Spanish oil company Repsol's chief executive said Tuesday that the global financial crisis and falling oil prices were making investment in new production projects less attractive, particularly in deep and ultra-deep waters.
Current prices of around US$40 per barrel for crude oil and $4 per million BTU for natural gas are well below the profitability levels for investment in important projects that were forecast to bring new production into the global stream, Repsol chairman and Chief Executive Antonio Brufau said.
That would be the case for new oil and gas production coming from nonconventional resources and areas where new discoveries are being made with difficult physio-geographic access, such as in the deep and ultra-deep waters offshore, Brufau said in Trinidad, where Repsol's Caribbean headquarters are located.
Deep-water operations are very expensive and pose diverse challenges because drilling and maintenance operations are more time-consuming and experienced personnel are more limited, he said.
Brufau spoke during a company reception for Spain's King Juan Carlos and Queen Sofia, who were on a 24-hour visit to Trinidad. They left for Jamaica on Tuesday.
All in all, the reduction of investment, the credit squeeze and the current strong risk aversion caused by the global financial crisis and low prices, could have long-lasting effects on the supply side well above the effect on consumption, that is, a temporary shrinkage in energy demand, Brufau said.
However, he said Repsol was interested in participating in future energy bid rounds in Trinidad and Tobago, which remains a core location because of the company's strong equity position in BP Trinidad and Tobago and Atlantic LNG company.
Repsol owns a 30 percent interest in BPTT and has stakes in the four liquefaction trains of Atlantic LNG with a total capacity of 15 million tons per year.
He said Trinidad was also important because of Repsol's 70 percent share of three offshore oil fields on the east coast of Trinidad, called Teak, Samaan and Poui, which includes 17 platforms, two field-to-shore pipelines and 31 infield pipelines. There are approximately 100 producing wells.
Their exploration activities have led to the identification of 14 new prospects in the development of these fields and reserves of 40 million barrels of oil.
At the end of 2008, Repsol's net production from its Trinidad assets was 151,000 barrels of oil equivalent per day, of which approximately 89 percent was natural gas.
Brufau said the Caribbean region, which plays an important role in the company's exploration and production portfolio, holds 20 percent of its global production. (Editing by Jane Sutton and Jim Marshall)