Español

 

Guyana


Trinidad
& Tobago




Very usefull links



PW
Bookstore





News links

AP

AFP

Aljazeera

Dow Jones

Oil price

Reuters

Bloomberg

Views and News
from
Norway

 

 

 

Brazil's oil auction flop as bidders stay away

Bloomberg

A Brazilian offshore oil platform.

- The 'total disaster' is is a warning for majors and Aramco
-
Spending discipline demanded by investors is choking off a big source of oil-supply growth.

By Liam Denning / Bloomberg

LONDON
Petroleumworld 11 07 2019

Royal Dutch Shell Plc made a big investment in offshore energy this week   wind energy, that is . The very next day, Brazil announced the results of a more traditional energy auction in the waters off its coast. They were not good.

The country's biggest-ever sale of oil deposits flopped on Wednesday morning. Only two out of four blocks were sold, and only one of those involved foreign bidders, with China's CNOOC Ltd. and China National Oil and Gas Exploration and Development Co. taking all of 10% of the Buzios field. Petroleo Brasileiro SA took the other 90% and all of the Itapu block. Western oil majors, such as Shell or Exxon Mobil Corp., were nowhere to be seen.

Offshore oil investment was all the rage among Big Oil during the supercycle, with capital expenditure almost quadrupling in the decade up to 2014. That is the problem. The majors poured money into large, multi-year projects prone to delays and, because of their often bespoke engineering, spiraling budgets . The result: tumbling return on capital and an inability to dial back investment quickly when the oil crash hit in 2014. Roughly 3,000 new offshore projects sanctioned between 2010 and 2014 have either barely generated any value for oil companies or are expected to generate none at all, according to a recent study published by Rystad Energy, a consultancy:

More recent investments score better, mostly because the boom tailed off, with offshore capex falling by more than half between 2014 and 2018. That took the heat out of industry inflation; and, because of the bonfire of returns in the prior decade, oil majors got smarter about such things as  standardizing offshore equipment design to cut costs and shorten schedules. The pace of new projects has picked up again after the slump. Exxon, for example, has effectively opened up an entire new offshore zone with its Guyanese fields.

Still, one look at the stock prices of oilfield services firms , especially offshore-focused types such as Transocean Ltd. and Noble Corp. Plc, tells you this investment wave is nothing like the tsunami of yesteryear. Bad memories combined with unease about both near- and long-term oil demand make bold bets on big, multi-year offshore projects a tough sell with investors more interested in payouts . Even Exxon's success in Guyana gets overshadowed by the fact that the company's capex bill leaves it borrowing to pay its dividend . And Exxon, like Chevron Corp. and other majors, has swung more of its spending toward shorter-cycle onshore fracking in North America.

Brazil's brush-off is an ominous sign the investment discipline demanded by energy investors is choking off one of the world's biggest sources of oil-supply growth. In its latest World Oil Outlook published this week, OPEC cited Brazil as being second only to the U.S. in terms of medium-term growth, and number one in terms of projected long-term non-OPEC growth. Bob Brackett, an analyst at Sanford C. Bernstein, published a report a couple of weeks ago pondering if global offshore oil supply would peak next year, perhaps for good.

The implications are profound. There is a wide range of views on when global oil demand will slow or peak altogether. If it is later than sometime next decade, then the decline in offshore production that will inevitably follow a mass exodus from this part of the business could stoke another upcycle in prices. The Brazil auction suggests, however, that such possibilities play second fiddle to expectations on the part of many investors that oil has entered its twilight years.

Such results are ominous for offshore services providers, of course, and for the countries involved. Brazil's currency slumped Wednesday morning as the market digested the lack of foreign capital targeting the country's choicest oil resources.

Another country that should take note is Saudi Arabia. Like Brazil, it's trying to tempt foreign buyers to pay up for a piece of its black gold. On the same morning, reports emerged that Saudi Arabian Oil Co. is seeking commitments from Chinese state-owned entities to invest in its IPO. Such strategic buyers do provide cash. But as Brazil could tell Aramco, turning to them also says a lot about the broader appetite for what you're selling.



Story by Liam Denning from Bloomberg.

bloomberg.com / 11 06 2019

________________________


We invite you to join us as a sponsor.

Circulated Videos, Articles, Opinions and Reports which carry your name and brand are used to target Entrepreneurs through our site, promoting your organization’s services. The opportunity is to insert in our stories pages short attention-grabbing videos, or to publish your own feature stories.

________________________

Copyright© 1999-2019 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ (PW) stories by anyone provided it mentions Petroleumworld.com as the source.

Other stories you have to get authorization by its authors. Internet web links to http://www.petroleumworld.com are appreciated.

Petroleumworld welcomes your feedback and comments, share your thoughts on this article, your feedback is important to us!

We invite all our readers to share with us
their views and comments about this article
.

Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels

Twitter: @petroleumworld1


TOP

Contact: editor@petroleumworld.com,

Editor & Publisher: Elio Ohep/
Contact Email: editor@petroleumworld.com

CopyRight © 1999-2019, Paul Ohep F. - All Rights Reserved. Legal Information

PW in Top 100 Energy Sites

CopyRight©1999-2019, Petroleumworld   / Elio Ohep - All rights reserved

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission fromPetroleumworld or the copyright owner of the material.