BUSINESS REVIEW
IMPACT OF OIL PRICE MOVEMENT
It would be an understatement to say that global
oil prices have been in the news since October 2014.
Physical demand for fossil fuels has remained steadily
growing and inelastic despite price movements,
indicating that the real challenge has been supply,
or more accurately, the perception of ever growing
supply. With the exception of Middle Eastern sources,
international oil companies have announced significant
cuts to capital expenditure since late 2014. Within
Australia, mega projects like Gorgon, Ichthys, Prelude
andWheatstone are due to come on stream in the next
24 months, additional developments may encounter
delays.
Rig utilisation has been dropping as lower drilling
expenditure coincides with deliveries of new drilling
assets with the predictable decline in day rates. Industry
consolidation is likely to accelerate moving ahead, we
have already seen Haliburton-Baker Hughes among oil
service companies, Shell – BG among oil majors, etc.
Order books for capital projects are being depleted as
deliveries continue.
Production activities will continue and this will provide
opportunities for service companies but lower prices will
push down prices in line with market pressure. Lower
rates for asset owners are likely to lead to reduced
service revenues.
GROUP CEO’S
STATEMENT
4
“This is a tumultuous time in the oil and gas
industry. Recovery following a long period of
expansion can be arduous. However, we have
seen peaks and troughs before. Our financial
position is strong and our gearing is low.”
Kuah Boon Wee
Group Chief Executive Officer
May
2000
May
2005
May
2010
May
2015
160 -
140 -
120 -
100 -
80 -
60 -
40 -
20 -
0 -
Crude Oil Price (USD/bbl)
CRUDE OIL PRICE
