Woodside CEO Wary On Timing, Extent Of Any Oil Market Recovery
MELBOURNE, Feb 18 (Reuters) - The world's oil market is likely to see a drop in supply over the next three to five years as cheap debt dries up and majors cut capital spending, but the timing of any recovery in prices is too difficult to call, Woodside Petroleum's CEO said.
The uncertain outlook is deterring Australia's top oil and gas producer from going ahead with its biggest growth project, Browse floating liquefied natural gas (LNG), or from chasing acquisitions.
Key factors pointing to tighter supply include harder access to capital, and oil and gas majors' slashing capital spending by 30 to 40 percent which in turn forces the oil service industry to retire rigs, Chief Executive Peter Coleman told Reuters in an interview.
"If we're sitting here in a year's time and oil is still below $45, then I think the seeds of structural change have been well sown and then you'll start to see shoots coming up around that. But it'll probably take six to 12 months before we start to see anything material, of significance," he said.
But Coleman added it was difficult to be bullish as too many producers cannot afford to cut output. Woodside is among the first oil companies to have cut its long-term projections, predicting $75 a barrel in real terms from 2021 - 20 percent lower than an earlier assumption.
Smaller and mid-sized producers, especially U.S. shale oil and gas producers loaded with debt, are reluctant to shut any wells. Even if they do shut them, they can easily restart them.
At the same time, some OPEC and large non-OPEC producers are facing budget problems, encouraging them to keep producing at full tilt, despite efforts by Saudi Arabia, Qatar and Russia to forge an agreement to freeze output.
They are likely to remain reluctant to cut output as long as U.S. shale oil producers remain viable.
"So I don't expect any near term relief from those guys until they actually see structural capacity go out of the business," Coleman said.
Woodside still likes assets in Papua New Guinea, even after failing in an $8 billion takeover approach to PNG-focused Oil Search Ltd last year.
These include the PNG LNG project, run by ExxonMobil Corp and co-owned by Oil Search and Santos, and the Elk Antelope gas fields, run by France's Total and co-owned by InterOil Corp as well as Oil Search, but Coleman said there was no chance of a deal with Oil Search and others were too expensive.
(Reporting by Sonali Paul; Editing by Edwina Gibbs)
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Operates 3 Offshore Rigs
- Chevron Starts LNG Output at Australia's Wheatstone (Oct 09)
- Global LNG: Faltering Supply Prompts Short-Covering Price Rally (Aug 11)
- Woodside Sees Output Growing 15 Pct Over Next Three Years (May 23)