the big story of this past week turned out to be not a story at all...the semi-annual meeting of the OPEC oil ministers at their headquarters in Vienna Austria produced no agreement on limiting oil output of its members, nor any other oil policy statements...about all they managed to agree on was the selection of Nigeria's Mohammed Barkindo as its new secretary-general, replacing Libya's Abdalla El-Badri, who completed his recent 3 year term...news before the meeting had pretty much discounted the possibility of a deal, as Iran had repeatedly rejected any notion of an output cap in statements beforehand, and there'd been no change in the Saudi position that they would not participate in any agreement that didn't limit Iran, resulting in the same impasse that torpedoed the Doha talks with Russia 7 weeks ago...so although oil prices dropped on the news of no deal, the decrease was quickly reversed the next day as oil traders refocused on fundamentals...
the latest report from OPEC did show that their output was down to 32.52 million barrels per day in May, from the near record production of 32.64 million barrels per day in April, as the disruptions to supply from Nigeria outweighed the increases in output from Iran, the Saudis, and other Gulf states...at the same time, Russian output fell slightly from its post Soviet Union high of 10.91 million barrels per day in March to average 10.83 million barrels per day in May, still well above the 10.2 million barrel per day average they saw in 2015....Canadian tarsands production restarted earlier this past week, and they expect to have full operations restored by this week, which will restore the million barrel per day output that was shut down when the Ft McMurray wildfire tore thru the region three weeks ago...
even with the disruptions to global supply, which we looked at in more detail a few weeks back, US oil prices seem to remain stuck in a range below $50 a barrel, occasionally trading at that price midday before falling to close near $49 a barrel each day this week..a similar price scenario has played out with the global oil benchmark Brent, which has been trading ~75 cents higher than its American counterpart over the past few weeks...prices for both fell to close at their lows for the week on Friday when Baker Hughes released active rig data, which showed an increase of 9 oil rigs, the most since the week ending December 18th 2015, and only the second increase in oil rigs this year...that suggests that some oil drillers think they can cover their drilling costs at these oil prices, which might likewise mean that some of the nearly 3000 DUC wells (drilled but uncompleted) may similarly soon be fracked, which could result in a production spike from US wells, further delaying oil market rebalancing, and ultimately sending oil prices lower...for the short term, however, the diminished Nigerian output seems to be the largest oil market influence; early last week their output was said to be cut to 1.1 million barrels per day, from their normal average of around 2 million barrels per day...furthermore, there were new attacks on Shell and Eni oil facilities on Friday; the Niger Delta Avengers tweeted that they had bombed several named crude oil pipelines operated by Italian oil giant Eni in southern Bayelsa state at about 0100 GMT, and that they blew up the 48-inch Shell Forcados export line about an hour later..
The Latest US Oil Stats from the EIA
this week saw another modest decrease in our field production of crude oil, coupled with a rebound of oil imports to near the average we we've seen most of this year...at the same time there was another modest drop in refinery activity, which nonetheless required another 1.4 million barrel withdrawal from our crude oil inventories.....this week's reports from the Energy Information Administration, delayed til Thursday because of the holiday, showed that our field production of crude oil fell by 32,000 barrels per day, from an average of 8,767,000 barrels per day during the week ending May 20th to an average of 8,735,000 barrels per day during the week ending May 27th...that leaves our output 8.9% lower than the 9,586,000 barrels per day that we were producing during the fourth week of May last year, and 9.1% below the 9,610,000 barrel per day peak of our oil production that we saw during the week ending June 10th of last year, suggesting than unless we see a large production cut in the next two weeks, our one year drop in oil production will be less than 10% off the peak...our oil production has now been down 18 out of the last 19 weeks and is now 420,000 barrels per day lower than at the beginning of 2016...
at the same time, this week's data indicated that our imports of crude oil rose by 524,000 barrels per day, from the average of 7,315,000 barrels per day we saw during the week ending May 20th, up to an average of 7,839,000 barrels per day during the week ending May 27th....that was 6.3% more than the 7,373,000 barrels of oil per day we imported during the week ending May 29th a year ago, while the EIA's weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports remains at the 7.6 million barrel per day level, which was 8.3% more than our oil import rate during the same four-week period last year...
meanwhile, crude oil used by US refineries fell for the second week in a row, dropping to an average of 16,206.000 barrels per day during the week ending May 27th, 73,000 barrels per day less than the average of 16,279,000 barrels of crude oil per day they used during the week ending May 20th...the US refinery utilization rate inched up to 89.8% of operable capacity last week, from a 89.7% capacity utilization rate during the week ending May 20th, but that was still below the 93.2% capacity utilization rate of the week ending May 29th of 2015, when US refineries were processing an average of 16,407,000 barrels of crude each day... since this is the time of year refineries are usually running closer to capacity, it's possible the ongoing oversupply of downstream products with narrow margins is giving them cause to slow their normal operations...
even with less oil being refined, however, our refinery production of gasoline still rose by 50,000 barrels per day, as gasoline output averaged 9,916,000 barrels per day during the week ending May 27th, up from the average of 9,866,000 barrels per day of gasoline produced during the week ending May 20th...that was 5.4% more than the 9,408,000 barrels of gasoline per day we were producing during the same week last year, although the year ago month did see two weeks of gasoline production in excess of 10 million barrels per day...at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 96,000 barrels per day to 4,757,000 barrels per day during the week ending May 27th...however, that was 5.3% lower than our distillates production of 5,025,000 barrels per day during the week ending May 29th, 2015, as last year’s distillates inventories were somewhat tighter...
however, even with increased production of gasoline and distillates, inventories of both ended the week lower....our gasoline inventories fell by 1,492,000 barrels to 238,619,000 barrels on May 27th, after the surprise increase of 2,496,000 barrels during the week ending May 20th....that was as our total gasoline imports averaged 921,000 barrels per day, 12,000 barrels per day less than the prior week, and as the gasoline supplied to US markets rose by 200,000 barrels per day to 9,716,000 barrels per day, which was 8.2% higher than the 8,978,000 barrel per day consumption during the week ending May 29th last year, although that was a holiday week....still, this week's gasoline inventories were 8.3% higher than the 220,293,000 barrels of gasoline that we had stored on May 29th last year, and 12.7% higher than the 211,785,000 barrels of gasoline we had stored on May 30th of 2014...thus our gasoline supplies are still categorized as "well above the upper limit of the average range" for this time of year..
meanwhile, our distillate fuel inventories also fell by 1,255,000 barrels to end the week at 149,623,000 barrels, as diesel fuel was withdrawn from storage in all PADD districts except for the Gulf coast...however, since distillate inventories have been above normal since our warm winter reduced heat oil consumption, our distillate inventories were still 12.8% higher than the 132,612,000 barrels of distillates we had stored at the same time last year, and 26.7% higher than our distillates supplies as of May 30th 2014, and thus they're also characterized as "well above the upper limit of the average range" for this time of year...
finally, even with the increase in crude imports and the refinery slowdown, we still found it necessary to draw another 1,366,000 barrels of oil from our stocks of crude oil in storage, which fell from 537,068,000 barrels as of May 20th to 535,702.000 barrels as of May 27th...also note that the crude oil fudge factor included on the weekly U.S. Petroleum Balance Sheet (line 13) was a minus 74,000 barrels per day, which means that 74,000 barrels of oil per day that we appeared to have produced or imported last week did not show up in the final figures...still, the stated oil inventory level was 12.2% higher than the 477,415,000 barrels of oil we had stored as of May 30th, 2015, and 37.6% higher than the 389,523 ,000 barrels of oil we had stored on May 30th of 2014....to illustrate that, we have a chart below which puts this year's oil inventories in perspective, as compared to recent years...
the above graph comes from a weekly pdf booklet of petroleum graphs produced by Yardeni Research, a provider of independent investment and economics research, run by Dr Ed Yardeni...it shows the end of the week stocks of crude oil in millions of barrels for each week beginning with January 2012, up to and including this week's report for May 27th, with graphs for each year color coded as indicated...here we can clearly see that our oil inventories stayed in a narrow range between 2012 and 2014, represented by the mustard, green and blue bands, typically falling to 350 million barrels by the end of summer and rising to around 390 million barrels by early spring....however, at the beginning of 2015, represented by the grape colored graph, our inventories of oil started rising each week till they reached 490 million barrels at the end of April 2015, and then stayed elevated in a range 80 to 100 million barrels above the previous norms...that continued into 2016, represented by the scarlet colored graph, which shows that our oil inventories rose from what were already record levels to new records up until the record high of the record high of 543,394,000 barrels was set on April 29th, and since then they've been falling at a slower rate than last year...although our supply of oil stored above ground (not counting what's in the government's Strategic Petroleum Reserve) is now down by 6,602,000 barrels from that record that was set 4 weeks ago, our oil inventories are still up by 53,378,000 barrels since the beginning of the year...
This Week's Rig Counts
as we mentioned earlier, this week saw the largest jump in active oil rigs yet this year, which contributed to the first increase in the overall rig count since August 21st of last year......Baker Hughes reported that the total count of active rotary rigs running in the US increased by 4 rigs to 408 rigs as of June 3rd, which was still down from the 868 rigs that were deployed as of the June 5th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...also as mentioned, the count of rigs drilling for oil rose by 9 rigs to 325, which was still down from the 642 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by 5 rigs to a record low of 82, which was down from the 222 natural gas rigs that were drilling a year ago, and down from the recent high of 1,606 rigs that were drilling for natural gas that was set on August 29th, 2008...there was also one rig running this week that was classified as miscellaneous, unchanged from last week but down from the 4 miscellaneous that were operating a year ago....
however, there had been rigs drilling both offshore and on inland waters that were shut down this week...a net three drilling platforms that had been deployed in the Gulf of Mexico were taken out of service this week, all of which had been drilling offshore of Louisiana...that cut the Gulf of Mexico active rig count down to 20 rigs, which was down from 27 a year ago, and reduced the total offshore count down to 21, as there still is an offshore platform working off the Cook Inlet in Alaska....at the same time, there was also a rig removed that had been drilling through an inland lake in southern Louisiana, which cut the inland waters rig count down to 5, which was up from the 4 rigs that were deployed drilling on inland waters at the end of the same week last year...
the number of working horizontal drilling rigs increased for the first time since November 13th, as horizontal rigs rose by 5 to 319 rigs this week, which still was down from the 673 horizontal rigs that were in use on June 5th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, a single vertical rig was pulled down, leaving 44 vertical rigs still working, which was down from the 99 vertical rigs that were in use at the end of the same week a year earlier...meanwhile, the directional rig count was unchanged at 44 rigs, which was still down from the 96 directional rigs that were drilling in the US during the same week last year...
for the details on which states and which shale basins saw changes in drilling activity this past week, we're again going to include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of June 3rd, the second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the 4th column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was June 5th of 2015:
as you can see from the above, it continues to be fairly quiet across most of the country, with the only increase in horizontal drilling showing up in the Permian basin, where 5 rigs were added...it's purely speculative, but Pioneer Resources, one of the frackers who works in the Permian as well as elsewhere, has been talking about adding rigs, so that could be their operation that bumped up the rig count there...also note that despite the loss of three rigs offshore and one on an inland lake, Louisiana is only down by one rig this week; checking that, we find they added 3 land based rigs in the southern part of the state, which is not part of a major basin, so those were likely conventional drilling operations...also note that the addition of a single rig on land in Alabama is not included in the major state table above; that's currently the only rig working the state; last year at this time, Alabama also had just one rig active...
Ban Sought on New Fossil Fuel Leasing in Ohio's Wayne National Forest - Environmental groups today called on the Bureau of Land Management to halt all new fossil fuel leasing in Ohio’s Wayne National Forest over concerns about the harmful impact of fracking. The Sierra Club, the Center for Biological Diversity, Ohio Environmental Council and Friends of the Earth are also challenging BLM’s plans to lease up to 40,000 acres of the Athens Ranger District, Marietta Unit of the Wayne National Forest, which would open it up to new oil and gas drilling and hydraulic fracturing (fracking) in the Marcellus and Utica shales. In its environmental assessment, BLM proposed a “finding of no significant impact,” failing to take into account the impacts fracking would have on air quality, water quality, wildlife, and climate change. The Wayne National Forest is home to rare and endangered species including bobcats, Indiana bats, timber rattlesnakes and cerulean warblers. “It’s unconscionable that we could ever permit drilling in Ohio’s only national forest,” said Jen Miller, director of Sierra Club Ohio. “This forest is owned by the people for their enjoyment — not for the oil and gas industry to destroy. Permitting fracking will disrupt wildlife, threaten clean water resources and reduce recreation and tourism. It should and must be preserved for this generation and those to come.” In the letter submitted, the groups called for BLM to cease all new leasing of fossil fuels in Wayne National Forest, or, at minimum, defer the proposed leasing pending a programmatic review of the federal fossil fuel leasing program. “The science is clear: avoiding the worst impacts of climate change requires keeping untapped fossil fuels in the ground,” said Taylor McKinnon with the Center for Biological Diversity. “Opening new areas to development — let alone our public lands — directly conflicts with that science and delays a transition to clean, renewable energy.”
Ohio State University to sell 28 acres of mineral rights in Doddridge County, West Virginia land for oil and gas fracking - Columbus Business First (paywalled) Ohio State University wants to sell mineral rights it owns in the heart of West Virginia's shale oil and gas region. The university plans to sell rights to about 28 acres in Doddridge County, near the eastern Ohio border and 130 miles from Columbus. An unidentified estate willed the real estate to Ohio State.
Judge again dismisses lawsuit against fracking opponents: (AP) — A judge has again dismissed a lawsuit that landowners filed against people and groups who oppose fracking in a western Pennsylvania township. Natural gas drilling has been delayed in Middlesex, Butler County while some of the rural community’s 800 residents challenge a zoning ordinance that would allow drilling in 90 percent of the rural township. Dewey Homes and Investment Properties and 12 landowners sued the drilling opponents, seeking damages for royalties they’ve been unable to collect from gas drilling companies who have leases to drill on their land. A Butler County judge dismissed the lawsuit in September, but allowed the landowners to file an amended complaint, which he struck down Tuesday. The fracking foes claimed the litigation was a strategic lawsuit against public participation, or SLAPP suit, meant to silence their opposition and free-speech rights. The judge agreed.
When Gas Wells Leak…Deals Get Cut! -- There are a few really BAD players in the gas industry, and these guys are at the top of the list of companies you hope NEVER come to your town to drill! State drops nearly $9 million fine against Range Resources - Pennsylvania environmental regulators have, for now, dropped their pursuit of a nearly $9 million fine against Range Resources-Appalachia LLC after the two sides reached an agreement over a Lycoming County gas well that regulators said leaked methane into drinking water supplies and streams. The Fort Worth, Texas-based oil and gas production company is still likely to face a penalty at a later stage in the gas migration case, which is ongoing.“We are currently investigating the source and the remedy and then will take appropriate enforcement action,” Department of Environmental Protection spokesman Neil Shader said.Range Resources withdrew its appeal of the proposed penalty on May 13 after DEP “fully rescinded” the proposed $8.95 million fine, the company said in a filing with the Pennsylvania Environmental Hearing Board. The withdrawal of the proposed fine was first reported by PennLive on Saturday.The proposed penalty assessment was dropped in keeping with an agreement DEP and Range finalized on May 5, but that document was not included in the filing, and DEP has not released it. In its withdrawal, Range reserved its rights to challenge future civil penalty actions by the DEP, Mr. Shader said.
New Federal Report Shows Dimock Water Was Unsafe to Drink After All -- Back in 2012, the U.S. Environmental Protection Agency (EPA) made a startling announcement, shaking up the battle over fracking in one of the nation’s highest-profile cases where drillers were suspected to have caused water contamination. Water testing results were in for homeowners along Carter Road in Dimock, Pennsylvania, where for years, homeowners reported their water had turned brown, became flammable or started clogging their well with “black greasy feeling sediment” after Cabot Oil and Gas began drilling in the area. The EPA seemed to conclude the water wasn’t so bad after all. "The sampling and an evaluation of the particular circumstances at each home did not indicate levels of contaminants that would give EPA reason to take further action,” EPA Regional Administrator Shawn M. Garvin said in a press release. The drilling industry crowed. “The data released today once again confirms the EPA’s and DEP’s [Department of Environmental Protection] findings that levels of contaminants found do not possess a threat to human health and the environment,” Cabot said in a statement. Now, a newly published report by the Agency for Toxic Substances and Disease Registry (ATSDR), part of the Centers for Disease Control (CDC), puts EPA’s testing results into an entirely new light. The water was not safe to drink after all, the ATSDR concluded, after a lengthy review of the same water testing results that EPA used back in 2012.“ATSDR found some of the chemicals in the private water wells at this site at levels high enough to affect health (27 private water wells), pose a physical hazard (17 private water wells) or affect general water quality so that it may be unsuitable for drinking,” the ATSDR’s health consultation—launched in 2011 and published May 24—concludes.
Pennsylvania group challenges fracking permit process - : PennFuture has filed a legal challenge to the zoning ordinance in Mount Pleasant Township, Washington County arguing that it is constitutionally invalid because it allows industrial gas drilling across all zoned districts. Representing members who reside and own property in the township, live near proposed well sites, and have been harmed by the ordinance, PennFuture sent legal notice to the zoning hearing board dated May 27, 2016. “Our members have twice fought applications for well pads to be located within a mile of the Fort Cherry K-12 school complex,” said George Jugovic Jr., chief counsel for PennFuture. “The state Supreme Court has made clear that townships have a duty and responsibility to protect the public health of its residents, particularly its most vulnerable populations, and allowing industrial activities throughout the township fails to fulfill that duty” The ordinance in question provides for the following with no differentiation in conditions to account for the varying purposes, population density, and other uses allowed in each district:
- Oil and gas wells as a conditional use in all zoned districts;
- Compressor stations as conditional use in agriculture, rural and suburban residential, highway commercial, and light industrial districts;
- Oil and gas processing facilities as conditional use in agricultural and light industrial districts; and
- Oil and gas metering stations as permitted uses in agriculture, rural, neighborhood and suburban residential, and highway commercial districts.
Inside the Movement to Stop the Oil Industry's 'Bomb Trains' - If you're one of the approximately 180 families who live in the Ezra Prentice Homes, in the poor, industrial southern section of Albany, New York, oil trains are a daily fact of life. These trains rumble through as they move crude oil from North Dakota and elsewhere to the northeastern US. Sometimes, the trains pass 15 feet from people's homes. South Albany isn't unusual among poor communities throughout the country—many are located near train tracks and highways, oil refineries, and other sources of environmental danger—but what makes it notable is that residents seem fed up and ready to do something about it. Earlier this month, as part of a series of protests against the fossil fuel industry called Break Free, thousands marched through the streets of Albany to protest residents' environmental concerns. Some activists blocked the railway as part of a action calling for an end to the transportation of oil by rail in Albany and elsewhere. Activists have argued that carrying flammable oil on trains, which they sometimes call "bomb trains," is inherently dangerous: Not only do the trains emit diesel fumes in the poor neighborhoods they pass through, the trains have in the past tipped over or crashed, leaked, exploded, polluted rivers and wetlands, and in some cases killed those who live nearby. Albany residents say the tracks are a part of a long history of "environmental racism," meaning if they were located in a white community the oil trains would be shut down by now. And they say the railway behind the Ezra Prentice Homes needs to be shut down for the sake of South Albany's current residents—to do otherwise is to be waiting for disaster to strike. "People thought you could put whatever you wanted here because it was a poor black community, and now things are coming to a head because of that,"
Kinder Morgan receives FERC approval for Elba Liquefaction Project - Houston-based Kinder Morgan Inc. announced June 2 that it has received approval from the the Federal Energy Regulatory Commission for its new $2 billion liquefied natural gas project in Georgia. The development, dubbed the Elba Liquefaction Project, will be at Kinder Morgan's existing Elba Island LNG Terminal near Savannah, Georgia. It is expected to have a total capacity of 2.5 million tonnes per year of LNG for export, which is equivalent to about 350 million cubic feet per day of natural gas. The first 10 units of the project are slated to be completed in the second half of 2018, with nine more units expected to come online by the end of that year. FERC also approved $306 million in projects by Kinder Morgan's subsidiaries, Elba Express Company LLC and Southern Natural Gas Company LLC, to expand the capacity of the pipeline. The expansion is expected to be completed in the fourth quarter of 2016. Earlier this year, Kinder Morgan awarded Houston-based IHI E&C International Corp. a contract for the engineering, procurement, construction, commissioning and startup of the project, according to a statement. The Elba project began as a joint venture between Kinder Morgan and Royal Dutch Shell, in which Kinder Morgan owned 51 percent and Shell owned the remaining 49 percent. In July 2015, Kinder Morgan announced that it had agreed to buy Shell's interest in Elba Liquefaction Company LLC, which owns the project. The Hague-based Shell, which has its U.S. arm headquartered in Houston, still retains its 20-year contract to subscribe to 100 percent of the terminal’s export capacity.
The Sand Mines That Ruin Farmland - — Many of the environmental hazards of the gas extraction process, called hydraulic fracturing or fracking, are by now familiar: contaminated drinking water, oil spills and methane gas leaks, exploding rail cars and earthquakes. A less well-known effect is the destruction of large areas of Midwestern farmland resulting from one of fracking’s key ingredients: sand. Fracking involves pumping vast quantities of water and chemicals into rock formations under high pressure, but the mix injected into wells also includes huge amounts of “frac sand.” The sand is used to keep the fissures in the rock open — acting as what drilling engineers call a “proppant” — so that the locked-in oil and gas can escape.Illinois, Wisconsin and Minnesota are home to some of the richest agricultural land anywhere in the world. But this fertile, naturally irrigated farmland sits atop another resource that has become more highly prized: a deposit of fine silica sand known as St. Peter sandstone. This particular sand is valued by the fracking industry for its high silica content, round grains, uniform grain size and strength. .In the Upper Midwest, this sandstone deposit lies just below the surface. It runs wide but not deep. This makes the sand easy to reach, but it also means that to extract large quantities, mines have to be dug across hundreds of acres. At the end of 2015, there were 129 industrial sand facilities — including mines, processing plants and rail heads — operating in Wisconsin, up from just five mines and five processing plants in 2010. At the center of Illinois’s sand rush, in LaSalle County, the Chicago Tribune found that mining companies had acquired at least 3,100 acres of prime farmland from 2005 to 2014. In the jargon of the fracking industry, the farmland above the sand is “overburden.” Instead of growing crops that feed people, it becomes berms, walls of subsoil and topsoil piled up to 30 feet high to hide the mines.
Texas firm cancels application to build $3.3B natural gas pipeline (AP) — Houston-based Kinder Morgan has withdrawn its application for a federal permit to build a $3.3 billion natural gas pipeline and a network of compressor stations. The 420-mile Northeast Energy Direct pipeline was intended to send natural gas from Pennsylvania’s shale gas fields across upstate New York to New England. The company announced last month that it was suspending work on the project, citing a lack of contracts with gas distribution companies. It formally withdrew its application with the Federal Energy Regulatory Commission on Monday. New York regulators last month denied a water quality permit for the Constitution Pipeline, which would have followed much of the same route. That pipeline’s developers are challenging the state’s action in court.
Corruption is How The O&G Industry Gets It Done -- The O&G Industry spend millions of dollars each year influencing elected officials to turn a blinds eye and create an unlevel playing field for Industry to enable them to go about their business unencumbered by state and local environmental regulations. America is a Banana Republic by any other name and most of our elected officials are whores…Oil industry has captured California’s regulatory apparatus. Underneath California’s veneer as a “green leader” is a dark and oily reality — the state is the third largest petroleum producer in the nation and the oil industry is California’s largest and most powerful political lobby. In fact, last year’s oil industry “gusher” of lobbying expenses ensured that no environmental bill opposed by Big Oil was able to make it out of the Legislature unless it was amended, as in the case of SB 350, the green energy bill. The oil lobby broke its prior spending record, spending $22 million over the past year. The oil industry’s chief lobbying group, the Western States Petroleum Association (WSPA), headed by Association President Catherine Reheis-Boyd, spent around $11 million alone during this period. (http://www.eastbayexpress.com/SevenDays/archives/2016/02/11/california-oil-lobby-spent-a-record-22-million-in-2015) The lobbying figures for the first quarter of 2016 are now in, revealing that lobbying expenses by the oil industry have continued to soar in the 2015-2016 Legislative Session. The Big Oil heavy hitters – WSPA, Chevron, Phillips 66, AERA Energy, Exxon and Shell – have spent more than $25 million so far in the 2015-16 legislative session, according to the latest report on oil industry lobbying by the American Lung Association in California. The oil industry has been spending an average of $55,000 per day since January 1, 2015, So far in 2016, Big Oil has reported $3.5 million in lobbying expenses.(http://www.lung.org/local-content/california/documents/oil-industry-lobbying-2016-may-2-2016.pdf) WSPA has spent $12.8 million so far in the session, ‘making them, as usual, the top California lobbying spenders of the session,”
Oil’s “Slick” Cover-up…The “See No Evil” Approach The Oil & Gas Industry have relied on lies, corruption and and cover-ups in order to operate since first created, and Americans are now learning first-hand what indigenous people around the globe have been dealing with for almost 100 years. Hiding bad news from Texans. An El Paso Times story last month revealed the existence of numerous aerial photos of flood-related oil spills on a state-run website. The response from the state of Texas was predictable, yet still disappointing: State officials ordered the photos removed from a website operated by the University of Texas at Austin. State officials ordered the photos removed from a website operated by the University of Texas at Austin. The photos, which weren’t generally known to the public until the Times’ story, showed potential environmental damage caused by flooding in oil drilling areas, including fracking sites. The photos provided useful information, particularly to people who live in or near the affected watersheds. But a state official said the photos were meant to be used by emergency management personnel in real-time settings. “In consultation with UT staff, the photos have been removed from the public domain, as they are not vetted for privacy concerns or related issues in real-time when uploaded during an emergency,” Ken Kramer, water resources chairman of the Lone Star Chapter of the Sierra Club, said the photos are of interest to the public. He was skeptical about the unspecified privacy concerns raised by state officials. “The public has a right to know about flooding events that could pose a threat to their health and their environment,” Kramer said. “Removing air surveillance photos of floods of oil and gas facilities from public access is a blow to transparency and accountability. It’s ridiculous to say that this was done for privacy concerns.”
Possibility of Indian burial site stalls Dakota Access pipeline (AP) — The possibility of an American Indian burial site in northwest Iowa may require relocation of a crude oil pipeline route and delay the beginning of construction in Iowa, the only one of four states where work hasn’t begun. The Dakota Access pipeline passes through the Big Sioux Wildlife Management area in Lyon County, traditional homeland for the Dakota Sioux where Standing Rock Sioux Tribal leaders say there is a burial site. “The site has been identified by the tribe as of historical and cultural significance with associated burial activity,” said State Archaeologist John Doershuk. Under Iowa law, Doershuk must now study the area to determine whether it is more than 150 years old. If so, it is considered ancient burial grounds and he is obligated under Iowa law to protect it from disturbance. The Sioux ceded land in the region to the U.S. government by treaty in 1851, according to a history of Lyon County, Iowa, posted on the county’s website. The wildlife area is managed by the Iowa Department of Natural Resources but the U.S. Fish and Wildlife Service owns the property. The federal agency in March granted Iowa permission to issue a permit for the pipeline to run through the area but on Wednesday informed the state agency the permit was revoked due to the discovery. “We did send a letter to the DNR stating to please stop all clearing and ground disturbing activities within that pipeline corridor on the Big Sioux pending further investigation,” said Mara Koenig, a spokeswoman for the agency’s Midwest region. “We’ll work with state archaeologist to review evidence that is collected from that site so we can determine the next course of action.”
Iowa Utility Board Delays Decision on Bakken Pipeline Timeline -- There was no decision made Wednesday on when the Bakken pipeline will go in the ground. The Iowa Utilities Board met Wednesday morning to consider whether or not to give Dakota Access the go-ahead to start building. The decision would only apply to areas where it already has approval, which means everything but the 37-mile stretch the U.S. Army Corps of Engineers is still considering as well as three parcels currently under litigation. The pipeline company argues that starting now will help farmers. They say it will prevent construction from going into a second growing season. The Iowa Utilities Board could make a decision on Dakota Access moving forward by the end of the week.
Green light likely for Bakken pipeline construction in Iowa: (AP) State utility regulators signaled Wednesday they are ready to give a green light to begin digging to construct the Bakken oil pipeline through most of a 346-mile route that will slice diagonally through 18 Iowa counties. Two of three members of the Iowa Utilities Board said they are prepared to approve a request by Dakota Access, LLC, a unit of Dallas-based Energy Transfer Partners, to begin work on the pipeline. However, Dakota Access would not immediately be allowed to proceed with pipeline construction on water crossings overseen by the U.S. Army Corps of Engineers, which has jurisdiction over about 2.5 percent of the land along the Iowa route. Construction also could not immediately proceed where the company has not obtained an easement either voluntarily or through use of eminent domain. Board members Libby Jacobs and Nick Wagner said they believe that allowing work to begin on certain sections of the route would comply with an order they issued in March to grant a state permit for the pipeline project. Authorizing construction "would seem to be the next logical step," Jacobs said. However, Chairwoman Geri Huser had questions, expressing concerns the board was modifying conditions it established in March which included a requirement that all state and federal permits be obtained before construction could begin. But Wagner downplayed Huser's reservations about the board's pending actions, saying, "I view it as more of a clarification." The board directed its staff to develop an order for pipeline project that at least a majority of the board is expected to sign later this week.
Colorado Home to Best-Value Frac Wells -- The Denver-Julesburg basin in Colorado hosts the most commercial, or low-cost, fraclog in the United States, according to a study by Rystad Energy. The costs per barrel of oil extracted after the wells are fracked equal US$4.70 and the basin holds almost 600 unfracked wells that await crews to complete the process. A large number of incomplete wells have piled up due to delays by Anadarko Petroleum - the Texas-based company that operates half of Weld County’s fraclog. Three other companies--PDC Energy, Noble Energy and Whiting Petroleum--each preside over 10 percent of the uncompleted wells. Rystad’s report says the drilled but uncompleted (DUC) wells become economical when the West Texas Intermediate (WTI) barrel price reaches just $30 a barrel. NASDAQ says WTI traded at $49.54 on Friday. Reeves County in the Permian Delaware ($4.80 in costs per barrel) and McKenzie County in the Bakken ($5.10 in costs per barrel) also exhibited favorable economics. The study implies that a major part of the US’ DUC inventory is profitable even as prices are low and recover only slowly. The Wall Street Daily reported when oil solidly hits $50 dollars a barrel – which it briefly did earlier this week – a portion of 4,000 fraclogged wells could go online in a matter of months. On average, it takes around 80 days to bring a fraclogged well back into production, according to Bloomberg. If 170 wells a month began producing oil, a fresh supply of 500,000 barrels a day would enter international markets – potentially causing another price drop.
What happens to hydraulic fracturing wastewater on cropland - The use of hydraulic fracturing, or "fracking," has grown rapidly in the U.S. over the past 15 years -- but concerns persist that the oil and gas extraction method could harm the environment and people's health. To better understand its potential effects, scientists simulated what would happen to the wastewater produced by the technique after a spill. They published their findings in the ACS journal Environmental Science & Technology. This spring, the U.S. Energy Information Administration estimated that hydraulic fracturing accounts for two-thirds of the country's natural gas production. The Colorado Oil and Gas Conservation Commission received reports of 838 spills that released a total of more than 660,000 gallons of fluids associated with fracking in 2014. Since hydraulic fracturing and, potentially, any associated spills often occur near agricultural land, Jens Blotevogel, Thomas Borch and colleagues wanted to find out whether compounds in the wastewater biodegrade or stick around in the soil where they might be taken up by crops. The researchers tested the fates of three common hydraulic fracturing additives in agricultural topsoil. The surfactant polyethylene glycol completely degraded within 42 to 71 days. But the surfactant did not break down when combined with another hydraulic fracturing additive called a biocide at a salt concentration typical for wastewater produced during oil and gas extraction. The researchers say their findings highlight the need for further testing to better understand spills' potential effects on crops and the environment.
Hydraulic Fracturing Chemical Spills On Agricultural Land Need Scrutiny Say CSU Researchers -- Hydraulic fracturing involves not only underground injections composed mostly of water, but also a mixture of chemical additives. These chemicals range from toxic biocides and surfactants, to corrosion inhibitors and slicking agents, and many are also used by other industries. A Colorado State University research team desired a deeper understanding of the fate of these chemicals when they are spilled accidentally during either transportation or production in oil and gas operations. These spills, especially in Colorado, often take place on or near agricultural lands. The researchers cite 838 total hydraulic fracturing fluid spills in Colorado, reported to the Colorado Oil and Gas Conservation Commission in 2014. They tested three well-known organic chemicals: polyethylene glycol (PEG), a commonly used surfactant; glutaraldehyde, a biocide that prevents pipe corrosion from microbial activity; and polyacrylamide, a slicking agent that allows hydraulic fracturing fluid to better penetrate shale. They looked at how these chemicals interact both with each other, and with naturally occurring salts underground. They found that the PEG (surfactant) by itself completely biodegrades within about 70 days, but that in combination with glutaraldehyde (biocide), the PEG stayed in the soil much longer. That biodegradation was fully inhibited by salt concentrations typical for oil and gas extraction activities. “Our motivation for doing this is because the chemicals often come up as mixtures,” Borch said. “While you may see biodegradation of a surfactant under normal circumstances, if you spill that together with a biocide that kills bacteria, maybe you don’t break that surfactant down as quickly. And that’s exactly what we see. If chemicals don’t degrade as quickly, it gives them more time to be transported to groundwater or sensitive surface water.”
Hidden, Abandoned, Dangerous: Old Gas And Oil Wells In Neighborhoods - In 2007, Rick Kinder was working for a contractor, building a house in southern Colorado. “And we just heard this big roar and then a big boom and it threw us against the walls, and it just blew the whole top of the roof off,” Kinder says. He and his colleagues didn’t know it but they were building on top of an abandoned gas well that was leaking methane — an odorless and highly explosive gas. No one was killed in the explosion, but the blast sent Kinder into cardiac arrest. He ended up having a quadruple bypass. In many parts of the country, areas that are now full of houses and schools and shopping centers were once oil and gas fields. You wouldn’t know it by looking, but hidden underground, there are millions of abandoned wells. New development happening on top of those old wells can create a dangerous situation. In most states, there is no requirement for homeowners to be notified about abandoned oil and gas wells on their properties. The trouble is that it might be hard to know if the wells were emitting something. When a well stops producing commercial quantities of oil and gas, companies “abandon” it, usually by filling the well with cement to stop the flow of gas and fluids. The industry considers that the end of a well’s life. The belief that a well is dead once it’s plugged means there is no systematic monitoring for leaks. We simply don’t know what percent of abandoned wells are leaking — but we do know that at least in a handful of cases, it’s happened, as it did to Kinder.
Colorado's new, higher oil and gas fines are biting industry: (AP) — Colorado is imposing heftier fines on energy companies as the state struggles to resolve conflicts between growing cities and big oilfields at their doorstep, an Associated Press analysis shows. Regulators say the tougher penalties for breaking health, safety and environmental rules are prompting energy companies to be more careful. Others say it’s too early to call them a success. The higher fines kicked in a year ago after lawmakers said Colorado’s existing penalties were too light. The AP reviewed records for the first 12 months under the new system, from April 2015 through March 2016, and found regulators levied 74 fines totaling $5.3 million — both higher than any calendar year for the previous 20 years. Regulators also handed out Colorado’s largest single oil and gas fine in at least 21 years, $1.3 million for a series of leaks at facilities owned by Benchmark Energy in a remote part of the state. That fine probably would have been around $500,000 under the old system, said Matt Lepore, director of the Colorado Oil and Gas Conservation Commission, which regulates the industry. Lepore said he doubts Benchmark will be able to pay the fine because it’s a small operation. Companies that don’t pay can lose permits they need to do business in the state. Benchmark officials didn’t return phone messages seeking comment. The new penalty system raised the maximum daily fine from $1,000 to $15,000 and eliminated a fine cap of $10,000 per violation. Although there is no ceiling now, fines must be commensurate to the infraction, Lepore said.
North Dakota oilfield cleanup project scrubbed due to funding (AP) — Scientists have halted a project aimed at finding a new way to restore North Dakota land ruined by briny oilfield wastewater, determining there wasn’t enough money allocated to complete the research. The scientists, at the University of North Dakota’s Energy and Environmental Research Center, have found that the site in Renville County is double the size of what had been thought and isn’t feasible now because of additional costs involved, said John Harju, an EERC vice president.Harju said the researchers will use the money now to monitor — but not clean — some additional sites affected by oil development. The North Dakota Industrial Commission, a three-member panel that includes Republican Gov. Jack Dalrymple, approved the change in plans Monday. The Legislature last year set aside $1.5 million from portion of a tax on North Dakota oil production to restore land impacted from oil booms past and where companies no longer are legally responsible for land ruined by saltwater, a byproduct of oil production that can be many times saltier than seawater. Part of the effort was aimed at allowing North Dakota’s two biggest universities to develop a method of restoring such sites without the use of expensive mechanized excavation and hauling in new dirt to re-cover the land. UND’s research center got a $500,000 grant to use pumps and drainage tiles to flush and recover salt from sites, instead of digging it up. Harju said the affected site in Renville County was estimated at 7 acres, up from 3 ½ acres estimated earlier. The depth of the affected site also is about 14 feet, or triple initial estimates, he said.
Hamm seeks new home for Bakken crude — Continental Resources chief executive Harold Hamm told a North Dakota audience that he had just returned from South Korea where he was negotiating a deal to sell Bakken crude — a move that would have been unfathomable before last December when Congress and President Barack Obama ended four decades of oil export restrictions. "I just got back from South Korea to arrange a deal to deliver oil from the Bakken to South Korea," Hamm said."And we are going to be able to do that. We are going to have Bakken oil going to South Korea." While it is not clear if a deal has been finalized, Hamm's statement appeared to be news to his own public relations team. A company spokeswoman yesterday said she had not spoken with Hamm since his return from Asia and would not have anything to add until next week. Continental is not new to Asia, as it already partners with South Korea's SK Group on gas production in Oklahoma. SK operates the 870,000 b/d refinery in its home country, although it is not immediately clear if it is the trade partner Hamm mentioned at the Trump speech. Logistics are a hurdle. There are no plans to span the Rocky Mountains with a westbound crude pipeline, so the only two options are rail to the Pacific coast or transport to the US Gulf coast paired with a long voyage. While most of the Pacific northwest crude-by-rail unloading terminals are run by refiners that do not offer merchant services, Global Partners' facility at Clatskanie, Oregon, does and has ready access to the Pacific.
Oil train derails near Mosier in Oregon's Columbia River Gorge -- An oil train derailment Friday in the Columbia River Gorge near Mosier sent up a massive plume of black smoke and stoked long-standing fears about the risks of hauling crude oil through one of the Pacific Northwest's most renowned landscapes. Eleven cars from a 96-car Union Pacific train jumped the tracks west of the small city about 12:20 p.m., next to Rock Creek that feeds the Columbia River. Several rail cars caught on fire and at least one released oil, but it's not known how much, railroad officials said. No oil reached the river or its tributaries, authorities said late Friday. Railroad crews placed booms across the creek to prevent contamination. Workers plan to cool off the derailed cars and then will use foam on the burning cars, but cautioned that the risk of fire and possible explosion remains. The train originated in New Town, North Dakota, and was moving crude extracted from the Bakken formation to the U.S. Oil & Refining Co. refinery in Tacoma, said company spokeswoman Marcia Nielsen. The accident closed a 23-mile stretch of Interstate 84 in both directions as a precaution and caused the evacuation of a community school and people in a quarter-mile radius. The cars derailed within about 20 feet from the city's sewage plant, said Arlene Burns, mayor of the city of 440 people, east of Hood River. Residents have been asked not to use bathrooms and other drains into the city's sewage lines. "We've been saying for a long time that it's not fair for trains with toxic loads to come into our towns near our Gorge," Burns said. "We don't have the capacity to fight these fires."
Oregon train derailment spills oil, sparks fire: (AP) — A train towing cars full of oil derailed Friday in Oregon’s scenic Columbia River Gorge, sparking a fire that sent a plume of black smoke high into the sky. The accident happened around noon near the town of Mosier, about 70 miles east of Portland. It involved eight cars filled with oil, and one was burning, said Ken Armstrong, state Forestry Department spokesman. Highway 84 was closed for a 23-mile stretch between The Dalles and Mosier and the radius for evacuations was a half-mile. About 200 students were evacuated from an elementary and middle school near the scene. The train was operated by Union Pacific. Railroad spokesman Justin Jacobs didn’t return calls. Silas Bleakley was working at his restaurant in Mosier when the train derailed. “You could feel it through the ground. It was more of a feeling than a noise,” he told The Associated Press as smoke billowed from the tankers. Bleakley said he went outside, saw the smoke and got in his truck and drove about 2,000 feet to a bridge that crosses the railroad tracks. There, he said he saw tanker cars “accordioned” across the tracks. Another witness, Brian Shurton, was driving in Mosier and watching the train as it passed by the town when he heard a tremendous noise. “All of a sudden, I heard ‘Bang! Bang! Bang!’ like dominoes,” he said. He, too, drove to the bridge overpass to look down and saw the cars flipped over before a fire started in one of the cars and he called 911, he said. “The train wasn’t going very fast. It would have been worse if it had been faster,”
Huge Fire Erupts After At Least 8 Oil Cars Derail Near Oregon - Live Feed --A train towing cars full of oil derailed on Friday in Oregon's scenic Columbia River Gorge,sparking a fire that sent a plume of black smoke high into the sky. According to witnesses, multiple cars derailed and smoke and flames can be seen in downtown Mosier near the Rock Creek overpass. The train is operated by Union Pacific, who had not returned calls at the time. From KSL The accident happened just after noon near the town of Mosier, about 70 miles east of Portland. It involved eight cars filled with oil, and one was burning, said Ken Armstrong, state Forestry Department spokesman. Highway 84 was closed for a quarter-mile near the site, and the radius for evacuations was a half-mile.The train was operated by Union Pacific. A spokesman for the railroad didn't immediately return calls. Silas Bleakley was working at his restaurant in Mosier when the train derailed. "You could feel it through the ground. It was more of a feeling than a noise," he told The Associated Press as smoke continued to billow from the tankers. Bleakley said he went outside, saw the smoke and got in his truck and drove about 2,000 feet to a bridge that crosses the railroad tracks. There, he said he saw tanker cars "accordioned" across the tracks.
I-84 closed due to oil train derailment in the Gorge -- An oil train passing through the Columbia River Gorge near Mosier derailed Friday afternoon, igniting a fire and sending out large plumes of smoke. The train derailed at about 12:20 p.m. Interstate 84 is closed from The Dalles to Hood River. The closure was from Cascade Locks to The Dalles earlier in the afternoon. ODOT recommends using the Hood River Bridge as a detour and the toll will be waived during the closure. Traffic on Highway 14, across from the Columbia River, is backed up. Residents were immediately evacuated within a quarter-mile of the crash. KGW's Pat Dooris reports Mosier residents have been warned that a mandatory one-mile evacuation could be put in place at anytime. The city is also worried about a sewage treatment plant near the fire. A boil water notice has been sent to Mosier residents. A Red Cross shelter was opened in The Dalles for evacuees. The shelter is located at the Dry Hollow Elementary School at 1314 E. 19th St. Union Pacific says 11 rail cars from the 96-car crude oil train derailed. The train was on its way to Tacoma, Washington, from Eastport, Idaho.The cause of the crash is under investigation. Oil was released from at least one rail car and multiple cars caught on fire. It wasn't immediately clear how much oil was released. Union Pacific sent a hazardous response team to contain the oil. There was an explosion and the fire intensified at about 5 p.m. A cooling operation began knocking down flames at about 6:30 p.m. Crews were focusing on cars that weren't on fire before going after the engulfed rail cars.
Oil train derails and catches fire, forcing Oregon town to evacuate - An Oregon river town was evacuated Friday afternoon after an oil train derailed and two cars caught fire and sent thick smoke into the air, the sort of accident that communities along the rail route have long feared and said they were not prepared to handle. The town of Mosier, population 440, was evacuated after the 12:30 p.m. derailment. No one was hurt when the 96-car train derailed, authorities said, and no oil was believed to have reached the Columbia River. The cause of the derailment remains under investigation. Each month, milelong Union Pacific trains carry 3 million gallons of Bakken crude oil on the Oregon side of the Columbia River Gorge to refineries in Washington state. The gorge is dotted with small, rural towns that are ill-equipped to fight fires involving volatile crude oil. In a survey last year of 80 Oregon fire agencies along the gorge, the state fire marshal found that 90% were unprepared to fight a fire resulting from a spill. The state relies on 13 regional hazardous materials teams to fight oil train fires. But given the geography, the teams have a “goal response time” of 2 ½ hours. It’s unclear how long the hazardous materials team took to reach Friday’s fire. And though the state fire marshal requested $2.7 million last year for training and equipment, the Legislature provided just $365,000. Columbia Riverkeeper, an environmental advocacy group that opposes oil trains in the Columbia Gorge, concluded this year that “neither Oregon’s local fire departments nor Oregon’s Regional HazMat Teams are equipped to respond to and extinguish an oil train fire.” . The derailment occurred on the edge of Mosier, next to its sewage treatment plant, said Columbia Riverkeeper’s executive director, Brett VandenHeuvel, who surveyed the overturned oil cars from an airplane. “We’ve been saying, it’s not a matter of if, it’s a matter of when,” he said. “Now they’re scrambling to get foam from different places.” One of the cars derailed into Rock Creek, a dry riverbed that occasionally floods into the Columbia. The accident has raised worries among the Yakama Nation tribe, which has a fishing site downriver from where the train derailed.
Exporting Fracked Oil to China Via Oregon Bomb Trains All in accordance with $hillary’s plan . . Oil Train Derails, Catches Fire In Oregon (CBS / AP) –A train towing a highly volatile type of oil derailed Friday in Oregon’s scenic Columbia River Gorge, igniting a fire that sent a plume of black smoke high into the sky and spurring evacuations and road closures.Eleven cars derailed in the 96-car Union Pacific train and at least one ignited, releasing oil alongside tracks that parallel the region’s treasured Columbia River, said Aaron Hunt, a spokesman for the railroad. All the cars were carrying Bakken oil, a type of oil that is more flammable because it has a higher gas content and vapor pressure and lower flash point than other varieties.The accident immediately drew reaction from environmentalists who said oil should not be transported by rail, particularly along a river that is a hub of recreation and commerce. “Moving oil by rail constantly puts our communities and environment at risk,” said Jared Margolis, an attorney at the Center for Biological Diversity in Eugene, Oregon. It wasn’t immediately clear if oil had seeped into the river or what had caused the derailment. Hunt did not know how fast the train was traveling at the time, but witnesses said it was going slowly as it passed the town of Mosier, Oregon, about 70 miles east of Portland.
Feds give thumbs-up to fracking off California coast -- An environmental assessment from two federal agencies released Friday determined that fracking off the coast of California causes no significant impact, thus lifting a moratorium on hydraulic fracturing that was instituted earlier this year.An environmental assessment from two federal agencies released Friday determined that fracking off the coast of California causes no significant impact, thus lifting a moratorium on hydraulic fracturing that was instituted earlier this year. "The comprehensive analysis shows that these practices, conducted according to permit requirements, have minimal impact," Abigail Ross Hopper, director of the Bureau of Ocean Energy Management, said in a statement. The Bureau of Safety and Environmental Enforcement joined in the assessment, which analyzed well stimulation treatments on 23 oil and gas platforms off California's coast between 1982 and 2014, and came back with a "Finding of No Significant Impact." The Center for Biological Diversity, the environmental group that filed a lawsuit that resulted in the moratorium, said Friday it is considering filing another suit in light of the agencies' decision. Companies still need to go through the federal application and permitting processes to frack at individual sites. Industry officials welcomed the Friday's announcement.
Federal Agencies Find That Fracking In The Pacific Would Have No ‘Significant’ Environmental Impacts - The debate over fracking in California is about to get even more heated, following a report from two federal agencies that found that fracking for oil and gas in the ocean — known as offshore fracking — is unlikely to have a “significant” impact on the environment. On Friday, both the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) jointly released an environmental study that looked at the impact of hydraulic fracturing — or fracking — on marine ecosystems. The report analyzed 23 offshore fracking operations that operated in California between 1982 and 2014, and found that the operations have a minimal impact on the quality of water and ocean health. To the fossil fuel industry, this signals a return to normalcy, as both the BOEM and BSEE will resume approval of offshore fracking permits that they had temporarily suspended while the environmental study was being conducted. But for environmental groups, the report is a troubling development. According to the Center for Biological Diversity, oil companies have fracked at least 200 wells off the coast of California — and opponents of fracking worry that these operations could be putting both California wildlife, and California residents, at risk.Fracking is a really dirty and dangerous practice that has no place in our ocean “I think it’s just absurd that the agency could look at the environmental of offshore fracking and make a finding that there is no significant environmental impact,” Miyoko Sakashita, oceans director for the Center for Biological Diversity, told ThinkProgress. According to Sakashita, fracking companies are currently allowed to discharge 9 billion gallons of wastewater into the ocean each year — and that waste water can include toxic chemicals. There is no limit for the amount of chemicals that companies can discharge into the ocean, and companies are not required to disclose which chemicals they use in their operations.
Hercules Offshore strikes deal with lenders (AP) — Oilfield services company Hercules Offshore has worked out an agreement with lenders before it seeks Chapter 11 bankruptcy protection, the second time will have done so in less than year. This time, however, the company is selling assets to pay off investors. Hercules transferred the right to acquire the rig, formerly named Hercules Highlander, to a subsidiary of Maersk Drilling. Maersk Highlander UK Ltd. succeeds to the right to take delivery of the rig and will settle the final payment of approximately $196 million with Jurong. In August of 2015, the company filed for bankruptcy and emerged in November after restructuring with a new $450 million credit facility. That filing showed that the Houston company had $1.3 billion in debt and $546.3 million in assets, at the time. Hercules completed its first restructuring in early November. On November 6, 2015, Hercules completed its initial financial restructuring under Chapter 11 of the U.S. Bankruptcy Code with a new $450 million senior secured credit facility in place. While there has been a slight recovery in crude prices, a barrel broke $50 for the first time this year, there has been tremendous damage in the energy industry. “Since this time, the ongoing decline in oil prices, the consolidation of its U.S. customer base and the addition of new capacity have negatively impacted dayrates and demand for Hercules’s services,” the company said Friday. The company had wanted to sell more of its assets as part of a recovery but that, “did not yield results that would have been better for stakeholders.”
Oil Company Warren Resources Files for Chapter 11 Bankruptcy Protection -- Warren Resources Inc, an oil and gas producer that operates in California, Pennsylvania and southwestern Wyoming, filed for bankruptcy protection Thursday after reaching a deal on the terms of a debt-for-equity swap with Blackstone Group’s GSO Capital Partners. In court papers filed in U.S. Bankruptcy Court in Houston, Denver-based Warren said lenders led by GSO Capital will swap $248 million they are owed for an 82.5% stake in the reorganized company. The investment firm has also agreed to provide it with a $130 million bankruptcy-exit loan and an additional $20 million to fund the chapter 11 case. Junior lender Claren Road Asset Management LLC, a struggling hedge fund owned by Carlyle Group, bondholders and Citrus Energy will divide among themselves the remaining 17.5% stake in the reorganized company. The restructuring pact, which requires court approval, will form the basis of Warren Energy’s chapter 11 plan. Warren, with about $230 million in assets and $545 million in debts, joins more than 80 North American oil and gas companies that have filed for bankruptcy protection since last year, according to law firm Haynes & Boones. It failed to make a $7.5 million interest payment on Feb. 1.
Condensates after Lifting of the Crude Export Ban - Still Being Whipsawed -- “Condensates are long and you can’t give them away … No, things have changed – condensate supply is tight and prices are running up relative to WTI … But wait wait, the oversupply is back and prices are down again.” No wonder the market’s love for condensates has faded. It’s a liquid hydrocarbon that is being buffeted by every force the market can bring to bear: declining production, lots of new committed infrastructure (stabilizers, pipelines, and splitters), wide-open export markets, volatile crack spread splitter economics -- the list goes on. Adding to this whirlwind is the fact that historically there has been limited analytical data to work with, with most condensate information buried deep inside crude production numbers from producer investor presentations and less-than-revealing Energy Information Administration (EIA) crude oil reports. But we have some new tools to help understand what’s going on, including the EIA’s new 914 crude quality data and condensate export numbers from ClipperData. Today, we continue our exploration of rapidly evolving condensate markets.
Mackenzie gas project in Canada's Northwest Territories gets extended deadline - The long-planned and frequently delayed Mackenzie Gas Project, a C$16 billion ($21.21 billion) pipeline that would carry 1.2 Bcf/d from the gas-rich Mackenzie Delta in Canada's Northwest Territories to pipelines in northern Alberta, was given a life extension Thursday. In an announcement, Canada's National Energy Board said it would extend the sunset clauses for the project developers until December 31, 2022. The project developers, led by Imperial Oil, last summer had asked for an extension of a December 2015 deadline for a project investment decision. In a letter to the developers, the NEB said the project "is still in the public interest" and that the original conditions attached to the project will require that it be designed, constructed and operated in a way that is safe and protects the environment.The project is a joint venture of Imperial, Shell, ConocoPhillips, ExxonMobil and the Aboriginal Pipeline Group. The proposed 1,842-km (1,144-mile) pipeline is designed to carry 1.2 Bcf/d from the gas-rich Mackenzie Delta near the Beaufort Sea south through the Northwest Territories to link with pipelines in northern Alberta. Proponents of the project still face many challenges, not the least of which is building a major gas pipeline to bring gas into markets already awash with the output of shale plays. Imperial asked the NEB to extend the sunset clauses on August 20, 2015. On November 9, NEB extended the sunset clauses to September 30, 2016 so it could consider the application.
Why The Arctic Oil Dream Is Not Over Yet -- The race to discover oil and gas in virgin Arctic waters is now on, as Norway offered oil majors a lifeline on Wednesday by opening up what experts say could be home to 15 percent of the world’s undiscovered oil and 33 percent of the world’s undiscovered natural gas. Norway officials on Wednesday awarded 10 new oil and gas licenses to explore the untapped area of the Arctic Barents Sea, an area that until 2011, was disputed for almost 40 years with Russia. The drilling licenses consist of 40 blocks that were awarded to 13 oil companies. Of the licenses granted, 13 companies were offered participating interests, and five were offered operating licenses. Norway has not offered exploration licenses for new acreage in over twenty years, and this new acreage is particularly appealing to oil explorers. “The big prizes in Norwegian oil are still in the Barents Sea—it is very under-explored.” Companies gaining licenses include Centrica, Tullow Oil, Statoil, Chevron, and Lukoil. Statoil, Norway’s largest oil explorer and producer, has been awarded five of the coveted Arctic licenses. It expects to drill the first well in 2017. Statoil had previously been forced to cut its Norway drilling activity in 2015 after oil prices slumped, drilling only 16 wells in the area in 2015, down from 21 in 2014. By the end of 2015, Statoil’s 2016 outlook for its Arctic activities seemed bleak, and more cuts were expected. But Wednesday’s new licenses for unexplored areas bring new optimism for Statoil.
Scotland Bans Fracking, Forever | OilPrice.com: The Scottish Parliament voted to ban fracking countrywide on Wednesday, making a moratorium on the controversial technique a permanent affair. The narrow vote can after the legislative body temporary outlawed fracking in January 2015 while it conducted a public health impact assessment and consulted environmental experts. The Scottish Greens, the Liberal Democrats, and the Labour Party joined together to hand a 32-29 defeat to the Conservatives, who vehemently opposed the permanent measure, The Guardian reported. Legislators affiliated with the Scottish National Party chose to abstain from the vote, which prompted its fellow liberal parties to call on the group's leaders to clarify its position on fracking and its energy platform. The Scottish National Party’s energy minister, Paul Wheelhouse, said he and his government remained “deeply skeptical” on the merits of fracking and confirmed that the practice would not be allowed in Scotland until there is clear evidence that it does not cause health-related or environmental harm. Maurice Golden, a newly elected member of parliament for the Conservative party, argued in favor of fracking, and said the “leftwing cabal” of the three united liberal parties had been “ignoring” scientific evidence regarding the practice, which, if allowed, would add jobs and boost the economy.
The Crude Crash Has Created Oil’s Technological Superpowers | OilPrice.com: Falling oil prices which started in late 2014 have highlighted an increased emphasis on the cost of producing oil, particularly from shale oil formations in the U.S. With 50 percent of U.S. oil production coming from U.S. shale, analysts initially estimated breakeven prices for shale oil operations to be at $75 per barrel, then lowering those estimates to $50 per barrel, and now, in some core regions, breakeven prices are as low as $30-$35 per barrel. The reason U.S. shale continues to see lower breakeven prices is because companies in the U.S. continue to innovate shale drilling techniques and technology. Similarly, Canadian shale drilling continues to improve alongside that of the U.S., and Canada has implemented similar technological progress towards the extraction and refining of oil from its oil sands. This continued U.S. improvement in oil and gas drilling, extraction, and refining technology provides for the hypothesis that such cutting-edge and unrivaled capability has the effect of anointing a qualification to those within the industry as “the technological superpowers of oil.” For some time, oil & gas producing countries as well as those countries that depend on energy imports have been experiencing a decline in domestic production, forcing these countries to increasingly turn to technology for oil & gas drilling, extraction, and production. The technology they turn to has principally been developed by experts in the U.S. and Canadian oil & gas markets, and is now being earnestly adopted by countries around the world.
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.
Trends in oil supply and demand – Jim Hamilton -- World oil production barely increased between 2005 and 2013. Yet this was a period when oil consumption from the emerging economies was growing rapidly. For example, Chinese imports of crude oil grew by a million barrels a day between 2005 and 2008 and increased by another two million barrels a day between 2008 and 2013. How could China realize such a big increase in consumption when very little additional oil was being produced worldwide? The answer is that consumption in places like the United States, Europe, and Japan had to fall. The primary factor that persuaded people in those countries to use less was the high average price of oil over 2007-2013. But in the last few years global oil production broke away dramatically from that decade-long plateau. In 2013-2014 the key factor was surging production from U.S. shale formations. That peaked and began to decline in 2015. But world production continued to grow during 2015 thanks to tremendous increases from Iraq. And increases in 2016 may come from new Iranian production now that sanctions have been lifted.The new supplies from the U.S., Iraq, and Iran brought prices down dramatically. And in response, demand has been climbing back up. U.S. consumption over the last 12 months was 800,000 b/d higher than in 2013, a 4% increase. Vehicle miles traveled in the U.S. are up 6% over the last two years. Average fuel economy of new vehicles sold in the United States is no longer improving. Low prices are increasing demand and will also dramatically reduce supply. The EIA is estimating that U.S. production from shale formations is down almost a million barrels a day from last year. These factors all contributed to a rebound in the price of oil, which traded below $30/barrel at the start of this year but is now back close to $50.Nevertheless, I doubt that $50 is high enough to reverse the decline in U.S. shale production.
3 Years Of Painful Cuts Sets Markets Up For Serious Supply Crunch -- Total global oil production could decline for the next several years in a row as scarce new sources of supply come online. According to data from Rystad Energy, overall global oil output will fall this year as natural depletion overwhelms all new sources of supply. But the deficit will only widen in the years ahead due to the dramatic scaling back in spending on new exploration and development. Statoil says that global capex is set to fall for two years in a row, and is on track to fall for a third year in 2017 as more spending cuts are likely. “For the first time in history, we’ve seen cutting of capex two years in a row and potentially we risk a third year as well for 2017,” Statoil’s Chief Financial Officer Hans Jakob Hegge told Bloomberg in a recent interview. “It might be that we see quite a dramatic reduction in replacing the capacity and of course that will have an impact, eventually, on price.” Oil companies are making painful cuts to spending, which will translate into much lower production than expected in the years ahead. Although markets have dealt with the supply overhang for the better part of two years, the surplus could flip to a deficit as early as this year, as declines exceed new sources of production by a few hundred thousand barrels per day. That widens to more than a million barrels per day in both 2017 and 2018. To be sure, there are extremely large volumes of oil sitting in storage, which will take a few years to work through. That will prevent any short-term price spike even if depletion surpasses new production. But Statoil’s CFO said the world could start to see supply problems by 2020.
Natural Gas Shoots up on Technical Trade - WSJ: Natural-gas prices surged to a new four-month high after futures broke through an important technical level and forecasts warmed for one of the country’s biggest markets for demand. Futures for July delivery settled up 11.9 cents, or 5.5%, at $2.28 a million British thermal units. It was the largest daily percentage gain since April 19 and the highest settlement since Jan. 29. The last two trading sessions broke a gradual, but steady, decline for the month, single-handedly pushing May to gains of 11 cents, or 5.1%. It is the third-straight month of gains and gas is up 40% from a 17-year low it hit in early March. Front-month prices are now up 17% since the June contract expired Thursday at just $1.963/mmBtu. July’s contract hasn’t traded below $2/mmBtu since early March, and summer prices are often higher because of increasing demand for gas-fired power to run air conditioners. Weather updates for mid-June are showing warmer temperatures in the southeast than Friday’s updates ahead of the three-day weekend, and that strengthens demand expectations in the biggest region for gas-fired power, according to analysts. But gas may be getting a bigger boost from technical traders who move on price momentum, brokers and trader said. Prices moved above their 200-day moving average Tuesday for the first time since November 2014, which appeared to trigger a lot of buy orders, they said. About a third of the gains came just at 9 a.m. ET, the traditional start of U.S. trading hours when volume usually increases dramatically. That 200-day moving average is a widely-watched trigger for technical traders to close out bearish positions or add to bullish positions. It covers a broad period, so if prices can stay above it, technical traders see it as a major indicator the market sentiment has changed.
European Natural Gas Prices Collapse --Oil and natural gas producers cannot catch a break of late it seems. A few years after the onset of the natural gas glut, Europe is experiencing a similar phenomenon with Russia and Norway using tactics akin to those used by the Saudis with oil. The result is rock bottom prices on natural gas that are benefiting utility companies across the continent. The effective result of these actions is also hitting LNG terminal development economics in the U.S. and minimizing growth of imports from Qatar. In a remarkable development, gas in the UK has fallen 37 percent in the last year just as Cheniere Energy has started offering exports of U.S. LNG to Europe. While Russia and Norway both deny specifically targeting market share through their business approach, it is clear that national firms in both countries are low cost producers that are proving to be the last men standing as prices continue to tumble. Neither country’s producers need to take specific actions to drive market share – all they have to do is be willing to sell at the market’s defined prices and as those prices fall, natural volume declines from other producers leads to increased share.
Fightin' Words; Fight's On -- Earlier we updated the LNG / Poland story. Today, Bloomberg has more: Poland will struggle to replace all the natural gas it gets from Russia’s Gazprom PJSC, including with U.S. supplies, as it bids to lower dependence on its eastern neighbor, according to the Moscow-based company. “Of course, everybody is free to choose how to purchase his gas and to ensure the competitiveness of his economy," Gazprom Deputy Chief Executive Officer Alexander Medvedev told reporters in Moscow Tuesday. “There is a well-known fairy-tale about an old woman who asked a golden fish to turn her into a Sea Empress but in the end she found herself back with her broken washtub in front of her," he said, referring to a story by Alexander Pushkin. Poland, which relies on Russian gas for two-thirds of its needs, has sought lower prices from Gazprom amid political tensions between the nations over President Vladimir Putin’s policies in eastern Europe. The European Union nation will get its first shipments of liquefied natural gas from Qatar and Norway into a new terminal next month, and has proposed doubling its capacity and building a pipeline to Norway to completely cut its reliance on Russia. Poland was Gazprom’s fifth-biggest EU customer last year, buying about 9 billion cubic meters (320 billion cubic feet) worth more than $2 billion. It is one of the most vocal opponents of a push by Putin to expand a natural gas link to Europe that circumvents Ukraine.
Exxon CEO Says Argentine Shale Project May Top $10 Billion - Exxon Mobil Corp. may invest more than $10 billion as it transplants the U.S. shale-drilling model to Argentina’s Vaca Muerta region in the next few decades, Chairman and Chief Executive Officer Rex Tillerson said Thursday. The oil giant has so far invested $200 million in the world’s second-largest shale gas deposit and plans to invest another $250 million in coming months on a pilot project, Tillerson said after meeting with Argentine President Mauricio Macri in Buenos Aires. Unlike the mega-projects that have been Exxon’s hallmark for more than half a century, the shale developments the company began pursuing in 2010 have involved drilling hundreds of individual wells and installing thousands of miles of pipes to squeeze crude and natural gas from deep, dense, onshore fields. If the pilot project is successful, the company will start full development during a period of 20 to 30 years that could involve additional investment “that would be well in excess of $10 billion,” he said. For Tillerson, Argentina’s vast Vaca Muerta shale region represents an opportunity to reverse production losses and add reserves after a $35 billion wrong-way bet on U.S. natural gas and a Russian exploration venture that was derailed by international sanctions. Exxon, the world’s largest oil explorer by market value, has designated Vaca Muerta as one of nine “key activity” areas in the Western Hemisphere and one of just four in South America, according to company data.
Oil tankers in limbo as Venezuela's PDVSA fails to pay BP - sources - (Reuters) - Four tankers carrying over 2 million barrels of U.S. crude are stuck at sea and cannot discharge at a Caribbean terminal because Venezuela's PDVSA has not yet paid supplier BP, according to two sources and Thomson Reuters vessel tracking data. The cargoes are part of a tender Petroleos de Venezuela, known as PDVSA, awarded in March to BP and China Oil. The deal was to import some 8 million barrels of West Texas Intermediate (WTI) crude so Venezuela could dilute its extra heavy crudes and feed its Caribbean refineries. While three cargoes for this tender were delivered in April, seven other vessels, including BP's four hired ones, are waiting to discharge, leaving up to 3.85 million barrels of WTI in limbo. PDVSA did not immediately respond to a request for comment.The company's cash crunch, which also affected its oil imports late last year, have added to a backlog of tankers since March due to malfunctioning loading arms at Jose, Venezuela's main crude port. PDVSA initially offered to pay for the imports with Venezuelan oil, but negotiations for those swaps failed as the proposed loading windows and crude grades did not work for BP, a source close to the talks said. Amid low crude prices, declining exports and a brutal recession at home, PDVSA has since 2015 delayed payments to suppliers. As a result, service firms including Schlumberger, Halliburton and Petrex have curtailed operations in the OPEC country. The payment delays are also raising questions about who will pay for demurrage, or the daily costs for delays. Three of the BP tankers have been anchored for over 30 days.
BP Oil Cargoes in Limbo at Terminal as Venezuela Can’t Pay its Bills - As Venezuela drowns in debt and takes its state-run oil company, PDVSA, down with it, Reuters is reporting that BP has over 2 million barrels of oil stuck at a terminal in the Caribbean over unpaid bills. The cargo of 2 million barrels of U.S. light sweet crude sold by BP cannot be discharged at the PDVSA terminal in Curacao until it’s paid for, according to the news agency, which is relying on unnamed sources and Thomson Reuters vessel tracking data. China Oil and BP reportedly have a tender from PDVSA for the shipment of 8 million barrels of WTI crude for the second quarter of 2016. PDVSA is struggling to pay its bill as the Venezuelan economy crumbles and unrest becomes riotous. Last week, reports emerged that PDVSA was offering service providers a debt-swap deal in exchange for payments. A subsidiary of PDVSA has reportedly offered service contractors a deal in which US$2.5 billion in debt would be swapped for dollar bonds, according to the Wall Street Journal. Venezuela is running out of most basic consumer items as the crisis worsens.
French refineries, ports continue to face disruptions, strike spreads - French refineries and ports continued to face disruptions Wednesday as the strike called by the CGT union against changes in labor legislation entered its second week and is also spreading into other sectors, including the railways, metro and air traffic control. Of France's eight refineries, four remain at a complete standstill, including Total's refineries at Donges, Feyzin, Gonfreville and Grandpuits. Total's La Mede, however, is now running at 80% of capacity and has resumed pipeline deliveries of products. But the labor union on the site does not rule out a complete halt of production and has demanded that the refinery does not supply products to the French market, according to media reports. ExxonMobil's Gravenchon Port Jerome and Fos-sur-Mer are operating normally and loading products, the company said. Runs at Petroineos' Lavera refinery have been reduced due to maintenance, but also as a result of the strike, according to sources. But with discharges halted at nearby Mediterranean oil terminals at Fos and Lavera at the port of Marseille, crude deliveries to the Lavera refinery as well as to the Cressier refinery in Switzerland, which receives crude via a pipeline, are threatened, according to reports. Tugboats at Marseille are also planning a strike June 2. Meanwhile, the French railway SNCF is starting an unlimited industrial action Wednesday, which is likely to threaten rail deliveries of oil products, according to reports.
Nigeria’s Oil Production In Free Fall After More Attacks - The resurgence of Niger Delta militancy has reached the level of an all-out renewal of conflict that Nigeria’s security forces appear incapable of stopping, and force majeure on oil deliveries is being declared almost across the board. Attacks are now coming on a weekly basis, and each time, they succeed in taking more oil offline, forcing the government to admit that half of the country’s oil production is now effectively halted. As of Monday, oil and condensate production in Nigeria is down to 1.1 million barrels per day, according to Nigerian petroleum officials, with 50 percent of output offline. Over one million barrels per day of production has been lost. Four major crude export grades—Qua Iboe, Bonny Light, Brass River and Forcados—are now under force majeure. Exxon’s is Qua Iboe, and this is said to be a mechanical failure, but the rest are confirmed as the direct result of militant attacks. On Saturday, the Niger Delta Avengers (NDA) made another strategic move by blowing up oil and gas pipelines belonging to Shell and Eni-owned AGIP. The attacks targeted Shell’s Bonny terminal trunkline and AGIP’s Brass export terminal. The deadline for the supermajor oil companies to leave the Niger Delta is tomorrow—May 31. And as militants threaten that more is to come and “something big is about to happen and it will shock the whole world,” no one is second-guessing them.
Nigerian militants threaten 'bloody' attack on oil industry - Rebels in Nigeria's main oil producing Niger Delta region Tuesday threatened more attacks on oil installations as well as oil workers in reprisal for a military raid on a militant hideout. Government troops engaged militants belonging to the self-styled Niger Delta Avengers in a fierce gun battle on Sunday near an oil pipeline operated by Italy-based Eni, with several of the militants killed, according to Army spokesman Sani Usman. Local media Tuesday reported the deployment of jet fighters and gunboats by the military in the creeks of the Niger Delta in the continued hunt for militants. "To the international oil companies and indigenous oil companies, it's going to be bloody this time around. Your facilities and personnel will bear the brunt of our fury," the group said in a tweet from their usual Twitter account. The group claimed responsibility for last Saturday's attacks on the Nembe 1, 2 and 3 Brass to Bonny trunk line belonging to Eni and indigenous company Aiteo. It came barely 24 hours after the bombing of state-owned Nigerian National Petroleum Corp. crude and gas pipeline in the western division of the Niger Delta. Industry officials said was a well scripted plan by the self styled Niger Delta Avengers group to completely shut down oil production in Nigeria, already down to 1.1 million b/d, according to official statistics. Renewed militancy in the Niger Delta which resurfaced after years of relative calm, has caused Nigeria's crude oil and condensate production to drop by almost 50% since the start of the year. Most of the production cuts came from outages at facilities attacked by the militants in the western division of the Niger Delta. Currently, four Nigerian crude export grades -- Qua Iboe, Bonny Light, Brass River and Forcados -- are under force majeure. The Qua Iboe outage is not militant related. The sharp drop in oil production has severely hurt Nigeria's economy, already reeling from the slump in global oil prices.
Nigeria’s Massive Oil Cleanup Could Take Decades And A Billion Dollars - Oil is seen on the creek water's surface near an illegal oil refinery in Ogoniland, outside Port Harcourt, in Nigeria's Delta region. A region of Nigeria's oil-rich southern delta suffers widespread ecological damage as spilled oil seeps into its drinking water, destroys plants and remains in the ground for decades at a time. What’s been described as the most wide-ranging and long-term oil clean-up plan in history was launched in Nigeria Thursday to restore hundreds of square miles of Delta swamps ravaged by nearly sixty years of oil extraction and spills. The move to restore Ogoniland, located in southern Nigeria and home to more than 800,000 people, comes a year and a half after Shell agreed to an $84 million settlement with residents for two massive oil spills in 2008 and 2009. By then Nigeria had asked the United Nations Environmental Program (UNEP) to study the area. UNEP released a report in 2011 noting oil impacts on Ogoniland are ongoing, widespread, and severe. In turn, Nigeria, Africa’s largest oil producer, started a $1 billion restoration plan this week to clean up decades of spills by Shell and other companies, including the state-owned company. It will be at least 18 months before full remedial work starts, the Guardian reports. Some $200 million will be spent annually for five years to clean up 1,000 square miles — an area about the size of Arkansas — though more money may be needed to fully restore the ecosystem. “The people of Ogoniland have paid a high price for the success of Nigeria’s oil industry, enduring a toxic and polluted environment for decades,” said Achim Steiner, UNEP’s executive director, in a statement. “Today marks a historic step toward improving the situation of the Ogoni people, who have paid this high price for too long.” Ogoniland is situated in the Niger Delta region, the third largest mangrove ecosystem in the world. While oil has not been produced in Ogoniland for more than two decades, spills from illegal, aging, and poorly maintained refining infrastructure continue.
Nigerian militants claim fresh attacks on Shell, Eni oil facilities - - The self-styled Niger Delta Avengers said Friday it had bombed oil production facilities operated by Eni and Shell in the Niger Delta region, the latest in a series of attacks on infrastructure this year that has seen Nigeria's crude output nearly halved. The group said in a tweet it had bombed the Ogboinbiri to Tebidaba and Clough Creek to Tebidaba crude oil pipelines operated by Eni in southern Bayelsa state at about 0100 GMT and about an hour later blew up the 48-inch Forcados export line operated by Shell. A Shell spokesman said: "We are investigating the reported attack on our pipelines in the Western Niger Delta area". A spokesman for the ethnic Ijay Youths Council, Udengs Eradiri confirmed the attacks. "It is unfortunate," he said. Renewed militancy in the oil-rich Niger Delta, which resurfaced after years of relative calm, has seen Nigeria's crude oil and condensate production fall almost 50% since the start of the year to around 1.1 million b/d, state-owned oil company Nigerian National Petroleum Corp. said last week. Independent producer Eland Oil and Gas, which uses the Forcados pipeline to transport around 5,000 b/d of crude produced from its Opuama field, said Friday there was no breach on any of its facilities in the area. "The company confirms that it is not aware of any incidents on its properties and confirms that the company's continuing maintenance and operational activity remains unaffected," Eland said. The Niger Delta Avengers said its latest attacks were "in line with our promise to all international oil companies and indigenous oil companies that Nigeria oil production will be zero". It said it had "been able to drop Nigeria oil production from 2 million barrels [per day] to just 800,000 barrels without killing a soul".
OPEC Oil Output Falls from Near-record in May on Nigeria Outages - OPEC's oil output fell in May from near a record high, a Reuters survey found on Tuesday, as attacks on Nigeria's oil industry and other outages outweighed increases in Iran and Gulf members. A rise in supply from Saudi Arabia plus Iran suggests the group's top producers remain focused on market share, following the failure of an initiative in April between OPEC and non-OPEC producers to support prices by freezing output. With OPEC meeting in Vienna on Thursday, outages are effectively achieving the supply restraint on which producers could not agree. Those disruptions are supporting oil prices , which are close to 2016 highs, and the rally has reduced the urgency of any new attempt at deliberate supply curtailment. Supply from the Organization of the Petroleum Exporting Countries fell to 32.52 million barrels per day (bpd) this month, from 32.64 million bpd in April, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. OPEC output has surged since the group abandoned in 2014 its historic role of cutting supply to prop up prices, in a shift led by Saudi Arabia. There are more indications, however, that some producers are struggling to maintain supply.May's biggest decline occurred in Nigeria due to militant attacks on the country's oil industry. The disruption has pushed output to its lowest in more than 20 years.Libyan output declined further due to a blockage of shipments from the port of Hariga. Loading difficulties and other problems made a further dent in Venezuela's supply, sources in the survey said. Iraq, the fastest source of OPEC production growth in 2015, also pumped less as power outages limited southern exports, which in April were at a near-record.
Oil Pessimists Exit Market as Supplies Seen Closer to Balance -- The oil market doomsayers are beginning to capitulate. Speculators reduced bets on falling prices to the lowest level in 11 months as oil briefly breached $50 a barrel on signs supplies are coming into balance. Crude climbed 7.4 percent this month in New York amid lower U.S. production and unplanned disruptions in Canada and Nigeria. Prices are up almost 90 percent since February. Money managers’ short position in U.S. benchmark crude reached the least since June, according to data from the Commodity Futures Trading Commission. "If you’ve been short since February this has been a very painful ride," "There are always a few die-hards but otherwise you’d want to get out. This is indicative of the improving fundamentals." West Texas Intermediate rose 0.6 percent on the New York Mercantile Exchange during the CFTC report week. Futures rose 0.3 percent to $49.50 a barrel at 11:43 a.m. on Monday. Oil has surged amid a spate of disruptions. Nigerian crude output has dropped to the lowest level in 27 years as militants increased attacks on pipelines in the Niger River delta. Fires that began early May in Fort McMurray shut about 1.2 million barrels a day of production in Canada’s oil-sands region. Analysts from the International Energy Agency to Goldman Sachs Group Inc. say the crude glut is dissipating as supply and demand move back into balance. Goldman increased its 2016 forecast for WTI to $44.60 a barrel, from $38.40 in a report dated May 15.
Oil dips but notches fourth straight monthly gain | Reuters: Oil prices dipped on Tuesday as a stronger dollar and slide in equity prices sparked profit-taking, but crude futures posted a fourth straight monthly gain as investors bet that the global glut was slowly easing. Crude futures had gained early in the session, with investors expecting higher U.S. fuel demand as peak driving season arrived in the No. 1 oil consumer. Caution ahead of weekly U.S. crude inventory data kept investors from pushing prices toward seven-month highs above $50 a barrel. The dollar's rise and slide in Wall Street stocks in afternoon trade eventually tipped oil into the negative zone. Brent crude futures for July LCON6 settled down 7 cents at $49.69 a barrel before expiring as the spot contract. August Brent LCOQ6, the market's spot contract from Wednesday, finished down 47 cents, or nearly 1 percent, at $49.89. U.S. crude's West Texas Intermediate (WTI) futures for July CLc1 settled at $49.10, down 23 cents, or 0.5 percent, from Friday's settlement. U.S. financial markets were closed on Monday for the Memorial Day holiday. For the month, Brent rose 3 percent and WTI gained 7 percent.
Oil Speculators No Longer Confident In Price Crash -- If the whims of oil speculators are anything to go by, then another oil price downturn looks increasingly unlikely. Oil prices have gained more than 80 percent over the past three months, bouncing off of $27 lows in February to hit $50 last week. Those sharp gains raised the possibility of another crash in prices because the fundamentals still appeared to be bearish in the near term. By early May, oil speculators had built up strong net-long positions on oil futures, extraordinary bullish positions that left the market exposed to a reversal. Speculators had seemingly bid up oil prices faster than was justified in the physical market. But the physical market got some help. The massive supply outages in Canada (over 1 million barrels per day) and Nigeria (over 800,000 barrels per day) provided some support to prices, erasing some of the global surplus. Now speculators who had started to short oil in May have retreated, pushing short bets down to an 11-month low. “There are always a few die-hards but otherwise you’d want to get out. This is indicative of the improving fundamentals.” With the supply outages, along with some early signs that the record levels of crude oil inventories are starting to come down, prices are on firmer footing than they were a few weeks ago. The next big catalyst is the OPEC meeting that begins on June 2, although there is a general consensus that very little will be agreed on at the meeting. Saudi Arabia has shifted course over the past two years, downgrading its faith in the oil cartel as a vehicle for its oil policy.
$50 Oil Doesn’t Work -- Gail Tverberg - $50 per barrel oil is clearly less impossible to live with than $30 per barrel oil, because most businesses cannot make a profit with $30 per barrel oil. But is $50 per barrel oil helpful? I would argue that it really is not. When oil was over $100 per barrel, human beings in many countries were getting the benefit of most of that high oil price:
- Some of the $100 per barrel goes as wages to the employees of the oil company who extracted the oil.
- Often, the oil company contracts with another company to do part of the oil extraction. Part of the $100 per barrel is paid as wages to employees of the subcontracting companies.
- An oil company buys many goods, such as steel pipe, which are made by others. Part of the $100 per barrel goes to employees of the companies making the goods that the oil company buys.
- An oil company pays taxes. These taxes are used to fund many programs, including new roads, schools, and transfer payments to the elderly and unemployed. Again, these funds go to actual people, as wages, or as transfer payments to people who cannot work.
- An oil company pays dividends to stockholders. Some of the stockholders are individuals; others are pension funds, insurance companies, and other companies. Pension funds use the dividends to make pension payments to individuals. Insurance companies use the dividends to make insurance premiums affordable. One way or another, these dividends act to create benefits for individuals.
- Interest payments on debt go to bondholders or to the bank making the loan. Pension plans and insurance companies often own the bonds. These interest payments go to pay pension payments of individuals or to help make insurance premiums more affordable.
- A company may have accumulated profits that are not paid out in dividends and taxes. Typically, they are reinvested in the company, allowing more people to have jobs. In some cases, the value of the stock may rise as well.
When the price falls from $100 per barrel to $50 per barrel, the incomes of many people are adversely affected. This is a huge negative with respect to world economic growth. If the price of oil drops from $100 per barrel to $50 per barrel, this change adversely affects the income of a large share of people who formerly benefited from the high price. Thus, the drop in oil prices affects the incomes of many of the people listed in the previous section. Furthermore, this drop in income tends to radiate outward to the rest of the economy because each worker who is laid off is forced to purchase fewer discretionary items. These workers are also less able to take on new debt, such as to buy a new car or house. In some cases, they may even default on existing debt.
Is $60 the Next Stop for Oil? - Oil prices were hit with some bearish news to start off the week, as Canada is set to bring much of the more than 1 million barrels per day of oil production that was disrupted from wildfires back online. But optimism is rising in the oil markets. Even with that crude coming back online, there is a growing bullishness pervading the markets as of late, as forecasters raise their price projections and speculators gamble on steadily higher prices. Bloomberg reports that speculators shorting crude oil have been squeezed out of the market, and short bets have fallen to their lowest levels in almost a year. The shift in trades reflects more and more confidence that oil will not fall back down, at least not to the depths seen earlier this year. Also, several banks, including Standard Chartered Plc and SEB Bank have come out and said that oil will hit $60 before the end of the year. UAE’s economic minister, Sultan Bin Saeed Al Mansoori, said on Monday that he could see oil hitting that threshold by summertime. A survey conducted by The Wall Street Journal found that the array of investment banks polled raised their price targets for Brent crude in 2016 by $2 on average in May compared to the previous month’s forecasts. Not everyone is so bullish, however. Some analysts attribute the recent price gains simply to the supply disruptions in Canada and Nigeria, outages that were always going to be temporary (at least in the case of Canada). "The output disruptions are a key factor supporting prices at the minute. We don't think prices will go much further from here," Thomas Pugh of Capital Economics told Reuters. "In fact, we think prices are vulnerable to a downturn in the short term if some of the disrupted supply returns, or there is evidence that higher prices are stimulating more production." Even with the upward revisions, many are still cautious – the average projections polled by the WSJ expect oil to trade at only $48 per barrel in the fourth quarter.
Ahead of meeting, OPEC seems close to riding out price slump — OPEC is not yet in safe harbor. But ahead of a top-level meeting, the 13-nation oil cartel appears close to weathering the storm of slumping crude prices that threatened to bankrupt some members and called into question its relevance. After touching a 13-year low early this year, the price of oil has moved steadily upward to its present level of around $50 a barrel. While that’s still only half of what crude fetched as late as two years ago, it’s a gain of almost 90 percent since January. That is easing some of the pain for poorer members such as Algeria, Venezuela and Nigeria that depend on crude as their main income. And there are promises of further increases. U.S. shale production is in decline as it needs higher prices to be economical. At the same time, the world economy is showing signs of some improvement, meaning that the appetite for petroleum may increase. Oil ministers of the Organization of the Petroleum Exporting Countries convening in Vienna Thursday will thus likely opt for the status quo. Total production is now well over 32 million barrels a day, and in a note ahead of the meeting, analysts at Commerzbank Commodity Research said expectations are for the “meeting to end without reaching any agreement on production targets or production caps.” Ironically, part of the credit for OPEC’s improving fortunes is due to its inability to act in unity in recent years. Instead, many individual members produced what they could, driving down prices to the point where shale producers are increasingly unable to compete. Some have gone out of business, reducing the glut of global supply. At the height of its power decades ago, OPEC essentially was able to set world prices and supplies. Although it is still responsible for more than a third of world production, that clout has eroded since the 1980s, as outside output increased and members looking to maximize income increasingly ignored OPEC production ceilings.
Oil Spikes On Yet Another OPEC "Oil Freeze" Headline ---Just when you thought the February through April recurring headline nightmare is over, in which an "unnamed source" repeatedly promised that an OPEC oil output freeze is imminent, it has come back to life just hours ahead of the OPEC meeting.
- OPEC MAY CONSIDER NEW OIL OUTPUT CEILING AT THURS MTG: RTRS
- REUTERS CITES 4 OPEC SOURCES ON NEW CEILING CONSIDERATION
The "sources" no longer even bother including Russia as being part of the deliberations for one simple reason: Russia will not only not be present in Vienna, but is no longer seeking a freeze in global output because prices have risen close to $50 a barrel without one. So while there is nothing new here at all, the algos love it and bid WTI back up to $49.
WTI Slides Back To $48 Handle After Surprise Build In Crude Inventories --With oil traders playing headline-hockey ahead of tomorrow's OPEC meeting, tonight's API data may not be quite as consequential as usual. With sizable draws expected overall and at Cushing, API reported a shocking 2.35mm build (2.5mm draw expected) which, despite a bigger than expected 1.1mm draw at Cushing (twice the expected) sent WTI Crude prices tumbling. Gasoline and Distillates both saw draws with the latter's 7th consecutive week - the longest streak since oct 2015. API:
- Crude +2.35mm (-2.5mm exp)
- Cushing -1.1mm (-500k exp)
- Gasoline -1.48mm
- Distillates -1.15mm
Following last week's bigger than expected draw in crude, this week's build was a big surprise (2nd biggest build in 2 months) and we see 7th consecutive draw in distillates
Opec leaders meet in Vienna as Iran rejects oil output cap - Iran’s oil minister has rejected suggestions Opec will agree a production cap at a meeting due to take place in Vienna, saying his country backs a return to a national quota system. Tehran, which only recently returned to world oil markets after western sanctions were lifted, has opposed any attempt to limit output to support weak crude prices. Iran stayed away from a disastrous meeting in Doha on 4 April between Opec and other major producers, including Russia, that failed to agree a coordinated output freeze. The Iranian minister, Bijan Zanganeh, said on the eve of Thursday’s meeting that a production cap would have “no benefit” for Iran – or for the other members of the cartel, which pumps around a third of the world’s oil. “One of our main ideas is to have country quotas, but I don’t think we can reach an agreement on this subject at this meeting,” the minister said as he arrived in the Austrian capital. Iran exported more than 2m barrels of oil every day in May and Zanganeh predicted that would soon double as the country is currently producing some 3.8m barrels a day. He said the meeting would focus on choosing a new Opec secretary general to replace Abdalla El-Badri of Libya.
OPEC Fails to Reach Deal: Members of the Organization of Petroleum Exporting Countries failed to reach a deal to curb oil production in an effort to boost prices Thursday. The OPEC meeting in Vienna came after a couple of years of falling oil prices have hurt energy companies and oil exporting nations. Prices plunged from well over $100 a barrel to around $26 because oil production has been greater than demand for petroleum products. The cartel controls more than one-third of the world's oil, and previously was able to keep prices high by agreeing to limit production. Oil prices had recently rebounded to around $50 a barrel, but fell somewhat after OPEC's failure to make an agreement. Analysts say friction between two key oil producers, Saudi Arabia and Iran complicated efforts to reach a deal. Saudi Arabia is a Sunni Muslim nation while Iran is overwhelmingly Shi'ite Muslim. OPEC member nations did agree to appoint Nigeria's Mohammed Barkindo as its new secretary-general.
OPEC states fail to reach deal on production | bakken.com: (AP) — OPEC countries failed Thursday to agree on measures to influence crude supplies and prices, in a missed opportunity to show the resolve that for decades let them set how much consumers and industries worldwide would pay for gasoline, heating and related necessities. At the same time, OPEC officials argued the cartel was alive and well, scoffing at suggestions that its authority was eroding to the point where it will soon be negligible. “Don’t take that (to mean) that OPEC is dead,” said Secretary General Abdulla al-Badri. “OPEC will be powerful, will be strong. OPEC is alive.” But the decision to take no decision appeared more an illustration of lack of unity, particularly between OPEC rivals Saudi Arabia and Iran, whose deepening struggle for Mideast supremacy has for years been mirrored at oil meetings. Iran was second only to the Saudis inside the Organization of the Petroleum Exporting Countries in terms of production before international sanctions over its nuclear program crippled sales. Now with a deal in place limiting its atomic prowess, sanctions have been lifted — and Tehran served notice even before the Vienna meeting that it intends to reach or surpass previous levels. Mehdi Hosseini, the head of the oil contracts revision committee at Iran’s Petroleum Ministry, puts pre-sanctions levels at around 4.2 million barrels per day. Accepting anything less than that, Hosseini said in April, would amount to “another sanction against ourselves. It is something we cannot accept.” One idea at the Vienna meeting that could have allowed for more Iranian production was to abandon a firm production target. OPEC countries had been considering a sliding ceiling that could shift between two benchmarks, both well above 30 million barrels a day. But Iran already put its foot down against quotas of any kind in April. It did not even show up at a meeting between OPEC members and outside producers attempting to agree on a joint output freeze to push prices higher. The Saudis subsequently aid they would not cap output if Iran didn’t do the same, dooming the gathering to failure.
Oil Drops After OPEC Fails To Reach Oil Freeze Agreement -- The anticlimatic conclusion to today's OPEC meeting came earlier courtesy of Bloomberg which moments ago reported that OPEC has failed to reach a new oil supply agreement, but that it has agreed to appoint a Nigerian candidate for new OPEC secretary general. While we would take such preliminary rumors with a grain of salt, the oil market is not happy and has dropped by 0.8%, even if it is still above the levels from yesterday when the rumors of an oil deal emerged. As noted earlier, we would not be surprised if the algos, after taking out the low stops, end up ramping WTI to new highs.
Oil Jumps After DOE Reports Bigger Than Expected Inventory Draws, 19th Weekly Production Cut -- Following last night's surprise build of 2.35mm barrels reported by API (against expectations of a 2.5mm draw), DOE reported inventory draws across the board. While the headline crude draw of 1.36mm barrels was below expectations of -2.5mm, it was way better than API. Cushing saw a bigger than expected draw of 704k and both gasoline and distillates draws were bigger than expected. This is the seventh week in a row of Distillate draws. Crude production fell for the 19th wek in a row to its lowest since Sept 2014. DOE:
- Crude -1.36mm (-2.5mm exp - range from -6.42mm to 0)
- Cushing -704k (-500k exp)
- Gasoline -1.49mm (-350k exp)
- Distillates -1.25mm (1mm exp)
The 7th weekly distillate draw in a row and the entire complex saw inventory draws...
We Better Start Getting Some 10 Million Barrel Drawdowns in Oil Inventories (Video) - Gasoline demand is good, but Distillate demand not so much on a year over year basis, and per-well costs are down 25% to 30% from 2012 high levels for upstream costs for onshore plays. The Real Question is when do the Sharks start front running the end of the Summer Driving Season?
OilPrice Intelligence Report: Why OPEC’s Inaction Didn’t Harm Oil Markets: The OPEC meeting in Vienna ended with no agreement on production targets, despite some rumors ahead of time that Saudi Arabia had floated a reinstatement of those limits. Iran still has no use for OPEC’s coordinated action, and Iran’s oil minister says that it still has some lost ground to regain. Iran won’t consider any possibility of limiting its production until it reaches 4 million barrels per day (mb/d) of production; its output currently stands at about 3.8 mb/d. As a result, OPEC couldn’t agree on anything, but such an outcome was largely expected by oil analysts. Still, prices plunged by more than 1 percent on the news from Vienna. . But the losses were quickly regained on June 2 as the fundamentals continue to provide some reassurance. Storage levels in the U.S. fell by another 1.4 million barrels, the first time that the U.S. has posted consecutive weeks of declines in a long time. Also, U.S. oil production fell by yet another 32,000 barrels per day last week – the losses continue to mount and output is down by more than 900,000 barrels per day from last year’s peak at nearly 9.7 mb/d. The oil markets were buoyed by these figures, pushing WTI and Brent back towards $50 per barrel following the disappointment from Vienna.. On the other hand, the Labor Department released the worst monthly jobs report in years on June 3, revealing that the U.S. added only 38,000 jobs in the month of May. The unemployment rate fell to just 4.7 percent, but largely because of people dropping out of the labor force. The dismal report could put downward pressure on crude oil, but it could also cause the Fed to delay a rate hike, which would be seen as a positive for oil prices.
US rig count sees first significant jump of 2016: (AP) — The number of rigs exploring for oil and natural gas in the U.S. rose by four this week to 408, the first rig count gain in months and halting a slide that pushed the count to record-low levels amid collapsed energy prices. A year ago, 868 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 325 rigs sought oil and 82 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Texas and Alaska each gained three rigs. New Mexico was up two. Oklahoma and Pennsylvania declined by two and Louisiana was down one. Arkansas, California, Colorado, Kansas, North Dakota, Ohio, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981.
U.S. Oil Rig Count Rose by Nine in Latest Week - WSJ: The U.S. oil-rig count rose by nine to 325 in the latest reporting week, according to oil-field services company Baker Hughes Inc., an uptick that comes amid a broader trend of declines. The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the sector, has fallen sharply since oil prices began to tumble in 2014. The number of oil rigs in the U.S. peaked at 1,609 in October 2014. According to Baker Hughes, the number of U.S. gas rigs fell by five in the latest week to 82. The U.S. offshore-rig count was 21 in the latest week, down three from last week and down six from a year earlier. Oil prices fell further below the key $50 threshold Friday, as weaker-than-expected U.S. jobs data lowered expectations for gasoline demand and weighed on the dollar. U.S. crude was recently down 1.6% to $48.40 a barrel.
Oil rig count makes first big jump of 2016 - The number of rigs actively drilling for oil in the U.S. made its first sizable increase of the year this week now that the price of oil has increased for more than three months, according to weekly data collected by Baker Hughes. The U.S. oil rig count grew by nine this week, bringing the overall tally up to 325 rigs. Texas’ more resilient Permian Basin led the way with five rigs added to its count, while Alaska brought on three more rigs. The change shows some signs of life returning to the gloomy oil patch with the U.S. benchmark for oil hovering just below $50 a barrel — a price that could bring small profits for many wells. The overall rig count though only grew by four rigs because the amount of rigs seeking natural gas dipped by five. The total count now stands at 408 rigs. The previous tally of 404 rigs of the past two weeks represented the lowest total count since the oil field services company first began compiling the data in 1944. There are only 82 rigs actively looking for gas. Despite this week’s jump, the oil rig count is down 80 percent from its peak of 1,609 in October 2014 before oil prices began plummeting. This is the first time the oil rig count has grown since just one rig was added in mid-March. The last time the oil count saw a bigger jump than this week was in December. The price of U.S. oil may have bottomed out in February at a settled low point of $26.21 on Feb. 11. The price was dancing around $48.50 early Friday afternoon, down almost 70 cents for the day.
US oil closes 1.1 pct lower on US rig count rise, economy concerns: U.S. oil prices tumbled more than 1 percent on Friday, after weekly data showed U.S. drillers added rigs for only the second time this year. Drillers added nine oil rigs in the week to June 3, Baker Hughes said. The closely followed report rekindled fears that U.S. shale drillers would turn the spigots back on as prices flirted with $50 a barrel. Prices had already dipped in early trade on worries about the U.S. economy, but losses were limited by a weakening dollar, which makes oil less expensive for buyers using other currencies. The Baker Hughes report sent prices sharply lower. "The increase in the rig count as prices near the $50/bbl range is clearly indicative of the elasticity of U.S. production and speaks to the tremendous efficiency gains reaped by the U.S. producer community over recent years," said Michael Tran, director of energy strategy at RBC Capital Markets in New York. Oil traders view falling U.S. output as key to reducing a global glut of crude that has pressured prices during a steep two-year slump. Brent crude futures fell 30 cents to $49.74 per barrel, but were still almost double January lows and on track for an eighth weekly gain in nine weeks. U.S. West Texas Intermediate (WTI) crude futures settled 55 cents lower, or 1.1 percent, at $48.62 a barrel. Oil prices have rallied from this winter's lows due largely to supply disruptions, particularly in Nigeria, Venezuela, Libya and Canada. On Friday, militants in the restive Niger Delta region that produces more than half of Nigeria's oil claimed three new attacks on oil infrastructure, promising to bring the country's oil production to "zero."
Indonesia producing on target at 830,000 b/d: minister - OPEC's newest member Indonesia is producing 830,000 b/d of oil, in line with its target for this year, energy minister Sudirman Said said as he arrived at Thursday's OPEC meeting, the first since Indonesia's readmission. Indonesia, OPEC's only Asia-Pacific member, was re-admitted at the start of this year after a suspension of its membership in 2008. "Current production is 830,000 b/d. We will maintain this level because it is our optimum production level," the minister told journalists. In 2015, Indonesia produced 786,000 b/d of oil and 8.078 Bcf/d of gas, according to the country's official statistics.In the first quarter of this year it pumped 835,000 b/d of crude oil, above its full-year target of 830,000 b/d, a senior government official said in early April. It steadily increased output over the three months, pumping 819,000 b/d in January, 840,000 b/d in February and 847,000 b/d in March, he added. On Thursday the minister said one contributer to the increase had been the ExxonMobil-operated Cepu oil and gas block, which is currently producing 165,000 b/d, slightly below the 185,000 b/d peak production estimate for the block. Some Indonesian officials have said Cepu could reach 200,000 b/d. The block straddles the border between Central Java and East Java and is estimated to contain about 600 million barrels of oil.
Venezuela Targets 3 Million B/d Output If Prices Favorable - Venezuelan oil minister Eulogio Del Pino voiced optimism Thursday about his crisis-hit country’s ability to increase its oil production to 3 million b/d, depending on a hoped-for price recovery. Speaking to reporters ahead of an OPEC meeting, Del Pino said Venezuela had produced 2.8 million b/d in May — well above some independent estimates. He played down the significance of Venezuela having to import crude oil amid an economic and political crisis that has seen parts of the domestic industry shut down, partly because power cuts have affected facilities such as refineries, and the lifting of heavy oil. On oil markets, Venezuela has long sought a more interventionist approach by OPEC to support prices, an ambition that has largely gone ignored by key members of the group. Going into Thursday’s meeting, Del Pino said: “We are fighting to have an equilibrium price that justifies investment and that we can have a rate of return that is fair for everyone. We hope that is going to be in the range of $60-70/b by the end of the year.” On Venezuela’s own oil production levels, he said that following 2.8 million b/d of output in May, “our target is to try to increase next year, depending on the recovery of the prices, to recover to about 3 million b/d.” Del Pino said it was to be expected that a company such as state-owned PDVSA, with overseas refining assets on the island of Curacao and a US subsidiary, Citgo, would need to import crude, anrily rebutting suggestions to the contrary from reporters.
Stunning Satellite Images Of The Global Tanker "Traffic Jams" --One week ago, we showed the latest MarineTraffic update of the unprecedented congestion of crude oil tankers located off the coast of Singapore, together with an extended analysis of what is causing this and what are the implications. Today, we'll spare readers the ongoing analysis - which hasn't changed - and instead present the following dramatic satellite images just released from Reuters, showing "huge traffic jams of tankers which have formed around the world with some 200 million barrels of oil either waiting to be loaded or delivered as ports struggle to cope with record volumes in perhaps the most visible sign of the global oil glut." Almost all of the over 660 Very Large Crude Carriers (VLCCs), the largest tankers in use to transport seaborne oil, are used to ship crude between the Middle East and Asia’s consumption hubs around India and the Far East. The map above shows all of these super tankers in operation on April 11.
Saudi Arabia Said to Weigh Bond Sale of as Much as $15 Billion --Saudi Arabia is considering selling as much as $15 billion of bonds this year in what would be the country’s first foray into international capital markets, people with knowledge of a matter said. Encouraged by Qatar’s record issue last week, Saudi Arabia is weighing a sale of at least $10 billion in five-, 10- and 30-year bonds after Ramadan ends in July, the people said. No final decision has been made and the discussions are still at a preliminary stage, the people said, asking not to be identified as the talks are private. Qatar last week attracted $23 billion in orders for its $9 billion sale, the biggest-ever from the Middle East. Abu Dhabi raised $5 billion from the sale of five- and 10-year securities in April, while Dubai is also said to be preparing an international bond sale this year. One of the government’s biggest challenges will be navigating the worst economic slowdown since the global financial crisis. Authorities are cutting spending to plug a budget deficit that reached about 15 percent of gross domestic product in 2015. Saudi Arabia’s credit rating was reduced to A1 from Aa3 early this month in the second cut this year by Moody’s Investors Service. The kingdom’s rating was also lowered by Fitch Ratings and S&P Global Ratings earlier in 2016. The country has been financing its budget deficit by selling local debt and drawing down foreign reserves. In April, the kingdom sealed its first loan in at least 15 years as it seeks to cover a shortfall estimated at about $100 billion this year. Saudi Arabia secured a $10 billion facility, people said at the time.
Saudi oil output capacity 12.5 million b/d, but investment needed: Falih - Saudi Arabia's total oil production capacity stands at 12.5 million b/d, energy minister Khalid al-Falih said on Thursday, but he warned that the country would need to continue investing to maintain it. "If you do not invest, it will start to decline," he told reporters in Vienna just before OPEC began its ministerial meeting. Saudi Arabia pumped 10.18 million b/d in April, according to the latest Platts OPEC production survey, which would mean the kingdom has maintained about 2.3 million b/d of spare capacity. But Falih did not elaborate on how quickly Saudi Arabia could get its maximum production capacity online, nor how long it could be maintained. He also did not say how much investment would be necessary to keep that capacity.In an interview with Argus Media published Thursday, Falih said some of Saudi Arabia's non-core projects had been "stretched and deferred," but state-owned Saudi Aramco was maintaining drilling. Domestic price reforms and gas investments gave the country more flexibility in "periods of market imbalance and/or unforeseen circumstances," he said. "We want to keep a cushion. We think in fact that cushion will be needed pretty soon, because markets will tighten, as supply expansion lags demand growth," he said."We have not abandoned our policy of keeping spare capacity."
Analysis: Saudi Arabia reinforces strategy with 10-year high Japan crude sales - Oil - The sharp upsurge in Saudi Arabia's crude exports to Japan to 10-year highs in April clearly signals one thing -- that the Middle East supplier is intensifying efforts to grab any incremental demand opportunity that comes from its key customers. And it seems to be in no mood to deviate from its aggressive policy of doing all it can to boost market share, industry sources and analysts said, adding that its strategy was unlikely to change over the course of the year. "The Saudi response [for incremental supplies] has improved in recent months," a Japanese refiner source said. "We feel that they are actively responding to requests for incremental supplies in a prompt manner." Japan's crude imports from Saudi Arabia averaged 1.42 million b/d in April, the highest for the month since it imported 1.5 million b/d in April 2006, according to preliminary data released Tuesday by the Ministry of Economy, Trade and Industry.Saudi Arabia's crude supplies to Japan in April surged 37.2% from 1.037 million b/d a year earlier, according to S&P Global Platts calculations based on METI data. It includes 50% of imports from the Partitioned Neutral Zone, which lies between Saudi Arabia and Kuwait. METI lists it as a separate supply source. Saudi Arabia's market share rose to 41% of Japan's total crude imports of 3.47 million b/d in April, from 31% a year ago.
Uber Just Raised $3.5 Billion in Funding From Saudi Arabia - Ride-hailing giant Uber has just closed one of the largest funding rounds by a tech company in recent history. The company said on Wednesday that it had closed $3.5 billion in new funding from Saudi Arabia’s Public Investment Fund, at an unchanged valuation of $62.5 billion. As part of the deal, Public Investment Fund (PIF) managing director Yasir Al Rumayyan will join Uber’s board, the company said. Rumors of Uber’s latest fundraising efforts first surfaced last fall, and the round has now fully closed, the company confirmed.Last week, Uber revealed it has pocketed an undisclosed amount of funding from Toyota, with which it will also partner to provide its drivers with more affordable car purchase and lease terms. PIF’s investment in Uber is part of Saudi Arabia’s plan to shift by 2030 from its reliance on oil revenue.Uber, one of the most highly capitalized private companies with billions in previous funding, has been raising money from a wide variety of investors including traditional venture capitalists, the wealthy clients of Goldman Sachs, other sovereign funds like Qatar’s, and Russian businessmen via the LetterOne investment fund.
Russia's Long Road to the Middle East - “Now they’ve achieved their historical dream of having bases in the warm waters of the region, and they will make sure no gas pipelines will come from Central Asia or Qatar without their approval. They have gained a foothold in the region.” Mr. Putin’s ambition to re-establish Russia as a major power in the Middle East (and the rest of the world) has been constrained by his country’s declining economy, now roughly the size of Italy’s and still shrinking. Already suffering from sanctions imposed by the West after Mr. Putin’s 2014 invasion of Ukraine, Russia has been hit hard by the low prices of oil and gas, the country’s main exports. But such limits are familiar to Russia, which has never been particularly prosperous but has frequently sought a leading role in global affairs. “Putin understands that Russia, based on its economic weight today, can’t be a great power, but he refuses to act in accordance with this weight,” explained Dmitri Trenin, head of the Carnegie Center in Moscow and a former Soviet military officer whose career included a stint as an adviser in Iraq. “He aims to punch well above Russia’s economic might. The worldview is: We are either a great power, or we disintegrate and are nothing.” Nor is it just a lackluster economy that limits the reach of Russian influence. Russia also lacks the kind of soft power that the U.S. has long exercised world-wide. Young Arabs and Iranians are not particularly eager to watch Russian movies, listen to Russian pop music or study in Russia. “No one in this part of the world loves or hates Russia today. Russia in the Arab mind is just political strategy and weapons. These are its only commodities,” If anything, there is a stronger social and cultural influence spreading in the other direction. Today’s Russian population is about 15% Muslim—a proportion that has grown with the influx of millions of migrant workers from Central Asia.
Dozens killed in bombing of national hospital in Idlib - At least two dozen people including several children have been killed in northern Syria in the latest apparent attack by forces loyal to the Bashar al-Assad regime on medical facilities in opposition-held areas, UN officials and activists have said. The bombing of the national hospital and its surroundings in Idlib city, a provincial capital wrested from regime control last year, was the latest incident in a systematic aerial campaign against medical personnel and facilities that has gone unpunished despite its intensification over the last year and a half.“There is no use to all of this. The bombing of hospitals will continue and cannot be stopped – that much is clear,” said Zedoun al-Zoabi, head of the Union of Syrian Medical Relief Organisations, which operates a number of hospitals in northern Syria. “We have lost hope, and all we can do is build hospitals underground because there is no international decision to prevent the bombing of hospitals.” The office of the UN high commissioner for human rights said the attack happened at 10pm on Monday, with multiple airstrikes by pro-government forces targeting the national hospital. According to first responders, at least 30 people were killed and dozens of civilians wounded, and the death toll was likely to rise as rescue operations continued, the statement said. The Syrian Observatory for Human Rights said several children were among the dead. It was unclear whether the attack was conducted by Russian or Syrian fighter jets.
Air strikes on Isis in Iraq and Syria are reducing their cities to ruins - Some 20,000 Iraqi soldiers, special forces, federal police and Shia paramilitaries are advancing on Fallujah, a Sunni Arab city held by Isis since early 2014. They are backed by the destructive might of the US-led coalition of air forces that have carried out 8,503 air strikes in Iraq and 3,450 in Syria over the last two years. Without such close air support, the anti-Isis forces in Iraq and Syria would not have had their recent successes. “I think they [government forces] will take Fallujah but the city will be destroyed in the process,” said Najmaldin Karim, the governor of Kirkuk to the north east of Fallujah in an interview with The Independent. “If they don’t have air strikes they probably won’t be able to take the city.” The precedents are ominous. The Iraqi army backed by Coalition airpower recaptured the city of Ramadi from Isis last December, but more than 70 per cent of its buildings are in ruins and the great majority of its 400,000 people are still displaced. “The destruction the team has found in Ramadi is worse than any other part of Iraq. It is staggering,” said Lise Grande, the UN's humanitarian coordinator in Iraq. “all water, electricity, sewage and other infrastructure – such as bridges, government facilities, hospitals and schools – have suffered some degree of damage.” This included no less than 64 bridges destroyed. US air commanders congratulate themselves on the pinpoint accuracy of their bombardment (so unlike Vietnam or earlier wars) but, if this is so, why was it necessary to destroy Ramadi? The same is true of other victories over Isis in Iraq and Syria. Last year I was in the Syrian Kurdish city of Kobani that Isis tried to capture in a siege lasting four-and-a-half months until they were driven out by Syrian Kurdish fighters and 700 US airstrikes that pulverised three-quarters of the buildings. Everywhere I looked there was a jumble of smashed concrete and broken metal reinforcement bars sticking out of the heaps of rubble. Only in the enclave the Syrian Kurds had clung onto were buildings still standing.
Exclusive: White House Blocks Transfer of Cluster Bombs to Saudi Arabia - Frustrated by a growing death toll, the White House has quietly placed a hold on the transfer ofcluster bombs to Saudi Arabia as the Sunni ally continues its bloody war on Shiite rebels in Yemen, U.S. officials tell Foreign Policy. It’s the first concrete step the United States has taken to demonstrate its unease with the Saudi bombing campaign that human rights activists say has killed and injured hundreds of Yemeni civilians, many of them children. The move follows rising criticism by U.S. lawmakers of America’s support for the oil-rich monarchy in the year-long conflict. Washington has sold weapons and provided training, targeting information, and aerial refueling support to the Saudi-led coalition fighting in Yemen. It has also sold Riyadh millions of dollars’ worth of cluster bombs in recent years. Asked about the hold on the shipments, a senior U.S. official cited reports that the Saudi-led coalition used cluster bombs “in areas in which civilians are alleged to have been present or in the vicinity.” “We take such concerns seriously and are seeking additional information,” The hold applies to CBU-105 cluster bombs manufactured by the U.S.-based firm Textron Systems. According to Amnesty International and Human Rights Watch, Saudi-led forces have dropped CBU-105 munitions in multiple locations around Yemen, including Al-Amar, Sanhan, Amran, and the Al-Hayma port. Cluster bombs contain bomblets that scatter widely and kill or injure indiscriminately. Sometimes bomblets fail to detonate immediately and can kill civilians months or even years later. The weapons were banned in a 2008 international treaty that the United States refused to sign.
U.N. adds Saudi coalition to blacklist for killing children in Yemen: (Reuters) – United Nations Secretary-General Ban Ki-moon slammed the Saudi Arabia-led coalition fighting in Yemen for killing and maiming children by adding it to an annual blacklist of states and armed groups that violate children’s rights during conflict. The coalition was responsible for 60 percent of child deaths and injuries last year, killing 510 and wounding 667, according to Ban’s report released on Thursday, which also said the coalition carried out half the attacks on schools and hospitals. The Saudi-led coalition began a military campaign in Yemen in March last year with the aim of preventing Iran-allied Houthi rebels and forces loyal to Yemen’s ex-President Ali Abdullah Saleh from taking control of the country. “Grave violations against children increased dramatically as a result of the escalating conflict,” Ban said in the report. “In Yemen, owing to the very large number of violations attributed to the two parties, the Houthis/Ansar Allah and the Saudi Arabia-led coalition are listed for killing and maiming and attacks on schools and hospitals,” he said. The Houthis, Yemen government forces and pro-government militia have been on the U.N. blacklist for at least five years and are considered “persistent perpetrators.” Also appearing again on the list is al Qaeda in the Arabian Peninsula.
The US in the Middle East – “There Is No Strategy” - Andrew Bacevich - We have it on highest authority: the recent killing of Taliban leader Mullah Akhtar Muhammad Mansour by a U.S. drone strike in Pakistan marks “an important milestone.” So the president of the United States has declared, with that claim duly echoed and implicitly endorsed by media commentary — the New York Times reporting, for example, that Mansour’s death leaves the Taliban leadership “shocked” and “shaken.” But a question remains: A milestone toward what exactly? Toward victory? Peace? Reconciliation? At the very least, toward the prospect of the violence abating? Merely posing the question is to imply that U.S. military efforts in Afghanistan and elsewhere in the Islamic world serve some larger purpose. Yet for years now that has not been the case. The assassination of Mansour instead joins a long list of previous milestones, turning points, and landmarks briefly heralded as significant achievements only to prove much less than advertised. One imagines that Obama himself understands this perfectly well. Just shy of five years ago, he was urging Americans to “take comfort in knowing that the tide of war is receding.” In Iraq and Afghanistan, the president insisted, “the light of a secure peace can be seen in the distance.” “These long wars,” he promised, were finally coming to a “responsible end.” We were, that is, finding a way out of Washington’s dead-end conflicts in the Greater Middle East.