Once energy executives start waxing lyrical about an otherwise unwelcome event or development, it’s clear that this event or development has lost its destructive effect.
In the case of oil and gas, this week’s Offshore Technology Conference featured at least two speakers with a poetical bend. Transocean’s director of technology and innovation, Jose Gutierrez, compared the oil bust to the asteroid that 66 million years ago wiped out around 80 percent of all life on Earth. Fatal as the event was for these 80 percent, it also, scientific evidence suggests, marked the beginning of the rise of mammals, hence humans.
Luckily, the oil price crisis did not wipe out as many energy industry “species”, but it did sink a lot of smaller players. For them this was undoubtedly bad, but for those that survived, it meant, to extend the analogy, more grazing lands (in the form of oil and gas acreage, of course) and better chances to survive and thrive in the future. Besides, according to Gutierrez as quoted by FuelFix, the bust forced companies to collaborate, driving more innovation, which is always a good thing these days.
Another industry official, ConocoPhillips’ chief procurement officer, chose a confectionery image to illustrate his take on where the energy industry stands today. David Chenier compared it to Neapolitan ice cream, where the chocolate part is the best one, while the vanilla and strawberry-flavored parts are “average or decent.” Related: Stability In Libya To Start An Oil Race
For Chenier, the chocolate represents the core business of oil and gas companies, which the shale revolution boosted substantially. Then came the crisis, and to extend Chenier’s comparison, there was suddenly too much ice cream in the world. Now survivors from the bust are back to focusing on the best bits, selling the vanilla and the strawberry, or in Conoco’s case, its Canadian oilsands operations. The same is true for Shell, which also exited the oilsands almost entirely, and Chevron, which recently sold its downstream business in Canada.
And the chocolate? Much of the chocolate is in the Permian right now. Everybody wants to be there, mergers and acquisitions are on the rise, and so are drilling permits. Active rigs in the top performer of the shale patch are also multiplying relentlessly, and according to the industry, production costs are falling.
There’s a lot of chocolate in the Gulf of Mexico as well, judging by the latest news coming from that direction, such as Shell claiming it can make a profit from its Mars field even if oil trades at $15 and BP discovering a whole new field worth 200 million barrels in reserves underneath Atlantis – a field that the company is already developing. Related: Is The U.S. Oil Patch A Value Trap?
All in all, the future looks bright for U.S. oil and gas, and it’s not just because of tech innovation that is bringing costs down and improving yields. It is also because sentiment seems to have changed – prices of $50 per barrel are increasingly considered normal and there is no urgency to push them up as soon as possible. Acceptance of reality is a good thing – it’s a major step towards coping with said reality and U.S. oil is coping pretty well right now, according to the people who run the industry.
By Irina Slav for Oilprice.com
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