Access to Conventional Reserves

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Del curso dictado por Duke University

Oil & Gas Industry Operations and Markets

1112 calificaciones

Duke University

Oil & Gas Industry Operations and Markets

1112 calificaciones

The oil and gas industry has an enormous impact on all aspects of daily life. Individuals, corporations, and national governments make financial and policy decisions based on the cost, use, and availability of these two natural resources. This two-week course looks at the two most fundamental aspects of the oil and gas industry, its operations and markets, each of which is addressed as a separate module in the course. In the operations module, the course provides an overview of the production of oil and gas, from initial exploration to final transport. The second module focuses on the forces that drive the industry's operations, the oil and gas markets, including the cost of wells, seasonal impacts on prices, and the role of oil reserves. After every lesson, learners will take short quizzes to test their newly acquired knowledge, participant in crowd-sourced discussions about global markets, and complete a final project.

De la lección

Oil and Gas Industry Markets

In this second module, the course shifts to the markets that drive Oil and Gas Industry operations. You will learn about the various costs of the core oil and gas industry activities, the factors that determine the prices that oil, gas and petroleum products sell for, and the effect that the amount of oil and gas remaining in the ground has on the future viability of individual companies to the Industry as a whole.

Original Oil and Gas in Place4:48

Resources vs. Reserves5:42

Access to Conventional Reserves5:45

Additional Types of Unconventional Resources5:54

Conoce a los instructores

Lincoln Pratson
Gendell Professor of Energy & Environment
Nicholas School of the Environment

Two general and related trends have affected the total cost to produce oil and

gas over the decades.

One is that countries that contain, and thus own, the cheapest reserves of oil and

gas still to be produced in the world

have increasingly limited access to these reserves by foreign companies.

For example,

one of the largest remaining reserves of crude oil lies beneath Saudi Arabia.

The oil was first discovered and

produced the world's largest international oil companies.

But the only company now allowed to produce the oil is Saudi Aramco,

the national oil company of Saudi Arabia.

Other countries, such as Russia, allow international oil and

gas companies to explore their territories for hydrocarbons, but

only in partnership with the country's national oil and gas companies.

And only under profit sharing agreements favorable to the host country.

For some oil and gas prospects, the international companies will deem such

partnerships with the host country worth the cost risk.

For other prospects, the international companies will not.

So, even in countries that allow outside access to their reserves,

exploration and production has been throttled.

This has led the international oil companies to explore for and

produce oil and gas resources that only these companies have the technological

know-how and financial resources to go after.

Thus the other general trend to oil and

gas production costs over the decades has been one of increasing cost for

finding, developing, and producing new reserves of oil and gas.

Paralleling these trends has been an ever-rising global demand for

more oil and gas.

When this demand has approached the maximum rate that oil and

gas can be produced in the world, prices have risen,

spurring increased exploration for new reserves.

And changing reserves that were formerly too expensive to extract

into reserves that are now economic to produce.

The greater investment in exploration and

production often leads to the formation of many new companies.

While the rising oil and gas prices created by high demand can spur

existing companies to expand production of more costly types of oil and gas.

However, the supply and demand for oil and gas is subject to fluctuations.

For example, economic downturns in the 1970s, 1990s and

in the late 2000s triggered sharp drops in demand for oil and gas.

And cost reductions in producing oil sand, shale gas, and shale oil resources

have dramatically increased oil and gas production during the 2010s.

Both of these circumstances have created periods of excess supply

relative to demand, leading to sharp price drops.

Most companies can weather these price drops if they do not last long.

But if the low prices persist then the highest cost reserves

to produce once again become too expensive to extract.

In theory, companies could halt going after these types of reserves until

prices climb once again to levels that make the reserves economic to extract, and

in fact many companies will often do this.

But other companies that have taken out considerable debt to help

finance the drilling of wells and

production facilities may have to go after these more expensive reserves,

even though they are losing money, just so that they can service the company's debt.

And, even if a company is still able to turn a profit from such wells,

those profits can be significantly reduced when the price of oil and gas remains low.

In either case, the stock values of such companies can decline to the point

that they become targets for other oil and gas companies with strong balance sheets.

And thus enough liquid assets or

financial resources to potentially acquire or merge with the weaker company.

The stronger company's motivation for doing this might be because acquiring

the proven reserves of the weaker company is a cheaper and more sure way

of building the stronger company's own reserves than drilling new wells.

The motivation might also be that the weaker company might have assets, and or

expertise that help reduce the stronger company's operation costs.

Or instantly make it a significant player in a new type of asset for

the stronger company were it to merge with or acquire the weaker company.

For example, Exxon Mobile's purchase of XTO

in 2009 helped the supermajor become a significant operator in shale gas plays.

And Shell's ongoing purchase of the BG Group

in 2015 is helping this supermajor also become a major player in natural gas.

Such mergers and acquisitions between oil and

gas companies can also happen when oil prices are high or rising.

But at these times, the stocks of all oil and gas companies tend to rise,

making it far more expensive to take over another company.

Hence the most significant mergers and

acquisitions have tended to occur when prices have experienced an extended low.

This was the case between 1998 and 1999 when a number of major oil and

gas companies merged to become supermajors.

These include Exxon and Mobil, BP, Arco and Amoco, and Chevron and Texaco.

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