oil prices continued to erode this week as traders and the media continued to focus on the increasing glut of refined products...after closing at $45.24 a barrel on Monday, down from last Friday's $45.95, oil fell again late Tuesday to close at $44.65 a barrel after the American Petroleum Institute's estimates showed an unexpected increase in gasoline supplies.....prices steadied on Wednesday when the EIA confirmed that gasoline inventory increase, but also showed the ninth consecutive weekly crude drawdown as trading for August oil expired....prices then sank to close at $44.75 a barrel on Thursday in a delayed reaction to the EIA report, which also showed the combination of oil and product stockpiles at a new all-time high...oil then traded below $44 a barrel on Friday as the media picked up on the gasoline glut story, and stayed depressed Friday afternoon to close at $44.19 a barrel, after the rig count report showed the largest percentage increase in oil drilling rigs since December 2009...since it's probably easier to look at a picture of how oil prices have slumped than to read text, we'll include a graph of the daily price changes over the past three months below...
this graph now shows daily prices per barrel over the past 3 months for the September contract of the US benchmark oil, West Texas Intermediate (WTI)...since this graph only shows prices for September delivery, the earlier prices quoted for the expired August contract are not shown, but the trajectory has been the same...it appears that the springtime oil price rally, which saw oil prices nearly double from near $26 a barrel in late February to over $50 a barrel by early June, is now over, having succumbed to the British vote to exit the European Union, which broke the three month uptrend...
July Drilling Productivity Report
in a report of interest to us in Ohio, this week the EIA released the Drilling Productivity Report for July, which estimates the output of oil and gas per working rig from the seven major US shale basins, including the Utica shale, and projects output for the next month, based on their recent data from existing oil and natural gas wells...note that this report does not distinguish between oil-directed rigs and gas-directed rigs, because more than half of the existing wells produce both oil and gas, irregardless of the targeted formation...we'll start with the summary table of drilling production projections by region, which is from under Tab 2 on the web landing page for the report (note that the report itself is a series of pdfs linked to on the sidebar, under "contents")
the above table shows the expected output of oil and natural gas for July and August for the 7 major shale basins, which together account for 92% of US shale output... oil in thousands of barrels per day is shown in the 3 columns on the left, while projections for natural gas in million cubic feet per day is shown in the three columns to the right...note the change columns in each case is in units, not percent, and thus total oil production in most basins other than the Permian is expected to fall on the order of 4%, while the percentage drop in total US production of natural gas is primarily from the Eagle Ford and Niobrara (map from the report of all 7 regions is here)
the next table, from under Tab 1 of the report, shows the drilling productivity for new wells on a per rig basis...the EIA estimates new-well production per rig using several months of recent data on total production from new wells for each field, divided by the region's monthly rig count....here, in all regions, drilling productivity for new wells is still expected to increase monthly from July to August, as it has over the history of fracking extraction...
the next two graphs, from the Year-over-year summary (pdf), show the expected drop in August production from old wells, as compared to the decrease from old wells in August a year ago...in general, these graphs shows us the expected well depletion rate for the existing wells in each basin...
above is the expected decrease in thousands of barrels per day for the wells currently producing oil in each basin...again, since this is in units of decrease, rather than percentage, it tells us the obvious, that those basins with the largest amount of current production will see the largest decreases...anyone who wants to work out the percentage declines for each basin based on our first table can do so....what is noteworthy here is that for the most part, the decreases going forward will be less than in 2015, because of the larger percentage of old wells which deplete somewhat slower...the Utica, with a large percentage of relatively newer wells, is the only basin where the August 2016 oil depletion rate is expected to be greater than that of last year
like the oil graph, the natural gas bar graph above shows us the expected August decrease in million cubic feet per day for the wells currently producing gas in each basin, against the similar decrease in August 2015...once again, for most basins, the decreases in natural gas output going forward will be less than they were in 2015, because of the larger percentage of old wells..the exceptions are again the Utica, with it's larger percentage of newer wells, and the Permian, which has been producing more natural gas recently than it had in the legacy years...
the next two graphs we'll include are for oil and natural gas productivity for new Utica wells...once again, the EIA is estimating August output from new wells based on recent historical data on total production from new wells divided by the region's average monthly rig count, lagged by two months...in this first graph below, the total Utica rig count since 2007 is shown in black, while the output of oil per rig from new wells is shown as a brown graph over that same span...
in the second graph of this set below, the total Utica rig count is again shown in black, while the output of natural gas from new wells per rig in thousand cubic feet per day in shown in blue...now, look closely as those productivity lines, brown above for oil and blue below for natural gas...we can see that oil output per new Utica well has quadrupled from under 100 barrels per day to nearly 400 barrels per day in the short span from mid 2014 to mid 2016...similarly, natural gas output per new Utica well has tripled, from 2,500,000 cubic feet per day to 7,500,000 cubic feet per day over the same 2 year span (after it had quadrupled in the prior two years, so there's been a twelve-fold increase per new well in 4 years)...also notice that neither the brown line for oil nor the blue line for natural gas shows any sign of topping out, ie, if the trend continues, we might even expect another tripling two years hence...so, why such a exponentially increasing rate of productivity? in part, it’s because the frackers are getting better at what they do; ie, their fracking techniques have improved...but another big factor is that with prices depressed, they're no longer fracking half the state willy-nilly, like Chesapeake did during the McClendon era...they are only fracking in those locations where they believe that profitable production is pretty much a sure thing, and hence they're now producing as much gas and oil from new wells running a dozen rigs than McClendon & his boys did two years ago with 4 dozen rigs..
The Latest Oil Stats from the EIA
Wednesday's release of US oil data for the week ending July 15th by the Energy Information Administration indicated that our oil imports rebounded back to above recent averages, that our refineries ramped back up to seasonal levels to use all those extra imports, and as a result another small portion of our monstrous glut of crude oil was converted into a glut of refined products...our caveat for this review is that this week's crude oil fudge factor included to make the weekly U.S. Petroleum Balance Sheet (line 13) balance out was +498,000 barrels per day, which meant that 498,000 more barrels per day showed up in our final consumption and inventory figures this week than were accounted for by our production and import figures, meaning one or several of this week's metrics were incorrect by that amount, errors which are typically due to inadequacies in gathering or reporting that data...that makes for the 4th week in a row when we've seen a large positive adjustment, and as a result this year's cumulative daily average of that weekly statistical adjustment has also turned positive by 18,000 barrels per day, after several months of being negative...during most of the weeks earlier this year, much of what we appeared to have produced or imported did not show up in the final consumption or inventory figures, and that statistical aberration has now completely reversed..
our field production of crude oil inched up for the 2nd week in a row, as oil output from US wells rose by 9,000 barrels per day to an average of 8,494,000 barrels per day during the week ending July 15th....again, like last week, the entirety of the increase resulted from a 38,000 barrel per day increase from Alaska, while production in the lower 48 was down 29,000 barrels per day....even with the back to back increases, our oil output still remained 725,000 barrels per day below the pace we saw at the beginning of this year, and was still 11.1% lower than the 9,562,000 barrels we produced during the week ending July 17th of 2015, and 11.6% lower than the record 9,610,000 barrel per day oil production that we saw during the week ending June 5th last year...
at the same time, the EIA reported that our imports of crude oil rose by an average of 293,000 barrels per day to an average of 8,134,000 barrels per day during the week ending July 15th, nearly a million barrels per day, or nearly 13% more than the 7,199,000 barrels of oil per day we were importing during the week ending July 17th a year ago...at the same time, the 4 week average of our imports reported by the EIA's weekly Petroleum Status Report (62 pp pdf) actually slipped back to an 8.0 million barrel per day level, which was only 5.9% higher than during the same four-week period last year...
meanwhile, usage of that crude oil by U.S. refineries rose by 319,000 barrels per day from the prior week during the week ending July 15th, as the US refinery utilization rate rose to 93.2% during the week, up from 92.3% of capacity during the week ending July 8th...this week’s refinery throughput was virtually unchanged from the 16,870,000 barrels per day US refineries used during the week ending July 17th last year, however, when US refineries were operating at 95.5% of capacity..
even with the increase in refining, however, our refineries’ production of gasoline fell back from the elevated levels of last week, dropping by 168,000 barrels per day to an average of 10,050,000 barrels per day during the week ending July 15th...that was 0.6% lower than the 10,109,000 barrels per day of gasoline produced in the same week last year, but about 2% higher than last July's average output...at the same time, refinery output of distillate fuels (diesel fuel and heat oil) also slipped, falling by 30,000 barrels per day to 5,004,000 barrels per day during the week ending July 15th....that also put distillates output 1.4% below the 5,073,000 barrels per day that was being refined the same week last year, which was on a par with distillates output for that month...it's a bit puzzling to see output of both gasoline and distillates down with such a large increase in refinery inputs, but i see no easy explanation; production of propane/propylene was up by 55,000 barrels per day to 1,734,000 barrels per day, and output of residual fuels was up by 24,000 barrels per day to 413,000 barrels per day, but production of jet fuel was also down, albeit by an insignificant 5,000 barrels per day to 1,722,000 barrels per day...
even with the large drop in our output of gasoline, our gasoline inventories rose again, by 911,000 barrels to 241,000,000 barrels as of July 15th, the fourth increase in the past 5 weeks, at a time of year when our gasoline supplies are usually being used up; in fact, July 15th saw the highest summertime level for gasoline supplies in the EIA's weekly records....contributing to the increase in gasoline inventories was a 57,000 barrel per day increase in our gasoline imports to 897,000 barrels per day, which was also 62,000 barrels per day more than the 815,000 barrels of gasoline we imported during the same week a year earlier....as a result, this week's gasoline inventories were 11.4% higher than the 216,285,000 barrels of gasoline that we had stored on July 17th last year, and also 10.6% higher than the 217,871,000 barrels of gasoline we had stored on July 18th of 2014... thus our gasoline supplies remain categorized by the EIA as "well above the upper limit of the average range" for this time of year..
at the same time, our distillate fuel inventories fell by 216,000 barrels to 152,783,000 barrels on July 15th, using up a small portion of the 4,058,000 barrel distillates inventory increase to 152,997,000 barrels we saw a week ago...since our distillate inventories have continued to run far above the normal level after the warm winter reduced US heat oil consumption, our distillate inventories as of July 15th were still 8.0% higher than the 141,515,000 barrels of distillates we had stored as of July 17th last year, and 21.3% higher than our distillates supplies as of July 18th 2014, and thus they were again characterized as "well above the upper limit of the average range" for this time of year...
finally, as our refineries more than kept pace with our increased imports, we again needed to withdraw 2,342,000 more barrels of oil from our stocks of crude in storage to meet the week's need, as thus our crude oil inventories fell to 519,462,000 barrels as of July 15th....but that's a fairly normal withdrawal rate for this time of year, and it left us with 12.0% more oil in storage than the 463,885,000 barrels we had as of the same weekend a year earlier, and 40.0% more oil than we had stored on July 18th of 2014....with our oil supplies thus continuing to beat the seasonal records we set most every week in 2015, it should go without saying that our crude oil supplies also remain "well above the upper limit of the average range" for this time of year..."
This week's rig counts
US drilling activity increased for the 7th week out of the last 8 during the week ending July 22nd, with oil rigs seeing their largest percentage increase since December 2009, despite the lower prices for crude.....Baker Hughes reported that the total number of active rotary rigs running in the US was up by 15 rigs to 462 rigs as of Friday, which was still down from the 876 rigs that were deployed as of the July 24th report last year, and down from the recent high of 1929 rigs that were in use on November 21st of 2014...the number of rigs drilling for oil this week rose by 14 rigs to 371, which was still down from the 659 oil directed rigs that were in use a year earlier, and down from the recent high of 1609 oil rigs that were drilling on October 10, 2014, while the count of drilling rigs targeting natural gas formations fell by a single rig to 88 this week, which was also down from the 216 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 on August 29th, 2008...there were also three rigs drilling this week that were classified as miscellaneous, up by 2 rigs from last week and also up by 2 miscellaneous rigs from the same week a year ago....
however, despite the large overall increase in drilling, three of the platforms that had been drilling offshore in the Gulf of Mexico were shut down this week, which reduced the Gulf of Mexico active rig count to 18 rigs, down from the 31 rigs working in the Gulf of Mexico a year ago...since there is also an offshore platform still working off the Cook Inlet in Alaska, the total offshore count fell to 19, also down from 31 a year ago....meanwhile, the inland waters rig count was unchanged at 3, down 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 also increased for the 7th time in 8 weeks, rising by 13 rigs to 357, which still was down from the 662 horizontal rigs that were in use on July 24th of last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, one directional rig and one vertical rigs were also added...that brought the working directional rig count up to 44 rigs, which was still down from the 83 directional rigs that were in use at the end of the same week a year earlier, and brought the vertical rig count up to 61 rigs as of July 22nd, which was nonetheless down from the 131 vertical 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'll again 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 July 22nd, the second column shows the change in the number of working rigs over the last week, the third column shows the prior week's rig count, the 4th column shows the change in the number of rigs running from the equivalent week in July 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 July 24th of 2015:
what's immediately obvious from looking at those tables is that the entirely of the jump in drilling activity could be accounted for by the 15 rig increase in Texas, with an increase of 8 rigs in the west Texas Permian basin, 3 more rigs in the Barnett shale near Dallas/Ft Worth, and two additional rigs in the Eagle Ford of the southern part of the state...other states were relatively static, with only California up two rigs to 7 and Louisiana down two rigs to 44 showing a rig count change greater than 1, with the later accounted for by the 3 rig drop in the Gulf of Mexico...not included in the list of major state variances above, Nevada drillers started running a single rig this week, their first since last September, which left them unchanged from the 1 rig they had working a year ago...
Several nonpowered dams along the Ohio River to be converted to hydroelectric dams in 2016 -- In 2016, nearly 300 megawatts (MW) of electricity generating capacity is expected to come online from dams that did not previously have electric generating units, commonly referred to as nonpowered dams (NPDs). NPD capacity additions make up 92% of the 320 MW of planned hydroelectric capacity for 2016. Expected capacity additions at NPDs in 2016 are large compared to recent NPD additions, which totaled 126 megawatts (MW) over 2006–15, but relatively small compared with total U.S. hydroelectric capacity of nearly 80,000 MW as of April. The National Hydropower Association estimates that 3% of the nation's 80,000 dams currently generate electricity. Existing conventional hydroelectric generators in the United States provided 251 million megawatthours of electricity in 2015, or about 6% of annual total net generation. Unlike other forms of renewable-fueled electricity, such as solar and wind, hydroelectric capacity additions have been relatively modest in recent years. Also, about 1,000 MW of hydroelectric capacity has been decommissioned over the 2006–15 period, mainly through the removal of existing dams. New conventional hydroelectric generators may not be eligible for federal tax credits, unlike new wind and solar additions. Depending on the state, hydroelectric generation may not be eligible for compliance with state renewable portfolio standards or voluntary goals. Although electric generating units have been installed at NPDs throughout the country, the Ohio River accounts for much of this activity. About 74% of all the new and planned NPD capacity additions from 2006 to 2016 occurred along the Ohio River. Many of the existing dams along the Ohio River that have been or will be converted to produce electricity are used to maintain navigable depths during periods of low water flow.
FirstEnergy to shut down or sell several coal-fired units in Ohio - Crain's Cleveland Business: Akron-based FirstEnergy Corp. announced on Friday, July 22, that it will shut down or sell some of the operations at two of its coal-fired generation plants in Ohio. The company said it will either sell or deactivate its 136-megawatt Bay Shore Unit 1 in Oregon, Ohio, and retire four units of its W.H. Sammis Plant in Stratton, Ohio. The Sammis units are among seven the company operates at the Sammis plant, and the four units represent 720 megawatts of generation capacity, or about 4% of all the electricity FirstEnergy produces. The remaining three units at Sammis will continue to provide 1,490 megawatts of baseload power generation, the company said. FirstEnergy said it will complete its closure or sale of the Bay Shore unit by October 2020 and will shut down the Sammis units in May 2020. The company had been hoping to get some subsidies for its older coal-fired power plants from the Public Utilities Commission of Ohio, but those efforts have not gone smoothly, as there was opposition by environmental groups and, ultimately, the Federal Energy Regulatory Commission (FERC) rejected the plan. Since then, the PUCO staff has recommended that FirstEnergy receive $131 million annually, in the form of a special rate rider, to help preserve the company’s credit rating. However, FirstEnergy now says that the plants are just too small to compete in today’s market.
FirstEnergy to partially close coal-fired Sammis power plant and Bayshore on Lake Erie, competing gas-fired plants now being built | cleveland.com -- FirstEnergy told investors this morning that it intends to close the four smaller boilers at the coal-fired W.H. Sammis power plant on the Ohio River because they are no longer able to compete in wholesale markets dominated by new gas-fired power plants. The company also plans to close or sell its small Bay Shore power plant in Oregon, Ohio, which burns coke supplied by a nearby BP refinery. "We have taken a number of steps in recent years to reduce operating costs of our generation fleet, said Jim Lash, president of the corporation's generation company, in a release. "However, continued challenging market conditions have made it increasingly difficult for smaller unit like Bay Shore and Sammis Units 1 through 4 to be competitive. It's no longer economically viable to operate these facilities." The company said it does not intend to layoff the 368 employees affected at Sammis or the 78 at Bay Shore. Sammis units 5, 6 and 7 will continue to run. The shutdowns would occur in 2020 and would impact the company's financial results with non-cash "impairment" charges. The closings must be approved by PJM Interconnection, the non-profit company that manages the high-voltage power grid in 13 states, including Ohio. PJM could refuse to allow the closings because it could disrupt the stability of the grid. The company could then receive extra payments from PJM to continue operating the plants, exactly what it did when in 2012 it announced it would close its Eastlake power plant and other coal-fired plants on Lake Erie in 2015. Customers paid for that with slight increases in delivery charges. Ultimately, the company built a new transmission line to Northeast Ohio from power plants in Pennsylvania. Customers are now paying for that. But unlike the 2012 announcement, today's announced closings come at a time when large, clean natural gas-fired power plants are being built all over Ohio which will more than make up for FirstEnergy's closings.
FirstEnergy closing Bay Shore, Sammis coal-fired units - FirstEnergy Corp. is seeking to sell or shut down its 136-megawatt Bay Shore plant six miles east of Toledo and also will close a significant portion of its W.H. Sammis plant, its largest coal-fired electric generator that sits along the Ohio River in Stratton. The Akron utility announced the changes Friday. FirstEnergy said it will sell or deactivate Bay Shore Unit 1 by Oct. 1, 2020. The plant, on 571 acres along Maumee Bay, primarily burns coal and also has a small, 16-megawatt oil-fired peaking unit. FirstEnergy has not yet determined what it will do with the oil peaking unit there. It also will deactivate, by May 31, 2020, units 1 through 4 at Sammis that now generate 720 megawatts out of the facility’s capacity of 2,210 megawatts. The four units were built from 1959 through 1962, making them the plant’s oldest. Most recently, they have been used to meet peak demand, not baseload demand, the utility said. Sammis takes up 187 acres along the Ohio River. FirstEnergy said it will take impairment charges of $150 million for the Bay Shore closure or sale and impairment charges of $497 million for Sammis. The company did not give specific reasons for the sale or closures other than saying in a letter to investors that “the business environment for the [Competitive Energy Services] segment continues to be challenged by the current market conditions.” FirstEnergy spokeswoman Jennifer Young said the coal units the utility will close down are uneconomical and no longer needed. The units will continue to make electricity into 2020, she said.“We continue to face challenging market conditions,” she said. That includes pricing pressures as well as lower demand for electricity, she said. The Sierra Club applauded the announcement and issued a statement, noting FirstEnergy said it is no longer economically viable to operate the facilities. “The majority of these units have been front and center in an ongoing two-year fight before the Ohio Public Utilities Commission where FirstEnergy has been trying to secure subsidies from its customers that could be used to keep these aging and ailing coal units open,” the environmental group said.
Charter group claims election board member has conflict of interests - Athens Messenger -- A group promoting a home rule charter in Meigs County is asserting that an elections board member has a conflict of interests. The board member, Jimmy Stewart, disputes that there is a conflict. Stewart is president of the Ohio Gas Association. The proposed Meigs County charter, like the one that was declared invalid by the Athens County Board of Elections, would prohibit the use the county’s water for high-volume hydraulic fracturing (fracking) for extraction of shale gas and oil, and prohibit the disposal of fracking waste in the county. On July 8, the Meigs County Board of Elections voted unanimously that the charter petition submitted by the Meigs County Home Rule Committee did not have enough valid signatures. A total of 596 were needed, but of the 821 submitted only 592 were valid — although Ohio law allows additional signatures to be submitted. Stewart then made a motion that the charter petition be declared invalid because it does not meet the requirement of Ohio Revised Code 302.02 that the an alternative form of county government must include an elected or appointed county executive. (The proposed charter contains a sentence saying that it is not forming an alternative government under ORC 302.) Stewart and board member David Fox voted to declare the charter petition invalid, while board members Rita Slavin and Charlie Williams abstained. According to minutes of the meeting, Slavin and Williams both questioned whether the board should even consider content of the charter, but should instead just determine if the petition was filled out properly and contained enough valid signatures. On July 11, the board decided to ask Secretary of State Jon Husted how it should proceed from this point — including whether the July 8 vote constitutes a tie, a board spokeswoman told The Messenger. As of Friday, a response had not been received from Husted. A tie vote would send the matter to Husted to decide the validity of the charter petition.
Anti-fracking group leaning toward appeal of local Board of Elections rejection of petitions - Athens NEWS - A group that submitted petitions to place a proposed charter government for Athens County on the November ballot was still weighing its options Sunday after the Athens County Board of Elections voted unanimously to reject the proposal for the ballot earlier this month. Nonetheless, communications from the group indicate plans to challenge the elections board decision. This is the second time the county Board of Elections has rejected a charter proposal from the Athens County Bill of Rights Committee (ACBORC) in as many years. The committee’s proposed charter does not propose to alter the structure of Athens County government with regard to officeholders or duties, but does seek to ban local water use for oil and gas hydraulic fracturing, as well as injection wells for fracking wastes. The former restriction, if enforced, likely would prevent deep-shale drilling in Athens County, a process that uses immense amounts of water. The state of Ohio reserves regulation of oil and gas drilling activities to the Ohio Department of Natural Resources, a set-up that state courts have upheld repeatedly. At the very least, this raises questions about whether any local fracking rules could be enforced by Athens County. On July 8, the county Board of Elections found that the proposal had enough valid signatures to go on the ballot, with 1,720 valid signatures out of 1,441 needed and 2,392 collected. Nevertheless, after voting 4-0 against putting the charter to voters, the elections board informed the Athens County Commissioners that they had determined that although the petition contained sufficient valid signatures, “the petition is not valid.” The Board of Elections cited a letter from Athens County Prosecutor Keller Blackburn wherein he advised the board that he doesn’t believe the proposal is a valid charter but recommended the board certify the proposal for the ballot regardless. The board decided instead to reject the proposal.
Meigs elections board says charter petition invalid — A home rule charter submitted for placement on the November ballot has been ruled invalid by the Meigs County Board of Elections. If the decision stands, it means the issue will not be on the ballot. The 4-0 vote by the board was taken during a meeting Thursday afternoon. As required by state law, the board has notified the Meigs County Commissioners of its decision. In a letter to the commissioners, the elections board stated that the proposed charter does not meet the threshold requirements of Ohio Revised Code 302.02 because it seeks to create an alternative form of government without the requirement of having an elected or appointed county executive.“It’s a false argument, they’re all being coached by the secretary of state,” said Greg Howard, a member of the Meigs County Home Rule Committee that submitted the charter petition to the elections board. According to Howard, the charter would be formed under the authority of the Ohio Constitution and does not seek to form an alternative government under Section 302 — which the proposed charter states. The charter would prohibit the use the county’s water for high-volume hydraulic fracturing (fracking) for extraction of shale gas and oil, and prohibit the disposal of fracking waste in the county. Elections Director Meghan Lee said no one from the charter committee was at Thursdays meeting, although she said a meeting notice was posted on the board’s Facebook page and in the newspaper. Howard said he was unaware the meeting was taking place.
University of Cincinnati Geologists Identify Sources of Methane, Powerful Greenhouse Gas, in Ohio, Colorado and Texas - Researchers from the University of Cincinnati recently studied the sources of methane at three sites across the nation in order to better understand this greenhouse gas, which is much more potent at trapping heat in the atmosphere than is carbon dioxide. The UC team, led by Amy Townsend-Small, assistant professor of geology, identified sources for methane in Carroll County, Ohio; Denver, Colorado; and Dallas/Fort Worth, Texas, by means of an analysis technique that consists of measuring carbon and hydrogen stable isotopes (isotopic composition). This approach provides a signature indicating whether methane is coming from, say, natural gas extraction (fracking), organic/biologic decay, or the natural digestive processes of cattle.Said Townsend-Small, “This is an analysis technique that provides answers regarding key questions as to specific sources for methane emissions. With isotopic composition analysis, it’s possible to tell whether the source is fracking or biogenic processes (like bacterial decomposition in landfills or algae-filled water). It’s a laborious technique to implement, but its use makes it possible to trace and attribute the source of methane production.” In findings to be presented at the July 20 Kentucky Oil and Gas Association annual meeting held in Covington, Ky., Townsend-Small will report on a 2012-15 study examining methane levels and origins of methane in groundwater in the Utica Shale region of eastern Ohio: Results from this study, where 23 wells were tested three to four times each year and a total of 191 samples examined, found that methane levels in these groundwater wells came from decay of organic matter (decomposition of plants) biological processes occurring in subsurface coal formations. In less than a handful of cases, the natural methane levels were relatively high (above 10 milligrams per liter). However, most of the wells carried low levels of methane.
Utica Region Drilling Productivity Report for July is out - Akron Beacon Journal - The Utica Drilling Region Productivity report for July is out from the U.S. Energy Information Administration. You can see the report here.
Compressor Stations Open Up New Front in Fracking Debate - WYSO - Back in February, 300 people crowded into a school gym in Medina County, Ohio, to lob questions, concerns—and some unvarnished anger—at state environmental regulators. At issue was the siting of a new natural gas compressor station along the planned NEXUS pipeline—a 250-mile transmission line being built to carry gas from Ohio to Chicago, southeast Michigan and Ontario. The Ohio Environmental Protection Agency held the meeting as part of the permitting process for the new compressor station. Such facilities are critical—if not well-known—components of the nation’s energy infrastructure. They are needed every 40 to 100 miles along pipelines to re-pressurize natural gas and keep it moving. There are about 150 such stations in Ohio already, and state officials say there are about 15 new ones planned. Like other industrial facilities, compressor stations are allowed to emit limited amounts of air pollutants. And while the Ohio EPA and energy companies say the facilities are safe and well-regulated, some people who live near them say the pollution is making them sick. Initially, Carroll County resident Barry Booth, who’s retired from manufacturing, didn’t have a problem with the nearby gas exploration. He even signed a lease agreement with Chesapeake Energy to make some extra money. Then one day, he went to get his wife, Mary Booth, a cup of coffee. The next thing he knew, he was on the floor—nauseated and dizzy. “I jumped up to check on him and then ended up beside him,” Mary Booth remembers. “It was just really hard to breathe, and the odor was very strong.” The Booths say they also started getting rashes, nosebleeds and headaches. And Mary Booth has battled breast cancer.The couple blames air emissions from the nearby gas facilities—especially a big compressor station—for their recent health problems. That facility’s permit allows it to emit limited amounts of carbon monoxide, volatile organic compounds and particulates—among other pollutants.
On The Hunt For Methane Leaks - They are in rural Susquehanna County looking for methane—the powerful greenhouse gas and the main component of natural gas.Lead researcher Naomi Zimmerman, a post-doctoral research associate at Carnegie Mellon University, turns on a gas monitor to see how much methane is in the air. The monitor starts to pick up a reading of 1.2 parts per million. That’s about 12 times what they would expect to see from a gas well. Judging by the wind direction, Zimmerman and fellow Carnegie Mellon scientists Mark Omara and Aja Ellis think the gas is coming from a nearby pipeline.“I think we have a pipeline leak,” Ellis says.The monitor climbs to nine parts per million, prompting a few “whoas” and “wows” from the trio of scientists, who are decked out in navy blue fire-resistant overalls.Their work is adding to a growing body of research into how the fracking boom is contributing to climate change. There are thousands of gas wells in the Marcellus and Utica shale formations of Pennsylvania, Ohio and West Virginia—and a growing number of pipelines moving that gas around the Northeast. And even though low gas prices have slowed the flurry of drilling activity, the hills and dairy farms of northeast Pennsylvania are criss-crossed with pipelines, compressor stations and other infrastructure sending gas to market. .But exactly how much of this infrastructure is leaking methane? That’s what the Carnegie Mellon researchers are trying to find out.
Fracking may worsen asthma for nearby residents, study says | abc13.com: Fracking may worsen asthma in children and adults who live near sites where the oil and gas drilling method is used, according to an 8-year study in Pennsylvania. The study found that asthma treatments were as much as four times more common in patients living closer to areas with more or bigger active wells than those living far away. But the study did not establish that fracking directly caused or worsened asthma. There's also no way to tell from the study whether asthma patients exposed to fracking fare worse than those exposed to more traditional gas drilling methods or to other industrial activities. Fracking refers to hydraulic fracturing, a technique for extracting oil and gas by injecting water, sand and chemicals into wells at high pressure to crack rock. Environmental effects include exhaust, dust and noise from heavy truck traffic transporting water and other materials, and from drilling rigs and compressors. Fracking and improved drilling methods led to a boom in production of oil and gas in several U.S. states, including Pennsylvania, North Dakota, Oklahoma, Texas and Colorado. Sara Rasmussen, the study's lead author and a researcher at Johns Hopkins University's Bloomberg School of Public Health, said pollution and stress from the noise caused by fracking might explain the results. But the authors emphasized that the study doesn't prove what caused patients' symptoms.
Medical Study: Asthma Exacerbations Linked To Fracking Activities | OilPrice.com: The American Medical Association’s Journal of Internal Medicine released the results of a study this week that documented a correlation between fracking activities and an increased risk of asthma exacerbations for nearby residents. Unconventional natural gas development (UNGD) has previously been associated with air quality disturbances, which can lead to the exacerbation of asthma symptoms. The pollution has been known to stem from truck traffic and sleep disruption, the article said. "Asthma is a common disease with large individual and societal burdens, so the possibility that UNGD may increase risk for asthma exacerbations requires public health attention,” the report’s authors noted. “As ours is the first study to our knowledge of UNGD and objective respiratory outcomes, and several other health outcomes have not been investigated to date, there is an urgent need for more health studies.” “These should include more detailed exposure assessment to better characterize pathways and to identify the phases of development that present the most risk," the study concludes.”
Fracking wells increase rate of asthma attacks in nearby residents, study finds -- Natural gas wells created by fracking in Pennsylvania may elevate the number of asthma attacks for nearby asthma patients, according to a study published Monday in JAMA Internal Medicine. The investigation found a patient living near one of these sites — known as unconventional natural gas development (UNGD) wells — was 1.5 times more likely to have a severe asthma attack and four times as likely to have a moderate attack. While the study doesn’t prove natural gas pollution caused the asthma attacks, it is likely to stir the debate over the health effects of fracking. “We believe it is time to take a more cautious approach to well development with an eye on environmental and public health impacts.” Schwartz and his colleagues came to this conclusion by tracking 35,508 asthma patients in the Geisinger Health System, which serves northeastern and central Pennsylvania. The team collected data on how often these patients had mild, moderate and severe asthma attacks from 2005 to 2012. The study stated more than 6,200 wells were drilled during this timeframe. The researchers then cross-referenced how far these patients lived from UNGD wells. Along with finding that a well’s proximity correlates with asthma attack, the study said the most hazardous stage was the production stage. UNGD wells are made in four stages: pad preparation, drilling, stimulation (hydraulic fracturing/fracking) and production where natural gas is consistently extracted and typically lasts for the longest period of time.
Medical Daily: How Fracking Wrecks Havoc On Your Lungs - New research published Monday in JAMA Internal Medicine adds more fuel to the fire concerning fracking’sunintended side-effects on human health with new claims that fracking may worsen asthma symptoms. Fracking, known as unconventional natural gas development, requires four major phases, all with the purpose of retrieving natural gas (and oil) from previously unreachable veins found deep inside the earth. They involve preparation, drilling, stimulation, and the actual production of gas via wells. The stimulation phase, most commonly associated with fracking, is when highly pressurized water and other chemicals are used to crack open rocks so that natural gas and oil can be better extracted.Critics have accused fracking companies of poorly safeguarding the building and maintaining of these wells, citing the leakage of fracking fluids into the water supply, and have also noted that gas from wells may be unhealthy, and release pollution into the air. To test these claims of negative health impacts caused by fracking, the researchers, primarily hailing from Johns Hopkins University in Baltimore, studied the electronic health records of 35,508 patients with asthma living in and around Pennsylvania from 2005 to 2012, a major hub of fracking development. They specifically tracked any documented flare-ups of the patients’ asthma, ranging from needing steroid medication for a mild attack to being hospitalized for a severe attack. Lastly, they cross-referenced the incidence of these events with how close the patients lived next to a fracking work site. They found that those who lived closest to a site, regardless of which phase of development it was in, experienced more asthma-related incidents than did those who lived farthest away. Depending on the severity of attack and the site’s phase of development, the odds of an asthma attack were 1.5 to four times higher for those who lived nearby.
Sunoco's Mariner East pipeline wins big in court but hurdles remain --- Commonwealth Court on Thursday upheld Sunoco Logistics Partners' power to take private property for its Mariner East Pipeline, adding momentum to Sunoco's plan to deliver more energy from the Marcellus Shale region to Marcus Hook. The court, in a 5-2 ruling, affirmed a Cumberland County judge's decision last year that Sunoco's pipeline subsidiary is a public utility as determined by the Pennsylvania Public Utility Commission, which Sunoco says gives it the authority to take rights of way from property owners who decline to negotiate agreements along the pipeline's 351-mile route. The majority opinion, written by Judge Renée Cohn Jubelirer, concluded that "Sunoco is regulated as a public utility by PUC and is a public utility corporation, and Mariner East intrastate service is a public utility service." Sunoco Logistics called the ruling decisive. "Although this case confirmed Sunoco Pipeline's public utility status, we have always worked with landowners to reach mutually acceptable agreements, and pursued legal proceedings only in those instances where an agreement could not be reached," the Newtown Square company said in a statement. The Mariner East project, which would deliver natural gas liquids like propane, butane and ethane to Delaware County, still faces obstacles that were unresolved by Thursday's ruling. A separate suit, filed last year in Philadelphia by the Clean Air Council, also argues that Sunoco has no legal right to use eminent domain to build its pipelines, which it argues would not serve a public need. "This is not the end of the story," said Alex Bomstein, a Clean Air Council attorney. He said the ruling on Thursday was "quite narrow" and did not address the constitutional challenges raised by the Philadelphia suit, including arguments that the pipeline violates the state's Environmental Rights Amendment. Bomstein said the issues will ultimately be decided by the state Supreme Court.
New gas pipelines would make U.S. miss climate target: report | Reuters: The United States will miss its emission-reduction targets under the Paris climate agreement if 19 pending natural gas pipelines are built across eastern states, a report published on Friday by environmental groups said. Oil Change International and 11 other organizations found that 19 proposed pipelines due to move natural gas from the shale fields of Pennsylvania, Ohio and West Virginia to states from Louisiana to New York would unlock at least 15.2 billion cubic feet per day of new natural gas production. This would lock the country into more natural gas-fired electricity rather than renewable energy, and cause the United States to miss a target of cutting greenhouse gas emissions 83 percent from 2005 levels by 2050, the report said. "Our calculations show that the rise in gas consumption projected by the EIA (Energy Information Administration) would alone lead to emissions that would surpass the current long-term U.S. climate target by 2040," it added. Owners of the pipelines cited included Spectra Energy Co, Williams Cos Inc and EQT Corp. The study comes as opponents of hydraulic fracturing, or fracking, move from targeting drilling sites to planned pipeline routes. By limiting the capacity for transporting carbon-based fuels, they hope to reduce the number of projects developed. Environmentalists and landowners in states like New York have helped to block or slow down construction of proposed pipelines, such as the Pennsylvania-to-New York Constitution Pipeline.
New Gas Infrastructure Is Going To Completely Undermine U.S. Climate Goals - The fossil fuel industry is building a giant machine to extract more fossil fuel in the United States. The country is in the process of building hundreds of miles of natural gas pipeline that will tie the United States to fossil fuel production and consumption for decades — well past when most scientists predict we will have done irreparable harm to our human habitat. “Once the pipelines are built and permitted and operating, it significantly lowers the cost for operators to get their gas to market,” Stephen Kretzman, executive director of Oil Change International, told ThinkProgress. “All of that additional production that gets triggered needs to be thought about.” In fact, if the United States continues with its current natural gas policy, there is no way for the country to meet its emissions reduction goals, according to a report released Friday by Oil Change International. The report, which focuses on the natural gas-producing area of the Appalachian Basin, specifically Ohio, Pennsylvania, and West Virginia, details the growth in natural gas infrastructure in the region. This includes pipelines that will make the gas accessible across the country and around the world. There are currently 19 major pipelines in the works in the region, which has increased production 13-fold since 2009. Production is expected to double again by 2030. “The fossil fuel industry is building a giant machine to extract more fossil fuel in the United States,” Kretzman said. His group is pushing for the Federal Energy Regulatory Commission (FERC), which approves natural gas infrastructure permits, to include a climate test in its approval process. Right now, despite the fact that there are several national goals and international commitments to reduce emissions, the country does not consider climate impact when evaluating projects. In addition, projects are evaluated individually, rather than in aggregate
Whoa, why no criminal charges in dumping of radioactive fracking waste? - Attorney General Andy Beshear’s decision not to pursue criminal charges in the illegal dumping of radioactive fracking sludge in a solid-waste landfill in Estill County is disappointing. Beshear did recommend pursuing civil damages and penalties “to the fullest extent of the law” against the owners of a West Liberty company, Advanced TENORM Services, for “flagrant violations and reckless disregard for the safety of the community.” Beshear urged the Cabinet for Health and Family Services, which is responsible for controlling radiation hazards, to “levy the harshest civil penalties available under Kentucky law against those responsible in this troubling case.” There are gaps in both state and federal oversight that should be tightened to protect the environment and public health from the enormous amount of waste, much of it radioactive, that is being generated by new oil and gas drilling techniques. But the ban on importing low-level radioactive waste into Kentucky for disposal is already clear and indisputable — and has been for a long time. It’s inconceivable that a Kentucky company that billed itself as expert in managing radioactive drilling waste could have been ignorant of the Kentucky law. After all, the “TENORM” in the company’s name stands for technologically enhanced naturally occurring radioactive material. If there’s any doubt about what the company knew and when, consider environmental lawyer Tom FitzGerald’s testimony that in April 2015, months before the waste was trucked to Estill County, a state official emailed an Advanced TENORM executive links to the laws and regulations that prohibit importing low-level radioactive waste into Kentucky from any state but Illinois. Intentionally violating this prohibition is a class D felony.
U.S., Enbridge reach $177 million pipeline spill settlement | Reuters: Canadian pipeline operator Enbridge Inc has agreed to pay $177 million in penalties and improved safety measures in a settlement with the U.S. government tied to one of the largest inland oil spills in U.S. history. The settlement, announced on Wednesday by Enbridge, the U.S. Justice Department and the Environmental Protection Agency, resolves Clean Water Act violations stemming from the 2010 failure of Enbridge's Line 6B near Marshall, Michigan, which spilled some 20,000 barrels of oil into a branch of the Kalamazoo River. It also resolves a second spill that same year in Illinois and commits the company to spend at least $110 million to prevent future spills and improve operations on its pipeline system that extends through seven U.S. states in the Great Lakes region. Under the settlement, Enbridge Energy Partners, a U.S. subsidiary of Calgary-based Enbridge, will pay a $61 million fine related to the Marshall spill, plus a $1 million fine for a September 2010 spill of about 6,400 barrels of oil from a second pipeline in Romeoville, Illinois. Enbridge said it accepts the fines and measures required under the consent decree. Brad Shamla, Enbridge vice president of U.S. operations, said the settlement "won't have a material impact on us from a financial perspective." The company estimated the total cost for cleanup to date at $1.2 billion.
This $177 Million Oil Spill Fine Is Everything That Is Wrong With Environmental Enforcement - Six years after spilling more than 27,000 barrels of oil into local rivers, Enbridge Energy Limited Partnership is finally facing the music: a $177 million settlement with the U.S. government. The music is a little soft. The settlement covers two spills, but one of them was a doozy. On July 25, 2010, an Enbridge pipeline ruptured, ultimately spilling 20,000 barrels of tar sands oil into the Kalamazoo River and becoming the largest ever on-shore tar sands oil spill. Tar sands oil, extracted primarily in Canada and piped into and across the United States, is heavy, thick, and mud-like. Unlike most other oils, it sinks, making it even more difficult to clean up. After the Kalamazoo spill, Enbridge had to dredge the river and then replant native vegetation. At the five-year mark of the spill, the river’s ecology had not fully returned. “The fines amount to a slap on the wrist, far from what a historic spill like this should garner,” Anthony Swift, Canada director for the Natural Resources Defense Council, said in a statement. “This will do little to force the pipeline industry to think about spills—even historically massive ones—as a cost of doing business.”The company will pay $62 million in civil fines, $5.4 million in unreimbursed expenses the federal government incurred. The remaining $110 million will go to spill prevention and response measures. Enbridge had previously agreed with Michigan to pay $75 million for the spill. But the truly shocking thing might be that all Enbridge faces is costs.According to the government's complaint, "Although the [pipe] Line 6B rupture triggered numerous alarms in Enbridge’s control room, Enbridge failed to recognize a pipeline had ruptured until at least 17 hours later. In the meantime, Enbridge had restarted Line 6B... pumping additional oil into the ruptured pipeline causing additional discharges of oil into the environment." That means Enbridge had a detection system in place and had the ability to know that the pipeline ruptured. Someone at Enbridge — or someones, most likely — chose to ignore the alarm and continue pumping oil.
Like a sick joke: Snyder appoints BP lobbyist to head MDEQ: Enbridge says its Pipeline 5 -carries millions of gallons of oil and natural gas each day under the Mackinac Straits.This photo filmed last summer shows a diver inspecting the 62-year-old pipleline.(Photo: Enbridge) In the wake of the Flint water crisis, amid profound concerns over an aging oil pipeline under the Great Lakes, with an ongoing, urgent need to decrease pollution and improve air quality and public health in southwest Detroit, Gov. Rick Snyder has appointed ... wait for it ... a former oil-industry lobbyist, Heidi Grether, to head the state's Department of Environmental Quality. It's a stunning look into the way the governor views the state's responsibility to protect Michigan's environment, and Michiganders' health. And in the aftermath of the Flint water crisis, it's like Snyder is rubbing the noses of his constituents in his own mess. The move is astoundingly tone-deaf to Michiganders, who rely on the state's environmental regulatory agency to keep us safe. It's also a tacit announcement that Snyder no longer finds rebuilding Michiganders' trust in government, something nearly everyone agreed was paramount after the Flint crisis, to be particularly important.
Court affirms decision blocking frac sand mine (AP) — A state appeals court has affirmed a decision blocking a frac sand mine in western Wisconsin. The Mississippi Land Connection and Timber Company LLC and Wisconsin Bluff Sands LLC filed an application for a permit for a mine in the town of Waumandee in 2013. The Buffalo County Board of Adjustment denied the application after hearing from experts that little vegetation would grow in the area after the mine closed and from members of the public concerned about potential traffic, declining air quality and declining property values. The 1st District Court of Appeals upheld the board’s decision on Tuesday, finding that the board properly considered the mine’s environmental impact. The companies’ attorney, Richard White, said he hadn’t seen the decision and had no comment.
Group calls for action to stop fracking in Big Cypress National Preserve -- Fracking in Southwest Florida’s Big Cypress National Preserve? Unthinkable? No. With the National Park Service’s approval of a proposal for seismic testing in the preserve in order to begin drilling, hydraulic fracturing, fracking, acid fracking, acidization and well stimulation, it could be just around the corner. Saying that drinking water for more than seven million Floridians is at risk, Thursday the League of Women Voters of Palm Beach County called for residents to contact Sen. Bill Nelson urging him to do everything he can to keep the testing from happening. Here is a letter that will be sent to Senator Nelson. The recently approved permit will allow Texas-based Burnett Oil to begin seismic testing in 70,000 acres of federally protected land in the Big Cypress in Collier County. Big Cypress and the Everglades provide fresh water to the Biscayne Aquifer, which provides Palm Beach County’s drinking water. The letter asks Nelson to:
- Ban any form of seismic testing and any form of fracking and drilling
- Protect Our Drinking Water, air, health, climate and communities
- Prevent contamination of drinking water sources from disposal and leaking wells
Sempra gets OK to boost exports from proposed expansion (AP) — A San Diego energy company says it has federal permission to boost planned exports by 39 percent from a proposed expansion of the plant it’s building in southwest Louisiana. Sempra Energy said Monday that the U.S. Department of Energy approved exporting an additional 1.4 billion cubic feet of natural gas a day to countries outside U.S. free-trade agreements. According to a news release, that will bring Cameron LNG’s export capacity to 3.5 billion cubic feet a day, or 24.9 million tons a year. The company says the Federal Energy Regulatory Commission already has approved adding up to two more liquefaction trains and one more LNG storage tank. Sempra is building Phase 1 of the $10 billion project, which calls for three liquefaction trains and four storage tanks. It expects to begin operations in 2018, with 2019 as its first full year of operations.
Fayetteville Shale boom gone bust; glory days’ jobs, cash now history | NWADG: Abram initially planned to raise cattle. But when drilling rigs and other heavy equipment began rolling into the community, he realized there was an alternative use for his 773 acres. A crush of companies arrived in north-central Arkansas in the mid-2000s eager to pull natural gas from the Fayetteville Shale, a formation that stretches across the state to the Mississippi River. The nation was on the verge of a shale boom that would change the American energy landscape. In Arkansas, it offered a gold-rush opportunity for people like Abram, and thousands of jobs and wealth for local communities. When gas companies approached Abram about leasing his property for drilling, he agreed to a lease of $25 an acre, plus one-eighth mineral royalties. "If they offer me upwards of $20,000, they must be a gift from God," he recalled thinking at the time. But it didn't last. The energy companies' success at extracting natural gas from shale soon became their undoing. An oversupply of gas pushed prices to record lows. That led to layoffs, bankruptcies and meager royalty checks. The glory days of the Fayetteville Shale are over. The main drillers are gone. What remains is sobering. Businesses have closed. Once-bustling highways are mostly empty now, and equipment sits idle along the roadsides.
Energy firms gone, but their impact lingers | NWADG: As large equipment sits idle in cow pastures of the Fayetteville Shale in north-central Arkansas, some locals worry that years of natural-gas drilling there will have lasting consequences for the land and environment. Drilling in the Fayetteville Shale began in the mid-2000s and came to a halt in December. "We're left with hundreds of drilling sites," said Kathy Golding, who lives in the Heber Springs area. "What happens in the future?" Energy companies streamed into the area and began hydraulic fracturing, a high-intensity drilling technique known as fracking, to extract natural gas from in the dense shale rock. Initially, "many people didn't know what was taking place," said Buck Layne, president of the Searcy Chamber of Commerce. "There were a few people in town that knew about the gas business," he said. "Most people in the area were just learning on the fly."Many now worry that fracking can contaminate water or create excessive air emissions that contribute to global warming. And there is the matter of earthquakes. Small earthquakes in recent years have shaken communities near oil patches across the United States, and many scientists believe they are linked to oil and gas drilling activity. In Arkansas, drilling in the shale has generated dozens of environmental problems, including oil spills and eroded reserve pits that contain drilling fluids, according to a state agency. The bulk of the problems -- recorded by the Arkansas Department of Environmental Quality -- involved the three largest companies drilling in the formation and were found between 2008 and 2010, the height of the Fayetteville Shale boom. Only a handful of the problems led to formal action by the department. The Arkansas Public Policy Panel, which reviewed the department's inspections in the shale between July 2006 and August 2010, found more than 500 violations of water and other environmental regulations resulting from just under 300 inspections.
Permian gas output levels off, but processing capacity is rising - Crude oil has always been the big draw for producers in the Permian –– and in the especially prolific Delaware Basin within the Permian –– but the wells there also produce large volumes of “wet” natural gas that needs to be gathered, processed and transported to market. A lot’s been written about the Permian’s still-strong oil production and the infrastructure developed to support it; we’ve also covered natural gas liquids (NGLs) in the play. Now it’s time to delve into the gas processing and gas pipeline capacity out of West Texas and southeastern New Mexico, including pipes into the increasingly important Mexican market. Today, we discuss recent developments on the gas side of the U.S.’s hottest (remaining) oil production area. It’s been a tough 24 months in the U.S. oil patch, with falling crude oil prices, cutbacks in drilling and production, and –– more recently –– concern that the hoped-for recovery in crude prices may not be gaining traction. The situation’s been a lot less gloomy in the Permian, though, which is “still the one” where the production economics are more favorable than in other plays and where output levels for crude, associated natural gas and NGLs remain very close to the peaks they had reached a few months ago. The Permian region covers about 75,000 square miles of West Texas and southeastern New Mexico (slightly larger than North Dakota, and twice the size of New England!), and includes several sub-regions such as the Delaware, Central and Midland basins (see Figure 1), each with their own geologic and hydrocarbon-production characteristics.
Trump looking to pick top fracking mogul Hamm as energy secretary - Japan Times -Republican presidential candidate Donald Trump is considering nominating Oklahoma oil and gas mogul Harold Hamm as energy secretary if elected to the White House on Nov. 8, according to four sources close to Trump’s campaign. The chief executive of Continental Resources would be the first U.S. energy secretary drawn directly from the oil and gas industry since the Cabinet position was created in 1977, a move that would jolt environmental advocates but bolster Trump’s pro-drilling energy platform. Dan Eberhart, an oil investor and Republican financier, said he had been told by officials in Trump’s campaign that Hamm was “the leading contender” for the position. Eberhart said he had discussed the possible appointment with top donors at the Republican National Convention in Cleveland this week. Three other sources close to the Trump campaign confirmed Trump was considering Hamm for the post. One of the sources said he first heard that Hamm was a contender from Trump officials on Sunday. Hamm, 70, became one of America’s wealthiest men during the U.S. oil and gas drilling boom over the past decade, tapping into new hydraulic fracturing drilling technology to access vast deposits in North Dakota’s shale fields.
Trump would appoint fracking exec Harold Hamm as energy secretary -— Republican presidential candidate Donald Trump is considering nominating Oklahoma oil and gas mogul Harold Hamm as energy secretary if elected to the White House on Nov. 8, according to four sources close to Trump's campaign.The chief executive of Continental Resources (CLR.N) would be the first U.S. energy secretary drawn directly from the oil and gas industry since the cabinet position was created in 1977, a move that would jolt environmental advocates but bolster Trump's pro-drilling energy platform. Dan Eberhart, an oil investor and Republican financier, said he had been told by officials in Trump's campaign that Hamm was "the leading contender" for the position. Eberhart said he had discussed the possible appointment with top donors at the Republican National Convention in Cleveland this week. Three other sources close to the Trump campaign confirmed Trump was considering Hamm for the post. One of the sources said he first heard that Hamm was a contender from Trump officials on Sunday. Hamm, 70, became one of America's wealthiest men during the U.S. oil and gas drilling boom over the past decade, tapping into new hydraulic fracturing drilling technology to access vast deposits in North Dakota's shale fields. Hamm's future was discussed at a private fundraiser organized by a Trump Super PAC, Great America PAC, in Cleveland on Monday. Hamm was there, along with major donor Foster Friess and former Republican presidential candidate Ben Carson, one of the sources said, asking not to be named.
Fracking Tycoon Admits Democrats Better for Business Than GOP -- Despite the widely-held belief that the Republican Party and the fossil fuel industry are natural allies, one of the world's most prominent fracking tycoons admitted Tuesday that, actually, his business has fared better under Democrats. "The industry has actually historically done better under Democratic presidents during my 42 years, going back, than under Republican presidents," said Scott Sheffield, chairman and CEO of Pioneer Natural Resources, which runs an enormous oil drilling operation in West Texas' Permian Basin. Sheffield went on to explain how from the time Democratic President Barack Obama took office in January 2009 to the crash of the oil market at the end of 2014, his business skyrocketed, with Pioneer stock reaching the fifth place on the S&P exchange and first in the industry market. The remarks came in response to a question from a reporter with Inside Climate News during a CEO speaker session at the Washington, D.C.-based Center for Strategic and International Studies (CSIS). The reporter was asking Sheffield to comment on how important the 2016 presidential election is for the future of fossil fuel industry, and more specifically, the industry's tepid support for Republican Party nominee, Donald Trump. "I think most of us would agree that [...] there are better candidates on each side," Sheffield said, referring to Trump and presumptive Democratic nominee Hillary Clinton. "That doesn't meant that either person [couldn't] end up doing a great job."
Here's what a President Trump would do on energy, Harold Hamm says: The biggest geopolitical weapon the United States has is crude, and a President Donald Trump would ensure that the country developed more oil and gas, Continental Resources CEO Harold Hamm said Wednesday. Hamm, who is an informal advisor to Trump on energy policy, is set to speak at the Republican National Convention Wednesday night. He believes if Trump were elected to the White House, the GOP nominee would back off of some of the "punitive" regulations the industry has endured during the Obama administration. "While we've been doing this the last seven or eight years — doubling U.S. production — we've had an onslaught, a tsunami if you will, of punitive regulations designed to put us out of business," he said in an interview with CNBC's "Closing Bell." The Obama administration has pushed through measures regulating hydraulic fracturing on government land and the release of methane from new and modified wells, citing concerns about environmental, health and safety risks. The industry has suffered "death by a thousand cuts" because of those regulations, and he thinks that if Hillary Clinton is elected to the Oval Office, it will be more of the same — or worse. If the U.S. produces more oil, then it won't have to rely on countries that are connected with terrorism, Hamm said. "We do not need to be funding the nations that are funding terrorism. And that's what we're doing unless we produce more here and certainly that's what we need to be doing."
Oil Industry CEO Claims Democrats Have Done More For Oil | OilPrice.com: With the Republican National Convention set to wrap up on Thursday, and the Democratic National Convention getting ready to kick off in Philadelphia next week, one prominent oil executive is noting that the industry has fared better under Democrats than Republicans. Scott Sheffield, CEO of Pioneer Natural Resources, says that he has noticed the trend during his 42 years in the business. That may sound strange considering the two parties’ diverse platforms when it comes to energy. The Republican party is touting deregulation and has said that it does not support the Paris Climate Accords. Going a few steps further, the party has plans to defund renewable energy, and open public lands and the outer continental shelf to drilling. Additionally, the party also wants to leave the regulation of fracking and drilling to the states, and increase oil and gas exports. Conversely, the Democrats are calling for an 80 percent reduction in greenhouse gas emissions and oppose the expansion of oil and gas production. They also want to phase down energy production on public lands. The party supports the inquiries into the alleged “climate change cover-up” by Exxon Mobil, and wants to see the nation using only renewable energy by the middle of the century. Comparing the two platforms, the GOP clearly appears to be the ally of the oil and gas industry. However, Sheffield says that under President Obama, Pioneer became the fifth largest company in the S&P in 2014.
Another Fracking Disaster: Explosion Causes 36 Oil Tanks To Burn -- A huge oil field erupted in flames in New Mexico on July 11. The fire broke out at a fracking site operated by WPX Energy, closing a highway and forcing the evacuation of local residents. The site, which is known as the 550 Corridor and is a part of Greater Chaco Canyon, contained six new oil wells and 30 temporary oil storage tanks. All 36 storage tanks caught fire and burned, according to the Tulsa, Oklahoma-based energy company. Two days later, “only 7 of 36 tanks at production site on fire this morning,” the company tweeted. “The site that exploded is a brand new facility that consists of six wells drilled to shale formations that have never been adequately analyzed for impacts and safety concerns,” Mike Eisenfeld, the Energy and Climate Program manager at the San Juan Citizens Allliance told EcoWatch in an email. WPX was given approval to develop the site from the New Mexico Oil Conservation Division in September. The U.S. Bureau of Land Management (BLM) Farmington Field Office gave final approval to drill the land in December.“In a leap before looking scenario, the federal Bureau of Land Management in Farmington, New Mexico has allowed WPX to proceed with these shale facilities discounting the inherent danger that has now become clear with the explosion,” Eisenfeld said.“This highlights the failure to have adequate safeguards in place to protect local communities and also raises serious questions about chemicals and toxicity associated with the explosion,” he went on. “Emergency response for this explosion was hours away. A thorough investigation is necessary.”
New Mexico Gas Co. plans natural gas pipeline to Mexico (AP) — New Mexico Gas Co. says it’ll seek a federal permit to begin building a natural gas pipeline from southern New Mexico to Mexico. Company spokesman Teala Kail says the $5 million project would extend the company’s existing pipeline in Santa Teresa about five miles to the U.S.-Mexico border and enlarge the pipeline. The Albuquerque Journal (http://goo.gl/CTuQez) reports that additional facilities would need to be built on the Mexican side of the border before exports of gas could begin. A federal permit is required for pipelines that reach the border between the United States and Canada or Mexico, and Kail says the company expects the permit process will take a few months. New Mexico Gas is the state’s largest natural gas utility, serving more than 515,000 customers.
Trump vs Clinton: How Will Energy Fare? -- The Republican platform offers standard industry-friendly fare, calling for deregulation and promising no action on climate change. It rejects the Paris climate change agreement, rejects a carbon price, and pledges to defund renewable energy programs. The platform also downplays the significance of climate change as a national security threat (even though the Pentagon would disagree). At its core, the platform simply calls for more fossil fuel development. The party supports “opening of public lands and the outer continental shelf to exploration and responsible production, even if these resources will not be immediately developed.” It criticizes Democrats for wanting to “keep it in the ground,” a popular rallying cry among the environmental movement. And in another nod to the industry, Republicans want to leave regulation of fracking, methane emissions, and horizontal drilling to states and not the federal government. Finally it calls for fully liberalizing energy trade, allowing for greater oil and gas exports. In short, oil and gas companies will probably be pretty pleased with President Trump – although there is quite a bit of uncertainty regarding whether or not he is in line with his party’s articles of faith. Drillers would likely see fewer regulatory roadblocks and weaker support for competing technologies. The Democratic platform is much more complicated for the industry. Democrats call for an 80 percent reduction of greenhouse gas emissions by 2050 and lambast Republicans for denying climate change science. They support a Department of Justice inquiry into the role that oil companies played in misleading the public on climate change, a statement that all but mentions ExxonMobil. They also want to end fossil fuel subsidies and tax breaks while expanding public support for renewable energy and mass transit. Unlike the Republicans, the Democrats do not clearly support an expansion of oil and gas production. They oppose drilling in the Arctic and Atlantic Oceans, and support a “phase down” of fossil fuel development on public lands. But what should frighten oil and gas producers the most is the Democrats’ vision for the future. For example, one statement says “America must be running entirely on clean energy by mid-century.” On the way to that future the Democrats issued an interim goal of 50 percent clean electricity within a decade. There are massive questions marks around the Democrats ability and willingness to pursue such a strategy, but it presents an existential threat to both the production of oil and gas, and the long-term demand for those resources.
Federal Agents Went Undercover To Spy on Anti-Fracking Movement, Emails Reveal -- When more than 300 protesters assembled in May at the Holiday Inn in Lakewood, Colorado — the venue chosen by the Bureau of Land Management (BLM) for an auction of oil and gas leases on public lands — several of the demonstrators were in fact undercover agents sent by law enforcement to keep tabs on the demonstration, according to emails obtained by The Intercept.The “Keep it in the Ground” movement, a broad effort to block the development of drilling projects, has rapidly gained traction over the last year, raising pressure on the Obama administration to curtail hydraulic fracturing, known as fracking, and coal mining on federal public lands. In response, government agencies and industry groups have sharply criticized the activists in public, while quietly moving to track their activities.The emails, which were obtained through an open records act request, show that the Lakewood Police Department collected details about the protest from undercover officers as the event was being planned. During the auction, both local law enforcement and federal agents went undercover among the protesters.The emails further show that police monitored Keep it in the Ground participating groups such as 350.org, Break Free Movement, Rainforest Action Network, and WildEarth Guardians, while relying upon intelligence gathered by Anadarko, one of the largest oil and gas producers in the region.“Gentlemen, Here is some additional intelligence on the group you may be dealing with today,” wrote Kevin Paletta, Lakewood’s then-chief of police, on May 12, the day of the protest. The Anadarko report, forwarded to Paletta by Joni Inman, a public relations consultant, warned of activist trainings conducted by “the very active off-shoot of 350.org” that had “the goal of encouraging ‘direct action’ such as blocking, vandalism, and trespass.” The protesters waved signs and marched outside of the Holiday Inn. The auction went on as planned and there were no arrests.
Colorado business coalition reactivates to fight “economically damaging” oil and gas initiatives - The Denver Post -- Coloradans for Responsible Reform, a battle-hardened business coalition, is mobilizing to help the state’s petroleum industry fend off three ballot initiatives that target oil and gas development in the state. “We will raise what we need to raise to be successful,” said Kelly Brough, president and CEO of the Denver Metro Chamber of Commerce, and co-chair of the effort. Brough expressed a mix of resolve and frustration that the group, first assembled in 1994, must redeploy to fight what it considers ill-conceived and economically damaging initiatives trying to become part of the Colorado constitution. One way to think of the CFRR is as the political equivalent of a tested military reserve unit that the chamber calls into action when it believes business interests in the state face a serious threat. Earlier this year, there were 11 proposed initiatives targeting oil and gas and other business activities, but only three have survived ahead of an Aug. 8 deadline to submit signatures to make the November ballot. Initiative 75 would give local governments a greater say in limiting oil and gas activity within their boundaries and implementing restrictions that go beyond state standards. Initiative 78 would require new wells be setback 2,500 feet from inhabited dwellings and sensitive environmental areas. Initiative 63 would permit local governments to implement environmental standards on businesses independent of state and federal law. While not specifically aimed at oil and gas drilling, the new rules could be used to block it.
The August, 2016, EIA US Drilling Productivity Report Has Been Posted -- July 19, 2016 -- Link here. Note:The Drilling Productivity Report uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions. EIA's approach does not distinguish between oil-directed rigs and gas-directed rigs because once a well is completed it may produce both oil and gas; more than half of the wells produce both. While shale resources and production are found in many U.S. regions, at this time EIA is focusing on the seven most prolific areas, which are located in the Lower 48 states. These seven regions accounted for 92% of domestic oil production growth and all domestic natural gas production growth during 2011-14. Of the seven, the Bakken is the only "almost" pure oil play. The Eagle Ford, with regard to oil comes next, but it also produces a significant amount of natural gas. The Permian produces both. Interestingly, if you look at the regional map at the link, the EIA is not yet including the STACK/SCOOP in Oklahoma in their monthly productivity report.
EIA Predicts Slump in Shale Outputs By August - The United States Energy information Administration’s monthly report on domestic shale outputs puts oil production down by 99,000 barrels per day from July to August of this year. The report included production rates from the seven largest shale players in the U.S. market and predicted that the per day barrel count would land at 4.55 million by the end of next month. The Eagle Ford shale site in Texas will suffer the largest downturn, with output slumping by 48,000 barrels in August, the EIA site said. The Bakken shale play, which begins in Canada and extends into North Dakota and Montana, will see output declines by 32,000 barrels a day, according to the report. The report did not provide causes for the output declines. U.S. shale is the lowest cost option for new oil production, a report from Wood Mackenzie last week said. The U.S. shale industry has weathered the oil price downturn, tweaking drilling practices and cutting costs in order to stay in business, the report said, adding that the industry is proving to be resilient and flexible in the face of the worst oil market crisis in three decades. The report concludes that U.S. shale companies have managed to cut costs by as much as 40 percent since 2014. Much of that comes from lower costs from equipment suppliers and oilfield services firms. But it also comes from improved productivity from the average shale well. Instead of drilling anywhere and everywhere, U.S. shale companies are getting better at finding the “sweet spots.”
Natural gas flaring ticks upward | Prairie Public Broadcasting: The flaring of natural gas spiked upward in May. It’s back up to 11-and-a-half percent. "There are a couple of reasons," said State Mineral Resources Director Lynn Helms. "Natural gas production went up, and there was no additional processing or gathering capacity ready to take that up." Production rose to 1,643,522 MCF per day, from April's 1,616,769 MCF per day. Helms said the Hess Tioga gas plant ran only at 74 percent of capacity. He said that’s because of a delay in a project that would bring natural gas from south of Lake Sakakawea to that plant. "They (Hess) had been counting on the river crossing under Lake Sakakwea, in order to bring that plant up to full capacity," Helms said. "It has just been continuously delayed, and delayed, and delayed." Helms said Hess is awaiting federal approvals for that. But he said it looks like the approvals will come later this year. Helms also said three new gas plants should be coming on-line shortly. Meanwhile, this summer, natural gas prices have increased. That’s because more utilities are using the gas to generate electricity. And it is the summer air conditioning season. The norm used to be – natural gas prices would go up in winter, for heating, and down in summer. Helms said this summer, prices went up – and storage went down. And he said that bodes well for the development of natural gas processing plants in North Dakota.
Over 10K gallons of oil, produced water spill near Keene (AP) — North Dakota officials say more than 10,000 gallons of a mixture of oil and produced water have spilled at a well site in McKenzie County. The state’s Oil and Gas Division says the incident happened Tuesday at a site about 10 miles southeast of Keene. Officials say the incident was caused by a “piping connection leak.” The division says more than 9,500 gallons of the mixture have been recovered. Clean-up efforts are ongoing. A state inspector visited the site Wednesday. Produced water is a mixture of saltwater and oil and can contain drilling chemicals. Hess Bakken Investments II operates the site. A company spokeswoman did not immediately return a call seeking comment Wednesday.
A dirty little secret - The Economist - METHANE is invisible to the naked eye and does not make for good television. So when about 100,000 tonnes billowed out of a natural-gas system in Aliso Canyon, Los Angeles, over 112 days last winter (pictured in infra-red above), it drew relatively little media attention—even though it forced the evacuation of thousands of homes and the plume was big enough to be detectable from space..Unsurprisingly, many oil and gas companies would prefer methane leaks to remain out of the public eye, even though their industry now surpasses cow burps as a source of emissions (see chart). Methane is the predominant constituent of natural gas, a fuel that energy companies are embracing over oil and coal as a “bridge” to a post-carbon future and which has been given a new lease on life by America’s shale revolution. When burned, it emits about half as much carbon dioxide as coal and far less sulphur, soot and other pollutants. But greenhouse gases insulate the Earth in different ways. Carbon dioxide stays in the atmosphere for more than 500 years; methane just for 12. But the latter is about 25 times more potent.The American Petroleum Institute (API), a lobby group, says America is in “good shape” thanks to natural gas. Yet even environmentalists who acknowledge a preference for natural gas over coal believe methane leaks could be its fatal flaw. The Environmental Defence Fund (EDF), an American NGO that works with industry to reduce methane emissions, has in recent years deployed infra-red cameras along energy firms’ pipelines and beside thousands of oil and gas wells, as well as airborne monitoring kit to gather data. The results suggest methane leaks are significantly higher than had been previously understood. EDF has found that a disproportionate amount of fugitive emissions from the oil and gas infrastructure comes from a few “super-emitting” sites. In rare cases, like Aliso Canyon, they can take months to plug. More often the culprits may be well-side storage tanks with faulty valves, which may be fixable just with a wrench, but while left unattended billow methane into the air.
Another California County Just Approved A Fracking Ban - California’s anti-fracking movement just recorded its latest win Tuesday with the passage of fracking ban in Alameda County. Alameda, which has environmentally-friendly cities like Berkeley and Oakland within its borders, is now the first Bay Area county with a fracking ban in place and the fifth in the state. Last month nearby Butte County residents approved a fracking ban through a ballot measure.Alameda is fracking-free and has just one oil drilling company operating out of the city of Livermore, according to the San Jose Mercury News. Yet the county could have substantial oil reserves since part of Alameda is near the Monterey Shale, one of largest reservoirs of frackable oil in the U.S. Environmentalists had been working for two years to get the ban in place, arguing that fracking could harm the county’s wine region. California environmentalists have also long argued that fracking’s water-intensive nature is incompatible with a state going through the fifth year of a crippling drought that forced regulators to implement mandatory water restrictions. Some property owners criticized the move during Tuesday’s meeting, however, saying the ban trumped their property rights. Alameda County Board of Supervisors ultimately sided with environmentalists and unanimously approved the ban.
Why Do We Pretend to Clean Up Ocean Oil Spills? -- When the Deepwater Horizon well operated by BP (formerly British Petroleum) exploded and contaminated the Gulf of Mexico with at least 650 million litres of crude oil in 2010, blue-smocked animal rescuers quickly appeared on television screens. Looking like scrub nurses, the responders treated oil-coated birds with charcoal solutions, antibiotics and dish soap. They also forced the birds to swallow Pepto-Bismol, which helps absorb hydrocarbons. The familiar, if not outlandish, images suggested that something was being cleaned up. But during the chaotic disaster, Silvia Gaus poked a large hole in that myth. The German biologist had worked in the tidal flats of the Wadden Sea, a region of the North Sea and the world's largest unbroken system of intertidal sand and mud, and critical bird habitat. A 1998 oil spill of more than 100,000 litres in the North Sea had killed 13,000 birds in Wattenmeer National Park, and the scientist had learned that cleaning oil-soaked birds could be as harmful to their immune systems as the oil accumulating in their livers and kidneys. Kill, don't clean, she advised responders in the 2010 BP spill. Gaus then referred to scientific studies to support her unsettling declaration. One 1996 California study, for example, followed the fate of brown pelicans fouled by oil. Researchers marked the birds after they had been "cleaned" and released them into the wild. The majority died or failed to mate again. The researchers concluded that cleaning brown pelicans couldn't restore them to good breeding health or "normal survivability."
Canadian Q2 oil, gas drilling falls 57%; signs of recovery seen: Precision CEO - The number of oil and natural gas wells drilled in the second quarter of 2016 in Canada fell 58% year on year to 313, but the industry is now showing signs of a "modest recovery" as crude prices improve, a leading drilling contractor said Thursday. "This is the sixth consecutive quarter since the downturn [began in late 2014], but clearly the tone and the sentiment has changed now," Precision Drilling CEO Kevin Neveu said during a earnings webcast. "Our customers are moving from a cash conservation mode to a more normalized drilling activity keeping in mind the long-term fundamentals of demand for energy. We will not call this a rebound, but rather a recovery," Neveu added. As of Wednesday, Precision had 29 rigs active in Canada, another 29 rigs in the US and seven internationally that included three each in Saudi Arabia and Kuwait and one in Mexico, he said.The company has 57 rigs contracted for the third quarter, which is an increase of three new rigs compared with its position four months ago, Neveu said. Neveu's comments came after a "weak" Q2 that saw Precision's active rig count in the US standing at 24 rigs, compared with 57 rigs in Q2 2015. In Canada, its rig count last quarter was 13, compared with 26 rigs in Q2 2015.
Canadian energy company says crude oil has leaked into river (AP) — Canadian energy company Husky Energy says between 52,834 gallons (200,000 liters) and 66,043 gallons (250,000 liters) of crude oil and other material has leaked into the North Saskatchewan River in west-central Canada. Husky Energy said Friday that booms are being used in an effort to contain the spill, which leaked Thursday morning near Maidstone, Saskatchewan. Saskatchewan Mayor Ian Hamilton says in the event any oil makes it through to North Battleford, the city will shut down its water treatment plant, which draws its supply from the North Saskatchewan River. The pipeline runs from Husky’s heavy oil operations to its facilities in Lloydminster, between the border of Alberta and Saskatchewan, and carries oil mixed with a lighter hydrocarbon, called a diluent, that’s added to ease the flow.
Big Oil Begins To Worry About Trump’s Wall - Donald Trump’s idea to build a wall along the southern border of the U.S. has been called everything from controversial to harebrained, but—to the likely dismay of some of the oil majors—it’s now officially part of the Republican Party’s platform. As it turns out, the idea has been on the GOP table for a while, and Trump was just the man to voice it loudly and persistently enough. Trump’s wall is on the agenda, should he become president. A wall stopping people and vehicles from illegally crossing into the U.S. may appear to be a simple and effective solution to illegal immigration, but it sure won’t sound so good to Marathon Oil, Anadarko Petroleum, Exxon, Chevron, Kinder Morgan and their peers. The reason: since Mexico liberalized its energy market back in 2014, it has become an attractive investment destination for U.S. energy companies. E&Ps are bidding for oil and gas blocks. Service providers are building pipelines to export oil and gas to the south. Gas is a top priority, as it is gradually becoming the dominant element in Mexico’s energy mix. U.S. natural gas exports to its southern neighbor spiked following the 2014 liberalization, reaching 103.42 billion cubic feet in March 2016, from just 20.63 billion cubic feet in April 2010, according to the Energy Information Administration. To put this into perspective, let’s see how prices have been moving since 2014. The U.S. exported natural gas at $2.26 per 1,000 cubic feet in November 2015, which fell to $$2.20 in February this year and further to $1.88 in March, before inching up to $2.03 in April. The EIA’s latest natural gas report noted higher prices would stimulate production, and these higher prices, if they translate into higher export prices for Mexico, could add to the pre-wall pressure between the two countries. Especially since there are large-scale gas transportation projects underway.
Energy Giant Schlumberger Fires Another 8,000 As "Market Conditions Worsened" In Q2 –-- Last quarter, Paal Kibsgaard, the Chairman and Chief Executive Officer the world's largest oilfield services company, Schlumberger warned that "the decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis. This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity." He then promptly fired 8,000 workers in the first quarter, and said that he is not expecting a meaningful recovery in the company’s activity until sometime next year. He was right, because while the oil industry was touted as experiencing a substantial rebound since then, this appears to not have been the case for the energy services giant. This was confirmed in the results reported moments ago by Schlumberger which announced another unexpected loss or $2.16 billion, or $1.56 cents a share, compared with a profit of $1.12 billion, or 88 cents, a year earlier. As Bloomberg notes, as the downturn dragged on, executives at the world’s largest oilfield services provider have had to push back their expectations for an improvement in drilling and fracking work, with crude prices remaining more than 50 percent lower than their peak in 2014. As a result, the tone of Paal Kibsgaard this quarter was even gloomier than in Q1: In the second quarter market conditions worsened further in most parts of our global operations, but in spite of the continuing headwinds we now appear to have reached the bottom of the cycle. Or so he hopes.
Halliburton signals better demand for fracking equipment | Reuters: Halliburton Co indicated that demand for its fracking equipment was returning, despite the fewer number of rigs at work, as high-intensity shale drilling soaked up all the available capacity in the market. Halliburton is the world's largest provider of equipment used in hydraulic fracturing or fracking - the process of pumping water and chemicals, known as proppants, into shale rocks to extract oil and gas. U.S. shale oil producers - Halliburton's customers - are now drilling longer horizontal wells with multiple fracking stages, and deploying more horsepower and proppants to cover larger areas. This high-intensity drilling is boosting demand for fracking equipment. "Let me start today with a headline: 900 is the new 2,000 for U.S. rig activity," the company's president, Jeff Miller, said on a post-earnings call on Wednesday. "I believe it will only take 900 rigs to consume all of the horsepower available in the market." The company reported a smaller-than-expected quarterly loss and said it expected a "modest uptick" in rig count in the second half of the year. The U.S. rig count climbed by 7 to 447 in the week ended July 15, but is far short of the 1,931 at work in September 2014.
Despite Optimism, Oil Firms Keep Cutting Jobs - WSJ: Energy companies continued to cut thousands of jobs during the second quarter, even though many chief executives are now voicing optimism that the oil market crash is ending and a rebound in drilling is afoot. Although the heads of Halliburton, Schlumberger and other major firms forecast higher crude prices and a return to U.S. shale fields when discussing earnings this week, those companies and others disclosed another 15,000 industry layoffs. Among the recent job cuts were 8,000 employees from Schlumberger, the world’s largest oil-field service company, and 5,000 from its rival Halliburton. FMC Technologies, which makes offshore oil equipment, cut 1,000 workers in the spring and summer. ConocoPhillips, one of the biggest U.S. oil producers, confirmed another 1,000 employees will be let go by the end of September. Further bloodletting in the oil patch has brought the number of global energy jobs lost during this downturn to more than 385,000 people, with the bulk of the latest cuts coming in the U.S. and Canada, according to data from Houston-based consultancy Graves & Co. Paal Kibsgaard, the chief executive of Schlumberger, characterized the state of the market this way: “We aren’t expecting a uniform V-shaped recovery here,” Schlumberger, which helps oil-and-gas producers tap new wells and coax more fuel out of old ones, has clients from Oklahoma to Oman, but in the last two years it has reduced its world-wide workforce by 50,000 people.
ConocoPhillips to Trim 6% of its Workforce | Rigzone -- ConocoPhillips will lay off approximately 6 percent of its global workforce, the exploration and production (E&P) company confirmed to Rigzone in an email. ConocoPhillips, which has headquarters in Houston, has undertaken a series of cost-reduction measures over the last 18 months in response to the industry downturn, ConocoPhillips spokesperson Daren Beaudo told Rigzone. Beaudo said ConocoPhillips has significantly reduced its capital activities and finished some major projects, leaving the company with “more organizational capacity” than it needs. “We have been transparent with employees that we will have targeted workforce reductions in certain areas of our business to align our organizational capacity with future activity levels,” Beaudo said. North America will be impacted the most by the job cuts.
Keppel Sees Prolonged Dearth Of Oil-Rig Orders Amid Glut | Rigzone-- Keppel Corp., the world’s largest builder of oil rigs, sees little prospect of an improvement in global demand amid a supply surplus that’s caused quarterly profit to fall to the lowest in almost a decade. The company may consider reducing its workforce and mothballing some facilities in its rig-building operations because of excess capacity, the Singapore-based company said Thursday. Keppel Offshore & Marine Ltd. has already shrunk its workforce by about 11,000 and subcontractor headcount by some 8,500 since 2015, according to Chief Executive Officer Chow Yew Yuen. "It’s about hunkering down," Keppel Corp. Chief Executive Officer Loh Chin Hua said at a briefing. "What we have seen in the industry, it’s not just about oil prices. We have to look at the oversupply of rigs and the current situation with the traditional customers." Keppel sees a long, harsh "winter" in its rig-building business after net income fell 48 percent in the second quarter to S$205.8 million ($152 million). The company is among Asian shipyards that have cut jobs and are considering dock closures after oil prices more than halved in two years, leading to a slump in orders for offshore drilling and production, deferrals and cancellations. The company has been hit by non-payments from one of its biggest clients, Sete Brasil Participacoes SA, which filed for bankruptcy protection in April. Shares of Keppel fell as much as 1.8 percent to S$5.48 and traded at S$5.50 as of 9:27 a.m. in Singapore, while smaller rival Sembcorp Marine Ltd. dropped 2.6 percent to S$1.485. The stocks have both fallen about 15 percent this year, compared with a 1.8 percent advance in the benchmark Straits Times Index. Keppel said the order outlook is weak because of oversupply of oil rigs and falling day rates, or the fees charged to lease a drilling rig. Demand is expected to return eventually when oil companies curb falling production and replenish declining reserves to meet the world’s requirements for fossil fuels. Revenue at Keppel fell 37 percent on year to S$1.63 billion in the second quarter.
Old and In The Way - Jones Act Fleet Retirements and Their Effect on Charter Rates -- Since 2012, the capacity of the Jones Act fleet of tankers and large articulated tug barges (ATBs) has increased by more than one-third, to 22.5 million barrels, and over the next 18 months, new-build tankers and more large ATBs will add another 4.5 million barrel –– or 20% –– to the capacity total. That’s raised a lot of concern among vessel owners about a capacity glut and the potential for bargain-basement charter rates. What’s important to factor in, though, is that a lot of older Jones Act vessels are getting close to retirement age, and their exit from the shipping “work force” will help to mitigate the effects of any over-build. Today, we continue our series on recent developments in the Jones Act fleet and how they affect crude oil and petroleum products shippers. In the first episode of this series, Flirtin’ With Disaster –– The Coming Oversupply of Jones Act Tankers and ATBs, we noted that 17 Jones Act tankers and large, ocean-going ATBs (combined capacity of more than 4.5 million barrels, or MMbbl) will be delivered by the end of 2017, boosting the total fleet capacity of these types of vessels by one-fifth. These new-vessel orders were made a few years ago in response to increased shipments of crude oil within the U.S. that, at the time, had resulted in a shortage of Jones Act product tankers and large ATBs. This in turn led to higher charter rates and the resulting increased costs of shipping crude oil and petroleum products in the coastwise trade. Now though, the decline in U.S. crude oil production has upended those expectations.
US agency creates Jones Act enforcement division - Amid increased pressure from the US maritime industry to boost Jones Act enforcement, the US Customs and Border Protection has created a new division of enforcement for the nearly century-old law. CBP's Office of Field Operations has created the National Jones Act Division of Enforcement, which has a mission to "assist CBP and industry partners on issues concerning coastwise trade, with the goal of being a clearinghouse for all coastwise trade issues," according to a July 15 notice from Vernon Foret, director of the Area Port of New Orleans. The division, known as JADE, will be headquartered in New Orleans and will include a staff of Jones Act experts, Foret wrote. "The JADE will work in partnership with industry stakeholders in the enforcement of the Jones Act, along with all other coastwise trade laws," Foret wrote, adding that the Jones Act was the "foundation" of US maritime policy.There are few public details on this new division and their future work outside of Foret's notice. Katrina Skinner, a CBP spokeswoman, declined to comment beyond the announcement. But sources said the JADE was likely created in response to lobbying from the US maritime industry, a fierce defender of the Jones Act, and may lead to more Jones Act enforcement cases. "This plainly is the outgrowth of industry lobbying to get CBP to take Jones Act enforcement more seriously,"
The Glut Is Far From Over As Offshore Oil Storage Continues To Swell - Nine tankers carrying as much as nine million barrels of crude are floating in the North Sea as traders can’t afford to sell the crude they have—at least not profitably enough. In May, there were seven million barrels of oil stored in tankers in the North Sea. Bloomberg reports, citing the International Energy Agency, that worldwide crude oil amounts at sea had reached 95 million barrels at the end of June, the highest since the global financial recession in 2008. However, during the 2008-2009 rise in crude oil storage at sea, traders were holding off the sales to make bigger profits – crude then was in triple-digit territory, hitting US$140 a barrel in 2008. Now they can’t afford to sell it, as prices are down once again, following API’s estimate that U.S. stockpiles have risen by 2.2 million barrels in the week to July 8. Even official figures from the EIA did not reverse the trend, even though they were for a draw of 2.5 million barrels. So, it seems that regardless of what Saudi Arabia’s new Oil Minister recently said about the excess supply having disappeared and the market close to balance, the situation is pretty much the same as it was a month ago in terms of supply. While the IEA concurs that excess is diminishing, this is not the same as “glut over”. In its latest report, the agency said global supplies of crude rose in June, by 600,000 barrels per day to 96 million bpd. Production, on the other hand, was 750,000 bpd lower than last June, with OPEC pumping more, but not enough to offset the decline in the U.S. The IEA also noted that there was healthy demand for crude in Europe and that this demand supported global growth of 1.4 million bpd, which should continue through the end of the year.
UK probes Unaoil for 'bribery, corruption and money laundering' - Petro Global News: The UK Serious Fraud Office said Tuesday it is “conducting a criminal investigation into the activities of Unaoil, its officers, its employees and its agents in connection with suspected offenses of bribery, corruption and money laundering.” A report in late March by Fairfax Media and the Huffington Post said Monaco-based Unaoil paid bribes on behalf of large companies in the oil and gas sector. HuffPo said its story was based on leaked internal Unaoil documents. The SFO said Tuesday it has “been approached by a number of sources who may have information relevant to this investigation.” The SFO opened its investigation in March 2016 but didn’t announced it until Tuesday. The agency said it couldn’t comment further “at this time.” Unaoil has denied the allegations of corruption.In June, it said in a statement it would take legal action against Fairfax Media and its partners for “malicious and damaging allegations negligently published” by them. Unaoil also said it would file a criminal complaint with law enforcement in Monaco for the theft of company data. Police in Monaco raided Unaoil’s offices after the Fairfax Media / Huffington Post report appeared. The report named about a dozen companies as “beneficiaries of Unaoil’s network in the Middle East.” The leaked Unaoil documents, according to HuffPo, mentioned Core Laboratories, FMC Technologies, Rolls-Royce, and Weatherford. Also named were Saipem, MAN Turbo, SBM Offshore, ABB, Cameron/Natco, Leighton Offshore, and Petrofac.
Gazprom sees efficiency coming from fracking - UPI.com: (UPI) -- Hydraulic fracturing of oil reservoirs is part of the long-term goal of making drilling operations more efficient, Russian energy company Gazprom Neft said. Gazprom Neft, the fourth largest oil company in Russia, announced it became the first Russian company to use a multi-stage hydraulic fracturing method while drilling into the Yuzhno-Priobskoye field. First Deputy CEO Vadim Yakovlev said hydraulic fracturing, or fracking, is "inextricably" bound to long-term efficiency goals. "Improving oil recovery and bringing into development reserves previously considered non-viable are key components of the company's technology strategy," he said in a statement. By drilling horizontally, some fracked wells can yield more than conventional drillings operations. Gazprom Neft in April said it reached a production milestone at the Yuzhno-Priobskoye field. Most of the oil in the basin, however, is considered "hard-to-recover." Production started in 1999, more than a decade after discovery. Initial rates of production were around 3,300 barrels per year. The economics of fracking may be prohibitive. U.S. crude oil production is on the decline because drillers are unable to generate a viable revenue stream at some shale basins because of the low cost of crude oil. Russian oil supplies to the world are expected to increase slightly to average almost 11 million barrels per day in 2016, a level that's higher by 10,000 bpd from the previous estimate. More narrowly, however, second quarter output was 40,000 bpd lower than the first quarter average.
Venezuela's oil production just sank to a 13-year low, and things are going to get worse - Venezuela’s oil production plunged to a 13-year low in June as the economic crisis continues to eat into the nation’s only source of export revenue. Venezuela’s oil production has declined by 170,000 barrels per day since the start of 2016, dipping to 2.18 million barrels per day (mb/d) in June, according to the IEA’s latest Oil Market Report. Part of that was due to electricity blackouts that cut 120,000 barrels per day from the country’s output between April and June, but even with some of those issues resolved – rain has restored some output at hydroelectric dams – the IEA says that “further losses are expected in 2H16.” A year-on-year decline in oil production of 200,000 barrels per day “looks unavoidable as foreign oil service companies reduce their activity and international oil companies face repayment issues and daily operational challenges.” But 200,000 barrels per day could be just the start. Venezuela does have some of the largest oil reserves in the world, but much of its oil production occurs at mature fields that require maintenance. But maintenance requires cash, something that is increasingly scarce in the country. Venezuela’s state-owned PDVSA was already failing to properly invest in oil production even when oil prices were in triple-digit territory several years ago. In fact, production has been gradually declining for more than a decade. The problem is that the declines are now accelerating. In the mature oil fields around Lake Maracaibo in the west, wells are depleting as investment falls short. The IEA says that even in the Orinoco Belt in the southeast output is falling because PDVSA is struggling to process the heavy crude due to a shortage of light crude for blending. Venezuela has long predicted that it would be able to ramp up production from its heavy oil fields in the Orinoco Belt, which holds some of the largest heavy oil reserves in the world and accounts for half of the country’s output, in order to compensate for the aging fields in the Maracaibo region. The predictions were always overoptimistic, but now they are entirely off the table.
Turkey coup attempt: Asian crude traders see little impact - Asian crude traders say Monday they do not see much immediate market impact from the failed coup attempt launched by Turkish army officers late last week. The August/September Dubai crude swap traded at minus 46 cents/b at 3 pm Singapore time (0700 GMT), down slightly from minus 41 cents/b at Singapore close on Friday. At 3 pm in Singapore, ICE September Brent crude was at $47.54/b, while NYMEX August crude was at $45.80/b, both slightly down from Friday's settle. September ICE Brent had jumped to as high as $48.25/b late Friday as news of the coup attempt in Turkey spread. "So far, we don't see any impact yet [from the failed coup attempt] ... market is relaxed, it's OK,"Industry officials had told S&P Global Platts late Sunday that the failed coup attempt launched late Friday by Turkish army officers had little or no impact on oil and gas flows through Turkey. A spokesman for BP Turkey had said Azeri crude flows through the Baku-Tbilisi-Ceyhan pipeline were continuing as normal, as were gas flows through the South Caucasus gas pipeline. An official from the Kurdistan Regional Government confirmed to Platts Saturday that crude flows through the main Iraq-Turkey pipeline to Ceyhan were continuing as normal and had not been affected, while a spokesman for the region's main crude producer, Anglo-Turkish Genel Energy, said he was unaware of any interruptions to flows. Tanker traffic through Istanbul's Bosporus was halted for a period from late Friday, but restarted the following day, local media reported.
WTI Tumbles To $45 Handle As 'Failed Coup' Leaves Flows Unhindered -- Despite Turkish turmoil, oil prices have resumed their downturn as the 'failed coup' has left flows unhindered and a stronger dollar (and waning gasoline demand) pushed WTI back to a $45 handle this morning. Catalysts for the downside push appear to be:
- 0il tankers loading, unloading cargoes normally at Turkey’s ports and supplies arriving in ships and pipelines from neighboring countries, according to Turkey's Energy Ministry.
- Demand for gasoline in the U.S. fell last week even though it remains higher than the same period last year, as well as the five-year average.
However, overproduction in the past means gasoline inventories remain at a high level of around 240 million barrels, says the Oil Market Journal. The worry is that, as the end of the U.S. driving season is around the corner, demand for gasoline will plunge, leaving gasoline stocks elevated.
"With demand failing to meet expectations, and stocks holding high, we believe the risks remain to the downside," the note says.
- And the US dollar is strengthening.
Nigeria's oil war festers as truce hopes fade - The Nigerian oil industry risks sinking deeper into crisis in the months ahead with more disruptions to oil output and exports as the government's dialogue with militant groups has failed to curb violence in the Niger Delta. Some 700,000 b/d of Nigerian oil output is currently shut-in due to the latest wave of attacks on pipelines and other production facilities in the Niger Delta region, the state oil firm NNPC said Thursday, taking production to around 1.5 million b/d. The Nigerian government had hoped that by August oil production would recover to its pre-January levels of around 2.2 million b/d after plummeting to 1.4 million b/d in May. But this looks increasingly unlikely. Negotiations with the militants have so far yielded little in the way of positive results and some oil companies and analysts said time is running out for the government to stem the wave of disruptions to their operations. Despite a temporary lull in attacks on oil assets late last month following a short-lived ceasefire, industry insiders now believe the recent rise in attacks shows the government may be over-promising on progress of peace talks."Maybe in order to assuage the concern of the companies, the government said it was meeting with some groups; but the continued attack on facilities does not suggest so," an official from Shell, which is very active in Nigeria, said.
Workers: Force majeure at ExxonMobil Nigeria may last weeks (AP) The force majeure — or freedom from contractual obligations because of extraordinary circumstances — declared by ExxonMobil on Nigeria’s largest crude stream could last a month because of extensive damage to its 300,000 barrel-a-day Qua Iboe export terminal, workers of the U.S.-based oil giant told The Associated Press on Friday. ExxonMobil has denied that militants bombed the facility July 11 and cited a “system anomaly.” Spokesman Todd Spitler said Qua Iboe was “operating and production activities continue.” But a company security official said the damage is too great to be a system failure. He and two other workers said the force majeure could last weeks. All spoke on condition of anonymity for fear of losing their jobs. Futures sales of Nigerian oil have been affected by frequent declarations of force majeure since attacks by oil militants resurged this year. Qua Iboe terminal had just restarted production after a month-long force majeure in June following an attack claimed by the Niger Delta Avengers. President Muhammadu Buhari on Thursday said his government has initiated indirect talks with the militants but the Avengers denied that Friday through social media. The 400,000 barrel-a-day Forcados terminal of British-Dutch Shell has not resumed exports since the Avengers in February blew up a subsea pipeline. Shell also shut its 180,000 barrel-a-day Trans-Niger Pipeline after it was dynamited earlier this month. The Avengers have hit facilities of U.S.-based Chevron and Italian Agip as well as state-owned pipelines. The attacks have stopped production at two of Nigeria’s five oil refineries and slashed supplies of gas used to fuel electricity generators.
Why Another Oil Price Downturn Is A Distinct Possibility - In June 2015, oil prices surged to $60 per barrel, raising hopes that the oil price downturn would have been brief and the recovery swift. But by July, oil prices were heading back down, the beginning of a deeper slump that would continue for months. A year later, a similar pattern could be playing out, or at least, that is what oil producers are fearing. After hitting a low point in February of this year, oil prices began a four-month rally, rising from $26 to $51 per barrel by June, the third year in a row in which the month of June saw a relative peak for oil prices. Now, July could once again mark a renewed nose-dive. This time around, an array of oil producers are not taking any chances. According to Bloomberg, more and more E&Ps are hedging their production, protecting themselves against a crash in prices. Earlier this month, Laredo Petroleum Inc., for instance, hedged more than 2 million barrels of its 2017 production. “The producers have sold the hell out of this rally,” Stephen Schork, president of Schork Group Inc., told Bloomberg. “The companies that did survive, they’ve been hedging into this rally. And they’re counting their blessings.” Hedging even began before prices rallied. Reuters surveyed shale firms earlier this month, finding that 17 out of 30 had increased their hedging in the first quarter when oil prices were at a low point. Even though they locked in at low prices, doing so offered some stability and certainty in their revenue projections. But it was also an indication of the level of anxiety with which E&Ps were approaching 2016. The rally since February has buoyed spirits, but with oil prices back to $45 per barrel, negative sentiment once again pervades the market. For the week ending on July 12, oil traders increased their short bets by 1.6 percent, the third week in a row that shorts climbed. Production is falling but global supplies are still elevated. Worse, inventories are only coming down slowly from record highs. Then there is the possibility of new drilling – the rig count rose again last week, with the industry adding 6 oil rigs and 1 natural gas rig, according to Baker Hughes. On the other hand, although drillers could get back to work, the markets are likely overestimating the impact of a few dozen rigs coming back into operation.
Why Oil Prices Might Never Recover - By Arthur Berman -- Two years into the global oil-price collapse, it seems unlikely that prices will return to sustained levels above $70 per barrel any time soon or perhaps, ever. That is because the global economy is exhausted. The current oil-price rally is over as I predicted several months ago and prices are heading toward $40 per barrel. Oil has been re-valued to affordable levels based on the real value of money. The market now accepts the erroneous producer claims of profitability below the cost of production and has adjusted expectations accordingly. Be careful of what you ask for. Meanwhile, a global uprising is unfolding. The U.K. vote to exit the European Union is part of it. So is the Trump presidential candidacy in the U.S. and the re-run of the presidential election in Austria. Radical Islam and the Arab Spring were precursors. People want to throw out the elites who led the world into such a mess while assuring them that everything was fine. The uprising seems to be about immigration and borders but it’s really about hard times in a failing global economy. Debt and the cost of energy are the pillars that underlie that failure and the resulting discontent. Immigrants and infidels are scapegoats invented by demagogues. Energy is the economy. Energy resources are the reserve account behind currency. The economy can grow as long as there is surplus affordable energy in that account. The economy stops growing when the cost of energy production becomes unaffordable. It is irrelevant that oil companies can make a profit at unaffordable prices. The oil industry is damaged and higher prices won’t fix it because the economy cannot bear them. It is unlikely that sustained prices will reach $70 in the next few years and possibly, ever. Lack of investment will inevitably lead to lower production, supply deficits and price spikes. These will further damage the economy. The future for oil prices and the global economy is frightening. I don’t know what beast slouches toward Bethlehem but I am willing to bet that it does not include growth. The best path forward is to face the beast. Acknowledge the problem, stop looking for improbable solutions that allow us live like energy is still cheap, and find ways to live better with less.
The Peak Oil Paradox – Revisited --Euan Mearns - Back in the mid-noughties the peak oil meme gained significant traction in part due to The Oil Drum blog where I played a prominent role. Sharply rising oil price, OPEC spare capacity falling below 2 Mbpd and the decline of the North Sea were definite signs of scarcity and many believed that peak oil was at hand and the world as we knew it was about to end. Forecasts of oil production crashing in the coming months were ten a penny. And yet between 2008, when the oil price peaked, and 2015, global crude+condensate+NGL (C+C+NGL) production has risen by 8.85 Mbpd to 91.67 Mbpd. That is by over 10%. Peak oilers need to admit they were wrong then. Or were they? It is useful to begin with a look at what peak oil was all about. This definition from Wikipedia is as good as any: Peak oil is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. Peak oil theory is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time. Those who engaged in the debate can be divided into two broad classes of individual: 1) those who wanted to try and understand oil resources, reserves, production and depletion rates based on a myriad of data sets and analysis techniques with a view to predicting when peak oil may occur and 2) those who speculated about the consequences of peak oil upon society. Such speculation normally warned of dire consequences of a world running short of transport fuel and affordable energy leading to resource wars and general mayhem. And none of this ever came to pass unless we want to link mayhem in Iraq*, Syria, Yemen, Sudan and Nigeria to high food prices and hence peak oil. In which case we may also want to link the European migrant crisis and Brexit to the same. Firmly belonging to the group of data analysts, in this post I want to take a look at two different data sets to explore where peak oil stands today. Is it dead and buried forever, or is it lurking in the shadows, waiting to derail the global economy again?
OilPrice Intelligence Report: Oil Prices On Edge With Few Upside Catalysts: Oil prices are still hovering around levels at the close of last week – WTI sitting just above $45 per barrel and Brent around $47 per barrel. High levels of refined products are weighing on the market (more below), and while all major analysts see the market continuing down the path towards supply/demand balance, there is disagreement over how quickly that will arrive. In the very short-term, there do not seem to be a lot of bullish catalysts on the horizon, although weekly EIA data could provide a lift if stock drawdowns are stronger than expected. Three weeks of rig count increases. The rig count increased for a third consecutive time for the week ending on July 15, rising to 357. That brings the total increase to 41 rigs since the end of May, a clear sign that more than a few companies feel that they can get back to work. However, since the rig count data lags behind the oil markets, it often reflects conditions from weeks prior. The increase likely has more to do with $50 oil in June than it does with $45 oil in July. High inventories move to forefront. After rallying to $50 per barrel in June, and then faltering, the markets have recently sent conflicting signals about what to expect in the coming months. Now, after several weeks of new data, the problem of excess inventories for gasoline and diesel are taking center stage as the elephant in the room for any price rally. Elevated levels of refined products are found not just in the U.S., but in Europe and Asia as well – a global problem of too much supply. A glut of refined products is increasing the incidence of tankers being used for floating storage, a sure sign of a near-term glut. New York saw some gasoline tankers backed up because onshore storage was at a premium. Reuters reports that some floating storage is cropping up off the coast of the UK. Oil prices will run into a price ceiling until these inventories are drawn down.
Oil Slides After Unexpected Gasoline Inventory Build --Following last week's surprise distillates build (and lower than expected crude draw) API reported inventories largely in line with expectations (-2.3mm vs -2mm exp. This nevertheless managed to pump and dump crude futures before drifting slightly lower asGasoline showed a bigger than expected build (+800k vs -500k exp.). API":
- Crude -2.3mm (-2mm exp)
- Cushing -84k (-100k exp)
- Gasoline +805k (-500k exp)
- Distillates -484k
This is the 9th weekly draw in crude in a row... and Gasoline showed a major build vs expected draw...
Unexpected Gasoline Inventory Build, Production Rise Spark Crude Chaos - Following last week's surprise Distillates build (and bounce in production) and API's overnight surprise Gasoline build, DOE data this morning was mixed confirming the 2.3mm draw in overall crude inventories (9th weekin a row) but surpringly large builds in both Cushing and Gasoline inventories (expectations were for draws). Oil prices were chaotic - running stops high and low - as algos noted crude production also rose (for the 2nd week in a row). DOE
- Crude -2.3mm (-2mm exp)
- Cushing +189k (-100k exp)
- Gasoline +911k (-500k exp)
- Distillates -214k
This is the 9th straight week of crude inventory drawdowns...Following last week's bounce (as Alaska came back on line), crude production rose for the 2nd week in a row...Crude was extending losses early on USD strength - AUG16 dropping below $44 for the first time in 2 months - but was panic bid into the DOE data... then went into full stop-running panic-mode (just as it did after API) following the print...
More pain seen for U.S. crude as product glut adds to gloom (Reuters) - A glut of refined products has worsened the already-grim outlook for U.S. crude oil for the rest of the year and the first half of 2017, traders warned this week, as the spread between near-term and future delivery prices reached its widest in five months. A stubborn, massive supply overhang punished crude over the winter as U.S. oil futures hit 12-year lows in February. As supply outages and production cuts increased, crude rallied and spreads tightened significantly in May. But the unusually large amount of gasoline and oil in storage, combined with expectations of a ramp-up in crude production, has made traders more bearish on the price outlook for late 2016 and early 2017. West Texas Intermediate (WTI) futures for delivery in September traded at a discount of as much as $2.23 to those for delivery in December on Wednesday, the biggest this year. Turnover in that spread soared, touching a record high of more than 19,000 contracts, or about 19 million barrels of oil. December spreads, which are the most actively traded, have also blown out in the past month. The discount of the WTI December 2016 contract to December 2017 widened to $4.11 last week. On Wednesday it traded as wide as $3.92 with over 15,000 lots traded. In May that spread had narrowed to just 50 cents, the tightest since November 2014. The market is concerned that gasoline supply will not clear up in the second half of 2016, causing refinery run cuts and another wave of excess crude, a North Carolina-based trader said. These are, however, short-term concerns, leading to more pressure on the front part of the curve, he said. Crude inventories have fallen for nine straight weeks, but at 519.5 million barrels, stockpiles are at historically high levels for this time of year, the U.S. Energy Department said. ""The market may be adjusting to the reality that crude stocks are not only not going to draw rapidly, but also that as we move into refinery maintenance season, that could exacerbate the problem,"
As China Floods The World With Gasoline, European Stocks Hit All-Time High -- Two weeks ago, when referring to an unprecedented gasoline glut, we said: Several months ago we reported that the next big threat to oil prices had nothing to do with oil fundamentals, either lack of demand or excess supply, or technicals, i.e., algo buying or selling, and everything to do with the upcoming glut of the most important crude byproduct: gasoline. We concluded by saying that "with the inventory bottlenecking having reached all the way to the gasoline level, in lieu of refiner buying, crude producers will be forced to start selling oil and dumping prices just to get marginal demand as both onshore and offshore storage is near capacity. Today, it appears that this story has reached the mainstream and as a Bloomberg note titled "WTI Drops as Gasoline Glut Weighs on the Market" it quotes an expert who says precisely what we have been warning about for the past few months, to wit: “we are gradually shifting from a crude glut to a refined product one, particularly in gasoline,” Thomas Finlon, director of Energy Analytics Group said by phone “The gasoline production numbers in the United States are just astounding.” The China gasoline export story is also attracting attention. In a separate note Bloomberg writes, that "the volume of China’s gasoline exports caught up with diesel last month as refiners dumped excess output in overseas markets to alleviate swelling stockpiles at home amid record domestic production. The world’s largest energy consumer more than doubled shipments in June compared with a year earlier to a record 1.1 million metric tons, or about 312,000 barrels a day, data from the General Administration of Customs in Beijing showed on Thursday. Exports of the motor fuel increased 75 percent to 4.45 million tons between January and June. Diesel volumes slowed to 1.1 million tons, the lowest level in four months even as overseas sales in the first half of the year more than tripled to 6.6 million tons.The country processed a record 11 million barrels a day of oil in June, boosting gasoline output by 8.7 percent to the highest monthly level ever. The nation’s refiners have been adjusting their facilities to maximize gasoline production at the expense of diesel to take advantage of robust vehicle growth in the world’s largest auto market. Commercial gasoline inventories increased to a record 7.83 million tons at the end of May, according to data released by Xinhua’s Oil, Gas & Petrochemicals newsletter.
Oil Rally Hopes Crushed As Inventories Hit All-Time High - Oil prices sank on Thursday following fresh data showing oil and product stocks rising to an all-time high. The EIA released its weekly data on July 20, revealing a slight drawdown in crude oil inventories. Crude oil stocks were down 2.3 million barrels, posting the ninth straight week of declines and adding momentum to a slow but steady oil market balancing. Still, oil inventories stood at 519.5 million barrels as of mid-July, about 60 million barrels higher than year-ago levels. Combined, all U.S. crude oil and refined product stocks jumped to 2.08 billion barrels, an all-time high. This comes at a time of year when peak demand is supposed to draw down on inventories. Part of the increase came because gasoline stocks unexpectedly rose yet again, rising by 0.9 million barrels to 241 million barrels, the highest level since April. It was also the fourth weekly increase in five weeks, a sign that refiners continue to pump out more product than the market is demanding. In fact, refinery runs increased by 1 percent last week from the week before (using a four-week average), about five times higher than analysts had expected. In other words, refiners are contributing to the drawdown in crude oil stocks, pulling oil out of storage, but they are simply spinning that into gasoline, which then ends up in storage because people are not using as much as the industry thought it would. As summer comes to an end and refiners turn to maintenance and cutback on refining runs, the upward pressure on gasoline inventories could subside, but the demand on crude could also fall.It isn’t just maintenance season that could push refiners to cut back. The elevated inventory levels and the high rates of refining have shrunk margins. There is little scope to continue at the current rates as refiners earn less.
WTI Tumbles To $43 Handle - 3-Month-Lows - As Gasoline Glut Deepens --- Mainstream media is beginning to catch on to what we detailed first in February, the gasoline glut is about to bite back. As Bloomberg reports, Oil’s retreat to a three-month low this week demonstrates that surpluses in other parts of the market, most notably refined fuels like gasoline, are holding back any lasting recovery. Combined inventories held by industrialized nations of all forms of oil -- from crude to refined products to natural gas liquids -- reached a record of more than 3 billion barrels last month, data from the Paris-based International Energy Agency shows.In the U.S., gasoline stockpiles were at the highest for the time of year since 1984 as record consumption failed to drain the glut refiners created when crude was cheap, according to the Energy Information Administration. Sept 16 WTI has tumbled from over $51 a month ago to a $43 handle today.. Three-month lows... (pre-OPEC plunge and ramp levels) Tracking last year's pump-and-dump of hope perfectly. “In many ways, the bigger issue is the total inventory overhang,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London, said by e-mail. “It is the plight of oil products -- in particular the light products such as gasoline -- that is slowing the pace of total stock-draws even as crude stocks fall, and of the eventual re-balancing.”
OilPrice Intelligence Report: Oil Markets Spooked By Glut Fears -- Oil is set to close out the week with a loss as worries over a glut of refined product inventories persist. The EIA did nothing to dispel those concerns this week, reporting another uptick in gasoline stocks, the fourth increase in five weeks. Those gains in inventories come even as June saw record gasoline demand in the U.S. as motorists failed to put a dent in the high levels of supply. Gasoline stocks ended June at their highest level since 1984 for the time of year. "The narrative of a balanced oil market (in the second half of 2016) has so far been an illusion," UBS oil analyst Giovanni Staunovo, told Reuters.After Oil Search backed away, it appears that ExxonMobil will move forward with a takeover of InterOil. The $3.6 billion in stock and cash for the company will be Exxon’s largest purchase in several years. That gives the oil supermajor a much larger stake in LNG exports from Papua New Guinea, which is really a play on the LNG trade to China, Japan and Korea in the decades to come. As Royal Dutch Shell becomes one of the largest LNG producers on the planet with its takeover of BG Group, Exxon appears to be upping the stakes in the region. Halliburton reported dismal second quarter numbers this week, revealing a $3.2 billion loss. But the oilfield services company also said that the market is moving passed the bottom and is on an upswing. Schlumberger posted a $2.16 billion loss in the second quarter, and also announced that it eliminated another 16,000 positions in the first half of the year. At the same time, Schlumberger echoed Halliburton’s sentiment and is looking ahead to better days. The declaration from the executives of the two largest oilfield services companies is a good signal that the oil markets are indeed on the mend.
Baker-Hughes Rig Count July 22, 2016: Highlights The Baker Hughes North American rig count rose for the eighth week straight and is up 22 to 564 in the July 22 week. The U.S. rig count is up 15 at 462 and is down 414 rigs from last year. The Canadian rig count is up 7 from last week to 102 and, compared to last year, is down 98 rigs. Rigs classified as drilling for oil were up 14 in the U.S. and up 4 in Canada, while gas rigs were down 1 in the U.S. and up 3 in Canada.
US Rig Count Up 15 This Week to 462 - The New York Times: — The number of rigs exploring for oil and natural gas in the U.S. increased by 15 this week to 462.A year ago, 876 rigs were active. Depressed energy prices have sharply curtailed oil and gas exploration.Houston oilfield services company Baker Hughes Inc. said Friday that 371 rigs sought oil and 88 explored for natural gas this week. Three were listed as miscellaneous.Among major oil- and gas-producing states, Texas gained 15, California was up by two and New Mexico gained one.Louisiana declined by two. Alaska and Kansas each lost one.Arkansas, Colorado, North Dakota, Ohio, Oklahoma, Pennsylvania, Utah, West Virginia and Wyoming were unchanged.The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404.Continue reading the main story
U.S. Oil & Gas Rig Count Jumps By 15, Pushing Oil Prices Down | OilPrice.com: The U.S. rig count is up 15 oil and gas rigs this week, nearly doubling last week’s rig increase and heralding new supply to add to the existing glut and push oil prices down further. According to the Baker Hughes rig count released at 1:00 EST today, oil rigs are up 14 for the week, while gas rigs were down by one, and ‘miscellaneous’ rigs were up two. The biggest gains were in Texas, where 15 new rigs were brought on line, with the Permian basin specifically seeing eight new rigs put into action. The total U.S. rig count is now 462, with Canada coming in with seven new rigs at 102. At the time of the rig count release, West Texas Intermediate (WTI) was trading at US$43.94 per barrel, while Brent crude was trading at US$45.37. This week trading has seen oil prices slump downward by US$0.83 by mid-day Friday (EST). On Wednesday, prices closed at a weekly low of US$43.96. The decline is being attributed to a ramp-up in drilling fields that are profitable with oil below US$50 per barrel, adding further to the supply glut. The U.S. rig count took a major dive beginning in August 2015, but since May 2016 has started the climb back upwards, with 41 drilling rigs at work since late May and until last week’s rig count.
Crude Drops After US Oil Rig Count Jumps Most Since 2009 - Having risen for 6 of the last 7 weeks, the US oil rig count extended its run with a 14 rig surge this week - the biggest absolute rise since Dec 2015. Oil rigs have now risen 55 rigs in the last 8 weeks - the biggest percentage rise since Dec 2009. WTI is tumbling to fresh 3-month lows on the news...
- *OIL RIGS IN D-J/NIOBRARA ROSE BY 2 TO 18: BAKER HUGHES
- *OIL RIGS IN EAGLE FORD ROSE BY 2 TO 29: BAKER HUGHES
- *OIL RIGS IN PERMIAN ROSE BY 8 TO 168: BAKER HUGHES
The 14 rig surge to 371 is the biggest weekly percentage rise since Nov 2009...
Saudi Arabia Offers Hope For An Oil Price Rally -- Crude oil prices hit a 10-week low on Tuesday, but one piece of data from Saudi Arabia could provide a glimmer of hope for those longing for an oil price rally. Saudi Arabia is burning through some of its oil inventories as exports combined with scorching domestic demand exceed its total production. In 2015, Saudi Arabia built up crude storage levels to a record high, as the kingdom stepped up production in the face of a global supply surplus. As other producers have cut back on production, there is more room for Saudi and OPEC to export. At the same time, domestic demand is rising quickly in Saudi Arabia. In order to meet that demand and also pursue greater market share, Saudi Arabia has had to draw on its oil sitting in storage. That led the sharp monthly gains in inventories to flip into a deficit late last year. From October 2015 to May 2016, Saudi crude inventories dropped 12 percent to 289 million barrels, according to The Wall Street Journal, the longest period of decline in 15 years. But part of the reason that domestic demand is so strong is seasonal. Saudi Arabia’s oil consumption spikes in the summer because it uses a substantial volume of crude for electricity, and with all the air conditioners running full blast in the hot summer months, more oil is needed. In 2015, the country used 25 percent of its oil production domestically. The Wall Street Journal says that Saudi Arabia is reluctant to simply ramp up production further in order to plug the deficit for fear of spooking the markets. An increase in output beyond 10.5 million barrels per day – a record set in June 2015 – could spark a sell off if oil traders interpreted the move as an attempt to flood the market. Moreover, although the country says it has a production capacity of 12.5 million barrels per day, it also values holding onto spare capacity in the case of a supply disruption. That means that it is already near its practical limit in terms of how far it is willing to ratchet up production.
OPEC's pyrrhic market share victory: -- OPEC’s decision to defend its market share by opting for freewheeling crude oil production appears to be working. It was only a few months ago the International Energy Agency said the market was “drowning in oil” and prices plummeted to less than $30/b. Fast forward to July and the IEA said there had been an “extraordinary transformation” from a major surplus in the first quarter to near-balance in the second. Non-OPEC production remains on course to fall 900,000 b/d this year before staging a modest recovery in 2017, according to the IEA. Meanwhile, OPEC production hit an eight-year high in June, helped by Iran’s post-sanctions return being better than most analysts expected. Couple that with Iraq’s substantial rise in 2015 and the IEA commenting that “low-cost Middle Eastern OPEC countries have seen output rise steadily in recent years” and not only is OPEC defending its market share, it’s slowly increasing it. So far, so good. However, there are a number of flaws to the plan. First, it has only delayed the inevitable. US shale producers are becoming more flexible and prices around $50/b start to make it economic for some to increase output. Second, even the better placed OPEC members have felt the squeeze — evidenced by the mooted privatizations from Kuwait and Saudi Arabia to generate extra cash for depleted government coffers. Third, OPEC may well have a shared goal but that is often driven by Saudi Arabia and it doesn’t mean individual members are fully committed: they do say a camel is a horse designed by a committee.
Analysis: Demand grows for Middle East's newest heavy crude oil grade - A year or so after Iraq's State Oil Marketing Organization was having to defend the quality and stability of flagship crude Basrah, the Middle East's newest grades - Basrah Heavy and Basrah Light - have established themselves, with the heavier grade in particular growing in popularity. SOMO has made inroads with all major Asian crude importers, while also selling nearly a third of its volumes to the competitive European market and a not insignificant 11% into the US, according to shipping data compiled by S&P Global Platts. Looking at loading data since June last year, it is possible to see the average API for the two grades, which are both loaded from Iraq's southern oil export terminals and single point moorings in the Persian Gulf. Basrah Heavy averaged 23.96 over the course of the year to end May, with a high of 24.32 degrees in December. In June 2016, it was just 23.65 degrees, its heaviest point. Basrah Light averaged 28.11 degrees over the same period, well within the expected range. Daily loadings of Basrah Heavy averaged around 700,000 b/d over the year, rising from 691,000 b/d at its launch in June to a high of just under 900,000 b/d in August. SOMO hopes to increase this figure to more than 1.1 million b/d in the next three years, driving the country's oil export growth. Much of the heavy oil is used to pay international oil companies developing fields in Iraq. The figure has varied month to month but, on average, around 65% of Basrah Heavy loadings are sold through term contracts, with the remaining loaded as payment to international oil companies. . "We are talking to the customers. They are asking for more",
NY Post: Saudi Government Helped 9/11 Terrorists - Now we know why the missing 28 pages on 9/11 were kept under lock and key for 15 years: They show the hijackers got help across America from Saudi diplomats and spies in the run-up to the attacks. Because of the coverup, a Saudi terror support network may still be in place inside the United States. A CIA memorandum dated July 2, 2002, stated unequivocally that the connections found between the hijackers, the Saudi embassy in Washington and Saudi consulate in Los Angeles are “incontrovertible evidence that there is support for these terrorists within the Saudi government.” “Numerous” FBI files also fingered two Saudi government employees who assisted the 9/11 hijackers as “Saudi intelligence officers,” the newly declassified documents reveal. Though much is still redacted, they also show the Saudi government’s ties to the hijackers and other al Qaeda suspects were so extensive that the FBI’s Washington field office created a special squad to investigate the Saudi angle. But this special focus on Saudi Arabia occurred belatedly, only after the 9/11 attacks, “due to Saudi Arabia’s status as an American ‘ally.’ ” Astoundingly, investigative resources were not dedicated to Saudi involvement in financing and supporting terrorism prior to 9/11. The explosive information was locked up in a top-secret, highly secured room in the basement of the US Capitol for the past 15 years, ostensibly to protect the Kingdom from embarrassment. (The Post helped get the declassification ball rolling with the December 2013 piece, “Inside the Saudi 9/11 coverup.”)
It Is A Smoking Gun - Prince Bandar And Other Saudis Financed The 9/11 Terrorists - News reports about the recently released 28 pages of the Joint Inquiry into the 9/11 attacks aretypically dismissive: this is nothing new, it’s just circumstantial evidence, and there’s no “smoking gun.” Yet given what the report actually says – and these news accounts are remarkably sparse when it comes to verbatim quotes – it’s hard to fathom what would constitute a smoking gun. To begin with, let’s start with what’s not in these pages: there are numerous redactions. And they are rather odd. When one expects to read the words “CIA” or “FBI,” instead we get a blacked-out word. Entire paragraphs are redacted – often at crucial points. So it’s reasonable to assume that, if there is a smoking gun, it’s contained in the portions we’re not allowed to see. Presumably the members of Congress with access to the document prior to its release who have been telling us that it changes their entire conception of the 9/11 attacks – and our relationship with the Saudis – read the unredacted version. Which points to the conclusion that the omissions left out crucial information – perhaps including the vaunted smoking gun. In any case, what we have access to makes more than just a substantial case: it shows that the Saudi government – including top officials, such as then Saudi ambassador to the US, Prince Bandar bin Sultan, and other members of the royal family – financed and actively aided the hijackers prior to September 11, 2001.
‘9/11: Bush's Guilt, And The 28 Pages -- On Friday July15th, as the national news media were either on vacation or preparing for the opening of the Trump National Convention on Monday the 18th, the long-awaited release of the ‘missing’ 28 pages from the US Senate’s 9/11 report occurred. It «was kept secret from the public on the orders of former President George W. Bush», and remained secret under Bush’s successor Barack Obama, until that Friday night late in Obama’s Second Administration, right before a week of Republican National Convention news would be dominating the news (along with any racial incidents, which would be sure to distract the public even more from any indication of Bush’s guilt). The pdf was of a picture-file so as to be non-searchable by journalists and thus slow to interpret, and thus would impede press-coverage of it. The file was also of a very degraded picture of the pages, so as to make the reading of it even more uninviting and difficult. Well, that was a skillful news-release-and-coverup operation! The Federal Government had plenty of time to do this right, but they evidently had plenty of incentive to do it wrong. They’re not incompetent; the reasonable explanation is something worse than that. (After all, this information has been hidden from the public for all of the 13+ years since that report was published without the 28 pages at the end of 2002.) What these 28 long-suppressed pages revealed was well summarized by one succinct reader who wrote: "The Inquiry discloses that there is a very direct chain of evidence about financing and logistics… [that] goes from the Saudi Royal family (Amb. Bandar's wife and Bandar's checking account) and Saudi consulate employees (al Thumiari) to the agent handlers (Basnan and al Bayoumi) to some of the 9/11 hijackers (Khalid al-Mihdhar, Nawaf al-Hazmi)."
Release of 9/11 report could strain US relationship with Saudi Arabia - The release Friday of a long-classified congressional report on possible ties between Saudi Arabia and the 9/11 terrorist plot has the potential to do lasting damage to the US relationship with the oil-rich Arab kingdom. The so-called “28 pages” suggest a much larger web of connections between al-Qaida and the Saudi royal family than had previously been known. Even as the White House – and the Saudi ambassador to the US – insisted that the 13-year-old report did not implicate senior Saudi officials in supporting al-Qaida, family members of the 9/11 victims who have long demanded the report’s release, as well as some of their congressional allies, said they believed the report demonstrated the need for a new investigation of a possible Saudi government role in the 2001 terror attacks. The report – classified in December 2002 on orders of then president George W Bush – is almost certain to feed public suspicions that the Saudi government gave extensive support to Osama bin Laden before 9/11, and perhaps even directly to the 9/11 plotters themselves, as the US government looked the other way. Perhaps the most explosive passages in the 28 pages, part of a larger, otherwise unclassified congressional report on American intelligence blunders before 9/11, offer previously unknown information about the actions of a powerful figure in the Saudi royal family. Prince Bandar bin Sultan, who was his country’s ambassador to Washington for several years before and after 9/11 and was a close friend of Bush. According to the report, at least $15,000 went directly from Prince Bandar’s bank account in Washington to the family of a Saudi expatriate, suspected of being a Saudi government spy, who organized a support network in California for two of the 9/11 hijackers while they were living in San Diego in the year before the attacks.
Civilian Death Toll From Coalition Airstrikes in Syria Could Be Single Largest in U.S.-Led War on ISIS - Scores of civilians trapped in Islamic State-controlled territory in northern Syria were reportedly killed Tuesday by airstrikes from Western coalition aircraft. The reported death toll, potentially the highest ever to result from a coalition bombing in the international campaign against ISIS, continued to climb as The Intercept reached out to monitoring groups tracking operations in the area. The Syrian Observatory for Human Rights said at least 56 civilians were killed when their convoy of vehicles attempted to slip out of an area north of the city of Manbij in the predawn darkness, as U.S.-backed forces pushed forward in an increasingly bloody offensive in the area. In a brief phone interview, a representative from the Britain-based organization said that while coalition aircraft were believed to be responsible for the air raid, the group suspected it was a “100 percent mistake.” Airwars, a nonprofit that tracks claims of civilian casualties resulting from the international air campaign against ISIS, said incoming reports indicated the death toll may prove to be well over 100 civilians — potentially making it the largest single loss of civilian life resulting from coalition airstrikes since the U.S.-led campaign to destroy ISIS began nearly two years ago. Tuesday’s reports were the latest in a string of recent incidents in which coalition aircraft have been implicated in the deaths of civilians in the Manbij area. “Really these civilians are in a desperate situation,” Chris Woods, head of Airwars, told The Intercept. “We’ve never seen anything like this.”
US Has Spent $11.5 Million A Day For Past 542 Days Straight In Fight Against ISIS - After two years of bombing, the U.S. recently marked a horrendous milestone in a war with no clear end in sight. Vocativ reported that the American-led coalition in the Middle East has now dropped 50,000 bombs in the ongoing campaign against Daesh (an Arabic acronym for the terrorist group commonly known as ISIS or ISIL in the West) that began in August 2014. The analysis noted that bombing has increased with time, peaking in June when coalition forces dropped 3,167 bombs on Iraq and Syria. “By comparison, U.S.-led forces in Afghanistan have dropped just over 16,000 bombs in the last six years, military data shows,” Shane Dixon Kavanaugh, a senior writer for Vocativ, wrote on Tuesday. Although reports suggest Daesh is losing to ground forces in the region, the conflict still has no clear end in sight. And despite U.S. government denials, Kavanaugh reported it’s become increasingly clear that civilians are frequently killed by bombs dropped by the U.S. and coalition forces: “Airwars estimates that at least 1,422 civilians have been killed by weapons deployed by coalition warplanes through July 18, a figure far greater than the 41 civilian deaths acknowledged by the Pentagon to-date.” Antiwar.com reported Tuesday that hundreds of civilians may have been killed in coalition airstrikes on villages occupied by Daesh near the northern Syrian city of Manbij. Jason Ditz wrote: “U.S. and coalition airstrikes against the northern Syrian villages of Tokhar and Hoshariyeh have killed at least 56 civilians, including 11 children, according to the Syrian Observatory for Human Rights. Other groups claimed the civilian toll was as high as 200.”
U.S. Considers “Pause” In Supplies For Group Beheading Sick Child - Yesterday some ten year old kid in Syria was beheaded by U.S. supported "moderate rebels". The "rebels" alleged that the boy was a fighter for a Palestinian group on the Syrian government side. But the boy looks very small and weak, has infusion tubes in his arm and no military attributes like a uniform or weapons.(picture) There is now additional information about the case: 8:08 AM - 20 Jul 2016 Elijah J. Magnier @EjmAlrai #Palestinian child, Abdullah Issa, was at Hospital, beheaded by Mateen al-Nahlawee coz his father is a militant. #Palestinian Abdullah Issa was suffering from lack of oxygen n the bloodstream causes thalassemias and needed blood transfusion every month+ He was a patient at the Hospital in #Aleppo when beheaded by pro-#US Zinki. The five "individuals" who killed the child are members of the Harakat Nour al-Din al-Zenki, a group supported by the CIA as well as with Saudi money and weapons. The group issued a statement on the case. It called it "an act of an individual" and blamed the "international community" for its problems. While only one person does the cutting the video shows that the five "individuals" are clearly acting as a group, cheering Takbeer and Allahu Akbar during and after the beheading. Despite the publicly available video and the statement by the Zinki group leaders admitting the case, the U.S. State Department had only a very subdued response to it: MR TONER: Well, I think if we can prove that this was indeed what happened and this group was involved in it, I think it would certainly give us pause. We may expect, says the State Department, a "serious pause" in the delivery of new lethal U.S. weapons to the group. Will a day or two do?
US says airstrikes on Syrian city Manbij to continue despite civilian deaths - The US will not pause airstrikes in Syria despite appeals from opposition activists after what appears to be the worst US-caused civilian casualty disaster of the war against the Islamic State. Anas Alabdah, president of the Syrian National Coalition, has called on the US to suspend its airstrikes until it performs a thorough investigation into the attack near the contested northern city of Manbij on Tuesday that Syrian activists say killed at least 73 civilians – and possibly more than 125. Alabdah, in a statement, insisted on “accountability” for those responsible for the devastating airstrike, “revised rules of procedure” for future strikes, and warned that continuing the aerial bombardment would deliver the hard-fought region back into the hands of Isis. More strikes at the moment will drive Syrians “further into a spiral of despair and, more importantly, will prove to be a recruitment tool for terrorist organizations,” Alabdah said. The US has launched at least 12 airstrikes since the destruction in the village of Tokkhar, according to a daily tally released by the military. Asked by the Guardian if the military will pause airstrikes, Army Colonel Christopher Garver, chief spokesman for the US military command in Iraq and Syria, replied: “No. Operations continue against Daesh,” another name for Isis.
Iraqi Shi’ite Cleric Tells Followers to Target US Troops -- Influential Iraqi cleric Moqtada al-Sadr has had his plate full leading a protest movement calling for major reforms, but in comments to followers today instructed them that US ground troops inside Iraq are “a target for us,” the latest indication the US could quickly find itself facing a Shi’ite insurgency on top of the ISIS war in Iraq. This isn’t a surprise, as Sadr has been loudly opposed to US deployments of ground troops into Iraq, warning that his followers would resist any attempt to return to the days of the American occupation, during which US troops repeatedly targeted Sadrists. The timing of the comments, less than a week after the most recent Pentagon announcement of another large deployment to Iraq, suggests that Sadr’s patience for the growing US force is wearing thin, and that, having already gone far beyond the “cap” the Abadi government set on US troop numbers, he doesn’t care to see more troops arriving uncontested. Sadr’s Mahdi Army was disbanded almost a decade ago, but fighters loyal to that army remain across the Shi’ite portions of the country, and have often made public their presence in such cities as a set of “Peace Brigades.” There is little real doubt that Sadr could reform the Mahdi Army as a substantial force overnight, and if he really does intend to begin targeting US forces, it could be a major change in the country’s landscape, and the US view that their latest deployment is limited just to ISIS.
If Trump Tries To Remove ISIS, Will He Be Removed? -- Via The Daily Bell, Donald Trump accused his Democratic rival Hillary Clinton of enabling Islamic State’s emergence with “her stupid policies” in a joint interview with running mate Gov. Mike Pence, while pledging to “declare a war” on the terror group. “Hillary Clinton invented ISIS with her stupid policies. She is responsible for ISIS,” Trump said launching a scathing attack on Clinton’s legacy as US Secretary of State while speaking to CBS’s “60 Minutes” show host Lesley Stahl in an interview aired on Sunday. -RT. Saying that Hillary Clinton enabled ISIS, is an almost incomprehensible statement. Doesn’t Donald Trump realize that Hillary is not alone? She represents the most massive military and monetary forces available on this planet. Does he not realize they can crush him? Is he somehow doing their bidding? We know what to think of Hillary based on her associates and history. As we wrote here, she represents corporatism and militarism – the coming technocracy, in other words. We are less certain about Trump. He may have decided to run for president on his own and thus opened up possibilities for personal and political manipulation. But when Trump speaks bluntly about Hillary’s role in creating ISIS, he is basically making statements rarely heard in large – mainstream – venues before. Mitt Romney never said anything like this. GOP leaders, despite their supposed antagonism to Democrats, have never made such statements. Many GOP-ers are pro-war. Any war. Just like Hillary. True, in this interview he said he would “declare a full-blown war on the group.” On the other hand, he clarified his statement. “I am going to have very few troops on the ground. We’re going to have unbelievable intelligence, which we need; which, right now, we don’t have,” he said. If Trump really does try to wipe ISIS out – or drastically reduce the power of NATO – will he be risking his own health and well-being? The US is run by corporatist and military entities. Will they hesitate to intimidate or remove Trump if he tries to end ISIS?
Turkey's secret pact with Islamic State exposed by operative behind wave of ISIS attacks -- New evidence has emerged that the Turkish government under President Erdogan is covertly providing direct military, financial and logistical support to ISIS, even while claiming to fight the terror network. The evidence comes in the form of testimony from an ISIS terrorist captured by Kurdish fighters, widely recognised as the most effective force confronting ISIS on the ground. The testimony has been reported by two Kurdish news agencies, the Syrian-Kurdish Harwar News Agency (ANHA) based in Rojava, and the Turkish-Kurdish Ajansa Nûçeyan a Firatê (Firat News Agency or ANF News). The latter’s head office is based in Amsterdam. Websites of both news agencies are blocked in Turkey. Interviews with the ISIS fighter, captured by the Kurdish People’s Protection Units (YPG), reveal that Turkish military and security forces are facilitating ISIS operations within Syria, as well as ISIS terrorist attacks inside Turkey. The new testimony corroborates similar claims made by other former and active ISIS members, as well as Western and Middle East intelligence sources. Yet Turkey is a leading member of the NATO alliance. And while the Western members of NATO have gathered mounting intelligence confirming Turkey’s sponsorship of ISIS, they have refused to act on this intelligence.
Energy Is The Reason Europe Is Still Backing Erdogan | OilPrice.com: A lot of people in Europe are wondering why political leaders on the continent seem to be ready to agree with whatever Turkish President Recep Tayyip Erdogan says, and do anything he demands. Many resent Erdogan’s hand-twisting approach to the migrant crisis and worry about Turkey turning into a dictatorship, plain and simple. Now, the attempted coup by the Turkish military over the weekend has become the latest event to highlight Turkey’s major role in the global energy market and the implications of any political shakeup in the country for this same market.The Bosphorus is where around 3 percent of daily global crude oil shipments pass, or some 3 million barrels. This may not be a lot in percentage terms, but for Europe it accounts for well over a quarter of its total crude oil imports. Europe imported 1.559 billion barrels from the former Soviet Union last year, or an average of 4 million barrels daily, according to European Commission figures.Besides the Bosphorus, Turkey is also home to two pipelines for Caspian and Iraqi crude, as well as the Southern Gas Corridor, which should provide Europe with an alternative source of natural gas in hopes of undermining the leading position of Russia’s Gazprom on the European market. There is also the Ceyhan port, Turkey’s main crude export terminal. This is where the two pipelines from Azerbaijan and Iraq end up, and this is also allegedly where a lot of ISIS oil ends up. In short, Turkey is already a major hub for oil and gas coming from the Middle East and Central Asia, and its importance in this respect will only grow as new projects—especially gas projects—come online.
Podcast: Why wars in the Middle East will cost the U.S. trillions more | Reuters: The United States is at war and has been for more than a decade. Although major combat operations in Iraq in Afghanistan have ended, America still maintains a presence in both and will for years to come. It also funds Syrian rebels, bombs Islamic State strongholds in the region and runs drones from Afghanistan to the Horn of Africa. With America fighting on so many fronts, it’s hard to understand the Pentagon’s strategy or the endgame for the various conflicts. Retired U.S. Army Colonel Andrew Bacevich says it feels that way because it is that way. According to Bacevich, the American military is fighting a war that began decades before 9/11. This week on War College, Bacevich walks us through what he calls America’s War With the Greater Middle East and tells us how it started and why he thinks it must end.
Iran nuclear treaty assessed on anniversary - One year after major world powers reached a historic nuclear deal with Iran, that country has largely kept up its end of the bargain but Tehran has complained it has not experienced the financial boost it hoped to receive. After years of negotiations, Iran accepted restrictions on and monitoring of its nuclear program – which the world feared was an attempt to make a bomb, despite Iranian assertions to the contrary – in exchange for the lifting of crippling sanctions. Iran moved swiftly to dismantle its nuclear program after the deal was signed July 14, 2015, to speed sanctions relief, which would not come until the International Atomic Energy Agency certified Tehran had fully complied with the requirements. Those also included reducing its stockpile of enriched uranium from 12,000 kilograms to 300 kilograms, filling the core of its Arak heavy-water reactor with cement, removing nuclear material from its Fordow facility and dismantling two-thirds of its 19,000 centrifuges from Natanz.Opponents of the landmark deal, reached between Tehran and the U.S., China, France, Germany, Russia and the U.K, asserted that Iran was sure to cheat given its past illicit nuclear activity. But IAEA monitors have found the country so far has complied, including shipping the bulk of its enriched uranium to Russia. . . “Since implementation day in January, Iran has adhered to all of the restrictions under the agreement, sanctions have been lifted and while Iran isn’t seeing economic windfall it originally anticipated, businesses are demonstrating interest in going back into Iran.”
Why does the world think India is the next big growth center for oil? (video) The International Energy Agency recently said India's thirst for oil will be a key factor driving global demand growth this year and next. In this video, senior oil news and analysis editor Sambit Mohanty, examines India's appetite for oil and the factors contributing to the sub-continent's rising oil consumption, as well as the reasons to remain optimistic about India's growth story despite some signs of a demand slowdown in the past couple of months.
Analysis: China's oil product exports set to break all records - China's oil product exports are likely to stay strong in the second half of 2016 after rising to close to record highs in June as new independent refiners prepare to join the bandwagon and state-owned oil giants sit on large volumes of unused export quotas. Several independent refiners including Chambroad Petrochemicals, Luqing Petrochemical, Wonfull Petrochemical and Lihuayi Group plan to start oil product exports in the second half of the year. Chambroad, Luqing, Wonfull and Lihuayi have a combined 255,000 mt of export quotas. In addition, Sinochem Quanzhou won an oil product export quota of 2.55 million mt in the government's third round of quota allotment -- more than the 2 million-mt quota it received in the first two rounds, indicating its ambitious export plan.At the same time, the state oil giants Sinopec and CNPC hold sufficient quotas to raise their exports going forward. Including quotas awarded in the third round, Sinopec now has a total export quota of 21.2 million mt -- more than double the 10.3 million mt quotas it won over the first three rounds in 2015. CNPC has 13 million mt awarded in the first three rounds, up 68% from the 7.75 million mt in last year. Over January to May, China exported 3.35 million mt of gasoline, 5.49 million mt of gasoil and 4.78 million mt of jet fuel. This represents only 31%, 35% and 32% of the respective quotas for the products granted so far this year.