There are zombies in the oil fields.
After
crude prices dropped 49 percent in six months, oil projects planned for
next year are the undead -- still standing upright, but with little
hope of a productive future. These zombie projects proliferate in
expensive Arctic oil, deepwater-drilling regions and tar sands from
Canada to Venezuela.
In
a stunning analysis this week, Goldman Sachs found almost $1 trillion
in investments in future oil projects at risk. They looked at 400 of the
world's largest new oil and gas fields -- excluding U.S. shale -- and
found projects representing $930 billion of future investment that are
no longer profitable with Brent crude at $70. In the U.S., the shale-oil
party isn't over yet, but zombies are beginning to crash it.
The
chart below shows the break-even points for the top 400 new fields and
how much future oil production they represent. Less than a third of
projects are still profitable with oil at $70. If the unprofitable
projects were scuttled, it would mean a loss of 7.5 million barrels per
day of production in 2025, equivalent to 8 percent of current global
demand.
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