As oil firms continue to slash investment and look for more ways to cut their costs, the chief executives and presidents of more than 30 US-based exploration companies gather in Scotland today for the oil and gas equivalent of the global economic Davos Summit.
The key speaker at the 2016 Simmons oil-energy conference, being held at Gleneagles Hotel, near Cumbernauld, is Ryan Lance, Chairman and Chief Executive of Conoco Phillips – the world’s largest independent oil company, which has substantial operations in the North Sea.
But for the benefit of our readers whose budgets may not stretch to three days at Gleneagles (see full list, below) Lance’s speech tonight (31 Aug) will probably include warnings about increasing efficiency and a forecast that crude oil supply will continue to exceed demand to depress oil prices into 2017.
Speaking yesterday in Norway, Lance said the key to future investment and exploration was to lower the breakeven costs of projects “as much as you can” and to try to keep some cash flexibility.
“You’d better not have everything tied up in very large projects because you may have to deal with a 70% decline in revenues over six months,” he said.
With a 60% downturn in crude oil prices over the past two years, Edinburgh-based consultancy Wood Mackenzie has put the drop in exploration and production spending by the top 56 oil and gas firms at 49%, or $230 billion, over the period.
Hopes for a steep recovery in prices have been dashed by persistent oversupply, meaning companies must keep hammering costs for at least another year.
Lance added: “Cost-cutting is going to continue – and the oversupply will extend into 2017.”
Statoil has managed to reduce costs further on the initial phase of its giant Johan Sverdrup field – the largest North Sea oil find in the last 30 years – to 99 billion crowns ($12 billion) from an original forecast of 123 billion crowns.
The company is reviewing its entire portfolio to identify projects that could be developed with better concepts, more efficient drilling and standardised methods, all in an effort to bring down its breakeven costs further.
At the same time, the cost of developing the Zidane gas field off Norway has been cut by 20%, according to ex-BP chief John Browne, now executive chairman of Russian billionaire Mikhail Fridman’s investment vehicle LetterOne.
Meanwhile, Aberdeen-based Wood Group has been awarded a new engineering services framework agreement by DONG Energy to support its oil and gas assets across the Danish, Norwegian and UK continental shelves.
Front end development, maintenance and modifications, engineering, and late life and decommissioning services, for both topsides and subsea facilities, will be provided under the four year contract, which is effective immediately.
The full corporate attendance list at the Gleneagles event – hosted by a US-based investment bank – includes; –
|Atwood Oceanics, Inc.||Noble Energy, Inc.|
|Awilco Drilling||North Sea Midstream Partners|
|Broad Cairn Investments||Pioneer Natural Resources|
|Conoco Phillips||Rowan Companies PLC|
|Core Laboratories N.V.||Schlumberger Limited|
|Devon Energy Corporation||SmartSand|
|EOG Resources Inc||Southwestern Energy Company|
|FMC Technologies, Inc.||Superior Energy Services, Inc.|
|Halliburton Company||Transocean Ltd.|
|ICR Integrity||U.S. Silica Holdings Inc|
|Keane Group||Valero Energy Corporation|
|Marathon Oil Corporation||Weir Group PLC|
Meanwhile, OPEC members saw their revenue almost cut in half last year, according to the US Energy Information Administration. The agency said that OPEC members earned just over $400 billion in net oil export revenue in 2015 – a decline of 46% from the previous year’s $753 billion – as a result of depressed crude prices (presently hovering around the $50-barrel level).