"World Oil's" 2015 Overview | Russell T. Rudy Energy LLC
John Higgins, the publisher of “World Oil” magazine was the speaker at the February meeting of the Houston Chapter of the American Petroleum Institute (API). Predictably, his comments were quite interesting and provocative. While they are not at great variance with what many other analysts have forecast, his are backed up by a wealth of experience and data. In this post I will present an overview of his remarks. In future posts I intend to address his specific oil forecast, natural gas forecast, and in as much as it impacts domestic onshore prospects, his international forecast.
Fortunately crude prices seem to have established at least a temporary floor at $50/barrel. However, should they drop back below this level and stay there, oil-directed exploration and production (E&P) efforts will be dampened. This is particularly true for Arctic, Canadian tar sands, and low-margin shale plays in the U. S. Conversely, those areas of the Middle East, North Africa and West Africa with low lifting costs and relative political stability should be less affected. Unless oil prices exceed $60/barrel, we will start seeing more imports into the U. S. to offset domestic production losses.
Low oil prices will also adversely affect gas directed E&P, especially LNG projects where prices are indexed to oil. Those LNG projects that do not already have long term sales contracts will face an uphill battle against competition from Qatar, Australia and Russia.
Specifically, “World Oil” foresees the following for 2015:
-A 20% reduction in the number of U. S. wells and footage drilled.
-Gulf of Mexico E&P to continue, but at a slower rate.
-A 30% drop in Canadian drilling in terms of wells.
-Drilling outside the U. S. will drop 7-9%.
To learn more about the “World Oil” worldview, please go to www.worldoil.com .
