World’s oil investments slowed by over $300b in 2015, 2016 – IEA
Following up on World Energy Outlook 2015, which examined the potential impact of a prolonged period of lower oil prices on energy markets, an updated analysis from the International Energy Agency, IEA, has confirmed that the current low oil price has had a negative impact on oil investments and hurt energy efficiency.
The latest data from the IEA showed that investments in the oil sector declined in 2015, and then again in 2016, the first consecutive two-year drop in three decades.
The industry cut more than $300 billion in spending in two years, or 42 percent of the total, an unprecedented downturn, even taking into account significant reduction in costs.
According to IEA data, North America accounted for about half the drop.
However, if prices remain at current levels, a significant rebound appears unlikely in 2017.
The latest data also points out that Middle East oil supply has reached historically high levels, exceeding 31 million barrels per day. The region now accounts for 35 percent of global oil supplies, the highest level since 1975.
This growth in production, from Saudi Arabia, Iraq and Iran, highlights the fact that low-cost producers in the Middle East remain central to oil markets. Production from the Middle East is expected to account for most of the world’s demand growth this year.
Nigeria reportedly lost about $21 billion in oil investments due to the fall in oil prices in 2015 alone.
The fall in global oil prices has continued to affect several economies. The worst hit have been countries whose economies depend solely on oil for a significant percentage of their foreign exchange earnings. Some of these countries include Venezuela, Angola, Azerbaijan, Ecuador and Nigeria.
Nigeria, West African countries, the Gulf of Mexico and Brazil also lost about $200 billion in capital expenditure due to deferred investments in the deepwater projects, Julie Wilson, Analyst with Wood Mackenzie, a global energy research and consulting Group, said.
While emphasising the need for exploration investments to continue despite the low-priced environment, he said that, “Deepwater projects have been deferred around the world, but the “Golden Triangle” of West Africa, the Gulf of Mexico, GoM and Brazil have been particularly hard hit.
A total of 20 of the 29 deferred projects are in those three regions, including high profile proposed developments such as Mad Dog Phase 2, Canada and Bonga South West (Operated by Shell Nigeria Exploration AND Production Company, SNEPCO). “Frontier gas developments also have been affected. The Browse project in Australia and Golfinho in Mozambique, with a combined 6.6 billions of barrels of oil equivalent, Bboe of resources, have been held back from the beleaguered liquefied natural gas, LNG, market due to the high predicted break evens,” he said.
