Oil & Gas – the past 40 years, the current market and a look to the future

We wholeheartedly agree with Professor Redfern (quoted below) that the future of oil and gas looks positive.

“There has not, to date, been a viable alternative to oil and gas so it’s difficult to imagine our global dependence on it waning. Moving forward, the key challenges for companies will be to reduce costs, adhere to environmental standards and continue to discover new methods, all while achieving high levels of efficiency. A steep challenge, but the talent in this sector is second to none.

“Despite the drive for reduction in CO2, and to meet climate change, which will be undoubtedly a challenge for oil companies to manage going forward, I can’t see at present any viable alternative to meet global energy needs other than oil and gas.

The long term trends, at least for the next 50 years, I think will still involve increasing production, until there is a similar step change in renewables technology to reduce its costs and increase efficiency. This could involve large scale carbon sequestration, that ball is still in the court of the governments; In this situation the authorities may task oil companies to deliver that CO2 sequestration anyway, as they are the ones with the technology and ability to move fluids in vast volume. Any changes will likely be gradual, and oil and gas as a resource for chemicals and such will always remain.

We have been “too” successful, if anything, in meeting this global energy challenge, and in the short term has resulted in the oversupply of the market. But this will correct naturally and going forward I think there is still a very rewarding, exciting career available in oil and gas, and one that the world needs, to maintain its energy output, without which the crisis we would face would dwarf any issues of climate change in my opinion.”

Professor Jonathan Redfern, Head of Petroleum Geoscience and Basin Studies research and Chair of Petroleum Geoscience at University of Manchester

Petroplan

We would agree that the oil and gas sector still offers incredible opportunities, from travelling the world to the chance to help discover new techniques and help keep the world’s energy lines open. It’s a demanding but rewarding career; therefore we thoroughly recommend it.

Petroplan’s experience in the oil and gas industry spans four decades so we have seen fantastic successes, difficult challenges, controversies and huge changes. The oil and gas industry has transformed the kinds of jobs we recruit for compared to when we began – so what have the last 40 years looked like, and how do we envisage the next 40?

The oil and gas industry is of incredible value to the UK and its economy. The sector provided 1 in every 80 jobs(450,000 people alone work in the extraction of North Sea oil) and the UK enjoys a stellar reputation worldwide for its work in this industry.

Celebrating the past and present

It’s not just our 40th anniversary this year – North Sea oil celebrated its 40th birthday in 2015 too. Petroplan established a year before the first oil was produced off the coast of Scotland  – 1975 – and  since then more than £1.4 trillion worth of oil has been pumped.

Writing last year, Daily Telegraph commodities editor Andrew Critchlow explained the link between North Sea oil industry’s revenue and the UK’s ability to “afford a free-to-access National Health Service”, and commented on the long-term success of Royal Dutch Shell and BP, two of the largest companies in the FTSE 100.

There’s been an undeniable dip in the oil industry over the past few years, with estimates showing that the industry has extracted the majority of reserves in the North Sea. Official figures suggest that more than three quarters of the available oil and gas in this area had been extracted by the end of 2010.

Despite a fall in North Sea oil production levels and peak prices a thing of the past, confidence in the sector remains – with the chief executive of Total Patrick Pouyanne stating in May 2016 that “there is a future for the North Sea, no doubt about it”.

“there is a future for the North Sea, no doubt about it”

Patrick Pouyanne, Chief Executive, Total

Source www.bbc.co.uk

Worldwide, the oil and gas industry sector remains incredibly lucrative. More than four billion metric tonnes of oil are produced annually worldwide by leading producers Saudi Arabia, Russia and the US, followed by China, Iran, Canada and Venezuela. The top three producers kick out more than 40 million barrels of oil every single day, with the US consuming 25% of this.

Falling prices, job instability and a battle to position oil and gas as a viable option compared to renewables have certainly impacted the oil and gas industry over the past decade, but we believe the sector is better placed than ever to move into the next 40 years with confidence and success. So how do the next four decades shape up?

Looking into the future of oil and gas

Although the older oil industry fields in the North Sea are not as lucrative as they once were, we expect them to yield oil for the next quarter of a century. Globally, the need for oil is still growing and companies have to balance this demand for more oil with potentially diminishing supplies.

Oil and gas industry reserves by nation

Key: All oil numbers are in million barrels (MMbbl), gas numbers are in trillion cubic feet (Tcf)

Petroplan World Map

Statistic source: http://www.eia.gov/

Map depicts the world’s top ten oil and gas industry producing countries, with countries 10 to 20 shown in the table 

Overview

To be counted towards the world’s oil and gas reserves, fossil fuels must be recoverable under current operating conditions and economic constraints. This means the order of the world’s largest producers of oil and gas is liable to quickly change. This map shows the current top 10 countries by proven oil and gas reserves, using figures from 2015.

The largest oil reserves collectively belong to OPEC, which has proven reserves of 1,206.00 billion barrels. OPEC member nations represents more than 80% of the world’s oil.

CountryOilGas
US37 MMbbl338 Tcf
Kazakhstan30 MMbbl85 Tcf
China25 MMbbl164 Tcf
Qatar25 MMbbl872 Tcf
Brazil15 MMbbl16 Tcf
Algeria12 MMbbl159 Tcf
Mexico9.8 MMbbl17 Tcf
Angola9 MMbbl9.7 Tcf
Ecuador8.8 MMbbl.2 Tcf
Azerbaijan7 MMbbl35 Tcf

It’s likely that in future the design of oil fields will take into account a longer life. An injection of water or gas into the oil supply will boost their longevity and enhance its pressure. Decommissioning is also set to be a focus for the next 40 years. Figures suggest that North Sea operators will need to remove some 470 platforms, 6,000 miles of pipeline and 5,000 wells by the 2050’s . The removal of an estimated 40,000 concrete blocks keeping offshore operations steady is also a consideration. Decommissioning itself could open up an area of employment for those entering the sector or seeking a new challenge.

The heavy oil in oil sands has recently become part of global oil reserve estimates. As exploration into this kind of oil begins in earnest, the extraction of it will likely become less labour intensive, more environmentally friendly and cost effective.

Fracking and embracing new technology

Fracking has had negative press – some of it misinformed – but remains a vital part of future oil and gas.  This method is commonplace in the US, where it produces around half of the oil and gas output.

The technique remains controversial in the UK, but the government has issued 100 licenses for fracking in certain areas. These include parts of Yorkshire, Lancashire, Derbyshire and Nottinghamshire. Meanwhile, a consultation on opening up a further 5,000 square miles of viable fracking territory is ongoing.

Several US analysts have predicted 2017 to be a year of significant recovery in the oil and gas industry sector, with hopes for cashflow surges of as much as 60% in the US and a drive to reboot idle oil patches into action.

British analyst Dieter Helm believes Iran and Iraq’s potential to increase their output could impact the market moving forward. He cited the global move towards shale technology in an April 2016 report, predicting the US may be energy independent by the 2020’s. In Helm’s view, “abundant cheap fossil fuels are back” and there is “enormous potential” in the Arctic.

Others think a defined outlook is the way forward. In a 2016 oil and gas trends report, PriceWaterhouseCoopers urged oil and gas companies to hone their approach to strategy. They recommended aiming for definition rather than a broad business model. They used the example of traditional downstream specialists dabbling in upstream activities and having “unsatisfactory experiences”.

The advice to oil and gas firms is to avoid arbitrary cost cutting. Instead pursue a way to balance the production of competitively priced oil with carbon footprint reductions. PriceWaterhouseCoopers also advised that new technologies can help to minimize costs and reduce emissions.

More change and challenges will shape the next 40 years . To succeed, the oil and gas industry must strike a balance between competitive pricing, investment in new technology and a defined business focus.

Here’s to the next exciting half century.

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