(Repeats story from Thursday)
* A fifth of projects at risk with oil at $80/barrel- Rystad
* Oil prices drop puts economics of some projects in doubt
* Canadian oil sands, LNG projects at high risk of delays
* Some North Sea, Arctic and Gulf of Mexico fields on hold
By Ron Bousso
LONDON, Dec 4 Global oil and gas exploration
projects worth more than $150 billion are likely to be put on
hold next year as plunging oil prices render them uneconomic,
data shows, potentially curbing supplies by the end of the
As big oil fields that were discovered decades ago begin to
deplete, oil companies are trying to access more complex and
hard to reach fields located in some cases deep under sea level.
But at the same time, the cost of production has risen sharply
given the rising cost of raw materials and the need for
expensive new technology to reach the oil.
Now the outlook for onshore and offshore developments - from
the Barents Sea to the Gulf or Mexico - looks as uncertain as
the price of oil, which has plunged by 40 percent in the last
five months to around $70 a barrel.
Next year companies will make final investment decisions
(FIDs) on a total of 800 oil and gas projects worth $500 billion
and totalling nearly 60 billion barrels of oil equivalent,
according to data from Norwegian consultancy Rystad Energy.
But with analysts forecasting oil to average $82.50 a barrel
next year, around one third of the spending, or
a fifth of the volume, is unlikely to be approved, head of
analysis at Rystad Energy Per Magnus Nysveen said.
"At $70 a barrel, half of the overall volumes are at risk,"
Around one third of the projects scheduled for FID in 2015
are so-called unconventional, where oil and gas are extracted
using horizontal drilling, in what is known as fracking, or
Of those 20 billion barrels, around half are located in
Canada's oil sands and Venezuela's tar sands, according to
For a graphic on the outlook for global oil and gas projects
click here: link.reuters.com/nab63w
ASSESSING THE ECONOMICS
Geographically, the projects on the balance are widespread.
Chevron's North Sea Rosebank project is among those
with a shaky future and a decision on whether to go ahead with
it will likely be pushed late into 2015 as the company assesses
its economics, analysts said.
"This project was not deemed economic at $100 a barrel so at
current levels it is clearly a no-go," said Bertrand Hodée,
research analyst at Paris-Based Raymond James. He estimates a
development cost of $10 billion for Rosebank, with potential
reserves of 300 million barrels - meaning the Chevron would only
recoup $33 a barrel.
Even with oil at $120 a barrel, the economics of some
projects around the world were in doubt as development costs
soared in recent years. Chevron's Rosebank project has already
been delayed for several years.
In response to a question from Reuters, the company said
"the Rosebank project is in the Front End Engineering and Design
phase. The review of the economics and the additional
engineering work is progressing... It is premature to make any
statements on an FID date."
Hodée said any offshore project with a development cost
above $30 a barrel would most likely be put on hold in current
Norway's Statoil this week said it had postponed
until next October -- a six-month delay -- a decision to invest
$5.74 billion in the Snorre field in the Norwegian Sea as its
profitability was under threat.
New oil fields typically require four to five years to be
developed and billions before the first drop of oil is produced.
Any cutbacks in oil production bodes ill for international
oil companies that are already struggling to replace depleting
reserves as exploration becomes harder and discoveries smaller.
It also points to tighter supplies by the end of the decade.
Projects in Canada's oil sands, which require expensive and
complex extraction techniques, are the most unlikely to go ahead
given their high investment requirements and relatively slow
returns. Total recently decided to postpone the FID on
the Joslyn project in Alberta, the cost of which Hodée estimated
at $11 billion.
Shell's liquefied natural gas (LNG) project in Canada's
British Columbia, already under pressure from a looming supply
surge, faces further strain in the current price environment,
analysts said. According to research by Citi, the project
requires oil at $80 a barrel to break even.
Royal Dutch Shell's chief financial officer Henry
Simon indicated in October that it was "less likely" to go ahead
with unconventional projects in West Canada if oil falls below
$80 a barrel.
Asked by Reuters what the company's current thinking was, a
Shell spokesman would not comment on "internal decision-making."
Even in the Gulf of Mexico, one of the most attractive oil
production areas in the world, projects are facing challenges.
BP last year put on hold a decision on its Mad Dog
Phase 2 deep water project in the Gulf of Mexico after its
development costs ballooned to $20 billion and the oil major is
now expected to further delay an investment on the field's
"BP were talking positively about bringing it back, but now
it may be put on hold," BMO Capital Markets analyst Iain Reid
BP's chief financial officer Brian Gilvary however said in
an analysts briefing in October that he expected Mad Dog Phase 2
to be sanctioned in the first quarter of 2015.
Statoil's Johan Castberg field in the Barents Sea, which was
expected to get its FID in 2015, seems unlikely to get the
go-ahead at the moment given it has an estimated project cost of
$16-$19 billion, Hodée said.
Statoil said that the final project design is due in the
summer of 2015. Its giant Johan Sverdrup field in the North Sea
is still on track for development with a price tag of $32.5
(Additional reporting by Oleg Vukmanovic in Milan and Balazs
Koranyi in Oslo; Editing by Sophie Walker)