News that oil giant BP is to accelerate its redundancy programme underlines how the industry is being squeezed by the tumbling price of crude.
Companies that had been riding the crest of $100-plus oil are facing a reality check. What looked like a good investment at $100-a-barrel doesn't look so profitable at $60.
Across the sector - from super-majors like BP, services giants such as Halliburton, and minnow explorers in the depths of Africa - the question is the same: is the 40% fall since June the new normal, or a blip in an otherwise long-term upward trend?
This week, analysts at investment bank Morgan Stanley warned that oil could fall to $43 a barrel in the second quarter of next year unless oil producers' group Opec bolsters the price by cutting production.
But in truth, no-one really knows for sure where the price is going. In the meantime, companies like BP are forced make contingency plans ahead of what could be a tougher climate.
"The fall in oil prices has added to the importance of making the organisation more efficient," a BP spokesman told the BBC.
A company the size of BP can at least play the long game. Hundreds of smaller and mid-tier oil and gas explorers - and their investors - will be rethinking their business plans urgently.
There is a fear that some exploration in Africa could be the first to go as investors cut back funding
Many of these firms do not have the financial muscle to withstand a prolonged price fall. Analysts predict a wave of mergers and acquisitions as firms seek out rescue deals, and falling share prices create bargains for larger predators with deeper pockets.
"A lot of these companies have smaller budgets and are more exposed," says Graham Sadler, managing director of Petroleum Services Group at business services firm Deloitte.
Many will try to spread the risk by, perhaps, sharing drilling rigs and other facilities. "But a lot of drilling will be pushed onto the backburner," he predicts.
'Obsession'
However, industry juggernauts in the US and Europe will not escape the need to change course, especially when leasing an oil rig can cost anywhere between $50,000 and $600,000 (£30,000 and £380,000) a day depending on the demands of the project.
Mr Sadler says that drilling in high-cost places like the Arctic and deepwater locations could be casualties as the big players cut back on costs.
Drilling projects in the Arctic that have not already received substantial investment may now be delayed
Projects that have already received billions of dollars in investment will probably be safe. Others that have yet to leave the drawing board will likely be put on hold.
That the oil majors are being hit by falling prices is reflected in recent speculation that BP and Royal Dutch Shell are in merger talks. This old chestnut surfaces every few years when the oil price falls sharply.
But it underlines that in tough times even the giants of the sector are expected to be searching for economies of scale and better pricing power. And remember, BP turned itself into a global player via a bold acquisition spree in the late 1990s, when the low oil price threw up takeover opportunities.
Author Daniel Yergin, one of the foremost authorities on the industry, wrote last week in a Wall Street Journal article: "Even before the collapse in prices, major oil and natural-gas companies had become preoccupied with the continually rising costs of developing new supply and were heeding the call from investors for 'capital discipline'.
"This price decline will turn this preoccupation into an obsession. The result will be a slowdown and reduction in major new investments around the world.".....
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BP/Shell merger?
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