Oil: how low can it go?

[jshell]

Captain Benzo said:

jshell said:

2-ish years before any major gains in price, further decimation of the oil industry in the UK, particularly the exploration side. Many, many people have and will lose their jobs in the coming while and I wouldn't be buying property in Aberdeenshire or Western Norway right now!

as I sit at my desk in Aberdeen, i can agree with you. I'm fortunate to be busy right now, but ask me again in six months.

forecasts for next year aren't good, but there is work out there.

the issue here is that at $110 / barrel, there was excess cash to create meaningless jobs, those have all gone. the junior Skilled workers are starting to be let go too.

as stated before, there is a limit to how little maintenance can be done, those rigs are pretty rusty as it is. there is still work in the middle east, africa and gulf of mexico.

I think even GoM and Africa are cutting back, together with KL. Kinda perfect storm right now, but good time to buy oil shares and squirrel them away...

[irocfan]

Welshbeef said:

Surely if you invest in a few 30/40 year hedges if they have that low value then storage isn't an issue?


Is it possible that you go to Shell/Tesco etc and ask for 50,000 gallons of derv/petrol to be paid for in advance and then drawn down on a prepaid card for free.

problem is that petrol goes 'off' doesn't it?

[emicen]

jshell said:

I think even GoM and Africa are cutting back, together with KL. Kinda perfect storm right now, but good time to buy oil shares and squirrel them away...

Still plenty of tenders going out for Africa, dont have as much exposure to the others but know of a few GoM in work.

Should bear in mind Statoil have just pulled the trigger on a significant North Sea development with more further phases on the horizon.

[RDMcG]

There is nowhere to store it and even China is running out of storage capacity So ,with Iran coming on stream and OPEC collapse I would think maybe $30 mid 2016

[turbobloke]

RDMcG said:

There is nowhere to store it and even China is running out of storage capacity So ,with Iran coming on stream and OPEC collapse I would think maybe $30 mid 2016

Last week a Bloomberg talking head reckoned $50 by end-2016.

[AbzST64]

emicen said:

jshell said:

I think even GoM and Africa are cutting back, together with KL. Kinda perfect storm right now, but good time to buy oil shares and squirrel them away...

Still plenty of tenders going out for Africa, dont have as much exposure to the others but know of a few GoM in work.

Should bear in mind Statoil have just pulled the trigger on a significant North Sea development with more further phases on the horizon.

I work in Aberdeen on O&G tenders but thankfully for the Global side of the business and not the North Sea side.
We are flat out to be honest, Africa seems to be big at the moment, Middle east all regions still busy, Russia & far east...! If anything we can't handle the tenders coming in...we think it may be due to the low oil price and most have decided to re tender a lot of the work for the coming couple of years!

[twinturboz]

Judging by some of the options trading, someone thinks oil is going to rise by 14% in the next 9 trading sessions.

[jk_88]

I would not say it's all doom and gloom. The day rate for rigs has crashed meaning exploration in the North Sea for tertiary fields is now more viable than it has been for years. Look at Apache and the Beryl Tertiaries.The facilities already exist with very good infrastructure, adding more tie backs is a relatively easy way of avoiding massive costs. Producers are now looking at alternative production methods to bring down costs.

There are still massive projects in Brazil, Middle East and Africa.

This is the reset the industry needed in some regards. Consultancies were massively inflating costs for all manner of projects and stifling innovation to some extent as they limited the direct discussions between vendors and end clients. This meant the best engineering solution was not always selected as some times it didn't tie in with the EPCs knowledge or experience so it was disregarded.

[Fittster]

jk_88 said:

I would not say it's all doom and gloom. The day rate for rigs has crashed meaning exploration in the North Sea for tertiary fields is now more viable than it has been for years. Look at Apache and the Beryl Tertiaries.The facilities already exist with very good infrastructure, adding more tie backs is a relatively easy way of avoiding massive costs. Producers are now looking at alternative production methods to bring down costs.

There are still massive projects in Brazil, Middle East and Africa.

Surely that's part of the doom and gloom? If you want to see higher prices investment in massive project needs to disappear, curtailing future production.

[emicen]

Fittster said:

Surely that's part of the doom and gloom? If you want to see higher prices investment in massive project needs to disappear, curtailing future production.

Depends if you want oil prices to rise or to rocket.

[Otispunkmeyer]

cptsideways said:

Is it me or is all this a very short term view?

In theory now would be a good time to buy a lifetimes worth of petrol/diesel/heating oil & some storage for it. At what point does it work out cost effective?

I reckon I have 30 years of driving left in me, say I oil heated our small house & wanted a mix of petrol/diesel fuel for the road.

Petrol doesn't keep as well as diesel I don't think. Youd have to use it up or refresh your supply.

[jk_88]

Fittster said:

Surely that's part of the doom and gloom? If you want to see higher prices investment in massive project needs to disappear, curtailing future production.

Yes and no. The cycle for these projects will be 5-7 years which will continuously replace ageing assets being retired. In 5 years time the world economy will most likely be very different from today I would imagine. If these projects are abandoned then there could be a shortage of oil and more importantly skilled people to scale up production.

In my view attaining and maintaining a high oil price, whilst advantageous for oil companies in the short term, cannot be seen as a long term strategy. Striving for 100$ barrel price will open the door to "green" energies which will further reduce demand. Europe has already seen a plateau in demand over the last few years.

[Hooli]

irocfan said:

Welshbeef said:

Surely if you invest in a few 30/40 year hedges if they have that low value then storage isn't an issue?


Is it possible that you go to Shell/Tesco etc and ask for 50,000 gallons of derv/petrol to be paid for in advance and then drawn down on a prepaid card for free.

problem is that petrol goes 'off' doesn't it?

The lighter parts evaporate, maybe if you could seal the vents?

[paul.deitch]

Hooli said:

irocfan said:

Welshbeef said:

Surely if you invest in a few 30/40 year hedges if they have that low value then storage isn't an issue?
Is it possible that you go to Shell/Tesco etc and ask for 50,000 gallons of derv/petrol to be paid for in advance and then drawn down on a prepaid card for free.

problem is that petrol goes 'off' doesn't it?

The lighter parts evaporate, maybe if you could seal the vents?

The pure fuel itself will not evaporate if sealed but the problem is the additives which become "gummy" after about 6 weeks. However if you are going to buy 50,000 gallons then just specify without additives.

[NRS]

emicen said:

jshell said:

I think even GoM and Africa are cutting back, together with KL. Kinda perfect storm right now, but good time to buy oil shares and squirrel them away...

Still plenty of tenders going out for Africa, dont have as much exposure to the others but know of a few GoM in work.

Should bear in mind Statoil have just pulled the trigger on a significant North Sea development with more further phases on the horizon.

Tenders will be busy since there is the chance to renegotiate a lot of the costs now at cheaper rates to the operators (and the service companies need the money so have to do this to keep any business). However other parts of the business (Exp and production) will and are massively down as a lot of companies save any cost that is not giving value back quickly/ at a high rate.

I can see it continuing to go down into next year as Iran starts producing. That's probably one of the biggest issues for OPEC agreement now. Since Iran didn't have much production then any production they do now is extra money, so it doesn't matter about low oil prices as long as it is profitable (which it will be). Saudi will want to stop Iran getting money/ power in the middle east and so they will keep production up. They are affected much more negatively since they have lost a lot of their predicted budgets, but have the benefit of a lot of savings. So low $30s or even into the $20s next year is certainly possible. I also think it will be low for a few years at least, although perhaps up from the lows of $20-30 that we could see.

The Statoil thing is an anomalie and was more related to the old oil prices. Depending on the stage of investment it may be delayed (i.e. if the big costs have started they just have to continue, if not they will delay the project).

All of this is assuming business as usual in regards to politics, and that there won't be wars that affect world production in a big way.

[BlackLabel]

telegraph said:

Russia is battening down the hatches for a Biblical collapse in oil revenues, warning that crude prices could stay as low as $40 a barrel for another seven years.

Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a scenario that would have devastating implications for Opec.

It would also spell disaster for the North Sea producers, Brazil’s off-shore projects, and heavily indebted Western producers. “We will live in a different reality,” he told a breakfast forum hosted by Russian newspaper Vedomosti.

http://www.telegraph.co.uk/finance/economics/12046185/russia-opec-saudi-arabia-bluff-40-oil-price.html

[DocJock]

Hooli said:

irocfan said:

Welshbeef said:

Surely if you invest in a few 30/40 year hedges if they have that low value then storage isn't an issue?


Is it possible that you go to Shell/Tesco etc and ask for 50,000 gallons of derv/petrol to be paid for in advance and then drawn down on a prepaid card for free.

problem is that petrol goes 'off' doesn't it?

The lighter parts evaporate, maybe if you could seal the vents?

Erm, 'Beef's suggestion is you prepay and then collect it a tankful at a time from any of your supplier's stations.

[Captain Benzo]

emicen said:

Still plenty of tenders going out for Africa, dont have as much exposure to the others but know of a few GoM in work.

Should bear in mind Statoil have just pulled the trigger on a significant North Sea development with more further phases on the horizon.

Indeed they have, although the further cases are being pushed back, they are still funding FEED studies though for optimisation. It's an interesting time for making things better in terms of cost and functionality instead of rehashing what was done before.

who do you work for? if you dont mind me asking

[NRS]

The Crack Fox said:

emicen said:

Should bear in mind Statoil have just pulled the trigger on a significant North Sea development with more further phases on the horizon.

Statoil said, as I understand it, that they are restructuring all projects with the simple metric that they must be viable at =>$40/barrel. That was a few months ago. I'm not sure they, or anyone else, expected it to drop this low.

To echo other posters, though, it was due a correction. I have earned nicely from the high oil price for so long, as have others, but it never felt 'right', really. Hey ho. Now working in a different sector and won't really miss O&G that much.

Statoil has a lot of options because of the exploration success in the last number of years. Previously the aim was production for 2020, hence a lot of field development projects going through which were less robust economically ("designing for every possibility" as it were), but with the price drop it is changed to aiming at value. Thus some projects will still go ahead at a higher break even since they are too late to delay. But if a unsanctioned project has a high break even it will be delayed/ re-evaluated to try and save costs. Obviously there is political pressure and strategic aims to consider too though.

As a simple geologist myself and a few colleagues thought it would get down here. It had "stabilised" at $40 or so, but the obvious problem was Iran opening up. They'd up the production and Saudi won't want to lose market share. So I think it was strange that most people thought it wouldn't be going lower.

[el romeral]

http://www.nettavisen.no/na24/statoil-tilbyr-alle-...

Blimey, Statoil have now offered every one of its employees a severance package.


Oil price is the first thing I check when I log on, comes before car sites, news, weather even p0rn lol.
I am paid in NOK and its rate against the euro (and all other currencies) has crashed with the oil price. I live in the Eurozone so my pay is down about 15-20% from what it once was.

Edited by el romeral on Tuesday 15th December 15:45