Wood Mackenzie: Oil industry to cut $1 trillion spending as North Sea hits “critical phase”
The global oil industry will spend $1 trillion (£704bn) less on development and exploration in 2015-20, just as the UK's North Sea sector hits a critical phase.
Development investment will be around 22 per cent less than what was anticipated before the oil price rout started in the middle of 2014. And an additional $300bn will be cut from exploration efforts.
Crude fell from over $110 per barrel to below $28 per barrel in January, and is currently hovering around $50.
Read more: Oil and gas firms are struggling as the industry braces for fresh job cuts
Malcolm Dickson, principal analyst at Wood Mackenzie, said international production would eventually recover. But he warned that the spending cuts could have a long-lasting impact on the UK Continental Shelf, due to the basin's maturity.
"The North Sea is a little bit of an exception. We're at a critical phase … there is a danger some of the investment may not return," he told City PM
Read more: 120,000 UK jobs lost from the oil price crash
Upstream spending cuts will have short-term consequences for production, with seven billion barrels of oil less being produced in the four years to 2020 than was expected before the oil price drop, according to the analysis.
In the nearer term, it expects three per cent or five million barrels per day less global output this year, and four per cent or six million barrels per day less in 2017, with US shale gas accounting for 70 per cent of the fall.