Sunday, April 3, 2016

USGS cites induced quake threat to Perry; fracking causing Canadian quakes, US oil exports fall after ban lifted, more records, et al

news of a new report on man-made induced earthquakes from the USGS was at the top of my news feeds all week, with coverage of it in not just the US media but also the global this report, they expanded on their previous assessment of eastern and central US earthquakes that are being caused by high pressure injection of drilling wastewater underground, and endeavored to produce an earthquake hazards forecast for public use by everyone from insurance company actuaries to potential first responders, as they found that more than 7 million of us are at risk of damaging shaking from such quakes ....most of the press called these assessments new findings, but i'm sure you all recall the many times in the past where we've cited USGS designations of induced fact, it was less than a year ago we went into detail about a similar USGS report which we sent out and posted under the heading "earthquakes induced by Lake and Ashtabula county injection wells are a threat to Perry Nuclear" which was our assessment of the risk at the time, not that of the USGS...however, in this year's seismic hazard assessment, the Perry nuclear power plant risk is included, and prominently featured on each of the maps showing the locations of the induced earthquake hot-spots in the US, a map of which we'll include below...

March 30 2016 USGS manmade earthquake hazards map

the above map of US zones of induced seismicity comes from page 11 of the new USGS 58 page pdf report titled 2016 One-Year Seismic Hazard Forecast for the Central and Eastern United States from Induced and Natural Earthquakes…the tan areas on the map outline major sedimentary basins in the US east of the Rockies, and the yellow shading indicates the areas of those basins that are currently being exploited for gas and oil…the map also shows the location of injection wells that have been associated with earthquakes in blue, and the location of injection wells that have not been associated with earthquakes in green…with the shades of those colors so close, it’s difficult to distinguish between the two on this small map, but if you go to page 11 of the pdf and zoom in, you’d see that while most Ohio injection wells are green and hence not associated with earthquakes, one at Perry, two in Ashtabula, three in Youngstown, and a few elsewhere in the state are marked blue, meaning they have been associated with earthquakes…on page 9 of that same pdf, you’d see that the January 1986 earthquake that struck Perry is now considered "induced" by USGS, in contrast to the less certain designation of "potentially induced" by which some other earthquakes on that map are classified…

now, i know some of you have probably rolled your eyes each time i hyperbolically referred to Perry as a potential Fukushima on the shore of Lake Erie over the past several years, and i know my repeated return to that potential threat has probably seemed somewhat quixotic, but this week, in reporting on this story, even the Plain Dealer focused on the injection well threat to Perry, noting that in an assessment of US nuclear power plants after Fukushima, the Perry Nuclear reactor’s risk of severe earthquake damage was found to be 24 times as high as previously thought; in fact, Perry Nuclear was found to be the US nuclear plant most likely to suffer core damage in an earthquake, a finding which was noted even before the USGS included the area as an induced seismic hazard zone in their seismic hazard model for 2014, the previously referenced 14.4 MB PDF report that was released last April…

while the USGS report was grabbing all the headlines this week, another report on induced earthquakes from scientists at Natural Resources Canada, the country's environmental regulatory agency, got much less press....their comprehensive study, published in the peer-reviewed journal Seismological Research Letters, looked at 12,389 fracking wells and 1,236 wastewater wells in Alberta and nearby British Columbia and found that it was the fracking itself, and not wastewater disposal, that was causing most of the induced earthquakes in Western Canada....they found that at least 39 fracked wells in Alberta and British Columbia were implicated in triggering about 65 earthquakes over the 5 years they studied...these weren't all minor earthquakes either; in January, quakes measuring between 4.2 and 4.8 magnitude originating from the Duvernay oil and gas field struck Fox Creek, Altberta, causing minor damage...while i didn't get into the details of this study, if these fracking quakes were anything like the Poland Ohio fracking quakes, geologists can be pretty sure when fracking itself is implicated...recall that on March 10th, 2014, a 3.0 quake struck the Republic Services’ Carbon Limestone Landfill near Poland Ohio, at the exact same time and same depth (6300 feet) as the concurrent Hilcorp 7 lateral fracking operation...the industry friendly Kasich ODNR was so certain that the fracking had caused that quake that they shut down that operation depending on the geology, we know fracking itself can certainly cause earthquakes, although they're rare compared to the wastewater injection induced variety...

The Latest Oil Stats from the EIA

our imports of oil moderated this week after last week's 33 month high, and with output of US wells continuing to decline while more of our oil was being refined, this week's addition to our record stocks of oil also moderated, even though it did set another record....this week's Energy Information Administration data showed our field production of crude oil fell for the 9th time in the last 10 weeks, dropping by another 16,000 barrels per day, from an average of 9,038,000 barrels per day during the week ending March 18th, to an average of 9,022,000 barrels per day during the week ending March 25th...that's 3.9% below our output of 9,386,000 barrels per day in the same week last year, and the lowest our oil output has been since the 2nd week of November 2014..

at the same time, our imports of crude oil fell back to an average of  7,748,000 barrels per day during the week ending March 25th, from the 33 week high of 8,384,000 barrels per day that we were importing during the week ending March 18th....but those imports were still 5.4% higher than the average of 7,348,000 barrels per day we were importing during the 4th week of March last year, and the 4 week moving average of imports reported by the weekly Petroleum Status Report (62 pp pdf) indicates our oil imports are still at the 8.0 million barrel per day level, 9.8% above the same four-week period last year...  

there's been a interesting and noteworthy market dynamic influencing the ongoing elevated level of imports we've seen over the last 3 months, which have been far in excess of what we'd need to replace our slowly declining production...recall that in the week before Christmas, a provision to repeal the 40 year old ban on US oil exports was included in the fiscal 2016 budget bill at the behest of the oil companies, and that with much fanfare a few boatloads of light crude made their way to Europe in the weeks thereafter...before that ban was lifted, US oil prices as measured by the WTI benchmark price had been averaging $5 to $10 a barrel lower than the per barrel price for Brent, the global benchmark based on a North Sea grade of oil, as we showed with a graph at that time.....that price differential closed as it became apparent that the export ban would be lifted, and within a week thereafter, US oil prices had reached and then exceeded the level of global prices....that meant that US oil was no longer priced competitively against global grades of crude, and hence there was no incentive for European refineries to buy crude from us when they could buy it for less nearby, nor was there any incentive for Mexican and Canadians, who had already been importing our crude, to continue doing as a result of the price change brought about by lifting the oil export ban, US oil exports actually went down, and are now 5% lower than they were at the beginning of the fact, our exports of crude have only averaged 387,000 barrels per day so far in March, down 21.1% from the average of 490,500 barrels per day of crude we exported last March, and are at the lowest rate of crude exports since December of 2014...

a similar dynamic has been in part responsible for the increase in imports, over and above the contango trade we've discussed previously...most coastal US refineries had already been optimized to process various grades of imported crude, such as the heavy sour crude from Venezuela, whereas most of the crude produced from US shale basins has been ultra light and sweet, actually a better grade of oil, but not what our refineries were designed to use...while some refineries using heavy crude oils can use some lighter crude oils, especially when blended with other grades, those refineries are designed to run most economically with the heavier crude when fracking produced the glut of light crude at a price $5 to $10 a barrel lower than the global price, many of those refineries switched to using such lighter blends to take advantage of the large oil price differential...but now that that US oil prices have reached parity with global prices, there is no incentive for them to transport light crude from the center of the continent when discounted poorer grades are available to be imported dockside at a discount...for instance, refiners have been importing more heavy oil from Mexico and Venezuela, which has been priced about $9 a barrel lower than WTI...

the graph below, from Y-Charts, shows the Brent – WTI spread, or the difference in price per barrel between global prices and US oil prices over the past 5 years, wherein a higher international price is shown as a positive and a lower price internationally falls below the "0" line...thus we can see that early during the fracking boom, the US price for crude was driven as low as $25 a barrel below the global benchmark, and generally had remained near a range $5 to $10 cheaper over the 2 years prior to the lifting of the ban (the highest spread in 2015, of $11.85 a barrel on last February 24th, is shown in this snapshot)...although it's difficult to see on this static chart, the original chart is interactive, and by scrolling across it we can discover that Brent ranged from $2.04 higher to $1.28 a barrel lower than WTI since the beginning of this year, ie, generally not enough of a price differential to make trans-oceanic exports worthwhile at a time when the whole world is awash in oil...

April 1 2016 Brent WTI spread

US refineries did pick up the pace last week, as they processed an average of 16,234,000 barrels of crude per day during the week ending March 25, 414,000 barrels per day more than they were taking in a week earlier, and 3.2% more than the 15,728.000 barrels per day they were processing during the same week last year...the US refinery utilization rate rose to 90.4% during the week, up from the utilization rate of 88.4% during the week of March 18th, and up from the refinery utilization rate of 89.4% during the week ending March 27th last 2015, refineries first reached 90% of utilization during the first week of April, so it appears that refineries are a bit ahead of schedule on switching over to summer blends this year...

even with more oil being refined, however, refinery production of gasoline fell for the 2nd week in a row, dropping to 9,430,000 barrels per day during week ending March 25th, from our output of 9,683,000 barrels per day during week ending March 18th...that output of gasoline was also down 3.1% from the 9,729,000 barrels per day we produced during the same week last year, although our totals for March and for the year to date are still running ahead of last years pace.....meanwhile, our refinery output of distillate fuels (ie, diesel fuel and heat oil) rose by 185,000 barrels per day to 4,927,000 barrels per day during week ending the 25th, which was also 69,000 barrels per day, or 1.4% higher than our distillates production during the same week of 2015...   

the decrease in gasoline production meant that our gasoline inventories fell to 242,560,000 barrels by March 25, from the 245,074,000 barrels of gasoline we had stored as of March 18th...but this weeks stores were still 5.9% higher than the 229,128,000 barrels of gasoline that we had stored at the end of the same week last year, which were at the time the highest for the last weekend in March since 1993, and thus our gasoline stores are still well above the average range of their normal level for the last weekend of March…at the same time, our distillate fuel inventories also fell, despite the higher production, slipping by 1,075,000 barrels to a total of 161,185,000 barrels as of March 25th, as the week saw a return to a more normal demand for distillates...with the warm winter, however, our stocks of distillates remained well above the upper limit of the average range for this time of year, measuring 26.6% greater than the 127,174,000 barrels of distillates we had stored during the same week last year..   

finally, even with the drop in imports and the pickup in refining, we still had 2,299,000 barrels of unused crude oil left over at the end of the week, and hence our stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose once again to a new record of  534,834,000 barrels as of March 25th, up from the record 532,535,000 barrels of oil we had stored on March 18th..that was 13.4% higher than the then record of 471,444,000 barrels of oil we had stored as of March 27th, 2015, and 40.7% higher than the 380,092,000 barrels of oil we had stored on March 28th of 2014....we've now increased our inventories of crude oil by by nearly 52.3 million barrels over the last 11 weeks, setting new records for the amount oil we had in storage in the US in each of the last 7 of them...

This Week's Rig Count

we also again set another all time record low in drilling activity in the US for the fourth week in a row, as Baker Hughes reported that their total count of active rigs drilling in the US fell by another 14 to 450 rigs as of April 1st, which was down from the 993 rigs that were deployed on Thursday April 2nd of 2015, and down from the recent high of 1929 rigs seen on November 21st of 2014... the count of rigs drilling for oil fell by 10 to 362, which was down from 802 a year earlier, and down from the recent high of 1609 working oil rigs that was set on October 10, 2014, while the count of drilling rigs targeting natural gas fell by 4 to 88, another record low, which was down from the 222 natural gas rigs that were deployed a year ago, and down from the recent natural gas rig high of 1,606 that was set on August 29th, 2008...

there were also a few changes in offshore rig deployments this week...first, there was new platform set up and drilling offshore of Alaska which wasn't there last week, which i've been told is for fracking off the Cook Inlet...on the other hand, 3 of the platforms working the Gulf of Mexico were idled, so the Gulf rig count fell to 24, down from 29 a year earlier...the total offshore count thus fell by two to 26, counting the rig set up offshore California last week, which was still down from a total of 31 rigs drilling offshore a year ago...

a net of 13 more horizontal rigs were pulled out this week, leaving the count of horizontal rigs at 346, which was down from the 799 horizontal rigs that were in use on April 2nd of 2015, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of the same time, 3 directional rigs were also stacked, leaving 49 still running, which was down from the 93 directional rigs that were in use at the end of the same week a year earlier...meanwhile, a net of 2 vertical rigs were added, bringing the vertical rig count back up to 55, which was still down from the 136 vertical rigs that were in use the same week last year... 

of the major shale basins, it was the Granite Wash of the Oklahoma-Texas panhandle region that saw the largest decrease this week, as they saw 4 rigs pulled out, leaving just 4, which was down from the 23 rigs working there a year earlier...then, the Permian basin of west Texas and eastern New Mexico, the Mississippian of southwest Kansas, and the Williston of North Dakota were each down by 2 rigs...that left the Permian with 145 rigs, down from 285 a year earlier, left the the Mississippian with 5 rigs, down from 40 a year earlier, and left the Williston with 29 active rigs, down from the 91 that were deployed there last April 2nd...a single rig was pulled out of the Cana Woodford of Oklahoma, where there are now 30 rigs still active, down from 40 a year ago, as was a single rig pulled out of the Appalachian Marcellus, where there are now 29 rigs working, down from 70 a year ago....meanwhile, the Ardmore Woodford and the Arkoma Woodford, both of Oklahoma, and the Eagle Ford of south Texas, each saw another rig added this week...that brought the Ardmore Woodford back up to 2 rigs, still down from 8 a year ago, brought the Arkoma Woodford up to 4 rigs, down from 6 a year earlier, and brought the Eagle Ford up to 42 rigs, which was still well down from the 137 rigs drilling in the Eagle Ford last year at this time...

the state count tables again indicated that Texas had the largest drilling rig decrease, as they saw 5 rigs pulled out this week, leaving 204 rigs still working, which is down from the 456 rigs that were working in Texas on April 3rd last year…Louisiana, with the loss of 3 offshore rigs, was down by a total of 4 rigs to 47 for the week, which was down from 67 rigs working there a year earlier...California, North Dakota, and Oklahoma each saw 2 rigs idled; that left California with 5 active rigs, down from 15 a year earlier, left North Dakota with 29 rigs, down from 90 a year ago, and left Oklahoma with 61 rigs, down from 129 a year earlier....Alaska, Kansas, and Pennsylvania were each down 1 rig; that left Alaska with 9 rigs, including the 1 offshore, left Kansas with 6 rigs, down from 12 a year earlier, and left Pennsylvania with 17 rigs, down from 50 a year earlier...on the other hand, New Mexicans saw 2 rigs added this week, which brought their count back up to 16, which was still well down from the 51 rigs working there a year ago at this time...a rig was also added in Utah, where there are now 2, down from 8 rigs a year earlier...and in Kentucky, where the state's only active rig was pulled out last week, saw it set back up this week, so they now have 1 rig active again, down from the 2 that were working that state a year ago at this time...

we’ll wrap this up with a graph showing both oil production weekly (in blue) and the oil rig count weekly in red, going back to 2007, which comes from the Zero Hedge coverage of this week's rig count….notice that they pulled the rig count forward by 18 months, then jiggered the scale of both graphs on the right margin to make the two graphs line up over the 2007 through 2013 period, suggesting production is tracking the rig count…while there is a relationship between the number of drilling rigs deployed and future production, it’s certainly not on a one to one basis as this graph seems to imply, nor would we expect US oil production to fall to below 6 million barrels per day 18 months hence, which the collapsing rig count line seems to suggest…

April 1 2016 rig count vs lagged production


PUCO to decide FirstEnergy power plant subsidy case Thursday | -- The Public Utilities Commission of Ohio said late Tuesday it will vote Thursday on requests from FirstEnergy and American Electric Power to have customers help subsidize continued operations of older power plants. FirstEnergy in August 2014 filed a new rate plan containing unprecedented "power purchase agreements" between FirstEnergy Solutions, its unregulated company that owns its power plants, and its traditional utilities like the Illuminating Co., that are today just distribution companies. The agreements as proposed would have the Illuminating Co., Ohio Edison and Toledo Edison buy all of the electricity produced by the Davis-Besse nuclear power plant on Lake Erie and the coal-fired W.H. Sammis coal-fired plant on the Ohio River. The distribution companies would pay FirstEnergy Solutions whatever it cost to generate the power plus a 10.38 percent profit -- and then immediately sell that power into the wholesale grid. If the companies received less money in the competitive markets where lower-priced power from gas-fired plants sets the pace, then customers would have to make up the difference. Extra charges would appear on the delivery side of their bills, meaning no customer could avoid the charges, even those customers buying power from other companies.

Ohio regulators OK 2 deals that subsidize older power plants -- (AP) — Regulators in Ohio approved two closely watched energy deals on Thursday allowing two utility companies to impose short-term rate increases on electricity customers to subsidize some older coal-fired and nuclear power plants. The Public Utilities Commission of Ohio took a single combined vote on the power purchase agreements, which were separately filed by Akron-based FirstEnergy and Columbus-based AEP. The deals have attracted mountains of written testimony, websites, email-writing campaigns and sparring in television ads. That’s because they follow an old model at a time of sweeping change in the U.S. energy market that consumer groups believe should be driving prices down, not up, and forcing coal-fired plants to close. Opponents immediately hinted they’d challenge the deals, and a group of independent power producers has asked the Federal Energy Regulatory Commission to intervene in the cases. It could take up to 60 days for any re-hearing request to be filed and processed before a lawsuit could be filed. With the plans, the power companies got profit guarantees to cover operational costs at certain aging coal-fired and nuclear plants as they modernize the power grid and transition to cleaner energy sources.

U.S. government outlines man-made earthquake risks in Northeast Ohio -  - Injection wells that pump wastewater into the earth's core have raised earthquake risks in parts of the central United States to the same level as sections of California along the San Andreas fault, a new federal study says. The U.S. Geological Survey this week released its first maps of areas that are prone to earthquakes because of human activities. It found that roughly 7 million people live and work in sections of the central and eastern U.S that are subject to "damaging shaking" from man-made quakes. Perry, Ashtabula and Youngstown are among the 21 hot-spots the survey identified as vulnerable to human-induced earthquakes. Ohio's tremor risks aren't as great as parts of Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas where quakes have escalated dramatically since 2008.  The number of earthquakes of 3.0 magnitude or larger in those areas soared from an average of 24 each year before 2009 to 1,010 in 2015, the study said. Through mid-March, that region experienced 226 tremors. The study's authors attributed the rise to wastewater disposal, although they stressed that most injection wells aren't associated with earthquakes. In Ohio, the study said tremors from man-made causes decreased in recent years, though it offered no explanation why. Survey The study said there weren't any quakes of 2.7 magnitude or higher in Northeast Ohio last year and there were just two the prior year, both in the Youngstown area. For that reason, it predicted there's no great risk of man-made earthquakes this year in northeast Ohio. "Our assessment of induced earthquake hazard was dependent on the assumption that past earthquake rates will remain constant over the next year of the forecast," the study said.

Judge agrees to hear oral arguments in case related to injection well -- Although it’s too soon to know if the ultimate outcome will change, something different has happened in Athens County Fracking Action Network’s second attempt at challenging a ruling related to an injection well. On Monday, Franklin County Common Pleas Judge Richard Frye agreed to hear oral arguments in the case — something ACFAN was unable to get in a prior case. ACFAN filed a case last year in common pleas court that attempts to reverse a ruling by the Ohio Oil & Gas Commission. The commission had refused to hear the organization’s appeal of a permit issued in connection with a K&H Partners’ third injection well in Athens County’s Troy Twp. The commission said it lacked jurisdiction because it was a drilling permit, not an injection permit (which ACFAN disputes). When it filed the common pleas case, ACFAN also asked to make oral arguments, saying that the case involves issues of significant statewide public impact. K&H Partners disagreed and opposed oral arguments. On Monday, Frye scheduled oral arguments for April 29. This is AFCAN’s second attempt to challenge in Franklin County Common Pleas Court the commission’s refusal to hear a permit appeal. The prior case —involving the same issues, but with K&H Partners’ second injection well — was heard by Judge Patrick Sheeran, who decided against a request for oral arguments and ultimately ruled in favor of the Oil & Gas Commission in the case. Sheeran’s ruling in the case has been appealed by ACFAN to the 10th District Court of Appeals.

Range Resources sells Marcellus assets --Range Resources closed its Bradford County, Pennsylvania non-operated asset sale. The purchase agreement was made in early February and included the company’s non-operating Marcellus interest in Bradford County, Pennsylvania for about $112 million, according to Zacks. Wall Street 24 notes that the sale of the Bradford County assets caused shares of Range Resources stock to increase, indicating a 3.65 percent incline to $31.84 per share. The company received $110 million of sales proceeds at the closing in addition to keeping the net cash flow since the effective date. The transaction allows the company to reduce debt in addition to covering other corporate costs and increasing liquidity.  Range Resources is one of the largest companies operating in the Marcellus Shale. According to their website, 95 percent of the the company’s capital budget is directed towards the Marcellus as part of long-term investment in natural gas-rich shale play that covers parts of Pennsylvania, New York, Ohio and West Virginia.

Move It on Over—Ports and Pipelines Delivering East Coast Refined Products -- Most of the gasoline, diesel, heating oil and jet fuel consumed in the U.S. East Coast region is piped in via long-distance pipelines from Gulf Coast refineries, but substantial amounts are moved in by ship—either from the Gulf Coast by Jones Act vessels or from overseas. These shipped-in volumes then need to make their way from port to consumer. Today we continue our examination of how transportation fuels and heating oil are delivered to East Coast users with a look at the ports and connecting pipelines that help move these critically important fuels. This is the third episode in our series describing the complicated but efficient networks developed since World War II to transport (as of now) some 4 MMb/d of gasoline, diesel, heating and jet fuel (which we have dubbed GDHJ) into the 17 East Coast states (and District of Columbia) that comprise Petroleum Administration for Defense District (PADD) 1. That 4 MMb/d represents four-fifths of the East Coast’s consumption; the other 1 MMb/d is produced by refineries in the Central Atlantic states (mostly along the Delaware River near Philadelphia). As we said in Episode 1, the Gulf Coast region (PADD 3) produces about 7.5 MMb/d of GDHJ, and sends a good bit of that output (about 2.8 MMb/d) to the East Coast, more than 80% of it (about 2.3 MMb/d) via the two primary refined products conduits between and through the two regions: the 2.5 MMb/d Colonial and the 700 Mb/d Plantation pipelines. In Episode 2, we described those pipelines in some detail: their routes, injection points, storage-tank terminals, spurs and delivery points. Today we consider the very different situations that each of the four sub-regions in PADD 1 (New England, Central Atlantic, Southeast, and Florida) find themselves in regarding the sources of their GDHJ and the means by which these refined petroleum products are delivered.

Too big to fight: In Pa. pipeline wars, landowners lose before judge rules on eminent domain - --The woods that gave Pennsylvania its name have become battlegrounds in pipeline wars raging across the state. These are passionately fought legal cases that pit rural landowners against huge corporations tasked with revolutionizing America's energy future and maximizing profits amid an industry downturn. While the fracking boom changed the country's dependence on foreign oil, it's the pipeline development that is reversing the U.S. from an energy importer to exporter. That's a plan supported by the president and his federal agencies, including the commission that regulates pipeline development in Pennsylvania. "The big gorilla in the way is FERC," It's difficult to put a legal block in front of a pipeline before construction starts because the federal regulatory process overrides a lot of other decisions, attorneys say. Simply put, a pipeline builder can cut down thousands of trees across Pennsylvania long before a county judge says it's allowed.  But in Pennsylvania pipeline fights, landowners lose before a judge issues a ruling. Ellen Gerhart Ellen Gerhart opposes pipeline  This week, the Gerharts lost hundreds of trees on the 28-acre Huntingdon County property they purchased in 1982 and soon enrolled in the Pennsylvania Forest Stewardship Program. The silent promise they made to never develop or profit from the land was superseded by a pipeline project the minute the Pennsylvania Public Utility Commission classified the Mariner East 2 as a public utility.But this pipeline is not like the natural gas lines that deliver winter heat to numerous homes across the state.It's a behemoth that stretches hundreds of miles from the shale fields of Ohio, West Virginia and southwestern Pennsylvania to a Sunoco Logistics hub in Marcus Hook. Once it reaches that export terminal, it can ship overseas the 450,000 barrels a day of propane and butane moving through the lower half of the state.Those exports are why nearly all landowners and plaintiffs' attorneys say these pipelines don't deserve eminent domain status.

More Details On The REX Natural Gas Pipeline Reversal From Marcellus/Utica To The Midwest -- --Back on March 18, 2016, RBN Energy provided an update on that huge pipeline moving natural gas from the east (Marcellus/Utica) to the midwest. Today RBN produced another update. For me to understand this massive pipeline here are the data points from today's update: The US is in the midst of the "biggest infrastructure overhaul in many decades, designed to reverse traditional flow patterns out of the Northeast Region and allow Marcellus/Utica shale gas to target growing and new demand markets primarily in the Southeast US."  In addition to the REX, "there are several other pipelines looking to reverse flow out of the Northeast, but the REX is, by far, the most significant, not only volume-wise but also because it touches nearly every US region via interconnects with other major long-haul gas pipelines."So far:

  • build-out and expansion of the Seneca Lateral, near Clarington, OH, has been completed
  • build-out of the East-to-West (E2W) expansion; has been completed
  • last August, E2W came on-line, bringing capacity to 1.2 Bcf/d in Zone 3 of REX (between its eastern terminus point in Clarington, OH, and Moultrie County, IL; this brought total westbound capacity in the zone to 1.8 Bcf/D for that stretch of REX

Today, RBN focused on the next phase of expansion: Zone 3 Capacity Enhancement project (REX Z3CE) Details of REX Z3CE:

  • approval granted for adding 800 MMcf/d east-to-west capacity (Clarington, OH, west to Mexico, Missouri, just west of the Illinois state line)
  • RBN Energy says that Tallgrass has begun construction; project should be completed by 4Q16
  • the incremental 0.8 Bcf/d will bring the total westbound capacity to "a huge 2.6 Bcf/d"
  • firm contracts to ship natural gas from six (sic -- I count seven) shippers

U.S. production of hydrocarbon gas liquids expected to increase through 2017 - U.S. production of hydrocarbon gas liquids (HGL)—a group of products including ethane, propane, butanes, and natural gasoline—is expected to increase from 3.86 million barrels per day in 2015 to 4.33 million b/d in 2017, according to EIA's Short-Term Energy Outlook (STEO). HGLs are produced at both natural gas processing plants and petroleum refineries, but natural gas plants are expected to provide more than 95% of the forecast production growth.  Between 2008 and 2015, HGL production at natural gas processing plants (including fractionation facilities) increased as a by-product of the growing supply of natural gas from shale gas and tight oil formations. Projects that increased the capacity to produce, store, transport, export, and consume HGLs enabled the supply of HGLs to expand at a faster rate than natural gas production. STEO expects HGL production growth to continue to outpace natural gas production growth in 2016 and 2017, as more HGL infrastructure projects are completed.  The United States, which was a net importer of all HGL products in 2007, became a net exporter of natural gasoline in 2008, of butane and propane in 2011, and of ethane in 2014. Annual average net propane exports (gross exports minus gross imports) increased from 10,000 b/d in 2011 to an estimated 500,000 b/d in 2015, as the capacity to export liquefied petroleum gas (LPG), including propane and butanes, increased by almost 1 million b/d.

EPA aims to cut methane leaks from natural gas companies (AP) — The Obama administration on Wednesday announced a new partnership with 41 energy companies that have agreed to voluntarily reduce methane emissions from natural gas operations to help combat climate change. The Environmental Protection Agency unveiled the Natural Gas STAR Methane Challenge Program at this week’s Global Methane Forum held in Washington. Methane is a potent greenhouse gas, capable of trapping 25 times more heat in the atmosphere than an equivalent amount of carbon dioxide. EPA Administrator Gina McCarthy said the voluntary program is meant to protect public health and combat climate change while providing a platform for companies to report actions taken to reduce methane emissions. The announcement comes after the worst methane leak in the nation’s history was finally plugged last month at an underground storage facility owned by Southern California Gas Co. The months-long disaster required the evacuation of 6,400 families and released the climate-warming equivalent of the annual pollution from more than a half million cars.

West Virginia natural gas producer fined for discharge (AP) — A natural gas pipeline company has paid a $14,440 fine to settle an environmental complaint stemming from a ruptured pipe in West Virginia’s Northern Panhandle. The Environmental Protection Agency announced Wednesday that Williams Ohio Valley Midstream paid the penalty after 132 barrels of natural gas components discharged last year in Moundsville. Media outlets report the components leaked into three waterways, including a tributary of the Ohio River. The penalty will go into a federal trust fund to be used for future oil spill cleanups. Williams Ohio Valley Midstream is a division of Tulsa, Oklahoma-based Williams.

Study: Straits of Mackinac oil spill could affect vast shoreline areas — (AP) — A newly released study says hundreds of miles of Lake Michigan and Lake Huron shoreline are at risk of contamination if oil pipelines in the Straits of Mackinac rupture. The report by the University of Michigan Water Center is based on 840 computer simulations of possible spills from twin lines that run across the floor of the straits linking Michigan’s two peninsulas. They are owned by the Canadian company Enbridge, which says they’ve never leaked and remain in good shape. Environmentalists are pushing to have them removed.  Hydrodynamics expert David Schwab directed the study released Thursday. He says when all simulated spills are plotted on a map, 720 miles of shoreline in the U.S. and Canada are considered potentially vulnerable. High-risk areas include Mackinac Island and shores near Mackinaw City.

TransCanada to sell assets, stock to raise cash for Columbia Pipeline buy - : Canadian pipeline giant TransCanada is engaged in sales of its stock and some North American assets in order to fund its proposed acquisition of the Columbia Pipeline Group, a TransCanada spokesman said Wednesday. TransCanada had announced earlier this month it would buy in a $13 billion all-cash deal. The company plans to sell all of its electric power generating assets in the US Northeast, TransCanada spokesman Mark Cooper said in an email. This includes "hydroelectric plants on the Connecticut and Deerfield Rivers," Cooper said. "The decision to sell came down to some tough financing decisions we needed to make in order to realize the rare opportunity to gain a foothold in the Marcellus and Utica basins through the Columbia acquisition."TransCanada's hydroelectric assets, located in New Hampshire, Vermont and Massachusetts, include 13 hydroelectric stations, which 43 generating units capable of producing 560 megawatts of power. Other TransCanada-owned electric generation assets in the US Northeast include: the 2,480-MW Ravenswood Generating Facility, a multi-fuel plant, capable of burning natural gas, fuel oil and kerosene, in New York City; the 560-MW Ocean State Power plant in Rhode Island, which can be fueled by gas or fuel oil; and the 132-MW Kibby Wind Power Project, New England's largest wind power project, comprising an array of 44 wind turbines in Maine. In addition to the proposed power asset sales, TransCanada has raised C$4.42 billion ($3.37 billion) in the largest stock sale in Canadian history, according to press reports.

Atlantic drilling off table but survey permits pending (AP) — While drilling for oil and natural gas in the Atlantic is off the table for now, permits are still pending that could allow seismic surveys to map just how much might be out there. The Obama administration announced earlier this month that the Atlantic will not be included in the next round of offshore energy leases from 2017 through 2022. Interior Secretary Sally Jewell said the decision was based in part on local opposition. Dozens of coastal communities passed resolutions opposing offshore drilling worried that oil spills could hurt fisheries and tourism. Two years ago, however, the Bureau of Ocean Energy Management opened areas in the Atlantic to energy surveys and eight companies currently have pending applications to use seismic air guns to map the ocean floor. Environmental groups worry the loud sounds from the air guns will harm marine life such as whales and turtles. The advocacy group Oceana released maps Tuesday showing areas where permits are being sought and where they overlap crucial marine habitat. Almost 40 fishermen and others who make their living on the waters off Delaware, Maryland and Virginia also sent a letter to the governors of the three states. “Allowing seismic blasting could disrupt the spawning, feeding and migration patterns that support our fisheries and replenish fish populations from year to year,” the letter warned.

Gas Pipeline Uses 160 Eminent Domain Suits To Get Property In 3 States  -- Eminent domain is a tough pill to swallow for Americans who take their property rights very seriously, and the aggressive moves by Sabal Trail to seize property for a natural gas pipeline running through three southern states is turning into a drama of immense proportions. Sabal Trail, the joint venture planning to build a 500-mile natural gas pipeline through Georgia, Alabama, and Florida, has gone to court in order to secure the right of way through the land where the pipeline should pass.  So far, Sabal Trail has filed 160 eminent domain suits and more are expected, according to a report by the Orlando Sentinel. The company is desperately trying to get the right of way through 346 more properties, though it says it has already secured the agreement of 1,248 landowners in the area along the route. But it’s doubtful that any of these will be allowed by the respective courts to reach the stage of contestation and litigation due to the stated regional importance of the pipeline project.  Florida satisfies almost two-thirds of its power needs with natural gas. Coal is a distant second at around 22 percent, making gas the major source of power for the state. The numbers are not as high for Georgia and Alabama, but natural gas is a significant component of the energy source mix there as well.  Sabal Trail, which is owned by Spectra Energy Corp (NYSE: SE) and NextEra Energy (NYSE: NEE), will carry one billion cubic feet of gas daily once it starts operating at full capacity, and will supply it to regional utilities Florida Power and Light, Duke Energy, and Spectra. Construction works are slated to begin in late June, and the pipeline should be operational in May 2017. The pipeline project, however, is facing serious opposition, which focuses on environmental and health concerns. There are those who believe that any opposition will be crushed, because the project is so important it cannot be stopped.  As for those who disagree, the news that Kinder Morgan has suspended the construction of the Palmetto pipeline because of strong local opposition is somewhat reaffirming. Palmetto would have carried crude oil from South Carolina to Florida, but the Georgia legislature passed a moratorium on new oil pipeline construction in the state.

Gulf Coast waterborne crude flows adjust to a new world --Waterborne crude volumes (including imports) delivered to coastal refineries in Texas, Louisiana and Mississippi by domestic producers peaked at 27% of inputs in 2014 as regional plants processed increasing quantities of shale crude. Since then, these volumes have plummeted to 15% of inputs in March 2016 as Gulf Coast refiners have returned to more competitive imports instead. At the same time Eagle Ford crude volumes shipped along the Gulf Coast have fallen 28% this year in response to declining production and narrow price differentials between Texas and Louisiana ports. Gulf Eagle Ford crude now also plays a far smaller part in export markets than WTI grades. Overall exports have not increased since the end of the export ban but volumes to Canada have plummeted as shipments to other nations have increased. Today we review the shifts in waterborne flows across the Gulf Coast region.

Coast Guard: Unknown amount of crude in Louisiana bayou (AP) — The U.S. Coast Guard says an unknown amount of crude oil has spilled into a bayou in southern Louisiana. The Coast Guard said in a statement Monday night it received a report around 8 p.m. that a tanker on Bayou Teche near Morgan City was being filled with crude oil when the spill began. The statement says the source of the spill has been secured and crews have deployed more than 200 yards of boom. Times-Picayune reports some residents of nearby St. Mary Parish were advised to shelter in place. The cause of the spill is under investigation. The Coast Guard says the spill was reported by PSC Industrial Outsourcing. The company couldn’t immediately be reached by The Associated Press early Tuesday. A stretch of the 135-mile-long waterway will be closed to commercial traffic during the cleanup.

Drilling ban at Joe Pool Lake sets up showdown between Texas, Army Corps -- A move by the U.S. Army Corps of Engineers to protect its dam at Joe Pool Lake is leading to a showdown with state regulators over who controls drilling near the reservoir. Last week, the corps said it is banning drilling, including hydraulic fracturing, within 4,000 feet of the dam. The federal agency also said it would limit injection wells to at least five miles from the dam out of fears of “induced seismicity,” or tremors triggered by human activities. Corps officials said the tougher restrictions — which grew out of a study about whether drilling could damage the structural integrity of the dam — went into effect immediately. One corps official said the agency is willing to go to court to enforce them, if necessary. But in a letter sent to the corps on Thursday, Texas Railroad Commission Executive Director Kimberly Corley questioned the federal agency’s actions, stating that the Railroad Commission has the authority to oversee the oil and gas industry in Texas, including hydraulic fracturing and injection wells.Corley took issue with the corps for taking steps without consulting the commission or other appropriate state agencies and without going through a formal rule-making process. The letter also asked pointed questions about information used by the corps in establishing its restrictions.

Pain in the Permian | Petroleum Economist: THE CONVOYS of 18-wheelers ferrying equipment across the vast terrain easily outnumber all other vehicles on the road. They’ve long since overwhelmed a highway that was built for people passing through this desolate stretch of West Texas, now servicing one of the biggest oilfields in the world. Construction crews are laying down new tarmac as quickly as they can, but it’s not fast enough. Racing from oilfield to oilfield, horns blaring, the big rigs make navigating the road a sometimes-harrowing adventure for sedans like mine. And the dust: kicked up by the bustle, it coats everything. If this is your first impression of the place, you’d think business is still booming in the Permian shale, the beating heart of the Texan tight oil industry. Along this stretch of Interstate 20 between Midland and Odessa in West Texas – the main artery running through the Permian – evidence of the bonanza is ubiquitous. Highway road signs won’t dispel your ideas about West Texas: this is the country of God – "Repent", one of the billboards implores – of high-school football and, of course, of oil. But look more closely and it doesn’t take long to see that the brutal oil-price collapse is inflicting serious pain in American oil country. Try Helmerich and Payne’s storage yard, a parking lot for rigs: for every rig that leaves for the oilfield, many more are returning, swelling the space. At least three dozen rigs lay idle during my recent visit, a growing steel forest rising above I-20, reminding everyone that the boom times have ended. And you can’t avoid the billboards promising quick cash for distressed oil companies: "Sell us your wireline trucks & tools! Cash in 48 hours".

USGS: Human Activity “Significantly Increases” US Earthquake Risk  - On Monday, for the first time, the U.S. Geological Survey has released an analysis of the magnitude of “human-induced” earthquakes. That such a thing as human-induced earthquakes can exist is scary enough, but the “dramatic increase in seismicity” in places like Oklahoma has forced the USGS to consider the threat more broadly. “By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” said Mark Petersen, Chief of the USGS National Seismic Hazard Mapping Project, in a statement. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” The USGS also released its first-ever one-year earthquake hazard outlook on Monday, taking into account the current impact of fracking and wastewater injection (part of the oil and gas recovery process). So, not only do we now have overwhelming proof of the effect of the oil and gas industry on earthquake risk, but we have a prediction that increased seismic activity will continue until practices change. For now, that means that Oklahoma bears a risk of earthquakes on par with California. In fact, Oklahoma is now one of the most seismically active places in the entire world. Recently, the state’s Republican governor, Mary Fallin, allocated funds to increase monitoring of the earthquakes, and the state’s Corporation Commission requested well operators to reduce the amount of wastewater injected below the surface. The state also launched a website,, to discuss the threat.

7 million Americans at risk of man-made earthquakes, USGS says - Earthquakes are a natural hazard -- except when they're man-made. The oil and gas industry has aggressively adopted the technique known as hydraulic fracturing, or fracking, to shatter subsurface shale rock and liberate the oil and gas lurking there. But the process results in tremendous amounts of chemical-laden wastewater, which the industry disposes of by pumping into deep wells. And the Earth moves. On Monday, the U.S. Geological Survey published for the first time an earthquake hazard map covering both natural and "induced" quakes. The map and an accompanying report indicate that parts of the central United States now face a ground-shaking hazard equal to the famously unstable terrain of California. Some 7 million people live in places vulnerable to these induced tremors, the USGS concluded. The list of places at highest risk of man-made earthquakes includes Oklahoma, Kansas, Texas, Arkansas, Colorado, New Mexico, Ohio and Alabama. There are also states with wastewater-disposal wells but no record of recent natural earthquakes -- suggesting that the practice of injecting wastewater deep into the Earth can be done more safely in some places than in others.It's not immediately clear whether this new research will change industry practices, or even whether it will surprise anyone in the areas of newly estimated risk. In Oklahoma, for example, the natural rate of earthquakes is only one or two a year, but there have been hundreds since fracking became commonplace in the last decade.

U.S. Geological Survey creates forecast for human-induced earthquakes -- In its first-ever earthquake forecast, the U.S. Geological Survey says temblors likely will increase in certain parts of the country, particularly Oklahoma and Texas, where a boost in oil drilling and injection wells has caused problems. The agency's forecast said activity should decrease in Ohio this year, despite a cluster of induced earthquakes in recent years. Geological Survey scientists used seismicity data and reports to create a map that looks at natural and induced earthquakes. They said on Monday that the report is timely because the number of earthquakes have increased rapidly since 2010. A year ago, the USGS released results of its first widespread examination of possible links between earthquakes and the oil and gas industry. Geologists found 17 regions nationwide, including the Mahoning Valley area around Youngstown, Ohio, where residents were at higher risk of earthquakes. Oil and gas drilling and wastewater injection wells spurred hundreds of earthquakes in Oklahoma, Texas, Arkansas and Ohio, according to the 2015 report. Today's forecast calls for increased risk of earthquakes in Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas in the next year. More people in Oklahoma and Texas are at risk of induced earthquakes than natural earthquakes, according to the Geological Survey. Four Ohio counties could see earthquakes in the future because of human causes, including oil and gas activity, the report found: Belmont, Guernsey, Harrison and Washington. All four are counties where oil and gas activity has grown.

Fracking leads US scientists to include manmade quakes in risk maps - Telegraph: The threat from manmade earthquakes is now so great that parts of the American Midwest have the same risk of suffering a damaging tremor as areas that straddle seismic faults, such California, according to a new assessment by the US Geological Survey. For the first time it has included “induced” as well as natural quakes to cover the growing risk from activities linked to fracking for oil and gas. Mark Petersen, head of the agency's mapping project, said: "By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the US.”The risk maps are used by emergency management officials and the country's engineering and design associations in deciding how and where to construct buildings. The new designation puts an additional seven million people in the Central and Eastern US in areas threatened by earthquakes. Oklahoma is at the greatest risk for hazards associated with induced seismicity, the USGS said, followed by Kansas, Texas, Colorado, New Mexico and Arkansas. Oklahoma has seen a huge increase in the number of tremors that rank above magnitude 3.0. Last year it experienced 907 such seismic events compared with two in 2009. Last month it was rocked by 5.1 magnitude quake, adding stength to scientists' concerns that a string of small tremors was building up to a big one. Scientists estimate the chances of a 6.0 magnitude shock during the next year to be between five and 12 per cent - about the same as quake-prone parts of California.

Induced Earthquakes Increase Chances of Damaging Shaking, Wastewater Disposal From Fracking Primary Cause -- For the first time, new U.S. Geological Survey (USGS) maps identify potential ground-shaking hazards from both human-induced and natural earthquakes. In the past, USGS maps only identified natural earthquake hazards.  This is also the first one-year outlook for the nation’s earthquake hazards, and is a supplement to existing USGS assessments that provide a 50-year forecast The report shows that approximately 7 million people live and work in areas of the central and eastern U.S. (CEUS) with potential for damaging shaking from induced seismicity. Within a few portions of the CEUS, the chance of damage from all types of earthquakes is similar to that of natural earthquakes in high-hazard areas of California. “By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” Mark Petersen, chief of the USGS National Seismic Hazard Mapping Project, said. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” Induced earthquakes are triggered by human activities, with wastewater disposal being the primary cause for recent events in many areas of the CEUS. Wastewater from oil and gas production operations can be disposed of by injecting it into deep underground wells, below aquifers that provide drinking water.

Map shakes up views on fracking - - NZ Herald News: Earthquakes are a natural hazard - except when they're man-made.The oil and gas industry has aggressively adopted the technique known as hydraulic fracturing, or fracking, to shatter subsurface shale rock and liberate the oil and gas lurking there. But the process results in tremendous amounts of chemical-laden wastewater, which the industry disposes of by pumping into deep wells.And the Earth moves.Yesterday, the United States Geological Survey published for the first time an earthquake hazard map covering both natural and "induced" quakes.The map and an accompanying report indicate that parts of the central US now face a ground-shaking hazard equal to the famously unstable terrain of California.Some 7 million people live in places vulnerable to these induced tremors, the USGS concluded.The list of places at highest risk of man-made earthquakes includes Oklahoma, Kansas, Texas, Arkansas, Colorado, New Mexico, Ohio and Alabama.There are also states with wastewater-disposal wells but no record of recent natural earthquakes - suggesting that the practice of injecting wastewater deep into the Earth can be done more safely in some places than in others.It's not immediately clear whether this new research will change industry practices, or even whether it will surprise anyone in the areas of newly estimated risk.

New USGS maps show higher chances of damaging earthquakes in Oklahoma —New maps released on Monday by the USGS show potential ground-shaking hazards from both human-induced and natural earthquakes.The USGS said the maps are also the first one-year outlook for earthquake hazards and the first time the USGS has identified human-induced earthquakes. “By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” said Mark Petersen, Chief of the USGS National Seismic Hazard Mapping Project. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” The USGS said wastewater disposal was the primary cause for human-induced earthquakes. The new maps show six states face the highest hazards: Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas. Oklahoma and Texas have the largest populations exposed to human-induced earthquakes, according to the USGS. “In the past five years, the USGS has documented high shaking and damage in areas of these six states, mostly from induced earthquakes,” said Petersen. “Furthermore, the USGS Did You Feel It? website has archived tens of thousands of reports from the public who experienced shaking in those states, including about 1,500 reports of strong shaking or damage.” According to the USGS, the new hazard model estimates where, how often and how strongly earthquakes can be expected during 2016.

Drilling makes Oklahoma as earthquake-prone as California --Drilling for oil and gas has made parts of Oklahoma and Kansas as likely to be hit by major earthquakes as California. A new United States Geological Survey (USGS) hazard map shows that the risk of a "damaging" quake within the next year is now as high in north Oklahoma -- 10-12 percent -- as anywhere else in the US. The revelation comes from the USGS changing the way it forecasts earthquakes in the country. In the past, its hazard maps only highlighted natural risks, meaning only California and small parts of Idaho, Montana, Nevada, Washington and Wyoming were mapped. Now, it factors in "induced earthquakes" triggered by human activity, with the primary cause being wastewater disposal from oil and gas production. This tainted liquid is injected into deep underground wells, which can lead to an increase in pressure that negatively affects the seismic stability of an area. Based on the risks posed by wastewater, much of Oklahoma is now highlighted, while smaller sections of Alabama, Arkansas, Colorado, Illinois, Kansas, Kentucky, Missouri, New Mexico, Texas, and Tennessee also carry a warning. It should be noted that most states have at most a five-percent or less chance of damage. Only Oklahoma and a tiny area in southern Kansas are at higher risk. Far from being alarmist, the USGS' assessment is mostly based on one- and two-year earthquake data from the above states. Last year, 907 quakes of magnitude 3 and above hit Oklahoma. 106 have been recorded this year, with three measuring around magnitude 5, which ranks among the largest in the state's history. It's now third only to California and Alaska in earthquake frequency. The USGS saysfurther data on both induced and natural earthquakes is required to improve its hazard models. It also notes that its methodology for mapping the western states only factors in natural risks, and suggests it should expand its induced quake data to cover states like California. However, it's not simple to determine the reasons for tremors in areas with naturally high seismic activity, and more research is needed.

Pair of earthquakes hit Crescent in central Oklahoma - US News: (AP) — The U.S. Geological Survey says two earthquakes hit central Oklahoma in the overnight hours, but no damage or injuries have been reported. The USGS says a 4.2 magnitude quake struck late Monday in Logan County. The quake was centered 3 miles north-northeast of Crescent, and the USGS says it was felt as far north as Wichita, Kansas. A 4.1 magnitude earthquake hit the same area shortly after 5 a.m. Tuesday. The USGS says that temblor had an epicenter 4 miles north of Crescent, or 37 miles north of Oklahoma City. Another smaller quake hit near Enid around 10:30 p.m. Monday. On Monday, the USGS released a survey that found Oklahoma has a 1 in 8 chance of damaging quakes in 2016, surpassing California as the state with the highest probability.

See How Oil Drilling Created an Earthquake Crisis in Oklahoma -- In the last few years, Oklahoma has become one of the most seismic places on the planet. Last year, there were almost 6,000 earthquakes, 900 of which were magnitude 3 or higher, according to the U.S. Geological Survey (USGS). Scientists say the increase is due to hundreds of saltwater disposal wells around the state that pump brackish water that comes up naturally during drilling back underground.The state’s quakes have become so frequent that the USGS released a new nationwide hazard map Monday which, for the first time, included manmade earthquakes and showed parts of Oklahoma to be as seismic as California. See how oil drilling causes earthquakes in the video above, and read more about it here.

Everyone panic. The fracking induced earthquakes are coming to kill you all - Joel Achenbach at the Washington Post is out to save you all from a potential catastrophe. The evil oil and gas industry is going to cause most of the people reading this to flee in terror from their homes as earthquakes ravage the land and zombies begin to feast on the flesh of the living. Okay.. it’s not quite that bad, but a quick read of this study will likely have you checking for the nearest exits in your buildings. You see, fracking is causing earthquakes in unusual places (which is actually true, though not nearly on the calamitous scale as is implied) and it could impact up to half the people in the country. On Monday, the U.S. Geological Survey published for the first time an earthquake hazard map covering both natural and “induced” quakes. The map and an accompanying report indicate that parts of the central United States now face a ground-shaking hazard equal to the famously unstable terrain of California.Some 7 million people live in places vulnerable to these induced tremors, the USGS concluded. The list of places at highest risk of man-made earthquakes includes Oklahoma, Kansas, Texas, Arkansas, Colorado, New Mexico, Ohio and Alabama. Most of these earthquakes are relatively small, in the range of magnitude 3, but some have been more powerful, including a magnitude 5.6 earthquake in 2011 in Oklahoma that was linked to wastewater injection. As usual, it’s hard to even know where to begin with this sort of “analysis” since the mixture of facts, speculation and hyperbole render the final product something of a mess. While I admit I initially expressed doubts about the entire concept of fracking induced earthquakes back when the first reports emerged, the industry has confirmed that this is indeed a known phenomenon. But the descriptions which seek to compare Oklahoma and Ohio to the communities along the San Andreas fault are laughable.

Millions at risk of manmade quakes. How can fracking states lessen tremors? - The US Geological Survey has added manmade earthquakes to its 2016 earthquake forecast for the central and eastern United States (CEUS), which have become increasingly common in the region in part due to oil and gas drilling activity. Earthquake activity in the CEUS region – particularly in states like Oklahoma, Kansas, and Texas – has increased markedly, according to the USGS, in large part because of "induced seismicity." Unlike natural earthquakes, these seismic events can be attributed to human activity, and in the CEUS, that usually means wastewater disposal from oil and gas drilling. Yet induced seismicity is such a novel issue regulators are struggling to figure out how to reduce the number of manmade quakes. States like Kansas have made some progress, but induced earthquakes are not considered in building-code maps, and nearly 8 million people live in areas that are vulnerable to that kind of activity, according to the agency's 2016 forecast." .Kansas is one state that, tentatively, suggests it may have found an answer. From 2000 to 2013 the state never saw more than four earthquakes magnitude 2.5 or greater every year, but in 2014 that number jumped to 154, including nine quakes of a magnitude 3.5 or more. In March 2015, state regulators ordered drilling companies in some of the most vulnerable areas to dramatically reduce their wastewater injection volumes. Results have been promising in two of those areas: Harper and Sumner counties, which are in the Arbuckle Shale that straddles the Kansas-Oklahoma border.

Induced Earthquakes Raise Chances of Damaging Shaking in 2016 - For the first time, new USGS maps identify potential ground-shaking hazards from both human-induced and natural earthquakes. In the past, USGS maps only identified natural earthquake hazards. This is also the first one-year outlook for the nation’s earthquake hazards, and is a supplement to existing USGS assessments that provide a 50-year forecast The report shows that approximately 7 million people live and work in areas of the central and eastern U.S. (CEUS) with potential for damaging shaking from induced seismicity. Within a few portions of the CEUS, the chance of damage from all types of earthquakes is similar to that of natural earthquakes in high-hazard areas of California.“By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” said Mark Petersen, Chief of the USGS National Seismic Hazard Mapping Project. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” Induced earthquakes are triggered by human activities, with wastewater disposal being the primary cause for recent events in many areas of the CEUS. Wastewater from oil and gas production operations can be disposed of by injecting it into deep underground wells, below aquifers that provide drinking water.

Here’s the U.S. Earthquake Forecast, Now Including the Quakes We Cause A cluster of central states surrounding Oklahoma now faces the highest risk of earthquakes induced by human activities "such as fluid injection or extraction," according to a short-term seismic forecast by the U.S. Geological Survey. The report, which for the first time includes quakes that may be linked to oil and gas production, comes after an alarming six-year rise in the incidence of quakes throughout the central and eastern U.S. There, some seven million people, concentrated near Oklahoma City and Dallas-Fort Worth, face an increased risk of earthquakes. There were more than 1,000 quakes last year with a magnitude greater than 3 on the 10-point Richter scale, up from an annual average of 24 between 1973 and 2008. The states facing the highest risk from human-induced quakes are, in order, Oklahoma, Kansas, Texas, Colorado, New Mexico, and Arkansas, according to the report, published Monday. The largest populations at risk live in Texas and Oklahoma. Scientists predict that any damage would probably be on par with some of the cracking in homes and commercial buildings already witnessed since the oil-and-gas boom began. North-central Oklahoma is the most prone to quakes this year, according to the research, with a 12 percent risk. The link to the energy industry is largely based on wastewater from wells subjected to hydraulic fracturing, or fracking, the engineering advance that let drillers free hydrocarbons trapped in shale. The production process yields a lot of water, which may be disposed of by injecting it into storage wells. That is the practice suspected in the increased earthquake activity. As the number of quakes in Oklahoma, Texas, and other central states has risen in the last decade, so has concern among local residents, environmentalists, and regulators. Oklahoma saw a 5.1-magnitude temblor in February, coincidentally three days before the Sierra Club sued three companies under a federal law governing dangerous waste disposal. It’s the latest in a string of accusations against companies involved in the disposal of wastewater.

Pipelines Threaten Liens on Oil Firms That Don’t Pay Up -  Pipeline companies that rode the energy boom are confronting the risk that their customers, cash-starved oil producers, may not pay their bills. Inter Pipeline Ltd., whose customers include big oil sands players, has threatened to slap liens on crude oil it transports and is seeking letters of credit from shippers with ratings that have been chopped below investment grade. Rival Pembina Pipeline Corp. is hoping to avoid losses by matching new requests to ship crude with producers that bought more capacity than they now need. Some companies that transport and process oil and gas are going a step further, eyeing possible royalty stakes in producer lands in exchange for building new facilities, people familiar with such negotiations said. The moves reflect intensifying concern that debt-burdened firms – if they survive at all – could renege on shipping commitments made when oil fetched closer to $100 (U.S.) a barrel.

Legislature Approves Protections Against Fracking Waste, Reforms at Oil & Gas Commission — Bold Nebraska applauds the Nebraska Legislature today for approving LB 1082 by a 48-0-1 vote, a bill to reform the Nebraska Oil & Gas Conservation Commission (NOGCC) and put stronger protections for our water and land in place against fracking waste. Although Bold Nebraska believes the bill could have gone much farther, LB 1082 is a step in the right direction.LB 1082:

  • Requires periodic sampling and reporting of fracking waste fluids, and monitoring of produced water transporters in Nebraska.
  • Requires periodic evaluation of financial assurance for companies engaged in fracking waste disposal.
  • Requires notification of counties, cities, villages and natural resource districts of fracking wastewater injection well applications.
  • Reduces the “promotional” aspect of the Nebraska Oil & Gas Commission, and refocuses the agency’s purpose on promoting health, safety and protection of natural resources.

Governor Opposes Earthquake Damage Lawsuit Bill - Gov. John Hickenlooper said Thursday he would not sign a legislative bill that would make it easier to residents to sue oil and gas companies for damage caused by earthquakes induced by operations that pump wastewater down into underground wells.The U.S. Geological Survey released maps this week that show the most likely places for those earthquakes to occur, NPR reports: 7 million people are now, suddenly, living in quake zones. There are 21 hot spots where the quakes are concentrated. They're in places where, historically, noticeable earthquakes were rare: Texas, Colorado, Arkansas, Kansas, New Mexico, and Oklahoma. Ohio and Alabama have also experienced some induced quakes. State Rep. Joe Salazar, D-Thornton, who sponsored the legislation, says it's a response to concerns over fracking operations that are moving closer to more populated areas. Oil and gas industry groups say fracking is safe and oppose the bill. The governor studied those maps and isn't convinced of the danger. " I don’t think there’s a real risk," he said. "It makes us appear like we’re anti-business. And I think that’s something that’s not conducive to what we’re trying to get done.”

Proposed bill: local control over oil and gas activity - Boulder Weekly: Comments from lawmakers, advocates and industry personnel were heard this week by a state assembly panel on a bill that would give local control on oil and gas operations to municipalities and counties in Colorado. House Bill 16-1355 was introduced on March 11, and it now sits on the desk of the Democrat-majority State, Veterans and Military Affairs committee. The bill was introduced by four house Democrats, including east Boulder County representatives Mike Foote and Matt Jones. The bill would repeal certain rights afforded to oil and gas interests in the state, while also providing new abilities to concerned municipalities. For instance, the bill repeals the ability of the Colorado Oil and Gas Conservation Commission (COGCC) to designate oil and gas development areas as areas of state interest. The removal of this clause would gut the state’s ability to claim that oil and gas siting and regulation decisions is a matter, exclusively, of state interest. The bill allots municipalities and counties the power to determine oil well drilling site locations, claiming that local authorities are in the “best position to determine the appropriate locations for oil and gas facilities and will properly balance the interests of all property owners as well as the effects on public health, wildlife and the environment.”

Colorado Bill Threatens Oil, NatGas Operators, Industry Says -- The Colorado House passed HB 1310 to the state senate last week, causing continued concern among officials at the Colorado Oil and Gas Association (COGA) and across the industry. HB 1310 narrowly passed out of committee earlier this month, causing concerns by the state's two main industry trade associations, which fear a chilling impact on oil and natural gas activities, including hydraulic fracturing (see Daily GPI, March 15). Those concerns were magnified when the measure was passed by the lower house last week and sent on to the state senate, though one knowledgeable capitol watcher told NGI it has little chance of passage. "The bill ignores 70 years of legal precedent as applied to the liability of oil/gas companies in Colorado and actually treats oil and gas as if it's hazardous waste rather than products that Coloradans rely on every single day," said COGA spokesman Doug Flanders. HB 1310 would "radically change" state law and legal standards, he said. "We're very disappointed that it passed out of the full House despite opposition from a broad and diverse coalition of business leaders and organizations." The measure's own language indicates that if were to be signed into law it "would hold oil and gas operators strictly liable for their conduct if oil/gas operations, including a hydraulic fracturing treatment or reinjection operations cause an earthquake." Plaintiffs would be given five years after discovery of alleged damages or injury to file a legal action. Any quake damage to the surface owner’s property could conceivably be found to be the liability of the oil/gas operators working in the area. The legislation makes it easier for the landowners to sue, and to allege oil and gas operations have harmed their land, structures on the land or any persons on their land.

Colorado oil and gas bill deserves defeat - The Denver Post: While officials in most Colorado cities and towns would seek responsible accommodation with the energy industry if they had final say in all siting decisions — indeed, most already do this — a few clearly would not choose such a course. They would instead either ban energy extraction outright or impose so many conditions and rules on permits as to make them impossible to obtain. They would effectively seize mineral property rights, in other words, with no intention of providing a cent in return. And never mind the Fifth Amendment's prohibition on taking private property without just compensation. It's those mineral property rights, it turns out, that distinguish oil and gas development from most other industries. We're not imagining this prospect, since a few jurisdictions have taken such action even in the face of case law that fails to support their cause. That's among the reasons House Bill 1355 is a bad idea, whatever its intent. In giving such crucial authority over oil and gas facilities to local governments, it turns on a green light to regulation driven not only by legitimate concern over local impacts — noise, transportation and a variety of other above-ground issues — but also a fervent anti-drilling ideology. In effect, the bill would displace the state as the ultimate authority on oil and gas drilling and undermine Colorado's clear interest in the orderly and safe production of energy.

Stanford Researchers: Fracking & Its Impact On Drinking Water Sources - Many have long speculated about fracking and its possible negative impact on drinking water. Recent research released today from Stanford scientists finds for the first time that fracking operations near Pavillion, Wyoming have had a clear impact on underground sources of drinking water. The research paints a picture of unsafe practices, including the dumping of drilling and production fluids containing diesel fuel, high chemical concentrations in unlined pits, and a lack of adequate cement barriers to protect groundwater. The new study has been published in Environmental Science & Technology. “This is a wake-up call,” said lead author Dominic DiGiulio, a visiting scholar at Stanford School of Earth, Energy & Environmental Sciences. “It’s perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources.” As part of the so-called frackwater they inject into the ground, drilling companies use proprietary blends that can include potentially dangerous chemicals such as benzene and xylene. When the wastewater comes back up after use, it often includes those and a range of potentially dangerous natural chemicals. “Decades of activities at Pavillion put people at risk. These are not best practices for most drillers,”

Fracking Contaminates Groundwater: Stanford Study - Another scientific study has confirmed that fracking, the controversial technology that blasts apart low-grade rocks containing molecules of hydrocarbons, can contaminate groundwater. "We have, for the first time, demonstrated impact to Underground Sources of Drinking Water (USDW) as a result of hydraulic fracturing," says the study published in the journal Environmental Science & Technology. Researchers from Stanford University published their findings after combing through publicly available data on the drilling, fracking and cementing of scores of tight gas wells in Pavillion, Wyoming. "Given the high frequency of injection of stimulation fluids into USDWs to support [coalbed methane] extraction and unknown frequency in tight gas formations, it is unlikely that impact to USDWs is limited to the Pavillion Field, requiring investigation elsewhere." The scientists matched chemical compounds used in fracking to chemicals found in two groundwater monitoring wells drilled by the U.S. Environmental Protection Agency in 2008. No jurisdiction in Canada has yet set up long-term groundwater monitoring wells to track the movement of contaminants from oil and gas drilling into groundwater. The researchers also discovered that industry fracked directly into aquifers at depths as shallow as 213 metres with highly toxic chemicals, including benzene.

New Study Confirms Fracking Contamination That The EPA Walked Back On In 2011 -- A new study out of Stanford University offers residents of Pavillion, Wyoming a little more clarity on an issue that has been plaguing them for nearly a decade: is hydraulic fracturing to blame for years of contamination in their drinking water?  The town initially made headlines in 2008, when residents began complaining of strange odors and tastes in their drinking water. In 2011 the EPA got involved, first issuing a draft report that connected fracking to the contamination. The agency later walked back on the report, however, and refused to issue a finalized version and instead handing the matter over to state officials. Years later, the state has yet to move forward with the report.This may be causing widespread impacts on drinking water resources. So researchers at Stanford decided to take measures into their own hands, looking at publicly available records and documents obtained through the Freedom of Information Act to see if they could pinpoint the source of Pavillion’s water contamination. Their conclusion, which was published earlier this week in Environmental Science and Technology, was that fracking operations near Pavillion have had a clear influence on the quality of groundwater. “This is a wake-up call,” lead author Dominic DiGiulio, a visiting scholar at Stanford School of Earth, Energy & Environmental Sciences, said in a press statement. “It’s perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources.”

Stanford University report finds fracking CAN pollute underground drinking water, conflicting with previous studies -- A newly released study of fracking in a small Wyoming town has found that common practices in the industry may have widespread impacts on drinking water – a conclusion in direct conflict to U.S. EPA and Yale University reports last year that no such evidence exists. The latest study was conducted by scientists at Stanford University based on findings from hydraulic fracturing operations in Pavillion, Wyoming, population 231. The findings were reached based on public records and were published in the latest edition of Environmental Science & Technology.The Stanford study found a direct link between fracking operations near the town and underground sources of drinking water. The research cited such unsafe practices as the dumping of drilling and production fluids containing diesel fuel, high chemical concentrations in unlined pits, and a lack of adequate cement barriers to protect groundwater."This is a wake-up call," said Dominic DiGiulio, a visiting scholar at the Stanford School of Earth, Energy & Environmental Sciences, and the lead author of the study. "It's perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources." Co-author Rob Jackson said, "Decades of activities at Pavillion put people at risk. These are not best practices for most drillers." Yale researchers released a report in October that concluded fracking does not contaminate drinking water, based on an analysis of groundwater collected from private residences in northeastern Pennsylvania. The study mirrored the EPA findings released in June.

New Research: ‘People at Risk’ Due to Fracking and Toxic Groundwater: A new study, called a “wake up call,” has revealed the link between hydraulic fracturing, or fracking, and poisoned groundwater. A Stanford University study, published in Environmental Science and Technology, has determined that there is a "clear impact" on groundwater in Pavillion, Wyoming, where residents have observed the quality of their water deteriorating since the 1990s. "This is a wake-up call," Dominic DiGiulio, the lead author of the study wrote. "It's perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources." The town of Pavillion is in close proximity to 180 drilling operations. In 2011, the Environmental Protection Agency (EPA) warned that the operations may have contaminated the town's water supply. Two years later, however, the EPA handed their investigation over to the state of Wyoming, after criticism from the local energy industries and the state's fossil fuel regulators, Common Dreams reported. Once the investigation was in their hands, state regulators stopped all research, despite an alert from the federal Agency for Toxic Substances and Disease Registry that residents not use tap water for drinking, cooking, or bathing. "When you look at everything as a whole, it seems implausible that all this is due to natural conditions," DiGiulio told InsideClimate News. "When you look at the compounds, it's a virtual fingerprint of chemicals used in the field."

Fracking Found Guilty of Contaminating Water Supply  --- Some background – these studies confirm that my pal John Fenton’s waster was contaminated by fracking. I met John at a conference in Colorado. We talked about his situation and it was apparent that his deep water well had been directly contaminated by rather shallow fracking operations – because there was not enough distance between the water strata and the frack target. Subsequent studies by the DOE confirmed that a frack can travel up to 2,000 feet vertically – far less than the separation between Fenton’s water well and the frack zone. DOE: Fracks Can Hit Aquifers! A DOE test well in Pennsylvania has proven that a frack can travel up to almost 2,000 feet. Which means that a frack can contaminate an aquifer – if the separation between the two is less than 2,000 feet. Immediately. That means that any fracked horizontal lateral that is closer than 2,000 feet to any aquifer may have already contaminated that aquifer. No longer a matter of “if” – just how many have been contaminated and by how much. The frackers were so worried that the EPA would find evidence of direct contamination that they persuaded the feds to shut the EPA studies down ! New independent studies now confirm the obvious: the frack was too close to the Fenton’s water, and so their water got fracked.  Truth will out.

Fracking in Wyoming Forces Residents to Find Water Elsewhere: The US state of Wyoming has provided cisterns for residents of an area where hydraulic fracturing, or fracking, in oil and gas wells has poisoned well water, Powder River Basin Resource Council organizer Shannon Anderson told Sputnik on Thursday. "Once fracking started, there was groundwater contamination both from the wells and also from pits, some leaks and that sort of thing," Anderson said in describing the town of Pavillion and surrounding areas. "The state has actually funded cistern systems for landowners to get new water sources because they can’t use ground water any more. Their domestic wells are polluted,"  . The Powder River Basin Resource Council operates a network of community organizers throughout Wyoming that focus on conserving natural resources in one of most pristine regions of the United States. . A study by Stanford University scientists published earlier this week shows dozens of instances between 2000 and 2005 where fracking near Pavillion took place at depths at or near the water level for domestic wells. The pollution from accumulated methane was so great that at one point flames would erupt when a lighted match was placed next to a sample of well water, Anderson explained. The Stanford study is likely to give fresh momentum to a nationwide effort to ban fracking, a process where water and chemicals are injected into the ground at high pressure to break apart rock formations to unlock pockets of oil and gas.

Regulators: More than 14,000 gallons of saltwater spill: North Dakota oil regulators say more than 14,000 gallons of saltwater have spilled from a central tank battery about 14 miles southwest of Grassy Butte in Billings County. The North Dakota Oil and Gas Division says Cobra Oil and Gas Corp. reported that the 14,280 gallons were released, contained and recovered at the site. The cause is listed as an equipment failure. The division says a state inspector has been to the site of the release. Saltwater, or brine, is a byproduct of oil production. It is many times saltier than sea water and can easily kill vegetation.

Opposition to Fracking Mounts in the U.S. - - -- Opposition to the practice of hydraulic fracturing or "fracking" has increased significantly in the past year as environmental concerns, such as earthquakes, have grown, even though the procedure has helped keep oil prices low.  In the past year, the price of oil has fluctuated between roughly $25 and $60 per barrel, a staggering drop from its peak of around $120 in mid-2014. One major reason the price of this commodity has remained so low is fracking, which now accounts for half of the oil production in the U.S. As recently as 2000, fracking made up only 2% of the nation's oil output. In Gallup's 2016 Environment survey, conducted March 2-6, Americans have a clearer position on fracking than they did a year ago. Last year, 40% said they favored fracking and 40% were opposed, with a substantial 19% not knowing about or having no opinion on fracking. In 2016, support for fracking has slipped to 36%, while opposition has climbed to 51%. The percentage of Americans with no opinion has dropped to 13%, perhaps as the term becomes more commonplace in the culture, or as the media has more extensively covered the arguments for and against fracking. Americans' turn against fracking comes as the percentage predicting there will be a critical energy shortage in the next five years has fallen to a new low, likely because of lower gas prices. With oil and gas relatively cheap, many Americans may not see the need to fracture the earth through fracking. Lower oil and gas prices may also be the reason a majority of Americans are opposed to nuclear energy for the first time. Additionally, more people would like to prioritize alternative energy over traditional energy sources. Fracking, while a relatively new way to extract oil, is still a means of harnessing fossil-fuel energy, helping explain why Americans may be growing averse to it. Republicans had the biggest drop in support for fracking, falling from 66% support in 2015 to 55% this year. Still, Republicans' support for fracking far exceeds support among independents (34%) and Democrats (25%). Views among the last two groups are essentially unchanged from last year.

Federal oil, gas leases stall over bird concerns in US West (AP) — Concerns over a bird that ranges across the American West continue to delay federal oil and gas lease sales, five months after Interior Secretary Sally Jewell proclaimed the Obama administration had found a way to balance drilling and conservation. The Interior Department said it will defer the sale of almost 60,000 acres of leases that were nominated by companies in eastern Montana as the agency works on new policies for greater sage grouse. More than 8 million acres of leases previously were deferred in Colorado, Utah, Nevada, Montana, North Dakota, South Dakota and Wyoming. It remains unclear when those will be freed up for sales or removed from consideration. Jewell said in September that Endangered Species Act protections were not needed for the grouse, a chicken-sized bird that inhabits sage brush ecosystems spread across 11 Western states. Grouse numbers declined significantly over the past several decades because of the loss of habitat. Officials said the decision to forgo protections avoided the need for draconian restrictions on drilling, livestock grazing and other activities that help drive the region’s economy. It followed a sweeping overhaul of federal public land management plans to limit drilling near grouse breeding areas and allowing oil and gas exploration to proceed elsewhere. The U.S. Bureau of Land Management still is crafting policies to put those plans into effect, agency spokesman Al Nash said. Completion of that work is several months away, he said.

New Mexico reviews water injection wells for damages  (AP) — New Mexico’s state land commissioner is ordering a broad examination of easements for injection wells used by the oil and natural gas industry to dispose of waste saltwater, in response to environmental damage at a site in the southeast of the state. State regulators blame Midland, Texas-based Siana Operating for spills of oily water at an injection well site 20 miles southwest of Eunice, New Mexico. They have been waiting for a remediation plan from the company to fix the damage and remove old equipment. Photographs taken by the land office showed an unlined pool of water, oil on the ground and traces of liquid on the ground nearby. Public Lands Commissioner Aubrey Dunn has instructed his agency’s district managers to look at each of about 60 saltwater disposal easements on state trust land for possible damages. Administrative reviews of leases also are planned. The site visits and reviews could take months to complete, agency spokeswoman Emily Strickler said. Wastewater from drilling operations is typically delivered by truck to disposal sites like Siana’s, where most oil is skimmed off before water is injected deep underground. State regulators accuse Siana of trespassing and damaging the site outside Eunice after it stopped making lease payments years ago. Siana owes $113,000 in unpaid royalties for water disposal and unpaid annual rental fees, according to a March 18 notice from the State Land Office.

This Is What's Happening To People Who Live Near The Worst Gas Leak In US History - On February 18, SoCalGas and the national media declared the “worst methane gas leak in U.S. history” permanently sealed, but just over a month later, hundreds of Porter Ranch residents who evacuated — and are now returning home — are suffering the same symptoms they suffered when the gas leak was active. They are experiencing nausea, dizziness, fatigue, headaches, nosebleeds, and many, including children, are also experiencing a new ailment: irritated skin rashes across their bodies. Neither SoCalGas, which owns the Aliso Canyon facility, the Los Angeles County Department of Public Health, nor any other government agency has provided a concrete explanation for these continued symptoms. In fact, one of Los Angeles County’s top medical officials recently told local physicians to refrain from performing tests to determine what is causing the symptoms. Late last week, preliminary lab tests from an independent UCLA study found evidence of benzene, a carcinogen, in at least two Porter Ranch homes. Benzene was reported to have been released in the 100 metric tons of methane that spewed into the Los Angeles basin for four months — a fact SoCalGas previously attempted to downplay and withholdMany residents have said the rashes, which can be extensive, are new and did not occur during the initial, months-long gas leak from October to February. During that time, thousands of families were evacuated and the Department of Public Health received 700 health complaints. Others reported experiencing skin irritation before they relocated, though it appears to be more widespread now.  “The main symptoms are headaches, difficulty breathing, watery eyes, coughing and general fatigue. It feels like I’m in a thick fog of sorts that’s oppressive,” she said. She and her husband were not eager to return home, still concerned about toxins in the area and the health of their newborn baby. But amid long delays receiving reimbursements from SoCalGas — and unable to charge more expenses on their credit card — they moved back to Porter Ranch. Ritenour told Anti-Media that like many other families, she and her husband have had to pay out-of-pocket for relocation services — and have experienced long delays receiving reimbursement checks.

Slow Train Coming – Crude By Rail Shipments to California Drying Up - Although California refineries initially met the criteria that spurred development of crude-by-rail (CBR) shipments to other coastal regions (lack of pipeline infrastructure and wide crude price differentials between stranded inland supplies and coastal alternatives) neither rail shipments or terminal build outs have made much of a dent in the Golden States’ crude supply. At their height in December 2013 CBR shipments into California reached 36 Mb/d – just 2% of the State’s 1.9 MMb/d refining capacity and they have since dwindled to a trickle. Today we examine the low pace of shipments. Recap: This is Part 7 in our series updating the sorry state of the CBR business in North America in 2016 compared to its heyday a few years back. In Part 1 of this series we noted CBR declines in response to narrower spreads between U.S. domestic crude benchmark WTI and international equivalent Brent. The lower spreads reduce the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines. CBR became a big deal when WTI was discounted to Brent by upwards of $25/Bbl in 2011 and 2012 because of congestion caused by a lack of pipeline capacity. Back then it made sense to use rail to get stranded crude to market. As a result, U.S. CBR shipments grew from 33 Mb/d in January 2010 to a peak of 928 Mb/d in October 2014 (according to Energy Information Administration - EIA). As new pipelines have been built out to provide less expensive options to get stranded crude to market so the WTI discount has narrowed and CBR traffic has declined. Primarily in response to the narrowing spread – overall CBR volumes fell during 2015 but not as fast as you might expect – dropping only 30% between January and December 2015 (latest EIA data) even though spot market economics for rail shipments often made no sense. As we discussed in Part 2 – looking at the epicenter of the CBR boom in North Dakota – the slower than expected decline in rail shipments is mostly because committed shippers and refiners continue to use rail infrastructure that they invested in (and made take-or-pay commitments to) and because some routes do not have pipeline access (East Coast and West Coast).

U.S. Lifted The Crude Oil Export Ban, And Exports Went…Down -- Just over three months after the authorities lifted the four-decade ban on crude oil exports, the U.S. has actually exported less this year than it did over the same period the year before, when the ban was still in place.  According to Clipper Data market intelligence cited by the Financial Times, we’ve seen a 5 percent decline in U.S. crude oil export volumes since the beginning of this year. The data suggests that on average we are exporting (waterborne) 325,000 barrels per day now, compared to 342,000 barrels per day during the first months of 2015.  And there’s no official data yet—not since the beginning of this year, when the U.S. Energy Information Administration (EIA) noted that during the week ending 22 January, the U.S. had exported just shy of 400,000 barrels of oil, which again was 25 percent less than what was exported for the same week in 2014.An oil tanker that reached a French port in January was the first post-ban delivery of U.S. crude oil, but things haven’t really picked up pace since then.January’s cargoes, totaling about 11.3 million barrels, marked a 7 percent decline from U.S. crude exports in December, according to data by the U.S. Census Bureau. Shipments during January went to Curacao and France, in addition to Canada, the primary destination. The total number of tankers that have set sail with U.S. crude oil will not be known until comprehensive data on February’s shipments is released by the U.S. Census Bureau.  Europe and Asia are flooded with oil from Russia and the Middle East, though the first two shipments to leave the U.S. post-export ban went to Europe: one to Germany and the other to France, to be used in a refinery in Switzerland. Dutch media outlets reported in January that a tanker from Houston had reached Rotterdam port, but this remains just a drop in the global export bucket.

The U.S. Is a Big Oil Importer Again - In the three months since the U.S. lifted its 40-year ban on crude oil exports, a curious thing has happened. Rather than flooding global markets, U.S. crude shipments to foreign buyers have stalled. At the same time, imports into the U.S. jumped to a three-year high in what looks to be a reversal of a yearslong decline in the amount of foreign crude brought into the American market. As of March 25, the four-week average of imports was running at 7.9 million barrels a day, 9.8 percent higher than the year before. “That’s not a one-week blip,” says Tim Evans, an energy analyst at Citi Futures. “We’re seeing a consistent pattern.”   U.S. producers, who reaped the benefits of the shale revolution, no longer enjoy a steep price advantage over foreign rivals in selling to domestic refiners. Production has fallen by about 600,000 barrels a day from its peak of 9.6 million in 2015. Now refineries are buying foreign oil to replace the lost U.S. output—and, along with traders, are storing much of the less-expensive imported oil to sell when prices rise.  A week before the Senate approved lifting the export ban on Dec. 18, WTI traded around $3 below Brent. Over the next month, the discount disappeared, and, for the first time in six years, WTI traded at a premium to Brent for a few days in January. WTI is now less than a dollar cheaper than foreign barrels available on the Gulf Coast.  So refineries along the coasts are choosing to buy imports instead of WTI. One of the biggest winners is Nigeria, which is regaining lost market share. Imports from Nigeria surged to 559,000 barrels a day in mid-March, compared with an average of 52,000 for all of 2015. Refiners are also taking more heavy oil from Mexico and Venezuela. Not only is it about $9 a barrel cheaper than WTI, it’s also what U.S. refineries prefer to handle.

Scramble for oil storage extends, suggesting excess has room to run - (Reuters) - Trading houses are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of falling production. Traders such as Vitol, Gunvor and Glencore are looking to extend or lock in new leases on storage tanks for crude oil and refined products in key hubs as far out as the end of 2018, sources at storage firms and trading houses say. Storing oil in a heavily oversupplied market has been a cash cow for traders and oil companies in recent years as markets bet that future oil prices will be significantly higher than current ones, in what is known as contango. Ian Taylor, chief executive of top oil trader Vitol, said on Tuesday that "stocks of crude and products continue to build and these will weigh upon the market". Like other traders, Vitol has invested in recent years in storage, and last August acquired the other half of its VTTI storage subsidiary for $830 million (£586 million). Oil prices have risen 30 percent since mid-February to around $40 per barrel, as global production shows signs of slowing, which has led to a significant narrowing of the crude contango despite a stock overhang of 300 million barrels. Crude oil has found more of a balance in recent weeks through supply disruptions in Iraq, Libya and Nigeria.

Oil Explorers Face Challenge to Secure Financing as Oil Prices Fall - Just a few years ago, when oil sold for about $100 a barrel, banks here were lining up to give international oil explorers access to billions of dollars to finance new drilling and projects. But as oil prices stay mired in a funk, the money is drying up. Senior executives from companies such as Tullow Oil and Cairn Energy have been meeting with their bankers for a biannual review of the loans that allow them to keep drilling and building out projects. For many European companies, it has been a nail-biting experience, as banks worry about the growing pile of debt taken on by oil companies with little or no profits. Several companies said they expect their ability to tap credit lines to be diminished after the reviews. Some lenders have brought in teams that specialize in corporate restructuring to scrutinize companies’ balance sheets, spending and assets, though not at Tullow or Cairn, a person familiar with the matter said. In the past, the reviews were generally conducted solely by banks’ energy specialists.The new scrutiny in Europe comes as oil-company debt emerges as an issue across the world with prices for crude near $40 a barrel—down more than 60% from June 2014. Globally, the net debt of publicly listed oil and gas companies has nearly tripled over the past decade to $549 billion in 2015, excluding state-owned oil companies, according to Wood Mackenzie, the energy consultancy. Reviews of these loans have high stakes. If a bank decides a company has already borrowed more than it can afford, the reviews could trigger a repayment, more cost cuts or even a fire sale of assets to raise cash.

SandRidge eyes bankruptcy, restructuring in U.S. shale bust - (Reuters) - SandRidge Energy Inc confirmed on Wednesday it has hired advisers to evaluate options including a bankruptcy filing, in what could be the most high-profile reorganization yet in U.S. shale oil industry. The company, battered by a 60 percent slide in oil prices since mid-2014, said in a regulatory filing there was substantial doubt about its financial viability. The company "has engaged advisors to assist with a private restructuring or reorganization under Title 11 of the U.S. Bankruptcy Code in the foreseeable future," the filing said. ( SandRidge officials could not immediately be reached by phone. SandRidge is one of dozens of oil and gas companies with piles of debt that look increasingly difficult to pay as revenues, oil and gas output, and reserves tumble on low prices. A pullback in expensive new drilling means SandRidge's oil and gas output fell 18 percent in the fourth quarter of 2015 compared with the same period a year ago. Reuters reported in January that the heavily indebted oil and gas company was exploring debt restructuring options, including an orderly bankruptcy. SandRidge, which is working with law firm Kirkland & Ellis and investment bank Houlihan Lokey on restructuring options, has drawn down its revolving credit line and has tried to trim costs with asset sales and job cuts. In December, Capital One Securities ranked SandRidge as the most indebted of 50 U.S. shale oil producers, noting that its net debt to cash flow ratio exceeded 10, far above a ratio of 2 that analysts consider desirable. (

Hybrid airship deal could benefit oil, mining industries (AP) — The long-held vision of giant airships nearly the length of a Canadian football field delivering workers and supplies to the oilsands and the North’s mining sector is a step closer to reality. U.S.-based Lockheed Martin has announced it has a letter of intent to sell 12 hybrid airships to Straightline Aviation of the United Kingdom. Straightline and Hybrid Enterprises, Lockheed Martin’s hybrid airship reseller, are finalizing the purchase agreement, which has a potential value of US$480 million. Straightline expects to start receiving the airships, which have a maximum speed of 110 kilometres an hour and a cargo capacity of 20 tonnes, in 2018 with the final ones arriving by 2021. The airships are expected to be deployed in Canada’s North, Alaska, southeast Asia and the Middle East. "They have to find ways of getting oil out of the ground less expensively, more efficiently, without compromising safety.” Zeppelins have long been held out as a promising idea to serve as a workhorse in Canada’s North and the oilsands, where huge pieces of heavy equipment often need to be transported to places with no all-weather roads.

Quakes from fracking on the rise in Canada - While man-made earthquakes in the central United States have been linked to disposal of drilling wastewater, a new paper links a growing pattern of quakes in western Canada to the specific practice of hydraulic fracturing. A team of scientists from Canadian universities and government agencies compared earthquakes in a broad swath of western Canada to "fracked" oil and gas wells and found a strong correlation. "In western Canada," the study said, "most recent cases of induced seismicity are highly correlated in time and space with hydraulic fracturing."  Their paper, being published today online in the journal Seismological Research Letters, linked quakes to 39 fracked wells in the foothills region of the Western Canada Sedimentary Basin. They also correlated seismicity linked to disposal operations, but that trend has remained steady in recent years. The number of quakes linked to fracking has shot up significantly. The earthquakes in the United States linked to fracturing have been relatively weak, usually barely strong enough to be felt. But quakes linked to fracking in Canada have been as strong as magnitude 4.6.

90 per cent of seismic activity in B.C.-Alberta region linked to fracking: Study: A new report, set to be published in the journal of the Seismological Society of America, examines an area straddling the B.C.-Alberta border and finds that between 90 and 95 per cent of seismic activity Magnitude 3 or larger in the last five years was caused by oil and gas activity, with most of it linked to hydraulic fracturing, or “fracking.” "The biggest implication of this study is that we can no longer deny the link between induced earthquakes and hydraulic fracturing," said Honn Kao, an earthquake seismologist with the Geological Survey of Canada and co-author of the report. Asked if more work is needed to better understand the link between seismic activity and resource extraction in Western Canada, Kao said: "The answer is definitely yes. "We now know much more about induced seismicity than four years ago when our research project started. But we still have a long way to go before we can claim that the phenomenon is well-understood," The report notes that between 2010 and 2015, "both seismicity rates and the number of HF (fracking) wells rose sharply," adding: "It is remarkable that, since 1985, most of the observed M =3 seismicity (activity of Magnitude 3 or greater) in the WCSB appears to be associated with oil and gas activity."

Fracking, not disposal, behind human-caused earthquakes in western Canada: study - New research suggests that hydraulic fracking of oil and gas wells is behind human-caused earthquakes in western Canada. The study, published Tuesday by a group of top Canadian researchers, concluded that it isn’t injecting wastewater underground that’s causing problems in Alberta and British Columbia — a major step in understanding seismic events in those provinces that have already changed regulations and caused public concern.“It’s critical that we get to a complete scientific understanding of the issue,” said David Eaton, a University of Calgary geophysicist and a co-author of the study. Fracking involves pumping high-pressure fluids underground to create tiny cracks in rock and release natural gas or oil held inside. Scientists have previously concluded that oilpatch activity can cause earthquakes by making it easier for faults in underground rock to slip, but they didn’t know whether the Canadian quakes were caused by fracking or by the injection of wastewater back underground.  Public interest in the issue has been high, especially after an event in January shook pictures on the walls of homes in Fox Creek, Alta., a community in the centre of the Duvernay oil and gas field. Measuring between a 4.2 and 4.8 magnitude, that quake was the largest of hundreds of similar shakers around the community since 2013.

Fracking—not wastewater disposal—linked to most induced earthquakes in Western Canada: A survey of a major oil and natural gas-producing region in Western Canada suggests a link between hydraulic fracturing or "fracking" and induced earthquakes in the region, according to a new report published online in the journal Seismological Research Letters. The study's findings differ from those reported from oil and gas fields in the central United States, where fracking is not considered to be the main cause of a sharp rise in induced seismicity in the region. Instead, the proliferation of hundreds of small earthquakes in that part of the U.S. is thought to be caused primarily by massive amounts of wastewater injected back into the ground after oil and gas recovery. The SRL study does not examine why induced seismicity would be linked to different processes in the central U.S. and western Canada. However, some oil and gas fields in the U.S., especially Oklahoma, use "very large amounts of water" in their operations, leading to much more wastewater disposal than in Canadian operations, said Gail M. Atkinson of Western University. It is possible that massive wastewater disposal in the U.S. is "masking another signal" of induced seismicity caused by fracking, Atkinson said. "So we're not entirely sure that there isn't more seismicity in the central U.S. from hydraulic fracturing than is widely recognized." The fracking process uses high-pressure injections of fluid to break apart rock and release trapped oil and natural gas. Both fracking and wastewater injections can increase the fluid pressure in the natural pores and fractures in rock, or change the state of stress on existing faults, to produce earthquakes.

Fracking Is Triggering Major Earthquakes in Western Canada - The vast majority of large earthquakes that rocked British Columbia and Alberta last year were caused by the oil and gas sector, and especially hydraulic fracking, according to a new report. The comprehensive study — published in the peer-reviewed journal Seismological Research Letters — looked at 12,389 fracking wells and 1,236 wastewater wells along the B.C.-Alberta border. The good news is only a small fraction of them — 39 fracking wells and 17 wastewater wells — caused any caused seismic activity. But the few that did were responsible for 90 per cent of seismic events over magnitude 3.0 to hit the region during the last five years. Fracking wells, specifically, were deemed responsible for 60 per cent. While there's been no damage or injuries connected to these human-triggered quakes, lead author Gail Atkinson worries it's only a matter of time. "Only a small fraction of hydraulic fracture wells induce significant earthquakes, but there are so many drilled every year, that this significantly changes seismic hazard in the region, and poses risks to critical infrastructure in the immediate vicinity of such operations," Atkinson, a professor at the University of Western Ontario's Department of Earth Sciences and an expert in seismic hazards, told VICE News. "These risks need to be more carefully considered and regulated to avoid damage."

Many Man-Made Earthquakes in Western Canada Can Now Be Linked to Fracking - Some fracking operations in western Canada are producing a surprising—and for many Canadians, troubling—side effect: earthquakes.  How widespread is the problem? According to a new study published Tuesday, at least 39 fracked wells in Alberta and British Columbia are suspected of triggering about 65 earthquakes between 2010 and 2015. "We now confirm that many induced earthquakes in Western Canada can be linked to hydraulic fracturing operations," study author Honn Kao wrote in an email to InsideClimate News. Kao is a scientist at Natural Resources Canada, the country's main environmental regulatory agency. The Canadian study is the latest in a string of investigations focusing on man-made quakes tied to the oil and gas industry in North America. Earlier this week, the United States Geological Survey published new maps that took into account the threat of man-made, or "induced," events for the first time. Unlike in Canada, however, the main culprit for man-made quakes in the central and eastern U.S. is the deep underground disposal of oil-and-gas-related wastewater—not fracking.Kao, along with his 12 colleagues from academia and government, also examined the link between wastewater disposal wells and earthquakes in Canada. They found wastewater activities had a smaller impact on earthquakes there, identifying 17 disposal wells with possible links to past seismicity, according to their work published in the journal Seismological Research Letters.

What the frack? Fracking may cause 90 percent of earthquakes in Western Canada: A new paper due to be released by the Geological Survey of Canada argues that more than 90 percent of the large earthquakes being caused in Canada may be the result of fracking. Proponents of fracking have long argued that the intensive extraction process will not induce earthquakes, but mounting evidence says otherwise. “Fracking” is a process by which high pressure water and chemicals are injected into cracks and holes in the earth. This forces natural gas and oil to the surface. The new study has discovered a link between hydraulic fracturing and the vast majority of the major earthquakes that have occurred in British Columbia and Alberta's oil fields since 1985.  Researchers examined every earthquake of a magnitude 3.0 or greater on the Richter scale since 1985. They also examined data from 12,289 hydraulically fractured wells. The researchers then found that more than 90 percent of the earthquakes appeared to be associated with a hydraulic well. Looking at the data further, scientists could only find links to seismic activity in roughly 5 to 10 percent of the earthquakes. Fracking induced earthquakes appear to be caused both by the initial drilling process, and the re-injection of waste water back into the earth after the process is completed. In the United States, fracking is suspected of causing earthquakes in Oklahoma, California, Colorado, and elsewhere. The full paper will be featured in the May-June issue of the journal of the Seismological Society of America.

Fracking earthquakes are rare, isolated events, says B.C. Oil and Gas Commission - Earthquakes from fracking are rare and usually not felt, says the B.C. Oil and Gas Commission, in response to a report released last week that show a definite link between hydraulic fracturing and large earthquakes. The report says 90 per cent of all large earthquakes with a magnitude larger than 3.0 in northeastern B.C are linked to fracking. It is simply a matter of time before a fracking-triggered earthquake causes damage, said one of the report's lead authors. However, the report also said less than one percent of fracking wells directly trigger earthquakes. That's the piece of information the oil and gas industry is highlighting. "These are isolated events, they're rare events. It's very rare that they are ever felt at surface," said Ken Paulson, chief operating officer for the B.C. Oil and Gas Commission.  Any wells that cause a 4.0 magnitude or larger earthquake must shut down and implement measures that mitigate the risk for another earthquake, said Paulson. "You can reduce the pressures or you can reduce the pump rates," he said. Alternatively, well operators can choose to avoid the fault altogether.

Alberta and oil prices: How Middle East geopolitics and religion affect our future - Calgary - CBC News: Calgary is unlike most other cities. It is a city of 1.2 million people separated from its two nearest urban neighbours by 300 kilometres of prairie and 1,000 kilometres of mountains. Yet as a city Calgary's economic fortunes are affected less by the surrounding landscapes and neighbouring cities, and more by difficult-to-comprehend and impossible-to-influence decisions made on the other side of the planet.   For better or for worse Calgary's well-being and prospects hinge on the world price of oil. Here is a look at the escalating rivalry between Iran and Saudi Arabia and what its impact might be on Calgary.

Fracking and man-made earthquakes in NZ: If fracking and deep well injection of the waste produced by fracking, is causing earthquakes in the US, are the same activities undertaken here causing earthquakes in New Zealand ?If fracking and ‘deep well injection’ of the waste produced by fracking, is causing earthquakes in the US, are the same activities undertaken here causing earthquakes in New Zealand ? 24 separate fracking procedures went ahead at just one well pad in Taranaki between Jan and March of this year. The oil and gas industry in New Zealand have aggressively adopted the technique known as hydraulic fracturing, or fracking, to shatter subsurface tightsand rock and liberate oil and gas from within that rock. And just like in the US, this process results in tremendous amounts of chemical-laden wastewater, which is disposed of by pumping it under pressure, into deep wells. The industry is so aggressive in NZ, they even fracked on Easter Friday, one of only two days in the year when business is expected to give way to family and religious rights. It is great that the Herald reports on the dangers of fracking in America, but now, we need media to get stuck in at home and report on the dangerous situation right here. With more than 1200 oil and gas wells drilled in and around NZ, and hydraulic fracturing being used routinely throughout Taranaki with plans to expand, the risk to our communities must be made known to all and no longer swept under the national rug.

Let’s listen to all the fracking arguments - I honestly don’t know how I feel about fracking - you hear a lot of horror reports of environment disaster in America, of landscapes laid bare and poisonous vapours spilling from the earth. Fracking companies will, no doubt, say that these are historical issues, that huge advances have been made and that checks and measures in the UK would protect our communities from the worst of the ecological impact. There is also a legitimate business argument for shale extraction - that it will create a lot of jobs and it will plough a lot of money back into rundown areas. Plus, there is also a genuine need for us to provide fuel as other natural resources diminish, or have to be imported from an increasingly unstable world. The other argument, of course, is that we are relying on information from a certain point of view. We are told that reserves are diminishing, that coal streams are no longer ‘sustainable’, and that alternatives need to be sought. You could, of course, rephrase this as ‘getting the rest of the coal out of UK streams will cost the shareholders’ and therefore we’d much sooner just close everything down and import in the cheap stuff in from abroad. Fracking, we can assume, means big money - particularly if they are prepared to throw millions at the communities that it impacts on. But then, this is nothing new. Much of our region has had its coal taken out, its landscapes marred and its economy blighted for generations. What is different is that, in the case of coal, those who made the profit kept all of it. What I do know, however, is that there are a lot of arguments spinning around here, and we should listen to them all.

Spain's Lower House of Parliament Approves Ban on Fracking: Spain’s lower house of parliament, the Congress of Deputies, on Tuesday adopted a draft law that would ban the oil and gas companies from production with the help of hydraulic fracturing, known as fracking.  The draft law was proposed by the Left Republicans of Catalonia party and was supported by the parliamentary majority. Two parties — the right-wing conservative People’s Party and the center-right regionalist Asturias Forum — voted against the proposal. The centrist Citizens party abstained from a vote. The law requires the government to ban all fracking-related activities, citing environmental concerns. Over 120 companies have been granted a license for fracking across Spain. Canadian energy company BNK, which is planning to extract oil in the Burgos province, is ready to start work in late 2016.

Argentina oil production extends decline as rig activity slows - Argentina’s oil production declined 1.6% in January, extending a slide that started in 1998, energy ministry data reveals. Crude production dropped to 524,947 barrels per day (BPD) in January, from 533,261 BPD one year earlier, the ministry said. January’s production was 38% less than the record 847,000 BPD in 2004, Platts reported. “Most of the fields in Argentina are mature and they are declining in production,” Alejandro Gagliano, a partner at Giga Consulting, an oil industry consulting firm in Buenos Aires, told Platts Tuesday. “A lot of investment is needed to sustain production.” Argentina has not attracted much oil investment since a 2001-02 economic crisis ushered in a populist-left government whose policies cut profit potential and made it harder for businesses to plan. These included price caps, trade restrictions and bans on paying dividends abroad. A lack of access to foreign capital markets and low interest rates, a response to the country’s $100 billion bond default in 2001, further discouraged spending. Foreign companies left, and those that stayed reduced spending. The country’s rig count fell to roughly 45 in 2002, from 50-100 in the mid-1990s, when production was growing after the county started opening up fields for private investment, Kallanish Energy reports. More rigs were deployed during the 2000s, reaching an average of 60 to 90, according to Baker Hughes. The fleet reached a peak of 112 in November 2014, holding steady above 100 between March 2014 and November 2015, Platts reports.

Norway Has More Problems Than Just $40 Oil -- Bloomberg -- Over the past 25 years, exploration wells off Norway averaged 27 million bbls -- 27 million bbls/exploration well -- until this past year. This past year, on average, each exploratory well off Norway averaged less than 5 million bbls of oil and gas.  Bloomberg is reporting Norway has more problems than $40 oil: The collapse of crude prices isn’t the only problem facing energy companies in Norway: Explorers in western Europe’s biggest oil-producing nation also have had their leanest drilling spell in almost a decade. Companies searching off Norway found less than 5 million barrels of oil and gas for every exploration well drilled last year, the lowest ratio since 2006. That compares with a 27 million-barrel average over the past 25 years.   The dismal results, due in part to the depletion of the North Sea, are bad news for a country whose oil production has shrunk by half since 2000. The slump in prices has already dried up income from crude extraction, which feeds the world’s biggest sovereign wealth fund and has made Norwegians some of the richest people on the planet. In January the government made its first withdrawal from the fund since it was set up in the 1990s as the market rout eroded growth.   The dwindling drilling success has left the country’s top explorers -- Statoil ASA and Lundin Petroleum AB -- impatient to tap an entirely new region of the nation’s Arctic, bordering Russian waters. Norway plans to award licenses in an area known as the Barents Sea Southeast before summer and drilling could begin as soon as 2017.

Holy Gas: Donald Trump’s Foreign Policy Team Member Pushed Offshore Drilling in Israel“ --  When Republican Party presidential campaign front-runner Donald Trump named 2009 DePaul University graduate George Papadoupolous as a member of his foreign policy advisory team, some in the media raised eyebrows, while others jested that his wunderkind status makes him more likely to serve as office coffee fetcher than in a position of such prestige. But you aren’t named to sit on such a team without serious connections, few of which the media made with regards to Papadoupolous, who has spent most of his professional career working as a research assistant at the Hudson Institute and now works as director of the Center for International Energy and Natural Resources Law & Security at the London Center of International Law Practice. The story of who Papadoupolous is begins and ends with the Hudson Institute, a think-tank with a long history of climate change denial and anti-science advocacy. A DeSmog investigation has revealed that the Hudson Institute, via Koch Brother’s funding its advocacy efforts, has proven instrumental in opening up Israel’s offshore natural gas reserves for drilling in the Mediterranean Sea for Noble Energy. Likewise, the efforts of Papadoupolous have helped pave the way for Noble to tap into the Mediterranean. One may not realize the full extent of this, though, without some Hebrew language skills.

UNAOIL: How the West Bought Iraq -- Basil Al Jarah was an oil industry fixer. But had authorities known his true business, they might have taken a far keener interest in the man waiting for a plane to Amman in 2011. Because by that stage, Al Jarah and his employer, a Monaco-based company called Unaoil, had cultivated an astonishing web of influence in the upper echelons of Iraqi power – all based on the simple expedient of bribing the right man at the right time. As tens of thousands of secret emails reveal, Al Jarah and Unaoil were at the heart of a global bribery operation funded, sometimes wittingly, by dozens of US, British, European and Australian multinationals. These firms paid huge sums to Unaoil. In return, Unaoil used its friends in high places to win billions of dollars worth of government contracts. In Iraq, the man charged with making those friends was Al Jarah. From 2003 onwards, he used his influence to help deliver huge contracts to Unaoil's clients. It did not matter if these clients were more expensive or less capable than their competitors. Unaoil and Al Jarah were, in effect, fleecing the people of Iraq, and in the process making a mockery of the US government's promise, after toppling Saddam Hussein, to ensure Iraq's oil wealth would benefit all Iraqis.  Al Jarah was careful to cover his tracks. He struck deals in hotel rooms late at night and used code words to communicate. To understand the scale of Unaoil’s Iraq operation, someone would have to break these codes. And to do that they would need access to thousands of emails. It is almost certain Al Jarah never believed this possible.  But last year, Fairfax Media and Huffington Post began investigating the underbelly of the global oil and gas industry. After many months of digging and a trip across Europe, our reporters uncovered a treasure trove of emails and memos.  They reveal him routinely bribing government officials who were deemed “useful to us” and to Unaoil's clients – multinationals such as British firms Rolls-Royce, Petrofac and Clyde Pumps, US listed giants Weatherford, Cameron/Natco and FMC Technologies and European firms such Saipem, SBM Offshore and MAN Turbo.

Unaoil Bribery Scandal: The company that bribed the world -- In the list of the world's great companies, Unaoil is nowhere to be seen. But for the best part of the past two decades, the family business from Monaco has systematically corrupted the global oil industry, distributing many millions of dollars worth of bribes on behalf of corporate behemoths including Samsung, Rolls-Royce, Halliburton and Australia's own Leighton Holdings. Now a vast cache of leaked emails and documents has confirmed what many suspected about the oil industry, and has laid bare the activities of the world's super-bagman as it has bought off officials and rigged contracts around the world. Amassive leak of confidential documents has for the first time exposed the true extent of corruption within the oil industry, implicating dozens of leading companies, bureaucrats and politicians in a sophisticated global web of bribery and graft. After a six-month investigation across two continents, Fairfax Media andThe Huffington Post can reveal that billions of dollars of government contracts were awarded as the direct result of bribes paid on behalf of firms including British icon Rolls-Royce, US giant Halliburton, Australia’s Leighton Holdings and Korean heavyweights Samsung and Hyundai. The investigation centres on a Monaco company called Unaoil, run by the jet-setting Ahsani clan. Following a coded ad in a French newspaper, a series of clandestine meetings and midnight phone calls led to our reporters obtaining hundreds of thousands of the Ahsanis’ leaked emails and documents. The trove reveals how they rub shoulders with royalty, party in style, mock anti-corruption agencies and operate a secret network of fixers and middlemen throughout the world’s oil producing nations.

There's A Huge New Corporate Corruption Scandal. Here's Why Everyone Should Care.: Most people remember that the Arab Spring started with a guy who lit himself on fire. What they don’t remember is that he did it as a protest against corruption:   The Arab Spring was “mostly about corruption,” said FBI Special Agent George McEachern, one of the leading investigators of global graft. “Corruption leads to failed states, which leads to terrorism." That's what makes the corruption revealed in a new trove of confidential emails from a mysterious Monaco-based company called Unaoil so significant. On Wednesday, The Huffington Post and its Australian partner, Fairfax Media published the results of a months-long investigation of Unaoil, an obscure firm that helps big multinational corporations win contracts in areas of the world where corruption is common. Hundreds of major international corporations -- including Halliburton, its former subsidiary KBR, Rolls-Royce and Samsung -- counted on Unaoil to secure lucrative contracts in Iraq, Kazakhstan, Libya, Syria, Tunisia, and other countries in Africa, the Middle East, and the former Soviet Union, tens of thousands of internal emails and documents reveal. It's common for large multinational corporations to partner with smaller firms with local expertise to win contracts. But in many cases, Unaoil wasn't winning contracts because of its expertise -- it was winning them by paying millions of dollars in bribes to corrupt officials.

Mainstream Media Ignores Blockbuster Expose of Massive Bribery in Iraq by Unaoil -- Yves Smith - The only rationale that made sense for why the US launched the Iraq War was fun and profit, specifically, to develop Iraq’s oil reserves, the second biggest in the world. Under Saddam Hussein, development and even maintenance had languished. The oil for food program, which was meant to assure that oil revenues were spent on food, pharmaceutical, and other essentials for the population, was rife with bribery. If you look at the Wikipedia entry, you’ll be impressed by how many were on the take, including even some reporters who received oil “coupons” that entitled holders to receive at least nine million barrels of oil.    Even though George Bush declared that Iraq’s oil belonged to the Iraqi people (which meant the West would still “help” and take its cut), a blockbuster report from a joint investigation by Fairfax Media and Huffington Post reveals the depth and reach of a massive looting scheme, with an obscure Monaco family oil company, Unaoil, as the fixer in chief. The story implicates a large number of multinational companies as well as two Iraqi oil ministers. At least one of the concerns called out in the story, Rolls Royce, is already under investigation by the UK’s Serious Fraud Office.. The overview and first story from this three part series have been releases. From the overview: A massive leak of confidential documents has for the first time exposed the true extent of corruption within the oil industry, implicating dozens of leading companies, bureaucrats and politicians in a sophisticated global web of bribery and graft. After a six-month investigation across two continents, Fairfax Media and The Huffington Post can reveal that billions of dollars of government contracts were awarded as the direct result of bribes paid on behalf of firms including British icon Rolls-Royce, US giant Halliburton, Australia’s Leighton Holdings and Korean heavyweights Samsung and Hyundai….Rolls-Royce and Petrofac from Britain; US companies FMC Technologies, Cameron and Weatherford; Italian giants Eni and Saipem; German companies MAN Turbo (now know as MAN Diesal & Turbo) and Siemens; Dutch firm SBM Offshore; and Indian giant Larsen & Toubro. They also show the offshore arm of Australian company Leighton Holdings was involved in serious, calculated corruption.

Unaoil Corruption Scandal: Monaco Raids Company Offices Amid Revelation Of Involvement Of Foreign Companies --  Police officials in Monaco raided offices and homes of officials from oil company Unaoil on a request from the United Kingdom after allegations of corruption, involving several foreign companies. The large-scale corruption was revealed in a joint report Thursday by Australia's Fairfax Media and the Huffington Post which said that Unaoil and its owners — the Ahsani family — used multi-million dollar commissions to bribe corrupt government officials in oil-rich countries to win contracts for companies like Texas-based oilfield services giant Halliburton, its former subsidiary KBR, U.K.-based automaker Rolls-Royce, South Korean conglomerate Samsung and automaker Hyundai. Monaco government said in a statement on its website, cited by Reuters, on Friday that the U.K.’s Serious Fraud Office (SFO) had sent an urgent request for international assistance in criminal matters. The joint report by the two media outlets said the U.S. Department of Justice, anti-corruption police in the U.K. and Australia had started a joint investigation into the dealings of Unaoil. Although the Reuters report said the company has not yet commented on the scandal, the Thursday joint report said the company denied any wrongdoing. “Monaco authorities conducted searches of the homes of the leaders of the company Unaoil and at its headquarters in the Principality,” the statement from Monaco’s government said, according to Sydney Morning Herald, adding: “The leaders of this company were also interviewed on 29 and 30 March 2016. These searches and interviews were conducted in the presence of British officers, in connection with a case of vast corruption with international ramifications that involves many foreign companies active in the petroleum sector.”The statement added: “The items collected during the search will be now be used by the British authorities in their investigations.”

Police Raid Offices Of Monaco Firm Accused Of Bribing World's Oil Producers -- Two days ago we brought you excerpts from a Huffington Post investigative report on Unaoil, a previously obscure Monaco company that allegedly functions as a kind of Bribery Incorporated for state actors looking to curry favor with the world’s oil exporters. A treasure trove comprising “hundreds of thousands” of leaked e-mails and documents led Huff Post and Fairfax Media to publish an expose on the “jet-setting Ahsani clan” which apparently has links to nearly every producing country on the planet and knows just which palms to grease when Western governments need to make inroads."They rub shoulders with royalty, party in style, mock anti-corruption agencies and operate a secret network of fixers and middlemen throughout the world’s oil producing nations," Huff Post wrote, on the way to documenting the Ahsani family's connections to Bashar al-Assad, Muammar Gaddafi, and the regime in Tehran, among other governments. Pictured below are Ata Ahsani and his two sons, Cyrus and Saman. Apparently, the family is worth more than $200 million which Huff Post reckons makes them part of the "global elite." The shady family business has been certified by anti-corruption agency Trace International which the Post rightly says "raises serious questions about the worth of such international accreditation."  On Friday, we learn that the Ahsanis' homes as well as Unaoil's offices have been raided by authorities at the request of Britain's Serious Fraud Office. "Authorities in Monaco have raided the headquarters of an oil company, as well as the homes of some of its bosses, as part of a British-led investigation into a corruption scandal implicating businesses all over the world," The Guardian writes. "In a statement released on Thursday, it said that the Monaco-based firm Unaoil was at the centre of the inquiry and that officials had acted after an urgent request for assistance from the UK’s Serious Fraud Office (SFO)." “These searches and interviews were carried out in the presence of British officials as part of a vast, international corruption scandal implicating numerous foreign oil industry firms," Monaco said in a statement. "The information collected is going to be examined by the British authorities as part of their investigation."

Unaoil raided on corruption charges in Monaco, multinationals implicated - Oil company Unaoil and the homes of its bosses have been raided by authorities in Monaco as part of a UK-led corruption investigation involving several multinational oil businesses. Unaoil directors were questioned by Monaco police on Tuesday and Wednesday, the Monaco government said in a statement. Officials in the principality acted after receiving a request from the UK’s Serious Fraud Office (SFO) and information collected by Monaco’s investigation will be used by UK authorities as part of their investigation, the statement said. The raid follows a joint report published on Wednesday by Australia’s Fairfax Media and the Huffington Post. The report alleges Unaoil “systematically corrupted the global oil industry” by paying millions in bribes on behalf of multinational oil companies to secure contracts in countries such as Kazakhstan and Iraq. Eni is one of the companies implicated by the report. The Italy-based oil producer told Reuters it plans to investigate the claims of corruption, adding that “none of the people mentioned in the articles are currently employed by Eni”. Unaoil’s chief executive, Ata Ahsani, said “The answer is absolutely no” when asked by both publications whether Unaoil had paid bribes. The joint report is the result of a six-month investigation by journalists, and cites hundreds of thousands of internal emails sent between 2002 and 2012. Unaoil has reportedly not questioned the authenticity of the files. Fairfax Media said the emails hold evidence of bribes paid to Middle Eastern oil chiefs and other officials. A number of unnamed Australian companies, including WorleyParsons, are also said to be implicated.

Police raids and more revelations: the fallout of the Unaoil scandal: In a day of dramatic developments, the Monaco company at the centre of Fairfax Media's global bribery revelations has been raided by police, while the board of top-100 Australian company Primary Health Care admitted it knew its chief executive was being investigated before he was appointed. Now Fairfax Media can reveal another Australian company to be hit by corruption allegations (unrelated to Unaoil), with federal police investigating consulting giant Sinclair Knight Merz over allegations that the company paid kickbacks to overseas officials. In continuing fallout from the joint Fairfax Media-Huffington Post investigation into corruption in the oil industry, the Monaco government revealed that it had raided the homes and offices of Unaoil's principals, who ran the company exposed as the global bagman for the oil industry. Unaoil executives "were also interviewed… in the presence of British officers in connection with a case of vast corruption with international ramifications that involves many foreign companies active in the petroleum sector," the Monaco government's statement said. Fairfax Media revealed on Thursday that the British police had teamed up with the Australian Federal Police, the US Department of Justice and the FBI to investigate the vast cache of leaked Unaoil emails on which our stories have been based.  Unaoil was hired over almost two decades by large multinational firms, including the offshore arm of Australia's Leighton Holdings, to pay bribes to top overseas officials in return for winning government funded contracts in oil-rich nations.Fairfax also revealed that the chief executive of Primary Health Care, Peter Gregg, was under criminal investigation over a $15 million payment he allegedly made in a former job as chief financial officer of Leighton Holdings. He appears to have signed documents making the payment to a United Arab Emirates firm, Asian Global Projects and Trading, to guarantee the supply of steel to the Australian construction giant at "preferred and commercially beneficial" prices. No steel was ever supplied and Fairfax Media has obtained documents revealing the Dubai company that received the money has engaged in bribery and money laundering.

'Biggest bribery scandal': US, UK, Australia launch probe into mass oil industry corruption - An investigation into a massive global oil bribery scandal has been launched by authorities in the US, Britain, and Australia, after leaked confidential files indicated that some of the world’s most powerful corporations were part of the racket.  The global investigation by authorities comes after the biggest leak of confidential files in the history of the oil industry, obtained by The Huffington Post, unveiled widespread corruption taking place in oil-rich countries. The US Department of Justice, FBI, UK National Crime Agency and Australian Federal Police are now jointly investigating the allegations in what could become the world’s biggest probe into corruption allegations. The scandal is being revealed in a three-part series titled The Bribe Factory, which is the result of a six-month investigation by The Huffington Post and Australia's Fairfax Media. The report’s first release disclosed apparent dodgy dealings in the Middle East and North Africa. The second will focus on alleged corruption in former Soviet states, and the final will focus on Asia and Africa. Citing the trove of leaked documents, the report has revealed that government contracts worth billions of dollars were awarded on the basis of bribes, many of which were organized by a 'fixer' company known as Unaoil. Although many outside the oil industry have never heard of Unaoil, it has allegedly been participating in major illegal deals behind the scenes, convincing Western corporations that they will not be able to get contracts in oil-rich countries without its help. The company stands accused of portraying itself as a lobbyist and charging major companies multi-million dollar fees in exchange for bribing government officials in order to get good deals for the corporations. According to the leaked documents, major international companies across the US, Europe, Asia, and Australia have taken part in dealings with Unaoil.

Khafji oil field restart seen bearish for Mideast crude market - The Middle East sour crude complex is likely to come under bearish pressure on news of Kuwait and Saudi Arabia agreeing to restart production from the 300,000 b/d offshore Khafji oil field, but the market was slow to react Wednesday in the absence of a clear timeline for the resumption. Analysts say the plan to resume production in the Saudi-Kuwait neutral zone field also raises a broader question on the commitment of some major oil producers to freeze output to support prices. "...even the idea of a freeze [in oil production] may be tested by [the] announcement that Saudi Arabia and Kuwait are preparing to restart the 300,000 b/d Khafji oil field. Without some clarification to the effect that overall output won't be increased, even the freeze idea may not hold," Citi analyst Timothy Evans said in a note to clients on Tuesday. OPEC members Saudi Arabia, Qatar and Venezuela last month agreed with Russia to maintain production at January levels, if other oil producers joined. Major oil producers are due to meet again in Doha, Qatar, on April 17 to discuss a potential freeze in production.

These Aboriginal Groups Are Trying to Halt a Natural Gas Boom in Australia's Northern Territory  -- Conservationists and indigenous communities in northern Australia are gearing up for a fight, as some of the world's largest energy companies line up to frack the region for shale gas. Santos, Sasol, Inpex and, more recently, businessmen who have made billions from fracking in the United States have all been lured to the McArthur Basin in Australia's Northern Territory. American Energy Partners (AEP), the company established by US fracking pioneer Aubrey McClendon — who died two weeks ago — has sealed four deals that cover a total area of 55 million acres of oil and gas properties. Texas-based private equity firm Energy & Minerals Group, meanwhile, has snapped up an 18 percent stake in a venture with Australian company Pangaea Resources. While production is still at an exploratory stage, prospecting is causing concerns among the four main Aboriginal communities in the Gulf of Carpentaria region. The area is one of the most remote parts of Australia's northern tropical savanna, a highly biodiverse region home to substantial areas of Aboriginal-owned and managed land. Traditional owners and activists fear fracking could contaminate ground and surface water supplies and the unique natural environment."We need clean water, we need clean country," Gadrian Hoosan, a spokesman for the Garawa people, said. "We need sustainable jobs in the community that will last for a lifetime — fracking doesn't provide that."

Exxon Mobil in talks to buy into Eni's giant Mozambique gas field -sources  --Exxon Mobil is in talks to buy a stake of around 15 percent in Italian oil major Eni's giant Area 4 gas field in Mozambique, two sourcesfamiliar with the matter said. Exxon is seen as a front-runner to buy into Eni's gas development and this would be the U.S. firm's first big acquisition since the oil price collapse. Area 4, in which Eni holds a 50 percent operating stake, is located in Mozambique's Rovuma Basin, where gas in place amounts to some 85 trillion cubic feet -- one of the richest gas discoveries of recent times.  Two sources said Exxon was in talks to buy a stake of that size (15%), one of whom said Eni was also negotiating with other firms. A banking source familiar with the matter said Exxon was interested in buying Eni's whole 50 percent stake, while a fourth source said Exxon was looking at unspecified stakes in all Eni holdings up for sale, also including assets in Egypt and elsewhere in Africa.

Shell Looking To Sell The Famous Brent Field, But Who Will Buy?  - Royal Dutch Shell has confirmed media reports that it is looking to sell part of its production holdings in the North Sea, saying all these assets—33 in total, including the Brent field that gave its name to the international benchmark—are being reviewed along with others, in other parts of the world.  The sale is part of Shell’s efforts to raise around $30 billion to restore some of the money it spent on buying BG Group for around $57 billion. Plans are to carry out the sales over the next three years. Of the total, less than $10 billion is expected to be generated this year, Shell’s CEO Ben van Beurden said at the presentation of the company’s 2015 financial results.  No buyers have been confirmed, although reports have it that one company interested in the assets is private equity fund Neptune Oil and Gas, founded by former Centrica head Sam Laidlow. The $5-billion fund is looking for distressed assets from the energy industry around the world. Shell’s divestment plan is quite ambitious given the current market environment. It is under pressure from investors to deliver the sales and cut further jobs to prop up its balance sheet, so it may have to settle for a lower price than it would be happy with. It’s a buyers’ market out there, so if Neptune decides it wants to snap up the North Sea fields, it’s very likely that it will dictate the terms. Especially if no other candidates turn up.

Connecting The Dots: Shell, Brent, And Saudi Aramco -- March 31, 2016 --It's being reported that Shell wants to sell some/all of oil producing assets in the North Sea, including it's Brent field. The story is here.  There are very few comments but this one is interesting: Saudi Aramco should buy all of Shell. Then turn around and sell the global reserves (Saudi doesn't need more oil that's harder to produce than its own). The proceeds from the oil will equal or exceed the costs of the whole Shell company, which means Saudi Aramco gets Shell's refineries, petchem plants and other downstream physical assets at no costs.  At least one other comment suggested Saudi Aramco was a player.  With Shell and Saudi Aramco recently splitting up their midstream/downstream assets in the US, presumably to make it easier for Saudi Aramco to monetize its assets, one wonders if the comment above "holds water."  Also, note that in an earlier post (the same link as above): After the split, Saudi Aramco wants to buy more US refineries. Reuters is reporting: Saudi Arabia's national oil company wants to buy more U.S. refining and chemical plants to expand its footprint in the world's largest energy market once the break-up of its joint venture with Royal Dutch Shell Plc is complete.  Ending an often rocky nearly 20-year relationship, Shell and Saudi Aramco announced on Wednesday plans to break up Motiva Enterprises LLC after almost two decades, dividing its assets and leaving Aramco with one plant, the nation's largest crude oil refinery, in Port Arthur, Texas.  Officials from Saudi Refining, the downstream arm of Aramco, told employees following the announcement that the state-owned firm was intent on buying more assets once the Motiva break-up is finished. I find it "hyperbole" to suggest Saudi Aramco would buy Shell, but at least "everyone" is on the same page when it comes to talking about Saudi Aramco acquiring more refining and chemical plants around the world.

Implications of shale oil for Arab producers | VoxEU OX- Lower oil prices are putting increasing pressure on Arab oil producers, and many pundits have been quick to blame US shale oil producers for the decline in prices and in Arab oil revenues. This column measures how much the the shale oil boom contributed to the fall in the global price of crude oil. The Brent price of crude oil since 2011 would have been as much as $10 per barrel higher in the absence of US shale oil. But as large as this effect is, it pales in comparison with the decline in the price of oil that took place after June 2014, to which shale oil actually contributed little. The column goes on to discuss the policy options facing Arab oil producers.

Oil Firms Slow Exploration to Weather Low-Price Era - WSJ: —The world’s biggest oil companies are draining their petroleum reserves faster than they are replacing them—a symptom of how a deep oil-price decline is reshaping the energy industry’s priorities. In 2015, the seven biggest publicly traded Western energy companies, including Exxon Mobil and Royal Dutch Shell, replaced just 75% of the oil and natural gas they pumped, on average, according to a Wall Street Journal analysis of company data. It was the biggest combined drop in inventory that companies have reported in at least a decade. For Exxon, 2015 marked the first time in more than two decades it didn’t fully replace production with new reserves, according to the company. It reported replacing 67% of its 2015 output. In the past, shrinking reserves could send investors and executives into a panic over a company’s future prospects. Italian oil producer Eni has shifted spending away from high-risk, high-reward projects in favor of squeezing more out of fields that are already producing. That shift shows how producers are responding to low prices by pulling back on new exploration in favor of maximizing profits. The risk is that cutting back on new projects now, when prices are low, could lead to shortages and price spikes in the future. Historically, energy companies spent heavily in the present to find resources for the future—new wells that would replace the barrels they pump every day. When they decide they can extract the oil and gas economically, firms book those resources as proved reserves, untapped inventories to be exploited at a profit down the road. The current oil glut has forced companies to cut spending wherever they can. So they have pulled back on exploratory drilling and spending on new projects. Across the oil sector last year, companies approved just six new developments, according to Morgan Stanley researchers.

This is what an oil bust looks like — In the oil and gas patches it has become clear that the economic gains of the so-called shale revolution are being wiped away by one of the worst fossil fuel downturns in U.S. history. Now, the oil companies are crying for help. First, they got the crude oil export ban lifted. Next they want proposed federal rules on methane emissions weakened or scrapped. As if any of that will help. Back in 2010, the price of a barrel of Brent crude (the international oil price benchmark) topped $80. That made it profitable to extract oil from tight shale formations, which is especially costly. A drilling frenzy ensued, domestic oil production skyrocketed, oil companies raked in profits and oil patch communities prospered. But all that new oil on the market, plus China’s slowing economic growth, began to dampen oil prices in the summer of 2014. Instead of curtailing production to keep prices afloat, OPEC’s leaders launched a thinly veiled price war, clearly aimed at putting U.S. producers out of business. Here are some indicators that OPEC won the war:  The U.S. rig count has collapsed to levels not seen since, well, ever. With both oil and natural gas prices at near-record lows, it simply doesn’t make economic sense to spend up to $10 million to drill a well. So the rigs are shutting down. In September 2014, 1,931 oil and gas rigs were operating in the U.S.; today there are just 476. Energy-state tax revenues are crashing. A single oil or gas well can be a big moneymaker for state and local governments, generating royalties, severance taxes, gross receipt taxes and property taxes. Price shifts hit these revenue streams hard. During the last quarter of 2015, all the major Western energy-producing states saw significant decreases in severance tax revenues, levied on the value of produced oil and gas and minerals, compared to the previous year..  Even as unemployment declines nationwide, it’s going up in the oil and gas patches. Following the great Recession of 2008, the counties that were fastest to recover tended to be those with a lot of oil and gas drilling. Now, the opposite is true. North Dakota, whose economy soared between 2010 and 2014, is down in the dumps. Nearly 20,000 jobs have been lost in the state during the last year, most of them in the oil and gas and construction sectors.

Oil Enthusiasts Stay Out of Rally Led by Shrinking Bearish Bets - Oil enthusiasts haven’t been jumping on board the latest rally. As crude has soared more than 50 percent since Feb. 11, the number of bets on increased prices has barely budged. Instead, the upward pressure on prices appears to have come from traders cashing out of bearish wagers at an unprecedented pace. The liquidation of short positions during the last seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest on record. "The rally has come from shorts getting scared out of their positions, and you’re not seeing a lot of money coming in on the long side," . "It really calls into question the fortitude and staying power of the rally." There has been plenty of bullish news to stoke the rebound. About 15 or 16 oil-exporting countries will attend a meeting to consider an output freeze next month, Organization of Petroleum Exporting Countries Secretary General Abdalla El-Badri said in Vienna last week. U.S. crude production fell to the lowest since November 2014. But American supplies remain stubbornly abundant as imports surge, and a production freeze by Saudi Arabia and Russia would still leave those countries’ output at historically high levels. "Even a freeze will lock in record production, and the countries not participating -- Iran and Libya -- have the most barrels to add,"   Short positions on West Texas Intermediate crude, or bets that prices will fall, have dropped by 131,617 contracts since Feb. 2, the biggest liquidation in CFTC data going back a decade. To close out a bearish position, traders buy back futures and options, putting upward pressure on prices. In the same period, bullish wagers fell by 971.

It's Official: The Oil Surge Was Driven By The Biggest Short-Squeeze Ever -- Two months ago, just before crude dropped to 13 year lows, we warned oil traders that there is "a constant short squeeze threat" because "oil shorts are at all-time highs", adding that "we have seen extreme short positioning building up in the oil futures market. The quantity of short positions opened is at an all-time high for Brent, and still high for WTI futures."  We also warned that "a positive surprise could happen quite sharply, as short positions are likely to be squeezed by a profit-taking move. On WTI, the in-the-money short positions are really dominating at the front end of the curve while out-of-the-money long positions are dominating at the long end of the curve: the front end of oil curve could thus be more exposed to some profit-taking." It was, and just a few days later, the algos took this warning to heart and, courtesy of the most recurring headline (that of a "farcical" oil production freeze) as a recurring catalyst, unleashed an historic short squeeze. Actually make that a record short squeeze. Wait, that's impossible: surely it was more than just shorts covering and oil rose because actual longs were piling in, one could say. One would be wrong, and it is now official: as crude soared 50% since Feb. 11, Bloomberg writes, the number of bets on increased prices has barely budged. "Instead, the upward pressure on prices appears to have come from traders cashing out of bearish wagers at an unprecedented pace. The liquidation of short positions during the last seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest on record."

Crude Rises After Gasoline Draw, Crude Build --Following last week's major surge in crude inventories, API reported a 2.6mm build (against expectations of a 3.1mm build) - 7th week in a row - which briefly jumped crude prices higher. A 319k draw at Cushing combined with draws in Gasoline (6th week in a row) and Distillates left oil pushing back to late-day highs. API Details:

  • Crude +2.5mm (+3.1mm exp.)
  • Cushing -319k (confirming Genscape
  • Gasoline -1.94m
  • Distillates –95k

As Net-Long Positions Near Records, Is The Oil Rally Overdone? - Since February, major investors have predicted that oil prices were poised for a huge rally.Hedge funds and money managers piled into bets on rising oil prices, going long on the crude rally.  Short sellers were squeezed, and the stampede become too much for many, resulting in a large liquidation of shorts. The short selling drove the rally, increasing oil prices by about 50 percent since early February. That has fueled optimism that the worst of the oil bust is over. And there is good reason to think that a rally is justified. U.S. oil production is off by about 600,000 barrels per day since the April 2015 peak. Disruptions in Nigeria and Iraq have caught the markets by surprise, knocking off another several hundred thousand barrels per day. Gasoline demand is at record highs in the United States, and OPEC is a few weeks away from meeting to discuss its production freeze deal, which may not cut into oversupply, but has nevertheless given the markets some hope. But there are warning signs on the horizon. The fundamentals are still very weak. Inventories are at record highs in the U.S. and still rising, and global oil production continues to exceed demand. As I wrote last week, the rally could be overdone. Barclays backed that hypothesis up in a recent report, warning that several commodities could be poised for declines as the recent two-month price rally exceeds what the fundamentals suggest is merited. In other words, the reason that oil faces downside pricing risk is that there is a disconnect right now between the fundamentals and market sentiment. On the one hand, you have incredibly bullish speculators. John Kemp at Reuters writeshedge funds and money managers have cobbled together a near-record high in net-long positions as of March 22, as shorts were closed out and investors bet that oil prices were on their way up. Net-long positions have surged to the equivalent of almost 579 million barrels, double the volume of net-long positions recorded at the end of 2015.

Oil prices fall 3 percent as investors focus again on glut | Reuters: Oil prices fell about 3 percent on Tuesday, reflecting growing concern that a two-month rally was fading as demand fails to keep up with swelling global supply, including new output from Kuwait and Saudi Arabia. Prices bounced, but only briefly, after U.S. Federal Reserve Chair Janet Yellen made remarks that investors saw as dovish for the U.S. interest rate outlook. Brent futures settled down $1.13 at $39.14 a barrel while U.S. crude settled $1.11 lower at $38.28 per barrel. Prices rebounded marginally in post-settlement trading after data from industry group American Petroleum Institute showed a 2.9 million barrels rise in crude stocks last week, less than the 3.3 million barrels analysts had expected. API The decision by Kuwait and Saudi Arabia to resume oil production at the jointly operated 300,000-barrel-per-day Khafji field, at a time when production is supposed to be frozen, triggered the selloff in oil, traders said. "The capacity of that field in the Neutral Zone is more than what Ecuador produces. If they do freeze, it will not be at the January levels but at a lot higher figure," one trader said, referring to the Kuwait-Saudi border area where Khafji is located.

Crude Pops As US Production Tumbles To 16-Month Lows - Following last night's API-reported near-expectations build in crude, DOE reports a smaller-than-expected 2.3mm build (against expectations of a 3.1mm build) and draws in Cushing, Gasoline, and Distillates. Oil prices surged on this. Production is more in focus now as it has fallen 9 of the last 10 weeks to its lowest since Nov 2014.  Crude prices dropped pre-data, then spiked,. but are struggling to maintain gains. Of course, crude is soaring on the heels of Yellen's dove-tardiness. API Details:

  • Crude +2.64mm (+3.1mm exp.)
  • Cushing -319k (confirming Genscape)
  • Gasoline -1.94m
  • Distillates -95k
DOE Details:
  • Crude +2.3m (+3.1m exp.)
  • Cushing -272k (-500k exp.)
  • Gasoline -2.5m
  • Distillates -1.075m
This is the 7th weekly build in inventories in a row...

John Kemp's Weekly Energy Tweets -- March 30, 2016

  • US gasoline stocks, adjusted for demand: 26 days in 2016; 26 days in 2015; 10-yr range 22 - 26 days; average 24 days; at high end of normal, but manageable
    US gasoline stocks fell 2.5 million bbl last week; only 6% higher than 2015 at this time; gasoline stocks have come way, way down but still well above historical levels
    I talked about US gasoline consumption earlier (at this link); looking for gasoline demand record this calendar year
    US commercial crude stocks continue to rise, but perhaps at a slower rate: increased another 2.3 million bbls last week; now at +63 million bbls (+13%) over 2015 level; the graph needs to be reset
    US crude oil imports eased back a bit from previous week's very high 8.4 million bopd to a more normal 7.8 million bopd
    US refinery throughput accelerated last week to 16.2 million bopd, up by one-half million bopd (+3.2%) compared with 2015
    US distillate stock adjusted for consumption (44 days) is still far above 2015 (33 days) but not getting worse
    US distillate consumption is finally back within the 10-year max-min range; but very, very low consumption

U.S. Oil Rig Count Down by 10 - The U.S. oil-rig count fell by 10 to 362 in the latest week, according to Baker Hughes Inc., BHI -2.01 % maintaining a trend of declines.   The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the sector, has fallen sharply since oil prices began to fall. But it hasn’t fallen enough to relieve the global glut of crude.  There are now about 72% fewer rigs of all kinds since a peak of 1,609 in October 2014.  According to Baker Hughes, the number of U.S. gas rigs declined in the latest week by four to 88.  The U.S. offshore-rig count was 26 in the latest week, down two from the previous week and down five from a year earlier.  Oil prices tumbled Friday after comments from a Saudi royal family member cast more doubt on a deal for major global exporters to cap output. Saudi Arabia’s deputy crown prince, Mohammed bin Salman, said in an interview with Bloomberg News that the kingdom will freeze its oil output only if Iran and other major producers agree to curb theirs.  U.S. crude oil fell 3.65% to $36.94 a barrel.

Report: Total US Rig Count Drops By 14 Rigs - In its latest tally, Baker Hughes Inc. said the total U.S. rig count is down to 450, dropping 14 rigs from the week ending March 25. Data showed the overall number of oil and gas rigs in the U.S. fell for the 15th straight week to the lowest level since at least 1940, Reuters reported. Oil rigs are down to 362, dropping 10, and natural gas rigs are down to 88, dropping four rigs since last week. The U.S. rig count was 1,028, down 578 rigs, compared to the same week last year. Since then, oil rigs dropped by 440 and natural gas rigs dropped by 134. The U.S. offshore rig count is 26, down two from last week, and down five rigs year-over-year. The Canadian rig count is down by six for a total of 49 rigs, Baker Hughes said in its report. Oil rigs remain unchanged at 11, but gas rigs are at 38, down by six. A year ago, Canada’s overall rig count was 100. Gas rigs are down by 42 year-over-year, while oil rigs are down by nine. Energy firms have sharply reduced oil and gas drilling since the sell-off in crude markets began in mid-2014, forcing more than 50 U.S. producers to file for bankruptcy protection since the start of 2015. Many analysts think the combined oil and gas rig count will rise later this year because there are indications that prices could have bottomed.

Baker Hughes Rig Count Analysis - Story of the Year in Oil Markets (Video) - Today`s Baker Hughes Rig Count data spells real trouble for U.S. Oil Production for the remainder of 2016. At this pace, we are going to start having massive declines in U.S. Domestic Oil Production.

Saudi Arabia loses oil market share to rivals in key nations -- Saudi Arabia lost market share in more than half of the most important countries it sold crude to in the past three years, even as the kingdom increased output to record levels. The world’s biggest oil exporter lost ground to rivals in nine out of 15 top markets between 2013 and 2015, including China, South Africa and the US, according to an analysis of customs data. Saudi Arabia set itself a goal in late 2014 of maintaining its crude market share amid a glut that prompted a collapse in oil prices, but the imports data compiled by FGE, an energy consultancy, suggest the country’s strategy suffered setbacks in some of its key customer countries last year. Other data show that Saudi Arabia achieved a limited increase in global market share in 2015 compared to 2014, although last year’s figure was lower than that recorded in 2013. “Saudi Arabia has had a very difficult time selling oil in this environment,” says Ed Morse, an analyst at Citigroup. “Its rivals are going into a very crowded market in a very aggressive way.” Oil producers including Russia and Iraq are putting pressure on Saudi Arabia in markets it regards as strategically important trading partners. Saudi Arabia signalled a shift in its market share strategy last month by reaching a provisional agreement with Russia and some other producers to cap output at January levels. This deal partly reflects the damaging impact of falling oil prices on producer economies, including Saudi Arabia.

Does Saudi Arabia's Play For Market Share Make Sense? - Props to Saudi Arabia. Unlike other producers, including U.S. shale producers, it maintained financial strength and flexibility during the last boom. When it began to shift the paradigm of global supply, the kingdom was explicit about its goal - market share - even if it didn’t always trumpet the proactive steps it was taking towards that goal. The now-evident objective of low prices, having been achieved and sustained, begs the question of why Saudi Arabia defended its market share. Their actions suggest that they intended to drive prices toward a basement price—stepping supply up when prices reached the $60s, slowly tuning it down when prices hit the $40s and below, and increasing its capacity for production even as prices fell. The recent address of Saudi Oil Minister Ali Al-Naimi in Houston was straightforward and polite, but it might be crudely paraphrased as, ”Get used to the low prices. Adapt or die.” The possibility of his bluffing is belied by historical actions. As recently as Monday, the OPEC report on monthly volumes showed the kingdom continuing to produce more than half a million barrels a day above its rates in late 2014. Saudi Arabia has had the will and means to drive prices, giving market forces some push. As oil has been its only resource and industry of value, the kingdom has treated the business as the treasure that it is. The centuries-long fate of the royal family and its kingdom depends upon how they manage themselves during the era of oil, particularly the epoch of increasing demand. Surely, the highly intelligent, disciplined and motivated planners knew the short-term consequences of the actions which the rest of the world is just beginning to appreciate fully. And even last month, Minister Al-Naimi professed the acceptability of $20 oil. Normally the benefit of market share is obvious—increased revenue and increased performance. This assumes, however, stable prices and economies of scale. If one maintains market share, or even gains a few percent, but prices drop by 50 or 70 percent, then revenue drops to half or a third of what it had been. Said differently, the Saudis could have absorbed all of the increasing production from the rest of the world, dropped their production by half to about 5 million barrels per day (mb/d) and still have had the same or more revenue than they have enjoyed during this transition. Market share is not its own reward. Evidently Saudi Arabia has some strategic plan that results in its making more money in the long run than it is losing in the short run.

Will Weak Fundamentals Force Saudis To Action? - The world’s seven largest oil companies only replaced about 75 percent of the oil that they produced in 2015, the first time in years that reserves essentially fell. ExxonMobil only replaced 67 percent of its production. Chevron, Total, and Eni replaced more than 100 percent, but the rest of the majors did not.   Israel’s High Court shot down a proposal to regulate the natural gas industry due to a provision that would prevent major regulatory changes for 10 years. The Israeli government has a year to revise the proposal. The decision could delay development of the Leviathan gas field, a large deposit discovered by Noble Energy and Delek Group.   Credit redeterminations are underway for many embattled shale drillers. Companies like LINN Energy LLC and SandRidge Energy have already maxed out their credit lines. Any cuts to credit lines for companies struggling to meet debt payments could force them into bankruptcy. Some analysts predict as much as a 30 percent cut to distressed shale drillers. India added 300,000 barrels per day in oil consumption in 2015 and is expected to continue to post strong growth rates. India is set to be the world’s most important country in terms of oil demand growth, taking that mantle from China as the Chinese economy continues to slow. The IEA expects India to consume 4.2 million barrels per day (mb/d) in 2016, overtaking Japan as the world’s third largest oil consumer. The Indian government is hoping to incentivize domestic oil production to help meet rising demand.  The U.S. Department of Energy gave approval to a $2.5 billion electric transmission line that would help bring wind power to the Southeast. The project, proposed by Clean Line Energy Partners, is a 705-mile transmission line that would carry 4,000 megawatts of wind power from Oklahoma to Tennessee. DOE used a statute that would override state objections to the project, which has bedeviled interstate transmission lines in the past. The decision will surely face lawsuits, but if all goes according to plan, the project could begin construction in 2017 and be completed by 2020.

Saudi Arabia Will Only Freeze Oil Production If Iran Joins - Bloomberg -- Saudi Arabia will only freeze its oil output if Iran and other major producers do so, the kingdom’s deputy crown prince said, challenging the country’s main regional rival to take an active role in stabilizing the over-supplied global crude market. The warning by Mohammed bin Salman, 30, who’s emerged as Saudi Arabia’s leading political force, leaves the outcome of a meeting between OPEC and other big oil producers this month in question and sent prices sharply down. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country’s nuclear program. "If all countries agree to freeze production, we’re ready," bin Salman said in an interview with Bloomberg. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.” In London and New York, oil prices sank more than 4 percent after the comments, with West Texas Intermediate erasing all of its gains for this year. Brent crude fell as much as $1.78 to $38.55 a barrel and WTI dropped $1.62 to $36.72 a barrel. After the Organization of Petroleum Exporting Countries abandoned its efforts to boost oil prices in November 2014, focusing instead on protecting its market share, Saudi Arabia increased production to an all-time high of more than 10.5 million barrels a day, claiming that customers were asking for more oil. The meeting of oil producers in Doha on April 17 follows a gathering in February between Saudi Arabia, Qatar, Russia and Venezuela in which the quartet tentatively agreed to cap their production at January’s level. The deal, which helped to lift the price of Brent above $40 a barrel from a 12-year low of $27.10 a barrel in January, was contingent on other countries joining it. Iranian Oil Minister Bijan Namdar Zanganeh will attend the Doha discussions but won’t join a production freeze, according to a person familiar with the nation’s policy. 

OilPrice Intelligence Report: Oil Falls As Saudi Arabia Questions Freeze Deal: The oil markets closed out the week largely where they started, trading just below $40 per barrel. In fact, prices dropped on Friday after some comments from Saudi Arabia’s Prince Mohammed bin Salman (more on that below) and expectations that the Fed could revert to a more hawkish position after a strong jobs report in the United States.Saudi Arabia’s Prince Mohammed bin Salman said in an interview with Bloomberg this week that his country will only freeze oil production if Iran agrees to do the same, throwing the success of the April 17 Doha meeting into doubt. Iran has already said that it would not participate until it was able to return its oil production to pre-sanctions levels, meaning that it plans on adding at least 1 million barrels per day in additional output. “If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them," the powerful 30-year-old prince said. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”  Prince bin Salman also said that Saudi Arabia is planning to build up its Public Investment Fund (PIF), a sovereign wealth fund, in order to plan for the future. The Prince said the government hopes to grow the PIF to $2 trillion in assets, and use it to help the Saudi economy transition to a world beyond oil. The partial IPO of Saudi Aramco will provide some of the funds, and the public offering could happen as soon as 2017. He expects the PIF to be the “largest fund on Earth” and it will aggressively invest in a wide range of assets around the world. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil,” he said.

Oil Tumbles After Saudis Say They Will Freeze Oil Production Only If Iran Joins - And so the great "oil production freeze" rumor, which helped halt oil's plunge after it hit a 13 year low in early February and forced a 50% short squeeze higher, dies.  Moments ago, Bloomberg released details of a 5-hour long interview with the Saudi deputy Crown Prince Mohammed bin Salman in which he said that the Saudis would freeze production only if Iran joined. "If all countries agree to freeze production, we’re ready,” the deputy crown Prince said, adding that "if there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door." When asked if Iran needs to join freeze, his response: "without a doubt. If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them." As a reminder, Saudi Arabia is among big producer countries meeting this month in Doha to conclude a plan to freeze output; whether Iran needs to participate hasn’t been clear because country is in process of restoring output after years of sanctions. And while Iran’s oil minister is attending Doha meeting, the country has said that it won’t join a production freeze.  Salman adds that the oil price slump doesn’t pose a threat to Saudi Arabia, as short-term budgetary benefits need to be evaluated against "threat to the lifespan of oil" adding that "for us it’s a free market that is governed by supply and demand and this is how we deal with the market." And since we, and the market, both doubt this story is part of an elaborate April fool's joke, the price of oil just tumbled as suddenly market participants realize they have been manipulated for the past 2 months and that the structural oversupply in the market will persist.

Saudi Arabia is Freezing Oil Production By Default (Video) -- When you are already pumping as much oil as you possibly can - by default - you are forced to freeze production, or agreeing to a production freeze.

Forget The Tough Talk – Saudi Arabia Is Desperate For a Production Freeze - At a time when the Saudis are desperately trying to hang on to their dwindling market share, it is intriguing to consider exactly why Russia and the OPEC nations are even discussing an oil production freeze, and what they hope to achieve, knowing that any increase in price will bring back the U.S. shale oil drillers with a vengeance, increasing the supply glut. But on closer scrutiny, the production freeze seems to be aimed at maintaining the market share of the two larger players, Saudi Arabia and Russia. Data compiled by FGE energy consultancy suggests that Saudi Arabia is losing its leadership position in 9 out of 15 of its major markets. The competitors eating into the Saudi share include Russia, Iraq, the African suppliers and the United States. Though Saudi Arabia talked about maintaining market share when prices began to fall in 2014, it later realized that when crude prices are low, competing producers were aggressively entering new markets and the maintaining Saudi market share was tougher than anticipated.  By the end of 2015, Saudi Arabia supplied 8.1 percent of the global oil demand, which is higher than the 2014 figure of 7.9 percent, but still well below its 8.5 percent global market share in 2013. Saudi Arabia realized that the price war was not helping it to increase its market share, instead, the price was taking a toll on revenue due to plummeting crude oil prices. Ballooning budget deficits, depleting foreign reserves, and the necessity of introducing unpopular measures brought about memories of the Arab Spring. Similarly, Russia, which is pumping at close to its peak capacity, is worried about losing its market share in Europe to Saudi Arabia.

These Are The Oil Producers That May (Or May Not) Attend Next Month's "Farcical" OPEC Meeting -- The one catalyst most responsible for sending the price of oil from its 13 year lows hit in early February some 50% higher in the following month, has been the recurring rumor about an "imminent" OPEC production freeze meeting which was initially supposed to take place in early March, then on March 20, and now on April 17 (we expect this to be rescheduled shortly as well). As a reminder, Qatar has invited all OPEC members and major producers from outside the exporting group to attend talks on April 17 on a deal to freeze output at January levels to support the global oil market, Qatar's energy ministry said. "The need has become an urgent matter to bring back balance to the market and recovery to the global economy," the ministry said in the invitation letter. The ministry had said that around 15 OPEC and non-OPEC producers, accounting for about 73 percent of global oil output, are supporting the initiative. The problem is that all it takes is forone or two member nations to avoid the meeting and thus make any attempt at supply cuts moot. So here is, according to Reuters, the latest summary of who is, may or won't be attending next month's Doha meeting:

Qatar says 12 countries confirmed for oil cap meeting — (AP) — Qatar’s oil minister says 12 countries have agreed so far to participate in a meeting it’s hosting next month to discuss a freeze in oil output levels. Qatar announced earlier this month it would be the venue for between OPEC and non-OPEC producers on April 17 to discuss the production cap. The talks are aimed at bolstering oil prices that have fallen from over $100 a barrel in 2014 to less than $40 a barrel at present.  Minister of Energy and Industry Mohammed Bin Saleh al-Sada said on Thursday that Qatar is still expecting official confirmation from producers that have verbally expressed plans to attend the meeting. Those confirmed so far are Saudi Arabia, Russia, Kuwait, the United Arab Emirates, Venezuela, Nigeria, Algeria, Indonesia, Ecuador, Bahrain, Oman and Qatar.

Iran's 'Suez Canal': Tehran Could Connect Caspian Sea and Persian Gulf: One of the most ambitious initiatives that Tehran plans to launch will see an artificial channel link the Caspian Sea and the Persian Gulf. The project, which is expected to be completed in the 2020s, is particularly interesting for Russia due to the cold spell with Turkey, but European and post-Soviet states will also benefit from it. In Iran, "work is underway to construct a navigable channel linking the Caspian and the Persian Gulf," economic analyst Alexei Chickin observed.. The initiative itself is not new. The idea first emerged in the late 19th century and by 1890s Russian engineers developed blueprints for the navigable channel that would offer Russia and others the shortest way to the Indian Ocean bypassing the Turkish Straits and the Suez Canal in Egypt. The project was endorsed by Iran's former President Mahmoud Ahmadinejad. In 2012, former Iranian Energy Minister Majid Namjoo estimated that the cost of the project would be approximately $7 billion.  In February 2015, Chairman of the National Security and Foreign Policy Committee of the Iranian Parliament Alaeddin Boroujerdi told the Fars news agency that Khatam-al Anbiya, an engineering company owned by the Iranian Revolutionary Guard Corps (IRGC), was taking a close look at the project. But not everyone has welcomed the idea with open arms. "The West and Turkey have directly or indirectly tried to block the waterway [from being created]. As a matter of fact, the United States imposed sanctions" on companies that have been involved in the project, Chickin explained.

Saudis To "Modernize" Economy As Interbank Rates Surge & Money Supply Collapses At Record Pace -- For the first time since January 2009, 12-month Saudi interbank rates have breached 2.00% - double the 1% lows of August. This 'stress' is also evident in the record pace of collapse of Saudi money-supply. While Riyal forwards have rallied back from extreme bets on devaluation, they remain concerning for Saudi officials who to undertake some deep and fundamental changes to their economy, reforms that no amount of browbeating from organizations like the IMF could induce. As's Nick Cunningham details, a new report from The Atlantic Council finds that the extensive decline in oil revenues is focusing minds in Riyadh. The fiscal pressure is forcing “the kingdom’s leadership to modernize the economy,” the report concludes. Saudi Arabia ran a fiscal deficit of about $98 billion in 2015, a figure that will decline only slightly to $87 billion this year. That deficit total is also probably closer to $120 billion in reality though, given that the costs from the war in Yemen were not included. The fiscal squeeze is forcing some changes. First, the Saudi government is looking at new taxes, including a 5 percent value added tax (VAT). That may seem like a run-of-the-mill austerity measure, but for Saudi Arabia it is a novel proposal: it will be the first tax imposed in the country. More to the point, the VAT is illustrative of where Saudi Arabia is heading. The Atlantic Council argues that the kingdom is starting to reform its economy in fundamentally positive ways. Low oil prices are forcing it to rely more upon taxes and less on oil revenues. That would start to make Saudi Arabia less of a “rentier state,” a country that has no need to build much of an economy because resource extraction is so lucrative. Rentier states often suffer from greater corruption and a deeper lack of responsiveness to the needs of the public, since abundant oil revenues mean that the government does not need revenue from its populace.

Saudi embassy hired mafiosi to smuggle Turkish PM Erdoğan’s son out of Italy ahead of money laundering charges --  Italian police spokesman Lt. Colonel Domenico Grimaldi says that Bilal Erdoğan was able to jump bail on money laundering charges because the Saudi embassy paid the mafia to help get him clear, assisting them with fraudulent diplomatic papers and a Saudi prince disguise. Bilal Erdoğan is the son of Recep Tayyip Erdoğan, the prime-minister of Turkey, a gollum-looking authoritarian kleptocrat who built himself a 1,000-room palace as a kind of capstone on a political career dominated by corruption, the detritus of which includes recorded phone calls in which the PM conspired to hide millions in ill-gotten gains from investigators. “Mafia activities continue to plague our judicial system and the Polizia di Stato is blamed for this humiliating security lapse in Rome airport. We also found that a notorious mafia gang active in Calabria and Sicily was hired by members in the Saudi embassy and they managed to release Mr. Erdoğan from Regina Coeli Prison,” police spokesman Lt. Colonel Grimaldi told AFP.They moved Bilal Erdoğan to Excelsior Hotel, added Lt. Colonel Grimaldi, and Erdoğan was caught on cameras leaving the Hotel, donned traditional Arab dress and adroitly disguised as a Saudi diplomat; Bilal passed the security check holding a fake Saudi diplomatic passport and we believe, he couldn’t have escaped without the connivance of a number of police officers in Leonardo da Vinci Airport. Rome’s Police spokesman: Saudi embassy helped Erdoğan’s son to escape the police custody; using a forged Saudi passport and disguised as an Arab diplomat [AWD News]

Children Pay ‘Highest Price’ as Yemen Falls Apart, U.N. Says - — A yearlong conflict is threatening to cause a humanitarian catastrophe in Yemen, one of the world’s poorest countries, the United Nations reported on Tuesday, saying that “children are paying the highest price.”The effects of the conflict and the deteriorating humanitarian conditions have brought Yemen “to the point of collapse,” Unicef, the United Nations Children’s Fund, said in a report, adding that the country was at risk of becoming a failed state.At least six children have been killed or maimed in the fighting every day for the past year, Unicef said, calling that “the tip of the iceberg” because that number represented only the cases that had been verified. The toll is almost certainly much higher, the organization said.For the past year, a Saudi-led coalition has sought to re-establish the government of President Abdu Rabbu Mansour Hadi, which was driven into exile by Houthi rebels and their allies.Mr. Hadi was able to reach the southern port city of Aden in September, but the front lines have hardly shifted since, despite a costly campaign marked by intensive Saudi-led airstrikes.

Unlikely partners? How Western media largely ignored State Dept-Google-Al Jazeera plot against Assad - The Western media has quietly ignored an unexpected collaboration between Washington, Google, and “independent” Al Jazeera aimed at helping to overthrow Syria’s Bashar Assad. Would they be as oblivious to a similar cozy “partnership” involving Russia? Last Monday, WikiLeaks lifted the lid on a correspondence between Jared Cohen, the President of ‘Google Ideas,’ and then-Secretary of State Hillary Clinton’s staff in the summer of 2012. In his July 25, 2012 email to top State Department’s officials, Cohen pitched his about-to-be-launched “tool” to Clinton’s inner circle, asking it to “keep close hold” of it. The leak revealing the project, which would seem to be an outrageous scandal to some, has actually been quite difficult to spot in the news. Since WikiLeaks released the latest batch of Clinton’s emails on March 21, a Google news search spits back about 30 web sources related to the story. Of those, only two – The Independent and Daily Mail – could arguably be considered major mainstream media outlets. That means there were slim chances that the eye of an average newsreader would catch wind of the State Department’s teamwork with the US’ biggest tech giant, Google, and Arab media outlet Al Jazeera. According to what Cohen wrote, it appears that Google’s innovative visualizer worked to “publicly track and map the defections in Syria and which parts of the government they are coming from.” “Our logic behind this is that while many people are tracking the atrocities, nobody is visually representing and mapping the defections, which we believe are important in encouraging more to defect and giving confidence to the opposition,” he said. Google also collaborated with Al Jazeera, which took primary ownership over the tool, because of “how hard” it was to get information out of Syria.

Syrians Armed By The CIA Are Fighting Syrians Armed By The Pentagon -- Syrian militias armed by different parts of the U.S. war machine have begun to fight each other on the plains between the besieged city of Aleppo and the Turkish border, highlighting how little control U.S. intelligence officers and military planners have over the groups they have financed and trained in the bitter five-year-old civil war.   The fighting has intensified over the last two months, as CIA-armed units and Pentagon-armed ones have repeatedly shot at each other while maneuvering through contested territory on the northern outskirts of Aleppo, U.S. officials and rebel leaders have confirmed.  In mid-February, a CIA-armed militia called Fursan al Haq, or Knights of Righteousness, was run out of the town of Marea, about 20 miles north of Aleppo, by Pentagon-backed Syrian Democratic Forces moving in from Kurdish-controlled areas to the east.   “Any faction that attacks us, regardless from where it gets its support, we will fight it,” Maj. Fares Bayoush, a leader of Fursan al Haq, said in an interview.  Rebel fighters described similar clashes in the town of Azaz, a key transit point for fighters and supplies between Aleppo and the Turkish border, and on March 3 in the Aleppo neighborhood of Sheikh Maqsud.   The attacks by one U.S.-backed group against another come amid continued heavy fighting in Syria and illustrate the difficulty facing U.S. efforts to coordinate among dozens of armed groups that are trying to overthrow the government of President Bashar Assad, fight the Islamic State militant group and battle one another all at the same time.

Full Metal Retard Part Deux: CIA-Backed Rebels Now At War With Pentagon-Armed Fighters In Syria's Aleppo - It would be difficult to find a program that better exemplifies the word “failure” than the Pentagon’s “train and equip” effort in Syria. Last May, US Central Command issued a hilariously absurd press release outlining what was quite obviously going to be a disastrous effort to arm rebel fighters.  [...]  Throw in the fact that the FSA - not to mention all the other "moderate" rebels fighting in and around Aleppo - just got finished having their proverbial asses handed to them by Russia and Hezbollah and you'd think things couldn't get much sillier for the Pentagon.  But you'd be wrong.  As The LA Times reports, Pentagon-armed Kurdish units (so these are different fighters from those involved in "train and equip") are now engaging in firefights with CIA-armed forces in what is surely the most ridiculous example of US strategy gone horriby (and hilariously) awry to date."Syrian militias armed by different parts of the U.S. war machine have begun to fight each other on the plains between the besieged city of Aleppo and the Turkish border, highlighting how little control U.S. intelligence officers and military planners have over the groups they have financed and trained in the bitter five-year-old civil war," the Times writes. "The fighting has intensified over the last two months, as CIA-armed units and Pentagon-armed ones have repeatedly shot at each other while maneuvering through contested territory on the northern outskirts of Aleppo, U.S. officials and rebel leaders have confirmed." Here's more:

The fate of the temple of Bel is a symbol of the tragedy engulfing Syria - Something incalculably precious has been wiped off the face of the Earth. Satellite photos have confirmed that the temple of Bel, a monument that for almost 2,000 years had stood resplendent amid the ruins of Palmyra, is no more. Scholars had been dreading the worst since the fighters of Islamic State annexed the ancient city back in May. Few had put much faith in the initial assurances of the conquerors that they would spare the archaeological site: too much ruin had already been visited on the antiquities of the territory under their control for that. And sure enough, at the end of June, the militants demolished the iconic statue of a lion sacred to Allat – a goddess who had suffered the signal misfortune of being condemned by name in the Qur’an. Then last month they destroyed a temple dedicated to Baal Shamin, a deity often paired with Allat. That was tragedy enough. Related: Tolerant and multicultural, Palmyra stood for everything Isis hates | Tim Whitmarsh The worst, though, was yet to come. The temple of Bel was (and how it stabs the heart to be obliged to use the past tense here) a monument fit to be ranked alongside the Parthenon or the Pantheon as one of the supreme architectural treasures to have survived from classical antiquity. Built soon after the absorption of Palmyra into Rome’s sphere of influence, it was dedicated in 32AD, at a time when Tiberius ruled the empire, and Jesus still walked the Earth. The god to whom it was dedicated, though, was older by far than the Pax Romana. “Bel” in Akkadian meant “Lord”, and as such it was a title the Babylonians in their own imperial heyday had bestowed upon Marduk, the deity who reigned as their lord of lords. It was a tribute to the prestige of the great city that the Palmyrenes should gradually have assimilated Bel to the similarly named guardian of their oasis, a god named Bol. When the Romans arrived on the scene, they in turn had no problem in identifying this potent deity with the king of their own pantheon. Bel was, in short, a thoroughly cross-cultural god.

Exclusive: Russia, despite draw down, shipping more to Syria than removing - Reuters: When Vladimir Putin announced the withdrawal of most of Russia's military contingent from Syria there was an expectation that the Yauza, a Russian naval icebreaker and one of the mission's main supply vessels, would return home to its Arctic Ocean port. Instead, three days after Putin's March 14 declaration, the Yauza, part of the "Syrian Express", the nickname given to the ships that have kept Russian forces supplied, left the Russian Black Sea port of Novorossiysk for Tartous, Russia's naval facility in Syria. Whatever it was carrying was heavy; it sat so low in the water that its load line was barely visible. Its movements and those of other Russian ships in the two weeks since Putin's announcement of a partial withdrawal suggest Moscow has in fact shipped more equipment and supplies to Syria than it has brought back in the same period, a Reuters analysis shows. It is not known what the ships were carrying or how much equipment has been flown out in giant cargo planes accompanying returning war planes. But the movements - while only a partial snapshot - suggest Russia is working intensively to maintain its military infrastructure in Syria and to supply the Syrian army so that it can scale up again swiftly if need be.

Copper Continues To Crumble Amid Record China Inventories -- Having bounced miraculously off the early January lows - despite no significant fundamental shift - scrambling all the weay up to its 200-day moving-average, copper prices have been tumbling for the last 7 days, the longest losing streak since early Jan. "Worries over Chinese demand is still weighing on the market," warns one analyst and rightly so as, just like the oil complex, copper inventories (in China) just hit a record high. Miracle ramp... Is fading now as stockpiles soar... Rising supply of late-cycle commodities, including copper and aluminum, together with uncertain Chinese demand may continue to weigh on metal prices this year, according to Bloomberg Intelligence analyst Zhu Yi. Copper inventories tracked by the Shanghai Futures Exchange are at a record. “Worries over Chinese demand is still weighing on the market,” Robin Bhar, an analyst at Societe Generale SA in London, said by phone. Of course much of this 'inventory' is collateral for China's crazy CCFDs enabling smaller players to get loans and stay alive considerably longer than they should. If any liquidation occurs of these zombies then prices will accelerate lower as CCFDs are unwound.

Miners buy back own bonds to soothe debt fears - Global miners have bought back billions of dollars of their debt in a display of financial strength designed to address investor concerns over their leverage as they try to deal with the after-effects of the commodities slump. Miners including Barrick Gold and Anglo American completed $2.5bn of bond repurchases this month. They join other miners including Vedanta Resources, Glencore and Fortescue Metals Group to have bought back part of previously issued debt in recent months. Indebtedness has become one of investors’ biggest fears about mine operators, with falling commodity prices making it more difficult to service previous borrowing. Debt levels ballooned in the commodity upswing as miners poured money into projects to meet increased demand for metals such as iron ore and copper. Low interest rates also made such borrowing attractive. Buying back debt is a way to address balance sheet concerns without issuing new stock at, for some miners, valuations that have plummeted along with commodity prices. Shares in Anglo lost three-quarters of their value in 2015, for example. Barrick has been one of the largest buyers of its own debt. Last week the Canadian gold miner completed a repurchase of $750m of bonds, following $2.1bn of such buybacks in 2015. Barrick mainly used cash from asset sales to cut its debt from $13bn to $10bn last year and has vowed to reduce the figure by $2bn this year. “Our shareholders want to see us bring down our total debt and that is one of our key priorities. We have strong liquidity with little debt due before 2018 and more than half our outstanding debt matures after 2032,” said Barrick.

World's Biggest Oil Market Is Too Tied To Mideast To End Addiction -- March 31, 2016  - Bloomberg is reporting:

  • Mideast producers have cut official selling prices; defend against other suppliers taking their markets
  • Saudi Arabia is selling Arab Light in Asia for 75 cents below benchmark Middle East prices (compare with $2.75 premium in early 2014)
  • Iran offering its oil at a deeper discount than Saudi Arabia for first time in a decade 
  • strategy working; but IEA has warned there is an increased possibility of oil-security surprises in the "not-too-distant" future
  • with non-OPEC supplies falling, Asian refiners have no choice but to buy Middle Eastern oil: cheaper and available in large volumes

Asia likes Mideast oil:

  • shorter shipping times
  • attractive prices
  • type of crude oil the refineries were optimized for
South Korea:
  • imports from the Middle East climbed last year to the highest level since at least 1980
  • wants to diversity purchases to guard against geopolitical risks tied to some of the world's biggest suppliers 
  • imported 845 million bbls in 2015; high since 1980 when that country started compiling the data
  • refiners are shunning shipments from distant ports, taking more cargoes from Persian Gulf
  • wants to diversity purchases to guard against geopolitical risks tied to some of the world's biggest suppliers
  • but, India's Reliance Industries, owner of the worlds biggest refining complex is shifting from crudes tied to Brent to grades priced against Dubai, the Middle East marker
  • Saudi Arabia and Oman have boosted supplies to China this year as volumes from Venezuela and Colombia have shrunk
  • more than half of the top 10 suppliers were from the Middle East last year

China's Sinopec expects steady throughput, 5% lower crude output in 2016 - Asia's largest refiner China Petroleum and Chemical Corp, or Sinopec Corp., plans to lift refining throughput a marginal 0.64% and cut crude production by 5% in 2016 as a result of cutting capital expenditures by 10.6% from 2015, it said in annual results late Tuesday. Sinopec, which is 71% held by parent company China Petrochemical Corp., or Sinopec Group, said it plans to spend Yuan 100.4 billion ($15.4 billion) this year. Its 2015 capital expenditures totaled Yuan 112.25 billion, down 27.4% from 2014 and 17.4% lower than planned. Nearly half of the budget this year will go to domestic oil and gas exploration projects, including development projects in the second-phase Fuling shale gas field, the Pingbei and Huangyan gas fields and the Daniudi gas field, and for the first-phase pressure boosting project to transport gas from Sichuan to Eastern China.Refining investment this year will be Yuan 19.5 billion, mainly to revamp the Zhenhai and Maoming refineries as well as quality upgrading for gasoline and diesel. Spending in the refining segment totaled Yuan 15.13 billion last year, mainly for oil products quality upgrading projects and refinery revamping.

CNOOC Overtakes Sinopec as China's Second-Biggest Oil Producer  |  Rigzone-- Oil’s plunge has reordered the pecking order among China’s biggest explorers. China Petroleum & Chemical Corp.’s move to close some high-cost fields has caused it to slip to number three in oil and gas production as rival Cnooc Ltd. got a boost from new domestic offshore projects. Sinopec, as China Petroleum is known, produced almost 472 million barrels of oil equivalent in 2015, down 1.7 percent. Cnooc overtook it by pumping about 496 million, jumping nearly 15 percent. PetroChina Co. remained the largest, at 1.49 million barrels. “Sinopec has the most mature exploration and production portfolio of the all three Chinese oil majors,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “For Cnooc, however, offshore China still has legs to grow. Strong reserves replacement by Cnooc suggests that they can stabilize production even in a low oil price environment.” Cnooc sees output slipping this year to 470 million to 485 million barrels of oil equivalent, putting in neck-and-neck with about 476 million from Sinopec. PetroChina sees output falling 2.7 percent this year to 1.45 billion barrels, according to its earnings statement last week.

BP signs first shale gas production sharing contract in China - BP and China National Petroleum Corporation (CNPC) today signed a production sharing contract (PSC) for shale gas exploration, development and production in the Neijiang-Dazu block in the Sichuan Basin, China. Witnessed by BP Group Chief Executive Bob Dudley and CNPC Chairman Wang Yilin, the contract is BP’s first shale gas PSC in China and covers an area of approximately 1,500 square kilometres. CNPC will be operator for this project. “We are pleased to reach this significant milestone as part of our strategic partnership with CNPC, building on our successful cooperation in and outside of China,” Dudley said. “We are looking forward to working together with CNPC on technology, operational and subsurface techniques in unconventional resources. We will bring our worldwide experience to our first unconventional gas project in onshore China with CNPC. We will combine this with CNPC’s knowledge and experience to bring gas to China’s growing clean energy market. China continues to be an important part of BP’s portfolio.” This PSC is the first achievement from BP and CNPC’s framework agreement on strategic cooperation that was signed last October during the visit to the UK of President of The People’s Republic of China, Mr. Xi Jinping. In addition to unconventional resources, the framework agreement covers possible future fuel retailing ventures in China, exploration of oil and LNG trading opportunities globally, and carbon emissions trading as well as sharing of knowledge around low carbon energy and management practices. 

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