Oil Search says low prices to stay

Oil Search chief executive Peter Botten says oil prices are likely to stay lower for longer amid a battle between OPEC and US shale producers.

Oil Search boss Peter Botten has warned oil prices are likely to stay low for the next five years, putting up to $5.5 trillion worth of projects around the world at risk.

Mr Botten said the rise of US shale producers, combined with OPEC countries' determination to preserve their market share meant it would be difficult for oil prices to rise significantly above their current levels.

"There are market forces that mean the oil price is not going to rise massively over the next five or so years," he said.

With oil currently trading around $US60 a barrel, compared to more than $US110 a year ago, many planned oil and gas projects, including some in Australia, wouldn't go ahead.

"That's something like $5.5 trillion of investment that won't happen," he told the Annual Stockbrokers Conference in Sydney.

"It means a lot of people in the oil and gas business probably aren't going to be in the sector over the next few years."

The slide in the oil price is the result of OPEC countries trying to protect market share against US shale producers by keeping the market oversupplied.

But Mr Botten said shale producers were unlikely to disappear, saying that while they have higher costs than traditional players, they were able to switch production on and off quickly.

And they were quickly becoming more efficient, he said.

"If you think $55 a barrel is their breakeven price today, next year its likely to be $45 a barrel," he said.

He said the outlook for the industry presented an opportunity for companies with strong balance sheets to buy out weaker rivals.

"This is a great opportunity to rebuild your portfolio," he said.

Oil Search's underlying profit more than doubled in 2014 thanks to its stake in the massive PNG LNG plant, but the company hasn't been immune to the fall in prices and has announced it will cut back capital expenditure this year.

Source AAP

Stay up to date with SBS NEWS

  • App
  • Subscribe
  • Follow
  • Listen
  • Watch