Low crude price threat to US$500Bn of projects

An offshore drilling rig. Photo courtesy of Juan Ramon Rodriguez Sosa
An offshore drilling rig. Photo courtesy of Juan Ramon Rodriguez Sosa

Rising oil extraction costs and falling world prices for crude are undermining the viability of more than US$500Bn of oil major’s capital spending plans, according to a report from the Carbon Tracker Initiative (CTI) think tank.

 

CTI says some of the capital projects planned over the next ten years should be either deferred or cancelled or else shareholder value will be destroyed as the huge sums invested fail to generate a sustainable return.

 

CTI’s analysts say that US$548Bn of capital investments in the ten years to 2025 need a crude oil market price of $95 a barrel to be viable. Some $357Bn of the total planned investment will be in high cost projects that have yet to be developed.

 

The analysts say short term cash flows will not be adequate to maintain dividend payments to shareholders as well as financing these plans.

 

The World Bank and the United States Energy Information Administration recently predicted that nominal crude oil prices would rise to around $109 a barrel by 2025. The report identifies 20 major projects costed at $90.7Bn that it says could be cancelled because they need a crude price of at least $110 a barrel to break even. Sixteen of these projects could be regarded as higher risk as they involve deep water drilling or processing oil sands.

 

CTI says Conoco Phillips and Royal Dutch Shell have the most production that could potentially be at risk from low crude prices. Total and Exxon Mobil are said to have the highest percentage of capital investments dependent on higher crude prices.

Please rate

Comments 

Name
Email
  Ctrl + Enter

Most Read

 FirstGroup to launch budget London to Edinburgh rail service

FirstGroup to launch budget London to Edinburgh rail service

FirstGroup is to launch a budget direct London-Edinburgh rail service next month, which it hopes will lure air passengers to the train as a cheaper and greener alternative.   The new service, branded Lumo, will have just one single class of travel and the company hopes it will carry more than

Record infrastructure pipeline investment to support future workforce

Record infrastructure pipeline investment to support future workforce

This infrastructure pipeline includes the projected future workforce demand based on planned investment in projects and programmes. The Infrastructure and Projects Authority (IPA) estimates that in the four-year period up to 2024/25, over 425,000 individuals will be needed on an average

One year on: HS2 reaches 20,000 jobs landmark

One year on: HS2 reaches 20,000 jobs landmark

Companies right across the country are now forming part of HS2’s ever-growing supply chain. Contracts have already been awarded to over 2,200 businesses, 97% of which are UK-based.   HS2’s jobs boost is also benefitting those in need, with bespoke initiatives designed to

This website uses cookies to enhance your user experience. By continuing to use this site, you consent to our use of these cookies. See our Cookie Policy.