Monday, February 11, 2019

BEGINNING OF THE END OF OPEC???


This article is about to showcase the upcoming oil discoveries and the end of the OPEC monopoly. Further, it also going to highlight in the next series that how despite high production profits will be in place despite falling prices(due to excess production by 2022-25).

Upcoming crude opportunities will flood the market by 2022-25. One of the promising hotspots for oil and gas exploration drilling this year—South Africa’s offshore. This has achieved significant attraction for investments. Oil companies have found Brulpadda as the prospects off the southern coast of South Africa. The discovery could hold 1 billion barrels of oil equivalent of gas and condensate resources.

In another place off the coast of Guyana, Companies had spent decades looking for oil off the coast of Guyana. In 2015 ExxonMobil, the world’s largest publicly traded oil company became the first to find it. The firm now estimates that more than 5bn barrels of oil lie beneath the seabed. If all goes to plan, within the next decade Guyana could become the second-biggest oil producer in Latin America, behind only Brazil.

Iran discovers new oil deposits near Abadan city in the Khuzestan province. On the other hand, South Sudan will return to producing more than 350,000 barrels of crude per day by the middle of 2020, up from current levels of just over 140,000 barrels per day (bpd) currently.

The legitimate government in Yemen hopes to scale up its crude production to 110,000 barrels per day (bpd) in 2019, with exports touching about 75,000 bpd. The country has proven oil reserves of around 3 billion barrels, according to the US Energy Information Administration (EIA).

In another finding, a new assessment by the U.S. Geological Survey (USGS) finds the Permian Basin in western Texas and southeastern New Mexico, already recognized as one of the richest oil and gas regions in the United States, contains even more oil and gas than government and industry experts previously estimated.

So taking all these together it can be said that OPEC itself is in big threat once these productions come into play. The monopoly days of OPEC are over.  They will have to find alternative revenue sources for their economies since many new nations and places are coming up with crude facilities.
The world will be flooded with crude and prices are expected to be on the lower side unless a war situation comes to help the price rise.

Those who are betting on prices will rise well it will be for the short term once the demand outlook grows but in the long term excess production will keep prices lower.

The new countries where these new productions expectations have come up have welcomed and for these countries, these investments are a great opportunity to develop their economies. Many of the production scale-ups this year in CY-2019 will keep prices lower.

Hedge funds have increased their stake of oil prices going up. Now the point which comes up in front of us is that if prices come down then who will invest in these crude discoveries. Well, the global growth of the population and GDP growth in the long term will push demands. 

Prices will remain volatile but the OPEC control will be negligible and they will have to cut down more in the long term. If US firms Chevron and ExxonMobil, Britain's BP, Anglo-Dutch Royal Dutch Shell and Total of France control the major markets of the crude and they have already made nearly US$80 billion in net profits last year.  They have taken up extensive cost cutting and cost measure controls.

The capability of reacting to changing market conditions and controlling costs is critical for every oil and gas company. Now more than ever. One of the greatest barriers to accurately capturing cost is the fact that many project-oriented companies are running various applications in different parts of their business. The complexity increases with global operations, as multiple divisions and locations are involved. All these factors affect oil and gas companies and their capability to keep track of planned, committed and actual costs.

In  my next series I will depict how cost control measures can and is already in place through which profits will continue despite falling crude prices.


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