Kuwait Petroleum Corp.'s (KPC) CEO today said the company would be increasing output, a move he says will put pressure on deepwater projects as well as the likes of onshore oil sands and expensive unconventional projects.
Nizar Al-Adsani said the market, which he predicts is unlikely to see US$100/barrel oil for at least 3-4 years, would decide who were the inefficient players.
Image: Nizar Al-Adsani, speaking at ADIPEC, last year.
"For three-four years we are not going to see the $100/barrel we have got used to," he said, as prices rebalance and "reach an equilibrium, at some point. As producers, we have taken $100/barrel for granted. Deep offshore, oil sands and some unconventionals will phase out," he said.
Al-Adsani's comments were made at GE Oil & Gas' annual meeting, being held in Florence today (February 2) and tomorrow. The event has seen a sharp focus on costs - which most, including senior BP, ExxonMobil and Statoil executives, all admitted had got out of hand.
Speaking at the event, Statoil's new CEO Eldar Saetre said a particular issue was around competitiveness. "The competitiveness of our industry is a problem," he said. "It has to improve. We can't decide on the oil and gas prices, the market does that. That means costs need to come down. That's the only way to improve our profitability and competitiveness."
He said oil firms were facing a situation where oil prices had halved. Yet, in the past decade, the oil price had nearly trebled, but despite this return on capital dropped by about a third in the same period, due to increasing cost complexities.
"As an industry, we do not have a choice," he said. "We have to be more efficient."
Neil Duffin, president, ExxonMobil Development Company, concurred. He said: "The cost base has got to high." High spending had led to burgeoning contract back logs, which had in some cases been unable to be fulfilled, which then meant costs have got out of control, he said, advising that better upfront engineering would help reduce project costs.
Another factor pushing up costs has been companies poaching staff, instead of training in house, said PEMEX CEO Emilio Lozoya, due to the length of time it takes to train up graduates. "This has led to industry buying talent rather than building talent," he said. "It is a key challenge because it drives cost."
The event continues tomorrow.
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