Big oil companies to cut investments

More than $100bn of spending on new projects by the world’s energy companies has been slowed, postponed or axed following the oil price plunge, evidence of the drastic industry action that will curb output in coming years. Companies including Shell, BP, ConocoPhillips and Statoil have led moves to curtail capital spending on 26 major projects worldwide.

The delays and cancellations, many disclosed quietly in recent weeks and months, come amid a wider retrenchment by the industry that has seen thousands lose their jobs and led to a slowdown in the US shale boom. The research by consultancy Rystad Energy shows that producers have targeted some of the highest-cost areas as they have trimmed spending, with nine Canadian oil sands projects put back, each ranging from $1bn to $10bn in planned expenditure. “Things are moving to the right and the particular area that is suffering is western Canada,” said Alastair Syme, energy analyst at Citigroup. “It is one area of the world outside US shale, where companies are actually stopping investment in train.” After reaching $115 a barrel last June, the price of oil plummeted to a low of $45 in January, as surging output of US shale oil and softening demand in Asia stoked a glut in the market. The decline accelerated after Opec, led by Saudi Arabia, decided not to cut production to support prices. Crude has since rebounded to around $66. While the $118bn total expenditure would be spread over several years, the impact of deferring investment on such projects would be to delay future production, with as many as 1.5m barrels a day — nearly 2 per cent of global oil output in 2013 — to come two years later than planned, said Rystad. The project deferrals that have already been announced could be just the start of a big wave of delays. Goldman Sachs has identified 61 new projects, more than half of those awaiting final approval, as uneconomic at an oil price of $60 a barrel, putting more than $750bn of capital expenditure at risk and 10.5m barrels a day of peak production