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Reaching Final Investment Decision – The Key Considerations

November 4, 2019
Mike Callis

The Rise in Financial Investment Decisions (FIDs)

FID represents one of the most integral stages to the delivery of energy projects, with its importance having become more prevalent in the energy industry over the past few years. This critical phase of any project relies on corporate finance decision makers giving the go ahead – or not – for projects to proceed and be executed successfully. It also represents an integral moment for investors to determine the likelihood of success of any projects they choose to back.

With industry analysts expecting the volume of FIDs throughout 2019 to be triple those of 2018, and collective oil and gas volumes – excluding shale and tight oil and gas prospects – equivalent to 46 billion barrels of oil, it is indicative of a flourishing industry.

It raises questions of why such growth is occurring and where.

So, why the growth?

Rystad Energy, whose research forecasts the aforementioned trebling of FIDs in 2019, identifies a large proportion of FIDs are from offshore deepwater, offshore shelf, and onshore markets. Much of this can be attributed to projects in Africa, Australia, the Middle East, and Russia – regions where a threat of reduced liquified natural gas (LNG) supplies can be expected in the mid-2020s.

Another contributing factor to the growth comes in the form of project delays. Five years ago saw the collapse of oil prices, leading to many operators halting their plans to reassess costs and planning. These delays are now beginning to bear fruit, with a quarter of all FIDs in 2019 relating to delayed projects.
This growth is a positive indicator for energy projects, with contracts running into the billions of pounds likely to be awarded, but getting them approved is a challenge in itself, and leads to assessment of the considerations of energy FIDs.

Main Considerations of Energy FIDs

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