Project Sanctions Primed to Surpass 2014 Numbers

Offshore project sanctioning in 2019 has already exceeded the $50 billion mark, which could mean we’ll soon see numbers surpassing 2014 commitments of $78 billion, according to energy research firm Rystad Energy.

With Saudi Aramco’s recent announcement of $18 billion worth of project commitments associated with the Marjan and Berri expansion projects, the offshore industry could reach a potential project commitment of $123 billion this year.

The Marjan Expansion on its own marks the largest field to be sanctioned globally since the pre-downturn era of 2014.

Once the Hail and Ghasha Sour Gas projects, Lula Oeste FPSO in Brazil and feed gas systems to develop the Atum and Golfinho assets on the Area 1 LNG project are sanctioned later this year, four of the top 10 offshore projects since 2014 will have been sanctioned in 2019, according to Rystad.

“With offshore free cash flows at nearly record highs, E&Ps are betting big on new projects. Offshore project sanctioning in 2019 looks ready to reach heights not seen since the $100 barrel of oil,” Matthew Fitzsimmons, Rystad’s vice president of oilfield service research said in a release sent to Rigzone.

When oil prices plunged in 2014, project sanctioning followed suit. In 2016, project sanctioning hit rock bottom at $37 billion worth of offshore commitments.

In order for the offshore industry to reach $123 billion of potential project commitments in 2019, Rystad said, more than $86 billion of 2H 2019 onshore and offshore commitments will need $40 per barrel oil to breakeven.

Currently, $16 billion worth of projects are at “high risk” of not receiving funding at the time of their sanctioning decisions this year.