Under the Radar: European Giants Suffering Decreased Production -- Not A Bakken Story

TINowhere in this story is any reference made to the release of oil from world strategic petroleum reserves earlier this summer, but sometimes very little dots can be connected to the larger dots.

In this case, RigZone reports that the major European oil giants have been unable to increase year-over-production.

When Europe's major oil companies reported quarterly earnings last week, headlines across national capitals once again excoriated the petroleum giants for soaring profits in the face of consumers anger at high fuel prices.

Yet the profits couldn't mask a trend that continues to trouble Wall Street and corporate boardrooms: Nearly every major oil company reported year-on-year oil and gas output declines, often in the double-digits.

Big Oil is throwing huge resources at the problem with more open embrace of unconventional petroleum developments, high-risk exploration in frontier areas and corporate restructuring. But even if these strategies work in some cases, there is little doubt that anemic petroleum output signals a long-term challenge confronting the sector.

The article talks about increasing costs and riskier projects to find and produce more oil. This comes at the same time governments are looking at the profits these companies are making as a way to help get them out of their budget crises. Okay.

Data points:

• BP: 11 percent output drop (yes, extenuating circumstances)
• Italian giant ENI: 15 percent drop to overexposure in Libya
• Spain's Repsol: 17 percent drop, multiple reasons
• Norway's Statoil: 17 percent drop
• UK: not mentioned in this article, but significant production loss reported elsewhere

On my "Top Ten" list at the sidebar at the right highlights the trend of production interest moving from OPEC to the western hemisphere.

This helps explain the WTI-Brent spread (understanding that the storage tanks are overflowing at Cushing, Oklahoma).