Name: Can the Caspian upstream sector still compete for capital?
Brand: Wood Mackenzie
SKU: 136718
Price: 1350 USD
Availability: OnlineOnly
Author: Wood Mackenzie

Insight 17 May 2021

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Report summary

The Caspian region – home to 6 million boe/d of liquids and gas production – risks facing an upstream investment crisis in the 2020s. Not one that will imperil near-term output in the landlocked region, but one that will shape the scale of the sector and the strength of hydrocarbon-dependent economies like Azerbaijan and Kazakhstan for decades to come. The region remains core to most of the Majors and has a diverse undeveloped resource base that should be primed for longevity. Existing megaproject production offers a rare operational scale and attractive cash flow margins, despite high transportation costs to international markets. Yet the region’s leading upstream growth options are disadvantaged at prices below US$60/bbl. The Caspian must now play catch up with the energy transition and evolving corporate strategies. Can future upstream projects be made lower-risk, lower-cost, higher-return and lower-carbon?

Executive summary
- Wood Mackenzie is here to support
Why is an upstream investment ‘cliff edge’ approaching?
- 1. The upstream megaphase era is ending
- Next steps at the region’s key upstream projects are being downsized
- 2. FID-ready greenfield options are lacking
- 3. Upstream growth projects require the Majors, but will struggle to attract them
What needs to change? Five proposals to boost the investment outlook
- 1. Lower costs: Doing projects differently to ‘fix’ the pre-share economics
- 2. Higher investor share: Governments accepting a lower share to secure economic multipliers
- 3. Lower carbon: Linking decarbonisation efforts and upstream priorities
- 4. Lower risks: Unblocking gas monetisation options to unlock value
- 5. Lower reliance on Majors: Strengthening regional cooperation to unlock opportunities
Case study: Kashagan will be a regional bellwether – for upstream progress or pain

Tables and charts

This report includes the following images and tables:

Caspian region - liquids and gas productionCaspian region - upstream development capexKashagan – operator’s development plan

Kazakhstan upstream development capital expenditureRegional discovered resources since 2000 by commercial statusMajors’ Caspian upstream portfoliosMajors’ Caspian upstream value (NPV10, Jan 2021)Benchmarking of pre-FID project economicsFiscal scenario analysis for large offshore model field in KazakhstanBenchmarking of emissions intensity (2021-30 portfolio averages)The unresolved challenge of domestic gas monetisation in Caspian region