This post is mostly about corporate communications.It’s also about the state of the oil industry in the U.S. I find a few things in common with Exxon’s infamous policy of suppressing climate science.
A study released by Deloitte, the industry analyst, this week predicts that a third of oil extraction and production oil companies in the U.S. may face bankruptcy in 2016, thanks to crashing crude prices. The “pure play” oil sector is in big trouble as producers in the Middle East keep production up in order to lower prices to compete with shale oil. Meanwhile, fuel switching to natural gas and the rise of renewables are depressing demand, pushing prices even lower. It’s a perfect storm for extraction and production companies, many of which are living on debt as they cut staff and cancel development projects.
Reuters picked up the story, and within a very few hours it was all over the web. The funny thing was, everyone else reported on the Reuters story. I couldn’t figure out why until I went searching for the study itself—it was VERY hard to find, buried on Deloitte’s website. But it was all explained front and center in a 2016 Outlook on Oil and Gas summary—that doesn’t happen to mention bankruptcies at all. Deloitte’s Oil & Gas “Leader,” John England, concludes a strangely upbeat litany of factors contributing to the industry’s problems with a masterpiece of spin:
A leaner, stronger industry – More than anything else in business, I believe in the power of free markets. Just as I believe the high prices of natural gas were a critical impetus for the development of the shale gas revolution, I believe today’s low crude prices are forcing an equally powerful innovation in the way oil is being developed and produced. Price forces innovation and I believe we are still in the early stages of what can be achieved in terms of reducing unit costs of oil production and ultimately increasing unit margin and achieving higher return on capital employed. The endgame is an oil and gas industry that will be stronger, leaner, and built to last.
I think the key word here is “leaner.” Not so sure about “built to last.”
Oh, to be a fly on the conference room wall when the study was finished and Deloitte had to decide what to tell the world—and its major clients in the oil and gas sector—about its findings. John England clearly had a brilliant idea: Bury the report and hype the spin! But then what happened? Did someone leak the report to Reuters? Am I turning in to a conspiracy theorist?