Energy majors brace for long period of low oil and gas prices

London

ENERGY companies reporting dismal results are bracing themselves for a lengthy period of low oil and gas prices. The question that analysts are asking, however, is whether major cuts in capital and exploration expenditure are paving the way for an eventual recovery. The key variable is Saudi Arabia, leading producer of the Organisation of the Petroleum Exporting Countries (Opec) which, as a group, produces around 40 per cent of global supplies.

Illustrating the gloom of major non-Opec producers, Royal Dutch Shell reported a third-quarter net loss of US$7.42 billion, compared with a profit of US$4.46 billion in the same period in 2014. The worst loss in more than a decade was the result of a US$7.89 billion charge because drilling was terminated in Alaska and an 80,000 barrel a day oil-sands project in Canada. Canada's oil sands hold the world's third largest crude reserves but carry some of the highest project breakeven costs, analysts said. The cuts were made on the grounds of pessimism regarding the outlook for oil and natural gas prices which contrasts with the optimism in 2013 and 2014 when Brent prices were over US…