More Oil Spending Cuts Coming as UAE Warns About Supplies
(Bloomberg) -- International oil companies will probably cut investment spending about $370 billion this year and next, according to Wood MacKenzie Ltd., just as the United Arab Emirates warned about a “massive” number of projects being delayed because of the drop in crude prices.
The investment cuts will mean a 3 percent reduction this year in oil and natural gas production, equivalent to 5 million barrels of oil, and another 4 percent, or 6 million barrels, in 2017, Jessica Brewer, a Middle East analyst for WoodMac, said in an interview at the company’s Dubai office Thursday. The global oil industry has postponed a number of projects, raising the risk of a slump in output and a potential shortfall in supply, U.A.E. Energy Minister Suhail Al Mazrouei told reporters in Abu Dhabi Thursday.
Benchmark Brent crude plunged from more than $115 a barrel in June 2014 to less than $28 in January this year, and traded below $48 Thursday. The decline has forced explorers to delay projects, cancel billions of dollars of investments and eliminate thousands of jobs. Patrick Pouyanne, chief executive officer of Total SA, France’s largest oil company, said last month that investment cuts in the industry threaten to cause an oil shortage by 2020.
‘Towards Balancing’
“This is what we are concerned about,” Al Mazrouei said. “The number of postponed projects is massive.” Decreased investment in oil production can crimp supply in the future, even as “the market is moving towards balancing,” he said.
The heads of Exxon Mobil Corp., BP Plc, Total and Italy’s Eni SpA are scheduled to join Al Mazrouei and the chief executive officer of Abu Dhabi National Oil Co. next week in Abu Dhabi for the largest oil conference in the U.A.E. capital to discuss global supply and demand and the industry’s future.
“Companies are going to be cautious” about deciding on new investments, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said by phone. “I don’t think anyone will be jumping back in with a significant increase in capital investment next year.” Prices will average about $60 a barrel next year, Bernstein forecasts.
The International Energy Agency estimates spending in exploration and production fell 25 percent in 2015 and will decline by the same amount this year, cutting more than $300 billion in investment. It sees no signs companies will resume spending in 2017.
Spending cuts in capital investment and deferred projects will amount to $1 trillion for the period from 2014 to 2020, according to WoodMac. By the end of the decade, those projects that didn’t go ahead will account for the equivalent of about 3 million barrels a day of supplies. Most Middle Eastern producers have moved ahead with projects, Brewer said.
“We in the U.A.E. are trying not to postpone projects in a major way,” Al Mazrouei said. “All projects around the world should be equal to the amount of demand.”
The Organization of Petroleum Exporting Countries is debating production cuts aimed at increasing prices. Investment is likely to resume in 2018 if prices stay at least at $50 a barrel as demand rises, Beveridge said. “There is a price that will bring back some investment but not too much to flood the market.’’
To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net; Mahmoud Habboush in Abu Dhabi at mhabboush@bloomberg.net. To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net Claudia Carpenter, Amanda Jordan
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.
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- Oman Sees Increasing Ship-to-Ship Transfers of Russian Oil Bound for India
- Ithaca Energy Studies Deal for Eni's UK Upstream Assets
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- UK Oil Regulator Publishes New Emissions Reduction Plan
- PetroChina Posts Higher Annual Profit on Higher Production
- McDermott Settles Reficar Dispute
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- USA Commercial Crude Oil Inventories Increase
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call
- India Halts Russia Oil Supplies From Sanctioned Tanker Giant
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Centcom, Dryad Outline Recent Moves Around Red Sea Region
- PetroChina Set to Receive Venezuelan Oil
- Czech Conglomerate to Buy Major Stake in Gasnet for $917MM
- US DOE Offers $44MM in Funding to Boost Clean Power Distribution
- Oil Settles Lower as Stronger Dollar Offsets Tighter Market
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea