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Welcome to our energy sources, come from New York.
The world is still working on what Donald Trump’s so-called liberation day means for the economy. The US president shook the market on Wednesday afternoon when he escalated the trade war and announced “mutual tariffs” on its major trading partners. The measure has had a major impact on the US energy sector and is heavily dependent on clean technology and grid equipment imports.
In other news, my colleagues Jamie Smith and Amanda Chew report plans to raise consumer bills by 14% as Dominion Energy, one of America’s biggest utilities, is fighting for rising labor costs, materials and grid upgrades amid rising electricity demand. Rates rise occurs when Trump’s trade agenda can increase prices.
In today’s newsletter, we’ll look at Deepwater’s oil industry and why sector projects are not subject to fluctuations in oil prices compared to shale. – Alexandra
How resilient are deep-sea producers amidst fluctuations in oil prices?
The decline in oil prices has caused alarms that a further decline will damage the sector, but analysts say deep-sea oil producers are not vulnerable to crude price fluctuations.
Oil prices have fluctuated this year amid uncertainty over Trump’s trade policy and the impact of Russian sanctions on crude oil exports. Global benchmark Brent crude settled at $75.02 per barrel on Wednesday, with the US West Texas intermediate level increasing to $71.80 a barrel.
Unlike the shale industry, offshore deep-sea drilling projects are longer cycle times and are not vulnerable to crude prices or election cycle fluctuations.
“Even if the (Trump) administration could have a short or medium-term impact on oil prices… The most resilient development to oil prices is a major discovery in the deep sea,” says ØivindTangen, chief executive of SBM Offshore, a Dutch oil services company that builds and operates the floating Vessel for the production of word words, like Deepwater production and Count Major Asaksun.
Deepwater Drilling is one of the biggest growth sources of large-scale operators with recent discoveries that are revived and stimulate exploration by major energy companies.
S&P Global estimates that Deepwater will grow to approximately 200,000 barrels of oil barrels per day by 2030, accounting for 20% of global production. In comparison, shale is projected to increase by 14 million barrels per day by 2030, accounting for just 13% of global production.
The excitement around Deepwater is in stark contrast to Shale, whose executives are unhappy with low prices, rising area and the Trump administration’s mercury trade agenda.
“Because these are long-cycle projects, it can take five to ten years to develop a sector from drilling exploration wells to first oil,” said Matt Hale, Vice President of Supply Chain Research at Rystad Energy. “If you take shale as another extreme end of that spectrum, you’ll see that you’ll add or drop rigs as the price rises or falls.”
Tangen said SBM Offshore has a backlog of projects expanded in 2051, including 19 different assets. “These are cycles that go far beyond the political cycle. Today we’re starting to dig something. We’re not going to see oil until 2032-2033,” he added.
Estimates from Rystad show that companies poured nearly $100 million into the sector last year. It rose from around $730 billion in 2020 to its highest level since 2016.
A Shale executive said further declines in oil prices would hurt the sector in a survey by the Federal Reserve Bank of Dallas. Trump’s trade adviser Peter Navarro suggested last month that $50 per barrel of oil could help tame inflation. However, Shale producers said they would damage profits and force production to be temporarily forced.
Rystad Energy estimated that for offshore Deepwater, the average intrusion price, the minimum amount needed to cover the cost, is $43 per barrel, while North American shale is $45 per barrel.
“Both shale and deepwater producers have some headroom so there’s going to be a significant price drop to really impact the project,” said Hale of Reistad.
However, Shale executives have at least one advantage. Onshore producers can close production and wait for better prices, but deepwater producers cannot stop excavation quickly.
“Offshore, production will not be shut down when prices drop,” said Bob Fryklund, Vice President of Upstream Energy at S&P Global. He added that low prices could affect deepwater projects awaiting a final investment decision, as they could not be approved until the price recovers to a place where the price is met.
Still, Hale said there are plenty of deep sea fields already discovered. He added that if there is a delay, “it’s about getting all these projects through the pipeline, whether or not the prices have risen.” (Alexandra White)
Job movements
Bashir Ojulari has been appointed Chief Executive Officer of the Nigerian National Petroleum Company after President Bola Tinubu, including former CEO Mele Kyari, removed the entire company’s 11 board of directors. Ojulari previously served as managing director of Shell’s Nigerian Deep Sea Exploration and Production Unit.
Thames Water has appointed Steve Buck as the new chief financial officer and replaced Alastair Cochran, who unexpectedly resigned last month. Buck is former finance chief for Utilities Pennon Group and Anglian Water, and will begin his new role on Monday.
The Tennessee Valley Department has replaced Jeff Reish, who promoted Donmoor to chief executive and said he would retire in January.
Greg Columbus has been appointed non-executive chair of Pilot Energy and will replace Brad Ringo.
Lvium appointed Philip Campbell as independent non-executive chairperson.
power point
The UK Treasury minister said he is confident that private funding at the Sizewell C nuclear power plant will be “tee-up” in time for the final investment decision in June after delaying last year’s decision.
Commodity traders are using profits acquired during the energy crisis to snap assets, expand into new areas such as metal trading, and bet on newer sectors such as biofuels.
Danish energy traders are developing algorithms to gain an advantage in the renewable energy market.
The energy source has been written and edited by Jamie Smith, Miles McCormick, Amanda Chew, Tom Wilson and Malcolm Moore, with the support of FT’s global team of reporters. Contact us at Energy.source@ft.com and follow us on X at @ftenergy. Check out previous editions of our newsletter here.
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