Credit crunch 'hits oil industry'

IveSeenTheLight · 11 February 2009 at 9:35AM

The banking crisis is going to hit exploration and development in the oil industry over the next 12 to 18 months, a report has warned.
Oil and Gas UK blamed the situation on a combination of low oil prices and the freezing of capital markets.
The assessment comes after a survey of 75 companies. The organisation called for the industry and government to act.
Last week Aberdeen and Grampian Chamber of Commerce forecast major job losses in oil and gas over the next year.
Companies have said that despite high oil prices last year the cost of developing and producing UK oil and gas had risen substantially.
The Oil and Gas UK survey suggested that only a third of new developments under consideration will break even at current costs.
Dropping prices
The organisation's chief executive, Malcolm Webb, said the industry was at the crossroads.
Mr Webb said it needed urgent government help and should concentrate in the short-term on mitigating the effects of the downturn.
But he said he was hopeful that talks with ministers would mean a range of measures being announced soon.
The economic slowdown has curbed demand for fuel around the world. The current price of oil is more than $100 below the record price of close to $150 a barrel seen last July.

http://news.bbc.co.uk/1/hi/scotland/north_east/7882588.stm

ad9898_3 · 11 February 2009 at 9:46AM

I remember reading last year that when we were at $148 a barrel, that developing and production of a lot of the current fields (world wide I might add) would require at least $55 a barrel oil, the North Sea's peak was almost 10 years ago now, so their costs must be spiralling upward. $40 dollar oil must be really hurting them.

IveSeenTheLight · 11 February 2009 at 9:57AM

ad9898 wrote: »

I remember reading last year that when we were at $148 a barrel, that developing and production of a lot of the current fields (world wide I might add) would require at least $55 a barrel oil, the North Sea's peak was almost 10 years ago now, so their costs must be spiralling upward. $40 dollar oil must be really hurting them.

Actually, I know some operators that make profit and set budgets based on $13 per barrell

Sure $40 barrell is hurting them, but only in profits

The story I linked is seen regularly when oil price is low and really has little to do with the credit crunch. The operators complain how they will have to cut back and make job losses to try and influance the government regarding the tax the operators have to play.

I assume we will hear more on oil tax in the coming weeks

mitchaa · 11 February 2009 at 10:16AM

It's time to curb the wages of the industries 'popstars'

Electricians earning circa £75-100k, where they would normally earn 1/3 of that onshore has to be looked into. Yes a premium has to be paid for the work that they do, but some of the wages on offer are completely ludicrous and i suspect the oil companies will be clamping down now.

Saying that their profits are still non too shabby and perhaps they can afford to keep paying popstar wages to mediocre professions.

Jonbvn · 11 February 2009 at 10:47AM

Having worked in O&G for many years, the major issue is that development proceeds at glacial speed. Think of it as driving an oil tanker - takes ages to speed up or slow down. Therefore, by the time they have made cut-backs it is possible that the oil price could be rising again.

Cannon_Fodder · 11 February 2009 at 12:04PM

"The organisation called for the industry and government to act."
"Mr Webb said it needed urgent government help and should concentrate in the short-term on mitigating the effects of the downturn."
"But he said he was hopeful that talks with ministers would mean a range of measures being announced soon."

"BP also undershot analysts’ forecasts for the full year, recording a 39 per cent jump in profits for the 12 months of $25.6 billion."
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5648334.ece

"But annual profits at the Anglo-Dutch company Shell rose 14%, to $31.4bn, helped by record oil prices over the summer."
http://news.bbc.co.uk/1/hi/business/7857532.stm

Surely BP, Shell, and others, could fund their own Anti-Recession Fund within the industry - why should an industry with profits like this get Government money?

IveSeenTheLight · 11 February 2009 at 12:46PM

Cannon_Fodder wrote: »

Surely BP, Shell, and others, could fund their own Anti-Recession Fund within the industry - why should an industry with profits like this get Government money?

It's easy to select the big players i.e. Shell and BP, but there are many smaller operators i.e. Taka, Dana etc.

Like I said in post 3, it's a regular stance that is called whenever the oil price is low. Make announcements of cut backs, stopping of seismic surveys / exploration etc and link to the taxation on profits and the low oil price.

Before, governments reduce the tax burden, but in recent years they have more of a tough !!!!!! attitude and keep the taxes while hittin OPEC to reduce output and thus increase the oil price.

skintlass · 11 February 2009 at 1:43PM

The Seismic exploration Industry has always had a roller coaster ride with money from oil companies. Those of my friends who still work in exploration have seen this coming and it isn't a surprise. You can't call on the government to bail out every industry that gets itself into trouble, oil and gas makes a lot of money in good times and they should be able to manage that to ride out the bad times.

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Credit crunch 'hits oil industry'

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