As oil prices fall and production costs rise, more than US$150 billion of early-stage oil and gas exploration projects may no longer be economically feasible.
A total of 800 projects worth $500 billion are scheduled for final investment decisions in 2015, according to Norwegian consultant Rystad Energy in a Reuters report. The projects represent about 60 billion barrels of oil. But with analysts forecasting oil to average US$82.50 a barrel next year, around one third of the spending is unlikely to be approved, head of analysis at Rystad Energy Per Magnus Nysveen said.
Over the past five months, oil prices have dropped 40 percent to around US$70 a barrel. “At $70 a barrel, half of the overall volumes are at risk,” Nysveen said.
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roduction costs have risen as developers shift to harder to reach onshore fields — largely using “unconventional” horizontal drilling — and those located in ever deeper waters offshore.
Those in jeopardy are located in different regions. Among those listed as uncertain are Chevron’s North Sea Rosebank, Statoil’s Snorre field in the Norwegian Sea and its Johan Castberg field in the Barents Sea, Shell’s LNG project in Canada’s British Columbia and BP’s Mad Dog 2 development in the Gulf of Mexico. Early-stage projects in Alberta, Canada’s oil sands are the most likely to be cut, according to the report.