Oil supply weakening, says Paal Kibsgaard, Schlumberger exec

Kay Cashman

Petroleum News

In its July 20 second quarter earnings conference call Schlumberger Chairman and Chief Executive Officer Paal Kibsgaard shared his observations of the world’s oil supply base, which he says is dwindling.

“In spite of OPEC’s recent decision to increase oil production, the supply base continues to weaken, with growing geopolitical pressure to remove Iranian barrels from the market, with no apparent resolution to the falling production in Venezuela, and with Libyan exports continuing to be volatile,” Kibsgaard said.

At present, “OPEC spare production capacity is limited to 2.1 million barrels per day from Saudi Arabia, Kuwait and the UAE, which is approaching the lowest levels seen in the last two decades.”

In North America, he said, “the pressure on infrastructure and export pipeline capacity from the Permian basin is becoming an increasing constraint to production growth, which will likely not be resolved until the second half of 2019.”

U.S. tight oil (commonly referred to as shale oil) producers are “also experiencing production challenges linked in part to well interference as infill drilling in the producing acreage increases and as drilling continues to step out from the tier 1 acreage,” Kibsgaard said.

And “lastly, after more than three years of E&P underinvestment, the international production base has started to show accelerating signs of weakness with noticeable year-over-year production declines in 15 of the world’s producing countries.”

If he’s right, the situation bodes well for future crude prices and capital investment by oil companies.

Optimistic future for oilfield service industry

Both men predicted a positive outlook for the service industry for the rest of the year and continuing even stronger into 2019 and 2020.

Note: This story was derived from reading second quarter results and reviewing Seeking Alpha transcripts (https://seekingalpha.com)

- KAY CASHMAN