The collapse in oil prices have led to severe cuts in spending and investment from oil producers, and a new report by Tudor, Pickering, Holt & Co. finds the combined cuts will lead to a daily 19 million barrels of potential future oil production taken off the table.
The report said oil companies have either canceled or suspended final investment decisions on 150 oil projects, which account for about 125 billion barrels of oil.
The cuts, and the resulting loss of future production, will be concentrated in a few key areas. For example, the report estimates Iraq will fail to realize 5 MMbpd of production. Iraq, like everyone else, is suffering from low oil prices. Meanwhile, the government has higher costs for its military campaign against ISIS militants. That leaves few resources left over to reimburse private oil companies for exploration and development work. So while Iraq has succeeded in increasing output in recent years, drilling is expected to slow down.
Additionally, Canada’s oil sands are expected to see 3 MMbpd less production than previously anticipated. Oil from Canada’s oil sands are some of the most expensive forms of oil production in the world.
Offshore Africa could also suffer. Nigeria and Angola will see lower production than expected. The U.S. Gulf of Mexico fares better – existing infrastructure and familiar operating conditions have oil companies not pulling the plug just yet. But worldwide, offshore production will come in at about 6 million barrels per day lower than expected.
It isn’t just oil. Tudor Pickering sees major deferments in the volumes of LNG export capacity.
“Virtually all (LNG) project sanction decisions outside of the U.S. have been pushed back,” Tudor Pickering said in its report.
By company, the oil majors account for an astounding one-third of the 150 projects that have been shelved. ExxonMobil alone has put 2.5 million barrels of potential production on ice.
One big caveat: the estimated 150 projects could eventually be greenlighted if oil prices rebound, but for now they are on hold.