Deepwater projects survive low oil price, executives say

Tue Oct 18, 2016 8:53am EDT
 
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* Deepwater seen working in Brazil, Gulf of Mexico

* Long-cycle projects require $60-$80/bbl oil price

* World will require deepwater to meet demand

By Ron Bousso and Karolin Schaps

LONDON, Oct 18 (Reuters) - The deepwater oil industry is not dead, even after the brutal drop in oil prices in recent years, but activity will focus on regions such as Brazil and the Gulf of Mexico where resources are large and costs low, executives said on Tuesday.

Sanctioning of multi-billion dollar projects, that take years to develop and which drove oil supply growth earlier this decade, ground to a near halt since the oil price collapse in mid-2014 as companies dealt with a sharp drop in revenue.

U.S. shale oil production has been able to sharply reduce its development costs in recent years to stay profitable at $50 a barrel in some cases, John Hess, Chief Executive Officer of U.S. independent Hess Corp told the Oil & Money conference.

"You will need prices in excess of $60-$80 a barrel to get the long-cycle projects running," Hess said. "We are not investing enough today to provide the projects for long-cycle that the world is going to need."

"Not all deepwater is equal," Andrew Gould, board member of Saudi Arabia's state-run oil company, said.   Continued...