The sanctioning of new projects is expected to pick up in the North Atlantic
Between 2010 and 2014 activity on the North Atlantic region was at an all-time high, reaching a peak spend of US$130 billion in 2014. Since then, however, the low oil price has reduced activity and spending levels. In 2016, total investments for the region are expected to fall to US$75 billion.
One of the main reasons for lower activity is the decline in new projects being sanctioned. At the beginning of this decade, around 3.5 Bboe of new hydrocarbon resources, both oil and gas, was sanctioned yearly, but by 2014, this number had dropped to 1.7 Bboe. Sanctioning activity increased in 2015 but this was driven by the development of the Johan Sverdrup field. For the current year sanctioned resources are expected to be 1.3 Bboe – the lowest activity level in 30 years.
Rystad Energy does not believe this trend will continue and expects to see a pick-up in activity in 2017. The low global activity level observed in 2015 and 2016 has contributed to the re-balance of the oil market, and the expectations of higher future oil prices will make it easier for E&P companies to make positive sanction decisions.
Total offshore resources sanctioned per year for the North Atlantic region.
In 2017 the value of sanctioned resources is expected to reach 2.7 Bboe, twice as much as compared to 2016. Norway, the United States and the UK will contribute to this growth, with the main projects being Johan Castberg (Norway), Lochnagar/Rosebank (UK) and Vito (US). The sanctioning activity is expected to continue to grow in 2018, and to reach 3.7 Bboe.
The conversion of discoveries into sanctioned development projects is important as it creates activity, increases the value for the E&P companies and shows the need for exploration. The Atlantic region has been through a tough period, and this is visible in the sanctioning activity. However, as oil prices are expected to gradually increase, new projects will be sanctioned again.
