The oil and gas sector is facing an acute financial crisis as the industry continues to face record-high production costs and a growing reliance on cheap, non-conventional fossil fuels.
The new report by Oil and Gas Industry Professionals (OGIP) is one of the most detailed yet published on the industry’s financials.
The oil and natural gas industry has been struggling to keep up with rising production costs over the past decade and the new report shows that demand is now becoming a major constraint for the industry.
In its report, the OGIP also highlighted the risks associated with increased reliance on unconventional oil and the impact on its competitiveness, with a number of potential negative effects including reduced output, reduced production, increased energy costs and increased environmental damage.
“The increase in oil production and the use of unconventional fuels such as shale gas, tight oil and tar sands is an issue that is affecting the industry,” said Dr John Glynn, CEO of OGIP.
“It is clear that it is very difficult to make economic sense of this.”
In addition, the introduction of hydraulic fracturing (fracking) into the sector will increase production and it will create jobs and raise the value of the sector, but these will come at a cost to the environment,” he added.
The report notes that the cost of shale gas is higher than that of conventional oil but the cost per barrel is lower than that in conventional oil,” said Glynn.””
The industry’s growth rate is currently 2 per cent, with an annualised cost of production of $2.3 billion.
The report notes that the cost of shale gas is higher than that of conventional oil but the cost per barrel is lower than that in conventional oil,” said Glynn.”
This is the first time in the history of the industry that it has reported that costs have increased at such a rapid rate, which will mean an increased burden on the companies and consumers,” he said.”
It is also concerning that the industry is seeing an increase in the number of shale and tight oil wells in the world.
This is an indication that the shale gas industry will continue to be a significant contributor to global greenhouse gas emissions, and will ultimately contribute to climate change,” he continued.
The study also highlights the fact that the oil and oil and energy sector is becoming increasingly dependent on non-renewable resources.
“Non-renewsable resources are becoming more expensive and are increasingly becoming scarce,” the report stated.
“These include hydrocarbons, hydrocarbon liquids (HCL), biofuels, and natural resources,” it added.
“Increasing use of natural resources is driving up the price of these non-reserves.
As a result, prices for oil and other non-residential natural resources will continue, and the cost for these resources will increase,” it said.