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2016-06-24 18:10:00

GLOBAL INVESTMENT DOWN $1 TLN

GLOBAL INVESTMENT DOWN $1 TLN

According to OGJ, global upstream development spending from 2015 to 2020 has declined 22%, or $740 billion, since fourth-quarter 2014. Including cuts to conventional exploration investment, the figure increases to just more than $1 trillion.

Capital expenditures in 2016-17 will be down 30%, or $370 billion, compared with pre-oil price plunge expectations. The firm expects to see further cuts throughout the year as more projects are dropped and companies struggle to break even.

Virtually every oil-producing country has seen some form of capex cuts. The deepest are in the US Lower 48, where forecast capital investment has halved in 2016-17, falling by $125 billion. This is mainly down to a big drop-off in drilling, with the onshore rig count dropping by 53% from 2015 to 2016.

A large drop off has also occurred in Russia, where investment is down 40% over the next 2 years, but much of that figure is due to the ruble depreciating vs. the dollar. Russia intends to maintain production and continue drilling. In March, the country reached another post-Soviet liquids production record of 10.9 million b/d.

The Middle East has generally been less impacted, as several countries in the region spend to maintain market share. Saudi Arabian investment, for example, will not decline during 2016-17.

Compared with expectations from before the oil-price slump, expected 7 billion boe less to be produced from 2016-2020. In the nearer term, as a result of the price drop, it forecasts 3%, or 5 million boe/d, less global production in 2016 and 4%, or 6 million boe/d, less in 2017, with onshore US accounting for 70% of the fall.

Costs not keeping pace

In the main, discretionary projects have been hardest hit with conventional pre-[final investment decision] greenfield investment alone down $80 billion from 2016 to 2020. Spending on deepwater and ultradeepwater projects has been cut nearly 40% in 2016-17. Conventional exploration investment for 2015-20 is $300 billion less than the firm expected in 2014.

Costs have not been cut as much and as quickly as the firm expected despite exploration investment more than halving since 2014, with expected spending at $42 billion/year in 2016-17. Some deepwater exploration spend has been protected by long rig contracts, but as these unwind we expect sharper cuts than in non-deepwater.

Cost deflation has played a major role in driving down spend. For example, costs in the US unconventional sector in 2015 fell 25% on average from peak in 2014. The firm's models show 2016 is likely to yield another 10%.

For now, the select few projects that are progressed will do so because costs have been cut substantially to hit economic hurdle rates. But kick-starting the next investment cycle will require more cost deflation and project scope optimization, along with confidence in higher prices and arguably fiscal incentives.

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Earlier: 

2017: SUPPLY & DEMAND BALANCE 

PRICE: $50 ISN'T ENOUGH 

SUSTAINABLE RUSSIAN OIL 

U.S. THE STEEPEST CUTS 

U.S. BANKRUPTCY & BUBBLES 

SAUDI'S TRANSFORMATION

 

 

Tags: OIL, GAS, PRICES, INVESTMENT

Chronicle:

GLOBAL INVESTMENT DOWN $1 TLN
2017, December, 15, 12:50:00

LUKOIL'S PLAN: $50

LUKOIL - The plan is based on the conservative $50 per barrel oil price scenario. Sustainable hydrocarbon production growth is planned in the Upstream business segment along with the growth in the share of high-margin projects in the overall production. In the Downstream business segment, the focus is on the improvement of operating efficiency and selective investment projects targeted at the enhancement of product slate.

GLOBAL INVESTMENT DOWN $1 TLN
2017, December, 15, 12:45:00

BP INVESTS TO SOLAR

BP - BP will acquire on completion a 43% equity share in Lightsource for a total consideration of $200 million, paid over three years. The great majority of this investment will fund Lightsource’s worldwide growth pipeline. The company will be renamed Lightsource BP and BP will have two seats on the board of directors.

GLOBAL INVESTMENT DOWN $1 TLN
2017, December, 13, 12:40:00

OIL PRICE: ABOVE $64 YET

REUTERS - Brent crude was up 69 cents, or 1.1 percent, at $64.03 a barrel by 0743 GMT. It had settled down $1.35, or 2.1 percent, on Tuesday on a wave of profit-taking after news of a key North Sea pipeline shutdown helped send the global benchmark above $65 for the first time since mid-2015. U.S. West Texas Intermediate crude was up 45 cents, or 0.8 percent, at $57.59 a barrel.

GLOBAL INVESTMENT DOWN $1 TLN
2017, December, 13, 12:35:00

RUSSIAN-TURKISH NUCLEAR

ROSATOM - On December 10, 2017, the construction start ceremony took place at the Akkuyu NPP site under a limited construction licence issued by the Turkish Atomic Energy Agency (TAEK). Director General of the ROSATOM Alexey Likhachev, and First Deputy Minister of Energy and Mineral Resources of the Turkish Republic, Fatih Donmez, took part in the ceremony.

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