OIL PRICE PLUNGE

Ramba Energy continues drilling as others trim investments

The Bangora gas field operated by KrisEnergy in Bangladesh. Unlike Ramba Energy, this Singapore-listed firm had promised a "significant reduction" to capex from last year. Investors are putting pressure on firms, favouring those that deliver "severe
The Bangora gas field operated by KrisEnergy in Bangladesh. Unlike Ramba Energy, this Singapore-listed firm had promised a "significant reduction" to capex from last year. Investors are putting pressure on firms, favouring those that deliver "severe capital expenditure cuts", the Wood Mackenzie report said. PHOTO: COURTESY OF KRISENERGY

As they wait for oil prices to turn, oil exploration firms have been slashing their investment budgets, postponing production and even cancelling new projects.

But Singapore-listed Ramba Energy is sticking by its guns. The firm, which explores proven basins on the islands of West Java and Sumatra, is not trimming its capital expenditure for now.

"We will continue our planned investment programme due to a number of key advantages," Mr Daniel Jol, commercial director of Ramba Energy, told The Straits Times. "Ramba's cost of production is significantly lower than US$20 a barrel."

So even as oil prices keep heading south from 2014, Ramba went ahead with the drilling of two exploration wells late last year.

Meanwhile, the Lemang block - its largest asset - is on schedule to have "first oil" this year, said Mr Jol.

And if oil breaches US$20 a barrel? That means cheaper drilling services, he said, and "less work to be done when oil prices bounce back".

But not everyone shares this outlook, even as prices inched up to about US$35 a barrel last Friday.

Some US$380 billion (S$541 billion) of upstream oil and gas projects have been deferred since 2014, estimates energy consultancy Wood Mackenzie. And that is just counting major projects.

Amid growing fears of a "lower for longer" price environment, investors are putting pressure on firms to free up capital and reduce future spending, favouring firms that deliver "severe capital expenditure cuts", the Wood Mackenzie report said.

Singapore-listed KrisEnergy, which operates in Bangladesh, Cambodia, Indonesia, Thailand and Vietnam, had promised a "significant reduction" to capex from last year.

Mr Richard Lorentz, director of business development at KrisEnergy, said: "In 2015, we brought two new oil fields on stream in the Gulf of Thailand and, therefore, we were committed to that associated capex. But in 2016...we are in a position to defer as much as possible till we see at least a modest recovery in prices."

Singapore-listed Rex International, which has wells in Oman and Norway, said it will take advantage of today's lower-cost environment to book future savings. Executive chairman Dan Brostrom said: "Demand for oil has not dropped and its long-term trend continues to rise. There is no significant substitute for oil when it comes to fuel for powering transportation on land, sea and air." He added that Rex will scout for promising resources to add to its portfolio, and cash in when prices recover.

A version of this article appeared in the print edition of The Straits Times on February 01, 2016, with the headline 'Ramba Energy continues drilling as others trim investments Oil price plunge'. Print Edition | Subscribe