Cheaper oil causes industry to pare drilling, lay off workers

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Cheaper oil causes industry to pare drilling, lay off workers

Cheaper oil causes industry to pare drilling, lay off workers
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Plunging crude prices have prompt a pullback in oil drilling.

French energy firm Total said is to cut spending on ageing North Sea fields and on US shale production.

That comes one day after the world’s largest miner BHP Billiton announced a reduction of shale drilling over the next six months.

BHP has also been hit by a collapse in iron ore and copper prices.

Some analysts are predicting the Anglo Australian giant may half its shale spending.

BHP said it would reduce the number of drilling rigs it is using to 16 from 26 by June 2015 and would update the market on its revised shale drilling budget in February.

Total’s chief executive Patrick Pouyanne said he expected crude to remain low in the first half of this year but he also believes “higher prices will come back”.

Total will reduce capital spending by 10 percent this year from last year and won’t be hiring any new staff.

Speaking at a panel session at the World Economic Forum in Davos, Switzerland, Pouyanne said US shale oil and gas production will also be curtailed.

“We have fields on the U.S. East Coast and my instructions have been pretty clear — we will limit investments,” Pouyanne told the panel. “I can come back in one year when prices come back.”

While many shale fields were profitable at oil prices of $70 a barrel, current low prices could lead to efficiencies that will reduce production costs below $50 per barrel, he added.

A surge in shale production in recent years has caused a large build up in global oil supplies and pulled down prices,

Oilfield service providers Halliburton and Baker Hughes also plan to cut thousands of jobs reflecting an abrupt slowdown in drilling activity.

The number of oil rigs operating in the US has fallen by about 15 percent, in the last two months.

Oilfield service provider industry leader Schlumberger recently said it would cut 9,000 jobs.