Low Oil Prices Prompt Rethink on Asian Projects

Low Oil Prices Prompt Rethink on Asian ProjectsLow Oil Prices Prompt Rethink on Asian Projects

Frontier and deepwater exploration in Asia will be among high-cost energy projects most at risk from an oil price slump that has knocked 25 percent off the top of global crude prices.

Asian companies embarked on a raft of new projects, including marginal fields, as oil prices held above $100 a barrel for most of the last four years, supported by output cuts in the Middle East and North Africa.

But tumbling prices over the past four months have seen many projects come under scrutiny, analysts and investors were quoted by Reuters as saying on the sidelines of an energy conference this week.

As companies look at "their spending over the next few years they might scale back some of their higher cost exploration, particularly looking at frontier and deepwater exploration," Taylor said.

Many of the projects that could come under threat aim to develop smaller oilfields or exploit frontier deepwater reservoirs to shore up falling output in Southeast Asian countries such as Indonesia, Malaysia and Thailand.

State-owned Petroleum Brunei, for instance, has put on hold plans to develop fields that would produce 30,000-50,000 barrels per day (bpd) of oil after prices dropped, a source close to the company said.

The price fall has caught many oil producers off guard, even giants such as China's state-run explorer CNOOC Ltd.

CNOOC's 2014 budget is based on a crude price assumption of $102 per barrel, its chief financial officer Zhong Hua said, versus current international crude prices of $82-$86.

CNOOC would scale back or suspend some high-cost projects such as deepwater exploration overseas, he said, while moving ahead with other long-term projects that account for most of its development programme.

Frost & Sullivan energy consultant Subramanya Bettadapura said deepwater projects in Indonesia and Malaysia are likely to be delayed until oil rises back above $90 a barrel.