According to calculations of the consulting company Wood Mackenzie, the cost of upstream (exploration and production) in the next five years will decrease by 22% compared to the level projected two years ago, before oil prices began to fall, writes the Financial Times. In monetary terms the reduction will be about $1 trillion.
It is expected that due to the reduction of investment in exploration and production of oil and gas deliveries to the fuel market in 2017 will be reduced by 4%.
Some of the major oil company for three years reduced their capital expenditures by almost half. In particular, ExxonMobil has reduced the cost from $42.5 billion in 2013 to $23 billion in 2016. During the same period, Chevron has reduced the costs of exploration and production from $41.9 billion to $25 billion.
According to estimates by Goldman Sachs, if the price of oil set at $55 per barrel, projects with a total cost of $550 billion can be collapsed. The rate of decline in investment will be the fastest in North America.
According to senior analyst at Wood Mackenzie Malcolm Dixon, for a new wave of projects in the energy sector, which will be able to generate for the market offer, enough for future demand, will need to reduce production costs, increase efficiency, and confidence in the high prices and likely fiscal stimulus.
According to published on 14 June report by the International energy Agency (IEA), by the end of may, the total volume of oil production in the world amounted to 95.4 million barrels a day, which is 590 thousand barrels below the production level a year earlier. The IEA noted that global oil production has significantly decreased since 2013.
As stated in an interview with Italian newspaper Il Sole 24, the head of “Rosneft” Igor Sechin, “maybe in 3-5 years the world market will require…an agreement for an emergency increase in production and supply of oil from strategic reserves to eliminate the deficit, caused by a period of low investment.”
The IEA estimates that current volume of oil supplies to exceed demand 800 thousand barrels. Six months ago, in January 2016, the amount of “extra” oil was 1.5 million barrels.