BHP Billiton said it will reduce the number of rigs at its shale drilling operations by approximately 40 per cent by the middle of the year.
The price of oil has fallen by half over the past six months to a six-year low below $US47 a barrel because of oversupply and slowing global growth. BHP Billiton chief executive, Andrew Mackenzie, said the move was in response to those lower oil prices.
"The revised drilling program will benefit from significant improvements in drilling and completions efficiency," he said. BHP Billiton will cut the numbers of rigs in use at its onshore US shale fields from 26 to 16 by the end of June.
In its latest operational review, the big miner said total petroleum production rose by 9 per cent in the six months to the end of December to a record 131 million barrels of oil equivalent.
Other US energy producers have shut down drilling with the number of oil rigs in operation at a six-year low. The average oil rig count is expected to fall by 15 per cent in the first few months of the year from the last few months of last year according to US oil services firm, Baker Hughes. It plans to lay off around 7,000 workers.
Gavin Wendt, senior resources analyst with MineLife, said he was not surprised by BHP’s plans to reduce oil drilling.
"This just reflects what’s happening in the broader US shale industry at the present time," he told the ABC in an interview for The World Today.
"We always knew that US shale oil production was a high cost endeavour, and was sustained and made commercially viable by the higher oil price environment that we’ve seen over the last four to five years."
Oil producing cartel, the Organisation of Petroleum Exporting Countries, has refused to cut production so it can maintain market share at the same time that other countries like the US have increased output.
In a statement posted on the Iranian oil ministry’s website, Iran’s Oil Minister, Bijan Zanganeh, said he saw no sign of OPEC cutting production.
"Even if the oil price goes down to $US25 a barrel, the oil industry will not be threatened," he was quoted as saying by Iran’s Fars news agency.
Mr Wendt said he expected oil prices to track sideways for the next six months unless conflicts in the Middle East and Ukraine worsened. - ABC