Oil’s Creeping Crash

July 31, 2020

New videos will focus on the catastrophic effect of the Corona Crisis on the fossil fuel industry.
I’ve posted recently about recent write-downs of oil and gas assets by BP and Shell. The Wall Street Journal reported that the moves signal vast parts of corporate oil reserves may be “left in the ground.”
Things were already bleak in the oil, gas and coal space before the pandemic, now the industry tries to find rays of hope as the walls keep closing in…

CBC:

French energy giant Total says it is writing off $9.3-billion worth of oilsands assets in Alberta and cancelling its membership in the Calgary-based Canadian Association of Petroleum Producers.

Total now considers oil reserves with high production costs that are to be produced more than 20 years in the future to be “stranded” given its carbon reduction targets and because the resource may not be produced by 2050, the Paris-based company said Wednesday.

It will take writedowns worth $7.3 billion related to its 24.6 per cent ownership in the Fort Hills oilsands mine operated by partner Suncor Energy Inc., the company said, and its 50 per cent stake in the Surmont thermal oilsands project operated by partner ConocoPhillips.

Total will also write off $2 billion in other oilsands assets, it said, along with $1.07 billion on its liquefied natural gas assets in Australia.

Australian Business Review:

Australia’s LNG sector has blown up more than $20bn in writedowns after French energy giant Total took a $US800m ($1.1bn) hit, sparking concern high construction costs and a lower oil price outlook may derail spending needed for a next wave of investment.

Total, which owns stakes in Inpex’s $US45bn Ichthys gas plant in Darwin and Santos’s $US18.5bn GLNG export project in Queensland, blamed “giant projects with high construction costs” and lower oil price assumptions for the impairment.

Over $22bn has now been written off on projects run by Woodside Petroleum, Shell, Origin Energy and Oil Search so far in July as some of the nation’s biggest gas producers slash their assumptions for oil amid COVID-19 uncertainty.

Australia’s $200bn LNG spending spree in the past decade has catapulted the country to be the world’s largest gas exporter but most projects have suffered cost blowouts and delays, trimming returns for some of the world’s biggest energy producers and raising doubts over the appetite of majors to bankroll a next wave of projects.

Reuters:

Oil prices are set for a slow crawl upwards this year as the gradual easing of coronavirus-led restrictions buoy demand, although a second COVID-19 wave could slow the pace of recovery, a Reuters poll showed on Friday.

The survey of 43 analysts and economists forecast benchmark Brent crude LCOc1 to average $41.50 a barrel in 2020, up slightly from the $40.41 consensus in last month’s survey and compared with around $42 average for the benchmark thus far this year. It is expected to average $49.85 in 2021. 

The 2020 outlook for West Texas Intermediate CLc1 rose to $37.51 per barrel from June’s $36.10.

Seasoned observers tell me that oil prices mired in the 40s will not be high enough for US producers to be profitable.
Stay tuned.

4 Responses to “Oil’s Creeping Crash”

  1. neilrieck Says:

    Perhaps the chart title should be changed from “analysts raise” to “analysts raze”

  2. rhymeswithgoalie Says:

    Seasoned observers tell me that oil prices mired in the 40s will not be high enough for US producers to be profitable.

    Maybe those lending banks will stop throwing good money after bad. Bankers tend to have stick-in-the-mud mindsets, though.


  3. Reblogged this on The Most Revolutionary Act and commented:
    Things were already bleak in the oil, gas and coal space before the pandemic, now the industry tries to find rays of hope as the walls keep closing in.


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