By TARA PATEL and FRANCINE LACQUA
Total, Europes third-largest oil company, called on
peers to revise projects that require tens of billions of
dollars of investment as costs escalate.
Costs are becoming too high, Christophe de
Margerie, CEO of the Paris-based company, said Friday in a
Bloomberg Television interview from Davos,
Switzerland. Projects of $50 billion leave one thinking
Isnt it crazy?
Total has vowed to lower capital spending even as it starts
s from Norway to Angola to
increase output. Royal Dutch Shell, Europes largest oil
producer, also has pledged to rein in costs after this month
issuing its first profit warning in a decade. The companies
have seen expenses climb as they search for crude and gas in
more remote and complex areas.
We have to redefine how we can develop some fields
without spending as much money, De Margerie said.
It probably means reinventing, going back to the
architecture of project
s to reduce cost
Expenses also have been driven up by rising construction
bills and currency
changes. In Australia, such costs have hurt companies
including Chevron, whose A$52 billion ($45 billion) Gorgon project
is among seven liquefied
(LNG) ventures being
built there at a cost of more than $180 billion.
The pressure on producers has a knock-on effect for
oil-service companies that help them find and pump crude and
gas. Ayman Asfari, CEO of London-based oil engineer Petrofac,
said Thursday that the company and its peers will feel the
impact of belt-tightening among their clients.
Our industry is facing a huge amount of cost
pressure, he said. More is being spent to produce
less. Our clients are seeing the rate of return on capital
dropping and theyre being challenged by investors who
want them to be more disciplined.