Editorial comment
Essentially the Summer of 2009 seems to have been mired in uncertainty and apprehension. The swine flu outbreak, for example, has been confusing and convoluted in equal measure.
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Essentially the Summer of 2009 seems to have been mired in uncertainty and apprehension. The swine flu outbreak, for example, has been confusing and convoluted in equal measure. Initially identified as a threat in April, and indeed a major talking point at this year’s Offshore Technology Conference, the early hysteria and certainly the media coverage, seemed to have all but petered out by the end of June, the very point that the virus actually ‘took off’. Suddenly rates of infection increased from the anecdotal to pandemic proportions, as did the scaremongering. There was talk of mass school closures come the end of the Summer holidays and anti-viral drugs began to change hands on ebay for vastly inflated prices. Then there were even concerns about the anti-viral drugs themselves and their side effects. Today the threat seems to have abated with rates of infection slowing and symptoms considerably less severe than originally feared. Yet, we are still being warned that colder weather over the months ahead could well lead to a swine flu resurgence and the distinct possibility of it mutating to become more virulent.
The panic and confusion engendered by swine flu has simultaneously been mirrored by the global recession and conflicting reports of a global recovery. Again we have seen opinion lurch from optimistic announcements of ‘green shoots’ and recovery to dire predictions of ‘double-dip recession’. The banking sector seems to be recovering with reports of profits and bonus taking, but businesses seeking loans are finding offers of credit extremely sparse. Whilst house prices and stockmarkets seem at last to be rising, so too are unemployment figures. As Autumn gets underway, we are no clearer as to what lies ahead in the coming months.
The oil and gas industry has certainly not been immune from this anxiety and doubt. In fact, oil prices are intricately linked to the prospect of global recovery with analysts concerned that increased global oil consumption will quickly lead to another major spike in oil prices. With the International Energy Agency (IEA) predicting a 3% fall (2.6 million bpd) in worldwide oil consumption in 2009, with OPEC consistently cutting back on production throughout the Summer and with record levels of crude being held in storage around the world, this would seem contradictory. However, as National Oil Companies (NOCs) have closed ranks and squeezed out western oil and gas companies, there has been a strong trend towards a fundamental lack of investment in oil exploration and production over recent years, which the worldwide recession has only exacerbated. When the ‘uptick’ in the global economy finally comes, there is a very real danger that demand for oil will quickly outstrip the industry’s ability to supply it. Once the oil hungry economies of China and India start to rebound (the early signs of which are already there), then current surpluses will rapidly be exhausted sending prices soaring towards the extraordinary US$147/bbl reached in July 2008, or even beyond.
Yet whilst we worry about record oil prices and the onset of peak oil, there have also been a series of ‘good news’ stories from those companies that have continued to invest in the industry. BP announced on 2 September, that it had made the discovery of a ‘giant’ oilfield in the Gulf of Mexico thought to hold approximately 3 billion bbls of oil. The Tiber well was drilled to a depth of over 35 000 ft making it one of the deepest wells ever drilled and proving the ongoing potential of the Gulf of Mexico. Similarly, the recent announcement that the Australian federal government had finally granted environmental approval for the US$ 42 billion Gorgon LNG project was a significant boost for Chevron and its partners on this project, ExxonMobil and Shell.
Let’s hope that the global economy’s self-doubt is over, that the emerging ‘green shoots’ really are green, that swine flu is no more and that the oil and gas industry continues to make the type of large scale progress which ensures that the oil and gas market is well balanced and future recession inducing price spikes are avoided.
