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Oil and Gas Predictions for 2020

Oil and Gas Predictions for 2020

 

Hey, folks, let’s learn something new about the oil and gas industry. First thing is my apologies. We were very busy in 2019. Plus I went through a bunch of personal stuff, so I did not put out much content at all. So my apologies to you, our audience out there. 2020 we’re gonna hit it with a bang. You’re gonna see so much great content coming up including this. This is the new modalpoint Global Studio and we’re gonna give you a behind the scenes look in about a month now in how we built this, the tools, the techniques, the cameras, the lightings used, all that stuff.

But this is the Oil and Gas predictions for 2020.So, let’s just jump right into it.

Number 1 Oil and Gas Predictions for 2020 Go Big or Go Home

If you look at what’s happening in the shale plays, you see a lot of people out there saying that shale is just a bubble. It’s going to burst. There’s a whole bunch of capital inefficiencies by the operators and basically shale is dying or on its way out the door. We don’t believe that, whatsoever. We think something’s going on in the maturity level of the shale plays. So, if you look at what’s happened in the last say 5 years, you see a lot of independent operators go into production, use those production numbers to borrow money, to borrow CAPEX to drill more wells, do more production. That’s not a long term business model.

That’s a short term business model that quite frankly has failed. We all can agree upon that. What we see happening is something bigger and better really for the entire industry. We’re seeing the major independents and the majors and the super majors come in. And a couple of things that are different about them in the shale plays, we’ll use Chevron as an example. Chevron owns the mineral rights in the Permian, right, in the shale plays. Almost all the independent operators lease them. Now, that’s a big difference that nobody ever thinks about. When you lease those mineral rights, in those contracts is certain production goals because the owner of mineral rights wants to make money, wants to get paid. And they get paid on your production. So, if you’re an independent operator and you’re leasing mineral rights, you are forced contractually to go in production.

Chevron doesn’t have to worry about that. Chevron can produce or not produce whether they want to or not depending on what the market dictates because they own the mineral rights. We think that’s the trend of the future and we’re watching the other super majors buy mineral rights instead of lease them, which verifies what we think. The other thing is the majors don’t have to borrow money. They don’t have to borrow CAPEX. They have their own funding internally. So, you take those two simple things together, the “I don’t need more money ‘cause I have enough cash in my bank to do it myself” and the fact that I own the mineral rights, those 2 things together give the major operators anywhere from $0.50 to $3 a barrel more profit than the independent operators. We think that is a sustainable business model. The mergers and acquisitions that are happening now proves that we think that’s where the future is going.

So, it’s really good for everybody. It will be some turmoil. We’re gonna have some of the service companies suffer a little bit as the prosperity from the independent operators gets transferred to the majors and the super majors. But once it gets settled and leveled out, we’ll still be in this low crude price environment for almost forever. We’ll go to that a little bit later. But now, you have the majors who are much more efficient at running capital, much more efficient running multiple large projects. And that’s gonna level everything out in the shale plays we think. So, go big or go home is #1 in our Oil and Gas predictions for 2020.

Number 2: Petrochemicals Rule

If you look at 1/3 of the growth in hydrocarbon consumptions, not what the world is consuming now, but if you look towards the future, 1/3 of that future growth is pure petrochemicals. Petrochemicals makes modern life possible. Everything from the lipstick that your wife or girlfriend wears, to the soccer balls you play with on afternoons with your kids, to the tires on your car, to the fuel of Space X, to the nylon that goes into the military protective vest, all that’s petrochemicals.

And the world wants more and more of that. And the world needs more and more of that. And so, as an industry, we’re providing more of the raw feedstock which is crude oil and natural gas. Think of things like an ethylene cracker. An ethylene cracker in simple forms coverts to natural gas to plastics. There’s a proliferation globally. In here in the U.S., we have dominated petrochemicals. So, #2, petrochemicals rule, which is really cool.

Number 3: Hello Agility

You heard me right. Agility. So, if you think of the oil and gas industry from its conception as an industry until now, it’s always been in a resource constrained environment. Resources were hard to find. It was hard to find reservoirs. It was hard to find  oil and natural gas. It was work. It was money. And so, the old style of running that type of business lends itself very well to almost like a military operation. Command and control. In that resource constrained world, command and control works extremely well. Not picking on you, Exxon. I love you to death, but you’re a perfect example of that command and control business model. Well, that’s changed. Hydrocarbons are everywhere. This geology we have, yes, we keep calling ‘em shale geology, it’s not just here in the U.S. It’s all around the world. And as the world matures as far as infrastructure, roads and pipelines, the rest of the world will be able to tap into their shale plays and even the best operator in the shale plays today in 2020 can only get maybe 15% of the hydrocarbons out the ground. At least 85% is still there. So, hydrocarbons are there forever, but the business has changed.

We’re no longer a resource constrained world. So, the old command and control business model, which served our industry so well for so long, doesn’t work. Now, it’s about being nimble. Who could be first to market? Who could be the first to figure out a different way to finance a project? Who will be the first group to figure out different talent sources to tap into? So, agility is what’s gonna make the differences between oil and gas companies that make it in the future and once it disappear. This is the 3rd part of our Oil and Gas predictions for 2020.

Number 4 Hydrocarbon Pricing

We’ve been doing these yearly predictions for I think 6 years now. And every year, people want me to give a number of what I think natural gas is going to be and I never do it. Let’s do it. What the hell, right? So, we think in 2020 Brent is gonna average $64 a barrel and we think natural gas is gonna average $2.55 per million BTU. Now, my predictions on the price of crude is a little bit higher than the other analysts. My predictions on natural gas is a little bit lower. Let’s see what happens with our Oil and Gas predictions for 2020.

Number 5 Oil and Gas predictions for 2020 Talent

As an industry, we are facing the talent shortage of epic proportions for the first time ever people around the world don’t wanna come work in our industry. Up until just recently, if you were a young man or woman in Angola, Africa, your whole village would be super happy if you get a job in the oil and gas industry because it was prosperity, medical care, money, and food. And everybody was super stoked about that. Folks, we’ve let it get to the point now where these young men and women in Africa, or China, or India don’t wanna come work in our industry because they think we’re destroying the planet. As an industry whether it’s upstream, midstream, downstream, or service. We’re an industry of engineers and project management. What happens when we can’t hire engineers and project managers?

This is real. This is serious. This is big. Now, oil and gas global network is working on something to help address this, but I need all of us to address this. We can talk about this a little bit later in the predictions, but talent is a major constraint in our industry now. It’s only gonna get worse in the future. And you look at the type of talent we need. We now need data scientists. We now need data architects. We now need drone pilots. Those are the exact ones that don’t wanna come work here, but the tech industry is going to snag them. And so, talent’s a major constraint. And whether you’re a small oil and gas company or a mega oil and gas company, if you’re able to figure out how to recruit or retain talent compared to your competitors, you could pull way ahead. And if you’re those companies that don’t wanna change the way that you deal with your talent, you’re gonna get left behind. Sorry.

Number 6 Green is Picking Up Steam

Going green Oil andGas Predictions for 2020So, when all this first started, it was amazing to watch the oil and gas companies dip their toe into the renewable world, right, the renewable market. It was really a PR stunt. Now, as an industry, we’ve looked at that and see if we make money from clean energy, can we make money from renewables? And there’s also a bit of a disparity in between what happens here in Europe, in the U.S. and the rest of the world. We’re actually spoiled by oil and gas here and in Europe. I mean, I live in a 3,000 square foot house. I probably burn 15 kilowatts of electricity a day. The only reason I can do that is because it’s dirt cheap and it’s dirt cheap because oil and gas. We have the ability to make electricity just almost free.

The rest of the world doesn’t live like that. So, the rest world is coming out of an agrarian lifestyle and they don’t need 15 kilowatts. They need 1 or 2 watts. Right? They need to run a small refrigerator, run a couple of light bulbs, and recharge their iPad. They don’t need to run central heat or air like I do, and my espresso machines, and my 3 refrigerators. They don’t need that. So in renewable energy, solar is a great fit for that. You don’t have to worry about infrastructure. You don’t have to worry about pipelines. So, the other thing is if you look at CO2 emissions, the #1 way globally to lower CO2 emissions is for the world to switch from coal to natural gas. Guess who you get natural gas from, folks? The oil and gas industry. So, going green is no longer a PR stunt. It’s now a revenue stream that we’re all trying to figure out. The majors, the super majors especially have put a lot of money and research, which is great, into renewables and we love that. We actually have an oil and gas renewable podcast coming out this year.

Number 7 Oil and Gas predictions for 2020 Regional Hydrocarbons

I know this is weird. Regional hydrocarbons. Have you ever wondered why, you know, WTI right now is going for $57 a barrel here in Houston, same exact price in Tokyo, Japan, same exact price in Rio de Janeiro? Do you ever wonder why it could be the exact same price? It’s because up until just recently, you can move those hydrocarbons, the crude natural gas for almost nothing. We have a global network of supertankers and pipelines where it costs almost nothing to move it. So, if you wanna pay the list price today here, I can move it halfway across the world for nothing and sell it for that price over there. Interesting bit of trivia: At any one time in the oceans, there’s more weight in crude oil being moved around that the weight of all the fish combined. That’s how big this is.

Well, for the first time in my lifetime, especially supertanker rates are going up. So, it used to cost $2 million to move a supertanker from here to Asia Pacific. It’s now up to $10 million. Well, that’s now affecting that ability to move stuff for almost free. Now, it’s not almost free. So here in the U.S., we love heavy complex crudes and we import those crudes from Canada, Venezuela, Middle East and then the rest of the world loves light sweet crudes. And so, we export our crudes that we develop here to the rest of the world because we can do it for almost nothing. Well, what happens when that price of transport, those logistic prices go up especially globally? Right? Not pipelines, but supertankers, which is what’s happening now. Now, all of a sudden we could be more worried about regional hydrocarbons.

Is the U.S. going to look at it using its own production, its own light sweet crudes, and switch it from using those heavy crudes in the rest of the world to our own light sweet crudes because the cost of transport is going up? It’s the same thing that happened in Europe. So, regional hydrocarbons for the first time is gonna be a major driver in 2020. We expect that trend to continue and actually get bigger and bigger. so regional hydrocarbons is in our Oil and Gas predictions for 2020

Number 8 Conflict in the Middle East

Then, and I really hope I’m wrong about this one. We think there’s gonna be a conflict in the Middle East. And when it happens or if it happens, you’re gonna see a jump in prices, right, which a lot of people are hoping to happen, but that’s going to be a temporary jump in prices. And thing is it’s gonna be different this time with the conflict in the Middle East. Its OPEC is gonna implode a little bit. They’re not gonna be able to produce as much and that’s gonna open up market share. For the first time, us and Russia will go after that OPEC market share and try to capture that. And when the war in the Middle East gets settled, they won’t be able to come back and take back that market share back. OPEC knows this. OPEC is doing everything it can to keep a conflict from breaking out, but there’s the perfect storm of what’s going on with Saudi Aramco IPO. You get Saudi Arabia paying the overhead for having U.S. troops over there to protect everything. You have everything that’s going on in Iran, you know. And you had our embassy that was just attacked.

So, this is the perfect storm and I am firmly convinced we’re gonna have a conflict in the Middle East. I don’t want it to happen. I don’t want anybody to get hurt. I don’t want American boots on foreign soil, but we think it’s going to happen in 2020. And you’ll see that spike in hydrocarbon prices and you’ll see that the global shuffle for market share. It’s gonna be an interesting time. If I am right, if we are right about the conflict, let’s hope that it ends quickly so it doesn’t get out of control.

Number 9 Politics Gets Personal

And then speaking of ending quickly and out of control, for the first time in the oil and gas industry and for me personally, politics has to get personal. Folks, we’re fighting a battle against organizations that don’t like us for various reasons. Either their after financial gain or they’re misinformed, but that battle is being fought right now. And if you’re around during the `70s, the same thing happened with Green Peace and the nuclear energy industry. Nuclear energy should be here. It’s the safest way to generate electricity that we know of, but it’s gone because of Green Peace.

Green Peace used public perception and marketing to convince the world that nuclear was bad. They’re wrong and they’ve eliminated something that was vital to mankind. The same thing is going on with oil and gas. Now, in the case of oil and gas, no organization will ever make it go away completely because it’s used for everything, but what will happen is it’s gonna increase our cost of doing business to the point that we may not be competitive with other energy sources. So, for the first time ever, I’ve always said I want to stay out of politics and the public eye, I want my company to stay out of politics and the public eye, that needs to change. You, yourself, you and your company, I don’t care if you work for super major, needs to get involved in politics.

But listen to me, you don’t need to get involved in politics by giving money to trade organizations. The big Super Bowl ads that the API runs and all the other full-page magazine ads, the Wall Street Journals, that does nothing with this new younger workforce. It needs to be real. It needs to have a big social media component. You look at the people that don’t like us. They’ve used social media very well to shut down pipelines, to shut down access to drilling, to restrict water usage. We need to do the same thing, but we need to do it in a way we’re talking about the facts, the good things of our industry.

A perfect example, I keep telling about ExxonMobil. Do you Exxon Mobil spends more money fighting malaria than anybody else in the world? Nobody knows that. Do you know that their new corporate headquarters outside of Spring, when they removed a lot of the trees for construction, they spent a ton of money to put those trees in cold storage and paid tree experts to keep those trees alive for years. And when they finished their construction, they went back and replanted those trees. Nobody knows that story. That’s the type of stuff we need to tell, but we need to tell it to our politicians and our politicians need to understand the truth about our industry, how vital it is to mankind, how many jobs we support. And if they don’t, we need to vote and get them out of office. So, for the first time ever, modalpoint, Mark LaCour, and the Oil and Gas Global Network are getting involved in politics and the public eye and you need too as well. We’re in a battle and that battle can only be won if we start influencing our politicians in a way that’s transparent and honest and it’s based upon the fact. So, politics gets personal.

Number 10 New Ways of Working

Then finally for our Oil and Gas predictions for 2020, for the first time new ways of working in oil and gas industry. Part of it is being driven by this new workforce that’s coming in. Part of it is also being driven by technology. You know, when I got started in business in the late `80s, you went to the office because that’s where the data was you needed to do your job. There was no internet. There really was no email. We had a terminal in a mainframe computer and we had internal email, but not external. And I got maybe 2 emails a week. All that’s gone now. I no longer need to go to the office to access the file cabinets with the information I need. Right? I can do it all on my phone. Same way with you. And for the first time ever, not only does the oil and gas industry recognize that and you’re seeing work from home, you’re seeing global positions where people are halfway around the world doing it, but you’re also seeing stuff like measurement while drilling being done 100% remotely. You’re seeing management of wells being done 100% remotely.

We got involved in this group called Top Coder and we got involved with them through Anadarko. And what Top Coder is is some of the best technology minds and workforce in the world and a community. It’s a gig economy type thing. Sort of like Uber. But what’s so cool about it is that you can offer them a job if you need something done, which is what Anadarko did. And you get not only the top minds of the planet, but they work together. It’s collaborative. So, it ends up being cheaper and quicker for the customer, on this case Anadarko. And then the people that work for Top Coder, they were writing the code. They’re coming up with the technology. They’re making 2 or 3 times as much as they would work for another company and they can pick and choose their job. They can pick jobs they wanna do and they don’t have to pick jobs they don’t wanna do. So, you’re looking at it that way. Entirely new ways of working. It’s changing the actual culture of oil and gas. I suspect in my lifetime that subsea engineers will spend part of the time working on a bunch of trees for, you know, Shell and then the other half they’re working on a bunch of trees for Chevron and working on a bunch of trees for Petrobras. Right? We don’t do that now, but it’s coming. That’s gonna drop efficiencies and employee satisfaction in a way that we’ve never done before. So, new ways of working is #10 of our predictions in oil and gas for 2020.

Hopefully our Oil and Gas predictions for 2020 has helped. We’ve done this in 2014, 2015, 2016, 2017, 2018 and 2019 and will continue to do so. I hoped this helped, we will see you next time.

Oil and Gas Predictions for 2019

 

 
Oil and Gas Predictions for 2019

All right it’s that day that you all been clamoring for, it’s our oil and gas predictions for 2019. We’ve been on this little tour and done this a couple of times with some private groups. Then this came out a few days ago on the podcast. It went out to the podcast audience first, but then we are releasing right after to everybody that follows my blog and watches my YouTube videos. So, let’s just jump right into the predictions for next year, and check out the best dividend paying oil stocks for 2019 as well.

Decline of Field Sales. Where is the Jerky?

Number one, decline of field sales. And you go, “What?” You heard me, decline of field sales. Right now around the world and especially on land in the shale basins, there are these sales people that do nothing but deliver donuts and beef jerky. And don’t hate me, I know you all do way more than that. But what they are really doing is continuing the in-person relationships with the operators. That’s really important. 

That operator out in North Dakota or in West Texas needs to know the vendors he can rely on, and one way to do that is regular contact. And if you bring a gift of food (which the oil and gas industry loves), you help further strengthen those bonds. So that the operator knows that they can trust you and your company if they really need you for something.

Oil and Gas Predictions for 2018

Oil and Gas Predictions for 2018

Hey, folks it’s that time…Oil and Gas Predictions for 2018.

We’ve done this since 2014 (2015, 2016, 2017), and we went back and looked and we have about a 75% success ratio. Which is actually pretty good, considering we aren’t professional analysts. But we do get this information from our clients and also the research we do all year long. So are you ready?

Number one. Online searches. Up until recently it didn’t matter if your company made 1-inch ball valves, if you showed up on Google. Surprisingly we’ve done the research and from 2014 to the end of 2016, online supply chain searches in oil and gas globally have grown 1700%. That’s right, 1700%.

Why? The old guy in the warehouse who knew where the 1-inch ball valves were, he didn’t go online and look for anything. If his boss told him to get some, he had vendor A, B, and C because he’s played golf with them for the past twenty years. They went out drinking, dinner, hunting, fishing and so on. So he knew where to get the ball valves. And if for some reason his vendors couldn’t supply him, he had a stack of paper catalogs he’d looked through. Well now he is gone. He’s taken the package or he’s retired. The new young person right out of school that took his job, when his boss says get me 1-inch ball valves, first thing he does is look for it on Google.

If your company doesn’t have a strategy to show up in organic search — searches for whatever your company does. Whether it’s a process, a service, parts, whatever. If you don’t show up in online searches, that it’s going to start hurting your business now. And you’re going to lose large chunks of your business in the future.

Online Searches-Vital for Oil and Gas Predictions for 2018

I know several large (and I mean really large) oil and gas service companies that are aware of this, and they’re working on it right now. Now the cool thing is if you’re a small company, you can pull ahead of these larger companies. If you go online right now and search for oil and gas sales experts, you’ll see me, modalpoint dominate huge multi-billion dollar companies, because we understand the importance of this. If you want to see some really extra cool, go search for oil and gas speaker and see who comes up number one.  So that’s the first one for Oil and Gas Predictions for 2018, online searches.

Number two. This new younger workforce; they act and think differently. We talked about number one. This new younger workforce is coming in and they’re going to expect consumer grade technology. No matter how well you treat them, no matter what type of path to future success they have, they’re not work for your company for 20 or 30 years because they want different work experiences. Just the paycheck isn’t enough for them. They want to make a difference and they want to understand what’s going on, and play a part.

So this new younger workforce is coming in and it’s coming very fast. Right now, about 33% of the oil and gas workforce here and Europe are under the age of 35. In five years, this will be 70%.  You have no choice, they’re coming and that’s who’s going to be running our industry. You got to get used to it, but that’s one of our oil and gas predictions for 2018.

Labor Shortage (No Really)

And then, everybody is going to think I’m crazy. Remember, last year I called the — the inflation on land at the very end of 2017 which is going on right now, so we got that one right.

So number three. Labor shortage. Yeah. Yeah. Yeah. I know we’ve had a bunch of layoffs in industry especially upstream and the service companies, but we’re facing a labor shortage; skilled labor, unskilled labor, managerial, project managers, engineers. There are simply not enough young people going to school to supply the need that we have.

So, one of two things are going to happen. You will see a price war breakout, which is never good for our industry. Or we’re going to have to look at ways of running our business with less people, and that’s an interesting way to go. We think there’s going to be a technology play there so we are keeping an eye on that. So, number three is labor shortages.

Number four for Oil and  Gas Predictions for 2018. Changing buyer behavior. If you’ve been in sales in oil and gas, you’ve always looked for the “decision-maker”. Well he doesn’t exist anymore. It’s now a decision making team. And what used to be a linear track from discovery to close is now all convoluted, because all the different decisions have to be made by different groups of different people. If your sales and marketing organization doesn’t understand how that’s changing, you’re going to get left behind. So change in buyer behavior is number four.

Then, number five. We’ve hit the valley of negative public perception. We think 2018 the public perception of oil and gas (which is not good right now) will hit rock bottom. It’s interesting, of the millennials about 13% think of oil and gas in a positive way. The generation, the one right behind them, it’s a negative 3.5%. Come on people, as an industry we have to change that.

We have several oil and gas podcast and that’s our mission on the podcast. Its to help change the young people in the world’s opinion of this great industry (see bottom of this page). And we think in 2018, we’re going to hit the bottom of that negative public perception. And then we will start coming back up. We’re starting to finally understand how to use social media. And the world at large is starting to understand the prosperity that we bring with cheap, abundant, reliable energy. So rock bottom public perception and starting to reverse that trend is an Oil and  Gas Predictions for 2018.

Oil and Gas Predictions for 2018 – New Business Models

Then new business models. Come on, Schlumberger is now an operator? You have pipeline companies that are actually standing up ethylene crackers. The world of oil and gas is changing and there’s these new business model that companies are trying. If you think about Schlumberger forming joint ventures with NOCs, what they are doing is testing the waters. They do that all the time (think OneSubsea). And once they get it figured out, then they’ll go full-blown and become an operator as one of their business units.

Imagine Schlumberger is an operator. Number one they can sell their services at cutthroat prices, which reduces the overhead of those wells, which means they can make money where anybody else can’t.  Or they can keep their services the same, but make sure they provide the on time and help that operator which it would actually allow Schlumberger to produce oil in a more economical way. Either way they win, so they’re mitigating their risk by becoming an operator. That is really cool. And like I said, there’s a whole bunch of different models being tried and this is something new for oil and gas in 2018.Oil and Gas Predictions for 2018

Then finally, number seven. We’re having confidence in upstream sector. Prices are still low and prices are going to stay relatively low forever. That $50 to $65 price range, but we’ve driven so many inefficiencies out of the system that we are now comfortable with that price range. So investors, upstream companies, the NOC’s, the majors, the super majors, they’re starting to spend money again in upstream. They’re not going to do silly stuff and land still rules, but you’re seeing that confidence come back in upstream which is good for everybody.

Then, pay attention. Here in the U.S. we’re going to have a boom in midstream; pipelines, tankers, rail, etc?  Look at all the pipelines being built in the Permian. Why? Because it drives efficiencies and it’s safer for the environment. Plus it makes it a more predictable model not just to move the crude that you get out of ground, but to remove around the fresh water you need,  to move the produced water to move around natural gas.

There’s a whole Renaissance of new pipelines being built in the U.S. and you need to get ahead and understand it because it’s number eight Oil and Gas Predictions of 2018.

NGL’s Will be Huge

Then NGL (natural gas liquids) they’re going to be huge. As we increase our production the world has an appetite for our NGLs. NGLs things like butane, pentane, propane and we are producing the begebe’s out of NGL’s and we are selling it to the rest of the world at very high margins. That’s stuff we use to almost just throw away, we are now selling and making very healthy margin on. So NGLs are going to be a huge business boom and are part of our  Oil and Gas Predictions for 2018

Now I called this wrong in 2015. But I’m going to call it again and put my neck on the line. Number ten for Oil and Gas Predictions 2018, Mergers and acquisitions. I think the M&A activities will go through the roof in 2018. I think you can see large service companies combined to join forces. I think you will see a lot of independents combining. I think you’re going to see companies that just to be used thought of a technology company buying bits of oil and gas because they know they can make money out of it. I think the M&A activity for 2018 is going to be crazy and that’s just good for everybody.

All right. So, I just rattled off our ten Oil and Gas predictions for 2018. Can you do me a favor if you found it useful, can you share this? You know forward it to a friend, do the all company e-mail, post it on Twitter, whatever.

But this is our predictions for 2018. I hope you found it valuable. And like I said we have the podcast. I’ll put a link in the show notes so you can go check those out. We have a bunch more in the works. And we’re really building this Oil and Gas Global Network media super power in oil and gas. Its fun and we’re making a difference.  So, go check that out as well.

Podcasts

Oil and Gas This Week

Oil and Gas Industry Leaders

Oil and Gas HSE

 

Oil and Gas Predictions for 2017

Our Oil and Gas predictions for 2017.

Historically, this is what we call the business drivers for each year. We’ve done 2014, 2015, 2016. This year, we’re changing the title. So this is the Oil and Gas Predictions for 2017. Let’s do it.

Number one, petrochemicals

oil and gas predictions for 2017Petrochemicals will be a huge business globally; methanol, ammonia, ethylene, polypropylene, fertilizers, plastics. All that is going to be huge because the raw feedstock is so abundant and so cheap here in the US. It might a good time to be looking at buying some BASF stuff or Dow stock because of that 😉

Number two, global ethylene shortage.

If you don’t know what ethylene is, ethylene is what ethylene crackers take out natural gas and help convert into plastic things like polyethylene. So, it’s the raw feedstock of plastics. Globally, demand for this is going through the roof and the supply is not there. That’s driving a lot of business. Look at all the ethylene crackers that are being built here in the US and globally. So, another major oil and gas predictions for 2017 is ethylene shortage.

Number three, offshore standardization.

The Holy Grail. This industry is a long term low crude price environment which means that we have to drive cost down. Historically, offshore everything is built to suit. So, Exxon builds a platform its way for this part of the world, Anadarko builds a platform this way for its part of the world and everything is different, the trees, the manifold, everything is unique. That needs to go away and it will. We’re just now starting to see this the beginning of that. All the majors have signed a memorandum of understanding to start looking at standardization even though they’re competitors. This is huge. Once again an Oil and Gas predictions for 2017.

Number four, inflation in the service industry on land.

Then, and everybody used to say I’m crazy. At the end of 2017, we’re going to see inflation in the service industry on land. There’s not going to be enough people, enough pumps, enough parts. We’re going to see prices go up. We’re not there yet, but the end of 2017 you’ll actually start seeing inflation from the service companies on land.

Number five, long term hydrocarbon abundant world.

Then, we’re in this long term hydrocarbon abundant world. Oil and gas is everywhere, we don’t know what to do with it. You know think about that because it’s a long term hydrocarbon abundant world, prices are going to stay low for a very, very, very long time. Which is going to drive different business models and that is just – it’s actually a good thing. The price could stay high enough where companies can still make money, but low enough so that the population benefits from this abundant cheap energy, so a great thing an another oil and gas predictions for 2017.

Expensive Oil is Dead is an Oil and Gas predictions for 2017

 

Number six, expensive oil is dead.

Then, because of that, expensive oil is dead. High pressure, high temperature, ultra deep water, Oil Sands and the North Sea — dead. Sorry. But that in itself is driving business. So, when you think about the decline in North Sea, you have all these opportunities for decommissioning and nobody’s looking at it yet. You’re looking at fifty years maybe even a hundred years of decommissioning work. That’s a lot of money to may be taking these platforms offline. So, just because expensive oil is dead, don’t think there’s not business opportunities. Now, that expensive oil will come back as we improve technologies and as we reduce cost somewhere in the future. Another twenty or thirty years, so that oil will come back, but we’re not there yet.

Number seven, fundamental changes.

Then, the basic fundamentals of oil and gas industry is changing right now. We’re seeing the transformation. So, the typical start out in the field when you’re 18 years old work your way through the company and you end up running parts of the business, that’s gone. All of the senior guys a lot of them have left the industry. The new people that are coming in this industry are young, but they’ve never been on the well, they’ve never picked up a torque wrench. So, fundamentally this industry is changing and I actually think it’s changing for the better.

Number eight, unconventionals go global.

Then, here’s a big one, unconventionals, they go global. The shale plays here in the US, that geology is not unique here. That same geology is in China, it’s in Russia, it’s in Africa, it’s in Europe and your startingoil and gas predictions forecast for 2017 and see the beginnings of unconventionals going global. Once again it will keep hydrocarbon cheap because there’s so much oil and gas out there. And another oil and gas predictions for 2017.

Number nine, politically conductive administration.

Then, for the first time in American history, we have the most politically conductive administration for the oil and gas industry ever, right? I’m expecting a lot of this administration. I’m expecting to see a lot of the teeth being removed from the EPA which is a good thing. I’m expecting federal lands being opened up for drilling. I’m expecting a lot of the executive actions that hurt the oil and gas industry will be rescinded. And what I think is really cool is for the first time in my lifetime, people that are putting political office during this administration for the oil and gas industry are actually from the oil and gas industry not politicians. That’s good for all of us.

Number ten, land rules.

And then, finally, number ten the last thing prediction, land rules. Sorry, land rules. I’m looking at all the capex budgets for the majors out there, they’re shifting their budgets, they’re reducing their offshore spin, but they’re increasing their land spin. Once again, that’s a great opportunity if you can get ahead of that.

So, there we did went through really quick our ten oil and gas predictions for 2017. If you like this and found it valuable, can you do me a favor? Can you use the social share buttons on this post and share it with your social media please?

And then anybody that has an interest in what we’re talking about, can you forward them this blogpost? It helps us spread the word and reach more people.

So, folks I hope this helped. We will see you next time.

Top 10 Oil and Gas Business Drivers for 2016

Top 10 Oil and Gas Business Drivers for 2016.

People have been hammering me like crazy, “Mark, when are you going to do your predictions for 2016?” We’ve even had people reach out to us on our podcast who want to know when it’s going to happen. So we’re going to do it right now. This is our top 10 Oil and Gas Business Drivers for 2016

Number one. Increased interest rates. We think that interest rates are going to go up in 2016 that is going to increase the cost of capital. Now, unfortunately for a lot of the smaller upstream operators in North America they’ve lost a lot of their existing hedging. This increase in interest rates is going to increase the cost or capital, which will actually hurt them even more. Which is unfortunate, but it is going to be one of the business drivers in 2016.

Number two. Operational excellence. So, operational excellence got started in automotive. In the oil and gas industry has dabbled in operational excellence before, in fact we did this big long blog post about operational excellence in oil gas. You can find it here. But going forward upstream and the service companies that service upstream are going to have to improve efficiencies. So they’re going to have to change their culture, the way they think about stuff. Things like continuous improvement which they don’t have imbedded in the entire company, has got to become core to their business. So, number two of the top 10 Oil and Gas Business Drivers for 2016 is operational excellence.

Top 10 Oil and Gas Business Drivers for 2016Number three. Talent. And, I’m telling you people think I’m crazy, there’s still a huge shortage of talent in this industry. Yes, there have been layoffs in the upstream in the service companies that touch upstream, but downstream and midstream are hiring like crazy. In fact, there’s not enough bodies out there and one of the things that’s new is there’s a lack of skilled labor. So things like pipe fitters, machinists, welders, there’s not enough of them to meet the need, so that shortage is going to drive business decisions. So, number three is lack of talent.

Number four. Export. And, I should have saw this coming, but I just recently figured this out. You know here in the U.S. we use about 20 million barrels a day, but we don’t actually consume 20 million barrels a day. We use 14, the other 6 are exported as refined goods. And the U.S. has the most robust, efficient, and largest refining capacity in the world. And when I say refinery most people think fuels – jet fuel, diesel, gasoline. No, think of all the petrochemicals, plastics and fertilizers. So, this will become major business driver and this is going to be a bit of a new business is exportation of refined goods from the U.S. So the number four of the top 10 Oil and Gas Business Drivers for 2016 is export.

Crude will get back to $60 a barrel

Number five. Crude prices. Now, we said over a year ago that we thought crude get back to $60 a barrel in April. We still are saying that oil will get back to $60 a barrel, but now we’re thinking it’s more like August. But it will happen in 2016. But it won’t go back to $90 or $100 a barrel, so the industry as a whole have to learn how to work in that $60 to $75 price range which for most of the guys is totally fine, that’s going to be another business driver is the return of $60 a barrel crude oil.

Number six. Technology. This industry is adopting new technology faster than I’ve ever seen it anywhere. Things like big data, analytics, efficiencies, Internet of things which we call the digital oilfield and cyber security. With all these new pipelines and refineries being built there’s more points of entry for the bad guys so all of a sudden cyber security is not something that just the IT managers worry about. The business is now worried about cyber security. And then there is data driven drilling. The upstream guys have to become more efficient in operations, they can’t just spray and pray, so they have to harness the power of big data analytics just to get where they drill. And the whole thing is they want to make sure they stay in that top quartile of production, which they can by using data. So, number six of the top 10 Oil and Gas Business Drivers for 2016, technology.

Number seven. Gas. What else can I say? Natural gas is everywhere. The world has a huge need for natural gas. We’re developing the technologies and infrastructure and place to mush it down to a liquid so we can move it. That’s all the LNG plants are going on. It’s much cleaner much better for the environment. Here and in Europe we’re switching from coal-powered electric plants to natural gas-powered plants. That’s another huge business driver in 2016 is gas.

Then, shifting global markets. There are things going on in the globe that never happened before in oil and gas. You have the Middle East starting to sell oil and gas to Europe, that’s always been Russia’s market. Well, in order for Russia to maintain some money, now, they’re starting to sell stuff to Asia Pacific which they’ve never done that before either. China’s buying crude like crazy and increasing their strategic reserves and they’re also building refineries like crazy. Saudi Aramco is building refineries, they’ve never done that. The Middle East even though they produce a lot of crude historically has imported refined products. So, you’re seeing literally shifts in the global markets and once again it’s a major business driver in 2016.

And, number nine. Downstream. Downstream is where it’s at! For years if you had some product or solution and you want to sell in oil and gas, you’re going after upstream or the service company because they have all the money. That’s gone. For 2016 it’s going to be downstream, they’re making money hand over fist. Think about it. Think about if you made men’s shirts and somebody cut the cost of your raw cotton by 40%, your business would explode and grow, right? Because your raw feed stock got cut by 40%. That’s what’s going on in downstream right now, their raw feed stock is crude and natural gas and it’s not just fuel, so think plastics, petrochemicals, fertilizers, that business is crazy in 2016. So, if your company wants to sell stuff in oil and gas, you need to be looking at downstream. So number nine of the t op 10 Oil and Gas Business Drivers for 2016 is Downstream.

For 2016 we’re going to be in a hydrocarbon abundant world! (click to tweet)

Then finally number ten, for 2016 we’re going to be in a hydrocarbon abundant world. That has not happened in my lifetime. Because of new technologies and new ways to simulate wells, we’re not going to have an absence of hydrocarbons. They’re everywhere. Prices will stay low; access will be easy for a lot of people. We’re going to see the standards of living for a lot of countries go up because they have access to cheap and abundant energy. How wonderful is that?

So, there you go, our top 10 Oil and Gas Business Drivers for 2016. Our predictions are now out there.

Curious on what we predicted in the past? Click here for our predictions for 2015. And here for our predictions for 2014.

Can you do me a favor? If you liked this, will you click one of these social share buttons and help us spread our message? It helps us reach a bigger audience, which in turn just helps us get better information, which in turn allows us to help you better.

WVU says Utica Shale may have more natural gas than initially perceived

north-dakota-oil-drilling-9-27-2011

West Virginia University’s study reveals a new estimate on the natural gas in Utica Shale that led to millions in investments. According to the study, Utica “is much larger than original estimates, and its size and potential recoverable resources are comparable to the Marcellus play, the largest shale oil and gas play in the U.S. and the second-largest in the world.”

If true, then the gas that is being drilled in Pennsylvania and West Virginia could extract over 780 trillion cubic feet of natural gas, which can be converted to an enormous yield of 2 billion barrels of oil. The U.S. Geological Survey’s estimate three years ago was just 38 trillion cubic feet, which was the basis of WVU’s errata.

“This is a landmark study that demonstrates the vast potential of the Utica as a resource to complement, and go beyond, what the Marcellus has already proven to be,” said Brian Anderson, the director of West Virginia’s Energy Institute.

The Utica Shale Play Book Study was two year’s worth of research that was sponsored by several drillers in the area, including some big players such as Range Resources and Chevron Corporation.

There are several ways that liquefied natural gas can be extracted from Earth, and some engineering firms are already at the forefront of extraction that using a procedure that isn’t too invasive. One method is relying on new separation technologies and injection-mixing devices for desuperheating. Sulzer, a long-time associate of equipment maintenance company Unaoil, is a pioneer of developing pumps for tanker loading and tank farm transfer, which both operate reliably at cryogenic temperatures.

The other method, and the more common one, is called fracking. It involves a well simulation technique in which rocks are fractured using pressurized liquid. Injecting high-pressure liquid into a wellbore creates cracks that helps natural gas flow freely from the Earth. The practice has always been seen as unethical by environmentalists due to the negative effects it causes to the surrounding flora and fauna.

Despite the advances of extracting oil, however, global drilling is declining as the industry is currently experiencing a surplus, leading to all-time low prices of the precious black commodity. Gas production in the Utica area is the only one that was able to increase its production yield from July to August.

Happy Birthday America!

 

happybirthdayamerica

On the Fourth of July, I raised the flag,

As I spoke with love and pride:

“I’m blessed to be an American,” I said,

To two friends who stood by my side.

 

One was my neighbor, who lives next door,

He’s a citizen, like me.

The other, a visitor from a hard, oppressed land,

Far across the sea.

 

“My flag stays in its box this year,”

Said my neighbor, boiling mad.

“The terrible shape this country’s in,

The future looks nothing but bad.

 

“Taxes, scandal, indifference and crime,

On our land like a giant stain.”

My visitor said, “We have all that, and worse,

But it’s against the law to complain.”

 

My neighbor looked startled, but not subdued;

Then he started in on the Press:

“There’s nothing but bad news; the headlines are bleak.”

(It gets me down, too, I confess.)

 

“Our news is all good,” said my visitor.

“It’s just how you’d like to be.

We know what our government wants us to know;

Our press is controlled, you see.”

 

My neighbor spun ’round and marched toward his house,

And here is the end to my story:

The next time we saw him, he was out in his yard,

Proudly raising Old Glory.

 

By Joanna Fuchs

 

On Memorial Day Think Always Faithful

Memorial Day

Today is not about backyard barbecue’s or three day weekends. Its not about cooler’s full of beer or traveling to visit friends and family. Today is not about you and your life. Its about those that paid the ultimate price, so you could lead the life that you desire.

Today is a time for ALL Americans to think about those who have died in service of the United States of America. To remember those brave men and woman who entered into harms way to protect an ideal. To protect a way of life. To protect freedom and liberty. To protect you.

I am honored to have served my country. I have a band of brothers and sisters around the world that spent part of their life serving in the USMC. The motto of the Marine Corps is Semper Fidelis, which means “always faithful”.

We rattle off “Semper Fi” to each other as a greeting or instead of saying goodbye. Such a short but sweet bit of Latin that just rolls off the tongue. Now that I am older I see deeper meaning in these two words.

I now no longer see it as the motto of the USMC, I see it as a motto that all Americans should embrace. Always faithful as as American, regardless of our differences. Regardless of what is going on in the world. Regardless of what is changing or needs to be changed.

In the future when I am no longer here, there will be new Americans running our country. And I want them to be “always faithful” to our nation, to each other and to the American ideals. I want my son to grow up knowing that if need be, his fellow Americans will step into harms way to protect him. To protect his way of life. His freedoms. His liberty. Because they are always faithful.

Remember the fallen today, and lets always be faithful to each other.

I think the great communicator put it best:

Freedom is never more than one generation away from extinction. We did not pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children’s children what it was once like in the United States where men were free

-Ronald Reagan

Talent. Oil & Gas Making or Breaking Future Business

 

Come see how the Oil and Gas industry will either make or break their future business based upon their choices in managing their talent pool.

 

Hey, folks. Let’s learn something new about the oil and gas industry.

[Music]

Today, we’re going to talk about something that’s going to be a major driver in the oil and gas industry, it’s just not going to happen right now.

So, we’re in the first quarter of 2015 and we’re still under low crude prices. And what’s happening is companies are having to figure out especially the upstream and the service companies how to figure out how to deal with these declining budgets and declining revenue, right?

They have a bunch of options on their plate to increase operational efficiency and one of those options on the plate is actually to decrease the size of their workforce – layoffs. Now, unfortunately this point in history there’s a massive shortage of talent in the oil and gas industry especially STEMS talent. You’ve heard us talk about that before; science, technology, engineering, and mathematics.

So, companies right now are trying to figure out what’s the best way to manage this, right? They may have to reduce the size of their workforce, but they know down the road they’re going to need the same people back and they’re not going to be able to hire them.

And we’re watching companies right now making some really smart decisions. FMC Technologies, Chevron are making really good decisions about their talent right now. And we’re seeing other companies make not such good decisions and what’s going to happen is right now it’s not going to impact the company, but when the price of crude goes back up and we’re thinking it’s going back up 2016, the decisions these companies are making now are either make or break them in the future.

So, if you’re one of these companies and you’re in the industry, you need to really think about your talent and what the future is going to bring you before you make a decision to get rid of people because you probably won’t be able to pick them back up and hire them again. And so, that whole thing is a major driver and we’re watching it unfold right now. You’re seeing things play in that like knowledge transfer, reaching out to other facets of different parts and makes you see if you can find talent.

Downstream right now has a major shortage that’s going to continue to grow. In fact, 2017 there’s going to be a 188 million man hours of craft labor needed just in the Gulf Coast region. There’s only 90 million man hours of capacity, what are they going to do? That’s going to drive some major business decisions. And like I said the companies that are making the smart decisions now are going to benefit from that in the future.

So, folks, I hope this helped. If you like what we’re doing, could you help us spread the love? Just click the social share buttons underneath and help us reach other people that would appreciate our message.

And if you haven’t done so yet, go to our blog, sign up for our newsletter. It’s a great monthly little read where we highlight all the oil and gas events that are going on so you know which ones are worth your attention and which ones are not.

So, folks, I hope this helped. We will see you next time.

[Music]

 

Happy Earth Day 2015

Earth Day

In celebration of Earth Day I’m very proud of how far we have improved the quality of life and benefited the environment. It’s been a long struggle, but through hard work and determination we have made it happen. Just some quick facts:

Healthier Air – emissions of six major air pollutants have dropped more than 60 percent since 1980.

Cleaner Water – Only about a third of American water was safe for swimming or fishing in 1972. Today, that proportion has risen to about two-thirds.

Saving Species – The bald eagle has become a poster child for saving species from extinction.

And we have greatly improved the quality of life for so many people:

We have natural gas that heats millions of homes, provides many gigawatts of abundant and affordable electricity, and cooks billions of meals around the planet each and every day. Plus it much better for the environment than burning coal or wood.

We have gasoline that powers our cars, jet fuel that enables millions of people to travel at a moment’s notice, and all the petroleum-based products that allow us to brush our teeth, make-up our faces and make ourselves smell better with deodorants and anti-perspirants.

We have the ability to get crude oil and natural gas out of the ground safely and environmentally responsibly. This provides feedstock for the fertilizers that enable the world’s farmers to feed more than 7 billion human  beings on a daily basis and the plastics derived from petroleum that touch and improve our lives in a thousand different ways every day.

So lets all celebrate Earth Day today realizing that we are making a difference!