Sunday, February 12, 2017

US oil imports hit a 52 month high, a near record jump in oil supplies; OPEC cuts oil output but keeps on drilling..

in case you haven't heard, the Army Corps of Engineers reneged on its commitment to conduct a thorough environmental review of the Dakota Access pipeline, approved the final easement needed to complete the pipeline, and granted the permit that will allow its completion...after that green light from the Corps on Tuesday, Energy Transfer Partners said on Wednesday that it plans to resume work immediately, and Phillips 66, holder of a 25 percent stake in the project, said they expected the Dakota Access Pipeline to start pumping Bakken crude in the second quarter...according to the Associated Press, the Cheyenne River Sioux filed a legal challenge to the easement Thursday in federal court in Washington, D.C. while Standing Rock Sioux Chairman David Archambault flew to Washington to meet with Trump administration officials to share the Tribe’s perspective on why they so strongly opposed the project... U.S. District Judge James "Jeb" Boasberg, who will be overseeing the lawsuit filed by the Standing Rock and Cheyenne River Sioux, is said to be sympathetic to the historic exploitation of Indians in America, but has also denied an earlier attempt by the Standing Rock tribe to halt the pipeline work...

meanwhile, petrogeologist and oil analyst Art Berman echoed the same reservations that i had voiced in reporting that Trump had ordered expedited approval and construction of the Keystone XL...in an article posted at oilprice.com and elsewhere, Berman asserts that it will take at least $85 oil prices to develop enough new oil sand projects needed to fill the Keystone XL, and that even under the optimistic projections from the Canadian Association of Petroleum Producers that annual oil sand production will grow 128,000 barrels per day until 2021, it would take still 10 years to fill the Keystone, even if none of the other new Canadian pipeline projects currently approved and underway were completed...he concludes that TransCanada’s bet is that oil prices will move much higher and more quickly than most forecasts anticipate and that the volumes of bitumen will be there by the time that the pipeline is built, and also a bet that US tight oil plays will continue to produce enough light oil for several decades to dilute the tarry goop to a viscosity light enough to pipe and refine....i'll take the other side of that bet...

at any rate, at least we're going to get a brief respite from the onslaught of pipeline approvals we've seen over the past two weeks...two weeks ago, during his initial barrage of pipeline diktats, Trump named Cheryl LaFleur as acting chairwoman of the Federal Energy Regulatory Commission, and largely as a result of that, Norman Bay, who served as FERC chairman for the past two years, tendered his resignation effective February 3rd...that left the 5 member commission with just two sitting commissioners, LaFleur and Colette Honorable, and as a result FERC no longer has a quorum, can't approve anything, and hence cancelled their next monthly meeting on February 16th....so until such time as Trump vets and appoints at least one more commissioner, and that new commissioner is approved by the Senate, no more pipelines can be approved...according to the Associated Press, there's at least a half dozen major pipeline projects totaling more than $10 billion that now wait approval, including the $2 billion Pennsylvania to Ohio and Michigan Nexus pipeline, that would pass through the counties south of us, and the Atlantic Coast pipeline, which several members of Trump's transition team and White House staff have business or lobbying connections to..

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oil continued to trade in a narrow range this week as news that OPEC had achieved 90% compliance to their agreed to production cuts offset the news that US oil supplies saw their 2nd largest weekly jump in the EIA's records...strength in U.S. dollar, which makes internationally traded commodities cheaper, weighed on oil prices to start off the week, as US WTI oil for March delivery fell 1.5% to close at $53.01 a barrel, after closing the prior week at $53.83....prices continued to fall on Tuesday, after the EIA forecast that US crude output would hit a fracking era high in 2018 and the American Petroleum Institute reported the 2nd largest increase in oil inventories in history, along with large increases in gasoline and distillate supplies, and again ended another 1.5% lower at $52.17 a barrel....however, prices steadied on Wednesday, despite confirmation of the large oil supply increase from the EIA, and closed up 17 cents at $52.34 a barrel, as a drop in gasoline supplies encouraged traders to think that demand for gas was returning to normal....momentum from that rebound carried into Thursday, when prices rose to close at $53.00, after oil ministers from Iran and Qatar suggested that OPEC production cuts might be extended into the 2nd half of this year...oil prices then rose 1.6% on Friday to close out the week 3 cents higher than last week at $53.86 a barrel, after the International Energy Agency said OPEC had achieved a record initial compliance of 90% with their planned production cuts, that global oil output had fallen by 1.5 million barrels per day, and revised upward their estimate of global oil demand growth for this year  from 1.3 million barrels per day to 1.4 million  barrels per day...

for an initial look at those OPEC compliance levels, we have a table of OPEC oil output for December and January as per the IEA (note that's the International Energy Agency, headquartered in Paris, as distinguished from the US EIA, the Energy Information Administration of the US Dept of Energy, in case those similar acronyms are confusing to you)

February 11 2017 OPEC production via IEA

the above table comes from the IEA via Zero Hedge and it shows the IEA estimates of the December output of crude, in millions of barrels, from each of the OPEC members in the first column, estimates of their January output of crude in the second column, and then the supply baseline in the third column, also in millions of barrels ...it's that supply baseline, which is approximately equal to the October production level of each member, on which the 4.5% OPEC production cuts are based, so the amount in millions of barrels of crude that each member is expected to cut is therefore shown in the 4th column, as the "agreed cut"....then, based on these estimates of January oil production, the "actual cut", or the difference between the baseline and each member's January production, is then shown in the next to last column...finally, in the last column, the IEA computes a compliance percentage, which is simply the amount each member has cut shown as a percentage of what they agreed that they would cut...at the bottom, they then total OPEC figures and give us the totals for all 11 members of OPEC, and conclude from those totals that they've achieved 90% compliance..while that's all pretty much self explanatory, as are the footnotes at the bottom of the table, we'd note that the Saudis by themselves cut 116% of what they'd agreed to, and thus account for more than half of the OPEC cuts so far....that means that without the Saudi cuts, OPEC compliance was at a not very spectacular 71.6%...

The Latest Oil Stats from the EIA

this week's oil data for the week ending February 3rd from the US Energy Information Administration showed that our imports of crude oil were at their highest level in over 4 years, while our refining of that oil fell for the 4th week in a row, and as a result this week's surplus of crude that was added to our stored supplies ended up as the 2nd largest on record...our imports of crude oil rose by an average of 1,082,000 barrels per day to an average of 9,372,000 barrels per day during the week, while at the same time our exports of crude oil rose by 18,000 barrels per day to an average of 567,000 barrels per day, which meant that our effective imports netted out to 8,805,000 barrels per day for the week, 1,064,000 barrels per day more than last week...at the same time, our crude oil production rose by 63,000 barrels per day to an average of 8,978,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 17,783,000 barrels per day during the week...

meanwhile, refineries reportedly used 15,893,000 barrels of crude per day during the week, 54,000 barrels per day less than during the prior week, while at the same time, 1,976,000 barrels of oil per day were being added to oil storage facilities in the US...thus, this week's EIA oil figures seem to indicate that we consumed or stored 86,000 more barrels of oil per day than were accounted for by our oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 86,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents "unaccounted for crude oil"...that is further described in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil.", which means they got that number by the method we just showed, and hence we've been calling it the EIA's weekly oil fudge factor...

the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports rose to an average of 8.463 million barrels per day, now 10.0% higher than the same four-week period last year...from that same source, we also find that this week's 63,000 barrel per day oil production increase included a 73,000 barrel per day jump in oil production in the lower 48 states, which was partially offset by a 10,000 barrel per day decrease in output from Alaska..our crude oil production for the week ending February 3rd thus was just 2.3% lower than the 9,186,000 barrels of crude that we produced during the week ending February 5th of last year, and 6.6% below our June 5th 2015 record oil production of 9,610,000 barrels per day...

US refineries were operating at 87.7% of their capacity in using those 15,893,000 barrels of crude per day, down from 88.3% of capacity the prior week and down from the year high of 93.6% of capacity just four weeks earlier, but up from the 86.1% capacity utilization rate during the same week a year ago, as refineries are now into their regular winter slowdown...thus, even though the week's oil refining was down by more than 1.2 million barrels per day from the first week of this year, it was 2.5% more than the 15,510 000 barrels of crude refined during the week ending February 5th, 2016....and even though they took in less crude, gasoline production from those refineries rose by 703,000 barrels per day to 9,804,000 barrels per day during the week ending February 3rd, which was 2.6% more than the 9,553,000 barrels per day of gasoline that were produced during the week ending February 5th a year ago (part of this week’s increase was a 226,000 barrel per day adjustment to correct for the imbalance created by the blending of fuel ethanol and motor gasoline blending components)....meanwhile, refineries' production of distillate fuels (diesel fuel and heat oil) also rose, increasing by 125,000 barrels per day to 4,802,000 barrels per day, which was up by 10.2% from the 4,357,000 barrels per day of distillates that were being produced during the week ending February 5th last year, during a mild El Nino winter...

however, even with the increase in our gasoline production, the EIA reported that our gasoline inventories fell by 869,000 barrels to 256,217,000 barrels as of February 3rd, the first drop in our gasoline supplies in 6 weeks...that happened as our domestic consumption of gasoline rose by 631,000 barrels per day to a closer to normal 8,941,000 barrels per day, following 4 weeks wherein gasoline demand approached 16 year lows...that gasoline supply draw-down occurred despite gasoline imports that were up by 323,000 barrels per day to 811,000 barrels per day, while our gasoline exports remained unchanged at 902,000 barrels per day...however, even with this week's withdrawal, our gasoline supplies are up by more than 29 million barrels since Christmas, and remain fractionally higher than the 255,657,000 barrels of gasoline that we had stored on February 5th of last year, and 5.6% above the 242,647,000 barrels of gasoline we had stored on February 6th of 2015...

meanwhile, with the increase in distillates production, our supplies of distillate fuels rose by 29,000 barrels to reach 170,746,000 barrels by February 3rd, for an increase of over 19 million barrels over the first 6 weeks of winter, at a time of year when distillates are usually being drawn down and consumed as heat oil...the amount of distillates supplied to US markets, a proxy for our consumption, rose by 101,000 barrels per day to 3,910,000 barrels per day, and was thus above the average of the past 5 years, and our exports of distillates rose by 217,000 barrels per day to 1,097,000 barrels per day, or else we would have had even more surplus.....still, our distillate inventories ended the week 6.1% higher than the distillate inventories of 160,976,000 barrels of February 5th last year, and 30.1% above the distillate inventories of 131,223,000 barrels of February 6th, 2015…    

lastly, as we mentioned in opening this segment, the elevated level of our oil imports led to the 2nd largest recorded jump in our weekly inventories of crude oil, which rose by 13,830,000 barrels to 508,592,000 barrels by January 27th, a level which is now only 0.7% below the April 29th record level of 512,095,000 barrels...moreover, we ended the week with 8.1% more crude oil in storage than the then record 470,676,000 barrels we had stored on February 5th of 2016, and 32.5% more crude than the 383,800,000 barrels of oil we had in storage on February 6th of 2015...since it's been a while since we've taken a look at a graph of our oil supplies, we'll include the EIA graph of them here first, and explain why these common EIA graphs have become inadvertently deceptive...

February 10 2017 crude oil stocks for Feb 3

in the graph above, copied from the EIA's This Week in Petroleum Oil Section, the blue line shows the recent track of US oil inventories over the period from June 2015 to February 3, 2017, while the grey shaded area represents the range of US oil inventories millions of barrels as reported weekly by the EIA over the prior 5 years for any given time of year…the grey area intends to show us the normal range of US oil inventories as they fluctuate from season to season over the 5 years prior to the two years shown by the blue line...however, note that the increase in the grey wedge on the right now includes the record oil inventories that we were seeing last year at this time (ie, it includes the image of the blue line, or the early 2016 record inventories) which we have recently been exceeding by 5% to 10% each week...thus, the grey section of the graph, supposedly representing historical seasonal levels, has already become bloated by the record inventories that we've been seeing for two years running, as we can see in the blue line...thus comparing the current inventory level in blue to the grey shaded area is deceptive, in that the top of that grey area now represents record glut of the prior year...by rights, to compare the current blue line to a normal level of inventories, it should be compared to the bottom of the grey shaded area, as we'll show in the graph below, which gives us the exact crude oil supplies for every week of the period:..

February 11 2017 Yardeni crude stocks for Feb 3

the above graph comes from a weekly pdf booklet of petroleum graphs produced by Yardeni Research, a provider of independent investment and economics research, run by Dr Ed Yardeni...it shows the end of the week stocks of crude oil in millions of barrels for each week beginning with January 2013, up to and including this week's report for February 3rd, with graphs for each year color coded as indicated...here we can see how our oil inventories stayed in a narrow range during 2013 and 2014 (and during the years before then, for that matter), represented by the mustard and green bands, typically falling to below 330 million barrels by the end of each summer and then rising to nearly 370 million barrels by early spring....however, at the beginning of 2015, represented by the blue colored graph, our inventories of oil started rising each week till they topped 450 million barrels at the end of April 2015, and then stayed elevated in a range 80 to 100 million barrels above the previous norms over the rest of that year...that continued into 2016, represented by the grape colored graph, and although the rate of increase over 2015 tailed off late in the year, our 2016 oil supplies had generally averaged about 15% above 2015's elevated levels, and more than 40% above historical levels...now we see in the scarlet colored graph, representing the beginning of 2017, that our oil supplies are rising again from the comparable seasonal records set in 2016...thus, to accurately compare today's oil inventories to the seasonal norm, we'd have to go back not just one or two years, but three years to early 2014, before the current oil glut developed...doing that, we'd find that today's oil inventories of 508.6 million barrels are 54.1% higher than the oil inventories of 329,983,000 barrels seen on February 7th, 2014...

This Week's Rig Count

US drilling activity increased for the 14th time in 15 weeks during the week ending February 10th, with the four week increase in drilling rigs still the largest 4 week increase since January 2010...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 12 rigs to 741 rigs in the week ending on this Friday, which was 200 more rigs than the 541 rigs that were deployed as of the February 12th report a year earlier, but of course still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

the number of rigs drilling for oil rose by 8 rigs to 591 rigs this week, which was up from the 439 oil directed rigs that were in use a year ago, but down from the recent high of 1609 oil rigs that were drilling on October 10, 2014...meanwhile, the count of drilling rigs targeting natural gas formations rose by 4 rigs to 149 rigs this week, which was also up from the 102 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...there also remained a single rig that was classified as miscellaneous, which we could call an increase from a year ago, when there were no miscellaneous rigs at work...   

one drilling platform offshore from Louisiana in the Gulf of Mexico was shut down this week, which cut the Gulf of Mexico rig count back down to 20, which was also down from the 25 rigs working in the Gulf a  year ago…our total offshore count for the week was thus cut back to 21 rigs, as a drilling operation is still going on in the offshore waters off Alaska...however, one drilling platform started operations on an inland lake in southern Louisiana, where there are now 3 such inland waters operations, which is also up from 2 rigs working on inland waters a year ago..

the number of horizontal drilling rigs working in the US increased by 11 rigs to 607 rigs this week, which is now up by 174 rigs from the 433 horizontal rigs that were in use in the US on February 12th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, a net of one vertical rig was added during the week, bringing the total vertical rig count up to 68, which was also up from the 59 vertical rigs that were deployed during the same week last year...meanwhile, the directional rig count was unchanged at 66 rigs as of February 10th, which was 17 rigs more than last February 12th's count of 49 directional rigs....

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of February 10th, the second column shows the change in the number of working rigs between last week's count (February 3rd) and this week's (February 10th) count, the third column shows last week's February 3rd active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 12th of February, 2016...       

February 10 2017 rig count summary

once again, we see new drilling in the Permian basin of western Texas and New Mexico accounted for half of this week's increase, while a 3 rig addition in the Eagle Ford of south Texas brought the total increase in the state to 7 rigs, with 4 of the Permian rigs apparently on the New Mexico side of the border...on the other hand, the Cana Woodford of Oklahoma, home to the SCOOP and the STACK basins, was down by 5 rigs to 51 rigs this week, after rising by 7 rigs last week, 3 rigs the prior week, and 9 rigs the week before that; i have no idea what's going on down there...nor have i heard news that would explain the 2 rigs that were shut down in Ohio's Utica, which cut the state total back to 19 rigs...we can explain the 4 natural gas rig increase in the light of that Ohio drop by noting the 3 rig increase in the Marcellus, another gas rig in the Haynesville, and two gas rigs in "other basins", which Baker Hughes doesn't name in their summary data...otherwise, what we see above is what we got; there were no changes in states other than those listed above...

International Rig Counts for January

Baker Hughes also released the international rig counts for January on Tuesday of this past week, which unlike the weekly North American count, is an average of the number of rigs that were running in each country during the month, rather than the total of those rig drilling at month end....Baker Hughes reported that an average of 1,918 rigs were drilling for oil and natural gas around the globe in January, which was up from the 1,772 rigs that were drilling around the globe in December, and up from the 1,969 rigs that were working globally in January of last year, which was the first time global drilling activity surpassed year earlier totals since December of 2014....increased North American drilling again accounted for most of the global increase, as the average US rig count rose from 634 rigs in December to 683 rigs in January, which was also up from the average of 654 rigs that were working in the US in January a year ago, while the average Canadian rig count rose from 209 rigs in December to 302 rigs in January, which was also up from the 192 Canadian rigs that were deployed in January a year earlier....outside of Northern America, the International rig count rose by 4 rigs to 933 rigs in January, which was still down from 1,095 rigs a year ago, as increases in drilling in the Middle East and Eastern Asia more than offset a decrease in Latin American activity..

drilling activity in the Middle East rose for just the 5th time over the past 13 months, as the countries included in this region added a net of 6 rigs, including 3 offshore, increasing their active rig average to 382 rigs for the month, which was still down from the 407 rigs deployed in the Middle East a year earlier....OPEC member Kuwait accounted for the entire increase, as they started 8 more rigs in January and now have 54 rigs active, which was up from the 40 rigs the Kuwaitis were running a year ago....in addition, Egypt, who is not an OPEC number and who has not agreed to output cuts, added 1 rig in January and thus had 25 rigs active, which was still down from the 42 rigs they were running a year earlier....on the other hand, Oman, who is not an OPEC member but who has committed to a production cut of 45,000 barrels a day, cut back their drilling by 2 rigs, from 59 rigs in December to 57 rigs in January, which left them down from the 70 rigs they were running in January a year ago...in addition, the Saudis pulled out one rig in January, which left them with 124 rigs still active, the same number as they had running a year earlier...however, Saudi Arabia's rig count has averaged near 125 rigs weekly since early 2015, up from their average of around 105 rigs in 2014, so they've not yet even pulled back to the level of drilling they were doing before OPEC opened the spigots...among other major OPEC producers, Iraq's drilling was unchanged at 41 rigs in January, while Abu Dhabi of the United Arab Emirates was also unchanged at 48 rigs, the same as their count a year ago, although like the Saudis, they are still doing far more drilling than their 30 rig average of early 2014...

drilling activity in the Asia-Pacific region also increased by a net of 6 rigs to 198 rigs in January, even as their offshore deployment fell by 5 from 87 rigs to 82, which was down from the 198 rigs working the region a year earlier, which just included 75 platforms working offshore at that time....Indonesia, who was booted out of OPEC for not agreeing to the group's production cuts, added 7 rigs and thus had 23 rigs working during January, up from 20 rigs a year earlier....Australia added 5 more rigs, after adding 5 rigs in December, bringing their total to 14 rigs active nationwide, which was thus up from the 13 rigs they were running a year earlier... Brunei, who had shut down both of the rigs they had active in December, started both rigs back up in January, and the 2 rigs they're now running are the same as they had a year earlier....on the other hand, China shut down 5 more offshore rigs, after they had shut down 3 rigs in December, leaving them with 20 rigs working offshore, down from the 27 offshore rigs they were running last January...at the same time, both Papua New Guinea and Malaysia both idled one rig; that left Papua New Guinea with 2 rigs active, same as they had a year earlier, and left Malaysia with 3 rigs running, down form the 5 rigs they were running a year earlier...

meanwhile, the Latin American region saw their active drilling rig numbers drop by a net of 8 rigs to 176 rigs, down from 243 rigs in January of last year, and down from 321 rigs as recently as September of 2015, as the region idled 92 rigs over the first 6 months of 2016....Argentina, where they had shut down 11 rigs in December, shut down another 7 in January, and now have 52 rigs active, down from 72 rigs a year ago, and also down from over the over 100 active rigs Argentina saw through most of 2015...Mexico, who has agreed to cut their oil output by 100,000 barrels a day, idled 3 rigs for the month, which left them with 16 active rigs, down from the 43 rigs they were running last January....Venezuela and Ecuador, both members of OPEC, each shut down 1 rig; that left Venezuela with 51 rigs, down from 67 last January, and left Ecuador with 6 rigs, up from the single rig they were running last January, which was during an anomalous slowdown in Ecuador's normal activity.....in addition, Chile shut down 2 rigs and now have 2 remaining, down from the 3 rigs they had active last January, and Suriname shut down the only rig they had active in December, while they had two active a year ago...on the other hand, Brazilian drillers, who were not party to the OPEC production cuts, added 3 rigs during the month; which brought their active rig count back up to 16 rigs, which was still down from the 34 rigs deployed in Brazil a year earlier.....Trinidad and Tobago, meanwhile, added two rigs, and now have 5 rigs working, which is still down from the 7 rigs they had running a year ago...in addition, both Columbia and Peru added a single rig; for Peru, that brought their active rig count up to 2 rigs, up from none a year earlier, while for Columbia, their count rose to 20 rigs, up from the 8 rigs they had running a year earlier...

drilling activity also slipped a bit in Europe, falling by 1 rig to 98 rigs, which was down from the 108 rigs working in Europe a year ago at this time, as their offshore drilling activity fell from 35 rigs to 31 rigs, also down from 35 rigs offshore a year ago...4 platforms offshore from Norway were idled, leaving 12 still active there, down from 18 a year ago, while the UK idled 3 offshore, leaving them 8 active, same as they had offshore last January....on the other hand, 2 new offshore platforms were deployed off the coast of the Netherlands, and one was set up in the Mediterranean off of Italy...those brought the Netherlands count up to 3 offshore, from one on land and one offshore in December, but down from two on land and two offshore in January of 2016, and brought the Italian count up to 5 rigs, from 4 land based rigs in December and 3 on land last January...elsewhere on land in Europe, Turkey added 3 rigs and now have 32 active, up from 29 rigs in December and a year ago, and France started up two rigs, up from none in in France in December and none most of last year...meanwhile, the Germans shut down 1 rig, leaving them 3 still active, down from the 7 rigs they had deployed a year earlier...

lastly, the African continent saw a net increase of 1 rig to 79 rigs in January, which was still down from the 94 rigs working in Africa last year at this time...OPEC member Nigeria, who is exempt from the organization's production cuts for the time being, added 2 rigs and now have 6 rigs working, which was still down from the 9 rigs they had deployed a year ago...OPEC member Angola also added a rig, and now have 5 rigs active, also down from the 10 rigs they had active a year earlier...in addition, the Congo Republic, which had shut down all 3 rigs they had active in December, added 1 rig back in January, still down from the 3 rigs they had active last January...OPEC member Algeria shut down 1 rig, leaving 51 rigs still working in Algeria, same as they had a year ago....and both Liberia and Ghana shut down the only drilling rig they had active; a year ago, Liberia had no rigs and Ghana had one....finally, note that Iranian, Russian, and Chinese rig counts are not included in this Baker Hughes international data, although we did note that China's offshore area, with an average of 20 rigs active in January, were included in the Asian totals here...  

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Despite solar job growth, company officials say Ohio policy prevented more - Ohio added more than 1,000 jobs in the solar energy field last year and remains one of the top 20 states for employment in the industry, according to a new report. But the situation isn’t as sunny as it could have been, in the view of some company leaders in the state. The National Solar Jobs Census 2016 found that job growth in the solar industry outpaced the U.S. economy by 17 times with the addition of more than 51,000 jobs last year. Overall solar job growth since 2010 was 178 percent, according to the The Solar Foundation’s February 7 report.Total figures showed more than 260,000 people who spent at least half of their time on solar-related duties, of whom 28 percent were women or racial and ethnic minorities.“Solar employs slightly more workers than natural gas, over twice as many as coal, over three times that of wind energy, and almost five times the number employed in nuclear energy,” said the report. Employment in Ohio’s solar industry grew 21 percent last year, with the addition of 1,020 jobs, according to the report. The state’s total of 5,831 jobs ranked Ohio’s solar industry employment 11th overall, but only 25th on a per capita basis. Company leaders say Ohio could have done much better if its lawmakers had not frozen targets under the state’s renewable portfolio standard at the 2014 level through the end of last year. “Without SB 310, our job growth would have been at least double, more likely triple,” said Alan Frasz at Dovetail Solar and Wind in Cleveland. Before that 2014 law took effect, employment in the industry had grown at much higher rates, he noted. “Ohio’s job growth would absolutely have been higher without the freeze,” agreed Steve Melink of Melink Corp. in Milford. Although Ohio was a “national leader” when the state’s renewable portfolio standard was first adopted in 2008, “now we have fallen behind most states and many countries around the world,” Melink added.

Ohio’s Oil and Gas Industry to award student scholarships - Students interested in pursuing careers and training in the crude oil and natural gas industry have until March 1 to submit their scholarship applications to the Ohio Oil and Gas Energy Education Program (OOGEEP). Qualifying students will receive $1,000 renewable scholarships to attend an accredited Ohio college, university, technical or trade school of their choice. To date, more than 300 scholarships have been awarded to Ohio students. “Ohio’s oil and gas industry recognizes the vital importance of students to the future of our state and our industry,” said OOGEEP Executive Director Rhonda Reda. “OOGEEP’s scholarship winners will be part of the next generation to develop Ohio’s energy resources and we’re proud to do all that we can to support education across Ohio.” “In a world where energy needs are growing exponentially, the oil and gas industry needs young, bright minds more than ever,” said Ohio State University student and repeat scholarship winner James Roche. “Exciting things are happening in the oil and gas field, and I am very much looking forward to being a part of it,” added Zane State College student Jordan Watson. Interested students must submit a 250-500 word essay describing their personal and career goals as well as how their degree would help the oil and gas industry. In the essay, students should also detail their academic achievements, extracurricular activities, awards and recognitions, community service, work history, financial needs, and personal or family influences. In addition, two letters of recommendation from a teacher, employer or other mentor figure are required.

Local attorney blasts Spectra Energy over fault line - The Blade: A local attorney known for defending activists today called Houston-based Spectra Energy’s apparent oversight of the Bowling Green Fault line “an astonishing screw-up” that could help his cause and complicate company efforts to build its proposed $2 billion NEXUS Gas Transmission pipeline through northwest Ohio. Flanked by about 50 sign-carrying demonstrators along the banks of the Maumee River, at Farnsworth Metropark’s Roche de Boeuf visitor center south of Waterville, Terry Lodge discussed the request for a hearing he filed last week with the Federal Energy Regulatory Commission, or FERC, based on the region’s potential seismic activity and its porous karst geology. Only a few hundred feet away, along a paved hiking trail, lies a Metroparks of the Toledo Area marker in front of a portion of the 100-mile fault, describing how the crack can be exposed at surface level when the river’s running low. The fault goes from the Findlay area into southeast Michigan, according to the plaque. “When water is low, you can walk along the Maumee River next to the crack,” Mr. Lodge said. He was joined by Andrew Kear, a Bowling Green State University associate professor who specializes in geology and political science, and Lisa Kochheiser, spokesman of the newly formed citizens group called UC4POWER, which stands for United Communities for Protecting our Water and Elevating Power. Holding signs in opposition to the project were a broad cross-section of college students, children and young mothers, and several older residents and property owners. NEXUS — which stated in its final environmental impact statement that it believes the fault is at least 2,200 feet below surface — has said little about the new contention, which has drawn large crowds at recent Bowling Green city council meetings and those of other municipalities. The company reiterated its position last week that the pipeline will be built safely and without risk to the environment. It is expected to file a formal response with FERC soon about the region’s potential vulnerability to earthquakes.

Local group hopes to keep fracking away from Columbus area | NBC4i.com: — Local organization Columbus Community Bill of Rights is hoping to garner enough signatures for a ballot initiative in time for the November 2017 election that would prevent the effects of fracking from ever reaching the Columbus area. The group wants to ensure that no fracking or wastewater injection wells are ever a consideration in Columbus. They point to 13 injection well in Morrow County—among 200 statewide—where brine and fracking wastewater are disposed. Members of the group are concerned about the risk of leakage of contaminated wastewater finding its way into the watershed at some point in the future. In December 2016, the federal Bureau of Land Management auctioned 719 acres of the Wayne National Forest in southeastern Ohio near Marietta for proposed fracking interests. Environmental groups have fought this sale, believing that the threat of potential air, water and noise pollution was not adequately addressed in the environmental assessments involving the state’s only national forest. A study conducted by the Bureau of Land Management concluded that there is no significant environmental harm caused by fracking. Gas and oil companies have already established drilling sites on leased parcels considered private property, once parcel ownership was established.

Shale gas and oil producers could pay $250 million in local property taxes, industry study claims | cleveland.com: -- Ohio oil and gas producers in just six eastern counties paid local property taxes totaling $43 million in four years and could pay up to $250 million over the coming decade, a new industry study finds. Energy in Depth, a research arm of the Independent Petroleum Association of America, and the Ohio Oil and Gas Association released its findings today. The 29-page report uses public property tax records obtained from Belmont, Carroll, Guernsey, Harrison, Monroe and Noble counties from 2010 through 2015. The time period includes the first three years of horizontally drilled shale gas development. Jackie Stewart, state director of Energy in Depth, said the property taxes levied on shale wells represented about 22 percent of all real estate taxes paid in the six counties during the period. "One hundred percent of this money stayed local," she noted, "with approximately 60 percent going to local schools." Stewart said the estimated $200 million to $250 million that producers will likely pay by 2026 is a projection based on the ramp up of production after the initial three-year period. "Since 2013, natural gas production has increased by 852 percent, [and oil production by 496 percent], which is how we conservatively arrived at our projection for the next 10 years of tax collection," she said.

Fracking Fluid Contains A Stew Of Known Toxic Chemicals — And That May Not Be The Worst Of It --Arsenic, benzene, formaldehyde, lead and mercury are among more than 200 toxins found in fracking fluids and wastewater that may pose serious risks to reproductive and developmental health, according to a paper published on Wednesday.And that list may just be just the tip of the iceberg, said Nicole Deziel, an environmental health expert at the Yale School of Public Health and senior author of the new study. Many more chemicals known to be used in fracking could pose similar risks, yet remain unstudied, Deziel said. Other substances involved in oil and natural gas production remain undisclosed by fracking companies. In their study, Deziel and her team investigated more than 1,000 chemicals used in and created by the controversial drilling process, which shoots a mix of pressurized water, sand and chemicals into shale rock to unlock hydrocarbon reserves. The U.S. Environmental Protection Agency used the same list in its assessment of the available science, which found no evidence that fracking has led to widespread, systemic contamination of drinking water.For most of the chemicals, insufficient information thwarted the researchers' efforts to determine potential toxicity. "That's not really surprising," said Deziel. "There are thousands of chemicals in commerce that people are routinely exposed to and for which we have limited data." (Hence, the major push to overhaul the 1976 Toxic Substances Control Act, which environmentalists argue doesn't give the EPA enough authority to study and regulate chemicals.) Of the 240 chemicals for which the Yale team did have adequate data, they found that 157 were associated with some kind of reproductive or developmental problem, such as adverse birth outcomes, derailed brain development or infertility.

Wagner thinks DEP should give notice before inspections - It’s no secret that our Sen. Scott Wagner has never met a regulation he likes, especially those from the Pennsylvania Department of Environmental Protection. During an in-person meeting in his York office, Sen. Wagner was clear, “DEP should be mandated to give 24 hours’ notice to businesses before making inspections.”   But that doesn’t seem right to us. Why grant more time when the point of inspections is to see if there are any issues with pollution when the business is running on an average day. Imagine if a bar owner wanted the police to notify them a full day in advance before they setup a sobriety checkpoint near their establishment.   DEP’s job is to enforce laws that defend us from environmental threats that poison human life and impact our children in increasingly dangerous ways. DEP needs to ensure that businesses that could cause pollution aren’t doing so. Yet our state senator continues his pursuit to limit DEP in fulfilling its mission and defending our kids’ right to a healthy and abundant life that Jesus’ called for in John’s Gospel. As an example, Sen. Wagner recently agreed to co-sponsor Senate Bill 175, introduced by Sen. Reschenthaler (R, 37). The bill states: “In addition to the other limitations imposed under this section, the board may not promulgate ambient air quality standards, emission or performance standards, control measures or other requirements, and the department may not impose permit or plan approval conditions, for methane that are more stringent than those promulgated by the United States Environmental Protection Agency for new sources.” In effect, the bill would stop new standards in Pennsylvania to reduce methane leaks from natural gas drilling and transportation.

Facing $3B deficit, governor proposes shale tax - Building on an ambitious bet that he can squeeze savings out of state government, Gov. Tom Wolf asked lawmakers Tuesday to help fill a $3 billion projected deficit by imposing a tax on Marcellus Shale natural gas production and signing off on potentially touchy cuts in spending, including transportation aid to schools. The Democratic governor also wants to charge local governments that rely solely on state police for law enforcement coverage and lease the huge Pennsylvania Farm Show Complex in Harrisburg in expectation of a $200 million upfront payment. Education would get more money, albeit more modest amounts than Wolf had sought in previous years, and programs for the poor and vulnerable would remain intact. His requests to the Republican-controlled Legislature come with a slew of efficiency measures the governor rolled out Tuesday, including shifting more of the rising cost of medical care for the poor to the federal government. Wolf also targeted hundreds of millions of dollars in what the administration views as business tax loopholes and wants lawmakers to approve an increase in the minimum wage to $12 an hour, counting on the resulting higher tax receipts to help balance the budget. “Our commonwealth has been operating with a structural deficit for a long time,” Wolf said during a 22-minute address to a joint session of the Legislature in the ornate House chamber. “That means Harrisburg has been living beyond its means. Households can’t do that, and neither can we.” He called his proposal a “responsible solution to our deficit challenge and a different approach from the way things have been done in Harrisburg for almost a generation.”

Without a quorum, US FERC cancels monthly open agenda meetings - The US Federal Energy Regulatory Commission has canceled its regular monthly open meetings until further notice because it lacks a quorum, the remaining sitting commissioners -- acting Chairman Cheryl LaFleur and Commissioner Colette Honorable -- announced Wednesday. The next agenda meeting, at which the commissioners typically consider, discuss and vote on a full slate of official orders, was scheduled to occur February 16. FERC, for the first time in its history, finds itself without the minimum three commissioners needed to do the bulk of its major caseload. Norman Bay, who served as FERC chairman for nearly two years, abruptly left the commission, effective February 3, after President Donald Trump designated LaFleur acting chairman. The five-member commission normally has a majority of sitting commissioners, including the chairman, who are members of the president's party. The three open seats are expected to be filled by Republicans, as both LaFleur and Honorable are Democrats. But vetting prospective commissioners and moving them through the Senate nomination and confirmation procedures can take months. Until the US Senate confirms the replacements, the commission will be unable to act on significant orders, petitions, rules and policy pronouncements. Some routine business can continue under authority delegated to office directors.

Why the Marcellus and Utica are paying close attention to Norman Bay -- Norman C. Bay just resigned as chair of the Federal Energy Regulatory Commission (FERC), leaving a mess behind him. This is the entity that controls the power to approve contested electric transmission lines, natural gas pipelines and utility plans. He resigned after President Trump promoted Cheryl A. LeFleur to chair the commission. Now, reports the Pittsburgh Post-Gazette, FERC doesn’t have a quorum: When Bay departs, the five-person commission, which already has two vacancies, will no longer have a quorum. No quorum means no approvals for contested issues including electric transmission lines, natural gas pipelines and utility plans. Any new member nominated by Trump must go through Senate confirmation, something that could take another four months. For the Marcellus and Utica regions in the Northeast, this could mean serious problems. The list of approvals isn’t short, despite the “increased urgency” to get project approvals. President Trump’s promise to create jobs and “jump start infrastructure projects” seems unrealistic now that Bay’s void leaves the commission with no quorum to get business accomplished. According to the Associated Press, at least a half dozen major pipeline projects totaling more than $10 billion wait approval while FERC works to fill the vacancy on the five-member panel. Those on the list include:

  • Nexus pipeline, $2 billion, Ohio and Michigan
  • PennEast pipeline, $1 billion, Pennsylvania and New Jersey
  • Northern Access pipeline, $450 million, Pennsylvania and New York

The AP also noted that Senate Energy Committee Chairwoman Lisa Murkowski, as well as several energy-related trade associations, all urged President Trump to replace Bay sooner rather than later. Murkowski said she has advised the White House for months of the need to nominate a new commissioner. As FERC waits for a new commissioner, natural gas infrastructure projects in the Marcellus and Utica areas will be indefinitely delayed.

EQT buys Marcellus, Utica acreage in Stone Energy bankruptcy auction - EQT on Thursday said it won a bankruptcy auction that would see the Pittsburgh-based producer expand its Appalachian Basin footprint in West Virginia through the purchase of 85,400 net acres, including 53,400 net acres in the core of the Marcellus Shale play, as well as drilling rights on 44,100 net acres in the Utica Shale. Under the deal, which a bankruptcy court is expected to approve Friday, the independent exploration-and-production company will acquire acreage with production of about 80 MMcf of natural gas equivalent per day from Stone Energy for $527 million. The acquired acreage -- primarily located in West Virginia's Wetzel, Marshall, Tyler and Marion counties -- is within the core of EQT's liquids-rich development areas and complements the company's adjacent operations, it said in a statement. EQT said the assets include 174 Marcellus wells -- of which 123 are developed and 51 are in-progress -- as well as 20 miles of gathering pipeline and 32,000 acres outside the company's core development area.The acreage has an average 85% net revenue interest and 86% is either held by production or has lease expiration terms that extend beyond 2019, which means the producer will be able to take its time before it begins developing the acreage. In December, Stone and its domestic subsidiaries filed voluntary petitions under Chapter 11 of the US Bankruptcy Code in the Bankruptcy Court for the Southern District of Texas. As part of its pre-packaged bankruptcy filing, the court oversaw an auction that allowed Stone to put its Appalachian Basin assets up for sale to raise additional capital as part of its pre-arranged plan of reorganization. Prior to the bankruptcy filing, in October, Stone had entered into an agreement with TH Exploration III, LLC, an affiliate of Tug Hill, to sell the assets for $360 million in cash. Pursuant to bankruptcy court orders, the auction was held on Wednesday, with the initial Tug Hill bid serving as the stalking horse bid. The completion of the auction process should allow Stone to emerge from the protection of the bankruptcy court as early as Friday, a Stone spokeswoman said in an interview Thursday.

Williams Making Good on Plan to Double Down in Heart of Shale | Rigzone-- Williams Cos. is following through on a promise to unload assets and double down in a region of the U.S. where natural gas production is still booming: the Marcellus shale formation. On Thursday, the master-limited pipeline partnership controlled by Williams Cos. said it had struck a deal with Western Gas Partners LP to exchange its 50 percent stake in a gas-gathering system in Texas for a bigger position in two gathering networks in the northern Pennsylvania area of the Marcellus and a cash payment of $155 million. The trade builds on Williams’s efforts to streamline operations and strengthen its position as a pipeline giant in the Marcellus and Utica shale basins of the eastern U.S. -- a plan Chief Executive Officer Alan Armstrong laid out in the aftermath of a failed, $33 billion takeover by Energy Transfer Equity LP last year. Gas supplies flowing out of the region have outpaced pipeline capacity, and Williams has heavily invested in projects to bring more of the heating fuel to market. In the exchange with Western Gas, “Williams gets more gas right where they want it," Brandon Blossman, an energy analyst with Tudor Pickering Holt & Co., said by phone. “They want to ‘core down’ to their competency, and their competency is moving gas from the Northeast to end-users in the mid-Atlantic, Southeast and Gulf Coast.” While the deal will shrink Williams’s spending in Texas and New Mexico and bring in immediate cash, the company is also giving up “growth potential” in America’s most-active shale basin, the oil-rich Permian, Williams said Thursday that it had also reached an agreement with Anadarko Petroleum Corp. to sell its 33.33 percent stake in the Ranch Westex gas-processing plant in the Delaware Basin of West Texas and New Mexico for $45 million in cash.

New York, New England Will Need More Gas for Power --So far, relatively mild weather this winter has insulated New England natural gas consumers from pipeline capacity-related price spikes that occurred during cold snaps in previous winters. And even if another polar vortex were to happen, it’s likely the regional electric grid operator’s Winter Reliability Program to shift gas-fired generators from pipeline gas to stockpiled oil or LNG would keep the lights on. But New England’s day of reckoning is coming. The region is becoming ever-more dependent on gas-fired power, most gas pipeline projects into New England are stalled or scrapped, and New York’s recently announced plan to close two Indian Point nuclear units will only make matters worse. Today we discuss the still-widening gap between Northeast pipeline capacity and gas demand. New   As we have written about often in the RBN blogosphere, New England suffers from woefully inadequate pipeline capacity for power generation on frigid winter days and nights, and remains vulnerable to natural gas price spikes that affect gas and electric customers alike. This is ironic, of course, because the six New England states (and New York, their occasionally pipeline-averse neighbor) are so close to the Marcellus production area, which sends out about three times as much gas per day as New York and New England combined consume (on average). Another irony is that while the seven states (New York plus New England) have been among the most difficult places on God’s green earth to develop incremental gas pipeline capacity (the Constitution Pipeline, Northeast Energy Direct et al), they also have been particularly aggressive in 1) shutting down nuclear and coal-fired power plants and 2) adding new gas-fired plants to replace them.

Trump Team Tied to Atlantic Coast Pipeline Now Being Pushed by White House --On Jan. 25, President Donald Trump's team listed the Atlantic Coast pipeline among the White House's top priorities for infrastructure projects, an attempt to deliver on his campaign promise to invest in U.S infrastructure programs.  Of the 50 on the list, Atlantic Coast is surprisingly the only pipeline project named. Some had suspected Trump's infrastructure promise would serve as a massive pipeline giveaway. So, why prioritize this one?  A possible answer: Several members of Trump's transition team, landing team and current White House operation have connections to companies behind the project or to firms lobbying for it.  The Atlantic Coast pipeline has been proposed by a partnership among Dominion Resources, Duke Energy and Southern Gas Company.  The natural gas pipeline, currently under review by the Federal Energy Regulatory Commission (FERC), has faced staunch opposition from environmental activists and residents along its 550-mile-long path stretching from West Virginia through Virginia to North Carolina. It will carry natural gas obtained via hydraulic fracturing (" fracking ").  Among other things, detractors argue that the pipeline will have adverse effects on sensitive habitats, reduce property values and introduce dangerous precedents for the seizure of private property through eminent domain.  The pipeline is included in a document listing the Trump White House's highest priority infrastructure projects. The document, which was leaked recently to the Kansas City Star , had reportedly been sent by Trump transition team members to the National Governor's Association for review and comment.  Titled, Priority List: Energy and National Security Projects , the list includes various highway and rail expansions, airport upgrades, hydro and wind power projects, new transmission lines and a sole natural gas pipeline: the Atlantic Coast.

With Bayou Bridge Pipeline, Louisiana again weighs oil, environment --- This is where the geography maze that is the Atchafalaya Basin unfolds in a breathtaking flat canvas of forest, wetlands and pockets of semi-navigable water. To the novice -- and even some old-timers -- it's impossible to tell where one bayou begins and another ends. Mound Bayou, Salt Mine Bayou and Cannon Bayou all nestle around Sorrel, a name given to a bayou and the river that runs through it, as well as to this unincorporated village of fewer than 250 people. There's another maze here, too. It's one of pipeline canals etched in every crisscrossing direction through the basin by oil and gas companies that directly employ more than 64,000 people in Louisiana. They carry the state's most lucrative natural resources from the ground to refineries and petrochemical plants across the coast. Since oil was discovered in Louisiana in 1902, there's been a steady tension between those who make their livelihood fishing, trapping and hunting the creatures living in the basin, and those who make money by extricating the crude oil and gas created millions of years ago from the fossilized remains of marine organisms that once lived here. The problem, in a nutshell, is there's no feasible way to get this fuel out of the ground and transported to a location where it can be refined or processed without some damage to the natural landscape. And that, complain fishers and environmentalist activists, is altering drainage and water flow, eroding the land and increasing flood risks. It's one of several reasons that south Louisiana is disappearing into the Gulf of Mexico. "We need to get out of the fossil fuel business," said Anne Rolfes, founding director of the Louisiana Bucket Brigade, a New Orleans-based environmental health and justice organization. "We need to stop building pipelines. It's causing catastrophic problems to our environment." Against this backdrop comes a company that wants to build the Bayou Bridge Pipeline, a $670 million project that would run 162 miles through the Atchafalaya Basin and across 11 parishes, beginning in Calcasieu and ending at an oil terminal in St. James. "It's the safest and most economical way to transport crude," said Gifford Briggs, vice president of the Louisiana Oil and Gas Association. "People should be celebrating this project."

President Trump Kept This One Obama Regulation Because It Makes Approving Pipelines Easier   -- A new regulation from the Army Corps of Engineers that streamlines the permitting process for some projects, including some pipeline crossings, won an exemption from the White House freeze on regulation, according to a report. The exemption — reported by Politico — will allow the rule to take effect on March 19. The modified "nationwide permits" program was finalized in early January but was subject to Trump's freeze on regulations that had not taken yet effect. An old version of the rule was set to expire this year and the exemption will save projects from unexpected delays that would have occurred had the old rule expired. The nationwide permits regulation was used in several places along the Dakota Access Pipeline, though it did not apply for the contentious crossing near the Standing Rock Indian Reservation. Trump has made expediting approval of energy infrastructure a priority of his administration signing executive orders intended to do just that. Still, in at least one case he has inadvertently slowed the process.

New analysis suggests ways for landowners to limit fracking and mineral extraction without regulations - Private landowners concerned about the risks of fracking may be able to prevent mining for oil and natural gas on their land – in perpetuity – without government regulation, according to a new analysis by Rob Jackson, professor of Earth system science at Stanford University, and his colleagues.  Jackson and a team of legal scholars have assessed how an established legal agreement – the conservation easement – could enable individual landowners to restrict fracking on their property. They've dubbed this new approach a mineral estate conservation easement (MECE). As some local governments try to ban fracking, legal battles have yielded mixed success, largely because state governments are considered the greater authority on regulating oil and gas development. In Denton, Texas, voters approved a fracking ban only to have it overturned by the state legislature months later. "People concerned about groundwater contamination and other potential impacts of fracking may welcome a new option for permanent conservation," said Jackson. "The MECE is a conservation easement underground that provides landowners with legal flexibility to restrict hydraulic fracturing and other subsurface activities on their land in perpetuity." The analysis is published this week in Environmental Law Reporter. A conservation easement is a contract (usually between a landowner and a land trust) whereby a landowner voluntarily agrees to sell or donate the right to use a piece of property in a certain way, commonly agreeing not to develop it. The restriction on the property often diminishes its value and the law allows landowners donating a conservation easement to take a tax write-off of the difference in fair market value of the land before and after the easement. Donors with larger tax bills could see significant savings without being required to give up private ownership of their property.

A new wave of Houston crude pipeline and storage infrastructure - As U.S. crude production ramps back up and larger volumes flow to the Gulf Coast, competition is building among midstream companies for control over the final miles from pipeline to refinery or marine dock. Nowhere is this more evident than the Houston area, where more than a dozen pipelines can deliver as much as 4 million barrels/day to the region’s 10 refineries as well as to export docks. Owners of the long-distance incoming pipelines—seeking to secure terminal, storage and dock fees—are making significant midstream investment in Houston, but smaller players are also developing assets. Today we begin a two-part series describing the build-out and how competitive the market has become. The RBN blogosphere has covered the build-out of Houston’s crude oil infrastructure extensively over the past three years, including two deep-dive Drill Down reports starting with Houston We Have A Problem and followed up with Stairway to Houston. There also have been a couple of blog series—see Saving All My Crude For You and The Future of Houston Area Crude Infrastructure. But while the Houston area already offers an amazing array of oil pipeline, storage and dock assets, the continuing evolution of the market results in ongoing efforts by midstream companies to tweak and add to the region’s infrastructure.

Agua Dulce basis headed higher to draw gas south – last of a 4 part series, reviewed here - As natural gas exports to Mexico continue to rise and as construction proceeds on Texas liquefaction/LNG export terminals, the day is approaching when Texas will flip from being a net producing region to being (with exports) a net demand region. Fortunately, supplies from elsewhere are readily available to meet that demand—sourced from the Marcellus/Utica and moving on new and reversed pipeline capacity to the Gulf Coast. A good portion of that gas must traverse “miles and miles of Texas” to meet the burgeoning export demand at the Agua Dulce hub near Corpus Christi, a location that is emerging as a key pricing point for the South Texas gas market. But a potential problem is looming: There may not be enough pipeline capacity available to meet that demand, with important implications for South Texas prices, flows and natural gas export volumes. The average annual basis at Agua Dulce could increase to as much as a dime ($0.10/MMbtu) above Henry Hub in 2020 from its historical level $0.02/MMbtu to $0.05/MMbtu below Henry. Today we discuss these and other highlights from the fourth and final part of RBN’s Drill Down series.

US natural gas exports and the Agua Dulce Hub makeover -- South Texas—and its primary trading hub, Agua Dulce—is emerging as the fulcrum for U.S. natural gas producers and growing demand markets on the Texas Gulf Coast and across the border in Mexico. Between the Freeport and Corpus Christi LNG export projects and cross-border pipeline projects to Mexico, nearly 4.0 Bcf/d of export capacity is being developed in South Texas over the next few years. Meanwhile, U.S. producers as far north as the Marcellus/Utica are jockeying to capture this new demand. Large investments are being made to expand and reverse traditional pipeline flows across the Texas-Louisiana border to get gas all the way down to South Texas and the Texas-Mexico border. But will enough capacity be available when the demand shows up? Today, we break down the natural gas supply/demand picture in South Texas and what it will take to balance the market there as exports ramp up.In recent months, we’ve written in the RBN blogosphere and more extensively in our “I Saw Miles and Miles of Texas” Drill Down series about rising natural gas demand along the Texas Gulf Coast and across the border in Mexico and the resulting changes to the U.S. supply, demand, flow and pricing dynamic––not to mention the substantial overhaul of the long-haul pipeline infrastructure required in the eastern half of the country to accommodate it. The emerging export demand is expected to be one of the biggest drivers of natural gas production growth over the next several years and is already propelling massive investment in natural gas infrastructure, including wholesale reversals of legacy pipelines in the U.S. But, as we’ve detailed in Part 1, Part 2, and Part 3 of the Drill Down series, this transition is facing substantial challenges, with the potential to create a good deal of volatility along the way.

Parsley Energy to buy Permian Basin assets for about $2.8 billion | Reuters: Parsley Energy Inc (PE.N) said on Tuesday it would buy certain assets in the oil-rich Permian Basin for about $2.8 billion from Double Eagle Energy Permian LLC, its second deal in the largest U.S. oil patch in less than a month. The energy industry overall poured more than $28 billion into land acquisitions in the Permian Basin of West Texas last year, more than triple what they spent in 2015. Permian Basin producers make money at the current crude price CLc1 of about $52-$53 per barrel because of the region's sprawling pipeline network, abundant labor and supplies, and warm winters that allow year-round work. Double Eagle and its predecessor companies have made a fortune buying and selling Permian acreage starting in 2009. Parsley said the deal, which includes undeveloped acreage and producing oil and gas properties, would add about 71,000 net acres to its acreage in the Midland Basin, bringing its total acreage in the Permian Basin to about 227,000 acres. The oil producer's shares were down nearly 4 percent in after-hours traded, recovering somewhat from a drop of more than 7 percent, after the company said it would sell stock to fund the acquisition. Parsley said on Jan. 10 that it would buy acreage in the Permian Basin for about $607 million and said on Tuesday it would increase its activity in the region and raised its production forecast and capital budget for 2017.

Qatar sets sights on US energy market - Gas-rich Qatar is looking for opportunities to invest in the US energy market, the Gulf state's Energy Minister Mohammed Saleh al-Sada said on Wednesday. Sada said Qatar wanted to build on Doha's good ties with Washington and shrugged off fears about any protectionist policies under US President Donald Trump. "We have an excellent relationship with the US on all fronts," Sada said on the fringes of a Qatari government-organised press trip in Doha. He said US energy giants ExxonMobil, ConocoPhillips and Chevron Phillips were already working in Qatar. "We built an excellent relationship and we invested in the US and we are looking for opportunities to invest in the US," he said. Asked about the potential impact of Trump's presidency on international trade, Sada said he would adopt a wait-and-see approach. "But we are sure that any policy coming up from the US will be supportive to their own country as well as the rest," said the minister, who is also the current OPEC president. The tiny emirate is the world's biggest producer and exporter of liquefied natural gas (LNG), which has enabled it to generate much of its wealth. But some say Qatar's position could be threatened by lower global energy prices and increased competition from other nations including the United States, one of Qatar's main competitors in the LNG market.

Colorado's oil and gas industry making a U-turn - Journal Advocate: After two years of acting as a drag on the Colorado economy, the state's oil and gas industry is once again in a position to help propel it forward. Oil prices, which rose after recent OPEC production cuts, are now high enough to motivate producers to put more rigs to work, which should translate into more domestic production, said Erica Bowman, chief economist with the American Petroleum Institute, during a visit to Denver on Wednesday. "A lot of how Colorado fits into the broader national picture will depend on state policies," said Bowman, who was part of a delegation that lobbied state legislators to not pass laws that could derail the nascent recovery. Colorado has 26 drilling rigs running in the state, compared to a low of 15 rigs working in May and the 76 operating in fall 2014, before Saudi Arabia said it wouldn't restrain its production, according Baker Hughes. That may seem like a big gap, but today's rigs are much more productive than those operating years ago, according to EnerCom, a Denver-based energy consultant. For example, in the Permian Basin of southwest Texas, currently the country's hottest petroleum play, rigs today are pulling up 3.4 times what rigs in 2014 did, EnerCom estimates. More rigs and more drilling should translate into more hiring. But petroleum firms will face a much tighter labor market than was the case in 2012 and 2013, especially in Weld County, the epicenter of drilling activity in the state.

Industry-Backed Congress Members Want to Roll Back Protections Against Dangerous Methane Pollution – AlterNet -  Industry-backed members of Congress have introduced legislation to roll back protections against harmful methane pollution from shale gas drilling (fracking) on public lands.Methane is a powerful greenhouse gas that poses a severe threat to the world's climate. And that's not the only danger it poses. When methane is extracted it is often accompanied by volatile organic compounds (VOCs) known to be toxic to humans. Both the methane and the VOCs frequently leak into the atmosphere. Why should you care if these methane protections go away? Because rolling them back would weaken our ability to fight climate change. The clock is ticking—scientists believe the opportunity to limit major world crises from climate change is now. The Republican-led Congress is targeting a methane and waste prevention regulation, which requires oil and gas companies to cut the amount of natural gas that's released each year on public and tribal lands. (Natural gas is primarily composed of methane.) The regulation also reduces harmful air pollution. The regulation is managed by the Bureau of Land Management, an agency within the Department of the Interior that manages more than 247 million acres of public lands in the U.S.—one-eighth of the landmass of the country. Republicans are using the Congressional Review Act to dismantle the BLM methane regulation. Under the CRA, Congress has 60 legislative working days to withdraw any regulation finalized after June 13, 2016. What often goes unnoticed—and perhaps even more wicked—is that once a rule is overturned, the originating agency is barred from producing a "substantially similar" rule without congressional approval. That means it will be exponentially more difficult to reduce methane pollution on public and tribal lands in the future if this CRA passes.

Wasting energy is not conservative: Keep the BLM wasted gas rule | TheHill: Very soon, the U.S. Senate will decide whether to use a seldom-used mechanism known as the Congressional Review Act (CRA) to revoke important rules meant to increase industry accountability, protect taxpayers, and reduce harmful air pollution. On the chopping block is the U.S. Bureau of Land Management’s Methane Waste and Prevent Rule that prevents private energy companies from wasting energy resources that belong to the American people.The BLM standards require oil and gas companies operating on public lands to reduce the amount of methane – the primary component of natural gas – that is burned, flared, or leaked into the air. Analyses have shown that negligent drilling practices waste more than $1 million of natural gas every day. In fact, enough American energy is wasted every year to power a city the size of Chicago. That also translates to more pollution in the air and less royalty revenues for taxpayers. One recent study estimates that rolling back these protections will cost Americans $800 million over the next decade. Those public tax dollars are split between the federal government and energy-producing states to fund education, roads and bridges, conservation efforts, and other projects. But without the methane waste rule, those tax dollars will literally go up in smoke. There is nothing even remotely conservative about waste, which is why the push to overturn this prudent rule is so misguided. Claims by the oil and gas industry, which its pals in Congress parrot, that the methane rule represents costly, job killing, bureaucratic overreach are ridiculous. Nothing could be further from the truth.

CalPERS staff says fund should not divest from Dakota Access | Reuters: California Public Employees' Retirement System should maintain its investments in the controversial Dakota Access oil pipeline project in order to exert influence over the companies involved, staff for the largest U.S. public pension fund said on Monday. Legislation proposed in California would require CalPERS, a $300 billion fund, to divest from companies involved in the building and financing of the 1,168-mile-long underground pipeline project, which would affect an estimated $4 billion in CalPERS holdings, according to staff. CalPERS staff said that while divesting stocks of companies involved in the project may reduce stakeholder perception that the fund's investments contribute to climate change, the move would limit CalPERS ability to change corporate behavior through engagement. "There is considerable evidence that divesting is an ineffective strategy for achieving social or political goals, since the consequence is generally a mere transfer of ownership of divested assets from one investor to another," staff said in its recommendation, which was published on its website. In order to comply with the legislation, CalPERS would have to sell off shares in the pipeline builder Dakota Access LLC and Energy Transfer Partners (ETP.N). In addition, the bill calls for divesting from the banks financing the $3.78 billion project. Those banks include Bank of America (BAC.N), Wells Fargo (WFC.N), JPMorgan Chase (JPM.N), and Citibank (C.N).

House approves most DAPL protest bills -- bismarcktribune.com: North Dakota House lawmakers advanced four bills Monday aimed at giving law enforcement more tools for responding to Dakota Access Pipeline protests. The package of bills, which some opponents criticized as “knee-jerk legislation,” would double the penalties for some riot offenses and create a new felony offense for individuals who cause economic harm while committing a misdemeanor. The legislation, which still needs to be considered by the state Senate, also would make it a misdemeanor to wear a mask while committing a crime. Rep. Terry Jones, R-New Town, said he and other members of the House Judiciary Committee carefully considered the proposals with the goal of protecting citizens' rights. “The Judiciary Committee is working really hard to balance the rights of North Dakota citizens to protest and the rights of North Dakota citizens to live under rule of law and conduct their day-to-day activities,” Jones said. Legislators voted 72-19 to approve House Bill 1193, which creates a new Class C felony offense for causing $1,000 or more in economic harm while committing a misdemeanor. The new charge would apply to situations such as pipeline protesters who attach themselves to equipment to stall construction of the pipeline. “This bill protects constitutional rights for those that are peacefully protesting,” said Rep. Kim Koppelman, R-West Fargo, chairman of the Judiciary Committee. “It just has consequences when they cross the line.” Opponents questioned whether a felony offense was appropriate. “I am opposed to knee-jerk legislation because it’s almost always bad legislation,” said Rep. Rick Becker, R-Bismarck. Legislators voted 63-27 to increase penalties for riot offenses, going against the committee’s do-not-pass recommendation. House Bill 1426 would elevate offenses such as instigating a riot of 100 or more people or providing firearms or weapons for a riot from a Class C felony to a Class B felony. That would double the maximum penalties for such offenses to 10 years in prison and/or a $20,000 fine. Engaging in a riot would become a Class A misdemeanor under the proposal with a maximum penalty of one year in prison and/or a $3,000 fine. Currently the offense is a Class B misdemeanor with 30 days in jail and/or a $500 fine.

Army Corps to Grant Final Permit for Dakota Access Pipeline -- The U.S. Army Corps of Engineers will grant Energy Transfer Partners the final easement to finish the Dakota Access Pipeline (DAPL), according to a court filing Tuesday. The permit will allow construction for a tunnel under Lake Oahe, a reservoir that is part of the Missouri River. The U.S. Army Corps of Engineers will grant Energy Transfer Partners the final easement to finish the Dakota Access Pipeline (DAPL), according to a court filing Tuesday. The permit will allow construction for a tunnel under Lake Oahe, a reservoir that is part of the Missouri River.This news comes just two months after the Obama administration ordered the Army Corps to conduct a full environmental review of the 1,170-mile pipeline and two weeks since President Donald Trump signed two executive actions to advance DAPL and the Keystone XL . According to CNBC, the move is "almost certain to spark a legal battle and could lead to clashes at camps near Cannon Ball, North Dakota, where hundreds of protesters are still camped out in opposition to the project." "Donald Trump will not build his Dakota Access Pipeline without a fight," Tom Goldtooth, executive director of the Indigenous Environmental Network , said. "The granting of an easement, without any environmental review or tribal consultation, is not the end of this fight—it is the new beginning. Expect mass resistance far beyond what Trump has seen so far."  This announcement comes after thousands of environmental and indigenous activists spent months living in camps near the Standing Rock reservation and pipeline construction site. Just last week, 76 water protectors were arrested following a clash with law enforcement at the reservation. The arrests came a day after federal officials claimed that the final controversial easement for DAPL had been granted.

Army Green-Lights Completion Of Dakota Access Pipeline - The Army said Tuesday it will abandon an environmental study of the Dakota Access Pipeline and grant a permit that allows its completion.Army Deputy Assistant Secretary Paul Cramer wrote in a letter to Rep. Raul Grijalva, ranking member on the House Natural Resources Committee, that the service planned to grant an easement allowing Energy Transfer Partners to build a section of pipeline in a bitterly disputed federal waterway. The decision follows an executive action from President Donald Trump that sought to resume construction on the 1,172-mile oil pipeline despite objections from a Native American tribe living near its path in North Dakota and a halt ordered by former President Barack Obama last year. “Today’s announcement allows for the final step, which is granting of the easement,” Acting Army Secretary Robert Speer said in a statement. He said another study on the project’s possible environmental impact was unnecessary, according to NBC News.Pipeline opponents denounced the Army’s decision. “Donald Trump will not build his Dakota Access Pipeline without a fight,” said Indigenous Environmental Network executive director Tom Goldtooth. “The granting of an easement, without any environmental review or tribal consultation, is not the end of this fight ― it is the new beginning.” The status of the the pipeline has been in limbo for months, though construction on the North Dakota-to-Illinois route by Energy Transfer Partners is nearly complete.  The Standing Rock Sioux have fought the project for months, arguing it threatens the water source for their reservation, disturbs sacred ground and violates a 19th century treaty with the federal government. Months of protests on the Great Plains by the Standing Rock Sioux and their supporters led the  Department of the Army to order an environmental impact statement in December before making a final decision. At the time, Army Corps of Engineers officials also said they’d look at options for re-routing the line away from the Sioux land.

Army Approves Dakota Access Pipeline Route, Paving Way For The Project's Completion -- The U.S. Army Corps of Engineers has granted an easement allowing the Dakota Access Pipeline to cross under the Missouri River north of the Standing Rock Sioux Reservation, paving the way for construction of the final 1.5 miles of the more than 1,700-mile pipeline.In doing so, the Army cut short its environmental impact assessment and the public comment period associated with it.In a Jan. 18 notice published in the Federal Register the Army had said it would accept public comments on the project through Feb. 20, still nearly two weeks away.  On Jan. 24, President Trump signed a memorandum encouraging the U.S. Army Corps of Engineers to expedite the review and approval process, and last week the Army said that it had been directed to expedite its review of the route. In a letter to Congress announcing the decision, Deputy Assistant Secretary of the Army Paul Cramer cited the president's memorandum, saying that "consistent with the direction" in the memo, his agency would "waive its policy to wait 14 days after Congressional notification before granting an easement." He wrote that the Army would officially grant the easement as soon as Wednesday afternoon, at which point the company building the pipeline, Energy Transfer Partners, would be able to begin construction. The letter noted that the nature of the project — which involves drilling a horizontal hole under a part of the Missouri River known as Lake Oahe for a 30-inch diameter pipe — does not require a separate construction license. That gives opponents of the pipeline very little time to pursue legal action, as the Standing Rock Sioux promised to do after the president's memorandum was signed

US Army Corps approves easement needed to complete Dakota Access oil pipeline - The US Army Corps of Engineers has approved the final easement needed to complete the Dakota Access Pipeline and will issue it as soon as Wednesday afternoon, the federal agency said Tuesday. Paul Cramer, deputy assistant secretary of the Army, said in a notice to Congress that the Corps would waive a two-week waiting period often observed between congressional notification and the issuance of the easement. Related: Find more content about Trump's administration in our news and analysis feature. The approval will allow Dakota Access to finish a section underneath Lake Oahe, a dammed section of the Missouri River in North Dakota that became the focal point of months of protests against the project. The delayed 470,000 b/d Bakken crude oil project could start commercial service no sooner than early May, based on a timeline the company's lawyer gave in court Monday. He said the pipeline can have oil flowing under Lake Oahe within 60 days of receiving the easement and start commercial operations within 83 days. The Standing Rock Sioux Tribe is expected to continue challenging the pipeline in the US District Court for the District of Columbia, potentially seeking an emergency order to prevent the line from going into service. It argues the project threatens its sacred land and drinking water supply. "The Obama administration correctly found that the tribe's treaty rights needed to be respected, and that the easement should not be granted without further review and consideration of alternative crossing locations," Jan Hasselman, an Earthjustice lawyer representing the tribe, said Tuesday. "Trump's reversal of that decision continues a historic pattern of broken promises to Indian tribes and violation of treaty rights. They will be held accountable in court."

Why the Dakota Assess Pipeline Doesn’t Make Economic Sense --Last week, Donald Trump signed an executive order to advance approval of the Keystone and Dakota Access oil pipelines. This should come as no surprise, as Trump continues to fill his administration with climate deniers, ranging from the negligent choice of Rick Perry as energy secretary to Scott Pruitt as the new head of the Environmental Protection Agency.  As environmental economists, my colleague Anders Fremstad and I were concerned. We crunched the numbers on the Dakota Access Pipeline (DAPL). The verdict? Annual emissions associated with the oil pumped through the pipeline will impose a $4.6 billion burden on current and future generations. First and foremost, the debate about DAPL should be about tribal rights and the right to clean water. Under the Obama administration, that seemed to carry some clout. Caving to pressure from protesters and an unprecedented gathering of more than a hundred tribes, Obama did indeed halt the DAPL, if only for a time. Under Trump and his crony capitalism mentality, the fight over the pipeline appears to be about corporate profits over tribal rights. Following Trump’s Executive Order to advance the pipeline, the Army Corps of Engineers has been ordered to approve the final easement to allow Energy Transfer Partners to complete the pipeline. The Standing Rock Sioux have vowed to take legal action against the decision. While the pipeline was originally scheduled to cross the Missouri River closer to Bismarck, authorities decided there was too much risk associated with locating the pipeline near the capital’s drinking water. They decided instead to follow the same rationale used by Lawrence Summers, then the chief economist of the World Bank, elucidated in an infamous memo stating “the economic logic of dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.” That same logic holds for the low wage counties and towns in the United States. The link between environmental quality and economic inequality is clear—corporations pollute on the poor, the weak, and the vulnerable; in other words, those with the least resources to stand up for their right to a clean and safe environment.

Dakota Access Pipeline to start in second quarter: stakeholder | Reuters: The chief executive of Phillips 66 said on Friday he expects the Dakota Access Pipeline to start operations in the second quarter, even though the project - which has sparked protests by Native Americans and environmentalists - is still in the midst of legal battles and a U.S. regulatory review. Phillips 66 has a 25 percent stake in the $3.8 billion project led by Energy Transfer Partners LP. Phillips 66's CEO, Greg Garland, made the comments on a conference call with analysts to discuss quarterly earnings. The pipeline was originally set to start in late 2016 but has faced intense protests and legal challenges from climate activists and Native Americans, led by the Standing Rock Sioux Tribe, whose land in North Dakota runs adjacent to the route.. "Commercial operations are expected to begin in the second quarter of 2017, pending the issuance of an easement from the U.S. Army Corps of Engineers to complete work beneath the Missouri River on DAPL," Phillips 66 said in its earnings news release. On Wednesday, the U.S. Army said it had taken initial steps to "expeditiously review requests for approvals to construct and operate" the pipeline per an order issued by President Donald Trump, but the project's easement has not yet been approved. It is unclear whether the second-quarter timeline would be met unless the easement is granted soon. The comment period ends on Feb. 20, and even if the easement were granted immediately after, ETP has estimated a 90-to-120-day drilling period.

The Latest: Company to resume work on oil pipeline - The company building the Dakota Access oil pipeline says it plans to resume work immediately to finish the project. Dallas-based Energy Transfer Partners on Wednesday got final permission from the Army to proceed with a crossing of the Missouri River in southern North Dakota. The work on the $3.8 billion project had been stalled for months due to opposition by the Standing Rock Sioux, but President Donald Trump last month instructed the Army Corps of Engineers to advance pipeline construction. The tribe fears a pipeline leak could contaminate its drinking water. ETP says the pipeline is safe. Company CEO Kelcy Warren has said it will take about three months to finish the river crossing. Members of the North Dakota Congressional delegation say the Army has granted the developer of the Dakota Access pipeline formal pipeline permission to lay pipe under a Missouri River reservoir in North Dakota. U.S. Sen. John Hoeven and U.S. Rep. Kevin Cramer issued statements Wednesday saying the easement was issued. The action clears the way for completion of the disputed $3.8 billion project. But the Standing Rock Sioux tribe has promised to challenge it in court. The tribe worries that a pipeline leak could pollute its drinking water. Dallas-based pipeline developer Energy Transfer Partners says the pipeline is safe. The crossing under Lake Oahe (oh-AH’-hee) is the final big chunk of work on the pipeline that would carry North Dakota oil to Illinois. The Army had begun further study of the river crossing, but notified Congress on Tuesday that it would stop the effort and grant the easement to ETP.

Company to resume work to finish Dakota Access pipeline -- With the green light from the federal government, the company building the Dakota Access oil pipeline said Wednesday it plans to resume work immediately to finish the long-stalled project. Opponents of the $3.8 billion project meanwhile protested around the country in an action some dubbed their "last stand." The Army on Wednesday granted the developer of the four-state oil pipeline formal permission to lay pipe under a Missouri River reservoir in North Dakota, clearing the way for completion of the disputed project. "We plan to begin immediately," Vicki Granado, a spokeswoman for developer Energy Transfer Partners, said in an email to The Associated Press Wednesday night. Work had been stalled for months due to opposition by the Standing Rock Sioux, but President Donald Trump last month instructed the Army Corps of Engineers to advance pipeline construction.The tribe fears a pipeline leak could contaminate its drinking water. ETP says the pipeline is safe."Now, we all need to work together to make sure the project is completed safely and with as little disruption to the community as possible. This has been a very difficult issue for everyone who lives and works in the area," U.S. Sen. John Hoeven, a North Dakota Republican, said in a statement announcing that the final easement had been granted.Some members of the Standing Rock Sioux tribe, which has been at the center of the debate for nearly a year, urged "emergency actions" via social media.Protesters posted an online list of about 50 events nationwide. There were large rallies, including one outside the White House, and smaller ones, such as in Des Moines, Iowa. A group of protesters in Chicago targeted a bank, and another group went to an Army Corps of Engineers office in New York City but was asked to leave when they started filming without a permit. Several people were arrested for blocking public access to a federal building in San Francisco.

Former interior secretary Jewell says Army is ‘reneging’ on its commitments on Dakota Access pipeline -- Former interior secretary Sally Jewell said in an interview Wednesday that the Army Corps of Engineers was “reneging” on its commitment to other federal agencies and tribal leaders to conduct a thorough environmental review of the Dakota Access pipeline before granting an easement to the project’s sponsor. On Tuesday, Army officials said in court filings that they would grant the final federal permit that the pipeline’s sponsor, Energy Transfer Partners, needs to complete the 1,170-mile project. Jewell, who has refrained from commenting on the new administration even as it has clashed with members of her former department, said she felt compelled to speak out because she says it is now violating its legal obligations. [Trump administration to approve final permit for Dakota Access pipeline] Jewell said the Corps failed to adequately consult with leaders of the Standing Rock Sioux tribe, whose reservation abuts the proposed route, early on in the process. The formal Environmental Impact Statement, which the agency indicated in December it would conduct, would have provided the tribe with an opportunity to air its concerns and allowed other agencies to weigh in on the decision. “So the decision to not do any of that is reneging on a commitment they made [in December] and I think it’s fair to say that I’m profoundly disappointed with the Corps’ reversal of its decision to conduct an Environmental Impact Statement and consider alternative routes,” she said. “This is a clear reversal of a commitment on the part of the U.S. Army Corps of Engineers on something they gave thoughtful consideration to when they decided to do an environmental review.” She added that when approving projects in the United States, the Corps is required to abide by the National Environmental Policy Act and the National Historic Preservation Act. “That has not been done in this case.”

Trump: 'I Haven't Even Had One Call From Anybody' Complaining About DAPL or Keystone XL - Early yesterday, work restarted on the highly controversial Dakota Access Pipeline (DAPL), less than a day after the Trump administration granted a final easement to allow the project to go ahead over the disputed land near the Standing Rock reservation.  As work began again, several things have become apparent since Trump took office, if they were not blatantly obvious before.  This is a man who is a bully, who has no regard for the constitution or the rule of law, unless it suits him. This is a man who lives in an isolated bubble of a small clique of advisors who shield him from the reality of what is happening in the real world. This is a man who does not care about climate change or Indigenous rights.  You should watch the footage from ABC of Trump saying: "As you know I approved two pipelines that were stuck in limbo forever. I don't even think it was controversial. I approved them. I haven't even had one call from anybody saying that was a terrible thing you did. I haven't had one call ... Then as you know I did the Dakota Pipeline and no one called up to complain."

Tribe files legal challenge as construction of Dakota Access continues - Construction on the controversial Dakota Access Pipeline has begun again, days after the U.S. Army Corps of Engineers approved a final easement to allow the $3.8 billion pipeline to continue.  A spokesperson for Energy Transfer Partners, the company building the pipeline, said in a statement that construction continued immediately after the Army granted the final easement to complete the project on Tuesday.It’s the latest development in what has been a months-long battle over the project, which Native American tribes and environmental activists say threatens cultural sites and contaminates nearby water sources. Energy Transfer Partners, the company building the pipeline, has said it’s safer than other methods of moving oil, like by train or truck.The Cheyenne River Sioux filed a legal challenge to the easement Thursday in federal court in Washington, D.C., according to the Associated Press.   Like the Standing Rock Sioux Tribe, which has become the center of the movement against the project, the Cheyenne River Sioux say the crude oil pipeline threatens the Missouri River, the main source of drinking water for both tribes. The tribe wants construction to be halted until previous lawsuits by Sioux nations, stuck in federal courts, can proceed. In December, then-President Barack Obama halted pipeline construction by calling for an environmental impact statement from the Department of Army, which owns the federal land where the pipeline will be laid. But after taking office, President Donald Trump signed an executive order to expedite the permit and approval process for projects like the pipeline. At the end of January, the Army said it had been directed to expedite review of the Dakota Access pipeline.  Along with Tuesday’s easement approval, the Army announced it was “terminating the Environmental Impact Statement that was in progress.”That day, Tribal Chairman David Archambault was on his way to Washington, D.C. to meet with Mr. Trump and share the Standing Rock Sioux’s concerns. The tribe strongly opposes drilling underneath Sioux water supply. Archambault learned the Army had approved the easement when he landed. He cancelled his meeting with Trump upon hearing the news, according to a statement on the tribe’s website.

Colleagues say judge in Dakota pipeline case is even-handed | National | bgdailynews.com: (AP) — The federal judge who will decide whether oil flows through the disputed Dakota Access pipeline has shown sympathy for the historical plight of American Indians, but has also made clear that he doesn't think that should play a role in judicial decisions. U.S. District Judge James "Jeb" Boasberg is overseeing a lawsuit filed by the Standing Rock and Cheyenne River Sioux that could be their last hope of stopping the $3.8 billion pipeline to carry North Dakota oil to Illinois. The tribes argue the pipeline threatens drinking water and cultural sites. A hearing is scheduled Monday. While the Washington, D.C.-based Boasberg cited in a previous ruling the historic exploitation of Indians in early America, he also told an attorney for the tribe last year he won't be influenced by phone calls from pipeline opponents to sway his opinion. That doesn't surprise Michael Kellogg, a law firm colleague of Boesberg's in the mid-1990s, or Virginia attorney Tim Heaphy, who once worked with Boasberg in the D.C. federal prosecutor's office. "He is not motivated by ideology or politics," Heaphy said.In a September ruling Boasberg wrote, "the tragic history of the Great Sioux Nation's repeated dispossessions at the hands of a hungry and expanding early America is well known." But he denied an attempt by the Standing Rock tribe to halt pipeline work, rejecting arguments that tribal officials hadn't been properly consulted and that cultural sites were in immediate peril.

Dakota Access Pipeline Approved a Week After Co-Owner's Pipeline Spilled 600,000 Gallons of Oil in Texas – Steve Horn - On January 30, 600,000 gallons (14,285 barrels) of oil spewed out of Enbridge's Seaway Pipeline in Blue Ridge, Texas, the second spill since the pipeline opened for business in mid-2016. Seaway is half owned by Enbridge and serves as the final leg of a pipeline system DeSmog has called the “Keystone XLClone,” which carries mostly tar sands extracted from Alberta, Canada, across the U.S. at a rate of 400,000 barrels per day down to the Gulf of Mexico. Enbridge is an equity co-owner of the Dakota Access pipeline, which received its final permit needed from the U.S. Army Corps of Engineers on February 7 to construct the pipeline across the Missouri River and construction has resumed. The alignment of Native American tribes, environmentalists, and others involved in the fight against Dakota Access have called themselves “water protectors,” rather than “activists,” out of concern that a pipeline spill could contaminate their drinking water source, the Missouri River.   Brittany Clayton, who works at a nearby gas station in Blue Ridge, which is 50 miles from Dallas, Texas, was close to the scene of the spill when it occurred. “You could just smell this oil smell. A customer walks in and says ‘nobody smoke.' You could see it just spewing,” Clayton told KDFW-TV, the local Fox News affiliate in the area. “It was just super huge. It was like a big cloud. The fire marshal said, 'This is like a danger zone. You guys have to evacuate immediately.' I was totally freaked out.” Enbridge and co-owner Enterprise Products Partners said in press release that the spill had been contained and it resumed service on February 5. According to KDFW, the Texas Department of Transportation (TxDOT) and the U.S. Environmental Protection Agency (EPA) intend to do water and environmental testing in the coming days. TxDOT also told the local National Public Radio affiliate,KETR-FM, that it would take “several weeks” to complete a full cleanup.

Dakota Access Dumping Ground – WSJ - The U.S. Army Corps of Engineers finally granted an easement Tuesday that will allow the Dakota Access Pipeline to cross under the Missouri River north of the Standing Rock Sioux Reservation in North Dakota. The approval means that construction of the final 1.5 miles of the more than 1,700-mile pipeline can proceed. More important, the approval means that the era of arbitrary political interference with private infrastructure projects is over.  The Dakota Access Pipeline’s last sliver had been held up for months by protesters who claim to oppose disturbing the area’s pristine natural resources. In reality, they oppose extracting any fossil fuels from the ground, and the Obama Administration indulged them in its final days.  Other evidence of less-than-pristine motives comes from the garbage dump the protesters left behind. A North Dakota Fox affiliate reported this week on the clean-up efforts for the makeshift encampments: Thousands of protesters produced enough garbage to fill an estimated 250 trucks with trash. The detritus—tarps, tents—has frozen into “massive chunks of junk,” said the report, and much of it is buried under snow.  The Army Corps closed the area and said in a press release that grass has been destroyed or removed from some 50 acres. The mess has to be cleared out before a spring flood sends toxic sludge into the nearby Cannonball River and Lake Oahe, the same lake the protesters said would be polluted by the pipeline. Moral grandstanding can be a dirty business, but shouldn’t the protesters pay to clean up their own mess?

US To Sell 10 Million Barrels Of Oil From Strategic Petroleum Reserve In February -- Following a January announcement according to which the DOE planned to sell 8 million barrels of oil from the Strategic Petroleum Reserve, and which some speculated was the reason for the big buildup in crude inventories in the past several weeks, today the U.S. Energy Department said it will sell 10 million barrels of oil from the government's emergency crude reserve in late February.  This represents the second sale of oil from the emergency stash this year: according to Reuters, last month Shell bought 6.2 million barrels from the reserve and Phillips 66 bought 200,000 barrels, which was below the 8 million projected for sale. As explained below, that sale was partially held to fund a modernization of the SPR itself. More sales are expected be held in coming years to fund up to $2 billion for the revamp. According to the notice of sale, the entire 10 million barrels will be sour crude drawn from three sites—Bryan Mound and Big Hill in Texas, and West Hackberry in Louisiana. Revenues from the sale will be deposited in the general fund of the U.S. Treasury to carry out the National Institutes of Health innovation projects as designated in the 21st Century Cures Act. The sale from the SPR is required by a law passed last December to help raise funds for medical research. The law has mandated sales of 25 million barrels from the SPR over three years, starting with the sale of 10 million barrels this year. The US oil reserve is held in a series of heavily guarded underground salt caverns along the coast in Texas and Louisiana and currently holds about 690 million barrels of mostly sour oil, a type containing high sulfur that many U.S. refineries can process. Part of the motivation to sell crude is to finance upkeep for the SPR itself. The reserves are held in salt caverns in Louisiana and Texas, setup decades ago in the aftermath of the Arab Oil Embargo in 1973. The SPR system can hold more than 700 million barrels of oil, the largest strategic stockpile in the world. The idea is that the SPR holds 90 days’ worth of oil supplies, which could be released in the event of a global outage.

Keystone XL Needs Much Higher Oil Prices To Be Viable - Arthur Berman - The Keystone XL Pipeline (KXL) is a bet on much higher oil prices several years from now. It will take at least $85 oil prices to develop the new oil sand projects needed to fill the pipeline. It is also a bet that U.S. tight oil output will continue to grow and will need heavy oil to blend for refining. Both bets are risky.  KXL would add about 830,000 barrels per day (b/d) to the 1.3 million b/d already moving through the base Keystone Pipeline system completed in 3 phases between 2010 and 2014 (Figure 1) when oil prices were more than $90 per barrel. It was not until prices exceeded $70 per barrel in 2005 (December 2016 dollars) that oil sands expansion began to accelerate (Figure 2). Since then, production has almost doubled from 1.3 to 2.4 mmb/d and cumulative production has increased from 5.4 to 10 billion barrels.  By comparison, the Bakken and Eagle Ford tight oil plays have each produced 2.4 billion barrels. The Permian horizontal tight oil plays–Spraberry, Wolfcamp and Bone Spring–have produced less than 1 billion barrels.* In 2015, oil prices averaged only $43 per barrel. No new oil sand projects have been sanctioned since oil prices collapsed in 2014 although 3 pilot projects have been approved since prices moved into the $50 per barrel range. Approval is not the same as sanctioning and these 3 projects together would add only 35,000 b/d. It seems unlikely that new greenfield projects will be sanctioned until oil prices move much higher (Canadian heavy oil (WCS) trades at a 25% discount to WTI). Assuming that prices stabilize in the $50 to $60 range, it is reasonable that pilots may evolve into brownfield expansion projects over the next year or two. The Canadian Association of Petroleum Producers estimates that annual oil sand production will grow 128,000 b/d until 2021 and then, grow more slowly at 59,000 b/d. If all of that new oil were going to KXL, it would not reach capacity for about 10 years. But other pipelines are already approved for expansion and will probably get much of the oil before KXL is completed. TransCanada’s bet, therefore, is that oil prices will move much higher and more quickly than most forecasts anticipate and that the volumes will be there by the time that the pipeline is built.

U.S. energy trade with Mexico: U.S. export value more than twice import value in 2016 – EIA - Energy trade between Mexico and the United States has historically been driven by Mexico’s sales of crude oil to the United States and by U.S. net exports of refined petroleum products to Mexico. Through 2014, Mexico’s exports of crude oil to the United States were the most valuable component of bilateral energy trade, with the overall value of Mexico’s U.S. crude oil sales far exceeding the value of U.S. net sales of petroleum products, primarily gasoline and diesel fuel, to Mexico. From 2006 through 2010, for example, the value of U.S. energy imports from Mexico were two to three times greater than the value of U.S. energy exports to Mexico. The bilateral energy trade situation with Mexico has changed significantly in recent years. In 2015 and 2016, the value of U.S. energy exports to Mexico, including rapidly growing volumes of both petroleum products and natural gas, exceeded the value of U.S. energy imports from Mexico as volumes of Mexican crude oil sold in the United States continued to decline. For 2016, the value of U.S. energy exports to Mexico was $20.2 billion, while the value of U.S. energy imports from that country was $8.7 billion.Import and export values each reflect commodity volumes and their prices. Monthly trends in volumes through 2016 showed increasing U.S. petroleum product and natural gas exports to Mexico, with a generally declining trend in U.S. crude oil imports from Mexico. Mexico is second only to Canada in energy trade with the United States. Based on the latest annual data from the U.S. Census Bureau, energy accounted for about 9% of all U.S. exports to Mexico and 3% of all U.S. imports from Mexico in 2016.

U.S. refiners face weakening demand at pump for first time in 5 years | Reuters: U.S. refiners are facing the prospects of weakening gasoline demand for the first time in five years, stoking fears that earnings this year may be even worse than the dismal performances seen in 2016. The sign of weakening U.S. gasoline demand comes as U.S. refiners are in the midst of reporting their worst year of earnings since the U.S. shale boom started in 2011. The oil boom turned to bust in 2014, and U.S. independent refiners reaped the profits as plunging pump prices and a growing economy helped fuel a surge in demand. U.S. refiners amassed large inventories that punished margins last year, but record gasoline demand and robust exports helped provided a firewall against further slippage. Now the industry faces the prospects of higher crude prices following global production cuts and fresh federal data that suggests their gasoline demand safety net may be eroding. “We are very cautious on refining margins, and on demand," Sarah Emerson, a managing principal at ESAI Energy LLC, said. "When oil prices goes up, gasoline demand is going to go down.” The U.S. Energy Information Administration said Wednesday that the four-week average of gasoline supplied in the United States was 8.2 million barrels per day, lowest since February 2012. U.S. gasoline demand is closely watched by traders since it accounts for roughly 10 percent of global consumption. [EIA/S] “It’s tough to base conclusions solely on the weekly data, which can be off significantly," said Mark Broadbent, a refinery analyst with Wood Mackenzie. "If the demand is low as it the data shows, then it’s a going to be real problem for refiners."

Gasoline Glut Could Ruin The Oil Price Party -Oil and refined products inventories in the U.S. continue to climb at a worrying pace, raising some red flags for an oil market that was supposed to be on the mend.Crude oil inventories jumped by a whopping 6.5 million barrels last week, rising to 494.8 million barrels. Oil stocks have now increased every week of 2017, and are now not far off from the 80-year highs reached in 2016. It isn’t just crude oil stocks, but gasoline inventories are also rising sharply. Last week gasoline stocks surged by 3.2 million barrels to 257.1 million barrels. The sudden and sharp increase in both crude oil and refined product stocks is a warning sign for oil traders that have by and large been betting on a tightening market and rising prices. In fact, the gasoline glut has become so acute on the U.S. eastern seaboard that some tankers destined for American ports have been rerouted to Europe, according to Bloomberg. The surge in inventories “will keep demand for voyages into the East Coast low as the market awaits the impact of spring maintenance,” George Los, senior tanker markets analyst at Charles R. Weber Co., told Bloomberg. PADD 1 inventories, a designation for the East Coast, are at an all-time high. “The concern is the PADD1 market,” said Gary Simmons, senior vice president at Valero Energy Corp., according to Bloomberg.  Bloomberg says that a few tankers were diverted away from New York and sailed to the Caribbean, where there are more storage locations. But rerouting tankers away from the U.S. does not solve the problem. Rerouted tankers will just lead to higher inventories elsewhere. The problem seems to be ongoing oversupply problems in the market. In fact, gasoline demand has dropped to its lowest level since 2012, dipping to just 8.2 million barrels per day at the end of January.

Goldman Stunned By Collapse In Gasoline Demand: "This Would Require A US Recession" --While energy traders remain focused on weekly changes in crude supply and demand, manifesting in shifts in inventory of which today's API  data, which showed the second biggest inventory build in history, was a breathtaking example of how OPEC's "production cut" is clearly not working, a much more troubling datapoint was revealed by the Energy Information Administration last week when it reported implied gasoline demand.    To be sure, surging gasoline supply and inventories are hardly surprising or new: they remain a byproduct of the unprecedented global crude inventories leftover from two years of failed OPEC policy which resulted in a historic glut. Last January, overall crude runs were up 500,000 bpd as refiners shifted away from diesel and other products to gasoline to chase more attractive margins amid a mild winter and sluggish diesel demand. The move led to an overbuild of gasoline stocks that lingered into the summer, punishing margins when they should have been at their strongest. This January, crude runs are at historic levels, up by roughly 300,000 bpd over last year. So yes, both gasoline stocks and supply remains at extremely high levels, but what set off alarm bells is not supply, but demand: the EIA last week reported that the 4-week average of gasoline supplied - or implied gasoline demand - in the United States was 8.2 million barrels per day, the lowest since February 2012. And, as Reuters adds, U.S. refiners are now facing the prospects of weakening gasoline demand for the first time in five years.

Changing Seasons, Changing Gas Prices - We’ve probably all noticed that gas prices go up each spring and generally seem to peak around Memorial Day. Most consumers assume that prices max out at this point because of the advent of the summer-drive season. And to a certain extent, yes, seasonal demand is a factor. But other events also put stress on the system and lead to the higher prices seen around Memorial Day. (video) 1. Refinery Maintenance During the First Quarter - The United States has greater demand for gasoline (as opposed to diesel fuel) than most other countries. That means U.S. refineries are optimized to produce gasoline, with maintenance schedules based on gasoline demand. And because demand for gasoline in the United States is generally lowest in the first two months of the year, refinery maintenance, known as a “turnaround,” is often scheduled during the first quarter of the year. That’s also the time between peak heating oil season and peak summer drive season, allowing refineries to retool for summer-blend fuels.  On average, refineries experience turnarounds about every four years, meaning that about one quarter of the country’s refineries experience a turnaround in a given year. These turnarounds are scheduled at least one to two years in advance, and last one to four weeks. 2. The Switch to Summer-blend Production in April. The blends of gasoline used in the summer months are different than those used in the winter. In the winter, fuels have a higher Reid vapor pressure, meaning they evaporate more easily and allow cars to start in colder weather. In the warm summer months, these evaporative attributes would lead to increased emissions and the formation of smog. The Clean Air Act Amendments of 1990, which had final implementation in 2000, require that different fuels be used in many metropolitan areas. That affects more than 30 percent of the gas purchased in the country. Reformulated gas, known as RFG, is required in cities with high smog levels (and considered optional elsewhere). It’s currently used in 18 states and the District of Columbia. Adding to the complications of producing new fuels, there are more of them. In the winter months, only a few fuels are used across the country. However, because of various state or regional requirements, 15 different fuel specifications are required for the summer months. Refineries must produce enough for each area to ensure there are no supply shortages.

California gasoline grades pop on refinery issues, Mexico demand - Spot prices for CARBOB gasoline rose 5 cents/gal Thursday in San Francisco and 3 cents in Los Angeles on a combination of refinery issues, demand from Mexico, and data showing production declines in California. Los Angeles CARBOB traded at least five times for more than 125,000 barrels Thursday morning, lastly at NYMEX March RBOB futures plus 22 cents/gal, up 3 cents day on day and 7.50 cents so far this month. San Francisco was talked 5 cents higher to plus 15 cents/gal, which is up 11 cents in February. Los Angeles CARBOB has been steadily gaining on talk of issues at Chevron's 269,000 b/d El Segundo refinery. Sources cited a crude unit and alkylation unit down, but did not know the timing for a restart.One market source said the San Francisco Bay area was moving in sympathy with Los Angeles, but also because of demand from Mexico. "It's typical logistics, Bay to Mexico," he said. Two ships capable of carrying 47,000 mt of product, the Maersk Miyajima and Eagle Milan, were going up empty from Mexico, according to cFlow, Platts' trade-flow software. The ships are expected to load gasoline for western Mexico. Production of CARBOB, the most commonly used grade in California, fell 2.5% week on week in the week ended February 3, according to California Energy Commission data released Thursday.

Brent spreads imply big draw down in crude stocks after June: Kemp | Reuters: Brent futures prices indicate the crude market is expected to move into a deficit with a significant draw down in stocks from the middle of the year. Brent futures are trading close to full contango or full carry through until June but thereafter the calendar spreads are no longer wide enough to cover the cost of storing and financing oil stocks. Most stocks are held involuntarily because the oil is in transit from the well to the refinery or because the stocks are needed to meet the operational requirements of refiners. But beyond these operational requirements, traders will hold inventories only if prices are expected to rise or they can cover their storage and financing costs by running a short position in the futures market. The structure of futures prices therefore determines the profitability of storing oil beyond minimum operating needs, so called “cash and carry” trades (tmsnrt.rs/2kbnk0O). On Feb. 9, the structure of Brent futures prices provided around 37 cents per barrel to hold stocks between April and May and around 33 cents to hold stocks from May to June. If the cost of onshore storage is around 20-30 cents per barrel per month and the cost of borrowing is around 2 percent per year, storage is just about profitable in May and June (tmsnrt.rs/2kbiSiw). But the spread from June to July is just 24 cents and it declines even further to just 15 cents from July to August and 6 cents from August to September. There is no way oil storage can be profitable at such low spreads.

Oil Production Vital Statistics January 2017 -- January was the month that OPEC was supposed to reduce production by 1.2 Mbpd and Russia + others were supposed to cut a further 0.6 Mbpd. None of the January production data has been released yet and the only real time indicator we have is the oil price that began the month of January on $55.05 and ended the month on $54.77 (Brent) (Figure 1). The only remarkable thing is how little market response there has been to the feeble OPEC dealLatest reports suggest that Libya was producing 715,000 bpd at the end of January with the objective of raising production to 1.3 Mbpd by year end, to a large extent countering the efforts of countries that may or may not have reined in production. Given the lack of price response, we will not be surprised to see some non-compliance with the planned cuts.  On 6 Jan, there were 529 operational oil rigs in the USA, that had risen to 583 on 3 February, + 54 for the month (Figures 4, 5, 6 and 7). Rising oil drilling activity in the USA will inevitably lead to more oil production at some point. US production was 12.30 Mbpd in November rising to 12.44 Mbpd in December, up 140,000 bpd for the month (Figure 12). Middle East drilling remains on a cyclical high (Figure 9) while drilling remains in the doldrums everywhere else (Figures 8 and 10). The following totals compare December 2015 with December 2016:

  • World Total Liquids 97.15/97.65/ +500,000 bpd
  • OPEC 31.69/32.86/+1.17 Mbpd
  • Russia + FSU 14.07/14.55/ +480,000 bpd
  • Europe  3.65/3.74/ +90,000 bpd
  • Asia 7.79/7.41/ -380,000
  • North America 20.00/19.42/ -580,000 bpd

This is the first edition of Vital Statistics produced using the Global Energy Graphed database employing Google Sheets. All the old graphs are there with several additions. Note that since these graphs are live, they will update automatically in future as more data are added meaning that the narrative will no longer match the data in the months ahead.

Qatar says oil market can cope with higher shale output | Reuters: Higher oil prices may boost shale oil production but the global oil market can accommodate this as demand remains healthy, Qatar's energy minister said on Wednesday. U.S. energy companies have been adding oil rigs and redeploying cash and workers, cautiously confident the energy sector has turned a corner after the election of President Donald Trump and a commitment signed by OPEC to curb production in the first half of 2017. Crude prices have held above $50 a barrel since early December, leading to concerns that higher output by U.S. shale producers could offset any further price gains. The market is "gradually accommodating shale oil and shale gas" and demand is healthy, said Energy Minister Mohammed al-Sada, who last year served as OPEC president. "With that continuous demand increase I think all available oils are going to be accommodated," Sada told Reuters in Doha. "With the current price some fields can be developed profitably though the majority of fields today will not be satisfied with this current price and will not be able to justify further development in high-cost oil fields, especially deep-water and unconventional fields," he said. "Those will need a higher price," he said without offering further details. Brent crude LCOc1 traded on Wednesday at $54.68. OPEC and some non-OPEC producers, including Russia, have agreed to cut production by around 1.8 million barrels per day to help reduce supply and support prices in the first such deal since 2008. OPEC will meet next in Vienna on May 25 to monitor the six-month deal and could extend it for an additional six months.

Risk, double-edged swords and imagining the worst --A friend of mine recently said that intellectual honesty often requires imagining the worst. Of course, in the study of climate change and natural resources one needs only to read the analyses of scientists to imagine the worst. Imagining the worst in not necessarily the same as believing the worst is inevitable or even likely. It can be merely a standard part of both scenario and emergency planning. Of course, imagining the worst can also be a double-edged sword with a sinister edge, sometimes eliciting Richard Hofstadter's paranoid style of politics.  In scenario planning the whole point is to consider seriously a range of possible outcomes and formulate plans for dealing with those outcomes. For example, the U.S. Energy Information Administration (EIA) reference case for world oil production (defined as crude oil and lease condensate) shows it rising from about 76 million barrels per day (mbpd) in 2012 to 99.5 mbpd in 2040. The low production case is 92 mbpd and the high production case is almost 103 mbpd. You may feel that this range doesn't reflect more extreme scenarios, but at least the agency offers a range. Some forecasters pretend to know to the second decimal point the future of oil production and reserves decades hence. It's hard to put this down to anything but hubris. Compare these forecasts to a forecast based on much sounder data, this one made by an EIA researcher in 2009 about how much oil we would have to find and deliver to meet rather extravagant future demand expectations:

Megadeals Boost Global Oil, Gas Transactions To $395B In 2016 - Although the volume of global oil and gas transactions dropped last year, the deals’ total value rose to US$395 billion from US$340 billion in 2015, thanks to megadeals in the midstream and oilfield services segments, EY said in its Global oil and gas transaction review 2016 published on Wednesday. In early 2016, companies were more concerned about adapting to the new reality, and transactions took a back seat, according to Andy Brogan, EY Global Oil & Gas Transactions Leader. But Brogan went on to add:“Now, with the consensus throughout the sector that the worst is behind us, we’re starting to see a shift as companies realize that there may be a cost to inaction. We expect to see the momentum that began in the fourth quarter of 2016 continue in the year ahead.” EY’s transaction review estimates that the total upstream deal value dropped by 14 percent to US$130 billion in 2016, but excluding the mega Shell-BG deal from 2015, last year’s activity improved, especially in the fourth quarter as renewed confidence started to settle in on the market. The U.S. transactions led the way - with the Permian setting record deal volumes – and the North American industry recorded more than US$76 billion in upstream transactions last year, compared to US$43 billion in 2015. In many other regions transaction activity remained subdued as buyers and sellers struggled to reach agreements on values amid the price shocks in the industry, EY said. Recent figures from other industry research firms point to U.S. deals being definitely on the rise. Over the past 12 months, the number of M&A deals in the shale patch rose to 385 from 285 in 2015, according to industry research firm PLS. More impressive was the rise in total value, however, to US$69 billion last year from US$32 billion in the year before.

NYMEX March natural gas settles 8 cents higher at $3.130/MMBtu -  The NYMEX March natural gas futures contract settled 8 cents higher at $3.130/MMBtu on Tuesday, on the heels of a slide that saw the prompt month shed nearly 13 cents across two trading days. The March contract had given up a combined 13.7 cents in trading Friday and Monday following the US Energy Information Administration's bearish storage report released Thursday. US natural gas in storage fell 87 Bcf to 2.711 Tcf in the week ended January 27, according to the EIA, the smallest withdrawal for January since an 86-Bcf draw for the week ended January 22, 2010. "We continue to anticipate smaller-than-average storage withdrawals over the next few weeks," Tim Evans of Citi Futures said in a note."Thursday's storage report for the week ended February 3 may interrupt the larger bearish trend, with the early consensus running similar to our own forecast for 160 Bcf in net withdrawals, exceeding the relatively modest 138 Bcf five-year average for the date," Evans said. Platts Analytics' Bentek Energy projects total US demand to average around 88.5 Bcf/d over the next two weeks, up about 7 Bcf/d from Tuesday. Production continues to struggle to gain traction and is expected to stay flat at about 76 Bcf/d over the same period.

High infrastructure costs, low returns delay US use of LNG for bunkering - The use of LNG for bunkering in the US maritime industry will take some time as shipowners and suppliers consider the costs of building infrastructure and assess the risks, according to industry sources. "Most companies won't even look at that type of project unless the return on investment is at least 10% and depending on the capital leverage the return on investment may need to be closer to 18%-20%. The return on investment is largely determined by the cost of capital leverage," a shipping expert with more than 50 years of industry experience said. The International Maritime Organization decided October 27 to reduce emissions by nearly 87% for oceangoing ships sailing in international waters. Starting in January 2020, ships will be required to burn fuel with a maximum sulfur content of 0.5%, except when traveling in designated Emission Control Areas where the sulfur limit is 0.1%.Although in Asia and Europe shipowners and port authorities are working on the transition to LNG fueling ahead of the new regulations, in the Americas the shipping industry is still assessing how feasible the utilization of LNG can be.

Shell criticised for plans to abandon North Sea structures   - Royal Dutch Shell has come under fire for plans to leave 64 storage tanks as tall as Nelson’s Column on the seabed when it abandons its Brent oilfield in the North Sea. Environmental groups accused the company of cutting corners to save costs as a public consultation began on the biggest decommissioning project of its kind in the oil industry. Under plans submitted to the UK government on Wednesday, Shell would remove the upper parts of its four Brent platforms in a multibillion-pound project that will deliver a windfall to the Teesside shipyard chosen to scrap the rigs. However, Shell wants to leave behind the concrete legs, each weighing as much as the Empire State Building, which support the platforms, as well as 64 subsea storage tanks, known as cells, and drill cuttings contaminated with oil. Government backing will be needed for Shell to secure an exemption from European rules, known as the Ospar convention, which require operators to return the marine environment to its natural state after closing down oil and gasfields. Shell’s Brent decommissioning project is seen as an important test of those rules because it is the biggest North Sea field to be dismantled so far, with hundreds more to follow as UK oil and gas production enters long-term decline. Lang Banks, director of WWF Scotland, a conservation group, accepted there might be a case to leave the concrete legs because of the environmental and safety risks involved in removing them. But he argued that Shell should clear the seabed of drilling detritus and storage tanks. “The main thing preventing this from being done in this particular case is the cost,” he said. “Shell should do the right thing and remove these potentially polluting materials.” ‘

Wanna Drill in a Famous Forest? Sure Would. Rob from the Rich & Give to the Richer -- Last week I wrote an article in The Surge about drilling for oil and gas in our national parks. I am not in favor of that since we have so many other good places (and much more accessible) to drill and keep America’s energy renaissance going. And much to my surprise, over 90 percent of the readers who commented actually agreed with me. I don’t even get that high of a percentage at home. Anyway, it seems that the US isn’t the only country dealing with such issues.The international chemical giant Ineos announced plans this week to drill for gas under Sherwood Forest in England. You remember, the one made famous by Robin Hood (no relation to Little Red Riding, even though they share the same last name).Their announcement pointed out that they will first be doing seismic studies, with the eventual intent of setting up fracking operations. And the initial seismic work will take place just a few hundred yards from Major Oak, the most famous tree in Sherwood Forest, rumored to be where Robin and his merry men (and Maid Marian, I assume) slept. The 800-year old tree is one of the most popular attractions in the forest, playing host to thousands of visitors every year. Ineos stated in their news release that they would “take great care” to protect Major Oak. Sherwood Forest sits on what the Brits refer to as National Trust land, similar to our national parks. Its locale is in what I consider one of the most beautiful parts of England. I mean, London is nice, but topographically, it’s about as flat as Houston. The Forest is almost dead center in England with lush greenery, rolling hills, and a fabled past. The closest big towns are Sheffield (about 30 miles away) and of course two of the towns that Robin made famous (or at least Kevin Costner did when playing Robin), Loxley (also 30 miles), and Nottingham (as in “the Sheriff of”, about 20 miles).

UK to rely more on Norwegian natural gas in future on coal phase-out: ministers -  The UK will be more dependent on Norwegian gas imports in the future given the UK's move to phase out coal-fired power generation, the ministers of the two countries said Friday. In a joint statement following a meeting in Oslo, the UK energy minister Jesse Norman and his Norwegian counterpart Terje Soviknes stressed the close relationship between the two countries in the energy sphere. "British interest in Norwegian gas is set to grow as the UK looks to phase out power generation from unabated coal in the transition to a lower carbon energy mix," they said."Norway is the UK's most important energy supplier, particularly as an external supplier of gas," they added. Norwegian exports via pipeline to the UK hit a record high in January, according to data from Platts Analytics' Eclipse Energy. UK receipts at St. Fergus and Easington combined stood at a record 4.05 Bcm in January, up from 3.77 Bcm in December last year and over 1 Bcm higher than 2.93 Bcm in January 2016. The UK has received much more Norwegian gas so far this winter as a combination of higher domestic demand and weaker LNG and storage availability has boosted the UK wholesale gas price compared with its Continental European equivalents. The UK received a total of 14.36 Bcm during the first four months of the Winter 2016/17 delivery period, up 31% year on year. The UK and Norway also plan to build a 1.4 GW electricity interconnector to link the countries' two power markets from 2022.

Huge Gas Finds Can Keep Europe Warm If the Arguing Stops - Giant platforms for extracting gas rise from under the Mediterranean Sea. Hundreds of miles of undersea pipelines will cost billions of dollars and pose a technical challenge for their designers. And even that task is dwarfed by the political engineering required to build stable energy routes through a conflict-ridden region. That’s true across the Eastern Mediterranean, where nations have watched enviously over the decades as energy finds a bit further east made their Gulf peers rich. Now it’s got riches of its own, as it becomes clear that Delek’s discoveries were just a start. The whole area from Cyprus to Lebanon and Egypt may be sitting on even bigger gas fields. The United States Geological Survey estimates they could hold more than 340 trillion cubic feet, an amount that would surpass U.S. proven reserves, though many in the industry think the actual volume may be lower. There’s an ideal market nearby in Europe -- rich, mostly lacking its own fuels, and desperate to wean itself off energy dependence on Russia. It’s just that getting the gas there will require collaboration between countries with a history of feuding or fighting. “This is the kind of opportunity where either everybody rises or everybody falls,” said Amos Hochstein, who served as former U.S. Secretary of State John Kerry’s energy envoy. Hochstein acknowledges the “complicated relationships” involved, but says they can be overcome. “We’ve been preaching this gospel in the wilderness for a while,” he said. “But enough people now see the potential fruits.”

Feature: Strict EU regulations remain burden for European refineries - Stringent European Union environmental regulations continue to pose a challenge to refineries in the region, according to delegates at an EU refining forum in Brussels February 2. The forum, which started in 2012 and is chaired by the EU, aims to examine excessive legislation and its impact on the refining industry. While the EU recognizes the importance of the refining sector, its drive to lowering carbon emissions remains fully in force."The European Union will stick to its commitment to a low carbon economy," was the message by European Commissioner for climate action and energy Miguel Arias Canete, who added that "clean energy transition is here to stay," and that the refinery sector "must adapt to decarbonization." But refiners appealed to EU policy makers to implement a "broader and more rational approach" and to "have regulation aligned with the rest of the world," as Cepsa CEO Pedro Miro Roig said. The very strict environmental regulations in Spain have resulted in the idling of Cepsa's Tenerife refinery three years ago, and the plant is unlikely to restart, Miro Roig said. The EU regulations are also posing "a heavy burden" for Cepsa's two operating refineries in Spain, adding $2/barrel to the cost "to comply with the regulations." "We can't focus on short-term policies and strategies," Miro Roig said. The EU legislation has reduced competitiveness of the refining sector by 25%, according to the "fitness check" published by the European Commission, reminded Jaime Martin Juez, Repsol's director of technology and sustainability. He also noted that products with carbon cost embedded in them are imported in Europe without any checks. After closing five refineries, Italy still has an excess of production capacity and faces problems of competition, said an Italian delegate.

Disappearing Arctic Sea Ice Loss Will Help Russia Export Its Oil - By the end of the century, oil tankers and cargo ships, with only the occasional help of icebreakers, will safely ply Russia’s Arctic coast for more than half the year if global warming continues unabated, a group of Russian scientists say. The study, funded by the Russian government, was released by the journal Environmental Review Letters on Monday evening. It comes as a powerful North Atlantic storm is poised to smash into the  Arctic Ocean for the third time this winter, perhaps pushing its temperatures above the freezing mark — also for the third time — in a year that has already set records for limited sea ice. “Further warming in the Arctic will promote the Northern Sea Route (NSR) as an alternative to the conventional Suez or Panama Canal routes for intercontinental shipping,” wrote Vyacheslav Khon, a climate scientist at Kiel University, and his colleagues in the study. “The study appears to be a sound analysis of the present and future navigability of the Northern Sea Route,” geographer Scott Stephenson of the University of Connecticut, told BuzzFeed News. Nathanael Melia, a climate scientist at the University of Reading, told BuzzFeed News that by the middle of the century, a shipping route that crosses directly over the poles will be favored over the Russian coastal one in the new study. During the height of the shipping season, he said by email, “this route is two days faster and potentially avoids Russian tariffs.” -

Indonesia needs $70-80 bil in gas investments to avoid shortage: Pertamina - Indonesia needs to invest $70 billion to $80 billion in gas infrastructure through 2030 to avoid a potential gas shortage, as domestic consumption growth outpaces supply, state-owned energy business Pertamina said Tuesday. An expanding economy and growing middle class are the key drivers of energy consumption, which continues to grow by around 4-5% a year. Natural gas accounts for approximately 15% of the country's energy needs, and its growth is primarily supported by expanding demand from the power, refinery, fertilizer and transport sectors. "Indonesia needs new investment to explore and develop new gas resources and to build gas infrastructure," said Yenni Andayani, chairman of Indonesia Gas Society and acting president director of Pertamina."Gas infrastructure investment requires coordination with all stakeholders, incentives, competitive prices and a good domestic investment climate," he said, at the opening of the International Indonesia Gas Conference and Exhibition 2017. Indonesia is a major LNG supplier, with Bontang, Tangguh and Donggi Senoro LNG facilities having produced a total of 18.83 million mt of LNG in 2016, up by 4.3% from the 8.05 million mt produced in 2015, according to Platts Analytics. Of the total, 3.016 million mt was delivered to one of Indonesia's three import terminals supplying the highly populated centers of Java and Sumatra, up by more than 30% from 2.281 million mt received in 2015.

Norway's Grane crude oil at five-month high on demand for heavy grades -  Norwegian crude Grane has hit a five-month high versus the Dated Brent benchmark, lifted by buoyant trading levels on competing heavy crudes such as Angola's Dalia, sources said. Grane was assessed 25 cents/b higher at Dated Brent minus $1.25/b Tuesday, its highest since early September, S&P Global Platts data showed. The volume of Dalia clearing to the East had increased local demand for heavier North Sea crudes like Grane, according to traders, adding the six March-loading Dalia cargoes have been sold to end-users. "Look at Dalia which is a competitor and has been trading at very high levels," one trader said."The heavy crudes have cleared in WAF and Middle East allocations to Europe have gotten smaller. Margins are favoring heavier cuts, so Grane is looking good. Margins are OK but supply has been lower from other regions." Dalia has seen its value soar during the March trading cycle. On Tuesday, Platts assessed Dalia at a discount of 75 cents/b FOB to the 30-60 day Dated Brent strip, its highest since August 2, 2013. "Angola and the heavy grades have moved even further up [over the course of March trading]. it Is crazy," said one West Africa crude trader. ‘

Nigeria Rescues Oil Tanker From High-Seas Pirates | OilPrice.com: The Nigerian Navy has rescued an oil tanker from pirates near Bonny Island, even as the number of high-seas hijackers is at an 18-year low, according to the International Maritime Bureau (IMB). Nigerian Navy Captain Sulieman Dahun said the naval forces rescued the MT Gas Providence oil tanker, which came under pirate attack on Wednesday in River State, just off Bonny Island. The vessels 21 crew members were rescued after sending off a distress signal received by the Navy. It was the second failed hijacking attempt in the area this week. A Nigerian naval vessel also thwarted at a pirate attack on a second oil tanker, MT Rio Spirit.In 2016, there were 36 recorded incidences of high-seas piracy in Nigeria—more than double the number of incidences the year before. There has also been an increase of high-seas kidnappings in Nigeria.

China to take first cargo of Eastern Canadian crude: sources - Eastern Canadian crude will make a first-of-its-kind voyage into the Caribbean and on to China, as weakening prices have opened the unique arbitrage to East Asia, crude traders said Monday. The unusual voyage is also supported by depressed shipping rates, Brent's narrowing premium to benchmark Dubai and a shrinking Middle East supply due to OPEC-led production cuts. Crude traders said a 710,000-barrel cargo of White Rose, 30.56 API and 0.28% sulfur, and a partial cargo of Hibernia, 36 API and 0.40% sulfur, will lift mid- to late February out of the NTL terminal in Whiffen Head, Newfoundland. It's unclear, however, which companies bought and sold the cargoes. Traders said the grades will first head to NuStar's Statia Terminal in St. Eustatius, where they will be co-loaded with an unspecified Latin crude grade onto a ship bound for China, likely a VLCC. The East Coast Canada barrels will most likely be co-loaded with a cargo of Venezuelan extra-heavy sour crude Merey, according to an industry source familiar with the Latin American markets. Produced in Venezuela's Orinoco Belt, Merey crude has a typical API gravity of 16 degrees and sulfur content of 2.45%. In January, about 3.668 million barrels of Venezuelan crude were shipped from Jose Terminal to St. Eustatius, from where they are presumably distributed to buyers in other markets.According to the latest import data from Platts China Oil Analytics, China imported an average of 403,000 b/d of Venezuelan crude in 2016, representing a year-on-year increase of 79,000 b/d, or 24.4%. A narrowing spread between the front-month swap value for Brent and Dubai has provided and incentive for imports of Brent-based crudes to China, including Venezuelan, Colombian and Brazilian grades, according to a second Latin American industry source.

Analysis: Saudi Arabia's forceful strategy lifts Japan crude sales to 10-year high -  Saudi Arabia's crude oil supplies to Japan rose to a 10-year high in 2016, underlining the kingdom's strong will to defend its share in the ever competitive Asian markets. Saudi Arabia's crude supplies to Japan last year averaged 1.18 million b/d, up 4.7% year on year, and accounted for roughly 36% of Japan's total imports of 3.31 million b/d, according to S&P Global Platts calculations based on Ministry of Economy, Trade and Industry data. Saudi Arabia's market share in Japan rose from 33% in 2015, marking the third consecutive year-on-year rise. "We appreciate that [Saudi Arabia] maintained simple but logical pricing [for crude supplies]," a source with a Japanese refiner said, adding that price was the decisive factor in his company's decision to buy Saudi crudes.Saudi Arabia's market share strategy has worked effectively in Japan as a consequence of its pricing, which were often competitive against similar grades from the Middle East, market sources said. The rise in Saudi crude oil supplies came even as Japan's total crude imports in 2016 fell to their lowest since 3.19 million b/d imported in 1987. Japan's 2016 imports fell 2% year on year.

Asian condensate buyers may favor Australian NWS over Qatar DFC: traders -  Brent's narrowing premium over Dubai crude could help swing market conditions in favor of Oceania suppliers and price differentials for Australian North West Shelf condensate, which is linked to the European benchmark, could outperform rival Qatari grades this month, market participants said Wednesday. The Brent/Dubai Exchange of Futures for Swaps spread -- a key indicator of ICE Brent's premium to benchmark cash Dubai, which enables holders of ICE Brent futures to exchange a Brent futures position for a Dubai crude swap -- has been narrowing sharply in recent weeks, making Brent-linked Oceania condensate more price competitive than Middle East ultra-light grades, regional traders said. "[The narrow Brent/Dubai] EFS would put NWS condensate [sellers] in the driving seat," said a trader familiar with monthly Oceania crude and condensate sales. The second-month Brent/Dubai EFS has tumbled to a more than one-year low in recent weeks.The EFS was assessed at $1.25/b on January 26, the lowest level since September 10, 2015, when the spread was $1.24/b, S&P Global Platts data showed. The second-month EFS averaged $1.53/b so far this month, compared with $1.65/b in January and $2.18/b in December last year, Platts data showed.

Will OPEC continue to cut production? -- Ten OPEC countries achieved 91 percent of their required cuts in January, according to an S & P Global Platts survey released on Monday. In the agreement signed last year, OPEC countries promised to cut 1.2 million b/d for six months and freeze production at 32.5 million b/d for six months in 2017. This includes production by Indonesia, whose OPEC membership is currently suspended. Eleven non-OPEC countries, including Russia, also agreed to cut output by 558,000 b/d in the first half of 2017. Some doubt about whether or not OPEC would actually adhere to the agreement has surfaced, but the January report shows most countries are taking the cuts very seriously. Saudi Arabia, Kuwait and Angola made larger cuts than they were required, which helped to make up for some of the other countries who did not quite meet their production goals. Saudi Arabia’s energy minister, Khalid al-Falih, said that Saudi Arabia would “strictly adhere” to their commitment, while Kuwaiti oil minister Essam al-Marzouq said Kuwait would “lead by example.” Marzouq is a member of the committee that will monitor and enforce the production agreement along with a representative from both Algeria and Venezuela and non-OPEC countries Russia and Oman. Iraq, Algeria and Venezuela did not meat their production goals, with Iraqi output at 4.48 million b/d, despite a quota of 4.35 million b/d, said Platts. This is where the controversy kicks in. Some still speculate that some OPEC countries, like Iraq, do not intend to cut production as much as promised, since the elevated oil price has sparked more production from U.S. shale producers. Iran, whose sanctions were lifted (and now may be reinstated after its recent missile test) was not required to cut production at all.  Improved technology and efficiency have made breakeven prices for drilling in the North American shale plays much more competitive, which means that there is renewed interest in shale production. In the Bakken, for example, the average breakeven cost per barrel was $59.03 in 2014, which fell to $29.44 in 2016, said the Hellenic Shipping News quoting Rystad Energy

OPEC Ministers Say the Market Might Need More Oil Cuts - OPEC and other major crude-producing nations may need to extend output cuts into the second half of the year to re-balance the market, oil ministers for Iran and fellow group member Qatar said. Global oil supplies have decreased as the Organization of Petroleum Exporting Countries and producers outside the group comply with a six-month deal to curb output that took effect on Jan. 1, Qatar’s Energy Minister Mohammed Al Sada said Wednesday at a news briefing in Doha. “It’s too early to make a judgement,” he said, adding that markets may re-balance in the third quarter. “We kept it open to reconsider the rollover, and rollover is an option if needed,” Al Sada told Bloomberg TV in Qatar’s capital. In principle, OPEC will have to cut output in the second half, Iran’s Oil Minister Bijan Namdar Zanganeh said, according to the Fars news agency. The issue needs further study before the group can make a decision, Zanganeh said, after meeting in Tehran with his counterpart from Venezuela, also an OPEC member. The organization agreed in November to impose quotas on its members for the first time in eight years, in an effort to stem a supply glut that had depressed crude prices. OPEC enlisted support from 11 other producers on Dec. 10 in an historic deal to remove as much as 1.8 million barrels of oil a day from the market. OPEC expects to decide whether to extend the cuts at its bi-annual meeting in Vienna in May.

Markets Remain Bullish On Oil Despite Growing Risks | OilPrice.com: The U.S. dollar weighed on oil prices to start off the week; WTI and Brent were down by more than 1 percent. On the bright side, a new survey from S&P Global Platts estimates that OPEC has achieved a 91 percent compliance rate with the November 30 agreement, far higher than many oil watchers had expected. The figures are a strong signal that OPEC is doing its best to live up to the details of the agreement. Bloomberg reports that the U.S. Army Corps of Engineers is likely days away from issuing the easement to Energy Transfer Partners (NYSE: ETP) to complete the Dakota Access Pipeline. The $3.8 billion pipeline has been at a standstill for months even though it is close to completion. ETP has said that the pipeline will likely come online in the second quarter, however, the Standing Rock Sioux Tribe and environmental groups have vowed more lawsuits if the easement is granted. BP reported a $400 million profit for the fourth quarter, lower than analysts had expected. The oil major also posted a $1 billion loss for the full-year. Deteriorating refining margins were part of the problem, and most of the fourth quarter financials for just about all of the oil majors disappointed the markets. Worse for BP was the fact that the company now says its books can balance if oil trades at $60 per barrel. That is up from the $50 to $55 per barrel that company executives said it needed last year. Meanwhile, Statoil (NYSE: STO) also reported poor figures, booking a surprise fourth quarter loss. The Norwegian company took a $2.3 billion impairment charge.The deregulatory bonanza underway in Washington could cause oil and gas prices to crash in 2018, according to Bank of America Merrill Lynch. That is because supplies could rise quickly, leading to another state of oversupply. “The industry has high hopes for less red tape, a more pragmatic approach to regulation and lower costs of having to comply with climate change rules,” BofA analysts said. The big uncertainty is over the pledge to implement a border-adjustment tax, which would have far-reaching implications for the oil and gas industry.

Oil prices slide after API reports 14.2 million barrel US crude stockpile increase; gasoline stocks also rise --Oil prices extended losses on Tuesday after an industry group reported a far larger rise in weekly U.S. crude stockpiles than anticipated.U.S. crude oil in storage rose by 14.2 million barrels last week, according to the American Petroleum Institute. That was more than five times analysts' forecasts for a 2.5-million barrel increase.Gasoline stocks rose by 2.9 million barrels, compared with analysts' expectations in a Reuters poll for a 1.1-million barrel gain.U.S. crude was trading at $51.72 after ending Tuesday's trade down 84 cents, or 1.6 percent, at $52.17.Benchmark Brent crude was down $1.03, or 1.9 percent, to $54.69 a barrel by 4:50 p.m. (2150 GMT).Concerns that U.S. gasoline consumption is stalling weighed on futures. U.S. gasoline prices fell 2.3 percent.  Futures were pressured on Tuesday by sluggish demand and evidence of a burgeoning revival in U.S. shale production that could complicate efforts by OPEC and other producers to reduce a supply glut. Gasoline stockpiles rose by almost 21 million barrels in the first 27 days of 2017, compared with an average increase of less than 12 million barrels at the same time of year during the previous decade, according to official inventory data.  "It's a supply-driven setback ... We are within 2 million barrels of the record in U.S. gasoline stocks that we saw last February," . "A strong build in inventory reports could weigh on gasoline in a seasonal timeframe where gasoline demand is weak."

Oil Slides After EIA Forecasts US Crude Output In 2018 Will Be The Highest Since 1970  -- Suggesting that the OPEC "production cut" gambit may soon backfire, on Tuesday the U.S. Energy Information Administration cut its 2017 world oil demand growth forecast by a fractional 10,000 barrels per day to 1.62 million bpd, and also cut its 2018 estimate by 50,000 bpd to 1.46 million bpd. At the same time, the EIA cut its U.S. crude output forecast for 2017 dractionally to 8.98mmbpd from its January  9 mmpd forecast - still 100,000 higher than 2016 - even as it aggressively boosted its 2018 US output forecast to 9.53 mmbpd from 9.30 mmbpd. If accurate, that would mark the highest US crude output since 1970, and indicate that US shale is indeed becoming a key global marginal oil producer. "Global oil supply and demand is now expected to be largely in balance during 2017 as the gradual increase in world oil inventories that has occurred over the last few years comes to an end," said Howard Gruenspecht, acting EIA administrator, in a statement. While the EIA also forecast WTI would average $53.46 a barrel this year, up from the previous forecast for $52.50 and Brent at $54.54 this year, up from $53.50, the market's kneejerk reaction was negative, with concerns about rising supply mounting, and as a result March West Texas Intermediate crude continued to trade lower, declining declined over 1%, to a 2-week low...

WTI/RBOB Plunge After 2nd Biggest Crude Inventory Build In US History - After a weak day in the energy complex driven by yuuge IEA output forecasts, and following last week's continued trend of large inventory builds, API reported a shockingly massive 14.27 mm barrel build (2.5mm exp). This is the 2nd largest weekly build in US history. The reaction in WTI and RBOB futures was immediately obvious as the former plunged below $52 and the latter below $1.4750.API:

  • Crude +14.27mm (+2.5mm exp)
  • Cushing +624k
  • Gasoline +2.903mm (+1.5mm exp)
  • Distillates +1.373mm

The sixth weekly build in gasoline in a row... butwhat really matters is the utterly massive build in crude inventories - the second bigest in histriy

Oil Prices Tank After API Reports 2nd Biggest Crude Build In U.S. History -- U.S. crude oil inventories increased by a whopping 14.227 million barrels, according to this week’s American Petroleum Institute (API) inventory report published on Tuesday afternoon, pressing down further on already falling prices. The build is the second largest build in U.S. history, according to Zerohedge.Analysts were anticipating a much more  conservative crude oil inventory build of 2.38 million barrels, according to Market Realist.While reduced OPEC production for January has seemed to support higher oil prices, reports of OPEC’s accomplishments have lost some sway in recent weeks in the wake of the American Petroleum Institute and the Energy Information Administration reports, which have both reported weeks of builds for crude oil, along with Baker Hughes, which showed that US drillers are putting rigs into production at rates not seen since mid-2014 before the oil price crash began.While OPEC is reporting a 91% compliance to the deal reached in November 2016, Baker Hughes reported a 17-rig gain for oil, which followed a 15-rig increase the week prior. Prior to the API’s data release, Brent crude had traded down $0.22 since Friday’s rig count release. Brent crude was trading at $54.89 ($55.11 on Friday), while WTI crude traded at $52.03 ($52.83 on Friday). The API reported a 2.903-million-barrel build in gasoline inventories, and a 1.373-million-barrel build to distillates.Supplies at the Cushing, Oklahoma, facility also rose this week by 624,000 barrels.Last weeks’ EIA report showed a crude oil inventory build of 6.5 million barrels, which came a day after the API reported a 5.8-million-barrel build; and a 3.9-million-barrel build to gasoline compared with a 2.9-million-barrel build reported by the API.

Oil prices slump on bloated U.S. fuel inventories, stalling China demand | Reuters: Oil prices dropped on Wednesday to extend falls from the previous day, as a massive increase in U.S. fuel inventories and a slump in Chinese demand implied that global crude markets remain oversupplied despite OPEC-led efforts to cut output. International Brent crude futures LCOc1 were trading at 54.54 per barrel at 0214 GMT, down 51 cents, or 0.9 percent, from their previous close. U.S. West Texas Intermediate (WTI) crude CLc1 was at $51.52 a barrel, down 65 cents, or 1.3 percent. These slumps came after over 1-percent falls the previous day. The sharp declines came on the back of unexpectedly big increases in U.S. fuel inventories, as reported by the American Petroleum Institute (API) on Tuesday. [API/S] "The API delivered a Goliath crude inventory number... The second highest on record. The reaction was predictable as the herd, already nervous from the previous day's price action, turned en masse and ran off the cliff," said Jeffrey Halley of futures brokerage OANDA in Singapore. Crude inventories rose by 14.2 million barrels in the week to February 3 to 503.6 million barrels, compared with analysts' expectations for a 2.5 million barrels increase. Gasoline stocks rose by 2.9 million barrels, compared with expectations for a 1.1-million barrel gain. Goldman Sachs said that the data pointed to "U.S. gasoline demand falling sharply by 460,000 barrels per day (bpd) year-on-year in January, with such declines only previously (seen) during recessions."

WTI Holds Losses After 2nd Biggest Inventory Build In History, Production At New Cycle Highs -- Following last night's shockingly massive crude build reported by API, DOE data confirmed the ugliness with a 13.83mm build (over 5 times larger than the expected 2.5mm build).Cushing also saw a major unexpected build but Gasoline and Distillates saw lower than expected builds (Gasoline draw). Production rose to a new cycle high. DOE:

  • Crude +13.83mm (+2.5mm exp)
  • Cushing +1.143mm (-500k exp)
  • Gasoline -869k (+1.5mm exp)
  • Distillates +29k (+500k exp)

The 2nd biggest build in US history for crude stocks but Gasoline unexpectedly saw a drawdown...

Oil prices turn positive as drop in gasoline stockpiles offsets massive crude inventory build - Oil prices turned positive on Wednesday after government data showed a surprise drop in gasoline in storage that offset a huge rise in U.S. crude stockpiles. International Brent crude futures were trading at $55.54 per barrel at 11:08 a.m. ET (1608 GMT), up 49 cents, or 0.9 percent, from their previous close.  U.S. West Texas Intermediate (WTI) crude was at $52.55 a barrel, up 38 cents, or 0.7 percent.U.S. commercial crude inventories rose by 13.8 million barrels in the week through Feb. 3 to 508.6 million. That compared with analysts' expectations for a 2.5 million barrels increase. The EIA data were just shy of figures reported by the American Petroleum Institute (API) on Tuesday, which showed crude inventories jumping by 14.2 million barrels to 503.6 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.1 million barrels, EIA said. The builds in crude stockpiles came as refineries cut output and crude imports jumped. Weekly U.S. oil production also ticked up, preliminary data showed, continuing a trend that has pushed the nation's four-week average output higher lately. But the EIA data on fuel inventories provided some relief. Gasoline stocks fell by 869,000 barrels, compared with analyst expectations in a Reuters poll for a 1.1 million-barrel gain. API had said gasoline stocks rose by 2.9 million barrels, raising concerns about fuel demand. The EIA figures showed a moderate uptick in gasoline demand. It has recently fallen to unusually low levels. "It appears gasoline demand as measured for the week has rebounded to near-normal levels, which offsets some of the report's other bearish elements. The recent plunge in gasoline demand was a conundrum,"

Oil Market Still Not Balanced After OPEC Production Cuts - We discuss the EIA Oil Report data in this video, and it appears that we are going to set another all-time record high for Oil held in storage again this year. In fact at the current pace we are going to blow through that previous record of 510 Million Barrels of Oil stored in private reserve facilities. It appears we are on track to hit 550 million barrels of oil in storage by May of this year. OPEC Production cuts also appear meaningless, as we are building at the same pace as this time a year ago in the oil markets. What a difference a year makes, as we have more supply than last year, and we are double the price from a year ago. The difference in gasoline demand is simple higher prices mean lower consumption, this is simple economics at work in a country where most consumers are broke paying their damn cell phone and cable bills each month.  Oil should be much lower based upon the current fundamentals, but this never ceases to amaze me how manipulated all markets are for the 15 years I have been involved with them. But the manipulation of the oil market just prolongs the inevitable rebalancing process, nobody has still yet to go out of business in the oil markets. Until this happens the oil markets will never be rebalanced; again pure economics at work. You cannot artificially prop up a market without major market ramifications down the line to be addressed. Either OPEC Needs to cut further, or Shale Production needs to go down significantly for the oil market to actually rebalance as everyone would like in the business. Unless things change, and an extension of the current OPEC Production Cuts isn`t going to cut it, the oil market will take the next leg down lower at some point over the next 12 months. It is just a matter of time. My guess is that if we haven`t sold off before July, then this will be the start of the next leg down in the oil markets; probably corresponding with a selloff in the overall Markets.

Oil overhang points to need for extended OPEC output cuts | Reuters: An OPEC-led production cut may well be accelerating a drawdown in global oil stocks that began last year, but implementing the reduction for just six months means the producer group will fall short of achieving its objective of rebalancing the market. The Organization of the Petroleum Exporting Countries and non-OPEC producers in December reached their first deal since 2001 to curtail oil output jointly, by around 1.8 million barrels per day. In the months leading up to the deal and after it was struck, OPEC ministers said tackling an overhang in crude and oil product inventories that has depressed oil prices for over two years was one of their main objectives. So far, OPEC kingpin Saudi Arabia, which is contributing the biggest chunk of the cut, has said the deal does not need to be extended beyond a six-month period. This contrasts with price hawk Iran, whose oil minister Bijan Zanganeh said OPEC should cut production further in the second half of 2017. Under the deal, Iran was allowed to boost output slightly above October levels. The International Energy Agency (IEA) said inventories of crude, natural gas liquids and oil products in member countries of the Organisation for Economic Cooperation and Development (OECD) remained 286 million barrels above the five-year average of around 2.7 billion barrels. This is despite a draw of 800,000 bpd in the fourth quarter of 2016. The overhang is almost evenly split between crude and liquids on one side and oil products on the other. The agency forecasts a stockdraw of 600,000 bpd in the first half of 2017 if compliance with the output deal is maintained at January levels.

OPEC Production Cut May Need to Be Extended: Oil Ministers - The oil ministers of Iran and Qatar have suggested that OPEC’s production cut agreement may have to be extended beyond the June deadline, despite an almost 100-percent compliance rate. The comments come a day after the American Petroleum Institute reported the second-largest crude oil inventory increase in history, at 14.227 million barrels, which added fuel to worries that production cut efforts are not enough to rebalance the market.  Iran’s Oil Minister, Bijan Zanganeh, told Iranian media after a meeting with his Venezuelan counterpart that the option of extending the cut needs further study, but, he said, “in principle” the group must do it. Zanganeh also said that most OPEC producers would be happy with oil at US$60 – a level that has proved difficult to reach.  Qatar’s Oil Minister Mohammed Al Sada, for his part, spoke at a news conference in Doha, saying that the oil market may rebalance in the third quarter, adding that “it’s too early to make a judgment.” At the same time, however, Qatar’s Finance Minister said that the country is comfortable with the current level of oil prices, with expectations that it will be able to plug its budget hole this year, at oil price levels of US$45, as stipulated in the budget. The latest update from OPEC on how the production cut was progressing pegged daily production for January at 32.89 million barrels, versus a target of 32.5 million barrels. This represented a compliance rate of 91 percent and suggested that nearly everyone is on board with the market rebalancing effort.

IEA hails 'solid start' to OPEC cut pact, raises oil demand outlook -  The International Energy Agency on Friday revised upward its estimate of global oil demand growth for this year to 1.4 million b/d, from 1.3 million b/d, and said OPEC had made a "solid start" to its six-month production cut pact, confirming signs of a tightening market. In its latest monthly oil market report, the IEA also said oil stocks in the OECD developed countries had fallen below the symbolic 3 billion barrel level at the end of 2016 for the first time in a year, although it cautioned that volumes were still rising in China and emerging markets, and at sea. It estimated that OPEC crude output had fallen by 1 million b/d in January to 32.06 million b/d and that global oil output generally had fallen by 1.5 million b/d. World oil production was 730,000 b/d lower than a year ago, at 96.4 million b/d, the agency said. OPEC's implementation of the production pact it agreed last November amounted to 90% in January, the month it went into force, with some members, notably Saudi Arabia and Iran, cutting by more than the agreed amount. The UAE and Venezuela meanwhile over-produced by 90,000 b/d and 80,000 b/d respectively, the IEA said. It also said Russia appeared to have cut production by 100,000 b/d in the first month of its phased commitment to cut output by 300,000 b/d as part of the six-month deal between OPEC and some non-OPEC producing countries. But it also repeated its forecast that overall non-OPEC production is likely to increase by nearly 400,000 b/d this year, compared with an 800,000 b/d decrease last year, thanks to a revival in US shale output and longer term investment in Brazil and Canada.

Oil Jumps After IEA Reports Record OPEC Compliance With Production Cut Deal -- Oil jumped this morning, with Brent rising 1%, trading above $56 after the International Energy Agency said OPEC had achieved record initial compliance of 90% with planned production cuts - it is unclear how much of this was self-reported and questionable -  while demand grew faster than expected. In the first month of OPEC’s supply cut agreement, key member Saudi Arabia reduced production by 116%, or even more than it had committed, despite Venezuela's struggles to reduce output (it had achieved only 18% of planned cuts) while higher demand is aiding the group’s bid to re-balance world markets, the IEA said. The following Bloomberg chart shows alleged deal compliance by nation... ... and the detailed breakdown is shown below: The IEA, which advises industrial nations on energy policy, said that if current compliance levels are maintained, the global oil stocks overhang that has weighed on prices should fall by about 600,000 barrels per day (bpd) in the next six months. The IEA also estimated that 11 producers including Russia, Kazakhstan pumped 269k b/d less crude in January versus October-November levels, citing preliminary data. The IEA also increased its 2016 estimates for world oil demand growth for a third month, and boosted its outlook for 2017, anticipating an increase of 1.4 million barrels a day this year. World oil inventories will fall by 600,000 barrels a day during the first half of the year if OPEC sticks to its agreement, the IEA said. Oil has fluctuated above $50 a barrel since a deal to trim output between OPEC and 11 other nations took effect on Jan. 1. U.S. producers are taking advantage of higher prices by increasing drilling activity and boosting daily output to the highest level since April, a dynamic the IEA said is capping prices in the mid-$50s. “There is a demand element to this price rise as well as OPEC compliance,” says Michael Hewson, market analyst at CMC Markets. “We’re still short of the highs of the month”

OilPrice Intelligence Report: Oil Rallies As Glut Fears Abate: Oil prices faltered midweek on growing concerns of oversupply, but rallied on Wednesday after the EIA reported a surprise drawdown in gasoline inventories. The latest data indicated that U.S. gasoline demand was not as weak as previously thought, and it was enough to overcome investors’ worries regarding the large increase in crude oil inventories. WTI and Brent are set to close out the week roughly where they started – around $54 and $56 per barrel, respectively. The combined OPEC cuts of 1.2 million barrels per day (mb/d) plus the additional 0.6 mb/d from non-OPEC countries is helping to erase the supply overhang in the oil market. But the oil ministers of Iran and Qatar said this week that OPEC’s work would be undone if the deal was allowed to expire in June. They suggested that the cuts might need to be extended until the end of the year if the oil market is to balance, a sign that the adjustment process is taking longer than anticipated.  The IEA says that global oil production fell by 1.5 mb/d in January, largely because OPEC cut 1 mb/d as part of its deal. The Paris-based energy agency said that the cuts were some of the largest in OPEC’s history and the 90 percent compliance rate is a sign that the group is intent on carrying out the agreement. If OPEC maintains the cuts at current levels, the IEA says that global inventories could fall by 600,000 bpd through June. The IEA said it would take a “wait and see” approach, but the agency was largely optimistic in its latest monthly oil market report.  Venezuela’s state-owned oil company PDVSA has “fallen months behind on shipments and fuel under oil-for-loan deals with China and Russia,” according to a new Reuters report. Russia and China are key benefactors of Venezuela, keeping it afloat during the worst economic crisis in recent memory. But Russia and China are also on the hook for a combined $55 billion to Venezuela, and needs to keep the oil flowing in order to recoup payment. Reuters says that PDVSA is behind by about $750 million in oil, which speaks to the depths of the crisis that Venezuela finds itself in.

Rig count up 12, 200 over last year -- The Baker Hughes North American Rig Count showed an increase of 12 rigs exploring for oil and gas on Friday, Feb. 10. This number shows an increase of 200 rigs to a total of 741 over last year’s count. Confidence that OPEC may stay true to its agreement to cut production could be driving the rig count increase. The Permian Basin gained six rigs, while the Eagle Ford and Marcellus each gained three. The Cana Woodford in Oklahoma lost 5 rigs after gaining a significant number over the past few weeks. The Utica also lost two rigs. By state, Louisiana and West Virginia each gained 2 rigs while Ohio lost 2. Texas gained 7, and New Mexico gained 4. Pennsylvania gained 1. The price of West Texas Intermediate Crude sits at $53.78/bbl at 3:00 PM EST. Brent Crude is $56.82 per barrel. Natural gas is down slightly at $3.04/MMBtu.

US Oil Rig Count Up On Rising Oil Prices - The number of active oil and gas rigs in the United States increased again on Friday by 12, taking aim at earlier gains to both WTI and Brent crude oil benchmarks. Both benchmarks were trading up over 2% earlier on Friday after an International Energy Agency report showed that OPEC‘s supply-cut deal achieved a record initial compliance rate of 90 percent.The total number of active oil and gas rigs in the United States is now 741, according to oilfield services provider Baker Hughes, which is 200 rigs above the rig count a year ago.The number of oil rigs went up from 583 last week to 591 this week. The number of active oil rigs in the United States is now the highest since October 23, 2015. Oil rigs have increased by 114 since the OPEC agreement was announced on November 30. While rig gains have been substantial in recent months, it’s still a far cry from the number of rigs in production on October 10, 2014, when the United States had 1,609 oil rigs in production—the highest number of active oil rigs since Baker Hughes began tracking the data in 1944. The number of gas rigs increased this week by 4, and now stand at 149, marking the thirteenth week of gas rig increases in the last 14 weeks. The coveted Permian basin gained six rigs this week, and now has 301 oil and gas rigs—129 rigs more than the same week last year. Eagle Ford and Marcellus each saw a three-rig increase this week, while Cana Woodford lost five rigs. All basins except for Barnett, Mississippian, and Williston have reached or exceeded the number of rigs in production a year ago.

Oil up on widespread OPEC deal compliance, U.S. rig count rises | Reuters: Oil prices rose on Friday after reports that OPEC members delivered more than 90 percent of the output cuts they pledged in a landmark deal that took effect in January. Supply from the 11 members of the Organization of the Petroleum Exporting Countries with production targets under the deal fell to 29.92 million barrels per day, according to the average assessments of the six secondary sources OPEC uses to monitor output, or 92 percent compliance. The International Energy Agency (IEA) - one of OPEC's six sources - said the cuts in January equated to 90 percent of the agreed reductions in output, far higher than the initial 60 percent compliance with a 2009 OPEC deal. "Some producers, notably Saudi Arabia, (are) appearing to cut by more than required," the agency said in a report. Global benchmark Brent crude LCOc1 settled up $1.07, or 1.9 percent, at $56.70 a barrel. It touched a session high of $56.88. U.S. West Texas Intermediate (WTI) crude futures CLc1 settled up 86 cents, or 1.6 percent, at $53.86 a barrel. Another increase in U.S. oil rigs limited gains in the afternoon. Drillers added eight oil rigs in the week to Feb. 10, bringing the total count up to 591, the most since October 2015, energy services firm Baker Hughes Inc (BHI.N) said. "From a psychological viewpoint, a big number to close above would be $54, and the rig count probably made that a little less likely,"

US Rig Count Rise Continues: What Will OPEC Do If The Market Doesn't Rebalance? --EIA confirmation of OPEC cut-compliance is trumping the dismal inventory data and surging US production for now. However, as US oil rig counts continue to rise (+8 to 591 - highest since Oct 2015) with US crude production charging ahead with it, the question many should be asking (given all-time record high net long speculative positioning in WTI/Brent) is "what will OPEC do if the market doesn't rebalance?" The rise in rig counts has been all Permian and all horizontal. Oil rig counts rose 8 this week to 591 - the highest since Oct 2015.US crude production reached new cycle highs (highest since April 2016) tracking perfectly with lagged oil rig count data... Oil algos seem willing to do 'whatever it takes' to get WTI green for the week... It seems rising production is no fear for speculators for now... But as EnergyFuse.com's Matt Piotrowski asks "what will OPEC do if the market doesn't rebalance?" Hedge funds and other investors have clearly overbought, the EIA expects shale to boom back to 9.5 million barrels per day (mbd) in 2018, U.S. stocks rose by a massive 14 million barrels last week, and OPEC producers not bound by quota (Libya and Nigeria) are pumping more volumes. There’s another issue worth noting—the OPEC cut might not be steep enough to rebalance supply and demand and also drain bloated inventories. Nothing will change materially in the market until there’s a significant stock draw, a development that appears doubtful, which could ultimately force OPEC to change strategy once again. Some OPEC ministers are already grumbling that the cartel’s production agreement, to manipulate fundamentals and boost prices, may not bring about a longer-term rebalancing and a sustained deficit. Iran’s Oil Minister Bijan Namdar Zanganeh said this week that OPEC will have to cut production in the second half. “OPEC talk that production cuts may be extended beyond their initial six-month term is a mixed signal,” said Tim Evans of Citi Futures, “an indication of commitment toward rebalancing the market but also an acknowledgment that there is more, ongoing work to be done.” The market has yet to achieve a deficit, although we are only a month and a half into the production cut. Based on the latest data from the EIA, OPEC slashed output by 910,000 barrels per day (b/d) in January, 76 percent compliance, but the global market was in surplus by more than 700,000 b/d. If OPEC continues at its current production levels for the rest of the year, and demand grows at the expected clip of 1.6 mbd, the global market will eventually see a draw. But this outlook makes a number of big assumptions that may not pan out.

Iran oil minister says OPEC output cut should be extended into second-half – Fars - Iranian Oil Minister Bijan Zanganeh said OPEC should cut crude production “a bit more” in the second half of 2017, Fars news agency reported. The Organization of the Petroleum Exporting Countries agreed on Nov. 30 to cut output by 1.2 million bpd to 32.5 million bpd for the first six months of 2017, in addition to 558,000 bpd of cuts agreed by non-members such as Russia, Oman and Mexico. OPEC members all agree that oil should be $60 a barrel, Fars quoted Zanganeh as saying.

Saudis To Raise $10 Billion Ahead Of Aramco IPO -- Saudi Arabia’s oil giant Saudi Aramco has hired four banks as advisers to its first bond sale, possibly by June this year, ahead of a planned initial public offering next year, Bloomberg reported on Monday, quoting people familiar with the matter. Aramco has picked HSBC Holdings’ local unit HSBC Saudi Arabia, as well as Riyad Capital, to advise it on the sale of riyal-denominated Islamic bonds, the so-called sukuk, before the end of the first half this year. In addition, NCB Capital Co and Alinma Investment Co are also said to be working on the sukuk sale, which is part of Saudi Aramco’s plans to generate US$10 billion in bond sale proceeds in 2017, according to one of Bloomberg’s sources. The sukuk issue could be followed by a dollar-denominated bond sale, according to others. Aramco’s possible bond sale would follow the Saudi Arabian government’s huge US$17.5 billion bond issue in October last year, which became the largest-ever emerging market bond sale and attracted orders from investors totaling nearly four times that amount. Apart from setting up talks with possible advisers for a bond issue, Saudi Aramco recently made the headlines with reports that an external audit of its oil reserves had confirmed that the Saudi oil giant has more than 261 billion barrels of reserves.   In view of next year’s share listing, Saudi Aramco is required to provide an independent audit of its reserves. Significantly higher or lower reserves would greatly change the evaluation of the company, which Saudi officials say is worth around US$2 trillion. Although Saudi Arabia plans to sell just 5 percent of Aramco’s shares, its IPO is expected at around US$100 billion, the world’s largest ever.

Islamic State sees chance to revive fortunes in Trump presidency | Reuters: President Donald Trump has set out to crush Islamic State when it is already at a low ebb, but Islamists and some analysts say his actions could strengthen the ultra-hardline group by creating new recruits and inspiring attacks on U.S. soil. IS has been weakened in recent months by battlefield defeats, the loss of territory in Iraq, Syria and Libya, and a decline in its finances and the size of its fighting forces. Trump's pledge to eradicate "Islamic extremism" looks at first sight to be yet another blow to Islamic State's chances of success. But Middle East experts and IS supporters say his election triumph could help revive the group's fortunes. They also believe his move late last month to temporarily ban refugees and bar nationals from seven mainly Muslim countries could work in the group's favor. The executive order, on which IS has been silent, is in limbo after being overturned by a judge. But whether or not it is reinstated, it has angered Muslims across the world who, despite Trump's denials, see it as evidence that he and his administration are Islamophobic. The White House did not immediately respond to a request for comment on the accusations of Islamophobia. But White House spokesman Sean Spicer said last week: "The president's number one goal has always been to focus on the safety of America, not the religion. He understands that it's not a religious problem." Denying the travel ban would make the United States less safe, Spicer has said "some people have not read what exactly the order says and are reading it through misguided media reports."

Trump’s Plan to Fight ISIS With Putin Isn’t Just Futile. It’s Dangerous. -- America and Russia fighting on the same side against ISIS: This is the radical realignment that President Trump has been dangling as the linchpin of his promised reboot of the global war on terror. Pressed on the wisdom of working with Russia, Trump defended the idea not by denying that Putin is “a killer” and a potentially problematic partner for this fight, but by saying that we should work with Russia because America is not “so innocent” and has “a lot of killers around,” too. ..The President’s statement drew immediate bipartisan fire, with voices from both sides of the aisle calling Putin a thug and pointing out that journalists and political opponents alike often end up dead in Russia. But Trump’s broader plan is no less fraught than the casual moral equivalency he drew. The differences between our wars on terror run as deep as those between our nations. On the surface, the idea of partnership with another powerful and capable military to share the burden of fighting the Islamic State may sound tempting. The truth is that it is both pointless and dangerous for America to fight ISIS alongside Russia. Pointless because the Russians are not there to fight ISIS — their real goals in the region have nothing to do with eliminating the terror group, but with empowering Assad and other anti-American allies. Dangerous because the United States and Russia share neither common goals nor common tactics. Our forces are not interoperable, and neither is the way we fight wars. Russians operate differently from Americans at every level of conflict — tactically, operationally, and strategically. There is no established trust between our nations or our forces, and the place to build that trust is not during a major operation where our goals are fundamentally misaligned. There is simply no way to make Russia our partner in this fight without betraying the values we defend as a nation, betraying the principles we endeavor to uphold in this war, and betraying the force we have built to fight it. If Trump pushes ahead anyway, what are we in for?

Cost Of War Against ISIS Reaches $11 Billion -- Since the air war against the so-called Islamic State kicked off in August 2014 ,the United States has spent just under $11 billion financing it. According to the most recent Pentagon figures, Statista'a Niall McCarthy reports that the bill for the campaign hit $10.99 billion as of December 31, 2016. On a daily basis, the cost of operations against the terrorist group averages $12.5 million. Since 2014, the cost of flying operations has reached $4.4 billion while $2.4 billion of munitions have been expended against ISIS targets. As of January 27, U.S. and coalition warplanes had flown 136,067 sorties to degrade and destroy the terrorist organization. 17,734 strikes had been carried out by the middle of last week with 10,948 occurring in Iraq and 6,785 happening in Syria. 31,900 targets had been reported damaged or destroyed by late September of last year including 164 tanks, 388 humvees and 8,638 fighting positions. A military official told CNN in early December that as many as 50,000 ISIS fighters are believed to have been killed since military operations began in 2014. In other words, the United States has spent on average $220,000 per dead ISIS fighter in the 'war on terror'... so far.

Trump Set To Approve Weapons Sales To Saudi Arabia, Bahrain Blocked By Obama - There was cheering among the libertarian community when, in the last months of his administration, Barack Obama decided to halt some arms sales to Saudi Arabia, following "allegations" of war crimes perpetrated by the kingdom in Yemen. However, it appears that Saudi Arabia - despite its clear predisposition toward Hillary Clinton in the presidential race - has made even deeper inroads into the White House than many suspected because according to the Washington Times, the Trump Administration is poised to "quickly approve" not only the deal rejected by Obama. According to the Wash Times, citing one U.S. official directly involved in the transfers, a roughly $300 million precision-guided missile technology package for Riyadh and a multibillion-dollar F-16 deal for Bahrain are now in the pipeline ready for clearance from the new administration. The deals, if approved, would send a clear signal about the "priorities of the new administration." For one it would suggest that Saudi Arabia is once again a clear beneficiary of US weapons exports, which would suggest that the proxy war in Yemen, fought largely with US-made weapons, will continue. The source spin is that the US delivery is meant to help defend the Saudis from potential ISIS terrorist threats, as well as concerns about Iran. “These are significant sales for key allies in the Gulf who are facing the threat from Iran and who can contribute to the fight against the Islamic State,” said the official, who spoke on condition of anonymity. “Whereas the Obama administration held back on these, they’re now in the new administration’s court for a decision — and I would anticipate the decision will be to move forward.” If confirmed, it would suggest that contrary to expectations of a military de-escalation in the middle east, the Trump administration will contribute further US military involvement, both direct and indirect, in the region.  Already Trump has vowed to create "safe zones" in Syria, a decision which critics have blasted as assuring even more US troops are sent into harm's way.

Strike in Yemen missed al Qaeda leader: report | TheHill: President Trump’s first counter-terrorism offensive missed its primary target, according to a new report from NBC Nightly News.Military and intelligence officials told NBC that the Jan. 29 raid in Yemen was aimed at taking out Qassim al-Rimi, an al Qaeda recruiter and one of the most sought after terrorists in the world. The operation’s main goal failed, however, and NBC has obtained an audio tape it says military sources have authenticated of al-Rimi taunting Trump in the aftermath of the offensive."The fool of the White House got slapped at the beginning of his road in your lands," al-Rimi allegedly says in the recording. It is unclear whether al-Rimi was at the compound at the time of the U.S. strike and escaped, or whether he was somewhere else altogether. The raid in Yemen has become a flashpoint of controversy. Chief Special Warfare Operator William "Ryan" Owens, 36, a Navy SEAL was killed in the strike and four other service members were injured. U.S. Central Command acknowledged “regrettably that civilian non-combatants were likely killed.” There are reports that these number as high as two-dozen and include women and children. Reuters cited U.S. military officials in a report claiming that the operation was approved without sufficient intelligence, ground support or adequate backup operations. The White House has pushed back strenuously against those reports, providing a detailed timeline of the weeks-long vetting and preparation that took place in advance of the raid.

Yemeni Journalist Allegedly Poisoned After Oil Company Probe  - An autopsy has reportedly shown that top Yemeni investigative journalist Mohammed al-Absi, who died under mysterious circumstances in December, was poisoned.The journalist died in the Yemeni capital Sana’a after having dinner with a cousin. He was said to have been investigating oil companies and had recently published a series of reports on government corruption.  His death had sparked suspicions from his family and the Yemeni journalists’ union who are now demanding an investigation into his death."We are troubled by the passing of Mohamed al-Absi in such unclear circumstances and support his family and the YJS in their demands for a serious and independent investigation in the case as well as an autopsy by a doctor representing the union to clarify the cause of his death," said President of the International Federation of Journalists (IFJ), Philippe Leruth, which has joined the Yemeni Journalists Syndicate (YJS) in demanding a probe.Al-Absi was a prominent Yemeni investigative journalist said to have been investigating oil companies owned by Houthi leadership. He had published a series of reports over the past years, focused on corruption, particularly in the energy industry and in relation to arms deals.Human rights activists are responsible for the claims that Al-Absi was investigating oil and gas companies allegedly operating on the black market. Activists published several documents that were in the journalist’s possession after his death.One of the published documents concerns Houthi spokesman Mohammed Abdul Salam, alleging that he owns an oil company that sells on the black market in Houthi-controlled areas. The autopsy report comes amid an intensifying proxy war being played out in Yemen between Iran and Saudi Arabia.

The U.S. military’s stats on deadly airstrikes are wrong. Thousands have gone unreported -- The American military has failed to publicly disclose potentially thousands of lethal airstrikes conducted over several years in Iraq, Syria and Afghanistan, a Military Times investigation has revealed. The enormous data gap raises serious doubts about transparency in reported progress against the Islamic State, al-Qaida and the Taliban, and calls into question the accuracy of other Defense Department disclosures documenting everything from costs to casualty counts. In 2016 alone, U.S. combat aircraft conducted at least 456 airstrikes in Afghanistan that were not recorded as part of an open-source database maintained by the U.S. Air Force, information relied on by Congress, American allies, military analysts, academic researchers, the media and independent watchdog groups to assess each war's expense, manpower requirements and human toll. Those airstrikes were carried out by attack helicopters and armed drones operated by the U.S. Army, metrics quietly excluded from otherwise comprehensive monthly summaries, published online for years, detailing American military activity in all three theaters. Most alarming is the prospect this data has been incomplete since the war on terrorism began in October 2001. If that is the case, it would fundamentally undermine confidence in much of what the Pentagon has disclosed about its prosecution of these wars, prompt critics to call into question whether the military sought to mislead the American public, and cast doubt on the competency with which other vital data collection is being performed and publicized. Those other key metrics include American combat casualties, taxpayer expense and the military’s overall progress in degrading enemy capabilities.

Analysis: Iran takes market share from OPEC rivals - Iran's crude oil and condensate exports rose 3% month on month in January as it continued to regain market share, widening its appeal among refiners around the globe in the process. Total estimated export volume on Aframaxes, Suezmaxes and VLCCs from Iranian ports in January climbed to 2.162 million b/d from 2.102 million b/d in December, data from cFlow, S&P Global Platts trade flow software, showed. Iran was the only Middle Eastern producer to see exports rise in January, as others, like Iraq, Kuwait, Saudi Arabia, and the UAE, saw a fall in loadings, in line with agreed OPEC-led output cuts by crude producers. Unlike its peers under the landmark OPEC-led agreement, Iran has wiggle room to boost production to 3.80 million b/d.  Iranian crude is similar in quality to barrels from other OPEC countries in its region, meaning this is an ideal time for it to broaden its customer base, sources said. Output in January rose to 3.72 million b/d, up 30,000 b/d from December, a monthly survey of OPEC output by Platts found, meaning Iran seems intent on reclaiming ground lost under years of sanctions that crippled its oil sector.  One of the main reasons for the rise in output has been a gradual increase in production from the South Azadegan field, in the strategic West Karun region, according to sources and oil ministry officials. In recent months, Iran has signed a number of upstream development deals as part of its plans to boost oil and gas exports to pre-sanctions level of four million b/d.

Iranian Oil Will Not Be Stopped By Trump --  Despite new sanctions by the Trump Administration and an escalating war of words regarding its ballistic missile program, Iran is continuing to push ahead with plans to maintain oil production at around 3.8 million bpd, the level agreed upon at the November OPEC meeting last year. In order to do so, Iran will need to attract billions in new investment, as its current production is based on aging fields and crumbling infrastructure. To maintain the current production level while continuing to export and meet domestic demand, Iran will need at least $100 billion in new investment. The announcement of the new sanctions caused a slight tremor in prices, which was offset by inventory reports and reviving U.S. output. If tensions between the U.S. and Iran were to escalate, it would place upward pressure on prices.Iran is set to announce a round of tenders in mid-February. Originally set for January, the tenders were delayed several weeks, in part due to disagreements within the Iranian government (which oversees the National Iranian Oil Company, or NIOC) over how best to attract foreign investment. Debates over new oil contracts raged all last summer, as the question of inviting more foreign companies into Iran is beset with political significance in a country still considerably isolated from international capital, as well as one that has a long history of distrusting foreign oil companies. According to Reuters, the first round of tenders has been repeatedly delayed, while major companies have made only hesitant inroads into Iran. Shell signed a provisional deal in December to develop three large oil and gas fields, but has yet to act on it. French company Total agreed in principle to a $2 billion deal to develop the South Pars natural gas field, with a 50.1 percent stake in the project

Iran says U.S. sanctions stop American oil firms taking part in projects | Reuters: Iran has imposed no restrictions on U.S. oil firms willing to participate in energy projects in the country but American sanctions make such cooperation impossible, Iran's deputy oil minister said on Monday. "Iran has not imposed any restrictions on the U.S. companies, but they cannot participate in our (oil and gas) tenders due to the U.S. laws," Amir Hossein Zamaninia, deputy oil minister for trade and international affairs, was quoted as saying by state news agency IRNA. "Based on the U.S. Congress sanctions, the American oil companies cannot work in Iran," he added. Iran said on Saturday that it will hold the country's first tender in mid-February since the lifting of international sanctions to develop oil and natural gas fields. OPEC's No. 3 oil producer hopes to draw foreign companies to invest in Iran and boost output after years of under-investment. However, foreign firms have so far made little inroads into the country despite the lifting of sanctions. President Donald Trump's new U.S. administration on Friday imposed fresh sanctions on Iran, which it said were just initial steps. It said Washington would no longer turn a "blind eye" to Iran's hostile actions. Dismissing the new sanctions, Zamaninia said "such actions have had no effect, and international companies are still keen to do business with Iran."

Iran Carries Out Military Drills as Standoff With U.S. Heats Up - Iran held military exercises involving missile and radar systems Saturday, just a day after the Trump administration imposed new sanctions on Tehran for a recent ballistic missile test.The morning drills were an illustration of the Islamic Revolutionary Guard Corps’ rejection of sanctions and preparedness to deal with threats, according to the guards’ official website.“We will do our best to defend the Iranian nation’s security day in and day out, and if the enemy makes any mistake our roaring missiles will land on their heads,” Brig. Gen. Amirali Hajizadeh, the IRGC aerospace forces’ commander, was quoted as saying. The aerospace unit of the IRGC, an elite military force charged with protecting the country’s Islamic system, carried out the drills in Semnan province, east of Tehran. It wasn’t immediately clear if any ballistic missiles were launched as part of the exercise.A ballistic missile test in Semnan province about a week ago led to new U.S. Treasury Department sanctions Friday against officers and business executives tied to the IRGC. They were alongside sanctions on more than two dozen Iranian, Chinese, and Emirati businesses and individuals for their alleged role in supporting Iran’s ballistic missile program.  It is unclear how the Trump administration will respond to the latest drills, but they appeared to mark a further escalation in a standoff that has intensified by the day. The U.S. and Israel want to contain Iran’s missile development, fearing the munitions could be pointed at Israel and possibly equipped with nuclear warheads. Israeli and Trump administration officials say the tests violate a 2015 United Nations Security Council resolution that called upon Iran not to develop and test missiles designed to be capable of carrying nuclear weapons.

"When Trade Stops, War Starts" Jack Ma Warns As China Protests US Sanctions On Iran -- Having recently accused the US of 'wasting $14 trillion on war instead of its people',China's second richest man, Jack Ma, continued to voice his concerns to President Trump on a recent trip to Australia, warning retreat from globalization will only result in trouble. While meeting US President Donald Trump last month, Ma announced Alibaba would help to create a million jobs in the US, but speaking in Melbourne, where the e-commerce giant Alibaba opened its Australia and New Zealand headquarters, RT reports that Ma warned...“Everybody is concerned about trade wars. If trade stops, war starts,”“But worry doesn't solve the problem. The only thing you can do is get involved and actively prove that trade helps people to communicate,”The globalized economy is more than just transactions of money and goods, according to Ma.“We have to actively prove that trade helps people to communicate. And we should have fair trade, transparent trade, inclusive trade,” he said.“Trade is about a trade of valu es. Trade of culture,” said the billionaire, stressing that he felt a personal responsibility to fly more than a hundred thousand kilometers in the past month to promote global commerce.

Are We Likely To See A Clash Over Resources In The South China Sea? -- Sparks of hostility are flying between Beijing and Washington, kindled by China’s expansionist policies in the South China Sea – a major shipping route and a reservoir of oil and gas – and the U.S.’s unwillingness to adhere to China’s warnings for its vessels to stay away from its territorial waters there.President Trump has voiced criticism of China more than once, both on the campaign trail and after entering office. His attitude was echoed by Secretary of State Rex Tillerson during his confirmation hearing, when he said he would take a tough stance on China’s expansion in the South China Sea, preventing its army from accessing artificially created islands used as military bases.Tillerson’s stance is in tune with other representatives of the Trump administration, but for some observers, this stance reflects a conflict of interest with his former employer, Exxon. One such observer, Steve Horn, notes in an analysis of the South China Sea situation, how Exxon has been building a presence in the region despite pressure from China.Last month, Exxon announced a US$10-billion deal with PetroVietnam for the development of a natural gas field in Vietnam’s sector of the South China Sea. The company also has interests in Indonesia, via a production-sharing agreement with local state-owned major Pertamina, and in Malaysia, where it is partnering with local Petronas on several offshore projects.  For those who doubt Tillerson’s bona fides, this must look like a pretty extensive presence – sufficient to use as an argument of a possible conflict of interest. The argument could be solidified – from a certain perspective – by adding to it the fact that Gazprom and Rosneft are also building a presence in the region, notably in Vietnam.  For critics, the interests of Exxon and the Russian energy firms overlap in a suspicious way – though it’s worth asking the hypothetical question whether this overlapping would have been identified as such had Tillerson had no history with the Kremlin.