Pressure to boost oil production; are there enough workers?
BILLINGS, Mont. — In the oil fields of northern Montana, industry veteran Mac Mcdermott watched crude prices whipsaw from $75 a barrel in January to more than $120 as Russia pressed its war in Ukraine, then down again when coronavirus worries in China raised the specter of a global slowdown.
Mcdermott said his family-owned company will modestly increase drilling if oil prices stabilize. But for the next few months, he’s waiting on the sidelines and struggling to get enough workers to watch over roughly 100 oil wells the company operates. That includes some wells idled during the pandemic that he’s been trying to bring online since last year.
President Joe Biden’s move to ban Russian oil imports over its invasion of Ukraine was met with Republican demands to boost U.S. production to address high gasoline prices.
The White House, too, called for more drilling and cited the war as it shelved Biden’s campaign pledge to curb drilling on public lands because of climate change.
Yet political rhetoric about quickly ramping up U.S. crude output is at odds with the industry’s reality: There’s not enough workers to rapidly expand, scant money to invest in drilling and wariness that today’s high prices won’t last, according to industry representatives, analysts and state officials.
“It would be great to produce more domestically,” Mcdermott said. “(But) it’s so volatile. … We haven’t had any access to capital for years. If we drilled, money would have to come from existing production. It’s a risky business.”
The United States doesn’t import much Russian oil and Biden’s administration has effectively halted new oil or natural gas lease sales from federal lands and waters. But it has approved almost 4,000 new drilling permits on federal lands and companies have thousands more stockpiled.
Federal energy reserves account for about a quarter of U.S. oil, with the remainder coming from private, tribal and state land.
Obstacles to more U.S. oil are surmountable, according to analysts, yet will take months to work through and it could be late this year or early next before a significant production increase materializes.
Where in the world to look
In the short term, the world is looking to other sources. The United Arab Emirates said last week it would urge OPEC to consider boosting oil output, which sent oil prices tumbling. Saudi Arabia alone has roughly 2 million barrels a day of additional capacity standing by, said Rice University energy researcher Jim Krane.
By comparison, total U.S. production last year was about 11 million barrels a day.
Even with favorable conditions — strong prices, political pressure and less-cautious shareholders — companies in the U.S. could see production rise by just over 1 million barrels daily by the end of the year, said Robert Johnston with Columbia University’s Center on Global Energy Policy.
Some of the biggest U.S. reserves are offshore in the Gulf of Mexico. However, the massive platforms used in deep Gulf waters take years to finance, build and put into place.
A near-term crude boost would have to come from onshore oil resources already developed, such as the Permian Basin in New Mexico and Texas and the Bakken of North Dakota and Montana, said Andy Mcconn with Enverus, an energy analytics company whose data is used by industry and government agencies.
Even in those areas, there’s no way to simply crank open the spigot immediately. The most easily accessible reserves already have been drilled, Mcconn said.
“There’s not a lot of low-hanging fruit,” he said.
Multiple factors are tempering a production boom, said Stephen M. Robertson with the Permian Basin Petroleum Association, including volatile prices, labor issues and longer wait times for parts to be fabricated and supplies shipped. Even the custom cowboy boots favored by some workers have been hard to come by.
If the conflict in Ukraine drags on, prices stay high and the logistical hurdles are overcome, companies could move into relatively untapped fields, including Wyoming’s Powder River Basin and Utah’s Uinta Basin.