Oil execs predict slower recovery
victor - hugo carazas
Oil execs predict slower recovery
Oil executives recently met at the World Petroleum Congress in Istanbul and they shared a darkened forecast for an industry that's already endured a longer slump than most people expected.
According to Total CEO Patrick Pouyanne and Weatherford International head Mark McCollum, it could easily take until 2020 for the industry to fully recover. Executives said they’re still focused on repairing bruised finances and resetting their operations to withstand low prices.
“In terms of the magnitude of damage this is by far the worst” industry downturn, McCollum said. It may take until 2020 for demand growth to accelerate enough, or for a supply gap to emerge that U.S. producers can’t fill. “That’s when pricing will begin to rise. Until then it feels very tenuous.”
But the U.S. shale industry that triggered the slump to below $30 has survived and thrived. Despite OPEC efforts to curb production, banks including Goldman Sachs Group and BNP Paribas are cutting their price forecasts for the upcoming years.
“Lower for longer is the new normal,” Lorenzo Simonelli, CEO of Baker Hughes, said in Istanbul. Exploration has slowed and producers outside the shale areas in the U.S. aren’t increasing spending, he said.
Brent crude traded for about $47 on Thursday, less than half the level of three years ago. Dinesh Kumar Sarraf, chairman of India’s state-run Oil & Natural Gas, said companies must be prepared for a “lower forever oil price.”
“As companies we have to remain very disciplined about spending and not assume that the price will go up,” BP’s Dudley said. “The years of $100 oil will turn out to be an aberration. We used to make money at $40 oil, we used to make money at $25 oil.”
Dudley, who was among the first Big Oil bosses to predict an extended downturn, does see glimmers at the end of the tunnel. Prices will eventually rise as demand surpasses supply and erodes overloaded inventories.
“It’s lower for longer, but not lower forever,” he said at an industry dinner in Istanbul.
Sooner or later the market will catch up with the decline in spending, said Mark Richard, senior vice president of global business development and marketing at oil-services giant Halliburton.
“You can’t have sustainable business without investment,” Richard said. “You’ll see some kind of spike in the price of oil, maybe somewhere around 2020, 2021."
Some countries who are larger consumers than others do not share such a negative outlook towards lower prices. India, the world’s second-largest nation in terms of population, imports more than 80% of its crude oil and spent $134 billion in the two years to March 2017, 47% less than the preceding two years, according to data from its Oil Ministry.
“The new normal has emerged,” Petroleum Minister Dharmendra Pradhan said in an interview at the Congress. “This price will stay. This is a reasonable price for everyone."
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