OPEC Bonds With U.S. Shale Over ‘Dangerously’ Low Oil Spending
Kevin Crowley, Sergio Chapa and Paul Takahashi
Mon, March 7, 2022,
(Bloomberg) -- Outgoing head of OPEC Mohammad Barkindo met with U.S. shale producers Monday night in Houston and said both groups are aligned in how they see the challenges posed to the oil industry by underinvestment.
The theme of spending that’s insufficient to keep pace with strong global demand was a recurring one during the first day of CERAWeek by S&P Global, a major industry conference taking place in person for the first time in three years.
The event is happening against a backdrop of surging oil prices as buyers and traders worry Russian supplies may be subject to government sanctions because of the war in Ukraine. Brent crude hit a 13-year high Monday.
“Theres no doubt we need to engage the investment community, the financial community, to address the encumbrances that are turning out to be obstacles on our way to access capital,” Barkindo said in an interview following the dinner meeting.
“The world is gradually but dangerously running out of spare capacity which is the insurance buffer which is absolutely necessary for industry and for the world,” he said. “This is a function of the massive underinvestment in the industry in the last 10, 15 years.”
He said the Organization of the Petroleum Exporting Countries is “on the same page” as U.S. shale. In previous years, both groups have eyed each other warily or engaged in outright competition for market share.
But Barkindo struck a wistful tone after the dinner, which was attended by U.S. industry figures including EQT Corp. Chief Executive Officer Toby Rice, Hess Corp. CEO John Hess, Chesapeake Energy Corp. CEO Nick Dell’Osso, and Credit Suisse Group banker Tim Perry. The shale executives could be seen through the restaurant’s windows applauding Barkindo as he was presented with a bottle of Barnett shale. For Barkindo, a Nigerian, it was his last OPEC-shale dinner as secretary general. Kuwaiti oil executive Haitham al-Ghais succeeds him in the role in July.
“We went down memory lane,” Barkindo said. When he first came to CERAWeek several years ago, “I was not optimistic that I would be welcomed, listened to.” But, he added, “we realized that we had more that binds us together.”
U.S. shale shortages to limit efforts to replace banned Russian oil
A pump jack operates in the Permian Basin oil production area near Wink
Tue, March 8, 2022
By Arathy Somasekhar
HOUSTON (Reuters) - U.S. shale producers are unlikely to replace banned Russian oil imports due to a shortage of oilfield materials, equipment and labor and a dwindling backlog of wells waiting to be completed, energy executives and analysts said on Tuesday.
U.S. President Joe Biden imposed an immediate ban on Tuesday on Russian oil imports in retaliation for its invasion of Ukraine, putting a spotlight on shale producers' ability to boost output to make up for the loss of about 200,000 barrels per day of Russia crude typically imported by domestic refiners.
Shale has a short-cycle - able to add or reduce production relatively quickly - and in the past, producers have delivered explosive growth when prices allow.
In the Permian Basin, the top U.S. shale field, output jumped by 100,000 bpd nearly every month in 2018, according to U.S. government data.
But unlike 2018, there is a lack of oilfield materials, equipment and labor, and the fastest way to increase shale production - completing already drilled but not yet completed wells - has declined.
Shale wells waiting to be completed and turned on have fallen sharply to 4,466, the lowest since January 2014 and nearly half of the highs touched mid 2020, data showed.
"Drilled-but-uncompleted (DUC) wells represent latent potential, and that latent potential has shrunk," said Stacey Morris, research director at Alerian, an energy index provider.
Analysts warned the time needed to drill and complete a new well can take six to eight months.
Even though the U.S. rig count has climbed for a record 19 months in a row, its growth has been slow and oil production is still far from pre-pandemic record levels as many companies focus more on returning money to investors rather than boosting output.
Today's lack of materials, equipment and labor is "not adequately recognized as a significant impediment for growth," Occidental Petroleum Chief Executive Vicki Hollub said.
Oil producers which have not planned for volume growth this year cannot change and abandon commitments to allocate profits to debt reduction and shareholder returns, she said.
"Capital discipline today for oil companies is basically no (production) growth," Hollub said.
Shale companies have set their production budgets for the year and, like Occidental, cannot revise them without investor approval, said Pablo Prudencio, a senior analyst at energy consultancy Wood Mackenzie.
(Reporting by Arathy Somasekhar and Liz Hampton in Houston)
A pump jack operates in the Permian Basin oil production area near Wink
Tue, March 8, 2022
By Arathy Somasekhar
HOUSTON (Reuters) - U.S. shale producers are unlikely to replace banned Russian oil imports due to a shortage of oilfield materials, equipment and labor and a dwindling backlog of wells waiting to be completed, energy executives and analysts said on Tuesday.
U.S. President Joe Biden imposed an immediate ban on Tuesday on Russian oil imports in retaliation for its invasion of Ukraine, putting a spotlight on shale producers' ability to boost output to make up for the loss of about 200,000 barrels per day of Russia crude typically imported by domestic refiners.
Shale has a short-cycle - able to add or reduce production relatively quickly - and in the past, producers have delivered explosive growth when prices allow.
In the Permian Basin, the top U.S. shale field, output jumped by 100,000 bpd nearly every month in 2018, according to U.S. government data.
But unlike 2018, there is a lack of oilfield materials, equipment and labor, and the fastest way to increase shale production - completing already drilled but not yet completed wells - has declined.
Shale wells waiting to be completed and turned on have fallen sharply to 4,466, the lowest since January 2014 and nearly half of the highs touched mid 2020, data showed.
"Drilled-but-uncompleted (DUC) wells represent latent potential, and that latent potential has shrunk," said Stacey Morris, research director at Alerian, an energy index provider.
Analysts warned the time needed to drill and complete a new well can take six to eight months.
Even though the U.S. rig count has climbed for a record 19 months in a row, its growth has been slow and oil production is still far from pre-pandemic record levels as many companies focus more on returning money to investors rather than boosting output.
Today's lack of materials, equipment and labor is "not adequately recognized as a significant impediment for growth," Occidental Petroleum Chief Executive Vicki Hollub said.
Oil producers which have not planned for volume growth this year cannot change and abandon commitments to allocate profits to debt reduction and shareholder returns, she said.
"Capital discipline today for oil companies is basically no (production) growth," Hollub said.
Shale companies have set their production budgets for the year and, like Occidental, cannot revise them without investor approval, said Pablo Prudencio, a senior analyst at energy consultancy Wood Mackenzie.
(Reporting by Arathy Somasekhar and Liz Hampton in Houston)
OPEC chief says there's 'no capacity in the world' that could replace Russia's 7 million barrels a day in oil supply
Adam Morgan McCarthy
Tue, March 8, 2022
Mohammed Barkindo speaks to reporters in 2019AP
OPEC's secretary general said there isn't enough oil capacity to compensate for the loss of Russian supply.
The oil producer group has no control over the events that are driving prices, Mohammed Barkindo said Monday.
The US is reportedly prepared to go it alone with a ban on Russian oil imports over the Ukraine war.
Russian oil exports are crucial to global supply, and there are no sources that can compensate for the millions of barrels the country contributes, OPEC's secretary general has said.
The US is considering whether to ban imports of oil from Russia over its war on Ukraine, and there are fears Russia could redirect its volumes in response to Western sanctions. That has prompted debate as to whether there are alternatives to Russian oil on deck.
"There is no capacity in the world that could replace 7 millions barrels per day," OPEC chief Mohammed Barkindo told reporters at the Ceraweek conference, according to Reuters.
Barkindo, who has been OPEC's secretary general since 2016, was speaking at an industry conference in Houston on Monday as oil prices roared toward 14-year highs.
Brent crude was last up to 1.7% at $125.15 a barrel on Tuesday, rising for the third straight day after hitting $139.13 a barrel the previous session. WTI moved up 2.8% Tuessday.
But Barkindo downplayed the impact OPEC could make in the market as the conflict in Ukraine continues, and as Russia and the West trade moves and threats.
"We have no control over current events, geopolitics, and this is dictating the pace of the market," he said.
So far, OPEC and its allies — known as OPEC+ — have shown no interest in ramping up production, leading some analysts to say that this is contributing to the squeeze on supply.
Meanwhile, oil buyers and refiners have been "self-sanctioning" — staying clear of Russian supplies and looking for alternatives, market analysts have said.
The US is willing to act alone on a ban on Russian oil imports, if its European allies step back, Reuters reported.
But Germany's leader, Chancellor Olaf Scholz, said Russian energy was "of essential importance" to the daily life of its citizens, as he cautioned against the move.
"Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment," Scholz said in a statement.
The threat of an import ban prompted Russia's deputy prime minister to issue a warning and predict oil prices could surge to $300 a barrel.
"It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market," Alexander Novak said on state television Monday.
Russia's Most Important Oil Export PartnersStatista
The US is willing to act alone on a ban on Russian oil imports, if its European allies step back, Reuters reported.
But Germany's leader, Chancellor Olaf Scholz, said Russian energy was "of essential importance" to the daily life of its citizens, as he cautioned against the move.
"Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment," Scholz said in a statement.
The threat of an import ban prompted Russia's deputy prime minister to issue a warning and predict oil prices could surge to $300 a barrel.
"It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market," Alexander Novak said on state television Monday.
Read more: Bank of America predicts that a ban on Russian oil exports could push prices as high as $200 a barrel - and breaks down why this could trigger a global recession or stock market crash
Adam Morgan McCarthy
Tue, March 8, 2022
Mohammed Barkindo speaks to reporters in 2019AP
OPEC's secretary general said there isn't enough oil capacity to compensate for the loss of Russian supply.
The oil producer group has no control over the events that are driving prices, Mohammed Barkindo said Monday.
The US is reportedly prepared to go it alone with a ban on Russian oil imports over the Ukraine war.
Russian oil exports are crucial to global supply, and there are no sources that can compensate for the millions of barrels the country contributes, OPEC's secretary general has said.
The US is considering whether to ban imports of oil from Russia over its war on Ukraine, and there are fears Russia could redirect its volumes in response to Western sanctions. That has prompted debate as to whether there are alternatives to Russian oil on deck.
"There is no capacity in the world that could replace 7 millions barrels per day," OPEC chief Mohammed Barkindo told reporters at the Ceraweek conference, according to Reuters.
Barkindo, who has been OPEC's secretary general since 2016, was speaking at an industry conference in Houston on Monday as oil prices roared toward 14-year highs.
Brent crude was last up to 1.7% at $125.15 a barrel on Tuesday, rising for the third straight day after hitting $139.13 a barrel the previous session. WTI moved up 2.8% Tuessday.
But Barkindo downplayed the impact OPEC could make in the market as the conflict in Ukraine continues, and as Russia and the West trade moves and threats.
"We have no control over current events, geopolitics, and this is dictating the pace of the market," he said.
So far, OPEC and its allies — known as OPEC+ — have shown no interest in ramping up production, leading some analysts to say that this is contributing to the squeeze on supply.
Meanwhile, oil buyers and refiners have been "self-sanctioning" — staying clear of Russian supplies and looking for alternatives, market analysts have said.
The US is willing to act alone on a ban on Russian oil imports, if its European allies step back, Reuters reported.
But Germany's leader, Chancellor Olaf Scholz, said Russian energy was "of essential importance" to the daily life of its citizens, as he cautioned against the move.
"Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment," Scholz said in a statement.
The threat of an import ban prompted Russia's deputy prime minister to issue a warning and predict oil prices could surge to $300 a barrel.
"It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market," Alexander Novak said on state television Monday.
Russia's Most Important Oil Export PartnersStatista
The US is willing to act alone on a ban on Russian oil imports, if its European allies step back, Reuters reported.
But Germany's leader, Chancellor Olaf Scholz, said Russian energy was "of essential importance" to the daily life of its citizens, as he cautioned against the move.
"Supplying Europe with energy for heat generation, mobility, electricity supply and industry cannot be secured in any other way at the moment," Scholz said in a statement.
The threat of an import ban prompted Russia's deputy prime minister to issue a warning and predict oil prices could surge to $300 a barrel.
"It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market," Alexander Novak said on state television Monday.
Read more: Bank of America predicts that a ban on Russian oil exports could push prices as high as $200 a barrel - and breaks down why this could trigger a global recession or stock market crash
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