Global oil and natural gas companies are ready for low prices in 2019, as they have positioned their portfolios accordingly, global energy research and consultancy group U.S.-based WoodMackenzie said in a statement Monday.
"Oil and gas companies can cope with whatever's thrown at them in 2019," Tom Ellacott, senior vice president, said in the statement.
"Portfolios are set to weather low prices, and the recent slide in prices justifies the sector’s conservative mindset. In our view, the commitment to capital discipline will not budge entering the new year," he added.
The price of international benchmark Brent crude fell from $84 a barrel on Oct. 4 to as low as $57.50 on Nov. 29. After OPEC, and its oil-producing allies including Russia, announced on Dec. 7 a curb to their total oil production by 1.2 million barrels per day (bpd), Brent rose to around $60 a barrel.
Meanwhile, the American benchmark West Texas Intermediate hovers around $51 a barrel, after plummeting from $76 per barrel at the beginning of October.
"If oil prices return to $70 per barrel or above, the cash windfall generated is huge and will inevitably drive sentiment back in favor of growth," Ellacott said.
- More U.S. shale expected in 2019
WoodMackenzie said U.S. tight oil, also known as shale oil, would be one of the most significant areas that will intake capital flow in 2019, adding that major oil companies will lead these investments.
"Permian mega-deals defined 2018, and we expect more in 2019," Angus Rodger, upstream research director, said in the statement.
"After spending nearly $35 billion on tight oil acquisitions in 2018, the super majors and bigger independents are serious about ensuring long-term success," he added.
Major oil companies are expected to drill longer with more capital efficient wells, according to WoodMackenzie, but this will also increase pressure on small oil firms to acquire new fields.
The Permian basin, the U.S.' most prolific shale play, has also come under pressure during 2018 as pipeline capacity in the basin has reached record high levels, leading some producers to bring their operations elsewhere until new capacity becomes operational in 2019.
WoodMackenzie said tight oil growth in the Permian basin would be around 650,000 bpd next year, compared to more than 1 million bpd in 2018, adding that new pipeline capacity is anticipated to come online in the third quarter of 2019.
- Competition for resources
In addition to oil, liquefied natural gas (LNG) will make headlines in the energy industry next year, according to WoodMackenzie.
Energy firms in 2019 will make final investment decisions in the Arctic LNG-2 in Russia, at least one project in Mozambique and three in the U.S., whose total capital investment will be over $50 billion, the statement said.
Project expansions in Qatar, Papua New Guinea and Nigeria could also get a nod next year, which could take total spending closer to $150 billion, it added.
"These are huge investments that will take time to deliver. This new phase of LNG development will be a real test of the industry’s improved project execution and cost management," Rodger said in a statement.
- 20 billion barrels up for grabs
Along with LNG, the biggest focus will be deepwater oil in Brazil and Guyana, WoodMackenzie said, adding that around 20 billion barrels of oil equivalent will be up for grabs globally, up from 15 billion barrels of oil equivalent in 2018.
Some other regions in 2019 will include Mexico, the U.S. Gulf of Mexico, Cyprus, South Africa and the Barents Sea in Norway, it added.
As for renewable energy, WoodMackenzie said investment in this sector would show just a small increase in 2019.
Major energy companies have allocated less than 3 percent of their budget to renewable energy since 2016, it said, adding that spending in that industry would nudge up in 2019, albeit not by much.
"Companies and investors will be wary of backing the wrong horse in new energy. It’s a sector they are still trying to understand," Ellacott said in the statement.
"Upstream will still account for the majority of capital investment in 2019," he concluded.
By Ovunc Kutlu