The African oil and gas hangover from 2015 and 2016 - and how it will affect the rest of 2017

All basins, however, are not created equal…the spending surge is directed largely at U.S. shale oil production. U.S. shale is relatively inexpensive and quick to bring to market, in certain instances only 6 months to get to market. Rig counts are accelerating at a pace faster than expected in the U.S. The Permian basin of West Texas currently accounts for approximately 50 per cent of the operating oil rigs in the U.S. and output is expected jump to 2.5mn bpd by the end of 2017 from about 2.1mn bpd as of February 2017. If current price levels remain constant, production in the basin could rise to 3mn bpd by the end of 2018. And, with technological advances, some analysts see profitability with crude prices around US$40 per barrel for producers in the Permian basin of West Texas. Some analysts even argue that some Permian producers can turn profits at US$30 per barrel.

OPEC, in its February report, captured the “remarkable potential” of the Permian Basin with one statement: “A move towards higher prices may lead to a resurgence in US tight oil production from the most prolific shale regions.” It is no surprise then that the Midland and Delaware plays in the Permian basin saw a new high of US$26bn in merger and acquisition activity in 2016.

U.S. President Donald J. Trump has promised to back the U.S. oil and gas industry more than any president in recent history. This could have positive and bad effects on the global oil and gas industry. But to understand the varying views on the market, the changes between the previous two presidents can be informative.Texas’s own oil man, former U.S. President George W. Bush presided over eight straight years of declining U.S. oil production. In 2000, just before President Bush assumed office, U.S. oil production sat at 5.8mn bpd, according to the Energy Information Administration (EIA). During President Bush’s last year in office, in 2008, US oil production averaged 5.0mn bpd.

On the contrast, former President Obama, portrayed as the oil and gas industry’s nemesis, presided over the rising oil production in each of his first seven years in office. US oil production skyrocketed to 9.4 million bpd in 2015, a staggering 88 per cent bump during the Obama presidency which is the largest domestic oil production increase during any presidency in U.S. history. President Obama missed a full eight years of growth as U.S. oil production fell to estimated 8.9 million bpd in 2016, which lowered his gain to a rather impressive 78 per cent in eight years.

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

twn Are you sure that you want to switch to desktop version?