The US shale industry executives have warned Europe they will not be able to come to their rescue by boosting oil and gas provision for the continent in time for winter, the Financial Times has reported.
Although the vast US oil and natural gas reserves could be used to alleviate the European energy crunch, supplies apparently cannot be increased quickly enough to avert winter shortages.
“It’s not like the US can pump a bunch more. Our production is what it is… There’s no bail-out coming… Not on the oil side, not on the gas side,” Wil VanLoh, head of private equity group Quantum Energy Partners, one of the US shale industry’s largest investors, was cited as saying.
Soaring shale production in the US had seen output at 13Mln barrels per day, or more than 10 percent of global supply, before the COVID-19 pandemic. But once oil prices plummeted there was a decline in production, with US output just recently recovering to 12.1Mln barrels per day.
Executives added that because of sluggish supply growth, oil and liquefied gas exports from the US were already hovering near a maximum. Crude output growth is expected to fall short of government forecasts by an estimated 1Mln barrels per day this year.
Scott Sheffield, chief executive of Pioneer Natural Resources, also ruled out any prospect of a big production boost from the US shale industry, saying:
“No, I don’t see it coming. We’re not adding [drilling] rigs and I don’t see anyone else adding rigs.”
The US shale industry’s investors prefer a "low-production, high-profit" model, baulking at giving the green light to a big production increase, according to Ben Dell, chief executive of private equity group Kimmeridge Energy.
Furthermore, even if there were "modest supply increases" from the US in the months ahead, it would “not move things at a world scale”, Matt Gallagher, head of private driller Greenlake Energy Ventures, added.
Relentless Energy Crunch
As crude and petrol prices soared earlier this year and inflation hit a 40-year high, the Joe Biden administration has sought to lower the costs, vowing to continue releasing emergency oil reserves to add to supply.
The Democratic POTUS, who has been battling a host of challenges before the 8 November mid-term elections, called on shale producers to raise supply. US energy secretary Jennifer Granholm in a speech to executives at the CERAWeek energy conference in Houston described the country as being on a “war footing”.
“That means [crude oil] releases from the strategic reserves all around the world. And that means you producing more right now if and when you can. I hope your investors are saying this to you as well. In this moment of crisis, we need more supply,” Granholm said.
US Treasury secretary Janet Yellen earlier warned that the embargo on Russian crude sales coming into full effect later this year “could cause a spike in oil prices”. The International Energy Agency (IEA) also warned in its Wednesday report that oil sales from Russia could fall by almost 20 percent after the embargo, prompting Brent prices to rise 1 percent to $94.10 a barrel.
On 21 July, the EU adopted a new, seventh package of sanctions against Moscow because of its special military operation in Ukraine. It included a gradual phase-out of Russian oil, providing for a complete import ban on all of the country’s seaborne crude as of 5 December 2022, and petroleum products as of 5 February 2023. The bloc seeks to ban all Russian oil imports eventually.
However, the sweeping western sanctions that were designed to cripple Russia’s economy have, in effect, fueled a rise in energy costs and caused nearly two-digit inflation across Europe. Moscow has repeatedly emphasized that western countries’ "short-sighted" policies were behind the price crunch. Russia’s President Vladimir Putin also recently commented on the G7 nations’ push for a "price cap" on Russian energy supplies, calling the politically motivated idea “absolutely stupid” and warning that Moscow might simply cut off all energy deliveries to these nations if its economic interests are threatened.