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49 comments on Is it time to start exploring again?

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spooky on September 13, 2005 - 1:11pm Permalink | Subthread | Comments top
One item that most economists fail to take into consideration in their modelling is the increased risk associated with deeper wells and remote locations. Another is lack of infrastructure.

People need to realize that this is a drilling boom for the oil patch. Rig utilization is hovering at 90% of available rigs or even higher. We can draw up all the plans we want, but in the end, drillers are limited by rig and material availability. Prices are still not high enough for everybody to pile on in wild abandon - the threshold is probably around $100-$125 a barrel sustained. That will draw money into the industry via the stock market, and these companies will have to spend it or return it as dividends.

The remaining oil on this planet is in difficult to reach places - geologically, politically and geographically. This means the risk is higher for these areas, and in many cases, new technology is required to get the oil out of the ground and into production. Oil prices will not only need to be high, but to remain high for these areas to be drilled.

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Eroie Van Tanstaafl on September 13, 2005 - 1:27pm Permalink | Subthread | Parent | Comments top
Oil prices will not only need to be high, but to remain high for these areas to be drilled.

They are.  They will.

Prior to the oil shocks, prices averaged $10 (constant 2000 $US).
After the oil shocks ended and the taps opened again in 1985-6, prices DOUBLED, averaging roughly $20 until 2000.  

Since 2000, the've been going mostly up. For a while OPEC talked about a $30 target; now even CERA foresees 'equilibrium' prices around $35-40.

Basically, prices have doubled again.  Whatever the costs and risks of the new exploration, a doubling of oil prices will more than cover it.

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step back on September 13, 2005 - 11:36pm Permalink | Subthread | Parent | Comments top
Another thing economists miss as they do their deep drill into the spreadsheets is the ability to step back and see the big, global scale picture. Our species is migrating towards the continental shelf "cliff" by step wise moving our oil rigs from the easy on-shore sites towards the ever more treacherous deep off-shore sites. At some point, like lemmings, we are going to fall over the edge.
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49 comments on Is it time to start exploring again?

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