US stripper wells among first to face shutdown: Rystad
Small US onshore oil wells that produce as little as 10 b/d of output face the prospect of shut-ins from the current crude price drop, but any large-scale closures are still unlikely, consultancy Rystad Energy said today.
These low-volume wells, commonly known as stripper wells, account for about 1.2mn b/d, or a little over 10pc, of total US onshore output of about 10.5mn b/d last year.
At $20/bl WTI about 75pc of these marginal stripper wells are still able to cover their cash cost, according to Rystad, but the remaining 25pc, or about 300,000 b/d, are not. Given their size and output, these wells will be the first candidates for shut-in. If crude prices fall further, more will face closures as they are not able to cover their costs. Nymex WTI settled at $20.09/bl yesterday, at its lowest since February 2002.
Even so, shutting down the vast majority of these stripper wells is unlikely because the cost of permanently closing them would be higher than the losses the owners would incur in keeping them in production for a few years.
The cost to close ranges anywhere between $20,000-$40,000/well. Even if oil prices are $10/bl below the cash breakeven, a typical marginal well will lose around $600/month, or $7,200/year. Hence, the operator can keep these wells producing for about four years before the loss would match the cost of abandoning the well.
Rystad's analysis shows that historically most shut-ins of these wells have been for good, and they have rarely been reactivated when oil prices have recovered because of the high cost of restarting them and the loss of reservoir pressure that would occur with the closures.
More than half of marginal wells are operated by private operators, including private equity-backed players and hundreds of small independent producers and family-owned businesses, it said. But about 40pc of the output is controlled by publicly-traded independent operators, with nearly 340,000 b/d, and majors accounting for 160,000 b/d.
"Hence, stripper well supply may be less elastic and flexible than some people might think, and it might not be the source of supply that would help balance the market," Rystad's head of shale research Artem Abramov said.
More than 440,000 b/d of Permian oil, in Texas and New Mexico, presently comes from marginal wells, it said.
US energy investment bank Tudor Pickering Holt in a note today said while most public upstream operators have yet to detail their shut-in plans, a potential closure of a portion of their production looks imminent as storage fills up in coming months.
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Kazakhstan outlines Opec+ compensation plan
Kazakhstan outlines Opec+ compensation plan
London, 3 May (Argus) — Opec+ member Kazakhstan has submitted a plan to Opec detailing how it intends to compensate for producing above its crude production target in the first four months of the year. Kazakhstan and Iraq — which has also submitted a compensation plan — are the Opec+ alliance's largest overproducers and a key reason why the group exceeded its overall production in the first three months of the year . Kazakhstan's energy ministry said it produced above its target by 129,000 b/d in January, 128,000 b/d in February, and 131,000 b/d in March, according to secondary source estimates. Opec secondary sources, of which Argus is one, have yet to formally submit their production estimates for April, but Kazakhstan said it is factoring preliminarily overproduction of 100,000 b/d for April. The ministry said it kept oil production high because of high winter demand for natural gas — much of its gas production is associated and is produced alongside its oil. Kazakhstan said it would start its compensation plan in May with an initial cut of 18,000 b/d below its official target of 1.468mn b/d. It would then stick to its target in June and July before implementing a cut of 131,000 b/d in August, none in September, 299,000 b/d in October, 40,000 b/d in November and zero in December. The cuts have been designed to coincide with scheduled maintenance at the country's key oil fields of Kashagan and Tengiz, the ministry said. Kazakhstan would have to reduce its output by 149,000 b/d in May compared with its March production of 1.599mn b/d to meet its pledge, according to Argus calculations. The compensation plan is set to be adjusted once a final figure for April is available. The plan would be further adjusted to accommodate any change in the Opec+ alliance's output policy — for which a meeting is scheduled to take place on 1 June in Vienna. Opec has been increasing pressure on members exceeding their targets. It called last month on countries that have overproduced to submit detailed compensation plans by the end of April. The Opec+ alliance has implemented a series of cuts — voluntary or collective — worth a combined 5.4mn b/d since October 2022 in a self-described bid to "support the stability and balance of the oil market". The latest round of "voluntary" output reductions by several members came into force in January and is due to run until the end of June. By Aydin Calik and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Iraq sets plan to compensate for excess Opec oil output
Iraq sets plan to compensate for excess Opec oil output
Dubai, 3 May (Argus) — Iraq, Opec's second-largest oil producer, has submitted a plan to the Opec secretariat outlining how it will compensate for producing above quota in the first quarter of 2024. The plan indicates that Baghdad will make compensatory cuts from May through to the end of this year, although its breakdown could be tweaked if its April production is again above quota, based on average production estimates issued by the seven Opec secondary sources, including Argus . Opec+'s Joint Ministerial Monitoring Committee (JMMC) said in its 3 April meeting that members that have produced above their quotas so far this year would need to submit plans to compensate for the excess. Iraq and Kazakhstan, which Opec said has also submitted its own compensation plan, have produced the most excess excess volumes in the Opec+ group since the beginning of the year. The JMMC oversees compliance to the coalition's crude production cuts and studies market dynamics. Iraq produced 194,000 b/d above target in January, and overshot by 217,000 b/d and 193,000 b/d in February and March, respectively. To compensate for this, Baghdad plans to produce 50,000 b/d below its quota between May and September, 100,000 b/d below quota for October and November, and 152,000 b/d below its quota for December. Iraq has been working to a quota of 4mn b/d since the start of the year, including two rounds of voluntary cuts it made in April and November last year. Baghdad will submit its crude production figure for April later this week, it said. Any extra volumes produced will also be factored into the country's compensation plan. To meet obligations, Baghdad says it will cap its crude burn at 75,000 b/d and maintain refining intake to between 400,000 b/d and 500,000 b/d through to the end of this year, according to Iraq's Opec national representative Mohammed Adnan Ibrahim Al-Najjar. But Iraq has yet to decide whether it will extend a 3.3mn b/d cap on exports, in place since April , beyond the second half, as it will depend on "Opec+ agreements [in the June meeting] and [the needs of] Iraq's economy over the coming months," the oil ministry told Argus last week. When needs must With the summer season around the corner in the Mideast Gulf region, Iraq has pushed the majority of its compensation into the last three months of the year. Iraq in summer often experiences extreme heatwaves resulting in a major spike in electricity demand. Power shortages during the summer season have fuelled political unrest in Iraq in recent years. To strike a balance between its Opec+ commitments and avoid similar scenarios this year, Iraq says it will import higher levels of gas from neighbouring Iran, with Baghdad also beginning to benefit from electricity supply from Jordan through a newly-established power line which became operational at the beginning of April. Iran and Iraq finalised a five-year supply agreement at the end of March, which will see Tehran send "up to 50mn m³/d" of gas to Iraq, Iraq's electricity minister Ziad Ali Fadel said. But Iraq's persistent overproduction, which has drawn scrutiny within Opec+, might be difficult to address, especially as Iraq blames it on its inability to oversee production in the semi-autonomous Kurdistan region in the north of the country. Most Iraqi Kurdish crude output is directed to local refineries or sold on the black market following the closure of the export pipeline that links oil fields in northern Iraq to the Turkish port of Ceyhan just over a year ago. Iraq's federal oil ministry says its Kurdish counterpart has stopped providing production data, but on 3 May said it estimates Kurdistan Regional Government (KRG) crude production to be between 40,000 b/d and 50,000 b/d. Meanwhile, Iraq's oil minister Hayyan Abdulghani on 2 May announced that two joint Baghdad-Erbil committees have been formed to resolve the issue of contracts between Erbil and the international oil companies operating in the Kurdistan region. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Austrian regulator consults on gas tariff changes
Austrian regulator consults on gas tariff changes
London, 3 May (Argus) — Austrian energy regulator E-Control has revised up its planned increase in gas tariffs from the start of 2025 but adjusted its commodity charge lower. E-Control on Friday published draft amendments to its gas system charges ordinance that would codify planned changes to how it calculates tariffs. It largely retains its revised methodology from April, but has modified its planned outright tariffs and commodity charge. The regulator had in February proposed a shift to a capacity-weighted distance (CWD) model for its reference price methodology, along with a change to a 50:50 entry-exit revenue split from roughly 20:80 at present. The proposed changes would have tripled entry costs from Germany and quadrupled them from Italy from 2025, as well as other significant changes for the distribution system and storages. Austria's system operators supported the changes , but almost all other respondents to the consultation were highly critical , warning that the changes could threaten diversification, lower utilisation and increase tariffs further and harm liquidity. E-Control last month walked back on several of the proposed changes . Most significantly, it revised the entry-exit split to 25:75, limited the increase in exit tariffs to the distribution zone, introduced a 50pc discount on exit fees to storage facilities, and equalised entry tariffs at all points. The switch to a CWD model was retained, however. The most notable modification from the changes proposed in April is a roughly 7pc increase in capacity-based tariffs, as the new amendments use final prices as opposed to indicative prices previously (see table) . The difference "results from the findings over the course of the cost approval procedure during the past few months", E-Control told Argus . In contrast, the commodity charge on gas entering and exiting the Austrian grid has decreased as a result of "lower expected fuel energy costs", E-Control told Argus . It now plans to charge around €0.04/MWh on entry flows and €0.13/MWh on exit flows, compared with €0.12/MWh and €0.13/MWh, respectively, in the original proposal. There is no commodity charge in place for this year. The final change is an update of the multipliers for capacity bookings depending on their duration. The regulator now proposes multipliers of 1.25 for quarterly products, 1.5 for monthly, two for daily, and three for within-day. Interested parties may submit comments to the regulator by 16 May. Final tariffs will then be published in June, and will be applicable from 1 January 2025. By Brendan A'Hearn Austria 2025-28 estimated tariffs €/kWh/h/a Entry/Exit Capacity type* 2025 (final) 2026 (preliminary) 2027 (preliminary) Baumgarten Entry FZK 1.30 1.37 1.48 Oberkappel Entry FZK 1.30 1.37 1.48 Uberackern Entry FZK 1.30 1.37 1.48 Uberackern Entry DZK 1.17 1.23 1.33 Uberackern Exit FZK 4.25 4.59 4.98 Uberackern Exit DZK 3.82 4.13 4.48 Arnoldstein Entry FZK 1.30 1.37 1.48 Arnoldstein Entry DZK 1.17 1.23 1.33 Arnoldstein Exit FZK 5.96 6.62 7.39 Murfeld Exit FZK 3.73 4.19 4.71 Mosonmagyarovar Exit FZK 2.15 2.49 2.80 Distribution area Exit FZK 1.26 1.45 1.67 Storage Penta West Exit FZK 2.12 2.29 2.49 Storage MAB Exit FZK 1.07 1.19 1.34 *FZK = Firm, freely allocable capacity; DZK = dynamically allocable capacity — E-Control Austria 2025 final tariff vs current €/kWh/h/a Entry/Exit Capacity type* 2025 Current ±% Baumgarten Entry FZK 1.30 0.85 53 Oberkappel Entry FZK 1.30 0.97 34 Uberackern Entry FZK 1.30 0.97 34 Uberackern Entry DZK 1.17 0.88 33 Uberackern Exit FZK 4.25 3.26 30 Uberackern Exit DZK 3.82 2.93 31 Arnoldstein Entry FZK 1.30 0.97 33 Arnoldstein Entry DZK 1.17 0.68 72 Arnoldstein Exit FZK 5.96 4.35 37 Murfeld Exit FZK 3.73 1.90 97 Mosonmagyarovar Exit FZK 2.15 1.23 75 Distribution area Exit FZK 1.26 0.42 200 Storage Penta West Exit FZK 2.12 0.44 383 Storage MAB Exit FZK 1.07 0.44 144 *FZK = firm, freely allocable capacity; DZK = dynamically allocable capacity — E-Control Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US job growth nearly halved in April
US job growth nearly halved in April
Houston, 3 May (Argus) — The US added fewer jobs in April as the unemployment rate ticked up and average earnings growth fell, signs of gradually weakening labor market conditions. The US added 175,000 jobs in April, the Labor Department reported today, fewer than the 238,000 analysts anticipated. That compared with an upwardly revised 315,000 jobs in March and a downwardly revised 236,000 jobs in February. The unemployment rate ticked up to 3.9pc from 3.8pc. The unemployment rate has ranged from 3.7-3.9pc since August 2023, near the five-decade low of 3.4pc. The latest employment report comes after the Federal Reserve on Wednesday held its target lending rate unchanged for a sixth time and signaled it would be slower in cutting rates from two-decade highs as the labor market has remained "strong" and inflation, even while easing, is "still too high". US stocks opened more than 1pc higher today after the jobs report and the yield on the 10-year Treasury note fell to 4.47pc. Futures markets showed odds of a September rate cut rose by about 10 percentage points to about 70pc after the report. Average hourly earnings grew by 3.9pc over the 12 month period, down from 4.1pc in the period ended in March. Job gains in the 12 months through March averaged 242,000. Gains, including revisions, averaged 276,000 in the prior three-month period. Job gains occurred in health care, social services and transportation and warehousing. Health care added 56,000 jobs, in line with the gains over the prior 12 months. Transportation and warehousing added 22,000, also near the 12-month average. Retail trade added 20,000. Construction added 9,000 following 40,000 in March. Government added 8,000, slowing from an average of 55,000 in the prior 12 months. Manufacturing added 9,000 jobs after posting 4,000 jobs the prior month. Mining and logging lost 3,000 jobs. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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