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Vista Projects
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Vista Projects

Occidental Says Outlook for Shale Growth ‘Dire’ & More: CERAWeek Update

These translations are done via Google Translate

It was the second day of CERAWeek by S&P Global in Houston, one of the energy industry’s biggest annual gatherings and one that hasn’t been held in person in three years because of the pandemic.

The event is taking place amid massive gyrations in global energy markets following Russia’s invasion of Ukraine. On Monday, Exxon Mobil Corp.

Chief Executive Officer Darren Woods warned conference attendees that oil and other energy markets are in for more turbulence. Hess Corp.’s CEO John Hess called on the U.S. and its international allies to release more oil from strategic reserves, while Chevron CEO Mike Wirth said there’s no evidence of physical oil or gas shortages yet.

Time stamps are Houston.

Shell CEO Cancels CERAWeek Plans (6:40 p.m.)

Shell CEO Ben van Beurden canceled his plans to attend CERAWeek “as a result of unfolding events related to the war in Ukraine,” the company said in a statement.

He was scheduled to speak in an event titled “Strategies for the Next Decade” on Thursday morning.

Suncor Says Canada Oil Can Help Replace Russia Imports to U.S. (6:40 p.m.)

Canada could supply the U.S. with a third of the oil that the country usually imports from Russia in the wake of the Biden administration’s ban, Suncor Energy Inc. Chief Executive Officer Mark Little said.

He was among the Canadian oil executives speaking at CERAWeek by S&P Global on Tuesday that excoriated the Biden administration for blocking construction of the Keystone XL pipeline, which they said could have helped ease prices at the pump in the wake of Russia’s invasion of Ukraine.

OPEC’s Barkindo Says There’s ‘No Physical Shortage’ of Oil (6:04 p.m.)

The outgoing general secretary of OPEC, Mohammad Barkindo, said that while oil prices in the futures markets have risen more than 30% since Russia invaded Ukraine, there’s “no physical shortage of oil, as of this morning.”

The futures markets are “paper barrels,” but in the physical market supplies are guaranteed, Barkindo said in an interview with Bloomberg TV during CERAWeek by S&P Global in Houston. OPEC and its allies will continue to guarantee supplies to the market.

Tellurian Says U.S. LNG to Grow With or Without Biden (5:05 p.m.)

The U.S. liquefied natural gas industry will grow with or without the help of the Biden administration, said Charif Souki, chairman of LNG developer Tellurian Inc.

Russia’s invasion of Ukraine has upended global energy markets and sent European natural gas prices surging, a boon for U.S. LNG exporters. But while the Biden administration has a climate policy, it lacks an energy policy, Souki said in an interview.

“What they can do is make it happen a little faster and take the credit for it, or take the blame for not doing it fast enough and watch somebody else do it,” Souki said, referring to the future expansion of U.S. exports.

Alberta Premier Urges U.S. Shift From OPEC (4:15 p.m.)

Alberta Premier Jason Kenney urged the U.S. to change its energy policies that he said prioritizes oil and gas imports from OPEC countries over liberal democracies like Canada.

The head of Canada’s largest oil-producing province commended President Joe Biden’s announcement Tuesday banning imports of Russian crude. However, Kenney questioned earlier decisions to cancel the Keystone XL pipeline connecting Alberta’s oil sands to Gulf Coast refineries, and the administration’s recent requests to OPEC countries such as Venezuela to pump more oil to ease price.

“It is inexplicable for us as Canadians to watch what’s happening in American policy emanating from Washington right now, an administration that understandably is desperate to replace Russian imports with oil from somewhere else,” Kenney said.

Kenney called for bilateral talks between the U.S. and Canada to improve energy security, and for Canada to prioritize the construction of more liquefied natural gas terminals to export more energy to Europe.

Pioneer CEO Calls for Biden Support of Fossil Fuels (2:30 p.m.)

President Joe Biden needs to take a public pro-fossil fuel stance immediately if U.S. shale is to have any chance of backfilling Russian oil frozen out of global markets, said Scott Sheffield, CEO of Pioneer Natural Resources Co.

Adopting the position that “energy security is just as important as climate change” will improve investors’ mindset toward energy and allow companies to take the steps needed to grow production, Sheffield said in an interview.

For Biden, “the big change is fossil fuels are needed for this country, energy security is needed,” he said. “That’s the biggest item. He’s got to come out publicly” and say that.

Pioneer has spoken to investors over the last few days and “they don’t want us to grow because nobody knows how long this cycle is going to last,” Sheffield said. As such, Pioneer is sticking with its plan to limit production growth to 5% long term.

The U.S. will add around 700,000 barrels a day this year, but could double that rate in 18 months’ time if the Biden administration and investors change their mindset toward U.S. shale, he said.

Biden also needs to convince Saudi Arabia to pump more oil by visiting Crown Prince Mohammed bin Salman, the de facto ruler, otherwise crude could trade at $150 to $200 a barrel for the next “several years,” Sheffield said.

Occidental CEO Sees Oil at $150 (12:49 p.m.)

Crude prices could go to $150 a barrel as a result of the Russia situation, according to Occidental Petroleum Corp. CEO Vicki Hollub.

The U.S. is key to replacing Russian oil, but it won’t happen immediately, she said in an interview with Bloomberg TV on the sidelines on the conference. Shortages of pipeline equipment, sand, trucking and people are hampering production in the Permian Basin, she said.

To turn things around, the industry need fresh support from the Biden administration, going beyond just regulatory freedom, Hollub said. President Joe Biden must support the industry by winning over consumers through “explaining how supply and demand works.” Biden’s warnings over price gouging damages public sentiment towards the industry, she said.

“We produce a lot of low-cost, low-emissions energy in the U.S.,” Hollub said. “We have to have time to prepare” for production increases.

BP CEO Says He’s Hired Executives Away From Google (12:49 p.m.)

BP Plc Chief Executive Officer Bernard Looney boasted to a CERAWeek audience on Tuesday about one of his most prized accomplishments: hiring 38 executives into the company from the outside over the past two years.

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This is a departure for the energy giant after typically growing its own executive talent from within, he said. The new hires from other companies such as Google, Tesla and Amazon were swayed by the challenge of tackling the energy transition while keeping the world powered with today’s fuel needs.

A different leadership style at BP is also gaining ground, he said.

“People want to work for real people, I think people don’t want to work for heroes,” Looney said. “There’s something about the realness and the authenticity of being a real person and not somehow this heroic person that knows everything, knows always what to do.”

Chesapeake CEO Says Price Spike Is Bad for Industry (12:17 pm.)

Skyrocketing crude prices aren’t good for the oil and gas industry, and could lead to falling demand for petroleum products and disrupt global markets, Chesapeake Energy Corp. CEO Nick Dell’Osso said.

“You have prices spiking really high and I think that’s not actually great for our industry,” Dell’Osso said during an interview at CERAWeek at S&P Global on Tuesday.

“We all like to enjoy a nice profit margin but a shock to prices is not good for commodity producers,” he said. “You have bad things happen in commodity production when you have these kind of spikes.”

Dell’Osso said U.S. shale producers will need six to nine months to ramp up production and meet growing demand in the wake of Russia’s war on Ukraine. Chesapeake Energy and other shale producers are challenged by the ongoing labor shortage and a tightening market for steel and chemicals used in drilling and production.

“We as an industry like to be known as a supplier of energy that can be reliable,” he said. “When you have these shocks, there’s a lag time, and we hate to see that there’s a need for the product that isn’t being  met in the short term.”

ConocoPhillips Ties Energy Volatility to ‘Failed Policy’ (10:54 a.m.)

The Biden administration’s ban on Russian oil imports is “not enough to upset the U.S.” energy system, but “sends a message” to Russian President Vladimir Putin, ConocoPhillips CEO Ryan Lance said.

In practical terms, the market will “equilibrate itself reasonably quickly,” but now is the time for the U.S. and other nations to start thinking about energy security over the medium term, he said.

The volatility we’ve seen in recent days is largely “the result of failed policy,” with too many countries moving too fast on the energy transition and leaving the system vulnerable to shocks, Lance said.

Any talk from U.S. lawmakers or others about banning energy exports from the country is the “stupidest thing you can think of” and is an example of the “energy illiteracy” that’s pervasive, he said.

Lance has a very different view on U.S. production than rival Occidental Petroleum Corp., which sees constrained growth.

The U.S. will increase crude and condensate production by 800,000 to 900,000 barrels a day this year and likely next year, he said. Supply-chain constraints are a problem, but at current prices there’s so much cash being generated that companies can both grow strongly and return plenty to shareholders, Lance said.

Schlumberger Sees Close to a ‘Perfect Storm’ (10:54 a.m.)

Problems with the global supply chain have been “highly disruptive” to the oil industry over the last three to four quarters, said Olivier Le Peuch, CEO at Schlumberger, the world’s biggest oil-services provider.

“Logistics is really becoming highly difficult to anticipate, to manage,” Le Peuch said onstage at CERAWeek. The combination of a changing industry leaning further into the energy transition along with lingering effects from the pandemic have proved difficult for moving oilfield supplies around the world.

“It’s not the perfect storm, but close to it,” he said.

Aramco CEO Says World Needs More Spare Crude Capacity (10:23 a.m.)

Saudi Aramco Chief Executive Officer Amin Nasser said the world needs more than the current spare crude capacity of about 2 million barrels per day in order to absorb economic shocks, such as Russia’s invasion of Ukraine.

The head of the world’s largest oil producer said at CERAWeek by S&P Global that he’s concerned about the lack of investment in oil and gas projects and declining supplies in an increasingly volatile energy market.

“Today, we only have 2% of effective spare capacity, which is an imbalance,” Nasser said. “You need a resilient and strong spare capacity to make sure that you can absorb any supply shocks. Look at what’s happening. Before the Ukraine crisis, the spare capacity was declining fast.”

Occidental CEO Says Don’t Rely on Permian (9:44 a.m.)

The world’s energy markets can’t rely on major growth in the Permian Basin U.S. shale patch to ease oil prices, according to Occidental Petroleum Corp. Chief Executive Officer Vicki Hollub.

It’s a “dire situation,” she said, adding that supply-chain constraints are severely limiting companies’ efforts to grow in the world’s largest shale basin.

The Permian is also suffering from labor shortages, she said. Companies also don’t have enough rigs to support strong growth, and they’ve already used up most of the drilled-but-uncompleted wells that provided a quick uplift in growth in previous up cycles.

“The call for increased production from the U.S. at this point, especially with supply-chain challenges, can’t happen at the level that’s needed,” Hollub said.

OPEC Meets With U.S. Shale (8:45 a.m.)

Outgoing head of OPEC Mohammad Barkindo met with U.S. shale producers Monday night in Houston and said both groups are aligned in how they see the challenges posed to the oil industry by underinvestment.

“There’s no doubt we need to engage the investment community, the financial community, to address the encumbrances that are turning out to be obstacles on our way to access capital,” Barkindo said in an interview following the dinner meeting.

“The world is gradually but dangerously running out of spare capacity,” he said. “This is a function of the massive underinvestment in the industry in the last 10, 15 years.”

He said the Organization of the Petroleum Exporting Countries is “on the same page” as U.S. shale. In previous years, both groups have eyed each other warily or engaged in outright competition for market share.

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