Inflation in the oil sector is worsening and industry executives do not expect cost pressures on everything from steel pipe to frack sand to ease any time soon.
The increase in prices has been so swift that oil chief executives are being forced to increase the size of their annual budgets to preserve crude and natural gas output targets.
Those same executives have issued a warning that rampant oilfield inflation make any significant increase in domestic oil production much more difficult to attain despite the incentive of $100-a-barrel crude.
Benchmark US and international oil prices have surged by more than 40 per cent this year as strong post-coronavirus demand crashed headlong into anaemic growth in crude supplies and the worldwide market dislocations caused by Russia’s invasion of Ukraine.
“Given the substantial supply chain bottlenecks and scarcity of oil service equipment and field personnel, any attempt to increase activity in the US will be logistically challenging and capital inefficient,” Apa chief executive John Christmann said during a conference call on Thursday.
Apa, the oil explorer formerly known as Apache, this week raised its full-year drilling budget by 8 per cent, startling investors unaccustomed to such revisions a few months after the plan was minted.
The stock fell by as much as 10 per cent, wiping out more than $1.5 billion in market value in less than three hours on Thursday.
ConocoPhillips also increased its spending plan by 8 per cent while Murphy Oil and Laredo Petroleum raised theirs by 7 per cent and 6 per cent, respectively.
The inflationary trend has hit every corner of the oil exploration and production cycle. Drillers said they are experiencing sticker shock on everything from rigs and workers to diesel fuel and frack sand.
Shale company Continental Resources said the price of steel tubes used to line the interior of oil wells jumped by about 7 per cent in the month of March alone.
Meanwhile, another shale specialist, Coterra Energy, noted that it can take as long as two years to take delivery of pipes, compressors and other production equipment.
Both companies said their drilling and production costs are up 16 per cent to 20 per cent from last year.
That represents an acceleration from earlier this year, when the sector was expecting cost increases in the range of 10 per cent to 15 per cent.
“I think it is here with us for a while,” ConocoPhillips chief executive Ryan Lance said on inflation during a conference call. “I don’t think it is transitory and we are going to have to deal with it.”
Hess is raising its capital budget by as much as $100 million this year, mainly because of a 7 per cent increase in drilling and fracking costs in the Bakken Shale region of North Dakota.
Scott Sheffield, the chief executive of Pioneer Natural Resources, expressed worry that supply constraints will hamper production.
“I just think it is going to be tough to hit” some of the Wall Street forecasts for oil supply growth, he told investors. “It makes me even more bullish about some of the oil price numbers that are out there.”
Shale executives are trying to minimise the pain from rising costs by ordering supplies earlier and reducing unit expenses through strategies such as drilling longer lateral wells.
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Ticket prices
- Golden circle - Dh995
- Floor Standing - Dh495
- Lower Bowl Platinum - Dh95
- Lower Bowl premium - Dh795
- Lower Bowl Plus - Dh695
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- Upper Bowl Premium - Dh395
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UAE v Zimbabwe A
Results
Match 1 – UAE won by 4 wickets
Match 2 – UAE won by 5 wickets
Match 3 – UAE won by 25 runs
Match 4 – UAE won by 77 runs
Fixture
Match 5, Saturday, 9.30am start, ICC Academy, Dubai
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
La Mer lowdown
La Mer beach is open from 10am until midnight, daily, and is located in Jumeirah 1, well after Kite Beach. Some restaurants, like Cupagahwa, are open from 8am for breakfast; most others start at noon. At the time of writing, we noticed that signs for Vicolo, an Italian eatery, and Kaftan, a Turkish restaurant, indicated that these two restaurants will be open soon, most likely this month. Parking is available, as well as a Dh100 all-day valet option or a Dh50 valet service if you’re just stopping by for a few hours.
Final scores
18 under: Tyrrell Hatton (ENG)
- 14: Jason Scrivener (AUS)
-13: Rory McIlroy (NIR)
-12: Rafa Cabrera Bello (ESP)
-11: David Lipsky (USA), Marc Warren (SCO)
-10: Tommy Fleetwood (ENG), Chris Paisley (ENG), Matt Wallace (ENG), Fabrizio Zanotti (PAR)
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Company profile
Date started: December 24, 2018
Founders: Omer Gurel, chief executive and co-founder and Edebali Sener, co-founder and chief technology officer
Based: Dubai Media City
Number of employees: 42 (34 in Dubai and a tech team of eight in Ankara, Turkey)
Sector: ConsumerTech and FinTech
Cashflow: Almost $1 million a year
Funding: Series A funding of $2.5m with Series B plans for May 2020
Thor: Ragnarok
Dir: Taika Waititi
Starring: Chris Hemsworth, Tom Hiddleston, Cate Blanchett, Jeff Goldblum, Mark Ruffalo, Tessa Thompson
Four stars
Frankenstein in Baghdad
Ahmed Saadawi
Penguin Press
Dubai works towards better air quality by 2021
Dubai is on a mission to record good air quality for 90 per cent of the year – up from 86 per cent annually today – by 2021.
The municipality plans to have seven mobile air-monitoring stations by 2020 to capture more accurate data in hourly and daily trends of pollution.
These will be on the Palm Jumeirah, Al Qusais, Muhaisnah, Rashidiyah, Al Wasl, Al Quoz and Dubai Investment Park.
“It will allow real-time responding for emergency cases,” said Khaldoon Al Daraji, first environment safety officer at the municipality.
“We’re in a good position except for the cases that are out of our hands, such as sandstorms.
“Sandstorms are our main concern because the UAE is just a receiver.
“The hotspots are Iran, Saudi Arabia and southern Iraq, but we’re working hard with the region to reduce the cycle of sandstorm generation.”
Mr Al Daraji said monitoring as it stood covered 47 per cent of Dubai.
There are 12 fixed stations in the emirate, but Dubai also receives information from monitors belonging to other entities.
“There are 25 stations in total,” Mr Al Daraji said.
“We added new technology and equipment used for the first time for the detection of heavy metals.
“A hundred parameters can be detected but we want to expand it to make sure that the data captured can allow a baseline study in some areas to ensure they are well positioned.”
