The steep fall in energy prices may lead to the oil and gas industry cancelling about $1 trillion of planned projects globally in the next couple of years, a senior Saudi Aramco executive said on Monday.
Aramco itself has put on hold its deepwater oil and gas exploration and drilling activities in the Red Sea and suspended plans to build a $2-billion clean fuels plant at its largest oil refinery in Ras Tanura, industry sources told Reuters.
“Challenges during down cycles are more complicated today than before…At this moment, the global industry is poised to potentially cancel about $1 trillion in capital funding,” Amin Nasser, senior vice president for upstream operations at the Saudi oil giant, told a conference in Bahrain.
Speaking to reporters later, Nasser said the figure included projects that might merely be delayed, not just those that could be cancelled outright.
Since last June, the Brent oil price has collapsed from $115 a barrel to around $60 because of a supply glut fuelled by a sharp rise in US shale oil production, as well as weaker global demand.
The decline has left some smaller oil producing countries reeling and forced a number of oil companies to slash investment budgets.
“What we’ve heard from the industry is that there is $1 trillion of planned projects that will be dropped or deferred over the next couple of years because of what’s happening,” he said, without elaborating on the source of that estimate.
Aramco’s chief executive Khalid Al Falih said in January that the company would renegotiate some contracts and postpone some projects because of cheap oil.