Oil Field Megaprojects 2004 --
[Note: The 2005 version is by subscription only, so this gives some idea "for historical purposes" as SecState Rice might say.
A discussion of this .pdf can be found upstream on this thread, else here:
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[[See .pdf for chart of megaprojects ]]
The future shape and prosperity of the oil industry is determined by the mega projects – those with reserves of over 500mn boe and the potential to produce over 100,000 b/d of oil. Here, ChrisSkrebowski tabulates and analyses all the mega
projects, as well as the key discoveries that could become mega projects at some later date. Oil field mega projects
2004 PETROLEUM REVIEW JANUARY 2004
This year’s listing has been expanded to include all the discoveries of over 500mn boe that are likely to become mega projects but have not yet reached the point of project sanction. Where projects seem certain to be sanctioned they have been included under the most likely start-up year. Those where the uncertainty is greater, or the production date is unknown, have been listed as ‘potential projects’. Examination of our mega projects database shows that, on average, from
first discovery to first production is about six years. Where the project time is significantly shortened it is usually
because there is some existing infrastructure that can be used in whole or in part. In contrast, where there is an
extended delay the underlying cause is either political (Russia, Caspian), challenges in getting egress for production
flows (Caspian), or the challenging economics of the production (heavy oil, tar sands).
In sharp contrast to gas, where there are large volumes of stranded reserves, there is a ready market for additional oil flows. The days of large oil companies having substantial
reserves banks are largely over. This means that any substantial finds will become development projects in a
very limited time, unless actively inhibited by politics or access.
Offshore domination
The listing is overwhelmingly dominated by offshore projects. For onshore projects production builds progressively as wells are drilled or gathering stations installed. In sharp contrast, most offshore projects are pre-drilled – which means that peak production flows are achieved rapidly and are largely determined by the capacity of the facilities. Companies aim to maintain flows from developments close to peak capacity for
as long as possible by linking in new accumulations as the original accumulation starts to deplete. A perfect
example of this is the Girassol facilities offshore Angola, where Total has just starting flowing the Jasmin field
through the Girassol facilities to compensate for the decline from the Girassol field (see p41).
Over the last year (2003) seven mega projects have been brought onstream, with two more due to flow by the end of the year. As seven of the fields were offshore, most of the peak capacity of
1.2mn b/d should be achieved by 2004. In the course of the next 12 months (2004) a further 11 mega projects are due onstream. As most of them are offshore projects it means that most of the
peak capacity of 2mn b/d will be flowing by 2005.
New capacity
The year 2005 continues to be the peak year for new mega projects coming onstream. Some 18 projects with a potential peak capacity of 3mn b/d are due onstream in 2005. For 2006 the pace of development eases back a little to 11 projects, with a capacity of around 2mn b/d. Undoubtedly there will be project slippage – it already looks virtually inevitable that Kashagan will slip into 2007. However, the bottom line is that
between 2003 and early 2007 some 8mn b/d of new capacity will have been brought onstream to meet global oil demand growth and to offset thedecline in oil production from those areas that are already in decline. Currently 21.3mn b/d or around a third of the world’s oil production is already in decline (see Petroleum Review August 2003), the best estimate of the likely decline rate going forward is about 4%, made up of a typical
onshore decline rate of around 3% and an offshore one of around 5%. On the basis of a 4% decline rate for one third of the world’s production, global capacity declines by over 1mn b/d each year. Global demand growth is once again expanding at over 1mn b/d. (the IEA’s latest estimate is for oil demand of
78.6mn b/d in 2003 and 79.6mn b/d in 2004. Demand in 2002 was 77.3mn b/d). As a rough calculation, by early 2007 production capacity will have declined by 3-4mn b/d (2004–2006), offset by the 8mn b/d of new capacity – giving up to 4mn b/d of new capacity to meet demand growth of around 3mn b/d. However, this is before the additional capacity created from the development
of all the smaller accumulations and the expansion of production in existing fields. In short, supplying global oil
demand up to 2007 appears to be well covered and, depending on the timing of new capacity and economic conditions, there may even be periods of relative price weakness.
Problematic future
If we look beyond 2007, however, the outlook becomes rather more problematic. Only three mega projects are so far known for 2007 and a further three for 2008. For 2009 and 2010 only the later stages of existing projects are currently known about. Consequently, the volumes of new production for this period
are well below likely requirements. Even if the normal mega project development period of around six years was foreshortened to four years a mega project sanctioned now would be unlikely to be onstream by 2008. There are clearly enough known developments – listed as the 23 potential developments
– to plug the gap. However, of these 23 developments 11 are in Opec countries and 10 in Russia, leaving just Shell’s Great White discovery in the Gulf of Mexico and PetroVietnam’s block 09-03 discovery in the Cuu Long Basin as yet-to-be sanctioned non-Opec, non-FSU projects.
Whether this skewing of future projects to Russia/FSU and Opec is seen as a curiosity or a concern largely depends on the degree to which western interests coincide with those of Russia and Opec. To date Opec has tended to favour prices rather higher than than western interests would prefer while the importance of oil exports to the Russian and FSU economies would suggest that they too would favour higher prices. In terms of future production capacity the largest single unknown is the speed at which Iraq’s production capacity can be restored and then expanded. The potential is certainly there (see Petroleum Review, July 2003) but the rate at which it can be developed is currently unknowable. Although it is too early to be wholly certain there is mounting evidence that the discovery rate for major oil fields with reserves of over 500mn boe has fallen dramatically over recent years. IHS Energy, on a map of recent discoveries it supplies to its clients, records 28 discoveries of over 500mn boe in the three years 2000, 2001 and 2002. However, 16 of the discoveries were in 2000, eight in 2001 and just three in 2002. Broken down by discovery type
this gives:
? 2000: 6 oil/gas finds, 7 gas/condensate finds, 3 gas finds;
? 2001: 2 oil/gas finds, 4 gas/condensate finds and 2 gas finds;
? 2002: 2 oil/gas finds (Shell’s Great White and Petrobras’ Jubarte) and 1 gas find.
This rapid decline in recent large discoveries may the explanation for why there are so few mega projects six years
later, ie 2007-2008. A lack of recent discovery has also been seen in Russia, where IHS Energy records reserves replacement ratios of 17% in the last five years and 14% in the last ten years. Even Opec seems to be having difficulty replacing reserves with a replacement ratio of just 18.2% in 2002 (see
Petroleum Review, November 2003). The conclusion to be drawn appears to be that for the next four years a flood of new production is set to hit the market. Whether the volume and
timing is of a magnitude that significantly depresses prices remains to be seen and will largely depend on whether existing flows are maintained and whether the sort of unpredictable
events such as the production restrictions seen in Venezuela, Iraq and Nigeria over the last 12 months remain a feature of the market.
? While every effort has been made to esure that the data in the table is correct, if readers are able to fill in gaps or
have better information the Editor would be very please to hear from them.
Please contact: cs@energyinst.org.uk |
