OPEC+ Cuts Production, SPR Tapped Again

We are midway through the fourth quarter of the calendar year 2022. The months of November and December are not only impacted by the holidays, limiting the number of shipping days — we all will be impacted by rising fuel costs.

OPEC+ has announced that it will cut oil production by 2 million barrels a day, beginning this month. Oil pricing has already started increasing with WTI at $85.92/barrel (Bbl) and Brent at $91.72/Bbl, as of this writing.

As a countermeasure, the Biden administration announced an additional 10 million barrels from the Strategic Petroleum Reserve (SPR), which is already at an historic low.

The SPR was created for national security and extreme national emergencies, not for political purposes to secure midterm votes. The extreme drawdown of the SPR negatively affects the ability of our military to respond to national threats from our adversaries.

The Biden administration has announced a proposal to ban all offshore drilling at a time when the nation is approaching the winter season, resulting in a rise in demand and pricing pressure. In addition to the short-term effects, this action will exacerbate the energy crisis in the long term. The administration’s ban poses an additional national security risk as global geopolitical tensions increase.

The transition to a green energy environment cannot happen by fiat. Fossil fuels will be needed to fuel the economy as private industries develop economic alternative resources to produce clean energy so coveted by the environmentalists. 

The keynote speaker at the PVF Roundtable dinner held in October — Robert Bryce — presented a solid case that the transition to green energy espoused by the Biden administration is an illusion. The use of fossil fuels has not been, nor will be, diminished but relied upon to fuel the U.S. economy for the foreseeable future.

According to Goldman Sachs, Brent crude, the international benchmark price, is rising. It is estimated that Brent oil will reach $110 a barrel during the fourth quarter of this year. Damien Courvalin, the head of energy research at Goldman Sachs, has long argued that the oil market’s buffers (stock and spare capacity) remain critically low and higher prices remain the key viable long-term solution to increased inventories in the short term and higher supply capacity in the medium term.

The market is now facing large deficits in the coming months.

The American Petroleum Institute’s President and CEO Mike Sommers said: “The solution to meeting demand for affordable, reliable energy is right here in the United States. We face a growing energy crisis driven by geopolitical instability; U.S. policymakers should be doing everything in their power to produce more energy here in America.”

Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association (TIPRO), said: “OPEC’s oil output cuts make it clear once again why it is so important for the U.S. to encourage domestic oil and gas production and to continue exporting our resources into the global market. Without Texas oil, the impact of OPEC’s cuts would be far greater on prices, U.S. consumers and the current energy crises facing our allies abroad.”

Combined-Cycle Power Projects

A more positive note for the PVF industry is combined-cycle power projects are as popular as ever, with some being combined with other energy sources as hydrogen.

Industrial Info is currently tracking $3.5 billion worth of natural gas-fired power generation projects that are set to begin construction in the fourth quarter of this year.

The single largest project is Venture Global LNG’s $1 billion combined-cycle power unit addition to its Plaquemine LNG Production & Export Terminal in Davant, La. The project is designed to generate 720 megawatts (MW) for the Plaquemine complex. 

Southern Louisiana is seeing power demand rising amid coal-fired plant retirements. This is also the home of a unique power-generation project: Kindler Energy’s Magnolia Generating Station in Plaquemine, a 705-MW facility to be initially fueled by natural gas. Later, it will be able to use up to 50-percent hydrogen by volume as hydrogen becomes more available.

Upgrades, Interest Rates and Hotels

Upgrades and replacements account for many of the projects initiating construction in the fourth quarter include the Salt River Project’s upgrades of units 5 & 6 at the Gila River Power Station, Gila, Ariz., each generating 174 MW.

Daigag Group’s 665-MW combined-cycle Block 1 at the Kleen Energy Power Station in Middletown, Conn., will be undergoing an upgrade as well.

The North American Construction Starts Index shows project activity in the U.S. manufacturing sector to be trending upward, despite rising inflation and economic uncertainty

The Federal Reserve is expected to stay aggressive, hiking interest rates this month and in December by another full percentage point, and possibly by a point and a half accumulative prior to the end of the year.

How this will affect privately funded construction markets is yet to be determined. Recent interviews with PVF distributors indicate a slowdown in announced private-funded project starts; they see this trend continuing during the remainder of the year and into 2023.

However, hotel projects in Dallas and other major cities, are driven by a strong rebound in leisure travel and have seen a significant jump in hotel demand. Popular tourist spots are reporting their highest occupancy rates since early 2020.

The industry is reporting 366 hotel projects in 2023 that are forecasted to open in the top 50 U.S. markets. This represents nearly 50,000 rooms and a growth rate of 2 percent.

 Punitive duties imposed by the International Trade Commission and the U.S. Department of Commerce in their final ruling regarding the anti-dumping and countervailing duty petition on oil country tubular goods (OCTG) from Argentina, Mexico, The Republic of Korea and Russia amounted to 44.93 percent. As of this writing, pricing for OCTGs has not been announced in response to the final ruling.

With these developments in mind, it is critical to maintain close relations with your manufacturers and suppliers to avoid being unprepared for price fluctuations and shipping delays (especially true for those relying on offshore producers). 

PVF Roundtable News

Weldbend associates were delighted to meet PVF Roundtable members and their guests (totaling 400 approximately) at the Weldbend-sponsored dinner event held Oct. 11 at the Marriott Houston Westchase.

Keynote speaker Robert Bryce’s robust presentation addressing industry issues regarding energy production captivated the audience’s attention so intently that he exceeded his allotted time by more than 15 minutes. Bryce is an Austin, Texas-based author, journalist, film producer and public speaker. 

Bryce spent more than 30 minutes after the close of the meeting signing copies of his latest book, “A Question Of Power (Electricity And The Wealth Of Nations).”

All proceeds of the event will be donated to the PVF Roundtable Charitable Foundation (a 501-C3 corporation).

The next meeting of the PVF Roundtable will be The Christmas Celebration and Casino Night, Dec. 13, 2022, commencing at 4:30 p.m. CT at Houston’s The Bell Tower on 34th.

All attendees are encouraged to donate a toy or gift for the “Fill The Stocking” sponsored by Houston firefighters.

The PVR Roundtable Golf Tournament and the TroutBlast are the two major fundraising events held by the PVF Roundtable Charitable Foundation, with the funds raised dedicated to the PVF Roundtable Scholarship Programs. To date, $1.7 million in scholarships have been distributed to universities and trade schools for the development of a skilled labor force for the PVF industry.

As a member of the board of directors, and I speak for all members, we thank you for your participation in these events.

With the uncertainties in the current turbulent PVF market, the Networking Meetings are a unique venue for you and your associates to network with your peers in the PVF industry. These events provide the platform to share information, discuss pertinent issues, meet new contacts, develop new long-lasting friendships and to pursue new opportunities in the industry. 

Source: www.phcppros.com

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Drake Wills Plumbing

We're here to help.

We’re dedicated to giving our customers the kind of service they expect—and deserve—when it comes to plumbing. We provide a complete range of services, from simple repairs and maintenance to major system upgrades. Whether you’re ready to make an upgrade or you need to fix that leaky faucet once and for all, drop us a line; we’d love to hear from you.

M-F: 8am-5pm | S-S: Closed