By Kristin Schwab
Between the shipping bottleneck and damage to oil infrastructure in the Middle East, energy companies are looking for new places to drill.
ExxonMobil is spending $1.5 billion developing deepwater operations in Nigeria, and Chevron is expanding operations in Venezuela. Political instability has long incentivized companies to diversify their oil supply, especially since the oil crises of the 1970s.
“Politics is never a straight line,” said oil and gas well engineering consultant Robello Samuel. “It is always non-linear. It is always a problem.”
Those problems could mean anything from a change in tax structure to war. It’s why Samuel said companies are trying to source oil beyond OPEC member countries.
“So that would move the center of gravity of the global energy,” he said.
But investment takes time.
“10-year timelines are the sort of thing you have in mind,” said Ryan Kellogg, professor of climate and energy policy at the University of Chicago. “That is the time it takes from really making a decision — ‘I want to explore this new basin’ — to finding something, to developing it, to actually getting it to market.”
Improved technology has helped curb costs. But Kellogg said research still costs hundreds of millions of dollars, and development takes tens of billions. And drilling has to happen for at least a handful of years before firms break even.
“Everyone thinks about them as these, sort of these very technical companies,” Kellogg said. “At their core their business is risk management.”
The risk is not finding enough oil, prices shifting, and geopolitical conflict.