Wood Mackenzie: ‘Oil projects risk being scrapped at current prices’

Irish-linked exploration stocks wavered yesterday after leading international energy research and consultancy group Wood Mackenzie warned most major conventional oil projects risk being delayed or cancelled if global prices remain at or below $50 a barrel.

Brent crude was down by well over 4% at $46.22 yesterday and the International Energy Agency said the oil stock overhang threatens any real price recovery.

Global upstream and exploration spending has already dropped by more than $1 trillion since the start of the oil price slump in mid-2014, as cash-strapped oil companies tightened their purses, according to Wood Mackenzie.

The company, which publishes regular assessments of the economics of the world’s oil and gas fields, said especially deepwater projects offshore west Africa and in non-OPEC nations won’t make any money at current market prices.

Tullow Oil shares climbed nearly 1.6% yesterday; although last week’s bond announcement targeting fresh funds of €270m to help fund further development of its western and eastern African assets pulled the stock down by over 15% then.

Providence Resources shares were flat yesterday at 15c, ahead of a shareholder vote due this morning on a share sale aimed at raising €66m to boost working capital and eliminate debt.

Data, this week, estimated that drilling at Providence’s Newgrange prospect, off the west coast, will cost over €20m.

Europa Oil and Gas – sitting on four billion barrels of oil equivalent in Irish waters and heavily dependent on concluding farm-out deals for its seven Irish-based licences – saw its shares slip nearly 4% yesterday.

Nevertheless, Wood Mackenzie’s analysis showed aggressive cost cutting had increased the percentage of projects viable below $60 a barrel to 70%, up from 50% a year ago.

Reductions of around 15% in global oil service costs, including payments for drilling rigs or personnel, have helped boost some project economics, especially in the US tight oil market, the report said.

As much as nine million barrels per day (bpd) of potential fresh oil supply is commercially viable at an oil price of $60 a barrel, compared with seven million bpd in its previous study.


Lifestyle

Last week, I wrote about 'small is beautiful' as a key to an improved environment for all living things after this Covid crisis is finally over. As I wrote, I saw, in the mind's eye, the village where I live in west Cork and from which my wife and I are temporarily exiled.Damien Enright: Community spirit can ensure we pull through - together

Fifty years ago, a fox was spotted in Dublin’s St. Stephen’s Green. The unfortunate animal was chased by local ‘gurriers’. It took refuge in a tree but was promptly stoned to death.Richard Collins: Wildlife taking back the streets of our cities

The north pier on Cape Clear has been eerily quiet these last few months as no visitors disembark. The ferry is not unloading boatloads of tourists from Baltimore, 45 minutes away, or from Schull, as it would normally.The Islands of Ireland: Cape Clear tells its side of the story

If the Donegal postman and amateur weather forecaster has it right, we could be in for water shortages in the coming months. Michael Gallagher, who predicted the scorching summer of 2018 and the 2010 freeze-up, says we’ll have a ‘lovely’ summer.Donal Hickey: Demand for water to soar

More From The Irish Examiner