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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (39975)	6/20/2001 11:46:25 AM
From: SecularBull	Read Replies (1) \| Respond to of 50167

And there's this: Message 15969320 ~SB~

To: IQBAL LATIF who wrote (39975)	6/20/2001 1:13:38 PM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

OPEC Versus High-tech By Thorsten Fischer 06/20/01 12:00 PM ET Technological advances are responsible for increased production outside OPEC, as exploration becomes economically viable in places that were heretofore out of reach. The high price of oil due to OPEC's restrictive production quotas and lower lifting costs outside the vast oilfields of the Middle East due to improved technology have resulted in a moderately declining share of OPEC production in overall world production. The process of capturing OPEC market share is slow, and will suffer setbacks since crude oil production in the Middle East remains by far the cheapest and most efficient anywhere in the world due to the geological realities. That leaves OPEC with powerful tools to discipline the global market, such as threats to expand production in the short term to discourage new entrants. Still, crude oil prices for West Texas Intermediate in the upper $20 per barrel range (see chart) have sparked exploration, development and production outside OPEC on a large scale, mainly in the former Soviet Union, Mexico and off the coast of Africa. A clear indication of what to expect can be gained from the Baker Hughes rig count. The rig count is a leading indicator for development and production. The international rig count, which excludes the U.S., is up sharply since 1999, indicating increased drilling activity worldwide. At the same time, rig counts in the Middle East have remained stable. Thus, with capital spending by oil and gas companies outside of OPEC totaling $115 billion, an increase of over 25 % compared to last year, the share of crude oil from outside OPEC will continue to increase in the future. Still, to put development into a broader context, while the rig count is up from 1999, it is still below the high levels reached before the 1998 oil glut. Nevertheless, there is a long-term trend that shows an increase in activity outside OPEC. The advancement of crude oil production outside OPEC would have been inconceivable without a revolution in the oil industry that has led to the integration of information technology and to vast improvements in productivity. Important advances in technology include 3-D seismic imaging, directional, rather than vertical drilling, and increased computational power to make full use of these new technologies. While directional drilling has existed for decades, only its combination with 3-D seismic imaging has rendered it commercially feasible. After all, it is only worthwhile to spend resources drilling if one has an accurate picture of where one wants to go. Similarly, 3-D seismic imaging would have been impossible with advances in computer technology, given the enormous computing requirements. The main upshot is that existing wells are used more efficiently and that the yield of existing oil fields increases as technology makes exploitation more efficient. The Department of Energy estimates that only slightly more than 10% of new proven reserves come from new fields, while some 90% come from existing fields. Think of the oil industry undergoing a development similar to many other industries where resources are used more intensively rather than extensively. As a result, even as the world continues to consume more oil, proven reserves increase and stand now at roughly 1 trillion barrels. Predictions that the world would run out of oil have proved incorrect again and again. Moreover, increased productivity has led to a dramatic improvement in cost. For example, the Energy Information Administration reports that the average cost of finding new oil has dropped from as high as $12-$16 per barrel throughout the 1970s and 1980s to $4-$8 today. Cost improvements are similar in other regions of the world. While these technological advances have the potential of reshaping the global oil market and increase the role that producers outside OPEC can play, OPEC will remain the most important player in global oil markets for the foreseeable future, only now with an ever enlarging thorn in their side.