Excess oil, flat economic growth battle on two fronts for industry

A New Attitude - Pragmatism

This is an extension and intensification of an attitude that developed after the 1991 Soviet collapse. National governments that were distant or unresponsive during 1998 will be more open to foreign market-driven capital in 1999. The need is to survive the economic struggles of 1999 and support longer-term growth projects. Oil is a very fungible product with a ready worldwide market. Resource investment, especially petroleum investment, generates hard capital quickly even in depressed markets.

A Reborn Tiger - Thailand

Thailand is in an especially strong position having built a successful offshore gas industry over the last eight years. Access to this clean primary fuel positions the country to electrify broadly. This new power availability creates an infrastructure other businesses can build upon. The offshore petroleum business will help make it a reality.

A New Opportunist - China

Chinese entrepreneurs were forced out of Indonesia by ethnic violence following the economic collapse in 1998. These people will be hesitant to return. More than likely they will seek a friendlier climate for their investment capital. Perhaps even more important is the need of mainland China for expanded petroleum energy resources. Watch for expanded Chinese naval activity to support its sovereignty claim over the South China Sea and/or more intense negotiations to secure Chinese access to future offshore resources. The nations weakened by economic collapse are in a difficult position to defend their claims across the region.

More Large Discoveries

Deepwater activity will continue to drive the offshore sector. Multi-year drilling commitments for new semisubmersibles will maintain a steady drilling pace through 1999. Steady drilling means that new fields will be found. Since the best targets will be drilled first, expect significant new reserve announcements in deepwater theaters.

More Hot Air

The global warming debate will rage throughout 1999 with little effect. Much more study is needed to form a solid baseline for debate and to separate man's climate influence from the Sun's general effect. Expect new calls for punitive taxation of fossil energy and petroleum companies. Developing nations will seek wealth transfers to help them cope with the "damage" to their specific climates. New climate clauses are possible in licensing contracts.

New Relationships

Some form of "new relationship" will develop from the Saudi overture. It could be as straight-forward as the refining joint venture it has with Texaco. It could be more encompassing. The Saudis see their future in industrialization and want to leverage their oil wealth to develop the country. They need jobs for their people, and the oil will ultimately deplete. A cooperative venture between secure crude oil supply and western technology will serve a greater good if trust can be developed. The Middle East continues as the pivot point for the global petroleum business.