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

Thames Water announces partners for its AMP7 programme

Thames Water announces partners for its AMP7 programme

The clean and wastewater projects will include schemes to provide additional resilience to potable water supplies and protecting and enhancing the environment within communities across London and the Thames Valley. The frameworks are extendable into AMP8 and could see Thames award up to £4

Suttons Tankers wins Yorkshire Water £60m AMP7/8 contract

Suttons Tankers wins Yorkshire Water £60m AMP7/8 contract

The bioresources sludge removal and transport services deal will cover the transportation for all internal liquid sludge and raw sludge cake from sewage works to sludge treatment centres. Over the course of the contract a 15% carbon savings has been forecast, which forms part of Yorkshire

Govt & Ofwat call on water companies to accelerate AMP7/8 plans

Govt & Ofwat call on water companies to accelerate AMP7/8 plans

In an joint letter to UK water companies, the Government, the Environment Agency, the Drinking Water Inspectorate, Ofwat and CCW have called on them to accelerate their existing AMP7 plans – and consider bringing future investment from 2025 and beyond forward.The letter says they can play

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.