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    Deferred upstream projects tally reaches 68 - equal to US$380 billion in investment

    News // January 14, 2016

    Wood Mackenzie has updated its analysis published in July 2015 on the impact of continued low oil prices on upstream oil and gas projects. It concludes that in the last six months of 2015 an additional 22 major projects and seven billion barrels of oil equivalent (boe) of commercial reserves have been deferred, on top of the 46 developments and 20 billion boe of reserves identified previously.

    Deepwater projects have been hit hardest, accounting for over half of the total, as companies are forced to rework projects with high breakevens, large capital requirements and high costs. Mr Angus Rodger, Principal Analyst – Upstream Research for Wood Mackenzie, said the impact of lower oil prices on company plans has been "brutal."

    "What began in late-2014 as a haircut to discretionary spend on exploration and pre-development projects has become a full surgical operation to cut out all non-essential operational and capital expenditure. Tumbling prices and reduced budgets have forced companies to review and delay Final Investment Decisions (FID) on planned projects, to re-consider the most cost-effective path to commerciality and free-up the capital just to survive at low prices,” he said 
     
    Wood Mackenzie’s report ‘Pre-FID project deferral update: deepwater hit hardest’ has identified 68 large projects globally that have had FID delayed due to the fall in oil prices since the oil price crash in 2014 to the end of 2015. The list has grown by over a third in the last six months, as more and more projects are deferred through the down-cycle. Mr Rodger adds: “For all 68 projects there are multiple elements contributing to delay. Price is rarely the only factor slowing down FID - but it has exerted the strongest influence.”

    Deepwater projects account for more than half of new project deferrals up from 17 to 29; 62 per cent of total reserves; and 56 per cent of total capex.

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