Up and into 2014, the steady rise in oil price allowed the industry to exploit hydrocarbon reserves that were only marginally profitable – the unconventional plays. But these small margins were enough to attract more investment and the drilling boom began.
The oil-price collapse that began in mid-2014 was initially due to unconventional oil from North America hitting the markets, but it was followed by the push-back from more efficient producers aiming to retain their market share.
With unconventional production costing up to three times that of high-quality conventional reservoirs, producers needed to reduce costs and improve well performance to remain financially competitive. Unfortunately this has yet to happen.
The consequence is that today, one-third of North American unconventional producers are in default, the offshore industry is in retreat, and globally over 350,000 people have lost their jobs.