A rebound in oil prices is meaningless unless production costs come down, said Maersk Drilling CEO Claus Hemmingsen.
Speaking at Sea Asia 2015 in Singapore on 21 April, Hemmingsen said, “Oil companies’ profits cracked when oil prices fell from USD110 to USD100 a barrel.
“So in the offshore industry, we don’t go round with the illusion that if oil prices go up to USD90 a barrel, we would have sorted out our problems.”
Oil prices are now hovering at USD63 a barrel, a 2015 high, raising hopes of a recovery in oil prices.
In the aftermath of the collapse in oil prices, oil companies have refrained from investing in new oil fields, and this has hurt offshore vessel owners.
Hemmingsen continued, “We have to sort out the problems of costs in the industry. If you look at the 10-year horizon, the investment in offshore oil production increased from USD15 billion to USD360 billion a year to maintain production of 28 million barrels a day.”
While shale oil output is about 7,500 barrels a day, this has not made up for the drop in offshore and conventional onshore oil production.
Hemmingsen believes that oil supply will continue declining as oil companies refrain from making new investments.