The World's Biggest Oil Companies, 2013  

Posted by Big Gav in

Forbes has a weird article on the oil industry, simultaneously pooh-poohing peak oil while repeating a litany of facts the average doomer would be comfortable quoting (how does one manage to say that the "era of cheap energy" appeared to be over when oil was under $30, but that this was clearly wrong given that today oil costs more than 3 times as much - do you have to undertake some sort of double-speak training to become a Forbes reporter ?) - The World's Biggest Oil Companies, 2013.

Pemex has slid down the rankings due to the dramatic death of its offshore giant Cantarell, which peaked at 2.2 million bpd in 2003 and has since plunged to 450,000 bpd. Long-anticipated energy reforms championed by President Enrique Peña Nieto could breathe new life into Pemex.

Back in 2003 motorists were shocked when gasoline prices hit an all time high of $1.75 a gallon. We wondered how Americans could maintain their way of life with crude oil so “expensive” at $30 a barrel. That led to endless handwringing that the United States, and soon the world, would surpass that tipping point of Peak Oil, after which prices would skyrocket and outright oil shortages would be commonplace. It didn’t look good for natural gas then either. Instead of the glut of gas we enjoy today, back then energy companies were trying to figure out how to import gas in the form of LNG from the likes of Qatar. The era of cheap energy appeared to be over.

So much has changed in 10 years. Now oil is comfortably at $100 a barrel and the world has not ended. ...

The oil giant that has lost the biggest portion of its output is BP. Back in 2003 BP’s output was 3.9 million bpd. By the time of the Deepwater Horizon disaster in 2010 that had inched up to 4 million bpd. Since then, BP under CEO Bob Dudley has sold $38 billion in assets. And Dudley in recent weeks has pledged $10 billion more in sales the next two years. As a result, BP is now down to 3.1 million bpd, and falling. ...

The simple truth is that it’s getting ever more expensive for the big publicly traded oil companies to get access to the remaining hordes of “easier” oil controlled by the state-owned giants. In the third quarter of 2013 earnings for the big integrated oil companies were down about 25% over the previous year. Why? Because costs are going up for exploration and production while refining margins have been lackluster. As oil prices rose into 2008 the supermajors very much enjoyed counting their profits on their stable of conventional projects, where the cost of building out a field averaged $7 to $10 per barrel. But developments have gotten more and more complex, and now it can cost $30 or more per barrel in build-out capex, according to Bernstein Research. The supermajors’ average net income these days amounts to $14 per barrel produced.

Consider Kashagan, the megafield in Kazakhstan, where a consortium led by Exxon, Total, Eni and Shell has spent a decade and more than $50 billion on the build out, and still can’t get it right. The snafus resulting from too many cooks in the kitchen has delayed startup and infuriated the government. ConocoPhillips wisely sold out its piece of Kashagan for $5 billion a couple years ago.

Many shareholders would welcome an end to Big Oil’s profligate capital spending. This year Shell expects to invest $45 billion, ExxonMobil $38 billion, Chevron $36 billion. ...

As long as oil prices stay strong, the supermajors may feel justified in spending ever more cash to drill deeper, trickier wells. But the more that they stumble over new plays like Shell, the more likely it becomes that Big Oil will reach an inflection point where they realize that the chase just isn’t worth it anymore, that a better strategy may be to return cash to shareholders and simply be satisfied with milking the cows they have.

The Guardian also has an article on peak oil, quoting some recent research from the University of Maryland - Imminent peak oil could burst US, global economic bubble - study.

A new multi-disciplinary study led by the University of Maryland calls for immediate action by government, private and commercial sectors to reduce vulnerability to the imminent threat of global peak oil, which could put the entire US economy and other major industrial economies at risk.

The peer-reviewed study contradicts the recent claims within the oil industry that peak oil has been indefinitely offset by shale gas and other unconventional oil and gas resources. A report by the World Energy Council (WEC) last month, for instance, stated that peak oil was unlikely to be realised within the next forty years at least. This is due to global reserves being 25 per cent higher than in 1993. According to the WEC report, 80% of global energy is currently produced by either oil, gas or coal, a situation which is likely to continue for the foreseeable future.

The new University of Maryland study, in contrast, conducts a review of the scientific literature on global oil production and argues that the bulk of independent, credible studies indicate that a "production peak for conventional oil [is] likely before 2030", with a "significant risk" it could occur "before 2020." Unconventional oil such as Canadian tar sands is "unlikely to expand enough to fill the gap", and this also applies to "shale oil and gas." Shale wells, the study argues, "reach their maximum production levels (peaks) much earlier than conventional ones and are therefore difficult to operate profitably."

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