Price fall to push oil industry into sharp recession

The oil price plunge means energy companies will slash capital spending in North America, Europe and Asia in 2015, investment bank Evercore IS said Tuesday.
But investment will continue to rise in Africa and the Middle East as producers in those areas seek to boost long-term output in the flooded global oil market.
Evercore estimated that oil companies would cut spending on exploration and production globally this year by 10-15 percent, and by 25-30 percent in North America.
"To sum it up, a sharp recession is coming to the global oilfield," said James West, an oilfield services analyst at Evercore, after surveying 300 global oil and gas companies on their 2015 spending plans.
The report shows the impact of the sharp drop in oil prices. US oil prices Tuesday stood at five and a half year lows, below $49 a barrel, down from nearly $107 in June.
The London benchmark, Brent crude, has fallen from $115 a barrel to less than $53 Tuesday.
Evercore said the industry is contending with lower cashflow and a lack of access to capital. Independents are especially vulnerable.
As a results, companies are cutting back especially in high-cost Arctic drilling and in Canadian oil sands projects, as well as on some US shale ventures.
Evercore also expects capital spending in Europe to fall by 20 percent due to cuts in the North Sea. It projects more modest declines in spending in Asia and Latin America.
However, Middle East capital spending is expected to rise 15 percent, with Saudi Arabia proceeding with a number of high-cost natural gas projects and Kuwait working to boost its crude output to four million barrels a day in 2020 from about three million now.
The report said African spending would rise by six percent in 2015, thanks to strong investment in Angola and Algeria.
Evercore's projections were based on replies to a survey on company spending plans that was begun in November, when the US oil price was still above $70 a barrel.
Survey responses showed 2015 capital spending declining by 11 percent in North American and 2.1 percent in international markets.
However, West said because oil prices have continued to sink since the survey was launched, its numbers "grossly" underestimate the scale of likely spending cuts.
Indeed, in December 15 companies revised down their capital spending plans by an average of 38 percent.