The plunge in oil prices has seen the deferral of 46 big oil and gas projects. Photo / Bloomberg
The world’s big energy groups have shelved US$200 billion ($298
billion) of spending on new projects in an urgent round of cost-cutting
to protect dividends as the oil price slumps for a second time this
The sell-off in oil has been matched by a broader slump in
copper, gold and other raw materials, pushing the Bloomberg commodities
index to a six-year low over concerns of weaker Chinese growth and
rising supplies.Energy firms cut costs in bid to shore up dividends.
The plunge in crude prices since last northern
summer has resulted in the deferral of 46 big oil and gas projects with
20 billion barrels of oil equivalent in reserves – more than Mexico’s
entire proven holdings – according to consultancy Wood Mackenzie.
from Rystad Energy, a Norwegian consultancy, found in May that US$118
billion of projects had been put on hold, but the Wood Mackenzie survey
shows that the toll is now much greater.
Brent crude, which has more than halved in the past year, stabilised in March.
But it has come under renewed pressure after the price
fell below US$55 a barrel this month – a 20 per cent decline from a
five-month high reached in early May.
Investors have been nervously watching the sector after the S&P energy index fell more than 7 per cent in the past month.
rout in other commodity prices has also hurt mining companies, which
are slashing jobs and shutting operations as they try to cope with the
fallout of the end of the gold and copper boom.
postponing big production plans while waiting for costs to come down are
UK-listed BP, Anglo-Dutch Royal Dutch Shell, US-based Chevron, Norway’s
Statoil, and Australia’s Woodside Petroleum.
More than half the
reserves put on hold lie thousands of metres under the sea, including in
the Gulf of Mexico and off west Africa, where the technical demands of
extracting crude and earlier inflation have pushed up costs.
is the biggest single region affected, with the development of 5.6
billion barrels of reserves, almost all oil sands, having been deferred.
upstream industry is winding back its investment in big pre-final
investment decision developments as fast as it can,” Wood Mackenzie said
in a report.
“This is partly because it is one of the quickest ways to free up capital in response to low oil prices.”
added that the number of large upstream projects expected to be fully
approved during 2015 could probably be counted “on one hand”.
is in the process of making deeper cuts to its capital spending this
year, cutting its most recent estimate of US$33 billion expenditure.
Total is expected to reveal that it has managed greater efficiency
savings than expected just a few months ago, while BP is likely to spell
out the impact of falling supplier costs on its spending.