FALKLANDERS GREET OIL PRICE RISE WITH CAUTIOUS OPTIMISM.
By J. Brock (FINN)
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 on Tuesday it was just below $10.00 per barrel.
On Wednesday everything turned around with the price of crude going up by 93 cents to approximately $11.00 per barrel. This was due to the impending Iraqi crisis and those trading in oil saw this as a sign that the supply of oil is in danger.
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.
Many are hoping that the rise in the oil price will be a steady one and that earlier predictions are understated.
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.
Wednesday's price rise is a step in the right direction and Falklanders are hoping to see more rises sooner rather than later. There is still a long way to go in order to reach the break even $14.00 mark and Falklanders are cautiously optimistic about their chances for further exploration by their own oil concern, Desire
Petroleum.
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. |
