AmericanMachinist.com: Black Gold Is Filling Machine Shop Coffers

EXTRACT: Royal Dutch/Shell Group has only been able to acquire reserves of between 44 percent and 57 percent of oil and gas it has sold over the last five years. Shell’s 2004 production was actually 3 percent less than its 2003 production. At the same time that oil and gas are getting harder and more costly to find, increasing demand from the fastgrowing Chinese and indian economies keeps price pressure up for what oil is currently available. Taken altogether, the current boom is likely to last from now until the oil finally runs out.

Larry Haftl
08/07/2007

The current boom in the oil Patch, the informal name for the petroleum and natural gas industry, is being fueled by the high prices for crude oil.

Oil fields in the United States are much more expensive and difficult to drill – the fields are deeper, the geology is more complex the formations are tighter and they usually require more complex and costly drilling techniques to tap into. As long as the price for a barrel of crude stays high, companies can afford to invest in new and refurbished drilling rigs.

Original estimates for how long this current boom would last were two to three years. Current estimates range from five to seven years or more.

For an oil company to remain in business it has to find or acquire at least as much oil reserves as it is currently pumping out of the ground. that is getting harder and more expensive to do. The average size of new oil discoveries has dropped from 353 million barrels in the 1970s to 107 million barrels since 2000 according to Morgan Stanley investments.

“The law of diminishing returns is alive and well. We’re drilling more to get the same volumes,” Arthur L. Smith, chief executive officer of John S. Herold Inc., a Norwalk, Conn. energy consulting firm, said.

Royal Dutch/Shell Group has only been able to acquire reserves of between 44 percent and 57 percent of oil and gas it has sold over the last five years. Shell’s 2004 production was actually 3 percent less than its 2003 production. At the same time that oil and gas are getting harder and more costly to find, increasing demand from the fastgrowing Chinese and indian economies keeps price pressure up for what oil is currently available. Taken altogether, the current boom is likely to last from now until the oil finally runs out.

For the complete article go to…

http://www.americanmachinist.com/304/Issue/Article/False/70025/Issue

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