Insight
Can the Caspian upstream sector still compete for capital?
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?
Table of contents
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Executive summary
- Wood Mackenzie is here to support
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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
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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 11 images and tables including:
- Caspian region - liquids and gas production
- Caspian region - upstream development capex
- Kashagan – operator’s development plan
- Kazakhstan upstream development capital expenditure
- Regional discovered resources since 2000 by commercial status
- Majors’ Caspian upstream portfolios
- Majors’ Caspian upstream value (NPV10, Jan 2021)
- Benchmarking of pre-FID project economics
- Fiscal scenario analysis for large offshore model field in Kazakhstan
- Benchmarking of emissions intensity (2021-30 portfolio averages)
- The unresolved challenge of domestic gas monetisation in Caspian region
What's included
This report contains:
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