In a comprehensive analysis looking at the impact of cost deflation on the global upstream oil & gas sector,Wood Mackenzie concludes that while operators are seeking an average cost reduction of 20-30% on projects, supply chain savings through squeezing the service sector will only achieve around 10-15% on average.
In order to ensure projects are economically viable, operators will also need to focus on project optimisation and adopt smarter ways of working with the service sector. Illustrating the need to reduce costs in the industry, Wood Mackenzie's analysis estimates that $1.5 trillion of uncommitted spend on new conventional projects and North American unconventional oil is uneconomic at $50 a barrel.…EconMatters
Low Oil Prices Kill $1.5 Trillion of Oil And Gas Projects
2 comments:
One would assume if people are spending 1/3 to 1/2 of what was previously expected, the investment should drop accordingly. With cheaper alternatives, why would people pay extra to use oil?
At least it's an investment that USA can fall on if prices raise again neutering the effect of high prices to a point, unlike other regions of the world (where higher prices instead will benefit alternative energies, like in the EU). On the long run that's bad as substitution is prevented through those schemes.
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