CAPITAL PROJECTS&CONTRACTSOVERVIEW A year of opportunity?
With the oil price climbing towards USD55 per barrel, analysts are predicting a modest but sustained recovery in the energy sector. One area where production will be increasing is Iran, which has selected 29 international companies to bid for its oil and gas projects.
2
017 could shape up to be a year of stability and opportunity for the global
oil and gas industry. That was the view put
forward by industry analyst Wood Mackenzie, which said the oil and gas industry will turn cashflow positive for the first time since the downturn, if Organization of Petroleum Exporting Countries (OPEC) production cuts drive oil prices above USD55 per barrel. “Most oil and gas
companies will start 2017 on a firmer footing, having halved cashflow breakevens to survive the past two years. Further evidence of a cautious, U-shaped recovery in investment should emerge,” said Tom Ellacott, senior vice president of corporate analysis research at the research consultancy. Strengthening finances will
still be a top priority for the majors, independents and national oil companies. But 2016 will prove to be the low point in the investment cycle, with confidence boosted by OPEC’s decision to cut production, he said. Mergers and acquisitions
will also be an attractive value proposition for those companies in a financially strong position. “Low-cost, low-risk discovered resource opportunities will look
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Russia, alongside the OPEC cartel, claimed it would reduce oil output in 2017.
attractive again. And the larger players will need these to ensure long-term portfolio renewal as part of a more balanced growth strategy.”
OPEC cuts Production cuts from Kuwait and Oman indicate that OPEC is sticking to its guns with regard to reducing oil output in 2017, in a bid to stabilise the oil market. At the time of writing Kuwait
has reduced output by 130,000 barrels per day (bpd) to about 2.75 million, while Oman is
Most oil and gas companies will start 2017 on a firmer footing, having halved cashflow breakevens to survive the past two years. – Tom Ellacott, Wood Mackenzie
cutting 45,000 bpd from its current 1.01 million bpd production; oil futures rose approximately 2.8 percent – West Texas Intermediate for February delivery gained USD1.52 to USD55.24 a barrel while Brent for March settlement climbed USD1.33 to USD58.15 per barrel. The production cuts
announced by OPEC, along with Russia, are welcome news to the US oil and gas industry. US shale drillers are preparing to boost spending on exploration and production through 2017 as banks extend credit lines for the first time since 2015. Industry analyst Raymond
James believes that North America-focused oil and gas producers will increase their capital investments by 30 percent in 2017. Oil prices rose by more than
45 percent over the course of 2016, increasing the value of
oil and gas reserves against which loans and credit lines are decided. A number of US companies have also seen their eligible proven reserves rise, in part due to acquisitions. Overall, US crude oil
production is forecast to fall to 8.8 million bpd in 2017 from 8.9 million bpd in 2016, according to the US Energy Department. But shale output could increase from 200,000 to 500,000 bpd in the coming year.
Iran gears up The National Iranian Oil Company (NIOC) has chosen 29 international exploration and production (E&P) companies to bid for the country’s new oil and gas projects. The companies are allowed
to bid for oil and gas projects using the less restrictive Iran Petroleum Contract (IPC) model. The list of pre-qualified firms included Shell, Total, Eni, Petronas, Gazprom and Lukoil. Other companies include CEPSA Spain, CNPC, Japan Petroleum Exploration, Korea Gas Corporation, Maersk, Mitsui, OMV, ONGC Videsh, Pertamina, and Schlumberger. NIOC’s main priority is to
boost recovery at the Yadavaran and Azadegan oil fields. Furthermore, Chinese companies, Total and Shell are investigating the development of the West Karoun joint oilfields. Total, Shell and Inpex have already signed memoranda of understanding (MoU) or agreements with NIOC to carry out the study phase of South Azadegan development project. One absentee from the list
was BP, which reportedly opted- out of the bidding because of concerns over possible renewed US-Iran tensions with Donald Trump as the new US President.
January/February 2017
HLPFI 39
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