Navigating a global economic collapse that has shrunk world energy use for the first time in 25 years and anticipating policies of a new US president committed to cutting greenhouse gases could make 2009 one of the toughest years for the oil industry.
All signs point to chaos. Oil prices have dropped $100 a barrel since July, leading major companies to slash investments and causing the cartel that pumps about a third of the world’s oil to cut production as member countries scramble to salvage their tattered national budgets.
The precarious environment will test the mettle of the Organisation of the Petroleum Exporting Countries, oil executives, and governments hoping to survive the downturn — and many of the top players from across the spectrum will gather to discuss the issues at the CeraWeek conference in Houston.
“The challenge is how to manage and invest across the cycles,” said Daniel Yergin, Pulitzer Prize-winning author and chairman of Cambridge Energy Research Associates.
Developing multibillion dollar, world-class oil projects can take over a decade and “if you’re not careful you can get whiplash,” Yergin said.
The speakers list includes Saudi Oil Minister Ali Al-Naimi, representing the world’s top energy exporter and de facto leader of Opec, along with top executives from two of the world’s largest energy companies, Royal Dutch Shell and BP.
The world has shifted on its economic axis since last year’s conference, when oil prices were buoyant amid talk of a looming global supply crunch and countries like Venezuela were squeezing international firms for better terms.
Now, Opec producers like Iran and Venezuela are seeing state coffers run bare as oil prices cut their revenues, and international oil companies like ExxonMobil Corp, still flush with profits and spare cash, are back in the drivers seat.
“National oil companies have a need for cash, which I think opens the door for (international oil companies) to help (national oil companies) with more creative deals,” said Gary Adams, leader of Deloitte LLP’s energy group.
Industry response to the boom-bust cycle has not been uniform. Some companies are cutting staff. Others pledge to hold onto talent. Some are cutting capital spending. At least one — Shell — is raising it.
