En­ergy com­pa­nies cut cap­i­tal spend­ing as oil price drops

Mizzima Business Weekly - - AFFAIRS // NEWS -

A steep and pro­longed drop in the price of oil has prompted en­ergy com­pa­nies to re­think their in­vest­ment strate­gies.

The oil price plunge will force en­ergy com­pa­nies to slash cap­i­tal spend­ing in North Amer­ica, Europe and Asia in 2015, ac­cord­ing to a re­port by in­vest­ment bank Ever­core on Jan­uary 6 high­lighted in the Bangkok­Post.

But in­vest­ment will con­tinue to rise in Africa and the Mid­dle East as pro­duc­ers in those ar­eas seek to boost long-term out­put in the flooded global oil mar­ket.

Ever­core es­ti­mated that oil com­pa­nies would cut spend­ing on ex­plo­ration and pro­duc­tion glob­ally this year by 10-15 per­cent, and by 25-30 per­cent in North Amer­ica.

How this might af­fect in­vest­ment in Myan­mar’s oil and gas fields is as yet un­clear.

“To sum it up, a sharp re­ces­sion is com­ing to the global oil­field,” said Mr James West, an oil­field ser­vices an­a­lyst at Ever­core, after sur­vey­ing 300 global oil and gas com­pa­nies on their 2015 spend­ing plans.

The re­port shows the im­pact of the steep drop in oil prices. US oil prices Tues­day closed at US$47.93, down from nearly $107 in June.

The oil-price crash is also be­gin­ning to re­ver­ber­ate across other in­dus­tries. US Steel plans to lay off hun­dreds of work­ers due to lower pe­tro­leum in­dus­try de­mand for pipes, a union source said Tues­day. About 750 work­ers are ex­pected to lose their jobs, ac­cord­ing to US me­dia.

[Mizzima]

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