“International oil companies will be focusing largely on higher cost but higher-return deepwater developments,” McKay added. “All will be acutely aware of how oil and gas project sanctions are playing out in the public domain and the scrutiny to which their associated emissions will be subject.”
Projects this year will require on average $49/bbl crude to deliver a breakeven 15% internal rate of return (IRR). A weighted average IRR of 19%, at $60/bbl, would be the lowest since 2018, the consultant suggested, with an average payback for this year’s projects at nine years.
“Short-cycle and small-scale offshore projects will out-perform in terms of both paybacks and returns,” said Greg Roddick, principal analyst of upstream research. “Long-life LNG projects are compromised when it comes to IRRs, but their attractive and stable future cash flows will be strategically important...
“Advantaged deepwater oil and shelf projects will outperform on emissions, but LNG, sour gas and some onshore projects require mitigation measures.”
04.13.2023