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COPYRIGHT 2005 Hart Publications, Inc.
Oil and Gas Investor: What's your outlook for the energy industry this year and next?
Barnett: Looking out through the 2009-2010 period, we see more spending by the industry, not less, in the known and accessible hydrocarbon basins throughout the world.
Clearly, improved drilling and completion technologies have increased oil and gas well-success rates, sped up production, added to reserves and driven up return rates for the industry for the dollars spent.
Indeed, there are fields in West Texas, discovered in the 1930s, where operators are going back with new technologies to increase the field's estimated ultimate recoveries and production. In addition, there are fields being developed in the deep-shelf Gulf of Mexico as the result of applying new seismic technology to areas that weren't adequately mapped before. While technology is making it possible to accelerate payouts, it's also allowing producers to find new fields, extract more oil and gas from older ones and extend their productive lives.
OGI: Does this mean a greater level of supply going forward?
Barnett: To some extent yes, but the world's appetite for cheap sources of crude oil and natural gas is stronger, meaning the industry is going to have to spend more on drilling and technology just to keep pace with rising energy demand. Buying back shares might be in vogue right now, but industries can't run their machines on common shares, and homes can't be heated or cooled on common shares. Currently, the world is consuming around 88 million barrels of oil per day. If we assume only a 1% increase in demand, that's another 880,000 barrels of oil per day of needed new supply. Now, if the average new oil well is producing, let's say about 500 barrels per day, this means we would need 1,760 new wells--each producing 500...
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