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The North America Oil & Gas Sectors : A Company and Industry Analysis (May 2007)
Mergent, May 2007, Pages: 32
This report updates the previous North American oil and gas report, focusing on the markets in Canada and the United States
Current Environment - Key Points
- Oil edged towards US$62 a barrel (US$/bbl) on April 10 as traders fretted over Iran's nuclear program and declining US gasoline supplies
US motor fuel stockpiles dropped nearly 10% from February 2 to April 10 due to a spate of unplanned refinery outages
- Energy security, cleaner air and climate change made the headlines in the US, but oil companies called for changes to existing energy policies to further develop oil and gas resources
- Buoyed by high crude oil prices, the Big Three - ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP) - recorded combined windfall profits of over US$72 billion in 2006
- Oil and natural gas extraction companies in Canada reaped over C$31 billion (US$27 billion) in profits in 2006, an increase of 2.3% from 2005 levels
- With this year's oil prices down from their 2006 peak, Canada faces an industry downturn for the rest of 2007 until its high oil and gas inventories are cleared and prices ramp up once more by 2008
Industry Profile - Key Points
- The US is the world's largest oil and natural gas consumer
As of January 1, 2007, US proved oil and natural gas reserves stood at 21.757 billion barrels (BBL) and 204.385 trillion cubic feet (Tcf) respectively
- Total US petroleum consumption averaged 20.9 million barrels daily (MMbbl/d) in the first quarter of 2007, up 2.6% from the same period last year
However, gasoline inventories are expected to remain below the lower end of the normal range throughout this year's summer and may result in higher margins and retail prices than those seen last summer
- Canada is the eighth largest producer of crude oil and third largest producer of natural gas in the world
As of January 1, 2007 Canada held 179.2 BBL of proven oil reserves, 95% of which were oil sands reserves
- Rapid oil production growth and high oil prices drove Canadian oil industry extraction profits to C$15 billion (US$13.07 billion) in 2006, but moderate weather led to an overall 40% drop in monthly gas revenues
Market Trends and Outlook - Key Points
- US oil companies stand to benefit from a pending Iraqi oil law which would give away two thirds of Iraq's known hydrocarbon reserves to foreign investment, under contracts lasting for up to 30 years
But US companies are losing out in the race for global oil and gas assets growth amid a rise in nationalism
- For 2007, the US Energy Information Administration (EIA) forecasts West Texas Intermediate (WTI) crude oil prices to average US$62/bbl and the Henry Hub natural gas spot prices to average US$7.58 per thousand cubic feet (US$/Mcf) due to an anticipated return to normal weather, lower commercial prices, and growing industrial output
- Canada plans on setting up a carbon market as it seeks to reduce greenhouse gas (GHG) emissions to 6% below 1990 levels by 2012, under the Kyoto Treaty
Prices averaged US$4 per ton of carbon dioxide (CO 2 ) on a prototype North American emissions reduction market
- The Conference Board of Canada (CBC) forecasts soft oil prices in 2007 to result in a 30% profit drop for the country's oil extraction industry
Natural gas revenue is also forecast to remain weak throughout 2007, growing at just 2.4% to C$69 billion (US$60.1 billion), while profits are predicted grow less than one half of 1%
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