High-Cost Projects to Struggle at $80-$85 Crude, Oil Search Says
2014-10-23 07:05:49.786 GMT
By James Paton
Oct. 23 (Bloomberg) -- High-cost energy projects globally
will struggle to stay profitable if crude oil prices stay around
$80 a barrel to $85 a barrel and some proposed developments may
be shelved, according to Oil Search Ltd.
“The bottom line is that much of the industry around the
world needs $80, $85 consistently to provide returns,” Managing
Director Peter Botten said today in an interview in Sydney. “If
it stays at that level, marginal projects will struggle, and
eventually production will adjust.”
Weakening global demand and a supply glut in the U.S. drove
Brent crude down to as low as $82.60 a barrel last week, the
cheapest since 2010. Oil Search, Exxon Mobil Corp.’s partner in
a $19 billion liquefied natural gas project in Papua New Guinea,
is considering adding capacity in the country.
“We’re well-situated to compete in a $80-to-$85 oil price
environment,” Botten said. “There would be a range of other
LNG projects, and LNG expansion projects, that would stop
before” Oil Search’s plans to expand, he said.
Brent was at $84.86 a barrel as of 5:04 p.m. Sydney time,
and has fallen 23 percent this year.
A price around “$85 a barrel is something that’s going to
be pretty realistic over the next few years,” Botten said.
“Marginal projects, high-cost projects, will be progressively
shelved.”
Four out of 11 unnamed LNG plants in Australasia that have
been approved or are under development need an LNG price of at
least $12 per million British thermal units to break even,
according to an Oil Search presentation earlier today, citing
estimates from energy consultants Wood Mackenzie Ltd. The PNG
LNG project needs a price of less than $8, the figures show.
Asian LNG prices may “settle” at $12 to $14 per million
British thermal units for supply between 2020 and 2025, the
company said.
