To drill or not to drill. That's the question.

"The secret of my wealth? - Some people find oil, some don't". (Paul Getty)

We live under many oil market parameters but only a bunch of investors knows the secret. To maintain the actual level of production we have to increase the level of drilling on and off-shore. The wiser players in the market and the sovereign funds know it. They are betting strongly for Equipment companies till P/E ratio above 28 against 11 for Producers.

In the practice, in Europe, being Russia the main producer, the drilling has 2 significant problems to solve. One, difficulties to lease rigs in their territories. Other, but not minor, the future technical challenge of drilling in deep waters. Both cases requires an extraordinary amount of capital on private equity regarding others wells easier to explore.

I don't want to hide to my readers, that my alter-passion for renewables is the drilling activity. The first time I saw a rig reaching oil, I was 10 years old. I felt fascinated by the Schlumberger and Caterpillar equipment. I kept in my memory this technical adventure to extract from the earth the powerful liquid. Unfortunately the oil quality was'nt good, because of  arsenic contamination, but I understood that the essential on this oil industry is to drill.

Many human necessities and consumer expectations are in fact based upon this drilling activity. We have the immediate future of the human kind in every turn of our bit. Later we will have residual but not less important extraction, before to be reconverted to the promised green life.

 

In 10-15 years, we will have time to reduce equipment investment and accepting a longer depreciation for the machinery. But in the meantime, funds must be sent primarily to the equipment and service industry. The oil producers are nothing without rigs.  The OPEC knights and the rest of suppliers, don't have any other surviving possibility than drilling more and more to maximize their unexplored wealth in a short period of time.

To drill or not to drill. Maybe not the only important question, but is the only way to serve faithfully the world expectations of growth meanwhile our governments decides to aply or not the full oil taxes to change this critical dependence. Of course, there are a big risk in how politicians handle the timing  of our pick oil and sustitution of energy. But having a strong and   responsible drilling industry is a world priority today.