OIL AND GAS EXPENDITURE DECLINES BY OVER $1 TRILLION WORLD-WIDE

It has been revealed by Wood Mackenzie that upstream and exploration spending has been reduced worldwide by over $1 trillion due to fall in oil price since mid-2014.

It is very obvious Nigeria is feeling the brunt of the heat as a lot of oil servicing firms have downsized enormously, on the other hand indigenous operators are finding it difficult to meet their financial responsibilities to their financial institutions due to recurrent cancellation of contracts by IOCs.

It was also made clear by the report that a lot of conventional oil projects are facing risk of either cancellation or deferral if international prices remain at $50 per barrel.

According to Wood Mackenzie, a popular publisher of the economics of the world’s oil and gas fields, deep-water projects offshore West Africa and in non-OPEC countries may not make any financial return at the present market price of $50 per barrel. “In conventional oil projects, deepwater west Africa is a tough place to be. A number of projects in Angola and in Nigeria have been pushed out of our analysis,” as reported by Simon Flowers, Wood Mackenzie’s analyst, told Reuters.

In the meantime, Sonangol, Angola’s national oil company has put all talks on hold that are associated with assets sales, while in Nigeria, the government has warned about using funds kept aside for oil projects to fill budget deficits.

However, analysis made by Wood Mackenzie reveals that aggressive cost cutting had increased the percentage of projects viable below $60 per barrel to 70% a year ago.

A 15% reduction in international oil servicing costs, which includes payment for drilling rigs or personnel , have helped in boosting some project economics, especially in the U.S. tight oil market.

It was further said that as much as 9 million bpd of potential fresh oil supply is currently commercially possible at an oil price of $60 per barrel, as against 7 million bpd in the preceding study.

“You will begin to see more FIDs (final investment decisions) come through by the end of this year and early 2017,” said Flowers, adding that U.S. tight oil and near field projects will be targeted as they are cheaper to bring on stream.