Daily Energy Report
US March crude production and crude quality, Equinor’s Bay du Nord Canada oil project, oil prices in 2023, energy storage in Texas, LNG plant outage in Norway, Indonesia’s LNG exports, and more
CHART OF THE DAY: Shale Companies Are Changing Locations and Zones
Summary
As we expected in February, US oil production recovered in March by 171,000 barrels per day (b/d), reaching 12.696 mb/d, based on data published today by the US Energy Information Administration (EIA). It was a recovery because all the increases came from Texas, New Mexico, and Oklahoma, states that suffered from inclement weather conditions in February which led to a decline in production. Additionally, there was a recovery in the Gulf of Mexico where maintenance activities were carried out also in February.
Figure (1) above shows US L48 crude oil production by API. We would like to draw our readers’ attention to the increase in the production of crude below 45 API, while others with different APIs remained virtually flat or declined.
EOA’s Main Takeaway
We stated in previous reports that the short history of the US shale has taught us that when companies find themselves venturing into gassier areas and zones, they draw back and return to regions with lower API. We also noted on various occasions how almost all the additions have been condensates, and how wells have become gassier. We told readers how companies don’t benefit from these changes since they earn less revenue and are sometimes forced to sell gas at negative prices. So, as a result of these gassier conditions, companies have reverted to oiler areas and zones within a few months, and this is reflected in the EIA’s March data: production of oil with higher API either remained flat or declined, while production with lower API increased.
STORY OF THE DAY
REUTERS: Equinor delays Bay du Nord Canada oil project up to 3 years over rising costs
Summary:
Due to rising costs blamed on "volatile market conditions", Norway's Equinor ASA said today that it will postpone its Bay du Nord Canadian offshore oil project for up to three years, Reuters reported. The project has received the “rare support” of the Canadian government due to its low emissions.
EOA’s Main Takeaway:
First, we remain bullish on offshore activities. Second, and as for the decision to delay this project, we expect it to be scrapped altogether for the following reasons: