El Gaviero, in reply to your post:
>>>...that we are headed for a trap set by geology & economics. Because more and more effort is required to get the same amount of oil out of the ground, supply will lag demand, prices will spike then fall, and the resulting volatility will inhibit investment in the oil patch.<<<
I don't fully agree with this. The problem is the assumption that more & more effort is required to get more oil. At the moment this is false. We are now producing more oil than ever, with less and less people & effort in recent years. The assumption is true for any given field, but so far has been false on a worldwide scale. Once that changes then this logic may work.
Look at the last little natural gas boom, where we had about 1,100 rigs working of which say 850 were drilling for gas. The supply response was enough to give us this glut we are now in (granted combined with the economic downturn in demand). How does that contrast in effort & manpower to the 4,000+ rigs we had working in the early 80's? Not very well. I believe this shows the tremendous benefit of new technology. I think Simmons has consistently underestimated the impacts of technology, which is why he hasn't been right yet.
>>>Also, I don’t see the rest of the world ever being able to do what we have done here in the USA -- make a profit on oil wells of low productivity. Out there in the world where the oil is, social, political and legal conditions are not conducive to such an intensive level of activity.<<<
I have mixed feelings on this. People in Nigeria make a living selling used coke bottles, cardboard boxes, etc. - any little thing of trifling value that they can try to turn a profit on. Do you really think they couldn't make a go of a stripper well operation? Maybe, maybe not. I will say that most countries have a few thousand wells versus our 500,000+, so inherently their stripper operations wouldn't amount to much anyway since they just don't have the numbers.
You also asked why isn't my industry attracting new talent? I hear tales all the time of how good things were in the past. More money, loose expense accounts, less regulation, more of a swashbuckling seat of the pants engineering approach (i.e. fun). Right now we are being asked to work in companies with skeleton crews during boom times, and bloated ranks fearing layoffs in busts. It is not easy or for the weak of heart. Why even bother when in recent years you could just be a trader and make more money, or go somewhere with a semblance of stability. The money really isn't good enough to justify working the ridiculously long hours in operations, being sent to West Africa or the Middle East, and a good deal of the fun has gone out due to ever increasing regulations & paper work.
I really do believe we are going to have a huge oil crisis one of the these days, but that day keeps getting put off several years or more. The cyclical nature of the biz is probably here to stay, and will become worse as long as the traders are allowed to continue their current practices (ala Simmons "tail wagging the dog"), and the data remains poor.
How can we profit is a more immediate question. I'm personally hoping for a good E&P washout this spring to set up a great buying opportunity. I'm also keeping a close eye on OSX stocks (as always), hoping for better prices than we currently have.
Sharp |
