Oilfield Chemicals forecasts for 2011 & 2016
Energy prices remain high amidst supply concerns
In 2006 US energy prices reached their highest levels in two decades, driven by global and regional tightness in crude oil and natural gas supplies. Rising demand from industrializing nations has been driving robust global crude oil consumption, at a time when many key producing areas are struggling to expand oil output. This tenuous market situation has eroded spare production capacity and sharply increased crude prices, a development not aided by continuing concerns over the political stability of several important oil exporting nations. Similar supply concerns are found in the US natural gas market, as stagnant production and import infrastructure limitations have restrained supplies, pushing prices high enough to force a significant portion of industrial consumers out of the market. Despite a slight easing of domestic oil and natural gas prices through the first half of 2007, continuing market tightness is expected to leave prices elevated through the forecast period.
Challenges increasing for domestic producers
Motivated by favorable economics, energy companies are striving to expand their production of US energy resources, many of which are heavily depleted after over a century of production. Domestic crude oil output has been falling for decades due to depleting reservoirs, environmental restrictions and a lack of investment, a situation gaining increasing government notice due to the US economy’s increasing dependence on imported petroleum. The natural gas situation is more critical; with limited import capacity, the country is heavily reliant on maintaining production from an increasingly mature resource base. Although improved technologies have boosted initial well flows, they have also substantially accelerated depletion rates, forcing producers to drill ever more wells just to keep natural gas output at existing levels. In both the oil and gas sectors, high prices and limited prospects are driving producers toward higher-cost projects in difficult operating environments, such as the deepwater fields of the Gulf of Mexico and unconventional coalbed methane fields. Further complicating these challenges are the sharp increases in upstream capital costs observed in recent years, which have negatively impacted project economics throughout the US.
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