as you know, the EIA was out with new maps of the Utica shale formation, and the Point Pleasant formation directly below it, earlier this week...i found that by copying the original EIA post, the map pictures would still appear, and better yet, clicking the links below the map pictures pops up the maps in separate window, complete with a zoom magnifier, so we can, for all practical purposes, get right down to identifying the characteristics of the formations that underlie our county and those adjacent to it...basically, each of the maps below has two notes below it; one for the sources of the information used in producing the map, followed by a note to "Click to enlarge"...it's that "Click to enlarge" that you'll have to click to get the large version of the map in a separate tab or window;…the large versions of the maps have a magnifier which enables you to zoom in or zoom out, giving a relatively clear picture of all the features on each, and when you zoom in, the otherwise faint county borders become visible...
Source: U.S. Energy Information Administration, based on DrillingInfo, Inc., IHS Inc., the Appalachian Oil and Natural Research Consortium, and U.S. Geological Survey
Note: Click to enlarge.
The U.S. Energy Information Administration has produced new maps that show the structure, thickness, and geologic setting of the Utica Shale play and the location of production wells. Production of oil and natural gas from the Utica play has increased since 2011, with more than 1,700 wells drilled as of January 2016. The Utica play includes both the Utica formation and the deeper Point Pleasant formation, each with its own characteristics.
the first map, above, shows several of the geologic features of the northern Appalachian basin, mostly as they relate to the Utica shale, and the targeted area of it, which is shown with the blue shading..some of the oil & gas related literature includes the Point Pleasant formation, directly below the Utica, as part of the Utica, as apparently they can be accessed together in the same drilling / fracking operation...i'm unfamiliar with many of the other geologic features shown above, though the Rome trough, shown in magenta, is another deep formation including the Rogersville shale, occasionally mentioned as a target of drilling in Kentucky and West Virginia....the Ordovician outcrops are apparently areas where features of the same geologic formation that includes the Utica come to the surface...the Utica is a Ordovician era formation named after Utica, New York, where an outcrop of it was first described...and it's my understanding that the nearly parallel faults shown crosshatching most of Pennsylvania are the result of the counter-clockwise rotation of the North American plate as it moves to the WNW, which cracks as it's twisted, much as you would break up an ice cube tray...
The Utica play spans about 60,000 square miles across Ohio, West Virginia, Pennsylvania, and New York. The geologic characteristics of the Utica and Point Pleasant formations, which are discussed in EIA's update, are favorable for the accumulation and production of hydrocarbons.
The Utica map is one of several maps of low-permeability hydrocarbon formations that EIA updated with additional geologic detail. EIA has previously published updated maps of major geological and tectonic features for the Marcellus and Eagle Ford plays. EIA has also provided shapefiles for structure and thickness maps for the following: Marcellus, Eagle Ford, Abo-Yeso, Bone Spring, Delaware, Glorieta-Yeso, Spraberry, Bakken, Three Forks, and Niobrara.
Source: U.S. Energy Information Administration, based on DrillingInfo, Inc., IHS Inc., the Appalachian Oil and Natural Research Consortium, and U.S. Geological Survey
Note: Click to enlarge.
this next map, above, mostly shows the depth of the Utica shale in feet below sea level..note that the Utica is close to the surface in Canada north of New York, and in the area around Cincy...zoom in to our corner of the state, you'll see the Utica is 4,000 ft below sea level at the lake erie shore, in Lake, northern Ashtabula and Geauga counties, and in western Cuyahoga..it then falls to 4,500 ft below sea level in southern Ashtabula and Geauga counties, and to 5000 ft below sea level in Portage and Trumbull counties...to the south, we see that most of the wells drilled thus far in Ohio target the Utica 6,500 to 7,500 below sea level....if you know your own elevation above sea level, you should be able to figure out the depth from where you're at to the Utica....for instance, the Cuyahoga river south of Burton is about 1100 feet above sea level; that would mean that the Utica shale is about 5600 feet below the river...the elevation of Chardon is 1299 feet, while Lake Erie is 571 feet above sea level, so go figure..
Source: U.S. Energy Information Administration, based on DrillingInfo, Inc., IHS Inc., the Appalachian Oil and Natural Research Consortium, and U.S. Geological Survey
Note: Click to enlarge.
the next map (above) shows the elevation of the top of Point Pleasant formation, which is directly below the Utica, and which you'll note in the EIA notes below is more often targeted by Utica drillers than the Utica itself...unsurprisingly, then, we find top of Point Pleasant is 4,000 ft below sea level at the lake erie shore and in Lake county, and that it's at 4,500 feet below for most of Ashtabula and Geauga counties, and then it drops to 5000 ft below sea level in northwest Portage and Trumbull counties, and to 5500 ft below sea level to the south and east of there..also note both formations are as deep as 12,500 feet below sea level in southwest Pennsylvania, which probably means that it would take an expensive 14,000 foot deep well just to reach it from there...
The Utica is a stacked play that includes both the Utica formation and the underlying Point Pleasant formation. Currently, the deeper Point Pleasant is more often targeted for oil and natural gas drilling because it is more productive. Most of the more productive areas across the Point Pleasant formation footprint are in eastern Ohio and western Pennsylvania. Subsea elevation contour maps representing the top surface of each formation were developed with depth measurements from wells and outcrop data from the U.S. Geological Survey. These maps represent subsea depths and only roughly approximate drilling depth to reach the top of each formation.
The Point Pleasant formation is deepest in the southwest region of Pennsylvania, reaching subsea depths of more than 13,000 feet, and it is shallowest at the junction of Ohio, Indiana, and Kentucky. The Utica formation reaches subsea depths of up to 12,500 feet in a northeast arc though Pennsylvania and is also shallowest at the junction of Ohio, Indiana, and Kentucky. The most productive wells in the Utica formation are found at subsea depths ranging from 5,000 to 11,000 feet.
Structure maps not only provide valuable drilling information, but they also lend insight into the distribution of oil and natural gas throughout the play. Temperature and pressure, which are functions of a formation's depth, are key factors in the amount of oil and natural gas present in the formation.
Note: Click to enlarge.
these next two maps show the thickness of each of those stratuses of organic shale, and where each contains rich organic matter, suggesting extractable oil or gas...above we have the thickness of the Utica shale, ranging from just 20 feet thick under the Cincinnati area to 220 feet in extreme northeast Ohio and northwest Pennsylvania...the Utica is over 200 feet thick along the shore of Lake Erie east of Lorain to northern Geauga and Ashtabula, and between 160 and 180 feet in the rest of the region, except for two areas in Ashtabula where it's more than 220 feet... the thickness of the Utica where most Ohio horizontal wells have been drilled & fracked ranges between 100 and 180 feet...the areas with high organic content are enclosed by a green ellipse that includes most of the region....all else being equal, the thickest areas of shale offer the biggest target for fracking...for instance, we know much of the fracking of the Marcellus in Pennsylvania was in areas in the northeast which were 200 to 400 feet thick, and the Ohio thicknesses ranging from 25 to just over 50 feet is the reason there was little drilling of the Marcellus in Ohio...
below, we have the thickness map for the Point Pleasant formation (click the link below the map)..here we have a different layout than for the Utica, in that the thickest areas of the Point Pleasant are in Trumbull and Ashtabula county, generally ranging from 110 feet at the east and west borders to 130 feet in the middle of the county, with one area in Ashtabula near the Geauga border as thick as 150 feet...the thickness drops from there as we move west, with the thickness in the southwest corner of Geauga falling to 70 feet, and further thins to two areas of southern Portage county that come in at just 50 feet thick...most of the Utica wells in southeast Ohio are drilled in areas where the Point Pleasant formation is between 70 and 90 feet thick...the organically rich areas of the Point Pleasant on this map are enclosed by the violet circle, again including almost the entire region...
Note: Click to enlarge.
Note: Click to enlarge.
in this last map, the combined thickness of the Utica and Point Pleasant shales is shown, presumably because any well drilled in this area will be targeting both formations at the same time...and here, the thickest areas are in our part of the state, ranging from a thickness of 245 to 265 feet in southern Geauga and eastern Portage county, to over 305 feet in northeast Geauga and at the lake shore...the combined thicknesses then rise to over 345 feet in parts of southern Ashtabula, and generally fall to 305 feet to the north and south of there...most of the horizontally drilled wells in Ohio that target these formations do so where the thickness is between 185 feet and and 245 feet, so our part of the state appears to offer the frackers a richer target than where they're drilling now...
Thickness maps (isopach) for each formation individually and for the Utica play as a whole were developed using observations from wells. The maps also show areas of high organic content, which is a factor in the amount of hydrocarbons in the rock. Like structure maps, isopach maps provide valuable drilling information because thickness of the reservoir is a key factor in determining whether, and where, to drill a well.
The Utica formation is thickest in western Ohio and the northwest corner of Pennsylvania at 200-300 feet and thins to 50 feet or less in southern Ohio and northern Kentucky. The Point Pleasant formation reaches a thickness of more than 200 feet in central Pennsylvania and thins to less than 20 feet in the eastern half of Kentucky. The combined thickness of Utica and Point Pleasant is less than 100 feet in the area where Ohio, West Virginia, and Kentucky meet. The thickness reaches more than 300 feet in northwest and central Pennsylvania, and in northeast and central Ohio. Most producing wells are located where the formation has a thickness of 150 feet or more.
now, i dont know why our area, where the shale play seems to be the thickest, has not yet been targeted for the extensive drilling that the southeast part of the state has...it's possible that the shale in those areas have a higher hydrocarbon content than the shale in our area...it's also possible that they found a rich vein down there and stuck with it, not knowing that other parts of the Utica/Pt Pleasant might be richer...it's even possible that they stayed in poorer areas of the Appalachian foothills because the people there are less likely to fight drilling and fracking than the quasi suburban counties in this part of the state; area frackers are already on record saying they deliberately keep their wells away from the “big houses” of wealthy and potentially influential people...whatever the case, with these maps, it's now known by everyone who's paying attention that these north eastern Ohio counties offer a richer target than most other areas of the state...as we saw two weeks ago, Utica natural gas production growth is poised to overtake Marcellus gas growth this year...now the EIA has confirmed that the Utica will provide the US with most of its new natural gas in the future...and thus these maps tell us that we'll eventually have a fight on our hands to keep that gas from coming out from under us...
The Latest Oil Stats from the EIA
this week's oil balance sheet data showed the largest one week drop in our crude oil production in 10 months, which was almost matched barrel for barrel by an increase in our oil imports...still, despite a modest increase in the oil refined, we still had nearly 2.8 million more barrels of oil left than we could use, and hence set yet another record for the amount of oil we had stored at the end of the week...Wednesday's reports from the Energy Information Administration showed that production of crude oil from US wells fell for the 14th time in the past 15 weeks, but unlike prior weeks this year when the decreases in production were on the order of 0.1 or 0.2% of the aggregate, this week saw a drop of nearly 1.3%, as our output fell by 113,000 barrels per day, from an average of 8,938,000 barrels per day during the week ending April 22nd to an average of 8,825,000 barrels per day during the week ending April 29th....that's now 5.8% below the 9,369,000 barrels per day we were producing during the same week last year, and 8.2% below the 9,610,000 barrel per day peak of our oil production that was hit during the week ending June 10th of last year...
at the same time, our imports of crude oil rose by 110,000 barrels per day, from an average of 7,550,000 barrels per day during the week ending April 22nd, to an average of 7,660,000 barrels per day during the week ending April 29th...that was 17.1% more than the 6,541,000 barrels of oil per day we imported during the week ending May 1st a year ago, but the EIA's weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports was still at the 7.8 million barrel per day level, which was 8.4% more than our oil import rate of the same four-week period last year...
as we mentioned earlier, refinery processing of crude oil rose this week, after the odd slowdown last week, as US refineries used 15,986,000 barrels of oil per day during the week ending April 29th, 139,000 barrels per day more than the average of 15,847,000 barrels of oil per day barrels they processed during the week ending April 22nd...the US refinery utilization rate rose to 89.7% of operable capacity last week, up from a 88.1% capacity utilization rate during the week ending April 22nd...that's still below the 93.0% capacity utilization rate of the week ending May 1st last year, when US refineries were using 16,347,000 barrels of crude each day...
with more oil being refined, refinery production of gasoline rose to average 9,811,000 barrels per day during week ending April 29th, up by 303,000 barrels per day from our gasoline output average of 9,507,000 barrels per day during week ending April 22nd...moreover, that output of gasoline was up more than 7.2% from the 9,152,000 barrels of gasoline per day that we produced during the same week last year, a week when gasoline output was unusually depressed....at the same time, our refineries' output of distillate fuels (diesel fuel and heat oil) fell by 33,000 barrels per day to 4,589,000 barrels per day during week ending the 29th, which was 381,000 barrels per day, or 7.7% lower than our distillates production during the same week of 2015...
with that greater output of gasoline, combined with gasoline imports of 946,000 barrels per day, the highest gasoline imports in 8 months, our gasoline inventories rose again, increasing from 241,259,000 barrels on April 22nd to 241,795,000 barrels as of April 29th...hence, our gasoline inventories were 6.1% higher than the 227,852,000 barrels we had stored on May 1st last year, which was at that time the highest gasoline stores for the last week in April in EIA records going back to 1990...hence, our gasoline stores are still categorized by the EIA as "well above the upper limit of the average range" for this time of year...
at the same time, our distillate fuel inventories fell by 1,261,000 barrels to end the week at 156,970,000 barrels, as farm use of diesel fuel continues to be above last year's pace...however, because distillate inventories were already bloated after a warmer than normal winter reduced heat oil consumption, distillate inventories remained 20.0% higher than the 130,773,000 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, when all was said and done, we ended up with an additional 2,784,000 barrels of surplus crude oil this week, and hence our stocks of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose once again to a new record of 543,394,000 barrels as of April 29th, up from the record 540,610,000 barrels of oil we had stored as of April 22nd...that was 11.6% higher than the 487,030,000 barrels of oil we had stored as of May 1st, 2015, and 36.7% higher than the 397,576,000 barrels of oil we had stored on May 2nd of 2014....we've now increased our inventories of crude oil by by nearly 61.1 million barrels since the beginning of this year, while setting new records for the amount oil we had in storage in the US in 11 out of the last 12 weeks...
This Week's Rig Counts
we also again set another all time record low for drilling activity in the US, as the rig count fell further below its previous record low for the 9th week in a row......Baker Hughes reported that their total count of drilling rigs running in the US was down by 5 more rigs to 415 rigs as of May 6th, which was also down from the 894 rigs that were working on May 8th of 2015, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014... the count of rigs drilling for oil fell by 4 rigs to 328, which was down from 668 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 fell by 1 to a record low of 86, down from the 221 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...
one of the rigs that was shut down this week had been drilling in the Gulf of Mexico, meaning the Gulf rig count fell to 23 and the total offshore count dropped to 24, with the other offshore platform working off the Cook Inlet in Alaska...that was down from 33 rigs in the Gulf of Mexico and 34 total offshore that were in use on May 8th of 2015...there was also a rig removed that had been drilling through an inland lake in southern Louisiana this week, which left the inland waters rig count at 3, up from the 2 rigs deployed drilling on inland waters last year at this time...
a net of 6 horizontal drilling rigs were pulled out this week, leaving the count of rigs drilling horizontally at 318, which was down from the 692 horizontal rigs that were in use on May 8th of 2015, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of 2014...at the same time, 2 more directional rigs were also stacked, leaving 44 directional rigs still working, which was down from the 88 directional rigs that were in use at the end of the same week a year earlier...however, a net of 3 vertical rigs were added this week, increasing the vertical rig count to 53, which was still down from the 114 vertical rigs that were in use nationally 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 the rig count summary from Baker Hughes, which shows those changes...
the first table above 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 cases, the first column shows this week's active rig count, second column shows the change in the number of working rigs from last week, the third column shows last weeks rig count, the fourth 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 8th of 2015...hence, you can thus see that the active rig count in the Eagle Ford shale of South Texas was down by 3 rigs to 37, which was down from the 105 rigs that were working that basin a year ago, while the Permian basin of west Texas saw 5 new rigs added, bringing that total up to 139, which of course was still down from 237 last year at this time..as a result, the top table shows that Texas added 3 rigs, and now have 188 still drilling, which is nonetheless down from the 379 rigs that were working in Texas a year ago... at least this week the Utica saw one of its rigs shut down, leaving just 10 in the basin and hence 10 rigs still working in Ohio, down from 24 last week at this time...the Baker Hughes state count tables do not indicate any change in drilling activity in states not shown above...
Global Drilling Activity During April
Friday also saw the monthly release of the international rig count for April, which unlike the weekly count, is an average of the number of rigs running in each country for the month, rather than the total of those drilling at month end....Baker Hughes reported that an average of 1424 rigs were drilling for oil and natural gas around the globe in April, which was down from 1,551 rigs drilling globally in March and down from the 2,268 rigs that were deployed globally in April of last year...as usual, most of the 127 rigs that were pulled out worldwide during the month had been drilling in North America, where the average number of rigs deployed fell from 566 in March to 478 in April...the US averaged 437 active rigs in April, down from 478 in March, and down from 976 in April of last year, while the Canadian average deployment was 41 rigs, down by more than half from 88 in March, and down from the 90 rigs that were working in Canada a year ago at this time...
the Middle East saw rigs pulled out for the 4th month in a row, after a run of 5 months when their drilling increased, as the region's activity was down by 13 rigs to an April average of 384, which was also down from the 410 rigs deployed in the Middle East a year earlier...however, the region saw an unusual increase of 12 rigs working offshore, bringing the offshore count back up to 54, same as their offshore rig count last April....Iraq accounted for 5 of the net rigs removed from the region, as they were were down to 43 rigs in April from 48 in March, and down from the 53 rigs that were drilling in Iraq a year earlier...the Saudis idled 4 rigs, which left them with 123 still active, which was down from 124 a year earlier...however, the Saudis have been averaging a deployment of 125 rigs throughout 2015 and 2016, an increase from their average of 105 rigs in 2014, when oil prices averaged twice as high, so they’ve been adding rigs as prices fell...other Middle East rig reductions in April were seen in Oman, down 2 rigs to 68, but up from 64 a year ago, and single rig cuts in Kuwait to 40, which was also down from 50 a year earlier, and in Pakistan, where they were down to 23 rigs but up from 22 rigs a year earlier...meanwhile, Qatar added a rig and now has 7, which is still down a rig from the 8 they had deployed last April...
meanwhile, the Latin American countries pulled out another 15 rigs, after pulling out 52 rigs in the first 3 months of the year, as the region averaged 203 rigs in April, including 36 offshore, down from the total of 325 rigs, which included 64 offshore rigs, that were active in Latin America in April of 2015....Brazil saw the largest pullback, as they were down by 9 rigs to 19, which was down from the 43 rigs that were in use in Brazil a year ago...Mexico idled 4 more rigs, after shutting down 12 in March, and they were hence down to just 23 active rigs, from the 67 rigs deployed in Mexico in April last year...in addition, Venezuela, Colombia and Trinidad all cut 2 rigs in April, that left Venezuela with 69 rigs, which was an increase from the 55 they were running a year earlier, left Colombia with just 2 rigs, down from 25 a year earlier, and left Trinidad with 5 rigs working, which was up from the 3 rigs working there a year ago....meanwhile, Argentina, which had cut their active rig count from 101 to 65 in the three months ending February, added 5 rigs in April after adding 3 in March, which brought them back up to 73 rigs, which was still down from the 107 rigs they had deployed last April...also, Venezuela added 2 rigs and now have 71 active, up from 62 in March of 2015...
elsewhere, the Asia-Pacific region had 179 drilling rigs working in April, down from the 183 rigs working the region in March, and down from the 228 rigs working the region a year earlier...both Australia and Indonesia shut down 2 rigs, leaving Australia with 6 rigs, down from 18 rigs a year ago, and leaving Indonesia with 17 rigs, down from 32 rigs in April of 2015...at the same time, the Vietnamese added 2 rigs and hence had 3 working, same as they had a year ago...rigs working on the African continent, meanwhile, fell by 1 from 91 rigs in March to 90 in April , which was down from the 120 rigs working the African continent last year at this time...Nigerian activity dropped by two rigs to 6, which was down from the 9 rigs working in Nigeria a year earlier...both the Ivory Coast and Chad saw their rig count drop from 2 rigs to 1; a year ago, the Ivory Coast had 2 rigs drilling, and Chad had 3...at the same time, single rigs were added in Algeria, Angola, and in Equatorial Guinea, which brought Algeria up to 55 rigs, down from 56 a year earlier, brought Angola up to 9, down from 15 a year earlier, and brought Equatorial Guinea up to 2 rigs, same as they had deployed last April...
lastly, the rig count in Europe fell by 6 rigs to 90 in April, which was down from the 119 rigs working in Europe a year ago at this time...Norwegian drillers idled 2 rigs which left them with 17 running, down from 18 in April a year ago...Romanians also shut down 2 rigs, leaving 4 still working, which was down from 12 in April a year earlier...the Brits idled one rig onshore and 1 offshore; that left them with no drilling on land, same as April a year ago, and 8 offshore, down from 15 platforms a year ago...Germans also cut a rig, leaving 4, which was up from the 3 rigs they were running last April, while the Turks added a rig and now have 29 active, down from 30 rigs last year at this time.....note that Iran, Russia, and China rig counts are not included in Baker Hughes international data, although China's offshore area, with an average of 26 rigs active in April, is included in the Asian rig totals here...
Feds seek public input on oil-and-gas leasing in Wayne National Forest (AP) — A federal agency is seeking public comments on a draft environmental assessment of proposed oil and gas leasing in Wayne National Forest in southeastern Ohio. The Bureau of Land Management opened a comment period this week. Documents will be available for review until May 29. The environmental report analyzes impacts on about 40,000 acres underlying the forest. The agency says it is assessing a broader area than would be opened to drilling to avoid having to do a separate report on each individual lease request. Oil and gas companies told the bureau that they wanted to drill beneath the forest in 2011. The proposal has seen heated debate that pits supporters of the economic potential of the wells against southeastern Ohio residents and groups concerned about environmental problems.
BLM draft assessment: Leasing to drillers won’t hurt national forest - athensnews.com: A federal agency has issued a preliminary “finding of no significant impact” related to a proposal to lease 18,000 acres in the Wayne National Forest’s Marietta Unit for oil and gas drilling. The finding does not become official until after a draft environmental assessment (EA) issued Thursday by the federal Bureau of Land Management becomes final. The public has 30 days (until May 29) to review and comment on the draft EA. Then pertinent federal officials will have to review that input before finalizing the EA and the related finding of no significant impact. Click here to link to the EA and other pertinent documents.Proposals to lease land in the Wayne National Forest for deep-shale oil and gas drilling (which involves “fracking”) have generated bitter opposition from citizens and environmental groups concerned about the adverse effects on water and other natural resources in the national forest. However, other citizens, including many landowners whose land borders the Marietta Unit of the Wayne forest, support leasing and drilling. They say it will allow them to lease their own private oil and gas rights. Public and private land is intermingled throughout the Wayne National Forest. The EA in question only involves designated acreage on the Wayne’s Marietta Unit for which more than 50 oil-and-gas industry “expressions of interest” have been submitted, but not the Athens or Ironton units of the national forest. In the yet-to-be-signed finding of no significant impact, BLM District Manager Dean Gettinger, states, “Based upon a review of the EA and supporting documents, I have determined that the proposed action (leasing of 18,494 acres in the Wayne’s Marietta Unit) is not a major federal action, and will not significantly affect the quality of the human environment, individually or cumulatively, with other actions in the general area.”
BLM displays shortsighted attitude on forest - Marietta Times -- In response to the BLM's recent "Finding of no significant impact" related to the leasing of 18,494 acres in the Wayne National Forest's Marietta Unit for deep shale oil and gas drilling: there are many of us absolutely appalled at this short-sighted assessment. There are so many ominous - not to mention, scientifically proven - down sides to this. The first real issue is water, on both ends of this potential fracking disaster. First: it takes about 4,000,000 gallons of fresh water to frack just one well. Fact. I attended the BLM so-called presentation at Marietta College back in March. I asked every agent there, "So. My first question is, where is all the fresh water to frack going to come from?" Not one could answer my question. One man did say 'the water source was up to each individual driller." There are no guidelines on this issue. According to Terry Smith of the Athens News, there have, so far, been 50 individual expressions of interest in the Marietta Unit. If each one of those drillers frack even one well each, that is - let me get my calculator - 200,000,000 gallons of fresh, potable water. Taken from where? Wherever the hell a driller wants to get it. You can bet they won't use a public utility spigot. Then on the back side, where is all that now-radioactive, toxic, contaminated waste water going to GO? It will be injected back into the earth, under great pressure in injection wells, where? We know. In Marietta's injection wells up in Harmar, in Devola, Veto, and Waterford, among others, and down in Torch and Coolville. 200,000,000 gallons. Read that again. When that water perks back up everywhere - and you may be assured that sooner or later, it will - does anyone really think the water departments can ever provide safe drinking water again? Not to mention all the private water wells in our area. One other note: SE Ohio has no geological surveys of our aquifers. None.
Local anti-fracking movement continues to grow - athensnews.com: The local people and groups who continue to oppose fracking and injection wells have had mixed success against powerful fossil-fuel interests, federal and state government that are gung-ho about the expansion of fracking wherever there is natural gas. There are also, of course, some Ohio and Athenian businesses and citizens who focus on the prospect of immediate, if not long-term, economic benefits from fracking and/or who are ideologically against additional and effective government regulation when it comes to natural gas and other fossil fuels. Nonetheless, opponents, such as Athens County Fracking Action Network, have done an exemplary job locally on educating the people in the area on the well-documented harms that result from fracking. The voters of Athens City have supported a ban on fracking in the city that remains so far uncontested in the courts. They have supported legal action against the Ohio Department of Natural Resources and other government regulatory agencies for allowing inadequate permitting processes. Most recently, but not for the first time, they have taken a stand against the federal government’s proposal to allow fracking in the Wayne National Forest. They have lobbied elected officials at the city, county and state levels. Organized rallies. Roused and engaged citizens in some of the townships, like Torch, and nearby counties where injection wells are proliferating. The Athens County Bill of Rights Committee is right now undertaking a petition drive to get a provision on the November ballot to ban fracking and injection wells in the entire county.
Toxic brine from oil well spills in Morrow County - Columbus Dispatch -- A truck carrying brine from an oil well was struck by a train in Morrow County on Friday, spilling 3,200 gallons of the toxic waste water. None of the liquid spilled into creeks or affected public water supplies, said John C. Harsch director of the Morrow County Office of Homeland Security and Emergency Management Agency. Still, "there’s liquid all over the place,” Harsch said. “It just splashed everywhere,” said Sgt. Dave Flanagan of the State Highway Patrol’s Mt. Gilead post. “Covered the train, covered everything.” The brine came from a conventional well in Morrow County, not a horizontally fractured “fracking” well, said Eric Heis, an Ohio Department of Natural Resources spokesman. . The waste liquid was headed for disposal in an injection well. The Ohio Environmental Protection Agency was working with a contractor to clean the spill. The brine flowed into a farm field and a ditch, Ohio EPA spokesman James Lee said. He said he didn't think well water was affected. The Fishburn Services truck was heading west on Township Road 75 northeast of Edison about 8 a.m. when it crossed the CSX tracks. A northbound train traveling at 59 mph struck the truck in the tank, Flanagan said. The site is about 50 miles north of Columbus. The driver, James Thompson, 58, of Marengo, was taken by a MedFlight helicopter to OhioHealth Grant Medical Center in Columbus. Flanagan said he didn’t believe the injuries were life-threatening.
Ohio report looks at drilling potential of Devonian shales - From a Monday press release from the Ohio Department of Natural Resources: Posted on 5/2/2016 by Geological Survey in Devonian shale oil oil and gas. A new open-file report released by the ODNR Division of Geological Survey provides an analysis of source rock generative potential and thermal maturity of the Devonian shale interval in eastern Ohio. The interval for this study extends from the top of the Middle Devonian Onondaga Limestone to the base of the Upper Devonian Berea Sandstone. Maps created as part of the study include total ototal organic carbon (TOC), existing hydrocarbons (S1), hydrocarbons generated during pyrolysis (S2), vitrinite reflectance (%Ro), and conodont alteration index (CAI). Open-File Report 2016-3 is available for free download here as a PDF file [file size = 19 MB].
When fracking makes climate sense - Beacon Journal Editorial - Bernie Sanders boasts that he is the one candidate prepared to address climate change in a substantial way. Sanders also supports a ban on hydraulic fracturing in mining for oil and gas. The concept is swell in the ideal. Unfortunately, the country isn’t in position to follow such a course in the short term, not when natural gas accounts for one-third of electricity generation. Add the senator’s opposition to nuclear power and coal, and he has pushed aside roughly 85 percent of the country’s energy sources. How would Sanders replace them? Wind, solar and other renewable energy sources hold much promise. So does energy efficiency. They are not prepared to make up the difference soon, or likely even by the 2030s. This is one of the concerns about the way Sanders discusses an issue that he rightly describes as defining for the next generation. He doesn’t talk squarely about the complications and practicalities at work. No question, hydraulic fracturing, or fracking, involves risks via air pollution, plus water and ground contamination. Especially troubling are leakage of methane (a most potent greenhouse gas) and the toxic liquid injected and flushed at the drilling site. This process must be tightly regulated and adequately taxed, something Ohio still has not accomplished. What Sanders and others let slide too easily is that fracking (done right) produces fuel that burns more cleanly than the coal alternative. Natural gas generates 50 percent to 60 percent less carbon dioxide (the leading greenhouse gas) when burned in new, more efficient power plants. It also produces less soot, mercury, sulfur dioxide and nitrogen oxide.The technology just isn’t there to make a clean break with fossil fuels. And the problem of climate change cannot wait. A transition is required, and the cleaner alternative is natural gas, as long as fracking is well regulated.
Gulfport loses $242 million despite increased production - Gulfport Energy’s Utica Shale production was strong in the first quarter but the company lost $242.3 million. Gulfport has drilled 244 Utica wells in Ohio. It has the second most wells after Chesapeake Energy. The loss equaled $2.17 per share, the company said in a press release ahead of a Thursday conference call with investors. The Oklahoma City-based company had revenue of $157 million during the quarter, but losses dragged its balance sheet into the red. Gulfport’s largest loss, $219.0 million, was from a drop in the future value of production from its oil and natural gas properties. Gulfport’s first quarter production averaged 692.2 million cubic feet equivalent per day, 1 percent above the company’s highest estimate. However, oil and natural gas prices were about half what they were a year ago. The company spent $74.5 million drilling and fracking wells and another $19.7 million on leases. Most of Gulfport’s production was in the Utica, where the company drilled 10 wells and began production from 15 wells during the quarter. The company has three rigs in the Utica and plans to drill up to 24 Utica wells and begin production from as many as 39 wells this year.
Is Shell Chemical finally ready to act on Ohio River cracker? - Shell Chemicals is taking steps that suggest it finally may be ready to pull the trigger on a long-debated petrochemical complex which would include an ethylene plant (steam cracker) and three polyethylene units in the heart of the “wet” Marcellus/Utica natural gas liquids production region. If the $3+ billion project advances to construction soon, it would significantly impact ethane market dynamics, not just in Ohio/Pennsylvania/West Virginia but along the Gulf Coast too. And if it turns out we’re in for extended stagnation in drilling and production, the Shell cracker also may undermine plans to build additional NGL pipeline capacity out of the Marcellus/Utica—or any other cracker there. Today we discuss the likelihood of Shell proceeding with its Beaver County, PA cracker and the effects the project’s development might have. The production of NGLs in the Utica/Marcellus really started taking off in 2011-12, when shale drillers, responding to declining prices for natural gas, began to focus on “wet” gas liquids plays to take advantage of higher prices – thus higher returns. That required the build-out of gas processing and fractionation capacity, which we documented initially in Whoville, the Big New NGL Hub in Marcellus/Utica, and more recently in our Join Together With Demand series and Drill Down Report. As we noted in that report, in 2009, there was only 600 MMcf/d of gas processing capacity in the entire Northeast region, most of it legacy infrastructure dating back decades, and now there is some 7,600 MMcf/d of gas processing capacity—more than 40 new plants built in the past six years, most of them built by MPLX (MarkWest) at eight major processing centers across the region. There are still more gas processing plants on the drawing boards. Similarly, there’s now some 500 Mb/d of fractionation (C3+ or full range) and another 240 Mb/d of de-ethanization capacity. All that production—natural gas, mixed NGLs and “purity” products like ethane, propane, butanes and natural gasoline—has also resulted in the build-out of extensive take-away capacity (pipelines for gas, NGLs and purity products; rail- and barge-loading terminals for NGLs and purity products) as well as the development of local gas-fired power plants to consume Marcellus/Utica gas and—the subject of our blog today—proposals to construct in-region steam crackers to consume locally sourced ethane.
Enbridge predicts $62M in fines, penalties tied to oil spill (AP) — A pipeline company says it expects $62 million in fines and penalties related to a 2010 Michigan oil spill. In a filing Monday with the Securities and Exchange Commission, Enbridge says $55 million represents penalties under federal water law. The Alberta-based company says no final fine or penalty has been ordered yet as negotiations continue with the U.S. government. Enbridge says about 20,000 barrels of oil spilled into the Kalamazoo River system, near Marshall, from a ruptured line in 2010. Enbridge says total costs from the disaster are pegged at $1.2 billion. The company says most of the costs are covered by insurance.
Pennsylvania Town Opposes Fracking, Says Civil Disobedience a Human Right: A Pennsylvania town attempting to stop the use of fracking, a highly toxic and economically-questionable method of oil extraction, has ruled that direct action and civil disobedience is a protected civic duty. Grant Township, a hotbed of fracking prevention and protest, on Tuesday passed an ordinance proclaiming that the use of nonviolent resistance against fossil fuel companies is protected because it is a “sanctioned civil right.” The new ordinance stems from a November 2015 adoption of the country’s first-ever municipal charter, aimed directly at fighting Pennsylvania General Energy Company (PGE) and the Pennsylvania Independent Oil and Gas Association (PIOGA). The charter established a local set of protocols codifying environmental and democratic rights, Common Dreams reports. “If a court does not uphold the people’s right to stop corporate activities threatening the well-being of the community, the ordinance codifies that, ‘any natural person may then enforce the rights and prohibitions of the charter through direct action.’ Further, the ordinance states that any nonviolent direct action to enforce their Charter is protected, ‘prohibit[ing] any private or public actor from bringing criminal charges or filing any civil or other criminal action against those participating in nonviolent direct action,’” a press release from Community Environmental Legal Defense Fund (CELDF), who assisted with drafting the ordinance, said in a press release. The charter has been hailed as "one of the boldest moves to stop the natural gas industry's attacks on our communities, climate and democracy.” "We're tired of being told by corporations and our so-called environmental regulatory agencies that we can't stop this injection well," stated Grant Township Supervisor Stacy Long. "We're being threatened by a corporation with a history of permit violations, and that corporation wants to dump toxic frack wastewater into our Township." "I live here, and I was also elected to protect the health and safety of this Township. I will do whatever it takes to provide our residents with the tools and protections they need to nonviolently resist aggressions like those being proposed by PGE,”
DEP investigates 5 quakes, 1 close to Lowellville - Youngstown Vindicator -- The Pennsylvania Department of Environmental Protection is investigating five micro earthquakes in Lawrence County that occurred last Monday. The quakes – all too small for people to feel – occurred not far from a well pad operated by Hilcorp Energy Co. Subsequently, Houston-based Hilcorp voluntarily halted its nearby fracking operation about noon Monday. The U.S. Geological Survey reports these earthquakes that day in Lawrence County:
- 12:05 a.m.: magnitude 1.9; 1.9 miles northeast of Bessemer, Pa.
- 4:16 a.m.: magnitude 1.7; 0.6 miles west of Oakland, Pa.
- 5:03 a.m.: magnitude 1.8; 1.2 miles east-southeast from Lowellville.
- 10:54 a.m.: magnitude 1.9; 2.5 miles northeast of Bessemer, Pa.
- 10:10 p.m.: magnitude 1.8; 1.9 miles northeast of Bessemer, Pa.
The DEP will meet with Hilcorp to discuss geologic data the company collected from the area during and before drilling. The Pennsylvania Department of Conservation and Natural Resources is investigating the quakes with the DEP. Hilcorp has not returned a request for comment. Hilcorp, doing business as North Beaver NC Development, has four wells on that well pad. The first two wells were fracked in a southeast direction and were completed, according to the department.The second two wells were going in a northwest direction, and fracking was ongoing but near completion.“That time and space correlation suggests that [the earthquakes and the fracking] are related,” said Michael Brudzinski, a professor of seismology in the Department of Geology and Environmental Earth Science at Miami University in Oxford, Ohio. “The operator was very proactive about it. They are cognizant that there’s something to be concerned about.”
Hilcorp Energy responds responsibly to 5 quakes: The Greater Youngstown area certainly is no stranger to adversity tied to hydraulic fracturing for oil and natural gas. Who, after all, could ever forget the rocking New Year’s Eve in 2011 when Youngstown and its environs were jolted by the most powerful of a series of 12 earthquakes that the Ohio Department of Natural Resources later attributed to injection-well operations at D&L Energy?In those and other incidents, the Ohio Department of Natural Resources and other state and federal agencies took charge, ordering shutdowns and initiating full-scale investigations. But in an encouraging sign of growing corporate responsibility, a different response accompanied the immediate aftermath of a series of five earthquakes last week that some believe can be traced to fracking operations in Mahoning Township, Pa., near the Mahoning County line. This time, the company in charge needed no prodding, pushing or shoving from the long arm of the state or federal governments to do the right thing. Houston-based Hilcorp Energy Co., one of the largest privately held oil and natural-gas exploration and production companies in the United States, independently acted to halt all fracking operations just a mere hours after it learned of the quakes. There were five of them that day – all technically described as micro-quakes because of their extremely low magnitude. The company’s decision to act on its own to ensure that worker and public safety would not be compromised reflects its awareness of the amped-up public consciousnesss toward the potential hazards of fracking to the environment and community health. It also reflects the higher standards to which companies drilling for natural gas and oil are being held as state governments – including those in Pennsylvania and Ohio – have enacted increasingly taut regulations to monitor the industry and safeguard public health.
Pipelines drained; feds investigating cause of explosion - Natural gas pipelines were being drained Saturday as authorities try to determine the cause of an explosion in western Pennsylvania that destroyed one home, damaged at least three others and burned a fleeing homeowner. Officials in Westmoreland County said the 30-inch Texas Eastern transmission line burst open around 8:15 a.m. Friday in Salem Township, shooting flames into the sky. Spectra Energy said in a statement Saturday that it is cooperating with an investigation by the federal Pipeline and Hazardous Materials Safety Administration and taking steps to reduce harmful effects on the environment. "We are deeply sorry for the effect this incident has had on the community, and we are committed to taking care of all of those involved," the company said. The injured man, whose home was about 500 yards from the explosion, was taken to the University of Pittsburgh Medical Center-Mercy. An update on his condition wasn't immediately available Saturday. Company spokesman Creighton Welch said the pipeline was one of four parallel lines running through the rural area. One of the other pipelines was out of service, and the remaining two were being drained of natural gas, a process that should be finished by the end of the day, Welch said. Bob Rosatti, chief of the Forbes Road Fire Department in Salem, told the Pittsburgh Post-Gazette that once that work has been done, officials can begin inspecting the pipe that exploded and the three others. Spectra Energy said that the section of pipe where the fire occurred was built in 1981 and that a 2012 inspection found "no areas requiring repair or remediation." Welch said regulations call for the pipelines to be inspected every seven years.
Pennsylvania gas blast reverbs in Massachusetts | Boston Herald: A massive natural gas explosion that rocked western Pennsylvania and left one person badly burned is being pointed to by elected officials and local advocates as evidence of the potential danger of a planned pipeline by the same company in West Roxbury. “The risk here is obvious,” U.S. Rep. Stephen F. Lynch (D-South Boston) said. “I see disaster on the horizon.” The West Roxbury Lateral Pipeline is an offshoot of a larger project by Spectra Energy Corp., a Texas natural gas company, and will wind through Dedham, and West Roxbury, among other towns. An explosion and fire on Spectra’s Texas Eastern pipeline in Pennsylvania Friday disrupted service and left one person with severe burns. “It could happen to us, and the damage, destruction and loss of life could be even more here, because we’re more densely populated,” said Paul Horn, of the Committee to Stop the West Roxbury Pipeline. “We all need to be concerned about this. Lynch and critics of the pipeline have balked at a high-pressure natural gas pipeline running through the narrow residential streets in West Roxbury, as well as its proximity to an active quarry that routinely uses explosives. A metering station is planned across the street from the quarry, while a compression station similar to the one that blew in Pennsylvania is planned for Weymouth. “Common sense and an overriding sense of responsibility for the safety of the public would definitely require us to stop this pipeline,” Lynch said. “You would hope common sense would prevail, but I’m still waiting.”
Corrosion found on Texas Eastern pipeline that exploded Friday: The Texas Eastern pipeline explosion that injured one man, damaged several homes and disrupted natural gas flows to the northeast on Friday involved a pipeline that federal investigators said had corroded in at least two places. The U.S Department of Transportation’s Pipeline and Hazardous Materials Safety Administration cautioned that “the cause of failure is unknown at this time, and the investigation is ongoing,” in a document on Wednesday. A preliminary investigation, however, revealed corrosion along two welds. One was located right where the pipeline ruptured and another was in a section of the pipe excavated after the accident. “The pattern of corrosion indicates a possible flaw in the coating material applied to girth weld joints following construction welding procedures in the field at that time,” the agency wrote. Experts warn that a preliminary finding is often amended or reversed entirely during the cause of an investigation, which could span months or even years. Spectra Energy, which operates the 30-inch diameter pipeline that burst and three others alongside it as part of the Texas Eastern system that stretches some 9,000 miles from the Gulf Coast to New York, has not resumed service at its Delmont Compressor station yet. The compressor was processing some 1.3 billion cubic feet of gas a day before the accident, which is about 7 percent of all the gas produced in the Marcellus Shale daily.
Possibly flawed welds cited in Pennsylvania pipeline blast - Investigators say they’ve found evidence of corrosion on a natural gas pipeline that exploded in western Pennsylvania last week, damaging homes and burning a resident. The federal Pipeline and Hazardous Materials Safety Administration says the cause of the blast remains unknown, but the corrosion indicates a “possible flaw” in the coating material applied to welded joints. The federal agency said Wednesday it has ordered Houston-based Spectra Energy Corp. to take a series of corrective actions. The damaged pipeline and three nearby pipelines are out of service while the probe continues. Three homes were damaged and one was destroyed in the blast. The injured man suffered third-degree burns over 75 percent of his body.
Feds approve plan to build gas pipeline for power plant (AP) — Federal officials have signed off on a plan to build a 34-mile pipeline through five central Pennsylvania counties that will carry natural gas to a power plant being built along the Susquehanna River. Federal energy regulators approved the Sunbury Pipeline Project on Friday. The pipeline would service the power plant being built in Shamokin Dam, about 40 miles north of Harrisburg, and will travel through Lycoming, Montour, Northumberland, Union and Snyder counties. UGI Energy Services Inc. spokesman Kenneth Robinson says they are pleased with the approval. Construction should begin after state environmental regulators issue the necessary permits. The utility says they plan to complete the pipeline in November and have gas available early next year. The more than 1,100-megawatt power plant is scheduled to be completed in early 2018.
Is Fracking For Gas As Dirty As Coal? - Even though coal is much cleaner than ever before, State energy portfolios are eliminating coal, and increasing natural gas, as fast as possible. According to Stephen Moore at The Washington Times, U.S. coal plants have reduced their emissions significantly in the past several decades.” But the shift away from coal is accelerating because of regulations discouraging companies from building new coal-fired plants, and State energy portfolios that dictate an increasing amount of power coming from renewables. Besides China’s new decreasing hunger for coal, another problem with selling coal to China is that no one in America wants that coal going through their backyards, especially along the best routes in the Pacific Northwest. As an example, a proposed coal-export terminal along the Columbia River in southwest Washington State has had nothing but problems getting permitted. According to an environmental impact report released last week by Washington Department of Ecology and Cowlitz County (the host county), the proposed terminal could have “unavoidable, significant impacts on greenhouse gases emissions, vessel traffic and rail safety.” Other concerns include increased water traffic, as 840 ships a year would be added, and a potential for train accidents along rail routes in Cowlitz County and other parts of Washington from the dramatically increased rail traffic that would occur. Opposition also came from unexpected sectors. Steve Charter, a Montana rancher, stated that the Washington coal port is also bad news for his own state of Montana, saying that rail towns would have to deal with traffic delays, diesel exhaust and other consequences.
Map: Here's Where America Gets Much Of Its Natural Gas - The Utica shale play, which spans 60,000 square miles across Ohio, West Virginia, Pennsylvania and New York, will provide America most of its new natural gas, according to a new map published Monday by the U.S. Energy Information Administration (EIA). Production of oil and natural gas from the Utica play has increased since 2011, and companies have drilled more than 1,700 wells as of January 2016, according to the EIA map. The Utica is the center of America’s natural gas boom enabled by hydraulic fracturing, or fracking. America produced 79 billion cubic feet of natural gas each day in 2015, breaking the previous record by 5 percent, according to an EIA report from earlier this month. Much of the natural gas boom has been concentrated around the Utica shale. Together, the states around the Utica accounted for 35 percent of total American natural gas production while the rest of the country saw a modest decline. Ohio alone saw its natural gas production grew 41 percent faster last year than it did in 2014. The development of the Utica shale for natural gas helped America surpass Russia early last year as as the world’s largest and fastest-growing producer natural gas. Today, America’s proven recoverable natural gas reserves are seven times larger than they were in 2014. Rising U.S. natural gas production has made gas the fuel of choice for America’s power plants, which were transitioning to natural gas before 2015. Natural gas provided more electricity than coal for every month between July and October of last year, according to data released in December by EIA.
Natural gas net imports in 2015 at lowest level since 1986 - Today in Energy - U.S. EIA -- U.S natural gas net imports fell to 2.6 billion cubic feet per day (Bcf/d) in 2015, continuing a decline that began in 2007, when net imports of natural gas exceeded 10 Bcf/d. While both U.S. natural gas consumption and production have increased in recent years, natural gas production has grown slightly faster, resulting in a decline in net imports. Increasing domestic production of natural gas has reduced U.S. reliance on imported natural gas and kept U.S. natural gas prices relatively low. Most U.S. imports of natural gas come by pipeline from Canada. A small and declining amount of imported liquefied natural gas (LNG) comes mainly from Trinidad. Most U.S. exports of natural gas are sent by pipeline to Mexico and Canada. The United States also exported LNG and compressed natural gas to several countries, but these volumes were relatively minimal in 2015. EIA's Short-Term Energy Outlook expects that the United States will become a net exporter of natural gas by mid-2017. In recent years, increasing production from shale plays in the United States has resulted in an increase in U.S. natural gas exports. Since 2012, the natural gas pipeline industry has added 3.4 Bcf/d and 0.2 Bcf/d of export capacity to Mexico and Canada, respectively. As a result, U.S. natural gas exports to Mexico grew from 1.3 Bcf/d in 2011 to 2.9 Bcf/d in 2015. U.S. natural gas net imports from Canada have remained relatively stable since 2011.
Analyzing US Natural Gas Consumption in 2016 - Market Realist: US natural gas consumption fell by 1.8% for the week ended April 27, 2016, compared with the previous week. In contrast, natural gas flows to the power plants increased by 0.9% for the same period. This is 5.3% higher than the same period in 2015. Natural gas deliveries to the industrial sector fell by 1.2% for the week ended April 27, 2016, compared with the previous week. Natural gas flows to residential and commercial segments also fell by 4.7% for the same period. Natural gas consumption dropped due to milder-than-normal weather. The EIA (U.S. Energy Information Administration) forecasts that US natural gas consumption could average 76.2 Bcf (billion cubic feet) per day and 77.4 Bcf per day in 2016 and 2017. Natural gas consumption is estimated to rise by 3.9% in the electric power sector in 2016. Then, it could fall by 1.3% in 2017 due to the increase in natural gas prices. . Natural gas consumption would also be driven by the rise in demand from the industrial sector in 2017. New projects coming online in the fertilizer and chemical sectors could also drive the demand. The EIA (U.S. Energy Information Administration) estimates that the US natural gas supply could exceed demand by 3.4 Bcf (billion cubic feet) per day in 2016. Then, it could further increase to 3.73 Bcf per day in 2017. Total US natural gas inventories are 48% higher than their five-year average. The widening supply and demand gap and high inventory could limit the upside potential for natural gas prices. The EIA forecasts that US natural gas prices could average $2.25 per MMBtu (British thermal units in millions) in 2016. Then, it could further increase to $3.11 per MMBtu in 2017. Moody’s Investor Service forecasts that gas prices could average $2.25 per MMBtu and $2.50 per MMBtu in 2016 and 2017. Raymond James, a financial services firm, forecasts that US natural gas prices could average around $2 per MMBtu in 2016.
Natural Gas Prices Rise - WSJ: Natural gas futures rose Tuesday as traders took profits after a sharp price slide Monday. Futures for June delivery settled up 4.4 cents, or 2.2%, to $2.086 a million British thermal units on the New York Mercantile Exchange. Prices dropped 6.2% Monday as weather forecasts indicated minimal need for gas-powered indoor heating in the next two weeks. The natural gas market is already oversupplied, with storage levels 48% above the five-year average for this time of year, due to robust production and sluggish heating demand. “Nat gas demand will be decreasing after Thursday to relatively light levels through next week,” said forecaster NatGasWeather.com in a note Tuesday. Still, many traders and analysts expect natural-gas prices to rise in the coming months as production falls to lower spending on new drilling and demand increases. “Bulls can continue to cite some recent production slippage that is finally seeing translation from the plunge in the rig counts,” said energy-advisory firm Ritterbusch & Associates in a note. “On the other hand, bears can indicate a near record level of storage.” A pipeline explosion on Friday caused a temporary rise in prices, but natural-gas deliveries to power plants appear unaffected, said data provider Genscape Inc.
Natural Gas is Sexy Once Again from a Macro Fundamentals Standpoint (Video) -- The mild winter has Nat Gas stocks at record levels, but the last time this many natural gas rigs went offline in 2012, prices rebounded to the $5 level nicely on a long trending trade. Traders and Investors are trying to anticipate and evaluate the likelihood of this move in Natural Gas happening again.
If You Frack With My Horses, I Will Kill You -- It’s pretty much that simple. And any jury in Texas will acquit me on the grounds of justifiable homicide In fact, I would probably be named Horseman of the Year by the American Quarter Horse Association I can’t think of any more diplomatic or tactful way to put it. The algorithm is quite elementary: You frack with my horses + I kill you = You die. Doesn’t take Cornell grad to figure out. Even a Texas Aggie gets it, mathematically speaking. A number of foals born on the Sayre, Pennsylvania standardbred farm operated by Meadowlands owner Jeff Gural over the last three years have developed an affliction known as dysphagia, which prevents them from swallowing properly. The story was first reported by the Ithaca Journal. Gural said the farm’s water supply is behind the problem and that the water has a high concentration of manganese which may be the result of nearby fracking operations. Over three years, 17 foals born at Gural’s farm have developed the problem and last year 11 of 12 had the issue. Gural estimated his farm has produced 30 foals over the three-year period in question. No mares came down with the disorder. Each affected foal was sent to the Cornell University Equine Hospital, where they were successfully treated. Gural sells most of the horses he breeds at yearling sales and said that each one was 100 percent healthy and over the problem by the time they entered the sales ring. “Everyone wants to know if fracking is a factor and Cornell is doing a study,” Gural said. “I assume that at some point we will get to the bottom of this.” A previous study done by Cornell concluded that “dozens of cases of illness, death and reproductive issues in cows, horses, goats, llamas, chickens, dogs, cats, fish and other wildlife, and humans” could be “the result of exposure to gas drilling operations.”
The Shale Sector Just Got Two Critical Wins – In Two Different States | OilPrice.com: A lot of things are in flux right now for U.S. oil and gas producers, and that includes critical legal frameworks for unconventional development across the country. The regulatory landscape got notably better for E&Ps this past week, with not one but two critical decisions coming down in favour of producers, in two completely separate parts of America. Perhaps the biggest development came Tuesday in the state of Pennsylvania, where the state legislature moved to strike down a controversial set of new rules that would have made surface use for oil and gas drilling more difficult. A group of lawmakers forming Pennsylvania’s House Environmental Resources & Energy Committee voted 19 to 8 to strike down the tougher drilling laws — which had been introduced in April by the state’s Independent Regulatory Review Commission. The move was seen as a big positive for unconventional development in key plays like the Marcellus shale. With the proposed rules mandating more expensive storage solutions for drill fluids — and requiring E&Ps to assess potential impacts on a slate of “public resources” before drilling. And that wasn’t the only bright spot for drillers. With a key court decision Monday coming down in favour of E&Ps — all the way across the country in Colorado. That came from the Colorado Supreme Court, which ruled that the fracking bans implemented by two Colorado cities are illegal because they conflict with state law. Judges in the high-profile case decided that state-level regulatory body Colorado Oil and Gas Conservation Commission has the mandate to promote “efficient and responsible development of oil and gas resources.” With the court saying that municipal bans impeded this function for state regulators.
New England gas pipelines update -- More than 3,000 MW of new, natural gas-fired generating capacity is either under construction in New England or will be soon, but some of the gas pipeline projects that would ease long-standing constraints into and through the six-state region have hit rough patches. Kinder Morgan in mid-April suspended plans for its Northeast Energy Direct project, a “greenfield” pipeline across Massachusetts and southern New Hampshire, and a few days later the state of New York denied the co-developers of the already-delayed Constitution Pipeline—a key link between the Marcellus and New England--a needed water quality permit. The fates of some other major projects in the Northeast are uncertain too. Today, we provide an update on pipelines in the land of Yankees and Red Sox. We’ve written often about gas pipeline constraints to and through New England, a region with less than one-third the area of Texas but nearly 15 million people, the vast majority of whom believe that Fenway Park is heaven on earth. As we said in our Drill Down reports on the subject (Please Come to Boston and 50 Ways to Leave the Marcellus), New England has been adding a lot of new gas-fired generating capacity, but only modest enhancements have been made to the gas pipeline network that serves the region. And, as we blogged about in Polar Vortex Workaround, in the unusually cold winter of 2013-14, the lack of sufficient pipeline capacity to meet demand during periods of very high demand sent natural gas prices soaring as local distribution companies (LDCs) with firm transportation contracts took most of the gas and owners of many gas-fired power plants either scrambled for deliverable, high-priced gas or switched to firing their units with fuel oil.
Residents to weigh in on new Atlantic Coast Pipeline path (AP) — Residents in three western Virginia counties will have a chance to weigh in a proposed new path of the Atlantic Coast Pipeline. The Richmond Times-Dispatch reports that the Federal Energy Regulatory Commission said this week that it will collect comments from the public and agencies on changes to the $5 billion natural gas pipeline proposal. The companies behind the project revised the route in February to avoid sensitive animal habitat in national forests in Virginia and West Virginia. The new route would affect about 249 additional landowners in Highland, August and Bath counties and parts of West Virginia. Federal officials will take public comment on the proposal during hearings in Marlinton, West Virginia, on May 20 and Hot Springs, Virginia, on May 21.
US shale firm's bankruptcy exit shows new chapter just as tough - Reuters - Magnum Hunter Resources Corp and its founder Gary Evans are emblematic for the U.S. shale revolution: it started small, borrowed heavily to snap up land and rivals and then crumbled under the weight of debt when prices crashed. Now, the oil and gas company is among the first casualties of the energy slump to exit bankruptcy and Evans has a message for its peers: even once you are debt-free you cannot take survival for granted if energy prices do not recover soon. With little chance of seeing hundreds of millions of dollars in debt repaid, creditors agreed to convert all of it into shares in a revamped Magnum Hunter. Bankruptcy lawyers say that by eliminating its entire $1 billion debt load, cutting costs by renegotiating contracts with suppliers and moving quickly, Magnum Hunter has already provided a template for other cash-strapped drillers. Now Evans and the new board face a fateful decision. One option is to hunker down and minimize spending and borrowing while waiting for markets to eventually recover. Another is to ramp up drilling to get the company growing again, widening losses until oil and gas prices rise. Evans told Reuters in an interview that even debt-free Magnum Hunter, primarily a gas producer, would need gas prices to rise to $2.50 - $3.00 per million cubic feet equivalent from about $2 now to get the 15 percent return on new wells it normally uses as a target when making spending decisions. Magnum’s new owners appear set to opt for the low-risk, low-cost scenario - the company has told the court it expects to keep posting net losses through 2018 and its oil and gas reserves to shrink about 11 percent over that period.
Bank's Oil Exit Creates New Questions for Energy Lenders | American Banker: Green Bancorp's surprise exit from energy lending has left others in the industry scrambling to make sense of what it means for them. The Houston company said late Thursday that it will purge $277 million of energy loans and other classified assets by the end of this year. The recent downturn in oil — and a dismal outlook for its recovery — was a drag on performance and a distraction for management's dealings with investors. The move makes Green the first Gulf Coast lender to call it quits on the struggling energy sector. Bad loans have taken large bites out of several banks' profits as oil firms struggle to stay afloat. Green's exit creates more uncertainty at a time when most energy lenders have been reassuring investors that they have a handle on oil-related risks. "I think it is a little wait-and-see in terms of what it means for other banks," said Emlen Harmon, an analyst at Jefferies. For others, Green's situation is unique. In the lead-up to the announcement, the $3.7 billion-asset company's stock — for a host of reasons — had been trading at a significant discount to banks of similar size along the Gulf Coast. Exiting the oil business will help Green clean up its books — and potentially return to making acquisitions, some industry observers said. At the same time, Green would be a much easier bank to acquire if it went ahead and did the hard work of purging its balance sheet of questionable energy credits.
Texas’s Toxic Rivers: Fracking Chemicals Seep Into Waterways After Floods - - The floods Texas has experienced recently have inundated oil wells and fracking sites resulting in the flushing of oil and fracking chemicals into local rivers. Emergency management officials in Texas have mobilized the Civil Air Patrol to photograph possible oil spills and leaks around the flood regions where a catastrophe could be in the making. Many environmentalists and residents have expressed concern that recent floods have deluged fracking sites, spreading oil and the chemicals used to turn shale into oil and is now depositing them into waterways and even possibly drinking water. Texas is the home to America’s petroleum industry where companies engage in shale fracturing — more commonly referred to as “fracking” — seen by many ecologists as destructive to the environment, mostly for the industry’s use of harsh chemicals. Photos show oil-sheen as well as plumes flowing from tipped tanks and fracking sites that were inundated with rainwater during March’s flooding of the Sabine River. “That’s a potential disaster,” Dr. Walter Tsou, a former president of the American Public Health Association, told the El Paso Times. “Cattle that drank the fracking fluid actually died an hour after drinking it. There are potential carcinogens that can lead to leukemia, brain cancer and other endocrine disruptors that can affect premature births.” Critics are additionally concerned that the state’s commission will continue to fail to hold oil and gas companies responsible for such incidents given that commissioners receive more than half of their campaign contributions from that industry.
Fracking & Flooding Don’t Mix in Texas — Scores of photographs taken by state emergency-management officials show that when floodwaters rise in Texas, they inundate oil wells and fracking sites, sweeping crude and noxious chemicals into rivers throughout the Lone Star State. Most recently, rainbow sheens and caramel plumes can be seen radiating from tipped tanks and flooded production pads during the March flood of the Sabine River, which forms much of the state’s boundary with Louisiana. Similar scenes are visible in photos from last year’s floods of the Trinity, Red, and Colorado rivers. But despite apparent evidence that spills have been routine in recent floods, Texas’ regulator, the Railroad Commission of Texas, contends that it has responded effectively. Scientists and environmental groups aren’t as confident. “In other areas, cattle that drank the fracking fluid actually died an hour after drinking it. There are potential carcinogens that can lead to leukemia, brain cancer and other endocrine disruptors that can affect premature births.” They worry that as floodwaters rage, harmful substances are swept downstream into the environment — and, possibly, drinking-water supplies — before Railroad Commission inspectors can reach the site of the spills. “They’re looking after the fact at what might have happened,” said Ken Kramer, water resources chairman of the Lone Star Chapter of the Sierra Club. “Because of that, it’s pretty hard to figure out exactly what happened.” It’s hard to draw definite conclusions simply by looking at photographs, but after reviewing a few, one expert said the spills could be deadly.
Fracking foes won't let go in Denton - Watchdog.org: The moment of reckoning has come at different times for the people of Denton, Texas, as they wait in fear for the outcome of an election May 7. For the resident and outside zealots who saw their hopes of a ban on hydraulic fracturing smashed by the Texas Legislature, the reckoning came with a repeal by the City Council of its fracking ban ordinance a month later. For council member Kevin Roden it came with the furious reaction from those same zealots to the zealots to the Renewable Denton Plan, a plan that would have placed Denton in the forefront of American cities turning hard toward renewable energy. For Joey Hawkins, a popular council member who voted against the original fracking ban and for its repeal, it was his recall — driven by those same activists — that voters will decide on election day. And for Pete Kamp and the other community leaders who formed Citizens For Local Governance, the reckoning has come in the realization their effort to deal with what was once a local zoning matter has been hijacked by national and international groups whose underlying message is anarchy. Kamp, who opposes fracking, has nonetheless been working furiously to encourage voters to reject Hawkins’ recall and to vote for at-large incumbents Greg Johnson and Dalton Gregory, who are facing challengers spurred on by the activists.
Fracking: environmental groups sue EPA in call for strict rules on waste -- Frack waste has triggered earthquakes from Ohio to Oklahoma, and fouled rivers in Pennsylvania to North Dakota – and now the Obama administration is being sued by environmental groups to crack down on the industry. A coalition of environmental groups sued the Environmental Protection Agency on Wednesday to demand a strong uniform standard for the transportation, storage and disposal of frack waste. Since 1998, when the modern era of fracking began in Texas, the industry has generated hundreds of billions of gallons of frack waste – packed with toxic chemicals such as benzene and naturally occurring substances underground such as radium and arsenic – and there are almost no rules governing the process, environmental groups said. “Updated rules for oil and gas wastes are almost 30 years overdue,” said Adam Kron, senior attorney at the Environmental Integrity Project. With the lawsuit, environmental groups hope to push the EPA to adopt strict national standards for frack water storage and disposal – starting with firm limits on wastewater injection wells. US Geological Survey scientists and independent researchers have found a sharp rise in seismic activity in states such as Oklahoma, Kansas and Texas and connected those tremors to high volumes of frack waste in disposal wells. A single well near Youngstown, Ohio, was linked to 77 earthquakes. Arkansas, Colorado and New Mexico have also experienced a spike in earthquakes, because of high-volume wastewater injection wells. “If the injection of vast gallons of this waste is leading to increased danger of earthquakes, that is certainly reasonable for the EPA to step in and try and do something about it,” Kron said.
EPA failing to regulate disposal of toxic gas and oil production waste, according to lawsuit -- Environmental groups are suing the EPA over what they say is a 28-year-old broken promise to craft new rules for managing oil and gas production waste. The lawsuit – filed Wednesday in federal court in Washington, D.C. – seeks to force the Environmental Protection Agency to update rules for disposal of waste generated by the oil and gas production industry. Plaintiffs said the current rules are minimal and inadequate, and regulation now is largely left up to the states. The EPA agreed in 1988 that the rules needed to be changed but no action has been taken since then, according to the plaintiffs. Adam Kron, senior attorney for the Environmental Integrity Project, said this has “real-world impacts” since the waste can harm people’s health, contaminate drinking water and cause earthquakes. The plaintiffs said the waste can contain radioactive material as well as benzene, mercury and other toxins. “The rules governing the disposal and handling of this waste are the same rules that apply to all nonhazardous waste, even household trash, despite that fact that oil and gas waste can be toxic and much more dangerous,” said Amy Mall, a senior policy analyst for the Natural Resources Defense Council. “It’s outrageous that current rules haven’t been updated since 1981, even though the industry and its waste have grown exponentially.” The lawsuit targets both waste water and solid waste created by gas and oil drilling and the fracking process. The wastewater injection wells have been blamed for the sudden appearance of earthquakes in this region and others.
Lawsuit seeks stronger regulation by EPA on how drillers handle, dispose of fracking waste: Seven environmental and community organizations are suing the U.S. Environmental Protection Agency in federal court to compel the agency to tighten controls on the handling and disposal of oil and shale gas drilling and fracking waste. The lawsuit, filed Wednesday in U.S. District Court for the District of Columbia, asks the court to set strict deadlines for the EPA to adopt updated oil and gas waste disposal rules that it says are almost 30 years overdue. ”Each well now generates millions of gallons of wastewater and hundreds of tons of solid wastes, and yet EPA’s inaction has kept the most basic, inadequate rules in place,” said Adam Kron, senior attorney at the Environmental Integrity Project. “The public deserves better than this.” According to the lawsuit, the regulatory refreshening is required by the U.S. Resource Conservation and Recovery Act, the federal law that governs waste disposal. The law mandates that the EPA to review and revise the regulations every three years if it determines such actions are necessary. The groups note that the EPA in 1988 determined that such regulatory revisions were necessary to address specific shortcomings, but never followed through with the changes.. “The agency has had a continuing duty to make the revisions it determined were necessary but has done nothing,” Mr. Kron said. He said the EPA has not responded to the notice of intent to sue filed by the environmental groups in August 2015.
Lawsuit: EPA needs new rules to address manmade earthquakes (AP) — A coalition of environmental groups is suing federal environmental regulators over their alleged failure to stop oil and gas companies from disposing of drilling waste in ways that can threaten drinking water supplies and trigger manmade earthquakes. The lawsuit filed Wednesday in Washington urges the Environmental Protection Agency to issue new rules covering the disposal of contaminated wastewater created by hydraulic fracturing operations and then pumped back underground. The lawsuit filed by the Environmental Integrity Project, the Natural Resources Defense Council and other groups cites the sharp increase of earthquakes in states where oil and gas drilling has boomed in recent years, including Oklahoma, Ohio and Texas. EPA spokeswoman Laura Allen declined to comment on the pending litigation. Individual states often take the lead in regulating oil and gas operations.
Geophysicist: Humans cause quakes, but fracking not main culprit - Geophysicist Dr. Justin L. Rubinstein answered the big question about earthquakes in Kansas and Oklahoma right in the title of his free lecture Saturday at the Cosmosphere: “Yes. Humans Really Are Causing Earthquakes.” The subtitle complicated things, though: “But not in the way you think.” Rubinstein said human-induced earthquakes have been known for more than a century, dating back to 1894 in Johannesburg, South Africa, where gold mines caused earthquakes.. Oil and natural gas production has been documented to cause earthquakes in several ways, he said. The extraction of oil and gas can cause earthquakes directly, but that is a minor factor in causing earthquakes. Hydraulic fracturing, often called fracking, also can cause earthquakes, but is much less of a factor than wastewater injection wells, Rubinstein said. That is because fracking involves much smaller amounts of fluids and over brief periods of time compared to wastewater disposal.. Contrary to popular belief, most of what is injected in wastewater wells isn’t chemicals used in fracking. It is mostly saltwater that comes out of wells along with the desired oil and gas. The saltwater is the remnant of ancient oceans trapped below ground. In this area of the country, the product of an oil well might be 20 parts saltwater to one part oil. Earthquakes seem most likely to occur when wastewater can find its way to a fault in the earth, where fluid pressure can reduce friction. “You could imagine it as more or less lubricating the fault,” he said.
Colorado Court Strikes Down Local Bans on Fracking - Colorado’s Supreme Court on Monday struck down local government prohibitions on hydraulic fracturing, or fracking, handing oil and gas companies a victory in a lengthy battle over energy production in the environmentally conscious state.In separate rulings, the court said a moratorium in Fort Collins and a ban in Longmont were invalid because state law pre-empted them. A lower court had reached the same conclusion earlier.Two other cities and Boulder County have prohibitions on fracking that presumably are affected by the decisions. With oil and gas exploration in a slump nationwide, the short-term effect of the rulings in Colorado will be small, industry officials said.But when the slump ends, activity in urban areas across the Front Range — the eastern foothills of the Rocky Mountains and Colorado’s most populous region, where oil and gas production is concentrated — could be significant.The land opened to exploration by Monday’s rulings is comparatively small. More significant, said experts on both sides of the conflict, is that the rulings shut down future efforts to stop fracking in local jurisdictions.
Colorado Supreme Court voids two city voter-approved fracking bans | Reuters: Colorado's Supreme Court on Monday struck down voter-approved bans on fracking and the storage of fracking waste within the cities of Fort Collins and Longmont, ruling they conflicted with state law. Voters in Longmont approved a ban in 2012, while voters about 30 miles north in Fort Collins approved a five-year moratorium in November 2013, drawing legal challenges from the Colorado Oil and Gas Association, an industry trade group. Lower courts subsequently sided with the association, invalidating the Fort Collins moratorium and the Longmont ban. The Colorado Supreme Court affirmed the rulings in separate decisions. Justice Richard Gabriel said the Longmont ban could result in uneven and potentially wasteful oil and gas production and affect the rights of the owners of those interests. The decisions in Colorado are the latest rulings on attempts to curb the hotly contested oil and gas extraction process known as fracking through popular votes. In Denton, Texas, for example, voters approved a hydraulic fracturing ban in 2014 that prompted lawsuits by a Texas industry trade group and bills in the Texas legislature that eventually led to a state law that prohibited cities from interfering. The Colorado Supreme Court found the Longmont ban and Fort Collins moratorium operationally conflict with the application of the state's Oil and Gas Conservation Act. If left in place, the Longmont ban "could ultimately lead to a patchwork of regulation that would inhibit the efficient development of oil and gas resources,"
Longmont fracking ban struck down, what now? - Boulder Weekly: The further I delved into the Colorado Supreme Court’s decisions to overturn Longmont’s ban on fracking and Fort Collins’ five-year, voter-sanctioned moratorium on the same practice, the more disturbed I became. The decisions, which were predictably announced by recent Hickenlooper appointee to the Supreme Court Judge Richard Gabriel, didn’t just say that the ban and moratorium were in conflict with state law as has been widely reported in the media. Oh no, they went much further than that. Upon closer inspection, I found these rulings read more like a climate change-denier’s manifesto than the narrow opinion on preemption that they claim to be. According to the Court, it had to determine if oil and gas extraction was to be governed by state, local, or a mix of state and local regulations. In order to do this, the Court asked and then answered several questions beginning with, “Is there a need for statewide uniformity” when it comes to oil and gas extraction? The Court concluded that while “uniformity in itself is no virtue, it is necessary ‘when it achieves and maintains specific state goals.’”The Court determined that the “state’s goals,” based on existing law, include preventing anything, when it comes to drilling methods, spacing and well patterns, that could cause “less than optimal recovery and a corresponding waste of oil and gas.” The court then determined that Longmont’s “ban on drilling within the city limits could result in uneven and potentially wasteful production of oil and gas… ” I should point out that Longmont never actually banned drilling in its city limits, just fracking, but that’s just one of the giant details lost at times on a Supreme Court that appears to have been trained at the Hickenlooper School of Critical Thinking. So in the end, the Court determined that the “state’s goals” are to optimize oil and gas recovery and prevent waste, and that the Longmont ban fails to maximize recovery and causes waste so it is clearly in conflict with the state’s goals and state rules and regulations designed to support the state’s goals. Therefore, the ban is illegal and no longer in force and effect. Case closed.
Colorado’s battle over regulating fracking shifts to ballot — Colorado’s battle over who should regulate fracking — and how much — now shifts to the November election after the state Supreme Court overturned attempts by local governments to impose their own rules. The court ruled Monday that a ban on fracking in Longmont and a five-year moratorium in Fort Collins are invalid because they conflict with state law. State officials and the industry argued the state has the primary authority to regulate energy, not local governments. It wasn’t the end of the debate, however. Coloradans face a loud and fierce campaign over fracking this fall if activists succeed in getting any constitutional amendments on the ballot to restrict oil and gas drilling or give local governments the authority to do so. “We’re taking them as a serious threat to responsible oil and gas development in the state of Colorado,” said Karen Crummy, a spokeswoman for an industry-backed group called Protecting Colorado’s Environment, Economy and Energy Independence. “We consider all of these measures to be a ban on fracking,” Crummy said. “We’re going to fight.” Backers of the proposed constitutional amendments also vow a fight, saying Monday’s ruling injects a sense of urgency into their cause. “It can only help us because it shows that communities don’t have many rights right now when industry wants to drill,”
This year’s anti-fracking measures are more extreme than ever: Two years ago, the last time Colorado was threatened with anti-fracking measures on the statewide ballot, Gov. John Hickenlooper (D) called the initiatives “radical” and “extreme.” Today, you’d better grab a dictionary and thesaurus to find some new adjectives, because the measures headed for this November’s ballot are much, much worse.In early May, the spotlight was back on a new set of anti-fracking initiatives, after the Colorado Supreme Court reaffirmed that local oil and gas bans are illegal. Food & Water Watch – the national activist group that campaigned for those local bans – said the court decision shows “exactly why we need to pass … ballot measures this November.” So how do the new initiatives compare to the 2014 ballot measures, which Hickenlooper warned “would drive oil and gas out of Colorado” due to their severe impacts? On setbacks, the activists are now pushing to ban oil and gas development within 2,500 feet of any occupied building. For scale, imagine a circle with a radius of 2,500 feet. The area inside that circle is roughly 450 acres – five times the size of Mile High Stadium and its parking lot. That’s the size of the no-drilling zone that would be imposed around any occupied building, and it’s 56 percent larger than the 2014 measure called for. But there’s another catch, and it’s a big one. According to the setback measure, the no-drilling zone of 450 acres would apply to other places besides buildings, including parks, streams, irrigation canals, sports fields and other areas of “special concern.” Soon enough, finding places to drill new wells would become practically impossible – which is the goal of “ban fracking” groups like Food & Water Watch, of course.
Moratorium at gas-leak facility sent to California governor: (AP) — California lawmakers are sending Gov. Jerry Brown legislation to extend the closure of a gas storage facility after it spewed massive amounts of natural gas for nearly four months. The Senate approved the measure in a 36-0 vote on Monday. SB380 by Democratic Sen. Fran Pavley responds to the leak of climate-changing methane at the Aliso Canyon facility near Los Angeles. It extends Gov. Jerry Brown’s January moratorium on injecting natural gas into the Southern California Gas Co. underground site. It requires state regulators to complete a safety review and decide if one of the nation’s largest natural gas storage fields should be eliminated. Opponents fear that limiting the major natural gas supplier for Southern California could lead to power outages.
Fracking in Bakken Oilfield Largely Responsible for Global Rise in Ethane --The Bakken shale oilfield is single-handedly responsible for most of a mysterious global rise in atmospheric ethane—a pollutant that can harm human health and heat the atmosphere further—peer-reviewed research published last week reveals. The Bakken, which stretches from North Dakota and Montana into Canada, has made headlines over the past decade for its sudden drilling boom (and an equally sudden job market bust as oil prices have plunged over the past year). But while the drilling boom made North Dakota the nation’s second largest oil-producing state, the amount of hydrocarbons leaking and being deliberately vented from the oil field may have been enough to alter the composition of the Earth’s atmosphere slightly, reversing a long-running decline in ethane levels worldwide. The Bakken alone is responsible for roughly two percent of the ethane emitted into the atmosphere worldwide, the newly published paper concludes. Ethane is the second-most common hydrocarbon in the atmosphere and helps form ozone, a gas that at ground-level is usually called smog, the notorious haze that can cause people breathing problems and damage crops. Smog has long been associated with fracking due to emissions of other pollutants—volatile organic compounds or VOCs—part of the reason that remote areas of Utah have recently suffered from a suffocating blanket of smog at levels higher than those found on summer day in freeway-clogged Los Angeles. But the role of ethane in smog problems is far less widely discussed. Ethane also contributes to climate change in three ways: as a greenhouse gas itself (though it’s extremely short-lived in the atmosphere so these effects are relatively fleeting), by extending the lifespan of the powerful greenhouse gas methane (because it consumes compounds that help break methane down) and because it helps to form smog, which the researchers described as “the third-largest contributor to human-caused global warming after carbon dioxide and methane.”
Statoil ASA : to Resume Bakken Fracking Amid 10% Production Drop - Senior executives at Norway's Statoil ASA, the fifth largest Bakken Shale producer, on Thursday said the company's production has dropped about 10% in North Dakota, but it plans to reactivate some hydraulic fracturing (fracking) crews there. The offshore-focused company reported 1Q2016 adjusted earnings of $857 million (22 cents/share), compared to a $3.3 billion loss for the same period in 2015, but it does not break out results for specific Bakken or other U.S. onshore operations (Eagle Ford and Marcellus). In response to analysts' questions, CFO Hans Jakob Hegge gave the broad results and plans for the company's 355,000 net acres in the Bakken play. U.S. oil production comprises less than a third of Statoil's total equity production of more than 550,000 b/d as of mid-2015. Hegge said Statoil was down to one rig and no well completions during 1Q2016 in the Bakken. "Having said that, we are bringing in our frack crew to the Bakken area, so we expect the team to do some completions going forward," he said. Hegge also told analysts that the quarter-over-quarter declines in production are "not representative" of what you can expect going forward. "Going forward with increasing prices, you should expect a higher activity level [from us], including in the Bakken."
Whiting to restart wells at 90 days of $50/bl — Top Bakken producer Whiting Petroleum will start bringing wells online once oil prices touch $50/bl and stay there for at least 90 days. Bringing down its inventory of drilled but uncompleted wells (DUC) "would be one of the first things we would do at higher prices," chief executive Jim Volcker said in an earnings call today. "$50/bl is the price where we would move forward on that." The independent yesterday raised its output guidance on the back of an agreement it signed with an undisclosed private party to share drilling and completion costs. Volcker said there are more opportunities to sign similar joint venture agreements across its other acreage but a call on how to develop those resources will depend on where oil prices are. "We will evaluate as oil prices rise whether we want to drill those or whether we want to JV them," he said. Under the agreement signed on 14 April, the party will pay 65pc of drilling and completion costs for a 50pc working interest in 44 gross Williston basin wells in North Dakota.
Western North Dakota oil refinery hampered by oil slowdown (AP) — The owners of a new oil refinery in western North Dakota plan to operate it at only 75 percent capacity due to continued losses tied to the slumping oil industry. The Dakota Prairie Refinery at Dickinson lost $7.2 million in the first three months of the year, due in part to low demand for diesel fuel, according to North Dakota-based MDU Resources Group Inc. “We are disappointed with market conditions that continue to challenge our refinery investment,” MDU Resources President and CEO David Goodin said in the company’s first quarter earnings report. MDU Resources and Indianapolis-based Calumet Specialty Products Partners spent $430 million on the refinery. Construction began in March 2013, and the plant began selling fuel in May 2015. The refinery can process up to 20,000 barrels of western North Dakota oil each day into diesel fuel and other products. A barrel is 42 gallons. Officials had expected to run the plant at 90 percent capacity, or about 18,000 barrels per day, but it currently is processing only about 15,500 barrels per day, according to The Bismarck Tribune. MDU Resources said in its earnings report that the plant is “operating satisfactorily” but that officials are focusing “on operational improvements and cost-cutting measures” to improve profitability.
MDU cites continued losses with their new refinery in southwest North Dakota - MDU Resources Group Inc., will only run its Dakota Prairie Refinery in Dickinson at 75 percent capacity following continued losses of $7.2 million in the first quarter. MDU Resources CEO Dave Goodin said the company is assessing its options regarding its partial ownership in the refinery, which started operations a year ago. The company had expected run the plant at 90 percent capacity but with a low local demand for diesel and higher costs of production, the refinery is currently only processing 15,000 to 16,000 barrels of Bakken crude daily. The lowest the capacity can be sustainably reduced at the refinery is 14,000 to 15,000 barrels per day. MDU’s partner in the refinery, Calumet Specialty Products Partners, LP, also said in its quarterly earnings report that it may divest of some of its assets including Dakota Prairie. Despite the continued struggle of the refinery, other MDU Resources business sectors experienced growth in the first quarter and company earnings are on the rise.“The other businesses for the most part doing very well; I think that’s why shares are at their highest since last summer,” said Edward Jones analyst Brian Youngberg.He said many investors likely assume MDU will try to exit the refining industry. “The trick may be finding a buyer … especially when their partner is struggling even more,”
Significant contamination at 3,900 fracking spill sites in North Dakota alone -- There's no doubt that fracking has provided a boost to the North Dakota economy in recent years, but at what cost? New research from Duke University scientists has mapped 3,900 fracking spill sites in North Dakota, analyzing both water and soil around these locations and finding significant, persistent pollution levels that could have serious implications for human and environmental health alike. Researchers found high levels of ammonium, selenium, lead and other toxic contaminants as well as high salt levels and radium, a naturally occurring radioactive element. And the problem appears to be persistent—pollutant levels regularly exceeded federal safety limits for safe drinking water or aquatic health, and at one site at least, the researchers were still able to detect high levels of contaminants in spill water four years after the spill occurred. This problem is apparently exacerbated by the fact that, unlike oil, many of the inorganic chemicals found in the wastewater are resistant to biodegradation, creating a long-term legacy of contamination. Avner Vengosh, professor of geochemistry and water quality at Duke’s Nicholas School of the Environment, suggests these findings present a new picture of the potential downsides of fracking when wastewater is not safely managed: “Until now, research in many regions of the nation has shown that contamination from fracking has been fairly sporadic and inconsistent. In North Dakota, however, we find it is widespread and persistent, with clear evidence of direct water contamination from fracking. The magnitude of oil drilling in North Dakota is overwhelming. More than 9,700 wells have been drilled there in the past decade. This massive development has led to more than 3,900 brine spills, mostly coming from faulty pipes built to transport fracked wells’ flowback water from on-site holding containers to nearby injection wells where it will be disposed underground.”
It's About To Get Crazy Again - North Dakota Official Exalts Oil Boom "Is Coming Back With A Rush" - Great News!! As OilJobFinder.com reports, North Dakota's top oil regulator sent out a message the other day to the leaders of Williston: Get Ready. "This is going to come back pretty hard and pretty rapidly," Helms said told members of Williston’s Chamber of Commerce."And we'll be back running to stay ahead of it." You can smell the desperate hope in his rhetoric... It’s not a matter of if- it’s about to happen and there’s no stopping it. Oil prices are on the rebound finally. Oil reached its highest level it’s seen in the last 6 months just yesterday. It’s the light at the end of the tunnel we’ve all been waiting for. Get your resumes out, get your work gear out, things are about to get crazy again. With oil prices climbing higher and higher we are about to see the oil patch fire back up. Drilling crews are going to kick it into high gear. Many companies will be entering back into the Bakken looking to make up lost time. Thousands of workers will be needed in every part of the oilfield. OilJobFinder.com notes that according to Helms he’s projecting Williston will support 40,000 permanent oil jobs. This will put the towns population over 80,000. Right now estimates are Williston has about 30,000 residents. It’s time to make room for an in-flux of 50,000 workers. We are going to see Williston explode in population growth.
Next round of ND oil production figures ‘going to be bad,’ Helms says – Early March oil production numbers show that North Dakota will likely drop below 1.1 million barrels per day for the first time since June 2014, the state’s top oil regulator said. An official update will be released next week, but Director of Mineral Resources Lynn Helms told an oil industry group in Williston he expects to see a “severe” production drop. "It's going to be bad,” Helms told the Williston Basin chapter of the American Petroleum Institute Tuesday night. North Dakota saw a smaller than expected drop in oil production in February as more companies put fracking crews to work to complete wells and maintain cash flow. The state produced an average of 1,118,333 barrels of oil per day in February, a 0.4 percent drop from January, according to preliminary figures released in April. But March figures, scheduled to be released May 12, are reflecting the more significant production drop Helms had been anticipating.
Despite Shale Glut, U.S. Imports More Foreign Oil - WSJ: The U.S. is importing more foreign crude than it has in years, becoming one of the last ports of call for many oil-producing nations despite a glut of crude from domestic companies. Oil imports this year have surged 20% to about eight million barrels a day since early May 2015, when they approached a 20-year low, according to federal data. Crude from the Republic of Congo, Russia and Brazil is arriving at U.S. ports, while Canada is sending a record amount of oil to the U.S., the data show. A series of market disruptions in recent months is one reason for the sharp rise in imports, even though U.S. production is close to a three-decade high at nearly nine million barrels a day. These changes include Iran’s return to exporting crude after sanctions were lifted in January, a move that indirectly led to more U.S. imports even though Iran itself can’t sell to the U.S. Another big driver: The rest of the world is running out of places to store oil. Facilities from Rotterdam to Cape Town already are near capacity, but the U.S. still has room to spare, said Brian Busch, director of oil markets for Genscape, a data firm that tracks energy shipments. The U.S. has filled about two-thirds of its total storage capacity and has room for roughly 100 million barrels more, Mr. Busch said. By comparison, major storage hubs in China and South Africa appear full, and Europe’s main storage space centered in Rotterdam appears to be within 10% of its usable capacity, according to Mr. Busch.
Recent U.S. imports of oil tend to be heavier than domestic production - (EIA) In 2015, more than 70% of the crude oil produced in the Lower 48 states was light oil with an API gravity above 35 degrees. At the same time, 90% of imported crude oil was heavier, with a gravity below 35 degrees API. To accommodate increasing U.S. production of light crude oil, refineries have adjusted their imports by reducing imports of light crudes. The differences between domestic production and imports in this key oil characteristic could bring changes to petroleum refinery operations in the United States, as discussed in the EIA report, Implications of Increasing Light Tight Oil Production for U.S. Refining.Domestic crude oil production has grown rapidly in recent years, primarily because of light crude oil produced from low permeability (tight) formations. EIA's report on crude oil production and crude oil quality estimates that about 90% of the nearly 3.0 million barrel per day (b/d) growth in production from 2011 to 2014 consisted of light crude oil, with an API gravity of 40 or above. At the same time, light crude oil imports fell from 1.7 million b/d in 2011 to 0.7 million b/d in 2014, and medium crude oil (27° ≤ API < 35°) imports decreased from 3.3 million b/d to 2.5 million b/d. Imports of heavy crude oil (<27° API) have remained near 4.0 million b/d since 2010. U.S. refineries reflect a wide range of capacities, quality of crude oil inputs, utilization rates, and sources of crude oil supply. Most U.S. refineries are designed to run medium to heavy crude oil. However, technical options are available for shifts in input streams to process additional light crude oil.
Oil Price Upheaval Finally Hits Refiners - WSJ: U.S. refiners, which posted robust profits the last 18 months even as other parts of the oil business were racked by low crude prices, finally saw their roll come to a halt in the first quarter. Many refining businesses reported earnings for the period that were down roughly by half from a year earlier. That decline helped sour results for oil giants such as Exxon Mobil Corp., which has counted on refining to offset profit declines in energy production, and for Valero Energy, the world’s largest stand-alone refiner by output, which on Tuesday reported its lowest first-quarter profit in four years. “The first quarter presented us with challenging markets, with gasoline and diesel margins under pressure,” said Valero Chief Executive Joe Gorder. Two trends have helped upend the refining boom: U.S. crude is no longer trading at a steep discount compared with oil from other parts of the world. And American exports of gasoline and diesel are pushing into increasingly well-supplied foreign markets. For years, U.S. refiners benefited because a bounty of oil unlocked by shale exploration was essentially landlocked in the country due to a ban on most crude exports, creating a glut that pushed down prices compared with barrels in Africa and the Middle East. That allowed U.S. refiners to turn oil into gasoline, diesel and other products more cheaply than some competitors, and enhanced their ability to export the fuels to foreign markets. Now that U.S. oil production is falling and the country allows crude exports, that advantage has significantly diminished. Once as high as $25 a barrel in 2011, the difference between U.S. and international crude benchmark prices now sits at a little over $1 a barrel today.
Massive Fire Burns At Gateway Town To Alberta's Oilsands; 30,000 Evacuated -- Residents of neighborhoods in the Canadian boomtown of Fort McMurray - considered the gateway to Alberta's oil sands as the Athabasca oil sands are roughly centered around the town - are under mandatory evacuation as a massive wildfire has jumped across Highway 63 and entered the city limits. Homes have begun to burn in Fort McMurray as residents flee for safety from a blaze that’s doubled in size within a day. More than 30,000 people have now been ordered to evacuate Fort McMurray communities. The fire has already destroyed homes on the outskirts of the municipality. Bernie Schmitte, wildfire manager at Alberta Agriculture and Forestry said that the fire made a "major run" during the night and reached the Athabasca River. All Air Canada and WestJet flights to and from Fort McMurray have been cancelled “My whole life is burning away,” Jenn Tremblett, who has left for Edmonton, told Metronews. “My home is in Gregoire (Fort McMurray neighbourhood) so it may be gone soon. "My family is trying to get out of town.” Tremblett said the community of Beacon Hill is on fire, after a nearby Shell gas station blew up. Fire officials have extended the evacuation order to 10 communities in the city, including Beacon Hill, Abasand, Waterways, Draper, Saline Creek, Grayling Terrace, downtown, Thickwood, Wood Buffalo and Dickinsfield.
‘Apocalyptic’ Inferno Engulfs Canadian Tar Sands City - A raging wildfire in a Canadian tar sands town has forced tens of thousands of evacuations and destroyed several residential neighborhoods, offering a bleak vision of a fiery future if the fossil fuel era is not brought to an end. The blaze in Fort McMurray, Alberta, started over the weekend, doubled in size on Monday, and grew into an inferno on Tuesday. It is expected to worsen on Wednesday as strong wind gusts and record high temperatures persist. “It’s apocalyptic,” John O’Connor, a family physician who has treated patients with health problems in the region related to tar sands pollution, told the National Observer. “There was smoke everywhere and it was raining ash,” evacuee Shams Rehman said to the Globe and Mail after he and his family reached an evacuation center in the resort town of Lac La Biche, Alberta. “I’ve never seen anything like it.” Brian Jean, the leader of Alberta’s opposition party and a resident of the city, said much of downtown Fort McMurray was going up in flames: “My home of the last 10 years and the home I had for 15 years before that are both destroyed.” According to the Edmonton Journal: Officials estimate 17,000 citizens fled north to industry sites. Another 35,000 headed south, including 18,000 people enroute to Edmonton.Traffic was bumper-to-bumper as people packed families and pets into cars, trucks and campers. Line-ups snaked around gas stations and late in the evening, RCMP were advising they would travel the highway with gas to assist stranded motorists. Wednesday morning, the Alberta government took to social media to say that it would be escorting a fuel tanker along Highway 63 to help people who were still waiting for gas.
Wildfire Empties Fort McMurray in Alberta’s Oil Sands Region - NYTimes — The entire community of Fort McMurray, the heart of Alberta’s oil sands region, was ordered to evacuate on Tuesday night as a fast-spreading wildfire advanced on the city and cut off its only highway link to the south. The fire destroyed a number of homes in one neighborhood and some trailers in a trailer park, said Robin Smith, a spokesman for the Regional Municipality of Wood Buffalo, which includes Fort McMurray. According to television news reports, commercial buildings downtown were also ablaze. There were no reports of injuries by early evening. A video showed flames and smoke rising hundreds of feet into the sky, prompting the largest fire evacuation in Alberta’s history, The Edmonton Journal reported. The fire was expected to get worse on Wednesday, when winds were forecast to switch direction and increase in speed. Mr. Smith said early Tuesday that Highway 63, which connects Fort McMurray to Edmonton, Alberta, to the south and the main oil sands production areas to the north, was heavily congested with cars fleeing the fire, which began over the weekend. Late in the afternoon, however, the fire jumped over the highway, making evacuation to the south impossible, Mr. Smith said. He added that there was no immediate danger in areas north of Fort McMurray. The highway was later reopened. As of early Tuesday evening, the city’s airport was open, but some airlines were canceling flights, said Jillian Philipp, an airport spokeswoman. After leaving the airport earlier in the day, Ms. Philipp said she was unable to return because of the fire. But employees still there told her that it did not appear to be in the immediate path of the flames. The provincial government had ordered residents out of six neighborhoods and a trailer park by late in the afternoon after declaring the fire “out of control.”
Alberta wildfire: Emergency declared in Fort McMurray - BBC News: A state of emergency has been declared in the province of Alberta in Canada after a wildfire forced all 88,000 residents of Fort McMurray to flee. Officials say the fast-moving blaze could destroy much of the city. The fire, which broke out on Sunday in the heart on the country's oil sands region, has gutted 1,600 buildings, including a new school. The evacuation was the largest-ever in Alberta. Oil companies operating in the area have been forced to cut output. Several firms have shut down some pipelines. This was done to help evacuate non-essential personnel, reports say, but oil facilities are not in the current path of the fire. So far there have been no reports of deaths or injuries, but two women gave birth in one evacuation centre, Reuters news agency reported. What residents witnessed Resident Neil Scott told the BBC: "It was something you'd see in a movie probably. I was stuck between a concrete barrier and the fire and I thought 'You know what? I might not make it out'. "There's whole neighbourhoods that are gone. A hotel burned down, a gas station exploded. One lady that I met she actually was sheltered behind like an electrical box when it actually exploded and she felt a shockwave." "You could hear the pop, pop, pop because of the propane tanks," Doug Sulliman, a former professional ice hockey player, told Associated Press. "The fire was just consuming these houses. It just destroyed the whole community." The night sky above Fort McMurray is illuminated by a fierce orange glow as fires continue to burn to the north and to the south.
Residents evacuated as fires threaten Canadian oil sands town (AP) — A raging wildfire emptied Canada’s main oil sands city, destroying entire neighborhoods of Fort McMurray, Alberta, where officials warned Wednesday that all efforts to suppress the fire have failed. About 88,000 residents successfully evacuated as flames moved into the city surrounded by wilderness in the heart of Canada’s oil sands. No injuries have been reported. Alberta Premier Rachel Notley said all 105 patients at the local hospital had been safely airlifted to other care centers. She said, so far, the fire had destroyed or damaged an estimated 1,600 structures. Unseasonably hot temperatures combined with dry conditions have transformed the boreal forest in much of Alberta into a tinder box. Danielle Larivee, Alberta’s Minister of Municipal Affairs, said the province has declared a state of emergency and said the fire is actively burning in residential areas. Over 200 firefighters are battling the blaze. Fatalities have been reported from a collision on a nearby highway but she was unaware if it was related to the evacuation. More than 80,000 residents were ordered to flee as flames moved into the city, destroying whole neighborhoods.“This is a nasty, dirty fire. There are certainly areas of the city that have not been burned, but this fire will look for them and it will find them and it will want to take them,” Fort McMurray Fire Chief Darby Allen. Firefighters were working to protect critical infrastructure, including the only bridge across the Athabasca River and Highway 63, the only major route to the city in or out. All commercial flights in and out of Fort McMurray have been suspended. “It’s a possibility that we may lose a large portion of the town,”
Alberta wildfire evacuees moved a 2nd time as weather shifts: (AP) — A raging Alberta wildfire has moved south, forcing three more communities to evacuate and an emergency operations center to move again — taking it far from the devastated oil sands city of Fort McMurray. Officials with the Rural Municipality of Wood Buffalo had been notified of changing weather patterns and weren’t taking chances, ordering the evacuation of Anzac, Gregoire Lake Estates and Fort McMurray First Nation, an aboriginal reservation. The fire has already forced the evacuation of more than 80,000 people and torched 1,600 homes and other buildings in Fort McMurray. There was still no indication of injury or death from the fires. The province of Alberta declared a state of emergency. “Homes have been destroyed. Neighborhoods have gone up in flames. The footage we’ve seen of cars racing down highways while fire races on all sides is nothing short of terrifying,” Prime Minister Justin Trudeau said in Parliament on Thursday, calling it “the largest fire evacuation in Alberta’s history.” Trudeau called on all Canadians “to support our friends and neighbors at this difficult time,” saying the federal government will match individual charitable donations to the Red Cross.
Fort McMurray Wildfire in Alberta Grows, Firefighters Hope for Rain - NBC News: Gusting winds and "tinder-dry" conditions were feeding the beast of a blaze in western Canada early Friday, as officials warned it could be days or weeks before evacuated locals can return home. The fires in the province of Alberta forced 88,000 people to flee and destroyed more than 1,600 structures. Officials were waiting to see if it would be safe to get another convoy of evacuees out on Friday, according to local media.Around 328 square miles have been scorched. Alberta Premier Rachel Notley praised the "herculean" firefighter response but warned late Thursday that the inferno could spread due to "tinder dry" conditions. "They are very early days," she told a press conference. "There is much more to do and more help will be needed." Notley acknowledged the frustrations of evacuated locals desperate for answers but urged patience. "The damage to the community of Fort McMurray is extensive and the city is not safe for residents," Notley said. "It is simply not possible, nor is it responsible to speculate on a time when citizens will be able to return. We do know that it will not be a matter of days," she said. More than 1,110 firefighters, 145 helicopters and 22 air tankers are fighting the fires.
Canada wildfire: Blaze disrupts convoy near Fort McMurray - BBC News: The only land convoy evacuating people trapped by a wildfire in the Canadian province of Alberta has been suspended after 200ft (60m) flames flanked the road. The convoy was made up of hundreds of people who fled their homes in Fort McMurray for oil worker camps north of the city. The fire is expected to double in size in the coming 24 hours. The fire now covers an area larger than New York City, and more than 80,000 people have fled their homes. Tens of thousands of people have been evacuated by air with 300 flights to the provincial capital Edmonton since Tuesday, and another 4,000 are due to leave on Saturday. No deaths or injuries have been reported. The police-escorted road convoy of 1,500 vehicles was due to pass by the southern part of the city but was suspended on Friday afternoon until Saturday. Twenty minutes south of Fort McMurray, the road forks into two branches. By noon on Friday, both were ablaze on either side. We watched with the police as the skies filled with grey and black smoke and flames roared into the air, devouring even the tallest pine trees. The danger, said one officer, was "tentacles growing out of the fire", which could end up looping around and trapping people.
Halliburton and Baker Hughes scrap $28 billion merger | Reuters -- Oilfield services provider Halliburton Co and smaller rival Baker Hughes Inc announced the termination of their $28 billion merger deal on Sunday after opposition from U.S. and European antitrust regulators. The tie-up would have brought together the world's No. 2 and No. 3 oil services companies, raising concerns it would result in higher prices in the sector. It is the latest example of a large merger deal failing to make it to the finish line because of antitrust hurdles. "Challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action," said Dave Lesar, chief executive of Halliburton. The contract governing Halliburton's cash-and-stock acquisition of Baker Hughes, which was valued at $34.6 billion when it was announced in November 2014, and is now worth about $28 billion, expired on Saturday without an agreement by the companies to extend it, Reuters reported earlier on Sunday, citing a person familiar with the matter. Halliburton will pay Baker Hughes a $3.5 billion breakup fee by Wednesday as a result of the deal falling apart. The U.S. Justice Department filed a lawsuit last month to stop the merger, arguing it would leave only two dominant suppliers in 20 business lines in the global well drilling and oil construction services industry, with Schlumberger being the other.
Energy explorers Halliburton and Baker Hughes abandon merger (AP) — Two companies crucial to the business of U.S. energy exploration, Halliburton and Baker Hughes, have abandoned their planned merger in the face of opposition by regulators who said it would hurt competition. Prospects for the merger, which was valued at nearly $35 billion when it was announced in 2014, seemed especially bleak after the Justice Department sued to block the deal on April 6. The government claimed the merger would lead to higher prices by unlawfully eliminating significant competition in markets for almost two dozen services and products crucial to finding and producing oil and natural gas in the United States. “The companies’ decision to abandon this transaction — which would have left many oilfield service markets in the hands of a duopoly — is a victory for the U.S. economy and for all Americans,” Attorney General Loretta E. Lynch said in a statement on Sunday. The Justice Department said its opposition to the deal stemmed in part from fear among oil and gas companies that rely on Halliburton and Baker Hughes. “We heard extreme statements of concern from dozens of companies and over 100 individuals,” Mark Gelfand, deputy assistant attorney general in the Justice Department’s antitrust division, told reporters Monday. He declined to identify the companies and did not detail their concerns.
Energy producers weather historic oil market collapse: The oil market collapse has put more pressure on energy producers than ever before, causing an unprecedented financial crisis, according to industry officials. On average, an oil company earns only $26 for each barrel of oil sold at current oil prices, according to a report by the Houston Chronicle. In February, oil prices in the United States fell to a 13-year low of $26 per barrel. Drillers could not generate cash at those prices, but still had to pay off debts. Margins had never been slimmer, one industry specialist said Wednesday at the Offshore Technology Conference in Houston. “This is, in historical context, extraordinary,” a partner at Norway’s Rystad Energy, said. “When you compare this to history, it makes some of the setbacks that we’ve put behind us in 2009 and the early 2000s look like a walk in the park.” Businesses have cut more spending – hundreds of billions of dollars – than in any previous downturn. Oil field production around the world has declined 10-12 percent. Still, global oil production hasn’t fallen enough to alleviate the world’s oil glut. Although the industry has shelved or canceled oil projects worth billions of dollars, companies continue to pump oil from deepwater installations and other projects approved years earlier. For example, oil companies sanctioned projects with 18 billion barrels in reserves in 2013 alone. Those projects added 1.7 million barrels a day to the world’s oil production last year and will add another 1.7 million this year. From 2017 until 2020, the projects will add another 5.8 million.
Anadarko Petroleum reports 1Q loss — Anadarko Petroleum Corp. (APC) on Monday reported a loss of $1.03 billion in its first quarter. The company, based in The Woodlands, Texas, said it had a loss of $2.03 per share. Losses, adjusted for non-recurring costs and restructuring costs, came to $1.12 per share. The results beat Wall Street expectations. The average estimate of 11 analysts surveyed by Zacks Investment Research was for a loss of $1.19 per share. The oil company posted revenue of $1.67 billion in the period, falling short of Street forecasts. Three analysts surveyed by Zacks expected $1.78 billion. A year earlier, the company posted a loss of $3.27 billion, or $6.45 per share, on revenue of $2.32 billion. The adjusted loss in the 2015 quarter was 72 cents per share. In the final minutes of trading on Monday, shares hit $51.95, a drop of 45 percent in the last 12 months. In after-hours trading, the stock traded at $50.50, down 2.8 percent.
Shell’s Profits Plunge 83% | OilPrice.com: More earnings reports are trickling in. Royal Dutch Shell is the last oil major to report first quarter earnings, and like its peers, the Anglo-Dutch company saw its profits tumble. Shell’s current cost of supplies, likened to net profits, crashed by 83 percent from a year earlier, falling from $4.8 billion to just $0.8 billion. The results were the first since the company completed the $54 billion purchase of BG Group, and the combined company “is off to a strong start,” Shell’s CEO Ben van Beurden said. The good news for Shell is that the merger is moving quickly and the company is not seeing its cost structure rise. BG Group has also added quite a bit of production to the combined company’s output. Still, Shell is still spending too much money. Shareholders are pressing the company to reduce spending to $30 billion so as to ensure the longevity of the company’s dividend payout. Shell outlined $3 billion in spending cuts to bring 2016 spending down to $30 billion. "Can we go further? Yes, we can," Shell’s CFO Simon Henry, said to reporters following the release. Shell also wants to sell off $30 billion in assets by the end of 2018. But as The Wall Street Journal noted, Shell is still not covering its high levels of capex and its dividend with cash flows. In the first quarter, Shell generated $4.6 billion in cash flow, but spent $6.1 billion on capex. And that does not take into account money going out the door in the form of dividends. Excluding proceeds from asset disposals, Shell needs oil prices to trade somewhere around $70 per barrel in order to cover capex.
Devon Energy Reports $3.1B Loss, Increases Production Guidance - Devon Energy posted a $3.1 billion loss in the first quarter of the year, down $6.44 per share, but less than the $3.6 billion, or $8.88 a share in the first quarter of 2015. In explaining the loss, the company argued low oil prices. More precisely, Devon said it was presently selling a barrel of oil around the $20 mark, while a year ago, it was selling for about $56. Natural gas is going for $1.66 for 1,000 cubic feet, compared to $2.96 from a year ago. The company’s revenues for the same period dropped to $2.1 billion, down from almost $3.3 billion in the last year’s quarter. Devon said it had a core earnings loss of $249 million, or 53 cents a share. Amid a decline in revenues, Devon resorted to cutting expenses. Compared to a year ago, general and administrative costs were down by 23 percent, namely $194 million, with year-round savings estimated to reach $500 million. At the same time, operating costs were cut by 20 per cent compared to last year. The company on Tuesday raised production guidance for the second quarter and the full year. For the second quarter the company now projects oil production of 616,000 to 653,000 barrels a day. For the full year the estimates have risen to 611,000 to 648,000 barrels of oil equivalent production. Crude oil makes up about 40 percent of projected production.
Beleaguered Chesapeake to Sell Off More Assets to Reduce $9B Debt -- The second-largest producer of natural gas in the United States, Chesapeake Energy Corp., has announced plans to sell part of its Oklahoma shale acreage in order to prop up finances and reduce a massive debt load of around $9.4 billion. Chesapeake announced yesterday that it would sell around 42,000 acres in the Stack field in Oklahoma, which currently produces around 3,800 barrels of oil equivalent per day. The assets will go to Newfield Exploration Co. for an estimated price of $470 million. Furthermore, due to low oil and gas prices, the company will seek to sell additional assets that will bring between $500 million and $1 billion in its coffers by the end of the year."We anticipate subsequent divestitures during the second and third quarters," Chief Executive Doug Lawler said in a statement. Despite these difficulties, the company’s shares were up 12 percent at $6.31 in pre-market trading after the company reported a smaller quarterly loss and cut its production expense forecast for the year. They later traded at $5.97, up 5.7 percent. The loss narrowed to $964 million over the first three months of the year, down from $3.78 billion in the same period of last year. First quarter revenue also fell by 39 percent to $1.9 billion, whereas analysts’ expectations stood at $2.55 billion. Except for an $853 million impairment charge, the loss in the latest quarter was 10 cents per share, in line with analysts' average estimate.
Apache's Surprise Savings Signal US Drillers Not Done With Cuts (Reuters) - Apache Corp's cost savings in the first three months of 2016 exceeded its own expectations and are likely to continue even if oilfield services costs rise, executives of the Houston-based oil and gas producer said on Thursday. The cost cuts mean the company could achieve its goal of cash flow neutrality for 2016 with oil prices at $35 per barrel and natural gas prices at $2.35 per million British thermal units, Chief Executive John Christmann told investors on a conference call to discuss first quarter results. The surprise savings come despite concerns that U.S. shale companies might have hit a wall in cost or productivity improvements, and are the latest sign that cost reductions could allow U.S. shale producers to keep drilling and pumping even if prices fail to recover significantly from a nearly two-year rout. "Six quarters into the downturn, we are still achieving significant quarter on quarter cost improvements," Christmann said, noting that well cost reduction efforts "continued to exceed our expectations." He said these cost reductions "are more than belt-tightening efforts in response to the downturn."
EOG can post 'strong returns' at $40 oil, CEO says | Reuters: EOG Resources Inc has the ability to post strong returns with oil prices around $40 a barrel, and would post triple-digit returns should prices spike to $60, Chairman and Chief Executive Bill Thomas told investors on Friday. Houston-based EOG, considered one of the most efficient U.S. drillers, has a $15-$20 per barrel cost advantage over the rest of the industry, which needs a "sustained $60-$65 oil price and 12 months of lead time" to deliver modest growth, Thomas said on a call to discuss first quarter results. Thomas said the company was focusing on "premium drilling," which he defined as wells that can generate a return of at least 30 percent after taxes at $40 oil. The company also said its efforts at "enhanced oil recovery," or getting more output from existing wells with relatively low investments, had been successful, particularly in the Eagle Ford shale play in South Texas. "It will get more efficient as we move forward, and lower-cost," Thomas said. After falling 70 percent between mid-2014 and early 2016 amid a global glut, U.S. oil prices have recovered to trade above $45 per barrel on Friday, as a huge wildfire in Canada prompted substantial production cuts.[O/R]
Bankruptcies spread through oil patch, more than 175 companies are 'high risk' - The number of U.S. oil firms filing for bankruptcies is swiftly approaching levels last seen during the telecom bust. According to Reuters, 59 U.S. oil firms have filed for bankruptcy since prices began falling in 2014, just nine filings shy of the 68 bankruptcies filed during the telecom bust in 2002 and 2003. Oklahoma-based Midstates Petroleum and Houston-based Ultra Petroleum became the latest firms to file for bankruptcy protection earlier this week. A report published by Deloitte in February found that nearly 35 percent of pure-play E&Ps listed worldwide, or about 175 companies, are at a “high risk” for insolvency. Thirty-five U.S. E&P firms with a cumulative debt of under $18 billion filed for bankruptcy protection from July 2014 to December 2015, according to Deloitte. According to data collected by Dow Jones U.S. Oil and Gas Index and seen by Reuters, the valuation of U.S. energy companies has declined by as much as $1.02 trillion since oil prices began sliding in 2014. However, the wave of bankruptcies has not put a large dent in U.S. production as most companies continue to operate under Chapter 11 protection. Crude production dipped 3.4 percent year-over-year in April to 9.129 million barrels per day, according to the U.S. Energy Information Administration.
The Unloved Business That's Saved Big Oil From Low Energy Prices - For years, the business of turning gas and crude into the chemicals used to make everything from plastic bags to paint has been a mostly unloved corner of the world’s largest oil companies. Now, it’s shining, cushioning companies from Exxon Mobil Corp. to Royal Dutch Shell Plc from the worst energy price slump in a decade. “Chemicals are coming back on to the radar screen,” Simon Henry, chief financial officer at Shell, Europe’s largest oil company, said on Wednesday. In good times, when high oil and gas prices deliver billions of dollars in profits, the chemical business is largely a footnote in the profit and loss account. Today, with most major oil companies losing money in their production and exploration units, petrochemicals have become one of the biggest -- if not the biggest -- sources of income. The petrochemical business is getting a lift from the very same factor weighing down the production and exploration units: low oil and gas prices. Effectively, cheap energy translates into cheap raw materials and higher margins. “Petrochemical has been doing very well, actually,” Total SA CFO Patrick de la Chevardiere said last week. Take Exxon Mobil. In the first quarter, the chemicals business accounted for almost 75 percent of the $1.8 billion the company reported in profit. From January to March, it made $1.36 billion producing chemicals such as ethylene and propylene. During the same period it lost $76 million pumping oil and gas. Two years ago, when crude traded above $100 a barrel during the first quarter of 2014, the chemicals business accounted for less than 13 percent of Exxon’s income as the oil and gas business delivered $7.8 billion in profits.
The riskiest energy companies are defaulting at a record rate - Two companies have pushed the default rate on risky bonds in the energy sector to an all-time high. On Friday and Saturday, Ultra Petroleum and Midstates Petroleum respectively filed for bankruptcy protection. And according to Fitch Ratings, they pushed the energy high-yield default rate to 13%, topping the previous record of 9.7% set in 1999. Their filings added $3.1 billion to the high-yield energy bond default volume, according to Fitch. Defaults in the energy high-yield space have been triggered by the spectacular plunge in oil and gas prices that started in the middle of 2014. Although oil prices are rebounding, with oil up about 20% in April to be the best-performing asset, many companies are still cash-crunched. This means there may be more defaults to come. Fitch projects that the rate at which energy companies miss payments to their creditors will balloon to 20% by the end of the year. And, consulting firm Deloitte thinks that up to one-third of all oil producers could end up filing for bankruptcy by the end of the year if commodity prices don't rebound. Midstates Petroleum filed for bankruptcy after reaching an agreement with its lenders that involves converting a $2 billion conversion of debt to equity. Ultra Petroleum's filing for Chapter 11 bankruptcy Friday showed it had $3.92 billion in debt. The company's quarterly report, released on the same day, warned investors that it did not have enough liquidity to pay its debt and would likely seek court protection. Fitch noted that Ultra's $850 million 6.125% bonds due in 2024 are priced at just $0.15, showing "the market's expectation of below-average bond recoveries."
Hang On in There, Baby—Financial Struggles, Chapter 11, Asset Sales, Asset Purchases - On Friday of last week, two more large E&Ps filed for Chapter 11 – Ultra petroleum with $3.8 billion in unsecured debt and Midstates Petroleum filing with a $2 billion debt-for-equity swap deal. Over the past 18 months there have been 65 E&P bankruptcies – mostly small companies, but nine companies make up 75% of the $28 billion in total debt exposure of all of these firms. This chaos in the oil, gas, and NGL markets is having all kinds of financial and strategic ramifications. One of the consequences of all of the turmoil could be a wave of asset sales, demands for contract restructuring, and more bankruptcy proceedings. But there can be some real opportunities in all this chaos if you know what to look for, understand where the needs and pitfalls can lie, and especially to recognize that “the sun’ll come up tomorrow.” It’s no secret that the entire U.S. oil and gas producing industry is under a lot of financial pressure over the last couple of years. Many companies had negative cash flow and heavy leverage before prices for everything they produced crashed to historic lows. The high leverage and negative cash flow was enabling companies to put all the cash they could into the development of new oil, gas, and NGL supply. When you’re in that situation and you lose 60 percent or so of your revenue because of a price crash, that’s a pretty material event. Cost cutting in response to the crash, price hedges that delayed the impact, and simply stopping pretty much all of their drilling have combined to hold things together for most producers and midstream companies. Unfortunately, in some cases that has not been enough. There has been and continues to be a wave of asset divestitures and bankruptcies across the industry. As noted above, from January 2015 through today there have been 65 energy bankruptcies (mostly small producers), potentially defaulting on $28 billion in debt. But not all have been small companies. The lion’s share of total debt exposure, about 75% - has come from the bankruptcies of nine companies: Samson, Sabine, Milagro, Quicksilver, Magnum Hunter, Venoco, Energy XXI, Ultra and Midstates.
Debt: The Key Factor Connecting Energy and the Economy – Gail Tverberg - There are many who believe that the use of energy is critical to the growth of the economy. In fact, I am among these people. The thing that is not as apparent is that growth in energy consumption is dependent on the growth of debt. Both energy and debt have characteristics that are close to “magic” with respect to the growth of the economy. Economic growth can only take place when growing debt (or a very close substitute, such as company stock) is available to enable the use of energy products. The reason why debt is important is because energy products enable the creation of many kinds of capital goods, and these goods are often bought with debt. Commercial examples would include metal tools, factories, refineries, pipelines, electricity generation plants, electricity transmission lines, schools, hospitals, roads, gold coins, and commercial vehicles. Consumers also benefit because energy products allow the production of houses and apartments, automobiles, busses, and passenger trains. In a sense, the creation of these capital goods is one form of “energy profit” that is obtained from the consumption of energy. The reason debt is needed is because while energy products can indeed produce a large “energy profit,” this energy profit is spread over many years in the future. In order to actually be able to obtain the benefit of this energy profit in a timeframe where the economy can use it, the financial system needs to bring forward some or all of the energy profit to an earlier timeframe. It is only when businesses can do this, that they have money to pay workers. This time shifting also allows businesses to earn a financial profit themselves. Governments indirectly benefit as well, because they can then tax the higher wages of workers and businesses, so that governmental services can be provided, including paved roads and good schools.
Should India Go Ahead With Shale Gas Exploration, Or Will It Be Wasted Effort? – Shale is a fine grained sedimentary rock that can be a rich resource for petroleum and natural gas, and as such shale gas is the natural gas that is trapped within shale formations. The Government of India had announced policy guidelines on October 14, 2013, whereby national oil companies ONGC and OIL were to take up shale gas and oil exploration activities in their nominated blocks. While the ultimate success of shale gas exploration efforts in India remains to be seen from the point of view of technological and economic feasibility, the fact remains that very large quantity of water has to be injected for shale gas exploration. Such water will have to be pumped from running river or ground water sources. Depletion of ground water resources can be a scary situation. Given the fact that several parts of India are already suffering from severe water scarcity due to frequent drought like situation and “water war” between the states are becoming very frequent, the question is whether India should go ahead with shale gas exploration at all that would require huge quantity of fresh water and result in large quantity of used waste water that would be chemically contaminated. Should India spend energy, time, efforts and resources in what appears to be a negative project? India and the USA signed memorandum of understanding for shale gas cooperation during the recent visit of President Barack Obama to India.
Russian April Oil Output Flat -- Reuters/Rigzone is reporting: Russian oil production edged lower in April: to 10.86 million barrels per day (bpd) from a record 10.91 million in March. The preliminary statistics show Russia is determined to keep oil output high after the world's leading crude producers failed to clinch a deal to freeze output to support weak crude prices. The sources said seasonal maintenance at oilfields and refineries brought production down. Production still running above the 2015 average of 10.73 million bpd, however, which was the highest yearly output for nearly three decades. Russian oil output has repeatedly surprised on the upside over the past decade, rising from as low as 6 million bpd at the turn of the millennium. Oil experts have repeatedly predicted a decline but it has yet to happen. Most remarkable is the "exactness" of the figures. 10.91 million - 10.86 million = 50,000 bbls or 0.4% and "we" know it's due to "seasonal maintenance at oilfields and refineries. Call me cynical, but 0.4% is a rounding error. I wish I could account for my own monthly spending that closely.
Declining Production Rates for many of the Top 30 Oil Producing Countries (Video) - People don`t realize the magnitude of all the Oil Producing Countries with declining Production Rates, and trending the wrong direction compared with the consistent and steady rise in Global Oil Demand Growth. The Oil Market is going to 'unbalance' in the opposite direction over the next 12 months, and start heading south fast over the next five years. The US probably needs to increase Oil Production to 12 Million Barrels per day in five years just to keep up with global oil demand, as the US is one of the few countries globally capable of increasing capacity given the resource requirements, political stability, and technological requirements necessary to invest in these capital intensive projects. But it is going to take a much higher price for a sustained duration to get the US all the way to 12 Million Barrels per day, as much of the low hanging fruit has already been taken out of the ground so to speak.
Iraq says oil exports, revenues increase in April (AP) — Iraq says April crude oil exports have increased by 2.3 percent from the previous month, filling cash-strapped coffers amid an acute economic crisis. Oil Ministry spokesman Assem Jihad, said Sunday that daily oil exports averaged 3.364 million barrels last month, worth $3.343 billion. March exports stood at 3.286 million barrels per day, bringing that month’s revenues to $2.9 billion. Jihad added that last month’s average price was $33.257 per barrel. Iraq’s 2016 budget is based on an expected price of $45 per barrel. Iraq holds the world’s fourth largest oil reserves, and oil revenues make up nearly 95 percent of its budget. Its economy was badly hit by the plunge in oil prices at a time when Baghdad is struggling to combat the Islamic State group.
Brexit: What could it mean for the North Sea's oil? — In less than two months UK citizens will make one of their biggest political decisions in more than 40 years: whether to remain or leave the EU trading bloc they have been part of since 1973. While an exit from the EU could mark a major milestone for the UK economy — the government fears GDP could suffer by over 6% after 15 years — a leave vote is seen having a limited impact on the UK upstream sector. For a start, North Sea oil has been regulated by London since before the UK joined the EU. Offshore safety laws were tweaked by Brussels in the wake of the 2010 US Gulf of Mexico spill, but their scope is limited. In the short term at least, it is seen as unlikely that there would be any back-peddling on EU legislation which has already been implemented into domestic law. Existing rules, whether originating in Brussels or not, would not fall away on Brexit (British exit from the EU) and it is unlikely that they would simply be repealed. Further down the road the UK would be free set its own offshore rules, which could diverge with EU legislation. In upstream oil and gas, Brexit would not change the key fiscal regime for the North Sea. London already has sovereignty over corporation tax, licensing and other regulations would not be affected in the short term. There is also little sense of urgency over an exit vote in the industry. Any changes to the operating environment would be years down the line..Most multi-national firms support the UK remaining in the EU and Big Oil is also in favor of the status quo. BP’s boss Bob Dudley has said Britain’s role would be “much diminished” if it exits while Shell’s CEO has signed a pro-EU letter saying leaving “would deter investment and threaten jobs.”
Oil Bulls Bet the Waning U.S. Shale Boom Will Curb Global Glut -- Hedge funds are rooting for a quick collapse of the U.S. shale boom. Money managers turned the most bullish since May as West Texas Intermediate crude climbed to a five-month high on optimism that falling U.S. production and rising fuel demand will trim the global glut. Investors shrugged off an inventory gain that left supplies at the highest since 1929. “The market’s focused not on current oversupply but on predictions of a balance in the second half of the year,” said Mike Wittner, head of oil markets at Societe Generale SA in New York. “Managed money is just adding to the upward momentum.” Speculators’ net-long position in benchmark U.S. crude climbed to the highest since May 12 in the week ended April 26, according to data from the Commodity Futures Trading Commission. Short positions dropped to a 10-month low. WTI futures surged 7.2 percent on the New York Mercantile Exchange in the CFTC report week, and were at $45.19 a barrel as of 10:14 a.m. in New York on Monday. Energy companies responded to the lowest prices since 2003 earlier this year by cutting spending on exploration and developing new fields. The number of active oil rigs fell to 332 last week, the least since November 2009, according to Baker Hughes Inc. The total is down to less than one-fourth of the 2014 peak. U.S. crude production fell to 8.94 million barrels a day in the week ended April 22, the least since October 2014, Energy Information Administration data show. The agency on April 12 cut its average forecast for the whole year to 8.6 million barrels a day. Output from U.S. shale formations will drop in May to the lowest level in almost two years.
The Age of Cheap Oil and Natural Gas Is Just Beginning - Scientific American --Oil price rises over the past 40 years have been truly spectacular. In constant money, the price of oil rose by almost 900% between 1970 and 2013. This can be compared with a 68% increase for a metals and minerals price index, comprising a commodity group that, like oil, is exhaustible. In our view, it is political rather than economic forces that have shaped the inadequate growth of upstream oil production capacity, the dominant factor behind the sustained upward price push. But we believe the period of excessively high oil prices has come to an end. The international spread of two revolutions will assure much ampler oil supplies, and will deliver prices far below the highs that reigned between the end of 2010 and mid-2014. Beginning less than a decade ago, the shale revolution – a result of technological breakthroughs in horizontal drilling and fracking – has turned the long run declining oil production trends in the US into rises of 88% from 2008 to 2015. Despite current low prices and the damage done to profits, an exceedingly high rate of productivity improvements in this relatively new industry promises to strengthen the competitiveness of shale output even further. A series of environmental problems related to shale exploitation have been identified, most of which are likely to be successfully handled as the infant, “wild west” industry matures and as environmental regulation is introduced and sharpened.Geologically, the US does not stand out in terms of shale resources. A very incomplete global mapping suggests a US shale oil share of no more than 17% of a huge geological wealth, widely geographically spread. Given the mainly non-proprietary shale technology and the many advantages accruing to the producing nations, it is inevitable that the revolution will spread beyond the US.
Oil Prices Edge Lower As OPEC Nears Record Output -- Forty-two years to the day after the filming of “Jaws” began (in Martha’s Vineyard, Massachusetts), and the bears are smelling blood in the water for a pullback (perhaps driven by this news from OPEC?). With certain countries closed for a bank holiday today (May day! May day!), here are five things to consider in the oil market:
- 1) With a new month on deck, we get a new onslaught of economic data, and specifically, global manufacturing data. China kicked things off over the weekend, with a below-consensus print on its official PMI manufacturing number, showing marginal expansion at 50.1 (down from 50.2 last month and below the expectation of 50.4).
- 2) The latest CFTC data show net-longs held by speculators such as hedge funds have increased to their highest level in a year, as short positions have dropped to a 10-month low. Once again, this has been driven by a ‘less bearish’ stance, as opposed to ‘mo’ bullish’ one, with both long and short positions shrinking. Shorts shrank by 6.9 percent, while longs slipped 0.5 percent.
- 3) We can see in our ClipperData that Argentina is seeing crude oil loadings ramping up, encouraged by a newly-announced government subsidy. As long as international oil prices remain below $47.50/bbl, the government is paying $7.50/bbl to oil exporters.
- 4) Currency movements continue to push and prod crude prices around. While the euro rallies above 1.15 for the first time since last August, it is joined in strength by the yen. Hence, the U.S. dollar index is weakening again – not surprisingly to the lowest since last August. The weaker dollar continues to backstop crude prices from a more severe sell-off.
- 5) Finally, Halliburton and Baker Hughes has announced that it is calling off its merger – which was valued at one point at ~$35 billion. Opposition from regulators has been to blame for the breakdown. Halliburton has said that it will pay a $3.5 billion breakup fee to Baker Hughes as part of the conditions of the merger agreement.
Oil down 3 percent on OPEC output hike, speculative ramp in Brent - (Reuters) - Oil prices fell about 3 percent on Monday as production from the Organization of the Petroleum Exporting Countries neared all-time peaks and record speculative buying in global benchmark Brent sparked profit-taking on last month's outsized rally. OPEC's crude production climbed in April to 32.64 million barrels per day, close to the highest in recent history, a Reuters survey showed. Iraq's April exports from southern fields increased, as did seaborne exports from Russia, the biggest exporter outside OPEC. Traders also cited market intelligence firm Genscape's report of a 821,969 barrel rise in stockpiles at the Cushing, Oklahoma delivery point for U.S. West Texas Intermediate (WTI) crude futures during the week to April 29. Brent's new front-month contract, July (LCOc1), settled down $1.54, or 3.3 percent, at $45.83 per barrel, hitting a session low at $45.72. WTI (CLc1) closed down $1.14 cents, or 2.5 percent, at $44.78 a barrel, after hitting an intraday low at $44.54. "Our high side parameters for both WTI and Brent have been achieved and we would strongly suggest against purchases anywhere across the energy spectrum, especially off the weekly EIA data,"
Oil Prices Fall Back as Rally Hits a Ceiling - There are early signs that the three-month rally in oil prices, up from a low of $26 per barrel in February, might be reaching its limits for the time being. Oil prices retreated at the start of the week as OPEC reported higher production levels. Iraq saw oil exports rise slightly, and there are rumors that Saudi Arabia is ramping up production in the wake of the failed Doha agreement. "There are enough supply stories out there to slow or temper any gains," Energy Aspects analyst Richard Mallinson told Reuters. Also, from a technical trading standpoint, oil is facing fierce resistance at $48 to $50 per barrel. The sharp run up in prices is now staring down a “textbook retracement,” Todd Gordon of TradingAnalysis.com said on CNBC. Backing that up is the fact that hedge funds and other money managers have amassed a huge pile of net-long bets on crude prices. Whenever positions increase by such a large amount, the chances that the pendulum swings back in the other direction rises. In other words, because oil prices have rallied so quickly, there is a good chance that they will correct and fall back again. . E&P companies are also not sure that the oil price rally is here to stay. When oil prices rose to $45 per barrel, a “flurry of dealing kicked off” according to Reuters, as companies scrambled to lock in prices for the rest of this year and next. For its part, the Paris-based International Energy Agency believes that the worst is over for oil prices. Provided that the global economy fares well, oil prices should continue their upward trajectory, although in fits and starts. "It may well be the case, but it will depend on how the global economy looks like. In a normal economic environment, we will see the price direction is rather upwards than downwards,” the IEA’s Executive Director Fatih Birol told reporters on the sidelines of the G7 energy ministers’ meeting. "We believe under normal conditions towards the end of this year, second half of this year but latest 2017, markets will rebalance." At the same time, the IEA has consistently warned that today’s cutbacks in investment could set the markets up for a shortage several years from now.
WTI Crude Jumps Above $44 After Smaller Than Expected Cushing Build -- Notable weakness in oil prices amid growth/demand concerns today, following genscape's Cushing's big build report yesterday, and expectations for continued builds in overall crude and Cushing levels set up trades ahead of API's report with oil below $44 heading in. An overallcrude inventory rise of 1.3mm barrels (almost double the 750k expectation) was not enough to trump a smaller than expected Cushing build of just 382k barrels (1.3m exp) which seemed to please the machines which ripped WTI back above $44 instantly. API:
- Crude +1.265m (+750k exp)
- Cushing +382k (+1.3m exp)
- Gasoline -1.17m
- Distillates -2.6m
Why This Year's Oil Rally Might Be for Real - At first blush, the rally in oil to start 2016 bears some resemblance to the rally at the start of last year, which ultimately ended in tears. This time, though, analysts at Citigroup Inc. led by Seth Kleinman say the rally has legs. "The extra year of low prices has finally derailed the supply resilience that defined markets last year," writes Kleinman. A big factor differentiating this year from last year is what the markets are expecting a few months from now. Kleinman and his team point out that 24-month West Texas Intermediate (WTI) futures are currently around $49 a barrel, versus the $65 a barrel seen in the second quarter of 2015. If the futures market doesn't expect the price to rise, producers can't lock in a profit like they might have at $65. If you can't lock in a profit, you can't produce as much and thus the supply should theoretically fall. This has led some analysts and economists to say the futures price is far more important than the current or spot price. "To keep all capital sidelined and curtail investment in shale until the market has rebalanced, we believe prices need to stay lower for longer," "As short cycle shale production is a 12-month investment proposition, producers typically hedge out 9 to 12 months...As a result, the market anchor is shifting to this ‘one-year-ahead’ swap which creates the level of investment to balance future physical markets. It is therefore this forward price that needs to remain below full-cycle costs to curtail investment, not the spot price." While U.S. supply was a big driver last year, it's time to look at supply outside of America. The analysts note that U.S. production peaked last April, and supply outside the country is now significantly impacted by low prices. This is important because it's much harder for other countries to get drills back online than in the U.S. Due to the nature of shale, once oil prices start to rise, U.S. producers can quickly ramp up production while other countries can't.
Why Oil Prices Will Likely Drop Below $40 Soon - The 70 percent rise in crude oil prices from the lows of $27.1 per barrel to a high of above $46/b in a matter of three months is being driven by speculative activity—make no mistake about it. The speculators have latched on to every bit of rumour and news to bid prices higher, and this has nothing to do with the real fundamentals. However, speculation can boost prices only to a certain extent in the short-term. After this, the fundamentals take over. The extent of speculation is enormous, though the daily production of oil in the U.S. is around 9 million b/d, the WTI crude oil contract trades more than 100 times the produced quantity, as highlighted in this January 2016 post.. The trading volume is generated by the algo traders, day traders, and scalpers who are in and out of their positions many times a day. Due to their enormous volume, they set the direction of prices in the short-term. However, these traders are neither involved in the production nor do they take physical delivery of oil; they are usually active only in the near-term contracts until expiry; after which the users of oil take deliveries. The oil producers have used the sharp rise to hedge part of their production for 2016 and 2017 as reported by The Wall Street Journal. (Click to enlarge) However, Citi Research points out that the oil producers have hedged only 36 percent of their estimated production for 2016, compared to 50 percent in the previous years. If prices creep up further, the producers will not only hedge more, they are likely to increase production to mend their balance sheet. Pioneer Natural Resources has hedged 50 percent of its expected 2017 output and has conveyed its intention to add five to ten horizontal drilling rigs if prices recover to $50/b, with a positive outlook for oil fundamentals. Earlier on, too many U.S. shale oil drillers had indicated that they will be back at around $50/b levels.
Is Gasoline Demand the Biggest Red Herring In Oil Markets? - Gasoline demand is a red herring. Gasoline demand distracts from the more important subject that there is no fundamental reason for the current oil-price rally. U.S. Gasoline Consumption Has Fallen 2 Million Barrels Per Day Since 2005. Those who believe that gasoline demand is the fire behind oil’s recent rally confuse production with consumption. They also don’t understand that Americans increased their driving when oil prices were $100 per barrel and continued to travel more miles throughout and despite oil-price highs and lows. A recent Bloomberg article stated, “American gasoline consumption rose to 9.25 million barrels a day in March, an all-time high for the month.” 9.25 million barrels per day is product supplied, the measure of how much gasoline is produced in U.S. refineries. Total wholesale and retail sales is the measure of U.S. consumption and that amount is only 7.76 million barrels per day. Consumption of gasoline in the U.S. has increased 802 thousand barrels per day (kbpd) since January 2014 but is 1,973 kbpd less than peak consumption in June 2005. U.S. production of gasoline is 908 kbpd more than the post-Financial Collapse low in January 2012 but is 542 kbpd less than the peak in July 2007 (Figure 1). Meanwhile, net gasoline exports are at record high levels. Exports have increased 1,443 kbpd since June 2005. So, consumption has increased but remains far below pre-2012 levels. Production is again approaching earlier peak levels but most of the increased volume is being exported. The belief that U.S. consumption is approaching record highs is simply not true. Americans are driving more than ever before. Vehicle miles traveled (VMT) reached an all-time high of 3.15 trillion miles in February 2016 (Figure 2). VMT have increased 97 billion miles per month (3 percent) since the beginning of 2015 and gasoline sales have increased 187 kbpd (2 percent). The rates of increase are not proportional.
Crude Slumps On Big Inventory Build Despite Biggest Production Plunge In 10 Months -- Overnight exuberance sparked by lower than expected Cushing build reported by API is fading on the heels of June OPEC headlines of no production limits (and rising Saudi production) heading into DOE inventory data. Crude inventories printed a significantly higher than expected 2.78mm build but Cushing saw a smaller than expected build of 243k. Gasoline surprised with a 536k build (API 1.17m draw) and Distillates saw a smaller than API build of 1.26m barrels. The biggest news was the biggest plunge in US production since July 2015, and yet inventories still rose suggesting that fundamentally this is and has been as much a demand story as one of supply (even as OPEC countries are happy to offset declining US output). DOE:
- Crude +2.78m (+750k exp)
- Cushing +243k (+1.3m exp.. Genscape +821k)
- Gasoline +536k
- Distillates -1.26m
Overall inventory levels continue to rise... Production plunged by the most sicne July 2015 (driven by a 16.2% collapse in Alaska production - Lower 48 fell 0.4% Wow) On the all important topic of gasoline, which has been a key bullish driver in recent months, gasoline stocks rose 0.5MM to 241.8MM... ... even as consumption is moving briskly higher, and is now above the 10 year maximum for this time of the year. However, whatever it is that the algos were looking at, the reaction in crude was quick: Crude prices are slipping (focused on the outsize inventory build) since the plunge in production is driven more by Alaska (down 16.2% Wow) as opposed to Lower 48 (down 0.4% WoW)...
Oil turns lower after bigger-than-forecast U.S. crude build | Reuters: A bigger-than-expected build in U.S. crude inventories to fresh record highs pushed oil markets lower on Wednesday after an early rally over concerns about production cuts in Canada's oil sands region due to a wildfire. U.S. crude stocks, which have been setting record highs since January, grew 2.8 million barrels last week, government data showed, about a million barrels more than analysts' expectations. Gasoline stocks also posted a surprise increase. The data overshadowed concerns over evacuations in the Canadian province of Alberta, where a wildfire raged unchecked through the Canadian city of Fort McMurray in the heart of the country's oil sands region, prompting some companies, including Suncor Energy (SU.TO) and Royal Dutch Shell (RDSa.L), to cut back production. "It's hard to see how it (the wildfire) wouldn't have a broader impact temporarily on pipeline exports," said John Kilduff, a partner at Again Capital Management in New York. "I think it was a legitimate scare that will prove transitory." U.S. crude futures settled at $43.78 a barrel, up 13 cents or 0.30 percent, while Brent crude settled down 35 cents or 0.78 percent at $44.62 a barrel. Gasoline futures fell 1.17 percent to $1.4925 a gallon, after the EIA data showed a surprise increase of the fuel in storage. The gasoline crack spread 1RBc1-CLc1, a key figure in determining refiner margins, fell by 7.5 percent to $18.28 a barrel in afternoon trading.
Interview: US oil output could recover in 6-12 months at $60-$65/b, says Birol - Platts - US oil production could recover if prices rose to $60-$65/b but the impact would not be immediate, International Energy Agency Executive Director Fatih Birol said May 1. In an interview with S&P Global Platts on the sidelines of the G7 Energy Ministerial meeting in Kitakyushu in southwest Japan, Birol said that even if oil prices climbed over $60/b, US crude production would take six to 12 months to rescind the current trend of falling output. "It will take a lot of time to bring the logistics, the rigs, the workers together so we think we may need six months to one year [for] US oil production to come back and see a reverse in the trend of a decline. It will not be from one day to another," he said.Analysts have said that some of the US shale oil production that has fallen in the past year could come back if prices rose sharply above $50/b. But some have remained wary about the resilience of shale oil, as US crude production has fallen steadily in the past year. In its April monthly report, the IEA said US tight oil production fell by as much as 450,000 b/d year on year in March as low oil prices took their toll and rig counts tumbled. In IEA's annual medium-term oil outlook report, published in February, it had forecast US light tight oil production to decline by nearly 600,000 b/d. However Birol said he expected US crude oil imports to increase further, especially with strong oil demand growth bolstered by robust US gasoline demand.
Oil up as fire curbs Canada output; higher dollar, stockpiles cap gains | Reuters: Oil prices surged on Thursday after a raging wildfire near Canada's oil sands region curbed output that mainly flows to the United States, before settling off their highs as a rebounding dollar and a huge U.S. stockpile build cut into gains. While the oil sands facilities are mostly to the north of the wildfire in city of Fort McMurray in Alberta that is spreading south, as much as a third of Canada's daily crude capacity has been cut and some major pipelines closed after more evacuations were ordered. A stranded Glencore oil cargo in Libya, after a stand-off between eastern and western political factions, also fed the rally at first. Some traders said the market had overreacted to both events. "The Canadian blaze, horrific as it is, is far south of the real producing fields to cause real lasting damage to production there," said John Kilduff, partner at New York energy hedge fund Again Capital. "The Libyan barrels weren't really on the market anyway." Crude oil futures jumped 5 percent before paring gains. Their retreat came as the dollar rose 0.6 percent, its most in three weeks, making greenback-denominated oil costlier for holders of the euro and other currencies. Some traders also pinned oil's weakening to market intelligence firm Genscape's report of a 1.35 million-barrels stockpile build at the Cushing, Oklahoma delivery hub for U.S. crude futures during the week to May 3. The Genscape report came on the heels of U.S. government data showing total crude stockpiles at record highs above 543 million barrels last week.
500,000 Barrels And $1 Billion In Losses: The True Cost Of Canada’s Wildfire - It took the market over a day to appreciate the fallout from the devastating Canadian wildfire which has led to a state of emergency in Alberta, the evacuation of over 80,000 people in the oil sands gateway city of Fort McMurray, and the destruction of over 1,600 structures. According to insurance industry reports, losses from the fire are approaching $1 billion, and will likely set records for the country. The average cost of a single-family home in the community was recently around CAD$627,000 ($487,000), Aon said, citing data from the local real estate industry, and cited by CNBC. That would suggest losses of CAD$1 billion ($779 million), with more to come as the fire continues to blaze out of control. Such damages would already make the fire the third-costliest insured loss event in Canadian history, the firm said. And now that Canada has had a chance to evaluate the damage from the historic fire, the question on everyone's lips is what will be the near-term impact on oil production as a result of the fire. While initially producers located in the area denied they would be forced to reduce production, this has changed over the past 24 hours. “As more information comes in, it appears that the impact on production of the wildfires in Alberta will be significant,” said analysts at JBC Energy in Austria. Analysts noted that Shell shut its Albian Sands mine and Suncor shut its base plant, while producers Syncrude Canada and Connacher Oil & also reduced output in the region. "Taken together this amounts to some 0.5 million b/d of capacity that is currently offline. Infrastructure is being affected too, with the 560,000 b/d Corridor pipeline shut down and movement along the 140,000 b/d Polaris pipeline significantly curtailed. On top of that, trains are not operating near Fort McMurray, according to the Canadian National Railway,” said the analysts.
Nigerian Oil Output Plunges to 20-Year Low as Attacks Escalate | Rigzone- Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years, as attacks against facilities in the energy-rich but impoverished nation increase in number and audacity. Chevron Corp. said on Friday it had shut down about 90,000 barrels a day of output following an attack on an offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg. “This is some very, very sophisticated brazen attack,” . “It is a resurgence of militancy. These guys don’t seem to be after money. They just want to frustrate the government.” The fresh round of attacks come after President Muhammadu Buhari vowed to stamp out corruption and oil theft. They echo a campaign waged by the self-proclaimed Movement for the Emancipation of the Niger Delta between 2006 and 2009, which cost the Nigerian government billions of dollars of lost oil revenue. That violence abated after thousands of fighters accepted an amnesty from late-President Umaru Musa Yar’Adua and disarmed, in exchange for monthly payments from the government in some cases. Chevron said it shut down its Okan offshore facility after it was “breached by unknown persons” and had sent “resources to respond to a resulting spill.” The facility, which feeds crude and gas into Escravos, one of the country’s largest export facilities, is jointly owned by the U.S. company and state-owned Nigeria National Petroleum Corp. A group calling itself the Niger Delta Avengers said on its website that it was responsible for the attack. The authenticity of the claim could not be verified by Bloomberg News.
Oil Prices Lifted By Global Supply Outages - -- Hark, here are five things to consider on this sixth day of May.
- 1) Data has been light elsewhere, leaving the spotlight to shine on today’s Nonfarm payrolls report. Job creation last month was considerably lower than expectations, coming in at 160,000 compared to the consensus of 202,000. The unemployment rate remained at 5 percent. Average hourly earnings rose 0.3 percent YoY (good), while the participation rate dropped to 62.8 percent (bad).
- 2) The fire in Fort McMurray, Canada rages on. It is now estimated that up to 1 million barrels per day of Canadian production has been taken offline. To put the situation in context, Canada produces ~4 million bpd of crude oil, nigh on 80 percent of which is produced in Alberta. Canada is the largest supplier of crude oil to the U.S. sending approx.3million bpd – the vast majority of which moves by pipeline.
- 3) This piece today highlights how the U.S. Gulf is congested due to rising crude imports; we were quoted in the Wall Street Journal on Wednesday highlighting how there are over 28 million barrels of crude waiting to be discharged due to strong arrivals and weather delays.While we’ve been highlighting of late how Saudi imports have climbed to their highest level in nearly a year, it would be remiss not to shine a light on Iraqi flows, which have reached their highest level since September 2014. Imports reached nearly 280,000 bpd in April, heading to various destinations on the East, West and Gulf Coasts:
- 4) This chart below is from EIA’s ‘today in energy’, highlighting the breakdown of U.S. crude production and imports by API gravity for 2015. More than 70 percent of domestic production last year is of light crude – oil with an API gravity of over 35:
- 5) Finally, there has been a militant attack on a Chevron platform off the coast of Nigeria, which has forced the closure of a Chevron oil facility. The militant group, the Niger Delta Avengers, have claimed responsibility for bombing Chevron’s Okan platform in what is being viewed as one of the most serious attacks since 2009.
OilPrice Intelligence Report: Oil Prices Buoyed As Global Supply Outages Accumulate: This week the oil markets experienced something that used to be common but has become a rarity since the collapse of oil prices almost two years ago: major unexpected supply disruptions. It is not that there have been no disruptions since mid-2014, just that they have not mattered in a world awash in oil. But as the supply and demand curves continue to converge, geopolitical upheaval is moving the needle on oil prices again. The largest disruption, of course, came from Canada, where forest fires have torched large swathes of boreal forest near major oil sands operations (more on that below). Oil prices initially surged on the news in the middle of the week, but fell back following EIA numbers showing an uptick in storage levels. The markets also seemed to digest the fact that Canada’s outage will be temporary, and the world still has problems with oversupply. Forest fires spread in Alberta, and apocalyptic images spread around the globe, showing blazing fires and black haze engulfing much of Fort McMurray and the surrounding area. An estimated 80,000 people were forcibly evacuated from the city. Several oil sands companies said that they had reduced or shut down oil production in the region. Morgan Stanley estimates that about 400,000 to 550,000 barrels of production has been temporarily affected. Reuters pegs the outage at 640,000 barrels per day, while another estimate says 1 mb/d has been disrupted. The outages probably will not last too long as they have more to do with evacuated personnel than they do with damage to facilities. Nevertheless, the disruptions helped to push up crude prices this week. Nigerian militants attacked a platform operated by Chevron in the Niger Delta. "Its Okan offshore facility in the Western Niger Delta region was breached by unknown persons," said Chevron in the statement. "The facility is currently shut-in and we are assessing the situation, and have deployed resources to respond to a resulting spill."
Fire threatens Alberta oil production, helps boost price --The massive wildfire in the heart of Alberta oil country is helping send crude prices higher. Benchmark U.S. crude rose 34 cents to $44.66 a barrel Friday in New York after earlier dropping by nearly 2 percent. Oil prices often spike when there is concern that production could be curtailed. Canada is the leading exporter of crude oil and natural gas to the United States, according to figures from the Energy Information Administration. Canada sends about 100 million barrels of crude and 240 billion cubic feet of natural gas per month to the U.S. S&P Global Platts, which tracks the energy industry, estimated that up to 820,000 barrels a day of crude oil production were shut in by the fire, although the number could be lower if facilities were operating below peak capacity.“It definitely is helping to boost the prices, although (the increase) is not that high considering the amount of crude that is being threatened,” said Jeff Mower of Platts. He attributed the restrained market reaction to high inventories of crude in the U.S., especially in the Midwest, where much of the Canadian crude goes for refining. Some grades of Canadian crude normally trade at premiums to benchmark U.S. oil while others usually trade at a discount, but all were trading higher Thursday and Friday than earlier in the week, according to Platts. The fire is near the tar sands hub of Fort McMurray, Alberta. So far there are no reports of damage to production facilities. More than 80,000 people have left Fort McMurray, where the fire has torched 1,600 homes and other buildings. Key pipelines were closed Thursday, although a major one reopened Friday morning, according to analysts for Genscape, which monitors the pipelines.
A 4.5-Million-Barrel Per Day Oil Shortage Looms: Wood Mackenzie - 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 half of the 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. 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. Oil dived more than 75 percent over a year and a half – that’s a hard blow to withstand. However, those laid off as part of the E&Ps’ coping mechanism will not sit around and wait to be rehired at the first opportunity. They will, and do, look for work elsewhere. So, the energy industry is facing another shortage that will help determine the ultimate one: a shortage of manpower. The third part of the problem is reserves replacement. New exploration is not just a form of art for art’s sake, or a means of expansion to boost bottom lines. It’s an essential part of the operations of an oil business. Oil is finite, and in order to stay profitable, an oil company needs to maintain a consistent rate of reserves replacement.
US rig count drops 5 this week to 415, another all-time low -- The number of rigs exploring for oil and natural gas in the U.S. dropped by five this week to 415, another all-time low amid depressed energy prices. A year ago, 894 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday that 338 rigs sought oil and 86 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Oklahoma declined by three rigs, Louisiana was down two and Alaska, Colorado, North Dakota and Ohio each fell by one.Texas gained three rigs and Utah one. Arkansas, California, Kansas, New Mexico, Pennsylvania, West Virginia and Wyoming were all unchanged. The U.S. rig count peaked at 4,530 in 1981. The previous low of 488 set in 1999 was eclipsed March 11, and has continued to slide.
Oil drillers dig for the bottom for rig counts | Reuters: For the past year and a half, a chart of the number of U.S. oil rigs in operation has resembled a death-defying ski slope - but soon it may be time to get back on the chair lift. The U.S. rig count may finally be bottoming out as U.S. oil companies look for oil prices to rally just a bit more, a signal that the time has come to deploy more capital and get production moving again, analysts say. The number of active oil rigs in the United States has fallen for seven consecutive weeks, as of data released Friday. Some believe the rig count will start to rise, as drillers plan to ramp up production if benchmark U.S. crude reaches the trigger level of $50 a barrel. U.S. crude prices hit a year-to-date high of $46.78 last week. In the past two weeks, oil producers including Anadarko Petroleum Corp and Pioneer Natural Resources have cited an improving outlook for oil prices, executives said on calls discussing earnings. Dave Lesar, chief executive of oilfield services provider Halliburton Co, said he believes the rig count has hit a bottom and likely will rise this year. The U.S. rig count generally reacts to prices with a three or four-month lag, so following the nadir for crude in February, it should bottom in the next month, Morgan Stanley's head of energy commodity research Adam Longson said in a report this week. "The same analysis also suggests a notable increase in rig activity may be ahead – potentially reversing much of the decline over the past several months," he wrote.
Oil Shrugs As US Total Rig Count Continues Crash To Record Lows -- WTI crude prices are unimpressed at the rig count data today (after spiking off the dismal jobs data). Total rig count fell 5 to 415 - a new record low while oil rigs fell 4 to 328, tracking lagged oil prices to their nadir. 19th weekly decline of the 20 weeks in 2016... will it change as laged oil prices pick up? With the total count continuing to crash to new record lows...
Gulf States Tap Bond Markets, $50 Oil a 'Trigger' - Qatar became the latest Gulf Cooperation Council country intending to tap international bond markets with a planned $5 billion bond. If it is launched, it will be the first bond from the country since 2011. With the drop in oil prices, countries across the region are turning to the debt markets. Bloomberg reports that Qatar will run a $13 billion budget deficit in 2016. Last week, Abu Dhabi raised $5 billion from its first bond sale since 2009. Reuters reports that Qatar has already borrowed $5.5 billion through a bank loan concluded in January 2016. Proceeds from this bond will likely be used to repay this bridge financing. Qatar 10-year yields are currently around 2.45%, according to tradingeconomics.com. (For more see: How Petro Economies Are Coping with $40 Oil.) Devon Energy (DVN) CEO Dave Hager said on its conference call with Wall Street analysts to discuss 1Q16 earnings results that the company could start adding incremental drilling activity if oil prices hit $50 a barrel and could double capital spending if they reach $60, according to Reuters. His comments fall in line with a series of other CEO’s who indicated recently that oil prices around $50 could trigger a renewal of US shale oil production. Investor’s Business Daily reports that Pioneer Resources (PXD) said last week it would add five to ten drilling rigs when oil hits $50 per barrel. This has also led to speculation that companies will attempt to lock in hedges at these higher prices, which will allow them to continue producing even if oil prices fall again. This could result in the oil price falling quite rapidly in H216 since supply would not be scaled back quickly.
The Saudis Know Something About Oil That Most Of Us Don't -- Rick Newman -- Yahoo!Finance -- Nomination For Geico Rock Of The Year Award -- Another "fluff" article from Yahoo!Finance with an eye-catching headline: The Saudis may know something about oil the rest of us don’t. Considering they produce 10 million bopd and most of the rest of us don't, I would hope the "Saudis" know something about oil that the rest of us don't. What an incredibly lame headline / thesis. The writer seems to be overly excited about the "Saudis" monetizing their assets. In fact, they will be monetizing less than 5% of the implied value of Saudi Aramco and they are pretty much monetizing downstream assets. This has nothing to do with selling their oil in the ground, except marginally --- and an incredibly tiny margin at that. Why they are doing it is anyone's guess. We've talked about this before. But just the fact that they are doing it speaks volumes. Regardless, Rick Newman, noting that the Saudis probably know something about oil that you and I do not know about has nominated himself for the 2016 Geico Rock of the Year Award. Congratulations.
Oil's Latest Casualty: Saudi Binladin Group Fires 50,000 Workers, A Quarter Of Its Workforce -- In the latest clear sign that low oil prices are taking their indirect toll not only the US shale sector, leading to billions in capex cuts and hundreds of thousands of lost oil and gas jobs, on Friday Saudi newspaper al-Watan reported that the multinational construction conglomerate Saudi Binladin Gropu (which was founded in 1931 by Sheikh Mohammed bin Laden Sayyid, father of Osama bin Laden who was removed as a shareholder in the business in 1993 and disowned by the family) has laid off 50,000 staff as pressure on the industry rises amid government spending cuts to survive an era of cheap oil. This means that Binladin, one of Saudi Arabia's biggest firms and among the Middle East's largest builders, whose total workforce is around 200,000 just fired a quarter of its total staff. Reuters adds, citing al-Watan's unnamed sources, that the group has terminated the contracts of 50,000 workers - apparently all foreigners - and given them permanent exit visa to leave the kingdom. However, the workers have refused to leave the country without getting paid as some had not received wages for more than four months. Furthermore, they were protesting in front of the Binladin's offices in the country almost daily, the paper added. What is most disturbing is that one of the biggest companies in Saudi Arabia if the not the Middle East, has had a series of pay disputes with workers this year as it appears unable to fund payroll. In March, scores of workers gathered outside one of the company's office in Saudi Arabia to demand unpaid wages.
Hot Air in the Saudi Desert: a Kingdom in Descent?: The Kingdom of Saudi Arabia (KSA) is in financial dire straits. Since the plunge in oil prices, the kingdom has been hemorrhaging money left, right and center. It has provided billions of dollars to shore up counter-revolutionary governments around the Middle East, especially Egypt, it is heavily involved in the Syrian conflict, and is burning through some $6 billion a month waging war on impoverished Yemen. The country needs oil to be $104.6 a barrel, according to the Institute of International Finance, for its budget to break-even; the current price is around $45. Finances have become so tight that from being the second largest importer of armaments worldwide in 2010–14, deputy Crown Prince Mohammed bin Salman(MbS) has said the kingdom aims at sourcing up to 50 percent of arms from local producers to help diversify the economy. It is as much of a pie-in-the-sky idea as turning KSA over the next several years into a knowledge-based economy.What is also indicative of the financial difficulties ahead is that commercial banks have tightened lending to anyone outside of the government, with the state the primary borrower, according to a senior financial officer in Riyadh. “There is a liquidity crunch at the banks, and it is the government that is borrowing, so companies are suffering,” he said.
Why Saudi Arabia Is Suddenly in Serious Trouble -- What does a country do when it enters a period of crisis? It calls the consulting firm McKinsey. That is precisely what Saudi Arabia did. McKinsey sent its crack analysts to the Kingdom. They returned—in December 2015—with Saudi Arabia Without Oil: The Investment and Productivity Transformation. This report could have been written without a site visit. It carries all the clichés of neo-liberalism: transform the economy from a government-led to a market-led one, cut subsidies and transfer payments, and sell government assets to finance the transition. There is not one hint of the peculiar political economy and cultural context of Saudi Arabia. The report calls for a cut in Saudi Arabia’s public-sector employment and a cut in its three million low-wage foreign workers. But the entire political economy of Saudi Arabia and the culture of its Saudi subjects are reliant upon state employment for the subjects and low-wage subservience from the guest workers. To change these two pillars calls into question the survival of the monarchy. A Saudi Arabia without oil, McKinsey should have honestly said, is a Saudi Arabia without a monarchy. What would the McKinsey transformation produce? “A productivity-led transformation,” wrote the eager analysts, “could enable Saudi Arabia to again double its [Gross Domestic Product] and create as many as six million new Saudi jobs by 2030.” The King’s son, Mohammed Bin Salman (MbS), took McKinsey at its word. He then copied and pasted the report in his own Saudi Vision 2030. Little of Prince MbS’s statement differs from the McKinsey proposal. The eagerness of the Prince shows his lack of experience.
US-Created System In Iraq Is Collapsing: Protesters Storm Parliament, State of Emergency Declared - Live Webcast -- Less than two years ago, the US set up another puppet government in the mid-east this time in the state of Iraq when following substantial US pressure, on August 14, 2014 then prime minister al-Maliki agreed to stepped down and be replaced with Haider al-Abadi. Today, the regime is in chaos and the system set up in Iraq by the US is collapsing when protesters loyal to popular Shiite cleric Muqtada al-Sadr breached the heavily fortified Green Zone, home to government buildings and foreign embassiesm and stormed the Iraqi parliament, forcing MPs to flee and resulting in a state of emergency being declared for all of Baghdad. As can be seen in the photo (and live webcast below), hundreds of demonstrators occupied the country's parliament. Video from inside the building showed jubilant crowds waving Iraqi flags and shouting "peaceful, peaceful." Supporters of Sadr, whose fighters once controlled swaths of Baghdad and helped defend the capital from ISIS, have been demonstrating for weeks at the gates of the Green Zone, responding to their leader's call to pressure the government to reform. Cited by NBC, Brig. Gen. Saad Mann, a spokesman for the Iraqi military, said that Iraq security authorities have declared a state of emergency in Baghdad. "All gates that lead to Baghdad are closed. No one is allowed to enter into Baghdad, only those who want to leave Baghdad can do so." "There is no evacuation for the American staff inside the American embassy," he said. A U.S. official who spoke on condition of anonymity said the American Embassy in Baghdad was not being evacuated, contrary to local reports. We expect that should the pro-US government fall, this will promptly change.
"The Situation In Iraq Has Become Very Dangerous"- Iraq PM Orders Arrests As Mass Protests Continue --Following yesterday's dramatic escalation in Iraq's suddenly very unstable political situation, when Beghdad was put under a state of emergency after supporters of popular Shiite cleric Muqtada al-Sadr breached the heavily fortified Green Zone and stormed both the parliament and government offices - an event which we dubbed the collapse of the US-created political system in Iraq - the situation has continued to deteriorate. Protesters reached the cabinet headquarters inside the Green Zone, storming the general secretariat of the cabinet building, al-Sumaria reported, citing security officials. Security has been boosted around the central bank, the Interior Ministry said in an e-mailed statement. The United Nations Assistance Mission for Iraq said it’s “gravely concerned” by Saturday’s developments and urged political leaders to work together to restore security in the country. “The situation in Iraq has become very dangerous,” said Wathiq al-Hashimi, a Baghdad-based political analyst said cited by Bloomberg. “No one will be able to control thousands of angry protesters while the rest of residents in Baghdad are in panic and living in real fear.” Iraq has been mired in a political crisis for months, hindering the government's ability to combat ISIS, which still controls much of the country's north and west, or address a financial crisis largely prompted by the plunge in global oil prices. Sadr and his supporters want to reform the political system put in place following the U.S.-led invasion in 2003, in which entrenched political blocs representing the country's Shiites, Sunnis and Kurds rely on patronage, resulting in widespread corruption and poor public services. The major blocs have until now stymied the reform attempts of Prime Minister Haider al-Abadi.
Iraq Cleric Moqtada al-Sadr’s Followers Trigger Political Crisis - WSJ: Followers of a firebrand Shiite cleric who has long tormented the U.S. have triggered a crisis that threatens Iraq’s political stability and hampers its efforts to fight Islamic State extremists. Protesters loyal to cleric Moqtada al-Sadr stormed Baghdad’s government seat, occupied the Iraqi parliament and even attacked a senior lawmaker. They withdrew Sunday, but a committee of Sadr supporters organizing the protests said demonstrators would return after an Islamic religious holiday which ends Tuesday, according to Iraqi state television. The turmoil thrust Iraq’s fragile government into one of the biggest political crises of its young democracy at an important moment for U.S. officials who see stability in Baghdad as essential to the fight against Islamic State. Vice President Joe Biden visited Iraq last week, the highest ranking U.S. official to do so since 2011. Islamic State claimed responsibility for multiple suicide attacks in the Baghdad area over the weekend that left dozens of people dead. The latest attack came on Sunday in the city of Samawah, south of Baghdad, and killed at least 30 people. The Iraqi military has recently gained some momentum in the fight against the extremists. But Iraqi officials were forced to call back troops from the front lines in Anbar Province in April to protect the capital amid protesters’ threats, as U.S.-backed Iraqi forces are preparing for a campaign to recapture Iraq’s second-largest city, Mosul. Iran-backed militia groups aligned with Iraq’s government announced late Sunday night that they are deploying fighters in Baghdad to help secure the city.
Spontaneous Protests in Baghdad Green Zone Show Cracks in the Security Apparatus Yves here. Readers may recall that we flagged the incursion of protestors into Iraq’s Green Zone, where both the US Embassy and Iraq’s Parliament had safely sat, well protected from citizens. The initial reports were that the occupiers appear to have been let in and were peaceful (only one politician injured and some damage to furniture in the Parliament). Most important, they did not want to overthrow the government but wanted an end to corruption, seeing it as necessary to get improved delivery of services to the population. Lambert highlighted the minimal mainstream media coverage of this development and the lack of crisp talking points from sources close to the Administration. And the story appears to have dropped from the news radar. This Real News Network segment gives the background on the protests. They’ve been underway for some time, are secular in nature, and to a significant degree, cross sectarian and ethnic lines.
Iraq crisis could impact India as oil prices claw back over $40 - Times of India: (IANS) The latest political crisis in Iraq is fraught with implications for India, which imports over half its oil from the volatile Middle East region, even as data on Monday showed the price of the Indian basket of crude oils has risen to nearly $45 a barrel. A state of emergency was declared in Baghdad on Saturday after hundreds of supporters of Iraqi Shia cleric Moqtada al-Sadr stormed the Iraqi capital's Green Zone and entered the parliament building. Sadr has been demanding that parliament vote in a new technocratic council of ministers. Moreover, Islamic State claimed responsibility for multiple suicide attacks in the Baghdad area over the weekend that left dozens of people dead.Low oil prices have severely hit Iraq's economy and Islamic State controls about a quarter of its territory. India's oil imports from the volatile Middle East region rose to 59 percent in the first 11 months of the last fiscal, reversing a previous decline, parliament was told last week. The increase was mainly on account of the rise in imports from Iraq, which saw the biggest jump from around 24.5 MT in each of the past three years, to 32.97 MT during April-February 2015-16. Petroleum Minister Dharmendra Pradhan told the Lok Sabha in a written reply that India imported 109.09 million tonnes of crude from 10 countries in the Middle East between April 2015 and February 2016, which was 59.22 percent of the total oil imports during the period. The Indian basket, comprising 73 percent sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent, rose to $44.59 on Friday for a barrel of nearly 160 litres, as per data compiled by the state-run Petroleum Planning and Analysis Cell.
Russian orchestra performs amid Syria's ruins as airstrike nearby kills 28 -- A renowned Russian conductor led a triumphant concert Thursday in the ruins of the ancient Syrian city of Palmyra, once terrorized by the Islamic State group, even as an airstrike on a refugee camp in the north left at least 28 people dead and dozens wounded, including many children. The performance in the same ancient amphitheater where militants from the Islamic State, also known as ISIS, ISIL, or Daesh, carried out widely publicized killings — and called "A Prayer for Palmyra" — was intended to send a message that Russia's presence in Syria would bring hope and stability. But even as strains of Bach and Sergei Prokofiev's First Symphony echoed through the Roman theater packed with an audience that included Russian servicemen, Syrian government ministers, and children in colorful native dress, the war raged elsewhere. Images posted on social media of the aftermath of the airstrike that tore through the Sarmada camp in rebel-held territory close to the border with Turkey showed tents burned to the ground, charred bodies, and bloodied women and children being loaded onto a pickup truck.
Caught On Tape: Raw Footage Shows The Moment A Missile Hits Aleppo Hospital -- Sadly, a typical consequence of war is that innocent "collateral damage" lives are lost. The civil war in Syria is no different, as over the past week four medical facilities were hit with missiles from fighter jets taking out their targets from the skies, pushing the civilian death toll even higher. One of the targets that got hit last week (during a truce nonetheless) was a pediatric hospital in Aleppo that was supported by both Doctors Without Borders and the International Red Cross. Recovered cctv footage captures the moments before, during, and after the hospital took a direct hit. The video also shows what is said to the be the last pediatrician in the city walking the halls moments before the missile hit, killing him and an estimated 50 others. U.S. Secretary of State John Kerry condemned the attack, immediately blaming the Syrian government. Predictably everyone involved in the region has denied having anything to do with the strike. As a reminder, the U.S. isn't innocent of horrendous events such as this, as just last October the U.S. repeatedly bombed a compound run by the humanitarian organization Doctors Without Borders, killing at least 30 people. Here is the raw footage of the bombing last week via ABC news. In the final seconds of the video, a person emerges carrying what appears to be a baby, driving home the realities of what can happen when nations meddle in others affairs.
The World's Largest Shipping Company Is Already Preparing For The Next Oil Crash -- It was almost a year ago, when having tumbled in early 2015, oil proceeded to rebound strongly into the summer, where it traded at about $60 for three months, before US production resumed resulting in the next big leg lower which culminated with this's February drop to 13 year lows. At that point a comparable rebound to last year materialized, and just like last year, the pundits have emerged claiming that there will be no further downside. Incidentally, we covered this comparison previously in "For Oil 2016 Is Setting Up To Be A Rerun Of Last Year." However, unlike last year, not everyone is (wrongly) convinced that this time the rebound in oil will be sustainable. One very prominent company that is already preparing for the next oil crash is the world's largest shipping company, Danish conglomerate A.P. Moeller-Maersk A/S (also known as Maersk). Maersk is perhaps best known for its pragmatic, even downright bearish outlook on the global economy. Recall that three months ago, the company admitted in its annual report that "demand for transportation of goods was significantly lower than expected, especially in the emerging markets as well as the Group’s key Europe trades, where the impact was further accelerated by de-stocking of the high inventory levels." The company's CEO, Nils Andersen, told the FT in February that "it is worse than in 2008.The oil price is as low as its lowest point in 2008-09 and has stayed there for a long time and doesn’t look like going up soon. Freight rates are lower. The external conditions are much worse but we are better prepared." It is the risk that the current 60% rebound in oil prices from 2016 lows is just another temporary bounce, that has forced Maersk to start preparing for the next oil crash.The company's CEO is confident that since the world keeps producing more petroleum than it can consume, it is "adapting its cost base to prepare for the risk of lower crude prices"according to Bloomberg.
Asian oil derivatives volumes on CME surge 19.2% on month in April - Oil | Platts News Article & Story: Asian oil derivative clearing and trading activity on the CME Group's platforms saw a 19.2% month on month rise to 34,647 transactions in April, according to data from the exchange Wednesday. The largest gains were in its Dubai crude derivative offerings, which tripled to 1,225 trades in April from 299 in March. This was followed by an 80.6% month on month rise in middle distillate trading and clearing activity to 15,647 contracts. The biggest gains within this part of the barrel were in gasoil derivatives, which more than doubled to 14,292 in April. Both jet (36.4% month on month fall to 550), and regrade (21.5% fall to just 805) hedging activity dropped sharply following the close of the North Asian winter heating demand season. The largest month-on-month slide was in the residual fuels segment, which recorded a 22.2% fall over the course of April to 7,910 transactions. 380 CST high sulfur fuel oil swaps fell 23.2% month on month to 6,165 in April, while 180 CST HSFO instruments edged up 3.2% over the same period to 1,461.
Why China Is Really Dictating the Oil Supply Glut | OilPrice.com: Ship tracking data from Bloomberg shows that 83 supertankers carrying around 166 million barrels of oil are headed to China, which has stockpiled an impressive 787,000 barrels a day in the first quarter of 2016—the highest stockpiling rate since 2014. While the world was speculating about oil prices plunging to $20 and $10 per barrel, China was busy stockpiling its reserves. The chart below shows an increase in imports as crude prices collapsed. Since the beginning of this year, China has imported a record quantity of oil. Back in January 2015, Reuters had reported that China planned to increase its strategic petroleum reserves (SPR) from 30 days to 90 days. In January 2016, it was revealed that China was building underground storage to complement its above-ground storage tanks. The Chinese urgency points to two things. China believes that crude oil prices will not remain at the current levels for long, and that a disruption is possible due to geopolitical reasons, which can propel oil prices higher. As a net importer of crude, it is protecting itself against a black swan event and using the current low prices to fill its tanks. The filled up tanks will ensure a steady supply of crude for at least three months in case of a disruption. Does the record buying spree by the Chinese indicate a bottom in crude oil prices? That is difficult to conclude, but it does put a floor beneath the current lows, because in all likelihood, China will resume its record buying and top up its SPR if prices tank.
China Looking To Secure Oil Supplies By Buying Stake In Rosneft - Russian Deputy Energy Minister Alexei Teksler said a couple of weeks ago that Chinese state giant CNPC is interested in participating in the partial privatization of Russia’s top oil company, Rosneft. Rumors that companies from the Chinese energy sector will take part in the Kremlin’s privatization plan for 2016 first started emerging late last year when the plan was announced. Yet oil prices fell so low that there were doubts as to whether such a deal or deals are still viable. Prices are now recovering and some analysts believe that this is just the start of a longer, massive rally that will eventually see oil trade in three-digit territory again. The fundamental reason: less investment in new E&P projects will inevitably tighten supply and once it does, the energy sector won’t have the manpower and equipment to expand it. The Chinese, however, may be a step ahead of the rest of the world, if indeed CNPC takes part in Rosneft’s IPO, as it reportedly confirmed it would.China needs secure long-term oil supply. Forget about the much talked-about switch from an industry-based to a service-based economy. Service-based economies also need fuel (a lot of it) and even with a blooming solar power sector, China remains a huge oil consumer, which is unlikely to change anytime soon.