At a difficult time for the oil industry, large new oil and natural gas fields were discovered recently, including two located in the American states of Texas and Alaska. While it will take several years to produce significant amounts of oil from the fields, their discovery supports contentions that oil prices will stay low for a long time, and that oil companies will continue to try and increase their reserves for future production.
The oil industry welcomed the news, despite many companies curtailing exploration to cut costs during the price slump. This camp also holds that prices will recover within the next few years. On the other side of the debate are environmentalists and independent energy experts, who say that to meet targets set by the Paris climate talks, most remaining reserves should stay in the ground.
Further, the new discoveries have bolstered confidence within the industry that the US “will remain a major oil power, capable of producing substantial amounts for itself and exporting major quantities around the world”, the New York Times reports.
In the first week of October Caelus Energy announced it had found a field in the waters off Alaska which could produce as much as 2.4 billion barrels of oil. Previously Apache Corporation said its new field, in West Texas, contains at least three billion barrels of oil and 75 trillion cubic feet of gas. Analysts say there could be more discoveries in West Texas and Arctic Alaska.
The find has particular significance for Alaska, where production there has been in decline for decades. “This discovery could be really exciting for the state of Alaska”, said James C. Musselman, Chief Executive of Caelus. “It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades.” Caelus will need to build a 125-mile pipeline to connect production to its existing pipelines.
American petroleum producers wrote down $177 billion in assets last year, according to a report by consulting firm IHS Energy. A report from Haynes and Boone, an international law firm, notes that 102 American and Canadian oil and gas producers have filed for bankruptcy since early 2015. By early September this year, 58 producers had filed for bankruptcy.
The price of crude was given a lift last month following a tentative agreement among OPEC countries to cut output later this year. However, oil executives are sceptical that the countries will be able to get individual members to commit to the agreement.
At the same time, oil executives assert that with investment in exploration and production being cut by $250 billion last year, and $70 billion more this year, demand will eventually outstrip supply. “You do need new discoveries to feed the supply system”, said Scott D. Sheffield, Chief Executive of Pioneer Natural Resources, a major producer in Texas. “We have very little supply coming on.”