After chopping spending by more than 30% to cope with a crash in oil prices and billions in writedowns that sent profits to the weakest since last decade, China’s energy giants are cutting even deeper, RigZone reported.
PetroChina Co., Cnooc Ltd., and China Petroleum & Chemical Corp., which together produce more crude than any country in OPEC besides Saudi Arabia, will reduce combined capital expenditure by about 8% this year, or roughly $4.6b, on top of 2015 cuts in spending.
Sustained low prices, combined with the high costs of ageing and depleted fields, have proved too much for the Chinese oil industry. Announced spending cuts as well as job and salary reductions could further weigh on resource-dependent local economies in north and northeast China, where a decline in coal prices is already battering growth, wrote The Financial Times.
Under the current environment, energy companies globally have shelved about $380b worth of major projects that could produce 27bboe, Wood Mackenzie Ltd. estimated in January. Brent crude, the benchmark for more than half the world’s oil, plunged 48 percent last year, forcing producers and drillers from the U.S. to Asia to slash spending and cut staff. Meanwhile, China’s economy, the world’s second largest, grew 6.9% last year, the lowest in a quarter of a century, according to Shanghai Daily.