The worst of the oil price rollercoaster is over, according to industry leader Sir Ian Wood.
“I think there’s probably a feeling that we’re seeing the bottom of the oil price,” he said.
“I think the $28 was really frightening.
“I think the indications are that various producing countries around the world are beginning to face some really big problems. Not necessarily because it costs a lot of money to produce oil, but because their economy is based on $50 $60 oil.
“Certainly I have more confidence that into 2017 and 2018 we’ll see the oil price back at $55, $60, $65 and that’s a big, big difference from $30, and a big difference from $40.
“I think it will begin to get heads up again. I think there will be plans pulled out to look again at some of the new field developments.”
He added: “We’re past the worst. Having said that I think the rest of this year is going to be pretty horrible and there will be more job losses in 2016.”
Sir Ian sat down with Energy Voice to discuss the themes of the site’s OTC research campaign, Sub $50: New Perspectives and Hidden Opportunities.
The industry veteran discussed recovery, diversification, operators on the brink and tax breaks, which he argued can’t be brushed aside as unhelpful, because people “aren’t paying taxes”.
“People plan ahead when they’re planning an oil field, so they’re going to plan around the oil price of 2019 ,2020, so the tax regime is very relevant in terms of planning, ” he said.
“I’m kind of hoping that by mid-2017, we’ll certainly be above $50 and hopefully up towards $60 and people will be talking about development and I still think there’s probably a need for some special incentives for more exploration in spite of the seismic.”
Special incentives include the government working with banks to take a more “medium term” view with the industry.
He added: “It’s so important that we don’t lose people. Again, we should be planning now for the two or three operators who are clearly facing liquidity issues, bank problems, that we put together some kind of thought to make sure they don’t get too far offline.
“What have we done with British steel? I think it would be a mistake to let good companies go down purely on the basis of liquidity when they’re actually basically good companies, and with a half reasonable recovery in the oil price they’ll be back on their feet again.
“I think government knows that. I think Treasury knows that and I think steps will be taken. Certainly steps in terms of talking to the banks and making sure banks apply a bit of medium term thinking. But I think steps should be taken to try and keep the key companies going.”
As well as keeping companies from falling off the financial cliff, Sir Ian stressed the importance of small companies resisting a cheap sell-out.
“A lot of these small companies are really struggling financially right now, and therefore I guess there’s a possibility that in the next six months as people begin to see some daylight that these companies, which have really been brought down on their knees, might be bought very cheaply,” he said.
“That would be very unfortunate. I think a lot of these people have worked extraordinarily hard and they deserve to get a reasonable return. I kind of hope they don’t sell out. I hope they stay the course, because they’re going to be the key players in the 2020s as we try to plan the long term future of Aberdeen and the north-east of Scotland post oil.”
Watch the video to hear why politicians are his biggest frustration, what he thinks of the OGA’s progress and if he were back in the chief executive seat where he would invest.
Sub-$50 Oil – New Perspectives and Hidden Opportunities is sponsored by the Greater Beaumont Chamber of Commerce in Texas and multi-discipline law firm Burness Paull in the UK.