OIL INDUSTRY'S CHALLENGES IN 1991

Perhaps never before has the oil industry faced challenges as varied or intense as those it faces in 1991. The industry must plan and function in an oil market that has been in turmoil since Iraq invaded Kuwait last August. For that reason alone, business as usual would be difficult. But there will be no business as usual in 1991. The world is changing too much, too fast.

Jan. 7, 1991

3 min read

Perhaps never before has the oil industry faced challenges as varied or intense as those it faces in 1991.

The industry must plan and function in an oil market that has been in turmoil since Iraq invaded Kuwait last August. For that reason alone, business as usual would be difficult.

But there will be no business as usual in 1991. The world is changing too much, too fast.

ECONOMIC CHALLENGES

In 1991, European countries will put critical finishing touches on economic unification. The U.S.S.R. will catch its economic balance or continue to splinter politically. Former Soviet satellites will struggle to survive under a capitalist regimen to which they're unaccustomed.

In much of the world, recession looms. Oil price hikes since August intensify the threat. So might collapse of international trade talks. Africa and Latin America are particularly vulnerable. The Asia-Pacific region might lose some of its impressive economic gains of recent years.

An economic slowdown will reduce oil demand. At some point, renewed production from Iraq and Kuwait will increase supply unless the Organization of Petroleum Exporting Countries exercises unprecedented quota discipline. After the runup of 1990, therefore, crude prices in 1991 may be in jeopardy.

And those are just the economic challenges.

Industry faces challenging political questions, too. How should industry interpret defeat of major environmental initiatives in several U.S. states and of the Green Party in recent German elections? How will economic unification affect energy policies and trade in Europe? How and with whom will industry conduct business in the U.S.S.R. and newly democratizing countries in Eastern Europe? In the U.S., will Congress decide to treat oil field wastes as hazardous substances subject to costly controls? What sort of national energy strategy will President Bush propose?

Facing these and other economic and political perplexities, industry must, in many areas, perform or perfect technological miracles.

The biggest test will come in the U.S., where last year's Clean Air Act reauthorization bill mandated sales of vehicle fuels nobody knows how to make. Preliminary results of the joint auto-oil industry test program indicate the task may be more complicated than Congress imagined. In the area of reformulated vehicle fuels, someone is going to have to make scientific history.

As always, offshore drilling and production present tender technological frontiers. Industry lately has been conquering water depth limits in 1,000 ft bounds. Recent discoveries in places like the Gulf of Mexico and offshore Brazil promise another major step or two in 1991.

HORIZONTAL DRILLING

Horizontal drilling technology has roared into its own recently and will find new applications in 1991 and beyond. The same holds true for rig automation and interactive three dimensional seismic technology.

Technical challenges also await the international petroleum industry as economic and political barriers fall in the Soviet Union and Eastern Europe. Petroleum facilities in formerly Communist areas desperately need modernization. And technology will have to strain to repair the environmental damage created by past inefficiencies.

Economics. Politics. Technology. In many cases, the challenges overlap. In most cases, they're staggering. If the Middle East crisis can come to a peaceful conclusion, 1991 will be a very good year.