Big Oil Thinks Small | Russell T. Rudy Energy LLC
“World Oil” reports a strategic shift from megaprojects to shale wells for many of the largest U. S. producers. The realization that oil prices will be “lower for longer” seems to be driving this movement.
ExxonMobil, Shell, ConocoPhillips, and Hess have all delayed or abandoned expensive, long lead time, management intensive, and technically challenging projects for more straightforward shale alternatives which offer a quicker return on investment. Deepwater Gulf of Mexico, Canadian oil sands, and Arctic exploration projects are among the casualties.
Michael Webber of the University of Texas Energy Institute observed, “What makes more sense in this environment: drill a $100 million well in the deepwater Gulf that might come up empty, or poke lots of holes in West Texas where you already know there’s oil for a few million apiece?”
Deepwater Gulf of Mexico projects are among the early losers as capital budgets for these efforts are expected to be slashed up to 25% next year. Chevron has put its $5.1 billion Big Foot project on hold until at least 2018. ConocoPhillips has canceled plans to explore in the deepwater as well.
International projects, which are experiencing major delays and cost overruns are also being scrutinized. ExxonMobil has shelved expansion of its Kearl oil sands project in Canada indefinitely, and Chevron’s Gorgon gas export facility in Australia is under review.
Alternatively, resources are being redirected to domestic shale opportunities. ExxonMobil plans to double domestic shale production over the next three years, and Chevron expects to be producing the equivalent of 160,000 barrels of shale oil per day in two years.
As Howard Duhon with Gibson Applied Technology and Engineering summarized the current situation, “Projects are getting bigger and bigger and they are failing more often. It’s not clear that we’re getting any better results.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/10/30/oil-producers-curb-megaproject-ambitions-to-focus-on-us-shale .
