the state of Ohio has now joined forces with West Virginia and Pennsylvania in a natural gas cartel formed to promote and strengthen the Marcellus and Utica shale industry in the hopes that our region of the country will become the petro chemical capitol of the world, with all the polluting development and campaign kickbacks to government officials that would imply...this 3 year agreement to promote exploitation and use of natural gas from the shale underlying the 3 states came at the end of the Tri-State Shale Summit in Morgantown, WV, hosted by West Virginia governor Earl Ray Tomblin and attended by Pennsylvania governor Tom Wolf, West Virginia Senator Joe Manchin, Ohio Lt Governor Mary Taylor and a host of business and oil industry executives, in which business leaders and government officials from the three states pledged to help build area's shale industry...the idea is that the states would collaborate rather than compete in bringing gas consuming industry to our area, apparently hoping to build a refining and petrochemical industry to rival that of the Gulf Coast, possibly along the Ohio River...and this isn't just a political pipe dream, either; the states already have partial commitments for up to four ethane cracker plants to produce ethylenes for plastics at various locations in the region...with this level of industry promotion, maybe the governors of the three states should be looking to meet biannually in Vienna, possibly on a schedule to coincide with the meetings there of OPEC...
This Week’s Data from the EIA
meanwhile, the big story coming out of this week's reports from the Energy Information Administration was the largest jump in our inventories of oil in storage since the first week in April...that came about in part due a decrease in usage of oil by refineries, in part due to higher imports, and in spite of a small drop in domestic production of crude...we're now into the time of year when inventories normally increase, as demand for most oil products are at seasonal lows, and at the rate inventories are growing now we may well see a new all time high before the year is out....according to the EIA, US stocks of crude oil in storage, not counting the government's Strategic Petroleum Reserve, rose to 468,559,000 barrels as of October 9th, up from the 460,997,000 barrels we had stored on October 2nd...that was the largest one week jump in oil inventories since the week ending April 3rd, and left us with 26.4% more oil in storage than we had in the 2nd week of October a year ago...that was also the most oil 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...
part of the reason for the large increase in inventories, at least compared to the 3.1 million barrel increase of last week, was an increase in our imports of crude oil, which were up by 247,000 barrels per day to 7,315,000 barrels per day during the week ending October 9th, as the restart of Syncrude in Canada led to higher imports in the Midwest...that was still 5.4% lower than the same week last year, and our 4 week moving average of imports remained at 7.3 million barrels per day, 1.7% below the same four-week period last year...the other factor contributing to the glut of oil headed into storage this week was weaker demand, as refinery inputs of crude oil fell to 15,267,000 barrels per day during the week ending October 9th, 292,000 barrels per day less than in last week's report...refinery activity slowed once again, as the refinery utilization rate fell to 86.0%, which is way down from the 93.1% of refinery capacity in use a month ago, and the lowest capacity utilization for refineries since January 16th ...nonetheless, gasoline production still increased over last week, averaging 9,536,000 barrels per day, up from 9,443,000 last week, as output of distillates and other products were down by a similar amount...even so, ending stocks of gasoline in storage were down by over 2.6 million barrels to 221,302,000 barrels in the week ending October 9th, but that was still 7.6% more than the 205,673,000 barrels of gasoline than we had stored at the 2nd weekend of October last year...
as we mentioned, our field production of crude was also down some, from 9,172,000 barrels per day for the week ending October 2nd to 9,096,000 barrels per day in the current report, which coincidentally was the same output as during the week ending September 25th...that's about 5.3% 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 1.6% above our production rate of 8,951,000 barrels per day in the 2nd week of October a year ago...
A Look at Refined Product Inventories
that low refinery utilization rate and falling gasoline inventories might lead one to believe that it's just a matter of time before the refineries ramp back up their production and lessen that building oil glut; indeed, the 2.6 million barrel drop in gasoline stocks was cited by Reuters as the reason oil prices held steady in the face of the crude buildup....so let's take a look at the inventories of oil products and see how reasonable an assumption that might be...we'll do that by taking a quick look at a few oil products inventory graphs from the weekly Petroleum Status Report (62 pp pdf) that are similar to the crude oil inventory chart that we looked at last week; the first one is a graph of gasoline inventories over the last 5 years, that includes by inference gasoline inventories back to the beginning of 2009...
gasoline inventory 10/9/15:
just so we're on the same page when viewing this, the blue line in the graph above shows the recent track of US gasoline inventories over the period from January 2014 to October 9, 2015, while the shaded area represents the range of US gasoline inventories as reported weekly by the EIA over the prior 5 years for any given time of year, essentially showing us the normal range of US gasoline inventories as they fluctuate from season to season....see can see that even with the recent drop in gasoline supplies, the gasoline we had stored on October 9th was still higher than any time in any October over the past 5 years, and we'd that our gasoline supplies are close to the highest for any October in US history if that chart covered a longer time span...so how about other refined products? the next chart shows inventories of distillate fuel oil, which we most often see as diesel fuel or home heating oil...
distillates inventory 10/9/15:
here again, the blue line in the graph above shows the recent track of US distillate fuel oil inventories over the period from January 2014 to October 9, 2015, while the shaded area represents the range of distillate fuel oil inventories as reported by the EIA over the prior 5 years...here, the story is a bit different; until this year, our distillate fuel oil inventories were running below normal, just climbing back into the normal range about a year ago...but now they've stayed pretty much near the middle of the historical seasonal range since the beginning of summer, and there's no reason to believe refining has to be stepped up to increase their supplies at this point, either...
next we have propane/propylene inventories as of October 9th:
again, the blue line above shows the recent track of our propane/propylene oil inventories over the period from January 2014 to October 9, 2015, while the shaded area is the range of propane/propylene inventories over the prior 5 years...this product of oil refining is the basic building block from which most petrochemicals are derived...this chart clearly shows a large surplus in our stockpiles of propane/propylene that started to build last summer and which leaves our supplies roughly 20 million barrels, or at least 20% higher than the top of the normal range...
the EIA weekly Petroleum Status Report also has similar graphs of inventories of other refined products, such as kerosene type jet fuel, which are in the normal range, and residual fuel oil, which are above the historical range, but you get the point; there is no shortage or shortfall of stockpiles of any refined products that would provide a reason for US refineries to ramp up production (and hence consume more crude) beyond the level at which they are now operating...
Latest Rig Counts
active oil rigs dropped for the 7th straight week during the week ended October 16th, and despite an increase in working gas rigs, the total rig count was down for the 8th month in a row...Baker Hughes reported that the number of active drilling rigs in the US fell by 8 to 787 in the week just ended, with rigs drilling for oil down by 10 to 595, rigs drilling for gas up by 3 to 192, while the last working rig classified as miscellaneous was shut down...those counts are down from 1590 oil rigs and 328 gas rigs the same week a year ago, and marks the anniversary of the first drop of oil rigs from the peak they hit in the week ending October 10th last year...one rig was added in the Gulf of Mexico this week, so we now have 32 offshore, down from 55 the same week last year...active offshore drilling rigs are also more than one year past the recent peak of 66 first reached on August 29th 2014, which was matched on two other dates in September of that year...so a year of oil rig shutdowns has not diminished the oil glut..
horizontal drillers continue to shut down operations, as the net count of wells being drilled horizontally for fracking fell by 7 to 591, which was down from the 1353 horizontal rigs that were running the same week a year ago...4 vertical rigs were also stacked this week, leaving 110 in operation, which was down from the 362 vertical rigs in operation a year earlier...meanwhile, three directional rigs were added to those operating this week, increasing their active count to 86, which was down from the 203 directional rigs that were deployed in the same week last year...
half of the reductions in active rigs working in major shale basins came out of the Eagle Ford shale of south Texas, where 4 rigs were stacked, leaving 76, which was down from 209 running as of the 17th of October last year...two rigs were also shut down in the Permian basin of west Texas and eastern New Mexico, which is still the most active basin with 233 rigs working, which is also down from 561 rigs a year ago...single rigs were also pulled from the Williston basin of North Dakota, which now has 64, which is down from last year's 193, and the Cana Woodford of Oklahoma, which at 36 is just down 2 from last year's 38...meanwhile, one rig was added in the Granite Wash of the Texas panhandle Oklahoma border area, where they're now back up to 12 rigs, but still down from 62 a year ago...
the rig count by state data indicates that the net rig figures hide a lot of shifting of activity from one part of the country to another...New Mexico was the state with the greatest rig reduction, as their count was down 5 to 41, and down from 98 a year ago...Oklahoma and Texas were both down 2, the former down to 89, and down from 204 a year earlier, and the latter down to 351 this week and from 898 a year ago....in addition, Alabama, which isn't even carried on the rig count summary, saw two rigs shut down this week, leaving them just 1..the Baker Hughes historical Excel file shows us that they had 5 rigs running this week a year ago...likewise for Nebraska; they had their only rig pulled out this week, and now they're rig free; a year ago, they were encumbered by 2 rigs...moving on, North Dakota saw one rig stacked, and they're now down to 63 rigs, and down from 181 a year ago, as did Colorado, where they're down to 30, and down from 76 a year ago...meanwhile, Louisiana had 3 rigs added; one offshore and two in the northern part of the state, and they now have 68 rigs active, which is still down from 111 a year ago at this time...in addition, Wyoming added 2 rigs, and they're now up to 26, but that's still down from 63 a year ago, and California added 1, bring their total back up to 14, down from 44 a year earlier...meanwhile, this week's active rig count in Ohio and all other states not mentioned above was unchanged...
Anti-fracking proposal goes to Youngstown voters for 5th time - Vindicator -- It took a decision by the Ohio Supreme Court, but the anti-fracking Community Bill of Rights charter amendment is in front of Youngstown voters for a fifth time on the Nov. 3 ballot. The bill calls for fracking to be banned in the city, which opponents and state officials say isn’t enforceable because those decisions are made by the Ohio Department of Natural Resources. Susie Beiersdorfer, a member of Frackfree Mahoning Valley, a citizens group that backs the proposal, said, “It’s a very important issue to the people of Youngstown. It’s about local control.” She also objects to those who say putting this on the ballot is a waste of time. “If we can’t petition our government, democracy will go down the toilet,” Beiersdorfer said. “Everything starts at the local level. If it passes, we don’t know what happens from there. If it doesn’t pass, I don’t know if we will seek a sixth time.” Mayor John A. McNally, a member of the Mahoning Valley Coalition for Job Growth and Investment, which opposes the fracking-ban proposal, said, “The residents of the city are tired of hearing about this issue.”Fracking isn’t happening in the city, but there are other businesses – such as other oil and gas drilling and those that transport fracking water – that would be hurt if this amendment is approved, McNally said. “If it passes, a company or business could file in court and it would be ruled unconstitutional, but it has the potential to drive away business from the city,” The Ohio Supreme Court wrote in a Feb. 17 decision regarding a similar matter in Munroe Falls that the state constitution’s home-rule amendment doesn’t grant local governments the power to regulate oil and gas in their limits.
Southeast Ohio Senators pass resolution supporting lift of US oil ban - A U.S. Congress bill that might increase hydraulic fracturing activity is getting a nod from the state senate, thanks in no small part to two Southeast Ohio representatives. The Ohio State Senate passed a resolution by a vote of 31-1 Wednesday urging U.S. Congress to "lift the prohibition on the export of crude oil from the United States." "This to me (benefits) the whole fracking industry," Andrea Rike, a member of the Athens County Fracking Action Network, said. "The whole premise of the ban was clean energy and energy independence for the U.S., and to me, lifting this ban lets it become a free-for-all, and the oil industry is given the right (to put) communities at risk." The statehouse resolution coincides with a U.S. House of Representatives resolution passed Friday that, if passed by the U.S. Senate, would end the 1975 ban on oil exports."This resolution lifts the ban on U.S. exports, in turn driving down prices, creating jobs and making domestic producers more competitive," State Sen. Troy Balderson, R-Zanesville, who introduced the bill, said in an email. "Lifting the ban would be good for the U.S., good for Ohio and good for Athens County." That resolution, which is already under threat of a Presidential veto, would help encourage manufacturing jobs in Southeast Ohio, according to State Sen. Lou Gentile, D-Steubenville, who represents a part of Athens. "The lion's share of oil and gas production in this state is taking place in (my) district," he said. "The new production means that the key components that go into that need to be manufactured. Those goods and services will be provided by (Southeast Ohio workers)."
Gulfport Energy, Rice Energy forming new joint venture in Ohio's Utica Shale - Oklahoma-based Gulfport Energy Corp. and a subsidiary of Pennsylvania-based Rice Energy Inc. have agreed to develop natural gas-gathering pipelines and water services to support Gulfport’s drilling for natural gas in eastern Belmont and Monroe counties. Gulfport and Rice announced Thursday that they plan to invest approximately $520 million to develop gathering and compreRicssion assets and $120 million for water assets over the next six years. Each partner will fund its proportionate share of the total capital investments. Initial construction of the system is expected to begin immediately and first deliveries are planned for the middle of 2016. Gulfport will own 25 percent of the joint venture. Rice will own the remaining 75 percent. The joint venture will be supported by long-term, fee-based service agreements with Gulfport. Rice will be responsible for constructing and operating the joint venture’s assets. That includes 165 miles of natural gas pipelines, 50,000 horsepower of compression to deliver natural gas to nearby interstate pipelines and a water system to provide water for hydraulic fracturing or fracking. Gulfport will dedicate about 77,000 acres to the joint venture. That includes recent acquisitions from Paloma Partners III LLCF and American Energy-Utica LLC. In addition, Gulfport will also contribute to the venture an existing 11-mile gas-gathering pipeline and an existing connection to an interstate pipeline, both of which are in Monroe County.
Horizontal drilling comes to Central Ohio with Morrow County well - Morrow County is getting its first horizontal oil well. Houston-based EOR Technology LLC plans to drill the well about 45 miles north of Columbus, the Galion Inquirer reports. EOR typically stands for enhanced oil recovery, which includes techniques to extract oil after much of it has already been drained. Central Ohio has always been home to drilling, but with traditional vertically drilled wells. Part of the reason the Utica shale in eastern Ohio is coveted by drilling companies is because it's now economically accessible to get the oil and gas in it via horizontal drilling and hydraulically fracturing, or fracking. Now that practice is coming to Central Ohio, in Canaan Township, about 150 miles from most Utica shale drilling activity in the state. The drilling permit is for 3,200 feet, a depth too shallow to tap the Utica shale, as Marcellus Drilling News points out. Instead, it's the Trempealeau formation, state records show, whose oil was coveted in the 1960s. The Morrow County well is under construction.
Central Ohio set for earthquake drill - Columbus Dispatch -- Just follow the news for a few minutes and you’ll find plenty to worry about: terrorism, flooding, gun violence. Earthquakes, by comparison, don’t top many worry lists, unless you’re from California. In fact, Franklin County’s Emergency Management and Homeland Security Agency ranks quakes at the bottom of its risk assessment list, behind extreme heat, drought and invasive species. Topping the list are tornadoes, dam failure and flooding. Still, a statewide drill on Thursday will warn people about geologic dangers and how to prepare for them. “They occur in other places. We have felt them here. But there has been no damage,” said Kelly McGuire, spokeswoman for the agency promoting the Drop, Cover, and Hold drill Thursday morning. At 10:15 a.m., participants will listen to a digital recording simulating an actual earthquake along with instructions about how to seek cover under furniture and stay there until the shaking stops. “We're not required to participate in the event,” spokeswoman Jacqueline Bryant, said of the brief drill. “Our schools are not participating.” Folks in northeastern Ohio, however, might want to take the drill seriously. In the study, published in the Bulletin of the Seismological Society of America, three Miami University geologists reported that nearly 80 earthquakes in the Youngstown area were caused by oil and gas drilling by fracking into shale deposits in March 2014.
Putting The Marcellus / Utica Into Perspective --- Part VI - Some numbers to give some perspective on the Marcellus/Utica supply situation:
- At the moment there are 8,000 producing unconventional wells in Pennsylvania and Ohio.
- There are over 3,000 wells that are already drilled (some frac'd) that are not yet online (producing).
- At the recent rate of three (3) wells per day being brought online, it would take over 1,000 days - over 2 1/2 years to bring these wells into production.
- A leading operator, Antero, recently said that they have less than a quarter of their leased acreage held by production (HBP).
- The 'wildcatting' of the dry gas Utica has barely started and is already showing off the charts production. .
One of the arguments for intermittent energy (wind/solar) is that once the farms are brought on-line, the energy source is free (wind is free; solar is free). Proponents of intermittent energy will say, that, yes, the upfront cost of building an intermittent energy farm is two, three, or several times more expensive than building a natural gas plant, but the cost of energy going forward will offset that initial upfront cost (and that's with huge government tax subsidies). But with natural gas so inexpensive and so plentiful, the argument that wind/solar is free while natural gas will still incur a cost does not hold up. The on-going cost of natural gas is so inexpensive it is a minor piece of the full utility bill. The major part of the utility bill (coal, natural gas, solar, wind) is administrative costs, profits, regulatory inefficiencies, transmission costs, hidden fees, taxes, net metering, etc. Just like buying a bag of potato chips: a $4.99 bag of chips with 20 cents worth of potatoes.
Ohio and Pennsylvania activity report, October 5-12 -- The Pennsylvania Department of Environmental Protection’s Oil and Gas Management department issued 17 oil and gas permits last week, October 5-12. This total may seem underwhelming compared to the previous week’s eruption of 64 oil and gas permits, but researchers at Johns Hopkins University Bloomberg School of Public Health might see a permit cutback as a good thing. The university issued a study suggesting pregnant women who live closer to active natural gas well have a greater risk of high-risk pregnancies or preterm births. The state’s Department of Environmental Protection and Department of Conservation and Natural Resources are partnering with Pennsylvania State University to improve seismic monitoring. Though earthquakes rarely occur in Pennsylvania, scientists believe the study will help track valuable information about the area’s environment. The US Geological Survey reports earthquakes linked to man-made causes like oil and gas development rarely prompt safety concerns, but an earthquake in 1954 believed to be linked to a sinking coal mine caused about $1 million in damages to a neighborhood in Wilkes-Barre. In the latest reports for Ohio, the state issued one horizontal permit for its Marcellus shale from September 27 to October 3. The singular permit, granted to CNX Gas Company LLC, is set for Switzerland in Monroe County. The Utica formation, however, gained 18 horizontal permits for that same time frame, most of which are concentrated in Monroe and Belmont Counties.
Ohio, W.Va., Pennsylvania combine efforts on gas drilling — Ohio, West Virginia and Pennsylvania have agreed to cooperate — rather than compete — in attracting shale-gas development and jobs to their region over the next three years. The states signed an agreement Tuesday during the Tri-State Shale Summit in Morgantown, West Virginia. They agreed to coordinate marketing efforts, workforce development, investment strategies and academic research as they capitalize on Utica and Marcellus shale development “in an environmentally sound manner.” Shale gas has become available through the horizontal drilling practice commonly known as fracking. Ohio Lt. Gov. Mary Taylor said challenges and opportunities surrounding the industry “do not recognize state lines,” so collaboration is essential. The U.S. Energy Information Administration reports the three states have had 85 percent of the increase in U.S. natural gas production since January 2012.
West Virginia, Pennsylvania and Ohio leaders pledge to help build area's shale industry — Community members, leaders and government officials from three states gathered Tuesday to collaborate on ideas in regards to the shale industry. The 2015 Tri-State Shale Summit, which took place in Morgantown at the Waterfront Hotel, featured speakers and guest panelists from West Virginia, Pennsylvania and Ohio. The purpose of the event was to provide a discussion on the future of Marcellus shale and Utica shale in the region. Among those in attendance were U.S. Sen. Joe Manchin, D-W.Va., Gov. Earl Ray Tomblin and Ohio’s Lt. Gov. Mary Taylor. The governor of Pennsylvania, Tom Wolf, provided a video message. During the event, Tomblin, Taylor and Wolf signed an agreement that pledged support and cooperation in the tri-state area for development of the natural gas industry in the Appalachian Basin. “The Allegheny Conference on Community Development, Team NorthEast Ohio and Vision Shared in West Virginia congratulate Gov. Tomblin, Gov. Wolf and Lt. Gov. Taylor on signing this unprecedented memorandum of understanding,” the groups said in a joint statement. “This is a critical step toward demonstrating that our 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.” Manchin said he was glad he had the opportunity to attend this event and hear from others in this industry.
Leaders from 3 states sign historic shale collaboration in Morgantown - – West Virginia, Pennsylvania and Ohio join forces to strengthen the Marcellus and Utica shale industry. At the Tri-State Shale Summit in Morgantown Tuesday, Governor Earl Ray Tomblin said through collaboration, the northeastern region of the country could become the petro chemical capitol of the world and home to billions of dollars in economic development. “As much as we don’t hear about Texas, Louisiana, Mississippi and Alabama individually we hear about the gulf coast being a petro chemical hot bed,” Tomblin stressed. “We must work to promote the Appalachian basin.” Projects like a 500 mile Atlantic coast pipeline through the state reaching North Carolina and a 300 mile mountain valley pipeline from Wetzel County to Virginia could attract drilling and gas companies to West Virginia. Independent state programs lowering taxes to entice industry growth and legislation on horizontal shale can create interest in W.Va. alone. But, Ohio Lt. Governor Mary Taylor, also speaking at the summit, said through collaboration each state could maximize its workforce to maximize interest in the region from companies worldwide. According to Taylor, 13, 863 jobs have already been created by Marcellus and Utica drilling. She noted a SafeNet program helping create qualified natural gas industry workers. “It’s a training program that is very specific to this industry and it’s currently offered at 3 schools in Ohio. I know workforce development will continue to be a key component of this agreement,” she explained.
Editorial: We know the drill: Plan for worst - New cases of common sense never cease to surprise us. Still, despite the shock at the agreement reached Tuesday at the Tri-State Shale Summit in Morgantown, no one should be in awe, yet. The shared action plan we refer to — signed by Ohio, Pennsylvania and West Virginia — provides for cooperation, rather than competition, among these states to attract shale gas development and jobs to this region for the next three years. The plan calls for coordinating marketing efforts, workforce training, investment policies and academic research, while capitalizing on Marcellus and Utica shale development. But most importantly, this agreement calls for achieving this development “in an environmentally sound manner.” First off, this agreement makes sense from many perspectives. Obviously, this region’s track record in natural gas production is staggering. According to the U.S. Energy Information Administration, these three states alone are responsible for 85 percent of the increase in U.S. natural gas production since January 2012. Their potential for production of natural gas in the future many suspect will be far more impressive as pipeline grids expand, liquified natural gas facilities at major ports go on line and prices rebound. This agreement minces no words about these developments, calling this three-state area “an emerging world-class energy center.” Even shale gas drilling’s byproducts are accounted for in this plan that seeks to bring major petrochemical manufacturers to this tri-state region.
Ohio, Pennsylvania, West Virginia likely to get three or four ethane cracker plants to produce ethylenes for plastics — Ohio, western Pennsylvania and West Virginia are likely to see three or four multi-billion dollar plants built to turn ethane from the Utica Shale into ethylene, a key ingredient for making plastics. That analysis came from Tom Gellrich of TopLine Analytics, a Philadelphia company that closely follows ethane markets, at Tuesday’s Utica Summit III that drew 125 people to Kent State University’s Stark Campus. Gellrich said he is confident that three or four of the so-called cracker plants will be proceeding forward in the Appalachian Basin by 2020. Royal Dutch Shell may be the company farthest along in developing a chemical plant to turn liquid ethane from the Utica Shale into ethylene, he said. That plant, with a $4 billion price tag, would be west of Pittsburgh on the Ohio River in Beaver County. Shell likely will make its final decision in the next 24 months, he said, and the plant could be running within five years or so. A Thai company, PTT Global Chemical, is looking at building a similar $5.7 billion cracker plant in Ohio’s Belmont County. Braskem/Odebrecht, two Brazilian companies, are looking at a site near Parkersburg, W.Va., although that proposal has run into problems. A Texas-based company, Appalachian Resins, had been looking at a small cracker plant in Ohio’s Monroe County, but those plans are now on hold.
US Gov't Support for Fracking Reveals Oil, Gas Industry Desperation - The use of public resources by the US government to protect domestic oil and gas interests reflects the desperation of those industries, Center for Biological Diversity Climate Media Director Patrick Sullivan told Sputnik. Sullivan was speaking two days after three US states — Ohio, West Virginia and Pennsylvania — announced on Tuesday that they were joining forces to advance the fracking industry in their territories. "This use of public resources to defend fracking is a sign of how desperate the oil and gas industry and its political allies are becoming," Sullivan said on Thursday. "The grass roots movement to rein in this threat to our health and environment is too strong to be thwarted by pandering politicians." Fracking is a technique of extracting shale gas and oil by injecting pressurized toxic liquid into the ground. Experts warn that the process endangers the environment through leakage of poisonous liquid materials into ground water. "People understand that fracking pollutes our air and water and endangers our climate, and they want this toxic technique stopped before more damage is done," Sullivan said.
Study Finds More Premature Births In Areas Of Heavy Fracking: Expectant mothers have a lot to be concerned about, but those living near fracking sites have even more to fear, an expanding body of evidence shows. Most recently, a data review of more than 10,000 pregnancies has linked living in heavily fracked areas with a higher risk of premature births. In the study, published Sept. 30 in the journal Epidemiology, scientists at Johns Hopkins University, Brown University and the University of California, Berkeley and San Francisco, analyzed data from the 10,496 pregnancies of 9,384 mothers in nearly 700 communities in Pennsylvania from 2009 to 2013. At the same time, they tracked shale gas drilling, fracturing and production in a 12.4-mile radius of each woman. What they found was that mothers who had higher exposure to these operations and infrastructure -- in essence, those who had more drilling and fracking sites in the vicinity of their homes -- were 40 percent more likely to give birth to premature babies. They were also 30 percent more likely to have high-risk pregnancies, the researchers found. "Any form of energy extraction that harms the well-being of infants and pregnant women has no place in society," Sandra Steingraber, a biologist with the organization Americans Against Fracking, who was not involved in the study, said in response to the new findings. "These data show that a ban on fracking is good prenatal care."
Fracking wells linked to high-risk pregnancies - New research from the Johns Hopkins Bloomberg School of Public Health has revealed that women living near fracking wells are at an increased risk of experiencing high-risk pregnancies and giving birth prematurely. The study, published in the journal Epidemiology, analysed data from 40 counties in north and central Pennsylvania, where extensive fracking has taken place over recent years. It looked at the records of 9,384 mothers who gave birth to 10,946 babies between January 2009 and January 2013, and correlated it with data on local fracking operations. Women living in the most active areas of fracking were 40 per cent more likely to give birth pre-term, and 30 per cent more likely to have their pregnancy classed as high-risk by an obstetrician.“The growth in the fracking industry has gotten way out ahead of our ability to assess what the environmental and, just as importantly, public health impacts are,” said lead author Brian S. Schwartz, a professor in the Department of Environmental Health Sciences at the Bloomberg School. “More than 8,000 unconventional gas wells have been drilled in Pennsylvania alone and we’re allowing this while knowing almost nothing about what it can do to health. Our research adds evidence to the very few studies that have been done in showing adverse health outcomes associated with the fracking industry.” While the study does not reveal why women near the most active wells are more likely to give birth prematurely, the researchers know that fracking activity results in increased noise, road traffic and other changes that can increase maternal stress levels. Questions have also been raised around the environmental impact of fracking, and its effects on air and water quality.
Fracking chemicals lower sperm count in mice when they reach adulthood, says new research - Chemicals used in fracking lowered the sperm count in mice when they reached adulthood, according to new research which could have fertility implications for people living in shale gas zones in the United States. American scientists tested 24 chemicals used in the oil and natural gas drilling technique and discovered that all bar one of them were endocrine-disrupting chemicals, or EDCs. EDCs mimic, block or otherwise interfere with hormones, the body’s chemical messengers that act through receptors to regulate the activity of cells and biological processes such as metabolism, reproduction, growth, and digestion. Tests were carried out on the chemicals from Colorado, either on their own or as part of a mixture, for their ability to activate or inhibit action of the oestrogen, androgen, progesterone, glucocorticoid and thyroid receptors using a human cell-based assay.lthough shale gas now accounts for around 50 per cent of US domestic gas production, fracking has failed to make similar inroads in the UK. Among the 23 EDCs the scientists identified, more than 90 per cent of the chemicals disrupted the functions of oestrogens and androgens, male sex hormones such as testosterone. In addition, more than 40 per cent could interfere with progestogens, another type of reproductive hormone, and glucocorticoids, which are involved in metabolism and stress. Thirty per cent of the chemicals disrupted thyroid hormone signalling. “It is clear EDCs used in fracking can act alone or in combination with other chemicals to interfere with the body’s hormone function. These mixture interactions are complex and challenging to predict. More research is needed to assess the many other chemicals used for fracking and to determine how they may be contributing to health outcomes.”
Fracking chemicals proven to reduce sperm count -- A comprehensive study of the chemicals that are actually used in fracking operations in several parts of the United States has found that at least 40 percent of the chemicals can lower sperm count in males, increase testicle size, and increase the testosterone levels in the blood. Dr. Susan C. Nagel of the University of Missouri in Columbia reported the findings in the Oct. 13, 2015, edition of the journal Endocrinology. The levels of the chemicals called endocrine-disrupting chemicals were found to be present in sufficient quantities to have an effect on humans. The study examined exposure of female mice to the chemicals and the resultant impact on the levels of estrogen, androgen, progesterone, glucocorticoid, and thyroid hormones in their offspring. . The female mice were exposed to 23 chemicals used in fracking for a period of 11 days before the mice gave birth. The exposure levels were equivalent to known levels found in waste water from fracking operations. The study compared the effect of fracking chemicals on the endocrine system of the exposed mice to a group of mice that were not exposed to any of the chemicals. The male mice showed lower sperm counts as adults, larger testes, and higher levels of testosterone in the blood. The researchers compared the level of birth defects, reproductive disorders, cancer, diabetes, obesity, and neurodevelopmental issues that could be attributed to prenatal exposure to fracking chemicals in humans and found a consistent correlation with the mouse study. The potential for endocrine system disruption in humans by fracking chemicals is considered conclusive by the study.
Study: Elevated organic compounds in Pennsylvania drinking water from hydraulic fracturing surface operations, not gas wells: In the largest study of its kind, a Yale-led investigation found no evidence that trace contamination of organic compounds in drinking water wells near the Marcellus Shale in northeastern Pennsylvania came from deep hydraulic fracturing shale horizons, underground storage tanks, well casing failures, or surface waste containment ponds. The presence of organic compounds in groundwater aquifers overlying the Marcellus Shale is likely the result of surface releases from hydraulic fracturing operations and not migration from gas wells or deep shale layers, according to researchers in the lab of Desiree L. Plata, assistant professor of chemical and environmental engineering at Yale. The results of the study were published in the journal Proceedings of the National Academy of Sciences. Brian Drollette, a Ph.D. student in Plata’s lab, is the lead author. Due to its vast reserves of natural gas, the Marcellus Shale has become an active site for hydraulic fracturing. During a period of rapid natural gas well expansion, the researchers regularly visited the northeastern region of Pennsylvania, covering about 7,400 square kilometers, over three years and obtained 64 samples from the drinking water wells of residential properties. Using a suite of chemical analyses, the researchers found that a subset of the groundwater samples contained low levels of organic compounds in areas close to natural gas wells. The analyses also indicated that these compounds most likely entered the groundwater supply from gas extraction operations above the ground surface — and not subsurface migration.
U S Chamber of Commerce : Yale Study: Hydraulic Fracturing Doesn’t Contaminate Drinking Water - Environmental activists who oppose hydraulic fracturing -and the oil and natural gas it produces-have more science to ignore. The latest study is in the Proceedings of the National Academy of Sciences. A team, led by a Yale University researcher, looked at 64 natural gas wells in Pennsylvania three to five years after drilling and found: There was no evidence of association with deeper brines or long-range migration of these compounds to the shallow aquifers. In laymen's terms, the act of drilling thousands of feet below the surface (far below drinking water supplies) and hydraulically fracturing natural gas wells does not contaminate drinking water. Another way of putting it is: Josh Fox doesn't know what he's talking about. Add this study to the growing list of research confirming that hydraulic fracturing is a safe way to develop energy: It's no wonder that Secretary of Energy (and physicist) Ernest Moniz said, 'To my knowledge, I still have not seen any evidence of fracking per se contaminating groundwater.' This reminds us that states are successfully regulating hydraulic fracturing. Duplicative federal regulations aren't needed. Also, states and local governments should rethink their bans on the technology. When done properly hydraulic fracturing produces abundant energy that powers the American economy, creates jobs, and saves consumers money.
Low prices don't stop investments in state's oil, natural gas - The sales price for a unit of natural gas is down dramatically, but industry leaders say interest and investment in West Virginia’s natural gas industry continues to climb. It’s true some West Virginia drillers have parked their rigs because of plunging oil and natural gas prices. And last week, Gov. Earl Ray Tomblin cited lower prices for natural gas sales — sales that are up 30 percent over last year — when explaining the unprecedented drops in the state’s severance tax collections and announcing an across-the-board budget cut of 4 percent for most West Virginia government agencies.But top executives of several companies developing the Marcellus and Utica shales in northern West Virginia, Ohio and Pennsylvania recently outlined the ongoing investments in West Virginia. Al Schopp, chief administrative officer, regional vice president and treasurer of Antero Resources Corp., said there’s also been a lot of talk in West Virginia over the past five years about a lack of local trained labor but “we’ve trained the local resource. “We’re the most active driller in West Virginia because we feel committed to keep those resources so we don’t go back to where we were five years ago in this area,” he said. “We need those local resources, to be productive.”
Sooner or Later? – The Search For Signs of A Natural Gas Production Slowdown – Part 2 -- On Tuesday of this week the Energy Information Administration released its latest Drilling Productivity Report, projecting declines in US natural gas production volumes. Meanwhile, daily pipeline flow data shows gas production hitting record highs and gas storage fill could also be heading toward maximum levels. The CME/NYMEX Henry Hub natural gas price for the November 2015 is responding to these burgeoning supplies, settling yesterday at $2.518/MMBtu, near all-time lows for this time of year. Today we continue our look at the various sources of natural gas production data and what they tell us. In the first part of “Sooner or Later,” we looked at the natural gas production data in EIA’s historical monthly report – the Natural Gas Monthly (NGM) – as well as two of its forward-looking monthly reports – the Short-Term Energy Outlook (STEO) and the Drilling Productivity Report (DPR). The September ending NGM published actual gas production volumes for July 2015 for the first time and showed that gas production rose to a record high in July, exceeding June production and also trumping prior expectations for July in the STEO and DPR data, both of which last month had predicted that July 2015 volumes would decline month-on-month. What’s more, the September 2015 STEO also raised its projections for August through December 2015 by about 100 MMcf/d. The latest DPR released earlier this week (Oct. 13) revised its July 2015 gas production estimates up by a total of about 400 MMcf/d across all seven shale basins, and, further, it lifted its projections for August through October 2015 as well. Upward revisions were largest in the Utica and Permian basins. Unlike the STEO and NGM, however, the latest DPR continues to predict that the combined volumes from all basins declined between June and July and will continue to decline month-over-month through at least November.
Pipeline firm: Landowners OK'd surveys for 55 percent of local route - The Tennessee Gas Pipeline Co. said in a filing with federal regulators Thursday it has acquired survey permission to 55 percent of the parcels along its so-called supply route — a section of the project that includes a stretch across Delaware, Schoharie and Chenango counties. The company behind the proposed 412-mile Northeast Energy Direct pipeline also advised the Federal Energy Regulatory Commission that it has been making changes to the proposed route in order to accommodate “construction constraints and requests from landowners, towns and applicable regulatory agencies.” The company, affiliated with energy giant Kinder Morgan, also reported that it is evaluating proposed major river crossings where it is considering using horizontal directional drilling. As of Sept. 30, Tennessee Gas said it has completed biological surveys on 104 miles of its supply path, or 61 percent of that section of the line, and for 93.5 miles of its market path, or 37 percent of that component of the route. The company said it is also evaluating potential access roads, contractor yards and other areas that would be used during construction. An updated listing of those sites will be included in the company’s request for a federal certificate to operate a pipeline.
In the Heart of Texas Oil Patch, It's Gas That's Taking Off -- The oiliest county in Texas has seen its new natural gas production capacity more than double as drillers hone in on their most profitable acreage. The peak output rate from new gas wells in Karnes County has surged 134 percent since January, estimates from Drillinginfo show. The only other county in Texas’s Eagle Ford shale patch where new gas capacity’s gaining is Live Oak, about 50 miles (80 kilometers) southwest of Karnes, the Austin-based energy data provider said. Gas producers are focusing on the most prolific parts of their plays as they grapple with the worst price collapse since 2008, and Karnes County has long been a sweet spot in Texas’s Eagle Ford shale. The 20,000-square-mile shale formation supplies about one-sixth of the nation’s crude. Karnes County, southeast of San Antonio, is home to “top- tier acreage," Chris Smith, senior research analyst at Drillinginfo, said in a telephone interview Wednesday. "In this pricing environment, a lot of the rigs still active would be moving toward that core area." The retreat to core fields, known as high-grading, is occurring in oil and gas fields across the U.S. Drillers are eager to cut costs amid low prices and focus their rigs on sweet spots that produce the most, Smith said. Natural gas prices have fallen about 36 percent over the past year to $2.420 per million British thermal units in New York. U.S. crude prices have plunged 44 percent over the same period. Rigs actively drilling wells in Karnes County total 24 this month, the highest among the 11 Eagle Ford shale counties for which complete data was available, according Drillinginfo. That’s up from 19 in June.
South Texas pipeline blast leads to evacuations, no injuries — A fiery natural gas pipeline explosion in South Texas has forced dozens of people from their homes and canceled classes at a nearby school. Nobody was hurt in the accident before dawn Friday near Encinal (EN’-suh-nahl), 25 miles north of Laredo. Authorities are seeking the cause of the blast. City Manager Velma Davila (DAH’-vee-lah) says 30 to 40 people who live near the pipeline evacuated to Encinal City Hall, as a precaution. Davila says classes were canceled Friday at Encinal Elementary School, about 500 yards from the pipeline. She says gas to the line has been cut and the fire was being allowed to burn itself out. The pipeline operator, San Antonio-based Lewis Energy Group, says the fire happened around 4:15 a.m. CDT Friday. Emergency personnel monitored the situation.
Oklahoma records eighth moderate earthquake for the week - A duo of moderate earthquakes shook northern Oklahoma Saturday, bringing the total of quakes registering a 3.0 magnitude or greater across the state to eight on the week. A 4.4 magnitude quake was recorded by the U.S. Geological Survey at 4:20 a.m. about 18 miles southwest of Medford and about 100 miles northwest of Cushing. Cushing is where the world’s most important crude oil storage hub is located and it is used to settle futures contracts traded on the New York Mercantile Exchange. Bob Noltensmeyer, Cushing Emergency Manager, said he had not received reports of significant damage although there were “shattered nerves.” “This one was pretty strong,” he said. “The whole house shook.” It was one of the stronger temblors the earthquake-prone state has had this year according to U.S. Geological Survey seismologist George Choy. Choy told The Guardian it had all the hallmarks of an induced quake, indicating that it was triggered by the injection of drilling wastewater underground. A 4.5 magnitude quake was recorded at 5:03 p.m. Saturday about one mile northwest of Cushing.
4.5 Oklahoma earthquake comes after rule changes for fracking wells: An earthquake with a magnitude of 4.5 that struck near the U.S. crude oil hub of Cushing, Oklahoma on Saturday occurred just days after regulators imposed new rules meant to prevent temblors in the area and said more changes were possible. The Oklahoma Corporation Commission (OCC), which regulates the state’s oil and gas industry, ordered companies on Sept. 18 to shut or reduce usage of five saltwater disposal wells around the north-central Oklahoma city of Cushing. Saltwater, a normal byproduct of oil and gas work, is put into deep disposal wells that scientists say have contributed to a rash of small and medium-sized earthquakes in Oklahoma since 2009. At the time of its latest directive, the OCC said its “plan may be altered as more data is made available”. On Sunday, some people on social media, fearing a quake could cause a fire or explosion in Cushing in the future, were already calling for tougher rules. “This needs to stop,” read a comment at NPR’s StateImpact. “The injection wells & fracking are wrecking Cushing.”
Oklahoma Earthquakes 2015: Tremors Rise As Oklahoma Officials Struggle To Stem Fracking Wastewater Flow --- The ground shook throughout Oklahoma in recent days, including near the crucial Cushing oil storage hub. A 4.5-magnitude earthquake struck Oct. 10 just miles from the fields of white round tanks that hold the largest share of U.S. crude stockpiles, sparking fears among residents of potential explosions. A separate tremor in north-central Oklahoma sent homes and buildings gently swaying on the opposite side of the state, as far south as Norman and Oklahoma City. Such shaking has become routine in parts of Oklahoma, where oil and gas companies are injecting unprecedented volumes of wastewater into the ground and inducing earthquakes, scientists have confirmed. Oklahoma surpassed California last year as the earthquake capital of the lower 48 states and will likely beat the Golden State in 2015. Nearly 700 earthquakes of magnitude 3.0 or greater have rocked Oklahoma this year, a more than 300-fold leap from the start of the drilling boom in 2008. Insurance claims are rising as foundations crack and bricks crumble, while geologists are warning of the unknown long-term effects of continuously rattling an entire state and pumping it full of wastewater. Oklahoma officials say they are still struggling to devise a strategy to reduce seismic activity without strangling the energy industry, the state’s largest employer. The government has resisted calls from environmental groups to place a temporary ban on new wastewater injections while agencies and companies study the phenomenon. The Oklahoma Corporation Commission, which regulates the oil and gas sector, has taken some steps to reduce earthquakes, including limiting permits for new wells in “areas of interest” and requiring certain disposal wells to temporarily shutter or reduce water intake if shaking occurs nearby. But scientists in the state say those measures haven't been enough to drive a sharp decline in earthquakes.
Protesters flood IUB with objections over Bakken Pipeline - Chants of “No oil in our soil” could be heard outside of the Iowa Utilities Board offices in Des Moines Thursday as protesters, including a woman from Huxley, gathered to deliver more than 1,000 objections concerning the proposed Bakken Oil Pipeline. The near-80 protesters, organized by Iowa Citizens for Community Improvement, the Bakken Pipeline Resistance Coalition and the Food Sovereignty Alliance, stood on the sidewalks outside the IUB building expressing their concerns about the IUB rushing the proposal from Texas-based Dakota Access LLC forward in spite of overwhelming public opposition, as well as concerns over eminent domain abuse and safety issues. Brenda Brink, of Huxley, was among the people who attended Thursday’s rally in an attempt to stop the construction of the pipeline that would travel through 18 counties in Iowa, including Story. During the rally, Brink took part in a skit where she wore a giant pig mask and a business suit to portray an executive from the company attempting to construct the pipeline. Brink lives less than a mile away from the pipeline’s proposed path and said she finds the risk for local residents unacceptable. “I’m here because we need to stop this right now. There’s a precedent getting ready to be set in Iowa,” Brink said. “It’s in my backyard and I don’t want to see it anymore.”
Local witnesses enter testimony for Bakken Pipeline hearings - Nine witnesses, including several from Story County, filed formal testimony with the Iowa Utilities Board Monday on behalf of the Iowa chapter of the Sierra Club in preparation for a formal hearing on the Bakken Pipeline scheduled for November in Boone. According to a press release, the testimony is part on an ongoing effort by the Sierra Club to oppose the construction of the pipeline proposed by Texas-based Dakota Access LLC. If built, the pipeline would extend 1,100 miles from western North Dakota to Patoka, Ill., with 343 miles of the pipeline traveling through 18 counties in Iowa, including Story. The pipeline would initially carry 320,000 barrels each day but could reach up to 450,000 barrels per day. “The Iowa Chapter is concerned that the IUB is rushing the process to comply with Dakota Access’s construction timeline and not requiring Dakota Access to adequately evaluate the impacts of this project,” said Pam Mackey-Taylor, Iowa chapter of the Sierra Club conservation chair, in a press release. “These nine witnesses have provided valuable testimony on why the IUB should not allow the pipeline to move forward.”
ND regulators approve 100K barrel-per-day oil pipeline --- North Dakota regulators have approved a pipeline that would move up to 100,000 barrels of oil a day from the state’s oil patch. The Bismarck Tribune reports the state Public Service Commission approved the NST Express Pipeline on Wednesday. The pipeline is part of Texas-based NorthStar Midstream. The 23-mile-long pipeline is designed to move crude from a hub near Alexander to a terminal in East Fairview where it will interconnect to other pipelines that supply oil to refineries across the country. The project cost is pegged at more than $60 million and is expected to be completed late next year.
Study: Grassland birds losing ground to ND oil drilling -— A new federal study says many grassland birds are being displaced by drilling activity in western North Dakota’s oil patch. The three-year study completed in 2014 was done by scientists with the U.S. Geological Survey and the federal Fish and Wildlife Service. Researchers studied several oil well sites and nearby gravel roads and found some grassland birds avoided those areas by more than a quarter mile. The study says at least two species of grassland birds “were tolerant of oil-related infrastructure.” The study says combining numerous wells in a single area and putting them near existing roads could help minimize the impact on the birds. North Dakota Petroleum Council Vice President Kari Cutting says the state already requires that to be done.
Oil official: Federal rules threaten North Dakota's output — Forget slumping crude prices — it’s a “suite” of proposed regulations by the Obama administration that most threaten North Dakota’s oil production, a top industry official said Wednesday. “Jurisdictional overreach appears to be the norm in the federal agency rulemaking process,” North Dakota Petroleum Council Vice President Kari Cutting told a state legislative committee on energy development. North Dakota sweet crude was fetching about $38 a barrel Wednesday, which is about half of what it sold for a year ago. The number of drilling rigs has plummeted in North Dakota by nearly two-thirds to 66 due to low prices but production remains at near-record levels as drillers concentrate rigs in high-volume areas. Cutting, whose group represents more than 550 companies working in the oil patch, said the industry has increased efficiencies to keep production steady at about 1.1 million barrels daily, second only to Texas. But the industry will have a tougher time adapting to what she calls a “jurisdictional grab” by the federal government. New federal rules proposed by the Environmental Protection Agency and the state Bureau of Land Management range from increased air quality standards to additional animals being listed as endangered species, Cutting said. North Dakota’s oil industry is most concerned about the possibility of the federal government regulating the burning of natural gas as a byproduct of oil production, Cutting said.
Over 33K gallons of saltwater spill in western North Dakota — The state Department of Health says more than 33,000 gallons of saltwater has spilled in western North Dakota. The department says the spill is at a site operated by Hillstone Environmental Partners LLC in McKenzie County. The department says it doesn’t appear surface waters have been impacted. The site of the spill, reported Wednesday, is still being investigated to see if groundwater is affected. Brine is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it. Department of Health and North Dakota Oil and Gas Division officials are at the site. The Health Department is monitoring the investigation. The firm didn’t immediately respond to a request for comment.
North Dakota oil output slips again as outlook for industry gets bleaker - North Dakota oil production fell 1.7 percent in August, slipping below 1.2 million barrels per day in the fifth monthly decline since the state’s output peaked last December. The nearly 21,000 barrel-per-day drop from July represented the first time in 12 years that the state’s oil output fell in August, a month when the industry historically has a growth spurt thanks to favorable conditions, the state Department of Mineral Resources reported. “Production is down, and significantly down,” Lynn Helms, the head of the department, said Tuesday in his monthly update on the industry. The decline for August “is definitely not normal,” he added. “This is a reflection of what’s happening in the industry.” World oil prices sank to a six-year low in August despite an increase in demand, but the growth in demand is expected to end in 2016, the International Energy Agency said Tuesday. U.S. shale producers, like North Dakota’s, face a big challenge because new shale wells rapidly fall off in production — an 82 percent decline in the first two years — forcing continuous investment in new wells to sustain production, the IEA said. U.S. oil production growth could be stopped in its tracks, IEA said. North Dakota oil, which sells at a discount to the benchmark crude, fell almost $10 per barrel from July to August, but has since recovered slightly to $35 per barrel.
Williston moves toward closing the last of the crew camps - In the early hours of the morning, the oilfield crew is finishing its shift sat down for a quick bite. Finishing a plate of eggs and fruit, hydraulic fracker, Jay Huntz, sits alone in front of the cafeteria TV. “Man camps are nice,” Huntz said as he sipped on his coffee. “We work 16 to 18 hour days. We can come in, get something to eat, throw your dishes in the sink and get yourself a little bit of sleep. It makes life a little bit easier.” Developers, hoteliers, crew camp operators, and city officials have held separate meetings to discuss the future of crew camps in Williston. Mayor Howard Klug said developers may have had closed meetings if they chose to do so, but some developers have sat in on meetings meant for the crew camp operators. Due to the nomadic lifestyle of oil workers, they can be at a rig site one week and relocated to another the following week. Few workers say they are looking to make that kind of commitment to an area due to the uncertainty of where the work comes from. “From our perspective, we don’t believe they will flock into town to stay in an apartment,” said Target Logistics Regional Vice President Travis Kelley. “They are very temporary in nature.”
L.A. officials set oil drilling terms but fail to enforce them - When oil companies wanted to drill wells at a South Los Angeles site decades ago, city planners set out a long list of requirements intended to ensure that oil production was “strictly controlled to eliminate any possible odor, noise” and other hazards. Nearly a half-century later, neighbors complained about a foul stench, headaches and nosebleeds. Hundreds of complaints were filed with regional air quality regulators. Years after concerns first erupted, following a public outcry, the current operator of the site voluntarily suspended production. And the city attorney sued to prevent the firm, AllenCo Energy Inc., from resuming drilling, arguing it had created a “public nuisance.” But what the city didn’t do as the problems arose was investigate whether AllenCo was complying with the requirements originally imposed by the city. Los Angeles’ apparent lack of follow-through on its operating conditions, which The Times found in files in a government archive, points to broader weaknesses in city oversight of roughly 1,000 active wells across the city, many of them nestled near homes and schools. In the past, city planners crafted rules on a case-by-case basis that were meant to minimize problems at each drilling site. But Los Angeles has no systematic way to ensure those requirements are being followed.
California’s Big Fracking Hoax -- In December 2013, we gave the world a much-needed reality check on the Monterey Shale, proving unequivocally that the assumptions about recoverable oil in this California region were wildly optimistic. Five months later, the U.S. Energy Information Administration (EIA) issued a 96% downgrade of its Monterey Shale oil estimates, and last week, the USGS slashed estimates beyond the original EIA projections by nearly 99%, proving the merit of our analysis. Effectively, California’s Monterey Shale can only yield enough tight oil to power the U.S. for just 26 hours. Compare that with the EIA’s original estimate of over 2 years! Listening now? Good. We have more news for you. The EIA recently released its Annual Energy Outlook 2015, and we decided to put its data to the test with David Hughes, who also authored groundbreaking independent analysis of U.S. shale gas and tight oil production. Using real production data, a very different story emerged than what the EIA would lead you to believe. Three recently released updates show how the newest government projections and assumptions on U.S. shale gas and tight oil don’t hold up to scrutiny. If you care at all about the future of the U.S. energy picture, you’re going to want to pay attention. We’ve got a proven track record for getting these things right.
Alaska Governor: To Pay For Climate Change Programs, The State Needs More Drilling -- Climate change is already hitting Alaska hard — the state has warmed twice as fast as the rest of the country, and those warming temperatures are driving a loss of sea ice, melting of permafrost, and worsening fire season. Already, the majority of Alaska’s native villages are threatened by erosion and flooding, and a handful have made serious plans to relocate. We have villages that are washing away because of changes in the climate. But adapting to the impacts of climate change isn’t cheap — in addition to part of the $1 billion National Disaster Resilience Competition fund that Alaska is hoping to tap into, the state is also requesting $162.4 million in relief for villages vulnerable to climate change. To help finance its adaptation to climate change — including programs to relocate native villages — Alaska’s governor Bill Walker (I) told BBC News that the state needs to “urgently” drill in the Arctic National Wildlife Refuge. “We are in a significant fiscal challenge. We have villages that are washing away because of changes in the climate,” Walker told BBC News.
Cutting Staff Pay to Keep Workers - WSJ: As layoffs become the energy industry’s main response to low oil prices, a handful of producers are aiming to trim personnel costs without pink slips by spreading the pain among their employees. Companies including Occidental Petroleum and Canadian Natural Resources are employing hiring freezes, caps on bonuses, and even across-the-board wage cuts to preserve jobs. They and others that already have reduced payrolls—including many drilling and well servicing firms—are reluctant to slash further, say energy-industry experts. In part, they’re trying to avoid the type of skilled worker shortages that followed mass job cuts in prior downturns. But it’s also because their businesses can’t succeed without sufficient staff, especially if the downturn in oil prices reverses course. More than a year after oil prices began their descent to under $50 a barrel from over $100, the number of energy-company layoffs world-wide has topped 200,000, says Graves & Co., a Houston consulting firm. More cuts are expected because crude shows little sign of rebounding soon.Occidental Petroleum has avoided mass layoffs so far. The Houston-based company told its employees last month it will cap bonus payments this year and freeze salaries into early 2016, The last time Occidental disclosed large staff layoffs was in 1998, when it shed hundreds of jobs and cut its head-office workforce by half. That was during another period of mass layoffs in the oil industry stemming from low crude prices and consolidation. Those cutbacks led to a dwindling number of petroleum engineers followed by what some described as a “lost generation” that left the energy industry exposed to shortages of high-skilled professionals a decade later.
"There's No More Fat To Be Cut:" Desperate Oil Producers Cut Salaries To Save Mission Critical Jobs --- Early last month, Citi “exposed” what it said was shale’s “dirty little secret.” In a nutshell, the entire business model is uneconomic and thus the only reason a lot more drillers aren’t bankrupt is because capital markets are still wide open. “Capital markets plugged shale’s ‘funding gap’ from 2009 through the first half of 2015, but they are now tightening, reducing access to liquidity for some producers and shaping their ability to drill,” Citi said, adding that “with eight bankruptcies already announced this year, weaker producers may live or die by the whims of capital providers.” Well, yes. When free cash flow is negative, you’ve dug yourself a hole (no pun intended) and it has to be filled somehow, so you turn to capital markets. It’s just that simple. Of course the perpetually low prices that this dynamic engenders affect the entire space, which is why you’ve seen capex cuts and layoffs even among the industry’s stronger players. Now, it would appear that all of the proverbial fat that can be trimmed, has been trimmed which means that, as WSJ reports, further cost cuts will now have to come from salary cuts because going forward, cutting jobs altogether would imperil companies’ ability to operate. Here’s more: As layoffs become the energy industry’s main response to low oil prices, a handful of producers are aiming to trim personnel costs without pink slips by spreading the pain among their employees. Companies including Occidental Petroleum Corp. and Canadian Natural Resources Ltd.are employing hiring freezes, caps on bonuses, and even across-the-board wage cuts to preserve jobs. They and others that already have reduced payrolls—including many drilling and well servicing firms—are reluctant to slash further, say energy-industry experts.In part, they’re trying to avoid the type of skilled worker shortages that followed mass job cuts in prior downturns. But it’s also because their businesses can’t succeed without sufficient staff, especially if the downturn in oil prices reverses course.
Schlumberger to cut more jobs, sees recovery pushed to 2017 - Schlumberger Ltd, the world’s No.1 oilfield services provider, said it would cut more jobs and consolidate its manufacturing and distribution network as it did not expect a recovery in demand before 2017. The company’s shares fell as much as 4.6 percent to $72.63 in late-morning trading. Rivals Halliburton Inc and Baker Hughes Inc were also down about 4 percent. “The likely timing gap between the oil price recovery and the subsequent increase in oilfield services activity in combination with a more conservative spending outlook from our customers is causing us to now take further action,” said Chief Executive Paal Kibsgaard said on a conference call on Friday. Exploration and production spending is expected to fall for a second consecutive year in 2016, a first since the 1986 downturn, Kibsgaard said. However, the OPEC members’ current spare capacity is less than 2 million barrels per day, compared with more than 10 million bpd in 1986. Schlumberger, whose comments are closely watched for a glimpse into industry trends, said the first quarter of 2016 would be weaker than the current quarter as customers tighten purse strings further, hurting the usual year-end sales of software, products and multi-client licenses. The company said it would take a charge to cover severance costs for additional headcount reductions in the fourth quarter.
There Will Be (More) Fracking Blood to Come -- As the petrodollar debt bubble continues to implode. Dragging domestic and foreign frackers down. Quantitative Easing (QE), the Fed’s free money policy, facilitated the production of shale oil and gas where the production decision was no longer being tied to profitability. For instance, shale producers could borrow cheaply, produce at a loss and debt investors would simply look the other way because of the attractive yields that were offered on the debt. The overriding theme of these pieces was that the eventual crack-up in the energy sector would precipitate a crisis that was much larger than the great subprime crisis of last decade as waves of shale defaults would serve as the catalyst for investors to stop reaching for yield and once again try to understand what exactly they owned. Fast forward 9 months from the last piece and most of these shale producers are mere shells of themselves. Amazingly, these companies can still find creative ways to tap the debt markets, stay alive and flood the market with oil. Eventually, most won’t make it and I believe that the ultimate global debt write-off is in the hundreds of billions of dollars—maybe even a trillion depending on which larger players stumble. That doesn’t even include the service companies or the employees who have their own consumer and mortgage debt.I believe that shale producers are the “sub-prime” of this decade. As they vaporize hundreds of billions in investor capital, thus far, there has been a collective shrug as everyone ignores the obvious – until suddenly it begins to matter. By way of timelines, I think we are now getting to the early summer of 2008 – suddenly the smart people are beginning to realize that something is wrong. Credit spreads are the life-line of the global financial world. They’re screaming danger.
Fracking Junk Bonds -- Where did the frackers get their money ? From junk bonds. Source: U.S. Energy Information Administration, based on Evaluate Energy. Results from second-quarter 2015 financial statements of a number of U.S. companies with onshore oil operationssuggest continued financial strain for some companies. Low oil prices have significantly reduced cash flow for U.S. oil producers, and to adjust to lower cash flows, companies have reduced capital expenditures and raised more cash from debt and equity. Because of the large amount of debt accumulated from past years, a higher percentage of operating cash flow is being devoted to servicing debt. Debt service payments consist of principal repayment to creditors and typically are fixed in both amount and frequency, agreed upon before a company receives a bank loan or issues a bond. Some companies have been able to refinance their debt — that is, paying off old debt and taking on new debt, perhaps with a different interest rate or longer maturity. This option has increasingly become more expensive, because interest rates for energy company debt issuance have risen as crude oil prices declined, and rates are now higher than for any other business sector. The spread for energy company bond yields with a credit rating below investment grade averaged 11 percentage points above the risk-free rate since August, indicating higher interest rates for energy companies.
Can The Oil Industry Really Handle This Much Debt? --As the crude industry has been wrestling with low oil prices that declined by over 50 percent since its highest close at $107 a barrel in 2014, many exploration and production companies worldwide and in the U.S., in particular, have faced large shortfalls in revenue and cash flow deficits forcing them to cut down on capital expenditures, drilling and forego investments in new development projects. High debt levels taken on by the U.S. oil producers in the past to increase production while oil prices soared, have come back to haunt oil and gas companies, as some of the debt is due to mature by the end of this year, and in 2016. Times are tough for U.S. shale oil producers: Some may not make it, especially given that this month, lenders are to reassess E&P companies’ loans conditions based on their assets value in relation to the incurred debt. Throughout the oil price upturn that lasted until the middle of 2014, companies sold shares and assets and borrowed cash to increase production and add to their reserves. According to the data compiled by FactSet, shared with the Financial Times, the aggregate net debt of U.S. oil and gas production companies more than doubled from $81 billion at the end of 2010 to $169 billion by this June In the first half of 2015, U.S. shale producers reported a cash shortfall of more than $30 billion. The U.S. independent oil and gas producers’ capital expenditures exceeded their cash from operations by a deficit of over $37 billion for 2014. As The Wall Street Journal reported in August, Exxon Mobil Corp. and Chevron Corp. stated they were cutting stock-buyback programs, while Linn Energy LLC announced it would stop paying dividends to its shareholders. Meanwhile, several small U.S. oil and gas producers have filed for chapter 11 bankruptcy protection this year. Companies with persistently negative free cash flow fall into the trap of borrowing, as they have to incur more debt to repay what they have already borrowed before.
Wall Street firms that bankrolled oil boom are hurting - Oct. 14, 2015: Cheap oil is creating headaches for the Wall Street firms that bankrolled America's oil boom. That's because the crash in oil prices is putting energy companies under financial stress. Oil revenue has dried up, yet these companies are still saddled with tons of debt. America's largest banks are now raising red flags about the health of those loans. For the second-straight quarter, the banks have warned investors about an uptick in troubled energy loans. Banks "are going to lose money on the loans they've made. That's pretty evident -- whether oil prices go to $30 or $80 a barrel," said Dick Bove, an analysts who covers banks at Rafferty Capital. The American energy boom of the past decade was fueled by a wave of cheap credit from big banks. But now cracks have begun to emerge in that boom because oil prices have plunged from around $100 last year to below $50 today. Wells Fargo on Wednesday said it was forced to set aside more cash to cushion against potential commercial defaults due to the "deterioration in the energy sector." Bank of America reported it may need to set aside an additional 15% to deal with troubled commercial loans, specifically in its oil and gas portfolio. JPMorgan Chase too boosted its oil and gas loan-loss reserves by about $160 million last quarter. The increase was driven by the sentiment that "oil prices will remain low for longer," Marianne Lake, JPMorgan's chief financial officer, told reporters during a conference call.
Oil slide means ‘almost everything’ for sale as deals accelerate - At Large: More than $200 billion worth of oil and natural gas assets are for sale globally as companies come under renewed financial pressure from the prolonged commodity price rout, according to IHS Inc. There are about 400 buying opportunities as of September, IHS Chief Upstream Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year, more than 40 percent below the five-year mean. Low prices have slashed profits and as of the second quarter about one-sixth of North American major independent crude and gas producers faced debt payments that are more than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas acquisitions this year, the most in more than a decade, compared with $167.1 billion the same period in 2014, data compiled by Bloomberg show. “Basically almost everything is for sale,” Fryklund said Oct. 8 in Tokyo. “Low cycles are when a lot of these companies can rebalance their portfolios. In theory, this is when you upgrade your existing portfolio.” Companies with strong balance sheets are seeking buying opportunities, said Fryklund, citing Perth, Australia-based Woodside Petroleum Ltd.’s $8 billion offer for explorer Oil Search Ltd. and Suncor Energy Ltd.’s $3.3 billion bid for Canadian Oil Sands Ltd. Both targets rejected initial offers. As of August, one out of every eight junk-rated oil companies was in danger of defaulting, according to Moody’s Corp. WTI plunged below $40 a barrel in August, to the lowest price in six years. Next year the U.S. benchmark may trade around $55, said Fryklund. It will take several years for supply and demand to rebalance and prices may rise to about $70 a barrel by 2018, he said.
Schlumberger: This Is "The Most Severe Downturn For Decades", "The Recovery Now Appears To Be Delayed" -- Moments ago energy infrastructure giant Schulmberger reported third quarter earnings. We won't waste much time on the numbers (EPS of $0.78 beat consensus estimates by 1 cent due to $545 million in buybacks, and a drop in the effective tax rate, which was nonetheless a 48% plunge Y/Y, on revenue of $8.5bn which missed, and tumbled 33% Y/Y) and instead we will focus on the wording in the press release which, just like Fastenal's from a few days ago, admitted the recession has arrived. Here it is, with the punchlines highlighted: Schlumberger Chairman and CEO Paal Kibsgaard commented, “Schlumberger third-quarter revenue decreased 6% sequentially driven by a continuing decline in rig activity and persistent pricing pressure throughout our global operations. North America revenue fell 4% sequentially as we focused on balancing margins and market share, while International revenue dropped 7% due to customer budget cuts, activity disruptions, and service pricing erosion. “The business environment deteriorated further in the third quarter.However, the cost reduction actions we took in previous quarters and the acceleration of our transformation program enabled us to protect our financial performance in what is shaping up to be the most severe downturn in the industry for decades. As a result of our actions, we have been able to deliver pretax operating margins well above those seen in any previous downturn and we have continued to generate significant liquidity with free cash flow of $1.7 billion in the third quarter, representing 170% of earnings.
Lifting of 40-year oil ban heads to Senate - Oil industry officials hailed yesterday’s U.S. House of Representatives vote to lift the 40-year-old ban on crude exports as an opportunity to save consumers money and create new jobs, but environmentalists said it would worsen global warming and heighten the risk of harmful spills. American Petroleum Institute President and CEO Jack Gerard said the 261-159 vote on the measure, which now heads to the Senate, where its prospects are uncertain, “starts us down the path to a new era of energy security, saving consumers billions and creating jobs across the country.” “American producers would be able to compete on a level playing field with countries like Iran and Russia, providing security to our allies and accelerating the energy revolution that has revitalized our economy,” Gerard said in a statement. “… As the U.S. Energy Information Administration reported, lifting the ban could increase the value of U.S. crude and incentivize domestic production, which puts downward pressure on global oil prices and the prices that consumers pay for fuel.”
Energy Sector Divided on Measure to Lift Export Ban on US Crude Oil - U.S. oil producers claim that they're at a competitive disadvantage because they're restricted to selling their oil domestically at a time when they desperately need new markets to sell their expanding inventories. Congress is now debating whether or not to lift the 1970's era ban on crude oil exports that was established in the name of protecting national energy security. Legislation to lift the ban has passed in the U.S. House Committee on Energy and Commerce. Now the Senate Banking Committee is attempting to craft its version. The debate is hardly black and white: Some of the major players in the American energy sector oppose the idea. The debate has implications for both employment in the energy industry and for national security. To set the stage, imagine that you refine crude oil in this country. You buy the oil at a price known as WTI, West Texas Intermediate.That’s the benchmark price for U.S. crude. WTI is less, sometimes a lot less, than Brent crude, the world’s benchmark price. So you buy the discounted U.S. oil, refine it and sell the finished product to the highest bidder. “Right now because we don’t export crude oil, there is what some view as a disproportionate amount of profits going to refiners," "Because they can take in cheaper crude oil in the U.S. and export refined products at a global price for gasoline and diesel," he said. Refiners have a decidedly different take. They’ve spent billions of dollars over the last two decades to be better refiners of heavy, sulphur-laden oil known as sour crude because that’s what traditional drilling pulled up. But fracking, which has triggered a shale revolution in this country, is pulling up a higher quality grade of oil with much less sulphur called light, sweet crude. U.S. refiners are adapting to process an abundance of light, sweet crude oil, but not nearly fast enough to accommodate many U.S. producers. Four U.S. refiners have formed a lobby called Consumers and Refiners United for Domestic Energy, or CRUDE, to fight against the lifting of the export ban. “Refining is critical to American energy independence," said CRUDE’s spokesman Jay Hauck.
Dirty energy plutocrats are trying to buy the presidential election - The New York Times combed through Federal Election Commission reports for the presidential race through June 30 and looked at every donor who gave more than $250,000 — 158 families in total. Altogether, that group and the corporations they control gave more than $176 million. Add in the 200 families that gave between $100,000 and $250,000, and those 358 families have given well more than half of all the campaign funds thus far. Of the 158 mega-donors, the most common industry in which they have made their money is finance and the second biggest is energy, mostly oil and gas. The donors are disproportionately old, white, and male, concentrated in a handful of very rich, non-diverse neighborhoods. Most importantly, their politics are not representative of the country at all: 138 of the 158, or 87 percent, are Republicans. Contrary to the popular image of moderate pro-business Park Avenue bankers, some of these donors hail from the GOP’s anti-government right wing. “More than a dozen donors or members of their families have been involved with the twice-yearly seminars hosted by the Kochs,” the Times notes. What they and the establishment donors have in common: They are investing in their own financial self-interest. Donating a few million dollars to a candidate who goes on to win and cuts a billionaire oil magnate’s taxes, or stymies regulations of his industry, will more than pay for itself. If you’ve been wondering why public opinion in favor of higher taxes on the rich, increased Social Security benefits, or tighter regulation of carbon pollution doesn’t lead to passage of those policies, this is a big reason.
US puts a plug on Arctic oil exploration - The US government has put a final block on the prospect of oil exploration in the country’s Arctic in the foreseeable future, cancelling plans to sell more drilling leases in the region, and refusing to extend leases previously sold to Royal Dutch Shell and Statoil. The decision was welcomed as a victory by environmental campaigners, and attacked by the industry and politicians in Alaska as a blow to US energy security. The possibility that any oil companies would want to explore in the Arctic seas off the north coast of Alaska was already remote following Shell’s announcement that it was ending its drilling campaign in the region having found only traces of oil with its first well this summer. The decisions by President Barack Obama’s administration set the seal on that position, and could block further development in the Arctic for decades. Lisa Murkowski, a Republican senator for Alaska, described the administration’s move as “stunning”, saying it betrayed the interests of US energy security. She added that it was the latest move in “a destructive pattern of hostility towards energy production in our state that began the first day this administration took office, and continued ever since”. The US Department of the Interior had planned two sales of offshore Arctic drilling leases, in 2016 and 2017, but the slump in oil prices and the resulting pressure on oil companies’ finances meant they might not have attracted much interest anyway.
Mexico to import 9 Bcf/d of natural gas from US under five-year plan: ministry - Mexico aims to import 9 Bcf/d of natural gas from the US under a five-year plan to build gas pipelines and infrastructure, Mexico's Energy Ministry said Wednesday. Currently, Mexico imports about 1.5 Bcf/d from the US. The five-year plan, to run from 2015-2019, includes a new compression station in the northern state of Chihuahua and 13 other projects, many of which are already being tendered or under construction. Investment was calculated by Energy Minister Pedro Joaquin Coldwell at $11 billion through 2019.So far all the tenders are being organized by the two state companies of the sector, the Federal Electricity Commission and the oil company Pemex. The recently founded Cenagas will organize them beginning from next year. Cenagas is the autonomous state regulator for natural gas, under the terms of last year's energy reform. The Ramones pipeline, already under construction by Pemex from the US border to the north Mexican state of Nuevo Leon, is to be extended by 855 km to the southern Gulf state of Veracruz, Joaquin Coldwell said at an event to present the five-year plan.
Oil Sands Boom Dries Up in Alberta, Taking Thousands of Jobs With it - At a camp for oil workers here, a collection of 16 three-story buildings that once housed 2,000 workers sits empty. A parking lot at a neighboring camp is now dotted with abandoned cars. With oil prices falling precipitously, capital-intensive projects rooted in the heavy crude mined from Alberta’s oil sands are losing money, contributing to the loss of about 35,000 energy industry jobs across the province.Yet Alberta Highway 63, the major artery connecting Northern Alberta’s oil sands with the rest of the country, still buzzes with traffic. Tractor-trailers hauling loads that resemble rolling petrochemical plants parade past fleets of buses used to shuttle workers. Most vehicles carry “buggy whips” — bright orange pennants attached to tall spring-loaded wands — to help prevent them from being run over by the 1.6-million-pound dump trucks used in the oil sands mines. Despite a severe economic downturn in a region whose growth once seemed limitless, many energy companies have too much invested in the oil sands to slow down or turn off the taps. In addition to the continued operation of existing plants, construction persists on projects that began before the price fell, largely because billions of dollars have already been spent on them. Oil sands projects are based on 40-year investment time frames, so their owners are being forced to wait out slumps.
No quick relief in sight for Canada’s oil field service industry - North America is awash in cheap oil, which means it’s also awash in idle drilling rigs, hydraulic fracturing spreads and waste disposal crews. Low crude prices have hammered the entire Canadian energy sector. But the oil field service industry has been hit particularly hard, with no quick relief in sight. The sector is further down the food chain than exploration and production companies, and has gone – in less than 18 months – from being awash in work to having to fight for every scrap that remains in a low-oil-price environment. The companies that do much of the on-the-ground work for oil companies now face intense pressure to avoid the curse of unproductive equipment and crews, and the months ahead are likely to see more declining revenues and the continuation of a particularly painful period of restructuring. “With the downturn in activity, there’s overcapacity in virtually every sector,” he said. “You’re basically doing this for practice, not for profit.” For oil and gas service companies, share prices have dropped and dividends have been slashed. North American rig counts are down at least 50 per cent from a year ago. Contracts with customers have been renegotiated at lower prices. White-collar layoffs at major oil companies in downtown Calgary grab the headlines, but the Canadian Association of Petroleum Producers reports that of the at least 35,000 jobs that have been lost in the oil patch this year, 25,000 are from the oil field services side
Exclusive - Canada railroads cut crude freight rates to lure shipments – Canadian rail companies are slashing rates for shipping crude in their first serious effort to revive an industry rocked by the rout in global oil prices, according to shippers and terminal operators who are seeing discounts of as much as 25 percent. The move highlights how railroads are struggling to compete with pipelines for a share of shrinking crude shipments across North America, particularly in Canada, where a long hoped-for boom in oil sands traffic has fizzled with the oil bust. Canadian National Railway and Canadian Pacific Railway, which together account for the vast majority of crude-by-rail cargoes shipped across the country, are dropping prices, four people familiar with the cuts told Reuters. The size of the cuts varied among sources, leading one source to suggest that railroads may be working with individual shippers to give some bigger discounts than others. Canadian National said it does not publicly discuss its freight rates. Canadian Pacific said it does not comment on individual customer relationships. Canadian Pacific has offered discounts of around 15-25 percent, but in exchange wants shippers to commit to firm volumes, for example one 70,000 barrel unit train, made up entirely of oil tanks cars, per month for three months, said one source with a Calgary-based midstream company. Another shipper said his company had been offered a single digit discount giving them a “small amount of relief”. Shipments from Canada to the United States have plunged by more than a third this year to 112,000 barrels per day in July, according to the latest U.S. data, undermining industry forecasts made before the oil price crash that total Canadian crude by rail volumes could hit 700,000 bpd by end-2016.
Support for fracking continues to drop: A new survey shows that public support for the extraction and use of shale gas has dropped significantly over the last year with concerns about the potential impact on the environment beginning to outweigh the possible economic benefits. The University of Nottingham Shale Gas Survey has been tracking the public perception of shale gas extraction in the UK since March 2012. The survey has tracked changes in awareness of shale gas, and what the public believe to be the environmental impact of its extraction and use, as well as its acceptability as an energy source. The 11th survey, with over 6,700 respondents, was conducted between the 23 and 28 September 2015. This latest survey found that there had been a significant drop in the level of support for shale gas extraction in the UK over the last year. The difference between those who support extraction and those who don't now stands at just +10.4 per cent, compared with +21 per cent in September 2014 and +39.5 per cent in July 2013. Some of the key concerns highlighted during the Balcombe protests, such as the risk of water contamination, continue to be a major issue for the UK public. In September 2015, the survey found that the number of people who associated shale gas with water contamination had risen to 48 per cent – the highest level since the survey began. However, it is still clear, 11 surveys on, that the UK public believes that shale gas will bring economic benefits to the country, and that a large number of people see shale gas as a 'cheap' form of energy.
Fracking could decimate habitats - The government’s so-called dash for gas is beginning to become very real, with the recent announcement about new licences for fracking companies. We at the Wildlife Trust have serious concerns about fracking’s many local and wider impacts upon wildlife.As well as the building of a rig and surrounding infrastructure at the drill site itself, the constant supply of materials often means new roads need to be built and an increased amount of industrial traffic. The physical disruption, noise, and light pollution disturbs local wildlife and could fragment or even decimate sensitive habitats. The government acknowledged these visual impacts when ruling out fracking in National Parks and Areas of Outstanding Natural Beauty a few months ago, but failed to recognise that wildlife-rich sites like Sites of Special Scientific Interest (SSSIs) would be impacted too. The fracking process also risks a wider range of environmental impacts – it often demands enormous amounts of water at a time when our freshwater rivers and wildlife are already struggling to cope with abstraction for public use. Fracking in other parts of the UK has led to minor earthquakes – which could compound the land instability that parts of the Isle of Wight already face from erosion, and the potential loss of sensitive habitats.
Friends of the Earth on Fracking Debate at SNP Conference: Reacting to the very lively debate at the Scottish National Party (SNP) conference over fracking and unconventional fossil fuels today, Dr Richard Dixon, Director of Friends of the Earth Scotland said: “SNP members have voted overwhelmingly in favour of reigning in Underground Coal Gasification, a risky and experimental technique of burning coal under the ground, with a very clear message to the Party leadership that what they really want is a full ban policy straight away. Underground Coal Gasification has a disastrous track-record from around the world of environmental pollution with recent test projects in Australia resulting in major contamination. “Speaker after speaker welcomed the new moratorium from the Scottish Government but called for the party to take back a full ban on both fracking and underground coal gasification ahead of next year’s election. No-one spoke in favour of fracking or unconventional fossil fuels. “Today’s debate highlights how strongly the SNP grassroots feel about Scotland’s energy future. We heard a clear message that Scotland should be investing in clean, green technologies and exploiting its abundance of wind, wave and tidal potential, instead of investing in the fossil fuel industry that further exacerbates the climate change crisis. Scotland is on track to transition to a low-carbon economy and meet its climate change targets only if it says no to the unconventional fossil fuel industry before it gets its foot in the door.”
SNP narrowly votes against all-out fracking ban - The Scotsman: A bid to persuade the SNP to support an all-out ban on fracking was narrowly defeated at the party conference. Anti-fracking delegates challenged the SNP’s policy for a moratorium on the controversial gas extraction technique, arguing that conference should go further and outlaw it. Energy Minister Fergus Ewing has announced the moratorium to allow the Scottish Government to hold a public consultation and commission a health assessment on the impact of fracking.Ineos, the operator of the Grangemouth petrochemical plant run by the industrialist Jim Ratcliffe, is attempting to win support for fracking in the Forth Valley. During a highly charged debate, delegates voiced their opposition to fracking but eventually toed the party line. With the vote going to a count, 550 delegates supported a moratorium compared with 427 who wanted the party to strengthen its opposition to a full ban. One delegate who supported a ban told conference: “I am sick to death of Green Party members telling me that the SNP supports fracking. It does not. Jim Ratcliffe, I have a message for you - 1,400 jobs at Grangemouth will not be held hostage to you blowing our country to pieces.”
OilPrice Intelligence Report: Current Oil Price Rally Hasn’t Convinced Everyone Yet - The rally in oil prices – jumping by around 10 percent in a week – took a breather at the start of this week, as the markets began to digest what happens next. WTI dropped back to $47 per barrel from $50, and Brent traded just below $50 per barrel, down from about $52 last week. . Now that oil has bounced off of its recent lows, there is quite a bit of disagreement over the sustainability of the rally. For oil bulls, U.S. oil production will continue to contract at the same time that demand continues to rise. Still, bearish calls for oil prices persist. Deutsche Bank warns that the rally in energy stocks could be overdone. Citigroup’s Ed Morse says the bust in oil markets isn’t over yet. To muddy the picture further, the IEA released its monthly report for October, which didn’t include much of a change from the previous month. The Paris-based energy agency still expects oil markets to be oversupplied in 2016 as demand growth slows from a five-year high of 1.8 million barrels per day in 2015 to a more pedestrian 1.2 million barrels per day in 2016. At the same time, it appears increasingly likely that Iran will be able to bring new supplies online next year. For its part, OPEC published its monthly report on October 12, which showed gains in production from the cartel of about 109,000 barrels per day in September compared to August. The gains came mainly from Iraq, which added 80,000 barrels per day in output. Nigeria, Angola, and the UAE also added production, while Saudi Arabia pared back production by 48,000 barrels per day. The data illustrates how each member is working hard to increase its own output in order to make up for the shortfall in revenues from low oil prices. The data also put a damper on oil prices, as OPEC production is acting as a counterweight to the contraction in North America.
U.S. shale firms snap up $50 oil hedges, risking rally reversal - This past week, as oil prices barreled over 9 percent higher to break out of a weeks-long trading range, U.S. shale producers jumped at the chance to lock in $50-plus crude for the first time in months, making up for lost time after holding off hedging during the market’s late-summer slump. U.S. crude oil futures for December 2016 delivery, a favored contract for hedgers, saw trading volume spike to a weekly record high of nearly 190 million barrels, twice as much as the average for the previous four weeks, in what market sources and industry executives said was the biggest wave of hedging since a fleeting rush in late August. The price premium for the Dec 2016 contract against the same month in 2015 has shrunk to just $4 a barrel, down from more than $7 a barrel two months ago, due partly to forward selling. Oil producers’ rapid response to the latest move upward comes in contrast to the second quarter, when a moderate price recovery was met with only modest hedging interest as many executives bet – wrongly – that the worst was already behind them. It also highlights the far more precarious financial position for many shale firms facing rapidly tightening credit conditions, expiring legacy hedges and a deepening fear that prices may stay much lower for much longer than they thought. For some, hedging is now less an insurance policy than a lifeline as those who have scrimped on protection watched with despair oil prices shuffling between $43 and $48 for six weeks. Yet their activity also threatens to undermine one of the fundamental reasons for oil’s gains: falling U.S. output.
Why Oil Is Tumbling: Oil Hedges Were Just Rolled Over - One year ago, when oil prices first cracked and tumbled from $100 to a level some 60% lower, it took the US oil industry about 9 months to fully feel the pain and proceed with cash-saving production cuts as a result of extensive oil-price hedges that had been put on at the historical price, cushioning the blow from the price collapse driven by a drop in global oil demand coupled with a surge in Saudi oil production. The impact of these hedges was largely muted by the summer of 2015 when we first saw a notable decline in US oil production which had recently hit record levels. And with oil volatility surging in recent months, oil producers needed to take advantage of a rally, technical or otherwise, and an oil vol lull to reestablish hedges, even if it meant at far lower prices than recent benchmarks. This is precisely what happened in the past week following one of the most torrid surges in the price of oil seen in recent years. So ahead of looming re-determinations, crude oil producers which piled into this decidely technical-driven rally to hedge aggressively in order to show a more stable asset base for creditors, but more importantly, to offload further price decline risks to their counterparties. Today's reversal off $50 along with a surge in oil volatility suggests hedging activity has been aggressive, as further confirmed by Reuters..
Oil Stumbles Below $49 As Goldman Warns "Lower For Even Longer" -- Despite its dubious track record, oil prices are stumbling after Goldman Sachs releases a report calling for oil prices to remain lower for even longer, calling for a drop to $50 within the next 6 months. Via Goldman Sachs, Crude Oil: Lower for even longer. Ex SPR US crude stocks built 3.6mb in Sep vs. a seasonal draw of 2 mb. Cushing on the other hand drew 3.9 mb vs. a seasonal draw of 2 mb though we are heading into peak refinery maintenance period. Fundamentals remain weak and we view the market to be strongly oversupplied. Sep crude, gasoline, distillate, jet, fuel oil and unfinished oil inventories have built 8.9 mb vs. a seasonal build of 1.5mb. The market now requires non-OPEC production to shift from growth to large declines in 2016. The uncertainty on how and where that adjustment will take place has increased significantly.mThe potential access to capital in the US means that elevated financial stress needs to be maintained to eventually attain these adjustments. There is also the potential for prices to collapse to production costs if the oversupply breaches logistical and storage capacity. We estimate 2015 oil demand growth at 1.62 mb/d and we forecast 2016 global demand growth to be 1.28 mb/d which leaves the market 400 kb/d oversupplied. Prices have declined sharply over the past month to our previous $45/bbl forecast. Part of this was precipitated by macroeconomic concerns but in our view, it was also warranted by weak fundamentals. In line with our oversupplied outlook, we have changed our 3, 6 and 12-month WTI forecasts to $42/bbl, $40/bbl and $45/bbl.: Time spreads should remain in contango as the market needs to incentivize storage since there is insufficient demand to absorb supply.
U.S. shale oil output to fall by most on record in November: EIA – U.S. shale production is expected to fall the most on record in November, extending a nationwide output decline into its seventh consecutive month, according to a forecast on Tuesday from the U.S. Energy Information Administration. Total output is set to fall by more than 93,000 barrels per day (bpd) to 5.12 million bpd, according to the EIA’s monthly drilling productivity report. That’s the largest monthly cut forecast since data was available in 2007. Oil production from the Eagle Ford play in South Texas was expected to fall 71,000 bpd to 1.37 million bpd. Bakken oil output in North Dakota was expected to slide 23,000 bpd to 1.16 million bpd. Oil production from the Permian Basin of West Texas, which continues to buck the trend, was projected to rise 21,000 bpd to 2.03 million bpd. New well oil production per rig remained unchanged for the Bakken and Eagle Ford. It rose 2 bpd in the Permian, data show. Natural gas production in the major shale plays was expected to fall 294 million cubic feet per day (mmcfd) to 44.9 billion cubic feet per day (bcfd) in November from October. That would be the fifth expected monthly decline in a row for gas production from shale fields and would be the biggest decline since March 2014, according to EIA data. Despite the expected decline in November, overall production would still be up from the 42.8 bcfd shale output in November 2014.
U.S. crude oil falls for 5th day on glut concerns | Reuters: U.S. crude futures fell for a fifth consecutive day on Thursday, hit by concerns over a growing global glut of oil and after data showing a higher-than-expected U.S. inventory build last week. U.S. crude lost 42 cents or 0.90 percent at $46.22 a barrel as of 0008 GMT, after it settled down 2 cents at $46.64 on the previous session. * Global crude benchmark Brent also declined by 14 cents, or 0.28 percent, at $49.01 a barrel after it ended down 9 cents at $49.15 previously. * Data from industry group the American Petroleum Institute showed on Wednesday that U.S. crude inventories rose by 9.4 million barrels in the week to Oct. 9 to 465.96 million, compared with analysts' expectations for an increase of 2.8 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.4 million barrels, API said.
WTI Crude Plunges Back To $45 Handle After API Reports Biggest Inventory Build In 6 Months --For the first time in 5 months, API has reported a third weekly inventory build in crude oil in a row. API reported a stunning 9.3 milion barrel build (against expectations of a 1.8 mm build) with Cushing rising 1.4mm barrels! The result of the biggest inventory build since April, WTI is getting hammered...And the result...WTI back to a $45 handle Charts: Bloomberg
DOE Confirms Biggest Crude Inventory Build In Over 6 Months As Production Drops To 11-Month Lows -- While less than API's huge 9.3mm barrel build reported last night, DOE reported a 7.56mm barrel inventory build - the largest in over 6 months. This is the highest crude stock level seasonally on record. Crude prices dipped on the news but rallied back to pre-data levels - though are notably holding on to the losses from the API print... even as production dropped notably week-over-week. Biggest crude build in 6 months... remaining at the seasonally highest level of stocks on record... And crude is holding losses... Even as production drops to new 11 month lows... Charts: Bloomberg
Oil down about 2 percent after large U.S. crude build – Oil prices fell about 2 percent or more on Thursday after the U.S. government reported a larger-than-expected crude stockpile build, although a big drawdown in gasoline helped limit some of the market’s downside. The Energy Information Administration (EIA) said crude inventories rose by 7.6 million barrels for the week ended Oct 9. [EIA/S] That was more than double the build of 2.9 million barrels expected by analysts in a Reuters poll, although lower than the 9.3 million barrels indicated by industry group American Petroleum Institute (API) in a report on Wednesday. [API/S] The crude build comes amid lower processing of oil in the United States as refiners shut for seasonal maintenance after the peak summer driving season. The EIA said gasoline stockpiles fell by 2.6 million barrels as less of the motor fuel was turned out last week. That helped cushion some of the bearish impact on crude prices, said analysts.
U.S. Oil-Rig Count Drops by 10 in Latest Week - WSJ: The U.S. oil-rig count dropped by 10 to 595 in the latest week, the seventh consecutive week of declines, according to Baker Hughes Inc. The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year. After a streak of modest growth, the rig count has now declined for seven consecutive weeks. U.S. oil prices recently were up 1.9% to $47.25. There are now about 63% fewer rigs from a peak of 1,609 last October. According to Baker Hughes, the number of gas rigs rose by three to 192. The U.S. offshore rig count was 33 in the latest week, up one from last week and down 24 from a year ago. For all rigs, including natural gas, the week’s total declined by eight to 787.
U.S. oil drillers cut rigs for 7th week - Baker Hughes - U.S. energy companies cut oil rigs this week for a seventh week in a row, the longest streak of reductions since June, data showed on Friday, a sign low prices continued to keep drillers away from the well pad. Drillers removed 10 oil rigs in the week ended Oct. 16, bringing the total rig count down to 595, the least since July 2010. Over the prior six weeks, drillers had cut 70 rigs, oil services company Baker Hughes Inc said in its closely followed report. That total was less than half the 1,590 oil rigs in the prior year. Since hitting an all-time high of 1,609 in October last year, weekly rig count reductions have averaged about 20. While the total U.S. oil and gas rigs fell to another 13-year low, natural gas rigs were up three to 192. With that increase, gas rigs were just over the lowest level in at least 28 years, according to Baker Hughes data going back to 1987. Traders look to the rig count as an indicator of whether production may rise or fall over the next several months. The reductions over the past several weeks have erased the 47 oil rigs energy firms added over the summer when several drillers followed through on plans to add rigs announced in May and June when U.S. crude futures averaged $60 a barrel. U.S. oil futures this week averaged $47 a barrel, down from an average of $48 last week, in choppy trade driven up and down by mostly technical buying and selling.
Oil ticks up as rig count falls for 7th straight week: U.S. crude oil prices closed higher on Friday after oilfield services firm Baker Hughes released weekly data showing the U.S. oil rig count fell for a seventh consecutive week. The number of rigs in the nation's oilfields fell by 10 to a total of 595 in the week ended Oct. 16. At this time last year, oil and gas producers were operating 1,590 rigs. The rig counts have seen the longest streak of weekly declines since June, data showed Friday, a sign low prices continued to keep drillers away from the well pad. Over the prior six weeks, drillers had cut 70 rigs. U.S. crude settled up 88 cents, or 1.9 percent, at $47.26 a barrel. Brent's new front-month December contract traded up 70 cents at $50.40 a barrel. Crude oil prices had inched higher in choppy trade prior to the report, as short covering fueled a small rally after four days of sharp losses, though gains were limited as prices failed to break through key technical levels.
Chance of oil falling below $20 is under 50 percent - Goldman Sachs – Goldman Sachs head of commodities research and commodities bear Jeff Currie said on Thursday that he does not see the price of oil breaking above $50 a barrel in the next year, but the chances of it dropping to $20 are below 50 percent. Persistent oversupply, along with slowing demand from China and other emerging-markets as well as a stronger dollar, will create enough of a headwind to keep the price of oil below $50 a barrel through the coming 12 months. Goldman is forecasting growth in oil demand of 1.62 million barrels a day this year and 1.28 million bpd next year, creating a surplus of some 400,000 bpd that will have to clear before the price can recover much beyond current levels. “A substantially oversupplied market makes it that much more difficult in terms of trying to complete the adjustment process going forward, but also reinforces our view that of a chance that we trade down to $20, that’s where we reach storage capacity constraints,” Currie said at a news briefing. That said, not all the world’s spare capacity is readily available to come back online at the first sign of a significant pickup in the price, he said. “I put the likelihood (of a drop to $20) at below 50 percent,” he said. “We estimate there are 370 million barrels still available (in storage globally).”
OPEC sees more demand for its crude in 2016 as cheap oil hits rivals -– OPEC forecast on Monday that demand for its oil in 2016 would be much higher than previously thought as its strategy of letting prices fall hits U.S. shale oil and other rival supplies, reducing a global surplus. In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast the world would need 30.82 million barrels per day (bpd) from the group next year, up 510,000 bpd from the previous prediction. OPEC’s forecast, if realized, would be a further indication its strategy is working. The group last year refused to prop up prices and instead raised output, seeking to recover market share taken by higher-cost rival production. Oil is trading just below $53, half its price of June 2014. Supply outside OPEC is expected to decline by 130,000 bpd in 2016, the report said, as output falls in the United States, the former Soviet Union, Africa, the Middle East and much of Europe. Last month, OPEC predicted growth of 160,000 bpd. “This should reduce the excess supply in the market and lead to higher demand for OPEC crude,” OPEC said in the report, “resulting in more balanced oil market fundamentals”.
Oil market glut will persist through 2016, says IEA - FT.com --Higher oil output from Opec and a slowdown in world economic growth means the crude oil glut will persist through next year, the world’s leading energy forecaster said on Tuesday. The International Energy Agency said it expected a “marked slowdown” in oil demand growth as the stimulus from lower prices faded and as economic activity weakened in countries dependent on commodity revenues. “Oil at $50 a barrel is a powerful driver in rebalancing the global oil market,” the IEA said in its closely watched monthly report. “But a projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels . . . are likely to keep the market oversupplied through 2016.” An increase in production from Opec member Iran once sanctions are lifted is expected to overshadow the first drop in US oil output since 2008, the IEA added. The collapse in oil prices has supported the strongest oil demand growth in almost a decade, with low prices helping boost demand by 1.8m barrels a day to 94.5m b/d. Gasoline demand has been particularly strong, suggesting motorists have been encouraged to drive more by lower prices. But the IEA forecasts that effect will fade, with demand growth set to slow to 1.2m b/d next year. The IEA, which uses the International Monetary Fund’s growth assumptions for its oil demand estimates, said the global economic outlook was “more pessimistic”. The fund said earlier this month the world economy would grow for 2015 at its slowest pace since the global financial crisis. Weaker economic growth in oil-dependent economies such as Canada, Brazil, Venezuela, Russia and Saudi Arabia will also have an impact on demand growth. “Lower commodity prices, with all else held equal, eventually equate to lower public spending and a potential dampening in consumer expenditure in many of these countries,” the IEA said.
Exclusive - Nigeria revamps oil exploration firms in first step to reform - Nigerian President Muhammadu Buhari has taken his first steps towards overhauling the country’s troubled state oil firm by giving its exploration joint ventures control over their own budgets as a way to overcome chronic cash shortages. Corruption and mismanagement at the Nigerian National Petroleum Corporation have hampered an industry that provides 70 percent of state income. NNPC has been accused of failing to account for tens of billions of dollars, while no new exploration blocks have been sold since 2007. Buhari, who took office on May 29, wants to make reform of the sprawling NNPC a priority at a time when a slump in oil prices is hammering the economy. The former military ruler has fired the NNPC board and plans to break up the company, whose opaque structures have allowed corruption and oil theft to flourish. To speed up an often glacial decision making process at NNPC, Buhari has given the green light to revamping several joint ventures involving its poorly managed production and exploration arm, according to a letter by NNPC head Emmanuel Kachikwu signed by Buhari, a copy of which was reviewed by Reuters. Nigeria produces about 2.2 million barrels per day of oil with foreign and local companies through production sharing contracts and joint ventures (JVs). But projects have been held up because NNPC needs parliamentary and regulatory approval to spend anything. Officials and lawmakers are often six months late in giving their nod, making proposals irrelevant as costs exceed the original budgets. As a result, unpaid bills have been piling up.
Indonesia rejoining OPEC despite being a net importer of petroleum - Today in Energy - (EIA) The Organization of the Petroleum Exporting Countries (OPEC) notified Indonesia that it plans to accept the country's request to reactivate its membership at the next OPEC meeting in December. Once it rejoins, Indonesia will regain its status as the only Asian member of OPEC and the only member that is a net importer of petroleum and other liquids. . Indonesia originally joined OPEC in 1962 but suspended its membership at the beginning of 2009. OPEC does allow for associate membership, but currently all 12 members are full members. Indonesia's decision to suspend its OPEC membership was prompted by growing internal demand for energy, declining crude oil and condensate production in mature fields, and limited investment to increase production capacity. Indonesia had become a net importer of petroleum and other liquids by 2004 after domestic demand exceeded production, as Indonesia's production of petroleum and other liquids has been on a general decline since the mid-1990s. Indonesia produced about 790,000 barrels per day (b/d) of crude oil and condensates in 2014, the third-lowest level among OPEC countries. Although Indonesia is a net oil importer, the country continues to export crude oil and condensates. Because Indonesia is an archipelago, geographic distances between its domestic oil production and demand centers encourage both imports and exports. Despite its growing oil demand, Indonesia's oil and natural gas sectors continue to be an important part of the country's economy. Indonesia imports oil products, particularly gasoline, as a result of insufficient refining capacity to meet the growing demand for oil products.
OPEC Wins against the US: Crude Oil Market's Bloodbath Continues - On Monday, October 12, 2015, OPEC (Organization of the Petroleum Exporting Countries) released its MOMR (Monthly Oil Market Report). The monthly report highlighted that OPEC’s crude oil production rose by 109,000 bpd (barrels a day) to 31.6 MMbpd (million barrels per day) in September 2015 compared to August 2015. OPEC operates as a cartel. It controls over 40% of the global crude oil production. On June 5, 2015, OPEC decided to continue with its collective production target of 30 MMbpd for the next six months in order to defend its market share. So, OPEC has been producing 1–2 MMbbls more crude oil than its output quota. The record production is leading to a surplus. It’s negatively impacting oil prices. The group’s crude oil exporting giants like Saudi Arabia, Iran, and Iraq continue to produce crude oil at record levels. Saudi Arabia has even discounted crude oil prices to its Asian and US importers. As a result, it’s trying to increase its market share and outplay the high-cost US shale producers. Crude oil prices’ long-term downward trend has led to the fall in the US production. OPEC also expects that US production will continue to fall in 2016. OPEC beat the US energy players in the market share battle. Meanwhile, market surveys estimate that the energy sector’s 3Q15 earnings in the S&P 500 are expected to fall by 64% compared to 3Q14.
Kuwait sees no call for policy change as OPEC eyes balanced market – Kuwait said on Monday there were no calls within OPEC to change the oil group’s production policy and that lower output from high-cost producers could support prices in 2016, adding to signs OPEC will keep its strategy of defending market share. Meanwhile, OPEC forecast in a monthly report that demand for its oil in 2016 would be much higher than previously thought as lower prices curb U.S. shale oil and other rival supply sources, reducing a global surplus. OPEC last November decided against propping up prices by cutting output, seeking to recover market share taken by higher-cost rival production. While oil is hurting OPEC revenues by trading below $53 a barrel, half its price of June 2014, there are signs lower prices are taming non-OPEC supply. “Today there are no ideas or demands from the member states to make any big change in OPEC’s decision,” Kuwait Oil Minister Ali al-Omair told reporters, referring to OPEC’s move of November 2014. “Today there are indications that a lot of high-cost oil production is starting to get out of the market and this will help improve prices.” The Organization of the Petroleum Exporting Countries meets to review its output policy on Dec. 4 and the comments add to signs the group is unlikely to be diverted from its strategy.
Oil-dependent Saudi, Norway sovereign funds selling European shares - report – The three biggest sovereign wealth funds of oil-producing countries have been selling European equity holdings since May, a study showed on Monday, another sign of petrodollars being withdrawn from world markets. Asian funds have meanwhile continued to add European equities, according to the data from Nasdaq Advisory Services, which provides analysis on shareholder and investor activity. Since May, the Saudi Arabian Monetary Authority has sold $1.2 billion worth of equities across Nasdaq’s European client base. That accounts for 13 percent of its $9.2 billion holdings in the European companies tracked by Nasdaq. Norway’s Norges Bank Investment Management has sold $1.1 billion — around 2 percent of the $57.5 billion market value of its holdings, while the Abu Dhabi Investment Authority has cut some $300 million worth of shares from its $3.6 billion holding. “Over 2015, the three largest oil-dependent SWFs have all been reducing their equity holdings in the region, with this trend accelerating over the second quarter and into the third quarter of the year,” said Alexander Free, an analyst with Nasdaq’s Advisory Services. The data is based on a sample of 159 European companies, with a market value of $1.87 trillion, Nasdaq says. They range from retail and telecoms shares to financials and utilities.
Naimi: Saudi Arabia To Keep Up Energy Spending Despite Oil Drop - Rigzone: (Reuters) - Saudi Arabia is continuing with its investments in the oil and gas industry as well as solar energy despite the current drop in oil prices, the kingdom's oil minister was quoted as saying on Friday. Ali al-Naimi was speaking at the G20 Energy Ministers' meeting in Istanbul, according to state news agency SPA. "Since the 1970s this industry has been experiencing sharp fluctuations in prices - up and down - which have impacted investments in the field of oil and energy, and its continuity," Naimi said. "This volatile situation is not in the interest of the producing and consuming countries, and the G20 countries can contribute to the stability of the market." Oil fell on Friday, reversing earlier gains after U.S. non-farm payrolls data came in weaker than expected which clouded the demand outlook from the world's largest oil consumer. Oil prices have almost halved in the past year because of excess supply, although analysts see signs that OPEC's strategy of allowing prices to fall to put a squeeze on growth in high-cost production areas is having some impact. International oil companies have significantly lowered spending this year due to persistently low oil prices, cutting budgets and thousands of jobs. Global oil investments this year are expected to drop by 20 percent marking their biggest decline in history, Fatih Birol, head of the International Energy Agency, said on Friday.
Saudi state claws back unspent money as finances tighten (Reuters) - Saudi Arabia's finance ministry, seeking to cut waste as state revenues shrink because of low oil prices, is telling government bodies to return unspent money which they were allocated in this year's budget, sources familiar with the policy told Reuters. Over the past several years of sky-high oil, government bodies in the world's top oil exporting nation were given considerable freedom to transfer money from one project to another as they wished. That led to a bonanza of ad-hoc spending on bonuses, travel allowances and the like. Now, ministries are being told that if money is not fully spent on the projects for which it was originally allocated, the remainder must be sent back to the Treasury, the sources said. The ministry did not respond to a request for comment. The tighter policy underlines a sober mood taking hold in Riyadh because of the halving of oil prices since mid-2014. The International Monetary Fund and private analysts calculate Saudi Arabia may run a record budget deficit of $120 billion or more this year; to pay its bills, the government has sold over $80 billion of foreign assets since August last year. Around the kingdom, bureaucrats, businessmen and ordinary Saudis are preparing for a period of relative austerity as the finance ministry asserts more control over the purse strings. "Saudi Arabia has started to focus on efficient spending, which means tighter financial supervision,"
Saudi Arabia Interprets Anti-ISIL Campaign in Syria as Russia-Iran Alliance: — The Saudi foreign minister said after a meeting with his Russian counterpart Sergei Lavrov that Riyadh interpreted Russia's operation in Syria as an alliance between Iran and Russia. "Regarding the military operation carried out by Russia on the territory of Syria, we expressed our concerns that this operation could be interpreted as an alliance between Iran and Russia. But during the conversation, our Russian friends explained that the main objective was to fight Islamic State." Meanwhile, Sergei Lavrov said that Russia was ready for military cooperation with Saudi Arabia in Syria to erase any doubts regarding its aims in Syria. "From our side we expressed readiness, which found a counter-response from Saudi Crown Prince [Mohammad bin Naif], for the closest cooperation between our military and special services, so there would be no doubt that the targets of Russian aviation are the Islamic State, the Nusra Front and other terrorist groups."
Russia’s Move In Syria Threatens Energy Deals With Turkey -- Putin has long valued Turkey as a territorial and ideological play against NATO and the EU. Cross border trade exceeded $31 billion – good for sixth among Russia’s major trading partners – and U.S. and EU sanctions have expanded the horizons for further trade between the two nations. Natural gas in particular forms the backbone of this growing trade relationship. In 2014, Gazprom delivered 27.3 billion cubic meters (bcm) of gas to Turkey via its Blue Stream and Trans-Balkan pipelines. Gas exports from Russia are up some 34 percent since 2010, and Turkey – now Russia’s second largest market after Germany – is only getting hungrier. By 2030, gas demand in Turkey is expected to expand 30 percent, reaching 70 bcm per year. With European demand projected to grow by just over 1 bcm per year in the same period, Russia’s South Stream pipeline proposal was as misguided as it was non-compliant with the EU’s Third Energy Package. Routed through Turkey however, Russia’s newest pipeline, TurkStream, promised to add greater utility. Turkey gets its gas and partly fulfills its transit aspirations; Russia bypasses Ukraine while opening windows to Europe and the Middle East; and Europe, if it wants it, will have gas on demand. It sounds good – okay, at least – but as so often happens in Russia, the tale has taken a turn for the worse. TurkStream has stumbled out of the gates and larger happenings in Syria look to significantly damage Russia-Turkey relations.Originally intended as a four-pipe 63-bcm project, TurkStream will now top out at 32 bcm, if it gets off the ground at all. As it stands, the parties have agreed to draft the text of an intergovernmental agreement, with a targeted signing date of early next year, following Turkey’s general election. And that’s it.
Iranian parliament passes bill approving nuclear deal -- Iran’s conservative-dominated parliament has endorsed the landmark nuclear agreement struck earlier this year, clearing the last hurdle before both sides begin work to implement it next week. The Iranian parliament, the Majlis, on Tuesday passed a motion to approve the nuclear deal after heated discussions and sharp exchanges between MPs and the moderate administration of Hassan Rouhani, whose credibility was on the line had parliamentarians voted down the accord. It passed with 161 yes votes, 59 no votes and 13 abstentions among the 250 MPs present at the session. Under the agreement, Iran is expected to start work on rolling back its nuclear programme from 18 October – labelled as adoption day – which includes taking out thousands of centrifuges at its enrichment facilities and pulling out its heavy-water reactor and filling it with concrete. The EU will in return adopt a regulation for the lifting of sanctions and the US president, Barack Obama, will issue waivers for sanctions relief. However, these measures will not take effect until what has become known as implementation day, when the UN nuclear watchdog, the International Atomic Energy Agency, will verify that Tehran has taken the necessary steps as outlined under the deal.
Iran Could Trigger A Resource War On Several Fronts Other Than Oil -- As has already been discussed at length, once the economic sanctions imposed by the U.S. and the European Union on Iran begin to be lifted next year, there is going to be a surge in the already oversupplied global crude oil markets. The current world crude oil output is around 96.6 million barrels per day and with Iran’s addition, this output could further increase by around 500,000 barrels per day. Although the surge in crude oil markets could further worsen the global supply/demand gap, Iran could present a new source of competition on other crucial fronts too, especially in the gas markets. Let us look at Qatar first. Although Qatar is one of the smallest contributing members of OPEC, the small nation is the world’s biggest exporter of Liquefied Natural Gas (LNG). With close to 890 trillion cubic feet of proved natural gas reserves, Qatar is the third largest natural gas producer in the world. Almost all of Qatar’s natural gas is located in its North Field which, along with Iran’s South Pars, holds more than 885 trillion cubic feet (TCF) of natural gas and is the largest natural gas formation in the world.India has also expressed its interest in investing close to $15 billion in new projects in Iran. Even South Africa is planning to invest in future LNG projects in Iran. With rising interest from Europe, Asia and Africa, Iran is now gearing up to increase its gas production from South Pars field and it is expected that the Islamic Republic could start exporting gas to Europe and other regions by as early as 2020. With this, the moratorium on newer projects that is currently in place in Qatar’s North Field might soon come to an end and we might witness a race to compete for LNG exports between the two Middle Eastern nations.