Some analysts pointed out that because of the decline in oil industry spending, the newly mined oil reserves have dropped significantly compared to the past, which will increase the risk of future oil supply. Most analysts expect shale oil production to stabilize in the 1920s before falling. In the early 1920s, the risk of tight oil supplies increased due to the lack of new large-scale projects.
The oil industry's profits are higher than at any time in years, but in just a few years, the industry may not be able to supply enough oil to meet global demand.
Declining spending by oil producers, resulting in a reduction in newly discovered oil reserves
A series of second-quarter earnings reports released in the past two weeks show that profits in the oil industry have increased substantially, and profits of some companies have doubled or tripled from the same period last year. However, despite the cash in these companies, the industry has not recovered the high level of spending before the market downturn in 2014.
According to oil analyst Nick Cunningham, this may be a good thing or a bad thing. Relevant data shows that as governments around the world seek to address climate change issues, the trillion-dollar pipeline project in the oil industry will face funding risks. In essence, large amounts of oil and gas reserves will be forced to stop due to upcoming taxation, regulation or simply alternative energy development. In this context, the decline in oil industry spending is not a bad thing.
On the other hand, agencies such as the International Energy Agency warned that the current global oil industry is not spending enough.
The economic recession that began in 2014 caused a significant reduction in exploration and development spending in the oil industry. In 2015, spending in the oil industry fell by 25%, and in 2016 it fell by 26%. Since then, upstream spending has bottomed out and rebounded by 4% in 2017. The industry is only expected to increase spending by a modest 5% in 2018. But there is little evidence that spending in the industry will return to pre-recession levels.
The decline in spending has led to a sharp decline in newly discovered oil reserves. In 2014, the industry found an average of 1.35 billion barrels of oil per month. According to Rystad Energy, in 2015, this average reached 1.404 billion barrels per month. However, this figure plummeted in 2016, falling to 697 million barrels per month and falling to 625 million barrels in 2017.
Long-term supply or exposure to global oil
Rystad Energy said that as drilling activity rebounds, the newly discovered oil reserves in 2018 will rebound to 826 million barrels per month, an increase of 30% from 2017. ExxonMobil discovered three large oil fields in Guyana, accounting for a large portion of the total discovered oil reserves.
However, these discoveries still account for only a small portion of the past, and of course the oil industry has spent much more in the past than it does today. According to Rystad Energy, the oil industry needs to add about 33 billion barrels of oil a year, but it is expected to add 20 billion barrels of oil in 2018.
Espen Erlingsen, head of upstream research at Rystad Energy, said the oil reserves found in 2017 rose 30% from an unusually low level, which seems encouraging. However, oil exploration and producers are currently facing lower reserve replacement rates, averaging less than 10%. Given the long-term impact of global oil supplies, this situation is worrying.
As the oil pipeline begins to dry up in the next few years, there may be a supply gap. Virendra Chauhan, an oil industry analyst at consulting firm Energy Aspects, said in an interview that years of underinvestment are laying the groundwork for supply shortages.
Of particular concern is the exhaustion rate in the conventional sector. Schlumberger CEO Paal Kibsgaard said at a earnings conference that there has been insufficient investment in exploration and production over the past three years, and there are increasing signs that oil production in 15 oil-producing countries around the world has appeared year on year. Significant decline. These developments underscore the growing need to increase oil exploration and production expenditures, especially in the international market, as it is becoming increasingly clear that new projects that will be launched in the next few years may not be sufficient to meet the growing demand for oil. The average mining decline rate rose from 3% in 2014 to 6.3% in 2016, although it rose to 5.7% in 2017.
US shale oil production is expected to slow down next year. However, after several Permian pipelines were put into production in late 2019 and early 2020, oil production will once again accelerate. The Permian will be one of the largest sources of medium-term oil supply growth. But most analysts expect shale oil production to stabilize in the 1920s before falling. In the early 1920s, the risk of tight oil supplies increased due to the lack of new large-scale projects.
On the other hand, as demand peaks have arrived, maybe this is not a problem at all?
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