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Failure to lift U.S. oil export ban may cause big drilling drop, Pioneer CEO says

  • Failure to allow U.S. crude oil exports could result in a big drop in the U.S. drilling rig market, Pioneer Natural Resources (PXD) CEO Scott Sheffield says.
  • The CEO also says a predicted oversupply of crude oil from the sharp and continuing production rise from prolific shale and unconventional basins could also result in a more than $30/bbl price differential for U.S. crudes to Brent.
  • The rig count would drop quickly if WTI, which now hovers near $100/bbl, were to drop to $70, Sheffield says; a rig drop might start with marginal plays, but "eventually every play" would shut.
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Comments (12)
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    The best cure for high prices, is high prices.

     

    Playing out?
    8 Apr, 05:48 PM Reply Like
  • bgold1955
    , contributor
    Comments (2105) | Send Message
     
    No position on exporting but I do believe if the price of oil exceeds a certain dollar amount due to exporting, you will see a tremendous alternative fuel initiative that could be detrimental for the oil/gas industry. This is not the 1970's where consumers were at the mercy of OPEC & big U.S. oil corps. Look what happened to oil in the 80's thru late 90's. A balance, not robbery, would perhaps be beneficial to all.

     

    Long PXD.
    8 Apr, 05:49 PM Reply Like
  • User 353732
    , contributor
    Comments (4913) | Send Message
     
    Free trade in energy benefits all participants.
    The ban on exporting crude is hostile both to job and income generation in the US and to the security of our trading partners
    It provides aid and comfort to Russia, Venezuela and Iran
    8 Apr, 06:02 PM Reply Like
  • long_on_oil
    , contributor
    Comments (1176) | Send Message
     
    So we have gone from energy dependent to energy independent with an over supply so huge we have to export it. Why are we importing any oil if this is the case? I wonder what our buddies at opec think of this report.
    8 Apr, 06:09 PM Reply Like
  • Gigem77
    , contributor
    Comments (1300) | Send Message
     
    We have an increasing supply of light crude moving to the Gulf region where the refineries are built to use heavier grades. Some of the oil will be blended, some moved by barge and rail to other US refiners. Some will be exported to Canada. VLO is paying a large amount of money to reconfigure one of their refineries to use the lighter crude. Despite all of those responses, more crude is available than will be used. It is more efficient and much more economical to sell the remaining surplus at world prices for light crude while continuing to buy the cheaper, heavier crude for our own use. It would help to repeal the Jones Act too and let foreign flagged vessels move crude around our coasts.
    8 Apr, 08:44 PM Reply Like
  • Randal James
    , contributor
    Comments (2815) | Send Message
     
    The US has been granted a reprieve from higher oil prices that would remind us why we all hated OPEC 40 years ago. It could not come at a better time as we try to find renewables that work and fine-tune our vehicles to alternatives such as NG. But these fields we're finding will not keep popping up indiscriminately every few years. We will not learn that the Arizona desert is another Saudi Arabia, somehow overlooked for 140 years.

     

    It is true that oil exported today - to China or Italy or New Zealand - represents income today that will help enrich these companies quicker. Mr. Sheffield can retire sooner. But the notion that not exporting means we shut down drilling is... silly.

     

    Many of the recent finds are tricky shale plays and they reach a point - perhaps out to 3-4 years where the net inflow into the system is no longer economical without steam injection or other intensive and costly measures. Those pads can be revisited later for slight recovery, but they are mostly done. Anyone operating in the shale plays will have to keep expanding their usage on leased acres to keep supply constant. Further, all the fields have 'sweet' spots and those not as nice, but friendly and some that are simply untenable. As the best areas play out, the production will have to move to ever-more marginal properties.

     

    Pumping more oil for export only accelerates the point at which we use the best of the new fields faster with no special benefit to our LT balance of payments and we accelerate the time when we will be dependent, once again, on someone else's oil.

     

    The situation is equally true for NG. Right now US chemical companies operate at a significant advantage to their overseas competition because of cheap and abundant NG. It gives US made products a cost advantage that is rare and favors higher-margin manufactured goods over commodity pricing for LNG. Ummm... have we not noticed that manufacturing jobs are something hard to come by?

     

    There are no more relevant policy areas for our economy than how we decide to manage our energy resources because the fossil-based ones will someday be gone.

     

    Here in Washington State, we grow a lot of apples and we always dream of being given full unfettered access to Asian markets. But those desirable markets seemingly develop concerns over pesticides or bacteria that might be on the stems or a hundred other quibble points that keep exports from reaching what the farmers would love. But our surplus or success in export of apples is not going to affect a bricklayer in Memphis or a teacher who commutes 20 miles to her school in Abilene. Dow Chemical will not notice a surge in input costs because 'Made in Washington' apples start showing up in Kyoto.

     

    But if we more quickly lose our oil/gas riches by selling them wherever someone can find a market, we're not unlike the lottery winners who wake up 5 years later wishing they had not been such spendthrifts. High energy prices, when they arrive, will curtail economic activity, which will reduce the jobs for the bricklayer, the spending of the teacher because her commute is costing extra dollars, and Dow will struggle because the current advantage in pricing will be lost to dirt-cheap labor in foreign markets that PXD would happily sell to.

     

    We are a nation that glorifies the notion of free market economics. Yet we are bullied by other countries who use a playing field of their own design. For anything so critical as our energy policies and advanced technologies, we should be as equally prudent and selfish as everyone else.

     

    My advice to Pioneer is to note that Mexico has just opened up its rather astonishing oil fields to foreign investment. Mexico has a large and not affluent society with many tasks to become a more prosperous nation. The oil you wish to export is right there and the markets you wish to sell to will be the same. Make Mexico richer and keep the US stronger at the same time. Win-win, and I bet PXD can even figure out how to make money doing it.
    8 Apr, 07:25 PM Reply Like
  • bgold1955
    , contributor
    Comments (2105) | Send Message
     
    Randal, excellent points.
    8 Apr, 08:10 PM Reply Like
  • stuoliver
    , contributor
    Comments (15) | Send Message
     
    Worked in the Oil Patch for 30 Plus years, when the price of oil drops below the cost of exploration returned value the drillers lose the contracts to punch holes in the ground. In the drilling industry it can go from boom to bust virtually overnight.
    10 Apr, 10:21 AM Reply Like
  • 1980XLS
    , contributor
    Comments (3333) | Send Message
     
    Last I checked ( and bought) gasoline by me it's approaching an all time record.

     

    I'll be surprised if a new record is not set by Jul 4.

     

    Almost comical all the talk about the "Cheap Energy Boom renaissance" while average wages for the sheeple have done nothing for about 6 years.

     

    I guess if you hear it on TV and read it on the internet, it must be true?

     

    I guess I'm missing something.
    8 Apr, 09:00 PM Reply Like
  • Hendershott
    , contributor
    Comments (1587) | Send Message
     
    There is no talk of cheap oil, there is cheap NG. WTI won't go to $70, that's a complete misunderstanding of shale economics. The US is not oil independent and won't be for some time, if ever. We produce close to 8 mbd now but consume about 19 mbd. The only real way to independence is the use of NG. What Pioneer and others want is to sell WTI at Brent prices instead of just selling distillates at Brent like prices. The refiners are on the other side of the argument.
    8 Apr, 09:38 PM Reply Like
  • Hendershott
    , contributor
    Comments (1587) | Send Message
     
    As a further comment, a lot of what we record as consumption is oil refined and the products exported in the form of diesel etc.
    8 Apr, 09:42 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8692) | Send Message
     
    Too bad we can't export congress!
    8 Apr, 11:07 PM Reply Like
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