Declining Oil Prices Cause Industry Giants to Suspend Ambitious Projects

© AP Photo / Sunday Alamba)The dramatic decrease in oil prices is forcing energy giants worldwide to cut expenses by putting ambitious projects on hold and cutting hundreds of jobs
The dramatic decrease in oil prices is forcing energy giants worldwide to cut expenses by putting ambitious projects on hold and cutting hundreds of jobs - Sputnik International
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The dramatic decrease in oil prices is forcing energy giants worldwide to cut expenses by putting ambitious projects on hold and cutting hundreds of jobs.

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MOSCOW, January 15 (Sputnik) On Wednesday Royal Dutch Shell announced the decision not to proceed with its $6.4 billion joint project with Qatar Petroleum — Al Karaana. "The decision came after a careful and thorough evaluation of commercial quotations from EPC (engineering, procurement and construction) bidders, which showed high capital costs rendering it commercially unfeasible, particularly in the current economic climate prevailing in the energy industry," the company said on its official web site. The Al Karaana project was agreed upon in December, 2011 and stipulated the construction of one of the world's biggest petrochemicals complexes in the Ras Laffan Industrial City in Qatar.

On the same day, Premier Oil said it would not proceed with its $2 billion Sea Lion project on the Falkland Islands while oil prices remain below $50 a barrel. In November the British oil giant said it would develop smaller portion of project when previously thought to cut the costs.

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On January 1, it was reported that Saudi state oil giant Aramco decided to suspend plans to construct a $2 billion clean fuels plant at its refinery in Ras Tanura. And in December, US Chevron Corp said it would indefinitely halt its plans to drill a deepwater well in the Beaufort Sea in the Arctic, citing, again, economic uncertainty in the industry. The Arctic drilling program was announced in 2009. Chevron was expected to implement it before 2020.

While most are merely making savings on future projects, several industry giants are being forced make cuts. On Thursday, BP announced its decision to cut 300 out of the company's 3,500 North Sea oil fields jobs. According to SkyNews, the move will help BP save $1 billion annually.

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The Canadian oil sands giant Suncor Energy Inc is planning to save the same sum by cutting 1,000 jobs. Calgary-based Suncor Energy announced its decision on Tuesday of this week. "Today's spending reductions are consistent with our commitment to spend within our means and maintain a strong balance sheet. We will monitor the pricing environment and take further action as required," Steve Williams, the company's president, said in a statement.

Other major players announced jobs cuts as early as July (Chevron, 225 jobs) and August, 2014 (Shell, 250 jobs) when oil prices were only beginning to go down.

The price per barrel of Brent Crude Oil dropped to $46 this week from $115 in June, 2014. Earlier this week, US Goldman Sachs analyst Jeff Currie said that over the next six months the Brent price may fall to $43 per barrel returning to $70 only by September.

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