Midway through the third quarter of calendar year 2023, we see oil pricing for WTI at $70.31/barrel and Brent at $75.10/barrel. Saudi Arabia will continue its unilateral oil production cut in August to prop up the market amid persisting fears over the global economy. Russia also announced fresh curbs on exports. Russia will assist the Saudi effort by reducing oil exports by 500,000 barrels a day during the month of August.

According to the United Arab Emirates, additional oil cuts made by Saudi Arabia and Russia should be enough to help balance the oil market.

The U.S. Energy Information Administration’s latest Short-Term Energy Outlook projects that the Brent spot price will average $79.54/barrel this year and $83.51/barrel in 2024. 

U.S. oil production is on track to set new records in 2023 and 2024. S&P Global is projecting shale output will increase by 1.4 million barrels/day this year alone. Growth will be driven most likely by higher output in the Permian Basin, though the pace of growth will moderate compared to previous years.

Despite already impressive gains over the past decade, roughly 90 percent of the 180 billion barrels of recoverable oil reserves in the United States remain untapped, which would fuel production gains for years to come. The minimum price at which drilling is profitable has stabilized below $50/barrel, giving producers greater flexibility to increase output or at least hold output steady.

This bodes well for the energy sector labor market as demands for skilled workers remain high; however, the pool of qualified workers remains painfully low. 

Growth in CCS Market

Carbon capture and storage (CCS) is another sector of the PVF industry that is experiencing growth. ExxonMobil Corp. has signed a CCS agreement with the steel producer Nucor Corp.

The agreement calls for ExxonMobil to capture, transport and store up to 800,000 metric tons of carbon dioxide (CO₂) from Nucor’s plant in Convent, La., and store it at ExxonMobil-owned infrastructure in Louisiana. The project is expected to be operational in 2026. 

Denbury has signed agreements that will expand the company’s CO₂ sequestration portfolio in the state of Louisiana.

The company signed an agreement with Lapis Energy to form a joint venture to design, implement and operate a CO₂ sequestration project at Lapis Energy’s 14,000-acre site in St. Charles Parish, La., approximately 20 miles west of New Orleans.

Each party will have a 50 percent interest in the new company, Libra CO₂ Storage Solutions. The owners believe the site has the potential to store at least 200 million metric tons of CO₂. The site is scheduled to be operational as early as 2027.

Denbury indicated that it intends to connect the site to its existing CO₂ pipeline network in southeast Louisiana with a 45-mile pipeline connection.

In a separate agreement with Soterra, a wholly owned subsidiary of Greif, Denbury acquired the rights to develop a dedicated CO₂ sequestration site on 8,500 acres in St. Helena Parish, approximately 50 miles northeast of Baton Rouge, La.

The potential sequestration capacity of the site named Virgo is at least 100 metric tons and should be operational as early as 2026.

Denbury plans to submit Class VI permits to the U.S. Environmental Protection Agency covering two to three additional dedicated sequestration sites this year. Denbury intends to drill two to three additional stratigraphic test wells across its portfolio by the end of 2023.

Yellen in China

Pricing for the carbon steel butt-welding fitting and forged-steel flange sector remains stable and should remain stable in the ensuing quarter, barring any unforeseen disruption in the supply chain or raw material increases.

A note of caution: It is being reported that the industry is seeing an increase in the import of carbon steel butt-welding fittings from Vietnam. If these products were produced from Chinese rough fittings, it could be an attempt to circumvent specifications barring the use of Chinese material on domestic projects.

As of this writing, U.S. Treasury Secretary Janet Yellen is in China to ease trade tensions between the two largest economies in the world. Yellen’s persuasiveness is questioned by her initial comments indicating a timid approach to grievous trade issues confronting the United States and China.

Let us hope she deals from strength and is not conciliatory in the negotiation process. Yellen’s success or failure to come to an agreement favorable to the United States is to be determined upon her return.

Continued aggressiveness of China in the Trans-Pacific region is expected regardless of what success, if any, Yellen achieves during her visit.

This continues to pose concern for supply chain disruptions that affect the availability of offshore PVF products; fittings, flanges, pipe, valves and other raw materials are particularly at high risk.

PVF Roundtable News

As indicated earlier in this column, the PVF industry is in desperate need of qualified, skilled workers required to populate our workforce that is consistently exposed to the attrition of experienced workers. The PVF Roundtable continues to work diligently to support the education and training of young associates for the PVF sector through the PVF Roundtable Charitable Foundation.

This year, the PVF Roundtable will exceed $2 million in total scholarships distributed by the foundation since its inception to trade schools and universities for the development of a skilled labor force to meet the increasing demands of the PVF industry. 

Distributions for the first half of 2023 will be announced at the Oct. 10, 2023, meeting.

Also at this meeting, the PVF Roundtable will have guest speaker Rick Perry, former governor of Texas and former U.S. Secretary of Energy, in addition to the networking session. This will be a dinner event with doors opening at 4 p.m. CDT. 

The venue for the October meeting is the Bayou City Event Center located at 9401 Knight Road, Houston, 281-501-6720. Please put this meeting on your calendar and register early, as our speaker garners a large audience.

The PVF Roundtable Golf Tournament and TroutBlast are the major fundraising events scheduled for 2023. The Weldbend Corp., Ferguson Industrial and MRC Global are key sponsors of these events. 

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

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