Wood Mac: Spending habits for oil and gas industry changing

A report from the consultant group found the industry has sanctioned 15 new oil and gas developments, which is the equivalent of about 8 billion barrels of new reserves. That compares with final investment decisions for 12 new projects last year, or about 8.8 billion barrels of oil equivalent.

"These are positive signs that the upstream industry is continuing on the road to recovery and that the more competitive conventional projects are moving down the cost curve sufficiently to attract new investment," Angus Rodger, Wood Mackenzie's research director for exploration and production in the Asia-Pacific region, said in an emailed statement.

Of the 15 projects sanctioned this year, 11 of them were for expanding prospects that have reached a production plateau and need further stimulation, or for linking up to nearby fields already in production. The report found those type of projects, known in the industry as brownfield developments, are less expensive than new field development and tend to have a shorter progression.

In late June, the British subsidiary of Spanish energy company Sinopec said first gas was developed on schedule from its Cayley field in the central North Sea, the final phase of the company's development from the broader Montrose area in British waters. Installed in 1976, the company said the production gains from the region will extend the life of the entire area for another 15 years.

Lower crude oil prices last year starved the industry of the capital needed to invest in exploration and production. The price for Brent crude oil, the global benchmark, is about $2 per barrel more than this time last year, but about $9 per barrel below its 2017 peak and more than half the price it was about three years ago.

With the industry learning to be more efficient with work plans and capital in the low-price era, Wood Mackenzie said brownfield developments offer a much better return on investment than new, or greenfield, developments.

"This is reflected in lower development capital expenditure per barrel and stronger project returns," Rodger said. "For example, on average, project capex is down to $11 per barrel of oil equivalent versus $15 per boe in 2015."