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‘You can’t just turn on the taps’: bottlenecks hit hopes of US oil output surge

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‘You can’t just turn on the taps’: bottlenecks hit hopes of US oil output surge

Shortages of employees and provides are weighing on the restoration of US oilfields, derailing hopes that Texas drillers may unleash gushers of crude to assist deliver hovering international costs beneath management.

The Biden administration has pleaded with oil producers to lift output to ease the burden on American motorists, who’re paying excessive costs on the pump following Russia’s invasion of Ukraine.

However the service teams answerable for offering supplies, drilling gear and labour warn that in depth bottlenecks imply this can’t be accomplished in a single day.

“You possibly can’t simply instantly activate the faucets,” mentioned Ryan Hassler, senior analyst at consultancy Rystad Power. “It should take a while to reactivate the gear and employees the crews and produce on the extra sand capability.”

The US’s shale patch has over the previous decade come to be seen as a kind of launch valve for international oil provide, able to quickly ratcheting output up or down as wanted in a comparatively quick time period. In earlier years this might be accomplished in anyplace from three to 6 months, say analysts.

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However at present that timeframe is prone to be double — which means any vital development is as much as a yr away. The reason being a persistent scarcity of important labour and gear: from drilling rigs and frac sand — used to prop open shale rocks in order that oil and gasoline can stream by way of — to crews and drivers.

The countdown is not going to begin till traders, who’ve put the clamps on spending, clear operators to return to development mode.

The bottlenecks will damp the hopes of the Biden administration {that a} drilling push by US producers will mood costs. The value of Brent crude, the worldwide oil marker, sat at round $120 a barrel on Friday, up 25 per cent since Russia’s troops invaded Ukraine final month. Nationwide common petrol costs hovered simply shy of document ranges struck in current weeks, at $4.24.

The shortage of frac sand is a key drawback. Within the Covid-induced downturn of 2020, when oil costs crashed beneath zero, many sand suppliers went bankrupt and mines had been taken offline. Their restoration has been sluggish and provide is lagging behind demand.

Regardless of a capability of about 71mn tonnes a yr within the Permian basin of West Texas, under-investment has pressured many amenities offline, leaving manufacturing at lower than 50mn tonnes, effectively beneath annual demand of 60mn tonnes. Spot costs have soared from about $20 a brief tonne to greater than $70 early this yr.

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“It’s nearly just like the trade thought we had been driving a automotive with a five-speed transmission — however we went to shift from fourth to fifth gear and that fifth gear simply wasn’t there,” mentioned Dirk Hallen, chief government of Hello-Crush, one of many nation’s largest sand miners.

“Swiftly now, we’re hitting this sort of supply-demand imbalance. It’s actually constraining completions exercise,” he added, referring to the method of bringing a effectively into manufacturing after drilling has been accomplished.

With minimal further capability set to be delivered to bear within the close to time period, sand suppliers say they want concrete indicators from operators earlier than they will spend money on growing output.

“For idled mines to come back again on-line, the market wants increased and extra constant pricing and prospects eager to assist the trade by way of time period contracts,” mentioned Lee Beckelman, chief monetary officer at Good Sand, one other main provider.

However sand availability is just one of many constraints holding again oil manufacturing. Scott Sheffield, chief government of Pioneer Pure Sources, this month advised the Monetary Occasions there was a plethora of provide chain elements impeding his firm’s return to development. “There’s labour shortages, there’s frac fleet shortages, there’s rig shortages, there’s sand shortages,” he mentioned.

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Hallen mentioned: “It’s of a type of issues the place when you repair one bottleneck, you’re on to the subsequent bottleneck. And I believe all this stuff form of come collectively to make it actually robust to ramp rapidly previous ranges we’re already doing.”

Regardless of hovering costs, US crude manufacturing has but to recuperate to its ranges earlier than the worth crash of 2020. Output sits at about 11.6mn barrels a day, in contrast with nearly 13mn barrels earlier than the pandemic. The US Power Info Administration expects output to rise to about 12.5mn b/d by the tip of the yr.

However Sheffield mentioned development ranges had been “locked in” for this yr at about 700,000 barrels. This might doubtlessly be doubled to deliver on one other 1.4mn barrels a day in 2023, he mentioned, offering traders agreed and provide chain points had been resolved.

Suppliers of sand, rigs and labour say there’s room for them to extend provide however they want a transparent dedication from oil and gasoline firms earlier than they achieve this.

It will take time to rent employees to crew drilling rigs and frac operations — and coaxing skilled folks again to distant areas resembling West Texas may take time.

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“There’s a giant folks drawback,” mentioned Raoul LeBlanc, senior analyst at IHS Markit and former director of strategic planning at Anadarko Petroleum. “Folks received laid off and so they moved in 2020 and so they dwell in Montana or Colorado or North Carolina — and also you want them again and they should keep there.”

“Cash ultimately straightens out that scenario,” he added. “However it’s important to overcome this sort of resistance from folks.”

The supply of drilling rigs — rented out from contractors — can also be cited by operators as an impeding issue as drillers may take months to deliver gear on-line that has been left idle for the reason that downturn.

Nevertheless, Nabors, the world’s largest driller, dismissed this, saying it had been cautious to keep up gear and will rapidly get new rigs into the sector.

“If operators come to us — if our prospects name us — clearly, we’re going to face able to assist them with accelerated development,” mentioned Travis Purvis, senior vice-president of world drilling operations. “However that does include a value. That’s the problem for the operators: to steadiness their capital and the way they’re going to deploy that.”

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It at present prices round $50 a barrel for firms to interrupt even, in keeping with a current survey of oil executives. In line with IHS estimates, operator prices have already risen by about 15 per cent this yr, and a big drilling marketing campaign would push them up by one other 35 per cent subsequent yr.

If the availability chain points are to be overcome and vital development achieved subsequent yr, operators might want to put their cash the place their mouth is within the subsequent few months, say analysts.

“I believe the clock is ticking,” mentioned LeBlanc. “Boards of administrators have to make capital allocations . . . to develop in 2023. And they should make these commitments by Might or June of this yr.”

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Stick-Wielding Man Kills 2 Homeless People in Miami and Injures 2 Others

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Stick-Wielding Man Kills 2 Homeless People in Miami and Injures 2 Others

A man with a stick attacked four homeless people in downtown Miami early Thursday morning, killing two and injuring two others in what the police called a horrible “display of unprovoked violence.”

The man was seen attacking the people with a stick at 6 a.m., the Miami Police Department said in a statement. The police responded soon after calls came in and saw a man who matched the description that had been given. He ran off but was arrested after a brief foot chase, the police said.

Two of the homeless people died at the scene of the attack. The two people who were injured were taken to a nearby trauma center for treatment, the police said. Their conditions were not available.

The authorities did not immediately release the name of the man who was arrested, who is in his 30s. They said that they would disclose his identity and the charges he faces once the charges had been confirmed. The motive for the attack was not immediately clear, the police said.

The suspect does not have an arrest history in Miami, but he has had “minor criminal run-ins with the police” in New York, Manuel A. Morales, the chief of police for the Miami Police Department, said at a news conference on Thursday. The man’s place of residence was not immediately clear.

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“This is a horrible incident,” Chief Morales said.

The Miami-Dade County Homeless Trust, the county’s leading homeless outreach group, said in a statement that it was grieving the “senseless loss of these lives.” and thanked the police for their swift response.

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Rio Tinto and Glencore held talks about combining their businesses

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Rio Tinto and Glencore held talks about combining their businesses

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Rio Tinto and Glencore held talks last year about combining part or all of their businesses, in an indication of how the push by mining companies to secure metals needed for the energy transition has focused executives on large-scale deals.

The London-listed companies engaged in early-stage talks as recently as October, according to people familiar with the matter, but the discussions did not progress to a deal.

A full-blown merger between Rio and Glencore — which have market capitalisations of $103bn and $55bn, respectively — would rank among the largest-ever transactions in the mining industry.

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The talks between the two companies followed BHP’s failed £39bn bid for Anglo American last year, which prompted rivals to review strategic options.

BHP was interested in Anglo’s copper mines, among other assets, because the metal is used in renewable energy projects and electric vehicles.

Glencore and Rio declined to comment. Bloomberg first reported the companies had discussed combining their businesses.

Rio has been looking to boost its exposure to commodities including lithium and copper to offset weakness in the iron ore market as demand from China slows.

Glencore owns stakes in two significant copper mines — Collahuasi in Chile and Antamina in Peru — that would boost its production of the metal by almost 1mn tonnes a year and offer substantial expansion capacity, according to analysts.

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A potential deal with Glencore would be complicated by the Swiss-based company’s heavy exposure to thermal coal, a commodity Rio has abandoned in recent years.

Matthew Haupt, a portfolio manager at Wilson Asset Management, which owns shares in Rio, said the deal “didn’t make a lot of sense” given Rio’s efforts to get out of coal and invest in renewable energy to power its operations.

Glencore, which has a large commodity trading business and mining operations, has been debating the future of its coal business.

The company said in 2023 it would spin out its coal mines into a separate listed business but changed its mind last year and decided to retain them. 

Glyn Lawcock, an analyst with investment bank Barrenjoey, said coal assets could be spun out as a separate company as part of any agreement. He added there was little overlap between the two companies, meaning there were few synergy benefits from a merger and a deal would need to be justified by asset diversification and creating more scale.

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Ray David, a portfolio manager at Blackwattle Investment Partners, which owns Rio’s UK-listed shares, said Rio could fund an acquisition of Glencore by issuing shares in Australia, which would rebalance Rio’s share structure and close the value gap between its Australian and London listings.

Activist investors, including Blackwattle, have urged Rio to move its primary listing to Sydney — where its stock trades at a premium — to simplify share-based deals.

Rio’s Australia-quoted shares fell 1.8 per cent in early trading in Sydney on Friday, before climbing back to be down 0.5 per cent.

Demand for commodities required to decarbonise the global economy — such as copper, lithium and aluminium — has triggered a flurry of dealmaking activity in the mining industry over the past year.

Rio last year announced a $7bn deal to acquire Arcadium Lithium to increases its presence in metals used in batteries for electric vehicles. People close to the company said it was still digesting that transaction. 

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Rio previously rejected a takeover bid by Glencore in 2014.

Lawcock said the reaction from some Rio investors in Australia was one of unease given Glencore’s reputation for smart dealmaking.

“Shareholders have said I don’t want any of my companies sitting across the table from Glencore,” he said.

Blackwattle’s David said the fact talks had ended showed Rio remained cautious in a consolidating market.

“I suspect Glencore wants a high premium,” he said. “It is a positive sign [that talks ceased] as it shows Rio is being disciplined and aware of not destroying shareholder value. It would be easy to panic.”

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ICE estimates it would need $26.9 billion to enforce GOP deportation bill

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ICE estimates it would need .9 billion to enforce GOP deportation bill

Detainees do a virtual visit with their attorneys or asylum officers at the Port Isabel Detention Center hosted by U.S. Immigration and Customs Enforcement Harlingen Enforcement and Removal Operations center on June 10, 2024 in Los Fresnos, Texas.

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The Homeland Security Department is warning lawmakers in Congress that a proposed immigration enforcement bill would cost $26.9 billion to implement in its first year and “would be impossible for [Immigration and Customs Enforcement] to execute within existing resources.”

The Senate is currently weighing amendments on the Laken Riley Act, which would direct federal immigration enforcement to detain and deport anyone in the U.S. without legal status if they have been charged, arrested or convicted of burglary, theft, larceny or shoplifting.

The bill passed the House last week with more Democratic support than the previous time the body voted on it. The bill has been broadly seen as a marker emphasizing Washington’s focus on immigration and border security as President-elect Donald Trump is about to be inaugurated.

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Some Senate Democrats are giving the measure a chance. This week, a bipartisan set of procedural votes opened up the measure to further debate and changes.

But the agency in charge of carrying out the potential new law warns that it may physically not be able to.

New estimates from an internal ICE document obtained and verified by NPR show that the agency would need 110,000 more detention beds and over 10,000 enforcement and removal operations personnel to increase apprehensions, detentions and removals. More than 7,000 additional attorneys and support personnel would also be needed to handle immigration proceedings, according to the estimates.

The document notes that a figure of $3.2 billion “has been shared widely as a cost estimate,” but calls that number incorrect because it “does not represent the full cost of implementation.” The document says the previous estimate — outlined in a three-page memo from ICE sent in response to questions from one of the bill’s House sponsors — was based “on only 60,000 beds.”

Sen. Katie Britt, R-Ala., who introduced the measure in the Senate, did not respond to a request for comment. The measure that passed in the House does not include funding for additional ICE staff or resources. ICE declined to comment on its ability to enforce the bill.

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Senate Democrats and Republicans are working through several proposed amendments to the measure. There is not a timeline yet for a final floor vote.

The bill is named after a Georgia nursing student who was killed last year by a Venezuelan man who was in the U.S. without legal status. Her death became a rallying cry for Republicans, who criticized the Biden administration’s approach to border security. Her assailant, Jose Ibarra, was convicted in November and sentenced to life in prison without parole. Ibarra had previously been charged with shoplifting in New York, leading Republicans to argue that if the law had been in place, Riley may still be alive.

The bill’s critics have said it could lead to innocent people being thrown into detention without due process, and note that research shows that immigrants commit less crimes than those born in the U.S.

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