The crashing oil price is taking ever more casualties.
Oil’s slump to 13-year lows has led to savage cutbacks in investments by energy companies. Industry consultancy Wood Mackenzie says 68 large upstream oil and gas projects worth $380 billion have already been put on hold.
The delays mean the equivalent of 27 billion barrels of commercially viable oil and gas will be left in the ground for now.
“The impact of lower oil prices on company plans has been brutal,” said Angus Rodger, an analyst at Wood Mackenzie.
The consultancy concludes that the cost of big projects has not fallen enough to justify massive upfront investment. Oil has plunged by about 70% from the June 2014 peak of almost $108.
Instead of concentrating on finding new sources of oil and gas, big companies are now having to focus on how to “free up the capital just to survive at low prices,” Wood Mackenzie said.
And it’s not just the low price, but the prospect that oil won’t rebound for a long time that is killing projects, particularly costly deepwater investments.
BP (BP) announced this week it was cutting 4,000 jobs, including 600 from its deepwater North Sea operations in Aberdeen, Scotland.
Many of the 68 projects would have taken years to come on stream. Delaying them will deprive markets of 1.5 million barrels of oil per day by 2021, and nearly 3 million barrels by 2025, the report concludes.
Most of the delayed oil projects are in Canada, Angola, Kazakhstan, Nigeria, Norway and the United States.
Wood Mackenzie warns that even more projects could be delayed if prices don’t recover soon. It believes oil would have to climb back above $60 a barrel before companies start dusting off their plans again.