BP (NYSE: BP) cannot solve the world's oil price increase troubles on its own, but it aims to make a big contribution. Its Prudhoe Bay property is getting old which means it will begin to yield less crude, but the company has decided to drill more wells anyway.
"No field the size of Prudhoe Bay has ever been shut in," said Gordon Pospisil, a senior BP petroleum engineer who is leading the effort to tap the field's heavy oil reservoirs" according to Reuters. The company believes that the region may have as much as two billion barrels in crude left.
The effort says a great deal about the current state of the oil industry. It also point to a potential drop in oil company profits. New technology allows wells to produce more oil by drilling deeper and using chemicals to bring up more crude. But, all of this costs money. That may squeeze margins.
The fact of the matter is that, with oil at close to $100, there is a growing concern that demand will greatly outpace supply over the next decade as countries like China use more oil OPEC may not increase production because it wants to keep the revenue flowing to it members at record levels.
That leave companies like BP to make up the difference.
Douglas A. McIntyre is an editor at 247wallst.com
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Reader Comments (Page 1 of 1)
2-22-2008 @ 10:01AM
John said...
You talk like maximizing profit is communism. Oil companies are under no obligation whatsoever to provide you suburban lunatics with cheap energy.
Go Hugo. Best guy to happen to ExxonMobil since Lee Raymond retired.
2-22-2008 @ 11:32AM
Jalarmo said...
"New technology allows wells to produce more oil by drilling deeper and using chemicals to bring up more crude. But, all of this costs money. That may squeeze margins."
...umm, maybe when oil was $25/bbl. At $100/bbl, you could grind up white tigers to inject into the well and the accountants won't even notice. Nowadays we are drilling 10 000m (10km/6mile) deep holes as *exploration* wells at staggering cost with minimal likelihood of discovery, just because anything found would be so incredibly lucrative. Even the *information* that the logging equipment brings up about the topology is now worth the 10+ million dollar cost of a single deep well.
Drilling more wells in Prudhoe bay, no matter what the cost, will not lead to "squeezed margins". Neither will injecting "chemicals."
The comment above is the sort of heavily-qualified "possibility" comment that gives the air of expertise where none exists.
This blog seems to post a lot of "information" that is in fact just theorizing by authors who have no real knowledge of whether their conclusion is reasonable. Maybe you guys should be under less pressure to crank out posts and focus more on research and tight, accurate writing?