You are here
Oil price rout seen as threat to US$1.5t of new projects
[SYDNEY] About US$1.5 trillion of potential investment in new oil projects isn't viable with crude prices at US$50 a barrel, highlighting the need to reduce costs, according to consultant Wood Mackenzie Ltd.
The proposed projects, including spending on North American shale, are "now out of the money, or in starker terms, uneconomic at US$50 oil," James Webb, upstream research manager at Wood Mackenzie, said in a statement Monday. "This spend is very much at risk." While operators want to cut costs by 20 per cent to 30 per cent on new projects, supply-chain savings will only achieve cuts of 10 per cent to 15 per cent on average, according to Wood Mackenzie.
A drop of about 50 per cent in crude prices over the past year has forced oil companies to cut spending and defer new projects. Brent, the benchmark for half the world's oil, was trading at US$47.78 a barrel, up 31 US cents, at 1:06 pm in Sydney. A glut may keep oil prices low for the next 15 years, according to Goldman Sachs Group.