This
was 100% predictable to those with even half a brain as the world
sinks further into a deflationary depression.
Excellent news for New Zealand.
Still
no truth from the mainstream media.
Oil
explorers pull back on drilling plans
Plunging
oil prices have forced explorers to scale back plans in New Zealand,
some have had to restructure and there could be a sharp decline in
capital spending in a sector the Government has backed heavily.
14
January, 2015
Around
the world, explorers are pulling back on drilling programmes, rigs
are idle and some companies are eyeing hiring supertankers to
stockpile oil while prices are at six-year lows.
Oil
prices dipped yesterday with Brent crude closing at US$47.57 and West
Texas Intermediate hitting a similar trough at US$45.90 a barrel.
The
drop came as Goldman Sachs sharply cut its forecast for 2015 oil
prices, projecting the US commodity would hit US$41 a barrel in three
months and US$39 a barrel in six months, down from US$70 and US$75
previously.
Listed
New Zealand Oil & Gas says it is cutting back its exploration and
the price plunge had the industry reassessing work programmes.
"We're
very conscious of it when part of our revenue goes down by 40 per
cent and we are always actively managing our portfolio against a
range of factors," said NZOG chief executive Andrew Knight.
His
company had surrendered permits last year and had not bid in the
latest block offers, largely because of the fall in oil prices, which
he said could remain low for 18 months to two years.
"Even
though we have long investment horizons, the industry does tend to
cut back during these times."
Companies
must stick to timetables stipulated in permits and NZOG would be part
of seismic work being done off the Taranaki and Otago coasts later
this summer.
"What
you are getting is that a few of the more difficult prospects are
being put on the backburner rather than necessarily dumped. The
exploration focus has moved to the larger deepwater plays. Those
frontier plays are very long term."
Knight
said producers did leave oil in the ground when prices got very low
but his company's offshore Taranaki fields had not reached that
stage.
"In
the fields we've got it is still economic even at current prices."
Woodward
Partners analyst John Kidd said that even before the price fall there
had been a downturn in exploration. "In New Zealand, the ebb in
activity that has been coming for some time is in our view now at
risk of a much sharper decline than might otherwise have been the
case," Kidd said.
Curtailments,
deferrals and reviews had been signalled or were underway by NZOG,
Kea Petroleum, TAG Oil and NZ Energy Corp.
In
the Woodward quarterly outlook for December, Kidd said that while it
was the mid-cap players which had taken the lead, if barrel prices
continued to tumble then "big oil will inevitably follow".
"It
would be naive to think that work programmes would not be at risk
should the current oil price environment continue or, worse, further
deteriorate for an extended period."
Kidd
said those companies with strong balance sheets such as AWE, NZOG and
TAG were well placed to weather the downturn and potentially prosper
during it.
"As
the realities of deteriorating free cash flows and constrained
capital market access bite, we expect companies in positions to do so
to focus increasingly on acquisition opportunities to take advantage
of the market downturn."
The
2014 block offers attracted new big players Chevron and ONGC Videsh
and will result in a minimum of $110 million in spending, but this
had been muted by the oil price "reality". However, the 15
permits awarded were of a long duration, with an average of 12.2
years.
Oil
and gas exploration is a key part of the Government's economic
strategy and it has reformed the blocks offer process, provided more
information to explorers and clamped down on protests against seismic
survey ships in a bid to attract more overseas interest.
Oil
is our fourth-largest commodity export after dairy, meat and wood.
Oil and gas contribute more than $2.7 billion to GDP each year.
What's
driving down prices?
• US oil production has hit a three-decade high.
• Opec is fighting against cuts to production.
• European and Asian demand remains subdued.
• US oil production has hit a three-decade high.
• Opec is fighting against cuts to production.
• European and Asian demand remains subdued.
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