Australasia set for FID-rich 2021 after 2020s oil output surprise

Even though 2020 was the year oil and gas producers reduced output to balance the pandemic-hit demand, Australasia’s production did not only stay resilient, but it also rose a little, a Rystad Energy report reveals. The market analyst estimates combined petroleum output across all products was 1.210bn boe last year, little changed from 1.208bn boe in 2019.

Within this, Australasia – Australia, New Zealand, Timor-Leste and Papua New Guinea – produced an average 160,000 b/d of crude oil, an increase of about 3% from 2019. The largest contributor to crude oil production growth was Woodside’s Greater Enfield project, which is estimated to produce about 28,000 b/d. The region pumped condensate at an average rate of 265,000 b/d in 2020, down approximately 10% from 2019, while natural gas liquids (NGLs) increased roughly 10% to about 114,000 boe/d.

Rystad Energy estimates Australasian gas production averaged 16.6bn cf/d in 2020, relatively flat year-on-year. The top gas-producing project in the region was Chevron’s Gorgon, with an estimated output of close to 2.1bn cf/d (LNG and domestic gas).

Upstream capital and operating expenditures have been sharply reduced alongside exploration budgets as a result of the coronavirus pandemic. Woodside, one of the largest producers in Australia, halved its total expenditure to about $2.4bn in 2020, and other companies with a strong presence in Australia, like Santos, Beach Energy and Origin Energy, also slashed their 2020 spending plans.

Projects that were to be sanctioned over the 2020–2022 period have been deferred due to the prevailing situation. Rystad Energy expects these delays will reduce Australasia’s capital expenditure between 2020 and 2022 by approximately $5bn.

However, new upstream oil and gas projects worth about $15bn are forecast to be sanctioned in Australasia this year, representing a huge boost compared to the $1.2bn committed to new projects in 2020. This jump in activity, however, is almost entirely dependent on the anticipated final investment decisions (FIDs) being taken for the Scarborough and Barossa LNG projects in Australia. Without these major FIDs, Rystad Energy anticipates new commitments this year of only $526mn in the region, representing a 57% drop from 2020 for major E&P companies. Virtually all sanctioning activity expected this year in the region will be in Australia.

The impact of project delays is most apparent in Rystad Energy’s production forecasts for the 2024 to 2030 period. It now expects that Australian gas production in 2030 will be 101mn boe lower than its previous forecast – a drop of about 9%. On a combined liquids and gas basis, the market analyst now forecasts a 2030 production of 1.26bn boe, 188mn boe below its previous forecast and representing a 13% drop.

Record year for renewables
Meanwhile, 2021 is set to be a busy one for Australian renewable energy players, with an expected 5.3 GW of utility PV, wind and battery projects expected to complete commissioning. Activity will be concentrated to the West Murray region for utility PV commissioning and western Victoria for wind.

New utility PV and wind construction is set to bounce back in 2021 from a four-year low in 2020. Rystad Energy estimates the additions at 2.1 GW in utility PV projects, 2.8 GW of wind and 0.45 GW from batteries. However, beyond 2021 appears challenging as grid capacity for new connections becomes limited.

When it comes to projects that break ground, the record for new construction starts in the utility PV sector was set in 2018, when 2.1 GW started construction. This year is set to challenge that record as several large-scale projects have secured power purchase agreements (PPAs) and are expected to begin construction in 2021.

Utility wind construction in Australia is also gearing up for a record year in 2021. About 2.9 GW of utility wind assets have currently signed PPAs but have yet to start construction.