‘New normal’ means new challenges for for energy industry

WHEN the going gets tough, the tough get resourceful. This is part of what Harold Hamm terms “the new normal” in the oil and gas exploration arena.

Like rarely before, exploration firms must focus on the most potentially productive, most cost-efficient places in which to drill. The richest play in the long term or the easiest in the short term? That’s the old normal.

Unlike populist belief, “oil barons” don’t control the global price of oil and gas. Producers feed product to the market and accept what the market will pay.

Oil companies such as Hamm’s Continental Resources can’t predict what the price will be even a few months from now. The best guess is that a long-lasting price slump will continue. And, apparently, so will exploration. But where?

Definitely not in places where the tax structure is unfavorable in relation to production potential. This is all the more reason Oklahoma leaders must exercise caution in raising production taxes.

The new normal is using the best technology available, having a sense of where a good play will pay and, yes, enjoying a little bit of the wildcatter’s luck.

The resilience of the oil industry has been demonstrated time and time again over decades of boom-and-bust cycles. We seem to be somewhere in between those extremes now.

As reported by The Oklahoman‘s Adam Wilmoth, the price slump has curtailed the most expensive, long-term exploration such as deepwater offshore drilling. This closes a door of supply but opens a window of opportunity elsewhere, including the STACK play in northwestern Oklahoma.

Chesapeake Energy Corp. CEO Doug Lawler expects prices to eventually rise because of the pullback on deepwater drilling and other expensive propositions.

The new normal means the industry is no longer focused on maximizing supply but instead on scrutinizing the bottom line. Petroleum firms could be producing a lot more now than they are. It doesn’t make sense to do so. Rather,…

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