most of you probably know by now that a provision to repeal the 40 year old ban on US oil exports was included in the bipartisan budget bill that passed this week...as you'll recall from our discussion last week, this bill was the regular annual budget bill, delayed since October 1st, that funds all the discretionary spending the government undertakes over the year, from defense to the EPA, but not including non-discretionary entitlements such as social security...since it's an absolute must pass bill, all the congresscritters try to hang whatever they might want to push through on it, proposals that would otherwise not be viable as stand alone legislation...such as it is, this creates the incentive for most congresscritters to vote for the entire package, because although it may have provisions they'd otherwise oppose, they've got their own high priority rider attached that they couldn't get through otherwise...
thus, while there was undoubtedly much more horsetrading behind the scenes than was covered in the press, what basically happened is that the Democrats traded their votes for the repeal of the oil export ban for Republican votes in favor of extending tax subsidies for wind and solar for another five years, with a gradual phase out of those subsidies thereafter...Republicans also agreed to free up a $500 million payment to a trust fund for developing countries as part of the Paris climate deal....this deal was completed late Tuesday night, and by early Wednesday morning congresscritters were presented with 2242 pages of legislative text and over 1000 pages of explanatory material...then, after a thorough & thoughtful reading and discussion, the $1.15 trillion spending bill and $680 billion package of special interest tax-breaks was passed by the House on a 316-113 vote early Friday morning, hurriedly followed by Senate passage by a 65-33 vote, in plenty of time for them to all make the afternoon flights out of DC for the Christmas recess...Obama, who was staying in Washington, then put his signature on that bill later that afternoon...
so, henceforth, US & international oil companies will have free reign to frack for oil anywhere and everywhere in this country with the clear knowledge they can sell it to the highest bidder, be they in Europe, Japan, or China...as a practical matter, since we are still importing oil at well over a 7 million barrel a day pace, every barrel we export will have to be replaced by additional imports, except to the degree that our drilling and fracking increases to meet foreign demand... the American Petroleum Institute estimates that our domestic production of crude will increase by up to 500,000 barrels per day over what it would otherwise be without exports, that investment in oil infrastructure would increase by $70 billion, ultimately adding 300,000 more jobs in consumer products and services and hydrocarbon production by 2020...Oil Change International, an advocacy group committed to exposing the true cost fossil fuels, concurs with the API in that they estimate unfettered oil exports could add an additional 467,000 barrels a day to our production, raise the price of crude and it's products in the US, and eventually double the oil bomb-train by rail traffic from today's levels...ultimately, we'll end up draining American oilfields first, before those anywhere else, and end up paying Russia and OPEC five times as much for whatever oil our country still might need someday in the future..
all that notwithstanding, at today's international price for oil (under $40 a barrel), there isn't going to be a lot of new drilling in the near future to supply those international markets...remember, early this year, Bloomberg showed that 97% of US fracking operations were unprofitable below $50 a barrel...while there have been much touted efficiency gains since then, the fact that US oil production is unprofitable at levels even up to $60 a barrel was born out by 2nd quarter and 3rd quarter financial reports from the oil companies, when most reported significant losses...what we may see is some outsourcing of refinery work, where the international oil companies ship oil to their lower cost refineries in Asia or the Caribbean, possibly importing the gasoline that is thereby produced while selling other products elsewhere (it's for that reason that a tax credit for oil refiners was also added to the budget bill)...there has also been talk of some initial shifting of crude around to better optimize refinery throughput; such as shipping Bakken crude from North Dakota to Europe, where their refineries make optimum use of such a light grade, and importing more Venezuelan crude or Basra Heavy from Iraq to process in Gulf Coast refineries, both of which sell at a discount to the lighter grades....however, any profits from such shifting will just accrue to the oil company's bottom lines and is unlikely to benefit anyone in our neighborhood..
to show how US and international oil prices have played out as the lifting of the export ban approached, we'll include a graph of the difference between the benchmark US oil price (WTI) and the benchmark global price (Brent) below...the graph comes from Jack Kemp, energy analyst with Reuters...
the above graph shows the monthly difference in the average price between the US benchmark oil, WTI (West Texas Intermediate), and the international benchmark of Brent oil, named after a North Sea oilfield, over the period from 1989 till November...the types of oil are very comparable, both are light sweet grades, meaning they're less dense and lower sulfur than other grades, and typically produce more gasoline and distillate grade fuels when refined...when the US price was higher, it's shown as a positive number of dollars above the zero line; when the US price was lower, as it has been recently, it's shown as a negative dollar amount below the zero line..
what we can see from the above graph is that before fracking became widespread, US prices for oil were typically in a range averaging around $2 a barrel more than international prices; this was because there was a limited supply of domestic crude, and to make up the shortfall refiners had to import, and $2 generally represented the average cost of shipping suitable grades of oil from the Middle East, Africa or South America...then as fracking became widespread, the light grades of crude oil thus produced were in surplus in the US, and without the ability to export them, their prices fell, a glut developed, while some refineries that were designed to process sour or heavy crudes continued to import those...more recently, as it became clear that the push to allow exports might pass, the international price of oil fell even faster than the US price, and the price differential has closed, and for the most of this week the international price has averaged just $2 more than the US price...
since the chart above only shows the difference in price between the two types of oil, we'll include 5 year charts of both side by side, so you can see how that played out in terms of actual prices...these graphs should also load separately if you click on them...
This Week’s Oil & Gas Prices
contract prices for both oil and natural gas closed lower this week, with oil closing at a new low for this cycle, as you can see above, while natural gas saw it's lowest price ever on an inflation adjusted basis...after falling roughly 10% to $35.24 a barrel last week in a reaction to news from OPEC, US oil prices rose by more than a dollar a barrel on both Monday and Tuesday as it became clear the move to allow unfettered oil exports would be included in the budget bill, ultimately closing at $37.35 a barrel on Tuesday...but on Wednesday, the EIA's weekly Petroleum Status Report showed a large jump in oil & oil product inventories, and traders suddenly remembered that we have a huge glut of oil on our hands, and oil fell to close Wednesday at $35.74 a barrel...that inventory building continued to weigh on prices Thursday as prices fell to close at $35.94, but prices rose again Friday morning as the budget bill, including the repeal of the oil export ban was passed...that rally was not to last, however, as Baker Hughes showed the largest increase in oil rigs in 5 months, and oil prices crashed again in the afternoon to close the week at $34.73, having come within a whisker of the 2009 lows...
meanwhile natural gas prices fell every day this week except Friday, when they rebounded slightly to close the week at $1.767 per mmBTU, after closing Thursday at $1.755 per mmBTU, the lowest price ever on an inflation adjusted basis, and the lowest actual price for a January natural gas contract in 21 years of NYMEX trading....after closing last week at $2.015 per mmmBTU, they fell to $1.894 on Monday after weekend forecast showed warm weather would continue in the Eastern US...a forecast of 65 degrees in New York on Christmas day contributed to their drop to 1.822 mmBTU on Tuesday, the lowest since 1999 and the second lowest price on record on an inflation-adjusted basis...gas prices then fell another 1.8% to close at an all time inflation-adjusted low of $1.79 mmBTU on Wednesday, but it didnt stop there, as the Weekly Natural Gas Storage Report from the EIA showed a slim drawdown of 34 billion cubic feet, leaving 3,846 billion cubic feet of gas still in storage, the most ever for the 2nd week of December, and 16.4% more gas than was stored the same week last year, raising fears that we'd run out of storage space for gas when the weather turned warmer...we're including a graph of the NY mercantile exchange prices for January delivery of natural gas over the past three months below, so you can see how rapidly the price has dropped over than short span...we'd have to go back to 1999 to find contract prices for natural gas this low at any time of year..
the graphic below from the EIA clearly shows why such a glut of natural gas has developed...it shows the output in billions of cubic feet per day from each of our gas producing shale basins from 2000 to October of this year, color coded and stacked on top of each other such that the top of the Marcellus output in green represents the total daily output of gas nationally over that period...from an output near 5 billion cubic feet a day in 2008, mostly from the Barnett in Texas, gas production increased to 10 billion cubic feet a day by 2010, to nearly 20 billion cubic feet a day by 2011, and to nearly 40 billion cubic feet a day by 2014....even after a glut of gas developed in the warm winter of 2012 and drove prices down to $2 per mmBTU by March of that year, there was barely any sign of a pullback; natural gas production continued to grow like bacteria in a petri dish...the "polar vortex" winters of early 2014 and 2015 may have saved them from a price crash then, but facing an El Nino winter, when gas consumption promises to be low, they're still producing gas like they're expecting a new ice age…the catch 22 for these gas frackers is that the more methane they release into the atmosphere from their fracking operations, the faster the planet will heat up, and the less of their gas consumers will need to use to heat their homes...
The Latest Oil Stats from the EIA
this week's reports from the US Energy Information Administration showed a new two year high in oil imports, a small increase in our crude oil production, a small reduction in refinery use of that crude, and another large jump in the surplus oil that we've got stored....for the week ending December 11th, our imports of crude oil rose by 291,000 barrels per day to 8,312,000 barrels per day, the most oil we've imported in any week since September 2012...thus, this week's imports were 17.0% above the 7,104,000 barrels per day we imported in the 2nd week of December last year, and brought our 4 week average of imports up to 7.9 million barrels a day, now 6.3% more than we imported in the same 4 week period last year...tell me again, why should we be exporting oil?
in addition, our field production of crude oil was at 9,176,000 barrels per day in the week ending December 11th, a slight increase of 12,000 barrels per day from the production rate of 9,164,000 barrels per day during the week ending December 4th...that is still 0.4% above the 9,118,000 barrels per day output in the same week last year, when most oil drillers were still running a large fleet of drilling rigs...looking at oil production over the last 6 or 7 weeks, it appears to be settled into a range about 50,000 more barrels per day than our level of crude production during September and October...
meanwhile, net U.S. crude oil refinery inputs averaged 16,611,000 barrels per day during the week ending December 11th, 41,000 barrels per day less oil than our refineries used during the previous week...that was still at a refinery throughput level 1.9% above last December 12th's 16,301,000 barrels per day, even though the US refinery utilization rate fell to 91.9%, down from 93.1% last week...our production of gasoline increased by 94,000 barrels per day to 9,963,000 barrels per day, which was the greatest refinery output of gasoline since the 2nd week of August, despite refinery utilization rates as high as 94.5% in the interim...our production of distillate fuels (diesel fuel and heat oil) fell, however, as output of distillates were at 5,107,000 barrels per day during the week ending December 11th, down from 5,228,000 barrels per day during the week ending December 4th...even so, with reduced consumption of heat oil during the week, our distillate fuel inventories increased by another 2,563,000 barrels, on top of last week's 5 million barrel increase, as they rose from 149,413,000 barrels as of December 4th to 151,976,000 barrels on December 11th, leaving distillate fuel supplies well into the upper half of their normal range for this time of year...our week ending supplies of gasoline also saw a big jump, rising by 1,731,000 barrels, from 217,653,000 barrels as of December 4th to 219,384,000 barrels as of December 4th, which also kept gasoline inventories solidly the upper half of their normal range for this time of year...
so, with our oil field production holding steady and our refinery throughput lower, that big jump in oil imports served no immediate useful purpose, and hence had to be added to our already monstrous glut of stored oil...moreover, it appears that almost all the imports, or 8 million additional barrels, went into storage in the Gulf Coast PADD, even though oil inventories in that region are usually drawn down near year end to avoid inventory taxes in Louisiana and Texas...at any rate, our total inventories of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose by over 4.8 million barrels, increasing from 485,856,000 barrels on December 4th to 490,657,000 barrels on December 11th, the 11th increase in the last 12 weeks...that's up by 36,688,000 barrels since September 18th, and leaves us with 110.7 million more barrels, or 29.1% more oil in storage, than the 379,942,000 barrels we had stored at the end of the second week of December a year ago...so we now have the most oil we ever had stored anytime in December in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year, and we're closing in on the all time inventory record of 490,912,000 barrels set on April 24th this spring...
Latest US Rig Counts
this week's rig count from Baker Hughes provides us an anecdote on how short-sighted some US oilmen can be...despite US oil prices that have been below $40 a barrel for more than 2 weeks, and international prices that have been below $42 over that span, upon hearing that the export ban would be lifted, the frackers appear to have gone out and started up the most oil rigs they've added since late July, at a time when oil prices had rallied above $60 a barrel....the total number of rigs drilling for oil increased by 17 to 541 during the week ending December 18th, after the oil rig count had previously decreased for four consecutive weeks...the total rig count was unchanged from last week, however, as 17 gas rigs that had been working last week were pulled out, leaving 168 gas rigs still active...those totals were down from 1536 oil rigs, 338 gas rigs and 1 miscellaneous rig that were active as of the third weekend of December a year ago, as the rig count at that time had already fallen from the peaks in October and November...
of the rigs started this week, one was offshore in the Gulf of Mexico, where there are now 24 active, down from 56 in the Gulf and 58 total offshore a year ago...however, we did see a drilling rig pulled from an inland lake in southern Louisiana, so there is now only one rig operating on inland waters, down from 12 a year ago... 4 vertical rigs were shut down this week, leaving 87, which was down from 324 vertical rigs in the same week a year ago...the directional rig count was reduced by 1 to 63, down from the 195 directional rigs that were in use the 3rd week of December last year...meanwhile, the frackers added 5 horizontal rigs, bringing the active horizontal rig count back up to 559, which was still less than half of the 1356 horizontal rigs that were working a year ago...
of the major shale basins, the Permian of west Texas saw 2 rigs added, after that basin had seen the most rig reductions over each of the past five weeks; that brought the Permian up to 206 rigs as of December 18th, which was still down from 539 a year earlier...in addition, the Barnett shale of the Dallas area, the Eagle Ford of south Texas, Oklahoma's Cana Woodford, and the DJ-Niobrara chalk of the Rockies front range all saw one rig added...the Barnett now has 8, down from 26 a year ago, the Eagle Ford has 77 rigs, down from 206 a year ago, the Cana Woodford has 38 rigs, down from 45 a year ago, and the Niobrara has 24, down from 59 last year at this time...meanwhile, three basins saw single rig reductions: the Haynesville of northern Louisiana now has 26 rigs remaining, down from 42 a year ago, the Marcellus of Pennsylvania and adjacent states is down to 41, from 82 a year ago, and the Mississippian of the Kansas / Oklahoma border area is down to 11, from the 73 rigs that were drilling in that basin the 3rd week of December 2014...
the Baker Hughes state count tables show that both Texas and Pennsylvania saw their net rig count down by 4, with Texas now with 320 active rigs, down from 868 a year ago, and Pennsylvania with 26, down from 55 a year earlier....Louisiana saw 2 rigs pulled, leaving 58, down from 110 a year earlier, while a single rig was stacked in Wyoming, where there are now 20 rigs active, down from 58 a year ago...meanwhile, 3 rigs were added in West Virginia, which now has 16 drilling, which is still down from 31 a year ago, and 2 rigs were added in Illinois, which had none last week and only one a year ago....in addition, new rigs were added in Alaska, Alabama, Mississippi, Nebraska, Kansas, New Mexico and Oklahoma...Alaska now has 12 rigs, up from 11 a year ago, Alabama now has a rig offshore, while last week and a year ago they had no rigs anywhere in the state, Mississippi has 5 rigs, down from 14 a year ago, Nebraska has 1 rig running, down from 2 a year ago, Kansas has 11 rigs, down from 30 a year ago, New Mexico has 37 active, down from 103 a year earlier, and Oklahoma now has 86 rigs working, down from 205 a year ago...
Ohio has big stake in energy debate - For two weeks in Paris, negotiators from more than 190 countries worked toward the historic agreement announced Saturday on commitments to lower greenhouse gases that scientists say are warming the planet and causing climate changes around the globe. In few places in the U.S. is this debate more relevant than in Ohio, which ranks fifth nationally in carbon dioxide emissions from burning fossil fuels, and where two-thirds of the electricity we consume comes from coal. That means big changes — and potentially huge costs — could be in store for coal-dependent states like Ohio as a result of the climate-change benchmarks agreed to in Paris. The state already faces a 2022 federal deadline to start cutting power plant carbon dioxide emissions under the Obama administration’s Clean Power Plan, which Ohio is challenging in federal court along with 26 other states. The federal mandate calls for increased use of renewable energy like solar and wind, and shifts away from coal and toward lower-carbon natural gas. For Ohio, that means a 37 percent reduction in the rate of power plant carbon dioxide emissions by 2030, according to rules finalized in October by the U.S. Environmental Protection Agency. “The day of reckoning is coming,” said Jack Shaner, deputy director of the Ohio Environmental Council. “Ohio has traditionally had to be drug kicking and screaming to comply with federal clean air standards. That has taken a toll on our health, on our environment and even on our economy.”
Crews finish effort to drain sunken barge found in Lake Erie — Crews have finished an effort to eliminate environmental threats from a sunken barge that apparently sat undiscovered in Lake Erie for nearly 80 years, The U.S. Coast Guard said Thursday. Salvage crews recently pumped out hazardous, oil-based substances from the barge, though six of the eight tanks onboard were empty. The mixture of cargo and water removed from the site near the U.S.-Canadian border totaled more than 33,000 gallons, the Coast Guard said in a statement announcing the effort’s official end. Whether oil-based substances in the other tanks spilled when the barge sank or trickled out over time remains a mystery. A Coast Guard spokesman, Lt. Mike Hart, previously said officials have no way to make a determination on that. The vessel is believed to be the Argo, which sank during a storm in 1937. The wreckage was among 87 shipwrecks on a federal registry that identifies the most serious pollution threats to U.S. waters. Historical documents indicated it was transporting benzol and crude oil when it went down. A report produced by the National Oceanic and Atmospheric Administration in 2013 said it was believed to be carrying 100,000 gallons of the oil-based products. Up to $5.65 million from two funds was made available for the cleanup, and the actual costs still are being finalized, the statement said.
Fracking Bans Are Teaching Americans That They Are Not as Free as They Think - In December 2014, people in Ohio took an unprecedented step to protect their communities and natural environment from fracking. To enforce their city ban on fracking activities, the residents of Broadview Heights filed a class action lawsuit against the oil and gas corporations that were threatening them—and against their own governor and state government. The lawsuit seeks a ruling that would stop oil and gas corporations from overturning Boadview Heights’ frack ban, and seeks a declaration that the state’s preemptive oil and gas laws—which require every Ohio community to allow fracking—violate the constitutional right of the people of Ohio to govern their own communities.The residents of Broadview Heights aren’t the only ones pitted against their own state. In Colorado, residents of Lafayette filed a similar class action, based on their city ban on fracking. The Lafayette lawsuit, much like that in Broadview Heights, seeks a court order prohibiting drilling corporations from interfering with the local frack ban, and a ruling that Colorado’s oil and gas laws—which also mandate that every community allow drilling and fracking—are unconstitutional.The communities share more than just lawsuits—in both Broadview Heights and Lafayette, it wasn’t the city government that proposed and adopted the frack bans, in November 2012 and November 2013 respectively, but the residents themselves through a public referendum. Similarly, in both class action lawsuits, it was community members who filed the lawsuits on behalf of all residents of their communities.In the lawsuits, residents are arguing that the actions taken by corporations and their state government—to interfere with and override their local fracking bans—violate the constitutional right of residents to local, community self-government.
Ohio is poised to set records for volumes of drilling wastes going into injection wells - Ohio is on track to end 2015 with a record volume of drilling wastes going into the state’s injection wells. Through nine months, Ohio’s 211 injection wells have taken in 20.0 million barrels of wastes, according to activist Teresa Mills of the Buckeye Forest Council who compiled the data from Ohio Department of Natural Resources’ records. That’s enough to fill 1,275 Olympic-sized swimming pools, the forest group said. That compares to 22.0 million barrels injected in all of 2014 and 16.3 million barrels for all of 2013. Ohio has already accepted 9.7 million barrels of liquid wastes from Ohio drillers in 2015. That compares to 10.7 million barrels in 2014 and 8.1 million barrels in 2013. Ohio has also accepted 10.2 million barrels from out-of-state drillers, mostly in Pennsylvania and West Virginia. In 2014, Ohio accepted 11.2 million barrels from out-of-state sources. It also took in 8.2 million barrels in 2013. Ohio can do little to block out-of-state wastes because they are protected as interstate commerce by the U.S. Constitution. Coshocton County was No. 1 in Ohio in 2014 volumes. It was followed by Athens, Trumbull, Portage and Muskingum counties. Stark County was No. 10.
Taking a stance against fracking waste — Taking a stand against the disposal of hydraulic fracking brine and drill cuttings, the Fayette County Commission is moving forward with an ordinance that would ban the storage, disposal or use of oil and natural gas waste countywide. The with a quorum of two, commissioners Denise Scalph and Matt Wender passed the ordinance on first reading Tuesday, and it must be passed on second reading at a January 12 meeting before taking effect. Commissioner John Henry Lopez was not in attendance Tuesday. The ordinance is in response to a longstanding controversy over an injection well site in Lochgelly, positioned just upstream from a drinking water intake on New River. As previously reported by The Register-Herald, water testing conducted by Duke University showed frack waste had infiltrated Wolf Creek, a tributary to the New River. The ordinance interprets state code as allowing county commissions to pass ordinances to protect public health and safety and eliminate public nuisances. Reviewing the ordinance, county commission attorney Larry Harrah explained that no state or federal permit, license, charter or corporation operating under state charter will be allowed to violate the county ban. The enforcement for the ordinance will come through the court system, said Harrah. The commission as well as individual citizens can sue those who violate the ordinance. In addition to recuperative legal costs, Fayette County Circuit Court can impose a fine of between $1,000 and $5 million for the misdemeanor offense.
Fracking plays active role in generating toxic metal wastewater, study finds: The production of hazardous wastewater in hydraulic fracturing is assumed to be partly due to chemicals introduced into injected freshwater when it mixes with highly saline brine naturally present in the rock. But a Dartmouth study investigating the toxic metal barium in fracking wastewater finds that chemical reactions between injected freshwater and the fractured shale itself could play a major role. The findings, which are published in the journal Applied Geochemistry, show that transformation of freshwater used for fracking to a highly saline liquid with abundant toxic metals is a natural consequence of water-rock reactions occurring at depth during or following fracking. Fracking wastewater poses a hazard to drinking water supplies if improperly disposed. A PDF is available on request. The researchers examined samples from three drill cores from the Marcellus Shale in Pennsylvania and New York to determine the possible water-rock reactions that release barium and other toxic metals during hydraulic fracturing. . A mile below the earth's surface where fracturing takes place, chemical reactions occur between water and fractured rock at elevated pressure and temperature and in the absence of oxygen. It has been assumed that the peculiar composition of the produced wastewater results from mixing of freshwater used for fracking with high salinity water already underground that also contains barium. But the Dartmouth team found that a large amount of barium in the shale is tied to clay minerals, and this barium is readily released into the injected water as the water becomes more saline over time.
Magnum Hunter latest oil producer to seek bankruptcy - Oil and gas producer Magnum Hunter Resources Corp and its affiliates filed for Chapter 11 bankruptcy protection on Tuesday to carry out a debt-cutting plan as a prolonged slump in oil prices has depleted the company's cash. The company entered into a restructuring agreement that will convert its funded debt into equity, substantially reducing its more than $1 billion in debt, according to a company statement. Magnum Hunter ranks among the biggest energy producers to file for bankruptcy this year, joining Samson Resources Corp, Sabine Oil & Gas Corp, Quicksilver Resources Inc and Energy & Exploration Partners Inc. To fund its operations during its bankruptcy, the company's lenders agreed to provide up to $200 million in financing, which will also convert into equity when Magnum Hunter emerges from bankruptcy, according to the statement. Magnum Hunter, which operates primarily in the Appalachian Basin in West Virginia and Ohio, said it expects to emerge from bankruptcy in April. "With the unified support of our various lenders, we anticipate this restructuring will be a success and unprecedented in our industry," said Gary Evans, the company's chairman and chief executive officer, in the statement. Evans noted in his statement that Magnum Hunter expects to become one of the first energy companies to find a quick path out of Chapter 11 bankruptcy.
'Backdoor' amendment in Pa. fiscal code guts regulations, gives millions to new natural gas fund - The state Senate on Thursday passed the fiscal code with some new language that environmentalists say not only guts regulations governing the oil and gas industry, but also subsidizes it. The fiscal code, which tells lawmakers how to spend money in the general fund, takes $12 million from the Alternative Energy Investment Act and puts it into a new Natural Gas Infrastructure Development Fund, delays implementation of the federal Clean Power Plan and handcuffs new regulations on oil and gas operators. State environmental regulators have been working for three years to modernize regulations governing drilling and natural gas production, but the fiscal code could wreck that progress and force them to start over, environmentalists say. After the Senate passed the fiscal code 48-2, a dozen environmental groups on Thursday afternoon issued a joint statement calling the move “state government at its least transparent and most hostile to public health, clean air and pure water.” The Marcellus Shale Coalition, the industry’s largest trade group, applauded the Senate for its bipartisan support.
Fracking sharply reduces property values for property owners who use well water: Home values decline steeply when fracking occurs in neighborhoods that use well water, says new research from Duke University. But the outcome differs in neighborhoods that rely on piped water, where home values rise slightly after shale-gas drilling occurs. The study, conducted in Pennsylvania, found that in areas using well water, home prices dropped by an average of $30,1676 when shale drilling occurred within a distance of 1.5 kilometers. Meanwhile, homes using piped water gained an average of $4,800 in value after shale wells opened nearby. Hydraulic fracturing, or "fracking," is a relatively new technology in which gas is extracted by drilling into a shale formation and then applying a high-pressure mixture of water, sand and chemicals to create cracks from which the underground gas stores are released. The paper is among the first to quantify the impact of fracking on property values in a wide geographic area, said lead author Christopher Timmins, a Duke economics professor who specializes in environmental economics. It appears online in the December issue of the American Economic Review. "Our results show clearly that housing markets are responding to homeowners' concerns about groundwater contamination from shale gas development," Timmins said. "We may not know for many years whether these concerns are valid or not. However, they are creating a real cost to property owners today."
Some gas produced by hydraulic fracturing comes from surprise source: Some of the natural gas harvested by hydraulic fracturing operations may be of biological origin—made by microorganisms inadvertently injected into shale by oil and gas companies during the hydraulic fracturing process, a new study has found.The study suggests that microorganisms including bacteria and archaea might one day be used to enhance methane production—perhaps by sustaining the energy a site can produce after fracturing ends. The discovery is a result of the first detailed genomic analysis of bacteria and archaea living in deep fractured shales, and was made possible through a collaboration among universities and industry. The project is also yielding new techniques for tracing the movement of bacteria and methane within wells. "A lot is happening underground during the hydraulic fracturing process that we're just beginning to learn about," said principal investigator Paula Mouser, assistant professor of civil, environmental and geodetic engineering at The Ohio State University. "The interactions of microorganisms and chemicals introduced into the wells create a fascinating new ecosystem. Some of what we learn could make the wells more productive." Oil and gas companies inject fluid—mostly water drawn from surface reservoirs—underground to break up shale and release the oil and gas—mostly methane—that is trapped inside. Though they've long known about the microbes living inside fracturing wells—and even inject biocides to keep them from clogging the equipment—nobody has known for sure where the bacteria came from until now.
Consol Energy subsidiary agrees to settlement over water usage - Marcellus Shale gas well developer, CNX Gas Co. LLC, has agreed to pay $450,000 to settle state violations alleging it exceeded its water withdrawal limits from a reservoir in north Franklin, Washington County, on multiple occasions from 2011 through 2014. The settlement agreement was announced Thursday by the Pennsylvania Department of environmental Protection, which will receive $345,750, and the state Fish and Boat Commission, which will get $105,000. According to the DEP news release, CNX, a subsidiary of Consol Energy Inc., violated its state water withdrawal permit on 43 days between October 2011 and june 2013. And on 164 days between October 2013 and December 2014, CNX withdrew water from the reservoir despite limiting restrictions set by the Fish and Boat Commission. Those illegal withdrawals resulted in, “low water levels in the reservoir, drying out of the shallow shoreline areas and the surrounding forested wetlands,” the release said. “Protecting the waters of the Commonwealth is a core function of both DEP and the PFBC and this agreement underscores the fact that, together, we take this responsibility very seriously,” said Eric Gustafson, DEP manager for Oil and Gas Operations in the Southwest Oil and Gas District Office. “We expect that operators will follow their water management plans and draw-down permits to the letter.” CNX drills and hydraulically fractures shale gas wells, each of which can use upwards of 4 million gallons of water.
Frackers Freak Out that EPA May Determine Fracking Fracks Water - Billions of gallons of water are contaminated by fracking every year – most of it permanently. There is no science to indicate otherwise. The oil and gas industry fears the Environmental Protection Agency may issue a new report that says fracking contaminates U.S. water supplies and is urging the agency to stick with the science of its original findings that shows no such risk exists. The Independent Petroleum Association of America sent a letter Monday to EPA Administrator Gina McCarthy pressing her not to give in to anti-fracking special interest groups that have been pressuring the agency to go against scientific precedent with a finding that fossil fuel production from shale poses systemic risks to the nation’s water supply.The EPA is finalizing its draft report on the effects of fracking on the nation’s water supply. The industry group says that although EPA’s draft report, developed in concert with the agency’s Scientific Advisory Board, shows no substantial risk from fracking, members of the advisory board are looking to change that in the final version of the report.Recent reports suggest members of the EPA advisory board may be considering a revision to the EPA five-year report findings “based not on science, but rather pressure from special interest groups,” the letter says. “We recognize that several critics of U.S. oil and natural gas production, who have waged a years-long campaign to ban or restrict the use of hydraulic fracturing, have publicly pressured EPA and the SAB into revising its finding,” the letter reads. “But we must remind you that the SAB is a scientific body, and thus its conclusions should be based on science; they should not be subject to political pressure from environmental groups who simply disagreed with what the EPA’s five-year study found.”
We are Seneca Lake Red-lines Crestwood: no fossil fuel infrastructure -- “With this red line laid down across Crestwood’s driveway, we declare that its plans to store fracked gases in abandoned salt caverns on Seneca Lake constitutes an emergency,” said Colleen Boland, who recently returned from the Paris climate talks. “We declare that these plans threaten our water, our children, and our climate.”The red line motif emerged at the end of the Paris climate talks last Saturday, as 15,000 people marched in the streets of Paris. It signifies a commitment to holding society to the lines that cannot be crossed in order to avoid catastrophic climate change. Eighty percent of fossil fuels must be left in the ground in order to curb climate change.The red line motif also was prominent last weekend as 300 residents in Porter Ranch, CA demanded closure of the Aliso Canyon Storage Facility. The Southern California Gas Co. field has spewed natural gas into the atmosphere since Oct. 23. It currently contributes a full one-quarter of California’s daily methane emissions. There have been hundreds of complaints from the surrounding community of headaches, nosebleeds, stomachaches, rashes, and respiratory illness from exposure to the gas and its additives. 1,000 families have evacuated. The company estimates it will take 3 months to plug the leak.“Aliso Canyon is a clear warning to us of what can go wrong with underground gas storage,” said Tony Del Plato, 67, of Covert, “and how willing the companies are to ignore the plight of the communities around them, and the impact on the climate.”Schuyler County deputies arrested the nine shortly before 10 a.m. as they blocked a Crestwood tanker truck from leaving the facility.
NatGas Bloodbath Accelerates Amid LNG Glut Worse Than Oil --- OilPrice.com's Nick Cunningham warns, while the glut in oil is expected to continue for the next year or so before balancing in late 2016, the pain for liquefied natural gas (LNG) could be just beginning... Building LNG export terminals is a long-term proposition. It can take years to develop a greenfield project, bringing a lump of new capacity online long after the project was initially planned, exposing developers to the possibility that market conditions could change in the interim. It is not unlike a conventional oil project, such as an offshore well, which also can take years (as opposed to a much shorter lead time for shale drilling). But there is a major difference between oil and LNG: the market for LNG is much smaller and less liquid (no pun intended). In other words, a handful of new LNG export terminals can significantly alter the supply/demand balance. That is exactly what is currently unfolding. Several years ago, spot prices in Asia for LNG spiked, particularly following Fukushima nuclear meltdown. Japan’s demand for LNG skyrocketed. At the same time, the shale gas revolution was unfolding in the U.S., and rock bottom prices opened up a window of opportunity to ship American gas to Asia. But it wasn’t just the U.S. – LNG export terminals proliferated around the world, particularly in Australia. There were so many projects planned at the same time, and the first batch started to come online this year, with many more nearing completion in 2016 and 2017. The rush of new supply is hitting the market all at the same time. Not only would such a rush in supply have pushed down prices on their own, the timing is actually really unfortunate for LNG exporters. Economies in East Asia are slowing, leaving a shortfall in demand. Japan, the largest LNG importer, is seeing its economy stagnate. China’s growth has slowed significantly.
Natural-Gas Prices Drop to Lowest Level Since 1999 - WSJ: Natural-gas prices dropped to the lowest level since 1999, as concerns about weak demand continued to weigh on the market. Futures for January delivery settled down 7.2 cents, or 3.8%, on Tuesday at $1.822 a million British thermal units, the lowest settlement since March 24, 1999. On an inflation-adjusted basis, Tuesday’s settlement price is the second-lowest on record. The inflation-adjusted record low is $1.80/MMBTU, reached in January 1992. Gas futures have fallen for five consecutive sessions as higher-than-average temperatures show no sign of letting up. Warm weather in the U.S. caused by the El Niño weather phenomenon has sharply limited demand for the heating fuel this year. About half of U.S. households use natural gas as their primary heating source. “The potential for early winter is gone,” said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk. “They’re talking 65 degrees in New York on Christmas day.…Every day we go is one less day of demand.”
Natural Gas Falls to All-Time Inflation-Adjusted Low - WSJNatural-gas fell to the lowest ever inflation-adjusted price in its history of Nymex trading on Wednesday as extremely warm weather continues to limit demand. Prices for the front-month January contract settled down 3.2 cents, or 1.8%, at $1.79 a million British thermal units on the New York Mercantile Exchange. That is the lowest settlement since March 24, 1999. Gas prices have been falling precipitously in recent weeks because of the combination of record-high stockpiles and a December that could be the worst for heating demand in history. Prices have fallen 25% in just one month and have dropped 39% from their high in August. Wednesday settlement put gas below the inflation-adjusted low of $1.801 that had been in place since January 1992. Gas did make a move up to small gains in after-hours trading, but many traders and brokers had little explanation for that rebound. The trader Marc Kerrest said he noticed prices and spreads moving higher for months far away, a sign front-month prices could follow. He closed out some of his bearish bets before settlement, he said. “But in no way would I consider going [bullish on] gas just because of what it’s done,” in recent weeks, said Mr. Kerrest, who manages his own gas-focused fund, Cornice Trading LLC. Warm weather in the U.S. caused by the El Niño weather phenomenon has sharply limited demand for the heating fuel this year. The natural-gas market is oversupplied, and some traders and analysts say the industry could run out of storage space for gas by mid-2016.
Natural Gas Prices Slump Again - Natural gas prices fell again on Wednesday, plunging to their lowest-ever price level (adjusted for inflation). Futures expiring in January declined 1.8% to settled at $1.79 a million British thermal units, though the United States Natural Gas exchange-traded fund (UNG) rallied into the stock-market’s closing bell, up 1.6%. Owners of UNG so far in 2015 have lost half their money. The culprit is unusually warm winter weather, which shrivels the demand for natural gas as a heating fuel. Don’t expect the situation to change before the end of the year. Weather prognosticators expect mild weather conditions from Kansas City, Mo. to Augusta, Maine, in the Days ahead. Some are forecasting that gas will be so abundant that the industry may run out of space by the middle next year. But Anthony Yuen, a commodities strategist at Citigroup, says that things might not be so dire after all, assuming that weather patterns return to some semblance of normalcy next year. That’s a big if, of course. He explains: “This warm weather certainly has markets spooked – is it justified? While winter heating demand has certainly taken a hit this quarter, a mild 4Q alone is not as bearish as some market participants may think. Historically, on average only 27% of winter inventory draws occurred during the first half of the winter heating demand season (Nov-Dec), while 73% of draws occurred during the second half (Jan-Mar). … Our model over 35 years of 1Q winter demand scenarios, we find that storage levels would likely remain reasonable next year despite the mild start to the winter season if normal weather conditions were to return in the second half of winter.”
Natural Gas Falls to 16-Year Low on Healthy Supply - WSJ: Natural gas slid to a fresh 16-year low on Thursday as traders increasingly fear warm weather and heavy stockpiles are leading to a glut that will last deep into next year. Heating demand has been so limited, but production is still going so strong that stockpiles last week—usually solidly into winter heating season—fell by only a third of their average drop for the week, the U.S. Energy Information Administration. The fall was also far less than traders and analysts expected, just 34 billion cubic feet compared with expectations for 41. Prices whipsawed after the news, and then fell decisively in the afternoon, extending gas’s losing streak to seven sessions, the longest since December 2012. Prices for the front-month January contract settled down 3.5 cents, or 2%, at $1.755 a million British thermal units on the New York Mercantile Exchange. That is the lowest settlement since March 23, 1999. And it is the lowest inflation-adjusted settlement in the history of Nymex trading, which started for gas in 1990. A historically strong El Niño weather phenomenon has sharply limited demand for the heating fuel this year just as rampant production had pushed stockpiles to an all-time high. Forecasts have predicted temperatures hitting 70 degrees Fahrenheit in New York on Christmas Eve, a crippling blow to a market reliant on winter heating to drive demand.
Weekly Natural Gas Storage Report - EIA - Working gas in storage was 3,846 Bcf as of Friday, December 11, 2015, according to EIA estimates. This represents a net decline of 34 Bcf from the previous week. Stocks were 541 Bcf higher than last year at this time and 322 Bcf above the five-year average of 3,524 Bcf. At 3,846 Bcf, total working gas is above the five-year historical range.
Gas Pipelines Cut Down Forests to Ship Fracked Gas to China -- Today, residents of Pennsylvania and New York are standing together and demanding that our elected officials shut down dirty fossil fuel infrastructure and support community-based renewable energy sources instead! It’s time for politicians to wake up to what New Yorkers who have opposed the “Constitution” and Northeast Energy Direct pipelines already know. Regardless of what name you use, it’s the same pipeline. It’s the same fight.Both projects threaten to forever harm New York’s environment by ripping through forests, streams, fields, and farms of the northern Catskills. Both threaten to victimize the same landowners, using eminent domain granted by a rubber-stamp agency — the Federal Energy Regulatory Commission — to take private property for corporate profit. Both threaten to ruin rural communities with air pollution and industrialization. And both threaten our planet with climate catastrophe, feeding a growing addiction to fossil fuels at home and abroad while undermining the necessary shift to renewables. Indeed, through most of New York, the biggest difference between the two pipelines is the distance between them — about 50 feet.Yet, while the public clearly understands that these doppelganger gas projects are one and the same, our state politicians seem to believe they can pander to their constituents with mixed messages.
Kinder Morgan tops $70k on lobbying — The energy company that wants to build a $3 billion natural gas pipeline across Southern New Hampshire spent $53,500 to lobby state officials in 2014 and an estimated $70,780 so far in 2015, more than any other public interest, nonprofit or labor organization, according to Open Democracy. The nonprofit organization’s analysis of campaign contributions also reveals that Gov. Maggie Hassan in 2014 received a $2,000 donation from Richard and Nancy Kinder. Richard Kinder is the co-founder and executive chairman of Kinder Morgan. The Concord-based nonpartisan organization was founded in 2009 by campaign finance reformer Doris “Granny D” Haddock, who died a year later. The group is best known in New Hampshire for its flagship campaign, the New Hampshire Rebellion, which aims to get big money out of politics. The group analyzed campaign finance records over the past 15 years to determine the extent of political contributions and lobbying from Kinder Morgan, whose Tennessee Gas Pipeline subsidiary has applications pending before state and federal regulators for the 30-inch transmission pipe that would cross through 17 towns in Southern New Hampshire. Kinder Morgan spokesman Richard Wheatley said the company does not make corporate political contributions, and that the figures cited by Open Democracy, if accurate, reflect the individual contributions of Kinder Morgan executives or employees. As regards lobbying expenditures, he declined to comment.
More Natural Gas Infrastructure Is Needed - Wheeling Intelligencer -Prices for all natural gas remain depressed, but Joe Eddy said Marcellus and Utica shale drillers are now selling their product for just 75 cents per 1,000 cubic feet, which is leading some companies simply to keep it in the ground. Eddy, president and CEO of Eagle Manufacturing in Wellsburg, represented the Independent Oil and Gas Association of West Virginia during a Thursday meeting at Oglebay Park. He said approximately 1,400 horizontal wells that have already been drilled in Ohio, West Virginia and Pennsylvania are still waiting for fracking jobs because there is simply nowhere to send the natural gas. Furthermore, Eddy said there is enough ethane produced in the Marcellus and Utica shale regions now to support "eight or nine crackers." He said the planned $5.7 billion PTT Global Chemical plant would significantly benefit the Upper Ohio Valley's economy because it would allow the product to be processed locally. However, the lack of pipelines is now the major problem, Eddy said."We have to have the ability to move the resource out. That's why our pricing is so low - we just can't move it," Eddy said. According to the New York Mercantile Exchange Thursday, the price for an Mcf of natural gas was about $1.75. This is significantly lower than the roughly $3 per unit price from one year ago. However, Eddy said the lack of adequate pipelines in the Marcellus and Utica regions means producers are only getting about 75 cents per Mcf at this time. "You just can't stuff anymore into the pipelines we have. It is a glut of gas," he said.
Report: Atlantic Drilling Would Offer $0 To States, Not $19 Billion -- The Obama administration and several southern governors are talking about drilling for oil off the Atlantic coast. But a new report from the Center for a Blue Economy suggests that the southern Atlantic states — Virgina, North Carolina, South Carolina, and Georgia — would see little to no benefit from offshore drilling, while putting a critical piece of their economies and lifestyles at risk. The report, commissioned by the Southern Environmental Law Center (SELC), looked at a 2013 industry report commonly used to justify offshore drilling and found that it is based on outdated assumptions — including a price of oil roughly triple what it currently is. The 2013 Quest Offshore report, prepared for the American Petroleum Institute and the National Ocean Industries Association, evaluated the economic benefit of opening the entire Atlantic coastline to offshore drilling (the administration’s five-year plan includes only the four states mentioned above and is restricted to 50 miles off the coast), assumed lease sales in 2018 (currently projected for 2021), set the price of oil at $120/barrel (oil is currently near an 11-year low of less than $40/barrel), and did not look at potential economic damage from oil activities. What we have already is so crucial and so valuable to our southeastern states. It’s not worth the risk
Carolinas congressmen seek delay in offshore testing - — South Carolina U.S. Rep. Mark Sanford, in a letter signed by more than two dozen other House members, is asking the federal government to halt permitting activities for seismic testing for offshore natural gas and oil. The letter, written with Virginia U.S. Rep. Bobby Scott, was sent Thursday to Abigail Ross Hopper, the director of the federal Bureau of Ocean and Energy Management. It calls on the agency to prepare new environmental reviews of the impacts of using seismic air guns to explore off the coast. The letter, also signed by North Carolina Republican U.S. Rep. Walter Jones and Democratic U.S. Rep. David Price as well as 27 other House members, said that current studies don’t take into account the long-term economic and ecological impacts. Sanford, a Republican, Jones and Price were the only members of the congressional delegations in the Carolinas calling for a moratorium. The Bureau of Ocean and Energy Management is reviewing if and where oil and gas leases might be issued on the Atlantic Outer Continental Shelf between 2017 and 2022. The letter said using seismic air guns which bounce sound waves off the ocean floor to explore for fossil fuels “is an enormously disruptive activity in the ocean” and can impact commercial fish catches and disrupt the feeding and breeding behaviors of endangered right whales. The letter also noted that information about what is found by energy companies won’t be shared with the states so states can’t make a reasonable analysis of the benefits and risks posed by offshore drilling.
Orange County bans fracking: -- Orange County unanimously passed a resolution Tuesday to ban fracking — the controversial process of drilling down into the Earth to extract gas using high-pressured water and chemicals. The resolution had had strong support after it was placed on the Orange County Commission's consent agenda for its meeting. Before commissioners voted, though, they turned to the public for input. The language of the resolution is still being finalized. One by one, supporters of the county's proposed ban took to the podium to share their thoughts. Commissioners also discussed the resolution with a back-and-forth conversation about wording in certain paragraphs. Discussions on fracking have made their way across the United States as well. Fracking has garnered supporters, who have said it helps produce more oil and gas at home, which drive down those prices. Opponents say it's disastrous for the environment and produces health concerns for those living near drills sites. At the state level, competing bills have been written in Florida.
Report: Straits of Mackinac oil pipeline not necessary - Continuing to move up to 23 million gallons of crude oil per day through 62-year-old, underwater pipelines in the Straits of Mackinac is too risky and not necessary, an environmental group said Monday. For Love of Water, or FLOW, released a report on alternatives to Enbridge’s Line 5, saying the existing oil pipeline network in the Midwest provides alternatives that pose far less risk to the Great Lakes. FLOW would like the Michigan Pipeline Safety Advisory Board to take a comprehensive, system-wide look at the oil pipeline network in the state and close down Line 5. “The bulk of the oil that goes through Line 5 goes from Canada back to Canada,” said Gary Street, a former Dow chemical engineer and FLOW technical adviser. “The risk is being given to the state of Michigan; the profitability flows to Enbridge. “Our work today has given us reason to believe that alternatives do exist, and they exist within the existing pipeline system.” FLOW-outlined alternatives include existing pipeline systems coming north to Michigan from the Gulf of Mexico and the “Alberta Clipper” pipeline that takes crude oil from Alberta, Canada eastward. The Alberta network includes a pipeline through productive oil regions in North Dakota that runs southeast through Minnesota and reaches a major pipeline hub area near Chicago. From there, available pipeline capacity exists on Enbridge’s Line 6B, which runs east-west through the southern Lower Peninsula of Michigan before reaching Marysville and continuing on to Sarnia, Ontario — the same Michigan finishing point for Line 5.
Minnesota Supreme Court backs Sandpiper pipeline opponents — The Minnesota Supreme Court has given a victory to opponents of the proposed Sandpiper oil pipeline, declining to review a Court of Appeals decision requiring an environmental impact statement for the project. In an order Tuesday, the high court without comment denied petitions by the Minnesota Public Utilities Commission and an Enbridge Energy subsidiary to hear their appeal. The Court of Appeals in September reversed the PUC’s decision to grant a certificate of need for the Sandpiper pipeline, which would carry Bakken light crude from western North Dakota across Minnesota to an Enbridge terminal in Superior, Wisconsin. The court said state law requires the completion of an environmental impact statement before granting the certificate. The PUC had planned to conduct the environmental review at a later stage in the proceedings.
Minnesota regulators to make some key pipeline decisions — The Minnesota Public Utilities Commission meets Thursday to make some important decisions on how it will proceed with Enbridge Energy’s proposed Sandpiper oil pipeline from the Bakken oil fields of North Dakota across Minnesota to Superior, Wisconsin. The decisions will also affect Enbridge’s proposal to replace its aging Line 3 pipeline from the tar sands of Alberta to Superior because Enbridge wants the new line to partially follow Sandpiper’s route. The path forward became murky in September when the Minnesota Court of Appeals ruled that Sandpiper needs a full environmental review, and the PUC now faces a complicated web of issues to work out. Enbridge Energy wants to build the 616-mile Sandpiper pipeline to carry light crude oil, much of which is currently is shipped by rail. Enbridge separately plans to replace its Line 3 pipeline, which runs 1,097 miles, was built in the 1960s and is operating at reduced capacity for safety reasons. The two projects overlap because Enbridge wants the Line 3 replacement to follow the same route as Sandpiper from its terminal in Clearbrook, Minnesota, to Superior, rather than its crowded existing corridor. The appeals court ruling created considerable uncertainty among the commissioners and the project’s supporters and opponents over what’s next. The PUC had planned on conducting a fuller environmental review later, during a separate set of state regulatory proceedings on what route Sandpiper should take. Sandpiper’s opponents say the pipeline poses an unacceptable risk of oil spills in environmentally sensitive areas of northern Minnesota. Their recommendations on how to proceed aren’t identical, but in general they support doing a thorough EIS and keeping the certificate-of-need and route proceedings separate.
Regulators authorize expansive environmental reviews for proposed Minnesota pipelines - State regulators decided Thursday to take a deeper look at the environmental effects of crude oil pipelines planned across northern Minnesota. In procedural decisions on a pair of pipelines — one to deliver North Dakota crude oil, another to import Canadian crude — the Minnesota Public Utilities Commission set the stage for an expansive environmental analysis that supporters fear will delay the projects. “We already know it is going to be gigantic,” commission Chairwoman Beverly Jones Heydinger said of the planned environmental study. The effort was compared to PolyMet Mining Corp.’s proposed northern Minnesota copper mine. A 3,500-page environmental report on that project was released in November — after 10 years of work. Calgary-based Enbridge Energy, which proposes the two pipelines, wants the reviews done in time to begin construction in 2017. Company officials are concerned that delays in the studies could wreck that schedule. “We intend to do extensive modeling of spill deposition and what happens at key, representative points — what would happen with a small- or medium-sized leak or a large leak,” said Bill Grant, deputy commission for energy in the state Commerce Department, which will oversee the environmental studies.
Induced Earthquakes Remain Challenge for Oil, Gas Operations - Rigzone: Earthquake activity in Oklahoma, believed to have been triggered by saltwater disposal well injection activity, marks the latest in a trend of a growing number of U.S. earthquakes and their link to increased oil and gas activity. The Oklahoma Corporation Commission’s (OCC) oil and gas conversation division called for operations at two disposal wells to be halted Nov. 19, and for reduced volumes for 23 other wells, a total net volume reduction of 41 percent. The wells targeted for shutdown or reduction were in the Cherokee-Carmen area of the state. Additionally, disposal wells within 10 to 15 miles of earthquake activity are being placed on notice to prepare for possible changes to their operations, OCC said in a Nov. 19 advisory. The notice is the latest in a series of oil and gas disposal well volume reduction plans implemented by OCC to address earthquakes that have occurred in Oklahoma this year. Since 2009, the number of earthquakes occurring in the central United States has increased, according to the U.S. Geological Survey (USGS). From 1973-2008, an average of 24 earthquakes of magnitude 3 or larger occurred each year. From 2009 to 2014, an average 193 earthquakes occurred per year, peaking last year with 688 earthquakes. So far this year, 430 earthquakes of magnitude 3 or greater have occurred in the central U.S. region, according to the USGS website.
Oil starting to flow through Enbridge pipeline — Construction on the Enbridge pipeline is complete with delivery of oil expected to begin before the new year. “Our original plan was to get it in service before the end of the year and it looks like we are going to make it,” said Jennifer Smith, manager of stakeholder relations. The 167-mile pipeline, known as the Southern Access Extension, will transport crude oil from Enbridge’s Flanagan terminal near Pontiac to a petroleum terminal hub near Patoka in Marion County. The $900 million pipeline crosses eight area counties, including Livingston, McLean, DeWitt, Macon, Christian, Shelby, Fayette and Marion. Officials are currently working to fill the 24-inch diameter line with oil, a process that takes several days to complete, said Smith. The pipeline will have the capacity to transport 300,000 barrels per day. “Once the line fill is complete, the pipeline will be placed into service and oil will begin being delivered to customers,” she said. “We expect that to occur this month.”
Illinois becomes second state to approve Bakken pipeline - Illinois has become the second state to approve a controversial interstate crude oil pipeline that is proposed to pass through Iowa. Spokesman Bob Gough confirmed the Illinois Commerce Commission voted 5-0 Wednesday to approve a permit for that state’s 177-mile segment of the pipeline. Dakota Access LLC, the Texas-based company proposing the $3.8 billion Bakken oil project, said in a statement it was pleased. “This decision moves Dakota Access another step closer to beginning construction on an underground pipeline to transport domestically produced light sweet crude oil out of production areas in North Dakota to refining markets around the country,” it said. Dakota Access has easement agreements for 81 percent of the land needed in Illinois, the company said. South Dakota’s Public Utilities Commission gave its approval in November. A decision in North Dakota is expected in January. The Iowa Utilities Board, which concluded its hearing phase of the case earlier this month, indicated it might not rule until February.
Dakota Access pushes IUB for decision on Bakken pipeline - Dakota Access LLC, the Texas-based company proposing the Bakken pipeline, is urging the Iowa Utilities Board to make a decision quickly on whether or not the use of eminent domain will be allowed for the company to gain access to properties where landowners have not signed over rights. The pipeline would initially carry 320,000 barrels of crude oil each day from North Dakota’s Bakken Shale through South Dakota and Iowa en route to a hub in Pakota, Ill., that connects to a Texas-bound pipeline. It would extend 343 miles through Iowa and transverse 18 counties in the state, including Story and Boone. The total cost of the project would be $3.8 billion, according to IUB. Beginning on Nov. 12, and ending last Monday, the IUB held hearings to decide if permits would be issued and eminent domain would be granted to enable the pipeline’s construction. The IUB originally said that they expected to make a decision in December or early January but that timeline has since been changed to February, which may interfere with the Dakota Access’ planned construction schedule, if the permits are approved. “It is our hope that the IUB adheres to the original schedule of issuing a decision by early January to ensure the timely construction of this important energy infrastructure project, so we can safely transport domestically produced crude oil to refining markets as quickly as possible. We will do all we can to support the IUB in its decision-making process to meet this time frame,” said Vicki Granado, spokeswoman for Dakota Access. This move by Dakota Access has caused concern among opponents of the pipeline’s construction who have argued that the company is not considering the voice of Iowans.
Bakken pipeline supporters, foes speak out at Iowa DNR meeting — Iowans gave mixed reviews during a public meeting Wednesday to a proposed oil pipeline that would cut across the state — some favoring it and the jobs it would provide, others calling it an environmental threat to be rejected. A crowd of nearly 100 people attended a sometimes raucous meeting held by Iowa Department of Natural Resources officials, who will decide whether to grant an environmental permit needed by the proposed Bakken oil pipeline to cross publicly owned land and water under state jurisdiction. Dakota Access LLC, a unit of Texas-based Energy Transfer Partners, has proposed an underground pipeline to transport about 450,000 barrels of crude oil daily from North Dakota through South Dakota and Iowa to a distribution hub at Patoka, Ill. The Iowa segment would cross diagonally for 343 miles through 18 counties, from Lyon County in northwest Iowa through Lee County in southeast Iowa. Included in the route would be crossings of publicly-owned lands and waters at the Big Sioux River and Big Sioux River Complex Wildlife Management Area, both in Lyon County; the Des Moines River in Boone County; and the Mississippi River in Lee County. Company officials say the pipeline would be tunneled under the Mississippi River into Illinois.
Trial scheduled for oil truck operator in North Dakota murder-for-hire case | bakken.com: – The trial of an oil truck operator charged with orchestrating the killings of two business rivals competing for work in North Dakota’s giant Bakken oil patch was slated to begin in January after the man withdrew his guilty plea, his lawyer said on Thursday. In a September plea agreement, James Henrikson admitted to an interstate murder-for-hire plot to kill Kristopher “KC” Clarke in February 2012 in North Dakota and Douglas Carlile in December 2013 in Spokane, Washington. Henrikson withdrew the plea last month after a judge ruled he was not made aware of the mandatory minimum penalty of life imprisonment his crimes carried prior to entering the plea, court documents showed. Henrikson has now pleaded not guilty, his attorney, Todd Maybrown, said. The trial was slated for Jan. 25 in Richland, Washington. Henrikson faced murder-for-hire and conspiracy to commit murder-for-hire, among other charges, in alleged plots against several people he viewed as an impediment to his enterprises, as well as conspiracy to distribute heroin, court documents said.
North Dakota regulators mull easing pipeline spill fine — North Dakota regulators are considering easing a record $2.4 million fine levied against a Texas company for a pipeline spill that spewed saltwater and oil for three months before being detected. The North Dakota Industrial Commission, a three-member all-Republican panel led by Gov. Jack Dalrymple, approved the sanction in June against Woodlands, Texas-based Summit Midstream Partners and its subsidiary, Meadowlark Midstream Co. The 3 million-gallon spill, the largest in state history, was discovered in early January near Williston in western North Dakota but regulators believe the ruptured pipeline had been leaking unnoticed since early October, 2014. Officials said it primarily contaminated Blacktail Creek but also flowed into the Little Muddy and Missouri rivers, though there was no harm to drinking water supplies because it was so diluted. Alison Ritter, a spokeswoman for the state Department of Mineral Resources, said Monday that the state and the company are “actively negotiating a settlement.” Ritter’s agency regulates the state’s oil and gas industry and is overseen by the Industrial Commission. North Dakota regulators routinely settle on fines that are about 10 percent of the maximum penalty, saying it promotes cooperation.
SEC investigating unusual 2012 stock trading at oil train company - Federal authorities have been investigating a price spike in the stock in a Minnesota-based oil train loading company after it went public in 2012, resulting in an windfall for investors who held promissory notes with an unusual payout feature. The investigation by the U.S. Securities and Exchange Commission (SEC) is focused on a $9 million loan by several individuals to Dakota Plains Holdings of Wayzata. Under the terms of the promissory notes, the note holders received bonus payments based on Dakota Plains’ share price during the first 20 days after its stock began publicly trading in March 2012. In a filing in U.S. District Court in Minnesota, the SEC said that after Dakota Plains went public through a reverse merger, its stock “rose to $12 per share on very light volume and stayed at or near $12 per share for almost exactly 20 days,” entitling the note holders to $32.9 million. After the run-up in price, shares steadily fell and never rose anywhere near the $12 level. The investor, Jessica Medlin, is the former spouse of Ryan Gilbertson, CEO of Northern Capital Partners, a private equity firm based in Wayzata. According to the SEC, both of them engaged in 2012 Dakota Plains transactions. At the time, Gilbertson also was president of Northern Oil and Gas Inc., which invests in North Dakota oil leases. Gilbertson left Northern Oil and Gas, also based in Wayzata, in October 2012, a few months after the events under SEC investigation.
Oil, gas producers urge BLM to reconsider proposed rules -- The Independent Petroleum Association of America on Monday urged the U.S. Bureau of Land Management to reconsider its approach and work with the industry on proposed rules to update, replace and codify three of its Onshore Oil and Gas Orders. The BLM’s proposed rules would result in substantial changes to the way U.S. onshore oil and gas operations are conducted and would lead to significant increases in the costs of oil and natural gas development on federal and tribal lands. The IPAA filed formal comments Monday evening along with the American Petroleum Institute and Western Energy Alliance.“As they currently stand, the federal government’s proposed changes to its Onshore Order are counterproductive and do not account for innovative new technologies,” The IPAA, API and Western Energy Alliance submitted joint comments on Onshore Order 4 and Onshore Order 5.Western Energy Alliance and the IPAA also submitted comments on Onshore Order 3.Independent producers account for 90 percent of the nation’s energy production, supporting more than 200,000 jobs, and send more than $10 billion in additional revenue to the United State Treasury each year through royalties and other payments. Many producers argue that added layers of costly regulations make it difficult for producers and small businesses to continue to develop resources.
DUC, DUC, Production Boost? | Rigzone: Hundreds, if not thousands of drilled but uncompleted (DUC) wells are idling in the United States, but how much they could produce – or even when production may commence – vexes industry insiders. As analysts at Raymond James (RayJa) explained in a November report, DUCs have long been part of the oil and gas business. A natural, “normal” imbalance exists for two primary reasons: the difference between the number of rigs and completion crews, and the lag between drilling time and completion time. And while an absolute method for calculating the number of DUCs is up for debate, there’s little disagreement that currently there is an overabundance of DUCs. States calculate DUCs on often incomplete data that is “massively oversimplified,” RayJa said. For example, Texas data would indicate there are more than 2,000 DUCs in the Permian basin. But more typical estimates vary from 500 or so to more than 3,000 DUCs. And those numbers are expected to swell in 2016 if oil prices don’t incent operators to put the DUCs to work. The key issue is what bringing these DUCs online will do to U.S. production. RayJa’s best guess, “with a very low confidence level” is that DUCs could account for 100,000 to 300,000 barrels per day (bpd) for 2016 production growth. “Again, the actual DUC impact upon our U.S. oil supply model could be as low as zero and as high as 400,000 bpd next year,” RayJa said.
Lawmakers question delays in energy lease sales (AP) — Members of Congress from eleven states say they’re concerned about postponements to recent oil and gas lease sales. The lawmakers wrote U.S. Interior Department Assistant Secretary Janice Schneider asking her to explain the delays by Jan. 5. They cited postponed sales on public lands in Arkansas, Utah and Michigan. The effort is led by two Utah House Republicans — Natural Resources Committee Chairman Rob Bishop and Oversight Committee Chairman Jason Chaffetz. Acreage leased by Interior’s Bureau of Land Management has dropped sharply over the past eight years. More than 4 million acres were leased in 2007, compared to 1.2 million acres in 2014. Much of the decline has been attributed to efforts to ensure a ground-dwelling bird, the greater sage grouse, is not imperiled by drilling.
DUCs -- Rigzone Analysis -- This is an interesting analysis by the Rigzone staff with regard to DUCs. There are many story lines. This analysis focuses on how fast and how much oil can be brought to the market if the price of oil makes it economical to complete these DUCs. But here are my thoughts. They assume the DUCs will all be completed but with the caveat that if the price does not support completing these DUCs, some may not be completed. When I first started blogging, the completion (fracking) accounted for about half the total cost; drilling vertically and then drilling horizontally to "total depth" accounted for the other half. With drilling becoming much more efficient and fracking now involving many more stages, more sand, and more water, the costs of fracking have gone up in proportion to drilling. Rigzone puts the total cost at 1/4th for drilling and 3/4ths for fracking. What they do not mention is that the upfront costs of a) building the road to the pads; b) building the pads; c) laying the pipeline -- water, wastewater, oil -- in some cases; d) paying the upfront lease money for the initial well; e) putting in the storage tanks; f) doing the survey studies from scratch; etc., has all been done. Those were significant costs; if anyone has seen the miles of roads the oil companies have built in the Bakken, they know this is a great expense to have behind them. But the biggest factor affecting whether to complete or not complete a well is knowing that these wells will be productive. It's not like these are wildcats and they don't know whether they will have a well or not. Rigzone suggests that in one scenario operators will leave the DUCs uncompleted until the price of oil makes them economical, and then at that time, there will be a "mad rush" (my words, not Rigzone's) to complete the DUCs. NDIC has not given the operators an "infinite" amount of time to complete these wells. In North Dakota, operators have been given an additional year to complete wells, going from one year to two years. I update the status of wells periodically, and note that DUCs are being completed on an ongoing basis.
Tough times ahead for US shale producers — Cash-strapped US shale oil producers are facing another sharp sell-off in an 18-month crude slump, with reduced hedging protection risking a severe hit to earnings if prices fail to recover. A Reuters analysis of hedging disclosures from the 30 largest oil producers showed the sector as a whole reduced its hedge books in the three months to September. "Producers have survived 2015 as they benefited from large reductions in service costs while having a significant amount of production hedged at high prices," said John Arnold, the Texas billionaire formerly at hedge fund Centaurus Advisers. "Come January 1, revenues will experience a pronounced decline for many companies, coinciding with a time of severe stress for balance sheets across the industry," he said. When oil started falling from about $100 a barrel in mid-2014 due to a global supply glut, many US producers had strong hedge books guaranteeing prices around $90 a barrel. Now, with prices below $36 and flirting with 11-year lows on the renewed fear of oversupply, only five drillers among those reviewed by Reuters expanded their hedges in the third quarter and eight had no protection beyond 2015, leaving them fully exposed to price swings.
The Future Of The U.S. Oil Fracking Sector - It’s no secret that the global oil industry is undergoing a major adjustment. Oil prices dropped precipitously during the summer of 2014 and haven’t really recovered as of yet. If anything, even further weakness is indicated as a supply glut continues to plague financial markets amidst a slowing global economy. Now there’s a battle going on between the former world oil cartel OPEC and the U.S. shale oil revolution. OPEC has long been the world determinant of oil prices, with a huge market share of the industry and the ability to control supply as it saw fit. However, the entrance of U.S. shale oil has thrown the industry for a loop, with OPEC now controlling less and less of the oil market share. And the organization hasn’t been taking it lightly. Despite the struggles of the global economy, OPEC has not reduced oil production. That has driven prices to seven-year lows, with even further drops in the near future likely. The idea is to keep oil low enough to make U.S. fracking cost prohibitive and drive these companies into bankruptcy so they can’t threaten OPEC’s dominance in the industry. But the U.S. shale oil industry isn’t going anywhere anytime soon. Despite the pain OPEC is causing in oil values, the shale revolution is here to stay.
Chesapeake Bonds Plummet To 27 Cents Of Par After Company Hires Restructuring Advisor - After numerous false starts and months of hollow hopes for the stakeholders of beleaguered gas producer Chesapeake Energy, including an activist stake built up by none other than Carl Icahn which was the source of much transitory joy, various notional reducing debt exchanges, and speculation of asset sales, the time is coming when the inevitable debt-for-equity restructuring, one which could wipe away most or all of the existing $2.6 billion equity tranche (down from $11 billion a year ago) is on the table. According to the WSJ, Chesapeake has hired restructuring advisor Evercore "to shore up its balance sheet as commodity prices extend their decline." This means that Evercore will seek to further slash its debt, almost certainly be equitizing a substantial portion of it, and handing it over as equity in the new company to CHK's bondholders.And while many saw the restructuring, and potential prepackaged bankruptcy, coming from a mile away, what precipitated it was the plunge in the company's liquidity as a result of the ongoing collapse in commodity prices. Just earlier today, nat gas hit the lowest price in 13 years, which meant that after ending 2014 with $4.1 billion in cash, the company is down to just $1.8 billion in cash, or about 1-2 quarter of liquidity at the current cash burn rate. But while CHK's stock has imploded, falling 79% this year to around $4.09 per share or a $2.7 billion market cap, the real story is in the company's bonds.Chesapeake’s $1.3 billion in bonds due in 2020 bearing 6.625% interest recently traded at 29 cents on the dollar, down from 47 cents late last month, according to MarketAxess. Worse, the company's 2023 bonds which were trading at par as recently as late May, just rumbled to a record low 27 cents on the dollar.
Chesapeake Energy Works With Advisers To Reduce Debt Load - Chesapeake Energy Corp. is working with restructuring advisers at Evercore Partners Inc. to shore up its balance sheet as commodity prices extend their decline, according to people familiar with the matter. The Oklahoma City-based company, co-founded in 1989 by famed wildcatter Aubrey McClendon, became one of the dominant U.S. gas explorers during the shale boom. Fueled by cheap debt, Chesapeake expanded aggressively in Ohio, Texas and other parts of the U.S., becoming the country's second-largest, natural-gas producer behind Exxon Mobil Corp. But the tumble in natural gas prices has hurt the company, which has posted three straight quarterly losses this year. Chesapeake ended September with $1.8 billion in cash, down from $4.1 billion at the end of 2014, according to regulatory filings. Chesapeake's share price has fallen nearly 80% this year to $4 per share. Its market capitalization currently stands at roughly $2.8 billion, down from $11.4 billion a year ago. Natural gas prices fell to their lowest point in more than a decade Monday, as record-high December temperatures in New York and other cities sap demand for heating fuel. Prices are down 35% this year and 69% below their February 2014 highs, driven largely by oversupply after advances in drilling techniques unlocked new reserves in shale-rock formations across the U.S. Chesapeake's bonds have been among the hardest hit in a recent selloff of junk-rated energy-company debt, driven in part by continued declines in oil and gas prices. The company is offering to exchange bonds at a discount for up to $1.5 billion of new debt. Investors who take the offer would accept a reduction in the face value of their debt in exchange for a stronger claim on the company's assets.
Fracking Just Caused Another 4.6-Magnitude Earthquake: Oil and gas regulators in British Columbia, Canada, confirmed this week that a 4.6-magnitude earthquake earlier this year was caused by fluid injection from hydraulic fracturing, also known as fracking. The quake is the largest of its kind in the province to be linked to the process, whereby fluid in injected into the ground at high-pressure to release natural gas stored inside shale rocks. Oklahoma's energy regulator declared last month that the state now has more earthquakes than anywhere else in the world, which scientists have also linked to wastewater injections, a long-used method to dispose of the chemical-laced byproduct of oil and gas production. A recent study by the U.S. Geological Survey traced wastewater injection methods to the 1920s in Oklahoma and tied the rise in quakes in the past 100 years to industrial activities, such as oil and natural gas production. About 1.5 billion barrels of wastewater was disposed underground in Oklahoma last year, according to statistics released by the governor's office. A swarm of earthquakes has recently rumbled through the north-central swath of the state, one with a 4.7 magnitude. In response, the Oklahoma Corporation Commission's oil and gas division has proposed ways for wastewater disposal well operators in that area to halt or reduce volume.
Earthquake in Northern B.C. caused by fracking, says regulator - British Columbia's energy regulator has confirmed that a 4.6 magnitude earthquake in northeast B.C. in August of this year was caused by a nearby fracking operation. "This seismic event was caused by hydraulic fracturing," said Ken Paulson, CEO of the B.C. Oil and Gas Commission. Paulson said fewer than one per cent of fracking operations trigger seismic activity, and those quakes tend to be low magnitude and cause little damage. The quake struck in August, about 110 kilometres northwest of Fort St. John, near a gas fracking site operated by Progress Energy. Hydraulic fracturing or "fracking" is a process that involves pumping a mixture of water, sand and chemicals underground at high pressure to fracture rock and release trapped natural gas. Studies have linked fracking with earthquakes in the U.K., Oklahoma, and in B.C. The epicentre of the August quake was three kilometres from the Progress Energy fracking site. The operation shut temporarily immediately after the quake but soon restarted with continued monitoring. Fracking operations have previously triggered small earthquakes in B.C. In the U.S., the disposal of frack waste has triggered larger quakes. But scientists said last summer that the 4.6 magnitude August quake may be the largest in the world caused by hydraulic fracturing. No one was injured in the earthquake and there was no damage reported, but shaking could be felt for several kilometres. "This level of earthquake, although sounds scary, but in terms of the actual seismic damage, magnitude 4.6 is very unlikely to cause significant damage,"
ConocoPhillips capital budget cuts for 2016 largely spare Alaska - ConocoPhillips has laid out its global plans for the next year, with its base capital spending levels in Alaska falling — but its overall investment in-state remaining static due to a series of projects. In its 2016 operating plan unveiled Thursday, the firm — one of the “Big Three” oil companies operating in Alaska, and a partner with the state in a planned natural gas pipeline — said it expected to have a $15.4 billion worldwide budget for the year, split evenly at $7.7 billion apiece in capital and operating costs. Ryan Lance, the company’s chairman and CEO, said the reduced capital budget, about 25 percent smaller than 2015’s, was the product of a global operating environment he called “challenging.” “We are significantly reducing capital and operating costs, while maintaining our commitment to safety and asset integrity,” Lance said in a statement on the operating plan. “We also retain the flexibility to adjust capital spending in response to market factors. Our plan highlights the actions we accelerated over the past year to position our company for low and volatile prices.” Alaska, with relatively minor reductions, was the bright spot in ConocoPhillips’ capital budget. Cuts across the company’s operations in the Lower 48, Canada, Europe and the Asia-Pacific/Middle East ranged from 15 to 30 percent. “Approximately $1.3 billion, or 17 percent, is allocated to Alaska,” ConocoPhillips officials wrote. “This reduction of about 5 percent compared with 2015 expected spending is predominantly the result of reduced major project spending in the region following the startup of CD5 and Drill Site 2S in 2015. Capital in 2016 will mostly target development drilling, base maintenance and the progression of several major projects.”
Company plans gravel island to extract Arctic offshore oil — Arctic offshore drilling by Royal Dutch Shell PLC drew protests on two continents this year, but a more modest proposal for extracting petroleum where polar bears roam has moved forward with much less attention. While Shell proposed exploratory wells in the Chukchi Sea about 80 miles off Alaska’s northwest coast, a Texas oil company wants to build a gravel island as a platform for five or more extraction wells that could tap oil 6 miles from shore in the Beaufort Sea. The U.S. Bureau of Ocean Energy Management is deciding how to assess the environmental effect of a production plan for the Liberty Project by Hilcorp Alaska LLC, a subsidiary of Houston-based Hilcorp Energy Co. A successful well would mean the first petroleum production in federal Arctic waters. Hilcorp’s plan for a 23-acre gravel island, about the size of 17.4 football fields, has drawn mixed reviews from conservationists and outright condemnation from environmentalists who believe the oil should stay in the ground.
Canada's Trudeau leaves room for oil pipelines to gain local approval (Reuters) – Canada’s government sounded another note of opposition to a proposed oil pipeline in the country’s west coast, though he appeared to leave the door open to allowing proponents to acquire the needed local approval for projects to go ahead. The newly elected Liberal government campaigned on a promise to toughen up the environmental review process for oil pipelines and has voiced its opposition to Enbridge Inc’s Northern Gateway pipeline. Prime Minister Justin Trudeau reiterated that stance on Thursday, telling reporters, “I’ve been saying for years that the Great Bear Rainforest is no place for an oil pipeline, (and) that continues to be my position.” Oil would travel through parts of the Great Bear Rainforest as part of the planned pipeline from Alberta to British Columbia. “We need to be consulting with communities; we need to be partnering with indigenous peoples; we need to be reassuring Canadians that the science and environmental impact and the risks are being properly monitored,” Trudeau told reporters. “However, we do need to continue to allow processes … underway where proponents of a broad range of projects can attempt to acquire the social license that simply was not available, even as a theoretical option, over the past years,” he added.
Britain Pushes to Revive Fracking, Possibly Under National Parks : — The British government is once again trying to revive its flagging effort to extract the country’s natural gas and oil from shale rock.On Wednesday, members of Parliament voted 298 to 261 to approve legislation allowing use of the shale-gas-extraction technique known as hydraulic fracturing 1,200 meters, or nearly 4,000 feet, beneath the surface of national parks and other protected areas, including World Heritage sites.The push by Prime Minister David Cameron’s Conservative Party comes just days after delegates to the United Nations climate conference in Paris reached a widely hailed agreement on curbing carbon dioxide emissions blamed for global warming. Despite the ambitious goals outlined on Saturday, many analysts say they believe oil and gas will play crucial roles in the world economy for decades.The opposition Labour Party criticized the government for weakening the protection of areas that need it. “We should have a moratorium on fracking in Britain until we can be sure it is safe and won’t present intolerable risks to our environment,” said Lisa Nandy, a Labour energy spokeswoman.Britain, in a separate effort to generate greater interest in shale, is expected to soon award new licenses for shale gas and oil exploration, possibly in national parks.One of the government’s aims is to allow long, horizontal wells drilled from outside such areas to tap the oil and gas below them. The government argues that there can be little harm from such deep drilling, saying that supplies of drinking water are “normally found below 400 meters.”
UK Parliament backs fracking below national parks - The British Parliament has approved proposals that would allow fracking for shale gas below national parks, world heritage sites and other designated areas of natural beauty. The measure, which is opposed by environmental groups, was endorsed Wednesday by 298 votes to 261 and paves the way to more extensive fracking three-fourths of a mile below parks. The fracking process involves pumping huge volumes of water, sand and chemicals underground to split open rocks to allow oil and gas to flow. It has produced major economic benefits in some countries, but also raised a number of fears, including that the chemicals could spread to water supplies. The opposition Labour Party said after the vote that there should be a moratorium until better safeguards are in place. "We should have a moratorium on fracking in Britain until we can be sure it is safe and won't present intolerable risks to the environment," said Lisa Nandy, Labour's spokeswoman on energy and climate issues. She said the government is ignoring the public's "legitimate concerns" about the technology. Earlier this year, British lawmakers rejected a proposal to suspend fracking but indicated they would not permit fracking in national parks. Rose Dickinson of Friends of the Earth said the government is reneging on its commitment to have strong fracking safety regulations in place.
Britain Offers Licenses for Shale-Rock Exploration - The British government, in an effort to stoke interest from energy companies in extracting fuels from shale rock, said on Thursday that it was offering licenses for oil and gas exploration on 159 tracts of land.The government said that 75 percent of the licenses being offered related to areas thought to contain shale gas or oil. Most of the blocks are in Northwest and Northeast England, and are believed to have substantial shale potential.“We need to get shale gas moving,” Britain’s energy minister, Andrea Leadsom, said in a statement on Thursday.The major British oil companies, BP and Shell, have so far stayed clear of the hunt for shale gas in Britain, stating that they had little interest in wading into the environmental controversy over extracting the fuel, at least until it is demonstrated that there is enough shale gas to make it commercially attractive.The government said that companies that accepted the licenses would still need to seek further permission before they could begin drilling.The licenses were offered a day after members of Parliament approved legislation that may open the way to hydraulic fracturing — the shale-gas-extraction technique known as fracking — deep beneath the surface of protected areas like national parks using long, horizontal wells outside the park borders. A few of the licenses awarded on Thursday are in such parks.
UK Begins Fracking Push As New Onshore Licences Are Awarded - The UK government began offering almost 100 new onshore oil and gas licences to companies on Thursday, with around three quarters of the blocks suitable for fracking. The 14th onshore licensing round was conducted by the industry regulator, the Oil and Gas Authority, with the 159 blocks on offer being consolidated into 93 licences which have been offered to companies that had successful applications. The first London-listed stocks to report they had won licences were UK Oil and Gas Investments PLC and Solo Oil PLC, with the pair winning one licence on the Isle of Wight. Fellow AIM-listed Egdon Resources PLC also said it had won nine licences under the licensing round whilst Europa Oil and Gas (Holdings) PLC secured three new licences, one of which with partner Upland Resources PLC. It is likely other London-listed stocks will have applied for licences. Under the licensing round, a total of 95 applications were made by 47 companies. Importantly, of the 159 blocks that were on offer, around 119 of them hold unconventional shale oil or gas, making them suitable for fracking which has been a hot and controversial topic this week after MP's approved fracking in certain parts of the UK, including underneath national parks. "Around 75% of the 159 blocks being offered today relate to unconventional shale oil or gas, and additional regulatory requirements apply to this kind of activity," said the UK government. "This round enables a significant amount of the UK’s shale prospects to be taken forward to be explored and tested." The dishing out of the licences comes only days after MPs voted to allow fracking for shale gas below national parks and other protected sites, bringing the already controversial topic back into the spotlight.
Fracking: plans to drill 68 new shale gas wells unveiled - Fracking firms plan to drill up to 68 shale gas wells in England in the next five years, after being handed new rights to explore across an estimated 4,500 square miles of land. At least 14 of the new drilling sites – in parts of Yorkshire, Cheshire, Derbyshire and Nottinghamshire - are expected to be fracked under the plans, as ministers attempt to “get shale gas moving”. The areas earmarked for shale exploration include parts of the North Yorks Moors and Peak District national parks as well as several Areas of Outstanding Natural Beauty, and part of Chancellor George Osborne’s Tatton constituency. Fracking has not taken place in Britain since a temporary ban on the controversial practice was lifted in 2012, with energy firms facing repeated setbacks from strong local opposition. But Andrea Leadsom, the energy minister, said the Government wanted to “press ahead and get exploration underway so that we can determine how much shale gas there is and how much we can use”. The Government yesterday awarded rights to energy companies to explore for oil and gas across about 5,000 square miles of England, in addition to 1,000 square miles they awarded in the summer. Of the 6,000 square miles total, roughly 75 per cent of the licences relate to shale exploration, the Government’s Oil & Gas Authority said, with the remainder being earmarked for other types of drilling.
UK offers fracking licenses for 132 onshore oil and gas blocks - The UK Oil & Gas Authority (OGA) has awarded a further 132 new licenses to frack oil and gas, during the second tranche of the 14th onshore oil and gas licensing round. The first tranche of the 14th round was announced in August and awarded 27 licenses. Of the total 159 licensing blocks being offered, around 75% are for unconventional shale oil or gas and subject to additional regulations for fracking. Launched on 28 July 2014, the 14th onshore licensing round received a total of 95 applications from 47 companies covering 295 ordnance survey blocks. OGA chief executive Andy Samuel said: "This round enables a significant amount of the UK's shale prospects to be taken forward to be explored and tested. The oil and gas regulator will now issue Petroleum Exploration and Development Licences (PEDL) over the offered blocks, after agreeing on specific details. The companies will now start planning future strategies for exploration activities for their licenses. These activities, however, are subject to further local planning, safety, environmental and other approvals. UK Energy Minister Andrea Leadsom said: "Last month we set out the vital role gas will play in the UK's transition to a low-carbon future. "The licences offered today move us a step closer - driving forwards this industry which will provide secure, home grown energy to hardworking families and businesses for decades to come.
Four countries added to global shale oil and natural gas resource assessment -- EIA continues to expand its assessment of technically recoverable shale oil and shale natural gas resources around the world. The addition of four countries—Chad, Kazakhstan, Oman, and the United Arab Emirates (UAE)—to a previous assessment covering 42 countries has resulted in a 13% increase in the global assessed total resource estimate for shale oil and a 4% increase for shale gas. A total of 26 formations within 11 basins were analyzed in these 4 countries. Although these formations contain significant volumes of technically recoverable resources, there is currently no shale exploration underway in any of the four countries, meaning the new assessed resources are not yet economically recoverable. The portions of these resources that become economically recoverable in the future will depend on crude oil and natural gas market prices, as well as the capital and operating costs and productivity within the countries. Each of the countries has an existing oil and natural gas industry with infrastructure connecting the basins to global markets. All current production of oil and natural gas in Chad, Kazakhstan, Oman, and the UAE is from non-continuous resources (from high-permeability formations).
The zombie apocalypse in oil: Why it's a bad sign for all of us - - The dramatic drop in oil prices has created what are called "zombie" companies, oil companies which can still afford to pay interest on huge debts, but little else. If oil prices stay low, the problem is likely to spread and become an economic zombie apocalypse for much of the industry and the communities and countries that depend on it. Meanwhile, consumers have rejoiced as cheap oil prices have led to cheap gasoline, diesel, heating oil and jet fuel. But should those consumers be so sanguine? Can the low prices we are experiencing today be extrapolated far into the future? The conventional wisdom says yes. It claims that the American fracking boom of recent years has unleashed a flood of oil that will keep prices down for many years to come. Combine that with an undisciplined OPEC that pumps flat out and you get not a temporary dip in prices, but a new era of low-cost oil and oil products. But the same facts can be interpreted as leading to serious future supply constraints and high prices, provided the world economy does not fall into a prolonged slump that would reduce oil demand. Cheap financing fed the fracking boom. And, even though borrowed funds are still cheap, struggling oil companies are finding their bank lines of credit reduced and a bond market that is shunning their high-yield debt. With additional funds hard to raise, many independent companies are finding it difficult to drill new wells needed to make up for declining production from existing ones, around 40 per cent per year in the two largest tight oil formations--the Eagle-Ford in Texas and the Bakken in North Dakota--where fracking is the primary technology for extracting oil. While some say that a rising oil price would quickly reverse the current downward trend in drilling activity in U.S. tight oil fields, the key will be whether investors will provide the capital needed to do so. So, it's important to understand that the OPEC war on American drillers also extends to those who finance them. If the thumping investors have taken so far as result of the long, deep slide in oil prices makes them reluctant to fund new drilling in the United States when prices rise, the presumed fast ramp-up in U.S. drilling won't take place. The necessary cheap and ready credit won't be available as it has been in the past.
19 Million Barrels Missing: Energy investment bank, Tudor, Pickering, Holt & Company said the oil industry has deferred or cancelled about 150 projects that could unlock 125 billion barrels of oil over their lifetime. Those 150 projects could produce about 19 million barrels per day at their peak. In a separate presentation Chevron said the decline in mature fields would need $7-$10 trillion of additional investments to prevent the drop in production. In today's energy market with oil prices under $40 that investment is not going to be made. In the chart below, Chevron illustrated the problem. Demand will continue to rise since the global working population rises +200,000 per day. The existing base of production declines every day as the oil is taken out of the ground. Between now and 2030 another 200 billion barrels of oil will need to be discovered and produced in order to keep up with demand. With active drilling declining at a rapid rate and capital expenditures by the major oil companies being slashed every quarter those discoveries are not going to be made. The major reason is that all the cheap oil that could be produced profitably at $40 a barrel was discovered long ago. The majority of oil discovered today requires an average of $75 a barrel to be profitable. There are some exceptions but for every lower priced barrel, there is a higher priced barrel to offset it. Any deepwater offshore oil requires $75 or higher to be developed. You cannot spend billions of dollars developing a 10 well field at $40 oil. Chevron halted development on a North Sea project costing $8 billion because profitability required $100 per barrel or more. The vast majority of shale oil requires prices over $40 and that is why active drilling is rapidly declining.
$30 Oil Will Accelerate Much Needed Rebound -- : Oil markets are waiting for a much greater supply contraction before prices rebound, and the deeper downturn in prices will test the current pace of adjustment. With WTI dipping to $35 per barrel, it will likely spark deeper cuts to spending and drilling, which could perhaps contribute to an accelerated pace of adjustment. In other words, a sharper fall from the mid-$40s per barrel to the mid-$30s per barrel could sow the seeds of a faster rebound than we might have otherwise witnessed. Although to date the pain has been significant in the upstream exploration and production sector, things are about to get much worse. Hedges continue to roll off, removing the last bit of protection that some drillers have had up until now. “Come Jan. 1, revenues will experience a pronounced decline for many companies, coinciding with a time of severe stress for balance sheets across the industry,” . Reuters surveyed the 30 largest oil producers, and only five of them actually expanded their hedging program during the third quarter of 2015. The rest saw their hedging positions erode as contracts expired. Eight of them had no hedging protection whatsoever for 2016. Reuters noted the “missed opportunity” when few companies added hedging protection when oil prices rebounded to $60 per barrel in the spring, and then again in September and October when prices rose modestly after a downturn in the summer. According to Reuters, Devon Energy, Whiting Petroleum, Hess and Denbury Resources are a few of the companies that have seen their hedging positions decline the most. That will subject them to the full savagery of oil prices flirting with 11-year lows. Without hedging, there is a much lower incentive to drill, as any barrels pulled out of the ground will be sold for much less than they would be under a hedged position.
America's 40-year oil export ban may soon be lifted - There's growing momentum to kill the restriction and a deal could be reached before the end of the year as part of a broader spending and tax bill that's making its way through Congress. Proponents argue the restriction is terribly outdated. It was signed into law on December 22, 1975 when the OPEC oil embargo created a shortage that slammed the American economy with skyrocketing prices. Today, the world has too much oil -- thanks largely to the American shale oil boom. That's why crude oil prices have crashed below $35 a barrel and a gallon of gasoline is on the verge of falling below $2 per gallon. In other words, there is no longer an oil scarcity that justifies keeping it at home. In fact there's too much of it. "Restrictions on free trade of energy are a legacy of a bygone era that doesn't reflect the realities of today," A big reason for the momentum is the fact that gasoline prices are down by half since peaking in 2008 at $4 per gallon. Politicians have less reason to fear voters will blame them for high gas prices caused by allowing U.S. oil to be sold overseas. In fact, U.S. oil actually trades at a discount to Brent. That's because American oil producers can't currently export to overseas refiners who are willing to pay a bit more. American producers will have access a wider market if the export ban is lifted. That's why the move is likely to make oil and gas prices in the future cheaper than they would otherwise be.
Senators Close in on Oil-Export Deal Amid Tax-Break Talks - Senate negotiators are nearing a deal to allow unfettered U.S. crude oil exports for the first time in 40 years, though differences remain on renewable-energy tax credits that Democrats are demanding in return, according to people close to the discussions. While any agreement could still collapse in the coming days -- the deal faces opposition in the House -- lawmakers are weighing the extension of solar and wind tax credits for as long as five years in exchange for lifting the crude-export restrictions, which were established to counter the energy shortages of the 1970s. Tax breaks are part of the discussion, though lawmakers are still negotiating the length of wind- and solar-energy tax extensions and whether they should be phased out, said a Senate Democratic leadership aide, who wasn’t authorized to speak on the record. If agreed to and approved by Congress, repeal of the nation’s ban on most crude oil exports would mark the most significant shift in U.S. oil policy in more than a generation. Repeal, benefiting oil producers including ConocoPhillips, Hess Corp. and Continental Resources Inc., would come at a time when the industry is cutting jobs to deal with a global glut in crude oil and the lowest prices in seven years. Talks for a deal are under way as envoys from 195 nations reached an agreement to limit fossil-fuel pollution and curb the effects of climate change. Congress is considering lifting the export ban as part of either a package to extend expiring tax provisions or to finance the government through Sept. 30 before current funding authority expires Dec. 16. Among the items being discussed are a 9 percent manufacturing tax credit for refiners and an extension of the U.S. Land Water Conservation Fund, according to at least three lobbyists close to the negotiations. Even if such a deal is struck by Republicans and Democrats in the Senate, House Democrats, who are vital to reaching an agreement, have suggested they won’t go along unless a provision for indexing the Child Tax Credit, which allows taxpayers to reduce federal income taxes for each qualifying child, is added to the mix. And it’s unclear whether House Republicans will support a deal if they assess that the price Democrats are seeking is too high.
Democrats Ignoring Climate Implications of Lifting Oil Export Ban – “We Can Have Our Cake and Eat It Too” -- Jason Bordoff wants to lift the oil export ban and has been actively working on this for the past two years. Which is odd if you believe that President Obama is against lifting the ban as the White House claims. Prior to Bordoff’s work to lift the oil export ban at Columbia University’s Center on Global Energy Policy (CGEP), he was special assistant to President Obama and senior director for energy and climate change. So why is Obama’s former senior director on climate change pushing a policy that will greatly increase fracking in Americaas well as global oil consumption for decades? The carbon and methane pollution consequences of this for climate change are plainly obvious. For the past two years, many former Obama administration officials have joined Republicans in calling for a lifting of the export ban. Lawrence Summers, former Obama treasury secretary gave a talk at the oil industry-funded Brookings Institute in September 2014 arguing for lifting the ban, and he didn’t leave much room for debating the merits on the issue saying, “The merits are as clear as the merits with respect to any significant public policy issue that I have ever encountered.” As for the environment, Summers dismissed any concerns with the absurd statement that “whether we move beyond fossil fuels will not be affected one way or the other by our export policy, or our natural gas export policy.” One of the leading champions for lifting the export ban is Daniel Yergin. Yergin works for energy consulting firm IHS that has produced industry funded “studies” supporting lifting the ban. He also is part of CGEP at Columbia. They gave him a medal. In October 2014, Secretary of Energy Ernest Moniz presented Yergin with the first James R. Schlesinger Medal for Energy Security.
Exporting Climate Change Denial to China --Talk about irony. As the world struggles this week in Paris to finally do something meaningful about climate change, American environmentalists around the convention hall are suddenly having to divert their energy to deal with a threat from politicians back home. Behind closed doors in Washington, Republican leaders are trying once again to commandeer the federal budget to the benefit of their fossil fuel benefactors — and they are getting an assist from some leading Democrats as well. They are apparently negotiating with the GOP to end the long-standing ban on crude oil exports, a move that would dramatically undercut America’s negotiation position, and demonstrate that the oil industry maintains a firm grip on both our political parties. A vote on lifting the ban could come as early as Friday — the very day that the world is supposed to be reaching its final climate pact.Ending the oil export ban is a poor idea on many grounds: Unions oppose it because it will cost refinery jobs, conservationists oppose it because it will lead to more drilling in sensitive areas and increased pollution in communities of color. It makes a mockery of the idea that we’re actually interested in “energy independence.” We’d get 4,500 more rail cars a day full of explosive oil. It’s such bad policy that 69 percent of Americans, across both parties, oppose lifting the ban.And if it’s bad policy, it’s even worse timing. Right at the very moment when we desperately need to be reducing emissions and investing in clean energy solutions — right when President Obama in his Paris speech and his Keystone XL rejection has called for leaving carbon underground — lifting the crude oil export ban would do the exact opposite: add 3.3 million barrels of extra oil production per day between now and 2035. That’s more than 515 million metric tons of carbon pollution per year, the equivalent of the annual emissions from 108 million passenger vehicles or 135 coal-fired power plants.
White House says still opposes legislative move to lift crude oil export ban – The White House said on Friday it opposed legislative action to lift the U.S. ban on crude oil exports as part of negotiations on a spending agreement to fund the U.S. government in 2016. “We have opposed legislative action that would lift the ban on crude oil exports, primarily because this is already authority that rests with the executive branch,” White House spokesman Josh Earnest told a news briefing. “We do not believe it is necessary for Congress to take legislative action in this area.” Ending the ban has been one of the issues delaying a deal being negotiated in the U.S. Congress for a $1.15 trillion funding bill to pay for government operations through September 2016.
U.S. oil export ban 'very likely' to be lifted in spending bill: source -- The 40-year-old ban on most U.S. crude oil exports will “very likely” be lifted in the government spending bill, and talks on the final budget deal are likely to continue through the weekend, a Senate aide said on Friday. The aide did not want to be identified due to the ongoing nature of the talks. When asked if it was likely that the oil export ban would be lifted, a spokeswoman for Senate Minority Leader Harry Reid, a Nevada Democrat, said there was no final deal yet. “We do not have a final agreement on the omnibus or tax extenders,” said Reid’s spokeswoman Kristen Orthman. Leaders in both the House and Senate have been meeting behind closed doors in recent days to see if a deal can be reached on the bill. Energy interests, and Republicans, who lead both chambers of Congress, say lifting the trade restriction would keep the U.S. drilling boom alive and give U.S. allies alternatives to Russia and OPEC for their oil supplies. Opponents, including many Democrats in the Senate, say it would put oil refining and ship building jobs at risk and more drilling would harm the environment and increase the number of trains carrying crude oil. The White House has said repeatedly that President Barack Obama opposes legislation in the bill to lift the ban and that Congress should instead work to help green sources of energy. It has stopped short of saying Obama would veto a spending bill that includes lifting the ban.
Oil Export Plan Last Obstacle to U.S. Spending Bill, Reid Says - - A dispute over ending the 40-year-old U.S. crude oil export ban is the last remaining obstacle to agreement on a spending bill to avoid a government shutdown, Senate Democratic leader Harry Reid said Tuesday. It’s up to Republicans to decide whether they’ll agree to environmental measures sought by Democrats in exchange for lifting the export ban, Reid of Nevada said on the Senate floor Tuesday. “If Republicans think reducing our carbon emissions and encouraging the use of renewable energy is an unacceptable price to pay, we can move the rest of the package without the oil export ban,” Reid said. “It’s decision time.” House Speaker Paul Ryan said congressional leaders expect to unveil a $1.1 trillion government spending bill later Tuesday for a possible vote on Thursday. Current government funding ends at the end of the day Wednesday, and the speaker said a short-term extension will be needed to keep the government operating. "I think we’ve been pretty clear we’re not going to have a shutdown," Ryan of Wisconsin said during a Politico event in Washington. Congressional negotiators have been working on the spending bill and an accompanying package of as much as $750 billion in business and low-income worker tax breaks. A resolution has been delayed by disagreements over a variety of policy changes sought by Republicans, including lifting the oil export ban.
Meet the Lobbyists and Big Money Interests Pushing to End the Oil Exports Ban -- Steve Horn -- The ongoing push to lift the ban on exports of U.S.-produced crude oil appears to be coming to a close, with Congress agreeing to a budget deal with a provision to end the decades-old embargo. Just as the turn from 2014 to 2015 saw the Obama Administration allow oil condensate exports, it appears that history may repeat itself this year for crude oil. Industry lobbyists, a review of lobbying disclosure records by DeSmog reveals, have worked overtime to pressure Washington to end the 40-year export ban — which will create a global warming pollution spree. Congress has introduced four oil export-promoting bills in the past year, all of which received heavy lobbying support from the industry. Language from those bills, as with a bill that opened up expedited hydraulic fracturing (“fracking”) permitting on public lands in the defense appropriations bill last year, is inserted into the broader budget bill. So without further ado, meet some of the lobbying and big money interests that propelled these bills forward. H.R. 5814 mandated that the “United States should remove all restrictions on the export of crude oil, which will provide domestic economic benefits, enhanced energy security, and flexibility in foreign diplomacy.” Companies such as Anadarko Petroleum, Marathon Oil and HollyFrontier Corporation all put their best foot forward in lobbying for the bill. Anadarko paid Robert Hickmott and W. Timothy Locke — both of whom passed through thegovernment-industry revolving door — to do the job. Among them is ExxonMobil, the news these days mostly for the “Exxon Knew” climate change denial scandal and the ongoing New York Attorney General's Office investigation.Exxon's oil exports lobbyist armada includes former U.S. Senator Don Nickles (R-OK) and Majority Leader and U.S. Sen. Mitch McConnell (R-KY)'s former chief of staff Michael Solon.The fracking lobby, America's Natural Gas Alliance (ANGA), also brought its lobbying clout to the forefront for the bill. ANGAlobbied for H.R. 702 in both quarters two and three. National Industrial Sand Association, the frac sand industry's lobbying group, also lobbied for the bill. Koch Industries front group Americans for Prosperity (AFP) also deployed a trio of lobbyists to advocate on behalf ofH.R. 702.
US Congress Republicans agree to lift 40-year ban on oil exports - Republican leaders in the US Congress announced late Tuesday a measure allowing American oil exports for the first time in four decades. However, Democrats haven't confirmed the agreement. Both the House and Senate still must pass it and President Barack Obama must sign it into law. “We have the best technology, the best oil and over time we will drive out Russian oil, we will drive out Saudi, Iranian,” Republican Representative Joe Barton of Texas told Bloomberg. “It puts the United States in the driver’s seat of energy policy worldwide. It is a huge victory,” he added. The announcement comes as oil prices plunge to the lows of 2008. WTI was trading one percent lower at $37.02 per barrel as of 11:10am GMT on Wednesday. Brent was down almost three percent at $37.37 a barrel. Low oil prices have increased the urgency for Congress to lift the ban, according to John Hess, chief executive of American oil company Hess Corporation.
Congress reaches deal to lift 40-year ban on oil exports - In a move considered unthinkable even a few months ago, congressional leaders have agreed to lift the nation’s 40-year-old ban on oil exports, a historic action that reflects political and economic shifts driven by a boom in U.S. oil drilling. The measure allowing oil exports is at the center of a deal that Republican leaders announced late Tuesday on spending and tax legislation. However, Democrats haven’t confirmed the agreement. Both the House and Senate still must pass it and President Barack Obama must sign it into law. The deal would lift the ban, a priority for Republicans and the oil industry, and at the same time adopt environmental and renewable measures that Democrats sought. These include extending wind and solar tax credits; reauthorizing for three years a conservation fund; and excluding any measures that block major Obama administration environmental regulations, according to a GOP aide. By design or not, the agreement hands the oil industry a long-sought victory within days of a major international climate deal that is aimed at sharply reducing emissions from oil and other fuels, a deal opposed by the industry and one that will arguably require its cooperation. More than a dozen independent oil companies, including Continental Resources and ConocoPhillips, have been lobbying Congress to lift the ban on oil exports for nearly two years, arguing that unfettered oil exports would eliminate market distortions, stimulate the U.S. economy and boost national security
Budget deal bill boosts oil exports, renewable energy (AP) — Republicans are hailing the likely demise of a 40-year-old ban on crude oil exports, as well as spending limits imposed on the Environmental Protection Agency, a longtime GOP target. Democrats are cheering five-year extensions of tax credits for wind and solar energy producers and renewal of a land and water conservation fund that protects parks, public lands, historic sites and battlefields. Energy and environment provisions in the massive year-end spending and tax bills give both parties reasons to celebrate. Thanks to the threat of President Barack Obama’s veto, Democrats blocked GOP proposals to thwart administration regulations on clean air and water as congressional leaders and the White House hammered out the massive budget deal. Lawmakers expect to vote on the $1.1 trillion spending bill and $680 billion in tax cuts for businesses and individuals by week’s end. Western lawmakers from both parties are highlighting a plan to spend $2.1 billion to fight increasingly serious wildfires that have afflicted the drought-plagued region in recent years. The figure is $500 million above a 10-year average for snuffing out wildfires. House Speaker Paul Ryan, R-Wis., called removal of the export ban the most important change in U.S. oil policy in more than a generation. “This is a big win for America’s energy workers, manufacturers, consumers and our allies,” he said. Lifting the ban should create about 1 million jobs in nearly all 50 states within a matter of years, Ryan said, and it could add $170 billion a year to the nation’s gross domestic product.
Congress To Lift Four Decade Oil Export Ban: Will It Impact Crude Prices? -- A little logrolling is better than brinksmanship and legislative gridlock we suppose and thanks to GOP concessions on tax credits for wind and solar as well as a three year reauthorization of a conservation fund, Republicans were able to include a measure that lifts the 40-year old ban on crude exports in a package of spending and tax legislation that funds the government until September of 2016. As Bloomberg reports, “House Speaker Paul Ryan told fellow Republicans in a closed-door meeting Tuesday night in Washington that leaders had reached a deal pairing a $1.1 trillion spending bill with a separate measure to revive a series of expired tax breaks.” “I think we’ve been pretty clear we’re not going to have a shutdown,” Ryan said on Tuesday, tacitly acknowledging the reputational damage the party suffered in 2013 when bickering over Obamacare brought the government to a virtual standstill. “That’s the way I think Congress ought to run,” he added. Foreign sales of refined products (like gasoline) were allowed under the ban - in place since 1975 after the Arab oil embargo - and as WSJ notes, “a certain type of light oil is also already starting to flow overseas thanks to permission granted in 2014 by the Commerce Department, which allows producers to reclassify a certain type of oil as a refined fuel, similar to gasoline, which is legal to ship abroad.” Exports to Canada (which is exempt from the ban) have increased ninefold to 400,000 b/d since 2008.The inexorable decline in crude prices served as the impetus for reviving the debate around the export ban. As The Journal goes on to recount, “a dramatic drop in oil prices, hovering below $40 a barrel, helped prompt lawmakers of both parties to consider pairing renewable energy support with oil exports, a type of grand Washington deal-making that hasn't been seen for years on the highly divisive issues of energy and environment.” As for the impact on global markets, OPEC’s Secretary-General Abdalla El-Badri said Tuesday that "any change in U.S. oil policy will have 'zero' impact on global mkts because the country remains an importer."
Big Oil Just Won Another Round In Congress - In a blow to environmental activists, lawmakers agreed late Tuesday to lift the 40-year-old oil export ban in a budget deal for the coming year. In exchange, the wind and solar industries will receive some market certainty, with tax credits extensions for the next five years. Republicans have been pushing hard this year for an end to the ban, which was established to protect American energy security after the oil embargo of the 1970s. In recent years, with the rise of fracking and American production of light, sweet crude, the international and national prices of oil have become imbalanced. World and U.S. prices of oil are expected to converge if the export ban is repealed.Oil production is expected to get a big boost from lifting the ban. Oil Change International estimates it could add an additional 467,000 barrels a day, while the American Petroleum Institute estimates up to 500,000. “This is a powerful reminder of just how powerful Big Oil and the Koch brothers are,” Radha Adhar, a federal policy representative for the Sierra Club, told ThinkProgress. She said it had become clear that the Republican leadership was willing to shut down the government over the issue, and that Democrats in the Senate worked hard to get clean energy tax breaks in return. Shipping oil overseas will also likely increase the amount of oil being moved from the Bakkan fields in North Dakota to the coasts — either by rail or by pipeline. Pacific Northwestern states have been moving in recent weeks to curb fossil fuel infrastructure, in an effort to reduce the amount of coal and oil moving through the area.
Landmark exports deal was months in the making - After years of legislative gridlock on energy policy, Congress is on the verge of approving a historic compromise giving both parties key wins in what has become a ceaseless war of attrition between fossil fuels and renewable interests. The blockbuster omnibus and tax package that could be signed into law as early as this weekend would repeal the 40-year-old ban on crude oil exports, while also extending for five years the renewable production and investment tax credits for wind and solar -- sectors that are booming in response to climate change and falling costs but have been slowed by uncertainty over their on-again, off-again tax credits (E&E Daily, Dec. 15). Other issues, including policy riders and extending the popular Land and Water Conservation Fund, were also part of the horse-trading that led to this week's deal, but a swap that would repeal the exports ban in exchange for green tax credits has been the foundation of the quid pro quo for months.Getting to an agreement was anything but easy and was driven by a small group of lawmakers who methodically pressed the exports issue for more than a year, laboring patiently to sell the idea to skeptical colleagues. Leading the charge was Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska), who raised the issue in a speech at a high-profile industry conference in March of 2014. For much of the next year, Murkowski pressed the issue, urging the Obama administration to use its existing authority to ease the export restrictions passed in the wake of the oil embargoes of the 1970s.
Lifting Crude Oil Export Ban Locks in Fossil Fuel Dependency for Decades to Come - One year ago this week, Gov. Cuomo banned fracking in New York, listening to the growing movement to keep fossil fuels in the ground. So it’s especially disheartening that Congress, through a provision included in the omnibus appropriation, has just lifted the decades-old crude oil export ban—locking us into fossil fuel dependence for decades to come. At a time when we need to be investing in making a rapid transition to 100 percent clean energy, this decision would move us in the opposite direction. The Democratic leadership traded this ban for a small extension of taxes that support renewable energy. The tax credit for solar will be extended and phased down over five years, with the credit for residential solar eliminated after 2021. The tax credit for wind will be cut each year until it is eliminated in 2020. The decision by President Obama and Democratic leadership to cave in to the demands of the fossil fuel cartel will harm Americans in order to give oil companies larger profits. Lifting the export ban will give these companies hundreds of billions of dollars in new profits over the next decade, while leading to more drilling and fracking for oil and increased greenhouse gas emissions. We’ll see more oil trains through towns and cities and an armada of Exxon Valdez-sized ships on our oceans. It has been estimated that lifting the crude oil export ban could lead to an increase in oil production of 3.3 million barrels a day and as many as 7,600 new wells drilled each year. Most of those wells will be fracked. The increases in drilling and fracking could lead to annual increases in greenhouse gas emissions on par with building 135 new coal fired electric power plants.
Congress will lift the oil export ban, boost clean energy subsidies. Is that a good trade? - Late Tuesday night, as part of a sweeping budget deal, congressional leaders forged an unexpected compromise around a few key energy provisions. Basically:
- Democrats agreed to lift the 40-year ban on US crude oil exports, a provision long sought by the oil industry because it could bolster domestic drilling.
- In exchange, Republicans agreed to extend key tax subsidies for wind and solar for another five years, phasing them out only gradually. This is a big victory for the renewable industry. The 30 percent tax credit for solar was set to expire next year, putting a dent in the nascent solar boom. Same for the tax credit for wind, which lapsed back in 2014. Total cost: $25 billion.
- Republicans also won't block a $500 million payment that the Obama administration plans to make to the UN Green Climate Fund, which will distribute aid to developing countries as part of the Paris climate deal. Some conservatives had wanted to block these funds, to toss a wrench in the UN climate talks. So much for that.
So... is this a good trade? Bad trade? From a climate standpoint, this looks quite helpful in the near term. The wind and solar credits will reduce US greenhouse gas emissions moderately for the next half-decade (around 0.3 percent per year, by one estimate), at least until the EPA's Clean Power Plan takes effect. Conversely, few analysts expect the repeal of the export ban to matter much for the next few years, since conditions aren't currently favorable for exports. But in the longer run, if those conditions shift, this provision could bolster US oil production and increase emissions, which is why so many green groups hate it. It's a temporary clean energy boost, they say, in exchange for broader support for fossil-fuel extraction.
Lift-Off? US Moving Toward Exporting Domestic Crude - “They’ve got to come to terms pretty quick, or the government’s going to shut down. That’s where all of this comes to a head really quickly. This is politics, and when it comes down to something you really want, you can hold other things hostage, and that’s kind of what’s going on in both sides,” Medlock said. But it’s those hard-knuckled politics, coupled with some lip-biting acceptance that neither side gets exactly what it wants, that finally wins the day. “I wouldn’t be surprised if something hits [President Obama’s] desk before Dec. 31,” Not everyone is optimistic, however. At the University of Houston, energy fellow Ed Hirs, said the import-export math simply doesn’t work. “If the U.S. is able to start exporting a million barrels of oil a day, that means we’re going to have to start importing another million barrels a day,” he told Rigzone. “The producers in the Bakken still don’t understand that they don’t sell their oil below what OPEC can sell it for, and they’ve been pushed out of the refineries in Philadelphia because they won’t compete on price.” Hirs isn’t the only one not quite ready to pop open the champagne. Analysts at Raymond James (RayJa) said in a note to investors Dec. 16 that assuming the framework remains intact, the obvious winners would be U.S. Lower 48 oil producers who would benefit from a narrower WTI discount to Brent and U.S. solar developers, who would avoid the looming tax credit fall-off at the end of 2016. “On the other hand, domestic refiners – which have long lobbied against lifting the export ban – would find a narrower WTI-Brent spread unhelpful, though there is the possibility of a new refining subsidy being added to the package, thus cushioning the effect on margins.
Crude/Condensate Export Pipelines to Corpus and the Refineries They Feed -- We don’t expect to see a flurry of U.S. crude shipments overseas following the expected lifting of the decades old U.S. ban on exports by Congress this week. That’s because the price spread between U.S. crude benchmark West Texas Intermediate (WTI) and international equivalent Brent is currently trading at less than $2/Bbl – providing no economic incentive to cover the freight cost of shipping U.S. crude abroad. However, longer term the end of the export ban expands the market options for U.S. crude producers. In that context, well-developed pipeline connections between South Texas Eagle Ford oil and condensate production and the Port of Corpus Christi bode well for future export opportunities. This is the fourth episode in our series on crude and condensate infrastructure to and within Corpus. Episode 1 provided a brief refresher course on what lease condensate is (an ultra-light form of crude oil with an API degrees gravity level of 45 or 50 or more) and discussed why condensate, with its lighter range of hydrocarbons, is generally less desirable to Gulf Coast refineries configured to process heavier crudes. In Episode 2 we took a high-level look at how crude and condensate moves from the Eagle Ford and the Permian to Corpus (and from the Permian to Houston and Cushing, OK), then began a detailed review of pipelines to Corpus... Our most recent entry, Episode 3, considered several pipelines that run from Gardendale to (or at least towards) Corpus, including Kinder Morgan and Magellan Midstream Partners’ Double Eagle Pipeline, NuStar Energy’s South Texas Crude Oil Pipeline System, and the Harvest Pipeline System co-owned by Hilcorp Energy and others. Today, we describe remaining pipelines to Corpus, and then discuss existing and planned refineries and splitters there.
Report: Eagle Ford Shale Has Peaked, Lifting of Oil Export Ban Could Drain Field More Quickly -- Steve Horn - A new report published by the Post Carbon Institute concludes that Texas' Eagle Ford Shale basin, the most prolific shale oil basin in the U.S., has peaked and reached terminal decline status. The Post Carbon report dropped just as Congress is on the verge of lifting the oil export ban for U.S.-produced crude oil, which will only further incentivize drilling and fracking. Titled “Eagle Ford Reality Check: The Nation's Top Tight Oil Play After More Than a Year of Low Oil Prices,” the report is the latest in a series of long reports on the overhyped future of oil obtained via hydraulic fracturing (“fracking”) in the U.S. by Post Carbon Institute Fellow David Hughes. Hughes formerly worked for 32 years with the Geological Survey of Canada as a scientist and research manager before coming to Post Carbon. It also comes just two months after Post Carbon's October release of a similarly titled report on North Dakota's Bakken Shale basin, the second biggest shale oil field in the U.S. behind the Eagle Ford. “In Eagle Ford Reality Check, David Hughes…looks at how production in the Eagle Ford has changed after a year of low oil prices,” a summary of the report explains. “Oil production in the Eagle Ford is now falling after more than a year of low oil prices. The glory days of the Eagle Ford are behind it, at the ripe old age of six years.” Many of the same themes and concepts, for those familiar with Post Carbon's previous “shale bubble” updates, reappear in this report. Those include the drilling treadmill, drilling sweet spots, and U.S. government and industry drilling productivity assessments (the seeds and intelligence upon which energy policymaking is made) vs. independent drilling productivity assessments. The skinny on the report is that the Eagle Ford is certainly productive and resilient, even despite a year of low global oil prices, but its future as a super-major type field is certainly in question based upon the numbers crunched by Hughes.
Shell Cuts 2,800 Jobs as It Takes Over BG Oil Company: — Royal Dutch Shell says it expects to cut 2,800 jobs once it completes its takeover of rival BG Group.The losses amount to about 3 percent of the combined workforce, and come on top of Shell’s previously announced plan to shed 7,500 staff and contractor positions.Shell agreed to buy British rival BG Group for 47 billion pounds ($71 billion) in April. The deal will boost Shell’s oil and gas reserves by 25 percent and give it a bigger presence in the fast-growing liquefied natural gas market.Shell said in a statement Monday that “the deal remains on track for completion in early 2016.” It said it had received clearance from Chinese authorities, its last major regulatory hurdle. It has already been approved by Brazil, the European Union and Australia.
Petrobras CEO expects to sell $20 billion in debt in 2016 - – Brazil’s Petroleo Brasileiro SA plans to sell about $20 billion of debt next year to finance its 2017 needs, Aldemir Bendine, chief executive of the state-run oil company known as Petrobras, told Bloomberg News on Thursday. There is a good possibility that bonds backed by future oil exports could help meet that financing goal and find strong demand in Asia, Bloomberg reported, citing Bendine. Petrobras, though, has ruled out the use of hybrid securities in the short term, Bendine said. He adding that such bonds, which are partly guaranteed by the future sale of equity, could be sold at some later date. Hybrid securities were the subject of reports in November that the government was considering their use as a way to rescue Petrobras in case the company found it difficult to raise enough money to pay both maturing debts and for capital investment needed to secure future output. Bendine also told Bloomberg that the only way the company will reduce its debt is through the sale of assets. Petrobras has nearly $130 billion of debt, the most of any oil company in the world.
Oil Rout to Claim More Victims After First Norway Bankruptcy - The collapse of oil prices has claimed its first bankruptcy victim in Norway’s offshore industry, and analysts warn more may follow. Dolphin Group ASA, a seismic surveyor that maps the seabed for oil and gas reservoirs, became the first Oslo-listed company in the industry to file for bankruptcy Monday. One of its competitors, Polarcus Ltd., is in talks on restructuring debt -- but the threat won’t stop there, with insolvency cases bound to multiply among drillers as well, analysts say. “Drilling companies might be next in line,” “Drillers are now living off their existing contracts taken out at market peak, but these are running out.” Oil producers are cutting spending globally to cope with a plunge in oil prices and there is likely to be little let up next year, with Brent crude hitting a new seven-year low Monday at $36.33 a barrel. Investment offshore Norway will this year fall the most since 2000 and is expected to fall further next year.
BP faces Mexico class action lawsuit over 2010 oil spill - A few months after reaching the largest corporate settlement in U.S. history, BP Plc faces a class action lawsuit in Mexico over its deadly 2010 Gulf of Mexico oil spill, which a civic group on Friday said it had filed against the company. Acciones Colectivas de Sinaloa, a group specializing in consumer and environmental class action claims, lodged the lawsuit against four BP units at a Mexico City court this week, said the head of its board, David Cristobal Alvarez. The claim was based on BP’s acknowledgement of the damage caused when the Deepwater Horizon oil rig exploded on April 20, 2010, off the coast of Louisiana, and on studies supporting evidence of environmental damage in Mexico, Alvarez said. Because the Deepwater Horizon accident did not immediately contaminate the Mexican part of the Gulf of Mexico, no claims were made at the time, he added. “But with the maritime currents and the air, the contamination has reached the Gulf of Mexico, it’s started to affect people on the coasts of the states in the Gulf of Mexico,” Alvarez said.
Why the oil price slump hasn't kickstarted the global economy - One of the biggest economic surprises of 2015 is that the stunning drop in global oil prices did not deliver a bigger boost to global growth. Despite the collapse in prices, from over $115 a barrel in June 2014 to $45 at the end of November 2015, most macroeconomic models suggest that the impact on global growth has been less than expected – perhaps 0.5% of global GDP. The good news is that this welcome but modest effect on growth probably will not die out in 2016. The bad news is that low prices will place even greater strains on the main oil-exporting countries. The recent decline in oil prices is on par with the supply-driven drop in 1985-1986, when Opec members (read: Saudi Arabia) decided to reverse supply cuts to regain market share. It is also comparable to the demand-driven collapse in 2008-2009, following the global financial crisis. To the extent that demand factors drive an oil-price drop, one would not expect a major positive impact; the oil price is more of an automatic stabilizer than an exogenous force driving the global economy. Supply shocks, on the other hand, ought to have a significant positive impact. Although parsing the 2014-2015 oil-price shock is not as straightforward as in the two previous episodes, the driving forces seem to be roughly evenly split between demand and supply factors. Certainly, a slowing China that is rebalancing toward domestic consumption has put a damper on all global commodity prices, with metal indices also falling sharply in 2015. (Gold prices, for example, at $1,050 per ounce at the end of November, are far off their peak of nearly $1,890 in September 2011, and copper prices have fallen almost as much since 2011.)
Something Strange Is Taking Place In The Middle Of The Atlantic Ocean -- In the latest sign that the world is simply running out of capacity when it comes to coping with an inexorable supply of commodities, three diesel tankers en route from the Gulf to Europe did something rather odd on Wednesday: they stopped, turned around in the middle of the ocean, and headed back the way they came! "At least three 37,000 tonne tankers - Vendome Street, Atlantic Star and Atlantic Titan - have made U-turns in the Atlantic ocean in recent days and are now heading back west," Reuters reported, citing its own tracking data. The Vendome Street actually made it to within 800 miles of Portgual (so around 75% of the way there) before abruptly turning around. "Ship brokers said a turnaround so late in the journey would come at a cost to the charterer," Reuters notes. The problem: low prices, no storage capacity, and soft demand.Here's Reuters again: "European diesel prices and refining margins have collapsed in recent days to six-year lows as the market has been overwhelmed by imports from huge refineries in the United States, Russia, Asia and the Middle East. At the same time, unusually mild temperatures in Europe and North America further limited demand for diesel and heating oil, putting even more pressure on the market. Gasoil stocks, which include diesel and heating oil, in the Amsterdam-Rotterdam-Antwerp storage hub climbed to a fresh record high last week. And here are the stunning visuals via MarineTraffic. As of now, it's "unclear if the tankers will discharge their diesel cargoes in the Gulf Coast or await new orders," but what you're seeing is a supply glut so acute that tankers are literally just sailing around with nowhere to go as there are reportedly some 250,000 tonnes of diesel anchored off Europe and the Mediterranean looking for a home. On that note, we'll close with the following quote from a trader who spoke to Reuters: "The idea is to keep tankers on the water as long as you can and try to find a stronger market."
Oil tumbles towards crisis-era lows -- Oil fell to a seven-year low on Monday and close to the levels hit during the financial crisis amid increased expectations of a persistent oversupply in global crude. The renewed pressure on the oil price comes amid widespread expectations that the US Federal Reserve will on Wednesday raise rates for the first time in nearly a decade. Cheaper energy costs are a boon for consumers and the broader economy. However, the prolonged slide in oil is hurting highly indebted US shale drillers and the banks that lend to them, with much of the junk bond energy sector currently in distress. “The year is ending on an uncomfortable note. The smell of fear is back in the air,” Bond markets showed fresh signs of anxiety on Monday, with a further sell-off for corporate debt. Brent crude dropped $1.60 to $36.33 a barrel on Monday, the lowest in seven years, edging closer to the December 2008 intraday low of $36.20 a barrel. If Brent falls below this, it will hit a level last seen in the middle of 2004. The global benchmark, which had been declining for its seventh consecutive session, rebounded in afternoon trading to $38.20 a barrel. West Texas Intermediate, the US market benchmark, sank $1.09 to $34.53 a barrel, the lowest since February 2009, before recovering to $36.34 a barrel. WTI traded at $32.40 a barrel in 2008. Oil prices have tumbled since the meeting of Opec ministers at the start of the month. Brent has plunged as much as 17 per cent, while WTI is down 16 per cent.
Per barrel oil prices testing 'ugly lows' -- The posted price for a barrel of crude oil could be below $30 by the end of December, a Texas petroleum economist said Monday. Karr Ingham, based in Amarillo, said the posted price — the actual price producers charge versus the price set by speculators in New York — was $32 on Friday, a continuation of the downward trend Texas and the rest of the country has witnessed since mid-2014 when prices started to decline. On Monday, speculators dropped the price per barrel by 3.1 percent to $34.53, the lowest since February 2009. The price of oil has been in decline in large part because of an oversupply of U.S. crude oil in storage without a matching demand. While production has decreased some, it hasn’t been a meaningful reduction. Ingham said there will be a natural reduction in activity with the rig count dropping more than 60 percent from the weekly peak average of 906 to 324 on Monday. District 9 of the Railroad Commission, which includes Wichita Falls, had 16 oil rigs operating roughly a year ago. That number was down to three on Monday. “There’s always a lag time between a drop in price and then a drop in other measures of activity and production itself,” he said. “So, now we see production starting to roll over and begin to decline, but it certainly hasn’t done that to a meaningful extent. So, the point being that the price declines as of now or not very far removed from now in the recent past have not had the desired effect of price decline … (which is) in this case to lower supply.”
U.S. oil rises, reversing course after nearing 11-year lows -- U.S. crude rose nearly 2 percent Monday, recovering slightly after moving within a hair of 11-year lows, but analysts and traders said it is still too early to declare the market has reached its bottom. Both U.S. and global benchmark Brent crude have been tumbling downward since an OPEC meeting Dec. 4 at which the oil-producing countries removed their production ceiling, exacerbating global crude oversupply. Monday's close marked the first significant rebound since the meeting. Early in the day, both Brent and U.S. crude futures fell by as much as 4 percent to their lowest levels since the start of the 2008 financial crisis, before turning around midday in the United States. Brent futures for January delivery LCOc1 settled down 1 cent at $37.92 a barrel. U.S. crude CLc1 rose 69 cents, or 1.94 percent, to $36.31. The two benchmarks began to converge - a step toward eliminating the once-deep discount for U.S. crude - in an indication that the market is shifting structurally. Early in the session, Brent traded just 13 cents above the $36.20 low set in December 2008. Below that level, it would be at its lowest since July 2004, when oil was rebounding from single-digits lows hit during the 1998 financial crisis and when talk of a commodities super-cycle was just beginning.
WTI Slumps Under $37 After API Reports Unexpected, Large Inventory Build -- Following last week's huge draw, total crude inventories were expected to drop 1 million barrels this week driven by expectations that refinery utilization rose last week. When API reported a hugely surprising 2.3 million barrel build, crude prices, which had drifted off highs after NYMEX close, dropped further as disappointment set in, back under $37. A majorly unexpected build... Charts: Bloomberg
Strong oil imports lift U.S. crude stocks near record: Kemp | Reuters: U.S. crude oil imports have accelerated over the last four weeks, pushing commercial crude inventories within a whisker of the record set in April. Crude imports surged to 8.3 million barrels per day (bpd) last week, up from 7.0 million bpd four weeks earlier, according to the U.S. Energy Information Administration (tmsnrt.rs/1NV47Y4). Imports are running at the fastest rate since September 2013, with almost all the extra crude arriving at ports along the U.S. Gulf Coast. (tmsnrt.rs/1NV4dyW) Both the timing and the location are unusual because refineries and traders try to minimize stocks held along the Gulf Coast at year-end to avoid storage taxes imposed by Texas and Louisiana. Faster imports have pushed crude stocks higher even as refiners have boosted the amount of crude they process to a seasonal record 16.6 million bpd. Crude imports are notoriously volatile: Each very large crude carrier (VLCC) arrives with around 2 million barrels of crude, which is recorded in U.S. inventories once it has cleared customs. The timing of ship arrivals and customs clearances can therefore have a big influence on reported weekly import volumes. Heavy seaborne imports one week are often followed by a sharp drop the following one due to the timing of ship arrivals. But the past four weeks have seen a fairly unusual and sustained increase in imports along the Gulf Coast, where imports have risen from the equivalent of around 9 VLCCs to 14 VLCCs per week. The reason could be purely timing-related as tankers unload now after being delayed in transit or unloading back in November. Or crude could be flowing to storage facilities in the United States because it is easier and cheaper to store there as terminals in the Caribbean, Europe and Asia fill up.There are also strong commercial reasons to put oil into storage in the United States. The contango is running at nearly $1 per barrel per month on average for the first six months (more than enough to cover the cost of financing the inventory and leasing tank space).
Jack Kemp's Energy Tweets -- US Crude Oil Imports Surged For The Second Consecutive Week; Highest So Far This Year --Some interesting energy tweets from Jack Kemp today including the first one:
- US crude oil imports surged for the second week running to 8.3 million b/d, the highest so far this year, at 8.3 million bopd
- US refiners processed a seasonal record 16.6 million b/d last week up by +300,000 b/d from 2014
- US gasoline consumption averaged 9.2 million b/d in last 4 weeks, an increase of just +61,000 b/d compared with 2014
- US gasoline stocks adjusted for consumption are exactly with 2014 and long run average:
- US crude oil stocks rose +4.8 million bbl last week and now almost +111 million above prior year level (the graph is staggering)
- US total crude and product stocks rose +5.0 million bbl last wk reversing adecline of -3.6 million bbl the prior wk (the graph is staggering)
With regard to the US economy as a whole, the "gasoline consumption" data point above is most concerning; this does not support an expanding economy.
Crude Crashes To $35 Handle After Massive, Surprise Inventory Build & Production Rise -- Following last night's surprising 2.3mm barrel inventory build, reported by API, DOE reports a massive 4.8mm build against expectations of a 1.5mm barrel draw and way above the highest estimate of a 2.6mm draw. This is the biggest build in 2 months at a seasonally 'weak' time of year. Crude ramped overnight to regain the losses from the API dump, but dropped back to lows (under $37) before the DOE data, then crashed below $36. Furthermore, production was up in the lower 48. Biggest build in 2 months... And production rose… Crude prices collapsed lower... Charts: Bloomberg
Oil down second day running on fresh supply build, dollar spike (Reuters) - Oil prices fell as much as 2 percent on Thursday, with Brent trading near 11-year lows, as data showing fresh supply builds at the delivery point for U.S. crude futures added to worries about a global glut. Market intelligence firm Genscape reported an inventory increase of 1.4 million barrels at the Cushing, Oklahoma delivery hub for the U.S. crude's West Texas Intermediate (WTI) futures, traders who saw the data said. "Bearish fundamentals are hanging over the oil markets like storm clouds, with no break in sight or relief in the near future," . "The dollar is moving higher too." The dollar hit a two-week high against a basket of currencies, making oil and other commodities denominated in the greenback less affordable to users of the euro among others. [USD/] WTI was down 72 cents, or 2 percent, at $34.80 a barrel by 1:40 p.m. EST (1840 GMT), reaching a session low of $34.63. On Monday, WTI hit a seven-year low of $34.53. Brent, the global crude benchmark, was down 30 cents at $37.09 a barrel, trading less than $1 above its 2004 low. WTI and Brent fell about 3 percent on Wednesday after government data showed a ramp up in oil supplies across the United States last week.
Oil ends below $35 as natural gas suffers 7th straight loss - Oil futures settled lower Thursday, as recent data showing an unexpected climb in U.S. crude supplies and strength in the dollar following the Federal Reserve’s decision to hike interest rates combined to pull U.S. prices below $35 a barrel. Meanwhile, natural-gas futures tallied a seventh straight session loss after a report revealed that U.S. supplies of the heating fuel fell less than expected last week. January WTI crude CLF6, -2.14% fell 57 cents, or 1.6%, to settle at $34.95 a barrel on the New York Mercantile Exchange. Prices logged their lowest settlement since February 2009. February Brent crude LCOG6, -1.34% on London’s ICE Futures exchange also lost 33 cents, or 0.9%, to $37.06 a barrel. Gasoline for January delivery RBF6, +2.76% tacked on 2.9 cents, or 2.3%, to $1.262 a gallon, rebounding from losses a day earlier, while January heating oil HOF6, -0.49% shed nearly a penny to $1.105 a gallon. Oil’s decline was due to a combination of the U.S. dollar rally post-Fed and “WTI still feeling its way around $35 as it continues to test its 2008 low,” said Colin Cieszynski, chief market strategist at CMC Markets.
Wells Fargo says slump in oil prices could last longer - Wells Fargo & Co’s head of corporate banking has warned of stresses in the bank’s energy portfolio and said the slump in oil prices “feels deeper and broader and could last longer”, the Financial Times reported this week. Wells Fargo has the largest exposure to oil and gas industry among the big U.S. banks, with its lending to the energy industry, accounting for about 2 percent of its overall loan portfolio in the third quarter ended Sept 30. Kyle Hranicky, who spent nine years at the helm of the Houston-based Wells Fargo Energy Group before rising to head the corporate banking in May, said the bank had been in discussions with energy industry clients for several months about preserving cash and cutting borrowing limits, the FT reported. Some oil and gas companies have the liquidity to survive the cycle, but others will be under significant stress and may be forced to sell assets or recapitalize, he said. A recent U.S. regulatory review could force banks to scale back loans to energy companies whose revenues have been hit hard by falling oil prices, and could force more oil drillers into bankruptcy, industry analysts have said.
US oil rig count jumps - The US oil rig count jumped for the first time in five weeks, by 17 this week to 541, according to driller Baker Hughes. The total rig count remained unchanged, while the number of gas rigs fell 17 to 168. Last week, the oil rig count slumped by 21 to 524, the biggest drop in two months. The gas rig count fell 7 to 185. After rebounding a bit, crude oil prices slid as the rig-count data was released. West Texas Intermediate crude futures in New York fell 1% to as low as $34.29 per barrel. At their lowest levels on Friday, oil prices were down about 20% since OPEC's December 4 meeting when it maintained its production target. Since then, data from the Energy Information Administration and others have shown that US oil inventories and output continue to be robust.
Crude Crashes To Cycle Lows After Oil Rig Count Surges -- WTI crude has collapsed to cycle lows after the US oil rig count surged by 17, the largest jump in 5 months. The total rig count was unchanged as the surge in oil rigs was perfectly countered by the collapse in natural gas rigs. The oil rig count continues to track the lagged oil price... And that has sent Jan WTI (expires Monday) to fresh cycle lows... Charts: Bloomberg
Oil Prices Turn Lower as Rig Count Rises - WSJ: Oil prices turned lower Friday after a big increase in weekly rig-count data returned attention to the supply glut. Baker Hughes Inc. BHI 1.29 % said the U.S. oil rig count increased by 17 in the latest week to 541, after declining for four consecutive weeks. 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 collapsing last year. But it hasn’t yet been enough to relieve the global crude glut and adding more rigs could worsen the glut. Light, sweet crude for January delivery fell 22 cents, or 0.6%, to $34.73 a barrel on the New York Mercantile Exchange, the lowest settlement since February 2009. Brent, the global benchmark, fell 18 cents, or 0.5%, to $36.88 a barrel on ICE Futures Europe, the lowest level since December 2008. Brent lost 3.8% for the week—its seventh losing week in the past 10—and is down 36% for the year. WTI lost 2.5% for the week—its third straight losing week—and is down 35% since the start of the year. The increase in rigs is the second largest in more than a year, and analysts and traders had few immediate explanations for the sharp reversal. The last time producers added this many rigs was in late July, but that came just after prices surged to around $60 a barrel. Producers had been cutting back on their spending and their work in the months since as prices retreated again. The market clearly sold off hard on the news, although one week may make little difference, brokers and analysts said. Producers shut down even more rigs—21—just a week ago. But any sign that the glut may worsen has a tendency to scare traders into selling because of how oversupplied the market is, they said.
Oil ends down for third week as U.S. rig count rises | Reuters: Oil prices fell about half a percent on Friday after the U.S. oil rig count unexpectedly rose for the first time in five weeks, pressuring a market already at seven-year lows. Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures settled down for a third straight week. With two weeks to the year-end, both were slated to finish 2015 down about 35 percent on a rout driven by oil oversupplies. Despite the severity of the decline, data from oil services company Baker Hughes Inc showed U.S. energy firms added to the number of oil rigs in operation this week, indicating more supply to come. The closely watched report showed 17 new rigs that brought the total to 541. "The rig count increase was a bit of a surprise," . "I don't think it was a coincidence that the market fell after the report." WTI hit $34.29 a barrel, the lowest since February 2009, after the release of the Baker Hughes' report. It settled the day down 22 cents, or 0.6 percent, at $34.73. For the week, WTI lost 2.5 percent. Brent finished the session down 18 cents, or 0.5 percent, at $36.88. Its session low was $36.41, just 21 cents above a 2004 bottom. Brent lost 3 percent on the week. Some oil bears said they were actually counting on a price rebound that would let them make a bigger profit selling the market down. "I'm quietly waiting for a bigger covering bounce that will presage the next leg lower in WTI,"
Dubai Crude Price Crashes To Lowest Since 2004, Stocks Hit 2 Year Lows -- Dubai Light Crude prices have plunged overnight, crashing the spot price below the 2008 lows for the first time, to its lowest since 2004. This is continuing to weigh on Dubai's once-exuberant equity market which just hit fresh 2-year lows as financials and property companies plunge. Worst in 11 years... Driving the exuberant money-chasers out of the nation's stock market... (and do not forget we market the top in 2014 when a company that actually did nothing saw its IPO oversubscribed 36x)... And finally this is why all of this is a problem... when there is no equity to back that 'skyscraper' of debt, the contagion will spread. One supports the other... and vice versa. Though we do note that Dubai's crude is not the lowest priced...
$100 Billion Evaporates as World's Worst Oil Major Plunges 90% - Colombia is nursing paper losses of more than $100 billion after its oil boom fell short of expectations, wiping out 90 percent of the value of what was once Latin America’s biggest company. From being the world’s fifth-most valuable oil producer at its zenith in 2012, worth more than BP Plc, state-controlled Ecopetrol SA now ranks 38th. Its market capitalization has fallen to $14.5 billion, down from its peak of $136.7 billion. “They just haven’t found oil, it’s as simple as that,” “The whole oil sector got massively over-bought, and people assumed that one day they’d hit an absolute gusher.” As the army wrested back territory from Marxist guerrillas over the last decade and a half, opening up more land for exploration, the outlook was bright for the oil sector in Colombia, which borders Venezuela, the nation with the world’s largest reserves. Ecopetrol’s share price soared to “irrational levels” as investors bet on surging output that then failed to materialize, Stebbings said. With shares in the oil producer still high, the government opted in 2013 to sell a stake in electricity producer Isagen SA rather than Ecopetrol. Finance Minister Mauricio Cardenas, who sits on the board of Ecopetrol, said in an August 2013 interview that the government didn’t want to sell a further stake in the company because its growth prospects were better than Isagen’s. Since then, Isagen shares have risen 4.2 percent, while Ecopetrol’s have fallen 74 percent.
Russia Sees No Oil Price Recovery In The Coming 7 Years -- “Lower for longer” is becoming the catch phrase of the global oil industry, as an increasing number of energy executives and government officials alike see no opportunity for prices to rebound to their levels of mid-2014. The latest such forecast came from Maxim Oreshkin, Russia’s deputy finance minister, who says he expects oil to sell for no more than $40 to $60 per barrel for the next seven years, and that Moscow is adjusting its budget planning accordingly, given that half the country’s annual budget relies on revenues from oil and gas sales. “In our estimates, one should hardly expect any serious growth of the oil price above $50,” Oreshkin told a breakfast forum hosted by Russian newspaper Vedomosti on Friday. “The oil industry is changing structurally and it may happen that … the global economy will not need that much oil." “Therefore we see a range from $40 to $60 somewhere for the next seven years,”Oreshkin said. “And these are the prices we should base our macroeconomic policy on.” They also must take into account the pressure on Russia’s economy brought by Western sanctions imposed because of Moscow’s annexation of Ukraine’s Crimean peninsula and its role in the country’s internal conflict. The Finance Ministry’s first step, he said, will be to address an expected deficit of 3 percent for the country’s 2016 fiscal year because his ministry forecasts that the average global price of oil will remain where it has been for the past few months, between $40 and $50 per barrel. In fact, the world’s two international benchmarks, Brent crude and West Texas Intermediate, recently dipped below $40.
Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies - Russia is battening down the hatches for a Biblical collapse in oil revenues, warning that crude prices could stay as low as $40 a barrel for another seven years. Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a scenario that would have devastating implications for Opec. It would also spell disaster for the North Sea producers, Brazil’s off-shore projects, and heavily indebted Western producers. “We will live in a different reality,” he told a breakfast forum hosted by Russian newspaper Vedomosti. The cold blast from Moscow came as US crude plunged to $35.56, pummelled by continuing fall-out from the acrimonious Organisaton of Petrol Exporting Countries meeting last week. Record short positions by hedge funds have amplified the effect. Bank of America said there was now the risk of “full-blown price war” within Opec itself as Saudi Arabia and Iran fight out a bitter strategic rivalry through the oil market. Brent crude fell to $37.41, even though demand is growing briskly. It is the lowest since the depths of the Lehman crisis in early 2009. But this time it is a 'positive supply shock', and therefore beneficial for the world economy as a whole.
World Bank lends Iraq $1.2 billion to face oil, security shocks – The World Bank said on Thursday it would lend Iraq $1.2 billion in emergency support to help it deal with the economic effects of its fight against Islamic State militants and low oil prices. The budget support loan will be disbursed in a single tranche and should be available to Iraq before the end of the year, said Ferid Belhaj, a senior World Bank regional official who oversees Iraq. “These twin shocks, coming at this particular juncture, are threatening the stability of the country,” he told Reuters in a telephone interview, saying it was vital to prevent Iraq falling into deeper crisis. “Iraq falling into chaos means an even more chaotic Middle East. At this particular juncture, nobody wants that. We have enough chaos about,” said Belhaj, director for the Mashreq region, which includes Iraq, Lebanon, Jordan, Syria and Iran. Iraq’s state finances are heavily dependent on oil revenues, which have sunk as oil prices have plunged. At the same time, Baghdad has ramped up military spending in its battle against the hardline Islamic State group, which has killed and displaced thousands, and destroyed services and infrastructure.
Israeli prime minister signs landmark gas deal — Israeli Prime Minister Benjamin Netanyahu has signed a landmark deal with U.S. and Israeli gas companies to develop Israel’s offshore gas deposits, despite months of protest by liberal lawmakers and environmentalists. Resource-poor Israel announced the discovery of sizeable offshore natural gas deposits about five years ago, and a partnership made up of Israeli and U.S. companies began extracting gas. After the country’s antitrust commissioner determined last year that the gas companies’ ownership constituted a monopoly, a government committee reached a deal with the firms to break up their control and introduce competition. Critics say the deal favors the developers over the Israeli public. Netanyahu dismissed the criticism as “populist,” and signed the deal Thursday. Groups opposed to the deal are submitting petitions to challenge it in Israel’s supreme court.
Did Saudi Arabia Just Clear The Way For An Invasion Of Syria And Iraq? - While it’s still far from common knowledge among the Western public that Washington’s closest allies in the Mid-East are funding, arming, and otherwise enabling the Sunni extremists (including ISIS) battling for control of Syria and working to destabilize Iraq, the massacre that unfolded earlier this month in San Bernardino has managed to focus some much needed attention on the role Saudi Arabia plays in promoting extremism. As we noted in the immediate aftermath of the California mass shooting, the fact that Tashfeen Malik spent 25 years in Saudi Arabia living with a father who, according to family members who spoke to Reuters, adopted an increasingly hardline ideology as time went on, underscores the fact that the puritanical, ultra orthodox belief system promoted by the Saudis is poisonous. That’s not a critique of Islam. It’s a critique of Wahhabism and the effect it has on the minds of those who are inculcated by Saudi culture. Here’s an excerpt from "Saudi Arabia Is Underwriting Terrorism. Let’s Start Making It Pay," by Charles Kenny: For years since 9/11, U.S. and Western officials have mostly looked the other way at all this ideological support for extremism: Saudi oil was just too important to the global economy, even though many of these Saudi petro-dollars were underwriting repression at home and the growth of Salafist fundamentalism abroad. This support for radicalism abroad should come as little surprise given that Islamic State is an ideological cousin of Saudi Arabia’s own state-sponsored extremist Wahhabi sect—which the country has spent more than $10 billion to promote worldwide through charitable organizations like the World Assembly of Muslim Youth. The country will continue to export extremism as long as it practices the same policies at home.
Refining ISIS Oil: Images From A Syrian Cottage Industry -- From the time Turkey ambushed and downed a Russian Su-24 near the Syrian border late last month, the world has developed a fascination with Islamic State’s illicit and highly lucrative oil smuggling business. Although there are multiple accounts which purport to explain how the group ultimately gets its oil to market, the general consensus is that there are a series of trafficking routes that all converge on the Turkish port of Ceyhan. The Russian defense ministry says it’s identified at least three such routes and a report by Al-Araby al-Jadeed documented the path the illegal crude takes from northern Iraq to the southeast coast of Turkey. While no one has yet offered any conclusive evidence to prove that Turkish President Recep Tayyip Erdogan and his family are behind the trade, there’s quite a bit of circumstantial and anecdotal evidence to tie Ankara to “Raqqa’s Rockefellers” (if you will). And while everyone loves watching Russian MoD clips of oil tankers barreling across the Turkish border without so much as slowing down, what you don’t see that often are images from the various cottage industries that have grown up around Islamic State’s oil trade. Below are several pictures of a makeshift refinery near Idlib (the site of Tuesday’s Russian airstrike on a fuel market) which Reuters says runs on Islamic State oil.
Is ISIS Simply A "Saudi Army In Disguise"? - In recent weeks I have been increasingly unsatisfied by the general explanations about who is actually pulling the strings in the entire Middle East plot or, more precisely, plots, to the point of reexamining my earlier views on the role of Saudi Arabia. Since the June, 2015 surprise meeting in St Petersburg between Russian President Putin and Saudi Defense Minister Prince Salman, the Saudi monarchy gave a carefully cultivated impression of rapprochement with former arch-enemy Russia, even discussing purchase of up to $10 billion in Russian military equipment and nuclear plants, and possible “face time” for Putin with the Saudi King Salman. Like many global political events, that, too, was soaked in deception and lies. What is now emerging, especially clear since the Turkish deliberate ambush of the Russian SU-24 jet inside Syrian airspace, is that Russia is not fighting a war against merely ISIS terrorists, nor against the ISIS backers in Turkey. Russia is taking on, perhaps unknowingly, a vastly more dangerous plot. Behind that plot is the hidden role of Saudi Arabia and its new monarch, King Salman bin Abdulaziz Al Saud, together with his son, the Defense Minister, Prince Salman.
ISIS Twitter Handles Traced To UK Government By Hackers -- There’s no shortage of speculation about the possible role the West plays in funding, arming, and otherwise assisting Islamic State. Recent revelations about Turkey’s role in facilitating Islamic State’s 45,000 b/d illicit oil trade have only added fuel to the fire and little by little, the Western public is starting to wake up to the fact that ISIS is more than the progeny of Abu-Mus'ab al-Zarqawi - it’s an entity that enjoys a great degree of state sponsorship. The question is this: which states ultimately participate in the conspiracy? One way to track down possible collaborators would be to go unit by unit through the network of regional affiliates that comprise Islamic State’s vast propaganda machine: The group should have a sizeable digital footprint given how active its followers are on Twitter and given the fact that ISIS distributes some 40 pieces of propaganda each day in various formats, most of which is disseminated on the web. With that in mind, we bring you an interesting story from The Mirror who reports that “a number of Islamic State supporters' social media accounts are being run from internet addresses linked to the UK Department of Work and Pensions.” “A group of four young computer experts who call themselves VandaSec have unearthed evidence indicating that at least three ISIS-supporting accounts can be traced back to the DWP's London offices,” the paper says, adding that “at first glance, the IP addresses seem to be based in Saudi Arabia, but upon further inspection using specialist tools they appeared to link back to the DWP.”
China Has Something to Tell OPEC: Oil Prices Have Fallen Too Far - The world’s biggest energy consumer may have a message for OPEC. China’s decision to suspend fuel price cuts as crude continues its decline is sending a signal to the Organization of Petroleum Exporting Countries that prices are too low, according to a report from Sanford C. Bernstein & Co. The move gives oil a price floor around $38, according to the analysis. “China’s decision to not cut refined product (gasoline, diesel) prices is a first,” analysts including Neil Beveridge wrote in the report. The move “sends a signal to OPEC that its largest customer (China) believes that oil prices are too cheap.” China, the world’s second-biggest oil consumer, said it will suspend fuel price cuts while crude continues to fall in order to slow consumption growth and trim automobile emissions. Gasoline demand in the country increased 10.4 percent in the first 10 months of the year from the same period of 2014, according to the Paris-based International Energy Agency. OPEC raised crude production to the highest in more than three years in November and scrapped its output ceiling at a Dec. 4 meeting as it pressed on with a strategy to protect market share and pressure competing producers. Brent crude, a benchmark for most of the world’s oil, has fallen about 14 percent this month. “OPEC’s strategy of pushing prices lower is to increase demand and reduce non-OPEC supply growth,” the analysts wrote in the report. China is now signaling to OPEC members “that pricing is now too low and they will gain incrementally less in terms of demand growth from further cuts in prices.”