Why Price Of New Oil Wells Go Up
Cost inflation triggered by higher drilling demand and supply chain issues has seen the price of new oil wells go up 16% year-on-year, according to Platts.
Diesel fuel costs and prices of steel piping have seen the most marked increases, though operator’s efficiencies such as faster drilling techniques have offset almost half of the negative impact of drilling costs.
At the same time, the production rates of new rigs continue to decline across all major producing plays in the U.S., with well efficiency in the Permian falling 15% year-on-year to 1,078 b/d.
According to WoodMac, ultra-deepwater wells are set to suffer the most this year, with average floating rig rate costs edging higher by 26% compared to last year, almost double that of onshore cost inflation.
U.S. oil major Chevron might become a harbinger of an oil industry anti-ESG wave, with minority shareholder Strive Asset Management arguing that climate goals force “value-destroying limitations” on the company.
Australia’s largest oil producer Santos has reportedly agreed to sell 5% in the Papua New Guinea project PNG LNG to the state-owned Kumul Petroleum for $1.1 billion.
UK energy major Shell has relinquished its stakes in two offshore wind projects in Ireland with a total capacity of 2.65 GW, less than a year after it bought a 51% stake in them.
Things are still looking bearish for crude, with WTI still trading below the 80 per barrel mark, but a number of bullish catalysts could offer support.
Hurricane Ian, was touted to become the next menace of oil production and refining in the U.S. Gulf of Mexico. As of Tuesday morning, two oil majors have decided to shut oil platforms in anticipation, and the hurricane is now expected to make landfall in Florida. Hence, oil market bulls see OPEC+ as their ultimate line of defense against a meager macroeconomic background and a strengthening dollar, with all eyes on Russia, which is likely to propose a major production cut at the next OPEC+ meeting on October 5th.