Deepwater oil projects and complex gas facilities worth around $200 billion have been cancelled or put on hold worldwide in recent months due to the sharp drop in oil prices over the past year, consultancy Ernst and Young said on Tuesday.
Further project cuts and delays are likely as the industry braces for an extended period of lower oil prices as a result of a supply glut, Reuters reported.
"The mind set in the industry at the moment is that prices are unlikely to be bouncing up materially in the near term," the consultancy's Andy Brogan said in a presentation. "There is an expectation that volatility is with us for a reasonable period of time to come and companies need to cope with that."
The delays in multi-billion dollar projects that can take up to 10 years to develop, and needed to support rising global demand for energy, could create a shortage in the future.
International companies have responded rapidly to the near halving of oil prices since last June, slashing tens of billions of dollars in capital spending in order to boost their balance sheets and maintain dividend payouts to investors.
"A total of $200 billion of oil and gas projects have been deferred or cancelled," said Brogan, global oil and gas transactions leader at Ernst and Young.
"Portfolios reviews are happening more frequently and probably with more rigor," Brogan told the World National Oil Companies Congress. "There isn't anywhere for projects to hide."
The main 24 mega projects that have been put on ice or scrapped are spread across the globe, according to EY.
For oil, many of the projects are complex, deepwater fields in the Gulf of Mexico, the North Sea, West Africa and Southeast Asia with budgets of up to $20 billion.
Among the most expensive are liquefied natural gas facilities such as the Arrow liquefied natural gas project in Australia, operated by Royal Dutch Shell's and PetroChina and BG Group's Prince Rupert LNG project in Canada.
Though often just as expensive, most oil mega-projects benefit from the advantage of returning value within three to four years from first investment, compared with up to 12 years for LNG projects, Brogan said.
"We have seen International Oil Companies already go through one rigorous review of their portfolio. We are now seeing them turning their attention to see how flexibility can be embedded in their portfolios and businesses."
