Big time unemployment and they can not hire workers. I worked with a petroleum engineer who left the field because he could not get steady work. That was a few years ago.
Rigs can be built. I bet the prices are going down due to the economy too.
So you are saying that “drill, baby, drill” != “short term solution”, eh?
Fist off a lease does not do the company any good so far as value. The investors look at booked reserves. Owenership of a lease without having a hole in the ground, some formation evaluation and pressure data is not in proved, probable or possible. So holding leases does not affect the reserves, and so does not affect the company more valuable.
As for you comment of having lots of money so they can just buy a new rig, I am sure you are aware that oil companies do not own rigs. The service companies buy and operate them (Pride, Transocean, Nabors etc). They are making profits, but they are not in business of having several hundred million in the bank to buy one flat out. The money comes from banks, and the loans is backed by a contract signed by an oil company. Regardless of how much money one has, it is still very difficult to build a new rig, let me quote from National Oilwell Varco (NOV) who are one of the largest drill rig and equipment manufactures (they sell to the service companies)
NOV Q2 Earnies backlog comment
Backlog for capital equipment orders for the Company’s Rig Technology segment at June 30, 2008 increased to $10.8 billion, compared to $9.9 billion at March 31, 2008, with record new orders during the quarter of $2.2 billion. The increase in the Company’s backlog for capital equipment reflected the strong demand for its drilling equipment products, particularly for international offshore rigs. Backlog for drill pipe orders in the Company’s Petroleum Services & Supplies segment increased 19 percent during the second quarter.
So there is a backlog, and it isn’t getting smaller. Wild profits do not translate into easily available new equipment.
With regards to people, yes a lot of trained people left the industry, due to the boom bust cycle. As for unemployment, well sorry, but trained people are required, a 15 year telecoms engineer or an ex investment banker is not going to be much use. There are massive shortages in the rig crew side, an increase in unemployment in manufacturing and construction may help that shortage. again trained people is the issue.
So yes to reiterate, ONE (there are others) of the reasons that leases are not being drilled is due to equipment and people shortages. The equipment and people that are available are targeted to the best prospects. The more marginal ones are not drilled.
If we see a drop in service prices and particularly and increase in availability of well bore hardware such as the steel casing, and rig capacity increases, these undeveloped prospects may see some action.
Take it from a drilling engineer, the shortages are real, they are affecting the ability of companies to expand production and money can’t fix everything.
You obviously know your stuff. tell me: how many wildcat wells get drilled today? Is the state of oil exploration such that you have a 90+% chance of hitting oil when you drill?
Lastly, i remember seeing a show about Norway’s North Sea oilfields-they had a completely automated drilling rig-no guys in hard hats-just robot arms moving the drillpipe. are these common today?
Pump prices here are down to about $2.95/gallon of regular, from a high of just over $4.00. Would love to see a chart that correlates the rise in oil cost/barrel and pump cost/gallon. It does seem to go up a lot more quickly than it comes down.
If you are willing to do a little excel work you can go to www.eia.doe.gov and click on the tab that says latest data
This should be a direct link for the retail gasoline data
http://tonto.eia.doe.gov/dnav/pet/pet_pri_gnd_a_epmr_pte_cpgal_w.htm
The look here for the crude and the spot market for gasoline
http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm
and plot away.
I think you may want to look at the retail price to the spot price of gasoline products on the market and see if there is a lag , and also be careful what spot market you pick , LA delivery is a lot more expensive than NY harbour or Rotterdam.
It is important to remember that there are two markets involved the spot/futures for crude, then the spot/futures for refined products.
Whilst they are all obviously interlinked with crude demand linked to gasoline demand etc comparing the crude market price with the retail price may miss out significant factors such as refinery outages and refined product stocks that may not be reflected in the crude price.
Numbers for rank wildcats are difficult to come by, and success rates are also not widely published. If you look at www.rigzone.com you can see under exploration news any number of reports on exploration activity. A lot of small companies will release a lot of news reports, mainly as a investment effort, it pays to keep your name in the spot light so the private money will keep flowing. The bigger boys are a little more reticent about releasing information.
Yes drill floor automation is here and all new builds have pretty much fully automated pipe handling systems, and everything is fly by wire. There are still people controlling the systems, they just are not on the floor. IF you are on a deep water or harsh environment rig, it will almost certainly have some degree of automated pipe handling and maybe a dual activity derrick.
This is making a huge impact on safety (along with a change in mentality) as working on the drill floor and tubular handling is a dangerous activity. Drill floor automation has moved people out of the danger zones and made a change in the skills of the people. The roughnecks now spend less time lift heavy stuff and need to spend more time maintaining complex AC electric/hydraulic systems. The old manual style kit really did not need much maintenance.
The automation is also coming to the land market. Canada has a lot more automation on land, which was traditionally the low end of the market, a big independent just made a huge investment in taking modern automated land rigs down to south America, so things are changing. Unfortunately there is a lot of manual junk on US land and elsewhere out there, which, more often than not is operated with a ‘rougher and tougher than you’ attitude, which is still killing people.
OK, I’ll get off my soap box on that one and return your to your regularly scheduled debate.
Sweet. I will be back in Tampa around Christmas. Been wondering how much money I’ll waste in gas while I’m there.
Well… I currently live in Iraq, I have a barracks room in Germany, an apartment in Korea and my home–in Tampa.
Yeah, but Kendall Jackson wines suck!
Did you experience the 33%+ price increases there that have allowed us to think that a 25% drop is a Good Thing?
That was extremely clever. Did you mean that to be the case? Because of course,
X * 1.33 * 0.75 = X
A 33% increase, followed by a 25% decrease, yields the original number.