Global Financial Credit Crunch: Will it lead to a Global Oil and Gas Supply Crunch?

The report provides an in-depth analysis of the effects of the credit crisis on the capital expenditure of companies and the current and future projects in the upstream and the downstream sectors. The report highlights the key issues leading to a future supply crunch and the role of government policy in the energy markets. Finally, the report tries to map out the consequences of the low investments on the future production capacity and compares them with the future demand growth estimates.

The report analyses current and future demand and supply projections to propose three scenarios for the future possible evolution of the world oil industry and examines the possibility of a supply crunch in the near future.

Credit Crunch And The Economic Slowdown Are Negatively Affecting The Investments In The Oil And Gas Industry

The tightening of the credit markets, collapse of the equity markets and a sharp decline in the oil prices has had a combined effect in creating an uncertain environment in the oil and gas industry and has had a negative effect on the capital expenditure plans of the oil and gas companies in 2009. The fall in prices with the absence of a corresponding decrease in construction and material costs has resulted in the tightening of cash flows of the oil and gas companies. Due to the economic environment and a projected lower demand, prices in the future are expected to be considerably lower than in 2008. Project finance is the preferred form of raising capital for huge and risky projects in the refining, LNG and pipeline industry. Reduced liquidity among the financiers and increased risk aversion has resulted in decreased project financing.

Almost all of the major E&P companies are cutting back on their earlier proposed capital expenditure plans for 2009.