Big Oil to Cut Investment again in 2016

by Karolin Schaps and Ron Bousso (Reuters) With crude prices at 11-year lows, the world's biggest oil and gas producers are facing their longest period of investment cuts in decades, but are expected to borrow more to preserve the dividends demanded by investors.

At around $37 a barrel, crude prices are well below the $60 firms such as Total (TOTF.PA), Statoil STO.OL and BP (BP.L) need to balance their books, a level that has already been sharply reduced over the past 18 months.

International oil companies are once again being forced to cut spending, sell assets, shed jobs and delay projects as the oil slump shows no sign of recovery.

U.S. producers Chevron (CVX.N) and ConocoPhillips (COP.N) have published plans to slash their 2016 budgets by a quarter. Royal Dutch Shell (RDSa.L) has also announced a further $5 billion in spending cuts if its planned takeover of BG Group (BG.L) goes ahead.

Global oil and gas investments are expected to fall to their lowest in six years in 2016 ...

Shell has not cut its dividend since 1945, a tradition its present management is not keen to break. The rest of the sector is also averse to reducing payouts to shareholders, which include the world's biggest investment and pension funds, for fear investors might take flight.

Shell, which plans to complete its $54 billion acquisition of BG in February, intends to focus on the attractive liquefied natural gas (LNG) market and on deep water oil production, especially in Brazil, both areas in which BG is a leader.

But with fewer projects approved, fewer fields developed and less maintenance work undertaken, companies are putting their growth at risk.

"You've got to hold your nerve. If you cut too deeply, it is very, very difficult to take advantage of the price rebound when it comes," a senior official at a European oil major told Reuters. READ MORE / MORE and MORE (Advanced Biofuels USA) and MORE (Wall Street Journal)