As energy prices soar, supply chain snags threaten U.S. oil output gains

By Liz Hampton

DENVER (Reuters) – U.S. oil producers are struggling to find enough crews, vehicles and equipment to take advantage of rising global demand and a seven-year high in crude prices, say executives at oilfield service firms.

The problems are preventing the world’s top oil producer and consumer, the United States, from responding to higher prices and could mean it takes longer for global output to match demand recovering from the coronavirus pandemic. That would result in oil firms draining inventories and in turn contribute to higher prices.

Higher energy prices are fueling consumer inflation, which last month hit 6.2%, the highest in 30 years. The Biden administration has urged oil producers to pump more oil, signaling it might release U.S. emergency stockpiles if prices keep rising.

The drillers and service firms that bring new oil and gas to market are confronting shortages and delays in everything from trucks, electronics, pumps and skilled workers. Workarounds so far have kept a crunch at bay, but shortages are hitting oilfield service results and could short-circuit U.S. production gains early next year, they said.

Logistics snags have cut access to specialized steel, submersible pumps that boost well pressures, and pickups that ferry workers and equipment. U.S. oil production figures show output remains 1.8 million barrels per day (bpd) below the peak reached nearly two years ago while global demand is forecast to exceed pre-pandemic levels by June.

Nearly two-thirds of Texas business executives polled by the Dallas Federal Reserve Bank recently disclosed difficulties getting needed supplies, with nearly half saying problems have become worse. It could take seven to 12 months to ease, said roughly half, with 18% expecting shortages to last more than a year.


“We’ll come to a point where we can’t handle additional work with existing inventory,” said Brad James, chief executive of driller Enterprise Offshore Drilling. “The problems we’re seeing are going to get worse,” he predicted.

Pressure on supplies is not as bad as it might have been because many shale oil producers have pledged to restrain new spending for output and instead use cash generated by high prices to pay dividends and reduce debt.

Oil services firms are struggling, however, even though many producers are standing pat. Requests for some orders to supply oil companies have gone unanswered, said James, and lead-times for certain drilling equipment are so far out that Enterprise has resorted to cannibalizing rigs idled off the Louisiana coast to keep existing rigs running.

“Without significant additional investment, land contract drillers are at their limit with the rigs they can deploy to satisfy the requirements of today’s multiple-well, very long-lateral drilling,” said Richard Spears, vice president of oilfield consultancy Spears & Associates.

Equipment shortages and lengthy delays are driving up prices for what is available. Denver, Colorado-based oil service firm Liberty Oilfield Services took a $12 million hit to third quarter earnings because costs rose faster than it was able to raised prices, its CEO said.


Fredrick Klaveness, CEO of NLB Water LLC, which developed a membrane-driven technology to treat and recycle wastewater from oil and gas production, has been waiting since June for $200,000 worth of orders that have not shipped because suppliers are also waiting on certain components.

“One small piece of the puzzle stops everything,” said Klaveness. If the ordered membrane modules are not received in time, NLB may lose an important contract. “Parts probably worth less than $5,000 are holding up the entire order. Those parts are not microchips or something fancy, but basic components made out of materials like stainless steel and titanium.”

A heavy duty Dodge Ram pickup he ordered in June took five months to arrive, Klaveness said. His workarounds to keep business flowing include buying supplies from Canada and at one point, picking up galvanized steel from several Home Depot stores in Colorado and hauling it to West Texas where it was not available.


The electronic components shortage hurting the auto and computer industry is troubling renewable energy as well as oil and gas. That is affecting companies digitalizing operations and adding renewable power to lower greenhouse gas emissions.

Firms that convert pipeline compressor stations to run on electric motors instead of natural gas are finding parts in short supply, said energy consultant Spears.

Ru Schaefferkoetter, CEO of solar pump firm Trido Solutions, said basic materials such as steel and aluminum can be hard to find. She worries that supplies could get tighter as the Biden administration incentivizes solar development.

President Joe Biden’s Infrastructure Bill, which could be signed into law on Monday, includes funding to upgrade power infrastructure and expand renewable energy through a new Grid Authority.

“There are a growing number of people laid off on solar projects because there are no panels,” said John Berger, CEO of Sunnova, at a recent Kansas City Federal Reserve Conference. An “extreme shortage of electricians,” is another concern, he said.

(Reporting by Liz Hampton in Denver; Editing by Marguerita Choy)

Ukraine denies report of Russian troop buildup near its borders

KYIV (Reuters) – Ukraine’s defense ministry on Monday denied a media report of a Russian military buildup near its border, saying it had not observed an increase in forces or weaponry.

The Washington Post said at the weekend a renewed buildup of Russian troops near the Ukrainian border had raised concern among some officials in the United States and Europe who are tracking what they consider irregular movements of equipment and personnel on Russia’s western flank.

“As of November 1, 2021, an additional transfer of Russian units, weapons and military equipment to the state border of Ukraine was not recorded,” the Ukrainian defense ministry said in a statement.

In Washington, the Pentagon said it was aware of public reports about “unusual activity.”

“We’re certainly monitoring the region closely as we always do so and as we’ve said before, any escalatory or aggressive actions will be of great concern to the United States,” Pentagon spokesman John Kirby said.

This spring, Moscow alarmed Kyiv and Western capitals by building up tens of thousands of troops along the border with Ukraine, though it later ordered them back to base.

Relations between Kyiv and Moscow have plummeted since 2014, when Russia annexed Ukraine’s Crimea peninsula and a war broke out between Ukrainian troops and Russian-backed separatist forces in eastern Ukraine, which Kyiv says has killed 14,000 people.

(Reporting by Pavel Polityuk; Additional reporting by Idrees Ali and Phil Stewart in Washington; Editing by Mark Trevelyan and Sandra Maler)

U.S. Pacific islands brace for long recovery after ‘catastrophic’ typhoon

A downed power line sits on a damaged building after Super Typhoon Yutu hit Saipan, Northern Mariana Islands, U.S., October 25, 2018 in this image taken from social media. Brad Ruszala via REUTE

(Reuters) – Authorities in the Northern Mariana Islands called for urgent supplies and equipment on Friday and were preparing for weeks without power after being hit by their most powerful typhoon in half a century, killing one woman and causing widespread destruction.

Super Typhoon Yutu, a category five storm, struck the U.S. Western Pacific territory overnight on Wednesday, pulling down hundreds of electricity poles, damaging homes and commercial properties and the international airport on Saipan, located about 6,000 km (3,700 miles) west of Hawaii.

A damaged structure is seen at Saipan International Airport after Super Typhoon Yutu hit the Northern Mariana Islands, U.S., October 25, 2018 in this image taken from social media. Brad Ruszala via REUTERS

A damaged structure is seen at Saipan International Airport after Super Typhoon Yutu hit the Northern Mariana Islands, U.S., October 25, 2018 in this image taken from social media. Brad Ruszala via REUTERS

On the island of Tinian, which took a direct hit from Yutu, the mayor asked for tools, machetes and chainsaws to help clear debris and urged residents to be patient and conserve fuel, food and water as emergency supplies had yet to arrive.

“Please be calm, help is on its way,” mayor Joey Patrick San Nicolas said in a Facebook Live video.

“Our stores are not opening, restaurants have been destroyed and we are left with what we have in our refrigerators in our homes. We are anxiously awaiting the arrival of emergency of military aircraft.”

With winds of about 270 kph (168 mph), Yutu was the strongest typhoon seen in the archipelago of 52,000 people since 1968, according to governor Ralph Torres.

He said a long recovery period was ahead and he was pressing the central government for a major disaster to be declared and approved by U.S. President Donald Trump, so the Marianas could receive federal disaster assistance.

Torres said a 44-year-old woman in Saipan had been killed while sheltering in an abandoned building that collapsed.

“This is an unfortunate incident,” he said, adding that authorities were focusing on saving and preserving lives.

“Our first responders remain vigilant and (are) working around the clock.”

U.S. health secretary, Alex Azar, declared a public health emergency for the islands on Thursday to boost access to medical care after what he described as a “catastrophic” storm.

Water pipes were damaged and all flights to Saipan’s airport halted. Images on social media showed some buildings near the airport leveled by the storm, beneath them crushed vehicles and debris scattered over large areas.

Some 200-300 power poles had been toppled, and 400-500 were leaning. Authorities requested at least 700 replacements and transformers and said restoring power to pump water was top priority.

Yutu was traveling at 20 kph on Friday, with winds of 180 kph and gusts 220 kph and headed toward the northern Philippines, where the state weather agency said it could make landfall early on Wednesday.

(Reporting by Martin Petty in Manila; Editing by Michael Perry)

New York City police upgrade gear after Texas, Louisiana shootings

Crime scene of Dallas shooting

By Gina Cherelus

(Reuters) – The New York City Police Department has acquired $7 million in military-style protective equipment for patrol officers in response to recent shooting attacks on police in Baton Rouge and Dallas earlier this month, officials said on Monday.

“You name it, we’re buying it,” Police Commissioner William Bratton told a news conference. “There’s not a police department in America that is spending as much money, as much thought and interest on this issue of officer safety.”

Bratton said the NYPD has purchased 20,000 military-style helmets, 6,000 heavy duty bullet-proof vests, trauma kits and ballistic doors and windows for patrol cars.

He said the new bullet-proof vests are capable of stopping rounds fired from the type of weapon used in the Baton Rouge shooting that killed three officers and the Dallas shooting that left five officers dead and seven wounded.

“Obviously all over the country people have been deeply trouble by the attack on our officers,” added Mayor Bill de Blasio. “We made this decision quickly in light of the challenges we face.”

Special units are already equipped with protective gear like the upgraded equipment. Because patrol officers are likely to respond to active shooting situations, they will begin carrying the new equipment starting in September, according to police officials.

In recent weeks, major police departments across the country have been implementing new patrol tactics for officers in the wake of racial tension plaguing various cities.

Nearly half of the police departments in the 30 biggest U.S. cities issued directives after the Dallas attack requiring patrol officers to pair up while on duty.

(Reporting by Gina Cherelus; Editing by Dan Grebler)