Last week, the annual Australasian Oil and Gas (AOG) conference took place in Perth, Australia, It was an ideal opportunity to take the temperature of the current industry outlook in this part of the world.
Despite the reduced number of exhibitors and attendees on previous years, the temporal waves of panic from 2015/16 were replaced with a steely outlook of “the worst is behind us” in a spark of returning confidence. Companies having survived initially by trimming budgets are increasingly adopting an innovation mindset of “what worked previously may not apply now”, in a price environment that seems to have settled around the ‘new normal’ of $45-55 per barrel.
Analysts indicated $60 oil as a key tipping point fuelling additional spending on E&P activity while replacing gas reserves for LNG contracts in China and South Korea will remain a key driving force in Australia.
One area which may be of particular industry to our Drilling community, was a renewed focus on supply chain efficiencies and collaboration. A stream of the conference was exclusively set aside to share thoughts on this topic.
According to Wood Mackenzie a leading industry advisory specialist, sanctioned projects for 2017 globally will double that for 2016. These approvals will generally apply to projects running at averages of just US$7 per barrel in capital costs as opposed to US$17 per barrel for 2014 projects.
These projects have a forecast IRR of 16% up from an IRR of 9% on 2014 projects (IRR is internal rate of return and is basically the interest companies earns on the money they invest in these projects).
Australia has been identified as one of the leading locations in the word for improved oil and gas expenditure. Australia’s strong LNG position is a catalyst for increased spending. Recent major discoveries at Phoenix South and Roc off the Northwest Coast of WA are also interesting blinks on the oil and gas radar.
Chevron’s proposed drilling campaign in the Bight Region and BP’s hunt for a new major gas field at the Ironbark Prospect all point towards a renewed buzz of interest for deepwater prospects.
Other projects are Greater Flank Phase 2, Greater Enfield, Gorgon Stage 2 and Waitsia Phase 2 all approved or in the process of getting the go ahead.
An increase in rig tenders also points towards increased activity that should lead to an increase in the number of rigs from its current 5 to perhaps 7-8 rigs at the end of the year and beginning of 2018.
All in all good news and a more positive atmosphere than the last couple of years with some tangible light appearing at the end of the tunnel.
Share your thoughts or feel free to get in touch at Martin.Flojgaard@rigforceglobal.com or +618 9389 2800.