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Hey, folks. Let’s learn something new about the oil and gas industry.
Today’s show is when we predict what’s going to happen next year in the oil and gas industry. So today’s show is top ten business drivers in oil and gas for 2015. Let’s jump right into it.
Number one. Low Crude Prices. And when I say low crude prices, we’re predicting that the crude gets below $50 a barrel. Now, a lot of people don’t understand what’s going on and they think that OPEC is trying to punish the US Shell players and that’s not it at all. OPEC did nothing, nothing, they just didn’t cut production and they’re doing it for two very important reasons.
Number one, they’re sticking a knife in Russia’s back while Russia’s down because they got really upset over the whole Ukraine thing. Number two is they’re punishing the other OPEC members that went rogue that didn’t cut production eight months ago when they asked them to like Brazil and Venezuela.
So, keeping oil below $85 a barrel is destroying Russia’s economy and it’s destroying Venezuela and Brazil as well, so that’s what’s going on. We are predicting that those crude prices will stay low all through 2015 and about mid-2016, it will get back up to $85 a barrel.
Because of the low crude price, there’s a bunch of things happening. So, all the ultra-deep water and deep water projects are getting pushed out because they’re expensive. All the deepwater and ultra-deepwater projects are getting pushed out and you can see workovers increases, it’s much cheaper to go get more oil out of an existing well than to drill a new well. So, that in itself is going to be a bunch of business drivers all hinged on the low crude prices.
Number two. New Geo Political Risk. So, you have changing laws in Mexico and Argentina. We’re predicting that Venezuela economy is going to collapse completely and Russia’s almost collapsed. And you have political unrest in both Nigeria and Libya. All of that is new to the oil and gas industry who’s used to having political risk in the Middle East, but not the rest of the world.
Number three. Technology. And, oh, boy, when I say technology, it is everywhere; big data, digital oil field, fiber security, and analytics. All stuff is being adapted by the oil and gas industry at a record place so they can be more competitive.
Number four. Shortage of talent. And we talk about this all the time, the great crew change. But it’s to the point now where the oil and gas company six years ago started working with local universities so they could grow talents because they can’t find the talent they need anymore. And when I say talent, it’s everything from frontline, supervisors, to welders, to management, to geologists, to accounting people. So we reach out the oil and gas industry to start partnering with colleges to grow that talent. Now, we’re at the point where partnering with high schools and I’m part of that. So through the Society of Petroleum Engineers, I go teach STEM which is Science Technology Engineer and Mathematics in my local high school half a day each Friday to help grow that pool of talent. If this keeps up, I’ll probably out teaching kindergarten about the oil and gas industry.
Mergers and Acquisitions. It is a right market for mergers and acquisitions. It is a right market for mergers and acquisitions and we’re going to make a couple of predictions. Somebody’s going to buy BP, it’s either going to be Exxon or Shell. I think somebody is going to buy National Oilwell Varco. But there’s a lot of small players out there that are over leverage and because of the low crude prices, it’s prime time for bunch of mergers and acquisitions.
Number six. Rising Emerging Market Demands. India for the first time surpassed China for the consumption of crude. That’s totally different, it’s going to drop some different metrics in oil and gas industry.
Number seven. Gas. And what else can I say, it is all over the place. Electric companies are switching to gas for their feedstock which is lowering the price of electricity. You can use gas in plastics manufacturing. We’re building the facilities to ship it all over the world. Gas is still a major business driver.
Number eight. Low Interest Rates. And what does that mean? That means that companies can now borrow money very effectively, so these large CAPEX projects will get kicked off; the LNG plants, the compressed natural gas plants, pipelines, rail expansion, all that should be another driver in oil and gas.
Number nine. Longer Term Project Planning. So the big oil companies and even the independents are now instead of looking at their projects from a five or ten-year view, have to look at it from a thirty to fifty-year view. When you’re out there and getting the ultra-deep water projects going, that project alone may take ten years to actually start production, they may produce for another forty years. One thing that’s new in the oil and gas industry.
And then, number ten. Uncertain Energy Policies Here in the U.S. Let me tell you. A typical – we have talked about this, a typical project deep-water is a thirty-year project, but we change political administrations every four years. Those two do not go together, so the oil and gas industry has to really look at what’s happening politically.
We got a couple of predictions. Number one, we think that the U.S. is going to lift its import ban partially so we can also stick a knife on Russia’s back, but it’s also the right thing to do from a business point of view. Keystone will not get approved in 2015, it will get approved in 2016 at the end of Obama’s administration so they can take credit for jobs created.
So, there you go, top ten business drivers in oil and gas in 2015. I hope this helped. We will see you next time.