DW: US Should be Careful with Strategic Petroleum Reserve

Posted by Michelle Howard
Monday, May 05, 2014

Should Russia occupy more Ukrainian soil and sustain the already tense relations with the West, the U.S. government may decide to release crude from its Strategic Petroleum Reserve (SPR) – perhaps 500,000-700,000 barrels per day as suggested by the Financial Times. Such a move would undoubtedly hurt Moscow economically – not to mention several of the U.S.’ allies (notably Saudi Arabia) – as crude oil prices would probably drop below the $100 per barrel mark. But how would this affect the U.S.’ own oil production, especially the capital-heavy Gulf of Mexico? Would the White House be cutting off its nose to spite its face?

Unquestionably the sector that would feel the tightening purse strings most would be the deepwater U.S. Gulf of Mexico (GoM). Douglas-Westwood (DW) in their World Development Drilling & Production Forecast currently expect U.S. GoM liquids output to reach 1.65 million boe/d by 2020 due to a host of projects coming onstream before the end of the decade. An SPR release, however, would likely see the cancellation of seven significant subsea projects. This would see the number of subsea tree installations in water depths of over 1,000 metres drop 22% by the end of the decade from 329 in the high case (Brent price circa. $110) to 258 in the low case (Brent price below $100). The Mad Dog, Shenandoah and Buckskin projects would be amongst the list of victims. Such cancellations would see U.S. GoM daily liquids production finish the decade over half a million barrels a day lower than our high case scenario at some 1.14 million boe/d.

Ultimately, the U.S. must tread carefully in its pursuit of justice against Russia. The case outlined in this article could be repeated in other capital-heavy environments such as West Africa or Brazil and may risk alienating Saudi Arabia. The latter occurring would presumably result in OPEC cutting production in an effort to lift Brent crude above $100 per barrel, risking a tug of war with the U.S. over oil prices.


Maritime Today

The Maritime Industry's original and most viewed E-News Service

Maritime Reporter November 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds


Maersk to Idle Vessel

The world's biggest container-ship operator Maersk Line  has confirmed market talk that it has temporarily idled one of its largest vessels - yet another sign that the industry is in dire straits,

Russian Navy Trying Hard for Facelift

Official announcements related to naval shipbuilding give the appearance of a Russian Navy that is undergoing a rapid revival. However, the reality is that many

USNS Maury Completes Acceptance Trials

USNS Maury (T-AGS 66) completed Acceptance Trials, November 6, following a week of extensive ship tests and underway events, included testing of major propulsion,


S&P Raises Steamship Mutual outlook to Positive

Poor’s has revised its outlook on Steamship Mutual to Positive from Stable. The A- financial strength rating has been reaffirmed. In their announcement Standard

Norwegian Escape with Biggest Scrubbers sets Sail

On a sunny October day in the German harbor-town of Hamburg, M/V Norwegian Escape, a brand new cruise ship, sets sail for the first time. On board are five Yara SOx scrubbers – one for each engine.

ZIM Integrated Shipping Remains Profitable

Despite challenging market environment with freight rates reaching historic lows in several key trades,  ZIM Integrated Shipping Services continues to outperform


ESL Shipping to Enter the Renewable Energy Market

ESL Shipping and AB Fortum Värme have signed an agreement for biofuel transport. The agreement provides ESL Shipping with access to the renewable fuels transport market.

Deltamarin to Designs First LNG Handysize Bulk Carriers

Deltamarin Ltd proudly announces that it has signed a contract to design the world’s first LNG handysize bulk carriers, which will point the way towards greener shipping of commodities.

Asia Fuel Oil-Cracks, Spreads Tight; Bunker Prices Climb

Asia's fuel oil crack for benchmark 180-centistroke rebounded to a discount of $6.79 a barrel on Wednesday, gaining as bunker prices firmed on the possibility of

Maritime Careers / Shipboard Positions Maritime Security Navigation Offshore Oil Pipelines Port Authority Salvage Ship Repair Ship Simulators Shipbuilding / Vessel Construction
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.0688 sec (15 req/sec)