Betting on Oil Price Recovery, Statoil Snips Where Rivals Slash
OSLO, April 23 (Reuters) – Norway's Statoil is cutting investments less than any other oil major this year, positioning for a crude price recovery but taking a risk should the slump be protracted.
By continuing to spend on projects that won't start making returns for a up to a decade, the state-controlled energy giant hopes to sidestep the kind of boom-to-bust cycle often seen in the oil sector. Crude oil prices halved last year.
"We as an industry tend to have a permanent bipolar disorder. We are either euphoric or depressed," Statoil Chief Economist Eirik Waerness said.
"Maybe this time it will be slightly different and this will allow us to look through the cycle."
The strategy reflects Norway's tradition of long-term thinking and also some pressure to maintain work from the country's powerful regulator.
But is not without risks. If crude prices recover quickly, Statoil will be better positioned to resume growth, but a long period of cheap oil could increase debt and hurt its credit rating, and force the company to slash dividends.
According to industry-wide budgets finalised this month, Statoil plans to cut spending by 8 percent this year while rivals slash by an average of more than 20 percent. Its spending on exploration will fall just 9 percent, even though an offshore discovery won't produce oil for eight to 10 years.
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