Oil

[Stewy]

(03-07-2022, 11:35 AM)KillerGoose Wrote: I work in the oil industry as well, though I am on the software side as an analyst. Stewy can correct me if I am wrong here. We lost our energy independence due to the pandemic causing production issues. Demand plummeted, but so did production, and we are still feeling that as demand has normalized. It is much easier to shut production down than it is to ramp production up. The U.S. has around 40 billion bbls in reserve right now, which is massive. They weren't able to add to that, though, since production also dipped. 

Commenting in general here, I 100% agree with the overall sentiment in this thread - people are going to blame Biden for the gas/oil prices but they aren't really his fault. People are also going to harp on the Keystone. My MIL was wailing on Biden, telling him to turn the Keystone on and I had to remind her that the Keystone has been on for close to a decade and transports 500k bbls per day. He killed the XL project, which was going to transport tar sands crude that would be sent to the international market, primarily. It was never operational, though. 

Yes demand plummeted during the Pandemic, but the recovery in demand (according to the IEA) has out stripped their expectations and we have been back to pre-covid levels of demand for a while now.  As for lagging production, that is because of a lack of investment following the oil crash in 2014.  New Oil projects take 2-10 years to bring on line AFTER discovery and appraisal.  However, the most expensive projects were back burnered, and are still dormant or just now moving forward.  Large companies are STILL exercising Capital Discipline, and now increasing their exploration budgets.  While I can't give specifics I can say that my companies XPLO budget hasn't changed in the last 3 years and we're told not to expect it to go up, and our company is big into investing in renewables.

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Rig Count - 2014 vs, now and why it hasn't recovered and can't recover quickly.  This is total country wide rig count I am talking about.

I have wanted to write a little on this for a while and I suppose this is as good a time as any.  These numbers are approximate, but rig count right now is in the high 400's....about 480 or so (it changes daily obviously).  That is dominated by onshore rigs.  Pre-2014 US rig count was ~1500, which is a 60%+ drop, and it has not recovered. 

There are two primary reason why it has not recovered:
#1 - Companies are spending less since 2014 and haven't increased their budgets as I said above, but even if they did....
#2 - Rig crews are dominated by Blue Collar laborers - as 2/3 of all rigs went dormant, these hourly laborers were without income.  Moreover, due to the tremendous recovery time for oil price recovery and more importantly stability, these blue collar individuals have LEFT THE INDUSTRY, to take other jobs.  We're talking about 10's of thousands of jobs here.  And these are skilled laborers, not floor sweepers.  Working a rig in dangerous and requires training and experience, but that experience is not sitting on the sidelines, but has left the building to play somewhere else.  So a company can't just go out and hire 20 rigs and start drilling, the skilled hourly labor just isn't there.  And this, more than anything else, will hold back rapid US Production Growth.
#2a - This also goes for all the companies which service a rig while it is in operation:  (Onshore) On site housing, Cafeterias, Mud Loggers, Mud Providers, Well Loggers, road and pad crews, tr4uck drivers, etc.  All of that skilled and unskilled labor had to make a living and couldn't wait, and is mostly gone, which leads to re-hiring and training of new individuals.  Furthermore, these companies aren't going to hire people ASSUMING oil companies are going to need more rigs, they'll hire a they go until the see a long lived spike of recovery in the industry.

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And XL wouldn't have helped us with energy independence.....because Canada.