E&P companies no longer feel the need to own assets #nocsconf

The role of E&P companies was discussed by Gay Boubel, Senior Vice President of Global Developments, Hess Corporation, Mike Daly Executive Vice President of Exploration Division BP and Nicholas Maden SVP Exploration of International Statoil at the 2012 World National Oil Companies Congress.

It was stated that the role of companies in upstream areas have changed in the last decade. Organizations no longer feel the need to own assets, e.g BP’s presence in Iraq. It’s a more sophisticated way of doing business. Companies are more focused on showing a presence, and demonstrating a strong cash flow.

When questioned about the effect of economics on production projects, the general consensus was that projects cannot react to changing oil prices when considering projects in the long term. Although it is worth mentioning that changing oil prices can have a significant impact upon the profit of a million dollar deal. The challenge is to “follow through” these dips, and encourage companies to maintain a healthy balance sheet.

In addition, when discussing the trade off between of oil and gas, no project is turned down on the basis of being either commodity. Fundamentally companies are after hydrocarbons. Currently the economics of companies such as Statoil demonstrate their output is 70% oil reserves 30 % natural gas. As long as a resource can generate a profit, it’s a worthwhile investment. This stance could change however, as gas becomes a more viable product then it has been in the past. Circumstances such as the Turkmenistan gas pipeline project may have a significant impact upon the future of this decision.

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