Released April 19, 2023 | SUGAR LAND
en
Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--With the U.S. Energy Department pointing to an uptick in shale oil production, an energy consultant group said there's likely to be a job and wage boom emerging.
Rystad Energy, a consultant group based in Norway, said it expected wage growth in oil and gas to increase by as much as 7.2% over this year and next.
"Strong production growth will spur labor growth, including in the core shale basin of the Permian, where an expected increase in output levels of more than 10% will lead to more than 7,000 new jobs," senior analyst Sumit Yadav said.
These are high-paying jobs. The Bureau of Labor Statistics shows a wellhead pumper can make about $70,000 per year, while a petroleum engineer can earn upwards of $170,000.
Just as higher oil prices are attracting more bidders to drilling auctions, the price recovery since the pandemic is incentivizing activity in the shale patch. West Texas Intermediate (WTI) hit triple digits last year, though much of that was due to a geopolitical premium stemming from the war in Ukraine.
Even with $80 WTI, drillers seem responsive. The Drilling Productivity Report (DPR) for April 2022 shows Permian production at an even 5 million barrels per day (BBL/d). While WTI is a good $20 per barrel less than year-ago levels, the latest DPR shows Permian output at 5.6 million BBL/d last month and 5.7 million BBL/d expected for this month.
If Rystad is right, it will be an answer to prayers coming out of the Permian. Energy surveys from the Federal Reserve Bank of Dallas have shown a persistent call for more employees. Respondents in the services sector said there's nobody available with the right skill set to do the job.
"The persistent labor shortage in the Permian basin shows no signs of easing. It is very difficult to fill mechanical and electrical positions with local residents," one respondent said. "Our company is relying on shift workers from out of state to fill these spots due to the shortage of local qualified workers."
Rystad expects trends both in hiring and production to continue for the rest of the year.
Total inland shale oil production is on pace to set a record this month at 9.3 million BBL/d. The U.S. Energy Information Administration (EIA), the statistical arm of the Energy Department, is forecasting 12.54 million BBL/d this year and another 12.75 million BBL/d for 2024.
That makes the United States the largest crude oil producer in the world. Presumably Russia is producing below average due to sanctions, and Saudi Arabia, according to secondary sources reporting to economists at the Organization of the Petroleum Exporting Countries (OPEC), produced 10.4 million BBL/d last month.
More of that U.S. crude oil is finding its way to foreign shores as markets adjust to dwindling Russian barrels. So much so that pricing agencies recently included WTI-Midland, which reflects activity in the Permian, into the basket of crudes that make up the global benchmark Brent.
Light, sweet crude from the United States is becoming the slate of choice for some importers. But like recent trades in crude oil, activity in the shale patch could be range bound.
The recent decision from OPEC+, the core members plus their allies, opted to trim 1.6 million BBL/d next month, ostensibly for the sake of market stability. That decision was met initially with calls for a return to $100 crude, though recent reports from the likes of the International Monetary Fund show the economy is cooling off.
That, coupled with growth outside OPEC+, could keep a lid on crude oil prices. Prices in theory could move lower should policymakers at the Federal Reserve opt for another rate hike in May. That may mean a reversal of growth, or at least some levelling off, in the U.S. shale patch. "After 2024, we expect operator spending levels to peak, production growth to slow down, and the impacts of the U.S. Federal Reserve's stringent monetary policies to become more evident," Rystad's Yadav wrote. "This will reduce macro labor demand and significantly offset the impact of retirements and stagnant labor force participation, tempering the pace of wage growth."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Rystad Energy, a consultant group based in Norway, said it expected wage growth in oil and gas to increase by as much as 7.2% over this year and next.
"Strong production growth will spur labor growth, including in the core shale basin of the Permian, where an expected increase in output levels of more than 10% will lead to more than 7,000 new jobs," senior analyst Sumit Yadav said.
These are high-paying jobs. The Bureau of Labor Statistics shows a wellhead pumper can make about $70,000 per year, while a petroleum engineer can earn upwards of $170,000.
Just as higher oil prices are attracting more bidders to drilling auctions, the price recovery since the pandemic is incentivizing activity in the shale patch. West Texas Intermediate (WTI) hit triple digits last year, though much of that was due to a geopolitical premium stemming from the war in Ukraine.
Even with $80 WTI, drillers seem responsive. The Drilling Productivity Report (DPR) for April 2022 shows Permian production at an even 5 million barrels per day (BBL/d). While WTI is a good $20 per barrel less than year-ago levels, the latest DPR shows Permian output at 5.6 million BBL/d last month and 5.7 million BBL/d expected for this month.
If Rystad is right, it will be an answer to prayers coming out of the Permian. Energy surveys from the Federal Reserve Bank of Dallas have shown a persistent call for more employees. Respondents in the services sector said there's nobody available with the right skill set to do the job.
"The persistent labor shortage in the Permian basin shows no signs of easing. It is very difficult to fill mechanical and electrical positions with local residents," one respondent said. "Our company is relying on shift workers from out of state to fill these spots due to the shortage of local qualified workers."
Rystad expects trends both in hiring and production to continue for the rest of the year.
Total inland shale oil production is on pace to set a record this month at 9.3 million BBL/d. The U.S. Energy Information Administration (EIA), the statistical arm of the Energy Department, is forecasting 12.54 million BBL/d this year and another 12.75 million BBL/d for 2024.
That makes the United States the largest crude oil producer in the world. Presumably Russia is producing below average due to sanctions, and Saudi Arabia, according to secondary sources reporting to economists at the Organization of the Petroleum Exporting Countries (OPEC), produced 10.4 million BBL/d last month.
More of that U.S. crude oil is finding its way to foreign shores as markets adjust to dwindling Russian barrels. So much so that pricing agencies recently included WTI-Midland, which reflects activity in the Permian, into the basket of crudes that make up the global benchmark Brent.
Light, sweet crude from the United States is becoming the slate of choice for some importers. But like recent trades in crude oil, activity in the shale patch could be range bound.
The recent decision from OPEC+, the core members plus their allies, opted to trim 1.6 million BBL/d next month, ostensibly for the sake of market stability. That decision was met initially with calls for a return to $100 crude, though recent reports from the likes of the International Monetary Fund show the economy is cooling off.
That, coupled with growth outside OPEC+, could keep a lid on crude oil prices. Prices in theory could move lower should policymakers at the Federal Reserve opt for another rate hike in May. That may mean a reversal of growth, or at least some levelling off, in the U.S. shale patch. "After 2024, we expect operator spending levels to peak, production growth to slow down, and the impacts of the U.S. Federal Reserve's stringent monetary policies to become more evident," Rystad's Yadav wrote. "This will reduce macro labor demand and significantly offset the impact of retirements and stagnant labor force participation, tempering the pace of wage growth."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
