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Vol. 231 No.4 |
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| PRAMOD KULKARNI, EDITOR |
‘Please, God! Give us another boom.’
I am honored to join World Oil magazine, which has been defining technology for the upstream oil and gas sector since 1916. We have an energetic editorial team in place and all of us are looking forward to providing you with news and insights about exploration, drilling, completion and production activities throughout the world.
The oil and gas industry is poised at several critical junctures at this time. The first turning point, hopefully, is the world economy and, consequently, the energy sector. While there are no certainties in life other than death, taxes and the boom-and-bust cycles for our industry, the recession appears to have bottomed out. IHS economist Nariman Behravesh expects demand to start rising and continue on the upswing through 2011 and 2012. He suggests that oil prices are somewhat high at this time due to “investor activity,” but he does not expect the prices to dip below $65. OPEC President and Ecuadorian Oil Minister Germánico Pinto also suggests that “acute and excessive price speculation” is determining oil prices. OPEC agreed in mid-March to keep production quotas unchanged as the ministers meeting in Vienna expressed contentment with oil at about $80 a barrel.
As a 35-year industry veteran, I have lived through four booms and three busts. Once again, I can hear prayers reaching out to the Almighty from the oilfield executive boardrooms to the field offices and rigsites, “Please God, give us another boom. We won’t screw it up this time.” Actually, it is the oil and gas industry that has provided the appropriate response to the downturn and, on the contrary, it is the banks, real-estate speculators and investment bankers that cannot be trusted to help maintain a stable economy. Operators and service companies have trimmed budgets, reduced rig count and cut payroll to retain financial flexibility. However, these entities have not lost sight of the long-term need for increasing supplies of both oil and gas. Majors and independents have continued their offshore and onshore exploration and development programs and discovered major oil and gas fields. A case in point is the robust response to the US Central Gulf of Mexico 213 lease sale. As our article in this issue on floating structures describes, a large number of newbuild drillships, semisubmersibles and FPSOs are heading toward new E&P arenas such as the lower Tertiary fields in the ultra-deep waters of the Gulf of Mexico and the presalt fields offshore Brazil. The industry’s heavy investments in such long-term projects will continue without regard to the daily price fluctuations. In North America, shale gas operators are continuing to acquire new acreage and sustain drilling operations, and there’s growing interest in pursuing shale opportunities in other regions of the world.
The second critical juncture for the oil and gas industry is the mix of energy supplies between oil, natural gas and renewable sources such as biofuels, solar and wind. There is unanimous consensus that oil will remain the dominant fuel for decades to come. The Obama administration has put its political weight and the economic power of incentives behind the renewable sources. US Energy Secretary Paul Chu begrudgingly said at CERA Week in early March that natural gas could serve as a clean transition fuel until the renewable sources take over. Coining a new term, “hydrocarbon deniers,” ConocoPhillips CEO James Mulva contended that natural gas is not just a transition fuel, but the fuel of the future—with shale gas providing adequate supplies for the next 100 years. Statoil President Helge Lund said he is mystified as to why natural gas doesn’t enter into discussions of alternative clean energy fuels in political circles of Europe and the US. Saudi Aramco President Khalid Al-Falih expressed optimism about the long-term prospects for alternative energy sources, but warned of “green bubbles, the collapse of which will not only have a negative impact on the broader economy, but will also damage the long-term prospects for the success of these energy sources.”
The third critical juncture concerns government intervention in the energy business through either taxes or legislative restrictions. There is the looming threat of either a cap or a tax on carbon emissions, which can drastically affect the US economy as well as every sector of the energy industry. In its FY 2011 budget, the US administration is proposing to raise $40 billion from the oil and gas industry over the next 10 years through the repeal of a variety of tax incentives that had been implemented to encourage domestic production. Shale operators must contend with a proposed new Environmental Protection Agency study on the effects of hydraulic fracturing and legislative attempts in the US Congress to demand that service companies release proprietary information on the chemical composition of their fracturing fluids. There are, however, encouraging signs in other parts of the world. The province of Alberta, Canada, has decided to rescind all or a portion of the 20% royalty increase it had imposed in 2007. The UK government is planning to offer incentives to encourage exploration in remote areas such as the Shetlands.
The fourth critical juncture concerns the publishing industry. Just like oil, print publications will remain a dominant source of news and analysis for the foreseeable future, but there is also complementary growth of instantaneous sources of information from the web and portable devices such as the iPhone, Blackberry and the recently introduced iPad. We’re now seeing increasing usage of webcasts, podcasts and You Tube videos. World Oil will continue to serve our readers through our print magazine and books, but you can also visit our website (www.worldoil.com), view our profile on Facebook and follow us on Twitter. Among the latest innovations we have introduced on our website is contextual search so you can find the information you need—faster.
As we progress to a brave new world, World Oil will introduce evolutionary improvements to meet the changing needs of our readers. I look forward to hearing from you. Besides phone and email, I have Facebook and Twitter accounts. I’ve heard that the hip people have now moved to new social media sites such as Digg, ShoutWire and Wetpaint. I guess I should stop writing and check out these sites. An editor must follow his readers, wherever they are. 
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