Foreign investors have turned especially bearish on the Australian economy, with one describing it as "toast", a National Australia Bank report says.
Chief economist Ivan Colhoun said a recent visit to clients in Britain, continental Europe and the Middle East revealed a "uniformly negative view on Australia's prospects".
"I have never experienced such overwhelming negativity on the outlook for the Australian economy and Australian dollar in all my years marketing the Australian economy offshore," he wrote on Monday.
"To be fair, one investor did say that they were not that negative on Australia.
"Due to actual investments in production the volumes are still being added to the market, but the current cuts are starting to have an affect. In the next years the ongoing programs of investment shrinking - primarily from the transnational corporations - will certainly have their effect. As for now, the implementation of their long-term investment programs that started even before the current crisis has expressed in some production growth. But in 2014, the oil majors claimed to reduce the investment in production; in 2015, additional reductions by 10-20% and more were announced by such majors as BP, Shell, Chevron, Total. Overall cutback in global upstream investment was about $140 bln, and it is expected to reach $200-250 bln by 2016 year-end. Within 2-3 years, this will inevitably influence on the production and will have a long-term negative effect.
It should be noted that the average production costs in 2013 were 5 times higher than they had been 10 years before. As a result high revenues to shareholders were already in question before the recent drop in prices, therefore cutbacks in investments are being made quite actively. We should take into account that the status of the hydrocarbons resource base is permanently getting worse. The growth of world reserves of "conventional" oil and gas in 2014 was the lowest for the past 20 years; the negative trend remains for 4 years. Over 30% of new resources pertain to tight resources (deep water, heavy oil, super-tight reservoir, high content of acid gases).
A very limited set of countries have the ability to significantly build up oil and gas production now. While in the short to medium term they are mainly the Gulf countries, some African countries and possibly the United States, in the long term the main aspirations to meet the global demand for hydrocarbons are associated with Russia, Venezuela and Iran.
As a result, we can expect with a high probability that we are likely to witness the comeback of oil prices to a level that ensures a reasonable return on investment during the current investment cycle.
If compared to 1980s, the current share of the discovered conventional onshore fields reduced from 60% to less than 30% of all new discoveries. At the same time, the rate of more expensive deep-water and shallow-water fields, along with other sources of "high-tech" oil such as tight oil, has substantially grown. Such discoveries will prevail in the future. It is the deep-water oil that will define the full cycle costs and require higher prices for its efficient production.
Analysts got used to the fact that today Russia is not the absolute leader in the proven reserves of oil and gas being behind such countries as Venezuela, Saudi Arabia and Iran. However, according to a number of current estimates, the potential hydrocarbons resource base of the Russian Federation is the largest in the world.
Thus, the magnitude of potentially recoverable gas resources in Russia is estimated at 90 - 220 trillion cubic meters which is more than twice than the resource base of the United States (40-62 trillion cubic meters).
Though less recognized, the situation is similar with the oil resources. The potentially recoverable oil resources in Russia are estimated at 367-506 billion barrels which is significantly more than the capacity of not only the US but also Iraq, Iran and Saudi Arabia.
Take note that the major oil production projects in Russia are substantially below their main competitors on the cost curve, and are comparable with the projects the Gulf region. The oil production Opex per barrel in Russia in the recent years was 5-7 dollars, and in the current price environment, taking into account the weakening of the ruble, it went down to 2.8 dollars per barrel. This allows us to supply even at the lowest price scenarios, and the partners that have decided to join the Russian assets may count on a profitable return on investment."~Sechin
OAO Rosneft, the world’s largest traded oil producer, increased drilling by 27 percent in the first seven months of the year, according to a statement. That helped the company stabilize output in the first half, Chief Executive Officer Igor Sechin said in Moscow on Friday.
The Kremlin-backed company is able to buck the international trend of cutbacks in oil projects because the plunge in the ruble and the quirks of
Russian tax law insulated producers from the crude price slump. The nation’s exports remain just as profitable as they were a year ago when the oil price was about $100, according to Citigroup.
“We don’t see a financial reason for Russian production to start falling,” Ronald Smith, an oil and gas analyst for Citigroup, said by phone. “If anyone was out there expecting Russia to balance the market, the signal is that’s not going to happen.”
Brent, the international oil benchmark, is trading at about $50 a barrel, less than half the level a year ago. While oil drilling in the U.S. fell by a record after the Organization of Petroleum Exporting Countries decided last year to defend market share rather than cut production, Russia’s industry has shrugged off the price slump. The nation’s oil production rose to a record in June.
Rosneft drilled more than 800 new wells through the first half of the year, according to the statement. Total depth drilled rose to 4.59 million meters (15 million feet) compared with 3.61 million meters in the first seven months of last year.
The company is buying Trican Well Service Ltd.’s Russian pressure pumping business for $140 million. Pressure pumping, also known as hydraulic fracturing, blasts water, sand and chemicals underground to release trapped hydrocarbons.
Rosneft “needs to drill actively in order to withstand falling production,” said Alexander Kornilov, an oil analyst at Alfa Bank. Results of increased drilling will probably be seen in 2016, he said.
At the company’s largest unit, RN-Yuganskneftegas, drilling increased by 40 percent including a larger number of wells using more advanced technology, the company said. Rosneft has changed its business plan toward increasing output at existing projects including Yuganskneftegas, Sechin told Prime Minister Dmitry Medvedev on Friday.
Furious investors have kidnapped the head of a Chinese exchange for minor metal trading from his hotel and handed him to police, the Financial Times (FT) has reported.
The investors were angry that authorities had failed to find out why their funds had been frozen and believed by handing over Fanya Metals Exchange boss Shan Jiuliang to police they could spark an investigation.
The FT reported investors had been protesting for weeks about their funds being frozen at the exchange which is based in the southwestern city of Kunming and traded minor metals. It also offered high interest investment products from offices in Shanghai and Kunming.
Shan had been holding regular meetings with exchange backers and was on the way to Guangzhou for a business trip when he was captured. Photo: Weibo
The exchange, which had purchased minor metals for above market prices, has faltered as China's economy slowed.