Oil industry executives are concerned the sharp drop in investment that followed the oil price crash could lead to another crisis - a supply shortage even while OPEC and other big crude producers work toward a deal to cap production to erode a glut.
After companies slashed budgets due to oil prices more than halving to around $50 a barrel since mid-2014, Saudi Energy Minister Khalid al-Falih said on Monday at the World Energy Congress in Istanbul that over $1 trillion worth of oil projects have been canceled or delayed.
It takes years to develop an oil field. It would be at least 2020 for an oil field to start producing oil after a decision to develop the field is taken in 2016.
To work out details of a global agreement to cap production for at least six months, OPEC, which produces around a third of the world's oil, will hold talks with non-member oil producers. Support to the initiative has been lent by non-OPEC member Russia, the world's largest producer.
French oil and gas company Total Chief Executive Patrick Pouyanne urged the industry to start investing again as OPEC revives its role as an oil "central banker".
"By 2020 we will have a lack of supplies," Pouyanne told the conference.
"Volatility has been huge. The stress on everybody, the balance sheets of companies and countries is huge," he added.
BP Chief Executive Bob Dudley echoed his concerns.
"As much as a $1 trillion of big projects have been canceled or deferred around the world and that could catch up with the world," Dudley said at the same event.
Bernstein analysts said that around 1 million of barrels of oil equivalent would be added every year from eight new oil and gas projects have been approved so far this year, after they come on stream. At a combined cost of around $22.1 billion, they are expected to take an average of 38 months to come onstream.
Oil demand will outstrip supplies starting in 2018, the International Energy Agency forecast in its 2016 medium-term report.
But due to new fields that are coming on line in the coming years and the abundance of U.S. shale oil, which can be extracted within a few months, Dudley expects supply and demand to be relatively balanced until the end of the decade.
And as a result, until the end of the decade, he expects oil prices to remain within a band of $55 to $70 a barrel, well below the $114 a barrel it hit in mid-2014.
"I do see the price of oil setting itself a band. Shale oil in the US… will attenuate the price a bit."
Lorenzo Simonelli, CEO of oil services company GE Oil & Gas said that shorter cycles would be created by new technological breakthroughs that improve field production and reduce downtime, unlike previous supply shortages.
"The industry will continue to be volatile. However, it has also changed with the advent of shale and technology we are going to see smaller cycles of volatility," Simonelli said.
(Source:www.reuters.com)
After companies slashed budgets due to oil prices more than halving to around $50 a barrel since mid-2014, Saudi Energy Minister Khalid al-Falih said on Monday at the World Energy Congress in Istanbul that over $1 trillion worth of oil projects have been canceled or delayed.
It takes years to develop an oil field. It would be at least 2020 for an oil field to start producing oil after a decision to develop the field is taken in 2016.
To work out details of a global agreement to cap production for at least six months, OPEC, which produces around a third of the world's oil, will hold talks with non-member oil producers. Support to the initiative has been lent by non-OPEC member Russia, the world's largest producer.
French oil and gas company Total Chief Executive Patrick Pouyanne urged the industry to start investing again as OPEC revives its role as an oil "central banker".
"By 2020 we will have a lack of supplies," Pouyanne told the conference.
"Volatility has been huge. The stress on everybody, the balance sheets of companies and countries is huge," he added.
BP Chief Executive Bob Dudley echoed his concerns.
"As much as a $1 trillion of big projects have been canceled or deferred around the world and that could catch up with the world," Dudley said at the same event.
Bernstein analysts said that around 1 million of barrels of oil equivalent would be added every year from eight new oil and gas projects have been approved so far this year, after they come on stream. At a combined cost of around $22.1 billion, they are expected to take an average of 38 months to come onstream.
Oil demand will outstrip supplies starting in 2018, the International Energy Agency forecast in its 2016 medium-term report.
But due to new fields that are coming on line in the coming years and the abundance of U.S. shale oil, which can be extracted within a few months, Dudley expects supply and demand to be relatively balanced until the end of the decade.
And as a result, until the end of the decade, he expects oil prices to remain within a band of $55 to $70 a barrel, well below the $114 a barrel it hit in mid-2014.
"I do see the price of oil setting itself a band. Shale oil in the US… will attenuate the price a bit."
Lorenzo Simonelli, CEO of oil services company GE Oil & Gas said that shorter cycles would be created by new technological breakthroughs that improve field production and reduce downtime, unlike previous supply shortages.
"The industry will continue to be volatile. However, it has also changed with the advent of shale and technology we are going to see smaller cycles of volatility," Simonelli said.
(Source:www.reuters.com)