Class of 2021: benchmarking this year’s upstream FIDs

Table of contents

• Executive summary
  • Economics trend positive for the class of 2021, but emissions need mitigation
  • Short-cycle, deepwater and US Lower 48 mostly exceed investment hurdles and support emissions intensity goals
  • Long-life projects (e.g. LNG and sour gas) are comparatively challenged on both returns and Scope 1 & 2 emissions metrics
  • 2021 could be a sweet-spot for an invest now, divest later strategy
• Slides and key messages
  • Pre-FID projects contribute a significant share of future upstream investment
  • After just 12 major FIDs in 2020, we expect a cautious recovery in 2021
  • Qatar’s North Field East megaproject reached FID in January, dwarfing every other project on the list
  • IRR and payback are two key economic metrics that IOC are using to make investment decisions
  • Short-cycle and deepwater oil projects mostly exceed typical industry IRR and payback hurdles
  • LNG and sour gas' marginal returns and longer payback are offset by long-term cash generation
  • Under our base case valuation, 2021 projects are more profitable than in previous years
  • Short-cycle projects are most attractive on P/I
  • Projects with most oil price leverage
  • Projects with little or no oil price linkage
  • Most challenged at US$50/bbl Brent
  • Deepwater oil and short-cycle project exceed economic hurdles
  • Long-life projects (e.g. LNG and sour gas) typically need lower economic hurdles to reach sanction
  • Some projects rely on a bullish price outlook
  • Despite a lower long term price assumption, returns from the class of 2021 are higher than recent averages
  • Reducing capital exposure to pre-FID projects taking FID in 2021
  • 2021 could be a sweet-spot for an invest now, divest later strategy
  • High Scope 1 & 2 emissions from LNG means the class of 2021 is above the global onstream average
  • Carbon emissions are an increasingly important consideration for new investment
  • 2021 FIDs benchmark similarly to recently sanctioned projects, although operators of several high-emitting projects have major CCS plans
  • Deepwater and US Lower 48 have significant economic and Scope 1 emissions intensity advantages
  • LNG has high Scope 1 & 2 emissions intensity, but provides Scope 3 emissions advantages
  • Carbon benchmarking: value at risk

Tables and charts

This report includes 13 images and tables including:

What's included

This report contains:

• SLIDES Class Of 2021 – Benchmarking This Year’S Upstream Fids

  PDF 1.47 MB

• Class of 2021: benchmarking this year’s upstream FIDs

  PDF 1.32 MB