Final investment decisions (FID) within the global upstream sector are on pace to double from 2016, marking a positive turning point for the long-depressed oil and natural gas markets.

In a recent report by Wood Mackenzie, “A Big Year for FIDs: 2017 Marks a Turning Point,” researchers said they expect 25 FIDs this year, versus 12 issued in 2016.

In the first six months of this year, the industry already has witnessed 15 project sanctions, which equates to around 8 billion boe of reserves, according to Wood Mackenzie. Most were for brownfield (renovated) projects.

For full-year 2016, the 12 FIDs approved would bring in around 8.8 billion boe of reserves.

“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,” said research director Angus Rodger, who is in charge of Asia-Pacific upstream.

“Eleven of the 15 project sanctions year-to-date are either brownfield expansions on existing fields, satellite developments or subsea tiebacks,” he said. “Not only are these projects less risky than greenfield developments, they also tend to be less capital-intensive and are quicker to bring onstream, offering a quicker payback and better returns on development dollars.”

Among the FIDs launched to date this year are Italy’s Eni SpA’s Coral South floating liquefied natural gas project in Mozambique and Calgary-based Husky Energy Inc.’s White Rose West project offshore Newfoundland. Royal Dutch Shell plc in February FID’d its first development in the Gulf of Mexico (GOM) in 18 months, the Kaikias deepwater field in Mississippi Canyon. Also in late February Noble Energy Inc. launched the first phase of the Leviathan natural gas project in deepwater Israel.

And late last year BP plc sanctioned Mad Dog 2 in the deepwater GOM, a “leaner” $9 billion project that is to include a floating production platform with the capacity to produce up to 140,000 b/d gross of crude oil from up to 14 production wells.

The lower costs overall for projects are reflected in lower development capital expenditures (capex) per bbl and stronger project returns, Rodger said.

For example, on average, project capex since 2015 has fallen to $11/boe from $15/boe, while internal rates of return (IRR) are at 15% in 2017 versus 11% in 2015. IRRs “run on a flat $50/bbl Brent deck in 2017, escalating at 2%/year thereafter.”

A clear trend in FIDs is domination by the oil majors, which should pull the trigger on eight of 15 project sanctions this year, according to Wood Mackenzie.

Put another way, of the 35 mid-to-large projects, i.e. with at least 50 million boe of commercial reserves sanctioned since the start of 2015, 19 are operated by a Big Oil producer, researchers said.

That rate for oil major FIDs equates to slightly below 14 billion boe of the 22 billion boe total of commercial reserves sanctioned. Researchers estimated that these projects would make up 1.6 million boe/d net of new production for the oil majors by 2024, which is around 6% of total output from the peer group.

Conversely, national oil companies (NOC) have tightened their purse strings and have been noticeably inactive on new project investments over the period from 2015 through the first half of 2017, said Wood Mackenzie.

“Operating less than 1 billion boe of the 22 billion boe total of sanctioned commercial reserves, NOCs need to be on the lookout for investment opportunities as many face significant production declines post-2020,” researchers said.

“The second half of 2017 could see another 11 billion boe of reserves hit FID, and again we expect strong activity from the majors,” said Rodger. “However, it is also important to note that last month ExxonMobil Corp. sanctioned the first phase of development on the 1.5 billion boe Liza oilfield,” one of the largest oil discoveries of the past decade, located offshore Guyana.

“This goes to show that it is not just about short-cycle investments,” said Rodger. “The best greenfield opportunities are also moving forward to commercialization.”

Rystad Energy in early June also said it expects more global FIDs this year than in 2016. Analysts tracked FID delays since the second half of 2014 to post-appraisal pre-sanctioned upstream projects.

“We find 17 of these delayed projects have since been launched, accounting for an estimated $78 billion of development spending,” Rystad analysts said. About 40% of the spending is for Chevron Corp. unit’s Tengizchevroil Tengiz expansion in Kazakhstan.