February 2024

First oil

If you like stability, you’ll love 2024
Kurt Abraham / World Oil

At World Oil, we just completed our annual winter forecast, and if you’re looking for something exceptional or sensational to come out of it, well then, this outlook is not for you. However, if you value stability and don’t like to see abrupt, whip-saw changes in the market, then this is your kind of forecast.  

Let me amplify what this means. In the U.S., we forecast that drilling will be up 0.6%, at 18,015 wells. That’s only 114 more wells than the 2023 total. As for footage drilled, we expect U.S. operators to rack up 258.78 MMft of hole, down just 0.3% from 2023’s 259.66 MMft drilled. Then, if you look at our international forecast, you will see that drilling outside the U.S. will be up just 0.8%, at 41,915 wells, vs. last year’s total of 41,584 wells. That’s only a difference of 331 wells across the entire planet, outside the U.S.  

The only main data point that’s a difference of more than 1.0% is worldwide offshore drilling. On that number, we’re calling for a 3.9% increase to 2,746 wells this year. But again, that’s only a difference of 102 wells across the globe. Again, if you look at expectations for capital spending this year, courtesy of our friends at Evercore ISI, you will see that they are calling for just a 5.0% increase in global capex during 2024, after an 11% gain in 2023. And within North America, U.S. spending will decelerate from 19.7% growth to a gain of just 2.2%. And in Canada, capex will drop from a 17.0% increase last year to a mere 2.3% this year.  

So, we can expect an E&P year scarcely different from 2023—no great changes on a percentage basis, either up or down. So, what’s behind the flat activity in the U.S.? Well, as we’ve alluded to in recent months, U.S. operators point to prices for oilfield equipment, supplies and services that are still too high; a continuing emphasis on fiscal discipline, particularly by publicly held companies; low prices for natural gas; and considerable regulatory interference by the federal government and some state regimes, which creates uncertainty and hesitancy. But the overriding factor that this editor has heard from quite a few operators and other industry personnel is that they are waiting to see what happens in the November elections. No one wants to get too far out in front of his/her skis, so to speak.  

But in the meantime, we invite you to visit all our considerable forecast material in this issue. While the overall picture is stable, there are some ups and downs among individual U.S.states and Canadian provinces and all the many countries worldwide. 

Biden’s LNG stupidity. Here we are, nearly a month later, and people in the industry, as well as in many political circles, are still trying to assess how bad the damage will be from President Joe Biden’s seemingly inexplicable decision to put the granting of additional LNG export licenses from the U.S. “on pause.” The Biden White House caught quite a few people by surprise, when it announced this pause on Jan. 26: “Today, the Biden-Harris Administration is announcing a temporary pause on pending decisions on exports of Liquefied Natural Gas (LNG) to non-FTA countries until the Department of Energy can update the underlying analyses for authorizations.” 

To put it bluntly, folks, this has to be one of the most boneheaded decisions made by any President in the history of U.S. energy policy. And goodness knows, there have been many poor decisions on energy by 10 different Presidents over the last 50 to 55 years. But this one really takes the cake. 

Fig. 1. Cheniere Energy’s Sabine Pass LNG facility is part of existing infrastructure that has helped to boost U.S. LNG exports. Image: Cheniere Energy.

At a time when the U.S. was making great progress in building LNG infrastructure and ramping up LNG exports (Fig. 1), this decision seems extraordinarily harmful. And what happened to the White House push to export more LNG from the U.S. to Europe, to free them from Russian supplies, in connection with the attack on Ukraine? We also were told by the administration that natural gas is an important bridge fuel in the “energy transition,” so the more U.S. gas we could spread around the world to supplant coal for power generation, the better. Let us also not forget that increased exports of natural gas are helping to level out our Balance of Trade.  

But all those rationales went by the wayside in the blink of an eye. “What happened,” you ask? Perhaps the only explanation that makes any sense is that this was a cynical, somewhat scared move on the part of Biden and his people to shore up his standing among the hard-core environmental voters he will need in his re-election bid in the fall. This, along with convincing younger voters that natural gas is somehow bad—therefore Biden is their only option—is the White House playbook. Put simply, it’s a case of preserving or buying votes. 

It's not a strategy that has the country’s best interests at heart, but the White House doesn’t care. They’re simply concerned with retaining power. If you want to gauge how important the LNG situation is to the industry, just consider that this editor received formal statements of disgust from eight different associations. Usually, a significant issue might generate four or five statements of reaction.  

Perhaps the strongest, most direct reaction came from API. ““This is a win for Russia and a loss for American allies, U.S. jobs and global climate progress,” said API President Mike Sommers. “There is no review needed to understand the clear benefits of U.S. LNG for stabilizing global energy markets, supporting thousands of American jobs and reducing emissions around the world by transitioning countries toward cleaner fuels. This is nothing more than a broken promise to U.S. allies, and it’s time for the administration to stop playing politics with global energy security.”  

Just to show that the LNG issue is not cooling down, API on Feb. 26 filed an application for rehearing on DOE’s indefinite pause on new and pending LNG permit approvals for non-FTA countries. In the legal filing submitted to DOE, API argued that “the pause is unlawful, violating both the Natural Gas Act and the Administrative Procedure Act, and that it erodes America’s energy advantage by threatening U.S. jobs, national security and environmental progress.”  

Fig. 2. These vehicles are examples of the EVs that Hertz is removing from its fleet. Image: Hertz.

More problems with EVs. The failings of electric vehicles (EVs) just keep coming. For instance, the giant rental car firm, Hertz, said last month that it is dumping 20,000 EVs from its fleet, Fig. 2. The company said that part of its decision is due to high repair and maintenance costs for EVs. In addition, collision damage repairs are running higher for EVs. The vehicles being sold off will be replaced by new gasoline-powered vehicles by Hertz. The rental company found out what some analysts had already discovered, which is while consumers might enjoy the fuel savings and driving experience of an EV, there are other hidden costs to owning these vehicles. These include insurance, residual-value retention, charging infrastructure (or lack thereof) and concerns over inhibited range. 

Meanwhile, in the UK, there are cybersecurity concerns emerging with regard to EVs being charged with a generic home charger. Analysts point to use of the vulnerable “SNMPv1 protocol.”  They say a “low-level malicious actor” could use this information to initiate a Denial of Service (DoS) or attempt to alter the internal systems of the car.  

In addition, The Epoch Times reports that more than 200 luxury EVs)will be recalled in Australia’ due to a manufacturing issue that could increase the risk of fire. Audi said it is recalling e-tron GT EV models released in 2022 and 2023, due to an issue with the sealing of the high-voltage battery housing, which may “reduce” over time, allowing moisture to enter. The 2023 Audi e-tron GT is a sleek luxury EV that sells for about A$180,000 (US$118,000) in Australia plus on-road costs. 

Redefining “long haul” flights. Finally, given the amount of air travel that the upstream industry undergoes each year, we’re always interested to see new airline services. Accordingly, American Airlines will inaugurate a new route this fall that will redefine the meaning of “long haul” for the company. American said it plans to fly directly from Dallas, Texas, to Brisbane, Queensland with a newly designed 787-9 aircraft (Fig. 3), beginning in October. This first-ever service between DFW International Airport and Australia’s third-largest city will be the longest nonstop flight in the airline’s route structure.  

Flight time on the Dallas-Brisbane route will be nearly 16 hours, and 14 hours, 20 minutes going from Brisbane to Dallas. The route will run during Australia’s warmer months, giving Americans an opportunity to escape the cold of fall and winter to relax on Queensland beaches between Oct. 28, 2024 and late March 2025. The route will involve American partnering with Australian flag carrier Qantas. 


Special focus: 98th Annual Forecast & Review. For the 98th consecutive year, the World Oil staff has assembled its annual review and forecast of global E&P activity. The Forecast section features Evercore’s capital spending outlook, the regulatory/political picture in Washington from Contributing Editor Roger Bezdek, and the U.S. drilling forecast, compiled by our editorial team. The U.S. report includes considerable analysis. Additional reports cover Canadian and international E&P. 

Drilling technology: Digital tool kit enhances real-time decision-making to improve drilling efficiency and performance. In this month’s primary sub-theme, an NOV author explains how a   

new AI-driven solution provides insights that enable rig personnel to act earlier and more confidently, reducing risks and improving well delivery. Drilling Beliefs and Analytics (DBA) is a step change in how data are used to support field and town personnel. The solution has been built to ensure continuous improvement, with the constant addition of new beliefs, models, and calculations, such as a full stuck pipe module. 

Completion technology: Using data to create new completion efficiencies. As described by an author from Deep Well Services, the firm has designed an innovative, real-time, data analytics platform (DAP). This  DAP platform was designed to capture and transform wellsite data into valuable insight for operators. The live feed data offer real-time visibility into operations worldwide while providing customizable alarms, real-time automated plug tracking, key performance indicator (KPI) analysis, built-in data analytics, and user reports.  

About the Authors
Kurt Abraham
World Oil
Kurt Abraham kurt.abraham@worldoil.com
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