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Recent Investment May Indicate Oil Company Confidence in REcovery
On July 5, 2016, Exxon and Chevron, along with their other partners, announced plans to expand the Tengiz oil field in Kazakhstan (http://www.ft.com/cms/s/0/53bf815a-42a5-11e6-9b66-0712b3873ae1.html#axzz4DfMONod9). Together, the companies will invest $36.8 billion to expand the existing field with the hope of ultimately increasing production by 850,000 barrels per day by 2022. Chevron, the operator of the project has a 50% stake, and Exxon Mobil a 25% stake in the field. Interestingly, this follows a June 30 announcement by Exxon in which they indicated they struck gold in the Liza field located in Guyana: they now believe the reserves are double their original estimated and the field could hold between 800 million to 1.4 billion barrels of crude oil.
Similarly, BP authorized a multibillion-dollar gas export expansion complex as well as an intent to fast-track a major offshore gas discovery in Egypt. Italy’s Eni SpA is also moving ahead with development of an Egyptian field as well.
These investments seem to indicate growing confidence by the major players in hat the recovery, while volatile, is here to stay over the long haul. Of course, concerns remain that American shale could quickly ramp up production thereby hampering the recovery, or at the very least, slowing it down.
This is in sharp contrast to the overall trend since 2015, during which big oil firms slashed their budgets by a quarter (over $30 billion) and cut more than 30,000 jobs. While these projects will not come online soon, the willingness of major oil companies to expand operations does add credence to the belief that the worst may be behind us – at least for a little while.