By Akanimo Sampson
A seeming cherry new report by Rystad Energy is forecasting that the offshore segment of the petroleum industry will see growth in 2019, with a strong outlook for offshore operators.
The forecast came as Mubadala Petroleum and Eni signed an agreement for the sale of a 20% participating interest, out of Eni’s share, in the Nour North Sinai Offshore concession, in Egypt, to Mubadala Petroleum, a wholly owned subsidiary of Mubadala Investment Company.
Eni CEO Claudio Descalzi said, ‘’this transaction strengthens our partnership after the successful relationship in Zohr and confirms Mubadala Petroleum’s trust in Eni’s robustness as operator, both in projects development and exploration activities.’’
In the concession, which is in participation with Egyptian Natural Gas Holding Company (EGAS), Eni holds an 85% stake in partnership with Tharwa Petroleum Company, which holds a 15% stake of the contractor’s share where Eni & Tharwa are collectively the contractor.
Mubadala Petroleum’s Chairman, Musabbeh Al Kaabi, said ‘’t his investment enables Mubadala Petroleum to further expand our position in Egypt while deepening our strategic partnership with Eni, the operator of both the Shorouk and Nour concessions.’’
The completion of the transaction is subject to the fulfillment of certain standard conditions, including all necessary authorizations from Egypt’s authorities.
Nour is a block located in the prolific East Nile Delta Basin of the Mediterranean Sea, approximately 50 km offshore in the Eastern Mediterranean, in water depth ranging from 50 to 400 meters, and covers a total area of 739 km2. Eni and Tharwa Petroleum Company are currently carrying out the drilling of the exploration well as foreseen in the first exploration period of the Nour concession.
Eni has been present in Egypt since 1954, where it operates through the subsidiary IEOC. The company is the main producer in the country with an equity production of around 340 thousand barrels of oil equivalent per day.
Meanwhile, Rystad Energy continuously collect and combine data from thousands of available sources and use them to build up, adjust, and calibrate their own outside-in perspective on the industry. Their main sources are governmental databases and archives, company presentations, professional and scientific reports, media as well as user feedback.
According to their forecast, an expected $210 billion will be spent on offshore oilfield services globally next year, pointing out, ‘’offshore contractors have experienced four consecutive years of declining revenues, but those still standing can expect revenues to start growing again next year.’’
Head of Oilfield Service Research at Rystad Energy, Audun Martinsen, said ‘’the offshore service market is like a super tanker: It takes time to accelerate. The uptick in new projects in 2017, 2018 and now 2019 will be enough to turn revenue growth positive to mid-single digits as offshore capex is set to increase due to the recent years of capital commitments. And on top of that comes an expected increase in operating expenses.’’
Oil and gas operators plan to sanction at least 100 offshore projects in 2019 after giving the green light to 90-plus projects in 2018. The projects on track to be sanctioned next year have total greenfield commitments representing about $120 billion.
Despite the fact that oil prices have come down during the fourth quarter of 2018, operators still plan to spend more next year and move forward on project sanctioning. More than 85% of the projects that Rystad Energy expects to be sanctioned in 2019 will generate returns greater than 10% even at current oil prices, the company estimates, as development costs have been reduced by as much as 30% since 2014.
Unit prices in 2018 were down at levels not seen by the offshore market since 2006, which could have positive implications for the breakeven prices of the projects in question.
‘’Offshore operators are quite trigger-happy on FIDs these days, despite the recent reduction in oil prices. 2018 saw the lowest obtainable unit prices since 2006, as much as 30% down from the peak in 2014, and that makes their cost per barrel and breakeven prices highly favorable. Couple that with one of the most profitable years for E&Ps in decades in 2018, and the recent production cut agreement by OPEC and Russia – offshore operators want to focus on field development again’’, Martinsen said.
According to Rystad Energy, 30% of 2019 project value sits in Middle East, 25% in South America, 15% in both Africa and Asia, and the rest in Europe and North America combined.
