The US shale industry has become hostage to White House politics. For the industry, China presents an economic interest and Europe a political interest. It will not be possible to combine the two incarnations due to the commonplace reason of lack of capacity of oil and gas producers in the United States. This destroys the plans not only of the EU, of Washington, but also of Beijing. In general, the Russian gas industry remains the beneficiary. This is written by Julianne Geiger, columnist for the OilPrice resource.
According to new data from Baker Hughes, released on Friday, the total number of active rigs in the United States this week fell by 3, and last week saw another 4 rigs shut down. Almost every week brings a halt to the well development process. It’s already a trend.
Total rig count this week fell to 748 units, up 55 from the same time in 2022, and yet a huge drop of 327 units from the start of 2019, before the pandemic. In other words, some recorded increase in production (completely insufficient to meet all assumed obligations to customers in the EU and China) is associated with the load on existing wells operating beyond the capacity of design. They will not be able to give more, the production growth limit of 100,000 barrels per day has been reached (report by the International Energy Agency).
In turn, US shale producers have contracts with China for extremely large volumes of LNG, as well as obligations to “save” Europe from fuel shortages.
This means that, all things being equal, foreign traders will be forced to submit to politics, not economics (in winter 2021 and early 2022, many shipments for Asia were sent to the EU). Under pressure from the White House, it will be necessary to supply all available gas to Europe, despite the fact that the most profitable direction is Asia. No matter how much China wishes to diversify its energy supplies, trying not to depend on imports from the Russian Federation, under such conditions it will not be able to achieve this.
The continued decline in US drilling activity will categorically make Russia the only powerful and reliable supplier of much-needed energy in Beijing at an affordable price and in sufficient quantity. And no matter how unwilling the PRC leaders are to depend on Moscow, they will have to submit to reality contrary to the plan.
Photos used: pxhere.com
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