Australia to lead Asia Pacific’s oil & gas FID surge in 2020, Woodmac says

Asia Pacific oil and gas sector might in 2020 see an increase in mergers & acquisitions and FIDs, while offshore drilling is expected to focus on brownfield wells rather than on wildcats, Wood Mackenzie said in a report on Thursday.

Scarborough upstream concept schematic / Image source: Woodside
Scarborough upstream concept schematic / Image source: Woodside

Per WoodMac, around US$35 billion of new development expenditure and 4.6 billion barrels of oil equivalent (boe) of resource could be sanctioned in 2020, compared to only US$5.5 billion and 1.2 billion boe of new projects getting the go-ahead in 2019.

After a dearth of project sanctions in the last few years, Australian project final investment decisions (FIDs) are now back on the cards in 2020, the energy intelligence group said.

Wood Mackenzie senior analyst David Low said: “Barossa is closest to the line as new operator Santos looks to backfill the Darwin LNG plant.”

Santos took over the Barossa field from ConocoPhillips in October, through the acquisition of the U.S. company’s northern Australia business for $1.39 billion-plus contingent payments. Santos at the time said the Barossa final investment decision could be achieved by Barossa by early 2020, with first LNG expected in 2024.

Woodmac’s Low further said: “We expect Woodside to sanction Scarborough to underpin the Pluto Train 2 expansion, and Shell is set to take FID on the Crux field to backfill the Prelude FLNG facility.”

Apart from Australia, Wood Mackenzie also sees Malaysia’s Petronas as an important factor when it comes to the APAC project sanctions in 2020.

Research director Andrew Harwood said: “In Q1 2020, PETRONAS will be looking to develop its deepwater expertise close to home through Limbayong, offshore Sabah, and the Kelidang Cluster, offshore Brunei. Given its deepwater ambitions in Mexico and Brazil, the national oil company (NOC) will be keen to demonstrate proficiency in bringing similar domestic projects online.”

Majors might ditch non-core assets

Wood Mackenzie sees the pipeline of assets for sale in the region as”strong.”

“The Majors alone hold US$18 billion worth of non-core assets in Asia Pacific. Divesting late-life assets, low-return, pre-FID projects and positions with limited growth potential will be priority. Chevron’s Indonesia Deepwater Development and Repsol’s PM3 CAA are two examples of key assets expected to change hands over the next 12 months,” Wood Mackenzie said.

According to Wood Mackenzie, in Australia, LNG related deals will once again make headlines in 2020.

“Santos’ 2019 acquisition of ConocoPhillips’ northern Australia portfolio is the catalyst for further M&A to align equity interests. SK E&S, part of the Barossa JV, is in line to move first and acquire 25% of Santos’ stake in Darwin LNG and Bayu-Undan. Likewise, the Japanese participants in Darwin LNG are also expected to farm into the Barossa JV,” Woodmac said.

The expected Barossa transactions are in line with what Santos said when it announced the acquisition of ConocoPhillips’ assets.

Santos said it was targeting to sell down equity in Darwin LNG and Barossa to 40-50% “in order to create alignment between joint venture participants as well as by optimizing equity levels in our Western Australia assets.”

 Drilling shifting to appraisal after a record year for exploration in 2019

When it comes to drilling operations, Wood Mackenzie expects that the oil and gas companies will switch to delineating some of the key discoveries in made in 2019, a record year for Asia Pacific exploration.

Appraisal drilling at Repsol’s Kali Berau Dalam, Eni’s Ken Bau, PTTEP’s Lang Lebah, and CNOOC’s Yongle 8-3 will prove up commerciality ahead of development planning, the energy intelligence firm said.

Regarding the pure exploration wells, Wood Mac sees the outlook as “more limited in 2020,” however, it sees some potential play-openers in New Zealand’s Great South Basin, deepwater Myanmar, offshore North Sumatra, and offshore Papua.

In Australia, it will be a pivotal year for the Beetaloo and McArthur Basins, long thought to hold significant resource potential, that could be the savior of the Australian east coast gas market.

“This could be the breakout year when we find out if all the hype is justified. Origin, Santos and Empire Energy are hoping to get a better understanding of the rock mechanics and well deliverability with their exploration programs in 2020. Flowrates above 5 million cubic feet per day (mmcfd) would be considered a success,” added Low.

Andrew  Harwood said: “In 2020, we expect a growing focus on improving recovery rates by NOCs and smaller specialist players. PERTAMINA will hope to slow declines at Offshore Mahakam via an ambitious drilling campaign and new well and platform designs. PTTEP aims to recover more contingent resources from G1/61 (Erawan) and to lower development costs through synergies with its nearby assets.”



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