By John Donovan
In response to the collapse in the price of oil, Shell and Qatar Petroleum have abandoned a $6.4 billion joint venture to build a petrochemical complex in the Ras Laffan Industrial City.
Extract from a Reuters Report:,
Prices quoted by companies to build the huge complex showed the project was “commercially unfeasible, particularly in the current economic climate prevailing in the energy industry”, the statement said.
RELATED FINANCIAL TIMES ARTICLE 14 JAN 2015:
Shell scraps $6.5bn Qatar project due to oil price rout
The decision not to proceed — a significant move following the halving of oil prices since last summer — was taken “after a careful and thorough evaluation of commercial quotations” from engineering, procurement and construction bidders, Shell said.
Under pressure to improve returns following the first profit warning in its history last year, Shell had already embarked on an intense round of cost-cutting before the slide in international crude prices to below $50 a barrel, from more than $110 last summer.
RELATED TELEGRAPH ARTICLE 14 JAN 2015
Shell ditches $6.5bn Qatar project as oil price slump deepens
Royal Dutch Shell and its partner Qatar Petroleum have ditched a $6.5bn (£4.3bn) project in the latest sign of the broadening impact of falling oil and gas prices on the hydrocarbons industry.
Shares in Shell were down 2.5pc at £30.18 in London following the announcement.
With oil prices firmly below $50 per barrel billions of dollars of projects both upstream, or in refining and petrochemicals are under threat.
Shell is due to report fourth quarter earnings at the end of the month when analysts expect more details on how the UK’s biggest oil company plans to adapt to the new price environment.
RELATED REUTERS ARTICLE 14 JAN 2015
Oil under pressure as World Bank cuts growth forecast
Reuters) – Oil prices pared early losses on Wednesday but remained under pressure after the World Bank cut its economic growth forecast, doing little to end a rout that saw prices touch their lowest in nearly six years in the previous session.
“OPEC is not going to come to the rescue of the market,” said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas.
RELATED BLOOMBERG ARTICLE 14 JAN 2015
Oil Collapse of 1986 Shows Rebound Could Be Years Away
The last time excess supply caused a plunge in oil, it took almost five years for prices to recover.
The CHART OF THE DAY shows how West Texas Intermediate, the U.S. oil benchmark, tumbled 69 percent from $31.82 a barrel in November 1985 to $9.75 in April 1986 when Saudi Arabia, tiring of cutting output to support prices, flooded the market. Prices didn’t claw back the losses until 1990. Oil has dropped 57 percent since June and OPEC members say they’re willing to let prices sink further.
Surging prices in the 1970s led to the development of the North Sea and Alaska oil fields. OPEC members also increased capacity, leaving the Saudis to trim output when demand softened.