Drillers expected to go deep again this year

    Major oil companies could venture back into the ocean depths this year, FuelFix.com reports.

    Energy research firm Wood Mackenzie believes drillers will double the number of final investment decisions this year compared to last year, meaning the industry may pull the trigger on 20 large multiyear projects in 2017.

    That’s still only half the annual average number of large projects launched each year from 2010 to 2014, when the industry began a string of expensive so-called mega-projects.

    But this year, oil companies will likely focus on smaller, more efficient projects close to existing infrastructure, says Julie Wilson, a Wood Mackenzie researcher in Houston.

    Drillers could spend $7 per barrel in capital expenditures this year on these smaller projects this year, compared to $17 a barrel before the bust, pushing rates of return up from 9% to 16% over the same period, Wood Mackenzie estimates.

    Though companies may sign off on some deep-water projects in the Gulf of Mexico, Guyana and Brazil this year, half of these 40 large projects aren’t profitable enough to launch even at $60 a barrel oil.

    “There are still a lot of deep water projects that struggle to make the 15 percent hurdle rate,” in terms of rates of return, Wilson says. “There’s still a lot of work to be done on those.”

    FuelFix.com has the full story. 

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