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Why oil companies spend more money
Question:
Hello folks. I’m interested in oil industry especially upstream investment. Last year, oil companies get more profit and spent more money in exploration & development part than expected. I’v heard the major reason is the strong oil price. But despite low price in this year, the upstream activity is still high. What is the reason of the high activity? If you have a reasonable answer, please mail me. Thank you very much.
Response:
- Hide quoted text — Show quoted text – >Hello folks. >I’m interested in oil industry especially upstream investment. >Last year, oil companies get more profit and spent more money in exploration & >development part than expected. I’v heard the major reason is the strong oil >price. >But despite low price in this year, the upstream activity is still high. >What is the reason of the high activity? >If you have a reasonable answer, please mail me. >Thank you very much.
Perhaps it is because oil companies are often led by people who have many decades worth of experience in the competitive energy production world. They seem to have the ability to look beyond short term pricing fluctuations to see the larger picture. In my view, the larger picture is that many developing countries are dramatically increasing their energy usage as they become more industrialized and prosperous. Some of these countries (notably India and China) have a potentially ENORMOUS thirst for oil. On the supply side, Alaskan production is slowing, North Sea production is slowing and nuclear power, which has tremendous potential to reduce the demand for oil in many areas is under assault. If I were in the position of oil company executives, I too, would be spending a lot of my resources on searching for new supplies. Rod Adams Rod Adams Adams Atomic Engines, Inc P. O. Box 1017 Tarpon Springs, Fl. 34688-1017 Imagine building a nuclear plant from scratch in less than 18 months! Find out how and where it was done in the Oct/Nov 1996 issue of Atomic Energy Insights. Back issues of AEI are on the WWW at URL http://www.ans.neep.wisc.edu/~ans/point_source/AEI/AEI_home.html