Albert Einstein once said: "We cannot solve our problems with the same thinking we used when we created them." This is an attitude that is more than applicable to today’s energy landscape, upon which the oil crash has had a compound effect. The crash, which has seen the price of crude plummet over the past 18 months, has been the subject of much debate, analysis and evaluation.
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The start of 2016 brought a new wave of commentary, as the price per barrel of Brent crude fell to settle around the US$30 mark. The International Energy Agency (IEA) cited milder temperatures in early winter, and weak economic sentiment in commodity-dependent countries such as China, Brazil and Russia as the major factors affecting demand, while persistent oversupply and bloated inventories took their toll on the supply side. Industry forecasts, many of which still remain optimistic (despite frequent revision of their outlooks), note the high uncertainty in crude oil price predictions. So, it really is a case of ‘wait and see’.
And crude oil is not the only energy commodity that has witnessed a fall. Heating oil, gasoline and natural gas have all experienced a little ‘crash’ of their own in recent months, albeit not with such serious consequences. Prices for petroleum-based heating oil have been lower than expected, due to falling crude oil prices and a drop heating fuel demand – the US Energy Information Administration (EIA) expects retail prices to be 29% less this winter compared to last winter. Gasoline has also taken a hit, again due to low crude prices and a seasonal slowdown in demand. In mid-January, the US average retail price for regular gasoline fell to US$1.996/gal., falling below US$2.00/gal. for the first time since 23 March 2009. Finally, the retail price of natural gas is estimated to be around 6% lower this winter, while the average Henry Hub natural gas spot price was US$1.93/million Btu in December 2015, the lowest monthly average since March 1999. However, the EIA has predicted natural gas price increases over the next couple of years, as the sector will supposedly witness increased consumption growth, predominantly from the industrial sector.
This unpredictable environment has been, and will undoubtedly prove to be, a struggle for oil and gas companies worldwide. Both service providers and operators, many of which had been expanding and ramping up activity on the back of high oil prices over the past decade or so, are now faced with obstacles such as cancelled or delayed projects, financial distress and, as a result, business restructuring and re-strategising – talk about an uphill battle.
So, back to Einstein. 10 years ago, business strategies, research and development, and project execution were carried out very differently than they are today, being tailored to the energy climate of that era. While innovation has always been important, the modern day landscape demands the need for new ideas and technologies at a much faster rate – with low costs, high efficiency and decreased emissions considered a must. Luckily, as an industry, we are in a class of our own in this area. I see evidence of this every day, be it in the news, or in one of our many technical articles and case studies, and can say for sure that we have a lot to look forward to.
We are always on the look out for innovation here at Hydrocarbon Engineering. So, if you have your own success story to tell, please do get in touch!