Published By : 21 Sep 2015 | Published By : QYRESEARCH
Some of the world’s largest oil companies are depending on the cost of everything starting from oil rig rates to the steep pipe rates falling. These prices help them keel over in oil prices; however, projects worth around $1.5 trillion are likely to remain uneconomic. They may not even move ahead, said a leading market report published on Monday.
Several oil producers are aiming at steep cost cuts of approximately 20-30% in the event of the biggest slump in oil prices witnessed ever since 1980. This has also led to a slash of investment programs and set back of various projects that remain extremely expensive at crude’s present price level of nearly $50 per barrel.
According to the report, the spending is down by nearly $220 bn for the forecast 2015-2016. These figures are compared to the Edinburgh-based consultancy’s oil price crash estimations.
Most of the spending has been focused in the onshore areas of North America with around 50 projects being delayed around the world.
Some of the measures are required to manage costs. The industry cost-reduction goals will not be met by merely squeezing the service sector. The new projects in the oil and gas segment remain uneconomic. Many producers are still benefiting from lower costs.
The U.S.’s shale-oil production has become more flexible to low oil prices. Thanks to the technological developments and efficiency gains.
Exxon Mobil Corp said during the second-quarter earnings that the cost of engineering services and construction labor have declined at least 10%. The offshore rig rates are between 25% and 40% lesser than they were.
Estimates that supply-chain savings are squeezing the service sector are going to result in an average cost reduction of just 10%-15%. In order to cut costs, the sector needs to rethink of a better approach.