April 5 (UPI) -- Lower costs and improved market conditions led to more oil and gas investments, though spending last year was below the historic average, analysis found.
Energy consultant group Wood Mackenzie found that average spending last year on major projects, those with commercial reserves of more than 50 million barrels of oil equivalent, was around $2.7 billion, the lowest in a decade. Average spending over the last decade was closer to $5.5 billion.
Jessica Brewer, a principal analyst at Wood Mackenzie, said operators are spending more on mature basins, expansions to existing infrastructure or on projects that can be tied in to nearby producers. Less is being spent on new oil and gas field developments.
The Norwegian subsidiary of Lundin Petroleum in late March confirmed two separate oil and gas discoveries about 12 miles south of the producing Edvard Grieg field in the North Sea. The Norwegian Petroleum Directorate, the nation's regulator, said the operator would likely develop the prospect by linking to existing infrastructure on Edvard Grieg.
For Norway, the Johan Sverdrup field would be the largest new project in years. All told, the government expects total investments to improve, though Grethe Moen, the president and CEO of state-owned oil and gas company Petoro, said the industry needs to look beyond mega projects like Johan Sverdrup to prove additional profitable resources.
"Both investors and operators want to see faster cycle times and quicker returns on upstream projects," Wood Mackenzie's Brewer said in a statement emailed to UPI. "We should continue to see operators favoring a 'leaner and meaner' path in 2018."
Nevertheless, Wood Mackenzie found that improved market conditions and improvements on where operators can break even in terms of the price of oil led to an uptick in industry sentiment. The most competitive prospects are in the waters offshore Mexico, Norway and the United Kingdom. For natural gas, the bonanza could be in Iran, Norway and Oman.
Separately, Angus Rodger, a research director at Wood Mackenzie, said liquefied natural gas in particular is a bright spot on the horizon, though questions remain on investment rigor.
"While it is good news that operators have found ways to grow in tough business conditions, the big question is whether the industry is actually spending enough," he said.