Is this possible?

[tut]

I would just like to see it go up to a sustainable level again, $140 was too much but $80 should be acceptable, and the effect on the great unwashed would only be an increase in the price of petrol to around £1.10.

tut

[Mikie711]

Sorry but no, needs to be higher to maintain all our ridiculous wages

[BiggestNizzy]

I would be happy with $40 a barrel. I work for a sub-con sub-sea machine shop and that's what we need to get things back. I see 2016 being a quiet year.

[mwmackenzie]

If oil has gone from $140 a barrel to, what $28 a barrel? why have by fuel bills not gone down by the same percentage? I'd actually say my household fuel bills are up on last year despite last year running some extra electric heaters I don't have this year....

[campbell]

Don't think oil is much used for leccy production, if at all? And not sure if gas & oil pricing are linked in any direct way.

As for vehicle fuels, something like 75% of the retail price disappears straight to the Exchequer so we will never see 75% of any oil barrel price reduction.

[Callummarshall]

There seems to be a lot of blame against the Saudis, yes they may have started it but it's not only them that's maintaining the low price. Other Oil states (such as Baku) whom rely solely/heavily on the exports of oil are actually increasing production to try and balance the books hence worsening the flood in the market.


As others have said, there is oil there and it's becoming more and more expensive to get it out of the ground, the truth is no one bloody knows technologies advance and things that weren't possible yesterday are possible tomorrow extending well life and allowing previously unviable or unknown options to be exploited. Look at fracking for example that's a relatively new technology and its now becoming more popular to produce oil in a way in which we couldn't before.

I'd like to hope there is another 45 odd years left to get me through seeing how I'm just starting out but at the end of the day I'm sure there will be something else. It's seriously frustrating trying to move up at the moment as there is little to no movement anywhere for engineering positions, I just have to be glad I've got what I've got and hang in and try make the best of a bad situation. 2016 seems set to be a lot worse than last year and that's for sure!

[Mikie711]

That's true, many have up'd production to counter the low oil price. Angola where I work has/is doing the same thing to maintain revenue stream but this is due mainly because of the low oil price. Had prices remained stable at $80 ish/bbl then the ramp up would not have been as severe. Venezuela for instance has a break even of $115/bbl and as such their economy is collapsing.
Much of the increased production increases are in reaction to the Saudis frankly belligerent decision to try and price out the shale oil drillers in the states and to maintain market share in the middle east. Had they not gone down this road then the price may well have remained more stable, at a lower level certainly but less volatile.
Fo all sorts of political reasons the Russians have up'd their production in an attempt to bleed the Saudis of as much money as possible which just exacerbates an already flooded market. And frankly I don't blame them, if it were me I would be sick and tired of the Arabs trying to manipulate the market to their end again and again.
Hopefully the Saudis will run out of money, common sense will return to the major oil producers and they will realise that this current course serves nobodies best interests and agree production quotas. Though I doubt that will happen anytime (soon).

[kerryxeg]

Mike gave me an interesting chat reference lack of exploration the other day. Cant remember the actual figures but something like currently we have a 35 million dollar shortfall daily which if continued means reserves or rather known reserves are depleted in only 2 years.
Hopefully he or someone in the know will be along shortly to explain better, seemed really interesting and concerning.

Somehow I've moved from drilling wells to figuring out how to develop new fields. It's fair to say the current oil price makes the North Sea a very difficult place to operate and make a profit, but that is not the immediate problem. Very few people saw the current oil price collapse coming, so even the biggest oil companies have economic problems. They have committed to major projects which can be $5 billion or more and do not now have the cash coming in from their producing assets. So they will do what anyone else would do in this situation and that starts with cutting investment where you are not obligated to continue, such as additional development of existing assets and conducting exploration. The can't cut exploration totally, because the share price of an operator is influenced by the years of proven (drilled and tested) reserves against the volume of annual production i.e. is it a sustainable business. Unfortunately the North Sea has some very old fields which with low production and relatively high costs results in some of the highest production costs in the world on a $/bbl basis. There are many North Sea fields which simply don't make economic sense on an investment level and would be shut down tomorrow if there was the possibility of flicking a switch.

So is it the end for the North Sea? Every field has an economic life, the point at which it cost more to run the field than you are making from the oil produced. Technology has been used to boost recover of the oil, this includes injecting water to boost the reservoir pressure, injecting gas to increase the mobilisation of the oil, fracturing to increase permeability of the rock and now injection of chemical to increase fluid mobility. In general we only get 50-55% of the oil in the reservoir out, so there is potential to increase this. But as the field ages the production drops and what you can afford to do becomes more limited. A single North Sea Well costs $30-$50 million, and the justification to add wells becomes more and more difficult as you get closer to the end of field life as you will have less producing years. So many of the North Sea fields were still looking economic with high oil price, but the dramatic reduction puts them into an uneconomic position and I expect many to be shutdown within the next 3-4 years. It does take quite a bit of time to shutdown a platform, I'd say at least 3 years. In some cases they will have to invest and upgrade facilities just to be able to do the abandonment.

However fields which have received significant investment in recent years are in a different place, they have higher production and therefore more attractive $/bbl and will have a long life forecast to ensure a return on the investment made. These will be the newer fields, but there are exceptions such as Forties.

The other important factor is the change of ownership within the North Sea. Many smaller operators have used the high oil price era to gain a foothold as a field operator. They did ok while the price was high, but will struggle in the low oil price environment especially if recovery is years off. Most oil fields are owned by groups of operators, typically 4 or 5 per licence. If any 2 of the licence holders are short of cash, it may not matter how good the project is, they may have enough share to stop progress. The recently established OGA - Oil and Gas Authority have a remit to ensure this does not prevent investment, but they are yet to establish how big their teeth are.

I get a lot of information from analysts on oil price and supply trends etc and taking and for every positive forecast of recovery I can find a negative one. The most sensible view I've read recently suggested that the $100+ oil price should be considered to be the anomaly, not the $50/bbl. Unfortunately during the $100 era the operators used the extra cash to explore, found bigger fields and started to develop them. Creating a boom of high priced developments and in the drilling world a massive increase in construction of very high cost rigs. In the drilling world, this has resulted in a massive oversupply of rigs, resulting in a sudden drop in rig rates. Where possible the rig contractors are delaying completion of the rigs, but some have built new rigs on spec and have no work. The rig rate reduction will eventually result in more activity as the rates feed through to cheaper well costs, but in the North sea at the moment the lack of available cash means the operators cannot take advantage of the situation and so the activity levels remain very low.

To end on a positive, there are still North sea fields which have a life well beyond 2030, the infrastructure they support will remain aiding the development of any future fields. There will be an increasing number of field abandonments in the coming years, but there is still a lot of development left in the remaining fields.

PS I wouldn't believe too much you read in the paper, the typical news article is so short of detail and real analysis they rarely consider the real issues at play. The industry is a global industry and has to be considered in global terms before any of the investment decisions really make sense.

[Mikie711]

To add to what Kerry was talking about in the drilling sector, what he said is true but the new rigs aren't the problem. The high oil price meant extortionate rig rates as demand for units was high. Ergo the drilling contractors and shipyards strived to meet the demand. Now the lead time on a new build, from idea to first well, was approx 5yrs. 2 year lag time to obtain a yard slot for your build, 2-3 years from first steel cut to finished rig depending on if it was a rig or drillship. Ships are a bit quicker.
In the mean time the drilling contractors discovered that all the old 3 gen rigs could get highly disproportionate day rates for rigs that had very low overheads. So, cheep rig to run and $300k day rates = huge profitability. To give you some idea a 3 yen semi would have an operating day rate of $50k plus some contingency, a 6th or 7th ten rig/ship would run you $180-225 a day and cost upwards of $600million to build for which you could, in the top of the market, get circa $600k a day for. You don't have to be a Robin to figure out which was the more attractive to run. Therefore none of the old rigs were scrapped, they just kept patching them up and send them out on the next job.
As the new builds come on line you end up with a situation where you have more and more rigs chasing less and less work. The old rigs can't drill the deep water wells and the new ships don't handle harsh weather well. But drilling contractors have to maintain the work for the new rigs so they start to remove the older rigs from the market and eventually scrap them.
Which is where we are now, much of the older fleet are being idled or scrapped some of which are 50 years old+, this should have happened during the natural cylce of the industry but the high oil price meant they stayed around a lot longer than they should have. Hence the market saturation of rigs.

[pshanks76]

And even when we do stop producing in the North Sea those assets need to be decommissioned and there are many years of work involved in that too.

Sent from my Nexus 7 using Tapatalk

[kerryxeg]

Decomissioning is an industry in itself - it's certainly got lots of potential. It is chargeable against previous tax so the government will be paying the biggest chunk. I hope they have saved up.

[campbell]

Nah. They'll just stick it onto fuel duty.

[Mikie711]

As Kerry said oil is an international business and as such many of us don't work in the North Sea which is a small piece of a very large pie. It was and probably always will be an expensive place to drill and produce oil but there is still money to be made so will continue for many years. De-commisioning will add live to the service companies geared up around it also.
The current dip is just another in a long line of boom and bust cycles that this industry seems to suffer. Never really understood it as by now you would think that it would benefit everyone concerned to maintain a stable commodity price but apparently not so.

[point n squirt]

Esso Hamilton are now selling Petrol and Diesel at £0.99 and there expecting that price to stay.

[mckeann]

Esso Hamilton are now selling Petrol and Diesel at £99.9 and there expecting that price to stay.

Rip off merchants. Asda are doing it for £0.99