Oil and gas operators globally will continue to push for faster returns with shorter cycle investments, as the industry moves away from giant developments. Projects now go from final investment decision (FID) to first oil/gas in under 3-4 years, even for larger integrated developments with midstream components. Globally, this trend was observed with Zohr in Egypt, which produced first gas only 22 months after the FID, and more recently with for Liza in Guyana.
Aside from phased approaches, shorter development timelines are enabled by a continuing push towards standardisation, both with production drilling and well design. Furthermore, the offshore environment continues to move towards subsea tie-backs and floating production, storage, and offloading (FPSO) units are the dominant development concept.
Demand for natural gas will accelerate in 2020, as it will increasingly be used to replace coal and gas for power generation, as well as be increasingly employed as a main petrochemical feedstock. In 2020, 99 new gas projects are expected to start production and while the number of oil projects is larger at 112, gas projects will be producing 17% more hydrocarbons on a per barrel of oil equivalent (boe) basis, by 2023 once they reach maturity. This indicates that new gas projects are larger in scale on average than upcoming oil projects and points to the importance of liquefied natural gas (LNG) to global oil and gas chain.
Rise of electric vehicles (EVs) and shift to gas-powered electricity will put downward pressure on global oil demand. With uncertain long-term demand, oil and gas operators will shy away from high-cost oil reserves. While 14 ultra-deepwater oil and gas projects are expected to commence production in 2020, all but two projects are located in Brazil and the United States Gulf of Mexico.
Advancements in drilling and fracturing methods allowed for the production of hydrocarbons from previously untapped sources, such as ultra-deepwater locations or low-permeability shale formations. Shale oil production in the US ultimately changed the global oil and gas geopolitical landscape.
New technologies, ranging from artificial intelligence (AI) enabled drilling to remotely-controlled production facilities will allow for the reduction in production costs, while driving capital and operational efficiencies.