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INDUSTRY FOCUSUPSTREAM OIL & GAS


will see substantially increased investment in new projects over the next few years. However, in a classic illustration of the


S


continuing volatility of that market, the Brent price then dropped sharply, falling below USD60 per barrel by the end of November. Factors behind that reversal included concerns about a possible worldwide economic slowdown in 2019, and fears that increased US oil production could upset the global oil market supply/demand balance. Predictably, the near 30 percent drop in


crude oil prices in the latter part of 2018 prompted energy industry analysts and industry organisations to cut their previously projected average prices for 2019. The US Energy Information


Administration (EIA), for example, announced in late November that it now expects Brent spot prices to average USD72 per barrel this year, USD3 lower than previously forecast. Other analysts cut their predictions of USD80 or more to nearer USD70. Prior to the recent oil price falls, most


energy industry observers, analysts and participants had been reporting a modest upturn in investment activity through 2018 and an anticipated continuation of that trend this year and into 2020.


Changing forecasts The International Energy Agency’s (IEA) World Energy Investment 2018 report published in late July, for example, suggested “investor confidence in the upstream oil and gas sector continues to recover in response to rising oil prices and sustained oil demand growth”. Specifically, it said that following a


decline of over 40 percent between 2014 and 2016, upstream investment had rebounded by 4 percent in 2017 to USD450 billion and was set to increase by 5 percent to USD472 billion in 2018. However, the IEA also said that the


Agility said that upstream


project logistics work generally improved during 2018, although not at the rate previously envisaged.


www.heavyliftpfi.com


overall trend masked some big differences in terms of developments in specific assets and geographies. On the plus side, it stated, spending in the US shale industry is continuing to expand briskly, while conventional onshore investment, with a focus on brownfield projects, is rising modestly, driven by national oil companies’ spending in key producing areas such as the


tronger oil prices through mid-2018, with Brent crude hitting USD85 per barrel in early October, boosted hopes that the global upstream oil and gas sector


Those [new] projects include investment in new sites and the expansion or upgrading of existing operations ... for which Volga-Dnepr executed flights throughout 2018.


–Fayçal Boumerkhoufa, Volga-Dnepr Airlines


Middle East and Russia, as well as in China. However, according to the report,


offshore investment looks set to decline again in 2019 as few new projects have been sanctioned over the previous three years, although there had been “clear signs” of renewed interest in that sector in the latter part of 2017 and early 2018. The majority of heavy lift and project


freight forwarding company executives contacted by HLPFI reported that overall project logistics activity in the upstream oil and gas sector had picked up through 2018, although most suggested the improvement had been fairly modest.


Falling costs Consolidation among engineering, procurement and construction (EPC) companies and a major reduction in suppliers’ project costs have significantly reduced exploration and production costs. This trend, coupled with increased oil


and gas prices, led to more upstream activity in 2018 with more projects achieving a final investment decision (FID). Senior executives at two heavy lift


airlines reported positive news. Fayçal Boumerkhoufa, global director oil and gas for the Volga-Dnepr Airlines group, said a few new projects had been approved over the last year and were either already in the process of being activated or were on the way to being so. “Those projects include investment in


January/February 2019 33


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