Intelligence brief: Peak oil decade away in most bearish scenario; Natural gas beats oil on US cost reductions

Upstream oil and gas news you need to know

Forecasting peak oil has proved more difficult than geologist M. King Hubbert would have expected when he presented his peak theory in the 1950s (Image credit: Wikimedia Commons)

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Peak oil decade away in most bearish scenario

BP’s worst-case scenario for oil has a silver lining: global demand will continue to grow until around the mid-2020s to a high point of about 4.5 billion tons. Consumption will then decrease slowly so that demand in 2035 is still higher than it is today.

In its 2016 Energy Outlook, BP predicted the consequences for different fuel types if global emissions in 2035 are nearly 8% below the 2014 level – a scenario that it said goes beyond the pledges made at December’s Paris climate-change conference.

The share of fossil fuels in total energy would fall from 86% to around 70% by 2035, it predicted. Renewables would see an almost six-fold increase in output to grab a 15% share of energy. Natural gas and hydro and nuclear (the latter two of which were grouped together) would see gains. Coal consumption would fall more than 30% to its lowest level since 2002.

In the report’s base case, world GDP would more than double, but gains in energy efficiency mean the energy required to fuel this activity would grow by only a third. In this scenario, fossil fuels would remain the dominant form of energy powering global expansion, providing around 60% of additional energy and maintaining a market share of 80% of total energy supplies in 2035.

Natural gas beats oil on US cost reductions

Natural gas-focused operators in the United States cut production costs by 29% between April 2014 and September 2015, better than the 25% cost reduction by their oil-focused counterparts, according to a Deloitte Center for Energy Solutions report.

Gas players benefit more from economies of scale, the report said, pointing to a widening gap between the costs of large and small gas-focused companies and a smaller gap between large and small oil producers.

Deloitte said oil players, particularly the large ones, could still do more to reduce costs, but it also predicted that the industry would soon relax its focus on lowering breakeven costs to support cash flow. A new focus, it said, would be to bolster return on capital investment on the now-devalued investments made in the past.

Gas-focused operators have reduced costs better than their rivals in oil (Source: Deloitte Center for Energy Solutions)

The industry will reduce capital expenditure for a second consecutive year in 2016, the first time this has been achieved since the mid-1980s. This will likely have a “long-lasting impact” on future supplies, the report predicted, explaining that the cuts would slow the conversion of resources to reserves in frontier locations and eat into the capex required to maintain again fields and facilities.

The report also contained a warning: that access to capital markets and other sources of financial protection that assisted the industry in 2015 are “fast waning”. Nearly 35% of pure-play exploration and production companies listed worldwide, or, are at high risk of bankruptcy, it said. These companies have a combined debt of more than $150 billion.

Airborne survey to cover offshore Mexico

Mexico’s National Hydrocarbons Commission has given French geoscience firm CGG the green light to commence a multi-client airborne gravity and magnetic survey in the Mexican portion of the Gulf of Mexico.

The program includes the acquisition of about 200,000 line kilometers over six areas in the GoM. CGG will commence data acquisition in March 2016 and expects to spend 12 months studying the area with two specialized geophysical survey aircraft.

CGG's multi-client airborne survey area will cover a number of areas in the Mexican Gulf of Mexico (Source: CGG)

The survey will provide coverage over the most prospective areas from the prolific Perdido fold belt (AOI 1 in the image above), to the more-mature near-shore heavy oil belt (AOI 6). The data will help explorers map crystalline basement and magnetic and density anomalies within the sedimentary section. The airborne survey will also collect continuous data through the “transition zone” from the marine environment to onshore, according to CGG.

Jean-Georges Malcor, chief executive of CGG, said: “This airborne gravity and magnetic survey offshore Mexico will be a significant addition to our existing gravity & magnetic database in the Gulf of Mexico where we have over 1,000,000 line kilometers of multi-client data. Combined with our other seismic, geologic and satellite multi-client data in Mexico, this new airborne survey will provide a unique geoscience-rich library to support the successful exploration and economic development of this high-potential area for many years to come.”