A new study, ‘Global Oil Trends 2002’ by Cambridge Energy Research Associates (CERA) and Sun Microsystems claims that “astute application of technology will be a key determinant of success for the oil industry.” Companies will be under continuous pressure to improve their financial performance, as the industry contends with revenue swings of a dramatic magnitude. Technology will be crucial in the drive to reduce costs and improve margins in both the upstream and the downstream markets.
CERA President Joseph Stanislaw said, “Technological progress in the upstream means prospects can be found, and reservoirs produced, that would otherwise be uneconomic or invisible. The rise in upstream costs since 1996 is already being reversed. Upstream costs in non-OPEC countries are expected to fall by an average of 3% per year to 2010, from almost $9 per barrel, to little more than $7.”
Larry Rice, energy sector manager for Sun Microsystems added, “As the industry looks for ways to use technology, improving data and knowledge management are important areas of focus. Technology has increased flexibility in the downstream industry which is responding to changing regulatory and market conditions. Shorter response times and adaptable operations have contributed to significant reductions in operating costs.”
According to the CERA report, world proven reserves of crude oil as of January 2001 have grown to 1,027 billion barrels (79.2% in OPEC countries), up 11 billion barrels from 2000. US proven reserves increased by 0.8 billion barrels, mostly associated with ongoing development in the Gulf of Mexico deep water and on Alaska’s North Slope. A characteristic of the oil market in recent years is exceptional volatility. In 1998 the annual average price of Arab Light in nominal terms was $12.30, but by 2000 it had risen to an average of $26.75, an increase of 117%.
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