Can the Caspian upstream sector still compete for capital?

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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

    • Wood Mackenzie is here to support
    • 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
    • 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

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  • Document

    Can the Caspian upstream sector still compete for capital?

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