American Oil and Gas Reporter - January 2023 - 50

Outlook 2023
he adds, more players will weigh expanding
investment under disciplined
screening criteria. Majors and U.S. independents
reinvested 27% and 35%, respectively,
of their 2022 operating cash
flows, Ellacott calculates.
Although Fraser McKay, head of upstream
analysis at Wood Mackenzie,
emphasizes that environmental, social
and governance considerations must be
a priority, activity levels must increase
to avoid future supply shocks. " Upstream
development spending needs to rise.
Not by as much as most observers think;
the inefficiency of the early 2010s is
neither welcome nor required. But where
investment is deployed and by whom
will be a topic of much debate in 2023, "
he argues.
Natural Gas
Considering oil's longtime status as a
global commodity, geopolitical events'
influence on crude prices-and by extension,
U.S. independent producers-is
a given. However, natural gas arguably
manifested an unprecedented international
profile in 2022. Pipeline and liquefied
natural gas terminal capacity-both liquefaction
and regasification-limit the
extent to which events in Europe, Asia
and the Middle East impact natural gas
prices in the Mid-Continent, Appalachia
and Rocky Mountains, but the U.S. gas
market increasingly is plugged in to the
worldwide one.
According to press accounts, Clarkson's
Research found the global order book
for LNG carriers totaled 170 by late December,
a 95% increase over 2021.
The disruption to European natural
gas supplies in the wake of Russia's invasion
of Ukraine constitutes the most
obvious reason. Many European countries'
dedication to voluntarily weening themselves
off Russian gas has exceeded
several foreign policy analysts' expectations
(and perhaps the Kremlin's). Alongside
involuntarily restrictions, such as
the intentional destruction of the Nord
Stream 1 and 2 pipelines linking Russia
and Germany, that resolve has caused
energy costs to soar.
Media accounts chronicle the hardships
that high energy costs may create
this winter. " The French government
last week started instructing officials
around the country to plan for potential
rolling electricity outages as soon as
(January), " details the New York Times.
" Britain's National Grid operator has
warned households of possible blackouts
(during early evening hours) if gas used
to produce electricity runs short. Electric
car owners in Finland are being advised
not to heat their plugged-in vehicles on
freezing mornings to avoid straining the
grid.
" Germany has issued advisories on
what to expect in a blackout, " the piece
adds. " 'The telephone is dead, the heating
doesn't come on, there is no warm water,
the computer goes on strike, the coffee
machine stays off, there is no light,' the
Office of Civil Protection and Disaster
Assistance said on its website. "
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50 THE AMERICAN OIL & GAS REPORTER
Despite the dire warnings and record
natural gas benchmark prices across Europe
in 2022, U.S. natural gas prices
have trended downward since the start
of the winter heating season. By year's
end, Henry Hub prices were roughly
half their levels of last spring, when gas
was trading at its highest point in 14
years. Looking forward, warmer-thannormal
weather forecasts for the peak
winter months appear primed to continue
that pattern, according to analysis from
EBW Analytics.
The firm noted in its Dec. 20 report
that U.S. gas storage volumes were expected
to soon surpass the five-year average
for the first time since January
2021, erasing the historic inventory
deficits that have been a key price catalyst.
" As March eventually assumes the
front-month role, the 2023 injection
season may increasingly set pricing for
natural gas. In the most-likely scenario,
the injection season could fall into contango
as the market turns its attention
to the injection season ahead, " the report
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American Oil and Gas Reporter - January 2023

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