DENVER, Nov 15 (Reuters) - U.S. oil producers are strugglingto find enough crews, vehicles and equipment to take advantageof rising global demand and a seven-year high in crude prices,say executives at oilfield service firms.
The problems are preventing the world's top oil producer andconsumer, the United States, from responding to higher prices and could mean it takes longer for global output to matchdemand recovering from the coronavirus pandemic.
That wouldresult in oil firms draining inventories and in turn contributeto higher prices.Higher energy prices are fueling consumer inflation, whichlast month hit 6.2%, the highest in 30 years. The Bidenadministration has urged oil producers to pump more oil,signaling it might release U.S. emergency stockpiles if priceskeep rising.
The drillers and service firms that bring new oil and gas tomarket are confronting shortages and delays in everything fromtrucks, electronics, pumps and skilled workers. Workarounds sofar have kept a crunch at bay, but shortages are hittingoilfield service results and could short-circuit U.S. productiongains early next year, they said.Logistics snags have cut access to specialized steel,submersible pumps that boost well pressures, and pickups thatferry workers and equipment.
U.S. oil production figures showoutput remains 1.8million barrels per day (bpd) below the peak reached nearly twoyears ago while global demand is forecast to exceed pre-pandemiclevels by June. Nearly two-thirds of Texas business executives polled by theDallas Federal Reserve Bank recently disclosed difficultiesgetting needed supplies with nearly half saying problems have become worse. It couldtake seven to 12 months to ease, said roughly half, with 18%expecting shortages to last more than a year.
'GETTING WORSE'
"We'll come to a point where we can't handle additional workwith existing inventory," said Brad James, chief executive ofdriller Enterprise Offshore Drilling. "The problems we're seeingare going to get worse," he predicted.
Pressure on supplies is not as bad as it might have beenbecause many shale oil producers have pledged to restrain newspending for output and instead use cash generated by highprices to pay dividends and reduce debt.Oil services firms are struggling, however, even though manyproducers are standing pat. Requests for some orders to supplyoil companies have gone unanswered, said James, and lead-timesfor certain drilling equipment are so far out that Enterprisehas resorted to cannibalizing rigs idled off the Louisiana coastto keep existing rigs running.
"Without significant additional investment, land contractdrillers are at their limit with the rigs they can deploy tosatisfy the requirements of today's multiple-well, verylong-lateral drilling," said Richard Spears, vice president ofoilfield consultancy Spears & Associates.
Equipment shortages and lengthy delays are driving up pricesfor what is available. Denver, Colorado-based oil service firmLiberty Oilfield Services took a $12 million hit to thirdquarter earnings because costs rose faster than it was able toraised prices, its CEO said.
SIX MONTHS FOR A TRUCK
Fredrick Klaveness, CEO of NLB Water LLC, which developed a membrane-driven technology to treat and recycle wastewater fromoil and gas production, has been waiting since June for $200,000worth of orders that have not shipped because suppliers are alsowaiting on certain components.
"One small piece of the puzzle stops everything," saidKlaveness. If the ordered membrane modules are not received intime, NLB may lose an important contract. "Parts probably worthless than $5,000 are holding up the entire order. Those partsare not microchips or something fancy, but basic components madeout of materials like stainless steel and titanium."
A heavy duty Dodge Ram pickup he ordered in June took fivemonths to arrive, Klaveness said. His workarounds to keepbusiness flowing include buying supplies from Canada and at onepoint, picking up galvanized steel from several Home Depotstores in Colorado and hauling it to West Texas where it was notavailable.
RIPPLE EFFECT
The electronic components shortage hurting the auto andcomputer industry is troubling renewable energy as well as oiland gas. That is affecting companies digitalizing operations andadding renewable power to lower greenhouse gas emissions.
Firms that convert pipeline compressor stations to run onelectric motors instead of natural gas are finding parts inshort supply, said energy consultant Spears.Ru Schaefferkoetter, CEO of solar pump firm Trido Solutions,said basic materials such as steel and aluminum can be hard tofind. She worries that supplies could get tighter as the Bidenadministration incentivizes solar development.
President Joe Biden's Infrastructure Bill, which could besigned into law on Monday, includes funding to upgrade powerinfrastructure and expand renewable energy through a new GridAuthority.
"There are a growing number of people laid off on solarprojects because there are no panels," said John Berger, CEO ofSunnova, at a recent Kansas City Federal Reserve Conference. An"extreme shortage of electricians," is another concern, he said.