oil prices rose this week while natural gas prices fell, but pricing for the later was complicated by the Wednesday expiration of the contract for November delivery of gas, meaning that as of Wednesday afternoon the quoted price for natural gas was for the higher priced contract for December delivery...more on that in a second, but oil prices fell from $44.60 a barrel last week to a six week low of $43.20 a barrel by the Tuesday close on news that plans to sell at least 58 million barrels of crude oil from our strategic petroleum reserve, starting in 2018, were included in the budget and debt ceiling deal reached between the white house and congress early Monday....the stupidity of announcing an unnecessary oil sale at a loss after prices had fallen 60% notwithstanding, oil prices jumped back up on news of a modest inventory increase on Wednesday, then extended those gains when an industry group reported that oil stocks fell at the Cushing Oklahoma oil hub, and closed the week at $46.59 a barrel, up more than $2 on the week...
meanwhile, the price of natural gas for delivery in November, which had closed last week down 6.4%, at a three year low of $2.286 per mmBTU, fell nearly 10% more on Monday, its biggest one-day decline since February 2014, on forecasts of continuing warmer weather..it closed the day at $2.062 mmBTU, briefly sliding below $2, which had it held would have been a record low...then, after rising above $2.10 on Tuesday, the November contract price fell 3.6 cents to $2.056 per million BTU before trading on the contract expired Wednesday morning...the quoted price for natural gas then became the contract price for delivery in December, which was off about six cents on the day to $2.302 mmBTU...December gas prices then fell to $2.257 on Thursday before finally steadying and recouping some of the loss, to close the week at $2.322 per mmBTU...so even though the quoted price for gas was about 3 cents higher than a week earlier, the price now quoted is for December delivery, the contract for which was down 4 cents from the beginning of the week...
3rd Quarter Reports from the Fracking Patch
the past week has seen the release of the first batch of 3rd quarter fracking earnings reports, mostly from the major oil & gas companies, with a few independent frackers also reporting, so by taking a look at how they did over this July thru September period, which included two months after oil prices had fallen below $50 a barrel, we should be able to tell whether their losses are becoming severe enough to shut them down or not...understand that the vertically integrated major oil companies, who have downstream oil refining and product marketing operations, are likely to see that side of their business even more profitable when oil prices are lower; in fact, some are experiencing record profit margins on the refining part of their business... however, the financial situation for independent drillers, whose profitability is directly related to the wellhead price they receive for oil and gas, has been quite tenuous; nearly two dozen frackers have already filed for bankruptcy already this year, and if oil and gas prices hold at current levels, it's doubtful many drillers without other operations can survive..
of the major oil companies reporting this week, Exxon saw its 3rd quarter profits fall by nearly half from the year ago level, as the $4.24 billion they earned in the 3rd quarter was their worst 3rd quarter in 12 years...that drop was despite the fact that profits of their refining operations doubled to $2 billion, while their exploration and exploitation business profits fell from $5.1 billion to $1.4 billion on a 2.3% increase in output...reporting the same day, Chevron logged 3rd quarter profits of $2 billion, 64% lower than a year earlier, on 37% lower revenues; they were saved from worse results by record refining margins, for which California drivers paid the price...Chevron has been cutting costs, which means people; three months ago, they announced layoffs of 1,500 globally; with Friday's earning report, they announced they'd be cutting up to 7,000 more jobs, or 11 percent of their global workforce, and that they'd sell off $5 to $10 billion in assets by the end of 2017, in addition to the $15 billion of assets they'd announced divestiture plans for earlier this year...
on Thursday, Royal Dutch Shell reported a huge third quarter loss of $7.4 billion , which included charges of $7.9 billion, including $2.6 billion for their cancelled drilling project offshore of Alaska and $2 billion related to the decision this week to pull out of their tar sands operations...that was down from profits of $5.3 billion in the third quarter last year, but wasn't enough to interrupt their dividend or interfere with their purchase of BG (British Gas)...luckily for them, the administration cancelled their arctic leases, so at least they won't have to keep paying on Alaska operations they know to be hopeless...earlier in the week, BP had reported profits of $1.8 billion, 40% lower than last year's $3 billion and said they planned an additional $3 to $5 billion of asset sales going forward...BP had reported a 2nd quarter loss of $6.3 billion related to the Gulf oil spill, and said they plan to balance their cashflows by 2017 based on $60 a barrel oil...
in contrast with the oil majors that have a large refining and retail presence, ConocoPhillips, which had refocused its business on exploration, production and distribution of oil, reported a third quarter net loss of $1.07 billion, their worst quarterly results in 6 years, compared with third-quarter 2014 earnings of $2.7 billion...at the same time, they announced they would further cut their 2015 capital spending budget, to $10.2 billion from $11.0 billion, and exit all their deepwater exploration projects by 2017...in addition, Occidental Petroleum, the fourth-largest U.S. oil producer, reported a third-quarter loss of $2.61 billion, after reporting a profit of $1.21 billion in the 3rd quarter of last year...simultaneous with their earnings statement, they announced they'd be shutting down and pulling out of their operations in the North Dakota oil patch, to concentrate their capital outlays on their core Texas shale holdings....meanwhile, Marathon Oil, with a large presence in the Eagle Ford, became the first major shale producer to cut their dividend, slashing it from 21 cents to a token 5 cents per share, after they reported 3rd quarter profits of $948 million, compared with $672 million in the same period a year ago, largely from the profitable results of their Speedway retail gas station chain...
others reporting this week included Hess Corporation, who reported a third-quarter loss of $279 million, compared to earnings of nearly $1 billion a year earlier; Anadarko Petroleum, who reported a third-quarter net loss of $2.24 billion, compared to a profit of $1.09 billion a year earlier, Murphy Oil, who reported a third quarter loss of $1,595 million on revenue of $714.9 million in the period; Whiting Petroleum, the largest oil producer operating in North Dakota, who reported a net loss of $1.87 billion, compared with a net income of $158 million last year; Pennsylvania based Range Resources, who lost $301 million in the quarter vs profits of $146 million in the same period a year ago, Cabot Oil & Gas, who reported a third-quarter loss of $2.2 million, after reporting net income of $85 million in the same period a year earlier, and Pittsburgh based EQT Corp, who reported third quarter net income of $40.8 million, mostly from hedging operations, compared to third quarter 2014 earnings of $98.6 million...excluding the profits from derivatives trading, EQT reported an adjusted net loss of $50.2 million for the quarter...
there were two companies that didn't report earnings this week...Denver based American Eagle Energy and Tulsa based Samson Resources, both working shale plays in the Bakken of North Dakota, both filed for Chapter 11 bankruptcy, both announcing plans to sell off their North Dakota assets in an attempt to pay off some of their debts...Samson Resources apparently hopes to reorganize and emerge as a viable operator; American Eagle "could not be reached" for comment...between June and September, 10 oil and gas companies working in North Dakota's Bakken oil patch have filed for bankruptcy; 19 have filed in the last year...as of Tuesday, North Dakota sweet crude was selling for about $36 a barrel, more than $7 a barrel below the US benchmark price...with few pipelines in place, most Bakken crude must be shipped by rail, adding to its costs...
This Week’s Oil Data from the EIA
the weekly stats from the Energy Information Administration showed that our oil production rose a bit, our imports fell a lot, and our refineries used more crude, which combined to lower the amount of surplus that had to be stored...US field production of crude oil rose by 16,000 barrels a day, from 9,096,000 barrels per day during the week ending October 16th to 9,112,000 barrels per day during the week ending October 23nd, about 1.6% higher than the same week a year ago, but still in the same narrow range that it's been in over the last 8 weeks...meanwhile, our crude oil imports, the other primary source of domestic supply, fell by 439,000 barrels per day from last week, but at 7,032,000 barrels per day during the week ending the 23rd was only 1.0% below the import rate of the 4th week of October last year...checking the 4 week average of imports carried in the weekly Petroleum Status Report (62 pp pdf), we find that U.S. crude oil imports averaged 7.2 million barrels per day over the last 4 weeks, 3.8% below the same 4 weeks last year, so neither our production nor imports is that much off the pace of last year, before OPEC announced they would leave open the spigots...
meanwhile, crude oil used by US refineries averaged 15,616,000 barrels per day during the week ending October 23, 2015, 271,000 barrels per day more than the week before, as our refineries operated at 87.6% of capacity in the current week, up from 86.4% of their operable capacity the prior week, and up from 86.6% of capacity in the 4th week of October last year....gasoline production increased to an average of 9,703,000 barrels per day, and distillate fuel production was also up, averaging 4.9 million barrels per day....nonetheless, our ending gasoline inventories fell, from 219,784,000 barrels last week to 218,647,000 barrels this week, but they still remain above the upper limit of the average range for this time of year, while distillate inventories are in the middle of the average range for this time of year, and propane/propylene inventories, which were unchanged last week, are still well above the upper limit of the average range we’ve ever had stored at this time of year....
so, essentially, the combination of lower imports and greater usage led to a drop in the widely watched amount of crude oil that we added to storage....US stocks of crude oil in storage, not counting the government's Strategic Petroleum Reserve, rose to 479,963,000 barrels as of October 23rd, up 3,376,000 barrels from 476,587,000 barrels as of October 16th...while that's still quite a substantial inventory build, it was down from the more than 8 million barrels we added last week, hence the market's relief...but we're still up nearly 26 million barrels from 5 weeks ago, and we still have 26.4% more oil in storage than we had in the 4th week of October a year ago...and that's also the most oil we ever had stored anytime in October in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year...
Latest Rig Counts
also supporting the price of oil this week was the falling number of rigs drilling for it, as some traders still see a relationship between drilling and production, despite the fact that our active rig count is down by more than 60% from a year ago while our production of oil is still inching up... Baker Hughes reported that their count of rigs targeting oil was down by 16 to 578 as of October 30th, while their count of rigs drilling for natural gas was up by 4 to 197; that's the ninth week in a row that oil rigs have been down, and they're now down by 1,004 from last's year's 1582 active oil rigs...on the other hand, working gas rigs have now been up 3 weeks in a row, but they're still down by 149 from the year ago total of 346...
2 of the rigs pulled out this week had been operating in the Gulf, so the Gulf of Mexico count is back down to 32, and down from 51 a year ago...we also managed to rid ourselves of 14 rigs designed to drill horizontally, leaving the horizontal rig count at 577, down from the 1353 horizontal rigs that were in use at the end of October a year ago...net vertical drilling rigs, on the other hand, increased by 3 to 112, but that's still below the year ago 365...and one directional rig was also taken out of service this week, leaving 86, down from 211 a year earlier...
the rig counts from the major shale basins leave us a mystery as to where those 14 horizontal rigs were pulled from, however, because the major shale basins only show a loss of 4 rigs...2 of those came from the Eagle Ford of south Texas, which is now down to 75 rigs, and down from 218 a year ago...the Haynesville of Louisiana and Texas also idled a rig; they now have 25, down from the 41 rigs working a year ago, as did the Utica of Ohio and the Williston of North Dakota...the former is down to 21 rigs, and down from 46 a year ago, while the latter is down to 63, and down from 192 rigs a year ago....meanwhile, one rig was added in the Granite Wash, and at 13 that Texas panhandle field is down from 59 a year ago...
among the primary oil producing states, Texas, with 7 less rigs, saw the greatest decline, but they still have 339 rigs working, down from 901 a year ago....Oklahoma also shed 6 rigs; they now have 84, down from 208 at the last weekend of October last year...Louisiana idled a net two rigs, as both the Gulf rigs were registered to that state, although they also saw a southern land rig shut down and a rig set up on an inland lake; at 71 rigs, they're down from 112 a year earlier...three states saw their count drop by one: North Dakota, Ohio, and West Virginia....North Dakota now has 62 active rigs, down from 180 a year ago, Ohio has 20, down from 42 a year ago, and West Virginia has 16, down from 34 last year at this time...meanwhile, 2 rigs were added in both Kansas and New Mexico, where they now have 9 and 42 respectively, down from 26 and 100 a year ago...and Alaska also added a rig, and at 13 rigs, they're up from 8 rigs a year ago, and the only state to see a year over year increase...
so, we still have 10 idled horizontal rigs unaccounted for...but rather than dig through all of the Baker Hughes files to see where each one of them might have come from, we'll just leave their former locations as a mystery this week; we wont miss them....besides, life would be pretty boring if there weren't any mysteries left, don't you think?
Environmental group appealing FirstEnergy coal ash permit (AP) — An environmental group is appealing a state permit that would let FirstEnergy Corp. ship coal ash from a Shippingport power plant to a dump near a former power plant in Greene County. The Beaver County Times says EarthJustice is representing the Sierra Club in the appeal. The groups say the coal dust includes arsenic and other toxins that could blow off the barges and contaminate the rivers as it is shipped. Company spokeswoman Stephanie Walton says FirstEnergy shipping the ash to the shuttered 107-acre Hatfield Ferry Power Plant is only one of many options being considered. FirstEnergy currently sends waste to the Little Blue Run coal ash impoundment on the Pennsylvania-West Virginia border. The company will no longer be allowed to ship waste there after December 2016.
Gates Mills Council candidates discuss gas, oil wells: Voter Guide 2015 (video) - cleveland.com — Gas and oil wells dominated the conversation among the Gates Mills Council candidates in a recent debate with cleveland.com, for its 2015 voter guide. Village leaders have been weighing ways to deal with potential deep-well drilling since Mayor Shawn Riley announced controversial plans to form a land trust last year. Voters last year also denied a bill of rights residents proposed to give the village more control over drilling, which is regulated by the state. A charter amendment, drafted with the help of council candidate Charles Belson, on the Nov. 3 ballot would require the village to ask voters any time it wanted to change an existing lease for oil and gas wells on village land or enter into a new agreement. According to Belson, there are three wells on village-owned property now. Belson is seeking one of three seats against incumbent Councilwoman Sandra Turner and new candidate Jay Auwerter. Incumbent Councilman Ed Welsh is also seeking re-election. He did not attend the debate.
Groups: More action, less talk on Ohio fracking tax - – Ohio’s development of oil and gas extraction from fracking has exploded in recent years, leaving local communities carrying the costs associated with the boom. The state’s tax rate on oil and gas is less than a half percent, much lower than in other oil and gas states. Ohio lawmakers are discussing raising the state’s severance tax, and charged the 2020 Tax Policy Study Commission with examining reforms. But the state director of the advocacy group One Ohio Now says the commission’s new report delays action on raising the tax. “There’s really nothing new, which is the very disappointing thing,” explains Gavin Devore Leonard. “We’ve been looking at this for so long. It says in the report what we know, which is that the rates are too low, that there’s nowhere lower in the country, and we just feel that it’s time to act on this instead of keep talking about it.” The report notes that market forces are financially burdening the industry, and opponents argue a higher severance tax would discourage new production.Gov. John Kasich supports a higher tax, and several Ohio organizations are pushing for 5 percent to better compensate for increased infrastructure needs, better regulatory oversight and the negative environmental impacts. A 5 percent severance tax would match West Virginia’s tax rate on oil and gas production.
Trump mocks Kasich's economic achievements: John got lucky with fracking -- It didn’t take long for Donald Trump and John Kasich to mix it upWednesday over economic policy at the Republican presidential primary debate. Mr. Kasich, the Ohio governor, took a broadside at the so-called outsider candidates without government experience, saying his “greatest concern is we’re on the verge of picking someone who cannot do this job.” He cited proposals by other candidates to slash Medicare and Medicaid, deport illegal aliens, and other ideas that he described as “fantasy.” “Folks, we’ve got to wake up,” Mr. Kasich said at the debate held at the University of Colorado’s Coors Event Center. “We cannot elect someone who does not how to do the job.” Meanwhile, the businessman Trump challenged Mr. Kasich for taking credit for Ohio’s economic rebound, saying the recovery can be attributed to hydraulic fracturing and the oil and gas boom. “John got lucky with a thing called fracking,” said Mr. Trump, adding that Mr. Kasich’s remarks came because “his poll numbers tanked, that’s why he’s at the end [of the stage].”
Pennsylvania and Ohio drill permit report, Oct. 18-24 | marcellus.com: Pennsylvania’s oil and gas permit activity took a bit of a tumble since last week, but still shows signs of improvement from earlier this month. The state’s Department of Environmental Protection’s Office of Oil and Gas Management approved a total of 58 permits throughout the state. As the state’s approved permits pile up, so could the Pennsylvania’s tax on natural gas operators. Shale operators throughout the Marcellus region rallied against Gov. Tom Wolf’s proposed natural gas severance tax to bolster funding for public schools and other services. Seventeen executives penned a joint letter to the General Assembly, arguing that the bump “defies good economic policy to single out a key industry and economic engine by instituting an onerous energy tax that would generate limited additional revenue.” The total of 23 new permits issued by the Ohio Department of Natural Resources echoes the previous week’s total of 21 new permits. The newest permits only approve drilling in the Utica Shale, driving the total rig permits up to 2,066. Ohio lawmakers also grappled with a newly proposed severance tax for the state’s energy industry. The seven-member commission met to discuss the new taxes in an approved two-year budget, albeit 21 days past their Oct. 1 deadline. Lawmakers will meet several more times before a conclusion is made, though Gov. John Kasich has made it clear he sees the severance tax as a “total and complete rip-off to the people of this state.”
Fracking Nearby Private Wells -The Methane Mafia has been misleading the public about how safe Fracking is, because they have been hiding the truth about frack jobs that go “out of zone”, or that “communicate” with old & abandoned wells by repeating the same lie that “fracking has never contaminated a private well” – so here is how it can happen. Hydraulic fracturing can form cracks that can connect new shale gas wells to nearby abandoned wells, possibly allowing methane to leak into the atmosphere or aquifers underground, according to a University of Vermont study published this week. The study is one of the latest efforts to answer an elusive question: How do fracked oil and gas wells leak methane and other hydrocarbons into underground aquifers and into the atmosphere? Previous research has shown that shale gas drilling and production may leak a large but not fully known amount of methane into the atmosphere, possibly up to 1,000 times more methane than previously thought. The U.S. Environmental Protection Agency has proposed rules to curb methane emissions from oil and gas wells and pipelines, seeking to slash emission from the oil and gas industry by up to 45 percent below 2012 levels over the next decade. Abandoned gas wells in the Marcellus shale in Pennsylvania have been found to leak methane, but nobody knows yet how many wells leak and how much methane they’re emitting.
As the Fracking Boom Spreads, One Watershed Draws the Line: Only one area of Pennsylvania’s Marcellus has escaped the fracking storm — the portion that lies within the watershed of the Delaware River, the longest undammed river east of the Mississippi. Four years ago the gas industry was poised to spread into the Delaware River basin, which encompasses 13,000 square miles of land in four states. The industry had signed thousands of leases with watershed landowners. And although many of those landowners’ neighbors looked west at the industry’s growth in the Susquehanna River basin and wanted no part of it, the Delaware River Basin Commission (DRBC) was ready to give the go-ahead. But in November 2011, with only two of the four states in the Delaware Basin in support of fracking, the DRBC abruptly withdrew its proposed regulations and instituted a moratorium. The fracking industry in the Pennsylvania portion of the Delaware basin was stopped in its tracks. The contrast between the two watersheds — the fracked territory of the Susquehanna basin, and the unfracked of the Delaware basin — is sharp. Extensive areas of the Susquehanna watershed contain the well pads, drilling rigs, pipelines, and roads trafficked by large trucks supporting the industry. By contrast, much of the Delaware River watershed remains extraordinarily well-protected. It still provides drinking water to 15 million watershed residents, more than half of those in New York City. The water runs unfiltered from the Delaware's headwaters to the city’s taps, an amenity New York prizes and protects through ownership or easement of 130,000 acres of watershed.
Plains Twp. residents form group to protest pipeline plan - Township residents upset with the proposed path of the PennEast natural gas pipeline through their community have joined forces to start a new group. Plains Township Citizens Against the Pipeline made its official debut on Tuesday, according to a press release from Lori Pascucci Leggio, the group’s secretary. The group believes “the impacts the pipeline will have in the township and on the individual homeowners will far outweigh the benefits to this community.” The group has a six-person board and numerous members; at its first meeting, held recently in the Plains Township fire hall, “we had well over 50 people,” Leggio said. PennEast Pipeline Co. LLC filed a formal application with the Federal Energy Regulatory Commission on Sept. 24 to construct a $1 billion, 114-mile, 36-inch diameter pipeline from Dallas Township to Mercer County, New Jersey. The pipeline would deliver approximately 1 billion cubic feet of Marcellus Shale gas per day to customers in New Jersey and southeastern Pennsylvania. Claims the gas will be shipped overseas are untrue, PennEast spokeswoman Patricia Kornick said. The petitions allege the pipeline is unnecessary because “research has shown that (New Jersey) is enjoying the lowest natural gas prices in decades and is well served by the existing pipeline network. The entire state … consumes on average 1.8 billion cubic feet of natural gas per day. That includes everybody — residential customers, electrical generation plants, industrial users and vehicles. The proposed PennEast pipeline will carry 1 billion cubic feet of natural gas per day. This represents 55 percent over capacity for New Jersey — this one pipeline could literally power more than half the state … all by itself.”
More than 1,400 intervenors want to be part of PennEast Pipeline process -- By Thursday evening’s deadline, more than 1,400 individuals, governmental bodies and other entities filed as intervenors to PennEast Pipeline’s proposed 114-mile natural gas pipeline. The status is important for those who oppose the project because it makes them a party to the proceedings and allows them to appeal any decisions made by the Federal Energy Regulatory Commission, the independent agency responsible for approving natural gas pipelines. Among the intervenors are 22 of the 29 municipalities along the pipeline route, which extends from Wilkes-Barre to Mercer County, N.J., cutting through Northampton County along the way. Locally, Bethlehem Township, Lower Saucon, Williams, Moore, Lower Nazareth and Lehigh townships and the City of Easton are among those municipalities that intervened. The majority of intervening municipalities oppose the project, though not all of them have taken a stance. In their interventions, the Northampton municipalities, except for Williams, called the project a threat to the Lehigh Valley’s environmental resources. Lower Saucon, which hired an environmental attorney and adopted a resolution in January opposing the pipeline, said construction of the pipeline and a two-mile “Hellertown lateral” threatens to significantly damage streams, wildlife habitat, existing farm operations and quality of life in the township.
Fracking Cocktail May Lower Sperm Count: Fracking chemicals may pose a threat to male reproductive health, according to a new study published this month in the scholarly journal Endocrinology. “Our results suggest possible adverse developmental and reproductive health outcomes in humans and animals exposed to potential environmentally relevant levels of oil and gas operation chemicals,” the study said. The research focused on how mice react when exposed before birth to chemicals used during fracking and at other phases of natural gas production, The Huffington Post reported. “Researchers found that male mice exposed in the womb to minute levels of the mixture developed enlarged testes and decreased sperm counts later in life.” The scientists tested 24 chemicals including benzene, toluene, and bisphenol A. The concoction was “administered to mice throughout the course of their pregnancy so that researchers could observe the effects on their male babies. The mixture mirrored chemical levels that human are likely exposed to from wastewater or drinking water contaminated with fracking fluids.” The researchers found that 23 of the chemicals disrupted the natural functions of estrogens, androgens, and other hormones. That included functions vital to healthy development of sex organs and fertility, the report said. "This study is the first to demonstrate that [endocrine-disrupting chemicals or EDCs] commonly used in fracking, at levels realistic for human and animal exposure in these regions, can have an adverse effect on the reproductive health of mice,". "These findings may have implications for the fertility of men living in regions with dense oil and/or natural gas production."
EPA wants to expand toxic chemicals database -- The U.S. Environmental Protection Agency has proposed requiring large oil and gas processing facilities to publicly report, to the federal Toxics Release Inventory, the names and amounts of the toxic chemicals they emit. It would be the first expansion in 20 years of the TRI, the online public database in which most other industries must list their pollution emissions, and, according to the EPA, would affect more than half of the 517 existing large oil and gas processing plants around the nation, including three in Western Pennsylvania. Those are the Mark West-Liberty Midstream & Resources facilities in Washington and Butler counties and the Mountain Gathering LLC facility in Butler County, according to Tom Pelton, a spokesman for the Environmental Integrity Project, a Washington, D.C., environmental organization. The EPA’s decision to add the large oil and gas facilities to the TRI settled a lawsuit filed in January by the Environmental Integrity Project and nine other environmental and open-government groups. But the settlement will not require shale gas well sites, compressor stations, pipelines and other smaller processing facilities that employ fewer than 10 people to disclose their toxic emissions as the groups had sought.
Why does firewood cost so much? Fracking's part of it - —Northeasterners who are digging deeper into their pockets to pay for firewood this season can add a new scapegoat to the roster of usual market forces: fracking. Yep, a timber industry representative in New Hampshire said those hydraulic fracturing well sites in Pennsylvania's Marcellus Shale formation to suck natural gas out of the ground are using construction "mats" made of hardwood logs - think of the corduroy roads seen in sepia-toned photographs from the 1800s - to get heavy equipment over mucky ground, wetlands or soft soils. That increased demand has crept down the chimney into fireplaces. Prices in parts of New England are averaging $325 a cord and can even push past $400 for a seasoned, delivered load. That's anywhere from $50 to $75 more a cord than last year - or an increase of 18 to 23 percent. Jasen Stock, executive director of the New Hampshire Timberland Owners Association, said it's not just fracking sites that are hogging the logs. Pipelines and transmission wires - really any large-scale construction project - have in the past three years ramped up the appetite for the perfect mat log: a hardwood trunk, 16 to 20 feet long and 8 to 10 inches in diameter. As a result, the cost of cordwood on the stump (that is, live trees) went from $10 in 2012 in northern New Hampshire to $15 this year, Stock said. "If you're putting in a power line or gas line over wetlands or soft soil, they use thousands and thousands of these mats, and they're made of hardwood logs," Stock said. "If you're in the firewood business, that's your sweet spot. That's the log you want."
Very Bad Gas: Fracked Gas Worse Climate Changer Than Coal For Power Plants -- Natural gas doesn’t smell, burns clean and cooks planets faster than coal ! It’s the Frackers Way to Global Disaster. You’ve read about Armageddon in the Bible, time to make it happen – with gas ! The greenhouse gas leaks of methane during producing, distribution and burner tip use of natural gas makes fracked gas actually worse than coal in power plants. The only way that is not so is to assume that the methane leaks as much as the EPA estimates – which is about half of all scientifically measured amounts. Fracked gas is the largest new contributor to climate change; methane is the molecule of choice to cook a planet. Time to do something about it. One fracker at a time. Just in time for Halloween, a decommissioned, coal-burning power plant north of Crestwood on Seneca Lake is being brought back to life, and plans are being laid to convert it to natural gas (methane). The old Greenidge (Dresden) Power Plant–located just 20 miles north of Crestwood’s gates and shuttered for four long years—may be repowered with natural gas. And, yes, this plant is connected by a series of pipelines to Crestwood’s Seneca Lake Methane Storage Facility. At the very least, if it is approved, it will create further demand in the region for natural gas. The NY Public Service Commission will be holding an information session and public hearing next Wednesday on the proposal to repower the Dresden power plant on Seneca Lake.. We need all lovers of Seneca lake in attendance! Please consider offering oral testimony. Or, just wear blue and show up. We need a showing of concerned citizens opposed to the further build-out of fracked-gas infrastructure in the Finger Lakes.
Natural-Gas Market Goes Cold - WSJ: The benchmark U.S. natural-gas price tumbled to its biggest one-day decline since February 2014 on expectations of a deepening supply glut. Forecasts for warm fall weather across swaths of the U.S. spurred the nearly 10% plunge on Monday. Above-average temperatures at the start of heating season will undercut seasonal demand, analysts say, boosting stockpiles that already are near record highs. “The market is now in absolute free fall,” . “There’s no real strong forecast for any weather-[related] demand in the near future.” The North American natural-gas market has been mired in a supply glut for years amid robust output. Companies continue to grow more efficient at extracting the fuel from shale rocks in Pennsylvania, Texas and elsewhere, and they’re able to maintain production even as gas prices plumb three-year lows. But Monday’s selloff nevertheless is another blow to energy producers, which now must grapple with falling natural-gas prices in addition to low oil prices. Producers have struggled with persistently low gas prices for years and are now seeing additional threats to their earnings due to the past year’s plunge in oil prices. . Energy producers have sharply cut spending on new drilling this year in response, but many analysts and investors expect both oil and natural-gas prices to remain low through the end of 2015 and into 2016 as large inventories continue to pressure the market. November natural gas slid 22.4 cents, or 9.8%, to $2.062 on the New York Mercantile Exchange, the lowest close since April 2012 and the largest one-day percentage drop in 20 months.
NatGas Crashes To April 2012 Lows On Weather, Inventories -- For once, blaming the weather is not a 'joke'. Natural gas futures fell to the lowest since April 2012 as traders reacted to near-record inventories and mild weather that’s pushing back the start of winter demand for the heating fuel. As Bloomberg details The eastern U.S. may be warmer than usual from Nov. 1 to Nov. 10, according to Commodity Weather Group. Washington might reach 74 degrees Fahrenheit (23 Celsius) on Nov. 5, 12 degrees above normal, AccuWeather data show. The city’s low on that day could be 54 degrees, 10 above normal. Stockpiles totaled 3.81 trillion cubic feet Oct. 16, 4.5 percent above the 5-year average, according to a government report. BofA Merrill Lynch analysts lowered their year-end price target. “The pressure is on here with the lack of weather and the storage situation,” “It’s really gotten the attention of a lot of investors suddenly just how oversupplied we are.”
U.S. natural gas futures ease on continued warm forecasts - U.S. natural gas futures eased on early Wednesday on forecasts for well above normal temperatures over the next two weeks, expected to keep heating demand lower than normal. On its last day as the front-month, the November gas future on the New York Mercantile Exchange fell 3.6 cents, or 1.72 percent, to $2.056 per million British thermal units at 10:02 a.m. The December contract, which will be the front month on Thursday, was off about six cents to $2.302. “With a very weak November contract heading into the history books after today’s session the market could then set-up for an overdue bout of short covering in the coming week or so as the overall market remains extremely oversold,” The front-month was on track to remain in oversold territory on the Relative Strength Index (RSI) for a fourth day in a row, the longest since December 2014. The market however remains bearish with gas inventories expected to reach a record high around 4 trillion cubic feet in mid November. “With an El Nino winter playing out most projections are calling for heating fuel consumption coming in well below normal through the majority of the winter,” If the winter is warmer than normal as expected, traders noted the end of the winter season storage level could turn out to be at a record high level for that time of year and a major drag on prices throughout the winter heating season and into the spring. The warm winter forecasts were taking their toll on the winter futures.
Natural Gas Retreats on Warm Weather - WSJ: Natural gas retreated from gains Thursday as expectations for soft demand and heavy stockpiles outweighed a smaller-than-expected weekly stockpile addition. Prices for the front-month December contract settled down 4.1 cents, or 1.8%, at $2.257 a million British thermal units on the New York Mercantile Exchange. Front-month prices had fallen 18% during the six sessions before Thursday when December and its higher winter prices became the front-month contract. Thursday’s 1.8% losses are measured from the December contract’s settlement on Wednesday, which was nearly 27 cents higher than the November contract’s expiration price. Near-record production is on pace to put what may be a record amount of gas in storage ahead of a winter that could bring mild weather and tepid heating demand, analysts said. Gas prices have fallen in six of the past seven sessions, a pattern still holding because weather forecasts keep showing more unseasonably warm weather into mid-November, analysts said.The U.S. Energy Information Administration did say producers added 63 billion cubic feet of natural gas to storage in the week ended Oct. 23. That is five bcf less than the average forecast of 22 analysts and traders surveyed by The Wall Street Journal. But that still brought stockpiles to 3.9 trillion cubic feet, 4.1% above their five-year average level for this week of the year and 12% above their level at this time a year ago. At this pace, the market could set a record of around four trillion cubic feet heading into the winter heating season, analysts have said.
Shadow of Storage Surplus Threatens Winter Natural Gas Prices - The Energy Information Administration (EIA) yesterday (Thursday) reported the U.S. natural gas storage inventory is 3,877 Bcf as of Oct. 23, which is above the 5-year maximum for this week and within striking distance of breaching the all-time record high of 3,929 Bcf (Nov. 2, 2012) by the end of the traditional storage injection season on Oct. 31. And, while the production growth rate has slowed compared to recent years, and even dipped a bit over the past couple of weeks, total gas production is still near record levels and about 2.0 Bcf/d higher than last year. Now the gas market is about to flip to withdrawal season, when winter heating demand typically exceeds available local production, leading to storage drawdowns. The combination of high storage and production levels sets up a bearish dynamic for the winter market. Today, we take a look at the supply and demand balance going into the winter gas market. Our last update on the natural gas supply and demand balance was at the end of August 2015 At that time the market had worked off some of the supply surplus it started with back in April. At the start of the summer injection season in April there was 600 Bcf more gas in storage and production was 4.0 Bcf/d higher than last year. By August end, near-record demand from power generators and flattening production helped to whittle down the year-over-year storage overhang to just under 500 Bcf. Since then, demand has maintained record highs each month. And, while average production set a new record in September, year-over-year increases continued to flatten out.
How super low natural gas prices are reshaping how we get our power - This week, U.S. natural gas prices plunged briefly below $ 2 per million Btu (British thermal units), lower than they have been since early 2012. It’s part of a long term price drop that is closely tied to the fracking and shale gas boom, but also more immediately to high levels of natural gas storage and warm weather. Meanwhile, Duke Energy, the nation’s single largest utility company by market capitalization, purchased Piedmont Natural Gas for $ 4.9 billion, paying a premium for the natural gas distributor. The two overlapping stories hint at one of the most important consequences of the natural gas glut — it’s already changing not only what we pay to heat our homes in winter but also how we get electricity across the board. Natural gas displaced coal as the largest source of electricity generation in the U.S. for two months so far this year — a landmark development that has been long forecast — and if prices like these continue, that could become a much more frequent occurrence. Indeed, a Duke spokesman says frankly that gas-fired electricity is the better deal right now. “Thirty percent of our coal plants’ cost is in transportation,” says Duke’s Thomas Williams. “It’s rail to bring the coal from the mines to the plants. With gas at two and a half bucks or two bucks, incredibly low, it’s way in the money compared to coal.” The reason for such changes, across the country, is both the construction of more gas plants but also more “switching” from coal to gas plants as gas prices get lower, says Sam Andrus, a senior director with the North American natural gas practice at IHS. “Switching really is a real time decision, the replacement of gas capacity for coal capacity is a long term permanent decision. Both are happening right now,” Andrus says.
New Shale Gas Boom Could Be on the Way - Natural gas prices plunged Monday to their lowest level in more than three years on concerns that the market will remain oversupplied this winter. Adding to investors’ fears, some companies are hinting at a new production boom. Most of the growth in natural-gas production in recent years has been in the Marcellus Shale in Pennsylvania and West Virginia. Some industry experts say the Utica Shale, which stretches into Ohio and also lies underneath the Marcellus in some places, could be just as bountiful. EQT Corp. said in an earnings call Thursday that it has drilled wells in the Utica with very high production rates. EQT’s shares fell more than 7% that day. “A year ago, it would have been hard to imagine a more prolific play than the Marcellus,” said David Porges, EQT chief executive, on the call. “However, if the deep Utica works, it is likely to be larger than the Marcellus over time.” This comes on top of already-booming production. Total output rose to a record of 74.9 billion cubic feet per day in September, according to the latest Energy Information Administration estimate. Deutsche Bank said in a note Monday it expects production from six companies focused on Northeast natural-gas production to exceed expectations for the third straight quarter. Investors have been adding to their bearish bets on natural-gas prices. As of Oct. 20, money managers including hedge funds held one of the largest net bets on record that natural-gas prices would fall, according to the Commodity Futures Trading Commission. To be sure, some analysts expect natural-gas production to decline in the coming months, as producers drill fewer new wells. The number of rigs drilling for natural gas in the U.S. has dropped 42% in the past year, according to oilfield-services firm Baker Hughes. In addition, oil production has started to decline, which could limit the amount of natural gas extracted from oil wells.
Cheniere expects to ship first U.S. LNG export cargo in January – Cheniere Energy expects to start receiving natural gas to convert into super-chilled liquid fuel at its first U.S. LNG export terminal before the end of the year, with shipments to start in January, its chief executive said on Monday. Cheniere’s plant will mark the first exports of cheap and abundant U.S. shale gas as liquefied natural gas (LNG), adding to a huge boost in output out of Australia as well. The ample supplies, combined with slowing growth in China and falling demand in top importers Japan and South Korea, have cut prices and prompted a battle for market share. First natural gas supplies will arrive at its U.S. LNG plant this year, Chief Executive Officer Charif Souki told reporters on the sidelines of Singapore International Energy Week. “We will ship our first cargo sometime in January.” Spot LNG prices in Asia have tumbled by half from a year ago, narrowing the gap with U.S. benchmark prices. Once Cheniere’s first LNG plant starts up, the company will have a new production train starting up every six months until mid-2019, leaving it with seven total lines of gas liquefaction at its Sabine Pass project in Cameron Parish, Louisiana, and at another terminal in Corpus Christi, Texas.
Coming LNG wave more likely to head to Europe than China -- What’s well known is that a wave of new liquefied natural gas (LNG) is about swamp already well-supplied markets, what’s less known is how exactly these new cargoes will be absorbed. The consensus assumption has always been that China would soak up vast quantities of the super-chilled fuel, driven by rising energy demand and the need to switch away from more polluting coal. But this view has been challenged by China’s slowing growth profile, and by evidence that natural gas is failing to make the anticipated inroads into China’s energy markets, mainly as it remains a higher cost option for industry, consumers and power generators. China’s LNG imports dropped 3.8 percent to 14.13 million tonnes in the first nine months of the year compared to the same period last year, although pipeline imports of natural gas gained 8 percent to 18.13 million tonnes. There is the possibility that as the global LNG supply expands by 170 million tonnes from around 300 million currently over the next few years that China will switch from pipeline supplies, especially if LNG prices fall as much as many analysts expect. But even assuming a fairly dramatic increase in LNG purchases by China, there is still likely to be a supply glut by 2020, which will need to find a home or be idled, which is less likely given the need to keep production going to repay the enormous capital invested to build LNG projects. How will the market absorb some 66 million tonnes of new LNG from Australia and 61 million tonnes from the United States by 2020.
La. lost $1.1 billion from 2010-2014 because of severance tax exemption on horizontal drilling, audit says - Louisiana's generous severance tax exemption on horizontal drilling for oil and gas cost the state more than $1.1 billion in revenue from fiscal years 2010 to 2014, according to a report by the Louisiana Legislative Auditor.. Among top producing oil and gas states, Louisiana is the only one that allows a severance tax suspension for horizontal wells, the report said. The audit was completed in August and will be presented Thursday (Oct. 29) to legislators who sit on the Legislative Auditor Advisory Council, an oversight committee, said Karen LeBlanc, director of performance audits. The audit was not prompted by a request or any particular action, LeBlanc said. The severance tax exemption is among a number of exemptions the Legislative Auditor's office will be examining, she said. As an incentive to spur the industry, the state adopted a law in 1994 to exempt companies from paying severance taxes on oil and gas produced from horizontally drilled wells. The law suspends the tax for the first 24 months or until the exploration company recovers the costs of drilling the well, whatever came first. But because horizontal wells are most productive during their first two years, Louisiana is forfeiting substantial revenue during the most productive period of a well's life, the report said.
Chinese companies purchasing Texas oil assets - Chinese national oil companies (NOC) are purchasing west Texas oil assets for $1.3 billion. Shanghai-listed Yantai Xinchao Industry Co. Ltd. said it would buy oil fields in Howard and Borden counties from Nevada-based companies Tall City Exploration and Plymouth Petroleum, according to The Associated Press. Yantai Xinchao signed a letter of intent Friday with Ningbo Dingliang Huitong Equity Investment Center, a limited liability partnership, and its seven shareholders to buy the west Texas oil properties through a subsidiary, Moss Creek Resources LLC. The oil fields lie within the Permian Basin, which has seen resurgence in recent years thanks to horizontal drilling and hydraulic fracturing. Investors have been attracted to the Permian Basin due to low drilling costs and easy access to market. Declining oil prices have resulted in an oversupply and made asset prices particularly attractive to potential buyers. Chinese investment in American energy resources has been limited due to restrictions, but the transaction was approved by the Committee on Foreign Investment in the United States, according to Moss Creek Resources.
Oil execs attending secret meeting are schooled on how to handle ‘green radicals’: play dirty or lose -- In a room filled with oil & gas executives, a veteran lobbyist called Richard Berman held a crash course on how companies can use scare tactics and manipulation to make environmental groups look like radical morons. This includes digging up dirt on opponents (celebrities are the focus), exploiting basic emotions like fear and anger, skewing information and other dirty tactics, because in the end “you can either win ugly or lose pretty,” Berman said. Of course, these things would have never been admitted in public, but unbeknownst to Berman the whole meeting was taped by one of the executives who found the whole affair appalling, then made public by the New York Times. Richard “Rick” Berman is well known in Washington, being a PR specialist and long time lobbyst operating through his consulting firm, Berman and Company, Inc. In the past couple of years he’s been involved with almost 50 campaigns lobbying for powerful interest against environmental groups. Some of these campaigns include “PETA kills animals” ( smears People for the Ethical Treatment of Animals), “Stepup Wyoming” (attacks Wyoming’s teachers union and advocates for anti-union legislation), “Minimum Wage” (opposes all federal, state, and local efforts to raise the minimum wage), “EPA Facts” (disparages the Environmental Protection Agency and claims that environmental regulations will hurt the economy), and many other shady and distasteful attempts to manipulate the public. At the meeting in Washington, sponsored by Western Energy Alliance, a group whose members include Devon Energy, Halliburton and Anadarko Petroleum, Berman was trying to raise cash (a measly $3 million) for his latest attack: “Big Green Radicals”. Let’s take a look at the first introductory paragraph posted on the campaign’s website (biggreenradicals.com):
Alarming Uptick of Earthquakes in Kansas Linked to Fracking With 52 in Just Last Two Weeks - Just like in Oklahoma, Kansas is seeing a shocking uptick in earthquakesconnected to the underground disposal of wastewater from the hydraulic fracturing, or fracking, process. The Washington Post reports that Kansas has recorded more earthquakes in the past two weeks alone than there have been in the years between 1990 and 2013. According to the Kansas Geological Survey, between Oct. 15-26, there were 52 quakes, most with a magnitude between 2.0 or 3.0. That’s a huge increase from the 19 earthquakes recorded in the state between 1990 and 2010. In all, the number of earthquakes in the state jumped from four in 2013 to 817 in 2014, the Post reported. In recent years, Kansas has seen an energy boom-and-bust due to technological advancements in fracking and horizontal drilling. However, this quest for oil and gas has produced mixed results, from harmful waste spills to an increase in seismic activity. Earlier this year, the Kansas Corporation Commission, which regulates the state’s oil and gas industry, decided to limit the underground injection disposal of saltwater from oil wells mainly in Harper and Sumner Counties. The decision reportedly tamped down on the number of earthquakes in the area, according The Wichita Eagle. However, one can only wonder if the recent spate of tremors in the state has anything to do with the commission’s regulations expiring Sept. 13.
Kansas Regulators Extend Limits on Oil and Gas Wastewater Disposal -- Kansas regulators have decided to continue limits on wastewater disposal associated with oil and gas production in south central Kansas. It’s part of an effort to study and reduce earthquake activity. The rules regulate how much water can be pumped into underground disposal wells in Sumner and Harper County. Samir Arif, with the Kansas Corporation Commission, says regulators have been studying whether wastewater injection is influencing earthquakes. “The results were pretty much inconclusive, so they’d like to study it further. That is sort of the impetus for extending this order for another six months,” Arif says. The wastewater is a byproduct of oil and gas production. Early results show reducing the amount of wastewater pumped into the ground may reduce the strength and frequency of earthquakes in the area.
Kansas extending fracking limits until at least mid-March in effort to decrease earthquakes - Oil and gas industry restrictions meant to decrease the frequency and intensity of earthquakes in south-central Kansas will remain in place until at least March 2016, state regulators decided Thursday. The Kansas Corporation Commission issued an order extending limits on the injection of wastewater into the ground by oil and natural gas producers during fracking. The limits, first imposed in March of this year, apply to five earthquake-prone areas in Harper and Sumner counties. The restrictions had been set to expire in September, but the commission’s staff recommended continuing them after a drop in the number and intensity of earthquakes in the spring and summer. The restrictions will be revisited early next year, the order said, but they could stay in effect longer. Both the commission’s staff and the Kansas Geological Survey have said there needs to be more study to determine whether limiting wastewater injection in the area is reducing seismic activity. The order described the restriction’s results thus far as “encouraging but inconclusive.” “(The restrictions) will give us a better chance to observe the real impact,” said Ryan Hoffman, the director of the commission’s Conservation Division. “That will give us a bigger picture.” More than 200 earthquakes have been recorded in Kansas since the start of 2013 after only five in the previous 10 years. Environmentalists believe hydraulic fracturing, or fracking, is to blame because after reaching previously inaccessible oil and gas deposits, drillers inject large volumes of wastewater into disposal wells.
Oklahoma Earthquakes Are a National Security Threat - In the months after Sept. 11, 2001, as U.S. security officials assessed the top targets for potential terrorist attacks, the small town of Cushing, Okla., received special attention. Even though it is home to fewer than 10,000 people, Cushing is the largest commercial oil storage hub in North America, second only in size to the U.S. government's Strategic Petroleum Reserve. The small town's giant tanks, some big enough to fit a Boeing 747 jet inside, were filled with around 10 million barrels of crude at the time, an obvious target for someone looking to disrupt America's economy and energy supply. After the shale boom added millions of additional barrels to Cushing, its tanks swelled to a peak hoard of more than 60 million barrels this spring. Now the massive oil stockpile faces an emerging threat: earthquakes. In the past month, a flurry of quakes have hit within a few miles of Cushing, rattling the town and its massive tanks. According to the Oklahoma Geological Survey, more than a dozen quakes have registered 3.0 or higher on the Richter scale within a few miles of Cushing since mid-September. The biggest, registering at 4.5, hit about three miles away on Oct. 10.This is all part of the disturbing rise in earthquakes in Oklahoma, which has corresponded to increased fracking activity and oil production in the state. Since 2008, Oklahoma has gone from averaging fewer than two earthquakes per year that measure at least 3.0 in magnitude to surpassing California as the most seismically active state in the continental U.S. This year, Oklahoma is on pace to endure close to 1,000 earthquakes. Scientists at the National Earthquake Information Center in Colorado recently published a paper (PDF) raising concerns that the welter of moderate-sized earthquakes around Cushing could increase the risk of larger quakes in the future.
Bakken backlog: ND extends timeline to bring new wells online - Last week North Dakota regulators approved a plan to allow oil and gas producers an additional year to bring a new well online in order to give the industry a buffer zone amidst the persisting oil price slump. As reported by Reuters, oil and gas companies operating in the Bakken will now have up to two years to hydraulically fracture drilled-but-uncompleted wells. The extension comes with unanimously approved changes made by the North Dakota Industrial Commission. Prior to the change, companies had only one year to bring new wells into production, but could be granted a six month extension if the window passed. Since oil prices have dropped by more than half since last year, though, more companies are opting to delay the completion of new wells under the market climate improves. Currently, North Dakota is home to approximately 1,000 uncompleted wells, and without the rule change, companies would be forced to spend billions of dollars after hitting the one-year cut off in December. Some investors feared that the backlog of wells coming online would only add to the current oil market oversupply.For North Dakota, the change means delayed but higher tax revenues. Helms told Reuters, “The state would prefer to tax the oil at a higher price in the future.” Applications for an extension must be submitted by producers on a per-well basis. Helms anticipates that about half of the 1,000 uncompleted wells will be granted delays, which will likely impact state oil output by approximately 100,000 to 150,000 barrels per day. To read the full report, click here.
Iraqis tour North Dakota to study gas-capturing technologies — The Iraqi government has turned to North Dakota for help in finding solutions to the wasteful burning of natural gas that’s a byproduct of oil production. Iraq, OPEC’s second-biggest oil producer behind Saudi Arabia, is having much the same problem dealing with excess natural gas that North Dakota has had as oil production there has increased, though the state has made strides recently to capture and use it, said Julio Friedmann, the U.S. Energy Department’s deputy assistant secretary for fossil energy. Iraq’s oil production has surged to more than 4 million barrels a day, up about 2 million barrels in the past five years. “Iraq is unquestionably serious about reducing flaring,” Friedmann said. “They hope to learn from the experience in North Dakota.” U.S. Energy Department officials along with Hamed Younis Saleh al-Zoba’ei, Iraq’s deputy minister of gas affairs, and Hillal Ali Ismaeel Mushtaq, Iraq’s director of general of studies, concluded a three-day tour of North Dakota’s oil patch on Wednesday, after visiting gas-processing facilities and meeting with state and industry leaders.
Oilfield firm working with Williston center on oil cleanup -— An oil industry company is trying to establish a biological process in which oil-eating bacteria are used to clean up a spill with the help of a Williston-based research center. Rick Reese, founder and CEO of Colorado-based Compliant Resources, calls his method aggressive bioremediation instead of land farming, a similar concept, mainly because it’s seen limited success. “Land farming in the oil field is almost a dirty word, and for a good reason,” Reese said. “It’s been tried between Williston and Denver, at least 100 times and maybe even 200, and there are only two documented successes.” While visiting the Bakken formation in the North Dakota-Montana border, Reese was able to develop his ideas and arrive at a successful grant proposal for a study involving the Williston Research Extension Center. After speaking with center director Jerry Bergman and soil science expert James Staricka, Reese discovered the missing component in many oilfield-led efforts was agricultural expertise, the Williston Herald reported. “There are hundreds of examples of oil field companies who have gone and tried to do this, and they just don’t get it because they don’t know a Dr. Bergman, and they don’t know agronomy,” Reese said. “They are engineers.
ND seeking public comment on oilfield waste landfill The North Dakota Department of Health has opened a 30-day window to receive public comments regarding a proposed 39-acre oilfield waste landfill, reports the Forum News Service (FNS). The Black Mallard Disposal Facility, which would be located three miles south of Ross in Mountrail County, would mostly take in solidified drill cuttings and soils or other materials contaminated by spills. The site would not, however, accept radioactive oilfield waste despite state rules pertaining to accepting such materials. The proposal has been in review for about two years as local officials have worked with Green Group Holdings, an environmental services company specializing in the planning, implementation and operation of waste disposal, recycling and reuse sites. As reported by the FNS, the site has been granted a conditional use permit, but it included several stipulations, such as not accepting filter socks or other naturally occurring radioactive materials. As permitted, the landfill would be able to accept up to 200,000 tons of waste per year and is anticipated to be in operation for about 27 years. The facility will have an inspector working on-site who will be trained and supervised by the health department. The disposal site is expected to have 18 to 20 trucks hauling in waste every day.
ND likely to ship inmates out of state to curb overcrowding — Negotiations are underway to send North Dakota inmates to an out-of-state private lockup to relieve overcrowding that’s due largely to an increased population spurred by oil development, the state’s top prison administrator said. “There are too many inmates and not enough capacity,” said Leann Bertsch, director of the state Department of Corrections and Rehabilitation. North Dakota’s prison system topped 1,800 inmates last week, a record level for inmate numbers and 500 more than ideal, Bertsch said. “It’s very likely” an agreement will be reached soon to send some North Dakota inmates by year’s end to a lockup in Colorado that is among some 60 detention facilities owned or managed nationwide by the Corrections Corporation of America, based in Nashville, Tennessee. The company operates four facilities in Colorado. Bertsch said she did not know yet which facility would house the North Dakota inmates. The private prison operator specifies what types of inmates it will accept and those who have had disciplinary problems and prisoners with recurring medical and mental problems are not eligible, she said.
Bakken worker death caused by toxic gas, lawsuit claims - The family of a man found dead atop an oil collection tank in the North Dakota oil patch in 2013 is suing the Texas-based company the deceased was working for. As reported by the Billings Gazette, on July 18, 2013, the body of Blaine P. Otto of Sidney, Montana, was discovered on a catwalk above the tanks where he was checking oil levels. Bradley T. Otto, Blaine’s brother, is representing the estate of the deceased and is suing Newfield Exploration Co. The company has denied any responsibility for Otto’s death. The official death certificate states that the 39-year-old died from natural causes due to heart problems and obesity. Otto’s family, however, believes he was killed by toxic gasses that were released upon opening of the hatch at the site located in McKenzie County.An investigator that has determined the cause of death in other, similar oilfield worker deaths, told the Tribune that heart attacks are often wrongly attributed to the cause of death when workers are exposed to the released toxic gases. By the time the victims are found, the concentration of harmful gases have usually dissipated. The investigator said that when coroners are evaluating a scene such as this, they will check for natural causes of death because there is no obvious evidence of an accident. The lawsuit points to nine other deaths which have occurred in the Bakken oilfields under similar circumstances.
Samson Resources And American Eagle File For Bankruptcy; Bakken Operators -- The Dickinson Press is reporting: Two debt-heavy operators in the state, Tulsa, Okla.-based Samson Resources and Denver-based American Eagle Energy, filed for Chapter 11 bankruptcy, planning to sell off Bakken assets to pay back what they owe. Samson, with production acres in the Three Forks and Middle Bakken plays, has not yet succeeded in selling off acreage. According to 2012 reports, Samson had 400,000 acres in the Bakken. Later that year, it would sell 116,000 acres, primarily in Divide and Williams counties, to Continental Resources for $650 million. No other sale of assets has been reported by the company since then. American Eagle held 54,262 acres in the Bakken in late 2014. In early 2015, it sold 1,185 leasehold acres in Divide County for $9.5 million. The Samson Resources story is not exactly "news." It was announced August 15, 2015, that the company was planning to file for bankruptcy.
More companies operating in Bakken oil patch file bankruptcy — Two more energy companies operating in North Dakota’s Bakken oil patch have filed for Chapter 11 bankruptcy in the midst of slumping crude prices. The Bismarck Tribune reports Tulsa, Oklahoma-based Samson Resources and Denver-based American Eagle Energy plan to sell off Bakken assets to pay debts. Between June and late September, 10 oil and gas companies filed for bankruptcy. Others have agreed to sell shale oil acreage and assets in North Dakota. Bismarck-based MDU Resources Corp. also is trying to sell off its oil and gas exploration subsidiary, Fidelity Exploration and Production Co. North Dakota sweet crude on Tuesday was fetching about $36 a barrel — about half of what it sold for a year ago. The number of drilling rigs in North Dakota has plummeted by nearly two-thirds.
New Jobless Claims In and Out of the Fracking Patch -- The United States has a curious relationship with the price of oil and gasoline. For much of the U.S., falling fuel prices represent a positive economic situation, which gives Americans the opportunity to spend their disposable income on things other than fuel, such as dining out, clothes, and cars. And yes, even more fuel (for leisure travel). These are the kinds of oil price-sensitive industries that can grow and expand when oil prices fall, which because these kinds of businesses are found in every state, means that American consumers benefit in every state from that dynamic. In some states however, whose economies include significant contributions from oil production, falling oil prices can have a negative consequence as well. As revenues and profits in the oil producing sector of their economies fall, the benefits of falling oil prices for consumers is offset by losses in the productive part of their economies. That's something that becomes especially clear when we look at statistics like new jobless claims. If we look across the nation, we see that there has been a general trend of improvement in the level of initial unemployment insurance claims filed each week since oil prices began falling from their peaks in early July 2014. At present, we find that the seasonally-adjusted level of new jobless claims for the states of Colorado, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, West Virginia and Wyoming is essentially the same as it was before oil prices began falling. In these states, for new jobless claims, the positive economic benefits of falling oil and gasoline prices for consumers has been almost perfectly offset at this point of time by increased new jobless claims taking place in their oil production sectors.
West Coast refining: Higher yields make Bakken crude by rail economical - Tesoro Corp. says that in spite of higher costs, it is continuing to see the value in receiving rail shipments of North Dakota Bakken crude at its Washington state refinery due to improved yields. As reported by Reuters, Tesoro CEO Greg Goff told analysts, “We still see economic value to be able to move Bakken to the West Coast and achieve the benefits that we have always stated, which primarily are driven by the yield improvements in the refineries.” The discounts applied to crude produced in the Bakken and other areas have narrowed in the wake of the global oil price slump, greatly reducing the profitability of transporting crude by rail. Last month at the North Dakota Petroleum Council’s annual meeting, Justin Kringstad, director of the state’s pipeline authority, said that North Dakota’s Bakken crude will continue to head to the U.S. West Coast via rail. According to data from the American Assocation of Railroads, oil-by-rail shipments across the nation are down by approximately 13 percent over the past year. Although new pipelines have become operational in recent years, no pipelines have been planned to cross the Rocky Mountain Range. Kringstad said, “The West Coast will be serviced by rail for the foreseeable future.”
Range Resources losses mount on low commodity prices - Struggling with lower prices for oil and natural gas, Range Resources lost $301 million in the third quarter despite aggressively cutting its operational costs and the number of drilling rigs in the field. The Fort Worth-based energy company reported late Wednesday that it lost $1.81 per diluted share compared to a $146 million profit, or 86 cents a diluted share, during the third quarter of last year. Revenue for the period was $479 million, a 22 percent decline. The third-quarter results included a $502 million writedown on the value of oil and gas properties in northern Oklahoma and northwest Pennsylvania. Other companies, including Chesapeake Energy, also have been writing down asset values. Any sales proceeds will be used to reduce debt and strengthen our balance sheet. President and CEO Jeff Ventura Excluding charges, Range said its adjusted net income for the period was $5.5 million, or 3 cents per diluted shares, compared to $62 million, or 37 cents, in the prior-year quarter.
Range Resources looking to sell assets as low gas prices remain a drag -- Range Resources Corp. expects to sell some assets outside the Marcellus shale as it battles low natural gas prices that pummeled its revenue. “We are continuing to work on potential noncore asset sales for areas in our portfolio that cannot compete against the Marcellus for capital,” CEO Jeff Ventura said Wednesday in announcing third-quarter financial results. The Fort Worth-based company swung to a net loss of $301 million, or $1.81 per share, during the quarter, which compares to a profit of $146 million, or 86 cents per share, during the same period last year. The loss included a $502 million write-down on oil and gas properties in Oklahoma and northwest Pennsylvania. Without that charge and other one-time financial items, Range reported adjusted net income of $5.5 million or 3 cents per share. Range, Pennsylvania’s fourth largest shale producer, increased its production by 20 percent during the quarter and brought online 23 wells, including a second Utica shale well in Washington County. But the company said it got 30 percent less for that gas. Revenue from gas, oil and liquids fell 43 percent to $252 million.
Occidental slips to Q3 loss, quits North Dakota oil patch - Occidental Petroleum Corp, the fourth-largest U.S. oil producer, swung to a significant net loss for the third quarter on Wednesday as it booked charges for dropping futures prices and halted projects while saying it was exiting North Dakota. The company, which also has operations in the Middle East and Colombia, showed a net loss of $2.61 billion, or $3.42 per share, in the third quarter ended Sept. 30, compared with a profit of $1.21 billion, or $1.55 per share, in the year-ago quarter. The result reflects the tough times a more than 50 percent drop in crude prices over the last year has wrought on oil companies. Charges it took “reflect the sharp decline in the oil and gas futures price curves, as well as projects that management determined it would cease to pursue,” Occidental said in a statement. On an adjusted basis, Occidental was able to beat expectations as it lifted output from a year earlier and slashed costs to offset tumbling prices. Houston-based Occidental slashed its capital budget by $300 million in the quarter, and Chief Executive Steve Chazen said the company has “made a strategic decision to exit” the Bakken, which had drained resources away from Occidental’s core Texan shale fields. Reuters reported this month that Occidental had sold its North Dakota assets to private equity fund Lime Rock Resources. It was the most significant pullback by a big company from the Bakken fields of North Dakota since the downturn started.
Hess posts third-quarter loss on crude price slump, beats expectations -- Oil producer Hess Corp reported an adjusted quarterly loss on Wednesday but beat expectations as a sharp drop in capital spending and other cost cuts helped offset a 60 percent slump in crude prices in the past year. Hess said it would further pare costs in 2016, aiming to spend 27 percent less on its capital budget, in a range of $2.9 billion to $3.1 billion. Much of the reduction will come from the company’s workhorse Bakken shale fields, where it expects to run four drilling rigs next year, about half of the 2015 average. That should depress Bakken output, which rose in the latest quarter by 31 percent to 113,000 barrels of oil equivalent per day. “The net loss attributable to Hess was $279 million, or 98 cents per share, in the third quarter, compared with a net profit of $1.01 billion, or $3.31 per share, a year earlier. Excluding one-time items, Hess lost $1.03 per share. By that measure, analysts expected a loss of $1.20 per share, according to Thomson Reuters I/B/E/S. Production jumped nearly 20 percent to 380,000 barrels of oil equivalent per day during the quarter, though the average selling price Hess received for its crude fell 53 percent to $45.66 per barrel. Shares of New York-based Hess fell 4.8 percent to $54.18 in early trade.
Anadarko Petroleum posts loss as crude prices slump - U.S. oil and natural gas company Anadarko Petroleum Corp reported a quarterly loss that met Wall Street expectations compared with a year-earlier profit as results were hurt by a slump in crude prices. Anadarko, like other oil companies faced with a more than 50-percent decline in crude, is working to improve drilling efficiency and productivity while keeping a close eye on costs, Chief Executive Officer Al Walker said in a news release. The Houston-based company reported a third-quarter net loss of $2.24 billion, or $4.41 per share, for the third quarter ended Sept. 30. A year earlier, Anadarko had a profit of $1.09 billion, or $2.12 per share. Excluding one-time items, Anadarko had a per-share loss of 72 cents per share, a figure that was in line with Wall Street’s expectations for a loss of 73 cents per share, according to Thomson Reuters I/B/E/S. In the third quarter, the company’s total sales volumes of oil and gas averaged 787,000 barrels oil equivalent per day, down from 849,000 boepd in the year-ago period.
BP shrinks again to weather extended oil slump -- BP announced a third round of spending cuts and more asset sales over the coming years on Tuesday to tackle an extended period of low oil prices and help pay for its $54 billion (35 billion pound) U.S. oil spill settlement. The British oil and gas company, which has already sold nearly $50 billion in assets since the deadly 2010 Gulf of Mexico spill, said it expected an additional $3-5 billion of divestments in 2016. Oil companies have been aggressively cutting spending and operating costs over the past year to deal with a sharp drop in cashflow due to lower oil prices. The cuts have resulted in thousands of job losses and the scrapping of many new projects. For the first time since 2010, BP was able to report quarterly results knowing how large its oil spill liabilities are, removing a huge element of uncertainty. "Now finally, BP can be more of a normal oil company and do what oil and gas companies do and I'm very excited about that," Chief Executive Bob Dudley told Reuters in a telephone interview. BP said that its capital spending, known as capex, for this year would now come in at close to $19 billion, down from a previous estimate of under $20 billion, and capex would fall to $17-19 billion a year through to 2017. This is the third time the company has reduced its 2015 capex target from an original goal of $24-$26 billion.
BP’s big plans need crude at $60 -- BP has big plans to balance its cashflows by 2017, but it needs crude prices to hold $60 a barrel and St James’s Place has reported a terribly polite 17 per cent rise in net fund inflows. FT City editor Jonathan Guthrie rounds up the morning’s main news and puts it into context. BP is battening down the hatches for oil to stay at $60 per barrel, publishing plans for “balanced cashflows by 2017” at that level. The oil major says this will“sustain” the dividend and produce growth in distributions over the long term. The oil industry has been hopeful of a recovery in the price of the black stuff, which traded at over $110 per barrel until around this time last year. BP is preparing for low prices to persist. It will curb capex at around $17-$19bn a year through to 2017 and expects to make additional divestments of $3-$5bn in 2016. What happens if Brent stays below $50 per barrel? Presumably BP would have to make another plan. Replacement cost profits for the quarter were $1.2bn lower year-on-year for the third quarter at $1.8bn.
Next Few Weeks Will Reveal Full Extent Of Oil Industry Suffering -- With the bulk of quarterly earnings reports in the energy industry yet to be announced, there are already $6.5 billion worth of asset write-downs, according to Bloomberg. And that could be just the tip of the iceberg. A Barclays’ assessment last week predicted $20 billion in impairment charges from just six companies. Write-downs occur when the expected future cash flow from an asset falls sufficiently that a company has to report that the asset has lost some of its value. With oil prices half of what they were from mid-2014, oil and gas fields around the world are no longer worth what they used to be. Some oil fields that were previously expected to produce in the future may no longer even make sense to develop given current oil prices. As a result, investors should expect billions of dollars in further write-downs in the coming weeks. Persistently low oil prices are putting a lot of pressure on the dividend policies of oil and gas producers. The Wall Street Journal reported that four oil majors – BP, Royal Dutch Shell, ExxonMobil and Chevron have a combined cash flow deficit of $20 billion for the first half of 2015. In other words, these big players are not earning enough revenues to cover expenditures, share buybacks, and dividends. With such a large cash flow deficit, something has to give. All four are focusing on slashing spending in order to preserve their promises to shareholders, with dividends especially seen as untouchable.
Whiting Petroleum posts third quarter losses, increased production - Whiting Petroleum Corp., the largest oil producer operating in North Dakota, posted losses for the third quarter following the oil price rout and the writedown of its purchase of rival Kodiak Oil & Gas in 2014. In its third quarter financial and operating results report, Whiting reported a net loss of $1.87 billion, compared with a net income of $158 million, or $9.14 and $1.32 per share respectively, in the one-year-ago timeframe. Also during this timeframe, Whiting production rose 38 percent to 160,590 barrels of oil equivalent per day (BOE/d), despite witnessing the average price or each barrel sold decrease by 49 percent. In a statement, Whiting Chairman, President and CEO James J. Volker said, “Our third quarter results demonstrate we remain on track to balance capital spending and cash flow in 2016 at approximately $1 billion while maintaining our longer term growth profile. Total capital expenditures decreased 46 percent from the second quarter while production adjusted for asset sales was relatively flat.”
Shell Has Biggest Loss in More Than a Decade on Price Slump - Royal Dutch Shell Plc reported its biggest net loss in at least 16 years after Europe’s largest energy group abandoned some projects and lowered its oil-price expectations, resulting in a charge of almost $8 billion. The loss highlights the pain oil and gas companies are enduring as prices plunge, forcing them into the biggest belt-tightening in a generation. Eni SpA, the Italian oil group, also fell into a loss in the third quarter, while profit slumped at BP Plc and Total SA. The oil price rout has wiped almost $500 billion since the end of last year from Bloomberg World Oil & Gas Index, which tracks energy stocks globally including Shell, ExxonMobil Inc and Chevron Corp. Shell, which is buying BG Group Plc in the energy industry’s largest deal this year, reported a third-quarter net loss of $7.42 billion, compared with a profit of $4.46 billion a year earlier. Adjusted for one-time items and inventory changes, profit dropped 70 percent to $1.77 billion, The Hague-based Shell said Thursday in a statement. That missed the $2.92 billion average estimate of 17 analysts surveyed by Bloomberg. Shell took a $4.61 billion charge resulting from the withdrawal from offshore drilling in Alaska and an oil-sands project in Canada, and $3.69 billion triggered by cuts to its outlook for oil and natural gas prices. BG Deal The loss increases the pressure on Europe’s biggest oil producer, which has cut jobs and reduced spending this year, as Chief Executive Officer Ben Van Beurden prepares the company for enduring low prices. Shell’s market value fell last month to the lowest this decade amid concerns that it may be overpaying for BG.
Chevron cutting up to 7,000 jobs as profits shrink -- Chevron is cutting up to 7,000 jobs, or 11 percent of its workforce, the latest indication of the toll that low oil prices are taking on the industry. The two biggest U.S. oil companies reported huge profits for the third quarter. Chevron Corp. said Friday that it earned $2 billion, and Exxon Mobil Corp. earned more than $4.2 billion. But those profits are down sharply from a year ago. Chevron’s profit was 64 percent lower than last year’s third quarter; Exxon’s profit fell 47 percent, its worst third quarter since 2003. Both companies are slashing costs to boost profits. Chevron plans to cut capital and exploratory spending next year by one-fourth, with further cuts in 2017 and 2018 depending on the oil industry’s condition then. That will include cutting the workforce by 6,000 to 7,000 jobs and shedding a similar number of contract workers, said Chairman and CEO John Watson. Many of the layoffs will be in Australia, he said, and an unspecified number will be in the U.S. Chevron has 64,700 employees. Exxon doesn’t announce job cuts, and a spokesman declined to say whether the company had reduced its headcount in response to low oil prices. Vice president of investor relations Jeffrey Woodbury told analysts that Exxon has “continuously … right-sized our global function organization” and has the same number of employees today that it had in 1999, before its merger with Mobil. Halliburton, Schlumberger and other oilfield-service providers have also cut thousands of jobs. While workers in the oil industry lose their jobs, consumers are saving money from lower energy prices.
The Shale Massacre: Chevron Fires Another 7,000 After Laying Off 1,500 Three Months Ago -- Back in January, in the aftermath of the first plunge in commodity prices, and oil in particular, oil major Chevron had the unsavory distinction of being the first US oil giant to admit cash flow "constraints" when it was forced to scrap its buyback. And since oil's dead cat bounce fizzled just around the summer before resuming is slide, it was inevitable that Chevron would proceed with trimming even more cash outflows. It did so for the first time in July, when as we reported at the time, Chevron would layoff 1,500 jobs globally, saying that "the cost reductions due to cuts in the corporate center are expected to total $1 billion with additional cost savings expected across the company." And even though Chevron said in July that its cost-cutting initiatives would be "completed by mid-November of 2015" it decided to surprise everyone moments ago when on its earnings call it announced it would not only slash its capex by another 25%, but will shortly distribute another 7,000 pink slips. The reason: another terrible quarter in which the $2 billion in earnings were a 73% plunge from a year earlier. From the company's press release: “Third quarter earnings were down substantially from a year ago,” said Chairman and CEO John Watson. “While downstream earnings remained strong, lower overall earnings reflected weaker market prices for both crude oil and natural gas, which depressed upstream profitability. We are focused on improving results by changing outcomes within our control. Operating and administrative expenses are 7 percent lower than last year, and we expect further reductions in the quarters ahead.”
Oil industry slipping into the red as outlook dims – The oil sector is slipping into the red after years of fat profits as the steep slump in oil prices shows little sign of ending, with this quarter shaping up to be the worst since the downturn started. The world’s top oil companies have struggled to cope with the halving of oil prices since June 2014. They have cut spending repeatedly, made thousands of job cuts and scrapped projects. The lower-for-longer outlook for oil prices took its heaviest toll yet in the third quarter as oil companies again reported a dramatic drop in income. Some saw results swing into the loss column, and the industry had billions of dollars in impairment charges. “This downcycle poses significant challenges,” Jeff Sheets, ConocoPhillips’ chief financial officer, told investors on a conference call after the company posted a loss. With 10 of the top 20 European and North American oil and gas producers having reported third-quarter results, seven have posted losses. These include Royal Dutch Shell, Italy’s Eni and in North America Occidental Petroleum Corp, Anadarko Petroleum Corp, Hess Corp, Suncor and ConocoPhillips. Shell posted a third-quarter loss of $7.4 billion on Thursday, hit by a massive $8.2 billion charge after halting its exploration in Alaska’s Arctic sea and a costly oil sands project in Canada.
Bad timing: Big Oil ramps up output just as prices sink – After years of declining output, major oil companies have ramped up crude production this year, just as they are being battered by a plunge in prices due to already excessive supplies. Executives have taken pride in seeing billions worth of investments in new technologies and new fields in places such as Brazil, the North Sea and West Africa kick in and boost output. But most of the investment was made three to five years ago when oil was about $100 a barrel, around double current levels. Now, the new production is contributing to a glut in supply due mostly to the North American shale boom, a faltering global economy and OPEC’s decision not to cut output. Recent third-quarter results show the scale of the problem. According to Reuters calculations, oil production from nine of the world’s largest oil and gas producers rose a combined 8 percent in the first nine months of the year to over 10 million barrels per day (bpd) for the first time since 2013. With low prices pushing some companies into the red, oil majors have had to sharply cut costs and rein in growth plans. “The priority for these companies is to achieve cash flow neutrality and investment will be pulled back in order to achieve that where possible,”
OilPrice Intelligence Report: Reality Setting In For The Oil Majors: Third quarter earnings capture some of the worst losses recorded since the downturn in oil prices began last year. Oil prices have displayed great volatility over the last twelve months, rallying to $60 per barrel in the second quarter before dropping back down to current levels in the mid-$40s. That has contributed to some large impairment charges and quarterly losses for the world’s biggest oil companies. Here is a quick snapshot of some of the quarterly figures:
• Hess (NYSE: HES) reported a net loss of $291 million, or a loss of $1.03 per share. Production jumped, however, from 318,000 boe/d in 3Q2014 to 380,000 boe/d in 3Q2015.
• Marathon (NYSE: MRO) became the first large U.S. shale producer to cut its dividend, slashing it from 21 cents to 5 cents per share, or a cut of 76 percent.
- • ConocoPhillips (NYSE: COP) reported a $1.07 billion loss, or $0.87 per share, the largest in six years.
- • Royal Dutch Shell (NYSE: RDS.A) revealed a huge $6.1 billion loss for the quarter, which included impairment charges of $7.9 billion. Shell ditched its drilling campaign in the Arctic and also wrote off assets in Canada’s oil sands.
- • Eni (NYSE: ENI) lost 952 million euros in the third quarter. Eni also announced a sale of 12.5 percent stake in Saipem, an oilfield services company.
• ExxonMobil (NYSE: XOM) posted a reasonable $4.24 billion profit, or $1.01 per share, beating expectations and outperforming its peers. However, profits are still half of the $8.07 billion from last year’s third quarter, and the year is shaping up to be the company’s worst performance since 2009.
- • Chevron (NYSE: CVX) earned $2 billion for the quarter, or $1.09 per share. That is down by 35 percent from year ago figures. The company also announced it would lay off 6,000 to 7,000 workers and it would sell off $5 to $10 billion in assets by the end of 2017.
• Even PetroChina (PTR), China’s largest oil and gas producer, reported miserable numbers. Earnings fell to 5.2 billion yuan, or 0.03 yuan per share. That is about one fifth of the level from a year ago. The performance was the worst for PetroChina on record.
Oil Producers Curb Megaproject Ambitions to Focus on U.S. Shale - Big U.S. oil companies are starting to think small. A stubborn 16-month crude rout with no end in sight is driving the largest U.S. oil producers away from costly, high-risk megaprojects long touted as the industry’s future and toward safer shale operations that generate the cash needed to satisfy anxious investors. Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., ConocoPhillips and Hess Corp. have all either delayed or abandoned projects that range from the deep seas of the Gulf of Mexico to Canada’s oil sands and the U.S. Arctic. At the same time, Exxon and Chevron both announced plans to substantially increase U.S. crude production, largely as a result of their shale operations. “What makes more sense in this environment: drill a $100 million well in the deepwater Gulf that might come up empty, or poke lots of holes in west Texas where you already know there’s oil for a few million apiece?” Explorers are expected to slash spending on deepwater wells by 20 percent to 25 percent next year, compared with a 3 percent to 8 percent overall reduction on all types of fields. The type of giant reservoirs that require megaproject treatment are now found in only the roughest, deepest and coldest parts of the world. International producers are failing to deliver 80 percent of megaprojects on time and on budget, compared with about 50 percent in 2005, “It’s really bad for megaprojects now,” “When oil was $90 or $100 a barrel, there was a lot of wiggle room to make a return. But at $45 oil, there’s no wiggle room. Enormous projects can’t go over or be late.”
New way to bet on oil wipes out billions in investor savings: Two years later, her partnerships have plunged in value and widow Robinson has lost more than half of the $202,000 she invested, according to a complaint filed with regulators against Parks and his firm, Ameriprise Financial Services. For years, brokers have been luring savers like Robinson into drilling partnerships with the promise of fat payouts. With yields on safer investments like government bonds so puny, it wasn't a hard sell. But now this once hot business, a big source of fees for brokers and banks, is coming to a messy end. In the past year, investors have lost $20 billion in publicly traded drilling partnerships, or $8 of every $10 they had invested, according to a report prepared by FactSet for The Associated Press. That figure does not include losses from $37 billion of bonds sold by the partnerships in the five years since 2010, many down by half in last 12 months, or losses from bets on private partnerships that don't trade publicly and are difficult to track. A plunge in the price of oil that few anticipated explains much of the loss. But many partnerships had borrowed heavily and were running big risks even when oil was twice as high a year ago, suggesting that either investors were too sloppy in their hunt for steady income or brokers too reckless in their hunt for fat fees — or some ugly combination of both. "If you were trying to preserve your capital, oil and gas producers were not for you,"
After a decade, oil begins flowing from National Petroleum Reserve-Alaska -- Commercial oil production has begun in the National Petroleum Reserve-Alaska. ConocoPhillips Alaska made that announcement on Tuesday, saying oil has begun flowing at its CD5 drill site, part of the Alpine field on the North Slope. The production is coming from Alaska Native lands within the boundaries of the Indiana-sized reserve, created as a naval petroleum reserve after World War I. The oil giant is also pursuing other development in the reserve, including Greater Moose’s Tooth 1 where the Bureau of Land Management recently approved a drilling permit. If funding is approved by ConocoPhillips, a decision is expected later this year, the $900 million project is expected to result in the first production from federal land in the reserve. CD5 is located eight miles east of Greater Moose’s Tooth 1. ConocoPhillips said in a statement that peak production at the $1 billion CD5 project could reach 16,000 barrels of oil daily. “First oil at CD5 is a landmark for our company, Kuukpik Corporation, Arctic Slope Regional Corporation and for Alaska,” said Joe Marushack, president of ConocoPhillips Alaska. “This announcement is the culmination of more than 10 years of work and collaboration with key stakeholders, including the residents of the nearby village of Nuiqsut.” CD5 sits on land owned by the Kuukpik Corporation, the village corporation for Nuiqsut. Mineral rights are owned largely by ASRC, the Alaska Native regional corporation for the North Slope.
As Alaska lawmakers debate how to build pipeline, some ask: ‘Should we?’ –– Gov. Bill Walker and the Alaska Legislature have fought over budgets, but one thing the two branches of government agree on: Alaska should be trying to build the $55 billion gas pipeline that’s currently under discussion at a special legislative session here. While there’s often discord over how, exactly, the project should move forward, it’s rare for an Alaska politician to question outright the merits of the pipeline. In interviews this week, however, a pair of legislators said they expect to start hearing more questions about whether the project is truly feasible. The state is facing multibillion-dollar budget deficits, and market prices for natural gas have recently plunged along with oil. “I think you’re going to see us start talking about it,” said Rep. Lynn Gattis, R-Wasilla. “Can we afford it and should we? Who’s got the plan?” Sen. Bill Wielechowski, D-Anchorage, meanwhile, said it was a “legitimate question whether we should continue to pour money and time and effort” into the project. “The problem with this pipeline is it’s going to cost money — you can’t build it for free,” he said.
Fracking, landslide blamed for contamination of Northern B.C. creek - A relentless landslide that's contaminated a source of drinking water near a community in northeastern B.C. has residents blaming oil and gas exploration's effects underground for causing the slide that's contaminating the creek with silt and heavy metals. Farmers and ranchers near Hudson's Hope say they've lost their sole water source and blame landslides on changes to underground aquifers and land stability because of nearby fracking and the effect of two nearby hydro dams, but officials say there is no proof of this. Last year, a landslide started oozing grey mud, filling the creek with silt and sand. Tests by the Ministry of the Environment showed dangerously high concentrations of heavy metals, including lead, barium, cadmium, and arsenic.In September 2014, the District of Hudson's Hope and Northern Health issued an advisory to stop using the creek's water for drinking, stock watering or farm irrigation. "Clean water is essential for life and all of us need to feel confident that the ground and surface water we all depend on is of good quality. We will continue to press for answers to how exotic metals came to be present in the groundwater," In the past, hydraulic fracturing, or fracking, in the region has triggered earthquakes. However, an internal report prepared by B.C.'s Oil and Gas Commission, and obtained by CBC News, states there's "no evidence" that five fracking and disposal wells in the area are associated with the landslide. The report also notes a "prevalence of natural metals" in the soil and historic instability in the area.
Enbridge Montreal Line Reversal Likely to Squeeze Bakken Crude Supply -- Delays to the Enbridge Sandpiper project bringing greater volumes of Bakken crude onto the Enbridge Mainline system at Superior, WS threaten to limit the supply of crude to feed refineries in Quebec when Enbridge’s Line 9B reversal project comes online in November 2015. The market impact could push crude prices higher in North Dakota. Today we discuss the crude supply picture and possible impact when Line 9B opens up. In Episode 1 we explained the somewhat tortuous path that crude oil has to travel to get to the origin of Enbridge’s Line 9B at Westwood, Ontario – via Line 5 that runs across the top of Lake Michigan or via Lines 78 and 6B that deliver crude northeast from Flanagan, IL to Sarnia, Ontario. The predominantly light crude oil that Line 9B will deliver to refineries in Quebec Province was expected to mostly come from the North Dakota Williston Basin (Bakken) as well as some synthetic light crude processed from oil sands bitumen in Alberta. We pointed out that Enbridge plans to deliver light crude to Line 9B appear to rely on additional Bakken crude volumes that will flow onto their system from North Dakota at Superior, WS once the 225 Mb/d Sandpiper pipeline comes online in 2017. However, delays to Sandpiper (originally expected online early in 2016) mean that committed shippers on Line 9B may initially struggle to source adequate supplies to meet their take or pay arrangements with Enbridge. In the paragraphs below, we consider the existing crude diet of the refineries that Line 9B will feed in Quebec and then assess the market impact of limited crude supply before Sandpiper comes online.
Lockdown: The End of Growth in the Tar Sands - Oil Change International - The pipelines exporting tar sands out of Alberta are almost full, according to new analysis by Oil Change International. Without major expansion-driving pipelines such as Energy East, Kinder Morgan or Keystone XL, there will be no room for further growth in tar sands extraction and tens of billions of metric tonnes of carbon will be kept in the ground. This would be a significant step towards a safer climate. All proposed new pipeline routes out of Alberta are facing legal challenges, opposition by local authorities and regulators, and broad-based public opposition. All of the major projects have been significantly delayed with some cancellations seemingly imminent. No pipeline has been built since 2010, despite active industry efforts. Key findings from the report and the model on which it is based include:
- the current system is 89% full
- the industry will run out of transportation capacity as soon as 2017
- further growth in the sector is unlikely to be viable without major pipeline expansions
- transporting tar sands by rail is found to be too expensive to justify major new growth
- the emissions savings of no new growth would be 34.6 gigatons of CO2 equivalent (equivalent to the annual emissions of 227 coal plants over 40 years)
Pipeline Opposition Has Put A Serious Dent In Tar Sands Expansion -- All of those marches, rallies, arrests, and inflatable pipelines are working. That’s the main finding of a report released this week by pro-clean energy group Oil Change International. According to the report, public opposition has been successful in stopping or delaying tar sands pipeline construction in North America. The existing pipelines carrying oil from Alberta’s tar sands region are 89 percent full, meaning that expansion of tar sands development depends heavily on new pipelines to get that oil to market. Oil Change International’s models found that without new pipelines or expansions on existing routes, tar sands producers will run out of pipeline capacity by 2017. There are four major proposed pipelines that are key to the expansion of the tar sands: Keystone XL, which runs from Alberta to the Gulf Coast of the United States, and Energy East, Northern Gateway, and the Trans Mountain Expansion, all of which run through Canada. These projects are all facing major opposition, the report notes. Keystone XL has been embroiled in protests, legal suits, and delays for six years, and the Canadian pipelines are all facing protests, both from citizens and from elected officials: the country’s new prime minister Justin Trudeau has said he opposes the Northern Gateway pipeline. In order to expand tar sands production, at least one of these pipelines will need to be approved, the report states. “The tar sands have run out of room to grow,” Hannah McKinnon of Oil Change International said in a statement. “Production is close to peaking, and now it is time for a recognition that tar sands production has no place in a climate safe world.”
Trump: US needs 'better deal' before approving Keystone pipeline | TheHill: Donald Trump says the United States needs a “better deal” from the developer of the Keystone XL oil pipeline before the project is approved. At a Tuesday rally in Iowa, the GOP presidential front-runner complained that the United States is “not really getting anything” in return for the controversial project, which President Obama is considering whether to approve seven years after TransCanada Corp. first applied to build it, the Toronto Star reported. The new position on Keystone contrasts with Trump’s earlier comments that he would approve the Canada-to-Texas pipeline immediately upon taking office, similar to his Republican rivals. The billionaire mogul also disparaged the oil sands that the pipeline would carry and said the United States’s oil is better. “We have really great-quality oil. Higher than Canada. You know, they have the tar sands, which is a problem, for them; very expensive to get it out. We have great stuff,” Trump said, using a term for oil sands that environmentalists often use to reinforce their position that the petroleum is dirty. “So I would approve it, because I love the jobs of building it, I love the jobs of building it, but I may just say, ‘Maybe we should get 10 percent, 15 percent, maybe 20 percent as that oil flows,’ ” he continued.
Shell halts construction on new Alberta oil sands project – Royal Dutch Shell Plc will not continue construction of its 80,000 barrel per day Carmon Creek thermal oil sands project in northern Alberta because of the lack of infrastructure to move Canadian crude to market, the company said on Tuesday. Shell said the decision to halt the project was also the result of “current uncertainties” and chief executive Ben van Beurden said the company was having to manage costs in today’s low oil price environment. “We are making changes to Shell’s portfolio mix by reviewing our longer-term upstream options world-wide, and managing affordability and exposure in the current world of lower oil prices. This is forcing tough choices at Shell,” van Beurden said in a statement. Canada’s oil sands hold the world’s third largest crude reserves but carry some of the highest project breakeven costs globally. Western Canada also struggles with market access issues due to limited export pipelines, which can lead to a glut of crude building up in Alberta and weighing on prices. The plunge in benchmark oil prices has prompted a number of companies to defer costly new oil sands projects, although so far few have been canceled outright once underway.
Pemex receives U.S. oil swap license, but for less than planned - State oil firm Pemex said on Wednesday it had received a license from the United States to import U.S. light crude in exchange for exports of Mexico’s heavier crude oil for the first time, albeit with a lower ceiling than originally planned. The terms of the year-long license will allow Pemex’s commercial arm, P.M.I. Comercio Internacional, to import U.S. light crude to process in its refineries from October, with the limit capped at 75,000 barrels per day (bpd). Pemex will initially receive conventional U.S. light crudes as part of the swap and later shipments could carry shale crudes as well. A Pemex spokesman said the decision to cut the original plan to import up to 100,000 barrels per day was made in accordance with the company’s present needs at its refineries. The first U.S. shipment would arrive in Mexico from the first half of November,
NT will suffer health, environmental effects unless fracking stopped, Senator Glenn Lazarus warns - Queensland independent senator Glenn Lazarus has told an anti-fracking meeting in Darwin he will not rest until Australian land owners are allowed to reject shale gas exploration on their properties. Senator Lazarus has renewed calls for a halt to coal seam gas (CSG) mining projects in Queensland after the death by suicide of farmer George Bender. At a meeting in Darwin on Wednesday night Senator Lazarus said it was only a matter of time before another person felt the pressure was overwhelming. "George won't be the last to commit suicide," he said. Senator Lazarus urged people in the Northern Territory to keep campaigning against hydraulic fracturing, known also as fracking. Fracking involves injecting water at high pressures into deep rock formations and is typically used to extract oil and gas. "One of the things we can do is create as much noise as possible. I've got to hope there's something we can do," Senator Lazarus said. While CSG is different to the process used to frack gas, the Senator said the environmental effects were similar. He said the NT would suffer similar health and environmental impacts to that seen in Queensland, if fracking continued.
Ministers accused of trying to sneak through new fracking rules - -- Ministers have been accused of trying to sneak through new rules allowing shale drilling under national parks without a proper parliamentary debate, in a move condemned by Labour and anti-fracking campaigners.The rules, first proposed in July, would permit drilling underneath protected areas, despite a commitment before the election from Amber Rudd, the energy secretary, to have an outright ban on fracking in national parks, sites of special scientific interest (SSSIs) and areas of outstanding natural beauty.Instead of a full parliamentary debate, the controversial measures will instead be discussed and voted on by a small committee of MPs on Tuesday. All MPs will get to vote on the regulations at some point next week but will be denied the chance of a debate.The 18 committee members include 10 Conservatives, including energy minister Andrea Leadsom, Julian Smith, an assistant whip, and Paul Maynard, a parliamentary aide to Rudd whose local association received a £5,000 donation before the election from Addison Projects, a company that could benefit from fracking.. Greenpeace estimates that 23 MPs have constituencies that include national parks or areas of outstanding natural beauty that could be affected by the new rules – including the former deputy prime minister, Nick Clegg, the Conservative chairman of the Treasury committee, Andrew Tyrie, and Oliver Letwin, the Conservative chancellor of the Duchy of Lancaster.
U-turn will allow fracking in ‘protected areas’, MPs claim - A government U-turn on fracking regulations will allow fracking under national parks and other areas previously protected, according to campaigners and MPs. Labour MPs Cat Smith and Gordon Marsden made their comments after the ‘Delegated Legislation Committee’ voted to make changes to a ban on fracking to allow the practice to take place more than 1,200 metres below sites including national parks, sites of special scientific interest and areas deemed to be vulnerable to ground water pollution. The committee of 18 MPs voted 10-8 in favour of overturning an amendment to the Infrastructure Bill – passed in January 2015 – which had banned all fracking from such areas.By approving the amendments, the amendments will now receive only a ‘division’ vote in the House of Commons - where MPs shout “aye” or “no” in response, with no debate. Fleetwood MP Ms Smith attended the meeting with Blackpool South MP Mr Marsden. Neither of them were eligible to vote, but the duo were each allocated one minute to speak at the session. Mr Marsden said: “The Government has gone back on promises it made when we asked it to protect these areas. “They say it is deep down and won’t affect the areas – but when you have to put a load of rigs somewhere like the Forrest of Bowland, it’s not going to be great.“And if you are doing things underground, you are inevitably going to affect the surface. “This is an abuse of process and of our trust.
Is fracking really a feminist issue? - When it comes to public relations blunders, the UK's shale gas industry is the gift that keeps on giving. Hot on the heels of self-defeatingly redacted reports, arrests of peacefully protesting MPs, and hysterically optimistic predictions about a fracking bonanza that resolutely refuses to materialise, today we received another present from new UKOOG chairwoman Averil Macdonald and her suggestion women are more likely to oppose fracking because they are less likely to understand it than men. Demonstrating the kind of public relations nous that would make even Donald Trump wince, Macdonald responded to a Nottingham University poll showing 31.5 per cent of women back fracking compared to 58 per cent of men by blaming women's lack of science education for the results. "Frequently the women haven't had very much in the way of a science education because they may well have dropped science at 16. That is just a fact," she told the Times. As a result women are more likely to trust their gut instinct, she continued. "Not only do [they] show more of a concern about fracking, they also know that they don't know and they don't understand. They are concerned because they don't want to be taking [something] on trust. And that's actually entirely reasonable." Yes, it absolutely is a fact that too few women study science at A-Level and university. I, for one, bitterly regret dropping Physics after GCSE despite the A*.But the suggestion opposition to fracking is down to a lack of scientific expertise is an insult to all the women and men who have analysed the environmental, economic, and political implications of building a fracking industry in the UK and concluded the risks outweigh the benefits.
Some U.S. bond funds bet on high-yield survivors of oil carnage -- High-yield energy bonds are on track for their worst year since the global financial crisis yet some funds are holding on, convinced that markets underestimate the ability of many oil companies to ride out the crude price slump. Some money managers such as Western Asset Management Co., Eaton Vance Corp. and Aberdeen Asset Management have broadly held on to their investments in bonds of oil and gas producers throughout the year even as now they lag more than 95 percent of their peers, according to Morningstar data. Their exposure to energy is around 10 percent or more, with varying shares of that in high-yield energy debt. The average yield on U.S. high-yield E&P credits has risen to 13.7 percent through Friday from 10.6 percent at the end of last year, according to Barclays PLC. That increase reflects fears that many companies will struggle with financing their operations and servicing their debt with oil stuck at around $45 a barrel , less than half of last year’s highs. The Barclays U.S. High Yield Energy Index is down 8.6 percent so far this year through Friday, putting it on track for its worst yearly loss since 2008. As of Sept. 30, 8.5 percent of the $117 billion of outstanding high-yield debt issued by U.S. oil and gas firms was in default, either because they missed payments to bondholders, entered bankruptcy or conducted a distressed debt exchange according to Fitch Ratings, a record high since it began tracking the data in 2000.
After Years of Decline, U.S. Oil Imports Rise - WSJ: U.S. imports of foreign oil are rising again after a long decline, as the oil bust forces domestic producers to scale back. Less than a year after the Organization of the Petroleum Exporting Countries opted to continue production despite plummeting prices, member countries including Saudi Arabia and Iraq are clawing back market share they ceded to oil companies pumping in Texas and North Dakota. U.S. crude imports declined 20% between 2010 and 2014 amid the domestic energy boom but have recently started to rise again. Total crude-oil imports rose for three straight months between April and July, according to the most recently available data from the Energy Information Administration. Imports of light crude grew more rapidly, from 5.6% of total imports in April to 11% in July. On the Gulf Coast, vessels carrying nearly a week’s worth of imports waited offshore Friday to unload, according to shipping tracker ClipperData. The slowdown in the nation’s shale-oil output has pushed up the price of high-quality U.S. oil relative to global prices, giving U.S. refiners a reason to buy from countries such as Nigeria. Until very recently, the boom in U.S. shale-oil production forced countries that exported oil to the U.S. to hustle for new customers.
Green incentives seen as key to lifting U.S. oil export ban -– Legislation crawling its way through Congress that would end the U.S. ban on crude oil exports will succeed only if tied to renewable energy incentives, said Senator Heidi Heitkamp, a moderate Democrat working to convince others in her party to support ending the decades-old restrictions. Heitkamp, who represents oil giant North Dakota, said she is convinced her bill or a similar one can pass by the end of the year, though getting the White House and others on board will require some kind of financial support for wind, solar and other renewable energies, energy efficiency and water conservation funds. “The notion that we would be able to do this without some kind of broader compromise in the energy sphere is probably unrealistic at this point,” Heitkamp told the Reuters Commodities Summit on Friday in Williston, epicenter of North Dakota’s oil industry. “Washington is a place where people don’t give up something for nothing.” The United States has limited most oil exports since the early 1970s. The U.S. House of Representatives passed a bill ending the oil export ban earlier this month, but President Barack Obama issued a veto threat, saying Congress should work to move the country to cleaner sources of energy. Two bills in the Senate similar to the House version have passed through committees – including the one co-sponsored by Heitkamp – but backers are struggling to find enough Democrats to pass legislation in the full chamber.
Forget VW: Oil slump more to blame for weak U.S. diesel demand - Long before Volkswagen AG’s emissions scandal spelled bad times for diesel, U.S. consumption of the fuel was bafflingly weak. Despite surprisingly robust economic growth, rising truck cargo, and pump prices that fell to parity with gasoline for the first time in six years, U.S. diesel use rose by only 0.2 percent in the first seven months of the year. That marked a sharp contrast with gasoline demand, which rose nearly 3 percent at the fastest clip since the 1990s, according to Energy Information Administration (EIA) data. Analysts and traders see several factors at play: lower traffic on diesel-powered railroads due to reduced coal and oil shipments; an economy increasingly tilted to services rather than heavy industry; and the baseline effect from unusually strong heating fuel use during frigid weather in early 2014. Some also say one of the biggest factors is the U.S. oil industry itself. As crude prices tumbled, drillers cut the number of rigs drilling for oil by almost two-thirds over the past year, reducing the number of fracking rigs, tank trucks, generators and other diesel-guzzling equipment. “Production is down, drilling is down, and that spreads to the rest of the economy,”
Natural Gas Growth In The US -- Something called the "NERC" divides North America into eight regions. Most of the regions are multi-state / multi-province, but a couple of them are pretty much just one state, e.g., Texas (TRE) and Florida (FRCC). I assume the latter is based on something other than just economics / customer base. Be that as it may. These are three very, very interesting graphs taken from a Seeking Alpha contribution today. The first graph is projected natural gas-fired generation increase by region (note that only four regions are broken out; the fifth ("rest of the US") consists of the other four regions which includes the midwest (two sub-regions, not very many people), the northeast (a lot of faux environmentalists, looking more and more like the EU) and Florida. Based on the graph, it looks like the following:
- the western region has a few coal plants to retire, and a bit of wind competition when it comes to NG in the short ter, but by 2025, the writing is on the wall: natural gas will be needed in huge amounts (I wonder if this doesn't correspond to nuclear plants reaching the end of their programmed life?)
- the Texas region takes off in 2025; probably simply due to growth, residential and commercial
- the southeast region has the largest number of coal plants to retire; certainly no wind competing; maybe nuclear plants retiring, also (I don't know)
- the Indiana-Ohio-Pennsylvania corridor as well as the rest of the US appear to simply mirror growth (and/or the loss of nuclear plants)
Just What We Need: More Natural Gas -- This Time From Alaska -- I just posted this over the weekend: were so bad that there was serious talk of a 48-inch natural gas pipeline from the Alaskan North Slope to the Northwest Territory (Canada), and from there to the continental US. Now, today, from Seeking Alpha: BP and ConocoPhillips have provided written assurances that they will commit their shares of Alaska North Slope natural gas to a future pipeline project, Alaska's Governor Walker says, adding that he will not introduce property tax legislation on gas leases within the Prudhoe Bay and Point Thomson units. The announcement comes as the state legislature begins a special session concerning the project, which now is likely to focus on buying out TransCanada’s interest in the proposed $45B-$65B project that would be the largest single investment in Alaska in the state’s history. Exxon Mobil, also one of the three top North Slope producers, has not yet made public a similar commitment. It sure doesn't sound like the US oil and gas industry is dead, as Saudi Arabia would like to paint it.
Update On Egypt's Super-Giant Natural Gas Field -- Previously reported; regular readers were aware of this some time ago. The New York Times points out the political side of the gas discovery in Egypt that threatens to upend Mideast energy diplomacy. The company, using drilling rights from the Egyptian government, found what it called a “supergiant” natural gas field. It may be the largest discovery yet in the Mediterranean and is one of the world’s biggest new gas finds in years. Eni will need to drill more wells to prove its claim that the field, which it calls Zohr, holds up to 30 trillion cubic feet of gas. That could be worth about $100 billion, even when taking into account current low energy prices. But the promise of Zohr — the Arabic word for noon — is already brightening the prospects of the Egyptian economy, which has been benighted by an energy shortage and years of political turmoil. With a big new supply of natural gas, Egypt might be able to stop burning oil to generate electricity and start exporting the petroleum instead. New domestic supplies of natural gas would help conserve scarce foreign currency resources and might spur investment in gas-fired factories and electric power plants. And natural gas exports might follow. But Egypt’s good fortune could come at the expense of its much richer neighbor. Eni’s trove could threaten Israel’s ambitions to tap its own giant offshore gas field, called Leviathan. Israel is already self-sufficient in natural gas by dint of a smaller offshore field — Tamar, discovered in 2009 — that serves the country via pipeline. Noble Energy, an American company that operates Tamar for the Israeli government, discovered the bigger Leviathan field in Israeli waters in 2010. Leviathan has potential reserves far exceeding Israel’s own needs.
Will Pakistan Benefit From LNG Glut Pushing Prices to New Lows? -- LNG spot prices hit a new low of $4 per mmBTU as the supply continue to significantly outstrip demand. It's creating opportunities for Pakistan to get access to large supply of cheap fuel for its power generation. With softening demand from China and 130 million tons per year (mmpta) of additional LNG supply set to reach market over the next five years, gas research firm Wood Mackenzie sees continuing downward pressure on global LNG spot prices. “The entire industry is worried because it is hard to tell when China’s demand will pick up again,” according to Wall Street Journal. “Rising demand from smaller countries such as Pakistan, Egypt and Bangladesh is not enough to offset the declining demand from north Asia.” As recently as two years ago, LNG shipped to big North Asian countries like Japan and Korea sold at around $15 to $16 a million British thermal units. This month, the price has already hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia next year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line, according to Wall Street Journal. Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar. This is a great opportunity for Pakistan to take advantage of historically low LNG prices to alleviate its severe load-shedding of gas and electricity. Recently, Pakistan has launched its first LNG import terminal in Karachi and started receiving shipments from Qatar. Pakistan has also signed a $2 billion deal with Russians to build a north-south pipeline from Gwadar to Lahore. But the country needs to rapidly build up capacity to handle imports and distribution of significant volumes of LNG needed to resolve its acute long-running energy crisis.
WTI Crude Contango Collapsed To 5-Month Lows Amid Growing "Over-Supply" Concerns -- At $44.21 (fro the Dec contract), WTI is trading at its lowest level since August 28th (in the middle of the month-end massacre). The WTI-Brent spread is at its widest in over 2 weeks "stressing the need for U.S. output to drop to get rid of the oversupply," warns Commerzbank commodity strategist Carsten Fritsch. Even more worrisome (for future hope), is the plunge in prompt contango (1st month - 2nd month) which has collapsed to 5-month lows. ZThis does not suggest good news on the horizon, as Fritsch warns, "unless we get news on U.S. production we should remain at these levels."
OilPrice Intelligence Report: Oil And Natural Gas Prices Crashing Once Again: The Wall Street Journal reported that the four largest oil companies in the world – BP, ExxonMobil, Chevron, and Royal Dutch Shell – had a combined cash flow deficit of $20 billion in the first six months of 2015. All four have plans to bring spending down sufficiently so that revenues cover capex and dividends, but it may take a few years. The emphasis on spending, with promises not to touch dividends, suggests that a large number of planned investments won’t move forward. The WSJ says that cuts in spending have led to the postponement of projects that would ultimately yield 7.3 billion barrels of oil equivalent. Rising storage levels contributed to increased bearish sentiment in the oil markets. Speculators shorted oil at the highest rate since July, rising by 18 percent for the week ending on October 20, according to new data from the U.S. Commodity Futures Trading Commission. “The decline in U.S. drilling and production is not enough to rebalance even the U.S. market, let alone the global market,” Citi Futures Perspective analyst Tim Evans told Bloomberg in an interview. “How much do you really want to pay for the next million barrels of inventory you don’t need?” Natural gas prices are also crashing, dropping to their lowest levels since 2012. NYMEX prices dropped by nearly 10 percent on October 26 alone, dipping below $2.10 per million Btu. That was the largest decline in a single day in almost two years. During intraday trading on October 27, natural gas prices fell below $2/MMBtu, a threshold not breached in over two and a half years. Natural gas prices are also crashing, dropping to their lowest levels since 2012. NYMEX prices dropped by nearly 10 percent on October 26 alone, dipping below $2.10 per million Btu. That was the largest decline in a single day in almost two years. During intraday trading on October 27, natural gas prices fell below $2/MMBtu, a threshold not breached in over two and a half years.
U.S. to sell 58 mln barrels from strategic oil reserve - Bloomberg - The United States plans to sell 58 million barrels of crude oil from its strategic petroleum reserve between 2018 and 2025 under a budget deal reached on Monday by the White House and lawmakers from both parties, Bloomberg reported. The proposed sale, which represents more than 8 percent of the 695 million barrels of U.S. strategic reserves, are due to start in 2018 at an annual rate of 5 million barrels and rising to 10 million by 2023, Bloomberg said. The proceeds from the sale will be “deposited into the general fund of the treasury,” Bloomberg said, citing a bill posted on the White House website. The United States may also sell an additional 45 million barrels to cover a $2 billion program from 2017 to 2020 to modernize its strategic reserve, including building new pipelines, Bloomberg said. In all, the sales, if completed, would represent about 15 percent of U.S. strategic reserves and comes as countries such as China and India build their own strategic oil reserves amid a steep drop in global crude prices.
One Chart That Explains The Stupidity Of Congress’ SPR Plan - Buy high, sell low. The definition of stupid. That’s what Congress is considering as it eyes selling oil from the U.S. Strategic Petroleum Reserve (SPR) to pay for certain projects in its latest spending plan. The last time the U.S. bought oil for the SPR in 2000 through 2005, oil prices were rising (Figure 1). Now Congress wants to sell oil when prices are the lowest in a decade and continuing to fall. Members of Congress who routinely tell us that they are good at business need to look at the chart above and explain why we should believe them. Selling oil from the Strategic Petroleum Reserve now is a terrible idea.
Buy High, Sell Low -- US Government Economics 101 -- October 27, 2015; Is The Bakken The New Stragetic Petroleum Reserve? --This may explain why the price of oil continues to drop. Wow, this puts additional pressure on Saudi Arabia and OPEC. I marvel at how things have changed. A few years ago it was all about "peak oil" and $150 oil. Now there's a glut of oil as far out as one can see. Bloomberg is reporting: The U.S. plans to sell millions of barrels of crude oil from its Strategic Petroleum Reserve from 2018 until 2025 under a budget deal reached on Monday night by the White House and top lawmakers from both parties. The proposed sale, included in a bill posted on the White House website, equates to more than 8 percent of the 695 million barrels of reserves, held in four sites along the Gulf of Mexico coast. Sales are due to start in 2018 at an annual rate of 5 million barrels, rising to 10 million by 2023 and totaling 58 million barrels by the end of the period. The proceeds will be “deposited into the general fund of the Treasury,” according to the bill. Short term, and perhaps a knee-jerk reaction, this seems like a bad omen for the domestic oil and gas industry, but then this: The sale is the second time the U.S. has raised cash from the reserve, created as a counter-balance to the power of Arab producers after the first oil crisis of 1973-74. The U.S. may sell also additional barrels to cover a $2 billion program from 2017 to 2020 to modernize the strategic reserve, including building new pipelines. With regard to the price of oil and the amount of oil being released from the SPR, let's keep it in perspective.
- the sales don't begin until 2018
- the sales go on for eight years
- the annual rate is 5 million bbls (14,000 bopd)
- 14,000 bopd of "new" oil coming unto the market won't even be noticed
NatGas Tanks Under $2, Crude Pushes 2-Month Lows After US SPR Decision & BP, Saudi Comments -- The overnight tumble lows in most 'risk' assets is being revisited by oil and gas prices following unhelpful comments from Genel's Tony Hayward that "the next 6-12 months will become challenging" for many in the industry, more details emerging with regard US selling SPR crude to cover budget needs, and finally OPEC's Saudi officials proclaiming that crude prices should be set by the market. NatGas (Nov contract) tumbled under $2 and WTI (Dec) cracks to fresh 2-month lows, erasing well more than half of the August month-end panic-buying surge... Genel’s Hayward Says Some Oil Companies Won’t Survive Next Yr
- Next 6-12 mos. will “become challenging” for many in industry, Chairman Tony Hayward says at conference in Cape Town.
- Capital mkts closed for many participants
- Mkt oversupplied by 2m-3m b/d
- Shale oil “completely overwhelmed” underlying demand
- Saudi production strategy “is working;” U.S. rig counts, output dropping
- Mkt will need 18-30 mos. to clear w/o intervention
- Supply-side “wild cards” include Iran, Libya: both could ramp up
- Oil prices will recover; $50 won’t sustain industry
Congressional leaders proposed to sell 58 million barrels of oil from U.S. emergency reserves over six years starting in fiscal 2018 to help pay for a budget deal that ends mandatory spending cuts, according to a copy of the bill posted to a congressional website. Led to an ugly last 24 hours...
Establishment Of Non-Governmental Strategic Petroleum Reserves -- October 27, 2015 With the new, relaxed rules recently announced by the NDIC, we will start to see changes in the Bakken and in the daily activity report. Today's report included a list of seven (7) EOG wells in the Parshall oil field that have been "temporarily abandoned."I only looked at one of the file reports and it said that the well would be temporarily abandoned and would be brought back on line when oil prices improve. I assume that is true for all of them. So, we now have at least three categories of wells that can be brought back on-line fairly quickly if need be:
- wells on the fracklog; DUCs; wells that have been drilled to total depth but not fracked;
- wells that are on-line but are choked way back to minimize production and flaring;
- wells that have been completed and are temporarily abandoned simply because of low prices; they will be inspected annually to insure they remain in good operating order
"They" Must Be Reading The Blog -- October 29, 2015 -- Just a couple of days ago I suggested that we are witnessing a new phenomenon in the United States: the "establishment" of non-government strategic petroleum reserves. Now, CNBC has brought up the same issue, asking whether we need the SPR any more. There is so much craziness in the article. The lede suggests that the government plans to sell a lot of oil out of the SPR. In fact, they will sell on an annual basis, 5 million bbls, starting in 2018. North Dakota has choked back oil production and is producing 5 million bbls every five days; unfettered, in a national emergency, North Dakota could easily produce 5 million bbls every two days. And that's just the Bakken. The Permian is bigger and the Eagle Ford is probably bigger. Then, the article suggests that the SPR oil sale will raise huge amounts of money to fund the government. In fact, we are talking maybe $2 billion. (5 million bbls x $50 = $250 million annually). Whether it's $2 billion or a fraction of that, both are rounding errors when it comes to the US budget, deficit, and debt. Then this from an analyst who apparently has never heard of the Bakken: McNally says that in addition to the sales already planned, the government has been eyeing the SPR to fund another government project — highway funding and transportation. "If this turns into a feeding frenzy and we sell down our entire reserve, that's where it could become a market issue," McNally said. "We better be sure we'll be at peace, and I wouldn't make that bet."
Oil prices touch multi-week lows, as supply worries grow - Oil prices fell to their lowest in six weeks on Tuesday, as mounting worries over persistent oversupply grew ahead of U.S. data that was expected to show another increase in crude inventories. Brent December futures fell 82 cents to $47.72 a barrel by 1338 GMT, their lowest since mid-September, after settling the previous session down 45 cents. U.S. crude dropped $1.10 to $42.88 a barrel, having touched a nine-week low of $42.74 earlier in the day. The difference between the price of oil for immediate delivery and in a year’s time yawned to its widest in more than six months, reflecting investors’ perception that supply is likely to be far more widely available now than in the future.“What markets don’t tend to realize is the overhang of crude, which has been developing since September last year, will go into the end of next year,” . U.S. production cuts – from a peak of around 9.6 million barrels a day to around 9.1 million – and optimism over demand have failed to translate into higher prices,. U.S. commercial crude stockpiles are expected to have risen for a fifth straight week, by an average of 3 million barrels to 479.6 million, in the week ended Oct. 23, a Reuters survey showed. While stocks of distillates, which include diesel and jet fuel, are expected to fall by 2 million barrels, storage utilization for distillates in the United States and Europe is nearing historic highs, Goldman Sachs said on Monday.
Crude Oil Price Jumps Following Inventory Report - The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 3.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 480 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years. Tuesday evening, the American Petroleum Institute (API) reported that crude inventories rose by 4.1 million barrels in the week ending October 16. For the same period, analysts had estimated an increase of 3.7 million barrels in crude inventories. Total gasoline inventories decreased by 1.5 million barrels last week, according to the EIA, but remain above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged about 9.1 million barrels a day for the past four weeks, up by 3.1% compared with the same period a year ago. Congressional leaders and President Obama agreed earlier this week to sell some 58 million barrels out of the U.S. Strategic Petroleum Reserve (SPR) as part of a deal to prevent another government shutdown at the end of this week. The sales, at an annual rate of around 5 million barrels, would take place between 2018 and 2025. Proceeds from the sale would go to the U.S. Treasury’s general fund. There are plenty of arguments for reducing the size of the U.S. strategic reserve. In this case the reason is Congress lacks the will to raise taxes to pay for needed services — and that’s among the weakest reasons. The SPR held more than 726 million barrels in 2009 and holds about 691 million barrels today. The average cost to taxpayers of a barrel in the SPR was $29.70, before figuring in inflation.
Crude Jumps Despite API Reporting 5th Consecutive Weekly Inventory Build -- While lower than last week's levels, API reported a still considerable 4.1 million barrel crude inventory build last week. This is the 5th consecutive inventory build. However, despite the size of the overall build, crude prices are rising (extending gains off NYMEX Close ramp) which may be related to a 748k draw on crude stocks at Cushing. 5th week in a row... Charts: Bloomberg
WTI Extends Gains - Tops $45 - On Large Cushing Inventory Draw -- Following last night's API reported 4 million barrel inventory build (against 3.75mm bbl expectations) and Cushing draw, DOE confirms a build (but smaller, at 3.38 million barrels) and Cushing saw a draw of 785k barrels (the largest in 4 weeks). Crude reaction was to extend gains from the earlier knee-jerk and break back above $45, even as crude production rose.And the reaction... Even as crude production ticked back up... (though mostly from Alaska) Charts: Bloomberg
October 29, 2015 - Jack Kemp's weekly energy tweets:
- Total US crude and product stocks fell -3.7 million bbls last week, the largest one-week decline in three months
- US refineries have started to come back from the fall turnaround season and ramp up processing
- US crude and product stocks all well above the 10-year range, except for distillate fuel stocks which are smack dab in the middle and trending down
- US refineries pass midpoint of turnaround season; crude stocks rise more slowly; refined fuel stocks draw strongly
From the EIA: US propane exports surging -- (graph)
U.S. crude rises after inventory drawdown at Cushing hub – U.S. crude futures rose from multi-week lows in thin early Asian trade on Wednesday after an industry group reported that stocks fell at the Cushing hub in Oklahoma, the delivery point for U.S. oil contracts. Crude stocks at the Cushing delivery hub fell by 748,000 barrels, data from the industry group, the American Petroleum Institute, showed late on Tuesday. General inventories rose by 4.1 million barrels in the week to Oct 23 to 477.1 million barrels, the data showed. Gains were limited as a supply glut persists even after U.S. production cuts and investors are awaiting official inventories data due out later on Wednesday that is expected to show further stockpiling. U.S. crude for December delivery was up 6 cents at $43.26 a barrel at 0049 GMT after earlier rising to as high as $43.48. The contract fell to as low as $42.58 on Tuesday, the lowest since late August.
US oil, natural gas rig count declines by 12 this week to 775 — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. this week declined by 12 to 775. Houston’s Baker Hughes said Friday that 578 rigs were seeking oil and 197 explored for natural gas. A year ago, with oil prices about double the prices now, 1,929 rigs were active. Among major oil- and gas-producing states, Texas lost seven rigs, Oklahoma declined by six, Louisiana lost two and North Dakota, Ohio and West Virginia each lost one. Kansas and New Mexico each gained two rigs and Alaska and Pennsylvania each gained one. Arkansas, California, Colorado, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.
U.S. Oil Rig Count Declines by 16 - WSJ: The U.S. oil-rig count dropped by 16 to 578 in the latest week, the ninth consecutive week of declines, according to Baker Hughes Inc. BHI 0.17 % 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 nine consecutive weeks. There are now 64% fewer rigs from a peak of 1,609 in October 2014. According to Baker Hughes, the number of gas rigs rose by four to 197. The U.S. offshore rig count was 33 in the latest week, down two from last week and down 20 from a year ago. For all rigs, including natural gas, the week’s total fell by 12 to 775. Earlier in the week, oil prices had their highest gains in two months. But that rally soon fell away, like many recent price spikes, as robust supply and expectations of weaker demand from China reminded investors of the market’s poor dynamics. Analysts are increasingly pessimistic that oil will break past $60 a barrel even into next year. U.S. oil prices recently were up 1% to $46.50.
U.S. oil drillers cut rigs for 9th week on low crude prices -Baker Hughes | Reuters: .S. energy firms cut oil rigs for a ninth week in a row this week, the longest losing streak since June, data showed on Friday, a sign low prices continued to keep drillers away from the well pad. Drillers removed 16 oil rigs in the week ended Oct. 30, bringing the total rig count down to 578, the least since June 2010, oil services company Baker Hughes Inc said in its closely followed report. That is about a third of the 1,582 oil rigs operating in same week a year ago. Over the last nine weeks, drillers cut 97 oil rigs. Although U.S. oil futures have averaged $45 a barrel so far this week, the same as the prior week, the December contract was on track for its first weekly gain in three weeks despite a supply glut that has tested storage capacity and hammered oil company results. Energy traders noted the rate of oil rig reductions over the past few weeks - about seven on average - was much lower than the 19 rigs cut on average over the past year since the number of rigs peaked at 1,609 in October 2014 due in part to expectations of slightly higher prices in the future. U.S. crude futures for next year were trading on average over $49 a barrel, according to the full year 2016 calendar strip on the New York Mercantile Exchange. Higher prices encourage drillers to add rigs. The most recent time crude prices were much higher than they are now was in May and June when U.S. futures averaged $60 a barrel. In response to those higher prices, drillers added 47 rigs over the summer even though crude prices had declined to $47 a barrel on average by the time July and August rolled around. The rig count is one of several indicators traders look at in trying to figure out whether production will rise or fall over the next several months. Other factors include how fast energy firms complete previously drilled but unfinished wells and recent rises in well efficiency and productivity.
OPEC-fueled oil glut to offset waning U.S. output -- Slowing U.S. production is unlikely to offer much respite to low oil prices into next year as high OPEC output feeds a persistent supply glut, a Reuters survey showed on Friday. Benchmark North Sea Brent crude is expected to average $58.52 a barrel in 2016, marginally down from last month’s poll and above $55.94 seen so far this year, the survey of 32 analysts showed. This is the lowest average 2016 forecast in the polls conducted this year. U.S. crude is projected to average $54.44 a barrel next year, up slightly from last month’s forecast of $54.10. Production in the United States will continue to decline in response to cheaper oil, but this is not likely to translate into higher prices, the analysts said. “We think prices will grind slowly higher over the next few years, which should help to ease the falls in production but we don’t expect a sharp rally in prices or a surge in output,” Thomas Pugh of Capital Economics said. The oversupply scenario could also be aggravated by an emerging trend of build-ups in refined products.
Stop Blaming OPEC For Low Prices - We are a little more than a month away from OPEC’s next meeting, which will be held in Vienna on December 4, 2015. OPEC altered the course of the oil markets last year when it decided to cast aside its traditional role of maintaining balance through production cuts. Instead it pursued a strategy of fighting for market share, contributing to an immediate rout in oil prices. WTI and Brent then went on to dive below $50 in the weeks following OPEC’s decision. OPEC is widely expected to continue its current strategy at its next meeting, and as such, no rebound in oil prices is expected, at least not because of the results of the group’s meeting in Vienna. But that raises a question about what the world of oil expects from OPEC: Why is it that the responsibility for balancing the market falls on OPEC? Why should OPEC be the one to fix the imbalances in the global crude oil trade? On the one hand, it makes a certain degree of sense that market watchers anticipated adjustment from OPEC. After all, the group has historically coordinated its production levels in an effort to control prices, or at least influence them. They could cut their collective production target to boost prices, and vice versa. However, there is an element of imperialism and superiority in the expectation that the burden should fall on OPEC, which is largely made up of producers from the Middle East. It is a bizarre mentality to think that private companies deserve to seize as much market share as they can manage, after which OPEC producers can take what is left. Steven Kopits, President of Princeton Energy Advisors, laid out the concept very nicely in a Platts article earlier this year, in which he says the expression “call on OPEC” should be scrapped.
Governments shouldn't count on low oil prices: IEA -- Countries should not bank on oil prices remaining low when formulating their energy policies, as supplies could tighten from mid-2016 due to a drop in investment and falling U.S. output, a senior industry official said on Monday. Global oil prices have more than halved since June 2014 on rising U.S. shale oil output and as members of the Organization of the Petroleum Exporting Countries (OPEC) decided to defend market share rather than cut production. “It will be a great mistake to index our attention to oil security to the oil price trajectory in the short term,” Fatih Birol, executive director of the International Energy Agency (IEA), said at the Singapore International Energy Week. If prices continued at current levels, oil investment was likely to decline again in 2016, mainly in high-cost regions, after sliding this year by more than a fifth, said Birol, who took over the top post at the Paris-based IEA in September. “If it comes true, this will be the first time in two decades we will see oil investments declining for two consecutive years,” he said. “One should think about medium and long term implications of this lack of investments.”
Sovereign Wealth Funds in the New Era of Oil | iMFdirect - The IMF Blog: As a result of the oil price plunge, the major oil-exporting countries are facing budget deficits for the first time in years. The growth in the assets of their sovereign wealth funds, which were rising at a rapid rate until recently, is now slowing; some have started drawing on their buffers. In the short run, this phenomenon is not cause for alarm. Most oil exporters have enough buffers to withstand a temporary drop in oil prices. But what will happen if low oil prices persist, and how will policymakers react? We explore here the fallout from low oil prices on sovereign wealth funds in oil-exporting countries and find that that they have important domestic implications. The impact on global asset prices will depend on the extent to which the unwinding of oil exporters’ sovereign wealth funds is not compensated by portfolio adjustment in other parts of the world.
Cheap Oil May Force Exporters to Sell Assets, Fueling Market Volatility -- Add one more thing likely to fuel market paroxysms in the months and years ahead: Oil exporters liquidating their rainy-day funds to buffer their economies against anemic crude prices. The International Monetary Fund estimates oil exporters holding $4.2 trillion in global equities, bonds and currencies maybe forced to shed nearly $1 trillion of their assets over the next five years to fill emptying government coffers. Given weak global growth, gains in energy efficiency and a massive gap between the available supply of oil and demand, economists are predicting a long period of soft oil prices. Although some of those oil-fund sales will likely be offset by oil-importing countries buying assets, those mass liquidations could foment turbulence in markets across the globe. “A substantial change in the path of asset accumulation by sovereign wealth funds will likely have a direct effect on financial markets,” say economists in a new IMF blog post. Markets are already on edge amid tectonic shifts in the global economy. Major emerging market economies, including the world’s No. 2 economy, China, are slowing or shrinking. The U.S. Federal Reserve is preparing to raise rates for the first time in almost a decade. Market bottlenecks, rising risk aversion and falling reserve holdings are inflaming investor jitters and fueling volatility. That’s why any big moves can amplify selloffs. The IMF estimates oil exporters’ sovereign wealth funds will have to sell off roughly $250 billion in assets this year alone.
Saudi central bank foreign assets fall to lowest level in nearly 3 years - Net foreign assets at Saudi Arabia's central bank fell 1.2 percent from the previous month in September to 2.426 trillion riyals ($647 billion), their lowest level since November 2012, official data showed on Thursday. The central bank, which serves as Saudi Arabia's sovereign wealth fund, has been liquidating assets to cover a huge state budget deficit caused by low oil prices, which have slashed the earnings of the world's top oil exporter. The assets shrank 12.2 percent from a year earlier. They reached a record high of $737 billion in August last year before starting to dwindle. The pace of decline has slowed since early this year, however, when month-on-month falls sometimes exceeded 2 percent. One reason for the slower fall is that the government resumed issuing domestic bonds in July for the first time since 2007, reducing the need to sell assets abroad.
Saudi Arabia hit with S&P credit downgrade on weak oil - - Standard & Poor’s Ratings Services on Friday lowered Saudi Arabia’s long-term foreign currency sovereign credit rating to A+ from AA-, citing a widening budget deficit resulting from weaker oil prices. The ratings agency projected the country’s fiscal shortfall will jump to 16% of gross domestic product this year from 1.5% in 2014. S&P said it expects Saudi Arabia to draw down its fiscal assets and issue debt to finance its deficit, though the country does not have much monetary-policy flexibility given the riyal’s peg to the U.S. dollar. “The outlook remains negative, reflecting the challenge of reversing the marked deterioration in Saudi Arabia’s fiscal balance,” said S&P.
Saudi Arabia downgraded after budget surplus turns negative -- The oil crash is crushing Saudi Arabia's budget.The dramatic plunge in oil prices over the past 18 months has caused a "pronounced negative swing" in Saudi Arabia's financial picture, S&P warned. The oil-rich kingdom has gone from a healthy budget surplus of 7% of GDP in 2013 to a projected deficit of 16% this year. S&P estimates that unless oil prices rebound meaningfully, Saudi Arabia will suffer deficits each of the next three years. A lower credit rating means that borrowing becomes more expensive. S&P's outlook on OPEC leader remains negative, leaving the option for the credit ratings firm to downgrade it further if the government fails to rein in deficits or runs low on cash. It's the latest alarm being raised on the trouble facing the oil-dependent Middle East. The International Monetary Fund recently warned most countries in the region will run out of cash in five years or less if oil stays around $50 a barrel. That includes Saudi Arabia as well as Oman and Bahrain. The problem is Saudi Arabia is heavily reliant on oil, from which it derives 80% of its revenue. S&P also pointed to "inflexible" spending plans as one of the country's financial "vulnerabilities." S&P believes that Saudi Arabia will respond by drawing down its stockpile of cash and issuing more debt. The country already sold bonds over the summer to raise at least $4 billion, its first time tapping the bond market in eight years. Saudi Arabia's central bank has also yanked up to $70 billion from asset management firms like BlackRock over the past half year.
US Ally Saudi Arabia Bombs Another "Doctors Without Borders" Hospital - Whenever you’re running an air campaign there’s always the possibility of collateral damage. In simpler terms, we you’re dropping bombs on populated areas, you’re invariably going to kill some non-combatants. Now ideally, you want to keep the number of dead civilians to a minimum, which is why The Intercept’s recent investigative report on America’s drone program was so disturbing - it turns out 90% of people killed aren’t the intended target. And while that would be bad enough on its own, the US and its regional allies in the Mid-East have recently made a number of “mistakes” while attempting to strike Taliban and Houthi targets in Afghanistan and Yemen, respectively. On Tuesday we learn that yet another Doctors Without Borders facility has been bombed, this time in Saada, Yemen. As Reuters reports, Saudi warplanes apparently “destroyed the entire hospital with all that was inside.” Here’s more: A Yemeni hospital run by medical aid group Medecins Sans Frontieres (MSF) was hit by a Saudi-led air strike, the group said on Tuesday, the latest bombing of a civilian target in the seven-month air campaign in Yemen."MSF facility in Saada Yemen was hit by several air strikes last night with patients and staff inside the facility," the group said in a tweet on Tuesday. Yemen's state news agency Saba, run the Iran-allied Houthi group that is the coalition's enemy, quoted the Heedan hospital director saying that several people were injured in the attack."The air raids resulted in the destruction of the entire hospital with all that was inside - devices and medical supplies - and the moderate wounding of several people," Doctor Ali Mughli said. Saba said other air strikes hit a nearby girls school and damaged several civilian homes.
US Approves $11 Billion Deal To Sell Combat Ships To "Brutal Dictatorship" -- Defying the international call for an arms embargo over war crimes concerns, the U.S. Department of Defense (DoD) announced Tuesday it has approved an $11.25 billion deal to sell combat ships to Saudi Arabia, which has been waging a military assault against Yemen for more than six months. “The selling of arms in the middle of a war will obviously send the message that the Saudis can do whatever they want and get away with it,” Farea Al-Muslimi, Beirut-based Yemeni writer and visiting scholar with Carnegie Middle East Center, told Common Dreams. The U.S. Defense Security Cooperation Agency, which is part of the DoD, announced Tuesday that is has rubber-stamped the export of four “Multi-Mission Surface Combatant (MMSC) Ships and associated equipment, parts and logistical support for an estimated cost of $11.25 billion” to Saudi Arabia. “This proposed sale will contribute to the foreign policy and national security goals of the United States by helping to improve the security of a strategic regional partner, which has been, and continues to be, an important force for political stability and economic progress in the Middle East,” the U.S. agency stated.
Secret Email Leaked From Hillary's Server: The Real Story Of Bush, Blair And Big Oil's Iraq Agenda - An extremely important story has come and gone in a flash, almost unnoticed, like so many important stories. It revealed that President George W. Bush and British Prime Minister Tony Blair had agreed to invade Iraq long before the first bombs fell on the oil-rich Middle Eastern country. The story is important because it adds to our understanding of the essentially criminal disinformation put out to convince Americans, Britons and the world that war was unavoidable. We’d all been told that Bush and Blair only acted after exhaustive efforts to determine whether Saddam Hussein had weapons of mass destruction (WMD) — and that in any case their focus was on addressing that threat through all possible diplomatic options. In fact, as a leaked White House memo now shows, the UK was committed to backing the US-led invasion almost a year before the war started in March 2003. Well, that had nothing to do with eliminating WMDs (which turned out to be non-existent). It had everything to do with securing a wealth of natural resources. As WhoWhatWhy previously reported, former NATO commander General Wesley Clark has revealed that the Pentagon had a plan dating back even before the attacks of September 11, 2001, to invade seven different countries in the region. According to Clark, it was “all about oil.” (Vice President Dick Cheney, chairing a secret energy task force, tried mightily to pin blame for 9/11 on Iraq — and though there was no truth to that claim, ended up persuading a fair chunk of the American public otherwise.)
Iraq: We Didn't Ask for U.S. Ground Operations - The Iraqi government said Wednesday it didn't ask for — and doesn't need — the "direct action on the ground" promised by the Pentagon. The revelation came a day after Defense Secretary Ashton Carter said the U.S. may carry out more unilateral ground raids — like last week's rescue operation to free hostages — in Iraq to target ISIS militants. Iraqi Prime Minister Haider al-Abadi's spokesman told NBC News that any military involvement in the country must be cleared through the Iraqi government just as U.S.-led airstrikes are. "This is an Iraqi affair and the government did not ask the U.S. Department of Defense to be involved in direct operations," spokesman Sa'ad al-Hadithi told NBC News. "We have enough soldiers on the ground."
Iran total oil loading hits 7-month low in Oct – shipping source – Iran’s exports of crude oil and condensate dropped to a seven-month low this month, hit by refinery maintenance and a lull in demand ahead of winter, according to an industry source with knowledge of the nation’s tanker loading schedule. Still, loadings of the light oil condensate grade were robust – the second highest for the year – due to Iran’s attractive pricing relative to other producers, the source said. Iran this month exported 1.07 million barrels per day (bpd) of crude and condensate, down 13 percent from revised figures in September and the lowest since March, when India and Japan took no oil to stay within sanction limits, said the source who keeps a close watch on the producer’s shipping program. Asia’s Iranian crude oil imports for the last two years have dipped in October, however, before recovering due to seasonal winter demand, and some industry sources said Chinese loadings are likely to rebound again in the coming months. Iran’s exports of condensate, a by-product of natural gas output, in October totalled 240,000 bpd, the second-highest this year and down 10 percent from top-month September. Industry sources attributed the recent high condensate shipments in part to Unipec – the trading arm of Chinese state giant Sinopec – resuming its purchases after laying off the light oil for several months, taking about 1 million barrels each month in September and October.
Iran to join BRICS New Development Bank — Tehran intends to participate in the BRICS New Development Bank, the Iranian Tasnim news agency reported on Monday, citing an Iranian official. The Iranian Deputy Minister of Economic Development Mohammad Khazaee said at a meeting of a joint Iran-Brazil economic council that the country is aiming to join the BRICS bank. The Bank was established in July at the BRICS summit in the Russian city of Ufa. The NDB intends to promote sustainable development in BRICS states. The start-up capital is $50 billion and is projected to reach $100 billion. The headquarters of the bank is in Shanghai. NDB is headed by a veteran Indian banker KV Kamath, who said the bank would be giving its first loans in April 2016. BRICS - Brazil, Russia, India, China and South Africa - comprise about 30 percent of world's GDP in PPP terms and are projected to increase to as much as 45 percent by 2030. The bloc already accounts for 17 percent of world trade. Last week, Russian Energy Minister Aleksandr Novak visited Iran where he negotiated a Russia-Iran bank to boost joint projects. The report of Iran joining BRICS bank appears to be linked to Novak’s visit.
Who's Really Isolated? Iran Set To Join BRICS Bank, Strengthen Ties With Brazil As US hegemony wanes in the face of dysfunctional domestic politics, foreign policy confusion, and a “lead from behind” mentality, the world has begun to transition towards a kind of new world order both politically and economically. On the geopolitical front, we’ve seen a resurgent Russia take charge in Syria after the situation spiraled out of control, leaving hundreds of thousands dead and creating the worst migrant crisis in Europe’s history. On the economic front, the BRICS nations have embarked on a series of projects designed to supplant the US-led multinational institutions that have dominated the post-war world. In what has become one of the bigger stories of the year, China has established its own development bank (the AIIB) and after the UK broke with Washington to support the new venture back in March, the floodgates opened with US ally after US ally jumping on the bandwagon. Although Beijing has promised it doesn’t intend to use the bank as an instrument of foreign policy or as a means of promoting yuan hegemony, the renminbi is set to play a prominent role in loans issued by the bank and there’s little question that development lending will bolster China’s attempt to establish a kind of Sino-Monroe Doctrine. Beijing has similar ambitions with the Silk Road Fund (see our full breakdown here), although part of the story there looks to revolve around an effort to provide a kind of pressure valve for the country's excess industrial capacity. And then there is of course the BRICS bank, whichofficially launched along with a reserve currency pool back in July. The following chart does a nice job of demonstrating why the bank matters:
China - International - Analysis - U.S. Energy Information Administration -- China has quickly risen to the top ranks in global energy demand over the past few years. China became the largest global energy consumer in 2011 and is the world's second-largest oil consumer behind the United States. The country was a net oil exporter until the early 1990s and became the world's second-largest net importer of crude oil and petroleum products in 2009. The U.S. Energy Information Administration (EIA) reports that China surpassed the United States at the end of 2013 as the world's largest net importer of petroleum and other liquids, in part because of China's rising oil consumption. China's oil consumption growth accounted for about 43% of the world's oil consumption growth in 2014. Despite China's slower oil consumption growth in the past few years, EIA projects China will account for more than one-fourth of the global oil consumption growth in 2015. Natural gas use in China has also increased rapidly over the past decade, and China has sought to raise natural gas imports via pipeline and as liquefied natural gas (LNG). China is the world's top coal producer, consumer, and importer and accounts for almost half of global coal consumption, an important factor in world energy-related carbon dioxide emissions. China's rising coal production is the key driver behind the country becoming the world's largest energy producer in 2009. China's sizeable industrialization and swiftly modernizing economy helped the country became the world's largest power generator in 2011.
Crude "Tipping Point" Arrives: China Runs Out Of Space To Store Oil -- It was just two days ago when we reported that according to Goldman calculations, the world was dangerously close to an almost unprecedented event (with two exceptions: 1998 and 2009): running out of space to store crude distillate products. As a reminder, this is what Goldman said: "the build in Atlantic distillate inventories this year has been large, following near-record refinery utilization in both the US and Europe, only modest demand growth, especially relative to gasoline, and increased imports from the East on refinery expansion and rising Chinese exports." As a result, and despite a cold winter in both Europe and the US last year, European and US distillate storage utilization is reaching historically elevated levels, driving a sharp weakening in heating oil and gasoil time spreads. This data was fitting with what we have seen outside the US. Earlier this month, we reported that supertanker day-rates has soared to over $100,000 for the first time since 2008 even as Saudi Arabia was slashing its price (to a $3.20 discount to the benchmark with the largest price cut since 2012) which suggested that in an effort to shore up its reserves and capture more market share amid dwindling demand (and excess supply) - a price war has begun led by US ally Saudi Arabia, and China is hoarding crude at these low-low prices. And then something very unexpected happened: the world quietly hit a tipping point when,according to Reuters, China ran out of space to store oil. In a report explaining why "oil cargoes bought for state reserve stranded at China port" Reuters notes that "about 4 million barrels of crude oil bought by a Chinese state trader for the country's strategic reserves have been stranded in two tankers off an eastern port for nearly two months due to a lack of storage, two trade sources said."
State-Controlled Oil Firms Feel Brunt of China’s Slowdown - WSJ: Once the flag-bearers of China’s economic rise, China’s state-controlled oil behemoths are feeling the brunt of its slowdown. Poor third-quarter earnings released by China’s two biggest oil companies on Thursday underscored big changes under way across China’s economy, and how the government’s push to reorient growth around consumer demand isn’t happening fast enough to support corporate profits. PetroChina, the nation’s biggest oil-and-gas producer by volume, said its net profit plunged more than 80% in the third quarter to 5.19 billion yuan ($817 million), weighed down by lower prices for oil and gas globally and weak demand at home for products it sells, including diesel. The company’s turnover fell by nearly 30% in the period to 427 billion yuan. PetroChina said its marketing segment plunged to an operating loss of nearly 1 billion yuan in the first three quarters, compared with profit of more than 10 billion yuan in the same period last year. PetroChina blamed weak prices for products like gasoline and slow demand growth for the turnabout. Meanwhile, China Petroleum & Chemical Corp, also known as Sinopec, China’s biggest refiner by volume, said net profit dropped 48% in the first nine months to about 27 billion yuan. Net profit for the third quarter fell to 1.64 billion yuan from 19.26 billion yuan a year earlier. Falling oil-product prices in China throughout 2015 have weighed on the company, which operates a vast network of some 30,000 service stations.