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

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

Reuters · 07/27/2022 16:19
Limited frack supply could hamper U.S. crude oil output

By Liz Hampton

- Demand for hydraulic fracturing equipment is quickly outpacing supply, executives said this week, setting the stage for a 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 .

"Availability of frac fleets is one of main bottlenecks impeding oil and as production growth for the 18 months," Robert Drummond, chief executive officer of fracking firm NexTier Oilfield Solutions said on Wednesday NEX.

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 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 and Liberty Oilfield Services LBRT have warned that the market was full utilization. Liberty estimated that roughly 250 fleets are running, with about 25 to be added this year. Consultancy Primary Vision Network puts the 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, as well as adding two electric fleets in the first quarter of 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.))