According to a new report from Wood Mackenzie, there could be up to 30 upstream projects with a size of over 50 million barrels of oil equivalent (boe) reaching Final Investment Decision (FID) in 2024. This represents an increase from the 22 projects in 2023. The report, titled “Class of 2024: benchmarking this year’s upstream FIDs,” highlights an anticipated rise in project activity this year, with an estimated $125 billion in investment and the potential for 14 boe to be sanctioned.
Ross McGavin, principal analyst at Wood Mackenzie, noted that the delay or postponement of many projects in previous years is expected to lead operators to commit to a greater number of projects in 2024. McGavin further mentioned that National Oil Companies (NOCs) in the Middle East are set to have the most projects, while the Majors will also be active, particularly focusing on advantaged deepwater resources.
Wood Mackenzie’s Lens Upstream analysis indicates that as the number of projects increases in 2024, project breakevens are projected to decrease, resulting in a rebound in returns (Internal Rate of Returns – IRRs) that dipped in 2023. The report states that the class of 2024 projects require an average oil price of $47 per barrel to generate a 15 percent IRR, slightly lower than the class of 2023’s average of $49 per barrel. The weighted average IRR for the class of 2024 is 23 percent, supported by a higher proportion of liquids (57 percent in 2024) compared to 2023 (46 percent) and the five-year average (51 percent).
McGavin highlighted that the higher liquids content and higher long-term price assumptions contribute to improved IRRs for the projects in 2024. Most of these projects are expected to have payback periods of less than eight years from FID, as operators prioritize rapid execution, lower unproductive capital, and higher returns.
The report also reveals that the average emissions intensity for the FID class of 2024 is 13.6 kgCO2e/boe, significantly lower than the global upstream average of 21 kgCO2e/boe (including liquefaction emissions) according to Wood Mackenzie’s Emissions Benchmarking tool. McGavin emphasised the role of new projects, particularly deepwater projects, in meeting emission reduction goals, as they continue to demonstrate low emissions intensity and economic returns.
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