Nearly 3% of global oil production is vulnerable to cuts if prices fall to $80 per barrel, making some projects in Canada, Angola, Brazil and Norway unprofitable, the International Energy Agency said.

 

The estimate was included in a monthly report in which the IEA also cut its forecasts for oil demand and said prices may drop further.

A tumble in the price from the year's high above $115 per barrel to below $90 has focused investors and oil companies once again on the breakeven level - the point at which net return on a project turns positive.

"All told, roughly 2.6-million barrels per day of world crude oil production comes from projects with a breakeven price in excess of $80 per barrel," the report said on Tuesday.

 

This represents 2.8% of the 93.2-million bpd of production in the third quarter of 2014.

 

Some Canadian production has among the highest breakeven rates, the IEA said.

 

"Canadian synthetics (oil sands) projects have the highest%age of production of the types examined here (about 25%) that would fall into a negative net present value if there were to be an extended period of prices below that level," the report said.

 

Projects with high breakeven rates are scattered around the world, however.

 

"Places as diverse as onshore China, offshore shallow-water Malaysia, Nigeria, conventional onshore US, shallow-water UK and onshore conventional Russia have significant amounts of high breakeven production," the report said.

 

It noted that some planned, high-cost projects had already been cancelled.

 

In the United States, slightly more than 4% of shale oil production requires a breakeven price of more than $80 per barrel, the IEA said.

 

A large proportion of deepwater exploration operations have high breakeven rates, the report noted, though the picture is mixed.

 

"Some 8% of deepwater crude oil production is adjudged to require a breakeven of $80 per barrel or higher ... totalling some 1.05 million bpd or 1.1% of liquid production," the report said.

 

"For ultra-deepwater alone (more than 1 500 metres), the results are, perhaps surprisingly, that very little of current output from those depths, less than 1%, requires such a breakeven price."

 

More than 80% of deep-water production is based in Brazil and the US Gulf of Mexico, where cost discipline ensures projects tend to be less exposed to higher breakeven levels than in Angola, Brazil, Norway and the United Kingdom.

 

Source : Engineering News