* Executives warn of lack of investment in new fields
* Volatility to remain even after OPEC deal -Total CEO
* Shale, technology to mitigate impact of supply shortage
By Ron Bousso
ISTANBUL, Oct 12 While OPEC and other big crude
producers work towards a deal to cap production to erode a glut,
industry executives are concerned the sharp drop in investment
that followed the oil price crash could lead to another crisis -
a supply shortage.
Over $1 trillion worth of oil projects have been cancelled
or delayed, Saudi Energy Minister Khalid al-Falih said on Monday
at the World Energy Congress in Istanbul, after companies
slashed budgets due to oil prices more than halving to around
$50 a barrel since mid-2014.
Oil fields take years to develop. In many cases, a decision
taken in 2016 to develop a field means oil production will start
in around 2020.
OPEC, which produces around a third of the world's oil, will
hold talks with non-member oil producers on Wednesday to work
out details of a global agreement to cap production for at least
six months. Non-OPEC member Russia, the world's largest
producer, has lent its support.
And as OPEC revives its role as an oil "central banker",
French oil and gas company Total Chief Executive
Patrick Pouyanne urged the industry to start investing again.
"By 2020 we will have a lack of supplies," Pouyanne told the
"Volatility has been huge. The stress on everybody, the
balance sheets of companies and countries is huge," he added.
BP Chief Executive Bob Dudley echoed his concerns.
"As much as a $1 trillion of big projects have been
cancelled or deferred around the world and that could catch up
with the world," Dudley said at the same event.
So far this year, eight new oil and gas projects have been
approved, which will add around 1 million of barrels of oil
equivalent when they come on stream, Bernstein analysts said.
They are expected to take an average of 38 months to come
onstream, at a combined cost of around $22.1 billion.
The International Energy Agency forecast in its 2016
medium-term report that oil demand will outstrip supplies
starting in 2018.
But Dudley expects supply and demand to be relatively
balanced until the end of the decade due to new fields that are
coming on line in the coming years and the abundance of U.S.
shale oil, which can be extracted within a few months.
As a result, he expects oil prices to remain within a band
of $55 to $70 a barrel until the end of the decade, well below
the $114 a barrel it hit in mid-2014.
"I do see the price of oil setting itself a band. Shale oil
in the US will attenuate the price a bit."
But unlike previous supply shortages, new technological
breakthroughs that improve field production and reduce downtime
will lead to shorter cycles, said Lorenzo Simonelli, CEO of oil
services company GE Oil & Gas.
"The industry will continue to be volatile. However, it has
also changed with the advent of shale and technology we are
going to see smaller cycles of volatility," Simonelli said.
(Reporting by Ron Bousso; editing by Susan Thomas)