Shortages of staff and supplies are weighing on the recovery of US oilfields, derailing hopes that Texas drillers could unleash gushers of crude to help bring soaring global prices under control.
The Biden administration has pleaded with oil producers to raise output to ease the burden on American motorists, who are paying high prices at the pump following Russia’s invasion of Ukraine.
But the service groups responsible for providing materials, drilling equipment and labour warn that extensive bottlenecks mean this cannot be done overnight.
“You can’t just immediately turn on the taps,” said Ryan Hassler, senior analyst at consultancy Rystad Energy. “It will take some time to reactivate the equipment and staff the crews and bring on the additional sand capacity.”
The US’s shale patch has over the past decade come to be seen as a sort of release valve for global oil supply, capable of rapidly ratcheting output up or down as needed in a relatively short period of time. In previous years this could be done in anywhere from three to six months, say analysts.
But today that timeframe is likely to be double — meaning any significant growth is up to a year away. The reason is a chronic shortage of essential labor and equipment: from drilling rigs and frac sand — used to prop open shale rocks so that oil and gas can flow through — to crews and drivers.
The countdown will not start until investors, who have put the clamps on spending, clear operators to return to growth mode.
The bottlenecks will dampen the hopes of the Biden administration that a drilling push by US producers will temper prices. The price of Brent crude, the international oil marker, sat at around $120 a barrel on Friday, up 25 percent since Russia’s troops invaded Ukraine last month. National average petrol prices hovered just shy of record levels struck in recent weeks, at $4.24.
The lack of frac sand is a key problem. In the Covid-induced downturn of 2020, when oil prices crashed below zero, many sand suppliers went bankrupt and mines were taken offline. Their recovery has been slow and supply is lagging behind demand.