Insight
What does good greenfield upstream investment look like?
Report summary
The outlook for the upstream industry profoundly uncertain. Market and price risks are at their highest for decades. Yet even the most conservative scenarios suggest continued investment will be required to meet future oil and gas demand. That means oil and gas investment has to continue, but investments have to demonstrate a new level of robustness. So in this new world, what does good greenfield upstream investment look like? In this Insight, we consider that question from three perspectives: conventional assets, unconventional assets and emissions performance.
Table of contents
- Executive summary
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Conventional oil and gas
- Growth at any coststrategy resulted in a decade of disappointing project returns
- Capital discipline since 2015 gives some hope, but will it continue?
- Market risks have never been higher. Short payback projects are advantaged.
- Upstream is a cyclical business, but investment in greenfield projects has been even more so
- Capital discipline must remain
- Responsive vs. sustained investment scenarios
- Responsive investment mirrors reality, but destroys value
- Sustained investment yields higher returns than running with the cycle
- The pre-FID project pipeline to 2025 is well filled
- Projects are better quality than five years ago
- The best projects are resilient at low prices, but give significant upside at high prices
- The right-hand side of the curve is dominated by LNG projects
- Wood Mackenzie's long term price forecast suggests potential for significant value upside
- Unconventional oil and gas
- Decarbonisation
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