The risks of E&P

After two years of soaring oil prices, oil majors are still building low oil-price forecasts into future investment plans. Is this sound risk management, or are they being too risk averse? By Stella Farrington

Despite this year’s soaring oil prices and much-publicised record profits, oil majors appear stubbornly reluctant build this world into their investment plans.

While US crude futures have averaged over $50 a barrel so far in 2005, most oil majors are still using a price estimate of around $25 a barrel for assessing whether a potential new E&P project will be profitable.

As a result, many of today’s potential projects – most of which are in expensive deep water or technically challenging areas

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