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Page added on February 19, 2016
‘Selfish’ oil firms relish new production despite glut
As oil firms scrap dozens of billions worth of mega projects essential for supplies in decades ahead, fresh output from huge fields already being developed is set to weigh for many more months on an oil market struggling to shake off a glut.
A collapse in oil prices over the past 20 months to below $30 a barrel has taken a heavy toll on production around the world, reversing spectacular growth in U.S. shale oil and halting plans to develop costly and complex fields deep in oceans or treacherous seas such as the Alaska Arctic.
But companies that have been investing often more than $10 billion in projects that were approved in the first half of the decade, when oil fetched in excess of $100 a barrel, are pushing ahead with many of their developments.
These include the TEN field off the coast of Ghana, operated by British company Tullow Oil, which is set to start production in the middle of this year, expansions at Chevron’s Jack/St Malo field in the Gulf of Mexico and at Cenovus’ Foster Creek oil-sands field in Canada.
Around 3 million barrels per day (bpd) of oil production is set to come on stream in 2016 from projects whose development started as early as 2013, according to Oslo-based consultancy Rystad Energy.
These projects will add a further 1.5 million bpd in 2017, with around two-thirds of the production coming from offshore developments.
‘SELFISH’
Patrick Pouyanne, chief executive of French oil major Total, was unapologetic about boosting his production by more than 9 percent this year even as the world faces a huge production overhang.
“We are all still investing in projects we decided in 2012-2013 and 2014. These projects will be put in production in 2016, 2017 and still 2018,” Pouyanne said last week at the International Petroleum Week conference in London.
“I am not sure we participated in the stabilization of the market, but you know, there is only one good reaction when you face a crisis, that is to be selfish and produce as much cash as you can.”
Total in recent years began production from the CLOV field off Angola’s coast, in which BP, Statoil and Exxon Mobil are partners. It is on track to launch the ultra-deepwater Kaombo project, also in Angola, in 2017.
In January, Anadarko started production from its Heidelberg project in the Gulf of Mexico which was discovered in 2009 and started development three years later.
The U.S. Energy Information Administration expects production in the Gulf of Mexico to rise from 1.5 million bpd in 2015 to 1.8 million bpd in 2017, offsetting some of the declines in shale oil production.
The ramp-up of production from projects is equally vital for the host nations, particularly economies that depend heavily on oil revenue such as Angola, Nigeria or Mexico, where national oil companies are partners in the developments.
The vast majority of the world’s projects of over $1 billion are formed by joint ventures between international and national oil companies, according to data from consultancy EY.
CORRECTION UNDER WAY
With more than $220 billion of oil and gas projects canceled or put on hold since the start of oil’s price decline and companies slashing spending plans, a correction in global supplies is under way, Rystad Energy head of analysis Per Magnus Nysveen told Reuters.
Production from mature fields is nevertheless set to decline by around 3 million bpd this year due to natural field decline and lower investment.
“Behind the scenes there is a lot of correction going on because old producing fields are declining faster than they used to because there is less drilling,” Nysveen said.
Global oil production is expected to align with demand towards the year-end as U.S. shale output declines, even though the world will continue to store unwanted barrels for the rest of 2016, the International Energy Agency says.
That means the rebalancing is taking far longer than most OPEC members had anticipated when the exporter group’s leader pushed through a strategy in late 2014 to maximize output and drive higher-cost producers out of the market.
New production is likely to delay the rebalancing further, analysts at U.S.-based investment bank Evercore said.
“While ultimately lower upstream (oil production) capital will drive lower aggregate supply, evidence suggests the balancing point is shifting to the right,” Evercore said.
This sets “a challenging environment for the market to question the sustainability of demand trends, and (is) likely a reflection of today’s market reality, in our view”.
22 Comments on "‘Selfish’ oil firms relish new production despite glut"
rockman on Fri, 19th Feb 2016 2:29 pm
A truly bizarre title. “Selfish”…!MFAO. Obviously the companies are putting on all this new production to hurt the US shale players…same as the KSA is trying to do. Certainly it’s not that they are all desperate for every $ of f*cking cash flow. All I can imagine is that idiots that write such bullsh*t have never run a business. OTOH maybe they have a point: I haven’t heard of a single “selfish” shale producer voluntarily cutting back on production. Maybe they’re trying to cripple the Saudis…yeah, that’s their evil plan. LOL,
Plantagenet on Fri, 19th Feb 2016 3:16 pm
rockman is 100% right. Producing more oil during an oil glut is hardly “selfish” since its going to make oil prices go down even more. Shortsighted, yes—but selfish no.
Cheers!
twocats on Fri, 19th Feb 2016 4:44 pm
Note that selfish is in QUOTES, and is referring to a Total CEO’s statement, ” there is only one good reaction when you face a crisis, that is to be selfish and produce as much cash as you can.” which is exactly what rockman is saying.
it’s only selfish in the sense that i selfishly eat everyday, sucking up the planet’s resources, and continue to live… I’m a monster.
I think the word “relish” is the weird word. I don’t think that makes sense. These are cold business decisions made with an incomplete understanding of the world economy. Bittersweet production is more like it.
It’s hard to imagine this situation going on for another 9 months. This isn’t catching a falling knife, this is like putting your hand into a turbine engine hoping that all the blood, bone, and tissue in there has somehow slowed it up enough that it would chop of your limb.
There’s a lot of formerly “smart” people that have lost several hundreds of billions, and currently “smart” people that are about to lose another couple of hundred of billions. If two or three trillion in value is vaporized it could stall a much larger engine – the global economic one.
What’s the shadow banking total? 28 trillion or some ridiculous number like that? What’s the global debt number? blah blah blah trillions? Yeah, laugh all you want at the crazy zerohedgers but in such a scenario anything physical that can retain something, anything, of value, will increase exponentially. It’s more common sense than anything (disclosure – I own NO physical gold or silver)
After that, a new monetary system will be put in place and who knows how value will be transferred from the old to the new system? “No one” is the answer.
twocats on Fri, 19th Feb 2016 4:45 pm
*WILL NOT chop of your limb 🙂
Harquebus on Fri, 19th Feb 2016 5:52 pm
Extreme selfishness.
“So here’s what happened. Exxon used its knowledge of climate change to plan its own future. The company, for instance, leased large tracts of the Arctic for oil exploration, territory where, as a company scientist pointed out in 1990, “potential global warming can only help lower exploration and development costs.” Not only that but, “from the North Sea to the Canadian Arctic,” Exxon and its affiliates set about “raising the decks of offshore platforms, protecting pipelines from increasing coastal erosion, and designing helipads, pipelines, and roads in a warming and buckling Arctic.” In other words, the company started climate-proofing its facilities to head off a future its own scientists knew was inevitable.”
http://www.tomdispatch.com/blog/176105/tomgram%3A_bill_mckibben%2C_it%27s_not_just_what_exxon_did%2C_it%27s_what_it%27s_doing/
onlooker on Fri, 19th Feb 2016 6:02 pm
All the while Har, Exxon was funding a very aggressive campaign of obfuscation and denial of climate change.
twocats on Fri, 19th Feb 2016 6:23 pm
Harq,
Like you are implying, I would consider behavior like that to go beyond selfish and into the realm of the sociopath:
http://www.sociopathworld.com/2012/04/narcissists-vs-sociopaths-part-1.html
Granted there may have been a lot of group/peer pressure to make the switch they did from studying global warming to denying it while planning for it. So individuals involved might just be labeled as cowards or selfish, the higher-ups and the system itself was/is pathological (certainly in this case). The fact that people are NOT at this moment being shot in the head for this is a testament to humanity’s failure.
onlooker on Fri, 19th Feb 2016 6:30 pm
The problem two, is all is all too common in corporate practice this type of behavior look at the cigarette companies and many other examples. Corporations do not let ANYTHING stand in the way of profit.
onlooker on Fri, 19th Feb 2016 6:32 pm
sorry this is all too common
shortonoil on Fri, 19th Feb 2016 6:38 pm
“While ultimately lower upstream (oil production) capital will drive lower aggregate supply, evidence suggests the balancing point is shifting to the right,” Evercore said.
Exactly, and it will continue to do so until oil production is no longer economically feasible.
Twocats on Fri, 19th Feb 2016 6:49 pm
Yes there was a great documentary about 15 years ago that profiled “the corporation” as a psychopath. It fit the model almost perfectly. That assessment wouldnt be outrageous in my mind.
twocats on Fri, 19th Feb 2016 6:51 pm
Heh heh, it was called “the corporation”. Im assuming most of the doomers have seen it.
onlooker on Fri, 19th Feb 2016 7:01 pm
No thanks for the reference but I have heard Corporations regarded as psychopaths before.
Apneaman on Fri, 19th Feb 2016 10:18 pm
The Corporation (Full Documentary)
“THE CORPORATION is a Canadian documentary film written by Joel Bakan, and directed by Mark Achbar and Jennifer Abbott. The documentary examines the modern-day corporation, considering its legal status as a class of person and evaluating its behavior towards society and the world at large as a psychiatrist might evaluate an ordinary person. This is explored through specific examples. Bakan wrote the book, The Corporation: The Pathological Pursuit of Profit and Power, during the filming of the documentary.”
https://www.youtube.com/watch?v=Z4ou9rOssPg
peakyeast on Sat, 20th Feb 2016 6:19 am
I found watching “the corporation” rather interesting.
When people get together to rule their combined intelligence equals the best yeast we have. In general the more people involved in the ruling process – the more yeastlike their behaviour becomes.
Of course, some individuals are perfect yeastlike – while others are not at all.
onlooker on Sat, 20th Feb 2016 6:25 am
Yes but at least yeast are following some rationale pursuit. Meanwhile humans in the form of corporations seem to be pursuing power and profit without any real benefit for themselves or anyone else.
Kenz300 on Sat, 20th Feb 2016 9:55 am
Climate Change is real….. we will all be impacted by it……
Exxon’s Climate Change Cover-Up Is ‘Unparalleled Evil,’ Says Activist
http://www.huffingtonpost.com/entry/exxon-evil-bill-mckibben_561e7362e4b028dd7ea5f45f?utm_hp_ref=green&ir=Green§ion=green
geopressure on Sun, 21st Feb 2016 9:09 am
Personally, I think that it’s a great time to be increasing production… Oil Prices will rebound prior to the 2016 Election, because Obama is going to blame the increased gasoline prices on the Republican’s Crude Export Deal in the hope’s picking up House/Senate Seats…
So by the time that said production comes online, prices are likely to be significantly higher…
Outcast_Searcher on Sun, 21st Feb 2016 12:10 pm
geopressure, so in your world Obama can increase oil prices by flapping his mouth about the GOP?
Do you know how economics works? Supply and demand, etc?
Politicians say random crap all the time. Generally it doesn’t mean much.
Oil prices will increase if demand meaningfully exceeds supply or if there’s some kind of a panic about potential supply disruption, like a big war event in the Middle East. Otherwise, not so much.
geopressure on Sun, 21st Feb 2016 2:01 pm
Outcast… It is far more complicated than what you suggest…
geopressure on Sun, 21st Feb 2016 2:09 pm
I was referring to Obama’s Plan, you are aware that he has a plan, right???
Oil prices are going up in 2016… You can carve that into stone.
Obama would like to hold the price increase off until Labor day (when oil demand peaks & closer to the election so that he use the increased gasoline prices as a tool to help kick republicans out of office)… I don’t think that he will be successful at holding it off that long…
The situation is way more complex than what you are considering… based upon your post, you believe exactly what the media wants you to believe, & that’s fine, you are just like everyone else…
Kenz300 on Mon, 22nd Feb 2016 9:08 am
Fossil fuel companies are all selfish…….they are poisoning the air, land and water we all need to survive.
Short term profits at the expense of the long term survival of the planet.
Fossil fuel companies are spending millions to spread doubt about Climate Change……
4 Ways Exxon Stopped Action on Climate Change
http://ecowatch.com/2015/11/27/exxon-stopped-climate-action/?utm_source=EcoWatch+List&utm_campaign=1d016dacb9-Top_News_11_28_2015&utm_medium=email&utm_term=0_49c7d43dc9-1d016dacb9-86023917