the unusual changes in the oil patch metrics we saw last week reversed themselves this week, so all of our speculation on possible energy markets changes they might have indicated have gone by the boards...US field production of crude oil, which had been holding near its early June record until last week, fell 1.5% in this week's report, from 9,558,000 barrels per day in the week ending July 17th to 9,413,000 barrels per day in the week ending July 24th; though that's still up 11.5% from the 8,443,000 barrels per day production in the same week last year, it's now more than 2% off the record of 9,610,000 barrels per day produced in first week of June this year....our imports of crude oil also fell, from 7,941,000 barrels per day last week to 7,545,000 barrels per day in the current reporting week, which was down 2.6% from the same week last year, but still left the 4 week average over 7.5 million barrels per day, 1.0% above the same four-week period last year...with lower production and imports, our inventories of crude oil in storage fell by 0.9%, from 463,885,000 barrels in last week's report to 459,682,000 barrels as of July 24th...that's still 25.1% more than the 367,374,000 barrels that were reported stored on July 25th of last year, and still nearly 20% more oil than had ever been stored at the end of July in the 80 years of EIA record keeping, which had never seen 400 million barrels of oil in storage before this year...
likewise, after the unusual increase in drilling rigs last week, after oil prices had been falling for month, the total count of rigs in operation this past week fell once again, although oil drilling rigs did increase again for the 5th week in a row...Baker Hughes reported that in the week ending July 31st, the number of active drilling rigs in the US fell by to 874, with oil rigs up 5 to 664, gas rigs down 7 to 209, and miscellaneous rigs unchanged at 1; that was down by 1,015 rigs from the 1,889 that were running at the end of July last year, with oil rigs down from 1573, gas rigs down from 313, and miscellaneous rigs down from 3...while 6 land based drilling rigs were taken out of operation this week, leaving 841, one rig was set up on a lake in Louisiana, bring the inland lake total to 5, and 3 rigs were added offshore in the Gulf, which now has 34...the shift to conventional drilling has also reversed, as there were 126 vertical rigs in operation, 5 less than last week, while horizontal drilling rigs increased by 2 to 664 and directional rigs increased by 1 to 84...
the largest increase in rigs this week was in the Cana Woodford, where 4 were added, bringing the total to 37; the count there is up from 32 a year ago, and it's the only shale basin in the US to see an increase in rigs over the past year..in addition, 3 rigs were added in the Permian basin, and the Utica and the Williston shales each saw an increase of 1 rig...meanwhile, 3 rigs were pulled out of the Marcellus, 2 were pulled from the Eagle Ford, and one was pulled from the Granite Wash....
the state rig totals don't match up well with the basin counts, however...we know Oklahoma drillers added 4 rigs in the Cana Woodford, but the net change for the state is zero...that would suggest that 3 conventional rigs were shut down in the state, and that a Granite Wash rig also was removed from OK...elsewhere, the Kansas rig count was reduced by 4 to 7, the Utah count was reduced by 3 to 4, the Pennsylvania count was reduced by 2 to 42, the Alaskan count was reduced by 2 to 9, the Colorado count was reduced by 1 to 38, and the rig count in West Virginia was reduced by 1 to 19....states adding rigs included New Mexico, where rigs increased by 3 to 54, Louisiana, where rigs increased by 2 to 78 with the removal of two land rigs and the addition of 4 on the water, North Dakota, where the rigcount increased by 1 to 70, Ohio, where the rig count increased by 1 to 21, Texas, where the rig count increased by 1 to to 375, and Wyoming, where the rig count increased by 1 to 22...in addition, single rigs were added in Alabama and Mississippi, which now have 2 and 3 rigs in operation respectively...
this past week has brought us the first raft of quarterly reports from the major oil & gas companies and the independent frackers, so looking at how they did over the April thru June time-span, when oil prices pretty much stayed within a few dollars of $60 a barrel, should give us a sense of whether or not they can remain profitable, or even remain in business, in the current oil price environment, where oil has been trading below $50 a barrel over the past few weeks...understand that the financial situation for independent drillers, whose profitability is directly related to the wellhead price they receive for oil and gas, is quite different than that of the vertically integrated major oil companies, who have downstream oil refining and product marketing operations that are likely made even more profitable when oil prices are lower...
of the major oil companies reporting this week, Chevron reported net income of $571 million in the second quarter, barely one-tenth of the $5.7 billion income they reported in the second quarter of 2014...reporting the same day, Exxon saw 2nd quarter earnings of $4.2 billion, less than half of the $8.8 billion they earned in the same period last year, even though their oil and gas output rose by almost 4%, for both Chevron and Exxon, these results were the worst of the decade, and Chevron accompanied their earnings report with the announcement that they'd be cutting 1,500 jobs globally, including 950 in their corporate headquarters in Houston, and 500 at their corporate offices in San Ramon, California...
on Thursday, Royal Dutch Shell, based in The Hague, reported that 2nd quarter earnings, adjusted for inventory changes and excluding one-time items, were at $3.8 billion, almost 40% lower than the $6.1 billion they earned in the same period of 2014, as their exploration division saw revenues drop by 80 percent due lower oil prices...Shell, who has already indicated they believe that oil prices will remain depressed for several more years, responded by announcing they'd be slashing 6,500 staff and contractor jobs this year, and reducing 2015 capital expenditures to $30 billion, $7 billion lower than last year..
in contrast with the oil majors that have a large retail presence, ConocoPhillips, which had refocused its business on exploration, production and distribution of oil, reported a second-quarter 2015 net loss of $179 million, or ($0.15) per share, compared with second-quarter 2014 earnings of $2.1 billion, although part of that loss was related to a deferred tax charge from a change in Canada’s tax law; excluding that and non-cash items, they still managed to eke out $81 million in earnings from operations; they had already announced layoffs and cut their 2015-2017 capital spending plans from an initial $16 billion to $11.5 billion per year, and with Thursday's announcement indicated they'd be further scaling back their deepwater and Gulf of Mexico operations....also taking a hit from a Canadian oil tax increase and other one time charges, Canada's Husky Energy, their 3rd largest integrated oil company, reported income of C$120 million in the second quarter, down 81% from their C$628 million in earnings a year earlier...they also reported their oil production rose slightly to 337,000 barrels of oil equivalent per day. from 334,000 per day in the 2nd quarter of 2014..
meanwhile, BP also reported a 2nd quarter loss of $6.3 billion, largely due to one-time charges from the Deepwater Horizon spill settlement with the US Gulf states, while it still had an operating profit from oil and gas exploration and production of $494 million in the second quarter, compared with $4.7 billion in the same quarter a year earlier, when oil prices were averaging over $100 a barrel...they are also warning of more layoffs ahead, including at corporate offices in Houston and Aberdeen..in addition, another British oil company, Centrica, announced it would cut 6,000 jobs, partly due to a reduced focus on oil and gas production, while Italy's biggest oil and gas industry contractor Saipem announced that not only is it cutting its earnings estimates, but that it also plans to cut 8,800 workers by 2017...
of the smaller frackers who reported this week, Range Resources of Ft Worth Texas reported that they lost $119 million in the second quarter this year, in contrast to their earnings of $171 million in the second quarter of 2014...they had already slashed their drilling budget to $870 million this year, $700 million less than in 2014, and had reduced their operations from 15 rigs to 10...they now plan to cut that to 6 rigs by year end...Houston-based Cabot Oil & Gas Corp reported a small second quarter loss of $14 million in the second quarter 2015,in contrast to $118.4 million profit in the same quarter last year; they had already seen a major loss of $221.8 million in the 4th quarter of 2014 and slashed their spending at that time, which seems to have ameliorated large losses going forward...
Pennsylvania based Consol Energy, with both coal and natural gas operations in Ohio, reported a net loss of $603 million during the quarter that ended June 30, much worse than the $25 million loss it reported in the 2nd quarter last year; despite a 45 percent increase in gas production, their revenue fell nearly 31 percent to $649 million, and they now plan to stop drilling new wells through next year...they had already announced a new round of layoffs, eliminating about 470 positions throughout the company, and also announced they would end retiree benefits for about 4,400 former employees by the end of this year...meanwhile, Pittsburgh based EQT Corporation eked out a $5.5 million profit in the quarter, down 95 percent from their earnings of $111 million last year, but they only managed that because of increased revenue from their midstream pipeline operations...Marcellus frackers have been netting less than $2 per mmBTU at the wellhead for their natural gas, so few have been able to maintain profitability...
Anadarko Petroleum, one of the larger oil-and-gas exploration and production companies, managed to report a profit of $61 million, or 12 cents a share, compared with earnings of $227 million, or 45 cents a share, a year earlier, but much of that was from hedging; excluding the hedging gains, Anadarko had a profit of 1 cent per share, which was still above analysts expectations of a 51 cent a share quarterly loss....and although Chesapeake Energy is not expected to report its 2nd quarter losses until this coming Wednesday, it has already announced it would suspend its dividend for the first time in 14 years... according to Bloomberg, Chesapeake has been cash-flow negative in 22 of the past 24 years,...
the oilfield service companies, the first to feel the hit when drillers cut back, also announced that they had made additional workforce cuts this week; as of quarterly filings on July 24th, Halliburton said it had cut nearly 14,000 jobs, 5000 more than it had previously announced, while Baker Hughes said it had laid off 13,000 employees, 2,500 more than it had previously reported....and on Thursday, Weatherford International announced an additional 1,000 job cuts, on top of the 10,000 workers who were laid off earlier this year...finally, Hercules Offshore did not have any earnings to report, as they announced they'll be filing for bankruptcy and turning control of what's left of the company over to bondholders...they'd already cut 40% of their workforce and cold-stacked 11 of their 20 offshore drilling rigs...they join BPZ Resources, Quicksilver Resources, American Eagle Corp. and Dune Energy, who have all sought bankruptcy protection in recent months...
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Ohio ripe for fracking | marcellus.com – As the shale industry continues to industrialize once quiet, rural swaths of the northeast and midwest United States, demand for hydraulic fracturing wastewater dump sites — or injection wells — grows. Many local government officials said they feel the industry is exploding faster than it can be contained by federal regulation — and local control was “stripped” long ago. As of July 6, there are 18 active injection wells spread across Ashtabula County, according to the Ohio Department of Natural Resources, the state’s fracking oversight entity. Last year, almost 1.1 million barrels of frackwater were dumped in those wells — that’s up 42 percent from 2013. Ashtabula County took in the eighth-highest amount of frackwater barrels in 2014. Township officials and many other concerned community members from across the state who testified at a July 20 meeting in the Ashtabula County commissioners’ chambers — some came from as far as Athens County — agreed action needs to be taken now. That includes a moratorium backed by several heavily affected counties, including Ashtabula. “Stop this runaway train,” said Roxanne Groff, Bern Township trustee, at the July 20 meeting. “Enforce the rules we have and make tougher ones. Stop poisoning our people.” Another open public forum on the issue is set for 6-8:30 p.m. Monday in the auditorium of Jefferson Area High School, 207 W. Mulberry St., Jefferson. Trumbull Township board of trustees chairman Ron Tamburrino, one of several organizers, said the meeting is for the benefit of township trustees — to better inform their constituents about fracking operations in their area; the region’s emergency responders, who need more industry transparency to safely mitigate potential disaster; and the public at-large, whose testimonies will need to reach the ears of the Legislature.
Rejecting injection wells: Officials seek increased local control of fracking industry - Roxanne Groff’s slideshow showed fireballs reaching the sky and pillars of smoke rising above communities — images from numerous injection well disasters across the country. But the debate over hydraulic fracturing operations and the injection wells that follow it isn’t just about explosions — it affects a community’s health, property records and values, county officials said Monday. Dozens of local government officials and residents of townships affected by the surge of hydraulic fracturing and injection well dumping operations in Ohio and Pennsylvania met Monday night Jefferson Area High School for a public forum on those issues. In 2014, about 250,000 barrels of fracking wastewater were produced in Ashtabula County, but 1.1 million barrels were dumped into county injection wells. Most of the frackwater coming into the county is from out-of-state, at a benefit to Ohio, but not the municipalities that host the wells, activists say. “They’re seeing the production; we’re seeing the waste,” said county Commissioner Casey Kozlowski, before testimony got underway Monday night from several concerned citizens and local government officials from around the state who have battled fracking on their own soil. Groff is a former Athens County commissioner and current Bern Township trustee who said she’s battled the industry throughout her political career. Next year, Athens County is poised to take the number one spot for frackwater dumping in the state, she said. Her message to Ashtabula County residents Monday was to stand up and fight against a host of “rogue agencies” whose push for shale industrialization doesn’t have local communities’ interests at heart.
Commissioners certify charter proposal - The Athens County Commissioners certified a proposed county charter to the county Board of Elections in a vote Tuesday, following a judge’s order. Despite reservations voiced by the commissioners about the proposal itself, the board acted in an administrative capacity and was not in a decision-making position on the proposal. If approved by voters, the measure will give Athens County a charter form of government that includes a community bill of rights with restrictions on certain oil and gas drilling activities (waste injection wells and using county water for oil and gas drilling). Serious questions remain, however, on whether those restrictions would be enforceable, since the state of Ohio regulates those activities. In a ruling earlier this month, Athens County Common Pleas Judge George P. McCarthy ordered that the proposal be put on the general election ballot in November. Following the commissioners’ certification, it’s now up to the elections board to proceed with putting the issue on the ballot. The commissioners acted last week in order to allow local residents time to file objection to the proposal with the Ohio Secretary of State. A local group called the Athens Liberty Coalition recently has formed, in part to oppose the proposal. On its Facebook page, run by former Athens City Council candidate Abe Alassaf and local resident Lori Zofchak-Linscott, an invitation went out to meet at the Board of Elections today (Monday) at 9 a.m. with the intent to file an objection. Objections must be filed by July 29.
County charter: You say you want a revolution? Well, no - The county charter/community bill of rights for Athens County appears headed toward the Nov. 3 ballot, but it’s important for residents to be aware of its limitations and potential consequences. This isn’t intended to recommend how residents vote on the proposed county charge (not yet), but rather that when they vote yes or no, they do so with eyes wide open. Or another way of putting it, the question isn’t whether stopping oil and gas injection wells and regulating fracking are worthy endeavors (I think they are), but rather whether city and county community bill of rights amendments will accomplish that goal. Evidence strongly suggests they won’t. Even if the Athens County charter/community bill of rights wins in a landslide, it likely will have no effect on oil-and-gas drilling activities (including injection wells) in Athens County. If you’re voting for this measure to protect county water resources and the environment in general, you’re probably going to be disappointed with the results. Courts in Ohio and elsewhere across the country have ruled against similar community bill of rights and charters purportedly designed to ban or restrict fracking and other oil and gas drilling activities. Nearly all of these laws were either written by, or based on measures written by, an insurgent outfit in Pennsylvania, the Community Environmental Legal Defense Fund (CELDF). CELDF’s legal rhetoric and strategies invite deep skepticism. A lot of the “natural rights” gobbledygook is reminiscent of arguments advanced by far-right constitutionalist and posse comitatusgroups in the Rocky Mountain West back in the ’80s and early ’90s. I covered some of these groups for small-town Western newspapers, and vividly remember the delirious, consistently unsuccessful legal arguments set forth in their court filings.
Opposition group declines to file objection to charter proposal -- A new issue-oriented group in Athens County will not file an objection to a proposed charter initiative after learning they could only object to the validity of petition signatures for the proposal and not the charter itself. The Athens Liberty Coalition (ALA) was formed earlier this month to bring together conservatives and others in Athens County, and, in part, to oppose the charter proposal. A group of members met at the county Board of Elections on Court Street in Athens Monday morning, but declined to go forward with filing an objection. This means, pending action by the elections board itself, which is slated to meet next week, the path is clear for a proposal to turn Athens County into a charter form of government to go before voters on Nov. 3. One last “X” factor is what opinion will be issued by the Ohio Attorney General’s Office, which has been asked by the elections board through the county Prosecutor’s office to rule whether the measure is valid.
No Taxation Without (Oil and Gas) Representation - Last month, Republican lawmakers axed a proposed tax hike by Gov. John Kasich that would have raised Ohio’s near non-existent severance tax on oil and gas drilling. Currently less than 1 percent, Kasich’s proposed increase — to 6.5 percent on natural gas and oil and to 4.5 percent on natural gas liquids — was his third attempt at increasing the tax on non-renewable energy sources in what has been a three-year battle against Republican lawmakers. Statehouse Republicans and the oil and gas industry have fought against the tax, claiming the increase could lead to job cuts and stifle industry growth. During a June 16 press conference, Ohio Senate President Keith Faber (R-Celina) and House Leader Cliff Rosenberger (R-Clarksville) announced the cutting of Kasich’s proposed fracking tax increase from the two-year state budget, which Kasich signed into law June 30. Faber and Rosenberger are instead creating a task force that will consist of six lawmakers — two Republicans and one Democrat from each chamber — along with Kasich’s budget director, Timothy Keen, to discuss their differences and produce a report with recommendations by Oct. 1. The task force’s recommendations will not ensure the tax is passed, and they won’t include a deadline. Faber defended the decision during the press conference, saying the move is not a GOP stalling technique, but rather a chance to work out a compromise between the two sides. “Make no mistake: There’s going to be a solution to this problem,” Faber said. Environmental advocates and other progressive groups have criticized the elimination of the tax hike. Ohio’s oil and gas production has doubled in a year’s time and continues to grow in a state with one of the lowest taxes in the country for drilling. “We need the money that a frack tax would bring in, because fracking is costly to communities,” says Wendy Patton of liberal-leaning think tank Policy Matters Ohio. “Roads need widening and strengthening to carry tankers of brine used in drilling.
Oil, gas industry will bounce back from low prices - – The oil and gas industry eventually will bounce back from low energy prices, an Ohio Oil and Gas Association spokesman says. Mike Chadsey, the association’s director of public relations, provided an update on the overall industry Thursday to the Youngstown/Warren Regional Chamber at Tippecanoe Country Club. Since the shale boom in 2011, the U.S. is producing the most oil in 30 years. But OPEC is not making any significant reduction in its production, which is not protecting the standard of $100 a barrel of oil. Therefore, the supply is high while global demand is weak, which caused oil prices to drop below $50 for the first time in five years, Chadsey said. And, gas has dropped below $2 per thousand cubic feet. “Now we’ve got too much,” he said. As of July 18, there are 1,980 horizontal-well permits issued in Ohio’s Utica Shale, of which 1,535 are drilled with 925 wells producing, and the rig count was at 20, according to the Ohio Department of Natural Resources. The drop in prices has caused several spending cuts throughout Ohio. At Vallourec Star, 2669 Martin Luther King Jr. Blvd., Youngstown, plant leaders announced early this month a workforce reduction of about 60 to 80 jobs effective in August. In February, company leaders decided on a three-week shutdown at that time. The company also offered a voluntary six-month layoff for workers interested. Prices will rebound eventually, Chadsey said. “What goes down must come up.”
New methanol and fertilizer plants to increase already-growing industrial natural gas use - Reversing a decline that lasted more than a decade, industrial natural gas consumption has grown steadily since 2009 as relatively low natural gas prices have supported use of natural gas as a feedstock for the production of bulk chemicals. Industrial facilities, including methanol plants and ammonia- or urea-based fertilizer plants, consumed an average of 21.0 billion cubic feet per day (Bcf/d) of natural gas in 2014, a 24% increase from 2009. Several new industrial facilities began service this year, with additional projects scheduled to come online through 2018. In the current (July) Short-Term Energy Outlook, EIA forecasts that new projects will help drive growth in industrial natural gas demand through the end of 2016. By the end of 2015, industrial natural gas consumption is expected to reach an annual average of 21.7 Bcf/d (3.4% above 2014 consumption). Industrial natural gas consumption is expected to increase by another 3.9% in 2016, to an average of 22.5 Bcf/d. In 2016, three methanol plants are expected to come online in the Gulf of Mexico area, with a combined capacity of almost 0.4 Bcf/d. Additionally, a large nitrogen fertilizer plant, estimated to use 0.1 Bcf/d of natural gas, is currently under construction on Louisiana's Gulf Coast and is expected to come online in 2016, according to Bentek Energy. Although most of the proposed new methanol plants are on the Gulf Coast, Northwest Innovation Works, a multinational company, is planning two methanol facilities for 2018 on the Columbia River in Washington and Oregon. The company plans to export methanol produced in the United States to a plant in Dalian, China, where it would be converted to olefins and used in manufacturing. Ammonia- or urea-based fertilizer plants are also being planned outside of the Gulf Coast region in agricultural areas by developers hoping to take advantage of higher domestic natural gas production. Later this year, a large fertilizer/urea plant in Wever, Iowa, is scheduled to come online, and two fertilizer plants are planned for towns less than 75 miles away in southern Indiana: Ohio Valley Resources has proposed a fertilizer plant in Rockport, Indiana, for 2017, and Fatima Resources has proposed a plant in Mount Vernon, Indiana, for 2018. Each of these plants would use close to 0.1 Bcf/d, supporting continued growth in industrial demand for natural gas.
Marcellus, Utica Driving 85% of Shale Gas Growth Since 2012 - Increased productivity of natural gas wells in the Marcellus and Utica Shale basins is responsible for 85% of increased natural gas production in the United States since 2012, according to the Energy Information Administration (EIA). Natural gas from shale basins is now responsible for 56% of U.S. dry natural gas production. Collectively, shale production from the Marcellus and Utica regions increased by 12.6 Bcf/d from January 2012 to June 2015, making them the driving force behind overall growth. The EIA’s Drilling Productivity Report (DPR) tracks total production and rig productivity in major U.S. basins, illustrating how increased efficiencies have pushed production higher. In the Marcellus, new-well production per rig in January 2012 was 3.2 MMcf/d. By July 2015, that number increased 160% to 8.3 MMcf/d. The trend of new-well production per rig also follows the trend in overall production, which increased to 16.5 Bcf/d in July 2015 from 6.3 Bcf/d at the beginning of 2012. New-well production per rig in the Utica saw an even more significant increase during the same time period, increasing by a factor of 2230%. In July 2015, new-well gas production per rig in the Utica Shale was 6.9 MMcf/d, compared to just 0.31 MMcf/d in January 2012. Overall production in the Utica increased by a factor of 1730%, reaching 2.6 Bcf/d in July of this year from 0.15 Bcf/d in January 2012. According to the EIA, the increases in natural gas production from these two plays were largely the result of four factors:
- Greater use of advanced drilling techniques
- Increased number of stages used in hydraulic fracturing operations
- Increased use of techniques such as zipper fracturing
- Use of specific components during well completion that aid in increasing fracture size and porosity of the geologic formation being targeted
EIA: Marcellus, Utica provide 85% of U.S. shale gas production growth since start of 2012 - The productivity of natural gas wells in the Marcellus Shale and the neighboring Utica Shale is steadily increasing because of ongoing improvements in precision and efficiency of horizontal drilling and hydraulic fracturing occurring in those regions. Since January 2012, natural gas production in the Marcellus and Utica regions has accounted for 85% of the increase in natural gas production reported in EIA's Drilling Productivity Report (DPR) and has driven recent growth in total U.S. natural gas production. The DPR provides a month-ahead projection of both oil and natural gas production for the seven most significant shale formations in the United States. Although the DPR regions are grouped according to the name of the predominant shale formation, the report analyzes all drilling and production within each geographic area. In practice, this means natural gas production activity in the Marcellus region, which includes Pennsylvania and West Virginia, encompasses not only the Marcellus formation, but also portions of the Utica shale and conventional formations that lay beneath those states. The Utica DPR region, which includes resources that lay beneath Ohio, includes production from the bulk of the Utica formation as well as production from the Point Pleasant shale formation and (to a lesser extent) conventional resources. The DPR identifies trends in total production and rig productivity, expressed as new-well gas production per rig. The July edition of the DPR noted that average new-well gas production per rig in the Marcellus region was 3.2 million cubic feet of natural gas per day (MMcf/d) in January 2012. In July 2015, new-well gas production per rig increased to 8.3 MMcf/d. This trend corresponded with an overall increase in the amount of natural gas produced in the Marcellus region during the same period. The DPR also indicates that the Marcellus region produced an estimated 6.3 billion cubic feet of natural gas per day (Bcf/d) in January 2012, increasing to 16.5 Bcf/d in July. The Utica region also experienced significant gains in rig productivity and production. In January 2012, new-well gas production per rig in the Utica region averaged 0.31 MMcf/d. July 2015 new-well gas production per rig is 6.9 MMcf/d. The DPR also indicates that the region's total natural gas production increased rapidly over the same period: production in July 2015 was almost 18 times higher than in January 2013 (2.6 Bcf/d and 0.15 Bcf/d, respectively).
Utica and Marcellus activity in Ohio --Activity in the Utica and Marcellus Shale formations in Ohio have seen some changes compared to the last well activity update, and apparently injection wells are getting a lot of attention from the public. Monday evening, residents and town officials from townships that have been impacted by the boom of fracking and injection wells in Ohio and Pennsylvania gathered together for a public forum. Roxanne Groff, one of the several attendees of the forum, provided a slide show that presented the numerous health and safety hazards of injection wells. Her slideshow pictured “fireballs reaching the sky and pillars of smoke rising above communities,” in efforts to prove how such practices are affecting impacted communities health, property records and values. Groff, a former Athens County commissioner and a current Bern Township trustee, has fought against the oil and gas industry throughout her entire political career, and has made it clear she is against companies forcing the industry on small communities. To make her point, Groff explained how Athens County is in the running for the number one frackwater dumping site in Ohio. During Monday’s meeting, she said her main message to Ashtabula County is to “stand up and fight against a host of ‘rogue agencies’ whose push for shale industrialization doesn’t have local communities’ interests at heart.” As reported by the Star Beacon, “In 2014, about 250,000 barrels of fracking wastewater were produced in Ashtabula County, but 1.1 million barrels were dumped into county injection wells. Most of the frackwater coming into the county is from out-of-state, at a benefit to Ohio, but not the municipalities that host the wells, activists say. To read the Star Beacon’s full story regarding the issue and the public forum, click here.The following information is provided by the Ohio Department of Natural Resources (ODNR) and is through the week of July 18th. The ODNR reported 437 wells were permitted, 428 drilled, 189 drilling, 92 producing, 25 inactive, 24 in final restoration and three abandoned wells in Ohio’s Utica formation. This brings the total number of wells in the Utica to 1,980.The Marcellus Shale in Ohio remains unchanged from last week’s well report. The area is still sitting at 15 wells permitted, 11 drilled, 17 wells producing and one well inactive. There are a total of 44 wells in the Ohio Marcellus Shale.
Plummeting natural gas prices slash revenue of Marcellus shale producers -- The head of Pennsylvania’s largest shale gas producer concluded his quarterly earnings call Friday with a dark view of the situation confronting drillers in the Marcellus. “I have been in this business over 30 years. I’ve seen a lot of cycles, and this is one of those draconian, down markets,” Dan O. Dinges, CEO of Houston-based Cabot Oil & Gas Corp., said after spending an hour answering analysts’ questions, and talking about low natural gas prices and the promise of more pipelines. Cabot swung to a $27 million loss for the quarter from a $118 million profit the year before despite a modest increase in production. Expect to hear similar news from Appalachia’s other shale producers as they discuss financial results in the next weeks, based on the prices they have been getting for their gas — less than $2 per million British thermal units — and early word from a few companies.Cecil-based Consol Energy Inc. warned investors it would report an operational loss Tuesday, when fellow producers Range Resources and Southwestern Energy will share results from the quarter. Analysts expect losses at Consol, Anadarko and Chesapeake, and profits of less than 5 cents per share at Southwestern and Range, according to Bloomberg’s consensus of estimates.
Consol Energy reports deep loss, bigger Utica results - Consol Energy Inc. will stop drilling new wells through next year, is further slashing its spending and will consider options including an outside partner for its metallurgical coal mine as the company copes with low prices that resulted in large second-quarter losses. Huge early gas flow from a new Utica shale well in Westmoreland County show the potential to increase production while spending less, though. The Cecil-based gas and coal producer early Tuesday reported a net loss of $603 million, or $2.64 per share, during the quarter that ended June 30, even deeper than the $25 million, or 11 cents per share, loss it reported last year. The results, which the company warned last week were coming, include an $829 million write-down of shallow, conventional gas and oil wells across Appalachia. Without that write-down and other one-time accounting entries, Consol still posted an adjusted loss of $84 million, or 37 cents per share. Despite a 45 percent increase in gas production, total revenue fell nearly 31 percent to $649 million. “Consol is focused on managing through what continues to be a very challenging commodity price environment,” CEO Nick DeIuliis said in a statement. The company cut its capital budget for drilling another 20 percent to $800 million and plans to spend $400 million to $500 million next year. It recently announced layoffs of more than 10 percent of its workers.
Natural gas as an electricity source: Is it sustainable? - While an international report predicts the rise of solar electricity worldwide, a different electricity revolution is already happening locally: the rise of natural gas. Natural gas recently overtook coal as the top source in the U.S. for electric power generation for the first time. Ray Dotter, spokesman for PJM Interconnection, which coordinates the movement of wholesale electricity in Pennsylvania and 12 other states, said the upward trend of natural gas began about five years ago. “Natural gas fire is now very competitive with coal,” Dotter said. “Ten years ago, that’s not something most people would’ve predicted in electricity.” At 36 percent, coal is still atop PJM’s generation by fuel type chart, according to its most recent report, but natural gas, at 17 percent, is quickly closing in on its competitor. Most new generation requests in the past five years have been for natural gas, Dotter said. Pennsylvania residents have already seen the benefits of the natural gas boom from drillers in the state’s Marcellus Shale formation.The future: The Bloomberg New Energy Finance report, which looks at the future of the world’s power market, predicts gas won’t be a viable option for long. The report suggests that few countries outside the U.S. will replace coal plants with natural gas, and utility-scale solar will be cheaper than natural gas production in the U.S. by 2036.
How Propane Could Completely Undermine One State’s Ban On Fracking -A group in New York may have found a way to get around the state’s so-called ban on fracking. Tioga Energy Parters, LLC, applied earlier this month to conduct propane fracking — a process similar to hydraulic fracturing, but that injects propane gas, not water, into shale formations to loosen the deposits of oil and natural gas underground. The state Department of Environmental Conservation (DEC) will review the application and determine whether a full environmental impact statement (EIS) is necessary. “It’s not a loophole. That ban does not apply to us,” Adam Schultz, a lawyer for the company, told ThinkProgress. Schultz said the permit application is going through the permitting process. New York environmentalists rejoiced when a state moratorium on fracking became an out-and-out ban earlier this year, but the law applies only to high-volume hydraulic fracturing — defined as extraction that uses 300,000 gallons or more of water per well, Schultz said. Propane fracking uses no water. It also injects a lower volume of fluid into the shale. It was not immediately clear who makes up Tioga Energy Partners, LLC — the company does not appear to have a website or previous projects — but Schultz said the group had “a great amount of experience and expertise with waterless fracking technology.”The application seeks to develop oil and gas on land owned by a group of farmers in Tioga County, in central New York, over part of the Marcellus Shale — the largest natural gas field in the United States. “This application has the support of the community and has the official support of the town of Barton,” Schultz said.
Interstate gas pipeline re-routed to avoid fragile NY forest — A section of the planned Constitution Pipeline, designed to bring natural gas to New York City and New England, has been redrawn to avoid a 1,000-acre private forest with fragile wetlands. Christopher Stockton, spokesman for the 124-mile pipeline to bring cheap gas north from Pennsylvania’s shale fields, confirmed the route change Tuesday. Stockton said the change adds almost 3 miles to the route and affects 11 landowners, who recently signed right-of-way agreements. The new route avoids the private Charlotte Forest in Harpersfield, about 50 miles southwest of Albany. The property is owned by the heirs of forester Henry Kernan. Family members have managed the forest for 70 years and were among the pipeline opponents. Construction would have required clearing trees from a mile-long, 75-foot-wide swath across the Kernans’ forest between two ecologically rare sphagnum bog lakes. “Since we introduced this project more than three years ago, we have adopted more than 300 route changes affecting more than 50 percent of the project,” Stockton said. “Most of these route changes were the direct result of feedback received from landowners, permitting agencies and data collected as a result of field surveys.” The project has Federal Energy Regulatory Commission approval contingent on receipt of a water quality certificate from the state Department of Environmental Conservation and a Clean Water Act permit from the Army Corps of Engineers. The department has no timetable for completing a review of the project’s potential impact on streams and wetlands, spokesman Tom Mailey said Tuesday. Stockton said Constitution Pipeline LLC plans to start construction in September. The line will end in New York’s Schoharie County, where it will connect with existing lines. A second pipeline, the 325-mile Northeast Energy Direct project proposed by Kinder Morgan, is in earlier stages of planning on a roughly parallel route.
Pipeline Whack-a-Mole - -- Didn’t I write this column already? The one where I say, hey, it’s so awesome that New York state banned fracking, but companies are still trying to criss-cross our state with new pipelines that allow gas fracked in other places to get to market—whether that market is New England, or abroad via tankers. The one where I explain how these companies who care for nothing but a quick buck and destroying the climate in the process are using eminent domain and federal regulations to force us to allow them to transport stuff across our state that (a) does not benefit us and (b) needs to stay in the ground for the future of humanity. Oh right, I did. In January, about the Constitution Pipeline, which would run from Susquehanna County, Penn., to Schoharie County. And this time it’s about the Northeast Energy Direct pipeline, which will run from Wright, N.Y., to Dracut, Mass. Same company. Same problems. Whole new set of hearings to attend and letters to write. Just like the bomb trains, these pipelines are a disaster waiting to happen. The area around them is called the “incineration zone.” A Harvard engineering study found each year about 15 billion cubic feet of natural gas leaks out of the delivery system in the Boston region. So let’s that put that under the Hudson River? Brilliant idea. Poor Pete Seeger must be spinning in his grave. (Or, knowing Pete, he’s writing a searing protest song instead; hopefully he’ll whisper it someone’s ear.) Organic farms, priceless natural treasure, drinking water supplies—all in danger. And just like the bomb trains, they are a symbol of how determined the dirty energy companies are. The climate justice movement may have celebrated a victory over the Keystone XL pipeline, but much of what would have flowed through it has been directed instead onto unsafe rail. New York banned fracking here, but is still in danger from fracked gas. Pipelines are springing up everywhere.
Hey, I Have an Idea Where They Can Stick the Atlantic Coast Pipeline ... - Governor Terry McAuliffe of Virginia campaigned on green energy (and I hear some people may have believed him, though I haven’t met one) and then immediately backed the proposed construction of a giant fracked-gas pipeline through the mountains and farms of Virginia to carry fossil fuels from West Virginia to North Carolina. Dominion Virginia Power paid $1.3 million this year in legal bribes to candidates’ election campaigns, more than anyone else in Virginia except the two Parties. Every single bill Dominion opposed in the legislature died. Dominion, according to the dictionary, is “the power or right of governing and controlling; sovereign authority; rule; control; domination.” In Virginia it’s easy to think of theevictions of the poor farmers 80 years ago to create Shenandoah National Park as something ancient that civilization has outgrown and would never do again. (And the old lyrics of the song Shenandoah, about giving the Native American chief liquor in order to steal his daughter, are not celebrated in this day and age.) But at least the injustice of the 1930s evictions created a park. At least there was some sort of public interest involved. Now here comes the Virginia government as the bought-and-paid-for servants of their corporate masters at Dominion to claim a 40-yard-wide path of destruction and potential catastrophe right through the middle of numerous private properties and public properties for the sake of escalating the collapse of a livable climate on the planet, not to mention facilitating the destruction in West Virginia where the fracking frackers will do their fracking. What’s the public interest to justify it? It’s going to ruin parks and not create any.
Drillers Fracking at Much Shallower Depths Than Widely Believed - The nation's first survey of fracking well depths shows shallow fracking is more widespread than previously thought, occurring at 16 percent of publicly recorded sites in 27 states, posing a potential threat to underground sources of drinking water. Stanford University scientist Robert Jackson and his colleagues reviewed about 44,000 wells and found that nearly 7,000 of the sites were fracked less than a mile below the surface, according to research published this week in the journal Environmental Science & Technology. "You'll hear from industry all the time that fracking only occurs a mile or two underground...it's something that they push really hard," That's because as concern has grown about fracking's potential threat to well water in recent years, industry has sought to reassure the public by saying that fracking occurs at depths far below the water table. Consequently, migration of fracking fluid or methane from a frack zone more than a mile underground (deeper than 5,000 feet) to a shallow aquifer (around 1,000 feet) would be nearly impossible, industry contends. While most fracking is occurring at those depths, said Williams, this paper reveals a "surprising" number of shallow wells "and that's a concern." Using well data from the website FracFocus spanning 2008-13, the researchers found well depths ranged nationwide from deeper than 3 miles to as shallow as 100 feet. Of the 27 states reviewed, 12 had recorded at least 50 shallow wells, defined as those drilled less than a mile deep. The three top states for shallow wells include Texas with 2,872 wells, Arkansas with 1,224 and California with 804. Jackson told InsideClimate News the analysis "definitely" underestimates the practice because of limited reporting to FracFocus, an industry-backed database where companies post drilling information. For most states, company reporting to the online registry is voluntary.
Despite slump, Texas is about to break a 43-year-old record -- Despite thousands of layoffs and continuous price calamity, Texas is on route to produce a record amount of oil that hasn’t been reached in over 40 years, the Houston Chronicle reports. At a bi-annual state assessment of oil and gas, economist for the Texas Alliance of Energy Producers Karr Ingham noted that budget cuts and reduction in drilling activity haven’t deterred record production. Statewide oil output is expected to reach 1.28 billion barrels this year, exceeding the state’s record of 1.26 billion barrels set in 1972. According to a shocked Ingham, Texas output is up 17 percent from the same time last year, even with crude prices 45 to 50 percent lower. Since oil prices started falling last year, oil and gas rigs have fallen 60 percent in Texas, according to Baker Hughes and reported by Fuel Fix. . Ingham said drilling permits had fallen and that completions decreased by 33 percent. “I don’t see any way at all now that we don’t continue to grow production in Texas for the balance of the year,” he stated. “We certainly have for the first part of the year. It almost can’t drop fast enough to keep this from happening.” However, prices have (obviously) made an impact on what projects could have been completed if crude were still in the $70 to $90 per barrel range. According to a recent Wood Mackenzie report, globally, delays due to low market incentives equal to $200 billion of investment.
Texas push to export continues -- Texas is so over not being able to export its oil. While the state currently sits on billions of barrels of oil, an oil embargo in the 1970s bars it from exporting a single one. “It’s an enormous amount of oil and the current policy keeps us out of the world market for oil,” Texas Senator Kel Seliger told ABC 7 News. The ban on oil exports was originally intended to curb the dwindling gas reserves of the time, but Judy Stark of the Panhandle Property and Royalty Owner Association said the ban stands as an antiquated set-back in the midst of the current production high in the U.S. “We are now the world leader in oil and gas production,” Stark said. “We’ve never been in that position.” According to Stark, the embargo is to blame for more than 300 thousand jobs cut and a slew of oil rig closures. In related news, RRC Chairman David Porter lights up Congress with export ban testimony. If the U.S. could export oil, “drilling rigs would start back up, jobs (would) start back up,” Stark said. “I believe it’s like $23 billion (per) year in increased revenue to the United States by lifting the ban.” The fight to lift the ban isn’t new to the Lone Star State; Senator Seliger’s Senate Resolution 13 asks congress to lift the ban—a move he believes would mutually benefit the U.S. and overseas countries.
Magnitude 4.5 and 4.0 earthquakes recorded in Oklahoma - — Two moderate earthquakes have been recorded in central Oklahoma. The U.S. Geological Survey reports a 4.5 magnitude quake at 1:12 p.m. Monday and a 4.0 magnitude quake at 12:49 p.m. Both were about 3 miles northeast of Crescent, or about 35 miles north of Oklahoma City. The Logan County Sheriff’s Office and officials at Crescent City Hall say there are no reports of damage or injury. The Oklahoma Corporation Commission recently announced plans to place more than 200 oil and natural gas wastewater disposal wells under scrutiny as it investigates whether they are triggering earthquakes in the state. The Oklahoma Geological Survey issued a report in April saying it’s “very likely” most of the state’s recent earthquakes were triggered by the injection of wastewater from oil and gas drilling operations.
Series Of Earthquakes Strike Oklahoma Near Wastewater Disposal Wells -- Two relatively large earthquakes struck northwest of Oklahoma City midday on Monday within a span of about 20 minutes. The 4.0 magnitude and 4.5 magnitude quakes were accompanied by another 4.1 quake about seven hours later around 8:20 p.m. Two more smaller earthquakes also rattled the region throughout the day. The largest ever earthquake in Oklahoma was a 5.6-magnitude jolt in 2011. While there were no reports of damage due to Monday’s quakes, they could be felt as far across five states — Oklahoma, Kansas, Texas, Missouri, and Arkansas — according to the Weather Channel. The high level of seismic activity, especially in these closely linked swarms, follows a recent trend in fossil fuel-rich Oklahoma in which a dramatic spike in quakes has been tied to wastewater injection wells accompanying proliferating oil and gas drilling operations. In April, the New Yorker published an article on the recent surge in Oklahoma quakes that found that nearly two-dozen peer-reviewed papers have concluded disposal wells and quakes are likely connected. In recent months, Oklahoma’s government has embraced the research showing such links and has begun to try to address the problem. Earlier in July, state oil and gas officials put more than 200 new wastewater disposal wells under extra review as “Areas of Interest” for the possibility that they are contributing to the recent earthquake swarms. This was in addition to 300 wells originally placed under the directive in March. According to E&E News, the 4.5 magnitude quake on Monday centered less than three miles away from an oil and gas wastewater disposal well recently added to the list.
40 Earthquakes Hit Frack-Happy Oklahoma in Last 7 Days - Yesterday Oklahoma recorded five earthquakes centered near Crescent, Oklahoma, some of which were felt in at least five states—Oklahoma, Kansas, Texas, Missouri and Arkansas. Three of the quakes measured above 4.0-magnitude and the biggest of these was a 4.5-magnitude earthquake, the strongest earthquake in the region since a magnitude-4.9 near Conway Springs, Kansas, on Nov. 12, 2014. The strongest magnitude earthquake on record occurred on Nov. 5, 2011 and registered as 5.6-magnitude. Oklahoma has seen two sizeable earthquakes early this afternoon: 4.5 magnitude within the past hour. pic.twitter.com/vlCpnTgTfi There was no reported significant damage from the earthquakes, but the rate of earthquakes in Oklahoma has increased by about 50 percent in the last two years, greatly increasing the chance for a damaging quake, according to the USGS. There have been eight quakes of magnitude 3.0 or larger near Crescent since Saturday and during the past seven days,Oklahoma has experienced about 40 earthquakes.“Noticeable quakes—above magnitude 3.0—now hit the state at a rate of two per day or more, compared with two or so per year prior to 2009,” reports Reuters. This spring scientists confirmed that the state’s recent uptick in fracking activity has led to a dramatic increase in earthquakes in the state, citing the injection into deep underground wells of fluid byproducts from drilling operations as the culprit. “Oklahoma experienced 585 magnitude 3+ earthquakes in 2014 compared to 109 events recorded in 2013,” according to the state’s website, Earthquakes in Oklahoma.
Oklahoma Frackquakes Blamed on Trump’s “Blasphemy” - Oklahoma state legislator, Gomer P. Richards, (R) Lawton, blames them on Trump’s “blasphemy,” telling NFW that, “These earthquakes are categorically not caused by fracking. They are God’s mighty revenge on America for letting the blasphemous and the idolatrous demagogue, Donald Trump, ride rough-shod over a great America, Senator McCain, who many regard as a kind of secular saint.”
ND gas flaring goals jeopardized by low oil prices — North Dakota’s top energy regulator says the low oil prices might jeopardize targets that require reducing the amount of natural gas that is burned off as a byproduct of the state’s oil production. State Mineral Resources Director Lynn Helms told some lawmakers Monday that the oil industry is exceeding rules that require reducing the amount of natural gas that is burned off as a byproduct of the state’s oil production. But he says low oil prices have put some natural gas projects on hold in North Dakota and that may make reaching new capturing goals difficult. The rules put in place a year ago require oil companies to capture 90 percent of natural gas by 2020. Helms says the industry is capturing 82 percent of the natural gas at present.
Hess experiments with tighter well spacing - Hess Corp.’s second quarter 2015 production saw about an 11,000 barrels-per-day increase over the first quarter and the company says the rise is due in part to bringing on a high number of new wells. President and Chief Operating Officer Gregory Hill told analysts on July 29 that Hess only wants about 25 to 30 wells at any given moment left uncompleted in order to maintain cash flow. During the low oil price environment, the company has found ways to manage the business with some “self-help.” “First, we’ve reduced our capital spend from $5.6 billion in 2014 to $4.4 billion in 2015 and we will further reduce capital in 2016,” Chief Financial Officer John Rielly said. “During 2015, our cost reduction efforts have yielded over $600 million of savings and we continue to be focused on reducing costs further.” Reilly added that for every $1 rise in oil prices, cash flows increase by over $70 million. “The entire industry is running deficits,” said John Hess, chief executive officer. “All the oil producers of the world are running deficits. And depending upon how low oil prices go and how long they go for, obviously that will figure in our calculus as well about how far we reduce our capex program next year,” he continued. “We have further flexibility to reduce in the Bakken and Utica and we also have flexibility to reduce in our offshore if it’s appropriate.” Hess’ eight-rig program includes six within the Bakken, and the company is experimenting with more wells per pad. The company has about 38 wells currently in eight- or nine-well spacings on 14 pads, but only 13 wells have been producing for more than 90 days. It plans to get 82 pilot wells in the ground by year-end.
Proposed BLM regulations draw industry criticism - — On July 10, the Bureau of Land Management announced proposed updates to its 25-year-old oil and gas regulations in an effort to help ensure states, tribes and taxpayers get fair royalty returns on resources taken from public lands. The proposed rule changes, announced Friday, will update the BLM’s “Onshore Oil and Gas Order Number 3 (Order 3),” which was established in 1989 before many modern industry operations and technological advances, such as horizontal drilling, were in use. The proposed changes to federal regulations are intended to ensure that oil and gas produced from leases overseen by the BLM are “properly and securely handled,” according to a BLM press release. The new proposed rules will be available for public comment for a 60-day period ending Sept. 11. Janice M. Schneider — a President Barack Obama nominee who became assistant secretary for land and minerals management at the Department of the Interior in 2013 — said the proposed regulations will ensure increased accuracy and reliability of royalty payments from oil and gas leases on public lands. “The proposed rule represents an important step in the BLM’s modernization of its oil and gas regulations,” Schneider said in a statement. “These updates will help ensure that oil and gas produced from leases overseen by the BLM is properly measured, that American taxpayers receive fair value for public resources, and that Indian tribes and allottees, states and local governments receive the full royalties they are due.”
Judge: Oil field work caused Weld County man's death — A judge’s decision that the death of a Weld County oil and gas worker was caused by exposure to hydrocarbons could have major implications for the industry. Federal health officials are taking a closer look at the dangers of “tank gauging,” the practice of measuring oil levels after opening a tank hatch, The Denver Post reported Wednesday. In the Weld County case, a 59-year-old truck driver died after he inhaled a mix of deadly hydrocarbon chemicals. He was among nine oil field workers who died in the past five years while working at crude oil production tanks and measuring the level of oil or other byproducts in tanks. A state judge ruled this month that the widow of the Weld County worker is owed full workman’s compensation benefits. Jim Freemyer’s widow never believed her husband’s poor health abruptly killed him last summer, but, rather, what he encountered while working the Weld County oil patch. The ruling by Administrative Law Judge Peter Cannici on behalf of Connie Freemyer came over the objections of Now or Never Trucking in Greeley — Jim Freemyer’s employer — and Pinnacol Assurance, which denied a claim for death benefits. Connie Freemyer will receive nearly $530 per week until she dies. She will also get $7,000 to defray the cost of her husband’s funeral.
Oil, gas spill reports for July 27 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.Noble Energy Inc., reported on July 22 a site investigation was completed due to lack of vegetation growth. Historical oils impacts were located outside of Greeley. There was an unknown amount of oil spilled. Foundation Energy Management LLC, reported on July 21 that a flowline leak was discovered on July 20 outside of Raymer. Foundation Energy said they began repairs. The estimated oil spill volume was less than one barrel. Noble Energy Inc., reported on July 21 that a cow rubbed against the separator, damaging a valve outside of Eaton. It is estimated between five and 100 barrels of condensate was spilled. PDC Energy Inc. reported on July 20 that a dump washed out on a separator outside of Greeley. An unknown amount of oil and produced water was spilled. Whiting Oil and Gas Corporation, reported on July 17 that 14.5 barrels of oil was release due to a stuck dump valve on a separator, causing the tank to overflow outside of Raymer. Liquid was contained and free liquid was recovered with a vacuum truck and impacted soils were excavated.Kerr McGee Oil & Gas Onshore LP, reported on July 15 that on July 13 a valve was left open during a fluid transfer. About 10 barrels of oil was released. Excavation activities were initiated to remove impacted soil. DCP Midstream LP, reported on July 13 that an unmarked DCP Midstream line was struck by a KP-Kuffman excavator while doing work on a tank battery outside of Longmont. It is estimated that between one and five barrels of condensate was spilled.
Recent Spills Give More Reason to Move Beyond Big Oil -- Big Oil has dealt North America a battering this month as we’ve seen spill after spill hit the headlines. Label it negligence or an inevitable reality of oil production, the impact is the same: oil and its byproducts are being dumped into our communities, our water supplies and the delicate ecosystems that we value. Despite the industry’s slick rhetoric of reassurance about the safety of oil extraction, it is undeniably clear that Big Oil is unable to contain its destructive product to the detriment of our health, communities and environment. It is high time our elected leaders embrace this indisputable fact and start taking serious steps to reduce our exposure to these risks—starting by saying no to the most extreme projects like drilling in the Arctic and Atlantic coasts or tar sands development—and ensuring that whatever extraction does occur is held to stringent safety standards. Ultimately, however, what the recent headlines make abundantly clear is that we will only be safe from the harms of fossil fuel production when we succeed in moving beyond oil to clean alternatives—and there is no time to waste. Between four spills in July alone (described in the chart above), we have seen more than 1.3 million gallons oil foul our lands while an unknown quantity, up to another million gallons, was leaked in to Galveston Bay. Of the oil allowed to spill onto soil, 97 percent of it was near Ft. McMurray in Alberta, Canada. The 1.3 million gallons of emulsion (tar sands bitumen and water) leaked by tar sands leviathan, Nexen, constitutes one of the worst land spills in history and it evaded detection by the relatively new pipeline’s “failsafe” spill detection system.
U.S. sets new final rule on oil, ethanol trains -- The Obama administration on Wednesday released a new regulation intended to prevent explosive rail disasters such as the 2013 oil train derailment that killed 47 people and destroyed part of Lac-Megantic, Quebec. The new rule by the Federal Railroad Administration (FRA) requires two qualified railroad employees to ensure that handbrakes and other safety equipment have been properly set on trains left unattended while carrying dangerous materials such as crude oil or ethanol. A series of oil train accidents in recent years led the United States and Canada in May to announce sweeping new safety regulations that require more secure tank cars and advanced braking technology to prevent moving trains from derailing and spilling their contents. The new rule is directed specifically at trains left parked on main lines, side tracks and in rail yards. “Requiring that an additional, trained individual double check that the handbrakes have been set on a train will help stop preventable accidents,” acting FRA Administrator Sarah Feinberg said in a statement. The new rule also contains requirements that involve briefings for train crews, exterior locks on locomotives and the proper use of air brakes. It applies to trains carrying substances that can cause harm if inhaled and any train carrying 20 or more cars of “high-hazard flammable materials.”
Arctic drilling: Obama gives Shell the go-ahead despite fears of oil spills - The Obama administration has granted permission to Royal Dutch Shell to drill for oil in the Chukchi Sea, off the northwest coast of Alaska. The company was given the final approval for its application to drill in the Arctic on Wednesday in what was a major loss for green activists who have fought the drilling plans. Shell has been granted permission start drilling exploratory wells about 140m off the coast of Alaska – one of the best prospective offshore areas in the world. Currently Shell are permitted to drill "top holes" up to 1,300ft deep and not in areas where there is known to be oil. They will not be able to drill deeper and in areas where oil in known to be until their vessel is equipped with a "capping stack" to prevent oil spills, the Bureau of Safety and Environmental Enforcement (BSEE) at the US Department of the Interior ruled. The Finnish icebreaker, MSV Fennica, is Shell's only vessel with that capability but is attempting to reach a to port in Oregon for repairs afterdamaging its hull on a shoal earlier this month. Shell has said that they aim to begin drilling to depths of about 8,000ft below the ocean bottom within a month, once the area is clear of sea ice, their support vessels are in place, and the vessel, the Polar Pioneer is safely anchored over the well site. Protestors against the decision fear that drilling will irreparably damage the Arctic’s pristine and fragile environment, cause oil spills worse than the 2010 BP oil spill in the Gulf of Mexico and further global warming. The Bureau of Ocean Energy Management in the US has said there is a 75 per cent chance of "one or more large spills" happening if extensive drilling takes place across the Arctic.
13 Climbers Suspended From Bridge Block Shell Oil Vessel From Heading to Arctic - Thirteen Greenpeace activists have suspended themselves from St. Johns Bridge in Portland, Oregon this morning to block a Shell Oil vessel—the MSV Fennica—from leaving port for Alaskan waters. The climbers have enough supplies to last several days, and are prepared to stay in Shell’s way as long as possible, according to Greenpeace. Shell’s icebreaker was supposed to leave for the Arctic last night. Then @GreenpeaceUSA climbers said#ShellNo: pic.twitter.com/Ygj6jsKXPe —Last week, the Obama administration granted federal permits that clear the way for the oil company to begin drilling in the Arctic Ocean. The company is only permitted to drill the top sections of its wells because it lacks the equipment to cap the wells in case of emergency. The ice breaker carrying the required capping stack for the wells, had been receiving repairs to its damaged hull in Portland and is now trying to leave the port. Once the Fennica is at Shell’s drill site, Shell can reapply for federal approval to drill into hydrocarbon zones in the Chukchi Sea.
Breaking: 13 Greenpeace Activists Suspended From Bridge Block Shell Oil Vessel - Shell Oil’s vessel, the Fennica, turned around today after being blocked by activists hanging from the St. John’s Bridge in Portland, Oregon. Thirteen Greenpeace activists remain suspended below the bridge to block Shell’s ice breaker from leaving the Portland port headed for the Arctic Ocean where the company plans to drill for oil. Greenpeace has been stationed on the bridge for more than 30 hours, and plans to stay put for the time being. The organization is urging President Obama to use his last chance to stop Shell’s Arctic oil drilling plans. The images streaming in from the event are stunning. #PDXvsShell showdown as climbers hung from a bridge to turn #Fennica icebreaker ’round, delaying @Shell‘s arctic plan pic.twitter.com/VX9DuSAe6U . Greenpeace wants to prevent the vessel from leaving the port because it’s “one of two primary icebreakers in Shell’s drilling fleet, and is equipped with a capping stack, which Shell is federally required to have on site in the Chukchi Sea,” says Greenpeace. “Until the MSV Fennica and the capping stack are on site in Alaska and Shell is granted federal drilling permits, the company can only drill top wells, thousands of feet above any projected oil.” Kristina Flores, a Greenpeace activist live-streamed the event via Periscope from the bridge. She is acting as one of the 13 “anchor supports” for the 13 activists suspended from the bridge below.Feeling victorious! The Fennica turned around and headed back to the port. Another successful day of blockading!#shellno arctic drilling!! — Kristina N. Flores
Activists Hanging From A Bridge Force Arctic Drilling Ship To Turn Around - “Not today, Shell!” an anchor support yelled from a Portland bridge as 13 climbers hung below for the 29th consecutive hour. Cheers and chants were heard from land and water around 7:30 a.m. Pacific Time Thursday, as a Royal Dutch Shell ship slowly turned around in the water and retreated from the bridge. The Arctic-bound ship stopped in its tracks Thursday during its second attempt to reach a Shell drilling site. The oil company aborted its first attempt early Wednesday morning, when Greenpeace activists rappelled off of St. John’s Bridge in Portland, Oregon with the support of assistants and “kayaktivists” on the water, two hours before the icebreaking vessel was scheduled to leave. The ship’s second attempt also failed. The vessel, MVS Fennica, is meant to keep ice at bay during Arctic drilling and carries a crucial part of Shell’s spill response system, according to Kristina Flores, one of 13 anchor supports at the bridge, who documented the protest using Periscope. “What we have on the water today is an eyesore,” she said. Activists considered the Fennica’s retreat a victory, but remained in position. Many climbers participating in the blockade, who risked arrest on felony charges, have access to social media. One live-tweeting climber posted when the ship retreated.
4 Videos Explain Why 13 People Would Hang From a Bridge to Say ‘No Arctic Drilling’ - Thirteen Greenpeace climbers remain suspended below the St. John’s Bridge, blocking the Shell Oil vessel‘s route out of Portland, Oregon, for more than 24 hours. In case you’re wondering what would inspire 13 people to take such an action, here’s your chance. Four videos have been released by Greenpeace, where Kristina, Harmony, Georgia and Elizabeth share why they are hanging from the bridge. Watch here:
US Forces Succeed in Clearing Peaceful Environment Guardians, Escorting Shell Rig Through and Sending on to Arctic - Reporting from the scene: US forces cleared kayakers out of the way and cut the cables connecting suspended climbers, making space for the government-escorted Shell oil rig to move through and continue on to the Arctic to begin the fossil fuel extraction process. As the ship approached, one (hopelessly naive) onlooker shouted, “Where is President Obama?“, as if this were being done against his will. Obama in 2012: “Now, under my administration, America is producing more oil today than at any time in the last eight years. That’s important to know. Over the last three years, I’ve directed my administration to open up millions of acres for gas and oil exploration across 23 different states. We’re opening up more than 75 percent of our potential oil resources offshore. We’ve quadrupled the number of operating rigs to a record high. We’ve added enough new oil and gas pipeline to encircle the Earth and then some.” Here is the oil rig passing through the cleared blockade: (video)
Arctic-bound ship leaves Portland after oil drilling protest — Authorities used boats, personal watercraft, poles and their bare hands to remove protesters in kayaks and hanging from bridges who had tried to block a Royal Dutch Shell icebreaker bound for an Arctic drilling operation. The Fennica left dry dock Thursday afternoon and made its way down the Willamette River toward the Pacific Ocean soon after authorities forced the demonstrators from the river and the St. Johns Bridge. Shell spokesman Curtis Smith said the Fennica was on its way to the Chukchi Sea where one of the energy giant’s vessels started initial drilling operations Thursday night. Several protesters in kayaks moved toward the center of the river as the ship began its trip, but authorities in boats and personal watercraft cleared a narrow pathway for the Fennica. Authorities also jumped into the water to physically remove some protesters who left their kayaks. Sgt. Pete Simpson, a Portland police spokesman, said “a number of people” were detained and it was still being determined whether any would face charges. Simpson earlier said safety was the main priority as authorities forced protesters from the area. “This is, obviously, a very unique situation,” he said.
Drilling Ship Heads To Arctic Despite Portland Bridge Protest -- After a showdown Thursday morning that was hailed as an environmentalist victory, Royal Dutch Shell’s Arctic-bound ship passed unobstructed under Portland’s St. John’s bridge just before 6 p.m. Pacific Time that day. The icebreaking vessel Fennica is on its way to Alaska to support Shell’s drilling efforts in the Arctic. Protestors hung from the bridge for 38 hours, obstructing the ship’s passage, before the U.S. Coast Guard and police removed them.Greenpeace, who organized the protest and blockade, has been fined $2,500 for every hour that it delayed the Fennica’s departure, beginning Thursday at 10 a.m., local time. Eight hours of violation at $2,500 per hour would total $20,000. A motion filed by Shell requesting the federal court to impose a fine said the daily rate paid by the oil company for the ship is $59,288. The fines would have increased every day had protesters not been removed Thursday evening.Protesters were asked to leave throughout the day by the Coast Guard, but they did not comply. “We’ve been here for 29 hours, and we’re ready to be here for another 29,” Greenpeace activist Kristina Flores said while broadcasting the protest on Periscope.The 13 climbers were accompanied by anchor supports on the bridge, “kayaktivists” and swimmers on the river, and a crowd of protesters on the nearest dock. Authorities used boats and even “jumped into the water to physically [remove] protesters who left their kayaks,” the Associated Press reported.The Fennica is designed to protect the drilling fleet from ice and carries the containment dome, a key component of Shell’s oil spill response system. It arrived in Portland last week for repairs on a meter-long gash in its side, and was headed back to the Alaskan Arctic when protesters created a blockade. Exploration and drilling plans could not go forward until the Fennica returned to the site.
#ShellNO:Climate Action Coalition Celebrates Historic Win in Raising Global Awareness on Urgency of Climate Crisis in Action in Portland -- — In record heat, members and organizers with the Climate Action Coalition in Portland, OR, together with Greenpeace activists made history on Thursday when they forced the MSV Fennica, the Arctic icebreaker, to stand down, delaying its departure by approximately 40 hours. The Fennica is now headed for the Arctic where it will assist Shell Oil in drilling for oil.The non-violent direct action of “kayaktivists”—activists on kayaks—and Greenpeace climbers suspended from the St. John’s Bridge in Cathedral Park in Portland, OR, focused international attention on the recklessness of Arctic drilling at a time when scientists tell us we must leave all unproven and most proven reserves of fossil fuels in the ground if we are to avoid dangerous and possibly runaway climate change. As the Fennica approached, kayakers paddled toward the icebreaker and continued to impede its path. Law enforcement out on the water intervened; approximately 25 kayakers and canoers were detained; 11 were taken to the Coast Guard and detained and issued $500 citations, and at least two others were also issued $500 citations. At least three may face serious legal charges. Local representatives of CAC received reports from some observers that Coast Guard and other law enforcement boats were ramming kayaks to knock people into the water. One law enforcement boat allegedly ran over a kayaker who was forced between the moving Fennicaand the law enforcement boat. Most disturbingly, a representative of the Backbone Campaign acting as part of the boat safety crew was detained by law enforcement while attempting to rescue two kayakers who had fallen in the Willamette River, creating a situation that could have been tragic. Portland Rising Tide activist Jonah Majure locked his neck to the railroad bridge before the boat attempted to come through, but was removed by police. Despite the hazards and risk of arrest, at least 500 people gathered on the shore, chanting, “Stop that boat! Stop that boat!” At one point, the Fennica did indeed stop when kayaks again flooded its path, but the ship eventually passed through the blockade.
Husky Energy profit falls 81 pct due to lower oil prices (Reuters) - Husky Energy Inc, Canada's No.3 integrated oil company, reported a nearly 81 percent fall in quarterly profit as it struggles to cope with weak oil and gas prices. The company's net income fell to C$120 million, or 10 Canadian cents per share, in the second quarter ended June 30, from C$628 million, or 63 Canadian cents per share, a year earlier. A one-time provision of $157 million for a corporate tax increase in Alberta and other items also affected the company's second-quarter net income. However, total production rose slightly to 337,000 barrels of oil equivalent per day from 334,000.
Weatherford announces cuts to workforce --Weatherford executives on Thursday announced plans to further cut costs and lay off another 1,000 employees after shedding 10,000 workers earlier this year. The company will also close 30 more facilities this year in addition to 60 closed across North America in the first half of 2015. Weatherford officials did not specify the regions where those cuts would happen, leaving it unclear to what degree those cuts will be felt in the Permian Basin. “Market conditions will not improve significantly in the balance of the year,” CEO Bernard J. Duroc-Danner said in a statement. “There will be modest activity increases in North America and selected international geographies but these will not be material.” Locally, Weatherford had about 1,100 employees before the downturn, according to a September 2014 annual survey published by the Odessa Chamber of Commerce. It is not clear where that employee count stands today. Weatherford is the only one of the four major oilfield services companies to announce cuts in a series of second quarter conference calls. And, taken together, the four biggest oilfield services companies offered tepid forecasts of a recovery in the oil and gas industry, supporting outside predictions that the worst of the layoffs are past.
Chevron pulls nearly 1,000 jobs in Houston -- Chevron announced Tuesday that the company will lay off 1,500 oil and gas workers companywide, including over 900 positions in Houston. In a statement released to KPRC 2 News, Chevron said that due to cost reduction efforts approximately 950 positions will be reduced in Houston. Operations in San Ramon, California will experience a reduction of 500 jobs and internationally, 50 jobs were reported for expected cuts. Around 270 of the total job cuts are currently vacant positions that will not be filled. The international oil mogul counts roughly 8,000 Houston-area employees. Two years ago, the company had a count of nearly 9,000 in the area. “In light of the current market environment, Chevron is taking action to reduce internal costs in multiple operating units and the corporate center. These initiatives, which are currently underway, are focused on increasing efficiency, reducing costs and focusing on work that directly supports business priorities,” read the statement. Chevron spokeswoman Melissa Ritchie stated that additional cost savings are expected to be achieved across the enterprise. Chevron stated that the job cuts are a part of the larger goal of reducing costs by nearly $1 billion. Earlier this year, Chevron had canceled its exploration projects in Romania due to crashing oil prices and heated protests. In addition, the company had moved 100 jobs from its San Ramon corporate headquarters to Houston, which now seems all for nothing.
Chevron to Cut 1,500 Jobs - Chevron Corp. will cut 1,500 jobs globally as the company aims to reduce internal costs in multiple operating units and the corporate center. The San Ramon, Calif.-based energy company will cut 950 positions in Houston, 500 positions in San Ramon and 50 positions internationally. Chevron is cutting jobs due to the current market environment and is “focused on increasing efficiency, reducing costs and focusing on work that directly supports business priorities,” Chevron spokesperson Melissa Ritchie said in an email to Rigzone. Chevron will be cutting 1,500 employee positions across the 24 groups that comprise the corporate center; 270 of the positions are existing vacancies that will not be filled. Additionally, 600 staff augmentation contractor positions will be cut in the corporate center. The cost reductions due to cuts in the corporate center are expected to total $1 billion with additional cost savings expected across the company. Ritchie said Chevron’s cost-cutting initiatives are currently underway and will continue in coming months. The company plans to have a majority of the cuts completed by mid-November of 2015 as well as cost-saving initiatives in place by 1Q 2016.
The Layoffs Return: Energy Giants Chevron, Saipem To Fire Over 10,000 Workers - In the beginning of 2015 the biggest threat to the economy as a result of the collapse in oil prices, both in the US and worldwide, was the surge in layoffs among highly-paid energy sector job. This was confirmed in April when we showed the Challenger layoffs data for the energy-heavy state of Texas, and the energy sector in general where the 37,811 job cuts in Q1 were some 3,900% higher than a year earlier. Then in Q2, after the price of oil staged a substantial rebound of about 50% from the year to date lows in the $40's, energy-related layoffs trickled to a halt as corporations hoped the worst is behind them, and as a result would merely bide their time before redeploying their workforce toward exploration and production. Alas, this was not meant to be, and as the events of the last month have shown, oil has resumed its downward slide. And, as expected, so have layoffs. Overnight, US energy major Chevron announced it will cut 1,500 jobs globally "as the company aims to reduce internal costs in multiple operating units and the corporate center." According to Rigzone, "the San Ramon, Calif.-based energy company will cut 950 positions in Houston, 500 positions in San Ramon and 50 positions internationally." Chevron was the first major which in January suspended its stock buyback blaming the collapse in cash flows. Is the dividend next? But it's not just the US, because moments ago Italy's biggest oil and gas industry contractor Saipem announced that not only is it cutting its guidance, sending its stock plunging, but also reported that it plans to cut 8,800 workers by 2017. According to ANSA, the reductions are part of a restructuring plan that follows more than 900 million euros in writedowns.
Oil companies slash spending, jobs as prices slide for second time – The stark reality of a much-feared second dip in crude prices is prompting global oil majors and nimble U.S. shale companies alike to ax spending once again a year after the first price crash started. Just days into the second-quarter earnings season, Chevron Corp and Royal Dutch Shell Plc said they would slash a combined 8,000 thousand jobs around the world. In North Dakota, Whiting Petroleum Corp , the top producer in the No. 2 U.S. oil patch, cut its capital expenditure budget days after optimistically raising it 15 percent on bets the renewed downturn in prices would be a temporary blip. ConocoPhillips , the largest U.S. independent, trimmed its 2015 budget for the third time on Thursday, by $500 million to $11 billion. More ominously, Linn Energy LLC , a small exploration and production company, suspended its quarterly distribution to investors on Thursday to conserve precious cash that has largely evaporated on the price drop. Its shares fell 26 percent. Conoco CEO Ryan Lance said the company was preparing for “lower, more volatile prices.” Crude prices have been on a roller coaster since mid-2014, when global oversupply started to chip away at levels higher than $100 a barrel. After hitting a bottom of $42 in March, U.S. crude rallied to around $60 in May, providing some breathing room to shale companies that saw a dramatic reduction in cash flow. But since June 23, when the latest rout started, oil has tumbled about 20 percent to around $49 a barrel. The second dip has dashed hopes raised in May that prices would hold steady at around $60 a barrel or inch towards $65, a level that many U.S. shale oil producers have said would allow them to add drilling rigs and emerge from their defensive crouch.
Shell and Centrica are cutting 12,500 jobs as oil prices fall - Royal Dutch Shell will slash 6,500 jobs in 2015 as part of a cost cutting drive. Another British firm Centrica will shed 6,000 jobs, partly due to a reduced focus on oil and gas production. The latest wave of job losses follow a period of relative calm for energy firms as global crude prices stabilized. But oil has resumed its slide over the past two months and now trades just below $49 a barrel. The American energy revolution and record OPEC output has created a massive supply glut at a time when global economic growth is depressing demand. The prospect of more oil exports from Iran as Western sanctions are lifted is also pressuring prices.
Here’s Why Oil Giant Shell Is Slashing Thousands of Jobs --There was no sugar coating on Shell’s earnings report Thursday: “Today’s oil price downturn could last for several years,” the company said. In reporting a 25% decline in net income in the second quarter,the company said it would be combating the “prolonged downturn” in the oil industry by slashing 6,500 staff and contractor jobs this year and reducing capital investment by $7 billion or 20%. The company employs 94,000 worldwide. Shell’s dreary outlook on Thursday comes after its prediction in April that oil prices would return to $90 per barrel in three years. Crude oil has slumped 50% in the last year—at one point hitting a six-year low. Shell isn’t alone in trying to grapple with cheap oil. This week Chevron said it would cut 1,500 jobsin an effort to cut costs by $1 billion. Likewise,ConocoPhillips said it’s continuing layoffs as it tries to reduce spending by $1 billion over two years. Graves & Co., an energy consulting firm, estimates that the energy sector has lost 50,000 in the past three months—that’s on top of the 100,000 layoffs since oil prices began to tumble last fall.
Range Resources reports second-quarter loss - Range Resources lost $119 million in the second quarter despite cutting back on the number of rigs deployed and the amount of money spent to drill each well. The Fort Worth-based energy company lost 71 cents per diluted share versus earnings of $171 million, or $1.04 per diluted share, in the second quarter of 2014. The results were released Tuesday after the stock markets had closed. Revenue for the period was $248 million, a 68 percent decline from last year. This comes after Range slashed its drilling budget to $870 million this year, a $700 million reduction from 2014. The company is running only 10 rigs, five fewer than at the first of the year. Range plans to end 2015 with only six rigs in the field, the company reported. Along with the help of lower service costs, Range has reduced its well costs per lateral foot by about 43 percent since 2008, from $4.30 per thousand cubic feet to an estimated $2.42. At the same time, Range’s wells produced record volumes, averaging 1,373 million cubic feet of gas a day, a 24 percent increase over the same quarter last year. Most of that activity was in the Marcellus Shale in the Northeast.
Tumbling oil prices slam profit at Exxon Mobil, Chevron - Weak oil prices shriveled quarterly profit at Exxon Mobil Corp and Chevron Corp , compelling both companies to rethink operations and plan for what many expect to be a sustained period of cheap crude. Earnings at Exxon and Chevron, two of the world’s largest oil producers, also missed analysts’ expectations, adding to concerns that perhaps executives had not acted quickly enough to mitigate the impact of an over-50-percent drop in oil prices since last summer. The results also highlighted how smaller and more nimble U.S. shale oil companies had slashed costs faster and more aggressively than global majors. Some shale producers have cut back drilling by 60 percent or more. Exxon’s profit fell by more than half, with the biggest drop in its exploration and production business, where earnings slumped by nearly $6 billion Chevron’s profit plunged 90 percent, a starker drop and one exacerbated by a $2.22 billion loss in its exploration and production division. Though production grew at both companies, they missed the estimates of many analysts who had expected the energy giants to pump more. Shares of both fell about 4.6 percent in morning trading.
Exxon Earnings: Carnage -- Moments ago energy titan Exxon Mobile, which not too long ago was bigger than AAPL by market cap, and is now roughly half the size of the phone maker, reported earnings which were, in a word, carnage. Starting at the bottom, EPS of $1.00 was not only a big miss to already reduced expectations of $1.11, but also the worst quarter since 2009. This was down a whopping 51% from a year ago, when the company made $2.05, and unlike other companies which mask the divergence between profits and EPS through countless gimmicks, XOM's Earnings also plunged by a comparable number, or about 52%. Revenues of $74 billion, while modestly better than expected, were also a debacle, plunging 33% from a year ago, and yet US upstream ops lost $47 million, down a massive $1.2 billion from a year ago, while non-US upstream ops, generated only $2.1 billion vs $4.6 billion a year ago. So revenues higher, but margins and profits lower, how come? Simple: boosting volumes to offset declining prices, and as has been the case with so many other companies, Exxon's oil-equivalent production increased 3% from 2014, with liquids up 8.9 percent and natural gas down 3.6 percent. The problem, again, was margins. A bigger problem is that while EPS and revenues crashed by 51% and 33%, CapEx was down just 16% from $9.8 billion to $8.3 billion. Expect Q3 capex to be slashed across the board. As a reminder, the main revision in GDP had to do with fixed investment. Well, as more companies tighten the belt on capital spending, GDP is poised to go in one direction only - down.
Hercules Offshore Files for Bankruptcy --- Hercules Offshore Inc., an offshore oil field services company, will declare bankruptcy next month as part of a major financial restructuring plan to wipe out its $1.2 billion in debt. According to Reuters, in April, Hercules retired several rigs and last November, laid off 324 employees in response to dropping oil prices and decreasing demand for its shallow water drilling services in the U.S. Gulf of Mexico. None of these actions were be able to prevent the company from filing a Chapter 11. Two-thirds of Hercules’s debt holders back the reorganization plan granting them nearly 97 percent of the company’s shares. “The new capital structure will provide a better foundation for Hercules to meet the challenges in the global offshore drilling market due to the down-cycle in crude oil prices and expected influx of new-build jack-up rigs over the coming years,” Hercules CEO John Rynd said in a written statement. Other highlights of the restructuring plan include shifting ownership of the company to its creditors and a backstop of $450 million to cover the remaining construction costs of the new drilling rig, the Hercules Highlander, as well as liquidity to fund company operations. “Hercules has sufficient liquidity to fund its operations through the period in which the restructuring contemplated by the Agreement will take place, which is important in our ability to meet our existing and future obligations to our customers, employees and vendors,”
BP Reports Second-Quarter Loss as Oil Spill Settlement Takes Toll — The British oil giant BP said on Tuesday that it had lost $5.8 billion in the second quarter, reflecting a huge settlement over the 2010 Gulf of Mexico oil spill. The roughly 40 percent fall in oil prices since last year is also sharply cutting into profits at BP and at other oil companies. BP had an operating profit from oil and gas exploration and production of $494 million in the second quarter, compared with $4.7 billion a year earlier. Besides lower prices, the central causes of the drop were sharply diminished production in the Gulf of Mexico because of maintenance and a write-down on exploration in Libya because of the political turmoil there. BP made $9.8 billion in provisions in the second quarter for the $18.7 billion agreement in principle that the company reached on July 2 with the United States authorities to settle penalties and damage claims arising from the explosion of the Deepwater Horizon rig in 2010. Total provisions for the explosion, which killed 11 workers and spilled millions of barrels of oil, are now $54.6 billion.
Sudden Drop in Crude-Oil Prices Roils U.S. Energy Firms’ Rebound - WSJ: U.S. energy companies are planning more layoffs, asset sales and financial maneuvers to deal with a recent, sudden drop in U.S. crude-oil prices to under $50 a barrel, the lowest level in four months. The companies had been banking on a rebound in oil prices in the second half of 2015 after falling sharply late last year. Prices began to regain ground in the spring, rising so quickly that some American producers started hiring back drilling rigs to pump more crude. That speedy return to the oil patch and the threat of new Iranian oil production have pushed down prices more than 20% over the past six weeks to $48.14 as of Friday , bringing storm clouds back to the energy patch. Oil-field services providers that help drill wells have quietly revealed job cuts that were deeper than initially announced, and warned of more layoffs to come. Halliburton Co. HAL -1.44 % and Baker Hughes Inc., BHI -1.01 % two big service companies that plan to merge, disclosed last week that they had cut 27,000 jobs between them, double the 13,500 they announced in February. Initially, Halliburton expected to reduce its workforce by 8%, but ultimately cut it by 16%. Baker Hughes first announced it would cut about 10% of its jobs, but cut 21%. Nearly 50,000 energy jobs have been lost in the past three months on top of 100,000 employees laid off since oil prices started to tumble last fall, according to Graves & Co., a Houston energy consultancy. Initial rounds of layoffs this year tended to be blue-collar jobs, such as roughnecks on drilling sites, fracking crews and workers at industrial-equipment manufacturers. Now the job cuts are starting to extend to engineers and scientists.
Fracking Not Profitable: US Taxpayers Foot the Bill (as usual) This analysis neglects to include the contribution methane makes to global warming (being that it is on the average 86x more potent than C02), which would suggest that the Oil & Gas Industry are even LESS profitable than described below. It is fairly well understood by now that releasing carbon dioxide and other greenhouse gases into the atmosphere imposes an economic cost, in the form of climate change impacts. In most cases, however, those responsible for carbon emissions are not required to pay that cost. Instead, it’s borne mainly by the world’s poor and low-lying countries, and of course by future generations, as many of the worst impacts of climate change will emerge years after the emissions that drive them. People sometimes refer to the unpaid cost of carbon pollution as a subsidy, or an “implicit subsidy,” to polluting businesses. The IMF recently issued a report saying that total worldwide subsidies to energy, mainly fossil fuel energy, amounted to $5.2 trillion a year. The reason that number is so high is that the IMF includes implicit subsidies — the social costs imposed by businesses (including climate damages) that they don’t have to pay for.Vox’s Brad Plumer raised some questions about whether that’s a misleading use of the term “subsidy.” Whatever you call it, though, it makes for an unsustainable situation, literally. It can’t go on.As climate change gets worse and the chance to avoid harsh impacts dwindles, governments are getting serious about putting some sort of price on carbon emissions, whether explicit (a tax) or implicit (regulations). By next year, a quarter of the world’s carbon emissions will be priced in some way. Businesses that now emit carbon pollution for free (or cheap) will soon see their costs rise.In other words, carbon pollution is a business risk. It’s a bubble that’s going to pop, probably soon. The Carbon Tracker Initiative has popularized a term for this looming liability: “unburnable carbon.” With proper accounting, the fossil fuel business doesn’t look like such a moneymaker.
Debt is destroying the fracking revolution - Business Insider: The shares of Chesapeake Energy, second largest natural-gas driller in the US, crashed nearly 10% yesterday, to $9.29, the lowest price since August 2003, down nearly 70% since oil began to plunge a year ago. The company’s $1.1 billion of 5.75% notes fell to an all-time low of 84.88 cents on the dollar. And its 4.875% notes dropped to 81.25 cents on the dollar, from 86 last week, according to S&P Capital IQ LCD. All this in the wake of its announcement that it would suspend its dividend for the first time in 14 years. It’s trying to conserve cash, and that dividend costs $240 million a year. It’s dumping assets as fast as it can, including some Oklahoma fields that will save it another $75 million a year in preferred dividends. It’s cutting operating costs and capital expenditures. It’s trying to stay alive. It has been cash-flow negative in 22 of the past 24 years, according to Bloomberg. The only thing surprising is that it took so long, that Wall Street kept funding its cash-flow negative operations and dividends for all these years. Chesapeake used to be mostly a natural gas producer. But the price of natural gas plunged over five years ago and has remained below the cost of production for most wells for much of that time. The only saving grace was that these wells also produced natural-gas liquids and oil, which sold for much higher prices. As its natural-gas business model collapsed, Chesapeake began chasing after oil-rich plays. But a year ago, the price of oil collapsed. Among natural gas drillers, Chesapeake isn’t in the worst shape. Much smaller Quicksilver Resources filed for Chapter 11 bankruptcy in March. It listed $2.35 billion in debts and $1.21 billion in assets. The difference has been forever drilled into the ground. Stockholders got wiped out. Creditors are fighting over the scraps.
Low prices threaten to curb rising rig count - Permian Basin producers added another three rigs in the week ending Friday, according to the widely-watched Baker Hughes rig count. But observers met the ongoing uptick in drilling activity with concern that it might be short-lived, after another dip in oil prices in July threatened to erase the gains of the previous months. The latest build in Permian rigs left 245 drilling in the region. That represented an addition of 13 drilling in the region during the past three weeks. Nationally, oil and gas producers added 21 oil rigs in the past week, offset somewhat by a decline of two rigs drilling for gas. But West Texas Intermediate oil prices continue to hover at about $50 per barrel — about half the peak price of this time last year. And the regional benchmark Plains-West Texas Intermediate posting ended at $44.50 per barrel on Friday. Rigs are generally contracted weeks or months ahead of time, and those added this month were likely based on oil company executives’ confidence in oil prices in the $60-per-barrel range, said Kirk Edwards, president of Latigo Petroleum in Odessa. That is where Edwards said he was coming from when he contracted for a rig in the Panhandle earlier this month that is set to drill in the next few weeks. A well can take about 30 days to drill. “I’m hoping in the next two to three months, once that well gets online and producing, prices will have recovered to the $60 to $70 range,” Edwards said. “That’s what we are betting on, and if it hasn’t, we’ll stop our drilling again just like everybody else.” In the meantime, the rig count might continue to rise in the next week or two, Edwards said, but it should drop again after.
Rude awakening for those who ignored the energy markets' warning signs -- Back in February (see post) numerous equity investors refused to believe that any crude oil recovery will be unsustainable. Many viewed this as a buying opportunity - just as they did in 2011 when such strategy worked. Look at the declines in oil rigs many argued - US crude production is about to dive. Even some in the energy business were convinced that crude oil recovery is coming and we will be back at $70/bbl in no time. It was wishful thinking. There is no question that North American production of crude oil is stalling. However for now it remains massively elevated relative to last year. More importantly, many fail to understand just how flexible US crude production has become - the time to bring capacity on/off-line has shrunk dramatically. Furthermore, a great deal of production in the US is now profitable at $60/bbl and even lower as rig efficiency rises. Many view this as unsustainable because new exploration is halted and existing wells are being reused. But there is enough staying power here to continue flooding the markets for some time. That's why we saw US rig count unexpectedly increase last week. This creates a natural near-term cap on crude prices, above which production can rise quickly. To add to the market's woes, the Iran deal threatens to bring materially more crude into the market in 2016, while immediately releasing a great deal of stored crude the nation currently holds. Moreover, the Saudis are ramping production to record levels, as OPEC members are now fending for themselves. The Saudis will attempt to recover some of the lost revenue in higher volume. Crude prices in the US fell below $50/bbl in response to some of these developments. So much for the "recovery".
Knife-Catching Hedge Fund Oil Bulls Dump Crude At Fastest Pace In 3 Years -- Hedge Funds' net long position in WTI Crude collapsed 27% (the biggest single 'dump' in over 3 years) ahead of the big plunge last week (and is now down almost 60% in the last month - the most since 2010). Part of a broader deflationary collapse in commodities, as Bloomberg reports, long positions dropped to a two-year low while short holdings climbed 25%, erasing more than $100 billion in market value from the 61 companies in the Bloomberg E&P stock index. With crude supplies still almost 100 million barrels above the five-year average, "there's a lot more room for prices to slide," warned one trader, "it's going to take a long time for this to work itself out." Speculators’ conviction that oil will rally weakened at the fastest pace in three years, just before futures tumbled into a bear market. As Bloomberg details, the net-long position in West Texas Intermediate contracted 28 percent in the seven days ended July 21, U.S. Commodity Futures Trading Commission data show. Long positions dropped to a two-year low while short holdings climbed 25 percent. Hedge Funds dumped their spec longs en masse...
Pessimism Amongst Oil Traders Reaches 5 Year High - With oil prices hitting their lowest levels since March, a renewed sense of gloom has washed over oil markets, and with it, fears over deeper trouble for U.S. shale companies are spreading. After hitting $43 per barrel in March, oil prices jumped to $60 per barrel by May and then stayed around that level for almost two months, raising confidence that a rebound was underway, albeit at a slow pace. A few companies, including EOG Resources, Pioneer Resources, Occidental Petroleum, and Diamondback Energy, suggested that they were considering stepping up rig counts and drilling activity this year on the heels of stronger oil prices. Having weathered the worst, drillers had cut costs and planned on bouncing back with gusto. But the optimism is a thing of the past. WTI dipped below $48 per barrel on July 27, not far from the March lows. The low oil prices will likely force a fresh round of layoffs across the shale patch. Halliburton and Baker Hughes have eliminated 27,000 jobs combined, twice as much as they originally announced in February, according to the Wall Street Journal. Months ago job cuts were centered on rig workers and other blue-collar jobs at drilling sites, but now the layoffs are moving up the food chain, hitting engineers and scientists. Usually that is something companies try hard to avoid, for fear of losing irreplaceable talent.
U.S. crude stockpiles fall 4.2 mln barrels in latest week - EIA – U.S. crude oil inventories declined far more than expected last week, while gasoline stocks decreased amid robust demand for the motor fuel, data from the Energy Information Administration (EIA) showed on Wednesday. Crude inventories fell 4.2 million barrels to 459.68 million in the week to July 24, more than twenty times analysts’ expectations for a decrease of 184,000 barrels. U.S. crude imports fell last week by 396,000 barrels per day (bpd). At 2.7 million barrels for the week, that is more than half the week’s decline in total U.S. crude oil inventories. Crude futures turned higher and rallied after the release of the EIA report. U.S. crude was up $1.02 at $49 a barrel at 11:13 a.m. EDT (1513 GMT), well above its session low of $47.39. Brent crude was up 58 cents at $53.88, having dropped to $52.51 earlier in the session.
Crude Oil Rises on Unexpected Declines in Supplies, Production - WSJ: Oil prices rose Wednesday on unexpected declines in U.S. crude-oil supplies and production. Prices have slumped this month on renewed fears that the global glut of crude oil could last longer than investors initially expected. This comes as production in the U.S. and elsewhere continues to exceed consumption. Wednesday’s data offered some hints that the oversupply of crude oil is starting to shrink, but analysts warned that the trend might not continue and prices could resume their decline. Light, sweet crude for September delivery settled up 81 cents, or 1.7%, to $48.79 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 8 cents, or 0.2%, to $53.38 a barrel on ICE Futures Europe. Domestic crude inventories fell by 4.2 million barrels to 459.7 million barrels last week, the U.S. Energy Information Administration said Wednesday. Analysts surveyed by The Wall Street Journal expected stockpiles to be unchanged in the week. Though refineries processed less crude into gasoline and other fuels compared with the week before, crude-oil inventories still declined due to a drop in imports and production. U.S. crude-oil production fell by 145,000 barrels a day to 9.4 million barrels a day, the largest one-week decline since October 2013. Excluding Alaska, which saw a small rise in output, the drop totaled 151,000 barrels a day.“The most interesting thing is the pretty big adjustment downward in crude production,” The EIA’s weekly production figures are based on a statistical model, not reported production.
U.S. oil storage becomes big business -- Commercial crude stocks across the United States rose by 105 million barrels early this year to peak at 490 million barrels, the highest level in eight decades. Despite some draw downs in recent weeks, which have reduced inventories to 460 million barrels, stocks are still 92 million barrels higher than this time last year.. And stocks could rise again at the end of the third quarter when U.S. refineries enter the traditional autumn turn around season. Yet the cost of storing crude has remained relatively modest throughout thanks to a big increase in tank farm and pipeline capacity added in recent years. Working storage capacity at refineries, tank farms and underground storage facilities in the United States has increased by 85 million barrels, almost 19 percent, since 2011. More than 45 million barrels of extra working capacity has been added in just the last two years, according to the U.S. Energy Information Administration (EIA). Over half the extra working storage capacity was in states along the U.S. Gulf Coast, with most of the rest added in the Midwest. In the same period, the amount of crude needed to fill pipelines and in transit by barge, tanker and rail has also jumped by 17 million barrels, as new oil pipelines and oil trains were added. Crude stocks at the end of March were 82 million barrels higher than in March 2013, according to the EIA (“Working and net available shell storage capacity” May 2015). But with an extra 17 million barrels of oil in line fill and transit, and 46 million barrels of extra working capacity, the storage utilization rate rose comparatively modestly from 56 percent to 63 percent.
House leader Boehner to support axing U.S. oil export ban (Reuters) – U.S. House of Representatives Speaker John Boehner will for the first time express his support on Wednesday for repealing the 40-year-old ban on domestic crude oil exports, two industry sources said. Boehner is scheduled to hold a news conference on Wednesday on legislation the chamber will deal with after the August recess. U.S. oil producers hope Congress will repeal the trade restriction, which they say has led to an oil glut that threatens to choke the drilling boom. A bill introduced by Representative Joe Barton, a Texas Republican, this year has more than 100 co-sponsors.
US Oil and Natural Gas Rig Count Down 2 to 874 - ABC News: Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by two this week to 874. Houston-based Baker Hughes said Friday 664 rigs were seeking oil and 209 explored for natural gas. One was listed as miscellaneous. A year ago, 1,889 rigs were active. Among major oil- and gas-producing states, New Mexico gained three rigs, Louisiana gained two and North Dakota, Ohio, Texas and Wyoming each gained one. Kansas lost four rigs, Utah declined by three, Alaska and Pennsylvania each lost two and Colorado and West Virginia each declined by one. Arkansas, California and Oklahoma were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999
U.S. Oil-Rig Count Increases to 664 - WSJ: The U.S. oil-rig count rose by five to 664 in the latest week, according to Baker Hughes Inc. BHI -0.92 % The number of U.S. oil-drilling rigs, which is a proxy for activity in the oil industry, had fallen sharply since oil prices headed south last year. The rig count had dropped for 29 straight weeks before rising for two weeks and then falling again. Now it has risen for two straight weeks. Oil prices fell nearly 60% from June 2014 to a six-year low in March, as soaring production from the U.S. and other countries overwhelmed global demand. There are still about 59% fewer rigs working since a peak of 1,609 in October, though the pace of declines has slowed considerably recently. In late May, several U.S. shale-oil companies said they were ready to bring rigs back into service, setting up the first big test of their ability to quickly react to rising crude prices. According to Baker Hughes, gas rigs were down by seven to 209 this week. The U.S. offshore rig count was up three to 34 in the latest week, though it is still off 24 from a year earlier. For all rigs, including natural gas, the week’s total was down two to 874, which is down 1,015 rigs from the same period last year.
OPEC says oil should not fall further, sees stability in 2016 - OPEC expects increasing oil demand to prevent a further fall in prices and sees a more balanced market in 2016, its secretary-general said on Thursday, the latest sign the group is sticking to its policy of defending market share. Oil has dropped about 15 percent this month and halved in value in the past year but neither OPEC nor Russia, the world’s top producer, have cut output to support prices, hoping cheaper oil will hit U.S. shale and other rival sources. “I would not expect they (prices) are going to fall because demand is growing,” OPEC Secretary-General Abdullah al-Badri told reporters in Moscow. OPEC pumps around 40 percent of global oil production. “The current situation is a test for all producers and investors. While the prices … no doubt will rebound, it is still too early to say when this will happen,” Badri said. He did not indicate what price he expected. OPEC faces a further challenge from the prospect of rising output from Iran, which has been lobbying for other OPEC members to curb supply to make way for a hoped-for rise in its exports following Tehran’s deal with world powers over its nuclear work. But Badri, indicating confidence in the outlook, was quoted by Russia’s Interfax news agency as saying the market could accommodate extra oil from Iran as demand increased – echoing the view of Gulf OPEC members. Russian Energy Minister Alexander Novak, who met with Badri earlier in the day, said they did not discuss coordination to help the market rebound. Badri added that even if OPEC had cut output by as much as 2 million barrels per day (bpd) – equal to around half of Russian exports – it would not have helped prices.
Top Factors Undermining Any Oil Price Recovery -- Global oil prices have returned to a state of flux. This is hardly news to any who follow the oil markets closely and yet prices continue to drive international headlines. While oil prices are notoriously difficult to predict, it has failed to deter the speculators. There are those warning that the latest dip is a precursor for $40 a barrel, a catastrophe for oil markets in some minds. On the other end of the spectrum are the optimists betting on a return to $100 by 2020. The World Bank has taken a typically middle-of-the-road approach, with forecasts of $57 a barrel in 2015. That said, given Iran’s potential revitalization, Russia’s murky outlook, and U.S. shale supply limits uncertain, prices will be responsive to supply and demand trends; at least in the short to medium term. The Iran deal could be a game changer for global oil supply. Lifting oil sanctions could pave the way for foreign capital to return to the country, contributing to a resurgent Iranian oil industry. The Iranian oil ministry is optimistic about the nation’s recovery, predicting 400,000 barrels per day of exports almost immediately and an additional 600,000 barrels per day over six months. Such a swift return is unlikely. Iran was once the second largest oil producer in OPEC before Europe banned purchases of its crude in 2012. Since then, oil production has declined from around 3.6 million barrels per day in 2011to just 2.85 million barrels today.The nation is still OPEC’s fourth largest producer but its output is far closer to Mexico’s than Saudi Arabia’s. Oil exports have declined by 1 million barrels per day during this time. Iran has significant onshore and offshore reserves but has lacked the technical capacity and capital to develop them in line with its ambitions.Executives from Shell have reportedly met with Iranian officials to express their interest in re-entering Iran. U.S. companies, meanwhile, risk losing out unless Congress decides to lift its own decades-old restrictions on dealing with Tehran.
The New Politics of Oil Abundance - The oil-price shocks of the 1970s and '80s marked the dawn of the modern era of United States energy policy. Over time, environmental concerns have gradually gained prominence as a rationale for measures meant to decrease U.S. reliance on oil. It was the first President Bush who took the large step of signing the UN Framework Convention on Climate Change, which set global, long-term goals to limit greenhouse-gas concentrations and anthropogenic climate change. Environmentalists had long hoped that a depletion of domestic oil supplies would force Americans to turn to renewable energy, despite its major flaws and steep price tag. For a long time, it appeared as if their wish might come true. Then, in 2009, the trend in domestic oil production reversed. By 2014, U.S. crude-oil output was 73% above its 2008 level — an increase that came in spite of drilling bans that caused major declines in outputs in Alaska, California, and, after the Deepwater Horizon oil spill, on the Outer Continental Shelf. The surging output of tight oil (sometimes called shale oil) is the main source of this new supply. New techniques, notably horizontal drilling and advanced hydraulic fracturing, have unlocked oil from tight rock formations; before these technological innovations, such "tight" oil could never have been extracted at a profit. The resulting onshore oil boom has yielded widespread benefits for the country as a whole. The President's Council of Economic Advisors estimates that rising oil and gas output has been lifting America's yearly gross domestic product growth rate by about 0.2 percentage points. More domestic oil output has reduced imports and improved terms of trade for the United States. The turnaround in domestic oil production is the closest thing to an energy revolution to occur since 1973. The new oil boom has transformed the political landscape around energy policy. Yet it has also sparked a fierce new policy debate. The stakes in this debate are high, and it is being waged with much heat, but clear logic and sound evidence have both often been in short supply.
The Economist explains: The global addiction to energy subsidies | The Economist: ENERGY prices have been falling for a year. Over the last month that trend has accelerated. On July 24th, the price of a barrel of oil in America reached a low of $48. In spite of this, governments are still splurging on subsidies to prop up production. Fossil fuels are reaping support of $550 billion annually, according the International Energy Agency (IEA), an organisation that represents oil- and gas-consuming countries, more than four times those given for renewable energy. The International Monetary Fund’s estimates are substantially higher. It said in May that countries will spend $5.3 trillion subsiding oil, gas and coal in 2015, versus $2 trillion in 2011. That is equivalent to 6.5% of global GDP, and is more than what governments across the world spend on healthcare. At a time of low energy prices, high government debt and rising concern over emissions there is scant justification for such spending. So why is the world addicted to energy subsidies? Governments have devised several different ways of giving handouts for fossil fuels. Most surveys analyse “consumption” subsidies, rather than support or tax breaks for producers. Traditional “pre-tax” measures keep prices below supply costs for folk filling up their cars, or switching on the lights, and are particularly popular with developing countries. In oil-producing nations like Nigeria and Venezuela, low fuel prices are seen by poor populations as one of the few benefits of having large natural resource endowments. Rich countries subsidise too—the IMF says America is the world’s second biggest culprit, spending $669 billion this year—but mostly by “post-tax” systems which fail to factor the costs of environmental damage into prices.
$40 Oil May Force Russia Into an Emergency Rate Hike, Economists Say - If oil hits $40, Russia is in trouble. Already faced with recession and sanctions, a further drop in crude might force the country's central bank into an emergency rate hike — after four cuts already this year — according to 65 percent of economists surveyed by Bloomberg from July 24-29. Thirty-nine percent of analysts said the government might impose Greek-like capital controls and 22 percent predicted a takeover of at least some of the country's banks. When asked about the central bank's own analysis of the $40-per-barrel oil scenario, which found a roughly 600 billion ruble capital deficit and two-fold increase in the share of non-performing loans, 69 percent of economists said it has accurately estimated the risks to the Russian economy and banking sector. The impact on growth from $40 oil would be particularly severe, weakening the ruble to 65 against the U.S. dollar by end-2015 and causing the economy to contract by 5 percent this year and 1 percent in 2016. Compare that to the far less pessimistic baseline consensus provided by Bloomberg's monthly economic survey, which currently forecasts a 3.5 percent contraction in 2015 and a 0.5 percent expansion in 2016.
Gas production at Gazprom set to hit post-Soviet low - FT.com Gazprom’s gas production is on track to fall to a fresh post-Soviet low this year as the state-controlled energy group is buffeted by recession at home, declining demand in Europe and Russia’s dispute with Ukraine. Output at the world’s largest gas company fell 13 per cent in the first half of 2015 compared with a year earlier and is set to reach 414bn cubic metres for the full year, according to data from the Russian economy ministry published on Tuesday. That would be the lowest level since Gazprom, the former Soviet gas ministry, was established in its present form after the break-up of the Soviet Union, according to Valery Nesterov, oil and gas analyst at Sberbank. The forecast implies a 6.7 per cent drop from last year’s output of 444bn cubic metres — already a post-Soviet low — and a dramatic fall compared with Gazprom’s plan, announced in May, to produce 485bn cubic metres this year. Mr Nesterov estimates that, together with a fall in gas prices, the drop in production will lead to a 27 per cent fall in Gazprom’s revenue this year to $106bn, although the impact on profitability will be cushioned by the fall in the rouble, which has reduced costs. The company last year accounted for 9 per cent of total Russian budget revenues. Gazprom has plentiful spare production capacity but demand for its gas has fallen both at home and abroad. Sales to Europe, the main driver of the company’s revenues, fell 6.2 per cent in the first half of the year as milder winter weather cut consumption and customers held off purchases waiting for contract prices, which are tied to oil prices but with a time lag, to follow the cost of crude lower.
Who Is To Blame For The Global Oil Supply Glut In Charts (Hint: Not Iran) - When crude oil decidedly broke its recent support level, and slid right back into the $40-handle range which served as a springboard for the dead oil bounce earlier this year, many blamed the imminent surge of Iran oil deliveries for as a the downside catalyst. The reality, however, is that a long time will pass before significant Iran oil may flood developed markets, and yet even without Iran oil the market has recently seen a surge in supply and production over the past few months - it is this sudden oil glut that has been the true driver of most recent slide in prices. But who is the culprit? We present the answer on the following several charts showing oil exports from both OPEC and non-OPEC oil producing countries. Note that Iran has gone exactly nowhere - it is "others" who are to blame for the most recent downturn in oil prices. What about non-OPEC production: despite speculation that the US production is peaking (and Saudi Arabia is winning), US production is virtually at its all time highs. So with everyone is overproducing, is global oil demand rising? Nope. In fact, while everyone knows that the US has just a modest oil "glut", this has moderated in recent months, but as the highlighted chart the oil glut across the entire OECD region has never been greater. End result? This: Absent either a dramatic slowdown in oil production, mostly by Saudi and Iraq, (where we hope the marginal producer is not ISIS) or a just as dramatic surge in oil consumption (now that the world is rapidly running out of places to store drilled oil) the price is going lower.
185 Billion Reasons Why The US Agreed To Nuclear Deal With Iran -- Many have questioned just why President Obama was so keen to get the Iran nuclear deal done - apparently with almost no real concessions - in the face of allies home and abroad deriding the agreement. Well, if one were so inclined, OilPrice.com explains that Iran's deputy oil minister for commerce and international affairs, Hossein Zamaninia, told Reuters that the country has already identified 50 oil and gas projects it will offer for bids - with the government pegging the value of these properties at $185 billion... via OilPrice.com,Important news last week -- from a place that's quickly becoming the world's focus for high-impact oil and gas projects. That's Iran. Where government officials said they are on the verge of revolutionizing the country's petroleum sector. Which could provide big profit opportunities for foreign investors. Iran's deputy oil minister for commerce and international affairs, Hossein Zamaninia, told Reuters that the country has already identified 50 oil and gas projects it will offer for bids. With the government pegging the value of these properties at $185 billion. And officials are hoping to get these fields licensed out soon. With Zamaninia saying that the government plans to offer all of the blocks over the next five years.Perhaps most importantly, Iranian officials say they have designed a new petroleum contract structure for international investors. Which they are calling the "integrated petroleum contract" or IPC. Officials said that the IPCs will last for a term of 20 to 25 years. A substantial improvement over the older, shorter-term contracts -- which have been a major stumbling point for the world's oil and gas companies.
The Balance of Power in the Middle East Just Changed, U.S.-Iranian Relations Emerge from a 30-Year Cold War - Don’t sweat the details of the July nuclear accord between the United States and Iran. What matters is that the calculus of power in the Middle East just changed in significant ways. Washington and Tehran announced their nuclear agreement on July 14th and yes, some of the details are still classified. Of course the Obama administration negotiated alongside China, Russia, Great Britain, France, and Germany, which means Iran and five other governments must approve the detailed 159-page “Joint Comprehensive Plan of Action.” The U.N., which also had to sign off on the deal, has already agreed to measures to end its sanctions against Iran. If we’re not all yet insta-experts on centrifuges and enrichment ratios, the media will ensure that in the next two months — during which Congress will debate and weigh approving the agreement — we’ll become so. Verification strategies will be debated. The Israelis will claim that the apocalypse is nigh. And everyone who is anyone will swear to the skies that the devil is in the details. On Sunday talk shows, war hawks will fuss endlessly about the nightmare to come, as well as the weak-kneedness of the president and his “delusional” secretary of state, John Kerry. There are two crucial points to take away from all the angry chatter to come: first, none of this matters and second, the devil is not in the details, though he may indeed appear on those Sunday talk shows. Here’s what actually matters most: at a crucial moment and without a shot being fired, the United States and Iran have come to a turning point away from an era of outright hostility. The nuclear accord binds the two nations to years of engagement and leaves the door open to a far fuller relationship. Understanding how significant that is requires a look backward.
The Ongoing Starvation of Yemen -- Lara Jakes reports on the continuing deterioration of conditions in Yemen: An estimated 25,000 additional Yemeni civilians each day are being pushed toward starvation [bold mine-DL] as fighting continues in the nation’s civil war and an ongoing Saudi Arabia blockade limits food, water, fuel and other aid from entering the country, Oxfam International concluded in a new report Monday. It bears repeating that much of Yemen’s current suffering owes to the Saudi-led intervention and blockade of the country, and the U.S. has backed both for the last four months. Thanks to the blockade, the civilian population is being deprived of essential food, medicine, and fuel. As I mentioned last week, Yemen is also suffering from serious water shortages and the related outbreak of disease because of a lack of fuel and damage to the country’s infrastructure. Yemen already had serious problems with food insecurity and inadequate water supply before the war, but the intervention has made all of the country’s many problems so much worse.
Oil Heading for Fall as Diesel’s Engine Sputters -- Mainland-listed shares in China’s national oil champion are up 27% so far this year, while their Hong Kong-listed equivalents are down 9%. The former have, of course, been juiced by Beijing’s desperate measures to prop up the mainland stock market. The latter are more reflective of what is really happening with oil supply and demand. China is showing signs of strain. While official gross-domestic-product data continue to helpfully meet Beijing’s targets, other numbers—and the stock-market panic— point downward. The latest, preliminary reading of the Caixin China Manufacturing Purchasing Managers’ Index hit a 15-month low. The State Council promptly announced measures to boost trade. Broad-based drops in the prices of industrial commodities from iron ore to copper serve as warnings of cooling China growth. Oil hasn’t escaped. If current futures prices hold, Brent crude will average about $57 a barrel in 2015, down 42% from 2014’s average and the lowest in a decade. U.S. benchmark West Texas Intermediate’s implied average is about $51.40, which would be the lowest since 2004. Yet even those averages look vulnerable; they rely on both grades rising through the fall and winter. For example, Brent futures for December trade at almost $57 a barrel, versus a current price of less than $55. Analysts are more optimistic, with a consensus forecast for the fourth quarter of around $65, according to FactSet. As refiners take advantage of cheaper crude, turning it into gasoline to meet demand, they are also producing a lot of distillate. That is a catchall term for other products, chiefly diesel, which is heading into storage. In its latest monthly report, the International Energy Agency showed stocks of middle distillates in the industrialized world in May were higher for that month than in each of the past three years. It said that “middle distillate spot prices posted the sharpest falls across all surveyed markets in June.”
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