Due to the steep fall in oil prices globally, offshore oil projects worth $200 billion are on hold, as per a report released by the consulting firm Ernst and Young.
If the prices continue to fall and there is no support for the oil prices, more projects would be kept on hold, as the supply is much higher than the demand.
With the prevailing scenario in the market, the oil prices are not expected to rally and the oil price fall is expected to continue for a while, as per a top consultant from Ernst and Young, Andy Brogan. He also added that companies would have to bear with the existing oil prices.
The projects that are presently kept on hold might take up to a decade to materialize and these projects might be highly essential for catering to the energy needs of the global markets. If not, it might result in a shortage too.
Also, since the past one year, companies are changing their policies and making decisions based on the fall in prices. They are cutting down on the expenses significantly, so that their company does not enter into loss due to the oil prices falling by nearly 50%.
Brogan from the global oil and gas transactions at E&Y estimated that in all, nearly $200 billion worth projects are kept on hold. While addressing at the World National Oil Companies Congress, he said that companies are making changes aggressively based on the trends and thus, these project are not able to fit in.
As of now, nearly 24 large-scale projects are kept on hold worldwide. These projects are complex and offshore ones, which were mainly based in the Gulf of Mexico, West Africa and South East Asia.
Some of the most expensive projects that could not see their day are the LPG facilities like the Arrow LNG project based in Australia, which was to be developed by the Royal Dutch Shell’s and the Prince Rupert LNG project based in Canada which was a joint venture between PetroChina and BG Group.
Usually, oil projects have absolute returns within 4 years of installation. However, LNG projects have returns at a much slower rate and might take up to 12 years from the year of installation.
E&Y also claimed that they are working on their portfolios and revamping it rapidly to cater to the prevailing markets.