Washington — US oil and gas industry officials and their allies in Congress on Wednesday discussed the sector's ability to rebound from current demand destruction, and debated whether more help from Washington was needed.
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During a webinar hosted by the Port of Corpus Christi in Texas, some industry representatives preferred reliance on market forces to fixes from Washington and pointed to the sector's recovery from previous troughs.
"I think as we've been able to demonstrate just in prior cycles, the industry has a tremendous degree of resiliency to be able to bounce back," said Khalid Muslih, executive vice president of Buckeye Partners, citing investments in infrastructure and technology advances as helping the position the US for global leadership.
The industry already has responded to the rapid decline in demand with aggressive cuts in production and capital spending along with cuts in refinery processing rates, Muslih said, adding the market will cycle back to a tighter supply and demand balance.
US crude production has fallen 1.5 million b/d since mid-March to 11.6 million b/d, according to the US Energy Information Administration. And according to Platts Analytics, so far 13.2 million b/d of crude cuts have been announced globally, with 1.7 million b/d of that in the US, and 1 million b/d in Canada.
LONG VIEW ON LNG
Charles Riedl, executive director of the Center for LNG, said that while LNG demand has dropped as a result of the pandemic, "I have nothing but confidence that once we start to emerge from this, we'll see that demand bounce back and ultimately we will need more infrastructure." Some countries also are using the pandemic as a springboard to think about the energy transition, and moving toward more natural gas to enable the adoption of renewables, he said.
He expected to see the second wave of US LNG projects come to a fruition, "just a little further out than initially forecast."
Christopher Smith, senior vice president of Cheniere Energy, also voiced optimism on long-term US LNG prospects, even amid US-China tensions.
"We are the connective tissue that connects drillers in West Texas with buyers and Beijing, so we think that business fundamentals of that connection continue to be good," he said.
Among lawmakers participating, Rep. Lizzie Fletcher, Democrat-Texas, discussed her support for legislation to fund more US crude oil purchases for the Strategic Petroleum Reserve, as well as water resources development legislation to authorize channel improvements.
Senator Ted Cruz, Republican-Texas, and others lawmakers on the call emphasized that a key to helping the sector recover from depressed demand will be moving the US economy toward reopening.
Cautioning about market interventions, Chet Thompson, CEO of the American Fuel and Petrochemicals Manufacturers, worried that steps such as tariffs on foreign crude oil would make it harder for us refiners to compete and interfere with price signals.
The US is well-positioned to be the energy leader of the world "if we do not give up on free-market principles" that were a catalyst to its success, added Todd Staples, president of the Texas Oil and Gas Association.
Riedl also said CLNG and the Natural Gas Supply Association were not seeking legislative fixes to "artificially stimulate the market" in any way.
Still, one area where the industry trade groups did look for action in Washington was on National Environmental Policy Act reforms to ease energy infrastructure permitting.