Article:Five fundamental reasons why OPEC should agree on an output hike
Article:The United States again holds more recoverable oil than Saudi Arabia
RYSTAD ENERGY PRODUCT HIGHLIGHTS
• UCube (Upstream Database): Complete overview of the global upstream oil and gas industry, with reserves, production profiles and economical figures for all fields, discoveries and exploration licenses globally.
Includes more than 65,000 assets and 3,200 companies globally, with coverage by continent, region, country, province and state. Historical data from 1900 and forecasts to 2100.
• ECube (Exploration Database): Well-by-well database tailored specifically for exploration analysis, from 79,000 assets and 18,000 producing fields. Includes multidimensional data parameters such as discovered volumes exploration costs, acreage positions, license round information and a range of reservoir parameters.
• Upstream Analytics:frequent reports and commentaries with global upstream sector analysis, both on a macro level and in detail, powered by our proprietary databases and our experts. Upstream Analytics is included with the database subscriptions and is available as a standalone product.
E&P Newsletter Subscription: If you are not yet a subscriber to this email or you would like to receive one of our other industry newsletters, please fill out the Newsletter Subscription Form
LNG continues to dominate Australia’s energy landscape, with several key projects expected to come online this year, such as Ichthys LNG and Prelude FLNG. Despite a significant drop in investments over the last three years, the country’s production has been growing, supported by volumes from recent LNG project startups, where the investments had already been made. The next investment cycle is similarly expected to maintain stable production from Australia over the next five years. This article assesses the outlook for the Australian E&P industry, illustrated by three key drivers: production, project breakeven prices and spending. Figure 1 shows gas production for Australia, split by project and life cycle, from 2010 to 2025. LNG accounts for the largest share of Australia’s gas production, with its contribution expected to grow from 45% in 2010 to around 75% in 2018, and to over 80% by 2025. North West Shelf LNG, with first production in 1989, makes up about 20% of the current gas volumes. The decline in production from mature fields is expected to be offset by the commencement of the APLNG and GLNG projects. First cargo was shipped from the Santos-operated GLNG in October 2015 with a second train put on production in May 2016. APLNG exported its first cargo in January 2016 and a second train started production in October 2016. The Chevron-operated Gorgon LNG project came online in early 2016, with the third train beginning production in March 2017, while the Wheatstone project commenced production in October last year. The Inpex-operated Ichthys LNG project is expected to come online in late Q2/ early Q3 2018 with Inpex planning to complete the necessary commissioning work by the end of May, and the shipment of condensate, LNG and LPG to commence thereafter. Similarly, the Shell-operated Prelude FLNG is scheduled to start production in Q4 of this year. After 2020, notable contributions to production are expected from the second phase of the North West Shelf Greater Western Flank development, operated by Woodside Energy, with the gas to be supplied to the Karratha Gas Plant, as well as the Barossa field, which will supply gas to Darwin LNG.
Figure 2 depicts the half-cycle breakeven gas prices for top Australian projects; that is the realized gas prices at which production is commercial as seen from the approval (FID) date. North West Shelf Greater Western Flank Phase II and Ichthys are the cheapest projects to develop. The Ichthys (Brewster + Plover) field, which is sanctioned for development and is expected to start producing in 2018, has a half-cycle breakeven price of 10 $/kcf. Ichthys Phase 2 is estimated to have a much lower breakeven price of 3.9 $/kcf as the infrastructure is already in place, and is anticipated to come online in 2024. The fields in the North West Shelf Greater Western Flank Phase 2 project also show lower breakeven prices, averaging 4.5 $/kcf. Among these, the Rankin/Sculptor fields are expected to come online by the end of next year with a breakeven price below 4 $/kcf. On the other hand, Prelude and Wheatstone projects have a breakeven around 10-11 $/kcf, with the Prelude field showing a breakeven of 11.2 $/kcf. A number of discoveries in the Wheatstone and Greater Gorgon projects are expensive to develop and are expected to be brought into production only in 2030-2040s.
Figure 3 shows total spending in Australia over the period 2010-2025. Investments (capex and exploration capex) were increasing from 2010 to 2013 and peaked at $59 billion in 2013.Since the oil price collapse in 2H 2014, the investments have started to fall rapidly, declining by 45% in 2016 and an additional 25% in 2017. We expect Australian spending to decline further in 2018 by an additional 43%. A new investment cycle is expected to start post 2020 with significant growth in investments expected in 2021. The growing spending will come primarily from phased developments of key LNG projects such as the second phase of Ichthys, Gorgon/Jansz Stage 2, and APLNG Train 3, as well as the Woodside-operated Scarborough project. Browse LNG FID is projected by Woodside to be taken in 2021, leading to a further increase in investments in the long term. Total spending in the region is expected to increase to around $46 billion by 2025, and is not likely to return to the 2013 levels again before the early 2030s.
The rise of LNG developments has meant the beginning of a new era for the Australian E&P, marked by high-cost projects leading production growth over the next decade. In the short run, the high investment levels committed from 2010 to 2014 led to a substantial increase in Australia’s production from 2015 and onwards, especially driven by projects including APLNG, Gorgon, Ichthys and Wheatstone. Furthermore, within each project there are a number of key discoveries waiting in the pipeline to be developed. However, given high average breakeven price for many of them, significant production contribution from these fields is only expected post 2030.