Growth in U.S. shale oil output might slow down in 2018 as oilfield service providers are finding it hard to respond to booming demand for their services, the head of business development of Halliburton, Mark Richard, said at the World Petroleum Congress that took place this week in Istanbul.
Richard said he expected the number of active drilling rigs in the United States to hit 1,000 by the end of this year, but after that their number will either remain flat or start declining: a rig count of 800-900 is more sustainable, Richard said. Last week, the rig count, as reported by Baker Hughes, hit the highest in more than 24 months, at 763.
Many see the increase in the number of U.S. rigs despite weeks of price drops of both WTI and Brent benchmarks as a sign of U.S. shale's resolve in the face of a low-priced oil market. Others see it as a 3- to 6-month lag between prices and active rigs.
Oilfield service companies in the U.S. have enjoyed a comeback with a vengeance since oil prices first ticked above $50 a barrel, after having to spend the last couple of years offering discounts and slipping into the red, many barely surviving and many going under. Now demand for drilling equipment and services is back and oilfield service providers are raising their prices, shunning some jobs for lack of workforce and equipment, and basically turning the tables on oil and gas producers.
Prices, however, have been easing off in the last few weeks and unless something…
Growth in U.S. shale oil output might slow down in 2018 as oilfield service providers are finding it hard to respond to booming demand for their services, the head of business development of Halliburton, Mark Richard, said at the World Petroleum Congress that took place this week in Istanbul.
Richard said he expected the number of active drilling rigs in the United States to hit 1,000 by the end of this year, but after that their number will either remain flat or start declining: a rig count of 800-900 is more sustainable, Richard said. Last week, the rig count, as reported by Baker Hughes, hit the highest in more than 24 months, at 763.
Many see the increase in the number of U.S. rigs despite weeks of price drops of both WTI and Brent benchmarks as a sign of U.S. shale's resolve in the face of a low-priced oil market. Others see it as a 3- to 6-month lag between prices and active rigs.
Oilfield service companies in the U.S. have enjoyed a comeback with a vengeance since oil prices first ticked above $50 a barrel, after having to spend the last couple of years offering discounts and slipping into the red, many barely surviving and many going under. Now demand for drilling equipment and services is back and oilfield service providers are raising their prices, shunning some jobs for lack of workforce and equipment, and basically turning the tables on oil and gas producers.
Prices, however, have been easing off in the last few weeks and unless something drastic is done (by OPEC) they are likely to remain depressed for the rest of the year. This will limit E&Ps financial capacity to invest in new drilling and might ease the strain on oilfield service providers, at the same time curbing production.
Deals, Mergers & Acquisitions
• Apache Corp. has become the latest energy major to exit Canada's oil and gas sector, by agreeing to sell its assets in Alberta and British Columbia to Paramount Resources, a Calgary-based peer. The value of the deal is $361 million and it includes mostly natural gas assets. Separately, Paramount Resources announced it will merge with local Trilogy Energy Corp. in the latest sign of ongoing consolidation in Canadian energy.
• Turkey's state-owned oil, gas, and pipeline company Botas, and Gazprom have reached an agreement on the financing of the Turkish Stream gas project. Figures were not disclosed. The project's total value was last year calculated at $12.9 billion. Already, Gazprom has a deal with Hungary for the delivery of natural gas via Turkish Stream.
• Amec Foster Wheeler sees no hurdles to its $2.84-billion merger with Wood Group, despite an ongoing investigation into Amec's business by the UK's Serious Fraud Office. The investigation concerns Amec's dealings with third parties and possible bribery.
Tenders, Auctions & Contracts
• Mexico has awarded exploration licenses for 21 of 24 onshore oil and gas blocks, tendered earlier this week, with local Jaguar Exploracion y Produccion coming out as the big winner. The Mexican energy company won 11 of the 21 projects, six of them in partnership with Canadian Sun God Resources, and five on its own. Expected investment in the 21 blocks throughout their lifetime is estimated at $2 billion. Mexico's hydrocarbon reserves shed 6 percent last year to 16.77 billion barrels of oil equivalent. At the moment, Mexico is pumping a bit more than 2 million barrels of oil daily and needs a 100-percent replacement rate of its reserves to just maintain it. The country, however, has plans to boost this to more than 2.6 million barrels.
• Russia sharply increased its shipments of crude oil and oil products to North Korea over the first four months of this year, according to customs data. Shipments of oil products were worth $2.3 million in the period, a 200% increase on an annual basis, and constituted almost the entire exported amount of crude and products. Last week, China announced it was limiting oil shipments to North Korea. So if data is true, Russia is using this opportunity to pick up market share despite all the saber-rattling over North Korea.
• Iran is preparing its first auction of oil and gas fields after the lifting of Western sanctions. Over the next two to three months, the energy ministry plans to tender 14 oil and gas blocks, seeking new discoveries to boost its energy industry. The ministry hopes to attract Big Oil companies such as BP and gas majors such as Russian Gazprom.
Discovery & Development
• Oil drilling is picking up in Colorado after the first decline in output last year since 2001. The recovery is being driven by established players in the U.S. energy industry including Anadarko, Noble Energy, PDC Energy, and SRC Energy. These companies are focusing their drilling projects on their best acreage in the state, combining the quality of the land holdings with improvements in the drilling and extraction process. PDC Energy, for example, says that it can drill profitably at even $40 a barrel.
• Shell is planning to build a network of LNG supply hubs as a way of boosting demand for transportation fuel, from heavy trucks to ships. The use of LNG as a transport fuel is rising as global efforts to curb fossil fuel emissions prompt a shift in priorities in the energy industry and this fact necessitates stimulating demand for this fuel. Separately, Shell has announced it will invest $1 billion annually in clean energy projects until 2020.
• Indian Oil Corporation, the largest fuel retailer in India, will build a bioethanol plant in partnership with carbon recycling services provider LanzaTech. The facility will be constructed at IOC's Panipat refinery and will produce the fuel by recycling off-gases from the refinery.
• Sinopec plans to double its annual natural gas production to 40 billion cubic meters by 2020, thanks to the development of the first shale gas project in China, the Fuling field. Fuling is seen to hit annual output of 10 billion cubic meters by the end of 2017. Reserves at the field are estimated at more than 600 billion cu m of gas.
• Saudi Aramco is planning to spend $300 billion on exploration and production over the next ten years as it seeks to maintain its current spare production capacity and boost its reserve base. The announcement was made by CEO Amin Nasser, who also warned that there is a global oil shortage looming because of a $1-trillion loss of investments during the industry downturn from the last two years.
Company News
• Adnoc, the UAE's state oil company, is looking for joint venture partners and is mulling over the listing of some of its business units in a bid to improve its revenue stream and create new jobs. The companies that will be partially privatized through listings include some service divisions but not the parent company itself. Adnoc currently pumps around 3 million bpd of crude and 9.8 billion cubic feet of natural gas.
• Halliburton said it has been hiring new workers at a rate of 100 per month since the start of the year to meet a surge in demand for oilfield services in West Texas. That's a 33% increase from the end of last year. The major has also upped its fracking truck fleet by almost a third in the area.
• Colombia's Ecopetrol has set up a subsidiary in Mexico as part of its diversification efforts aimed at strengthening its oil and gas portfolio, the company said. The subsidiary will work on projects that the Colombian state-owned firm was awarded in recent tenders in Mexico.
Politics, Geopolitics & Conflict
• The battle against IS in Mosul is almost over-so say Iraqi officials. It took nine months for the Iraqi army and its U.S. allies to take over the last stronghold of the terrorist group in Iraq and the battle is not over, Iraq's PM cautioned, because what remains of IS forces in the northern Iraqi city are already launching a counter-offensive.
• Tension is rising in Russia's Dagestan republic, with Chechen officials recently visiting the region and throwing in their support for the creation of an independent Chechen district within the Dagestan republic.
• Brazil's Senate will, by the end of this month, vote on corruption charges brought against President Michel Temer. If the lower house of the country's Congress accepts the charges, the president could be suspended for up to 180 days before standing a trial in front of the Supreme Court.
• The British Financial Conduct Authority has proposed new, laxer listing rules to accommodate the IPO of Saudi Aramco. The possibility of such a proposal has drawn a significant amount of criticism from the local financial industry.
• Bolivia's President, Evo Morales, has slammed Donald Trump for pulling out of the Paris Agreement on climate change, saying the move has left him "isolated and trapped."