Offshore staff
LONDON – Many E&P companies, including major operators, have taken steps to cut their capex budgets for 2020 by around 20%, according to data and analytics company GlobalData.
Sharp reductions in exploration capital will limit the amount of exploration budget available for licensing round acquisitions, at least in the short term.
GlobalData’s report ‘Impact of COVID-19 on Global Licensing Round Opportunities’ states that throughout the current uncertainty, licensing rounds will probably be either extended or deferred as governments prioritize managing the domestic impact of the virus, or decide to wait for investment conditions to improve.
Bangladesh, Brazil, India, Liberia, South Sudan, and Thailand and others have already announced changes to licensing round activities and others will likely follow.
Toya Latham, upstream fiscal analyst at GlobalData, said: “The number of deepwater licenses awarded as part of bid rounds is also likely to be subdued in the short term.
“With the largest discoveries of last year located mostly in deepwater settings, deepwater acreage offers potentially lucrative opportunities for E&P companies.
“However, deepwater projects often require more capital and have longer payback periods compared to onshore and shallow-water projects, and therefore deepwater acreage is likely to be less attractive in the current investment climate.”
Assuming the oil price does stabilize, it will still take time for the number of new awards from licensing rounds to increase.
Latham said: “Companies with less exposure to the oil price through limited or hedged production, which have available capital in the current environment, are likely to be well positioned for rounds held following the oil price stabilization and may be in an advantageous situation to capitalize on reduced service costs for exploration activities.”
04/03/2020
