By Irina Slav
For an industry in trouble, the oil and gas industry is doing pretty well in terms of discoveries and final investment decisions. So far this year, 21 new offshore projects received a final investment decision, according to Westwood Global Energy Group. At the same time, a number of discoveries were made, tapping billions in new oil reserves. The Middle East and Latin America are the leaders in final investment decisions, to the tune of a $20 billion, Offshore magazine reports, citing Westwood analyst Joe Killen.
In the Middle East, one of the highlights is the Farzad B natural gas field offshore Iran. Initially discovered by Indian state major ONGC Videsh, the field will now be developed by Iranian Petropars as U.S. sanctions made international participation in Iran’s oil and gas industry problematic.
Farzad B is estimated to hold some 22 trillion cubic feet of natural gas, with 16 trillion cubic feet of recoverable gas. It should produce about 1 billion cubic feet daily five years from now, according to the developer. The contract Iran’s government has signed with Petropars for Farzad B is worth $1.78 billion.
The other big project in the Middle East that got its FID this year is also a gas one: Karish North in Israeli waters. Earlier this month, developer Energean said it planned to drill five more wells in the Karish field, aiming to tap an additional 1 billion barrels of oil equivalent in reserves. Karish North holds an estimated 1.2 trillion cubic feet of natural gas and 31 million barrels of natural gas liquids.
Latin America, Brazil rules the new oil project ranking. Despite the energy transition push, despite the devastation that the pandemic wrought on the industry, Brazil’s pre-salt zone remains an attractive investment destination.
The Bacalhau project is one that got its final investment decision this year. The $8-billion project in the Santos Basin has Norway’s Equinor as its leader. When Equinor made the final investment decision in June this year, executive VP Arne Sigve Nylund told media that Bacalhau had a breakeven level of just $35 per barrel and estimated recoverable reserves of over 1 billion barrels. Commercial production should start in 2024.
Another pre-salt project that got its final investment decision this year was an expansion of production at the Mero field, also in the Santos Basin, which is turning into a focal point for pre-salt oil development in Brazil.
The Mero field is operated by a consortium led by local Petrobras and involving Shell, TotalEnergies, CNPC, and CNOOC. The consortium already operates the Libra field, also in the Santos Basin. At Mero, the consortium already has three floating production, storage, and offloading vessels in operation at the field, each with a daily capacity of 180,000 bpd.
Meanwhile, further to the north, BHP recently announced plans to spend $544 million on developing the Shenzi North oil field in the Gulf of Mexico, eyeing daily production of 30,000 barrels of crude. The company also said it would move forward with the Trion project, also in Mexican waters, to the design and engineering phase. BHP’s partner in Shenzi North, Repsol, is set to make the final investment decision on the project later this year.
Shell is also doubling down on the Gulf of Mexico. In July, the Anglo-Dutch supermajor announced the final investment decision on the Whale deepwater project. The company boasted projected internal rates of return of over 25 percent thanks to what the company calls a simplified, cost-efficient host design.
The Whale field—Shell’s 12th deepwater project in the Gulf of Mexico—has estimated recoverable reserves of some 490 million barrels of oil equivalent. Peak production is seen at 100,000 bpd, with commercial production set to begin in 2024.
As companies made FID after FID on new oil and gas projects, noting their low-carbon footprint and low cost, Exxon continued discovering oil offshore Guyana. The Whiptail-1 well produced oil last month, and a second well is currently being drilled in the area. Exxon expects to have t least six operating wells in the Stabroek Block by 2027, with a potential for another four.
In Africa, meanwhile, Namibia has emerged as a new hot spot in oil, with a discovery made earlier this year by a junior energy company. Soon after beginning exploratory drilling, the company, ReconAfrica, announced the discovery could hold as much as 31 billion barrels of crude. It is still early days, but there’s already talk about the latest country to join the oil club.
Namibia is also a rare case these days, with its discovery made onshore. Offshore seems to rule right now, with most of the new oil being found or developed across the world lying underwater. According to Westwood, offshore activity during the first half of the year was up by 60 percent on the year – a clear sign oil and gas were on a strong rebound despite the clouds looming on the horizon from the energy transition.