Global upstream investments are starting to recover after a large drop (minus 24%) in 2020 because of the pandemic. Year on year, global upstream investments are expected to rise 8% in 2021 and 9% in 2022

North America investments to increase 9%/year in 2021 and 2022. Investment outside North America expected to increase 8% in 2021 and 5% in 2022.

Sustained higher oil prices, with Brent expected to average $66/b in 2021 and $63/b in 2022, are resulting in more oil project Final Investment Decisions. YTD, eight projects have been approved versus only seven in 2020.

The pandemic hit the oil market hard in 2020, resulting in a global capital expenditure reduction of 24% (minus 38% in North America and minus 18% internationally). Oil prices have increased significantly since Brent dropped below $18/b in April 2020, to the current level of $72/b.

Platts forecasts Brent to average $66/b in 2021, a 58% increase over the 2020 average of $42/b. The recovery calls for global upstream investment increasing by 8% in 2021 and 9% next year.

Sustained higher oil prices are providing confidence for operators to start sanctioning more projects. We forecast Brent to average around $60/b through 2030, which yields robust project economics compared with average non-OPEC (ex Russia) Brent equivalent breakevens of $46/b ($49/b including sunk costs).

So far this year, eight non-OPEC oil projects (greater than $1 billion in capex) have been sanctioned versus seven in 2020. The eight projects have a peak capacity of 975,000 b/d, and five of them are in Deepwater Brazil, including three in the prolific Buzios field.

The most recent project, P-79, a joint venture between Petrobras and Daewoo Shipbuilding & Marine Engineering, aims to supply the eighth FPSO in the Buzios pre-salt field with first oil in 2025. This unit will be identical to P-78, with a processing capacity of 180,000 b/d. The Buzios field, within the Santos basin, continues to yield impressive results and reached 580,400 b/d of oil production in April via the P-74, P-75, P-76 and P-77 FPSOs.

Looking forward, Petrobras is in the early stages of having two more FPSOs, P-80 and P-81, potentially contracted under a similar bidding process as P-79 to help capture some of the 11.3 billion barrels of oil equivalent of recoverable resources in the Santos basin.

As prices hold steady or continue to rise, more projects are expected to be sanctioned during the year, coming mainly from Brazil, the Gulf of Mexico, Guyana and the North Sea. Between 2014 and 2019, the global average was 13 projects (greater than $1 billion in capex) sanctioned each year, which means 2021 is on pace to match pre-pandemic levels.

Source: Platts