before we get to this weeks news, we're going to add a postscript to last week's coverage of the oil bomb trains....in all the excitement of reporting about trains & refineries blowing sky high in various parts of the country and Canada, we forgot to point out that a lot of that fuel being hauled cross country isn't even intended for our use; it's for export...in tracking the trade report for years, i've noticed that while fracking increased, our exports of refined products have been increasing, but because the data in the monthly trade reports from the Commerce Dept is reported in dollars and prices change continuously, it's been difficult to get a handle on how much...however, the reports from the energy Department give us the data on production and exports in barrels of oil and refined product, so we can check their records and discover exactly what has been going on under the guise of drilling our way to energy independence...
as you may recall from our discussion of the Obama administration's ruling allowing exports of ultralight oils originating from US oil shale wells, exports of US crude are prohibited by the Energy Policy and Conservation Act of 1975, except in the cases of special licenses given by the Commerce Dept, or in trade with Canada and Mexico, where NAFTA specifically mandates that trade...hence our exports of crude oil itself aren't too significant, and have generally been well less than 5% of total output until recent months, probably rising now as our exports of light Bakken crude to Canada have increased as a blender for the much heavier Canadian crude...a screenshot of an interactive graph from the EIA of our monthly crude exports since 1920 is shown below, which indicates that we exported 13,692,000 barrels of crude in December, a bit less than 5% of our 286,003,000 barrels of crude production for the month...
on the other hand, our total exports of refined products has continued to increase as fracking increased...the graph below, also from the EIA, shows our total exports of finished refined products since 1980...in December of 2014, US based oil companies exported 96,368,000 barrels of finished products, about in line with recent US refinery exports of 97,570,000 barrels , 92,803,000 barrels, and 98,373,000 barrels in December 2011, 2112 and 2013 respectively, but more than twice the 42,032,000 barrels of product US refiners exported in December 2007...in 2013, the last year the EIA (Energy Information Administration) has complete annual data for, the output of US refineries and fuel blending facilities totaled 6,746,361,000 barrels of various finished refinery products; in that same year, 970,997,000 barrels, or 14.4% of our total refinery output, was shipped out of the country...
NB: so we all have a sense of what kind of fuels we're exporting, we'll include a few graphs of those exports here...but for the remainder of this discussion we'll use 2013 totals, because although the EIA published December 2014 data on Friday, they have not updated their annual data and graphs, and monthly data is too noisy to easily use to accurately show the trend...when they update their annual stats, we'll update the remainder of the data and graphs we use here and repost it...
the next graph from the EIA shows 70 years of total US exports of various grades of distillate fuel oils, the majority of which are most often used as home heating oil and diesel fuel...in 2013, US refiners exported 413,888,000 barrels of fuel oil, or about 24% of our total 2013 distillate fuel oil production of 1,727,493,000 barrels...that's more than a 10 fold increase from the 40,101,000 barrels of fuel oils we exported in 2004, and clearly US exports of fuel oil continue to accelerate...
the next graph from the EIA shows 80 years of US exports of various blends of gasoline; in 2013, we exported 136,146,000 barrels of gasoline, a little more than 4% of our total 2013 production of 3,370,460,000 barrels of gasoline...while that was down from the 174,776000 barrels of gasoline US refiners exported in 2011, it's still almost 3 times as much as the 46,369,000 barrels of gasoline we exported in 2007...
you'll recall that one of the trains that exploded into flames last week was carrying ethanol; the EIA also shows that 14,737,000 barrels of ethanol were exported in 2013, which would work out to about 4.7% of our 2013 ethanol production of 316,493,000 barrels..but new data out this week from the renewable fuels association shows that US ethanol exports increased to 836 million gallons in 2014, nearly 6% of our 2014 production...that's quite remarkable considering the amount of ethanol we are compelled to use ourselves in our gasoline, and the environmental damage done by pressing marginal farmland into use for it...nearly 40% of our corn crop goes to produce ethanol, and if you didnt know already, more than 89% of US corn is now generically engineered to allow for use of herbicides...
we'll include one more export graph showing US exports of jet fuel annually since 1980...in 2013, US refiners exported 56,989,000 barrels of jet fuel, or about 10.4% of our total 2013 jet fuel production of 547,275,000 barrels...those exports represent nearly a 4 fold increase from the 15,010,000 barrels of jet fuel we exported in 2007, as shown in the interactive screenshot, and once again we can see these exports are nearly rising exponentially..
next, we're going to look at a graph that includes total US crude oil production over roughly the same time span...although the EIA graph below shows US crude oil production since 1860, you can see that recent oil output clearly bottomed in 2007 and 2008, at 1,853,166,000 barrels and 1,830,002,000 barrels respectively, and that US crude production had increased by more than 50%, to 2,717,876,000 barrels by 2013...of course, given that we’re fracking half the country, that's not a surprise, but notice that the pickup in production coincides with the increase in exports we saw in the earlier graphs...lets take a closer look at that relationship next...
using 2007 as a common baseline, our field production of crude oil rose by 864,710,000 barrels over the period from 2007 to 2013, from 1,853,166,000 barrels in 2007 to 2,717,876,000 barrels of crude in 2013...over the same period, our exports of refined products more than doubled, from 455,240,000 barrels in 2007 to 970,997,000 barrels in 2013...that's an increase in our refined products exports of 515,757,000 barrels, or on a purely number of barrels basis, nearly 60% of the increase in oil production that we had over the same period...now, we understand comparing crude to refined products is an apples to oranges comparison, and that one barrel of crude might produce just 16 gallons of gasoline; 8 gallons of diesel fuel, a gallon of tar and a multitude of other refined products...in addition, we know we haven't even considered oil imports, some of which are also refined and exported...but oil is fungible, so just on a quantity of liquids basis, we can still say that it's as if well over half of the new oil production brought about by hydraulic fracking has not gone to benefit Americans in terms of lower priced fuel and heat oil, but has, in effect, been shipped out of the country to enrich the oil companies...and it's not the lower quality bi-products of petroleum, like asphalt, that are being exported; it's the high grade fuels like gasoline, diesel and jet fuel...and we're not talking about supporting a lot of jobs here either; the ongoing strike of 6,500 refinery workers is said to account for 20% of US refining capacity, so by extrapolation there wouldn't be many more than 35,000 non-management refinery employees in the entire US..
which brings us to the 200 deaths that we have headlined this missive about...in the wake of the 3 exploding oil trains that headlined last weeks news, an AP exclusive brought to light a previously unreported analysis by the Department of Transportation that forecasts that an average of 10 oil or ethanol carrying trains will derail and catch fire every year over the next 20 years, causing between $4.5 billion and $6 billion in damages, and probably killing around 200 people when one of those trains eventually derails in a populated area….8% of us live in an oil train’s expected blast zone, and the government expects that 15 such trains will probably derail this year, and presumably as safety improvements are made, the number of derailments and could be reduced to 5 a year by the year 2034...but remember, those railcars involved in last week's conflagration in West Virginia were already the safer new model cars, and the track and the train that derailed in Canada had just passed a state of the art inspection check...as we've just seen, many of these trains are now traversing the country, from North Dakota to east coast refineries (up to 80 a week through Philadelphia alone), not for our betterment, but for the purpose of delivering profits to the oil companies...and as a dozen or more trains derail this coming year and dozens of us are likely killed, it will serve as an acknowledgement that to the government-energy nexus, dead Americans are now no more than the expected cost of doing business, collateral damage in the eternal war to make profits from oil, whose lives are just as expendable as a wedding party on their way to a contested village in the Mideast...
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in this week's news from the EIA, we learned that in the 3rd week of February, crude oil production rose to another all time record high of 9,285,000 barrels a day, up from 9,280,000 barrels a day the previous week and up from 8,059,000 barrels a day during the third week of February last year...they also noted that for that same week, crude oil inventories increased by 8.4 million barrels from last week's 425.64 million barrels to 434.1 million barrels, the greatest level of inventories for any February in at least the 80 years that they have records for...also of note from that weekly 62 page pdf report, they report that despite those massive inventories, U.S. crude oil imports averaged 7.3 million barrels per day last week, up by 174,000 barrels per day from the week ending February 13th, and that the 4 week average of imports continued at 7.3 million barrels per day, only 0.7% below our imports in the same four-week period last year...US oil prices, meanwhile, dropped back below $50 a barrel for the first time in 3 weeks on the high inventory numbers, closing as low at $48.17 on Thursday, and then climbed back to close the wee at $49.76 a barrel on tight supplies of gasoline and diesel fuel...
activity in the oil patch again continued to slow last week, as 43 more drilling rigs were taken out of service, following the 48 that were idled in the previous week...for the week ending February 27th, Baker Hughes reported the count of working drilling rigs fell to 1267, down from the 1310 drilling rigs that were operated during the week of February 20th...the count of oil rigs was down by 33 to 986, while operating gas rigs fell by 9 to 280, and the count of miscellaneous rigs was down by 1 to 1...of those rigs running, 1208 were based on land, down 42 from last week, while 8 were set up on inland waters, up 2 from a week earlier...meanwhile, in US waters offshore, the count of drilling operations fell to 51, down 3 rigs from last week, and down 4 rigs from a year earlier...the Williston Basin saw the greatest reduction of rigs, with 12 stacked there this week, leaving 111 active, and hence North Dakota saw the greatest drop of any state, with their rig count falling by 11 to 108...the count of working horizontal rigs fell by 33 to 946, while the count of active vertical rigs fell by 9 to 194, and the count of directional rigs fell by 1 to 127...this left the US rig count 502 rigs lower than the count from last February 28th, when 1769 rigs were in use, with oil rigs down 444, gas rigs down 55, and miscellaneous rigs down 3 from a year ago...
in more than a dozen Ohio related links immediately below, we have additional discussion on the Monroe Falls vs Beck Energy case, more on Kasich's proposed severance tax, and reports on a ODNR report that indicate that year over year Ohio production of oil increased by 250% in the 4th quarter and output of natural gas nearly quadrupled...and we also learn that Chesapeake, who has more Ohio drilling permits than the next 5 largest drillers combined, will be reducing their operations in Ohio's Utica shale as part of a 37% reduction in operations nationwide; just 10% of their drilling budget will be spent on Utica wells, where they plan to use three to five rigs, down from eight last year, and four fracking crews...
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PUCO moves AEP agreement to the top of its to-do list -- After putting it on the back burner for a year, the Public Utilities Commission of Ohio is finally making its decision regarding American Electric Power Company Inc.’s proposed power purchase agreement.TheColumbus-based utility submitted a power purchase agreement proposal to state regulators as part of its rate case during 2013. Although controversy is not unfamiliar to the PUCO, AEP’s contentious case would allow guaranteed income for its share of a coal-fired power plant located in Ohio until 2040. If the PUCO approves the agreement this afternoon, AEP Ohio would be ensured a profit from the power sold from the plant and the chances for another equal or greater proposal to be approved are greater. Seems pretty clean-cut, right? Well, if the power sold from the plant is less than what the AEP Ohio spends, every single customer within the company’s service area is responsible for making up the difference through an extra charge on their bill. However, if the AEP does sell enough power from the plant, customers would receive credit on their bills instead of a lovely extra charge. According to AEP Ohio, the deal would give the company and its ratepayers stability from shifting energy prices and would also keep the company from selling off its plants.
Gov. Kasich defends tax increase on oil and gas drillers — Ohio’s governor is making his case for a proposed tax increase on the oil and gas industry, saying it won’t deter production in the state. Gov. John Kasich (KAY’-sik) has called for a fixed rate on crude oil and natural gas of 6.5 percent at the wellhead, and a lower rate of 4.5 percent for natural gas and natural gas liquids sold downstream. He discussed the proposal Tuesday during his State of the State speech. Proceeds from the increase would help reduce the state income tax. The governor’s fellow Republicans who control the Legislature have repeatedly scrapped Kasich’s past attempts to raise the tax, amid pushback from anti-tax groups and the industry. Kasich said he was disappointed in detractors who say the tax increase would kill the industry, calling such talk “a big fat joke.”
Ohio Supreme Court decision makes future of local fracking regulations unclear - Lexology: On February 17, 2015, the Ohio Supreme Court issued a 4-3 decision in State ex rel. Morrison v. Beck Energy Corp., holding that the Home Rule Amendment to the Ohio Constitution does not grant local governments the power to regulate oil and gas activities and operations within their limits. Specifically, the Court held that Ohio Revised Code Chapter 1509 gives state government “sole and exclusive authority” to regulate the permitting, location, and spacing of oil and gas wells and production operations within the state. The Ohio Supreme Court instructed that a municipal ordinance must yield to a state statute if: (1) the ordinance is an exercise of police power, rather than local self-government; (2) the statute is a general law; and (3) the ordinance is in conflict with the statute. First, the Court found that the ordinances, which prohibited the act of drilling for oil and gas without a permit, did not regulate the form and structure of local government. Thus, the Court held, and the City conceded, that the ordinances represented an exercise of police power rather than local self-government. Second, the Court found that R.C. 1509.02 is a general law because it satisfies the four definitive conditions of a general law: (1) it is part of a statewide and comprehensive legislative enactment; (2) it applies to all parts of the state alike and operates uniformly; (3) it sets forth police, sanitary, or similar regulations; and (4) it prescribes a rule of conduct upon citizens. The City attempted to argue that R.C. 1509.02 failed the uniformity requirement because only the eastern Ohio region contains economically viable quantities of gas and oil. The Court rejected this argument, stating that a general law can operate uniformly even if there is a disparate geographic effect within the state. Finally, the Court held that the City’s ordinances were in conflict with R.C. 1509.05 because they operated to prohibit what the state statute permitted – oil and gas drilling. Additionally, the Court held that the state statute provided the Ohio Department of Natural Resources the sole and exclusive authority to regulate oil and gas wells and production operations.
Officials and activists react to state high court ruling against local fracking laws: The Ohio Supreme Court ruled Tuesday 4-3 against a local oil-and-gas drilling and zoning ordinance in Munroe Falls, saying the local drilling regulations and resrictions cannot be enforced because they conflict with state law. Munroe Falls, located between Akron and Kent in Northeast Ohio, attempted to use its long-standing local zoning code to tell companies where they could and couldn't drill for oil or gas in the village. On Nov. 4, voters in the city of Athens passed its own ordinance that attempts to regulate oil-and-gas drilling activities with a "community bill of rights" intended to protect local water supplies and public health with a ban on fracking and related practices within city limits.The so-called fracking ban passed with an overwhelming majority of 79 percent for the initiative and 21 percent against. Voters in other Ohio cities including Gates Mills, Kent and Youngstown each rejected similar proposals. The Munroe Falls v. Beck Energy decision sets a precedent that does not bode well for the Athens law, or any similar local laws in Ohio communities that could be challenged in court, though at this time it doesn't seem likely that oil and gas companies will seek to conduct drilling activities within the city of Athens. Interim Athens Law Director Lisa Eliason said Wednesday that the state high court ruled that the Home Rule Amendment to the Ohio Constitution does not give Munroe Falls the power to enforce its own permit program, on top of the state regulatory system."It remains to be decided whether the General Assembly intended to wholly supplant all local zoning ordinances limiting land uses to certain zoning districts without regulating the details of oil and gas drilling expressly addressed by R.C. Chapter 1509."
Ohio's oil-and-gas industry donations, ruling tied? - Columbus Dispatch - An Ohio Supreme Court justice lamented last week that “the oil and gas industry has gotten its way” in a decision that says local governments can’t regulate drilling. “What the drilling industry has bought and paid for in campaign contributions they shall receive.” The dissenting opinion of Justice William M. O’Neill in a fracking case was not without factual basis: Ohio’s oil-and-gas industry poured about $1.4 million into the campaign coffers of legislators and other state officials in 2013-14 — including about $8,000 for the justice who wrote the pro-industry ruling and $7,200 for another who concurred — a Dispatch computer analysis shows. “What I liked about Justice O’Neill’s opinion was his willingness to point out the elephant in the room,” Catherine Turcer, policy analyst for Common Cause-Ohio said. “In this case, the elephant got almost $1.5 million.” O’Neill is one of the only public figures on Capitol Square who can criticize the influence of campaign contributions and not come off sounding like a hypocrite. He raised only about $5,000 in his 2012 campaign, all from his own pocket. He did not take a single outside campaign contribution. Justice Judith L. French authored the majority opinion in Tuesday’s 4-3 ruling that said state law trumped local ordinances designed to keep fracking out. The decision was based on a 2004 law whose prime sponsor was a legislator named Tom Niehaus, a New Richmond Republican who went on to serve as Senate president. The year after leaving office, he became a registered lobbyist for the Ohio Oil and Gas Association and BP America, concentrating on “legislation relating to the operation of oil and gas interests and operations,” according to his registration. He also signed up to lobby the governor, attorney general and 17 executive-branch agencies on oil-and-gas interests.
'Drill Wherever!' Ruling Raises Doubts Over Ohio Supreme Court's Neutrality -- If a town in Ohio doesn’t want to allow fracking within its limits, that’s too damn bad, the Ohio Supreme Court has declared. As the Columbus Dispatch writes, a new ruling from the state’s highest court says that the state has the sole authority to decide where drilling can occur and therefore local municipalities cannot pass ordinances to try to prevent fracking. The issue wound up in court after Ohio approved fracking permits in areas that municipalities had declared off limits. The fight is a common one – last year, Texas said it would ignore the ban that voters in Denton passed and continue issuing drilling permits in the town. With a slight majority, four out of seven Supreme Court justices declared that conflicting local ordinances make it too difficult for the state to offer licenses so the state of Ohio should have the deciding say on drilling. The decision is certainly peculiar considering that this sudden “conflict” seems to only apply to fracking. Towns have always been able to enact their own zoning laws to determine how land can be used, and that doesn’t lead to many problems, let alone cause the whole system to fall apart. The majority ruling was careful to specify that its decision applied specifically to “oil and gas activities” so as not to disrupt all local ordinances. Why would the Ohio Supreme Court carve out such a firm exception for the gas and oil industries? Dissenting Justice Bill O’Neill believes that it boils down to his peers receiving campaign donations from executives in this sector. “What the drilling industry has bought and paid for in campaign contributions, they shall receive,” he said. “The oil and gas industry has gotten its way, and unceremoniously taken away from the citizens of Ohio.”
Ohio Supreme Court gives oil and gas primacy over community rights in 4-3 ruling - Columbus Community Issues - "The Ohio Supreme Court has just added to the already mounting evidence that the people of Ohio do not live in a democracy and are not free to determine what corporate projects can come into their communities," said Tish O'Dell, Ohio organizer for the Community Environmental Legal Defense Fund. "The Supreme Court has just laid the last brick in the money-paved road to turn our communities into resource colonies for the oil/gas industry's profits."O'Dell was responding to the Ohio Supreme Court's ruling on Tuesday that the Ohio Department of Natural Resources' power to issue drilling permits overrides a city ordinance in Monroe Falls that bans fracking. "The Ohio General Assembly has created a zookeeper to feed the elephant in the living room," wrote Justice William O'Neill in a dissenting opinion on the 4-3 ruling. "What the drilling industry has bought and paid for in campaign contributions they shall receive. "The oil and gas industry has gotten its way, and local control of drilling-location decisions has been unceremoniously taken away from the citizens of Ohio," Justice O'Neill wrote. "Under this ruling, a drilling permit could be granted in the exquisite residential neighborhoods of Upper Arlington, Shaker Heights, or the Village of Indian Hill — local zoning dating back to 1920 be damned." “Consent of the governed no longer matters in the three branches of state government," Tish O'Dell said. "All three have been captured by corporate cash, corporate corruption, corporate law-making and corporate privileges held supreme over the general rights of the people. "Inalienable rights to local community self government, the right to clean air and water, and the right to protect our health, safety and welfare are higher law than state preemptions, higher law than ODNR administrative dictates," O'Dell said. "The court, the legislature, and this governor have presumed to surrender the rights of the people of Ohio to the corporations. They have, therefore, forfeited their legitimacy."
GOP legislators, justices sleeping with oily interests - The citizens of the great state of Ohio are drowning in oil, and not in a good way. If anyone had any doubt that the oil and gas industry is the tail wagging the Ohio government dog, it should be put to rest by the state Supreme Court's outrageous decision in the Morrison (Munroe Falls) vs Beck Energy Corp. case on Feb. l7. A split Supreme Court ruled 4-3 in favor of a drilling company that objected to being restricted by local regulations. Those restrictions were designed to protect the small Northeast Ohio community of Munroe Falls from disruptive or unsafe oil and gas activities. The majority in the decision cited Substitute House Bill 278, a 2004 law that granted authority over oil and gas regulation to the Ohio Department of Natural Resources. The bitterly divided court's long-awaited ruling probably invalidates the fracking ban that Athens city voters overwhelmingly approved last November, as well as similar bans and restrictions passed locally elsewhere in Ohio. In a minority opinion, Supreme Court Justice William O'Neill called out his colleagues on the high court, as well as Ohio lawmakers past and present, for feeding at the trough of corporate influence-peddling: "What the drilling industry has bought and paid for in campaign contributions they shall receive." The sell-out began with the passage of H.B. 278 some 11 years ago. It's not at all far-fetched to believe that the man who sponsored 278, then state Rep. Thomas Niehaus, R-New Richmond, was doing the bidding of the oil and gas industry rather than his constituents. He later became Senate president, and then a year after leaving office, a registered lobbyist for the Ohio Oil and Gas Assocation and BP America. The Columbus Dispatch, in an article on Sunday, reported that Niehaus's lobbyist registration states that he specializes in "legislation relating to the operation of oil and gas interests."
Ohio high court's Munroe Falls oil ruling wrongly quashes home rule rights, again: editorial | cleveland.com -- The state Supreme Court, siding with the Statehouse oil and gas lobby, has yet again pruned the home rule power of Ohio cities and villages, a decision, be it noted, enabled by an Ohio General Assembly in thrall to special interests. At issue: A bid by Summit County's Munroe Falls to use zoning to keep Ravenna-based Beck Energy Corp. from drilling an oil and gas well inside Munroe Falls' city limits. In Tuesday's 4-3 ruling, the Supreme Court ruled that a 2004 state law, signed by then-Gov. Bob Taft, gives the state "sole and exclusive" power to regulate oil and gas production in Ohio. Lead sponsor of the 2004 law, Substitute House Bill 278, was then-Rep. Thomas Niehaus, a suburban Cincinnati Republican who later became the Ohio Senate's president. Niehaus is now a Statehouse lobbyist, and among his 20-plus lobbying clients, representing a range of interests including the Northeast Ohio Regional Sewer District, is the Ohio Oil and Gas Association. Among legislators voting "yes" on the Niehaus bill were then-Reps. Keith Faber, a Celina Republican who's now Senate president, and Jon Husted, Ohio's secretary of state. Republican Justice Judith French, writing for the Supreme Court's majority, said the pivot of the Munroe Falls case is whether the 2004 law and the Ohio Constitution's home rule amendment "allow the kind of double licensing at issue here" -- by Munroe Falls and state government. O'Neill, in his dissent, wrote that hair-splitting over what the 2004 bill did or didn't allow, or on the possibility the General Assembly might rethink it, dodged a key factor."Let's be clear here," O'Neill wrote. "The General Assembly has created a zookeeper to feed the elephant in the living room. What the drilling industry has bought and paid for in campaign contributions they shall receive. The oil and gas industry has gotten its way, and local control of drilling-location decisions has been unceremoniously taken away. ... Under this ruling, a drilling permit could be granted in the exquisite residential neighborhoods of Upper Arlington, Shaker Heights, or the Village of Indian Hill -- local zoning dating back to 1920 be damned."
Enter Utica: The Fracking Industry Really Loves Ohio; Here's What's on Tap for All of Us -- The dissent in last week's Ohio Supreme Court decision was as telling as the majority opinion. In a 4-3 vote, justices ruled in favor of state legitimacy, granting Ohio regulatory powers over the oil and gas industry and stripping municipalities of long-held "home rule" governance. Thing is, Ohio now resides along the central nerve of the wealthiest industry in the world, and there is money to be made. With judicial approval, rampant state-sanctioned drilling will continue apace, and even with science and sob stories on their side, noisy grassroots activists aren't likely to nudge or sway their elected officials. The foolhardy Davids are beginning to comprehend the shape and monolithic size of this Goliath. "We've been trying to say that all along," Tish O'Dell says from Broadview Heights, applauding O'Neill's dissenting opinion. She's the president of the Ohio Community Rights Network, which assisted in authoring a Community Bill of Rights for her city's residents and their opposition to the health hazards posed by fracking. Other communities have taken similar steps to have their voices heard. And others still, like Munroe Falls, the complainant in the recent Ohio Supreme Court case, have passed zoning resolutions to prohibit fracking within city limits. Those zoning resolutions mean bupkis now. "This isn't about fracking though," Munroe Falls Mayor Frank Larson says two days after the decision. "This is about home rule. And I think people are beginning to realize that this is a lot farther reaching than oil and gas well issues. But I'll tell you, residents are concerned about the safety of their drinking water, and obviously the ODNR [Ohio Department of Natural Resources] and the EPA [Environmental Protection Agency] aren't."
How To Prohibit Fracking in Ohio - The old fashioned way. The legal way. By a comprehensive land use plan done by a real live land use planner and written into a zoning code by an honest-to-god zoning attorney. Evidently somebody in Ohio evidently knows the difference between an enforceable municipal land use law and a thick slice of sky pie. Ohio Supreme Court’s Decision on Fracking Won’t Deter the City of Mansfield. City law director says Mansfield’s measures take a different form than the ones the court dealt with. A closely-watched state Supreme Court decision last week limits what communities can do to regulate oil and gas development within their borders. But it did not address zoning ordinances, which are used in other states, such as Texas, California, New Mexico and New York to prohibit fracking and related heavy industrial land uses, such as disposal wells. While the court ruling directly addressed only one city’s rules, it’s expected to have a ripple effect across the state. In Mansfield, a company proposed putting a wastewater disposal well in an industrial park. The move spurred the city to adopt strict rules governing that kind of activity. Mansfield’s law director, John Spon, says the court decision won’t deter Mansfield from trying to protect its interests via a zoning ordinance.
Oil and gas production growing in Ohio - Oil and gas production is soaring in Ohio, according to new production figures that the Ohio Department of Natural Resources released Wednesday. The ODNR said that horizontal shale wells associated with the "fracking" boom produced about 3.5 million barrels of oil and about 164 billion cubic feet of gas in the last quarter of 2014. That's compared to about 1.4 million barrels of oil and about 43 billion cubic feet of gas in the fourth quarter of 2013. Meanwhile, Gov. John Kasich, in his annual "State of the State" speech Tuesday night in Wilmington, pressed his case for raising oil and gas production taxes in Ohio. Here's what the governor had to say, according to the official transcript:
Ohio oil production up by 18.1 percent, natural gas up 25.6 percent - Drilling - Ohio: During the fourth quarter 2014, Ohio’s horizontal shale wells produced more than 3,558,836 barrels of oil and nearly 165 billion cubic feet of natural gas, according to figures released on Wednesday by the Ohio Department of Natural Resources. Oil production from 779 horizontal Utica wells increased by more than 545,000 barrels, a 18.1 percent increase, and natural gas jumped by more than 33 billion cubic feet or a 25.6 percent increase compared to the third quarter 2014. Comparing the last two years in Ohio, there has been a 200 percent increase in oil production and a 350 percent increase in gas production, the state said. By comparison, 352 horizontal shale wells in the fourth quarter 2013 produced 1,439,209 barrels of oil and 43 billion cubic feet of natural gas. The new report lists 828 wells, 779 of which reported production. Forty-seven wells reported no production as they are waiting on pipeline infrastructure. Of the 779 wells reporting production results, the average amount of oil produced was 4,568 barrels. The average amount of gas produced was 211 million cubic feet. The average number of days in production was 80. The top 10 natural gas wells in Ohio were five in Monroe County and five in Belmont County. The No. 1 natural gas well in the quarter is the Schroyer Unit by Pennsylvania-based driller Eclipse Resources in Monroe County with nearly 1.9 billion cubic feet. The top counties for oil production in the quarter were Guernsey, Harrison, Noble and Carroll. The top oil well in the quarter was the Shugert well by American Energy Utica LLC in Guernsey County with 56,494 barrels.
Ohio oil well output doubles in a year; natural gas triples - (AP) - Oil production has more than doubled and production of natural gas has tripled in Ohio in one year, bolstering arguments by the administration of Gov. John Kasich that the industry is thriving enough to sustain a tax increase. Kasich wants to use the proceeds to reduce the state’s income tax. Statistics released Wednesday by the Ohio Department of Natural Resources showed more than 3.5 million barrels of oil and 164 billion cubic feet of natural gas were produced during the last three months of 2014. During the same quarter in 2013, Ohio wells produced 1.4 million barrels of oil and 43 billion cubic feet of natural gas. The increase was fueled by a building boom of wells. During this week’s State of the State address, the Republican governor dismissed claims by the oil-and-gas industry that they’d be devastated by his proposed tax increase. “The prosperity created by our oil and gas deposits can be great not just for shale country. This is not just for part of Ohio but for all of Ohio because it makes possible the income tax cuts that provide an economic boost statewide,” he told the crowd Tuesday.
Lower oil prices haven't hurt Ohio shale investment - yet - -- A drop in oil prices has led to growing concerns that investment is fleeing Ohio shale country, but there is no clear sign of this in the state’s oil and gas production figures. The fourth-quarter numbers, issued this week, show that production continued to rise at the same time that prices continued to fall. But don’t read too much into that, say energy experts and industry leaders. They expect low prices to discourage some production and say this will become evident over the next few quarters. “The rate of growth will slow, but we will see that effect a little bit later than might be apparent because of the time required to drill up a pad and get wells into production,” said Ben Ebenhack, a petroleum engineering faculty member at Marietta College. The Ohio Department of Natural Resources issued the figures on Wednesday, showing that operators of shale wells produced 3.6 million barrels of oil for the quarter, up 545,000 barrels from the prior quarter. Gas production was 164.8 billion cubic feet of natural gas, up 33 billion from the previous quarter. There were 779 wells reporting production, up 15 percent from the prior quarter. “Those numbers don’t tell the full story about the effect of the drop in commodity prices,” “I’ve seen rig count dropping. I’ve seen some companies exiting Ohio for a little while and focusing elsewhere.” Gulfport Energy is one of the companies that has pulled back, with four drilling rigs operating in Ohio’s Utica shale, down from eight a few months ago.
Shale gas and oil production in Ohio: The numbers tell the story -- Gas and oil production from wells drilled horizontally in Ohio's Utica shale industry increased in the last three months of 2014. Here are the average production numbers for the last quarter of of the year, as compiled by the Ohio Department of Natural Resources:
- 4,568 barrels: average amount of oil produced per well
- 211.6 million cubic feet: average amount of gas produced per well
- 80 days: average number of production days
Overall, 779 of 828 drilled shale wells produced 3,558,836 barrels of oil and 164,815,008 Mcf (164 billion cubic feet) of natural gas during the final quarter of 2014, the agency said in a report released Wednesday. The other 49 wells were idle waiting for pipelines to be built. In the same quarter of 2013, there were 352 horizontal wells drilled into Ohio's shale. Overall, they produced 1,439,209 barrels of oil and 43,124,516 Mcf (43 billion cubic feet) of natural gas. The department also compared the last quarter of 2014 with the third quarter of the year in an effort to show the acceleration of production. Oil production over the two quarters increased by more than 545,000 barrels and gas by more than 33 billion cubic feet, the department said. In a year-over-year comparison, the state analysis found that oil production increased by 200 percent and gas by 350 percent from 2013 to 2014. Production numbers are public record and can be accessed here.
Utica well activity -- Operations in the Utica are still going strong as oil and gas production for the state of Ohio has blown last year’s numbers out of the water, all thanks to the boom in well development. According to the Ohio Department of Natural Resources, in the span of a single year oil production has more than doubled and natural gas production has triple. Data released by the state show that more than 3.5 million barrels of oil and 164 billion cubic feet of natural gas was produced during the last three months of 2014. In 2013, during the same quarter, Ohio produced 1.4 million barrels of oil and 43 billion cubic feet of natural gas. Information from the report shows that out of 828 wells drilled in Ohio, 779 of them produced some amount of oil or gas at the end of 2014. In 2013, during the same quarter, only 352 wells were producing oil and natural gas. The remaining 47 wells that did not produce oil and natural gas during the last few months of 2014 couldn’t due to a lack of pipeline infrastructure. The following information is provided by the Ohio Department of Natural Resources and provides data through the week ending on February 21st. DRILLED: 298 - DRILLING: 256 - PERMITTED: 454 - PRODUCING: 816 -- TOTAL: 1,824
Chesapeake to reduce drilling in Utica Shale - The Canton Repository - Chesapeake Energy will curtail drilling in the Utica Shale as it cuts back in response to low natural gas and oil prices. The company plans to spend up to $4.5 billion on drilling around the country, officials said in a conference call Wednesday. That’s 37 percent less than last year, and will fund approximately 40 rigs, the company’s lowest number since 2004. Last year, the Oklahoma City-based driller used 64 rigs. CEO Doug Lawler said Chesapeake is managing its activity based on oil at $55 a barrel and natural gas at $3 per thousand cubic feet. Ten percent of the drilling budget will be spent on Utica wells, where Chesapeake plans to use three to five rigs, down from eight last year, and four fracking crews. Utica well costs averaged $6.6 million last year, and company officials said there is a chance they could drop below $6 million this year. The region had the lowest well costs outside Oklahoma. Utica wells also increased in lateral length and number of frack stages, averaging 6,000 feet and 27 stages. Chesapeake has 435 producing wells in the Utica, the most of any driller in Ohio. This year it plans to complete three to five wells in the oil window, which has proved difficult to produce.
Chesapeake, Gulfport and Antero scaling back - Natural gas production continues to rise in eastern Ohio. The industry is in a major funk because of falling prices, but still continued to drill for more natural gas in the final three months of 2014. Companies drilled 164.8 billion cubic feet of natural gas in the fourth quarter, up from 132 billion in the third quarter, according to new figures from the Ohio Department of Natural Resources. Gas production has risen 350 percent. Oil production, which is far outpaced by gas, increased 200 percent. You can see the full report here. Two Oklahoma City drillers that are the biggest players in eastern Ohio fracking released their latest earnings reports. Chesapeake Energy Corp, the biggest in Ohio, set its 2015 capital expense budget at a range between $4 billion to $4.5 billion, down 37 percent from $6.7 billion in 2014. Chesapeake has leased about 1 million acres of land in eastern Ohio, and expects to spend a quarter of its budget in 2015 in the Utica shale play, up from 10 percent last year. Gulfport Energy Corp, which operates mostly in the Utica, set its 2015 capital guidance in the range of $545 million to $595 million, almost all dedicated to the Utica. That's down about 18 percent from $675 million to $725 million the company set aside for 2014. Even with the reduced spending, Gulfport expects to increase production by up to 100 percent. Denver-based Antero Resources Corp., another active Ohio fracking company, projects spending $1.6 billion for drilling and completion services, down 36 percent from $2.5 billion a year ago.
Oil prices force Vallourec to reduce workforce, hours in 2015 - France-based company Vallourec announced plans to reduce its workforce due to low oil prices. The parent company of Vallourec Star made the announcement in its financial earnings for 2014 report that was released Tuesday. Vallourec is an international company that sells tubular products for the oil and gas industry, power generation and other industrial sectors. The company employs 23,000 worldwide, and operates in more than 20 countries. “The current environment is marked by a severe oil-price drop,” the company said in a news release. “In 2015, immediate and structural measures in the mills will result in a reduction of approximately 15 percent of working hours, including a reduction of approximately 7 percent of the workforce.” Neither Vallourec Star locally nor its parent company would comment further. The Youngstown facility started its production of small-diameter pipes for sale in the U.S. and Canadian markets in October 2012. It employs about 700.
Ohio Gov. Kasich’s Proposal to Raise Oil & Gas Taxes Criticized - As Ohio's oil and natural gas drillers slam Gov. John Kasich's plan to raise severance taxes on their activities, at least one legislator believes the governor wants to redistribute the wealth generated in the shale fields of Belmont, Jefferson, Harrison and Monroe counties throughout the state. "He wants to use the eastern Ohio shale industry as an ATM to fund tax breaks for those living in wealthy suburbs outside the major cities," Sen. Lou Gentile, D-Steubenville, said. "His whole idea is for our part of Ohio to assume all the risks that go along with this industry, but not gain the benefits." During his Tuesday State of the State address, Kasich said Ohio's current tax of 20 cents on a barrel of oil was "unconscionable." Along with raising the oil tax, Kasich wants to increase the natural gas severance rate from 3 cents for every 1,000 cubic feet."Ohio's severance tax was created decades ago, long before Ohio's shale boom was ever envisioned," Kasich said Tuesday. "I don't know anybody who lives in Ohio who would not like to sign up for this, 20 cents on a barrel of oil." The new severance rates - if adopted by both the House and Senate and signed into law by Kasich - would be 6.5 percent of the selling price if the product is sold before going to a processing plant, or 4.5 percent if is sold after going to a processing plant. "The prosperity created by our oil and gas deposits can be great not just for shale country. This is not just for part of Ohio, but for all of Ohio because it makes possible the income tax cuts that provide an economic boost statewide," Kasich said of his proposed 23 percent income tax reduction.
As fracking increases, lawmakers look to update the rules — As Kentucky mines less coal and produces more natural gas, state lawmakers want to update the environmental protection rules that drilling companies are required to follow.But some landowners worry the state's rush to welcome the practice of hydraulic fracturing, also called fracking, puts their land and their health at risk. In fracking, drillers inject water and chemicals into the ground to break up rocks and extract oil and gas.Tuesday, the House Natural Resources and Environment Committee approved a bill to update the state's oil and gas regulations for the first time in two decades."It's already legal to do fracking in Kentucky. What this is attempting to do is to get out in front of that issue and provide some additional protections so we can avoid some problems," said Tom FitzGerald, executive director of the environmental advocacy group Kentucky Resources Council, who supports the bill.The legislation would require companies to disclose what chemicals they use. However, they would not have to say how much of the chemical they use if they can prove that information is a trade secret. The bill would make an exception if a doctor needs to know how much of a certain chemical was used in order to diagnose or treat a patient. In such cases, the bill would allow regulators to tell doctors how much was used, but only if the doctor signs a confidentially agreement to use the information only for health purposes.
Kentucky "fracking" bill clears House committee on unanimous vote - A Kentucky House panel on Tuesday easily passed a bill supporters say will modernize Kentucky's oil and gas laws and protect the environment from hydraulic fracturing. House Bill 386, which sets standards for water testing and chemical disclosures and requires cleanup plans for drilled wells, unanimously cleared the House Natural Resources and Environment Committee and now heads to the full House. The measure, whose chief sponsor is House Majority Floor Leader Rep. Rocky Adkins, is the result of a 17-member work group that began meeting last summer. Environmental groups, energy industry representatives and state regulators are among those that crafted the bill. “While there is work that … remains to be done, this is a significant first step and one that's a consensus product,” Tom FitzGerald, director of the Kentucky Resources Council, said in remarks to the committee. FitzGerald, one of the state's leading environmental watchdogs, said he “heartily” endorses the bill, which he claimed marks the first substantive changes to Kentucky oil and gas rules in more than two decades. The measure also has the backing of the Kentucky Oil and Gas Association, whose board supports all the provisions in the bill, KOGA's Bill Barr told lawmakers. The only opposition came from Vicki Spurlock of Madison County, where residents have begun signing leases with energy companies that aim to extract oil and gas through hydraulic fracturing, or “fracking.”
An energy pipeline that would help NC -- President Barack Obama vetoed the Keystone XL Pipeline bill Tuesday, but an energy project that promises more benefits to North Carolina is quietly advancing.It’s the Atlantic Coast Pipeline, which will carry natural gas 550 miles from West Virginia across Virginia and through North Carolina on a north-south line roughly tracking Interstate 95.Surveying is underway. Public meetings in affected communities have been held. A permit must be granted by the Federal Energy Regulatory Commission, and that will require studies of the potential impact on the environment, cultural and historic resources, public safety and other concerns. If all goes according to plan, the pipeline could be operational by late-2018 at a cost of $4.5 billion to $5 billion.The pipeline will be built and operated by Dominion, a Richmond, Va.-based energy company, and jointly owned by Dominion, Duke Energy, Piedmont Natural Gas and AGL Resources.While the construction will create some jobs and boost spending in communities along the route, and the new infrastructure will add to local property tax bases, the greatest benefit will come from easier access to the abundant quantities of natural gas found in the Utica and Marcellus shale basins of West Virginia, Ohio and Pennsylvania.
Natural gas liquids not as shiny as they once were - Wet gas is a uniquely southwestern Marcellus Shale problem. Until recently, it was a uniquely southwestern Marcellus advantage, but then natural gas liquids began losing value and the cost to separate them from dry gas, or methane, began to obscure their promise. At least that’s how EQT Corp.’s CEO David Porges explained it during a company earnings call last month. “What’s usually called the liquids uplift,” he said, “now we call it the liquids impact.” Downtown-based EQT doesn’t have a lot of wet gas, a term that refers to natural gas that also contains liquids, in its production mix — less than 10 percent, according to Bloomberg Industries. But its experience is just a scaled down version of what’s happening across the shale play, said Steve Schlotterbeck, the company’s president of exploration and production. Natural gas liquids include ethane, propane and butane. “Ethane prices are very weak, especially netted back to the wellhead,” he said. “And propane, because of the storage situation, is also quite weak.” The latest production data submitted by operators to the Pennsylvania Department of Environmental Protection, showed that overall liquids production continued to increase in 2014, albeit at a much slower rate than during the two prior years. Producers in Pennsylvania reported pulling 4.3 million barrels of condensate and oil out of the ground last year, a 38 percent increase over 2013. From 2012 to 2013, the growth was 73 percent.
More sand goes into shale wells, and more comes out - As shale gas operators in the Marcellus have been saying for the past year, more sand is going into the ground in Pennsylvania to keep fractures open while gas flows out. And, consequently, more sand is coming out of the ground, along with the gush of flowback water that streams out of wells just after they’re fracked. That’s evident from the latest waste production data released by the Pennsylvania Department of Environmental Protection. In 2011, companies reported disposing of about 14,500 tons of flowback sand, DEP records show. Last year, that number exceeded 43,000 tons. That’s despite the fact that 1,957 shale wells were started in 2011, while only 1,373 began development in 2014. “Our people are using more sand, everybody is using more sand,” Rex Energy has more than doubled the amount of sand it uses for each foot of its horizontal wells, while at the same time increasing how long those horizontal sections stretch out by 30 percent in the last five years. The operator also reported a significant improvement in how wells produced during their first month on the job and a decrease in how quickly their production tapered off during the first year. While an average, conventional frack job cost the company about $4.7 million in 2010, its “Super-Frac” strategy is running closer to $6 million a pop this year.
Frackers War On Fractavists - A Susquehanna County judge has found anti-fracking activist Vera Scroggins in contempt of court for getting too close to a Cabot Oil & Gas site last month. She now faces a fine and possible jail time. This latest ruling was a win for Cabot in its protracted legal battle against the self-described “gas tour guide.” She frequently brings visitors to Cabot sites and points out its environmental violations. The company says she has repeatedly trespassed on its property and poses a safety risk. Cabot spokesman George Stark says the company is pleased with the contempt ruling. “She has been getting too close to us. That makes us nervous.” The case drew international attention after Cabot got a sweeping court injunction against her in 2013– which effectively barred her from half the county. Last March, the injunction was modified to be much less restrictive. But she still has to stay 100 feet from Cabot wellpads and access roads. At an October 2014 hearing, Scroggins was found to have come too close to an access road, but she was not punished, since there was some debate about whether the road was a family’s driveway. This time, she will likely face a fine of $300 to $1,000. She says she’s innocent and won’t pay– which could mean jail time.
Here's the sensible way for Pa. to enact a severance tax -- The scariest argument made by opponents of an extraction tax on natural gas produced from the Marcellus Shale formation in Pennsylvania is the notion that, if you set the tax too high, the drillers are going to pull up their rigs and go off somewhere else. That concept is, in intellectual terminology, mostly nonsense. The drilling companies have invested billions in purchasing drilling rights to hundreds of thousands of acres in Pennsylvania and they must drill within a certain number of years to continue to hold the land. Once a well is drilled - and thousands have been drilled in the Keystone State -- they need to deliver gas to the market to recoup their investments. To large degree, the drillers are stranded here - although, if gas prices were higher, it would be a pretty sumptuous stranding. The drillers' situation is similar to the answer Willie "the Actor" Sutton gave when asked why he robbed banks for a living. "That's where the money is," Sutton said. The Marcellus Shale Play - and the Utica Shale below that - is where the money is. Already, drilling in the Marcellus is delivering more than 4 trillion cubic feet of natural gas per year in Pennsylvania alone. Ohio is getting even more impressive numbers, on a per well basis, in the Utica Shale because the strata there contains lots of crude oil and other petroleum byproducts. West Virginia, which has an extraction tax on all sort of minerals including natural gas, oil and coal, generated $636 million in 2012 from its 5 percent tax (and it's a much smaller state than Pennsylvania). The Marcellus and the Utica plays combined make the Ohio/West Virginia/Pennsylvania gas fields the richest in the nation, surpassing even Texas in potential yield. Nobody is going to walk away. What does make sense is to create a uniform tax structure voluntarily across the Marcellus play. That way, the temptation is reduced for drillers to shift rigs between Pennsylvania, West Virginia and Ohio.
Marcellus Shale fracking foe: Drillers are 'vampires' who 'suck blood and leave' - – To hear fracking opponents tell it, the New York ban on deep, high volume, water-driven drilling on the rich Marcellus Shale is the best thing to ever happen to the Southern Tier. This is a 180-degree view from the depressing, put-upon sentiment among residents most directly affected by the ban — those with properties and livelihoods tied to the struggling towns that stand to be economically transformed by fracking. Isaac Silberman-Gorn, community organizer with Citizen Action and a spokesman for Save the Southern Tier, an anti-fracking coalition, smiles widely as he talks glowingly about New York Gov. Andrew Cuomo’s ban, issued in December. Not only was this the right thing to do according to a gathering storm of science that Silberman-Gorn says reveals the environmental and human health harms of fracking. It is the correct call when it comes to what is best for the economy of the Southern Tier, too. “The gas industry worked really hard to create the narrative that the Southern Tier wanted fracking,” Silberman-Gorn said from his community organizer office on the outskirts of struggling Binghamton, NY. “That’s ridiculous,” he scoffed. “This is about international corporate profits and companies looking to export this gas abroad as quickly as possible. These are vampire industries. They suck the blood and leave.”
How Frackers Lose Their Leases - By failing to frack them. In order to keep an oil and gas lease in place (unless you are Cabot or Chesapeake and scam the landowners), you have to drill. And you have to keep drilling to maintain production; which is why such clauses are known as Held By Production, or HBP requirements. Catch is, the fracker find another fool to finance the wells. And after they have maxed on on junk bonds and “story stocks” on Wall Street, that can be tough. Another fool may be born each minute, but it takes millions of fools to frack a shale well. The frackers are obligated to drill uneconomic wells in order to keep the lease. But the appetite for drilling uneconomic wells is not what it used to be. When the frackers hit that wall, the shale play collapses. Meanwhile, much of the on-going fracking activity in Fracksylvania is HBP – the frackers continue to frack not to make money but to avoid losing the leases, as this article explains: The Impact Of HBP Leases On Marcellus Production - Will hold-by-production (HBP) drilling by producers acting to preserve their leases for the longer term end up sending U.S. oil and gas production volumes higher when energy fundamentals and prices suggest production should slow down? This has happened before, with one of the highest profile instances in the Haynesville Shale between 2009-13, leading to even lower natural gas prices. Could it happen again in the Marcellus this year? Today we continue our look at HBP lease provisions with a focus on the Marcellus. In Part 1 we looked at the HBP provision that is a standard component of oil and gas land lease agreements between producers and mineral rights owners in the U.S. Producers can pay bonuses of thousands of dollars per acre for rights to conduct exploration and production activities on parcels of private land. However lease agreements typically dictate that drilling rights expire after an initial term, (that varies by negotiation but is typically 3-5 years) unless the lease operator produces minimum commercial quantities of oil or gas from the acreage to hold the lease by production. Once HBP’d the lease begins a second term that lasts as long as minimum production continues. We discussed how HBP clauses sometimes lead to “forced drilling” by producers to preserve drilling rights beyond the primary term.
New York’s Lack of Fracking Regulations Leave it Fracking Vulnerable - These local “please frack us” publicity stunts by New York towns on the Pennsylvania border, as preposterous as they are, underscore three underlying truths:
- 1. New York has no regulations for high volume fracking – they were never finished. The last draft was a disaster written almost entirely by the gas lobby. If/when the ban is lifted, New York may have the worst regulations in America.
- 2. Overall, New York has the worst oil and gas regulations in the United States – because it has no severance tax, no autonomous environmental oversight over fracking, and the worst compulsory integration law in America.
- 3. The ban on high volume fracking is ministerial – one gubernatorial election away from extinction.
Jeb Bush's private investments in fracking dovetail with public advocacy - Bush left unmentioned that fracking in the Marcellus Shale beneath the New York-Pennsylvania border also presented a big opportunity for himself. One of his private equity enterprises at that time was raising $40 million to back a Denver-based company acquiring fracking wells in hopes New York would lift its ban. The company, Inflection Energy, has active leases in Pennsylvania, and one of Bush's equity partners sits on the board. He also has fracking ties through a separate business with both of his sons. The intersection between Bush's private and public life — calls for fracking have been a part of his speeches and came as recently as last month in San Francisco — triggers questions of disclosure.
Biggest US refinery joins nationwide strike stretching into 4th week (PHOTOS) — Workers at three refineries, one them the largest in the US, have joined a mass nationwide strike affecting some 20 percent of US refining capacity. The USW union strike has hit its fourth week, after failing to reach an agreement with Royal Dutch Shell. The mass walkout of refinery workers – the first since 1980 – which started on February 1, has now expanded to four more plants. The union, which represents more than 30,000 American oil workers at more than 200 refineries, urged workers at the Motive refinery in Port Arthur, Texas to join the nationwide strike. “This refinery, a 50-50 joint venture between Shell Oil Company (American subsidiary of Royal Dutch Shell) and Saudi Refining, Inc. (subsidiary of Saudi Aramco), produces more than 600,000 barrels per day (BPD),” the union said in its call to action. USW also issued notices for three other plants in Louisiana to go on strike. They include two of Motiva’s Louisiana refineries and a Shell chemical plant in Norco. “Capacity at these facilities is 235,000 and 238,000 (BPD). These refineries are also jointly operated by Royal Dutch Shell and Saudi Refining, Inc. of Saudi Arabia,” a press release reads.
Refinery Workers Strike Spreads to Biggest US Location - The first nationwide oil refinery strike in more than 30 years was poised to expand this weekend in a labor dispute that may start having more of an impact on the price consumers pay for gasoline. The United Steelworkers union said Saturday that workers at the largest refinery in the U.S., the Motiva Enterprises refinery in Port Arthur, Texas, started their strike at midnight Friday. Employees at two other refineries and a chemical plant in Louisiana planned to strike at the end of Saturday. The union said in a statement that it expanded a strike that started Feb. 1 at refineries largely in Texas and California because the industry has refused to "meaningfully address" safety issues through good-faith bargaining. The union also wants to discuss staffing levels and seeks limits on the use of contractors to replace union members in doing daily maintenance work. The union started negotiating a new contract Jan. 21 with Shell Oil Co., which is serving as the lead company in national bargaining talks. Shell spokesman Ray Fisher said in an email that the company was "extremely disappointed" with the latest development.United Steelworkers represents about 30,000 workers at refineries, terminals, petrochemical plants and pipelines across the country. The strike started with about 3,800 workers at nine refineries and then grew to include locations in Indiana and Ohio. This latest expansion adds another 1,350 employees to the strike. The workers who were to begin striking Saturday at midnight work at Motiva refineries in Convent and Norco, Louisiana, and a Shell Chemical plant in Norco.
U.S. refinery strike affects one-fifth of national capacity - The largest U.S. refinery strike in 35 years entered its fourth week on Sunday as workers at 12 refineries accounting for one-fifth of national production capacity were walking picket lines. Sources familiar with the negotiations said talks may resume by mid-week to end the walkout by 6,550 members of the United Steelworkers union (USW) at 15 plants, including the 12 refineries. Representatives of both sides said no date has been set to restart negotiations, however. The strike comes as U.S. workers seek more pay in a strengthening economy. Wal-Mart Stores Inc has said its U.S. workers will get a raise to at least $9 an hour, while West Coast port workers have reached a tentative deal for a new contract after a months-long dispute. The refinery work stoppage began on Feb. 1 when talks for a new three-year contract between the USW and lead oil company negotiator Shell Oil Co broke down. Talks were resumed but halted again after nearly reaching an agreement on Friday, said sources familiar with the negotiations. After the latest breakdown between the two sides, Steelworkers leaders targeted Shell, which is the U.S. arm of Royal Dutch Shell Plc, calling workers out at a chemical plant and three refineries in the company’s Motiva Enterprises joint-venture with Saudi Aramco. The work stoppage now includes the nation’s largest refinery, Motiva’s 600,250 barrel per day (bpd) Port Arthur, Texas, refinery.
Proposed additions would increase LNG facility's production - — As site work continues on Cameron LNG’s plant expansion in Hackberry, company executives are looking to expand the facility a little more. Cameron LNG executives announced Tuesday they have initiated the pre-filing review with the Federal Energy Regulatory Commission to add two more trains and a fifth full containment storage tank to the expanding facility. The American Press reports the proposed additions would increase the facility’s LNG production by 9.97 million metric tons per year. If approved by FERC officials, Cameron LNG’s latest expansion would boost the plant’s total LNG export capacity to nearly 25 million metric tons per year.
Eagle Ford continues to see rigs drop - Rigs are continuing to drop like flies. Low oil prices are a major cause, but companies also cite the increases in efficiencies that have prompted them to lay some rigs idle. While oil prices have been up and down, and all around $50 per barrel, the latest data released from Baker Hughes shows a decline in active rigs all over the nation. According to Friday’s figures, the Eagle Ford Shale’s rig count has dropped from 164 to 160 over just the last week. With this last week’s decrease, the Eagle Ford Shale has seen drops in rigs over the last nine consecutive weeks. Counts in shale formation that covers most of South Texas have tumbled below May 2011 levels.Drilling operations across the U.S. have been on a downhill slide, according to Baker Hughes data. The nation’s active rigs fell from 1,358 to 1,310 and Texas as a whole lost 22 rigs over the past week, falling from 598 to 576. The following information is provided by Baker Hughes and looks at the major basins in the U.S. It compares rig counts from this week, last week and a year ago.
Archer to cut nearly 1,000 jobs - Oilfield service company Archer Ltd. announced in its fourth-quarter and year-end earnings report that it will be cutting nearly 1,000 employees despite reporting a fourth-quarter revenue increase of 15 percent year over year. Archer, a Bermuda-based company, conducts its U.S. operations in Houston. The 1,000 employees being cut account for 11 percent of Archer’s workforce. Archer employed about 8,800 people as of December 31, 2014. A reduction in activity and demand for its services were the main contributors to Archer’s decision to cut jobs. The company also saw the biggest reduction in the U.S. land market, as well as the North Sea, according to the Houston Business Journal.. “The company continues to review its compensation, bonus and benefits plans in order to bring them in line with the current economic climate,” Archer said in its report. “We are also working with our suppliers and subcontractors to reduce our cost base to maintain a base level of profitability and generate positive cash flow.” The 15 percent increase in fourth-quarter revenue for Archer gave them a year over year revenue of $603.7 million. However, the company recorded a net loss of $90.2 million, or 16 cents per share, which is down from a net loss of $431.7 million, or 75 cents per share in the fourth quarter of 2013. Archer Ltd. has been in business for more than 40 years and has more than 100 locations around the globe.
Officials: Rules changes have upped fracking water recycling - — Oil and gas drilling companies using hydraulic fracturing in Texas say they are recycling more water than ever before thanks to a change in state rules, Texas’ three railroad commissioners told two House committees Monday. But exactly how much water is being conserved or reused during production is unknown, according to the regulators who oversee the oil and gas industry, because the companies aren’t required to report those figures. During the commonly used process of hydraulic fracturing, or fracking, water and other substances are injected at high pressures into rock in order to extract oil and gas. The rule change removed restrictions for companies in the permitting process for recycling water on their own leases. Railroad Commission Chairwoman Christi Craddick told members of the House Energy and Natural Resources committees it was adopted in 2013 to encourage more water conservation. She said companies report recycling more, but told lawmakers there was no set target of how much recycling should occur. There are “no reporting requirements in place,” she said, adding that the commission relies on companies to self-report recycling efforts on a voluntary basis.
Politicians for local control, except when it comes to fracking, wages -- The people of Denton, Texas, recently voted to ban fracking within the city limits. They were tired of the noise, lights and fumes caused by the 277 gas wells, some placed right next to housing developments. A blowout in 2013 covered homes in clouds of benzene. Some had to be evacuated.One can hardly blame the citizens for trying to regulate industrial activity in a populated area unless one is the governor of Texas. Greg Abbott has denounced the vote and decisions by other local governments to regulate junkyards and ban litter-prone plastic bags as an affront to the “Texan model,” often defined as letting businesses do pretty much as they please.The party in power at one level of government is understandably tempted to push around a lower level. Liberals do it. Conservatives do it. The difference is that conservatives profess to deplore such interference. Sadly, support for local control often evaporates when such principles run up against the interests of moneyed backers.Similar battles are playing out in other places. Athens, Ohio, voted to ban fracking, but the Ohio Supreme Court just ruled that local governments can’t do that. They are clashing with the state’s “executive authority” on oil and gas drilling.Conservatives running the Florida and Louisiana state governments are fighting local plans to raise minimum wages. The restaurants don’t want to.“The state legislature is the best place to determine wage and hour law,” “This is not the kind of policy that should be determined jurisdiction by jurisdiction.”Actually, the local jurisdiction is one of the better places to set a minimum wage. The cost of living in New York City is much higher than it is across the state in Buffalo, and so might the minimum wage be.
How ‘Orphan’ Wells Leave States Holding the Cleanup Bag - WSJ: After a natural-gas boom in the Powder River Basin here petered out several years ago, few energy companies were interested in the leftover wells pockmarking the prairie. On one ranch near Gillette last month, several of Mr. Presley’s former wells peeked from the snow. Inside the flimsy sheds covering them, jumbles of rusting pipes protruded from the ground, worn company signs dangling nearby. Wyoming is now stuck cleaning up these deserted wells from a bygone boom, and thousands more owned by Mr. Presley and others, at a cost state regulators estimate will be tens of millions of dollars. State officials say the responsible parties never paid enough in regulatory fees to reclaim the wells. Drilling booms historically leave legions of idle wells that become state or federal wards. Yet agencies in some states, and federal regulators, aren’t adequately equipped to clean up so-called orphaned sites at a time when shale drilling is raising the prospects of still more.
Oil-gas panel suggests consulting role for local government - A Colorado task force is recommending that local governments be given a consulting role on some decisions about the location of large oil and gas facilities, but the panel decided against suggesting that cities and counties be allowed to enforce their own rules. In a series of votes Tuesday, the task force also rejected proposals to require disclosure of all the chemicals used in hydraulic fracturing and to give surface property owners more leverage if someone else owns the minerals under their land and wants to drill. The 21-member panel will submit its final list of recommendations to Gov. John Hickenlooper on Friday. The recommendations include expanding the staffs of two state agencies that regulate oil and gas and monitor public health: the Colorado Oil and Gas Conservation Commission, and the state Department of Public Health and Environment.
Group backs off plan to put fracking ban on Colorado ballot - An activist group is backing off its earlier announcement that it would to try to get a statewide fracking ban on the Colorado ballot. Karen Dike of Coloradans Against Fracking said Thursday the group will try to persuade Gov. John Hickenlooper to impose a ban on the practice, but it isn’t actively working on a ballot issue. Dike had said Tuesday the group planned to start a ballot campaign. She now says Coloradans Against Fracking isn’t ruling out a ballot issue if Hickenlooper fails to act. In an interview broadcast Thursday, Hickenlooper told Colorado Public Radio the state couldn’t justify a ban because there was insufficient evidence that fracking is harmful.
Kansas earthquakes worsen damage to century-old courthouse -- Harper County officials are grappling with how to fix a century-old courthouse that already was deteriorating before a sharp increase in earthquakes began rattling south-central Kansas. The bill just to repair the 107-year-old stairways has increased from $400,000 to $1.1 million and an insurance adjuster also has found cracks in the interior of the courthouse in Anthony. County officials attribute some of the damage to age but say the problems have worsened since the increased earthquakes began in 2013, The Hutchinson News reported ( http://bit.ly/1BM6vLT ). “We think possibly some of it could be from the earthquakes,” County Clerk Cheryl Adelhardt said. “We have seen the splits and cracks get larger.” Still, Ruth Elliott, the county’s deputy county clerk, said Tuesday the courthouse remains safe and open for business. The Kansas Geological Survey had recorded more than 200 earthquakes in Kansas since Jan. 1, 2013. More than 100 were recorded in Harper County, most with a 3.0 magnitude.While some environmental groups have blamed the outbreak of earthquakes on hydraulic fracturing, or fracking, used to extract oil and gas in the region, state officials still are studying the question.
U.S. Geological Survey: Fracking waste is the primary cause of the dramatic rise in earthquakes -- The U.S. Geological Survey has backed-up what scientists have been suggesting for years–that deep injection of wastewater is the primary cause of the dramatic rise in detected earthquakes: Large areas of the United States that used to experience few or no earthquakes have, in recent years, experienced a remarkable increase in earthquake activity that has caused considerable public concern as well as damage to structures. This rise in seismic activity, especially in the central United States, is not the result of natural processes. Instead, the increased seismicity is due to fluid injection associated with new technologies that enable the extraction of oil and gas from previously unproductive reservoirs. These modern extraction techniques result in large quantities of wastewater produced along with the oil and gas. The disposal of this wastewater by deep injection occasionally results in earthquakes that are large enough to be felt, and sometimes damaging. Deep injection of wastewater is the primary cause of the dramatic rise in detected earthquakes and the corresponding increase in seismic hazard in the central U.S. “The science of induced earthquakes is ready for application, and a main goal of our study was to motivate more cooperation among the stakeholders — including the energy resources industry, government agencies, the earth science community, and the public at large — for the common purpose of reducing the consequences of earthquakes induced by fluid injection,” said coauthor Dr. William Ellsworth, a USGS geophysicist.Emphasis added. In the last five years alone, Oklahoma has detected a staggering 2500 earthquakes. Scientists involved in the study are calling for a dramatic increase in transparency and cooperation:
USGS Confirms Oklahoma Quakes Are Due To Fracking -- The debate about the cause of the exponential rise in the frequency of earthquakes in Oklahoma has really heated up in the last year, but as KFOR4 reports, The United States Geological Survey (USGS) appears to have put any doubt firmly to rest. In a strongly-worded press release, the USGS states, "...Large areas of the United States that used to experience few or no earthquakes have, in recent years, experienced a remarkable increase in earthquake activity.. This rise in seismic activity, especially in the central United States, is not the result of natural processes... Instead, the increased seismicity is due to fluid injection associated with new technologies that enable the extraction of oil and gas from previously unproductive reservoirs." For some, that could end the debate; but Kim Hatfield, with the Oklahoma Independent Petroleum Association, is not so sure, "I don’t think it’s particularly helpful because basically, it says we’ve come to a conclusion, but we don’t have the science to back it up."
Full USGS Statement: Coping with Earthquakes Induced by Fluid Injection --A paper published today in Science provides a case for increasing transparency and data collection to enable strategies for mitigating the effects of human-induced earthquakes caused by wastewater injection associated with oil and gas production in the United States. The paper is the result of a series of workshops led by scientists at the U.S. Geological Survey in collaboration with the University of Colorado, Oklahoma Geological Survey and Lawrence Berkeley National Laboratory, suggests that it is possible to reduce the hazard of induced seismicity through management of injection activities. Large areas of the United States that used to experience few or no earthquakes have, in recent years, experienced a remarkable increase in earthquake activity that has caused considerable public concern as well as damage to structures. This rise in seismic activity, especially in the central United States, is not the result of natural processes. Instead, the increased seismicity is due to fluid injection associated with new technologies that enable the extraction of oil and gas from previously unproductive reservoirs. These modern extraction techniques result in large quantities of wastewater produced along with the oil and gas. The disposal of this wastewater by deep injection occasionally results in earthquakes that are large enough to be felt, and sometimes damaging. Deep injection of wastewater is the primary cause of the dramatic rise in detected earthquakes and the corresponding increase in seismic hazard in the central U.S.
Why fracking worsens earthquakes in the heartland - Not so many years ago, earthquake science was no more relevant to Oklahoma than marine biology. But these days the state is shaking way more often than California, and giving many people there an unwanted crash course in seismology. Last year, Oklahoma had 585 earthquakes with a magnitude 3.0 or greater (big enough for people to easily feel) — almost three times as many as California had and up from an average of just two a year before 2009. Not coincidentally, that's when oil and gas drillers began injecting wastewater from fracking operations into thousands of underground wells. In the past week alone, Oklahomans have felt the earth move eight times — which is probably eight times more than nature intended them to. It's enough to get officials, even in a drilling-friendly state, to take action to manage wastewater wells. The phenomenon isn't mysterious. Geologists have known for many decades that when pressure underground is changed — when people inject water, for example, or extract geothermal energy — latent earthquakes can be triggered. While the great majority of fracking-wastewater wells have no such effect, some — especially those in which great volumes of water reach crystalline basement rock that lies close to a fault — induce earthquakes that otherwise might not have happened for hundreds of years. There's also a whole lot more shaking going on in Arkansas, Colorado, New Mexico, Ohio, Texas and Virginia, too. But the most tremors have been reported in Oklahoma. So far, the injuries to humans and damage to chimneys and foundations from the uptick in seismic activity have been mostly minor. But scientists aren't able to predict this seismicity, or whether it is likely to continue to grow in frequency and strength.
Sued by Chesapeake Energy for Stealing Trade Secrets, Aubrey McClendon Hires PR Giant Edelman -- Chesapeake Energy has sued its former CEO, Aubrey McClendon, for allegedly stealing its trade secrets in the months between his resignation and the formation of his new company, American Energy Partners. To defend itself outside of the courtroom, American Energy Partners has hired Edelman, the 'world's largest' and often controversial public relations firm. Filed on February 17 at the District Court of Oklahoma County,Chesapeake's legal complaint alleges McClendon covertly took map-based data owned by the company in the time between resigning from the company and then officially leaving the company in early 2013. Chesapeake also alleges that he then utilized that same confidential data for business and investment decisions at his new startup in deciding which land to purchase for hydraulic fracturing (“fracking”) for oil and gas. “AEP used confidential information and trade secrets stolen by McClendon from Chesapeake as a basis for their decision to acquire certain acreage in the Utica Shale Play,” alleges the lawsuit. “Further, in acquiring this acreage…AEP interfered with Chesapeake's business plans and its negotiations for its own acquisition of acreage in the Utica Shale play.” Chesapeake Energy alleges that, before taking the data with him, McClendon asked a former company vice president of land, whose name is redacted in the complaint, to optimize and update the data.
As Oil Prices Tank, Firms Large And Small Feel The Pain -- It's a painful time to be in the oil business. With the price of crude oil about half what it was six months ago, companies large and small are being pressured to cut costs.On the front lines are oil services companies that do everything from drilling to providing electrical power at well sites. Hundreds of thousands of jobs are threatened as companies try to adjust.Gary Evans, CEO of the oil and gas company Magnum Hunter Resources, has a tough message for the people who provide critical services to companies like his: "We've got to lower our cost," he said to a packed auditorium in Houston last week. He says that means the services his company provides — everything from fracking to trucking — are going on sale, big time.When there's a big sale coming at Neiman Marcus, Evans says, you don't spend your money until the sale prices appear. And right now, he's waiting for the deep discounts in oil services before he spends any more money."No drilling, no completion, no fracking, no nothing. Cut it completely off. ... We tell our vendors, 'When you're ready to do it at 40 percent below what you were charging me in December, we'll go back to work.' "
How secure are ND’s pipelines and drilling sites? - A number of spills in North Dakota’s oil patch have got headlines recently, but at least one company is a little suspicious as to how they came to happen.“Hess spokesman John Roper said employees found wide-open valves on saltwater storage tanks on two well locations 3 miles apart,” the Bismarck Tribune reported.“We call that suspicious,” Roper told the newspaper. The implications of that statement are sobering given how endlessly controversial oil development is, and how invested politically some groups seem to be in using every oil spill and train derailment as a weapon against development. How secure are the state’s oil wells and pipelines? And who would be motivated to cause spills, if that is what’s happening? On the latter question, it could be a disgruntled employee or group of employees. Dropping oil prices have resulted in layoffs in some parts of the country, but that really hasn’t hit North Dakota yet.Could it be random vandals? Always possible. Could it be environmental activists who are heavily invested in any and every opportunity to embarrass the industry they hate? That’s also a possibility. The environmental movement, like any political movement, has its fringe elements. Acts of vandalism by these activists isn’t common, but it’s not unusual either. The oil industry is very controversial in some circles, and there are even foreign nations with an interest in doing whatever they can to wound America’s domestic oil production. Case in point, the Dakota Resource Council. This organization is not in any way connected to the alleged “suspicious activity” around the recent spate of spills in the oil patch, but they do exemplify the cynical opportunism at play among environmental activists generally.
Stats show oil patch highway is most dangerous in state - The main north-south artery in North Dakota’s oil patch is the most dangerous stretch of road in the state, newly released statistics show. U.S. Highway 85 had the most fatal accidents, injury accidents and property damage accidents, according to a preliminary 2014 report from the state Department of Transportation. The highway had 11 fatal accidents, 188 injury accidents and 526 property damage accidents. By comparison, Interstate 94 in southern North Dakota saw 4 fatal crashes, 141 injury crashes and 444 property damage crashes, according to the report. Portions of U.S. 85 also have some of the highest traffic volumes in the state. “That speaks to the amount of equipment for oil and gas and construction that’s moving up and down that corridor. This isn’t grain trucks,” said Cal Klewin, director of an organization pushing for the highway to be made into a four-lane expressway.
Williston man camp closing because of city code violations — Officials in Williston are standing by their previous decision and forcing a 400-bed man camp to close because of city code violations. The Williston Herald reports that Black Gold Lodge petitioned the city to reverse a Jan. 13 decision to shut down the facility Tuesday evening. City commissioners moved to take no action, allowing their previous vote to stand. Black Gold came under city limits in 2013 through a land annexation. The city requires sprinkler systems and commissioners had given Black Gold until Dec. 31, 2014, to install one, but the company says contractor issues stalled the installation. Black Gold says it’s now in compliance with city code and has spent nearly $700,000 installing the system. Commissioner Chris Brostuen argued the situation is “pure negligence,” which the commission should not reward.
Bakken oil drillers retreat to the core – North Dakota’s oil producers have pulled back to the core areas of the Bakken formation to cut costs and maximize output amid the slump in prices. The number of active rigs in the state has fallen to just 121, from 190 a year ago, according to an active rig list published by the state’s Department of Mineral Resources (DMR) on Wednesday. The rig count is now below the threshold of “at least 130″ DMR Director Lynn Helms identified last month as needed to sustain output at the current level of just over 1.2 million barrels per day. But more important than the raw number is their distribution across the state, with drilling now increasingly concentrated in only the most promising areas. Of the 121 rigs active on Wednesday, 115 are drilling in just four counties at the heart of the Bakken – Dunn, McKenzie, Mountrail and Williams. The number of rigs operating in the core has fallen by 30 percent from 165 on Dec. 12, according to DMR records. The four core counties accounted for 89 percent of the state’s oil production in December, a little over 1 million barrels per day. Only six rigs are operating outside the core counties, down from 17 in mid-December, a decline of 65 percent. Non-core counties produced just 128,000 barrels per day in December, so they account for a trivial amount of output on a national scale.
Senate rejects Bakken flaring bill -- Last Thursday North Dakota senators shot down a measure that aimed to further restrict and reduce flaring activity, according to a report by the Forum News Service. Senate Bill 2287 failed with 35 votes against and 11 in favor. The bill would have cut the amount of time a well is allowed to flare from one year to 90 days. It also would have placed restrictions on the volume of natural gas flared each day and nullify some exemptions from the current policy.The bill, sponsored by Sen. Jim Dotzenrod (D-Wyndmere), stated that the natural gas currently being flared, or burned off, into the atmosphere is an unreasonable amount. He said as much as 24 percent of the produced natural gas is being flared, an unacceptable figure in other oil and gas producing states,especially when there is gas capture technology available. As reported by the Forum News Service, Dotzenrod said, “I think we as a legislature have made it easy to flare.” According to Sen. Donald Schailble (R-Mott), because the North Dakota Industrial Commission has addressed the issues with recent gas capture goals, the Senate Energy and Natural Resources committee gave the bill a do-not-pass recommendation.
Energy companies slash $50 billion from their 2015 budgets - The collapsing oil price has pushed North American energy companies to slash their budgets for 2015—to the tune of $50 billion. That is the difference between the 2014 capital budgets of 66 mostly U.S.-based energy companies and what the same companies have set aside for 2015, according to a report by Citi. On average, the companies slashed their financial plans by 30%, Citi said. Some of the smaller companies went much further: midcap Denbury Resources for example, cut its capex budget by 50% this year; and small-cap Goodrich Petroleum cut its budget by more than 70%. Larger companies, with their more diversified portfolios both in terms of geography and business lines, have cut by a smaller amount. Chevron reduced its budget by 13% to $35 billion, for instance (rival Exxon Mobil will announce its 2015 capital budget next week.) Budgets are being slashed as the energy companies struggle to contain costs amid a slide in oil prices of more than 50% in a little over six months. Companies are also sidelining drilling rigs at a fast clip, and several have announced layoffs as the world continues to be awash in oil. Concerns about demand have also kept crude prices low. See also: these places have lost the most rigs since oil’s collapse. The glut is expected to persist through the first half of the year, at least, since the U.S. is still pumping a lot of oil through more efficient drilling techniques, and it is sitting on the largest inventories since the 1920s
Oil rigs fall idle after global crude prices drop: With the halving of world oil prices since June last year, the oil industry as a whole has been hit - but those involved in the manufacturing and servicing of offshore oil rigs have been especially affected. Some industry analysts have said it is the worst market they've seen since 1985, as drilling programmes are postponed or cancelled, and oil rigs - together with their staff - are put out of commission. The number of oil rigs actively drilling at any point in time, is considered a good gauge of the health of the industry. Currently there are more than 180 oil rigs in South Asia alone, but with the downturn in oil prices more than half of those are now effectively without a role. Worst still, there is an oil rig oversupply, with hundreds of old oil rigs still in the market, and newly-built ones waiting for work. Too many rigs Jack-up oil rigs, many of which are manufactured in Singapore, are used to drill for oil in relatively shallow waters. There are more jack-up rigs in the worldwide offshore rig fleet than any other type.Long-time oil industry specialist Ian Craven, with Icarus Consultants, says 91 new jack-up rigs were delivered to market between 2011 and 2014. And he says while those rigs may have been absorbed into the market, up to now few old rigs have been scrapped to make room for them. This, he explains, has led to a dog-eat-dog market place, with more rigs chasing fewer jobs and consequently losing work. Many surplus jack-up and floater rigs end up in Singapore, Malaysia or Indonesia where they are put into idle mode - or what the industry refers to as 'stacked'. Staff on board are replaced with skeleton teams, and the rigs are either kept ready for a new commission - or switched off before they are parked somewhere affordable, often off the shores of Malaysia or Indonesia.
US shale oil's crash diet likely to bring forward output dip – Shale oil producers are throttling back so quickly on drilling that U.S. crude output could fall sooner than expected, within months, executives say as they slash costs to cope with tumbling crude prices and compete with Persian Gulf rivals. About a dozen chief executives who talked to Reuters or who spoke publicly, acknowledged they were taken aback by the scale and speed of the cutbacks, noting how this oil price downturn was different from several previous episodes in their careers. For one, companies are cutting costs deeper and faster than before as Wall Street investors increasingly place a premium on capital discipline rather than just production growth. Some also say the nature of shale makes it easier for companies to defer work and wait for prices to recover. The wells that drove the U.S. energy boom of the last decade rapidly deplete, so overall output will fall unless new holes are constantly bored and oil extracted via hydraulic fracturing, or fracking. “The thing that has surprised me … is that companies large and small, financially strong, financially weak have really cut capital spending much quicker than I have seen before,” . Just few weeks ago, the prevailing view among industry insiders and analysts was that U.S. oil production would keep rising for several months despite falling rig numbers because of rising productivity of active wells and drilling inertia. In the past, if a producer had a rig contract, they would continue drilling. Now, producers are paying fees to break those contracts, a fact that has hastened the steep drop in the rig count, said Vincent.
US Rig Count Decreases 43 to 1,267 - Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. fell by 43 this week to 1,267 amid depressed oil prices. The Houston-based company said Friday in its weekly report that 86 rigs were exploring for oil and 280 for gas. One was listed as miscellaneous. A year ago 1,769 rigs were active. Of the major oil- and gas-producing states, North Dakota's count fell by 11, Oklahoma lost nine, Louisiana seven, Texas six, New Mexico four, Colorado three and Wyoming two. West Virginia, Ohio and Kansas dropped one each. Alaska increased by five. Arkansas, California, Pennsylvania and Utah were all unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.
US oil rig count plunges to lowest since June 2011 - The number of US oil rigs in use fell by 33 this week to 986. This is the lowest total for US oil rigs since the week ending June 17, 2011. The number of oil and gas rigs in use fell by 43 to 1,267, the lowest since the week ending January 15, 2010. The decline in oil rigs has been closely watched as the price of oil has tumbled, and at current levels, the decline in US oil rig count is about 39%; in January, Baker Hughes said the number of rigs in use has declined by 40%-60% during past oil downturns. On Friday afternoon following this report, West Texas Intermediate crude oil was up about 2.2% to $49.20, little changed from where it was ahead of the numbers. This week, the biggest number of rigs shutting down came from the Williston basin, where 12 rigs went out of use, while 7 rigs in the Permian basin were shut down. By state, 11 rigs in North Dakota were shuttered, 9 in Oklahoma shut down, and 7 in Louisiana. Compared to last year, the number of oil rigs in use is down by 444 in the US, while combined oil and gas rigs are down by 502. Last week the number of US oil rigs in use fell by 37 to 1,019. The number of combined oil and gas rigs declined by 48 last week to 1,250. Here's the latest chart of US oil rig count, per Baker Hughes.
Oil Prices Tumble As Pace Of Rig Count Decline Slows - With production and inventories at record levels despite the total collapse in rig counts, all eyes remain on Bake rHughes data for any signal the algos can use to mount a run. The total rig count fell for the 12th week, down 43 to 1267. This 3.3% decline is the slowest drop in 6 weeks and oil prices are sliding on this news. The key level to watch for WTI is $48.24 which moves it into the red for the 8th month in a row. The pace of decline (and this future possible production) is dropping... In theory, Oil prices should surge on this news... They are not... The excess supply, continued record production, and record inventory in the US (compared to refinery demand in Europe) has smashed the Brent-WTI spread to over $12.50 - the highest since Jan 2014... As Brean Capital's Peter Tchir recent noted, despite the plunge in rig counts, so far there is no sign of contraction in output. The problem is that not all rigs are created equal, and what we see is still a “net” number. We see the net number of rigs that are working. The reality is that some new projects continue to come on line and are very high producing wells, and some of what is being taken away, was either old, or projects that hadn’t yet been contributing production. I for one, cannot claim to know what each and every rig in America can produce, let alone the world, but I am willing to bet there is at least one person out there with a spreadsheet that does. They can estimate production very well. These are the people who have been pounding on the table that this rig count is NOT helping production much, at least for the next 3 to 6 months. They are quickly learning the lesson of trying to get a few facts to stand in the way of a good meme, but I think they are about to get listened to.
The oil patch rig count is down, but only technically speaking - Oil prices surged today as traders learned that the work of yet more rigs has been halted on the US shale oil patch. Baker Hughes, which keeps track of rigs operating in the field, reported that the count dropped below 1,000 for the first time since June 2011. At 986, the number of rigs is now down almost 39% since October.The oil optimists not only sense that supply is contracting—in the US, as well as in Iraq and Libya—but see glimmers of rising oil demand, possibly justifying a bottom to a months-long price plunge.Yet supply disruptions, especially in war zones, can be ephemeral and snap back. And, as we’ve written, rig-counting is tricky business, because drillers can withdraw any amount of equipment from the margins of a field while keeping other rigs working in the most productive areas.On the latter point, Citi has surfaced with some surprising data regarding the rig count within the shale oil patch, which almost totally accounts for the 4-million-barrel-a-day increase in US production since 2011. According to Citi, if you take into account the 20% rise in drilling productivity across the main shale oil fields, the number of rigs has actually increased since last year—substantially so.Citi’s report was written prior to today’s release of rig data, but the numbers don’t change the conclusions. The bank calculated that, yes, the absolute number of horizontal oil rigs was down year on year as of last week, to 377 from 386 last year. But adjusting for productivity, it was as though 452 rigs were drilling at 2014 rates, equal to a 17% increase. Likewise, when Citi broadened out its survey and looked at horizontal oil and gas rigs, it found an absolute drop to 641 rigs compared with 711 at this time last year. But taking into account the productivity gain, it was as though there were 770 horizontals, which would represent a 20% increase.
Amid controversy, oil trains quietly rerouted through Virginia towns (Reuters) - Hundreds of communities across the United States have become accustomed to the sight of mile-long oil trains rumbling by in recent years. Pembroke, Virginia, was not one of them, until now. CSX Corp is temporarily rerouting up to five oil trains through this small riverside town to bypass the site of an explosive oil train derailment that occurred 90 miles north in Mount Carbon, West Virginia, on Monday. The trains will likely travel instead on a track that hugs the New River and at one point sweeps into the Pembroke town limits. In line with a federal protocol established last year following a string of fiery derailments across North America, the Virginia Department of Emergency Management on Tuesday informed 16 counties and cities that oil trains could be coming through their towns, local officials and fire departments said, one day after the Mount Carbon derailment. Those counties passed the information on to local emergency responders. "They sent us information and gave us an emergency response guide sheet," said Chris Neice, Pembroke's fire chief. CSX has notified the state that as many as five trains, each carrying between about 24,000 and 70,000 barrels of oil, will be rerouted, according to Jeff Stern, state coordinator at the Virginia Department of Emergency Management. The trains will run along a Norfolk Southern line that normally transports coal and freight, not oil, until the main route is restored. That this is happening with little fanfare in Pembroke and potentially hundreds of other cities and towns along this track stretching as far as Ohio, highlights how ubiquitous oil trains have become in the United States, where crude-by-rail is an essential, yet sometimes explosive, fix for an overwhelmed pipeline network.
Crews begin removal of contaminated soil at derailment site - Workers on Tuesday started removing contaminated soil containing oil that spilled after a CSX train derailed in Fayette County, according to a CSX spokesman. Nearly 30 tank cars of the 109-car train, carrying oil from the Bakken Shale in North Dakota, derailed in Fayette County on Feb. 16. The derailment sparked explosions and fires, destroying one house and causing evacuations of other residents. Officials with the joint information center, comprising the company, state and federal officials, have said environmental tests show no further impact so far on public safety, and that water supply was not affected. Rob Doolittle, spokesman for CSX, said workers started excavating the soil on Tuesday morning. “We will collect all that soil and dispose of it in an environmentally responsible way,” he said. Doolittle wasn’t sure in what “environmentally responsible” way the soil would be disposed of but said the company would follow environmental standards. “The disposal plan is still under development and will be approved by the [Department of Environmental Protection] and the other elements of the unified command before we begin to execute it,” he said. “That process is not complete yet.” He said he didn’t know how contaminated soil had been disposed of other times CSX trains have derailed.
Recent “Bomb Trains” Expose Regulatory Failures: The latest oil train derailments could force the federal government to tighten the regulatory screws further than they had planned. The train disasters in Ontario and West Virginia were the latest in a long line of explosions from oil trains, or “bomb trains” as they have been called derisively by their critics. The problem, regulators thought, were the thin-walled flimsy DOT-111 railcars, which had not originally been designed to safely carry volatile crude oil. U.S. federal transportation regulators began writing new rules that would require the phase-out of these older cars, in favor of newer reinforced designs. The tricky problem facing regulators is one inconvenient detail – the newer railcars that have been trumpeted as much safer were the ones that that derailedand exploded on February 16 in West Virginia. The so-called CPC-1232 cars are an upgrade over the DOT-111, with thicker hulls to prevent puncturing and pressure valves to vent gas in the event of the railcars overheating. Nevertheless, even though the CPC-1232 cars have demonstrated that they are inadequately safe, much of the crude hitting the nation’s railways are not even traveling to that standard. Railcar manufacturers do not have the capability to ramp up production of the CPC-1232s fast enough, with a backlog of at least 50,000 cars. Meanwhile, there are still around 171,000 DOT-111s still in operation. And in another loophole exposed by E&E News, railroad companies can even continue to use damaged railcars which leak oil, with the approval from the federal government. Another problem is the extra volatility that Bakken crude has demonstrated. Due to the associated volatile gas that comes with oil drilled in the Bakken, the oil carried by train coming from North Dakota is more dangerous than conventional crude. The state of North Dakota hasrequired that producers process the oil to remove the gases, and that rule takes effect on April 1. While it is so far unclear if the crude that exploded in the West Virginia incident had undergone this type of processing, it would not have been required.
AP Exclusive: Fuel-hauling trains could derail at 10 a year (AP) — The federal government predicts that trains hauling crude oil or ethanol will derail an average of 10 times a year over the next two decades, causing more than $4 billion in damage and possibly killing hundreds of people if an accident happens in a densely populated part of the U.S. The projection comes from a previously unreported analysis by the Department of Transportation that reviewed the risks of moving vast quantities of both fuels across the nation and through major cities. The study completed last July took on new relevance this week after a train loaded with crude derailed in West Virginia, sparked a spectacular fire and forced the evacuation of hundreds of families. Monday’s accident was the latest in a spate of fiery derailments, and senior federal officials said it drives home the need for stronger tank cars, more effective braking systems and other safety improvements. “This underscores why we need to move as quickly as possible getting these regulations in place,” said Tim Butters, acting administrator for the Transportation Department’s Pipeline and Hazardous Materials Safety Administration. The volume of flammable liquids transported by rail has risen dramatically over the last decade, driven mostly by the oil shale boom in North Dakota and Montana. This year, rails are expected to move nearly 900,000 car loads of oil and ethanol in tankers. Each can hold 30,000 gallons of fuel. Based on past accident trends, anticipated shipping volumes and known ethanol and crude rail routes, the analysis predicted about 15 derailments in 2015, declining to about five a year by 2034.
Get used to it. Dept. of Transportation predicts 10 oil-train derailments a year -- A week ago, a 109-railcar train carrying 3.1 million gallons of volatile crude oil from the Bakken Shale of North Dakota derailed in Powellton Hollow, West Virginia. Twenty-seven of the cars went off the rails near the Kanawha River and 19 caught fire, burning for days and forcing an evacuation of more than 100 people there and in nearby towns. Just a few days before there was an oil-train derailment in Ontario. In these two cases nobody died, but as we saw in the case of the Lac-Mégantic oil-train derailment in 2013, when 47 people were killed and more than 30 buildings destroyed by the explosion and fire that ensued, these wrecks can be lethal, and the damage expensive to clean up and repair. According to an exclusive Associated Press article published this weekend, a U.S. Department of Transportation report last July predicts that over the next decade there will be an average of 10 derailments a year of trains hauling crude oil or ethanol. Damage from these over the next two decades could be as high as $4.5 billion. But if a derailment occurs in one of the densely populated cities through which these trains routinely travel, it could kill as many as 200 people and cause $6 billion in damages: The volume of flammable liquids transported by rail has risen dramatically over the last decade, driven mostly by the oil shale boom in North Dakota and Montana. This year, rails are expected to move nearly 900,000 car loads of oil and ethanol in tankers. Each can hold 30,000 gallons of fuel. Based on past accident trends, anticipated shipping volumes and known ethanol and crude rail routes, the analysis predicted about 15 derailments in 2015, declining to about five a year by 2034.
Canada: Oil train accident shows new safety rules inadequate - A fiery oil train derailment in Ontario this month suggests new safety requirements for tank cars carrying flammable liquids are inadequate, Canada’s transport safety board announced Monday. The accident was the latest in a spate of fiery derailments in Canada and the U.S., a trend which American safety officials say drives home the need for stronger tank cars, more effective braking systems and other safety improvements. The Canadian Transportation Safety Board said the tank cars involved in the Feb. 14 train derailment met upgraded standards that started to be instituted in Canada last year for new tank cars carrying crude and other flammable liquids. But it said the Class 111, 1232 standard cars still “performed similarly” to those involved in the derailment in Lac-Megantic, Quebec that killed 47 people two years ago. That accident predated the changes. “This was supposed to be a better quality car. So far we haven’t seen that better performance,” Rob Johnston, a senior Transportation Safety Board official, said in an interview with The Associated Press. The U.S. and Canada are trying to coordinate on even newer tank car standards. U.S. Transportation Secretary Anthony Foxx met with safety officials in Canada in December to discuss the issue but neither country has yet settled on a new tank car design, though the U.S. is getting closer. Transportation officials recently sent a proposal for new tank car standards to the White House budget office for review.
Canadian crude proves perfect partner to U.S. shale - U.S. refineries are processing record quantities of heavy crude from Canada as the perfect complement to light oils from North Dakota and Texas as they struggle to keep their average blend steady. Crudes vary enormously – from low-density oils with few impurities to much denser oils containing a relatively high percentage of sulfur and heavy metals such as nickel and vanadium. Bakken and Eagle Ford are light, sweet oils, while Saudi Arabia’s Arab Heavy and Alberta’s Western Canadian Select are much heavier and sourer. The density of crudes is normally expressed in terms of degrees API, which compares oil to the density of water at a standard temperature of 60 degrees Fahrenheit. Crude density ranges from 42 degrees API for Bakken (which makes it about 80 percent as dense as water at standard temperature) to 27 degrees for Arab Heavy (89 percent as dense as water) and 22 degrees for Western Canadian Select (93 percent as dense as water). But the big differences are easier to understand by switching to more familiar units. A cubic meter of Bakken crude weighs around 815 kg, compared with 885 kg for Arab Heavy and 925 kg for Western Canadian Select. While the qualities of crudes vary widely, U.S. refiners have discerning requirements. The average density of crude processed in U.S. refineries has been steady, varying by only 3 degrees over the last three decades, or about 17 kg per cubic meter, according to the U.S. Energy Information Administration (EIA). U.S. refiners like to process crudes averaging around 30-32 degrees API, or between 865 and 875 kg per cubic meter. Refineries achieve this remarkably steady performance by blending crudes to achieve a combined feed as close as possible to the ideal.
Pipeline expansion to connect Bakken ethane with Alberta market -- Pembina Pipeline Corp. has announced plans to expand the Vantage pipeline system which would link Bakken’s growing supply of ethane with the petrochemical market in Alberta, reports The Bakken Magazine. The recently constructed high-vapor-pressure Vantage pipeline runs from a gas processing plant in Tioga, North Dakota, and extends 430 miles to Empress, Alberta. From there it connects to the Alberta Ethane Gathering System pipeline. The $85 million expansion will increase the mainline capacity from 40,000 barrels per day (bpd) to roughly 68,000 bpd. The additions will include new pump stations and a new 50-mile 8-inch gathering line. As reported by The Bakken Magazine, Pembina President and Chief Executive Officer Mick Dilger said, “This expansion has been a priority for us since acquiring Vantage in September 2014, and we are very pleased to see it come to fruition. It supports our strategy to grow our fee-for-service-based cash flow stream, improves the accretion of the Vantage acquisition and will provide long-term shareholder value.” The pipeline expansion is supported by long term fee-for-service agreements with a significant take-or-pay component. The addition of the gathering line is supported by capital investment agreements with fixed returns. The expansion is expected to be operational by early 2016 pending regulatory and environmental approval. The company expects that once completed, the overall system will result in earnings up to $110 million per year before interest, taxes, depreciation and amortization are accounted for.
Obama vetoes Keystone XL pipeline bill – President Barack Obama on Tuesday swiftly delivered on his vow to veto a Republican bill approving the Keystone XL oil pipeline from Canada, leaving the long-debated project in limbo for another indefinite period. The Senate received Obama’s veto message and Senate Majority Leader Mitch McConnell immediately countered by announcing the Republican-led chamber would attempt to overturn the veto by March 3. Obama rejected the bill hours after it was sent to the White House. Republicans passed the bill to increase pressure on Obama to approve the pipeline, a move the president said would bypass a State Department process that will determine whether the project is in the U.S. national interest. “Through this bill, the United States Congress attempts to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest,” Obama wrote in his veto message. Republicans, who support the project because of its job-creation potential, made passing a bill a top priority after gaining control of the U.S. Senate and strengthening their majority in the House of Representatives in November elections. The bill passed by 270-152 in the House earlier this month and cleared the Senate in January. Despite their majority in the Senate, Republicans are four votes short of being able to override Obama’s veto.
President Obama Vetoes Keystone XL Pipeline Bill -- As expected, President Obama has vetoed the bill that would have fast-tracked the Keystone XL pipeline: President Obama on Tuesday vetoed a bill to approve construction of the Keystone XL oil pipeline, rejecting an effort by Republicans and some Democrats to force his administration to let the highly contested energy project move forward. By saying no to the legislation, Mr. Obama retains the authority to make a final judgment on the pipeline on his own timeline. The White House has said the president would decide whether to allow the pipeline when all of the environmental and regulatory reviews are complete. But the veto — his first rejection of major legislation as president — is also a demonstration of political strength directed at Republicans who now control both chambers of Congress. Mr. Obama is signaling that he will fight back against their agenda. The Obama administration must decide whether to approve infrastructure projects like the Keystone pipeline, which cross a border with another country. In his veto message to Congress, delivered with no fanfare on Tuesday afternoon, Mr. Obama wrote that the legislation “attempts to circumvent longstanding and proven processes for determining whether or not building and operating a cross-border pipeline serves the national interest.”
Obama Just Vetoed The Keystone XL Pipeline. Now What? -- A two-month legislative battle over the Keystone XL pipeline has come to its tentative end. President Obama on Tuesday vetoed a bill to approve construction of the controversial pipeline, which would bring tar sands oil from Canada down to refineries on the Gulf coast. The decision comes — as White House spokesman Josh Earnest said it would — with little fanfare. Obama had been widely expected to reject the bill, and there’s been no indication that the Republican-led Congress has enough votes to override him. So now what? For starters, pretty much everyone has noted that Keystone is not dead. All the veto means is that Congress isn’t able to force the pipeline’s construction through legislation — the process is just going back to being centered on the State Department’s administrative review procedure, as it largely has been for the last six years. After it’s finished reviewing the pros and cons of Keystone XL, the State Department will ultimately make a recommendation to Secretary of State John Kerry on whether Keystone XL is in the national interest. Kerry will then make the official determination, which will likely sway the President’s final decision. For now, there’s no telling when that will happen. As Neela Banerjee reported for InsideClimate News, Kerry has no deadline to make his decision on whether Keystone XL is in the national interest. But while everyone waits for that to happen, there are at least three things in the works that could heavily influence the future of the pipeline.
On Keystone and Climate, Bloomberg Presses Obama to Negotiate with Canada Instead of Congress -- Former New York City Mayor Michael R. Bloomberg, now a United Nations climate envoy, has laid out a wise path for President Obama that could sidestep the political morass surrounding Canada’s oil-rich Alberta tar (sands) pits and the proposed Keystone XL pipeline. As he did with China, Obama can negotiate with Canada to gain commitments on the prime goal of those fighting the pipeline, cutting carbon dioxide emissions, Bloomberg says. Cleaning up the pollution on the ground and in the waters of Alberta is Canada’s domestic responsibility. Making sure all pipelines carrying oil across the United States are safe (not to mention trains!) is this country’s existing responsibility, with or without the Keystone pipeline additions. Bloomberg’s approach, like most moves in this fraught arena, will never appease Obama’s critics on the left and right. But it could demonstrate leadership, both to the American middle class and the international community preparing for talks aimed at forging a global climate agreement at the end of the year in Paris. And, of course, its success depends on Canadian Prime Minister Stephen Harper getting serious about addressing climate change.
Shell Withdraws From Largest Tar Sands Project Yet - On Monday Royal Dutch Shell announced it was shelving plans to build a new tar sands mine in northern Alberta — the largest such project to be deferred. Shell withdrew its applications for the Pierre River project, which would have produced 200,000 barrels-per-day (bpd), to focus on maintaining profitability for its existing 255,000-bpd tar sands operations, according to the company. “The Pierre River Mine (PRM) remains a very long term opportunity for us but it’s not currently a priority,” said Lorraine Mitchelmore, Shell Canada President and Executive Vice President of Heavy Oil. “Our current focus is on making our heavy oil business as economically and environmentally competitive as possible. Shell was one of the earliest tar sands producers to cut staff due to low oil prices, laying off around 300 workers at its Albian tar sands project in Alberta starting last month. Instability makes it hard for most companies to do business, and unreliable oil prices are no different. Crude oil prices have fallen more than 50 percent over the last six months, hovering between $50 and $60 per barrel of late. Last August, Mitchelmore said Shell Canada’s tar sands business met profitability markers when crude traded above $70 per barrel. Shell originally halted work on the Pierre River project a year ago, stating the need to re-evaluate the timing as a heated environmental review process was taking longer than anticipated. The project was first proposed in 2007.
Canada's oil sands cash flows to fall by $21 billion in 2 years - – Oil sands cash flows will fall by $21 billion in the next two years, energy consultancy Wood Mackenzie said in a report on Tuesday, as low global petroleum prices make it less economical to extract bitumen from northern Alberta. Canada’s oil sands hold the world’s third-largest proven crude reserves after Saudi Arabia and Venezuela, but operating costs are among the highest globally, according to Wood Mackenzie principal analyst Callan McMahon. Current operating costs reach $37 per barrel for thermal projects, in which steam is pumped underground to liquefy tarry bitumen so it can flow, and $40 per barrel for mining projects. With benchmark U.S. crude trading around $50 a barrel, down from more than $100 in June, McMahon said the oil sands region’s cash flows would drop by $21 billion in 2015 and 2016 combined. Producers including Suncor Energy Inc, Cenovus Energy Inc and MEG Energy have slashed 2015 capital expenditures in response to the oil price slump. Wood Mackenzie estimates industry spending will drop by $1.5 billion over the next two years, down 4 percent from its fourth-quarter 2014 assumptions. McMahon said production was unlikely to be shut in even if projects temporarily operate at a loss, while new ones scheduled to start up this year will go ahead because the investment has already been made.
New hopes that tar sands could be banned from Europe --A landmark directive with the potential to ban tar sands oil from Europe has been reprieved, the Guardian has learned. The EU’s most senior energy official confirmed that the fuel quality directive (FQD) to encourage greener road fuels will not be scrapped at the end of the decade, as had been thought. Around 15% of Europe’s carbon emissions come from road transport and ambitious plans for cutting emissions from vehicles are expected to form a significant chunk of the bloc’s ‘Energy Union’ proposals next week. Asked by the Guardian whether that meant the FQD would continue after 2020, the EU’s vice president for energy union, Maroš Šefčovič, said: “My first reaction is yes. We just have to adjust it to all the lessons learned from biofuels, and all the [other] lessons learned from the previous time.” The FQD has been a platform for measures intended to price tar sands out of the European market – and for targets to provide 10% of Europe’s transport fuel from low carbon sources, mostly biofuels, by 2020. Transport fuels are the only European sector in which emissions are still rising and the directive mandates a 6% reduction in their greenhouse gas intensity by 2020.
Crude oil flowing into Cushing, Oklahoma, worth billions - — An Oklahoma town known as the “Pipeline Crossroads of the World” is again the focus of the global energy industry. The Oklahoman (http://bit.ly/1w5EWf5 ) reports that Cushing is home to the nation’s largest oil storage facility, a complex capable of holding more than 80 million barrels of crude oil. As oil prices have plummeted over the last several months, the U.S. Energy Information Administration said companies have stockpiled about 2.2 million barrels a week at Cushing. Companies hope to sell the oil at higher prices when prices rise again because the oil market is currently in contango, which means that oil delivered in the future will be worth more than oil delivered now. As of Feb. 13, the facility is holding almost 46.3 million barrels, valued at about $2.4 billion. Brian Busch, director of oil markets and business development at energy data and analysis firm Genscape, says that the facility could reach operational capacity by April if this rate continues. The operational capacity is about 80 percent of its total capacity. If the total capacity is reached and oil production continues to outpace demand, then prices will fall.
OilPrice Intelligence Report: Pain Continues For Oil And Gas Exporters -- The Obama administration proposed new regulations for oil companies seeking to drill in the Arctic. The new rules largely codify the voluntary standards that Royal Dutch Shell (RDS.A) had agreed to during its multiyear Arctic campaign, including putting in place a series of stand-by equipment and backup strategies to deal with a safety incident. For example, oil companies looking to drill in the Arctic need to have a spill response plan, along with an oil spill containment dome at the ready, and have access to an additional drilling rig to use to drill a relief well in the event of a well blowout. One interesting detail in the proposed rules includes using sea ice to determine the extent of the drilling season, rather than a fixed starting and ending date on the calendar. The rules will not have a major effect in the near-term, as they will only apply to new drilling operations – and they won’t take effect soon enough to influence Shell’s drilling operations this year. Moreover, Shell has more or less already complied with the regulations, so they will only really determine how other companies are allowed to approach drilling in the Arctic, and for now, there are no other companies will plans to do so. U.S. rig counts continued to drop last week, falling by another 48 rigs. That brings the total number of rigs in operation in the U.S. down to 1,310. While the drop was sizable, it is actually the smallest decline in seven weeks. Part of that may have to do with the uptick in oil prices, but some market analysts think that the most drastic cuts in rigs may be in the rear view mirror, raising hopes that a bottom could be reached within the next few months. In fact, Reuters reports that the decline in capital expenditures has been so swift – quicker than in previous busts – that actual oil production could start to dip in the coming weeks.
Oil's "Surprise" Collapse: It's The Demand, Stupid -- Crude oil futures have been quite volatile of late, particularly in the front months where even the slightest changes in expectations of whatever factor (rig counts, CEO comments, etc.) send WTI surging or tumbling by turn. Despite that, however, the outer years on the curve have seen not just more stability but a steady downward pressure of late. I think a lot of that has to do with futures investors reconciling actual contango options with the idea that demand is far more of not just a problem, but a longer-term problem. At the front end, rig counts have gained most attention but only as they relate to the surge in inventory. The US is overflowing with oil and production remains at a record high, but the two of those factors together don’t actually count as much in terms of price as is made out by most commentary. It is far too difficult for many to discount the entire economics professions’ complete dedication to the US “booming” economy in order to see a huge demand problem in oil prices; far easier to simply repeat the words “record supply” and leave it at that. If you actually view the futures curve of late, the curves of recent days has crossed in the outer years. In other words, where prices have moved around at the shorter end, out at the long end the curve has shifted significantly downward regardless of short term pricing. That relates to both contango, as noted above, but also I believe growing recognition that supply is overwrought and demand is what may be impaired – perhaps more permanently than anyone thought possible only a few months ago.
Commodities Crushed: WTI Plunges To $48 Handle, Copper Breaks Key Support -- Perhaps the world is beginning to realize that "it's the demand, stupid" as crude oil prices are collapsing this morning (not helped by "all out production" news from Oman). While 'markets' rallied peculiarly after last week's epic surge in inventories and production data, that has all been given back as one trader noted "the market got ahead of itself, even though the rig count has been falling it is not until mid-yr that we are going to see some impact on supply." WTI is back under $49. To complete the gloom, Copper is probing lower, breaking key support with projections to 222.50 if this move takes shape.
The Rig Count "Meme" (And Why The Bounce In WTI Is Likely Over) -- Recently, the Baker Hughes Rig Count has become all the rage. The problem is that not all rigs are created equal, and what we see is still a “net” number. We see the net number of rigs that are working. The reality is that some new projects continue to come on line and are very high producing wells, and some of what is being taken away, was either old, or projects that hadn’t yet been contributing production. While many have pointed out that the drop in rig count is not changing production, they are quickly learning the lesson of trying to get a few facts to stand in the way of a good meme, but we think they are about to get listened to... while oil has stabilized, the next leg is likely lower.
Is Oil Returning To $100 Or Dropping To $10? - If you have been following the price of oil over the last few months, the chances are you’re a little confused. On the one hand you have the likes of A. Gary Shilling who, in this Bloomberg article, loudly trumpets the prospect of oil at $10/Barrel, and on the other there is T. Boone Pickens, who, at the end of last year was predicting a return to $100 within 12-18 months. Pickens prediction has moderated somewhat as WTI and Brent crude have continued to fall, but in January he was still saying that oil would return to $70 or $80/barrel in the near future. So, who is correct?
Oil falls 2 percent on glut worries; heating oil up on tight supply (Reuters) - Crude oil futures fell more than 2 percent on Monday as investors worried about oversupply and a strong dollar, but heating oil futures jumped 5 percent due to operational problems at major U.S. refineries. Crude was down for almost the whole trading session, rising briefly after the Financial Times quoted Nigerian Oil Minister Diezani Alison-Madueke as saying the country might call for an OPEC extraordinary meeting in the next six weeks or so if prices fell further. The market has slid since Friday's data showing a slowdown in the weekly decline in the number of rigs drilling for oil in the United States. The data raised worries that U.S. crude inventories, already at record highs, could swell further. true The largest U.S. refinery strike in 35 years has also been a negative for crude prices. Heating oil futures rallied for a second straight day, reaching above $2.24 a gallon, the highest in nearly three months, as some of the biggest U.S. East Coast refineries struggled to restore operations after severe cold weather triggered outages. Sub-zero temperatures were expected to sweep through the region late on Monday, raising concerns about adequate heating supplies.Benchmark Brent crude settled down $1.32 at $58.90 a barrel Brent briefly rose, hitting a session high of $60.67, after the comments by the Nigerian minister, Alison-Madueke, who is also OPEC's president. Analysts said the gambit will likely fail without Saudi Arabia's support. U.S. crude futures, also known as West Texas Intermediate, or WTI, settled down $1.36, or 2.7 percent, at $49.81.
North American oil production continues to increase - The world’s largest oil exporters were not pleased with latest news coming from U.S. oil and gas producers: oil production keeps on rising. According to a report by The National, the recent decline in U.S. rig counts is leveling off and domestic production continues to increase. Imports from Canada are on the rise as well. This has resulted in a decreased demand for OPEC produced crude oil in the United States, further perpetuating the struggle for the global market share. Last week the U.S. rig count fell to the lowest levels since 2011. Despite the decrease in rig count, though, production in North America’s largest shale oilfields has actually been increasing. Recently the U.S. Energy Information Agency gave a projected outlook for domestic production. In a statement the agency reported, “Projected 2015 oil prices remain high enough to support some development drilling activity in the Bakken, Eagle Ford, Niobrara, and Permian basin, albeit at lower levels than previously forecast.” The EIA also said it expects production to decrease during this year’s third quarter, but not by much before increasing again if oil prices have recovered. Canada, home to some of the highest production costs in the world, has also seen an increase in output. While most of Canadian-produced crude is exported to the U.S., the Canadian National Energy Board reports that exports to other countries are on the rise.
Crude Oil Inventories Surge For 7th Week In A Row To Record Highs Amid Record Production -- Oil prices dumped (last night's major 8.9 million barrel inventory build from API), pumped (the Saudi minister claiming "demand is growing" - which just seems like total fiction given economic backdrops and China's VLCC count plunge), and then this morning, dumped setting the scene for this morning's EIA inventory data. Against expectations of an 8 million barrel build, crude inventories saw a 8.43 million barrel build (5 times higher than the 5 year average). Record levels of production and record total inventory sent WTI plunging out of the gate but it is stabilizing for now...
Brent crude up 5 percent as Saudi sees improved demand for oil (Reuters) - Brent crude oil futures surged 5 percent on Wednesday, after Saudi Arabia's oil minister said oil demand was growing and data showed Chinese factories were producing more than expected. Falling refined products inventories reported by the government helped lift U.S. crude and countered data showing a larger-than-expected U.S. crude inventory build. Brent April crude LCOc1 rose $2.97 to settle at $61.63 a barrel. U.S. April crude CLc1 rose $1.71 to settle at $50.99. true "The report is relatively bullish, despite the large crude oil inventory build," "The draw downs in the refined product categories represent an offset and are supportive," Kilduff added. U.S. crude stocks rose 8.4 million barrels last week to a record 434.07 million, the Energy Information Administration (EIA) said on Wednesday, adding 2.4 million barrels at Cushing, Oklahoma, delivery point for the U.S. crude contract. [EIA/S] The relatively small gain at Cushing may have helped widen the spread between Brent and U.S. crude to its widest since January 2014, with Brent's premium nearing $11 a barrel.
Chevron pulls out of shale gas exploration in Romania - — U.S. oil company Chevron says it has pulled out of shale gas drilling in Romania, weeks after ending business in Poland. The company began drilling for shale gas at its exploration well in northeastern Romania in 2014, a project that drew protests. It is also ending its three other concessions in Romania. In a statement Monday, Chevron said it was pulling out due to “a business decision …. this project in Romania does not currently compete favorably with other investment opportunities in our global portfolio.” Earlier this year, Chevron said it would no longer explore for shale gas in Poland, another blow to Poland’s plans to diversify its energy sources. Last year Chevron abandoned drilling for conventional gas in eastern Ukraine.
Chevron to divest Romania shale licenses, quit Europe exploration: Chevron intends to pursue the divestment of its shale gas exploration concessions in Romania this year after finding them to be financially unattractive, the US-based oil and gas giant said on Tuesday. Following similar moves out of Poland, Lithuania and Ukraine in recent years, the decision represents Chevron’s disengagement from shale gas exploration prospects in Europe. “We are not pursuing shale gas exploration licences in Europe,” said a company spokesman. After completing the drilling of one exploration well in the Barshad play in northeast Romania and carrying out a two-dimensional seismic survey across two of its three concessions in the southeast of the country, Chevron has decided not to pursue further exploration in the country and to divest the licenses. “This is a business decision which is a result of Chevron's overall assessment that this project in Romania does not currently compete favourably with other investment opportunities in our global portfolio,” the spokesman added. The move leaves Chevron as the latest firm to abandon once-promising assets in eastern Europe, following Eni, Talisman Energy, ExxonMobil and Marathon Oil’s decisions to quit exploration in Poland.
Shale Gas Project Encounters Determined Foes Deep in Algerian Sahara - Deep in the Algerian Sahara, daily protests against a pilot hydraulic fracturing, or fracking, project are now well into their second month. The demonstrations have spread to several towns and have provided opposition parties with a new platform at an especially precarious moment for the government, as oil prices have slumped and the declining health of President Abdelaziz Bouteflika has removed him almost completely from public view.Hundreds of police officers sealed off streets to block an antifracking march in the capital, Algiers, on Tuesday as opposition groups held rallies around the country in solidarity with the southern protesters in the distant oasis town of Ain Salah.At first glance, Algeria might seem an unlikely place for the sort of popular movement against fracking, a method of tapping into deep deposits of shale gas, that has unfolded in many Western countries. Money from oil and gas accounts for 97 percent of exports and keeps afloat a socialist system of generous public subsidies for everything from food to housing. In the past, the government has proved skillful at handling such popular unrest with a mixture of police repression and political and financial inducements made possible by its oil reserves. But the sharp fall in oil prices threatens to usher in a severe budget crisis and to undercut that long-tested strategy for preserving the peace and holding off demands for change. In part because of its oil wealth, Algeria avoided the upheavals of the Arab Spring uprisings of 2011. The government broke up early protests, then spent generously on social programs for youth and backdated pay raises for government employees and the police.
Oil Pumps-And-Dumps On Nigeria Comments On Emergency OPEC Meeting; OPEC Denies - Crude oil oprices have spiked higher after The FT reports members of OPEC have discussed holding an emergency meeting if crude continues to slide. This would entirely contradict Saudi Arabia's previous statements and, we suspect, means this was more a hope than a statement as the Nigerian Naira collapses... “Almost all OPEC countries, except perhaps the Arab bloc, are very uncomfortable," said Ms Alison-Madueke, adding if the price "slips any further it is highly likely that I will have to call an extraordinary meeting of Opec in the next six weeks or so."
Oil boom's end threatens pain for much of Latin America - Soaring oil prices the past decade transformed this rural backwater into Colombia’s richest city as nearby fields pumped black gold, drawing new businesses, international pop stars and vanity art projects such as the biblical-themed arch that towers over these sweltering grasslands. Now, crashing crude prices have the 45,000 residents of Puerto Gaitan bracing for a big fall, or already packing their bags. Many are questioning how the windfall was spent. “Things are going badly but we haven’t touched bottom yet,” said Edgar Candelo, who lost his job driving a tanker at the Rubiales oil field, which pumps out a quarter of Colombia’s crude. With no prospects in sight, the 46-year-old says he is leaving Puerto Gaitan for a job at half the pay hundreds of miles away. Similar upheaval is taking place across much of Latin America, where oil prices have fallen by nearly half since September, threatening to pull the rug out from under a decade-long economic boom. And the region’s leftist governments, which used the bonanza to lavish spending on social programs that entrenched them in power, now find themselves in the position of having to slash budgets amid rising social tensions. Across the region, from the shale deposits of Patagonia to Mexico, where the government is rolling out a historic oil reform, nervousness is widespread. Drilling projects that proliferated over the past decade are being shelved and the Bank of America last month cut to 1.3 percent from 1.8 percent its forecast for the region’s economic growth this year.
Senators rally behind oil trade with Mexico - Last week, 21 senators sent a letter to the U.S. Department of Commerce urging officials to promptly sign off on an oil trade of heavy Mexican crude oil in exchange for Light U.S. crude. The letter, which includes endorsements from energy-state representatives such as Lisa Murkowski, R-Alaska, John Cornyn, R-Texas, Ted Cruz, R-Texas and Heidi Heitkamp, D-N.D. calls for an expansion the energy products already being exchanged between the two nations. Additionally, the letter makes note of the energy resources that overlie national boundaries which tie our countries together such as the Gulf of Mexico and the Eagle Ford Shale play in southern Texas. “Natural gas is being traded our two nations through more than twenty existing pipelines, and many others are under consideration,” the senators wrote. “Increasing commercial activity in petroleum products, natural gas liquids, and other types of energy is further expanding the U.S.-Mexico energy relationship.” According to a report from the Midland Reporter-Telegram, Pemex affiliate’s request to export 100,000 barrels per day of light U.S. oil and condensates in exchange for heavy Mexican crude is a transaction that can be approved in a case-by-case basis under existing laws. However, the senators that addressed the Commerce Department are calling for more than such speedy authorization of singular deals.
Oil price plunge could hit UK jobs after 'bleak' 2014 --The UK oil and gas industry has reported its worst annual performance in 40 years, after the oil price plunged in the second half of 2014. Oil & Gas UK, which represents energy companies, said the sector invested £5.3bn more than it earned from sales last year. Rising costs also contributed to the shortfall. It said that the results posed a serious challenge to the future viability of the industry, The Guardian reports. The cost of producing a barrel of oil has risen to a record high of £18.50, on top of investment, tax and decommissioning costs, the group said. Simultaneously, the falling oil price – which dipped below $50 a barrel earlier this year – cut revenues to just over £24bn for the year. That was the lowest since 1970. Malcolm Webb, chief executive of Oil & Gas UK, said thousands of jobs were in danger unless taxes were cut and new incentives offered."Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground," Webb said.
U.K. North Sea Spending Cut in Half, Deterred by Oil Price, Tax -- U.K. North Sea investment will drop by more than half as tumbling oil prices and high taxation force energy producers to cut costs, according to an industry report. Planned spending on new projects is seen shrinking to 3.5 billion pounds ($5.4 billion) this year from 8.5 billion pounds in 2014, according to the report by Oil & Gas UK. Investments may sink further to 2.5 billion pounds by 2018, the lobby said. “There is very little fresh investment,” Malcolm Webb, chief executive officer of the group that represents about 500 companies, said in a statement. It “paints a bleak picture.” Operations in the region, from companies including BP Plc and Total SA, are caught between the rising cost of exploiting maturing resources and oil prices that fell by half since June. Britain was already suffering one of the steepest declines in output of any major producer since supply peaked 15 years ago, with the nation’s production collapsing by about two-thirds. The basin saw a negative cash flow of 5.3 billion pounds in 2014, the worst since the 1970s, as operating costs climbed to 9.6 billion pounds and revenues fell to 24 billion pounds, the lowest since 1998, according to the industry report. Only 14 wells were drilled, compared with an expected 25, Oil & Gas UK said. This year, eight to 13 wells may be sunk as explorers struggle to raise funds amid low prices, it said.
North Sea oil: That sinking feeling - FT.com - From his vantage point on Royal Dutch Shell's Brent Delta, one of several platforms to be scrapped, the man dismantling one of Britain’s biggest oilfields is looking past the collapse in oil prices to a multibillion pound decommissioning boom. Hundreds of miles away in London, in a Mayfair café, the chief executive of one small UK explorer, a veteran of past oil market highs and lows, is less bullish. “The industry is in a state of crisis,” says Tony Craven Walker, chief executive of Serica Energy. “Smaller companies like ours are losing their ability to raise finance and reward shareholders. It is a slow death by attrition.” He fears the end of the North Sea basin could come much earlier than previously expected. The plunge in prices, a tax system that he says deters investment and a failure by producers to co-operate could lead to a wave of early field closures and accelerated moves to decommissioning. Chris Wheaton, analyst and fund manager at Allianz Global Investors, says the region — between the UK and Norway — “is balanced on a knife edge”. The repercussions of oil’s slide from more than $115 a barrel last summer to around $60 now are rippling across the globe. For consumers, especially motorists, cheaper crude is a boon. Lower inflation could stave off interest rate rises in developed economies. But countries dependent on oil revenues to finance spending are hurting. So, too, are America’s shale producers, who pumped the new supply that contributed to the market’s collapse.Ageing North Sea fields, already seen as a marginal bet from which the biggest oil companies have been retreating, look very vulnerable. Oil & Gas UK, which represents offshore operators, says a fifth of production, or a third of fields, is now unprofitable. Cash losses, or the deficit after subtracting costs from revenues, topped £5bn last year, the biggest shortfall since the 1970s. This loss follows a long-term decline in production. Output on the UK continental shelf, despite record investment in recent years, has been sliding since 2000.
OPEC’s Strategy Is Working Claims Saudi Oil Minister - Saudi Oil Minister Ali al-Naimi, the architect of OPEC’s strategy to regain market share by causing the price of crude oil to plunge, says his plan is working, and data from petroleum research firms seem to back him up.Making his first public comments in two months, al-Naimi told reporters in the southwestern Saudi city of Jazan that the markets have cooled off, and cited Brent crude, the global benchmark, as an example, noting that its price has stabilized at about $60 per barrel.He also pointed to data that inexpensive oil is driving up demand, notably in China and the United States, which eventually could lead to price stability or to a price rebound. But Al-Naimi warned naysayers not to upset this new balance. “Why do you want to rock the markets?” he asked. “The markets are calm. … Demand is growing.” If al-Naimi is right, then his strategy was correct, and it acted quickly. It was only three months ago at OPEC’s headquarters in Vienna that the Saudi minister pushed through a plan to maintain oil production at 30 million barrels a day, declaring a price war with US shale oil producers who rely on costly hydraulic fracturing, or fracking, to extract oil embedded tightly in underground rock. The US shale producers had not only created a global oil glut, which was depressing the price of oil, but they also had turned their country from OPEC’s biggest customer to a nation headed towards energy independence.
What is Saudi Arabia not telling us about its oil future? -- It is popular these days to speculate about why Saudi Arabia cajoled its OPEC allies into maintaining oil production in the face of flagging world demand. As the price the world pays for oil and oil products has plummeted, the price OPEC members are paying in terms of lower revenues is high, even unbearable for those who didn't save up for just such a rainy day. Was the real reason for the decision to maintain production the desire to undermine rising U.S. tight oil production--which has now proven embarrassingly vulnerable to low prices after years of triumphalist talk from the industry about America's "energy renaissance"? Were the Saudis also thinking of crippling Canada's high-cost tar sands production? Was it Sunni Saudi Arabia's wish to undermine its chief adversary in the region, Shiite Iran? Was the Saudi kingdom doing Washington's bidding by weakening Russia, a country that relies so heavily on its oil export revenue? What if the Saudis are acting now to undermine U.S. and Canadian oil production because they realize that Saudi production will soon reach a peak, level out for several years and then start to decline in no more than, say, a decade? What if the Saudis fear that energy efficiency, fuel substitution (say, toward natural gas), and mandated greenhouse gas emission reductions will inevitably diminish their oil revenues beyond the next decade? What if this coming decade will therefore be the best time to maximize Saudi revenues per barrel? It would then make sense for the Saudis to cripple North American production now with, say, a year of low prices which should be enough to make investors skittish for many years thereafter. Then, the Saudis can capitalize on higher prices during the next nine years as the kingdom experiences its peak flows and before energy use reduction strategies
threaten oil revenues.
Thank Daesh For Lower Oil Prices - ISIS, ISIL, Daesh is helping to put the price of oil into free fall – by selling captured Iraqi, Syrian and Libyan oil at cut rate prices. Those supplies that they do not control in Libya, Syria and Iraq are being dumped on the market – to pay for the fight against Daesh. So this is Road Warrior for real. ISIS is an oil company masquerading as a apocalyptic death cult. Exporting most of its oil through Kurdistan to Turkey and Iran. Go figure: Islamic State has consolidated its grip on oil supplies in Iraq and now presides over a sophisticated smuggling empire with illegal exports going to Turkey, Jordan and Iran, according to smugglers and Iraqi officials.Six months after it grabbed vast swaths of territory, the radical militant group is earning millions of dollars a week from its Iraqi oil operations, the US says. Coalition air strikes against tankers and refineries controlled by Isis have merely dented – rather than halted – these exports, it adds.The militants control around half a dozen oil-producing oilfields. They were quickly able to make them operational and then tapped into established trading networks across northern Iraq, where smuggling has been a fact of life for years. From early July until late October, most of this oil went to Iraqi Kurdistan. The self-proclaimed Islamic caliphate sold oil to Kurdish traders at a major discount. From Kurdistan, the oil was resold to Turkish and Iranian traders. These profits helped Isis pay its burgeoning wages bill: $500 (£320) a month for a fighter, and about $1,200 for a military commander.
War And Petroleum Reserves - In the interest of analytical balance, we would do well to consider the possibility of war strategies when it comes to the global stockpiling of petroleum reserves. In the years leading up to the German invasion of Poland, the world witnessed dramatic decreases in the price of oil as well as massive increases in petroleum inventories, especially as the Texas fields began to produce. These shifts in the global oil markets ran parallel to the deflation which had begun in October, 1929, and as such, we can see the same pattern repeating today as oil prices collapse, inventories are growing, and world wide deflation is deepening. The United States and China are both increasing their Global Strategic Petroleum Reserves, with stockpiling taking place in Cushing, Oklahoma, and in provinces throughout China. The promoted script is that America is seeking energy independence and China is taking advantage of low oil prices to increase stockpiles, as they are an energy importer. But other countries around the world are stockpiling oil and petroleum products as well, from the construction of massive storage tanks in Nigeria, to hundreds of oil tanker ships full of crude floating of coastlines. Crude and petroleum product stockpiles are increasing to record levels. Here are just a few links to increasing stockpile articles:
http://www.rfa.org/english/commentaries/energy_watch/oil-01262015105428....
http://blogs.wsj.com/moneybeat/2015/01/07/heres-another-reason-for-falli...
http://www.cbsnews.com/news/where-to-store-excess-oil-at-sea/
Michael Schwartz, Israel, Gaza, and Energy Wars in the Middle East - Talk of an oil glut and a potential further price drop seems to be growing. The cost of a barrel of crude now sits at just under $60, only a little more than half what it was at its most recent peak in June 2014. Meanwhile, under a barrel of woes, economies like China's have slowed and in the process demand for oil has sagged globally. And yet, despite the cancellation of some future plans for exploration and drilling for extreme (and so extremely expensive) forms of fossil fuels, startling numbers of barrels of crude are still pouring onto troubled waters. For this, a thanks should go to the prodigious efforts of "Saudi America" (all that energetic hydraulic fracking, among other things), while the actual Saudis, the original ones, are still pumping away. We could, in other words, have arrived not at "peak oil" but at "peak oil demand" for at least a significant period of time to come. At Bloomberg View, columnist A. Gary Shilling has even suggested that the price of crude could ultimately simply collapse under the weight of all that production and a global economic slowdown, settling in at $10-$20 a barrel (a level last seen in the 1990s).And here's the saddest part of this story: no matter what happens, the great game over energy and the resource conflicts and wars that go with it show little sign of slowing down. One thing is guaranteed: no matter how low the price falls, the scramble for sources of oil and the demand for yet more of them won't stop. Even in this country, as the price of oil has dropped, the push for the construction of the Keystone XL pipeline to bring expensive-to-extract and especially carbon-dirty Canadian "tar sands" to market on the U.S. Gulf Coast has only grown more fervent, while the Obama administration has just opened the country's southern Atlantic coastal waters to future exploration and drilling. In the oil heartlands of the planet, Iraq and Kurdistan typically continue to fight over who will get the (reduced) revenues from the oil fields around the city of Kirkuk to stanch various financial crises. In the meantime, other oil disputes only heat up.
How Gaza’s Natural Gas Became the Epicenter of an International Power Struggle - Guess what? Almost all the current wars, uprisings, and other conflicts in the Middle East are connected by a single thread, which is also a threat: these conflicts are part of an increasingly frenzied competition to find, extract, and market fossil fuels whose future consumption is guaranteed to lead to a set of cataclysmic environmental crises. Amid the many fossil-fueled conflicts in the region, one of them, packed with threats, large and small, has been largely overlooked, and Israel is at its epicenter. Its origins can be traced back to the early 1990s when Israeli and Palestinian leaders began sparring over rumored natural gas deposits in the Mediterranean Sea off the coast of Gaza. In the ensuing decades, it has grown into a many-fronted conflict involving several armies and three navies. In the process, it has already inflicted mindboggling misery on tens of thousands of Palestinians, and it threatens to add future layers of misery to the lives of people in Syria, Lebanon, and Cyprus. Eventually, it might even immiserate Israelis. Resource wars are, of course, nothing new. Virtually the entire history of Western colonialism and post-World War II globalization has been animated by the effort to find and market the raw materials needed to build or maintain industrial capitalism. This includes Israel’s expansion into, and appropriation of, Palestinian lands. But fossil fuels only moved to center stage in the Israeli-Palestinian relationship in the 1990s, and that initially circumscribed conflict only spread to include Syria, Lebanon, Cyprus, Turkey, and Russia after 2010.
Addition of Iranian crude into over-supplied global oil market will have a bullish impact on crude oil .. Read More at: http://tinyurl.com/mke986v
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