During 2016, the “oil glut” that helped drive global oil prices down was the impetus for cutbacks by OPEC and other oil-producing nations. But oilfield services company Schlumberger chairman and CEO Paul Kibsgaard mentioned a shortage, not oversupply, of oil in years to come, reports Fuelfix. In a conference call with investors, Kibsgaard said drillers will need to begin putting money back into the oilfields in order to prevent a shortage as the industry sits on the cusp of recover in all markets.
The main challenge is going to be to reverse the effects of several years of global E&P under-investment and then mitigate the impending supply shortage we see unfolding.
Kibsgaard predicts production will steadily increase with the price of crude as 2016 unfolds, reversing the trend that prevented big projects from being approved by many companies around the globe. As the industry sees recover, Schlumberger and other oilfield services companies are beginning to renegotiate contracts that included deep discounts that allowed drillers to operate at break even prices. Increasing the price for its own services would allow Schlumberger, like other companies, to operate at sustainable rates as well. Schlumberger’s 2016 fourth quarter loss of $204 million was significantly higher than the previous year. The company cannot continue to operate with such significant losses despite a recent increase in its steerable rotary system used in unconventional drilling. Kibsgaard said:
We need significantly more pricing before we get into a sustainable operating environment.
To read more, read Schlumberger chief: drilling recovery “is on its way in all markets” at Fuelfix.com.