Monday, March 12, 2018

CUBE TECHNOLOGY PLANS TO FALL CRUDE PRICES


Crude prices will again fall and would benefit the Importing countries going ahead. The price will fall will not emanate now but will be around 2nd half of CY-2019. The new technology is changing the culture of crude production.The world will soon be flooded with crude oil and US will now gobble up Russia and other countries that are producing crude. In February, the International Energy Agency predicted that U.S. shale output could meet nearly all new global demand. Funding of terrorism has been used from the selling of crude and the world has numerous examples in hand supporting the same. It's been found that after fracking technology US have come with another advanced level of crude oil production and in coming years the markets are going to be flooded.  Shale production is just going to grow by leaps and bounds as the new production technology catches string grip of the US crude production.U.S. national interest right now is all about increasing domestic energy sources.

Cube Development is the new technology being used for crude production by the US. Its 3-dimensional” technique called cube development. The average cost of production of crude will be falling down and less working capital would be required which enhances the prospects for the oil producers. Under the cube development, in which a company drills about 20 wells from a single wellpad, extends in every direction. Its prime aim is of extracting oil and gas from the multiple layers of the Permian, rather than each well targeting as an individual shale layer. The driller is accessing the entire three-dimensional “cube” beneath the surface, rather than just the hydrocarbon resources immediately around the individual wells.

The largest gas producer in the US country is drilling as many as 30 to 40 gas wells per wellpad, with laterals extending as long as 4 miles in every direction. What does this mean for the Industry?  It means that it produces massive crude as a single cost which results in the US to be a future dominating country in term of crude production. The cube process could accelerate a drilling boom that’s already helped push US production past an historic 10mn bpd, rewriting the rules of global energy markets along the way.

More production leads to more price fall but as low cost of production rules this cube process, the revenue would grow significantly even from low prices but it’s a threat to the other producing countries.

Cube will also lead to consolidation of the industry in the long run as technology would lead to change in employment pattern and hence more cost-cutting and more profits would jump. Economies of scale might not be achievable but the dominance of Russia and OPEC would be reduced.  Importing countries would benefit again, countries like India would be again is sweet pot but not earlier 2019 end.

The biggest thing to watch out is that how much more OPEC could keep the production low and how much more they can suffer. The future markets will be entering into a volatile phase after the crude production from US increases. Crude will soon witness short term triggers of volatility followed with prices driven by production levels.  Technology is changing the scope of crude production but at the same time countries like Russia and OPEC are spending less on technology and hence they are going to witness more burn of cash compared to a low cost of production.

Don’t forget that low crude prices helped India to manage its fiscal condition and improve inflation levels. Well, the History is all set again to roll over. 


Cube is all set to revolutionize the Production system. 

0 comments:

  © Blogger template 'Minimalist H' by Ourblogtemplates.com 2008

Back to TOP