Sunday, July 16, 2017

OPEC output jumps in June, reversing their production cuts by a third; US distillates output at a record high

oil prices increased every day this week, rising $2.31 a barrel, or more than 5%, and as a result recovered almost all of what they lost in the short week following the Independence Day holiday...after falling $2.84 a barrel to $44.23 a barrel in post holiday trading of last week, oil prices moved up 17 cents to $44.40 a barrel on Monday on indications that OPEC might widen its production caps to include Nigeria and Libya, the two countries largely responsible for the erosion of the cartel's net compliance in recent months...oil tumbled back to $43.83 a barrel on Tuesday morning after it was revealed that the Saudis pumped 10.07 million barrels a day in June, a breach of their production limit, but then reversed those losses to rise 3% to $45.04 a barrel by the close, after the American Petroleum Institute reported U.S. crude stockpiles declined by 8.1 million barrels for the week ended July 7, the largest draw on supplies since September 2016....prices then rose another 45 cents, or 1%, to $45.49 a barrel on Wednesday, after the EIA confirmed the magnitude of the drop in U.S. crude stockpiles that had been reported by the API...oil prices were up for a 4th trading session on Thursday, rising 59 cents or 1.4% to $46.08 a barrel, despite higher OPEC production, on evidence from the US and China that global oil demand was increasing to meet that supply...oil prices then notched their fifth gain in a row on Friday, tacking on another 46 cents a barrel, as the U.S. dollar weakened on flat consumer prices, reports indicated that output from Saudi' Manifa oilfield had interupted, and the US rig count was relatively flat for the 2nd time in 3 weeks, with oil closing the week at $46.54 a barrel, up 1 percent on the day and 5.22 percent higher for the week... 

OPEC's June oil report

with OPEC's increasing production prominent in this week's news, we'll start by taking a look at OPEC's July Oil Market Report (covering June OPEC & global data), which was released on Wednesday of this week....the first table from the July report that we'll include here is from page 63 of that OPEC pdf, and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months as the column headings indicate...for all their official production measurements, OPEC uses data from "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...  

June 2017 OPEC cude output via secondary sources

from this table of official oil production data, we can see that OPEC oil output increased by 393,500 barrels per day in June, to 32,611,000 barrels per day, from a May oil production total of 32,217,000 barrels per day, a figure that was originally reported as 32,139,000 barrels per day before the addition of Equatorial Guinea to the Cartel this month...(for your reference, here is the table of the official May OPEC output figures before these revisions) we can see in the far right column, not only did OPEC see an increase of 127,000 barrels per day from Libya and 96,700 barrels per day from Nigeria, the two OPEC countries that are exempt from the production cuts because their production had already been driven down by domestic strife, but oil output from Angola, Iraq, and Saudi Arabia all also increased by more than 50,000 barrels per day in June...while Saudi Arabia and Angola still both managed to 'officially' stay under their quotas, the 60,600 barrel per day increase to 4,502,000 barrels per day by Iraq put them more than 150,000 barrels per day over their quota of 4,351,000 barrels per day, as can be seen in the table below:

June 8 2017 OPEC production  targets via Platts

the above table is from the "OPEC guide" page at S&P Global Platts: the first column of numbers shows average daily production in millions of barrels of oil per day for each of the OPEC members over the first five months of this year (the targeted period) and the 2nd column shows the allocated daily production in millions of barrels of oil per day for each member, as they agreed to at their November meeting...i had been hoping that Platts would update this table to include the June production numbers, but as of Saturday evening they have not...

not only did the official OPEC oil production data from secondary sources indicate an increase of nearly 400,000 barrels per day in production for June, but the OPEC members themselves reported even higher production than the official production data indicates, as is shown in the next table... 

June 2017 OPEC cude output as reported to OPEC

the above table, also from page 63 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 reports, we noticed that several of the largest OPEC members reported higher production than was attributed to them by the official secondary sources...note especially that Saudi Arabia, whose reported figures should be more accurate than secondary sources, reported that they produced 10,070,000 barrels per day in June, 120,000 barrels per day than the official data, and thus over their quota for the month...Iran reported they produced 3,880,000 barrels per day, a figure which would also put them over their quota, vs their official tally of 3,790,000...also notice that Iraq, who has been the biggest laggard on the production cuts, reported they produced 4,550,000 barrels per day in April, vs their official figure of 4,502,000 barrels per day...likewise, Venezuela reported that they produced 2,156,000 barrels per day in April, whereas the official data indicates they produced 1,936,000 barrels per day...if the reported numbers were lower than the official tallies, they might be suspect, but OPEC members have no reason to report that they produced more than they did, because higher oil output numbers would indicate that they're not in compliance with the cuts they agreed if anything, these self reported number indicate that the official output production figures may be an understatement of the oil supply that was actually available in June...

the next graphic we'll include shows us both OPEC and world oil production monthly on the same graph, over the period from July 2015 to June 2017, and it comes from page 64 of the July 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 global output shown on the right scale...

June 2017 OPEC report global supply

the preliminary data graphed above indicates that global oil production rose to 96.59 million barrels per day in June, up by 0.66 million barrels per day from a May total of 95.93 million barrels per day, which was revised .21 million barrels per day higher than the 95.74 million barrels per day global oil output that was reported a month ago...that June figure was also 2.26 million barrels per day higher than the 94.33 million barrels per day that was being produced globally in June a year ago (see last July's OPEC report for year ago data)...OPEC's June production of 32,611,000 barrels per day thus represented 33.8% of what was produced globally,  an increase from the 33.6% OPEC share in May...OPEC's June 2016 production, excluding Indonesia, was at 32,118,000 barrels per day, so even after the production cuts, the 13 OPEC members who were part of OPEC last year, excluding new member Equatorial Guinea, are still producing 1.0% more oil than they were producing a year ago, when they were supposedly producing flat out...

furthermore, even with the six recent months of production cuts we can clearly see on the above graph, there is still a surplus of oil supply being produced globally, as the next table that we'll include will show us..     

June 2017 global oil demand estimate via OPEC

the table above comes from page 37 of the July 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...on the "Total world" line of the third column, we've circled in blue the figure we're interested in, which is their estimate for global oil demand for the second quarter of 2017... 

OPEC's estimate is that during the 2nd quarter of this year, all oil consuming areas of the globe have used 95.33 million barrels of oil per day, down from the 95.44 millions of barrels of oil per day the world was using in the first quarter, but up from the 95.12 millions of barrels of oil per day they were using in 2016...that's typical for spring, as few regions of the globe need either heating or cooling at that time of year...but as OPEC showed us in the oil supply section of this report and the summary supply graph above, even with their production cuts, the world's oil producers were still producing 96.59 million barrels per day during June...that means that even after 6 months of OPEC and NOPEC production cuts have taken place, there continued to be a surplus of around 1,260,000 barrels per day of global oil production in June...note that global production for May was revised higher, to 95.93 million barrels per day, so that means the global oil surplus during May was therefore around 600,000 barrels per day, also based on the revised second quarter global demand figure of 95.33 million barrels per day shown above...on the same basis, April's global oil surplus was the lowest of the 6 months of the period, at around 280,000 barrels per oil production thus averaged 96.04 million barrels of oil per day over the 3 months of the 2nd quarter, an average surplus of 710,000 million barrels of oil per day over the entire period...prior to that, we saw that the global oil surplus during March was around 780,000 barrels per day, and nearly a million barrels per day in January and February, as we've shown when reviewing revisions to these reports in prior months... that means that despite the six months of OPEC production cuts, almost a hundred fifty million barrels of oil have been added to the global oil glut since the 1st of the year..  

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending July 7th, showed another increase in US oil exports, another decrease in our oil imports, and another increase the amount of oil used by US refineries, which together resulted in the largest withdrawal from our commercial stocks of crude this year...our imports of crude oil fell by an average of 132,000 barrels per day to an average of 7,610,000 barrels per day during the week, while at the same time our exports of crude oil rose by 150,000 barrels per day to an average of 918,000 barrels per day, which meant that our effective imports netted out to 6,692,000 barrels per day during the week, 282,000 barrels per day less than during the prior the same time, our field production of crude oil rose by 59,000 barrels per day to an average of 9,397,000 barrels per day, which means that our daily supply of oil from net imports and from wells totaled an average of 16,089,000 barrels per day during the cited week... 

during the same week, refineries reportedly used 17,244,000 barrels of crude per day, 103,000 barrels per day more than they used during the prior week, while at the same time a net of 1,531,000 barrels of oil per day were being pulled out of oil storage facilities in the US....thus, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 376,000 more barrels per day than what refineries reported they used during the account for that discrepancy, the EIA needed to insert a (-376,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...

details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 7,811,000 barrels per day, which was 3.0% below the imports of the same four-week period last year...the 1,531,000 barrel per day decrease in our total crude inventories came about on a 1,081,000 barrel per day withdrawal from our commercial stocks of crude oil and a 450,000 barrel per day sale of oil from our Strategic Petroleum Reserve, part of an ongoing sale of 5 million barrels annually that was negotiated in a Federal budget deal 21 months ago....this week's 59,000 barrel per day increase in our crude oil production resulted from a 25,000 barrel per day increase in oil output from wells in the lower 48 states and a 34,000 barrels per day increase in oil output from Alaska...the 9,338,000 barrels of crude per day that we produced during the week ending June 30th was 7.1% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up by 10.7% from our 8,485,000 barrel per day of oil output during the during the same week a year ago, while it was still 2.2% below the June 5th 2015 record US oil production of 9,610,000 barrels per day... 

US oil refineries were operating at 94.5% of their capacity in using those 17,244,000 barrels of crude per day, which was up from 93.6% of capacity the prior week, and well above normal for this time of year...the amount of oil refined this week was also well above the seasonal norm, as it was 4.2% more than the 16,544,000 barrels of crude per day.that were being processed during week ending July 8th, 2016, when refineries were operating at 92.3% of capacity, and roughly 10% above the 10 year average of 15.67 million barrels of crude per day for the first week of July....

with the increase in refining, gasoline production from our refineries increased by 104,000 barrels per day to 10,469,000 barrels per day during the week ending June 30th, the greatest weekly gasoline output this year and the second highest weekly gasoline output in history...that gasoline output was also 2.5% higher than the 10,218,000 barrels of gasoline that were being produced daily during the comparable week a year the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 239,000 barrels per day to 5,349,000 barrels per day, an all time high for distillates production and 6.3% more than the 5,034,000 barrels per day of distillates that were being produced during the week ending July 8th last year.....   

even with near record gasoline production, our end of the week gasoline inventories decreased by 1,647,000 barrels to 235,656,000 barrels by July 7th, the 4th drop in gasoline inventories in a row...this week's gasoline supplies were reduced because our domestic consumption of gasoline increased by 81,000 barrels per day to 9,786,000 barrels per day, the 2nd highest this year, and because our imports of gasoline fell by 211,000 barrels per day to 528,000 barrels per day... meanwhile, our gasoline exports fell by 166,000 barrels per day to 547,000 barrels per day at the same time, partially offsetting the drop in imports....with the week’s decrease in our gasoline supplies, our gasoline inventories are now 1.8% below last year's seasonal high of 240,089,000 barrels for this week of the year, but are still 8.1% higher than the 218,010,000 barrels of gasoline we had stored on July 10th of 2015, and 9.9% more than the 214,492,000 barrels of gasoline we had stored on July 11th of 2014… 

with our distillates production at a record high, our supplies of distillate fuels rose by 3,131,000 barrels to 153,553,000 barrels during the week ending July 7th, the fourth increase in six weeks....the major factor in this week's increase in distillates supplies was a 464,000 barrels per day drop to 3,858,000 barrels per day in the amount of distillates supplied to US markets, a proxy for our consumption...meanwhile our exports of distillates rose by 19,000 barrels per day to 1,169,000 barrels per day, while our imports of distillates rose by 17,000 barrels per day to 125,000 barrels per day....with this week's increase, our distillate inventories are now 0.4% higher than the 152,997,000 barrels that we had stored on July 8th, 2016, and 8.7% higher than the distillate inventories of 141,280,000 barrels that we had stored on July 10th of 2015...

finally, with a drop in oil imports, an increase in oil exports, and the pickup of US refining, our commercial supplies of crude oil decreased for the 12th time in the past 14 weeks, as our commercial oil inventories fell by 7,564,000 barrels to 495,350,000 barrels as of July 7th, the largest drop in our oil supplies since Labor Day week of last year... however, we still finished the week with 3.4% more crude oil in storage than the 479,012,000 barrels we had stored at the beginning of this year, and 0.9% more crude oil in storage than the 491,172,000 barrels of oil in storage on July 8th of 2016....compared to prior years, when the oil glut was still building, this week still saw 15.4% more crude than the 429,368,000 barrels in of oil that were in storage on July 10th of 2015, and 44.3% more crude than the 343,297,000 barrels of oil we had in storage on July 11th of 2014...      

This Week's Rig Count

drilling activity failed to increase for the 2nd time in 3 weeks this week, after a 23 week run of increases...Baker Hughes reported that the total count of active rotary rigs running in the US was unchanged at 952 rigs in the week ending Friday, which was still 505 more rigs than the 447 rigs that were deployed as of the July 15th report in 2016, even though it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil increased by 2 rigs to 765 rigs this week, which was up by 408 oil rigs over the past year, and the most oil rigs that were in use since April 2nd 2015, while it was still far from the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the count of drilling rigs targeting natural gas formations decreased by 2 rigs to 187 rigs this week, which was still 98 more rigs than the 89 natural gas rigs that were drilling a year ago, but way down from the recent natural gas rig high of 1,606 rigs that were deployed on August 29th, 2008...

there was no change in the total offshore or Gulf of Mexico rig counts this week, where drilling continues from 21 platforms in the Gulf, same as the 21 rigs working in the Gulf a year ago, but down from the total 22 offshore a year ago, when there was also a rig deployed offshore in the Cook Inlet of rig that had been operating on an inland lake in southern Louisiana was shut down this week, however, leaving three such inland waters rigs still running, same as a year ago..

active horizontal drilling rigs were unchanged at 804 rigs this week, still up by 460 from the 344 horizontal rigs that were in use in the US on July 15th of last year, but still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....meanwhile, the vertical rig count was up by 2 rigs to 76 vertical rigs this week, which was also up from the 60 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was down by 2 rigs to 72 directional rigs this week, which was still up from the 43 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 both tables, the first column shows the active rig count as of July 14th, the second column shows the change in the number of working rigs between last week's count (July 7th) and this week's (July 14th) count, the third column shows last week's July 7th active rig count, the 4th column shows the change between the number of rigs running on 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 the 15th of July, 2016...

July 14 2017 rig count summary

clearly, the net change of zero in drilling rigs masked as much activity as we've seen in prior weeks, with the only difference being that more rigs were simultaneously shut down this'll note that the Permian is back to having the largest increase, after 5 weeks with few changes in that basin, while the Eagle Ford of south Texas and the Cana Woodford of Oklahoma both saw their counts decrease by 4...the natural gas rig decreases were all in "other" unnamed basins, as activity in the 3 states overlying the Utica and the Marcellus was unchanged, although the Eagle Ford did add a natural gas rig, where they now have 9 gas rigs running, while shutting down 5 of their oil rigs at the same time...note that of the states not listed above, Nebraska also saw the only rig working in the state shut down this week, apparently the same rig that just started operating last week; otherwise, Nebraska has only seen spotty drilling activity over the past year...


Ohio orders pipeline to builder to clean up after its spills  (AP) — Ohio's environmental agency is ordering a company building a natural gas pipeline across Ohio to come up with a plan to clean up its spills from drilling and get rid of diesel-soaked mud. The Ohio Environmental Protection Agency also wants the state to pursue a proposed fine of $900,000 against Dallas-based Energy Transfer Partners. The company's $4.2 billion Rover Pipeline project is being built to carry gas from Appalachian shale fields to other states. The head of the Ohio Environmental Protection Agency said Monday that Energy Transfer officials are refusing to negotiate over the cleanup from several spills in the spring. One spill heavily damaged a wetland in northeastern Ohio. The company said Monday that it's trying to comply with the state EPA's directives while also working with federal regulators.

Major Crack Down on Energy Transfer's 'Perilous Behavior' During Rover Pipeline Construction - The Ohio Environmental Protection Agency (OEPA) announced Monday an unprecedented unilateral order in response to Energy Transfer Partner's fracked gas Rover pipeline's 27 violations. The announcement comes after the Rover pipleine had more spills last week near the Tuscarawas River.  OEPA's unilateral order includes requiring Energy Transfer to establish a stronger contingency plan for when disasters occur; removal and proper disposal of the diesel spilled in quarries near Massillon and Canton as well as along the Tuscarawas; groundwater monitoring near the multiple spill sites; and to create a remediation plan for the spill of more than 2 million gallons of clay and diesel fluid in a rare high-quality wetland in Stark County.  Additionally, the OEPA referred the nearly $1 million in fines to the state's Attorney General. In Monday's press conference, the OEPA stated that it is prepared to defend this unilateral order in state and federal courts, if Energy Transfer would challenge their authority to protect Ohioans' rights to clean air, water and land.  "The Sierra Club applauds Ohio EPA for taking action against Energy Transfer's reckless construction of a dirty and dangerous fracked gas pipeline," Sierra Club Ohio Director Jen Miller said . "We've always said that it's never a question of whether a pipeline will spill, but rather a question of when. Energy Transfer has proven that it's not merely an operational pipeline that threatens our communities and waterways, but one in construction too."  "Energy Transfer has proven that it cannot be trusted with our clean air, clean water, or our communities. As strong as OEPA has come down on this company, ultimately, the only way to protect Ohio is to stop this project," Miller added. "We call on the Ohio's Attorney General Mike DeWine and FERC to follow OEPA's lead in ensuring that the people of Ohio are protected by this irresponsible, rogue company. The Sierra Club remains ready to support OEPA in state and federal legal battles, if necessary."

Feds tell Rover Pipeline to clean up waste -- Rover Pipeline must clean up drilling waste contaminated with diesel fuel before it can operate the natural gas pipeline it’s building, federal regulators said Wednesday.The Ohio Environmental Protection Agency has accused Rover of numerous environmental violations during its construction of the $4.2 billion pipeline across the state, including Stark, Tuscarawas and Carroll counties. The biggest incident happened in April in Bethlehem Township where workers were drilling under the Tuscarawas River south of Navarre.When Rover’s path crosses a highway, river or other obstacle, workers drill a horizontal path beneath the surface. Bentonite clay slurry — commonly called drilling mud — is used to lubricate the drill. Sometimes the slurry inadvertently comes to the surface through cracks in the soil. According to the Ohio EPA, Rover spilled more than 2 million gallons of slurry into a wetland next to the Tuscarawas River on April 13, coating 6.5 acres in mud. Another 3 million gallons of slurry could remain underground.Testing by Ohio EPA later revealed the slurry was contaminated with low levels of diesel fuel.  In a letter on Wednesday, Terry L. Turpin, director of FERC’s Office of Energy Projects, told Rover to:

  • Remove and properly dispose of diesel-contaminated waste in the quarries.
  • Remove all slurry and drill cuttings from the Tuscarawas River site.
  • Plan to restore the wetland.
  • Plan to monitor private and public water wells near the quarries and the wetland for at least two years, and possibly longer, if contamination is found.

A message seeking comment was left with a Rover spokeswoman. Rover must take those steps to get FERC’s permission to use the pipeline, according to the letter. The interstate pipeline will carry natural gas produced by wells in the Utica and Marcellus shales.

Well pad fire reported - Steubenville Herald Star: — Area firefighters were called to a natural gas well pad near Stanley Lane and Genteel Ridge after receiving reports of lightning hitting a storage tank containing material involved with hydraulic fracturing. Bob Fowler, Brooke County director of emergency management, said the blaze was extinguished in less than two hours due in part to the efforts of firefighters from Franklin Community, McKinleyville and other departments and a mechanism on the tank that released pressure to prevent it from exploding. Fowler said several homes on nearby Hervey and Churchman lanes were evacuated as a precaution. He said the fire departments, the county’s ambulance service and the Brooke County Sheriff’s Department were at the scene within 15 minutes after the fire was reported. Tanker trucks from various departments also were called to provide water because there is no hydrant in the rural area where the pad is located.

Elections board rejects proposed Athens County charter for third time - For the third year in a row, the Athens County Board of Elections has rejected as invalid a proposal to create a county charter government. The rejected charter proposal also would include strong regulations discouraging oil and gas development in the county. The board accepted the validity of the petition signatures Monay morning, but rejected the charter proposal itself as invalid on the grounds that it did not include a county executive position required under Ohio Revised Code statute for alternative forms of government. Members of the Athens County Bill of Rights Committee who submitted the petitions said after the unanimous vote that the elections board erred in its decision. They charged that the charter proposal falls under Ohio constitutional guidelines and not the Ohio Revised Code statute that covers alternative forms of government. The ACBORC argued that charters formed under the state constitution are distinct and separate from alternative governments established under Ohio Revised Code. Members of the county Board of Elections said, on the other hand, that charters formed under the state constitution must still conform with the laws for alternative government put forward in the ORC. ACBORC spokesperson Dick McGinn called the decision a "travesty" and said that the group will file a protest with the elections board. The Board of Elections would then be required to bring the matter to the Athens County Common Pleas Court within three days of the protest being filed.

Elections board nixes county charter; next stop the courts - For the third year in a row, the Athens County Board of Elections has rejected as invalid a proposal to create a county charter government. The rejected charter proposal also includes strong regulations discouraging oil and gas development in the county.The board accepted the validity of the charter’s petition signatures Monday morning, but rejected the proposal itself as invalid on the grounds that it did not include a county executive position required under Ohio Revised Code statute for alternative forms of government.Members of the Athens County Bill of Rights Committee who submitted the petitions charged after the three-person unanimous vote that the elections board erred in its decision. They argued that the charter proposal falls under Ohio constitutional guidelines and not the Ohio Revised Code statute that covers alternative forms of government.The Bill of Rights Committee argued that charters formed under the state constitution are distinct and separate from alternative governments established under Ohio Revised Code. Members of the county Board of Elections said, on the other hand, that charters formed under the state constitution must still conform to the laws for alternative government set fourth in the ORC.Committee spokesperson Dick McGinn called the decision a “travesty” and said that the group will file a protest with the elections board. The Board of Elections would then be required to bring the matter to the Athens County Common Pleas Court within three days of the protest being filed. If the court determines the proposal to be valid, the Athens County Commissioners must certify it by resolution to the elections board no later than July 19. “We feel the decision was based on a faulty interpretation of law,” McGinn said. “Ohio Revised Code addresses an alternative form of statutory government. That’s not what a charter is. They’re saying that we have to follow the alternative form of statutory government when we produce a charter, which is simply not the case, and the (Ohio) Supreme Court has never held that.”

State criticized for shifting millions from oil-and-gas fund to settle unrelated lawsuit - Columbus Dispatch -- With three legislators objecting to the "raid," a state board on Monday approved appropriating $15 million from an oil-and-gas fund designated by law to protect Ohioans and the environment, to be used to pay a settlement of an unrelated lawsuit. The Controlling Board voted 4-3 to remove the money from the fund, which is used in part to seal "orphan" natural-gas and oil wells, to fund a settlement with landowners near Grand Lake St. Marys whose properties have flooded since a widening of the dam spillway in 1997. In response to questions about the legality of the move, Department of Natural Resources officials said temporary language long inserted in state budgets permits money to be withdrawn from an assortment of funds to pay legal settlements. Rep. Jack Cera, D-Bellaire, objected to using the fund for an unrelated purpose. “This multimillion-dollar cash grab by the state shows where Columbus politicians’ priorities are — not with hardworking taxpayers and property owners in eastern Ohio,” Cera said. “After almost 10 years to plan for a lawsuit settlement in the western part of Ohio, state officials failed to responsibly plan for the future and instead are robbing our area of what’s rightfully ours.” Last month, Cera was thwarted in his bid to take $10 million from the fund to repair roads and other infrastructure damaged by fracking in eastern Ohio.Sen. Charleta B. Tavares, D-Columbus, and Rep. Scott Ryan, R-Newark, joined Cera in his protest. Tavares said the fund should not be viewed as a "cash cow" that can be tapped for purposes other than intended. The oil-and-gas fund, generated by severance taxes imposed on drillers, can easily withstand the $15 million withdrawal, said Tom Johnston, the natural resources agency's chief financial officer. The fund took in $52.1 million last fiscal year, and spending totaled $17.1 million, he said. Last month, the legislature authorized removing $10 million from the oil-and-gas fund to prop up spending in the new state budget that took effect July 1.

Will Ohio Senate Greenlight Oil and Gas Drilling in State Parks? - Ohio lawmakers could soon greenlight oil and gas development in Ohio state parks and public lands. Last week, the Ohio House voted to override a veto that would have allowed Gov. John Kasich to retain appointment authority for members of the Oil and Gas Leasing Commission – the group that makes decisions about drilling on state-owned public lands. If Senate lawmakers also override the veto, that authority would go to the Ohio General Assembly. Cheryl Johncox, the Dirty Fuels campaign organizer for the Sierra Club in Ohio, says lawmakers are troubled that Kasich hasn't appointed anyone to the commission. "Folks in Ohio are very aware that the General Assembly wants to frack on our public lands, even though there are polls that say that 70 percent of Ohioans are in opposition to opening our public lands for fracking," she states. Public lands and trusts across the state could be affected, Johncox adds, including lands maintained by Ohio State University and Ohio University, as well as Mohican State Park, Hocking Hills State Park and the Shawnee State Forest. Julie Weatherington-Rice, a hydrogeologist from Worthington, explains that researchers have documented land use changes in parts of Southeastern Ohio and Pennsylvania due to fracking. She adds a good deal of deep forest cover has been lost to roads, compressor stations and other drilling infrastructure. "You lose an entire population of life in that region,” she states. “It's the first loss for which there is no economic valuation. “Nobody talks about that. Nobody assumes that the deep-forest biosphere has a value, but it does." Supporters of oil and gas drilling argue it could provide a significant economic benefit for communities near public lands. But Johncox counters that state parks and lands belong to Ohioans who cherish those areas for hiking, hunting, fishing and other recreation. "Toxic benzene, cancer-causing stuff comes out of the ground during this fracking process and is released into the air,” she stresses. “And families that are just camping with their kids could then be exposed to this toxic stuff, while they're enjoying themselves."

Pennsylvania Townships Allege Fracking Contamination - Construction Equipment -- Twelve households in West Whiteland and Uwchlan townships in Pennsylvania reported contaminated well water in Chester County, Pennsylvania, causing Sunoco Pipeline LP to temporarily halted construction on its Mariner East 2 pipeline last Friday.Sunoco tested private water wells in the area to determine if its horizontal directional drilling caused the murky water by introducing bentonite clay into water supplies.  Five families with contaminated water were relocated to local hotels after alerting the company and the EPA about the water problem. Other families affected were given additional filtration supplies and bottled water. Results from the recent water well tests have not yet been delivered but George Turner, a township supervisor, said “Our concern is to make sure that our residents have a permanent solution to this so it doesn’t recur.”In the meantime, West Goshen Township has filed a petition for an injunction against Sunoco Pipeline LP, accusing the company of violating a settlement agreement regarding the Mariner East 2 natural gas liquids pipeline.Sunoco's actions have already angered at least one local lawmaker, Pa. Sen. Andy Dinniman, who requested the company halt its work until tests of the water were complete. “You tell the residents it’s going to take a week to get the results back,” Dinniman said. “The next day, to the best of our knowledge, without the test results you start the drilling again but you publicly state that you’re awaiting the test results that are going to help us resolve the issues. So where are the test results? Did you get them done in a day or was your initial comment a puff kind of a comment? I don’t see how you get them back in a day.”

Release of treated wastewater from hydraulic fracturing contaminates lake --  Although the hydraulic fracturing technique has resulted in a shift away from coal, which could reduce greenhouse gas emissions, it produces large amounts of wastewater containing radioactive material, salts, metals, endocrine-disrupting chemicals and polycyclic aromatic hydrocarbons that could pose risks to the environment and human health. A Pennsylvania report estimates that in 2015, 10,000 unconventional oil and gas wells in the Marcellus Shale produced 1.7 billion gallons of wastewater. The facilities that collect the water provide only limited treatment before releasing it into surface waters. Bill Burgos and colleagues at Penn State, Colorado State and Dartmouth wanted to see what impact this strategy of treating and releasing fracking wastewater might be having. The researchers sampled sediments and porewaters from a lake downstream from two facilities that treat fracking wastewater in Pennsylvania. Their analysis detected that peak concentrations of radium, alkaline earth metals, salts and organic chemicals all occurred in the same sediment layer. The two major classes of organic contaminants included nonylphenol ethoxylates, which are endocrine-disrupting chemicals, and polycyclic aromatic hydrocarbons, which are carcinogens. The highest concentrations coincided with sediment layers deposited five to 10 years ago during a peak period of fracking wastewater disposal. Elevated levels of radium were also found as far as 12 miles downstream of the treatment plants. The researchers say that the potential risks associated with this contamination are unknown, but they suggest tighter regulations of wastewater disposal could help protect the environment and human health.

Fracking can contaminate rivers and lakes with radioactive material, study finds - The vast amount of waste water produced by fracking can contaminate rivers, lakes and other waterways with radioactive material and hormone-affecting chemicals, according to new research. The study tested sediments and groundwater downstream of a treatment plant in Pennsylvania that was designed to make the water used as part of the fracking process fit for release into the environment. The scientists, from Pennsylvania State University and other academic institutions, discovered that despite this process there were “high loads of chloride, barium, strontium, radium and organic compounds” in the Conemaugh River watershed.Stream sediments in Blacklick Creek, just downstream from one treatment plant, were found to contain about 200 times the level of radium upstream of the plant.The highest concentration of radium found was just 14 per cent below the level at which it would have to be treated as radioactive waste in some US states. However the researchers said the risks of the pollutants discovered were “difficult to assess”.Writing in the journal Environmental Science & Technology, the scientists said: “Large quantities of oil-and-gas wastewater with high loads of chloride, barium, strontium, radium, and organic compounds have been discharged into the Conemaugh River watershed.“Stream sediments in Blacklick Creek immediately downstream of centralised waste treatment plant number one were found to contain [radium] levels that were about 200 times greater than activities measured in upstream and background sediments. “Elevated concentrations of radium and other alkaline earth metals have now been detected in reservoir sediments about 19km farther downstream of this plant.“Despite several other sources of contaminants such as coal bed methane, coal mine drainage, and flue gas desulfurization releases that can impact surface water quality, we document multiple lines of evidence that indicate the legacy of unconventional oil-and-gas wastewater disposal has impacted stream sediments and porewater [groundwater] on a watershed-scale.” They said while the amount of fracking wastewater was “relatively small” compared to the volume of the stream it “nonetheless had a measurable impact”.

Fracking waste contaminates Penn. watershed with radioactive material - Stream sediments in Pennsylvania downstream from two fracking wastewater treatment facilities were found to contain radioactive material and carcinogens, according to study scientists from Penn State, Colorado State and Dartmouth universities. The study’s findings, published Thursday, came after Penn State’s Bill Burgos and his fellow scientists sought to discover what had been the effect of the strategy of treating and releasing fracking wastewater, according to the Independent.They sampled sediments and groundwater from the Conemaugh River water, downstream from two facilities that were created to make the water used in the fracking process fit for release into the environment.“Isotopic ratios of 226Ra/228Ra and 87Sr/86Sr identified that peak concentrations of Ra and Sr were likely sourced from wastewaters that originated from the Marcellus Shale formation,” according to the study Watershed-Scale Impacts for Surface Water Disposal of Oil and Gas Wastewater in Western Pennsylvania.Their analysis detected peak concentrations of radium, chloride, barium, strontium, radium and organic compounds in Conemaugh River watershed. The two major classes of organic contaminants included nonylphenol ethoxylates, endocrine-disrupting chemicals, and polycyclic aromatic hydrocarbons, known carcinogens.When scientists examined steam sediments in Blacklick Creek, just downstream from one treatment plant, it was found to contain about 200 times the level of radium found upstream of the plant. The highest concentration of radium was just 14 percent below the level at which it would have to be treated as radioactive waste in some US states.

Royalties Can Make You Rich -- WSJ -- July 10, 2017 --One study estimated that in 2012 private owners earned some $22 billion in royalties. Link hereOne often-overlooked benefit of the U.S. energy boom: The federal government receives billions of dollars in royalties annually. Thanks to property rights, so do millions of Americans. Over the past decade, for example, Cabot Oil & Gas Corp. has dished out $1 billion in royalties and $500 million in signing bonuses to Pennsylvania landowners in Susquehanna and Wyoming counties. In fiscal 2016, Washington collected $3.9 billion in royalties from oil and gas production on federal land and offshore—and that’s down from $6.6 billion in 2015, according to a new report from the Government Accountability Office. Lower energy prices contributed to the decline, but so did the Obama administration’s roadblocks on drilling-permit applications. The Congressional Research Service reports that federal lands produced 1.57 million barrels of crude oil a day in 2008. By 2015 that had risen 25% to 1.955 million. But over the same period production on nonfederal land more than doubled from 3.467 million barrels a day to 7.46 million. The contrast was starker for natural gas. Federal lands produced 6,471 billion cubic feet in 2008, but that number shrank to 4,594 billion by 2015. Over the same period production on nonfederal lands grew from 14,523 billion cubic feet to 24,143 billion.  The difference is even more pronounced when you realize that the royalty rate is typically much higher on state and private land. Oil and gas producers are required to pay 12.5% to drill on federal land. Royalties on state land are usually in the range of 16% to 18%. In Texas, the largest producer, the typical rate is 25%. Royalties on private land often reflect the state rate.   The Bureau of Land Management took an average of 307 days in 2011 to process applications for drilling permits. States can give approval within a few months.  Based on what I see at the NDIC, it looks like North Dakota can process applications in less than one month in established drilling areas. .

Fracking Boom Hushes Ky. Oil and Gas Action - Kentucky’s oil and gas industry has had a rough several years. Activity has been trending downward for over a quarter of a century, although promising new drilling targets were discovered just a few short years ago and hopes were high. That all came crashing down in late 2014, when the prices of oil and gas plummeted. Experience shows the market shifts, but for now, with oil prices sitting at about $45 a barrel and projected to drop even lower, and natural gas prices at about $3 per million BTU, Kentucky permits for oil and gas drilling are at a record low and are likely to stay that way for some time. Kentucky ranks 20th in the nation for crude oil production, and 18th for natural gas, according to 2012 U.S. Energy Information Administration data, the latest available. But the oil and gas industry is overshadowed by its behemoth cousin, coal, for which – along with horse racing and bourbon – Kentucky is synonymous. (The commonwealth is the nation’s fifth largest producer of coal.) “The oil and gas situation is not good,” Drilling permits issued by the Kentucky Division of Oil and Gas have been steadily declining since 2008 when oil peaked at over $130 a barrel, but the past few years have been particularly low. So far this year, only 59 permits for oil and gas drilling have been issued. KGS predicts the total number of permits for 2017 will be 50 percent less than the number issued in 2016, making it the third year in a row permitting will have declined by 50 percent or more. “The production numbers will typically lag behind the permitting numbers,” Harris said. “As soon as permitting goes down, you’re almost always guaranteed to see a decline in production. It’s been a pretty devastating change for the oil and gas industry.”

Nuns Protest Atlantic Sunrise Pipeline by Building Chapel on Proposed Route -- An order of Catholic nuns and the grassroots coalition Lancaster Against Pipelines have built an open-air chapel in Columbia, Pennsylvania along the proposed route of the Atlantic Sunrise Pipeline to stall construction of the $3 billion project. The St. Louis-headquartered Adorers of the Blood of Christ own a strip of land in Pennsylvania where the pipeline is set to go through. The nuns consider the fracked gas pipeline, a project of Oklahoma-based pipeline developer Williams Partners, a violation of their beliefs and environmental values, UPI reported. "The Adorers received a request from the grassroots coalition, Lancaster Against Pipelines, to install and use, and to invite other people of faith to use, a portable prayer 'chapel' on their land," the Adorers said in a statement . "The hope is that the structure can draw people to prayer and reflection about just and holy uses of land." The simple wooden alter was constructed on a grove just feet from where the pipeline would cut through a corn field, explained Karen Feridun, a founding member of Pennsylvanians Against Fracking and founder of Berks Gas Truth . The 180-mile Atlantic Sunrise Pipeline is an expansion of the existing 10,200-mile Transco pipeline network. According to the Sierra Club , the project would clear cut its way through 10 Pennsylvania counties, impacting 2,000 acres of forested land and crossings hundreds of wetlands and water bodies. The proposed route includes nearly 200 miles of new pipeline which would supply gas exports out of Maryland and gas plants in North Carolina and Florida.  The Federal Energy Regulatory Commission approved the pipeline earlier this year and ruled that Williams Partners has the right to construct, maintain and operate the pipeline on the private land.

Putin Is Funding Green Groups to Discredit Natural Gas Fracking – Newsweek  - Forget about allegations of Russian interference in U.S. presidential elections for a moment, or even “collusion” between Russian officials and Trump campaign operatives. The real action is in the European and U.S. energy markets, according to a letter from two Texas congressmen to Treasury Secretary Steven Mnuchin that details what they call “a covert anti-fracking campaign” with “little or no paper trail.” The Daily Signal obtained a copy of the June 29 letter to Mnuchin from Reps. Lamar Smith and Randy Weber, both Republicans who chair energy-related House panels. (See the full letter below.) Smith and Weber quote sources saying the Russian government has been colluding with environmental groups to circulate “disinformation” and “propaganda” aimed at undermining hydraulic fracturing. Commonly called fracking, the process makes it possible to access natural gas deposits.The sources include a former secretary-general of NATO, who is quoted by the GOP congressmen as saying:Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called nongovernmental organizations—environmental organizations working against shale gas—to maintain dependence on imported Russian gas. This anti-fracking campaign seizes upon environmental issues and health concerns that could be used to constrain U.S. drilling and fracking exercises, the letter explains. Gazprom, a large Russian oil company, stands to benefit if Russian-funded environmental activism results in reduced levels of fracking and natural gas production in the United States, Smith and Weber tell Mnuchin. Top U.S. government officials who have acknowledged the connection between Russian and environmental groups include former Secretary of State Hillary Clinton, the Democratic nominee for president in 2016. In 2014, Clinton delivered a “private speech” in which she discussed Russia’s financial support for environmental groups, the letter says. The speech was included in documents released by WikiLeaks, it says.

Lamar Smith Says Russians Are Behind Sierra Club, Other Environmental Groups Against Fracking | Houston Press -- It was only a matter of time before Representative Lamar Smith found a new hobby.After all, a person can only spend so much time as the chairman of the House Committee on Science, Space and Technology attacking anything that even hints at confirming climate change or looking for yet another way to weaken the federal Environmental Protection Agency. Heck, even attempting to get a "Secret Science Reform Bill" slammed through Congress can only occupy an elected official for so much of the day. But, luckily, Smith has cooked up another cause to keep himself busy. This time he's blaming the Russians. That's right, the Republican congressman from San Antonio now officially believes that the Russian government has been funneling money to environmental groups in the United States in return for the efforts of those groups to get in the way of the U.S. oil industry. Smith and Representative Randy Weber, another Republican on the House Science, Space and Technology Committee, recently sent Treasury Secretary Steve Mnuchin a six-page letter on the topic. In the letter Smith and Weber ask Mnuchin to investigate “what appears to be a concerted effort by foreign entities to funnel millions of dollars through various non-profit entities to influence the U.S. energy market.”  See, while Smith and the other House Republicans have continued to insist that the Russians did not muck around in the 2016 presidential election, they are entirely willing to entertain the notion that the Russians are involved in a dastardly scheme to make it more difficult for the United States to produce oil. Smith states that Russia is doing this because the glut of natural gas brought into the world market by shale plays in Texas and across the United States made natural gas dirt-cheap. This has, in turn, resulted in Russia losing some of its share of the global market, according to Smith's letter. The letter claims Russia has been sending environmental groups money through Bermuda-based shell companies. The environmental groups have then, Smith alleges, been using the money to push for restrictions on oil and gas drilling activities.  By way of proof, Smith cites reports in conservative publications like the Washington Free Beacon and former Secretary of State Hillary Clinton's emails (because apparently no Republican can resist trying to tie it all back to the emails released by Wikileaks).

A Russia collusion story worth pursuing - Power Line - The mainstream media may be looking for evidence of Russian collusion in all the wrong places. So far, despite its epic search, the media has uncovered no evidence that the Trump campaign colluded with Russia in the 2016 presidential election.  There is evidence, though, that Russia has colluded with U.S. environmental groups. Lamar Smith, chairman of the House Science Committee, tells James Freeman of the Wall Street Journal:If you connect the dots, it is clear that Russia is funding U.S. environmental groups in an effort to suppress our domestic oil and gas industry, specifically hydraulic fracking. They have established an elaborate scheme that funnels money through shell companies in Bermuda. This scheme may violate federal law and certainly distorts the U.S. energy market. The American people deserve to know the truth and I am confident Secretary Mnuchin will investigate the allegations. To help Sec. Mnuchin conduct such an investigation, Rep. Smith, along with Energy Subcommittee Chairman Randy Weber, sent him a letter. They noted:According to the former Secretary General of NATO, “Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called nongovernmental organizations – environmental organizations working against shale gas – to maintain dependence on imported Russian gas.” Other officials have indicated the same scheme is unfolding in the U.S.  Reps. Smith and Weber add that, according to public sources including a 2014 report from Republican staff on the Senate Environment and Public Works Committee, “entities connected to the Russian government are using a shell company registered in Bermuda, Klein Ltd. (Klein), to funnel tens of millions of dollars to a U.S.-based 501(c)(3) private foundation,” which supports various environmental groups. Klein denies this allegation.

Spy drones, blast zones, treetop sit-ins: getting fracking gas to Scotland -- How far would you go to protect your way of life? For rural homesteaders Ellen and Elise Gerhart, you trade a quiet retirement for jail time, camp out in a tree as chainsaws growl around you, and come under surveillance from drones.If you’re attorney Michael Bomstein, you spend a sunny Sunday in your office preparing a case pro bono, even though it’s a long shot. If you are Eric Friedman, you spend all your spare time attending meetings, collecting documents, and talking to reporters and government leaders.  And if you’re Allison Chabot, a clinical psychologist with two young children, you get ready to sell your home and move away. All of these people live near the path of  Sunoco Logistics’ massive Mariner East 2 pipeline (ME2) project now under construction across Pennsylvania’s southern belt to bring fracking gas to Scotland. Spanning 350 miles, by 2018 the $3 billion twin ME2 pipelines plus an existing ME1 pipeline are slated to bring 345,000 barrels per day of ethane, propane, and butane – classified as “hazardous liquids” by the US Department of Transportation – from the Marcellus Shale region across 17 counties to a storage facility at Sunoco’s Marcus Hook Industrial Complex. From there, the ethane will set sail for the Ineos petrochemical complex at Grangemouth on “dragon ships” to build the company’s proposed plastics empire.  In the first part of a major US fracking investigation funded by the digital campaign group, 38 Degrees, The Ferret reported in May that eyes teared up with fear and sadness in the western part of Pennsylvania. But farther east in Huntingdon County and the Philadelphia suburbs, jaws are set in anger. Campaigners say their basic rights are being trampled – no small thing in the state where the US Constitution was born – and they are fighting to halt this pipeline and others like it. Or at least, to win the safeguards to which they believe they’re entitled.

Actor James Cromwell Speaks Out Before Jail Time for for Peaceful Anti-Fracking Protest (Democracy Now! interview & transcript) - Oscar-nominated actor James Cromwell is reporting to jail at 4 pm Friday in upstate New York after he was sentenced to a week behind bars for taking part in a nonviolent protest against a natural gas-fired power plant. Cromwell said he'll also launch a hunger strike. He was one of six activists arrested for blocking traffic at the sit-in outside the construction site of the 650-megawatt plant in Wawayanda, New York, in December of 2015. The activists say the plant would promote natural gas fracking in neighboring states and contribute to climate change .  James Cromwell is known for his roles in some 50 Hollywood films, including Babe , The Artist , The Green Mile and L.A. Confidential , as well as many television series, including Six Feet Under. Democracy Now! spoke to him Thursday along with one of his co-defendants, Pramilla Malick. She is the founder of Protect Orange County , a community organization leading the opposition of the fracked gas power plant. She ran in 2016 for the New York state Senate.

Williams' Dalton expansion and the shifting Transco gas price spread - For much of the past few years, natural gas at Northeast demand market hubs has been priced at deep discounts, particularly in the low-demand summer months, because of the flood of Marcellus Shale gas that couldn’t go anywhere else. But now, those markets could soon see some upward pressure as pipeline projects that will expand takeaway capacity from the region come online. One of those projects is Williams’s Transco Pipeline Dalton Expansion, which includes an expansion of Transco’s mainline as well as a new, “greenfield” lateral. The project has already commenced partial-path service to move as much as 448 MMcf/d south on the mainline from Transco’s Zone 6 in New Jersey to its Zone 4 segment in Mississippi. And just yesterday (Thursday, July 13), Transco submitted a request with the Federal Energy Regulatory Commission (FERC) to place the remaining portion — the new Dalton Lateral pipeline extension and related connections — into service less than three weeks from now (on August 1). Today, we provide an update on the project and potential market effects.

Florida’s Sabal Trail pipeline and associated natural gas pipeline projects begin service - On July 3, the Federal Energy Regulatory Commission (FERC) authorized Phase I of the Sabal Trail pipeline to begin full operation. Sabal Trail is a 515-mile interstate natural gas pipeline transporting natural gas from an interconnection with the Transco pipeline in Tallapoosa County, Alabama, to the Central Florida Hub in Osceola County, Florida. Sabal Trail is one part of the Southeast Market Pipelines, three pipeline projects designed to increase natural gas transport capacity to Florida.  Much of the additional natural gas expected to flow into Florida will be transported to its power plants. Since the beginning of 2016, Florida has added 3.4 gigawatts (GW) of natural gas-fired electricity generating capacity, which is more than any other state. Another 3.9 GW of natural gas-fired capacity is planned to come online in Florida over the next six years, based on data reported to EIA by project developers.  Increases in Florida’s natural gas capacity have come as older coal- and oil-fired capacity has been retired. Unlike many states that have been building new natural gas generators, Florida is not located near a major source of natural gas production, and Florida’s geology is not conducive to underground natural gas storage. As a result, the natural gas needed to meet increasing demand is transported by pipeline.Sabal Trail Phase I is designed to have a total capacity of 810 million cubic feet per day (MMcf/d) and began partial service on June 14, with only two of three Phase I compressor stations operating. The next two phases will increase Sabal Trail’s total capacity to 1,050 MMcf/d. Phase II, when completed in 2020, will add 170 MMcf/d of capacity with the addition of two new compressor stations, and Phase III, scheduled for 2021, will add 70 MMcf/d of capacity through expansions to existing compressor stations. Two other projects associated with the Southeast Market Pipelines are Transco’s Hillabee Expansion Project and NextEra’s Florida Southeast Connection. Phase I of the Hillabee Expansion added 800 MMcf/d of capacity to the Transco line in Alabama to provide natural gas to Sabal Trail. Phases II and III of the Hillabee Expansion Project will add 200 MMcf/d and 100 MMcf/d of capacity, respectively, in 2020 and 2021.

Stop Dumping Offshore Fracking Waste Into Gulf of Mexico - A Trump administration proposal to continue allowing oil companies to dump unlimited amounts of offshore fracking chemicals into the Gulf of Mexico violates federal law and threatens imperiled marine wildlife, the Center for Biological Diversity warned this week. In a letter to the U.S. Environmental Protection Agency's (EPA) Region 6 office on its proposed wastewater-discharge permit for offshore oil and gas drilling activities off the coasts of Louisiana, Texas and Mississippi—where thousands of offshore drilling platforms are located—the Center for Biological Diversity explained that the proposed permit violates the Clean Water Act because it causes an undue degradation of the marine environment. The Center for Biological Diversity's letter notes that "scientific research has indicated that 40 percent of the chemicals used in fracking can harm aquatic animals and other wildlife ." "The Trump administration is letting the oil industry dump unlimited amounts of toxic fracking chemicals into these wildlife-rich waters," said Center for Biological Diversity attorney Kristen Monsell. "The EPA is supposed to protect ocean water quality, not turn a blind eye as oil companies use the Gulf as a garbage dump for fracking waste." Earlier this year the EPA's Region 6 office responded to a Freedom of Information Act request from the Center for Biological Diversity for records analyzing the effects of fracking chemicals on Gulf water quality and marine life. Officials said they didn't have any responsive records, meaning the agency has been allowing the oil industry to dump its fracking wastewater into the Gulf without studying its environmental impacts, as federal law requires. Federal waters off Texas, Louisiana and Mississippi host the largest concentration of offshore oil and gas drilling activities in the country. Previous records requests revealed that oil companies dumped more than 75 billion gallons of wastewater into these waters in 2014 alone.  At least 10 fracking chemicals routinely used in offshore fracking could kill or harm a broad variety of marine species, including marine mammals and fish, Center for Biological Diversity scientists have found . The California Council on Science and Technology has identified some common fracking chemicals to be among the most toxic in the world to marine animals.

Oil Spills Can Disrupt Entire Aquatic Food Web, New Study Shows - From dead fish to beaches covered in sludge, the immediate damage from an oil spill is easy to see. But a new study , published this week in the journal Archives of Environmental Contamination and Toxicology (AECT), found that the damage caused by these spills are much wider in scope and can indirectly disrupt the entire aquatic food web. The 2010 Deepwater Horizon oil spill , which released 134 million gallons of oil into the Gulf of Mexico, killed thousands of marine mammals and contaminated their habitats. But researchers in the AECT study found that the mass mortalities also led to a dramatic spike in forage fish populations such as menhaden in the years after the blowout. Menhaden are tiny fish that are prey to a wide range of marine predators such as larger fish, birds and cetaceans such as fin whales and dolphins. With many of their predators gone, these tiny fish were able to quickly multiply. According to the study, "these releases from predation led to an increase of Gulf menhaden biomass in 2011 to 2.4 million t, or more than twice the average biomass of 1.1 million t for the decade prior to 2010." "Our discovery suggests that the structure of food webs change after an oil spill, which may be much more damaging to fish and other aquatic fauna than the direct impacts of the spilled oil itself," explained lead researcher Jeffrey Short.  The new analysis "underscores the need to study not just those species obviously affected, but also the entire food web, during oil spill assessments," a press release for the study states.

Trump Administration Approves Exploratory Drilling in Arctic Ocean - The Trump administration on Wednesday approved a plan submitted by Eni US to drill for oil in the Arctic Ocean, setting the stage for a devastating oil spill in one of the most biologically rich areas in America's Arctic. The company, a U.S. subsidiary of the Italian oil and gas giant, has sat on its leases in the Beaufort Sea since acquiring them more than a decade ago. The leases would have expired at the end of this year if Eni did not act on them. The Trump administration provided the public only 21 days to review and comment on the exploration plan and only 10 days to comment on scoping for an environmental assessment under the National Environmental Policy Act. "Approving this Arctic drilling plan at the 11th hour makes a dangerous project even riskier," said Kristen Monsell, an attorney with the Center for Biological Diversity . "An oil spill here would do incredible damage, and it'd be impossible to clean up. The Trump administration clearly cares only about appeasing oil companies, no matter its legal obligations or the threats to polar bears or our planet." Under the approved plan, Eni US will drill extended reach wells into federal waters in the Beaufort Sea from an existing facility in Alaska state waters. Eni's proposed wells would be the longest extended reach wells in Alaska, reaching out more than six miles. The drilling is planned in Harrison Bay next to the Colville River Delta. The area is home to many imperiled marine mammals , including bowhead whales , polar bears and ringed seals. Birds from all over the world, including spectacled eiders and longtailed ducks, spend summers near where Eni will drill.  The Outer Continental Shelf Lands Act requires the Bureau of Ocean Energy Management to reject an exploration plan if it "would probably cause serious harm or damage to life (including fish or other aquatic life)" or to "the marine, coastal or human environment."

Dozens testify against Trump administration’s proposed delay of key methane rule -- Dozens of people showed up at the Environmental Protection Agency’s headquarters on Monday to speak out against the agency’s proposed two-year delay in the implementation of its methane rule for new and modified oil and gas drilling wells.Opponents of the agency’s proposed delay dominated the public hearing. They cited health concerns and a lack of action by state regulators in their calls to keep enforcement of the methane rule on schedule. Only a small number of supporters of the delay, who complain the Obama-era rule will be costly and duplicative, showed up to testify at the hearing.The Obama administration finalized the rule, known as the New Source Performance Standards, in 2016 as part of a federal effort to reduce the release of methane, a greenhouse gas with 25 times the warming potential of carbon dioxide. The oil and gas sector is the largest U.S. industrial emitter of methane, which is the second-biggest driver of climate change after carbon dioxide. When the EPA announcedthe proposed delay last month, the agency said the extra time would allow it to review the rule’s potential negative impact on oil and gas drilling activities. Under the proposed two-year delay, companies would not need to comply with the requirements.

Monster oil rigs draw attention in Texas for faster drilling -- Oil companies are shelling out more cash and signing long contracts for a limited supply of monster rigs that drill wells much faster than the older models that led the U.S. first shale boom. The Houston Chronicle reports some rig suppliers have recently signed 18-month and two-year contracts for these so-called super-spec rigs, collecting up to 20 percent more in daily rates as U.S. producers scramble to lock down the most efficient rigs in the nation's fleet. Earlier this year, oil producers had resisted entering higher-priced long-term contracts, but these new agreements with Houston's Nabors Industries and others signal oil field contractors have regained some clout in a market that earlier forced deep discounts, squeezed profit margins and forced them to cut thousands of jobs during the oil downturn. "Every single one of the super-spec rigs that can work is working today,". "Now we're seeing that exploration and production companies can't get these rigs if they don't sign contracts." Rig contractors have dispatched hundreds of these machines across the country in a record 23-week upward streak in the U.S. rig count this year, which ended June 30 as the count fell by one to 940, according to the Houston oil services giant Baker Hughes. In recent weeks, oil prices have fallen to around $45 a barrel, which may discourage shale drillers from bringing on additional rigs. If oil stays cheap, the nation's rig count could drop about 20 percent next year from an expected 1,000 at the end of 2017. But even then, oil companies aren't likely to give up the super-spec rigs that can drill a well in less than 10 days, shaving more than a week from the average drilling time in 2010.

Understanding Permian Gas Takeaway Capacity at Waha Hub, Part 4 -- The Waha Hub in West Texas figures to play a prominent role in supplying natural gas to Mexico soon, as pipelines connecting the Permian Basin to the international border are now complete and supplying small volumes to Northwest Mexico. As additional pipelines and power plants come online south of the border over the next 12 months, a meaningful ramp-up in flows from Waha to Mexico is expected. Facilitating those flows will be a Waha-area header recently built by a consortium of Carso Energy, MasTec and Energy Transfer Partners for Mexico’s Comisión Federal de Electricidad (CFE). With 6 Bcf/d of capacity and multiple pipeline interconnects, the header stands to dramatically improve interconnectivity among gas pipelines at Waha, but it has largely stood in the shadows of Mexico’s pipeline buildout. Today we continue our series on the Waha Hub with a look at CFE’s Waha header and its expected role in handling Permian-sourced gas. In Part 1 and Part 2 of this series we highlighted how Permian gas flows to the Waha Hub and we explored the paths out of the basin. In Part 3 we looked at new intra-basin infrastructure designed to get gas from Permian production areas to Waha. We also covered how all of the new takeaway projects are aimed at moving gas either south to Mexico or east into Texas intrastate markets. Following up on that analysis, we now take a look at CFE’s Waha header and how it will facilitate flows to new pipelines in Mexico and potentially South Texas too.

Existing and planned gas pipelines out of the Permian, part 2 - Production of associated natural gas in the Permian’s Midland and Delaware basins is forecasted to continue rising through the early 2020s, challenging existing pipeline takeaway capacity out of the region. There also are limits to how much gas can flow northeast into the Midcontinent and the Upper Midwest — after all, those regions have access to gas from other areas too, including the Rockies, western Canada, the Marcellus/Utica and the Midcon itself. The same holds true for Texas’s Gulf Coast, which has emerged as another battleground for gas producers. Today we continue our series on the ability of existing pipes out of the Permian to move natural gas to market and the enhancements that will be needed to allow Permian production to keep growing.  In Part 1 of our series, we said that the pace of Permian production growth will be influenced by many factors, including the degree to which the market price for crude oil exceeds the play’s breakeven prices and the ability of midstream companies to add incremental pipeline takeaway capacity as that capacity is needed. While the pursuit of crude oil is driving drilling and production activity in the Permian, rapid growth in crude output is being accompanied by large volumes of associated gas and natural gas liquids (NGLs) that also must be dealt with. Fortunately, the Permian has been a major production area for decades — a lot of crude, gas and NGL pipeline infrastructure is already in place. But, as we’ll get to, it won’t be enough. Part 1 built on our It Was Good Living With You, (W)aha series, which described the hub-and-spoke pipeline networks in West Texas that play critical roles in transporting large volumes of Permian gas to customers as far away as Southern California and Minnesota.

Halliburton hiring 100 per month to meet Texas fracking demand - Houston Chronicle: -- Halliburton has hired about 100 new workers each month this year to keep up with surging demand for fracking in West Texas, a sharp turnaround after the job-killing oil bust. The Houston oil field service company has expanded its active fleet of fracking trucks and pumps by 30 percent in recent months, and its workforce in the region has grown by more than a third to 2,700 employees, said Chris Gatjanis, who runs Halliburton's operations in the Permian Basin, in a recent interview. To keep that hiring spree going, the largest U.S. fracking company has had to recruit a large commuter workforce from outside of West Texas, holding job fairs in places like Alabama, Mississippi and Nevada. "We have a real bottleneck with people out here," Gatjanis said. "This market has been saturated. Most people out here are already in the business. And it's not the most beautiful place in the world to live. It becomes a challenge to get people to work here." U.S. oil producers locked in higher prices for their crude when oil prices climbed above $50 a barrel earlier this year, and the number of rigs in the Permian Basin surged, particularly in the Delaware Basin in Pecos County, where there are fewer roads and less equipment to carry the oil to market. Fifty-man frack crews have followed behind those rigs, pumping sand and water down the wells companies drilled to crack open multiple layers of dense oil-soaked rock, and the surge has allowed oil field service companies to raise their prices for frack jobs, lifting profits and easing financial stress after a brutal energy-market downturn.But U.S. oil prices have fallen into the mid-$40 a barrel range again, and it's not yet clear whether oil companies in the Permian will retreat again: many operators have already set their annual budgets based on oil hedging that locks higher prices in place for future production, Gatjanis said. "New oil that's coming onto the system, though, comes in at spot price and it's not hedged, so that's where you start to see the pinch," he said. "What you're going to see is really prudent operators out here are not going to outspend cash flow. They'll run their economics based on (lower oil price) and see what it does from a cash flow perspective -- and if that means they need to pull back, they'll pull back."

Small Permian producers feel pinch of $45 oil - For some small oil companies in West Texas, low crude prices are beginning to sting. Green Century Resources, a private oil company in Midland, is weighing an investment in a drilling project that appeared profitable a few months ago when crude prices hovered above $50 a barrel. Now, with U.S. prices under the $45-a-barrel mark, the small company may have to hold off on its plans, said James Mayer, founder and chief executive of Green Century. "If oil holds under $45, that would make a difference to us," Mayer said, adding his company is working to whittle down its projected capital and operating costs.  Several small operators in West Texas told the Houston Chronicle they're face increasing pressure from rising oil field service costs, particularly in hydraulic fracturing, in part because the downturn wiped out some of the service companies and allowed rivals to raise prices. That oil prices are falling now has convinced some to rethink their expansion plans for the year, which were set at a time when oil prices were higher. "You can see even the difference in traffic out here in Midland," Mayer said. "You can feel it slowing down." Larger, publicly traded oil producers in West Texas locked in higher prices for future output earlier this year, and so far, they haven't signaled plans to reduce drilling activity in the region. Houston-based Noble Energy, for example, has amassed a large footprint in the Delaware Basin through two multibillion-dollar acquisitions, and it plans to expand its drilling fleet there later this year even if oil stays cheap, said Donnie Moore, vice president of the Noble's Marcellus and Texas business units, in an interview at the Houston firm's field offices near Pecos, Texas. Nearly two-thirds of Noble's inventory of oil wells in the Delaware Basin breaks even around $40 a barrel, and the company plans to boost its U.S. onshore oil production 40 percent in the second half of 2017 compared to the same period last year, he added.  "We'll always be looking at the market, and activity, and what's needed, but right now, we're still at five drilling rigs, two frac crews and we're planning a sixth rig later in the year." But for smaller oil producers, cash flow determines drilling plans.

Reading, Writing And Fracking? What The Oil Industry Teaches Oklahoma Students - It's a Saturday at Choctaw High School, but for hundreds of Oklahoma teachers, there's a training class in session. Carrie Miller-DeBoer perches atop a stool monitoring a pair of soda bottles linked with a small length of thin plastic tubing created to mimic enhanced oil recovery, while teaching chemistry fundamentals. "I love it and my students will be so excited," she says. DeBoer is among 14,000 teachers in Oklahoma being trained to instruct a K through 12 education curriculum funded by the oil and gas industry. The lesson plans, created by the Oklahoma Energy Resources Board, have been used in Kansas, and the overall model has been pitched to at least five other states. The program centers on teaching math and science through oil-centric lessons and labs. That includes things like calculating the mileage of tanker trucks, or the slope of pipelines. "Half of our budget is restoration, half is education," says Dara McBee, communications director with the Oklahoma Energy Resources Board. Since the 1990s, the energy board – funded by oil and gas taxes – has spent $40 million on the education program. But an investigation by the Center for Public Integrity and StateImpact Oklahoma, a collaboration of local NPR member stations, reveals there's a blurry line between industry promotion and education. Documents show educators had some role in creating the plans, but it's unclear how the lessons are written and updated each year. The board's education director does not have a background in education or science.  Here are just a few of those lessons:

Court allows EPA to delay methane rules as it considers appeal - A federal appeals court on Thursday allowed the Trump administration to hold off on implementing emission rules for natural gas and oil drillers as it decides whether to appeal an earlier court decision that denied it from delaying the rules. The D.C. Circuit Court of Appeals said it would delay its order from last week rejecting the Environmental Protection Agency's delay of the Obama administration methane regulations while the administration considers its options on appealing the earlier decision. The court delayed the methane rules up to 14 days while the administration seeks an appeal. Delaying the regulations "for longer would hand the agency, in all practical effect, the very delay in implementation this panel determined to be [illegal]." The court ruled July 3 that the EPA had no authority under the Clean Air Act to halt the Obama administration standards for controlling methane emissions from drilling and hydraulic fracturing, or fracking. The decision was immediately followed by the court's mandate to implement the ruling. EPA had argued in response to the quick mandate that it needed time to consider its options.

Trump denies disaster declaration for Dakota Access pipeline - The Trump administration has denied a request from Republican North Dakota Gov. Doug Burgum for a "major disaster declaration" to help cover some of the estimated $38 million cost to police protests of the Dakota Access pipeline. Burgum spokesman Mike Nowatzki says the governor was notified in May that the request had been denied. The office didn't announce the denial until reporters asked about it this week. The declaration would have allowed the state to pursue reimbursement for the costs it incurred during the months-long protest against construction of the pipeline. The $3.8 billion pipeline, built and operated by Energy Transfer Partners, began moving oil from North Dakota to a shipping point in Illinois last month.

US approves oil drilling in Alaska waters, prompting fears for marine life -  An Italian multinational oil and gas company has received permission to move ahead with drilling plans in federal waters off Alaska which environmental campaigners say will endanger polar bears, bowhead whales and other marine mammals. Late on Wednesday, the federal Bureau of Ocean Energy Management announced conditional approval of an exploratory drilling plan submitted by a US subsidiary of the company Eni. The company plans to drill four exploration wells from the Spy Island drill site, an 11-acre artificial gravel island constructed in Alaska state waters 6-8ft deep. Spy Island is one of four artificial islands in the Beaufort Sea, off Alaska’s north coast, that support oil production.  Barack Obama last year banned oil and gas exploration in most of the Arctic Ocean. Donald Trump in April ordered the interior secretary, Ryan Zinke, to review the ban, with the goal of opening offshore areas. Environmental and Alaska Native groups sued to maintain it. Environmental groups say potential spills put marine wildlife at risk. Eni’s leases would have expired at the end of 2017, said Kristen Monsell, an attorney for the Center for Biological Diversity, in a prepared statement. Eni’s plan calls for extended-reach wells that could stretch more than six miles into federal waters.  The Trump administration provided the public only 21 days to review and comment on the exploration plan and only 10 days to comment on scoping for an environmental assessment, Monsell said. “Approving this Arctic drilling plan at the 11th hour makes a dangerous project even riskier,” Monsell said. “An oil spill here would do incredible damage, and it’d be impossible to clean up.”  Personnel at Eni’s office in Anchorage said they could not comment and forwarded a request for comment to company officials in Milan.

U.S. petroleum refinery capacity continues to increase - As of January 1, 2017, U.S. operable atmospheric crude distillation capacity reached 18.6 million barrels per calendar day (b/cd), 1.6% higher than at the beginning of 2016, according to EIA's annual Refinery Capacity Report. This increase in operable capacity was slightly lower than last year’s increase of 2.0%.  The capacities of secondary units that support heavy crude oil processing and production of ultra-low sulfur diesel and gasoline, including thermal cracking (coking), catalytic hydrocracking, and hydrotreating/desulfurization, also increased. Catalytic hydrocracking and deasphalting units experienced the largest capacity increases over the past year, rising by 4.5% and 6.1%, respectively. EIA's Refinery Capacity Report measures refinery capacity in b/cd and barrels per stream day (b/sd). Calendar-day capacity is a measure of the amount of input that a distillation unit can process in a 24-hour period under usual operating conditions, taking into account both planned and unplanned maintenance. Stream-day capacity is the maximum number of barrels of input that a distillation facility can process within a 24-hour period when running at full capacity under optimal conditions with no allowance for downtime. Stream-day capacity has historically been 6% higher than calendar-day capacity. The refinery capacity reported for the start of 2017 includes one new unit, the 42,500 b/cd Magellan Midstream Partners LP condensate splitter in Corpus Christi, Texas. Condensate splitters are distillation units that process condensate, which is lighter than crude oil. Splitter capacity is categorized as atmospheric distillation units in EIA data. The Magellan Midstream Partners LP unit, which began operating in 2017, was operable but not running at the start of the year, so its capacity was listed as idle in the Refinery Capacity Report. Overall, the percent of idle distillation capacity as of January 1 was 1.6%, a slight increase from last year’s relatively low 0.8%.  Gross inputs to refineries, also referred to as refinery runs, averaged a record-high 16.5 million barrels per day (b/d) in 2016. U.S. crude oil production was 0.5 million b/d lower in 2016 than in 2015, the first annual decline since 2008. To offset the decline in production, net imports of crude oil increased by a similar amount. Despite the increase in refinery runs, atmospheric crude distillation capacity increased even more, lowering refinery utilization in 2016 compared with 2015.

Tide turns for sulphur-rich oil in a sea of light crude | Reuters: (Reuters) - The world is awash with oil, but in pockets of the market lower-quality, sulphur-rich crude is limited and buyers are competing for cargoes. Lacklustre gasoline demand growth, particularly in the United States, and fears of a repeat of last year's poor summer gasoline profits, led refineries in the Atlantic Basin to skew their yields in favour of distillates, by running heavier oil. Strong profits for fuel oil has also encouraged refineries to run sour crudes. This has compounded supply cuts, which were concentrated in heavier oils, to keep sulphur-rich crudes, normally shunned for lighter, easier-to-process alternatives, at the top of the heap. Since OPEC-organised cuts began siphoning some 1.8 million bpd from the market in January – nearly all of it medium and heavy oil – the so-called "heavy" or "sour" grades have become the most sought-after barrels. Normally, refineries would snap up easier to process light grades before the summer, when they aim to run the gasoline-rich crude so they can sell the fuel to holidaying drivers. But now, in the middle of July, sour grades are still so sought after that differentials are hitting multi-year highs. "Sour grades are like gold dust at the moment," one oil trader said. "There's a need to fill in more sour grades heading to the U.S. and there is huge demand from the East."Differentials for Urals, a sour grade exported from the Baltics and the Black Sea, are trading at their highest level versus dated Brent in two years, while light grades nearby such as CPC Blend and Azeri are at two-year lows. 

Energy commodity prices declined more than other commodities in the first half of 2017 --The energy component of the Standard and Poor’s Goldman Sachs Commodity Index (GSCI) fell 11% during the first half of 2017, the largest decline for any commodity group in the index. Other components of the index—livestock, industrial metals, precious metals, and agriculture—had end-of-June prices that were higher than at the beginning of the year. Supply-side developments unique to energy commodities likely contributed to the divergence.  Because two major crude oil price benchmarks, West Texas Intermediate (WTI) and Brent, account for 70% of the weighting in the S&P GSCI energy index, the energy index tends to follow major price movements in the crude oil market. During the first half of 2017, WTI crude oil prices declined by 12%, while Brent prices fell 14%.  Oil production cuts agreed to among several countries within and outside the Organization of the Petroleum Exporting Countries (OPEC) at the end of 2016 were generally complied with over the first six months of 2017, but the drop in production did not significantly reduce global liquid fuels inventories. The cuts have been partially offset by production gains in certain OPEC countries not subject to restrictions, as well as production growth in Brazil and the United States. Recently, the production cut agreement was extended through March 2018.  Petroleum-based products such as reformulated gasoline blendstock for oxygenate blending (RBOB), ultra-low sulfur diesel (ULSD), and gasoil make up 24% of the S&P GSCI energy index. RBOB, essentially the petroleum-based component of motor gasoline, declined the least among petroleum products in the S&P GSCI energy index year to date, declining 7% through June 30. Gasoline prices exhibit seasonality and typically increase ahead of the summer driving season, which likely contributed to less of a decline in prices compared with crude oil and other petroleum products.  Natural gas accounts for the remaining 6% of the S&P GSCI energy index. Natural gas prices declined the least among energy commodities, albeit with significant volatility throughout the first six months. Prices declined as much as 23% from the beginning of the year through mid-February ($3.33 per million British thermal units (MMBtu) to $2.56/MMBtu) because of a relatively warm winter in the United States. Natural gas prices then increased to $3.42/MMBtu in mid-May before falling to about $3.00/MMBtu by the end of June. Natural gas prices have largely been affected by increasing U.S. natural gas exports and relatively flat natural gas production.

U.S. drilling costs start to rise as rig count climbs: Kemp (Reuters) - U.S. oil and gas exploration and production companies are paying more to hire drilling rigs as the number of rigs still idle after the slump declines.Drilling costs were up by 8 percent in June 2017 compared with their recent low in November 2016, according to preliminary data from the U.S. Bureau of Labor Statistics published on Thursday.The rise in drilling costs has barely started to reverse the previous 34 percent decline reported between March 2014 and November 2016, but it does mark an important turning point in the oilfield services costs cycle.Drilling costs have been rising year-on-year since March and in June were almost 3 percent higher than in the corresponding month a year earlier ( costs are cyclical and follow changes in the rig count with a lag of a few months, but so far cost increases have been very modest compared with the resurgence in drilling activity ( number of active rigs has more than doubled over the last year, according to oilfield services company Baker Hughes, while costs have risen by less than 3 percent.Drilling costs have remained low as rig owners have engaged in deep discounting to win contracts following the worst slump for more than a generation.In the early summer of 2016, there were 2,100 rigs available for use in the United States, but just 455 were operating, according to an annual census conducted by National Oilwell Varco (NOV) ( defines a rig as "available" as one that is currently active or ready to drill without significant capital expenditure ("63rd Annual Rig Census", NOV, 2016).The utilisation rate of 22 percent was the lowest in over six decades, and down from 51 percent in 2015 and 70 percent in 2014 ( be considered still available, a land rig must not have been idle for more than three years, or five in the case of offshore units. Badly damaged rigs, those which have been cannibalized for spare parts, and any in long-term storage are excluded.

When will the US fracking spree finally slow down? - Not in the sense of pumping rock full of fluid until it fractures to release petroleum. But as in, when will the US shale oil industry’s fracking spree finally slow down? The discussion has become more urgent since West Texas Intermediate crude tumbled below $50 a barrel. Independent companies exploring shale in aggregate act like a precision valve in the oil supply machine, increasing output as prices rise and decreasing it when they fall. Yet Wall Street seems to have miscalculated the point at which lower oil prices force producers to constrict this valve. This week Andy Hall of Astenbeck Capital Management, famed as a resolute oil bull, warned in a letter that the “long-term price anchor for oil has moved lower” because the cost for extracting shale oil has become surprisingly cheap. The shale industry’s recovery from the market plunge of 2014-16 is one of the two main influences on today’s oil market. The other is Opec, whose decision with allies including Russia to cut output, inadvertently helped rescue shale producers last year.  After declining in 2016, US crude oil production returned to growth this year. The government’s latest forecast projected volumes would reach a record above 10m barrels per day (b/d) in 2018, led by drilling in places such as the Permian Basin of west Texas and the Scoop and Stack areas of Oklahoma.  The expansion followed a doubling of oil prices from the sub-$30 depths of early 2016 to $55 in January. But on Friday WTI was just above $44, with prices dropping over the past month. At that price, operators in less attractive basins struggle to make money, analysts say.

First tech, now financing: U.S. shale firms get creative to pump more oil | Reuters: (Reuters) - U.S. shale producers survived an oil price crash and confounded OPEC's efforts to drain a global glut by employing innovative drilling and production techniques. Now, some of these producers are turning to creative investments to pump more oil. Drilling joint ventures, called "DrillCos" for short, combine cash from investors like Carlyle Group LP (CG.O) with drillable-but-idle land already owned by producers. Investors get a pledge of double-digit returns within a few years, while producers can raise productivity without spending more of their own money. The total raised by these ventures - at least $2 billion in the last 24 months - is a small part of overall shale financing. But they represent another way for Wall Street and shale producers to increase the flow of oil, and frustrate plans by the Organization of the Petroleum Exporting Countries to prop up prices. Private equity this year has showered more than $20 billion on U.S. energy ventures. Driven by shale expansion, U.S. oil production this year is forecast to increase by 570,000 barrels per day (bpd) to 9.9 million bpd, the U.S. Energy Information Administration estimates.Drillcos take control of drillable land and generally turn over 100 percent of the cash flow from oil and gas production to investors until they earn a 15 percent return. At that point, control reverts to the producer, with the investor's stake shrinking to about 10 percent of remaining production. 

Is Wall Street Funding A Shale Failure?  -- The latest figures from the EIA show that despite some hiccups, the shale rebound is still on track. Last week, the sharp drawdown in inventories made headlines, but buried within the weekly figures was a bounce back in oil production, reigniting fears that the market will take much longer to balance.The U.S. shale industry has already added almost a half million barrels per day since the end of last year, taking production up to 9.3 million barrels per day (mb/d). But production is expected to continue to grow rapidly, with projections putting output at a record-high 10 mb/d by next year.The coming wave of new supply will only be possible with the generous help of Wall Street. According to the Wall Street Journal, major banks and investors have showered the industry with credit and equity, pouring an estimated $57 billion into the sector over the past 18 months. All of that money is being translated into a sharp rise in drilling even as oil prices slump.But while individual companies hope to attract investors and boost profits by ratcheting up production, the industry as a whole is shooting itself in the foot. Some less efficient drillers are increasing production but losing money on every barrel produced.There is a growing recognition that loose money and easy credit is helping contribute to another downturn in prices. “The biggest problem our industry faces today is you guys,” the CEO of Anadarko Petroleum, Al Walker, said at an investor’s conference in June, according to the WSJ. “It’s kind of like going to AA. You know, we need a partner. We really need the investment community to show discipline.”Investors hungry for yield are throwing money into companies who then drill more, and the surge in production is hurting the industry as a whole. Despite efficiency improvements, the shale industry is expected to be cash flow negative by a combined $20 billion this year as oil prices sink.The energy sector, by some estimates, has been the worst performer this year for investors, so many are getting burned even as they keep the money taps open.Whether in terms of commodity prices (energy fell 11 percent in the S&P Goldman Sachs Commodity Index) or individual companies (73 of the 90 companies in the MSCI World Energy Sector Index saw their share prices decline in the second quarter), the oil and gas industry has not been a great space to be in.

U.S. oil producers paying off debt, but higher costs restrict cash flow growth -- EIA’s review of first-quarter 2017 financial results for 54 publicly traded U.S. oil and gas producers indicates that these companies, in aggregate, are paying off debt while funding investment through the sale of assets and the issuance of equity. In recent years, investment had been more heavily funded through the issuance of debt. Although revenue for these companies has grown over the past year with higher oil prices, net cash from operations has grown more slowly because of increased upstream costs. The 54 companies included in the analysis are listed on U.S. stock exchanges and are required to submit financial reports to the U.S. Securities and Exchange Commission. They operate largely in U.S. onshore basins, but some also have operations in the Federal Offshore Gulf of Mexico, Alaska, and various other regions across the globe. Aggregate global crude oil and other liquids production for these companies averaged 5.3 million barrels per day (b/d) during the first quarter of 2017. For these publicly traded companies, capital expenditures on exploration and development totaled $16 billion in the first quarter of 2017. This level is $8 billion lower than the 2012–16 quarterly average spending related to these activities by these companies, but is almost $3 billion higher than the first quarter of 2016. Many companies have announced that they expect to increase full-year 2017 capital expenditures when compared with 2016 levels by adding rigs for drilling new wells across various basins. Capital expenditures can be funded from cash from operating activities, the assumption of debt (bank financing or bonds), the issuance of equity, or asset sales. From 2012 through the end of 2015, debt was a significant source of capital for the producers included in the analysis, with the addition of a cumulative $55.3 billion in net debt. Since the beginning of 2016, however, these producers have reduced debt by $1.4 billion (Figure 1). The combination of higher equity and lower debt has resulted in the long-term debt-to-equity ratio, a measure of financial leverage, declining from 88% to 80% for the group of companies as a whole between the first quarter of 2016 and the first quarter of 2017.

EIA's Short-Term Outlook -- July 11, 2017 -- Oil, Very, Very Bearish --- EIA's short-term outlook:

  • A lower forecast for crude oil prices is expected to shave a little off projected growth in U.S. oil production next year compared with the previous forecast, but annual output is still on track to reach a record high in 2018.
  • A revised oil price forecast that is $2 to $4 per barrel lower for late 2017 and during 2018 than the prior forecast will make it less profitable for some U.S. producers to drill for oil.
  • The United States will account for almost 90% of the increase in global production of crude oil and other liquid fuels by non-OPEC countries in 2018.
  • The price U.S. consumers are expected to pay for gasoline this summer has been revised down as lower crude oil costs provide a break at the pump.
  • The price of crude oil, which accounts for about half the retail price of gasoline, has declined in recent months on rising U.S. crude oil production and high petroleum inventories.
  • U.S. natural gas production is expected increase through the rest of this year and during 2018 in response to higher natural gas prices and growing liquefied natural gas exports.
  • The United States will become a net exporter of natural gas this year, and U.S. liquefied natural gas exports in 2018 are expected are expected to increase 45% from this year’s levels.
  • U.S. natural gas inventories at the start of the upcoming heating season this November are expected to be lower than last year, but still 2% above the five-year average.

U.S. to become top 10 oil exporter by 2020 - Jul. 11, 2017: U.S. oil production is booming. The next step: conquering the export market. Increased shale production will transform the U.S. into one of the world's top oil exporters in just a few years, according to a new forecast by the consultancy PIRA Energy Group. PIRA estimates that American crude exports will grow to 2.25 million barrels a day by 2020, a four-fold increase from 2016. The boom would put the U.S. in roughly the same league as major oil exporters including the United Arab Emirates and Kuwait. "In the years ahead, these developments position the U.S. to potentially be one of the 10 largest exporters of crude oil in the world," wrote analyst Jenna Delaney. The major increase in supply would further undermine the strength of OPEC, which was exporting an average of 25 million barrels a day in 2016. Saudi Arabia topped the cartel's list of exporters last year, sending of 7.5 million barrels abroad each day. The U.S. vaulting into the top ranks of exporters would have been unthinkable even a few years ago. The U.S. had been out of the oil exporting business for 40 years when a ban on foreign shipments was lifted in 2015. The restrictions had been introduced in 1975, two years after OPEC banned oil sales to the U.S. Delaney said the growth in exports will be driven primarily by increased shale production. 

Energy Independence: Chimera or Chameleon? -- The Wall Street Journal says the US is beyond mere Energy Independence, emerging as "the world's energy superpower." But Geologist Art Berman points out that it's the world's biggest importer of oil: "Saudi Arabia and Russia- the real oil superpowers– import no oil." Mother Jones says "America is inching closer to Energy Independence". The Washington Times says Energy Independence is "achievable." Yet other recent articles speak of the "'Energy Independence' Myth", and liken it to the promise of perpetual economic growth. In corporate press releases, says one, "Optimism is more important than facts. And, it’s essential for attracting investors." Who can you believe? All of them, more or less. But watch the details, because at least two concepts of "energy independence" are in play:

  • (1) No imports of oil, coal or natural gas. That's what President Carter had in mind when he set Energy Independence as a national goal. But today we're importing about 8,000,000 barrels of oil - four supertankers full - every day.
  • Or (2) Some trade analysis that shows the U.S. as a net exporter of energy. Different analysts go at this in different ways. Some include trade in finished energy products such as gasoline and jet fuel. Some use physical units, others use dollars. The answer depends on how you set up the analysis.

So WSJ can say that the U.S. only imports 25% of its oil (oil and oil products, net) and Berman can reply it really imports 47% (of the crude oil flowing to US refineries). Checking US EIA figures for the latest 4 weeks, I got 48%.  But an export surplus isn't "independence" - it reflects a mutual dependence with our trading partners. Since our civilization is addicted to oil, "codependency" might be more accurate.  Experts have called Energy Independence a "chimera". Which is either a phantom, a will-o-the-wisp, or a fire-breathing three headed monster; not a good object to pursue in any case. But in political discourse, it becomes a chameleon: a wily lizard that changes color to blend with its context.

US Natgas Output Seen Up in 2017, but Still Below 2015 Record  (Reuters) - U.S. dry natural gas production in 2017 was forecast to rise to 73.30 billion cubic feet per day (bcfd) from 72.29 bcfd in 2016, according to the Energy Information Administration's (EIA) Short Term Energy Outlook (STEO) on Tuesday. The latest July output projection was unchanged from EIA's forecast in June but falls short of the record high 74.14 bcfd produced on average in 2015.EIA also projected U.S. gas consumption would fall to 72.86 bcfd in 2017 from a record 75.11 bcfd in 2016. The 2016 high was the seventh annual demand record in a row. That 2017 consumption projection in the July STEO report was down from EIA's 73.41-bcfd forecast for the year in its June report.

U.S. on track to be world's No.2 LNG exporter by end-2022: IEA | Reuters: (Reuters) - The United States is on track to have capacity to become the world's second largest exporter of liquefied natural gas (LNG) by the end of 2022, just behind Australia and ahead of Qatar, the International Energy Agency (IEA) said. Overall, global LNG export capacity would reach 650 billion cubic meters (bcm) a year by the end of 2022, compared to less than 452 bcm a year in 2016, the IEA said in its annual report on gas markets. Of that amount, Australia would have capacity to export 117.8 bcm a year of LNG, followed by the United States with 106.7 bcm a year and Qatar with 104.9 bcm a year, it said. Australia would stay top by adding 30 bcm a year of capacity by the end of 2022 to its existing capacity, but the United States, which has seen shale gas output surge, would add about 90 bcm a year to its capacity of about 14 bcm a year now. "By the end of our forecast period, the United States will be well on course to challenging Australia and Qatar for global leadership among LNG exporters," the report said. However, the new LNG capacity is being added to an already well-supplied market, while demand is falling in some of the traditionally large importing nations, such as Japan, it said. With demand expected to reach 460 bcm a year by 2022, the market would have 190 bcm a year in excess capacity, putting pressure on gas prices and discouraging new upstream investment. Current low LNG prices are already making it tougher for exporters, and competition is loosening the typically rigid contracts that have dominated the long-distance trade. "This change will be further accelerated by the expansion of U.S. exports, which are not tied to any particular destination and so will play a major role in increasing the liquidity and flexibility of LNG trade," the IEA said.

Slow down on the LNG exports - President Trump has stated, "We are sitting on massive energy, and we are now exporters of energy. So if one of you need energy, just give us a call." This is simply not true for natural gas, or from the perspective of companies who invest capital building manufacturing facilities to last 50 years or more. The Energy Information Administration (EIA) indicates that the U.S. has only 2,196 trillion cubic feet of technically recoverable natural gas in the lower 48 states. Eighty-five percent of natural gas resources are unproven. Also, technically recoverable does not mean it is economically recoverable. The EIA's AEO 2017 forecast tells a compelling and worrisome story for all consumers, not just domestic manufacturers. EIA's forecasted cumulative domestic natural gas demand, which includes LNG and pipeline exports, would consume 56 percent of all technically recoverable resources in the lower 48 by 2050, only 33 years away. Over these 33 years, LNG exports are forecasted to increase to only 12 Bcf/d, which is a low estimate. The past and current administrations have already given breathtaking approval of LNG exports to free trade agreement (FTA) and non-free trade agreement countries (NFTA) in the volume of 54 Bcf/d, which is 71 percent of 2016 U.S. natural gas demand. This is worrisome since EIA is also forecasting Henry Hub natural gas prices will rise 87 percent by 2020. If domestic prices rise to global levels long-term, the U.S. will have lost its competitive advantage, and the incentive to invest in the U.S. would be gone and on-shoring would stop. While Japan and EU leaders have signed an MOU on a major trade deal, the U.S. is giving away LNG to countries without considering bilateral negotiations to open those markets to U.S. manufactured goods. This is inconsistent with President Trump's fair-trade and "America First" policies. LNG exports lower other countries' natural gas costs and increase natural gas and electricity costs for domestic consumers long-term. The common-sense policy is to be cautious as to how many terminals are constructed over time and put consumer safeguards in place. We should learn from the mistakes of Australia whose domestic consumers are paying exorbitant natural gas prices due to LNG exports. If we do not act prudently, and prices rise, it will put trillions of dollars of manufacturing assets at risk. This is an unacceptable gamble.

Why tracking Strategic Petroleum Reserve stocks matters more now -  The weekly estimate of commercial crude oil inventories in the U.S. Department of Energy’s Weekly Petroleum Status Report — and the week-on-week change in those inventories — are among the most closely watched numbers in the oil sector. And for good reason. After all, the numbers help the market assess shifts in the supply/demand balance, a critical consideration in determining crude oil prices and signaling the need for more — or less — imports, exports, and of course production. In 2017, with a mandated drawdown in the Strategic Petroleum Reserve, it is now important to track weekly withdrawals from the SPR as well because of the effect they can have on commercial stocks. Today we discuss recent and planned SPR drawdowns and their effect on the supply/demand balance and crude oil prices. The U.S. Strategic Petroleum Reserve (SPR) is the largest government-owned crude oil stockpile in the world with a mission to protect the country during severe supply interruptions. The facility was developed in three phases from 1977 through 1991. In its current form, the SPR is comprised of four oil-storage sites along the U.S. Gulf Coast; the sites were chosen largely because of  their proximity to much of the nation’s refining capacity and access to underground salt deposits that can be mined to create storage space for hydrocarbons (see Smoky and the Salt Caverns). Two sites, Bryan Mound and Big Hill, are located in Texas, and the West Hackberry and Bayou Choctaw sites are in Louisiana. In total, these sites offer storage capacity of 713.5 million barrels (MMbbl) through 60 operational underground salt caverns. As we said in Part 1 and Part 2 of our “Need You Now” series, the SPR system is designed for an initial maximum drawdown rate of just over 4.4 MMbbl/d that could be sustained for up to 90 days. Each of the four storage sites was originally configured with the capability to deliver drawdown barrels to their designated distribution terminals and pipelines to then be sold in a competitive sales process in the event of a supply crisis. As discussed in Part 1, purchasers are then responsible for making their own transportation arrangements via three major pipeline and refinery distribution systems: Seaway, Texoma, and Capline.

Moniz: We need a modernized strategic reserve, not a smaller one - In late 2015, the Congress found that the Strategic Petroleum Reserve was, "one of the nation's most valuable energy security assets." Why would the Trump Administration conclude, just a little over a year later, that the SPR is not so valuable after all? The rationale for the administration's current budget recommendation - selling off more than half of the SPR's current inventory, shutting down two of four storage sites in Texas and Louisiana, and eliminating the Northeast Gasoline Reserve - was supported by Energy Secretary Rick Perry in congressional testimony last month.  The SPR - its value to domestic and global energy security, U.S. consumers and our economy - needs to be viewed instead through the lens of the dramatic changes that have taken place in the last 40 years.First, while it's true that domestic oil production has substantially increased, key oil data then were not dramatically different than now. In 1973, daily crude and oil product net imports were about 6 million barrels and in 2016 they were about 5 million; consumption back then was 17 million barrels per day and today, it is about 19 million (for a population that has grown by 50 percent).Second, there was no global oil market 40 years ago. The WTI futures contract had been introduced just a few years earlier, and federal price controls discouraged surplus domestic production capacity. These market features virtually ensured that the OPEC oil embargo of 1973-74 would have an outsized impact on U.S. oil - and gasoline - prices. Today, oil prices are deregulated, and spot cargoes move around the globe.Third, our crude oil and product imports and exports link us to global oil markets. Even with no net imports, when global prices spike, ours will, too. World GDP growth fell from 4 percent to 2 percent after prices spiked in 1999-2000. On the flip side, using the SPR provides benefits to the U.S. economy. After an announced swap of 30 million barrels of SPR oil in 2000 when spare capacity was tight and heating oil inventories were low, oil prices immediately dropped by more than 20 percent.Fourth, much of the increase in U.S. unconventional oil production is occurring in unconventional locations such as North Dakota. This has reversed traditional pipeline flows; crude oil is now moving from north to south into the Gulf of Mexico where the SPR's storage and distribution systems and 60 percent of the nation's refining capacity are located. The result is a congested system in which SPR oil released in an emergency could be displacing commercial oil volumes, not providing much-needed incremental oil to the marketplace. Infrastructure upgrades are called for.Finally, reserves in the ground can't provide us oil we need in an emergency disruption - increased domestic production does not equate to emergency surge capacity.

‘Big oil’ dismisses predictions of collapse in demand - Two of the world’s largest oil companies have hit back against predictions that electric vehicles threaten a collapse in demand for hydrocarbons and warned that global energy security would be at risk if investment is withdrawn from fossil fuels too soon.Saudi Aramco and Royal Dutch Shell acknowledged that a shift towards renewable energy — including battery-powered cars — was under way but said oil and gas would remain indispensable for decades to come.“There seems to be a growing belief that the world can prematurely disengage from proven and reliable energy sources like oil and gas, on the mistaken assumption that alternatives will be rapidly deployed,” Amin Nasser of Saudi Aramco told an energy conference in Istanbul.  Addressing the same event, Ben van Beurden of Shell said the transition to low-carbon technologies would “take place over generations” rather than as a rapid “revolution”.

Fears of looming oil shortage wildly overstated, Citi’s Morse says - Houston Chronicle - Scattered across a sprawling Houston ballroom, dark-suited energy executives listened earlier this year as officials from OPEC, Saudi Arabia and the International Energy Agency warned of a looming oil supply shortage that could force oil prices to spike in a few years, despite rising U.S. production.On Monday, the CEO of Saudi Aramco repeated the idea that dramatically lower capital spending levels during the oil bust will mean the industry will have to replace 20 million barrels a day from declining oil fields over the next five years. The U.S. oil industry won't be able to fill that gap alone, Saudi Aramco CEO Amin Nasser argued, according to media reports.But some analysts are skeptical. Ed Morse, global head of commodities research at Citigroup, said his team believes the supply gap will only come to about 10 million barrels a day over the next half-decade. "That's not a big number to replace," Morse said in a recent interview. Through 2019, he added, growing oil production in the United States, Canada and Brazil should be able to cover rising global demand. Let's look at the math. Nasser has previously said the drop in oil spending means companies will have to replace 30 million barrels a day over the next five years. That assumes oil fields producing roughly 100 million barrels a day will decline at a rate of 6 percent a year for five years. Morse believes that's a wild overestimate. In recent years, the global oil-production decline rate, he argued, has been inflated by shut-in oil fields, and that statistical effect will fizzle out soon. So analysts should use 5 percent, he said, as the world's base decline rate in oil production, not 6 percent.And, he said, they shouldn't use 100 million barrels a day in the equation, because roughly 20 million barrels a d ay are natural gas liquids or not refined for some other reason. Roughly 32 million barrels a day belong to OPEC countries, which can keep oil production going longer than their rivals, and another 5 million barrels a day come from Canadian oil sands or other fields that don't fall off rapidly.  So if you cut that remaining 40 million barrels a day by about 5 percent a year, it comes to 2 million barrels a day each year, or 10 million barrels a day over the next five years – half of Nasser's estimate. That means in coming years, growing oil production from the United States, Canada and Brazil could still outpace demand, Morse said.

Tillerson gets oil industry award, says he misses colleagues - U.S. Secretary of State Rex Tillerson took a brief break from his diplomatic duties on Sunday, returning to his Exxon Mobil comfort zone to bask in the glow of approval from his former colleagues in the oil sector. Accepting a lifetime achievement award from the World Petroleum Congress, the former Exxon CEO reminisced about his more than 41 years as an oilman, calling the energy industry “marvelous” and the people in it some of the most talented in any business. He also took time to meet with Turkey’s president and foreign minister. “I miss all of you,” he said wistfully to his former colleagues in the oil business. “I miss you as colleagues, I miss you as partners, I miss you as competitors.” Tillerson said he learned he would be honored with the WPC’s Dewhurst Award before then-President-elect Donald Trump chose him to be America’s top diplomat and thought his trip to Istanbul to accept it would be a pleasurable interruption of a fishing trip in his planned retirement followed by a “leisurely journey back home.” “It didn’t quite work out that way,” he said to laughter from the crowd of oil executives and top government energy officials from dozens of nations. Tillerson arrived in Istanbul after attending the Group of 20 summit in Germany and a brief visit to Ukraine. He departs Monday for what may be a week of grueling shuttle diplomacy in the Middle East. Tillerson has been criticized for leading Exxon during a period when the company downplayed climate change and global warming but nonetheless argued unsuccessfully for Trump not to pull the U.S. out the Paris climate accord. “Energy is fundamental to economic growth and prosperity, it’s fundamental to lifting people out of poverty the world over,” he said, adding “that it requires massive investments over long periods of time and requires enormous risk-taking and risk management.”

Desjardins Suspends New Pipeline Investments - Montreal-based Desjardins Group, North America’s biggest association of credit unions, decided Friday to suspend new investments in energy pipelines, citing concerns about their environmental impact.The mega-investment house, one of more than two dozen institutions that have helped finance Kinder Morgan’s Trans Mountain pipeline expansion, “temporarily suspended lending for such projects and may make the decision permanent” in September, Reuters reports, citing company spokesperson Jacques Bouchard. “That would likely mean Desjardins would not help finance other major Canadian pipelines projects, including TransCanada Corporation’s Keystone XL and Energy East and Enbridge Inc.’s Line 3,” the news agency notes.The announcement followed ING Group’s confirmation that it won’t directly finance any of the four pipelines.“This decision shows that astute financial institutions are becoming increasingly wary of financing fossil fuel projects,” said Greenpeace Canada Climate and Energy Campaigner Patrick Bonin in Montreal.“Tar sands pipelines pose major risks, whether you are concerned about profits, human rights, the environment, or all three. Desjardins has made the right decision by announcing a moratorium on investments in and financing of oil pipelines, and we look forward to it becoming permanent.”A Greenpeace release Saturday encouraged Desjardins to “take the logical next steps: to sell its existing $145-million stake in the $5.5-billion credit facility Kinder Morgan recently obtained to fund the Trans Mountain expansion project, and to make their newly-announced moratorium permanent.” Reuters reports that a coalition of more than 20 environmental and Indigenous groups, including Greenpeace, has been pushing the 28 institutions backing Trans Mountain to withdraw their support. Greenpeace noted that fossil financing by 37 of the world’s largest banks fell 22% last year.

Kinder Morgan's Trans Mountain Pipeline Financing at Risk - Kinder Morgan, Inc.’s KMI Trans Mountain pipeline expansion may not receive funding from Canadian lender, Desjardins, which cited concerns about the project’s impact on the environment. Desjardins had committed $145 million to Kinder Morgan’s Trans Mountain pipeline expansion. Desjardins, the largest association of credit unions in North America, is no longer contemplating on funding energy pipelines. Per the sources, on Jul 7, the company temporarily suspended lending for such projects and stated that it could finalize the decision. However, a final statement would be made by the lender in September. Per sources, Desjardins, a financier of Kinder Morgan Canada Ltd's expansion of Trans Mountain pipeline, has been appraising its policy for such lending for months. If Desjardins sticks to its decision permanently, the association will stop funding other major Canadian pipeline projects, including TransCanada Corp's Keystone XL, Energy East and Enbridge Inc's ENB Line 3. Such a move would follow that of Dutch lender ING Groep NV, which has a long-standing policy of not backing projects directly linked to oil sands. It is the latest indication that pipelines could face difficulty while applying for funds as banks face pressure from withdrawals. Per the regulatory filings, Desjardins is among 24 financial institutions that approved to lend money to a subsidiary of Kinder Morgan Canada, majority of which is owned by Kinder Morgan.In June, an alliance of over 20 indigenous and environmental groups, including Greenpeace, urged 28 major banks to pull funding for Trans Mountain. They mentioned the risk of pipeline spills and their potential contribution to climate change. ING, which was under attack by the coalition, explained it will not finance any of the major Canadian pipelines. 

Can Mexico spur gas production in its Burgos Shale play? - It may take a number of years to pan out, but Mexico is taking steps to accelerate the development of its natural gas-rich Burgos Shale region, which lies just across the Rio Grande from South Texas’s newly resurgent Eagle Ford play. Today (July 12, 2017), Mexico’s Secretaría de Energía (SENER) is expected to name the winners of a competitive bidding process for the rights to drill for natural gas within 1,500 square miles in the states of Nuevo Leon and Tamaulipas. If the effort to juice Burgos drilling activity and production proves successful, it could affect how much natural gas Mexico needs to import from the U.S. Today we discuss the prospects for reversing gas production declines south of the border and the challenges that exploration and production companies (E&Ps) face in Mexico’s most promising shale play. In the past few years, exports of natural gas from the U.S. to Mexico have soared, driven by a combination of rising Mexican demand for gas (mostly to fuel a fast-growing fleet of new gas-fired combined-cycle power plants) and declining Mexican gas production. The statistics are eye-catching. In 2016, exports of U.S. natural gas to Mexico via pipeline averaged almost 3.8 billion cubic feet/day (Bcf/d), compared with only 913 million cubic feet/day (MMcf/d) in 2010, and in the first four months of 2017 pipeline-gas deliveries from the U.S. to Mexico averaged 4 Bcf/d. Mexico also has been the Numero Uno recipient of liquefied natural gas (LNG) shipped from Cheniere Energy’s Sabine Pass LNG facility since the southwestern Louisiana liquefaction plant and export terminal started up last year, receiving more than two dozen LNG cargoes to date.

Talos, Premier make 1 billion-barrel oil find offshore Mexico -- US independent Talos Energy and its partners scored a home run offshore Mexico, unveiling on Wednesday what they called a "world class" oil discovery holding more than 1 billion barrels of resource with their first exploration well. The Zama-1 well on Block 7 found up to 650 feet of net oil bearing reservoir holding light crude of 28 to 30 API gravity after drilling an initial shallow target depth of 3,383 meters (11,100 feet), the companies said. Initial gross original oil in place estimates for the find are over 1 billion barrels, which could extend into a neighboring block, the companies said. The find is sited in 546 feet of water. Pablo Medina, senior analyst for Latin America upstream for energy consultants Wood Mackenzie, said it is significant that a company "that isn't [Mexican state company] Pemex" has turned up a large field in the country's offshore. "The Zama discovery by Talos is the most important achievement so far of Mexico's energy reform," Medina said in a Wood Mackenzie podcast. "According to our data, it is one of the 15 largest shallow-water fields discovered globally in the past 20 years." Moreover, "Zama is the first find by a private company in Mexico in almost 80 years," Medina added. 

Oil Discoveries Suggest Mexico's Bet to Open Energy Sector Is Paying Off -- When Mexico gambled on ending decades of state control of its energy industry, officials said they hoped the move would promote investment and give the country access to technical expertise. That wager now appears to be paying off.The government began auctioning off rights two years ago to drill in parts of the Gulf of Mexico. On Tuesday, an international consortium of energy companies said they had discovered a large oil field, and another firm said it had discovered more oil than expected in a separate area.The overhaul of the Mexican oil and gas sector in recent years eventually ended the state energy company’s seven-decade domestic monopoly on exploration and production. The aim was to arrest years of declining oil output, blamed on a slow-moving public sector that lacked the technology to exploit opportunities in deep-sea drilling, or shale oil and gas.The two announcements on Tuesday appeared to suggest that Mexico’s strategy, which was met with criticism when it was first pushed through, was succeeding.The consortium, made up of Premier Oil of Britain, as well as Talos Energy of Texas and the Mexican company Sierra Oil and Gas, said that it had discovered a field containing more than one billion barrels of oil in shallow water 40 miles off the Mexican coast. Riverstone Holdings, an American private equity firm that specializes in energy investments, owns 45 percent of Talos Energy and 43 percent of Sierra Oil and Gas. “This is the most important achievement” so far in Mexico’s overhaul, said Pablo Medina, a Houston-based analyst at the consulting firm Wood Mackenzie. The companies won the rights to drill in the zone in 2015, during Mexico’s first auction of exploration rights.

Oil Fields Pumping a Third of Supply Die Fastest in 24 Years -- The tussle for supremacy between OPEC and U.S. shale drillers is killing off older oil fields at the fastest pace in almost a quarter century. That could hurt the industry once the current glut has faded.  The three-year price slump triggered by the battle for market share choked off funds for aging deposits elsewhere, accelerating their decline. Output at older fields from China to North America -- making up a third of world supply -- fell 5.7 percent last year, the most since 1992, according to Rystad Energy AS. It’ll drop about 6 percent in 2017 if oil stays at current prices, the consultant said. Oil fell from above $100 a barrel in 2014 to as low as $26 in 2016 as the Organization of Petroleum Exporting Countries opened the taps in an effort to stem the surge in shale production. That set off the worst industry downturn in a generation, forcing cost-cutting companies to focus on higher-margin assets at the expense of older, costlier fields. While OPEC changed course last year and curbed output to boost prices, shale was the main beneficiary and resurgent U.S. output has kept crude below $50.“A lot of the focus is on OPEC and shale and not on the decline at these mature fields, where supply is struggling,” said Espen Erlingsen, a partner at Oslo-based Rystad. “We’re starting to see the long-term impact of lower oil prices.”Though new projects mean total global production continues to rise, the slide at aging fields may give OPEC a helping hand by reducing surplus supply today, according to Erlingsen. The danger for major oil companies -- many of which are gathering in Istanbul this week for the World Petroleum Congress -- is that the decline may be difficult to reverse, increasing the risk of future supply shortfalls as spending cuts take their toll for years to come.

National Grid to import LNG from US shale for the first time: The US shale boom will reach British homes and power plants for the first time this weekend as National Grid prepares to take delivery of its first US cargo of liquefied natural gas. A UK-bound LNG carrier is scheduled to arrive at the Isle of Grain port in Kent on Saturday, carrying enough gas to meet around half the UK’s average daily summer demand. The sighting of the long-awaited inaugural cargo comes amid rising gas supply concerns after British Gas owner Centrica said it would shut the country’s most important gas storage facility after 30 years of use. As North Sea reserves continue to decline the UK is increasingly reliant on long-term contracts for pipeline gas from Norway and imports of LNG from Qatar. Last year the UK relied on Norwegian imports for 34pc of its demand but this has already climbed to 42pc, according to market data provider ICIS. By contrast the US is fast emerging as a major energy export force after years of reliance on imports due to the boom in shale gas production. “The delivery adds more diversity to the sources of gas we rely on,” said Simon Culkin, Grain’s terminal manager. “This year we have brought in shipments from Algeria, Qatar and South America too. The more sources you can draw on, the better.” The Grain LNG terminal is able to release the gas into the national gas system with only an hour’s notice from the buyer. National Grid would not reveal which company bought the cargo but it is likely to be one of its six primary customers: BP, Centrica, Algeria’s Sonatrach, Spain’s Iberdrola, France's Engie, or Germany’s Uniper. 

U.S. Fracked Gas Hits the UK -- Soon British consumers will be cooking and heating their homes with American fracked gas for the first time. But there is growing evidence that fracked U.S. gas—and the infrastructure being built to supply it—has a huge ecological, social and personal impact back in the U.S., which British consumers may not know about. In a great new investigation, the Ferret , an independent award-winning journalistic platform, has published an article on the problems of fracked gas headed to the UK. The must-read investigation, published Tuesday, focuses on Sunoco Logistics' massive Mariner East 2 pipeline (ME2), which is under construction across southern Pennsylvania's belt, to bring fracked gas to Scotland. When completed, the multi-billion dollar pipeline will bring up to 70,000 barrels per day of ethane, propane and butane to a storage facility at Sunoco's Marcus Hook Industrial Complex. From there, the ethane will be transported by tanker to Scotland and the vast sprawling petrochemical complex at Grangemouth in Scotland owned by the chemical company Ineos. While Ineos is leading the UK fracking push, it is also leading the way to import gas from the U.S. Indeed, earlier this year, Ineos received its first cargo of ethane gas from the U.S. for its Grangemouth plant. The Ferret reports about the anger and resentment brewing against the ME2 pipeline back home. Local campaigners "say their basic rights are being trampled—no small thing in the state where the U.S. Constitution was born—and they are fighting to halt this pipeline and others like it. Or at least, to win the safeguards to which they believe they're entitled." It is easy to see why people are outraged. Due to arcane laws in the U.S., where companies can seize property via a legal manoeuver called an "eminent domain," l ocals have had their property seized.

UK LNG stocks hit 6-month high on recent arrivals- The amount on natural gas equivalent held in tank in the UK's three LNG terminals combined rose to a six-month high at the beginning of the week due to several arrivals at the start of June allied to weak regasification levels, data from National Grid showed Wednesday. Total LNG stocks in the UK began Tuesday's gas day at 893 million cu m of natural gas equivalent -- about 70% of total combined capacity -- after having started July with 507 million cu m in tank, and were more than treble the 250 million cu m multi-year low seen at the beginning of March. So far this month, four LNG tankers have berthed at UK facilities, three Qatari vessels at South Hook (Zarga on July 3, Aamira on July 7, Al Mafyar on July 9) and the first vessel from Sabine Pass at Isle of Grain (Maran Gas Mystras on July 8). Due to the three Q-Max tankers arriving at South Hook in a short space of time, stocks at the Qatari-owned facility rose to a nine-month high of 420 million cu m -- about 85% of total capacity -- as a result, after having been down at 53 million cu m on July 3. More LNG tankers are expected to berth in the UK before the beginning of August, with the Adam LNG -- hailing from Nigeria -- set to arrive at the Isle of Grain on Friday and two more Qatari Q-Max tankers due at South Hook (the Lijmiliya on July 20 and the Shagra on July 29). This would mean seven July tankers in total after only four arrived during June.

Drilling rig owned by UK fracking firm Cuadrilla 'seriously vandalized’ --A drilling rig owned by one of the UK’s most prominent fracking firms has been seriously vandalised, in a move seemingly intended to slow down the country’s embryonic shale industry. Derbyshire police said that between 18 and 24 May, a person illegally entered a facility near Chesterfield run by PR Marriott, Britain’s largest onshore deep drilling company, which stores and maintains the rig on behalf of shale gas firm Cuadrilla. Once inside, they caused what the authorities described as “a large amount of criminal damage” to the rig. Police are investigating but there have been no arrests so far. According to a source with knowledge of the matter, the rig was attacked with sledgehammers to smash its touchscreen computers and windows. Components were drilled out, while pneumatic pipes and electrical cables were cut. In January, Cuadrilla started work on a site in Fylde, Lancashire, where later this year it hopes to frack the first well in the UK since 2011. Anti-fracking campaigners have staged daily protests outside the fences of the site on Preston New Road, which Cuadrilla’s chief executive has said have been largely peaceful but occasionally tipped into intimidation and harassment. Activists have also successfully pressured subcontractors into ending their agreements with Cuadrilla.The Guardian understands that the damage at PR Marriott was to a Drillmec HH220, a mobile rig which it is believed was intended for use during the main drilling stage at Preston New Road. The yard in Danesmoor, between Sheffield and Nottingham, has been the target of protests by anti-fracking protestors. Campaigners have blockaded the company several times – 11 people were arrested at one demonstration there in April and two more were arrested on 30 June, one on suspicion of aggravated trespass. 

Fracking protester run over by truck after 'slow walking' in front of vehicle during controversial demonstration - Mirror Online: A fracking protester stood in the middle of road 'slow walking' has been run over by a pick-up truck at the location of a controversial demonstration. A video of the accident - filmed by campaigners who have been camping out near the Cuadrilla site in Little Plumpton, Lancashire - shows the man falling to the floor. Witnesses said the man sustained minor injuries after pacing along Preston New Road practising a form of peaceful protest known as 'slow walking'. The road - which has become the focal point for demonstrators since energy firm Cuadrilla set up on its shale gas site there in January - was closed by Lancashire Police after the incident. Officers confirmed the driver had been spoken to about the alleged collision but said no arrests had been made. Cuadrilla said the truck was not one of its vehicles, nor was the driver one of its employees. A protester who filmed the incident claimed campaigners used the 'slow walking' tactic as it is recognised as a method of lawful protest, but still manages to cause disruption. Unemployed Danny Llew, 31, said: "[The protester] was doing slow walking. I've done it before. It has been used for quite a few years as a peaceful protest method. 

Fracking Companies to Government: We Are 'Suffering' as Financing Dries Up -- Fracking companies in Britain privately admit they are "suffering" and struggling to secure finance, according to government documents obtained via freedom of information.  In a meeting last May with then-business minister Anna Soubry, the Onshore Energy Services Group (OESG) said raising the money needed to develop a wide-scale fracking infrastructure was proving difficult.  "Industry are finding it a challenge to get support from British banks ... all funding therefore comes from overseas and self-growth," the group said, according to the government's minutes of the meeting.  "British banks are saying the companies are too small."  The documents were released just weeks after leading UK shale explorer Cuadrilla posted multimillion pound losses for the third year running.  The trade association, which represents small and medium-sized oil and gas companies [SMEs] in Britain, also raised concerns that if fracking takes off, supply chain companies won't be ready to provide the equipment needed to build the infrastructure to support the industry.  It told government that "incremental gains" will be made in making individual fracking sites operational, but that the "social license will be more important when this industry scales up."  In other words, getting public support will be key.

It Makes No Sense To Say Fracking Can Be Safe, No Matter What Guidelines Are In Place -  Can fracking be safe? A new study suggests how fracking – the process of extracting oil and gas trapped in rocks deep underground by blasting water into the rock at high pressure – can be conducted without causing earthquakes, which is one of the most well known concerns. While this kind of research can help produce guidelines to reduce the risks associated with fracking, ultimately, it makes no sense to talk of fracking being entirely “safe”.You might as well ask whether you can ensure your journey to work is safe. There are rules designed to reduce the risks, such as speed limits and the highway code, but there will always be the chance of human error or equipment failure. Venturing onto the roads is an inherently unsafe business. Of course, that doesn’t mean we should never do it. The risks involved in any industrial activity mean that we need to think carefully about how to manage them, rather than trying to claim it is safe or not. Fracking or hydraulic fracturing involves pumping up to 16 Olympic swimming pools’ worth of water, chemical additives and sand into shale rocks lying between 2km and 3km underground. This creates a dense network of small fractures in the rocks, releasing gas or oil that moves into the water stream and is pumped or carried to the surface. Earthquakes can occur when fracking takes place near a geological fault. It’s a bit like how a hovercraft works, by pumping air to produce a cushion so it can slip more easily over the land surface. If frack fluid is pumped into a geological fault, it can also slip more easily. Fracking can also change the stress on the fault, causing it to release, and a big enough fault shift will be felt as an earthquake. The new paper, published in Geomechanics and Geophysics for Geo-Energy and Geo-Resources, tries to predict how far from a geological fault it is safe to frack a well without causing an earthquake.  The results show any fracking site needs to be at least 63 metres away laterally from any fault, and perhaps as far as 433 metres. They haven’t estimated by how much this would reduce the chance of an earthquake.

Labour to bring forward Bill to ban fracking in Scotland -- Labour is to bring forward a Bill aimed at banning fracking in Scotland. The Scottish Government introduced a moratorium barring the controversial method of extracting gas in January 2015, but ministers have still to decide if this should be made permanent. Labour environment spokeswoman Claudia Beamish will announce today that she will press ahead with a Member’s Bill that would outlaw it. She said: “The SNP has repeatedly failed to ban on-shore fracking in Scotland – so Labour will do it.” Ms Beamish added: “The climate science is irrefutable. Scotland does not need a new fossil fuel as we shift towards a low carbon economy.”

Ukrgazvydobuvannia announces tender for 40 more hydraulic fracturing projects: Public joint-stock company Ukrgazvydobuvannia has announced a tender to carry out 40 more hydraulic fracturing projects for the total cost of up to UAH 195 million (VAT included). Ukrgazvydobuvannia said in the ProZorro e-procurement system that the tender is divided into two lots 20 hydraulic fracturing projects each for one year each with the expected cost of up to UAH 97.5 million. Bids can be submitted by July 20. Hydraulic fracturing will be conducted at the gas and gas condensate wells of Shebelynka and Poltava gas divisions in the depths of 2,800-5,000 meters.

Construction starts on gas pipeline linking Australia's Northern Territory to east coast - Construction has started on Australia's Northern Gas Pipeline, which will connect the Northern Territory to the eastern seaboard's gas market, the Northern Territory government said Wednesday. The planned 622-km long pipeline will link Tennant Creek in the Northern Territory to Mount Isa in Queensland, connecting, for the first time, the Territory to the Eastern Gas Pipeline Grid, which spans across the Australian states of Queensland, Victoria, New South Wales and Tasmania. The pipeline, which operator Jemena has scheduled to flow first gas late in 2018, may bring some relief to the tight gas situation on the east coast and relieve some of the pressure on the region's LNG exporters. "Our modelling suggests that the pipeline can be relatively easily expanded and extend to transport up to, or beyond, 700 Tj of gas per day. This far exceeds gas used on an average day in the New South Wales and Queensland markets," Jemena managing director Paul Adams was quoted to say by The Australian."The pipeline will also benefit Australian households and businesses in the southern states, as it will free up gas currently flowing north to supply LNG plants in Queensland, making this gas available for use in New South Wales, Victoria, and South Australia," he said. The Australian Energy Market Operator earlier this year warned that the east coast could face some gas supply issues in the next couple of years, which led to the federal government implementing LNG export restriction measures.

How energy-rich Australia exported its way into an energy crisis - On a sweltering night this February, the world’s No. 2 exporter of liquefied natural gas didn’t have enough energy left to keep its own citizens cool. A nationwide heat wave in Australia drove temperatures above 105 degrees Fahrenheit around the city of Adelaide on the southern coast. As air-conditioning demand soared, regulators called on Pelican Point, a local gas-fueled power station running at half capacity, to crank up.It couldn’t. The plant’s operator said it wasn’t able to get enough natural gas quickly to run its turbines fully. At 6:03 p.m., regulators cut power to 90,000 Adelaide homes to prevent a wider blackout.Resource-rich Australia has an energy crisis, one that offers lessons for America as it prepares to vastly increase natural-gas shipments abroad. Australia now exports so much liquefied natural gas, or LNG, it may overtake No. 1 exporter Qatar within several years. It exported 62% of its gas production last year, according to the BP Statistical Review of World Energy. Yet its policy makers didn’t ensure enough gas would remain at home. As exports increased from new LNG facilities in eastern Australia, some state governments let aging coal plants close and accelerated a push toward renewable energy for environmental concerns. That left the regions more reliant on gas for power, especially when intermittent sources such as wind and solar weren’t sufficient. Shortages drove domestic gas prices earlier this year in some markets in eastern Australia to as high as $17 per million British thermal units for smaller gas users such as manufacturers. On the spot market, gas prices have gone from below $1 in 2014 to roughly $7 today—well above the roughly $3 that prevails in the U.S.—causing havoc around the country. In March, Australia’s largest aluminum smelter cut production and laid off workers because it said it couldn’t secure enough cheap energy. During one blackout last year, some families lost embryos in an in-vitro-fertilization clinic with no backup generation, according to a government-commissioned report. In February, some tuna fishermen watched catches rot because freezers shut off.

India buys first ever U.S. crude oil, to step up purchases --India, the world's third-largest oil importer, will import crude oil from the United States for the first time after Indian Oil Corp bought a cargo that will be delivered in October. The purchase comes after Indian Prime Minister Narendra Modi's visit to the U.S. in June when President Donald Trump said his country looked forward to exporting more energy products to India. IOC bought 1.6 million barrels of U.S. Mars crude, a heavy, high-sulfur grade, and 400,000 barrels of Western Canadian Select that will be delivered onboard a Very Large Crude Carrier, IOC's head of finance, A.K. Sharma, told Reuters. PetroChina was awarded the tender to sell the cargoes and is expected to load the oil off the U.S. Gulf Coast, said a trading source with direct knowledge of the sale. The cargo was priced on a delivered ex-ship basis, which is "very competitive" to that of Basra Light, Sharma said. "So long as the prices remain competitive, we will buy more of the U.S. crude," he said. IOC had to obtain special permission from the shipping ministry to buy the cargo on a delivered basis as local regulations favor the use of Indian flagged carriers for imports, Sharma said. India is the latest Asian country to buy U.S. crude after South Korea, Japan, China, Thailand, Australia and Taiwan as the countries seek to diversify oil imports from other regions after the OPEC cuts drove up prices of Middle East heavy-sour crude, or grades with a high sulfur content.

Cheaper options knock Gulf's share of Indian June oil imports to 19-mth low  (Reuters) - India's reliance on Middle East oil imports shrunk in June to the smallest since October 2015 as the world's third-biggest importer tapped other sources amid OPEC supply cuts, ship tracking data from industry sources and data available on Thomson Reuters Eikon showed. India's imports of Middle Eastern crude oil shrunk in June to the smallest since October 2015 as the world's third-biggest importer tapped other sources amid OPEC supply cuts, ship tracking data available with Reuters showed. Middle East imports fell 7.6 percent in June from the previous month, partly driven by declines from Kuwait, Iraq and Saudi Arabia as the production cuts by the Organization of the Petroleum Exporting Countries (OPEC) made more of a dent in supply. The cuts also drove up Middle East crude prices, prompting price-sensitive Indian buyers to seek substitutes from Russia and Latin America as the world remains awash with oil. Gulf crude accounted for about 58.5 percent of India's imports compared with about 66 percent in May, while the share of oil from Latin America, Africa, and Central Asia, including Russia, rose, according to ship tracking data obtained from sources and data compiled by Thomson Reuters Oil Research & Forecasts. "The choices have increased and crude is available at competitive prices," said M. K. Surana, chairman of oil refiner Hindustan Petroleum Corp."There are high supplies of low-sulphur crude because Nigeria is exempted" from the OPEC cuts, he said. Even as OPEC and some non-OPEC producers cut output to shore up prices, global oil output in June is 1.2 million barrels per day above a year ago, the International Energy Agency said on Thursday in its latest monthly report. The weight of supplies has forced sellers to cut prices allowing Indian refiners to snap up cargoes in the spot market. 

This Nation Just Became The World's Newest Energy Superpower - Lots of news this week on energy companies from one particular spot on Earth.India.In Lebanon — where reports suggest Indian state oil firm ONGC will bid for offshore blocks. In Canada — where Indian officials are said to be negotiating coking coal supplies. And even in Venezuela, where the cash-strapped government is seeking to sell ONGC a 9 percent stake in the key San Cristobal oil field.And a new study released this week suggests it’s not coincidence we’re hearing so much about Indian companies on the energy stage.In fact, India has quietly become one of the world’s biggest energy investors.That revelation came from the International Energy Agency (IEA) — which released a report yesterday on energy investment trends for 2016. Showing that India’s investment in energy projects surged during the past year.All told, India’s spending on electricity, oil and gas, coal and renewables jumped by 7 percent in 2016, as compared to the previous year. Reaching nearly $100 billion. As the chart below shows, that rise was enough to vault India into third place globally for energy investment. Edging out oil giant Russia.   India moved into third place globally for energy spending in 2016. Of course, India’s energy spending is still a long way off second-place U.S. and top investor China. But the rapid rise of energy investment here shows this is an up-and-coming spot for project funding in oil and gas, and beyond. IEA attributed India’s ascent to new government policies helping to modernize and expand the economy. Further evidence the country is “getting its act together” in becoming a true natural resource superpower.

Venezuela’s oil reserves kick into reverse - Venezuela’s claim of being home to the world’s largest oil reserves based on its massive Orinoco heavy oil belt has been the subject of industry skepticism for years. The South American producer estimates it has over 300 billion barrels of proven oil, a figure naysayers believe is grossly overstated as much of its huge bitumen resources are tricky, and hence too costly, to produce. Venezuela's official reserves vs productionNow two years after the biggest oil price collapse in a generation, Venezuela’s world-beating oil reserve claims are not only looking increasingly shaky but the country’s current economic and political quagmire means its recoverable oil reserves are now firmly in retreat, according to an independent study. Norwegian oil consultancy Rystad Energy last week estimated that Venezuela’s total recoverable oil resources stand at 75 billion barrels, 24% below ago levels and less than a quarter of the official 302.3 billion barrels figure for proven reserves. The shortfall is even more dramatic given Rystad’s approach to classifying recoverable oil resources. Unlike BP’s touchstone annual Statistical Review, which presents a mix of resource categories based on opaque official sources as “proven”, Rystad claims to take a more rigorous approach by applying Society of Petroleum Engineers (SPE) standards. On this basis, Venezuela’s proved reserves actually stand at just 8 billion barrels, a fraction of the claimed total and less than neighboring Brazil. Even on a more generous proved and probable basis—equivalent to 2P reserves cited by oil companies as the most likely estimate of their recoverable oil—Venezuela holds 17 billion barrels, Rystad believes.

Venezuela oil production dives as big debt bills loom -  Venezuela's only source of cash is quickly dwindling as the country faces mounting unpaid bills, violent political protests and citizens starving due to food shortages. Oil makes up nearly all of Venezuela's exports, and with the country in a full-blown crisis, oil is only thing it can sell. But production is down to its lowest levels since 1989 -- excluding an oil strike in 2002 -- according to data compiled by Rice University professor Francisco Monaldi. Production has declined 10 out of the last 11 years, according to BP statistics. And in the first half of this year, it was down sharply, 12 percent, compared to the same time last year, OPEC numbers released on Wednesday show. Central to its production problem is that oil service providers, such as Halliburton and Baker Hughes, have cut back on pumping out oil until President Nicolas Maduro pays them back for millions of dollars in unpaid bills. Venezuela separately owes about $5 billion in outstanding debt payments to investors this year. Fears are rising that Venezuela can't pay, and S&P downgraded the nation's credit rating on Tuesday deeper into junk status. "This is much worse than we ever expected," says Monaldi, a former consultant to the World Bank. "It really takes some special talent to destroy an economy in such a way." Venezuela has more oil than any country in the world. But the South American nation is enduring a self-inflicted economic crisis. Extreme government overspending, mismanagement of natural resources and corruption pushed Venezuela into a recession in 2014. The country's political opposition have staged months of street protests against socialist President Maduro, claiming he has abandoned democracy and violated human rights. Nearly 100 Venezuelans have died in demonstrations and clashes with police since late March.

China wraps up combustible ice mining trial, setting world records - Xinhua | (Xinhua) -- China on Sunday completed a 60-day trial of mining gas hydrates, commonly known as combustible ice, in the South China Sea, marking breakthroughs in human's search for alternative clean energy sources. Started from May 10, the mining operation in waters near the Pearl River estuary has beaten previous expectations and set world records in both the length and total amount of extraction, according to the China Geological Survey Bureau. The trial exploration produced over 300,000 cubic meters of gas - mainly methane, with an average daily extraction of more than 5,000 cubic meters of high purity gas, and a highest daily output of 35,000 cubic meters, said the bureau. Meanwhile, 6.47 million sets of experimental data were recorded. China declared its first success in collecting samples of combustible ice in the South China Sea on May 18, which usually exists in seabed or tundra areas with the strong pressure and low temperature necessary for its stability. The substance can be ignited like solid ethanol, which is why it is called combustible or flammable ice. One cubic meter of combustible ice, a kind of natural gas hydrate, is equal to 164 cubic meters of regular natural gas. China Geological Survey Bureau's deputy director Li Jinfa said combustible ice will play a vital part in China's energy security and economic development. "It is considered a strategic alternative to oil and natural gas in the future," Li said. "Not just China, the world at large sets eyes on it."

OPEC forecasts 2018 call on its crude oil at 32.2 mil b/d, down 60,000 b/d from 2017 - OPEC's analysis arm on Tuesday offered a bearish 2018 outlook for the producer bloc, projecting that global demand for its crude would fall by 60,000 b/d from this year to average 32.2 million b/d. That is 400,000 b/d below its June output level of 32.6 million b/d, according to OPEC's secondary sources, meaning that if OPEC holds output steady, the market's supply glut would continue through next year. Related article -- Oil markets currently in balance, set to tighten in H2 2017: BP's Dudley In offering its first forecasts of 2018 market fundamentals, OPEC said its projections of non-OPEC oil supply and OPEC NGLs growth next year "will slightly outpace incremental world oil demand." OPEC would therefore hope that "a better-than-expected improvement in the global economy could contribute further to oil demand growth in the coming year, accelerating the ongoing rebalancing in the oil market and supporting market momentum in 2018," its analysts wrote in their monthly oil market report. OPEC forecast a significant market tightening in the months ahead, with demand for OPEC's crude expected to average 33.34 million b/d in the third quarter, significantly above the second-quarter call of 31.55 million b/d, as non-OPEC supply will not be as robust as previously forecast. But supplies start to grow again in 2018, the analysts projected. Non-OPEC supply will average 58.96 million b/d in 2018, a 1.14 million b/d rise from the estimate for 2017 of 57.82 million b/d, which was revised downward by 300,000 b/d from last month's report. OPEC NGLs production, which was expected to average 6.31 million b/d in 2017, will rise to 6.49 million b/d, largely due to the addition of Equatorial Guinea to OPEC, the report stated. The country was voted in as a full member during OPEC's May 25 meeting. Meanwhile, global demand in 2018 is expected to average 97.6 million b/d, up 1.26 million b/d from OPEC's 2017 forecast, which it kept unchanged from last month's estimate of 96.4 million b/d.

OPEC oil supply is lost in a fog of data: Kemp - (Reuters) - The Organization of the Petroleum Exporting Countries coordinates the policies of its members by giving each of them a production allocation rather than limiting how much they can export.OPEC agreements have been specified in terms of output rather than exports since the first allocations were agreed in March 1982 (“Annual Statistical Bulletin”, OPEC, 2017).Quotas, as the production allocations are informally known, apply to crude oil but not to condensates or other natural gas liquids.The system originally made sense but now appears increasingly outdated because of the rising production of natural gas liquids and the growing oil consumption within OPEC countries themselves.Between 1980 and 2016, OPEC’s crude production increased by 31 percent from 25.4 million barrels per day to 33.3 million bpd.But OPEC’s output of natural gas liquids sextupled from 1.0 million bpd to 5.8 million bpd over the same period.And OPEC’s internal oil consumption more than tripled from 2.6 million bpd in 1980 to 9.0 million bpd in 2016.In fact, OPEC’s own members have reported some of the fastest growth in oil consumption over the last four decades owing to population expansion and increasing prosperity.OPEC’s share of world oil demand has climbed from just 1.8 percent in 1973 and 4.1 percent in 1980 to peak at 9.9 percent in 2015 before edging down to 9.5 percent in 2016.OPEC’s internal demand has risen from 18 percent of its crude oil production in 1982 to as much as 28 percent in 2016.At the same time, some OPEC members have invested heavily in refineries and petrochemical plants to capture more value-added from their exports.OPEC’s refining capacity has grown from 5.3 million bpd in 1980 to 11.8 million bpd in 2016, according to the organisation’s data. The result of these changes is that crude production is less and less relevant to the volume and composition of the crude and refined products that OPEC exports to the rest of the world. Exports, net of any imports, rather than crude production, are what matters for the world supply-demand balance and global oil inventories.

Oil traders succumb to a dangerous despond: Kemp (Reuters) - U.S. Independence Day marked a turning point in the oil market, when a short-covering rally ran out of momentum and gave way to a renewed and very aggressive bear market.Hedge funds and other money managers increased their net long position in futures and options contracts linked to Brent and WTI by 46 million barrels in the week leading up to July 4 ( increased their net long position for the first time after reducing it by a cumulative 231 million barrels over the previous four weeks, according to data from regulators and exchanges ( move had all the characteristics of a short-covering rally, with crude prices rising steadily between June 21 and July 4 (  Even so, only a small number of short positions had been closed out by July 4. But then something very unexpected happened. Instead of prices continuing to climb as more short positions were closed, prices began to sink in the second half of last week.From a positioning perspective, the balance of risks remained tilted to the upside, with a small number of long positions left to liquidate and a large number of shorts still needing to be closed out.So the renewed decline in oil prices therefore marked an unusual and aggressive move, with extra selling from unknown traders pushing prices lower.Oil prices continued to slide despite an unusually large drawdown in U.S. commercial crude stocks reported on July 6.From a positioning perspective, positions still appear very stretched on the downside. There is still a very high risk of the trade becoming crowded. But sentiment in the oil market has become exceptionally bearish, with most traders concluding OPEC won't, or can't, do anything to support prices, and U.S. shale producers can't, or won't, moderate the drilling boom.

Why Crude Oil Trades So Poorly --- Crude oil is the new widow maker.  It trades heavier than a wet dawg in a New York thunderstorm.    Rallies have no legs and its seems the only bid these days are the shorts with their family jewels caught in a vice grip. Note the recent lower highs and lower lows and stiff  resistance at the 50 and 200-day moving averages.  OPEC is fighting the same forces that did “John Henry, the steel driving man” in.  And, for that matter, the same changes that have wiped out most of the floor traders on the NYSE.  Technology.  We came across this Foreign Affairs piece yesterday that absolutely floored us (be sure to click Foreign Affairs to read full article), The technology revolution has transformed one industry after another, from retail to manufacturing to transportation. Its most far-reaching effects, however, may be playing out in the unlikeliest of places: the traditional industries of oil, gas, and electricity.…These technologies have helped drive oil prices down from an all-time high of $145 per barrel in July 2008 to less than a third of that today, and supply has become much more responsive to market conditions, undercutting the ability of OPEC, a group of the world’s major oil-exporting nations, to influence global oil prices.…. As the price of oil tumbled from above $100 per barrel in early 2014 to below $50 per barrel in January 2015, many of these projects [deep water] stalled. By early 2016, companies had put on hold an estimated four million barrels per day of new oil output, 40 percent of it from deep-water sources.…As drilling stalled, oil and gas operators, desperate to cut costs, began to rethink the complex systems they used.…Today, thanks to these innovations, the average breakeven prices of new deep-water projects have fallen, to just $40–$50 per barrel in the Gulf of Mexico—an important global bellwether because it is one of the most responsive regions in the world to changes in market conditions. –Foreign Affairs  Technology only moves forward unless the Luddites take power, which given recent events can’t be entirely dismissed.   So, our guess is the long-term pressure on crude prices is lower.

Oil Bulls, Stand Aside - Bloomberg Gadfly -- Oil bulls got their first ray of hope last week from the U.S. Energy Information Administration. Weekly data showed a sharp fall in inventories, appearing to support the notion that OPEC is finally taking chunks out of the global crude glut. But surging exports from North America mean the market should treat that idea with some caution. Stockpiles aren't coming down because the oil is being used, it's just being moved overseas.  Six months of OPEC cuts have done little to drain U.S. oil inventories  The EIA reported the biggest drop in combined crude and refined-product stocks (including those held in the Strategic Petroleum Reserve) in four years for the last week of June. In the four months through June, when any cuts in OPEC crude deliveries to the U.S. should have begun to show up in lower import numbers, the oil stockpile tumbled by almost 21 million barrels.That doesn't seem like a lot. At that rate, it would take two-and-a-half years to get total inventories back to their five-year average level.It does start to look better, though, if you compare that with what normally happens over the period.This is the first year since at least 2000 that total U.S. oil inventories have fallen between the end of February and June 30. The average increase in stockpiles over that period has been 54 million barrels. But what has happened to all that oil?  The short answer is that the oil has been sent elsewhere. The U.S. is a big net importer of oil -- dreams of energy independence have yet to be realized -- but the excess of imports over exports has slipped after the ban on overseas sales was lifted last year. The U.S. exported 149 million more barrels of crude and refined products in the four months through June than it did in the same period of 2016. Had those barrels not been exported, U.S. inventories would have risen by another 129 million barrels.

WTI Tumbles Back To $43 Handle After Saudis Breach OPEC Agreement --Having v-shaped recovered yesterday after disappointing Russian comments (on no news whatsoever), crude prices are tumbling once again this mornig, WTI back to $43 handle, after Saudi Arabia told OPEC it pumped 10.07 million barrels a day in June, a person with knowledge of the data said, exceeding its production limit for the first time since brokering a deal to curb global crude supply to counter a glut.As Bloomberg reports, the world’s biggest oil exporter boosted output from 9.88 million barrels a day in May, surpassing the limit of 10.058 million it accepted in an agreement between OPEC and other major suppliers including Russia. Under the deal reached in December, Saudi Arabia agreed to reduce production by 486,000 barrels a day, the most of any country participating in the cuts. The person with knowledge of the June data asked not to be identified because the information isn’t public. And the result is yet more downward pressure on cride prices...

Goldman Warns Oil Could Plunge Below $40 Absent OPEC "Shock And Awe" - Goldman has done it again: less than two weeks after the bank said "oil prices have likely hit bottom of the price range, and look attractive" when it slashed its WTI price target from $55 to $47.50 (and every other Wall Street bank promptly followed), in a note released overnight by its analysts including Damien Courvalin and Jeffrey Currie, the central banker incubator has effectively thrown in the towel, and writes that while its 3 month base case price target remains$47.5, it warns that absent a "shock and awe" production cuts from OPEC, oil could tumble below $40/barrel. First, Goldman explains that the market remains, gasp, volatile and could move down as well as well as up:While US oil inventories posted a large draw last week, we find that high frequency oil data is not yet providing a clear signal for oil prices to move sharply out of their recent trading range. As a result, we see symmetrical risks of higher or lower moves in the short term as data volatility continues to impact sentiment. As we laid out last week, we believe that sustained trends in inventory draws and US rig count declines or evidence of further OPEC actions will be required for prices to rally, which remains our base case with our 3-mo WTI forecast at $47.5/bbl. And then the punchline: Given the recent rebound in net speculative length from its 18-month lows, we believe, however, that a failure for these shifts to materialize soon could push prices below $40/bbl as the market tests OPEC’s and shale’s reaction functions. Importantly, we wouldn’t expect such a move to be volatile, as it is not driven by storage concerns like last year (with available storage capacity given the 2017 draws) but the ongoing search for a new equilibrium. Goldman specifically envisions the growing output from Libya and Nigeria, and warns that unless OPEC engages in further "shock and awe" cuts, the next stop is lower: OPEC production and exports increased in June, driven by Libya and Nigeria which have sustained production above our expectations over the past few weeks. While OPEC has yet to address this increase in production, the group has invited both countries to participate in the next compliance committee meeting on July 24. We continue to believe that there is another opportunity for OPEC to increase the cuts, but that this should be done in a “shock and awe” manner, with little public announcement. This requires further patience in assessing the group’s response to higher aggregate production and lower prices.

Saudi Arabia curbs oil shipments to United States: Kemp (Reuters) - Saudi Arabia is trying to support oil prices by reducing its crude shipments to the United States in a bid to cut the amount of oil in commercial storage.U.S. crude imports from Saudi Arabia averaged less than 900,000 barrels per day (bpd) in the four weeks ending on July 7, according to the U.S. Energy Information Administration.U.S. imports from Saudi Arabia are running at the slowest rate since 2015, and the slowest for the time of year for over five years ( and from Saudi Arabia will fall even further to less than 800,000 bpd in August, according to a Saudi industry source familiar with the kingdom's oil policy."Saudi Arabia is keen to see an improvement in the oil market and accelerate the balancing process," the source told Reuters on Wednesday ("Saudis to cut August oil exports to lowest level this year", Reuters, July 12).Saudi Arabia is cutting exports to all destinations but reducing shipments to the United States is especially important because U.S. stocks are the most visible and have the biggest impact on prices.The United States accounts for more than 40 percent of the commercial crude and product stocks held in the OECD and its stocks are reported weekly rather than monthly as in most other countries.U.S. crude and product stocks therefore receive disproportionate attention from oil traders and analysts, and can have a major impact on global oil prices.Changes in U.S. crude and products stocks are often (misleadingly) interpreted to reflect changes in the global supply-demand balance.Saudi Arabia is the largest supplier of crude oil to the United States after Canada, providing an average of 1.1 million bpd to U.S. refiners in 2016.By restricting shipments, Saudi Arabia hopes to reduce U.S. stocks and demonstrate to sceptical traders that the long-awaited rebalancing of the global market is finally underway.The strategy seems to have had some early success with U.S. crude stocks falling earlier and faster than normal so far in the second and third quarters of 2017. U.S. crude stocks have fallen by 40 million barrels since the end of March, compared with a drawdown of just 8 million barrels over the same period in 2016.

Oil Rises Despite Gloomy Outlook - Oil moved down in early trading on Tuesday as Goldman Sachs warned that oil could fall below $40 if bullish catalysts don’t emerge soon, prompting other banks to review their oil price forecast. Prices recovered somewhat on Tuesday afternoon as the EIA’s STEO report reflected a small drop in U.S. crude oil production in June. U.S. crude oil production decreased 0.02 kb/d to 9.22 mmb/d in June compared with May. Output has increased 0.66 kb/d since the low in September 2017. Production, however, is forecast to increase 1.01 mmb/d in 2017 and 0.34 mmb/d in 2018 and reach 10.13 mmb/d by December 2018. It should increase +0.91 mmb/d from June 2017 to December 2018.   The IEA published its annual Energy Investment report, detailing investment trends in the energy sector. Upstream oil and gas saw investment plunge by 44 percent between 2014 and 2016, but will see a slight uptick this year. However, the expected 3 percent global increase in investment is mostly due to U.S. shale, which will see investment expand by 53 percent.  OPEC is reportedly considering taking the exemption away from Libya and Nigeria, forcing the two OPEC members to limit their production as part of the cartel’s collective reductions. Libya and Nigeria had been given exemptions because both countries have suffered from instability and attacks on oil infrastructure, forcing large volumes of capacity offline. But both have seen a sharp resurgence in output. The restored supply is undermining the efficacy of the cuts from other OPEC members. It is still early, but sources told the WSJ that OPEC officials have been inquiring about production data from Libya and Nigeria, which could be a prelude to production caps, perhaps at the next meeting in November in Vienna. Meanwhile, Russia’s energy minister hinted that the OPEC and non-OPEC countries could theoretically extend and deepen their cuts, comments likely intended to reverse the dramatic bout of pessimism throughout the global market.

Oil rises 2.5 percent after surprisingly large U.S. crude stock draw | Reuters: Oil prices climbed more than 2.5 percent on Tuesday along with rising heating oil futures on reports showing cuts in U.S. oil production and declines in U.S. crude and European product stockpiles. U.S. crude stocks plunged almost three times more than forecast in the latest week, while gasoline inventories decreased unexpectedly and distillate stocks built, industry group the American Petroleum Institute said Tuesday. Crude inventories fell by 8.1 million barrels in the week to July 7 to 495.6 million, compared with analysts' expectations for a decrease of 2.9 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 2 million barrels, API said. Benchmark Brent LCOc1 futures rose 64 cents, or 1.4 percent, to settle at $47.52 a barrel. U.S. West Texas Intermediate crude CLc1 also rose 64 cents, or 1.4 percent, to settle at $45.04 per barrel. After the close and the supportive API data, Benchmark Brent LCOc1 futures rose $1.25, or 2.7 percent, to $48.12 a barrel. U.S. West Texas Intermediate crude CLc1 rose $1.31, or 2.9 percent, to settle at $45.71 per barrel. U.S. heating oil HOc1 futures, meanwhile, gained 1.6 percent on Tuesday, boosting the products crack spread CL321-1=R, a measure of refinery margins, to the highest since late May. European refineries increased crude oil intake in June, but stocks of oil products, particularly diesel, slid, Euroilstock data showed on Tuesday. "That tells you demand globally is a lot stronger than people thought it was going to be and that is having a net positive effect on heating prices,"

WTI Pops After Huge Crude Inventory Drawdown --WTI prices have roller-coastered (generally lower) since last week's inventory(lower)/production(higher) data back to unchanged but as API printed a massive 8.133mm crude drawdown (vs 2.45mm exp), the biggest since Sept 2016 if DOE confirms, WTI prices quickly jumped higher. Gasoline also saw a bigger than expected draw while Distillates built. API:

  • Crude -8.133mm (-2.45mm exp) - biggest draw since Sept 2016
  • Cushing -2.028mm - biggest draw since Feb 2014
  • Gasoline -801k (-534k exp)
  • Distillates+2.079mm

Big drawdowns across the board last week from API and DOE added to in crude and gasoline this week...A lot of hope today as EIA cut its 2018 crude production forecast (modestly) - “This pull-back in production is kind of wake-up call to people who thought that shale was going to be viable no matter what OPEC did,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, says by phone, adding "If output doesn’t rise as much as previously anticipated, “then it’s time for the bears to start questioning their religion again."Notice that WTI was trading at the same level as it was when last week's API data hit before the print...once the data hit, WTI was bid above $45.50...Deja vu all over again

Oil rises above $48 as API reports drop in U.S. fuel stocks | Reuters: (Reuters) - Oil rose above $48 a barrel on Wednesday in response to a fall in U.S. fuel inventories and a cut in the U.S. government's forecast for crude output and despite OPEC suggesting the oil market will see a surplus next year. U.S. crude inventories fell by 8.1 million barrels, industry group the American Petroleum Institute said on Tuesday, much more than the forecast. Official inventory data from the Energy Information Administration is due at 1430 GMT. Brent crude LCOc1, the global benchmark, was up 62 cents, at $48.14 a barrel by 1130 GMT. U.S. crude CLc1 gained 67 cents to $45.71. "While further upside could be expected in the short term amid the speculations of a cut in U.S production, gains may be limited by the firm oversupply dynamics of the markets," FXTM analyst Lukman Otunuga said. The U.S. crude stocks drop will raise hopes that a long-awaited market rebalancing is under way. A supply glut has stuck around for three years, despite an OPEC-led output cut in 2017, keeping oil at less than half its price of mid-2014. Also supporting prices, the EIA said on Tuesday it expected U.S. crude oil production to rise by less than previously forecast next year due to a lower price outlook. The lower 2018 forecast of 9.9 million barrels per day will ease concerns that the OPEC-led supply cut will lead to a flood of competing U.S. shale supplies, swamping the OPEC effort.

The Major Wildcard That Could Send Oil To $120 --The latest rally in oil prices ran up against a wall yet again, and the same fears about oversupply have not receded in the slightest. The expectation from most oil analysts is that there is very little room on the upside for oil prices and that we will have to wait until 2018 at the earliest before the market gets closer to “balance.” But the one major wildcard for oil prices is geopolitics, which, however unlikely given the degree of supply overhang that still exists, could send prices up. But how high? The latest blockade of Qatar, which has mushroomed into a regional political crisis in the Middle East, would have caused a severe spike in oil prices in the past, even though Qatar is a relatively minor producer. However, the simmering standoff not only failed to register, but occurred at a time of falling oil prices.If a crisis involving heavyweight oil producers was shrugged off by the market, it is hard to imagine some other event causing a sharp price spike, even if more barrels were on the line.But that is exactly what some analysts are afraid of, warning that the markets are overlooking some potentially massive geopolitical problems looming just over the horizon."Venezuela's 2 million barrels of oil a day could literally go any day. Mexico looks poor. Azerbaijan's in trouble. China's own production is collapsing rapidly," Neil Dwane, the chief investment officer of European equity at Allianz Global Investors, told CNBC last week."One only has to have one mistake and the only thing you'll be talking about all morning is oil at $120."Herman Wang of S&P Global Platts agreed with that sentiment, although he expects the price spike to be less severe."There are plausible scenarios where you could see, perhaps not $120 a barrel, but an elevated oil price, say $70 to $80 on some of these geopolitical and some of the supply concerns. Venezuela certainly is a mess right now," Wang told CNBC's Squawk Box last week.

Saudi Arabia: Saudi Arabia's June oil output up on domestic summer crude burning - source - Times of India: (Reuters) - Saudi Arabia's crude oil production in June rose to 10.07 million barrels per day due to a domestic increase in crude burning during the hot summer months, an industry source familiar with the kingdom's output figures said on Tuesday. The amount of crude supplied to the market - both domestically and for exports - was also slightly up at 10.1 million bpd, the source said. The rise in production from Saudi Arabia last month is only 12,000 bpd above its output target under the OPEC deal which is 10.058 million bpd. But crude exports in June were below 7 million bpd, the source said and the increase in output and supply was seasonal. The top oil exporter is still committed to the OPEC agreement. Supply to the market may differ from production depending on the movement of oil in and out of storage. The kingdom burns some 700,000 bpd of crude during the summer months when usage of air conditioners increases as temperatures rise.

Which oil exporters are most desperate for higher prices? -- The price of oil and natural gas has roughly halved in the past three years. That’s redistributed about $1 trillion in yearly export earnings — more than 1 per cent of global gross domestic product — from net producers to net consumers.*  A new report from Brad Setser and Cole Frank of the Council on Foreign Relations explains which countries have had to adjust the most in response, which have yet to adjust, and which remain the most vulnerable to further price drops.  Setser and Frank analysed what they call the “external breakeven”: the current account deficit minus the oil and gas trade surplus, divided by net oil and gas exports in barrels of oil equivalent. . Here’s what the external breakevens of the major oil and gas exporters look like as of 2015:

OPEC's Barkindo says all producers should help balance market | Reuters: All global oil producers should help balance the market, OPEC's Secretary General Mohammad Barkindo told reporters on Tuesday when asked what else the Organization of the Petroleum Exporting Countries could do to ease a global oil glut. "It is beyond any group of stakeholders, it has to be a collective responsibility of all producers," he told reporters on the sidelines of an industry conference in Istanbul.

WTI Slips As Inventories Draw But Production Hits New Cycle High -  WTI has extended gains (on weaker dollar) from last night's 'bullish' API data in a deja-vu of last week, and DOE data (showing large draws in Crude and Gasoline) confirmed continued rebalancing. However, once again mimicking last week's action, prices were not exuberant asanother surge in production - to new cycle highs - stymied some of the excitement. DOE:

  • Crude -7.564mm (-2.3mm exp) - biggest draw since Sept 16
  • Cushing-1.948mm - biggest draw since Feb 14
  • Gasoline -1.697mm (-682k exp)
  • Distillates +3.131mm (+728k exp)

The question heading into this week was whether last week's bigger than expected draw was a one-off, or the start of rebalancing. This week, we get some answers and it seems like the rebalancing is continuing...

Oil settles higher as EIA confirms a drop in U.S. crude stockpiles - Oil prices settled higher Wednesday as U.S. government data confirmed a sharp decline in domestic crude supplies for a second week in a row. Prices, however, ended off the session’s best levels, as rising production in the U.S. and elsewhere continue to prevent the market from reaching a lasting balance between supply and demand. August West Texas Intermediate crude climbed 45 cents, or 1%, to settle at $45.49 a barrel on the New York Mercantile Exchange. Prices pulled back from the $46.17 level they traded at before the data, but the settlement was still the highest since July 3, FactSet data show. September Brent crude on London’s ICE Futures exchange added 22 cents, 0.5%, to $47.74 a barrel. On Wednesday, the U.S. Energy Information Administration reported that domestic crude supplies dropped 7.6 million barrels for the week ended July 7. That topped a forecast for a decline of 2.6 million barrels by analysts surveyed by S&P Global Platts, but came in a bit less than the decline of 8.1 barrels reported by the American Petroleum Institute late Tuesday. Crude stockpiles had dropped by 6.3 million barrels in the prior week, according to the EIA. “Crude inventories have dropped below 500 million barrels for the first time since late January, and are just above year-ago levels, after the biggest draw since last September,” said Matt Smith, director of commodity research at ClipperData. The EIA pegged last week’s total crude stocks at 495.4 million. But total U.S. crude production edged up by 59,000 barrels a day to 9.397 million barrels a day last week, according to the EIA figures.

Oil Rises As Robust Chinese Demand Seen Helping Drain Glut (Reuters) - Oil prices rose 1.3 percent on Thursday after much stronger demand in China overshadowed a downbeat report by the International Energy Agency (IEA) that showed higher production by key OPEC exporters. Brent crude settled up 68 cents or 1.42 percent at $48.42 a barrel. U.S. light crude settled up 59 cents at $46.08 a barrel. "The market is trying to stabilize," said Gene McGillian, manager of market research at Tradition Energy. Prices had responded only minimally to data Wednesday showing U.S. crude oil inventories dropped last week by the most in 10 months. "The market is having difficulty picking its head up," McGillian said. Oil prices have dropped in recent weeks to levels not seen since the end of last year as investors lost faith in a deal between OPEC and non-OPEC producers to reduce output, while U.S. shale oil production has risen sharply. But there is evidence world oil demand is picking up, notably in the United States and China, the world's two biggest oil consumers. China imported 8.55 million barrels per day (bpd) of oil in the first half of this year, up 13.8 percent from the same period in 2016, making it the world's biggest crude importer ahead of the United States.

Opec: IEA says OPEC compliance with oil cuts at lowest in 6 months - OPEC's compliance with production cuts fell in June to its lowest levels in six months as several members pumped much more oil than allowed by their supply deal, thus delaying market rebalancing, the International Energy Agency said on Thursday. OPEC's compliance with cuts slumped to 78 percent last month from 95 percent in May as higher-than-allowed output from Algeria, Ecuador, Gabon, Iraq, the UAE and Venezuela offset strong compliance from Saudi Arabia, Kuwait, Qatar and Angola. "Each month something seems to come along to raise doubts about the pace of the rebalancing process. This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement," the Paris-based IEA said. The Organization of the Petroleum Exporting Countries and several non-OPEC producers including Russia have agreed to cut production by around 1.8 million barrels per day until March 2018 to ease a global crude glut spurred by booming U.S. output. OPEC members Libya and Nigeria were exempted from the cuts due to years of unrest that have sapped their output. The two countries have managed to increase their combined production by more than 700,000 bpd in recent months, the IEA said. "For fellow OPEC members, who agreed to reduce production by 1.2 million bpd, to see their cut effectively diluted by nearly two-thirds must be very frustrating, especially as their pact has, hitherto, been well observed by historical standards," the IEA said. The cuts have stabilised oil at around $45-50 per barrel, but prices have come under renewed pressure in recent weeks due to growing U.S. output and little evidence of global stocks falling from record highs above 3 billion barrels. 

OPEC compliance issues, non-OPEC surge hamper rebalancing: IEA - Weaker compliance by OPEC producers with the group's output pact, together with surging non-OPEC supply raised global oil output by 720,000 b/d in June to 97.46 million b/d, the International Energy Agency said Thursday. However the IEA also raised its estimate of oil demand growth this year to 1.4 million b/d, from 1.3 million b/d, offering some comfort to those worried about low oil prices, after a "dramatic acceleration" in the second quarter. In its monthly oil market report the IEA estimated total oil demand was 97.44 million b/d in the second quarter, and supply 96.77 million b/d, implying a stock draw in the period of 670,000 b/d. However the IEA noted that "actual stocks numbers do not support this picture," adding that the data for the quarter was not yet complete. "We need to wait a little longer to confirm if the process of re-balancing has actually started in 2Q17," it said. The report said commercial oil stocks in OECD countries had fallen by 6 million barrels in May to 3.05 billion barrels which was 266 million barrels above the five-year average, compared with 300 million barrels above in April. It said OPEC output had risen 340,000 b/d in June to 32.6 million b/d due to a combination of higher Saudi output and a resurgence in Libya and Nigeria, which are exempt from the group's self-imposed production cuts. Also, compliance with the agreement fell from 95% in May to 78% in June, the lowest since it came into force in January, the IEA said. Iraq's compliance had fallen to just 29%, with a cut of just 60,000 b/d from its baseline, while Iran's crude output had crept up, to 3.79 million b/d. Overall, OPEC's production cut amounted to 470,000 b/d in June, compared with the 1.2 million b/d envisaged by last year's production cut agreement.

IEA Less Confident on Oil Rebalancing as OPEC Supply Rises (Bloomberg) -- The rebalancing of global oil markets has become less certain, with OPEC production rising and little evidence that bloated stockpiles are shrinking as expected, the International Energy Agency said. While world demand is climbing faster than initially estimated, OPEC’s implementation of the supply cutbacks needed to clear the inventory surplus has faltered to its lowest level since the group began in January, the Paris-based agency said. That’s a change from two months ago when the IEA said the “ rebalancing is here” and was accelerating in the short term. “We need to wait a little longer to confirm if the process of rebalancing has actually started in the second quarter,” said the IEA, which advises most of the world’s major economies on energy policy. The agency’s supply and demand estimates suggest fuel inventories should be shrinking steadily but “for now, actual stocks numbers do not support this picture.” Oil prices have lost about 16 percent in New York this year on signs that supply curbs by the Organization of Petroleum Exporting Countries and Russia aren’t deep enough to eliminate a glut built up during three years of over-production. The initial price boost from the agreement on the cutbacks last year also encouraged more output from shale-oil drillers in the U.S., further diluting OPEC’s efforts. The IEA’s global supply and demand estimates suggest oil stockpiles should have declined at a rate of 700,000 barrels a day in the second quarter, but it’s uncertain whether that actually happened, the agency said. Currently available data indicate that over the first half of the year inventories in developed nations actually increased by 215,000 barrels a day. The rebalancing is being aided by strength in fuel consumption. The IEA raised estimates for global oil demand growth in 2017 by about 100,000 barrels a day to 1.4 million a day, the strongest in two years. Consumption surged by 1.5 million a day in the second quarter compared with a year earlier amid surprising resilience in developed nations, and will average 98 million barrels a day for the full year. Rising production from OPEC is threatening that progress, the IEA warned.  

Report: Saudi Aramco's Manifa Oilfield Production Hit by Technical Issue (Reuters) - Output from Saudi Aramco's massive Manifa oilfield has been hit by a technical problem, the International Oil Daily reported on Tuesday, citing unnamed sources. Manifa is one of state-run Aramco's biggest oilfields and latest expansions, with a production capacity of 900,000 barrels per day. Aramco brought the field online in two phases. The industry publication reported that it was unclear how much production was removed as a result of corrosion of the water injection system used to maintain pressure in the reservoir. It added, quoting sources, that the losses were likely to be in the "millions of dollars". Saudi Aramco did not immediately respond to an emailed request for comment. The offshore oilfield - made of rigs on manmade islands linked by 41 km (25 miles) of causeways and bridges over the Gulf - was discovered in the 1950s. "Corrosion control in the water injection system is not a technical challenge but it can be expensive to repair the water injection lines. They will probably have to shut down the field for maintenance," said Sadad al-Husseini, a former executive vice president at Saudi Aramco.

The Technical Failure That Could Clear The Oil Glut In A Matter Of Weeks -- OPEC exports have come under pressure this week from technical threats to oil fields, with Saudi Arabia’s Manifa problems grabbing the headlines. Saudi Aramco CEO Amin Nasser, while addressing the World Petroleum Congress in Istanbul, stated that the outlook for oil supplies is “increasingly worrying”, due to a loss of $1 trillion ($1000 billion) in investments last year. The skepticism shown by a majority of financial analysts and oil commentators about the real threat to global oil (and gas) production volumes was countered by the news that the production at Saudi Aramco’s main offshore oil field, Manifa, has been hit by technical problems. News sources reported that the output from Saudi Aramco's massive Manifa oilfield has been hit by a technical problem. The impact of this possible technical mishap is not to be underestimated. Aramco’s Manifa is one of its biggest oilfields, with a targeted production capacity of around 900,000 bpd, to be brought onstream in two phases. At present, the main issue being reported on is that there has been corrosion of the water injection system, which is used to keep pressure in the reservoir. No facts have emerged about the total impact on the Manifa production capacity, but unnamed sources are already quoting ‘millions of dollars’ of losses. The current reports are not really worrying, as corrosion control in a water injection system is only a technical challenge. Maintenance of the field is expected, resulting in a shut-down of production – something that has been confirmed by Sadad Al Husseini, former VP Aramco. If the all production needs to be shut-down, Saudi Aramco’s overall production capacity will be cut by 900,000bpd. The current corrosion problem at Manifa is not new when looking at the overall situation of some giant fields in the Kingdom. Aramco has been fighting an uphill battle for years to counter existing corrosion threats to the Ghawar, Manifa and other fields. The problem is immense, as main production wells could be completely blocked if no solutions are found for corrosion and scaling issues. Until now, no real solutions have been found, except the traditional mitigation in place. At the same time, Saudi Arabia’s export volumes have been hit by high local summer demand for crude oil and products. The Kingdom already stated that it will cut overall crude oil shipments by around 600,000 bpd in August to balance the rise in domestic consumption during the summer.

OilPrice Intelligence Report: Oil Posts Solid Gains Despite Downward Pressure: Oil prices posted steady and solid gains this week, clawing back some of the most recent losses and moving back up into the upper-$40s per barrel. The concerns about oversupply have not gone away, so there are questions about how much more room oil has to run from here. The IEA said in its latest Oil Market Report that the higher production from OPEC is likely going to delay the rebalancing of the oil market. Saudi Arabia increased production by 120,000 bpd in June, and the sharp increase in output from Libya and Nigeria led to a decline in the group’s compliance rate to just 78 percent, down from 95 percent a month earlier. Meanwhile, Saudi Arabia is hoping to cut oil exports to the U.S. in a bid to drain American oil inventories, a strategy that could see the U.S. imports of Saudi crude dropping to just 800,000 bpd in August.  The news about higher OPEC production made more headlines, but oil traders took solace in another aspect of the latest IEA report: Oil demand is growing faster than previously expected. The agency said that demand would expand by 1.4 mb/d this year, or about 0.1 mb/d faster than it previously thought. But within that annual figure is a more “dramatic acceleration,” as the IEA put it. Demand grew at a meager 1 mb/d pace in the first quarter, but surged to a 1.5 mb/d annualized rate in the second quarter, giving the market momentum and offering a signal that stronger inventory declines are likely forthcoming. In a research note earlier this week, Barclays slashed its three-month oil price forecast from $57 to $49, the latest in a series of price downgrades at major investment banks. “The recent weakness reflects the market’s need to price in a lower [U.S.] shale break-even and absorb the unexpected return of around 300-400 [kbpd] of Libyan and Nigerian oil,” Barclays said in the report. “With inventories still quite high, government stockpiles available, DUCs standing ready, and cuts providing OPEC with additional spare capacity, there are plenty of plugs to fill any hole,” they added.

Oil Prices Hold Steady As U.S. Oil Rig Count Rise -- The number of active oil and gas rigs in the United States was flat this week overall, after gaining 505 rigs in the last 12 months. But on the oil side, the number of rigs still increased—this week by two—while gas rigs decreased by 2 for a net growth of zero. Combined, the total oil and gas rig count in the US now stands at 952 rigs.Prices rose by mid-day on Friday with Shell’s declaration of a force majeure on Nigeria’s Bonny Light grade, and on yesterday’s IEA report showing a forecast for increased global demand this year. WTI was up .89% at 12:31 pm EST at $46.46—almost $2 above last-week’s levels. The Brent crude benchmark was up .93% at $48.87, also a near-$2 gain per barrel. By 12:59pm, prices were even higher, with both benchmarks trading up over 1% for the day.During 2017—a year of tumultuous prices that began on January 3, 2017, at $58.30 per barrel for WTI and fell almost $10 to today’s $46.46—the number of US rigs have increased almost 50 percent. Of the 14 major US basins for oil and gas, 7 have seen over a 100 percent increase in the number of active oil and gas rigs. The largest basin—the Permian—has seen a total increase of 213 oil and gas rigs in 2017, bringing the Permian’s 2017 growth to 133 percent o verall.Since the advent of the OPEC agreement, oil rigs in the United States have increased by 288, and have only taken on losses in two weeks out of the 32 weeks since the deal was sealed—a fact that OPEC is finding it increasingly hard to ignore as it considers next steps. At 16 minutes after the hour, WTI and Brent prices started to fall and were trading at $46.54 and $48.90 respectively.

Rig Count Rises To April 2015 Highs As Analysts Warn "Oil Market Rebalancing Hasn't Even Started Yet" - After falling for the first time this year two weeks ago, Baker Hughes reports US oil rig count rose once again (up 2 to 765) for the 24th week in the last 25, to the highest since April 2015. "The so-called re-balancing is likely to happen later than earlier," Michael Poulsen, an analyst at Global Risk Management Ltd, said on Friday. It does appear we have reached an inflection point in the rig count numbers (if the historical relationship with crude holds)... While EIA cut its 2018 production outlook, this week saw the effect of field maintenance in Alaska and Tropical Storm Cindy in the Gulf of Mexico fall away and production surged once again this week - to new cycle highs... And the lagged rig count trend suggests crude production has further to rise yet... Crude prices have been active today with macro headlines hurting and machines helping ramp any dip... the rig count create iunstant selling which was instantly bid back upo,,, And while US crude production just jumped to cycle highs (and shale production we believe reached a record high),'s Nick Cunningham notes the oil market rebalancing hasn't even started yet... Global oil production surged in June “as producers opened the taps,” according to a new report from the International Energy Agency (IEA). OPEC was a major culprit, with Libya and Nigeria doing their best to scuttle the production cuts made by other members. But it wasn’t just those two countries, who are exempted from the agreed upon reductions. OPEC’s de facto leader, Saudi Arabia, also boosted output by an estimated 120,000 bpd in June, from a month earlier. That put Saudi production above 10 million barrels per day (mb/d) for the first time in 2017.

OPEC Admits It Has A Problem: It Is Still Producing Too Much Oil -- In its just released latest market report for the month of July, OPEC admitted it has a problem: more than six months after the Vienna deal that was supposed to bring supply and demand in balance, the oil cartel confirmed it is pumping too much, not only in 2017, but also in 2018, blaming shale production as the primary reason behind the oversupply. First, looking at historical data, according to secondary sources, production among the 14 OPEC member states rose by a whopping +394k b/d in June to 32.611mb/d.  The biggest monthly increases took place in those nations that had previously been supply constrained and which are exempt from the output cut accord: Libya +127k b/d, and Nigeria +97k, although even Saudi Arabia saw a substantial pick up in production, which rose by +51k b/d m/m to 9.95m b/d, the highest since the start of the year. More ominously, in direct communications to OPEC, Saudi reported a monthly increase of +190k b/d m/m, up to 10.07m b/d, suggesting that as discussed yesterday, Saudi commitment to production cuts may be "waning.  In total, OPEC admitted that output exceeded demand in 1H this year and was set for overproduction in 2018: the total output of 32.6m b/d in June was more than the 32.2m b/d it expects will be needed in 2018.Just as striking was the report’s suggestion that OPEC and non-OPEC’s accord to cut production was not deep enough according to Bloomberg calculations: despite reducing production, the organization’s data show it oversupplied markets by ~700k b/d in 1H this yr. And the punchline: OPEC expects to oversupply global markets markets by ~900k b/d in 1Q next year, with US shale scapegoated as the culprit for OPEC's failure to bring the market back into equilibrium: Non-OPEC supply to grow by 1.14m b/d in 2018, up from 800k b/d in 2017.

Nigeria Politely Declines OPEC Invitation To Cap Production --The fractures within OPEC's precarioua production cut agreement are becoming increasingly more visible.Following last weekend's report that OPEC will invite Nigeria and Libya - two cartel member states whose output was not capped as part of the Vienna agreement - moments ago Nigeria's oil minister Emmanuel Ibe Kachikwu has politely declined such an overture, saying that his country will "miss" the ministerial meeting in Russia on July 24, adding that it will eventually find the time to meet Saudi and Russian oil ministers (just not now), and that his country has no set timeframe to join OPEC oil production cuts."Hopefully in the next two to three months we can see how predictable the production return has been and then can say we feel stabilized and need to make the corresponding cuts," Emmanuel Ibe Kachikwu told reporters cited by Reuters. And while Kachikwu said that Nigeria will support a cap on its production, this won't happen for a while: he said that while his country is currently producing 1.7mmbpd of crude, it will (maybe?) impose a cap only when it can stably pump 1.8 million barrels per day. He also said that he will hopefully know in "two to three months" whether oil output has stabilized before agreeing on production cuts. Faced with the prospect of even more supply output out of Nigeria, oil is once again on the back foot.

Saudis to cut August oil exports to lowest level this year - (Reuters) - Saudi Arabia will cut crude oil shipments to its customers in August by more than 600,000 barrels per day to balance the rise in domestic consumption during the summer, while staying within its OPEC production commitment, a Saudi industry source said. "There is strong demand for our crude but we are sticking to our OPEC commitments," the source, who is familiar with the kingdom's oil policy, said on Wednesday. "In order to meet its OPEC quota and meet its domestic demand during summer, Saudi Arabia has made big cuts in allocations internationally by more than 600,000 bpd for the month of August," the source said. Crude exports for August will fall to their lowest level this year at around 6.6 million bpd, the source added. Crude allocations to Asia for August will be reduced by about 200,000 bpd to 3.5 million bpd, while allocations to Europe will be down by around 70,000 bpd at 520,000 bpd. Oil majors were allocated some 200,000 bpd less in August at 780,000 bpd. Exports to the United States will be below 800,000 bpd in August, the source said. Saudi Arabia told the Organization of the Petroleum Exporting Countries its oil production in June rose to 10.07 million bpd, slightly above its OPEC target, mainly due to an increase in domestic crude burning for power during summer. The source also cited late May port closures as pushing some cargoes into June, which may have resulted in higher June exports. The source said July oil output would be lower than June, without providing details. "Saudi Arabia is keen to see an improvement in the oil market and accelerate the balancing process, and expects other producers to do the same," the Saudi source said, adding that there are signs of improvement in market fundamentals.

Saudi-led blockade will continue to have limited impact on Qatar's oil, natural gas trade: minister - The current economic and diplomatic blockade on Qatar imposed by Saudi Arabia, Egypt, Bahrain and the UAE, will continue to have a limited impact on its oil and gas trade, the country's energy and industry minister Mohammed al-Sada said Monday. "Despite the illegal siege currently enforced on Qatar, [it] has never failed a single shipment and has not compromised on its longstanding image of being a reliable supplier of energy to all corners of the world," Sada said, speaking at the World Petroleum Congress in Istanbul. Qatar is the world's largest LNG supplier, having exported 78.8 million mt of LNG in 2016, more than 30% of global supply of 257.8 million mt, according to S&P Global Platts Analytics, and an increasing share of its production has been delivered to emerging Middle Eastern buyers including Egypt and the UAE. But Sada assured the conference that the blockade would not have a wide impact as "total exports in trade to Saudi Arabia, UAE and Bahrain account for less than 8%" of its total global trade.  This unjust blockade is demonstrating our economic strength, diversity and resilience," he added. He emphasized that total trade flows of energy to Japan, India, South Korea and China -- the main centers of oil demand growth -- account for three quarters of its exports and trade to these nations "remain unchanged." Meanwhile, Qatar's oil output has remained steady at 610,000 b/d since April, according to the Platts OPEC survey.

After Iran move, Total seen in pole position to snap up Qatar gas deals - Total is well placed to take a lead role in helping Qatar expand output from the world's largest gas field, largely thanks to its involvement in the Iranian side of the shared deposit, two sources familiar with Doha's thinking said. That puts the French oil major ahead of rivals like Exxon and Shell in the early running for developing the expansion, which the tiny Gulf state announced as it seeks to counter growing isolation caused by a regional diplomatic rift. Total boss Patrick Pouyanne signed a deal this month to develop the South Pars field, as Iran's part of the shared reserves are known, becoming the first oil major to return to the country since the lifting of sanctions. As he was ironing out details of that agreement, he was careful to keep Qatar in the loop. "Of course, I won't go to the same field in Iran without telling Qatar," Pouyanne told Reuters. "The Iranian block where we are supposed to produce is next to the border with Qatar. When I traveled to Doha I discussed it with the (Qatari) authorities and they told us: 'It is ok - we know you'." On one level, working with both countries who share a prized gas asset seems obvious. But it is not without risks for Total. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have imposed political and economic sanctions on Qatar, demanding that it stops fostering terrorism and courting Iran, Riyadh's main rival. Qatar denies the accusations. Besides Iran and Qatar, Total also has large projects in Saudi Arabia and the UAE, highlighting the complexity of investing in the Middle East.

The special ingredient that helps explain Saudi Arabia’s diplomatic war on Qatar  Saudi Arabia says it’s waging diplomatic war against Qatar because of its support for terrorism. But if you drill below the surface, there’s actually something else that helps explain the crisis: Qatar’s hugely valuable natural gas reserves. Enormous amounts of natural gas, not oil, have fueled Qatar’s rise to become one of the world’s wealthiest nations in per capita terms It’s also the special ingredient that helps explain how it has become a renegade state in the Gulf region — and the target of an isolation campaign that marks the most acute diplomatic crisis in the Middle East in decades. The fact that Qatar’s economy isn’t as beholden to oil means that it isn’t as beholden to Saudi Arabia, the world’s largest oil exporter and the leader of the Organization of the Petroleum Exporting Countries (OPEC), a group that acts in unison to influence oil prices. Qatar generates four times more export revenue from natural gas than it does from oil, and doesn’t need to follow Saudi’s dictates the way it would if its survival were predicated on it. In addition to this, the natural gas Qatar exports is liquefied, meaning it is compressed and shipped around the world, and isn’t primarily distributed through pipelines that are vulnerable to being meddled with by angry neighbors. Then there’s the issue of the origins of Qatar’s natural gas: It gets most of it from an offshore gas field in the Persian Gulf that it shares with Iran. Which is to say Qatar has every interest in maintaining harmonious ties with Saudi Arabia’s nemesis. Qatar’s economic independence has translated into an independent-minded foreign policy. The tiny former British protectorate has evolved in recent decades into a global player that competes with and defies Riyadh on several fronts, whether through the popularity of its robust international media operation Al Jazeera; its backing of groups like the Muslim Brotherhood, which Saudi Arabia and its allies consider to be an existential threat to their own regimes; or its friendly relationship with Saudi’s regional rivals, Iran and Turkey. Since Saudi Arabia can’t rein in Qatar using its dominance over oil, it’s using its immense diplomatic influence in the region to hurt Qatar’s economy in other ways. Saudi Arabia and its allies Egypt, the United Arab Emirates, and Bahrain have severed all diplomatic ties with Qatar and suspended air, land, and sea travel to and from the country. Other countries in the region have since joined. It’s a bold — and risky — attempt to make Qatar fall in line after marching to its own beat for decades.

Saudi blockade backfires as Qataris hail emir - A plan hatched by Arab allies to destabilise the small but wealthy desert state of Qatar with a punitive blockade has backfired, triggering a personality cult around the country’s 33-year-old emir. The standoff between Saudi Arabia, Egypt, the United Arab Emirates (UAE) and Bahrain, on the one hand, and one of the world’s richest countries is now well into its second month with little sign of compromise. Rex Tillerson, the US secretary of state, flew to Kuwait yesterday to try to broker peace talks. The quartet accuse Qatar of funding Sunni extremism and appear to hope that by cutting off Doha from its neighbours they might topple the emir, Sheikh Tamim bin Hamad al-Thani. However, rather than weaken Sheikh Tamim domestically, the five-week dispute has forged a cult around him. Abdulrahman al-Kuwari, 27, a student who was visiting an exhibition of hagiographic works in the royal family’s honour by the local artist Ahmed al-Maadheed, said: “This has made me realise we should all support our country more.” The exhibition is called Tamim the Glorious. Qatar’s two main telecom companies have changed their official network name to “Tamim al-Majd” — Tamim the Glorious. It is impossible to avoid the image of the emir, whose face stares down from office blocks. It is always the same picture, a screenprint by Maadheed of the emir’s face in profile. Saudi Arabia, the UAE, Egypt and Bahrain have led a blockade of the country, aimed at changing its foreign policy. They issued 13 demands that included closing Al Jazeera, a Qatari-owned broadcaster that they blame for inciting pro-democracy protests, and to stop harbouring Iranian-backed terror groups such as Hezbollah. However, the emir ignored them in a move that many believe has confounded the newly promoted Saudi crown prince and his allies. The tiny, gas-rich emirate claims that its critics do not know what to do next.

Qatar threatens to withdraw from GCC if conditions not met - (Xinhua) -- Qatar threatens Monday to withdraw from Gulf Cooperation Council (GCC) by setting conditions for the Saudi-led bloc, state news agency MENA reported. Qatari Minister of Foreign Affairs Mohammed bin Abdulrahman al Thani on Monday sent a letter to Secretary General of the GCC Abdul Latif Bin Rashid Al Zayani, setting his country's conditions so as not to withdraw from the GCC. Al Thani said Qatar is committed to international laws and conventions, especially with regard to fighting terrorism and its financing, adding that Qatar will not negotiate on its sovereignty. He added that his country would give a three-day notice to the Gulf countries to lift the "siege" imposed on Qatar and compensate it for the political and economic losses. Following the deadline, Qatar will officially announce its withdrawal from the GCC, according to the letter. Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt issued a list of 13 demands to Qatar later last month, including closing Al-Jazeera TV station, stopping financing and supporting terrorism, and downgrading its ties with Iran, as major preconditions for ending their boycott. The four countries vowed to take further political, economic and legal steps to tighten the screws on Doha after the latter refused to accept demands. They are scheduled to hold another foreign ministers' meeting, after the one held in Cairo, Egypt on July 5, in Bahrain soon to discuss the next steps. In response, Qatar has dismissed as "baseless" the Saudi-led bloc's accusations that it supports terrorism and interferes in their internal affairs.

Got Milk? First 165 Cows Airlifted To Qatar - It appears that the Gulf blockade against Qatar will remain in place for the foreseeable future after representatives from Saudi Arabia, Egypt, Bahrain and the UAE dismissed Qatar's response to their 13 demands as “not serious” and pledged to continue to keep the Gulf state under political and economic sanctions until it changes its policies.And after a local businessman said he would import 4,000 cows to the gulf desert late last month, the first cows are already starting to arrive. As CNN Money reports, Qatar has taken delivery of 165 cows that were airlifted into the Gulf state to ease a milk shortage caused by sanctions imposed by Qatar’s neighbors. They are the first shipment for local dairy company, Baladna, which is ramping up production just weeks after Qatar's four Arab state antagonists cut off diplomatic ties. Qatar has repeatedly denied allegations that it supports terrorism, and has said it would not comply with the gulf state’s other demands, including shuttering its media properties, including Al Jazeera. The first cows, purchased from a German supplier, arrived Tuesday on a Qatar Airways flight from Budapest, Hungary. Other cows are expected to be sourced from the Netherlands, the U.S. and Australia. Most of Qatar's fresh milk and dairy products, meant for Doha’s more than 1 million residents, came from Saudi Arabia up until the sanctions were declared. That supply was cut off after the kingdom and its allies cut transport links with "a country that spends $500 million a week to prepare stadiums and a metro before the soccer World Cup in 2022. In an act of generosity toward its distressed Gulf neighbor, Iran dispatched four cargo planes of food to Qatar and plans to provide 100 tons of fruit and vegetable every day. Qatar has also been holding talks with Iran and Turkey to secure food and water supplies after Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut links, accusing Doha of supporting terrorism.

Turkey Deploys "Fifth Batch" Of Troops To Qatar -- While Rex Tillerson was actively seeking to resolve the Qatar crisis with his "shuttle diplomacy" tour across the Gulf, signing a memorandum of understanding with Qatar on fighting terrorism inDoha on Tuesday  after spending Monday in Turkey and Kuwait, Qatar said more Turkishtroops had arrived at a Turkish military base in Doha after Ankara fast-tracked legislation in June expanding the troop deployment to Qatar.  According to Gulf Times, the Directorate of Moral Guidance at the Ministry of Defence has announced the arrival of the fifth batch of Turkish troops in Qatar.According to the directorate, the batch is joining the Turkish forces currently in Doha (Tariq Bin Ziyad battalion camp). Arrival of the batch will boost training tasks within the framework of military co-operation between Qatar and Turkey and to activate the terms of defence agreements between the two countries.The latest "training" exercise at the Qatari base - which houses Turkish soldiers under an agreement signed in 2014 - has been ongoing since June 19, with the continued base existence one of the key demands in the recently rejected Saudi ultimatum. As a reminder, at the end of June, Riyadh laid down a list of 13 demands for Qatar, including the closure of Al-Jazeera television, a downgrade of diplomatic ties with Iran and the the closure of the Turkish military base in the emirate. The UAE warned that Qatar should take the demands seriously or face a "divorce" from its Gulf neighbors. Ten days later, Qatar denied the accusations, calling the move "unjustified."Even as the diplomatic crisis escalated, Turkey has been trying to do its best to mediate. Ankara displayed its support to Qatar as Parliament approved two deals to deploy troops to an air base in Qatar. Ankara's latest troop deployment to Qatar is meant to increase stability and help Turkish peacemaking efforts function better according to Reuters. The deal to deploy troops to Qatari soil, which is expected to improve the country's army and boost military cooperation, was signed in April 2016 in the Gulf country's capital Doha. The deal was approved by Parliament after a period of one year.

Are The Arab Nations On The Brink Of War? The Rift Between GCC Monarchies Saudi Arabia and Qatar -- Almost five weeks have passed since Saudi Arabia, its Gulf allies, and Egypt announced the start of a diplomatic boycott against Qatar—a fellow Arab monarchy which, the boycotters contend, encourages sectarianism in the Middle East and sponsors terrorist organizations.Doha has refused to comply with KSA and friends’ demands that it shut down renowned news outlet Al-Jazeera, end the construction of a Turkish military base inside Qatar, and cut off ties with Hezbollah and terrorist organizations. The whole list of demands includes 13 points, each one bent on curbing the Qatari diplomatic initiatives that contradict the Saudi Arabian foreign policy agenda. Risk consultancy Shadow Governance talks to OilPrice about the political players driving the landmark rift between GCC monarchies that has shaken Middle Eastern alliances without causing volatility in oil and natural gas prices. (Q & A)

The Recapture of Mosul - Iraq is declaring victory over Isis in Mosul as the Prime Minister Haider al-Abadi, wearing black military uniform, arrived in the city to congratulate his soldiers at the end of an epic nine-month long battle.Elite Iraqi government forces raised the Iraqi flag on the banks of the Tigris River this morning, though Isis snipers are still shooting from the last buildings they hold in the Old City.The magnitude of the victory won by the Iraqi government and its armed forces, three years after they suffered a catastrophic defeat in Mosul, is not in doubt.A few thousand lightly equipped Isis fighters astonished the world by routing in four days an Iraqi garrison of at least 20,000 men equipped with tanks and helicopters. The recapture of Mosul now is revenge for the earlier humiliation.The devastation in the city is huge: the closer one gets to the fighting in the centre, the greater the signs of destruction from airstrikes. Wherever Isis made a stand, Iraqi forces called in the US-led coalition to use its massive firepower to turn whole blocks into heaps of rubble and smashed masonry.A volunteer medical worker, who wished to remain anonymous, said that on bad days  “some 200 to 300 people with injuries had turned at my medical centre. I hear stories of many families dying, trapped in basements where they had been sheltering from the bombs.” Isis gunmen have slaughtered civilians trying to escape from areas they held.

CNN Hired Top al-Qaeda Propagandist for Award-Winning Syria Documentary and Wants to Cover Its Tracks --On June 16, an American media activist living in rebel-held Syrian territory sat down before a camera to vent his frustration with a former employer. Bilal Abdul Kareem described how he and his online outlet, On the Ground News, had been contracted by CNN to film the documentary Undercover in Syria.“This was with CNN and their correspondent Clarissa Ward, which I have big-time respect for, big-time respect as a journalist, as a person,” Abdul Kareem remarked.With a sardonic grin, Abdul Kareem described how he was slighted: “This Undercover in Syria, you can Google it — it won the prestigious Peabody Award, and it won the prestigious Overseas Press Club Award, which are basically the highest awards in journalism for international reporting. Now, [CNN] barely mentioned my name! I’m telling you, somehow CNN must have forgotten that I was the one that filmed it, I guess they forgot that.”Indeed, Abdul Kareem’s name was a mere footnote in the Peabody Awards press release on its honoring of CNN. The organization praised Clarissa Ward for “[going] undercover into northern Syria to document Russian influence on the fighting and to navigate the ongoing devastation,” but credited Abdul Kareem only in small print, despite the fact that he was responsible for providing CNN with its on-the-ground footage.

US-Russian Ceasefire Deal Goes Into Effect In Southwest Syria --A U.S.-Russian brokered ceasefire in southwest Syria was holding several hours after it took effect according to Reuters, the latest international attempt to restore peace in the six-year Syrian war. The truce, which took effect across southwest Syria on Sunday at noon Damascus time (09:00 GMT), extends to Syrian government forces and rebel groups in the provinces of Deraa, Quneitra, and Sweida where western-backed rebels control swathes of territory and form a center of the insurgency south of the capital Damascus.Last week, shortly after the first meeting between Trump and Putin, the United States, Russia and Jordan announced they had reached a ceasefire and "de-escalation agreement" with the aim of paving the way for a robust truce to deliver aid to war-torn areas and end hostilities; it will be enforced by the three countries’ militaries.The Syrian Observatory for Human Rights told Reuters that "calm was prevailing" with no air strikes or clashes in the southwest since the truce began at noon on Sunday."The situation is relatively calm," said Suhaib al-Ruhail, a spokesman for the Alwiyat al-Furqan rebel group in the Quneitra area. Another rebel official, in Deraa city, said there had been no significant fighting. It was quiet on the main Manshiya front near the border with Jordan, which he said had been the site of some of the heaviest army bombing in recent weeks. A witness in Deraa said he had not seen warplanes in the sky or heard any fighting since noon.Separately, a Syrian official indicated that Damascus approved of the ceasefire deal, describing the government's silence over it as a "sign of satisfaction"."We welcome any step that would cease the fire and pave the way for peaceful solutions," the government official told Reuters.

Secret Details of Trump-Putin Syria Cease-fire Focus on Iranian Proxies - A confidential U.S.-Russian cease-fire agreement for southwestern Syria that went into effect Sunday calls for barring Iranian-backed foreign fighters from a strategic stretch of Syrian territory near the borders of Israel and Jordan, according to three diplomatic sources. President Donald Trump hailed it as an important agreement that would serve to save lives. But few details of the accord have been made public. U.S. Defense Department officials — who would have responsibility for monitoring the agreement — appeared to be in the dark about the pact’s fine print. The pact is aimed at addressing demands by Israel and Jordan — the latter is a party to the agreement — that Iranian forces and their proxies, including Hezbollah, not be permitted near the Israeli-occupied Golan Heights, which separates Syria from Israel, or along the Jordanian border. But former U.S. diplomats and observers question whether the agreement is truly enforceable, expressing doubts that Russia could act as a reliable guarantor for a cease-fire involving the Syrian regime, Iran, and its proxies. “The question is, ‘Who is going to enforce that?’ Is Russia going to take on the responsibility for telling Iran what to do?” said Gerald Feierstein, a veteran U.S. diplomat who retired last year, noting that a peace deal without Iranian buy-in is untenable. “Iranians are much closer to Assad’s position on the way forward in Syria than the Russians are.” 

War & Cholera Decimate Yemen, But Saudi Bombing Gets More US Help - In this Real News Network interview, AlterNet reporter Ben Norton calls out US complicity in the Saudi-led war against Yemen. This conflict has spawned a  humanitarian crisis, including a cholera epidemic and a famine that threatens millions. (video & transcript)

Yemen cholera cases pass 300,000 mark, ICRC says -  A 10-week cholera epidemic has now infected more than 300,000 people in Yemen, the International Committee of the Red Cross (ICRC) said on Monday, a health disaster on top of war, economic collapse and near-famine in the impoverished country. "Disturbing. We're at 300k+ suspected cases with ~7k new cases/day," ICRC regional director Robert Mardini said in a tweet. The World Health Organization has said there were 297,438 suspected cases and 1,706 deaths by July 7, but it did not publish a daily update on Sunday, when the 300,000 mark looked set to be reached. A WHO spokesman said the figures were still being analyzed by Yemen's health ministry. Although the daily growth rate in the overall number of cases has halved to just over 2 percent in recent weeks and the spread of the disease has slowed in the worst-hit regions, outbreaks in other areas have grown rapidly. The most intense impact has been in areas in the west of the country which have been fiercely contested in the two-year war between a Saudi-led coalition and armed Iran-aligned Houthi rebels. The war has been a breeding ground for the disease, which spreads by faeces getting into food or water and thrives in places with poor sanitation. In the past week a first few cases have appeared in Sayun city and Mukalla port in Hadramawt region in the east. Yemen's economic collapse means 30,000 healthworkers have not been paid for more than 10 months, so the U.N. has stepped in with "incentive" payments to get them involved in an emergency campaign to fight the disease.The WHO has said its response, based on a network of rehydration points and the remnants of Yemen's shattered health system, has succeeded in catching the disease early and keeping the death rate from the disease low, at 0.6 percent of cases. 

Radiation and ringworm: a tale of social policy, racism, and health care -- On June 14, 2017, the Israeli newspaper, Israel Hayom, published an extraordinary report documenting medical experiments on mostly Yemenite children who subsequently “disappeared”; those who died were autopsied without parental consent, the parents were often not allowed to see their dead children, and no death certificates were provided. Since Operation Magic Carpet, 1949 to 1950, when 49,000 Jewish Yemenites were airlifted to Israel to grow the Jewish population and counteract the procreating Palestinians, there have been three official inquiries exploring egregious and unethical patterns of behavior towards Yemeni children by the medical and social service communities. Previous Israeli committees concluded that no children were kidnapped, although some children died or were adopted by Ashkenazi families without the birth parents’ consents. Parents were simply told their children had died. Israel Hayom also documented an experimental treatment on four malnourished babies who subsequently died from the injection of a “dry protein” created from plasma as well as an attempt to prove (using faulty assays and assessments) that Yemenite children were of African descent by testing dead children for sickle cell anemia, again without consent. (There was no evidence for sickle cell but the researcher published a scientific paper before he was proven wrong.) Despite the Israeli state’s efforts to delegitimize and silence this information, (no investigation, no crime), the kidnapping of up to ten thousand Yemenite babies in immigrant absorption camps for adoption by Ashkenazi families was well documented in 2013 and 2014 by the Israeli webzine +972.  In the 2013 article, the information is based on the 2009 book by Shoshana Madmoni-Gerber, Israeli Media and the Framing of Internal Conflict: The Yemenite Babies Affair.  While the Israeli press largely stood by the official state narrative (nothing could have happened and besides, data was classified or lost), this attitude was reinforced by racist stereotypes towards Yemenites as primitive, ignorant, and uncaring towards their children. In short, adoption was “doing them a favor.” Additionally, the fact that the cover-up persisted for decades reflects the continued racism within Israeli society and the medical establishment. The forcible transfer of babies is also defined by the UN as genocide and clearly no one in Israel is going to admit to that.

U.S. Oil Exports Reduce Trade Deficit with China -There's a really exciting story developing in the international trade between the United States and China, two of the world's largest trading partners.  Here, the legalization of oil exports in 2016 from the United States has subsequently led to a rather dramatic surge in exports of petroleum products from the U.S. to China in 2017. China imported nearly 100,000 barrels of crude oil per day from the U.S. in the first five months of 2017, 10 times the average in 2016, according to data by the Chinese customs. The upward trend seems to be picking up speed. In April and May, imports surged to more than 180,000 barrels per day on average. In February, China became the biggest buyer of U.S. crude oil, surpassing Canada, at a time when OPEC was scaling back its output, according to Bloomberg. China's own falling production, political uncertainty in the Middle East – on which China has long depended for fuel – and the cheaper price of US oil have contributed to the increase in imports. According to the U.S. Census Bureau's data on international trade, China imported nearly $496 million of U.S. crude oil, refined oil and other petroleum derived products in May 2017, which was more than double the $214 million of these goods that it imported from the U.S. in May 2016. Altogether, these petroleum exports accounted for 5.2% of all the oil that the U.S. exported to all other countries during May 2017, and 4.9% of the value of all the goods and services that the U.S. exported to China during the month.  For the first five months of 2017, the Census Bureau reports that the cumulative value of U.S. crude oil, petroleum gases and refined petroleum to China totals over $2.76 billion. For just U.S. crude oil exports, China has purchased $1.6 billion, which represents 21% of all U.S. crude oil exports to the world from January through May 2017.

China sets up base in Djibouti - (Xinhua) -- Ships carrying Chinese military personnel departed Zhanjiang in southern China's Guangdong Province on Tuesday to set up a support base in Djibouti.Shen Jinlong, commander of the People's Liberation Army (PLA) Navy, read an order on constructing the base in Djibouti, and conferred military flag on the fleets.The establishment of the PLA Djibouti base was a decision made by the two countries after friendly negotiations, and accords with the common interest of the people from both sides, according to the PLA navy.The base will ensure China's performance of missions, such as escorting, peace-keeping and humanitarian aid in Africa and west Asia.The base will also be conducive to overseas tasks including military cooperation, joint exercises, evacuating and protecting overseas Chinese and emergency rescue, as well as jointly maintaining security of international strategic seaways.

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