This year marks the beginning of a recovery after a disappointing 2020, when the Covid-19 pandemic caused a significant drop in sanctioning of offshore projects. Rystad Energy now projects a rebound to take place this year, with a continuous rise towards 2023.
Operators are now even more focused on costs and profit margins, and majors are expected to concentrate their individual activity to fewer countries than before. This means the world’s resource-rich countries will have to compete more than ever to attract investments.
Rystad Energy has analysed how each country’s fiscal regime affects the profitability and breakeven price of developing offshore mega-projects across the world. This has resulted in a top five list of countries for profitable large-scale field developments, seen from the operators’ perspective.
UK scores best
For the purpose of modelling each country’s score, Rystand Energy used a sample project with the characteristics of Norway’s Johan Castberg field, a single-phase project with plenty of available data that makes it an ideal candidate for benchmarking. To get a fair comparison, the analysis does not take into account the activity of national oil companies (NOCs) in their home countries.
In Rystad Energy’s analysis, the United Kingdom scored the highest post-tax valuation and offers the best profitability conditions for operators, with a net present value (NPV) of $11.1 per barrel of oil equivalent (boe) in the country at a flat oil price of $70 per barrel. The next in line are Kuwait ($11 per boe), Canada ($8.9 per boe), the US ($8 per boe) and Colombia ($8 per boe).
Read the full press release here.
Is there a Johan Castberg equivalent in the UKCS?
But how big is the Johan Castberg field, and how many of those can be found on the UKCS to make this investment climate a realistic opportunity. According to the Norwegian Petroleum website, Johan Castberg contains up to 560 MMb of recoverable oil.
When looking at undeveloped fields in the UKCS of reasonable size, names such as the Cambo and Rosebank (West of Shetlands) and Glengorm (Central North Sea) discoveries spring to mind. Are they as big as Johan Castberg?
A recent publication on Rosebank cites a resource estimate of 300 MMboe, which is derived from a Wood McKenzie report amidst claims from Equinor that a more detailed assessment is currently taking place. With Glengorm being announced as a 250 MMboe discovery, this field is also significantly smaller than Castberg. However, Cambo is reported to contain over 800 MMbo in place, which means that with an assumed recovery of 50% the field comes closest to what Johan Castberg is reported to be able to produce, albeit still lower.
Siccar Point deferred the Cambo final investment decision to this year at the start of the pandemic in March 2020. Will the Rystad analysis help to push the investment over the line?
PRESS RELEASE & EDITORIAL NOTE