For what its not worth here's my take on the oil industry. From the 1950's thru 1970's the bulk of foreign oil was developed by the 7 Sisters(BIG multinationals). They ran the business like banks, cheap plentiful supply, well balanced supply/demand, they could bank on X amount of profits for the next 20 years, nobody rocked the boat. When the Shah fell the game was really over and OPEC finally stopped the exploition, which was only fair. However, most of Opec has been headed by idiots, they continually cheat on their quotes and temporarily screw with the supply/demand thru greed which eventually cuts their own throats. And over and over again. While oil is finite there should never be a shortage in our lifetime unless deliberately contrived. The USA is still the 2nd or 3rd largest producer in the world(haven't checked in a long time) but we continually import over 50%. Our biggest conventional reserves are offshore Gulf. New technology,ie. Horizontal drilling, 3D seismic, deeper water drilling rigs, have made previously unobtainable reserves in the Gulf now very attractive$$$$. Of course the exploration companies have to make a profit and higher oil prices are the biggest parameter, however, regardless of whether or not a Gulf Well is a producer the service companies get paid and thier fees are VERY HANDSOME. Federal and State off shore leases have expirations all the time and the Big Boys paid dearly for those leases. They do not want to have them expire and pay out the nose AGAIN in competitive bidding, it is usually cheaper to meet your drilling commitment then to have a lease expire and go thru the whole process of bidding again. These wells cost MILLIONS to drill and all that money goes to the service companies. While temporarily lower oil prices will cut into Exploration companies pockets and may slow down some of their development, they will continue drilling, here and offshore worldwide. Schlumberger( pronounced "slumber j" for anyone wondering) is incredible with technology as is Haliburton, there are several others as well (rig conractors, etc.) They get paid regardless of the price of oil. Oil prices will continue to be cyclic and it will affect producers profits, but the service companies will still get paid. Certainly when activity slows they won't have as many wells to service, but they will get paid, and when activity picks up so will their volume. As the world developes and grows energy consumption will continue to grow. Until there is a cost effective alternative, drilling for oil will continue, with its ups and downs. And the service companies WILL GET PAID. Years from now when supplies truly get tighter and the price of oil stays at +$50, or whatever the profitable price is...oil shale deposits in western Colorado are absolutely gigantic and they will be developed, someday?
Former partner of mine has been working offshore Nigeria and Gulf Coast, he marvels at how technology has changed the business in the last 10 years, Schlumberger continues to be the leader, just as they were the pioneers in the 1930's, and thru all the booms and busts, they STILL GET PAID, from the Big Boys, Exxon, BP etc. Although, it seems to me that we stiffed them on a few bills back in 1983 when the Independent I worked for got crushed when the banks panicked and called their loan, but thats another story, and I am rambling on.
I only pay marginal attention to oil, gas and mining now.....took 5 years to get it out of my blood...fun, exciting, frustrating
CH |
