oil prices continued falling early this past week, but rallied on Wednesday after the EIA's report of the first US oil inventory drawdown in 10 weeks, and ultimately ended the week 29 cents higher at $48.78 a barrel...the early weakness was a continuation of last week's big selloff, as hedge funds who had built up a overwhelmingly long position in oil futures and options continued to head for the exits, and oil prices fell 9 cents to close at $48.40 a barrel on on Monday and then fell to close at $47.72 a barrel on Tuesday, after the Saudis unexpectedly reported that their February oil production had increased...however, after the EIA reported a small decrease in crude supplies and rather large drops in gasoline and distillate supplies on Wednesday, oil prices jumped 2.4% to close at $48.86 a barrel...prices drifted lower on Thursday to close at $48.75 a barrel, and then an attempt at a rally sputtered on Friday, after Baker Hughes reported a double digit increase in active oil drilling rigs, as oil went on to close the week at $48.78 a barrel...
OPEC's March report
since oil pricing, and hence the industry's plans for drilling and fracking in the US, is still largely dependent on what OPEC does, we'll start this week by looking at the new OPEC Monthly Oil Market Report for March (covering February OPEC & global data)...this first table we'll include here is from page 60 of that 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 as to whether their output quotas and production cuts are being met, to resolve any potential disputes that could arise if each member reported their own figures...this is also the oil production data we often see quoted in the media, other than that from independent analysis by energy research divisions of organizations such as Platts and Reuters, who will compute their own numbers..
here we can see that this official data shows that OPEC production was down by 139,500 barrels per day to under 32 million in February, from a January oil production total that was revised 42,000 barrels per day lower from what was reported last month...(for your reference, here are the official January figures before these revisions)...recall that OPEC committed to reducing their production by 1.2 million barrels per day from their October levels (shown here, with Indonesia), so these figures show the remaining 13 members are now pretty close to achieving what they agreed to...however, there are a number of different estimates out there, and depending on who's judging their output and their promises, their compliance with their pledged oil output cuts could be anywhere from 71.9% to 111.5%....however, it wasn't these official figures from OPEC that attracted the attention to this report this week, but rather the February production figures that the OPEC members reported to the OPEC Secretariat, which are shown in the next table...
the above table, also from page 60 of the OPEC pdf, shows the oil production in thousands of barrels per day that each of the members reported to OPEC (for those that did report)...although this data is considered suspect because of the many incentives OPEC members have to fudge their data, it attracted attention and precipitated a Tuesday selloff because the Saudis reported that they increased their production by 263,000 barrels per day, rather than cutting production by 68,100 barrels per day like the official totals show...while their 10,011,000 barrel per day output was still within their committed range, the increase put to rest the market consensus that the Saudis would cover for the other OPEC members such as the Emirates (UAE), who have not met their promised cuts...while oil prices rebounded after the Saudis explained the extra production was purely for domestic storage, over 10 million bpd was still more production from the Saudis than had been expected, and cast a pall of uncertainty over the market, whee traders had believed that OPEC had their production reductions under control..
next, we'll include a graph of the total OPEC oil output for all 13 members included in this report, so we can see how this month's production stacks up compared to historical figures...
the above graph, taken from the 'OPEC February Production" post 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 February 2017, using the official data from secondary sources...obviously, we can see that February OPEC production of 31,958,000 barrels per day is down quite a bit from their record production of 33,374,000 million barrels per day in November, achieved during their production run-up before the agreement was reached, but note that their current production is still somewhat more than what they were producing between February 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) ...similarly, we find that despite all of the brouhaha over the OPEC production cuts, their February 2017 production of 31,958,000 barrels per day is still 1.2% more oil than what the same 13 countries were producing in February 2016...
this next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, from March 2015 to February 2017, and it comes from page 61 of the March OPEC Monthly Oil Market Report...the light 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, with the metrics for that shown on the right scale...global oil production fell to 95.88 million barrels per day in February, while it was still unchanged from a year earlier, and OPEC production of 31,958,000 barrels per day thus represented 33.3% of what was produced globally, a decrease from the 33.5% OPEC share in January and 34.0% in December...but even with the two months of production cuts we can obviously see here, there is still a surplus of oil supply globally, as the table we'll include next will show..
the table below comes from page 37 of the March 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...note that the forecast for global oil demand in the current first quarter of 2017 is shown on the "Total world" line of the second column, and projections are that during the first three months of this year, all oil consuming areas of the globe will use 95.34 million barrels of oil per day, up from the 95.05 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 their production cuts, the world's oil producers were still producing 95.88 million barrels per day during February...that means that even after all the production cuts have taken place, there continued to be a surplus of more than half a million barrels per day in global oil production...
The Latest Oil Stats from the EIA
the oil data for the week ending March 10th from the US Energy Information Administration showed a large drop in our imports of crude oil, while refining of such crude was little changed, resulting in the first withdrawal of crude from US storage in 10 weeks...our imports of crude oil fell by an average of 745,000 barrels per day to an average of 7,405,000 barrels per day during the week, while at the same time our exports of crude oil fell by 180,000 barrels per day to an average of 717,000 barrels per day, which meant that our effective imports netted out to 6,688,000 barrels per day during the week, 565,000 barrels per day less than last week...at the same time, our crude oil production rose by 21,000 barrels per day to an average of 9,109,000 barrels per day, which means that our daily supply of oil, from net imports and from wells, totaled an average of 15,797,000 barrels per day during the week...
during the same week, refineries reportedly used 15,472,000 barrels of crude per day, 20,000 barrels per day less than during the prior week, while at the same time, 150,000 barrels of oil per day were being taken out of oil storage facilities in the US...thus, this week's EIA oil figures seem to indicate that we used 475,000 less barrels of oil per day than were supplied by our net oil imports, total oil well production, and what we took out of storage…therefore, in order to make the weekly U.S. Petroleum Balance Sheet balance out, the EIA inserted a phantom -475,000 barrel per day number onto line 13 of the petroleum balance sheet, which the footnote tells us represents "unaccounted for crude oil"...that "unaccounted for crude oil" 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 balance sheet number by backing into it, using the same arithmetic we just used in explaining it...
the weekly Petroleum Status Report also tells us that the 4 week average of our oil imports fell to an average of 7.6 million barrels per day, now 4.4% below that of the same four-week period last year...at the same time, the 4 week average of our oil exports fell to 887,000 barrels per day, still 127.3% higher than the same 4 weeks a year earlier, as our overseas exports of our surplus light oil were barely underway in early 2016...the 150,000 barrel per day draw out of our crude supplies included a 117,000 barrel per day sale from our Strategic Petroleum Reserve, the first of a planned sale of 5 million barrels annually that was planned during the Obama administration, 18 months ago...meanwhile, this week's 21,000 barrel per day oil production increase included a 20,000 barrel per day increase in oil production in the lower 48 states and a 1,000 barrel per day increase in output from Alaska...the 9,109,000 barrels of crude per day that we produced during the week ending March 10th was the most we've produced since the week ending February 12th last year, and was almost 0.5% more than the 9,068,000 barrels per day produced during the week ending March 11th, 2016, while it was still 5.2% below the June 5th 2015 record oil production of 9,610,000 barrels per day...
US refineries were operating at 85.1% of their capacity in using those 15,472,000 barrels of crude per day, down from 85.9% of capacity the prior week, and down from the year high of 93.6% of capacity in the first week of January, when they were processing 17,107,000 barrels of crude per day....their processing of crude oil is also down by 3.3% from the 15,996,000 barrels of crude that were being refined during the week ending March 11th, 2016, when refineries were operating at 89.0% of capacity....with the ongoing refinery slowdown, gasoline production from our refineries fell by 304,000 barrels per day to 9,540,000 barrels per day during the week ending March 10th, which was 4.7% less than the 10,015,000 barrels per day of gasoline that were being produced during the week ending March 11th a year ago...in addition, refineries' production of distillate fuels (diesel fuel and heat oil) was also down, falling by 83,000 barrels per day to 4,690,000 barrels per day, which was also down by 1.9% from the 4,781,000 barrels per day of distillates that were being produced during the week ending March 11th last year...
with the decrease in our gasoline production, the EIA reported that our gasoline inventories fell by 3,055,000 barrels to 246,279,000 barrels as of March 10th, after they had dropped by a near record 6,555,000 barrels the prior week....that happened as our domestic consumption of gasoline fell by 14,000 barrels per day to 9,254,000 barrels per day, our gasoline exports fell by 206,000 barrels per day to 535,000 barrels per day, and our imports of gasoline rose by 330,000 barrels per day from last week's 17 year low to 572,000 barrels per day...while our gasoline supplies are thus down by 12,784,000 barrels from the record high set 4 weeks ago, they're only down 1.4% from last year's March 11th high of 249,716,000 barrels, and are still 4.6% above the 235,400,000 barrels of gasoline we had stored on March 13th of 2015...
our supplies of distillate fuels also fell this week, decreasing by 4,229,000 barrels to 157,303,000 barrels by March 10th, as the amount of distillates supplied to US markets, a proxy for our consumption, increased by 418,000 barrels per day to 4,409,000 barrels per day, and as our imports of distillates fell by 187,000 barrels per day to 79,000 barrels per day, the lowest this heating season, while our exports of distillates fell by 366,000 barrels per day to 964,000 barrels per day....while our distillate inventories are now 2.5% below the bloated distillate inventories of 161,343,000 barrels that we had stored on March 11th 2016, at the end of the warm El Nino winter of last year, they are still 25.0% higher than the distillate inventories of 125,883,000 barrels of March 13th, 2015…
finally, with our net oil imports considerably lower than in recent weeks while refinery demand for oil was flat, our commercial inventories of crude oil were drawn down for the first time in 10 weeks, decreasing by 237,000 barrels to 528,156,000 barrels by March 10th...at the same time, 816,000 barrels of oil from our Strategic Petroleum Reserve was sold, with 550,000 barrels of going that to Petro China, which left inventories in the SPR at 694,009,000 barrels, a quantity not usually considered when aggregating our oil inventories...thus for current commercial purposes, we still ended the week with 10.3% more crude oil in storage than the 479,012,000 barrels we had at the end of 2016, 7.3% more crude oil in storage than what was then a record 492,160,000 barrels on March 11th of 2016, 24.3% more crude than what was also then a record 425,047,000 barrels in storage on March 13th of 2015 and 53.5% more crude than the 344,183,000 barrels of oil we had in storage on March 14th of 2014...
This Week's Rig Count
US drilling activity increased for the 19th time in 20 weeks during the week ending March 17th, as we also saw the 7th double digit rig increase in the past 9 weeks....Baker Hughes reported that the total count of active rotary rigs running in the US increased by 21 rigs to 789 rigs in the week ending on this Friday, which was 313 more rigs than the 476 rigs that were deployed as of the March 18th report in 2016, but still far from the recent high of 1929 drilling rigs that were in use on November 21st of 2014...
the count of rigs drilling for oil increased by 14 rigs to 631 rigs this week, which was up from the 387 oil directed rigs that were in use a year ago, and nearly double the 316 rigs working on May 27th, but still down from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations rose by 6 rigs to 157 rigs this week, which was up from the 89 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...in addition, a single rig that was classified as miscellaneous was added this week, in contrast to a year ago, when there were no such miscellaneous rigs at work...
a drilling platform that had been working offshore from Texas in the Gulf of Mexico was shut down this week, which lowered the current Gulf of Mexico count to 19 rigs, still down from the 26 rigs that were drilling in the Gulf during the same week of 2016...that was also down from a total of 27 rigs working offshore of the US a year ago, when there was also a rig working offshore from California, in addition to the 26 rigs that were drilling in the Gulf of Mexico at the time...
active horizontal drilling rigs increased by 19 rigs to 658 rigs this week, which is well more than double the May 27th 2016 total of 314 working horizontal rigs...that's also up by 289 horizontal rigs from the 369 horizontal rigs that were in use in the US on March 18th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, a net total of 2 vertical rigs were added this week, bringing the vertical rig count up to 70 rigs, which was also up from the 58 vertical rigs that were deployed during the same week a year ago...meanwhile, the directional rig count was unchanged at 61 rigs, which was also up from the 49 directional rigs that were deployed during the same week last year....
as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf 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 March 17th, the second column shows the change in the number of working rigs between last week's count (March 10th) and this week's (March 17th) count, the third column shows last week's March 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 18th of March, 2016...
noteworthy in this week’s report was the first drop in drilling in the Permian basin of western Texas since October 27th, although with 308 rigs, their active rig total is still more than double their year ago count...although Texas drillers did add 4 rigs this week, the state with the largest increase this week was Oklahoma with 10 rigs, with an increase of 3 rigs in the Arkoma Woodford, while the 3 new Mississippian rigs were also likely in that state, since Kansas shows no change in drilling activity...also note the increase of 5 rigs in North Dakota, possibly in anticipation of the completion of the Dakota Access pipeline, which by cutting shipping costs would increase the wellhead price for Williston basin drillers...and even with the increase of 6 rigs targeting natural gas, the rig count in Ohio's Utica shale still remained unchanged, as 3 natural gas rigs were added in the Arkoma Woodford, 2 were added in the Eagle Ford, and one each was added in the Marcellus and the Haynesville, while one was pulled out of an "other" unnamed basin...note that outside of the major producing states listed above, both New York and Illinois added a rig this week, while Montana had one rig shut down, and now has none, same as a year ago...for New York, that one new rig is the first drilling they've seen since two weeks in July of 2015, while Illinois now has two rigs running, in contrast to a year ago, when they also had none..
DUC report for February
this week also saw the release of the EIA's Drilling Productivity Report for February, which 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...as you'll recall, 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 DUC wells in the US rose from 5,352 in January to 5,443 in February...a month ago, we speculated that slowdown might be the result of a shortage of competent fracking crews, and the oilfield worker shortage issue again got play this week in an article at oilprice.com this week, where they complain that even trucker jobs with an annual paycheck of $80,000 remain unfilled...frackers have 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 in the previous boom have since found work elsewhere, so putting together a fracking crew familiar with the latest techniques has become much harder than before..
like in previous months, most of the February 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 by 95, from 1,669 in January to 1,764 in February, as we'd expect with the increase in drilling that we've seen in that basin...at the same time, DUCs in the Eagle Ford of south Texas rose by 13, to 1,265 in February, and DUCs in the Haynesville of Louisiana increased by 10 wells to 170...on the other hand, the Niobrara chalk of the Rockies front range saw a decrease in DUCs (which means more wells were being fracked than were being drilled) as the Niobrara DUC count fell from 700 in January to 678 in February...in addition; the Utica also showed a decrease of 5 uncompleted wells and thus had only 92 DUCs remaining at the end of February, and the Marcellus DUC count fell by 4 to 666 uncompleted wells....for the month, DUCS in the 4 oil basins tracked by in this report (ie the Bakken, Niobrara, Permian, and Eagle Ford) increased by 90 wells, while the DUC count in the natural gas regions (the Marcellus, Utica, and the Haynesville) increased by 1 well, even though natural gas DUCs have generally declined since December 2013, as new natural gas drilling fell to record low levels and has barely recovered....
Ohio bill would allow customers to opt out of utility renewable energy charges -- Ohio's debate over renewable energy standards is poised to heat up again. Rep. Bill Seitz, who heads the House Public Utilities Committee, said the bill from last year to make renewable energy standards voluntary for two years didn't go far enough. H.B. 114, by contrast, would introduce a voluntary renewable energy standard of 12.5% in place until 2027. For energy efficiency, the bill would eliminate the standard by 2027 after a series of phase-downs. H.B. 114 would also permit customers who shop on the retail market to "opt out of paying any rider, charge, or other cost recovery mechanism" designed to pay for utility electricity from renewable resources, starting in January 2019. The provision is reportedly a response to AEP's plans to construct 900 MW of renewable energy, part of a settlement agreement with environmental groups approved last year in exchange for income support for aging baseload plants. AEP is gearing up for a legislative push to re-regulate Ohio's electricity markets, and Seitz cautioned the utility against challenging his renewables bill if it wants to make progress in his committee on other proposals. "I think AEP is fully aware that a bill with 50-some odd co-sponsors out of the gate would not be a very wise thing to oppose if they expect boxcar three to ever be carried forward by the engine," he told CBF. Gov. Kasich vetoed last year's bill, meaning the energy efficiency and renewable energy standards will come into force this year after being frozen since 2014. Kasich touted job growth as a primary driver behind his decision to veto the bill.
Ohio renewable energy bill could impact AEP's 900 megawatt wind and solar projects – and that's Rep. Bill Seitz's point - - A plan to scrap Ohio’s renewable energy standards could impact a Columbus utility’s plan to develop large wind and solar projects.A provision allows customers who shop for their power to not pay the utility costs it passes on from providing new power generation, including from renewables. While American Electric Power Company Inc. handles power distribution and bills for every Central Ohio power user, 35 percent of its customers – more than 511,000 people – shop on the open market for power generation.AEP wants to build 900 megawatts of wind and solar power, and already has gauged interest from developers on the projects. It has yet to file specific projects with the Public Utilities Commission of Ohio.Allowing more than a third of its customer base to opt-out of paying for the project could hinder its development prospects – and that’s exactly the point, says one of the bill’s main co-sponsors.“It is, I would say, a fairly direct response to that," Rep. Bill Seitz said in an interview.Seitz, a Cincinnati Republican who chairs the House Public Utilities Committee, said the bill emphasizes that charges related to renewable energy should be by-passable, meaning that customers who shop for power don’t have to pay for the utility’s power-generation costs. If you don’t shop for power, AEP or your local utility is the default provider.AEP firmed up plans for the development of Ohio-based wind and solar in December 2015 as part of an agreement it signed with the Sierra Club. The environmental group had been a fierce voice against the utility’s plans to earn subsidies to keep some of its Ohio coal-fired power plants open; it dropped its opposition after AEP committed to the the wind and solar projects.
Research Maps Ohio Water Supplies Fracking Activity – The importance of safe drinking water has become a pressing issue in recent years after lead contamination and algal blooms tainted supplies in Ohio. A new report sheds light on what some see as another possible threat: oil and gas drilling. Great Lakes program coordinator for FracTracker Alliance Ted Auch says given the growing concerns over containment of hydraulically fractured and Class II injection wells, the group assessed the proximity of the infrastructure to public water supplies. "Ohio and the Great Lakes value fresh water," he said. "We have an abundance of fresh water, but if we compromise it and we continue to take it out of the surface and put it into the geology in the name of energy extraction, there's going to be serious questions, there's going to be serious costs associated with that." The research found 13 public water systems in a half-mile of Class II waste-disposal wells and 18 within a half-mile of permitted Utica wells. Within one mile, there are dozens of public water systems serving 18,000 to 61,000 Ohioans. A recent industry study showed Utica Shale oil production jumped almost 500 percent in Ohio since 2013, and Auch says water demand from the industry is rising about 16 percent each year. He says this is putting pressure on eastern Ohio water supplies, with little water quality or well security information. "Even if there was a policy in place to safeguard public water supplies, the lack of real-time data and monitoring on an oil and gas well and injection well front makes me worried because even if you have a good policy but you don't have the data to kind of inform that, then where are you?" he asked. "So we're kind of flying blind." Auch says these questions are especially crucial in areas like the Muskingum River Watershed in southeast Ohio. The report highlights a recent water-withdrawal agreement there that will increase Class II injection wells in communities where the industry already has extracted the equivalent of more than 14 percent of residential water. "The Muskingum Watershed is a prime example of that struggle between wanting to sell water to the oil and gas industry and generating revenue and the demand of existing residents and farmers and the like in these watersheds. And I think that struggle is going to come to a head in the next couple of years." Auch notes the alliance will be monitoring these spatial relationships as the rate of fracking is expected to accelerate with the Trump administration's support for increased oil and gas production.
Editorial: Gas industry gushing over encouraging signs - Canton Repository -- In the volatile oil and gas industry, it has been a few years since the overall outlook has been encouraging. Signs lately, however, give industry followers reasons to be optimistic. Prices are trending in an upward direction, federal approval has come for several projects and the administration of President Donald Trump was barely in office when it backed two long-stalled, controversial pipeline projects: Keystone XL and Dakota Access. Locally, evidence of positive movement in the industry soon will be visible as miles of steel pipe begin to ship from the Republic Short Line rail yard in Massillon. The pipe, some sitting at the former locations for Republic Steel and Massillon Stainless facilities for nearly two years, will head to construction sites as part of the 713-mile Rover Pipeline that recently received final federal approval. Rover's twin 42-inch pipelines will cross southwestern Stark County (Pike, Bethlehem and Sugar Creek townships) and parts of Tuscarawas and Carroll counties as it delivers up to 3.25 billion cubic feet of natural gas a day from the Utica and Marcellus shales to destinations in the Great Lakes, Midwest, Gulf Coast and Canada. The lack of infrastructure to transport gas to out-of-state markets has been one of the biggest challenges facing Ohio's oil and gas industry. The other challenge, of course, has been the commodity's price. The good news: Spot market prices have reached their highest levels since 2014. The still-worrisome news: Those prices remain far below peaks that were reached nearly a decade ago, according to the U.S. Energy Information Administration. Companies continue to invest in the Utica region. Rex Energy has said it plans to spend up to $80 million drilling and fracking wells this year. As much as 20 percent of that money will be invested in its Utica holdings in Carroll County. The company plans to complete 26 wells and begin production from 23 wells during 2017. So how soon until we see higher levels of drilling activity? We've said repeatedly there will be fits and starts with Utica Shale development. People and businesses, inside and outside the industry, must take a long view.
Energy Transfer 'Couldn't Feel Better' About Rover Schedule - Energy Transfer Partners LP (ETP) is sticking to an aggressive timetable for its Rover Pipeline, deploying "a tremendous amount of manpower" to clear trees along the route before its window of opportunity closes at the end of March, management said Thursday. Speaking to analysts during a 4Q2016 conference call, COO Marshall McCrea said the Dallas, TX-based master limited partnership "couldn't feel better" about where it currently stands with Rover. The massive 3.25 Bcf/d, $4.2 billion pipeline -- proposed to run from producing areas in Pennsylvania, Ohio and West Virginia to interconnects with the Vector Pipeline in Michigan and the Dawn Hub in Ontario, Canada -- received its FERC certificate order in early February. This is no doubt later than ETP would have hoped given the Federal Energy Regulatory Commission completed a final environmental impact statement for the project last summer. With its federally-approved tree-clearing window closing at the end of spring and not to reopen until the fall, ETP had asked FERC for an order by the start of January to ensure timely construction. But despite the lengthy federal approval process -- including a complication with FERC over a possible violation of the National Historic Preservation Act -- ETP management reassured analysts and investors that it expects to hit its original targets of partial service to Defiance, OH, by July and full service to Vector and Dawn by November of this year. "We've talked within the last week. There's a tremendous amount of manpower out there now cutting trees. We have" a notice to proceed from FERC "to clear up to 90% of the trees right now along the route. The wetlands are only about 10%. So, we are highly confident that we will have the trees cut by the end of March."
Judge: Pipeline project can seize land without owners' blessings - Energy Transfer Rover Pipeline can immediately seize land along the route of a future natural-gas pipeline, a federal judge ordered. At issue are 116 tracts of land in Livingston, Washtenaw and Lenawee counties that ET Rover had not been able to reach right-of-way agreements with owners on, including private property owners, county drain commissions and other utility companies such as Michigan Bell Telephone Company, Enbridge Pipelines, Consumers Energy and others. Contractors have already started clearing trees to prepare for pipeline construction. ET Rover is also allowed to temporarily access some adjacent properties during construction, even if the property owners are against it. U.S. District Court Judge Mark A. Goldsmith ordered ET Rover deposit over $2.5 million with the court clerk that is available for property owners to withdraw and said he will work to determine fair compensation for property owners losing their lands through eminent domain.The pipeline sued 58 property owners and easement holders of 177 tracts of land in Michigan in February, filing in U.S. District Court for the Eastern District of Michigan. Some reached settlements prior to the judge's order. The natural-gas pipeline will pass through 15 miles of Livingston County, coming from the south through Washtenaw and Lenawee counties, the Pinckney State Recreation Area and Putnam, Marion, Iosco and Handy townships, before linking up with an existing Vector pipeline south of Fowlerville that is a joint venture between Enbridge Inc. and DTE Energy Co. It's estimated the line will transport 3.25 billion cubic feet of natural-gas produced in the Marcellus and Utica shale formations, passing through West Virginia, Pennsylvania, Ohio and Michigan, and then on into Canada. "Absent immediate possession of the property rights it seeks, Rover will suffer irreparable harm," due to construction delays and added costs, Goldsmith wrote in an order filed Friday. He wrote that a delay would "jeopardize Rover's compliance with binding contracts with gas shippers, thus causing substantial monetary losses."
Ohio Valley Environmental Coalition to host meeting Wednesday about proposed area pipelines - Huntington Herald Dispatch -- The Ohio Valley Environmental Coalition is holding an informational meeting at 6 p.m. Wednesday, March 15 at the Main Cabell County (Huntington) Library, 455 9th Street (corner of 5th Avenue and 9th Street). OVEC has produced and printed 29,000 copies of the 28-page special edition newspaper. The paper will be mailed to people in Cabell, Wayne, Putnam, Jackson, and Roane counties who reside near some of the proposed pipelines and their associated compressors stations. A total of nine large diameter pipelines are proposed to come through the Huntington area. Unlike the Dakota Access Pipeline and the Keystone XL Pipeline, which are largely completed already, the fracked-gas pipelines proposed for the Huntington area are not yet in construction, and some are still in the planning phases. Columbia’s Leach XPress pipeline is planned to bore under the Ohio River near Camden Amusement Park, and Columbia’s Mountaineer XPress pipeline is currently in the public comment phase. There is also industry discussion now about fracking the very deep Rogersville Shale which underlies the Huntington area. “All across the United States, a new energy for citizen action is emerging. We need to tap into that energy and work with others concerned about the severe climate impacts of these planned developments in our neighborhoods,” says OVEC Executive Director Natalie Thompson. “As pipeline companies seek eminent domain rights, we need to remember that informed and organized people can demand their rights, protect their property, and contribute to a better energy future for our state and nation.” “We see the problems our neighbors in north central West Virginia have faced with the rise of deep shale fracking-related activities. We’ve published Renew West Virginia because we want to make certain that people know deep shale fracking-related activities are not the same as our grandfathers’ oil and gas industry,” says Robin Blakeman, OVEC’s project coordinator. The print edition of the paper is free. The online version is available at http://ohvec.org/renew-wv/ Find out more about these issues by visiting the OVEC Facebook page at https://www.facebook.com/OhVECinWV or go to the website, ohvec.org and search for “pipelines” and “fracking.” You can also send an email at email@example.com, or call the local office, located on 14th Street West in Old Central City, at 304-522-0246.
Proliferation of pipelines, fracking will hurt region | Opinion | Dianne Bady & Vivian Stockman - West Virginia's Senate President Carmichael recently was quoted as stating, "We have a moral imperative to provide low-cost energy, not only to West Virginia, but to the world" (State Journal, Feb. 13). West Virginia's fracked gas may be low cost for "the world," but fracking activities force very high costs on those who live nearby. Hundreds of our neighbors in northern West Virginia have already sued fracking companies for serious problems, and some have to have replacement water trucked into their homes after their wells apparently became contaminated. If they can afford it, they often drink only bottled water, because not everyone trusts the replacement water. Oil and gas prices are rising, and the industry has figured out cheaper ways to get fracked gas. This is why the fracking re-boom is now underway in north central West Virginia, Pennsylvania and Ohio.Here in the Huntington area, we could suffer very high costs to our air, water and quality of life if the fracking and pipeline industries have their way. A 36-inch, high pressure pipeline for fracked gas was approved by the Federal Energy Regulatory Commission on Jan. 19. Columbia's Leach XPress pipeline would originate in Marshall County, West Virignia, and would transport methane (the main component of natural gas) through regions of Ohio, where fracking of the Utica shale is rapidly expanding. It would then pass through Lawrence County, Ohio, and underneath the Ohio River near Camden Park, and link to another Columbia pipeline to go to a greatly expanded compressor station near the Huntington Tri- State Airport. From there, the gas would go to Kentucky near Marathon Petroleum's Catlettsburg refinery and would link with the recently approved Rayne Xpress pipeline to carry fracked gas to the Gulf Coast. There are now nine large-diameter pipelines proposed to go under or near the Ohio River in the Huntington area. Columbia's Mountaineer XPress pipeline is moving through the Federal Energy Regulatory Commission's approval process. Plans for the Buckeye Xpress pipeline were announced last month. The Leach XPress, the Mountaineer Xpress and the Buckeye Xpress would carry fracked methane gas from West Virginia, Pennsylvania and Ohio to a pipeline interconnection site near the Marathon's Catlettsburg refinery. It looks like this gas is mostly intended for export from Gulf Coast ports. The Appalachian Storage Hub, still in the planning process, would include six more big pipelines carrying natural gas liquids through our Huntington area to Catlettsburg, possibly in above-ground pipes. Highly pressurized natural gas liquids are even more explosive than dry natural gas (methane).
Group meets on fracking, pipeline threats to Tri-State - herald-dispatch.com: - An environmental and social justice group had an informational meeting Wednesday evening in Huntington regarding the fracking and pipeline proposals for the Tri-State area. "We want to make people aware of the fracking and pipeline threats to the Tri-State," said Natalie Thompson, executive director of the Ohio Valley Environmental Coalition (OVEC). "We have staff who have been working on researching all the various pipelines and their routes, which change daily, and trying to become educated so we can educate those who would be affected by them." OVEC, based in Huntington, wants Tri-State area residents to know about fracked gas pipelines close to the Ohio River. "They will be following the Ohio River and come into confluence just a few miles away at a compressor station in Ceredo, near Camden Park," Thompson said. Thompson says most people don't know the possibilities of the side effects, health effects and environmental effects from fracked gas pipelines. "The Huntington area could suffer very high costs to our air, water and quality of life if the fracking and pipeline industries have their way," Thompson said. Thompson, along with other OVEC speakers, raised concerns about a massive infrastructure being developed to increase the amount of unconventional oil and gas drilling that they believe would clog rural and urban roads with massive trucks, create public safety hazards, risk water pollution, impair drinking water and the potential for catastrophic damage to homes, schools and businesses.
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 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.
Experts: Fracking-related earthquakes in the area are not likely -- Fracking can cause earthquakes in western Pennsylvania, but the seismic activity likely won’t be felt by people above ground, experts said. That opinion is followed by a recent report from the state Department of Environmental Protection that found a low-level earthquake which occurred in Lawrence County by the Ohio border in April was related to fracking. The DEP said the five earthquakes that occurred just west of New Castle on April 25, 2016 were roughly 2 on the Richter scale, the equivalent of feeling a large truck drive by. “When you put high- pressure fluids in the ground, it is going to impact what is underground,” said Kyle Fredrick, a geologist at California University of Pennsylvania. “The idea that it is fracking makes it a touchy topic,” he said. CUP’s Fredrick said the fracking-related earthquake is much different from the seismic activity that took place at well sites in Oklahoma last fall. In November, a 5.0 earthquake was reported, which caused renewed worries that oil and gas drilling was the cause. What makes what has happened in Oklahoma much different from the earthquake in Lawrence County is that wastewater from fracking operations are pumped back into deep wells, the Washington Post said. In most cases, wastewater from fracking operations in Pennsylvania is taken out of state – usually Ohio - for disposal. Ohio has more disposal wells that the Commonwealth.
U.S. Gas Climbs to 1-Month High as Blizzard Bears Down on Northeast --A blizzard bearing down on the U.S. Eastern Seaboard pushed natural gas futures to a one-month high on speculation that demand for the heating fuel will surge during the storm, shrinking a supply glut. The weather system may dump as much as 20 inches (51 centimeters) of snow from Connecticut to Long Island, including New York City, according to the National Weather Service. A deep freeze is poised to linger in the Northeast after the storm passes, sending Boston’s low to 15 degrees Fahrenheit (minus 9 Celsius) on March 16, 16 below average, AccuWeather Inc. data show. The late-winter cold blast is giving gas bulls a break after a warm start to the season sent the market plunging to an eight-month low. While gas stockpiles are still above normal for this time of year, frigid conditions could erode the surplus and stave off another price collapse before the summer. “It’s not just tomorrow’s storm, but the forecast going out to late March that should be supportive for prices,” said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. “But we’re coming to the end of the season, and storage is pretty healthy.” Gas futures for April delivery rose 3.5 cents, or 1.2 percent, to $3.043 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Feb. 9. Gas is still down 18 percent this year, the worst performer among major commodities.
NYMEX April gas rises 3.5 cents to $3.043/MMBtu - The NYMEX April natural gas futures contract continued to increase Monday, fueled by strong demand as weather forecasts indicate winter is not over just yet. This on the heels of three straight sessions of gains that have seen the prompt month increase 21.9 cents since the March 7 close of $2.824/MMBtu. However, prices may face headwinds later in the week as warmer weather is expected to return in a few weeks for a majority of the continental US. The NYMEX April contract settled trading at $3.043/MMBtu Monday, up 3.5 cents, and traded in a range between $3.028/MMBtu and $3.089/MMBtu in the session.The National Weather Service's six- to 10-day forecast called for most of the continental US to see temperatures rise above normal, except for a small portion of the Pacific Northwest and the Northeast. This pattern is expected to hold through the rest of the month. Temperatures plummeted to the upper 40s to lower 50s along the US Gulf Coast over the weekend. In the Northeast, heavy snow is forecast through Tuesday morning, and the weather service expects blizzard conditions for the New York City and New Jersey metro areas. "The natural gas market is extending its price recovery from the February lows on the back of a temperature forecast that continues to trend colder, with a late winter spike in heating demand this week helping to support the rally," Citi energy futures specialist Tim Evans said.
250 Protestors Demand Enbridge Pipeline Shutdown Over Fears of Great Lakes Oil Spill -- Officials from Enbridge Energy Partners insisted on the structural safety of its 64-year-old pipelines that passes under the Straits of Mackinac even though a company-commissioned study found that the lines' protective coating has deteriorated in some areas. "I believe this pipeline is in as good of condition as it was on the day it was installed," Enbridge's director of integrity programs Kurt Baraniecki said at a Pipeline Safety Advisory Board meeting in Lansing, Michigan on Monday. But the 250 protestors who showed up to the meeting responded to the comments with "derisive howls and laughter," the Detroit Free Press reported. The meeting was centered around the Canadian oil transport company's heavily contested Enbridge Line 5 that lies just west of the Mackinac Bridge and carries roughly 23 million gallons of crude oil and liquid natural gas each day. Built in 1953, the 645-mile, 30-inch-diameter pipeline runs from Superior, Wisconsin, across Michigan's Upper and Lower Peninsulas before terminating in Ontario, Canada. As it travels under the Straits of Mackinac, a narrow waterway that connects Lake Michigan and Lake Huron, Line 5 splits into twin 20-inch-diameter, parallel pipelines. Environmentalists fear that a potential rupture of oil lines that run through the heart of the Great Lakes, which contains 21 percent of the world's surface fresh water, would be an ecological disaster. The straits' strong currents reverse direction every few days and a spill would quickly contaminate shoreline communities miles away, a University of Michigan study commissioned by the National Wildlife Federation found. Not only that, opponents cite Enbridge's numerous and well-documented spills. The company was responsible for more than 800 spills between 1999 and 2010 , totaling 6.8 million gallons of spilled oil. Most notoriously in 2010, an Enbridge line spilled more than 800,000 gallons into the Kalamazoo River in Michigan—creating the biggest inland oil spill in U.S. history .
Midwest and Rocky Mountain Transportation Fuels Markets - A new study commissioned by the U.S. Energy Information Administration (EIA), finds that changes in North American energy markets over the past decade have strengthened the supply of transportation fuels including motor gasoline, distillates, and jet fuel in the Midwest and Rocky Mountain regions.The development of Canadian oil sands crude and the emergence of light, tight crude oil in the United States have provided refiners in the Midwest and Rocky Mountain regions with access to abundant, cost-advantaged crude supply, providing opportunities to optimize crude slates and expand refinery capacity and utilization. Increased refinery production, combined with moderating demands for transportation fuels, has enabled suppliers in the Midwest and Rocky Mountain regions to reduce their dependence on inbound transportation fuels supply from the Gulf Coast, and has enhanced the redundancy and resiliency of their transportation fuels supply chains. Refinery capacity and production of transportation fuels in the Midwest and Rocky Mountain regions grew significantly between 2005 and 2015, and fuels markets and supply chains in these regions have become increasingly self-sufficient. Meanwhile, demand for transportation fuels has been stagnant in the Midwest (but has grown in the Rocky Mountain Region), while increasing volumes of renewable fuels—ethanol and biodiesel—have been added to the supply mix. As a result, in-region refinery production of fuels used (net of ethanol and biodiesel inputs) in 2015 has grown to 84% in the Midwest and 101% in the Rocky Mountain region, up from 69% and 97%, respectively, in 2005. Figure 1 compares transportation fuels production with consumption in the Midwest and Rocky Mountain regions in 2005 and 2015. This study is the third and final in a series of reports that examines supply, consumption, and distribution of gasoline, diesel fuel, and jet fuel across the United States. This study focuses on the Midwest and Rocky Mountain regions. The Midwest region comprises 15 states in the north central United States, and the Rocky Mountain region comprises five states in the western north-central United States, corresponding to Petroleum Administration for Defense Districts (PADDs) 2 and 4. Previously published studies focused on the East and Gulf Coasts and the West Coast.
The US has one inspector for every 5,000 miles of pipeline—or twice the length of the country, each - There are 2.7 million miles of pipeline snaked across the US. Some of the pipes carry hazardous chemicals, others carry crude oil, and still others carry highly pressurized natural gas. And when it comes to safety, all of them are under the care of 528 government inspectors.That’s more than 5,000 miles of pipeline or more than twice the length of the United States, per inspector.The little-known and notoriously understaffed Pipeline and Hazardous Materials Safety Administration, or PHMSA, has 188 federal inspectors. States have another 340 inspectors, all of whom go through PHMSA-certified training. According to the agency’s website, those two forces combined are “responsible for regulating nearly 3,000 companies that operate 2.7 million miles of pipelines, 148 liquefied natural gas plants, and 7,574 hazardous liquid breakout tanks.”If US president Donald Trump’s plans to complete both the long-disputed Keystone XL and Dakota Access pipelines come to fruition, they would add 327 miles and 1,172 miles, respectively, to that burden. It is unclear if PHMSA will add new inspectors to accommodate that increase, and PHMSA has yet to return a request for comment. So far, the White House has released no word about Trump’s plans for the Department of Transportation budget, which oversees PHMSA, although his transition team reportedly proposed big cuts for the agency. The cuts would be at odds with Trump’s campaign promise to invest heavily in infrastructure during his first year in office.
Is more pipeline capacity needed to serve natural gas exports via south Texas? - South Texas is emerging as the newest premium destination for natural gas supply in the U.S. Demand in the area is expected to grow much faster than local production, creating a supply shortage in the region by early 2018. New pipeline capacity will be needed to move incremental supply into South Texas. There are several projects planned to facilitate southbound capacity on pipelines running along the Gulf Coast Industrial Corridor. Today we examine the planned pipeline capacity and whether it will be enough to serve the coming demand. We’ve blogged quite a bit recently about the growing natural gas demand for exports, in particular from South Texas. Demand there is expected to nearly double over the next four years, from an average 4.5 Bcf/d in 2016 to about 8.2 Bcf/d by late 2020, driven by pipeline export capacity to Mexico and liquefaction capacity for LNG exports. The new demand will change flow patterns and pricing in the region. And if sufficient supply isn’t available, these changes have the potential to create supply constraints and price volatility. To understand how much incremental supply the region will need, we looked at future changes in the supply and demand balance. First we examined the supply side of the balance in South Texas, 80% of which comes from the Eagle Ford Shale—and that’s where we would expect any local production growth to come from. The Eagle Ford was hit particularly hard by the oil price crash that began in mid-2014, but it looks to be poised for somewhat of a comeback. After nose-diving from a pre-crash level of about 200 to a low of just 29 rigs in June 2016, the Eagle Ford rig count has doubled in the past eight months or so, to more than 70 rigs this month (March 2017).
First major U.S. oil refinery in decades claims it will be ‘green’ with geothermal - A Houston-based company, Raven Petroleum, plans to build the largest new oil refinery in the United States in 40 years, and they say that they’re going “green.” Raven Petroleum’s managing director, Christopher Moore, announced February that they will partner with Austin-based Thermal Energy Partners to build a 55,000 barrel-per-day crude oil refinery with an onsite geothermal plant on 832 acres in Duval County, just east of Laredo, Texas. The refinery will process sweet crude oil from Texas’s Eagle Ford Shale and export diesel, jet fuel, naphtha, gasoline, and liquefied petroleum products to Mexico via railway. “This is going to be a near-net-zero emission, and we will not be burning any dry gas for our energy,” Moore told The San Antonio Express-News during a press conference. “We will be pulling that completely from the geothermal.” The geothermal plant will be capable of generating up to 20 megawatts of power using the heat from wells dug 12,000 feet deep to power turbines, according to James Jackson, Chief Business Development Officer at Thermal Energy Partners. “The idea is to make the cleanest, greenest refinery possible, and the intent is to replicate this model.” “Many people don’t even realize that geothermal is possible in Texas,” Jackson said. But according to the native Texan, the state has vast untapped potential: He estimates Texas holds up to 10% of the total geothermal energy latent in the United States.
DOE announces contract awards from the first sale of SPR crude - Oil & Gas Journal: Seven companies have been awarded contracts for 10 million bbl of crude oil from the US Strategic Petroleum Reserve, the US Department of Energy announced on Mar. 10. Atlantic Trading & Marketing Inc., BP Oil Supply Co., Marathon Petroleum Co., PetroChina International (America) Inc., Phillips 66 Co., Shell Trading (US) Co., and Valero Marketing & Supply Co. received the contract, DOE’s Fossil Energy Office said. Of the 10 million bbl, 3 million bbl will be sold from the SPR’s Bryan Mound, Tex., site, 2.1 million bbl from the Big Hill, Tex., site, and 4.9 million bbl from the West Hackberry, La., site, it said. Deliveries will take place in May and June, with early deliveries in April accommodated to the maximum extent possible, FEO said. A continuing federal budget resolution, which became law on Dec. 10, 2016, included a provision to allow DOE to sell as much as $375.4 million in crude from the reserve as the first tranche of oil sales designed to fund operational improvements to ensure the long-term infrastructure integrity under the SPR Modernization program, it said upon announcing the sale (OGJ Online, Dec. 15, 2016).
DOE economist talks SPR exports, storage and sales - The Barrel Blog: The presenter who arguably received the best questions at Wednesday’s Crude Oil Quality Association meeting in New Orleans was the US Department of Energy’s economist, Kenneth Vincent. His presentation was part overview, such as the locations of the four salt caverns that hold the more than 700 million barrels of US oil – Texas and Louisiana, and the maximum drawdown capacity – 4.4 million b/d. But there were also some nuggets not found on factsheets such as the how the physical salt caverns are shrinking due to geological pressures and how “distribution issues are a major concern (for the DOE) currently and going forward.” Following the presentation, the overflowing room of oil industry participants had plenty of questions for Vincent. And if they didn’t know the answers, and I didn’t know the answers, I reckon you might be interested too: (Q&A)
Vitol Warns U.S. Crude Exports Will Grow "A Lot More" Rising production in the Permian, coupled with cheap pipeline and railway transport fees to the Gulf of Mexico, will enable the U.S. to significantly raise its already record-high crude oil exports, Mike Loya, head of the Americas business at oil trading giant Vitol Group, toldBloomberg in an interview published on Friday.“We will see a lot more growth in U.S. crude exports,” said the manager of Vitol, the company that handled the first U.S. cargo after restrictions on oil exports were lifted at the end of 2015.Since the restrictions were lifted, U.S. crude oil has reached customers in various regions around the world, including buyers in Venezuela, China, Italy, and Israel.Vitol’s Loya believes that Asia will be increasingly one of the top destinations for U.S. crude oil, after the initial expansion to the Caribbean markets, Latin America, and Europe.According to Loya, the Permian crude production would increase by between 600,000 bpd and 700,000 bpd by the end of this year, and “a lot of that is going to be exported”. The EIA currently expects U.S. crude oil production to average 9.2 million bpd this year and 9.7 million bpd next year, compared to an estimated 8.9 million bpd pumped in 2016. The Administration’s latest Drilling Productivity Report shows that the Permian is expected to add 70,000 bpd to its production this month to reach 2.250 million bpd.
Is the OPEC/non-OPEC deal proving to be a boon for US shale oil producers? - Platt's podcast - Capitol Crude looks at whether the landmark crude oil supply cut agreement between OPEC and non-OPEC producers may be undermined by growth of US shale oil supply. Spencer Dale, BP’s group chief economist, and Lynn Helms, North Dakota’s top oil and gas regulator, talk to senior oil editors Meghan Gordon and Brian Scheid about how US producers are responding and to the agreement what they’re looking for from the deal. We also look at the top three questions coming out of CERAWeek by IHS Markit on the future of the OPEC/non-OPEC deal.
Trump Tax Cut May Save Oil Explorers $10 Billion, Boost Drilling | Rigzone -- The Trump administration’s plan to slash corporate tax rates could free up more than $10 billion a year for U.S. oil explorers, opening new opportunities to boost drilling at a time of uncertainty in the marketplace. Crude prices in New York have fallen 10 percent since the end of 2016 as added drilling in America’s shale fields offset an OPEC-led drive to raise prices by cutting production. The U.S. push has spurred concern that another price rout could be just around the corner, following a two-year decline that saw prices fall as low as $26.05 a barrel in February 2016. Republicans led by President Donald Trump have said they want to cut the top corporate rate to 15 or 20 percent, from 35 percent now. That could mean more than $10 billion in savings for oil producers that are one of the country’s most-heavily taxed industries, according to Bloomberg Intelligence research. The final number will hinge on whether drillers surrender other tax breaks in exchange, said Vincent Piazza, a senior analyst at BI. “In theory,” explorers would divert tax savings to more domestic drilling, Piazza said in a telephone interview “But nothing is ever one-for-one.” West Texas Intermediate crude fell 0.2 percent on Monday to $48.47 after it hit a high of $55.24 on Jan. 3. The number of rigs drilling U.S. fields for crude almost doubled to 617 since the end of May, when the full impact of the oil-market collapse shrank the fleet to a 6 1/2-year low, according to Baker Hughes Inc. The oil rig count has advanced in 18 of the past 19 weeks as explorers coped with reduced cash flows by finding cheaper ways to pump each barrel from the ground. U.S. drillers lifted crude production more than 3 percent since the end of 2016 to 9.088 million barrels a day as of March 3, according to the Energy Department in Washington. It’s not clear when a tax cut plan might be finalized by the U.S. Congress and signed into law by the president. “A reform bill faces stiff challenges, and would likely come with tradeoffs such as fewer tax breaks,” the Bloomberg Intelligence report said. Still, the discussion comes as the future of the global industry is under debate. At CERAWeek by IHS Markit, the largest annual gathering of industry leaders, some top executives warned against overindulgence by U.S. drillers.
The fossil fuel industry's invisible colonization of academia - On February 16, the Harvard Kennedy School’s Belfer Center hosted a film screening of the “Rational Middle Energy Series.” The university promoted the event as “Finding Energy’s Rational Middle” and described the film’s motivation as “a need and desire for a balanced discussion about today’s energy issues.” Who can argue with balance and rationality? And with Harvard’s stamp of approval, surely the information presented to students and the public would be credible and reliable. Right? Wrong.The event’s sponsor was Shell Oil Company. The producer of the film series was Shell. The film’s director is Vice President of a family-owned oil and gas company, and has taken approximately $300,000 from Shell. The host, Harvard Kennedy School, has received at least$3.75 million from Shell. And the event’s panel included a Shell Executive Vice President. The film “The Great Transition” says natural gas is “clean” (in terms of carbon emissions, it is not) and that low-carbon, renewable energy is a “very long time off” (which is a political judgment, not a fact). Amy Myers Jaffe, identified in the film as the Executive Director of Energy and Sustainability at the University of California, Davis, says, “We need to be realistic that we’re gonna use fossil fuels now, because in the end, we are.” We are not told that she is a member of the US National Petroleum Council. The film also features Richard Newell, who is identified as a Former Administrator at the US Energy Information Administration. “You can get 50% reductions in your emissions relative to coal through natural gas,” he says, ignoring the methane leaks that undermine such claims. The film neglects to mention that the Energy Initiative Newell founded and directed at Duke University was given $4 million by an Executive Vice President of a natural gas company. Michelle Michot Foss, who offers skepticism about battery production for renewables, is identified as the Chief Energy Economist at the Center for Energy Economics at the University of Texas at Austin. What’s not said is that the Energy Institute she founded at UT Austin is funded by Chevron, ExxonMobil, and other fossil fuel interests including the Koch Foundation, or that she’s a partner in a natural gas company.
U.S. Shale Faces A Workforce Shortage - A problem for the U.S. shale oil and gas industry that analysts and observers have warned about for a long time has materialized: there is a shortage of workers. According to one service provider for E&Ps, trucker jobs remain vacant even with an annual paycheck of $80,000, which is certainly a big change from a couple of years ago when layoffs were sweeping through the shale patch.This shortage could dampen the prospects of not just shale producers, who are eager to ramp up production as quickly as possible and take advantage of higher international oil prices, but it will also seriously hamper the recovery of the oilfield services segment, which has been hit harder than E&Ps by the price crash.We wrote earlier this year how oilfield service providers are starting to get back at producers with higher fees for their services, to make up for the hefty discounts they were forced to offer over the last two years to stay afloat. Drilling rates per well almost doubled in some cases as the market turned from buyer-dominated to supplier-dominated.We also noted then that this could be problematic for producers as they, too, have yet to recover fully from the blow dealt them by the price crash, limiting their ability to regain profitability. Now, the workforce shortage is exacerbating the problem.U.S. crude oil output has been rising at a faster rate than in the original shale revolution, according to Bloomberg, gaining 125,000 bpd on average since last September. Currently, it exceeds 9 million bpd and is widely seen as the main factor limiting the growth potential of oil prices. What’s more, E&Ps are increasing their capital and exploration budgets for this year, despite the arrested growth of oil prices. Continental Resources will be investing $1.95 billion, aiming to accelerate production growth in the second half of 2017. Hess Corp is planning a budget of $2.25 billion, up from the 2016 actual spend of $1.9 billion. Chesapeake Energy Corporation plans total expenditures in the range of $1.9 billion–$2.5 billion this year, compared to total capital expenditures of $1.65 billion–$1.75 billion last year.
U.S. shale oil output to soar in April, Permian to hit fresh record | Reuters: U.S. shale oil production in April was set for its biggest monthly increase since October as output in the Permian Basin, America's fastest growing shale oil region, was expected to hit another record high, government data showed on Monday. Total shale oil production was expected to rise 109,000 barrels per day to 4.96 million bpd, according to the U.S. Energy Information Administration's drilling productivity report. Oil production in the Permian Basin in Texas and New Mexico, the largest U.S. shale oil field, was set to rise 79,000 bpd to 2.29 million bpd, the highest level on records dating back to 2007. In the Eagle Ford region in Texas, output was expected to grow nearly 28,000 bpd to 1.14 million bpd, the highest level since November. Production in the Bakken, however, was set to drop 10,000 bpd to 964,000 bpd, the only month-on-month decline across all seven basins used in the report. That would be the third consecutive monthly decline in the North Dakota basin. Meanwhile, U.S. natural gas production was projected to increase to a record high 49.6 billion cubic feet per day in April, the EIA said. That would be up almost 0.6 bcfd from March and would be the fourth monthly increase in a row. The EIA projected gas output would increase in all of the big shale basins in April, including the Eagle Ford, where production had been declining since January 2016.Output in the Marcellus formation in Pennsylvania and West Virginia, meanwhile, was set to grow by almost 0.2 bcfd to a record high near 19.2 bcfd in April, a sixth consecutive increase. EIA also said producers drilled 807 wells and completed 716 in the biggest shale basins in February, leaving total drilled but uncompleted wells (DUCs) up 91 at 5,443, the most since April 2016.
Natural Gas Takeaway Capacity from the SCOOP and STACK --The oil- and condensate-focused SCOOP and STACK shale plays in Central Oklahoma have been garnering the industry’s attention for their attractive producer economics, which are second only to the Permian among the crude oil shale plays. Rig additions in Oklahoma over the past several months are clearly targeting this 11-county area of the Anadarko Basin, and the RBN Production Economics Model projects production from the region will grow by 1.5 Bcf/d over the next five years. The increased drilling activity and expected production growth has piqued the interest of midstream companies looking to invest in infrastructure in the area. Given the increased output, is more takeaway capacity needed, and if so by when? Today we continue our look at the potential for takeaway constraints out of the SCOOP and STACK. This blog series provides a snapshot of our latest in-depth analysis of production trends and infrastructure out of the SCOOP/STACK. As we noted in Part 1, drilling activity in the South Central Oklahoma Oil Province (SCOOP) and Sooner Trend Anadarko Canadian Kingfisher (STACK) producing regions primarily targets crude oil, natural gas liquids (NGLs) and condensates in the Woodford and Meramec formations of the Anadarko Basin (see Scoop-y Doo and All Come to Look for a Meramec). But that type of drilling brings with it substantial amounts of associated natural gas production volumes.
Cheniere Gas Pipeline Would Link STACK-SCOOP to Gulf Coast, Southeast -- Cheniere Energy, Inc. subsidiary Midship Pipeline Co., LLC, has proposed building a 200-mile 36-inch interstate natural gas pipeline linking the emerging STACK and SCOOP resource plays in Oklahoma's Anadarko Basin to Gulf Coast and Southeast markets, Cheniere announced Friday. "Not only will the Midship Project help meet the Anadarko Basin's need for additional natural gas takeaway and serve demand along the Gulf Coast, it also demonstrates the uniquely integrated market solution Cheniere can provide by leveraging our LNG platform along the entire value chain." Midship has signed precedent agreements with foundation shippers – Cheniere, Devon Energy Corp., Marathon Oil Corp. and Gulfport Energy Corp. – to support construction of the pipeline, which would provide up to 1,400,000 Dekatherms per day of firm transportation, Cheniere stated.In addition, Midship has launched a binding open season to solicit additional long-term shipper commitments for the proposed project. Cheniere stated the open season will run from 9 a.m. Central time on March 17 to 3 p.m. Central on March 30. Subsequently, Midship plans to submit its official 7C application with the Federal Energy Regulatory Commission.The Midship project would comprise new mainline pipeline, several laterals, compressor stations and interconnects tied to STACK and SCOOP processing plants, Cheniere noted. It would provide deliveries to Bennington, Okla., the TexOk hub near Atlanta, Texas, and the Perrysville Hub near Tallulah, La., the company added. Cheniere anticipates an early 2019 in-service date for the proposed Midship Project.
Chevron Pipeline Spills 4,800 Gallons of Oil on Public Land, Kills Wildlife - Cleanup efforts are underway after a failed Chevron Corporation pipeline released about 4,800 gallons of oil into an intermittent stream on public land in northwestern Colorado and killed some wildlife. The breach happened on Bureau of Land Management (BLM) land and was first detected on March 5 by a Chevron consultant. The pipeline was shut down after discovery of the leak and the oil is now trapped in a berm and siphon dam in a dry ravine, according to the Associated Press . As it happens, the leak occurred around the same time that the conservation group Center for Western Priorities found that Chevron was behind 31 reported spills in Colorado last year, ranking the energy corporation as the fourth highest oil and gas spiller in the state. Chevron spokeswoman Erika Conner said that while there are no public health concerns after the March 5 incident, some animals have died. Two mallard ducks covered in oil were found at the spill site and were transferred to Colorado Parks and Wildlife on March 5 but died the day after. Two other small birds and several mice have also been found dead by cleanup crews. "The U.S. Fish and Wildlife Service has been notified," Conner told The Daily Sentinel . "We regret the impact the release has had on the affected animals and are working diligently to avoid any additional impacts to wildlife." Colorado Department of Natural Resources spokesman Todd Hartman told the AP that the failed section of pipeline is being analyzed to determine a cause.
Interior Department to withdraw Obama-era fracking rule, filings reveal -- The Trump administration plans to withdraw and rewrite a 2015 rule aimed at limiting hydraulic fracturing, or “fracking,” on public lands, the Interior Department indicated in court filings Wednesday. The move to rescind the 2015 regulation, which has been stayed in federal court, represents the latest effort by the new administration to ease restraints on oil and gas production in the United States. Interior’s Bureau of Land Management issued the rule in an effort to minimize the risk of water contamination through the practice, which involves injecting a mix of chemicals and water at high pressure into underground rock formations to force out oil and gas. Under the proposal, companies that drill on federal and tribal lands would be subject to stricter design standards for wells and for holding tanks and ponds where liquid wastes are stored. They also would be forced to report which chemicals they were pumping into the ground. But last June, U.S. District Judge Scott Skavdahl in Wyoming ruled that Interior had exceeded its congressional mandate in choosing to regulate the controversial drilling practice. While Obama administration officials appealed that decision to the U.S. Court of Appeals for the 10th Circuit, the appeals court asked BLM on March 9 if the agency’s position had changed now that Trump is in office. On Wednesday, Justice Department lawyers representing Interior and BLM asked the court to “continue the oral argument and hold these appeals in abeyance pending a new rulemaking” on the issue. The attorneys noted that Interior officials were already reviewing the regulation to mesh with Trump’s agenda. “As part of this process, the Department has begun reviewing the 2015 Final Rule (and all guidance issued pursuant thereto) for consistency with the policies and priorities of the new Administration,” the motion reads. “This initial review has revealed that the 2015 Final Rule does not reflect those policies and priorities.”
Trump to repeal Obama fracking rule | TheHill: The Trump administration is planning to repeal former President Barack Obama’s landmark 2015 rule setting standards for hydraulic fracturing on federal land. Justice Department lawyers revealed the decision late Wednesday in a filing with the Denver-based Court of Appeals for the Tenth Circuit, where the federal government under had been fighting against the oil and natural gas industry and conservative states to get the rule reinstated. It is the latest in a series of high-profile Obama environmental rules the Trump administration is repealing or working to change. Earlier Wednesday, President Trump asked the Environmental Protection Agency to consider weakening greenhouse gas emissions standards for cars. Trump has ordered the EPA to consider repealing Obama’s Clean Water Rule, and will soon seek to undo the Clean Power Plan, the coal leasing moratorium for federal land and other climate and environmental regulations. Attorneys said the Interior Department and Bureau of Land Management (BLM) have been reviewing rules as part of a White House directive on reducing unnecessary and burdensome regulations. “As part of this process, the department has begun reviewing the 2015 final rule … for consistency with the policies and priorities of the new administration,” lawyers wrote. “This initial review has revealed that the 2015 final rule does not reflect those policies and priorities.” Attorneys said that Interior would formally propose to repeal the rule within 90 days. That will start a process, likely to take a year or more, of undoing a rule that was a high priority for Obama and took many years to write.
Trump Administration to Kill Fracking Rule on Public Lands - The Trump administration intends to scrap and rewrite an Obama-era rule designed to make fracking on federal lands safer. Drilling has taken place on federal lands for years, with more than 100,000 wells in existence. In 2015, the Interior Dept. issued new standards aimed at making the process safer, including stricter and higher design standards for wells and waste fluid storage facilities to mitigate risks to air, water and wildlife. Companies would also be required to publicly disclose chemicals used in fracking. However, U.S. District Judge Scott Skavdahl blocked the Obama rule in June after accepting the argument from energy companies and several states that federal regulators lack congressional authority to set rules for fracking. The Obama administration appealed the decision to the 10th Circuit, but the rule could be killed for good. The Trump administration said in court filings Wednesday it is withdrawing from the lawsuit. Justice Dept. lawyers representing Interior and the Bureau of Land Management asked the court to "continue the oral argument and hold these appeals in abeyance pending a new rulemaking" on the issue. "As part of this process, the Department has begun reviewing the 2015 Final Rule (and all guidance issued pursuant thereto) for consistency with the policies and priorities of the new Administration," the motion reads. "This initial review has revealed that the 2015 Final Rule does not reflect those policies and priorities." A spokeswoman for Interior Sec. Ryan Zinke confirmed with the Associated Press that the administration intends to submit a new rule.
‘We haven’t lost…we have awakened’: Indigenous nations March on the White House - They came to Washington to march on the White House, to remind President Donald Trump that despite making up less than one percent of the country’s population, Native people and their rights should be in the front of his mind. Hundreds of people, representing indigenous communities from around the country, came despite the rain, the hail, the wind, burning sage in front of the Army Corps of Engineers headquarters in downtown D.C., shouting reminders that the Corps is bound by the Constitution to protect the country from enemies both foreign and domestic.“Your president is the enemy!”“You can’t drink oil, keep it in the soil!” It was not the first march on Washington led by indigenous communities, and it won’t be the last. The movement against the Dakota Access pipeline has suffered a string recent setbacks at the hand of the Trump administration and the courts: an executive order reversing the Obama administration’s hold on the Dakota Access Pipeline, an Army Corps decision to abandon an environmental impact statement, and a series of defeats in federal court. But on Friday, the Native Nations Rise march buzzed with the feeling that many of the fights brought to the forefront by the movement at Standing Rock — issues like tribal sovereignty, water rights, environmental justice — were just beginning.“I think a lot of people feel as though we have lost, but we haven’t lost… we have awakened so many folks to water rights issues, to indigenous land rights issues, to the issues that face women of color and marginalized communities,” Eryn Wise, who grew up on the Jicarilla Apache Reservation in New Mexico and now works with the International Indigenous Youth Council, told ThinkProgress. “People are finally starting to understand that we are not just mascots, we are not just caricatures, we’re not just past tense, we’re not historical figures. We are people that exist in the here and now. We are people that are fighting for the rights of our futures, our children, our ancestors.”
Tribes ask judge to stop Dakota Access oil from flowing - ABC News: Two Native American tribes who are suing to stop the Dakota Access pipeline have asked a judge to head off the imminent flow of oil while they appeal his decision allowing the pipeline's construction to be completed. U.S. District Judge James Boasberg last week rejected the request of the Standing Rock and Cheyenne River Sioux tribes to stop construction of the final segment of the pipeline under Lake Oahe, a Missouri River reservoir in North Dakota from which the tribes get their water. The pipeline's developer, Texas-based Energy Transfer Partners, expects to have the work done and the pipeline filled with oil as early as this week. The tribes maintain that an oil pipeline under the lake they consider sacred violates their right to practice their religion, which relies on clean water. In his decision last week, Boasberg said the tribes didn't raise the religion argument in a timely fashion and he questioned its merits. Cheyenne River attorney Nicole Ducheneaux on Friday appealed the ruling to the U.S. Court of Appeals for the District of Columbia Circuit. She also asked Boasberg to "prevent the flow of oil through the Dakota Access pipeline" until the appeal is resolved. "Should construction continue during the appeals process, the last opportunity for Cheyenne River Sioux Tribe to defend its tribal members' free exercise of religion will be lost," Ducheneaux wrote. Boasberg on Monday gave ETP and the Army Corps of Engineers until Tuesday to file their responses to the request. The Corps is a defendant in the lawsuit because it manages the Missouri River system and authorized the Lake Oahe work last month at the urging of President Donald Trump.
U.S. judge denies tribe's request to stop oil flow in Dakota Access pipeline | Reuters: A U.S. federal judge on Tuesday denied a request by a Native American tribe for an emergency injunction to prevent oil from flowing through part of the Dakota Access Pipeline, saying such a move would be against the public interest. The ruling, issued in court documents ahead of plans to start pumping oil through the pipeline next week, follows months of demonstrations in a remote part of North Dakota, where the Standing Rock Sioux tribe demonstrated in an attempt to stop the Dakota Access Pipeline crossing upstream from their reservation. Judge James Boasberg of the U.S. District Court for the District of Columbia issued his decision denying the request by the Cheyenne River Sioux Tribe, saying the court "acknowledges that the tribe is likely to suffer irreparable harm to its members’ religious exercise if oil is introduced into the pipeline, but Dakota Access would also be substantially harmed by an injunction, given the financial and logistical injuries that would ensue." The pipeline is nearing completion after President Donald Trump signed an executive order last month smoothing the path for construction. He also cleared the way for the Keystone XL project that would pipe Canadian crude into the United States. The Standing Rock Sioux and the Cheyenne River Sioux last week lost a legal bid to halt construction of the last link of the pipeline under Lake Oahe in North Dakota, which they say threatens tribal lands. The pipeline will be ready to carry oil by April 1.
Dakota Access Pipeline races to start moving Bakken crude - Oil will likely flow through the Dakota Access Pipeline under Lake Oahe in North Dakota early next week. Barring any more twists or turns — and there have been plenty in the last seven months of this project — the contentious 470,000 b/d crude oil pipeline will start commercial service very soon thereafter. It will open up a major new route for Bakken and Three Forks production to flow to Illinois and onto the Texas Gulf Coast.A March 7 ruling by Judge James Boasberg of the US District Court for the District of Columbia cleared the way for the startup, when he turned down two North Dakota tribes’ request for a preliminary injunction to prevent oil from flowing under Lake Oahe. On Tuesday, he ruled against the tribes again in denying an injunction pending appeal by the US Court of Appeals for the District of Columbia Circuit. The lawsuit will go on, but Boasberg’s role in the Dakota Access saga will likely fade to the background. Protesters will continue to fight Dakota Access and use it to galvanize opposition to future energy projects. The movement solidified a shift among environmentalists from exclusively targeting upstream projects to trying to block the transportation networks that move oil or natural gas from the wellhead to markets. At the same time, companies have likely learned their own lessons from the Dakota Access saga — whether they plan to ramp up local engagement before applying for projects to build community support or adopt Energy Transfer Partners’ strategy of keeping nearly silent while they go through the regulatory and court process.
Judge combines 4 tribal suits over Dakota Access pipeline - bismarcktribune.com: A judge has combined lawsuits filed by four Sioux tribes over the Dakota Access pipeline, streamlining the drawn-out legal battle over the $3.8 billion project to move North Dakota oil to a distribution point in Illinois. Meanwhile, a federal appeals court could decide this weekend on a tribal request to stop oil from flowing through the pipeline next week. The neighboring Standing Rock and Cheyenne River tribes teamed up last summer in the main lawsuit against Texas-based pipeline developer Energy Transfer Partners and the U.S. Army Corps of Engineers, the federal agency that granted pipeline permits at more than 200 water crossings, including the Missouri River. The Yankton Sioux also sued last summer, and the Oglala Sioux filed its own lawsuit last month.The four Dakotas tribes make essentially the same claims: The pipeline threatens cultural sites and the Missouri, from which they get water for drinking and religious practices. "Consolidating the cases would conserve judicial resources, allow the parties to save time and expense, and enable the court and parties to schedule matters more efficiently," Corps attorneys said in asking U.S. District Judge James Boasberg in Washington, D.C., to lump the cases together. None of the tribes or ETP objected to the move, and Boasberg granted the request Thursday. The legal battle lingers even as ETP prepares to launch pipeline operations. Crews are wrapping up final pipe work under Lake Oahe, a Missouri River reservoir in North Dakota, and the company has said oil could flow as early as Monday. Cheyenne River attorney Nicole Ducheneaux asked the U.S. Court of Appeals for the District of Columbia Circuit to issue by Monday an "emergency" prohibition of any oil flow, until it resolves an appeal of Boasberg's recent decision to not stop final construction. Boasberg also rejected a separate tribal request to stop oil from flowing.
Standing Rock protests, killing of activist, unite indigenous struggles | Reuters: - Protests against the Dakota Access Pipeline in the United States and the killing of prominent Honduran land rights campaigner Berta Caceres have united the struggles of indigenous peoples on the continent, a Guatemalan indigenous leader said on Tuesday. Andrea Ixchiu, a Mayan activist and campaigner for indigenous land rights, said the pipeline protests allowed the public to speak out about injustices committed against indigenous communities in the United States. "Standing Rock shows us the creativity of resistance," she told the Thomson Reuters Foundation in London, referring to the Indian reservation where thousands of people gathered to protest the installation of an oil pipeline last year. Indigenous Mayan groups from Guatemala traveled to the Standing Rock protest camp on the North Dakota plains as a show of solidarity with Native Americans, she said. Ixchiu was in London to promote a documentary she appears in which she hopes will raise awareness of the struggles faced by indigenous communities in Guatemala. "500 Years" was released in January at the Sundance film festival in the United States and will be screened at the Human Rights Watch film festival on Tuesday. Pamela Yates, who directed the film as part of a trilogy about indigenous resistance in Guatemala, said the Standing Rock protests were a moment in North America which "changed everything."
ACLU challenges warrant to search Facebook page of Dakota Access opponents | TheHill: The American Civil Liberties Union is moving to quash a police warrant granted to search data on a Facebook page of a group protesting the Dakota Access pipeline. The American Civil Liberties Union filed a motion Wednesday to strike what it described as a far-reaching and unconstitutional request by the Whatcom County Sheriff’s Department in Bellingham, Wash., to search the Facebook page of the Bellingham #NODAPL Coalition. The coalition and other individuals across the country have engaged in protests against the Trump administration’s plan to move forward on construction of the pipeline. The group is said to have been involved in a protest at Bellingham’s U.S. Bank in early February.According to the ACLU, the founder of the Facebook page received an email from Facebook on March 3 with a copy of the warrant issued to search the site. The message, cited by the ACLU in its filing, also indicated that a motion would need to be filed by March 8 to quash the warrant and that Facebook would otherwise respond to the legal process. The ACLU has posted a copy of the warrant on its website. The motion argues that the warrant is unconstitutional because it permits a broad search of private electronic data protected by the First and Fourth Amendments.
Battle Against the Dakota Access and Keystone Pipelines -- Last week in Washington, DC, members of American Indian tribes and their supporters demonstrated against the construction of the Dakota Access Pipeline . The protest was led in part by members of the Standing Rock Sioux tribe, who have been battling the U.S. government for almost a year over the oil pipeline, which they say will contaminate their drinking water and has destroyed sacred sites in North Dakota. In this edited interview, Sarah Jaffe speaks with Kandi Mossett of the Indigenous Environmental Network about the march last week and what's next in the fight against the Dakota Access Pipeline, as well as other pipeline projects. (The full interview is available in the audio above and online at TruthOut.org ). Mossett is a member of the Mandan, Hidatsa and Arikara Nation, which has been active in the Standing Rock protests since August.
Cook Inlet Gas Leak remains unmonitored as danger to marine life is feared - As the underwater methane leak in Cook Inlet, Alaska continues well into its third month, even basic environmental monitoring has been impossible because of ice cover. The ice also prevents any repair to the pipeline or response to the leak.While much about the natural gas pipeline leak remains unknown, including its exact location or how the methane may be affecting the inlet's endangered beluga whales, enough is known to make some environmental scientists concerned about a potential environmental disaster in the making.Because of where the gas is leaking, a massive amount of water is continually exposed to the methane. And as each day goes by without a fix to the pipeline, the potential problems could be getting worse."It's like a perfect storm of conditions that would encourage or enhance the diffusion of the methane into the waters," said Chris Sabine, a chemical oceanographer with the National Oceanic and Atmospheric Administration. "And that's a bad thing for the water and for the organisms that live in it." The 8-inch pipeline carries natural gas 15 miles from land to four offshore oil platforms. It has been leaking between 210,000 and 310,000 cubic feet of gas per day since at least late December, according to the company.The gas is about 99 percent methane. Federal regulators have said the line must be shut down if it's not repaired permanently by May 1. Two environmental groups have separately announced their intent to sue if the pipeline is not repaired soon.
3 Months and Counting: Pipeline Leaks Natural Gas Into Alaska's Cook Inlet - For more than three months, an underwater pipeline has been spewing hundreds of thousands of cubic feet of processed natural gas per day in Alaska's Cook Inlet, possibly threatening critically endangered belugawhales , fish and other wildlife.The 8-inch pipeline, owned and operated by Hilcorp Alaska , is leaking more than 210,000 cubic feet of gas per day. The gas is 99 percent methane and provides fuel for four platforms in Cook Inlet.A notice from the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) revealed that Hilcorp knew about the leak as early as December but did not report the leak until Feb. 7 after a helicopter spotted gas bubbling to the surface of the water.PHMSA said that the natural gas discharge could pose a risk to public safety, the environment and marine mammals and has given Hilcorp until May 1 to permanently repair the line or shut it down.But conservation groups warn that waiting until May could allow the release of another 16 million cubic feet of gas. Seven groups have submitted a letter to the Trump administration urging for an immediate shutdown of the 52-year-old pipeline."This dangerous leak could stop immediately if regulators did their job and shut down this rickety old pipeline,"saidMiyoko Sakashita, the Center for Biological Diversity oceans program director. "We're disgusted with the Trump administration's lack of concern about this ongoing disaster. Every day the leak continues, this pipeline spews more pollution into Cook Inlet and threatens endangered belugas and other wildlife." Hilcorp contends that Cook Inlet's heavy ice cover and strong tides has made it too risky for divers to immediately fix the problem and is waiting until at least late March or April for the ice to clear. The ice cover has also made it impossible to survey the leak's risks to environmental and wildlife. But scientists have already warned that the impact could be disastrous.
Huge Oil Find Could Save Alaska's Oil Sector - Spanish oil firm Repsol SA just announced the largest onshore oil discovery in the U.S. in three decades, a 1.2 billion barrel find on Alaska’s North Slope. Repsol has been actively exploring in Alaska since 2008 and finally hit a big one. The find came after drilling two wells with its partner, Armstrong Oil & Gas. Repsol says that it if it moves forward and develops the project, first oil could come by 2021. The field could produce 120,000 bpd, a significant volume given the predicament the state of Alaska finds itself in. Alaskan oil production has been declining for decades. After BP’s massive Prudhoe Bay oil field came online in the 1970s – the largest oil field in North America – Alaska’s oil production shot up. But the field saw its production peak in the late 1980s at 1.5 million barrels per day, after which it went into long-term decline. The Trans-Alaskan Pipeline System (TAPS) has made oil production on Alaska’s northern coast possible. With a price tag of $8 billion, the 800-mile pipeline was the largest privately-funded construction project in the 1970s. The pipeline is absolutely critical to Alaska’s oil industry – without it, producing on the North Slope never would have gotten off the ground. But falling output levels on the North Slope from aging fields like Prudhoe Bay put the pipeline’s existence into jeopardy. The pipeline has a throughput capacity of 2 million barrels per day, but actual oil flows have declined to roughly 0.5 mb/d, and are falling by about 5 percent per year. That isn’t just a problem from a revenue standpoint, but also from an operational one. Declining throughput means slower moving oil, which means lower temperatures for that oil. Slower and colder oil leads to water separating from the oil and freezing. That can damage the pipeline. If the oil flow drops too low, the pipeline operator might have to switch from continuous flows to more intermittent throughput. Ultimately, the pipeline’s very existence is in doubt if the state’s oil production continues to fall.
Opening Arctic for drilling is Trump priority, key senator says - Senator Lisa Murkowski said President Donald Trump is interested in opening up new coastal waters for oil and gas drilling and reversing Obama-era policies that restrict energy development in Alaska. Both Trump and Interior Secretary Ryan Zinke are weighing ways to expand opportunities to drill in Arctic waters though the changes could take years to accomplish administratively, Murkowski said in an interview on the sidelines of the CERAWeek conference in Houston. Murkowski, who heads the Senate Energy and Natural Resources Committee, joined her fellow Republican senator from Alaska, Dan Sullivan, in a meeting with Trump and Zinke earlier this week to discuss the issue. Trump “clearly understood the impact of taking off-line” oil and gas development in the Chukchi and Beaufort seas north of Alaska, Murkowski said. “What was very clear was a recognition that what Alaska has to offer is considerable, important and we need to be working to undo much of what the Obama administration did in terms of locking up these resources,” Murkowski said of her talks with Trump. Among her targets: making it easier to develop parcels in the National Petroleum Reserve-Alaska, a 23-million-acre (9.3 million hectare) region set aside 94 years ago because of its oil and gas potential, and allowing the activity in part of the Arctic National Wildlife Refuge (ANWR). Any decision to open up ANWR would fall to Congress, where Murkowski and Sullivan are pushing legislation that would allow oil and gas development in as much as 2,000 acres of the refuge. The president can set some changes into motion immediately by directing the Interior Department to rewrite a plan for selling offshore oil and gas leases over the next five years and add auctions of tracts in the Arctic and Atlantic oceans that the Obama administration left out. But wedging those sales back into the plan would require environmental analysis and public comment periods -- perhaps consuming a year for the Arctic and even longer for parcels along the U.S. East Coast.
Keystone XL Does Not Make Sense Anymore - Canada’s oil industry is facing a dilemma – three major proposed pipelines but perhaps only room enough for two of them. For years, the oil industry in Canada has been fighting for expanded pipeline capacity. Landlocked Alberta has had trouble getting its oil to market. Every direction except north has been seriously considered, with TransCanada, Enbridge and Kinder Morgan jockeying to advance their competing projects to service Alberta. All of these projects have been bogged down by a combination of the federal approval process, environmental protest and opposition from First Nations. The Keystone XL pipeline saga is nearly a decade old and there is still no steel in the ground. Over the years, Canadian heavy oil has been forced to sell at a discount because of the shortage of pipeline space. In fact, the lack of pipeline capacity has been singled out as one of the top threats to expanded oil sands production. That is exactly why environmental groups targeted Keystone XL years ago, and it is exactly why the oil industry says building pipelines is its top priority. “Canada’s energy future relies on our ability to get Canadian oil and gas to the people who need it,” Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers (CAPP) said last year. Canadian pipelines can carry 4 million barrels of oil per day, which is just a bit above the actual oil flows in 2015 at 3.981 mb/d, according to CAPP. Without more pipelines, oil sands companies cannot expand their operations. The industry is targeting an additional 850,000 bpd over the next five years. In the fourth quarter of last year, the Canadian government gave federal approval to two major pipeline expansions: the Trans Mountain Expansion and the Line 3 replacement. Kinder Morgan’s Trans Mountain Expansion project will see the construction of a twin line that will run parallel to an existing pipeline from Alberta to the Pacific Coast. The expansion will nearly triple its capacity from 300,000 to 890,000 bpd. Enbridge also received approval for the replacement and overhaul of its Line 3 pipeline from Alberta to Wisconsin in the United States. The replacement of the pipeline will nearly double its carrying capacity to 760,000 bpd. Then there is the Keystone XL Pipeline, which, like a zombie, refuses to die. The election of President Donald Trump brought the project, left for dead by President Obama, back to life. TransCanada hopes to move forward on the project.But according to Enbridge, there may not be a market for all three pipelines. "If you look at the supply profile and you look at our expansion replacement capacity for Line 3 and one other pipeline, that should suffice based on the current supply outlook, out to at least mid-next decade," Enbridge’s CEO Al Monaco said on a fourth quarter earnings call. Naturally, Monaco wants his company’s Line 3 to be one of the two pipelines to move forward.
3 Reasons Why Keystone XL Pipeline May Never Get Built - Almost a full decade since first applying for a presidential permit, TransCanada looks set to finally receive go-ahead in the U.S. for its massive $8-billion Keystone XL pipeline . But here's the thing: U.S. approval, while a great leap forward for TransCanada, doesn't guarantee the Keystone XL pipeline will ever be built. New U.S. President Trump was elected with the explicit promise to get the 830,000 barrel per day pipeline from Alberta to Nebraska built, under the conditions that the U.S. would receive a "big, big chunk of the profits or even ownership rights" and it would be built with American steel; his administration has already flip-flopped on the latter pledge. On Jan. 24, Trump signed an executive order , inviting TransCanada to reapply for a presidential permit, which the company did two days later. It's now in the hands of the State Department, which has to issue a verdict by the end of March. Sounds like a slam dunk, right? Not so fast. Here are reasons why. Even Enbridge CEO Al Monaco recently stated that Canada only needs two more export pipelines. "If you look at the supply profile and you look at our expansion replacement capacity for Line 3 and one other pipeline, that should suffice based on the current supply outlook, out to at least mid-next decade," Monaco said on a fourth quarter earnings call last week. Wood Mackenzie analyst Mark Oberstoetter seconded that: "There's not an evident need to get three or four pipelines built." Add to that the rapidly declining long-term prospects in the tar sands . Those include Exxon's writing off of 3.5 billion barrels in bitumen reserves, ConocoPhillips' cutting of 1.2 billion barrels in reserves and Shell's forecasting of global peak oil demand in 2021. Just last week, Shell sold off almost all of its tar sands assets to Canadian Natural Resources Limited. This follows divestitures by Statoil and Total SA in recent years. "There will be no more greenfield projects if the price of oil stays at what it is," said David Hughes, expert on unconventional fuels and former scientist at the Geological Survey of Canada. Hughes adds that Western Canadian Select already sells at a discount of around $15/barrel due to transportation and quality discounts.
US needs Canada’s resources, Trudeau tells gathering of global oil and gas executives -- Prime Minister Justin Trudeau is in the heart of the U.S. oilpatch to make the case for investing in Canadian natural resources, even while his Liberal government is preparing for a future without fossil fuels. “Nothing is more essential to the U.S. economy than access to a secure, reliable source of energy,” Trudeau said Thursday night in Houston during a keynote address to an influential global gathering of politicians and energy sector executives. Trudeau talked up the connection between resource development and taking care of the environment, a message he has also been taking to Canadians – including those who still had bitter memories of the national energy program his father, former prime minister Pierre Trudeau, implemented in the 1980s. “It was a failure,” said Trudeau in an advance copy of his speech. Trudeau has been trying to convince skeptics on both sides of the political spectrum that he will get it right this time, and that the country needs both new pipelines and a carbon-pricing plan meant to cut back on greenhouse gas emissions.
Majors exiting Canada's oil sands acting in own interest: Trudeau | Reuters: Canadian Prime Minister Justin Trudeau on Friday dismissed a recent string of major oil companies selling their holdings in the heavy oil sands of Western Canada and moving investments to shale fields. Royal Dutch Shell and Marathon Oil this week disclosed sales of operations that largely removed both firms from the carbon-heavy oil reserves. Shell is selling its interests to Canadian Natural Resources(CNQ.TO). Last month, Exxon Mobil (XOM.N) wrote down all of its oil reserves from its Kearl project in northern Alberta, saying extracting the oil was no longer economic at current prices. "Businesses will make the decisions they make," Trudeau said. In a wide-ranging media briefing, Trudeau said oil and gas executives are looking for greater clarity on regulations and pricing, arguing that the world is ready for a low-carbon economy. He also said Canada and the United States are working on border issues, including migration and trade. Trudeau said a Canadian consensus on a carbon price to meet international climate change goals shows the nation can move forward on difficult issues. "The one thing I’ve heard consistently from leaders in the energy industry is the need for clarity in terms of what (the) frame of regulations, (and) pricing is going to be," he said.Promoting both renewable and conventional energy sources shows "investments in Canada are sound investments, not just for short term, but for the long term," Trudeau said." We're going to see many people interested in partnering in drawing on Canadians' great natural resources."
Mexico needs 15 successful upstream auctions to reach output forecast: AMEXHI - Mexico would require at least 15 upstream oil and gas auction rounds as successful as Round 1 to fulfill the International Energy Agency's production forecast, a Mexican Association of Hydrocarbon Companies, or AMEXHI, study showed Tuesday. The IEA Mexican Energy Outlook forecast Mexico could produce 2.8 million b/d in 2040, adding the country requires investments of $640 billion to achieve this production level. From that 2.8 million b/d, 2.5 million b/d would come from new projects in 2040. "This is a titanic effort," said Pablo Zarate, information director of AMEXHI's research center, said at an AMEXHI event Tuesday. Only 2% of Mexico's total oil production comes from reservoirs that started producing in the last 25 years, Monica Boe, leader of AMEXHI's resource access committee, said at the event. This is a small amount compared with US' 7%, Venezuela's 8%, and the UK's 35%. "The amount of new discoveries in Mexico are very low. To reverse this, we need to explore intensively," said Boe.
The World Wasted Trillions of Dollars on Fossil Fuels Because of Bad Math -- Government subsidies for fossil fuels over the last three decades have been far larger than anyone previously thought, according to a new study published by the University of Calgary's School of Public Policy in March.A fossil fuel subsidy is any government policy that lowers the cost of fossil fuel production, raises prices received by producers, or lowers prices paid by consumers: they can consist of tax breaks and direct funding for fossil fuel companies. But subsidies can also consist of loans, price controls, or giveaways in the form of land or water at below market-rates, and many other actions.They have been so high across the world, finds Dr. Radek Stefanski—an economist at the University of St. Andrews in Scotland— that they are nearly four and a half times higher than previously believed.So what's the damage? It's pretty colossal. For the last year in his model, 2010, Stefanski found that the total global direct and indirect financial costs of all fossil fuel subsidies was $1.82 trillion, or 3.8 percent of global GDP. He also found that the subsidies meant much higher carbon emissions released into our atmosphere.Compare that to the International Energy Agency (IEA) figure for the same year. In its 2011 World Energy Outlook, the IEA calculated total worldwide fossil fuel subsidies for 2010 to be $409 billion, less than a quarter of Stefanski's figure of nearly two trillion dollars.Stefanski is not the first to have suggested that older methods of calculating global fossil fuel subsidies were missing the mark by millions, if not billions. But he's the first to have applied a more advanced methodology to go back and see how much we've actually been spending in the past to shore-up the oil, gas and coal industries.His findings suggest that government spending to keep the fossil fuel industries pumping has been orders of magnitude higher than we ever thought for several decades, not just years.
Oil and gas industry is waking up to competition from renewables - The world’s energy demand will continue to grow in the decades ahead, but who will consume it, and in what form, has oil and gas companies scrambling to protect market share. “This is going to require common sense at scale for the world to recognize that we are going to need all forms of energy,” BP CEO Bob Dudley said. “You can’t just turn off oil or coal.” Dudley was also one of many CEOs who declared that the industry needs to reduce greenhouse gas emissions and fight climate change in order to stay in business. Exxon Mobil CEO Darren Woods also called on political and industry leaders to recognize climate change and embrace a carbon tax. The quickest way to reduce carbon emissions is to switch from burning coal and oil to cleaner natural gas. Many major energy companies are increasing their natural gas holdings in anticipation of high demand from power companies as developed nations use more electricity for transportation and less oil.
Offshore oil drillers stuck in 'wait and see' mode - Offshore oil exploration remains in the doldrums as the industry awaits clearer signs about the outlook for crude prices, says the head of one of Europe’s largest oilfield services companies. Stefano Cao, chief executive of Italy’s Saipem, said most oil explorers remained in a “wait-and-see mode” before committing to new projects, creating an uncertain outlook for companies that rely on offshore drilling and construction for business. “In order to see light at the end of the tunnel we need to see a rebound in capital expenditure by oil companies,” he told the Financial Times. “There is an expectation that things will pick up but we do not see it yet.” Prospects for a recovery in industry spending have not been helped by a renewed dip in oil prices. Brent crude, the international benchmark, fell 8.1 per cent last week to $51.37, its lowest level since December, as rising US supplies rattled the market. Prices are still 80 per cent higher than the 12-year lows hit early last year but the latest volatility has increased doubts over the ability of Opec nations and Russia to drive further recovery by curbing output. Some oilfield service companies, including Schlumberger and Halliburton, have been benefiting from resurgent investment in US shale oil resources — but there are few signs of the revival spreading to the rest of the world. The number of active drilling rigs in the US and Canada has risen 87 per cent in the past year to 1,083, while the number outside North America has fallen almost 8 per cent to 941, according to Baker Hughes, the US oilfield services group. Most oilfield service companies continued to see revenues fall last year as projects approved before the 2014 oil price crash came to an end with few new ones to replace them. Saipem’s 2016 sales were down 13 per cent at €9.98bn.
North Sea oil outlook less promising as Scotland eyes new referendum: consultancy - - The North Sea oil industry faces a halving of investment in the next three years and tens of billions of pounds worth of decommissioning obligations, creating an unpromising environment for a potential Scottish independence referendum, consultancy Wood Mackenzie said Friday. The UK oil industry has made progress on costs and efficiency since Scotland's last independence referendum in 2014, the consultancy said in a research note after the devolved government in Edinburgh proposed a new referendum this week. However new challenges have emerged, including weaker oil prices and a lack of new discoveries and development projects, Wood Mackenzie, which is based in the Scottish capital, said. "It is clear that oil and gas tax revenue will play a smaller part in the economic case for independence should a second referendum be held," it said.In any case, "political uncertainty could deter investors from committing to new projects," particularly in the context of the UK's exit from the European Union, it added. Wood Mackenzie estimated the value of Scottish oil and gas fields, including a 10% discount, at GBP44 billion ($64 billion). However the volume of the UK's commercial oil and gas reserves has dropped 30% since the vote in 2014, mainly because reserves totaling 1.6 billion barrels of oil equivalent have been tapped in the intervening period, compared with total discoveries of just 100 million boe. In addition, 1.3 billion boe of UK resources have been removed from consideration as commercial reserves due to lower oil prices. This means that as of the start of this year the UK was home to 6 billion boe in reserves, of which 5.3 billion boe, or 88%, lay in Scottish waters, although Scotland may be able to count on another 4.3 billion boe of "contingent" resources.
Oil Minister: Up To 12 Oil And Gas Projects Possible In Norway This Year (Reuters) - Up to 12 oil and gas projects off Norway could be sanctioned by oil companies this year, the Norwegian oil and energy minister told Reuters on Thursday, suggesting that activity in the sector could be on the rise after a two-year slump. "There is a possibility that there can be 10 to 12 projects sanctioned on the Norweigan Continental Shelf in 2017," Terje Soeviknes said on the sidelines of an oil conference. "Some of these could be moved to 2018 though." Five field development plans were presented to authorities for approval last year.
EU Lawmakers Reject Call For Ban On Arctic Oil Exploration (Reuters) - The European Parliament rejected a call to ban Arctic oil and gas exploration on Thursday, in a symbolic vote seen as a barometer for future moves by Brussels to regulate to protect the region. Lawmakers who back the ban, which had drawn the ire of Norway, say the European Union needs a strategy for future developments in a region being transformed by climate change.Lawmakers voted 414-180 to reject the non-binding motion calling for the European Commission and member states to work with international forums towards "a future total ban on the extraction of Arctic oil and gas".The European Parliament did, however, endorse a call to ban oil drilling in the region's "icy" waters - wording Norway says does not concern its current plans.Norway, which on Monday announced plans to nominate a record number of blocks for oil and gas exploration in the Barents Sea, says it only allows drilling in the Arctic away from the area that is vulnerable to sea ice in winter.The motion to ban exploration in the Arctic was brought by Estonian liberal lawmaker Urmas Paet and Finnish centre-right lawmaker Sirpa Pietikainen. But even Paet said that, while there was a need for cautious management of the environment, oil and gas extraction in the Arctic was "a decision of sovereign states".The motion also called for greater cooperation among Arctic states to safeguard indigenous people in the region from the worst impacts of global warming; protect the environment from fossil fuel exploration; and reduce military tensions.Oil majors are resuming their search for giant offshore fields in the region after a two-year lull as a recent stabilisation in oil prices revives appetite for exploration - alarming environmental groups. The Arctic is estimated to hold more hydrocarbon reserves than Saudi Arabia and governments including Russia, Norway and Denmark are keen to stake their claim over the icy waters.
January Atlantic LNG production falls 9% on year - LNG production at Trinidad-based gas liquefaction complex Atlantic LNG totaled 2.2 million cubic meters in January, down 9% year on year, according to a bulletin released Tuesday by Trinidad and Tobago's Energy Ministry. Production at the Point Fortin, Trinidad, facility continues to be far short of capacity as a result of curtailments by natural gas producers. The shortfall, caused by upgrades to gas infrastructure and decreased upstream investment by energy companies, is expected to continue through at least this year, according to industry officials. January LNG sales and deliveries from Atlantic LNG were 52.0 million MMBtu, down 8% year on year, the ministry said.The seven gas producers operating in Trinidad and Tobago produced an average 3.3 Bcf/d of gas in January, down 12% year on year. Gas production typically has averaged between 3.8 Bcf/d and 4.1 Bcf/d in recent years.
There are big problems with UK’s biggest natural gas store -- The prognosis for Centrica Plc’s business of storing natural gas is getting worse. Its Rough facility, an old depleted gas field under the North Sea, will end up costing the company at least another 100 million pounds ($122 million), according to a Bloomberg survey of analysts and traders. While Rough was once a jewel in Centrica’s crown, its efficiency has declined with age and usage. The facility’s strategic importance to the UK gas market has forced the company to throw cash at it to slow the decline, but over the last year, technical problems have mounted in frequency and severity. The trouble at Rough has implications both for Centrica, which is losing money from a once-profitable business, and the UK economy, likely to experience more volatile energy prices without the level of flexibility the giant storage facility used to provide. Without some kind of financial support, the utility could decide further investment isn’t viable. Centrica declined to comment on future spending on the nation’s largest gas store, but said because of its strategic value there may be scenarios where the UK will have to pay for the security it provides. The nation’s energy security would be OK even if Rough closed, the UK’s Department for Business, Energy and Industrial Strategy said by email.
Gas supply shortage will threaten nation’s power supplies, AEMO forecasts - An assessment from the Australian Energy Market Operator (AEMO) is warning that, without a swift response, Australia could face a difficult choice — keeping the power on versus cutting gas supplies to residential and business customers. “If we do nothing, we’re going to see shortfalls in gas, we’re going to see shortfalls in electricity,” AEMO chief operating officer Mike Cleary said. The analysis said without new development to support more gas-powered electricity generation, modelling showed supply shortfalls of between 80 gigawatt hours and 363 gigawatt hours could be expected from summer 2018/19 until 2020/21. Widespread shortages are predicted to hit New South Wales and South Australia first, then Victoria in 2021, and Queensland between 2030 and 2036. The AEMO report makes clear Australia's energy mix is facing big challenges, with export of liquefied natural gas now a dominant factor for the eastern states, production from existing gas fields in decline, and electricity demand rising.
Australia's ACCC head urges Gladstone LNG operators to supply domestic market - The chairman of Australia's competition watchdog has urged east coast LNG operators to provide as much supply as possible to the struggling domestic market and raised concerns over their moves to sell additional volumes in the international spot market. "They would be well advised to support the domestic market as much as they can at this critical time," Australian Competition and Consumer Commission Chairman Rod Sims said, according to an early copy of his speech to the 5th Annual Australian Domestic Gas Outlook conference in Sydney obtained by S&P Global Platts. LNG exports over the past couple of years via the three terminals -- Australia Pacific, Gladstone and Queensland Curtis -- almost tripled demand in the eastern and southeastern states, Sims said. This stretched Australia's eastern seaboard's gas supply, pushing up prices, and resulting in warnings of a likely shortage. The ACCC conducted an inquiry in April last year and found that the east coast was expected to produce sufficient gas to meet both domestic demand and existing LNG export commitments until at least 2025. But, if LNG operators sell in the international LNG spot market, it could change the situation. "Most LNG producers are selling gas on the LNG spot market in addition to meeting their contractual commitments and these volumes are expected to increase going forward," he said. "The comment that I made [advising the LNG producers to support the domestic market] seems relevant here," he added.
Platts JKM prices for Apr LNG delivery fall 21% on month to $6.079/MMBtu - - The Platts JKM for April LNG delivery averaged $6.079/MMBtu over February 16-March 15, sliding 20.5% from a month earlier on expectations of rising supply and limited demand. Train two of the Gorgon project in Western Australia resumed production at the end of February, following its recent shutdown. The prospects for new LNG supplies grew as market players focused on the expected startups of Australia's Gorgon Train 3, US Sabine Pass Train 3 and Petronas' floating LNG project, all expected to start up in March and all exerting bearish pressure on the market. There was also re-selling of long-term contracted volumes, with Unipec actively re-marketing volumes in February, expected to be at least one cargo a month, with the exact volumes dependent on Chinese domestic demand, from their 7.6 million mt/year LNG contract from eastern Australia's APLNG project.In addition, at the end of February, multi-cargo sell-tenders from Papua New Guinea's PNG LNG, as well as Russia's Sakhalin injected significant supply into the market. Sakhalin's May 2017-March 2018 DES sell tender of six cargoes were heard awarded to BP, JERA and another northeast Asian utility at 11.5% of Brent crude price. A further three cargoes for April delivery was awarded at $6.10-6.20/MMBtu, to Mitsui, PetroChina and Gazprom, sources said. PNG LNG's six-cargo tender, which closed on February 22, for April-November deliveries were heard awarded to CPC, as well as several non-project offtakers. The market also had to absorb more sell tenders, with Argentina's Enarsa awarding a total of 20 cargoes, in a tender which closed March 7. The results of the Enarsa tender awarded were published by the company, Wednesday. Super major Shell was awarded all of the tender slots, save those for June 6 and July 21 delivery into Escobar, which were awarded to Petrobras and Gas Natural Fenosa, respectively. All of the Shell cargoes for July and August were sold on a Henry Hub basis.
India seeks to clinch deal for Iranian offshore gas development - - India is working to finalize a $3 billion deal with Iran on the 18.75 Tcf Farzad B gas field development in the Persian Gulf by September 2017, sources at the oil ministry said Thursday. The confirmation from India came after Iranian oil ministry news service on Monday quoted the managing director of Pars Oil and Gas, Mohammed Fam, as saying the company had put Farzad B's development high on its agenda. Pars is a unit of state-owned National Iranian Oil Co. responsible for developing Iran's biggest offshore gas field, South Pars, as well as the North Pars gas field, but it is not the company with which India has primarily been negotiating. That company is Iranian Offshore Oil Co., a sister company to Pars to which ONGC Videsh (OVL), the overseas arm of India's state-run Oil and Natural Gas Corp., has submitted a new master plan for Farzad B and which operates in Iranian waters except for those covering South and North Pars.The new plan excludes liquefaction facilities, the Indian ministry sources said. It is some $7 billion cheaper than the original proposal that included LNG production facilities, and is expected to be finalized over the next six months once both the parties, OVL and IOOC, agree on a gas price and a rate of return for the Indian entity's investment in the Iranian gas field, they added. A definitive agreement is likely to be ready by the first half of the new Iranian fiscal year from April, the sources said.
Argentina's Pampetrol restarts oil field after exit of private operator - Pampetrol, the state oil company of Argentina's La Pampa province, has brought back into production a formerly privately operated block, with an eye to boosting output, the provincial government said. "Pampetrol has started the first four production wells," the government said, adding each of the wells on Salina Grande I was producing an average of 94 b/d. The La Pampa government said these were the first of 10 existing wells that Pampetrol will gradually put back into operation on the block in the south-central province. The block had been inactive for a year, it said.Last August, La Pampa revoked the exploration and production permit of Salina Grande I's private consortium, saying the group had failed to comply with license requirements in terms of the pace of investment since winning the permit in 2006. The consortium was made up of Gregorio, Numo y Noel Werthein, Petrosiel and Energial, the latter of which was the operator of the block. La Pampa has also taken back under state control other blocks like Jaguel de los Machos from Brazil's state-run Petrobras. La Pampa produces 3.8% of the country's 511,000 b/d of crude and 0.8% of its 123 million cu m/d of gas, according to the Argentine Oil & Gas Institute, an industry group.
Pakistan's oil demand jumps 13% on low prices, economic growth - Pakistan's oil consumption from July 2016 to February 2017 jumped 13% year on year, owing to lower petroleum product prices and higher economic activity, driven by GDP growth, foreign investment and greater political stability. Pakistan's economy expanded 4.2% in 2016, foreign investment has continued to grow -- attracted by the multi-billion dollar China-Pakistan Economic Corridor project -- and improvements in the country's security front, following the government's efforts to combat terrorism, have also led to economic gains and additional investment. Oil sales during the first eight months of the current fiscal year rose 13% year on year to 16.67 million mt, according to data from oil marketing companies and the Pakistan's Oil Companies Advisory Committee. Pakistan's fiscal year runs from July to June. Motor gasoline sales increased to 4.36 million mt, up 20% year on year, while demand for high speed diesel increased 15% to 5.46 million mt, the data showed."Sales of both products moved north due to significantly lower prices and lower availability of compressed natural gas in the transport sector," said Muhammad Saad Ali, research analyst with Karachi-based brokerage Inter Market Securities. The price of Pakistan's motor gasoline peaked in October 2013 at Rupees 114 ($1.1)/liter compared with Rupees 73/liter currently, while high speed diesel was at Rupees 117/liter versus the current price of Rupees 82/liter. Sales of furnace oil also increased to 6.21 million mt from July 2016 to February 2017, up 10% year on year, driven by higher consumption by the power generation sector amid lower water levels and weak hydroelectric production.
Analysis: China makes first-ever US SPR crude oil purchase - PetroChina International has bought crude oil from the US Strategic Petroleum Reserve -- the first such purchase by a Chinese company -- in a move that further underscores growing Chinese interest in US crude. PetroChina International, the overseas trading arm of state-owned oil giant PetroChina, bought 550,000 barrels from the SPR in the US Department of Energy's latest sale for a total of $28.8 million ($52.36/b). A Beijing-based senior crude trader with PetroChina International Tuesday said that the deal, announced last week by the US Department of Energy, was not yet completed and they have not decided whether to bring the barrels back to China or send them elsewhere as the volume is small. PetroChina's Houston office would not comment. "We notice that more and more crude barrels from North America are flowing into China, but we have not decided whether to send this cargo back," he said, declining to comment further. Deliveries of the crude, both by pipeline and vessel, are expected to take place in May and June, but there may be some early deliveries in April, the US DOE said Friday. The volume and price of the deal prompted a Shanghai-based analyst to call it a profile-building exercise by PetroChina. "It will be a milestone and a good headline for a Chinese company to buy [crude oil from] the US SPR,"
China crude oil stockpiling impervious to OPEC price hike: Russell | Reuters: China's stockpiling of crude oil appears to have increased in the first two months of the year, despite prevailing higher prices caused by OPEC and its allies curbing output. The country rarely releases detailed inventory levels for strategic and commercial storage, but it's possible to work out an estimate from net crude imports, domestic output and refinery throughput. In the first two months of 2017 the total amount of crude available from net imports and domestic output was 96.72 million tonnes, equivalent to about 11.97 million barrels per day (bpd), according to official statistics. The refinery throughput for January and February was 90.76 million tonnes, or about 11.23 million bpd, according to data released on Tuesday by the National Bureau of Statistics. On a daily basis, the runs for the first two months of the year were the second highest on record, just behind December's 11.26 million bpd. The bureau provided only numbers for the first two months in order to smooth the impact of the Lunar new year holidays. Subtracting the amount of crude processed by refiners in the first two months of 2017 from the total amount available leaves about 740,000 bpd, most of which is likely to have flowed into commercial or strategic storage. This is slightly higher than the 732,800 bpd gap between available crude and the amount refiners processed over the whole of 2016. While this isn't a major increase, it does come against a backdrop of higher prices over the period when crude that arrived in January and February would have been booked.
Russian Rosneft agrees to double oil products supply to Turkey over 2018-20 - --Russia's Rosneft agreed with Turkey's Demiroren Group to extend its oil products supply to the Turkish company to 2018-2020, when it plans to double annual delivery from this year's level, Rosneft said in a statement late Friday. Under the new agreement, the two companies will sign an additional contract to supply upto 4.6 million mt in total in the course of the next three years, including 3.6 million mt of low sulfur diesel containing 10 ppm of sulfur, and upto 1 million mt of LPG, it said. While Rosneft plans for roughly equal supply of about 1.533 million mt/year, or 30,800 b/d, the volumes may vary, the company's spokesman said, adding that the agreement marked the maximum volume. It declined to give the minimum permitted volume. The document, signed during Turkish President Recep Tayyip Erdogan's visit to Moscow, is an extension of Rosneft's previous deal with Demiroren for upto 840,000 mt of diesel supply this year, Rosneft said. While the company said in December that it had agreed to supply 550,000 mt to the Turkish group this year, the volume was later reconsidered upwards, the spokesman said. The new contract, which is yet to be signed, will allow Rosneft to "significantly strengthen its position in Turkey's market, allowing the company to ensure supplies of additional 11.3% of the country's diesel imports and about 6% of its diesel consumption," Rosneft said in a statement.
Russia's falling fuel oil exports: podcast -- S&P Global Platts editors Joel Hanley and Elza Turner discuss how Russian refinery upgrades and a rise in export duty have led to a fall in exports for fuel oil. However, one product in particular is seeing a rise in exports.
Analysis: Iraqi KRG faces obstacles to maintain crude oil export quality - The regional government of semi-autonomous Iraqi Kurdistan appears to be struggling to maintain the quality of its oil exports, just as it has signed a landmark supply agreement with Rosneft aimed at opening up new markets for Kurdish crude. The problem surfaced last month in a regulatory filing by Gulf Keystone Petroleum, which produces heavy crude from Kurdistan's giant Shaikan field, disclosing a Kurdistan Regional Government decision to stop accepting Shaikan crude for blending into pipeline exports of Kurdish crude for delivery to the Turkish Mediterranean oil terminal at Ceyhan. Instead, the KRG has agreed to shoulder the cost of transporting Shaikan crude by truck for onward export as a stand-alone product and to continue paying Gulf Keystone a flat $15 million/month for current and past exports, the company said.Kurdish officials said the action was taken to preserve the quality of the crude exported by pipeline. The main problem for the KRG, however, is unlikely to be solely the low API and relatively high sulfur content of Shaikan crude, which so far has been pumped in limited quantities -- recently at a rate reported by Gulf Keystone of about 37,000 b/d. More likely, the KRG's unexpected decision to exclude Shaikan crude from the export pipeline reflects much bigger problems for the regional government in coping with a large drop in output from one of Kurdistan's major producing fields, compounded by delays in bringing new fields onstream.
OPEC cuts make global crude supply lighter and sweeter: Kemp (Reuters) - OPEC’s production cuts have changed the quality of the global oil supply, shaking up the relationship between important crude benchmarks and altering purchasing calculations for refiners. Most oil from shale formations in the United States as well as from the North Sea and West Africa is relatively low density and contains only a small percentage of sulphur. Crude from Saudi Arabia and other countries around the Middle East Gulf, on the other hand, is mostly denser and contains much more sulphur (giving it an acrid odour). Atlantic basin crudes are mostly “light” and “sweet” while Arabian crudes are mostly “medium” or “heavy” and “sour”. The bulk of OPEC’s cuts have come from members exporting medium and heavy sour oils while members exporting lighter oils have cut much less or been exempted. Light and sweet crudes are generally more valuable to refiners because they are much easier and less expensive to process. Light crudes require less secondary processing through cracking and coking and yield a greater proportion of high-quality premium fuels. Medium-sour crudes, on the other hand, normally trade at a discount to compensate refiners for the extra energy and expensive equipment needed to refine them. By restricting their production, Saudi Arabia and other Middle East members of OPEC have reduced the aggregate supply of medium and sour grades on world markets. The result has been a sharp narrowing of the quality premium for light, sweet crudes such as Brent over medium sour crudes such as Oman (http://tmsnrt.rs/2mQyu93).
OPEC's best signal of success no longer looks so promising - When OPEC announced production cuts last year, the most reliable indicator of oil-market supply started signaling a shortage ahead. Now it’s pointing the other way. In the weeks after OPEC’s Nov. 30 agreement, shorter-term oil prices began to strengthen versus longer-term contracts amid expectations the group’s output cuts would cause a shortfall this year. That trend is reversing on growing concern the curbs aren’t enough to clear the surplus in world oil inventories. Oil prices have slumped below $50 a barrel for the first time this year as record crude stockpiles and rebounding production in the U.S. suggest that the curbs by the Organization of Petroleum Exporting Countries and Russia aren’t working fast enough. In January, front-month Brent crude futures narrowed their discount -- known as contango -- against contracts for the following year on expectations the supply curbs would succeed. By Feb. 21, the front-month had developed a premium over the year-ahead contract, a situation known as backwardation. Last week, the contango strengthened again. “The market has started to doubt that OPEC will prolong the cut deal into the second half of 2017 and hence maybe the stock draws that would follow will not happen,” said Torbjorn Kjus, chief oil analyst at DNB Bank ASA in Oslo. “Hence, backwardation is changing to contango for that part of the curve.” Saudi Arabian Energy Minister Khalid Al-Falih told a conference in Houston last week that the kingdom hasn’t yet decided whether OPEC should prolong the output curbs once they expire in June. Kuwait, while agreeing it’s too early to decide, would back an extension, according to comment by Oil Minister Issam Almarzooq reported by news agency Kuna. A move to backwardation was among the criteria Al-Falih listed for deciding whether the measures are working. Whereas contango rewards traders for amassing inventories that will be worth more in future, backwardation would encourage them to deplete those stocks and clear the surplus.
Saudi Arabia and the war on shale oil that never ended -- Last week when Saudi Arabia let it leak that the kingdom has no intention of leading OPEC toward another cut in production to accommodate the growing volumes of oil from American shale deposits, it was another sign that the Saudi war on shale actually never ended. To properly understand this announcement, we need to return to last fall. Most people believed then that the cuts agreed to by OPEC under Saudi leadership marked the end of Saudi Arabia's war on shale oil in America. At the time I cautioned against such a conclusion, and said I was doubtful that there would actually be any decline in world oil production because the Saudis didn't really want a decline. And, guess what? The OPEC cuts have yet to be fully implemented and have been offset by rising production elsewhere. And, the Saudis are now complaining that the Russians who, though not part of OPEC, agreed to cuts to support prices, are not keeping their end of the bargain. The Saudis are practicing a marvelous bit of misdirection to keep any blame away from themselves. With the Saudis, it's always necessary to look at the entire game board in order to understand their moves. So, why are the Saudis content to allow oil prices to remain this low and possibly drift lower? I believe it's because their war on shale never ended; they mean to destroy the long-term financial viability of oil from shale deposits--and that job won't be finished until investors say, "Never again!"Apparently, investors in American shale deposits have very short memories or they have not had enough punishment. They continue pour money into the Permian Basin located in Texas and New Mexico. The Permian is likely to be the only U.S. shale oil deposit that will see growth in oil production this year as low prices continue to take their toll on other shale plays such as the Bakken in North Dakota.But there are only so many profitable sites in the Permian, and with the continuing rush of capital into the area, the good ones will start to run short at some point. We'll only know that's happened when the second great wave of wealth destruction in the shale fields begins as I suspect it will in the not-to-distant future.
Saudis Are Right Back Where They Started - Saudi Arabia has ended up with precisely what it wanted to avoid. Its output cut has left it supporting rival producers, while its sacrifice of volume has yielded little in the way of higher prices. Crude fell back on Thursday to levels not seen since before the producer group announced its historic oil output cuts on Nov. 30. What went wrong, and where do they go from here? First things first. The oil price jumped after OPEC announced its decision to cut output by around 1.2 million barrels a day. It rose further when a group of non-OPEC countries joined them the following month. The crude oil market barely batted a sleepy eyelid when the cuts began at the start of January. It rolled over with a gentle snore when the first month's production figures showed an almost unprecedented level of compliance of over 90% among the OPEC countries who were party to the deal. Saudi oil minister Kahlid Al-Falih said last week that global oil stockpiles have been slower to decline than OPEC had hoped. In fact, they don't seem to be declining at all. Total U.S. inventories of crude and refined products remain more than 20 percent above a five-year average level that includes the last two years of rising stockpiles. Comparing it with 2010-2014, the surplus is more than 30 percent higher than average. In Europe, a 5.4 million barrel reduction in crude oil inventories in February was entirely offset by increases in gasoline and middle distillates, according to Euroilstock data. Meanwhile, China built crude oil stockpiles by nearly 30 million barrels last month, according to analysis by Vienna-based consultants JBC Energy. OPEC cuts have had no impact on U.S. stockpiles of crude and refined products.
OPEC’s Rebalancing Act – IMF blog - Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait are bearing the brunt of the OPEC cuts, which could be extended another six months, while some member countries such as Nigeria and Libya have been exempted. Moreover, non-OPEC producers joined in and agreed to cut about 600,000 barrels a day. Russia committed to cut 300,000 barrels, and 10 other non-OPEC oil producing countries agreed to cut the remaining 300,00 barrels a day. These agreements appear to have brought supply and demand into balance at a price just above $50 a barrel—largely because of the high degree of compliance by OPEC members with the level of production agreed to last November. OPEC reported that compliance was close to 90 percent in January—a level that would be in sharp contrast with the typically low adherence by OPEC members to those set in earlier production agreements. There are some reports that compliance is lower, but Saudi Arabia has signaled it will do whatever it takes to enhance the credibility of the agreement and has cut its production more than required.That said, there are several threats to the effectiveness of the agreement, even in the short term. Some OPEC members—Iraq, Libya, and Nigeria—have increased their production since October. Furthermore, not only did non-OPEC producers make smaller reductions than OPEC, they also do not have to reach their production targets as soon. For example, Russia has so far cut only 120,000 of the 300,000 barrels a day it promised. And some analysts believe that some of the targeted reductions are phantom, reflecting a natural decline from historically high production levels rather than active cuts. But perhaps the biggest threat to the attempt to achieve price stability comes from shale oil producers. The $6-a-barrel increase in spot oil prices that followed the hints last September of an OPEC production agreement is expected to stimulate investment in oil production in 2017, after significant declines in the previous two years. An increase in shale oil output in the United States could quickly offset much or all of the OPEC and non-OPEC production cuts, because shale wells can begin production within a year of the initial investment, unlike conventional oil investments, which take a number of years to come to fruition.
New Oil Price War Looms As The OPEC Deal Falls Short - Last November, OPEC orchestrated an impressive feat: corralling all (or nearly all) of its members to sign on to relatively aggressive production cut deal, and then actually convincing everyone to follow through on those reductions beginning in January. OPEC’s estimated 94 percent compliance rate defied the cartel’s own history of cheating and mistrust, and OPEC has taken around 1 million barrels of oil production per day off the market.They were initially rewarded for this. Oil prices rallied more than 20 percent in the month after the deal was announced and investors and analysts have been mostly bullish on crude prices ever since. But the cuts were not all that they seemed to be for two reasons: OPEC cut from record highs and countries exempted from the deal ramped up oil production in the fourth quarter of 2016, offsetting much of the reductions.Member countries (excluding Indonesia, which is no longer a member) produced about 32.5 million barrels per day (mb/d) in August. That was the last month before the September Algiers accord, which was basically an agreement to agree to cuts at a later date. By January, after nearly 90 percent of the 1.2 mb/d of cuts were implemented – or reductions of about 1.1 mb/d – the group still produced a relatively high 32.14 mb/d. Why the disconnect? Pretty simple: OPEC used an October baseline, when production was more than 400,000 bpd higher than two months earlier. Cutting from a peak made the reductions seem much more dramatic.Moreover, the countries exempted from the deal offset the steep cuts from countries like Saudi Arabia. Libya has added about 400,000 bpd in output since last summer, while Nigeria has added between 200,000 and 300,000 bpd. So, we have OPEC talking up a major production cut deal, and also trumpeting its unprecedented rate of compliance. Oil investors listened, and became incredibly bullish on oil prices, expecting a sharp tightening in the market to be forthcoming. But while the participating countries have indeed taken about 1.1 mb/d off the market, they did so from their peak levels, and those cuts were offset by rising output from Libya and Nigeria. The bottom line is that OPEC has only taken a few hundred thousand barrels per day off the market from last summer’s levels.
What Does OPEC Do Next? - OPEC’s failure to understand the future market conditions and speed of technological advancements has resulted in economic setbacks. A 2012 paper about the role of U.S. shale oil in global oil markets suggested that “It could be in the interest of OPEC to already increase its production now and allow oil prices to decline to below $60 to discourage further development of shale oil”. The industry, and more particularly OPEC, continued with their “business as usual” strategy, unaware of the dramatic impact U.S. shale would have on oil prices. $100+ oil prices allowed companies to master the fracturing technology. As a result, the shale industry was able to increase average productivity per well by employing advanced horizontal drilling techniques, multi-stage fracturing and concentrating towards the most productive areas of the basin. The higher U.S. shale oil production started to take its toll on oil prices in the second half of 2014. To counter the new enemy (shale oil), OPEC, contrary to its traditional tool of curbing its own production, flooded the market for an extended period of time, explaining that it was merely defending its own market share and assuming that such policy would incur permanent damage to the U.S. shale industry. Having executed this strategy for over 2 years, OPEC realized that the continuation of such a policy was quite detrimental to the economies of its members. Eventually, OPEC reverted back to their old wisdom of cutting oil production, which saw oil prices creep up to the mid-fifties. And now the U.S. shale patch has brought break-even costs per barrel down even further, Shale oil production could even increase as oil prices fall below $50 per barrel again. Offering some clues on how the cartel could defend its market share, an article by the author, published last year on Oilprice.com forecasts the responsiveness of U.S. shale oil production against various oil price scenarios. In the base scenario, if oil prices gradually increase to $78/bbl, than by December 2020, total U.S. shale oil production from the given seven basins would increase to 6.79 MMBPD – an increase of 37 percent compared to March 2016. In contrast, under low oil price scenarios (range of mid thirties and mid twenties), shale oil production would decline in all the basins and by December 2020 would fall to 3.03 MMBPD, a decline of 67 percent compared to March 2016.
OPEC is considering a second production cut -- The supply-cut deal has so far resulted in a surprisingly high OPEC compliance of more than 90 percent, thanks to the cartel’s leader and biggest producer, Saudi Arabia, which has been cutting deeper than pledged. But the market has already priced in this high compliance, and although oil prices jump for a few hours on every report of ‘extraordinary efforts’ and reassurance that members will strive for ‘full conformity’, they are stuck in a narrow band, kept in check by U.S. shale and record high inventories in America. A key upside driver for prices would be an extension of the OPEC deal beyond its original expiry date at the end of June. Just over a month had passed since the beginning of the production cut deal when talk of extending the agreement started to intensify. OPEC is said to be prepared to extend the deal, and may also increase the cuts , if inventories fail to drop to a specified level, sources from the group told Reuters.
Kuwait Becomes First OPEC Nation to Call for Longer Oil Cuts -- Kuwait wants OPEC to extend output cuts beyond June, becoming the producer group’s first member to call for more time to balance the global oil market as the rally that boosted prices initially on the curbs has faded. U.S. inventories have climbed more than expected, causing prices to decline even as global producers cut their output, Kuwait’s Oil Minister Issam Almarzooq said, according to official news agency Kuna. Kuwait supports rolling over the oil cuts, though it’s too early for the Organization of Petroleum Exporting Countries to agree on an extension, he said. “Kuwait supports the extension of the agreement after June,” Almarzooq said. An extension will ‘‘accelerate the rebalancing of the global oil market and will contribute to the return of prices to levels acceptable for producing countries and for the petroleum industry in general.” OPEC and 11 other major producers agreed last year to slash production, spurring a 20 percent increase in Brent oil prices during the last five weeks of 2016. The rally stalled this year as U.S. output and supplies continued to grow. Brent crude, a global benchmark, has declined 9.6 percent this year. Global inventories stand at 280 million barrels, built up over two years, and reducing them “within one or two months isn’t easy,” Almarzooq said. “But I am certain and fully confident that the commitment of all the countries with this agreement will bear fruit in the next few months.” Iraq and Angola, two other OPEC members, have signaled a willingness to back cuts beyond the first half of this year. Saudi Oil Minister Khalid Al-Falih’s position on extending the cuts has shifted. Six weeks ago he said an extension was unnecessary; last week, he opened the door to the possibility of a rollover. Russia’s Energy Minister Alexander Novak said he and other ministers discussed the possibility of an extension in their meetings last week.
Kuwait Has Added Almost 50% More Active Rigs In The Past Year; It Has Added 34% Since The Announcement Was Made To Cut Production --- Note the huge jump in active rigs by Kuwait. Kuwait becomes first OPEC nation to call for longer oil cuts -- from Bloomberg. By the way, a reader spotted this: in February, 2017, Kuwait activated 7 more drilling rigs, going from 52 in January, 2017, to 59, in February, 2017. Something tells me OPEC is keeping a couple of set of books on oil production. The source: http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsintl. In fact, as long as we are at it, here are the number of active rigs Kuwait has/had according to BHI:
For those who like statistics:
- February, 2017: 59 -- another huge jump again in rigs in February
- January, 2017: 52 -- note huge jump in rigs after November announcement
- December, 2016: 44
- November, 2016: 47 -- announcement -- OPEC cut
- from 44 to 52, an 18% jump in the number of active rigs, month-over-month
- from 52 to 59, a 13% jump, month-over-month
- from 44 to 59, an incredible 34% jump in the number of active rigs since the November meeting to cut production
- from 40 (January, 2016) to 59 (February, 2017): a 48% jump in the number of active rigs
IEA says oil market could tilt into deficit in the first half if OPEC sticks to cuts | Reuters: Global oil inventories rose for the first time in January as the market grappled with a swell in production last year, but if OPEC maintains its output cuts, demand should overtake supply in the first half of this year, the International Energy Agency said on Wednesday. The IEA's monthly report struck a more bullish note than that issued by the Organization of the Petroleum Exporting Countries on Tuesday. OPEC also flagged rising inventory levels, but raised its estimates for production outside the group and did not see a rebalancing between supply and demand until the second half of this year. [OPEC/M] The IEA said crude stocks in the world's richest nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels, more than 300 million barrels above the five-year average. "The actual build in OECD stocks in January reminds us that it may be some time before global stocks start to fall," the agency said. The increase is the product of "relentless" supply growth in the latter stages of last year, particularly from OPEC countries that pumped at record levels, and from the U.S. shale oil basin, where drilling activity began picking up 10 months ago. Compliance by OPEC with its agreed output cut of 1.2 million barrels per day in the first half of this year was 91 percent in February and, if the group maintains its supply limit to June, the market could show an implied deficit of 500,000 bpd, the IEA said. "If current production levels were maintained to June when the output deal expires, there is an implied market deficit of 500,000 bpd for 1H17, assuming, of course, nothing changes elsewhere in supply and demand," the IEA said.
Lack of agreed methodology on OPEC compliance leads to confusion - Based on the latest S&P Global Platts OPEC survey, the producer group’s compliance with its pledged oil output cuts is 98.5%. It is also 111.5%. At the same time, it is 71.9%. Depending on how compliance is measured, the oil market is getting different impressions of how closely OPEC is sticking to its much-ballyhooed deal, as barrel counters among the news media and various international agencies do not appear to have any standard agreed methodology for their calculations. The fuzzy math has many OPEC watchers dubious over whether the pact is succeeding in its goal of accelerating the market’s rebalancing. As early reports of OPEC production under the deal came out in February, the market seemed generally impressed that the promised output cuts were indeed happening. Petromatrix analyst joked in a recent note about news headlines trumpeting “OPEC’s compliance reaching a level that would make a North Korean leader jealous.” Since then, the market has reversed course, as news of stubbornly bloated US inventories have sowed doubt about the effectiveness of the OPEC agreement. To a man, OPEC ministers have touted that adherence to the deal is robust. Kuwaiti oil minister Essam al-Marzouq on Thursday declared that OPEC compliance was a staggering 140% for February, according to a report by his country’s official Kuna news service. The report, however, did not provide any details or breakdowns of members’ output levels, beyond Marzouq crediting “deep production cuts” by Saudi Arabia. Compliance among the 11 non-OPEC countries that have pledged to cut output in concert is much lower, perhaps only 50%, by some accounts, though OPEC has tried to spin this positively by saying it expects that percentage to move higher in the coming months.
OPEC Secretary General Suggests U.S. Oil Producers Collude With OPEC - OPEC Secretary General, Mohammad Sanusi Barkindo, appears to be pressing his idea for the U.S. producers to join OPEC in cutting production this week at an oil industry conference in Houston. But according to guidelines issued by the Federal Trade Commission and U.S. Department of Justice, “agreements of a type that always or almost always tends to raise price or to reduce output are per se illegal….the Department of Justice prosecutes participants in hard-core cartel agreements criminally.” In addition to suggesting U.S. producers collude with OPEC, he also has met secretly with oil traders and banks to get feedback on OPEC’s market manipulation, denied there was ever a price war, and blamed the current glut on American shale oil producers. Mr. Barkindo had said the United States should join future OPEC-non-OPEC deals to limit oil production, and that any major deal would be “incomplete” without U.S. participation.
US crude oil prices, inventories, and the supply/demand balance. - For three solid months, from the first week of December 2016 through the first week of March, the end-of-day NYMEX price for benchmark West Texas Intermediate (WTI) remained consistently within a relatively narrow band—roughly $53 to $56/bbl, give or take a few nickels at the top and bottom—and during much of that time the price-band was even narrower. Then, on Wednesday and Thursday last week (March 8 and 9, 2017), the price of WTI plummeted 7% and closed below $50/bbl for the first time since OPEC’s members agreed (on November 30, 2016) to reduce their collective output by 1.2 million barrels per day (MMb/d) starting in January 2017—see Is This the Real Life? Russia and a number of other producing countries not part of OPEC agreed to another 600 Mb/d in production cuts. (Whether they will make good on their promises remains an open question.) The latest sharp drop in crude oil prices, which was blamed in part on unexpected gains in already record-high U.S. inventories, is a stark reminder of the importance of understanding and routinely calculating estimates of the oil supply/demand balance. Only by keeping up with the ever-changing relationship between crude availability and crude consumption—and by anticipating shifts in that relationship—can oil traders and others whose daily success or failure depends on crude pricing trends make informed decisions. Today we begin a blog series on the modeling of U.S. crude oil supply and demand, and the sourcing of input data.
Oil prices drop as hedge funds head for the exit: Kemp (Reuters) - Hedge funds and other money managers had barely started liquidating their record bullish position in crude oil futures and options before prices tumbled on March 8.The critical question is how much more of the position will need to be liquidated before the market stabilises again.Hedge funds still held a net long position in the three major Brent and WTI futures and options contracts amounting to 874 million barrels at the close of business on March 7 (http://tmsnrt.rs/2mRYP96).Fund managers had reduced their net position by 16 million barrels compared with the previous week and by a total of 77 million compared with the record of 951 million barrels set on Feb. 21.The net position has been trimmed in the two weeks ending on March 7 but only after increasing by 529 million barrels in the previous 14 weeks (http://tmsnrt.rs/2nleco9).The net long position is still more than double the low of 422 million barrels set in mid-November before OPEC announced its production-cutting agreement.Fund managers still held an overwhelming bullish position at the end of March 7, with long positions outnumbering shorts by a ratio of 7:1 (http://tmsnrt.rs/2nloC76).The near-record concentration of hedge fund long positions in oil significantly raised the risk of a crowded trade and likely contributed to the sharp fall in the price of oil starting on March 8.The drop in prices started after the cut off for the latest commitments of traders reports issued by the U.S. Commodity Futures Trading Commission and ICE Futures Europe. But the next reports, for the week ending March 14, are likely to show hedge funds liquidated more long positions when they are published on March 17 and March 20. The sharp fall in prices that occurred on March 8 and continued on March 9-10 is consistent with the rush for the exits which occurs when a crowded trade breaks down ("Predatory trading and crowded exits", Clunie, 2010).The rush normally starts shortly some time AFTER prices have peaked and after a small number of traders have already started to shift their positions (“Why stock markets crash”, Sornette, 2003). In this case, Brent prices reached a recent peak of $57.31 per barrel on Feb. 21, and the hedge funds' net long position also peaked at 951 million barrels on the same date.
Oil Tumbles Below $48 As JPM Warns Of Possible Commodity Liquidations --Any hopes for an early rebound in oil following last week's torrid plunge in WTI and Brent appear to be dashed, at least at the open, when WTI promptly tumbled below $48/barrel.While there have been no materal adverse catalysts over the weekend, three factors are being mentioned by Sunday night trading desks as drivers behind the latest seloff. First: price momentum has simply persisted from the Friday US selloff, as Asian funds catch up to the US action. Second, some have pointed to a report by JPM's Nikolaos Panigirtzoglou from Friday evening, which warns of "commodity downside" as a result of persistent near-record net long futures positioning, and warns that "a pending normalization/mean-reversion of spec positions in commodity futures has begun." Here are some of the reports highlights: Spec positions stood at pretty elevated levels as of last Tuesday March 7th, the latest available snapshot, suggesting that this normalization is at its beginning rather than its end phase. A third possible catalyst for the drop is the yet another prominent voice in the oil industry has slammed the OPEC gambit, this time Leonardo Maugeri, better known as the former head of strategy at Italian energy giant, Eni. His reported is titled simply "OPEC’s Misleading Narrative About World Oil Supply" and as the title suggests, Maugeri is the latest to point out that the OPEC emperor is naked and that OPEC's actions have, at best, served as psychological support to oil prices:
Oil market is about to get 'ugly' -It was a rough week for the crude oil market. After months of relative price stability, with WTI oil prices pinned between $50 and $55 per barrel, the floodgates of selling opened wide, as the record amount of long positions that was built up by speculators over the preceding weeks was, quite obviously, liquidated, as evidenced by sky-high volume in both futures and option contracts. There were several catalysts: Crude oil inventories in the United States hit a new, record level, according the Department of Energy's weekly status report, which also showed U.S. oil production rebounding to within five percent of last year's record to nearly 9.1 million barrels per day. Of course, the steadily rising oil rig count indicates that even more production is on the way, and it is not impossible to foresee overall production rising toward 10 million barrels per day over the course of the next 12 months.Statements by Saudi Arabia's oil minister and OPEC's Secretary General were hardly reassuring about them continuing the current production limiting accord, after June 30, when it is set to expire. The Saudi oil minister explicitly said that the accord adherents would not abide "free-riders," which is how he referenced the shale producers, in particular. Apparently, sideline discussions among this disparate group was even more pointed. ;
Brent spreads become battleground amid doubts over oil rebalancing: Kemp (Reuters) - Global oil markets are gradually rebalancing, but progress has been slower and more uneven than the Organization of the Petroleum Exporting Countries and bullish hedge funds expected. OPEC as well as most commentators, crude traders and hedge funds have assumed the rebalancing of the oil market will be accompanied by a shift from contango towards backwardation in oil futures prices. Officials at the producer group have focused on the shift to backwardation as a key indicator of whether their policies are working. Hedge funds and physical traders appear to have been trading around the futures curve as they speculate on when and how quickly the oil market will tighten. But OPEC officials acknowledged in Houston last week that the rebalancing and the shift to backwardation had not proceeded as fast as they had hoped. Now there are fears that the resurgence of U.S. shale production could throw the process off course entirely. For oil traders and analysts, the strip of futures prices provides the most commonly employed indicator of the changing balance between production, consumption and stockpiles. If production exceeds consumption, and stocks are high and rising, prices for oil delivered in the near term trade at a discount to prices for oil delivered further in the future. The price structure, known as contango, reflects the extra costs of buying oil now only to store it until needed later. The main costs associated with storing crude are the cost of borrowing money and the cost of owning or leasing space in a tank farm or tanker. In the opposite situation, where consumption exceeds production and stocks are low and falling, oil delivered in the near term will trade at a premium to that for future delivery. The price structure, known as backwardation, reflects the premium buyers are willing to pay to own oil now and avoid the risk of failing to secure sufficient supplies. The relationship between the cost of borrowing money and leasing tank space on the one hand, and the premium for immediate availability on the other, determines whether futures trade in contango or backwardation. In a heavily oversupplied market, the premium for immediate availability falls to zero, and the shape of the futures curve is determined entirely by the cost of finance and storage, ensuring futures prices are in contango. But as the market becomes less oversupplied, or even undersupplied, the premium for immediate availability rises and starts to offset the discounts for finance and storage.
Why Last Week’s Oil Price Crash Was Inevitable -- For traders who were paying attention, the weekly COT (Commitments of Traders) reports from the CFTC (U.S. Commodity Futures Trading Commission) have recently been screaming out a warning…crude oil bear market ahead. What the COT reports were showing was wildly bullish investor sentiment matched with equally extreme hedging activity as investors piled into the WTI crude oil futures contract. While bullish sentiment peaked as of the 10 February report, as recently as the beginning of March, hedge funds and other large speculative (that is non-commercial) players held near-record net long positions in WTI crude oil futures. Commercials are industry players who are largely hedgers and are usually considered smart money. In fact, total net long positions were just over 525,000 contracts for the week ended February 28, 2017, as concurrently the U.S. rig count had increased to 609 and inventories had risen for an eighth week in a row to over 520 million barrels. The COT reports are complicated enough to make out even in short-form format (see Release Schedule), but the industry-focused media, including oilprice.com; usually publishes the key aggregated results for each major commodity, including WTI, on Saturday each week. The Evidence was Mounting What was the root cause of the record bullish positioning by so-called smart money players? We may never know precisely. It could have been that the big funds really did believe in the efficacy of the OPEC crude oil production deal and its potential extension into 2017. Alternatively, the funds may have thought that Trump-induced global growth would really put a bid under demand for crude. Or maybe the funds’ algorithms had been in sleep mode as the price of crude hadn’t really budged since the Trump election, stuck in a range of less than 6 percent between say US$51-54. Liquidation, however, began in earnest with the crude oil crash of last week, as net bullish contracts declined by almost 17,000 to 509,000 contracts for a 3.2 percent drop on a weekly basis as of the Friday 10 March reporting date. More liquidation is presumably on the way.
Citi Tells Investors to Stop Worrying and Learn to Love Oil - Buy oil now, and count on Saudi Arabia for support, according to Citigroup Inc. OPEC’s output cuts aimed at easing a global glut are “real” and is cleaning up the market, analysts including Seth Kleinman wrote in a report dated March 14. While prices have dropped recently amid rising U.S. inventories and drilling activity, investors should take advantage of the slide because the Saudis are likely to defend prices this year, according to the bank. The bank’s comments are similar to Goldman Sachs Group Inc., which called for investors to be patient and said they should go, or stay, long on oil. Prices last week fell below $50 for the first time since December on concern rising U.S. output will offset curbs by the Organization of Petroleum Exporting Countries and other producers. While Saudi Arabia told OPEC it dialed back on some of its cuts last month, the extra supplies were moved into storage and the kingdom said it remains determined to stabilize the market. “Citi views this sell-off as a buying opportunity for 2017,” the analysts wrote. “Running down the record level of inventories was always going to be a lumpy process, with tighter timespreads pushing oil out of tank and onto the physical market where it will weigh until it clears.” While Saudi Arabia pumped more than 10 million barrels a day last month, the volume of crude supplied to markets nonetheless fell by 90,000 barrels a day to 9.9 million. The nation’s data show it’s cutting output more than required under the terms of OPEC’s Nov. 30 agreement. Nevertheless, Energy Minister Khalid Al-Falih warned last week that the kingdom won’t indefinitely “bear the burden of free riders.”
Fuel-Conscious U.S. Drivers Crimp OPEC’s Bid to Raise Oil Prices - Rising U.S. oil production isn’t the only thing getting in the way of OPEC’s efforts to drain a global glut. American drivers aren’t helping either. The Organization of Petroleum Exporting Countries is counting on growing demand to bolster the production cuts it’s making in a bid to balance the market. But motorists in the U.S. -- the world’s largest consumer of gasoline -- are using less, not more. And that’s not likely to change any time soon. About 40 percent of the crude in America is processed into the motor fuel, government data show. As the price of gasoline has risen more than 30 percent since February 2016, drivers are burning less, swelling supplies to near record highs. Meanwhile, new cars offer consumers an ever-widening variety of more efficient options to cut back on fuel use. "Don’t expect the U.S. driver to save the market this year -- he cares about the price now," "There’s now a strong correlation between price and gasoline demand." As people trade in old cars, the new vehicles they’re driving are between two and 10 miles per gallon more efficient, Book said. “This is likely to lead to a flattening or even decline of U.S. demand as early as late this year." The U.S. fleet of passenger cars and light trucks averaged a record 24.8 miles per gallon during the 2015 model year, an increase of 0.5 mpg from 2014, according to an annual report of automaker efficiency from the Environmental Protection Agency. In November, the agency projected an overall average of 25.6 mpg in 2016.
Oil settles a tad lower after sliding to 3-month lows | Reuters: Oil prices settled a few cents lower on Monday, retracing much of an early retreat to three-month lows in a steep slide that began last week as investors wondered whether swelling U.S. crude supplies would hinder OPEC's efforts to restrict output and reduce a global glut. Analysts said the slump may not have much further to go now that prices have fallen more than 8 percent since last Monday, the biggest week-on-week drop in four months. Prices had risen on more than two months of reduced production from the Organization of the Petroleum Exporting Countries. Now, the market faces evidence that U.S. production remains high and global markets remain oversupplied. "There is growing skepticism that the production cut has been enacted long enough to take care of the overhang," said Gene McGillian, director of market research at Tradition Energy. "The longs who piled in last year are turning on the market because there seems to be a realization that a six-month agreement isn't long enough to rebalance the market." The steep price slide could slow as traders finish unwinding bullish long positions, McGillian said. Brent crude futures settled down 2 cents at $51.35 a barrel. The session low was $50.85, the lowest since Nov. 30. U.S. West Texas Intermediate crude settled down 9 cents at $48.40 a barrel. Goldman Sachs said in a note it remained "very confident" about commodity prices and maintained its price forecast of $57.50 for WTI in the second quarter.
Oil Steadies Below $49 as U.S. Drilling Threatens Longer Glut - Oil settles at the lowest level since November as record U.S. crude inventories and a boost in drilling activity threaten OPEC’s efforts to reduce a global glut. Futures slipped 0.2 percent in New York after fluctuating between slight gains and losses during the session. U.S. crude inventories probably rose by 3 million barrels last week, according to the median estimate in a Bloomberg survey before an Energy Information Administration report on Wednesday. Rigs targeting crude in the U.S. climbed to the highest since September 2015. Kuwait supports extending OPEC’s output deal beyond June, Kuwait’s official news agency Kuna reported, citing Oil Minister Issam Almarzooq. Oil broke below the $50-a-barrel level last week that it had held above since the Organization of Petroleum Exporting Countries and 11 other nations started trimming supply on Jan. 1. OPEC Secretary-General Mohammad Barkindo said that February compliance to the historic deal will be higher than January and shale producers have agreed that oversupply isn’t good for anyone. Yet, U.S. crude stockpiles are at a record-high level and production surged to the highest in more than a year. Rising U.S. output is the “ main threat” to the global output deal, according to Russia’s largest producer. “It’s all about the short-term glut that we have to deal with today, with the potential shortage months down the road,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said by telephone. “For the market to establish the fact that it has finally hit bottom, we really have to get the price of oil back above $50 a barrel, which is still a tall order at this point.” West Texas Intermediate for April delivery fell by 9 cents to settle at $48.40 a barrel on the New York Mercantile Exchange, the lowest since November 29. Total volume traded was about 7 percent above the 100-day average.
Oil Prices Sink As Bearish Sentiment Takes Hold - Oil prices bounced around at their new lower levels to start off the week, with WTI moving around the $48-$49 per barrel range, and Brent at $51-$52. Fears of oversupply are now back at the forefront of the market’s concerns as the OPEC cuts fail to clear record high inventories and oil prices continue to fall. “Apart from the survey-based production figures, there is little to suggest as yet that this market tightening has already begun,” Commerzbank said this week. Stuart Ive of OM Financial echoed this concern: “Unless there are positive signs from non-OPEC producers on production cuts or there is a significant supply outage, the relentless pursuit of the U.S. shale production will cut into OPEC’s plans,” he told the WSJ. Secretive biotech company has been working on a device that could save millions of lives and transform the medical market in 2017. In its latest Drilling Productivity Report, the EIA predicts that shale output will jump by 109,000 bpd in April, a significant increase from March. The gains will be led by the Permian Basin (+79,000 bpd), with smaller contributions coming from the Eagle Ford (+28,000 bpd) and the Niobrara (+11,000 bpd). The gains will surely weigh on a market that is growing increasingly concerned about the swift comeback of U.S. shale. In the same DPR report, the EIA said that natural gas production will jump to 49.6 billion cubic feet per day in April, hitting a new record high. It would mark the fourth consecutive month of production increases. These figures will prevent any meaningful rebound in natural gas prices. A separate and more damning report from Tudor Pickering Holt & Co. projects a 25 percent increase in gas production from the Permian basin, largely due to a rise in output of associated gas from the wave of oil drilling. The increase in production could send natural gas prices below $2/MMBtu, Tudor Pickering says. Hedge funds and other money managers cut their net-long positions on WTI and Brent last week to a one-month low. Aside from a few exceptions, speculators have built up bullish bets on crude nearly every week since the OPEC deal was announced in late November. Now, with the market still oversupplied and U.S. inventories swelling, bearish sentiment is back.
Saudis Tell OPEC They Eased Cuts to Pump 10 Million Barrels | Rigzone-- Saudi Arabia told OPEC it raised output back above 10 million barrels a day in February, reversing about a third of the cuts it made the previous month. The kingdom boosted production by 263,300 barrels a day to 10.011 million a day, according to a report from OPEC on Tuesday. Oil prices sank on speculation the country had grown impatient with fellow producers lagging in their own cutbacks. Saudi Arabia’s Energy Ministry said that the volume of crude supplied to markets nonetheless fell by 90,000 barrels a day to 9.9 million, as the extra supplies were moved into storage. Even after the increase, Saudi Arabia’s data show it’s cutting output more than required under the terms of OPEC’s Nov. 30 agreement. The kingdom remains determined to stabilize the global oil market, according to a statement from the ministry. Nevertheless, Energy Minister Khalid Al-Falih warned last week that the kingdom won’t indefinitely “bear the burden of free riders.” Russia, Iraq and the United Arab Emirates are yet to deliver all the curbs they promised. “The Saudis are once again showing their stern face, as they did in the days before the OPEC meeting, and trying to get the laggards to live up to their promises,” Crude in New York fell to the lowest since the OPEC supply deal was first struck, sinking as much as 2.7 percent to $47.09 a barrel after the report. Speaking at the CERAWeek oil industry conference in Houston last week, Saudi Arabia’s Al-Falih said the country hasn’t decided yet whether OPEC should prolong the curbs once they expire in June. At 10.011 million barrels a day, Saudi output is still below the ceiling of 10.058 million a day imposed by the agreement. The figure submitted by Riyadh jars with OPEC’s own estimates, compiled from external sources such as news agencies, which show Saudi output falling by 68,100 barrels a day to 9.797 million a day.
Oil Tumbles After Saudis Report Big Jump In Production; Kuwait Warns Of Drop To $45 --Just as WTI was trying to record its first increase in 6 days, the latest, March, OPEC monthly report was released which revealed something surprising: while secondary sources claimed that Saudi Arabia production declined by 68kbpd to 9.797mmbpd, according to Saudi's own numbers, the kingdom ramped up production in February by a whopping 263kpb, back over 10 million barrels per day. While the Saudi surge was a surprise, the kingdom contained itself to producing within its permitted quota, which as per the Vienna agreement is at 10.058mmbpd. Perhaps just as concerning is that as a result of the vast gap between the self-reported Saudi production, and the far lower secondary sourced one, the official OPEC production number is now quite suspect: according to the cartel, in February, total production declined by 140kbpd to 31.958mmpd, however thwas number is driven by a Saudi number that is over 200kbps below the one reported by Saudi Arabia itself, and as such one can argue that in February total OPEC production actually rose if using primary source data. Finally, the straw that broke the oil rebound's back came from Kuwait's oil minister, Issam Almarzooq, who said at the same time as the OPEc report was released that oil risks dropping to $45/barrel as a result of rising shale production, as well as other factors. The result: WTI has tumbled following the OPEC report and Kuwait statement.
Oil Jumps After Saudis "Explain" Production Surge -- Having sent crude oil pries tumbling overnight by admitting they cheated on OPEC production cuts, Saudi officials are desperately trying to unwind that faux pas by claiming the over-production was purely for domestic storage. The problem with this "explanation" is that Saudi deliveries to China soared in January... Bloomberg reports that Saudi Arabia didn’t raise supply to the international oil market in February, according to a person familiar with the kingdom’s oil policy. The OPEC member increased the volume of oil in storage at domestic refineries and terminals last month, says the person, asking not to be identified because the information isn’t public. If that's the case then perhaps explain the surge in deliveries to China... Additionally the unnamed officiasl claimed that OPEC cuts will continue to reduce oil stocks in Q2. Which is odd given that they are building their own storage (according to them) and US crude inventories are at record highs once again. Of course the machines did not care and just auto-bid WTI...
Oil prices fall after Opec stocks rise - BBC News: Oil prices have fallen after the Opec group of oil producing nations said global crude stocks had risen. A surprise output jump from its biggest member, Saudi Arabia, put further pressure on prices. Gains made since Opec announced output cuts late last year have nearly all been erased. Saudi Arabia said it was "committed" to stabilising the global oil market, and that its output was still in line with its Opec target. "Despite the supply adjustment, stocks have continued to rise, not just in the US, but also in Europe," Opec said in its report. "Nevertheless, prices have undoubtedly been provided a floor by the production accords." Saudi Arabia's production increased to 10.011 million barrels per day in February compared with 9.748 million barrels per day in January. Saudi Arabia "is committed and determined to stabilise the global oil market by working closely with all other participating Opec and non-Opec producers", its energy ministry said. Oil prices fell after the release of the Opec report to trade close to $50 (£41) a barrel, their lowest since November. Crude prices are still higher than $40 per barrel a year ago and a 12-year low of about $28 in January 2016. The price of Brent crude settled about 0.5% down at $51.09 per barrel, while US crude was at $47.90.
WTI/RBOB Kneejerk Higher After Unexpected Inventory Drawdown --After the Saudis spoiled the energy party early on (and tried to talk it back for the rest of the day), API reported an unexpected 531k Crude draw (the first drawdown in 2017). While Cushing saw a notable build (over 2mm - biggest since Dec 2016), Gasoline and Distillates had big draws and that sent WTI and RBOB prices higher. API:
- Crude -531k (+3.13mm exp)
- Cushing +2.06mm
- Gasoline -3.875mm (-2mm exp)
- Distillates -4.07mm
The unexpected crude drawdown ends the 9 week streak of builds, but Cushing's build was the largest in over 3 months. This is the 4th weekly draw in Gasoline (seasonally appropriate) The overnight drop in WTI leaked back higher after the Saudis tried to explain why/how they cheated (note, RBOB managed to get green by the close). Notice the small run higher in WTI/RBOB before the data was released, then jumped as the data hit... RBOB tagged 1.60 stops and WTI 48.50...
How Shale Is Reshaping The World: Three New Wars - We recently met with geopolitical strategist Peter Zeihan to discuss world events since the American election and his new book, “The Absent Superpower: The Shale Revolution and a World without America.” In the book, Peter credits energy and resource innovations with reshaping the global geopolitical environment. We covered so much ground in our visit with Peter that we decided to break it into two reports. Last month in part 1, we covered the broad impact of the Shale Revolution, which he calls, “the greatest evolution of the American industrial space since 1970,” and which he expects to accelerate the breakdown of the global order as we know it. Today, in part 2, we examine the major global shifts in geopolitics that will result as the US moves into energy independence. Peter believes this will reshape global geopolitics, leading to three major conflicts - Russia vs. Europe, Iran vs. Saudi Arabia & an Asian Tanker War. It is these conflicts we asked him to discuss in greater detail. We hope you enjoy the discussion. (transcript)
WTI/RBOB Sink As Production Surge Trumps Inventory Drawdowns -- API's surprise crude draw sparked a recovery off Saudi production lows overnight in WTI and RBOB, and DOE's data confirmed it with a 237k crude draw (against expectations for a 3.13mm build). Cushing saw the biggest build since the first week of December but Gaosline and Distillates saw big draws. However, yet another surge in US crude production appears to have teumped the inventory data and WTIO/RBOB are fading for now. DOE:
- Crude -237k (+3.13mm exp)
- Cushing +2.13mm (+500k exp)
- Gasoline -3.055mm (-2mm exp)
- Distillates -4.229mm (-1.5mm exp)
The 9 week streak of crude builds is over... However, despite the drop in crude stocks, Cushing, the storage hub that's a key pricing point, filled up last week, with inventories there climbing back to 66.5 million barrles (+2.1 million barrels) - Notably Genscape showed significant inflows into Cushing in the prior week. That's still below the all-time high set in May last year of 68.3 million barrels. Gasoline inventories have fallen four weeks in a row and five times in six weeks. Distillate inventories are down four weeks in a row.
Has OPEC Underestimated US Shale Once Again? -- The U.S. shale cowboys are back on their horses and leading a strong recovery in the oil patch that is not expected to falter even as WTI prices dropped last week below $50 per barrel for the first time in more than two months.With lessons learned from the oil price crash and budgets streamlined and focused on the most prolific shale plays, U.S. drillers are giving OPEC a hard time by raising output and hedging future production. Meanwhile, the cartel members are trying to cut supply and fix the price of oil at such a range that would allow them to reap higher oil revenues, but not allow the shale patch to recover too much too fast.Two and a half months into the supply-cut deal, it looks like OPEC is losing the campaign to prop up oil prices. The drop in prices that began last week saw them retreating to almost exactly the same level as on November 30 – just below $52/barrel for Brent - when the OPEC deal was announced, the International Energy Agency said in its monthly report on Wednesday. At the same time, reduced breakeven prices in many shale plays and forward locking-in of production is allowing the companies currently drilling in the U.S. to turn in profits even at a price of oil at $40 a barrel. The U.S. shale patch has not only emerged leaner and more resilient from the downturn, it has also hedged future production with contracts guaranteeing the price of the crude they will be pumping a year or two from now, Bloomberg reports, citing industry executives and analysts.According to Katherine Richard, chief executive at Warwick Energy Investment Group that holds stakes in more than 5,000 oil and gas wells, many of the U.S. drillers would not see their profits reduced unless the price of oil drops to the $30s or lower.So the drillers that have locked in their future production—and those include Parsley Energy, RSP Permian, Diamondback Energy, and Harold Hamm’s Continental Resources—probably didn’t worry much when the price of WTI dropped below $50 last week. This is a sign that OPEC may have underestimated—yet again—the resilience of the U.S. shale patch when the cartel decided to collectively curtail oil supply.
Oil slips as U.S. production threatens OPEC-led output pact -- Oil prices finished with a modest loss on Thursday, a day after a big rally, as rising output from the U.S. remained a threat to efforts by other major producers to rebalance the market.Still, prices continued to find some support following data Wednesday showing the drop in U.S. crude supply in 10 weeks, as well as weaker dollar in the wake of the Federal Reserve’s less-hawkish-than-expected rate announcement.Oil prices also briefly traded higher in the last hour before the settlement, buoyed comments from Khalid al-Falih, Saudi Arabia’s energy minister, who said output cuts led by the Organization of the Petroleum Exporting Countries may be extended if necessary, according to Bloomberg News. The market also saw volatility tied to the day’s expiration of April crude oil options. “As options expire, the market tends to gravitate towards an even number” and WTI prices made a late-session attempt to climb toward $49, said Phil Flynn, senior market analyst at Price Futures Group. The market was also “looking at Russia and OPEC comments to get a sense of whether [its members and other major producers] will extend production cuts.”Russian news agency TASS reported Thursday that Lukoil’s president considers it is reasonable to extend the six-month production cut agreement Russia and other producers made with OPEC. West Texas Intermediate crude oil for April delivery edged down by 11 cents, or 0.2%, to settle at $48.75 a barrel after rallying by 2.4% on Wednesday. May Brent crude shed 7 cents, or 0.1%, to $51.74 a barrel on the ICE Futures exchange in London. Oil prices climbed Wednesday after data from the Energy Information Administration showed an unexpected drop in U.S. stockpiles last week. They got an added boost just before that session ended as the U.S. dollar weakened in the wake of the Federal Reserve’s decision to lift its benchmark interest rate by 25 basis points, as expected.
OilPrice Intelligence Report: Oil Uncertain As Iraq Threatens OPEC Deal: Oil prices are set to close out the week unchanged from a week earlier, having moved up and down over the past few days. The latest report from the EIA was a merciful one for crude, showing a small but all-important drawdown in crude inventories. Had crude stocks jumped again last week, oil prices surely would have dropped significantly. Still, there is a weak case for much higher oil prices in the near-term, given that U.S. inventories are still at a record high and oil production is rising. Saudi Arabia’s energy minister Khalid al-Falih said in a Bloomberg interview that OPEC would be prepared to extend the production cuts “if it’s needed.” He said that if inventories are still above the five-year average by June, or if the markets are still not confident, then an extension would be warranted. “We would signal to them that we are going to do what it takes to bring the industry back to a healthy situation.” OPEC will meet in May to assess market conditions and discuss their plans. Al-Falih also said that the market shouldn’t “pass judgment” on non-OPEC countries like Russia and Kazakhstan who have not yet reduced their output to their targeted levels. He said they are “fully committed” to living up to their end of the deal. His comments provided more assurance to the market after recent reports suggested he has become “fed up” with non-compliance from Iraq and Russia, in particular. In short, al-Falih’s comments provided further evidence that OPEC is willing to extend its deal through the end of the year. Six out of 10 oil analysts polled by Reuters believe that OPEC will extend its deal for another six months. "If OPEC is genuinely pursuing an inventory target, then an extension to current supply restraint is needed," BNP Paribas analyst Harry Tchilinguirian said. Iraq’s oil minister said that his country plans on boosting oil production capacity to 5 million barrels per day this year, up from around 4.5 mb/d. The comments could confound OPEC’s ability to rollover the production cuts. . Wood Mackenzie analyzed 119 oil and gas firms that have laid out their capital budgets for 2017, and the companies are planning on spending $25 billion more this year. 99 of the 119 surveyed will step up spending. About $15 billion of the $25 billion will be focused on the Lower 48, with the Permian Basin
Halfway into 2017's oil supply cut, Asia remains awash with fuel | Reuters: Halfway into an OPEC-led oil supply cut, Asia remains awash with fuel in a sign that the group's efforts to rein in a global glut have so far had little effect. The Organization of the Petroleum Exporting Countries (OPEC) and other suppliers including Russia have pledged to cut production by almost 1.8 million barrels per day (bpd) during the first half of this year to rein in oversupply and prop up prices. Yet almost three months into the announced cuts, oil flows to Asia, the world's biggest and fastest growing market, have risen to near record highs. The Asian surplus will pressure global oil prices and weigh on the budgets of major oil producing nations but may also help spur growth in demand needed to soak up the excess. Thomson Reuters Oil Research and Forecasts data shows around 714 million barrels of oil are being shipped to Asia this month, up 3 percent since December when the cuts were announced. Responding to rising production, benchmark crude prices are down 10 percent since January, and analysts warn that more falls could follow. "Cuts are not enough to re-absorb the world's excess supply. So, unless oil demand growth rebounds to record levels in 2017, oil prices could head for another substantial fall," said Leonardo Maugeri, senior fellow at the Harvard Kennedy School's Belfer Center for Science and International Affairs. Not only are supplies from the Middle East and Russia to Asia still high despite the pledge to cut, but record volumes are flooding into Asia from the Americas and Europe.The result is a market awash with fuel. More than 30 supertankers are sitting off the coasts of Singapore and southern Malaysia filled with oil, despite a price structure that makes it unattractive to buy oil now and store it for sale at a later date. Crude for delivery in January 2018 is only 70 cents more expensive than that for delivery next May, making those floating storage vessels unprofitable.
U.S. Rig Count Soars, Putting Yet More Pressure On OPEC -- This week’s Baker Hughes report shows the U.S. domestic oil and gas rig count up 21 rigs this week, bringing the total to 789 active oil and gas rigs—a fantastic 313-rig increase over last year. The bulk of this week’s gains were oil rigs, which saw a 14-rig gain, while gas saw a build of 6, with one miscellaneous rig added last week. The number of active oil rigs in the United States now sits at 631—244 rigs over the number of rigs this time last year. In sharp contrast, Canada saw a 31-rig decrease to its oil rigs, while the number of gas rigs in Canada dipped by 10 this week. Both West Texas Intermediate and Brent barrels were traded slightly up (.02% and .04% respectively) on Friday preceding the release of the report, with WTI still trading below $49 per barrel at $48.76. At 12:32pm EST, Brent was trading at $51.76 per barrel, indicating that the market is still dissatisfied with the current state of crude oil inventories. On Thursday, Saudi Oil Minister Khalid al-Falih reassured the battered oil market by acknowledging that it would be willing to sit down with OPEC members and extend the production cuts, if needed. An extension could mean even more good news for US shale, who has seized the opportunity presented by OPEC and brought on 157 oil rigs since the cuts were announced at the end of November 2016. Surprisingly, the Permian Basin lost a rig this week, while the Willison Basin saw a 4-rig increase. The Arkoma Woodford and Mississippian basins each saw a 3-rig increase, and Eagle Ford saw a gain of 2 rigs.Within 20 minutes of the data release, both benchmarks were starting to feel the pinch, with WTI trading down .06% at $48.72 with Brent trading down .08% at $51.70.
BHI: US rig count climbs by 21 in 9th straight weekly rise - The US drilling rig count jumped 21 units to 789 during the week ended Mar. 17, continuing a recent surge in a drilling rally that dates back to May 27, 2016, according to Baker Hughes Inc. data.The count has risen in 9 consecutive weeks and by double-digits in 7 of those weeks (OGJ Online, Mar. 10, 2017). While onshore rigs targeting oil and drilling horizontally provided their usual boost, this week’s rise was concentrated in producing regions of Oklahoma and North Dakota as opposed to the Permian basin.The overall count is up 385 units since May 27, a week that marked the end of year-and-a-half-long drilling dive.The steady progression of the US drilling and production rebound is being fueled by a notable increase in capital expenditures this year vs. last by US operators.In newly revised estimates compiled by Barclays for 70 firms that represented 88% of North America spending for 2016, those firms are expected to increase North American upstream spending in 2017 by 32% year-over-year compared with the overall 27% increase expected 2 months ago (OGJ Online, Mar. 14, 2017).However, Barclays notes the near-term risk to crude oil prices adds downside risk to exploration and production budgets, which are a function of cash flow. The market is currently monitoring rising US crude output and inventories as well as any hints foretelling a May decision by the Organization of Petroleum Exporting Countries and non-OPEC producers to either stop or extend their agreement to collectively limit output.The US Energy Information Administration this week forecast crude production from the seven major US onshore oil and gas producing regions will rise 109,000 b/d month-over-month during April to 4.962 million b/d (OGJ Online, Mar. 13, 2017).The Permian is projected to gain 79,000 b/d month-over-month during April to 2.286 million b/d, while the Eagle Ford is expected to continue its newly established upward trend with a 28,000-b/d monthly increase to 1.144 million b/d.Forecast production increases in the Permian and Eagle Ford in part reflect growing tallies of drilled but uncompleted (DUC) wells. The Permian’s count expanded by 95 month-over-month in February to 1,764, and the Eagle Ford’s rose 13 to 1,265. For the week ended Mar. 10, overall US crude output gained 21,000 b/d to 9.109 million b/d, EIA separately reported. The Lower 48 accounted for 20,000 b/d, while Alaska provided the remaining 1,000 b/d.
Saudi Arabia Says Oil-Supply Cuts May Be Extended If Needed - OPEC and its allies may prolong production cuts after they expire in June if the world’s crude inventories remain excessive, Saudi Arabia’s Energy Minister said. T The curbs will be sustained if stockpiles are “still above the five-year average, if the markets are still not confident in the outlook, if we don’t see companies and investors feel good about the health of the global oil industry,” Khalid Al-Falih said in a Bloomberg television interview in Washington. “We want to signal to them that we’re going to do what it takes to bring the industry back to a healthy situation.” The Organization of Petroleum Exporting Countries will meet on May 25 to decide whether to continue its production cuts, aimed at ending a slump that battered the economies of energy exporters around the world. The strategy is moving global markets in the “right direction” and fundamentals have improved considerably, Al-Falih said. So far, Saudi Arabia has shouldered the bulk of OPEC cuts, trimming February output to 10.011 million barrels a day, which is below the ceiling imposed by the agreement. OPEC output in February was 1.39 million barrels a day lower than its reference level. Brent crude rose as much as 0.3 percent to $51.87 on Friday and traded at $51.81 as of 12:39 p.m. in Singapore.
Trump Greenlights Arms Sales To Saudis Frozen Under Obama --The US State Department under Donald Trump announced last week that they will green-light the sale of weapons to Saudi Arabia that were previously frozen in the final months of the Obama administration. The State Department announced the resumption of the sale of arms last week, that will primarily be used by Saudi Arabia to fight their ongoing war in Yemen. The problem is that the announcement did not include any conditions that would require the Saudis to improve the standards used in this war that have already led to a host of war crimes and human rights violations. This move comes at a time where Trump is stepping up operations by US forces in Yemen, fighting the al Qaeda branch; al Qaeda in the Arabian Peninsula (AQAP). AQAP however, has not been the primary target of the Saudis who are currently engaged in fighting with the Houthis allied with the segments of the Yemeni army who have rejected the Saudi backed government that was installed before the war. Saudi Arabia has already been accused of committing war crimes in their attacks on Yemen by the United Nations, in a campaign that has been facilitated by the US since its inception. Obama previously supplied the Saudis with weapons for this military venture but even after his mostly symbolic halt of arms shipments, US planes were still refueling Saudi bombers and US intelligence was providing targets to the Saudi Air Force.The weapons shipment will primarily consist of technology used to carry out more precision air strikes, but even with that in mind there is cause for concern. The U.K., which has already been providing technology like this, have had concerns that they’ve sold more bombs than there were actual targets for in the small country. So despite the “precision” of these weapons, it’s known the Saudis continue to intentionally target civilian infrastructure.
Saudi deputy crown prince, Trump meeting a 'turning point': Saudi adviser | Reuters: Saudi Arabia hailed a "historical turning point" in U.S.-Saudi relations after a meeting between U.S. President Donald Trump and Deputy Crown Prince Mohammed bin Salman highlighted the two leaders' shared view that Iran posed a regional security threat. The meeting on Tuesday appeared to signal a meeting of the minds on many issues between Trump and Prince Mohammed, in a marked difference from Riyadh's often fraught relationship with the Obama administration, especially in the wake of the 2015 Iran nuclear deal. "This meeting is considered a historical turning point in relations between both countries and which had passed through a period of divergence of views on many issues," a senior adviser to Prince Mohammed said in a statement. "But the meeting today restored issues to their right path and form a big change in relations between both countries in political, military, security and economic issues," the adviser said. Saudi Arabia had viewed with unease the administration of U.S. President Barack Obama, whom they felt considered Riyadh's alliance with Washington less important than negotiating the Iran nuclear deal. Riyadh and other Gulf allies see in Trump a strong president who will shore up Washington’s role as their main strategic partner and help contain Riyadh's adversary Iran in a region central to U.S. security and energy interests, regional analysts said. The deputy crown prince viewed the nuclear deal as "very dangerous", the senior adviser said, adding that both leaders had identical views on "the danger of Iran's regional expansionist activities". The White House has said the deal was not in the best interest of the United States.
Saudi King Arrives In Japan: 10 Aircraft, 500 Limos, 500 Tons Of Luggage, 12,000 Hotel Rooms, 2 Golden Escalators --When Saudi King Salman bin Abdulaziz of Saudi Arabia visited Georgetown in September 2015, the Four Seasons hotel did some serious redecorating. As we reported at the time, eyewitnesses at the luxury hotel had seen crates of gilded furniture and accessories being wheeled into the posh hotel over the past several days, culminating in a home-away-from-home fit for the billionaire Saudi monarch, who was in Washington then for his first White House meeting with President Barack Obama. “Everything is gold,” said one Four Seasons regular. “Gold mirrors, gold end tables, gold lamps, even gold hat racks.” Red carpets were been laid down in hallways and even in the lower parking garage, so the king and his family never have to touch asphalt when departing their custom Mercedes caravan. Fast forward to this week, when the same King Salman bin Abdulaziz al-Saud landed in Japan, leading to largely to the same reaction, namely people stunned at the size of his delegation and his 500 tons of luggage. The king made quite an entrance, descending from his plane on one of his two golden escalators. The four-day visit, which began Sunday, is part of the Saudi royal’s month-long Asia trip, as the kingdom looks to diversify its economy from oil dependency. Saudi Arabia is Japan’s largest oil supplier. The king’s delegation arrived in Japan on 10 aircraft and according to the Japanese press, an entourage so large even Japanese government officials didn’t have an accurate number of how many people to expect. In preparation for the royal visit, 1,200 rooms in Tokyo’s best hotels were booked for the delegation.King Salman appears to have upped his game since visiting the US and, most recently, Indonesia, where he brought two limousines with him. In Japan, an entire fleet of up to 500 limousines were sourced from around the country according to RT. "Maintenance costs for luxury models are high and there is little constant demand for such vehicles," a limousine industry insider told Asahi Shimbun. "Because we are unable to secure the needed number only in Tokyo, we are gathering the vehicles from Kanagawa and Saitama prefectures as well as the Tokai region."
Pakistan sends combat troops to southern Saudi border | Middle East Eye: The Pakistan army is sending a brigade of combat troops to shore up Saudi Arabia’s vulnerable southern border from reprisal attacks mounted by the Houthis in Yemen, according to senior security sources. The brigade will be based in the south of the Kingdom, but will only be deployed inside its border, the sources told Middle East Eye. "It will not be used beyond Saudi borders," one said. It is the latest twist in a brutal and devastating two-year war, which has killed more than 10,000 people in Yemen, injured over 40,000 and brought the impoverished nation to the verge of famine. Both sides have been accused of war crimes and starving civilians trapped in the carnage. The war was launched by Saudi Arabia and its Arab coalition allies after the Houthis overran Sanaa, the Yemeni capital, and the southern port of Aden and ousted the Saudi-backed president, Abd Rabbuh Hadi. Increasingly, the Houthis have been retaliating with cross-border missile strikes on targets deep inside the kingdom. Last month the Houthis claimed to have hit a military camp near al-Mazahimiyah near Riyadh with what they called "a precision long-distance ballistic missile". The Saudis denied the claim. On 31 January, a missile killed 80 soldiers on a base run jointly by the Saudis and Emiratis on Zuqar island in the Red Sea, according to reports in Arabic media. The Saudis did not confirm nor deny the strike. In October a missile was shot down about 65km from Mecca, although the Houthis denied targeting the holy city.
More than 40 Somali refugees killed in helicopter attack - At least 42 Somali refugees were killed off the coast of Yemen late on Thursday when a helicopter reportedly attacked the boat they were travelling in. Coastguard Mohamed al-Alay said the refugees, carrying official UN refugee agency (UNHCR) documents, were travelling from Yemen to Sudan when they were attacked by an Apache helicopter near the Bab el-Mandeb strait.A senior official with the UN’s migration agency confirmed later that 42 bodies had been recovered after the military attack on a boat carrying refugees off the Yemeni coast.Mohammed Abdiker, emergencies director at the International Organization for Migration [IOM] in Geneva, said, however, that various survivors provided conflicting messages about whether the attack came from a military vessel or an attack helicopter that had taken off from the vessel.Abdiker called the attack, which happened at about 3am, was “totally unacceptable” and that responsible combatants should have checked who was aboard the boat “before firing on it.”One of the survivors, a Yemeni people trafficker, told the Associated Press his vessel had been hit by fire from a helicopter gunship. Al-Hassan Ghaleb Mohammed said the boat had been about 30 miles off the shore of Yemen when it was attacked. He added that when the gunship opened fire, panic erupted among the refugees. They finally managed to hold up flashlights and show the helicopter they were migrants. He said the helicopter then stopped firing but only after more than 40 Somalis had been killed. Saudi Arabia, which is leading a coalition in the war in Yemen, has US-built Apache A-64 Longbow attack helicopters. Maj Gen Ahmed Assiri, spokesman for the Saudi-led coalition, dismissed the accusation saying that the force had not been involved in fighting in Hodeida. Other naval forces operating in the area are also equipped with helicopters, including the US military.
Yemen is a complicated and unwinnable war. Donald Trump should stay out of it - The Trump administration is making its first radical policy change in the Middle East by escalating American involvement in the civil war in Yemen. Wrecked by years of conflict, the unfortunate country will supposedly be the place where the US will start to confront and roll back Iranian influence in the region as a whole. To this end, the US is to increase military support for Saudi Arabia, the United Arab Emirates and local Yemeni allies in a bid to overthrow the Houthis – a militarised Shia movement strong in northern Yemen – fighting alongside much of the Yemeni army, which remains loyal to former President Ali Abdullah Saleh. If ever there was a complicated and unwinnable war to keep out of, it is this one. Despite Saudi allegations, there is little evidence that the Houthis get more than rhetorical support from Iran and this is far less than Saudi Arabia gets from the US and Britain. There is no sign that the Saudi-led air bombardment, which has been going on for two years, will decisively break the military stalemate. All that Saudi intervention has achieved so far is to bring Yemen close to all out famine. “Seven million Yemenis are ever closer to starvation,” said Jamie McGoldrick, the UN humanitarian coordinator for Yemen in an appeal for more aid this week. But at the very moment that the UN is warning about the calamity facing Yemen, the US State Department has given permission for a resumption of the supply of precision guided weapons to Saudi Arabia. These sales were suspended last October by President Obama after Saudi aircraft bombed a funeral in the capital Sana’a, killing more than 100 mourners. Ever since Saudi Arabia started its bombing campaign in March 2015, the US has been refuelling its aircraft and has advisors in the Saudi operational headquarters. A bizarre element in Trump’s decision to take the offensive against Iran in Yemen is that the Iranians provide very little financial and military aid to the Houthis. Saudi propaganda, often echoed by the international media, speaks of the Houthis as “Iran-backed”, but Yemen is almost entirely cut off from the outside world by Saudi ground, air and sea forces.
Iraqi troops seize main bridge, advance on mosque in battle for Mosul | Reuters: Iraqi government forces battling Islamic State for Mosul took control of a main bridge over the Tigris river on Wednesday and advanced towards the mosque where the group's leader declared a caliphate in 2014, federal police said. The seizure of the Iron Bridge, linking eastern Mosul with the militant-held Old City on the west side, means the government holds three of the five bridges over the Tigris and bolsters Prime Minister Haider al-Abadi's assertion that the battle is reaching its final stages. The bridge, which was damaged in fighting late last year, was captured by federal police and Interior Ministry Rapid Response units, a police statement said. The gains were made in heavy fighting in which troops fought street-by-street against an enemy using suicide car bombs, mortar and sniper fire, and grenade-dropping drones to defend what was once their main stronghold. "Our troops are making a steady advance ... and we are now less than 800 meters from the mosque," a federal police spokesman said. Losing the city would be a huge blow to Islamic State as it has served as the group's de facto capital since its leader Abu Bakr al-Baghdadi proclaimed himself head of a caliphate spanning Iraq and Syria from the Nuri Mosque in July 2014. The capture of the mosque would thus be a huge symbolic victory as well as a concrete gain. But many hard days of fighting could still lie ahead as government forces try to make headway in the streets and narrow alleyways of the Old City.
US confirms air raid but denies targeting mosque -- The US military says it carried out a deadly air strike on an al-Qaedameeting in northern Syria and will investigate reports that more than 40 civilians were killed when a mosque was struck in a raid in the same area.Jets struck the village of Al Jina, in Aleppo province, on Thursday at the time of evening prayer when the mosque was full of worshippers, with local activists saying up to 300 people were inside at the time of the attack.Al Jina lies in one of the main rebel-held parts of Syria, encompassing the western parts of Aleppo province and neighbouring Idlib.The area's population has been swollen by refugees, according to United Nations agencies.Bilal Abdul Kareem, a documentary filmmaker, visited the mosque and said that the toll of the attack was likely much higher than 42, as was reported by activists, as many of the victims had yet to be recovered.
- US claims that it's air strike that killed 56 in Jeena didn't hit the mosque are false. See for yourself pic.twitter.com/tInKTlMTME — Bilal Abdul Kareem (@BilalKareem) March 17, 2017
Why has Iran wrecked its economy to fund war in Syria? -- Estimates of Iran’s military expenditure in Syria vary from US$6 billion a year to US$15-US$20 billion a year. That includes US$4 billion of direct costs as well as subsidies for Hezbollah and other Iranian-controlled irregulars.Assuming that lower estimates are closer to the truth, the cost of the Syrian war to the Tehran regime is roughly in the same range as the country’s total budget deficit, now running at a US$9.3 billion annual rate. The explanation for Tehran’s lopsided commitment to military spending, I believe, is to be found in Russian and Chinese geopolitical ambitions and fears. The Iranian regime is ready to sacrifice the most urgent needs of its internal economy in favor of its ambitions in Syria. Iran cut development spending to just one-third of the intended level as state income lagged forecasts during the three quarters ending last December, according to the country’s central bank. Iran sold US$29 billion of crude during the period, up from $25 billion the comparable period last year. The government revenues from oil of US$11 billion (655 trillion rials) were just 70% of official forecasts, and tax revenues of US$17.2 billion came in 15% below expectations.Chaos in Iran’s financial system prevents the Iranian government from carrying a larger budget deficit. The US$9.3 billion deficit reported by the central bank stands at just over 2% of GDP, under normal circumstances a manageable amount. But that number does not take into account the government’s massive unpaid bills. According to a February 27 report by the International Monetary Fund, the government arrears to the country’s banking system amount to 10.2% of GDP. Iran’s delegate to the IMF Jafar Mojarrad wrote to the IMF, “Public debt-to-GDP ratio, which increased sharply from 12% to 42% in 2015-16, mainly as a result of recognition of government arrears and their securitization, is estimated to decline to 35% in 2016-17 and to 29% next year. However, it could rise again above 40% of GDP after full recognition of remaining government arrears and their securitization and issuance of securities for bank capitalization,” Iran’s banks have so many bad loans that the government will have to issue additional bonds to recapitalize them, Mojarrad added. Iranian press accounts put toxic assets at 45% of all bank loans.
No one is paying attention to the 2nd Islamic State that's emerging in Syria - "There's a second Islamic State that has emerged," says Theo Padnos, adding: "Nobody knows what is happening in the northwestern corner of Syria. I know because I'm in touch with some of these people, and they're making videos all the time. We just haven't connected the dots." Padnos is a freelance journalist who, in 2012, was kidnapped in Syria and held captive by elements of Al Qaeda and the Nusra Front. He was released two years later, following negotiations led by the head of Qatar State Security. In a wide-ranging interview with RiskHedge's Jonathan Roth, Padnos explains this new entity that's growing in Syria. "There's a second Islamic State; it's right on the Turkish border," Padnos explains. "To get to this second Islamic State from any European country, it's a couple of days on the bus. Young kids are going every day — that's what the guys on the ground in Syria are telling me: 'Oh yes, we have new French people, new English people every day.'" The former captive says the Syrian government is winning the war in Syria, but the victory is coming with a cost. "[The Syrian Army] is dispersing the rebels," Padnos reports. "The rebels have been concentrating in certain urban neighborhoods, and now they're going off into the countryside. They're occupying villages. And when the US Army or the Kurds or some combination finally arrives in Raqqa [the capital of the Islamic State], all those ISIS fighters — they will have been gone for weeks. They're out of town now."
Fighting drone terrorism from ISIS and others with Patriot missiles doesn’t make much sense --Talk about overkill. At a recent military conference in Washington, DC, US general David Perkins told the audience that a US ally used a Patriot missile to shoot down a small consumer drone. These missiles are radar-controlled warheads designed by the US firm Raytheon, and cost up to $3 million apiece. Presumably out of deference to the fact that this was a hilarious overuse of a very expensive weapon, Perkins did not say which country’s military carried out the attack. “That quadcopter that cost 200 bucks from Amazon.com did not stand a chance against a Patriot,” he said. But Perkins brought up this point to illustrate how many of the weapons used on the battlefields today are not really the smartest choices against the sorts of technologies many groups, such as ISIS in Iraq, are using against the US military and its allies. “I’m not sure that’s a good economic exchange ratio,” Perkins said. “In fact, if I’m the enemy, I’m thinking, ‘Hey, I’m just gonna get on eBay and buy as many of these $300 quadcopters as I can and expend all the Patriot missiles out there.'”Perkins goes on to explain that the solutions for these new sorts of improvised threats will likely not involve costly traditional weapons like Patriot missiles, but new solutions, such as cyber-warfare, where drones can be disabled through hacking, or possibly remotely disabled. There are companies, such as Dedrone, that sell systems that allow authorities to detect drones being flown in restricted areas based on the radio signals they emit, and figure out where the pilot is. This can help mitigate the sorts of threats that a small consumer drone, perhaps strapped with a homemade explosive device, could have on a public event, such as football match, or a concert. There are other groups working on actually disabling drones that may present a threat. Japanese police have tested using other drones, carrying giant nets, to catch drones. Others are working on systems that disrupt a drone’s GPS signal and force it to land. Dutch police even trained eagles to nab drones with their talons. And then there are the enterprising Americans who exercise their second-amendment rights by just shooting drones out of the sky. Whatever the solution, it’s likely that there will be myriad ways that the US and others can defend against the threats of small consumer drones that don’t involve a 1,500-pound missile.
America has spent more rebuilding Afghanistan than it spent rebuilding Europe under the Marshall Plan - After WWII, the US launched the Marshall Plan to help Europe rebuild, spending about $120B in inflation-adjusted dollars on the project, which lifted the war-stricken European nations out of disaster and launched them into post-war prosperity; the US has spent even more than that on rebuilding projects in Afghanistan since the official cessation of hostilities there, but Afghanistan remains a crumbling, corrupt, failed state where violence is rampant, opium exports are soaring, and soldiers and civilians alike are still dying.Large-scale corruption persists, with Afghanistan third from the bottom in international rankings, ahead of only Somalia and North Korea. Adjusted for inflation, American spending to reconstruct Afghanistan now exceeds the total expended to rebuild all of Western Europe under the Marshall Plan; yet to have any hope of surviving, the Afghan government will for the foreseeable future remain almost completely dependent on outside support.And things are getting worse. Although the United States has invested $70 billion in rebuilding Afghan security forces, only 63 percent of the country’s districts are under government control, with significant territory lost to the Taliban over the past year. Though the United States has spent $8.5 billion to battle narcotics in Afghanistan, opium production there has reached an all-time high. For this, over the past 15 years, nearly 2,400 American soldiers have died, and 20,000 more have been wounded.
Somali pirates hijack first commercial ship since 2012 | Reuters: Pirates have hijacked an oil tanker with eight Sri Lankan crew on board, Somali authorities said on Tuesday, the first time a commercial ship has been seized in the region since 2012. Security forces have been sent to free the Aris 13, a regional police official said late on Tuesday. "We are determined to rescue the ship and its crew. Our forces have set off to Alula. It is our duty to rescue ships hijacked by pirates and we shall rescue it," Abdirahman Mohamud Hassan, director general of Puntland’s marine police forces, told Reuters by phone. Puntland is a semi-autonomous northern region of Somalia. Alula is a port town there where pirates have taken the tanker. Experts said the ship was an easy target and ship owners were becoming lax after a long period of calm. The Aris 13 sent a distress call on Monday, turned off its tracking system and altered course for the Somali port town of Alula, said John Steed of the aid group Oceans Beyond Piracy. "The ship reported it was being followed by two skiffs yesterday afternoon. Then it disappeared," said Steed, an expert on piracy who is in contact with naval forces tracking the ship.
Exclusive: Russia appears to deploy forces in Egypt, eyes on Libya role - sources (Reuters) - Russia appears to have deployed special forces to an airbase in western Egypt near the border with Libya in recent days, U.S., Egyptian and diplomatic sources say, a move that would add to U.S. concerns about Moscow's deepening role in Libya. The U.S. and diplomatic officials said any such Russian deployment might be part of a bid to support Libyan military commander Khalifa Haftar, who suffered a setback with an attack on March 3 by the Benghazi Defence Brigades (BDB) on oil ports controlled by his forces. The U.S. officials, who spoke on condition of anonymity, said the United States has observed what appeared to be Russian special operations forces and drones at Sidi Barrani, about 60 miles (100 km) from the Egypt-Libya border. Egyptian security sources offered more detail, describing a 22-member Russian special forces unit, but declined to discuss its mission. They added that Russia also used another Egyptian base farther east in Marsa Matrouh in early February. The apparent Russian deployments have not been previously reported. The Russian defense ministry did not immediately provide comment on Monday and Egypt denied the presence of any Russian contingent on its soil. "There is no foreign soldier from any foreign country on Egyptian soil. This is a matter of sovereignty," Egyptian army spokesman Tamer al-Rifai said. The U.S. military declined comment. U.S. intelligence on Russian military activities is often complicated by its use of contractors or forces without uniforms, officials say.
US accuses Moscow of aiding warlord in battle for Libyan oil ports -A fierce battle for control of Libya’s oil ports is raging this weekend as worried American officials claim that Russia is trying to “do a Syria” in the country, supporting the eastern strongman Khalifa Haftar in an attempt to control its main source of wealth. The fighting between Haftar’s forces and militias from western Libya is focused on Sidra, Libya’s biggest oil port, and nearby Ras Lanuf, its key refinery. Together they form the gateway to the vast Oil Crescent, a series of oilfields stretching hundreds of miles through the Sahara containing Africa’s largest reserves. Haftar’s forces have launched airstrikes against militias around the oil ports themselves, with social media showing pictures of corpses and burning vehicles. No casualty figures have yet been released. Capturing the glittering prize of the Oil Crescent has become the focus of a bitter civil war now in its third year and US officials fear that Russia has now entered the conflict, with Haftar the likely beneficiary. In testimony to the Senate’s foreign relations committee on Thursday, the chief of the Pentagon’s Africa command, General Thomas D Waldhauser, said: “Russia is trying to exert influence on the ultimate decision of who and what entity becomes in charge of the government inside Libya.” Asked by Senator Lindsey Graham whether Russia was “trying to do in Libya what they are doing in Syria”, Waldhauser said: “Yes, that’s a good way to characterise it.” Waldhauser’s complaint was bolstered on Friday when Reuters broke the news that armed Russian “security contractors” have been on the ground in eastern Libya, officially to help Haftar’s forces in mine clearance operations. Western diplomats say there are striking parallels with Russia’s decisive intervention in the Syrian conflict.
Why Saudi Arabia, China and Islamic State are courting the Maldives -- Saudi King Salman’s stop in the Maldives on his month-long tour of Asia brings into focus how this tiny archipelago – best known for high-end tourism and an existential battle against climate change – has emerged as a key player in a regional struggle for influence. Both Riyadh and Beijing are currying favour with the strategically located 820km-long chain of Indian Ocean atolls, in efforts analysts believe are aimed at gaining concessions for military bases. China sees the islands as a node in its “string of pearls” – a row of ports on key trade and oil routes linking the Middle Kingdom to the Middle East – while for Saudi Arabia, the atolls have the added advantage of lying a straight three-hour shot from the coast of regional rival and arch-foe, Iran. The possible building of Chinese and/or Saudi military bases here would also complement the independent development of both nations’ military outposts in Djibouti, an East African nation on a key energy export route at the mouth of the Red Sea. They “want to have a base in the Maldives that would safeguard trade routes – their oil routes – to their new markets. To have strategic installations, infrastructure,” Climate Change News quoted Nasheed as saying. The heightened Saudi and Chinese interest in the Maldives comes against a backdrop of increased military cooperation between the two nations. “China is willing to push military relations with Saudi Arabia to a new level,” Chinese defence minister Chang Wanquan (常萬全) told his visiting Saudi counterpart, Deputy Crown Prince Mohammed bin Salman, last August. Months later, in October, counterterrorism forces from the two countries held the first ever joint exercise between the Chinese military and an Arab armed force.