The Falklands: All Important Price Per Barrel Of Crude Will Determine The Future of Oil Exploration
By J. Brock, Falkland Islands News Network
December 15
With the announcement that Royal Dutch Shell and its British subsidiary lost £ 2.5
Billion in the last three months as a result of falling oil prices and the domino effect
those prices have had on other major and minor players in the Oil Biz, it is no
wonder that the hydrocarbons industry is treading on thin financial ice. Survival
plans for the industry include lay-offs and selling of assets. Shell announced 4,000
redundancies on Monday afternoon and by next Monday there may be more.
Lasmo, two weeks ago, announced 600 lay-offs.
Oil companies are merging together. EXXON and Mobil are the latest to
announce their marriages of convenience.
But what of the price of crude? Before the first noticeable oil crisis in the early
'70s the price of crude was around $4.00 per barrel. That crisis shoved the price
per barrel up to the prices that we are used to today. During the past ten years
the price peaked at $35.00 during the Gulf War and now it is below $10.00 per
barrel.
When interviewed by the BBC Derek Marnoch, MBE, President of the
Aberdeen Chamber of Commerce said, "The indications are not so much for the
on-going activity because the existing fields are producing enough to be serviced
and maintained. But, more importantly, for the next generation of fields, with the
price this low, it makes it more attractive for operators to go elsewhere in the
world." One third of Aberdeen's work force are employed in the oil industry and
with the current trends it may take a few years before things get back to normal.
What Derek Marnoch said can be echoed around the world and in all probability
the words "will look elsewhere" should be interpreted as "we are considering
freezing our exploration budget."
To be viable, any exploration budget must be supported by a correspondingly
high price per barrel of crude. When the prices are at historic lows, there is a
correspondingly quick exit from exploring altogether. Experts say that fourteen
dollars a barrel is the cut-off price for economically viable oil exploration in the
North Falklands Basin. Preferably the price should be eighteen to twenty dollars
per barrel to make exploration budgets comfortable and to encourage companies
to complete the search for the oil many experts predict is in the North Falklands
Basin.
At any rate, the volumes of data that have been collected from the area thus far
must be analysed and worked. This could take up the slack of those few years
while the price of oil per barrel stabilises and rises to an appropriate level. At the
appropriate time, with the correct data, Geologists will better be able to say
where any exploratory rig can be placed for the best results. So far, our timing
has been spot on and, with any luck at all, the next exploration phase will have the
added incentive of a rising oil price per barrel to go ahead.
Note: Derek Marnoch visited the Falklands in 1996 with the Aberdeen Chamber
of Commerce.
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