With oil and gas prices the lowest since 2009, many companies are being forced to shut down future projects. The uncertainty of the oil industry has put doubt in typically certain oil investing companies. Around $60 billion worth of projects have already been shelved, assuming many more to follow. With oil barrel prices half the price they were at this point a year ago, it is no surprise many investors are afraid to spend billions of dollars. From $115 USD to now $53 USD a barrel, The energy consultancy claims they “expect $12-billion worth of projects in the Canadian oil and gas sector to be deferred this year.” This number is expected to increase, $20 billion in 2016, and $27 billion in 2017.
The loss of these projects in Canada is a cause for concern for everyone in the oil industry. Thousands of jobs are in jeopardy due to the drastic drop in cost per barrel. According to the Financial Post, the following list are expected to face delays, “Cenovus Energy Inc.’s Christina Lake Phase H and its Narrows Lake Phase A; expansion work at Husky Energy Inc.’s Sunrise SAGD plant; and PetroChina’s MacKay River project.”
Even though many projects will be delayed, many companies are going to continue production in hopes the price per barrel begins to stabilize. By 2017 these projects are expected to come to fruition according to the Financial Post, “the $13.5-billion, 165,000-bpd Fort Hill venture owned by Suncor Energy Inc., Total E&P Canada Ltd. and Teck Resources Ltd.; Canadian Oil Sands Ltd.’s $3.9-billion 100,000-bpd Mildred Lake replacement project that had been expected to start in 2014; Imperial Oil Ltd.’s 110,000-bpd Kearl Phase 2; ConocoPhillips Canada Ltd.’s 109,000-bpd Surmont Phase 2; and Royal Dutch Shell Plc.’s 100,000-bpd Jackpine expansion.”
According to Bob Brackett, an analyst at NY — Sanford C. Bernstein & Co. explained, if the price per barrel averages $80 USD for the remainder of 2015, the global spending of oil will drop 20% and would surpass the fall in price faced in both 1999 and 2009. In 2009, the oil and gas sector dropped 20% but luckily for Canadian producers, they were able to bounce back and regain control. With only a 10-15% drop expected in 2015, economists are hopeful the numbers do not rise about 20%.
The reaction prompted by the decreasing value of oil has caused the United States and Canada to decrease their spending plans and challenge the industry to settle itself before putting back into the economy.