Upstream investment is the main driver for employment in our industry, and forecasts of company spending are eagerly expected by the service sector. I commented in my January column on the initial activity estimates made by West (Evercore).The forecasts have now been firmed up and the increases range between 15 and 17% in 2022 compared to 2021, with growth in all geographical regions. Evercore even projects that 2022 will be the beginning of a multiyear positive cycle for the industry, following 2021 which was a “renaissance of sorts” for the E&P sector. The US Energy Information Administration (EIA) Short Term Energy Outlook for February 2022 forecasts that US oil production will rise to 12.0 and 12.6 million B/D in 2022 and 2023, respectively. The latter would be the highest level ever reached, exceeding the previous record in 2019 by 0.3 million B/D.
In their fourth-quarter announcements, the leaders of major service companies made the most optimistic comments for the past several years. Halliburton’s CEO Jeff Miller stated that “simultaneous” growth will occur in both the North American and international markets with a “momentum that I have not seen in a long time.” For Schlumberger’s CEO Olivier Le Peuch, “a strong multiyear upcycle” is underway as capital spending commitments are set to increase by 20% in North America and in the “low to mid-teens” across the broader international market.
Such notes from the service sector are welcome news for SPE, as its financial sustainability depends on the engagement of the industry through trade shows, exhibitions, and meetings.
Fiscal year 2022 (which ends on 31 March 2022) was the most challenging one in SPE’s history, as we chose not to diminish the level of service to our members and continued to provide virtual and hybrid information channels. SPE’s account balance was positively impacted by the outstanding performance of its reserve funds in financial markets and the support from the US government through instruments such as the Paycheck Protection Program (PPP). These allowed a considerable reduction in loss to an estimated $3 million.
For fiscal year 2023 (ending 31 March 2023), the SPE Finance Committee has retained a cautious outlook, with significant uncertainties resulting from the pandemic situation. Early signals coming from the success of the recent hydraulic fracturing technology conferences and exhibitions in Oman and the US are positive. The financial strategy will be adapted in the coming months based on the results of key events such as IPTC, OTC Asia, and the Offshore Technology Conference in Houston.
Among the different annual projections made by institutions and analysts, Ed Crooks, vice chair at Wood MacKenzie, has made 10 predictions.They include a major production bump in the Permian, a global oil output increase of 4 million B/D, new highs in carbon prices, and increased support for low-carbon hydrogen. Another projection that attracted my attention was that “electric vehicles (EV) will take a double-digit share of the global market for the first time ever.” The last point is supported by a recently published analysis by the International Energy Agency. It shows that the share of EVs in new car registrations was less than 1% until 2016. In 2019, there were about 2 million new electric cars (about 2.5%). In 2021, the number of new electric cars had tripled from that level, reaching close to 9% of new car registrations, mostly from China, Europe, and the US. The caveat is that electricity used in China is generally from high-carbon-intensity sources.
Such signals are powerful indicators that the transformation of energy markets is accelerating, even though the world should not decrease its focus on stable oil and gas supply. Our industry will continue to play a strong role in the coming decades to provide sustainable energy.
It is one of the drivers of the proposed merger between SPE and AAPG, as both organizations share a similar vision on the future role of oil and gas. Since the agreement in May 2021 by the two organizations’ boards and executive committees to proceed with the exploration of the merger, the team has been working continually to ensure that all aspects are being addressed while considering our members’ suggestions and proposals.
The website for the proposed merger provides regular updates on developments. One of the most important components is related to the Mission, Vision, and Core Values for the proposed combined organization, which reflect our strength in petroleum-related disciplines.
We have held several townhalls and presentations, including one focused on addressing the members’ key concerns. All feedback from members that are genuinely interested in a sustained future for our great organizations is welcome.
Stay safe.
Please do not hesitate to contact me at President@spe.org should you have any query, suggestion, or volunteering proposal.
