Upstream uncertainty tempers otherwise upbeat outlook, Deloitte survey says

Oil, natural gas and chemicals executives see higher oil and gas prices in the future, but the industry has varying expectations for what the anticipated price recovering will bring, according to a new survey. In contrast to last year’s survey, optimism appears to be growing in the return of a more favorable business environment. The uncertainty of a critical flow venturi (CFV) gas flow transfer standard with dedicated, redundant pressure and temperature instrumentation is analyzed. At lower flows (≈5 g/min), the standard uncertainty of the transfer standard was 0.026 %. At higher flows (≈200 g/min), the standard uncertainty was 0.019 %. The largest uncertainty components were: 1) environmental temperature effects, 2) pressure sensors, and 3) the critical flow function. Temperature effects for the CFV transfer standard resulted from: 1) temperature sampling errors, 2) thermal boundary layers, and 3) thermal expansion of the CFV throat. Temperature effects on small CFVs were more significant than for large CFVs. “Positive sentiments have emerged from all sectors, but the real bright spot is in the downstream and chemical sectors. With growth and recovery top of mind, digital technologies could become critically important for productivity and profitability and should serve as a lever to help mitigate rising costs brought about by rising oil prices.”

Critical flow venturis (CFVs) are generally accepted as the most appropriate transfer standard in comparisons of gas flows greater than 1 L/min.1 The transfer standard (TS) for a recent low-pressure gas flow key comparison (CCM.FF-K6) comprised of a set of eight critical flow venturis (CFVs) with dedicated pressure and temperature instrumentation (see Figure 1). Most participants tested the TS with two CFVs in series. The TS had redundant sensors for measuring the CFV pressures and temperatures (2 upstream CFV pressures and temperatures, 2 downstream pressures and temperatures). The redundant pressure, temperature, and flow measurements allowed us to assess the TS calibration stability throughout the comparison. A majority (72%) of respondents expect West Texas Intermediate (WTI) crude to average $70 or more per barrel in 2020. More than half of executives surveyed from each of the four sectors – upstream, midstream, downstream and chemicals expect to increase capital expenditures in the coming year. The rise in commodity prices, along with a stronger economic context, has spurred confidence – but the benefits of a further price recovery are not anticipated to be homogenous for the industry, the survey notes. Segments less impacted by the downturn, including downstream and chemicals, have reportedly been able to continue to invest for growth and could realize advantages more quickly, while upstream and midstream must first finish working through their recovery strategies. “The industry seems much better off than a year ago,” said John England, partner, Oil, Gas and Chemicals, Deloitte & Touche LLP. “Positive sentiments have emerged from all sectors, but the real bright spot is in the downstream and chemical sectors. Most upstream executives surveyed see better days ahead, but are managing more with caution as they work through growing pipeline constraints, mounting geopolitical tensions and rising oil prices that could also push up costs.”

A majority (72%) of respondents expect West Texas Intermediate (WTI) crude to average $70 or more per barrel in 2020. Even more bullish and in sharp contrast to last year’s findings, 41% of the respondents expect WTI prices to average $80 or more per barrel in 2020, up from only 5% from the prior year. More than half (54%) expect Henry Hub natural gas will average $3.50 or more per million British thermal units (Mmbtu) with a majority of those (35%) expecting $4 or more per Mmbtu. More than half of executives surveyed from each of the four sectors – upstream, midstream, downstream and chemicals – expect to increase capital expenditures in the coming year. Downstream and chemicals sectors see the highest confidence in capital spend with 64% and 67% of those respondents respectively, expecting an increase in capital. About half of respondents expect spend, rig deployment or headcount to rise. Maintaining or increasing production is the top priority (39%), followed by reducing or streamlining general and administrative costs (30%), making divestitures (29%) and reducing capital expenditures (29%). Most respondents (62%) believe 20% to 60% of realized cost reductions are short-term or cyclical. Added risks are uncertainty around the economy, trade and rising interest rates, which have a greater impact on upstream more than other sectors.”

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