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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Thomas M. who wrote (26461)	7/24/1998 11:11:00 PM
From: Mike from La.	Read Replies (2) \| Respond to of 95453

I've been a lurker for quite a while, the coverage here is so excellent that I have not had anything to add. But maybe I've come up with something worth throwing up for consideration. From the 20 July Oil and Gas Journal: "An Independent Petroleum Association of Mountain States survey has found the plunge in oil prices is forcing marginal well shut-ins in the US Rocky Mountains. Twenty producers have shut in more than 200 marginal wells and laid off 11 employers, said Ipams. And all 20 have halted exploration. Ipams Pres. Ray Singleton said, "Virtually every independent company producing strictly oil said their company is in financial peril. Unless prices rise or Congress gives us immediate and substantial legislative relief, (fat chance) the U.S. will lose its production from marginal wells, which accounts for 15% of U.S, output." Even assuming that they are fudging their figures for effect, even 10% of U.S. output is a lot. Usually when marginal wells are shut in, they are never reopened, unless perhaps oil gets very high. Wouldn't it be fair to assume that the same situation is occurring all over the world. A majority of the world's oil fields are at or past maximum production, and entering marginal status. Say maybe 7 1/5% of the world's production is from marginal wells. They are basically losing money for every barrel they produce, so they get shut fast. I have not seen this as a counted as a factor in oil production projections. Add also about a 1% depreciation from most fields. These are rough numbers, but I calculate that OPEC's cuts equals about 4% of world production, (somebody may be able to do better figuring). The possible shut-ins could double the oil removed from production. This is why I think that when the cut backs land, the effect will be dramatic. Any thoughts? Mike