Avalon Oil & Gas Inc. is a domestic oil and natural gas producer with leases currently in Texas, Oklahoma, Louisiana and Arkansas. The company’s strategy is to use efficient reservoir maintenance and innovative oil recovery technologies on previously abandoned wells in order to produce much-needed hydrocarbon energy.
Avalon believes that global conditions in the energy market present the company with an attractive investment opportunity for proven technologies which will expand oil production efficiency in already-established oil fields. There is definitely oil to be recovered – according to the Department of Energy there is the potential to recover over 43 billion barrels of additional oil from stranded oil reserves and mature oil wells in the United States.
Finding additional oil will be important in the upcoming years. Why? The same old story – supply and demand. The supply of oil is steadily declining while the demand for oil is steadily rising.
Even before the onset of the financial crisis, oil production from many major fields globally in the Mid-East, Russia, and even Mexico’s once-giant Cantarell oil field had gone into sharp decline. And the financial crisis has only exacerbated the problem. Oil companies, both large and small, are having difficulties obtaining financing to operate their business.
In many areas, including the U.S., exploration and drilling activities have dropped by about 40%. Even giant firms have been affected – Brazilian oil giant Petrobras, who owns much of the most exciting oil discovery in decades, had problems finding financing. Russian gas giant Gazprom had trouble getting financing to even perform maintenance work on their facilities.
The International Energy Agency has said that the world needs in excess of $26 trillion in energy investments over the next 21 years in order to meet future demand. That investment is just not happening. All of this points to reduced oil production for years to come.
On the demand side, the International Energy Agency says that by 2030 the demand for oil will increase to 106 million barrels per day from the current level of around 83 million barrels per day. Why? Mainly because of the emerging economies such as China.
An example of this increased demand is the latest car sales data from China where sales in June rose 36.5% from last year to 1.14 million. Sales for the first half of 2009 were up 17.7% to 6.1 million vehicles. For the first half of 2009, U.S. sales fell to only 4.8 million cars. The engine of economic growth seems to have shifted eastward.
Despite some of Wall Street’s skepticism, the supply/demand outlook for oil is positive. This bodes well for the future of firms such as Avalon Oil & Gas which will be producing the precious commodity.
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