The UAE holds a major oil and gas conference just ahead of hosting UN climate talks in Dubai

JON GAMBRELL
Updated Mon, October 2, 2023 







United Arab Emirates Energy Minister Suhail al-Mazrouei talks during the ADIPEC, Oil and Energy exhibition and conference in Abu Dhabi, United Arab Emirates, Monday Oct. 2, 2023. 

(AP Photo/Kamran Jebreili)

ABU DHABI, United Arab Emirates (AP) — The Emirati president-designate of the upcoming United Nations COP28 climate talks urged oil and gas companies Monday to be “central to the solution” for climate change, a message delivered even as the industry boosts its production to enjoy rising global energy prices.

The appeal by Sultan al-Jaber highlights the gap between climate activists suspicious of his industry ties and his calls to drastically slash the world's emissions by nearly half in seven years to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) compared with pre-industrial times.

While addressing a major international concern, his remarks came at a marquee oil industry event highlighting the state oil company he oversees — feeding the concerns of those already critical of his appointment while also drawing applause from the same energy firms he wants to court at the upcoming COP28 talks starting in November.

“That is our North Star. It is, in fact, our only destination,” al-Jaber said. “It is simply acknowledging and respecting the science.”


However, he added: “We must do this while also ensuring human prosperity by meeting the energy needs of the planet’s growing population."

Al-Jaber serves as the CEO of the state-run Abu Dhabi Oil Co., which has the capacity to pump 4 million barrels of crude oil a day and hopes to reach 5 million barrels a day. He also made the call to the annual Abu Dhabi International Petroleum Exhibition and Conference, known by the acronym as ADIPEC, which brings together the largest players in the oil and gas industries.

While this year's conference has been described as focusing on “decarbonizing faster together,” the event is primarily about the drilling, processing and sale of the same carbon-belching fuels driving climate change — which cause more-intense and more-frequent extreme events such as storms, droughts, floods and wildfires. And al-Jaber himself has repeatedly said the world must rely on oil and gas for the near-term to bridge that gap.

“A phase-down of fossil fuels is inevitable. In fact, it's essential,” al-Jaber said. “Yet, this must be part of a comprehensive energy transition plan that is fair, that is fast, just, orderly, equitable and responsible.”

But on the business side, the oil industry is on the rebound. After prices briefly went negative during the lockdowns of the coronavirus pandemic, benchmark Brent crude now trades around $92 a barrel.

Diesel prices also are expected to rise as Russia has stopped its exports of the fuel, which likely will worsen global inflation through boosting transportation prices that will get passed onto consumers.

Gazprom, the state-owned natural gas company that is a pillar of Russia’s economy, had a major stand at the conference despite facing U.S. sanctions over Moscow's war on Ukraine. Russian officials took part in Abu Dhabi's major arms fair earlier this year, showing the UAE's deepening financial ties to Moscow despite its long ties to the American military and hosting thousands of U.S. troops.

The conference highlights the challenge the United Arab Emirates has faced in trying to convince already-critical climate scientists, activists and others that it can host the U.N. Conference of the Parties — where COP gets its name.

Though all smiles at Monday's conference, al-Jaber has acknowledged the withering criticism he's faced. On Saturday, he offered a full-throated defense of his country hosting the talks he's slated to lead, dismissing critics who “just go on the attack without knowing anything, without knowing who we are.”

“For too long, this industry has been viewed as part of the problem, that it’s not doing enough and in some cases even blocking progress,” al-Jaber told the conference. “This is your opportunity to show the world that, in fact, you are central to the solution.”

Following immediately after al-Jaber, OPEC Secretary-General Haitham al-Ghais praised his speech and defended the oil industry.

“We see calls to stop investing in oil. We believe this is counterproductive,” al-Ghais said. “The cornerstone of global economic prosperity today is energy security.”

Al-Jaber said 20 oil and gas companies had pledged to be “net zero” by or before 2050 and eliminate routine gas flaring by 2030. However, the industry would still be producing the oil and gas that release the carbon dioxide that traps heat in the atmosphere.

Al-Jaber, a 50-year-old longtime climate envoy, has been behind tens of billions of dollars spent or pledged toward renewable energy by this federation of seven sheikhdoms on the Arabian Peninsula. Al-Jaber and his supporters — including U.S. climate envoy and former Secretary of State John Kerry, who is on a trip to the UAE this week — say that's a sign he can lead the COP28 talks.

Meanwhile, Turkish Energy Minister Alparslan Bayraktar said at the Abu Dhabi conference that an Iraqi-Turkish oil pipeline that had been halted for months would see its flow restart this week.

“As of today, the pipeline is ready to operate,” he said. “And within this week we will start operating the Iraqi-Turkey pipeline, which after the resuming of oil operations, will be able to supply half a million barrels to the oil market.”

He did not elaborate on what the terms would be for the 970-kilometer (600-mile) pipeline, which is Iraq's largest. In March, Iraqi officials won an international arbitration case to halt oil exports from the semiautonomous Kurdish region to Ceyhan, Turkey, on the Mediterranean Sea.

Iraqi and regional Kurdish government officials did not immediately acknowledge the pipeline reopening, though Iraq's oil minister has said it was anticipated, without elaborating. Gulf Keystone Petroleum Ltd., which operates Shaikan oil field in Kurdish region of Iraq, saw its stock jump up by over 20% in trading Monday on the London Stock Exchange on news of the pipeline restarting.

Bayraktar said the pipeline also sustained damage in the recent earthquake and flooding in Turkey that had been repaired.

___

Follow AP's coverage of the climate and environment: https://apnews.com/climate-and-environment


Oil Latest: Industry Is Part of Energy Change, Executives Say

Anthony Di Paola and Salma El Wardany
Mon, October 2, 2023



(Bloomberg) -- Ministers and oil industry chiefs are gathering for the biggest energy conference in the Middle East as crude heads toward $100 a barrel. Whether prices can hold at these levels and the outlook for OPEC+ supply cuts are among topics that will be discussed from Monday.

But this year, climate is looming large over the forum. Delegates at the annual Adipec summit in Abu Dhabi, which has been dominated by oil in its long-running history, will devote a lot of their time to the energy transition. The meeting comes just two months ahead of the United Arab Emirates also hosting the crucial COP28 conference.

All times UAE

Oil Firms Must Be Heard in COP28, Executives Say (5:04 p.m.)

The oil industry is part of the energy transition and its voice should be heard at COP28, executives including Halliburton Co. CEO Jeff Miller, Liam Mallon of Exxon Mobil and Gordon Birrell of BP, said in a panel discussion.

Companies need to upgrade downstream operations to lower emissions, while a transformation of upstream operations is also required, they said.

Electrification of operations, carbon-capture and emissions detection can support the decarbonization process, they said.

Shell CEO Says Investors Will Decide If Low Carbon Is Viable (2:50 p.m.)

Shareholder needs to make a judgment on whether the low-carbon energy options that Shell Plc is pursing are viable, Chief Executive Officer Wael Sawan said.

“We need to be able to cover our cost of capital and make a return for our shareholders,” he said.

Oil Industry Is Central for Energy Transition: COP28 Chief (4:23 p.m.)

Large swathes of the global oil industry will pledge to eliminate methane emissions and gas flaring by the end of the decade, the president of the COP28 climate summit said.

More than 20 private and state oil and gas producers have made the commitment alongside setting targets to reach net zero by 2050, Sultan Al Jaber said. He did not name the companies.

Adnoc Testing Geothermal Energy for Cooling (3:24 p.m.)

Adnoc, the main oil producer in the United Arab Emirates, is testing using geothermal energy for district cooling in a preliminary program, as the country seeks to diversify energy sources.

The company is also studying capturing carbon in acquifers, said Musabbeh Al Kaabi, executive director of low-carbon solutions and international growth. Adnoc said Sunday it is doubling its carbon-capture target in a push toward net zero emissions.

UAE Warns About Lack of Oil Investment as It Boosts Own Capacity (2:30 p.m.)

The global oil industry has been losing capacity in the last few years due to a lack of investment, said United Arab Emirates Energy Minister Suhail al Mazrouei.

The minister rebuffed concerns about rising oil prices, arguing that crude needs to be high enough to justify making new investments. The UAE will expand its own capacity to 5 million barrels a day by 2027, Mazrouei said. From 2025, OPEC+ output quotas will be based on the latest capacity numbers, not outdated figures, he said.

Non-OPEC+ Oil Supply Is Outstripping Demand Growth: Yergin (2:11 p.m.)

Oil production in countries that are not part of the OPEC+ alliance, such as the US and Canada, is growing faster than demand, Dan Yergin, vice chairman at S&P Global Inc., said in a Bloomberg TV interview. Still, continued supply curbs by Saudi Arabia can be worrying because of concerns over global economic growth.

India Is Telling Oil Producers That Prices are Too High (1:54 p.m.)

India has “a constant dialogue with all producing countries where we keep raising this point” that crude prices are too high, Pankaj Jain, secretary at the Ministry of Petroleum and Natural Gas, said in an interview.

His country isn’t comfortable with current oil prices, which are near $93 a barrel in London, and “we need more production now,” Jain said. While India acknowledges OPEC’s right to decide how much they produce, the group’s cuts have increased prices.

“High prices lead to demand destruction,” Jain said. “Our viewpoint is we are finding these prices difficult to pass, difficult to continue to meet our energy needs.”

BP’s Interim CEO Reiterates No Change in Strategy (1:30 p.m.)

There will be no change in BP Plc’s strategy that was laid out in February, following the abrupt departure of Bernard Looney as head of the company, interim CEO Murray Auchincloss said.

“That’s a strategy that’s endorsed by the management team and endorsed by the board and a person leaving does not change the strategy,” he said. “We remain firmly committed to it.”

Looney resigned last month after admitting he had not fully disclosed relationships with colleagues. BP’s head of US operations, David Lawler, has also quit to pursue other opportunities outside the company.

Also read: BP Ends Its Week of CEO Chaos With Many Unanswered Questions

Iraq Official Says Ceyhan Pipeline Can’t Restart Yet (1:11 p.m.)

An Iraqi official cast doubt on a statement from Turkey that a key pipeline bringing oil from northern Iraq to the Mediterranean coast can resume this week.

Flows can’t restart until commercial and financial issues have been resolved, the official said, speaking on condition of anonymity. Earlier on Monday, Turkish Energy Minister Alparslan Bayraktar said the pipeline will resume operations this week. The oil conduit, which can carry almost half a million barrels of crude a day, has been offline since March amid a payment dispute between Ankara and Baghdad.

OPEC+ Has ‘Right Policy’: UAE Energy Minister (11:22 a.m.)

OPEC+ currently has the “right policy” for the oil market, the UAE’s Mazrouei said in an interview at the Adipec conference in Abu Dhabi.

Prices will increase if there’s no further investment in the industry, he said, adding that OPEC isn’t setting a price target.

Iraq Oil Pipeline Will Resume This Week (11:08 a.m.)

A crude oil pipeline running from Iraq’s Kurdistan region to the Mediterranean coast of Turkey will resume operations this week, Turkish Energy Minister Alparslan Bayraktar said.

The pipeline was shut earlier this year after an arbitration court ordered Ankara to pay about $1.5 billion in damages to Iraq for transporting oil from Kurdistan without Baghdad’s approval.

Citi Says Oil to Collapse to Low $70s in 2024 (9:53 a.m.)

Brent crude will collapse to the low $70s a barrel next year as the global market swings back to a surplus, according to Citigroup Inc. The shift reflects “more oil coming into the market,” analysts including Ed Morse said in a quarterly report.

“Higher prices in the near term could make for more downside for prices next year,” the Citi analysts said.

Oil Markets Will Continue to Tighten, Halliburton Says (9:18 am)

There’s a lot of support for oil prices and the market will continue to tighten, Halliburton Co. Chief Executive Officer Jeff Miller said in a Bloomberg TV interview at the Adipec conference.

The company is returning cash for our shareholders, he said.

Also read: Halliburton Sees US Gas Glut Freeing Up Gear for Oil Explorers

Deeper OPEC+ Production Curbs Unlikely: Eni (9:00 am)

The Organization of Petroleum Exporting Countries and its allies are unlikely to deepen their production cuts, Eni SpA CEO Claudio Descalzi said in a Bloomberg TV interview. Crude prices in London rose almost 10% last month as ongoing supply curbs squeeze the market.

A lack of investments in projects is the main issue for oil, while demand remains strong, Descalzi said.

--With assistance from Nayla Razzouk, Ben Bartenstein, Leen Al-Rashdan, Salma El Wardany and Yousef Gamal El-Din.

Bloomberg Businessweek




3 Oil Companies Leading in Renewable Energy Investment

Nilanjan Banerjee
Mon, October 2, 2023 



Economies across the world are gradually transitioning to cleaner energy sources. There has been a steady increase in pressure on energy companies to act on climate change on multiple fronts. Most analysts believe that although renewable energy will meet future energy needs, oil and natural gas demand will not be completely wiped out.

The U.S. Energy Information Administration, in its Annual Energy Outlook 2023, revealed that through 2050, renewables will increasingly match power demand. Thus, there are abundant opportunities for energy companies with a footprint in oil and gas resources or transporting commodities and the renewable energy space. Three such companies are Shell plc SHEL, Eni SpA E and Enbridge Inc ENB, which are well-poised to gain in the long run.
3 Stocks

Growing renewable business at a rapid pace is among the core strategies of Shell. In the renewable energy front, Shell has roughly 50 gigawatts (GW) of renewable generation capacity, considering projects either in operation, under construction or in the pipeline. Thus, for renewables and energy solutions, SHEL is investing actively in solar energy, wind energy, electric vehicle charging and others.

To implement the production of renewable energy, Plenitude, a benefit company, was established and is being controlled by Eni. To counter the decarbonization challenge, renewable energy generation is among the key strategies of Eni. This is reflected in its ambitious goal for more than 15 GW of installed renewable energy generating capacity by 2030.

Enbridge has been investing in wind farms, solar energy, geothermal projects and power transmission developments, reflecting the company's strong focus on renewables. Considering all the renewable energy projects that are either operational or under construction, Enbridge boasts a net of 2,173 megawatts of zero-emission energy generating capacity.

THEM IS FIGHTING WORDS
Ex-UN climate chief has 'lost patience' with fossil fuel industry

AFP
Thu, September 21, 2023 

Speaking at the "Climate Changes Everything" summit at the sidelines of the UN General Assembly, Christiana Figueres, among the key negotiators of the landmark 2015 Paris Agreement, said that the industry had failed to put "out of the park" profits back into developing renewables (Ezequiel BECERRA)


The UN's former climate chief said Thursday she had "lost patience" with fossil fuel companies and that they should steer clear of crunch talks in Dubai if the industry refuses to be part of the solution.

Speaking at the "Climate Changes Everything" conference on the sidelines of the UN General Assembly, Christiana Figueres, among the key negotiators of the landmark 2015 Paris Agreement, said that the industry had failed to put "out-of-the-park" profits back into developing renewables.

"Instead of doing everything that they do and applying their amazing engineering capacity, they've been actually doing the opposite," she said.

Oil and gas companies have been slowing down their decarbonization commitments, paying out handsome dividends to shareholders and lobbying governments to reverse climate commitments.

Asked whether to welcome them at the two-week talks in Dubai starting in late November, Figueres said "it should depend on whether they are there to help and to accelerate decarbonization," or "whether they are literally operating against those objectives."

The issue of the industry's participation is a hugely contentious point for the climate action community, even as the president-designate of the talks, Sultan Al Jaber, is himself an oil executive.

Figueres said the sector from which the COP president comes was not as relevant as being true to the mandate, and in this regard, she offered some cautious praise.

While she was initially skeptical Al Jaber was separating his country's national interest from global interest, "lately I have seen he is moving in that direction, which I celebrate.

"I think he has understood the political international responsibility, multilateral responsibility that comes with that presidency."

Jaber addressed a UN climate summit on Wednesday, acknowledging "the phasedown of fossil fuels is inevitable” and "essential."

ia/sct/jh

‘Fossil fuel industry speaks with forked tongue’:***

Al Gore tells Big Oil ‘get out of the way’ in climate battle

Louise Boyle
Thu, September 21, 2023 at 11:03 AM MDT·4 min read

Al Gore, former Vice President of the United States, speaks onstage at The New York Times Climate Forward Summit 2023 at The Times Center on September 21, 2023 in New York City (Getty Images)


Al Gore unleashed on the fossil fuel industry for engaging in “massive fraud” for decades and called on the powerful multinationals to “get out of the way” of those fighting the climate crisis.

The former vice president is the latest prominent political figure to break a long-held taboo, and directly name the fossil fuel industry as core perpetrator of creating - and continuing - the global crisis.

“I was one of many who felt for a long time that the fossil fuel companies, or at least many of them, were sincere in saying that they wanted to be a meaningful part of bringing solutions to this crisis,” Mr Gore told the New York Times at its Climate Forward event in Manhattan on Thursday, held on the sidelines of the UN General Assembly.

“But I think that it’s now clear they are not. Fossil fuel industry speaks with forked tongue.”

Mr Gore noted how the industry has been able to infiltrate the political process at every level including the United Nations annual climate summit.

He said that this year, the UN had gone “too far” in naming Sultan Ahmed Al Jaber, head of the Abu Dhabi National Oil Company, as president of Cop28 in the United Arab Emirates this December.

“That’s just like taking the disguise off,” Mr Gore said.

“The fossil fuel companies, given their record today, are far more effective at capturing politicians than they are at capturing emissions.”

He pointed to how the fossil fuel industry spent just 1 per cent of overall profits on the clean energy transition last year.

“It is a ruse,” he said. “And many of the largest companies have engaged in massive fraud. For some decades now, they’ve followed the playbook of the tobacco industry, using these very sophisticated, lavishly-financed strategies for deceiving people.

He added: “I don’t think it’s fair to expect them to solve this when they’re incentivised to do otherwise. But I think it’s more than fair to ask them to get out of the way, and stop blocking the efforts of everybody else to solve this crisis. I think it’s time to call them out.”

Despite the challenges, and the worsening climate impacts, the former VP said there were encouraging signs like the speed of transition to clean energy in the power sector, and the growing number of electric vehicles.

“There used to be an old cliche, denial is just a river in Egypt, and you could add that despair is just a tire in the trunk,” he said.

“Despair is just another form of denial, and we have to resist it. We don’t have time to wallow in despair, we’ve got work to do. We can do this.”

Mr Gore’s fiery denouncement of the fossil fuel industry was part of a shift among some leaders in public statements about the climate crisis.

It was similarly evident on the floor of the UN headquarters on Wednesday at the so-called “no-nonsense” Climate Ambition Summit – an event championing the “movers and doers” taking accelerated action to cut emissions.

Presidents and prime ministers along with state and local leaders were invited to speak, including California Governor Gavin Newsom, who excoriated the fossil fuel industry for its decades of deception.

“It’s time for us to be a lot more clear. This climate crisis is a fossil fuel crisis,” he said, to applause and cheers in the chamber.

Ms Mottley also laid responsibility at the door of the fossil fuel industry, noting it had benefited from $7 trillion in subsidies last year, along with naming financial institutions and the transport sector.

“If you don’t take corrective action now, you will have to tell us where you’re keeping all your scientific research to relocate you and your families to the planet Mars or Pluto,” Ms Mottley said.

Petro Gustavo, president of major fossil fuel exporter Colombia, gave a stark assessment.

“The real goal that all countries should have is aiming for zero in terms of production and supply of coal, gas and oil. If we keep as we are on our current track, it will be suicide,” he said.
***(LIKE 'OFF THE RESERVATION' THIS IS RACIST)

Svitlana Romanko: UN climate summit offers chance to confront Russian fossil fuels, climate crisis

Svitlana Romanko
Fri, September 22, 2023 

As world leaders gather for meetings at the UN’s Climate Ambition Summit, the urgency of addressing the climate crisis cannot be overstated. At the same time, we must confront Russia’s ongoing war in Ukraine, where innocent lives are being lost daily.

Over-dependence on Russian fossil fuels has already created severe energy insecurity, helped wreck the climate, and continued to threaten democracy.

Russia's war connects these seemingly disparate issues, and the role of the international community and multinational companies in indirectly supporting violence by facilitating Russia’s fossil fuel industry must be addressed.

The U.S., as a leader on the global stage, must spearhead efforts to create full and transparent sanctions against Russia’s fossil fuel industry. Equally important is holding U.S. companies like Halliburton accountable for their role in sustaining this industry.

The Climate Ambition Summit convened by U.N. Secretary General Antonio Guterres is held at the U.N. headquarters in New York, U.S., on Sept. 20, 2023.

 (Photo by Kyodo News via Getty Images)

As we discuss international climate action, it is essential to recognize that real progress means keeping Russian fossil fuels in the ground. Cutting down oil and gas production in Russia should be a priority for both ending the war in Ukraine and mitigating climate change.

While climate change threatens the planet, the expansion of Russian fossil fuel infrastructure, particularly liquefied natural gas (LNG), poses a dire threat to energy security, climate stability, and global peace.

As U.S. President Joe Biden arrives in New York, the U.S. must strengthen sanctions on Russia to halt the growth of this infrastructure. We also can’t ignore the fact that LNG expansion in the U.S. will also lock us in gas export dependency if the renewable energy revolution is not fast-tracked.

Furthermore, Russia has amassed about $445 billion for its exports of fossil fuels, and G20 countries that cause 80% of world emissions have paid $314 billion of this sum as of Sept. 1.

Ukraine has also called for major financial institutions like JPMorgan Chase, Citigroup, and HSBC to be prosecuted for war crimes for allegedly financing companies that trade oil with Russia. TotalEnergies, a France-based multinational corporation, has faced accusations of complicity in war crimes due to its involvement in Russia’s energy sector.



In particular, the recent exposure of multinational fracking corporation Halliburton sending over $7 million worth of oil refining hardware to Russia highlights the need for immediate action, not empty promises.

These revelations cast a shadow over the role of Western companies in the ongoing violence in Ukraine.

The time to move forward and build out clean-energy solutions to the climate crisis is now, at the same time as Russia’s fossil fuel-propelled war is raging in Ukraine. It is not enough to merely express concern; we must take concrete steps to stop these crises.

To bridge the gap between climate action and accountability for Ukraine, we propose a two-fold approach.

Strengthening sanctions and oversight

The U.S. and its allies must enhance sanctions against Russian critical industries, especially oil and gas extraction and exports, which are key sources of revenue to fund the war.

Embargoes and secondary sanctions on entities involved in cooperation with the Russian oil and gas industry are only partial thus far and are limited in effect.

In the U.S., legal action is expected to close the “refining loophole,” which allows Russian oil to be laundered and flow into the U.S., by banning the import of oil products produced from Russian crude in countries like India and Turkey.

For its part, the EU is working on a 12th sanctions package, which should include an embargo on Russian LNG.

Regulatory bodies should intensify oversight of financial institutions' transactions with entities connected to the Russian government.

Transparency and accountability should be at the forefront of these efforts, and it must be the responsibility of national governments to monitor and hold firms operating under their oversight responsible.


Responsible corporate conduct

Multinational corporations operating in Russia must engage in responsible business conduct. This includes conducting due diligence to ensure their operations do not indirectly support war crimes or human rights violations.

Companies that fail to uphold ethical standards should face legal consequences and reputational damage.

New York Climate Week provides an opportunity for world leaders, corporations, and individuals to align their actions with the principles of justice, peace, and environmental stewardship and start their full-speed shift to a renewable energy future.

Empty promises will no longer suffice. To secure a sustainable future, we must simultaneously tackle the climate crisis and demand accountability for those inadvertently financing violence in Ukraine.

As we embark on a journey toward a greener, more just world, let us ensure that our steps are marked by integrity, responsibility, and a genuine commitment to the well-being of all, both on our planet and in regions marred by war and conflict.

The people of the world demand not only words but actions from their leaders to save the climate and create peace, and I will be keeping up the pressure to make them act at this pivotal moment of history.

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WAR PROFITEERING

Halliburton equipment worth $7.1m imported into Russia in past year, customs records show

Exclusive: US oil multinationals face questions over trade with Russia amid pressure to cease operations

Daniel Boffey 

Chief reporter

THE GUARDIAN

Sun 17 Sep 2023 

US oil and gas multinationals are facing fresh questions over their trade with Russia after customs records revealed that more than $7.1m (£5.7m) worth of equipment manufactured by Halliburton has been imported into the country since it announced the end of its Russian operations.

Last September Halliburton, one of the world’s largest providers of products and services for oil and gas exploration, sold its Russian office to local management amid pressure on all US companies to cease their trade after the invasion of Ukraine.

Russian customs records seen by the Guardian show that despite this move to sell up on 8 September, Halliburton subsidiaries exported equipment of a value of $5,729,600 to its former operation in Russia in the six weeks that followed the sale.

The equipment was largely shipped from the US and Singapore although the records show it originated in a range of countries, including the UK, Belgium and France.

The bulk of exports from the subsidiaries ended on 6 October but the last shipment to Russia from a Halliburton company, recorded as Halliburton MFG in the records, was of a sealing element priced at $2,939.40 on 24 October 2022 from Malaysia to a firm called Sakhalin Energy, a consortium that is developing the Sakhalin-2 oil and gas project in eastern Russian. Its investors include Gazprom. Shell disinvested from the consortium after the invasion of Ukraine.

After a short pause, imports of Halliburton equipment to Russia then resumed in December 2022 from two companies unrelated to the US multinational.

The products were imported from Turkey, bringing the total value of exports of Halliburton equipment to Russia since the company closed its operations to at least $7,163,317.

Of all the exports to Russia made since last September, 98% were supplied to Halliburton’s newly independent former operation, known as BurService, whose clients have included Gazprom, Rosneft, TNK-BP and Lukoil.

According to customs records, exports to Russia of Halliburton equipment, which range in type from pumps, to wrenches for the drilling of wells, and cement additives, continued until at least the end of June this year. More recent records are yet to be made available.

There is exasperation in Ukraine at the lethargy of many large industrial players in the west in extracting themselves from the Russian economy.


The findings illustrate the difficulties multinational companies have had in unpicking their trading relationships and in controlling the distribution of their products via third parties.

Some of the world’s largest US oil and gas field service companies are already facing questions over their conduct. The Kremlin is heavily dependent on its oil and gas sector for the revenue that funds its military.

Earlier this month, the head of the US Senate foreign relations committee, Bob Menendez, wrote to Halliburton and their competitors SLB and Baker Hughes, after reports that the companies had continued to trade with Russia to various degrees after the invasion of Ukraine in February last year.

Menendez, in letters to the chief executives of the three companies, said he was “extremely disturbed” by an AP report that sales had continued in 2022. He accused the management of seeking to “make a profit” rather stand in solidarity with Ukraine.

Baker Hughes sold its oilfield services business in Russia nine months after the invasion. SLB, which reportedly had 9,000 employees working in Russia, announced only in July this year that it would stop exporting technology to Russia.

There is no suggestion that any of the companies breached the sanctions regime of the US or its western partners.

It is understood that the sale date of Halliburton’s operations in Russia was not fixed until late in the day, which may account for those shipments from its subsidiaries that left for the country shortly before and soon after 8 September.

A spokesperson for Halliburton said: “Halliburton was the first major oilfield services company to exit Russia, in full compliance with sanctions. It has been more than a year since we have conducted operations there.

“Halliburton wound down its Russia operations and completed the sale of its Russia business in less than six months while prioritising safety and securing the necessary government approvals, including for shipments to Russia. Halliburton no longer conducts operations in Russia.”

Halliburton, which was led by the former US vice-president Dick Cheney, posted a gross profit for the 12 months ending 30 June 2023 of $4.052bn, a 63.19% increase year-on-year despite writing off $300m on the sale of the Russian operation.

Glib Kanevskyi, chief executive of the Kyiv-based thinktank StateWatch, said that western governments needed to do more to persuade their large companies to better control the distribution of products which could be useful to the Russian economy.

He added that companies such as Halliburton should be encouraged to be transparent about how they are ensuring their products are being kept out of the Russian market.

Kanevskyi said: “When we talk about the Halliburton case, we need to understand that it cannot be effective if, for example, the USA or other countries will try to punish some company involved in this scheme to ship Halliburton equipment to Russia. It cannot be effective in my opinion.

“If the international community will collaborate and involve businesses then it can be helpful. It’s not easy. What countries can do today is dialogue with its own businesses. If we talk about Halliburton it is a serious player in the world and the US government can have a conversation with it and see how it can better control its distribution process”.

An inconvenient truth… there’s not enough critical metals to reach net zero

James Cooper | August 8, 2023 | 

Stock image.

I’ve taken the title for this article from the 2006 documentary film directed by Davis Guggenheim about former United States Vice President Al Gore’s campaign to educate people about global warming…


It was called An Inconvenient Truth.

So today, we’re going to deliver you perhaps a more pressing ‘inconvenient truth,’ one that’s set to undo our multi-generation assumption that energy supplies would remain cheap and abundant.

I set the scene back in June showing you why this energy crisis is being born out of years of under investment in the oil and gas industry.

If you haven’t already, I suggest you read that here.

Its why I believe storm clouds are approaching for global energy security…. The fossil fuel industry is running on empty.

It means we need to come up with an alternative base load energy source far earlier than the 2030 or 2050 targets mandated by western leaders.

Yet these governments have told us that renewables will naturally take up the slack from declining oil and gas output.

But dive into the data and it seems we’ve made a gross miscalculation on our ability to achieve net zero.

Why?

It centres around the lack of metal supplies sitting in the ground… Also known as mineral reserves.

That’s what the research from Associate Professor Simon Micheaux has uncovered.

Micheaux was engaged by the Geological Survey of Finland to calculate the entire volume of metals needed to bring one-generation of solar panels, windfarms, and EV’s into our energy mix.

Now, when Micheaux explains ‘one-generation’ this means the volume of raw materials needed to entirely replace fossil fuel reliance with renewables.

According to his research, these renewable energy sources have a service life of around 15-20 years.

Once that’s complete we’ll need to re-start and build the next generation all over again!

So how much metal do we actually need to create just that first round of renewables?

This is the part that will make most politicians shift uneasily in their seats…

Based on current annual output, Micheaux’s peer reviewed studies indicate we’ll need a staggering…

· 9,920 years’ worth of Lithium production

· 1,733 years’ worth of Cobalt production

· 3,287 years’ worth of Graphite production

· 189 years’ worth of Copper production

· 400 years’ worth of Nickel production

All condensed into 20-30 years!

But as I explained last month, thanks to a stranglehold on oil and gas development we’ll need to transition far earlier.

But as Micheaux’s data highlights, the crux of the problem is not so much the enormous increase in output but the fact we don’t actually have the metal in the ground to begin with.

Staggering!

Using data from the US Geological Survey, Micheaux discovered global copper reserves will fall short by 80%, global nickel reserves by 90%, and cobalt by around 96%.

Simply put, of all the cobalt we know that exists in the ground today, if we were to mine all of it then we’d have just 4% of the cobalt needed to achieve net zero.

It highlights a gross miscalculation by political leaders in their assumption that renewables would naturally pick up the slack from declining oil and gas output.

A problem they have created by penalising investment into fossil fuel industries.

It also points toward a disturbingly high probability of global energy shortages… This is backed up by Goehring & Rozencwajg’s recent report predicting multi-fold increases to energy prices set to manifest by the mid-2020’s.

This is as a complex problem that has the potential to erode global standards of living.

It’s also highly inflationary.

For over a century we have taken for granted uninterrupted access to abundant energy that has enabled technological innovation and improved standards of living.

But the seeds have been sown… An end to civilisations ‘era of abundance’ is fast approaching.

While this is set to be a monumental miscalculation with potentially dire consequences for the global economy…

There are perhaps a few key areas for investors to take shelter from a looming energy crisis.

The first and most obvious solution is gaining broad exposure through a highly liquid oil and gas ETF.

The iShares U.S. Oil & Gas Exploration & Production ETF (IEO) offers a market-cap-weighted ETF with exposure to companies engaged in the exploration, production, and distribution of oil and gas.

Assets under management stand at around $1.3 billion… The ETF also offers investors a 1.96% annual dividend yield.

With leverage to rising oil and gas prices it also enables investors to capture upside from future discovery.

Given the impetus to find more oil after a decade-long slump, holding exposure to both production and exploration should serve investors well.

However, the service-side of the oil and gas business is also set to capitalise on future energy volatility.

It offers investors a strategy for de-risking their exposure to production shortfalls and declining output among those companies that have chosen not to invest in future supply thanks to government net-zero mandates.

Should the global economy look to re-align itself with stabilising energy supply then capex spending will be enormous… Service companies will benefit the most.

The VanEck Oil Services ETF (NYSE: OIH) tracks the world’s largest O&G service companies… Including big names like Schlumberger (NYSE:SLB), Halliburton (NYSE: HAL) and Baker Hughes (NYSE: BKR).

These are multi-national companies with a global reach.

That limits jurisdictional risk… Something that hangs over producers operating in countries committed to ending oil and gas licenses and development applications.

Another angle to this investment theme is to focus on mining stocks.

Despite the seemingly impossible task in finding enough critical metals, governments will continue to push the net zero mandate.

It means they’ll be abundant opportunities to gain upside from explorers and developers focussed on critical metals.

But the most important point to understand is this…

Our modern economy has been built on decades of abundance… Cheap and plentiful supplies of energy.

But poor planning and lack of investment is steering the global economy toward a much more difficult future… One that will be mired in scarcity and far higher energy costs.

It’s why commodity stocks… From oil, gas, nickel, rare earths to copper, offer enormous long term upside for investors able to look beyond these short term market pressures.

Given this sector has endured heavy selling in 2023 investors are well placed to snap up bargains before this long term theme gains momentum.

James Cooper is a commodities analyst and geologist.

U.S. Extends License To Operate In Venezuela To Oilfield Services Companies

By Julianne Geiger - May 23, 2023

• The Biden Administration has extended a waiver that authorizes a few oilfield services companies to keep assets in Venezuela.
• 
  
• The license to preserve oilfield assets was originally granted back in 2019 to U.S. oilfield services providers Baker Hughes, Halliburton, Schlumberger, and Weatherford International.
• 
  
• Chevron also secured a license—but Chevron’s license is more extensive.

The United States has renewed a license that will extend the authorization to select oilfield services companies to keep assets in Venezuela. The license does not allow the companies to drill, process, or handle Venezuelan-derived crude oil, Reuters reported on Tuesday.

The license to preserve oilfield assets was originally granted back in 2019 to U.S. oilfield services providers Baker Hughes, Halliburton, Schlumberger, and Weatherford International. The license allows them to maintain a physical presence in the country, including their assets, but does not allow them to perform any operations with PDVSA or any JVs, including well maintenance.

Chevron also secured a license—but Chevron’s license is more extensive. Chevron is the only U.S. company allowed to do business in Venezuela after obtaining a six-month license to operate under its joint ventures with PDVSA. Profits from Chevron’s Venezuelan-derived crude oil will go towards paying down PDVSA’s debt to Chevron, and will not contribute to the state-run oil company’s profits.

Venezuela’s oil industry has been hit hard by corruption, mismanagement, and U.S. sanctions. Venezuela relies heavily on crude oil revenues to finance its budget. For 2023, Venezuela was planning to finance 63 percent of its budget with oil revenues.

Venezuela’s oil exports did increase in March, reaching their highest levels since last August, carried mostly by Chevron’s activity there. Venezuela exported nearly 775,000 bpd in March, with China, its largest buyer.

Some oilfield services companies, including Baker Hughes, had pushed last year to restart drilling in the sanctioned South American country, with analysts suggesting that doing so could boost Venezuela’s crude production back above 1 million barrels per day.

The oilfield services firms have been prohibited from conducting business in Venezuela since 2019.

By Julianne Geiger for Oilprice.com

FOSSIL FUEL OBSCENITY

Exxon reports record first-quarter earnings of $11.4 billion

Exxon's earnings during the first quarter topped $11 billion, supported in part by its refining segment. File photo by Eduardo Sverdlin/UPI | License Photo

April 28 (UPI) -- U.S. oil major Exxon Mobil on Friday reported first-quarter earnings more than twice as high as year-ago levels, while also reporting progress in emission reductions.

Exxon reported first-quarter earnings of $11.4 billion, compared with $5.5 billion during the first quarter of 2022.

"Our people's hard work to execute on our strategic priorities delivered a record first quarter following a record year," said Darren Woods, Exxon's chairman and CEO. "We are growing value by increasing production from our advantaged assets to meet global demand."

Production in the first quarter was 4.4% higher than year-ago levels and the company expects even more output once the oil bonanza offshore Guyana begins in 2026. That business segment posted revenue of $6.5 billion, down $1.7 billion from the fourth quarter because of the recent decline in commodity prices.

Total earnings, meanwhile, were lower than the $12.8 billion from the fourth quarter, due in large part to additional European taxes on the energy sector, the company said.

Its refining segment, however, saw earnings increase by $113 million from the fourth quarter to reach $4.2 billion, backed by the recent start-up of expanded operations at its Beaumont refinery in Texas.

Cash flow for Exxon in 2022 was $76.8 billion and the company invested some $22.7 billion on its operations last year, in line with expectations. Free cash flow was $11.4 billion for the first quarter.

RELATED Halliburton posts $2.8B first-quarter revenue, says outlook is 'strong'

Outside of commodities, the company said it has a long-term agreement to build a carbon capture and storage facility at Beaumont that would cut its overall emissions. Amid concerns that oil companies aren't doing enough to address climate concerns, Exxon added that its year-end greenhouse gas emissions intensity from its operated assets were 10% below a 2016 baseline.

America's Oil Patch Loses Its Luster

Story by Jinjoo Lee • WSJ

The oil-field services sector is still humming along, but its clients are casting their gaze past America’s once-booming shale patch.


America's Oil Patch Loses Its Luster© ali haider/Shutterstock

Industry services giants SLB and Baker Hughes had healthy numbers to report last week. SLB said on Friday that its top line grew 30% in the first quarter from a year earlier, better than the 25% Wall Street expected. Net income grew 83%, handily exceeding expectations. Baker Hughes said on Wednesday that revenue and net income grew 18% and 14%, respectively—also both higher than analyst expectations. Halliburton, the third huge player in the business and the one most focused on North America, releases results this Tuesday.

While spending on short-cycle U.S. shale powered the growth of oil-field services companies last year, long-cycle international spending is expected to take center stage in 2023. SLB said on Friday that the North American land market could see a plateau in activity this year as low natural-gas prices make it uneconomic for some producers to drill for the commodity. U.S. benchmark natural-gas futures have been hovering just above $2 per million British thermal units recently, well below the $3.45 per million British thermal units that price producers say they need on average for drilling to be profitable, according to a first-quarter energy survey by the Kansas City Federal Reserve.

Domestic oil-drilling activity has also been weak. The U.S. oil rig count has dropped almost every week since early February, according to Baker Hughes data. This might reflect caution and price sensitivity from private drillers, which had been quick to add rigs last year but were also quick to drop them when oil prices declined in parts of this year. After some steep cost inflation last year, break-even prices have risen for producers, according to Kansas City Fed survey results. If U.S. benchmark crude oil prices fall to $70 a barrel, private operators could drop a few dozen more rigs; if they fall to $60 to $65 a barrel, up to 150 rigs could stop being employed, according to estimates from Scott Gruber, equity analyst at Citigroup. West Texas Intermediate crude fell below $70 a barrel during parts of March, though it recovered after some members of OPEC+ announced a production cut earlier this month.

Both SLB and Baker Hughes lowered their expectations for North American spending growth this year. Baker Hughes said it expects drilling and completion spending in the region to grow by a low double-digit percentage this year, down from the mid to high double-digit growth it telegraphed three months ago. By contrast, international spending is expected to increase in the mid double-digit range. Baker Hughes’ CEO Lorenzo Simonelli said on his company’s earnings call on Wednesday that pricing in North America is starting to level off across the industry.

Even though some OPEC+ members committed to an oil production cut last month, that hasn’t reduced oil-field services companies’ business prospects. SLB Chief Executive Olivier Le Peuch said on the earnings call on Friday that there have been no signs of slowdown in spending in those countries. The company expects to see its highest-ever revenue in the Middle East this year. Notably, both Saudi Arabia and the United Arab Emirates have ambitious long-term capacity-expansion plans—both for oil and natural gas. Outside OPEC, SLB highlighted Brazil’s goal to expand its oil production to 4 million barrels a day from today’s 3.3 million barrels a day.

Additionally, major international oil companies that previously held back on expensive, long-cycle offshore drilling projects have again embraced it after generating prodigious cash flows last year. Investors have become more receptive to such projects after Russia’s invasion of Ukraine highlighted the importance of energy security, according to Michael Bradley, partner at Veriten, an energy-focused research and investment firm. SLB said it is seeing strong demand for exploration and appraisal services.

Weakness in North American short-cycle activity notwithstanding, oil-field services firms’ unwavering pipeline of long-cycle contracts signal that the world’s producers, whether major European oil companies or national oil companies, are still in the fossil-fuel business for the long haul.

Write to Jinjoo Lee at jinjoo.lee@wsj.com

Cornwall's underground power source could turbocharge Britain

Rachel Millard
Tue, March 7, 2023 

Geothermal energy pioneers also want to extract lithium from Cornwall's waters 

- eye35 / Alamy Stock Photo

The race to develop cleaner energy has sent engineers in several directions: out to sea to plant wind turbines, to the desert to plant solar panels, and into the laboratory to try and develop nuclear fusion.

At an industrial site in Cornwall, however, they are looking in another direction: deep underground.

Private company Geothermal Engineering has drilled more than three miles underground near Redruth, tapping into water at temperatures of up to 180 degrees centigrade.

It plans to harness that heat to generate electricity for the national electricity grid and warmth for nearby homes.

It would be the first deep geothermal power plant in the UK, when up and running as planned in 2024.

Geothermal Engineering has now raised £15m to get the project over the line, £12m of which is coming from Kerogen Capital, the private equity firm.

The $2bn [£1.6bn] asset manager has been best known for its investment in oil and gas, but is pushing into lower carbon sources and has a dedicated clean energy division, CelerateX.

Its investment into Geothermal Engineering comes amid a wider global push into deep geothermal energy as part of efforts to replace fossil fuels and cut carbon emissions.

Companies are rapidly developing new ways of drilling and extracting the warmth from deep underground, raising hopes deep geothermal could move from the niche into the mainstream.

“I think it can be very significant,” says Michael Liebreich, energy expert and chairman of Liebreich Associates, who is also chairman of the advisory board of deep geothermal developer Eavor.

“I think there's always been a strong understanding that it's a big opportunity - the challenge is how do you get it out, and how do you get it out economically.”

Deep geothermal currently makes a tiny contribution to the global energy system, with projects generally providing heat and electricity for small, local communities.

The complications, risk and expense of drilling deep underground and drawing out warmth has held the industry back, with little reason to invest heavily when other, competitive sources of energy are plentiful.

That equation is changing, however, because of efforts to diversify away from oil and gas, with billions of pounds now flowing into finding cleaner energy solutions and the price of carbon emissions going up in several economies.

Global concerns over energy security this winter after Russia’s war on Ukraine rocked oil and gas markets is also focusing minds on new solutions.

“The current situation – characterised by highly volatile oil and gas prices – provides renewed opportunities for geothermal energy to further develop as a strategic alternative in electricity generation, heating and cooling worldwide,” Irena, the International Renewable Energy Agency, said in a report last month.

New drilling techniques, including some developed through the natural gas fracking boom in the US, are also helping to push the industry forward.

In the US, for example, Quaise Energy is developing a new technique which uses super high energy laser beams to ‘drill’ through hard rock deep underground.

The company says the “radical new approach” should enable them to reach depths of up to 20 kilometres and temperatures up to 500 degrees celsius.

The technology was developed by scientists working on nuclear fusion at the Massachusetts Institute of Technology.

Carlos Araque, chief executive and co-founder, says he wants to build “clean electric generation and heat distribution plants within a short distance of every major population and industrial centre on the planet”.

In June, Quaise Energy raised $52m from companies including Techint Group, the Argentine conglomerate, and Safar Partners, US technology venture fund.

Before setting up Quaise, Mr Araque worked as a technology development manager at Schlumberger, the oilfield services company.

He is not alone in seeing the potential for assets and expertise from the fossil fuel industry to be redeployed.

In the oil and gas heartlands of Texas, oil and gas companies including Chevron and Halliburton have signed up to the new Texas Geothermal Energy Alliance.

"We've been drilling oil and gas wells for so long in Texas – over 1 million wells – that we have all this data about what's below the surface," Barry Smitherman, a former regulator in Texas, told S&P Global Platts last year. “That can inform geothermal developers about where to concentrate."

Meanwhile, in Europe heat is being extracted from an abandoned oil well in Kiskunhalas, Hungary, in a project officials hope could be replicated.

In South Wales, officials have been exploring whether water swirling through disused coal mines could be used to heat local homes.

Some investment is also coming from the fossil fuel sector. BP and Chevron have both backed Alberta-based Eavor.

Its approach involves using the geothermal warmth to heat water it pipes underground – acting like a large radiator – without needing to extract water from deep underground.

“Eavor has just dug the world’s deepest geothermal lateral in the world – we are really pushing the limits of drilling capability,” adds Mr Liebreich.

Geothermal is not without its problems: The process is energy intensive. In many cases, carbon dioxide dissolved in low quantities in water will also need capturing and sent back into the ground.

Geothermal drilling near Cornwall’s Eden Project had to be halted in March 2022 owing to seismic activity.

The UK’s banned natural gas fracking industry has argued geothermal drillers are treated unfairly given seismic risk.

However, the push away from fossil fuels gives geothermal a second impetus: electric car batteries need lithium, which can be extracted from geothermal waters at the same time as the heat.

In the UK, Geothermal Engineering is using a “binary” power plant.

Hot geothermal waters are piped from deep underground and used to heat a second fluid using a heat exchanger. The secondary liquid is used for steam to drive a turbine to produce electricity. The geothermal fluid is sent back underground.

Weekend; Beautiful park runs; Pix show the park run at the Eden Project, near St Austell, Cornwall.

Pic Jay Williams 14-09-19 - JAY WILLIAMS

Once that project is up and running, the company wants to build a fleet of small power stations around Cornwall.

Much will depend, however, on the outcome of an upcoming government auction to secure its electricity prices, where geothermal will compete against other technologies.

Ryan Law, Geothermal Engineering’s chief executive, estimates the cost of generating electricity from the plants could be in the region of £100 per MWh, which is far more expensive than offshore wind and other technologies.

As well as power supplies and heat, it also wants to extract lithium from the geothermal waters, and has been testing the viability with various approaches.

Law says an announcement should be made on that front in the next couple of months.

“It's a very exciting sort of development for us and potentially huge for UK PLC," he says.

“We’ve taken it step by step to try and get the solutions right, so that when we do produce lithium then we have meaningful quantities.”

He and Kerogen Capital, which is taking a majority stake, argue its investment “fires the starting gun” on a wider deep geothermal energy industry in the UK.

“Right beneath our feet, we’ve got the potential to heat every home in the UK with geothermal,” says Jason Cheng, chief executive of Kerogen Capital.

“It's been a niche industry, but now it's set to scale."

A New Bottleneck Emerges For U.S. Oil And Gas

By Alex Kimani - Feb 08, 2023

• Despite the mostly impressive top- and bottom-line growth, capital discipline and returning cash to shareholders have been consistent themes for oilfield services giants.
• 
  
• Wood Mac has reported that in 2022, the average cost of drilling and completing a well in the U.S. Lower 48 states rocketed 34%.
• 
  
• Oilfield services capacity in key markets, including North America, is a key determinant of the pace of growth in oil and gas production.

When the energy crisis hit a nadir two years ago, highly indebted E&P companies quickly changed their operational playbook, adopting stricter cost discipline, cutting back on expensive drilling programs and vowing to return more cash to shareholders in the form of dividends and buybacks. 

But E&Ps are not the only ones pursuing this new strategy. Oilfield services (OFS) companies have also adopted greater cost discipline, prioritizing cash generation and distributions to shareholders. For instance, in their latest earnings season, OFS giants Schlumberger (NYSE:SLB), Baker Hughes (NASDAQ:BKR) and Halliburton (NYSE:HAL) announced significant dividend hikes and heightened share buybacks.

SLB reported full-year revenue of $28.1 billion, good for a 23% Y/Y increase while net income of $3.4 billion grew a robust 83%Y/Y. SLB raised its quarterly dividend by 43% and resumed share buybacks. The company says that it expects to distribute more than 50% of free cash flow to shareholders in dividends and buybacks in the current year. SLB has also been strengthening its balance sheet, managing to pay down $1.7B in debt during the year to bring it down to $9.3B.

BKR reported Q4 2022 revenue of $5.9 billion, up 10% sequentially and up 8% Y/Y. Non-GAAP net income clocked in at $692 million, up 38% sequentially and up 21% Y/Y while net income fell 38% Y/Y to $182 million. Despite the lower profit, BKR announced its first dividend hike for the first time since 2017.

Meanwhile, HAL reported full year revenue of $20.3 billion, up 33% Y/Y while full year operating income of $2.7 billion increased 50% Y/Y. The company announced a 33% divided hike and resumed its share buyback program.

Despite the mostly impressive top- and bottom-line growth, capital discipline and returning cash to shareholders have been consistent themes in these companies’ latest earnings calls while capex growth remains muted. But global research and consultancy group Wood Mackenzie says that this is not necessarily a good thing from an E&P perspective.

Limiting Growth

Indeed, Wood Mac says that services capacity in key markets, including North America, is a key determinant of the pace of growth in oil and gas production, noting that running equipment harder is likely to result in more frequent breakdowns and disruptions. The analysts have warned that execution risk has the potential to be an even more serious problem than cost inflation, one of the biggest concerns for these companies in recent years. The experts say that capacity utilization rates for frac spreads--the pressure pumps used for hydraulic fracturing--and super-spec high-quality rigs are already running high.

Wood Mac has reported that in 2022, the average cost of drilling and completing a well in the U.S. Lower 48 states rocketed 34% as prices for diesel, proppant, and steel pipe hit record highs. However, the analysts expect cost inflation to be moderate this year, with costs expected to only rise 10%.

OFS companies might also be negatively impacted by new exploration and drilling practices being adopted by oil and gas producers. According to Wood Mackenzie’s ‘Oil and gas exploration 2022 edition, exploration well numbers in 2022 were less than half the numbers during pre-pandemic years; luckily the total volume of 20 billion barrels of oil equivalent was comparable to the average in the 2013 – 2019 period, creating at least $S33 billion of value. In other words, E&P companies are unwilling to go back to their drill, baby, drill days and are instead focusing their energies on low-cost, lower-carbon but high-yield assets.

“2022 was a standout year for exploration,” says Julie Wilson, Director of global exploration research at Wood Mackenzie.  

While volumes were good, Wilson says, they aren’t “stellar”. 

Still, she says, “explorers were able to drive very high value through strategic selection and focusing on the best and largest prospects”. 

The end result is that we’re seeing new discoveries with higher-quality hydrocarbons in portfolios. And it’s also better for the climate because these more strategic discoveries allow companies to “reduce carbon by displacing less advantaged oil and gas supplies while also meeting the world’s energy needs,” according to Wilson. 

Wood Mac says that the highest value came from several new deepwater discoveries in Guyana and Brazil; world-class discoveries in a new deepwater play in Namibia; and resource additions in Algeria. 

The average discovery last year was over 150 million boe, more than double the average of the previous decade. National oil companies (NOCs) and oil majors accounted for nearly 75% of new discoveries, with Exxon Mobil (NYSE: XOM), TotalEnergies (NYS: ETTE), Petrobras (NYSE: PBR) and QatarEnergy leading the way in net-new discovered resource. 

Another interesting development: Liquids accounted for 60% of new discoveries, marking just the third time in two decades that liquids made up the majority of new discoveries.

By Alex Kimani for Oilprice.com