Uproar in Ghana after president unveils his own statue    Putin hails 'courageous' Trump after election win    Israel passes law to deport relatives of attackers, including citizens    Monkey mayhem in South Carolina after 43 primates escape research facility    Russian anti-war teenager faces five years in jail after failed appeal    SR 3.95 million fines for 3 employees of a company and 6-month jail for one for violating Capital Market Law    Qassim emir launches 52 health projects costing a total of SR456 million    BD and INS partner to elevate standards of infusion care in MENAT    Dubai Design Week launches its 10th edition, celebrating creativity and innovation    GASTAT: Passengers of public transport bus and train soar 176% and 33% respectively in 2023    Fakeeh Care Group reports 9M-2024 net profit of SR195.3 million, up 49% y-o-y driven by solid revenue growth and robust profitability    HRT does not impact life expectancy — UK health body    Liam Payne's body to be flown back to the UK    Suspect arrested for banking fraud totaling SR493 million as Nazaha pursues corruption charges    Arab leaders and heads of state congratulate US President-elect Donald Trump    Neymar suffers muscle tear, out for 4-6 weeks    Crown Prince hails Saudi medical team that performed world's first fully robotic heart transplant    Al Nassr secures 5-1 victory over Al Ain to edge closer to knockout stage    Al Ahli extends perfect start with 5-1 victory over Al Shorta    Mitrovic's hat-trick leads Al Hilal to 3-0 victory over Esteghlal    India puts blockbuster Pakistani film on hold    The Vikings and the Islamic world    Filipino pilgrim's incredible evolution from an enemy of Islam to its staunch advocate    Muted Eid celebrations for millions of Nigerian Muslims    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



A trillion dollars! This is by how much global E&P revenues will fall
Published in The Saudi Gazette on 29 - 04 - 2020

The devastating effect of the COVID-19 pandemic on global oil and gas exploration and production (E&P) companies is better understood by looking at the industry's expected total annual revenues for 2020. A Rystad Energy analysis shows that global E&P revenues are now forecasted to fall by about $1 trillion in 2020, a drop of 40% to $1.47 trillion from last year's $2.47 trillion.
Before the COVID-19 pandemic, Rystad Energy expected total E&P revenues to reach $2.35 trillion in 2020 and $2.52 trillion in 2021. Now 2021 revenues are also projected lower, at $1.79 trillion.
Companies' cash flow is also set to plunge. For 2020 we estimate free cash flow for the E&P sector will shrink to $141 billion, or one-third of what it was in 2019. This is based on our base-case oil price scenario of $34 per barrel in 2020 and $44 per barrel in 2021, so there is a considerable downside risk if the current low-level prices persist.
"This drop not only undermines the companies' solidity and reduces money available for investments and dividends, but also significantly cuts government tax revenue. It will be challenging for petro-states such as Russia and many Middle Eastern countries to sustain their budgets," said Rystad Energy's upstream analyst Olga Savenkova.
In the short term, national wealth funds might come to the rescue and plug holes in the budgets to avoid sweeping spending cuts, but if the low-price environment persists these countries could come under serious financial stress, added Savenkova.
Initially, Rystad Energy expected upstream spending to fall about 20% this year as a result of the COVID-19 pandemic, which would have reduced investments by $100 billion from the 2019 level. As companies have continued to crimp investments, we now expect upstream spending to fall by 25% instead, from $530 billion in 2019 to $410 billion this year.
US shale remains the largest contributor with reported plans to slash 38% off their previously announced 2020 capital budgets, which implies a cut of nearly 42% compared to 2019 spending. These record numbers are followed by oil sands producers, which have also revised down spending by 42%.
Conventional supply segments show cuts in the range of 19% for onshore to 12% for offshore deepwater assets, as these segments are not as flexible when it comes to managing their capital costs.
The capex cuts will have a particularly strong impact on discoveries and companies' ability to proceed with final investment decisions (FIDs) on new projects. This year might be marked by the lowest project sanctioning activity since the 1950s in terms of total sanctioned investments, dropping to $110 billion, or less than one-quarter of the 2019 level, with most of the projects being deferred.
An operator may need several years to bring a deferred project back on track as more strict economic requirements are applied for a new FID. Facing the threat of prolonged low oil prices, stakeholders are likely to lower projects' breakeven price requirement, which was already on average below $35 per barrel even before the crisis. This will send many developments on a long-lasting cost optimization journey.
But, in contrast to the previous downturn, this time the situation is complicated by the distressed position of many service companies. The oilfield service sector already made substantial improvements in the supply chain with significant cost reductions back in 2015–2016, and operators cannot rely on a repeat performance a second time around.
Operators are now understandably demonstrating extreme caution when it comes to future investment commitments, resulting in a drop in sanctioning as projects are reshaped and paused until oil prices recover.
Considering the high maturity of most oil-producing regions, this approach to handle the crisis puts huge volumes of unsanctioned production at risk, potentially undermining medium-term liquids production levels.
At the same time, we see a growing decarbonization sentiment from both E&P players and investment banks, with major players targeting to reach carbon neutrality. As a result, the current low appetite for new project sanctioning could mean "peak oil" will arrive sooner than what we thought only a few months ago. – Rystad Energy


Clic here to read the story from its source.