Updated November 28, 2021
Westwood Energy Group says 2020 will be remembered as one of the most challenging years in the history of the oil and gas sector as oil consumption fell to levels not seen since 2001. At one point, US producers were also paying to offload crude as the WTI price went negative for the first time ever.
In the offshore sector, investment in new field developments was the lowest in over 30 years as companies of all sizes reacted quickly to the commodity price crash by slashing on average 30% from planned 2020 capex and postponing/stalling $54 billion of 2020 offshore Engineering, procurement, and construction (EPC) contract awards.
“$12.3 billion of offshore EPC contracts were awarded in 2020 in 32 sanctioned projects, down from $40.3billion in 80 projects in 2019,” Westwood said, pointing out that five E&Ps accounted for 75% of the award value in 23 projects.
“The five largest projects contributed 57% of the total value, including Woodside’s Sangomar, ExxonMobil’s Payara, Equinor’s Breidablikk, CNOOC’s Lufeng 14-1/4/8 and Petrobras’ Mero III,” Westwood stated.
The US$9 billion project was approved by Guyanese authorities in September 2020 after a period of review that was preceded by delays brought on by political uncertainty and a protracted election.
“The US$9 billion Payara development will target an estimated resource base of about 600 million oil-equivalent barrels and is the largest single investment in the history of Guyana,” Vickram Bharrat, the country’s Minister of Natural Resources said at the time.
Payara also paved the way for the award of the largest subsea contract in the oil and gas industry since 2014, which went to TechnipFMC. The project, which is ExxonMobil’s 3rd development offshore Guyana, includes 41 enhanced vertical deepwater trees, six flexible risers and ten manifolds along with controls and tie-in equipment. TechnipFMC has since secured another contract for ExxonMobil’s 4th development in Guyana which Rystad Energy says is among the biggest this century.
Westwood said upstream capex overall in 2021 is likely to be flat or decline from 2020 based on company guidance but increased spending by a few E&Ps, notably Petrobras, Shell and Woodside is driving a forecast increase in offshore EPC awards in 2021.
“Our base case outlook for 2021 (which assumes Brent averaging at $50/bbl) currently forecasts firm and already awarded offshore EPC contracts of around $29 billion with a further $12 billion of probable awards and $4 billion of possible awards, compared to the $12.3 billion awarded in 2020,” the consultancy group said.
Westwood said this outlook may appear optimistic, particularly to an industry still reeling from the latest downturn-within-a-downturn, but a significant proportion of the 2021 market is made-up of those projects deferred in the second quarter of 2020 which in many instances had already seen significant pre-FID commitment.