Oil pump jacks in Texas. The industry is raising its annual spending plans to meet output targets. Reuters
Oil pump jacks in Texas. The industry is raising its annual spending plans to meet output targets. Reuters
Oil pump jacks in Texas. The industry is raising its annual spending plans to meet output targets. Reuters
Oil pump jacks in Texas. The industry is raising its annual spending plans to meet output targets. Reuters

Why shale may not stage a comeback despite higher oil prices


  • English
  • Arabic

Inflation in the oil sector is worsening and industry executives do not expect cost pressures on everything from steel pipe to frack sand to ease any time soon.

The increase in prices has been so swift that oil chief executives are being forced to increase the size of their annual budgets to preserve crude and natural gas output targets.

Those same executives have issued a warning that rampant oilfield inflation make any significant increase in domestic oil production much more difficult to attain despite the incentive of $100-a-barrel crude.

Benchmark US and international oil prices have surged by more than 40 per cent this year as strong post-coronavirus demand crashed headlong into anaemic growth in crude supplies and the worldwide market dislocations caused by Russia’s invasion of Ukraine.

“Given the substantial supply chain bottlenecks and scarcity of oil service equipment and field personnel, any attempt to increase activity in the US will be logistically challenging and capital inefficient,” Apa chief executive John Christmann said during a conference call on Thursday.

Apa, the oil explorer formerly known as Apache, this week raised its full-year drilling budget by 8 per cent, startling investors unaccustomed to such revisions a few months after the plan was minted.

The stock fell by as much as 10 per cent, wiping out more than $1.5 billion in market value in less than three hours on Thursday.

ConocoPhillips also increased its spending plan by 8 per cent while Murphy Oil and Laredo Petroleum raised theirs by 7 per cent and 6 per cent, respectively.

The inflationary trend has hit every corner of the oil exploration and production cycle. Drillers said they are experiencing sticker shock on everything from rigs and workers to diesel fuel and frack sand.

Shale company Continental Resources said the price of steel tubes used to line the interior of oil wells jumped by about 7 per cent in the month of March alone.

Meanwhile, another shale specialist, Coterra Energy, noted that it can take as long as two years to take delivery of pipes, compressors and other production equipment.

Both companies said their drilling and production costs are up 16 per cent to 20 per cent from last year.

That represents an acceleration from earlier this year, when the sector was expecting cost increases in the range of 10 per cent to 15 per cent.

“I think it is here with us for a while,” ConocoPhillips chief executive Ryan Lance said on inflation during a conference call. “I don’t think it is transitory and we are going to have to deal with it.”

Hess is raising its capital budget by as much as $100 million this year, mainly because of a 7 per cent increase in drilling and fracking costs in the Bakken Shale region of North Dakota.

Scott Sheffield, the chief executive of Pioneer Natural Resources, expressed worry that supply constraints will hamper production.

“I just think it is going to be tough to hit” some of the Wall Street forecasts for oil supply growth, he told investors. “It makes me even more bullish about some of the oil price numbers that are out there.”

Shale executives are trying to minimise the pain from rising costs by ordering supplies earlier and reducing unit expenses through strategies such as drilling longer lateral wells.

Mental%20health%20support%20in%20the%20UAE
%3Cp%3E%E2%97%8F%20Estijaba%20helpline%3A%208001717%3Cbr%3E%E2%97%8F%20UAE%20Ministry%20of%20Health%20and%20Prevention%20hotline%3A%20045192519%3Cbr%3E%E2%97%8F%20UAE%20Mental%20health%20support%20line%3A%20800%204673%20(Hope)%3Cbr%3EMore%20information%20at%20hope.hw.gov.ae%3C%2Fp%3E%0A
Tearful appearance

Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday. 

Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow. 

She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.

A spokesman said her upset demeanour was due to a personal matter.

The specs
  • Engine: 3.9-litre twin-turbo V8
  • Power: 640hp
  • Torque: 760nm
  • On sale: 2026
  • Price: Not announced yet
AndhaDhun

Director: Sriram Raghavan

Producer: Matchbox Pictures, Viacom18

Cast: Ayushmann Khurrana, Tabu, Radhika Apte, Anil Dhawan

Rating: 3.5/5

How green is the expo nursery?

Some 400,000 shrubs and 13,000 trees in the on-site nursery

An additional 450,000 shrubs and 4,000 trees to be delivered in the months leading up to the expo

Ghaf, date palm, acacia arabica, acacia tortilis, vitex or sage, techoma and the salvadora are just some heat tolerant native plants in the nursery

Approximately 340 species of shrubs and trees selected for diverse landscape

The nursery team works exclusively with organic fertilisers and pesticides

All shrubs and trees supplied by Dubai Municipality

Most sourced from farms, nurseries across the country

Plants and trees are re-potted when they arrive at nursery to give them room to grow

Some mature trees are in open areas or planted within the expo site

Green waste is recycled as compost

Treated sewage effluent supplied by Dubai Municipality is used to meet the majority of the nursery’s irrigation needs

Construction workforce peaked at 40,000 workers

About 65,000 people have signed up to volunteer

Main themes of expo is  ‘Connecting Minds, Creating the Future’ and three subthemes of opportunity, mobility and sustainability.

Expo 2020 Dubai to open in October 2020 and run for six months

Cricket World Cup League Two

Oman, UAE, Namibia

Al Amerat, Muscat

 

Results

Oman beat UAE by five wickets

UAE beat Namibia by eight runs

 

Fixtures

Wednesday January 8 –Oman v Namibia

Thursday January 9 – Oman v UAE

Saturday January 11 – UAE v Namibia

Sunday January 12 – Oman v Namibia

Green ambitions
  • Trees: 1,500 to be planted, replacing 300 felled ones, with veteran oaks protected
  • Lake: Brown's centrepiece to be cleaned of silt that makes it as shallow as 2.5cm
  • Biodiversity: Bat cave to be added and habitats designed for kingfishers and little grebes
  • Flood risk: Longer grass, deeper lake, restored ponds and absorbent paths all meant to siphon off water 
Updated: May 06, 2022, 9:02 AM`