New field project delays increases to 63, $230bn spending also deferred

Industry news
Industry news

The number of new field projects put on hold has increased from 40 to 63 in the past six months alone, according to a report.

Senior analyst Readul Islam from Rystad Energy, said a total of $230billion in pre-development spending has also now been deferred.

Islam said the drop in oil price has imposed stricter financial prudence on E&P players.

Meanwhile, risky exploration spending has also been called off, with incremental developments such as infill drilling facing higher hurdles for approval.

Post appraisal pre-sanctioned projects are said to have “borne the brunt of the bloodletting” as teams try to balance budgets.

Rystad said the increase in delay from smaller, less complex projects, had come more so from smaller players.

The delay count has risen by 58% with total resources and capex delayed figures have risen by 30% to 38%.

The deferral of the 63 projects is expected to result in more than 3MMboe/d of supply delayed at a peak production that is expected in 2026.

Nigeria, Kazakhstan and Indonesia are the main countries expected to be affected, followed by Norway and Canada.

Islam said: “The first casualties as oil prices plummeted were the more complex & costlier oil sands, LNG and deepwater projects. But as the oil price continued its slide during the second
half of 2015, E&P companies eager to highlight their cost-cutting cred found easy targets in the smaller, simpler projects in their portfolios.

“Petronas delayed the tender submission date for its Kasawari gas development. Woodside announced Cossack North had been deferred following a portfolio review of spending.

“Operator Chevron’s partner PTTEP at the Ubon project signaled a development reassessment.

“The mid-2015 delay list mainly featured the majors, international NOCs and the larger independents.

“Smaller E&P players have less of a footprint, and in general tend to partner rather than operate their projects.

“But by the second half of 2015 the downward price spiral snagged smaller operators, with Vioco Petroleum recommending the deferral of the shallow water Gazelle development to the Ivorian authorities.

“Sunbird Energy’s plans to supply a South African utility with offshore gas from Ibhubesi ran into trouble due to the critical financial status of both the seller and the buyer.”