Limited frack supply could hamper U.S. crude oil output

Nextier Oilfield Solutions

27/07/2022 21:19

By Liz Hampton
    DENVER, July 27 (Reuters) - Demand for hydraulic fracturing
equipment is quickly outpacing supply, executives said this
week, setting the stage for a new obstacle to U.S. oil and gas
production growth. 
    Oil companies have been under pressure from the Biden
administration to lift production to curb high energy prices.
Some companies, particularly private firms, also want to boost
output to capitalize on oil's surge to $100 a barrel. However,
in order to boost output, equipment and crews are needed. 
    "Availability of frac fleets is one of main bottlenecks
impeding oil and natural as production growth for the next 18
months," Robert Drummond, chief executive officer of fracking
firm NexTier Oilfield Solutions said on Wednesday  NEX.N . 
    U.S. crude production is expected to average 11.9 million
barrels per day in 2022, below the pre-pandemic record of 12.3
million bpd in 2019, according to the U.S. Energy Information
Administration.
    Drummond warned that capital constraints and supply chain
snarls will make it difficult to add equipment and said it could
take several years to correct the imbalance in the market. 
    NexTier will not deploy any additional fracking capacity
this year, he added. 
    "We definitely see frac crew bottlenecks as a significant
headwind for U.S. producers headed into 2023," said Matt
Hagerty, a senior analyst at BTU Analytics, a Factset Company,
citing a "perfect storm" of frac sand and labor shortages,
inflation, and limited inventory of fleets that can be
reactivated after going idle in 2020.  
    Rivals Halliburton  HAL.N  and Liberty Oilfield Services
 LBRT.N  have warned that the market was near full utilization.
Liberty estimated that roughly 250 fleets are running, with
about 25 to be added this year. Consultancy Primary Vision
Network puts the number higher, at 290 currently operating. 
    Liberty said pricing in the market had recovered enough to
support re-activating some fleets it acquired from Schlumberger
 SLB.N , as well as adding two electric fleets in the first
quarter of next year. 
    However Halliburton last week warned that "supply chain
bottlenecks, even for diesel fleets, make it almost impossible
to add incremental capacity this year" and that experienced
crews are in high demand. 

 (Reporting by Liz Hampton in Denver
Editing by Marguerita Choy)
 ((Liz.Hampton@thomsonreuters.com; +1 832 571 8115; Reuters
Messaging: Reuters Messaging: liz.hampton.reuters@reuters.net))