Sunday, January 29, 2017

Trump orders expedited approval of Keystone XL and Dakota Access pipelines, US gasoline demand at another 35 month low, et al

as you've probably heard, Mr Trump has been quite busy this week.  among several other actions, he signed two diktats on Tuesday to advance the construction of the Keystone XL and the Dakota Access pipelines, both of which had been halted under the Obama administration...the Trump Keystone XL Memorandum declared that construction of the Keystone pipeline was in the national interest, formally invited TransCanada to re-submit its application to the State Department for a Presidential permit for the construction of the pipeline, and directed the relevant agencies to expedite the approval of their application....the Trump Memorandum Regarding Construction of the Dakota Access Pipeline also declared that the construction of that pipeline was in the national interest, and directed that "the Secretary of the Army shall instruct the Assistant Secretary of the Army for Civil Works and the U.S. Army Corps of Engineers to take all actions necessary approve in an expedited manner requests for approvals to construct and operate the DAPL"...those two diktats were part of a series of four pipeline related executive orders that he signed on Tuesday: his first Memorandum on Construction of American Pipelines directed that all manufacturing processes of iron or steel pipeline products used in American pipelines should be produced in the US of American materials, and that was quickly followed by an Executive Order Expediting Environmental Reviews and Approvals For High Priority Infrastructure Projects which directs relevant agencies to establish expedited procedures and deadlines for completion of environmental reviews for port facilities, airports, pipelines, bridges, and highways...

a few days after Trump signed the Keystone XL directive, Transcanada resubmitted their application to the State Department to build the Keystone XL...that application would seem to restart the clock on the whole Keystone pipeline approval procedure, since Obama had officially rejected their previous application in late 2015...so despite whatever intentions the administration has to fast track the project, they'd still have to follow the regulations and review processes that are already part of our laws, and then they'd still have to acquire the land they don’t already have by eminent domain, which could lead to lengthy court battles outside of Trump's or congress's jurisdiction...moreover, the economics of the Keystone project have changed considerably since it was first proposed, at a time when oil prices were twice what they are now...64 of the tar sands projects that were on the drawing board when oil prices first started falling have since been cancelled, with many of of the oil companies involved writing off huge sunk costs, so the oil that was to fill the Keystone won't be there...in addition, the two massive Canadian pipeline projects approved by Canadian Prime Minister Trudeau at the end of last year will already give them more takeaway capacity than the tar sands are currently producing...with oil at $50 a barrel, starting up any new tar sands operations would be unprofitable, since they're barely breaking even on the operations that are already up and running, so i just don't see where they get the oil to fill that pipeline...furthermore, both Trump and congressional Republicans are on board with a 20% tax on imports, which would further increase the cost of any tar sands oil brought into the US...theoretically, Transcanada could get around a US import tax by shipping all the Keystone XL oil directly to the Gulf coast, to be exported overseas directly from there, or by sending it to be refined by US refineries that are designated as international trade zones, but all such products thus refined would still have to be exported from those refineries to avoid the import tax...

as far as the Dakota Access pipeline goes, as of this week, Trump's appointment of billionaire Wall Street trader Vincent Viola as Secretary of he Army has yet to be approved by the full Senate, and Jo-Ellen Darcy, an Obama appointee, has been the Assistant Secretary of the Army for Civil Works since 2009, while Lieutenant General Todd Semonite took command of the Army Corps of Engineers on May 19 of last year...so until Trump has his team in place, the directive to expedite the DAPL is unlikely to go anywhere fast...after that, it's a good bet that the pipeline could be held up by legal action, as both the Standing Rock Sioux tribe and the nonprofit group Earthjustice have vowed to sue....if it is approved, and if it gets past any lawsuit after that, it'd only be a matter of months before it's operating...the Dakota Access subsidiary of Energy Transfer Partners has trenches dug right up to Lake Oahe on both sides, and have the equipment already in place to drill under the lake, a process which could be completed in a few months...north of Lake Oahe, the pipeline has already been filled with Bakken crude, so once the pipeline is completed under the lake, Bakken crude would start to flow south...if that should happen, it would probably reignite drilling in the Bakken, because transport costs from the most remote areas have been adding up to $12 a barrel to the cost of getting Bakken crude to refineries in recent years..

in the few days that have passed since Trump issued those directives, there was news of two major pipeline leaks, almost appropriately with one in Canada and the other in Iowa, about 150 miles northeast of where the Dakota Access pipeline would pass through the state...the Canadian spill, of 200,000 liters of crude, occurred in Saskatchewan, on the land of the Ocean Man First Nation tribe,140 km (87 miles) southeast of the provincial capital of Regina, in an area where there are so many pipelines they don't yet know which pipeline is leaking or which company owns the pipeline that leaked the oil...meanwhile, in Hanlontown, Iowa, roughly 140,000 gallons of diesel fuel spilled from a ruptured pipeline and pooled in a farmer's plowed field near the Hanlontown Slough Waterfowl Production Area...AP calls that the largest fuel spill in the US since 2010, and as of this weekend cleanup is still ongoing, with the cause of the break unknown...

The Latest Oil Stats from the EIA

this week's oil data for the week ending January 20th from the US Energy Information Administration showed that both our imports of crude oil and our oil refining fell substantially for the 2nd week in a row, while we again ended the week with a surplus of crude oil that was added to our stored supplies...our imports of crude oil fell by an average of 568,000 barrels per day to an average of 7,810,000 barrels per day during the week, while at the same time our exports of crude oil fell by 105,000 barrels per day to an average of 599,000 barrels per day, which meant that our effective imports netted out to 7,211,000 barrels per day for the week...at the same time, our crude oil production rose by 17,000 barrels per day to an average of 8,961,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,172,000 barrels per day during the week...

meanwhile, refineries reportedly used 16,047,000 barrels of crude per day during the week, a decrease of 421,000 barrels per day from last week, while at the same time, 406,000 barrels of oil per day were being added to oil storage facilities in the US...thus, this week's EIA oil figures seem to indicate that we consumed or stored 281,000 more barrels of oil per day than were accounted for by our oil imports and production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted that phantom 281,000 barrels per day number onto line 13, which the footnote tells us represents "unaccounted for crude oil"...that is further described in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil.", and hence we've been calling it the EIA's weekly oil fudge factor...

that same weekly Petroleum Status Report tells us that the 4 week average of our oil imports fell to an average of 8.1 million barrels per day, still 4.3% higher than the same four-week period last year...our crude oil production for the week ending January 20th was still 2.8% lower than the 9,221,000 barrels of crude that we produced during the week ending January 22nd of last year, and 6.8% below our June 5th 2015 record oil production of 9,610,000 barrels per day...this week's 17,000 barrel per day production increase included an additional 16,000 barrels per day of Alaskan production, and a thousand barrel per day increase in output from the lower 48 states...

US refineries operated at 88.3% of their capacity in using those 16,468,000 barrels of crude per day, down from 90.7% of capacity the prior week and down from the year high of 93.6% two weeks earlier, but up from the 87.4% capacity utilization during the same week a year ago, as refineries typically slow down at this time of year...thus, even though the week's refining was down by more than a million barrels per day from the first week of this year, it was 2.6% more than the 15,639,000 barrels of crude refined during the week ending January 22nd, 2016.....gasoline production from those refineries fell by 128,000 barrels per day to 8,825,000 barrels per day during the week ending January 20th, its lowest in 54 weeks, and hence was 5.9% lower than the 9,377,000 barrels per day of gasoline that were produced during the week ending January 22nd a year ago, and 3.8% lower than the 9,177,000 barrels per day of gasoline produced during the week ending January 23rd, 2015... meanwhile, refineries' output of distillate fuels (diesel fuel and heat oil) fell by 138,000 barrels per day to 4,575,000 barrels per day...but that distillates production was up by 2.8% from the 4,452,000 barrels per day that were being produced during the week ending January 15th last year, while it was 2.9% lower than the 4,712,000 barrels per day of distillates produced during the same week of 2015, which was during a colder winter than the last two...     

even with the drop in our gasoline production, the EIA reported that our gasoline supplies rose again, by 6,796,000 barrels to 253,220,000 barrels as of January 20th, for what is now a three week jump of more than 26 million barrels in our gasoline inventories since Christmas week...that happened as our domestic consumption of gasoline fell by 30,000 barrels per day to another 35 month low of 8,069,000 barrels per day, following the two prior weeks of the lowest gasoline demand in a year...further enhancing our supplies of gasoline as compared to a week earlier, our gasoline exports were down 49,000 barrels per day to 874,000 barrels per day, while our gasoline imports were up 5,000 barrels per day to 593,000 barrels per day...so our gasoline inventories are now 1.9% greater than the 248,461,000 barrels of gasoline that we had stored on January 22nd of last year, and 6.2% above the 238,335,000 barrels of gasoline we had stored on January 23rd of 2015   

similarly, even with a drop in distillates production, we still managed to add 76,000 barrels to our supplies of distillate fuels, which reached 169,149,000 barrels by January 20th, for a 4 week increase of 18.4 million barrels, at a time of year when distillates are usually being consumed for heat oil...the amount of distillates supplied to US markets, a proxy for our consumption, fell by 450,000 barrels per day to 3,645,000 barrels per day, allowing for the surplus...thus our distillate inventories are 5.4% higher than the distillate inventories of 160,472,000 barrels of January 22nd last year, and 27.5% above the distillate inventories of 132,687,000 barrels of January 23rd, 2015… 

finally, even with big drop in oil imports, there was simultaneously enough of a decrease in the amount of oil we refined that left us with extra oil to store, and hence our inventories of crude oil rose by 2,480,000 barrels to 488,296,000 barrels by January 20th, a level which was was still 4.6% below the April 29th record of 512,095,000 barrels...nonetheless, we still ended the week with 5.3% more crude oil in storage than the 463,552,000 barrels we had stored January 22nd of 2016, and 30.9% more crude than the 373,140,000 barrels of oil we had in storage on January 23rd of 2015...  

This Week's Rig Count

US drilling activity increased for the 12th time in 13 weeks during the week ending January 27th, with the two week increase in drilling rigs now the largest increase in the past decade...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 18 rigs to 712 rigs in the week ending on this Friday, which was up by 93 rigs from the 619 rigs that were deployed as of the January 29th report last year, but still down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...

drilling for oil in the US increased by 15 rigs to 566 rigs during the week, so oil rigs are now at their highest since November 13th 2015...oil drilling is also up from the 498 oil directed rigs that were working in the US on January 29th last year, while down from the recent high of 1609 oil rigs that were drilling on October 10, 2014.....at the same time, the count of US drilling rigs targeting natural gas formations increased by 3 rigs to 145 rigs, which is up from the 121 natural gas directed rigs that were in use a year ago, while it is still way down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, 2008... 

however, three drilling platforms that had been drilling offshore from Louisiana in the Gulf of Mexico were shut down this week, which reduced the Gulf of Mexico rig count to 20, which was down from 28 rigs working in the Gulf a year ago…our total offshore count for the week was at 21 rigs, with the ongoing drilling operation that was still in the offshore waters of Alaska, but our total offshore was still down from last year's offshore US total of 28 rigs...meanwhile, two rigs started drilling off of platforms set up on inland lakes in southern Louisiana, which are the only such inland water rigs now active, up from 1 rig on inland waters at this time last year..

the number of horizontal drilling rigs working in the US increased by 20 rigs to 579 rigs this week, which is now up from the 487 horizontal rigs that were in use in the US on January 29th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, the directional rig count was up by 1 rig to 61 rigs as of January 27th, which lifted the directional rig above last January 29th's count of 58 directional rigs....meanwhile, a net of 3 vertical rigs shut down during the week, reducing the vertical rig count to 72, which was still down from the 74 vertical rigs that were deployed during the same week last year

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of January 27th, the second column shows the change in the number of working rigs between last week's count (January 20th) and this week's (January 27th) count, the third column shows last week's January 20th active rig count, the 4th column shows the change between the number of rigs running this Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 29th of January, 2016...     

January 27 2016 rig count summary

once again, this week's increase in oil well drilling was driven by the ten rig increase in the Permian, which at 291 rigs accounts for more than half of the horizontal drilling going on in the US today...however, were a lot of changes in gas well drilling that don't show up in the tables above...to start with, the Louisiana Haynesville added 3 gas rigs, while one oil rig in the region was shut down, netting the two rig increase that you see...another gas rig was added in Oklahoma's Arkoma Woodford, while in the Cana Woodford a gas rig was pulled out while four oil rigs were added....a gas rig was also pulled out of the Eagle Ford in south Texas, where 6 oil rigs were added...an Arkansas Fayetteville and a West Virginia Marcellus gas rig were also removed, while 3 gas directed rigs were added in other basins not shown above...maybe the only surprise is the decrease of 3 oil rigs in the Denver-Julesburg Niobrara chalk of the Rockies front range, which has now dropped below it's year ago activity level...of the states not shown above, 1 rig was added in Alabama, where they now have 2, up from 1 rig a year earlier, while 1 rig was pulled out of Mississippi, where they also now have 2 remaining, down from 6 rigs on January 29th of 2016...

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Feds open more sites for oil, gas leases in Wayne National Forest - Columbus Dispatch - More of Wayne National Forest is up for auction. Federal officials have announced that oil and gas leases for nearly 1,200 acres of the forest's Marietta Unit in southeast Ohio will be sold online in March. In December, the Bureau of Land Management netted more than $1.7 million in an auction of more than 700 acres of the forest for eventual fracking, despite protests by environmental groups. The agency intended to include more land in the 2016 sale, but withdrew several parcels at the last minute because of questions about ownership. Officials reintroduced seven of the shelved parcels for the upcoming March 23 sale. The latest oil and gas leases could introduce Ohio's only national forest to fracking, a process that involves injecting as much as 5 million gallons of water, sand and chemicals below ground to fracture deep shale and free trapped oil and gas. Environmental advocates say they will continue to fight the auctions. "It's an expected hurdle," said Roxanne Groff, a former Athens County commissioner and member of the Athens County Fracking Action Network. "It's more of the same, and we'll continue to deal with it, to try to interrupt the process." Groff and other local advocates question the adequacy of several official environmental assessments, saying they rely on outdated studies. But others see the auction as resolution to an entirely different issue. Companies already have begun leasing private property in the forest in the hopes of tapping some of the state's most prolific Utica shale reserves, said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association.

Conservation groups threaten lawsuit to end auctions, ban fracking in Wayne National Forest -  Four conservation groups on Thursday said they will sue the U.S. Forest Service, U.S. Bureau of Land Management and U.S. Fish and Wildlife Service in an attempt to ban fracking at the Wayne National Forest in Southeast Ohio. In December, the BLM auctioned 719 acres of Ohio’s only national forest for $1.7 million to 22 oil and gas companies. The BLM has scheduled a second auction for March 23 to auction an additional 1,186 acres of forest land in Monroe County, which contains what is believed to be the state’s richest concentration of fossil fuels.A total of 38,000 acres of national forest land could become available for fracking before the auctions are concluded. Another auction is tentatively scheduled for June 22. The auctions will open the forest to large-scale, high-volume fracking of underground shale, the conservation groups said. It will industrialize the Appalachian hills and forests, increase climate pollution, destroy endangered Indiana bat habitat, and risk contaminating water supplies that support endangered mussels and the local communities, the groups said. The Center for Biological Diversity, Ohio Environmental Council, Heartwood, and Sierra Club filed a 60-day notice of intent to sue the federal agencies, charging them with violating the Endangered Species Act, and challenging the BLM for failing to consider the environmental effects of fracking. “Pipelines, well pads, and wastewater pits destroy habitat and harm people and wildlife,” said Nathan Johnson of the Ohio Environmental Council. “In 2014, a frack pad fire and chemical spill near the Wayne forced the evacuation of local residents” and killed 70,000 fish over a five-mile stretch of the Opossum Creek, an Ohio River tributary. “People do not want to hike near frack pads, smell diesel fuel in a forest, or fear that streams and rivers are contaminated,” said Loraine McCosker of the Sierra Club’s Ohio Chapter. The BLM agreed to open the national forest for oil and gas exploration following an Environmental Assessment study that found drilling would “have no significant impact on the environment.” The groups have also filed an appeal with the secretary of the interior to challenge the December 2016 lease sale.

Lawsuit Launched Over Fracking in Wayne National Forest - Conservation groups filed a notice of intent to sue the U.S. Forest Service, U.S. Bureau of Land Management (BLM) and U.S. Fish and Wildlife Service Thursday over invalid and outdated Endangered Species Act approvals of oil and gas leasing plans for the Wayne National Forest. The Center for Biological Diversity , Ohio Environmental Council, Heartwood and Sierra Club are challenging the approvals for failing to consider the effects of fracking , white-nose syndrome and climate change on the endangered Indiana bat and other protected species threatened with extinction. "The Indiana bat is already over-stressed by white-nose syndrome and climate change. Summer bat detection rates in Ohio have declined by more than 50 percent since 2011," said Wendy Park, an attorney with the Center for Biological Diversity. "But instead of protecting this fragile species, the BLM and Forest Service are allowing the razing and pollution of important bat habitat in the Wayne for harmful fracking." In December 2016 the BLM auctioned 719 acres of public land in the Wayne National Forest's Marietta Unit in southeast Ohio, opening up the forest to large-scale, high-volume fracking of the Marcellus and Utica shales for the first time. The groups' legal challenge aims to void this auction and halt fracking in the Wayne to protect the forest's wildlife and water. The groups assert fracking would industrialize Ohio's only national forest, increase climate pollution, destroy the Indiana bat's habitat and risk contamination of water supplies that support endangered mussels and local communities.   "Pipelines, well pads and wastewater pits destroy habitat and harm people and wildlife," said Nathan Johnson, an attorney with the Ohio Environmental Council. "These impacts are real. In 2014, a frack pad fire and chemical spill near the Wayne forced the evacuation of local residents and killed tens of thousands of fish and mussels."   The 2014 Monroe County well pad fire resulted in the contamination of a creek near the national forest. Wastewater and fracking chemicals spilled into Opossum Creek—an Ohio River tributary—killing 70,000 fish over a five-mile stretch. "Fracking the Wayne National Forest in Ohio is like kicking someone when they're down," said Tabitha Tripp of Heartwood. "This land has been overworked for the last 200 years. Are we not rich and wise enough now to let a tiny percentage go wild?  Declining species need that.  We need that.  Instead, we are witness to the betrayal of the public trust and we have no recourse but to sue."

Study seeks water-well owners for injection-well study - athensnews.com: Ohio University is continuing to recruit residents with property near or adjacent to fracking waste injection wells in the Torch and Coolville areas to participate in a water-quality study. The study is being conducted by OU’s Voinovich School of Leadership and Public Affairs, Torch CAN DO, the Buckeye Forest Council and the Athens County Fracking Action Network (ACFAN). The Sugar Bush Foundation, a supporting organization of the Ohio University Foundation, is funding the project. The study will document groundwater quality conditions in the groundwater flow path around the wells in a targeted area in eastern Athens County.“The purpose of the data collection is to measure environmental conditions of groundwater and monitor water-quality conditions in the area,” a letter to residents in December explained. Results will be accessible to the public with all personal information protected on the Voinovich School website at its conclusion in the summer of 2018, the letter said. Jennifer Bowman, interim director of environmental programs at the Voinovich School, told residents who attended an informational meeting Saturday in Coolville that researchers are particularly interested in property owners who have so-called “plume water wells,” as opposed to hand dug water wells. The meeting included a presentation on groundwater; the water cycle; how rainfall, runoff, and evaporation play roles in aquifers and rivers; and a demonstration of groundwater flow activity using a model and dyes to show how different variables can impact it. Residents with water wells in the area are being asked to allow access to existing groundwater wells on their property. The scope of the study will require collecting water samples from existing wells.

New REX Zone 3 capacity reveals the future of northeast gas markets - Tallgrass Energy’s Rockies Express Pipeline earlier this month (on January 6, 2017) brought into service the last 350 MMcf/d of its 800-MMcf/d Zone 3 Capacity Enhancement Project, boosting the line’s east-to-west takeaway capacity out of Ohio to 2.6 Bcf/d, up 45% from 1.8 Bcf/d previously. The new, fully-subscribed capacity, designed to serve Marcellus/Utica producers, filled up almost instantaneously.  But unlike previous capacity additions, Northeast production did not increase.  Instead the gas came from other pipelines.   This development provides an early indication of what the new capacity will mean for producers, flows and prices. In today’s blog, we delve into pipeline flow data to understand the early impacts of the new takeaway capacity. Since it first began bi-directional flow in its Zone 3 segment in 2014, REX has been an integral piece of the broader revolution to reverse traditional north and eastbound flow patterns to instead move gas out of the supply-rich, capacity-constrained Marcellus/Utica production region, one that we’ve been following closely in the RBN blogosphere (see Get Back to Where You Once Belonged and  End of Displacement). Just about all the long-haul pipes that traditionally have flowed gas into the Northeast have at least partially reversed flows in recent years to allow Marcellus/Utica producers to target growing demand markets along the Gulf Coast and in Mexico. REX’s Zone 3 expansion has been the most significant of those, in terms of sheer volume, but also because its 15-plus interconnects with major long-haul pipelines (in Zone 3 alone) essentially make it a massive header system with access to just about every other U.S. market. 

You Can Thank Fracking For Early Closure Of NY Nuclear Plan - In an ironic twist, fracking has been cited as a prime reason for shutting down New York’s Indian Point nuclear power plant, as cheap natural gas eroded the economics of generating nuclear power in the region. New York’s Governor Cuomo is a fracking critic who supported banning the practice, a step taken by the state in 2015. But Cuomo has also opposed Indian Point – located about 30 miles north of New York City – on safety grounds for years. Last week’s announcement that the plant would close 14 years early is being touted by the governor as a major victory, but his unlikely ally in that win is natural gas produced from the Marcellus and Utica shale resources located in nearby Pennsylvania, Ohio and West Virginia.

Plan to run pipeline through pinelands gets public hearing  (AP) -- As jobs-versus-environment clashes go, few issues have been as hard fought and generated as much passion in New Jersey as a proposal to run a natural gas pipeline through federally protected woods atop some of the nation’s purest drinking water. The plan was narrowly defeated in 2014. But since then, Republican Gov. Chris Christie has replaced several commissioners on the state agency that will reconsider the plan with supporters of the pipeline. On Tuesday, a public hearing on building the pipeline was held in Pemberton. With a new Republican administration in power in Washington that is more receptive to fossil-fuel energy projects, the fate of the Pinelands pipeline is sure to be closely watched by national energy and environmental groups. As the hearing was underway, President Donald Trump signed executive actions to advance the construction of the Keystone XL and Dakota Access oil pipeline projects. "This is a symbol of the national battle between clean energy and renewable resources, and the push for pipelines," said Jeff Tittel, director of the New Jersey Sierra Club. "This is the front line of a battle that's coming where Donald Trump is going to want to push pipelines everywhere." South Jersey Gas proposes to run the pipe from Maurice River Township in Cumberland County to the B.L. England power plant in Upper Township; it would run mostly under or alongside existing roads.

Exelon, hurt by low gas prices, files to become a gas exporter - Exelon may have found a way to turn low natural gas prices from a profit drag into a profit driver. The​ electricity giant is awaiting federal permission to build a $3 billion plant in Texas that would liquefy natural gas and sell it overseas, where prices generally are higher. If the feds approve and Exelon decides to proceed, the company would join other U.S. suppliers looking to tap growing demand for natural gas around the world. Until recently, regulatory barriers prevented U.S. gas suppliers from fully participating in global markets. In particular, exports to countries that don't have free trade agreements with the U.S. have been tightly restricted. The Obama administration began approving non-FTA export facilities a few years ago, and the first such facility in the Lower 48 states started shipping gas from a port in Louisiana last year. American companies currently enjoy a cost advantage over foreign gas suppliers. Advanced drilling techniques, aka​ fracking, have opened up vast new gas reserves in the U.S., driving down prices for domestic producers. Gas that costs less than $3.20 per million BTUs at home today can fetch nearly $10 as liquefied natural gas​ in some overseas markets. The price gap represents an opportunity for the parent of Commonwealth Edison to profit from low domestic gas prices that have been the bane of its power-generation business, which operates the country's largest fleet of nuclear power plants. Cheap gas reduces costs for rivals with gas-fired plants, enabling them to sell electricity for less, which in turn depresses wholesale power prices and squeezes the Chicago-based company's profit margins. Expanding U.S. exports also could relieve pressure on Exelon's generating profits. As foreign demand absorbs excess domestic gas supplies, the price of gas in the U.S. will rise, driving up costs at gas-fired power plants and potentially lifting wholesale electricity prices. A double win for Exelon, if it's not too late. Several U.S. liquefied natural gas export facilities already have won federal approval, and many others have applied. Securing approval to build the facility in Brownsville, Texas, likely will take years, by which time export markets could be glutted with U.S. LNG.

Massive Buildout of Gas Infrastructure = Superhighway to Climate Disaster- The Sierra Club released a report Thursday detailing how the fossil fuel industry is engaging in an unprecedented buildout of new gas infrastructure around the country. The report concludes that if America is to meet its climate commitments and protect communities from the dangers of this fossil fuel, we must reject any new proposed gas infrastructure buildout and plans for expansion.  The new gas rush could result in the construction of more than 200 new gas plants across the country, along with massive pipelines.  Sierra Club  In its place, the report calls for accelerating the transition to 100 percent clean, renewable energy like wind and solar in order to prevent further climate disruption. The report, The Gas Rush: Locking America into Another Fossil Fuel for Decades , documents the scale of the threat posed to our climate and clean air and water from a network of gas pipelines and gas-fired power plants across the country. "The science is clear: from extraction to production to consumption, gas is a dirty and dangerous fuel that produces significant amounts of pollution, threatens our climate, our clean air and water and the health of our communities," Michael Brune , executive director of the Sierra Club, said. "If the U.S. continues to approve new gas pipelines and power plants and if the majority of politicians continue to spread the falsehood that gas is a clean fuel, we will fail to meet our climate commitments and put our future and our children's future in peril from the climate crisis. "We must phase out the use of all dirty fuels as fast as possible—not commit to a massive buildout of new gas pipelines that will lock us into yet another dirty fuel for decades. This isn't building a bridge to a cleaner future, it's building a superhighway to climate disaster."

Natural gas prices rise as inventory decreases | Fuel Fix: Natural gas prices are expected to rise over the next two years, as colder winter weather drives up demand for natural gas and average withdrawals from storage are the highest they have been in years, according to the U.S. Department of Energy. The Henry Hub natural gas spot price averaged $2.51 per million British thermal unites in 2016, and analysts expect it to rise over the next two years, to an average $3.55 in 2017 and $3.73 in 2018. The hot summer of 2016 set the rise in natural gas prices in motion, as demand for natural gas decreased inventory in storage. Then, colder weather this winter spiked demand for natural gas, along with an increase in natural-gas fired power plants. For the past three weeks, net withdrawals of natural gas from storage have been more than 200 billion cubic feet, more than the five-year average of net withdrawal at 170 billion cubic feet. The amount of natural gas being taken out of storage is higher than average in most regions around the country, except on the West Coast.

NYMEX February gas futures settle at $3.279/MMBtu, up 3.6 cents - The NYMEX February natural gas contract continued its tepid ascent Tuesday, settling just under 4 cents amid choppy trading, despite bearish weather and storage report expectations. The prompt-month contract gained 3.6 cents to $3.279/MMBtu after trading in a range of $3.267-$3.35/MMBtu throughout the day. "I think there has been this back and forth parsing of weather reports, most notably with some talking about a colder period sandwiched between two warmer periods," Market movements have not been definitive enough to establish a new trend, though, Thompson said, noting dwindling open interest in last few days, "which is what you would expect in a choppy market."Despite a slight revision of expectations toward cooler temperatures across the Pacific Northwest and Western Canada in the National Weather Service's eight- to 14-day forecast, the vast majority of heat-consuming areas across the Lower 48 states are still expected to experience average to above-average temperatures through the first week of February. "Overall I would say that that little bit of cold weather is not enough to turn the market," Thompson said. The prompt month's strengthening also came in the face of bearish early estimates for Thursday's US Energy Information Administration storage report. Market expectations for the withdrawal are in the 115-128 Bcf range, notably lower than last week's 243-Bcf withdrawal as well as the five-year average withdrawal of 176 Bcf. S&P Global Platts releases its official estimates on Wednesday.

Natural Gas Price Ticks Higher as Colder Weather Looms -  The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 119 billion cubic feet for the week ending January 20. Analysts were expecting a storage decline of around 117 billion cubic feet. The five-year average for the week is a withdrawal of around 211 billion cubic feet, and last year’s storage decline for the week totaled 176 billion cubic feet. Natural gas inventories fell by 243 billion cubic feet in the week ending January 13.Natural gas futures for March delivery traded up by about 3% in advance of the EIA’s report, at around $3.45 per million BTUs, and traded around $3.47 immediately after the data release. Natural gas closed at $3.35 per million BTUs on Wednesday, after falling from a high of $3.39 last Thursday. The 52-week range for natural gas is $2.49 to $3.90. One year ago the price for a million BTUs was around $2.76. The mild temperatures that led to a relatively small withdrawal from storage last week is expected to give way to colder weather in all parts of the country, except the South and the West Coast. Alternating periods of warmer and cooler weather is forecast for the week ahead, with overall demand for natural gas expected to be moderate. Stockpiles have now dropped to 12.9% below their levels of a year ago and 2.6% below the five-year average.

RBN's steam cracker feedstock model and its uses --Every day, about 1.8 million barrels of NGLs, naphtha and other ethylene plant feedstocks are “cracked” to make both ethylene and an array of petrochemical byproducts. And every day, decisions are made for each steam cracker on which feedstock—or mix of them—would provide the plant’s owner with the highest margins. Within each petchem company, these decisions are optimized by staffs of analysts and technicians using sophisticated and complex mathematical models that consider every nuance of a specific ethylene plants’ physical capabilities. Fortunately for us mere mortals, it is possible to approximate these complex feedstock selection calculations for a “typical” flexible cracker using a relatively simple spreadsheet model. Today we continue our series on how the raw materials for ethylene plants are picked with an overview of RBN’s feedstock selection model, a review of feedstock margin trends, and an explanation of how the model also can be used to indicate future NGL and naphtha prices and to assess the prospects for various industry players.

BP Production to Grow with Thunder Horse South Expansion -- BP plc made another step towards its goal of adding 800,000 barrels of new production by 2020 with the start of production in December from the Thunder Horse South Expansion project. The project is expected to increase production at Thunder Horse, one of the largest Gulf of Mexico fields, by an estimated 50,000 gross barrels of oil equivalent. The Thunder Horse South Expansion project also started 11 months ahead of schedule and $150 million under budget. These facts demonstrate that deepwater projects can be executed in a cost-effective way “while keeping a relentless focus on safety,” Richard Morrison, regional president of BP’s Gulf of Mexico business, said in a Jan. 23 press statement. BP achieved the savings by relying on proven standardized equipment and technology, rather than building customized components. To keep costs down, BP used the same type of equipment from FMC Technologies that had previously been used at Thunder Horse. The vast majority of the subsea equipment, such as the jumpers and manifolds, is exactly the same kind used previously at Thunder Horse. BP also utilized Technip’s remotely operated vehicle simulator and modelling to map out subsea construction, BP spokesperson Jason Ryan told Rigzone. For the expansion project, BP added a new subsea production system roughly two miles to the south of the existing Thunder Horse platform. The system is a collection point for wells connected to the Thunder Hose platform by two 11,000-foot flowlines installed on the seabed late last year. Last year, BP launched a major water injection project at the Thunder Horse field that will enable BP to recover an additional 65 million barrels of oil equivalent. BP is operator of Thunder Horse with 75 percent interest. The company developed the Thunder Horse platform with partner Exxon Mobil Corp., which owns 25 percent.

Nearly 140000 gallons of diesel mix spill from broken pipeline in Iowa - Work crews are cleaning up a spill of nearly 140,000 gallons of a diesel mix from a broken pipeline in north-central Iowa. The Mason City Globe Gazette reports that the leak from a 12-inch Magellan Midstream Partners pipe was discovered around 8 a.m. Wednesday north of Hanlontown. Officials say the diesel mixture had pooled in a farm field and had not reached nearby Willow Creek or the Hanlontown Slough Waterfowl Production Area. The Iowa Department of Natural Resources initially reported about 63,000 gallons of fuel had spilled, but a Magellan official said later Wednesday that it was about 138,600 gallons. Crews had removed about 25,000 gallons by early Wednesday afternoon. Officials with the Environmental Protection Agency, the Iowa DNR, Magellan and local agency were on the scene.

Iowa Diesel Fuel Spill Is Largest In U.S. Since 2010 (AP) — Workers were expected to complete cleaning up Thursday about 140,000 gallons of diesel fuel that spewed from a broken pipeline onto an Iowa farm, the largest U.S. diesel spill since 2010, federal authorities said. Vacuum trucks were sucking up the fuel that spilled onto an acre of grass and tilled farmland when the pipeline broke. About 18 percent of the liquid had been removed, and no fuel entered rivers or streams, Iowa Department of Natural Resources spokesman Jeff Vansteenburg early on Thursday. No farm field drain lines have been severed so fuel can’t flow into waterways, he said. Contaminated snow and diesel are being hauled to a Minneapolis, Minnesota, facility. Contaminated soil will be excavated and taken to a landfill near Clear Lake, Iowa, Vansteenburg said. High wind and blowing snow were complicating cleanup efforts, he said. The pipeline, owned by Tulsa, Oklahoma-based Magellan Midstream Partners, was discovered spewing diesel fuel Wednesday morning. More than 70 Magellan representatives, local responders, regulators and contractors were on site Thursday morning, Magellan spokesman Bruce Heine said. No injuries were reported and no evacuations needed. He said the cause of the leak is under investigation.

Iowa pipeline spill cleanup begins; cause of leak still unknown ---The 138,600 gallons of diesel fuel that leaked from a ruptured pipeline in northern Iowa on Wednesday is the largest U.S. diesel spill since 2010, according to the Associated Press. Crews have mostly recovered the loose diesel fuel that leaked from a ruptured pipeline Wednesday in Worth County, said Jeff Vansteenburg, a field office supervisor for the Iowa Department of Natural Resources. However, officials at Magellan Midstream Partners could not say how long the cleanup process will take to recover all of the diesel fuel, which includes contaminated soil. The cause of the pipeline leak was still unknown Thursday, said Tom Byers, spokesman for Magellan, which owns the Magellan pipeline running through part of northern Iowa. Vansteenburg said nothing struck the pipeline to cause it to leak on Wednesday. The pipeline was built in the early 1950s, Byers said. With proper maintenance, Byers said the life of a pipeline is "indefinite." There have been no injuries or evacuations associated with the pipeline leak, and the situation is not an active threat to public health, Worth County Sheriff Dan Frank said Thursday morning. The leak has been contained, and no diesel fuel has reached waterways, Byers said.The pipeline leak occurred about three miles north and one mile east of Hanlontown. The fuel is pooled on an acreage with grass and trees and a tilled farm field about one-third of a mile north of the intersection of 390th Street and Wheelerwood Road. The pool stretches across an acre and a half, and the diesel also sprayed across Wheelerwood Road onto snow on farm land across the street, said Vansteenburg.  Byers said the ruptured portion of the pipeline has been removed and welding is in progress for a replacement piece. He said the repair should go quickly. Crews have dug out an area surrounding where the pipeline leaked and are vacuuming up the spilled fuel to be transported for disposal, Byers said. It snowed about 12 to 14 inches in the area, which has made cleanup more difficult, Vansteenburg said.

Standing Rock has inspired Texans to fight another pipeline -  The months-long protest at Standing Rock, North Dakota drew national media attention and accomplished a temporary victory for the Standing Rock Sioux Tribe in December, when the Army Corps of Engineers blocked construction of the Dakota Access pipeline. Now, it is inspiring pipeline opponents across the country. Just this past weekend, native groups and supporters protested oil and gas infrastructure in at least four different states, including North Dakota, Florida, Tennessee, and Texas.Organizers in Texas are working to block a natural gas pipeline, and they admit they are following the blueprint created at Standing Rock — a blueprint for civil disobedience that could prove vital as environmental organizers look to take on Donald Trump.  The Trans-Pecos pipeline will carry natural gas fracked in West Texas across the Rio Grande to Mexico. Energy Transfer Partners, the same company overseeing the Dakota Access pipeline, is constructing the project. The firm expects the pipeline, which will snake across the largely unspoiled Big Bend region, to be operational early this year. Mexico’s Federal Electricity Commission is paying for the project as part of an effort to modernize the country’s power sector. Mexico wants to generate less electricity from coal and more from cheaper, cleaner-burning natural gas. Pipeline opponents worry about the environmental impact of construction and the danger of leaks once the pipeline is finished. As NBC News reported, most towns along the pipeline’s path rely on volunteer emergency response teams, which could prove unable to stop a fire at the site of a leak. Landowners are concerned about losing their property to eminent domain. Private property, locals have said, is sacrosanct in Texas.

An analysis of Plains All American's Alpha Crude Connector deal. - Plains All American Pipeline announced on Tuesday that it has agreed to acquire Alpha Crude Connector (ACC), an extensive, FERC-regulated crude oil gathering system in the Permian’s super-hot Delaware Basin, for $1.215 billion. At first glance that might seem to be a lofty price, but the development of the ACC system appears to be a classic case of right-place/right-time because it addresses a fast-growing need for pipeline capacity across an under-served area. And, with its multiple connections, ACC is an attractive source of crude to fill currently underutilized downstream pipelines headed to Midland, the Gulf Coast to Cushing. Today we review Plains’ newly announced agreement to acquire the ACC pipeline system in southeastern New Mexico and West Texas.

Big Oil Roars Back : Last May, things looked so bleak in the Texas oil patch that the service company Halliburton decided to write a $3.5 billion check to get out of a planned merger with its major rival, Baker Hughes. The deal had made some sense when it was signed, in November 2014, but a year and a half later the companies’ rationale fell apart as crude oil prices experienced a precipitous, months-long slide. The merger’s demise was just one of many indications that the oil and gas sector was in the midst of its worst bust in three decades. In Texas, the average number of active rigs had plunged from nine hundred at the boom’s peak to fewer than two hundred. Companies slashed tens of thousands of jobs, and bankruptcies were rising. In Irving, the world’s biggest oil company, ExxonMobil, posted anemic profits. But as 2017 begins, the outlook is radically different. Prices seem to have stabilized (albeit at half their mid-2014 level), and Donald Trump has tapped two prominent Texans with deep energy-industry ties for his Cabinet. Pending their respective confirmations (which had not been completed when Texas Monthly went to press), ExxonMobil chairman and CEO Rex Tillerson will be our next secretary of state, and former governor Rick Perry will run the Department of Energy. And an almost-Texan—Oklahoma attorney general Scott Pruitt—has been nominated as administrator of the Environmental Protection Agency, where he would likely pursue a pro-oil agenda. After eight years of the cold shoulder, fossil fuels are back in vogue in Washington. “It’s a complete U-turn from the previous administration,”

Human-Induced Earthquakes on the Rise --As more and more types of industrial activity were recognized to be potentially seismogenic, the Nederlandse Aardolie Maatschappij BV, an oil and gas company based in the Netherlands, commissioned us to conduct a comprehensive global review of all human-induced earthquakes.  Our work assembled a rich picture from the hundreds of jigsaw pieces scattered throughout the national and international scientific literature of many nations. The sheer breadth of industrial activity we found to be potentially seismogenic came as a surprise to many scientists. As the scale of industry grows, the problem of induced earthquakes is increasing also.  In addition, we found that, because small earthquakes can trigger larger ones, industrial activity has the potential, on rare occasions, to induce extremely large, damaging events.   As part of our review we assembled a database of cases that is, to our knowledge, the fullest drawn up to date. On Jan. 28, we will release this database publicly . We hope it will inform citizens about the subject and stimulate scientific research into how to manage this very new challenge to human ingenuity.  Our survey showed mining-related activity accounts for the largest number of cases in our database.

Hess to triple Bakken rig count, forecasts late 2017 supply surge - Hess plans to triple its rig count in the Bakken Shale by the end of 2017 from two rigs to six and forecasts the company's production in the play will grow as high as 110,000 b/d of oil equivalent by Q4, up 10% from the start of this year. "We are increasing activity in the Bakken," John Hess, the company's CEO, said during a Q4 earnings call Wednesday. Hess reported that its Bakken production averaged 95,000 boe/d in Q4, down about 13% from the same quarter a year ago, due largely to severe winter weather and the company's reduced drilling activity. Hess' production in the Gulf of Mexico fell from 73,000 boe/d in Q4 of 2015 to 61,000 boe/d in Q4 2016. Overall, oil and gas production averaged 311,000 boe/d in Q4, down from 314,000 boe/d in Q3 and 368,000 boe/d in Q4 of 2015. "Lower volumes were primarily due to a reduced drilling program across our portfolio, planned and unplanned downtime, and natural field declines," the company said in a statement.The dip was expected as the company cut its capital and exploratory expenditures to $1.9 billion in 2016, down from $4 billion in 2015. It plans to spend $2.25 billion on those expenditures in 2017 when it forecasts production to average between 300,000 boe/d and 310,000 boe/d. Still, production, particularly in the Bakken, is expected to surge through 2017, the company said. Hess forecasts production to average about 270,000 boe/d to 280,000 boe/d in Q2, but to grow as high as 340,000 boe/d by Q4.

Last pipeline protesters weigh whether to fight or leave -  Most of the demonstrators who gathered on the North Dakota plains to oppose the Dakota Access oil pipeline declared victory and departed their snowy protest camp last month after the Army announced it would halt the project. Now that President Donald Trump's administration is pushing to complete the pipeline, the few hundred protesters still living on the wind-whipped prairie must decide what to do — accept the likely defeat and leave, or stay and keep fighting. Some vow to remain, but Trump's action seems unlikely to spark a major rejuvenation of the depleted camp of people who dubbed themselves "water protectors." Dan Hein, a 43-year-old Ohio man who has been living at the camp since September, was packing Tuesday to go home. "I knew this was coming," he said. But Gena Neal, 43, who came from Oklahoma, said she was staying, even if protests remain subdued. "We are proving action by just being here," she said Wednesday as snow swirled around a dozen people, many wearing donated ice grippers on their shoes. Trump on Tuesday signed an executive action ordering the Army Corps of Engineers to quickly reconsider its Dec. 4 decision to stop the construction to allow time for more environmental study. Before the project can be finished, builders need permission to lay pipe under Lake Oahe, a Missouri River reservoir from which an American Indian tribe draws its drinking water. The tribe at the center of the protests, the Standing Rock Sioux, says the pipeline threatens its water and cultural sites. Developer Energy Transfer Partners disputes that. The Oahe segment is the last major piece of the four-state pipeline designed to move North Dakota oil to a shipping point in Illinois. It was not clear when the Corps will act on Trump's memorandum

600+ Water Protectors Facing Criminal Charges Unlikely to Receive Fair Trials - On Jan. 27, attorneys representing the first 10 water protectors arrested in actions against the Dakota Access Pipeline in early August 2016 renewed their motion for a change of venue, on grounds that the state did not adequately respond to the motion and is not taking basic steps to assess bias among jurors.   The requested change of venue would move the trials to a different county, outside the reach of negative media coverage and hostile community perception. The motion was filed on Jan. 19 and denied by North Dakota District Judge Cynthia Feland on Jan. 24, who claimed that "a fair and impartial jury has already been impaneled and seated" and that "it would be nonsensical for the court to say it cannot be done."   The motion renewal filed Friday by North Dakota attorney Chad Nodland stated:   "It appears that the state's strategy is to simply delay discovery, charge people based on collective action and not individual acts which can be established by admissible evidence, and then hope for a conviction from a jury overwhelmingly biased towards law enforcement and the state."   A randomized survey conducted by the National Jury Project concluded it is highly likely that the more than 600 water protectors facing criminal charges in the coming months will not receive fair trials from petit jurors impaneled in Morton and Burleigh Counties. The survey found that 77 percent of the juror-eligible population in Morton County and 85 percent of the juror-eligible population in Burleigh County had already decided the defendants were guilty.   A substantial number of of the surveyed population have connections to law enforcement, the oil industry, landowners and others who have been affected by the protests.  Many respondents made statements indicating that they perceive protesters as a threat to community safety and described the water protectors as "eco terrorists," "criminals" and "idiots" who "hopefully all freeze to death."

Shale Frackers’ Weak Sales Leave Investors Asking What Growth -- Reporting a profit might not be enough Thursday for Baker Hughes Inc., after its two larger rivals failed to impress investors with anemic sales growth.Schlumberger Ltd.’s adjusted earnings surpassed estimates by a penny, Halliburton Co. earnings were 2 cents a share better than expected. Even Patterson-UTI Energy Inc., the rig contractor and fracking-service provider that’s buying rival Seventy Seven Energy Inc. for $1.4 billion, announced preliminary results that also are better than forecasts. Still, sales for the two largest oil-service companies didn’t grow as fast as the increase in North American drilling implied, and shares slid. Schlumberger sank 3.4 percent in the two days after its Jan. 20 earnings release. Halliburton fell 2.9 percent Monday and Patterson-UTI tumbled 4.2 percent. Investors are dissatisfied with the pace of growth, focusing on sales in North America, the driver of the global oil industry recovery, according to Credit Suisse. Shale explorers are seen increasing spending four times faster than the global average this year. The number of rigs drilling for oil and gas in the U.S. and Canada has more than doubled since May, after the promise of OPEC production cuts helped stabilize oil prices above $50 a barrel.  Even in the final three months of last year, the number of oil and gas rigs working in North America grew by 19 percent. Yet Halliburton’s revenue in the region rose just 9 percent from the previous quarter, while Schlumberger climbed 4 percent. "If Halliburton and Schlumberger would have announced revenues in line with the nominal increase of the rig count, everybody would have said, ‘Ok, looks like we’re on track,’" Wicklund said. "There will definitely be more interest in the breakdown of numbers than there would have been before."

OPEC's Attempt To Kill Fracking Made It 'More Efficient' - OPEC’s plan to kill U.S. hydraulic fracturing with low oil prices only made companies “leaner and more efficient,” according to the International Energy Agency (IEA).“Recent reports tell us that the productivity of shale activity has improved in leaps and bounds,” reads the IEA report. “Whether it be shorter drilling times or larger amounts of oil produced per well, there is no doubt that U.S. shale industry has emerged from the $30 per barrel oil world we lived in a year ago much leaner and fitter.”OPEC began flooding the global marketplace with oil in 2014 in an attempt to depress prices to counter competition, largely from fracking. Oil prices fell from $105 per barrel in June 2014 to only $29.04 per barrel in January 2016. OPEC’s recently announced production cuts sent crude prices to $52.04 per barrel.Its strategy to kill fracking backfired, however, and just made the process more efficient. U.S. oil production levels remained relatively constant despite low oil prices and declining investment. Companies such as ExxonMobil and Royal Dutch Shell were already investing $20 billion into fracking technology in August.  The total number of drilling rigs in select regions dropped by 64 percent, from a high of 1,309 rigs in October 2014 to only 475 in December 2015. But the decline in rigs was only accompanied by an 8 percent drop in production, according to the EIA report.

Strategic Petroleum Reserve sales expected to start this month -- Yesterday the U.S. Department of Energy's (DOE) Office of Fossil Energy awarded contracts for the first of several sales of crude oil from the Strategic Petroleum Reserve (SPR). A Continuing Resolution enacted in December 2016 included a provision for DOE to sell up to $375.4 million in crude oil from the SPR. This sale will be the first of several planned sales totaling nearly 190 million barrels during fiscal years 2017 through 2025. As the largest stockpile of government-owned emergency crude oil in the world, the SPR was established to help alleviate significant oil supply reductions from occurrences such as major geopolitical events, severe weather, unplanned production curtailments, transport disruptions, and delivery outages. Located in four storage sites along the Gulf of Mexico, the SPR held more than 695 million barrels of crude oil as of January 13, or about 97% of its design capacity (713.5 million barrels). Several recent acts of Congress have authorized sales from the SPR:

  • The Bipartisan Budget Act (Section 404), enacted in 2015, includes authorization for funding an SPR modernization program to support improvements deemed necessary to preserve the long-term integrity and utility of SPR's infrastructure by selling up to $2 billion worth of SPR crude oil in fiscal years 2017 through 2020. Although the estimated volumes presented in the chart above are based on an assumed oil price of $50 per barrel, the actual final sales volumes will depend on how SPR decides to allocate the sales volumes across those fiscal years and the actual price of crude oil at the time of the sales. For the Section 404 sales, SPR must get an appropriation from Congress to approve its requested sales revenue target.
  • Another section of the Bipartisan Budget Act (Section 403) mandates SPR crude oil sales for fiscal years 2018 through 2025 on a volumetric basis, rather than on a dollar basis, as specified in Section 404. The revenues from sales authorized under section 403 will be deposited into the general fund of the U.S. Department of the Treasury.
  • The 21st Century Cures Act, enacted in December 2016, calls for the sale of 25 million barrels of SPR crude oil for fiscal years 2017 through 2019. The first portion of these sales is expected in late spring 2017.
  • The Fixing America’s Surface Transportation Act, enacted in December 2015, calls for SPR sales totaling 66 million barrels from fiscal years 2023 through 2025.

Trump’s energy policy to focus on boosting fracking, reviving coal sector Following US President Donald Trump’s inauguration last week, his administration has confirmed its intentions to reverse Barack Obama’s climate change policies, boost fracking for oil and gas, and lift current restrictions affecting the coal mining sector. In the document entitled “An America First Energy Plan,” the US new leader outlined his government’s goals, leaving out specifics about how exactly it aims to achieve them.One of the first issues the piece mentions is how the new administration intends to eliminate "harmful and unnecessary policies such as the Climate Action Plan and the Waters of the US rule," which would increase American wages by more than $30 billion over the next seven years, according to the post on the new White House website.Together with a push to strengthen the US oil and gas industries, there will be a new focus on coal."The Trump administration is also committed to clean coal technology, and to reviving America's coal industry, which has been hurting for too long," it says. Clean coal technology is a collection of methods to remove carbon dioxide emissions from coal-burning plants and bury those emissions in the ground, or use them for enhanced oil recovery. The techniques, however, are not 100% pollution-free and their use is said to increase the cost of getting that energy.

Robots Over Roughnecks: Next Drilling Boom Might Not Add Many Jobs - The inevitable advance of technology and automation has upended industries such as car manufacturing and food processing. Now robotics is making its way into the oil fields by helping drilling activities and putting together heavy pipes. For companies, more automation would mean higher efficiency, safer operations, and ultimately, lower drilling and production costs. For oil rig workers, it would mean that part of the jobs lost during the oil price downturn would never return. Also, part of the new job openings would require a different type of skill set: for example, information technology and advanced computer skills. But even if automation is expected to increase, and some day take over drilling sites and drillships, it is not the norm in the oil and gas industry today. While there have been early adopters, the oil and gas drilling business is still years away from becoming an automated activity. Companies that had been lavishly spending on drilling at oil prices at $100 per barrel were too busy pumping oil and gas to think of efficiency and production costs. But the oil price bust has squeezed their budgets, and the firms are now seeking to cut costs while increasing efficiency. Apart from reducing the human factor in drilling such as shifts or fatigue, or work-related accidents and incidents, automation can reduce headcount costs. Automated drilling rigs may be able in the future to reduce the number of persons in a drilling crew by almost 40 percent, from 25 workers to 15 workers, Houston Chronicle’s Jordan Blum writes, quoting industry analysts. Drilling company Nabors Industries expects that it may be able to reduce the size of the crew at each well site to around 5 people from 20 workers now if more automated drilling rigs are used, Bloomberg’s David Wethe says.

How Rick Perry as Energy Secretary Could Mean More Fracking - In 2011, former Texas governor Rick Perry counted the Department of Energy among the government agencies he would eliminate as president—until he famously couldn’t remember the department’s name during a Republican debate.  Naturally, the very same Rick Perry was tapped by the Trump administration to run the Energy Department. And according to the New York Times, Perry accepted the job thinking that it had quite a bit to do with oil and gas drilling. While that would have been especially convenient to his corporate backers, Perry has by now discovered that most of the Department of Energy’s work concerns nuclear weapons and government scientific research facilities. But the department does oversee one component of the energy business: The overseas shipping of liquefied natural gas (LNG). The Energy Department’s Fossil Energy office facilitates LNG export deals, and it has in-house research departments that work on making recommendations about oil and gas exports. And it just so happens that exporting gas is pretty important to corporations that, until a few weeks ago, were very important to Rick Perry. At the end of 2016, Perry stepped down from the boards of Energy Transfer Partners and Sunoco Logistics. Thanks to mobilization at Standing Rock, many people are aware of Energy Transfer Partners because of its link to the Dakota Access pipeline. One of Sunoco’s most controversial projects is the Mariner East 1 pipeline, which runs across Pennsylvania, Delaware, Ohio and West Virginia carrying natural gas liquids to the Marcus Hook facility in southeastern Pennsylvania. The company is in the process of adding a second line, Mariner East 2, which would substantially increase the capacity to ship fracked gas liquids like propane and ethane. Ethane is eventually used in the manufacture of plastics, which is linked to air pollution. And where does all this gas go? Europe. In March of last year, a massive “dragon ship” left Marcus Hook loaded with ethane derived from shale gas drilling, headed to facilities in Scotland and Norway. The project is the brainchild of a company called INEOS, which has made a substantial investment in what industry observers call a ‘virtual pipeline’ across the Atlantic Ocean.

How Tillerson Could Fuel A Russian Arctic Drilling Boom -- It’s now clear to nearly everyone that U.S. President Trump intends to seek warmer U.S. relations with Russia, while putting China and Iran relations in the deep freezer. . . For Russian energy companies, it means the doors are cracking open again for business. Russia is again a hot topic on nearly every news site. And the topic has become even hotter with the U.S. election of a Putin-friendly president, who seems ready to share responsibilities with Russia for organizing the world’s response to global terrorism. In a world where Trump seems to have a strangle-hold on the daily news, his energy friendly policy ideas are well known: reducing regulations, opening restricted government land for leasing, rejecting climate change, and bringing back to life rejected pipelines such as Keystone XL. But hardly anyone expected the announcement that rocked the entire U.S. establishment, the nomination of Exxon’s CEO, Tillerson as Secretary of State in the new Administration. Even veteran political analysts were caught off guard, unaware that for the first time an oil industry leader was being considered to take the helm at State. Further upsetting many Trump opponents is Tillerson’s long and successful relationship in Russia with President Putin. Suddenly the world is full of angry politicians, some who hardly know Tillerson, others who have happily received donations from his company, now castigating this life long Texas Republican as a Putin-crony, despite the fact that his relationship with the Russian President was often stormy and contentious. But for the oil industry Tillerson’s appointment went beyond their wildest dreams.With this single act, Trump has established that his Administration may be one of the most oil industry friendly in history. For over a decade, Exxon has had large investments in Russia, starting out with the development of oil and gas reserves in the far Eastern region of on Russian Pacific Coast, in the frozen wasteland of Sakhalin Island. In partnership with Russian-controlled companies giant oil companies, the project started off well enough, with Exxon pioneering the discovery and development, with a ready and interested buyer in Japan close at hand, offering the second largest energy market in Asia. Solidifying the deal, two of Japan’s major oil companies became partners in the venture. Consider that Exxon, with its deep pockets and more than twenty years of experience in the Alaskan Arctic, is the most technologically advanced oil company in the world.The company brought much needed technology to Russia, where it partnered with the Russian giant oil company, Rosneft, for Arctic drilling.

Does Trump’s ‘America First’ Tax Plan Benefit Oil & Gas? -- U.S. President Donald Trump has plans to support domestic oil and gas industry, job creation and local manufacturing in his America First agenda. One proposed House Republican corporate tax reform, however, may lead to radical changes in U.S. crude oil and petroleum products flows and thus, in the global markets.The so-called border adjustment tax is part of the proposed legislation that has drawn the most attention, analyses, and contradictory opinions. If this legislation passes as-is, companies would not have to calculate revenue from exports in their tax base, but would be unable to deduct the cost of their imports. Although the border-adjustment tax is intended to boost American manufacturing, it would essentially tax imports, and U.S. refiners importing crude oil would certainly feel the pinch.The U.S. still imports lots of crude oil – even if volumes are lower than 10 years ago – and will continue to do so in the near future. Imports in October 2016 were 7.607 million bpd, the latest available data by the EIA show. Exports of crude oil were 491,000 bpd that same month, while exports of crude oil and petroleum products reached 4.942 million bpd.  According to a recent report by PwC, the border adjustment proposal would have a notable impact on the energy industry. Companies that export crude oil as well as those that manufacture and export refined products, equipment and chemicals would benefit from the provision. But companies that import equipment and crude oil for refining and processing would not be able to deduct import expenditures, PwC says.Economists think that the proposed tax would further strengthen the U.S. dollar, thus leading to lower costs of imported goods and “little or no net change in the after-tax cost of imports”, PwC noted.Still, PwC said:“Despite the benefits, the potential of the border adjustment for short-term economic disruptions is the subject of much debate.”

Republicans to Use CRA to Roll Back ‘Midnight’ Rules and Benefit Oil Companies  - Jerri-Lynn Scofield -- In an op-ed in yesterday’s Wall Street Journal, How the House Will Roll Back Washington’s Rule by Bureaucrat, Kevin McCarthy, House majority leader, pledged that Republicans would begin next week to use the Congressional Review Act (CRA)– enacted as part of Newt Gingrich’s Contract with America Advancement Act of 1996–  to roll back “midnight regulations”– rules finalized during the past 60 legislative days, by a simple majority vote of both House and Senate. (This 2009 Harvard Law Review Note, The Mysteries of the Congressional Review Act, tells all that one would conceivably wish to know about this arcane piece of legislation) Earlier this month, Congress also passed the REINS Act– discussed in this post by Yves entitled House Passes Koch Brothers-Backed REINS Act that Weakens Gov’t Regulatory Agencies, which requires separate approval votes by House and Senate within 70 legislative days of final agency action on any new regulation of $100 million before a rule can be considered final; otherwise, the rule becomes null and void and cannot be re-issued. Taken together, CRA and REINS represent a bold attempt both to unwind the final work of a previous administration and subject future regulatory efforts to effective veto by one house of Congress,  Top of the list of rules Republicans intend to target under CRA are those affecting energy companies. As McCarthy writes in his WSJ op-ed: Perhaps no aspect of America’s economy has been as overregulated as energy. So the House will repeal the Interior Department’s Stream Protection Rule, which could destroy tens of thousands of mining jobs and put up to 64% of the country’s coal reserves off limits, according to the National Mining Association.Likewise, the Obama administration moved at the 11th hour to limit the oil-and-gas industry through a new methane regulation. It could cost up to $1 billion by 2025, the American Petroleum Institute estimates, even though the industry is already subject to the Clean Air Act and has leveraged technological advances to dramatically reduce methane emissions. The additional regulation would force small and struggling operations— in the West in particular— to close up shop, which is why it will be one of the first to go. Jerri-Lynn here: I particularly appreciate McCarthy’s insouciant citations of National Mining Association and American Petroleum Institute numbers as holy writ.

Goldman Warns Of Oil Price Shock As Border Tax Could Lead To Surge In US Oil Production --While much has been said about the impact on the dollar from the proposed Border Tax Adjustment, which may or may not be implemented depending on what Trump says/tweets on any given day (and as a reminder, there has already been a loud outcry against it by powerful lobby groups, including the Kochs, as a result of the expected decimation of US retailers should BTA be implemented) little has been said about how it could impact US commodity production in general, and oil in particular.This morning, in a note titled "Destination-based taxation and the oil market", Goldman's Damien Courvalin focused on this issue and found that the price gain from shift to destination-based border adjusted corporate tax would prompt US drillers to “sharply increase activity" as a result of lower US corporate tax rates, which would aggressively incentivize shale drilling, resulting in a global oil price shock, sending domestic prices spiking, as global prices slide.The border tax would have an inflationary impact on U.S. service costs and reduce U.S. dollar costs of foreign producers. A lower U.S. corporate tax rate “could force a deflationary tax policy response” elsewhere further reducing the marginal cost of oil. In short, "US oil prices would appreciate immediately and sharply vs. global oil prices"Some observations: If domestic oil prices remained at the same level as imported crude oil prices upon implementation of the BTA,  US refiners would have an incentive to consume only domestically produced crude instead of importing crude as only the cost of domestic crude would be deducted for tax purposes, and (2) US producers would have an incentive only to export crude rather than to sell to domestic refiners as there  would be no taxes on exports. This would lead to a sharp appreciation of the US domestic oil price relative to the global price oil.

OPEC Shrugs Off Threat of U.S. Cutting Oil Imports -  OPEC’s two biggest suppliers to the U.S. shrugged off a vow by President Donald Trump to end dependence on the group’s oil, saying the world’s biggest economy would continue to need crude from abroad. The U.S. is “closely integrated in the global energy market,” Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said, while his Venezuelan counterpart Nelson Martinez said he expects his country’s crude exports to the world’s top consumer to remain stable. “The positions that the U.S. and Saudi Arabia take in global energy are very important for global economic stability,” Al-Falih said Sunday at a meeting of producing countries in Vienna. He added that Saudi Arabia was looking forward to working with the Trump administration. Just after his inauguration on Friday, Trump said he was “committed to achieving energy independence from the OPEC cartel and any nations hostile to our interests,” by exploiting “vast untapped domestic energy reserves”, according to a plan posted on the White House website. The U.S. imported about 3 million barrels a day from the organization last year, with Saudi Arabia and Venezuela accounting for 1.81 million, according to data compiled by Bloomberg.This isn’t the first time a U.S. president promises to end the country’s reliance on supplies from the Organization of Petroleum Exporting Countries. Former President George W. Bush promised to cut imports from the Middle East when he said in 2006 the nation was “addicted to oil.” Shipments from OPEC rose 10 percent during Bush’s time in office. Every U.S. president going back to Richard Nixon has pledged to reduce the country’s reliance on foreign oil. Venezuela’s Martinez played down any concern that his country’s shipments to the U.S. might dwindle under a Trump administration. “The export volumes will be maintained,” he said. “There is a lot of interdependence in the world of energy. It’s good to maintain it for everyone’s good.” Saudi Arabia exported an average of 1.08 million barrels a day of crude to the U.S. in 2016, while Venezuela shipped about 733,000 barrels a day and Iraq some 400,000 barrels a day, according to data compiled by Bloomberg.

Despite Trump’s Rhetoric: U.S. Needs OPEC Oil --President Donald Trump is taking his ‘America First’ energy plan from the campaign trail to the White House website, vowing to achieve energy independence from OPEC and any nations hostile to U.S. interests. Trump is not the first U.S. President to have promised energy independence. At the height of the 1973 Arab oil embargo, Richard Nixon suggested a project to ensure that by the end of the 1970s, “Americans will not have to rely on any source of energy beyond our own”. More than 40 years later, America continues to rely on foreign oil imports, and is a large importer and even larger consumer of crude oil. This makes the U.S. crude oil flows an integral part of the global oil market. The U.S also continues to import oil from OPEC producers, and even if volumes have been consistently below 4 million bpd since September 2012, imports in October 2016 were not a negligible figure - 3.11 million bpd, according to the latest available data by the EIA. To put this into perspective, total U.S. crude oil imports in October were 7.607 million bpd. If President Trump were to follow through with his vow to free America of OPEC imports, some 3 million bpd must come from non-OPEC producers: an unlikely development in the near term. Just after he was elected President in November, Trump threatened to block Saudi oil imports. Back then, Khalid al-Falih - the oil minister of OPEC’s biggest producer and the cartel’s biggest supplier to the U.S. – warned the U.S. not to stop Saudi imports, as free trade was “very healthy for oil”.  Now, just two days after President Trump was sworn in, al-Falih reiterated his view that America is “closely integrated in the global energy market”.The positions that the U.S. and Saudi Arabia take in global energy are very important for global economic stability,” the Saudi oil minister said on Sunday, as quoted by Bloomberg. Venezuela’s oil minister Nelson Martinez chimed in with remarks that there was a lot of interdependence in energy trade, and added that his country’s exports to the U.S. would stay stable.  Out of OPEC’s 3.11 million bpd in oil exports to the U.S. in October, Saudi Arabia exported 1.023 million bpd of that, while Venezuela exported 724,000 bpd.

Rex Tillerson, ExxonMobil and the separation of oil and state - FT --Mr Tillerson’s experience in Russia has become the central issue in the controversy over his nomination by President Donald Trump to be the US secretary of state. At the 64-year-old’s confirmation hearing at the Senate committee on foreign relations this month, he faced an attack from Senator Marco Rubio over President Vladimir Putin’s record on human rights, and was repeatedly questioned about his views on the sanctions imposed by the US on Russia following its invasion of Crimea. The suspicions about Mr Trump’s connections to Russia, and the allegations about the support he received from Mr Putin, make Mr Tillerson’s ties particularly sensitive. John McCain, a senator from Arizona, described himself as “very concerned” about Mr Tillerson’s acceptance in 2013 of Russia’s Order of Friendship from Mr Putin. By the weekend, however, Mr Tillerson’s path appeared to be clearing. Both Mr McCain and Senator Lindsey Graham from South Carolina, who had also expressed reservations about Mr Tillerson, said they would support his nomination in the Senate committee vote, scheduled for January 23. There is another way to look at Mr Tillerson’s experiences in Russia: as an indication of his character and competence. He worked at Exxon — which became ExxonMobil in 1999 — for 41 years, and led it as chief executive for 11, before stepping down at the end of last year. That record is the key to understanding his strengths and his weaknesses. Mr Tillerson is an engineer and Exxon is an engineer’s company, fixated on efficiency and precision. “Exxon has a very strong culture,”  A former executive at another oil company says meetings with Exxon on joint projects were always a source of amusement. The Exxon team would turn up with identical crewcuts, khakis and white short-sleeved shirts, and arrange their pencils and notepads in the same alignment on the table.  The defining moment in cementing that culture was the 1989 grounding of the tanker Exxon Valdez, which spilled 257,000 barrels of crude into Prince William Sound on the south coast of Alaska.  Determined not to repeat that accident, the company reviewed its procedures and introduced what is called its operations integrity management system, described as a “disciplined” framework for managing risk and ensuring safety. Today everything is done by the book, or the ring binder, setting out OIMS requirements.

Trump Revives Keystone Pipeline Rejected by Obama -President Trump sharply changed the federal government’s approach to the environment on Tuesday as he cleared the way for two major oil pipelines that had been blocked, and set in motion a plan to curb regulations that slow other building projects.In his latest moves to dismantle the legacy of his predecessor, Mr. Trump resurrected the Keystone XL pipeline that had stirred years of debate, and expedited another pipeline in the Dakotas that had become a major flash point for Native Americans. He also signed a directive ordering an end to protracted environmental reviews.   “I am, to a large extent, an environmentalist, I believe in it,” Mr. Trump said during a meeting with auto industry executives. “But it’s out of control, and we’re going to make it a very short process. And we’re going to either give you your permits, or we’re not going to give you your permits. But you’re going to know very quickly. And generally speaking, we’re going to be giving you your permits.” The decisions expanded an effort to unravel much of the policy structure left by former President Barack Obama, who made fighting climate change a central priority. Just a day earlier, Mr. Trump formally abandoned the Trans-Pacific Partnership, an ambitious 12-nation trade pact negotiated by Mr. Obama. In his opening days in office, Mr. Trump has also modified or reversed Mr. Obama’s policies on health care, abortion and housing while ordering a freeze of any pending regulations left behind by the former administration. The pipelines were more about symbol than substance but generated enormous passion on both sides of the debate. Mr. Obama rejected the proposed Keystone pipeline in 2015, arguing that it would undercut American leadership in curbing the reliance on carbon energy. The Army sidetracked the Dakota Access pipeline in North Dakota last month in the waning days of the Obama administration.

Trump to Sign Two Executive Actions to Advance Keystone XL and Dakota Access Pipelines - Today, President Donald Trump will scrap key aspects of former-President Obama's climate leadership, as he reportedly plans to sign Executive Orders to move the the Keystone XL and Dakota Access pipelines forward.  TransCanada, the foreign company behind the Keystone XL project, will attempt to use eminent domain to sue American landowners and seize their private property in order to pipe this dirty fuel across the U.S. for export. After Obama rejected the pipeline in 2015 , TransCanada sued the U.S. under the North American Free Trade Agreement (NAFTA) for $15 billion. Despite his previous remarks concerning NAFTA, Trump did not address the company and its lawsuit before approving the project.  Following months of national opposition to the Dakota Access Pipeline, the Department of the Army ordered an environmental review of the project in December of 2016. The pipeline was originally proposed to cross the Missouri River just above Bismarck, North Dakota, but after complaints, it was rerouted to cross the river along sacred Tribal grounds, less than a mile from the Standing Rock Sioux Reservation. Trump had invested in Energy Transfer, the company behind the Dakota Access Pipeline. His spokespeople have claimed that he has since divested, but no proof has been presented. Donald Trump has been in office for four days and he's already proving to be the dangerous threat to our climate we feared he would be. But, these pipelines are far from being in the clear. The millions of Americans and hundreds of Tribes that stood up to block them in the first place will not be silenced and will continue fighting these dirty and dangerous projects.  Trump claims he's a good businessman, yet he's encouraging dirty, dangerous tar sands development when clean energy is growing faster, producing more jobs and has a real future. Trump claims he cares about the American people, but he's allowing oil companies to steal and threaten their land by constructing dirty and dangerous pipelines through it. Trump claims he wants to protect people's clean air and water, but he's permitting a tar sand superhighway that will endanger both and hasten the climate crisis.

Trump uses executive action to revive Dakota Access and Keystone  President Donald Trump signed executive memoranda Tuesday allowing two controversial oil pipelines — Keystone XL and Dakota Access — to move forward. Delaying and stopping the development of those pipelines were among the environmental movement’s biggest victories over the past few years. Both projects attracted years of protest and civil disobedience, and Tuesday’s move is expected to be seen as a slap in the face to the broad coalition of Americans who oppose increased fossil fuel infrastructure.  “More people sent comments against Dakota Access and Keystone XL to the government than any project in history,” 350.org co-founder Bill McKibben said in a statement. “The world’s climate scientists and its Nobel laureates explained over and over why it was unwise and immoral. In one of his first actions as president, Donald Trump ignores all that in his eagerness to serve the oil industry.”Keystone XL, a TransCanada project, would bring heavy crude oil from the Alberta tar sands to refineries in the Gulf of Mexico. If constructed, the 1,700-mile pipeline will transport 830,000 barrels of tar sands oil per day — responsible for 181 million metric tons of carbon emissions every year. There were several protests against the pipeline, which came to symbolize the disregard for the environment in the name of oil production.More recently, a months-long protest by the Standing Rock Sioux Tribe prompted the Army Corps of Engineers to order a full Environmental Impact Statement for the Dakota Access pipeline. The tribe alleges that the pipeline, set to run under the Missouri River, endangers their sole water source. Construction on the pipeline, which runs 1,172 miles from North Dakota’s Bakken oilfields to a distribution hub in Illinois, is nearly complete.The executive memoranda — a similar document to executive orders, often used interchangeably at the discretion of the White House — are expected to be seen as particularly insulting to Native groups, whose rights have been routinely trampled by the U.S. government. Dakota Access’s delay in December was seen as a major tribal victory.

Trump signs Keystone XL, Dakota Access orders, wants US-made pipelines -  President Donald Trump signed five separate orders Tuesday, including two aimed at speeding construction of the Keystone XL and Dakota Access pipelines and one which could lead to a new requirement for all pipelines built within US borders to be made of US-made materials and equipment.The orders fit with Trump's campaign pledges to quicken the pace of pipeline approvals and promote US manufacturing, but also faced immediate opposition from environmental groups and may spur a lengthy fight with global trading partners. The Keystone XL and Dakota Access orders are aimed at getting those pipelines approved "as quick as possible," White House Press Secretary Sean Spicer said Tuesday. The Keystone XL order formally invites TransCanada to resubmit its application for the pipeline to the State Department and then requires that agency to issue a permit decision within 60 days. To quicken the pace of the permit approval, Trump's order allows State to use environmental reviews conducted during the Obama administration of the project to cover National Environmental Policy Act, and other, federal review requirements. The Obama administration in November 2015 rejected TransCanada's application to build Keystone XL, citing the project's potential climate impact and casting doubt on its economic benefits to the US. In a statement, TransCanada said it is preparing its application and intends to reapply for a permit for Keystone XL. The expected federal approval of the pipeline comes more than eight years after TransCanada initially applied for a permit, a time when market fundamentals and global oil flows were markedly different.

Fact Box: Trump signs orders on Keystone XL, Dakota Access pipelines -  US President Donald Trump on Tuesday signed executive actions aimed at advancing the Keystone XL and Dakota Access oil pipelines. Here's a look at the status of the two pipeline projects:

  • KEYSTONE XL The project has been stalled for more than eight years years, formally rejected twice by President Barack Obama and the subject of a number of environmental protests and current and looming court battles. EXPECTED STARTUP Many months, if not years, away. Even with Trump's support, the pipeline faces an eminent domain battle in Nebraska, where TransCanada still does not have an approved route. Environmental groups are also expected to launch new legal challenges against the pipeline extension, which could further tie the project up in court. After the project was rejected by the Obama administration in November 2015, TransCanada sought $15 billion in compensation under the North American Free Trade Agreement, which Trump has said he plans to renegotiate with Canada and Mexico. TransCanada has also filed a lawsuit in the US District Court for the Southern District of Texas in Houston challenging the president's cross-border pipeline authority. The Obama administration in November 2015 rejected TransCanada's application to build Keystone XL, citing the project's potential climate impact and casting doubt on its economic benefits to the US. The project, initially proposed by TransCanada in 2008, had also been rejected by President Obama in January 2012 after he said a 60-day decision deadline imposed by Republican senators had prevented a thorough review of the proposal. As proposed, the 1,179 mile pipeline would carry 830,000 b/d of Canadian oil sands crude and Bakken crude to Steele City, Nebraska, where it would connect with an existing pipeline to the US Gulf Coast. The project could be impacted by a proposed border adjustment provision to tax imports which is currently a central piece of congressional Republicans' tax reform efforts. As currently proposed, the provision would tax imports at 20%, but would only be imposed on imports consumed domestically, in order to encourage exports. This could compel shippers to export all of the Canadian crude transported via the line out of the US.
  • DAKOTA ACCESS: The project is nearly complete, with only a small section left to be connected underneath Lake Oahe, a dammed portion of the Missouri River in North Dakota. Crude oil has been filled into the pipeline north of Lake Oahe, Dakota Access Pipeline's vice president Joey Mahmoud said in a court filing last week. Crews have dug entry and exit holes on private land nearby so they can start horizontal directional drilling under the lake as soon as the project receives the final federal permission. The company has said it needs 90-120 days to finish the section under Lake Oahe, including line fill and testing. Based on that estimate, the project would be complete in late April to late May if crews start work this week. Dakota Access was on track to start operations by January 1, but it has been stalled by protests, lawsuits and permitting delays since August. Thousands of protesters camped near Lake Oahe for months, urging the Army Corps of Engineers to deny a federal easement needed to complete the pipeline. The Corps said December 4 it would not issue that easement because the project needed more rigorous environmental review. Dakota Access then urged a US district court judge in DC to order that the project already holds the right of way to build underneath Lake Oahe based on a July 25 document issued by the Corps' Omaha, Nebraska, district. The Corps considers the July 25 letter a preliminary step in the permitting process, not the final easement required to start building on US government land and under Lake Oahe. The four-state, $3.8 billion pipeline is designed to deliver 470,000 b/d of Bakken and Three Forks crude to Patoka, Illinois, where it connects with the Energy Transfer Crude Oil Pipeline to Texas. Energy Transfer Partners, Sunoco Logistics and Phillips 66 own shares in the project. Enbridge Energy Partners and Marathon Petroleum announced plans in August to acquire a major stake, but that deal has not closed.

Tribes And Lawyers Are Vowing To Fight Trump's Pipelines  - President Donald Trump resurrected two massive pipeline projects on Tuesday, drawing ire and threats of legal action from the movement that fought to keep them off US land. “We will see his administration in court,” said Trip Van Noppen, president of the nonprofit group Earthjustice, which represented the Standing Rock Sioux tribe in challenging the Dakota Access Pipeline, in a statement. “[Trump] should brace himself to contend with the laws he is flouting, and the millions of Americans who are opposed to these dangerous and destructive projects.” “We are opposed to reckless and politically motivated development projects, like DAPL, that ignore our treaty rights and risk our water,” the chairman of the Standing Rock Sioux Tribe, Dave Archambault II, said in a statement. In December, the US Army Corps of Engineers denied pipeline builder Energy Transfer Partners the necessary permission to build the Dakota Access Pipeline under Lake Oahe in North Dakota, and called for additional environmental review of pipeline routes. The decision arrived after months of protests and legal action led by the Standing Rock Sioux Tribe, which contended that the pipeline threatened a key water source. The tribe also argued that consultations around the pipeline, promised in treaties, were left out of the initial pipeline planning. In leaving out mentions of such obligations, the new memorandums signed by Trump mark a stunning reversal of the past administration’s stance toward tribal relations, Monte Mills, co-director of the Margery Hunter Brown Indian Law Clinic at the University of Montana, told BuzzFeed News. “Neither one of these actions gives any lip service to those tribal considerations,” Mills said. “The implied message there is that it’s going to be a very different relationship going forward.”

Memo shows Corps was ready to issue easement  - willistonherald.com: The green light is on for the red-lighted Dakota Access pipeline, but the picture is still murky when it comes to how things will unfold from here. A memo prepared by the U.S. Army Corps of Engineers sometime in December and contained in the paperwork filed Jan. 6 in U.S. District Court helps shed some light on what may occur, and also contains information that has, until now, been veiled from public view. An official with the agency could not be reached to verify the exact timeframe of its preparation, but the memo references a Dec. 2 meeting with the tribe in its conclusions, and Assistant Secretary to the Army Jo Ellen Darcy’s announcement was made Dec. 4. In the nine-page memo, Col. John W. Henderson of the Omaha District wrote that denying the easement would require a finding that the crossing was inconsistent with some aspect of the authorized purpose of the Lake Oahe project, or violated some other required parameter. An Environmental Assessment had already shown the former not to be the case, and Henderson lays out the remaining parameters that were met point by point. The memo also mentions a December consultation with the tribe, held to discuss additional safety precautions that could be taken at the disputed crossing, as well as the risks in light of those additional steps and whether to issue the easement. The three points are close in wording to what was ultimately published in a Federal Register notice that announced the start of a public scoping session for an Environmental Impact Statement to consider alternate routes. Craig Stevens, with the MAIN Coalition, said the memo clearly shows that politics overrode an open and transparent public process, superseding it by political decisions that lay outside the known regulatory process.

Behind Trump pipeline orders, a pledge to deliver energy jobs - —Near the top of candidate Donald Trump’s promise list was a revival of jobs in America’s fossil fuel sector, a pledge that may have delivered Mr. Trump the presidency – through narrow wins in the decisive and fuel-producing states of Pennsylvania and Ohio. Now, in his first week in the White House, President Trump is trying to make good on that pledge. In two executive actions Tuesday he moved to advance construction of the controversial Keystone XL and Dakota Access pipelines. This sets the table for other expected Trump efforts on the energy front: lifting some of the Obama administration’s rules and regulations on the industry, opening more federal lands to energy production, and taking steps to help an ailing coal industry. Even with such moves, though, the reality is that a jobs surge in this sector is tough to achieve. Some new jobs are likely, industry analysts say, but they add that market forces – notably low prices for oil and natural gas – make a boom in oil-patch investment unlikely. Also, amid the price bust of the past two years, energy companies have become more efficient. That means that, even if prices may now be tilting upward, firms can produce oil and gas with fewer people. Other energy jobs – in solar and wind power – could shrink under an administration that so far shows no enthusiasm for boosting the rise of clean power supplies. "President Trump's policies will help fossil fuels and hurt renewables," energy research firm Doyle Trading Consultants said in a December report for clients, and "much of the help on the fossil fuel side will help gas rather than coal." "Pipelines will alleviate bottlenecks in the supply chain, ... lowering oil and gas prices less than people might think," added the Colorado-based firm, which specializes in the coal industry. "Global energy trends will still be in the driver's seat."

Trump's boost for pipelines: Can he deliver on energy jobs? -  Near the top of candidate Donald Trump’s promise list was a revival of jobs in America’s fossil fuel sector, a pledge that may have delivered Mr. Trump the presidency – through narrow wins in the decisive and fuel-producing states of Pennsylvania and Ohio. Now, in his first week in the White House, President Trump is trying to make good on that pledge. In two executive actions Tuesday he moved to advance construction of the controversial Keystone XL and Dakota Access pipelines. This sets the table for other expected Trump efforts on the energy front: lifting some of the Obama administration’s rules and regulations on the industry, opening more federal lands to energy production, and taking steps to help an ailing coal industry. Even with such moves, though, the reality is that a jobs surge in this sector is tough to achieve. Some new jobs are likely, industry analysts say, but they add that market forces – notably low prices for oil and natural gas – make a boom in oil-patch investment unlikely. Also, amid the price bust of the past two years, energy companies have become more efficient. That means that, even if prices may now be tilting upward, firms can produce oil and gas with fewer people. Other energy jobs – in solar and wind power – could shrink under an administration that so far shows no enthusiasm for boosting the rise of clean power supplies.

Keystone XL Pipeline: A New Opening, but What Lies Ahead? -  In his first days in office, President Trump reversed the government’s position on a highly contentious energy project, reviving the Keystone XL, a pipeline that would link oil producers in Canada and North Dakota with refiners and export terminals on the Gulf Coast. The pipeline has long been at the center of a struggle pitting environmentalists against advocates of energy independence and economic growth. President Barack Obama rejected the project in late 2015, saying it would be antithetical to the United States’ leadership in curbing reliance on carbon fuels. But even with an opening for the pipeline to go forward, the energy markets are starkly different from what they were eight years ago, when the Obama administration began considering the pipeline. When the project was conceived, the United States was struggling to lift domestic oil supplies and push down prices. The Keystone XL project was meant to supplement existing pipelines and increase Canada’s export potential. Since then, production has rebounded in the United States, and international oil markets are dealing with oversupply. Gasoline at the pump is cheap. As has been the case throughout the project’s history, however, economic forces alone will not determine its prospects. Political, commercial, environmental and even diplomatic factors will also play a role.

Transcanada Responds To Trump Executive Order: Says Keystone XL Will Add $3 Billion To US GDP --In a response filed moments ago by TransCanada, the company said it is currently preparing a follow up application, and will take up President Donald Trump’s invitation to again seek permit for the Keysteon XL pipeline. It further adds that Keystone XL will add more than $3 billion to U.S. GDP and create “thousands” of construction jobs.Full statement below: We appreciate the President of the United States inviting us to re-apply for KXL. We are currently preparing the application and intend to do so. KXL creates thousands of well-paying construction jobs and would generate tens of millions of dollars in annual property taxes to counties along the route as well as more than $3 billion to the U.S. GDP. With best-in-class technology and construction techniques that protect waterways and other sensitive environmental resources, KXL represents the safest, most environmentally sound way to connect the American economy to an abundant energy resource.Ironically, as the back and forth was taking place, news emerged that a pipeline in the western Canadian province of Saskatchewan leaked 200,000 liters (52,834 gallons) of oil in an aboriginal community, the provincial government said on Monday according to Reuters. The government was notified late in the afternoon on Friday, and 170,000 liters have since been recovered, said Doug McKnight, assistant deputy minister in the Ministry of the Economy, which regulates pipelines in Saskatchewan.The spill came seven months after another major incident in Saskatchewan, in which a Husky Energy Inc pipeline leaked 225,000 liters into a major river and cut off the drinking water supply for two cities. It was not immediately clear how the current incident happened or which company owns the underground pipeline that leaked the oil. McKnight said Tundra Energy Marketing Inc, which has a line adjacent to the spill, is leading cleanup efforts. "There are a number of pipes in the area," he told reporters in Regina. "Until we excavate it, we won't know with 100-percent certainty which pipe."

Trump Pledges Allegiance to Big Oil -- On Jan. 24, President Donald Trump signed two executive orders calling for the approval of the Dakota Access and Keystone XL pipelines , owned by Energy Transfer Partners and TransCanada, respectively. He also signed an order calling for expedited environmental reviews of domestic infrastructure projects, such as pipelines . Fights against both pipelines have ignited nationwide grassroots movements for over the past five years and will almost assuredly sit at the epicenter of similar backlash moving forward. As DeSmog has reported, Donald Trump's top presidential campaign energy aide Harold Hamm stands to profit if both pipelines go through.  Hamm, the founder and CEO of Continental Resources who sat in the VIP box at Trump's inauguration and was a major Trump campaign donor , would see his company's oil obtained from hydraulic fracturing (" fracking ") in the Bakken Shale flow through both lines . Kelcy Warren, CEO of Energy Transfer Partners, was also a major Trump donor Rick Perry , Trump's nominee for U.S. Secretary of Energy, served on the board of directors for Energy Transfer Partners until he received the nomination from Trump.  The signing of the orders comes as the U.S. Army Corps of Engineers is under order to undergo a thorough environmental impact statement process.  Trump claimed constructing Keystone XL would create 28,000 jobs at the executive orders signing ceremony, and said all of the steel for the pipelines would be manufactured in the U.S.   But a September 2011 report published by Cornell University's Global Labor says the project will generate 2,500-4,650 construction jobs, also pointing to research which it said showed "there is strong evidence to suggest that almost half of the primary material input for KXL —steel pipe—will not even be produced in the United States."

You know, Trump also just made the Keystone XL way more expensive (and illegal) to build -- In all the tumult over US President Donald Trump's signing of a memorandum in favor of the speedy resumption of building the Keystone XL pipeline, something important has been lost. It's that he also signed a memorandum that would make the pipeline way more expensive and in violation of international trade law. First, let's clarify that memorandum are not executive orders. They do not mean things happen at the snap of a finger. They are more of a presidential pat on the bum to get things going – and going the president's way – if they're going to get done at all. Trump's way, as Reuters' John Kemp put it, is a violation of about 70 years of international trade law. His second memorandum requires the Keystone pipeline to be built with US steel. Wilbur Ross, the Secretary of Commerce, must submit a plan in 180 days "under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the United States ... use materials and equipment produced in the United States."That's going to be difficult, to say the least.  That's because this is the kind of action that gets you sued by the World Trade Organization. Member-nations (Like the United States) are supposed to allow companies to compete fairly on the price of goods. They're not supposed to favor their domestic goods or materials over the goods or materials of other nations.  From the "General Agreement on Tariffs and Trade", WTO, 1947 and 1994 via Reuters:"The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favorable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use."The Obama Administration sued China to kingdom-come for this kind of behavior. It's why we have a 500% tariff on Chinese steel, for example. After that, China said it would continue a controversial tax rebate for its steel exporters. Either way, member-nations, including the Chinese, will not take kindly to this particular Trump dictum. It will become fuel to fire an impending trade spat.

Trump's Toothless Pipeline Protectionism -- Tom DiChristopher of CNBC called me yesterday to get my take on Donald Trump's attempt to make builders of the Keystone pipeline use American-made pipe. The result is this excellent report by him, in which he quotes me accurately and also quotes Cato Institute trade scholar Dan Ikenson.  Dan and I both pointed out that Trump had given himself an out. Here's the relevant section of Tom DiChristopher's news article:Henderson and others point out a key phrase in the memorandum: that pipeline builders use U.S. products "to the maximum extent possible and to the extent permitted by law." Trade treaties have force of law under the Constitution, and so by including that phrase, there is no contradiction with the law, Henderson said. But it also means the executive action is toothless. In explaining this to Tom, I asked him how long he had been covering these issues, because I wanted to tell him a story from the Reagan administration. He said that he was born when I was in the Reagan administration.. That led to the following paragraph in Tom's article:"My guess is he's making it toothless on purpose so he looks good to his constituents without doing so much harm," he said. As Dan Ikenson pointed out in the article, very few people will look at the fine print. Few Trump supporters will look at the fine print. Good.

TransCanada announces submission of Keystone XL Permit application - In the wake of President Trump’s executive order earlier this week regarding the Keystone XL Pipeline and the Dakota Access Pipeline, TransCanada announced it has submitted a Presidential Permit application to the U.S. Department of State for approval of the controversial Keystone XL Pipeline.TransCanada asserts the pipeline project will create tens of thousands of well-paying jobs and “generate substantial economic benefit throughout the U.S. and Canada,” according to its press release. The same release stated that independent forecasts by the U.S. Department of State estimate the Keystone XL will contribute approximately $3.4 Billion to the U.S. GDP. However, CNBC reported Thursday that free market economists say the President’s statement that the pipelines be built with American steel are rules they described as “dictatorial” and “a bad idea.” An presidential memo that instructed the Secretary of Commerce to develop a plan requiring any company that builds a pipeline within U.S. borders to use American-made products could “spark retaliation by trade partners and make the United States less prosperous.” This is the opposite effect that many who support Trump’s made-in-America ideals believe such directives would do. While advocating products be American, thus supporting American manufacturers, CNBC said such a policy would “violate a bedrock of international trade deals” that rely on the principle “a government cannot treat foreign companies any differently than domestic companies.” CNBC quoted Dan Ikenson, director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies: First of all, this is private investment, so there’s no legal authority for the government to require a private company to use domestic materials.  Ikenson also noted that it’s very likely that TransCanada would have used U.S. and Canadian steel, because the United States has imposed tariffs on steel imports to prevent a number of countries from dumping low-cost supplies. In addition, it’s likely that Trump’s American-made directive was purposely penned to intentionally to continue to direct policy towards increasing U.S. manufacturing overall, furthering his “America First” ideology as well as to create manufacturing jobs. The pipeline would carry 830,000 barrels a day of petroleum, mostly from the Canadian oil sands to Nebraska where it would continue to refineries along the Gulf of Mexico. The controversial project has been in limbo for about 8 years.

The Trump DAPL-Keystone XL Pipeline Story No One Is Talking About -   The President Donald Trump DAPL-Keystone XL actions give new life to two oil pipeline projects the Obama administration opposed. President Trump doesn’t have the power to simply approve the Dakota Access pipeline (DAPL) and the Keystone XL pipeline. But his executive actions re-open doors that President Barack Obama had closed. Both the DAPL and the Keystone XL pipeline have become political flashpoints – which is why this is such big news. Liberals trying to stop the pipelines see them as a front line in their fight against climate change. But conservatives want to see the projects completed, both to create jobs and as part of a strategy to make the United States energy independent. The President Trump DAPL executive action is more likely to deliver results first. Rep. Kevin Cramer (R-ND) told The Hill that President Trump’s DAPL action instructs the federal agencies responsible to expedite approval of the pipeline. But it’s all part of a long-running political game… The key point left out of most stories on DAPL and Keystone is that the United States already has a huge, elaborate spider web of pipelines. Any given pipeline won’t make that much difference, either in the fight against climate change or in making America energy independent. As of 2015, the United States had 73,300 miles of crude oil pipelines and 62,600 miles of refined petroleum product pipelines, according to the Pipeline and Hazardous Materials Safety Administration. There’s more than 300,000 miles of natural gas pipelines. In all, the United States has more than 2.5 million miles of hazardous liquid pipelines. By comparison, the DAPL project is 1,172 miles and the Keystone XL pipeline is 1,179 miles.

Why The Keystone Pipeline Will Actually RAISE Gas Prices In the U.S.- Bloomberg notes: Completion of the entire [Keystone] pipeline would raise prices at the pump in the Midwest and Rocky Mountains 10 to 20 cents a gallon, Verleger, the Colorado consultant, said in an e-mail message.The higher crude prices also would erase the discount enjoyed by cities including Chicago, Cheyenne and Denver, Verleger said.CNN Money reports:Gas prices might go up, not down: Right now, a lot of oil being produced in Canada and North Dakota has trouble reaching the refineries and terminals on the Gulf. Since that supply can’t be sold abroad, it reduces the competition for it to Midwest refineries that can pay lower prices to get it. Giving the Canadian oil access to the Gulf means the glut in the Midwest goes away, making it more expensive for the region.Tyson Slocum – Director of Public Citizens’ Energy Program – explains: How does bringing in more oil supply result in higher gas prices, you ask? Let me walk you through the facts. A combination of record domestic oil production and anemic domestic demand has resulted in large stockpiles of crude oil in the U.S. In particular, supplies of crude in the critical area of Cushing, OK increased more than 150% from 2004 to early 2011 (compared to a 40% rise for the country as a whole). Segments of the oil industry want to import additional supplies of crude from Canada, bypass the surplus crude stockpiles in Oklahoma in an effort to refine this Canadian imported oil into gasoline in the Gulf Coast with the goal of increasing gasoline exports to Latin America and other foreign markets.

Furious Environmentalists Vow Trump Will See "Wall Of Resistance Like He Never Imagined" --After Trump's executive order to accelerate the Keystone XL and Dakota Access pipelines, angry environmental groups reacted quickly by denouncing Trump's actions, and promising legal action and White House protests. “Donald Trump has been in office for four days, and he’s already proving to be the dangerous threat to our climate we feared he would be,” said Michael Brune, the executive director of the Sierra Club. He added that "President Trump will live to regret his actions this morning," said Michael Brune of the Sierra Club, promising "a wall of resistance the likes of which he never imagined."  At the same time, tribal leaders protesting the construction of a controversial North Dakota pipeline vowed on Tuesday to fight Trump's order to revive the $3.8 billion project, calling his decision a "bad move." Protesters had rallied for months against plans to route the Dakota Access pipeline under a lake near the Standing Rock Sioux reservation, saying it threatened water resources and sacred Native American sites. The tribe, which has fought to stop the pipeline since last year, won a major victory last month when the government denied Energy Transfer Partners LP the right to run the pipeline under Lake Oahe, a water source upstream from the reservation. Trump's order instructed the Army and the Army Corps of Engineers to review the decision.  According to Reuters, as a small airplane circled over the main protest camp near the Dakota Access pipeline on Tuesday, the mood following the White House's announcement was calm but defiant. “I’m staying here,” Benjamin Buffalo, a 45-year-old Blackfeet tribal member from Browning, Montana, told a reporter. “I’m standing with the natives. This is our future.” On Tuesday, Standing Rock leaders said they would meet in the coming days to plan next steps. Some said they feared fresh violence after past clashes between protesters and law enforcement officers. Dana Yellow Fat, Standing Rock Sioux tribal council member at large, called Trump's order "a poor decision and a bad move" and said he worried about injuries if new violence broke out. “Now you’re going to see both sides gear up for even more actions on the ground because you have a group of people that is determined to stop that pipeline one way or another,” he told Reuters. Yellow Fat said he was unsure whether the tribe would back away from its request for protesters to leave the camp, but said Trump's order has prompted "a total re-evaluation of our recent actions."

Pipeline opponents face high legal hurdles challenging Trump - Opponents of two controversial oil pipelines face a long and difficult legal path if the U.S. government approves their construction, experts said after the Trump administration issued orders on Tuesday intended to advance the Keystone XL and Dakota Access projects. U.S. President Donald Trump issued a pair of memoranda to several agencies paving the way to revive Keystone XL, which would bring oil from Canada, and Dakota Access, a nearly completed pipeline which had sought to build under a lake near a Native American reservation in North Dakota. Both projects stalled under former President Barack Obama. “Presidents are by and large entitled to take their agencies in a different direction and serve their policy goals,” said Wayne D’Angelo, an energy and environmental lawyer with Kelley Drye & Warren in Washington. Nevertheless, several groups immediately said they would challenge in court any attempt to resume the projects, which have become hot-button political issues at the intersection of environmentalism, Native American tribal rights and energy needs. The two pipelines could present different legal obstacles for environmentalists and other groups intent on halting them.As a cross-border project, the $8 billion Keystone XL requires a presidential permit to proceed. Obama denied such a permit to pipeline operator TransCanada Corp in 2015, arguing it would undermine the United States’ ability to act as a world leader on climate change policy. Trump’s Keystone order on Wednesday invited TransCanada to re-apply. Presidential authority to grant such permits is generally accepted by the courts, said James Rubin, an energy and environmental attorney at Dorsey & Whitney in Washington. Even with presidential approval, TransCanada would need permits from other government agencies, including the U.S. Department of the Interior and the U.S. Army Corps of Engineers, to navigate federal waters and lands. Any of those permits could be legally challenged by opponents as improperly issued. Energy Transfer Partners LP’s Dakota project, meanwhile, was halted in December when the Army Corps denied an easement to tunnel under a section of the Missouri River after weeks of protests by the Standing Rock Sioux tribe and its supporters. Trump’s Dakota order on Tuesday did not instruct the corps to change its position. But the president ordered the agency to consider “whether to rescind or modify” its December determination. If the corps abruptly reverses its decision, opponents could argue the agency had no justification for changing course in the absence of any new evidence. Earthjustice, the nonprofit that has led legal challenges to the Dakota project, said it would fight any attempt by the corps to step back from its December decision.

Transcanada Applies For Keystone XL Pipeline Presidential Permit - Two days after Trump signed an executive order meant to streamline the approval of the mothballed Keystone XL pipeline, which the company said would add more than $3 billion to US GDP and create thousands of construction jobs, moments ago TransCanada announced it has submitted a Presidential Permit application to the U.S. Department of State for approval of the Keystone XL Pipeline, which as Trump vowed, will likely be approved by a fast-tracked procedure, setting off the first big conflict between Trump and the environmental lobby which has vowed to protest Trump's Keystone and Dakota Access pipeline proposals.From the press release: TransCanada Applies for Keystone XL Presidential Permit --TransCanada Corporation announced today it has submitted a Presidential Permit application to the U.S. Department of State for approval of the Keystone XL (KXL) Pipeline. "This privately funded infrastructure project will help meet America's growing energy needs as well as create tens of thousands of well-paying jobs and generate substantial economic benefit throughout the U.S. and Canada," said Russ Girling, TransCanada's president and chief executive officer."KXL will strengthen the United States' energy security and remains in the national interest. The project is an important new piece of modern U.S. infrastructure that secures access to an abundant energy resource produced by a neighbor that shares a commitment to a clean and healthy environment. Numerous studies have shown that pipelines are a safer and more environmentally sound way to transport oil to market than trains and KXL raises the bar on both fronts," concluded Girling.Enhanced standards and the utilization of the most advanced technology will help ensure KXL will be built and operated to uphold our fundamental commitment to safety and the communities we serve.Independent forecasts by the U.S. Department of State estimate that KXL will support tens of thousands of direct and indirect jobs and associated income during construction and contribute approximately $3.4 Billion to U.S. GDP.

Oil Pipeline Spills 53,000 Gallons on First Nations Land - An oil pipeline has leaked about 200,000 liters, or 52,834 gallons, of crude onto an aboriginal community in the oil-rich province of Saskatchewan, Canada. This is the province's largest pipeline breach since July's disastrous 225,000 liter (59,438 gallon) Husky Energy Inc spill, in which some oil entered the North Saskatchewan River and cut off drinking water supply for two cities. The latest spill happened on reserve lands of the Ocean Man First Nation. Ocean Man Chief Connie Big Eagle told Reuters that a local resident smelled the scent of oil for a week, located the spill and brought it to her attention on Friday. While no homes were affected, the spill is about 400 meters (1,320 feet) from the local cemetery, Big Eagle said. The Saskatchewan government was informed of the spill on late Friday afternoon, but the public was only notified of the spill on Monday. Doug MacKnight, assistant deputy minister of the petroleum and natural gas division in the Economy Ministry, told reporters that the delayed announcement was due to the government not knowing the spill volume until Monday morning.  "At that point we felt it was prudent to let everyone know what we were up to," MacKnight said.

200,000 litres of oil from pipeline spills near Stoughton, Sask. --Some 200,000 litres of oil has spilled near Stoughton, Sask., the provincial government said Monday. (Government of Saskatchewan) The provincial government was notified of the spill on Friday evening "as soon as the leak was detected," a spokesperson from the Premier's office said. Reporters were told Monday afternoon. The pipeline was shut down when the breach was discovered, and the spill is fully contained, the spokesperson said. The source of the leak is not yet known. The oil covered agricultural land but did not enter any water sources, the government said. The site was described as a low-lying area with a frozen slough. The spill has not affected air quality or wildlife as of yet, the government said. The cleanup, led by Calgary-based Tundra Energy Marketing Inc., began on Saturday. As of Monday, 170,000 litres of oil had been recovered, the government said. Doug MacKnight, assistant deputy minister with the Ministry of the Economy's petroleum and natural gas division, said there are multiple pipelines in the area of the leak. Until the site is excavated Wednesday, it will not be known which one is responsible. However, the Tundra-operated pipeline is thought to be the source.

Two Major Pipeline Spills Reported Same Week Trump Advances KXL, DAPL - Two major pipeline spills were reported the same week that President Donald Trump signed orders to move the Keystone XL (KXL) and Dakota Access (DAPL) pipelines forward. The recent breaches highlight the dangers of unreliable fossil fuel infrastructure in North America. The president signed executive orders on Tuesday. One a day later, about 138,600 gallons of a diesel mix spilled from a broken pipeline in Iowa. The pipeline is owned by Oklahoma-based Magellan Midstream Partners, which recently reached an $18 million settlement with the U.S. Environmental Protection Agency over alleged violations of the Clean Water Act, involving three pipeline spills in Texas, Nebraska and Kansas. On Monday, reports emerged of a Tundra Energy Marketing Ltd-owned pipeline that spilled 52,830 gallons of crude oil onto aboriginal land in Saskatchewan, Canada. The spill happened on reserve lands of the Ocean Man First Nation. Trump promises that pipelines such as the Keystone XL and the Dakota Access will help increase domestic energy production and create jobs. Energy companies also say that pipelines are safer and more environmentally friendly to move fuel compared to rail or trucks. But Tundra and Magellan's pipeline breaches only exacerbate the concerns of indigenous communities who are the ones who see these projects built then rupture in their backyards. "Of course everybody's not happy that it happened in the first place ... You hope that these things will never happen to you or to your community and so yah, it was shock. It  was a surprise," Ocean Man Chief Connie Big Eagle told Canada's Global News.   According to a ProPublicareport, America's 2.5 million miles pipelines "suffer hundreds of leaks and ruptures every year, costing lives and money," and these lines are only getting older. Not only that, the report notes that pipeline accidents have killed more than 500 people, injured more than 4,000 and cost nearly $7 billion in property damages since 1986.

Justin Trudeau: climate leader or charlatan?- The photogenic Canadian promised a new politics and talked tough on climate, but his embrace of three oil pipelines in as many months tells a different story: “I’ve been on record supporting Keystone XL… we know we can get our resources to market more safely and responsibly while meeting our climate change goals.” Keystone XL, it is estimated, would carry 800,000 barrels of tar sands oil every day over nearly 900 miles. It’s dirty stuff, by anyone’s reckoning. Each barrel would have a carbon footprint 17% higher than conventional oil, said the State Department. Truly, you might say, Trudeau is a man for all seasons, presidents and energy mixes. Usually the last one that he happens to spot.  To place this in context, this is a man who has keenly – and successfully – tried to rebrand Canada as a climate progressive, pushing it back into the heart of UN climate summits. Where before the North American energy giant was seen as a blocker, Trudeau directed his media-savvy environment chief Catherine McKenna to play a central role in securing a global climate deal. Caps on methane emissions, a 2025 goal to source 50% of electricity from low carbon sources and a ban on Arctic oil drilling were among the headline initiatives secured by Ottawa and DC. This followed on a national deal to implement a carbon tax by 2018, built on legal frameworks delivered by provinces through 2015 and 2016.

Canadian Drillers Brave Deep Freeze as Oil Patch Revives Growth In the snowy prairies of Western Canada, not even temperatures below -40 degrees have stopped Stampede Drilling Ltd.’s 60 recently rehired workers from manning the oil-service provider’s rigs after a nine-month dry spell for the business.  “Once oil hit $50, everybody started phoning again,” Bill Devins, the drilling company’s 57-year-old owner, said in a phone interview from his office in Estevan, Saskatchewan, a town bordering North Dakota right at the heart of the Bakken shale formation. “We started to have some activity come our way.”  From the tight-oil plays of Saskatchewan to the oil sands of northern Alberta, Canada’s energy producers are returning to growth mode after more than two years enduring the worst market rout in decades. They are leaner and more efficient after cutting staff, shelving projects and reducing costs since the downturn. Cheaper crude doesn’t feel so painful any longer.  Companies such as MEG Energy Corp., Canadian Natural Resource Ltd., Cenovus Energy Inc., Encana Corp. and Seven Generations Energy Ltd. have all announced plans to expand production. Calgary-based Precision Drilling Corp. hired and recalled about 1,000 field workers to reactivate rigs in Canada and the U.S.The renewed focus on expansion happens as the Organization of Petroleum Exporting Countries cuts output and after the Canadian government in November approved construction of two expanded oil pipelines that will add almost a million barrels a day of export capacity to Western Canada. The industry may also be poised to get another vote of confidence. U.S. President Donald Trump plans to take action Tuesday to advance construction of the Keystone XL pipeline from the oil sands to the U.S. Gulf, a person familiar with the matter said. That line would add a further 830,000 barrels a day of capacity.

Is Trump Setting The Oil Markets Up For Another Bust? -- President Donald Trump signed several executive orders this week intended to juice the American energy sector, calling for expedited environmental reviews and the advancement of the Keystone XL and Dakota Access Pipelines. He also is trying to erase any sign of climate change by scrubbing government websites of climate data and even any mention of the phrase. No doubt more directives will be forthcoming in the next few days, not to mention the regulatory actions his agencies – EPA and Interior chief among them – will take to remove all restrictions on oil and gas drilling once his nominees get into place.  The Dakota Access Pipeline will carry at least 470,000 bpd of Bakken crude to existing pipelines in the Midwest, and ultimately to refineries along the Gulf Coast. But without the pipeline, oil producers in North Dakota have to sell their crude at a discount in order to entice refiners to buy less competitive oil that is shipped by rail or truck. Wood Mackenzie estimates that to move oil by rail adds $12 to the cost while shipping it via pipeline only adds $7 per barrel. With crude trading at $50 per barrel these days, the $5 difference is 10 percent of the price – not a trivial figure. It is not a coincidence then that North Dakota oil output has declined roughly 200,000 bpd from a peak of 1.22 mb/d at the end of 2014. The absence of adequate pipeline capacity has helped trim the growth of the Bakken, and it has also deepened its losses since the market downturn over two years ago. According to the Dakota Access website, the pipeline will “eliminate the need for 500 to 740 rail cars and/or more than 250 trucks needed to transport crude oil every day.” As a result, the Dakota Access Pipeline would not only add takeaway capacity for the Bakken, but it would also trim the transit costs, theoretically making the entire basin more economically viable. That would translate to more investment, higher rig counts, more drilling and ultimately increased oil production. This is why environmental groups, among other reasons, are trying to block construction. Dakota Access is just one of President Trump’s expected initiatives to boost energy production. Others include scrapping regulations on methane, expediting (or gutting, depending on your point of view) the environmental review process for major infrastructure projects, opening up drilling on public lands, and auctioning off more offshore acreage in the Arctic, Atlantic and Gulf of Mexico.

HALLIBURTON: We are seeing weakness everywhere but in North America (Reuters) - Halliburton Co, the world's No. 2 oilfield services provider, on Monday warned of weakness in markets outside of North America, echoing comments made by larger rival Schlumberger last week. Halliburton reported a better-than-expected quarterly adjusted profit as oil producers put more rigs back to work in North American shale fields. Shale producers, encouraged by a rise in crude prices after a slump of more than two years, have been drilling and completing more wells in North America. "Despite the positive sentiment surrounding the North American land market, it is important to remember that our world is still a tale of two cycles," Chief Executive Dave Lesar said in a statement. "The North America market appears to have rounded the corner, but the international downward cycle is still playing out." International markets are yet to recover with most oil companies reluctant to increase spending on expensive deepwater and mature oilfields. Net loss attributable to Halliburton widened to $149 million, or 17 cents per share, in the fourth quarter ended Dec. 31, from $28 million, or 3 cents per share, a year earlier.

State of the Sector: Oilfield Services' Struggle May Persist In 2017 -- Lingering weakness in customer demand, overcapacity and a high net burden continue to punish the oilfield service (OFS) sector. Consequently, OFS will lag behind their upstream clients by at least one year, according to a Moody’s Investors Service research. Despite an increase in the rig count, it remains 65 percent lower than late 2014, said Sajjad Alam, assistant vice president for corporate finance at Moody’s. That won’t be enough to resuscitate the sector by the end of the year. “’Weak customer demand’ is relative,” Alam said. “Everything was under 20 feet of water, and although things are under five or 10 feet underwater now, they are still under water.” The length of the downturn – by some accounts, now in its third year – took a toll throughout the industry. The result? A “profoundly deleterious impact” to oilfield services, equipment and drilling companies, he explained. But where Moody’s expects another tough year for OFS, West and others are painting a rosier picture. Analysts at Evercore project global exploration and production (E&P) capital spending (CAPEX)this year will increase by 2 percent, providing an assist to OFS. And at Barclays, the ratings service is predicting global CAPEX of 7 percent and investor sentiment favoring the troubled sector.

Crude correlations about crude oil can shed light on changes  - Statistical correlations are interesting things. One of my favorite websites, and now a book, is Spurious Correlations. The site’s author looks at seemingly unrelated data sets that correlate in interesting ways. For example, there is a high degree of statistical correlation between the per capita consumption of chicken and total US crude imports.Unsurprisingly, there’s also a high degree of correlation between various regional and global crude oil crude benchmarks. And while correlation doesn’t equal causation, those relationships have changed in interesting ways over the past year.Historically, there was a strong correlation between the cash differentials for Light Louisiana Sweet crude and the Brent-WTI spread. Since restrictions around US crude exports have been lifted, those statistical relationships have just about vanished.Looking back to 2012, on average there was an 85% correlation between the differential between LLS and WTI and the Brent-WTI spread, meaning that for the most part when the Brent-WTI spread widened, the LLS-WTI spread also widened.This relationship made a lot of sense. At the time, WTI was landlocked in Cushing, Oklahoma, and LLS reflected the market for light sweet crude among the Gulf Coast refiners, which account for more than half of total US refining capacity.Gulf Coast refiners looking at a light sweet barrel had a few options: either buy LLS, or a related domestic grade, or import a similar barrel that would almost certainly be priced in relation to Brent crude, which was generally more reflective of supply and demand in the international crude market.At time, Brent was traded $15-$20/b above WTI, which was essentially limited to the US Midwest refining market. At the time, Cushing was oversupplied with domestic and Canadian crude, which had no way to reach refiners in the Gulf Coast. So it made a lot of sense for LLS to fetch a market price much closer to Brent than WTI. Refiners were looking to pay Brent-level prices for import crudes, why would domestic sellers offer LLS at $15 under that market? That’s how markets work.

Border Wall Tax on Mexican Crude Oil Would Cost U.S. Drivers -  U.S. motorists probably would foot the bill for President Donald Trump’s 20 percent border-wall tax as domestic refiners reliant on Mexican crude pass on the cost.  Less than a week after assuming office, the Trump administration indicated it may impose the levy on imports from Mexico to finance construction of a barrier along the southern U.S. border. American companies imported about $14 billion in oil and related products in 2015, government data show. White House press secretary Sean Spicer noted that the tax was only one idea being mulled to pay for the wall, a cornerstone of Trump’s campaign.The tax, which Spicer characterized in a briefing Thursday as "theoretical," would apply to countries with which the U.S. has a trade deficit. That would seemingly exempt Canada, with which the U.S. ran a surplus of $11.9 billion in 2015. However it may include Saudi Arabia, the second-largest foreign supplier of crude to the U.S., which sent $31 billion more to the U.S. than it took back in 2012.Most U.S. refineries reside inside Foreign Trade Zones, including the biggest U.S. importer of Mexican crude, a joint venture owned by Royal Dutch Shell Plc and Mexico’s state-controlled driller Petroleos Mexicanos. The zone is “almost like an embassy, and things will not be taxed until they exit the zone,” Janice Mosher with U.S. Customs and Border Protection said in a telephone interview. The wider range of countries that a tax would apply to would increase the hit to American drivers. The venture’s refinery in the Houston suburb of Deer Park imported almost 52 million barrels of Mexican oil during the first 10 months of 2016, according to government data. Valero Energy Corp., LyondellBasell Industries NV and Exxon Mobil Corp. were the next three biggest U.S. importers of Mexican oil during that period. The combined supply imported by those companies was enough to fill more than 30 supertankers, based on Bloomberg calculations.

Impact of changes to the Mexican heavy crude benchmark -- part 2. - A major component of the formula used to set the price of Maya—Mexico’s flagship heavy crude, and a key staple in the diet of many U.S. Gulf Coast refiners—was changed earlier this month, raising new questions about this important price benchmark for nearly all heavy sour crude oil traded along the U.S. Gulf, and points beyond. The change came as Maya production volumes continue to fall, and as Maya is facing increasing competition from Western Canadian Select (diluted bitumen) from Western Canada. Today we conclude a two-part series on Maya crude oil, the new price formula and its potential effects. As we said, in Part 1, Mexico currently produces about 2.2 million barrels a day (MMb/d) of crude oil, about half of which (~1.1 MMb/d) is exported—three-fifths of which goes to the U.S.  P.M.I. Comercio Internacional S.A. de C.V. (PMI) is the crude oil marketing entity of state-controlled PetrĂ³leos Mexicanos (PEMEX) and manages the export of four distinct quality grades of crude oil, ranging from Altamira (an asphalt grade) and Maya on the lower end of the quality spectrum, to Isthmus in the middle, and Olmeca at the higher end. Most of Mexico’s crude oil exports to the U.S. Gulf Coast are Maya blends, as Mexico tends to retain most of its lighter grades (Isthmus and Olmeca) for domestic refinery consumption. However, the share of Maya exports headed for the U.S. has been falling fast—from 78% in 2013 to only 44% through the first nine months of 2016; the share of Maya bound for Europe has more than doubled over the same period and the share shipped to the Far East has more than tripled.

UK Is Europe’s Last Hope For A Fracking Success - Following poor success across Europe, including Poland, Ukraine, France, the Netherlands, and Denmark, the UK now remains the last candidate province for European shale gas and oil in the near term. And a fracking moratorium in Scotland has further reduced that to England & Wales. The British government is in favour of developing the resource and has opened up significant acreage in the 14th Onshore Round. Nonetheless, some resistance remains. Meanwhile, North Sea production has been waning and the current deficit amounts to around 1 trillion cubic feet (Tcf) per annum, with the figure set to double over the next 20 years. 1/3 of gas imports come from either Russian fields or LNG supplies of mixed provenance. And with ‘Brexit’ looming, it will be vital for the UK economy to secure long term, reliable energy. The British Geological Survey has estimated around 1300 Tcf GIIP (P50) for the Bowland Shale in Northern England and 4.4 Billion barrels (Bbbl) OIIP for the southern Weald Basin. A further 80 Tcf GIIP and 6 Bbbls OIIP (P50) have been inferred for the Scottish Midland Valley but – due to the fracking restrictions – this basin is off-limits for the foreseeable future. Smaller CBM potential has also been identified within a number of coal measures in Wales and the English midlands.

European natural gas storage facilities face closure on weak economics: industry - A number of European gas storage facilities could face closure in the coming years given the weak economics for operating sites across the continent, industry leaders said late Wednesday. At the European Gas Conference in Vienna, officials from storage operators in Germany and Austria said the summer-winter spread -- historically wide to incentivize injections in the summer and withdrawals in the winter -- has narrowed considerably in recent years. "I'm surprised we haven't seen more closures," managing director of gas storage at Austria's OMV, Erich Holzer, said. "There will be more closures in the future -- summer-winter margins are too low to keep these storage facilities [operational]," Holzer said. Head of energy storage Austria at Germany's Uniper Michael Schmoltzer echoed his view. "The economics say that you have to close your storage sites that do not cover their costs," Schmoltzer said. "The summer-winter spread is putting us under pressure," he said. The current spread between TTF day-ahead prices and summer 2017 is just over Eur3/MWh, according to Platts assessed prices on Wednesday, but has been as low as Eur1/MWh in recent months. The bleak outlook has been somewhat tempered by a strong use of storage across Europe so far this winter.Commercial Managing Director of Innogy Gas Storage Michael Kohl said Europe was on track for its gas storage levels to drop to record lows by the end of the winter having started the season at record highs.

Mediterranean diesel supply firms as Black Sea loadings return to normal -- Black Sea loadings of gasoil and diesel have returned to more typical levels in recent days after a period of weather-based disruption, helping to meet product shortages in the Mediterranean consumer markets, sources said this week. "We are seeing more cargoes in general, of both gasoil and diesel coming into the Med over the past few days," one trader in the Mediterranean said. The return of loadings follows a period of disruption to product flows caused by poor weather conditions in the Black Sea. Distillate product flows to Mediterranean consumer markets were limited by fewer daylight hours, congestion and traffic around the Turkish straits, sources reported. "The weather delays in the Med are not there anymore...there were some issues yesterday [in Sarroch and Skikda], but they have smoothen down now," a Mediterranean shipbroker said. Cargoes of 10 ppm diesel in the Mediterranean were assessed by S&P Global Platts at a $5.75/mt premium to low sulfur gasoil futures Monday, down from a six-month high of $11.00/mt earlier in the month. "A lot of gasoil is being exported now, following the [Black Sea] delays. Now seeing material coming into the Med," a refinery source said. "There are many cargoes loading. There is around 8-10 cargoes of 0.5% gasoil [a month]; 5-6 cargoes of 0.25% gasoil; and 12-14 cargoes overall of ULSD." Another trader reported three cargoes of blended 0.1% gasoil loading from the Black Sea this week, along with two ultra low sulfur diesel cargoes. Despite the return of Black Sea loadings, 0.1% gasoil differentials remained strong, boosted by tender demand from the North African countries.

UK court: Nigeria citizens cannot sue Shell for oil spill -- The UK High Court [official website] ruled [judgment, PDF] on Thursday that Nigerian citizens affected by Shell oil spills cannot sue for relief in the UK. Lawyers for the Nigeria residents promised [press release] to appeal the judgment immediately, claiming that the court made its judgment before relevant evidence and testimony could be introduced.  The people of the Niger Delta have been hard hit by numerous oil spills in recent years. Amnesty International (AI) [advocacy website] reported [JURIST report] in November 2015 that Shell had failed to clean up oil spill sites in Nigeria despite its assurances that it properly handled the spills. Shell settled [BBC report] some of the oil spill claims in January 2015 with an $84 million deal. AI also claimed [JURIST report] in November 2014 that Shell had repeatedly misstated and underestimated the impact of two separate oil spills in Nigeria in 2008. Shell claimed that about 4,000 barrels of oil spilled, while AI estimated that closer to 100,000 barrels were spilled in the two incidents.

India's HPL looks to ADNOC for crude oil supply to planned refinery -  India's state-owned Haldia Petrochemicals Ltd has signed a memorandum of understanding with Abu Dhabi National Oil Company for crude oil supply to its planned 300,000 b/d refinery in eastern city Kolkata, government officials said Thursday. The MOU was signed on Wednesday in the presence of visiting Abu Dhabi's Crown Prince Sheikh Mohammed bin Zayed Al Nahyan and Indian Prime Minister Narendra Modi. The Crown Prince, on a three-day visit to New Delhi, is the chief guest for the Republic Day celebrations on January 26. The tie-up also has a provision for ADNOC to explore the likelihood of increasing naphtha supply to HPL. HPL is one of India's largest petrochemical companies and runs a naphtha-based petrochemical complex at Haldia, with an ethylene production capacity of 700,000 mt/year, and a processing capacity of over 350,000 mt/year of polymers. On Wednesday, ADNOC signed a major deal with state-owned Indian Strategic Petroleum Reserves Ltd or ISPRL, to establish a strategic crude oil storage in the southern city of Mangalore. The agreement with ISPRL covers the storage of 5.86 million barrels of ADNOC crude oil in underground facilities, at the facility in Karnataka state, an ADNOC statement said after the signing of the agreement. The Mangalore storage capacity stands at 11 million barrels.

Sources: Saudi Aramco Shelves Plan For Venture With Malaysia's PETRONAS  (Reuters) - Saudi Aramco has shelved plans for a partnership with Malaysian state-oil firm Petroliam Nasional Berhad in a $27 billion refining and petrochemical project in the southeast Asian country, industry sources familiar with the matter told Reuters on Wednesday. Aramco had been in talks with Petronas about a joint venture in the Refinery and Petrochemical Integrated Development (RAPID) project in the southern Malaysian state of Johor. Aramco and Petronas officials did not respond immediately to requests for comment. "I believe the proposal was still in an initial discussion phase," said Sadad al-Husseini a former senior executive at Saudi Aramco and now an energy consultant. "In any case, considering the scale of the investment, China's growing regional exports of refined products, Singapore's existing refining capacity and the competition this project would have created to Aramco's own JV refineries in Korea, China and Japan, its deferral was probably a very well considered and prudent Aramco management decision at this time." The RAPID project, launched in 2012 and expected to begin operations in the first quarter of 2019, is designed to have a 300,000-barrel-per-day oil refinery and a petrochemical complex with a production capacity of 7.7 million metric tonnes. Petronas last year sought proposals for a $7.2 billion loan for the project, with separate guarantees from the company and Aramco, Thomson Reuters IFR reported in June. Aramco's move to suspend plans for the Malaysian venture comes at a time when Petronas is struggling with the slump in oil prices. In early 2016 Petronas said it would cut spending by up to 50 billion ringgit ($11.27 billion) over the next four years. It has also slashed the dividend it pays to the Malaysian government.

OPEC and Friends on Track to Comply With Deal to Cut Output - OPEC and other oil-producing countries are scaling back their crude output as promised under last month’s historic agreement, putting global markets on track to re-balance after more than two years of oversupply.  Producers have cut oil supply by 1.5 million barrels a day, more than 80 percent of their collective target, since the deal came into effect on Jan. 1, Saudi Minister of Energy and Industry Khalid Al-Falih told reporters in Vienna as ministers gathered to monitor compliance with the agreement. “Compliance is great -- it’s been really fantastic,” Al-Falih said Sunday. “Based on everything I know, I think it’s been one of the best agreements we’ve had for a long time.”  Saudi Arabia, Kuwait, Qatar, Algeria and Venezuela are meeting counterparts from non-OPEC nations Russia and Oman to figure out ways to verify that the 24 signatories to their Dec. 10 accord are following through on their pledge to remove a combined 1.8 million barrels a day from the market for six months. They intend to prove the Organization of Petroleum Exporting Countries is serious about finally eliminating a global glut and dispel skepticism stemming from previous unfulfilled promises.  International oil prices rose to an 18-month high of more than $58 a barrel after OPEC and several non-members agreed to end two years of unfettered production and instead cut output. Crude has since slipped about 5 percent from that peak as traders await proof that they will follow through. Saudi Arabia, the world’s biggest oil exporter, has already exceeded its target with an output reduction of more than 500,000 barrels a day, Al-Falih said, while Algeria and Kuwait have also cut to levels beyond their targets, according to ministers from those nations. Other OPEC members such as Iraq and Venezuela have not yet reached their quotas but say they are more than half-way there.

OPEC Praises Production Cuts, Reveals No Penalties For Violators As Deal Skepticism Rises - After Sunday's latest meeting between OPEC and non-OPEC countries in Vienna, energy ministers struck an optimistic note regarding the recent agreement to cut oil output as a committee set to monitor compliance with the deal meets for the first time. Oil producers said they are in "total agreement" on the mechanism for monitoring pledged output cuts, Kuwait Oil Minister Essam Al-Marzouk told reporters after the committee ended its meeting in Vienna."I am satisfied, I am optimistic and, as I said, the markets are on their way to rebalance and it's happening," Saudi energy minister Khalid al-Falih said. He added that compliance with the agreement, which calls for cuts to begin this month, had been "fantastic", he said adding that "based on everything I know, I think it’s been one of the best agreements we’ve had for a long time.” The issue, however, is that what everyone else knows is largely sourced from word of mouth statements, at least until the first official reports of monthly production emerge, validating his optimism.As a reminder, under the Vienna deal struck last December between OPEC and non-OPEC nations, producers agreed to lower production by nearly 1.8 million barrels per day (bpd) aiming to ease a global glut that has weighed on oil prices for more than two years.Following Falih's claim last week that 1.5 million bpd in production had already been taken out of the market, on Sunday the Saudi energy minister added that "usually non-OPEC would raise their production to compensate for voluntary cuts by OPEC. Now, we are seeing voluntary cuts by both sides."  Saudi Arabia, has already exceeded its target with an output reduction of more than 500,000 barrels a day, Al-Falih said, while Algeria and Kuwait have also cut to levels beyond their targets, according to ministers from those nations. Other OPEC members such as Iraq and Venezuela have not yet reached their quotas but say they are more than half-way there. Al-Falih then predicted that "the other 300,000 bpd, for all I know, is still happening," and hoped for 100 percent compliance in February. Full compliance could take global oil inventories back close to their five-year average by mid-2017, lowering oil in storage by around 300 million barrels, Falih said.

How Russia sold its oil jewel: without saying who bought it | Reuters: More than a month after Russia announced one of its biggest privatizations since the 1990s, selling a 19.5 percent stake in its giant oil company Rosneft, it still isn't possible to determine from public records the full identities of those who bought it. The stake was sold for 10.2 billion euros to a Singapore investment vehicle that Rosneft said was a 50/50 joint venture between Qatar and the Swiss oil trading firm Glencore. Unveiling the deal at a televised meeting with Rosneft's boss Igor Sechin on Dec. 7, President Vladimir Putin called it a sign of international faith in Russia, despite U.S. and EU financial sanctions on Russian firms including Rosneft. "It is the largest privatization deal, the largest sale and acquisition in the global oil and gas sector in 2016," Putin said. It was also one of the biggest transfers of state property into private hands since the early post-Soviet years, when allies of President Boris Yeltsin took control of state firms and became billionaires overnight. But important facts about the deal either have not been disclosed, cannot be determined solely from public records, or appear to contradict the straightforward official account of the stake being split 50/50 by Glencore and the Qataris. For one: Glencore contributed only 300 million euros of equity to the deal, less than 3 percent of the purchase price, which it said in a statement on Dec. 10 had bought it an "indirect equity interest" limited to just 0.54 percent of Rosneft. In addition, public records show the ownership structure of the stake ultimately includes a Cayman Islands company whose beneficial owners cannot be traced.

For The First Time Ever Russia Beats Saudi Arabia As China's Top Oil Supplier --While OPEC members were infighting over crude production and export quotas, posturing with temporary production cuts (just so the Saudis could get a six month reprieve during which it clears out a massive internal crude glut), Russia was busy capturing market share, and according to overnight Chinese data, Russia overtook Saudi Arabia as China’s top oil supplier last year for the first time ever boosted by robust demand from independent Chinese "teapot" refineries.Russia boosted oil exports to China by 24% from 2015 to 52.5 million metric tons, or 1.05 million barrels per day, according to data released Monday by the General Administration of Customs, cited by Bloomberg. In a blow to Ridyah's ambitions, the Middle Eastern kingdom slipped to second place, shipping 51 million tons, or 1.02 million barrels per day, little changed from a year earlier. For December, Russia also held the top spot with supplies up 4.8 percent from the same month a year earlier at 1.19 million bpd. Meanwhile Saudi sales dropped nearly 20 percent from a year earlier to 841,820 bpd, data from the Chinese General Administration of Customs showed. Total crude oil imports in December hit a record as refiners stepped up purchases ahead of a deal by oil-producing countries to reduce supply and bolster prices, Reuters reports. For the whole of 2016, imports gained nearly 910,000 bpd over 2015, the strongest annual growth on record and mostly driven by teapot buying. While Saudi Arabia counts China's state oil firms as backbone clients through long-term supply contracts, China's independent refineries, called "teapots" due to their smaller processing capacity, saw Russia as a more flexible, and perhaps cheaper, supplier.

China’s inescapable oil slide is a record-breaking OPEC gift - OPEC’s campaign to prop up oil prices is getting unlikely support from its biggest customer. China’s production is forecast to fall by as much as 7% this year, extending a record decline in 2016, according to analysts at CLSA Ltd., Sanford C. Bernstein & Co. and Nomura Holdings Inc. That’s about the same size as the output cut agreed by Iraq, the second-biggest producer in the Organization of Petroleum Exporting Countries, which late last year reached a deal to trim supply to support prices. “China’s domestic crude output decline will certainly help OPEC’s plan to reduce global supply,” said Nelson Wang, a Hong Kong-based oil and gas analyst at CLSA, who sees a 7% slide this year. ”Even if that isn’t China’s intention, it’s just the reality that China can’t produce more under the current circumstances.” While China consumes more oil than almost any other country, it’s also one of the world’s biggest producers, with fields stretching from offshore its southern coast to the far north east. The collapse in prices that began in 2014 is taking its toll, and the nation’s output suffered a record decline last year. That plays into the hands of OPEC as it seeks to prop up the global oil market, forcing China to depend more heavily on imports.

Libya oil output to rebound with power returning at fields -Libya’s oil production rebounded to about 700,000 bpd after dipping temporarily due to power outages that disrupted operations at some of the OPEC member’s fields. Libya, with Africa’s largest crude reserves, is trying to revive its oil production in spite of political turmoil and conflict among armed forces competing to control the nation’s energy assets. It reopened two of its biggest fields last month, as well as a pair of oil terminals that had been closed for two years. Libya is still pumping far less than the 1.6 MMbopd it produced before a 2011 uprising that set off years of instability. Libya plans to almost double output this year. Additional increases in its production will put pressure on the Organization of Petroleum Exporting Countries and other major suppliers that agreed to pump less crude starting this month in a joint effort to end a glut. OPEC exempted Libya from cutting as the nation tries to restore its crude production and exports.

Iraq Has Cut 180,000 Bpd As Part Of OPEC Oil Deal (Reuters) - Iraq has reduced its oil production by around 180,000 barrels per day and plans to cut a further 30,000 bpd before the end of the month, the OPEC member's oil minister said on Monday. The cut came from a 4.75 million bpd level, Jabar Ali al-Luaibi told reporters at an industry event at Chatham House in London. "We are abiding by OPEC policy and the OPEC agreement," Luaibi said. Iraq agreed to lower its production by 210,000 bpd under a deal struck in December between the Organization of the Petroleum Exporting Countries and other producers led by Russia. The Middle Eastern country, OPEC's second-largest producer, had originally sought to be exempt from any cuts, saying it needed the revenue to fight an Islamic State insurgency. "We are cutting from all Iraq," Luaibi said, although he added that cuts to production started at fields operated by national oil companies. He said the ministry had contacted international oil companies operating in the country about the cuts and so far received a "good response" from most of them. He said Russia's Lukoil, which operates the West Qurna-2 oilfield, told him recently that the company was prepared to lower output by 20,000 bpd without compensation. "BP as well and some other companies are responding," he added. "So far everything is moving smoothly as far as the oil companies are concerned."

The Oil Production Cuts Are Purely Symbolic Marketing Trickery (Video) - The OPEC and Non-OPEC Oil Production cuts are actually a joke in the bigger scheme of things, the oil markets have been over supplied for a decade. The Market`s self serving definition of a balanced oil market is complete nonsense on a larger macro view of the market.There is a reason the 5-year averages for oil stocks have been rising every year I have been trading the oil market. It isn’t a coincidental indicator that more oil storage facilities are being built or expanded every year for the last 15 years of the modern electronic oil markets.There is so much oil and derivative oil products in storage on a global calculus, that it is a joke if OPEC thinks they have cut enough to actually long term balance the oil markets.In addition they are delusional if they think a little six month seasonal pullback in production is going to do anything other than artificially set the oil market up for the next leg back down in the second half of 2017.

Oil Speculators Have Never Been This Long --Despite soaring rig counts, surging US shale production, and increasing doubts over OPEC/NOPEC cuts being sustained (albeit with Saudi jawboning)... Oil speculators have decided to add to their long positions in the last week, pushing the net position in futures to a new record high - above the 2014 peak from which crude collapsed. As Raoul Pal detailed previously, look at the term structure of crude oil. We've got a fairly steep contango for a few months but then we see backwardation in the belly of the curve. So apparently, we're not going to need storage after June or July or so it's going to be a non-issue those tanks are going to be empty. I'm not buying that story. So I do see a curve steepener trade that is-- I actually just bought a bunch of spreads short June, long December. Just thinking that at that point there was backwardation in that segment of the curve I don't think that's going to stay in backwardation I think by the time June gets here we're going to be looking at contango again.So that's one trade that I see the other one I'm kind of waiting for and I’m lining up quite a few dominoes here is I think that Trump is going to get tough with ISIS very quickly after entering office and I wouldn't be surprised if there's some kind of ultimatum, ISIS knock it off or else, and I think there's so much hysteria right now politically there's so many people with such polarized viewpoints that you could easily see a an overreaction, a massive upward spike in oil prices because a lot of paranoid people are convinced that Donald Trump is going to launch nuclear weapons on ISIS or something. I don't think that'll actually happen. If there was a $25 up spike in oil prices from here I would look at that as a very very ripe shorting opportunity because I don't think prices can go $25 higher and stay there because the shale revolution will be restarted, the bakken will be relaunched and those prices will come back down. So I don't want to bet on the up spike I'm not convinced it will happen if it does happen I'll definitely bet on the mean reversion. Frankly that's all I can really see at this point for trades.

Oil prices rise as OPEC output cuts drain stocks | Reuters: Oil prices edged higher on Tuesday ahead of weekly U.S. inventory data on evidence the global market is tightening as lower production by OPEC and other exporters drains stocks. Increased drilling in the United States, however, could keep a lid on prices. Brent LCOc1 futures gained 21 cents, or 0.4 percent, to settle at $55.44 a barrel, while U.S. West Texas Intermediate CLc1 gained 43 cents or 0.8 percent, to $53.18 per barrel. That put WTI up for a fourth day in a row, its longest winning streak since the end of December. Post settlement, prices pared gains after weekly inventory data from The American Petroleum Institute (API) showed U.S. crude, gasoline and diesel stocks all rose last week. [API/S] The Energy Information Administration (EIA) will report its data at 10:30 a.m. EST (1530 GMT) on Wednesday. Ministers from the Organization of the Petroleum Exporting Countries (OPEC) and big producers outside the group said on Sunday that of the almost 1.8 million barrels per day (bpd) they had agreed to remove from the market starting on Jan. 1, 1.5 million bpd had already been cut. Saudi Arabia's oil output is likely to drop to around 9.9 million bpd in January, according to industry sources and shipping data. The kingdom said it pumped 10.47 million bpd in December. "The comments out of OPEC are the primary reasons for the price increase on Tuesday. That and recent weakness in the dollar, which is actually masking some serious weakness in oil," said Phil Davis, managing partner at PSW Investments in Woodland Park, New Jersey. The U.S. dollar .DXY settled at a seven-week low against a basket of currencies on Monday, but was up nearly 0.15 percent Tuesday afternoon. A weaker greenback makes dollar-denominated crude less expensive for users of other currencies.

Markets Buy The OPEC Cuts, But Fear U.S. Supply | OilPrice.com: Oil prices remain flat as markets see the tremendous rig count rise in the U.S. as a strong cap on a noteworthy oil price recovery.The U.S. rig count skyrocketed last week by 35 (29 oil rigs and 6 gas rigs), the largest weekly gain in years. The news was bearish for crude oil prices as it is a sign that shale drilling continues to accelerate. Iraq agreed to cut 210,000 bpd from its production levels as part of the OPEC deal, but one factor that made the commitment tricky was that much of its production comes from private international oil companies (IOCs). On Monday, Iraq’s oil minister said that the IOCs are complying with the cuts. "We are in collaboration with IOCs to cut from their part," Jabar al-Luaibi told Reuters on the sidelines of a conference. "We are in agreement with most IOCs, not all of them, that they will be in line with us. This is going well." He added that oil prices are rising because of the deal. "It is heading toward $60 now. We hope it will get to the level of $60 and $60-$65 will be reachable." Saudi Arabia says OPEC has already cut 1.5 mb/d. Saudi energy minister Khalid al-Falih said that OPEC and non-OPEC countries have already complied with 1.5 mb/d in cuts, an extraordinary development if true, but the claim is so far unverified. The statement is very bullish for oil prices, but the sharp increase in the U.S. rig count prevented any substantial price gain to start off the week.  Gazprom considers $6 billion asset sales. The Russian gas giant is considering asset sales, along with freezing dividends and higher levels of borrowing in order to meet its – arguably overstretched – spending levels on new pipelines, Bloomberg reports.  Russia surpassed Saudi Arabia to become China’s largest oil supplier, offering more flexible contracts than the fixed, long-term offerings from Saudi Arabia. Russia will likely hold onto that spot as it has export expansions in the works. Meanwhile, Saudi Arabia is cutting back as part of the OPEC deal, so will struggle to grow market share in China.

WTI Slides After Bigger Than Expected Builds Across The Oil Complex -- After two weeks of large crude and gasoline builds, API reported bigger than expected builds in crude, gasoline, and distillates (and smaller than expected draw in Cushing) which sent WTI prices tumbing, crossing back below the $53 Maginot Line once again. API

  • Crude +2.93mm (+2.5mm exp)
  • Cushing -145k (-500k exp)
  • Gasoline +4.85mm
  • Distillates +1.95mm

The 3rd weekly build in crude in a row and 4th large gasoline build in a row along with a smaller than expected draw at Cushing... And this comes on the heels of the biggest rise in rig counts in 3 years and surge in production... And after a day dominated by Iraq production cuts, border tax implications, and US/Canada pipeline discussions, the inventory reaction in WTI was an immediate drop to a $52 handle...

Is Libya A Bigger Threat To Oil Prices Than U.S. Shale? - Despite some suggestions that oil prices will level off at around $60 in 2017, since the initial surge of the OPEC production deal prices have barely nudged above $53. Over the long-term, outlooks are more bearish than bullish, and a major reason for that is the strong likelihood of increased production in three places: Libya, Nigeria and Iran. All three countries were effectively exempt from the OPEC production cuts, for various reasons. Iran has agreed to keep its production level below 4 million bpd, allowing it to add about 90,000 bpd to its production level. Nigeria has suffered significant cuts to production over the last year, chiefly due to the activities of militants in the Niger River Delta. Libya has been torn apart by civil war and a fight between its recognized government and separatists in its eastern regions, with the country’s rich oil fields and refineries the major prize in frequent skirmishes. Cuts from OPEC members totaling 1.5 million bpd, together with non-OPEC cuts of nearly 600,000 bpd, have already pushed prices above the their threshold in 2016 of $50, but there’s strong evidence that the initial market impact of the OPEC deal is on the verge of playing itself out. Over the next year, activity in these three countries could continue to exert downward pressure on prices. Libya succeeded in bringing the bulk of its oil production and export capacity back on line in Fall 2016. Between September 2016 and January 2017, Libyan production climbed from 300,000 bpd to nearly 700,000 bpd, a three-year high according to the National Oil Company (NOC). The increase came after military forces succeeded in retaking key installations in the east of the country, where separatist sentiment is strongest. The government has announced plans to increase production to at least 1 million bpd by the end of the year. These plans were delayed this week by an electrical failure at the Sarir oilfield, which cut 60,000 bpd in production. This will likely be a short-term outage, and only days before, a spokesman from Libya’s internally recognized Government of National Accord (GNA)boasted that the country’s oil production had already exceeded 750,000 bpd.

RBOB Plunges On Massive Inventory Build, Crude Slides As US Production Hits 9-Month Highs Following big recent builds and API's report overnight, oil held below the $53 level before DOE data confirmed the builds in crude and gasoline were even larger than API. Cushing saw a smaller than expected draw and Distillates an unexpected build. This is the 5th weekly crude build in the last six weeks and crude production also rose once again to its highest since April 2016.  DOE:

  • Crude  +2.84mm (+2.5mm exp)
  • Cushing  -284k (-400k exp)
  • Gasoline +5.796mm (+1mm exp)
  • Distillates +76k (-1mm exp)

3rd weekly build in crude in a row (5th in last 6 weeks) and 4th major build in gasoline stocks... As Bloomberg notes, those gasoline numbers are probably the biggest negative from this week's report.The stockpile has risen for 9 of the last 11 weeks and inventories are building in an already over-supplied market. Gasoline days of supply has jumped to 28.8 versus 27.1 a week ago. That inventory overhang just isn't going away. Crude oil inventories are 132 million barrels, or 37%, above the 5-year average level for the time of year.

Oil Prices Slip On Bearish Inventory Data - The Energy Information Administration reported a 2.8-million-barrel build in U.S. commercial oil inventories, a day after the American Petroleum Institute estimated the inventories had expanded by 2.93 million barrels, pressuring benchmark prices.At 488 million barrels, commercial inventories are within seasonal limits, though near the upper end. This is some improvement on summer 2016, when inventories were consistently above the maximum for the season. The EIA does not provide reference data for average seasonal limits.Oil rig additions are continuing across the shale patch, with last week seeing the largest seven-day increase in years, by 35 rigs, suggesting local output will only continue to grow, despite struggling oil prices. The EIA said in its report for the week to January 20 that gasoline inventories rose by a hefty 6.8 million barrels last week, with average daily production at 8.8 million barrels. This was slightly under the previous week’s figure, which was 9 million bpd. Refineries operated at 88.3 percent of capacity, also producing 4.6 million barrels of distillate daily, a bit down from the previous week’s 4.7 million bpd. Imports, according to the EIA, averaged 7.8 million barrels daily, down from the 8.4 million barrels reported for the week to January 13. Last week saw several news and analyst reports that strongly suggest that the U.S. shale oil industry is back in growth mode, inevitably fueling doubts about the global oversupply situation.  These doubts were somewhat quenched by a recent announcement from the OPEC-Russia camp that said it was setting up a special committee to make sure all signatories to the production cut deal keep their end of the bargain, but this wasn’t enough to prop up prices or at least make them more resilient to the weekly inventory reports coming from the API and EIA, which according to some commentators, are irrelevant to actual demand and supply in the world’s biggest crude oil consumer..

Re-Balancing Crude Oil Supply/Demand, Part 2, Definitions -- January 25, 2017 --I will argue that we won't see the full effects of re-balancing crude oil supply/demand until well after 2020.  I define the full effects of re-balancing crude oil supply/demand if the following occur:

  • relative spike in price due to real or perceived global "shortage" of oil ("spike" -- price of oil clearly moving out of its trading range in a relative short period of time  -- in hours, or days, not weeks/months; "spike" -- disorderly rise in price of oil)
  • a real or perceived discussion in mainstream media that a pending global "shortage" of oil appears to be imminent (within six to twelve months)
  • strange bedfellows (US, Saudi Arabia, Russia, China) all agree oil production needs to be significantly increased sooner than later to prevent global recession or rising global tensions
The criteria might be revised. The point is that I am not concerned about a "shortage" of crude oil until well after 2020, if ever (in my investing lifetime).
However, there are many who suggest I am wrong. Some feel that we will start to see a re-balancing of crude oil supple/demand: Two links that suggest I am wrong:
From World Oil: Asia grabs record North Sea crude oil as OPEC cuts supply. Data points:
  • "Asia's oil refineries are turning to the North Sea for crude supplies like never before"
  • crude exports to Asia from the North Sea are poised to reach a record 12 million bbls in January (Bloomberg)
  • if all the oil sailing from Norway and the UK continues to flow as planned, about two-fifths of January supply underpinning the Brent crude benchmark will go to Asia
From Barron's Asia: Bernstein Research sees substantial oil deficit in 2017 after OPEC deal. Data points:
  • OPEC cut: a "realistic target" for Brent crude is $60/bbl in 2017; $70 in 2018
  • Once cuts are implemented (Jan-17), oil markets will shift from surplus into deficit. Given the cuts in production announced by OPEC, we expect that markets will move into a 0.5MMbl/d deficit in 1H17. By the second half of 2017, the deficit could be substantial with a supply deficit of over 1MMbls/d.

Oil jumps to a nearly 3-week high as output cuts take hold - Oil futures on Thursday closed at their highest finish in almost three weeks, as traders showed growing confidence that major oil producers have been cutting back output as promised. A rise in U.S. stocks, with the Dow Jones Industrial Average at a record level, also fed expectations for higher crude demand, helping to offset concerns surrounding a report released Wednesday that revealed a third-consecutive weekly climb in domestic crude inventories. Natural-gas futures, meanwhile, failed to log a year-to-date high at settlement, but prices extended their gains to a fourth-straight session after a weekly report showed U.S. supplies of the fuel fell as expected. March West Texas Intermediate crude rose $1.03, or 2%, to settle at $53.78 a barrel on the New York Mercantile Exchange—the highest settlement since Jan. 6, FactSet data show. Brent crude for March delivery added $1.16, or 2.1%, to $56.24 a barrel. Some traders assert that “the bearish U.S. inventory data for last week that didn’t kill the market on Wednesday only makes it stronger,” said Tim Evans, energy analyst at Citi Futures, in a note Thursday.

BP warns of price pressures from long-term oil glut -- The world is facing a long-term oil glut as producers scramble to exploit reserves before fossil fuel demand goes into decline, according to a BP assessment that suggests that oil companies should brace for prolonged pressure from low prices. The UK oil and gas group said there was twice as much technically recoverable oil available as the world is expected to need between now and 2050, making it likely that some oil reserves will never be extracted. The surplus should spur increasing competition between companies and producer nations to ensure their assets were not left “stranded” as demand gradually shifts from oil to cleaner forms of energy. The result is likely to be “quite significant pressures to dampen long-run prices”, according to Spencer Dale, BP’s chief economist. His comments, in a presentation of BP’s annual energy outlook, provide a counter point to the optimism that has returned to the oil market since the Opec production cartel struck a deal last month with some non-Opec nations to curb output. The supply cut, the first by Opec and non-Opec nations for 16 years, has helped stabilise crude prices above $50 per barrel after a two-year downturn. Mr Dale declined to provide detailed predictions on pricing. But his forecast raised doubts about the ability of producer nations to maintain market discipline in the long term and suggested that the $100-per-barrel prices reached before the 2014 crash are unlikely to return. “Many low-cost producers have rationed supply with a view that if they do not produce a barrel today they can produce a barrel tomorrow,” Mr Dale said.

PetroChina expects oil price 'recovery' in 2017 amid market balance - PetroChina, China's biggest listed oil company by assets, expected the supply and demand for global oil market would gradually become balanced in 2017 and international oil prices would "recover," the company said late Wednesday in a profits warning for the 2016 annual result. The company said its net profit attributable to equity holders for the year of 2016 was estimated to decrease by 70% to 80% as compared with the Yuan 35.65 billion ($5.18 billion) reported in 2015. PetroChina attributed the deep drop to the substantial decrease in oil prices in 2016 due to fundamental oversupply. Meanwhile, the price of domestic natural gas also declined drastically from 2015. PetroChina is expected to release its annual results in March.

OilPrice Intelligence Report: Oil Prices Stuck In The Shale Band: Oil prices are set to close out the week slightly up after a bumpy ride, seesawing on the usual headlines regarding OPEC compliance and U.S. production figures, plus some influence from currency movements. Not much has changed in the market over the past week regarding fundamentals, although another week of EIA data continues to indicate rising activity in the U.S. shale patch, with production figures, crude stocks and gasoline stocks all on the rise. Oil production in the U.S., at least according to weekly surveys, is now just slightly below the 9 million barrel per day mark, a level that it has not hit since March of last year. Trump’s border tax? President Trump sent confusing signals on Thursday regarding the proposed 20 percent tariff on Mexican goods. The border tax would have enormous implications for the energy trade between the U.S. and Mexico, a relationship that has grown in recent years, much to the benefit of U.S. exporters. Problems with refineries in Mexico have led to a surge in imports of U.S. refined products. A growing economy has Mexico in need of U.S. natural gas as well. The border tax would disrupt much of this. The White House seemed to back off the plan after a public outcry, but it is unclear what avenue the administration will pursue. President Trump revived the pipeline battles of the Obama administration, pushing Dakota Access towards the finish line and breathing new life into the defunct Keystone XL proposal. His executive orders sought to advance both projects, but it is too early to know what the outcome will be. quickly submitted a new permit application for the Keystone XL project, which the Trump administration has promised will receive an expedited environmental review. But the pipeline landscape in Canada looks different than it did two years ago. The Canadian government approved Kinder Morgan’s  Trans Mountain Expansion and Enbridge’s Line 3 pipelines late last year, which combined would carry more oil than Keystone XL.  Iranian oil tankers are set to dock in Rotterdam next week, the first time the state-owned supertankers have arrived in Europe since sanctions were lifted a year ago. Iran has shipped oil to Europe over the past 12 months, but has done so with independent tanker companies because of residual uncertainty regarding international sanctions and shipping insurance. The latest development could allow Iran to step up its battle for market share in Europe.

US Crude Production Nears 10-Month Highs As Rig Count Soars Most In Over 6 Years (graphs) Following last week's massive 29 rig jump in the US oil rig count (the largest since April 2013), Baker Hughes reports another 15 rig surge to 566 in the last week (with the entire rise dominated by horizontal/Permian rigs). US Crude production continues to track the surging rig count and that is weighing on WTI futures prices (back below $53 once again). From the 316 count lows on May 27th, US oil rigs are up 250 overall (up 15 to 566 this week).. This is the biggest 2-week surge in rig counts since Dec 2011 And US Crude production is tracking the lagged oil rig count... The surge in oil rig counts since May 2016 has been dominated by Permian... Horizontal rigs... And WTI Futures are back below $53...

Movin’ on up! Rig count gains 18 - The Baker Hughes rig count showed another generous gain Friday. After a large jump last week, the number continues to climb. Of the 712 total, 566 are exploring for oil, 145 are exploring for gas, and 1 is labeled miscellaneous. Offshore, the rig count dropped by 3. The Permian Basin continues to stand out, claiming over half of the total gains. Ten new rigs went to the Permian. Texas overall saw 9 new rigs. Here is the breakout of the other gains and losses this week:  Gains: Alaska +1, Louisiana +2, New Mexico +4, North Dakota +1, Oklahoma +5, Texas +9.  Losses: Arkansas –1, Colorado –3 , West Virginia –1.Meanwhile, despite trading lower today, oil still managed to close at $53.20, sticking in line with recent projections by the EIA. BP also released its outlook this week, in which the company expects the energy mix to include a greater amount of renewable sources in the future. However, oil, gas and coal remain the dominant sources of energy, says BP, accounting for more than 75% of energy supplies in 2035 (down from 85% in 2015). Consumption will continue to grow, but BP analysts expect that growth to slow. The growing world economy will require more energy, but consumption is expected to grow less quickly than in the past – at 1.3% per year over the Outlook period (2015-2035) compared with 2.2% per year in 1995-2015.

Large Rig Count Gains Rock Oil Markets - The number of active oil and gas rigs in the United States increased on Friday by 18 for a total of 712 active rigs, according to oilfield services provider Baker Hughes, which is 93 rigs above the rig count a year ago. Last week, the oil and gas rig count was up by 35. As was the case last week, most of this week’s gains were oil rig gains, which were up 15, from 551 last week to 566 this week. The number of active oil rigs in the United States is now 68 more than the same week last year. Gas rigs also saw a modest three-rig increase, from 142 last week to 145 this week, which is 24 above the count for the same week last year. This marks 12 straight increases to the gas rig count. The increase in the number of active rigs comes as OPEC has managed to largely adhere to its agreement to cut production, much to the surprise of many. And while OPEC and non-OPEC producers seem to be well on their way to taking between 1.7 million bpd and 1.8 million bpd worth of production out of the market in an effort to lift prices, rocky oil markets that were in critical distress in early 2016 seem to be reluctant to buy-in.  At 12:23pm was trading down 1.9% at $52.76, with the Brent Crude benchmark trading down 2.12% at $55.05.Drillers are still adding rigs to the Permian basin at record paces. After a 10-rig gain this week alone, the Permian now has 291 oil and gas rigs—109 rigs more than the same week last year. WTI was trading at $52.83 moments after data release, with Brent at $55.11.

Oil: "Another huge week for total US oil rigs" --A few comments from Steven Kopits of Princeton Energy Advisors LLC:

• Another huge week, total US oil rigs up 15 to 566
• Horizontal oil rig counts up +17 to 463
• Widespread gains: Permian, EF, Bakken, Cana Woodford – the shale sector as a whole has turned back on
• Another month of this will torpedo the OPEC deal

'They want the Iraqis to pay for that?': Trump's comments about Iraq's oil are stirring backlash : (AP) — No one knows how seriously to take President Donald Trump's threat to seize Iraq's oil. Doing so would involve extraordinary costs and risk confrontation with America's best ground partner against the Islamic State group, but the president told the CIA this weekend, "Maybe you'll have another chance." The recycled campaign comment is raising concerns about Trump's understanding of the delicate Middle East politics involved in the U.S.-led effort against extremist groups. Trump has said he was opposed to the 2003 invasion that toppled Saddam Hussein's dictatorship. But on the campaign trail and again on Saturday, the day after his inauguration, he suggested the costly and deadly occupation of the country might have been offset somewhat if the United States had taken the country's rich petroleum reserves. "To the victor belong the spoils," Trump told members of the intelligence community, saying he first argued this case for "economic reasons." He said it made sense as a counterterrorism approach to defeating the IS group "because that's where they made their money in the first place." "So we should have kept the oil," he said. "But, OK, maybe you'll have another chance." The statement ignores the precedent of hundreds of years of American history and presidents who have tended to pour money and aid back into countries the United States has fought in major wars.

Iraqi general's tour suggests tough fight ahead in west Mosul | Reuters: Residents of east Mosul held up their children and took selfies with Iraqi counter-terrorism commander Lieutenant General Abdul-Wahab al-Saadi after his men cleared Islamic State fighters from their neighbourhoods. But his tour on Saturday of homes once occupied by the militants was a reminder of the dangers ahead as security forces prepare to expand their offensive against the Sunni militants into west Mosul. Flanked by bodyguards in the Mohandiseen neighbourhood, Saadi got a firsthand view of Islamic State's meticulous planning and reign of terror as he moved from house to house, greeted by locals as a hero. In one home were a set of instructions on how to make bombs. A large bucket was filled with screws that were packed into explosives to kill and maim. Beside the leaflets were a pair of industrial rubber gloves, wires and detonators. Nearby a thick book described how to use Russian machine guns. Militants were also well-versed on how to employ anti-tank missiles. The battle for Mosul, involving 100,000 Iraqi troops, members of the Kurdish security forces and Shi'ite militiamen, is the biggest ground operation in Iraq since the U.S.-led invasion of 2003. Iraqi security forces have retaken most of east Mosul, with the help of U.S.-led coalition airstrikes which flattened rows of buildings in Iraq's second-largest city. The next phase, expected to kick off in a few days, could prove more difficult.

US Intervention in Syria? Not Under Trump: A new coalition of US-based organisations is pushing for a more aggressive US intervention against the Assad regime. But both the war in Syria and politics in the United States have shifted dramatically against this objective.When it was formed last July, the coalition hoped that a Hillary Clinton administration would pick up its proposals for a more forward stance in support of the anti-Assad armed groups. But with Donald Trump in office instead, the supporters of a US war in Syria now have little or no chance of selling the idea.One of the ways the group is adjusting to the new political reality is to package its proposal for deeper US military engagement on behalf of US-supported armed groups as part of a plan to counter al-Qaeda, now calling itself Jabhat Fateh al Sham.  But that rationale depends on a highly distorted presentation of the problematic relations between those supposedly “moderate” groups and al-Qaeda’s Syrian offshoot.   A tell-tale sign of the shift in attitude toward those groups’ mood in Washington is the fact that Ignatius used the past tense in referring to the CIA’s programme of arming the “moderate” groups in Syria in his article last month. The US military leadership was never on board with the policy of relying on those armed groups to advance US interests in Syria in the first place.  It recognised that, despite the serious faults of the Assad regime, the Syrian army was the only Syrian institution committed to resisting both al-Qaeda and Islamic State. It seems likely that the Trump administration will now return to that point as it tries to rebuild a policy from the ashes of the failed policy of the Obama administration.

U.S. Under Trump Won’t Send a Delegation to Syria Talks - WSJ: —The Trump administration has decided against sending a U.S. delegation to Kazakhstan for talks on the war in Syria, despite receiving a formal invitation from the Kazakh government with the backing of Russia and Turkey, the State Department said Saturday. Instead, the U.S. will be represented in Astana only by its ambassador to Kazakhstan. “The United States is committed to a political resolution to the Syrian crisis through a Syrian-owned process, which can bring about a more representative, peaceful, and united Syria,” the State Department said in a statement. “Given our presidential inauguration and the immediate demands of the transition, a delegation from Washington will not be attending the Astana conference.” Russia has seized on the election of Donald Trump to call for greater cooperation between Moscow and Washington to end the Syrian civil war. The Kremlin purposefully excluded former Secretary of State John Kerry from Syria negotiations sponsored by Moscow and Ankara and held at the end of last year. The two countries have sought to take the lead on diplomatic efforts, eclipsing the administration of former President Barack Obama.Russian Foreign Minister Sergei Lavrov and other senior officials, however, have voiced hope that Mr. Trump will be more cooperative in Syria.Iran has publicly voiced opposition to Trump diplomats joining the Astana talks in recent days, suggesting rockier relations between Washington and Tehran in the coming months. Mr. Kerry had been a strong proponent of including Iran, a primary backer of Syrian President Bashar al-Assad, in his efforts to end the Syrian war. Dmitry Peskov, the spokesman for Russian President Vladimir Putin, voiced disappointment on Saturday that Iran wasn’t supportive of the inclusion of an American delegation at Astana. “This is probably the cause of some disagreement between Moscow and Tehran,” Mr. Peskov told the BBC. “It is obvious that without the United States it is impossible to resolve the Syrian issue.”

Russia takes power-broking role as Syria peace talks begin in Astana - Indirect talks between Syrian rebel factions and government representatives have opened in Kazakhstan, as Russia takes on the role of Middle East power broker. The meetings, scheduled to last two days at a luxury hotel in the Kazakh capital, Astana, will focus on how to extend the ceasefire negotiated after the opposition’s crushing military defeat in Aleppo at the hands of the Russian air force and Iranian-backed militias. It had been hoped the talks would lead to a face-to-face meeting between opposition fighters and representatives of Bashar al-Assad’s government. However, rebels said on Monday they had no plans for direct talks.The talks are sponsored by Russia, Turkey and Iran. The US, the EU, Saudi Arabia and the UN are, for the moment, largely marginalised. Russia faces a new set of challenges as it attempts to move from participant in the conflict to peace broker.Leaders of the Syrian opposition delegation, representing as many as 12 factions, claimed on the eve of the Astana talks that Moscow genuinely wanted to move to a neutral stance but was being held back by the Iranian and the Syrian governments. Mohammed Alloush, the leader of the opposition delegation, said the failure of Moscow to put pressure on Iran and the Syrian government to end what the opposition says are widespread violations of the Turkish-Russian brokered ceasefire would be a blow to its influence in Syria.

Foreign powers back Syria truce deal, war erupts among rebels | Reuters: Russia and regional powers Turkey and Iran backed a shaky truce between Syria's warring parties on Tuesday and agreed to monitor its compliance, but on the ground rebels faced continued fighting on two fronts which could undermine the deal. After two days of deliberations in Astana, Kazakhstan's Foreign Minister Kairat Abdrakhmanov said the powers had agreed in a final communique to establish a system "to observe and ensure full compliance with the ceasefire, prevent any provocations and determine all modalities of the ceasefire." While welcoming the text, the Syrian government's chief negotiator Bashar Ja'afari said an offensive against rebels west of Damascus would carry on. Rebels say it is a major violation of the ceasefire agreed on Dec. 30. Opposition negotiator Mohammad Alloush said he had reservations about the text which he said legitimized Iran's "bloodletting" in Syria and did not address the role of Shi'ite militias fighting rebels. In northwest Syria, heavy fighting erupted between the jihadist group Jabhat Fateh al-Sham and Free Syrian Army factions who were represented at the Astana talks. FSA groups are reeling after being driven from Aleppo city last month by government forces and their allies. Any further loss of territory in their main northern stronghold - this time at the hands of jihadist insurgents - could leave them too weak to achieve any meaningful gains from peace negotiations. In Astana, rebel and government delegates held indirect talks for the first time in nine months at a time when Turkey, which backs the rebels, and Russia, which supports Syrian President Bashar al-Assad, want to disentangle themselves from the fighting.

Trump says he will order 'safe zones' for Syria | Reuters: U.S. President Donald Trump said on Wednesday he "will absolutely do safe zones in Syria" for refugees fleeing violence in the war-torn country. Saying Europe had made a tremendous mistake by admitting millions of refugees from Syria and other Middle Eastern trouble spots, Trump told ABC News in an interview: "I don't want that to happen here." "I'll absolutely do safe zones in Syria for the people," he added, without giving details. According to a document seen by Reuters on Wednesday, Trump is expected to order the Pentagon and the State Department in coming days to craft a plan for setting up the “safe zones,” a move that could risk escalation of U.S. military involvement in Syria’s civil war. The draft executive order awaiting Trump's signature signaled the new administration was preparing a step that Trump's predecessor, Barack Obama, long resisted, fearing the potential for being pulled deeper into the bloody conflict and the threat of clashes between U.S. and Russian warplanes over Syria. "The Secretary of State, in conjunction with the Secretary of Defense, is directed within 90 days of the date of this order to produce a plan to provide safe areas in Syria and in the surrounding region in which Syrian nationals displaced from their homeland can await firm settlement, such as repatriation or potential third-country resettlement," the draft order said.

The Syrian People Desperately Want Peace – Rep Tulsi Gabbard - As much of Washington prepared for the inauguration of President Donald Trump, I spent last week on a fact-finding mission in Syria and Lebanon to see and hear directly from the Syrian people. Their lives have been consumed by a horrific war that has killed hundreds of thousands of Syrians and forced millions to flee their homeland in search of peace.It is clear now more than ever: this regime change war does not serve America’s interest, and it certainly isn’t in the interest of the Syrian people. I traveled throughout Damascus and Aleppo, listening to Syrians from different parts of the country. I met with displaced families from the eastern part of Aleppo, Raqqah, Zabadani, Latakia, and the outskirts of Damascus. I met Syrian opposition leaders who led protests in 2011, widows and children of men fighting for the government and widows of those fighting against the government. I met Lebanon’s newly-elected President Aoun and Prime Minister Hariri, U.S. Ambassador to Lebanon Elizabeth Richard, Syrian President Assad, Grand Mufti Hassoun, Archbishop Denys Antoine Chahda of Syrian Catholic Church of Aleppo, Muslim and Christian religious leaders, humanitarian workers, academics, college students, small business owners, and more. Their message to the American people was powerful and consistent: There is no difference between “moderate” rebels and al-Qaeda (al-Nusra) or ISIS – they are all the same. This is a war between terrorists under the command of groups like ISIS and al-Qaeda and the Syrian government. They cry out for the U.S. and other countries to stop supporting those who are destroying Syria and her people. I heard this message over and over again from those who have suffered and survived unspeakable horrors. They asked that I share their voice with the world; frustrated voices which have not been heard due to the false, one-sided biased reports pushing a narrative that supports this regime change war at the expense of Syrian lives.I heard testimony about how peaceful protests against the government that began in 2011 were quickly overtaken by Wahhabi jihadist groups like al-Qaeda (al-Nusra) who were funded and supported by Saudi Arabia, Turkey, Qatar, the United States, and others. They exploited the peaceful protesters, occupied their communities, and killed and tortured Syrians who would not cooperate with them in their fight to overthrow the government.

Rep. Tulsi Gabbard says she met with Assad on her secret trip to Syria - A high-profile Democratic congresswoman from Hawaii said she met with Syrian President Bashar al-Assad during a secret "fact-finding" trip she took to the country recently. Rep. Tulsi Gabbard, of Hawaii, told CNN on Wednesday that when she went to the country earlier this month she initially hadn't planned on meeting with Assad. But when CNN's Jake Tapper asked Gabbard if she met with the authoritarian ruler, she answered, "I did." "My reason for going to visit Syria was really because of the suffering of the Syrian people that has been weighing heavily on my heart," she said. "I wanted to see if there was in some small way that I could express the love and the 'aloha' and the care that the American people have for the people of Syria and to see firsthand what was happening there." Gabbard released a statement shortly after the CNN interview aired. "My visit to Syria has made it abundantly clear: Our counterproductive regime change war does not serve America's interest, and it certainly isn't in the interest of the Syrian people," she said in the statement. Gabbard was in Syria for four days. The nonprofit Arab American Community Center for Economic and Social Services (AACCESS)–Ohio sponsored the trip, according to Gabbard's statement. Obama administration officials have repeatedly insisted that Assad, who has been accused of massacring his own people, must step down. But the US hasn't directly intervened to bring an end to his brutal rule. Gabbard said in her statement that she returned to the US "with even greater resolve to end our illegal war to overthrow the Syrian government."

Gabbard meeting with Assad draws disgust from fellow lawmakers --Democrats and Republicans appear equally rattled at Rep. Tulsi Gabbard’s decision to meet this month with Syrian dictator Bashar al-Assad. “There's a pretty unanimous feeling of shock and disgust,” said a Democratic aide who works on national security issues. “Everybody I've talked to on both sides of the aisle, I think people are just stunned.” Republicans appeared more willing than Democrats to go on the record in ripping Gabbard (D-Hawaii), an Iraq War veteran and a prominent member of both the House Armed Services and Foreign Affairs committees.“An elected official, a representative of the United States, went on a secret trip to meet with the brutal dictator who had murdered nearly half a million of his own people –– it's reprehensible and cannot be justified,” Rep. Adam Kinzinger (R-Ill.), another Iraq War veteran, said Thursday in an email. “The actions of Congresswoman Gabbard have put our nation's reputation and foreign policy concerns at high risk and I couldn't be more disgusted.”Rep. Ed Royce (R-Calif.), chairman of the Foreign Affairs Committee, is also seething. “Assad has exterminated hundreds of thousands of Syrians,” a committee spokesman said Thursday. “This trip was not authorized by the committee, and it was just wrong.”Rep. Eliot Engel (N.Y.), the senior Democrat on the Foreign Affairs panel, offered a similar rebuke of Assad in a statement that did not explicitly criticize Gabbard or her decision to meet with Assad. "Mr. Engel's position on Assad is well established: he's a war criminal and a murderer, he has supported and benefitted from terrorism, he has close ties to Russia, and he cannot have a role in Syria's future," spokesman Tim Mulvey said in an email.

Johnson accepts Assad can run for re-election - Boris Johnson has conceded that President Assad should be allowed to run for re-election in Syria, a reversal of British foreign policy on the eve of the prime minister’s visit to Washington. The foreign secretary said Britain would have to “think afresh” about how to handle the Syrian crisis in the light of Russian intervention and Donald Trump’s election, abandoning its longstanding position that Assad must step down. Mr Johnson said that he, like Mr Trump, was open to working with Russia to defeat so-called Islamic State, another sharp policy reversal. “It is our view that Bashar al-Assad should go,” he told the Lords international relations select committee. “It’s been our longstanding position. But we are open-minded about how that happens and the timescale. I have to be realistic about how the landscape has changed. It may be that we will have to think afresh about how we handle this. The old policy, I am afraid to say, does not command much confidence.” Mr Johnson said that he still hoped for a “democratic resolution” in Syria which could include a UN-supervised election allowing the country’s displaced millions, mostly Assad opponents, to vote. Asked if that meant allowing Assad to contest the vote, he replied: “Yes.” He recalled a visit to Baghdad after Saddam Hussein was deposed when his guide told him: “It is better sometimes to have a tyrant than not to have a ruler at all.” Britain’s position since the start of the Syrian uprising has been that Assad must go. Before becoming foreign secretary, Mr Johnson praised Russia and Assad for retaking the ancient city of Palmyra from Isis, and suggested Britain join forces with them against the jihadists. Whitehall sources said he changed his mind as early as his first intelligence briefing in the foreign office, becoming one of Assad and Putin’s most vocal critics, accusing them of war crimes against Syrian civilians.

Iran Caught Smuggling Anti-Tank Missile Systems Through Ukraine Under "False Manifests" --According to new reports just surfacing today, last Thursday, the day before Trump was set to take his oath of office, Iran was caught by the State Border Guard Service of Ukraine attempting to smuggle anti-tank missile systems through Kiev's Zulyany airport under "false manifests."  According to the Washington Free Beacon, Ukrainian authorities, upon inspecting the cargo of a plane bound for Iran last week, discovered multiple boxes filled with components for a Fagot anti-tank guided missile system.Ukrainian authorities have confirmed that they seized a shipment of missile system components bound for Iran, according to official statements that could put the Islamic Republic in violation of international bans on such behavior.The State Border Guard Service of Ukraine, or DPSU, announced late last week that it had seized at least 17 boxes filled with missile components bound for Iran, according to IHS Jane’s.“The DPSU said that, during an inspection of the aircraft on 19 January, its personnel had found 17 boxes with no accompanying documents, which the aircraft’s crew said contained an aircraft repair kit,” according to the report. “Three boxes contained components that were believed to be for a Fagot anti-tank guided missile system, the rest contained aircraft parts.”Days after this finding, the DPSU said that it had confirmed the missile components were destined for Iran’s Fagot system.

Chinese Warships In Persian Gulf For First Time Since 2010 --In a deployment not seen in seven years, three Chinese warships including a guided-missile destroyer warship embarked on a tour of Gulf Arab states for the first time since 2010 in what al Arabiya has called Beijing's "desire to play a bigger role on the global stage."The three Chinese vessels arrived in Qatar’s capital Doha on Saturday following a visit to the Saudi port city of Jeddah, according to Chinese state broadcaster CCTV.  While China’s navy regularly tours the world and its ships patrol off the coasts of Yemen and Somalia as part of international anti-piracy operations, such visits to Gulf Arab states, where both the U.S. and Britain have naval bases, are less common. In 2014, China's navy visited Iran for the first time to take part in joint naval exercises with Saudi Arabia’s regional arch-rival.Beijing, which relies on the Middle East for oil, has tended to leave Middle Eastern diplomacy to the other four permanent members of the U.N. Security Council - the United States, Britain, France and Russia. As reported yesterday, for the first time in history, Russia surpassed Saudi Arabia as China's primary source of oil imports.