LONDON (Reuters) - Deepwater oil projects and complex gas facilities
worth around $200 billion have been cancelled or put on hold worldwide
in recent months due to the sharp drop in oil prices over the past year,
consultancy Ernst and Young said on Tuesday.
project cuts and delays are likely as the industry braces for an
extended period of lower oil prices as a result of a supply glut.
mind set in the industry at the moment is that prices are unlikely to
be bouncing up materially in the near term," the consultancy's Andy
Brogan said in a presentation. "There is an expectation that volatility
is with us for a reasonable period of time to come and companies need to
cope with that."
The delays in multi-billion dollar
projects that can take up to 10 years to develop, and needed to support
rising global demand for energy, could create a shortage in the future.
companies have responded rapidly to the near halving of oil prices
since last June, slashing tens of billions of dollars in capital
spending in order to boost their balance sheets and maintain dividend
payouts to investors.
"A total of $200 billion of
oil and gas projects have been deferred or cancelled," said Brogan,
global oil and gas transactions leader at Ernst and Young.
reviews are happening more frequently and probably with more rigour,"
Brogan told the World National Oil Companies Congress. "There isn't
anywhere for projects to hide."
The main 24 mega projects that have been put on ice or scrapped are spread across the globe, according to EY.
oil, many of the projects are complex, deepwater fields in the Gulf of
Mexico, the North Sea, West Africa and Southeast Asia with budgets of up
to $20 billion.
Among the most expensive are
liquefied natural gas facilities such as the Arrow liquefied natural gas
(LNG) project in Australia, operated by Royal Dutch Shell's and PetroChina <601857 .ss=""> and BG Group's Prince Rupert LNG project in Canada.601857>
often just as expensive, most oil mega-projects benefit from the
advantage of returning value within 3 to 4 years from first investment,
compared with up to 12 years for LNG projects, Brogan said.
have seen IOCs (international oil companies) already go through one
rigorous review of their portfolio. We are now seeing them turning their
attention to see how flexibility can be embedded in their portfolios