4. Opportunities from discovered resources and exploration
Discovered resource opportunities (DROs) will play a big part in building up portfolios in 2018. Iran and the UAE could award at least 10 billion boe of discovered resources next year. There will be huge interest in exciting Latin American opportunities too, particularly in Brazil.
NOCs and the Majors will compete fiercely to access DROs and exploration blocks in Brazil, bolstered by world-class deepwater economics. Licensing rounds in Mexico will also draw strong bidding from these players, while independents will look for lower-cost licensing opportunities.
5. Fiscal terms evolving
Investment hotspots in Latin America have seen host governments maximise their share of future profits by allowing industry to bid the fiscal rates. Iran will almost certainly follow suit in 2018. Most other countries don’t have such prospective rocks to offer, yet many governments continue to insist on a high fiscal burden. This is deterring potential upstream investment.
In 2018, we expect to see more regimes open the fiscal rates to a bidding process, which should establish a more appropriate ‘market rate’. To incentivise lower-cost operations, some governments, like Indonesia and India, are opting for revenue-sharing agreements over profit-sharing. Will others follow?