Chairperson's message for January 2009
Message from the chair. . .
Dear Fellow SPE Members,
Happy New Year.
I hope you had a happy and healthy holiday season and started a wonderful new year. I also hope 2009 to be a better year for all the people around the world.
The U.S. and global economies have suffered an unprecedented blow in the last few months of 2008. The economic crisis has significantly affected the energy industry worldwide. With continued downturn in economy, decline in energy demand, and the unsustainable growth and development in many countries, the oil and gas price volatility is more likely to continue for quite sometime. The sharp drop in prices in the past several months has lead many companies in our industry to revisit their aggressive expansion plans developed based on record high prices in the middle of 2008. Many companies are taking a second look and a more conservative approach in finalizing and implementing some of their development plans.
As we have experienced over the past 4 decades, the oil and gas prices are not only subject to the basic economic principle of supply and demand but also to many unpredictable factors and uncertainties including the world’s unstable and volatile political situation, globalization, technology and many more. However, there are several factors that cannot be ignored which make us believe in predicting higher petroleum prices over a long term. They include: limited and scarce hydrocarbon resources, higher cost of finding and producing these remaining limited resources, and the continued increase in global demand for petroleum. There are many indications to support the notion that fossil fuel will remain the main energy source (unless there are drastic government policy changes worldwide) at least for the next several decades despite many political talks and rhetoric regarding alternative energy sources.
In the US, we have witnessed the fact that dependency on oil and gas in general and their imports in particular have increased significantly over the past 35 years since the oil embargo. We have heard a lot of talks, discussions, and observed many political campaigns regarding making U.S. independent of foreign oil since early 1970’s. All the recent past seven presidents (from Richard M. Nixon to George W. Bush) have promised, announced and developed plans and policies, and some executed programs to reduce US energy dependency on foreign oil. Unfortunately, reality has proved otherwise (40% import in early 1970’s versus 60% now). Most current projections predict the share of oil and gas in the total energy consumption to be at the same percentage as today (or even higher) by 2025.
Considering the current US economic situation, energy independence is very unlikely to happen any time soon. With the world in a recession and approaching depression, it is not realistic to spend massive amounts of money to speed up development of alternative energy sources.
Recent events, once again, have confirmed the cyclic nature of the oil and gas industry. The cycle may delay or cause a temporary pause in some capital intensive exploration, drilling, and development projects as a result of financial crisis. But, it can also create many opportunities for the industry to apply new technologies in mature fields to boost production and recover the residual hydrocarbons as technology is the common thread in up and down cycles. Tough times create challenges but also opportunities. We should face challenges while taking advantage of the opportunities.
Sincerely,
Jalal Torabzadeh
LASPE Chairperson 2008-2009