Monday, December 15, 2008

Big oil projects put in jeopardy by fall in prices

This article in the New York Times rattles off the effects of the everyday low low prices of oil on development projects around the world. The fact is that dozens of major oil and gas development projects around the world have already been deep-sixed. Developments attractive at levels of $140/barrel heading to $200 look grim at levels of $45 and dropping. Oil sands projects, to take one example, need up to $90/barrel before they make a dime. Even worse, as the prices drop dramatically, the decline in costs is nowhere near as dramatic.

Some highlights. . .
The list of projects delayed is growing by the week. Wells are being shut down across the United States; new refineries have been postponed in Saudi Arabia, Kuwait and India; and ambitious plans for drilling off the coast of Africa are being reconsidered.

Investment in alternative energy sources like biofuels that had flourished in recent years could dry up if prices stay low for the next few years, analysts said. Banks have become reluctant lenders, especially to renewable energy projects that may prove unprofitable in an era of low oil and gas prices.


Oil demand growth has weakened throughout the industrial world. The International Energy Agency projects that worldwide demand will actually fall this year, for the first time since 1983.

So much surplus oil is sloshing around the world right now that some companies, including Shell, are using oil tankers for storage.
Given that Hebron has a 10 year sanction window, where in that window will it be sanctioned now?

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