this week's reports from the EIA, covering the week ending October 16th, again showed a large buildup in crude oil being put into storage domestically, a result of oversupply and lower demand; in fact, the addition of more than 8 million barrels this week topped last week's 6 month high, and we'd have to go back to early spring, when traders were buying boatloads of oil to store in hopes of higher prices, to find a week that saw that much oil added to US inventories....the increasing glut, combined with virtually no change in production or oilfield activity, finally turned the oil markets, which had been higher since the end of September, and the contract price for domestic WTI oil ended Friday at $44.60 a barrel, down 5.6% from $47.26 a barrel a week earlier...the price of natural gas saw a similar drop; the near term contract closed Monday at $2.442 per mmBTU, down from $2.535 per mmBTU Monday the prior week, eclipsed a three year low at $2.386 per mmBTU on Thursday and then dropped another 10 cents on Friday to close the week at $2.286 per mmBTU, 6.4% lower than its Monday close...inventories of natural gas grew a less than expected 81 billion cubic feet last week, but still remain 4.5% above the five-year average for mid-October, with forecasts for a mild El Nino winter for the northern half of the country suggesting lower than normal consumption..
also putting pressure on oil prices globally was the announcement by the United Arab Emirates (UAE), OPEC's second largest liquids producer, that they planned to expand oil production 30% by 2020, as well as reports that Ayatollah Khamenei had approved the nuclear deal between Iran and the West, and that Iran would boost its oil production within a week after sanctions were lifted, with the Iranian oil minister saying "We don’t need permission from anyone to export our oil," in reference to OPEC...there were also announcements by Thailand that they'd spend 690 billion baht ($19.4 billion) to expand their capacity to produce oil & other energy and by Cuba's state oil monopoly that they plan to drill deepwater wells in the Gulf of Mexico by the end of 2016, in spite low prices for oil...
those, and other expansion of oil exploration and exploitation abroad that we've seen recently remind us that when viewing the price of oil we have to be aware of how the strength of the dollar has made commodities such as oil appear cheap to us, while they may not be quite so low priced when viewed in other country's currencies...beginning with the devaluation of the Chinese Yuan on August 11th, we've watched as most free floating currencies around the globe fell against the dollar, and those currencies of some countries that had been pegged to the dollar were devalued...for instance, the oil and gas producing former Soviet republic of Kazahkstan's tenge fell 22% within a week of China's devaluation, and so far this year, the US dollar has increased 58% against the Brazilian real and 16% against the Canadian dollar...what that means in practical terms for a national oil producer such as Petrobras is that their domestic costs don't change, but the value of the oil they sell internationally is worth that much more in their home currency than it was before; ie, a barrel of oil at today's price will buy as much in Brazil today as a $75 barrel of oil would buy a year ago...similarly, while oil is selling for $44.60 a barrel in the US, it's fetching $58.92 a barrel in Canada, where they get U.S. dollars for the oil and gas they produce and export, but they pay wages and cover most of their other expenses in lower valued Canadian dollars...
This Week’s Data from the EIA
at any rate, the major story in the data this week was once again the big increase in our oil inventories, which rose by 8,028,000 barrels or 1.7%, from 468,559,000 barrels as of October 9th to leave 476,587,000 barrels in storage on October 16th...that eclipsed last week as the largest one week jump in oil inventories since the week ending April 3rd, and gives us 26.2% more oil in storage than the 377,684,000 barrels we had stored at the end of the 3rd week of October a year ago....over the last 4 weeks, our oil inventories have now increased by 5.0% or 22,618,000 barrels, and we now have 25.4% more oil than we ever had stored any time in October in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year...
contributing to that increase in inventories was a 165,000 barrel per day increase in our imports of crude oil, which rose to 7,471,000 barrels per day during the week ending October 16th, barely changed from the 7,477,000 barrels per day we imported during the week ending October 17th of last year...however, checking the 4 week average of imports in the weekly Petroleum Status Report (62 pp pdf), we find that U.S. crude oil imports averaged 7.4 million barrels per day over the last 4 weeks, 2.7% below our imports in the same 4 weeks of last year...and as we mentioned, our field production of crude oil was unchanged at 9,096,000 barrels per day for the week ending October 16th, which also happens to be the same as our oil production was during the week ending September 25th...actually, our oil production hasn't budged much over the last 7 weeks, as it's averaged 9,121,000 barrels per day over that span, about 4.3% below the modern weekly record production of 9,610,000 barrels per day that was set in the first week of June this year, but still more than 2% above the same 7 week span a year ago, when our excess production was already starting to impact prices...
meanwhile, consumption of that oil by refineries rose a bit, as refinery inputs of crude oil averaged 15,345,000 barrels per day in this current report, which was 78,000 barrels per day more than last week’s average...the refinery utilization rate inched back up to 86.4%, from 86.0%, but that's still well below the 96.1% of capacity US refineries were running at at the peak of the summer driving season, in late July and early August...while output of finished gasoline rose by more than 300,000 barrels per day in the week ending October 9th, it fell by 90,000 barrels per day this week, as output of distillates like diesel fuel, which fell last week, rose...but while ending gasoline inventories decreased by 1,518,000 barrels to 219,784,000 barrels this week, they're still above the upper limit of the average range for this time of year, so there’ll be no rush step up production....hence, while oil supplies increased somewhat with stable production and the increase in imports, the demand for that oil from from refineries didn't keep pace, which led to the increase in oil headed for storage...
The Latest Rig Counts
while the number of rigs drilling for oil fell for the 8th straight week this past week, the total number of active rigs was unchanged at 787, as Baker Hughes reported that their count of rigs targeting oil was down by just 1 to 594, while their count of rigs drilling for natural gas was up by 1 to 193...the total rig count is still down by 1,140 rigs from the year ago total of 1,927 working rigs, with oil rigs down 1,001 from last year's 1598 and gas rigs down 139 from last year's 320...net vertical drilling rigs in use were down by 1 to 109, which was 252 fewer than the 361 vertical rigs operating a year ago...meanwhile, 1 directional drilling rig was added bringing their total to 87, which was down from 211 on October 24th 2014, and rigs designed to drill horizontally were unchanged at 591 for the week and down from 1355 a year earlier...also note that 2 more rigs were added in the Gulf of Mexico this week, so we're now up to 35 offshore, 34 in the Gulf and one off California, which is still down from 55 offshore rigs a year ago...
the net zero change in rigs counts did not preclude several shifts within states or shale basins...the most active basin saw the greatest decrease, as 4 rigs were shut down in the Permian of west Texas, leaving 229, which was down from the 568 rigs that were working the Permian last October 24th...3 rigs were also stacked in the Marcellus, leaving 43, which was down from 81 a year earlier, while 2 rigs were taken down in the Mississippian (along the Texas / Oklahoma border) leaving 11, down from 73 a year earlier...on the other hand, two rigs were added in Ohio's Utica, bringing the Utica count up to 22, which is still down by more than half from last year's 49...two more rigs were also set up in the Haynesville of northern Louisiana, bringing the count in that basin up to 26, in contrast to the year ago Haynesville total of 40...and 1 rig was added to the Eagle Ford of south Texas, bringing the count in that basin up to 77, which was still down from 216 in the same week last year...the difference between those listed as added and those taken down leaves 4 horizontal rigs unaccounted for this week; hard to say where they might have been added, but shale basins in Illinois and Mississippi that are not listed in the Baker Hughes tables are suspect..
there were also relatively large changes in the state rig counts...including the two in the Haynesville and the two in the Gulf, Louisiana saw an increase of 5 rigs, bringing the state count up to 73, compared to 110 a year ago...two rigs were added in Ohio, and we now have 21, but that's still down from 44 last year on this date...a single rig was added in each of 5 states; Oklahoma, Alaska, Illinois, Mississippi, and Nebraska; those bringsthe Oklahoma count to 90, down from 204 a year ago; the Alaska count to 12, up from 8 a year ago; the Illinois count to 3, up from 1 a year ago, the Mississippi count to 6, which is down from 16 a year ago, while Nebraska now has 1 rig operating, down from 2 a year ago...
with a decrease of 3 rigs in the Permian and 2 in the panhandle District 10, Texas saw the largest rig count decrease, as they were down 5 to 346 this week, and down from 906 a year ago...Kansas and Pennsylvania both saw 2 rigs shut down; Kansas now has 7, down from 21 a year ago, while Pennsylvania now has 27, down from 52 a year ago...New Mexico's count was down 1 to 40 rigs, and down from 103 a year ago, and West Virginia's was down 1 to 17, and down from 36 a year ago...lastly, Alabama saw their last active rig shut down this week; a year ago, they had 7 rigs working...
Kasich details energy plan - Toledo Blade — Presidential contender John Kasich last week proposed an “all of the above” approach to energy production that includes renewables and conservation measures along with stepped-up fossil fuel production. But Gov. John Kasich’s first test may come next year with his position that a proposed, indefinite halt to Ohio’s mandate that utilities get more power from renewable sources like wind, solar and new technology is “unacceptable.” “We’ll make sure we produce more energy from oil and gas; from nuclear; from coal that we dig, clean, and burn; alternatives and renewables, and anything else that we can find, and we’ll do it responsibly,” Mr. Kasich said in New Hampshire as he spelled out his plan for the first 100 days of a President Kasich administration. “We need it all, and it should come from right here,” he said. He proposed working with Canada and Mexico to ensure that North America can meet its own energy needs, and part of that plan would be approval of the Keystone XL Pipeline, a position that puts him at direct odds with Democratic presidential front-runner Hillary Clinton. The pipeline would run through the central United States from Canada to Mexico. “Energy freedom is a matter of national security,” Mr. Kasich said. “We don’t want wars when it’s all about energy when we can do what we need to do in America to be energy independent.” He called for opening more federal lands to oil and natural gas exploration; research into cleaner coal, smart grid, battery, and other technologies; and letting states regulate hydraulic fracturing, or “fracking,” operations at home. He said he would end the ban on exporting domestic oil and gas and would end President Obama’s proposed, stricter regulations on carbon emissions from coal and other fossil fuel power plants.
Kasich: 'All the above' energy approach - — Presidential contender John Kasich last week proposed an “all of the above” approach to energy production that includes renewables and conservation measures along with stepped-up fossil fuel production. But Gov. John Kasich’s first test may come next year with his position that a proposed, indefinite halt to Ohio’s mandate that utilities get more power from renewable sources like wind, solar and new technology is “unacceptable.” “We’ll make sure we produce more energy from oil and gas; from nuclear; from coal that we dig, clean, and burn; alternatives and renewables, and anything else that we can find, and we’ll do it responsibly,” Mr. Kasich said in New Hampshire as he spelled out his plan for the first 100 days of a President Kasich administration. “We need it all, and it should come from right here,” he said. He proposed working with Canada and Mexico to ensure that North America can meet its own energy needs, and part of that plan would be approval of the Keystone XL Pipeline, a position that puts him at direct odds with Democratic presidential front-runner Hillary Clinton. “Energy freedom is a matter of national security,” Mr. Kasich said. “We don’t want wars when it’s all about energy when we can do what we need to do in America to be energy independent.” He called for opening more federal lands to oil and natural gas exploration; research into cleaner coal, smart grid, battery, and other technologies; and letting states regulate hydraulic fracturing, or “fracking,” operations at home. He said he would end the ban on exporting domestic oil and gas and would end President Obama’s proposed, stricter regulations on carbon emissions from coal and other fossil fuel power plants.
Mahoning County Dem Party endorses No vote on fracking amendment: The Mahoning County Democratic Party today announced that it has endorsed a "No" vote on the Youngstown city charter amendment banning fracking. The vote was unanimous. “The members of the executive committee were unanimous in opposition to amending the charter banning fracking. The group knows full well this is a total waste of the taxpayers' precious funds,” chairman David Betras stated after the vote. He urged all city residents to vote “no” on this "job-killing amendment." "The charter amendment is yet another attempt to ban fracking in the city of Youngstown. This is the fifth bite at the apple. The anti -fracking group has stated it doesn’t care that the Ohio Supreme court has taken away local control and knows full well the charter amendment is not constitutional," Betras said in a news release.
Anti-fracking proposal must be firmly rejected - Youngstown Vindicator -- There isn’t a newspaper in the country – ours included – that would criticize a citizen for petitioning his or her government. Indeed, government accessibility and transparency are the foundation of democracy and the mainstay of a free press. That said, we wonder how many newspapers would sit idly by while a citizens group petitions government – through the ballot box – not once, not twice, but five times. Not many, we suspect. Thus, we have no qualms about telling the bunch of self-righteous, self- important individuals who are pushing an anti-fracking charter amendment in the city of Youngstown to please go away. No one is trying to silence the advocates of the Community Bill of Rights or deprive them of their right to put the issue before the voters of Youngstown. But most reasonable people would admit defeat after four rejections. In our view, the “three strikes and you’re out” rule is applicable. But, Susie and Ray Beiersdorfer, the masterminds of the anti-fracking campaign in Youngstown, have no shame when it comes to being snubbed by the residents of the city.
Battle over $2 billion Nexus Pipeline continues to simmer in Medina, Summit counties -- The battle over the Nexus Pipeline continues to simmer in Medina and Summit counties — with a report of one Medina landowner threatening a surveyor and a survey crew being ordered off private property. Surveyor Frank Batson filed an affidavit, saying he was threatened Oct. 10 by landowner Donald Borling, 72, of York Township, the Medina County Gazette reported. Borling reportedly said he had a shotgun shell filled with salt ready for Batson. The Medina County Sheriff’s Department investigated, and no charges were filed, officials said. On Monday morning, a surveying crew for the $2 billion natural gas pipeline was refused access to a property in Guilford Township because an appeal has been filed with the 9th District Court of Appeals and Medina County Common Pleas Judge Christopher Collier issued a stay blocking survey access until the appeal is heard. That, at least temporarily, blocks Collier’s Oct. 6 ruling that gave the Texas-based company access to private property for surveying. Guilford resident Jonathan Strong said he got an email from a neighbor about 8:45 a.m., saying a surveying crew was assembling at nearby church. “There were about 10 vehicles and a small army of people,” he said. He then found them on the property of a neighbor who was at work. He confronted them, asking if they had permission from the landowner. They said no, he said. He then called the Medina County Sheriff’s Department. A deputy was dispatched to the site east of Seville. The deputy conferred by telephone with the Medina County Prosecutor’s office and access was denied because of Collier’s stay. The company was told permission is needed before its crew can access private property at this time.
Fracking tax: Earlier this month, the Legislature finally got around to imposing long-overdue reform of the state’s charter schools. But lawmakers are still dragging their feet on another issue that should be a priority, adjusting the state’s severance tax on oil and gas produced through fracking. A “hard deadline” of Oct. 1 was set in June by Senate President Keith Faber for a task force to issue recommendations on how much the tax should be increased. But now there appears little chance the matter will get resolved this year. That’s unacceptable, considering lawmakers have been looking at the matter for three years. Ohio’s severance tax, established 40 years ago, is paid when drillers remove oil, gas or other natural resources from the state. While oil production is up 200 percent and natural gas production 350 percent since 2012, Ohioans have little to show for it. Gov. John Kasich has proposed a modest tax increase on oil and gas produced via fracking in past budget-related bills, but each time Republican lawmakers have stripped the language from the legislation. Kasich has said an increase of 4.5 percent for natural gas and liquids, and 6.5 percent for oil, would still keep Ohio’s rates lower than other shale-drilling states. Making the tax market-based would raise an estimated $260 million in the next two years. That could be used to cut income tax rates, as Kasich proposed in the last budget, or provide funding for infrastructure and other projects in communities, especially those near eastern Ohio’s shale oilfields. Opposition has come from the oil and gas lobbyists, who claim that increasing taxes will discourage drilling, although there is no evidence that would happen.
Panel slated to address Ohio fracking tax hike kicks off (AP) — A study panel charged with addressing Gov. John Kasich’s (KAY’-siks) proposed tax hike on oil and gas drillers has scheduled its first formal meeting. The 2020 Tax Policy Commission was established in the last two-year state operating budget to review Ohio’s tax code for a potential overhaul. When Kasich’s proposal for the tax hike on hydraulic fracturing — or fracking — activity stalled, Senate President Keith Faber (FAY’-bur) and House Speaker Cliff Rosenberger said it would be put on the commission’s agenda and worked out by Oct. 1. After that date came and went, they said that changes in oil and gas markets were playing a part in the delay. Faber said Wednesday that the wording of a final report was still being worked out with the House.
Lawmakers studying frack tax meet for first time - Columbus Dispatch - State lawmakers now have a report that confirms what Gov. John Kasich has been arguing for three years — Ohio’s severance tax on fracking is low compared to other states. But based on the recommendations from an informal legislative group, there will be no move to increase Ohio’s tax on oil and gas companies anytime soon. The 2020 Tax Policy Study Commission met this morning for the first time, 21 days after its deadline to produce a recommendation to the House and Senate on a new severance tax for shale fracking The commission was given a report today from a three-member group that spent time over the summer trying to craft suggestions on how and when to increase the tax as drilling continues to expand in parts of eastern Ohio. “Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax,” the report said. The Kasich administration has been making a similar argument for years, as GOP legislative leaders, prodded by the oil and gas industry, have repeatedly rejected his proposals to increase the tax. The report compared Ohio’s current severance tax rate, which Kasich has called a “total and complete rip-off to the people of this state,” to a number of other states.
Ohio tax panel: Go slow with oil and gas industry — The oil and gas market remains too volatile to consider an immediate tax hike on an industry that Gov. John Kasich has repeatedly said was getting a great deal in Ohio, an informal legislative panel said Thursday. The panel, part of the broader 2020 Tax Policy Study Commission, had been working behind closed doors with the industry. The report had been promised by legislative leaders more than three weeks ago. Instead of proposing any rate increases, the informal group’s report suggested setting unspecified triggers at which point increases might be implemented or a slow phase-in of any increase. Any change should also look at the broader impact of other taxes on the industry as well as the potentially higher cost of extracting oil and gas from Ohio shale. The panel did agree with Mr. Kasich on one thing: “Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax,” the report reads. Currently, oil is taxed at the rate of 20 cents per barrel and natural gas at 2.5 cents per 1,000 cubic feet. The state collected $26.9 million from the tax in the last fiscal year.
State panel suggests more study of tax rates on oil and gas drilling --- A lawmaker panel recommended further studies of Ohio's tax rates on oil and gas produced via horizontal hydraulic fracturing, citing volatile commodity prices among the reasons for delayed action on a rate increase. The informal working group of a new tax policy study commission also said any future increase in taxes on fuels produced via fracking should include triggers to account for dropping commodity prices. "We are in a historical economic situation with the industry because of what's going on in Saudi Arabia...," said Rep. Jeff McClain (R-Upper Sandusky), co-chairman of the new 2020 Tax Policy Study Commission, who was also involved in the development of the severance tax report. "We want to be cautious. We want to make sure we take care of Ohio, but we want to make sure that we don't kill the industry." Sen. Bob Peterson (R-Sabina), the other co-chairman of the group, added, "The industry's in severe distress economically. Now is probably not a good time to increase the tax...." McClain and Peterson released the severance tax report Oct. 22 during the initial meeting of the tax policy commission, which was formed as part of the biennial budget bill earlier this year to undertake a longer-term study of Ohio's tax laws. Implementation of a flat income tax rate is among the issues that will be considered. Republican legislative leaders said in June that a report outlining a potential severance agreement would be issued on Oct. 1; the report released Oct. 22, however, recommends further consideration of the issue.
Lawmakers kick Kasich's frack tax down road - again: - Maybe you've heard this one before? Ohio's tax on oil and gas drilling remains among the lowest in the nation, but lawmakers don't want to raise it. That's what a new report on taxing oil and gas drilling found Thursday. It's also what conservative lawmakers have said for months even as Gov. John Kasich pushes for a higher rate. "The industry's in severe distress economically. Now's probably not a good time to increase a tax on them," said Sen. Bob Peterson, R-Sabina, one of several lawmakers, oil and gas company officials and Gov. John Kasich's staff to provide input for the report. For example, Chesapeake Energy Corp., a major player in Ohio, announced in February that it would cut 2015 spending because of low crude oil prices. Ohio taxes the industry at 20 cents per barrel of oil and 3 cents per thousand cubic feet on natural gas — one of the lowest rates in the country. Oil and gas taxes made up 0.4 percent of Ohio's total tax collections in 2014. In comparison, 53.8 percent of North Dakota's tax money and 10.9 percent of Texas' collections came from oil and gas drilling, according to the new report. "As we did our analysis, Ohio's total tax burden on the oil and gas industry is as low or lower than any other states that have a severance tax. So, we're low," Peterson said.
Ohio, Pennsylvania, West Virginia sign pact to develop shale resources -- Governors of Ohio, Pennsylvania and West Virginia have a new agreement to work together to make the most of shale-energy resources that run beneath parts of all three states. The five-page document says that officials in the states will cooperate to promote the region’s shared energy interests. “The issues and opportunities facing our growing oil and gas industry do not recognize state lines, making it essential that we work together to help ensure the continued growth we expect to see,” Ohio Lt. Gov. Mary Taylor said in a statement. “We are seeing tremendous and continued growth in this industry, and we know that can be strengthened by partnering on key areas.” Taylor signed the agreement last week on behalf of Ohio Gov. John Kasich. The other signatories were Govs. Tom Wolf of Pennsylvania and Earl Ray Tomblin of West Virginia. Each state would pay for its share of the programs, with no dollar figures listed. The deal runs through 2018
Marcellus and Utica oil and gas permit report, October 11-17 -- The Pennsylvania Department of Environmental Protection’s Office of Oil and Gas Management issued 76 new well permits from October 11 to 17—more than three times the permits reported for the previous week. Meanwhile, Ohio Department of Natural Resources reported the approval of 21 permits throughout the state. West Virginia’s Department of Environmental Protection reported issuing 15 permits during the same duration. Governors from the three states signed an agreement at the 2015 Tri-State Shale Summit last week that aims to solidify one another’s support and cooperation to further the region’s shale industry. The five-page document outlines four areas of cooperation among the states: marketing and promotion of local businesses, energy job training for residents, oil and gas transportation infrastructure including roads and pipelines, and state-sponsored academic research to benefit the industry. A joint statement from Pennsylvania Gov. Tom Wolf, West Virginia Gov. Earl Ray Tomblin and Ohio Lt. Gov. Mary Taylor said the move is “critical step toward demonstrating that out tri-state region is ready, willing and able to make downstream-related business investment a win-win for the region and for the firms—large and small—that have operations in the new global petrochemical center that is the Appalachian Basin.”
Study reveals proximity of schools, hospitals to fracking activity =- Thousands of Pennsylvania residents attend school or receive health care within one mile of a permitted natural gas fracking well site, according to a report released Tuesday. The report from the Penn Environment Research & Policy Center, titled “Dangerous and Close” revealed there are 166 schools, 165 child care providers, 21 nursing care providers and six hospitals within that radius. “Children should not live near and play in the shadow of dangerous fracking,” Zoë Cina-Sklar, PennEnvironment campaign organizer, said at the press conference in Scranton. PennEnvironment, an environmental advocacy organization based in Philadelphia, held the press conference on the sidewalk outside the Commonwealth Medical College, but the school has no affiliation with the group or the study. Findings included:
- –53,000 Pennsylvania children under the age of 10, and 41,000 seniors 75 years of age and older live within one mile of a permitted fracking well site.
- –More than 220 violations of environmental and public health regulations have occurred at wells within one mile of a school, while 180 violations have occurred within one mile of a childcare provider.
Pa. regulators caught unprepared for natural gas 'mother lode' - In 2005, Pennsylvania issued 19 permits for shale drilling. By 2010, that number reached 3,400 — a nearly 18,000 percent increase. "I don't think many people were aware that it existed at all," said Scott Perry, who currently leads the Department of Environmental Protection's Office of Oil and Gas Management. Before joining the agency in 2000, Perry admitted that he thought the green tanks holding extracted gas at well sites supplied water for cows. The shale boom left regulators scrambling to fulfill the demand for permits and oversight of an industry that had been largely invisible a few short years prior. "It wasn't until 2008 when we first became aware as an agency," Perry said. "I'm sure some of our inspectors knew what was going on, but that information hadn't really filtered its way up." Gov. Ed Rendell said the technology that enabled unconventional drilling seemed to "burst on the scene." There was a sense that the state had hit the mother lode amid a nationwide recession. And it had. But Pennsylvania stumbled through those early days. As director of the DEP's Southwest Regional Office in Pittsburgh, George Jugovic sat in on early meetings with drillers. Those companies, many of them with long track records in the oil and gas fields of Texas, assured the DEP that the technology was time-tested and would require no more regulation than what was already in place. "The line you heard from the industry was: 'Oh we've used fracking in conventional wells. It's not really a significant difference'," said Jugovic, an environmental attorney who had first joined the department in 1984.
The regulator in the Range hat: How politicians, DEP became cozy with shale drillers -- Mike Krancer announced he was stepping down as Pennsylvania's environmental secretary in March 2013, having led a reorganization that accelerated the permitting process for drillers. Krancer already had his next job lined up. After two years at the Department of Environmental Protection, he would return to Blank Rome, a Philadelphia law firm that, among other activities, represents Marcellus Shale interests and energy companies. . But Krancer wasn't the first regulator to make that transition. Six of the eight environmental secretaries since 1995, in addition to governors, advisers and countless rank-and-file employees, have gone on to work for the industry. The influence of the Marcellus Shale industry is apparent at every level of Pennsylvania's bureaucracy, from politicians who collect millions in campaign contributions each election cycle to low-level well site inspectors who've accepted hats and shirts and thermoses emblazoned with the logos of Chesapeake, Range and other operators. George Jugovic, who led the DEP's Pittsburgh office under Rendell and Tom Corbett, said inspectors tend to work in the field, visiting the same sites repeatedly and building relationships with the people who work there. The oil and gas inspectors, in particular, became a "close-knit group" that developed a friendly rapport with the people they regulated. Jugovic struggled not only to stop inspectors from accepting gifts emblazoned with gas company logos but to prevent them from wearing those items while on the job. "They're DEP inspectors and they're inspecting a Range Resources site wearing a Range Resources hat,"
EQT focusing more on Utica shale - EQT — Corp. plans to put more emphasis on exploring the deep Utica shale as continued low gas prices push the Downtown producer to focus on only the best spots for drilling and pipeline development. “The focus in 2016 will be on this more narrowly drawn notion of what the core Marcellus would be assuming the deep Utica play works,” CEO David Porges told analysts Thursday while discussing third quarter financial results that were hurt by a 42 percent drop in realized prices from a year ago. The state’s fifth-largest shale gas producer will likely cut capital spending next year — a move nearly all of its competitors made in 2015 as prices dropped and drilling slowed — and will suspend drilling in non-core areas such as Central Pennsylvania, Porges said. He declined to speculate on the spending cut, other than to say it will be “a fair bit lower” than this year’s capital budget. He predicted modest production growth of 15 to 20 percent next year. The core area for EQT’s drilling program — including 10 to 15 wells in the Utica — and expanding midstream systems is a territory stretching from Allegheny County south to Marion County, W.Va., and west to Wetzel County in the Northern Panhandle. EQT has leases for both the Marcellus and the Utica below it in that area.
Fracking Demand Creates Rural Water Lines: Natural gas companies, which require massive amounts of water for fracking, are trying to make friends in the water sector. These alliances may hold benefits for water customers. “Some gas companies working in the Marcellus and Utica shales are paying to extend public water lines into rural areas to provide the millions of gallons needed for hydraulic fracturing, or fracking, of their wells, and in some cases building treatment plants as well,” the Pittsburgh Tribune-Review reported. Southwestern Pennsylvania Water Authority is one example. The authority partnered with Vantage Energy this year on a $30 million project constructing water mains and expanding a water treatment facility. Jack Golding, a manager for Southwestern, explained the arrangement. “It's a win-win-win,” he said, per the report. “For us, this is a good deal. We get lines extended that would probably never get extended, and it gives us the ability to keep residential rates low.” Pennsylvania American Water has also explored partnerships with the energy industry. Senior Vice President Kathy Pape explained that such pairings initially raised questions. “There were concerns that the bad reputations of shale gas drillers would rub off on us. We're very protective of our reputation,” she said.
Pennsylvania panel to examine drilling impacts on poor communities - Pennsylvania’s Office of Environmental Justice, all but moribund during the administration of then-Gov. Tom Corbett, gets new life this week with the appointment of a director and a mandate to review, for the first time, shale gas facilities that could increase the health and environmental risks in poor and minority communities. Whether those expanded reviews will reduce those risks in so-called environmental justice communities, where almost 500 wells have already been drilled, is much less certain. Environmental justice communities are defined as those where at least 20 percent of the population is living below the poverty line or 30 percent are non-white. The DEP’s 2014 state environmental justice map identifies 851 communities or municipalities that meet that criteria, including many in Cambria, Fayette, Forest, Greene, Potter and Washington counties, where numerous shale gas drilling and development sites exist. John Quigley, secretary of the state Department of Environmental Protection, said last week that the Office of Environmental Justice’s mission will be “rebuilt from the ground up,” including the addition of shale gas development permit applications to a “trigger list” the office has used to determine when to provide such communities with enhanced notification, information and public participation opportunities. “Shale gas was removed from the trigger permit list and that was not a defensible action” Mr. Quigley said. “That’s going to be changed. Whether it’s a gas well or compressor station permit application, it will trigger an appropriate review.”
Johns Hopkins Study Links Fracking to Premature Births, High-Risk Pregnancies -- The health issues associated with fracking just keep piling up. The unconventional gas drilling method damages the environment by injecting toxic chemicals into the ground, which in turn poisons groundwater, interrupts natural water cycles, releases radon gas and causes earthquakes. But it can also damage our health, as fracking has been linked to numerous health conditions, including asthma, headaches, high blood pressure, anemia, neurological illness, heart attacks and cancer. But perhaps most heartbreaking is the effect that fracking may have on babies. Studies have linked fracking to increased infant mortality and low birth weight babies. Now researchers at the Johns Hopkins Bloomberg School of Public Health have found that expectant mothers who reside near active fracking sites in Pennsylvania are more susceptible to giving birth prematurely and having high-risk pregnancies. The retrospective cohort study, which was published online on September 30 in the journal Epidemiology, analyzed electronic health record data on 9,384 mothers living in northern and central Pennsylvania linked to 10,946 neonates from January 2009 to January 2013. The researchers found that expectant mothers living in the most active fracking areas were 40 percent more likely to give birth prematurely, i.e., within a gestational period of less than 37 weeks. In addition, those pregnant women were 30 percent more likely to have a high-risk pregnancy, a term that accounts for a variety of factors, including excessive weight gain and high blood pressure.
Fracking Chemicals May Cause Male Hormonal Changes, Reduced Fertility: Study - New research suggests that the chemicals used during the controversial gas-extraction process known as hydraulic fracturing, or fracking, may reduce fertility and sperm count for men residing in the area. In a study published last week in the medical journal Endocrinology, researchers from the University of Missouri indicate that testing on mice found that prenatal exposure to fracking chemicals resulted in lower sperm counts in male mice when they reached adulthood. While the oil and gas industry has been highly secretive about the chemical mixtures used during the fracking process, researchers were able to isolate and test 24 chemicals used in fracking. They determined that 23 of them were endocrine-disrupting chemicals (EDCs) which can block or mimic human hormones, potentially affecting the biological processes of the body. Researchers found that 90% of the chemicals disrupted the functions of estrogens and androgens, like testosterone. More than 40% of the chemicals could interfere with progestins, and 30% affected thyroid hormones, they determined. In addition, the researchers also found that mice exposed to the highest levels tended to be fatter and had changes to the structure of the heart. “This study is the first to demonstrate that EDCs commonly used in fracking, at levels realistic for human and animal exposure in these regions, can have an adverse effect on the reproductive health of mice,” the study’s senior author, Dr. Susan C. Nagel, said in an Endocrine Society press release. “In addition to reduced sperm counts, the male mice exposed to the mixture of chemicals had elevated levels of testosterone in their blood and larger testicles. These findings may have implications for the fertility of men living in regions with dense oil and/or natural gas production.”
Nurses Sound the Alarm: Fracking Oil Trains are Hazardous to Your Health | Reuters: — Members of the New York State Nurses Association along with local and state officials will stage a rally and die-in at the Saratoga Springs Amtrak station, where approximately 240 train cars containing oil from fracking pass each day. The speakout will dramatize the danger to public health posed by oil trains, commemorate the people who have lost their lives in oil train disasters, and bring together advocates who have been working on solutions to protect communities throughout the state from potential derailments and explosions. Hundreds of RNs from around New York State will attend the event in conjunction with their union's convention that is currently underway at the Saratoga Springs Hilton
Methane from fracking sites can flow to abandoned wells, new study shows: As debate roils over EPA regulations proposed this month limiting the release of the potent greenhouse gas methane during fracking operations, a new University of Vermont study funded by the National Science Foundation shows that abandoned oil and gas wells near fracking sites can be conduits for methane escape not currently being measured. The study, to be published in Water Resources Research on October 20, demonstrates that fractures in surrounding rock produced by the hydraulic fracturing process are able to connect to preexisting, abandoned oil and gas wells, common in fracking areas, which can provide a pathway to the surface for methane. A recent paper published in the Proceedings of the National Academy of Science showed that methane release measured at abandoned wells near fracking sites can be significant but did not investigate how the process occurs. "The debate over the new EPA rules needs to take into account the system that fracking operations are frequently part of, which includes a network of abandoned wells that can effectively pipeline methane to the surface,"
Fracking can cause nearby abandoned wells to leak methane: study - (Reuters) - Hydraulic fracturing can cause nearby abandoned oil wells to leak methane, according to a study published on Tuesday in the peer-reviewed Water Resources Research journal, marking a potentially large source of unrecorded greenhouse gas emissions. Researchers at the University of Vermont examined a part of New York state overlying the Marcellus shale gas reservoir to determine the chances that a newly fracked well there would intersect one of the state's thousands of existing wellbores. "Average probability estimates for the entire region of New York underlain by the Marcellus Shale range from 0.00 percent to 3.45 percent," according to the study, which suggested the results held broader national implications. It said oil and gas companies could reduce the probability of triggering methane leaks by seeking to identify the locations of abandoned wells before any new fracking, a potentially daunting task given the large number of unmarked abandoned wells across the country.
Fracking stirs debate in Michigan - For Michigan, from its Great Lakes’ shorelines to the inland lakes that speckle the lower peninsula, freshwater is one of its most valuable resources. Some believe that the process of hydraulic oil fracking is detrimental to the environment, and to the freshwater more specifically; the state has recently been facing a battle about whether or not this is true. The concern has even reached the campus of Washtenaw Community College.This year, on May 22, the Committee to Ban Fracking in Michigan launched a ballot initiative. The committee is not a non-profit organization but a political campaign – meaning it’s a Ballot Question Committee registered with the state of Michigan Bureau of Elections. This grassroots movement is commonly called, Let’s Ban Fracking.The legislative ballot initiative hopes to collect 252,523 valid signatures by Nov. 11, 2015. If it were to pass, the law would change state statute and ban horizontal fracking and frack wastes. The law would also remove some of the wording in the Natural Resources and Environmental Protection Act.
Fracking, a help in the climate fight, deserves respect from greens | Editorial | NJ.com: The leading reason the United States is reducing climate emissions is that power plants across the country, including in New Jersey, are switching from coal to natural gas, a move that cuts climate emissions in half. But because that success is based on the boom in fracking, which carries its own risks, many environmentalists are resisting this conversion. In New Jersey 40 concerned groups, from labor unions to the Sierra Club, have formed a coalition to promote green energy, and one of its priorities is to block natural gas pipelines in the state. Last week, the Union of Concerned Scientists issued a report warning of dependence on natural gas, and ranking New Jersey as one of 16 states at "high risk" of price swings due to overreliance on natural gas. What is going on here? Has the environmental movement lost its collective mind? Yes, fracking presents risks. The chemicals used to crack rock formations could leak into underground aquifers. And the process can release methane, undercutting some of the potential gains. But those risks can be managed. The Environmental Protection Agency concluded in June, a decade into the fracking frenzy, that incidents of water contamination were rare and minor. Methane emissions, meanwhile, are declining and the EPA proposed regulations in August to reduce them by another 40 to 45 percent. So how about some perspective? Any sensible energy policy must weigh one risk against another. This is not a close call.
Proposed West Virginia-Virginia natural gas pipeline files (AP) — Energy companies have formally filed with federal regulators to build a 300-mile natural gas pipeline from West Virginia through southern Virginia. Mountain Valley Pipeline announced Friday it applied to the Federal Energy Regulatory Commission to build the pipeline from Wetzel County, West Virginia, to Pittsylvania County, located in Southside Virginia. The pipeline would deliver natural gas from so-called fracked drilling fields in the rich Marcellus and Utica shale deposits. The joint venture between EQT Midstream Partners and other energy companies is proposing a 2016 construction start with the pipeline delivering energy by late 2018. The pipeline has encountered resistance along is proposed route. Dominion Resources has already filed with FERC to build a proposed pipeline that would also run from West Virginia to Virginia.
Editorial: Oil, gas, pipelines and trains - It’s been a year and a half since a CSX crude oil train, its 107 tanker cars filled with tens of thousands of gallons of Bakken crude oil on its way from the Dakotas to a storage depot in Yorktown, derailed in downtown Lynchburg. Three cars were punctured, with one catching fire and an undetermined amount of oil spilling in the James River. Just a few days ago, in the early morning hours of Oct. 4, another CSX train, partially laden with empty tanker cars, jumped the tracks when the locomotive struck debris on the tracks from weekend storms. Also this month, in a federal courtroom in Charlottesville, Judge Elizabeth K. Dillon dismissed two lawsuits filed by landowners in Augusta and Nelson counties, seeking to block surveyors working for Dominion Power from entering private property to do preliminary surveys for the proposed Atlantic Coast Pipeline. Opponents contend the 42-inch pipeline, which would transport natural gas from the fracking operations in the Marcellus Shale regions of the Ohio River Valley to the East Coast, poses grave safety and environmental risks and are seeking to block its construction. Into the pipeline fray has jumped RAIL Solution, a nonprofit advocacy group that promotes the environmental, energy and economic advantages of rail transportation of goods. David Foster, the group’s executive director, has argued that the rail industry is better poised and more capable of transporting the natural gas: Building plants at the point of extraction for “liquefying” the natural gas and then pumping it into special tanker cars for transport to ships on the coast makes more sense than digging a 564-mile long pipeline. When you boil down the arguments in favor or against either mode of transportation, it’s clear both are risky, just risky in different ways. That’s when choices, based on objective cost-benefit analysis, must be made, with winners and losers on both sides. It’s what a modern economy is all about.
4th worker died after pipeline explosion — The Terrebonne Parish coroner’s office says a fourth man has died of injuries from an explosion at the Transcontinental Gas Pipeline Co. facility in Gibson. Three men died immediately Oct. 8, and two were critically injured. Chief investigator Danny Theriot (TER-ee-oh) tells The Courier that 56-year-old Michael Hill of Paris, Tennessee, died Oct. 12. He says Theriot worked for Furmanite Corp., a technical services firm headquartered in Houston. Theriot identifies a Furmanite contractor who died Oct. 8 as 37-year-old Jason Phillippe of Rocky Mount, North Carolina. Furmanite did not immediately answer a query Thursday about the second critically injured man. Service company Danos LLC identified two dead contractors earlier. Spokeswoman Renee Piper said Thursday that the explosion is still being investigated. She said neither critically injured man worked for Danos.
How One Federal Agency Rubber Stamps All Pipelines - The Federal Energy Regulatory Commission (FERC), a national agency with wide jurisdiction over gas industry projects, used to be one of those unseen government organizations that go quietly about their business, creating no headlines and flying under the public radar. But mounting citizen alarm about the high-volume hydraulic fracturing industry has changed all that, and FERC’s opponents have publicly accused the agency of being a spearhead for fossil fuel corporate domination of the United States and its resources. Early opposition to shale drilling was restricted to protests against what is commonly called fracking – blasting chemical-laden water into subterranean rock to fracture it, forcing it to yield the methane (natural gas) it contains. But for the past several years there has been increased opposition to the major, ever-expanding fracking infrastructures over which FERC has jurisdiction – pipelines and the compressor stations that pack down fracked gas for its pipeline journeys. FERC was founded in 1977 as an independent agency, its status updated nearly 11 years ago by the 2005 Bush-Cheney Energy Act to include jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing and oil pipeline rates. FERC also reviews and authorizes liquefied natural gas terminals, interstate natural gas pipelines and non-federal hydropower projects. Only one gas pipeline out of hundreds has been outright rejected by FERC in the past 10 years.
Majority of Texans support local control of fracking, UT poll shows - A majority of Texans believe cities should be able to ban hydraulic fracturing even if state law otherwise permits it, according to a recent poll conducted by the University of Texas at Austin. In Texas, 57 percent of those surveyed agree that cities should be able to block hydraulic fracturing, or “fracking,” and nationally 58 percent support giving cities that authority, according to the UT Energy Poll released Tuesday. Continued support for local control comes after Gov. Greg Abbott signed House Bill 40 earlier this year reasserting the state’s control over oil and gas drilling and limiting a city’s regulatory powers. Lawmakers passed the bill after Denton became the first city in Texas to ban hydraulic fracturing. Tammy Vajda, an activist who opposed drilling in Flower Mound, was not surprised by the poll’s results. She said earlier that state lawmakers threw cities “in front of a freight train and let oil and gas run over us.” “I think every city should be able to address gas drilling however they want within their borders,” Vajda said. “I think it is a crime that they have taken that authority away from us.” Ed Ireland, executive director of the Barnett Shale Energy Education Council, an industry group, blamed negative press coverage for coloring people’s opinions about hydraulic fracturing. He said that when it is explained that it’s the only way to extract some oil and gas and keep prices down, public opinion changes. “I think the question is not being asked properly,” Ireland said. “A lot of these polls are skewed to the negative side.”
Injection Wells: The Poison Beneath Us - ProPublica: Over the past several decades, U.S. industries have injected more than 30 trillion gallons of toxic liquid deep into the earth, using broad expanses of the nation's geology as an invisible dumping ground. No company would be allowed to pour such dangerous chemicals into the rivers or onto the soil. But until recently, scientists and environmental officials have assumed that deep layers of rock beneath the earth would safely entomb the waste for millennia.There are growing signs they were mistaken. Records from disparate corners of the United States show that wells drilled to bury this waste deep beneath the ground have repeatedly leaked, sending dangerous chemicals and waste gurgling to the surface or, on occasion, seeping into shallow aquifers that store a significant portion of the nation's drinking water. In 2010, contaminants from such a well bubbled up in a west Los Angeles dog park. Within the past three years, similar fountains of oil and gas drilling waste have appeared in Oklahoma and Louisiana. In South Florida, 20 of the nation's most stringently regulated disposal wells failed in the early 1990s, releasing partly treated sewage into aquifers that may one day be needed to supply Miami's drinking water. There are more than 680,000 underground waste and injection wells nationwide, more than 150,000 of which shoot industrial fluids thousands of feet below the surface. Scientists and federal regulators acknowledge they do not know how many of the sites are leaking.
Earthquakes Not Caused by Fracking but Are Man-Made, Says Oklahoma Geological Survey --Since the fracking boom started, the state of Oklahoma has had numerous earthquakes, in increasing frequency. It has experienced more than 700 earthquakes so far this year, more than all of 2014. In the last seven days, up to Oct. 19, the state has experienced more than 40 earthquakes with a magnitude of 2 or greater within 200 miles, according to Oklahoma’s Stillwaterweather.com website. Jeremy Boak, director of the Oklahoma Geological Survey, said on Oct. 16 in a quick appearance on MSNBC’s “The Rachel Maddow Show” that the increased frequency of earthquakes in Oklahoma is caused by oil and gas operations. But he said it’s not due to water and chemicals being injected in the ground. He explained that naturally occurring water already located in the formations for tens of thousands of years is what is really causing earthquakes. “That’s the water that we’re disposing of,” he said. “We’re taking it out of formations, separating the oil and gas, and then we’ve got this stuff that has to be disposed of.” The disposed water is placed in a deep formation called the Arbuckle Group, he said. Arbuckle is a 7,000-foot sedimentary formation under Oklahoma, which sits on top of the crystalline basement (rocks concealed below the sedimentary formation). This water has been injected into the same rock formation for “many, many years … a long way away from groundwater,” according to Boak, and the stress state deep in the rock is changing and causing some small faults to move. He said these are the ones that are oriented “just right” within the stress field in Oklahoma. Boak says there have been more than 700 magnitude 3+ earthquakes already this year. Not only that, but the state maintains the largest oil storage facility in the world in Cushing, Oklahoma. The facility holds 82 million barrels of oil, and it has been designated as a critical national infrastructure by the U.S. government. It’s located in an area covering about 15 percent of the state that’s had this spate of magnitude 4 earthquakes, and Boak is worried that the next one may be bigger.
Shaking Out the Lies Surrounding Earthquakes and Hydraulic Fracturing -- Unless you have a child in a participating school, the “Ready Campaign” may have passed without your awareness. I grew up in Southern California, where earthquakes were so routine, we paid them no mind; we didn’t have earthquake drills. But that was then. Now, the Great ShakeOut is a global campaign. Now, Oklahoma has more earthquakes than California—and students in Oklahoma participated on 10/15 at 10:15. As if choreographed, Oklahomans had a reminder 4.5 earthquake just days before the drill. The anti-fossil crowd has declared the cause. Headlines claim: “Confirmed: Oklahoma Earthquakes Caused By Fracking” and “New study links Oklahoma earthquakes to fracking.” MSNBC’s Rachel Maddow gleefullyteased the earthquakes in Oklahoma as “the story that might keep you up at night.” On her October 16 show, she stated that Oklahoma’s earthquakes are: “The terrible and unintended consequence of the way we get oil and gas out of the ground. …from fracking operations.” Yet, when her guest, Jeremy Boak, Oklahoma Geological Survey Director, corrected her, “it’s not actually frackwater,” she didn’t change her tune. Despite the fact that the science doesn’t support the thesis, opponents of oil-and-gas extraction, like Maddow, have long claimed that the process of hydraulic fracturing is the cause of the earthquakes. Earthworks calls them “frackquakes” because the quakes, the organization says, are “fracking triggered earthquakes.” The anti-crowd doesn’t want to hear otherwise.
Seismic activity in Oklahoma tied to oil production, USGS finds - (UPI) -- An increase in seismic activity in Oklahoma since 2009 may be in part related to activity associated with oil production, the U.S. Geological Survey finds. "In Oklahoma, seismicity rates since 2009 far surpass previously observed rates at any time during the 20th century," Susan Hough, a USGS seismologist, said in a statement. "Several lines of evidence further suggest that most of the significant earthquakes in Oklahoma during the 20th century may also have been induced by oil production activities."Oklahoma is the No. 5 oil producer in the nation. Wood Mackenzie said energy investments in the region should top $4 billion for 2015. The USGS found many of the larger earthquakes reported in the emerging shale state are tied to industrial activity. A magnitude 5.7 earthquake in 2011 was the last major seismic event reported in Oklahoma. The largest before that was a 5.7-magnitude quake in 1952, which USGS seismologists concluded was tied to oil production in the state. USGS said the disposal of wastewater in deep underground wells is potentially leading to more earthquakes. "Deep injection of waste water, now recognized to potentially induce earthquakes, in fact began in the state in the 1930s," Hough said.
Study: Fracking Causing Strong Oklahoma Quakes: A sharp rise in earthquakes in Oklahoma in the past 100 years is likely the result of industrial activities in the energy-rich state, such as oil and natural gas production, a new study suggests. The paper by the U.S. Geological Survey, which singled out the state of Oklahoma, was released online this week and will be published in December's Bulletin of the Seismological Society of America. It concludes that injection of massive amounts of the byproduct of oil and gas production — chemical-laced wastewater — deep into the earth has induced the quakes. The paper dates wastewater injection methods to the 1920s in Oklahoma. The modern-day process that produces the byproduct wastewater is known as fracking, or forcing millions of gallons of water, sand and other additives deep into the ground to free up pockets of natural gas. Both the energy industry and scientists agree that fracking doesn't directly cause significant earthquakes. Where they part ways is what role injection of the byproduct wastewater back into the deep ground plays in inducing the quakes. "That's sort of been a red herring: 'does fracking cause earthquakes?'" said U.S. Geological Survey seismologist Susan Hough, the lead author of the study. "But that's not the point you want to argue. They were producing wastewater before (modern-day fracking)." The research shows that between 1880 and 2008, there were about 25 quakes of 3.5-magnitude or greater in Oklahoma. From 2008-2014, there were roughly 154 of the same strength. That includes the largest recorded earthquake in state history, a 5.6 earthquake centered near the town of Prague in 2011.
Eminent domain sought for one-third of Iowa land on Bakken pipeline - Bill Alexander gets emotional walking out to the farm fields where the proposed 1,134-mile, 30-inch-in-diameter Bakken crude oil pipeline would run down the middle of the property. Alexander fears oil spills, long-term damage to nutrient-rich soil and turning his back on the livelihood that’s supported four generations of his wife Pam’s family, future generations and their retirement. The Alexanders said they rejected easement bids that scaled from $5,900 an acre to $16,000. They won’t negotiate. They aren’t selling. But they might not have a choice. Resistance has been vocal to the pipeline that would cross 343 miles through 18 Iowa counties — much of it fertile farm ground — but official filings suggest most landowners already are on board. On Thursday, protesters presented 1,000 new letters to state regulators from landowners, environmentalists, personal property activists and others. Letters of opposition outnumber support four-to-one. And supporters, such as trade unions and business groups, are questioned for being from out of state or having a financial gain in the estimated $3.78 billion project, including $1.1 billion in Iowa. Despite the outcry, between 63 and 69 percent of landowners have signed easements — an agreement to cross their land — with pipeline developer Dakota Access, the subsidiary of Texas-based Energy Transfer Partners, according to information from the company and the Iowa Utilities Board. The board must decide whether the hazardous liquid pipeline will promote public convenience and if it is a necessity.
Communities Pushing For Legal Rights To Regain Power Over Fracking Companies -- A Colorado group with concerns about the environmental impacts of fracking are pushing for a fundamental change to the state’s legal system to give communities greater power over corporations. Coloradans for Community Rights has set its sights on dismantling the legal system where state laws take precedence over local rules. This system where local authorities must fall back on state law instead of forming their own makes it nearly impossible to raise minimum wages, set environmental protections, or even strengthen tenant rights and set rent controls. In August, CCR launched a statewide initiative: The Colorado Community Rights Amendment. The group plans to gather the necessary 99,000 signatures necessary to place the community rights amendment on the 2016 ballot. In 2014, a similar initiative was proposed but not enough signatures were collected to qualify for the ballot. By bringing together a broad coalition of environmental, economic and social justice fighters, the CCR is optimistic its model will be successful in bringing about political and legal change.The moves come as the Colorado Supreme Court has agreed to adjudicate in battles between community groups and fracking companies.
Colorado oil and gas spill report for Oct. 19 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.
- Kerr McGee Oil and Gas Onshore LP, reported on Oct. 5 that a storage tank overflowed because of an improper valve alignment while transferring liquids during drilling operations near Hudson. Between five and 100 barrels of drilling fluid spilled.
- Kerr McGee Oil and Gas Onshore LP, reported on Oct. 6 that petroleum hydrocarbon impacted groundwater was encountered during plus and abandonment near Platteville. An unknown amount of oil, condensate and produced water spilled.
- Noble Energy Inc., reported on Oct. 7 that a produced water vault showed signs of a leak during a draw-down test. The water vault was removed, and impacted soil was discovered neat Keenesburg. Between one and five barrels of produced waster spilled.
- Extraction Oil and Gas LLC, reported Oct. 7 that stained soils were observed during removal of a tank near Frederick. An unknown amount of oil and condensate spilled.
- Kerr McGee Oil and Gas Onshore LP, reported on Oct. 7 that historical petroleum hydrocarbon impacts were encountered near Fort Lupton. Between five and 100 barrels of oil spilled.
- Kerr McGee Oil and Gas Onshore LP, reported on Oct. 8 that shallow groundwater impacts were discovered near Frederick. An unknown amount of condensate spilled.
- Synergy Resources Corp., reported on Oct. 8 that historical soil hydrocarbon impacts were observed near Erie. Between one and five barrels of produced water spilled.
With Abandoned Gas Wells, States Are Left With The Cleanup Bill : NPR: When energy booms go bust, the public is often left responsible for the cleanup. That's because while most states and the federal government make companies put up at least some money in advance to pay for any mess they leave behind, it's often not enough.After the methane industry collapse, there were almost 4,000 wells in Wyoming that the company responsible walked away from. Now, the state has to pay the price.Driving around the Powder River Basin in northeast Wyoming with Jeff Campbell and Jeff Gillum, both of whom work for the Wyoming Oil and Gas Conservation Commission, is like playing an extended game of "Where's Waldo?"Gillum and Campbell are in charge of making sure the abandoned wells get cleaned up and plugged. But first, Gillum says, they have to find them as they did recently near the town of Gillette."Finding Waldo is easier!" Gillum says.That's because Gillette, like many other U.S. cities from Los Angeles to Denver, grew up around the wells. They're in people's front yards and at the end of the driving range at the golf course. They're everywhere.Workers begin the plugging process with bentonite, a kind of super absorbent clay that gets poured down the well to seal it. Once the bottom of the well is filled with bentonite, a cement crew comes in and then, a pipe cutting crew."It's a lot more work than a lot of people realize," he says. And it also takes a lot of money.
Governor criticizes BNSF for rerouting oil trains into downtown Minneapolis -- Gov. Mark Dayton has told BNSF Railway’s top executive that he is “deeply concerned” about the recent increase in Bakken oil trains on western suburban tracks into downtown Minneapolis, saying it puts an additional 99,000 people at risk. In a letter to BNSF CEO Carl Ice released Wednesday, the governor asked the railroad not to operate oil trains on the line that passes Target Field when events are underway at the stadium, to extend first-responder training to all communities along the route and assess it for a worst-case accident. BNSF, the major crude oil hauler out of North Dakota, recently disclosed in a mandatory report to the state that 11 to 23 crude oil trains per week are using the route from Willmar, Minn., through suburbs such as Wayzata and St. Louis Park into Minneapolis and across the Mississippi River at Nicollet Island. Dayton said he was concerned that BNSF did not inform him or his staff about the route change. BNSF spokeswoman Amy McBeth said in an e-mail that BNSF will be talking directly with the governor about his concerns. She did not say whether BNSF will consider halting oil trains during Target Field events, but noted that crude oil has been shipped along the corridor at lower volumes. State Rep. Frank Hornstein, DFL-Minneapolis, said that during a game late in the Twins’ season he saw three trains carrying either oil or ethanol pass Target Field over the course of six innings.
Minn. governor orders swifter inspections of oil rail routes — Minnesota Gov. Mark Dayton asked state railroad inspectors Thursday to speed up safety inspections of tracks where more oil cars are moving through, a response to marked changes in what routes trains take as they haul millions of gallons of crude across the state. Dayton said those inspections will occur almost a month ahead of schedule on routes in and around the Twin Cities, checking to ensure the tracks can handle an unprecedented amount of crude oil traffic. The inspection swap comes as BNSF Railway has substantially increased the number of trains coming from North Dakota’s oilfields and going through downtown Minneapolis, including a pass under Target Field. BNSF said in a statement that it shifted routes because of a major track expansion project north of the Twin Cities. Dayton said he spoke with the railway’s top executive by phone and demanded that the company notify him directly when it makes such re-routing changes. “There’s a recognition that these are potentially dangerous materials,” the Democratic governor said. “There’s no reason for them not to be in communication with us about what they’re transporting through our state and through our cities.”
Geothermal Energy Could Soon Stage A Coup In Oil And Gas - Geothermal energy is one of the most widely available green energy sources in the world today. In spite of its availability, its consumption is almost miniscule when compared to wind and solar energy mainly due to high drilling costs that are associated with it. Geothermal energy can actually help reduce the cost of conventional fuel, reduce rising greenhouse gases, help combat climate change and reduce the dependence on conventional fossil fuels. Researchers at the University of North Dakota even believe that geothermal energy has the potential to be one of the biggest contributors to the U.S. energy portfolio. So, how is it possible to economically tap this massive source of clean energy that is been trapped beneath the Earth? Oil and gas drillers can play an important part in developing geothermal energy Every single barrel of oil also brings out close to seven barrels of boiling hot water which can be utilized to generate electricity through geothermal turbines. "Oil- and gas-producing sedimentary basins in Colorado, Illinois, Michigan, and North Dakota contain formation waters of a temperature that is adequate for geothermal power production," said researchers Anna Crowell and Will Gosnold in a paper that appeared in Journal Geosphere.
Well blowout spills oil and brine in Mountrail County - Oil and brine spilled at a well site in Mountrail County has impacted the White Earth River, reports the North Dakota Department of Health. The spill occurred at an Oasis Petroleum operated well at around 11 p.m. on Saturday. Located approximately 15 miles south of White Earth, the personnel on site lost control of the well. Oasis is currently working to regain control, but as of Monday at 8 a.m., the well had not yet been shut in. The North Dakota Oil and Gas Division told the Bismarck Tribune that roughly 8,200 barrels were spilled, but the actual amount hasn’t been verified. A light sheen could be seen on the surface of the White Earth River roughly 850 feet north of the well pad. Booms were placed across the river to help keep the spilled material from migrating downstream to the lake. It empties into Lake Sakakawea, which is part of the Missouri River and is the primary drinking water source for southwest North Dakota. Brine water, also referred to as saltwater, is a byproduct of the oil and gas drilling process. The Environmental Protection Agency states that this water is usually extremely toxic to the environment and contains radioactive material and heavy metals. The water is many times saltier than sea water, and the toxic substances can be extremely damaging to the environment and public health if released onto the surface.
North Dakota Oil Well Still Spilling ‘Out of Control’ --Oil and saltwater are still spilling at an “out of control” rate from a North Dakota oil well owned by Oasis Petroleum Inc. that blew out over the weekend, UPI reports. So far, more than 67,000 gallons of crude and roughly 84,000 gallons of saltwater-brine (a toxic byproduct from the oil and gas drilling process) have leaked, according to Reuters. Despite the company’s weekend-long efforts to regain control, the well has still not been capped since the 11 p.m. blowout on Saturday. The well site is located in Mountrail County, approximately 15 miles south of the city of White Earth. The North Dakota Department of Health said that the spill has impacted a nearby river. “Oasis is working to regain control of the well, but as of 8 a.m. Monday, Oct. 19, the well had not been shut in,” the department said. “A light sheen was observed on the White Earth River approximately 850 feet north of the well pad.” Booms have been placed to stem the flow of the spill material from migrating downward. North Dakota’s dirty energy production and Oasis Petroleum were put under the microscope on a recent episode of Last Week Tonight with host John Oliver. The oil company in question owned a well that killed two contractors in 2011 due to a blowout. While the exact cause of the latest Oasis well blowout is still unknown, state officials suggested that it may be linked to hydraulic fracturing, aka fracking, of a nearby well. The Bismark Tribune reported: “The incident was caused when Oasis hydraulically fractured another nearby well, apparently causing this one to blow, even though it had been shut in to safeguard against exactly that outcome, according to Oil and Gas Division spokeswoman Alison Ritter.
Oasis Petroleum says killed North Dakota oil well that blew -- Oasis Petroleum Inc said on Tuesday it successfully killed a North Dakota well that had leaked oil, saltwater and natural gas since a blowout last weekend. Oasis crews pumped more than 33,000 gallons of a bentonite clay and water mixture down the well and plugged it. The well is now permanently shuttered. More than 67,000 gallons of oil had leaked from the well. In response to the spill, law enforcement and federal regulators closed several roads on Monday evening around the site due to concerns about the effects of leaking gas. Pumps again began injecting the clay and water mixture into the well, located near a tributary of the Missouri River, at about 8 a.m. local time (1300 GMT). Crews had halted operations overnight out of safety concerns. The well is located about 15 miles south of White Earth, in Mountrail County, one of the more prolific oil-producing regions in North Dakota. The Houston-based company was first notified that the well had blown out late on Saturday night when a driver passing the site heard a loud noise and called the company’s public emergency response phone line.
North Dakota regulators relax natural gas flaring mandate — Oil companies that exceed goals meant to curb the wasteful burning of natural gas will be given credits that can be traded to offset times when targets are unmet, North Dakota regulators decided Thursday. North Dakota’s Industrial Commission, a three-member Republican panel headed by Gov. Jack Dalrymple, approved the plan at a meeting in Watford City, which is in the heart of the state’s oil patch. It marked the second time in a month that the commission has relaxed self-imposed industry rules aimed at reducing the amount of natural gas that’s burned off as a byproduct of oil production. In September, the panel, which also includes Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring, gave the oil industry an additional 10 months next year to cut down on the reduction of flaring but also implemented a stiffer long-term benchmark. “Again, they’re making it much easier for oil companies to continue flaring,” said Wayde Schafer, a spokesman for the North Dakota chapter of the Sierra Club. State Mineral Resources Director Lynn Helms has called the flaring credits a “reward system for people who are going above and beyond.” The credits, which may only be used under certain circumstances such as gas pipeline maintenance cannot be sold or transferred to another company. They also only can be banked for three months.
NDIC Gives Operators An Extra Year To Bring Their DUCs On-Line -- It is "funny" (as in coincidental) how things turn out ... just the other day I mentioned the "one-year-rule" for bringing North Dakota wells on line. And here we are today, it's just announced that North Dakota will extend the deadline by a year. From Seeking Alpha:
- North Dakota regulators approve a plan to give oil producers an extra year to bring a new well online, Reuters reports, in an attempt to give the energy industry breathing room during the oil price downturn.
- Companies will now have up to two years to frack drilled but uncompleted wells under changes approved by the North Dakota Industrial Commission, which means the oil industry will not be forced to spend billions of dollars to frack an estimated 1,000 DUCs, most of which will hit their previous one-year deadlines in December.
For me this is the big story: again, operators and the state are working together during a very, very tough time.
Bakken water supply: Program allowing irrigation water for fracking ends - Infrastructure in western North Dakota is finally catching up with demand, evident in the state engineer’s office discontinuation of a program which allowed farmers to sell irrigation water for use in the oil and gas industry. As reported by the Forum News Service (FNS), in 2011, the engineer’s office created the Industrial Water Use in Lieu of Irrigation Policy in an emergency effort to meet the industry’s demand for water. The program allowed farmers who hold water permits to pause agricultural irrigation for a season in favor of using the water for the hydraulic fracturing process. In the early days of the boom, water distribution and availability were lacking so thousands of trucks were required to haul water long distances to well sites. The increased traffic lead to road damage and more traffic accidents. Now, however, roads have been improved and expanded, more water pipelines and depots are in place and demand is down. Director of Water Appropriations Jon Patch told the FNS, “We’re seeing a big drop in activity. We’re not seeing the amount of truck traffic, which is what created the emergency in the first place.” Due to the slowdown, the engineer’s office decided that the program is no longer necessary.
Is Fracking Drinking Up More Water Than Anyone Thought: Fracking is more water-intensive than anyone realized, according to National Geographic. "It's well known that water has been key to the shale oil and gas rush in the United States. But in one center of the hydraulic fracturing boom—North Dakota—authorities are finding that the initial blast of water to frack the wells is only the beginning," the magazine reported. That's because the wells require something called "maintenance water" to ensure the oil keeps flowing, the report said. "While the water first pumped down the hole to crack rock formations and release the underground oil and natural gas typically totals 2 million gallons (7.5 million liters) per well, each of North Dakota's wells is daily drinking down an average of more than 600 gallons (2,300 liters) in maintenance water, according to recent calculations by North Dakota's Department of Mineral Resources," the report said. Maintenance water is required to prevent salt from building up and blocking the flow of oil. It is not a small amount of water. "Over the life of the well, which authorities presume will be 30 to 40 years, maintenance water needs could add up to 6.6 million to 8.8 million gallons (25 to 33.3 million liters)—or more than three to four times the water required for the initial fracking," the report said.
Thinking factually about fracking: Recently, the Los Angeles Times ran an article alleging energy producers sell fracking wastewater to farmers, who then use the wastewater to irrigate organic fruits and vegetables. This prompted outrage by “fractivists,” who seized on the report as ammo for their ongoing war on energy production and even resulted in proposed legislation. The only problem was the report was false, and the L.A. Times has since issued multiple corrections related to the story. In fact, the disposal of fracking wastewater, which is pumped into injection wells, is governed by strict regulations and its sale for agricultural use is already prohibited. What seems to have confused the Times and the fractivists is the difference between “wastewater” and “produced water.” Produced water is generated in the course of the oil-production process. This water can be sold to farmers but it is first treated under strict supervision by the Regional Water Resources Control Board and is regularly tested. What drove the misleading report and ensuing panic was a failure to research the matter objectively. When people allow their emotions alone to dictate their behavior they tend to make poor decisions, whether that be taking selfies with bears or fearing a safe technology that contributes to California’s economy and energy security.
Natural Gas Sinks to Three-Year Low - WSJ: --Natural gas futures fell to fresh three-year lows Thursday as expectations of continued weak demand outweighed a smaller-than-expected inventory build. Futures for November delivery settled down 1.8 cents, or 0.7%, at $2.386 a million British thermal units on the New York Mercantile Exchange, the lowest settlement since June 13, 2012. Natural gas inventories typically rise at this time of year as producers stock up the heating fuel ahead of the winter, when consumption rises. The so-called injection season typically ends at the end of October, and consumers then draw natural gas out of storage to use for indoor heating through the end of March. This year, forecasts for warmer-than-normal weather in the coming weeks have traders concerned that stockpiles will continue to build longer than normal this year, pushing the already-oversupplied market into a deeper glut. The U.S. Energy Information Administration said Thursday that natural-gas inventories grew by 81 billion cubic feet last week, less than the 87-bcf build that analysts surveyed by The Wall Street Journal had expected. Even so, the market remains oversupplied, as stockpiles remain 4.5% above the five-year average for this time of year.
U.S. signs off on gas exports to non free-trade countries - (UPI) -- The U.S. Energy Department said it approved the export of compressed natural gas from a port in Florida to countries without a U.S. free-trade agreement. Canadian-based energy company Emera submitted a request to the U.S. government in late 2013 to export the gas equivalent of 9.13 billion cubic feet per day to countries that don't have a free-trade agreement with the United States. "Among other factors, the department considered the economic, energy security, and environmental impacts and determined that exports at a rate of up to 0.008 billion cubic feet per day for a period of 20 years was not inconsistent with the public interest," the Energy Department said in a statement. Emera under the terms of the consent agreement will export compressed natural gas from a proposed facility at the Port of Palm Beach, Fla. There was no public statement from Emera on the DOE approval or export considerations. The Energy Department said port facilities could be established for exports by the end of the year. While Emera has consent to export gas, the company's application says the bulk of the gas would be used to provide fuel to its affiliate, Grand Bahama Power Co. U.S. energy advocates say more exports of oil or natural gas could provide a source of economic stimulus and increase U.S. leverage overseas. For a liquefied form of natural gas, the U.S. Energy Information Administration found the "effects on overall economic growth were positive but modest."
- Natural Gas Pipeline Exports to Mexico may Underwhelm Expectations.
- Mexican Demand has Grown at 5.6% since 2000.
- Majority of Pipeline Expansions Created to Improve Grid Reliability.
Recently, we have had an uptick in questions about our view on US natural gas exports to Mexico driven by new export pipeline announcements. Pipeline development from the US to Mexico has seen recent new capacity with an additional 6 Bcf/d permitted or planned projects through 2020. These announcements, combined with existing and recently completed projects, would give the US market the ability to export nearly 12 Bcf/d of supply to Mexico compared to just 2.0 Bcf/d of flows to Mexico in 2014. After recently speaking at several conferences, we've had a chance to review a plethora of export forecasts with the most bullish forecasts calling for exports in excess of 7.0 Bcf/d by 2020. While exports to Mexico play an important role in our forward view of the market in terms of tightening the supply and demand balance for the US, 5 Bcf/d of incremental Mexico exports by 2020 would require exceptional things to happen south of the border. First, the Mexican gas demand market in 2014 was, on average, a 8.3 Bcf/d market in total met by 5.6 Bcf/d of domestic production, 0.9 Bcf/d of LNG, and 2.0 Bcf/d of imports from the US (totals do not match due to independent rounding). Another 5 Bcf/d of US exports by 2020 would imply huge declines in Mexican production or massive growth in Mexican demand and complete replacement of LNG. Granted, a $45 WTI price may have some impact on Mexican gas production, but if we look solely at the demand side, demand would need to exceed 12.6 Bcf/d by 2020 and 100% of LNG would need to be displaced back on the water at a time when global LNG markets are already awash with gas. This jump in demand would represent a 52% increase in Mexican demand by 2020, or 7% annual growth rate, and if LNG cannot be displaced, demand would need to grow by nearly 9% per year. Is there historical precedent for this to occur?
California’s gasoline imports increase 10-fold after major refinery outage - (EIA): Over a five-month period following an explosion at a California oil refinery in February 2015, imports of gasoline into California increased to more than 10 times their typical level, drawing from sources that include India, the United Kingdom, and Russia. Imported gasoline has been arriving from all over the world (see graph above) at rates of 28,000–68,000 barrels per day (b/d) for March through July (the latest data available). These levels compare with an average of 5,000 b/d in 2013-14. California gasoline markets continue to adjust to the February 18 explosion and fire at the ExxonMobil refinery in Torrance, California, located southwest of Los Angeles. The ExxonMobil refinery is the third-largest refinery in Southern California. The refinery unit affected by the explosion, the fluid catalytic cracker (FCC), is essential to making gasoline. Torrance's FCC represents 22% of the region's total FCC capacity, making it a key source of gasoline and distillate fuels that meet California's very stringent fuel specifications. On September 30, ExxonMobil announced the sale of the refinery to PBF Energy, which will be PBF Energy's first refinery on the West Coast once the sale is complete. Because of its unique product specifications and long distance from international gasoline markets, California specifically, and the West Coast in general, does not typically import much gasoline. As a result, the sudden loss of supply from the Torrance refinery resulted in immediate supply shortfalls and higher wholesale and retail prices. The higher wholesale prices covered the costs of importing more gasoline from distant markets into California to make up for the supply shortfalls.
Halliburton cuts more jobs as fracking hit worst in oil downturn — Halliburton cut another 2,000 jobs in the past month as the worst oil market slump in decades saps demand for work at the world’s largest provider of fracking services. The Houston-based company said the first quarter of next year may represent the lowest point for its North American profit margin as customers start fresh with new spending budgets for 2016 and tap Halliburton’s pressure-pumping expertise to start new wells. The comments came after the company reported a third-quarter loss of $54 million. “The pumping business in North American is clearly the most stressed segment of the market today, but it’s also the market we know the best,” President Jeff Miller told analysts and investors Monday on a conference call. “This is the segment that we expect to rebound the most sharply.” Oil has swung between a bear and a bull market in North America this year as the drilling rig count slid. Explorers have cut more than $100 billion from global spending plans for the year after crude prices fell by more than half since June 2014. Halliburton had a loss of 6 cents a share in the third quarter compared with net income of $1.2 billion, or $1.41, a year earlier, according to a statement Monday. Excluding certain items, the per-share result was 4 cents more than the 27-cent average of 34 analysts’ estimates compiled by Bloomberg. Sales dropped 36 percent to $5.6 billion.The company has now cut its workforce by 18,000, or about 21 percent, since its peak last year, Emily Mir, a spokeswoman, said Monday in an e-mail.
Weatherford Plans 3,000 Additional Job Cuts - Weatherford International plc plans on cutting an additional 3,000 jobs, the company revealed Wednesday. The oilfield services provider successfully completed its previously announced headcount reduction of 11,000, according to its 3Q report. Weatherford stated it has now increased its workforce reduction target to 14,000, “with an increased focus on support positions to be completed by year end.” In addition to the job cuts, Weatherford has also closed five of its seven planned manufacturing and service facilities. The company said it will close one additional office by the end of the year and the remaining closure will occur in 2016. Weatherford has closed more than 70 operating facilities in North America through Sept. 30, with plans to close 90 by the end of 2015. Weatherford believes these efforts will “mitigate the effects of the downturn,” but noted that a challenging market may continue and that the company plans to further reduce its cost structure to reflect the current environment. The company stated cost-cutting strategies in 2014 and 2015 will have generated savings of $2 billion by the end of the year. “Market conditions will experience further near-term activity reductions in the U.S., Latin America and Sub-Sahara Africa,”
EQT Corporation Reports Loss in Q3; Revenues Beat Estimates - Integrated energy player, EQT Corporation’s reported third-quarter 2015 adjusted loss per share of 33 cents. The Zacks Consensus Estimate was of a loss of 22 cents. The reported figure also plummeted from earnings of 51 cents recorded in the year-earlier quarter.Net operating revenue in the quarter came in at $577 million, which beat the Zacks Consensus Estimate of $437.0 million. The top line, however, decreased from $578.7 million in the year-ago quarter. EQT Production's third-quarter operating revenues were $188.5 million, 43% lower than the year-ago quarter. Nonetheless, the company clocked sales volume of 156.3 billion cubic feet equivalent (Bcfe) in the third quarter, 26.7% higher than the year-ago period. Adjusted operating loss for the third quarter was $72 million, which compared unfavourably with adjusted operating income of $107.9 million in the year-ago period.
Baker Hughes expects less drilling in 4th qtr - Oilfield services provider Baker Hughes Inc said it expects less drilling in the current quarter due to reduced customer spending but said it was seeing “stronger interest” in services that help increase oil and gas production. Baker Hughes, which is being acquired by larger rival Halliburton Inc, reported a net loss attributable to the company of $159 million, or 36 cents per share, in the third quarter ended Sept. 30, compared with a profit of $375 million, or 86 cents per share, a year earlier. Revenue fell 39.4 percent to $3.79 billion.
OPEC has stalled the shale revolution -- The resilience of U.S. shale producers has surpassed all expectations as they have wrung extra efficiencies out of their operations and pulled rigs back to the most prolific sections of existing plays. The shale sector’s ability to cut costs and sustain their output in the face of plunging prices has been extraordinary and testament to the entrepreneurial spirit and technical skill of the independent producers. Shale producers are justifiably proud of their ability to survive the perfect storm that has hit their industry since the middle of 2014. But it should not disguise the fact that the collapse in oil prices has paused the shale revolution, with the sector’s focus shifting from growth to survival. The revolution cannot be reversed. Techniques once mastered will not be unlearned. And adversity has forced shale drillers to become more efficient. If and when prices rise, shale output is very likely to start increasing again, and from an even lower cost base. For the time being, however, lower prices have stunted shale’s growth in the United States and slowed its spread around the rest of the world.
U.S. oil output slide looms as shale firms hit productivity wall – Stagnating rig productivity shows U.S. shale oil producers are running out of tricks to pump more with less in the face of crashing prices and points to a slide in output that should help rebalance global markets. Over the 16 months of the crude price rout, production from new wells drilled by each rig has risen about 30 percent as companies refined their techniques, idled slower rigs and shifted crews and high-speed rigs to “sweet spots” with the most oil. Such “high-grading” helped shale oil firms push U.S. output to the loftiest levels in decades even as oil tumbled by half to less than $50 a barrel and firms slashed rig fleets by 60 percent. But recent government and private data show output per rig is now flatlining as the industry reaches the limits of what existing tools, technology and strategies can accomplish. “We believe that the majority of the uplift from high-grading is beginning to wane,” said Ted Harper, fund manager and senior research analyst at Frost Investment Advisors in Houston. “As a result, we expect North American production volumes to post accelerating declines through year-end.”
US shale producers have $150bn in debt – Rosneft CEO -- The breakeven price for difficult to extract shale oil is $85-$98 a barrel, according to Rosneft CEO Igor Sechin, which is putting US producers deep in debt. "The total debt of only 25 companies engaged in the extraction of shale oil is about $150 billion," said Sechin speaking at the Eurasian Forum in Verona, Italy, TASS reports. According Sechin it’s the United States not to OPEC that controls the global oil market. "OPEC is no longer the regulator, its meeting on October 21 [with non-OPEC members] did not bring any decisions," according to Sechin.Last week, the head of Russia's biggest oil company said Riyadh has been actively dumping and cutting prices to secure its share of the market and gain new ones. Some European countries are now buying Saudi oil for the first time. Speaking about trends in the global energy market, Sechin said that Europe's share of world energy consumption will decrease from 19 percent in 2015 to 16 percent in 2030. Russian Energy Minister Aleksandr Novak said shale oil is losing its influence on the world market, and there has been a steady decline in its production in the recent months. According to the minister, dropping prices cause investment outflow. Subsequently, the number of drilling rigs in the United States is also reducing: a year before there were 1600 rigs with about 600 now.
U.S. Shale Drillers Running Out Of Options, Fast - Much has been made about the impressive gains in efficiency and productivity in the shale patch, as new drilling techniques squeeze ever more oil and gas out of new wells. But the limits to such an approach are becoming increasingly visible. The U.S. shale revolution is running out of steam. The collapse of oil prices has forced drillers to become more efficient, adding more wells per well pad, drilling longer laterals, adding more sand per frac job, etc. That allowed companies to continue to post gains in output despite using fewer and fewer rigs. However, the efficiency gains may have been illusory, or at best, incremental progress instead of revolutionary change. Rather than huge innovations in drilling performance, companies were likely just trimming down on staff, squeezing suppliers, and drilling in the best spots – perhaps all sensible stuff for companies dealing with shrinking revenues, but nothing to suggest that drilling has leaped to a new level of efficiency. Reuters outlined this phenomenon in detail in a great October 21 article. For evidence that the productivity gains have run their course, take a look at the latest Drilling Productivity Report from the EIA. Production gains from new rigs – which have increased steadily over the past three years – have run into a wall in the major U.S. shale basins. Drillers are starting to run out of ways to squeeze more oil out of wells from their rigs. Take a look at the below charts, which show drilling productivity flat lining in the Bakken, the Eagle Ford, and the Permian. For oil companies to add new production at this point it would require hiring new workers and new rigs and simply expanding the drilling footprint. That is something that few companies are doing because of low prices. In fact, most exploration companies are doing the opposite – rig counts continue to decline and the layoffs continue to mount.
OPEC Is About to Crush the U.S. Oil Boom -- After a year suffering the economic consequences of the oil price slump, OPEC is finally on the cusp of choking off growth in U.S. crude output. The nation’s production is almost back down to the level pumped in November 2014, when the Organization of Petroleum Exporting Countries switched its strategy to focus on battering competitors and reclaiming market share. As the U.S. wilts, demand for OPEC’s crude will grow in 2015, ending two years of retreat, the International Energy Agency estimates. While cratering prices and historic cutbacks in drilling have taken their toll on the U.S., OPEC members have also paid a heavy price. A year of plunging government revenues, growing budget deficits and slumping currencies has left several members grappling with severe economic problems. The fact that the U.S. oil boom kept going for about six months after the group’s November decision also means OPEC has so far succeeded only in bringing the market back to where it started. “It’s taken a hell of a long time and it will continue to take a long time -- U.S. oil production has been more resilient than people thought,” . “The bottom line is the re-balancing has begun.”
Who on Wall Street is Now Eating the Oil & Gas Losses? - Banks, when reporting earnings, are saying a few choice things about their oil-and-gas loans, which boil down to this: it’s bloody out there in the oil patch, but we made our money and rolled off the risks to others who’re now eating most of the losses. On Monday, it was Zions Bancorp. Its oil-and-gas loans deteriorated further, it reported. There’d be even more credit downgrades. By the end of September, 15.7% of them were considered “classified loans,” with clear signs of stress, up from 11.3% in the prior quarter. These classified energy loans pushed the total classified loans to $1.32 billion. Wells Fargo announced that it set aside more cash to absorb defaults from the “deterioration in the energy sector.” Bank of America figured it would have to set aside an additional 15% of its energy portfolio, which makes up only a small portion of its total loan book. JPMorgan added $160 million – a minuscule amount for a giant bank – to its loan-loss reserves last quarter, based on the now standard expectation that “oil prices will remain low for longer.” Banks have been sloughing off the risk: They lent money to scrappy junk-rated companies that powered the shale revolution. These loans were backed by oil and gas reserves. Once a borrower reached the limit of the revolving line of credit, the bank pushed the company to issue bonds to pay off the line of credit. The company could then draw again on its line of credit. When it reached the limit, it would issue more bonds and pay off its line of credit…. They made money from interest income and fees, including underwriting fees for the bond offerings. It performed miracles for years. It funded the permanently cash-flow negative shale revolution. It loaded up oil-and-gas companies with debt. While bank loans were secured, many of the bonds were unsecured. Thus, banks elegantly rolled off the risks to bondholders, and made money doing so. And when it all blew up, the shrapnel slashed bondholders to the bone. Banks are only getting scratched.
Obama Administration Cancels Oil Drilling Lease Sales In Arctic Ocean -- The Interior Department has scrapped two lease sales for oil drilling in the Arctic Ocean, a move that comes as a win for environmentalists who have fought to prevent oil development in the remote region. The lease sales had been scheduled tentatively for 2016 and 2017 in the Beaufort and Chukchi Seas. The Interior Department’s Friday announcement comes a few weeks after Royal Dutch Shell announced that it would be stopping its oil exploration in the Arctic “for the foreseeable future,” due to a “challenging and unpredictable” regulatory environment and insufficient oil and gas discoveries. The Interior Department referenced Shell’s decision in its reasoning behind canceling the two lease sales. “In light of Shell’s announcement, the amount of acreage already under lease and current market conditions, it does not make sense to prepare for lease sales in the Arctic in the next year and a half,” Secretary of the Interior Sally Jewell said in a statement. Also on Friday, the Interior Department rejected attempts by oil companies Shell and Statoil to get more time to explore for oil under their existing leases in the Arctic, saying that neither company properly illustrated how it would take advantage of the extra exploration time.
Interior Department curbs future Arctic offshore drilling (AP) — The Interior Department announced Friday it is canceling future lease sales and will not extend current leases in Arctic waters off Alaska’s northern coast, a decision that significantly reduces the chances for future Arctic offshore drilling. The news follows a Sept. 28 announcement by Royal Dutch Shell that it would cease exploration in the Chukchi and Beaufort seas after spending upward of $7 billion on Arctic exploration. The company cited disappointing results from a well drilled in the Chukchi and the unpredictable federal regulatory environment. Interior Secretary Sally Jewell said the federal government is canceling federal petroleum lease sales in U.S. Arctic waters that were scheduled for 2016 and 2017. “In light of Shell’s announcement, the amount of acreage already under lease and current market conditions, it does not make sense to prepare for lease sales in the Arctic in the next year and a half,” she said.
Is Russia The King Of Arctic Oil By Default? - To be king implies preeminence, or lasting rule. In the Arctic, such oil and gas supremacy is still little more than a dream. That dream remains alive in Russia however, and the nation –through an unmatched stubbornness and a decidedly timid field of competitors – is making a strong bid for the throne. A cursory search of ‘Arctic’ and ‘oil’ elicits little in the way of positivity. Certainly, Shell’s failure in the Chukchi Sea is notable. Combined with the Obama administration’s waffling distaste for future offshore Arctic development, it marks what should be a period of relative dormancy in U.S. waters. Still, it’s not indicative of the sector globally, which is seeing progress, albeit at a glacial pace. The shining example of such development to date is Gazprom Neft’s Prirazlomnaya platform. Located nearly 40 miles offshore in the Pechora Sea, the rig is the world’s first Arctic oil project involving a stationary platform – though the general concept itself has been employed before (see: BP’s Northstar Island). Gazprom Neft began production at the Prirazlomnoye field in 2013 and reached commercial figures last year, with a total output of roughly 5,000 barrels per day (bpd). With production well number two (of 19) now online, output should reach somewhere between 10,000-15,000 bpd by year’s end. To be fair, several important tests lie ahead for Prirazlomnaya and Russia’s Arctic shelf development in general. Chief among them is rapidly addressing its import dependence – one of the primary targets of U.S. and EU sanctions. No more than 10 percent of the equipment applied at the Prirazlomnaya installation is believed to be Russian-made, and this level of disparity is commonplace at both Russia’s onshore and offshore fields. Attention, domestic and international, has been given to the courting of China, India, and other backers – both financial and technological – but all eyes should be on the Russian solution, which will seek to demonstrate its efficacy by 2020.
Enbridge Montreal Line Reversal Offers Complex Journey For Bakken Crude -- After a year’s delay due to permit issues, Enbridge now expects the expanded and reversed 300 Mb/d Line 9B pipeline to Montreal will come online next month (November 2015). The pipeline is an important cog in Enbridge’s Eastern Access and Light Oil Market Access expansion projects and will supply mostly light crude to two refineries in Quebec. As we explain today, the payload will travel a winding route to get to Montreal. In previous blogs (seeTake A Pipe On The East Side) we reviewed the huge Enbridge Mainline system (made up of multiple pipelines) which delivers up to 2.5 MMb/d of hydrocarbon liquids (mainly heavy crude from Western Canada) to the US border in Minnesota where the system name changes to Lakehead (see the map in Figure #1). At Clearbrook, MN Enbridge Lakehead receives incoming light sweet Bakken crude from the Enbridge North Dakota system (purple arrows on the map). Once it reaches the Great Lakes at Superior, WI, the Lakehead system winds its way around Lake Michigan in two directions - flowing light crude north on Line 5 direct to Sarnia, Ontario while the majority of its payload travels south along two routes – one through Chicago that mostly feeds refineries in the Windy City and the other further west to Flanagan, IL. The Flanagan terminal in Pontiac, IL is the central pivot point in the Enbridge US system with crude flowing from there either northeast through Illinois to Griffith, IN and then back into Canada at Sarnia or southwest to Cushing, OK (in the future crude will also flow south from Flanagan to Patoka, IL). Crude that will end up in Montreal once Line 9B is reversed all has to pass through Sarnia – either southeast from Superior on Line 5 or northeast from Flanagan to Griffith and then east on Line 6B.
TransCanada to cut more management jobs -– Pipeline company TransCanada Corp has announced new job cuts, eliminating about 20 percent of its directors as slumping oil prices continue to take their toll on its customers, a spokesman said on Wednesday. The company, which is proposing the Keystone XL and Energy East pipeline projects, said the latest cuts affect about 30 directors. This follows an announcement in September to eliminate 20 percent of its senior management positions at the vice-president level and above. TransCanada laid off 185 people from its major projects division in June, joining several other Calgary-based energy companies, including Suncor Energy Inc and Penn West Petroleum Ltd, that had trimmed staffing levels in order to survive the oil price slump. Delays in a decision on whether to approve the Keystone XL project and other proposals have also caused uncertainty for TransCanada and the energy industry. TransCanada spokesman James Millar said the company was undergoing “significant” restructuring to become more nimble in its natural gas pipelines, liquids pipelines and energy units. He said the restructuring would allow TransCanada to pursue about C$46 billion in commercially secured projects underway for completion by the end of the decade.
Keystone XL opponents continue push to overturn pipeline law — Nebraska landowners who oppose the Keystone XL pipeline are still trying to overturn a state law that allowed the governor to approve the project route, even though pipeline developer TransCanada is no longer relying on it. Pipeline opponents said Monday they’re concerned that companies could use the law in the future to avoid a five-member state commission that regulates pipelines, opting instead for a governor’s review and blessing. Their comments came after a court hearing in O’Neill over a lawsuit filed by landowners, seeking to dismantle the law. A judge could rule on the case as early as next month. Attorneys for TransCanada are trying to get the lawsuit dismissed after the company announced that it was withdrawing its eminent domain claims against landowners and reapplying to the regulatory Nebraska Public Service Commission. “Our focus is entirely on moving forward with the (commission) process and building the Keystone XL route in Nebraska in the most timely way possible,” TransCanada spokesman Mark Cooper said in an email after the hearing. Former Gov. Dave Heineman approved a Nebraska route for the Keystone XL in 2013 after a review by the state Department of Environmental Quality. But the 2012 law that gave him the power to do so has been mired in court, preventing the project from moving forward and contributing to delays from Washington. The pipeline plan also requires presidential as well as state approval because it crosses an international border.
Oil prices and politics blur future of Keystone XL pipeline Remember the Keystone XL pipeline? It began as a proposed piece of energy infrastructure — a pipeline shortcut that would transport more than 800,000 barrels of crude oil a day from the tar sands of Alberta, Canada, across the U.S. border, through the upper Great Plains and south to refineries in Texas. But Keystone XL quickly became a symbol, a political litmus test and a line in the sand. Opponents said rejecting it would also reject the fossil-fueled past and present in favor of a renewable-energy future. Supporters said it would generate thousands of jobs and help provide national energy security at a time of international turmoil. The truth was more complicated, but neither side gave ground. The Obama administration, which has ultimate authority because the pipeline would cross an international boundary, was expected to approve or disapprove it at any moment. Of course, that was long ago — back when oil prices were soaring, Hillary Rodham Clinton was secretary of State, the company that wants to build the pipeline had not yet realized the strength of the opposition from some Nebraska landowners, and President Obama was worrying more about reelection than reaching a global climate agreement during upcoming talks in Paris. Years later, Obama still has not made a decision on Keystone XL. He could do so any day — or he could leave the issue to whoever wins the presidency in 2016.
Keystone & TPP under question as Canada elects Liberal PM -- The Liberal party’s victory in the Canadian general election is raising questions about the new government’s commitment to the Trans-Pacific Partnership and the Keystone XL pipeline, projects of interest to the US championed by the outgoing cabinet. Monday’s poll saw the Liberals, led by Justin Trudeau, win 184 seats in the Canadian parliament – more than enough to form a majority government. Stephen Harper’s Conservatives came in second with just 99 seats. The outgoing PM was enthusiastic about the Trans-Pacific Partnership (TPP), a recently negotiated free-trade pact between 12 Pacific Rim nations, excluding China. The White House has repeatedly presented the TPP as a way to prevent China from “writing the rules of the global economy,” in the words of President Barack Obama. The Liberals’ leader has criticized the secrecy surrounding the pact and said he would have to read the text of the agreement before making up his mind. His party, however, endorsed the TPP on principle when it was announced October 5, saying it “strongly supports free trade.”
Edmonton-area fracking boom brings new life, new issues to old oilfields - Deep horizontal “fracking” wells could be a “game changer” for Alberta producers as they attempt to reverse the decline in production from old oilfields, according to an expert with the Alberta Energy Regulator. Bob Willard, AER expert on fracking, says the new types of wells go much deeper and use hydraulic fracturing — fluid injected under pressure — along horizontal wells to crack the rock and release the so-called “tight oil,” which can’t be reached by old vertical wells and pumpjacks. So far, there are just a couple of dozen wells, but they are breathing new life into the oilfield near Devon, not far from the site of the province’s first big gusher in 1947. What’s new in Devon area wells are the lengthy horizontal channels — up to 1,500 metres long — that use “multistage fracturing.” That means the rock is cracked at different intervals along the well bore. This allows the “tight oil” to flow to the surface.As early as 2011, the federal government predicted a big impact for fracking in opening new supplies: “Tight oil has the potential to add significant light crude oil production that had not been anticipated just five years ago,” reads a federal report. “And that’s exactly what’s happening,” says Willard. Fracking has grown so quickly there’s now more oil coming from horizontal wells than old-style vertical wells topped with the pumpjacks that dot the rural landscape southwest of Edmonton.
Death by Fracking - Chris Hedges -- The maniacal drive by the human species to extinguish itself includes a variety of lethal pursuits. One of the most efficient is fracking. One day, courtesy of corporations such as Halliburton, BP and ExxonMobil, a gallon of water will cost more than a gallon of gasoline. Fracking, which involves putting chemicals into potable water and then injecting millions of gallons of the solution into the earth at high pressure to extract oil and gas, has become one of the primary engines, along with the animal agriculture industry, for accelerating global warming and climate change. The Wall Street bankers and hedge fund managers who are profiting from this cycle of destruction will -- once clean water is scarce and crop yields decline, once temperatures soar and cities disappear under the sea, once droughts and famines ripple across the globe, once mass migrations begin -- surely profit from the next round of destruction. Collective suicide is a good business, at least until it is complete. It is a pity most of us will not be around to see the power elite go down. The activists are waging a war against a corporate state that is deaf and blind to the rights of its citizens and the imperative to protect the ecosystem. The corporate state, largely to pacify citizens being frog-marched to their own execution, passes environmental laws and regulations that, at best, slow the ongoing environmental destruction. Corporations, which routinely ignore even these tepid restrictions, largely write the laws and legislation designed to regulate their activity. They rewrite them or overturn them as the focus of their exploitation changes. They turn public hearings on local environmental issues into choreographed charades or shut them down if activists succeed in muscling their way into the room to demand a voice. They dominate the national message through a pliable and bankrupt corporate media and slick public relations. Elected officials are little more than corporate employees, dependent on industry money to stay in office and, when they retire from "public service," salivating for jobs in the industry. Environmental reform has become a joke on the public. And the Big Green environmental groups are complicit because they rely on donors, at times from the fossil fuel and animal agriculture industries; they are silent about the reality of corporate power, largely ineffectual, and part of the fiction of the democratic process.
Women 'don't understand' fracking, leading scientist claims - Telegraph: Women are opposed to fracking because they "don't understand" and follow their gut instinct rather than the facts, according to a leading female scientist. Averil Macdonald, the chairwoman of UK Onshore Oil and Gas, said that many women are concerned about fracking, yet often lack a scientific understand of the topic. "Not only do [women] show more of a concern about fracking, they also know that they don't know and they don't understand," Prof Macdonald, who is emeritus professor of science engagement at the University of Reading, told The Times."They are concerned because they don't want to be taking [something] on trust. And that's actually entirely reasonable. "Frequently the women haven't had very much in the way of a science education because they may well have dropped science at 16. That is just a fact." Prof Macdonald is leading a campaign to persuade women that the process is safe and will benefit Britain’s economy as well as help to meet climate change targets.
Women are too emotional to understand fracking, says female scientist - Many women who are opposed to fracking are too emotional and just 'don't understand' it, one of Britain's leading female scientists has said. Averil Macdonald, who is the new chair of UK Onshore Oil and Gas, believes women against the process, which includes Vivien Westwood, just go with their gut instincts and ignore the science.More men will consider the facts but women who make up their minds 'will not be persuaded', the academic said. A recent study by the University of Nottingham has revealed that only 31.5 per cent of women believe fracking should be allowed in the UK, compared to 58 per cent of men.Professor Macdonald, who was handed an OBE this year for services to women in science, says a major problem is too few women study it after the age of 16 so lack the knowledge to 'trust' that fracking would be good for Britain.She told The Times: 'Frequently the women haven't had very much in the way of a science education because they may well have dropped science at 16. That is just a fact.'Not only do [they] show more of a concern about fracking, they also know that they don't know and they don't understand.
Women can't understand scientific facts. Are you fracking kidding me? - Ladies, put down your needlework and pay attention. I’m about to deliver some facts and I know it’s going to be very hard for you all to wrap your pretty little heads around them. I’m talking about fracking. No, that’s not the sounds your manicured fingertips make when the nail polish starts to fracture. It’s actually a method of drilling into rock and blasting it with high pressure jets of water and chemicals to obtain shale gas. Still with me, sweethearts? Until now, fracking has only been considered controversial thanks to environmental concerns around the potential for increased global warming, pollution and earthquakes. Now, it’s become a battle of the sexes. Recent research has shown that men are nearly twice as likely to support fracking. The survey by the University of Nottingham also revealed that women are less likely than men to know which fossil fuel is produced by fracking. Shale gas was correctly identified by 85 per cent of men but only 65 per cent of women. And now Averil Macdonald, 57, chairwoman of UK Onshore Oil and Gas, has helpfully explained that women are more likely to be anti-fracking because they ‘don’t understand’ it. Macdonald told the Times that, while women are concerned about the process, they lack the ability to understand and instead rely on ‘gut reaction’ in their opposition to it. "Not only do [women] show more of a concern about fracking, they also know that they don't know and they don't understand,” she said. She went on to say that merely showing women the facts wasn’t enough to change their minds, as they fail to grasp them and are more likely to form opinions based on ‘feel’.
Leading banks and financial institutions will meet to discuss the future of Project Financing in the Oil and Gas Sector --- Project Financing in Oil and Gas 2015 will give the latest updates in the Project Financing markets. Different scenarios regarding the oil and gas commodity prices and the resulting effect on Project Financing will be discussed, as well as understanding the complexities around financing your own oil and gas project. A wide range of complex topics will be explored. From understanding how different oil and gas price scenarios may affect project financing to appreciating the risks relating to each stream and how they can be mitigated. Leading experts will also cover how political risk can impact project financing in the Oil and Gas industry. This exclusive content will be delivered through 2 Opening Addresses, 13 Hand-Picked Case Study Based Presentations and an Exclusive Interactive "An Oil & Gas Project Finance Workshop.” For the full agenda please visit www.projectfinance-oilgas.com/EIN Speaker line-up 2015 includes top decision makers from: Deutsche Bank, Société Générale, Scotiabank, Niger Omega Group, UK Export Credit Agency, Macquarie Bank, Commonwealth Bank of Australia, Sumitomo Mitsui Banking Corporation Europe, Standard Chartered Bank, Rand Merchant Bank, Banca Imi S.p.A and many more.
The tangle of loose lending to tight oil - Gillian Tett, FT - A few weeks ago, a big hedge fund manager in New York asked a major Wall Street bank what was happening to energy sector loans. The answer was sobering. “They said that the covenants on 72 out of the 74 loans to the oil and gas sector had recently been modified,” this investor reports. Or to put this into plain English, this bank now realises that most of its energy sector borrowers are struggling — so it is quietly relaxing the borrowing conditions, to avoid the embarrassment of seeing loans it has made go into default. It is impossible to tell precisely how typical this is; bankers are pathologically secretive about loan modifications. But judging from the tone of US quarterly bank earning calls this week, I suspect the pattern is widespread — and points to an issue that investors need to watch closely this coming winter. Over the past year, the oil price has slid by more than 40 per cent, to trade below $50 a barrel. At that level many energy companies are almost unviable — particularly those small and midsized US explorers and producers that have ridden the shale boom. Yet this slump has caused remarkably few ripples in the wider financial world. True, the price of most energy sector bonds has tumbled, with many junk bonds now trading below par. But there have been few outright bond defaults and banks themselves have not been calling loans in; instead, it seems most have been “modifying” those covenants — and praying for an oil price rebound. But this could soon change. One reason is that bankers are starting to accept that oil prices below $50 a barrel might be the new norm. Earlier this month, for example, the International Energy Agency warned that the current pattern of excess supply and weak demand will continue throughout 2016. And banks such as Goldman Sachs are now telling clients to brace for a world where prices could even touch $20 a barrel. A second factor is the stance of the authorities. Until quite recently, regulators in the US and Europe seemed willing to let banks engage in forbearance. But now they are keen to show they have learnt the right lessons from last decade’s crisis — by getting ahead of the curve and forcing banks to be tough.
Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution (Working Paper - abstract) The combining of horizontal drilling and hydrofracturing unleashed a boom in oil and natural gas production in the US. This technological shift interacts with local geology to create an exogenous shock to county income and employment. We measure the effects of these shocks within the county where production occurs and track their geographic propagation. Every million dollars of oil and gas extracted produces $66,000 in wage income, $61,000 in royalty payments, and 0.78 jobs within the county. Outside the immediate county but within the region, the economic impacts are over three times larger. Within 100 miles of the new production, one million dollars generates $243,000 in wages, $117,000 in royalties, and 2.49 jobs. Thus, over a third of the fracking revenue stays within the regional economy. Our results suggest new oil and gas extraction led to an increase in aggregate US employment of 725,000 and a 0.5 percent decrease in the unemployment rate during the Great Recession.
Cuba says to drill in deep water despite low prices |- Cuba plans to drill exploratory deepwater wells in the Gulf of Mexico by the end of 2016 or beginning of 2017 despite current low oil prices, officials from the state oil monopoly said. Cuba-Petroleo (Cupet) will drill exploratory wells as deep as 7,000 meters (223,000 ft) in waters of up to 3,000 meters in production sharing contracts with Venezuelan state oil company PDVSA and Angola’s Sonangol. “We will initiate a drilling campaign at the end of 2016 or the start of 2017,” Osvaldo Lopez, Cupet’s head of exploration, told Reuters on Wednesday. “The essential goal of the new drilling campaign is at least two deep wells. There could be three. If there is a discovery there certainly will be more than two,” Lopez said on a tour of oil wells with international industry representatives. Experts believe billions of barrels worth of oil lie beneath the waters off Cuba’s northwest coast, but a host of companies that have drilled over the years have come up dry. Exploration has long been impeded by the U.S. trade embargo and is further complicated at times of low oil prices such as the present.
Thailand seen to invest $19 billion on energy in next three to five years - Thailand’s private and public sectors are estimated to spend 690 billion baht ($19.4 billion) over the next three to five years on expanding capacity of petroleum, electricity and renewables to secure energy supplies, a senior official at energy ministry said on Thursday. About 342 billion baht will be used for petroleum development, including expanding natural gas pipelines, building the second receiving terminal of liquefied natural gas (LNG) and others, Praphon Wongtharua, the ministry’s deputy permanent secretary, told an industry seminar. Some 121 billion baht will be spent on the electricity sector, with 102 billion baht for renewable energy and 126 billion baht for energy saving measures, Praphon said. The projection was based on Thailand’s new energy plan, which aimed to boost the proportion of renewables to 20 percent of total fuel mix by 2036 from 8 percent in 2014, he said. Thailand, which uses natural gas for almost 70 percent of its power generation, is under pressure to secure long-term energy supply as its own is expected to run out in six to seven years. About a fifth of supplies are piped from Myanmar but imports from this neighboring country are likely to fall as it is expected to use more of its natural gas resources for its own development. The ministry aims to encourage more exploration and production activities at home in order to reduce the declining rate of domestic resources to 2 percent a year from 11 percent, Prophan said.
Oil down 3 percent; tumbling gasoline adds to China, Iran worries – Crude oil fell 3 percent on Monday as tumbling gasoline prices deepened a selloff sparked by China’s slowing growth and signs that a nuclear deal waiving sanctions on Iranian oil will be implemented this year. A stronger dollar and weaker stock prices on Wall Street added to weight on the petroleum complex, traders said. “The products markets seem to be taking a hit over concerns the refinery maintenance season has peaked, and there could only be inventory builds from here,” said Pete Donovan, broker at New York’s Liquidity Energy. The front-month in Brent , the global crude benchmark, was down $1.55, or 3 percent, at $48.91 a barrel by 10:38 a.m. EDT. U.S. crude was off $1, or 2 percent, at $46.26, in lighter volume trades ahead of Tuesday’s expiry for the November contract as front-month. Gasoline tumbled 5 percent. The refining profit for the fuel, known as the gasoline crack , hit a 9-month low. China’s economy grew at the slowest pace in six years in the third quarter, according to official data released on Monday, making it increasingly likely that Beijing will cut interest rates to spur activity. Data also showed that Chinese oil demand fell slightly in September.
Crude Tumbles As API Reports Another Huge Inventory Build -- For the 4th week in a row, US Crude inventories rose according to API. With a larger than expected 7.1 million barrel build (3.5mm exp.), which follows DOE's reported 7.56 mm build last week, it is clear that stocks are piling up considerably faster than expected. The reaction was an immediate algo slam to the lows of the day... 4th weekly inventory build in a row...The reaction was weakness, slamming WTI to the day's lows.. Charts: Bloomberg
Crude Slammed To $44 Handle After Inventory Surges Most In 7 Months - The DOE just reported an 8.028mm barrel inventory build in crude stocks, even larger than the API reported data. This is the highest weekly build since April 3rd and is dramatically higher than expected. Crude prices are pressing on lower, with the new Dec contract now trading with a $44 handle. To make matters worse, US crude production was unchanged. Biggest inventory build in over 6 months... Sparks more selling in crude… Charts: Bloomberg
Oil slides 2 percent to three-week low on U.S. crude build | Reuters: Oil prices fell about 2 percent to three-week lows on Wednesday as the U.S. government reported a bigger build than expected in crude stockpiles, although significant drawdowns in gasoline and distillates prevented a steeper slide in crude futures. U.S. crude oil inventories rose 8 million barrels last week, the government-run Energy Information Administration (EIA) said. The build was more than double the 3.9 million barrels forecast by analysts in a Reuters poll. It was also above the 7.1 million build reported by industry group American Petroleum Institute. Oil prices extended losses briefly on the build, but came off their lows on a drop of 1.5 million barrels in gasoline stocks also reported by the EIA. Stocks of distillates, which include diesel, fell by 2.6 million barrels. The drop in gasoline and distillate stocks came despite a pickup in refinery runs, which should have translated to more products. The Reuters poll had forecast an inventory decline of 900,000 barrels for gasoline and 1.3 million for distillates.
Residual fuel oil stocks trending higher; at highest seasonal level since 2006.
Propane stocks appear to be peaking but still at record; + 20 million bbls above prior-eyar level.
US distillate stocks draw hard (-2.6 million bbls) eroding surplus over 2014 9(+19.3 million bbls) and 10-year average (+14.9 million bbls).
US gasoline stocks only slightly higher than last year once adjusted for increased consumption.
US gasoline stocks fell -1.5 million bbls; second consecutive decline, as refineries work down excess inventories.
US gasoline consumption averaged 9.1 million bopd over last four weeks, which is +272,000 bopd above prior year level. Saudi got us hooked on gasoline again.
US refinery throughput edged up +78,000 bopd as refiners reach the mid-point of maintenance season.
US crude oil imports are running high during maintenance season with surplus going into refinery/merchant storage.
Rise in crude oil stock was driving by continued strong flow of import s (7.5 milion bopd) despite refinery maintenance.
US commercial crude oil stocks jumped by another 8.0 million bopd last week, taking foru-week gain to +22.6 million bbls. The refiners like that inexpensive foreign oil.
Oil Prices Still Not Low Enough To Fix The Markets - Arthur Berman - Current oil prices are simply not low enough to stop over-production. Unless external investment capital is curtailed and producers learn to live within cash flow, a production surplus and low oil prices will persist for years. GDP (gross domestic product) correlates empirically with oil prices (Figure 1). GDP increases when oil prices are low or falling; GDP is flat when oil prices are high or rising (GDP and oil prices in the figure are in August 2015 dollars). This is because global economic output is highly sensitive to the cost and availability of energy resources (it is also sensitive to debt). Liquid fuels–gasoline, diesel and jet fuel–power most worldwide transport of materials, and electricity from coal and natural gas powers most manufacturing. When energy prices are high, profit margins are lower and economic output and growth slows, and vice versa. Because oil prices were high in the 4 years before September 2014 and the subsequent oil-price collapse, GDP was flat and economic growth was slow. That, along with high government, corporate and household debt loads, is the main reason why the post-2008 recession has been so persistent and difficult to correct through monetary policy. Brent oil prices exceeded $90 per barrel (August 2015 dollars) for 46 months from November 2010 until September 2014 (Figure 2). This was the longest period of high oil prices in history. Prolonged high prices made tight oil, ultra-deep water oil and oil-sand development feasible. Over-investment and subsequent over-production of expensive oil contributed to the global liquids surplus that caused oil prices to collapse beginning in September 2014. Oil prices were high during the 4 years before prices collapsed because world liquids production deficits dominated the oil markets. This was due mostly to ongoing politically-driven supply interruptions in Libya, Iran, and Sudan beginning in 2011. The global production surplus has persisted for 21 months and supply is still 1.2 million barrels per day more than consumption. This is the main cause of low oil prices that began in mid-2014.
Goldilocks and the three prices of oil -- Like a corporate version of Goldilocks, the oil industry has been wandering into the world marketplace in recent years often finding an oil price that is either too high such as in 2008 and therefore puts the brakes on economic growth undermining demand and ultimately crashing the price as it did in 2009. Or it finds the price too low as it is today therefore making it impossible to earn profits necessary for exploiting the high-cost oil that remains to be extracted from the Earth's crust. Oil that hovered around $100 per barrel from 2011 through much of 2014 seemed to be just right. But those prices are now long gone. Violent swings in the price of oil in the last decade have made it difficult for the industry to plan long term to produce consistent supplies at moderate prices. This has important implications for future supplies which I will discuss later. The great political power of the oil industry has led many to conclude erroneously that the industry must also somehow control the price of oil. If the industry has such power, it is doing a really lousy job of using it. It is true that in times of robust demand, OPEC can maintain high prices by limiting oil production in member countries. But when demand softens, OPEC rarely exhibits the necessary discipline as a group to cut production. Typically, Saudi Arabia shoulders most of the burden of reduced production under such circumstances. Which is why it was so shocking when, during this most recent swoon in the oil price, the desert kingdom responded with an emphatic "no." No, Saudi Arabia will not curtail its production. And, since all the other OPEC members are unable to challenge Saudi Arabia's power--which consists of the ability to add production to counter cuts by others--the price of oil has stayed low.
The Real Price of Oil - IEEE Spectrum: Average prices of WTI rose roughly 52-fold between 1970 and 2014, in current dollars—an enormous jump. How could the economies of oil-importing countries have kept on growing? The answer is simple: That 52-fold multiple is based on a doubly misleading metric. Though prices did soar in the 1970s, their fluctuations have been relatively restrained since then. The first adjustment we must make—for inflation—is trivially obvious, because currency values do not remain constant. Low inflation rates of recent years (and actual deflation in some countries) have resulted in only minor annual devaluations (or even in marginally higher value) of currencies, while back in the 1970s and 1980s, inflation rates were in the double digits. In 1970, a dollar was worth about $6 in today’s money; in 1980, it was worth $2.87 and in 2000, $1.37. Expressed in today’s dollars, average oil prices rose more than eightfold, from $10.90 in 1970 to $92.10 in 2014, virtually all of which took place between 1974 and 1980. In 1980, oil averaged $108.20 per barrel in 2015 monies, and its value has fluctuated ever since. The next adjustment is more subtle and thus often neglected. We must account for crude oil’s declining importance in all Western economies. This measure, usually called the oil intensity of the economy, traces oil used per unit of gross domestic product, and it is calculated by dividing the total national oil consumption by GDP expressed in constant monies. Before the first oil price rise of 1973–74, oil intensity had been diminishing rather slowly; afterward, its decline accelerated.
US rig count steady this week at 787 -- Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. this week remained unchanged at 787. Houston’s Baker Hughes said Friday that 594 rigs were seeking oil and 193 explored for natural gas. A year ago, with oil prices about double the prices now, 1,595 rigs were active. Among major oil- and gas-producing states, Louisiana gained five rigs, Ohio was up two and Alaska and Oklahoma each rose by one. Texas declined by five rigs and Kansas and Pennsylvania were down by two each. New Mexico and West Virginia dropped one apiece. Arkansas, California, Colorado, North Dakota, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.
U.S. oil drillers cut rigs for 8th week on low crude prices - Baker Hughes - U.S. energy firms cut oil rigs for an eighth week in a row this week, the longest losing streak since June, data showed on Friday, a sign low prices continued to keep drillers away from the well pad. Drillers removed one oil rig in the week ended Oct. 23, bringing the total rig count down to 594, the least since July 2010, after cutting a total of 80 rigs over the prior seven weeks, oil services company Baker Hughes Inc said in its closely followed report. That total was less than half the 1,595 oil rigs in the same week a year ago. Since hitting an all-time high of 1,609 in October last year, weekly rig count reductions have averaged 19. U.S. oil futures this week have lost about 5 percent, sliding for a second straight week, on continuing oversupply concerns even as China’s latest interest rate cut raised hopes for stronger demand from the world’s top energy consumer. The rig count is one of several indicators traders look at in trying to figure out whether production will rise or fall over the next several months. Other factors include how fast energy firms complete previously drilled but unfinished wells and rising well efficiency and productivity. “The current rig count implies that U.S. production would drop by 40,000 barrels a day in 2016,” analysts at Goldman Sachs said. Despite drilling cutbacks, U.S. oil production edged up to 9.4 million barrels per day (bpd) in July from 9.3 million bpd in June, according to the latest U.S. Energy Information Administration’s (EIA) 914 production report.
OilPrice Intelligence Report: A New Era For Canadian Oil And Gas, For Better Or Worse: Canadian voters kicked out the conservative government in the October 19 election, a party that had been in power for a decade. Polls had predicted a slight lead for the Liberal Party, but in a surprise result, the Liberals actually won a majority of seats in parliament and will form a majority government. Most analysts had expected the Liberal Party would have had to form a coalition government, but many voters appeared to strategically vote for the frontrunner in order to ensure a loss for the conservatives. The new government of Prime Minister-designate Justin Trudeau will almost certainly be much less friendly to the oil and gas industry in Canada, though to what extent remains uncertain. Trudeau opposes Enbridge’s Northern Gateway Pipeline, but also backs TransCanada’s Keystone XL Pipeline – the latter of which could be blocked by the U.S. government. More will be known in the coming weeks. However, one clear promise from Trudeau was his plan to engage in deficit spending to goose the economy through higher investments in infrastructure.The U.S. Department of Interior cancelled two lease sales for the Arctic, effectively ruling out new drilling for several years. The agency said that there was almost no interest from potential buyers for acreage in the Chukchi and Beaufort Seas, so it decided to scrap the lease sales. The move follows the decision from Royal Dutch Shell to abandon Arctic drilling, and without any other companies positioned to move forward, offshore drilling in the U.S. Arctic may not happen for years. In addition to cancelling the lease sales, the Obama administration also denied a request from Statoil (NYSE: STO) and Shell to allow an extension of their leases. They are set to expire in 2017 (Beaufort Sea) and 2020 (Chukchi Sea).
How Much Longer Can The Oil Age Last? - Over the last few months, we have witnessed how oil prices have fluctuated from a 6 year low level of $42.98 per barrel in March 2015 to the current levels of $60 per barrel. It is interesting to note that, in spite of the biggest oil cartel in the world deciding to stick to its high production levels, the oil prices have increased mainly due to falling US crude inventories and strong demand. However, the current upward rally might be short lived and there may yet be another drop in the international oil price when Iran eventually starts pumping its oil into the market at full capacity, potentially creating another supply glut. In these endless price rallies, it is important to take a holistic view of the global energy industry and question which way it is heading. Are the dynamics of global energy changing with current improvements in renewable energy sources and affordable new storage technologies? Can the oil age end in the near future? Will we ever stop feverishly analyzing the rise and fall of oil prices? Or, will oil remain irreplaceable in our life time? With little or no pollution, renewables like solar, wind and biofuels are viewed by many as a means to curtail the rising greenhouse emissions and replace oil as a sustainable alternative. There is little doubt as to why China, US, Japan, UK and Germany, some of theworld’s biggest energy gluttons have invested heavily in renewables. However, the total global investments in renewables fell by 14% to $214 billion in 2013. One of the major reasons of this fall was the backing out of some big oil firms such as BP, Chevron and Conoco Phillips. These companies significantly reduced their investments in renewables and decided to focus on their ‘core’ business; that is, oil and gas. As per Lysle Brinker, an oil and gas equity analyst at IHS “It’s not their (Big oil majors) strong suit to be spending a lot of money and time on renewables when they are definitely challenged in their core industry.”
Mideast Oil Consumption Could Increase Significantly Over Next Five (5) Years -- Arab oil consumption to increase to 17.3 mil b/d by 2020, says new study by Organization of Arab Petroleum Exporting Countries. This is not a data point that I track but it seems consumption to increase by 17 million bopd in the Mideast goes a long way in explaining why Saudi Arabia has stepped up their drilling program (and don't have a whole lot to show for it, yet). Here's more of the story, as reported by PipelineMideast: Energy consumption in Arab oil producing countries is expected to grow by as much as 4.9 per cent a year by 2020, according to a new study by the Organization of Arab Petroleum Exporting Countries. At the lower end of the estimate – in a low growth scenario for OAPEC member countries, the organization expects energy consumption to be at around 3.2 per cent in the study period. In its 2012 annual report, however, OAPEC estimated the annual rate of growth of energy consumption in OAPEC member countries was 5.3 per cent during the 2009- 2012 period. The report by the Kuwait based organisation found that daily energy consumption would be between 15.4 to 17.3 million barrels of oil equivalent (boepd) by 2020, compared to 12.4 million boepd in 2013. Saudi has not shown much increase in production for quite some time. Sure, they are hitting "new records" but the bar hasn't been rising all that much, certainly not enough to come anywhere close to several million more bopd. Currently about 12.4 million boed (most recent figures available), it seems quite a stretch to get to 17.3 million boepd by by 2020.
United Arab Emirates plans to increase crude oil and natural gas production - (EIA): The United Arab Emirates (UAE) was the world's sixth-largest oil producer in 2014, and the second-largest producer of petroleum and other liquids in the Organization of the Petroleum Exporting Countries (OPEC), behind only Saudi Arabia. Because the prospects for further oil discoveries in the UAE are low, the UAE is relying on the application of enhanced oil recovery (EOR) techniques in mature oil fields to increase production. Using EOR techniques, the government plans to expand production 30% by 2020. EOR is an expensive process, and at current prices, these projects may not be economic. However, despite today's low oil prices, the UAE continues to invest in future production. The Upper Zakum oilfield is one region that has been targeted for further development. The field is the second-largest offshore oilfield and fourth-largest oilfield in the world, and it currently produces about 590,000 barrels per day (b/d). In July 2012, the Zakum Development Company awarded an $800 million engineering, procurement, and construction contract to Abu Dhabi's National Petroleum Construction Company, with the goal of expanding oil production at the Upper Zakum field to 750,000 b/d by 2016. Production from the Lower Zakum field should also increase, with oil production eventually reaching 425,000 b/d, an increase from the current level of 345,000 b/d.
OPEC will keep oil output high, traders say -– Saudi Arabia and the other big Middle East oil producers in OPEC will keep pumping hard to build market share despite mounting over-supply that has brought prices to six-year lows, the world’s top traders say. The Organization of the Petroleum Exporting Countries probably will not change tack and trim output even if it means prices stay low for a long time, senior executives from Vitol, Trafigura and the other big commodities houses said. “I’m expecting OPEC to be quite consistent in this position,” Trafigura Chief Financial Officer Christophe Salmon told the Reuters Commodities Summit. OPEC ministers meet in Vienna on Dec. 4 to decide production policy and are likely to see sharp disagreements between rich Gulf countries with low production costs and poorer members such as Venezuela that need higher prices to meet their budgets. Caracas has proposed that the cartel, source of more than a third of the world’s oil, adopt a price band with a floor around $70 a barrel and has suggested OPEC and non-OPEC producers cooperate to support prices. Venezuela, Nigeria, Algeria and several other OPEC members need oil prices well over $100 barrel to cover their costs – twice the current crude price below $50. But core OPEC members in the Middle East have much lower costs and are more worried about losing market share to shale producers in the North America. They hope lower prices will squeeze out their competition and boost prices in the long term.
Saudi Crude Oil Inventories Reach Record High -- October 20, 2015 -- Oilprice.com is reporting: Saudi Arabia oil inventories reach record high as demand wanes -- JODI data over the weekend highlighted that Saudi Arabian crude stocks have reached a record high of 326.6 million barrels in August. As Saudi continues to keep production elevated, and as it struggles to find a home for all its exports amid a highly-competitive global market (awash with crude), this extra oil is finding its way into stockpiles as exports ease. Saudi Arabia crude oil inventory:
- Currently: 325 million bbls in storage
- 4Q14: 310 million bbls
- 4Q13: 285 million bbls
The world consumes around 93 million bopd; produces around 94 million bopd. Source: IEA.
Saudi Crude Stocks at Record High Amid Quest to Keep Share - Saudi Arabia, the world’s largest oil exporter, is storing record amounts of crude in its quest to maintain market share as it cut shipments. Commercial crude stockpiles in August rose to 326.6 million barrels, the highest since at least 2002, from 320.2 million barrels in July, according to data posted on the website of the Riyadh-based Joint Organisations Data Initiative. Exports dropped to 7 million barrels a day from 7.28 million. “The fall in Saudi crude exports reflects the market reality,” . “It’s normal to see this fall knowing that the market is becoming highly competitive, with many countries in OPEC selling at discounts and under-pricing the Saudi crude.” Crude inventories have been at record highs since May, a month before Saudi Arabia’s production hit an all-time high of 10.56 million barrels a day. The nation has led theOrganization of Petroleum Exporting Countries in boosting production to defend market share, abandoning its previous role of cutting output to boost prices. Brent crude oil prices have slid 13 percent this year amid a global supply glut. Brent futures for December settlement dropped 2.3 percent to $49.30 a barrel in London on Monday. Saudi Arabia cut oil production in August to 10.27 million barrels a day from 10.36 million in July, according to the JODI data. The kingdom told OPEC that it produced 10.23 million barrels daily in September. It pumped at an all-time high of 10.56 million barrels a day in June, exceeding a previous record from 1980.
Saudi Arabia Said to Delay Contractor Payments as Oil Slumps -- Saudi Arabia is delaying payments to government contractors as the slump in oil prices pushes the country into a deficit for the first time since 2009, according to three people with knowledge of the matter. Companies working on infrastructure projects have been waiting for six months or more for payments as the government seeks to preserve cash, the people said, asking not to be identified because the information is private. Delays have increased this year and the government has also been seeking to cut prices on contracts, the people said. Saudi Arabia is responding to the decline in crude, which accounts for about 80 percent of revenue, by tapping foreign reserves, cutting spending, delaying projects and selling bonds. Net foreign assets fell by about $82 billion at the end of August after reaching an all-time high last year. The country has raised 55 billion riyals ($15 billion) from debt issuance this year. “It’s hard to hold back from boosting spending when oil is on the rise, but very hard to cut when oil prices fall,” . “Cuts are coming -- the budget deficit is too large to ignore and pretend it’s business as usual.”
Expert: U.S. oil squeezing OPEC, Saudis - American shale production has weakened OPEC’s grip on the global oil and gas market, and the balance of control could tip even further toward the West in the years ahead, a former defense official said. The oil cartel led by Saudi Arabia has long influenced prices by increasing or scaling back production, but private U.S. producers are now “edging them to the sidelines,” former deputy assistant secretary of defense James Clad said. “The Saudis have to be looking at their pocketbook every day,” Clad said. “They thought they had enough reserves — nearly $1 trillion in reserves — and they would be able to keep (their national social programs) going. But, can they afford it? Can they afford it at this level of price?” Increasing production to discourage U.S. shale producers “isn’t working out” for OPEC, and lowering production to drive up prices now would give American companies a bigger slice of the pie. “If they reduce production still more, then their percentage of supply to the world market goes down and (American producers) will become disproportionately larger suppliers,” said Clad, an energy consultant. “Then the (domestic) shale industry will say, ‘Thank you very much for making prices go up.'” So does that mean gas prices will stay low? “The answer’s yes, for the time being, because the overhang of excess supply is great,” he said.
IMF: Low oil prices, turmoil keeps Mideast growth 'subdued' — The International Monetary Fund said Wednesday a fall in oil prices and deepening turmoil in parts of the Middle East will keep growth in the region subdued this year at 2.5 percent. Masood Ahmed, IMF director of the Middle East and Central Asia, said oil-exporting countries are facing tough choices as they brace for a $360 billion drop in revenues this year due to a drop in oil prices globally. Among the hardest-hit countries by the drop in prices is the world’s largest oil exporter, Saudi Arabia. The price of oil— the backbone of Saudi Arabia’s economy — has fallen by about half since mid-2014. About 90 percent of the government’s revenue comes from oil. The IMF estimates Saudi Arabia will post a budget deficit of more than 20 percent of gross domestic product this year, amounting to between $100 billion to $150 billion. The IMF’s Middle East economic outlook report launched Wednesday said reforms in Gulf Arab countries that create more jobs and diversify economies outside of the oil sector are “all the more urgent.” “There are difficult decisions that will need to be made in terms of cutting spending,” Ahmed told The Associated Press in an interview on the sidelines of the report’s launch in Dubai. “You could try to postpone some capital projects … you could look at energy prices, which are still subsidized or below international prices in most of the countries in the region.” Ahmed said the six oil-exporting countries of the Gulf Cooperation Council could gain $70 billion if they raised local energy prices to international market rates.
Saudis Risk Draining Financial Assets in 5 Years, IMF Says -- Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to shore up public finances amid the drop in oil prices. The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said. Saudi authorities are already planning spending cuts as the world’s biggest oil exporter seeks to cut its budget deficit. Officials have repeatedly said that the kingdom’s economy, the Arab world’s biggest, is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain. But the IMF said measures being considered by oil exporters “are likely to be inadequate to achieve the needed medium-term fiscal consolidation," the IMF said. “Under current policies, countries would run out of buffers in less than five years because of large fiscal deficits." Saudi Arabia accumulated hundreds of billions of dollars in the past decade to help the economy absorb the shock of falling prices. The kingdom’s debt as a percentage of gross domestic product fell to less than 2 percent in 2014, the lowest in the world. The recent decline in the price of crude, which accounts for about 80 percent of Saudi’s revenue, is prompting the government to delay projects and sell bonds for the first time since 2007. Net foreign assets fell to the lowest level in more than two years in August, with the kingdom fighting a war in Yemen and avoiding economic policies that could trigger social or political unrest. The IMF expects Saudi’s budget deficit to rise to more than 20 percent of gross domestic product this year after King Salman announced one-time bonuses for public-sector workers following his accession to the throne in January. The deficit is expected to be 19.4 percent in 2016.
Saudis Poke The Russian Bear, Start Oil War In Eastern Europe -- If the Saudis could use oil prices to force Moscow into ceding support for Bashar al-Assad in Syria, then the West and its regional allies could get on with facilitating his ouster by way of arming and training rebels. Once Assad was gone, a puppet government could be installed (after some farce of an election that would invariably pit two Western-backed candidates against each other) then Riyadh, Doha, and Ankara could work with the new government in Damascus to craft energy deals that would not only be extremely lucrative for all involved, but would also help to break Gazprom’s iron grip on energy supplies to Europe. Those are the “ancillary diplomatic benefits” mentioned in The Times piece. Only it didn’t work out that way. Instead, Russia just kind of rolled with the economic punches (so to speak) and while there’s probably only so much pain Moscow can take between low oil prices and Western sanctions, Putin has apparently not yet reached the threshold. Meanwhile, the Saudis have found that it’s taking longer than expected for Riyadh to realize another expected benefit from driving crude prices into the floor. Bankrupting the relatively uneconomic US shale space would go a long way towards solidifying Saudi Arabia’s market share, but thanks to wide open capital markets, Riyadh has effectively gotten itself into a war with the Fed. The longer ZIRP persists, the longer otherwise insolvent US producers can stay in business. In short: until the cost of capital starts to rise, there will likely still be investors of some stripe willing to finance some of these drillers. In other words, the Saudi gambit has been a miserable failure thus far and although they may be able to outlast the US shale space, the battle is nearly lost in Syria. All of this helps to explain why now, Riyadh is looking to muscle in on Moscow’s crude market share in Eastern Europe. Here’s Bloomberg with more: As President Vladimir Putin tries to restore Russia as a major player in the Middle East, Saudi Arabia is starting to attack on Russia's traditional stomping ground by supplying lower-priced crude oil to Poland.
Oil Market Showdown: Can Russia Outlast The Saudis? -- November 27, oil consuming countries will celebrate the first anniversary of the Saudi decision to let market forces determine prices. This decision set crude prices on a downward path. Subsequently, to defend market share, the Saudis increased production, which exacerbated market oversupply and further pressured prices. While the sharp decline in crude prices has saved crude consuming nations hundreds of billions of dollars, the loss in revenues has caused crude exporting countries intense economic and financial pain. Their suffering has led some to call for a change in strategy to “balance” the market and boost prices. Venezuela, an OPEC member, has even proposed an emergency summit meeting. In practice, the call for a change is a call for Saudi Arabia and Russia, the two dominant global crude exporters, which each daily export over seven-plus mmbbls (including condensates and NGLs) and which each see the other as the key to any “balancing” moves, to bear the brunt of any production cuts. Both, it would seem, have incentive to do so, as each has lost over $100 billion in crude revenues in 2015—and Russia bears the extra burden of U.S. and EU Ukraine-related economic and financial sanctions. Yet, while both publicly profess willingness to discuss market conditions, neither has shown any real inclination to reduce output—in fact, both countries seem committed to keeping their feet pressed to their crude output pedals. In the course of 2015, both have raised output and exports over 2014 levels—Saudi Arabia by ~500 and 550~ mbbls/day respectively and Russia by ~100 and ~150. The Saudis have repeatedly cut pricing to undercut competitors to maintain market share in the critical U.S. and China markets, while the Russian Finance Ministry recently backed away from a tax proposal which Russian crude producers said would reduce their output. This apparent bravado notwithstanding, the two countries’ entry into the low-price Crudedome is ravaging their economies. Should crude prices decline from current levels, or even just stagnate, it is possible neither country will exit the CrudeDome under its own power.
Future Of Iraq’s Oil Industry Under Threat - Iraq is one of the major reasons why OPEC has been able to increase oil production over the past year, even as oil prices have dropped to six-year lows. The war-torn country averaged 3.2 million barrels per day (mb/d) of production in 2014. But despite the onslaught from ISIS and the collapse in oil prices, Iraq succeeded in achieving steady gains in output, surpassing 4.1 mbd in September. Along with Saudi Arabia’s increase of around 600,000 barrels per day since 2014, Iraq has accounted for a majority of OPEC’s production gains over the past year, allowing the cartel to produce more than 31.5 mb/d – well in excess of its stated production target of 30 mb/d. However, although Iraq has succeeded in defying gravity thus far, the cracks in the country’s oil success story are starting to show. Genel Energy Plc, a London-based oil exploration company that is concentrated in the Kurdistan region of Iraq, trimmed its production forecast for the year, due to the late payments from the Kurdish Regional Government (KRG). The Iraqi central government in Baghdad and the KRG have been at odds over oil sales. In December 2014, the two sides reached an accord that would see the KRG exporting oil under the purview of the Iraqi state, in exchange for access to its portion of national revenues. The collapse in oil prices has sapped the state of resources, however. That has held up payments to the KRG, which in turn has halted the transfer of funds to private oil companies operating within Kurdistan.
Iran’s Supreme Leader approves nuclear deal, orders govt implementation on conditions -- Iran's Supreme Leader Ayatollah Ali Khamenei has approved the nuclear deal between Tehran and world powers, ordering it to be implemented subject to certain conditions, his official website says. In a letter to President Hassan Rouhani, Iran's highest authority said the US and European Union should clearly announce the elimination of sanctions against Tehran. Khamenei has warned that the deal has several structural weak points. Full text of letter of @khamenei_ir on #JCPOA & #IranDeal to president #rouhani has been published :https://t.co/Wd9UZwShfu |#Iran October 21, 2015 Khamenei adds in his letter that any remarks, suggesting that sanctions against Iran will remain in place for some reason, would go against the agreement reached between Iran and the P5+1 group of countries (the US, UK, France, China and Russia, plus Germany) over Tehran’s nuclear program.
Iran to up oil production one week after sanctions - Shana | Reuters: Iran will boost its crude oil production within one week once international sanctions are lifted and is determined to regain its lost market share, senior Iranian oil officials reiterated on Monday. Iran will raise production by 500,000 barrels per day in the first week after sanctions are lifted, Rokneddin Javadi, general manager of the National Iranian Oil Company, was quoted as saying by oil ministry news agency Shaha. "A 500,000-barrel increase in Iran's oil production will take place in less than a week after the effective lifting of sanctions," Shana quoted Javadi as saying. "Our customers for this increased production level will mostly be our traditional customers in Europe and Asia." On Sunday, the United States approved conditional sanctions waivers for Iran, although it cautioned these would not take effect until Tehran had curbed its nuclear program as required under a nuclear deal reached in Vienna on July 14. Iranian Oil Minister Bijan Zangeneh said on Monday that oil producers group OPEC is "rational" and would give room for Iran's gradual return to the market. "The OPEC members welcome Iran's oil return to the market, so do the customers," . "We don’t need permission from anyone to export our oil, and our production will enter the market," he said.
Iran’s Crude Oil Production Game Plan and Its Impact on Crude Oil - The EIA (U.S. Energy Information Administration) reported that Iran produced 3.3 MMbpd (million barrels per day) of crude oil in June 2015 compared to 3.315 MMbpd in May 2015. However, Bloomberg surveys suggest Iran produced 2.8 MMbpd in September 2015. Iran is among the top producers of crude oil among OPEC (Organization of the Petroleum Exporting Countries) countries. OPEC members Saudi Arabia and Iraq produce more crude oil than Iran. Iran’s crude oil production fell due to US and European oil sanctions in 2011 and 2012, respectively. Crude oil and other liquids exports fell by 1 MMbpd following Western oil sanctions. . As soon as sanctions are lifted, Iran could scale up its crude oil production and sell its 40 MMbbls of crude oil inventory. The Energy Ministry of Iran is estimating $100 billion of investments needed to rebuild its energy industry and scale up production to more than 5.7 MMbpd over the long term. In order to lure energy companies, National Iranian Oil Company might offer a 20-year contract term. Iran’s previous contracts paid oil companies a fixed fee over five to seven years, without giving energy investors a share of a field’s production in the long term. Meanwhile, the World Bank estimates that Iran could increase crude oil production by 0.5–0.7 MMbpd of crude oil to 3.6 MMbpd at least six months after sanctions are lifted. The rise in production from Iran will extend the crude oil glut market, and we could see the new era oil market.
How Iran Plans To Attract $100 Billion In Oil Investment There was little movement on oil prices this week – a few down days and a few up days. WTI closed out the week trading in the mid-$40s, with Brent at $48 per barrel. Crude seemed to weather a huge bearish development – the EIA reported that oil storage levels surged for the week ending on October 16. Inventories jumped by 8 million barrels to 476 million barrels. That is the highest level in months and is close to the 80-year high seen in the spring of this year. Storage levels are filling up as refineries undergo maintenance season, and should reverse course in the coming weeks and months. Still, the sky-high inventories do not necessarily offer strong reasons for crude prices to rally in the near-term. Iran released some more details on its oil contracts this week, revealing some specifics on its reforms intended to attract international investment. For example, Iran will pay larger fees to operators than previously thought. It will also offer 20-year contracts. “What’s been announced so far looks like an attractive contract -- no doubt it’s a vast improvement on the buy-back contracts,’’ Robin Mills, of Dubai-based consultancy Manaar Energy, told Bloomberg in an interview. An Iranian official who helped design the new contracts also told the Financial Times that domestic Iranian companies should be entitled to a 20 percent stake in any joint venture project. Mehdi Hosseini didn’t reveal a specific figure, but said “Naturally you would think of 20-25 or 30 percent as a minimum percentage,” according to an interview on October 21. “We don’t want to just give some small share [around 5 percent] to an Iranian company to try and make some money. We have a long-term view.”
Russia offers gas, oil swap deals to Iran – Russian Energy Minister Alexander Novak said on Friday Kremlin-controlled gas producer Gazprom has offered gas supplies to Iran under a swap arrangement, and similar oil deals were also under consideration. Moscow has boosted efforts to foster political and economic ties with Tehran and increased its activity after a decision in July to lift international sanctions on Iran in principle. The ending of sanctions, related to Iran’s nuclear program and including restrictions on oil exports, have yet to take effect. Novak said Iran normally supplies gas to its northern regions from the south of the country and the proposed swap deals would help to cut its transportation costs. “We could supply gas through to Iran’s north and receive gas from the south (of Iran) via swap deals in the form of liquefied natural gas or pipeline gas,” Novak told Russian state-run TV Rossiya-24. “Similar swaps could be done with oil. This is a reduction of transportation costs. Our colleagues have given a positive response to the idea,” he added. Iran is keen to recover oil market share it lost as a result of the international sanctions.
OPEC, non-OPEC experts to talk, but unlikely to cooperate on cuts – A meeting of OPEC and non-OPEC oil market experts this week is unlikely to increase the prospect of joint co-operation on supply curbs or show much support for Venezuela’s proposed price band, OPEC delegates and analysts said. The Organization of the Petroleum Exporting Countries has invited eight non-member countries including Russia for talks on the market at its Vienna headquarters on Wednesday. OPEC’s own meeting to set policy is not until Dec. 4. Non-OPEC producers have refused to work with OPEC in cutting supply to reduce a surplus that has prompted prices to sink to below $50 a barrel from $115 in June 2014. In turn, OPEC has refused to limit supply alone and many members have raised output. Cash-strapped member Venezuela is nonetheless pushing for OPEC and non-OPEC cuts and has proposed reviving OPEC’s price band mechanism, attempting to set a $70 price floor. But two OPEC delegates said the prospect of joint output cuts was low and the price band was unlikely to find much support. “I really don’t believe that Venezuela will succeed in its attempts,” said one of the delegates. “OPEC countries are now over-producing so the cutback should start from within before trying with non-OPEC producers.” According to OPEC’s own figures, OPEC is pumping 31.57 million barrels per day (bpd), much more than its official 30 million bpd target and the lion’s share of an excess supply of almost 2 million bpd.
Oil Hovers Near Crucial Technical Level As Rig Count Decline Slows, China Inventory Soars - Overnight weakness on the back of 8-month highs in Chinese crude inventory (combined with the recent plunge in super-tanker rates - i.e. China is no longer refilling its SPR) sent WTI Crude towards the critical $44 level (which has acted as support for 2 months). The China rate cut weakened crude further as PBOC admitted it was needed because of the state of the economy. And then Baker Hughes reported a total rig count unchanged 787 (lowest since April 2002) and an oil rig count decline of just 1 to 594 (the 8th weekly drop in a row).WTI slipped on the news. China is getting full...China September Crude Inventory Climbs to Eight-Month High (Bloomberg) -- Crude stockpile rose to 34.31m mt, accord. to Bloomberg calculation based on percentage-change data from Xinhua News Agency’s China Oil, Gas & Petrochemicals newsletter. Sept. kerosene inventory at record high 1.92m mt, Sept. diesel stockpiles drop to 8-mo. low at 8.79m mt, Inventory data refers to commercial stockpiles excluding Strategic Petroleum Reserves And the artificial SPR-refilling demand appears to have stopped...Benchmark Crude Oil Supertanker Rates Fall by Most This Year (Bloomberg) -- Charter rates on Saudi Arabia-Japan VLCC route fall 11% to 61.54 Worldscale pts, according to Baltic Exchange data. Equates to daily return of $68,921, lowest since Sept. 16. Baltic Dirty Tanker Index falls 1.3% to 739 pts. U.S. Gulf-Northwest Europe 38kt clean tanker rates rise 3.2% to 91.43
New Oil Order: Russia Again Tops Saudi Arabia As China's Largest Crude Supplier - Back in May, we noted that for the first time in history, Russia overtook Saudi Arabia as the number one supplier of crude to China. The implications of that should be clear, but in case they aren’t, allow us to elaborate. First, Moscow is wrestling with crippling Western economic sanctions and building closer ties with Beijing is key to mitigating the pain. Part of the cooperation Russia seeks revolves around energy partnerships and while the Western media has endeavored to play down the arrangements (some of which have admittedly been beset with delays), the interest is there on both sides which means sooner or later, the deals will likely get done. From a geopolitical perspective (and as regular readers are acutely aware, geopolitics and energy are inextricably linked at almost every turn), there’s a degree to which the shift is symbolic. That is, we don’t think we’re reading too much into it when we draw a connection between Russia’s usurpation of the Saudis on China’s crude suppliers list and the fact that Beijing and Moscow have voted with each other on the Security Council as it relates to Syria, where Riyadh’s interests are sharply at odds with The Kremlin’s. Meanwhile, the Saudis are struggling to cope with the plunge in crude prices that they themselves engineered (they “Plaxico’d” themselves, as we’re fond of saying). The proxy war in Yemen along with the cost of maintaining the everyday Saudi’s lifestyle doesn’t mix well with plunging oil as is abundantly clear from the following which shows that Riyadh is now facing a deficit on both the current and fiscal accounts.
BP signs $10 bln gas supply deal with China's Huadian - Oil major BP has signed a $10 billion liquefied natural gas (LNG) supply deal with China’s Huadian power producer, sealing the agreement as part of Chinese President Xi Jinping’s state visit to Britain. BP will supply up to 1 million tonnes of LNG per year over 20 years to Huadian, China’s largest gas-fired power generator. The oil major also agreed with China National Petroleum Corporation (CNPC) to cooperate on shale gas exploration and production in the Sichuan Basin, as well as fuel retailing in China. BP and CNPC’s agreement also included jointly finding new oil and LNG trading opportunities and to work together on carbon emissions trading. British Prime Minister David Cameron said more than 12 billion pounds worth of oil and gas deals had been signed with China as part of the President’s visit.