Sunday, October 1, 2017

US oil production at a 26 month high, US oil exports at a record high..

both US and international oil prices were higher again this week, largely on the strength of a Monday rally that saw US WTI prices rise $1.56 a barrel to a 5 month high at $52.22 a barrel, while North Sea Brent rose $2.16 a barrel to $59.02 a barrel...prices for both oil contracts then fell back in profit taking on Tuesday, with US WTI for November delivery shedding 34 cents and closing at $51.88, while Brent for November delivery fell 58 cents to 58.44 a barrel...however, after Wednesday's EIA report showed that US crude exports were at a record high, US oil prices rose 26 cents to $52.14, while the international benchmark price fell 54 cents to $57.90 a barrel...prices for both crude grades pulled back on Thursday as oil traders closed out their positions ahead of the end of the third quarter, with US crude falling 58 cents to 51.56 a barrel and Brent falling 59 cents to 57.41...however, the oil price rally resumed on Friday, on fears of geopolitical instability in Iraqi Kurdistan, with US crude prices finishing 11 cents higher at $51.67 a barrel, thus closing September with a 9.4% increase, their largest monthly gain since April 2016, while Brent prices ended the day up 13 cents at $57.54 a barrel in the strongest 3rd quarter gain for the international oil benchmark in 13 years..

now, although we've been warning over the past few weeks that such a large price difference between the US benchmark and the international oil price would lead to a surge in US crude exports, and although we did see a record for US crude exports this week, we're not yet sure that the coincidence is connected, as we did think it would take more than a few weeks for that price driven trade in physical oil to develop...let's take a look at a graph of recent US exports so i can point out the reason for my skepticism...

September 27 2017 oil exports as of Sept 22nd

the above graph comes from a weekly emailed package of oil graphs from John Kemp, senior energy analyst and columnist with Reuters...this graph shows weekly US crude oil exports in thousands of barrels per day over the past 13 months, and also gives us the exact amount of our crude exports in thousands of barrels per day over the past 4 weeks...what we can see from the recent history is that our weekly crude oil exports have been very volatile this year, generally over 500,000 barrels per day, but occasionally jumping to as high as 1,200,000 or 1,300,000 barrels per day...the reason that the volume of our crude exports appears so irregular is largely due to the size of the oil tankers and the time it takes to load them...the largest oil tankers can transport as much as 2,000,000 barrels of oil at once, so any week when a number of tankers happen to leave port within a few days of each other, we're going to see a spike in exports on a barrels per day basis...

with that in mind, then, look above at our oil exports for the last 4 weeks...in the week ending September 1st, our oil exports fell to a 3 year low at 153,000 barrels per day, as Hurricane Harvey shut down Corpus Christi and other Texas oil export ports...there was then a recovery to 774,000 barrels per day during the week ending the 8th, and to 928,000 barrels per day during the week ending September 15th, a time when many Texas ports still had draft restrictions in place, limiting the size of the ships that could enter...so it's possible that this week's spike in oil exports was just 'catching up' after Harvey, as the larger tankers that had been waiting offshore were finally docked, filled and departed...that's not to say that US oil exports wont eventually rise due to the lower price of US crude compared to that of international grades, but that from what we see here, we don't yet know if that has yet begun....

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 September 22nd, showed a big increase in the amount of oil used by refineries, that aforementioned big jump in our oil exports, and just modest increases in US oil production and imports, and as a result our crude oil supplies fell for the first time in four weeks....our imports of crude oil rose by an average of 59,000 barrels per day to an average of 7,427,000 barrels per day during the week, while at the same time our exports of crude oil rose by 563,000 barrels per day to a record high of 1,491,000 barrels per day, which meant that our effective imports netted out to an average of 5,936,000 barrels per day during the week, 504,000 barrels per day less than during the prior week...at the same time, our field production of crude oil rose by 37,000 barrels per day to an average of 9,547,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 15,583,000 barrels per day during the reported week... 

during the same period, US oil refineries were using 16,174,000 barrels of crude per day, 1,002,000 barrels per day more than they used during the prior week, and at the same time 377,000 barrels of oil per day were being withdrawn from oil storage facilities in the US...hence, 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 314,000 fewer barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+314,000) 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"...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 7,090,000 barrels per day, which was 9.3% below the imports of the same four-week period last year....the rounded 377,000 barrel per day withdrawal from our total crude inventories came about on a 264,000 barrel per day addition to our commercial stocks of crude oil and a 114,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which is still being tapped to address temporary spot shortages caused by Hurricane Harvey...this week's 37,000 barrel per day increase in our crude oil production was the result of a 16,000 barrels per day increase in oil output from wells in the lower 48 states and a 21,000 barrel per day increase in oil output from Alaska...the 9,547,000 barrels of crude per day that were produced by US wells during the week ending September 22nd was the most oil produced in any week since July 17th, 2015, 8.9% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 12.4% more than the 8,497,000 barrels per day of oil we produced during the during the equivalent week a year ago, while it was still 0.7% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015...  

US oil refineries were operating at 88.6% of their capacity in using those 16,174,000 barrels of crude per day, up from the of 83.2% of capacity the prior week, but down from the 96.6% capacity utilization rate in the week before Harvey struck....the 16,174,000 barrels of oil that was refined this week was up 14.9% from the 14,078,000 barrels of crude per day that were being processed two weeks earlier, but still 8.8% less than the 17,725,000 barrels per day that were being refined four weeks earlier, and 1.0% below the 16,334,000 barrels of crude per day that were being processed during week ending September 23rd, 2016, when refineries were operating at 90.1% of capacity...

even with the big increase in US oil refining, gasoline production from our refineries rose by just 62,000 barrels per day to 9,855,000 barrels per day during the week ending September 22nd...however, that gasoline output was still 3.1% higher than the 9,555,000 barrels of gasoline that were being produced daily during the comparable week a year ago....at the same time, our refineries' production of distillate fuels (diesel fuel and heat oil) rose by 97,000 barrels per day to 4,639,000 barrels per day, which was still 1.5% less than the 4,709,000 barrels per day of distillates that were being produced during the week ending September 23rd last year....   

with the increase in gasoline production, our end of the week gasoline inventories rose by 1,107,000 barrels to 217,292,000 barrels by September 22nd, only the 4th increase in gasoline inventories in 15 weeks...that increase was largely because our imports of gasoline rose by 354,000 barrels per day to 1,041,000 barrels per day while our exports of gasoline rose by just 6,000 barrels per day to 550,000 barrels per day, and while our domestic consumption of gasoline rose by 81,000 barrels per day to 9,522,000 barrels per day....still, with significant gasoline supply withdrawals in 11 out of the last 15 weeks, our gasoline inventories are still down by 10.3% from June 9th's level of 242,444,000 barrels, and 4.4% below last September 23rd's level of 227,183,000 barrels, even as they are still roughly 2.7% above the 10 year average of gasoline supplies for this time of the year... 

  even with the increase in our distillates production, their output still remained below normal, and hence our supplies of distillate fuels fell by 814,000 barrels to 138,045,000 barrels over the week ending September 22nd, following a big 5,693,000 barrel drop the prior week....that was mostly because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 518,000 barrels per day to 3,746,000 barrels per day, and as our exports of distillates fell by 84,000 barrels per day to 1,093,000 barrels per day, while our imports of distillates at 84,000 barrels per day were little changed from the prior week...after this week’s decrease, our distillate inventories ended the week 15.3% lower than the 163,077,000 barrels that we had stored on September 23rd, 2016, and 4.2% lower than the 10 year average for distillates stocks for this time of the year

finally, with the big jump in our oil exports and the increase in the use of crude by our refineries, our commercial crude oil inventories fell for the first time in four weeks, decreasing by 1,846,000 barrels to 470,986,000 barrels as of September 22nd, also the 21st decrease in the past 26 weeks...while our oil inventories as of September 15th were still fractionally below the 472,084,000 barrels of oil we had stored on September 23rd of 2016, they were still 10.6% higher than the 425,988,000 barrels in of oil that were in storage on September 25th of 2015, and much higher than the normal level for our oil supplies in the years before the oil glut started building up, ie., 44.7% greater than the 325,465,000 barrels of oil we had in storage on September 26th of 2014... 

This Week's Rig Count

US drilling activity increased for just the 4th time in the past 12 weeks during the week ending September 29th, after a string of 23 consecutive weekly increases earlier this year, with oil well drilling up while gas well decreased....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 5 rigs to 940 rigs in the week ending Friday, which was 418 more rigs than the 522 rigs that were deployed as of the September 30th report in 2016, while it was 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 was up by 6 rigs to 750 rigs this week, their first increase in 8 weeks, which still put oil rigs up by 325 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations decreased by one rig to 189 rigs this week, which was 93 more rigs than the 96 natural gas rigs that were drilling a year ago, but still way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, one rig that was classified as miscellaneous continued drilling this week, same as a year ago...

drilling started from 3 more platforms off the Louisiana coast this week, and hence the Gulf of Mexico rig count increased by 3 to 22 rigs this week, which was hence up from the 21 rigs that were drilling in the Gulf a year ago...however, a year ago there was also a rig drilling the Cook Inlet, offshore of Alaska, which means this week's total offshore rig count of 22 is the same as that of a year ago....however, another platform that had been drilling on an inland lake in southern Louisiana was shut down this week, leaving an 'inland waters' count of just 2 rigs, down from 3 on inland waters a year ago... 

the count of active horizontal drilling rigs rose by 4 rigs to 794 rigs this week, which was also up by 387 rigs from the 407 horizontal rigs that were in use in the US on September 30th of last year, but was still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....at the same time, the directional rig count was up by 5 rigs to 82 rigs this week, which was also up from the 51 directional rigs that were deployed on September 30th of 2016.....on the other hand, the vertical rig count was down by 4 rigs to 64 vertical rigs this week, the same number of vertical rigs that were deployed during the same week last year...  

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 29th, the second column shows the change in the number of working rigs between last week's count (September 22nd) and this week's (September 29th) count, the third column shows last week's September 22nd 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 for the 30th of September, 2016...      

September 29 2017 rig count summary

what you might immediately notice from the above table is that despite an increase of 5 rigs nationally, and an increase of 4 horizontal rigs, the count of rigs in the major geological oil and gas basins that are tracked separately is down...that's mostly because neither of the oil basins in Utah, the state with the largest rig count increase this week, are covered individually by this Baker Hughes report (there is a North America Rotary Rig Count Pivot Table (xls) which covers each well drilled since 2011 as a line item, but it's tedious to search through)...so except for that 4 rig increase in Utah, and the 3 rig increase in the Gulf of Mexico off Louisiana, drilling in the rest of the country was pretty much stagnant, with Oklahoma, where their horizontal drilling has been damaging their old vertical wells, seeing the largest decrease...and in addition to the major producing states shown on the table above, both Illinois and Mississippi saw single rig increases this week; those additions increased Illinois drilling activity to 2 rigs, same as a year ago, and increased the Mississippi count to 4 rigs, up from 3 rigs a year ago...

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Ohio Communities Face 'Voter Suppression' in Push to Rein in Oil and Gas Development - DeSmog (blog) Three years in a row, communities in Ohio have attempted to vote on initiatives that would grant them greater say over oil and gas development in their jurisdictions, but over and over again, appointed officials, some with direct ties to the fossil fuel industry, have put up roadblocks preventing these initiatives from reaching the ballot.  “We’re losing our ability to legislate and be a check and balance on the government,” Tish O’Dell of the Ohio Community Rights Network told DeSmog on September 15.  O’Dell had just learned that yet another local ballot measure — this one in Bowling Green, Ohio — was facing a possible legal challenge. “The Bowling Green initiative is the only one that made it through all the administrative hurdles to get on [the ballot],” O’Dell said. It is the latest in a flurry of anti-fossil fuel ballot initiatives across Ohio which have gained the required number of signatures but likely won’t appear on ballots come election day. This year, initiatives in Youngstown, Medina County, and Athens County have all been taken off the ballot. These ballot initiatives are a response to the surge in activity related to hydraulic fracturing (fracking) and pipeline development in Ohio and would establish new county charters or amendments to city charters that elevate the communities’ governing authority over legal privileges enjoyed by the industry. The officials placing roadblocks in the way of the county charters often have close connections to the very industry threatened by the local initiatives. Husted, a lead 2018 candidate for governor, has been the beneficiary of large campaign contributions and fundraising events put on by the oil and gas industry. And some of the local boards of elections have even closer ties to Ohio’s powerful fossil fuel industry. For example, one member of the Meigs County Board of Elections that took a county initiative off the ballot last year is Ohio Gas Association President Jimmy Stewart.

High Court shoots down third local anti-fracking charter - For the third year in a row, the Ohio Supreme Court has rejected a proposed county charter that otherwise would have gone to Athens County voters for consideration. The Athens County Bill of Rights Committee (ACBORC) has been working to bring its anti-fracking charter to voters since 2015, with the case reaching the Ohio Supreme Court each year and being rejected by the high court each year.  In July, the Athens County Board of Elections rejected the ACBORC charter as invalid by saying that a proposed executive council (comprising county elected officials who aren’t county commissioners) does not meet Ohio Revised Code requirements for a county executive under an alternative form of government. As with initiatives in the previous two years, this charter proposal doubles as an effort to keep oil and gas horizontal hydraulic fracturing (fracking) out of Athens County, through prohibiting the use of local water for fracking operations. It also would outlaw future fracking waste-injection wells, of which Athens County already has several in operation. In a split decision, the Ohio Supreme Court rejected the charter with two justices concurring, three more concurring in judgment only, and two dissenting. Like last year, the state high court rejected the charter saying it failed to provide for the exercise of all powers and duties of county government. “The Athens County charter petition is nearly indistinguishable from the language we rejected in (previous cases),” the decision said, taking issue with language that refers to duties of and compensation for county officials to be determined “in the manner provided by general law.” “The constitutional language is clear: a county charter must provide for the exercise of all powers, and the performance of all duties, imposed on counties and county officers by law,” the majority decision said. “For this reason, the boards did not abuse their discretion when they invalidated the petitions.” The majority decision was concurred upon by Chief Justice Maureen O’Conner and Justice Judith French. Justices Sharon Kennedy and Terrence O’Donnell concurred in judgment only but did not offer an opinion.

More than $200000 netted in latest eastern parcel lease to oil and gas companies - The Bureau of Land Management released another 142 acres of Wayne National Forest on Sept. 22 for private industries to lease with the intent of extracting oil and gas. The sale, combined with other parcels sold in Louisiana, netted the BLM more than $200,000, according to a press release.The BLM started selling parcels of the Wayne National Forest, Ohio’s only national forest, starting in September 2016. BLM spokesperson Davida Carnahan said in February that they intend to release parcels quarterly. The BLM also sold parcels in Louisiana. Some citizens worry the action could lead to hydraulic fracturing, a process in which chemicals are injected into the ground to fracture the earth and release natural gas. Since the BLM only leases the parcels to oil and gas companies, activists have the opportunity to submit proposals and protests through a formal process prior to the sale. 10 protests were made regarding the sales in the two states, but none of the six parcels were removed. Previous sales of the Wayne National Forest have yielded more than $7 million. The oil and gas companies that purchase the land are required to pay the federal government a royalty equal to 12.5 percent the value of production.Ohio receives 25 percent minimum of sales within the state.

Fracking Protesters: Our Concerns Are Being Ignored – WOUB -- Environmental activist groups say a federal agency is ignoring their concerns and protests over the leasing of land for oil and gas development in the Wayne National Forest.Bureau of Land Management (BLM) officials held a third lease auction of the Wayne National Forest on Thursday, leasing another 141 acres to develop “oil and gas reserves” in Monroe County.Two other auctions leasing out an over 1900 acres combined were held in December of 2016 and March, netting the BLM about $6.8 million in revenue total.Local activist groups such as “Keep Wayne Wild” and the Ohio chapter of the Sierra Club organization protested in front of the Wayne National Forest’s Marietta office on Sept. 9, but many of these protesters feel their efforts are brushed aside.“All of these auctions are going to happen until a judge or a court looks at the lawsuit,” said Roxanne Groff from the Athens County Fracking Action Network. “There’s no choice, really. As in other areas around the world, protests can go as far as interrupting the drilling process, but that can only do so much.”Environmental activists are particularly concerned about the third auction lease because of the parcels’ proximity to the planned route of the Rover Pipeline, a pipeline that will deliver processed natural gas from fracking Utica shale to delivery points in northern Ohio and Michigan.The Rover Pipeline had recent spills of “drilling mud” into Ohio wetlands in April, which activists are worried could happen in the Wayne National Forest.In a formal protest petition of the September auction filed by the Center for Biological Diversity and other groups in July, the petition asserts the BLM has not conducted an environmental impact analysis (EIA) for the cumulative impact of fracking in the Wayne National Forest and the potential effects of the nearby Rover Pipeline, as required by the National Environmental Policy Act.   The Center for Biological Diversity also sued the BLM and U.S. Forest Service in May in an attempt to void the past two lease auctions under similar grounds, arguing past EIA’s have not sufficiently analyzed the negative effects of fracking to the area. “I think what we’re seeing is shoddy environmental analyses being put forward by an agency that’s being pushed by the Trump administration to increase fossil fuel production at any cost,”

Frack My Land or Lose the Rights, Ohio Woman Tells Driller - A company that is drilling for oil could be forced to extract natural gas, as well, on an Ohio property or lose those rights as part of a lawsuit that tests the requirements of a 37-year-old contract signed before fracking became commonplace. The lawsuit, considered by the Ohio Supreme Court Sept. 26, turns on a 1980 contract that Linda Alford signed with Collins-McGregor Operating Co., allowing it to drill for oil on 74 acres of her property near Ohio’s West Virginia border. The drilling company has continually extracted oil from the property as required by the contract, but Alford wants to force the company to dig deeper for natural gas—or allow her to sell those rights to another firm now that hydraulic fracturing is more practical and lucrative ( Alford v. Collins-McGregor Operating Co., Ohio, No. 2016-1281, oral argument 9/26/17 ). Forcing Collins-McGregor to explore deep fracking would be the first such requirement in the nation and would be prohibitive to smaller companies only interested in oil, Brent Barnes of Geiger Teeple Robinson & McElwee PLLC, the attorney representing the company, said at the court hearing. He estimated fracking Alford’s property would cost between $8 million and $10 million. Imposing the requirement retroactively also would force drilling companies to perform work they never intended when they entered into contracts with landowners, Barnes said. A majority of justices appeared reluctant to expand this new duty to oil and gas leases in Ohio. Justices R. Patrick DeWine, Terrence O’Donnell, Patrick Fischer, and Chief Justice Maureen O’Connor all asked questions that seemed to show they were concerned about implications for the industry.  “So, because you have a right you must use it?” O’Donnell asked Alford’s attorney Sean Scullin of Scullin & Cunning LLC. “So the lease just says, ‘develop,’ and they’re in compliance because they’re developing their shallow rights.”Scullin argued that the deeper rights weren’t part of the contract at all back in 1980 because fracking wasn’t in the picture. For older contracts that still include these inherent duties, companies should be required to develop natural gas through fracking or allow landowners to re-sell those fracking rights so that the industry can take full advantage of the state’s natural resources, he said. Only Justice William O’Neill asked questions that could be seen as supporting extending this duty on drillers.

County, public remained in dark about big methane leak  -- lancasteronline.com: One night in early September, a critical piece of natural gas infrastructure temporarily blew its stack. By the time a resident heard the racket, dialed 911 and workers responded, the Harmony compressor station in rural northeastern Pennsylvania had spewed more than twice as much natural gas into the air as a typical compressor station does in a year. Yet the Sept. 2 leak was not made public by any state agency or by the company itself. The Associated Press learned of it during a review of calls to the U.S. Coast Guard's National Response Center hotline for discharges of oil, chemicals and other substances. County emergency management officials found out the same way — about a week after the fact. They said the station's operator, Detroit-based DTE Energy, should have notified them at the time of the release so they could've taken steps to make sure residents were out of harm's way. "If it's something like this that's larger, we definitely need to know about it," said Robert Thatcher Jr., coordinator of the Susquehanna County Emergency Management Agency. "I don't know why they didn't contact us. That's a question that DTE needs to answer."State regulations require operators of compressor stations to "immediately" alert county emergency officials when there's an "imminent and substantial danger to the public health and safety." The company might not have seen the methane release as a serious situation that warranted public notice, as the nearest residence is more than a half-mile away. There was no explosion and no one was hurt. 

2.9 Million Children Are Threatened by Toxic Air Pollution From Oil & Gas Development - A new analysis of state and federal data shows 2.9 million children enrolled in schools and daycares across the country are threatened by oil and gas air pollution . Released by the national environmental group Earthworks , this new analysis is part of a larger update to The Oil & Gas Threat Map , a map-based suite of tools designed to inform and mobilize Americans about the health risks from the oil and gas industry's toxic air pollution.  The Obama-era U.S. Environmental Protection Agency (EPA) and Interior Department issued rules to limit this type of oil and gas pollution. The Trump administration is now trying to block and revoke these rules before they go into effect.  "My two sons are among the millions of children who go to school near oil and gas operations that threatens their health and safety," said Patrice Tomcik, National Oil and Gas program coordinator with Moms Clean Air Force , from Southwest Pennsylvania. She continued, "Children are especially vulnerable to these threats, including cancer, respiratory illness, fetal defects, blood disorders and neurological problems. With so many children living, playing and learning in close proximity to oil and gas production, it is unconscionable that our federal government wants to stall and revoke safeguards that protect our children from this industrial pollution. Moms want to see these vital safeguards implemented, not ignored."  The Oil & Gas Threat Map maps the nation's 1.3 million active oil and gas wells, compressors and processors. Using peer-reviewed research into the health impacts attributed to oil and gas air pollution, the map conservatively draws a 1/2 mile health threat radius around each facility. Within that total area are:

  • 2,944,785 students attending 9,102 schools, colleges and day care facilities;
  • 12.5 million people living in their homes including
  • 3,035,508 children under 18
  • 1,756,398 senior citizens 65 and over;
  • 2,292 medical facilities; and
  • all encompassed by the 187,413 square miles—an area larger than California—that lay within 1/2 mile of 1,292,669 oil and gas production facilities.

Pipeline opponents sue Sunoco, alleging constitutional violations - Four opponents of the Mariner East 2 pipeline sued Sunoco Pipeline and its parent, Energy Transfer Partners, in federal court on Monday, alleging the company violated several constitutional rights when police arrested the plaintiffs on a private property in Huntingdon County.  The suit accuses Sunoco, plus a private security firm, a publicist, and 27 state and local police officers of violating constitutional protections over free speech, false arrest, malicious prosecution and equal protection when the plaintiffs were arrested on the property owned by the Gerhart family in March 2016.  The claims stem from a confrontation between the Gerharts and their supporters, and Sunoco and law-enforcement officers on March 29, 2016 when a tree-cutting crew entered an easement that the company obtained through eminent domain on the Gerharts’ land to build the pipeline. The day before the incident, the Huntingdon County Court of Common Pleas ordered that no-one may interfere with Sunoco’s work on the easement, including the cutting of trees. A 36-page complaint filed in U.S. District Court for the Middle District of Pennsylvania says the company entered the property almost a year before the final state permits were issued for pipeline construction, and before it was allowed to do so under a “writ of possession” issued by a state judge in April this year.  Officers arrested the co-owner of the 27-acre property, Ellen Gerhart, plus her daughter Elise Gerhart, and protesters Alex Lotorto and Elizabeth Glunt, the complaint says. Lotorto did not enter the easement and did not interfere with the work going on there but was handcuffed and detained for three days before being released without charge.

Cabot Oil & Gas settles fracking lawsuit with Pennsylvania families (Reuters) - Cabot Oil & Gas Co. has settled a lawsuit filed by two families in Dimock, Pennsylvania, who alleged their homes’ drinking water became contaminated with methane not long after the company began drilling for natural gas in 2007. The Ely and Hulbert families initially won $4.2 million in damages in a federal jury trial in Scranton last year, but Magistrate Judge Martin Carlson threw out the verdict as unjustified and ordered the parties to begin settlement talks. The terms of the settlement have not been made public. Leslie Lewis, the New York lawyer who represented the families, declined on Tuesday to comment on the terms. “After nine long years, the plaintiffs are happy and relieved to put the matter behind them,” Lewis told Reuters. Neither Cabot Oil & Gas spokesman George Stark nor the company’s lead lawyer, Stephen Dillard, could be reached for comment on Tuesday. Carlson approved the settlement on Sept. 21, court records show. Dimock, Pennsylvania was at the heart of the Marcellus Shale gas fracking boom that began in 2007. Residents complained that Cabot’s drilling caused methane gas to migrate to their wells, so much that they could light their tap water on fire. Flaming tap water in Dimock was a highlight of the 2010 Oscar-nominated documentary, “Gasland,” written and directed by Josh Fox. Residents also complained that their water had turned brown and corrosive.

New Pipelines Report Shows the ACP Is Part of a Widespread, Systemic Market Failure - Energy Collective - Anyone who examines the corporate deals that underlie the Atlantic Coast Pipeline comes away with a strong sense of looking at a broken regulatory system. The Federal Energy Regulatory Commission (FERC) is supposed to approve only those pipelines that can demonstrate they are actually needed. Pipeline companies demonstrate need by showing that customers have contracted for most or all of the pipeline’s capacity. In the case of the ACP, Dominion Energy and its partners manufactured the need by making their own affiliates the customers of the pipeline.What’s weird is that FERC seems to be okay with this. It recently approved another pipeline with a similar setup—the Nexus pipeline that will carry fracked gas from Ohio through Michigan to Canada. FERC ignored blatant self-dealing between the pipeline company and its regulated utility affiliate, including clear evidence the regulated utility affiliate increased its share of the pipeline’s capacity only to create a “need” for its parent company’s project.A new report from Oil Change International concludes the U.S. is currently building unneeded fracked-gas pipelines as a result of FERC’s regulatory failures, including its failure to police self-dealing. The result will be excess pipeline capacity, paid for by regulated utility customers. The primary cause of the overbuilding, and the reason companies like Dominion engage in self-dealing to create the impression of “need,” is that FERC sets an absurdly high rate of return on pipelines—14%, compared to a typical utility rate of return of 10%. FERC set the high rate back in 1997 when interest rates were double what they are now, so it was more expensive to build large infrastructure. FERC hasn’t changed the rate since then even though it is causing obvious market distortions—and creating an incentive for utilities to jump into the pipeline business.

LePage wants to develop a new gas pipeline from Quebec - Portland Press Herald: — Frustrated by failed attempts to greatly expand natural gas capacity in New England, Gov. Paul LePage said Thursday that he wants to develop a new pipeline from Quebec into Maine in an effort to lower energy prices for homes and businesses. “We cannot move forward as a state without more pipeline capacity,” LePage told a meeting of industry professionals and other business people at the fifth annual Natural Gas Conference held at The Woodlands Club in Falmouth.LePage told the group he plans to meet with officials in Quebec in the next month or so. In subsequent comments to the Portland Press Herald, LePage said the province is interested in a new gas line that could bring supply from western Canada through Maine.“The Canadians want to help,” he said.Attempts to reach the Canadian Consulate General in Boston were unsuccessful Thursday.LePage’s energy office is in contact with the consulate, which currently is led by David Alward, a former New Brunswick premier. LePage supported Alward’s attempts to bring a proposed crude oil pipeline from western Canada to New Brunswick.Maine officials have been trying for years to expand pipeline capacity in an effort to ease the hefty price differential that manufacturers pay for energy, compared to their competitors in the Southeast and Midwest. Those efforts have largely been stalled by public and political opposition to building new pipelines to the south, notably in Massachusetts. Maine is affected because the lines that bring lower-cost natural gas from Pennsylvania and New York must first pass through Massachusetts, supplying homes, businesses and power plants along the way. On the coldest days, there’s not enough gas to meet all the region’s demand, causing prices to spike. At the same time, environmental groups in Maine have been fighting pipeline expansions, favoring investments in efficiency, wind and solar.

West Virginia's regulatory environment markedly different than neighboring Pennsylvania - The Exponent Telegram  — Industry leaders were told this week West Virginia, Pennsylvania and Ohio couldn't be more different when it comes to the regulatory environment governing oil and gas operations.  Babst Calland's Blaine Lucas told attendees at Shale Insight 2017 in Pittsburgh this week that West Virginia case law governing local pre-emption — the line between local government authority and state controls — is relatively straightforward: First, a Monongalia County circuit judge nixed a ban on fracking within a mile of Morgantown's city limits in 2011. Then, just a few months ago the Fourth U.S. Circuit Court of Appeals upheld a federal judge's finding that Fayette County commissioners had overstepped their authority when they attempted to ban handling, storage and disposal of wastewaters associated with oil and gas operations within their county — essentially making any oil and gas operations a punishable offense. In the Fayette County decision, Appeals Judge Pamela Harris pointed out West Virginia law "simply does not permit a county to ban an activity — here, the permanent disposal of wastewater ... underground injection control wells — that is licensed and regulated by the state pursuant to a comprehensive and complex permit program.” "In West Virginia it's now fairly clear local regulation is preempted, and as a practical matter, very few counties in West Virginia have a zoning ordinance anyway," In Ohio, Lucas said recent decisions suggest local government control over the oil and gas has largely been preempted, "but that's not certain." The community of Munroe Falls, Ohio, tried at least twice to keep Beck Energy from drilling within city limits: In 2015 the Buckeye State's highest court dissolved an injunction the city had won in Summit County even though Beck Energy's drilling operation had been permitted. The city sued and lost again, though this time the Ohio Supreme Court ordered Munroe Falls to pay $45,000 in legal fees Beck Energy had racked up defending itself against what the court called a frivolous lawsuit. "In one case the Ohio Supreme Court bounced (it) off the ballot because it didn't deal with constitutional issues," Lucas said, noting the court has made it clear local government has very little jurisdiction. The regulatory environment in Pennsylvania is much different: A 2013 Supreme Court decision struck down sections of the state’s Oil and Gas Act that stripped local zoning regulations of their teeth. And earlier this year the same court decided any royalty payments the state received from the shale industry can only be used for environmental preservation.

Illinois has a choice to make about fracking—and Rauner is making the wrong one - Last month, the Illinois Department of Natural Resources granted its first high volume fracking permit to Woolsey Energy, a Kansas fracking company with a history of accidents. Woolsey applied for the permit in May but the application had so many deficiencies, it had to be resubmitted three times. Many of the people who worried about fracking in 2013 are even more worried now. Illinois People's Action and its coalition members, Fair Economy Illinois, are among them. We assert that the HFRA essentially provides an open-book test for completing an Illinois fracking application. Woolsey failed the test. Not once, but three times. The deficiencies weren't minor—missing data, inaccurate calculations, incomplete plans and, in the case of a Water Conservation Plan, no plan at all. Woolsey claimed that the Illinois law is more complicated than the Kansas law. This doesn't inspire confidence. In fact, there were 7,500 concerned comments submitted to the IDNR on Woolsey's application. But this time, the comments did not slow the process down. Quite the opposite. When the company submitted a shoddy application, IDNR walked Woolsey's execs through process. Instead of protecting the health and welfare of the people, IDNR enabled the corporation. The Illinois Constitution states "each person has the right to a healthful environment" (Article 11, Section 2). In Rauner's rush to embrace fracking, the permit was approved. With the governor's blessings, IDNR has become a captured agency of big energy.  Woolsey will be fracking for oil as the well sits over the top of the Illinois Oil Basin. If gasoline prices continue to rise in the wake of Hurricane Harvey, fracking may be knocking on the door of many Illinois communities. We don't need the oil or gas that Illinois fracking would produce. And we certainly don't need the negative environmental and health effects. Illinois could be a national leader in clean, renewable energy. We can move forward or we can move backward. Most Illinoisans choose to move forward. Gov. Rauner, listen to your constituents.

Enbridge Line 3 pipeline debate shifts to public hearings | Fox Business: Minnesota kicks off public hearings this week on whether regulators should allow Enbridge Energy to replace its aging Line 3 crude oil pipeline across northern Minnesota. The replacement would have higher capacity than the existing pipeline and run along a new route in some areas — two characteristics that opponents say shows it's more like a new pipeline than a replacement. Environmental and tribal groups say they expect hundreds of people to protest and march against the project before Thursday's hearing in St. Paul. They've been buoyed by a recent review from the state Commerce Department, which surprised opponents and Enbridge alike by concluding the project isn't needed and won't benefit Minnesota. But Enbridge says Line 3 is a critical piece of infrastructure for petroleum shippers and refineries in the region. Oil pipelines have become an increasingly contentious national issue amid concerns about tar sands oil and climate change, the danger that spills pose to water supplies, and the rights of American Indians who live along the routes. The fight over the Dakota Access pipeline drew thousands of protesters to the Standing Rock Reservation in North Dakota, stalling work on that project for months. Here's a look at some of the issues with Line 3:

Zinke: Fracking is proof 'God's got a good sense of humor and he loves us' -  Interior Secretary Ryan Zinke referred to the oil drilling method known as hydraulic fracturing, or fracking, as proof of divine love, as well as humor."Fracking is proof that God's got a good sense of humor and he loves us," Zinke told members of the National Petroleum Council, a federal advisory panel to the Interior and Energy departments. But the statement had no context and it was unclear what Zinke was trying to say exactly.  He made the statement after saying that one-third of the 70,000 employees he oversees at the agency are "not loyal" to him or the president, and he is planning a major overhaul that is expected to speed up energy permit approvals on public lands.Energy Secretary Rick Perry, who sat next to Zinke during the petroleum council meeting, was heckled by activists when asking the federal advisers to develop recommendations to advance carbon capture technologies that will make fossil fuel plants cleaner. He said the technology remain challenged commercially and he wants the oil industry to help find a way forward."Integrating technology and deploying CCUS [carbon capture utilization and storage technology] at scale still remains a commercial challenge," Perry said. Exxon Mobil is developing a form of the technology for use with natural gas power plants, which experts have described as a promising technology. Exxon announced on Monday it was ramping up a program to cut methane emissions from its fracking and pipeline operations. Methane, like carbon dioxide, is a greenhouse gas, which many scientists blame for exacerbating the effects of global warming.

U.S. lawmakers ask Facebook, Twitter for information on anti-fracking ads - (Reuters) - A U.S. House committee investigating whether Russia has tried to influence U.S. public opinion on fossil fuels asked Facebook, Twitter and Alphabet (GOOGL.O) on Wednesday to turn over information about Russian entities that may have bought anti-fracking advertisements. House Science and Technology Committee Chairman Lamar Smith, a Texas Republican and climate change denier, asked the CEOs of the technology companies to turn over documents by Oct. 10 that detail the involvement of Russian-based or funded entities detected on their platforms, information on ads they purchased, and any communications concerning ads advocating for “so-called green initiatives.” Smith and the Republicans on the committee that oversees U.S. scientific agencies have targeted mainstream climate change scientists, questioning their integrity and calling for eliminating federal funding for climate research. They have also accused environmental groups of colluding with Russians to push for regulations to curb fossil fuel extraction. “The committee is concerned that divisive social media and political messages conveyed through social media have negatively affected certain energy sectors, which can depress research and development in the fossil fuel sector and expanding potential for natural gas,” Smith wrote in letters to the CEOs. The committee, which oversees U.S. scientific agencies, believes such anti-fracking ads reflect “the Russian government’s concern about the impact of fracking ... on the global energy market and potential challenges to profitability” of Russian energy companies, the letter said. The letter says Russia’s meddling in the U.S. energy market has been “well documented in the public domain” and seeks information similar to what Facebook is providing to the U.S. Senate about anti-immigration propaganda and advertising.

Harvey Proved How Fragile the Oil and Gas Industry Really Is – - During this year’s record-breaking hurricane season, oil rigs and refineries were just as exposed as any structure on the precarious Gulf Coast, and their owners were limited to the same options as everyone else: evacuate, prepare, and hope the storm was merciful. The devastation Harvey and other storms left behind illuminates just how defenseless oil and gas infrastructure is in the face of hurricanes that are growing in magnitude and frequency and challenging the permanence of the oil and gas industry’s presence in the Gulf.Harvey shut down 22 percent of the nation’s refining capacity, vitally disrupted the oil and gas transportation networks that deliver energy to much of the US, and caused damage to facilities that leaked more than a million pounds of dangerous air pollutants into communities around Texas. The road back to full operational capacity will take weeks, if not months.It’s no secret that oil and gas infrastructure along the Gulf Coast is increasingly at risk and that climate change could render it useless. The US Government Accountability Office, the Department of Energy, the Department of Natural Resources, countless environmental groups, and oil and gas industry representatives have all openly warned of the coming catastrophe.Extreme flooding, made worse by sea level rise and warming temperatures, threatens the functionality of refineries and processing plants. Hurricanes with 100 mile-per-hour winds hurtle into well platforms, rigs, and ports with increasing regularity and severity. In Louisiana, the disappearance of wetlands and the rapid pace of coastal erosion expose pipelines to corrosive salt water and ocean currents that they were never intended to withstand. Hundreds of billions of dollars of infrastructure investment could be wiped out. As weather events become more erratic and disruptive, the question becomes whether the Gulf’s oil and gas infrastructure can remain functional in the long term. Will oil and gas companies choose to keep repairing and reinforcing their facilities in the Gulf, or will they move on? If they cut and run, what will happen to the communities they leave behind?

Exxon aims to curb methane emissions from shale division - (Reuters) - Exxon Mobil Corp said on Monday it would launch a program to curb its methane emissions from its U.S. shale facilities by replacing aging equipment and updating dated technology, part of a plan by the company to reduce its environmental footprint. The program comes as Exxon, the world’s largest publicly traded oil producer, fights accusations by environmentalists and others that it misled investors and the public for years about the risks of climate change from fossil fuels. Exxon declined to outline the cost of the three-year program or the savings it projects by keeping methane from venting. Methane is a component of natural gas and can be sold. “We do believe this will have a meaningful impact on our methane-emissions reductions,” said Sara Ortwein, president of XTO Energy, Exxon’s shale-focused subsidiary. “We remain committed to minimizing our environmental impact from our operations.” As part of the three-year program, Exxon will replace outdated natural gas-powered pneumatic pumps, which chronically leak methane into the atmosphere, with compressed air-powered pumps. Such pumps can regulate pressure, temperature and other variables in oilfield equipment. The company will also boost employee training on methane emissions reduction and begin to study how satellites, drones and other equipment can better be used to detect leaks. Exxon said it has worked with the National Oceanic and Atmospheric Administration on using drones for methane detection flights. The program has received praise from some environmental groups, who said Exxon is taking a step to curbing greenhouse gas emissions. “It sounds like a very robust program,” said Matt Watson of the Environmental Defense Fund. “We’re eager to get more details.”

OXY To Complete Corpus Christi VLCC Loading Facility By End Of 2018 - Occidental Petroleum is aiming to complete by late 2018 a project to install multiple loading arms at its crude storage facility at Corpus Christi, Texas, allowing it to load VLCCs on a regular basis, Vice President for Midstream Terry Morrison said Friday. "With a current draft of 45 feet at the Corpus Christi Ship Channel, that project will allow us to load a VLCC with 1.2 million barrels to 1.4 million barrels at our Ingleside Energy Center facility," Morrison said on the sidelines of the Energy Exchange Conference in Midland. At a greater water depth of some 66 feet and more, Oxy will be able to fully load a VLCC with a capacity of 2 million barrels, he said.In late May, a VLCC was brought to Oxy's Ingleside crude terminal so that the company could assess any modifications that may be needed so that it can regularly load VLCCs at the Occidental Ingleside Energy Center in the future. The VLCC Anne was chartered by Oxy and it successfully sailed out, said Sean Strawbridge, chief operating officer of the Port of Corpus Christi Authority. "The super tanker could not be fully loaded due to the lack of draft at the ship channel," Strawbridge said, adding that under an expansion program unveiled recently, the loading of VLCCs on a regular basis would result in transportation cost savings of at least 75 cents/b. In late August, the PCCA and the US Army Corps of Engineers said they will jointly invest $327 million to deepen the port through an extensive dredging program to 54 feet from the current 45 feet and also expand the width of the channel entrance at Ingleside and Corpus Christi to 530 feet from 500 feet and 400 feet, respectively.

Permian ‘Super Basin’ Holds Up to $3.3 Trillion in Untapped Oil - The Permian Basin of Texas and New Mexico holds 60 billion to 70 billion barrels of yet-to-be pumped crude oil, according to a study by IHS Markit Ltd.The Permian region’s so-called recoverable resources would be enough to supply every refinery in the U.S. for 12 years and have a market value of about $3.3 trillion at current prices for West Texas Intermediate oil, the domestic benchmark.IHS spent three years studying output data from more than 440,000 wells to calculate the amount of crude remaining within the sprawling, mile-thick rock formation that pumps more oil than any other U.S. field, the London-based researcher said in a statement on Monday. The estimate may grow as IHS geologists and data scientists extend their analytical techniques to deeper geological zones.“The Permian Basin is America’s super basin in terms of its oil and gas production history and for operators it presents a significant variety of stacked targets that are profitable at today’s oil prices,” Prithiraj Chungkham, director of unconventional resources for IHS, said in the statement.The assessment may boost Pioneer Natural Resources Co. Chairman Scott Sheffield’s claim that the Permian is a 75 billion-barrel field that may rival Saudi Arabia’s massive Ghawar field. In November, the U.S. Geological Survey estimated just one layer of the Permian known as the Wolfcamp holds 20 billion barrels of crude.

In Oklahoma, Fracking May Have Damaged Hundreds Of Traditional Vertical Wells -- A new oil and gas study suggests that hundreds of traditional vertical oil wells in Oklahoma have been damaged by more recently drilled horizontal wells, dug for the purpose of hydraulic fracturing or “fracking.”As StateImpact reports, the study by the Oklahoma Energy Producers Alliance reveals that horizontal drilling and fracking may have damaged 450 older vertical wells in Kingfisher County alone. Since Spindletop, oil has traditionally been extracted from the earth using vertical drilling methods. But the newer technique of “fracking” drastically increases production by using directional bits that drill long wells that run horizontal to the earth’s surface. This can wreak havoc on the production of any vertical wells operating in the region above the horizontal well. The commission has created a new method for operators to report damage from nearby horizontal wells.

WPX Energy : team hits new company record for lateral drilling -- Members of the San Juan Basin team for WPX Energy are celebrating a new company record and possible world record for drilling nearly 8,400 feet on a lateral drill in 24 hours on an oil well near Nageezi. The announcement was made on a post on WPX Energy's Facebook page on Aug. 22, stating the company believed the team set a world record by drilling 8,370 feet on a lateral section of the 745H oil well within 24 hours between Aug. 14 and 15. Lateral drilling allows companies to drill into areas not located directly beneath a well to tap into oil and natural gas resources. The company describes the accomplishment as new company record and a possible world record, according to WPX spokesman Kelly Swan. There is no official system for tracking such records. The accomplishment took place at a well pad located about three miles southeast of the Nageezi Post Office along U.S. Highway 550, according to Andrew Brunk. He is the drilling superintendent operating out of the Aztec office. "I'm very proud of our team we have," Brunk said. "It's an amazing feat. We're definitely excited to reach that goal." A team from Cyclone Drilling, Inc. based in Gillette, Wyoming, was contracted by WPX Energy to conduct the drilling. They worked alongside contractors from Scientific Drilling International and Field Geo Services Inc., both based in Grand Junction, Colorado.

BLM fracking rule, appeal both tossed by appellate court - A federal appellate court on Thursday dismissed an appeal of a ruling finding the Bureau of Land Management’s regulation regulating hydraulic fracturing to be illegal, while also vacating the ruling itself. The 10th Circuit Court of Appeals based its decision not on the merits of the case, but on the fact that the BLM is moving to revoke the regulation. But the action means that the fracking rule takes effect for the time being, said Michael Freeman, an attorney with Earthjustice who is a litigator in the case. The appeals court determined the the BLM’s move under the Trump administration to revoke the rule makes the appeal moot. “It is clearly evident that the disputed matter that forms the basis for our jurisdiction has … become a moving target,” the court ruled, finding that to proceed with considering the appeal would be a waste of judicial resources. It said its decision to also dismiss the Wyoming district court decision was guided in part by its general practice of vacating district court judgments when an appeal becomes moot, to prevent them “from spawning any legal consequences.” The lower court had ruled in 2016 that the BLM lacked the authority to regulate hydraulic fracturing. The new BLM rule requires disclosure of chemicals used in fracking, and also has new well construction and testing requirements, and requires the use of tanks rather than pits when storing fluids flowing back from wells. Freeman said the rule was scheduled to take effect in 2015, but it was put on hold by a preliminary injunction issued by the Wyoming judge. But the appeals court’s action means the injunction is no longer in place and the rule takes effect, he said. “In terms of how long that will be in effect, that’s uncertain,” he said.

BLM fracking rule reinstated by Court of Appeals —The Tenth Circuit Court of Appeals in Denver today vacated a lower court ruling that found the U.S. Bureau of Land Management had exceeded its authority when it enacted regulations of hydraulic fracturing on public lands.Several citizen groups had appealed the U.S. District Court ruling, which invalidated the fracking regulation in June 2015.“We’re very pleased with the court’s decision,” said Michael Freeman, staff attorney for Earthjustice who represented the citizen groups in the appeal. “The Tenth Circuit vacated the lower court’s ruling, which means the rule will now take effect. These are long-overdue protections for our public lands, water and public health.”Earthjustice represented the Sierra Club, Earthworks, Western Resource Advocates, The Wilderness Society, Conservation Colorado Education Fund, and the Southern Utah Wilderness Alliance in the case. Read the Tenth Circuit opinion

Appeals court sidesteps decision on US fracking regulations - (AP) — A federal appeals court on Thursday sidestepped a decision on whether oil and gas regulations enacted by the Obama administration are legal, noting that the current administration plans to rescind them. The 10th U.S. Circuit Court of Appeals in Denver said it would be a waste of time to rule on the regulations, which govern hydraulic fracturing on federal lands, because the Trump administration has already begun the process of revoking them. The ruling left the status of the regulations unclear, and neither the federal Bureau of Land Management nor its parent agency, the Interior Department, immediately responded to phone calls and emails seeking comment. Both environmental and industry groups claimed victory. Mike Freeman, an attorney who represents environmentalists in the case, said the regulations are in force until the Trump administration formally revokes them, and that could take months and get tied up in court. "Remember, it took the agency nearly five years to develop the rules the first time," he said. Kathleen Sgamma, president of the Western Energy Alliance, an industry advocate, noted that the regulations have never been in force because a lower court blocked them before they took effect. She said the Trump administration won't enforce regulations it plans to undo. "I don't see a scenario where the government and the industry waste resources on a rule that is going to fundamentally change in the very near future," she said. The Bureau of Land Management enacted the regulations in 2015, requiring drilling companies to disclose what chemicals they used within 30 days of any hydraulic fracturing on land owned or managed by the federal government. - 

Both sides claim win with fracking ruling - (UPI) -- Both sides in the debate over hydraulic fracturing claimed victory with a federal appeals court in Denver ruling on federal powers. The 10th U.S. Circuit Court of Appeals overturned a lower court's ruling on overreach challenges against the U.S. Bureau of Land Management, which wanted regulatory oversight from the states. Environmental groups said the ruling meant regulations developed under former President Barack Obama would now take effect "The 10th Circuit vacated the lower court's ruling, which means the rule will now take effect," Michael Freeman, an attorney for Earthjustice, said in a statement. "These are long-overdue protections for our public lands, water and public health."While appeals were pending, however, U.S. President Donald Trump took office and began the process of rescinding the rules altogether, which in part led the circuit court to vacate the lower court's opinion. Because of the changing circumstances, the appeals court said the matter was "prudentially unripe."For that reason, industry supports took the ruling as a victory. Kathleen Sgamma, the president of the industry's Western Energy Alliance, said it's time to put the matter aside."Just as the court recognizes that it is not worthwhile to expend judicial resources on a rule that is being overturned, it is clear that implementing the rule in the short term is likewise a waste of industry and government resources," she said in a statement.The long list of petitioners in a case pitting federal authority over state law included shale-rich states like Colorado and North Dakota. Colorado accounts for about 3 percent of total U.S. crude oil production in large part from its Niobrara and Denver-Julesberg shale basins. North Dakota is the No. 2 oil producer in the country, behind Texas, because of its Bakken shale reserve.

Highlands Natural Resources kicks off fracking programme in Colorado -- Highlands Natural Resources told investors it has kicked off a fracking programme, covering two wells - named Wildhorse and Powell - at the East Denver project in Colorado.The company highlighted that the start of the programme represents a further acceleration in its campaign at the East Denver project, ahead of the previously anticipated timeline.It is implementing what’s described as an efficient completions process, called 'zipper fracking', whereby two wells are completed in a coordinated parallel process.  HNR expects the programme will last for several weeks, and thereafter it plans to begin flow-back and production processes.  Robert Price, HNR chief executive said in a statement that he believes the company is now on the cusp of achieving “first oil, first gas, and first revenue”. "The commencement of fracking operations marks the beginning of the final major phase of sub-surface operations on the Wildhorse and Powell wells.”“We look forward to executing this advanced zipper fracking programme in concert with our third-party capital partners, who have collaborated with Highlands to optimise the operations plan over the past several months.

Colorado Landfills Contain Radioactive Substances From Oil Sector - Landfills in Colorado have begun to fill their space with low-level radioactive substances from oil and gas activities, state health officials have said, according to the local news site the Daily Camera. After a series of meetings with local officials, state authorities have concluded that unknown amounts of radioactive material have been stored at landfills throughout the state. Local authorities are currently trying to prohibit the practice altogether by strengthening their oversight mechanisms. "There is some of it that is just going to solid waste landfills…It is probably, mostly, staying in state," the state health agency’s director Gary Baughman said during the Wednesday meeting. So far, no “imminent” threats to public health have been detected, though landfill operators will continue to monitor water flowing out of the fills for radioactive qualities.Technologically advanced naturally occurring radioactive materials, or TENORM, have been a concern for health officials for a while now, especially in cases of improperly disposed materials from the fossil fuel industry. An accumulation of TENORM could cause cancer-causing exposure to the public and the environment. “It is in the industry's best interest to mitigate long-term risks. And it is in the public's best interest. This radiation lasts for a long time,” Jane Witheridge, a project manager for a special TENORM disposal plant in Pawnee, said. "If we don't treat it differently from municipal solid waste, we would not be serving either the industry or the environment as it should be in Colorado. This is being done in North Dakota. It is being done in Texas.” The 15 million-ton facility still will not be enough to dispose of all the TENORM produced by Colorado’s booming oil and gas sector. The Colorado Oil and Gas Association (COGA) denies that the TENORM has been destructive so far, though it continues to monitor the issue, an official statement read.

Colorado says 430 pipelines failed leak test after explosion  (AP) - Colorado regulators say about 430 oil or gas pipelines near occupied buildings failed a leak-detection test that the state ordered after a fatal explosion blamed on a gas line. The results were posted on the Colorado Oil and Gas Conservation Commission website Wednesday. It wasn't immediately clear if a test failure means with certainty that the line is leaking or if might indicate some other problem. Officials didn't immediately respond to an email seeking clarification. Regulators said the status of another 13,000 pipelines remains unclear, and officials are working with energy companies to get more information. More than 107,000 pipelines either passed the test or were out of service and sealed. The state ordered tests on pipelines within 1,000 feet (300 meters) of occupied buildings after the fatal explosion in April.

Erase fracking regulations, industry tells Trump (UPI) -- With a court dismissing a challenge to federal rules on hydraulic fracturing, producers said it was time for President Trump to erase the law altogether. "The industry recognizes that every energy-producing area has different geologic, topographic, and hydrologic conditions, which is why the states are far more efficient and effective at regulating hydraulic fracturing than the federal government," Barry Russell, the president and CEO of the Independent Petroleum Association of America, said in a statement.The 10th U.S. Circuit Court of Appeals overturned a lower court's ruling on overreach challenges against the U.S. Bureau of Land Management, which wanted regulatory oversight from the states during President Barack Obama's tenure. While appeals were pending, however, U.S. President Donald Trump took office and began the process of rescinding the rules altogether, which in part led the circuit court to vacate the lower court's opinion. Because of the changing circumstances, the appeals court said the matter was "prudentially unripe." "The Obama-era rule is nothing more than duplicative federal overreach that would limit access to public lands and cost independent producers tens of thousands of dollars per well to implement without any measurable environmental or safety benefits," Russell added. Last week, however, environmental groups said the circuit court's ruling meant regulations developed under Obama would now take effect. Protections outlined in the measure, said Michael Freeman, an attorney for Earthjustice, "are long-overdue."

IPAA Independent Petroleum Association of America : Independent Oil, Gas Producers Urge Withdrawal of BLM Hydraulic Fracturing Rule to Increase American Energy Dominance and Jobs - The Independent Petroleum Association of America (IPAA) and Western Energy Alliance today submitted detailed comments to the Bureau of Land Management (BLM) on its proposed rule that would rescind the March 2015 nationwide rule governing the practice of hydraulic fracturing on federal and Indian lands. 'From the beginning, the Associations have been actively engaged in efforts to assist BLM's rulemaking efforts related to hydraulic fracturing,' wrote the groups in their comments. 'The Associations are grateful that BLM now realizes that the one-size-fits-all solution the agency issued in 2015 was not an appropriate mechanism to address unsubstantiated public concern about hydraulic fracturing.' The trade associations' technical comments underscore in detail why the March 2015 final rule is duplicative of state's efforts and was not justified by BLM. It is estimated that rescission of the 2015 regulation would result in over $220 million per year cost savings to the industry, according to the comments.  'Industry recognizes that every energy-producing area has different geologic, topographic, and hydrologic conditions, which is why the states are far more efficient and effective at regulating hydraulic fracturing than the federal government,' said Barry Russell, president and CEO of the Independent Petroleum Association of America. 'Our companies have already demonstrated that even without the implementation of the 2015 federal rule, we play a part in the solution to reducing carbon emissions. Under the strong environmental leadership of state regulators, clean-burning natural gas, unlocked by horizontal drilling and hydraulic fracturing, has helped the United States cut its carbon emissions to near 30-year lows. The Obama-era rule is nothing more than duplicative federal overreach that would limit access to public lands and cost independent producers tens of thousands of dollars per well to implement without any measurable environmental or safety benefits. Simply put, a federal hydraulic fracturing rule would hurt America's energy dominance, economic growth, and well-paying U.S. jobs.'

Enhanced Completions In The Bakken Could Cap Upside -- Filloon -- - Over at SeekingAlpha, summary:

  • Bakken core wells show a lower level of oil production than other plays, but decreased well costs provide economic benefits
  • lateral lengths in North Dakota mostly range between 8,000 and 12,000 feet
  • current enhanced well results support production at $50/bbl (after differentials) but it is likely higher prices will be needed to support growth
  • enhanced well results have improved economics significantly, and are the reason there is much dissension in current break evens

Key point: Enhanced completions are in the early stages of development. Since results continue to improve, there is not reason to believe this will not continue in the immediate future. This continues to pressure oil prices and the U.S. Oil ETF. It is obvious that operators can produce a profit at much lower oil price than just two years ago. If improvements continue, we could see lower for longer with respect to WTI.

North Dakota's bill for oil pipeline protest costs now at $39 million -- North Dakota's bill for policing protests of the Dakota Access pipeline continues to rise. The North Dakota Emergency Commission is set to borrow an additional $5 million Monday to cover law enforcement costs. That will bring the total line of credit from the state-owned bank of North Dakota to $39 million. State Emergency Services spokeswoman Cecily Fong says 11 states provided law enforcement help to North Dakota, and some bills are only now arriving. Sponsor The $3.8 billion pipeline built by Texas-based Energy Transfer Partners began moving oil from North Dakota to a distribution point in Illinois in June, after months of protests. The Emergency Commission also is set to approve a $10 million federal grant to help pay state law enforcement bills related to the protests.

US exports of tar sands waste are fuelling Delhi’s air pollution crisis -  Come winter and the Indian capital, New Delhi, is preparing to once again struggle beneath the noxious fumes that have become a perennial crisis. Eight Delhiites die each day from the city’s bad air. In response, the regional government has made efforts to tackle pollution from coal plants and tailpipe exhaust. But any benefits these policies might produce are threatened by skyrocketing imports of a fuel more polluting than coal or diesel.Petroleum coke – known as petcoke – is a high-carbon residue produced during the refinement of heavy oils. In its raw form, the high-carbon fuel can be used as a cheap substitute for coal.Delhi’s environmental authorities say petcoke, cut into coal power station feeds around the capital, is now one of the major sources of smog in the city.In many parts of the world, petcoke is restricted because of its toxicity. In India however, the fuel is unregulated and burned freely. In this regulatory void, demand has soared, rising 23% a year for the last five years. The country imported 20 times more petcoke in 2016 than it did in 2011. Delhi is in a race against time. The Supreme Court has ordered the use of petcoke to end but the government has failed to ban or regulate the fuel. Activists and public health officials are desperate to convince politicians to act before winter’s still, stagnant weather conditions begin to pool smog above the capital.When burned, petcoke emits 5-10% more climate change-causing CO2 than coal. But its true filthiness is revealed in the toxic smog it creates. The key air pollution-causing contaminant is sulphur, which creates oxide gases and particles, both of which are harmful to human health. In Delhi, a (relatively lax) regulation limits sulphur in coal to 4,000 parts per million. The National Capital Territory’s environmental agency (EPCA) says petcoke being burned around the capital contains sulphur up to 72,000ppm. Petcoke emissions also contain significant amounts of toxic heavy metals – particularly vanadium, nickel and iron.

The Energy 202: Oil industry afraid about what Trump might do on NAFTA - So far, President Trump has given the oil and natural gas industry quite a bit of what it wants. American Petroleum Institute said it wanted Trump to reconsider the stop on the Keystone XL and Dakota Access pipelines. Check. It said it wanted federal regulations to be reviewed “holistically.” Check. Although a bushelful, that may have been the low-hanging fruit. API has another ask of Trump that will be harder for the president to fulfill: preserving a key investment-dispute provision of the North American Free Trade Agreement, which from Trump’s perspective is a “job-killing” trade deal between Canada, Mexico and the United States. Here’s what API (along with many other business groups) is asking for: that Trump push to preserve a system of resolving international trade disputes called investor-state dispute settlement, or ISDS. Here’s how ISDS works: Say you’re a multinational corporation that decides to invest in a foreign nation. You put in your investment — it could be a gold mine in Indonesia or a luxury resort in Egypt — but suddenly, the foreign government issues a regulation that you think hampers your business. Under ISDS, you can sue that foreign government for the investment you think you lost. ISDS is meant to inspire confidence in corporations making investments in foreign countries. But the arbitration system draws ire from many corners. Most environmentalists don’t like how ISDS hamstrings governments that are attempting to curtail pollution. And some conservatives don’t like how ISDS undermines national sovereignty by having tribunals of corporate lawyers, not judges, hear cases.And there is where the strange bedfellows are made. ISDS is a feature of many free-trade agreements, including NAFTA. But the White House is putting together a proposal to allow the United States, Mexico and Canada to withdraw from the North American arbitration system at will, the Wall Street Journal reported in August.But big businesses, oil and gas included, don't want the boat rocked. With the third round of NAFTA renegotiations underway as of Saturday, U.S. industrial groups are lining up to preserve the arbitration system that, according to API’s Gerard, “provides what we need in the U.S. to secure that investment overseas.”Of particular concern to oil companies is Mexico. When NAFTA was first signed 23 years ago, Mexico had a nationalized energy sector. Since then, Mexico has begun selling off oil and gas fields. Foreign investors, including ExxonMobil, want ISDS protection if they are going to drill there.

Latest E&P Profits Shrink After Strong Q1, But Industry Remains Solidly Profitable --The 43 U.S. exploration and production companies (E&Ps) we’ve been tracking racked up $160 billion in losses in 2015-16, but they turned things around in the first quarter of 2017, posting profits of $9.1 billion, or $9.12 per barrel of oil equivalent (boe), during that three-month period. At first glance, the second quarter might seem like a return to tough times; profits by the group fell more than 80%, to only $1.7 billion, or $1.71/boe. However, when $6.3 billion in impairments by ConocoPhillips ­­­­— most of them tied to $16 billion asset sales and a write-down of the Australia Pacific LNG project — are excluded, second-quarter profits by our universe of Oil-Weighted, Diversified and Gas-Weighted E&Ps totaled $8.0 billion, or $8.02/boe, a decline of only 11.6% from the first three months of 2017. Today, we begin a review of E&P performance and profitability with a big-picture look at key elements of their income statements. Monitoring the financial results of a large and diverse group of E&Ps over the long term is a good way to assess the health of the energy industry as a whole, particularly when you examine the details — the revenues, the costs and the impairments — that contribute to the bottom line. In Piranha!, our market study of 43 top U.S.-based E&Ps, we examined the strategies that E&Ps are adopting to thrive in a world of lower hydrocarbon prices. Of that universe of companies, 21 focus on oil (60%+ liquids reserves), nine are gas-weighted producers (60%+ natural gas reserves) and 13 are diversified producers. All major U.S. shale/unconventional plays are represented in the combined portfolios of these firms. In four blogs over the past month (beginning with Rock Steady), we reviewed in detail the changes in forecasted capital spending and production reported by our universe in their mid-year results announcements. Today, we begin our analysis of the profitability data compared with their reported first quarter 2017 results.

US drillers won’t generate ‘meaningful’ returns unless oil stays above $50 a barrel -- Oil prices below $50 are simply not going to cut it in the U.S. shale oil patch, Moody's analysts say in a new research note. Exploration and production companies have managed to drive down their costs since oil prices crashed in late 2014. But Moody’s believes it will be difficult for drillers to cut much deeper, and any reductions will be offset by a rebound in the prices that oilfield services companies charge. For that reason, drillers won’t be able to make significant returns on the capital they plow into new production unless benchmark U.S. West Texas Intermediate crude oil and natural gas prices cooperate, Moody’s said. “Despite substantially improved cost structures, E&P companies will be able to generate meaningful capital efficiency only if the WTI oil price is above $50 per bbl and the Henry Hub natural gas price is at least $3.00 per” million British thermal units, Moody’s senior analyst Sreedhar Kona concludes in the report.

U.S. fuel exports recover after Harvey, offering buyers respite  (Reuters) - Fuel exports from the U.S. Gulf Coast are rising rapidly as refineries recover from weeks of disruptions due to Hurricane Harvey, offering respite to buyers in Latin America and Europe. The gradual resumption of operations in the region that has become a major oil export hub has prompted a drop in benchmark gasoline and diesel refining margins on both sides of the Atlantic. Margins measure the profit from converting crude into fuels. Mexico’s state-run oil company Pemex bought gasoline cargoes from the U.S. Gulf Coast this week, according to shipping data, after sourcing dozens of cargoes from Europe, the Middle East and Asia through the month. Mexico, which relies on imports for half of its gasoline consumption, typically buys two cargoes of the road fuel per day, mostly from the U.S. Gulf Coast. U.S. outages came at a particularly difficult moment for Mexico as its largest refinery, the 330,000 barrels per day (bpd) Salina Cruz plant, was halted after an earthquake this month. It 190,000 bpd Ciudad Madero refinery was also undergoing maintenance. “The fuel supply is very complicated for Mexico right now. Two refineries are completely halted and several Texas ports are working with restrictions, so Pemex is looking for cargoes everywhere,” a trader exporting U.S. diesel to Mexico said. Similarly, diesel and gasoline exports from the Gulf Coast to Brazil were slowly recovering. About 10 tankers with cargoes of diesel have also been booked to sail to Europe this week, according to shipping data. That followed around three weeks of almost no activity on the transatlantic route which is a vital source of supply for Europe.

APPEC analysis: Asia seen as hot destination for US crudes --US crude producers will find a wide range of customers in the Far East as their ample supply could help accommodate Asia's fast-growing refining capacity, top industry executives said during opening addresses at the S&P Global Platts Asia Pacific Petroleum Conference in Singapore Monday. The rising popularity of US sweet and sour crudes in Asia emerged as one the key discussion topics in the preliminary stages of APPEC, with players from both the sell and buy sides highlighting positive aspects of US-Asia trade deals. US crude exports to Asia have been rising rapidly, reaching various destinations, with the trend expected to continue as over 4 million b/d of new Asian refining capacity will come online from 2016-2020, Unipec Deputy General Manager of Research and Strategy, Wang Peiat, said. "American producers are gaining market share in Asia...the US, with abundant non-conventional resources, has a great potential to become the next major crude suppliers [for Asia]," said Wang. Wang said Asia has already become the top destination of US grades in the first half of 2017, with various crude streams like WTI, Bakken, Mars, Eagle Ford and Southern Green Canyon finding a home in the Far East this year. "US crude exports to Asia, not only Europe, are up...even Australia has bought US crude as well. [Asia,] that is where the demand is," Chevron Vice President of Crude Supply and Trading, Ryan Krogmeier, said. The sharp rise in US production, especially from the Permian basin, coupled with ample output of condensate, could help drive future North America-Asia trade flows, Krogmeier said, adding the lack of US gulf coast refineries willing to handle mostly lighter-end grades produced in the US could mean more of the barrels may need to be pushed to the Asian outlets. 

As Brent oil markets rebalance, U.S. lags behind (Reuters) - New York and London oil futures are sending very different signals to market players about the state of global supply balances, with U.S. contracts weak even as physical crude markets rally and London prices indicate tightening supply. The divergence in the two benchmarks is one that is puzzling some oil traders. The signals are key to determining whether the Organization of Petroleum Exporting Countries’ goal to rebalance markets by reining in supply is working. Global marker Brent’s strength reflects tighter supplies due to those cuts. Yet the opposite appears true in the U.S. market, which continues to signal large oversupply. Hurricane Harvey exacerbated the excess of domestic supply by forcing the closure of nearly 25 percent of U.S. refining capacity and half a dozen U.S. Gulf Coast ports and pipelines late last month. The weakness in the U.S. market may not last, say a growing number of traders and analysts. U.S. cash grades are trading at multi-year highs, led by strong exports and refining margins. With the wider premium for Brent over U.S. West Texas Intermediate arbitrage, U.S. crude has become increasingly competitive in foreign markets. The Middle East’s Murban, a light sweet crude, recently widened its premium to $6 a barrel over WTI into Midland, Texas, according to Reuters Eikon data. A month ago, it traded at $1 a barrel over Midland. “When you look at the Atlantic basin, supplies are getting tighter, especially with more West African (crude) moving to Asia and floating storage disappearing,”

Mexico to offer 35 shallow-water blocks in March 2018 bid round: CNH -- Mexico's National Hydrocarbon Commission will auction 35 shallow-water blocks in its first invitation to bids of the country's third hydrocarbon auction round, or Round 3.1, the commission, or CNH, said Thursday. These blocks have a range of prospective resources ranging from light to heavy crudes, as well wet and dry gas blocks, the CNH said at a webcast session. The auction will be held March 27, 2018. The total area of the blocks is 26,300 sq km. They are in the Burgos, Tampico-Misantla-Veracruz and Cuencas del Sureste basins. A new feature of Round 3.1 is the inclusion of four "exploration-extraction clusters," CNH said. These blocks include discovered fields that were not awarded in Round 2.1. Article continues below... Request a complimentary issue of: Platts Mexico Energy Monthly Platts Mexico Energy Monthly Platts Mexico Energy Monthly Stay on top of policies, pipelines and prices in a way that only Platts can cover them. Each report covers natural gas and LNG, crude oil and NGLs, and electric power and includes: News and market commentary Price reports Access to the Platts Mexico Facilities Databank Supply and demand analysis Short- and mid-term natural gas and LNG imports forecasts Request a complimentary issue. LEARN MORE These blocks will give access to areas with exploration potential as well discovered fields ready for development, CNH has said previously. CNH will auction 14 fields with a total area of 8,400 sq km in the Burgos region in the state of Tamaulipas' offshore. This is the first time Mexico would offer blocks in this region. These have an average area of 602 sq km, water depths up to 590 meters and prospective resources of 56% wet gas and 44% light oil. Expected resources for four blocks is wet gas and for 10 blocks is light oil.

Exxon Mobil bets on Brazil, buys 10 oil blocks in auction | Reuters: (Reuters) - Exxon Mobil Corp vastly expanded its presence in Brazil on Wednesday, winning 10 blocks in the country’s 14th round of bidding for oil exploration and production rights, helping the cash-strapped nation fetch a record 3.8 billion reais ($1.19 billion). Exxon Mobil took six blocks in consortia with state-controlled oil giant Petroleo Brasileiro in the promising offshore Campos basin, after bidding 2.24 billion reais for one block. That was Brazil’s highest-ever such bid. The U.S. company prior to the auction was among the few oil majors without a presence in the exploration of the recently discovered large offshore fields in Brazil. Exxon Mobil also bought two blocks that it will operate on its own in the Campos basin, which abuts Brazil’s pre-salt area where hydrocarbons are trapped under a layer of salt below the ocean floor. It won a further two blocks in the Sergipe-Alagoas basin that it will develop with Queiroz Galvão Exploração e Produção (QGEP) and Murphy Oil Corp. The results came as a surprise after Brazil’s oil regulator ANP managed to sell just one of 76 blocks on offer in the highly productive Santos basin by late morning. Analysts had said lackluster oil price performance and dwindling cash for investments might have dented appetite. But Exxon Mobil, which also made a record bid of 1.2 billion reais with Petrobras for a Campos block on Wednesday, helped Brazil achieve the record take. Exxon said in a statement that it was looking forward to working with the Brazilian government and other partners in operating the blocks they won.Asked after the auction why he spent so much on the bids, Petrobras CEO Pedro Parente said he had information suggesting the blocks were part of the pre-salt area, one of the world’s largest oil discoveries in recent decades.

Gas pipeline through central Europe to go ahead as planned -  An EU-backed natural gas pipeline to connect Bulgaria, Romania, Hungary and Austria and ease reliance on Russian gas will proceed as planned, officials said on Thursday. The pipeline, BRUA, will be able to carry 1.75 billion cubic metres of gas from Bulgaria and Romania to Austria by 2019 and 4.4 billion once the second stage is completed in 2022.  The project hit a setback in July when Hungary said it was not commercially viable to expand the pipeline into Austria, but European Commission officials and energy ministers from southeastern Europe agreed at a meeting on Thursday to get the project back on track. "It was agreed in a memorandum signed today that there will be reverse flow interconnections in all four states, including Hungary and Austria," Romanian Energy Minister Toma Petcu told reporters after the meeting in Bucharest. Petcu said Romania aimed to start work on its portion of the pipeline in the spring of 2018 and finish it by 2020 at the latest. Romania will receive around 180 million euros from the European Commission to help finance the first stage of its portion of the pipeline.

Gas export curbs loom as Australia's east faces gas shortfall (Reuters) - Royal Dutch Shell, ConocoPhillips and Santos face curbs on exporting gas from Australia’s east coast in 2018 if they fail to plug a projected local supply shortfall, Prime Minister Malcolm Turnbull warned on Monday. Eastern Australia faces a gas shortfall of up to 17 percent of market demand in 2018, the nation’s energy market operator and competition watchdog projected in reports submitted to the government on Monday that will be the basis for a decision by Nov. 1 on whether to limit exports. The shortfall of around 110 petajoules (PJ) seen in 2018 is far worse than the market operator flagged in March. “We are determined to ensure and we will ensure that that shortfall, which we’ve been advised of today - three times bigger than we thought it would be six months ago - is not going to occur,” Turnbull told reporters. Turnbull said he would press the east coast LNG exporters - Shell at Queensland Curtis LNG, ConocoPhillips and Origin Energy at Australia Pacific LNG, and Santos at Gladstone LNG - for plans to plug the 110 PJ supply gap. Gas has become a hot political issue as soaring prices are hurting households and threatening jobs at manufacturers like food, building materials and chemical producers, and at the same time driving up electricity prices, as gas-fired power is needed to back up wind and solar energy. To deal with the crisis the government passed a law earlier this year that would allow it to limit exports from any of the three LNG plants on the east coast to beef up local supply. “Gas supply remains tight in eastern and south-eastern Australia in 2018 and 2019, and there remains a risk of a supply shortfall,” Australian Energy Market Operator Chief Executive Audrey Zibelman said in a statement. 

Australia government, east coast LNG producers in deal - avert export controls -- Australia's east coast LNG operators appear to have avoided restrictions put on the volumes of LNG they are allowed to export next year following an agreement with the federal government on Wednesday. To satisfy the federal government's concerns that the eastern seaboard of Australia could face gas shortages in the coming years, the Queensland-based LNG exporters -- which include Gladstone LNG, Australia Pacific LNG and Queensland Curtis LNG -- have agreed to plug the supply gap. "They have given us a guarantee that they will offer to the domestic market the gas that was identified as the expected shortfall by [the Australian Energy Market Operator] in 2018," Prime Minister Malcolm Turnbull, told reporters Wednesday. The prospect of the federal government triggering export limits for next year as part of its Australian Domestic Gas Security Mechanism, implemented in June, looked to have gathered steam after release of a report Monday by the AEMO which projected a shortfall risk for 2018 of 54-107 petajoules and 48-102 PJs in 2019. Turnbull said the LNG exporters indicated they would provide a similar guarantee for 2019 as they did for next year, with further details to be discussed when they meet again next week. "They've stated that they will offer first -- as a first priority -- domestic customers any uncontracted gas in future as a priority," Turnbull said. 

Interview: Pakistan to lock another 3 mil mt of LNG in term contracts by year-end - Pakistan is currently in negotiations to secure an additional three million mt of LNG in long-term contracts by the end of the year to supply its new LNG floating terminal due to arrive by December, according to M. Adnan Gilani, chief operating officer with Pakistan LNG Ltd. The negotiations are taking place with over half a dozen potential suppliers on a bilateral government-to-government basis, Gilani said at an interview with S&P Global Platts Thursday on the sidelines of the 9th CWC LNG Asia Pacific Summit, held in Singapore September 19-22. "We hope to have two to three government-to-government agreements signed by the end of this year," Gilani said. "In the interim, we will secure around four spot cargoes a month [the equivalent of 3 million mt/year] until our contracts start." The new supply agreements will increase Pakistan's total LNG contractual commitment to more than 11 million mt/year, as the country aims to resolve a decade-long energy crisis, driven by mounting gas consumption and faltering domestic production. The new contractual volumes will be delivered to Pakistan's second floating, storage and regasification unit -- with a capacity of 4.5 million mt/year -- due to arrive at Port Qasim by the end of the year. 

Pakistan Among Fastest Growing LNG Markets in the World - Pakistan joined the list of LNG importers last year and promptly became one of the world's fastest growing LNG markets, according to Shell 2017 LNG report.  The South Asian nation has suffered a crippling energy shortage as demand has risen sharply to over 6 billion cubic feet per day,  far outstripping the domestic production of about 4 billion cubic feet per day. Recent LNG imports are beginning to make a dent in Pakistan's ongoing energy crisis and helping to boost economic growth. Current global oversupply and low LNG prices are helping customers get better terms on contracts. Pakistan, Egypt and Jordan together imported 13.9 million tons of LNG, more than the combined increase of 11.9 million tons by the most populous nations of China and India. The biggest increase in LNG exports in 2016 came from Australia, where exports increased by 15 MT to a total of 44.3 MT. It was also a significant year for the USA, after 2.9 MT of LNG was delivered from the Sabine Pass terminal in Louisiana. Qatarremained the world’s largest LNG exporting country, accounting for around 30% of global trade of 258 MT by exporting 77.2 MT, according to International Gas Union report 2017.

BP starts production from giant Khazzan gas field in Oman ahead of schedule - Natural gas production has started at Oman’s tight Khazzan gas field operated by BP, in partnership with the Oman Oil Company Exploration and Production. The first phase of the Khazzan development is made up of 200 wells feeding into a two-train central processing facility, while the production is expected to plateau at 1 billion cubic feet of gas per day (bcf/d), said a press release. The project was completed ahead of schedule and below budget. Once the second phase of the Khazzan gas field is up and running, production is expected rise to 1.5 bcf/d. Approximately, 300 wells are expected to be drilled over the estimated lifetime of the Khazzan field. The first two phases together will develop an estimated 10.5 trillion cubic feet of recoverable gas resources. “I am delighted to see BP delivering Phase One of the Khazzan project within time and budget. This will result in realising more gas reserves and more production of gas that our country needs to support our energy planning and requirements,” said Dr. Mohammed Al Rumhy, minister of Oil and Gas. “The start of production from Khazzan, BP’s sixth and largest major project start-up so far this year, is an important milestone in our strategic partnership with Oman. With further development already planned, this giant field has the potential to produce gas for Oman for decades to come,” added Bob Dudley, group chief executive officer of BP. BP expects to start-up seven major upstream projects in 2017, making it one of the most important years for commissioning new projects in BP’s history. These seven projects are expected to make a significant contribution to the 800,000 barrels of oil equivalent per day of production from new projects that BP expects to add by 2020. “Khazzan further demonstrates BP’s ability to consistently deliver large, complex projects on schedule and within budget while applying the industry-leading skills and technology we have developed globally,” Dudley noted. “In this case, the tight gas techniques we perfected in the U.S. have been brought to Oman and we are very pleased with the results.”

BP brings shale techniques to Oman to start gas production -- British energy company BP said it brought lessons learned from hydraulic fracturing in the United States to start production at a natural gas field in Oman. BP and the Omani Ministry of Oil and Gas announced the start of production from the Khazzan natural gas field, BP's sixth and largest start-up for the year. "Khazzan further demonstrates BP's ability to consistently deliver large, complex projects on schedule and within budget while applying the industry-leading skills and technology we've developed globally," BP CEO Bob Dudley said in a statement. "In this case, tight gas techniques we perfected in the United States have been brought to Oman and we are very pleased with the results." Hydraulic fracturing has been used for decades, though improved techniques like horizontal drilling have led to considerable production gains for oil and natural gas in the United States. The first phase of operations from the Khazzan development in Oman will plateau at 1 billion cubic feet of natural gas per day. That's about half the September rate for gas production from the Bakken shale field in the United States, the least productive shale basin for natural gas in the country. Liam Yates, a research analyst at consultant group Wood Mackenzie, said in a statement emailed to UPI the Khazzan development is significant for Oman because it offsets declining production from elsewhere in the country. "BP's Khazzan project will be hugely important for Oman's gas supply, with Phase 1 alone supplying 25 percent of Oman's gas by 2019," he said. A second phase of operations will add another 500,000 million cubic feet per day. Capital expenses, meanwhile, are estimated at $12 billion, about 25 percent lower than initially planned.

Fracking fires up BP’s largest project of the year -- BP has started production at the Khazzan project in Oman, the largest of the new projects it has scheduled for this year, as the oil major attempts to export its US fracking experience around the world. The $16bn gas project uses the same controversial drilling technique that has unleashed an energy revolution in the US. Fracking has been used to prepare around 200 wells that will tap gas three miles below the earth’s surface in extremely hard, dense rock. The project is expected to produces one billion cubic feet of gas a day. BP believes the daily volumes could rise to 1.5 billion cubic feet in the project’s second phase, which will include an additional 100 wells. BP has used horizontal well-drilling and hydraulic fracturing, known as fracking, for years in the US. But the Khazzan project will be its biggest unconventional gas project outside of the US, and the largest of seven new projects the company was planning for this year. BP boss Bob Dudley credited the results of the Khazzan project to the techniques the company has perfected in the states. “Khazzan further demonstrates BP’s ability to consistently deliver large, complex projects on schedule and within budget while applying the industry-leading skills and technology we’ve developed globally,” Mr Dudley said. “The start of production from Khazzan, BP’s sixth and largest major project start-up so far this year, is an important milestone in our strategic partnership with Oman," he added. "With further development already planned, this giant field has the potential to produce gas for Oman for decades to come." Liam Yates, a research analyst with Wood Mackenzie, said the Khazzan project will boost Oman's gas production by 25pc and allow incremental increases in the amount of liquified natural gas it is able to export by ship. BP's global experience helped bring the project in within schedule and budget, he said.

Uganda plans to join OPEC after first oil fields flow in 2020: minister -- Uganda will seek to join OPEC once the East African nation starts pumping crude out from Lake Albert oil fields along the western border with the Democratic Republic of Congo at the end of the decade, Uganda's energy and minerals minister Irene Muloni said Wednesday. Article -- Feature: Ghana's output ramps up on Sankofa oil field The Ugandan government took the decision to join OPEC after consultations with other existing member states, including Equatorial Guinea, Muloni told an oil and gas conference in Kampala. "When we start producing our oil, we will join OPEC, to reap the benefits from being a member of the organization, these include stability of prices," she said. "We remain on course to deliver first oil in 2020." Uganda is hoping to start pumping as much as 200,000 b/d of crude in 2020 from its Lake Albert field, which could peak at 230,000 b/d in 2023, according to government estimates. The project is dependent on the construction of an export pipeline via Tanzania, however, and most market watcher believe the 2020 start-up target is optimistic. OPEC did not immediately respond to requests for comment.

Recent Developments In Russian Crude And Refined Product Exports -- Russia is a major producer — and exporter — of crude oil and natural gas, and a major exporter of refined products to boot. So it’s important to keep an eye on what’s going on in Russia, because as U.S. producers and refiners know all too well, what happens halfway around the world often has ripple effects in places like the Permian, the Houston Ship Channel and the Sabine Pass LNG terminal. Today, we discuss Russian crude production and refinery output, its compliance with the OPEC/NOPEC agreement to rein in crude production, and the country’s efforts to steer more of its crude and refined-products exports to Russian ports.  This blog is based on the latest FSU Monthly report from our friends at FGE – Facts Global Energy.  Russia is the world’s largest producer of crude oil, its total liquids output averaging about 11.2 million barrels/day (MMb/d) — nearly 10.9 MMb/d of crude and 370 Mb/d of natural gas liquids (NGLs). That puts Russian crude production about 900 Mb/d higher than Saudi Arabia and 1.4 MMb/d more than the good old U.S. of A. Most important to U.S. producers, Russia is among the 11 non-OPEC (NOPEC) oil-producing countries that last December (2016) agreed to reduce their production by a total of 600 Mb/d from November 2016 levels starting in January 2017 for six months as part of a larger, OPEC-led effort to reduce world oil supply and prop up oil prices. As RBN covered in Is This The Real Life? Is This Just Fantasy?, half of that 600-Mb/d production cut (or 300 Mb/d) is supposed to come from Russia alone, and OPEC’s side of the OPEC/NOPEC bargain calls for OPEC members (except for Nigeria and Libya, who’ve been given a pass) to reduce their output by a total of 1.2 MMb/d, again starting in January 2017. The OPEC/NOPEC agreement was later extended — it is now scheduled to run through March 2018, and it may be extended beyond that. Bottom line: Russia is a big part of the production-cut equation.

OPEC Loses Its Crown - Bloomberg Gadfly -Shale billionaire Harold Hamm told Bloomberg TV on Friday that forecasts of U.S. oil production growth are way too optimistic and are distorting global crude prices. That news was greeted with big smiles -- if not wild cheering -- by oil ministers meeting in Vienna to discuss the effectiveness of their output deal. But it is too early for them to start celebrating just yet.That wasn't the only boost ministers got ahead of their latest gathering. Analysts at Goldman Sachs Group Inc. said in a Sept. 21 note that the level of Brent backwardation -- the premium for crude for delivery next month over that for delivery a year in the future -- "is consistent with OECD inventories in days of demand cover falling to 5 percent above their five-year average level." In other words, OPEC is very close to reaching its target for stockpiles, at least in the developed nations.  Add to that the latest figures from U.K.-based Oil Movements that show the volume of crude oil in transit on tankers falling to the lowest in records going back to April 2015, along with the growing sense that physical crude markets are tightening. And there you have it. The group's cuts are doing the job intended, shale isn't responding, and OPEC and friends may finally be reaping the rewards from nine months of impressive compliance with the output deals they agreed late last year.How did U.S. government forecasters get it so wrong? They failed to recognize that U.S. shale producers were finally starting to focus on return on investment, rather than growth at any cost, Hamm said. When oil prices fell with the recovery in Nigerian and Libyan production during the second quarter, shale operators cut capital expenditure and output started to fall. The result is that, while official Department of Energy forecasts as recently as last month showed U.S. crude production reaching 9.82 million barrels a day by December 2017, the Domestic Energy Producers Alliance -- a group representing domestic onshore oil and natural gas exploration and production, chaired by Hamm -- sees it at 9.35 million.

Solar to power Middle East oil, natural gas exports - A long-standing concern of the energy industry has been growing Middle Eastern demand for its own oil and gas, supported by generous subsidies, which make fuel exceptionally cheap in the region. Higher oil and gas consumption regionally would lead to rapidly diminishing export capacities, resulting in shortages on international markets. A key indicator of this growing demand has been the emergence in recent years of a number of Middle Eastern countries as LNG importers, despite vast regional gas reserves. Those concerns are receding. Low oil and gas prices have hit the oil producers hard and subsidies have, to some extent, been reined in for budgetary reasons. Higher domestic prices act as a drag on demand growth, just as low prices prompted a near unrestricted expansion of consumption. However, a second factor is beginning to make itself felt – solar power. Solar power in the Middle East is cheap because of the long hours of sunshine the region enjoys. It is a region that most stands to benefit from the technology’s increasing efficiencies and its substantial downward cost trajectory. Solar PV set record low tender prices in the UAE last year, well below the cost of fossil fuel generated power. Solar’s attractions are becoming irresistible and the number of projects in the region is proliferating. In September, Algeria announced construction of a 10 MW solar PV farm to power an oil field. It’s a minor project in terms of capacity, but one that neatly encapsulates the growing relationship between oil, gas and renewables because the alternative option would undoubtedly have been an oil or gas-fired generation set. Much larger projects are underway. Iran in September unveiled an agreement with UK-based renewable developer Quercus for a 600 MW solar PV farm, while Saudi Arabia’s ACWA Power announced that it had been awarded the 700 MW Concentrated Solar Power (CSP) fourth phase of Dubai’s Mohammed Bin Rashid Al Maktoum Solar Park development at a levelized tariff of $7.30/kWh, which, according to the company, is the first time CSP has reached cost parity with natural gas or oil-fired generation.

Hedge fund positions in oil look stretched: Kemp (Reuters) - Hedge funds have become strongly bullish on the outlook for all parts of the petroleum complex, amid signs global crude stocks are declining and fuels will be short supply after hurricane-related refinery outages.But with so many fund managers already betting heavily on a further rise prices, the market has become lopsided and the risk of a sharp reversal has increased significantly (http://tmsnrt.rs/2jUBXpk).Hedge funds and other money managers raised their combined net long position in futures and options linked to Brent and WTI by 83 million barrels in the week to Sept. 19.Fund managers have amassed a net long position amounting to 695 million barrels, the highest since mid-August and before that late April, in a clear sign of returning confidence.The net long position in Brent rose by 34 million barrels to 465 million, the highest for six months, according to records published by regulators and exchanges.Meanwhile, the net long position in WTI increased by 49 million barrels to 230 million, the largest one-week rise since December 2016.Portfolio managers also increased their already large net long position in U.S. gasoline by a further 3 million barrels to 71 million, the highest since April 2014.The net long position in U.S. heating oil rose by a further 5 million barrels to 51 million, the highest since February 2013.And the net position in European gasoil was boosted by 0.2 million tonnes to a new record of 17.2 million tonnes.Fund positioning in gasoline, heating oil and gasoil now looks very stretched, with the ratio of long to short positions near multi-year highs in each case.The large concentration of hedge fund long positions in gasoline, heating oil and gasoil could presage a sharp correction at some point if fund managers try to realise some of their profits.From a fundamental perspective, stocks of gasoline and especially middle distillates look somewhat tight as winter approaches in North America and Europe.

US crude surges 3% to settle at $52.22, best closing price in five months -- Brent crude oil hit a new 2017 high on Monday, continuing a rally fueled by improving demand and expectations that producers will extend output cuts. U.S. West Texas Intermediate crude surged more $1.56, or 3.1 percent, to end Monday's session at $52.22 a barrel, the highest closing level since April. WTI hit a session peak of $52.28, about $3 below its 2017 intraday high. International benchmark Brent rose $2.01, or 3.5 percent, to $58.87 by 2:09 p.m. ET, having touched the highest level since July, 2015. Trader positioning shows the market believes there's more room for U.S. crude prices to run up.Hedge funds raised their bullish bets on U.S. crude futures to the highest level in four weeks, the U.S. Commodity Futures Trading Commission reported on Friday. Wagers that oil prices will fall declined for a third straight week, according to the data covering trades through Sept. 19.The positioning suggests that the prevailing bear case in the market is unraveling, said Tamar Essner, director of energy and utilities at Nasdaq Corporate Solutions. Traders were convinced that U.S. drillers would flood the market with oil whenever prices rose above $50 a barrel. But American producers signaled a greater focus on fiscal discipline during second quarter earnings reports.

Brent crude oil hits highest level since July 2015 -- Brent crude oil rose above $59 a barrel on Monday to its highest in more than two years, lifted by fast-growing demand and a threat to Iraqi Kurdistan’s crude exports as the autonomous region holds a referendum on independence.  BP’s top oil trader in Asia said the crude market had turned a corner after a three-year slump, with consumption boosted by lower prices and excess inventories finally declining thanks to Opec’s efforts to cut production.  “We are at a juncture where we are going to see continued inventory draws.” Brent, the international benchmark, rose 3.8 per cent to settle at $59.02 a barrel, its highest closing price since July 2015. It has gained more than 30 per cent since June as global stockpiles have tightened, with demand in industrialised countries expanding alongside emerging markets for the first time in almost a decade. West Texas Intermediate, the US benchmark, climbed 3.1 per cent to $52.22 a barrel, the highest level since April.

Goldman Turns Bullish On European Oil Majors --Goldman Sachs has raised its earnings per share (EPS) estimates for the European oil majors’ third-quarter results, and believes that the stocks will start reversing their underwhelming year-to-date performance when companies report higher Q3 cash flows from a year earlier, thanks to higher oil prices and increased production.The weak dollar against the euro and the reduction of the oil price estimates since the beginning of this year had prompted oil analysts to reduce their earnings estimates on Europe’s Big Oil by 24 percent.“Both these negative drivers [the dollar and oil prices] are coming to an end, with stable FX since the beginning of September and 2018 oil price expectations in line with the forward curve for the first time in over 12 months,” according to a Goldman Sachs note dated Thursday, as reported by The Street.“Our EPS estimates are currently 4% above... consensus expectations for 2018, having been 12% below in February,” Goldman Sachs analysts wrote in the note.According to the investment bank, European oil majors are expected to report 22-percent yearly growth in cash flows for Q3, on the back of higher production and higher oil prices. This should boost the companies’ stocks that have been underperforming the broader market by 12 percent year to date.  The Q3 figures by Europe’s largest oil companies are also expected to show increased refining margins, due to Hurricane Harvey shutting down U.S. refining capacity. BP is likely to benefit from those higher margins, because it operates large refineries in the U.S. that have not been affected by the storm.

Oil prices fall from 26-month high on profit-taking (Reuters) - Brent oil prices fell on Tuesday after investors took profit following a rally to 26-month highs spurred largely by threats from Turkey to cut crude exports from Iraq’s Kurdistan region. Brent crude futures LCOc1 fell 85 cents to $58.17 a barrel by 1405 GMT, having hit $59.49, the highest since July 2015 and more than 34 percent above their 2017 low. U.S. crude futures CLc1 slid 54 cents to $51.68 a barrel, after hitting a five-month high of $52.43. Turkish President Tayyip Erdogan repeated a threat to cut off the pipeline that carries 500,000-600,000 barrels per day (bpd) of crude from northern Iraq to the Turkish port of Ceyhan, intensifying pressure on the Kurdish autonomous region over its independence referendum. This potential loss, combined with 1.8 million bpd of output reductions by the Organization of the Petroleum Exporting Countries and non-OPEC producers, raised concerns of tighter supply. The Iraqi government said it will not hold talks with the Kurdistan Regional Government about the results of the referendum, which is expected to show a comfortable majority in favor of independence after the results are announced later this week. “Although there was plenty of price-bullish news making headlines yesterday, undoubtedly the biggest factor was the referendum in the Kurdistan region of Iraq,” analysts at Vienna-based JBC Energy said in a note. But the rally over the past two days also led to profit-taking. “There’s some nervousness at that flat price level given the level of speculative length in the market,”

WTI Pops Back Above $52 On Unexpected Crude Draw -- WTI is hovering around $52 as all eyes are watching API's data to gain inisght into how fast refiners are coming back on line. The previous week saw the trend of crude builds and product draws continue but last week crude actually drew down (against expectations of a build), gasoline built (against expectations of a draw and Cushing stocks rose most in 6 months. API:

  • Crude -761k (+3.1mm exp) - first draw since August
  • Cushing +1.064mm - biggest build in 6 months
  • Gasoline +1.47mm (-750k exp) - biggest build in 7 weeks
  • Distillates -4.527mm

As US refinery outages continue to fall so it appears we are starting to normalize post-Harvey with Crude drawing and gasoline building...notably, biggest Cushing build in 6 months  WTI was hovering just below $52 ahead of API and kneejerked above $52 on the print, RBOB faded lower...

Is The EIA Forecast Suppressing The Oil Price? -- Harold Hamm has complained about the EIA's forecast of a 1 mb/d increase in U.S. oil production next year, which he believes is not only overly optimistic but also responsible for the large discount that WTI suffers compared to Brent. "It's distorting. That's not putting America first, that's putting America last. And that's the result of this exaggerated amount the EIA has out there."Given that Hamm has been very successful in the oil business, he deserves to be listened to, but I have some concerns about his theory. For one thing, the explanations for price movements are legion. The U.S. independent oil producers are particularly inclined towards what academics call "agenticity," or a tendency to seek blame for an action. I've been on a number of radio call-in shows where the question was "Who raised prices?" not "Why did prices go up?" This saw its strongest expression in the late 1980s, after the 1986 oil price collapse, when many in the oil fields believed the theory that President Reagan asked the Saudis to crash the price of oil to hurt the Soviet Union. Because obviously, the thinking went, the price shouldn't go down therefore some outside force must have engineered it. For now, there are other reasons to doubt Hamm's theory. First and foremost, as the figure below shows, by February the EIA was forecasting an increase in U.S. oil production for next year at roughly 1 mb/d, but the differential between Brent and WTI did not begin increasing until early August. Possibly traders ignored the forecast until later in the year, as the reliability would in theory be increasing, but more likely something else was responsible. Traders tend to react when new monthly market forecasts are issued by the IEA, EIA and OPEC, but after the initial response, primarily to updated data or revisions to the projections, they have minimal impact on prices.

Global trade upturn aids oil market rebalancing: Kemp  (Reuters) - Global trade is growing at the fastest rate for six years - which is both a symptom and a cause of the recovery in commodity markets. World trade volumes were up almost 5 percent year-on-year from May to July, according to estimates compiled by government economic planners in the Netherlands.Growth was four times faster than at the same point in 2016 (http://tmsnrt.rs/2y89NxC).Global trade and commodity markets are linked in a circular causal relationship, which is one of the most important in the macroeconomy and a key source of fluctuations in the business cycle.Commodities, from grains to minerals, metals and oil, are the largest item in global trade by tonnage, so the state of commodity markets has a major impact on world trade flows.But trade volume is in turn a major driver of demand for fuels used in the engines on ships, trucks and railroads.Most freight is moved by high-horsepower engines using residual fuel oil (ocean shipping) or distillate fuel oil (roads, railways, coastal and inland shipping).The broad-based boom in commodity markets between 2010 and 2014 spurred an enormous increase in demand for freight-linked fuels.Global trade volumes increased by an average of 3.7 percent per year between 2010 and 2014, according to the Netherlands Bureau for Economic Policy Analysis (“World Trade Monitor”, CPB, July 2017).Global consumption of distillate fuel oil increased by almost 3 million barrels per day (bpd) over the same period (“Statistical Review of World Energy”, BP, 2017).Consumption of freight-linked fuels grew much faster than demand for gasoline, which rose by just 1.7 million bpd. Consumption of low-sulphur distillate fuel oil in the United States is rising at the fastest rate in two years and record exports point to strong demand in Latin America as well as other markets. Freight fuel demand is in turn encouraging refineries to process record crude volumes and whittling away excess crude stocks.

WTI/RBOB Sink After Surprise Gasoline Build, Crude Production Rise - Amid record crude exports, DOE reported a surprise draw for crude inventories and surprise build for gasoline inventories which along with another rise in crude production sent both WTI and RBOB lower in the initial market reaction. DOE:

  • Crude -1.85mm (+3.1mm exp)
  • Cushing +1.18mm
  • Gasoline +1.1mm
  • Distillates -814k

ICE Brent/WTI spread closes as US crude exports hit record high - The ICE Brent/WTI spread fell sharply Wednesday after weekly US Energy Information Administration data showed US crude exports averaged nearly 1.5 million b/d, an all-time high, pulling inventories lower. Around the market close, the front-month ICE Brent/WTI spread was $5.74/b, compared with $6.56/b on Tuesday and $6.80/b Monday, which was the widest it had been since August 2015. A drop in US crude exports following Hurricane Harvey helped widen the spread, but that now looks like being a thing of the past after the EIA data showed exports rose 563,000 b/d week on week to 1.491 million b/d. "With a spread upwards of $6-$7/b, that's what you get," said Ryan McKay, commodity strategist at TD Securities. Higher exports, combined with Gulf Coast refinery utilization rising 11.9 percentage points to 84.9%, caused US crude stocks to decline 1.846 million barrels to 470.986 million barrels. Analysts surveyed Monday by S&P Global Platts were looking for crude stocks to have risen 1.3 million barrels. NYMEX November crude rose 26 cents to settle at $52.14/b. ICE November Brent settled 54 cents lower at $57.90/b. With Gulf Coast refining capacity and port operations close to normal, "crude oil differentials will indeed begin to narrow over the next several weeks," Barclays said in a note. After legal restrictions on US crude exports were lifted in late 2015, the Brent/WTI spread stayed in a stable range of roughly $3/b or less given the potential for arbitrage.

Crude oil markets show how to be bullish, but not really (Reuters) - Sentiment is often a somewhat flighty and nebulous concept, but it appears that crude oil markets are turning increasingly bullish about the prospect for higher prices. Certainly the mood at this week’s major industry conference in Singapore was a marked change from recent years, with several upbeat presentations, panel discussions and off-the-record chats giving the view that prices were more likely to rise than fall. The most bullish commentary at the Asia Pacific Petroleum Conference (APPEC) was from trading house Trafigura, whose co-head of group market risk, Ben Luckock, said the era of prices being lower for longer was coming to an end, and the market would be in a supply deficit of between 2 and 4 million barrels per day (bpd) by the end of 2019. Luckock was joined by several other market players at the S&P Global Platts event in being optimistic that a new cycle of rising prices was starting. But scratch beneath the bullish views and a different picture emerged. A snap electronic poll of the conference participants showed a majority of just under 70 percent believed oil prices would remain locked in a $50-$60 range for 2018, with only 10 percent seeing a breakout to the upside. That is basically where crude prices are currently, with Brent at $57.64 a barrel and U.S. benchmark West Texas Intermediate at $51.99 in early Asian trade on Thursday. Effectively, if you were to take away an impression of the APPEC conference, Asia’s most significant oil event, it would be that market participants felt a lot better about the state of crude markets, without having much faith that prices would mount a sustainable rally. That’s largely because the risks to a sustained price rally seem larger than the drivers currently. 

Oil Prices At A Ceiling, Or Just Getting Started? - Oil moved back into bull market territory this week, with Brent prices jumping to a more than two-year high at $58 per barrel. A confluence of events has given a jolt of optimism to oil prices, with market sentiment at its most positive arguably in years. The proximate spark from earlier this week was the Kurdish referendum, which raised the specter of a sizable supply outage when Turkey threatened to cut off Kurdish oil exports through its territory, and Baghdad joined in by calling for an international boycott of Kurdish oil sales. So far, there are no signs of an actual supply disruption, but oil traded up at the start of the week on the heightened geopolitical risk. But Brent prices have only moved up into the upper-$50s because the underlying fundamentals have improved markedly in the last few months. Oil demand is robust and continues to grow even as global supplies have stagnated. The OPEC deal seems to finally be bearing fruit in the form of a sharp decline in global crude oil inventories.The oil market could finally be breaking out of a depressed pricing environment after three years of sluggishness, according to Trafigura Group, an oil trading company. “We are nearing the end of ‘lower for longer’ oil,” Ben Luckock, co-head of Group Market Risk at Trafigura said at the S&P Global Platts APPEC conference in Singapore on Tuesday. Luckock cites the fact that the oil market could lose some 9 million barrels per day (mb/d) by 2019 just from well depletion. That could leave the world short on supply, pushing up prices significantly. Citigroup said that the supply crunch could come as soon as next year, arguing that so many OPEC members are already producing at their maximum, despite nominally restraining output. Libya, Nigeria, Venezuela, Iran and Iraq might not be able to add new supply next year, Citi says. And in fact, the risk of a slide in production is probably a more likely outcome for some members. “Fear in the market has been that OPEC production will rise dramatically,” Citi’s Ed Morse said in Singapore. But, “there could be a supply gap emerging, which could point to a tighter market.” Much of OPEC is failing to invest in its upstream capacity, Citi argues, leaving little room for higher output.  However, not everyone agrees that there is further room to run for oil prices, and just because oil has rallied in the past few weeks, does not mean that greater price increases are a foregone conclusion.

OilPrice Intelligence Report: Are Oil Markets Too Bullish For OPEC? Brent flirted with $60 per barrel this week, but it might have to wait a little longer. After hitting the highest price in two years mid-week, Brent declined on Thursday after looking a bit overstretched. The price gains have been a little too much in such a short period of time, raising the risk of a downslide. "We've made a really impressive run here and I do think we're due for a pullback," Robert Yawger, director of energy futures at Mizuho in New York, told Reuters on Thursday.  There is quite a bit of disagreement about what happens next with oil prices. One notable call comes from Jodie Gunzberg, head of commodity and real asset indices at S&P Dow Jones Indices, who told CNBC that $80 is possible. She argued that Hurricane Harvey ignited a bit of bullishness from the outages, which could propel oil prices up in the coming months. "When we look at the index data, we can see the price could move even as high as $80 to $85 (a barrel). Not immediately, but with their structural backwardation and shortages in the market, you just can't replenish it overnight,” she said. "It is now in a bull market, Brent is up about 30 percent since June and we also had WTI up 23 percent." A top official from oil trading house Trafigura told an industry conference in Singapore this week that the “lower for longer” era was coming to an end. He argued that the oil market could see a supply deficit on the order of 2 to 4 million barrels per day (mb/d) by the end of 2019. While those were probably the most bullish comments at the event, other energy leaders at the event also struck an optimistic tone. . Although the oil market has experienced a bullish streak as of late, OPEC is not quite as confident that the price gains will continue. According to Reuters, OPEC officials are worried that demand will taper off and supply excesses will push down prices in the first quarter of 2018. Some top OPEC officials don’t see Brent holding near the $60-per-barrel level. “I don’t think it’s sustainable,” an official from a Gulf oil producer told Reuters. Another said that the current rally “might be short-lived.” He went on to add, “I think a range of $50-$55 a barrel is good, you don’t want to see prices rising to $60 or higher because then it will bring in more shale.”

NYMEX November gas dips 4.4 cents on 'lackluster' market after EIA data - NYMEX November natural gas futures settled at $3.017/MMBtu, down 4.4 cents, as a lackluster market put pressure on the contract despite a lower-than-expected storage build from the US Energy Information Administration. EIA figures showed a 58-Bcf build to gas storage stocks for the week that ended Friday to reach 3.466 Tcf. The build was below the consensus of an S&P Global Platts survey of analysts indicating a 66 Bcf injection. "Those numbers look like they are on the bullish end of things and the market initially popped in reaction," said Phil Flynn, senior market analyst for Price Futures Group, "but it's looking like October is not going to be the shoulder month we expected. "We're not seeing the demand and the market is not getting a boost from these numbers. The market is lackluster," he said. After the EIA report was released, the November contract initially ticked up about 1 cent to about $3.07/MMBtu before going into decline. On the whole, Flynn said the storage figures were not too promising. Storage stocks for the corresponding week a year ago totaled 3.593 Tcf, so 2017 is lagging 3.5% behind 2016. The five-year average for the same period stands at 3.425 Tcf, putting 2017 at 1.2% above that pace. 

Baker Hughes: Oil-directed rigs, Utah lift US rig count by 5 - Baker Hughes’ overall US rig count increased this week by its largest margin in 2 months, driven by more oil-directed drilling and activity in Utah and the Gulf of Mexico.The tally of active rigs gained 5 units during the week ended Sept. 29 to 940, down 18 units since a peak of the drilling rebound on July 28. The count had fallen in 6 of the previous 8 weeks (OGJ Online, Sept. 29, 2017).Oil-directed rigs jumped 6 units to 750, down 18 since their recent high on Aug. 11. Gas-directed rigs edged down 1 unit to 189. One rig considered unclassified remains operating.  Three rigs started work onshore, where those drilling horizontally gained 4 units to 794, down 16 since July 28. Rigs drilling directionally rose 5 units to 82, while rigs drilling vertically dropped 4 units to 64. Three rigs began drilling off Louisiana, bringing the overall US offshore tally to 22. Just 2 rigs are drilling in inland waters after 1 unit went offline this week.Utah’s rig count spiked 4 units this week to 12, leading the major oil- and gas-producing states in increases. Reflecting the movement offshore and in inland waters, Louisiana rose 2 units to 67. New Mexico and North Dakota—and its Williston—each edged up a unit to 69 and 50, respectively. Texas dropped 2 units to 451, down 15 units since Aug. 4. Edging down a unit to 385, the Permian posted a rare decline this week after jumping 6 units last week to its highest point since Feb. 6, 2015. Activity there remains elevated as firms continue to bet on the region despite still-volatile oil prices.. ExxonMobil currently is operating 19 rigs in the Permian. In the Midland basin, where the firm has added 200 wells since mid-2014, ExxonMobil has 14 rigs drilling horizontally. The firm also has 4 rigs drilling horizontally in the New Mexico Delaware basin, where it recently drilled its first 12,500-ft horizontal lateral.Oklahoma declined 3 units this week to 124, down 12 from its recent high on July 7. The Cana Woodford dropped 1 unit to 62, down 7 from Aug. 25.  The Haynesville, DJ-Niobrara, and Granite Wash also each decreased a unit to respective totals of 44, 25, and 13. Canada’s rig count, meanwhile, fell 7 units to 213, still up 33 units since May 12. Oil-directed rigs declined 9 units to 113, while gas-directed rigs gained 1 units to 100.

US Oil Rig Count Rises Most In 3 Months -- With US crude production having rebounded back to near cycle highs in its lagged response to the oil rig count, this week's rebound in the oil rig count (+6 to 750) is notably the largest addition in almost 3 months. As Bloomberg details, explorers renewed their search for U.S. crude as oil entered a bull market and overseas demand for American supplies flourished. Working rigs targeting crude increased by six this week, bringing the total to 750, according to Baker Hughes data reported Friday. Drillers resumed adding rigs for the first time in more than a month, a period that included Hurricane Harvey’s sweep across the Eagle Ford Shale region and coastal shipping terminals. Meanwhile, exports of domestic crude jumped 61 percent last week to an all-time high. The rig count is seen as an indicator of near-term production growth.  Production may have a little further to go... WTI has been volatile this week but remains higher on the week... having dropped below $52 yesterday

Oil Markets React Stoically To Rising Oil Rig Count --  The number of active oil and gas rigs in the United States rose this week by 5 rigs.The total oil and gas rig count in the United States now stands at 940 rigs, up 418 rigs from the year prior, with the number of oil rigs in the United States increasing by 6 this week and the number of natural gas rigs decreasing by 1. The oil rig count now stands 325 above the count one year ago.While there is typically a significant lag for correlation between oil prices and rig count movement, the recent rise in oil prices will no doubt encourage US shale drillers to turn on the taps at the more profitable pricing. It’s possible that the response to the prices may be quicker than normal, as the number of drilled-but-uncompleted wells (DUCs) have grown over the past couple of months, and stood at 7,048 as of the last count in August 2017. To compare, in December 2016, the number of DUCs stood at 5,379. A year ago August, the figure was 5,031. The increase in uncompleted wells has risen, year over year, more than 30%. WTI climbed $1.00 week on week, and almost $9 more than end-June prices. The spot price for WTI fell earlier on Friday as traders hung back before the data release, down 0.21% to $51.45 at 12:33pm EST—still almost $1 over last week’s price. Brent crude was trading down 0.68% on the day at $56.77— $.20 above last week. Oil rigs in the United States now number 750—325 rigs above this time last year. Although the number of oil rigs are still up significantly year on year, the increases slowed in the Q2 2017, and have reversed in Q3. The first quarter 2017 saw 137 oil rigs added in the United States, while the second quarter 2017 saw 97 rigs added. In stark contrast, the third quarter, that ended with today’s data, has seen the total number of rigs decrease by 6.Still, US crude oil production is again on the rise after a brief dip due to Harvey—now at 9.547 million barrels per day for the week ending September 22, 2017—a new high for 2017. At 10 minutes after the hour, WTI had rallied and was trading at $51.67. Brent crude traded at $56.86.

Mideast OPEC producers fret oil price rally may burn out (Reuters) - Middle East OPEC producers are concerned weak demand and excess supply in the first quarter of 2018 may undermine an oil price rally that has pushed Brent crude about 30 percent higher since June, OPEC and industry sources said. Supply cuts since Jan. 1 by the Organization of the Petroleum Exporting Countries, Russia and other producers helped lift prices, while Hurricane Harvey added to gains when it knocked out nearly a quarter of U.S. refining capacity. Benchmark Brent rose above $59 a barrel this week, its highest level in more than two years and nearing the $60 mark. Gulf oil sources have said OPEC’s largest producer Saudi Arabia would like to achieve that level this year. Brent is now trading around $58. “I don’t think it is sustainable,” said one senior Gulf oil industry source, citing possible excess supply from U.S. shale oil producers in the first few months of 2018 on the back of higher prices now. OPEC and others have cut production by about 1.8 million barrels per day (bpd), but U.S. shale producers have been filling the gap, with their output set to rise for a 10th month in a row in October. Climbing global demand for crude have also helped prop up prices, as have tensions OPEC member Iraq, where authorities in its semi-autonomous Kurdish region held an independence referendum despite opposition from Baghdad and Western powers. A second industry source from a main Middle East producer said the price rally “might be short lived.” “I think a range of $50-$55 a barrel is good, you don’t want to see prices rising to $60 or higher because then it will bring in more shale,” the source said.

Aramco listing reshapes Saudi Arabia's OPEC oil policy  (Reuters) - Saudi Arabia’s plans to float state oil titan Aramco are prompting the country to think the unthinkable. Late last year, Saudi Arabia tried to get fellow oil producers around the world to agree to reduce production. Before an OPEC meeting in Vienna in November, Saudi officials were armed with an unprecedented bargaining chip: if there was no deal, the kingdom would quit the exporter group altogether. The strategy was approved at the highest level of the Saudi government, said sources familiar with the matter. It was not only aimed at ensuring the smooth workings of the world’s energy supply. It was also driven by a desire to push up oil prices to maximize the valuation of Saudi Aramco ahead of the listing, said the sources who declined to be named as the information is confidential. In the end, the world’s biggest oil exporter did not have to enact that option. OPEC members along with non-OPEC producers including Russia agreed a deal in December to cut output by about 1.8 million barrels per day. But the fact such a move was considered shows how Aramco’s initial public offering (IPO) - expected to be the biggest in history - is forcing the kingdom to rethink its OPEC policies.Riyadh’s stance represented a shift, OPEC sources said, from its decades-old role of advocating restraint and seeking to convince fellow members like Algeria, Venezuela and Iran that prices rising too fast benefited alternative energy providers. “Saudi Arabia is now the main price hawk,” said a high-level OPEC source. He added he was surprised how quickly the kingdom shifted from its policy of prioritizing market share, by pumping oil at full tilt, to supporting production cuts following its decision to list Aramco. 

Moving Fast and Breaking Things, a Saudi Prince Tests His Public - The real weight of public opinion in Saudi Arabia lies among its young people, an Internet generation eager for social change. Or at least, so says one member of that cohort. And Mohammed Bin Salman, the 32-year-old who effectively runs the country in his father’s name, just placed a big bet on his millennial peers. By ending the world’s only ban on women driving cars, the crown prince has upset plenty of people in this Islamic kingdom, founded on a pact between clerics and the royal family. He may be calculating that an even larger number of Saudis are ready to go along for the ride. Will it work? It’s hard to gauge the mood of a country with little freedom of expression or opinion polling, though a 2014 survey found the public almost equally divided. Much depends on who wins the argument, because Prince Mohammed’s promise of a more “vibrant’’ society is just part of an all-embracing reform program. Further down the road lie economic changes that are likely to unsettle many Saudis accustomed to government largesse. Some measures have already met with resistance. Steffen Hertog, a professor at the London School of Economics and longtime Saudi-watcher, acknowledges that there’s guesswork involved. “My best guess is that there is a silent majority in favor” of letting women drive, he said. There’s also “a vocal minority that is very unhappy about the move.”  

Iraqi government asks foreign countries to stop oil trade with Kurdistan (Reuters) - Iraq on Sunday urged foreign countries to stop importing crude directly from its autonomous Kurdistan region and to restrict oil trading to the central government. The call, published in statement from Prime Minister Haider al-Abadi’s office, came in retaliation for the Kurdistan Regional Government’s plan to hold a referendum on independence on Monday. The central government’s statement seems to be directed primarily at Turkey, the transit country for all the crude produced in Kurdistan. The crude is taken by pipeline to the Turkish Mediterranean coast for export. Baghdad “asks the neighboring countries and the countries of the world to deal exclusively with the federal government of Iraq in regards to entry posts and oil,” the statement said. The Iraqi government has always opposed independent sales of crude by the KRG, and tried on many occasions to block Kurdish oil shipments. Long-standing disputes over land and oil resources are among the main reasons cited by the KRG to ask for independence. Iraqi Kurdistan produces around 650,000 barrels per day of crude from its fields, including around 150,000 from the disputed areas of Kirkuk. The region’s production volumes represent 15 percent of total Iraqi output and around 0.7 percent of global oil production. The KRG aspires to raise production to over 1 million barrels per day by the end of this decade.

Iran Closes Airspace To Iraqi Kurdistan Ahead Of Historic Independence Vote - The diplomatic and economic noose is tightening around Iraqi Kurdistan one day ahead of its historic independence referendum. On Sunday, the Iranian government announced closure of its airspace to northern Iraq's Sulaimani and Erbil Airports, at the request of Iraqi authorities. The Baghdad government has repeatedly threatened military intervention in Iraq's autonomous Kurdish region should the vote proceed on Monday, which Baghdad warns could provoke invasion by neighboring states. The United States too has warned that the non-binding referendum will be “particularly provocative and destabilizing” - this as Turkey musters tanks along its border with Iraqi Kurdistan.  On Sunday the Iranian Supreme Security Council announced through state media that, “At the request of the Iraqi central government, Iranian airspace has been closed on all flights that originate from Kurdistan Region.” The move comes after a month's worth of warnings that Iran could close its borders to Iraqi Kurdistan should the independence vote proceed. Iranian government officials had previously warned that, “The republic of Iran has opened its legitimate border gates on the premise of the consent of the federal government of the Iraqi state. If such an event [referendum] happens, these border gates from the perspective of the Islamic Republic of Iran would lose its legitimacy."

Turkey’s Erdogan threatens to cut off oil flow from Iraq’s Kurdish area over referendum (Reuters) - President Tayyip Erdogan warned on Monday that Turkey could cut off the pipeline that carries oil from northern Iraq to the outside world, intensifying pressure on the Kurdish autonomous region over its independence referendum. Erdogan spoke shortly after Prime Minister Binali Yildirim said Ankara could take punitive measures involving borders and air space against the Kurdistan Regional Government (KRG) over the referendum and would not recognize the outcome. Voting began on Monday despite strong opposition from Iraq’s central government and neighboring Turkey and Iran - both with significant Kurdish populations - as well as Western warnings the move could aggravate Middle East instability. Erdogan, grappling with a long-standing Kurdish insurgency in Turkey’s southeast, which borders on northern Iraq, said the “separatist” referendum was unacceptable and economic, trade and security counter-measures would be taken. He stopped short of saying Turkey had decided to close off the oil flow. Hundreds of thousands of barrels of oil a day come through the pipeline in Turkey from northern Iraq, but he made clear the option was on the table. “After this, let’s see through which channels the northern Iraqi regional government will send its oil, or where it will sell it,” he said in a speech. “We have the tap. The moment we close the tap, then it’s done.” Yildirim said Ankara would decide on punitive measures against the KRG after talks with Iraq’s central government. “Our energy, interior and customs ministries are working on (measures). We are evaluating steps regarding border gates and air space. We will take these steps quickly,” Yildirim told Turkish broadcasters. 

Don’t underestimate Kurdistan’s resilience – Brookings - Iraq's Kurdistan region will hold a referendum on Kurdish independence this week, which has been met with varying degrees of resistance from both the region and the international community. The international resistance to Kurdish self-determination is not a novel one, and has in fact been a hallmark of the Kurdish national struggle ever since the Kurds were deprived of their own state by imperial powers, which established the nation-state system in the Middle East from the ruins of the Ottoman Empire.  Prevailing state interests, international resistance to upsetting the balance of power in the region, and powerful, resource-rich armed forces at the disposal of the region’s (Western-aligned) autocrats made it implausible for the Kurds to redraw the map of the Middle East. That paved the way for a century’s worth of rebellions, countless atrocities, and genocide against the Kurds. Yet, the Kurdish national liberation project in Iraq survived. Its survival stems in large part from the persecution the Kurds have suffered, which has strengthened the unifying thread of Kurdish nationalism and the morally and intellectually resilient cause of Kurdish self-determination. Its survival is also due to geopolitics and a regional order that became beset with constant instability and conflict, opening up opportunities for external patronage and the development of personal and institutional ties with regional powers.The Kurds–who have been victims of dictatorship, human rights abuses, and systematic displacement, particularly under the Baath Party in Iraq, which killed scores of Kurds in the Halabja genocide and the wider al-Anfal operation–have championed their cause as one of the right to self-determination. This helped guarantee international recognition and legitimacy, and enabled a trajectory that has since moved them closer toward sovereignty.

Kurdistan’s Leaders Put Aside Differences, Vote Yes in Independence Referendum – Kurdistan Region’s officials and the political parties’ leaders cast their vote in the historic independence referendum, putting aside all political differences.   The polling stations opened across the Kurdistan Region and the areas outside of the Kurdistan Regional Government (KRG) administration at 8:00 am (local time) on Monday.   Despite political differences and some reservations over the date of holding the independence referendum among the political parties, the leaders unanimously participated in the referendum and voted yes.  President of the Kurdistan Region Masoud Barzani cast his vote early Monday morning in Pirmam, near the capital of Erbil, in a bid to begin the process to separate from Iraq. Following the vote, Barzani in a post on Twitter said “Proud to cast my vote earlier this morning and partake in this historic day, the day of the Kurdistan Referendum.”   Mala Bakhtiyar, Head of Executive Body of the Patriotic Union of Kurdistan, after casting his vote told reporters that holding the referendum is a legitimate right for the Kurds, stating that the country of Kurdistan is no threat to neighboring countries. Kosrat Rasool, the Vice President of the Kurdistan Region, who voted in one of the polling stations in Kirkuk, urged the Iraqi government to accept the results of the referendum if they believe in democracy. He commended the people of the Kurdistan Region for having a united stance and voicing their opinion about the independence. Omar Said Ali, the leader of the Gorran [Change] Movement, after casting his vote in Sulaimani revealed that he has voted yes, as the party in a statement on Sunday freed its supporters in how they deal with the referendum process.  Ali Bapir, Amir of the Kurdistan Islamic Group, told reporters at a polling station that the people of the Kurdistan Region have the legitimate right like all other nations to live freely.

Iraq’s Kurds just voted to secede. Here’s why that could cause a new civil war -- With the eyes of the world focused on North Korea, the Kurds have just taken a large — and very dangerous — step in that direction by overwhelmingly approving a referendum on formally declaring independence from the Iraqi central government in Baghdad. Qubad Talabani, deputy prime minister of the Kurdistan Regional Government (KRG), called it a “historical day” for Kurds. The referendum isn’t binding, and there’s no sign that the US-backed government in Baghdad has any intention whatsoever of acting on it. In a televised speech on Sunday, just one day before the referendum vote, Iraqi Prime Minister Haider al-Abadi called the vote “unconstitutional” and declared that Baghdad “will not recognize its outcome.”  Still, the mere act of holding the vote risks a new rupture between the Kurds and the Iraqi government — one with a real risk of actual fighting between the two sides.  Kirkuk is the flashpoint largely because of its massive oil wealth. Nine billion barrels of oil reserves lie just outside the city — 6 percent of the world’s total and 40 percent of Iraq’s. Until recently, Baghdad produced and sold all of Kirkuk’s oil. But after ISIS sabotaged Baghdad’s pipeline and peshmerga forces streamed in, Baghdad lost control. Kurds now control three of the five oil fields. A deal reached in August 2016 ensured that both Kurdish and Iraqi governments get a share of the oil proceeds, but Baghdad wants its oil fields back. Yet Kurdistan needs oil revenue from Kirkuk to pay even a fraction of the costs of running a quasi-independent Kurdish state. Baghdad’s only way to regain control of Kirkuk is through negotiations or fighting.

Turkey raises oil threat after Iraqi Kurds’ referendum --  Turkey has threatened potentially crippling restrictions on oil trading with Iraqi Kurds after they backed independence from Baghdad in a referendum that has alarmed Ankara as it faces a separatist insurgency from its Kurdish minority. Most oil that flows through a pipeline from Iraq to Turkey comes from Kurdish sources, and stopping that would severely damage the Kurdish Regional Government (KRG), which relies on sales of crude for almost all its hard currency revenues. Iraq’s Kurds endorsed secession by nine to one in a vote on Monday that has angered Turkey, the central government in Baghdad, and other regional and world powers who fear the referendum could lead to renewed conflict in the region. So far the pipeline is operating normally despite Turkish threats to impose economic sanctions on the Kurdish autonomous region in Iraq. Turkish officials, however, have ramped up pressure on the Kurds. Turkish President Recep Tayyip Erdogan said after talks with Russian President Vladimir Putin the Kurdish government “made a big mistake by holding the referendum” and must be prevented from “bigger mistakes”.

Kurdistan referendum: Erdogan says Iraqi Kurds risk 'ethnic war' and threatens military response to vote -- Turkish President Recep Tayyip Erdogan has warned that the referendum on support for independence for Iraqi Kurdistan next door risks sparking an "ethnic war" in the region. In a speech at the presidential palace in Ankara on Tuesday, Mr Erdogan reiterated that options, including the military, are on the table to protect Turkey's security.He also repeated his Monday threat to cut off the pipeline which exports the autonomous Kurdish Regional Government (KRG) of Iraq's oil across the Turkish border. The KRG's 8.4 million strong population took to the polls on Monday to vote on whether to separate from Baghdad in a referendum not recognised by the central government. Turnout is believed to have been high, at around 72 per cent, and local television said 90 per cent of votes had been cast as 'yes' to independence.  "Until the very last moment, we weren't expecting Barzani to make such a mistake as holding the referendum. Apparently we were wrong," Mr Erdogan said, referring to KRG President Masoud Barzani. Iraq's Kurds would starve, he added, if Turkey decided to close its long border with northern Iraq, warning that economic and military action were both options on the table for Ankara.  The Kurdish people - who number roughly 30 million across several countries - were left stateless when the Ottoman Empire collapsed a century ago.

Iraq Deploys Troops To Kirkuk After Kurdistan "Yes" Vote; Turkey Threatens Blockade - Immediately on the heels of the Iraqi Kurdistan "yes" vote, the Iraqi parliament approved sending troops to the disputed Kirkuk region to prevent the Kurdistan Regional Government (KRG) from taking full control of the oil-rich area. Preliminary official results out Wednesday indicate a 92% vote in favor of Kurdish independence. A written statement produced by Baghdad said the decision aims to protect Iraqi citizens residing in the contested area between Baghdad and Erbil. But the decision is also no doubt motivated by protection of Kirkuk's multiple oil and gas fields, which Baghdad has now ordered the KRG to hand over, including all other oil facilities throughout northern Iraq.The KRG held its deeply controversial referendum on Kurdish independence Monday, which as expected resulted in a "yes" vote to declare the autonomous Iraqi region a new state. Kurdish leader Masoud Barzani announced the results of the referendum on live TV Tuesday, while attempting to ease tensions by urging "serious dialogue" with the Baghdad government instead of threats of sanctions and troop presence. Barzani further warned Iraqi Kurds of "facing hardships" while also pleading with world powers to “to respect the will of millions of people”.Currently, Israel is the only country which has voiced public support for Kurdish independence - something which has earned the condemnation of Turkey, Iran, and others in the region. Israel stands accused of using the Kurds of to Balkanize Iraq and the broader Arab region. Turkey for its part has come close to warning Israel that it could cut diplomatic ties should Israel continue in its public support of an independent Kurdistan. This week Turkish President Recep Tayyip Erdogan warned, “If they do not review, we cannot take a lot of steps that we were about to take with Israel” - to which Israeli lawmakers responded that such threats were "empty".

Kurdish Vote Won't Spark A Sustained Oil Price Rally - Turkey and Iraq have stepped up the pressure on Kurdistan after the semi-autonomous region of Iraq voted for independence. Turkey’s President Recep Tayyip Erdogan threatened to block Kurdish oil exports through Turkish territory, while Baghdad called for an international boycott of Kurdish oil sales. The Kurdish people appeared to have voted overwhelmingly for independence on Monday, pending final results. But the Kurdish Regional Government has said that the vote, which won’t be recognized internationally, will be a starting point for negotiations with Baghdad, and not the culmination of real independence.Turkey’s President called the referendum “illegal, null, and void,” and threatened to shut down exports through the pipeline that runs from Kurdistan to the Turkish Mediterranean port of Ceyhan. “Let’s see where they are going to drain off the petrol — we control the valve,” he said. “Once you turn off the valve, it will be over.”The referendum was also opposed by Iran, as well as the United States, which argued that it would destabilize the region.Iraqi Prime Minister Haider al-Abadi said on Sunday that all foreign countries should not purchase oil from Kurdistan, arguing that the sales are illegal if not conducted under the auspices of the Iraqi central government.Iraq “asks the neighboring countries and the countries of the world to deal exclusively with the federal government of Iraq in regards to entry posts and oil,” a statement from the Prime Minister’s office said.Kurdistan produces just over 600,000 bpd, or about 15 percent of Iraq’s total output. Most contentiously are the oil fields around disputed areas in Kirkuk, which the Kurds took control of in 2014 when ISIS burst onto the scene and rapidly seized swathes of territory from the Iraqi government.“The Iraqi government is not going to stand still and watch Kirkuk’s integration into Kurdistan, and the mobilization that we’re seeing is an Iraqi effort to reassert control over the contested territory,” Ayham Kamel, director of the Middle East and North Africa at Eurasia Group, said in a Bloomberg interview. Ethnic clashes “might become a pretext for much wider mobilization,” he added. Kurdistan is largely at the mercy of its much more powerful neighbors. The bulk of the region’s finances come from oil exports, much of which go through a pipeline across Turkey to the Mediterranean. If Turkey takes draconian action to shut down Kurdish oil exports, it would cripple the Kurdish economy.

Kurdistan region refuses to hand over border crossings to Iraqi government: Rudaw | Reuters: (Reuters) - The Kurdistan Regional Government in northern Iraq refused to relinquish control of its border crossings to the Iraqi government, Erbil-based TV Rudaw said on Friday, citing a KRG official. Relinquishing control over border crossings with Turkey, Iran and Syria was a demand made by Iraq, Iran and Turkey in retaliation for the Kurdish independence referendum held on Monday in northern Iraq. Backed by Ankara and Tehran, the Iraqi government has demanded that the Kurdish leadership cancel the result of the referendum or face sanctions, international isolation and possibly a military intervention. An embargo on direct international travel to Kurdistan is set to begin at 6:00 pm local time (1500 GMT), imposed by the Iraqi government to force the KRG to hand over the control of its airports to Baghdad. Iraqi Prime Minister Haider al-Abadi said in a statement on Friday the direct air travel ban is not “a punition against the citizens of the region, it is a constitutional measure decided by the government in the interest of the residents of Kurdistan.”

Last flight departs as Iraq imposes ban for Kurdish independence -(Reuters) - The last international flight left Erbil airport on Friday as the Baghdad government imposed an air ban on Iraqi Kurdistan in retaliation for an independence vote that has drawn widespread opposition from foreign powers. Iraq's Kurds overwhelmingly backed independence in Monday's referendum, defying neighboring countries, which fear the vote could lead to renewed conflict in the region. (GRAPHIC: Iraq's Kirkuk region - tmsnrt.rs/2gq0Gk4) Foreign airlines suspended flights to Erbil and Sulaimaniya in the autonomous region, obeying a notice from the government in Baghdad, which controls Iraqi air space. Erbil airport was busier than usual as passengers scrambled to catch the last flights out before the ban went into force at 6 p.m. (1500 GMT) on Friday. Domestic flights are still allowed, so travelers are expected to travel to Kurdistan mostly via Baghdad’s airport, which will come under strain from the extra traffic. Maintaining the travel curbs is likely to discourage visits by businessmen and Kurdish expatriates, and affect industries including hotels, financial services, transport and real estate. More than 400 Kurdish travel and tourism companies are directly affected by the flight ban and 7,000 jobs are at risk in the sector, Erbil-based Rudaw TV said. The Kurdistan Regional Government (KRG), meanwhile, refused to hand over control of its border crossings to the Iraqi government, as demanded by Iraq, Iran and Turkey in retaliation for the independence referendum. 

Syria - U.S. CentCom Declares War On Russia --Yesterday three high ranking Russian officers were killed in an "ISIS attack" in eastern-Syrian. It is likely that they were killed by U.S. special forces or insurgents under U.S. special forces control. The incident will be understood as a declaration of war. The U.S. Central Command in the Middle East wants the oil fields in east-Syria under control of its proxy forces to set up and control a U.S. aligned Kurdish mini-state in the area. The Syrian government, allied with Russia, needs the revenues of the oil fields to rebuild the country. Last week the Russians issued sharply worded statements against U.S. coordination with al-Qaeda terrorists in Idleb province and warned of further escalation.Yesterday the Russian Ministry of Defense accused the U.S. military in east-Syria of direct collaboration with the Islamic State:US Army special units provide free passage for the Syrian Democratic Forces (SDF) through the battle formations of Islamic State (IS, formerly ISIS/ISIL) terrorists, the ministry said in a statement. “Facing no resistance of the ISIS militants, the SDF units are advancing along the left shore of the Euphrates towards Deir ez-Zor,” the statement reads.The newly released images “clearly show that US special ops are stationed at the outposts previously set up by ISIS militants.”“Despite that the US strongholds being located in the ISIS areas, no screening patrol has been organized at them,” the Russian Ministry of Defense said. This map marks the currently relevant conflict area - (U.S. proxies - yellow, SAA - red, ISIS - black):The accusations are plausible. Large parts of ISIS in Deir Ezzor consist of local tribal forces from eastern-Syria. U.S. special envoy Brett McGurk recently met tribal leaders who had earlier pledged allegiance to ISIS. Deals were made. As we wroteThe U.S. diplomat tasked with the job, Brett McGurk, recently met with local tribal dignitaries of the area. Pictures of the meeting were published. Several people pointed out that the very same dignitaries were earlier pictured swearing allegiance to the Islamic State.

Russia Releases Photos Showing US Special Ops At ISIS Positions In Syria -- The Russian Defense Ministry has released aerial images allegedly showing ISIS, the SDF, and US special forces working side-by-side on the battlefield against Syrian and Russian forces in Dier ez-Zor, Syria.The aerial photos of ISIS' territory north of #Deir_ez_Zor where #USA special operation troops are seen https://t.co/lH6u8H9bvZ pic.twitter.com/gjqlQubi9o— (@mod_russia) September 24, 2017AsAdam Garrie reports, via The Duran,it has long been thought that the US proxy militia SDF is operating in collusion with ISIS in various parts of Syria. This has especially been the case in respect of Deir ez-Zor. In Deir ez-Zor, the Russian Defense Ministry has previously stated that the Syrian Arab Army and their allies are fired on most intensely from positions known to be held by the SDF.Furthermore, Russian Defense Ministry Spokesman Major General Igor Konashenkov recently stated,“SDF militants work to the same objectives as Daesh terrorists. Russian drones and intelligence have not recorded any confrontations between Daesh and the ‘third force’, SDF”.He added that Russia will not hesitate to target SDF forces that threaten the battle field progress and personal safety of Russia’s allies, namely the Syrian Arab Army.Other reports surfaced of US military helicopters airlifting known ISIS commanders to safety as the Syrian Arab Army made its advance on the former ISIS stronghold of Deir ez-Zor. All of this has happened as the US is moving its proxy Kurdish led SDF forces from Raqqa to Deir ez-Zor, in a move that appears to be an attempt to stop Syrian forces from liberating their own country’s legally recognised territory.Now, the Russian Defense Ministry has released a statement followed by 12 photos showing how SDF forces work alongside US special forces in ISIS controlled areas without facing any resistance from ISIS. Furthermore, none of the US or Kurdish led forces even take defensive positions which indicate that they are cooperating with ISIS rather than engaging in a perverse truce. In other words, the SDF, US special forces and ISIS move among each other in the same manner as allies do. The following is the statement from the Russian Defense Ministry on the matter:

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