on Monday of this past week, the U.S. Energy Information Administration posted a fairly routine article on their daily blog (Today in Energy) titled United States remains largest producer of petroleum and natural gas hydrocarbons....the article featured a graph of our production of gas and oil vis a vis that of Russia and Saudi Arabia and went on to tell the familiar story about how fracking made it possible for our output of gas and oil to pass that of Russia in 2012, and that, as the headline indicates, we're still on top...as the week progressed, copies of the graphic from that post started showing up on other sites around the web, some to put an emphasis on that "we're number one" aspect that it showed, some to disparage the Saudis, who by the looks of that graph, barely come close...so i thought it would be instructive to take a look at that graph, and see what it shows, and more importantly, what it doesn't show...
the above bar graph, from the EIA's Monday blog post, shows the annual oil & gas output for the US, Russia, & Saudi Arabia since 2008 in both quadrillion BTUs (scale on left margin) and in millions of barrels of oil equivalent (right margin)...for each year, US output is represented by blue colors, Russian output is represented by brown and tan, and Saudi output is represented by brick red and pink, with the darker portion of each bar indicating crude oil output and the lighter shade representing natural gas output...thus, even though Saudi output of natural gas is dwarfed by that of the US and Russia, we can still see by looking at the darker portions of those bars that they (in dark red) led the world in crude oil output up to 2013, when the graph shows the US (dark blue) overtook them...
now, if you've been paying attention to the barrage of oil numbers we run through each week, you'll recall that the weekly EIA data on production of crude oil from US wells that we quote each week has shown that early this year our output of crude dropped below the 9 million barrel per day level, after being as high as 9.6 million barrels per day in mid-2015...but the graph above appears to indicate that our oil output topped 15 million barrels per day in 2015...why the discrepancy? it's because the EIA includes a number of other hydrocarbon liquids in their broadest definition of oil, which thereby inflates our total "oil" output...if we check the weekly petroleum balance sheet (pdf) from the EIA, we see in the second section headed "Petroleum Supply" there are two subheadings, "Crude Oil Supply" and "Other Supply"...under "Other Supply", they include our weekly output of "Natural Gas Plant Liquids", "Renewable Fuels", which includes ethanol, and "Refinery Processing Gain"..."Natural Gas Plant Liquids" are those hydrocarbons, primarily ethane, propane, butane, and isobutane, in natural gas that separate from the methane gas as liquids either in gathering or processing; they're valuable as a petrochemical feedstock but we can't refine gasoline from them... "Refinery Processing Gain" is the difference in barrels between the refinery crude input and product output that occurs because the products have a lower specific gravity than the crude oil processed...
so, looking at that weekly petroleum balance sheet (dynamic link, changes weekly) again to get an idea of the volume of this other supply, we see that year to date crude oil output for the first 5 months of 2015 averaged 9,327,000 barrels per day, while "other supply" averaged 5,172,000 barrels per day over the same period...that means crude oil was only averaging about 64% of our petroleum output in that part of 2015 (it's actually much less now), while natural gas liquids accounted for 21% and biofuels accounted for 7% of our so-called petroleum output...
now, from the output figures indicated above for the Russians and the Saudis, i can see that their "petroleum output" was accounted for in the same manner, so there's no deceit in that graph...but when most think about petroleum output, they're thinking of the dark colored viscous liquid as it comes out of the ground, not ethanol or the lighter liquids that condense during natural gas processing...for that kind of crude oil, US output averaged 9.4 million barrels per day in 2015; while the Saudis produced nearly 10.2 million barrels a day of crude at the same time, up from their 9.5 million in 2014, and while Russian output averaged over 10.2 million barrels per day in 2015, and they're now producing 10.49 barrels of real crude per day as of their latest report....even the EIA itself said that Russia is world's largest producer of crude oil and lease condensate on that same blog less than a year ago, in an analysis which didn't include US natural gas plant liquids or ethanol in the comparison....so when you see an article or hear someone say that the US has become the largest producer of oil, you know that they, or the source they're quoting, is including all those liquids we've just shown are included under 'other supply' by the EIA...
while we're comparing the world's top producers of fossil fuels, there's one more aspect of that comparison that we should bring up...you already know that the Saudis export most of what they produce; according to OPEC data, the Saudis export 7,153,000 barrels per days of crude oil and 2,202,000 barrels per day of refined products; that suggests they're exporting more than 90% of what they produce....the Russians are major exporters too; in 2014, Russia exported 4.7 million barrels per day of crude oil, almost 50% of their output, with 72% of that going to Europe and most of the rest to Asia...and just this week we learned that they even topped the Saudis as the top supplier to China, as Russian oil exports to China jumped 52.4% year over year to a record high in April...at the same time, Russian exports of natural gas are making their way to almost every country in Europe through a number of pipelines...according to the EIA, Russia exported 7.1 trillion cubic feet of gas in 2014, about one-third of their output, with Germany, Turkey, Italy, and Belarus accounting for more than half of that....in 2015, the state gas company Gazprom supplied 158.56 billion cubic meters of gas to European countries, with approximately 82% of the company’s exports going to western Europe....with the addition of the new Nord Stream-2 gas pipeline from Russia to Germany, Russian exports of gas have increased by 44% to Germany, by 42% to Italy, and by 73% to France since the beginning of this year....
so how about the US, who according to the EIA now produces more oil and gas than either Russia or the Saudis...well, since we cover US oil imports every week, i dont have to tell you that the US is still importing almost as much oil as it ever has...in February, the last full month we have confirmed data for, we imported 229,402,000 barrels of oil, the most in any February in 4 years and only 18% below the record February 2006 imports of 279,530,000 barrels....but to be fair, we're also exporting refined products at the same time, so we should subtract those exports to find out what our net imports are...conveniently, the EIA's weekly petroleum balance sheet (pdf) gives us that net figure, so we dont have to dig out each of the contributing data sets...on line 33 of that balance sheet, they give us a total for "Net Imports of Crude and Petroleum Products", which was at 5,946,000 barrels per day for the week ending May 20th...for 2015 year to date, our net imports of oil & oil products were averaging 5,215,000 barrels per day...so despite the fact that our 2015 "oil production" of more than 15 million barrels a day was so much more than major exporters Russia and Saudi Arabia, we still found it necessary to import more than 5 million more barrels a day to meet our gluttonous needs...
well, how about natural gas? surely, with the glut of gas we've seen in this part of the country, where prices for stranded natural gas fell to pennies per mmBTU this past winter, we must have such a surplus of gas that we wouldn't be importing that, too. well, no. even though you'll often run into those who say we're a gas exporter, we are also still a net importer of natural gas, despite being the top producer by far globally, as the graph above indicates...while earlier this year the first LNG export tanker set sail for Europe, up until then the only LNG tankers we'd see were those that were unloading here, from LNG exporters such as Norway, Trinidad, and Yemen...the Natural Gas Imports and Exports Fourth Quarter Report for 2015 from the Dept of Energy, which incorporates annual figures for the year, indicates that our imports of natural gas totaled 2788.3 billion cubic feet in 2015, with 96.7% of that coming from Canada, while our exports of natural gas totaled 1771.9 billion cubic feet BCF, with nearly 60% of that going to Mexico, while almost 40% was exported back to Canada...for those interested in the details, that 163 page pdf actually shows the volume of our gas imports and exports by point of entry and point of exit, even including by truck....the point is that our imports of natural gas still exceed our exports, which can be seen in the EIA graph of our net imports below...
the above graph comes from the EIA's data series on our monthly net natural gas imports; in other words, our imports minus our exports, since 1990....while we can see that our net imports of natural gas are down considerably from the 300 billion cubic feet per month level we saw during the prefracking era between 2000 and 2007, we're still importing more than 100 billion cubic feet per month of natural gas during the winter months...despite the glut of natural gas that developed this year as a result of the warm winter, our net imports were still at the 103 billion cubic feet per month level in January and at 87 billion cubic feet level in February, the last month we have confirmed data for...although the graph we posted to open this section gives our gas production in barrels of oil equivalents, the EIA gives our total production for 2015 at 27,096 billion cubic feet...the annual version of the above chart indicates our net imports for the year were 935 billion cubic feet, meaning we are still importing nearly 4% of the natural gas we use...
The Latest Oil Stats from the EIA
this week's oil data for the week ending May 20th indicated a rather large drop in our imports of crude oil, however, as it now includes a full week without imports from Alberta Canada, where pipelines still remain shut off after the Fort McMurray wildfire roared through the oil sands camps...and although refining was off a bit from last week, the large 480,000 barrel per day fudge factor of last week was unnecessary, because the data showed the largest withdrawal of crude from storage in 7 weeks...Wednesday's reports from the Energy Information Administration showed that our imports of crude oil fell by 362,000 barrels per day, from an average of 7,677,000 barrels per day during the week ending May 13th to an average of 7,315,000 barrels per day during the week ending May 20th ...however, that was still 9.2% more than the 6,696,000 barrels of oil per day we imported during the week ending May 22nd a year ago, and hence the EIA's weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports remains at the 7.6 million barrel per day level, which was 10.9% more than our oil import rate of the same four-week period last year...
at the same time, this week's data showed that production of crude oil from US wells fell by 24,000 barrels per day, from an average of 8,791,000 barrels per day during the week ending May 13th to an average of 8,767,000 barrels per day during the week ending May 20th....that was 8.4% below the 9,566,000 barrels per day that we were producing during the third week of May last year, and 8.8% below the 9,610,000 barrel per day peak of our oil production that we saw during the week ending June 10th of last year...our oil production has now been down 17 out of the last 18 weeks and has now dropped by 452,000 barrels per day since the first of the year....
as we mentioned earlier, refinery processing of crude oil also slipped somewhat this week, at a time of year refineries are usually ramping up, as US refineries used 16,279,000 barrels of oil per day during the week ending May 20th, 139,000 barrels per day less than the average of 16,371,000 barrels of oil per day barrels they processed during the week ending May 13th...the US refinery utilization rate fell to 89.7% of operable capacity last week, down from a 90.5% capacity utilization rate during the week ending May 13th...and that's way below the 93.6% capacity utilization rate of the week ending May 22nd last year, when US refineries were using an average of 16,450,000 barrels of crude each day...
with less oil being refined, our refinery production of gasoline fell by 131,000 barrels per day, averaging 9,866,000 barrels per day during the week ending May 20th, down from the average 9,997,000 barrels of gasoline per day they produced during the week ending May 13th...that was 2.9% less than the 10,164,000 barrels of gasoline per day we were producing during the same week last year...at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also decreased, falling by 109,000 barrels per day to 4,661,000 barrels per day during week ending May 20th...that was 4.7% lower than our distillates production of 4,891,000 barrels per day during the same week of 2015...
however, even with the drop in gasoline production, our gasoline inventories rose by 2,496,000 barrels to 240,111,000 barrels on May 20th, up from the 238,068,000 barrels of gasoline we had stored on May 6th...that was the largest increase in gasoline inventories since the 2nd week of February and it came at a time of year when gasoline inventories are usually in decline...factors contributing to that buildup of gasoline stocks included a 242,000 barrel per day increase in our imports of gasoline, which rose to 933,000 barrels per day, and a 239,000 barrel per day drop to 9,516,000 barrels per day in the amount of gasoline supplied to US markets, which last week was flirting with an all time high...so now our gasoline supplies are now 8.8% higher than the 220,627,000 barrels of gasoline that we had stored on May 20th last year, and still categorized as "well above the upper limit of the average range" for this time of year, which you can clearly see in the graph below, where normal supply levels for this time of year are indicated by the shaded area on the graph....
at the same time, our distillate fuel inventories fell by 1,284,000 barrels to end the week at 150,878,000 barrels, as diesel fuel was withdrawn from storage in all PADD districts except for the east coast...however, because distillate inventories were already bloated after a warmer than normal winter reduced heat oil consumption, our distillate inventories remained 17.1% higher than the 128,839,000 barrels of distillates we had stored at the same time last year, and thus they're also characterized as "well above the upper limit of the average range" for this time of year...
finally, with the decrease in crude imports and with a fudge factor of just 17,000 barrels per day, we found it necessary to draw oil from our stocks of crude oil in storage, which fell by 4,226,000 barrels from last week to 537,068,000 barrels as of May 20th...still, that was 12.0% higher than the 479,363,000 barrels of oil we had stored as of May 22nd, 2015, and 36.7% higher than the 392,954,000 barrels of oil we had stored on May 23rd of 2014....though our supply of oil stored above ground (not counting what's in the government's Strategic Petroleum Reserve) is down by 6,236,000 barrels from the record high of 543,394,000 barrels set 3 weeks ago, our inventories are still up by 54,744,000 barrels since the beginning of the year...
This Week's Rig Count
for the first time in the last 12 weeks, we did not see a new record low for the number of drilling rigs deployed in the US...we did not see an increase in drilling, either, as Baker Hughes reported that the total count of active rotary rigs running in the US was unchanged from last week at 404 rigs as of May 27th...that was still down from the 875 rigs that were working on May 29th last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014... the count of rigs drilling for oil was down 2 to 316, which was also down from the 646 rigs targeting oil that were in use a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 2 rigs to 87, which was down from the 225 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that was set on August 29th, 2008...there was also one rig deployed that was classified as miscellaneous, unchanged from last week but down from the 4 miscellaneous rigs that were operating a year ago....
the rig count summary indicates that an additional rig was set up on an inland body of water, but unfortunately the Baker Hughes state totals do not show where, as the 4 states having an inland water rig category (Texas, Alabama, Louisiana and Florida) were all listed as unchanged...the count of working horizontal drilling rigs was unchanged at 314 rigs this week, which was still down from the 674 horizontal rigs that were in use on May 29th of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of 2014...meanwhile, a net of 2 vertical rigs were pulled out this week, leaving 46 vertical rigs still working, which was down from the 111 vertical rigs that were in use at the end of the same week a year earlier...at the same time, the directional rig count rose by 2 rigs to 44, which was still down from the 90 directional rigs that were deployed in the US during the same week last year...
for the details on which states and which shale basins saw changes in drilling activity this past week, we're again going to include a screenshot of that part of this week's rig count summary from Baker Hughes, which shows those changes... the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of May 27th, the second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the 4th column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was May 29th of 2015:
as you can see from the above, it really was a quiet week as far as rig activity goes; only a few states saw changes, with none greater than the two rigs that were added in Oklahoma...you'll note that a rig was added in the Utica this week, where there are now 11 rigs working, down from 25 a year ago, while the rig count in Ohio is thus similarly up to 11, down from 23 a year ago, and down from 50 at the peak...also note that the shut down of the single rig that had been operating in Nebraska was missed by this overview; there had been 2 rigs operating in that state a year ago, now there are none...
$3.7M grant awarded to Lake Erie wind turbine project: (AP) — The U.S. Department of Energy has awarded a $3.7 million grant to a company doing engineering work on a proposed wind turbine project in Lake Erie. Lake Erie Energy Development Corp. is aiming to build a 20-megawatt demonstration wind farm in the lake northwest of downtown Cleveland. Current cost estimates are between $120 million and $128 million. The DOE grant is the third the department has given LEEDCo, bringing the total in federal funding to $10.7 million, Cleveland.com reported (http://bit.ly/1OG19E4). The department wrote in a memo to the Ohio congressional delegation that the additional funding will support the company’s offshore wind research and development progress. The grant depends on a partnership between LEEDCo and a Norwegian wind developer that provides a $1.9 million cost share, bringing the total funding available to nearly $5.6 million. The DOE had made LEEDCo a runner-up when it announced in 2014 that it would be awarding $47 million in grants to offshore projects in the Atlantic Ocean. LEEDCo is hoping the department will declare it a finalist and move a primary grant to the project since others have fallen behind the government’s engineering development schedule. David Karpinski, an engineer and LEEDCo vice president, said the current goal is to complete detailed electrical and mechanical engineering designs. The company wants to have the wind turbines built and functioning by the end of 2018, he said.
Activists want extended comment, hearing on Wayne drilling - Akron Beacon Journal (blog) -- Organized by Athens County Fracking Action Network (ACFAN), representatives of eight grassroots environmental groups held press conferences on Wednesday, first at Wayne National Forest Headquarters and later in downtown Marietta. Speakers from Torch Can Do, Buckeye Forest Council, Ohio Sierra Club, Mid-Ohio Valley Climate Action, Ohio Valley Environmental Coalition, Green Sanctuary of the First Unitarian Universalist Society of Marietta, Wayne Oil and Gas Organizing Group, andACFAN called for an extension of the Bureau of Land Management (BLM) comment period and a public hearing on BLM/Wayne plans to open the Wayne to deep-shale, high pressure horizontal drilling and fracturing (“fracking”). Heather Cantino of ACFAN stated, “The BLM as a federal agency is charged with involving the public in such an important decision as opening our Forest to fracking. Fracking was not in the 2006 Wayne National Forest Plan so must be fully evaluated with full public input, according to federal law. I’ve spent 8 hours trying to decipher the BLM’s so-called Environmental Assessment (EA) and so far find itto begobbledegook.” She cited a couple of examples: “They cite an unpublished Masters' thesis (Fletcher 2012, funded by BP) that says ‘small spills are more common than big spills’ and then (mis)use this meaningless statement to say that they don't need to consider the risk of spills! Water contamination from drilling with toxic chemicals, as Ohio allows, through unmapped aquifers? Well failure? Waste injection? Truck accidents? Blow-outs? Not considered. It will take me many more hours to figure out if there’s any science in this document. So far I can’t find any.”Cantino added,“We also can't expect everyone to read these confusing documents and make sense of them by themselves. We need a public hearing so that the public can share its extensive knowledge of the issues and our various attempts at understanding these confusing and consequential documents –– with one another, with our community, and with federal officials. We must then have time to write meaningful comments.”
Forest fracking views still sought - Marietta Times - Tempers have flared as local environmental activist groups, state officials and oil and gas companies debate drilling and fracking wells in parts of the Wayne National Forest, with the comment period for the proposed actions set to close at the end of May. Over the past three months, the federal Bureau of Land Management has been performing a comprehensive environmental assessment on a proposal to offer more than 18,000 acres of Wayne National Forest located in Washington County for sale for oil and natural gas development. The assessment found "no significant impacts" to the Forest, but these findings have some residents concerned. "The biggest issue here is not the drilling, it is the fracking," said Loran Conley, a member of Torch Can Do!, an oil and gas watchdog group based in Little Hocking. "These drillers use approximately 4,000,000 gallons of water to frack a single well, and once that water comes back up, it is toxic. Where do they get the water?" Tom Thompson, administrator of District Resources-Mineral and Uses for Wayne National Forest in the Marietta Unit, said the Forest Service does have concerns about fresh surface water, but the water falls under the purview of the state. However, according to Randy Anderson, the assistant district manager for the Northeast States - Bureau of Land Management, the proposal is not for drilling and hydraulic fracturing, but for the leasing of mineral rights under national forest land only.. "The assessment was only for the leasing of parcels and to identify any impacts of the leasing process. Environmental impact studies would be completed for both the drilling process and the fracking process, but those come at a much later date." The Wayne National Forest is federal land intermingled with a patchwork of properties held by private landowners governed only by the impact they could have to federal resources, said Thompson.
Detroit activists oppose increased fracking waste - Detroit residents and community activists have been organizing since last year to oppose the increased processing and dumping of hazardous and radioactive fracking waste at a US Ecology facility in their neighborhood. On May 18, members of the Coalition to Oppose the Expansion of US Ecology (COE-USE) joined with other activists at a demonstration at the main office of the Detroit Water and Sewerage Department. They opposed the dumping of fracking and other industrial waste liquids into Detroit’s sewer system while also demanding a moratorium on residential water shutoffs. USE operates several hazardous waste processing facilities in Detroit. The company has requested a permit from the Michigan Department of Environmental Quality to increase tenfold the processing and disposal of radioactive and carcinogenic fracking waste at its US Ecology North facility, which is located in the middle of Detroit at 6520 Georgia St. At a meeting with community activists on May 11, MDEQ representatives stated that they anticipate approving the permit on Oct. 1 because what USE wants to do is legal. This is the same state agency that played a major role in poisoning the water and the people of Flint. This is the same MDEQ that has allowed southwest Detroit to be the most polluted zip code in Michigan for decades, despite strong and vigorous opposition from residents. Many Detroiters have no confidence in the MDEQ, and, in fact, accuse it of a pattern of environmental racism.
Fracking Wastewater Is Cancer-Causing, New Study Confirms - The fracking industry likes to call its product “natural gas,” but the natural consequence of its activity is the production of billions of gallons of cancer-causing wastewater. A new study published in Toxicology and Applied Pharmacology titled, “Malignant human cell transformation of Marcellus Shale gas drilling flow back water,” is the first study of its kind to confirm widely held suspicions concerning the carcinogenicity of fracking pollution. The new collaborative study was conducted by scientists at esteemed institutions in both the U.S. and China and found that so-called “flow back” fracking wastewater induced malignant changes in human bronchial epithelial cells consistent with the cancerous phenotype. The same fracking wastewater was injected into mice, with 5 of the 6 developing .2 cm to .6 cm tumors as early as 3 months after injection, and with the control mice forming no tumors after 6 months. The authors concluded that their results indicate “flow back water is capable of neoplastic transformation in vitro,” i.e. fracking wastewater is capable of producing cancer in mammals. The implications of the data presented above are truly harrowing. Pennsylvania, alone, has over 7,700 active wells in use at present. Over 4,000 violations have been reported, and over 6 million in fines paid out thus far. The operation of these Pennyslvania wells require about 42 billion gallons of water, and according to the figures above, would together produce between 1.4 and 6 billion gallons of flow back wastewater
Leaky Abandoned Wells a Hidden Climate Threat - Researchers with the state and at various universities and institutions are trying to determine what risk the old wells pose to the climate, the surrounding soil and water, and human health. The most acute risks are well known — abandoned wells have channeled gas into homes, creating the conditions for explosions.The scale of the wells’ less visible hazards is still emerging. A 2014 study by Princeton University researchers of 19 old plugged or abandoned wells in Pennsylvania found that all of them were emitting methane and some were spewing significant amounts of the potent greenhouse gas.The historical wells are not counted in official greenhouse gas emissions inventories, but taken together the state’s estimated 300,000 to 500,000 abandoned oil and gas wells could be releasing as much as 4 percent to 7 percent of the total human-caused methane emissions in Pennsylvania,the study suggested.Now, a group within the Pennsylvania Department of Environmental Protection is embarking on a study of 208 wells that were abandoned before modern oil and gas plugging requirements were established in the state in 1984.The DEP study’s leaders hope both to calculate the total potential methane emissions from the state’s abandoned wells and to identify emissions trends. Perhaps wells from certain eras, regions or depths, or those that used particular materials or plugging techniques, will emerge as high emitters that should be addressed first.
Activists Ask President Obama to End Fracking in Film - Mark Ruffalo fielded a question from Ray Beiersdorfer, geology professor at Youngstown State University, during an online Q&A following a screening of the film “Dear President Obama.” “This [question] comes from Youngstown, Ohio,” Ruffalo said. “Do I think you should give up? No!” Actor Mark Ruffalo answers questions before an audience gathered in Moser Hall to watch the documentary film. Beiersdorfer asked if he should stop pursuing a fracking ban within the city of Youngstown, Ruffalo said he would win next time. He said more people will be emboldened to join as efforts increase, and documentaries work as tools to help revolutionize communities. Students, faculty and members of the community gathered in a room in Moser Hall to watch a free screening of the film, which was executive produced by Ruffalo. Ruffalo and director Jon Bowermaster fielded questions from several colleges and environmental groups afterwards. The film focuses on Barack Obama’s claim that fossil fuels extracted through fracking could power America for the next century. Experts in the documentary say that fossil fuels will not sustain us longer than 20 years. This documentary examined this problem and the effects of fracking across the United States and how Obama’s policies have increased the prevalence of fracking. Beiersdorfer said the film crew for the documentary interviewed him and toured injection sites in Youngstown, but he didn’t make the final edit. Ohio wasn’t mentioned in the movie. Beiersdorfer said he likes to educate people on energy and the environment. “One of the two major threats that we have are nuclear war and climate change,” Beiersdorfer said. “So I’m doing what I can to help educate the community.”
FERC Called Biased Against Local Concerns / Public News Service: - The federal agency that approves or denies gas pipelines is oriented against the concerns of landowners and communities, according to people working on the issues. The Federal Energy Regulatory Commission (FERC) will decide on the huge pipelines competing to bring natural gas through West Virginia and Virginia to eastern markets. Spencer Phillips, chief economist for Key-Log Economics, studied the impact of the Mountain Valley Pipeline (MVP). He estimates it will hurt folks along the line to the tune of more than $8 billion. But Phillips says FERC is not designed or inclined to consider those costs. "FERC's approval process for the Mountain Valley Pipeline is really a rigged game," says Phillips. "The agency's procedures themselves, as well as their track record, mean that they ignore some really important cost to people and communities." According to a Washington lawyer who specializes in cases like these, FERC's orientation is built into its legal DNA. Carolyn Elefant, an energy attorney in Washington D.C., says the 1930s Natural Gas Act was passed at a time when the government wanted to encourage the development of needed infrastructure. She says it gave regulators the power to use eminent domain to overcome landowner opposition. So, Elefant says FERC now assumes if most landowners make a deal with the developers, the folks along the line have received fair compensation. "That's very inaccurate," says Elefant. "Many times people enter into the agreements because they feel like they have no choice, they're not going to be able to fight a huge gas company, and they figure they might as well take what they can get."
New York senators continue to question gas pipeline expansion - (AP) — New York’s U.S. senators are urging the federal government to halt the expansion of a gas pipeline project that runs beside a nuclear power plant. Sens. Charles Schumer and Kirsten Gillibrand want the Algonquin pipeline project halted until independent health and safety reviews are completed. The two Democrats say the project poses a threat to the quality of life in the region and doesn’t come with any long-term benefit to the communities it would affect. Both senators are asking the Federal Energy Regulatory Commission not to approve any proposal until a thorough, independent review of the project’s potential impacts is completed. The project would nearly double the size of the current natural gas transmission line on a route that travels through Rockland, Putnam and Westchester counties in southeastern New York.
Market impact of 2016 northeast natural gas demand trends -- Northeast natural gas production has been averaging nearly 3.0 Bcf/d higher this year than last year, while demand has lagged behind due to mild weather. At the same time, storage inventories are running well above normal and there is little new takeaway capacity due online this summer. This means the Northeast is under pressure to balance excess supply in the region. In today’s blog, we wrap up our analysis of the Northeast supply/demand balance with a closer look at recent demand trends. We started this series in Part 1 with a look at the Northeast supply/demand balance (production versus demand) this past winter (November 2015 through March 2016), which marked the first winter that the Northeast was net long supply on a seasonal average basis. All but one month – January 2016 – posted net positive balances (production higher than demand) in the 2015-16 winter. Northeast production in the period averaged about 21 Bcf/d, while regional demand averaged about 19 Bcf/d, leaving the regional balance over 2.0 Bcf/d supply long, compared to a more than 4.0-Bcf/d supply deficit in the winter of 2014-15.
Industrial and electric power sectors drive projected growth in U.S. natural gas use - Today in Energy (EIA) - U.S. consumption of natural gas is projected to rise from 28 trillion cubic feet (Tcf) in 2015 to 34 Tcf in 2040, an average increase of about 1% annually, according to EIA's Annual Energy Outlook 2016 (AEO2016) Reference case. The industrial and electric power sectors make up 49% and 34% of this growth, respectively, while consumption growth in the residential, commercial, and transportation sectors is much lower. Much of this growth in natural gas consumption results from relatively low natural gas prices. In the AEO2016 Reference case, average annual U.S. natural gas prices at the Henry Hub are expected to remain around or below $5.00 per million British thermal units (MMBtu) (in 2015 dollars) through 2040. The Henry Hub spot price averaged $2.62/MMBtu in 2015, the lowest annual average price since 1995. Prices rise through 2020 in the AEO2016 Reference case projection as natural gas demand increases, particularly for exports of liquefied natural gas (LNG). Currently, most U.S. natural gas exports are sent to Mexico by pipeline, but LNG exports, including those from several facilities currently built or under construction, account for most of the expected increases in total U.S. natural gas exports through 2020. The persistent, relatively low price of U.S. natural gas is the primary driver for increased natural gas consumption in the industrial sector. Energy-intensive industries and those that use natural gas as a feedstock, such as bulk chemicals, make up most of the increase in natural gas consumption. Low natural gas prices also support long-term consumption growth in the electric power sector. Natural gas use for power generation reached a record high in 2015 and is expected to be high in 2016 as well, likely surpassing coal on an annual average basis. However, a relatively steep rise in natural gas prices through 2020 (rising 11% per year) and rapid growth in renewable generation—spurred by renewable tax credits that were extended in 2015—also contribute to a decline in power generation fueled by natural gas between 2016 and 2021.
NYMEX June gas rolls off board at $1.963/MMBtu, down 2.9 cents - Platts - The NYMEX June natural gas futures contract rolled off the board Thursday at $1.963/MMBtu, down 2.9 cents. Earlier Thursday, US natural gas in storage climbed 71 Bcf to 2.825 Tcf for the week that ended Friday, a build that was above analyst consensus expectations of a 68-Bcf injection to stocks. "The 71-Bcf net injection for the week ended May 20 was slightly more than the consensus expectation, but still supportive compared [with] the 97-Bcf five-year average for the date," said Tim Evans, energy future specialist at Citi Futures Perspective. In the corresponding week a year ago, EIA reported a 106-Bcf injection, while the five-year average build is 97 Bcf. As a result, stocks were 756 Bcf, or 36.5%, higher than the year-ago level of 2.069 Tcf, and 769 Bcf, or 37.4%, more than the five-year average of 2.056 Tcf.The National Weather Service's six- to 10-day outlook projected above-average temperatures over significant portions of the Northeast, Southeast, Upper Midwest and the entire West Coast, possibly spurring more cooling demand in major markets heading into June. Total dry gas production is expected to rise to 70.8 Bcf/d, making Tuesday's production total of 70.3 Bcf/d once again the 2016 year-to-date low. Dry production is on pace to average around 70 Bcf/d in May, reflecting a reduction in production for three months in a row from February's high of more than 73 Bcf/d, according to data from Bentek Energy, a unit of Platts.
U.S. natural gas futures extend losses after bearish U.S. storage data - NASDAQ.com: - U.S. natural gas futures extended losses in North America trade on Thursday, after data showed that natural gas supplies in storage in the U.S. rose more than expected last week. Natural gas for delivery in June on the New York Mercantile Exchange dropped 4.4 cents, or 2.02%, to trade at $2.137 per million British thermal units by 14:34GMT, or 10:34AM ET. Prices were at around $2.172 prior to the release of the supply data. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended May 20 rose by 71 billion cubic feet, compared to expectations for a gain of 68 billion. That compares with a gain of 73 billion cubic feet in the prior week, an increase of 112 billion cubic feet in the same week a year earlier and a five-year average rise of around 97 billion cubic feet. Total U.S. natural gas storage stood at 2.825 trillion cubic feet, 26.8% higher than levels at this time a year ago and 27.2% above the five-year average for this time of year. Meanwhile, the latest U.S. weather model called for mild temperatures over the next two weeks, which should reduce heating demand during that time. Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on spring heating demand. Gas use typically hits a seasonal low with spring's mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning. Unless intense summer heat boosts demand from power plants, stockpiles will test physical storage limits of 4.3 trillion cubic feet at the end of October.
Shale Boom Royalties Come Back to Bite Chesapeake - Chesapeake Energy Corp. has agreed to pay nearly US$53 million dollars to settle a suit over unpaid royalties in north Texas, according to Oklahoma state media reports. A total of US$29.4 million in cash will be paid to the plaintiffs in the class-action suit and another US$10 million will be distributed through a promissory note payable in three years. French Total SA, Chesapeake’s joint venture partner, agreed to pay US$13.1 million on top of its partner’s offerings. “We are pleased to have reached a mutually acceptable resolution of this legacy issue and look forward to further strengthening our relationships with our royalty owners,” Gordon Pennoyer, a spokesperson for Chesapeake said in a statement carried by the Oklahoman. At least 90 percent of the plaintiffs have to approve the deal for the money to be split and distributed. If adopted, the agreement would end the lawsuit lodged by landowners in Tarrant and Johnson counties. The plaintiffs said the company underpaid royalties for natural gas extraction on their land in the Barnett Shale by several hundred million dollars. Chesapeake has been accused of deducting post-production costs from the royalty payments, which the plaintiffs say is against the terms of their contract with the company.
Natural gas faces increasing competition in Texas -- With storage inventories soaring to record-high levels and production remaining relatively flat, the U.S. natural gas market is in dire need of record demand this summer to balance storage. All eyes are on power generation to soak up the gas storage surplus. Low gas prices and increased gas-fired generating capacity makes natural gas the go-to generation fuel this year. However, in the largest summer demand market – Texas – natural gas is facing increasing competition from wind. Wind power still provides a much smaller share of Texas’s power than natural gas, but the addition of several big wind farms in 2015 gives wind a stronger footing in the Texas market this year. Today we take a closer look at the potential impact of growing wind generating capacity on natural gas demand, particularly in Texas. We talked about the market’s dire need for incremental, even record demand recently in our “Carry That Weight” series of blogs. The gas market started the storage injection season in April (2016) with a record storage overhang, and mild weather since then has suppressed demand and limited the market’s ability to whittle down the surplus. However, if we discount the effects of the milder-than-normal weather, demand actually has been exceptionally strong on a degree day basis and could easily reach record highs this year if we get a normal-to-hotter summer weather. But now there is another potential factor that could blunt demand as well – wind generation, especially in Texas. Before we get to that though, first let’s put Texas power generation and wind into perspective.
Let's Go to Eaglebine, Texas - What It Might Take to Revive a Middle-Tier Shale Play -- Drill-rig counts and crude oil production are down sharply in the Eaglebine, one of many less-than-stellar shale plays that drillers and producers have mostly abandoned in favor of superstar counties in the Permian Basin, the southern Eagle Ford and the STACK play in Oklahoma. It’s understandable; in today’s low-oil-price/high-stress environment, everyone’s chasing the sky-high initial production (IP) rates that provide the biggest, quickest returns and help pay the bills. Still, as we will discuss today, there are at least a few glimmers of hope in the Eaglebine, including a possible pipeline restart and a new pipeline tie-in that will reduce crude-delivery costs. Now all we need is $60+/bbl oil. The Eaglebine is an “emerging” shale play that never quite emerged, mostly because the oil price collapse that started in mid-2014 sucker-punched Eaglebine drillers and producers just as they were ramping up their output, benefiting from new pipeline takeaway capacity, and dreaming big. As we said in our We Heard It Through the Eaglebine series a while back, the play is located within an 11-county area east of Austin, TX, south of Dallas and north of Houston, where the Eagle Ford Shale meets the Woodbine Sandstone (hence the clever combo-name). The play got off to a slower start than the Eagle Ford, in part because the Eaglebine formation (up to 1,000 feet thick, and found at depths of between 6,500 and 15,000 feet) has been more complex for drillers to exploit. The Eaglebine and Eagle Ford share similar geology--both are situated above the Buda Formation and below the Austin Chalk—but the Eagle Ford is a carbonate rich organic, while the Eaglebine contains a large percentage of silica-rich sands interlaced in the organic rich shale—a characteristic that makes Eaglebine completion and production a tad (or two, or three) more complicated.
George P. Bush Paid Fired Employees $1 million to Keep Them from Suing -- Texas Land Commissioner George P. Bush has paid out nearly $1 million in taxpayer dollars to dozens of people his administration fired in exchange for their promise to not sue him or the agency, a new report finds. Bush, the first-term Republican Land Commissioner, has directed his office to keep at least 40 people on the payroll for as long as five months after termination, according to ananalysis of records by The Houston Chronicle. The fired employees did not have to use vacation time, but rather continued to accrue more time as long as they were on the state’s payroll. The Chronicle reports that in return, the employees agreed in writing not to sue the agency or discuss the deal. Many recipients were top aides to former Land Commissioner Jerry Patterson who Bush fired when he took over the agency and replaced more than 100 employees.State employees are required to work to be paid — no severance packages are given for state jobs even though they are common in the private sector. “I can understand the thinking of an agency head who wants to get rid of someone and thinks that this is an easy way to do it, but this is not the way to do it,” Buck Wood, an ethics expert and former deputy state comptroller, told The Chronicle. “Keeping someone on the payroll when they’re not coming to work so you can avoid the hassle of a lawsuit is just illegal.”
Bakken pipeline permit yanked over possible sacred burial grounds -- Federal and state authorities have yanked a construction permit for a segment of the Dakota Access crude oil pipeline route to investigate reports it crosses ancient sacred tribal burial grounds in northwestern Iowa. The U.S. Fish and Wildlife Service notified the Iowa Department of Natural Resources on Wednesday it was revoking approval of a Sovereign Lands Construction Permit, which had been issued to pipeline developer Dakota Access on March 3. The permit granted construction, maintenance and operation in lands under U.S. Fish and Wildlife and Iowa DNR jurisdiction. It was one of several permissions Dakota Access needed for its $3.8 billion Bakken pipeline, which promises to deliver up to 570,000 barrels of crude oil per day 1,168 miles underground from North Dakota oil fields through South Dakota and Iowa to a distribution hub in Illinois. A significant archaeological site was identified within the Big Sioux River Wildlife Management Area in Lyon County and “all tree clearing or any ground-disturbing activities within the pipeline corridor pending further investigation” should stop, James B. Hodgson, chief of the agency’s Wildlife and Sport Fish Restoration Programs wrote to Iowa DNR Director Chuck Gipp. The Iowa DNR issued a “stop work order” Thursday.
Top Democrats Ally With Oil and Gas Industry to Fight Colorado Anti-Fracking Ballot Measures - Oil and gas companies are spending heavily to crush three Colorado ballot initiatives that would limit fracking. And some of the state’s most powerful Democrats are helping them. The stakes are particularly high for several Colorado communities that have voted to limit or ban oil and gas development locally. Those limits were nullified in two cities by state Supreme Court decisions earlier this month. So the ballot initiatives may be their last best chance to slow development whose speed has surprised even cities that initially supported oil and gas projects. “We feel it is a last ditch effort,” said Tricia Olson, director of Coloradans Resisting Extreme Energy Development, or CREED, which is pushing to get two of the measures on the ballot. One measure would allow cities to pass rules to limit or even ban oil and gas development locally; the other would disallow companies from building oil and gas facilities closer than 2,500 feet from “occupied structures.” A third, supported by a separate group called Coloradans for Community Rights, would empower communities to make all kinds of decisions, including whether to frack. The groups are currently in the process of gathering the 98,000 signatures required to get on the ballot. Campaign finance filings released this month indicate just how much oil and gas companies are willing to pony up to drill freely. An industry-backed committee created just to defeat fracking ballot measures in Colorado, called Protecting Colorado’s Environment, Economy, and Energy Independence, collected more than $6.3 million in the first five months of this year. Most of the pro-fracking group’s money came from two, $2.5 million donations, one each from Anadarko Petroleum and Noble Energy. Smaller contributions came from a dozen or so other oil and gas companies and industry groups.
Shell Pipeline Leaks 20,000 Gallons of Oil in California’s Central Valley - For the second time in two weeks, Shell has spilled thousands of gallons of oil, this time in California’s Central Valley. Less than two weeks after dumping nearly 90,000 gallons of oil into the Gulf of Mexico, Shell Oil is at it again. The company’s San Pablo Bay Pipeline, which transports crude oil from California’s Central Valley to the San Francisco Bay Area, leaked an estimated 21,000 gallons into the soil near in San Joaquin County this week. Responders are on the scene to clear oil that’s reached the surface, which county officials say covered roughly 10,000 square feet of land. As of today, Shell representatives claim the pipeline has been repaired, but have not resumed operations. Local government officials and Shell responders are investigating the cause of the leak and currently report that no oil has entered drinking water sources or populated areas. While two large oil spills in two weeks may seem like a pretty epic failure—particularly for a company that just said “no release [of oil] is acceptable“—in reality this is what business as usual looks like for an industry built on polluting our environment and driving climate disaster. In fact, this same pipeline sprung a leak just eight months ago in almost the same location, spilling roughly the same amount of oil into the ground. Adding irony to injury, the spill occurred on the site of one the state’s largest wind energy developments, the Altamont Pass Wind Farm. Wind energy, it should be clarified, does not release toxic chemicals into the soil or contribute to runaway climate change. Perhaps Shell responders on the scene will take note.
Toxic chemicals from fracking wastewater spills can persist for years | Chemical & Engineering News - In North Dakota’s Bakken region, the fracking boom has generated nearly 10,000 wells for unconventional oil and gas production—and along with them, almost 4,000 reported wastewater spills resulting from the activity. A new study shows that these spills have left surface waters in the area carrying radium, selenium, thallium, lead, and other toxic chemicals that can persist for years at unsafe levels (Environ. Sci. Technol. 2016, DOI: 10.1021/acs.est.5b06349). Soils and sediments at spill sites also harbored long-lasting radium contamination, the study found. During production, the well brings up a brine that carries the fingerprint of the rock formation below, including naturally occurring toxic or radioactive elements like selenium and radium. This wastewater, called produced water, may be reused, injected underground for disposal, or processed—though not always successfully—in water treatment plants. But as fracking has increased in the Bakken region, so has the incidence of wastewater spills, often resulting from leaks in pipelines that transport the brine to injection wells. The team used several geochemical tracers, including strontium isotopes, to detect wastewater residue at the spill sites. The ratio of 87Sr to 86Sr in fracking wastewater carries a distinctive signature of the rock formation where it was produced. By measuring strontium isotopes in the produced water and in water samples taken from spill sites, the researchers could identify brine residue from a spill. Other tracers present in both types of samples confirmed the link. In the water samples from spill sites, the team found that high concentrations of salts, trace metals, and other toxic contaminants persisted from the spills. Selenium, thallium, and radium exceeded maximum contaminant levels for drinking water in some samples. Additionally, ammonium and selenium concentrations were above recommended levels for aquatic life. In soil and sediment samples downstream from the Blacktail Creek spill site, radium concentrations were up to 100 times as great as in samples upstream.
Shale oil industry a 'Ponzi scheme' or can it boom again? -- Oil prices are rallying on the back of a drawdown in U.S. crude oil inventories but analysts are questioning whether the country's shale oil industry can ever boom again. The drawdown in crude oil inventories has led to hopes that a global glut in oil supply that has caused prices to plummet since mid-2014 could be finally working its way out of the system. The sharp decline in oil prices, which has been exacerbated by major oil producers such as OPEC refusing to cut production, has claimed many victims in the oil industry over the last two years, particularly in the U.S. where the shale oil industry has seen many producers cut and close down production. Dominic Haywood, an oil analyst at Energy Aspects, told CNBC on Thursday that "there will be a lot of guys (U.S. shale oil producers) that don't come back into the market. I think we've already lost around 35 to 40 independent shale oil or shale oil and gas producers and those producers won't come back," Haywood said. "They would need about a $70-$80 barrel of oil to cover drilling, extraction and capex costs," he said.: One analyst told CNBC that he doubted the very foundation of the U.S. shale oil industry which he said had been founded and expanded on cheap money and had effectively been a "Ponzi scheme" – an investment operation that generates returns for older investors by acquiring new investors. "I think in ten years' time someone is going to write a great book and make a great movie about the shale industry in the U.S. because I think it is, quite frankly, one of the biggest Ponzi schemes known to mankind," Gavin Wendt, founding director & senior resource analyst at MineLife, told CNBC on Thursday.
Would Regulated Oil Prices, Argentine-Style, Help U.S. Shale? -- U.S. shale oil companies are filing for bankruptcy at an alarming rate, whereas, their counterparts in Argentina are having a gala time. When the U.S. shale oil drillers were struggling to earn $39 per barrel of oil, Argentina was offering $67.5 per barrel to their producers. Due to the oil price crash, the world’s capital spending in oil and gas has reduced by approximately 20 percent in 2015. By comparison, U.S. oil and gas companies have reduced spending by 40 percent last year, according to Moody’s Investors Service. On the other hand, Argentina’s state-run oil company YPF increased spending by only 4 percent during the same period. Is this model of regulated oil prices in Argentina replicable in the U.S.? Though this seems to be a good solution, this is not sustainable or beneficial in the long-term.Prior to 2014, when oil prices were high, the cost of U.S. shale oil production was estimated to be between $70-$90/b, according to different analysts. But when crude prices declined, shale oil producers were forced to innovate and reduce costs, which has decreased the cost of production to $60/b in the third quarter of 2015. As the oil prices continued to drop further, shale drillers continued to modernize, further reducing the cost of production in 2016. Along with the technological advances, the productivity of the companies has also increased. Hence, there are many experts who believe that oil prices are unlikely to touch $100/b again. On the other hand, the biggest oil trading company, Vitol, has forecast a likely range of $40-$60/b for the next decade. Had the U.S. protected the shale oil producers, they would not have taken steps to cut costs.
United States remains largest producer of petroleum and natural gas hydrocarbons - Today in Energy - U.S. Energy Information Administration (EIA): The United States remained the world's top producer of petroleum and natural gas hydrocarbons in 2015, according to U.S. Energy Information Administration estimates. U.S. petroleum and natural gas production first surpassed Russia in 2012, and the United States has been the world's top producer of natural gas since 2011 and the world's top producer of petroleum hydrocarbons since 2013. For the United States and Russia, total petroleum and natural gas hydrocarbon production, in energy content terms, is almost evenly split between petroleum and natural gas. Saudi Arabia's production, on the other hand, heavily favors petroleum. Total petroleum production is made up of several different types of liquid fuels, including crude oil and lease condensate, tight oil, extra-heavy oil, and bitumen. In addition, various processes produce natural gas plant liquids (NGPL), biofuels, and refinery processing gain, among other possible liquid fuels. In the United States, crude oil and lease condensate accounted for roughly 60% of the total petroleum hydrocarbon production in 2015. An additional 20% of the U.S. production was natural gas plant liquids. Biofuels and refinery processing gain make up most of the remaining U.S. petroleum and other liquids production volumes. Throughout 2015, U.S. crude oil prices remained relatively low, with the spot price of West Texas Intermediate crude oil declining from $47 per barrel in January to $37 per barrel in December. Despite low crude oil prices and a 60% drop in the number of operating oil and natural gas rigs, U.S. petroleum supply still increased by 1.0 million barrels per day in 2015. U.S. natural gas production increased by 3.7 billion cubic feet per day, with nearly all of the increase occurring in the eastern United States.
Why Cheap Shale Gas Will End Soon - Art Berman - Enthusiasts believe that shale gas is simultaneously cheap, abundant and profitable thus defying all rules of business and economics. That is magical thinking. The recently released EIA Annual Energy Outlook 2016 sparkles with pixie dust as it forecasts almost unlimited gas supply at low prices out to 2040 and beyond. Exuberant press reports herald a new era of LNG exports that will change the geopolitical balance of the world and make America great again. But U.S. shale gas production is declining because of low prices and shale gas companies are in deep financial trouble because in the real world, price and cost matter. That is not magical. The financial performance of shale gas-weighted E&P companies in the first quarter of 2016 was a disaster. Chesapeake Energy, the biggest shale gas producer in the world, had negative cash from operations. That means that oil and gas sales didn’t even cover operating costs much less capital expenditures like drilling and completion. Other shale gas-weighted companies including Anadarko, Comstock and Petroquest also had negative cash from operations. Goodrich and Sandridge are in bankruptcy and Exco and Halcon will soon follow. Ultra, Forest, Quicksilver, Swift and Talisman were lost in action last year. On average, surviving companies out-spent cash flow by two-to-one both in 2015 and 2016 but many normally strong companies greatly increased negative cash flow this year (Figure 1). Devon Energy has been cash-flow neutral through much of the shale gas revolution but disturbingly increased capex-to-cash flow 5-fold in the first quarter of 2016. Similarly, Southwestern Energy has had an excellent record of near-cash flow neutrality but doubled its negative cash flow in 2016. The debt side of first quarter earnings is far more disturbing. The average debt-to-cash flow ratio for shale gas companies increased almost 4-fold to more than 7, up from less than 2 in 2015 (Figure 2).
International Markets Prove Hard To Conquer For U.S. LNG - The latest drilling productivity report from the Energy Information Administration (EIA) has shown that the Marcellus shale continues to be the largest source of natural gas in the U.S. by a wide margin, with daily amounts that put it on par with leading international producers such as Iran and Qatar. This is despite a serious dip in production that began last year as the market became saturated and prices plunged. The domestic gas market is still saturated, according to the EIA, which has projected that gas output in the Marcellus and elsewhere will continue to decline. International markets are the natural alternative for shale gas producers, but there are a few issues with this alternative, and these issues mean that the huge output in the Marcellus is not such good news. First, there is the competition. The European market is an attractive destination for U.S. gas as it is looking to diversify away from Russia’s Gazprom. Asia, with its high levels of demand, is also an attractive prospect. However, there are suppliers with an established presence in both these markets, which are likely to cut prices in a bid to preserve their market share. U.S. exporters, on the other hand, have less space for maneuvering. The only way U.S. companies can transport their gas is after liquefying it and shipping it to Europe or Asia. Cheniere Energy is already doing this. There are several liquefaction terminals in construction across the country, driven by hopes for gas demand growth across the world. However, these hopes have not yet proved realistic. To complicate things further, pipeline projects at home are being delayed, adding to the pressure on gas producers. There is a glut on the international gas market comparable to that in oil, although various sources claim the oil glut is on the wane with the recent production outages in Canada and Nigeria.
US LNG exports to be loss-making with '100% probability': Gazprom - US LNG exports will be a loss-making enterprise at some point in the next 20 years "with 100% probability", a leading official at Russian gas giant Gazprom said this week, as the monopoly continues to hit out at the prospect of US LNG competing with Russian gas in Europe. Valery Nemov, deputy head of contract structuring and price formation at Gazprom Export, also warned that US Henry Hub prices could soar in the future, rendering US LNG exports even less profitable. Nemov, writing in Gazprom's monthly newsletter published Thursday, said: "We can assume that a scenario when the market is short, prices in the US are at similar levels to those in Europe or Asia, and thus LNG exports from the US would be loss-making, is likely to happen in the next 20 years with 100% probability." Nemov also made the case that tolling fees for liquefaction at US LNG plants should not be considered "sunk costs" and that the economics of US LNG look considerably worse as a result. Many of the contracts signed by buyers of future US LNG include a tolling fee which the buyer pays to cover the cost of liquefaction. These currently equal $2.37-$3/MMBtu ($85-125/1,000 cu m) and under certain contracts must be paid regardless of whether buyers take delivery or not. "We would say that investments into liquefaction plants are 'sunk costs', but tolling fees are not," Nemov said. "The 'sunk costs' logic would only work if contracts are revised so as to exclude a 'liquefy-or-pay' condition and to stipulate buying liquefaction capacities on spot. In that case, money would be permanently lost for those who have invested in liquefaction," he said. Nemov said Gazprom did not exclude this scenario. "We know better than others that there are no buyers in the market that are ready to incur losses for decades," he said.
Why US LNG Doesn't Stand a Chance Against Russian Gas in Europe: U.S. oil drillers have been hollowed out from what has been described as a price war waged by OPEC. But a separate price war might soon descend upon the U.S. natural gas industry, which is already reeling from a downturn in prices. A global surge in natural gas export capacity is making the gas trade a lot more competitive. That is especially true in Europe, where U.S. LNG threatens to challenge Russia’s long-held customer base. Cheniere Energy is putting the finishing touches on its Sabine Pass LNG export facility in the Gulf of Mexico, and several more export terminals are under construction and will come online in the years ahead. These terminals are seeking to export LNG to Asia, as well as to customers in Europe. Russia has traditionally had a captive market in Europe, but with American LNG coming on the market, state-owned gas giant Gazprom is reportedly weighing an aggressive response. According to a new report from the Oxford Institute for Energy Studies (OIES), Gazprom might consider a strategy to flood Europe with cheap gas in 2016 to kill off U.S. LNG. Such a scenario would be possible because Gazprom has 100 billion cubic meters of annual gas production capacity sitting on the sidelines in West Siberia, which can effectively be used as spare capacity, not unlike the way Saudi Arabia can ramp up and down oil production to affect prices. Gazprom’s latent capacity is equivalent to 3 percent of global production. This large volume of capacity is the result of investments that were made in a major project on the Yamal Peninsula back when gas markets looked much more bullish. The approach would mirror Saudi Arabia’s strategy of keeping oil production elevated in order to protect market share, forcing the painful supply-side adjustment onto higher-cost producers. Crucially, Gazprom can produce and export gas to Europe at a much lower cost than LNG from across the Atlantic.
Shell to cut at least another 2,200 jobs globally (AP) — Anglo-Dutch oil company Royal Dutch Shell says it will trim at least 2,200 jobs globally amid challenging times in the oil industry. The losses are in addition to cuts already being implemented because of the energy company’s merger with BG. The losses will include some 475 positions in the North Sea. Oil companies around the world are slashing jobs and postponing investments to adjust to lower energy prices. Prices have fallen because production remains high even as slower economic growth, particularly in China, reduces consumption. Paul Goodfellow, Shell’s vice president for the U.K. and Ireland, told staff on Wednesday that these are “tough times for our industry and we have to take further difficult decisions to ensure Shell remains competitive through the current, prolonged downturn.” In related news, Shell: Skimmers in Gulf to clean up 88,200 gallon oil spill
Shell jobs facing axe rise to 5000 after BG deal - FT.com -Royal Dutch Shell on Wednesday announced plans to cut an additional 2,200 jobs after its £35bn takeover of BG Group in February. The energy company had previously said it expected to shed 2,800 staff as a result of the BG deal, on top of 7,500 Shell jobs and contractor roles it was already planning to remove because of the oil price collapse. But now Shell, which is listed in the UK and the Netherlands, is increasing the number of jobs going after the BG takeover to 5,000. At the end of last year, Shell had 90,000 employees, while BG had 4,600. Some investors have criticised the BG takeover, accusing Shell of overpaying for its smaller rival, particularly at a time of low oil prices. Shell declined to say where the latest job losses would be focused, except that 475 were in the UK and 150 in Norway. The affected jobs in the UK were mainly in its exploration and production operations, but also involved back-office staff. Paul Goodfellow, Shell’s vice-president for UK & Ireland, said: “Despite the improvements that we have made to our business, current market conditions remain challenging. “Our integration with BG provides an opportunity to accelerate our performance in this ‘lower for longer’ environment. We need to reduce our cost base, improve production efficiency and have an organisation that best fits our combined portfolio and business plans.”
GE announces deals worth over $1.4 billion with Saudi Arabia (AP) — General Electric Co. says it has made a series of deals with Saudi Arabia worth over $1.4 billion. GE made the announcement Monday, saying it is part of a plan by the kingdom to diversify its economy. Saudi state-run media did not immediately report on the deals. The deal comes as part of the kingdom’s Vision 2030 plan to wean itself off dependence on oil production. The plan, pushed by Deputy Crown Prince Mohammed bin Salman, the son of King Salman, also calls for floating a stake in the world’s largest oil company, Saudi Arabian Oil Co., and setting up one of the world’s biggest government investment funds.
Saudi Arabia is planning for the post-oil era, why not the United States? -- The world's largest exporter of crude oil, the Kingdom of Saudi Arabia, recently announced a plan for its post-oil future. If a country almost synonymous with the oil economy can see the need for such a plan, how can the rest of the world, particularly the United States, the world's largest consumer of petroleum, not see the necessity of such foresight? The kingdom's plan includes sale of part of Saudi Aramco, the world largest oil company and currently wholly-owned by the Saudi government. The company controls all oil development in Saudi Arabia. That the Saudis want to sell part of the most valuable company in the world means they have a different view about the future of oil than those who will be buying. Commentators often report that markets rise because investors are optimistic or fall because they are pessimistic. But this is complete nonsense because for every buyer there is always a seller. Each side of a trade believes in a different future for the investment being traded. Certainly, there are many reasons for selling a minority stake in Saudi Aramco. But one of them can't be that the rulers of the kingdom have an unalloyed bullishness about Saudi capabilities and oil resources. As recently as 2007 the U.S. Energy Information Administration (EIA) believed Saudi Arabia would be supplying the world with 16.4 million barrels per day (mbpd) of oil by 2030. (And, that was down from 23.8 mbpd projected for 2025 in a 2003 report.) In 2008 the Saudi king appeared to embrace a policy of 12.5 mbpd and no more. Since then long-term projections for Saudi production have come down with a range of 10.2 mbpd to 15.5 mbpd for 2040 (in a 2013 EIA report) depending on which of three scenarios you choose. No explicit range has been included in subsequent EIA reports.
The long twilight of the big oil companies The annual meetings of some of the world’s largest oil companies this week were like therapy sessions for an industry that is suffering from existential angst. The international objective of holding the increase in global temperatures to “well below” 2C, agreed at the Paris climate talks last year, implies the obsolescence of all fossil fuel production within the next few decades. The oil companies have not yet reconciled themselves to quite what this means. If governments stick to that commitment, fossil fuel companies will either have to find ways to stop greenhouse gas emissions from their products, or shift into renewable energy, or go out of business. At the annual meetings of oil groups including ExxonMobil and Royal Dutch Shell, that prospect was argued over by executives and shareholders, without conclusive result. In their public presentation, at least, the European groups including Shell and Total are more willing to face up to the threat of climate change than their US rivals. While accepting the conclusions of climate science, Exxon and Chevron stress the importance of energy security and affordability over reducing emissions. Calls from investors for the US companies to assess how their operations would fare under policies for a 2 degrees temperature rise were opposed by their boards and rejected in shareholder votes, albeit with substantial minority support. The leading European oil companies have started publishing their views of how such constraints would bite, but they remain reluctant to explore in detail what that outlook would mean for their investment decisions and future profits. Modelling published in the journal Nature last year suggested that to stay inside the 2 degree limit, about a third of the world’s oil reserves and half its gas reserves would have to remain unburned. That does not mean oil companies have to give up on all investment in future production. Different reserves have differing prospects, depending on production costs. Shale oil in the US, for example, probably has more growth potential than Canada’s oil sands. Overall, though, the message is one that is always hard for investors and management teams to hear: room for growth is tightly constrained, and in the long term output will have to fall rather than rise.
Hillary Clinton’s Energy Initiative Pressed Countries to Embrace Fracking, New Emails Reveal - Steve Horn - BACK IN APRIL, just before the New York primary, Hillary Clinton’s campaign aired a commercial on upstate television stations touting her work as secretary of state forcing “China, India, some of the world’s worst polluters” to make “real change.” She promised to “stand firm with New Yorkers opposing fracking, giving communities the right to say ‘no.’” But emails obtained by The Intercept from the Department of State reveal new details of behind-the-scenes efforts by Clinton and her close aides to export American-style hydraulic fracturing — the horizontal drilling technique best known as fracking — to countries all over the world. Far from challenging fossil fuel companies, the emails obtained by The Intercept show that State Department officials worked closely with private sector oil and gas companies, pressed other agencies within the Obama administration to commit federal government resources including technical assistance for locating shale reserves, and distributed agreements with partner nations pledging to help secure investments for new fracking projects.The documents also reveal the department’s role in bringing foreign dignitaries to a fracking site in Pennsylvania, and its plans to make Poland a “laboratory for testing whether US success in developing shale gas can be repeated in a different country,” particularly in Europe, where local governments had expressed opposition and in some cases even banned fracking. The campaign included plans to spread the drilling technique to China, South Africa, Romania, Morocco, Bulgaria, Chile, India, Pakistan, Argentina, Indonesia, and Ukraine.In 2014, Mother Jones reporter Mariah Blake used diplomatic cables disclosed by WikiLeaks and other records to uncover how Clinton “sold fracking to the world.” The emails obtained by The Intercept through a separate Freedom of Information Act request provide a new layer of detail.
Article: FOIA Reveals SoS Clinton Promoted Global Fracking -- My guest today is investigative reporter, Steve Horn. Welcome back to OpEdNews, Steve. Steve Horn: Thanks for having me again! Okay, so it's important to differentiate our article with those based on the emails Hillary Clinton handed over that were on her private server. I've written articles based on those emails (known these days thanks to Bernie Sanders as the "damn emails," which he said "America is sick and tired of hearing about") too. My stories on those "damn emails" centered around how she pushed oil/gas sector privatization in Mexico and how the State Department -- in handing over those emails she had stored on her private server at her private home over, which the State Department Inspector General recently berated-- redacted the entire job description of David Goldwyn, who headed up the Global Shale Gas Initiative that's the centerpiece of our article. Goldwyn now works as an industry lawyer, consultant and unregistered lobbyist. The emails we tapped into for our story on The Intercept were obtained, like the private server ones, via the Freedom of Information Act. Tellingly, as our request was made before the private server request took place, there are NO emails in our hundreds of pages we received that emanate from Clinton or her closest aides that used the clintonmail.com email domain names. But we still got back interesting stuff, which expanded upon the great 2014 Mother Jones investigation about how Hillary Clinton's State Department sold hydraulic fracturing ("fracking," a horizontal drilling technique) of shale oil and gas around the world. Our emails show that GSGI involved coordination among a plethora of federal agencies and it's important to note it wasn't just a State Department thing, but a "whole of government" approach touted by Goldwyn as such. State Department created its own Bureau of Energy Resources, under which sat GSGI. GSGI brought in delegations to the U.S. and sent delegations abroad for the purpose of selling U.S.-style fracking around the world. Clinton now campaigns as a cautious supporter of fracking (and aired a fairly secretive anti-fracking ad in New York State that her campaign hasn't put up on YouTube like the rest of the ads its run), given certain conditions only under which she'd support it, but there's no evidence these conditions were part of her team's plan for selling fracking under the auspices of GSGI. So, it could just be pandering and to be honest, it probably is. Why wouldn't it be? This is U.S. electoral politics after all!
Clinton Chasing Votes With Fracking U-Turn -- Leaked emails obtained by The Intercept reveal Hillary Clinton’s multiple stances on fracking—which apparently differ depending on whether we’re talking about fracking on U.S. soil or abroad. At a debate with Bernie Sanders in New York in early April, Hillary Clinton said she doesn’t support fracking, unless certain conditions are met, such as acceptance from the community and full disclosure of the chemicals that will be used in the process of releasing oil and gas from shale rock. Just four years ago, however, she was quick to point fingers at communities abroad who were fighting proposed fracking projects in Poland, Romania, and Bulgaria, as leaked emails obtained by The Intercept reveal. At that time, she promoted fracking – more specifically gas fracking – as a way for any country, especially those in Europe, to achieve energy independence (from Russia). During her term as Secretary of State, Hillary Clinton made no attempt to hide her international energy ambitions, which could be easily summed up as more locally produced gas for everyone, and more profits for the American companies that would pump that gas. Pretty much the usual run-of-the-mill approach to nurturing large corporate taxpayers and campaign supporters. Now, it seems, Clinton is ready to antagonize these same corporate campaign supporters in order to win more liberal votes. This approach risks alienating more than just the energy industry, as Jude Clemente rightly noted in an article for Forbes that offers a comprehensive summary of all the benefits the U.S. has reaped from fracking (although it fails to mention the risks). He warned that she might lose Ohio and Pennsylvania with her new anti-fracking position, but Clinton won both states, which are heavily dependent on gas fracking. In Ohio, she got the upper hand before declaring her new anti-fracking stance, but her Pennsylvania victory came after the New York debate. Apparently, the strategy of changing positions to suit the moment and the target audience is working, distasteful as it may seem to observers.
Donald Trump vows to undo Obama’s climate agenda, says US will not beg for oil again | The Indian Express: Donald Trump, the presumptive Republican presidential nominee, promised on Thursday to roll back some of America’s most ambitious environmental policies, actions that he said would revive the ailing US oil and coal industries and bolster national security. Among the proposals, Trump said he would pull the United States out of the UN global climate accord, approve the Keystone XL oil pipeline from Canada and rescind measures by President Barack Obama to cut US emissions and protect waterways from industrial pollution. “Any regulation that’s outdated, unnecessary, bad for workers or contrary to the national interest will be scrapped and scrapped completely,” Trump told about 7,700 people at the Williston Basin Petroleum Conference in Bismarck, the capital of oil-rich North Dakota. “We’re going to do all this while taking proper regard for rational environmental concerns.”It was Trump’s first speech detailing the energy policies he would advance if elected president. He received loud applause from the crowd of oil executives. The comments painted a stark contrast between the New York billionaire and his Democratic rivals for the White House, Hillary Clinton and Bernie Sanders, who advocate a sharp turn away from fossil fuels and toward renewable energy technologies to combat climate change. Trump slammed both rivals in his speech, saying their policies would kill jobs and force the United States “to be begging for oil again” from Middle East producers. “It’s not going to happen. Not with me,” he said.
Donald Trump's energy plan: Regulate less, drill more - May. 26, 2016: Donald Trump has a simple formula to get America's energy industry back on its feet: stop overregulation and start drilling a lot more for oil and gas. In his first in-depth speech about energy policy, Trump on Thursday promised to make American energy "dominance" a strategic economic and foreign policy goal of the U.S. "America's incredible energy potential remains untapped. It's a wound that is totally self-inflected," Trump said during a speech at a North Dakota oil industry conference. Here's what you need to know about Trump's energy plan: America first: Trump promised that the U.S. will achieve "complete" independence from foreign sources of oil. "Imagine a world in which our foes and the oil cartels can no longer use energy as a weapon. Wouldn't that be nice?" Trump said, adding that the U.S. is "loaded" in oil and gas resources. A key Trump adviser, Rep. Kevin Cramer of North Dakota, has co-sponsored a bill that would create a commission to investigate whether OPEC is manipulating oil prices through anti-competitive behavior. Regulate less: Trump said any regulation that is "outdated, unnecessary, bad for workers" or deemed "contrary to the national interests" will be scrapped completely. And here's Trump's criteria for future restrictions: "Is this regulation good for the American worker?" Trump also promised to make policy decisions in a public way and very transparently, adding they won't be "made on Hillary Clinton's private email account." Trump said he'd approve Keystone XL, which was blocked by President Obama. However, Trump would do it differently. He wants a cut of the profits because the controversial pipeline from Canada wouldn't be possible without U.S. approval.
Trump's Energy Plan: Save Coal by Unleashing Fracking? - Scientific American: In a nearly hourlong speech marking the first major energy policy address of his campaign, the Republican presidential nominee pledged to expand oil and gas production, “cancel” the Paris global warming accord and roll back President Obama’s executive actions on climate change. He described regulations to cut carbon dioxide emissions as ruinous to the economy and a trespass against personal freedom. He latched them closely to Democratic presidential candidate Hillary Clinton, whom Trump accused of supporting a radical environmental agenda. “As bad as President Obama is, Hillary Clinton will be worse,” Trump said. “She’ll escalate the war against the American worker like never before and against American energy, and she’ll unleash the EPA to control every aspect of our lives, and every aspect of energy.” The Republican nominee pledged to roll back a list of executive actions within the first 100 days of his presidency. The first one he mentioned was Obama’s Climate Action Plan, a guiding document that led the administration’s efforts to cut greenhouse gas emissions, increase adaptation and pursue international negotiations. “We’re going to rescind all the job-destroying Obama executive actions,” Trump said, “including the Climate Action Plan and the Waters of the United States rule. OK, remember that. We’re going to save the coal industry. We’re going to save that coal industry, believe me. We’re going to save it.”
There's a lot to unpack in just one of Donald Trump's answers about energy policy - If you're going to talk about energy in the United States, you might as well do it in North Dakota. The western part of the state had the good sense to be situated above a gigantic shale formation known as the Bakken, in which an enormous amount of natural gas and oil was trapped. Trapped, that is, until people figured out how to drill holes sideways through the shale and break it all up, sucking the oil and gas up to the surface. That's fracking, and it has made North Dakota one of the brightest spots in the American economy -- and the fastest-growing state in population year after year. It is not a place where any politician, much less the Republican nominee for president, would disparage the use of fossil fuels. Donald Trump, who held a brief press conference there Thursday, would perhaps be less inclined than most to say bad things about the oil industry, especially since his friend Harold Hamm -- energy industry titan and one-time Mitt Romney presidential adviser -- was standing next to him. So when asked about fracking, Trump took a lot of disparate threads of energy policy and politics in general and wove them together with his silver tongue. Here is what he said, in its entirety.
U.S. Gas Exports Poised to Surpass Imports for First Time Since 1957 -- For the first time since Ike was in the White House and lead was in gasoline, exports of U.S. natural gas will outstrip imports in a shift that could occur as soon as the end of this year, the head of the U.S. Energy Information Administration said last week. The change will mark a significant milestone – the latest in America's transformation into the world's biggest oil and gas producer and one long-awaited by policymakers who hope it will drive U.S. job growth and expand American influence abroad, even in the face of a global gas market slowed by anemic demand and excess supply. As imports plummeted 40 percent last year from their peak in 2007, American gas exports soared 116 percent during the same period, buoyed by a flood of natural gas unleashed by fracking and horizontal drilling, according to the EIA. The trends are on a collision course, with exports set to plow past imports in roughly a year's time, leading to potential ramifications beyond simply the energy sphere. "This pickup in growth in the United States leads to the U.S., in the very near future – later this year, next year – becoming a net exporter of natural gas,” EIA Administrator Adam Sieminski said of surging gas exports Wednesday, while presenting the EIA's International Energy Outlook at a think tank in the nation's capital. "That was something that most people would've thought impossible just 10 years ago."
The Devil Fossil Fuel Industry Has Us By the Short-hairs (and what are we going to do about it?) - Dissident Voice -- A new film by Gasland filmmaker proves greenies tied to Capitalism are the enemy, too A simple documentary premiere, in a small town north of Vancouver, WA, on the Columbia, a town called Kalama, near Longview, where millions of stripped logs from the Pacific Northwest’s forests are stacked 20 stories high, waiting for markets (sic) in Asia to be turned into lumber and cardboard and stuffing and paper and snot sheets for the U S of A. Amazing disconnect, how unsustainable and horrific Capitalism is as it plays out, guts communities – both that of Consumopithecus Sapiens and the natural world – while people will argue over some village square tree about to be cut down for the new mini-strip mall. So, this east coast Jewish boy, Josh Fox, came to town with his new fresh-from-the-white-movie-festival-Sundance documentary (sic)/anti-documentary, as a way to rally the people of Kalama (all white, all retired, more or less, excluding the activists from Portland) to keep fighting against a methanol refiner for fracked gas coming from Oh Canada’s Earth Genocide fields in Alberta. Lots of Beatles and Dylan songs, with the director Fox strumming the banjo and his sidekick Gabriel Mayers playing guitar and in the film singing one incredible song in a New York Subway, really, the highlight of the movie, in three minutes. That is the back story for me, wherever I go, in so-called “Indian Country,” how a town which is paved over with pathetic buildings and more cars than inhabitants will quickly forget how the original people existing in peace and on their people’s spirits’ river have been pushed off their sacred land through the will of the Iron Horse Galloping, Coal Spewing, Toxin Brewing, Gun Toting, Disease Spreading, Cement Setting White Peoples. The irony is those townies now living in Kalama, some with 4,000 square foot homes, on a hill, overlooking the river, all those eagles and great blue herons aloft at sunset, with outbuildings for 40-foot RVs and 10 meter long pontoon boats, lovely rose lined gardens, humming bird feeders and VW beetle sized barbecue sets, they are worried about another Iron Horse Crashing into/on top of/over their town: the oil and gas industry, those thugs we all love to hate but depend on for those jet trips to Vegas and weeks in the woods with our Air Streams.
Analysts: Oil Sands Cos Losing up to $50M a Day as Fires Rage (Reuters) - Out-of-control wildfires that have consumed over a million acres of land in Canada's Alberta are costing oil companies as much as $50 million a day in lost production, according to analysts. Alberta's oil producers curtailed production by May 5 as fires prompted the evacuation of Fort McMurray, a central production hub. By May 9, more than 1 million barrels of daily oil output had been halted. "We estimate total daily pre-tax profit loss at $45 to $50 million," Barclays analyst Paul Cheng said in an email to Reuters. For many companies, the shut-ins will translate directly to lower revenue in the second quarter, said Chris Feltin, an analyst at Macquarie Capital in Calgary. "The big thing here is that business interruption insurance is unlikely to be claimed because the damage isn't direct to their facilities, so this is something that is going to roll through on a revenue and cash-flow basis on the second quarter," Feltin said. There is no guarantee on how soon production will return to normal. Both more expensive light synthetic crude and cheaper heavy bitumen from oil sands production have been shut in, with a total of more than 1.2 million barrels of production offline, said Feltin. "That's a fair amount of production for both crude slates that is offline." Syncrude trades at a premium to benchmark U.S. crude futures, while Western Canadian Select crude trades at a discount, and bitumen is offered for even less. The spot price of Syncrude is currently $51 a $52 a barrel, said Cheng. Syncrude for June delivery is trading at $3.20 a barrel above the price of U.S. crude futures. WCS is trading at about $37 to $38 a barrel, he said, and bitumen is currently at about $33.50 a barrel.
Fire evacuation orders lifted north of Fort McMurray (AP) — Alberta officials on Saturday lifted mandatory evacuation orders in some areas north of Fort McMurray, where a raging wildfire has forced the evacuation of more than 80,000 people and the closure of oil sands operations. Officials said conditions have improved in some parts north of the oil sands city. Suncor Energy Inc. and Syncrude will now be able to resume their idled northern oil sands operations and bring back evacuated workers. About 8,000 oil sands workers in camps north of Fort McMurray were evacuated last Tuesday after gusting winds and high temperatures caused the fire to move rapidly toward them. That was in addition to the 80,000 people ordered to evacuate Fort McMurray nearly 2 ½ weeks ago. Northern Alberta is the heartland of Canada’s oil sands industry and the effects of the enormous wildfire on the oil sector have prompted forecasters to trim their 2016 economic growth predictions for the entire country. The Alberta oil sands have the third-largest reserves of oil in the world behind Saudi Arabia and Venezuela. Its workers largely live in Fort McMurray, a former frontier outpost-turned-city whose residents come from all over Canada. The blaze, which began May 1, has covered 1,930 square miles (5,000 square kilometers), including areas that are still burning and those where the fire has already been put out, along with nearly three square miles (eight square kilometers) in the neighboring province of Saskatchewan.
Canada’s oil sands producers near re-entry to evacuated sites - Mandatory evacuation orders were lifted today for the last of Alberta's oil sands production sites endangered by wildfires, Bloomberg reports, which starts the process of inspections by forestry and health officials to make sure the facilities safe for workers to return. Since late Friday, Alberta has removed orders that had prevented all but critical staff from remaining on sites connected with the operations of Suncor Energy (NYSE:SU), ConocoPhillips (NYSE:COP), Enbridge (NYSE:ENB) and Cnooc's (NYSE:CEO) Nexen unit, among others. The SU-controlled Syncrude joint venture says it is making progress on a plan to return to operations and will be able to give an update later on the timing for production restart. COP, which had shut down production at its Surmont project on May 5, says it has started the process of bringing workers back after getting approval.
Canadian fire points to Alberta's infrastructure weakness: - It’s been about three weeks since a wildfire broke out in the heart of Alberta’s oil sands production area in the Athabasca region in Fort McMurray, and it is still raging. Some 1,950 fire fighters, 208 helicopters, 29 air tankers and countless heavy equipment have been relentlessly fighting the “Beast” (as it has been nicknamed by firefighters), which has grown to engulf over 500,000 hectares.The Alberta government was also successful in its Herculean task of evacuating over 90,000 residents without a single loss of life. The oil industry didn’t fare so well as in a span of just three days, oil sands producers responded by either curtailing output or completely shutting production totaling roughly 1.03 million b/d. The hasty pull-back raises strategic questions about the reliability of Athabasca as a growing oil production center on the world stage. One of the questions is whether some of the shut-ins and ensuing force majeures could have been avoided as no production sites are directly impacted by the fire. The shutting of condensate and diluted bitumen lines, crude-by-rail loaders and power, as well as a lack of storage all point to where industry and government need to focus. “There is certainly a case for more tankage, and longer term, there is a need to manage it better,” “While mining facilities have adequate storage facilities on site, SAGD [steam-assisted gravity drainage] projects usually tend to use the Cheecham South terminal.” With a nameplate capacity of 1 million b/d, that terminal was one of the first few to be shut. Since it is the only major local storage option for SAGD producers, and pipelines and rail loading facilities were also shut, it was only a matter of time before production got backed up and producers had no choice but to stop output.
Will the oil sands need more takeaway capacity? -- Production in Alberta’s oil sands region is gradually rebounding after devastating wildfires that forced output scale-backs and temporary shutdowns of some production facilities, terminals and pipelines. It may be a while before life—and production—in the oil sands are back to normal, but Canada’s National Energy Board, producers and others expect the region’s output to continue to rise (if only gradually) the next few years, reflecting long-term oil sands expansion projects committed to when oil prices were more than double what they are today. There are very different views, though, about whether the oil sands will eventually need more takeaway capacity in the form of new or expanded pipelines. Today, we continue our look at the oil sands post-wildfires with a review of existing and proposed pipeline capacity. Wildfires are notoriously unpredictable and, sure enough, as soon as the worst seemed to be over in the Fort McMurray, AB area, new flare-ups in mid-May threatened oil sands production areas north of the city. Thanks to heroic efforts by Alberta fire crews, no production area has experienced any significant damage (so far at least—fingers crossed), but a few work camps have been destroyed or damaged, and will need to be rebuilt. Good news is trickling in though, such as Imperial Oil’s May 19 announcement that it has restarted limited operations at its Kearl oil sands site. If, as everyone hopes, the wildfires are brought under control within the next few days, it seems likely that oil sands production will ramp up gradually over the next few weeks, and that by mid-summer Alberta’s output might be close to the 3.1 MMb/d that the province was producing before the fires were sparked.
Oil sands found to be a leading source of air pollution in North America - The Globe and Mail: A cloud of noxious particles brewing in the air above the Alberta oil sands is one of the most prolific sources of air pollution in North America, often exceeding the total emissions from Canada’s largest city, federal scientists have discovered. The finding marks the first time researchers have quantified the role of oil sands operations in generating secondary organic aerosols, a poorly understood class of pollutants that have been linked to a range of adverse health effects. The result adds to the known impact of the oil sands, including as a source of carbon emissions that contribute to climate change. It also comes on the same day that the Bank of Canada delivered a sobering message about the country’s economy, saying the devastating Alberta wildfires that hit Fort McMurray – leading to production cuts in the oil industry and the destruction of thousands of buildings – will cause a drop in Canada’s gross domestic product in the second quarter. Given the economic circumstances and the political sensitivities currently surrounding the oil sands, the air pollutant study, published Wednesday in the journal Nature, offered the strongest test yet of the Trudeau government’s promise to allow scientists in federal labs to speak freely with journalists about their results. The pollutants the scientist measured are minute particles that are created when chemical-laden vapours from the mining and processing of bitumen react with oxygen in the atmosphere and are transformed into solids that can drift on the wind for days. While researchers have long thought that the oil sands must be a source of such particles, the new results show that their impact on air quality is significant and of potential concern to communities that are downwind.
New Brunswick extends fracking ban indefinitely - The New Brunswick government has extended for an indefinite period its ban on hydraulic fracturing, saying the jury is still out on the risks to public health and environment from the controversial practice. The province has faced major divisions over proposed shale gas development, with industry arguing it would spur the economy and boost job creation, but many residents and First Nations activists fearful of the potential environmental impact of fracking – the technique of using chemically laced water under high pressure to break rock and extract natural gas or oil. “I think more work needs to be done” on the safety case, Energy and Mines Minister Donald Arseneault said on Friday in a telephone interview. “These issues are not resolved and they’re not getting the buy-in or confidence of Canadians or New Brunswickers that we can mitigate some of these issues.” In imposing a ban on fracking, New Brunswick joins Nova Scotia and Quebec as well as several U.S. states, including New York. By allowing the practice, states like Pennsylvania, West Virginia and Ohio have seen a boom in shale gas production that has helped drive down North American energy costs. The province is believed to have a significant amount of commercially recoverable shale gas, but companies have been unable to establish the extent of it because of public resistance to drilling. One Halifax-based firm, Corridor Resources Ltd., does produce gas in the province, both by conventional means and, previously, by limited amounts of fracking.
Speculators boost net length as NYMEX crude rallies: CFTC - A rallying crude complex spurred speculative traders to massively increase net length in NYMEX crude futures over the most recent reporting week, Commodity Futures Trading Commission data showed Friday. While money managers added net length by cutting 20,594 shorts, the other reportables group added 23,296 longs as well as cutting 23,418 shorts. This left them net long 146,943 crude contracts, up 46,714 contracts on the week. Prompt crude futures rose $3.65 to $48.31/b over the reporting week. Money managers, meanwhile, increased their net long position 30,095 contracts to 221,826 contracts.Swap dealers and producer/merchants were active as well, likely taking much of the offsetting positions. Swap dealers net short position increased drastically, up 48,049 contracts to 56,136 contracts. Producer/merchants net short increased 11,759 contracts to 295,293 contracts. While total open interest in NYMEX crude futures Thursday fell to 1.632 million contracts -- lowest since November and down sharply from mid-February -- producer/merchant short positions have soared. This suggests that while easing volatility -- which peaked in mid-February as prompt crude futures tumbled to around $26/b -- may have pushed some opportunistic traders to the sidelines, it has not kept hedgers -- largely the producers accounted for in the producer/merchant category -- from locking in a floor to prices in lock step with the rally in futures.
Oil Traders Are Borrowing From Banks to Store Crude at a Loss - The waters between Singapore and Malaysia used to heave with wooden ships carrying exotic spices. Now the Straits of Malacca are filled with vessels carrying a very different sort of commodity. Oil traders awaiting a recovery in crude are turning to floating storage after benchmark Brent prices more than halved over a span of two years, according to Morgan Stanley analysts led by Adam Longson. Unlike previous oil storage trades, however, this one is unusual in that current oil prices and storage costs ought to make it unprofitable. Morgan Stanley estimates that the one-month Brent storage arbitrage currently produces a loss of $0.48 per barrel, while its six-month equivalent loses $6.11 per barrel. That suggests "no incentive to store oil on ships," the analysts write. "Yet, banks are seeing a sharp uptick in interest to finance storage charters. This storage is not happening for profit. Rather, the market is looking for places to store oil. To profit, traders need to hope for oil prices to rise enough to pay for the new debt incurred for this storage." The prospect of debt-fueled oil storage trades may raise concern should crude prices fail to rise enough to offset costs. Moreover, the 'Singapore supply glut' means the recent price rally may prove fragile. "The increase in floating oil comes despite disruptions in the Atlantic Basin and an out-of-the-money floating storage arb[itrage], suggesting markets are not as healthy as sentiment suggests," the Morgan Stanley analysts write. "It also highlights the speculative nature of much of the oil bounce this year."
Forecasting global oil demand -- Exxon doesn't seem to be incorporating all available information: At the company’s planned annual meeting on Wednesday in Dallas, shareholders will vote on a resolution to prod Exxon Mobil to disclose the risks of climate change to its business. Such resolutions have been floated before, and they typically do not pass. But there is a growing chorus of investors, many of them large institutional shareholders, who say they are worried that Exxon Mobil, the largest publicly traded energy company in the world, is not adequately preparing for tighter times if countries start acting on the pledges they made last December as part of the Paris climate change accord. Exxon Mobil, for example, projects that global demand for oil will keep growing — by just over 13 percent from today, to 109 million barrels of oil a day by 2040. But the International Energy Agency’s projections include one situation where demand could drop by 22 percent, to 74 million barrels a day by 2040, if measures are put in place to keep global warming at levels that, while still dangerous, could avoid the most devastating consequences. The shareholder resolution calls for Exxon Mobil to publish an annual assessment of impacts of various climate change policies, including ones that would lead to the steep drops foreseen in the most severe energy agency’s forecast. Another resolution calls for the company to give shareholders a bigger say over governance. Exxon Mobil previously tried to block the climate change resolution, but the Securities and Exchange Commission ruled in March that shareholders must be allowed to vote.
The Return of Fracking to UK? First Fracking Permit in Five Years - In a 7-4 vote, Councilors of the county of North Yorkshire approved industrial tests on Monday in a move that will allow fracking in Britain for the first time in five years. The Guardian reported that the go-ahead “swept aside” vocal protests from residents and environmentalists who feared “catastrophic seismic activity, health problems, and pollution” if hydraulic fracturing was introduced. The shale gas tests will occur in the village of Kirby Misperton by the British firm Third Energy. The council’s decision followed a two-day hearing during which supporters and opponents of the proposal voiced their hopes and concerns. The last fracking incident in Britain occurred in 2011, when the U.K.-based oil and gas company Cuadrilla Resources admitted that two minor earthquakes in north-west England had been caused by the company’s use of the controversial drilling practice. Two other high-profile applications to frack in the Lancashire area have been rejected by councilors since late-2011, but the companies have lodged appeals to reverse the decisions. The council that allowed the new tests in North Yorkshire received 4,375 objections to the proposal and 36 letters in support of the company’s plan to frack for shale gas near an existing well in the area, according to The Guardian’s report. David Cameron and his ministers are set to welcome the tests, as the prime minister said in 2014 that his “government was going all out for shale.”
North Yorkshire has approved the UK’s first fracking tests in five years. What does this mean?: Is fracking the answer to the UK's energy future? Or a serious risk to the environment?By India Bourke Follow @@india_bourke Print HTMLShale gas operation has been approved in North Yorkshire, the first since a ban introduced after two minor earthquakes in 2011 were shown to be caused by fracking in the area. On Tuesday night, after two days of heated debate, North Yorkshire councillors finally granted an application to frack in the North York Moors National Park. The vote by the Tory-dominated council was passed by seven votes to four, and sets an important precedent for the scores of other applications still awaiting decision across the country. It also gives a much-needed boost to David Cameron’s 2014 promise to “go all out for shale”. But with regional authorities pitted against local communities, and national government in dispute with global NGOs, what is the wider verdict on the industry? Opponents claim that the side effects include earthquakes, polluted ground water, and noise and traffic pollution. The image the industry would least like you to associate with the process is this clip of a man setting fire to a running tap, from the 2010 US documentary Gasland: Advocates dispute the above criticisms, and instead argue that shale gas extraction will create jobs, help the UK transition to a carbon-neutral world, reduce reliance on imports and boost tax revenues. So do these claims stands up? Let’s take each in turn...
BP's oil search strategy shrinks with budget cuts | Reuters: The surprise departure of BP's exploration boss has turned the spotlight on an oil search strategy that, after years of spending cuts, is focusing mainly on expanding existing fields rather than venturing expensively into the unknown. That caution reflects a firm chastened by the $55 billion cost of its 2010 Gulf of Mexico spill, and needing to squeeze every last drop out of a sharply reduced exploration budget at a time of low oil prices. "Exploration doesn't necessarily have to look like (nature broadcaster) David Attenborough standing on a brand new frontier," a BP source told Reuters. While BP's total reserves and fields coming onstream in the next four years look healthy compared to the other majors, its long-term project pipeline is the slimmest among its peers and its break-even costs are the highest, according to some analysts, among them Macquarie. Several BP sources said Chief Executive Bob Dudley and his team were hammering out a new long-term strategy, with investors expecting an update on its post-2020 plans later this year or early next. The plan is likely to chime with a phrase that Dudley is fond of using: "Big is not necessarily beautiful." After asset sales forced on it by the Gulf disaster shrank the company by a third, BP is today focusing its operations on five regions -- Angola, Azerbaijan, Egypt, the Gulf of Mexico and the North Sea.
Argentina seeks to spur natural gas production with incentives - Argentina is seeking to rebuild natural gas production after years of decline, offering higher prices on output from new developments, an Energy Ministry source said Friday. "The program is designed to encourage exploration and increase production," the source said on the condition of not being named. The program took effect Thursday and will run until December 31, 2018, according to a resolution in the Official Bulletin, the newspaper of record. The output from new projects can be sold at $7.50/MMBtu, according to the resolution. That's up from a current average of $5.20/MMBtu."It is necessary to continue with programs to increase gas production in the short term, reduce imports and encourage investment in exploration and production from new deposits that will make it possible to recover reserves," the Energy Ministry said in the resolution. Argentina has been ramping up gas imports since production started to decline from a record 143 million cu m/d in 2004, now down 16% at 120 million cu m/d. This has led to shortages as consumption has surged to 130 million cu m/d, with peaks of 180 million cu m/d during the cold months of May to September. The country is importing about 30 million cu m/d from Bolivia, Chile and off the global LNG market to help make up the shortfall, and plans to bring in more supplies next year from a floating regasification terminal in Uruguay. Argentina relies on gas to meet 50% of its energy needs.
France Hit By Gas Shortages, Rationing After Refinery Workers Go On Strike -- In the wake of French president Francois Hollande using an obscure article of the constitution in order to bypass parliament and force through labor reforms that are viewed as unfavorable to workers, protests have been ongoing in the country. Now, French refinery workers have launched a strike to hit the government where it hurts the most. Protesters have blocked deliveries to gas stations from at least half of France's eight refineries, and workers at three Total refineries have voted to halt all output by Tuesday according to France 24. The news sent drivers rushing to gas stations in order to fill up their tanks while they could.About 820 stations out of 11,500 in France were out of fuel on Sunday, and another 800 were lacking at least one type of fuel. Prime Minister Manuel Valls said that the situation is fully under control, and that there are enough fuel reserves to deal with the blockade. "We have the situation fully under control. I think that some of the refineries and depots that were blocked are unblocked or will be in the coming hours and days. In any case, we have the reserves to deal with these blockades." Kristine Petrosyan, an oil market analyst for refining at the International Energy Agency adds "there is a noticeable fuel shortage in the North West and North of the country, including parts of the greater Paris region."
Shutdowns spread to five French refineries, some depots unblocked - Oil | Platts News Article & Story: Industrial action against changes in labor legislation is spreading further across French refineries Monday, with at least five out of eight plants halting units, according to labor union sources. However, many of the 189 oil products depots that were blocked by demonstrators have been unblocked by police forces between Sunday and Monday, according to French newspaper Le Figaro. "I think that some of the refineries and depots that were blocked are unblocked or will be in the coming hours and days," French Prime Minister Manuel Valls told journalists on Sunday. Total's 247,000 b/d Gonfreville refinery in Normandy has been in the process of halting its units since Friday, a source at the site said. Staff at the 219,000 b/d Donges refinery in the west of France also voted for a shutdown Friday. Total's 153,000 b/d La Mede, 109,000 b/d Feyzin and 101,000 b/d Grandpuits refineries are also in the process of shutdown, union sources said. No products are leaving the plants, as deliveries by truck are blocked. Total was unavailable for comment. Product deliveries are also currently blocked by external protesters outside ExxonMobil's 140,000 b/d Fos refinery near Marseilles, but operations on the site continue. ExxonMobil's 235,000 b/d Port Jerome-Gravenchon refinery in Normandy has not been affected by the strike either, and loadings have been ongoing since Friday afternoon, the company said. Previously loadings had also been blocked by protests outside. Separately, operations at Petroineos' 210,000 b/d Lavera refinery near Marseilles in the south have also been affected by the strike, a union source said. The refinery declined to comment on the status of operations.
European oil market unfazed by French refinery strikes - - Europe's physical oil markets have yet to react in a big way to ongoing industrial action at French refineries and oil depots, though the disruptions were high on traders' radar Tuesday. Protests against changes in French labor law, which saw refineries start halting units over the weekend, was spreading Tuesday, with ports joining the action sooner than expected, sources said. The price of crude oil and refined products in Europe Tuesday was little changed from a week ago when the first disruptions to the supply chain in France started being felt. The action by workers comes at the end of the refinery maintenance season in France and the rest of Europe, when demand for crude from refiners and output of oil products from their plants are both lower.France is the world's largest importer of ultra low sulfur diesel and one of the largest consumers in Europe. Any shortfall in refinery production will need to be covered in the spot market and traders said the impact would be felt there first. "The European football championship starts on June 10 in France and we do not think that the government will allow for all retail [road fuel] stations to be empty for that event," analysts at Petromatrix said in a note.
French strike hits refinery output in labour reform showdown | Reuters: France's Socialist government drew battle lines with one of the country's biggest trade union's on Tuesday over labour market reforms as a strike by oil workers forced at least five refineries to halt or slow down operations. Riot police fired tear gas and water canon to break up a picket line blocking access to Exxon Mobil Corp's refinery outside the southern port city of Marseille, as scores of petrol stations nationwide ran dry of fuel. "Enough is enough," said Prime Minister Manuel Valls. The pre-dawn swoop drew a sharp riposte from the hardline CGT union, which wants to force President Francois Hollande's government to rethink the labour reforms designed to make it easier for companies to hire and fire employees. The CGT described the police operation as an act of "unprecedented violence" as it and other unions served notice of a June 3-5 strike by air traffic controllers that will dovetail with walkouts by state rail employees, port workers and staff on the Paris metro and suburban rail networks. The CGT, traditionally one of France's most powerful and influential trade union groups, says the reforms will unravel France's protective labour regulations, allowing firms to lay off staff more easily in hard economic times and by providing further exemptions from rules on pay and working conditions.
French refinery, port strikes continue; strategic stocks released - Strikes are continuing at French refineries and ports Wednesday and fuel storage sites remain blockaded across the country as France began to delve into its strategic stocks to avoid fuel shortages. Total's refineries are all on strike with operations either halted or in the process of halting, according to the CGT labor union and the company. A limited number of employees have joined the national movement at ExxonMobil's Gravenchon, but operations and supply of products are not affected, the company said. At ExxonMobil's Fos refinery, operations are also running normally and some loadings were proceeding during the night but have been blockaded this morning.The French government said it had started using strategic stocks, with three days' worth out of 115 used up to now, radio station Europe1 cited the country's transport minister as saying. To avoid fuel shortages the government had started using strategic stocks, industry group UFIP said in a statement. France currently has strategic stocks sufficient to cover demand for three months, of which crude represents one third, UFIP also said, adding that stocks used to cover shortages in one location where storages are blocked are subsequently replenished elsewhere. The French government said it had started using strategic stocks, with three days' worth of stocks out of 115 used up to now, radio Europe1 cited the transport minister as saying. Europe1 also quoted the government as saying that blockades had been removed at 11 storages. Police intervened to unblock storages at Fos-sur-Mer in the south and Douchy-les-Mines in the north, the station reported. After intervention by the government to unblock storage sites, the Federation of Dock and Port workers at the CGT called on all port staff to stop work for 48 hours on Thursday and Friday. Tug boats will stop working across France Thursday morning, shipping sources said. The oil terminals Fos and Lavera at the Mediterranean port of Marseilles have been on strike since May 23, shipping sources said.
France Goes Dark? Staff In 19 French Nuclear Power Plants To Go On Strike Tomorrow -- Following strikes over the unpopular French labor reform, that started over the weekend and crippled the French refining industry leading to gasoline shortages and rationing, things are about to get far more serious for the country whose economy has already been threatened with a sharp slowdown as a result of a relentless wave of labor unrest. According to Reuters, staff in France's 19 nuclear plants - which by definition we assume is essential - have voted to go on strike on Thursday as part of protests over a labour reform, according to a CGT union official. While industry experts say planned strikes are unlikely to provoke blackouts because of legal limits on strike action in the nuclear industry and France's ability to import power from neighbouring countries, it would not be at all surprising to see the opposite outcome. "It will start tonight at 2100 (1900 GMT) and last 24 hours," CGT spokesman Laurent Langlard told Reuters on Wednesday. "Our goal is not to bring down the network,” general secretary of the CGT-Energie de l'Aube, Arnaud Pacot, told Francetv Info. On the other hand, considering that France derives about 75 percent of its electricity from nuclear energy, it is difficult to envision a different outcome.
Militants attack Agip pipeline in Nigeria's Bayelsa state | Reuters: A crude oil pipeline in Nigeria's southern state of Bayelsa operated by the local subsidiary of Italy's Eni was attacked on Sunday, the Nigeria Security and Civil Defence Corps (NSDC) said. The attack comes just days after President Muhammadu Buhari said he had heightened the military presence in the oil-rich Niger Delta region, where attacks in the last few weeks have driven the country's oil output to a more than 20-year low. Desmond Agu, a spokesman for the NSDC, a government agency, said the Agip pipeline was attacked in the early hours of Sunday, around 12:30 a.m. (2330 GMT Saturday). "A gang of armed youths ... vandalised pipeline along Azuzuama axis of the Tebidaba-Brass pipeline with dynamite and ignited fire on the line," he said, adding that one of the suspected attackers had been arrested. Eni, which operates in Nigeria through its subsidiary Nigerian Agip Oil Company, could not be immediately reached to comment on the attack. Former militants have called for a halt to a resurgence of attacks in the Niger Delta, saying it is an unnecessary distraction for Buhari's administration.
Niger Delta Avengers militants shut down Chevron oil facility -- Members of the Nigerian militant group the Niger Delta Avengers have shut down facilities owned by one of the world’s biggest oil companies. People living near Chevron’s Escravos terminal in the oil-rich southern Nigerian region of the Niger delta reported hearing a loud blast during the night. Chevron confirmed on Thursday morning that the attack, which was on its main electricity power line, had shut down all its onshore activities. “It is a crude line which means all activities in Chevron are grounded,” a company source told Reuters. It was the latest in a string of attacks by the Avengers, who have demanded that foreign oil companies leave the Niger delta before the end of the month, and say they are fighting to protect the environment and to win locals a bigger share of the profits. The group has helped push the country’s oil output to its lowest level in decades. According to Emmanuel Ibe Kachikwu, head of the state-run oil company, the attacks have reduced the number of barrels produced a day from 2.2m to 1.4m. As well as hitting Nigeria’s economy – which, analysts have warned, is headed for a full-blown crisis – the attacks on Africa’s biggest petroleum producer have led to a rise in global oil prices.Under an amnesty deal reached in 2009 with other militants who were attacking oil facilities, the government paid millions of dollars to the leaders to “guard” oil companies’ infrastructure – in effect paying them not to attack it. Buhari has extended the deal, but cut its budget, giving rise to a potential source of anger in the region. It is not known who finances the Niger Delta Avengers, but it has issued threats via its website and social media.
Chevron Facility Goes Offline In Nigeria Following Tweeted Attack By Mysterious Militant Group -- Recently we presented a profile of latest scourge to haunt Africa's former oil producing powerhouse Nigeria, namely the Niger Delta Avengers, who not only maintained a regularly updated blog, but were perhaps the most social media savvy "freedom fighting" organization, with a twitter account that constantly updated on the group's ongoing activities. In fact, just yesterday the NDA may have been the first such group to pre-announce a terrorist act before any of the major media outlets caught it. We Warned #Chevron but they didn't Listen. @NDAvengers just blow up the Escravos tank farm Main Electricity Feed PipeLine.— Niger Delta Avengers (@NDAvengers) May 25, 2016 It wasn't a joke. As Reuters reported this morning, Chevron's onshore activities in Nigeria's Niger Delta have been shut down by a militant attack at its Escravos terminal, the company confirmed on Thursday.As Reuters observes, the Niger Delta Avengers, which has told oil firms to leave the Delta before the end of May, said late on Wednesday it had blown up the facility's mains electricity feed."It is a crude line which means all activities in Chevron are grounded," the source told Reuters, without elaborating. There was no immediate official confirmation from Chevron.Zebo Austin, who lives nearby, told Reuters: "We heard a loud blast at the Abiteye to Escravos crude pipeline which was blown up last night by yet-to-be identified militant group." The Avengers and other militants, who say they are fighting for a greater share of oil profits, an end to pollution and independence for the region, have intensified attacks in recent months, pushing oil output to its lowest in more than 20 years and compounding the problems faced by Africa's largest economy. Abuja has responded by moving in army reinforcements but British Foreign Minister Philip Hammond said this month President Muhammadu Buhari needed to deal with the root causes of the conflict.
Kurdistan turns to the US and others to help fund the future of its crude oil (audio) Iraq's semi-autonomous Kurdistan region has been hard hit by the oil price plunge of late, but it is attempting to pull its oil industry out of the shadows and toward legitimacy. Platts senior editors Herman Wang and Brian Scheid are joined by Ben Lando, founder and editor-in-chief of the Iraq Oil Report, and Jared Levy, director of the Iraq Oil Report-s custom research division, to dig into the region's complicated role in the crude landscape. They discuss the state of Iraq's crude production and exports, the Kurdistan Regional Government-s efforts to get the US to help with its $100 million deficit caused by low oil prices, and the impact of ISIS attacks on the country-s oil infrastructure. Lando and Levy, who also write for Platts, look at where Iraq's crude industry is headed and the major hurdles it currently faces.
This Week's Main News From The Oil Sector - For those who need a quick and easy recap of all the main events that took place in the oil and gas services sector, here it is courtesy of Credit Suisse's James Wicklung who present the various "things we've learned this week." According to Bloomberg, in the final gathering of OPEC officials prior to the June 2 meeting, no discussions of a production cut took place. Officials at the meeting concurred with OPEC's most recent research report that supply and demand will start to balance in the second half 2016. . Sunday, Iranian Deputy Oil Minister Rokneddin Javadi noted that the country has no plans to slow oil production, saying, "Currently, Iran's crude oil exports, excluding gas condensates, have reached 2M bpd; Iran's crude oil export capacity will reach 2.2M barrels by the middle of summer." Prior to economic sanctions, Iran produced 4.5M bpd, which is down from peak production of ~7M bpd in the 1970s. . Volatile oil and natural gas prices have accelerated planning by energy executives to change their business models; KPMG Global Energy Institute said in a May 24 release of annual survey results of US senior energy executives. Of more than 150 executives responding, 94% said commodity pricing coupled with the regulatory environment will require significant changes to their business models in 3-5 years.. Baker Hughes announced it is consolidating its previous regional operations structure into one global organization and, in conjunction, is making leadership changes. Most importantly, there was no change to the CEO position. SLCA announced it completed the purchase of a fully permitted, 327 acre parcel of land adjacent to its existing mine in Ottawa, Illinois. The land is expected to add 30M tons of proven reserves. In addition to oil and gas, the Ottawa facility serves multiple end markets such as glass, building products and chemicals….
IHS: Conventional discoveries outside N. America drop to lowest level since 1952 - Oil & Gas Journal: Just 12 billion boe of estimated recoverable resources were discovered from conventional wells outside of North America in 2015, representing the lowest level since 1952, according to IHS analysis. The volume of conventional oil alone discovered in 2015 totaled just 2.8 billion bbl, also a record low since the ramp-up of oil and gas exploration began following World War II. More than 9 billion boe of conventional natural gas was discovered globally during the year, marking the fifth straight year in which gas volumes discovered exceeded oil volumes discovered. “The fall in discovered volumes for conventional oil outside North America, in particular, has been steady and dramatic during the last few years,” commented Leta Smith, director, IHS Energy, upstream industry future service and lead author of the IHS Energy Conventional Exploration and Discovery Trends analysis. “We’ve seen 4 consecutive years of declining oil volumes, which has never happened before,” Smith explained. “The bottom has completely fallen out for conventional exploration, and the result portends a supply gap in the future that is going to be challenging to overcome. In the current cost-cutting environment, the outlook for 2016 discovery volumes is not likely to be better, either.”IHS notes exploration and appraisal (E&A) drilling for conventional resources fell sharply in 2015, exacerbating the annual drop in resources found. Last year, slightly fewer than 4,300 conventional E&A wells were drilled outside North America as exploration budgets were cut. That figure compares with the slightly more than 5,200 conventional E&A wells drilled globally in 2014 and 5,300 in 2012, the latter of which was the peak year for E&A wells drilled during 2005-15. The number of deepwater E&A wells drilled worldwide dropped more than 20%, while ultradeepwater E&A drilling declined more than 40%, compared with 2014. Deepwater activity in 2015 also showed a marked shift toward appraisal drilling as a portion of total exploration compared with prior years, and IHS researchers expect this trend to continue into 2016.
Four Consecutive Years Of Declining Oil Volumes Which Has Never Happened Before -- IHS -- May 23, 2016 - Oil & Gas Journal is reporting that the conventional discoveries of oil and gas outside North America have fallen to the lowest level since 1952. Some data points:
outside of North American in 2015: just 12 billion boe recoverable resources were discovered from conventional wells
- lowest level since 1952 (about the time I was born)
- wow: the volume of oil alone discovered in 2015 totaled just 2.8 billion bbl -- also a record on the downside -- since the ramp-up of oil and gas exploration following WWII
- 9 million boe of conventional gas discovered: fifth straight year that gas discoveries have exceeded oil discoveries
- the fall in discovered volumes for conventional oil outside North America has been stead and dramatic during the past few years
- four consecutive years of declining oil volumes, which has never happened before
- the bottom has completely fallen out of conventional exploration
- the supply gap in the future is going to be challenging to overcome
A 4.5-Million-Barrel Per Day Oil Shortage Looms: Wood Mackenzie | OilPrice.com: A report by Wood Mackenzie has warned the world may face a daily oil shortage of 4.5 million barrels by 2035. The amount represents around 5 percent of global consumption estimate of the International Energy Agency (IEA) for 2016. In other words, a true crisis is looming—and for the moment, there is no apparent way around it. The most obvious reason is that energy companies don’t want to spend money on exploration when prices are so disappointingly low. Many of them simply can’t afford to spend on exploration if they want to survive in today’s price environment. Ironically, their long-term survival can only be guaranteed by further exploration spending. A lot of costly projects have been shelved since the summer of 2014 when oil prices started falling, with the initial investments basically written off. Reviving these projects will cost more money. Where this money will come from is unclear—there is no certainty where oil prices are going in the near term, let alone any longer period, and the European Commission today forecasted $41/barrel oil for the rest of this year and just over $45 for 2017.Another part of the answer to the question, “How did we get ourselves into this mess?” has to do with the knee-jerk reaction of E&Ps in times of crisis. That knee-jerk reaction is generally “fire at will”. Layoffs in oil and oilfield services are piling up at speed, well into six-figure territory to date. Cost-cutting has become the daily mantra of oil companies, and it’s easy to see why.
When We Can Expect The Next Oil Shock -- The scenario above shows an Oil Shock Model with a URR of 3600 Gb, EIA data from 1970 to 2015, and the Annual Energy Outlook (AEO) 2016 early release reference projection from 2016 to 2040. The oil shock model was originally developed by Webhubbletelescope and presented at his blog Mobjectivist and in a free book The Oil Conundrum. The World extraction rate from producing reserves must rise to 15 percent in 2040 to accomplish this for this “high” URR scenario. This high scenario is 100 Gb lower than my earlier high scenario because I reduced my estimate of extra heavy oil URR (API gravity<10) to 500 Gb. The annual decline rate rises to 5 percent from 2043 to 2047 creating a “Seneca cliff”; the decline rate is reduced to 2 percent by 2060. The scenario presented above uses BP’s Energy Outlook 2035, published in Feb 2016. This outlook does not extend to 2040 and maximum output is 88 Mb/d in 2035 at the end of the scenario. This scenario is still optimistic, but is more reasonable than the EIA AEO 2016. Extraction rates rise to 10.6 percent and the annual decline rate rises to 2.5 percent in 2042 and is reduced to less than 2 percent by 2053. A problem with the BP Outlook is the expectation that U.S. light tight oil (LTO) output will rise to 7.5 Mb/d from 2030 to 2035, the BP forecast for U.S. LTO from 2013, 2014, 2015, and 2016 is shown below. A more realistic forecast would be a peak of 6 Mb/d in 2022 with output declining to 3 Mb/d by 2035. The scenario below shows roughly what World output might be with this more realistic, but still optimistic scenario. There is a plateau in output at 85 Mb/d from 2025 to 2030 with annual decline rate peaking at 2.1 percent in 2044 and then falling under 2 percent per year from 2048 to 2070.
Calling OPEC: The IEA's crude production forecasting dilemma - The Barrel Blog: Since its creation more than 40 years ago, the International Energy Agency has side-stepped predictions of OPEC crude production, acutely aware that the producer group’s output quotas made the job at best tricky, at worst politically inexpedient. But this may be about to change. Next month, the IEA is considering publishing “scenario” forecasts of OPEC crude production for the first time in a move likely to be seen as a nod to the cartel’s radical new free-wheeling output policy. The IEA, set up in response to the 1973 oil shock, is also rethinking longstanding, and much-cited, forecasts for the expected demand for OPEC’s crude. From next month, the IEA’s closely-watched monthly Oil Market Report could contain a scenario for OPEC crude output through to the end of 2017, Neil Atkinson, head of the IEA’s oil market division, told Platts. The change is being considered amid growing evidence that OPEC’s Saudi-led abdication of its traditional supply management role since late 2014 has become the “new normal” for the producer group. With OPEC producers essentially pumping flat out to maximize market share over prices, the job of forecasting OPEC production has apparently become less precarious. Indeed, since the oil price downturn of late 2014, the IEA has already broken with protocol giving some tentative predictions of OPEC’s future oil production for the purposes of mapping the potential timing of a return to market balance.
Why One Bank Is Urging Its Clients To Dump. Oil. Now -- Back in March we demonstrated how much of a historical outlier recent energy stock prices are, when we showed the ridiculous forward P/E multiple associated with energy stocks, whose earnings have collapsed not only historically but also on a forward multiple basis, resulting in a 50+ P/E forward multiple: something unprecedented in history. Overnight, Deutsche Bank recreated the same analysis in an even easier to digest chart, one which shows energy stock valuations based on an even more appropriate - because it focuses on cash flow - valuation metric, EV to EBITDA. As shown below, the US energy sector is now trading at a roughly 7x EBITDA multiple compared to a historical average between 1x and 2x. Notably, the bank also presents what the implied valuation is assuming $45 oil: roughly 3 EBITDA turns lower, implying the market is pricing energy companies on oil back in the $70-80 range, if not higher.But more than just equities, the risk of a sharp repricing is just as evident in the junk bond space, where energy is by far the largest sector amounting to just shy of 16% of all outstanding issues.As a result perhaps it is not surprising that the biggest driver to sharply tighter high yield spreads has been the recent rebound in oil prices, which has also led to a dramatic tightening in the HY index spread from north of 800 bps to approximately 600 bps today.As DB shows in the chart below, the biggest correlation (if not direct causation) to lower oil prices over the past year was the stronger dollar, which having eased in recent months thanks to the Fed's recent relent, has allowed oil to rebound. However, if indeed the Fed is again set on tightening financial conditions, what will happen to the dollar, whether DXY or trade-weighted, and how will this impact the price of not just oil, but the HY and equity market as well? To Deutsche Bank the answer is "not good."
Morgan Stanley Notices The Strange Thing Taking Place Off The Singapore Coast -- Last Friday we first reported on two surprising developments: one was a record accumulation of offshore crude tankers just off the coast of Singapore in the Straits of Malacca, awaiting higher oil prices to offload their precious cargo; the second was that as a result of previously profitable contango trades now flattening and making storage no longer profitable, oil shippers are now forced to ask for bank loans to fund offshore storage costs. Over the weekend Morgan Stanley's analyst Adam Longson also noticed our report, and released a report focusing on the problem of floating storage which continues to grow, especially in Asia, and how he thinks it will impact the price of oil. This is what he said, most of which is a recap of what we said on Friday.Floating storage continues to grow despite outages and poor economics.According to Reuters reports, at least 40 supertankers laden with crude are anchored offshore Singapore as floating storage. In fact, according to Reuters, the volume stored offshore Singapore is up 10% WoW despite outages, to 47.7 mmb. The increase in floating oil comes despite disruptions in the Atlantic Basin and an out-of-the-money floating storage arb, suggesting markets are not as healthy as sentiment suggests. It also highlights the speculative nature of much of the oil bounce this year (recent disruptions aside). Southeast Asia is getting worse, with offshore volumes reaching the highest level in at least 5 years. According to Poten & Partners, “the volumes of oil stored at sea in South East Asia - predominantly Singapore and Malaysia - appear to have increased significantly”. Remember that the Straits of Malacca, carry 15+ mmb/d of ~56 mmb/d of world oil maritime trade – or ~27% of all seaborne oil - primarily from the Persian Gulf.
Year-over-year Change in Oil Prices -- Oil prices are "only" down about 20% year-over-year (YoY), and the YoY decline has been decreasing. So I thought I'd look at the YoY change in oil prices over the last few decades. This graph shows the year-over-year change in WTI based on data from the EIA.Five times since 1987, oil prices have increased 100% or more YoY. And several times prices have almost fallen in half YoY. Oil prices are volatile! And it seems likely the YoY change will turn positive later this year.
Crude Spikes Above $49 After Biggest Inventory Draw Since 2015 - Following last week's surprise draw (from the DOE data), API reported a huge 5.14mm draw (against expectations of a 2mm barrel draw) - the biggest since Dec 2015. Bear in mind that last week API reported a large build only to se a major draw in DOE data so perhaps this is catch down from the Canada interruption. Cushing saw its first draw in 4 weeks but Gasoline inventories rose dramatically (+3.06mm vs -1.5mm exp). Crude prices are exuberantly looking to run last week's high stops on the news, breaking above $49 again. API:
- Crude -5.137mm (-2mm exp)
- Cushing -189k (-400k exp)
- Gasoline +3.06mm (-1.5mm)
- Distillates -2.92mm (-750k exp)
This is the biggest inventory draw since Dec 18th...
WTI Crude Nears $50 After Bigger Than Expected Inventory Draw, Production Cut - The July WTI contract neared $50 for the first time since early November ahead of this morning's DOE data, extending gains from last night's API-reported biggest draw since 2015 (which we warned seemed like catch up from a big build last week). DOE confirmed the big draw with a 4.22mm drop in inventories (less than API's 5.13 but more than 2mm expected) and further an even bigger draw at Cushing. Gasoline saw an unexpected build as Distillate inventories fell for the 6th week in a row. Production fell for the 18th week in a row, holding at Sept 2014 lows. Crude's reaction was chaotic, testing up over $49.60 and down to a $48 handle. DOE:
- Crude -4.22mm (-2mm exp)
- Cushing -649k (-400k exp)
- Gasoline +2.04mm (-1.5mm)
- Distillates -1.28mm (-1m exp)
The biggest headline is not the significant draw in crude but the very unexpected build in gasoline inventories... Production - down for the last 18 weeks - is hovering at its lowest since Sept 2014 (though some context is in order - at around 8.8m bbl/day, it is still up 60-70% from pre-2011 levels) The reaction...total chaos... as we suspect the gaosline draw is bringing doubts over demand... After nearing $50... Since the last time WTI traded at $50, the rest of the curve has collapsed amid aggressive hedging...
Oil ends session up; misses $50-target amid profit-taking | Reuters: Oil prices rose about 2 percent on Wednesday after the U.S. government reported a larger-than-expected drop in crude inventories, but profit-taking after the data kept prices below the $50 a barrel level that oil bulls had been hoping for. The U.S. Energy Information Administration said crude inventories fell 4.2 million barrels in the week to May 20. While the decline was steeper than the 2.5 million barrels forecast by analysts in a Reuters poll, it was not as much as the 5.1 million expected by trade group American Petroleum Institute. Crude futures fell briefly after the EIA data showed the steepest weekly drop in seven weeks, then consolidated and traded at the lower end of the day's gains. Brent settled up $1.13, or 2.3 percent, at $49.74 a barrel. Prices climbed as high as $49.96 in post-settlement trading. U.S. crude's West Texas Intermediate (WTI) settled 94 cents higher at $49.56, after peaking at $49.62, a seven-month high. Profit taking heading into the U.S. Memorial Day weekend also pressured prices, traders said. Oil bulls have been hoping in recent weeks that crude would rise to $50 a barrel or more, after global crude flows declined nearly 4 million barrels per day due to wildfires in Canada's oil sands region, a near economic meltdown in OPEC member Venezuela and a spate of violent attacks against the Libyan and Nigerian energy industries.
Brent Crude Rises Above $50 a Barrel -- The move above $50 was seen as a key moment by many analysts as providing a psychological boost to a market that has been trading below that level for six months now. Oil prices hit decade-lows below $30 a barrel earlier this year. “Oil prices continue to improve since the beginning of the year and breaking $50 is an important milestone,” said Julian Jessop, analyst at Capital Economics. Bjarne Schieldrop, chief commodities analyst at SEB Markets, said that as long as oil stayed below $50 his bank’s clients believed the price would fall back down to around $45. “Now we have $50 that is the reference point,” he said. “So when it dips below 50 that will be seen as a buying opportunity.” Thursday’s gains came after inventory data released by the U.S. Department of Energy on Wednesday showed a 4.2 million barrel reduction in oil stocks. Analysts polled by The Wall Street Journal had expected a decrease of only 2.5 million barrels. A weaker U.S. dollar also supported prices on Thursday. The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other currencies, fell 0.2%. As oil is priced in dollars, it becomes more attractive for holders of other currencies as the dollar falls. This added to a mostly positive sentiment in the oil market in recent weeks, which has been propped up by supply disruptions around the globe. Wildfires in Canada and unrest in a key oil-producing region of Nigeria have helped balance the oversupplied market and boosted prices.
The Consequences Of $50 Oil - On Thursday Brent crude rose above $50 while the WTI rose to $49.85. The rise in prices came after the EIA reported a dramatic fall in U.S. inventories. The weekly drop of 4.2 million barrels, far more than the 2 million that was expected, triggered a sharp rise in a market which had been growing increasingly bullish, sending the Brent price above $50 on Thursday morning. It is the first time in seven months that the price has reached this level. It’s a recovery that came much more quickly than analysts expected. Since reaching a low of $27 in January, both Brent and WTI have risen by nearly 80 percent, an impressive achievement considering the general slump in commodities. Concerns from the Energy Information Agency (EIA) that the world would “drown in over-supply” in 2016 have been allayed. The new price reflects disruptions in world production. Wildfires in Canada have affected imports to the U.S., while persistent violence in Nigeria has caused that country’s exports to fall from 2.2 million bpd to less than 1.4 million bpd according to the Nigerian oil minister. Canadian crude is the single largest U.S. oil import, and the sudden fall in Canadian production was bound to have an impact on U.S. inventories. The gradual decline in U.S. production may be partially arrested if the price hovers over $50 for long enough. Shale production, which has proven surprisingly resilient considering the enormous pressure placed on shale producers, could tick back up, triggering an eventual fall from $50 in the weeks or months ahead. Then again, some analysts have pegged the break-even for U.S. shale at a higher level, anywhere from $100 to $75 to maintain profitability. This indicates that the decline in the shale sector will continue, along with the sweeping bankruptcies that have plagued the U.S. oil patch since last year.
OilPrice Intelligence Report: Oil On Firm Footing at $50? -- Oil hit a milestone this week, with Brent crude briefly touching $50 per barrel on May 26 before falling back again. Supply outages continue to tighten the market in Canada and Nigeria. But the catalyst for price gains this week came from the EIA, which reported a surprisingly strong drawdown in crude oil stocks – down 4.2 million barrels – which beat estimates. Also, U.S. oil production fell by another 24,000 barrels last week as the contraction continues. Oil prices appear to be on sound footing more than at any time during the nearly two-year downturn. Of course, higher prices raise the specter of a resumption in drilling. Short-cycle shale drilling allows for quicker response times than, say, offshore projects that have long lead times. Shale was the first to go offline because of low oil prices, but drillers could once again open up the taps if they feel that they can turn a profit. The jury is out on whether $50 oil is enough to do the trick, but oil slipped back on May 26 as traders grew concerned that drilling could pick up again. Pioneer Natural Resources said in in its earnings release in April that it would consider adding five to ten rigs this year if oil prices rebound to $50. "I think it is fair to say we're more optimistic than we were last month and even the month before that. . Now that oil is back at $50, will Pioneer add rigs? "It's not so much getting to $50 at a particular point in time. It's having a view that oil at $50 will stay at $50. The industry supply/demand fundamentals have to improve. "What's really going to convince us is that inventory levels continue to come down," he said. The EIA just reported a strong 4.2 million barrel drawdown in inventories. A few more weeks of numbers like that, and Pioneer could be set to resume drilling.
U.S. Oil Rig Count Fell by Two in Latest Week - WSJ: The U.S. oil-rig count fell by two to 316 in the latest reporting week, according to oil-field services company Baker Hughes Inc., BHI 1.41 % keeping up a broad 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 tumble in 2014. The number of oil rigs in the U.S. peaked at 1,609 in October 2014. According to Baker Hughes, the number of U.S. gas rigs rose by two in the latest week to 87. The U.S. offshore-rig count was 24 in the latest week, unchanged from last week and down five from a year earlier. Oil prices fell further below the key $50 threshold Friday, as investors took profits from the recent rally and the dollar strengthened. U.S. oil breached $50 a barrel Thursday for the first time since October. Analysts now wonder whether Friday’s fall is a temporary pullback or indicative of a market still facing a problem with oversupply. U.S. crude was recently down 0.4% to $49.27 a barrel.
U.S. Oil Rig Count Declining Again After Single-Week Reprieve - The oil rig count fell again this week from 318 to 316 after last week’s slight reprieve, coming in at the lowest at any point in time since Baker Hughes has been keeping track.The 2-count loss in the number of active oil rigs was offset by an increase in U.S. gas rigs, up from 85 to 87, holding the total U.S. oil and gas rig count steady at 404. The U.S. oil rig count fell by two, as reported by Baker Hughes’ latest oil rig count, while the U.S. gas rig count climbed slightly to 87. This week’s slight fall in the number of active oil rigs comes after last week’s unchanged figures, which was preceded by eight weeks of free-falling. The total number of active oil rigs in the US of 316 represents less than 50 percent of last year’s U.S. oil rig count. Baker Hughes total oil and gas rig count for this time last year was 864 rigs. Oil rigs are now 49 percent of what they were a year ago, while gas rigs are 39 percent of what they were a year ago. In recent weeks, Baker Hughes stated that it did not expect U.S. rig counts to really stabilize until the latter half of the year, and this week’s decline, although slight, supports the notion that last week’s stable figures were clearly temporary.
Oil slips for 2nd day as $50 level sparks new output fears: Oil prices dipped for a second day in a row on Friday as some investors took profit on a surge to seven-month highs while others worried about higher production with the market hovering near $50 a barrel. A stronger dollar also weighed on demand for dollar-denominated oil from holders of other currencies. The dollar spiked after Federal Reserve Chair Janet Yellen said a U.S. rate hike was probably appropriate in coming months. A three-day weekend for the United States, owing to Monday's Memorial Day holiday, further discouraged investors from holding bullish bets. Also on Friday, oilfield services firm Baker Hughes reported the number of rigs operating in U.S. fields fell by 2 to 316 in the previous week. At this time last year, drillers had 646 oil rigs online. Brent fell 22 cents to $49.37 a barrel, retreating further from the previous session's $50.51 peak, its highest since early November. U.S. crude settled down 0.3 percent, or 15 cents, at $49.33 a barrel, and last dropped 6 cents to $49.42 a barrel after touching $50.21 on Thursday, its highest since early October. "People are worried crude production will come roaring back at these prices,"
Saudi Aramco Lifted 2015 Oil Output to Record in Market Spat | Rigzone - Saudi Arabian Oil Co., the world’s largest crude producer, increased output to an all-time high last year while keeping its reserves unchanged as the kingdom battles for market share. Saudi Aramco, as the state-owned company is known, produced 10.2 million barrels a day of crude in 2015, up from 9.5 million in 2014, according to an annual review posted on its website Thursday. Natural gas output rose to 11.6 billion standard cubic feet a day from 11.3 billion. The company discovered three oil deposits last year, the same as in 2014, while gas field discoveries declined to two from five. “Expanding oil and gas supplies to meet the needs of domestic and international markets is at the core of Saudi Aramco’s business, and in 2015 the company delivered on its commitments, reaching record levels of oil production and gas processing,” Chairman Khalid Al-Falih said in the review. Saudi Arabia’s rising production, along with increased output from shale plays in the U.S. last year, exacerbated a global supply glut that drove down benchmark prices by more than 30 percent in 2015. OPEC, led by Saudi Arabia, chose in November 2014 to keep pumping crude to protect its share of the market rather than cutting output to boost prices. Last month, the Organization of Petroleum Exporting Countries and other major producers including Russia failed to reach an agreement over a proposal to freeze output after Saudi Arabia insisted that it couldn’t sign up to a deal without the participation of Iran, which has pledged to boost its own oil production to pre-sanctions levels before considering a cap. The Saudi company’s oil reserves were unchanged at 261.1 billion barrels, while those of gas increased to 297.6 trillion standard cubic feet from 294 trillion. The company said it maintains an oil-production capacity of 12 million barrels a day.
Saudi Market Share Takes A Hit As Russia Doubles Oil Exports To China | OilPrice.com: Russian oil exports to China more than doubled in April 2016 compared to numbers from the same month last year, according to a report by Russia’s state-run news agency Russia Today. By the calculations of General Administration of Customs for the People’s Republic of China (PRC), the 52 percent year-over-year increase amounted to a transfer of 4.81 million metric tons between the two BRICS countries. In March, the imports reached 4.65 million tons. Two of the PRC’s three major oil suppliers—namely, Saudi Arabia and Iran—saw their Chinese oil orders decline year-over-year. Saudi Arabian oil imports fell by 22 percent to 4.12 million tons, and the Iranian figures dropped by 5.1 percent to 2.76 million tons in the same monthly comparison. China’s third major supplier, Angola, increased its business with China by 39 percent to 3.98 million tons in an April year-over-year analysis. A recent report by the International Energy Agency (IEA) said Russia had overtaken Saudi Arabia as China’s leading supplier of crude oil at the end of last year. Russia Today’s analysis says its home country’s exports to the PRC had more than doubled over the course of the past years—an increase equivalent to 550,000 barrels a day. The “oil friendship” between Russia and China is two-sided: the Polish Centre for Eastern Studies said China became Russia’s main oil customer in 2015 as well. New projects worth several billion dollars between Moscow and Beijing have led the two countries to cooperate closely regarding energy industry issues.
Iran Closes In On Saudis As Oil Exports Soar | OilPrice.com: Market data from Reuters shows that Iranian crude oil exports in April reached 2.3 million barrels per day, exceeding forecasts, while May exports are expected to be around 2.1 million barrels per day—or almost 60 percent higher than a year ago. In May last year, by way of comparison, Iran was exporting about 1.3 million bpd, according to Reuters. Logistics were holding up Iranian exports, with tankers being a key problem and indications now that this has been partially resolved. A week ago, Iranian officials announced that sanctions on the country’s shipping lines have been completely removed, and that Iranian tankers are now free to dock at any port in the world. “Accordingly, all tankers that are under Iran’s ownership as well as any [foreign] tanker that enters Iran’s ports will not have any problem with regards to the issue of insurance,” Iranian media quoted an official as saying. It’s a tough pill for rival Saudi Arabia to swallow, as the two fight for market share. Iran has regained almost half of its pre-sanctions European market, and exported 1.7 million bpd to Asia in April. Last week, Iran introduced a discount on the June contract for its heavy crude going to Asia, just a few days after Saudi Arabia announced a price increase for its own June contract for the continent. With the discount, Iranian oil will be noticeably cheaper for Asian clients than both Saudi and Iraqi crude.
Iran Won’t Freeze Oil Output Before OPEC Meeting -- Iran, which is due to meet with OPEC partners on June 2, has no plan to join any freeze in crude output as the country won’t be done ramping up oil exports to pre-sanctions levels before the second half of the year, the head of the state oil company said. The Persian Gulf state’s oil exports will likely surpass 2.2 million barrels a day by the middle of the summer, Rokneddin Javadi, managing director of National Iranian Oil Co., told Mehr news agency. Iran last exported at this level before sanctions were imposed on the country for its nuclear program more than four years ago. Sanctions were eased in January, and Iranian officials said they won’t discuss any output freeze or cut before reaching pre-sanctions levels. “The government has no plans for the time being to freeze or interrupt its increase in oil output and exports based on plans that are being carried out,” Javadi said. “In the current context, the oil ministry and the government have issued no policy or program to halt the increase in production and exports and so, the country’s plans to increase crude output continues.” Iran is rebuilding its energy industry and restoring crude sales after the lifting of international restrictions. The country declined last month to join other nations in a push to freeze output at a meeting between fellow members of the Organization of Petroleum Exporting Countries and other major producers in Doha, Qatar. The talks ended in disagreement after Saudi Arabia refused to limit production without the participation of all OPEC members, including Iran. OPEC is due to meet next on June 2 in Vienna.
‘’Iran Will Not Freeze’’ -Plans To Ramp Up Oil Production Through 2016 | OilPrice.com: Iran plans to ramp up oil production over the course of 2016, and there is no chance of the country joining any output freeze, Iranian Deputy Oil Minister Rokneddin Javadi confirmed on Sunday. "Under the present circumstances, the government and the Oil Ministry have not issued any policy or plan to the National Iranian Oil Co. (NIOC) towards halting the increase in the production and exports of oil," Javadi, who also runs the nationalized National Iranian Oil Co. (NIOC), said. The Iranian official added that the country has been implementing a plan to raise oil production and crude exports to pre-sanctions levels since sanctions were lifted in January. Saudi Arabia has previously demanded that Iran join the other members of OPEC in freezing oil production in order to rebalance the market. Iran declined to participate in the OPEC summit last month due to the disagreement. "If prices went up to $60 or $70, that would be a strong factor to push forward the wheel of development,” an oil ministry official told the International Business Times during the dispute in April. "But this battle is not my battle. It’s the battle of others who are suffering from low oil prices.” The 169th meeting of OPEC is set to take place in Vienna on June 2nd and will include Iran - Saudi Arabia’s main regional rival. NIOC currently exports two million barrels per day, according to Javadi’s numbers, and by the middle of this summer, the figure will increase to 2.2 million barrels a day.
Russia Inks $1B Offshore Rig Contract with Iran -- Iran has awarded a contract worth more than US$1 billion to a Russian shipbuilder for the construction of five offshore drilling rigs to be used in Iran’s section of the Persian Gulf shelf, a company official told Reuters. The company, Krasnye Barrikady, had been in discussions with the Iranian government regarding the project for almost two years. The terms of the contract dictate that the project will also make use of Russian funds. Iran is set to make a 15 percent down payment on the US$200 million price of the first rig it has ordered. Russia and Iran have signed several memoranda of understanding regarding a broad range of energy issues, including power plant construction, oil exploration and production projects and trade agreements for petroleum products. Earlier this week, Iranian Deputy Oil Minister Rokneddin Javadi confirmed plans to ramp up oil production over the course of 2016, and said there is no chance of the country joining any output freeze. "Under the present circumstances, the government and the Oil Ministry have not issued any policy or plan to the National Iranian Oil Co. (NIOC) towards halting the increase in the production and exports of oil," Javadi, who also runs the nationalized National Iranian Oil Co. (NIOC), said
OPEC’s Ability to Ease An Oil Supply Shock is Now Fading - WSJ: For half a century, the Organization of the Petroleum Exporting Countries has buffered global crude markets, curtailing production to ease oil gluts and boosting output to prevent shortages. Now, as it heads into a June 2 meeting to discuss how to stabilize world oil markets, the cartel has neither the political consensus to cut output nor the technical capability to significantly raise production. This year, OPEC’s spare pumping capacity—the amount it can bring online within 30 days and sustain for at least 90—will be at its lowest level since 2008, the U.S. Energy Information Administration estimates. It said OPEC spare capacity will decline more than 22% in the current quarter compared with the previous quarter.Since last year, OPEC members haven’t been able to agree on supply cuts to stem a glut that drove prices down by more than 50% since 2014. Instead they kept pumping full blast. The result: With recent supply outages sending the oil price back up, the cartel has little flexibility to boost production. Saudi officials have long said they can boost production by about 2 million barrels a day over today’s record daily production of 10.2 million barrels. But that 2 million barrels might not be possible in short order, a Saudi oil industry official said. “If there was a big crisis tomorrow, then the maximum Saudi Arabia can do would be around 500,000, maybe 700,000 maximum,” the official said.
OPEC's Death Knell -- May 23, 2016 Bloomberg/Rigzone is reporting: Saudi Arabia, one of the founders of OPEC, is sounding the group’s death knell. The world’s biggest crude exporter has already undermined OPEC’s traditional role of managing supply, instead choosing to boost output to snatch market share from higher-cost producers, particularly U.S. shale drillers, and crashing prices in the process. Now, under the economic plan known as Vision 2030 promoted by the king’s powerful son, Deputy Crown Prince Mohammed bin Salman, the government is signaling it wants to wean the kingdom’s economy off oil revenue, lessening the need to manage prices. Moreover, the planned privatization of Saudi Arabian Oil Co. will make the nation the only member of the Organization of Petroleum Exporting Countries without full ownership of its national oil company. “The main take-away from Saudi Vision 2030 is that there’s just no role for OPEC,” Seth Kleinman, head of European energy research at Citigroup Inc. in London, said by phone on May 16. “Or, you can have an OPEC without Saudi Arabia, which just isn’t much of an OPEC.” The first change of oil ministers in more than 20 years may also recast the country’s relationship with OPEC. The group’s 13 members, which contribute about 40 percent of the world’s supply, gather in Vienna on June 2.
"The Freeze Is Finished" - Why Did Saudi Arabia Kill OPEC? - The OPEC meeting is only a week away, but the chances of a positive result are as remote as ever. Rising oil prices, the heightened rivalry between Saudi Arabia and Iran, and Saudi Arabia’s willingness to go it alone will make a deal all but impossible. First of all, Iran is not in a cooperative mood. According to the IEA, Iran has managed to boost oil production to 3.56 million barrels per day in April, its highest level since November 2011. Oil exports also jumped 600,000 barrels per day to 2 million barrels per day. Importantly, Iran’s output now stands at pre-sanctions levels, a key threshold that the Iranian government says it needs to reach before it would consider any cooperation on production limits with OPEC. However, Iran thus far does not see it that way, insisting that it still has more ground to make up. More importantly, however, is Saudi Arabia’s shift in attitude. In a once unthinkable development, Saudi Arabia is backing away from OPEC. The cartel’s largest, most important, and most influential member will leave the group rudderless. Saudi Arabia’s spurning of OPEC has been building for some time. In November 2014 it abandoned any plans to limit production in order to prop up prices, a strategy to pursue market share that has led to some downsides, but has largely achieved its goals. Saudi Arabia has seen revenues plummet, but it is producing at record levels and outlasting rival producers. U.S. shale, for instance, is down about 1 million barrels per day (mb/d) from the April 2015 peak, and more than 70 North American drillers have gone bankrupt. But Saudi Arabia has gone further to distance itself from OPEC. In April, Saudi Arabia scuttled the production freeze deal in Doha, killing what would have been only a modest agreement that put limits on oil output. By all accounts, the emergence of the young Deputy Crown Prince Mohammed bin Salman led to a harder line from Saudi Arabia. The replacement of long-time oil minister Ali al-Naimi a few weeks later solidified perceptions of a new era in Saudi Arabia. The Saudi government has very little inclination to limit its output just as its strategy is bearing fruit, and even less of a willingness to work with Iran, its regional rival, who it is battling in proxy wars in Yemen and Syria. Saudi Arabia is going it alone and oil production is now close to record levels, above 10.2 mb/d.
Saudi Officials Crackdown On FX Market As Currency Peg Starts To Strain --As we warned previously, the devaluation, or breaking of the Saudi Riyal peg to the dollar, could be the black swan event for crude oil and the recent weakness in SAR forwards - while not as violent as Nigeria's Naira - certainly signals a renewed market fear that breaking the peg is imminent. It appears Saudi officials are none too pleased with the free markets speculating on this devaluation and as Bloomberg reports, banks in Saudi Arabia are coming under fresh pressure over products that allow speculators to bet against the kingdom’s currency peg, according to people with knowledge of the matter, which were supposedly banned in January. As Bloomberg reports, The Saudi Arabia Monetary Agency has asked lenders to explain why they are offering dollar-riyal forward structured products to customers less than four months after the regulator banned options contracts that let speculators place wagers on a currency devaluation, the people said. The authority, known as SAMA, didn’t reply to requests for comment. There has been renewed speculation that the world’s biggest oil exporter won’t be able to maintain the riyal’s peg to the dollar as revenue plunges and the kingdom weighs paying government contractors with IOUs. Riyal forwards for the next 12 months rose to 590 points, the highest since Feb. 19, according to data compiled by Bloomberg, signifying increased speculation of a devaluation.SAMA is asking banks to explain the rationale and relevance of the structured products for the economy and explain why they’ve entered into the products without informing the central bank, according to the people. It also wants transaction details of the derivatives since Jan. 18.It’s also seeking to understand the impact of the products on Saudi banks’ U.S. dollar buy positions from the central bank as well as the risks to customers and banks, they said. The central bank warned any future structured derivative product should be submitted to SAMA for review and approval before they’re launched.As The Telegraph's Ambrose Evans-Pritchard recently wrote, Saudi Arabia faces a vicious liquidity squeeze as capital continues to leak out the country, with a sharp contraction of the money supply and mounting stress in the banking system.
Saudi Press: U.S. Blew Up World Trade Center To Create 'War On Terror': The Saudi press is still furious over the U.S. Senate’s unanimous vote approving a bill that allows the families of 9/11 victims to sue Saudi Arabia. This time, the London-based Al-Hayat daily has claimed that the U.S. planned the attacks on the World Trade Center in order to create a global war on terror. The article, written by Saudi legal expert Katib al-Shammari and translated by MEMRI, claims that American threats to expose documents that prove Saudi involvement in the attacks are part of a long-standing U.S. policy that he calls “victory by means of archives.” Al-Shammari claims that the U.S. chooses to keep some cards close to its chest in order to use them at a later date. One example is choosing not to invade Iraq in the 1990s and keeping its leader, Saddam Hussein, alive to use as “a bargaining chip” against other Gulf States. Only once Shi’ism threatened to sweep the region did America act to get rid of Hussein “since they no longer saw him as an ace up their sleeve.” He claims that the 9/11 attacks were another such card, enabling the U.S. to blame whoever suited its needs at a particular time; first it blamed Al-Qaeda and the Taliban, then Saddam Hussein’s regime in Iraq, and now Saudi Arabia. The intention of the attacks, writes al-Shammari in his conspiracy article, was to create “an obscure enemy – terrorism – which became what American presidents blamed for all their mistakes” and that would provide justification for any “dirty operation” in other countries.
Peak Petro-State - The Oil World In Chaos -- Pity the poor petro-states. Once so wealthy from oil sales that they could finance wars, mega-projects, and domestic social peace simultaneously, some of them are now beset by internal strife or are on the brink of collapse as oil prices remain at ruinously low levels. Unlike other countries, which largely finance their governments through taxation, petro-states rely on their oil and natural gas revenues. Russia, for example, obtains about 50% of government income that way; Nigeria, 60%; and Saudi Arabia, a whopping 90%. When oil was selling at $100 per barrel or above, as was the case until 2014, these countries could finance lavish government projects and social welfare operations, ensuring widespread popular support. Now, with oil below $50 and likely to persist at that level, they find themselves curbing public spending and fending off rising domestic discontent or even incipient revolt. At the peak of their glory, the petro-states played an outsized role in world affairs. The members of OPEC, the Organization of the Petroleum Exporting Countries, earned an estimated $821 billion from oil exports in 2013 alone. Flush with cash, they were able to exert influence over other countries through a wide variety of aid and patronage operations. That, of course, was then, and this is now. While these countries still matter, what worries these presidents and prime ministers now is the growing likelihood of civil violence or even state collapse. Take, for example, Venezuela, long an ardent foe of U.S. policy in Latin America, but today the potential site of a future bloody civil war between supporters and opponents of the current government. Similar kinds of internal strife and civil disorder are likely in oil-producing states like Algeria and Nigeria, where the potential for the further growth of terrorist violence amid chaos is always high. Some petro-states like Venezuela and Iraq already appear to be edging up to the brink of collapse. Others like Russia and Saudi Arabia will be forced to reorient their economies if they hope to avoid such future outcomes. Whatever their degree of risk, all of them are already experiencing economic hardship, leaving their leaders under growing pressure to somehow alter course in the bleakest of circumstances -- or face the consequences.
Loan defaults spike at Gulf banks after oil slump: More than two-thirds of Gulf banks reported an increase in unpaid loans in the first three months of the year and more defaults are likely as oil-dependent governments slash spending to adjust to lower crude prices. After several years in which banks' profits jumped thanks to the region's petrodollar boom, the oil markets' two-year malaise is taking its toll. New global accounting standards from 2018 will make lending even harder. "The days of double-digit profits and expansion plans are gone," said one United Arab Emirates-based banker. "Now, it's all about single-digit growth and controlling costs as bad loans are going to keep getting higher. It's the new normal." Two of the region's largest banks show how tough things have become. National Commercial Bank (NCB), Saudi Arabia's largest bank by assets, put aside 58.8 percent more money to cover bad loans during the quarter, analysts estimate, partly due to delays in government payments to its customers. The bank has close links to the government and construction giant Saudi Binladin Group, which like many building companies, has been hit by a slump in the building sector as the state slows spending. One of the most visible signs of the slowdown is the King Abdullah financial district in Riyadh, where gleaming tower blocks are still unfinished a year after they were supposed to be completed.
Debt repayments in crude cripple poorer oil producers (Reuters) - Poorer oil-producing countries which took out loans to be repaid in oil when the price was higher are having to send three times as much to respect repayment schedules now prices have fallen.This has crippled the finances of countries such as Angola, Venezuela, Nigeria and Iraq and created a further division within the Organization of the Petroleum Exporting Countries.Ahead of an OPEC meeting next week, poorer members have continued to push for output cuts to lift prices but wealthier Gulf Arab members such as Saudi Arabia, which are free of such debts, are resisting taking any action despite prices falling 60 percent in the past 2 years.Angola, Africa's largest oil producer has borrowed as much as $25 billion from China since 2010, including about $5 billion last December, forcing its state oil firm to channel almost its entire oil output towards debt repayments this year.This year Angola, Nigeria, Iraq, Venezuela and Kurdistan are due to repay a total of between $30 billion and $50 billion with oil, according to Reuters calculations based on publicly disclosed information and details given by participants in ongoing restructuring talks.Repaying $50 billion required only slightly over 1 million barrels per day (bpd) of oil exports when it was trading at $120 per barrel but with prices of around $40, the same repayment would require exports of over 3 million bpd."All of those oil nations - Angola, Nigeria, Venezuela - have taken money for survival but haven't got any money left for investments. That is very damaging to their long-term growth prospects," said Amrita Sen from Energy Aspects think-tank."People tend to look at current production volumes but if you have committed your entire production to China or other buyers under loans - then you cannot invest to keep growing and won't benefit from higher prices in the future."
Why China Is Being Flooded With Oil: Billions In Underwater OPEC Loans Repayable In Crude -- When the price of oil was above $100, many of the less developed oil exporting OPEC members decided to capitalize on the high price and cash out by taking loans using the precious liquid as collateral very much the same way corporate CEOs use their inflated stock (thanks to buybacks they authorize) to issue loans against said stock. And why not: even if the price of oil were to drop, they could just pump more until the principal is repaid. However, few oil exporters anticipated such an acute oil plunge in such as short time span, which resulted in the value of the collateral tumbling by 70%, and now find themselves have to repay the original loan by remitting as much as three times more oil! According to Reuters, this is precisely what happened in the years preceding the great 2014-2015 oil bust: "poorer oil-producing countries which took out loans to be repaid in oil when the price was higher are having to send three times as much to respect repayment schedules now prices have fallen." As a result, the finances of countries such as Angola, Venezuela, Nigeria and Iraq have been crippled, in the process creating further division within the Organization of the Petroleum Exporting Countries. But while these already poor and corrupt OPEC nations were the biggest losers, one country was a huge winner, the country that provided the billions in virtually risk-free, oil-collateralized loans to any country that requested them. China. The same China which has once again proven smart enough to not demand repayment in fiat but in physical commodities, be they oil, copper or gold. Take Angola for example: Africa's largest oil producer has borrowed as much as $25 billion from China since 2010, including about $5 billion last December, which according to Reutersforced its state oil firm to channel almost its entire oil output toward debt repayments this year. Or Venezuela: ever since 2007, China, which has become Venezuela's top financier via an oil-for-loans program, has funneled an amazing $50 billion into the Chavez first and then Maduro regimes, in exchange for repayment in crude and fuel, including a $5 billion deal last September. While details of the loans have not been made public, analysts from Barclays estimate Caracas owes $7 billion to Beijing this year and needs nearly 800,000 bpd to meet payments, up from 230,000 bpd when oil traded at $100 per barrel.
Analysis: Russia grabs top supplier's crown with record crude oil sales to China - China's crude oil purchases from Russia jumped 52.4% year on year to a record high in April, propelling it to the top spot for the second time in 2016 and displacing Saudi Arabia, but May purchases from the European supplier could slow because of higher flat prices, traders said. Russia shipped 4.81 million mt, or 1.17 million b/d, of crude to China in April, about 36,910 b/d higher than the last peak of 1.14 million b/d recorded in December last year, according to data released by the General Administration of Customs Tuesday.It was the sixth time Russia has moved to the top spot as China's crude supplier, since capturing that spot for the first time in May, 2015. On the other hand, volumes to China from Saudi Arabia was 1 million b/d in April, dropping 21.8% year on year, despite an increase of 3.5% from March. Russia in April sent nearly 2 million mt of crude via pipeline to the northeastern city of Daqing in China, up 8.2% from 1.84 million mt in the same month last year, according to the Central Dispatching Unit, the statistical arm of Russia's energy ministry. The volume would translate into 488,000 b/d, taking a conversion factor of 7.33 barrels per metric ton. Most of those barrels go to PetroChina's refineries. The remaining 686,600 b/d from Russia were seaborne arrivals, which flowed to Sinopec, CNOOC as well as independent refineries. Most of the cargoes were loaded from the Far East port of Kozmino.
China Sinopec to triple Chongqing shale gas capacity to 15 Bcm/year by 2020 - China's Sinopec said Monday it targets tripling its shale gas capacity in Chongqing in southwest China to 15 Bcm/year by 2020 from the current 5 Bcm/year. It also aims to increase its shale gas output in Chongqing to 10 Bcm/year by 2020, the end of China's 13th five-year plan that runs 2016-2020, according to a news release on a strategic cooperation agreement signed with the Chongqing city government that was posted on Sinopec's website. The targets are in the line with Sinopec's plan unveiled in March to double its total domestic gas output to 40 Bcm in 2020 from 20.81 Bcm in 2015, with 10 Bcm to come from shale gas -- all of it from Chongqing -- 29.5 Bcm from conventional gas and 0.5 Bcm from coal bed methane. The company completed construction of the 5 Bcm/year Phase I of its flagship Fuling project in Chongqing last year and will begin building the second phase this year, Platts reported earlier. The proven developed reserves in Fuling stood at 28.77 Bcm at end 2015, more than doubling from 13.37 Bcm a year earlier, according to the company's annual report. Proven undeveloped reserves surged to 5.13 Bcm from 2.49 Bcm over the same period.
China coal imports from North Korea dip 35 percent as sanctions bite | Reuters: China's imports of coal from its neighbor North Korea reached 1.53 million tonnes in April, down 35 percent on the month and 20.5 percent year-on-year as Beijing sought to comply with a tougher sanctions regime against the country. North Korean shipments over the first four months of the year remain 23.2 percent higher than the same period of 2015, data from China's General Administration of Customs showed on Monday. China's Ministry of Commerce announced at the beginning of April that it would ban North Korean coal imports to comply with new United Nations sanctions on the country, though it made exceptions for deliveries intended for "the people's wellbeing" as well as coal originating from third countries like Mongolia. Mongolia was the chief beneficiary of the decline in shipments from North Korea, with the country supplying 1.98 million tonnes to China in April, up 34.7 percent on the year. Australia remained China's biggest supplier, though the April volume of 5.74 million tonnes was down 12.9 percent compared to last year.