Major oil and gas projects are likely to be stuffed back onto shelves thanks to the depressed oil price.

Oil prices surged briefly after US President Donald Trump claimed last week that Saudi Arabia and Russia had agreed to substantially cut their production, with the benchmark Brent and West Texas Intermediate crudes closing at $US34.11 ($56.55) and $US28.34 per barrel respectively on Friday.

This is up from the close of $US24.93 and $US21.51 per barrel respectively a week before.

However, doubts about whether the two countries would call a truce and agree to production cuts have since sent the Brent down to $US33.57 per barrel and the WTI down to $US27.43 per barrel.

Given that this is less than half the price that oil was trading at just before the end of 2019, it is clear why global resources consultancy Wood Mackenzie believes that almost all pre-final investment decision (FID) projects will be deferred.

“$US110bn of investment will almost certainly be deferred, with another $US100bn at risk,” Woodmac upstream research team member Rob Morris said.

He added that only company’s with the strongest balance sheets would even contemplate major project investment approvals.

This is despite five years of cost cutting and optimisation ensuring that more than half of 2020’s pre-FID are capable of generating 15 per cent returns at $US50 per barrel, while less than half of their 2015 counterparts could make 15 per cent returns at a higher $US85 per barrel price.

“Some project sanctions will be delayed to 2021 and beyond. Some will be completely reworked or even put on hold permanently. These include projects with weaker strategic drivers, high breakevens, and/or financially distressed operators,” Morris said.

“Africa, the North Sea, South East Asia and Australian LNG face mass project deferrals. Australian LNG is perhaps the most high-profile casualty. As we predicted, both Woodside Petroleum and Santos have already announced delays at Scarborough and Barossa until market conditions improve.

“Project deferrals now will mean huge volumes of pre-FID production at risk from the mid-2020s. Projects previously targeting a 2020 FID would have contributed 1.8 million barrels per day of liquids and nearly 20 billion cubic feet per day of production.”

In late March, Woodside (ASX:WPL) said it was cancelling or deferring non-essential activities to reduce total expenditure by about 50 per cent to about $2.4bn. This includes delaying the FIDs for Scarborough and Pluto Train 2 to 2021.

Santos (ASX:STO) was a little less cautious, trimming 38 per cent off its 2020 capital expenditure and the decision made to defer FID on Barossa until business conditions improve.

However, deepwater oil projects in places like Guyana and Brazil along with niche liquefied natural gas (LNG) projects – including low-cost greenfield and feedgas backfill at legacy LNG projects – could still progress.

Small cap companies have also halted projects, with Central Petroleum (ASX:CTP) pausing its planned three well production pilot in Queensland’s Surat Basin.