it appears that the ongoing drop of rigs drilling for oil is finally affecting output, as US production of oil fell for the 2nd week in a row in the week ending April 17th, slipping to 9,366,000 barrels a day from 9,384,000 barrels a day the prior week, matching our output in the 1st week of March...while our daily production has plateaud over the past 6 weeks, it's still been running 14.3% more than the same period last year... even with that higher production, our crude oil imports have been little changed; according to the weekly Petroleum Status Report (62 pp pdf), U.S. crude oil imports averaged about 7.8 million barrels per day in the week ending April 17th, which was 617,000 barrels per day higher than the prior week...over the four weeks ending April 17th, our crude oil imports averaged over 7.6 million barrels per day, 0.9% above the same four-week period last year...so, with our imports of oil relatively unchanged, our higher field production leaves us with more oil than we can use, meaning still more is being put into storage...in the week ending the 17th, U.S. commercial crude oil inventories increased by 5.3 million barrels to a new record of 489.0 million barrels, 23.0% higher than the 397.7 barrels we had stored in the same week last year..
in the week just ended, Baker Hughes reported that US oil patch operators shut down 31 more drilling rigs, leaving 703, while gas operators added 8, bring their total to 225, while the count of miscellaneous rigs increased by 1 to 4...this left 932 drilling rigs operating in the US as of April 24th, which was down from 1861 rigs running in the same week last year, with 831 fewer oil rigs, 98 fewer gas rigs, and miscellaneous rigs unchanged from a year ago...of those left operating this past week, 895 were based on land, which was down by 22 from last week, 3 were on inland waters, which was down from 4 last week, while offshore rigs increased by 1 to 34...the count of horizontal rigs was down by 21 to 720 while the count of vertical rigs dropped by 1 to 121...the greatest reduction of rigs was again in the Permian basin of west Texas and eastern New Mexico, where 12 more rigs were shut down this week, still leaving the area with 246 rigs at week end, while the Eagle Ford of southeast Texas saw another 8 rigs taken out of service...elsewhere, the Williston Basin in North Dakota saw a reduction of 5 rigs, Oklahoma saw 3 fewer rigs, while Louisiana added two...meanwhile, the rig counts for both the Marcellus and the Utica were unchanged, as operators shut down a rig in West Virginia and restarted one in Pennsylvania, leaving Ohio unchanged from last week with 25 rigs still running..
news on new studies on the seismic hazards associated with fracking dominated my news feeds this week, with two releases on state level induced quaking on Tuesday and a major USGS tome released Thursday generating web wide coverage....the major state release, from the Oklahoma department of Energy and the Environment, was actually just an official confirmation of what everyone in Oklahoma knew but had been denying, in that they admitted that the recent 600-fold increase in earthquakes in the state, with some damaging quakes as large as 5.7 and 5.3, was in fact being caused by the injection of oil and gas wastewater into underground formations...now, that this is the case is not new, in that roughly two-dozen peer-reviewed, published papers had concluded that the Oklahoma disposal wells and quakes were connected, but Oklahoma regulators, controlled by the oil industry, had been denying it up until this week, with State Seismologist Austin Holland silenced under pressure from the industry...so it will be interesting to see if they act on what they know before serious damage or fatalities occur...
north of the Oklahoma border, Kansas had been experiencing 17 quakes a month during 2014, an increase from none at all in 2012, and the Kansas Geological Survey linked a rather severe swarm, including a 4.1, to brine injection wells earlier this year....by the middle of March, Kansas regulators imposed sharp restrictions on the state's wastewater injection wells in response to the increase in earthquakes, citing an "immediate danger" to public safety as the reason for limiting the pressure that could be used and the volumes of liquid that could be injected.into the state’s injection wells...so far, since the time the regulations went into effect on March 30th, the area of south-central Kansas that had been plagued with quakes has not experienced another quake..
the dozens of earthquakes that began rattling the North Texas towns of Azle and Reno in November 2013 were the subject of the other state level injection well earthquake study that garnered attention this week, as a seismology team led by Southern Methodist University (SMU) in partnership with USGS developed a model for those quakes that indicated fluid pressure differentials resulting from roughly 70 production wells and 2 wastewater injection wells activated old faults in the area northwest of Dallas that hadn't moved in 60 years...in this case, fracking itself was implicated, as the quakes were the result of the combined actions of high fluid injection rates to the west of the faults and high water removal rates to the east where the fracking was taking place...as a result of this study, the Texas Railroad Commission moved to shut down the two wastewater disposal wells in the Barnett Shale that were linked to the seismic activity in the area..
these small state level studies notwithstanding, the real blockbuster report came on Thursday, when the USGS released their seismic hazard model for 2014, which incorporated induced seismicity into the earthquake risks for 17 new areas in the US, including two in our corner of Ohio...although the USGS had instigated and partnered in many studies of injection well quakes, this is the first time the geological survey itself put the Federal agency imprimatur on injection wells as the cause of the increase in earthquakes....this release updates the 2008 National Seismic Hazard Maps which are used by architects and urban planners in assessing the risk in designing cities and building construction, so USGS is, in effect, putting out a warning here that the potential for injection well earthquakes must be considered in these 17 regions....in many of these cases, the injection of fracking fluids were attributed to have awakened faults that have not moved in millions of years...
although much of the 14.4 MB PDF Report from USGS discusses the methodology of how they arrived at the new seismic risk maps for various regions of the US, using formulas and references that are above my pay grade, there are some images and tables we can look at from the report which will give us an idea of what they're saying and how it affects us...the first map we'll include below, from page 5 (11 of 75) of the pdf, shows the 17 induced seismicity zones that were identified by this report; obviously, the largest is in Oklahoma, and there are 4 such zones each in both Texas and Colorado where man-made earthquakes are known to have occurred...but note that two of them are in Ohio, and both of those are uncomfortably close to us, in Ashtabula and Youngstown...each of those 17 zones where injection well earthquakes have occurred are further described in a table on page 13 (18 of 75) within the report, where they are named and located, the peer-reviewed study that tied the earthquake to pressures induced by injection injection wells is cited, and largest quake and the time window when the quakes occurred is listed...for Youngstown, the period has been between 2011 and 2014, and includes all of the fracking related earthquakes we've discussed in this forum, with the largest quake the new year's eve quake of 2011, which we wrote about here...for Ashtabula, the injection well earthquakes they reference were previously unknown to me as being man-made, and occurred between 1987 and 2007, with the largest a 3.9 magnitude induced quake that occurred during January of 2001...the USGS now considers that earthquakes with a magnitude of 3.0 or greater are now 100 times more likely to occur in these 17 areas than they considered were likely previous to this new assessment...
USGS map of known man-made earthquake zones:
the next graphic from the report that we found instructive is a set of 17 graphs showing when and how many man-made earthquakes occurred in each of the 17 induced seismicity zones that this report highlights, which is taken from page 7 (13 of 75) of the pdf report...note that many of these injection induced quakes predate fracking, and the first known incident of an injection well induced earthquake, at the Rocky Mountain Arsenal in Colorado, didn't even involve the injection of brine, as the army was injecting much more hazardous waste underground there when that series of quakes occurred, which tailed off after they stopped injection and withdrew fluids...also note that only quakes greater than 2.7 are indicated below, and the color coding indicates the USGS catalog that references each of the quakes...again, we know the nature of the Youngstown quakes from our earlier discussions, but the Ashtabula quakes all appear to have occurred prior to taking in waste from Pennsylvania fracking, a time when at least a half dozen wells in the area were disposing of the copious quantities of brine that were associated with the gas wells being operated in the area at that time..note that the scale for each graph is different, with the two Ohio locations just showing a handful of quakes, while the central Oklahoma graph shows the number of injection well induced quakes spiking towards the 1000 mark...
historical man-made earthquake graphs:
that Ashtabula county has been identified as a seismically hazardous area due to induced injection wells earthquakes immediately brought to mind the Perry nuclear power plant, on the lake Erie shore, merely 5 miles to the west...as we have previously discussed, the 4.9 earthquake that stuck the Lake-Geauga county border due south of Perry on January 31st in 1986 earthquake produced ground motion at the Perry Nuclear Power plant that exceeded its SSE design specifications, and it was thus automatically shut down...at that time, i was involved in a county wide effort to stop CEI (now First Energy) from building another 345 KV transmission line corridor through the middle of Geauga county, from Perry to the Hanna substation near Ravenna, and hence i was fairly attentive to what was occurring at Perry...in talking to area politicians and geologists, i found there was considerable speculation that the 1986 Perry quake may have itself been the result of an injection well nearby, although i have to admit that at the time, the idea of a man-made earthquake seemed like a far fetched conspiracy theory to me..
later, when i was made aware that injection wells were still being operated in this area, i checked the literature to see if a connection between injected brine and that 1986 quake had been established...while it has been addressed on several occasions, the connection between the Perry quake and nearby injection wells still seemed to be inconclusive...the following links to abstracts from two papers from the journal Geology below are typical:
- Earthquakes, injection wells, and the Perry Nuclear Power Plant, Cleveland, Ohio: On January 31, 1986, an earthquake of Richter magnitude 4.9 occurred in northeastern Ohio some 17.0 km south of the Perry Nuclear Power Plant (PNPP) and 12.0 km south of the Calhio injection wells. Accelerometers on site at the PNPP recorded accelerations as high as 0.19 to 0.23 g. Many instruments tripped due to high-amplitude vibrations. Microearthquake networks have recorded 16 microearthquakes within 5.0 km of the injection wells with focal depths ranging from 1.0 to 3.0 km. A hydrological model of an anisotropic reservoir 7.2 km wide and 18.4 km long indicates a pressure buildup of 5.3 MPa at the epicenter and 11.8 MPa at the injection well. The assumption of an anisotropic reservoir is consistent with available geophysical and geologic data. A pressure increase of 11.8 MPa, based on stress ratio estimates in crustal rocks in the region, is more than sufficient to induce failure to a depth of 5.0 km. Furthermore, brittle faults and extensive fracture permeability within the basement rocks would allow for the migration of pressure transients to hypocentral distances. The indicated pressure buildup of 5.3 MPa at the epicenter may have been sufficient to trigger the January 31, 1986, earthquake.
- The northeastern Ohio earthquake of 31 January 1986: Was it induced? - On 31 January 1986, at 11:46 EST, an earthquake of mb = 5.0 occurred about 40 km east of Cleveland, Ohio, and about 17 km south of the Perry Nuclear Power Plant. The earthquake was felt over a broad area, including 11 states, the District of Columbia, and parts of Ontario, Canada, caused intensity VI-VII at distances of 15 km, and generated relatively high accelerations (0.18 g) of short duration at the Perry plant. Thirteen aftershocks were detected as of 15 April, with six occurring within the first 8 days. Two of the aftershocks were felt. Magnitudes for the aftershocks ranged from about 0.5 to 2.5. Focal depths for all of the earthquakes ranged from 2 to 6 km. Except for one small earthquake, all of the aftershocks occurred in a very tight cluster with a north-northeast orientation. Focal mechanisms of the aftershocks exhibit predominantly oblique right-slip motion on nearly vertical nodal planes oriented N15° to 45°E, with a nearly horizontal P axis north of east.
- Three deep waste disposal wells are currently operating within 15 km of the epicentral region and have been responsible for the injection of nearly 1.2 billion liters of fluid at pressures reaching 112 bars above ambient at a nominal depth of 1.8 km. Estimates of stress inferred from commercial hydrofracturing measurements suggest that the state of stress in northeastern Ohio is close to the theoretical threshold for failure along favorably oriented, preexisting fractures. This implies that effective stress conditions near the bottom of the two most active wells may be at or near the critical level for incipient failure. Two and, possibly, three earthquakes have occurred within less than 5 km from the wells since 1983. The relative distance to the main shock epicenter and its aftershocks (about 12 km), the lack of large numbers of small earthquakes typical of many induced sequences, the history of small to moderate earthquakes in the region prior to the initiation of injection, and the attenuation of the pressure field with distance from the injection wells, however, all argue for a “natural” origin for the 1986 earthquakes. In contrast, the proximity to failure conditions at the bottom of the well and the probable spatial association of at least one earthquake suggest that triggering by well activities cannot be precluded.
in NRC studies after the Fukushima meltdown, Perry Nuclear was found to be the US nuclear plant most likely to suffer core damage in an earthquake, and that study was conducted based on the 2008 seismic hazard maps, which obviously did not even take into account what we now know about induced seismicity from the area's injection wells...unlike the power plants in California, Perry was not built to withstand an earthquake the size of the Oklahoma injection well induced quake, and while Perry was able to withstand a 4.9 quake when it was a new plant operating at partial power in 1986, it's questionable whether it could withstand quakes as large as 5.3 or 5.7, which by my calculations would be more than 15 times destructive than the 1986 quake...many of the engineered components of the Perry plant were designed to last 40 years, and in some cases of planned obsolescence, not one day longer...thus the plant that safely shut down in 1986 due to the nearby 4.9 earthquake might not do so today under similar circumstances..
unfortunately, our captive ODNR licenses injection wells as a lucrative side line, making 5 cents a barrel on injected in-state waste, and tipping fees of 20 cents a barrel on out of state waste, incentivizing them to encourage other states to dump their waste into Ohio bedrocks...we know of at least 14 injection wells that are apparently still being operated in Ashtabula county, assuming those that were operation as of July of 2012 are still operating...that includes 3 in Lenox, 2 in New Lyme, 2 in Monroe, 1 in Piepont, and 6 at the large injection well complex in WIndsor, near the Geauga county line, and near the site of Ohio's first recorded earthquake in 1823...there are also two injection wells being operated in Lake County, in Painesville and in Leroy, 7 miles from the nuclear power plant...since we know from Oklahoma studies that injection wells have caused earthquakes some distance away, in one well studied case snapping three successive fault planes, one after the other, and that it has been shown that the distance of induced quakes increases with the length of time the injection well has been in operation, and that the magnitude of the largest induced earthquakes tends to increase as the total volume of injected wastewater increases...so it seems that ODNR is just sitting on a time bomb in our area by continuing to license and profit from these injection wells, and all we can do is hope that when the next induced quake strikes our corner of the state, it isn't the big one..
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Dozens attend anti-injection well forum in Windsor Township - Star Beacon — Dozens of county residents expressed their concerns about injection wells in Ashtabula County at a meeting this week. The Wednesday evening forum at Windsor Community Center focused on injection wells, but no one from the fracking industry attended. Vanessa Pesec of the Network of Oil and Gas Accountability and Protection (NEOGAP) give a presentation on the inefficiency, excesses and dangers of injection wells. She detailed the toxic contents of the injection liquid and the Ohio Department of Natural Resource’s inability to help Ohio citizens with injection well concerns. “The problem is frack wastewater contents are often not disclosed to the public because they are considered proprietary trade secrets,” Pesec said during the presentation. “There are 692 ingredients in fracking wastewater, and 51 one of them are very carcinogenic, like Radium 226, which causes leukemia.” She said all injection well “frack water” was highly toxic. “Pennsylvania fracking wastewater is 3,609 times more radioactive than the federal limit for safe drinking water,” she said. “And they’re bringing it here to Ashtabula County. One problem is safety forces may not know what they’re dealing with if an emergency occurs.” Ann Rapose, an Ashtabula County Water Watch board member who made introductory remarks, called Pesec’s presentation “a real eye opener.” Pesec said Ashtabula County has both active and abandoned wells, and even abandoned wells release toxic chemicals into the environment. Injection well casings can fail and let toxic materials enter aquifers, she said.
Gates Mills group to address fracking in eastern Cuyahoga County | cleveland.com: — Gates Mills has organized a committee of regional players and residents to deal with possibility of fracking in the village, after a year of debate over drilling gas wells. Gates Mills Village Council, with backing from Mayor Shawn Riley, founded the Regional Commission to Study and Address Oil and Gas Well Drilling late last year. The group of more than 40 has been meeting since January. Members include the Lyndhurst Fire Chief Mike Carroll, Gates Mills Fire Chief Tom Robinson, Mayfield school board member George Hughes, Pepper Pike Mayor Richard Bain and Bentleyville Councilwomen Karen Esposito and Kathleen Hale. The commission aims to develop a formal plan to tackle fracking in and around eastern Cuyahoga County, as cities grapple with the lack of local control over drilling regulations. Gates Mills borders the lucrative Utica shale region, and officials worry companies will drill horizontal wells there within the next 10 years. There are more than 40 vertical gas wells in the village now, many tapping the Clinton Sand sandstone reservoir. But the horizontal well operations are much larger and environmentally controversial.Mayor Shawn Riley's attempt at persuading property owners to pool their land in hopes of gaining bargaining power with drillers fell flat last year when a group of residents pushed back against the plan in favor of an outright ban on fracking.Residents formed the Citizens for the Preservation of Gates Mills and petitioned for a bill of rights that would essentially prohibit drilling. Voters rejected the bill in the November election.
News from Mantua Village: At their last meeting, village council heard from Mary Greer, spokesperson from the Concerned Citizens organization, on the topic of injection well integrity. According to Ms. Greer, residents in Portage County should be educated about the rate of breakdown of the cement casings in injection wells, especially since the county is soon to have 26 wells. Those wells are used to store potentially harmful waste products from injection (fracking) wells not only in Ohio, but from surrounding states, as well. The integrity of the casings is of paramount importance, since the cement-lined wells store the waste deep underground, near aquifers used for human consumption. According to Ms. Greer, “No studies on injection well integrity are yet complete, so we won’t realize their failure until there is nothing we can do about it.” She concluded, “We can’t decide if we want more injection wells unless we understand them.”
Local group appeals ODNR’s approval of 8th injection well: An Athens-based anti-fracking group has filed an appeal of a new drilling-waste injection well in eastern Athens County recently approved by the Ohio Department of Natural Resources. It will become the third well at that location owned by K&H Partners of West Virginia, and the eighth overall injection well in Athens County. The appeal was filed by the Athens County Fracking Action Network (ACFAN) with the Ohio Oil and Gas Commission, and alleges that the ODNR oil and gas chief's permit for the well was "unreasonable and unlawful." "This approval process subverted the law and ignored democratic principles," a statement from ACFAN released with its appeal document said. "Our safety and security are at risk from this rogue state agency and the governor who is in charge of it, and from the real and present threat this and other wells for injection of massive amounts of toxic and radioactive fracking waste pose to our drinking and agricultural water supply." The group has previously warned that the new well's operation may lead Athens to become the No. 1 county in Ohio for receiving injection-well waste. In 2014, Athens County ranked No. 2, with more than 2.74 million barrels injected. The new well was approved by the ODNR in March and went forward without a public hearing despite 200 letters of protest and a request by the Athens County Commissioners.
Group pushes for county home rule, injection well ban -- A group of anti-fracking activists announced Tuesday they will be circulating petitions to turn Athens County into a charter government and ban the dumping of oil-and-gas hydraulic fracking waste, as well as use of water from sources in the county, for fracking activities, on the November ballot. The measure apparently wouldn't seek to actually ban deep-shale oil and gas drilling, or fracking, however, and no such permit applications have been submitted to the state in the past year. Along with Athens, a group in Medina County is reportedly attempting something similar with regard to drilling wastes. The group claims that the proposed charter would not alter the way Athens County government functions, but would institute home-rule protection against fracking waste injection activities, and use of water for fracking, across the county. The Athens County Bill of Rights Committee is a countywide version of the city of Athens' Bill of Rights Committee that last year proposed a citywide ban on all oil and gas/fracking activities, which passed in November with 79 percent of the vote. Recent Ohio court decisions, including a pivotal Ohio Supreme Court decision earlier this year, have backed up the state of Ohio and drilling industry's contention that the state has primacy over oil and gas regulation, basically stating, "what the state allows, local government can't prohibit." Supporters of local fracking bans and regulations argue that the Supreme Court decision in the case involving oil and gas drilling regulations in Munroe Falls, Ohio, was narrow and limited, and didn't address local communities' attempts to protect their water and resources, based on the bill of rights framework.
Group Wants Charter Government For Athens County To Fight Fracking -The group that got Athens city voters to pass a citizen’s bill of rights to restrict fracking and associated practices within the city limits is now turning its attention to the entire county. The Athens Bill of Rights Committee is attempting to turn Athens County into a charter form of government in order to keep fracking and injection wells out of the county. The issue is slated to go before county voters in the November general election. The group is aiming to gather 2,000 signatures by June 24 in order to get the issue on the fall ballot. “By this charter we, the people, propose to secure the right of all county residents to live in a clean and safe environment, and to participate in county government,” said Dick McGinn, chairman of the Athens Bill of Rights Committee during a news conference on Tuesday. “These rights are presently denied to most citizens under the statutory form of county and township government.” A news release from the group stated: “We declare our right to refuse to live under state law HB 278, which denies our constitutional right to self-government, and instead, renders unto the Ohio Division of Natural Resources sole authority over the siting, permitting and regulation of oil and gas development and wastewater disposal in the state.” “This is the agency that issues my fishing license,” McGinn added. BORC member John Howell said the charter government would do two things: give county residents the right to referendum, initiative and recall; and protect the county’s water supply. “These are rights of local democracy to protect us from government at the state and federal levels gone awry under the influence of corporate interests,”
A Thai energy company says hello to eastern Ohio -- As reported by the Columbus Business First, a Thai energy company has shifted its eyes towards eastern Ohio and is considering building an ethane cracker plant in the region. Bangkok-based PTT Public Company Ltd, a state-owned company that is worth over $92 billion, has interest in developing the complex located in Belmont County, Ohio. The county is known as one of the best areas for energy exploration in the state of Ohio, according to industry sources that spoke with the Columbus Business First. PTT’s plans are anticipated to be released sometime this week by state officials. According to sources, PTT’s plans to build the ethane cracker plant could change depending on oil and natural gas prices. If the plant were to be built, it could reduce the cost of transportation for manufacturers in the region that use petrochemicals from natural gas greatly. Typically, ethane cracker facilities are located in the Gulf Coast region, so having one in Ohio seems logical and practical. PTT has stake in several areas of the energy business world, and most of its dealings that are outside of Thailand are located in Asia. The company’s PTT Global Chemical Public Company Ltd. is currently the largest petrochemical business in Thailand. PTT has also landed the 84th spot on Forbes’ Global 500 list of the largest corporations.
Belmont County named site for possible multibillion-dollar 'cracker' plant -- It is not every day that elected officials from Appalachian Ohio get to announce the possibility of a multibillion-dollar development. So Belmont County leaders had reason to enjoy news yesterday that a planned ethane “cracker” plant is envisioned for a site near the Ohio River. And they hope the news will be followed in about a year with a firm commitment by developers to build the project. “This potentially can be, from a fiscal standpoint, one of the biggest developments ever in Ohio,” said Mark Thomas, a Belmont County commissioner. “To have it, potentially, in Belmont County, in southeastern Ohio, in Appalachia, is incredible.” The developers are PTT Global Chemical of Thailand, a giant chemical and fuel-refining company, and Marubeni Corp. of Japan. A cracker plant takes ethane — a component of natural gas — and breaks it down into a substance that can be used to make chemicals and plastic.
Utica and Marcellus well activity in Ohio - Numbers in the Utica Shale have adjusted a little bit since last week’s report, unfortunately not so much in the Marcellus shale in Ohio. However, Ohio has gotten a lot of attention lately when it comes to ethane cracker projects. One company in particular is coming across seas in hopes of building a plant. PTT Public Company Ltd., a state-owned company based in Bangkok that is worth $92 billion, has turned its head to a complex in Ohio for a possible ethane cracker plant location. The complex is located in Belmont County which happens to be the best areas for energy exploration in the state of Ohio. According to industry sources, state officials plan to release PTT’s plans sometime this week. As with much of the anticipated projects in the industry, sources say that PTT’s plans to construct the ethane cracker plant depend on oil and natural gas prices. However, if the project was to move forward, it could greatly reduce the cost of transportation for manufacturers in the region that use petrochemicals from natural gas. The following information is provided by the Ohio Department of Natural Resources and covers activity through the week of April 18th. Activity in the Utica Shale formation in Ohio has had a few slight changes when compared to last week’s update. According to this week’s report, 380 wells were drilled (up 36), 229 drilling (down 24), 421 permitted (down 9) and 847 producing (up 2), bringing the total number of wells in the Utica to 1,877. The Marcellus Shale in Ohio has zero change reported when compared to last week’s well report. The area is still sitting at 15 wells permitted, 15 drilled, 13 producing and one well inactive. There are a total of 44 wells in the Ohio Marcellus Shale.
Aerial photos of shale gas production in Ohio : MARCELLUS AND UTICA SHALE
Marcellus permit activity in Pennsylvania - Well permit activity for the Marcellus Shale formation in Pennsylvania has seen some changes since the last report, and that’s not the only change the Marcellus has seen. The Pennsylvania Department of Environmental Protection (DEP) has released its final revisions of the Chapter 78 regulations. The Chapter 78 regulations, which manage oil and gas operations, have been under revision since 2011 and are now, hopefully, coming to an end. The new revisions, titled Advanced Notice of Final Rulemaking (ANFR), will impact both conventional and unconventional operators. In December 2013, the first revision of the rules was released by the Environmental Quality Board (EQB), which allowed a 90 day public comment period. During the comment period, the EQB received over 24,000 comments which have been addressed by the DEP in the latest revision of the regulations. To read a detailed version of the PIOGA’s issues regarding the latest revision of the Chapter 78 regulations, click here. The following information is provided by the Pennsylvania Department of Natural Resources and covers through April 11th to April 17th.
- New Permits: 56
- Renewed Permits: 16
Pennsylvania well permits hit a low -- According to the state Department of Environmental Protection (DEP) information, the number of unconventional well permits issued for this year’s first quarter has dropped by 30 percent; the lowest it has been over the last five years. Compared to last year, the DEP issued 863 permits just in the first three months. This year, the number of permits given out fell to 601. However, these numbers are not surprising considering companies across the U.S. have been cutting back on capital spending, laying off workers and shutting down rigs due to the low energy prices. In certain cases, like Antero Resources, some companies that were issued permits have chosen to defer well completions. The well will be drilled, but the work required to complete the well will be put on hold until it is needed. Antero has decided to hold off on 50 well completions located in the Marcellus Shale. As reported by Pittsburgh Business Times, on Monday during a conference call with analysts, executives from Halliburton Co. explained that there are 4,000 oil wells in North America alone that are waiting to be completed. CEO of Deep Well Services Mark Marmo stated that he believes that if oil and gas prices stay under $60 per barrel and $3 per thousand cubic feet that the number of wells deferred will increase. He also explained that he does think there will be an activity increase later this year: Companies will drill, but not necessarily complete a well since the completion side costs more than drilling. It all depends on the company hedge programs and the production goals they need to meet … With oil prices going up, and … with the coal-to-gas conversion from the power companies, the (exploration and production companies) will increase activity … I see gas prices going above $3 per thousand cubic feet, especially if it’s a hot summer.
Final oil and gas revisions have been released -- After years of trying to revise its oil and gas regulations, the Pennsylvania Department of Environmental Protection (DEP) has released its second and final version of its proposed Chapter 78 regulations. The revision process started back in 2011 and now four years later the process may be coming to an end. The new revisions, known as the Advanced Notice of Final Rulemaking (ANFR), will have a great impacts on conventional and unconventional operators. However, the Pennsylvania Independent Oil & Gas Association (PIOGA), which has participated in the revision process since 2012, has raised concerns regarding the DEP’s final version of the Chapter 78 regulations. A few of the PIOGA’s concerns include the “significant changes” that have been made from the 2013 version that will impact both unconventional and conventional well operations. Some of the changes, which haven provided by the PIOGA in its April 2015 edition, include:
- -The requirement to restore impacted drinking water supplies to Safe Drinking Water Act standards or predrill quality (whichever is better).
- -The elimination of the use of pits to store production fluids at well sites.
- -A new proposal to authorize centralized tank storage.
- -The expansion of predrilling assessments to include the identification of nearby active and inactive wells.
- -Revisions to the obligation to identify abandoned and orphan wells.
- -New obligations for site restoration beyond the requirements of Chapter 102.
- -A new requirement to remediate spills or releases at well sites in accordance with Act 2 under a timeframe uniquely created for oil and gas operations.
33 groups urge City Council to snub an energy hub -- Thirty-three environmental groups, neighborhood organizations and other activists on Wednesday called on Philadelphia City Council to snub an energy hub. In an Earth Day letter to Council organized by Food & Water Watch, the activists urged Council to pass resolutions rejecting efforts to build industries linked to the expanding Marcellus Shale natural gas development. “Such a plan would pose public safety risks on several fronts, deteriorate our community’s public health, and elbow out plans to build our community and economy in a safe and sustainable way,” the groups wrote. With the rapid development of Pennsylvania shale gas, business and political leaders are building support for developing southeastern Pennsylvania into a hub through which energy is shipped, stored and consumed. As the East Coast’s biggest refining center, the region already plays a substantial role as an energy trading center.
Fracking waste puts public at risk, study says - Weakness in state regulations governing hazardous oil-and-gas waste have allowed the leftovers to be disposed of with little regard to the dangers they pose to human health and the environment, according to a recent study by the environmental organization Earthworks.The report says states disregard the risks because of a decades-old federal regulation that allows oil-and-gas waste to be handled as non-hazardous material. Those rules, established by the U.S. Environmental Protection Agency in 1988, exempted the waste from the stricter disposal requirements required of hazardous substances and allowed the states to establish their own disposal standards.In its report, "Wasting Away: Four states' failure to manage gas and oil field waste from the Marcellus and Utica Shale," Earthworks studied rules governing disposal of the often toxic waste - and the gaps in those regulations in New York, Pennsylvania, West Virginia and Ohio.The organization, which is often criticized by the industry as being consistently biased, concludes the EPA was wrong when it applied the non-hazardous label to oil-and-gas waste."Drilling waste harms the environment and health, even though states have a mandate to protect both," said Bruce Baizel, co-author of the report and Earthworks' energy program director.
DEC chief: Final fracking report is ‘literally at the printer’ - New York is about to take its next step toward a ban on large-scale hydraulic fracturing. A several-thousand-page document that will lay out the rationale for prohibiting fracking is “being printed as we speak,” state Environmental Conservation Commissioner Joseph Martens said Wednesday.That report, known as the Supplemental Generic Environmental Impact Statement or SGEIS, has been nearly seven years in the making and will pave the way for Martens to issue an order keeping large-scale fracking from moving forward at the current time.“As you know, it’s voluminous,” Martens said Wednesday. “It is literally at the printer.”Martens was asked about the document following a speech he gave at an Earth Day event at Rensselaer Polytechnic Institute in Troy.Large-scale fracking—a much-debated technique to help retrieve natural gas out of underground shale formations—has been on pause in New York since 2008, when the DEC first launched its review.In December, Martens said he would move to prohibit high-volume fracking “at this time” after state Acting Health Commissioner Howard Zucker issued a report recommending against proceeding, citing concerns about health risks and gaps in science. But in order to formalize the effective fracking ban, the state Department of Environmental Conservation had to complete the SGEIS. Now, the next step is for the DEC to release a final SGEIS, which Martens said would happen “very shortly.” From there, state law mandates the document must be available for public review for at least 10 days before Martens issues a”findings statement,” the legal document that would enshrine the state’s fracking decision.
LAW: W.Va. landowners battle pipeline company over property rights -- - West Virginia landowners and litigators are testing a more fundamental level of opposition to the far-reaching expansion of America's pipeline network. Their approach isn't necessarily environmental; they're focused quite literally on what happens in their backyards -- denying access to surveyors and planners who are trying to secure a route for the 300-mile Mountain Valley Pipeline, one of many projects designed to transport the glut of natural gas from the nation's shale drilling boom. EQT Corp. and NextEra Energy Inc., the main backers of the MVP project, say the pipeline is critical for moving natural gas from the Utica and Marcellus shale formations to markets in the Mid-Atlantic and Southeast. Developers need early access to property along the route to do surveys and environmental assessments to ensure the pipeline path is viable. But many West Virginians are leery -- frustrated by developers scoping out their land and doubtful that they'll see much economic benefit. For now, the battle for access hinges on state law. Though the Federal Energy Regulatory Commission has long handled oversight of natural gas pipelines, the rules for property access in the early stages of planning are set at the state level, and dozens of landowners in the path of the $3 billion MVP proposal think they have West Virginia law on their side to thwart pipeline planning. MVP backers disagree with the landowners over the meaning of the state law, and both sides are now pressing judges to clarify the statute once and for all. Six West Virginia landowners filed two lawsuits last month, urging a state court to declare that pipeline planners cannot have access to property unless their project qualifies as an improvement for "public use."
Federal agency will study proposed conversion of natural gas pipeline that crosses Kentucky -- The Federal Energy Regulatory Commission will look into the potential environmental impact of Tennessee Gas Pipeline's proposal to convert an existing pipeline across Kentucky to allow the transport of natural gas liquids.FERC gave notice Friday that it would prepare an environmental assessment of the Tennessee Gas proposal. Federal law also requires the commission to discover and address concerns the public might have about the proposal — a process called "scoping.""Scoping is the process of determining how broad your analysis is going to be," said Tom FitzGrald, a lawyer with the Kentucky Resources Council.Comments from the public, and from local, state and federal agencies, might prompt the FERC to do an even more in-depth study, called an environmental impact statement, University of Cincinnati law professor Jim O'Reilly said."If they (FERC) go the next step and they do an environmental impact statement, that's a big deal because it will take about six months for the complete statement to be drafted," O'Reilly said. "In those circumstances, the pipeline company might walk away from the project — and I'm just speculating — but the longer it takes for them to get the project approved, the less likely they would do it."
Exxon Mobil firms to pay nearly $5M for Arkansas oil spill — The Justice Department says two subsidiaries of Exxon Mobil have agreed to pay almost $5 million in government penalties for a 2013 oil spill in a central Arkansas community. As part of a consent decree set to be filed in a Little Rock federal court Wednesday, the companies would pay about $3.2 million in federal civil penalties in addition to addressing pipeline safety issues and oil-response capacity. They would pay $1 million in state civil penalties, $600,000 for a project to improve water quality at Lake Conway and $280,000 for the state’s legal costs. The Pegasus pipeline ruptured in March 2013, spilling thousands of gallons of oil into a Mayflower housing subdivision. Assistant Attorney General John Cruden notes that Exxon Mobil doesn’t admit liability in agreeing to the measures.
How rules are shaking out: Quakes seem fewer since limits; KCC says 'it's too early' to tell - As of last Friday, it had been 11 days since an earthquake rattled south-central Kansas. A year ago, that might not have seemed remarkable, but the last time it occurred was actually more than nine months ago, at the end of June 2014, according to U.S. Geological Survey figures. Since September, the region has experienced an average of 17 quakes of magnitude 2.0 or higher each month. State scientists and regulators have conceded the injection of waste saltwater deep underground, to dispose of a byproduct of oil and gas production from hydraulic fracturing, is likely triggering the tremors along existing but previously unknown fault lines in the region. The Kansas Corporation Commission (KCC) issued an order March 20 setting new maximum daily wastewater injection amounts in Harper and Sumner counties, and further limiting disposal levels in five specific areas of “seismic concern.” The order, which began March 30, will cut injection in some wells up to 60 percent when fully implemented by late June. With the restrictions in place less than three weeks, officials with the KCC say “it’s too early to reach any conclusions” about whether the restrictions are resulting in a reduction in quakes. Officials noted that there has also been a significant reduction in activity in the region because of depressed oil prices. The type of oil production in the region, called hydraulic fracturing, is very expensive compared to traditional extraction methods.
Oklahoma: From two 3.0 quakes a year-to two a day - In November of 2011, a magnitude 5.7 earthquake ripped through the small Oklahoma town of Prague, damaging more than a dozen homes and toppling a turret on a St. Gregory's University building in nearby Shawnee. It was the worst of three large quakes to strike the area over several days, and it still as ranks as the worst Oklahoma has ever experienced. Since then, hundreds more have rattled the state, racking up millions of dollars in damages and unleashing a political and financial maelstrom. Until 2008, Oklahoma typically had one or two earthquakes of magnitude 3.0 or greater per year, according to the U.S. Geological Survey; since the start of 2015, the state has averaged 2 of this strength or greater per day. Read MoreOPEC slams oil producers with 'go-it-alone' attitudes "We have a good record going all the way back to the 1970s of magnitude 3 or larger earthquakes. They increased throughout the central U.S. in 2009, but primarily in just a few states like southern Colorado, Arkansas,Texas and Oklahoma," says Bill Leith, senior science adviser for Earthquake and Geologic Hazards at USGS. "Oklahoma is the most striking case, where the number of earthquakes is now at record levels." And a growing body of scientific research increasingly connects this upsurge in seismic activity with the recent boom in oil and gas production. In Oklahoma, oil production has more than doubled in the past five years, climbing from roughly 140,000 barrels per day in late 2009 to just over 360,000 barrels per day in January of this year, according to the U.S. Energy Information Administration. From 2008 through April 8 of this year, there were 1,063 earthquakes of magnitude 3.0 tallied in Oklahoma by the USGS. This year, through April 8, there were 210, compared with 91 over the same period in 2014. The USGS sees a connection: specifically, a link to underground disposal of wastewater generated by oil and gas production.
Oklahoma scientists say earthquakes linked to oil and gas work (Reuters) – Oklahoma geologists have documented strong links between increased seismic activity in the state and the injection into the ground of wastewater from oil and gas production, a state agency said on Tuesday. Oklahoma is recording 2-1/2 earthquakes daily of a magnitude 3 or greater, a seismicity rate 600 times greater than observed before 2008, the report by the Oklahoma Geological Survey (OGS) said. It is “very likely that the majority of the earthquakes” are triggered by wastewater injection activities tied to the oil and gas industry, the OGS said. It warned residents should be prepared for a “significant earthquake.” Last year the state recorded 585 quakes of magnitude 3 or greater, up sharply from 109 in 2013. Prior to 2008, Oklahoma averaged less than two a year. The spike in earthquake activity has put Oklahoma in the center of a national debate over whether wastewater disposal from oil and gas production triggers earthquakes. In response to the report, Oklahoma state Representative Cory Williams, a Democrat, called for a moratorium on oil and gas wastewater disposal wells.
Confirmed: Oklahoma Earthquakes Caused By Fracking » Despite the enormous increase in earthquakes in Oklahoma that started at the same time as heavy fracking began there—with the number of earthquakes over 3.0 magnitude skyrocketing from an average of less than two a year to 585 last year—the state has been in official denial about the cause. Now the state has not only admitted that the injection into deep underground wells of fluid byproducts from drilling operations is behind the quakes, but it put up a website titledEarthquakes in Oklahoma that is a “one-stop source for information on earthquakes in Oklahoma.” The site includes an interactive map that displays the dramatic change not only in the number of earthquakes but in their distribution. Instead of a scattering around the state, they’re clustered heavily in areas where drilling operations are disposing of fracking wastewater. The new website says, in a post dated April 21, “The Oklahoma Geological Survey announced today the majority of recent earthquakes in central and north-central Oklahoma are likely triggered by the injection of produced water in disposal wells.” “Oklahoma experienced 585 magnitude 3+ earthquakes in 2014 compared to 109 events recorded in 2013,” it says on the front page. “This rise in seismic events has the attention of scientists, citizens, policymakers, media and industry. See what information and research state officials and regulators are relying on as the situation progresses.”
Oklahoma Earthquake Swarm 2015: In Sharp Turnaround, Oklahoma Officials Confirm The Link Between Fracking Wastewater And Earthquakes -- Oklahoma’s government confirmed this week that hundreds of earthquakes rocking the state are largely caused by oil and gas operations. The position marks a sharp turnaround for state officials, who for years expressed skepticism that Oklahoma’s earthquake swarm could be linked to the rampant underground disposal of wastewater from oil and gas wells. The state’s energy and environment office on Tuesday launched a website, called Earthquakes in Oklahoma, which embraces the scientific consensus that injecting billions of gallons of wastewater near fault zones is triggering temblors in areas with little history of seismic activity. Until this week, officials had maintained that the spike in earthquakes was probably a natural phenomenon. Oklahoma experienced 585 earthquakes of magnitude 3.0 or greater last year -- up from just 103 temblors of that size in 2013, according to the Oklahoma Geological Survey. Before 2008, when oil and gas drilling accelerated in Oklahoma, the state experienced only about two magnitude 3.0 earthquakes each year. “While we understand that Oklahoma has historically experienced some level of seismicity, we know that the recent rise in earthquakes cannot be entirely attributed to natural causes,” the new state website says. “The Oklahoma Geological Survey has determined that the majority of recent earthquakes in central and north-central Oklahoma are very likely triggered by the injection of produced water [i.e., wastewater] in disposal wells.”
Oklahoma Lawmakers Vote To Outlaw Fracking Bans As Earthquakes In The State Spike - In an especially fractious split, the day after the state’s energy and environment cabinet acknowledged that the “recent rise in earthquakes cannot be entirely attributed to natural causes,” state lawmakers passed two bills to limit the ability of localities to decide if they want to allow fracking and drilling nearby. While at least eight bills were filed this session in Oklahoma to prevent cities and counties from banning drilling operations, the two that passed through the House this week are SB 809 and SB 468. SB 809 would allow “reasonable” ordinances related to “road use, traffic, noise and odor,” but would not allow any outright bans — the bill prohibits the direct regulation of oil and gas exploration, drilling, or fracking. SB 468 would make it so that any interference with oil and gas production would be considered a “taking” of property, meaning royalty owners could seek compensation. The Oklahoma legislature is one of a number of state governing bodies focused on how local jurisdictions could impede the oil and gas industry’s ability to drill first and deal with the consequences later. Earlier this month, the Texas House approved a bill that drastically curtails local governments’ abilities to say no to fracking within their communities. Authorities and industry leaders in both states are worried that more municipalities might follow the lead of Denton, Texas in instituting a ban on fracking within city limits. According to Oklahoma government, the current rate of earthquakes is approximately 600 times historical averages — a phenomenon that Oklahoma Geological Survey (OGS) now considers very likely to be caused by wastewater wells associated with drilling for oil and gas.
Jon Stewart’s Hilarious Take on Oklahoma’s Fracking Earthquakes - The Daily Show last night was particularly hilarious. Jon Stewart, of course, gives mention to Earth Day, “our favorite of the planetary birthdays,” and offers an apology to Uranus for forgetting her birthday. He then, moves into the news of Oklahoma confirming the link between the increase in earthquakes with the increase in fracking. “Is it, as common sense might suggest, the seemingly obvious connection to fracking, or is the Lord using our great state as a shake weight?” Stewart asks. “Who really knows?” He then has a field day with a bizarre Earth Day recycling promo video from the National Security Agency.
New Studies Link Earthquakes With Oil, Gas Drilling - WSJ: New scientific findings released Tuesday linked earthquakes to the practice of injecting wastewater from oil and gas operations deep underground, adding to a growing consensus among researchers that energy development is probably causing seismic activity in Oklahoma, Texas and other parts of the U.S. The Oklahoma Geological Survey released a statement Tuesday saying that it now “considers it very likely” that most of the hundreds of earthquakes in the state’s center in recent years were “triggered by the injection of produced water in disposal wells.” Produced water is salty fluid that naturally flows up wells along with oil and gas. Meanwhile in Texas, a team of college and federal researchers headed by scientists at Southern Methodist University released a new study concluding that a string of earthquakes that began in 2013 northwest of Fort Worth was also likely caused by wastewater injection. Oklahoma Gov. Mary Fallin, a Republican, called the findings by state geologists significant and said the state was working to toughen regulations in response to an increase in quakes. “State agencies are already taking action to address this issue and protect homeowners,” she said in a statement. Oklahoma last year experienced 585 earthquakes of 3.0 or greater magnitude—big enough to be felt indoors—according to the state, more than in the previous 30 years combined.
The Link Between Fracking Activity And Earthquakes Is Getting Stronger -- We’re only mid-week, but it’s already been a big one for human-induced earthquakes. On Tuesday, scientists from Southern Methodist University added to the growing body of research linking small earthquakes to oil and gas wastewater disposal. That body of research is particularly important to the popular but controversial process of hydraulic fracturing, or fracking, which produces significantly more wastewater than conventional drilling. On the same day, Oklahoma’s government announced that it would officially embrace that large body of scientific research, and start figuring out how to deal with its growing earthquake problem. In the last decade, Oklahoma has experienced a dramatic increase in earthquakes — an increase that has happened in tandem with the spread of wastewater disposal from fracking operations across the state. What makes the Texas study a bit different than other research linking human activity to seismic events is that it suspects wastewater injection alone is not causing the quakes. Instead, it asserts that there’s a specific thing workers do when extracting fuel and performing wastewater injection that may be triggering them. According to the research, quakes may be made more likely when workers extract gas and groundwater from one side of a fault line, then inject water back into the ground on the other side of the fault. That is slightly different than what other research has suggested — that wastewater injected anywhere near fault lines can change the stress of those faults to the point of failure, causing earthquakes.
Fracking Most Likely to Blame for 2013-14 Earthquakes - - It is no secret that fracking, or hydraulic fracturing, is suspected to play a role in earthquakes across the country, with some scientists saying it should be included in earthquake hazard assessments. And now, a seismology team led by Southern Methodist University (SMU), Dallas is blaming fracking for 2013-14 earthquakes in Azle, Texas. After identifying two intersecting faults, the team developed a sophisticated 3D model to assess the changing fluid pressure within a rock formation in the affected area. They used the model to estimate stress changes in the area, generated by two wastewater injection wells and the more than 70 production wells that remove both natural gas and significant volumes of salty water (brine). They also took into account fluid volumes, flow parameters, and subsurface pressures in the region to provide a more accurate estimate of the fluid pressure along this fault. "The model shows that a pressure differential develops along one of the faults as a combined result of high fluid injection rates to the west and high water removal rates to the east," Matthew Hornbach, SMU associate professor of geophysics, explained in a statement. "When we ran the model over a 10-year period through a wide range of parameters, it predicted pressure changes significant enough to trigger earthquakes on faults that are already stressed." In fact, the stress changes on the fault were typically tens to thousands of times larger compared to stress changes associated with water level fluctuations caused by the recent Texas drought, according to their model.
Azle earthquakes likely caused by oil and gas operations, study says -- Oil and gas operations are the most likely cause of dozens of earthquakes that began rattling the North Texas towns of Azle and Reno in November 2013, a group of scientists has concluded. The study, led by researchers at SMU and published Tuesday in the journal Nature Communications, presents some of the most conclusive evidence yet that humans are shifting faults below Dallas-Fort Worth that have not budged in hundreds of millions of years. While experts have not yet determined what’s causing the shaking in Dallas and Irving, the new paper previews aspects of that study and includes suggestions that will help speed research. “It’s certainly one of the best cases in the literature,” said Art McGarr of the U.S. Geological Survey’s Earthquake Hazards Program in Menlo Park, Calif. The new findings contradict statements by the Railroad Commission of Texas that there are no definitive links between oil and gas activity and earthquakes in the state. Shown an embargoed version of the paper, the commission’s staff seismologist Craig Pearson wrote in a statement that “the study raises many questions with regard to its methodology, the information used and conclusions it reaches.” But he declined to answer specific questions before meeting with the paper’s authors. The Railroad Commission regulates the oil and gas industry. The Azle study is the result of a yearlong collaboration involving 11 researchers at SMU, the University of Texas at Austin, and the U.S. Geological Survey and was reviewed by independent experts before publication. The scientists zeroed in on an unusual mechanism behind the quakes: workers pushing liquid into the ground on one side of a fault and sucking gas and groundwater from the other side of the fault.
Railroad Commission moves to shut down wells linked to quakes -- The Texas Railroad Commission said Friday it was considering shutting down two wastewater disposal wells in North Texas’ Barnett Shale after they were linked to seismic activity in the area. A study released by scientists at SMU earlier this week presented evidence a series of earthquakes around the rural town of Azle in late 2013 were caused by two disposal wells operated by XTO Energy, the Forth Worth subsidiary of Exxon Mobil, and Houston-based EnerVest. “In light of SMU’s study linking disposal well activity to earthquakes in 2013, it is important to assess this new information in relation to the continued operational safety of the wells,” Railroad Commission Chairman Christi Craddick said in a statement. A growing body of research has connected earthquakes with injection wells, which oil and gas companies use to store deep underground the billions of gallons wastewater that are a byproduct of drilling. Oklahoma, where oil and gas drilling is prevalent, has seen seismic activity spike to more than 5,000 quakes last year. North Texas has experienced a series of earthquake clusters since 2008, mostly recently around Irving where seismic events reaching more than 3.0 on the Richter scale have been recorded. On Thursday the U.S. Geological Survey said that the risk of damaging earthquakes in the Dallas-Fort Worth area had more than tripled since 2008 due to the increased use of injection wells. The Barnett Shale, which underlies 5,000 square miles in North Texas, is one of the largest natural gas fields in the United States.
Oil Price Collapse Means Texas Is Still Losing Jobs, J.P. Morgan Economist Says - There’s a saying: Don’t mess with Texas. But that’s not stopping J.P. Morgan Chase’s Michael Feroli. The economist first poked the bear at the end of 2014 in a report that argued Texas’ economy was in for serious trouble owing to the sharp collapse in oil prices. The bear poked back, in the form of a tough rejoinder from the Dallas Fed’s then-President Richard Fisher, who likened the report to “bull droppings.” In fact, in a March speech, he said The Wall Street Journal account cleaned up “my two-word response to this assertion,” which in its original utterance was much earthier. Mr. Fisher, who has since retired as Dallas Fed president, argued Texas was no longer tied to the fate of the oil industry. He said the Lone Star State had diversified itself considerably and could withstand the big drop in oil prices and continue to be an engine of growth for the nation. In a new report, Mr. Feroli was back to say he was right, and Mr. Fisher was wrong. “The only thing dropping in the Texas economy lately is the number of jobs,” he said in a report. The economist said Texas is now seeing the sort of job losses that would normally occur only in a recession. Mr. Feroli pointed to a report from the Texas Workforce Commission showing the state lost 25,400 jobs in March. The downturn in Texas jobs last month was the first negative reading in 53 straight months. While Texas has diversified, many of its jobs are still tied indirectly to the energy business, Mr. Feroli said. He added that investment declines tied to the oil sector appear to be hitting Texas particularly hard. He explained cuts in energy related capital expenditures alone could cut about 2.7 percentage points off the pace of economic growth in Texas in the first quarter, “a big hole to get out of to achieve positive growth.”
Fracking seen turning 'tornado alley' Oklahoma into deemed quake country by USGS - U.S. government geologists now recognize much of Oklahoma as earthquake country, accounting for the bulk of 17 regions newly designated for seismic hazards attributed to underground disposal of wastewater from fossil fuel production. The 17 regions are delineated in the first official map by the U.S. Geological Survey documenting areas of elevated and increasing earthquake frequency found to be induced by human activity, namely deep-well injection of oil and gas wastewater. The areas are spread across the Central and Eastern United States, from Colorado to Ohio. Oklahoma, long synonymous with the storm-prone area of the country known as “tornado alley,” now lies at the heart of a new manmade potential disaster zone, comprising by far the greatest amount of quake activity linked to wastewater injection. The new quake map was part of a USGS study modeling human-caused seismic hazards released on Thursday in conjunction with a meeting of the Seismological Society of America in Pasadena, California. It came a day after Oklahoma geologists issued their own report documenting strong links between rising seismic activity and wastewater injection. The USGS reported similar findings last year for Colorado and New Mexico. Other states with newly designated human-caused seismic zones include Texas, Kansas, Arkansas and Alabama. “Induced seismicity” has been most pronounced since 2009, the USGS said, coinciding with a surge in energy development associated with a drilling method called hydraulic fracturing, which forces water and chemicals into underground shale formations to extract oil and gas.
U.S. Maps Pinpoint Earthquakes Linked to Quest for Oil and Gas - The United States Geological Survey on Thursday released its first comprehensive assessment of the link between thousands of earthquakes and oil and gas operations, identifying and mapping 17 regions where quakes have occurred. The report was the agency’s broadest statement yet on a danger that has grown along with the nation’s energy production. By far the hardest-hit state, the report said, is Oklahoma, where earthquakes are hundreds of times more common than they were until a few years ago because of the disposal of wastewater left over from extracting fuels and from drilling wells by injecting water into the earth. But the report also mapped parts of eight other states, from Lake Erie to the Rocky Mountains, where that practice has caused quakes, and said most of them were at risk for more significant shaking in the future. “Oklahoma used to experience one or two earthquakes per year of magnitude 3 or greater, and now they’re experiencing one or two a day,” Mark Petersen, the chief author of the report, said. “Oklahoma now has more earthquakes of that magnitude than California.” The report came two days after Oklahoma’s state government acknowledged for the first time the scientific consensus that wastewater disposal linked to oil and gas drilling was to blame for the huge surge in earthquakes there. The state introduced an interactive map showing quake locations and places where wastewater is injected into the ground, and the state-run Oklahoma Geological Survey said it “considers it very likely” that the practice is causing most of the shaking.
Quakes in once-stable areas linked to oil, gas drilling - — More than a dozen areas in the U.S. have been shaken in recent years by small earthquakes triggered by oil and gas drilling, a government report released Thursday found.The man-made quakes jolted once stable regions in eight states, including parts of Alabama, Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma and Texas, according to researchers at the U.S. Geological Survey.Experts said the spike in seismic activity is mainly caused by the oil and gas industry injecting wastewater deep underground, which can activate dormant faults. A few instances stem from hydraulic fracturing, in which water, sand and chemicals are pumped into rock formations to free oil or gas.Many studies have linked the rise in small quakes to the injection of wastewater into disposal wells, but the Geological Survey’s report takes the first comprehensive look at where the man-made quakes are occurring.“The hazard is high in these areas,” said Mark Petersen, who leads the agency’s national mapping project.Oklahoma lately has been rocked by more magnitude 3 quakes than California, the most seismically active of the Lower 48 states, Petersen said.
US government says drilling causes earthquakes – what took them so long? - The drilling – or rather, the process of injecting water deep underground – has been triggering earthquakes in Alabama, Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma and Texas. The most obvious question is: what took you so long, USGS? Over those seven years, other scientists have speculated about whether this rise in earthquakes has anything to do with the injection wells used by the fracking industry to dispose of the water used in the process. For the most part, the report does not pin the blame on fracking itself – pumping large volumes of water, sand and chemicals into rock formations in order to free oil or gas – but rather on the associated process of injecting wastewater deep underground using injection wells. The rise of fracking after 2005’s Energy Policy Act slightly preceded and coincided with the rise in earthquakes. Oklahoma averaged a handful of earthquakes of magnitude 3 or greater from 1975 to 2008. Then, in 2009, it had 20. In 2011, the number of earthquakes in the state rose to over 60, and Oklahoma was hit by its largest earthquake in recorded history – magnitude 5.7. Immediately after the quake Katie Keranan, an assistant professor of geophysics at the University of Oklahoma, partnered with scientists from the USGS and Columbia University’s Lamont-Doherty Earth Observatory to install two dozen seismometers in Prague. Within a year, Keranan had data that indicated that the pressure from injecting water deep beneath the earth had snapped three fault planes, one after the other. Not long after, in 2012, an injection well was linked to quakes in Youngstown, Ohio. The state’s governor issued an executive order requiring operators to conduct seismic studies before the state would issue well permits.
Man-made earthquakes increasing in US, wastewater to blame – USGS — The US Geological Survey (USGS) has released a map of earthquakes believed to be the result of human activity. Experts say most of the quakes were caused by the oil and gas industry injecting wastewater underground. Fracking was also blamed in some cases. All of the areas highlighted on the chart “are located near deep fluid injection wells or other industrial activities capable of inducing earthquakes,” the study said. Such injection-induced earthquakes are occurring at a rate higher than before, according to the USGS. Scientists said the increase in seismic activity throughout the country is mainly due to the oil and gas industry injecting wastewater deep underground, which can activate dormant faults. Many of those awakened faults have not moved in millions of years, according to Geological Survey geophysicist William Ellsworth. "They're ancient faults...we don't always know where they are,” Ellsworth said, as quoted by AP. A few cases were blamed on hydraulic fracturing, or fracking – a process in which large volumes of water, sand, and chemicals are pumped into layers of rock to free oil or gas. The increase in earthquakes has rocked once stable regions in eight states: Alabama, Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma, and Texas.
These 17 Earthquake Hazard Zones Were Likely Created in Part by Fracking Wastewater -- A United States Geological Survey document released Thursday documents an increase in earthquakes likely caused by human activity, mapping 17 seismically active pockets in eight states. The document is not a study of the causes of the quakes, but rather the preliminary result of an initiative to model and predict future seismic activity; it does note that there has been a "substantial increase" in quake rates since 2009 and that the increase is attributed by other studies to the "injection of wastewater or other fluids in deep disposal wells." Wastewater injection is a technique often associated with hydraulic fracturing. Here's the USGS map of affected areas: These earthquakes are occurring at a higher rate than ever before and pose a much greater risk to people living nearby," a USGS official said in a press release. Officials in Oklahoma said on Tuesday that it is "very likely that the majority of recent earthquakes" in their state "are triggered by the injection of produced water in disposal wells." In context, that's a strongly worded statement, and it was described as "significant" by Republican governor Mary Fallin, who also added that "state agencies are already taking action to address this issue and protect homeowners."
Is fracking moratorium the solution for quakes in Texas, Oklahoma? - The release of studies this week linking fracking to recent earthquakes in Texas and Oklahoma came as no surprise to those who have been rocked by the temblors in recent years. The question for people such as Angela Spotts, 53, of Stillwater, Okla., is what’s being done about the problem. The reports, including one by the U.S. Geological Survey on Thursday, tied seismic activity to wastewater disposal following the oil and gas extraction technique known as hydraulic fracturing, or fracking. “I’m trying to understand what’s being done to protect us. There’s no excuse for a moratorium not being put in place immediately” on wastewater injection, Spotts said. “I’m very alarmed that more people are not concerned.” Industry experts say that something is already being done. “We’re all trying to find out what the heck is going on down under the ground. It’s got everyone concerned. Nobody wants to be the cause of earthquakes,” said Alex Mills of the Texas Alliance of Energy Producers, a group of 3,300 oil and gas producers based in Wichita Falls. Some other states that have been suddenly rocked by quakes in recent years declared partial bans on fracking, including Arkansas and Ohio, noted Casey Holcomb of the Central Oklahoma Clean Water Coalition. “They moved very swiftly on this when there were earthquake swarms. When we talk to the Oklahoma Corporation Commission here on this, they say they don’t have the authority,” Holcomb said of the state’s oil and gas regulator. He added, “The oil industry is in every level of government, and fracking has just given them obscene levels of wealth and they buy political power with it.”
Oil and Gas Industry Shake-up - America's booming domestic oil and gas industry is made possible through technologies such as horizontal drilling and hydraulic fracturing. Trucking has enjoyed lower fuel prices and a boom for those carriers involved in hauling sand, water, equipment and more to and from drilling sites. However, those lower oil prices have left some wells unfinished, with one fracking executive this week predicting half of all fracking companies will be gobbled up or out of business by the end of the year. And new reports from national and state geologists raise concern about the effect of the oil and gas boom on the planet.For the first time this week, the U.S. Geological Survey unveiled a map of earthquakes believed to be triggered by human activity in the eastern and central United States.Seismic activity has increased in Oklahoma, Texas, Kansas, Colorado, New Mexico and Ohio. All of the areas highlighted on the map “are located near deep fluid injection wells or other industrial activities capable of inducing earthquakes,” the study said.The New York Times has an excellent article delving into the very technical USGS report. Oklahoma, the worst-hit state, last year had more earthquakes magnitude 3 or higher than California.This week, the Oklahoma Geological Survey issued its most strongly worded statement yet linking the oil and gas industry to the state’s earthquakes, saying the spike in seismic activity is “very unlikely to represent a naturally occurring process.”However, it said the primary suspect was not hydraulic fracturing itself, but "the injection/disposal of water associated with oil and gas production," or dewatering.As Yahoo News explains:For the dewatering process, extremely salty water, which coexists with oil and gas below the Earth’s surface, is separated from those substances after extraction. Then barrels of wastewater are deposited into wells far deeper than their point of origin.
Seismologists Link Oil, Gas Drilling To Spike In US Quakes – But Could That Happen In California? - With the evidence coming in from one study after another, scientists are now more certain than ever that oil and gas drilling is causing hundreds upon hundreds of earthquakes across the U.S.So far, the quakes have been mostly small and have done little damage beyond cracking plaster, toppling bricks and rattling nerves. But seismologists warn that the shaking can dramatically increase the chances of bigger, more dangerous quakes.Up to now, the oil and gas industry has generally argued that any such link requires further study. But the rapidly mounting evidence could bring heavier regulation down on drillers and make it more difficult for them to get projects approved.The potential for man-made quakes “is an important and legitimate concern that must be taken very seriously by regulators and industry,” said Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University.He said companies and states can reduce the risk by taking such steps as monitoring operations more closely, imposing tighter standards and recycling wastewater from drilling instead of injecting it underground.A series of government and academic studies over the past few years — including at least two reports released this week alone — has added to the body of evidence implicating the U.S. drilling boom that has created a bounty of jobs and tax revenue over the past decade or so.On Thursday, the U.S. Geological Survey released the first comprehensive maps pinpointing more than a dozen areas in the central and eastern U.S. that have been jolted by quakes that the researchers said were triggered by drilling. The report said man-made quakes tied to industry operations have been on the rise.
USGS: Colorado 100 times more prone to severe earthquakes - A recent report from U.S. Geological Survey looks to oil and gas wastewater injection as the source of heightened seismic activity throughout 17 states, including Colorado, Oklahoma and New Mexico. According to the Denver Business Journal, the USGS evaluated records of earthquake data from 2000 to 2009, ultimately estimating that earthquakes with a magnitude of three are 100 times more likely to occur within the 17 states. This information concerns Mark Peterson, chief of the USGS National Seismic Hazard Modeling Project: These earthquakes are occurring at a higher rate than ever before andpose a much greater risk to people living nearby. … The USGS is developing methods that overcome the challenges in assessing seaismic hazards in these regions in order to support decisions that help keep communities safe from ground shaking. The areas with most quakes were concentrated in central and eastern states—areas heavy in oil and gas production. The study’s findings suggest, however, that hydraulic fracturing rarely contributes directly to felt earthquakes.
Oil, gas drill bits recovered from drill site in central Weld - Six of seven oil and gas drill bits reported stolen from a drill site last week have been recovered, the Weld County Sheriff’s Office reported late Monday night. The Weld Sheriff’s Office Strike Team, which was formed last year to address theft in rural areas, recovered the missing drill bits along with three others that had yet to be reported stolen, spokesman Sean Standridge said in a press release. The drill bits, which were found dumped at an oil battery site in central Weld, are valued at close to $300,000. The seven drill bits were stolen April 5 from a well site near Milliken. They are used in operation of an oil and gas rig, making them large, heavy — about 300 pounds — and would require two people to move. The sheriff’s office reported late last week that it is searching for a white man who was seen driving with the drill bits in a late 1980s dark green Ford F150 pickup. The “We received numerous tips, so the suspect probably dumped them since everyone was looking for a green truck with these in back,” Standridge stated
Greeley Wastewater Injection Well Site Bursts Into Flames - The fire at a wastewater injection well site just northeast of the Greeley-Weld County Airport on Friday could mean a total loss at the facility, Greeley Fire Marshal Dale Lyman said. About 1:15 p.m., a lightning bolt struck a water storage tank at the C4 facility east of the airport, causing a series of explosions and a fire that went on into the evening. After keeping the fire contained much of the day, firefighters began attack operations to extinguish the blaze about 5:30 p.m. Lyman said they had much of it knocked down about half an hour later. By 6:45 p.m. the fire was out.
Oil, gas spill report for April 20 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. Bonanza Creek Energy Operating Company LLC, reported on April 17 that during production, an onsite separator over-pressured, due to gas sales meter shut-in, outside of Kersey. It is approximated that two and a half barrels of oil released. Emergency response personnel were dispatched to begin cleanup of the release. DCP Midstream LP, reported on April 17 that a DCP operator left a bypass valve open, triggering the condensate to spray into the air as the unit de-pressured, outside of Kersey. It is approximated that less than 100 barrels of condensate released. The spray misted Weld County Road 40 and also the property of neighboring landowner. The DCP personnel was able to prevent the condensate from traveling any further with the use of absorption pads. A skid steer scraped the top layer of the road and ditch area, removing some of the impacted soil and floating condensate. DCP is working with the landowner to develop a cleanup of the area. PDC Energy Inc., reported on April 14 that a historic release was discovered during production line replacement, outside of Keenesburg. It is approximated that less than five barrels of condensate spilled and less than five barrels of produced water released. There was no groundwater encountered and excavation activities are ongoing.Noble Energy Inc., reported on April 9 that a hole developed in a production tank outside of Kersey. Less than five barrels of oil spilled. The tanks will be removed and all production was shut in.
Kirtland fuel spill plume seems to bypass Albuquerque wells - — A fuel spill that officials worried might pollute Albuquerque drinking water seems to be bypassing the city’s wells, according to experts. Leaders of the Kirtland Air Force Base jet fuel spill cleanup team say the plume appears to be headed north rather than northeast, the Albuquerque Journal reports. The direction means the fuel will likely bypass two of three nearby wells. It is unclear whether it will pollute the third. “It looked before like it was going directly to Kirtland (well) 3,” Dennis McQuillan, a geologist with the New Mexico Environment Department, said this weekend. “But it appears to be going more north than northeast.” The fuel leak, which is believed to have been seeping into the ground for decades, was first detected in 1999. Estimates of the amount of fuel spilled range from 6 million to 24 million gallons. The greatest concern has been that the spill would contaminate drinking water wells in the Southeast Heights. McQuillan and other officials involved in the effort to define the extent of the contamination and get rid of it have said all along that there is no imminent danger to the drinking water supply because the plume has been just inching along.
California Gas Pipeline Explosion Injures Up to 15 People - — A construction crew on Friday accidentally ruptured a natural gas transmission line in Fresno, California, sparking an explosion and fire that injured up to 15 people, four of them critically, officials said.The 12-inch (30-cm) pipeline, belonging to Pacific Gas & Electric Corp, was struck by a backhoe near state Highway 99, unleashing a fireball that injured members of the construction team and a jail inmate crew nearby, Fresno Fire Department spokesman Peter Martinez said.The accident forced closure of the highway in both directions, along with an adjacent railroad line, Martinez said. Rail traffic was halted to check for possible damage to a railway bridge over a river, he said.One worker in critical condition was flown to hospital by helicopter, and 13 or 14 others were taken to hospitals for evaluation and treatment of injuries after the pipeline was ruptured at about 2:30 p.m., Martinez added.Four of the injured were taken to Community Regional Medical Center in Fresno, and two more were taken to the burn unit there, said hospital spokeswoman Mary Lisa Russell, adding that four were in critical condition and two serious.The utility had shut off the gas flow by 3:20 p.m., with the residual amount in the pipeline burning off just before 4 p.m..
Why Are Oil & Gas Workers Mysteriously Dying Across America? -- Over the past several years, oil & gas workers in North Dakota, Colorado, Texas, Montana, and Oklahoma have mysteriously died while conducting routine checks of oil levels at tank batteries. In many cases, the fatalities were ruled to have been the result of natural causes. Now, it appears the real culprit has been found. The question is: how much did the industry know and why was the problem not addressed?
Why Did These Oil Workers Die? - WSJ: The deaths of Trent Vigus and at least nine other oil-field workers over the past five years had haunting similarities. Each worker was doing a job that involved climbing on top of a catwalk strung between rows of storage tanks and opening a hatch. There were no known witnesses to any of the men’s deaths. Their bodies were all found lying on top of or near the tanks. Medical examiners generally attributed the workers’ deaths primarily or entirely to natural causes, often heart failure. But in the past few months, there has been a shift. Though still unsure of the exact cause of the deaths, government agencies and some industry-safety executives are now acknowledging a pattern and are focusing on the possible role played in the deaths by hydrocarbon chemicals, which can lead to quick asphyxiation or heart failure when inhaled in large quantities. In the meantime, federal agencies and industry-safety groups are planning to send out a joint alert to the oil industry as early as this week, warning of the potential for imminent danger from inhaling hydrocarbons, according to several people involved in the effort. Much of the industry remains ignorant of the possible risks, they say.
North America’s Oil And Gas Industry Has Taken Over 7 Million Acres Of Land Since 2000 - Millions of acres of land across the U.S. and Canada has been taken over by oil and gas development in the last 12 years, according to a new study.The study, published Friday in Science, tallied up the amount of land that’s been developed to house drilling well pads, roads, and other oil and gas infrastructure in 11 U.S. states and three Canadian provinces. It found that between 2000 and 2012, about 3 million hectares (7.4 million acres) have been turned over to oil and gas development, a stretch of land that, combined, is equal to three Yellowstone National Parks. This land takeover can have ecological consequences, according to the report.“Although small in comparison with the total land area of the continent, this important land use is not accounted for and creates additional pressures for conserving rangelands and their ecosystem functions,” the report states. “The distribution of this land area has negative impacts: increasing fragmentation that can sever migratory pathways, alter wildlife behavior and mortality, and increase susceptibility to ecologically disruptive invasive species.”Most of the land converted into drilling operations was cropland and rangeland — a term that encompasses prairies, grassland, shrubland, and other ecosystem types — and roughly 10 percent was woodland. Wetlands, according to the report, were mostly spared by oil and gas developers, though a very small amount have been converted into oil and gas sites.
Oil Companies Are Getting a Second Chance in the Bond Market - Energy companies desperate to head off a potential funding squeeze are getting a second chance in the bond market, allowing them to keep drilling as they seek to weather the oil-price slump. Halcon Resources Corp., run by one of the architects of the U.S. shale boom, sold $700 million of bonds Tuesday that pay junk yields while pledging assets to back the debt. The Houston firm joins explorers Energy XXI Ltd. and Goodrich Petroleum Corp. in leading almost $10 billion of second-lien bond offerings in the U.S. this year, a record pace for issuance of such securities, according to data compiled by Bloomberg. The firms are getting a lifeline as banks shrink credit lines that are tied to the value of oil reserves. They’ve been able to pile on new debt because their existing obligations -- most of which were issued at the height of the shale boom -- exclude borrowing restrictions typically demanded by junk-bond investors. Those debtholders are now being punished because the new creditors are getting a stronger claim on assets. “It’s kind of the last bullet in the chamber for a lot of these companies in the most precarious situation,” “We saw weak covenants across the broader energy space, so the ability to do second liens was certainly there. It is a negative for unsecured holders, as it’s diluting your claim.” Oil companies are facing cuts to their credit lines this month as banks reevaluate the maximum amount they can borrow, a determination based on the value of their oil reserves. The loans are typically reset in April and October, meaning the squeeze happening now may get worse. Crude prices have dropped more than 47 percent to $56.50 since peaking at $107.26 in June.
What Happens To US Shale When The Easy Money Runs Out? -- One must understand that the easy money via QE from the Fed and zero interest rates allowed many shale players to burn free cash flow while showing operationally net of capital expenditures (which were funded by cheap flowing monies via FED) cash generation. To be clear, that model is now broken as the era of free Fed money appears to waning as both QE, and soon, zero rates become a thing of the past. The cost of capital is no longer falling but is now rising through higher bond yields and/or lower stock prices. The madness that is occurring in financial markets on discounting these events despite very weak, almost recessionary economics, boggles the mind.Despite the consensus of both ending, the realities are that FED will eventually reverse course on both in the realization that they can’t talk up economic growth any longer and easy money policies finally get recognized as failures. But that may occur only after another equity bubble bursts and in either case shale producers may find that equity markets are no longer going to fund production. In the end what’s likely, regardless of outcome, is that funding will be more difficult for shale producers who must constantly run in place to replace huge depletion rates.
America’s fracklog could be the next bump after the bust - America has strolled into 2015 claiming the title of the world’s top producer of petroleum and natural gas hydrocarbons. But thanks to low oil prices, holes are drilled but uncompleted, and according to a new analysis, America’s fracklog has skyrocketed. A recent Bloomberg Intelligence analysis found that the number of wells waiting to be hydraulically fractured, known as the fracklog, has tripled in the past year. Researchers claim that 4,731 wells have been drilled but uncompleted in the U.S. in the midst of low oil prices. With storage tanks at their fullest capacity since the 1930’s, companies are keeping roughly 322,000 barrels of oil per day in the ground. To put that into perspective, that’s about the same amount Libya has pumped out this year. Some analysts are worried about what will happen when companies get the first hint of a recovering market. With this many wells uncompleted and waiting for the opportunity to produce, the market could see yet another flood of petroleum commodity. This would mean a slower recovery overall for oil. Bloomberg Intelligence models show that oil production in the lower 48 states would rise 322,000 bpd to an average 7.485 million in the fourth quarter of 2016 if drillers begin to shrink their fracklogs by 125 wells a month in October. They also predicted another scenario where crude could stabilize to $60-65 per barrel. In this case, rigs could go back online, and supply would increase by 500,000 bbd to 7.67 million. According to the analysis, the Permian Basin of West Texas has the largest fracklog to deal with. Bloomberg Intelligence stated that as of February, the Permian had 1,540 wells waiting completion. A bit further south, the Eagle Ford Shale was tallied at 1,250. However the recent estimates from IHS claim that unfinished wells in south Texas number closer to 1,400.
Half of U.S. Fracking Companies Will Be Dead or Sold This Year -- Half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International Plc said. There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracking, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices. There were 61 fracking service providers in the U.S., the world’s largest market, at the start of last year. Consolidation among bigger players began with Halliburton Co. announcing plans to buy Baker Hughes Inc. in November for $34.6 billion and C&J Energy Services Ltd. buying the pressure-pumping business of Nabors Industries Ltd. Weatherford, which operates the fifth-largest fracking operation in the U.S., has been forced to cut costs “dramatically” in response to customer demand, Fulks said. The company has been able to negotiate price cuts from the mines that supply sand, which is used to prop open cracks in the rocks that allow hydrocarbons to flow. Oil companies are cutting more than $100 billion in spending globally after prices fell. Frack pricing is expected to fall as much as 35 percent this year, according to PacWest, a unit of IHS Inc. Fulks declined to say whether Weatherford is seeking to acquire other fracking companies or their unused equipment. “We go by and we see yards are locked up and the doors are closed,” he said. “It’s not good for equipment to park anything, whether it’s an airplane, a frack pump or a car.”
Oil markets bullish as US shale boom grinds to temporary halt: The latest news from oil markets seems to indicate that the US shale boom as we know it might be grinding to a temporary halt and transitioning to a new phase, leading to surges in the prices of Brent and WTI crude futures to their highest level in 2015. The US Energy Information Administration (EIA) released its April Drilling Productivity Report last week, forecasting a significant drop in total shale oil volumes in May, the first such forecast after the number of active US rigs began to fall sharply in the fourth quarter of 2014. “We are starting to see the effect of the declining rig count coming into play,” said Carl Larry, director of oil and gas business development at Frost & Sullivan. Output from seven key shale oil formations could drop by 57,000 barrels per day in May, the EIA said. This is the data oil markets have been looking out for, but the crucial point for traders is that it has come earlier than expected. “Although a drop is not unexpected, a decline in May would still be a couple of months earlier than anticipated and could signal less drilled inventory than expected,” said John Corrigan, energy specialist and vice president at Strategy&, a PwC consultancy. Crude oil prices rallied last week as traders mulled the possibility of a sooner-than-expected output cut, despite data from the International Energy Agency (IEA) announcing that in March rival OPEC recorded its highest monthly output increase in four years, and forecasting similar increases for April.
It’s time to lift the ban on crude oil exports -- When Congress approved the ban on crude oil exports 40 years ago in the aftermath of the Arab oil embargo, there was no reason to expect then that the United States would ever have a surplus of domestically produced oil. But a new era of energy abundance has arrived in America in recent years as a result of the shale revolution. Petroleum imports have dropped to less than 27 percent of what we consume, down from more than 60 percent a decade ago – and the United States is more energy secure and self-sufficient than it has been in at least thirty years. It’s time for Congress to overturn the outdated ban on oil exports. Lifting the ban would not only provide access to an international market for shale oil but would also create a wide range of jobs in the oil drilling supply chain and broader economy, according to a new study by the research firm IHS. The study says that nearly a million new jobs could be created by 2018 if the ban on crude oil exports is lifted. Only 10 percent of the jobs would be created in actual oil production, while 30 percent would come from industries that support drilling, such as construction, oil field trucks and information technology. And 60 percent of the new jobs would come from the broader economy.
Time to Lift the Ban on Crude Oil Exports -- This week Senate Energy and Natural Resources Committee Chairman Lisa Murkowski (R-AK) said she would push this year for legislation to end the United States’ export ban on crude oil. “We shouldn’t lift sanctions on Iranian oil while keeping sanctions on American oil,” she said. “It makes no sense.” Murkowski is correct—repealing the ban is long overdue. The ban on exports was enacted in the 1970s in response to the OPEC oil embargo, which sent global energy prices soaring. The thinking of legislators at the time was that an export ban was necessary to ensure U.S. oil producers sold their product domestically rather than seeking higher profits in the international market. But even after OPEC lifted the embargo and oil prices crept back from their highs, the ban remained in place. Today crude oil prices are extreme once again, but in the opposite direction. The shale boom in the Midwest has caused production of crude oil to rise 71 percent since 2010. The price of a barrel of crude oil has nearly halved, from $104 this time last year to only $56 today. The low prices are great for American consumers. But they also signal that our economy cannot absorb all the production by itself. Without buyers for their product, the shale boom that brought these states back from recession may come to an end.
Pressure builds on US to ease crude export ban - FT.com: The US may be the world’s largest crude oil importer, but one of its main energy policy tussles is over oil exports. Liberalising the 40-year-old US ban on exporting most domestic crude oil has become the subject of congressional hearings, intense lobbying and a multitude of studies.The debate seems curious, because the US still has gross crude oil imports of 7m barrels a day. But the volume has been dropping thanks to resurgent domestic production. Supplies of “light,” low-sulphur domestic oil from US shale formations have replaced most imports of similar quality. Opponents mobilising against the ban warn these supplies will saturate the market, depress domestic prices and slow down further output gains. The ban was passed in 1975 after the Arab oil embargo crippled US fuel supplies. At the time, economic policy included price controls, and crude export restrictions were needed to effect these controls, The ban restricts exports to everywhere but Canada, with few exceptions. For decades, US crude oil imports climbed steadily along with domestic fuel consumption to a peak above 10m b/d in 2005, making the question of exports irrelevant. But it has come back into focus as oil supplies climb from states such as North Dakota and Texas. Last year, US production rose by 1.2m b/d, the largest increase in records dating to 1900. Commercial crude inventories this spring were at their highest for 84 years. “For most of the past 40 years, the thought of exporting crude oil was not an issue. Folks had pretty much forgotten that when we lifted oil price controls in the early 1980s, we forgot to lift the ban,”
Oil rout forces LNG companies into radical policy rethink - FT.com: Brent crude at half the level of last June has made the production of expensive oil — from the Arctic to Brazil — unattractive. And the liquefied natural gas (LNG) industry could become another casualty. This is because the LNG market is dominated by long-term contracts whose pricing is linked to oil. Existing projects, many of which came on stream recently to meet Asian demand, have seen lower revenues, while expectations for what can be earned on new projects have been reduced. The oil rout — prices are hovering at $62 a barrel — has also meant developers of big projects have less money to spend. Energy companies have been forced to retrench, re-evaluating investment plans, reassessing cost structures and cutting expenditure. “Most integrated LNG developers are also oil majors and do not report separate capital expenditure for LNG projects.” The companies that are big LNG suppliers, from ExxonMobil to BP and Statoil, have announced cuts totalling $45bn this year — close to a 20 per cent year-on-year reduction. The timing is not ideal. LNG prices had already fallen as the rise in global energy demand slowed on weaker economic growth and milder weather. At the same time supplies were increasing. By mid-March 2015 spot LNG prices delivered into Asia, for example, had fallen by more than 50 per cent year on year. This has wiped out the price advantage of US LNG projects.
Emails: How State Department Secretly Approved Expanding Piece of Enbridge's "Keystone XL Clone" -- DeSmogBlog has obtained dozens of emails that lend an inside view of how the U.S. State Department secretly handed Enbridge a permit to expand the capacity of its U.S.-Canada border-crossing Alberta Clipper pipeline, which carries tar sands diluted bitumen (“dilbit”) from Alberta to midwest markets. The State Department submitted the emails into the record in the ongoing case filed against the Department by the Sierra Club and other environmental groups in the U.S. District Court for the District of Minnesota. Collectively, the emails show that upper-level State Department officials hastened the review process on behalf of Enbridge for its proposed Alberta Clipper expansion plan, now rebranded Line 67, and did not inform the public about it until it published its final approval decision in the Federal Register in August 2014.According to a March 17, 2014 memo initially marked “confidential,” Enbridge's legal counsel at Steptoe & Johnson, David Coburn, began regular communications with the State Department on what the environmental groups have dubbed an “illegal scheme” beginning in at least January 2014.Environmental groups have coined the approval process an “illegal scheme” because the State Department allowed Enbridge to usurp the conventional presidential permit process for cross-border pipelines, as well as the standard National Environmental Policy Act (NEPA) process, which allows for public comments and public hearings of the sort seen for TransCanada'sKeystone XL pipeline.Further, the scheme is a complex one involving Enbridge's choice to add pressure pump stations on both sides of the border to two pipelines, Enbridge Line 3 and Enbridge Line 67, to avoid fitting under the legal umbrella of a “cross-border” pipeline.
BP Spokesman: Tar Balls Left From Gulf Oil Spill Pose No Threat To Humans Or Animals -- Five years ago, BP’s historic 2010 Deepwater Horizon spill resulted in more than 210 million barrels of oil ending up in the Gulf of Mexico. But while scientists continue to observe ongoing problems, a BP spokesman appeared on ABC’s This Week on Sunday suggesting the remaining oil no longer poses a risk to humans or the aquatic ecosystem. Alisha Renfro, the Mississippi River Delta Campaign staff scientist for the National Wildlife Federation told a This Week reporter that while you no longer see oil slicked islands today: “You see tar balls that are washing up. And what it points to is the fact that oil is still in the system and, just because we can’t always see it everywhere we go, it’s still out there.” After Louisiana State University confirmed a sample tar ball as a nearly exact match to the Macondo well oil released during the 2010 spill, BP Senior Vice President of U.S. Communications Geoff Morrell told This Week. “The product that you have in your hand does not pose a threat to human or aquatic life. This, if it’s Macondo oil, is now five years old and likely weathered beyond the point of being harmful.” Watch the video:
Five Years after the BP Deepwater Horizon Disaster, Oil Spills Are on the Rise --Five years after the BP Deepwater Horizon blowout in the Gulf of Mexico sparked national outrage, oil spills remain a routine occurrence across the United States. Yet many receive little — if any — national attention. The enormity and unprecedented scale of the BP disaster demanded a federal emergency response and captured daily headlines for months. But oil spills and pipeline ruptures occur daily – as they have nearly every day since the Deepwater Horizon exploded on April 20, 2010. While many are relatively small in comparison, they still pose threats to public safety, health, and the environment.Although it seems incredible, there is no comprehensive national list of oil spills — from any government source.TheBureau of Safety and Environmental Enforcement, the federal agency that oversees offshore oil and gas operations, maintains a list of “incidents.” Although this list includes “collisions” as well as oil released from wells, it does not, for example, include last year’s oil tank barge collision in Galveston Bay that spilled nearly 170,000 gallons of oil.E&E’s EnergyWire noted last year that while there was a 17 percent increase in incidents between 2013 and 2014, these records are considered “an undercount” and not all states make this data available. In the top 15 oil and gas producing states, EnergyWire tallied at least 7,662 spills or other releases in 2013, up from 6,546 in 2012. That brings the 2013 total to about 20 such incidents per day that, combined, released some 26 million gallons of oil and related fluids
Five years after the Deepwater Horizon oil spill, we are closer than ever to catastrophe - In the five years since the Deepwater Horizon accident, the oil and gas industry has not retreated to safety. Instead, it has expanded its technological horizon in ways that make it harder to foresee the complex interactions between drilling technologies, inevitable human errors and the ultra-deepwater environment. Before its sinking, Deepwater Horizon had drilled one of the deepest oil and gas wells. That depth has since been surpassed, and exploration continues to new frontiers. Not far from the Deepwater Horizon accident site, Royal Dutch Shell is now developing the deepest offshore oil field in history. In the Caspian Sea, an international consortium is exploring the Kashagan oil and gas field, a mega-project that the consortium itself describes as an enormously challenging endeavour. And the hunt for Arctic oil takes place in some of the most inhospitable waters in the world. Numerous analyses of the Deepwater Horizon accident have pointed to three contributing causes: the complexity and inherent riskiness of oil drilling systems, human and organisational factors and regulatory challenges. In the past half-decade, we have made little progress in these areas. Indeed, the risk of another catastrophic spill may be greater than ever before. Offshore drilling is a complex system prone to technological failures that are difficult to predict and challenging to comprehend in real-time. Drilling operations have limited slack to absorb errors; the failure of one part of the system can spread quickly to other parts, and operators cannot simply “turn off the well” while they look for a solution. Unfortunately, major accidents are nearly inevitable in these kinds of systems, as decades of research by Yale sociologist Charles Perrow has shown.Human and organisational factors compound these challenges. A well-documented and particularly pernicious tendency of human decision-makers is to interpret evidence in a way that supports their pre-existing conclusions (pdf).
Fracking Campaigner's fury as chemical giant plans to drill 400 METRES from homes and SCHOOL - RESIDENTS blasted chemicals giant Ineos after they revealed plans to start fracking near school playgrounds and 400metres from homes. The news came at the first public meeting over the company’s controversial plans to extract shale gas in Scotland. Angry locals said the move to drill boreholes close to residential homes and a school was a “slap in the face”. The plans were revealed at a packed meeting in Denny High School in Stirlingshire. The company plan to give six per cent, around £2.5billion, of its profits to communities. Community councillor Maria Montenaro, 53, who is also part of the Concerned Communities of Falkirk group, said: “That is far too close for comfort. We wanted a two kilometre buffer zone as they have in parts of Australia. “They have planning consent for fracking at Skinflats village near Falkirk. This is unacceptable as they will be working only a few hundred metres away from Bothkennar primary school.
Offshore fields use power sent from land - FT.com: Offshore oil and gas fields supply much of the world’s energy, but it is not always appreciated that the very platforms extracting and delivering supplies to shore are themselves considerable consumers of fuel. Larger platforms deployed in the North Sea can typically consume power at a rate of 50 to 100 megawatts across a large range of processes — including oil separation, gas compression, wastewater treatment, gas lifting, and the ultimate export of oil and gas to shore. One study suggests that more than a quarter of Norway’s total carbon dioxide emissions could be attributed to North Sea oil and gas platforms operating in its waters at the beginning of the decade. However, a combination of environmental lobbying, engineering problem-solving and economic calculations have prompted the oil-rich nation to raise its game. Statoil, Norway’s oil industry champion, announced last month the award of a $155m contract to engineering company ABB for initial work on the first stages of a land-based power supply for the development of the Johan Sverdrup field — the biggest North Sea oil discovery of recent years. In total, partners backing the scheme are budgeting more than five times that amount to send power from Norway’s grid system, which is normally fully supplied by the country’s abundant hydroelectricity, via a high-voltage, direct current cable to help fuel oil and gas extraction from 2019 onwards. A 200km long submarine cable should have the capacity also to power adjacent fields scheduled for development from 2022, in line with commitments demanded by a coalition of Norwegian political parties last year to secure public backing for the launch of production from Johan Sverdrup.
Putting The Real Story Of Energy & The Economy Together -- What is the real story of energy and the economy? We hear two predominant energy stories. One is the story economists tell: The economy can grow forever; energy shortages will have no impact on the economy. We can simply substitute other forms of energy, or do without. Another version of the energy and the economy story is the view of many who believe in the “Peak Oil” theory. According to this view, oil supply can decrease with only a minor impact on the economy. The economy will continue along as before, except with higher prices. These higher prices encourage the production of alternatives, such wind and solar. At this point, it is not just peak oilers who endorse this view, but many others as well. In my view, the real story of energy and the economy is much less favorable than either of these views. It is a story of oil limits that will make themselves known as financial limits, quite possibly in the near term—perhaps in as little time as a few months or years. Our underlying problem is diminishing returns—it takes more and more effort (hours of workers’ time and quantities of resources), to produce essentially the same goods and services. We don’t measure our investment results with respect to the quantity of end product produced (barrels of oil produced, liters of fresh water produced, kilos of copper produced, or number of workers provided with sufficient education to work in high tech industries), so we don’t realize that we are becoming increasingly inefficient at producing desired end products. See my post “How increased inefficiency explains falling oil prices.” Wages, viewed in terms of the product produced–oil in this case–can be expected to decrease as well. This change isn’t evident in usual efficiency statistics, because some of the workers are providing new kinds of services, such as fracking services, that weren’t required before.
Oil Slips On Saudi Record Production Promise, Specs Pile In But Blackstone Skeptical -- For the 2nd day in a row, WTI crude prices are falling (back below $55) after Saudi Arabian Oil Minister Ali al-Naimi said production in the world's biggest crude exporter would stay near record peaks around 10 million barrels per day in April. The investment community remains divided over the future (perhaps more a reflection of time horizons): BofA notes Large Speculators bought crude contracts for the 3rd consecutive week - the longest streak since June 2014; but Blackstone (among other private equity firms) have stayed on the sidelines (despite plenty of cash to put to work) as public markets have exuberantly filled the void so far this year: Oil producers have been able to “raise a lot of debt and, in some cases, equity publicly at values that we wouldn’t touch."
IHS CERAWeek arrives at an uncertain point in O&G history -- Could the debris from an abysmal year for the oil and gas industry be close to settling? Not likely, CNBC reports. With soaring highs in U.S. oil production partnered with OPEC and Saudi Arabian reluctance to curtail production, IHS Inc. vice chairman Daniel Yergin forecast continued price volatility:“This is a market that’s far from settled down, and it’s a market that’s going to be a lot more volatile. What kind of prices do you need to keep it going? What does it mean when you say the U.S. is the new swing producer? It’s much easier to swing up than down.” The global oil glut and slump nearly halved oil prices since June—rig counts followed suit. Despite operating with half its arsenal of oil and gas rigs, the U.S. still manages to churn out about 9.3 million barrels per day—just one million less from the Saudi average of 10.3 million barrels. As industrialists stream into Houston this week for the 2015 IHS CERAWeek conference, there’s likely to be a stark contrast in conversation compared to last years’ event, when pricey oil inflated U.S. production. Though low oil prices drove some companies to cut jobs and budgets, Oppenheimer & Co. energy analyst Fadel Gheit said some companies might be able to maintain profit. ExxonMobile, for example, could see an increase in acquisition options with low prices, and Royal Dutch Shell plans to team with BG Group in a $70 billion LNG deal. Gheit expects the prices to recover to about $70 per barrel, but doubts they’ll meet their standards from last June:
Speculators divided over U.S. oil prices – Despite the surge in U.S. oil prices, hedge funds are still divided about what will happen next, according to the latest data from the Commodity Futures Trading Commission (CFTC). Hedge funds and other money managers held long positions in WTI-linked futures and options equivalent to 396 million barrels of oil on April 14. But the hedge fund community also had 150 million barrels of short positions, betting on a fall in prices, CFTC data show. The ratio of hedge fund long to short positions, at just 2.65 to 1, remains unusually low compared with recent years and is still below the level in January and February.In fact, the CFTC data identifies more separate large short positions (92) than long ones (78), implying more hedge funds are bearish rather than bullish, though the bulls on average hold bigger positions. The positioning data confirm that the market remains deeply divided about the outlook for oil prices, especially in the U.S. domestic market. Bulls point to the sharp drop in the number of rigs drilling for oil, down by almost 55 percent since early October, and the expected fall in U.S. oil output over the next six months. Bears focus on the absence of any hard evidence of a fall in production, as well as the build up of almost 100 million barrels of extra oil inventories since the start of the year, and increases in Saudi production.
Big Hit For U.S. Oil Production In January: U.S. crude oil production fell at least 135,000 barrels of oil per day in January 2015 compared to December 2014 according to the EIA (Figure 1). Figure 1. U.S. crude oil production. Predictions Should Be Taken With More Than A Pinch Of Salt. Bakken Shale production fell the most of any play or jurisdiction losing 37,000 barrels per day in North Dakota and 4,000 barrels per day in Montana for a total of 41,000 barrels of oil per day (Figure 2). Production in California, the offshore Gulf of Mexico, Alaska and Wyoming also declined significantly. Figure 2. January 2015 production changes by jurisdiction. Figure 3 shows Bakken production based on DrillingInfo data. The 42,000 barrels of oil per day drop in January production is completely consistent with EIA data differing by only 1,000 barrels per day. Figure 3. Bakken oil production. Source: DrillingInfo and Labyrinth Consulting Services, Inc. (Click image to enlarge) is important because DrillingInfo data also shows significant decreases in the Eagle Ford and Permian basin plays in January 2015 of 36,000 and 33,000 barrels of oil per day, respectively (Figures 4 and 5). EIA shows that Texas production increased 3,000 barrels per day.
The EIA Is Bizarrely Optimistic About Future US Oil Production - The EIA came out with its final update of Annual Energy Outlook 2015. It seems that the EIA is extremely optimistic concerning future US crude oil production. Here is a comparison with AEO 2014. The EIA still expects US crude production to peak in 2019 but at 10,472,000 bpd or 824,000 barrels per day higher than the expected last year. But the biggest difference is in the EIA’s change in decline expectations. They now expect the US to be producing 9,329,000 bpd in 2040 or 1,812 higher than they had 2040 production last year. This is the EIA’s reference, or most likely case. Production from tight formations leads the growth in U.S. crude oil production across all AEO2015 cases. The path of projected crude oil production varies significantly across the cases, with total U.S. crude oil production reaching high points of 10.6 million barrels per day (bbl/d) in the Reference case (in 2020), 13.0 million bbl/d in the High Oil Price case (in 2026), 16.6 million bbl/d in the High Oil and Gas Resource case (in 2039), and 10.0 million bbl/d in the Low Oil Price case (in 2020). What the EIA is saying in the above paragraph is that price and tight oil production is everything when it comes to US future oil production. On that point I would agree except that even if the price returns to $100 and higher, it will not produce tight oil production to anywhere near the EIA’s high price projections.
Wall Street Bets On Oil Price Rally -- If the whims of speculators are anything to go by, then oil markets are poised for a rebound. Data from the Commodity Futures Trading Commission show that bullish positions on WTI have reached their highest levels in eight months. Speculators make bets on the price of crude – long or short – depending on where they think prices are heading. Not since the end of the summer in 2014 have so many investors put money on the line, betting on a price rise. Obviously, elite investors are not always right. Few saw the bust coming. But the mounting belief that the worst is over for oil provides a bit of evidence that prices could be on the mend. That is also reflected in lending and equity positions in actual oil companies. Sensing a massive opportunity to buy up valuable assets on the cheap, big money is piling into shale companies. Banks, hedge funds, and other big investors are lending, buying equity, and purchasing assets during the down cycle. Around $12 billion in new stock was issued in oil and gas in the first quarter of 2015 according to Bloomberg, the highest amount in eight years. Such an astonishing level of new investment during a period of depressed prices shows that the markets, despite major concerns from corporate executives, have not soured on oil and gas in the least. Oil prices have more than halved from the 2014 peak, which has destroyed profits for many drillers. It is a volatile business to be sure, and more pain can be expected in the coming weeks as companies begin reporting first quarter earnings, but Wall Street’s actions so far this year demonstrate the enormous appetite for oil and gas investment.
A Plot To Hold Down Oil Prices Or Just A Happy Coincidence? - The recent unprecedented surge in oil imports has again prompted a review of things here. In a prior story, we wrote that the lack of capacity to process light sweet crude at refineries produced via shale plays could be playing a role in the stock build. As mentioned previously, refineries over the next 24 months are expected to add 700,000 B/D in capacity to handle this type of crude. In the meantime, we have noticed an unusual amount of crude being imported, possibly as a result of this imbalance in refinery capacity. Or could it be that a more sinister plot is afoot? To quantify the scale of the issue, we turn to Cornerstone Analytics’ work in uncovering the magnitude of the impact of imports on the rise in oil inventory stocks. We haven’t seen this level of import imbalance period since 2013, as the chart below demonstrates via Cornerstone. In the past 6 months, the level of imports relative to the requirement or need by refineries has jumped not once but twice. The 1M B/D “gap” goes a long way in explaining the oil inventory stock build which has been 5MB-10MB per week. If adjusted, the builds over the past 6 months without such imports would not exist at all or at the very least be greatly reduced. So is this occurring as part of the inability of refineries to handle the mix of output domestically or is this part of some plot to build inventories to crash the prices of oil? Quite frankly we can’t say for sure but anomalies such as this must be exposed so that they can be debated given that there has been ample debate on Saudi motivations for holding down oil prices and the ongoing media cheerleading on lower oil prices.
Halliburton says has cut 9,000 jobs in wake of oil's drop — Halliburton has cut 9,000 jobs in about six months and is considering additional cost-cutting moves as falling oil prices reduce demand for its drilling help. That’s more than 10 percent of the Houston company’s workforce. Halliburton Co. executives disclosed the job cuts Monday on a conference call with investors. The company reported a loss of $643 million in the first quarter. Still, the results excluding write-downs and other one-time costs were better than expected.
Baker Hughes Cuts 17% Of Workforce As Oil Slump Ripples Through Economy - Today, in the latest sign that depressed crude prices are likely to ripple through the economy for some time to come and in the process make the government’s unemployment figures look like even more of a farce than they already do, we learn that Baker Hughes has now increased the number of jobs it plans to cut from 7,000 to 10,500 (or nearly a fifth of its workforce) and the best (or worst) part is, that may not be the end of it. Here’s the statement: During the first quarter we took necessary actions to reduce our cost base and resize our footprint to mitigate current market conditions. These actions include the closure and consolidation of approximately 140 facilities worldwide along with the idling or impairment of excess assets and inventory. Correspondingly, we made the decision to increase our headcount reductions to a total of approximately 10,500 positions, or 17% of our workforce, which is 3,500 positions higher than what we previously announced. Combined, these actions are projected to reduce cost by more than $700 million on an annualized basis. Looking out to the second quarter, we expect unfavorable market conditions to persist. North America and international rig counts are projected to continue declining across most onshore and shallow water markets, which would further intensify the oversupply of oilfield services. We will continue monitoring market conditions closely and will take actions as necessary to optimize efficiency, while retaining the capacity to flex up when market conditions improve.
BP is preparing to stave off a takeover - If there was one thing guaranteed to follow low oil prices (other than the loss of thousands of jobs) it was mergers and acquisitions. This has certainly rung true as companies consolidate their portfolios or use their war chests to snap up competitors while prices are down. The recent deal between Royal Dutch Shell and BG Group has many expecting a renewed wave of major business decisions. The buzz has fueled rumors that BP Plc will be susceptible to a takeover by fellow oil giant Exxon Mobil Corp. Now even BP is worried that it may be next in line on the merger marketplace, according to Bloomberg. . Sources revealed to Bloomberg that “BP executives are concerned the company is vulnerable to an opportunistic bid.” Executives have recognized ExxonMobil, of course, but also Chevron Corp. as potential buyers. The one thing that is crippling BP’s market fortitude, however, is also making it an uneasy target. U.S. District Judge Carl Barbier has yet to rule just how much the British oil company will pay in fines under the Clean Water Act for the Deepwater Horizon oil spill, which began five years ago as of Monday. Although BP has shelled out billions for recovery and settlements already, it could be hit with as much as $13 billion in fines for the millions of gallons of crude oil that gushed from its Macondo well. Despite recent challenges for BP, though, the company is still worth roughly $131 billion. On the other hand, ExxonMobil, which is the most valuable oil company on the globe, has a value of $368 billion, and according to Bloomberg, it has more than enough capital to spend to scoop up BP.
Oil prices ease as U.S. stockpiles seen rising – Oil prices eased on Tuesday on expectations of another rise in U.S. stockpiles and as Saudi Arabia keeps output near record highs, but prices remained near a 2015-peak reached last week. Crude prices have climbed around 18 percent since the start of April on speculation about falling U.S. output after the domestic oil rig count hit 2010 lows. They have also been supported by tension in the Middle East. Still, U.S. commercial crude oil inventories are likely to have increased by 2.4 million barrels last week, marking a rise for the 15th consecutive week, a preliminary Reuters survey showed. Brent crude for June delivery was down 17 cents at $63.28 by 0141 GMT, after settling flat on Monday. U.S. crude for May delivery, which expires later in the day, was down 15 cents at $56.23 a barrel, after settling 64 cents higher.
Crude Inventories Rise For Record 15th Straight Week, Production Drops - DOE Inventory data confirmed API data overnight with a 5.3mm bbl build (notably better than expectations of 3.2mm and significantly higher than last week's 1.29mm build). Cushing saw a build that was the 2nd lowest since November 2014 (even though at +738k the build was well above expectations of +550k). Crude prices appear to jumping higher on the fact that production was a 2nd consecutive production cut (albeit very modest) even though we have seen such short-term drops before (and it was only Alaska that saw a drop -3.4% - lower 48 was flat 0.0%).
US Oil and Natural Gas Rig Count Drops by 22 to 932 - Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 22 this week to 932 amid depressed oil prices. Houston-based Baker Hughes said Friday 703 rigs were seeking oil and 225 explored for natural gas. Four were listed as miscellaneous. A year ago, 1,861 rigs were active. Among major oil- and gas-producing states, Texas lost 19 rigs; North Dakota lost five; Oklahoma was down three; and Alaska, New Mexico and West Virginia each lost one. Louisiana gained two rigs, while Arkansas, California, Colorado, Kansas and Pennsylvania each gained one. Ohio, Utah and Wyoming were unchanged.
Crude Drops After US Rig Count Decline Extends To Record 20 Weeks -- For a record-breaking 20th week, US rig counts declined. Total rigs dropped 22 to 932 (the 4th smallest drop since Nov 2014) while oil rigs fell 31 to 703 (down over 56% from the highs). With the very modest production drop (all due to Alaska with the Lower 48 flat) it appears any slowdown in drilling rigs has not dampened enthusiasm to pump, baby, pump. WTI initially popped but is fading now...
Baker Hughes expects falling rig count to weigh on 2nd qtr (Reuters) – Baker Hughes Inc, which is being bought by Halliburton Co for $35 billion, said it expects “unfavorable market conditions” to persist in the second quarter as drillers turn off more rigs, intensifying a glut in oilfield services. The comments echoed larger rival Halliburton’s warning on Monday of pricing pressure hurting oilfield services in North America and challenges in international operations. The rig count in North America, a region that accounts for 44 percent of Baker Hughes’ revenue, has halved to 1,000 so far this year. The dramatic fall follows a 45 percent drop in global oil prices since June. Oil producers have responded by quickly scaling back spending, which in turn has weighed on demand for Baker Hughes’ services. In response, the company is cutting 10,500 jobs or 17 percent of its global workforce. Baker Hughes also said it had closed and consolidated about 140 facilities worldwide, besides idling and writing off excess assets and inventory.Halliburton said on Monday that it had laid off about 9,000 workers, or more than 10 percent of its global headcount, in the past two quarters, while industry leader Schlumberger Ltd said last week that it was shedding about 15 percent of its workforce, or 20,000 jobs. Baker Hughes, which publishes a closely watched rig count, said it expected the rig count in North America to drop 30 percent in the second quarter on a sequential basis, and by as much as 15 percent across Europe and Africa.
US Oil Production May Not Drop In Earnest Until 2016 -- Readers are keen to know when US oil production will begin to fall. This is not an easy question to answer but in the comments to last week’s rig count update some interesting links were posted. Among them I came across a link to an Energy Information Agency (EIA) report into US drilling efficiency that sought to link future production to drilling activity and this seemed an interesting avenue to explore. The analysis presented here is jam packed with multiple lines of uncertainty, but a simple analysis based on many assumptions suggests that US production may actually increase further by about 1 Mbpd, due to an estimated 18 month time lag between drilling and first production, improved drilling efficiency and a growing backlog of drilled but idle wells. US oil production may not actually begin to fall in earnest until the middle of 2016. The starting point for this analysis is to look at recent history. In the wake of the 2008 financial crash, US drilling plunged then as it has done now. What impact did that have on production? There is a small dip in production aligned with the crash but I believe that dip has nothing to do with it and was instead caused by a hurricane closing down US Gulf of Mexico offshore rigs. So when did the decline in drilling show up in production? It is, at this point, important to understand that in 2008 / 09, most shale drilling was for gas and it was in the post-crash rise that there was a massive migration to drilling for oil (Figure 2). However, gas wells produce some liquids (natural gas liquid (NGL) and condensate) and oil wells produce gas. In some cases the lines can be blurred between the two. In this post I look at total rigs (oil + gas) that is compared to crude + condensate + NGL production as reported by the IEA.
Big oil warns world to brace for a different, but equally daunting, price shock to come - As the oil patch grows accustomed to a new world of US$50 to US$60 crude, it’s now looking ahead to a different but equally daunting sort of cliff.Oil companies are warning there will be a price to pay — a much higher price — for all the cost cutting being done today to cope with the collapse in the crude market. Big projects intended to start pumping oil and natural gas 5 to 10 years from now are being canceled or put on hold as the price crash forced US$114 billion in spending cuts on the industry. Energy giants from Exxon Mobil Corp. to Royal Dutch Shell say they’re taking a much more cautious approach to approving projects that cost billions and take years to complete. That’s setting the table for a future oil-price shock when a growing world population drives higher demand, said oil executives and financiers at the IHS CeraWeek Energy Conference in Houston. “What we decide today will have an effect on the future,” Patrick Pouyanne, chief executive officer of Total SA said Tuesday during the event. Postponing spending on mega-projects that usually deliver significant quantities of oil or gas “will have an impact. This could affect supply in three or four years.” Demand has already begun to show signs of strength. The Paris-based International Energy Agency last week raised its forecast for 2015 demand, projecting that the world will consume 94.7 million barrels a day of crude in the fourth quarter, a potential increase of almost 1 million barrels over
Oil falls on strong dollar and as Saudi output remains near record high (Reuters) - Oil prices fell towards $62 a barrel on Monday on a strong dollar and as Saudi Arabian Oil Minister Ali al-Naimi said production would stay around 10 million barrels per day (bpd) in April. Brent crude LCOc1 was trading down $1.20 at $62.25 by 1147 GMT, down from an intraday peak of $64.34. U.S. crude for May delivery CLc1 was down 74 cents at $55 a barrel, down from an early high of $56.65. The dollar was up 0.47 percent against a basket of currencies .DXY, denting the price of crude oil. A strong greenback makes dollar-traded commodities like crude oil less attractive for holders of other currencies. Production in the world's biggest crude exporter would stay near record peaks around 10 million bpd in April, Saudi Arabian Oil Minister Ali al-Naimi told Reuters on Monday in Seoul, where he is due to attend a board meeting of the state oil firm Saudi Aramco. "I have said many times we will always be happy to supply to our customers with what they want. Now they want 10 million," he said. Naimi earlier this month said Saudi Arabia produced 10.3 million bpd of crude in March, eclipsing a previous record of 10.2 million bpd, in what is seen as a move to defend market share against non-OPEC competition, including the United States.
Strong demand to rebalance oil market by early 2016: Kemp - – Global oil demand is set to rise by 1 million or even 1.5 million barrels per day (bpd) in 2015, according to a range of forecasters. Coupled with a fall in shale output in the second half of the year, as the decline in the U.S. rig count takes effect, that should be enough to bring the oil market near to balance by early 2016. Worldwide consumption will increase by a little over 1 million bpd in 2015, according to forecasts published this month by both the International Energy Agency and the U.S. Energy Information Administration (EIA). Ian Taylor, chief executive of Vitol, the world’s largest oil trader, has also predicted demand will grow by around 1 million bpd, at a conference hosted by the Financial Times. Paul Reed, who heads oil trading for BP, put growth at up to 1.5 million bpd, according to the Financial Times (“BP, Vitol: oil demand will be stronger than forecast” Apr 22). Consumption has increased by more than 1 million bpd in 11 of the last 20 years, according to the EIA, so growth of 1 million to 1.5 million bpd would not be exceptional. Moreover, a 1 million bpd increment in demand would represent a much smaller percentage increase than it did 10 or 20 years ago. Extra consumption of 1 million bpd would represent an increase of just 1.1 percent, a growth rate exceeded in 12 of the last 20 years.
Oil Prices Won't Recover Anytime Soon Says Exxon CEO - Rig counts hit new lows each week. For the week ending on April 17, Baker Hughes says the U.S. lost an additional 34 oil and gas rigs, bringing the total down to 954. Domestic crude oil production appears to have plateaued and the EIA expects a contraction in May. Nearly every driller is dramatically scaling back spending, which should increasingly cut into new output. And oil consumption is finally picking up, as drivers far and wide take advantage of cheap fuel. But what if the bust is not over yet? Despite the signs of a rebound, ExxonMobil’s CEO Rex Tillerson has a much more bearish take on oil prices. Speaking at the IHS CeraWeek conference in Houston, Tillerson predicted that oil prices would remain subdued for the next several years. While the longer-term is harder to predict, there is quite a bit of evidence to suggest that oil prices may not rise much higher than where they are right now in the short-term. For one, crude oil inventories continue to build. Although the stock build has slowed in recent weeks, it is still dramatically higher than the five-year average. Until production slows to the point that consumers are drawing down inventories faster than they can be replaced, oil prices have little room to rise. Another significant factor that could limit any further increases in oil prices is the enormous backlog of wells awaiting completion. Since most of the value of oil and gas coming out of shale occurs in the first few months of production, drillers are avoiding completing hundreds of wells because selling into the current low-price environment would earn them a lot less cash than if they wait until prices rise again. As a result, there is a vast collection of shale wells that will be completed once oil prices increase (an estimated 900 in North Dakota alone), which could bring a flood of new production online. The effect on prices is debatable, but the CEO of ConocoPhillips thinks it could send oil prices down once again.
Who Is Saudi Arabia Really Targeting In Its Price War? - Saudi Arabia is not trying to crush U.S. shale plays. Its oil-price war is with the investment banks and the stupid money they directed to fund the plays. It is also with the zero-interest rate economic conditions that made this possible. Saudi Arabia intends to keep oil prices low for as long as possible. Its oil production increased to 10.3 million barrels per day in March 2015. That is 700,000 barrels per day more than in December 2014 and the highest level since the Joint Organizations Data Initiative began compiling production data in 2002 (Figure 1 below). And Saudi Arabia’s rig count has never been higher.Market share is an important part of the motive but Saudi Minister of Petroleum and Mineral Resources Ali al-Naimi recentlyemphasized that “The challenge is to restore the supply-demand balance and reach price stability.” Saudi Arabia’s need for market share and long-term demand is best met with a growing global economy and lower oil prices. That means ending the over-production from tight oil and other expensive plays (oil sands and ultra-deep water) and reviving global demand by keeping oil prices low for some extended period of time. Demand has been weak since the run-up in debt and oil prices that culminated in the Financial Collapse of 2008 (Figure 2 below). Since 2008, the U.S. Federal Reserve Board and the central banks of other countries have further increased debt, devalued their currencies and kept interest rates at the lowest sustained levels ever (Figure 3 below). These measures have not resulted in economic recovery and have helped produce the highest sustained oil prices in history. They also led to investments that are not particularly productive but promise higher yields that can be found otherwise in a zero-interest rate world. The quest for yield led investment banks to direct capital to U.S. E&P companies to fund tight oil plays. Capital flowed in unprecedented volumes with no performance expectation other than payment of the coupon attached to that investment.This is stupid money. These capital providers are indifferent to the fundamentals of the companies they invest in or in the profitability of the plays. All that matters is yield. The financial performance of most companies involved in tight oil plays has been characterized by chronic negative cash flow and ever-increasing debt. The following table summarizes year-end 2014 financial data for representative tight oil-weighted E&P companies.
