oil contracts once again traded in a narrow price range this week, sliding by 90 cents a barrel to $52.93 a barrel on Monday, and then gradually clawing more than half of that drop back to end the week at $53.40 a barrel, down less than 1% for the week...oil traders seem to believe that the OPEC production cuts will eventually dent the supply glut, which has kept prices from falling below current levels, while US crude inventories continue to pile up, holding back any price increases...rather than discussing how prices moved, we'll just include a current graph so you can see for yourself...
the graph above shows the daily closing prices per barrel of oil over the past 3 months for the March contract for the US benchmark oil, West Texas Intermediate (WTI), as stored or to be delivered to the Cushing Oklahoma storage depot...we can see how oil prices jumped 14% during the last week of November, after the OPEC deal was announced, inched up a bit from there to approach $55 a barrel in December, and then slipped back to the $52 to $54 a barrel range over the past 6 weeks...this is a far cry from the 5% a day price changes we saw over most of 2015 and 2016, and we should figure that kind of volatility will return once prices break out of this narrow range...
next we'll include a similar graph of natural gas prices, so you can all see what's happened to them as our winter has turned warmer than expected:
the above graph shows the daily closing contract price over the last 3 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in March at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the US...as you can see, natural gas contract quotes have been sliding since Christmas, at a time when a cold snap brought on the largest December drawdown of natural gas supplies in 6 years...at that time, the then current January contract hit a 2 year high of $3.93 per mmBTU, which ultimately led to a nominal increase in drilling for gas early this year...historically, however, natural gas drilling activity has been on a long downtrend from the 1,606 natural rigs that were deployed on August 29th, 2008, only increasing briefly in late 2009 and early 2010 and again in 2014 in the months after natural gas prices briefly rose above $4.00 per mmBTU, but ultimately sliding to just 82 rigs on June 3rd, 2016 after gas price had earlier slipped below $2 per mmBTU...so although this week has seen another small rig increase, that's probably drilling that was contracted for earlier in the year...absent such contracts, we should expect gas drilling to slow down again until such time as natural gas prices rise appreciably from these levels...
OPEC's February report
Monday of this past week saw the release of the OPEC Monthly Oil Market Report for February (covering January data), so we'll look at that first, because it's the production data in this report, not the IEA estimates that we looked at last week, that will determine, by OPEC's own standards, whether their members have complied with the agreed to production cuts or not...this first table is from page 59 of the OPEC pdf and it shows oil production in thousands of barrels per day for each of the OPEC members over the recent years, quarters and months as the column headings are labeled...for all their official production measurements, OPEC uses "secondary sources", such as analyst's reports from satellites and shipping data, as an impartial adjudicator of their output quotas and production cuts, to resolve any potential disputes that might arise if each member reported their own figures...this is also the data we typically see quoted in the media, other than in independent analysis by energy research divisions of organizations such as Platts and Reuters that'll have their own numbers..
here we see that the official data shows that OPEC production was down by 890,200 barrels per day in January, from a December oil production total that was revised 56,000 barrels per day lower from what was reported last month...(for your reference, here is the December table before those revisions)...recall that OPEC committed to reducing their production by 1.2 million barrels per day, so these initial figures show they're not there yet....these figures are also somewhat less than the 1.04 million barrels per day that the IEA said that OPEC had cut last week, but IEA numbers were higher for December, so their total of 32.06 million barrels per day in January production is closer to OPEC's figure...the IEA showed that the Saudis had cut 560,000 barrels per day to end January at 9.98 million barrels per day, whereas these official numbers indicate the Saudis cut 496,000 barrels per day to end at 9.946 million barrels per day...the IEA also showed smaller cuts for Iraq and the Emirates, two major producers who have only cut half what they promised, than OPEC shows, so these figures would seem to indicate that the cooperation with the cuts is more evenly spread than IEA figures had indicated, even if it was less overall...
the next table, also from page 59 of the OPEC pdf, shows the oil production that each of the members reported to OPEC (for those that did report)...this data is considered suspect because of the many incentives OPEC members have to fudge their data, and is rarely reported by the media, but i'm including it as a curiosity, because OPEC members are quite obviously reporting that they've cut their output more than the official figures show...what stands out below is that the Saudis claimed to have cut 717,600 barrels per day, while the official totals “from secondary sources" above show they've actually only cut 496,200 barrels per day....that's important because Saudi claims are usually reported by the media, and often move the price of oil...
next, we'll include a graph of the OPEC data for all members included in this report, so we can see how this month's production stacks up next to historical figures...
the above graph, taken from the 'OPEC oil charts" page at the Peak Oil Barrel blog, shows total oil production, in thousands of barrels per day, for the 13 members of OPEC, for the period from January 2005 to January 2017...obviously, we can see that OPEC production is down quite a bit over the past two months from their record production of 33,374,000 million barrels per day in November, in their run-up before the agreement was reached, but note that their current production is still more than what they were producing last April and May of 2016, and every other month before that, including last January, when they produced 31,628,000 barrels per day (a figure i arrived at by subtracting Indonesian production from the 14 member total they reported last year.pdf) ...that means that despite all of the hullabaloo they've made over cutting production, their January 2017 production of 32,139,000 barrels per day is still 1.6% more oil than they were producing in January 2016...
this next graphic we'll include, as the heading tells us, shows us both OPEC and world oil production monthly on the same graph, from February 2015 to January 2017, and it also comes from page 59 of the February OPEC Monthly Oil Market Report...the pale blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, and that's shown on the right scale...global oil production fell to 95.82 million barrels per day in January, and OPEC production thus represented 33.5% of what was produced globally, a decrease from 34.0% in December...but even with the two months of cuts we can obviously see here, global oil supply is still in surplus, as the table after this graph will show..
the table below comes from page 34 of the February OPEC Monthly Oil Market Report, and it shows oil demand in millions of barrels per day for 2016 in the first column, and OPEC's forecast for oil demand by region and globally over 2017 over the rest of the table...while the changes by region from quarter to quarter may be interesting, the reason we're including this table here today is for the forecast for oil demand in the first quarter of 2017, which is shown on the "Total world" line of the second column...projections are that during the first three months of this year, all oil consuming areas of the globe will use 94.84 million barrels of oil per day, up from the 94.62 millions of barrels of oil per day they used in 2016...but as OPEC showed us in the supply section of this report and the summary supply graph above, even with the production cuts, the world's oil producers were still producing 95.82 million barrels per day during January...that means that even after all the production cuts have take place, there was still a surplus of around a million barrels per day in global oil production...
The Latest Oil Stats from the EIA
this week's oil data for the week ending February 10th from the US Energy Information Administration showed that our imports of crude oil fell back from last week's record but remained elevated, while our refining of that oil fell for the 5th week in a row to the second lowest rate in a year, and as a result there was another large surplus of crude added to our oil supplies, which were thus boosted to an all time high...our imports of crude oil fell by an average of 881,000 barrels per day to an average of 8,491,000 barrels per day during the week, while at the same time our exports of crude oil rose by 459,000 barrels per day to an average of 1,026,000 barrels per day, which meant that our effective imports netted out to 7,465,000 barrels per day for the week, 1,340,000 barrels per day less than last week...at the same time, our crude oil production slipped by 1,000 barrels per day to an average of 8,977,000 barrels per day, which means which means that our daily supply of oil, from net imports and from wells, totaled an average of 16,442,000 barrels per day during the week...
meanwhile, refineries reportedly used 15,458,000 barrels of crude per day during the week, 435,000 barrels per day less than during the prior week, while at the same time, 1,361,000 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 377,000 more barrels of oil per day than were accounted for by our net oil imports and oil well production…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom 377,000 barrel per day number onto line 13 of the petroleum balance sheet, 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.", which means they got that number by backing into it, using the same method we just illustrated.....
the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports inched up to an average of 8.491 million barrels per day, 9.9% higher than the same four-week period last year...we should also note that our crude oil exports of 1,026,000 barrels per day is a new record for oil exports, beating the prior record set in the first year of this year by 299,000 barrels per day...so you'll be sure to see that, we'll include a self explanatory.graph of that jump in our exports from the EIA's crude oil exports page, directly below.....
meanwhile, this week's 1,000 barrel per day oil production decrease included a 6,000 barrel per day increase in oil production in the lower 48 states, offset by a 7,000 barrel per day decrease in output from Alaska...our crude oil production for the week ending February 10th was 1.7% lower than the 9,135,000 barrels of crude that we produced during the week ending February 12th of last year, while it remained 6.6% below our June 5th 2015 record oil production of 9,610,000 barrels per day...
US refineries were operating at 85.4% of their capacity in using those 15,458,000 barrels of crude per day, down from 87.7% of capacity the prior week, and down from the year high of 93.6% of capacity just five weeks earlier, when they were processing 17,107,000 barrels of crude per day....their processing of oil is also down by 2.5% from the 15,848,000 barrels of crude that were being refined during the week ending February 12th, 2016, when refineries were operating at 88.3% of capacity....with the refinery slowdown, gasoline production from our refineries fell by 854,000 barrels per day to 8,950,000 barrels per day during the week ending February 10th, which was 7.5% less than the 9,675,000 barrels per day of gasoline that were being produced during the week ending February 12th a year ago...at the same time, refineries' production of distillate fuels (diesel fuel and heat oil) fell by 271,000 barrels per day to 4,531,000 barrels per day, which was 2.8% less than the 4,663,000 barrels per day of distillates that were being produced during the week ending February 12th last year, also during a mild winter...
however, even with the big drop in our gasoline production, the EIA reported that our gasoline inventories rose by 2,846,000 barrels to a record 259,063,000 barrels as of February 10th, in the sixth increase in our gasoline supplies in 7 weeks...that happened as our domestic consumption of gasoline fell by 508,000 barrels per day to 8,433,000 barrels per day, again well below normal for this time of year...in addition, our gasoline exports, which have often served to reduce our excess supplies, fell by 447,000 barrels per day to 555,000 barrels per day, while our imports of gasoline fell by 207,000 barrels per day to 604,000 barrels per day, making for the first week our gasoline imports exceeded our gasoline exports since the week ending October 14th...since this week's gasoline supplies are at an all time time high, we'll include a graph of their recent history here...
the above graph comes from the twitter feed of John Kemp, who is an energy analyst and columnist with Reuters...it shows US gasoline stores in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our supplies, or the middle of the daily range, traced by the blue dashes over each day of the year...the graph also shows our 2016 gasoline inventories traced weekly in a yellow line, with our year to date 2017 gasoline supplies represented in red...thus we can clearly see that for almost all of 2016, our gasoline supplies were at a seasonal high for every given date, and so far in 2017, our weekly totals have broke those year old 2016 records...
and that's what happened this week...last year, on February 12th, our gasoline supplies rose to a new record of 258,693,000 barrels, beating the February 13th 2015 record of 243,132,000 barrels by 6.4%...this week's 259,063,000 barrels thus topped last year's record by just a small fraction, but it is still a new record nonetheless...recent years have shown that gasoline supplies usually start to fall after the 2nd week of February, (which is clearly visible on the graph), so that may very well happen again this year...still, our gasoline stores are now up by nearly 32 million barrels since Christmas, and on track to continue setting seasonal records higher than those set last year..
meanwhile, the big drop in distillates production served to reduce our supplies of distillate fuels by 689,000 barrels to 170,057,000 barrels by February 10th, as the amount of distillates supplied to US markets, a proxy for our consumption, fell by 57,000 barrels per day to 3,853,000 barrels per day, and as our exports of distillates fell by 105,000 barrels per day to 992,000 barrels per day...even so, our distillate inventories are still 4.7% higher than the distillate inventories of 162,375,000 barrels of February 12th last year, and 33.5% above the distillate inventories of 127,409,000 barrels of February 13th, 2015…
lastly, the ongoing elevated level of our oil imports, combined with slack refining, led to another large addition to our weekly inventories of crude oil, which rose by 9,527,000 barrels to 518,119,000 barrels by February 10th, thus topping the previous record high oil supply of 512,095,000 barrels set on April 29th 2016...so another record high calls for yet another graph...
like the previous graph, this graph also comes from the twitter feed of John Kemp, who seems to post several graphs daily, along with other energy news...also like the prior graph, this one shows US oil supplies in thousands of barrels by "day of the year" for the past ten years, with the past ten year range of our supplies on any given date shown in the light blue shaded area, and the median of our oil supplies for any day traced by the blue dashes over each day of the year...this graph also shows our 2016 oil inventories traced weekly in yellow, with our year to date 2017 oil supplies in red...the difference here, as we saw last week, is that our 2016 oil supplies were not just fractionally higher than those of 2015, they averaged more than 10% higher, while 2015 oil supplies ran as much as a third higher than those of 2014...thus the 2017 oil inventories are that much higher again, and we've now set a new record for oil supplies on the 41st day of the year, which unlike gasoline supplies, tend to continue to rise seasonally until at least the 120th day of each year (when refining for summer gasoline supplies picks up)....thus, our oil supplies on February 10th were 9.6% higher than the then February record 472,823,000 barrels that we had stored on February 12th of 2016, 32.3% higher than the previous mid-February record of 391,516,000 barrels in storage on February 13th of 2015, and 56.6% higher than the closer to normal 330,956,000 barrels of oil that we had stored on February 12th of 2014...
This Week's Rig Count
US drilling activity increased for the 15th time in 16 weeks during the week ending February 17th, with the five week increase of 92 drilling rigs still the largest 5 week increase since January 2010...Baker Hughes reported that the total count of active rotary rigs running in the US increased by 10 rigs to 751 rigs in the week ending on this Friday, which was 237 more rigs than the 514 rigs that were deployed as of the February 19th report in 2016, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...
the number of rigs drilling for oil rose by 6 rigs to 597 rigs this week, which was up from the 413 oil directed rigs that were in use a year ago, but down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...meanwhile, the count of drilling rigs targeting natural gas formations rose by 4 rigs to 153 rigs this week, which was also up from the 101 natural gas rigs that were drilling a year ago, but down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...there also remained a single rig that was classified as miscellaneous, which is marked as a 1 rig increase from a year ago, when there were no such miscellaneous rigs at work...
four drilling platforms offshore from Louisiana in the Gulf of Mexico were shut down this week, while one was added offshore from Texas, which reduced the net Gulf of Mexico rig count down to 17, which was also down from the 25 rigs working in the Gulf a year ago…the total US offshore count for the week was thus cut back to 18 rigs, as a drilling operation is still going on in the offshore waters off Alaska.....
the number of horizontal drilling rigs working in the US increased by 7 rigs to 614 rigs this week, which is now up by 184 rigs from the 413 horizontal rigs that were in use in the US on February 19th last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...in addition, 6 directional rigs were added during the week, bringing the total directional rig count up to 72, up from the 66 directional rigs that were deployed during the same week last year...on the other hand, a net of 3 vertical rigs were stacked this week, reducing the vertical rig count to 65, which was still up from the 50 vertical rigs that were deployed during the same week a year ago...
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 February 17th, the second column shows the change in the number of working rigs between last week's count (February 10th) and this week's (February 17th) count, the third column shows last week's February 10th 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 19th of February, 2016...
as you can see from the above tables, the rig count story this week was all Texas, but not so much in the Permian basin as it has been lately, as the 16 Texas rig increases were fairly widespread, with 8 different Texas oil and gas districts seeing increases, while 2 districts saw drilling cut back...the unusual activity was the 5 rig increase in the Granite Wash basin of the eastern Texas panhandle and adjacent Oklahoma area, where all 13 rigs there are now drilling for oil, versus a year ago, when 7 out of the 10 rigs deployed there were drilling for natural gas...as for the increase of 4 rigs targeting natural gas, none were in our area, as 3 were added in the Haynesville and one was added in the Eagle Ford, while obviously the Ohio and Pennsylvania rig counts remained unchanged...also note that outside of the major producing states shown above, Mississippi saw a rig added this week; they now have 3 rigs working, up from just one rig during the same week a year ago..
DUC report for January
this week also saw the release of the EIA's Drilling Productivity Report for January, which once again showed another increase in uncompleted wells nationally, mostly as a result of dozens of newly drilled but uncompleted wells (DUCs) in the Permian basin...we had expected that with oil prices above $50, some of the DUC well backlog would be completed, but this report again showed that completion of wells slowed even as the drilling rig count rose, as the total count of DUCs in the US rose from 5,289 in December to 5,391 in January....a possible cause for this increase that i hadn't considered until this week might be a shortage of competent fracking crews...an article at Rigzone this week titled Bringing Back Our People: Industry Combats Workforce Challenges cites their problem as previously laid off workers who will probably never return to the oil industry....since the oil field layoffs started in early 2015, we've now gone nearly two years with just skeleton fracking crews operating in much of the country, and many of those who had worked in the oil fields before have since found work elsewhere...fracking has also gotten much more complex over that period, so putting together a fracking crew familiar with the latest techniques has become that much harder...
like in December, all of the January DUC increases were oil wells; the Permian basin, which includes the Wolfcamp and several other shale plays in these stats, saw its total count of uncompleted wells rise from 1,673 in November to 1,757 in January, in keeping with the increase in drilling that we've seen in that basin...at the same time, DUCs in the Niobrara chalk of the Rockies front range rose by 13, to 708 in January, and DUCs in the Eagle Ford of south Texas increased by 11 to 1,255...on the other hand, the Marcellus saw a small decrease in DUCs (which means more wells were being fracked than were being drilled) as the Marcellus DUC count fell from 610 in December to 600 in January...in addition; the Utica also showed a decrease of five uncompleted wells and thus had only 98 DUCs remaining in January...for the month, DUCS in the 4 oil basins tracked by the EIA (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 107 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) fell by 15 wells, as they have generally declined since December 2013, as new natural gas drilling fell to record low levels and has barely recovered....
Waste disposal problems halt operations at FirstEnergy's Beaver County plant - FirstEnergy Corp.’s long-awaited plan to safely dispose of waste from its Beaver County coal-fired power plant has hit a major snag just six weeks after taking effect. The Akron, Ohio-based energy company acknowledged it has indefinitely shut down two of its three power generating units at Bruce Mansfield Power Station after encountering problems with its $200 million dewatering facility. The units “are currently offline as we make adjustments to the new coal combustion byproduct disposal process,” the company said in a statement. “The refinements are focused on making the material easier to handle for mine reclamation.” Another factor in halting operations at the two units is a challenging energy market, in which daily energy prices do not support their operation, a spokeswoman noted. Meanwhile, the third unit is temporarily offline as workers complete maintenance on the boiler. The development is another blow to FirstEnergy’s ailing generation business, which has struggled to compete in the electricity market. Cheaper natural gas and lagging demand for electricity have weighed down profits at coal and nuclear power plants, which make up the majority of FirstEnergy’s generation. In November, the company said it is trying to sell all of its coal-fired plants in Pennsylvania to focus on its transmission and distribution businesses.
Ohio GOP targets clean energy standards, efficiency rules - --- It's been just six weeks since Gov. John Kasich vetoed a GOP bill that would have delayed for another two years mandates requiring power companies to sell an increasing percentage of renewable energy and help customers use less power.Rep. Louis Blessing, III, R-Cincinnati, began circulating a memo to House members Monday seeking co-sponsors for new legislation reducing state green energy and energy efficiency requirements on power companies.Kasich's Dec. 27 veto of House Bill 554 meant a return to mandates requiring that by 2027 at least 12.5 percent of a power company's sales be generated by renewable technologies like wind farms and solar arrays.The governor's veto also re-set the rules on energy efficiency, returning them to previous rules requiring that by 2027, the state's electric utilities cut customer peak demand by 22.5 percent compared with the highest demand in 2009.Blessing could not be reached for immediate comment. But his widely circulated memo makes clear that the legislation will be an effort to re-play a version of the defeated H.B. 554."I will soon be introducing legislation to revise Ohio Revised Code provisions that govern renewable energy, energy efficiency, and peak demand reductions," Blessing wrote.The legislation Blessing has in mind would, according to his memo:
- Make renewable standards goals rather than mandates.
- Clarify the law so that all energy goals and standards would end in 2027.
- Change efficiency standard compliance to every three years rather than every year, meaning fewer reports to state regulators and more time to meet the annual benchmarks.
- Reduce the 22.5 percent final energy efficiency target of 2027 to 17.2 percent.
The bill would also allow all customers, including residential customers, to opt out of paying for either efficiency programs or power company charges connected with the renewable standards.
Utica Shale Academy Prepares Students for Oil Jobs - The majority of American children attend traditional public schools. However, most public schools follow a college bound curriculum that does not meet the career choices for students not wishing to pursue a college education. Therefore, as the demand for skilled workers in the trades rises, parents are increasingly looking to alternative education choices for their children; one popular choice is charter schools. Although the number of charter school students is small compared to the current total of 50.4 million attending public schools, their increasing popularity is demonstrated by the doubling of charter school students from 1.3 million in 2008 to 2.6 million in 2014. To handle the increases in demand, the number of charter schools in the U.S. is now at approximately 6,800. These schools are spread across 43 states and the District of Columbia. The characteristics of charter schools vary from state to state, but basically, a charter school is a publicly funded school that typically has more flexibility over curriculum and teaching methods than traditional public schools. The name derives from the operational charter the school makes with applicable governing authorities. One example of a specialized charter school is the Utica Shale Academy (USA) in Columbiana County, Ohio. Due to its location, Columbiana County is considered part of Appalachia, sharing a common culture with neighboring western Pennsylvania and West Virginia. This area is active in shale oil production. USA meets the needs of those students wishing to go on to college studies, but also specializes in training students for careers in the oil and gas industry. USA’s unique focus is clear from its mission statement: The Utica Shale Academy provides a unique and vigorous learning environment through a specialized academic program which responds to employers’ and industries' current and emerging and changing global workforce needs and expectations through business/school partnerships.
New Protest Escalates Ohio Fracking Fight - Conservation groups this week filed an administrative protest challenging a Bureau of Land Management oil and gas lease auction slated for Ohio’s Wayne National Forest. The protest takes aim at the Bureau’s refusal to adequately analyze the impacts of fracking on climate change, water quality and endangered species.“Our protest challenges the Bureau’s disturbing practice of favoring fracking industry interests over clean water, wildlife and human health,” said Taylor McKinnon of the Center for Biological Diversity. “With each new federal fossil fuel lease, the Trump administration pushes us closer to climate disaster.”The protest charges that the plan to allow hydraulic fracturing or “fracking” on 1,186 acres of Wayne would degrade streams and groundwater, fragment wildlife habitat and worsen climate change. The federal auction is scheduled for March 23.The groups also note that the federal environmental assessment for the lease auction failed to fully disclose fracking’s effects on the national forest. That’s because the government failed to study the increased surface disturbance, habitat fragmentation, and water-pollution impacts of opening up adjacent privately owned areas to oil industry development.“The Wayne National Forest is owned by all Americans, and it’s a special place that deserves protection,” said Nathan Johnson, an attorney with the Ohio Environmental Council. “Tens of thousands of citizens are demanding a halt to fracking in the Wayne. The public doesn’t want to see pipelines tearing up this forest, and we don’t want fracking chemicals staining its streams. This fight is about holding the federal government accountable to both the law and the will of the people.”
Ohio critics hope bats might slow down pipeline project - ABC News: The existence of the threatened species remains one of the impediments the partnership between Houston-based Spectra Energy and Detroit's DTE Energy face before receiving expected approval to build the 255-mile long NEXUS pipeline capable of transporting 1.5 billion cubic feet of gas per day from the shale fields of Appalachia into Michigan and Ontario, Canada. NEXUS cleared a big hurdle in November when the Federal Energy Regulatory Commission issued an environmental impact statement that found no problems with the company's proposed route. NEXUS now awaits the Commission's approval to begin construction, a step that could be delayed when one of its three Commission members resigned last week. Opponents of the project in Ohio's Summit and Medina counties aren't backing down from a fight that began with efforts to get the pipeline rerouted away from homes and businesses to less populated areas. The Commission ruled in the impact statement that alternative routes proposed by the city of Green in southern Summit County held no environmental advantages over the one proposed by NEXUS. The existence of northern long-eared bats, classified as a threatened species by the U.S. Fish and Wildlife Service, along the proposed route means NEXUS isn't completely out of the woods. The bats live in caves and other sheltered spots during winter months and nest in trees during spring and summer. Its threatened status means trees in their habitats are not supposed to be felled between April 1 and Sept. 30.
Eleven ‘Super-Lateral’ Wells for East Ohio - The Intelligencer: After drilling its 3.5-mile-long “Purple Hayes” well last year, Eclipse Resources now plans to bore 11 additional horizontal wells this year, each of which will stretch at least three miles from their points of entry into the earth. In horizontal Marcellus and Utica shale drilling, contractors initially drill vertically to a certain depth in the earth, typically at least one mile beneath the surface. Drillers then bore outward horizontally from this position. The 11 Eclipse “super-lateral” wells will stretch horizontally in the firm’s eastern Ohio operations, which include portions of Monroe, Belmont, Guernsey and Noble counties.Eclipse plans to spend $300 million for drilling and fracking this year, while the firm holds 112,000 acres. During the last three months of 2016, the driller produced 255 million cubic feet of natural gas per day, including 71 percent dry methane natural gas; 18 percent liquids such as ethane, propane and butane; and 11 percent crude oil. In December, Eclipse placed five wells on its “Holiday” pad, located in eastern Monroe County, into service. These wells are the first to see the company’s new “Gen-3” fracking technique. “The organizational changes we have made will not disrupt that capability which we plan to continue to demonstrate this year with some exciting new operational milestones we plan to undertake in our drilling program. With these management changes, the company has placed an increased emphasis on its desire to grow both through the drill bit and through accretive acquisitions opportunities,” Hulburt added.
Study finds methane spike in Pennsylvania gas country - New research shows a recent three-year surge in methane levels in northeastern Pennsylvania, a hub of the state's natural gas production. After sampling the region's air in 2012 and again in 2015, researchers found that methane levels had increased from 1,960 parts per billion in 2012 up to 2,060 in 2015, according to a study published Thursday in the journal Elementa: Science of the Anthropocene. During that span, the region's drilling boom slowed and natural gas production ramped up. The researchers said this shift in gas activity is possibly to blame for the spike in methane levels. "The rapid increase in methane is likely due to the increased production of natural gas from the region which has increased significantly over the 2012 to 2015 period," Peter DeCarlo, an assistant professor at Drexel University and a study author, said in a statement. "With the increased background levels of methane, the relative climate benefit of natural gas over coal for power production is reduced."Methane is a potent greenhouse gas. Its emissions have been hard for regulators to quantify, with the EPA only last year beginning to target reductions from oil and gas production.Also last year, the Obama administration released new rules to reduce methane leakage, but the Trump administration has targeted many such rules for repeal.Some states are also starting to find ways to reduce methane emissions from oil and gas activities. Colorado was the first state to adopt rules to control drilling-related methane emissions. Pennsylvania, the second-ranked state for natural gas production, is following suit. Democratic Gov. Tom Wolf last year launched a strategy to reduce the emissions from natural gas wells, compressor stations and pipelines. "Every single background measurement in 2015 is higher than every single measurement in 2012," DeCarlo told InsideClimate News. "It's pretty statistically significant that this increase is happening."
DEP links Lawrence County earthquakes to fracking - A series of small earthquakes in Lawrence County last year appear to have been linked to fracking operations at nearby Utica Shale wells, Pennsylvania regulators said today. The Pennsylvania Department of Environmental Protection announced the conclusion in an advisory for an online event it plans to hold tomorrow to disclose details of its findings.The series of low-magnitude earthquakes on April 25, 2016, in North Beaver, Union and Mahoning townships “had a marked temporal/spatial relationship to natural gas hydraulic fracturing activities by Hilcorp Energy Co.,” the department concluded after what it said was an extensive review involving the agency and outside scientific and industry partners.DEP plans to hold a webinar at 10 a.m. tomorrow to discuss the findings and procedures it has developed to reduce seismic risk from future oil and gas operations.A Hilcorp spokesman did not immediately respond to a request for comment. Observers have acknowledged since the first days following the small earthquakes that the depth, time and location of Hilcorp’s fracking operations at its North Beaver, NC Development well pad suggested a link with the series of seismic events, but state officials had not broadly announced public conclusions about the events until now. Researchers have linked fracking to earthquakes in several sites in eastern Ohio not far from the Lawrence County quakes, as well as in England, Canada and Oklahoma, but cases of recorded or felt earthquakes directly tied to fracking have been rare. The Lawrence County earthquakes are the first known incidents of fracking-linked quakes in Pennsylvania.
Pennsylvania correlates natural gas fracking with quakes: Pennsylvania environmental regulators have found a likely correlation between a natural gas company's fracking operation and a series of tiny earthquakes in western Pennsylvania last year. The quakes were recorded last April in Lawrence County, about 50 miles north of Pittsburgh and close to a natural gas well pad owned by Houston-based Hilcorp Energy Co. They were too weak to be felt by humans and no damage was reported. Fracking, a method to extract gas or oil from underground shale rock, has been tied to earthquakes in neighboring Ohio and other states, but never before in Pennsylvania, the nation's No. 2 natural gas-producing state. "This is the first time we have seen that sort of spatial and temporal correlation," Seth Pelepko, an official with the state's Department of Environmental Protection, said Friday.Hilcorp stopped fracking at the well pad after the quakes. Company spokesman Justin Furnace said Friday the company has no plans to resume fracking at the site and will continue to work with the state to address any future concerns. The company was using a technique at the well called "zipper fracturing," essentially the simultaneous fracking of two abutting horizontal wells. To reduce the likelihood of future quakes, Hilcorp agreed to discontinue the practice for wells less than a quarter-mile apart in the three townships where the quakes were recorded, DEP officials said. DEP also required Hilcorp to operate its own seismic monitors in the townships, to notify the agency within 10 minutes of any quakes of 1.0 or greater magnitude and to suspend fracking in the event of larger quakes. Hilcorp's fracking operations were also blamed for causing 77 earthquakes in Poland Township, Ohio, a few miles from last April's tremors in Pennsylvania. One of the 2014 temblors was magnitude 3.0, strong enough to be felt by residents and "potentially one of the largest earthquakes induced by hydraulic fracturing in the United States," Miami University (Ohio) geologists wrote in a 2015 study.
Pennsylvania to release findings on fracking, quakes - (AP) - Pennsylvania environmental regulators are set to release the findings of their investigation into a series of minor earthquakes that took place near fracking operations by an oil and gas company. The temblors, all too weak to be felt by humans, were recorded last April in Lawrence County, about 50 miles north of Pittsburgh and three-quarters of a mile from a natural gas well owned by Houston-based Hilcorp Energy Co. No damage was reported. The state Department of Environmental Protection has been investigating. Regulators are releasing their findings on Friday. DEP notes the quakes had a “marked … relationship” to Hilcorp’s drilling operation in terms of timing and location. Fracking, a method to extract gas or oil from underground shale, has been tied to earthquakes in neighboring Ohio and other states, but never in Pennsylvania, the nation’s No. 2 natural gas-producing state.
Enviro groups seek immediate block to Mariner East 2 pipeline - Moving quickly, anti-pipeline activists have appealed the Pennsylvania Department of Environmental Protection’s decision Monday to approve the fiercely contested Mariner East 2 pipeline and asked for an immediate halt to the $2.5 billion project.The Clean Air Council, the Delaware Riverkeeper Network, and the Mountain Watershed Association filed the appeal with the Pennsylvania Environmental Hearing Board, alleging that the DEP’s review process for the cross-state pipeline was flawed."Bowing to heavy political pressure, the Department of Environmental Protection greenlighted Sunoco’s ill-conceived and dangerous construction plans for Mariner East 2 without having all the information it needed to make a reasoned and reasonable decision," the groups said in their 110-page plea for supersedeas, the legal term for suspending the permits. The groups said they would suffer an “immediate and irreparable injury” if ground were broken on the pipeline and requested a construction halt until their appeal could be adjudicated. The pipeline, which is being built by Sunoco Logistics Partners LP of Newtown Square, would transport natural-gas liquids across Pennsylvania to Sunoco’s terminal in Marcus Hook.“Sunoco’s permit applications were woefully incomplete, inaccurate, and contradictory, and the DEP’s review and approval was utterly inadequate,” Joseph O. Minott, the Clean Air Council’s executive director, said in a statement. “What DEP has authorized with these permits is the destruction of Pennsylvania streams and wetlands, the endangerment of the public, and great damage to both public and private property.” The appeals were filed late Monday, only hours after the DEP issued a series of permits allowing Sunoco to encroach on hundreds of waterways and wetlands during construction of the underground pipeline, which is also known as the Pennsylvania Pipeline Project.
Another round of NGL infrastructure in Marcellus / Utica - Natural gas production in the Marcellus and Utica plays is projected to rise by 30% or more by 2022 under all of RBN’s forecast scenarios, and production of Northeast natural gas liquids is expected to increase even more quickly. Midstream companies are responding to this next phase of gas/NGL growth with plans for still more gas-processing plants, fractionators, NGL storage facilities, and NGL takeaway capacity––pipeline, rail, ship and barge. Also, Shell Chemicals continues to advance plans for an ethane-consuming steam cracker in Beaver County, PA, and another petrochemical company may soon decide to build a cracker in Ohio. Today we begin a new series on the latest push by midstreamers to keep pace with NGL growth in the epicenter of U.S. gas and NGL production. After growing at a breakneck pace throughout the 2010-15 period, rising from less than 1.7 Bcf/d in January 2010 to just over 21 Bcf/d in December 2015, natural gas production growth in the three Marcellus/Utica states––Pennsylvania, West Virginia and Ohio––slowed dramatically in 2016. As of November, it stood at about 22.6 Bcf/d, and in its latest Drilling Productivity Report (DPR), issued on February 13, the Energy Information Administration (EIA) projected that February 2017 production in the Marcellus/Utica would average ~23 Bcf/d. There are several reasons for the 2016 lull; they include the lack of pipeline takeaway capacity additions during most of last year; gas storage constraints last fall; and sagging NGL prices, due in part to low prices for crude oil and to high NGL takeaway costs. Now, though, with long-standing gas-pipeline constraints out of the region being relieved and with demand for gas from U.S. power generators, liquefied natural gas (LNG) exporters, and Mexico on the rise (see Part 4 of RBN’s Drill Down Report on moving Northeast gas to Gulf Coast/Texas export markets, I Saw Miles and Miles of Texas), Marcellus/Utica gas production is in for another period of sustained growth. Because of the region’s highly favorable production economics, all three of RBN’s three price scenarios––Advance, Growth and Cutback––show Northeast gas (and NGL) production increasing by leaps and bounds by 2022 (see Figure 1 for the gas outlook).
West Virginia DEP Won't Monitor Light, Sound Pollution at Compressor Sites - — Excessive light and sound may not pose the health threat that carcinogenic benzene and formaldehyde originating from a natural gas compressor can, but those living in the vicinity of such a station may find it difficult to get a good night’s sleep. After an objection filed by the West Virginia Oil and Natural Gas Association, the state’s Department of Environmental Protection has decided not to regulate the light and sound associated with such compressor stations, including the large one located less than two miles east of The Highlands known as the Battle Run Appalachia Midstream Services compressor in the Valley Grove area. “To say that we’re disappointed is an understatement. We feel like we got ambushed by this,” West Virginia Surface Owners’ Rights Organization Project Manager Julie Archer said. “This is just a complete disservice to the members of the public who have to live near these things.” According to Penn State University, natural gas compressor stations are usually placed at 40- to 70-mile intervals along a pipeline that takes the product to market. Compression is required to get the gas to move through the pipeline. The natural gas enters the compressor station via a pipeline that is connected to gathering lines, which are connected to individual gas wells. At the station, the gas is compressed either by a turbine, motor or engine. Last year, West Virginia University occupational and environmental health professor Michael McCawley participated in a study that suggests those living near fracking operations can experience “sleep disturbance, cardiovascular disease and other conditions that are negatively impacted by stress” because of light and sound pollution. As the Marcellus and Utica shale boom proliferated in recent years, the number of compressor stations to move the material has also increased in both Ohio and West Virginia. “These things are just all over the place. . “There are limitations for some of the air pollutants. But they are basically saying it’s OK if people can’t sleep or can’t use a part of their house.”
Does the Australian LNG export experience foreshadow soaring U.S. natural gas prices? Two times last winter Australians living in the country's eastern region paid more than twice as much for natural gas as did Japanese customers taking delivery of liquefied natural gas (LNG) from the same region. (Australia has three separate natural gas pipeline networks which create three domestic natural gas markets, Eastern, Northern and Western.)The price spikes had eastern natural gas users, particularly business users, hopping mad about what they perceive as foolish energy policy. That policy, they say, gives away Australian energy resources at bargain prices to foreign countries while making domestic industries that are reliant on those resources less competitive because of high energy costs. In addition, the new volatility in gas prices makes planning difficult and expansion financially risky. The dust-up in Australia has some people thinking that the same thing could happen in the United States, something I pointed out in 2013. In the United States the Federal Energy Regulatory Commission has approved natural gas export terminals with a capacity of 17 billion cubic feet (bcf) per day. That represents 19 percent of current U.S. natural gas production. If all terminals for which applications are pending or expected are included, the number goes up to 42 bcf per day or about 47 percent of current production. Only one U.S. export facility is currently in operation. It's worth noting that U.S. marketed natural gas production is down a little over 1 percent for the 12-month period ending November 2016. During the same 12-month period net imports were about 654 bcf or about 2.7 percent of total consumption. That's right. The United States remains a net importer of natural gas even as it contemplates a major expansion of LNG export capacity. Back in Australia electricity blackouts in the state of South Australia are being blamed partly on the mothballing of a major new natural-gas-fired electric generating plant. The operator had contracted for large deliveries of natural gas at low prices to fuel the plant. But with the price of LNG exports from Australia soaring, it became so profitable to resell the gas for export that the plant was never opened. (That was before the domestic price spike. But by then the plant's gas was already committed.) The rapid expansion of natural-gas-fired electricity generating plants in the United States leaves the country vulnerable to similar dynamics that also include higher electricity rates. Most utilities get to pass fuel price increases on to their customers. And, LNG exporters cannot withhold deliveries and sell their contracted gas back into the domestic market if prices spike. They are obliged by long-term contracts with their customers to deliver.
What the FERC? How a lack of quorum could affect US oil and natural gas – Platts podcast - On February 3, US Federal Energy Regulatory Commission lost its quorum when Chairman Norman Bay announced he had "gone fishin’" and left the agency in regulatory chaos. Chris Newkumet, DC bureau chief and chief editor of Inside FERC, and Maya Weber, editor of Inside FERC, join senior oil editors Meghan Gordon and Brian Scheid to mull over the impacts of the changes. What does FERC's current state mean for pipeline permitting and oil shipping rates and what does it say about partisanship in Washington?
What a pro-infrastructure administration can and cannot do -- As it builds out the nation’s oil and natural gas pipeline networks to keep pace with ever-changing needs, the midstream sector has faced a number of challenges, perhaps chief among them regulatory delays exacerbated by organized environmental opposition. An oft-repeated priority of the new administration has been to make it easier to advance the development of new energy infrastructure development. That raises a few questions. How much difference will this apparent change in attitude make? Should we expect a huge surge in new pipeline projects to be approved and move forward? Today we examine major projects that have faced drawn-out approval processes and evaluate the degree to which a new administration can grease the skids for new pipelines.A long list of major oil and gas pipeline projects have secured regulatory approval and been installed and started up since the beginning of the Shale Era a few years ago, but a number of others have encountered delay after frustrating delay. Seven poster children in this category of stuck or potentially stuck stand out: two crude-oil pipelines (Keystone XL and the Dakota Access Pipeline—DAPL) and five gas pipelines: Constitution, Rover, NEXUS, Atlantic Sunrise, and Northern Access. Their developers all thought they had done everything they had to do to win needed approvals, but, all of them faced major delays and most still await final approvals. Let’s start our review of these projects—and what a new administration can and can’t do—with the two oil pipelines, the very controversial Keystone XL (purple line in Figure 1) and DAPL (orange line).
Pipeline fire out in Louisiana; missing worker presumed dead - ABC News: A pipeline fire that broke out Thursday night in south Louisiana, injuring two people and killing one, has been extinguished. Phillips 66 said in a Monday morning news release that the fire was out as of 8:30 a.m. Officials in St. Charles Parish said they began receiving calls Thursday about an explosion and fire at the Phillips 66 pipeline station at Paradis (PAIR'-ah-dee), west of New Orleans. The cause of the blaze hasn't been determined. The pipeline carried liquid components of natural gas. At one point, 60 nearby homes had been evacuated. Two contract workers for Phillips were hospitalized. Phillips said Saturday that one missing employee was presumed dead. The company said the St. Charles coroner would begin an examination at the scene once the area was deemed safe.
Phillips 66 sees strong US export demand reviving midstream opportunities - Phillips 66 expects a revival in the US midstream space in 2017, as demand for exports of crude, products and LPGs remain strong, President Tim Taylor said Tuesday. "We see a resurgence of opportunities in the midstream," said Taylor, addressing attendees at Credit Suisse's 22nd Annual Energy Summit in Vail, Colorado. His comments were webcast. Taylor said Phillips 66 and its midstream master limited partnership, Phillips Energy Partners, continues to find ways to deal with the "nature of market changes," particularly around growth in exports of both crude and products. Phillips 66 is a stakeholder in the Dakota Access Pipeline, expected to come online in the second quarter of 2017.DAPL received its final permit to finish the line in February 2017 following a contentious battle with environmentalists. Completion of the pipeline will open cheaper transportation for North Dakota's Bakken crude. The line will carry the light, sweet crude into the Midwest oil hub of Patoka, Illinois, and onward to the US Gulf Coast via the Energy Transfer Crude Oil Pipeline, or ETCOP. Phillips 66 is also a stakeholder in ETCOP. This will give the landlocked crude port access, opening the door for exports, as well as lower transport costs for East Coast refiners, who pay high rail costs from North Dakota to the East Coast.
More Houston crude distribution infrastructure on the way. - More than a dozen crude oil pipelines can deliver up to 3.4 million barrels/day (MMb/d) to the greater Houston area, with another 550 Mb/d of capacity planned, and as domestic production starts to grow again, a new round of projects is under way to build-out the region’s distribution pipelines, storage and marine-dock infrastructure. The developers of these Houston-area projects include a range of midstream players: from large, diversified midstreamers that own the long-distance pipelines flowing into the region to smaller players planning their first Houston projects. Today we conclude a two-part blog series on the latest round of projects and on the increasingly intense competition for barrels. Because of Houston’s outsized role in refining and in hydrocarbon markets more generally, the RBN blogosphere has covered the region’s crude infrastructure extensively. For example: two deep-dive Drill Down reports (starting in October 2014 with Houston We Have A Problem, followed up with November 2015’s Stairway to Houston) as well as numerous blogs on similar topics (see Saving All My Crude For You and The Future of Houston Area Crude Infrastructure). As we said in Part 1 of this series, existing pipelines into Houston from the Permian Basin in West Texas, the Eagle Ford in South Texas, offshore Gulf of Mexico and the legacy South Texas region can carry as much as 1.85 MMb/d. Another 1.55 MMb/d can flow into Houston from the Cushing, OK hub via the two Enterprise Products Partners/Enbridge Seaway pipelines and TransCanada’s Marketlink. Still more capacity is in advanced stages of development. In the second quarter of 2017, Magellan Midstream Partners and Plains All American plan to complete a 100 Mb/d addition to their BridgeTex Pipeline (from the Permian to Houston) and in mid-2018 Enterprise plans to start up its 450 Mb/d Midland-to-Sealy, TX pipeline (ditto). Pipeline flows to Houston (which are expected to increase by 250 to 350 Mb/d in 2017 due to Permian growth, according to recent RBN projections) are augmented by waterborne imports, which averaged 950 Mb/d between January and November 2016, according to the Energy Information Administration (EIA).
Refugio explosion seen in Corpus Christi, Houston - — The horizon looked fierce as Jake Ramirez started walking to a friend's house, just after midnight. It was supposed to be dark, but the sky he saw was filled with an ominous orange glow. "I just thought it had to be a big fire," Ramirez said of the big ball of light, which hovered over a ranch miles away in the distance. With that, he whipped out his cellphone and began filming. It's the same way many reacted after a natural gas pipeline unexpectedly exploded here early Wednesday morning. Refugio County Sheriff Raul "Pinky" Gonzales said the explosion occurred on rural ranch land known as Lake Pasture, near U.S. Highway 77 and state Highway 239. There were no reports of injuries, County Judge Robert Blaschke said. The ruptured pipeline belongs to Kinder Morgan Inc. Melissa Ruiz, a company spokeswoman, said the release and fire occurred on its Tejas pipeline system around 12:30 a.m. Wednesday. Kinder Morgan shut down the impacted pipeline segment, dispatched personnel to the site, and regulatory agencies were notified notified. http://www.caller.com/story/news/special-reports/energy-effects/2017/02/15/coastal-bend-industrial-incidents-since-2000/97966360/ People on social media reported a loud boom, then an orange fireball some estimated climbed as high as 200 feet, glowing in the distance. "We got calls from as far away as Katy, Corpus Christi and Beeville," said Stan Upton, Refugio County's emergency management coordinator. "A lot of people saw this thing."
Parsley to spend $2.8 billion in latest Midland basin acreage haul - Parsley Energy Inc., Austin, has agreed to acquire undeveloped acreage and producing oil and gas properties in Permian’s Midland basin from recently formed Double Eagle Energy Permian LLC for $2.8 billion. The deal covers 71,000 net acres and production of 3,600 boe/d as of Jan. 1. Parsley will receive 23 drilled but uncompleted (DUC) wells targeting the Lower Spraberry, Middle Spraberry, Wolfcamp A, and Wolfcamp B formations, with an average lateral length of 8,400 ft. Parsley also will take 3,300 net horizontal drilling locations, 80% of which it will have operating control. Of the total, 1,800 net locations are in the Lower Spraberry, Wolfcamp A, and Wolfcamp B. The acquired horizontal drilling locations have an average lateral length of 6,600 ft, with more than 40% featuring lateral lengths of 7,500 ft or more. The purchase price consists of $1.4 billion of cash and 39.4 million units of Parsley stock valued at $1.4 billion. Parsley intends to finance the cash portion through equity and debt offerings. The deal is scheduled to close on or before Apr. 20. After making more than $1 billion in deals for Permian assets last year, Parsley has kicked off 2017 by spending about $3.5 billion to continue its expansion in the basin. In January, the firm agreed in several deals to acquire undeveloped acreage and producing oil and gas properties in both the Midland and southern Delaware basins for $607 million in cash (OGJ Online, Jan. 11, 2017). The Double Eagle deal, Parsley’s largest to date, increases the firm’s Permian net lease holding to 227,000 acres, with 179,000 net acres in the Midland basin; and its Permian net horizontal drilling locations to 7,900, including 4,300 net locations in the Wolfcamp A, Wolfcamp B, and Lower Spraberry in the Midland basin, and Upper Wolfcamp in the southern Delaware basin. Parsley says the deal gives it a “sufficient acreage footprint to support more than 20 rigs focused on horizontal development.”
Passing On The Permian: Has The Bubble Grown Too Big? Has the Permian Basin become too hot? More companies and enormous sums of capital continue to flood into West Texas to take advantage of the most prolific shale basin in North America. Rig counts are showing no sign of slowing down and new deals in the Permian are announced on what seems like a weekly basis. However, will the Permian bubble deflate? ExxonMobil dumped more than $6 billion in January to double its holdings in the Permian, as the oil supermajor decided to ramp up shale drilling instead of taking on more complex megaprojects offshore. But in the past, ExxonMobil has made a play for shale assets at the top of the market. In 2009, Exxon paid more than $30 billion for XTO Energy, a Texas shale gas driller, in what was widely seen in retrospect as an expensive play on a market that had already peaked. With that context in mind, Exxon’s latest deal raises a few questions about the health of the Permian frenzy. Land prices have surged so high in the Permian Basin that some companies are starting to look elsewhere, according to Bloomberg. It is not uncommon these days to see land deals selling for more than $60,000 per acre, which Wood Mackenzie says is 50 times higher than four years ago and still 10 times higher than the Bakken today.In the past two years we have seen the Permian benefit at the expense of other drilling areas. Places like the Bakken and Eagle Ford have been hemorrhaging rigs, jobs, and capital, and consequently have suffered a sharp decline in production. Many companies drilling in those locations decamped for the Permian Basin, and the West Texas shale basin saw a corresponding increase in rigs and drilling activity. Wall Street, desperate for profits after nearly three years of poor returns on energy investments, has been dumping money into Permian drillers. Wall Street’s pot of money seems to be endless, and they are once againdumping money into oil and gas, and the Permian in particular. Related: Energy Storage Set To Boom In 2017 But land prices might have climbed too high. For every Parsley Energy – a small driller that is going all-in on the Permian – there are other companies taking a different approach. Bloomberg cites several companies that are passing on the Permian for less flashy locales – BP is looking to drill in Argentina’s Vaca Muerta, Newfield Exploration is expanding into Oklahoma’s STACK play, and Sanchez Energy is returning to the Eagle Ford, a shale play that has once again become an underdog.
What's with all the DUCs? - The latest Drilling Productivity Report from the EIA, released yesterday (February 13, 2017), shows that while the combined rig count in the seven major U.S. shale plays rose about 25% in the fourth quarter of 2016 versus the previous quarter, and the number of wells drilled was up 29%, well completions were up a paltry 1%, leading to an increase in the inventory of drilled-but-uncompleted wells (DUCs). Completions accelerated a bit in January 2017, but DUCs still continued to rise. That certainly seems counterintuitive. With crude oil prices stable in the low $50’s over the past few months you might think that producers would be pulling DUCs out of inventory, and in fact there have been statements to that effect in several producer investor calls. This is not just an exercise in energy fundamentals numerology. If the DUC inventory is increasing, then production will not be ramping up as fast as the growing rig count would imply. But what if, as some early signs indicate, the historical relationships are out of whack and the DUC inventory isn’t growing but rather declining? In that case, forecast models could be understating the outlook for production growth, and the market could be in for a more rapid and steeper rebound in oil and gas production than many expect. In today’s blog, we delve into the DUC inventory data and its potential upside risk to production forecasts.
Bringing Back Our People: Industry Combats Workforce Challenges - Lingering effects of the industry’s downturn are still wreaking havoc on the oil and gas workforce. A recent study by the University of Houston (UH) shed light on the potential HR nightmare – laid off workers who may never return to the industry. The study, which surveyed more than 700 adults who lost jobs in oil and gas within the past two years, found that 62 percent of respondents were still unemployed at the time of the survey. Additionally, only 13 percent of respondents who had been reemployed were in oil and gas.“Will those workers come back? Maybe, but there’s absolutely some evidence that we have damaged the workforce and we may not get a lot of those folks back,” Bob Newhouse said during the International Association of Drilling Contractors (IADC) Health, Safety, Environment and Training Conference Feb. 7-8 in Houston. According to the U.S. Bureau of Labor Statistics, a massive decline in the labor force participation rate began in about 2000, said Newhouse. So while the unemployment rate is going down, there are fewer people in the workforce. “Another negative trend we’re seeing is women leaving the workforce,” he said. “That’s attributed generally to higher education attainment. More people are staying in school longer, which is good for educators, but it’s bad for the workforce, so there’s a push-pull.” Oil and gas companies will need to focus on talent attraction as the industry recovers and job opportunities are created again. But this isn’t the oilfield of the 80s. Technologies have advanced and the workforce will need to be skilled enough to handle the changes
Oklahoma rocked by natural gas well explosion | Washington Examiner: A natural gas well exploded in Oklahoma Thursday afternoon, with reports of multiple injuries in Pittsburg County. A number of state and local emergency agencies responded to the well explosion, which occurred near the town of Quinton, about 150 miles east of Oklahoma City. The Quinton Police Department said the explosion in the major fossil fuel-producing state happened when the top of a natural gas well blew off, according to local channel News 9. Immediate reports indicated that one person had been flown by helicopter to a hospital in Tulsa. The explosion occurred as the U.S. Senate considers approving the state's attorney general, Scott Pruitt, to lead the Environmental Protection Agency.
TransCanada Tries Again for Nebraska's Approval of Keystone - TransCanada has rebooted its effort to build the Keystone XL oil pipeline across Nebraska, where it had met with opposition before it withdrew its application when the Obama administration denied the company a federal permit in late 2015. The company filed an application Thursday with the state's Public Service Commission, executives said on a conference call with investors and analysts to discuss earnings. Nebraska had been at the center of opposition to the pipeline, largely based on environmental concerns. TransCanada's latest move had been expected since Donald Trump was elected U.S. president. One of his first orders of business was to invite TransCanada to reapply for a permit from the U.S. State Department to allow the line to cross the border with the U.S. The company did so last month. Keystone XL's tentative route calls for it to originate in Alberta's oil sands region, cross the U.S. border into Montana and run through South Dakota to Steele City, Neb., where it would link to existing pipelines to Gulf Coast refineries and ports. Nebraska's permitting process, which requires a series of public hearings, could take up to a year and is expected to again draw strong opposition from residents, ranchers and farmers, as well as environmental groups. Landowners had expressed concern about use of eminent domain to seize land in the path of the pipeline. TransCanada has said the Gulf Coast is the natural destination for heavy Canadian oil because the many refineries in Texas and Louisiana are geared to process the sludgy crude into gasoline, diesel and other fuels. The company said it is working with potential shippers on the oil pipeline to assess demand for space on Keystone XL, with some customers wanting less than they did a few years ago and others signaling they may want more.
NM Groups Slam Move in Congress to Kill Methane Waste Rule - The U.S. House of Representatives today is slated to repeal the Bureau of Land Management's Methane Waste Rule, which requires drilling companies to capture excess methane at oil and gas wells on public land rather than burn or vent it into the atmosphere. The Obama-era rule went into effect only weeks ago, after years of public comment and hearings as well as a court challenge. Kent Salazar, a board member of the New Mexico chapter of Hispanics Enjoying Camping, Hunting and the Outdoors (HECHO), said companies should be required to install methane-capture equipment so the gas can be sold and generate royalties for taxpayers. "Especially now, New Mexico's in dire economic straits because of the drop in oil prices, and as citizens of the state of New Mexico, we're losing money when we lose our resource," he said. "When this methane is vented off, that's waste." Opponents of the Methane Waste Rule have said it imposes additional costs on the industry by requiring more equipment in remote locations. To scrap the law, the Congressional Review Act is being invoked, a rare tactic that requires only a simple majority in the House and Senate and forbids the BLM from crafting a similar rule in the future. Pollution from compounds in methane gas has been linked to respiratory disease and cancer, so Salazar argued that the Methane Waste Rule is needed to protect air quality in local communities. "It affects the health of the Native Americans (and) the Hispanics that live out by these wells," he said. "The natural gas that comes on methane has some other substances attached to it, such as benzene - which, when they enter the air like that and these people breathe it in, it causes health problems."
Boulder County keeps drilling moratorium despite warning - Boulder County did not drop its moratorium on oil and gas drilling Friday as Attorney General Cynthia Coffman demanded, a county official said, potentially setting up a court battle. Coffman, a Republican, told the heavily Democratic county last month the moratorium contradicts a Colorado Supreme Court ruling that only the state can regulate the industry. She warned she would file a lawsuit if county officials didn't rescind it by Friday. County officials say the moratorium is legal and is scheduled to stay in place until at least May 1 while they update their land-use regulations for oil and gas. County Attorney Ben Pearlman said the county is prepared to defend the moratorium in court. He said he believes the measure is legal because its purpose is to give the county time to revise its outdated regulations. "We've been working diligently on that," he said. Coffman said the county is wrong. "Plain and simple, Boulder County is violating state law and has left my office with no option other than to enforce the law," she said in a written statement. "It would be patently unfair for some local governments to be forced to comply with state law while allowing Boulder to continue with its illegal moratorium." Boulder has had a moratorium in place since 2012, extending it several times. Democratic state Sen. Matt Jones, who represents part of Boulder County, accused Coffman of acting "at the behest of oil and gas companies." He made the statement during a debate on the Senate floor.
Colorado Attorney General Sues Boulder County to End Fracking Ban - Colorado's attorney general is suing Boulder County over its fracking ban that has been in place for the last five years. Republican Attorney General Cynthia Coffman and the state of Colorado are plaintiffs in the lawsuit . The complaint to initiate the lawsuit was received by county officials on Feb. 14, KUNC reported. The AG's office had been threatening Boulder County with a lawsuit for several weeks over the county's moratorium on oil and gas development in unincorporated areas. The county first adopted the temporary ban back in Feb. 2, 2012 and has extended it several times. In a Jan. 26 letter to county commissioners, Coffman gave a Feb. 10 deadline to rescind the moratorium as it violates state law. Last May, Colorado's Supreme Court rulings on two cases prohibited local governments from preventing oil and gas development through the use of local bans. In light of the court's decisions, Coffman called Boulder County's continued ban "clearly unlawful." But Boulder County deputy attorney David Hughes disagrees. "Our position is that we are complying with state law and if attorney General Coffman just held off and let us complete our process, we think that is a perfectly viable option," Hughes told KUNC. "A lot of the open space that we bought over the years, the mineral rights had already been severed, so the open space doesn't provide protection in those instances." "In 2012 when the county adopted its regulations, it was looking at smaller well pads and now the trend is for these mega pads, we're looking at 20, 30 40 wells per pad," Hughes added. "Our regulations didn't really look at or address that issue." As KUNC explains, "after the state Supreme Court rulings, Boulder County rescinded its moratorium on new oil and gas permits that was set to expire in 2018. It was replaced by county commissioners with shorter time-outs, usually four to six months long. Most recently commissioners voted in December 2016 to extend it until at least May 1, 2017, while they revise the county's oil and gas regulations." But Coffman said in a statement about Tuesday's filing that the county had years to prepare with state law:
CU study links childhood leukemia in Colorado to oil and gas development -– Does living near areas of high-density oil and gas development increase the risk of childhood leukemia? A University of Colorado study released Wednesday appears to point to that conclusion. The study by the Colorado School of Public Health at CU Anschutz shows a link between young Coloradans diagnosed with acute lymphocytic leukemia and their proximity to high-density gas development. Researchers led by Dr. Lisa McKenzie looked at data from the Colorado Central Cancer Registry and compared that information from the Colorado Oil and Gas Information System. The study included 743 young Coloradans aged 0-24 years living in rural Colorado and diagnosed with cancer between 2001 and 2013. According to current research, more than 378,000 Coloradans live within one mile of oil and gas development. Although the study appears to show an association, researchers admit more research is needed to better understand the results. The researchers observed no association between non-Hodgkin’s lymphoma and high-density oil and gas development. Colorado's oil and gas industry has taken issue with the study and paints past research by Dr. McKenzie as "questionable." They released the following statement: "This is a very serious allegation. If you recall, Lisa McKenzie’s last major study in 2014 was disavowed by state health officials and in fact the state’s top health official went so far as to say the public could be “misled” by it. University researchers shouldn’t be in the game of scaring people just to secure additional funding. Still, public health is obviously of great concern to our industry and we will review her data immediately. We also look forward to the state’s review of the study.”
1,650 Illegal Oil Wells Still Polluting California Aquifers -- Gov. Jerry Brown's oil regulators failed to meet their own deadline Wednesday for shutting down 1,650 oil industry injection wells that are violating water-protection laws by dumping toxic fluid into protected California aquifers. "Governor Brown's administration has decided not to protect our water from illegal contamination by the oil industry," said Hollin Kretzmann of the Center for Biological Diversity . "By failing to meet their own lax deadline for shutting down these polluting wells, state oil regulators have given Californians another reason not to trust a word they say." All illegal oil-industry injection activities were supposed to be halted by Feb. 15, according to a promise made two years ago by California's Division of Oil, Gas and Geothermal Resources. The state could be imposing fines of up to $25,000 a day for every well that continues to operate in a protected aquifer. But as of Wednesday, the state has shut just a portion of wells operating in aquifers that should be protected by the federal Safe Drinking Water Act. State officials quietly announced the indefinite delay in enforcing the law in mid-January. In March of 2015, state officials testifying before the California senate pledged to stick to the February deadline and other aspects of a schedule approved by the U.S. Environmental Protection Agency (EPA). John Laird, the state's Secretary of Natural Resources, told senators that the Brown administration was "fully committed to meeting these deadlines." The promises came in the wake of admissions by the Brown administration that state regulators had let oil companies operate thousands of injection wells that have been dumping wastewater into scores of protected underground water supplies in Monterey, Ventura, Kern and other counties (see interactive map ). But instead of halting most of the illegal injections, state officials have moved forward with plans to exempt as many as 40 of these aquifers from water-protection laws. If these "aquifer exemption" applications are approved by the EPA, the oil industry would be allowed to make permanent use of these water supplies for the disposal of contaminated waste fluid.
Media Silent As Mystery Illness Plagues Residents One Year After Historic US Gas Leak --A year after the largest methane leak in U.S. history was sealed in Porter Ranch, California,residents are continuing to experience significant adverse health consequences. As SoCalGas - the company responsible for the blowout - uses fabricated gas shortages to justify reopening the Aliso Canyon gas storage facility, which has been shut down indefinitely since the leak occurred, a local doctor is now speaking out. Dr. Jeffrey Nordella has been treating Porter Ranch residents since the blowout of an underground methane storage well caused tons of methane gas to spewing the atmosphere in October 2015. A total of 5 billion cubic feet of methane was released into the atmosphere from October 23 to February 18, “or enough pollution to match the annual output of nearly 600,000 cars,” The Guardian noted shortly after it was sealed. Though the leak was sealed last February, residents have continued to complain of symptoms. Though some local news outlets have provided consistent coverage of the disaster’s aftermath, most national outlets stopped covering the story after the blown-out well was closed and, consequently, the immediate drama of the story subsided. But Nordella says that since the gas leak began, he has been inundated with patients of all ages.“Those symptoms were broad but yet had a common denominator. Eye and nasal irritation, headache, nosebleed, sore throat, loss of voice, cough, shortness of breath, palpitations, nausea, vomiting, diarrhea, fatigue, and skin rashes were among the most common,” he said during a press conference at his urgent care facility last Wednesday.According to the local Daily News:“He’s seeing abnormal pulmonary functions among some of those patients, and low red blood cell counts in others. He’s reviewed the files of residents whose family members died and said he’s seen a rare case of anemia that can be connected to toxic exposure.” Nordella says the symptoms he’s seen in patients are “clearly different from those with a common upper respiratory tract infection, seasonal allergies, sinus infections, and viral bronchitis.” He also said multiple contaminants could be causing the variety of health issues.
Fracking Rule Text Disappears From Interior Department Website -- In Donald Trump 's first week as president, text describing two rules regulating the oil and gas industry was removed from an Interior Department website. The rules, limiting hydraulic fracturing and natural gas flaring on public lands, are in the crosshairs of the Trump administration. The changes were noted by the Environmental Data and Governance Initiative or EDGI, which has been monitoring changes to federal web sites since Trump's inauguration. On Jan. 21, the Bureau of Land Management (BLM) page, which describes various regulations for how the oil and gas industry should operate on federal land, still included a section on the Methane and Waste Prevention rule. The regulation was part of the Obama administration's effort to reduce greenhouse gas emissions and the effects of climate change . By Jan. 28 , the section was gone. The rule , which is widely opposed by the oil and gas industry, limits fossil fuel companies' ability to vent and flare gas on public land, which releases methane , a greenhouse gas around 84 times more potent than carbon dioxide over a 20-year period. It was one of the first Obama era regulations to be targeted by a Republican-controlled Congress empowered by Trump. On Feb. 3, at least five days after the site had been updated, the House of Representatives voted to repeal the methane rule using the Congressional Review Act, which gives Congress 60 days to eliminate federal regulations legislators don't like. The bill awaits a Senate vote. Also removed was text within a section on the Interior Department's hydraulic fracturing rule, Obama's primary attempt to limit the impacts of the controversial oil and gas extraction method. The page still notes that the rule exists but it no longer describes what it does. The deleted text stated that the regulation was meant "to ensure that when operations are undertaken on lands where a BLM permit is required, steps are taken to ensure wellbore integrity, proper waste water management and greater transparency about the process, including information about the composition of fracturing fluids."
Fracking And What New EPA Means For Your Health – Forbes - Health and safety concerns about fracking are huge and likely to grow even more if Scott Pruitt, a man who has been described as a “stenographer for the oil and gas industry," is confirmed as director of the Environmental Protection Agency. Pruitt has sued the EPA repeatedly while he was the attorney general in Oklahoma—a state suffering multiple earthquakes as a result of fracking, and where he took no action. This multipart report will review some of the myriad of health and environmental concerns and the competing business interests surrounding fracking. In order to understand the health problems, you need to first understand how fracking is done. For hydraulic fracturing, a.k.a. fracking, a well is initially drilled to an average depth of 7,700 feet. When it reaches the right depth, the well drill and pipes are redirected horizontally, extending 1,000-6,000 feet. A mixture of water, sand and chemicals is injected into the wells under high pressure to fracture, or crack, the shale, enabling gas to be released and flow up the well. The process requires heavy construction equipment. It’s estimated that 200 tankers are needed to haul in 1 million gallons of water, and that each deep well might require 2-10 million gallons of water mixed with thousands of gallons of a sand “proppant" and chemical mixture. What makes fracking especially hazardous is the very high pressure needed to shatter the rock, and that the metal and concrete well casings are often not strong enough to tolerate the intense pressure, resulting in leaks of toxic fluids. This "well integrity" has NOT been safer in new wells. Commonly used chemicals used include: (see table) In addition to the chemicals injected into the wells during the fracking process, other chemicals are released from the shale, including these: (see table) But there are many others…and many of these are proprietary and, thanks to the “Halliburton Loophole,” which exempted the injection of these fracking chemicals (now euphemistically called “tools”) from the EPA’s regulation under the Safe Drinking Water Act. In many states, companies don’t even have to disclose what these chemicals are that they are injecting into these wells. Some states, like Pennsylvania, have even had gag orders prohibiting physicians who were given access to these trade secret concoctions in order to take care of their patients from disclosing this information either to other physicians or to the patients themselves! During fracking, a number of chemicals are released into the air, as well as into the water. Benzene is one, naturally occurring in the rock but toxic when vented into the air. Dr. Carol Kwiatkowskiof University of Colorado, examined air samples within a mile of shale gas wells. Her team found 61 airborne chemicals, including methylene chloride, which can cause respiratory symptoms and memory loss, and can be fatal acutely, as well as being a possible carcinogen in the longer term.The Colorado researchers also found levels of polycyclic aromatic hydrocarbons well above the threshold shown to cause lower IQs and developmental delays in prenatal exposures. Increased levels of radon, the second most common cause of lung cancer in the U.S., has been increasing in homes near unconventional (horizontal) drilling (a.k.a. fracking). Besides the chemical exposures, oil and gas drilling workers have a much higher fatality rate than average—2.5x that of the construction industry and 7x higher than industry as a whole.
US sees no adverse impact from Alberta Clipper pipeline (AP) — After a four-year review, the U.S. State Department on Friday said it does not believe there would be significant negative environmental impact from a Canadian company's plan to boost the capacity of an oil pipeline that crosses the U.S. border in northeastern North Dakota.Calgary, Alberta-based Enbridge Energy Partners asked the State Department in 2012 for a presidential permit to transport 800,000 barrels daily on an existing 3-mile section of pipeline on the company's Alberta Clipper pipeline that carries tar sand oil from Canada across northeastern North Dakota and northern Minnesota to Superior, Wisconsin. The State Department's supplemental environmental impact statement announced Friday was "coincidental" to President Donald Trump's action to advance the Keystone XL and Dakota Access oil pipelines, Enbridge spokeswoman Lorraine Little said."It's been long process to get to this point," Little said. "It is what it is."Todd Leake, a Sierra Club spokesman in North Dakota, said he believes Trump's fingerprints are all over the State Department conclusion."All pipelines are politics and money," said Leake, who farms about 80 miles from where the pipeline crosses into the U.S. near Neche, North Dakota. "All recent approvals of these pipelines go right back to the Trump administration."The State Department is taking public comment on its draft environmental impact statement for 45 days, until March 27. The State Department issues presidential permits for projects that cross the U.S.-Canadian border.
The United States of oil and gas - Washington Post (maps, pictures, graphics) There are more than 900,000 active oil and gas wells in the United States, and more than 130,000 have been drilled since 2010, according to Drillinginfo, a company that provides data and analysis to the drilling industry.We’re familiar with oil-rich regions of Texas, but technological advances and new pipeline infrastructure have brought the ability to extract these resources to new parts of the country, injecting billions of dollars into local economies and spurring a modern-day gold rush. Many oil basins, the deep geologic formations that hold resources, have started to decline in production. But some, like the ever-reliable Gulf of Mexico and the Permian Basin in western Texas and eastern New Mexico, show no signs of slowing down. The Permian has produced oil since the 1920s. Companies hit production peak in the 1970s, when they drilled vertically into reservoirs and the natural pressure immediately caused the oil to flow. Over the next 30 years, production declined throughout the United States. Recently, companies have doubled down on the Permian, using a combination of sophisticated hydraulic fracturing and new horizontal drilling techniques to unlock massive untapped oil and gas resources sitting in layers of shale rock. This is commonly known as fracking.In places like Andrews, Tex., within the Permian geologic formation — already in the middle of oil country — thousands of new wells were drilled in the last 10 years. The population in Andrews County has increased by more than 30 percent since 2005. Similar booms have occurred in other areas as well.
Is The Bakken A Bust? - North Dakota has released December production data for the Bakken and for all North Dakota. They were a little shocking. Bakken production down 86,150 barrels per day 895,330 bpd. North Dakota production down 92,029 bpd to 942,455 bpd. It was noted that this the largest decline ever in North Dakota production. But it should not be overlooked that the October increase in production was also the largest ever increase in North Dakota production. From the Director’s Cut Oil Production
- November 31,034,520 barrels = 1,034,484 barrels/day
- December 29,216,093 barrels = 942,455 barrels/day (preliminary)
- (all-time high was Dec 2014 at 1,227,483 barrels/day
- November 13,520
- December 13,337 (preliminary)
- (all-time high was Nov 2016 at 13,520)
- 11,449 wells or 86% are now unconventional Bakken – Three forks wells
- 1,888 wells or 14% produce from legacy conventional pools
- November 37
- December 40
- January 38
- Today’s rig count is 38 (all-time high was 218 on 5/29/2012)
Judge denies tribes' request to block final link in Dakota pipeline | Reuters: A U.S. federal judge on Monday denied a request by Native American tribes seeking to halt construction of the final link in the Dakota Access Pipeline, the controversial project that has sparked months of protests by activists aimed at stopping the 1,170-mile line. At a hearing, Judge James Boasberg of the U.S. District Court in Washington, D.C., rejected the request from the Standing Rock Sioux and Cheyenne River Sioux tribes, who argued that the project would prevent them from practicing religious ceremonies at a lake they contend is surrounded by sacred ground. With this decision, legal options for the tribes continue to narrow, as construction on the final uncompleted stretch is currently proceeding. Last week, the U.S. Army Corps of Engineers granted a final easement to Energy Transfer Partners LP (ETP.N), which is building the $3.8 billion pipeline (DAPL), after President Donald Trump issued an order to advance the project days after he took office in January. Another hearing is scheduled for Feb. 27, as the tribes seek an injunction ordering the Army Corps to withdraw the easement. Lawyers for the Cheyenne River Sioux and the Standing Rock Sioux wanted Judge Boasberg to block construction with a temporary restraining order on the grounds that the pipeline would obstruct the free exercise of their religious practices. “We’re disappointed with today’s ruling denying a temporary restraining order against the Dakota Access Pipeline, but we are not surprised," Chase Iron Eyes, a member of the Standing Rock Sioux tribe, said in a statement. The company needs to build a 1,100-foot (335 meter) connection in North Dakota under Lake Oahe, part of the Missouri River system, to complete the pipeline.The line would run from oilfields in the Northern Plains of North Dakota to the Midwest, and then to refineries along the Gulf of Mexico, and could be operating by early May.
US judge denies tribes' request to halt Dakota Access oil pipeline construction - A US district judge Monday denied an emergency request by two North Dakota tribes to halt construction of the Dakota Access Pipeline as crews rush to finish the last section of the 470,000 b/d Bakken crude outlet. The Cheyenne River Sioux Tribe and Standing Rock Sioux Tribe were seeking a temporary restraining order against the project based on new legal argument that the project violates their religious freedom. Related: Find more content about Trump's administration in our news and analysis feature. Construction restarted last week when the Army Corps of Engineers granted the project a federal easement to drill under Lake Oahe, a dammed section of the Missouri River in North Dakota that was at the center of protests for months. Judge James Boasberg of the US District Court of the District of Columbia said the tribes still have time before oil starts flowing on the system to argue for a preliminary injunction. Dakota Access estimated last week that it could start commercial service by early May in a best-case scenario. A lawyer said in court Monday that crews might be able to accelerate that timeline. Boasberg asked the company to give him an update February 21 and every Monday thereafter about when it expects to have oil flowing beneath Lake Oahe.The judge set a February 27 hearing for the tribes' preliminary injunction request. The tribes had argued that waters of the Missouri River, which they call Mni Sose, are sacred to them and "constitute the lifeblood of our religion and traditions." "The tribe's treaties and the federal statutes that govern the tribe's rights with regard to the Missouri River establish that the tribe enjoys a clear property right in the waters of the Missouri and enjoys a right to waters that are clean and suitable for drinking, agricultural use, hunting, fishing, and other rights," a lawyer for the Cheyenne River Sioux said in a court filing.
Dakota Access Pipeline 'Could Be Operational Within 30 Days' - A federal judge refused to issue a temporary injunction Monday against construction of the highly controversial Dakota Access Pipeline . The latest setback for the First Nations fighting the pipeline means that it could be "operational in as little as 30 days," according to a lawyer for the company building it, Energy Transfer Partners. In court Monday, lawyers for the Cheyenne River and Standing Rock Sioux tribes had argued that Lake Oahe, which the pipeline crosses, is sacred: "The Lakota people believe that the pipeline correlates with a terrible Black Snake prophesied to come into the Lakota homeland and cause destruction. The Lakota believe that the very existence of the Black Snake under their sacred waters in Lake Oahe will unbalance and desecrate the water." They added the pipeline would "desecrate the waters upon which the Cheyenne River Sioux tribal members rely for their most important religious practices." Cheyenne River Sioux tribe chair Harold Frazier also argued that "to put that pipeline in the ground would be irreparable harm for us in our culture." The judge, U.S. District Judge James Boasberg rejected the claim, though. He argued that he was not ruling on whether the pipeline was "a good or bad idea," but whether construction would cause " imminent harm ." To this end, he ruled that as long as oil actually is not flowing along the pipeline, there is no risk of imminent harm to the tribes, who had argued the pipeline poised a threat on religious grounds. The threat of harm to the tribe "comes from when the spigots are turned on and the oil flows through the pipeline," argued the judge. Although this is a setback for the Indigenous water protectors fighting the pipeline, the judge did say he would consider the case more thoroughly on Feb. 27.
Native American tribes make new court filing to stop Dakota Access pipeline - The Standing Rock and Cheyenne River Sioux Tribes on Tuesday submitted a new filing in a District of Columbia federal court in another last-ditch effort to stop completion of the Dakota Access pipeline in North Dakota. The filing calls the actions of the Army Corps of Engineers in issuing a final easement for the oil pipeline — as well as the agency’s environmental analysis and regulatory actions — “arbitrary, capricious, and contrary to law.” It asks the court to grant a partial summary judgment and vacate that easement. Unlike the previous filing, which made an argument on religious grounds because of the sacred nature of Missouri River waters there, this one cites alleged violations of the National Environmental Policy Act, the Administrative Procedure Act and other statutes. The filing says President Trump, who within four days of his inauguration directed the Army Corps to “review and approve” pipeline permits on an expedited basis, was “perpetuating our nation’s pattern of broken promises to the Tribe.” The tribes say the draft environmental assessment submitted by Dakota Access’s owner, Energy Transfer Partners, was “deeply flawed.” The document allegedly disregarded tribal rights and opposition, failed to assess spill risks and revealed that the owners had abandoned an alternative route north of Bismarck, N.D., because of spill concerns. The filing says Energy Transfer Partners should have submitted a more rigorous environmental impact statement. The Interior Department’s solicitor had acknowledged that the Standing Rock tribe held “expansive Treaty rights in and around Lake Oahe” where the pipeline would cross, just north of the tribe’s current reservation. The lake was created by dams the Army Corps built decades ago across the Missouri River. The filing also argues that the entire pipeline dispute must be seen in the context of the Fort Laramie treaties of 1851 and 1868, which granted the tribes control of a broad area, including the land where the pipeline is being constructed and the waters of the Missouri River.
Dakota Access Pipeline Secret Documents: The U.S. ‘Trustee’ is not Trustworthy - The U.S. Army Corps of Engineers December 4, 2016, decision to undertake a full Environmental Impact Statement (EIS) for the proposed Dakota Access Pipeline (DAPL) crossing of Lake Oahe states something quite startling: Paragraph 5 in the full text states, “Because of security concerns and sensitivities, several documents supporting the [original] Environmental Assessment were marked confidential and were withheld from the public or representatives and experts of the Standing Rock Sioux Tribe. These documents include a North Dakota Lake Oahe Crossing Spill Model Discussion….” How does that square with the February 7, 2017, statement by Acting Secretary of the Army Robert Speer when he announced the Army was aborting the EIS process and withdrawing the notice of intent? Speer said, “the decision was made based on a sufficient amount of information already available which supported approval to grant the easement request.” What information? Available to whom? How sufficient? In whose judgement? What happened to the conclusion reached by the Army’s Assistant Secretary for Civil Works, Jo-Ellen Darcy, in December, when she said, “it’s clear that there’s more work to do”? In Custer Died for Your Sins (1969), Vine Deloria Jr., wrote: “Past events have shown that the Indian people have always been fooled by the intentions of the white man. Always we have discussed irrelevant issues while he has taken our land. Never have we taken the time to examine the premises upon which he operates so that we could manipulate him as he has us.” With the Army’s secret documents and double-talk on Dakota Access Pipeline, Indian country now has yet another example of being fooled and manipulated by the white man. The federal back-and-forth on Dakota Access Pipeline offers an opportune moment to remember—and apply—the ancient adage: “Fool me once, shame on you. Fool me twice, shame on me.” Either way you say it, the moral of the saying leaves no doubt: When the same person uses the same tactics to fool you more than once, you’ve got no one to blame but yourself.
Dakota Access protesters cause "Ecological Disaster" - In a twist of supreme irony, the radical left-wing activists who protested the construction of the Dakota Access Pipeline (DAPL) near Native American land because of its alleged environmental threat have themselves created an environmental crisis.On Wednesday, North Dakota Gov. Doug Burgum signed an emergency evacuation order for the Oceti Sakowin protest camp, close to the Standing Rock Lakota reservation. “Gov. Doug Burgum today signed an emergency evacuation order out of concern for the safety of people who are residing on U.S. Army Corps of Engineers land in southern Morton County and to avoid an ecological disaster to the Missouri River,” the governor’s office said in a statement. “Warm temperatures have accelerated snowmelt in the area of the Oceti Sakowin protest camp … Due to these conditions, the governor’s emergency order addresses safety concerns to human life as anyone in the floodplain is at risk for possible injury or death,” said the statement. However, “the order also addresses the need to protect the Missouri River from the waste that will flow into the Cannonball River and Lake Oahe if the camp is not cleared and the cleanup expedited,” the statement read. “With the amount of people that have been out there and the amount of estimated waste and trash out there, there is a good chance it will end up in the river if it is not cleaned up,” U.S. Army Corps of Engineers spokesman Capt. Ryan Hignight told the Associated Press Wednesday. Just how much waste and trash did the environmentally conscious DAPL protesters leave? “Local and federal officials estimate there’s enough trash and debris in the camp to fill about 2,500 pickup trucks,” reported AP. “Garbage ranges from trash to building debris to human waste, according to Morton County Emergency Manager Tom Doering,” the AP report continued. In addition to rubbish and excrement, there are also a lot of abandoned cars at the site. “We’re going to have a very drastic situation trying to keep these vehicles from getting into the river — what everybody’s been trying to protect from Day One,” he said
Company Behind DAPL Reported 69 Accidents, Polluting Rivers in 4 States in Last Two Years - The energy company behind the disputed Dakota Access Pipeline (DAPL) has reported hundreds of thousands of gallons of spills from pipelines between 2015 and 2016, according to an analysis released earlier this month. According to the Feb. 6 reportfrom the Louisiana Bucket Brigade and DisasterMap.net , Energy Transfer Partners and its subsidiary Sunoco have filed 69 accidents over the past two years to the National Response Center, the federal contact point for oil spills and industrial accidents. That's 2.8 accidents every month, the analysis said, adding that "these are just the accidents that are reported." Dallas-based Energy Transfer Partners owns about 71,000 miles of natural gas, natural gas liquids, refined products and crude oil pipelines across the country. The report lists 42 known oil spills, 11 natural gas spills, nine gasoline spills, three propane spills, two "other" spills and two "unknown" spills. Those 69 incidents led to eight injuries, five evacuations and a total damage dollar amount of $300,000. In all, the total known amount of various substances spilled was 544,784 gallons. "Heavy rain was the explanation for some of the worst accidents. Bad weather, however, just exposes faulty equipment," the report states. "While Energy Transfer Partners and other companies portray weather related accidents as unavoidable, they are in reality a result of poor planning and neglected maintenance. For example, the largest tank fire in history happened in south Louisiana in 2001. Because it occurred during a storm, Orion Refining blamed the weather. In truth, a faulty drain on the tank sank the roof, exposed the gasoline and attracted lightening." Pipeline proponents have repeatedly touted that pipelines are much safer than tankers or trains. But as the report revealed, the majority of Energy Transfer Partners and Sunoco's reported spills (51 percent) were specifically linked to pipelines. Those 35 pipeline-related spills released 111,559 gallons of oil and polluted rivers in four different states, the Louisiana Bucket Brigade pointed out on its Facebook page.
What Do Louisiana Pipeline Explosion and Dakota Access Pipeline Have in Common? Phillips 66 - Steve Horn - The day after the U.S. Army Corps of Engineers gave the owners of the Dakota Access Pipeline (DAPL) the final permit it needed to build its line across Lake Oahe, which connects to the Missouri River, a natural gas liquids pipeline owned by one of the DAPL co-owners exploded and erupted in flames in Paradis, Louisiana. Paradis is located 22 miles away from New Orleans. That line, the VP Pipeline/EP Pipeline, was purchased from Chevron in August 2016 by DAPL co-owner Phillips 66. One employee of Phillips 66 is presumed dead as a result of the explosion and two were injured. In a press release published by Phillips 66 announcing its purchase of VP/EP, the company stated that “approximately 200 miles of regulated pipelines that carry raw NGLs from a third-party natural gas processing plant.” A DeSmog investigation shows that the “third-party natural gas processing plant” is owned by the company Targa Resources, and that plant is fed in part by a gas pipeline owned by Enbridge, another co-owner of Dakota Access. The Targa Resources plant is also known as the VESCO facility, with VESCO shorthand for the Venice Energy Services Company, located in Venice, Louisiana. “Through the Partnership’s 76.8% ownership interest in Venice Energy Services Company, L.L.C., [Targa] operates the Venice gas plant…and the Venice Gathering System ('VGS') that is approximately 150 miles in length,” explains Targa's 2016 U.S.Securities and Exchange Commission Annual Report. “VESCO receives unprocessed gas directly or indirectly from seven offshore pipelines and gas gathering systems including the VGS system. VGS gathers natural gas from the shallow waters of the eastern Gulf of Mexico and supplies the VESCO gas plant.” Enterprise Product Partners and ONEOK serve as co-owners of VESCO. Among the seven pipelines connected to VESCO, one is owned by Enbridge, the Mississippi Canyon Gas Line. That Line feeds gas extracted from the Gulf of Mexico via two offshore wells owned by Shell, as well as other companies, according to Enbridge's website.
Veterans at Standing Rock see police retribution after arrest and charges -- Police have filed charges against two US veterans supporting Standing Rock, holding one in jail for several days, raising concerns that law enforcement is trying to prevent them from aiding activists at the Dakota Access pipeline. Officers in North Dakota and South Dakota have pulled over and searched at least four veterans on their way to the camps at Standing Rock in recent days, charging two of them for medical cannabis. Police confiscated one veteran’s car and also seized what officials called “protester gear”, which included camping supplies. The charges against two veterans, who said they use medical cannabis to treat post-traumatic stress disorder, come days after a veterans service organization announced it would be returning to Standing Rock to provide support. Indigenous activists, known as water protectors, have been fighting the $3.7bn pipeline since last spring and have continued to live at camps near the construction site as drilling has resumed. “I’m honestly disgusted. It makes no sense to us,” said Mark Sanderson, executive director of VeteransRespond, the group coordinating the return to Standing Rock. “Why are you trying to attack a group of veterans doing nothing more than a humanitarian aid mission in North Dakota?” News of the charges adds to growing concerns that law enforcement is aggressively monitoring, arresting and prosecuting people affiliated with the anti-pipeline movement. Guardian recently reported that an FBI terrorism task force has attempted to contact at least three people tied to the demonstrations. The Morton County sheriff’s office announced the news of the arrests late Monday with a press release titled “Leader of VeteransRespond Cited for Drug Possession”, which summarized charges against a number of vets.
Why is the Joint Terrorism Task Force Questioning Water Protectors? - FBI Joint Terrorism Task Force (JTTF) agents have attempted to question a number of activists involved with the ongoing protests against the Dakota Access Pipeline (DAPL) at Standing Rock. This surprises exactly no one. According to Lauren Regan, a civil rights attorney who has helped with legal support at Standing Rock, JTTF agents visited at least three activists in recent weeks. These visits were “knock and talks,” which is when the FBI shows up, sans warrant, and tries to “voluntarily” engage the individual in a conversation. Such voluntary conversations are intimidating, and dangerous because they are fishing expeditions. The agent can ask about almost anything and seemingly innocuous comments can be developed into “incriminating” information and an individual can be charged with lying to a federal agent. Individuals should never talk to the FBI without a lawyer present.We have documented how the FBI continuously uses its counter-terrorism authorities to investigate First Amendment activity, most recently including Black Lives Matter movement, School of the Americas Watch, and anti-Keystone Pipeline protesters.If it’s a major movement for social, economic, or racial justice, chances are the FBI is interested–for the wrong reasons. And we can only expect that the FBI and their JTTFs will be engaging in more of these visits, as well as monitoring, infiltrating, and trolling for informants at meetings, conferences, and protests in the coming years.
US veterans return to Standing Rock to form human shield to protect Dakota Access pipeline protesters | The Independent: US army veterans are returning to Standing Rock to protect Dakota Access pipeline protesters amid violent clashes with the police. Native American activists are camped near the construction site and some hope the veterans could make it harder for police to remove them. “We are prepared to put our bodies between Native elders and a privatised military force,” air force veteran Elizabeth Williams told The Guardian. “We’ve stood in the face of fire before. We feel a responsibility to use the skills we have.”
Tribe, Dakota Access developer face off at House hearing | TheHill: Representatives from the company building the Dakota Access pipeline and the tribe opposing it both told a House committee Wednesday that the government is responsible for the tense debate over the project. But the officials found time to point fingers at one another, as well. At a hearing on energy infrastructure improvements, an Energy Transfer Partners official said political appointees in the Obama administration were behind the push to slow down the project. He said it was a “political decision” to withhold an easement allowing construction at a controversial river crossing in North Dakota.But the Standing Rock Sioux tribe, which has sued to stop the pipeline, also had “no interest in discussing the project with us,” Dakota Access project director Joey Mahmoud charged. “Requests for consultation were mostly denied,” Mahmoud told the Energy and Commerce Committee. “We had some conversations with the tribal chairman, but at the same time we were not able to have meaningful consultation due to lack of engagement.” Energy Transfer Partners last week received an easement to build its pipeline under Lake Oahe on the Missouri River in North Dakota. The company hopes to begin running oil through the 1,172-mile pipeline within two months, after it was delayed for much of the past year while the Obama administration reconsidered permitting decisions for the project. “We came to realize that good-faith efforts to meet accommodation — with many different stakeholders involved — can be a fool’s errand when political motivation overrides the rule of law,” Mahmoud said. Chad Harrison, a councilman-at-large for the Standing Rock Sioux, said the company improperly “argues it is the victim here,” when it has instead benefited under the Trump administration. “Dakota Access is a multibillion-dollar pipeline company in which the president of the United States has been an investor and whose CEO has been a campaign contributor to the president,” Harrison said. “When in history has such a company been a victim of an improvised Indian tribe? The answer is never.”
Dakota Access Builder Compares Pipeline Protesters to Terrorists -- The company building the Dakota Access pipeline told Congress that protesters trying to block the project were akin to terrorists. "I fear the aggressive tactics we have seen in North Dakota will soon be the norm -- if they are not already," Joey Mahmoud, an executive vice president for the company, said in his written testimony before a panel of the House Energy and Commerce Committee. "Had these actions been undertaken by foreign nationals, they could only be described as acts of terrorism." Energy Transfer Partners largely stayed mum during the months in which supporters of the Standing Rock Sioux Tribe camped out by a section of the pipeline that was left uncompleted, stalled by the Obama administration. After President Donald Trump took office, the Army Corps of Engineers issued the final permit so the $3.8 billion, 1,172-mile crude oil pipeline could be connected beneath Lake Oahe and completed. Mahmoud said employees and their children faced death threats and activists broke into and shut down pump stations on four operational pipelines. He said the activism was part of a "well-funded effort based primarily on hostility to fossil fuels." Protesters were getting paid, he claimed.
Pope appears to back native tribes in Dakota Pipeline conflict | Reuters: Pope Francis appeared on Wednesday to back Native Americans seeking to halt part of the Dakota Access Pipeline, saying indigenous cultures have a right to defend "their ancestral relationship to the earth". The Latin American pope, who has often strongly defended indigenous rights since his election in 2013, made his comments on protection of native lands to representative of tribes attending the Indigenous Peoples Forum in Rome. While he did not name the pipeline, he used strong and clear language applicable to the conflict, saying development had to be reconciled with "the protection of the particular characteristics of indigenous peoples and their territories". Francis spoke two days after a U.S. federal judge denied a request by tribes to halt construction of the final link of the project that sparked months of protests by activists aimed at stopping the 1,170-mile line. Speaking in Spanish, Francis said the need to protect native territories was "especially clear when planning economic activities which may interfere with indigenous cultures and their ancestral relationship to the earth". The Standing Rock Sioux and Cheyenne River Sioux tribes have argued the project would prevent them from practicing religious ceremonies at a lake they say is surrounded by sacred ground. "In this regard, the right to prior and informed consent (of native peoples) should always prevail," the pope said, citing the 1997 U.N. Declaration on the Rights of Indigenous Peoples.
Governor orders evacuation of Dakota pipeline protest camp | Reuters: The governor of North Dakota ordered protesters on Wednesday to evacuate a demonstration camp near the site of the Dakota Access Pipeline in the latest move to clear the area that has served as a base for opposition to the multibillion dollar project. Republican Doug Burgum ordered demonstrators to leave the camp located on land owned by the U.S. Army Corps of Engineers by Feb. 22, citing safety concerns that have arisen due to accelerated snowmelt and rising water levels of the nearby Cannonball River. Burgum also said in his executive order that the camp poses an environmental danger to the surrounding area. His order reaffirms a Feb. 22 deadline set by the Army Corps for the demonstrators to clean up and leave. Environmentalists and Native Americans who have opposed the pipeline, saying it threatens water resources and sacred sites, have faced a series of set-backs since President Donald Trump took office in January. A federal judge on Monday denied a request by Native American tribes seeking to halt construction of the final link of the $3.8 billion pipeline after the Corps of Engineers granted a final easement to Energy Transfer Partners LP last week.
Alaska Oil Bust Threatens Life of Few Taxes and Dividend Checks - The oil-industry rout is spurring Alaska to reconsider perks long enjoyed by its 741,894 residents: No income taxes, plus annual dividend checks drawn from the state’s investment earnings. No state relies as heavily on petroleum production as Alaska, and with the price of oil hovering at around $54 a barrel -- about half the peak in 2014 -- the government is contending with similar fiscal pressures seen in nations such as Venezuela, Saudi Arabia and Russia. With an economy in recession, Alaska has burned through $13 billion of savings over the past four years and is facing a $3 billion shortfall for the year that starts in July. An emergency fund is projected to run dry in mid-2018. And without a fix, S&P Global Ratings warns that it may downgrade the state’s bond rating again, which would raise borrowing costs for projects such as a natural-gas pipeline aimed at reviving the economy. "It’s a quantum shift in people’s thought process," said Randall Hoffbeck, the state’s revenue commissioner. "We’re at a point now, because of reduced oil and gas revenue, that we’re going to have to start looking a little a bit like everybody else if we’re going to maintain the services that people have come to expect.” Alaska, which became a state in 1959, reaped an average 84 percent of its revenue from oil production from 1980 to 2014, according to a report from the state’s Office of Management and Budget. With prices down, Alaska has slashed its budget nearly in half since 2013 and reduced public payrolls to where they were in 2002. Even so, next year’s deficit in the $4.3 billion budget equates to about $4,000 per resident.
Energy Companies Face Crude Reality: Better to Leave It in the Ground - A new era of low crude prices and stricter regulations on climate change is pushing energy companies and resource-rich governments to confront the possibility that some fossil-fuel resources are likely to be left in the ground. In a signal that the threat is growing more serious, Exxon Mobil Corp. is expected in the coming week to disclose that as much as 3.6 billion barrels of oil that it planned to produce in Canada in the next few decades is no longer profitable to extract. The acknowledgment by Exxon, after the company spent about $20 billion to put the oil sands at the center of its growth plans, highlights how dramatically expectations have changed about the future prospects of the region. Once considered a safe bet, Canada’s vast deposits are emerging as among the first and most visible reserves at risk of being stranded by a combination of high costs, low prices and tough new environmental rules. “For a lot of reasons the oil sands look like a prime candidate for eventual abandonment,” said Jim Krane, an energy fellow at Rice University’s Baker Institute. “One problem is that costs are persistently higher. The high carbon content only makes it worse.” During most of the past decade, Exxon and other giant oil companies spent billions of dollars in Canada as part of a global quest for new sources of supply, as analysts cautioned about “peak oil,” or the risk of running out of the resource. Prices surged to $140 a barrel. Companies were driven in part by the need to replenish their reserves of oil and gas, since investors have traditionally looked at such numbers as an important barometer for a resource company’s future. But now, the worry is more about “peak demand.” Amid a glut of supply that led to a price collapse in 2014 and a tepid recovery, investors and executives at some of the world’s biggest energy producers are considering the possibility that oil demand could peak and then slow in the coming decades. The shift from a preoccupation with insufficient supply to worries about demand has altered investment priorities away from high-cost opportunities in the Arctic, ultra-deep waters and the oil sands. Such projects can require billions of dollars in upfront investment and seven to 10 years, or more, to bring returns. Instead, companies are increasingly focusing on new sources of crude oil, such as shale, that don’t require the same massive investment and that can get from development to production much more quickly.
How a Russian Steel Oligarch and Putin Ally Is Profiting from the Keystone XL Pipeline – Steve Horn - Believe it or not, there's a key connection to Russia and its president, Vladimir Putin, in the fight over North America's controversial Keystone XL pipeline. One of President Donald Trump’s first actions in office was to sign an executive order on January 24 expediting the approval of the Keystone XL. Owned by TransCanada, this tar sands oil pipeline was halted by former President Barack Obama in November 2015. Trump signed another order on January 24, calling for steel for U.S. pipelines to be made in the U.S. to the “maximum extent possible,” and two days later TransCanada filed a newpresidential permit application for Keystone XLwith the U.S. Department of State. Critics, such as John Kemp of Reuters, pounced on the caveat language in Trump’s steel order and noted that it appears “designed to preserve lots of wiggle-room.” In fact, a DeSmog investigation reveals that much of the steel for Keystone XL has already been manufactured and is sitting in a field in rural North Dakota. DeSmog has uncovered that 40 percent of the steel created so far was manufactured in Canada by a subsidiary of Evraz, a companypartly owned by Russian oligarch Roman Abramovich, who is a close ally of Putin and a Trump family friend. Evraz has also actively lobbied against provisions which would mandate that Keystone XL's steel be made in the U.S. Abramovich is described in the 2004 book Abramovich: The Billionaire from Nowhere as “one of the prime movers behind the establishment of the only political party that was prepared to offer its undiluted support to Putin when he fought his first presidential election in late 1999. When Putin needed a shadowy force to act against his enemies behind the scenes, it was Abramovich whom he could rely on to prove a willing co-conspirator.” Evraz describes itself as “among the top steel producers in the world based on crude steel production of 14.3 million tonnes in 2015.”
Wall Street Pouring Money Back Into Oil And Gas -- Despite the near record increase in U.S. oil inventories last week – an increase of 13.8 million barrels – oil prices traded up on February 8 and 9 as traders pinned their hopes on a surprise drawdown in gasoline stocks, which provided some evidence of stronger-than-expected demand.The abnormal crude stock increase took inventories close to 80-year record levels at 508 million barrels, and is another bit of damming evidence that should worry oil bulls. But the oil markets were not deterred. In fact, that has been a defining characteristic of the market in recent weeks – optimism even in the face of some pretty worrying signals about the trajectory of the market “adjustment” process. More signs of optimism abound. Wall Street is pouring the most money into oil and gas companies in the U.S. since at least 2000, according to Bloomberg. In January alone, drillers and oilfield service companies raised $6.64 billion in 13 different equity offerings. "The mood is absolutely different," Trey Stolz, an analyst at the investment banking firm Coker & Palmer Inc., told Bloomberg. "Go back to a year ago and the knife was still falling. But today, it feels much, much better." Moreover, the money raised for these U.S. companies represented more than two-thirds of the total $9.41 billion in new energy equity issued across the globe in January. Big Finance is ready to pour money back into the oil and gas sector and they are doing it mostly in the U.S. The industry should see more activity this year as companies rush to conclude deals ahead of the rebound. A new report from Moody’s Investors Service predicts that M&A activity will rise substantially in 2017. “E&P acquisitions and divestitures dropped off when commodity prices collapsed in late 2014, but have significantly ticked up since mid-2016,” the Moody’s report says.
U.S. shale oil output to rise in March by 80,000 bpd: EIA | Reuters: U.S. shale oil production for March is expected to rise by the most in five months, government data showed on Monday, as energy companies boost drilling on the back of oil prices that are hovering over $50 a barrel. March oil production is forecast to rise by 79,000 barrels per day to 4.87 million bpd, according to the U.S. Energy Information Administration's drilling productivity report. That would be the biggest monthly rise since October. In the Permian shale play of West Texas and New Mexico, output is forecast to rise by more than 70,000 bpd to 2.25 million bpd, in what would be the biggest monthly rise since January 2016. Meanwhile, Eagle Ford production in Texas is expected to rise by 14,000 bpd to 1.08 million bpd, the first monthly increase since December 2015, EIA data showed. In North Dakota's Bakken field, production is forecast to fall by nearly 18,000 bpd to 976,000 bpd, the fifth consecutive month-on-month decrease.
Strategic petroleum reserve add-ons, and why they're needed. The Shale Revolution has caused big changes in U.S. crude oil production, in domestic flows of crude via pipelines, ships and rail tankcars, and in crude import volumes. Flow changes in particular have negatively affected the Strategic Petroleum Reserve’s ability to accomplish its two primary goals: protecting U.S. refineries from the worst effects of a major crude oil supply interruption, and—when called upon by the International Energy Agency—quickly injecting large volumes of crude into global markets. A fix now in the works would add Gulf Coast marine terminals dedicated specifically to moving SPR-stockpiled crude to those who need it, both within the U.S. and overseas. Today we conclude a two-part blog series on challenges and coming changes at the SPR. Crude oil helps drive economies around the world, and the world was—and still is—chock full of risk. The U.S., like other net oil-importing members of the International Energy Agency (IEA), has two obligations under the agency’s International Energy Program (IEP), which was established in the wake of the 1973-74 OPEC oil embargo. First, the U.S. needs to maintain crude oil inventories equal to at least 90 days of its net imports. Second, if the IEA calls for a collective response by its members to an international crude oil supply crisis, the U.S. is obligated to contribute to that effort volumes of crude equal to its share of total oil consumption by IEA’s members. That share is currently ~44%, which means that if there were a 4 million barrel/day (MMb/d) interruption in supply (from, say, a war in the Middle East), the U.S. would need to inject nearly 1.8 MMb/d (4 million barrels times 0.44) to keep its promise to IEA/IEP.
February To End On A Very Bearish Tone - Natural Gas Daily - Just when we thought the February outlook couldn't get any worse, and after updating to the public that the 6-10 day outlook worsened last Friday, it worsened again over the weekend. To put the latest forecasts into storage draw figures, the bearish developments back to back have now reduced storage forecast for 2/24 week by more than 80 Bcf. Yes, you read that correctly. On a five-year average basis, storage draws for 2/24 week will be less than half of the five-year average storage draw of -132 Bcf and less than last year's (already bearish) storage draw of -67 Bcf. To put it into context, one couldn't have asked for a more bearish finish than the latest update. As a result of the next 6-10 day forecast, meteorologists peg February 2017 as the top 3 warm February of all time.As we look ahead, weather begins to play less important of a role from March and onward, we have recently revamped our premium natural gas update content for premium subscribers to start including all of the daily flow fundamentals. From March to November this year, fundamentals will be the big driver to natural gas prices.Over the weekend, we also released our latest updated natural gas thesis to the public. A combination of higher takeaway capacity in the Marcellus and Utica and surplus storage to end April EOS resulted in us reducing our thesis that natural gas (NYSEARCA:UNG) prices needed to stay above $4/MMBtu for 8-12 months. Our new curve estimate is $3.50/MMBtu.
NYMEX March gas futures settle at $2.925/MMBtu, up 2 cents - The NYMEX March natural gas futures contract rose Wednesday after three straight sessions of declines on the eve of the release of the US Energy Information Administration's weekly natural gas storage report. The contract settled at $2.925/MMBtu, up 2 cents from Tuesday, after trading between $2.917/MMBtu and $2.994/MMBtu over the session. The EIA on Thursday is expected to estimate a 126-Bcf withdrawal of gas from storage for the reporting week ended February 10, according to a consensus of analysts surveyed by S&P Global Platts. The prompt month has fallen some 24.3 cents since it closed at $3.168/MMBtu on February 1, according to S&P Global Platts data. Compared with the prior two years, however, the 2017 March contract has so far averaged a higher daily close of $3.075/MMBtu, while the 2016 March contract averaged $1.93/MMBtu and 2015 March averaged $2.755/MMBtu. The contract's price drop this month has been due largely to shifting weather patterns, and markets could resume a downward shift given that somewhat bearish weather remains on the horizon for much of the US. The National Weather Service forecast below-normal temperatures in the western one-third of the continental US over the next six to 10 days, and above-normal temperatures for the eastern two-thirds of the country. That bearish forecast for the eastern US will put pressure on overall US demand. Platts Analytics' Bentek Energy forecast US demand to shrink almost 10 Bcf over the next seven days to 76.2 Bcf, compared with a February 15 estimate of 86 Bcf.
U.S. natural gas market tightens despite exceptionally mild winter: Kemp | Reuters: Warm weather has masked how much the underlying supply and demand picture for U.S. natural gas has tightened this winter thanks to lower production and strong exports. The winter heating season of 2016/17 has so far been even milder than that of 2015/16, which was itself the warmest winter on record. Since the start of the current season on July 1, 2016, according to the National Oceanic and Atmospheric Administration, there have been 2,454 population-weighted heating degree days - a measure of how cold the temperature was on a given day or over a period of days. Heating demand is running 3 percent below last year, when there were 2,541 population-weighted heating degree days at this point, and 17 percent below the long-term average of 2,960. With the exception of two short cold spells in early/mid-December and early January, the weather has been mostly warmer than normal since September. The unusual run of mild weather has confounded forecasters, who mostly predicted this winter would be somewhat colder than the record warm winter of 2015/16. But if temperatures have matched 2015/16, the development of the gas market could not have been more different. Working gas stocks in underground storage have fallen much more rapidly, eliminating the big surplus left at the end of winter 2015/16. Stocks are now 303 billion cubic feet below the level at the same point in the last heating season, having started the season 538 billion cubic feet above the previous year.
US gas market contango leaves questions around production, storage – Platts Snapshot video - Abnormally warm weather patterns have weighed heavily on US natural gas futures, and market participants are considering storage, production and demand changes ahead in 2017. Samer Mosis shares Platts Analytics' Bentek Energy forecast for production as well as how internal rates of return, as tracked by Platts Well Economics Analyzer, could play into those expectations.
UK LNG stocks fall at 46-month low on weak delivery schedule - The amount of natural gas equivalent held in tank in the UK's three LNG regasification terminals fell to the lowest since March 2013 over the weekend as a weak delivery schedule led to stocks running low despite poor regas rates, data from National Grid showed Tuesday. LNG stocks combined began Monday's gas day at 429 million cu m of natural gas equivalent, below the levels recorded in March/April last year and falling further towards the low seen 46 months ago. Stock levels were split between Isle of Grain, South Hook, and Dragon at 187 million cu m (32% of capacity), 171 million cu m (35%), and 71 million cu m (37%), respectively, National Grid data showed. Total LNG stock levels were less than half the 2017-to-date high of 918 million cu m from early January and over 200 million cu m shy of the five-year average of 642 million cu m. The unseasonably low stock levels have come despite regasification having been at low levels this winter, as deliveries of LNG into the UK have been much lower this winter compared with previous seasons amid higher pricing and firmer spot demand elsewhere. Between October 1 and January 31, nine LNG tankers delivered LNG into the UK, with South Hook receiving six vessels from Qatar, Isle of Grain receiving three -- two from Qatar, one from Nigeria -- and Dragon none. During the first four months of the Winter 2015-16 delivery period, South Hook received 30 vessels from Qatar alone. Isle of Grain received six -- three from Algeria and one each from Norway, Qatar, and Trinidad & Tobago -- and Dragon two Qatari deliveries. This has been countered by regas levels being well down this winter compared with previous winters.
UK gas-for-power demand hits six year high - UK gas-fired power generation hit a six-year high in January as day-ahead gas and power prices both climbed strongly, according to S&P Global Platts data. Gas-for-power demand stood at 2.21 billion cubic meters (Bcm) in January, recording increases of 6% month-on-month and 30% year-on-year. Cumulative gas-for-power demand for Winter 2016-17 to date stood at 8.43 Bcm, an increase of 56% on an annual basis and already 16% higher than total gas-for-power demand during the whole of Winter 2014-15. “Improved economics for UK gas plant have coincided with coal plant closures, accelerated by the UK Government’s Carbon Price Floor,” said Henry Edwardes-Evans, managing editor of Power in Europe, an S&P Global Platts publication. “This tax on CO2 emissions has hammered coal plant economics, to the point where Capacity Market subsidies are required to keep them open and bolster security of supply,” Edwardes-Evans said. Gas plant profits are under pressure again, however, with UK gas pricing supported by colder-than-average temperatures, a weak LNG delivery schedule, and more expensive Continental European hub pricing.
Trump holds the key to the revival of Scotland’s North Sea oil industry - Professor Alex Kemp said the chances of the North Sea fields fulfilling their remaining potential are hanging in the balance — with Donald Trump playing a pivotal role. He believes our offshore future depends on how the new US President handles a high-stakes production war with operators in Russia and the Middle East. And he fears Trump’s gung-ho approach, which has already seen him revive two controversial oil pipeline projects blocked by Barack Obama, suggests he could crank up US production again — possibly sparking another price slump and crippling North Sea output further. Prof Kemp said: “Our modelling is saying that at a price between $50 and $60 a barrel, some new investment in the North Sea might go ahead. But at $50 — not much at all.”
Record Russian natural gas flows via Nord Stream 1 fall after OPAL injunction - Platts podcast - Russia's Gazprom sent record natural gas volumes to Europe in January, making full use of its brief extra access to its OPAL pipeline in Germany to send more gas via Nord Stream 1 to meet higher demand from cold weather. But warmer weather and a legal injunction blocking future extra OPAL access until further notice saw Nord Stream 1 flows drop in February, while flows through Ukraine remained steady. S&P Global Platts editors Siobhan Hall and Lucie Roux and analyst Anise Ganbold discuss the impact of demand, Russian route choices and lawyers on the European gas market this winter, and what to look out for next. Read our related special report: US LNG vs pipeline gas: European market share war?
Nord Stream 2: The elephant in the room -- Last week the European Commission released its second ‘State of the Energy Union’. In the area of security of supply, the Commission highlighted achievements in building natural gas interconnectors, the fact that new liquid gas (LNG) terminals entered into operation and that work had begun on parts of the Southern Gas Corridor, a gas pipeline project in the Caspian region. Notwithstanding this progress, the State of the Energy Union failed to make a single mention of the biggest issue that threatens to derail much of the work: the planned Nord Stream 2 natural gas pipeline between Russia and Germany. When launched the Energy Union emphasised the need to diversify energy sources, suppliers and routes to ensure secure and resilient energy supplies. Upon closer inspection, the Nord Stream 2 pipeline in fact does the opposite. The project only contributes to route diversification for the Russian state-owed gas company Gazprom as it seeks ways to reduce its dependence on Ukraine and cements the company’s dominance in the German gas market by raising its market share to over 50 percent. More worrying perhaps, it would concentrate 80 percent of Russian gas imports into a single supply route. This could hardly have been the Energy Union’s intention when it was first presented.
Spain takes another US LNG cargo, third so far in 2017 - Another cargo of US LNG arrived at the weekend in Spain, according to cFlow, Platts trade flow software, the third delivery from the Sabine Pass terminal to Spain since the start of 2017. The cargo was delivered by the Methane Spirit into the eastern Spanish terminal of Sagunto and comes despite a plunge in Spanish gas prices since the start of February. Deliveries of flexible US LNG into the Iberian Peninsula in southwestern Europe have picked up since the start of 2017 as prices in the region surged on unusually cold weather and a month-long unplanned outage at the Skikda LNG export facility in Algeria.The latest delivery to Spain is the fourth to Iberia since mid-January following two previous cargoes to Spain and one to Sines in Portugal so far in 2017. Spain took its first US LNG cargo in the summer of 2016, but no others landed on Spanish shores until January 2017 as prices in Europe did not attract US LNG imports. But Spanish PVB gas prices soared from the end of December into late January due to rising demand amid the unexpected cold snap. Platts assessed the Spanish PVB month-ahead price at as high as Eur33/MWh -- more than $10/MMBtu -- in mid-January, a significant premium to the traditionally higher Platts Asian spot LNG JKM assessment. The high prices created an incentive for US LNG to come to Spain and Portugal, proving the price responsiveness of US LNG.
Asian gasoline crack to Brent crude hits 13-month high on strong demand - - Strong demand pushed the physical benchmark FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures to a 13-month high of $13.14/b at the Asian close last Friday, S&P Global Platts data showed. The crack was last higher on January 27, 2016, at $13.32/b, Platts data showed. Demand is being driven mainly by Abu Dhabi Oil Refining Co.'s, or Takreer's, requirements for March-April. Production from its 840,000 b/d Ruwais refinery in the UAE had been reduced to 50% by the closure of its west refinery due to a fire January 11 at its 127,000 b/d RFCC, crimping gasoline production. To plug the shortfall, ADNOC is seeking 240,000 mt of 95 RON gasoline in nine 27,000 mt cargoes over March-April delivery in a tender valid until February 19.Demand within Asia was also buoyant, with firm buying from Indonesia and Vietnam. Indonesia's March requirements were heard to be around 10 million-11 million barrels, more than February's 8 million-9 million barrels of imports. Recently concluded tenders in Asia also reflected an uptrend in cash differentials. Taiwan's CPC sold 30,000 mt of 92 RON gasoline for March 6-22 loading from Kaohsiung at a premium of 30-40 cents/b to the Mean of Platts Singapore 92 RON gasoline assessments on an FOB basis. It had previously sold two cargoes of 92 RON gasoline for February loading at premiums of 25-30 cents/b to the MOPS 92 RON gasoline assessments, FOB. A source close to the company said there were more bids for the latest tender than for the previous month.
China's independent refiners could get regulated away –- China’s regulatory pendulum has swung from supporting independent refiners by encouraging competition and deregulation to favoring state-owned oil companies, which could have the impact of regulating many of the independents out of business. In early 2015 China’s independent refiners, or teapots, were set to soar. Beijing’s policy makers gave teapots permission to import crude and export refined products. Regulators are now reminding independents that they really are not independent. In 2017, rather than giving teapots full year import quotas, regulators will allot the quotas in several rounds, and the first round was delayed by half a month. If the allocation had been further delayed, “we would not have enough feedstock to sustain normal runs in the refinery in addition to having to pay a high demurrage,” said a source at a Shandong-based independent refiner. The government has also yet to award refined product export permits to independents, which under what is called the “processing trade route,” allows refiners to not pay taxes on the exports. Without the export permits, independents would end up paying taxes on refined products exports, forcing them on the domestic retail market, where they lack a competitive edge. Fueling stations, which supply about 80% the road transportation fuel in China, are owned by state-owned companies Sinopec and CNPC’s PetroChina. To be competitive, independents have to sell gasoline at about Yuan 1,000-Yuan 2,000/mt lower than their state-run competitors, an amount they can ill afford to charge and stay profitable.
Oman emerges as unexpected beneficiary of OPEC crude oil output cuts amid Chinese demand - The Oman crude complex has strengthened to a more than two-month high against Dubai on the back of strong demand from Chinese independent refiners, which recently received their crude import quota for 2017, traders said Wednesday. The spread between the front-month Oman cash assessment and Dubai assessment widened to 79 cents/b at Tuesday’s Asia close, the widest since November 30 when it was 80 cents/b. It was assessed at a premium of 78 cents/b to front-month cash Dubai assessment on Wednesday, S&P Global Platts data showed. For the month-to-date, Oman commanded an average premium of 58 cents/b over Dubai, more than double the average of 25 cents/b in January. Bigger cuts by most OPEC members may have pushed some buyers to take Oman crude cargoes instead, according to trade sources. A production cut of only 45,000 b/d was expected from Oman, less than 10% of that expected from Saudi Arabia. Oman crude is easier to get, a Singapore-based trader said, attributing its attractiveness to its relative abundance. “Demand for Oman [crude is] still firm, especially from the Chinese independent refineries,” another trader in Singapore said.
Non-OPEC curde oil production cut compliance at 50%: Kuwait oil minister - Oil | Platts News Article & Story: Non-OPEC producers are only complying with 50% of their agreed cuts, under the landmark OPEC/non-OPEC output deal, Kuwaiti oil minister Essam al-Marzouq said Monday in a statement. OPEC's compliance with the November 30 production cut agreement was 92% since the deal became effective in January, the minister said in a brief statement to state-run Kuna news agency. Under the agreement, OPEC pledged to cut 1.2 million b/d from its October output levels for six months starting from January 1 and freeze production at around 32.5 million b/d, including Indonesia. It was joined by 11 non-OPEC countries, led by Russia, who agreed to cut output by 558,000 b/d in the first half of 2017. Marzourk chaired the first meeting in mid-January of a five-country committee created to monitor and enforce the OPEC/non-OPEC deal. Regular monthly meetings are planned.A technical committee is due to meet again February 21-22 at OPEC's headquarters in Vienna, and a ministerial meeting will be held March 22-23, Russia's energy minister Alexander Novak said Saturday.The International Energy Agency said Friday OPEC had made a "solid start" to its six-month production cut pact, with the producer group's implementation amounting to 90%.S&P Global Platts' own estimate earlier this month put OPEC's January production at 32.16 million b/d, down 690,000 b/d from December. The 10 OPEC members obligated to reduce oil output achieved 91% of their required cuts, with their production falling 1.14 million b/d from October.The IEA said in its latest monthly oil market report, OPEC crude output had fallen 1 million b/d in January to 32.06 million b/d. It also said overall global oil output had fallen by 1.5 million b/d. But it noted that while some members, notably Saudi Arabia, had cut more than the agreed amount, others such as the UAE and Venezuela had over-produced by 90,000 b/d and 80,000 b/d respectively.
Oil Flat As OPEC Cuts Offset By Shale - Oil is flat out of the gates this week with a continued “wait-and-see” approach, as the IEA put it. OPEC compliance looks good but U.S. drilling continues to rise. Since the ban on crude oil exports was lifted a little over a year ago, exports from the U.S have proceeded slowly. However, exports are finally beginning to pick up steam, averaging 623,000 bpd so far in 2017, up 42 percent from the same period a year earlier. U.S. crude exports could rise to 900,000 bpd at some point this year. Helping U.S. exporters is the steeper discount between WTI and Brent, making U.S. crude more competitive on the international market. Refining production of gasoline and diesel in Asia will exceed demand by 750,000 bpd this year, according to BMI Research. The firm expects the glut to persist through 2021 at least, a staggering supply overhang that could weigh on prices. It will also weigh on the profits of refiners in Asia as margins are set to remain low for the foreseeable future. Part of the reason for the glut is the wave of refining complexes planned years ago that have come online. But the demand side of the equation is also to blame, with Chinese oil demand growth set to slow to just 1.7 percent per year for the next eight years, after growing by an average of 5 percent for the past decade. With oil prices doubling over the calendar year in 2016, the energy sector offered some of the juiciest returns for investors – energy was the best performer in the S&P 500 last year, rising by 24 percent. Now, with oil prices stagnating in the $50s, the fat returns are over. The S&P Energy sector is down 3.6 percent year-to-date. According to OPEC’s latest monthly report, Saudi Arabia says that it has cut production much deeper than it was required as part of the deal reached last November. Saudi oil production dropped to 9.748 mb/d in January, lower than the 10.06 mb/d cap that it had agreed to. The reduction of 717,600 bpd since last fall has helped the group adhere close to its target. “OPEC has done particularly well, they’ve surprised most analysts,” Spencer Welch, director of oil markets and downstream at IHS Markit, told Bloomberg. “Saudi Arabia has made a particular effort to boost compliance.” It should be noted, however, that some analysts see this as the high watermark for compliance. Saudi Arabia will be under pressure to increase production as temperatures rise in order to offset demand, and the idea of front-loading steep cuts was intentional in order to inspire confidence in the deal from the market. The non-OPEC countries participating in the deal are posting a 50 percent compliance rate right now.
Oil Slips Most in 3 Weeks as OPEC Cuts Face Rising U.S. Output -- Oil declined in New York as OPEC’s supply cuts are tempered by a revival of shale drilling in the U.S. Futures slid 1.7 percent in New York, the biggest drop in more than three weeks. Saudi Arabia told OPEC it cut oil production by the most in eight years, while Kuwaiti Oil Minister Essam Al-Marzooq said the organization as a whole has delivered 92 percent of the output curbs it pledged. Meanwhile, U.S. oil drillers increased the rig count to the highest since October 2015, and the Energy Information Administration sees U.S. shale-oil output jumping next month to the highest level since May 2016. Oil has fluctuated above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other nations started trimming supply from Jan. 1 to help ease a global glut. The market will shift into a deficit during the first half of the year, and U.S. crude stockpiles will shrink amid a decline in imports as the curbs take effect, Goldman Sachs Group Inc. said last week. Higher crude prices have spurred drilling in the U.S., the world’s biggest oil consumer. “This is where the market takes a pause," Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. "You have to balance what OPEC can achieve in the next six months versus increases in production elsewhere that dilute the effects of those cuts.” West Texas Intermediate for March delivery fell 93 cents to settle at $52.93 a barrel on the New York Mercantile Exchange. Total volume traded was about 3 percent below the 100-day average. Brent for April settlement dropped $1.11, or about 2 percent, to end the session at $55.59 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a premium of $2.16 to April WTI.
Oil prices pare gains as US supply concerns overshadow OPEC cuts: Oil pared gains on Tuesday as concerns about rising supply from U.S. shale output overshadowed an OPEC-led effort to cut global output, which has supported oil prices in a higher range. U.S. light crude oil ended Tuesday's session 27 cents higher at $53.20, after earlier rising to $53.72. Brent crude was 36 cents higher at $55.95 a barrel by 2:53 p.m. ET (1953 GMT) off a session peak of $56.46 a barrel. An early morning rally lost steam as the dollar strengthened after U.S. Federal Reserve Chair Janet Yellen said she expects central bankers to raise interest rates at an upcoming meeting. A stronger greenback makes dollar-denominated commodities such as crude oil more expensive to holders of other currencies.The two benchmarks fell 2 percent on Monday. They are both now in the middle of $5-per-barrel trading ranges seen since early December. "The usually fairly volatile oil price has barely budged for two months, the reason being conflicting dynamics in the market," said Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam. The Organization of the Petroleum Exporting Countries and other exporters including Russia have agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017 in a bid to rein in a global fuel supply overhang. The market has largely priced in the production cuts that OPEC and other producers agreed to in November, leaving little room for prices to break out of the range, "It would take either a supply outage or serious cuts to move it," he said. "The first month, obviously, OPEC is going to do the best it can, but after that, let's see what the second and third month bring."
Why Sub $50 Oil Is More Likely Than $70 Oil – Berman - It is more likely that oil prices will fall below $50 per barrel than that they will continue to rise toward $70. Prices have increased beyond supply and demand fundamentals because of premature expectations about the effects of an OPEC production cut on oil inventories. Last week’s 13.8 million barrel addition to U.S. storage was the second largest in history. It moved U.S. crude oil inventories to new record high levels. Meanwhile, 130 horizontal rigs have been added to tight oil drilling since the OPEC cut was first announced in September. That means that U.S. output will surge and will continue to be a drag on higher prices.Comparative inventory analysis suggests that the current ~$53 per barrel WTI oil price is at least $6 per barrel too high. Don’t hold your breath for $70 oil prices. Most analysts believe prices will increase steadily now that OPEC has decided to cut production. Their logic is that over-production caused lower oil prices and lower output should bring markets into production-consumption balance. The problem is that production is not the same as supply and consumption is not the same as demand. Inventories lie in-between and modulate the flows from both sides of the production-consumption equation. Inventory is clearly part of supply but is also a component of demand. Excess production goes into inventory when demand is less than supply. When consumption exceeds production, oil is withdrawn from inventory reflecting increased demand. The International Energy Agency (IEA) reported last week that global liquids markets would move to a supply deficit by the first quarter of 2017 if OPEC production cuts take place as announced (Figure 1). Yet the OECD inventories on which IEA’s forecast is based have increased and are now more than 400 million barrels above the 5-year average (Figure 2). In order for a supply deficit to develop in the first quarter of 2017, those stocks would have to be drastically reduced over the next 6 weeks. Comparative inventory analysis provides some context for the necessary magnitude of that reduction.WTI/RBOB Tumble After Another Unexpectedly Large Inventory Build Following last week's massive inventory build (and hope for improved gasoline demand), API reports another much bigger-than-expected build (Crude +9.94mm versus +3.5mm exp) and WTI and RBOB prices tumbled. API:
- Crude +9.94mm (+3.5mm exp)
- Cushing -1.27mm (+500k exp)
- Distillates +1.5mm
This will be the 6th weekly build in a row for crude (and 3rd week of major builds)...
Oil Producers Comply With OPEC Deal to Cut Output, but for How Long? -- When OPEC and other major oil exporters agreed late last year to limit production as a way to bolster teetering prices, many saw it as a shaky deal by a spent force. That perception, though, has changed. And oil prices are up 20 percent since the agreement was reached. New data published on Monday by the Organization of the Petroleum Exporting Countries shows that the cartel’s 13 members have largely complied with the production cut. “So far this is holding up way better than any previous agreement had,” said Bhushan Bahree, an OPEC analyst at the research firm IHS Markit. Still, questions remain about how such a disparate group of countries will be able to hold together, and how much clout OPEC has in a market that has changed radically in recent years. Oil prices began falling in late 2014, when OPEC decided not to cut production as a way to stabilize prices. From a high above $100 a barrel earlier that year, prices fell below $30 a barrel in early 2016 before recovering modestly. That played havoc with the government budgets of major oil producers, pushing even Saudi Arabia — OPEC’s biggest member by oil output — to borrow large sums in financial markets and to risk antagonizing its citizens by raising energy prices and cutting government salaries. What followed was a year of sometimes cliff-edge negotiations to reach the deal that was eventually announced in Vienna on Nov. 30. Had the producers not agreed, prices could have fallen further. “People got pretty close to the abyss and looked down, and it was pretty deep,” Daniel Yergin, an oil historian, said in an interview. “As a consequence they stepped back and did something.” Russia’s shift to looking for production curbs was crucial, OPEC officials say. It gave the Saudis, who had insisted they would not cut output on their own, the comfort to agree to limits.
Oil pulls back in post-settlement trade as U.S. stockpiles rise | Reuters: Oil prices pared gains after the settlement Tuesday, as evidence of surging U.S. crude oil stockpiles underscored concerns that shale production might limit the effectiveness of an OPEC-led effort to cut global output. Brent crude LCOc1 traded at $55.73 a barrel at 4:39 p.m. Eastern, off the settlement of $55.97 a barrel, which was up 38 cents but well off the session high of $56.46 a barrel. U.S. light crude CLc1 traded at $52.94 a barrel following the inventory report by a trade group, after settling up 27 cents at $53.20. After settlement, the American Petroleum Institute (API) said U.S. crude inventories rose 9.9 million barrels in the week to Feb. 10, far exceeding analysts' expectations for an increase of 3.5 million barrels. Gasoline and diesel stockpiles also rose, the API's weekly report said. The U.S. government is scheduled to release its weekly data on stockpiles Wednesday morning. On Monday, both benchmarks fell 2 percent. Both are near the middle of $5-per-barrel trading ranges seen since early December. The Organization of the Petroleum Exporting Countries and other exporters including Russia have agreed to cut crude output by almost 1.8 million barrels per day (bpd) during the first half of 2017. The market has largely priced in these production cuts OPEC and other producers agreed to in November,
WTI/RBOB Tumble As US Crude Inventory Reaches New Record High -- After API's bigger than expected crude build, DOE confirmed the data with a much-bigger-than-expected 9.5mm build pushing total US crude inventories to a new record high. Along with a large gasoline build, WTI/RBIB prices are tumbling on the print. DOE
- Crude +9.527mm (+3.5mm exp)
- Cushing -702k (+400k exp)
- Gasoline +2.846mm (+500k exp)
- Distillates -689k (-1mm exp)
DOE confirmed API's major build - the 6th weekly build in a row. Gasoline inventories surged again.
US crude settles down 9 cents after US stockpiles soar to record: Oil futures fell slightly on Wednesday as record high U.S. crude and gasoline inventories fed concerns about a glut. Trade was choppy and losses were limited by evidence that OPEC and other producing countries were complying with agreed-upon supply cuts. The dollar weakened, which also helped support greenback-denominated oil. U.S. crude stocks rose 9.5 million barrels last week, the U.S. Energy Information Administration (EIA) said, nearly three times more than forecast, but confirming a trade group's report late Tuesday of a larger-than-expected build. U.S. crude inventories hit a peak at 518.12 million barrels, while gasoline stocks also touched a record, rising 2.8 million barrels to 259.1 million barrels, according to the EIA. U.S. crude settled down 9 cents at $53.11. Brent crude was down 24 cents at $55.73 by 2:33 p.m. ET (1933 GMT). Gasoline prices were up 0.1 percent to $1.5485 a gallon after falling by as much as 0.8 percent. "The U.S. witnessed yet another week of higher-than-expected stock builds; nonetheless, the build was less than last week's, which helped prices recoup some of the earlier losses," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London. "A build in gasoline stock is in tandem with seasonal norms and further builds are expected in the coming weeks as demand for the fuel remains low." Gasoline inventories have surged 10 percent since the end of 2016, EIA data showed. Last week, stockpiles of the fuel swelled to a record at 259 million barrels.
Benchmark USGC, Midwest gasolines fall on selloff of winter grade - Benchmark US Gulf Coast CBOB and conventional gasoline fell Wednesday as much of the last stocks of winter grade gasoline was sold off and after federal government data showed a rise in regional gasoline stocks. The same phenomenon attributed to the slow transition to spring gasoline was seen in part of the Midwest cash trade, market sources said. Also Wednesday, line space on the gasoline-only Colonial Pipeline Line 1 from Texas to North Carolina reached positive territory for the first time in nearly a month, reflecting interest in moving cheaper fuel from the nation's refining hub eastward. CBOB at 13.5 RVP for loading February 28 on the pipeline outside Houston was assessed at the NYMEX March RBOB futures contract minus 6.25 cents/gal, down from an assessment at 5.5 cents/gal under futures Tuesday. The lesser-traded conventional gasoline at 13.5 RVP fell 45 points on the day to NYMEX March RBOB minus 1.75 cents/gal, though it was heard traded as low as futures minus 2.75 cents/gal in the early part of the day. Gasoline at 13.5 RVP was softer with the last of the winter grade expected to shipped along the pipeline in the next few weeks. S&P Global Platts will shift Gulf Coast assessments to the costlier-to-produce 11.5-RVP gasoline on Friday. "It's that time of year again: 'El dumpo,'" a US refined products source said.
Oil rises modestly in tight trade, boosted by OPEC hopes | Reuters: Oil prices ended modestly higher on Thursday, as the market weighed swelling U.S. inventories against possible renewed efforts by major oil producers to reduce a price-sapping glut. Crude futures were initially bolstered after sources said the Organization of the Petroleum Exporting Countries (OPEC) may consider extending its oil supply-reduction pact with non-members and might even apply deeper cuts if global crude inventories failed to drop to a targeted level. Oil swayed between modest gains and losses throughout the session before rebounding late, and U.S. crude futures CLc1 settled at $53.36 a barrel, up 25 cents. Brent crude LCOc1 ended the day at $55.65 a barrel, down 10 cents. Prices have traded in a tight $5-range since OPEC and other exporters including Russia agreed last year to cut output by 1.8 million barrels per day (bpd) to reduce a price-sapping glut. The deal took effect on Jan. 1 and lasts six months. "I think that inside this little band we can expect a lot of choppy trading," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut. "I still think the forward expectations (for inventory drawdown) is what the market is focused on." OPEC's supply pact could be extended by May if all major producers showed "effective cooperation", an OPEC source told Reuters.
OilPrice Intelligence Report: Oil Bulls And Bears Are At A Stalemate: Oil prices fell slightly this week as more signs emerged that the market is still oversupplied. OPEC officials said that they were considering extending the production cut deal for another six months, a move that could be interpreted as bullish in the sense that they will keep oil off of the market for longer. However, it failed to inspire confidence – an extension would come because the market is still woefully oversupplied. Oil prices reacted in a way that has become a familiar pattern in recent weeks – moving only slightly up and then down and then back to where they were beforehand.In fact, oil prices have traded between a narrow band of $4 per barrel for much of this year, pushing volatility to its lowest level in nearly three years. “We’re kind of resigned to the fact that the price is at about the right level,” Tim Evans, a Citi Futures analyst, told the WSJ. Even bearish inventory figures have not managed to move prices significantly. Evans says that to break out of this range, it might require a geopolitical crisis affecting supplies. Otherwise, it could be several more weeks of a bobbing around in the mid- to low-$50s per barrel before some new pattern emerges. Libyan officials have said that oil production is now above 700,000 bpd, more than double the production level from last summer. More importantly, they are aiming to boost output to 1.2 million barrels per day (mb/d) by August and 1.7 mb/d by March 2018. That is a staggering amount of new supply if it comes to pass, and while there are good reasons to be suspicious of those targets given the turmoil in Libya, they are not entirely unrealistic. Eni and Total are ramping up activity and Bloomberg reports that many of the hurdles standing in their way – ISIS attacks and political infighting chief among them – have been sufficiently dealt with to allow them to resume operations. A wave of new supply from Libya is a downside risk to oil prices that needs watching. Saudi Arabia saw its oil demand skyrocket by 77 percent in the ten years through 2015, a massive increase in demand that ate into oil exports. Now, even as the oil kingdom cuts production in order to shore up prices, the cuts are undermined by the fact that demand is also waning a bit. New natural gas production is displacing oil in the electric power sector and the government has announced large investments in solar in order to also free up more oil for export. The summer peaks are getting smaller, which should help Saudi Arabia export more. According to the EIA’s latest Drilling Productivity Report, output from the Eagle Ford could rise by about 14,000 bpd in March, signaling a potential turnaround for the once prolific South Texas shale play.
U.S. Rig Count Rises As Crude Inventory Levels Hit Record High - The number of active oil and gas rigs in the United States increased again on Friday by 10. Both benchmarks were trading down earlier on Friday under heavy pressure from record-high crude oil inventories (518.1 million barrels), and record-high gasoline inventories (259 million barrels). The total number of active oil and gas rigs in the United States is now 751, according to oilfield services provider Baker Hughes, which is 237 rigs above the rig count a year ago. The number of oil rigs increased by 6, up from 591 last week to 597 this week. The number of active oil rigs in the United States is now the highest since October 09, 2015. Oil rigs have increased by 120 since the OPEC agreement was announced on November 30, and are following a steep trajectory upwards as OPEC continues to hold its members to specified production caps. The number of gas rigs increased this week by 4 again this week, and now stand at 153, marking the fourteenth week of gas rig increases in the last 15 weeks—the highest number of gas rigs in operation since the end of 2015. By basin, Granite Wash increased by 5 rigs and now stands at a total of 13, compared to 10 active rigs a year ago. Haynesville also saw a 3-rig gain, with the Permian, Eagle Ford, and Barnett all gaining 2 rigs each. Cana Woodford lost two rigs, and the Williston basin lost 1. At 11:32 am EST WTI was trading down 0.6% at $53.04—around $1.00 under last Friday’s pre-rig count price. The Brent crude benchmark was trading down 0.4% at $55.43—more than $1.00 under the price point last Friday. While things are looking up for US drillers, Canada lost 13 oil and 8 gas rigs this week, although both counts are up year on year.
Permian Panic Continues As Rig Counts Rise Amid Record Glut In Crude -- With a record glut of crude and gasoline, US crude production pushed to new cycle highs this week and continues to track lagged rig counts. US crude inventories are at a new record high... And so are Gasoline inventories... And the rig ccount keeps rising with lagged oil prices... *U.S. OIL RIG COUNT UP 6 TO 597 , BAKER HUGHES SAYS :BHI US Highest since October 2015 Production keeps rising, and has a long way to go to catch up to the lagged rig count... And the oil algo idiocy from DOE data has been erased with RBOB back below $1.50... The surge in rigs has been driven almost 100% in the Permian, but as OilPrice.com's Nick Cunningham asks, how much longer that the Permian craze continue? The two great dueling forces in the world oil market, OPEC and American production, have created an atmosphere of uncertainty, as prices hover above $50. Last week the EIA reported another record inventory and an increasing rig count, while analysts point to a possible crisis as a market held aloft by buoyant predictions of OPEC cuts slowly faces up to insufficient demand. Crucial to this situation is the state of the U.S. patch, particularly the Permian Basin, which since late last year has been the focus of recovering production. The EIA data for the field is good, with new well production rising sharply and overall production of oil and gas rising sharply in 2017. While some speculate the bubble may burst, prospects for companies already invested in the Permian look positive, even if production costs are rising. The Permian has seen the highest increase in rig count of any U.S. basin. Six of the twelve rigs added last week went up in the Permian, and its total now stands at 301 rigs, up from 172 a year ago, out of a total U.S. count of 741. In total the count is up 83 percent from May 2016, though it has yet to reach the booming numbers of 2013, when over two thousand rigs were in operation. Even 2015, as the U.S. sector was being squeezed by low prices, saw the total count hovering near two-thousand, according to Baker Hughes. The increase is coming hot on the heels of the OPEC production deal, and seems to be in direct correlation with the OPEC announcement of nearly 900,000 bpd in cut production this month. For now, markets are happy, but underlying fundamentals remain as they were: cut production in Saudi Arabia and elsewhere will be made up by a resurgent American sector.
Rig count continues to creep upward -- The U.S. rig count continues to creep back up slowly, up ten Feb. 17, 2017, according to the latest Baker Hughes report. The rig count has increased for 5 straight weeks, reaching 751. The U.S. added 6 rigs exploring for oil and 4 exploring for natural gas. The current oil rig count is 597, while gas rigs number 153. One rig is still labeled as miscellaneous. Texas, again, saw the greatest jump, with 16 new rigs. Louisiana saw a decrease of three rigs, although three of the Texas rigs added were in the Haynesville basin. The Cana Woodford dropped two rigs, and the Williston Basin declined by one. Oil prices, however, are likely to end the week down due to concerns about U.S. shale overproduction in the midst of OPEC cuts. MarketWatch reports: Talk of possibly extending the [OPEC] supply cut pact come at time when U.S. production is showing a strong revival. The EIA forecasts that U.S. output to average 9 million barrels a day this year and grow another 500,000 barrels a day next year. In the short term, Bob Silvers, managing director, in charge of energy practice at SSA & Company, a New York-based management consultancy. notes that “as long as U.S. demand/consumption is stable or slightly decreasing and OPEC maintains their current production cuts, U.S. shale production, which can continue to ramp up quickly, will keep prices relatively stable.” In the long term, however, Silvers says inventories will need to drop and show a reversal of these factors in order to see a sustained upward trend in prices, reports MartketWatch.According to the U.S. Energy Information Administration (EIA), natural gas production in the Marcellus and Permain shale regions should continue to rise. The EIA’s Drilling Productivity report released February 13, 2017 estimates that U.S. natural gas production will increase across all shale regions by 524 million cubic feet per day in March.
Can Saudi Arabia Carry OPEC Through Spring? -- Faced with budget strains amid low oil prices, Saudi Arabia ditched its pump-at-will policy and brought together the diverse group of OPEC nations to agree to production cuts late last year. Now the cartel’s de facto leader and largest producer is going the extra mile in reducing output, at least in January. The Saudis pledged the biggest cut in the November 30 deal, and last month went beyond the required amount to ensure a high rate of compliance.Initial estimates by the International Energy Agency (IEA) and OPEC itself show that the cartel’s early compliance to cuts is very high: more than 90 percent. The unexpectedly high rate is almost solely courtesy of Saudi Arabia.Bloomberg estimates -- based on IEA and OPEC figures -- show that just three out of 10 OPEC members that had promised cuts managed to reduce their output to target production levels in January: Saudi Arabia, Angola and Qatar. Thanks to the Saudis, the cartel’s compliance was 93 percent, with 1.078 million bpd taken off the market compared to a target level of 1.164 million bpd.Among the 11 non-OPEC nations that have signed up to the OPEC deal, compliance is -- as expected-- low. Only Oman – a Saudi Gulf Arab ally and a member of the Gulf Cooperation Council (GCC) – brought its production within the level it had promised.Non-OPEC compliance in January was 48 percent, with output reduced by 270,000 bpd compared to a pledge for a total of 558,000 bpd, Bloomberg’s estimates show.Russia, leading the non-OPEC nations in the deal with OPEC, has pledged to “gradually” cut 300,000 bpd of its output over the first six months this year. In January, Russia reduced its output by 117,000 bpd, according to a statement by Energy Minister Alexander Novak on the homepage of Russia’s energy ministry website.
CIA honors Saudi Crown Prince for efforts against terrorism -- The Saudi Crown Prince Mohammed bin Nayef bin Abdulaziz al-Saud, Deputy Prime Minister and Minister of Interior, received a medal on Friday from the CIA for his distinct intelligence-related counter-terrorism work and his contributions to ensure international peace and security. The medal, named after George Tenet, was handed to him by CIA Director Micheal Pompeo after the Crown Prince received him in Riyadh on Friday in the presence of Deputy Crown Prince Mohammad bin Salman al-Saud, Deputy Prime Minister and Minister of Defense. The Crown Prince said in a press statement after receiving the medal that he appreciated the CIA honor, stressing that his efforts were guided by the leaders of Saudi Arabia headed by King Salman bin Abdulaziz al-Saud, as well as the efforts of the Kingdom’s security forces. With regards to terrorism in the region, the Crown Prince said all religions are separate from the beliefs and actions of extremist groups, noting that religious, political and social groups who have used religion as a tool throughout history do not reflect the absolute truths about the religion which it is affiliated to, or attributes its actions to. He said Saudi Arabia has played a key role in the fight against terrorism and condemns all forms and manifestations of terrorism. “We, God willing, continue to confront terrorism and extremism everywhere, and with thanks to God we have managed to thwart many terrorist plots from occurring,” he said.
Hundreds of thousands rally in Iran against Trump, chant Death to America - TV | Reuters: Hundreds of thousands of Iranians rallied across Iran on Friday to swear allegiance to the clerical establishment following U.S. President Donald Trump's warning that he had put the Islamic Republic "on notice", state TV reported. Carrying "Death to America" banners and effigies of Trump, Iranians in Tehran marched towards the Azadi ( Freedom) Square to commemorate the anniversary of Iran’s 1979 Islamic Revolution that toppled the U.S.-backed shah. Iran's most powerful authority Supreme Leader Ayatollah Ali Khamenei had on Tuesday called Iranians to take part in the demonstrations to show Iran was not frightened of American "threats." "America and Trump cannot do a damn thing. We are ready to sacrifice our lives for our leader Khamenei," a young Iranian man told state TV. Last week Trump put Iran "on notice" in reaction to a Jan. 29 Iranian missile test and imposed fresh sanctions on individuals and entities. Iran said it will not halt its missile programme. Pragmatist President Hassan Rouhani also called on Iranians to join the rally on Friday to "show their unbreakable ties with the Supreme Leader and the Islamic Republic." State television said millions turned out nationwide at revolution rallies in all main cities marked by the traditional anti-U.S. and anti-Israel slogans and the burning of U.S. flags.