Cognizant of the fact that the COVID-19 pandemic will continue to place the profit margins of more companies under strain, leading industry analysts note that only those oil projects which have low breakeven prices and competitive payback times will be able to survive these turbulent times. Supporting this conclusion is one of the latest studies by Rystad Energy on the recovery of offshore projects.
In that analysis, Rystad was keen to note that offshore activity in Latin America is expected to recover from 2021 with more than three million barrels per day of peak production estimated to be sanctioned in Brazil and Guyana alone by 2025. Of this, Rystad said that more than 80% of the capacity has breakeven prices of less than US$45 per barrel and is expected to get sanctioned despite the current market environment.
Among major offshore producing regions, Rystad said that Brazil and Guyana combined will account for more than one-third of the offshore investments and hold the capacity to be sanctioned over the next five years. The Norwegian company said too that they will also account for more than 40% of the reserves to be sanctioned. “The region is, therefore, expected to emerge as the largest offshore player by the end of the decade,” the consultancy firm stated.
Apart from South America, Rystad said that the United States Gulf of Mexico (GoM) and the North Sea will also see significant expenditure on offshore projects in the medium term while lower investments are expected in Africa and the Middle East.