Released April 19, 2022 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--The U.S. Energy Department said it expects domestic crude oil production, along with any output from the Organization of Petroleum Exporting Countries (OPEC), will be more than enough to offset the expected loss of Russian barrels.
President Joe Biden last month imposed a ban on imports of Russian crude oil and refined petroleum products, a moratorium that included a 45-day grace period that expires April 22. There were rumors, meanwhile, circulating during the weekend that members of the European Union, which are far more dependent on Russia than North America, may follow suit.
That could be disastrous for a market that's heavily dependent on only a handful of major crude-oil producing nations. The U.S. Energy Information Administration (EIA) said in its monthly market report for April that it expected Russian crude oil production to decline by close to 2 million barrels per day. That's approximately double what OPEC-member Libya would typically churn out in a day.
In response, Biden and his Western allies tapped enough strategic reserves to replace most of what's expected to be lost, but that does little to address the lack of available spare capacity. And should there be an additional supply disruption on top of the sanction-driven isolation of Russia, there would be few barrels left as a buffer. Libya, for example, declared force majeure over some of its crude oil blends due to protests at major port cities during the weekend.
While starkly different from the type of oil Russia produces, barrels are barrels during a supply-side crunch. The EIA anticipates those pressures will remain, but there are buffers.
"Although we forecast Russia's oil production will decline by 1.7 million barrels per day (BBL/d) from February 2022 to the end of 2023, global oil production will nonetheless increase as a result of higher production elsewhere, mostly from the United States and OPEC," the EIA said in its latest monthly report.
OPEC members do have spare capacity, but the structure of the group now dictates coordinated production levels. The EIA estimates U.S. crude oil production, meanwhile, will average 12 million BBL/d this year, an increase of 800,000 BBL/d from 2021 levels. By next year, production should average nearly 13 million BBL/d, which would surpass the previous record of 12.3 million BBL/d set in 2019, if estimates prove accurate.
Most of that new production will come from the seven primary shale basins in the Lower 48 states. Alaska produces only around 500,000 BBL/d on average. And among the primary shale basins, it's the Permian reservoir that is the most lucrative producer.
Industrial Info is tracking 70 onshore Oil & Gas Production projects in the U.S., valued at $6.45 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production Project Database can click here for a list of detailed project reports.
Click on the image at right for a chart showing onshore U.S. Oil & Gas Production project activity by state.
According to the EIA's latest drilling productivity report, Permian production should average 5.2 million BBL/d in April, up from the 5.1 million BBL/d during the previous month. Norwegian consultancy Rystad Energy, meanwhile, added that permits for new wells in the Permian hit an all-time high last month.
Click on the image at right for an EIA chart comparing daily oil production in seven U.S. producing regions in April versus a year earlier.
Analysts there said that was a "clear signal" that supplies from the U.S. are ramping up. And on Friday, the U.S. Department of the Interior said more acreage will be made available to shale drillers, boosting the potential.
Biden has faced near-universal criticism from the oil industry for his seemingly dualistic energy policy. He's so far cancelled the Keystone XL pipeline and backed a moratorium on new drilling, while at the same time calling on OPEC to do more to address market shortfalls.
But now, the government is offering up 173 parcels on roughly 144,000 acres for new inland drilling. That offering comes just as the Federal Reserve Bank of Dallas notes that job opportunities upstream are expanding, opening up high-paying jobs at a time when U.S. shale is seen as one of the premier alternatives to Russia.
There are caveats, however. The new lease comes with an 18.75% royalty rate, a 50% increase from current rates, and the amount of acreage up for grabs is 80% less than what was originally nominated by the industry.
The industry, it should go without saying, is less than thrilled. An industry source in Texas told Industrial Info that if the federal government wanted an overwhelming response from shale producers, it would stop imposing restrictions ahead of new, somewhat oil-friendly offers.
Meanwhile, shareholder pressure could throttle some momentum as energy transition trends continue to move away from fossil fuels. Some of the geopolitical concerns emanating out of Eastern Europe are because the energy market is dominated by a handful of major producers, concerns that would not be as prevalent in a diverse market less dependent on fossil fuels.
Nevertheless, more barrels are coming despite the criticism of Biden's energy policy. And while it may be fleeting, the U.S. may be set for a shale oil revival.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
President Joe Biden last month imposed a ban on imports of Russian crude oil and refined petroleum products, a moratorium that included a 45-day grace period that expires April 22. There were rumors, meanwhile, circulating during the weekend that members of the European Union, which are far more dependent on Russia than North America, may follow suit.
That could be disastrous for a market that's heavily dependent on only a handful of major crude-oil producing nations. The U.S. Energy Information Administration (EIA) said in its monthly market report for April that it expected Russian crude oil production to decline by close to 2 million barrels per day. That's approximately double what OPEC-member Libya would typically churn out in a day.
In response, Biden and his Western allies tapped enough strategic reserves to replace most of what's expected to be lost, but that does little to address the lack of available spare capacity. And should there be an additional supply disruption on top of the sanction-driven isolation of Russia, there would be few barrels left as a buffer. Libya, for example, declared force majeure over some of its crude oil blends due to protests at major port cities during the weekend.
While starkly different from the type of oil Russia produces, barrels are barrels during a supply-side crunch. The EIA anticipates those pressures will remain, but there are buffers.
"Although we forecast Russia's oil production will decline by 1.7 million barrels per day (BBL/d) from February 2022 to the end of 2023, global oil production will nonetheless increase as a result of higher production elsewhere, mostly from the United States and OPEC," the EIA said in its latest monthly report.
OPEC members do have spare capacity, but the structure of the group now dictates coordinated production levels. The EIA estimates U.S. crude oil production, meanwhile, will average 12 million BBL/d this year, an increase of 800,000 BBL/d from 2021 levels. By next year, production should average nearly 13 million BBL/d, which would surpass the previous record of 12.3 million BBL/d set in 2019, if estimates prove accurate.
Most of that new production will come from the seven primary shale basins in the Lower 48 states. Alaska produces only around 500,000 BBL/d on average. And among the primary shale basins, it's the Permian reservoir that is the most lucrative producer.
Industrial Info is tracking 70 onshore Oil & Gas Production projects in the U.S., valued at $6.45 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production Project Database can click here for a list of detailed project reports.
According to the EIA's latest drilling productivity report, Permian production should average 5.2 million BBL/d in April, up from the 5.1 million BBL/d during the previous month. Norwegian consultancy Rystad Energy, meanwhile, added that permits for new wells in the Permian hit an all-time high last month.
Click on the image at right for an EIA chart comparing daily oil production in seven U.S. producing regions in April versus a year earlier.Analysts there said that was a "clear signal" that supplies from the U.S. are ramping up. And on Friday, the U.S. Department of the Interior said more acreage will be made available to shale drillers, boosting the potential.
Biden has faced near-universal criticism from the oil industry for his seemingly dualistic energy policy. He's so far cancelled the Keystone XL pipeline and backed a moratorium on new drilling, while at the same time calling on OPEC to do more to address market shortfalls.
But now, the government is offering up 173 parcels on roughly 144,000 acres for new inland drilling. That offering comes just as the Federal Reserve Bank of Dallas notes that job opportunities upstream are expanding, opening up high-paying jobs at a time when U.S. shale is seen as one of the premier alternatives to Russia.
There are caveats, however. The new lease comes with an 18.75% royalty rate, a 50% increase from current rates, and the amount of acreage up for grabs is 80% less than what was originally nominated by the industry.
The industry, it should go without saying, is less than thrilled. An industry source in Texas told Industrial Info that if the federal government wanted an overwhelming response from shale producers, it would stop imposing restrictions ahead of new, somewhat oil-friendly offers.
Meanwhile, shareholder pressure could throttle some momentum as energy transition trends continue to move away from fossil fuels. Some of the geopolitical concerns emanating out of Eastern Europe are because the energy market is dominated by a handful of major producers, concerns that would not be as prevalent in a diverse market less dependent on fossil fuels.
Nevertheless, more barrels are coming despite the criticism of Biden's energy policy. And while it may be fleeting, the U.S. may be set for a shale oil revival.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
