Nearly 2% Of Global Crude Could Be Cash Negative at $40 Brent

A company looking to reduce expenditure for the next two or three years may prefer to operate with a small loss versus decommissioning a field at the cost of hundreds of millions of dollars.

In Latin America, where a number of heavy oil projects become marginal at lower oil prices, governments dependent on these revenues may provide royalty relief to producers to maintain that production.

The slide in global crude production prices has prompted producers to cut capital expenditures and drilling plans, leaving many to wonder how low prices would go and if the Organization of Petroleum Exporting Countries (OPEC) would budge from their pledge not to cut production. Saudi Arabia and its Gulf OPEC allies haven’t shown any sign of considering a cut to boost oil prices, despite oil dipping below $50/barrel this week, Reuters reported Thursday. OPEC ministers and delegates have blamed non-OPEC producers such as Russia, Mexico and Kazakhstan, as well as U.S. shale and tight oil production, for the oversupply of oil in the world market.

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