Total cuts North Sea, U.S. shale spending after oil price plunge

By Dmitry Zhdannikov

DAVOS, Switzerland, Jan 21 (Reuters) – French oil and gas company Total will cut spending in ageing North Seafields and in U.S. shale production after the recent plunge in oil prices, its chief executive said on Wednesday.

View of the logo of French oil giant Total in front of the oil refinery of DongesSpeaking at a panel session at the World Economic Forum in Davos, Switzerland, Patrick Pouyanne said he expected oil prices to remain low in the first half of 2015 after falling almost 60 percent since June to below $50 a barrel.

Pouyanne told the Financial Times on Tuesday that Total planned to reduce capital spending by 10 percent this year from 2014’s total of $26 billion and was also looking at imposing a group-wide hiring freeze for 2015.

Total’s capital spending in the North Sea, home to the benchmark Brent crude oil, will be reduced as profitability from fields there has worsened, Pouyanne said on Wednesday.

U.S. shale oil and gas production, which has surged in recent years, causing a large build in global oil supplies, will also be curtailed.

“We have fields on the U.S. East Coast and my instructions have been pretty clear — we will limit investments,” Pouyanne told the panel.

“I can come back in one year when prices come back,” he added.

While many shale fields were profitable at oil prices of $70 a barrel, the current low price environment was most likely to lead to higher efficiencies that will reduce production costs below $50 per barrel, he added.

CYCLE

Total joins a raft of international oil exploration and production companies, including BP and ConocoPhillips , that have slashed 2015 budgets in light of the lower oil prices.

Pouyanne nevertheless warned that lower investment in new production could store up problems for the future.

“There is a natural decline of five percent a year from existing fields around the world. That means (that) by 2030 more than half of the existing global oil production will disappear. There is an enormous amount of money that needs to be invested to get another 50 million barrels per day of new production.”

“The cycle will come back and higher prices will come back,” he said.

Total may also abandon a search for oil and gas off Cyprus after failing to discover tangible signs of reserves, the island’s energy minister said on Wednesday. (Writing by Ron Bousso; Editing by Jason Neely and Mark Potter)

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