Sustaining Economic Operations With Low-Price Oil

Fig. 1—The three-tier pyramid models depict the maturity levels of the people, process, and technology elements of a digital oil field.

What does USD 60/bbl crude mean to the oil industry? We all know that oil prices are volatile and that we have seen oil in the USD 60/bbl price range before, but not since 2008.

How did the upstream industry respond then? The short answer is that it did what it is doing now: Projects were canceled, drilling and production were cut, petroleum revenue taxes declined significantly, and many staff in operator, service, and supporting companies left the industry through redundancy or early retirements. In short, the industry felt extremely sorry for itself.

The big difference between 2008 and 2015 is the state of the global economy. In early 2008, global demand for oil had been growing rapidly as countries such as China and India were evolving as major consumers and starting to add significantly to the traditional demand from highly developed countries. By the middle of the year, the world oil market was thrown into financial chaos as many global economies fell into recession. There was suddenly a glut of oil as consumer demand plummeted. OPEC, which at the time controlled about 40% of global oil output, responded by implementing its deepest ever cut in supply but even this did not protect the price. There was just too much oil available compared with global consumption requirements.

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Sustaining Economic Operations With Low-Price Oil

Julian Pickering, CEO, Geologix Systems Integration, and Samit Sengupta, Managing Director, Geologix

01 August 2015

Volume: 67 | Issue: 8

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