First oil: Drilling meanders as tariff situation drags on

KURT S. ABRAHAM, EDITOR-IN-CHIEF & CHIEF FORECASTER 

As we go into the last week of April, and this issue goes out the door, the upstream industry has nearly four months (one-third) of 2025 in the books already. So, what do we have to show for drilling activity in the first third of the year? Well, nothing spectacular.  

The U.S. rig count from Baker Hughes has averaged 587 through the first nearly four months of this year, compared to a figure of 599 for 2024. But one has to remember that the 2024 average includes a number of weeks, where the U.S. count was above 600. That is not the case this year, where the monthly average remains below 600, but it also is meandering around in a tight band between 582 and 592. So, not much variation and quite similar to activity levels in the back half of last year, which is what we expected for much of this year.  

Fig. 1. U.S. President Donald Trump needs to be aware of some oilfield realities. Image: The White House.

Yet, the question remains, “how long can activity hold up against the current tariff situation?” There was some concern expressed by attendees when this editor attended the annual meeting of the Energy Workforce & Technology Council during April 9-10, and the oil price dipped below $60 briefly. Indeed, during that meeting, it was impossible to get agreement on where the break-even point on oil price might be for operators. One analyst said that it was $62/bbl. But another panelist said that his company could tolerate the price dipping into the $40s for a brief period. And there were opinions in-between these figures.  

President Donald Trump (Fig. 1) would be well-advised to pay attention to his supporters in the industry. While most everyone still supports his broader goals of opening up more oil and gas development, eliminating some of the punitive regulations and increasing U.S. oil and gas output further, many folks are concerned about where some fundamental numbers are headed. If the price remains above $60/bbl, activity will remain level with where it’s been over the last few months, but there will be no growth. To get some growth, price has to be in a sweet spot of $70 to close to $80. If the price gets above $80, then there is likely to be some consumer backlash. 

However, if the price gets into the $50s (particularly below $55), Katy bar the door. That kind of figure, a number of people have told this editor, will cause quite a few rigs to be laid down. And that’s not good for anybody. If you want to know what operators (particularly independents) really think, all you have to do is look at the “Comments” section of the Dallas Federal Reserve’s quarterly Energy Survey for first-quarter 2025, ending March 31. We have reproduced that survey’s results in this April issue, so please go have a look at that article.  

For instance, one operator said, “The key word to describe 2025 so far is ‘uncertainty,’ and as a public company, our investors hate uncertainty.” He went on to say, “There cannot be ‘U.S. energy dominance’ and $50/bbl oil; those two statements are contradictory. At $50/bbl oil, we will see U.S. production start to decline immediately and likely significantly (1.0 MMbpd-plus within a couple quarters). This is not ‘energy dominance.’ The U.S. oil cost curve is in a different place than it was five years ago; $70/bbl is the new $50/bbl.” Another producer remarked, “First, trade and tariff uncertainty is making planning difficult. Second, I urge the administration to engage with U.S. steel executives to boost domestic production and introduce new steel specs. This will help lower domestic steel prices, which have risen over 30% in one month, in anticipation of tariffs.” 

Still another operator complained, “The administration's chaos is a disaster for the commodity markets. ‘Drill, baby, drill’ is nothing short of a myth and populist rallying cry. Tariff policy is impossible for us to predict and doesn't have a clear goal. We want more stability.” A fourth producer’s analysis said, “The administration’s tariffs immediately increased the cost of our casing and tubing by 25%, even though inventory costs our pipe brokers less. U.S. tubular manufacturers immediately raised their prices to reflect the anticipated tariffs on steel. The threat of $50 oil prices [due to] administration [actions] has caused our firm to reduce its 2025 and 2026 capital expenditures.” 

Outside the U.S., there is less data to go on, as we still await the monthly international count from Baker Hughes for April. But one would tend to think that the tariffs situation would slow down that activity, too. In January 2025, rigs outside the U.S. and Canada dropped from 909 to 905. They remained at 905 in February before slipping to 899 in March. We will see what the April count brings, but one has to assume further slippage. After all, certain costs are a universal problem, particularly steel. 

Fig. 2. Newly named GeoPark Limited CEO Felipe Bayón. Image: Bloomberg.

This editor has said repeatedly that Mr. Trump cannot go around saying “Drill, baby, drill” one week, and then go around the next week and brag about oil prices coming down (well below $70) and that he wants OPEC+ to produce more oil. These statements are wholly incompatible. One would hope that Energy Secretary Chris Wright and Interior Secretary Doug Burgum can make this point to the President. But there’s no evidence of it so far.  

GeoPark makes a good hire. Most of the time, this editor doesn’t comment on various CEO hires. However, there is one that just occurred, which deserves special mention. On April 24, Colombian independent GeoPark Limited announced that it has hired longtime executive Felipe Bayón (Fig. 2) as its new CEO and board of directors member, effective June 1, 2025, replacing former CEO Andrés Ocampo, who stepped down for “personal reasons.” I commend GeoPark for bringing in Mr. Bayón, as he has an impressive track record. He is recognized as one of the most effective energy executives in Latin America with more than three decades of accomplishments in the international oil and gas industry. 

I had the opportunity to see and listen to Mr. Bayón about two-and-a-half years ago, when he participated in a panel at an industry conference. At the time, he was still CEO of Colombian state firm Ecopetrol. I found Mr. Bayón to be poised, well-spoken and authoritative on not only his company’s operations and finances but also on such diverse industry issues as the digital transformation and recent E&P technology advancements. Accordingly, GeoPark should benefit greatly from Mr. Bayón being at its helm. 

From 2017 to 2023, he was CEO of Ecopetrol, where he led 18,000 employees, oversaw production of about 700,000 boed and revenues of over $30 billion, and delivered record financial, operational, and safety results. As a proven dealmaker, he forged a JV between Ecopetrol and Oxy to develop reserves in the Permian basin. That project grew from nothing to around 150,000 bpd, gross, in four years. He also entered Ecopetrol into the Brazilian ultra-deepwater pre-salt play in partnership with Shell, as well as other focused investments. 

Mr. Bayón began his career in 1991 as a mechanical engineer with Shell in field operations and projects. He then moved to bp, where he worked for a number of years in increasingly important operational and management roles in Colombia, Argentina, Brazil, Bolivia, the U.S. and the U.K. He also led Pan American Energy from 2005 to 2010.   

You may be asking yourself why Mr. Bayón left Ecopetrol at the end of March 2023. Part of the answer lies in the fact that Gustavo Petro was elected as Colombia’s president in June 2022. Upon taking office, Petro reemphasized his campaign pledges to focus on a transition to renewable energy and reduce/eliminate Colombia’s dependence on fossil fuels. A whole green agenda emerged. Meanwhile Mr. Bayón was perceived to favor a slower transition path, where fossil fuels would retain a greater role. But when you have a stubborn, self-righteous mule like President Petro (funny how his last name is so close to “petroleum”) putting his thumb on a fine company like Ecopetrol, bad things are bound to happen.   

Accordingly, it was announced in late January 2023 that Mr. Bayón would leave Ecopetrol at the end of March 2023. Since then, and up to his hiring by GeoPark, Mr. Bayón has been serving on several corporate boards. To sum it up, Ecopetrol’s loss is now GeoPark’s gain, and the latter firm should get exceptional, skilled service from its new CEO.

Fig. 3. A Lufthansa A380 aircraft similar to this one had to divert to Boston from a Los Angeles-to-Munich flight path, when a passenger’s iPad could not be retrieved from inside a Business Class seat. Image: Lufthansa.

Don’t lose your iPad in the wrong place on an airplane. Finally, as reported by numerous media  outlets, we have the bizarre story of a Lufthansa Airbus A380 (Fig. 3) that had departed Los Angeles on April 23 and was headed For Germany. However, while over Manitoba province in Canada, the flight was diverted to Boston after a passenger lost his/her iPad in the mechanical structure of a business class seat.  Given the considerable number of our readers that fly for business, we think you’ll be interested in this story.  

It seems that today’s airline seats, particularly in first class and business, offer handy automation and comfort, but they can also create dangerous entrapment zones for devices like tablets and cell phones. When compressed, lithium-ion batteries can overheat or even ignite, which would create a fire risk in a pressurized cabin. When the flight attendants could not locate/dig out the offending iPad, they reported the situation to the cockpit crew. Lufthansa reportedly said that to eliminate any potential risk, particularly regarding possible overheating of the iPad, the pilots and air traffic control jointly decided, as a precaution, to divert the flight to Boston. 

Well, this created considerable logistical problems. At the time of diversion, the A380 on Lufthansa flight 453 was flying at 35,000 ft, about 300 nautical miles northwest of Winnipeg. While the plane had been in the air for over three hours, it would take yet another three hours to get to Boston. And there were still too many gallons of jet fuel onboard, so the plane would have to perform an “overweight” landing on the runway at Boston. The flight finally touched down at Boston Logan International Airport at 2:41 a.m., Eastern time.  

Needless to say, the Boston airport folks had not been expecting a diverted flight with 461 passengers onboard at that hour of the night. The Airbus A380 is the only commercial aircraft with two full decks, hence the high passenger count. After landing, the plane spent an hour on the tarmac while technicians and mechanics searched around the seat in question for the iPad. They finally found it, and reports vary on what condition it was in. One source said that the iPad was found “not damaged.” However, another media outlet quoted Lufthansa as saying the iPad had "already shown visible signs of deformation due to the seat's movements."  

In either case, the A380 was allowed to take off from Boston after 90 minutes on the ground. It arrived in Munich about three hours late, so add those three hours to what was already scheduled as an 11-hour trans-Atlantic flight. Naturally, the domino effect of missed connections and frantic rebookings had already taken hold for many frustrated passengers, as the flight finally touched down later that morning at Munich’s airport.  

So, what is the lesson from this mess? Be careful to make sure that your iPad or cellular phone is adequately stored in a secure place, especially in those first class/business class laydown seats. And it wouldn’t be a bad idea to scan your neighbors in adjacent seats, to make sure they haven’t done something stupid, either. 

IN THIS ISSUE 

Special focus: Offshore Technology. We are fortunate to have five fine articles in this month’s lead theme. In one article, an ABS author discusses “drillships in the digital age” and how to have smarter, safer, more sustainable operations. A second feature from a Bailey International author describes how to unlock the full potential of custom hydraulic power units in offshore drilling. A third article from a Sentinel Subsea author details how technology is transforming well integrity monitoring and subsea leak detection systems in the Gulf of America/Gulf of Mexico. A fourth feature from Harbour Energy and HIMA describes how automation systems were migrated quickly and safely on the Mittelplatte field platform, offshore northern Germany. Last, but not least, we again feature write-ups and images for this year’s OTC Spotlight on Technology Award winners. 

Sustainability. Following up on Part 1 that ran in our March issue, we present Part 2 of an article from an Aramco author that provides a vision of upstream operations in a Net Zero emissions (NZE) future. He reviews specific state-of-the-art technologies and future concepts that will enable the NZE scenario for the upstream sector. Electrification of various field operations is just one example.  

Regional report: Gulf of America/Gulf of Mexico. Contributing Editor Gordon Feller says that big changes may be headed for hydrocarbon projects in the Gulf during 2025. Significant changes to the external environment, including political, economic and financial conditions, are affecting hydrocarbon projects in ways that could not have been predicted during 2024. Nevertheless, activity appears to remain on an even keel for this year.