Wood Mackenzie’s latest report indicates a potential increase in upstream projects reaching final investment decision (FID) in 2024, with up to 30 projects larger than 50 million barrels of oil equivalent (boe) expected to progress, compared to 22 in 2023.
The report, titled Class of 2024: benchmarking this year’s upstream FIDs forecasts heightened project activity this year, with a total investment of $US125 billion and the potential for 14 boe to be sanctioned.
Wood Mackenzie Principal Analyst Ross McGavin highlighted: “With many projects delayed or postponed, we expect operators to commit to more projects in 2024 than last year.”
National Oil Companies (NOCs) in the Middle East are expected to lead in project control, while the Majors are also poised for significant activity, particularly focusing on advantaged deepwater resources.
Wood Mackenzie’s Lens Upstream predicts that as project numbers rise in 2024, project breakevens are set to decline, accompanied by improved returns (IRRs) compared to 2023.
The class of 2024 projects require an average oil price of US$47 per barrel to generate a 15 per cent IRR, slightly lower than the class of 2023’s US$49 per barrel.
The weighted average IRR for the class of 2024 is 23 per cent, driven by a higher liquids weighting of 57 per cent in 2024, compared to 2023’s 46 per cent and the five-year average of 51 per cent.
McGavin said: “The higher liquids weighting and higher long-term price assumptions will improve IRRs for this year’s projects.
“Most payback periods are less than eight years from FID, as operators focus on rapid execution, lower unproductive capital, and higher returns.”
In terms of emissions intensity, the FID class of 2024 is expected to be below the global onstream average, with an average emissions intensity of 13.6 kgCO2e/boe, compared to the global upstream average of 21 kgCO2e/boe (including liquefaction emissions), according to Wood Mackenzie’s Emissions Benchmarking tool.
“New projects are a lever to meet emission reduction goals, especially those focused on deepwater projects that continue to deliver on low emissions intensity and economic returns,” said McGavin.
