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Upstream FIDs to increase in 2024 as project economics rebound

  • Focus targeted at deepwater resources
  • 30 projects to reach FID in 2024, with up to US$125 billion in investment and 14 billion boe sanctioned

Up to 30 upstream projects larger than 50 million of barrels of oil equivalent (boe) could reach FID in 2024, an increase from 22 in 2023, according to latest report from Wood Mackenzie.

The industry watchdog report – “Class of 2024: benchmarking this year’s upstream FIDs” states that project activity will increase this year, with a total of $US125 billion in investment and the potential for 14 boe up for sanction.

“With many projects delayed or postponed, we expect operators to commit to more projects in 2024 than last year,” says Ross McGavin, principal analyst at Woods. “National Oil Companies (NOCs) in the Middle East will control the most projects, but the Majors will be busy as well, particularly as they prioritise advantaged deepwater resources.”

With the Woodmac’s Lens Upstream showing that as the number of projects rise in 2024, breakevens are projected to fall, with an associated bounce back in returns (IRRs) which dipped in 2023. The class of 2024 projects according to Wood’s team require an average of US$47/bbl to generate a 15% IRR, slightly below the class of 2023’s US$49/bbl. The weighted average IRR for the class of 2024 which is set at 23%, is expected to get help through a higher liquids which is likely to weigh 57% in 2024, compared to 2023’s 46% and the five-year average of 51%.

“The higher liquids weighting and higher long-term price assumptions will improve IRRs for this year’s projects”, McGavin said. “Most payback periods are less than eight years from FID, as operators focus on rapid execution, lower unproductive capital, and higher returns.”

With a significant emphasis on deepwater projects and advantaged barrels the report shows, the average emissions intensity for the FID class of 2024 will be 13.6 kgCO2e/boe, well below the global upstream average of 21 kgCO2e/boe (including liquefaction emissions), according to Wood’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”, McGavin said.

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