First Oil: To our U.S. readers: Vote like your job depends on it
(WO) — Within a few days after this issue is distributed to you, we will once again be upon another fateful moment in U.S. history—the 2022 mid-term elections. Accordingly, we ask the understanding of our loyal readers outside the U.S., for this momentary indulgence.
Make no mistake, much is on the line in this set of elections. Right now, the cognitively challenged White House occupant, President Joe Biden (known to some of us as “Jabbering Joe”), can shove legislation and policies harmful to the upstream industry through Congress. That’s because his Democrat party holds a small majority in the House and a tiebreaker vote in the Senate via Vice President Kamala Harris. So, it is vitally important that the Republicans take back at least the House (which they seem likely to do) and preferably the Senate, as well (which they have a good shot at doing), so that Congress can block some of the crazy energy actions that Biden and his minions want to implement.
Biden’s harmful actions. After all, this is the President who, on his first day in office, revoked approval for the Keystone XL pipeline and imposed a moratorium on oil and gas leasing on federal lands and waters. Roughly 25% of U.S. production comes from federal areas. The Keystone XL cancellation showed that Biden is not above using a favorite climate activist tactic – blocking pipeline construction – to restrict upstream production. Never mind the fact that the Keystone XL was supposed to ensure a steady supply of oil from Canada, if the flow from other sources was suddenly undependable.
In addition, Jabbering Joe’s administration has done everything in its power to restrict growth of U.S. oil and gas production, from fighting court orders and legislative mandates to conduct federal leasing, to expanding anti-hydrocarbon regulations through the EPA, to promulgating punitive Interior Department regulations, all of these with an eye toward stifling growth of U.S. oil and gas production in favor of a radical climate change agenda. And when Russia’s invasion of Ukraine, along with already-present inflationary pressures, pushed energy prices to excessively high levels, Biden’s group did not try to invoke a potential relief valve by taking the shackles off U.S. drilling and production. Instead, they begged Saudi Arabia, the UAE, Venezuela and other foreign producers to boost their output and send more to the U.S.
The ultimate example of this pitiful exercise of foreign policy was the laughingly ridiculous letter sent to Saudi Arabia in early October, asking the Kingdom to delay a decision on OPEC+ production levels for a month, which would, of course, put it behind the Nov. 8 U.S. mid-term elections. The intention, obviously, was to reduce potential electoral harm to Biden and the Democrats. The Saudis, of course, dismissed this move out of hand and led the OPEC+ decision to reduce oil output by 2 MMbpd.
And then we have what our friends at API call “the red herring of unused leases.” This refers to the claim by Biden and his minions that American oil and natural gas producers are sitting on hundreds of unused federal leases and thus do not need access to more. As API V.P. for Upstream Policy Kevin O’Scannlain noted, “The law already requires companies to either produce oil and/or gas on leases, or return the leases to the government – the so-called “use it or lose it” provision – generally in the first 10 years. When a company acquires a lease, it makes a significant financial investment at the beginning of the lease, in the form of a non-refundable bonus bid, and pays additional rent until, and unless, it begins producing. For federal onshore, the Mineral Leasing Act prevents any one company from locking up unproductive excessive federal acreage. Developing a lease takes years and substantial effort to determine whether the underlying geology holds commercial quantities of oil and/or gas. The lengthy process to develop them from a lease often is extended by administrative and legal challenges at every step along the way.”
Biden & Co.’s anti-O&G behavior. Perhaps most infuriating about the Biden team is the consistently anti-oil-and-gas attitude, displayed in so many disrespectful ways. One example is Jabbering Joe’s persistent contention that oil and gas companies are making excessively high profits from high commodity prices. But he never tells the public that the companies have to operate in a global market that determines the prices. Another example is his recent tirade after Hurricane Ian laid waste to parts of southwestern Florida, where he issued his infamous warnings to U.S. oil companies about price gouging. “Do not. Let me repeat. Do not. Do not use this as an excuse to raise gasoline prices or gouge the American people,” he stammered. Someone needs to tell this dope that oil companies do not pursue price gouging—if anything like that occurs, it’s being done by renegade local distributors and/or unscrupulous retail outlets.
Biden’s cheap grandstanding in Florida evokes thoughts of the ever-juvenile antics of the Democrat candidate for governor in Texas, Robert Francis “Beto” O’Rourke. Jabbering Joe’s anti-oil-and-gas tirade, in the middle of the Florida hurricane tragedy, just makes one want to parody his own phrasing and say, “C’mon man, cut the crap.”
Lack of honesty. Perhaps the nastiest aspect of Biden and Co.’s oil-and-gas attitude is the consistent lack of honesty and facts—well, let’s really call it what it is—lying with impunity. These folks lie on a daily basis, taking advantage of the public’s lack of deep knowledge about oil and gas markets, operations and technology. For instance, Energy Secretary Jennifer Granholm during the summer said, “the Administration believes it is imperative that companies bring supply online to get more gas to the pump at lower prices.” Of course, we all know that this cannot happen with a snap of the fingers. But Granholm doesn’t tell the public this is the case.
Similarly, Transportation Secretary Pete Buttigieg during the summer said he didn’t “know why oil prices are falling faster than [gasoline] prices,” insinuating that oil companies were keeping pump prices elevated. Yet, he darn well knows that it takes days and weeks for oil that is produced in the fields to make its way to refineries, come out in the form of gasoline, and make its way into retail gasoline stations, thereby delaying a drop in pump prices.
And we’ve heard similar statements come directly from Jabbering Joe, himself. The point is that a good chunk of the administration is deliberately disingenuous and lying with impunity. Do we want this group to continue to promulgate disastrous energy policies? I think not, and doubtlessly, you don’t think so either. Accordingly, the good people working in this industry must go out and vote for thoughtful candidates that won’t wreck the economy in the name of a flawed ideology that has no grounding in common sense. Get out and vote—send a message to Jabbering Joe and his crew of misfits by voting to protect a balanced energy approach. Your future, and the industry’s future, depend on it.
Circumstances sour quickly in the UK
It was just in last month’s issue that we detailed the sudden rise of Liz Truss to British Prime Minister, followed just two days later by the sudden passing of Queen Elizabeth II, whose reign lasted a record 70 years and 214 days. At the time, we thought that Truss’ ascendancy would be a good step forward for the UK, particularly as regards energy policy. Just days after taking over as PM, Truss said she would “end the moratorium on extracting our huge reserves of shale,” which had been in effect across England since November 2019. In addition, Truss had pledged to support new oil and gas development in the UK North Sea. She also had reiterated her goal to cut taxes, with the idea of encouraging long-term supply security, and acknowledged that she did not support further windfall taxes on operators.
Alas, the now-former prime minister made an unforced, fatal error almost immediately. On Sept. 23, Truss’ administration announced an aggressive tax-cutting policy without also stating how she was going to pay for it. In other words, she failed to do her due diligence. What made it worse, and a surprise to some folks in the UK, is that Truss went beyond the promise she had made in campaigning against former Chancellor of the Exchequer Rishi Sunak to succeed former P.M. Boris Johnson. Truss had said she would cut the top rate of income tax. But after taking office, she held briefings, saying that the government might go even further and announce even more tax cuts.
Not surprisingly, the financial markets were roiled, and politicians reacted negatively to the thought of even more money getting into the marketplace and pushing up inflation further. On Oct. 3, Truss scrapped her plan to cut the top tax rate. On Oct. 14, still embroiled in controversy, Truss tried to save herself by dismissing Chancellor of the Exchequer Kwasi Kwarteng and allowed a business tax increase to take effect. But it was not enough—as the pressure on her mounted further, with just 45 days in office, Truss announced on Oct. 20 that she intended to resign. One can only speculate that if she had stood her ground on the original tax cuts, and come out with a plan to fund them, Truss might still be P.M. But when she gave in so easily, it was a signal that she could be run over easily, which is exactly what ensued. In some ways, she appears to have been set up to fail.
What has transpired since is one of the most boneheaded decisions that this editor has seen lately, something worthy of the Biden folks in the U.S. The Conservative Party, desperate to show some order and control, decided to put Sunak (of all people!) into the P.M. job. As we said, Sunak had been defeated by Truss to replace Johnson. He also implemented the loathsome windfall tax on North Sea oil and gas production. Sunak now appears to be on a path toward being the Conservative version of Gordon Brown, who also implemented an ill-advised extra tax on North Sea production, and who was knocked out of the P.M. slot in just three years.
IN THIS ISSUE
Special focus: Advances in Drilling. In this month’s lead theme, authors from Helmerich & Payne and DrillScan discuss BHA selection and its impact on quality. The authors propose methods that balance the needs of the directional contractor with the operator’s desire for a high-quality wellbore. Meanwhile, authors from Weatherford explain how a centralized real-time, multidisciplinary data capture platform improves drilling performance. Finally, Halliburton experts describe how an innovative PDC bit brings digital intelligence-driven design to Middle Eastern applications.
Offshore/deepwater technology: FPSO study group update. A consortium has spent the last year identifying operational and safety challenges with aging FPSOs, says an ABS author. For the future, these challenges require changes in the design phase to mitigate some issues and costs for retrofitting and further changes. Meanwhile, the first article of a three-part series from Frontier Deepwater and BMT discusses the lifecycle performance of wet (subsea) and dry tree systems for Lower Tertiary reservoirs in the ultra-deepwater GOM.
Digital transformation: Exclusive interview with Chevron V.P. Kevin Chambers. As Chevron’s V.P. for Subsurface, Mr. Chambers gauges the industry’s efforts to more thoroughly harness digital technology and discusses his own company’s projects to bring digital benefits to all its operations. He says the “Triple Crown” strategic partnership with Schlumberger and Microsoft is taking the strengths of the three partners to end up with better digital solutions to operational challenges than any of them could have devised independently.
