ConocoPhillips expects the oil and natural gas industry to partially recover in 2021 from the coronavirus pandemic, low demand and low prices, but the company expects oil demand to drop by 3 million to 4 million barrels per day in the United States in 2022-2023.
That assessment was offered by ConocoPhillips executive vice president and chief operating officer Matt Fox, Kallanish Energy reports.
He made his comments in a 32-minute keynote talk at the DUG Permian Basin & Eagle Ford, a virtual-only conference by Hart Energy that began on Tuesday and continues today.
The world in 2021 will see some recovery, but society will still be struggling with the post-Covid recession and workers may well be driving less if they are working from home, he said.
Houston-based ConocoPhillips is “pretty confident” that oil demand will be dropping and production will be less in subsequent years, he said.
“A lot of change is happening,” he said.
Fox said he expects oil prices to range between $40 and $70 a barrel. The prices will be “up and down like a fiddler’s elbow,” he said.
What the energy industry sent through last spring with the economic downturn was “unprecedented,” he said.
The world has radically changed since last March. The GDP has shrunk by 5%. It was the biggest drop since World War II.
Fox called the 2020 downturn a four sigma event, one that would occur on one day every 126 years. It was rare but devastating, he said.
And things would have been even worse if the industry did not act quickly to respond to the downturn, he said. It would have “created a world of hurt, much much worse,” he said
ConocoPhillips curtailed about one third of its worldwide production last spring when the coronavirus pandemic was at its peak, Fox said.
That was “a huge, huge decision,” he said.
The company was able to cut its production because of its strong financial balance sheet, he said.
It curtailed 225,000 barrels a day in May and 400,000 barrels per day in June with 65% of the curtailment in the Lower 48 states in the U.S., he said.
The company chose to forego about $500 million in income at $25 per barrel with the likelihood that it might earn 20% to 30% more for that oil in the future.
His company was the largest curtailer “by far” in North America, he said.
Total U.S. curtailments by all energy companies were 1.8 million barrels per day in May and 2.2 million barrels per day in June, he said.
ConocoPhillips curtailed more production than Norway, Indonesia, Mexico and Malaysia combined, he said.
Most of its curtailments have ended in the last three months, although full production has not returned to some spots in western Canada, he said.
His company is active in the Eagle Ford Shale in South Texas, the Permian Basin in West Texas and New Mexico, the Bakken Shale in North Dakota and Montana, the Montney Shale in British Columbia and in Alaska. It also has operations overseas.
Its production is generally flat in the Eagle Ford and the Bakken Shale and still growing in the Permian Basin and the Montney Shale, he said.
Consolidation is needed in the booming Permian Basin where 100 different companies drilled wells in the last year, Fox said.
His company has more rigs in the Eagle Ford than in the Permian Basin, he said.
It is taking a moderate approach to developing and drilling wells in the Eagle Ford which was heavily drilled and too quickly drilled by energy companies about seven years ago, he said.
This post appeared first on Kallanish Energy News.
