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Insiders Discuss How to Secure America’s Energy Future at CERA Week

Participants in the 2022 CERA Week by S & P Global Conference held in Houston, Texas, USA on Wednesday, March 9, 2022.

F. Cartersmith | Bloomberg | Getty Images

The annual CERA Week by the S & P Global Energy Council in Houston, which ended on Friday, couldn’t have come at a better or more time.

Russia’s invasion of Ukraine has brought energy (price, security, the transition to renewable energy) to the forefront with stories of human suffering, bringing together energy executives, policy makers and thousands of others this week. rice field.

Energy Secretary Jennifer Granholm, a keynote speaker, surprised the audience by urging the pace of oil production. Over hundreds of panels, and during all sessions in the conference hall, experts discussed what would happen next and what to do. The world’s energy complex should look like the future. Does the United States need to drill more oil and gas? Does energy security mean building renewable energy and breaking away from dependence on hydrocarbons? Will natural gas act as a bridge? What role do investors play in production policy?

At the meeting, participants in the oil and gas industry were optimistic about the important services they provide. Through conversations with more than 12 people who were granted anonymity, the companies they represent disagreed on issues such as whether rising oil and gas prices would facilitate or cool the energy transition. The common thread was that so-called traditional energy companies need to be part of the conversation.

“I’m really proud to work for an oil and gas company. It’s providing energy to people,” said one conference attendee. “There was an attack on the oil and gas industry.” Conflict puts the spotlight on energy integration, adding that “there is an energy mix. We need fossil fuels and then we need to move to renewable energies, which must be a step-by-step process. Hmm, “says the person. He said.

“I’m very happy to be able to work with oil and gas … it’s a technology industry [and] “I think our industry is leading the way,” said one attendee, adding that “natural gas infrastructure can contribute to ambitious environmental goals such as decarbonization and net zero.”

Energy conversion is coming

At this point, no one doubts that an energy shift is coming, even in the oil and gas industry. After all, it’s unfolding right in front of us. However, opinions vary greatly depending on what the pace will be. Forecasting Oil Demand Against this uncertain background, oil and gas companies have made several breakthroughs in carbon capture and decarbonization technologies such as hydrogen that were on display at CERA Week. Companies such as Exxon, Oxy, Saudi Aramco and Petronas had sophisticated exhibits. Introducing their efforts in these areas.

“It’s very exciting. Much is happening to shift and grow the industry from its predecessor,” said one.

But in the short term, oil demand is projected to exceed 100 million barrels per day this year, and prices are rising, so the question of when producers, or even to increase production, is paramount. It’s on the front line.

“The industry will accelerate the energy shift, but I think we’ll see more oil and gas as the world needs it in the near future,” said one participant, who is a board member of an independent oil and gas company. Said.

Of course, what comes to mind is that by controlling the production of much oil and natural gas, and because the markets are “very linked and interrelated,” they have a major impact on global energy trade. It was a Russian ability.

Participants in the 2022 CERA Week by S & P Global Conference held in Houston, Texas, USA on Wednesday, March 9, 2022.

F. Cartersmith | Bloomberg | Getty Images

Even before the Ukrainian crisis, oil prices were slowly but steadily rising from unprecedented lows struck during the pandemic. The US oil benchmark was temporarily traded in the negative territory as the virus robbed demand for petroleum products.

Soaring oil prices pose a threat to recession

After that, demand recovered, but supply remained restrained and prices rose. On the day Russia invaded Ukraine, US and global oil benchmarks exceeded $ 100, and just a week later they exceeded $ 130. Brent crude, an international oil marker, produces about 10 million barrels of oil per day in Russia, about half of which is exported. The country is a major supplier to Europe and prices have skyrocketed due to concerns about production losses in already tight markets.

President Joe Biden subsequently banned energy imports from Russia, but the United States does not actually import much from Russia. It is much more important if Europe takes similar steps. Still, even before sanctions on the energy industry were announced, buyers were already avoiding Russian products for fear of violating restrictions.

U.S. producers may have been keen to open taps before, as prices have risen from $ 50 to $ 60, $ 75, $ 90, and over $ 100, but companies think differently. I got out of the pandemic. It was emphasized many times in Houston. Companies focus on capital discipline and shareholder returns in the form of repurchases and dividends. Once a large amount of cash is returned to an investor, it is not easy to return to the same investor. Those who have survived years of low profits – and say it’s time to start drilling again.

According to data from oilfield service company Baker Hughes, the number of oil and gas rigs for the week ending Friday has increased for the ninth time in the last decade. The number of oil rigs is currently 527, the highest since April 2020. However, that number is still well below the pre-pandemic level of over 700 rigs.

Soaring fuel prices are undoubtedly exciting for the oil industry, but at some point even oil companies don’t want such highs, so Washington pays head-on to the industry and at the same time puts the economy in recession. You are at risk of falling. ..

“If oil prices stay high, I’m sure we’ll be in recession,” said one attendee in Houston, Deputy Production Director of the Integrated Oil Company. If the Russian war intensifies, it’s just around the corner.

“This isn’t good for consumers, it’s not very good for the industry,” said another conference attendee. The national average of one gallon of gasoline exceeded $ 4 on Sunday, and prices soared further in a week.

We will be attending the 2022 CERA Week by S & P Global Conference in Houston, Texas, USA on Sunday, March 6, 2022.

F. Cartersmith | Bloomberg | Getty Images

Addressing climate change is one of the Biden administration’s key beliefs, and oil and gas companies say policies are at a disadvantage to the industry. Delays in permits are often quoted. Not acting.

Petition for more excavation

But when Energy Secretary Jennifer Granholm addressed CERA Week on Wednesday, the tone of the administration seemed to be very different.

She even appealed directly to oil and gas shareholders. “I hope your investors are saying these words to you too. At this moment of the crisis, we need more supply,” she said in front of a room full of energy executives. I said in.

Some people in the industry describe the plight facing oil and gas companies as “self-harm” when shareholders are watching over them, even though authorities are asking companies to increase production. did.

“Investors wanted capital discipline from US oil and gas companies, and as a result, we have returned a lot of money to our shareholders,” he added.

If all other conditions are the same, even if oil and gas companies decide to increase production tomorrow, it will still be months before they go live.

“It’s very difficult to solve these problems. Nobody has them …. nothing will happen soon,” said one.

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