Abstract

Petroleum production grows from frontier to semi-mature to mature. There have been several attempts to quantify a petroleum region's production profile, including seminal works by Hubbert and others. Both the physics of production and the economics of exploitation are presumed to influence this profile. Defying the log-normal distribution which was suggested by Hubbert, entire petroleum provinces have extended their production history into a much flatter and considerably wider profile, recently characterized as fractal. Maturity implies, among other characteristics, small pool exploration, commoditized drilling and, especially, production enhancement services. We suggest that the transition in the production profile is characterized and at the same time aided by the flight of the major service company (which has become even bigger and more diversified) and its replacement by smaller service companies. There are significant distinctions between the local and international service companies. These include issues such as local vs. global knowledge, non-integrated vs. integrated services and a low vs. high comfort level by the clients. The mix of the local service companies can be greatly affected by the local operators. It must be emphasized that the quality and spectrum of services are crucial elements for the survival of the local petroleum production. We present here a model for the local service company/operator interaction, the changing role of the major service companies and criteria for technology utilization and required proficiency. We apply these concepts to a highly mature area (Oklahoma) and to Oman, entering maturity now.

Introduction

In our view, two extraordinary events have resulted from and further exacerbated the ongoing slight but important imbalance between petroleum supply and demand:

  1. a substantial recent reduction in petroleum prices and

  2. a consolidation of the upstream petroleum services sector.

The reduction in the petroleum prices although triggered by larger economic problems in Asia has, again, shown the precariousness of the current production and, especially, trading scenarios. It has also reinforced the fickleness of petroleum prices. No other commodity can suffer a 50% price reduction because of a reduction of a fraction of one percent in projected demand.

The reduction in petroleum prices has resulted in the usual problems in petroleum producing countries with larger populations such as Venezuela, Indonesia and Nigeria, and a marked decrease in the earnings of multinational petroleum companies. The capitalization of the service sector went through a dramatic depression in the course of a few months. In some cases the stock prices fell by 75%.

It is in this environment that the service sector underwent a widely expected consolidation, into a handful of mega-service companies, a consolidation that has been gradually ongoing for several years and was prompted by much longer-term considerations in the exploration and production (E&P) business.

The role of the four current, all encompassing mega-service companies (Schlumberger, Halliburon, Baker Hughes and BJ Services) has been steadily expanding in the last decade, encroaching into areas that were previously the exclusive domain of petroleum producers.

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