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Offshore project approvals in 2019 to ‘eclipse’ pre-downturn levels

Offshore project sanctioning could soon “eclipse” levels seen in 2014 before the oil downturn, according to new research.

Consultancy Rystad Energy predicts approvals may reach £98.6bn this year, well above 2014 levels of £62.5bn.

There have been more than £40bn worth of projects given the green light already in 2019, driven by Saudi Aramco’s commitment of more than £14.4bn for the Marjan and Berri expansions.

The Marjan expansion alone is the largest field to be sanctioned globally in five years and Rystad said this illustrates more operators are ready to invest in major developments.

Matthew Fitzsimmons, vice president of Oilfield Service Research, said: “With offshore free cash flows at nearly record highs, E&P’s are betting big on new projects.

“Offshore project sanctioning in 2019 looks ready to reach heights not seen since the $100 barrel of oil.”

A total of 74 projects were sanctioned in 2014 but after the price drop “operators thought again” about approving new work, leading to a bottoming out of sanctioning in 2016.

The new boom for this year does, however, bring a risk.

Rystad said that around 13% of the £98.6bn to be sanctioned will require a breakeven price of more than $60 a barrel.

That means around £12.8bn of projects are at “high risk” of not receiving funding at the time of their sanctioning decisions, the firm added.

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