At "only" 733 billion euros, oil investments are slowing
UsineNouvelle on October 03, 2014
Due to delays and additional costs on their major projects, the oil majors are easing off on their investments. Also, if the sector has been investing more and more since 2010, the growth in spending will slow slightly between 2013 and 2014.
As every year, the French Institute for Petroleum New Energy (IFPEN) publishes its report on the state of investments in exploration-production and refining. In 2014, the world of petroleum faced strong political instabilities in producing areas (Libya, Iraq, Nigeria, Venezuela, Russia…) which had the effect of reducing the availability of petroleum resources by 2,5 million barrels per day. Despite these tensions, the price of a barrel is down, having lost 17% of its value since June. Olivier Appert, President of IFPEN, judges that a price of $ 100 per barrel is possible in the long term.
SLOWING BUT RECORD
In terms of investments, the oil companies are easing off. In 2014, exploration-production expenses reached 733 billion euros, up only 5% compared to 2012. A slight increase when since 2010, growth was 11% per year. This slowdown is due to the majors, like Total, which reassess their spending. This is reflected in the oil discoveries. Between January and September 2014, only 155 discoveries of oil and / or gas fields were listed in the world against 172 in 2012 and 177 in 2013.
The cost of new projects has soared while several projects have fallen behind, very negative factors for margins. The majors thus reduced their investments by almost 8% over the period 2013-2014, while large national companies and small independent players (particularly in shale gas in North America) remained more active. Despite this slowdown, investments in 2015, up 4%, will reach 762 billion, an absolute record.
REFINING OVERCAPACITIES IN EUROPE AND CHINA
One of the first sectors affected by this slowdown is the geophysics sector. After a record turnover of more than 16 billion dollars in 2013, orders collapsed by 20% in 2014. The situation is all the worse since many modern seismic acquisition vessels, ordered there several years, arrive on the market and create overcapacity. The geophysical companies compensate for this lack of activity by financing campaigns' equity, sold retrospectively to customers.
Refining, for its part, is in a unique situation. Between 2013 and 2014, investments jumped $ 12 billion to reach $ 82 billion. This growth is driven by three drivers: the construction of refineries in emerging countries, a modernization of Russian refining and the development of downstream oil in the United States thanks to shale gas. Yet at the same time, the world is experiencing gigantic overcapacity. There is 1,2 million barrels per day of excess capacity today and this could reach 3,2 million in 2022. Two markets are concerned. The first is Europe, where the drop in oil demand and the petrol / diesel imbalance are putting industrial facilities at risk. The second is China, where the slowdown in growth is affecting the potential of new refineries.
THE FRENCH AIR CONDITIONER IN SHAPE
For its part, the French oil and gas industry is doing well, if we are to believe the results of the annual study of the Groupement des entreprises parapétrolière (GEP). The sector generated 39 billion in turnover in 2013, an increase of 12% compared to 2012. It is 90% realized by 35 large companies whose turnover exceeds 200 million euros. The sector now employs 65 people, compared to 000 in 60. Turnover is achieved on average at 000% from exports.
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