Everyone involved in the North Sea oil and gas sector will look back whimsically to a time when production was more than three times what it now is. Back then, untapped reserves considerably outweighed historic extraction and all involved in the industry could comfortably expect production to see out their careers. Notwithstanding price volatility, there was no pressing need to innovate and find new and clever ways to extract oil more cost effectively. Production could be extracted from more accessible fields with trusted technology.
Energy Voice has called on the global energy sector to participate in the second part of its landmark research launched to mark 50 years of oil and gas exploration in the North Sea. The latest survey has gone live, just two weeks after the first findings from the project – dubbed Energy 2050-Securing our Future - were revealed at OTC in Houston. In partnership with RGU, Burness Paull, EY, Douglas Westwood, Fifth Ring and the University of Oklahoma, this latest instalment will look at the sector's perceptions of technology and cost efficiencies.
North Sea technology can leverage the many unknowns of an emerging Asian exploration market as the new frontier finds its footing, according to an industry leader. Keith Palmer, Expro’s president of EPTI Overseas, sat down with Energy Voice fresh off his appointment in Bangkok, Thailand. Palmer discussed the emerging Asian market in the wake of Energy Voice research which revealed the region to be one of the most sought international frontiers. Palmer said now was a critical time for the North Sea to capitalise on a technology transfer.
As the latest survey goes live on Energy Voice, we've collected the first findings from the project, which were revealed at OTC 2015. Energy Voice has called on the global energy sector to participate in the second part of its landmark research launched to mark 50 years of oil and gas exploration in the North Sea. The project is a response to falling oil prices, which placed the UK and wider global energy market under pressure.
Have you ever heard the story of the ancient Chinese farmer? You know the one that takes place far, far away in a rural community in ancient China. You see back then a man’s worth wasn't measured by his monetary gains. Instead a man’s worth was determined by the amount of land, livestock and sons he had. My farmer had one horse, one son and a big piece of land, so he was doing pretty good.
The Energy 2050 survey finds a roughly even split between those who see oil back over $100 per barrel by 2020, and those who see it trading in the (albeit rather wide) range of $60-100 per barrel. Less than 10% of respondents expect prices to track under $60 per barrel. Not unsurprisingly in the current environment much of the focus is on managing through the next five years, rather than the long-term dynamics of the industry. A particular challenge remains for the higher-cost and mature areas like the North Sea where there is a clear need to address the cost, technology and ownership dynamics, but where confidence in the medium-term pricing environment is key to making the additional investments that are required to take advantage of the opportunities that still exist.
“Crude prices drop by 50% confronting the oil industry with major challenges”. Sound familiar? If you have been in this industry for more than ten years, you’ve seen at least one, maybe as many as five or six, major crude price down turns. Is this 1985? Or 1990? Or1998? Or 2008 again? Some things seem to be the same but to me something feels very different as well. Can recent history help us understand what comes next or is this a “new frontier”? First principles first – crude is a semi finite commodity. As a commodity, it is subject to significant price swings dependent upon demand changes or supply disruptions. Much of the past major crude price increases have been driven by either major supply threats or actual disruptions – some intentional and other complete surprises.
Watch the video and hear what the #OG2050 panel found most surprising about Energy Voice’s Energy 2050 – Securing our future results. Read more here.
The oil industry must leverage the sector’s current down cycle if it wants to give itself a fighting chance for the future, industry leaders said at standout event at this year’s OTC.
It’s understandable, following a 50% drop in the price of oil between June last year and March 2015, that participants of Energy Voice’s ‘Energy 2050 – Securing Our Energy Future’ survey, expressed the ‘need to slash costs’ as the number one challenge for the oil and gas industry right now.
In a low oil price environment, companies face a difficult challenge; maintaining vital business relationships with clients and operational capability, whilst maintaining profitability.
Daniel Moynihan, a US Senator, coined the phrase “You are entitled to your own opinion but not your own facts”. Information influences perspective.
Rahm Emanuel, now the Mayor of Chicago, famously said “You never let a serious crisis go to waste. And what I mean by that, it’s an opportunity to do things you think you could not do before.” While what we are experiencing just now may feel like an oil price crisis, that’s not really the root cause. Where the crisis lies is in the high cost of recovering oil and gas – particularly from the North Sea. At the expense of stating the obvious, there are two variables at work which will determine the health of the oil and gas sector – price and cost.
2015 is proving to be challenging for the North Sea. Despite the oil price reaching its highest level so far this year, touching $68 per barrel this week, there seems to be no end in sight to the continuous stream of concerning news about companies cutting costs, announcing redundancies and cancelling activities.
The UK offshore industry is in a fragile state. Around 300 fixed production facilities remain in operation, many of which are in excess of 40 years of age and require continuous maintenance and integrity management provision.
The need to slash costs is the number one challenge for the oil industry, according to a major research project by Energy Voice, but leaders also believe crude prices will bounce back above $100.