Issue link: http://resourceworld.uberflip.com/i/517266
52 www.resourceworld.com j u n e / j u l y 2 0 1 5 Oil & G a S L ost in the drama of the winter decline in the oil and gas sector, perhaps, are the potential down- stream benefits from that decline. Industry watchers can be forgiven for despairing in recent months as they watched oil prices fall more than 50% and natural gas drop to below-profitability levels. Benchmark oil prices, which as recently as the summer of 2014 stood at US $115/bbl, plummeted over the win- ter to lows in the low-$40s. Even now, as oil tops US $60/bbl for the first time in six months and natural gas hovers at US $2.77/MMBtu, experts aren't predicting a quick recovery, if there is one at all. And the industry has something new to fret about: The left-wing New Democratic Party's landslide victory over the Progressive Conservatives in the recent Alberta provincial election brought with it an immediate severe drop in oil stock prices plus warnings that the oil and gas industry may largely exit the province. Oil companies are warning that today's cost cutting and the cancellation of more than US $114 billion in major projects that were to fuel oil and natural gas production in 5-10 years could mean supply won't meet demand as the world's population grows. "What we decide today will have an effect on the future," Patrick Pouyanne, CEO of Total SA [TOT-NYSE] said at the recent IHS CeraWeek Energy Conference in Houston, reported in Bloomberg News. Postponing spending on mega-projects that usually deliver significant quantities of oil or gas "will have an impact. This could affect supply in three or four years," he said. Energy investment dropped almost 50% in the first quarter of this year, said Frederick Lawrence, the Independent Petroleum Association of America (IPAA) Vice-President for Economics and International Affairs. "That's the largest decline in six years, with some analysts reporting cuts of nearly $115 billion across the industry," he said, adding that a 2014 report by Rystad Energy noted that out of 800 planned projects with a $500 billion price tag, about half are at risk at or below US $70/bbl oil. "Mega-project delays and cutbacks started last year. The majors and national oil companies have been scaling back vari- ous projects in key areas: LNG, oil sands, deepwater, frontier, and in higher-cost areas such as the North Sea, the Arctic, heavy Latin America oil and even the Gulf of Mexico. And then you have the massive onshore Lower 48 cuts involving around 50% of oil rigs and ~45% Cap-Ex cuts involving non-core/lower tier projects in all the US shale plays." A recent Challenger & Gray report estimates there were more than 50,000 lay- offs in the energy sector in the US in the past year, and well over 100,000 jobs lost worldwide, with the number in Alberta are there downstream benefits of low oil prices? by Bruce Lantz Oil & G a S