Older Fields Around The World Are Shutting Down Faster Than Usual Due To Low Oil Prices -- July 15, 2017

Updates

Later, 11:31 a.m. Central Time: see first comment for some fun YouTube links. More importantly note the comment about "creative destruction." I'm always negatively impressed that Bloomberg seems to dwell on the negative outcomes of certain actions rather than the positive outcomes. But in this case, I think Bloomberg has it exactly wrong, suggesting that shutting down fields could be "bad news" if shale production cannot make up for the cuts in production elsewhere. Folks were also concerned that shale could not ramp up quickly enough if need be. In fact, if the older oil fields are needed, I have no doubt the oil companies can get back in very, very quickly.

Original Post

This is an interesting story. It's a few days old; I had seen the headline but did not read the story ... until now.

It turns out that because of the current OPEC - US shale story, "older" oil fields around the globe are shutting down faster than the historical pace. From Bloomberg:

The tussle for supremacy between OPEC and U.S. shale drillers is killing off older oil fields at the fastest pace in almost a quarter century. That could hurt the industry once the current glut has faded.

The three-year price slump triggered by the battle for market share choked off funds for aging deposits elsewhere, accelerating their decline. Output at older fields from China to North America -- making up a third of world supply -- fell 5.7 percent last year, the most since 1992, according to Rystad Energy AS. It’ll drop about 6 percent in 2017 if oil stays at current prices, the consultant said.

Oil fell from above $100 a barrel in 2014 to as low as $26 in 2016 as the Organization of Petroleum Exporting Countries opened the taps in an effort to stem the surge in shale production. That set off the worst industry downturn in a generation, forcing cost-cutting companies to focus on higher-margin assets at the expense of older, costlier fields. While OPEC changed course last year and curbed output to boost prices, shale was the main beneficiary and resurgent U.S. output has kept crude below $50.

I do know of at least one small mom-and-pop crude oil producer based out of Ft Worth is in deep trouble for that very reason. Early on, the son of the founder was not concerned, having seen his father experience the boom and bust cycle of the oil industry. He said that this downturn in oil prices was temporary and that things would soon "get back to normal."

Temporary turned out to be longer than expected.