Escolar Documentos
Profissional Documentos
Cultura Documentos
PETROLEUM INDUSTRY
a talk by
John D. Emerson
Chase Bank, New York
Presented at the
1982 OFFSHORE SOUTH EAST
ASIA CONFERENCE
Before leaving the demand side, let me reiterate that flat real
oil Prices over the decade would be unlikelv to stimulate
nemanc. Prices are already far above the point where greater
use is more economic than investment in qreater efficiency.
Hiaher real Prices over the decade would reinforce the effort
to use oil more efficientlv, lea~ing to lower overall use.
How will the demand for oil be met? Let us divide the supply
sources between non-OPF.C countries and OPEC cuuncries. The
non-OPEC countries tend to oroduce at their full potential.
T~ejr oil is Priced to move. OPEC countries on the other hand
currentlv have 10 million barrels a day of shut-in production.
Some of this is shut in f.or reasons of government policy and is
likelv to remain so. A sufficiently large potential surplus
will exist ~ver the decade, however, for us to designate OPEC
as the residual supplier. A verv important question, of
course, is whether the OPEC nations as a qroup will be the
residual supPlier or whether that role will be left to Saudi
Arabia alone.
- 6 -
Let me qive vou some ot the numbers involved. The oil supply
from non-OPEC countries is expected to increase from 21 million
barrels a day in 1980, to 25 million a day in 1985 and 26
million a dav in 1990. Most of the increase will come from the
North Sea and Mexico. Of the non-OPEC supply, just under half
will be produced i~ the United States. I am talking now of
crune oil, natural ~as liquids and svnthetic oil from shale,
coal and tar sanos.
Caoital Exoennitures
Before I get into the numbers, let me stress the role that
.
inflation plavs. The level of inflation that the world has
experienced in the seventies and will probably experience in
the eighties has the effect of more than doubling by 1990 the
exoenditures expressed in dollars of 1980 purchasing power. I
am qoina to give vou our estimates in Constant dollars--dollars
of 1980 ourchasing oower. You can factor• in your own estimate
of inflation.
- 9 -
Re~lectinq the fact that they drill most of the offshore and
frontier area wells, the maiors cost per well is c~rrently more
t~an ten times that of the independents. And the gap is likely
to widen, as future prospects become more expensive to work.
These conditions lead us to believe that in constant 1980
dollars the maiors' cost per well will increase at 10 percent a
vear and the independents' at 5 percent a year.
A new factor will enter the Far East international oil picture
this vear - China. Since relations between China and the west
were normalized in the late-seventies, a great deal has been
learned about oil in China and there has been much speculation
about the future.
I would like to stress the word "international" because oil
oroduction in China is not new. there is a field in Szechuan
Province, in the interior of the country, that was producing
oil and natural gas over 2000 vears aqo, and it is still
oroducinq. Anv estimate of future oil ?reduction, however,
should start with an assessment of the resource base. Such
assessments have a habit of changing over time. Back in the
twenties, geologists wrote China off completely, but then in
those davs, it was said that no oil would ever be found in
Saudi Arabia.
- 16 -
The first real net income growth that we assumed was 1.5
Percent a vear worldwide. This leans to a level of debt in
1990 hiqher than the industry's equity - in our judgment, an