ABSTRACT: Petroleum industry - perspective 2000

Stark, Philip H. (Pete) , IHS Energy Group, Denver, CO

From November 1997 through March 1999, the petroleum industry suffered its most significant oil price collapse since 1986. During first quarter 1999, benchmark oil prices reached 50 year lows (inflation adjusted) and U.S. and international drilling activity plummeted to record lows. The price collapse severely impacted the petroleum industry and triggered important paradigm shifts that alter industry business practices. An important new paradigm is the re-emergence of OPEC as a force in controlling oil supplies and prices. During March 1999, OPEC agreed to reduce and enforce compliance with a new quota that was 4.3 million bopd less than December 1997 levels. Spokespersons indicate OPEC wants to sustain its basket oil price in the $18-$20 per barrel range. Results exceeded expectations and in November 1999 Brent crude exceeded $26, the highest price in nine years. OPEC's ability to balance supply and demand is a major issue that could tip prices in either direction. Other important paradigms are the compelling requirement for operators to lower risks and costs and the dramatic shift in emphasis toward natural gas. These paradigms will result in significant shifts in industry's structure and the way it does business. Consequently, the industry outlook is flavored with cautious optimism. The objective of this paper is to review trends in market forces - including demand, oil supplies and stocks, OPEC production capacity and compliance, fiscal and legal terms - and to show how they impact the new industry paradigms and E&P trends. Understanding these trends will help to divine likely future industry economic returns and directions.

AAPG Search and Discovery Article #90913©2000 AAPG International Conference and Exhibition, Bali, Indonesia