Fifteen oil industry luminaries gathered recently at London's Institute of Petroleum (IP) for a session of crystal ball gazing.
They produced four alternative visions of how the U.K. oil and gas industry might appear in 2010.
The prophets included Greg Bourne, managing director of BP Exploration Operating Co. Ltd.; David Carr, production manager, Esso Exploration & Production U.K. Ltd.; Rex Gaisford, director for worldwide development, Amerada Hess Ltd.; and Peter Kassler, head of group planning, Shell International Petroleum Co. Ltd.
Their first scenario showed oil industry performing well in a harsh economy:
"2010 will see oil prices remaining at $10/bbl (in 1995 money).
Although technology exists to recover up to 70% of oil and 90% of gas from fields, it is not economic to do so at present price levels.
"Many fields once stated for abandonment are seen as future assets. Worn out topsides are being replaced by cheaper and simpler standardized packages. Independents are taking advantage of new technology to develop standalone marginal fields -is small as 1-5 million bbl of oil."
OUTLOOKS GOOD AND BAD
The gurus' second scenario pictured good industry performance in a good economic climate:
"U.K. continental shelf production remains at 2 million b/d, capital expenditure at 3 billion ($4.5 billion) in 1995 prices, and investment money readily available for most projects.
"Proved reserves remain high, even though most are in a myriad of smaller fields." The oil price in this scenario is a steady $25/bbl.
The prophets' third scenario envisaged low oil industry performance in an unfavorable economic climate:
"The steady fall of oil prices throughout the last 15 years they are now at $10/bbl-has made it impossible for the U.K.'s high cost wells to compete. Only those fields which have already amortized their development costs and which can be produced cheaply are still in production. The U.K. continental shelf now produces just under 750,000 b/d, and this total is expected to fall much further by 2020."
SURVIVAL FOCUS
The group's fourth scenario is poor industry performance in a favorable economic environment. It was presented as a Jan. 1, 2010, newspaper report on the annual results of the imaginary company U.K. Oil & Gas.
Oil price was given as $25/bbl, but poor management had led to two major pipeline bursts, causing massive pollution and lost production:
"By concentrating production and closing down some aging fields earlier than planned, it has been possible to remove almost half the company's offshore assets, thus minimizing the risk of further disasters.
"The chairman reminded shareholders that both pipelines had been successfully reopened in 1999 and have operated safely ever since. Capacity is back to a full 1.2 million b/d, although because of field decline, throughput is 600,000 b/d and the lines are expected to close in 2016."
IP is thinking of holding further seminars on different sectors of the oil industry
I suggest one phrase for all outlooks for good or bad oil industry and general economic performance: "Refinery margins are low."
