Monday, October 23, 2017

US oil production falls to lowest in 42 months, rig count drops most in 20 months

US oil prices were up 4 days out of 5 again this week, but still only ended 2 cents higher, while Brent, the widely quoted international oil price, was also up 4 out of 5 days and ended 58 cents higher, and hence the premium that's been driving record US oil exports widened...the contract for US oil for November delivery first rose 42 cents to $51.87 a barrel on Monday, as US trained and armed Iraqi forces moved on the key oil-producing city of Kirkuk, which had been occupied by US trained and armed Kurdish forces over the past three years...with conflicting reports out of Iraq on Tuesday, US oil prices rose to as high as $52.25 on Tuesday morning, then dropped to as low as $51.21 Tuesday afternoon, but ended the day at  $51.88 a barrel, up just 1 cent on the day....prices then rose 16 cents to a three week high close of $52.04 a barrel on Wednesday, as EIA data showed a larger-than-expected draw from U.S. crude stockpiles on near record oil exports...oil prices then fell for the first time in 5 days on Thursday, dropping 75 cents to $51.29 a barrel, pressured by larger-than-expected product inventories and profit-taking after the recent run-up, as Iraq occupied Kirkuk and promised that the oil would continue flowing....US WTI crude futures for November were then mostly flat on Friday in see-saw trading, but ended the session 18 cents higher at $51.47 per barrel, after Baker Hughes reported the largest drilling rig pull back in 20 months... 

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 October 13th, showed both the aforementioned large increase in our oil exports as well as a large drop in our domestic production of oil, which meant that a larger quantity of oil had to be pulled out of storage to meet the needs of our refineries, which also slowed....our imports of crude oil fell by an average of 134,000 barrels per day to an average of 7,483,000 barrels per day during the week, while at the same time our exports of crude oil rose by 528,000 barrels per day to a near record 1,798,000 barrels per day, which meant that our effective imports netted out to an average of 6,347,000 barrels per day during the week, 662,000 barrels per day less than during the prior the same time, our field production of crude oil fell by 1,047,000 barrels per day to an average of 8,406,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 14,091,000 barrels per day during the reported week... 

at the same time, US oil refineries were using 15,439,000 barrels of crude per day, 819,000 barrels per day less than they used during the prior week, while during the same period 927,000 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 421,000 fewer barrels per day than what refineries reported they used during the account for that discrepancy, the EIA needed to insert a (+421,000) 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 rose to an average of 7,435,000 barrels per day, 1.9% below the imports of the same four-week period last year....the 927,000 barrel per day withdrawal from our total crude inventories came about on a 819,000 barrel per day withdraw from our commercial stocks of crude oil and a 108,000 barrel per day emergency withdrawal of oil from our Strategic Petroleum Reserve, which apparently is still being tapped to address short term spot shortages caused by this year's hurricanes...this week's 1,074,000 barrel per day decrease in our crude oil production was due to a 1,084,000 barrel per day drop in output from wells in the lower 48 states due to Hurricane Nate, the largest drop since August 2012, while output from Alaska rose by 9,000 barrels per day...the 8,406,000 barrels of crude per day that were produced by US wells during the week ending October 13th was the least oil that we've produced since the last week of April 2014, 4.2% less than the 8,770,000 barrels per day we were producing at the end of 2016, but just fractionally lower than the 8,464,000 barrels per day of oil we produced during the during the week ending October 14th a year ago...

US oil refineries were operating at just 84.5% of their capacity in using those 15,439,000 barrels of crude per day, down from 89.2% of capacity the prior week, a reduction in throughput that was mostly due to normal seasonal maintenance.... the 15,439,000 barrels of oil that were refined this week was 12.9% less than the 17,725,000 barrels per day that were being refined the week before Hurricane Harvey struck, just seven weeks earlier, but it was actually a bit more than the 15,370,000 barrels of crude per day that were being processed during week ending October 14th, 2016, when refineries were operating at 85.0% of capacity...

despite the slowdown in US oil refining, gasoline production from our refineries was higher, increasing by 290,000 barrels per day to 10,031,000 barrels per day during the week ending October 13th, which was also 5.6% higher than the 9,935,000 barrels of gasoline that were being produced daily during the comparable week a year ago....on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 180,000 barrels per day to 4,784,000 barrels per day, which was 4.0% more than the 4,599,000 barrels per day of distillates that were being produced during the week ending October 14th last year....   

with the increase in our gasoline production, our end of the week gasoline inventories rose by 908,000 barrels to 222,334,000 barrels by October 13th, the fourth increase in gasoline inventories in a row...that was even as our exports of gasoline rose by 227,000 barrels per day to 636,000 barrels per day, while our imports of gasoline fell by 170,000 barrels per day to 690,000 barrels per day...offsetting that imbalance, however, our domestic consumption of gasoline fell by 344,000 barrels per day to 9,136,000 barrels per day at the same time...still, with significant gasoline supply withdrawals in 12 out of the last 18 weeks, our gasoline inventories are still down by 8.3% from June 9th's level of 242,444,000 barrels, and 2.5% below last October 14th's level of 227,967,000 barrels, even as they are still roughly 7.2% above the 10 year average of gasoline supplies for this time of the year...   

even with the decrease in our distillates production, our supplies of distillate fuels rose by 528,000 barrels to 134,487,000 barrels over the week ending October 13th, the first increase in seven weeks...that was because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 171,000 barrels per day to 3,477,000 barrels per day, the lowest seasonal level in more than 10 years, and because our exports of distillates fell by 273,000 barrels per day to 1,339,000 barrels per day, while our imports of distillates rose by 23,000 barrels per day to 107,000 barrels per day...however, even after this week’s increase, our distillate inventories ended the week still 13.6% lower than the 155,732,000 barrels that we had stored on October 14th, 2016, and 5.5% lower than the 10 year average for distillates stocks for this time of the year

finally, with our oil exports continuing at near record levels, our commercial crude oil inventories fell for the 24th time in the past 28 weeks, decreasing by 5,731,000 barrels, from 462,216,000 barrels on October 6th to 456,485,000 barrels on October 13th...while our oil inventories as of October 13th were 2.6% below the 468,711,000 barrels of oil we had stored on October 14th of 2016, they were still 2.7% higher than the 444,618,000 barrels in of oil that were in storage on October 16th of 2015, and 31.8% greater than the 346,414,000 barrels of oil we had in storage on October 17th of 2014...

This Week's Rig Count

US drilling activity decreased for 9th time in the past 12 weeks during the week ending October 20th, with this week's total pullback the largest since the week ending February 19th 2016...Baker Hughes reported that the total count of active rotary rigs running in the US fell by 15 rigs to 913 rigs in the week ending Friday, which was still 360 more rigs than the 553 rigs that were deployed as of the October 21st 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 down by 7 rigs to 736 rigs this week, their 10th decrease in 11 weeks, which still left active oil rigs up by 293 over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the count of drilling rigs targeting natural gas formations decreased by 8 rigs to 177 rigs this week, which was the smallest natural gas rig deployment since May 10th and just 69 more gas rigs than the 108 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...

there was no change in offshore drilling this week, as 20 platforms, all in the Gulf of Mexico, continued to see drilling activity, down from the 22 in the Gulf and one offshore from Alaska a year ago....the count of active horizontal drilling rigs was down by 15 rigs to 771 rigs this week, which was the smallest number of working horizontal rigs since July 2nd...however, that was still up by 326 rigs from the 445 horizontal rigs that were in use in the US on October 21st of last year, while down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, the vertical rig count was down by 1 rig to 62 vertical rigs this week, but still up from the 57 vertical rigs that were deployed during the same week last year....on the other hand, the directional rig count was up by 1 rig to 80 rigs this week, which was also up from the 51 directional rigs that were deployed on October 21st of of 2016.....

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of October 20th, the second column shows the change in the number of working rigs between last week's count (October 13th) and this week's (October 20th) count, the third column shows last week's October 13th 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 21st of October, 2016...       

October 20, 2017 rig count summary

it's pretty clear from the first table which states saw rig shutdowns this past week, but the table of major basin variances misses a lot of this week's changes; Baker Hughes details indicate that 5 oil rigs and 4 gas rigs were shut down in "other' basins, which they do not name...for starters, we know that Alaska had two rigs shut down, but none of the Alaskan oil fields are listed, so that accounts for two of those missing from the basin table...likewise for Wyoming, where the 2 rig reduction, which could have been pulled out of the Powder River basin, is not accounted for in the Baker Hughes basin table...Utah also saw a rig shut down, while none of the Utah basins, such as the Unita, are listed above..then, since Louisiana had one rig shut down in the Haynesville while one rig started in the south, we can figure there's two Haynesville rigs that must have been shut down in Texas...since there were two rigs added in the Eagle Ford in south Texas while 5 rigs were pulled out of the Texas side of the Permian, three more of the unaccounted for basin reductions must have been in Texas...likewise, there's an unaccounted rig shutdown in Oklahoma, since there were 2 rigs added in the Cana Woodford while one was pulled out of the Ardmore Woodford...and outside of the states included among the major producers in the first table above, Illinois also had a rig shut down this week, leaving them with just 1 rig still running, the same number they had running on October 21st a year ago... 


New Ohio bill reintroduces nuclear subsidy program as DOE pushes cost recovery NOPR - Illinois and New York have both adopted nuclear subsidy programs, and Connecticut has attempted to institute a nuclear subsidy. Ohio’s previousattemptsat its version of a nuclear subsidy stalled, but a new version of the bill aims to make the subsidies more palatable by reducing the costs to ratepayers. HB 381 would set the cost for residential customers at $2.50 and the lesser of $3,500 a month or 5% of the total bill for commercial and industrial customers. Under the previous bill, all customers would have been hit by a 5% monthly rate increase. The new bill also shortens the term of the subsidy to 12 years from 16 years. The new bill is sponsored by Rep. Anthony DeVitis (R) and co-sponsored by Rep. Ron Young (R). “Passage of [HB] 381 would increase the likelihood of keeping the plants operational throughout the life of the program,” FirstEnergy spokeswoman Jennifer Young told The News-Herald.  The Ohio bill comes as the Trump administration is trying to find a way to turn the tide for coal and nuclear generation. In September, Energy Secretary Rick Perry proposed the Federal Energy Regulatory Commission (FERC) begin a rulemaking on cost recovery for baseload generation. And earlier this month, the Environmental Protection Agency began the process for repealing the Obama administration’s Clean Power Plan.

Fossil Fuel Misinformation Helps Quash Community Effort to Ban Fracking in Youngstown, Ohio - DeSmog (blog) - For the first time since 2013, a group of activists in Youngstown, Ohio, has been told it cannot place an anti-fracking initiative on local ballots, due in part to a misinformation campaign from the fossil fuel industry. Soon after the Community Bill of Rights Committee gathered enough signatures for both initiatives to head to vote, the oil and gas industry launched a unique media campaign against not only the initiatives but the local ballot initiative process itself. The talking point: Local ballot measures cost taxpayers too much money and should be avoided. Earlier this year the pro-fossil fuel outreach website Energy In Depth filed a freedom of information request from the City of Youngstown for costs associated with the local ballot initiative process. (In 2011 DeSmog exposed Energy In Depth, which billed itself as the product of small, independent oil and gas producers, as being funded by some of the biggest fossil fuel companies on the planet, including BP, Shell, Chevron, and XTO Energy/ExxonMobil.) Energy In Depth reported that the city had spent $185,000 on the previous six anti-fracking ballot measures. However, a DeSmog analysis of the same records shows that this figure is misleading and inaccurate. The $185,000 figure represents the total cost of six primary and general elections between 2013 and 2016, which included much more than just the anti-fracking initiatives. According to the fiscal officer of the Mahoning County Board of Elections, which bills the City of Youngstown for election costs, there were five other charter amendments, 15 liquor options, and one county health board question that contributed to the city’s election invoice. Additionally, the figure touted by Energy In Depth includes paying poll workers in half of those elections, a regular cost incurred whether or not ballot measures were up for vote. Despite this inaccuracy, Energy In Depth’s talking point and the $185,000 figure were quickly picked up by localoutlets, fossil fuel–friendly publications and business journals. The U.S. Chamber of Commerce even compared the $185,000 to the amount of money that was spent managing the months-long anti-Dakota Access camps at Standing Rock (roughly $38 million) in a post called “The High Cost of Fracking Protesters.”

Pipelines Fuel Concern for Waterways in Coal Country -   - Bordering western Pennsylvania, the landscape of eastern Ohio is changing, literally. Stretches of hillsides are being cleared of trees, to make way for well pads and pipelines. The oil and gas industry is starting to take a front seat in what’s traditionally been rural coal country. As in Pennsylvania, some people are excited about the new industry. But others are concerned that there’s not enough regulation in place to protect waterways, and other aspects of the environment, from potential harm.  The region, around where Ohio, Pennsylvania and West Virginia meet, is called the Appalachian Coal Basin, and it’s considered to one of the largest coal fields in the country. By the late 1970s, Murray Energy’s coal mines had left the water quality in Captina Creek so bad that large sections of it were declared dead. Local citizens mounted an effort to clean up the stream and, with help from the coal companies, removed the gob piles from its banks. Today, Captina is considered one the cleanest streams that feeds into the Ohio. People swim and fish in it. Abbey Hayward, Captina Creek Watershed Coordinator at the Belmont County Soil and Water Conservation District, keeps an eye on the rare Eastern Hellbender salamander that lives here. . “They need clearer water because they breathe through their skin.” Hayward soon noticed drilling rigs on the hillsides, a sign of energy companies fracking for natural gas. Even though no one in her office, nor the Captina Creek Watershed Action Plan, had mentioned fracking, she started to understand how quickly the industry was moving in to Belmont County.

Prospects For Ethane Production And Transportation From The Marcellus/Utica -- Available ethane in the Marcellus/Utica is expected to increase 70% by 2022 to 800 Mb/d, from about 470 Mb/d this year. That should be good news for the slew of ethane-only steam crackers coming online in that time frame, primarily along the Gulf Coast. But unfortunately, there is limited ethane pipeline takeaway capacity out of the region and today more than half of the potential ethane supply is being rejected into the natural gas pipeline stream. Without additional takeaway capacity, that rejected volume is expected to grow and few additional ethane barrels will make their way to the Gulf Coast. The question is, will transportation economics support additional pipeline development to where the demand is growing the most? Today, we will explore how the changing ethane market is likely to impact the Marcellus/Utica producing region. This is Part 4 of a series in which we look forward based on RBN’s most recent forecasts of ethane supply and demand. In Part 1, we began with a discussion of how the ratio of Mont Belvieu ethane prices to the Henry Hub natural gas price on a per-Btu basis influences the decision of whether to extract ethane or reject it and send it into the natural gas stream. As we noted, that’s one of the most important market factors for understanding how the current ethane market transformation will unfold. The higher the ratio of ethane to natural gas prices/Btu, the greater the volume of ethane that is recovered as a liquid feedstock for the petrochemical industry. This year, that ratio has shifted to 1.4:1, up from 1:1 last year. As a result, ethane production is up about 90 Mb/d in 2017 year-to-date from the 2016 average.

At chapel where nuns protest a pipeline, 23 arrested, including several in their 70s and 80s -   Months ago, when the nuns and the activists built a chapel in the proposed path of a Pennsylvania pipeline, they said that if the bulldozers came to tear up the nuns’ land and put a pipe beneath it, they might stand in the way of the construction equipment to block it with their bodies and their prayers.That day arrived on Monday.  In a dramatic showdown in a cornfield, owned by Catholic sisters of the Adorers of the Blood of Christ, 23 people stood holding hands and singing hymns until they were arrested and charged with defiant trespassing.“I feel really frustrated with our courts and our government,” Barbara Vanhorn, a local resident who came to the nuns’ cornfield to join the protest, said to NPR. The oldest of the 23 people arrested at 86, Vanhorn said she worries that the natural gas pipeline, which will carry the products of fracking in Pennsylvania’s Marcellus Shale formation, will damage the environment. “They’re giving in to these big, paying, lying companies that are trying to destroy not only our country but the world.”According to the local Fox News station, 11 of the protesters who were arrested are in their 60s, 70s and 80s. NBC News reported that one protester, who suffered an apparent panic attack after his hands were zip-tied behind his back for more than an hour, was taken to a hospital. Most of the people arrested were local residents; one traveled from Massachusetts and another from West Virginia to join the protest. Mark Clutterbuck, who leads the group Lancaster Against Pipelines, said that almost 100 people participated in the demonstration. The nuns, most of whom are in their 80s and 90s, did not protest but did hold a prayer vigil in support.

As gas drilling returns, industry and colleges need to talk - No college or training program in Pennsylvania, West Virginia and Ohio makes speaking skills a major component of its programs for students headed into the natural gas industry.Yet half of drilling companies in that region want their employees to be good speakers.  The same goes for time management and writing skills, which between 6 percent and 7 percent of all colleges emphasize in their natural gas-related curriculum. Nearly half of drillers see those skills as important when making hiring decisions. The findings were part of a Rand Corp. study released in Pittsburgh on Tuesday spotlighting a lingering disconnect between the region's schools and employers in the gas industry that swept suddenly into southwestern Pennsylvania about a decade ago to tap into the Marcellus Shale formation.More broadly, it shows the challenge of getting industry and educators to work together on building a regional labor force.  “Few [oil and gas] employers provide deep or continual instructional or curricular support to colleges,” according to the report produced by three Rand researchers with funding from the National Science Foundation. “Both colleges and employers point to each other’s unwillingness and lack of time as key barriers to partnering.” It’s perhaps no surprise that the "skills gap" — a buzzword in workforce development spanning industries like construction, manufacturing, utilities, auto body shops and aeronautics — is an issue in oil and gas.

Secretive Billionaire Wants to Expand Fossil Fuel Empire in the US - The Real News Network – (interview & transcript) James Ratcliffe, the billionaire owner of the chemical giant Ineos Corporation, is pushing for a dangerous pipeline through Pennsylvania, while the company quietly works to start fracking operations in Scotland and the UK, says Food & Water Watch's Patrick Woodall  Patrick Woodall is Research Director and Senior Policy Advocate for Food & Water Watch. Patrick has been a public policy analyst, researcher and advocate on economic justice issues in Washington for more than two decades, including extensive work on mergers and consolidation throughout the food system.

Protesters arrested as pipeline construction begins on natural gas pipeline in Lancaster County   - Protesters surrounded a giant piece of digging machinery and about 25 were arrested as they tried to block the start of construction of a natural gas pipeline near Columbia in Lancaster County.  Within minutes of the last hand-cuffed protester being led away, work on the Atlantic Sunrise pipeline began on the tract of cornfield about a mile south of Route 30.The arrests took place on farmland owned by the Adorers of the Blood of Christ, a religious order of nuns who are suing the federal agency that approved the project, and Williams Partners LP, the Oklahoma firm that's building the pipeline to transfer natural gas from Pennsylvania's Marcellus Shale region.Although the suit is still alive, a federal judge on Friday ruled that construction can begin. On Monday, a crowd of protesters had gathered before 7 a.m. The pipeline, organizers said, violates "our religious rights, community rights, property rights, and rights to clean air and water." The protesters included people of all ages -- retirees, parents of young children and even a few teens who otherwise would have been in school. It took hours until construction equipment was in position and ready to go. Throughout the morning, Mark Clatterbuck, one of the leaders of the protest, urged the group to refrain from hostile words and actions. But, framing it as a "moral" dispute between profit-seeking outside interests and local people trying to protect the safety and beauty of their community, he said it would be a good time for those willing to be arrested for the cause to make their stand. The point, he said, was to call attention to the dispute.

Transforming the garden state into the pipeline state - The Pinelands National Reserve is the first national reserve in the United States and spans 1.1 million acres (around 445,000 hectares) across seven counties. It's one of the few truly wild places left on the US East Coast, the largest open space between Richmond, Virginia and Boston, Massachusetts - a wholly unique UNESCO biosphere, and an ecological jewel that 43 endangered species call home. So, of course, New Jersey's controversial Republican governor, Chris Christie, wants to run a pipeline through it.Last month, it was announced that the Pinelands Commission - the federally supported body that oversees public policy and development projects in the reserve - has approved a new 30-mile natural gas pipeline to run from Chesterfield Township to Manchester Township, right through the protected wilderness of the Pinelands.There has been significant community pushback against New Jersey Natural Gas' so-called "Southern Reliability Line", as well as against the South Jersey Gas Cape Atlantic Reliability Project, another pipeline that Christie approved earlier this year that will span 22 miles and also cut directly through the Pinelands.  Outside of New Jersey, there's been little media coverage of the pipeline controversies, or of Christie's determination to invest in fossil fuel. His folly may damage the Pines' fragile ecosystem for what many critics say is an ultimately unnecessary infrastructure project that goes against the stated mission of the Pinelands Comprehensive Management Plan, as set down by the federal Pinelands Protection Act of 1979: to protect the land and its people, and ensure that any approved projects hold a demonstrable benefit to those who call the Pines home.

Federal regulators approve two major East Coast pipelines - Federal regulators on Friday approved two major natural gas pipelines for construction on the East Coast, a move heralded by business leaders and condemned by environmentalists. The Federal Energy Regulatory Commission granted approvals for the Mountain Valley and Atlantic Coast pipelines, according to The Associated Press. One of the three commissioners dissented.  The Mountain Valley Pipeline, which is slated to cost $3.5 billion, would span 300 miles from the northern portion of West Virginia all the way to Danville, Va. The Atlantic Coast Pipeline, which will amount to $5 billion, will stretch 600 miles from north-central West Virginia, through Virginia, and through eastern North Carolina. Business advocates say the pipelines will lower energy costs and jumpstart economic development, however opponents argue the pipelines will interfere with property rights and have a negative impact on the environment. “Given the environmental impacts and possible superior alternatives, approving these two pipeline projects on this record is not a decision I can support,” said commissioner Cheryl LaFleur, an Obama-era appointee who dissented on Friday, according to the AP. The decision is the latest victory for pipeline advocates. It comes days after a federal judge ruled that the Dakota Access pipeline could continue its operation during a federal review of the project’s environmental impact.

Major East Coast Pipelines Approved by FERC Despite Strong Opposition - Federal regulators approved plans for two controversial new natural gas pipelines along the East Coast Friday. In a divided 2-1 vote, the Federal Energy Regulatory Commission gave the green light to the Atlantic Coast and Mountain Valley pipeline projects, which would carry shale gas through Virginia, West Virginia and North Carolina. Commissioner Cheryl LaFleur, the only dissenting vote, expressed concerns in her written dissent on the redundancy of the collective 900 miles of pipeline, the potential environmental impacts and the relatively small accounted demand for the Mountain Valley project. Both pipelines have been met with severe local opposition, and some activists expect backlash and increased fights against the projects following FERC's decision. As reported by the Charlotte Business Journal : "Greg Buppert, a senior attorney for the Southern Environmental Law Center , called the FERC order a long-anticipated 'rubber stamp' and said his organization intends to challenge the decision. 'The utilities involved in the construction of the Atlantic Coast Pipeline claim utility customers will save money, when in fact this pipeline will drive up ratepayers' bills—and cause harm to national forests and to rivers and streams while threatening to commit our states to fossil fuels for decades to come," he says.'" "This poorly-planned pipeline will hurt the local economy, pollute central Virginia's clean drinking water supply and scar the Appalachian National Scenic Trail," Ron Tipton, president and CEO of the Appalachian Trail Conservancy said in a statement.  "Central Virginia does not need another pipeline to fulfill America's energy needs, particularly one that violates local environmental laws and is strongly opposed by local elected officials and citizen groups."

Politicians react to FERC pipeline certifications - U.S. Sen. Tim Kaine used the phrase “very suspicious circumstances” Monday to describe how a federal agency announced it had approved two deeply controversial natural gas pipelines that will burrow through different regions of Virginia. Kaine, a Democrat who was in Roanoke on Monday, observed that notices from the Federal Energy Regulatory Commission about the commission’s endorsement of the Mountain Valley Pipeline and Atlantic Coast Pipeline were distributed after 7 p.m. Friday — timing clearly intended, he said, to inhibit news coverage going into the weekend. “When somebody puts something out at 7 o’clock Friday night, they’re trying to hide it,” Kaine said. “That means they’re ashamed of their decision. Why would they be ashamed of it?”He said the orders granting certificates of “public convenience and necessity” to the multi-billion dollar projects were issued when there were only three commissioners on FERC’s five-person panel. “Clearly, they were trying to rush it without a full complement on the team,” Kaine said, adding that he believes decisions of this magnitude ought to require the participation of all five commissioners. The senator noted too that a vigorous and “stinging” dissent by Commissioner Cheryl LaFleur was significant, partly because such dissents rarely occur on the commission, he said. LaFleur, a Democrat who has been a commissioner since 2010, wrote, “I cannot conclude that either of these projects as proposed is in the public interest.” The two commissioners who voted to approve the pipelines are both Republicans appointed by President Donald Trump who recently joined the commission. 

Rover Pipeline Spills Water Containing Gasoline Into Michigan Wetlands - Michigan's Department of Environmental Quality (MDEQ) issued a violation notice to Energy Transfer Partners after its Rover pipeline project spilled water containing gasoline into wetlands near Pinckney. The violation notice was issued after the department's Water Resources Division (WRD) staff received a complaint on Wednesday regarding a petroleum odor coming from water discharged from the pipeline project near the northern crossing of Dexter-Townhall Road in Washtenaw County. Upon inspecting the site, WRD staff noted a petroleum odor and observed a sheen in the dewatering enclosure. Staff from the Remediation and Redevelopment Division inspected the site on Thursday and also noted the presence of a petroleum odor and determined a nearby former gas station was the likely source. "Due to the observed odors and the close proximity to a former gas station, the source of the petroleum is likely to be contaminated groundwater from a release at the former gas station," the violation notice states. "The contaminated groundwater is being captured through the dewatering process, which is being employed for the pipeline installation and is being discharged to the wetland. Regardless of the potential source, the presence of odor and sheen indicates a discharge of petroleum-contaminated water from the dewatering activities being conducted on site." Because of the petroleum contamination, the company must apply for a special permit and treat the water prior to discharging it, MDEQ said. Additionally, the water withdrawal system should be registered with the DEQ prior to operating because it has the capacity to pump more than 100,000 gallons a day.  "Finally, Rover's dewatering activities may be exacerbating the spread of contaminated groundwater," the notice states.

DEQ finds Rover Pipeline spilling water containing gasoline into wetlands - The Michigan Department of Environmental Quality issued a violation notice on Friday, Oct. 13, to Rover Pipeline for discharging water containing petroleum into wetlands near Pinckney.Rover Pipeline LLC - which is building a 713-mile gas pipeline that ends in Livingston County - has until Wednesday, Oct. 18, to submit a response stating how the company intends to resolve multiple issues identified by the DEQ.  Rover Pipeline's media relations department did not respond to a request for comment on the situation Friday. The DEQ began investigating the water runoff - near the northern crossing of Dexter-Townhall Road - in response to complaints made by area residents who discovered a dewatering enclosure related to the pipeline project was spilling water into the wetlands near the Portage River and Silver Lake. Residents first observed the leak on Tuesday, Oct. 10, according to the Michigan Residents Against the ET Rover Pipeline citizen group. On Wednesday, residents noticed the water had the smell of gasoline and alerted the DEQ. A representative from the DEQ visited the site Wednesday evening, and then Rebecca Taylor, from the DEQ's Remediation and Redevelopment Division, returned to the site on Thursday to test the water, according to Taylor's field notes.   Taylor smelled gasoline in the water, and she determined the source was a nearby former gas station on Cedar Drive, according to the DEQ's violation notice and Taylor's records.   "The contaminated groundwater is being captured through the dewatering process, which is being employed for the pipeline installation and is being discharged to the wetland,"  Due to the petroleum contamination, the company needs to apply for a special permit and to treat the water prior to discharging it, according to the DEQ violation notice.

"My House Shook": Oil Rig Explosion Near New Orleans Leaves 7 Injured, 1 Missing -- An oil rig in Lake Pontchartrain, La. exploded Sunday night, leaving seven people injured – five of them critically – with one person still missing, NBC News reported. Reports of fire and smoke being seen from Lake Pontchartrain first came in around 8:20 ET Sunday night, according to Jefferson Parish spokesman Antwan Harris. The explosion took place about a mile-and-a-half from the shore of the lake, which is located north of New Orleans. Flames could be seen from the area and the air smelled of burning rubber. The cause of the explosion remained unknown early Monday, and authorities said it was too soon to tell whether any oil had spilled. Ben Zahn, the mayor of nearby Kenner, said no homes were threatened. First responders from St. Charles Parish, Jefferson Parish, Kenner, the US Coast Guard, East Jefferson General Hospital EMS and Louisiana Wildlife and Fisheries responded to the explosion. "Several people have been rescued from the active fire on the rig," Harris said."Authorities on the scene report that cleaning chemicals ignited on the surface of the oil rig platform," the City of Kenner Government posted on its Facebook page Sunday evening. Five of the injured were taken to University Medical Center with "blast type injuries and burns" and are in critical condition. The other two are in stable condition at East Jefferson General Hospital. Search and rescue efforts were continuing as of Monday morning, ABC reported.

Nearly 400,000 Gallons of Oil Spews Into Gulf of Mexico, Could Be Largest Spill Since Deepwater Horizon - Last week , a pipe owned by offshore oil and gas operator LLOG Exploration Company, LLC spilled up to 393,000 gallons of oil into the Gulf of Mexico, reminding many observers of the Deepwater Horizon explosion seven years ago that spewed approximately 210 million gallons of crude into familiar territory. Now, a report from Bloomberg suggests that the LLOG spill could be the largest in the U.S. since the 2010 BP blowout, according to data from the U.S. Bureau of Safety and Environmental Enforcement (BSEE). While at a much smaller scale than the nation's worst accidental oil spill , the Delta House floating production facility, located about 40 miles southeast of Venice, Louisiana, released between 7,950 to 9,350 barrels starting from Wednesday to Thursday due to a fractured pipeline. The flow has been contained and cleanup is underway, according to LLOG officials. No shoreline impacts have been reported and there are no reports of personnel injuries, BSEE noted . On Monday, BSEE Gulf of Mexico Region Director Lars Herbst initiated a five-member panel of inspectors, engineers and accident investigators into the oil release.  "BSEE places great emphasis on making certain all oil and gas operations on America's Outer Continental Shelf are safe," Herbst said . "This panel investigation is a critical step in ensuring BSEE determines the cause, or causes, of the incident and develops recommendations to prevent similar events from occurring in the future."

Oil pipeline break in Gulf of Mexico under federal investigation  - The federal Bureau of Safety and Environmental Enforcement has convened a panel of inspectors, engineers and accident investigators to review a break in an underwater pipe that resulted in the release of up to 9,350 barrels of oil into the Gulf of Mexico about 40 miles southeast of Venice on Thursday (Oct. 12).LLOG Exploration Offshore reported the ruptured pipe to the Coast Guard on Friday and was eventually able to shut off the flow of oil. The company estimated that between 7,950 barrels and 9,350 barrels of oil -- or between 333,900 and 392,700 gallons -- were released 4,463 feet below the surface. The pipe led from a deepwater well at Mississippi Canyon 209 to the company's Delta House platform nearby."BSEE places great emphasis on making certain all oil and gas operations on America's Outer Continental Shelf are safe," Lars Herbst, director of the BSEE Gulf of Mexico region, said in a news release. "This panel investigation is a critical step in ensuring BSEE determines the cause, or causes, of the incident and develops recommendations to prevent similar events from occurring in the future." At the end of the five-member panel's investigation, it will release a report containing findings, recommendations, and identifying any potential violations that should be considered by the BSEE enforcement staff, the news release said. BSEE inspectors traveled to the platform Friday to begin an initial inspection.

Oil Spill Off Louisiana Coast 2X Bigger Than Original Estimate - LLOG Exploration Company, LLC drastically underestimated the amount of oil its fractured pipeline spilled into the Gulf of Mexico last week . The oil and gas operator first estimated that it spewed about 340,000 gallons of oil. Now, according to a Coast Guard announcement, the company is now reporting a discharge of 672,000 gallons—about two times the initial estimate. A report from Bloomberg earlier this week suggested that LLOG's original discharge estimate was already the largest in the U.S. since the 2010 BP disaster which spilled about 210 million gallons of crude into familiar territory. The flow has since been contained and cleanup is underway, according to LLOG officials. No shoreline impacts have been reported and there are no reports of personnel injuries. The Coast Guard said that since the pipeline is 5,000 feet underwater, the oil is likely to be "broken down into small particles and disperse(d) into deep-water currents prior to reaching the surface." "Multiple daily flights" over the area, along with underwater inspections, have not detected any recoverable oil, the Coast Guard added, but noted that skimming vessels from Clean Gulf Associates and the Marine Spill Response Corporation "remain on standby."  On Monday, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) Gulf of Mexico Region Director Lars Herbst initiated a five-member panel of inspectors, engineers and accident investigators into the oil release.  "BSEE places great emphasis on making certain all oil and gas operations on America's Outer Continental Shelf are safe," Herbst said . "This panel investigation is a critical step in ensuring BSEE determines the cause, or causes, of the incident and develops recommendations to prevent similar events from occurring in the future."

Boom in American liquefied natural gas is shaking up the energy world  — A shale gas drilling boom over the last decade has propelled the United States from energy importer to exporter, taking the country a giant leap toward the goal of energy independence declared by presidents for half a century. Now the upheaval of the domestic energy sector is going global. A swell of gas in liquefied form shipped from Texas and Louisiana is descending on global markets, producing a broader glut and lower energy prices. The United States was supposed to be a big L.N.G. importer, not a world class exporter. The frenzy of drilling in shale gas fields across the country changed that over the last decade, creating a glut far larger than domestic demand could possibly consume. Companies that spent billions of dollars to build import platforms suddenly had useless facilities until they spent billions more to convert them for export.The switch will remake the global gas market for decades to come. Energy experts are predicting that the transformation will weaken Russia’s dominance over European power markets, help clean the air in cities across China and India by replacing the burning of coal and eventually provide cheaper and cleaner fuel to African villages.The full dimensions of the wave over the next four or five years, including its impact on the environment and climate change, are hard to predict, in part because they will depend on the policies adopted by many governments. But as several American multibillion-dollar export terminals come on line, few doubt that the influence of more gas, as the cleanest burning fossil fuel, will be consequential for powerful and poor countries alike. Experts point to Mexico as an example of how transformative gas can be in a matter of only a few years. As the American shale boom accelerated, producing more gas than its northern neighbor could consume, Mexico decided to import as much cheap gas as possible. Mexico replaced its dirtier burning coal and petroleum products, and now more than a quarter of the country’s electricity is powered by American gas. Four additional cross-border pipelines are to be completed over the next two years, and many more are in the planning phase. The gas imports have improved air quality, helped Mexico reach goals to reduce its carbon footprint to meet Paris climate agreement targets and freed capital to invest in more exploration and production of oil, which is more valuable on world markets.

Next wave of US LNG export facilities could face credit risk: S&P - Cheap, abundant US supplies of natural gas combined with forecasts of growing global LNG demand early next decade are not enough to ease the uncertainty facing the next wave of LNG export projects, S&P Global Ratings said Tuesday, citing high construction costs and the challenges in securing long-term supply contracts. The ratings agency is part of the same company that owns S&P Global Platts. The main fear is that as developers along the US Gulf of Mexico and the Atlantic and Pacific coasts seek creative ways to finance liquefaction units, they will be open to shorter agreements with smaller quantities and more flexible terms, raising concerns about their ability to repay debt as contracts come up for renewal more often, S&P Global Ratings noted in a report. There are more than a dozen LNG export projects currently being proposed to US regulators, though across the industry almost no final investment decisions have been announced over the last 18 months and some developers have delayed their decisions into 2018 or beyond. Few firm supply purchase agreements have been announced for the projects that have yet to commit to moving forward. "The repayment of project finance debt is from cash flow generated by long-term LNG offtake agreements with investment-grade companies; however, for a variety of reasons, these contracts are increasingly difficult to procure," it said. "The credit quality of new facilities could suffer if project finance structures are used but backed by shorter-term agreements (which introduce re-contracting risk) and/or merchant sales (and associated market risk) or include revenue counterparties that we rate below investment grade." Cheniere Energy's Sabine Pass terminal in Louisiana is the only US facility currently exporting LNG produced from shale gas. The four liquefaction units that it is currently operating there were financed with 20-year take-or-pay contracts with credit-worthy buyers, setting a standard for the industry. Dominion Energy's Cove Point export terminal in Maryland, which is expected to start shipping LNG later this year, has similar deals in place, as do the several other projects that are currently being built, including facilities in Freeport, Texas, and Corpus Christi, Texas.

US LNG exporters face fierce competition in an oversupplied market – Platts Commodity Pulse video - The US is looking to become the third-largest LNG exporter by 2019, and more than a dozen projects are fighting for a way to fit into a growing global market. But buyers don't feel pressure to sign long-term deals, which can be difficult for financing construction. Maya Weber, associate editor with Platts Inside FERC, and Rachel Adams-Heard, natural gas reporter with S&P Global Market Intelligence, have a conversation about the future of US LNG exports: Where is the demand, which projects will make it to completion and how will policy potentially affect the outcome? For an even more detailed analysis of the topic, read their recent post on The Barrel blog: To deal with global supply glut, US LNG export developers thinking outside the box

Haynesville's NatGas Rig Count, Proppant Intensity Surging | 2017-10-17 - The Haynesville Shale redux continues, with the natural rig count sharply higher from a year ago and proppant intensity surpassing any other onshore play in the United States, according to analysts.As of last week the Haynesville was capturing a 24% share or so of all U.S. gas rigs. The play, which straddles East Texas and North Louisiana, at the end of last week had 42 gas rigs running along with two for oil, versus a year ago when 25 gas rigs and two oil rigs were in operation. By comparison, the Marcellus, with 27% of the total gas rig share, was running 45 rigs last week; the Utica Shale had 30.Evercore ISI analyst James West, who issues a monthly analysis of U.S. drilling permit activity, noted in his latest tally that Haynesville permitting during 3Q2017 had increased by 6.6% from 2Q2017. Year-to-date through September Louisiana permitting -- where the core of Haynesville activity is underway -- had risen 21%.The pace of activity, “faster than that in the Marcellus/Utica, has surprised many observers,” said Sanford Bernstein analysts Jean Ann Salisbury and Bob Brackett. They decided to do a deep dive on what’s going on across the region to see if the play is doing as well as some are reporting.“This is an especially key question now, as we are on the cusp of pipeline buildout from the Marcellus/Utica, which will result in more competitive gas entering the market,” said the Bernstein duo. Assessing the latest wells, they found that most of the gas rig growth is attributable to private equity (PE) companies that have bought into the basin over the past few years, notably Covey Park Energy LLC, Indigo Minerals LLC and Vine Resources. However, the average Haynesville well also has improved significantly. Bernstein research determined that the average breakeven in the Haynesville was found to be about $2.40/Mcf half-cycle, and $3.00/Mcf full-cycle, or about 5 cents/Mcf better than a year ago, and “competitive with fully loaded Marcellus/Utica wells.”

Fracking Is Back in the Haynesville Shale - American shale drilling has returned to Haynesville Shale, boosting a building boom along the Gulf Coast. When gas prices plunged over a decade ago, Haynesville fracking fizzled out. Now as companies with positions in the area find it efficient to drill again, Haynesville is back in business. Gas production from the Haynesville has risen more than 20% so far this year, to more than 7 billion cubic feet a day from less than 6 billion in January, according to the U.S. Energy Department. The number of rigs active in northern Louisiana parishes and the Texas portion of the field has more than tripled in the past year to 44, according to oil field services company Baker Hughes Inc Apparently, the payouts on these wells are very attractive to companies. Private companies backed by private equity firms have spent billions buying property in the area from Roya Dutch Shell PLC and Exxon Mobil Corp."If you have Haynesville acreage, it's a good time to drill," said Clay Lightfoot, an analyst with energy consulting firm Wood Mackenzie.Regional producers can now also export their liquefied natural gas. Cheniere Energy Inc . LNG +0.46% 's Sabine Pass LNG plant, a major exporting facility that opened in Louisiana last year, is sending cargoes of liquefied natural gas to Asia, Europe and South America. A dozen other LNG projects are under construction or are permitted and planned in Texas, Louisiana, Mississippi and Maryland. That's a potential drawback for industrial users in the area, such as petrochemical plants, of which there are almost 80 under construction along the Gulf Coast. They fear the price of gas--their main feedstock--could rise as America ships more to foreign buyers.

NYMEX Nov gas settles at $2.873/MMBtu, up 1.9 cents, after late rally -- After spending most of Thursday trading below Wednesday's mark, the NYMEX November gas contract experienced a late surge to settle at $2.873/MMBtu, up 1.9 cents day on day. The rally followed the release of the US Energy Information Administration's gas storage report for the week ended October 13. It showed a build of just 51 Bcf, bringing stocks to about 3.646 Tcf, 4.7 Bcf below the 3.825 Tcf last year and short of the five-year average of 3.681 Tcf. The November contract had been trading between $2.842/MMBtu and $2.884/MMBtu and lingered at the $2.854/MMBtu level when the EIA data was released. "The market is obviously not worried about things," "There hasn't been much demand and there's not much weather, either. This market is comfortable where it is." A year ago, the build for the corresponding week was 77 Bcf, 26 Bcf above Thursday's injection. "This is the definition of a shoulder month," Cooper said. "We haven't had much for demand and stocks should be getting bigger, but we haven't seen the build." According to the US National Weather Service, temperatures in the Southwest are expected to be bearish through the end of the month, with temperatures higher than normal, while the Northeast is likely to experience pleasant weather. For November, the weather forecast calls for much of the nation to see average temperatures. Demand areas in the Northeast are predicted to be slightly warmer and, in the Southwest, Southern California is expected to see warmer-than-normal weather, with Arizona and New Mexico seeing even higher temperatures.

COLUMN-U.S. natural gas prices under pressure even as stocks tighten: Kemp (Reuters) - U.S. natural gas stocks continue to tighten, but most traders appear unconcerned, with futures prices for gas delivered this winter close to the lowest levels since the start of the year.Working gas stocks in underground storage were 35 billion cubic feet (bcf) below the five-year average at 3,646 bcf on Oct. 13, according to data from the U.S. Energy Information Administration ( stocks have tightened significantly since the middle of March, when they stood almost 400 bcf above the average and the market appeared heavily oversupplied.But since the injection season started at the beginning of April, stocks have risen by less than average in 19 out of 28 weeks, increasing by a total of 1,594 bcf compared with an average of 1,891 bcf.The result is that the surplus has been steadily worked off and the market has now moved into a small deficit compared with the five-year average.In fact, comparisons with the five-year average may understate the degree of tightening, because of the rapid growth in LNG exports and the increasing number of combined-cycle gas-fired power plants.Combined-cycle gas turbines (CCGTs) are replacing coal-fired power plants as the primary source of baseload power on the grid.The combined capacity of CCGTs connected to the grid has grown by almost 8 percent over the last three years.CCGTs are designed to run most of the time, providing baseload or intermediate load, and consume large quantities of fuel.With so many additional CCGTs now in operation, there is potential for much more power burn this winter than five years ago.Given higher exports and more CCGTs, the need for seasonal gas stocks should be higher, other things being equal.Yet few traders seem perturbed by the continued tightening of gas stocks compared with the five-year average.Futures prices for gas delivered at Henry Hub in December 2017 are trading at just $3.08 per million British thermal units, down from $3.69 in early May. The calendar spread between futures prices for December 2017 and March 2018 has moved into contango, indicating the market is well supplied.

U.S. crude oil production expected to increase through end of 2017, setting up record 2018 - EIA forecasts that U.S crude oil production will average 9.4 million barrels per day (b/d) in the second half of 2017, 340,000 b/d more than in the first half of 2017. Production in 2018 is expected to average 9.9 million b/d, surpassing the previous high of 9.6 million b/d set in 1970, based on projections in EIA’s Short-Term Energy Outlook (STEO). The STEO projects that most of the crude oil production growth in the second half of 2017 will be in the Permian region, which extends across western Texas and southeastern New Mexico and has become one of the more active drilling regions in the United States. Production in the Permian continues to increase, in part, as a result of West Texas Intermediate (WTI) crude oil average monthly prices that have remained higher than $45 per barrel since the second half of 2016. In the STEO, EIA publishes crude oil production projections for Alaska, the Federal Gulf of Mexico, and the aggregated Lower 48 states. However, each month in the STEO, EIA models oil production for certain states and regions within the Lower 48 states. STEO’s projected U.S. production changes for the second half of 2017 are discussed in more geographic detail in the latest This Week in Petroleum, which includes information on production in the Permian, Niobrara, Anadarko, Bakken, Eagle Ford, Alaska, California, and the Gulf of Mexico. The STEO forecast is based on recent trends in drilling and production and on anticipated future changes, driven largely by the WTI crude oil price. EIA evaluates past production trends on a well-by-well basis for all production documented since 2014 and uses that history to estimate future well performance and production decline rates at the state and regional levels.

EIA: Permian basin to drive fourth-quarter U.S crude production increase - In its Short-Term Energy Outlook (STEO) update released this week, EIA forecasts that U.S crude oil production will average 9.4 million barrels per day (b/d) in the second half of 2017, 340,000 b/d more than in the first half of 2017. EIA’s close monitoring of current rig activity in several producing regions shows continued production growth from tight-oil formations, such as shale in the Permian region, driving overall production increases (Figure 1). The STEO projects that the most significant production growth in the second half of 2017 will be in the Permian region. Permian production is forecast to grow to 2.6 million b/d in the second half of 2017, a 260,000 b/d increase from the first half of 2017. Production in the Permian continues to increase, in part as a result of West Texas Intermediate (WTI) crude oil average monthly prices that have remained higher than $45 per barrel (b) since the second half of 2016. Extending across western Texas and southeastern New Mexico, the Permian region has developed into one of the more active drilling regions in the United States because its large geographic size and favorable geology contain many prolific tight formations such as the Wolfcamp, Spraberry, and Bonespring. Increases in proppant intensity, lateral lengths, and changes to slick-water completions are also among the factors that have allowed the Permian to remain one of the most economic regions for oil production despite the low-oil-price environment. WTI spot prices averaged $50/b in the first half of 2017, spurring deployment of more rigs to the Permian, which rose steadily from 276 rigs in January to 380 rigs in September. The STEO projects that the Permian region rig count will continue to grow from an average of 341 rigs in 2017 to 371 rigs in 2018, and the WTI price is forecast to average $49/b for the second half of 2017 and $51/b in 2018. The STEO forecasts Niobrara and Anadarko production to grow by 75,000 b/d and 42,000 b/d, respectively, averaging 500,000 b/d and 460,000 b/d, respectively, for the second half of 2017. This growth makes these two regions the second- and third-largest contributors to the STEO’s projected growth between the first and second half of 2017. Production in the Niobrara and Anadarko regions has grown continuously since January 2017 in response to increasing rig activity and a monthly WTI price range from $45/b to $53/b during the year.

Crude oil shuttle pipelines in the Permian's Delaware and Midland basins, part 4. - Permian producers and shippers want to be able to transport their crude oil to whichever destination will give them the best netbacks. But that’s a moving target, so what they really need is destination optionality — something they can only get if the gathering systems and shuttle pipelines that move oil from the lease tie into multiple takeaway pipelines with different end-points like Houston, Corpus Christi and Cushing. Midstream companies are clamoring to meet that need by expanding existing shuttle pipelines and building new ones. Today, we continue our review of intra-Permian shuttle pipelines. With Permian crude oil production expected to continue rising under just about any foreseeable price scenario, there’s a big push on to expand regional pipeline networks’ capacity to move more crude oil out of the play and — just as important — to give producers and shippers as many destination options as possible. As we said in Part 1, until a few years ago, most of the oil produced in the Permian flowed north to the crude storage and distribution hub in Cushing, OK. By 2011-12, though, rising crude production in the Bakken, western Canada and the Permian itself — combined with too little pipeline capacity from Cushing to the Gulf Coast — caused a supply glut at Cushing. That, in turn, caused heavy discounting for Cushing benchmark West Texas Intermediate (WTI) versus Louisiana Light Sweet (LLS) at the Gulf Coast, and spurred development of new takeaway capacity from the Permian to Houston and other coastal destinations.

Expanding Storage Supports Booming Exports --U.S. crude exports continue to takeoff — increasing during the week ended September 29, to a new record just under 2 MMb/d, according to the Energy Information Administration (EIA), with 1.3 MMb/d in the first week of October followed by 1.8 MMb/d in EIA’s Wednesday report. The crude exodus is primarily occurring from port terminals along the Gulf Coast and is expected to continue as expanding Permian basin shale production is shipped directly to marine docks by pipeline. Recent and planned expansions to crude storage are largely linked to demand for new capacity at marine docks staging cargoes for export. In today’s blog, Morningstar’s Sandy Fielden details the rapid growth of commercial crude storage capacity at Gulf Coast terminals since 2011. We’ve covered growing terminal and storage capacity on the Gulf Coast extensively since the start of the shale boom. By 2014, pipelines were built out to reach the Gulf Coast from Cushing in the Midwest and the Eagle Ford and Permian basins in Texas, bringing significant new flows to the Houston region (see “Texas Bound and Flyin’”). All the new crude showing up in the Houston region needed new storage capacity to stage its redistribution to local refineries and plants further east in Louisiana. We detailed the growth of Houston storage in a 2015 blog series (see “Stairway to Houston”) and an accompanying Drill Down Report. More recently, we covered expanding storage capacity in Texas City (see “Easy Like Texas City”) and storage at the Louisiana Offshore Oil Port, as well as the potential for crude exports from that port (see “Livin’ on the Edge”).

Judge allows 'necessity' defense by climate activists in oil pipeline protest -- A judge in Minnesota has cleared the way for an unusual and potentially groundbreaking defense, allowing climate activists to use the "necessity" of confronting the climate crisis as justification for temporarily shutting down two crude oil pipelines last year.Robert Tiffany, a district court judge in Clearwater County, Minnesota, ruled on Oct. 11 that three activists who were arrested and charged with felonies last year can argue that they violated the law in order to protect citizens from the impacts of global warming and that they had no legal alternative.  "It is extremely unusual for a court to allow presentation of the necessity defense by environmental protesters," said Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia University. "It will be fascinating to see how this trial goes and how much evidence the court allows."The ruling is only the third time a judge in the United States has allowed for such a defense in a climate case. The first case, in Massachusetts in 2014, did not go to trial after the prosecutor dropped the charges. A judge allowed the necessity defense in a Washington State case in 2016 but then instructed jurors they could not acquit on necessity. "Only a few courts have allowed presentation of the climate necessity defense, and until Friday, no judge in a jury trial in the United States had recognized the defense in writing," the Climate Defense Project, a legal nonprofit that provided pre-trial briefing and is part of the defendants' legal team, said in a statement.In the Minnesota case, Emily Johnston, Annette Klapstein and Benjamin Joldersma are charged with felonies over the shutdown of two pipelines there on Oct. 11, 2016. A fourth defendant, Steven Liptay, who filmed the pipeline shutdowns, is charged with two gross misdemeanors. Enbridge Inc., the Canadian company that owns and operates the two pipelines, said at the time of the shutdowns that the actions were "reckless and dangerous" and that the company would "support the prosecution of all those involved," according to news reports.

More than 400 gather to offer views on replacing Enbridge pipeline in northern Minnesota — Conflicting priorities clashed during two meetings Tuesday, Oct. 17, to gather public input for Enbridge Energy's proposed Line 3 oil pipeline replacement project. More than 400 people attended as community members testified in front of administrative law judge Ann O'Reilly, who will compile the comments and make a recommendation to the Minnesota Public Utilities Commission about the project moving forward. Bill Grant, deputy commissioner for the Minnesota Department of Commerce, said the comments made at previous public meetings largely fell into two categories. "I would say on the proponent's side we've heard a lot of people talk about how much of a reliance we continue to have on oil, and how important it is to the state's economy that it continue to flow. We've heard a lot about the jobs that would be created by the project, the need for jobs in this area," Grant said. "On the opponent's' side, we've heard a lot about the concerns about an oil spill and what that would mean to the pristine waters of northern Minnesota." The Department of Commerce recently came out against the replacement project and said at Tuesday's meetings that it did not feel that Enbridge demonstrated a need. The current Line 3, built in the 1960s, runs from Alberta, Canada, through northern Minnesota to Superior, Wis. Enbridge hopes to decommission the aging line and build a new one; many environmental groups and community activists oppose the plan. Enbridge's preferred route would take the new pipeline through ceded treaty territories and wild rice beds important to local bands of the Minnesota Chippewa Tribe. Before Enbridge can build a new Line 3 and decommission the old one, the Minnesota Public Utilities Commission must issue a certificate of need and the necessary permits. The commission must consider the final environmental impact statement compiled by the Department of Commerce and released in August. 

Oil and gas producers face more stringent air-quality rules on Front Range - Oil and gas operators in the Front Range would have to retrofit equipment and conduct more frequent inspections to detect leaks if state regulators on Friday approve proposed rules aimed at helping alleviate smog concerns.More than 100 people showed up Thursday for a public hearing on the new rules before the Colorado Air Quality Control Commission. Nearly all of those speaking, some of whom were mothers carrying infants, urged the commission to grant final approval on Friday and consider putting in place even tighter regulations on the industry.The rules were drafted for oil and gas operations along the Front Range and are meant to address concerns that federal regulators have raised about air quality in the counties of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Jefferson, Larimer and Weld. The U.S. Environmental Protection Agency has said the region is out of compliance with federal standards for ozone pollution and has given the state until July 2018 to meet those standards.Many of those who spoke during Thursday’s public hearing drove up from western Colorado counties and urged the commission to expand the rules to ensure they apply to oil and gas drillers on the Western Slope too.State regulators currently plan to address the Western Slope concerns separately over the next two years. But Karen Sjoberg, a resident of Mesa County speaking on behalf of environmental advocacy group Citizens for Clean Air, urged the commission to immediately ensure the rules for Front Range energy companies apply to the entire state. “As we look to the future in Mesa County, there are advanced plans for 108 oil wells and increased natural gas drilling throughout the valley,” Sjoberg said. “Currently, there are over 1,000 active oil and gas operations in Mesa County alone, and over 18,500 across the Western Slope.”

Judge to hear arguments on tribe's pipeline contingency plan | Star Tribune: A federal judge in Washington, D.C., will accept arguments over the next month on whether the developer of the Dakota Access pipeline must stage equipment near an American Indian reservation in southern North Dakota to respond to any oil spill under the Missouri River. The idea is part of a fallback plan proposed by the Standing Rock Sioux tribe in August in case U.S. District Judge James Boasberg eventually decided to allow the four-state pipeline to continue operating while federal officials do more study on the $3.8 billion project's impact on the tribe. Boasberg ruled on Oct. 11 that oil could keep flowing from western North Dakota through South Dakota and Iowa to a distribution point in Illinois, as it has been since June 1. President Donald Trump earlier this year pushed through the pipeline's completion. On Wednesday, Boasberg conferred with attorneys on both sides of an ongoing tribal lawsuit against the pipeline and set a timeline for arguments on Standing Rock's proposal. It includes increased public reporting of pipeline issues such as repairs, and implementation of an emergency spill response plan — including equipment staging — at the crossing beneath the Missouri River's Lake Oahe reservoir. The tribe gets its water from the reservoir and fears harm from any spill. Standing Rock is the leader of four Sioux tribes hoping to convince Boasberg to shut down the line, which Texas-based developer Energy Transfer Partners maintains is safe. Boasberg won't make a decision until the Army Corps of Engineers, which permitted the project, completes more study that he ordered in June on the pipeline's impact on Standing Rock. The additional review isn't likely to be completed until next spring, according to the Corps.

Oil, coal train fines in Spokane go to voters with legal path unclear -- Initiative opponents say Bakken oil, which is extracted through a process known as hydraulic fracturing or “fracking,” is no more volatile than conventional crudes.  To support their position, they regularly cite 2014 congressional testimony from Timothy Butters, who served as deputy director of the Pipeline and Hazardous Materials Safety Administration. Butters’ testimony included the line, “Bakken crude oil’s gas content, flash point, boiling point and vapor pressure are not outside the norm for light domestic crude oils.”  That line was taken almost verbatim from a 2014 report prepared by Butters’ organization after a random sampling of oil samples taken from the Bakken shale called “Operation Safe Delivery.” But the report goes on to say Bakken crude “has a higher gas content, higher vapor pressure, lower flash point and boiling point and thus a higher degree of volatility than most other crudes in the U.S., which correlates to increased ignitability and flammability.”   The report compared the Bakken oil to the more traditional “heavy crude” that is produced elsewhere in the United States. Trade groups have focused on the finding that Bakken oil shares a similar chemical makeup to other types of domestic light crude, rather than its comparison to the “heavy” version of the commodity that the Pipeline and Hazardous Materials Safety Administration report indicates is less volatile. Environmentalist groups have pointed to the report as proof that Bakken crude is more volatile.Legal certainty is a trait shared by those on both sides of the debate over whether Spokane should impose fines on coal and oil trains rumbling through downtown.  The citizens group behind Proposition 2, which would fine the trains, argues that federal inaction has opened a window allowing the city to demand covered coal trains and the removal of combustible gases from rail-carried oil they say could cause a fiery explosion downtown.

Backers of oil terminal pour money into Washington port race   — Developers of a proposed oil-by-rail terminal that would be the largest in the nation have poured big money into a port commissioner race in Washington state that may shape the project’s future. Backers of the Vancouver Energy project have given $370,000 in cash to support Kris Greene, who has expressed support for the terminal proposed at the Port of Vancouver, according to filings with the Washington Public Disclosure Commission. That represents the bulk of the cash he has raised in the Vancouver port commissioner’s race. His opponent Don Orange is against the proposed $210 million terminal that would handle about 360,000 barrels of crude oil a day. Orange said he would work to end the project’s lease at the port. The terminal has been the subject of heated debate in the Northwest. Project developers see it as an opportunity to link domestic crude oil from the Midwest to a West Coast port and bring jobs and money to the region. Critics say it poses too great a risk to people and the environment, and the dangers extend well beyond the facility to include communities along rail lines. Tesoro Corp. and Savage Cos., operating as Vancouver Energy, have a 10-year lease at the deep-water port about 100 river miles (160.93 river kilometers) from the Pacific Ocean. The proposed terminal would receive an average of four 1½-mile long crude oil trains a day. Oil would be stored on site then loaded onto tankers and ships bound for West Coast refineries. Vancouver Energy said it supports Greene as the candidate with the right experience to lead the port. 

Crude oil and petroleum product exports reach record levels in the first half of 2017 -- Crude oil exports in the first half of 2017 increased by more than 300,000 barrels per day (b/d) from the first half of 2016, reaching a record high of 0.9 million b/d. Petroleum product exports also grew over the same period with propane and distillate exports reaching record highs of 0.9 million b/d and 1.3 million b/d, respectively. Following the removal of restrictions on exporting U.S. crude oil in December 2015, total volumes of crude oil exports and the number of destinations for those exports both increased. The United States exported crude oil to 26 countries in the first half of 2017 compared with 17 countries in the first half of 2016. Canada remained the largest recipient of U.S. crude oil exports at 248,000 b/d in the first half of 2017 but imported an average of 46,000 b/d fewer than in the first half of 2016. China increased its crude oil imports from the United States by 154,000 b/d and became the second-largest importer of U.S. crude oil, averaging 163,000 b/d in the first half of the year. Distillate exports in the first half of 2017 were 14% higher than in the first half of 2016, with exports to South and Central America accounting for most of this growth. The share of distillate exports to Central and South America increased slightly to 56%, while the share of distillate exports to Western Europe fell to 19%. Mexico remained the largest single destination for U.S. distillate, averaging 17% of total exports (223,000 b/d), followed by Brazil and the Netherlands.In the first half of 2017, despite consistently strong domestic demand, U.S. exports of total motor gasoline averaged a record high of 756,000 b/d, a 3% increase from the first half of 2016. High levels of domestic production of gasoline contributed to this record-high export level. Mexico was the destination of more than half (53%) of total U.S. gasoline exports in the first half of 2017. Recent market reforms in Mexico, which allow entities other than state-owned Pemex to import petroleum products, may have contributed to the recent growth in Mexico’s gasoline imports from the United States. Although Mexico produces large amounts of crude oil, Mexico’s refinery output of products such as gasoline has been declining since 2015. In the first half of 2017, Mexico experienced unexpected refinery outages that reduced production of gasoline and distillates even further, and U.S. exports of gasoline to Mexico increased by 27,000 b/d compared with the first half of 2016.

WORLD’S LARGEST OIL COMPANIES: Deep Trouble As Profits Vaporize While Debts Skyrocket -- The world's largest oil companies are in serious trouble as their balance sheets deteriorate from higher costs, falling profits and skyrocketing debt.  The glory days of the highly profitable global oil companies have come to an end.  All that remains now is a mere shadow of the once mighty oil industry that will be forced to continue cannibalizing itself to produce the last bit of valuable oil. I realize my extremely unfavorable opinion of the world's oil industry runs counter to many mainstream energy analysts, however, their belief that business, as usual, will continue for decades, is entirely unfounded.  Why?  Because, they do not understand the ramifications of the Falling EROI - Energy Returned On Invested, and its impact on the global economy.  For example, Chevron was able to make considerable profits in 1997 when the oil price was $19 a barrel.  However, the company suffered a loss in 2016 when the price was more than double at $44 last year.  And, it's even worse than that if we compare the company's profit to total revenues.  Chevron enjoyed a $3.2 billion net income profit on revenues of $42 billion in 1997 versus a $497 million loss on total sales of $114 billion in 2016.  Even though Chevron's revenues nearly tripled in twenty years, its profit was decimated by the falling EROI. Unfortunately, energy analysts, who are clueless to the amount of destruction taking place in the U.S. and global oil industry by the falling EROI, continue to mislead a public that is totally unprepared for what is coming.  To provide a more realistic view of the disintegrating energy industry, I will provide data from seven of the largest oil companies in the world.

Schlumberger shows growth in stagnating market - Schlumberger reported a $545 million profit in the third quarter with growing revenues of more than $7.9 billion as the world's biggest oilfield services company continues to outpace the stagnating industry. Schlumberger Chairman and CEO Paal Kibsgaard credited nearly all of the growth to the expanding North American shale market, even though the U.S. oil boom slowed significantly in the third quarter. "We continued to gain market share in both hydraulic fracturing and drilling services despite the decelerating rig count growth," Kibsgaard said. "We also saw strong sequential activity growth in Russia, the North Sea and Asia, while our activity in the rest of the world was largely flat compared with the second quarter." Schlumberger's revenues grew 13 percent versus the third quarter last year and 6 percent sequentially from the second quarter of 2017. Schlumberger posted a net loss last quarter because of one-time charges, but its profits still jumped 19 percent when discounting those isolated costs. Kibsgaard said he's cynical though toward the nation's offshore sector. "In the U.S. Gulf of Mexico, activity continued to weaken in the third quarter, and the outlook remains bleak for this region based on current customer plans," he said.To continue its onshore U.S. growth, Schlumberger is finalizing its OneStim joint venture with Weatherford International for hydraulic fracturing services that stimulate shale oil and gas wells. They're combining Schlumberger's large fracking fleet and Weatherford technologies used to stimulate multiple horizontal zones within shale wells. Schlumberger owns 70 percent of the JV. 

Trump approves oil pipeline expansion across Canadian border | TheHill: The Trump administration on Monday approved a proposed expansion of an oil sands pipeline that crosses the Canadian border. Enbridge Energy’s Line 67, also known as the Alberta Clipper, now has State Department approval to nearly double its capacity at the crossing near Neche, N.D., to about 890,000 barrels per day. Line 67 serves a similar purpose to the highly controversial Keystone XL pipeline, and after the expansion, it would carry slightly more oil than Keystone. Environmentalists opposed to Line 67 have sought to tie it to Keystone.It carries oil sands petroleum — which is very energy-intensive to refine — from Alberta’s booming oil country to the United States’ pipeline system for refining. The Line 67 expansion uses new and upgraded pump stations with the same 36-inch pipelines, which nonetheless required new approval from State. 

Senate votes down effort to block drilling in Alaska refuge | TheHill: The Senate on Thursday defeated a Democratic attempt to block oil drilling in the Arctic National Wildlife Refuge. A group of Democrats, led by Sen. Maria CantwellMaria Elaine CantwellUse tax reform to strengthen what’s working: The low-income housing tax credit Senate energy bill is misguided gift to Trump’s dirty fossil fuel agenda Help states solve their housing problems with the Affordable Housing Credit Improvement Act MORE (Wash.), offered an amendment to the Senate’s budget resolution looking to prevent potential drilling in the Alaska refuge as a way to raise revenue for the federal government. Most Democrats and environmentalists consider the refuge in northern Alaska to be too environmentally sensitive to allow oil drilling there, a position pushed by Cantwell and others as debate on the budget moved forward this week. “The notion that we, tonight, after 60-plus years, would give up what is a biologically important area, a critical habitat for polar bears, a breeding ground for caribou, migratory birds and over 200 species — for what? For oil we don’t need?” Cantwell said during floor debate late Thursday. But Republicans said they wouldn’t take the possibility of drilling off the table as the GOP looks to raise revenue and boost the American energy sector. “Those who would support this amendment will deny us the opportunity to do something constructive in this country, when it comes to our opportunities to produce energy, to produce wealth,” Sen. Lisa Murkowski (R-Alaska) said.

GOP-Controlled Senate Paves Way for Oil Drilling in Alaska's Arctic National Wildlife Refuge - The Senate Republicans' narrow passage of the 2018 budget plan on Thursday opened the door for oil and gas drilling in the Arctic National Wildlife Reserve ( ANWR ). But Democratic lawmakers and environmental groups criticized the GOP for sneaking the " backdoor drilling provision " through the budget process. Past proposals to drill in the refuge have consistently failed. The budget was passed through a legislative tool known as reconciliation which only requires a simple majority, rather than 60 votes. The budget was approved 51-49, with Kentucky Republican Sen. Rand Paul joining Democrats in opposition, paving the way for President Trump 's tax overhaul proposal. Drilling ANWR would raise revenue for Trump's tax plan that cuts taxes for the rich. ANWR, the largest protected wilderness in the U.S., consists of more than 19 million acres of pristine landscapes and is home to 37 species of land mammals, eight marine mammals, 42 fish species and more than 200 migratory bird species. "The budget passed by the Senate today sets in motion a sellout of some of our most iconic public lands and waters to the highest bidder, in order to fund tax breaks for billionaires," said Earthjustice president Trip Van Noppen.  "Drilling in the Arctic Refuge is not a budget issue, and should not be part of the budget reconciliation process," Van Noppen added. "This is a blatant attempt to use the budget reconciliation process to pass a divisive and controversial proposal that would lead us in the wrong direction on climate."

Senate votes to raise revenue by drilling in the Arctic National Wildlife Refuge - The Senate rejected an amendment Thursday that sought to block a key panel from raising revenue through drilling in Alaska’s Arctic National Wildlife Refuge, a move that could make it easier for future oil and gas drilling to take place there. Sen. Maria Cantwell (Wash.), the top Democrat on the Energy and Natural Resources Committee, offered a budget amendment that would have removed instructions to the panel to raise an additional $1 billion through federal leasing. It failed 48 to 52 on a largely party-line vote, with only Sen. Susan Collins (R-Maine) and Joe Manchin (W.Va.) breaking ranks. Collins voted in favor of Cantwell’s amendment, while Manchin opposed it. The vote, which came before the Senate approved Republicans’ proposed budget, represented a victory for the GOP and a defeat for environmentalists. The Trump administration is quietly moving to spur energy exploration in the refuge for the first time in more than 30 years by considering whether to allow seismic testing there, but only Congress can determine whether oil and gas drilling can take place within its 19.6 million acres. Sen. Lisa Murkowski (R-Alaska), who chairs the Energy and Natural Resources Committee, told her colleagues that they should view the budget instructions “as an opportunity to do something constructive for the country.” “It’s about jobs, and job creation. It’s about wealth and wealth creation,” she said, adding that drilling in the refuge is “not the only option” for how her panel could find $1 billion in new revenue. “But I will tell you it is the best option, and it’s on the table.” Opponents of the plan say that such operations could imperil the refuge’s wildlife, which include polar bears as well as caribou and migrating waterfowl. David Yarnold, CEO of the National Audubon Society, said in a recent interview that based on recent lease sales, the federal government would likely get only $9 million in revenue if it auctioned off the right to drill on the refuge’s coastal plain. “It’s just bad math,” Yarnold said, adding that when lawmakers predict this activity could raise $1 billion, “there’s no reason to believe that that’s going to happen.” 

ConocoPhillips Alaska plans largest exploration season in 15 years --  ConocoPhillips Alaska is planning its most ambitious exploration program in years, and the effort could provide more details about a newly promising North Slope play.The company plans to drill five exploration wells in early 2018.Three wells will help the company further analyze its large Willow prospect in the National Petroleum Reserve-Alaska, said Joe Marushack, president of ConocoPhillips Alaska, on Thursday night. That prospect could produce 100,000 barrels of oil daily, the company has said.Two other wells will be drilled near the Colville River, not far from where Armstrong Oil and Gas has heralded a large discovery it says could produce 120,000 barrels daily.Marushack said the plans, if completed, will represent the most exploration wells drilled per year by the company in 15 years.Marushack unveiled the proposal as keynote speaker at the annual meeting of the Alaska Support Industry Alliance, at a downtown Anchorage hotel.  Alaska, mired in a recession brought on by low oil prices, had the nation's highest unemployment rate in August. The plans generated applause from the large crowd. Marushack did not provide an estimated cost for the drilling program.The company plans to use three exploration rigs to conduct the drilling. Each rig typically provides 100 direct jobs, and hundreds of indirect jobs ranging from equipment operators to ice-road construction, said Natalie Lowman, a company spokeswoman, on Friday. In 2002, ConocoPhillips drilled seven exploration wells in Alaska, Lowman said. The winter drilling season generally extends from January through April.

Oil company proposes Arctic drilling from artificial island (AP) — America within a few years could be extracting oil from federal waters in the Arctic Ocean, but it won’t be from a remote drilling platform. Federal regulators are taking comments on a draft environmental statement for the Liberty Project, a proposal by a subsidiary of Houston-based Hilcorp to create an artificial gravel island that would hold production wells, a processing facility and the start of an undersea pipeline carrying oil to shore and connections to the trans-Alaska pipeline. The drilling would be the first in federal Arctic waters since Royal Dutch Shell, amid protest both in the United States and abroad, in 2015 sent down an exploratory well in the Chukchi Sea off Alaska’s northwest coast. Supporters like its chances. A final decision is in the hands of Interior Secretary Ryan Zinke. President Barak Obama in December signed an executive order designating the bulk of U.S. Arctic Ocean waters indefinitely off-limits to future oil and gas leasing. But President Donald in April signed another order aimed at reversing the policy. Zinke said Trump’s actions would put the country on track for energy independence. Opponents say Arctic offshore oil should stay in the ground, where it won’t add greenhouse gases that contribute to global warming and the melting of sea ice, the habitat of polar bears and walruses. They say spills are inevitable and cannot be cleaned up in icy Arctic water. Opponents also question Hilcorp’s safety record. State authorities this year fined the company $200,000 for violations at another production site. Hilcorp also waited several months to address an undersea pipeline leaking millions of cubic feet of processed natural gas in Alaska’s Cook Inlet because of danger to divers, Lois Epstein, Arctic program director for The Wilderness Society, said at an Anchorage hearing. “This ongoing gas release into Cook Inlet, visible from the air, was a national embarrassment for Alaska,” she said. The gas leaked from a pipeline supplying fuel to Hilcorp production platforms. The company confirmed the leak in February and lowered pressure in the line but waited until April to make repairs because of the threat to divers from floating ice. The Alaska Department of Environmental Conservation to date has found no evidence the leak harmed birds, fish or marine mammals. 

Video Shows Oil Company's Plans to Drill Arctic From Artificial Island  - The Liberty Project has posted a video about its proposal to build the nation's first oil production platform in federal waters in the Arctic .  The video was quietly uploaded two months ago and shows Hilcorp Alaska's plan to build an artificial gravel island and undersea pipeline for its offshore drilling project in the Beaufort Sea. Frankly speaking, the five-minute clip—with its all-American voiceover and electric guitar riffs—is something you'd expect from a pickup truck commercial.  According to the Associated Press (AP), the man-made island—located 5.6 miles off shore—would consist of a 24-acre base on the ocean floor that's about the size of 18 football fields. It will have sloped sides that lead to a work surface of 9 acres, or about seven football fields, allowing room for 16 wells, including five to eight conventional production wells. Hilcorp estimates it could extract up to 70,000 barrels per day for a total recovery of 80 million to 150 million barrels over 15 to 20 years. Hilcorp insists that it is committed to safety and its technology is sound, but environmental groups have warned about the company's record in Alaska, including its months-long gas leak in its underwater pipelines in Cook Inlet in the Spring.  Previous Arctic project studies have also warned that offshore drilling in those remote, treacherous waters carries a 75 percent chance of a major oil spill , noted the Center for Biological Diversity .  But proponents of the project have pointed out that Liberty would be the 19th artificial drilling island in Alaska, including four that are already pumping oil from state waters.  Federal regulators are currently taking public input on the Liberty project. The comment period ends on Nov. 18. The AP reports that the final decision lies with Interior Secretary Ryan Zinke .

Prudhoe Bay spill in April leads to wider review, suspension of 14 wells - BP has shut in 14 wells at the Prudhoe Bay field to prevent a replay of the oil and gas release on April 14 that the company now believes was caused by a "mechanical failure" after permafrost, melted from hot production fluids, caused the ground to sink and put extra pressure on the well. Five of those wells had been producing oil at the time of the spill but are currently not doing so because their operations were suspended, said Dawn Patience, a BP spokeswoman. The leak in April occurred when the wellhead and valve assembly of one of Prudhoe Bay's original wells suddenly jacked up 3 feet and struck the roof of a well house, causing damage to equipment that led to the uncontrolled release of oil and gas. Additional details about the incident and BP's plans to address the problem emerged in a June 27 report from BP to the Alaska Oil and Gas Conservation Commission. The agency said in a statement that it agrees with BP's conclusion and plan. Another nine wells are also being reviewed. A key element of the plan is a risk assessment of the potential for similar problems at the 14 "highest risk" wells with similar designs that have already been shut in. The oil-and-gas release did not harm people or wildlife or damage tundra. The escaping gas caused a plume of crude oil to spray into a containment area of the gravel drilling pad, affecting less than 1½ acres, state regulators said.The leaking was stopped April 17, three days after the incident began. Boots and Coots, a Halliburton-owned well-control company based in Texas, killed the well by pumping a solution of methanol and saltwater into it.

Unregulated Energy Industry Dams At Risk, Oil and Gas Commission Finds -- At least seven of 51 large dams built by the province’s shale gas industry in northeastern B.C. were not safe and required “enforcement orders” to comply with the law.  Almost six months after an independent report raised serious questions about the legality and safety of earth dams built to hold water for the fracking industry, the province’s energy regulator now reports it is taking action. The Oil and Gas Commission recently issued a bulletin saying it had inspected 51 dams northwest of Fort St. John last May and found “some issues” at seven different structures. These issues included water spilling over their top, erosion at the base and potential failure representing a hazard to the environment, First Nations and energy workers, according to the orders issued by the commission.The commission ordered Progress Energy to reduce water volumes by 50 per cent at five dams containing between 4.4 million and 26 million gallons of water.  The commission says it has identified 51 water storage sites holding more than 2.2 million gallons that qualify as regulated dams under B.C.’s Dam Safety Regulation. The dams are operated by 10 oil and gas companies.The industry funded energy regulator also ordered ConocoPhillips to empty all the water from two dams deemed unsafe and insecure.   Both ConocoPhillips enforcement orders noted “that allowing the structure to fill with water above the native grade elevation creates a potential for failure of the dam and a large release of material downslope.” Inspectors also found a variety of problems at five dams built by Malaysian-owned Progress Energy, including erosion, slumping and water overflowing the top of the dam.  In one case water levels came to within 50 centimetres of the top of the dam during a recent storm, “creating risk of overtopping.” In addition, “the existing closed-culvert spillway on the structure is insufficient to provide adequate outflow in the event of a large inflow from a storm rainfall event,” inspectors found.  In July the commission ordered Progress Energy to reduce water volumes in the structure because if it was more than half full there was “potential for structure failure.”

Cancelled $36B LNG project was 'wake-up call' to industry, says energy exec - Calgary - CBC News: Plentiful cheap natural gas is no guarantee that a Canadian LNG export industry will develop, says an executive with Progress Energy Canada, a division of Malaysia's state-owned Petronas, which cancelled its $36-billion Pacific NorthWest LNG project in July. The decision was difficult to make but "headwinds were too great" for the partnership to green light the West Coast megaproject, said Dennis Lawrence, vice-president of production for Progress, during a panel discussion at the Calgary Energy Roundtable on Wednesday.Lawrence said delays meant the project missed its opportunity to enter the global LNG market when it had a good chance to thrive. "We think it may be a bit of a wake-up call to us as an industry, to governments, to regulators within Canada that time is actually of utmost importance on these projects, that delays and long regulatory timelines can ultimately have an impact on whether projects go ahead or not," he said. Lawrence said the consortium's research showed that its northeastern B.C. Montney gas wells would be competitive with natural gas produced in the northeastern U.S. and it is now focused on developing access to those North American markets. Divergent opinions expressed at the conference reflect the uncertain status of Canada's LNG industry, with nearly two dozen projects proposed and only one — the relatively tiny Woodfibre LNG — approved for construction by its owners. Andy Calitz, CEO of the $40-billion LNG Canada project led by Royal Dutch Shell PLC, said he believes Canada's low-cost gas and relatively closer location to Asia makes it competitive with other countries vying to sell liquefied natural gas around the world. But he conceded the higher cost to build liquefaction facilities and pipelines in British Columbia will affect an investment decision expected next year. 

Indigenous rights 'serious obstacle' to Kinder Morgan pipeline, report says -- The controversial expansion of a pipeline that would carry tar sands crude from Alberta to British Columbia’s coast will be doomed by the rising power of Indigenous land rights.That’s the message that Kanahus Manuel, an Indigenous activist from the Secwepemc Nation in central BC, plans to deliver to banks financing the project as she travels through Europe this week.She’ll have in hand a report being released today by the Indigenous Network on Economies and Trade, which argues that Texas-based Kinder Morgan has misled financial backers about the risks of expanding its TransMountain pipeline, almost half of which runs across “unceded” Secwepemc territory.The project, whose cost has ballooned from $5.4 to $7.4bn, would nearly triple capacity on an existing pipeline to ship 890,000 barrels a day to Asian markets, locking in expanded production of one of the world’s most carbon-intensive oils.The report details “significant legal, financial and reputation risks” that amount to “serious obstacles” it says have been downplayed by Kinder Morgan in its dealings with Canadian and international banks.The key risks, identified by economists and lawyers based on the pipeline’s history, Canadian legal precedents, and financial documents, include Kinder Morgan’s plans to build on lands whose ownership is hotly contested. The pipeline crosses 518km of Secwepemc territory over which the First Nations assert Aboriginal title, a type of land rights that the supreme court of Canada has recognizedwere never ceded or relinquished through treaties.

Oil Spills Pose Dire Threats to Marine Life --  Research led by the Raincoast Conservation Foundation confirms the threat to marine mammals in BC waters from a seven-fold increase in tanker traffic is considerable.  After examining potential impacts of a 15,000-cubic-meter oil spill in BC waters on 21 marine mammals, researchers concluded most individuals would be at risk and a few local populations wouldn't survive. Baleen whales, for example, are highly susceptible to ingesting oil because they breathe through blowholes, filter and eat food from the ocean surface and rely on invertebrate prey. Oil residue can stick to the baleen, restricting the amount of food they consume.  Resident and transient killer whales, sea otters and Steller sea lions were most likely to see a drop in population levels from an oil spill. Killer whales are especially vulnerable because of their small populations, low reproductive rates, dietary specialization, long lives and complex social structure. The 76 southern resident killer whales off the BC coast, Canada's most endangered marine mammal, are particularly threatened by oil spills , as well as ship strikes and underwater noise that hinders their ability to feed and communicate.  If Trans Mountain's Kinder Morgan pipeline expansion proceeds and an oil spill occurs, the study estimates it would affect between 22 and 80 percent of these whales' critical Salish Sea habitat. They already face severe chinook salmon prey shortages and other challenges. In court, opponents argued that adding pipeline and tanker impacts to the mix could lead to their extinction.  Following the 1989 Exxon Valdez disaster in Prince William Sound, a unique pod of north coast orcas vanished forever. Nine of the 22 whales died and remaining pod members didn't produce any living offspring. All marine mammals are vulnerable to oil spills because they surface to breathe. If that happens in a spill, oil can adhere to their bodies, and they can inhale toxic vapors and ingest oil. Marine mammals exposed to oil spills may suffer damaged airways, congested lungs, stomach ulcerations, eye and skin lesions, weight loss and stunted growth. When whales and dolphins surface to breathe, oil can restrict their blowholes and airways. When seals and otters try to clean oil matted on their coats, they ingest it. They also lose heat because spilled oil ruins their natural insulation, so they can die of hypothermia.

Weak Alberta Gas Prices To Hurt Producer, Provincial Revenues  (Reuters) - Western Canadian natural gas prices have been stuck at historically weak levels since summer due to prolonged pipeline maintenance, which will hurt producers' quarterly profits and royalties paid to the cash-strapped province of Alberta. In the Alberta market, known as AECO, spot natural gas prices for immediate delivery have turned negative eight times in the last three months, most recently on Oct. 9, meaning producers got nothing for gas sold on those days. Throughout the third quarter of 2017 AECO spot prices fluctuated wildly, averaging around C$1.36 a gigajoule, down from C$2.05 a gigajoule or roughly a third on the whole of 2016, also a weak year. One reason is hefty maintenance and expansion work on TransCanada Corp's NOVA Gas Transmission Ltd (NGTL) pipeline system that has resulted in more severe capacity outages than market players expected and hindered gas flow across western Canada. "In August, September and October we have seen these wild swings and the price has gone ridiculously low. It's literally unprecedented," said GMP FirstEnergy analyst Martin King, who has tracked Canadian gas prices since 1993. Encana Corp and Kelt Exploration Ltd have shut in some natural gas production because of the maintenance work and weak prices. BMO Capital Markets this week downgraded their trading recommendations on Tourmaline Oil Corp, Peyto Exploration and Development, Advantage Oil & Gas Ltd and Paramount Resources Ltd to "market perform" from "outperform" because of exposure to AECO prices. Weak prices will also affect the royalties gas producers pay to the province of Alberta, which are based on AECO spot prices and contributed C$520 million to the province's coffers last fiscal year, about 1.2 percent of revenues. The Alberta government last updated its 2017-18 natural gas price forecast in August to C$2.60 a gigajoule, down 30 cents from its original budget estimate. A weaker gas price this year could deepen Alberta's expected C$10.5 billion deficit. 

Canada's oil sands survive, but can't thrive in a $50 oil world (Reuters) - Canada’s oil sands producers are stuck in a rut. The nation’s oil firms are retrenching, with large producers planning little or no further expansion and some smaller projects struggling even to cover their operating costs. As the era of large new projects comes to a close, many mid-sized producers - those with fewer assets and producing less than 100,000 barrels of oil a day in the oil sands - have shelved expansion plans, unable to earn back the high start-up costs with crude at around $50 per barrel. Larger Canadian producers, meanwhile, focus on projects that in the past were associated with smaller names. The last three years have seen dozens of new projects mothballed and expansions put on hold, meaning millions of barrels of crude from the world’s third-largest reserves may never be extracted. Where industry groups in 2014 expected Canada’s oil sands output to more than double to nearly 5 million barrels per day (bpd) by 2030, that forecast has been knocked down to 3.7 million bpd. This follows a spell of consolidation that has seen foreign majors sell off more than $23 billion in Canadian assets in a year and turn to U.S. shale patches such as the Permian basin in Texas, which produce returns more quickly and where proximity to refiners means the barrels fetch a better price. “We cannot compete with that huge sucking noise to the south that is called the Permian. Investment dollars are spiraling away down there,” Derek Evans, chief executive of small oil sands producer Pengrowth Energy told Reuters in an interview. Permian production rose 21 percent in 12 months through July compared to a 9 percent increase in Alberta’s oil sands, according to Canadian and US government data.

Russia Goes All In On Arctic Oil Development -- Neither sanctions nor persistently low oil prices are hindering Russia’s ambitions or plans to develop oil resources in its sections of the Arctic.In April, state-controlled oil giant Rosneft started drilling the northernmost well on the Russian Arctic shelf in the Khatangsky license area in the Laptev Sea. In June, Rosneft struck first oil in the Eastern Arctic in this license.Earlier this month, the oil firm said that recoverable reserves at the field exceed 80 million tons of oil, which is equal to around 586.4 million barrels. Geological data point to reserves at the field at 298 million tons of oil, or some 2.184 billion barrels, and the oil is high quality - light and low-sulfur, according to Rosneft.  The Russian oil giant - whose CEO Igor Sechin is a close ally of Vladimir Putin - continues to drill at the field to study its geology, search for more oil, and define future drilling strategies at the license, Rosneft says.Rosneft and Gazprom’s oil unit Gazprom Neft are the only two companies allowed to drill in the Arctic offshore under Russia’s legislation.Gazprom Neft operates the only oil-producing platform in Russia’s Arctic currently. ThePrirazlomnoye oil field in the Pechora Sea started pumping oil back in late 2013. The field is estimated to hold 70 million tons of oil, or 513 million barrels, with annual production averaging 5.5 million tons (40.3 million barrels) at full capacity.  Rosneft also plans to resume drilling in the Barents Sea next year and in the Kara Sea within two years, thus committing itself to conduct drilling works across the entire Russian section of the Arctic. Rosneft holds 28 licenses in the Russian Arctic shelf that are estimated to have combined reserves of 34 billion tons of oil equivalent, or 249.22 billion barrels. Since 2012, Rosneft has invested $1.74 billion (100 billion rubles) in Arctic exploration, and will invest in 2017-2021 another $4.354 billion (250 billion rubles). Russia, for its part, has stated that Arctic oil and Arctic development are priorities in its policies, and is supporting development with financing in a kind of political message that sanctions won’t deter its Arctic oil ambitions.

$800 Million Gas Pipeline Proposed As Argentina Preps For Shale Boom | Rigzone -- Gas transporter TGS, controlled by Pampa Energía, has proposed an $800 million pipeline and gas treatment plant in Argentina's Vaca Muerta shale fields, a company source said, aiming to address a key barrier to increasing production.The project, subject to approval by the government of Neuquen province, could be built in a year and a half and would transport gas produced by companies including state-run YPF SA, Tecpetrol, Dow Argentina and Exxon Mobil Corp, the source said. Argentina's President Mauricio Macri has made attracting investment to ramp up natural gas production a priority of his government, which is trying to end reliance on costly energy imports. But expanded output is limited by current pipeline capacity in the remote, Belgium-sized fields."Producers always say that a new pipeline will be needed for the next shale and tight gas drilling phase in Vaca Muerta," said the TGS source, who was not authorized to speak to press."This pipeline we are willing to do in a year and a half. We have the technical capacity to do it," the source said, adding that it would have an initial 4 million cubic meters capacity that could be expanded to 35 million cubic meters.Pipelines in Vaca Muerta are currently moving 60 million cubic meters (2,119 cubic feet) of natural gas per day and have capacity for 75 million, oil companies say.Predicting output will quickly rise beyond that as the government subsidizes gas production, state-run YPF, Argentina's top producer, has a contingency plan for two years to hire trucks to ship out gas, a YPF spokesman said.So far this year, Exxon Mobil, BP Unit Pan American Energy, Wintershall, Total,and Statoil have announced investments in Vaca Muerta."In the short term we are not going to have more capacity to move this gas, and planning for infrastructure to increase transport capacity needs to start now," said Gustavo Albrecht, General Director of Wintershall Energía, in a recent conference.Rival gas transporter TGN, controlled by Tecpetrol - part of conglomerate Techint - is also interested in building a pipeline or partnering with TGS, an industry source with knowledge of the company said. 

Venezuela's deteriorating oil quality riles major refiners (Reuters) - Venezuela’s state-run oil firm, PDVSA, is increasingly delivering poor quality crude oil to major refiners in the United States, India and China, causing repeated complaints, canceled orders and demands for discounts, according to internal PDVSA documents and interviews with a dozen oil executives, workers, traders and inspectors.The disputes involve cargoes soiled with high levels of water, salt or metals that can cause problems for refineries, according to the sources and internal PDVSA trade documents seen by Reuters.The quality issues stem from shortages of chemicals and equipment to properly treat and store the oil, resulting in shutdowns and slowdowns at PDVSA production facilities, along with hurried transporting to avoid late deliveries, the sources said.U.S. refiner Phillips 66 canceled at least eight crude cargoes because of poor oil quality in the first half of the year and demanded discounts on other deliveries, according to the PDVSA documents and employees from both firms. The canceled shipments - amounting to 4.4 million barrels of oil - had a market value of nearly $200 million. Another key buyer of Venezuelan crude - India’s Reliance Industries Ltd, operator of the world’s largest refinery - has repeatedly complained about oil quality, a PDVSA employee told Reuters. State-run firm China National Petroleum Corp (CNPC) also complained earlier this year about excessive water levels in oil cargoes, a former PDVSA employee said.The deterioration of PDVSA crude is the latest symptom of the firm’s ill-maintained production infrastructure, and it threatens to accelerate an already severe cash crisis at a time when Venezuela is hoarding dollars to pay some $3.4 billion to bondholders in the next few weeks. PDVSA’s financial woes radiate through the country’s recession-racked economy, which depends on oil for more than 90 percent of its export revenue. Venezuela’s Oil Ministry and PDVSA did not respond to requests for comment.

UK Oil And Gas Costs To Rise 100% If Brexit Fails - The UK’s embattled oil industry might have to tackle a twofold increase in trade costs if its separation from the European Union takes place under a no-deal scenario, an industry group has warned.The warning comes just as the region’s oil and gas companies start to boost investments in the UK’s continental shelf, thanks to generous government incentives.The UK government is attempting to negotiate a trade deal with the European Union, but optimism is fading as talks struggle to get off the ground. As Bloomberg noted earlier this week, after the end of yet another round of disappointing discussions, no government in Europe is willing to make concessions to London, as they have enough to deal with at home with populism on the rise and public opinion unlikely to hail any concessions to the British separatists.EU leaders chose to begin trade deal negotiations with London in December, despite the latter’s insistence the talks begin this week. If the talks end unfavorably for the UK, Oil & Gas U.K. warned this week, the investment rush currently underway in the UK’s section of the North Sea would slow down to a trickle as the cost of labor and equipment jumps. This, the group said, will inevitably happen if the UK reverts to World Trade Organization rules in the absence of a trade agreement with the EU.Earlier this year, Oil & Gas U.K. conducted a study of the potential effects of an unfavorable Brexit scenario on the oil and gas industry and found that it could see its cost of trade swell from the current $791 million (600 million pounds) to $1.45 billion (1.1 billion pounds). This is the cost on $97 billion (73 billion pounds) worth of annual trade in goods and services related to the oil industry. For Oil & Gas U.K., this would be the worst-case scenario. While, theoretically, costs equaling one-tenth of turnover isn’t insurmountable for an industry, UK oil and gas is working in one of the highest-cost oil basins in the world. Operators there also face hundreds of millions in decommissioning costs and field depletion. On the other hand, a recent Wood Mackenzie report found that the UK North Sea section has become the second hottest spot for deal making, after U.S. shale. Some oil majors have reduced their presence there, selling assets to independents who are eager to make the most of what oil remains in the North Sea, which isn’t an insubstantial amount. Others, namely French Total, have expanded their footprint through acquisitions.

OPEC's Output Curbs Squeeze World's Biggest Oil Refining Complex | Rigzone: -- Being sophisticated in the age of OPEC output curbs can prove a disadvantage, as the operator of the world’s biggest oil-refining complex is discovering.Reliance Industries Ltd.’s 1.24 million barrel-a-day facility in western India features highly advanced units designed to process the globe’s heaviest types of crude, which have historically been cheaper than lighter varieties because they are more difficult to break down into fuels. Now, a drive by the Organization of Petroleum Exporting Countries to stabilize the oil market is squeezing supplies of such grades and making them relatively costlier.The result: Billionaire Mukesh Ambani’s company posted quarterly profit that lagged behind estimates for the first time in more than two years. Reliance earned $12 for every barrel of crude it turned into fuel in the second quarter ended Sept. 30, compared with a prediction by CLSA India Pvt. for as much as $12.80 a barrel.Shares of the company were down 0.7 percent on Monday at 12:28 p.m. in Mumbai, compared with a 0.3 percent gain in the broader S&P BSE Sensex Index.Refining margins fell below expectations as OPEC’s curbs led to the lower availability of cheaper grades of crude, according to Srikanth Venkatachari, Reliance’s joint chief financial officer. “There is nothing which suggests that suddenly supply of heavy crude has eased, so this condition will persist.”

Crude or condensate? The dilemma over Nigeria's oil-cut exemption (Reuters) - When OPEC agreed to exempt Nigeria from its oil production-restraint deal last year, it knew the country faced a huge challenge in recouping output lost due to militant unrest.As tensions subside and the country pumps closer to normal levels, another dilemma looms for the producer group as it continues efforts to eradicate a price-sapping oil glut - how to count Nigeria’s crude output without mixing in condensates. The answer could determine when – and indeed if ever – Nigeria has to cut or curtail oil production, its key source of foreign currency. While Nigeria promised to cap at 1.8 million barrels per day (bpd) once production “stabilizes”, that limit exempts all of the West African nation’s condensates. And no one seems to agree on how much of that ultra-light oil it pumps. “Previously, due to the whole issue of militancy, quotas were not an issue,” said Gail Anderson, research director at consultancy Wood Mackenzie. But now, “if you start thinking about OPEC cuts, then the definition of crude and condensate becomes quite important”. Nigeria, along with OPEC peer Libya, was exempt from cuts due to militancy in its Delta region that slashed output from 2.2 million bpd to as low as 1.2 million bpd last year. The attacks have abated, with no major incidents since January. Nigeria’s output has also rebounded, and secondary sources such as consultancies and price-reporting agencies quoted by OPEC said it edged above 1.8 million bpd in August and September - reinstating the country as Africa’s largest oil exporter. But Nigeria has said some of that total included condensates, an ultra-light oil that is not counted as part of its promise to cap. Oil minister Emmanuel Ibe Kachikwu told Reuters in July that condensates contributed 450,000 bpd to Nigeria’s production that month. The figure exceeds external estimates for condensate production ranging from 200,000 to 250,000 bpd and suggests Nigeria’s own condensate definition could keep it out of any cap. 

Newest outpost for U.S. crude exports: India  (Reuters) - India is set to emerge as a key market for American crude exports in coming months, as refineries in that country are ramping up “test” purchases of U.S. grades to diversify their imports. U.S. exports recently set a weekly record with nearly 2 million barrels of crude a day sent overseas. But shipments to India have been rare, with just a few deliveries since the U.S. lifted its ban on crude exports in late 2015. Indian refineries are starting to increase purchases as the country seeks to secure more supply from outside the Middle East. Refiners are testing both U.S. sweet and sour crudes in their facilities, a common practice when importing crude from new sources. “A lot of these (Indian refiners) want to see what it’s like if they run it,” said one Houston-based oil broker. “They want to get a taste of U.S. crude.” Those refiners are taking advantage of a wide spread between U.S. oil and other global benchmarks, which has created an attractive discount on American crude grades. Foreign refiners, including those in India, have bid up those physical grades against the U.S. crude benchmark to multi-year highs, traders and brokers said. That includes onshore grades from the Permian Basin in West Texas WTC-WTM and the Eagle Ford further east, as well as offshore U.S. Gulf grades including Mars Sour WTC-MRS and Southern Green Canyon WTC-SGC. In June, Indian Prime Minister Narendra Modi and U.S. President Donald Trump met and discussed energy exports to India. Since then the Modi administration has been encouraging more crude imports by waiving some shipping requirements. 

Asia oil buyers turn to U.S. in hunt for cheap supply (Reuters) - Asia is set to ramp up crude oil imports from the United States in late 2017 and early next year, with buyers searching out cheap supplies after hurricanes hit U.S. demand for the commodity at a time of rising production in the country. As many as 11 tankers, partly or fully laden with U.S. crude, are due to arrive in Asia in November, with another 12 to load oil in the United States later in October and November before sailing for Asia, according to shipping sources and data on Thomson Reuters Eikon. U.S. West Texas Intermediate crude benchmark stands at its largest discount in years against the Atlantic Basin’s Brent, with local appetite curbed as U.S. refineries are still pushing to get back on track in the wake of hurricanes such as Harvey. “Between November and January, there is a very big volume of U.S. crude heading to Asia,” said a Chinese trader who has bought 4 million barrels of medium-sour U.S. oil to arrive in December. He declined to be identified as he was not authorised to speak with media. The price-spread between the two crudes had already pushed U.S. crude exports to a record 1.98 million barrels per day by late September, according to the Energy Information Administration in the United States. Exports in the next two to three weeks could hit 2.2 million bpd, Marco Dunand, chief executive of trading house Mercuria, said last week. That has also been driven as some Asian governments look to diversify supply sources and reduce trade surpluses with the world’s top economy. India joined China, Japan and South Korea when it imported its first U.S. crude in October. And high premiums for Middle Eastern grades of crude are also stoking Asian appetite for U.S. supplies. “U.S. medium sour grades can replace most Middle East grades and the light sweets may replace some African crude,”

Interview: Saudi Aramco in talks with India on refinery projects - oil minister Saudi Aramco is in discussions with India about the possibility of participating in a number of refining projects operated by state-owned Indian oil companies, the first of which could start up in around 2020-21, Indian oil minister Dharmendra Pradhan told S&P Global Platts Tuesday.  The two projects include plans by the state-owned IOC, HPCL and BPCL to build a 60 million mt/year (over 1 million b/d) refinery in Maharashtra, along with another with a capacity of 9 million mt/year developed by HPCL in Rajasthan, Pradhan said in an interview during a visit to Tokyo."There are some projects [under discussion]," Pradhan said. "Saudi Aramco feels comfortable with the Indian government companies so there will be a joint venture model between Aramco and some of [them]." Saudi Aramco said in early October that India was a priority destination for investment and that it was keen to play a bigger role as a crude and LPG supplier to feed an anticipated rise in demand. Saudi Arabia is India's second-largest supplier of crude oil after Iraq, accounting for about 19% of its imports. It also accounts for 29% of India's LPG imports.
During fiscal 2016-17 (April-March), India imported about 39.5 million mt of crude oil from Saudi Arabia, according to the oil ministry.

Major Energy Importer Bets $10 Billion On Natural Gas -- Much of the attention in energy markets has been focused on OPEC and oil prices lately. But news this week suggests that a different energy commodity is quietly becoming the hottest story going worldwide.That’s natural gas. With the world’s top importing nation — Japan — saying this week it’s about to embark on a major spending spree in the sector.Japanese press reported over the weekend that government agencies are about to launch a major funding program for international natgas projects — specifically aimed at the liquefied natural gas (LNG) sector. With the government planning to make a full $10 billion available for investment.Those dollars will reportedly come from Japan Bank for International Cooperation and Nippon Export and Investment Insurance. With targets being LNG receiving terminals as well as associated power plant facilities. Here’s the most intriguing part: Japanese papers said the program will be aimed entirely at LNG projects in Asia. With the stated goal to “build markets in Asia for U.S. LNG”. At first glance, it seems odd the Japanese government would be spending its own money to help America gain LNG market share. But there may be a more-selfish reason here: namely, to facilitate increased shipments of U.S. LNG into the Asian sphere, making it easier and cheaper for Japanese buyers to grab a piece of the growing supply.  It will be interesting to see how specific deals are structured in regards to this funding. But it’s likely that Japanese backers will look to take direct stakes in facilities they support — in order to have direct control of LNG flows around Asia.

China places bet on yuan-denominated crude oil futures | Asia Times: Oil traders are carefully watching to see which country will follow Venezuela’s decision to export crude oil denominated in renminbi instead of US dollars. Venezuela, the 11th largest oil producer in the world, announced on September 15 it would sell oil and gas in yuan to avoid the “tyranny of the dollar,” according to a plan announced by President Nicolas Maduro. The US promptly responded by announcing sanctions that would bar certain financial dealings with Venezuela.Carl Weinberg, chief economist and managing director at High Frequency Economics, said Wednesday that China will “compel” Saudi Arabia to trade oil in yuan. He said if this happens, the rest of the oil market will follow suit and abandon the US dollar as the world’s reserve currency. China wields significant power on the world oil market. In the first half of 2017, China passed the United States as the largest importer of crude oil – 8.5 million barrels a day on average versus 8.1 million barrels a day imported by the US, according to government data from both countries. In the first eight months of 2017, China imported 281.1 Metric Tonne Oil Equivalents, or 2 billion Barrels Oil Equivalent. At an average price of US$49.36 per barrel, China spent $99.11 billion for the eight months on oil imports, or about $148 billion per year. The Chinese government’s plan to promote the use of renminbi in global commodity markets has been outlined in recent speeches by Chinese officials and oil producers. China will promote the use of renminbi in the global commodity markets, Xinhua Finance Agency reported, citing Pan Hongsheng, the deputy secretary general of the People’s Bank of China’s monetary policy committee. The country will push forward the formation of pricing systems for yuan-denominated commodity products and encourage local commercial banks to launch innovative financial services to support these developments, Pan said in a speech during the first World Petroleum Business Conference in Hangzhou in Zhejiang province on September 18. It will also encourage the launch of derivatives and currency tools to help investors trade yuan-denominated commodity products, he said. 

China's bold gas plan may threaten winter power supplies (Reuters) - China has ordered state oil companies to speed up the construction of pipelines to move natural gas to homes and factories, underscoring worries that the country’s insufficient infrastructure could cause power outages during the peak winter demand period. This winter, millions of homes across the colder northern regions of the world’s second-largest economy will be heated for the first time by gas rather than coal, as part of Beijing’s effort to boost clean fuel use. But with just a month before newly installed radiators get switched on, the National Development & Reform Commission (NDRC) warned on Thursday that supply and demand conditions could be “serious” this winter. The alert shows Beijing is trying to head off supply disruptions during the peak demand period from November until March. Residential users with their radiators will have supply priority over industrial users, increasing the possibility of power losses during gas shortages. “We are all quite concerned with supply shortages this winter ... as we may not have the infrastructure capacity to catch up with the demand growth,” said Li Wei, a vice president of Kunlun Energy, which operates liquefied natural gas (LNG) terminals and gas production plants. Wood Mackenzie estimates the heating needs alone will add 10 billion cubic meters (bcm) to China’s gas demand, the equivalent of Vietnam’s annual consumption. The country is expected to use about 230 bcm this year.Small industrial users like hospitals have also had to switch to gas this winter. China will either need to ramp up imports, offering a boon for major exporters like Russia, or big industrial consumers may get interrupted, warned Kerry Anne Shanks, head of Asia gas and LNG research at consultants Wood Mackenzie. 

Exclusive: China offers to buy 5 percent of Saudi Aramco directly - sources (Reuters) - China is offering to buy up to 5 percent of Saudi Aramco directly, sources said, a move that could give Saudi Arabia the flexibility to consider various options for its plan to float the world’s biggest oil producer on the stock market. Chinese state-owned oil companies PetroChina (0857.HK) and Sinopec (0386.HK) have written to Saudi Aramco in recent weeks to express an interest in a direct deal, industry sources told Reuters. The companies are part of a state-run consortium including China’s sovereign wealth fund, the sources say. Saudi Arabia’s Crown Prince Mohammed bin Salman said last year the kingdom was considering listing about 5 percent of Aramco in 2018 in a deal that could raise $100 billion, if the company is valued at about $2 trillion as hoped. “The Chinese want to secure oil supplies,” one of the industry sources said. “They are willing to take the whole 5 percent, or even more, alone.” PetroChina and Sinopec declined to comment. The initial public offering (IPO) of Saudi Aramco is the centerpiece of an economic reform plan to diversify the Saudi economy beyond oil and it would also provide a welcome boost to the kingdom’s budget which has been hit by low oil prices. But the IPO plan has created public misgivings that Riyadh is relinquishing its crown jewels to foreigners cheaply at a time of low oil prices. Some Aramco employees would like the whole idea to be shelved, sources say. Internal disagreements between what some advisers recommend and what the crown prince wants have delayed several key decisions about the IPO, industry sources said. The sources also point to disagreements between senior government officials, with some pushing only to list Aramco locally or to delay the IPO beyond 2018 when they hope oil prices will have stabilized at $55 to $60 a barrel.

Russia's Gazprom Neft eyes cooperation with Saudi Aramco in hard-to-recover oil | Euronews: Russia’s Gazprom Neft will jointly work with the world’s largest oil producer Saudi Aramco in hard-to-recover oil production and on a technology known as hydraulic fracturing, Gazprom Neft’s head Alexander Dyukov said on Wednesday. Earlier this month, both companies have signed an agreement on technological cooperation during a state visit to Russia by Saudi King Salman. Dyukov also told reporters that Gazprom Neft expects its borrowings to rise to between 200 billion roubles and 210 billion roubles (£2.6 billion – £2.7 billion) next year without possible new funds for Messoyakha greenfield.

Chinese EV Boom Could Crash Oil Prices - The rapid adoption of electric vehicles could cause oil prices to fall to $10 per barrel in less than a decade, according to the CEO of Longview Economics. EVs are gaining traction, and although they still only make up a small fraction of the auto market, more and more analysts are starting to buy into the notion that EVs will quickly gain a foothold over the next decade or so, with massive ramifications for the oil market. There has been a sea change of sorts in just the past year or two, with EVs going from a niche idea even in long-term forecasts, to one that many believe will increasingly take market share from the traditional internal combustion engine. There are many reasons for this – policy and market forces are reinforcing each other to bring the EV revolution closer and closer. The falling cost of batteries have made EVs much more competitive, and EVs could become cheaper than gasoline or diesel-powered vehicles between 2025 and 2029, according to Bloomberg New Energy Finance (BNEF). BNEF predicts that EVs will capture than half of all new auto sales by 2040. But government policies could accelerate this trend. The UK and France have announced a phase out of the internal combustion engine, banning their sales by 2040. China and India have also announced tentative steps in that direction, which, if finalized, would totally change the game.  And China could go a long way by itself in accelerating this transition. As the world’s largest auto market, China’s EV policy, which is still being formulated, could supercharge the race for EVs. The massive investments planned for EVs, combine with restrictions on dirtier forms of transportation, all done within a top-down economy, could spark rapid change. “They can order charging stations set up all over China, dictate driving and licence plate restrictions in major cities,” a western auto executive told the FT, drawing a clear contrast with what can be done in western economies.

NYMEX November gas continues rally, settles up 1.1 cents at $3/MMBtu -- The NYMEX November natural gas futures contract continued to rally Friday off the heels of Thursday's 10-cent climb. The contact settled at $3/MMBtu, up 1.1 cents.The rally has put the front-month contract at the $3/MMBtu level for the first time since September 29. Production near record levels and forecasts of a mild winter had helped drive prices down over recent weeks. But Platts Analytics' Bentek Energy data showed US dry gas production has dipped recently, averaging 72.1 Bcf/d over the past six days. The most recent six- to 10-day outlook from the National Weather Service calls for a high likelihood of warmer-than-average weather across the eastern half of the US, with the eight- to 14-day outlook projecting similar results.Warmer-than-average weather stretching through the end of October could cut into heating demand, allowing gas in storage to build at an above-average pace. The US Energy Information Administration estimated Thursday an 87-Bcf build for the week ended October 6, which equaled the 87-Bcf five-year average for the week. National stocks sit an estimated 0.2% deficit to the five-year average, according to EIA data.

Investors hit peak bullishness on oil (Reuters) - The wave of investor bullishness towards oil that started back in July and August may have peaked at the end of September, according to the latest position records published by regulators and exchanges.Hedge funds and other money managers cut their net long position in the five major futures and options contracts linked to petroleum by a total of 32 million barrels in the week to Oct. 10.Hedge funds cut their net long position in every one of the major benchmarks including Brent (-16 million barrels), WTI (-7 million barrels), U.S. gasoline (-4 million) and U.S. heating oil (-5 million).Fund managers had accumulated a record number of long positions in the petroleum complex by the end of September and the net position in many individual contracts was at or close to record levels.But fund managers have now cut their net long position in petroleum for two weeks in a row and oil prices have generally drifted lower since the end of last month ( to the downward pressure on prices, portfolio managers also cut their net long position in European gasoil by almost 1.6 million tonnes last week from the record of 18 million tonnes set the week before.Investor positioning in petroleum markets had become stretched by the end of September, as many traders and analysts noted at the time.Since the start of 2015, lopsided positioning by hedge funds and other money managers has been a good indicator of an approaching reversal in prices.So the concentration of long positions and absence of shorts posed an increasing risk of a price correction in the event the rally stalled and fund managers attempted to realise some of their profits.Some investors are already anticipating a renewed down-cycle in prices with short positions in NYMEX WTI increasing by more than 17 million barrels since Sept. 26. Positioning and fundamentals now point in opposite directions which will create some short-term tension in oil prices.

Oil jumps 1 percent; fighting shuts output in Iraq's Kirkuk (Reuters) - Oil prices jumped 1 percent on Monday as Iraqi forces entered the oil-rich city of Kirkuk, taking territory from Kurdish fighters and briefly cutting some crude output from OPEC’s second-largest producer. “We’re seeing increased geopolitical tension in the Middle East providing support in the market today, namely in Iraqi Kurdistan, and some uncertainty around Iran,” said Anthony Headrick, energy market analyst at CHS Hedging LLC in Inver Grove Heights, Minnesota. Iraq’s Kurdistan briefly shut down some 350,000 barrels per day (bpd) of production from major fields Bai Hassan and Avana due to security concerns. Iraq launched the operation on Sunday as the crisis between Baghdad and the Kurdish Regional Government (KRG) escalated. The KRG voted for independence in a Sept. 25 referendum. Brent crude futures LCOc1 were up 62 cents or 1 percent at $57.79 per barrel at 11:02 a.m. U.S. West Texas Intermediate (WTI) crude was up 36 cents or 0.7 percent at $51.81 per barrel. The government said its troops had taken control of Iraq’s North Oil Co, and the fields quickly resumed production. The KRG government said oil continued to flow through the export pipeline, and it would take no steps to stop it. Still, the action unsettled the market. Some 600,000 bpd of oil is produced in the region, and Turkey has threatened to shut a KRG-operated pipeline that goes to the Turkish port of Ceyhan at Baghdad’s request.

Global Oil Prices Soar as Kirkuk Conflict Flares Up - The development of the conflict in the Iraqi city of Kirkuk, where Iraq's military units clashed with Kurdish Peshmerga detachments, has already affected the global economy.In the afternoon on Monday the price of December futures for the North Sea oil mixture Brent rose by 1.75 percent, to $58.17 per barrel, whereas the price of November futures for WTI rose by 1.46 percent to $52.2 per barrel.This comes amid tensions between Baghdad and Kirkuk, which have further escalated following Iraqi Kurdistan's independence referendum. Although Kirkuk is not a part of Iraqi Kurdistan it took part in the referendum.  “Oil Brent is now quoted at 1.4% higher than at the close of Friday's trading in Moscow, with the main rise happening this morning. Market participants are reacting to the escalation of the conflict between the Iraqi Kurdistan authorities and the central government of Iraq. …The dynamics of oil markets … were influenced by emerging over the weekend of reports that Saudi Arabia may postpone holding an IPO of company Aramco,” a report by an analyst of Sberbank KIB read.The Iraqi troops have been conducting an operation in the region and have reported capturing the Kirkuk airport from the Kurdish Army in the oil-rich region, which aims to gain independence like Iraqi Kurdistan. The Iraqi federal police managed to capture the Kirkuk administration building without any fight, a source told Sputnik.

Oil prices rise toward six-month high as new Iraq conflict threatens output -- Oil prices closed in on the highest level in six months as a conflict in Iraq spilled over into one of the nation's key crude-producing hubs. Iraqi forces on Sunday launched a campaign to retake control of the area surrounding Kirkuk, an ethnically diverse area controlled by the semiautonomous Iraqi Kurdistan region. Government troops took control of the North Oil Company, a military base and airport, Reuters and Dow Jones reported, marking the escalation of an intensifying dispute following a Kurdish independence referendum last month. U.S. West Texas Intermediate crude prices hit a session high of $52.37 a barrel on Monday, the strongest level since Sept. 28 and about 50 cents shy of posting a six-month high. They eased back and were last up 41 cents at $51.86. Brent crude oil peaked at $58.47 on Monday, about $1 below a more than two-year high struck last month. The international benchmark also pared gains to trade 68 cents higher at $57.85."The international market really took off higher on the news," said John Kilduff, founding partner at energy hedge fund Again Capital. The fallout depends on whether or not fighting actually occurs, he said.Clashes appeared to be limited, according to initial news reports. Still, the standoff was not in the cards as recently as a week ago, Kilduff said. The contracts hit their peaks after Reuters reported Iraqi Kurdistan temporarily shut down 350,000 barrels a day of production at the Bai Hasan and Avana oil fields due to security concerns. An Iraqi oil ministry official told Reuters operations in Kirkuk are "proceeding normally."

Oil Fundamentals Overturn Geopolitical Risk - Oil posted gains on Monday and Tuesday on news that the Iraqi military seized control of Kirkuk, raising fears of supply outages.  Iraqi forces unexpectedly seized control of the key oil fields around the city of Kirkuk, which had been under Kurdish control for more than three years. The move sparked concerns over civil war, and comes three weeks after the Kurdish referendum favoring independence. There were early reports that an estimated 350,000 bpd of oil production was temporarily sidelined after Iraqi government forces took control of the oil fields, and there are conflicting reports on whether the outage remains. Kurdistan has said it would not impede oil exports. The problem is that the oil flows through Kurdish pipelines as a separate pipeline system under Baghdad’s control is damaged. Oil jumped on Monday on fears of outages, although those fears will probably dissipate if exports are restored.  There won’t be any immediate effect on the oil market from the decertification of the Iran nuclear deal by the Trump administration, but if tensions rise in the coming months, it would likely occur at a time when the oil market is tightening anyway, leading to upward pressure on prices, according to FBR Capital Markets. The decertification of the Iran nuclear deal and the military offensive by the Iraqi government has thrust the prospect of geopolitical risk back into the oil market, according to Goldman Sachs. Still, it isn’t like it used to be – years ago, oil would immediately jump by a few dollars per barrel when news would break about heightened tension. The return of geopolitical risk will be more muted due to a well-supplied market.  While peak oil demand might prove elusive, demand will expand at negligible levels beginning in the 2020s, according to Wood Mackenzie. The consultancy sees demand still rising to 2035, but at very slow rates. While WoodMac does not see peak oil demand overall on the horizon, it does see a peak for gasoline. Consumption in the transportation sector is expected to dip due to the penetration of EVs, but the petrochemical industry will offset the decline. Natural gas will take on greater significance as a fuel used in trucking, shipping, electricity and petrochemicals.

Oil holds ground, settles near 3-week high - Oil settled little changed on Tuesday, but fighting in Iraq and tensions between the U.S. and Iran kept prices at their highest level in nearly three weeks. “Geopolitical risk supported the initial move higher, but we’ve pushed to price levels that are clearly attractive to U.S. shale producers,” Robbie Fraser, commodity analyst at Schneider Electric, told MarketWatch. November West Texas Intermediate crude tacked on a penny to settle at $51.88 a barrel on the New York Mercantile Exchange after tapping a high of $52.25. It settled at its highest level since Sept. 27 for a second session in a row. Brent crude for December rose 6 cents, or 0.1%, to $57.88 a barrel—also its highest since late September.“WTI prices have found some breathing room above the $50 [a barrel level] and the market is increasingly concerned that those levels will trigger rising rig counts and stronger production growth further down the line,” said Fraser. “So long as the market has faith in a U.S. production response, we should keep seeing this secondary move to sell any price rally.”A monthly report from the Energy Information Administration released Monday showed expectations for a rise of 81,000 barrels a day to 6.12 million barrels a day in shale-oil production from seven key U.S. shale regions in November. Elsewhere, Iraqi forces clashed Monday with fighters from Iraq’s semiautonomous Kurdish region in the oil-rich province of Kirkuk, in a continuing standoff over Kurdish independence. The violence followed a referendum late September in which the Kurds voted overwhelmingly in favor of independence, in defiance of the central government in Baghdad and other regional powers.

WTI Shrugs Despite Huge Crude Draw -- A v-shaped recovery in WTI/RBOB today (amid a dollar reversal at the EU close and chatter about a big crude draw) led prices higher into the API print (but after last week's 100% incorrect API vs DOE reversal, who knows what it means). And the rumors were true - a huge crude draw (biggest in 2 months) and the first build at Cushing in 8 weeks. However WTI prices didn't move much as product builds weighed on RBOB prices.  API:

  • Crude -7.13mm (-3.2mm exp) - bigget draw in 2 months
  • Cushing -151k - first draw in 2 months
  • Gasoline +1.951mm (+1.05mm exp)
  • Distillates +1.644mm - biggest in 3 months

After last week's 100% wrong API data (API crude build, gas draw; DOE crude draw, gas build), who knows what will happen.

Crude Oil Prices Menace Six-Month High, EIA Inventory Data on Tap --Crude oil prices sank after Sky News reported that Kurdish Peshmerga militia reached agreement to return to Iraq’s 2003 borders. Conflict between local fighters and government forces in the Kirkuk province shut down two oil fields, stoking supply disruption fears.  The swiftly selloff evaporated as markets looked ahead to API inventory flow data however, and it did not disappoint. The report showed US stockpiles shed 7.13 million barrels last week, outpacing the 3.85 million outflow expected to be on display in EIA statistics due today.If official figures hew closer to the private-sector estimate, oil prices may enjoy a further boost. JODI numbers on global output and export trends are also due. Commentary from China’s Communist Party Congress as well as the Oil & Money conference are also worth monitoring for relevant tidbits. Goldprices continued to fall against a backdrop of rebuilding Fed rate hike speculation. The US central bank’s Beige Book survey of regional economic conditions is now in focus.

OPEC oil output cuts 'working' but need to run to end-2018: Total CEO – The current OPEC/non-OPEC output cut deal is starting to bring the global oil market back towards balance, but the agreement will likely need to run until at least the end of next year to fully draw down the overhang of oil stocks, Total CEO Patrick Pouyanne said Wednesday. "The OPEC/Non-OPEC deal is working well...I think the market is slowly rebalancing, the inventories are going down," Pouyanne told the Oil & Money conference in London.Pouyanne said, however, he would reiterate comments he made in January when the OPEC cuts began, that it would take at least two years for the cut deal to fully rebalance the oil market and reduce the overhang of global oil stocks."If you have three or four years of oversupply, it takes time to rebalance the market," he said. Noting comments made during the recent visit by Saudi Arabia's King Salman to Moscow to meet Russian President Vladimir Putin, Pouyanne said he was "convinced" the two major oil producers were now pursuing a target of bringing oil prices to $60/b. During the historic meeting earlier this month, King Salman and Putin discussed extending the deal to keep the OPEC/non-OPEC coalition's market rebalancing efforts on track. "The meeting...I think cemented the agreement between two of the three main producing countries of the world," Pouyanne said. "I'm convinced that both of them are targeting a price of about $60/b."According to the IEA's latest monthly oil market report, OECD oil stocks continued falling against the five-year average in August, to reach 170 million barrels above the five-year average, although the total remained above the 3 billion mark, at 3.015 billion barrels.Global oil stocks are likely to have fallen in Q3 for just the second time since oil prices started collapsing in 2014, the IEA added, noting that stocks are likely to fall by 300,000 b/d on average this year.With current oil prices of around $56/b, Pouyanne said he also saw a new "wave of investment" by US shale producers as drilling efficiencies had lowered break-even costs. Looking further ahead, however, he repeated concerns voiced over the past 18 months that a the sharp drop in upstream spending by oil majors after the 2014 price slump could create a supply shortage in the next decade.

The world’s largest oil trader sees Brent plunging to $45 in 2018 - Brent oil prices could tumble more than 20% by 2018, as U.S. output surges and adds renewed pressure on an oil market that is already battling with a persistent oversupply, according to Ian Taylor, chief executive officer at Vitol Group, the world’s largest oil trader. Speaking at the Oil & Money conference in London on Wednesday, Taylor warned that there’s currently a consensus in the industry that prices will go higher, but that such an unanimity “can be dangerous.”“We are all expecting a little bit of tightening to come through because we all see demand growing next year at a pretty good rate, we all expect OPEC to hold together and we expect probably the capital discipline to [remain in place],” he said. “So it’s guaranteed we are all going to be wrong. And I think there’s a chance oil could fall closer to $40 than $50, because I think there’s still one more big surge coming from U.S., which will knock prices down,” he said, pointing to $45 per barrel as his 2018 forecast. Brent prices traded around $58 on Wednesday, so Taylor’s prediction would indicate a 22% slump from current levels.  U.S. shale output has been singled out as one of key reasons oil prices came crashing down in the summer of 2014 and still haven’t recovered to their former glory. Both crude oil and Brent are still around 50% lower than their 2013-2014 peaks. In response to the price plunge, the Organization of the Petroleum Exporting Countries and a group of non-cartel members have agreed to cut production until March 2018 in an effort to reduce the global supply glut.  However, the U.S. isn’t part of the accord and has been able to grow market share as other global players have frozen or scaled back their output. U.S. oil production is expected to rise for an 11th straight month in November, by around 82,000 barrels a day to 6.12 million barrels a day, the U.S. Energy Information Administration said this Monday.

OPEC reportedly favors 9-month extension to output cut deal in bid to boost oil prices -- OPEC members are reportedly forming a consensus around extending their production cutting deal with other crude exporters by nine months, a move that would help to put a floor under oil prices.That would prolong the agreement among OPEC, Russia and other oil-producing nations to keep 1.8 million barrels a day off the market through the whole of next year. The exporters reached the deal last December and have already extended the agreement once through March of 2018.Sources told Reuters that OPEC may not agree to the extension at its next policy meeting in November. Instead, they may wait until early next year to make a final decision.Oil prices strengthened following the report. International benchmark Brent crude futures were up 38 cents, or 0.7 percent, $58.26 per barrel by 10 a.m. EDT. U.S. crude for November delivery was up 31 cents, or 0.6 percent, at $52.19. OPEC may put off the decision at its Nov. 30 meeting if demand for crude oil and petroleum products remains strong, a source told Reuters. OPEC and the International Energy Agency have recently reported that demand has improved, though the IEA raised concerns about future consumption growth in its latest report.Three of the sources confirmed to Reuters that OPEC is leaning towards a nine-month extension, while a fourth said prolonging the deal by six to nine months would do the job of sopping up excess oil sitting in stockpiles.OPEC is trying to drive down global crude stockpiles to the five-year average. The producer group reported last week that inventories among the OECD, a group of mostly wealthy nations, stood at just under 3 billion barrels in August, about 171 million barrels above the five-year average. Two OPEC sources told Reuters that the group is not likely to deepen the cuts beyond 1.8 million barrels a day.

Oil Algos Shocked As US Crude Production Crashes Most In Over 5 Years ---Following API's huge 7.1mm barrel crude draw overnight, WTI prices are slightly higher (driven more by OPEC jawboning) as last week's API errors are still on traders' minds, but DOE confirmed a big crude draw but notable builds in gasoline and distillates surprised. However, the biggest headline is likely the 11%-plus collapse in US crude production... DOE:

  • Crude -5.73mm (-3.2mm exp) 
  • Cushing +202k
  • Gasoline +908k (+1.05mm exp)
  • Distillates +528k (-1.5mm exp)

Traders clearly did not trust the API data (after last week's flip-flop) but DOE confirmed a big draw and notable builds in both gasoline and distillates... As a reminder - Supplies remain bloated at about 21% above the five year average despite rising exports. Following the previous week's drop in production, this week saw a 12% collapse in US Lower 48 output - presumably affected by Hurricane Nate!! The biggest drop since Hurricane Isaac in Aug 2012

Crude futures rise slightly as US product builds limit upside --Crude futures inched higher Wednesday after Energy Information Administration data showed a larger-than-anticipated decline in crude stocks, but surprise builds in product stocks tempered the rise. NYMEX November crude rose 16 cents to settle at $52.04/b. ICE December Brent settled 27 cents higher at $58.15/b. US crude stocks fell 5.731 million barrels to 456.485 million barrels last week. Analysts surveyed Monday by S&P Global Platts expected a draw of 3.9 million barrels. It was the fourth straight decline, but traders looked elsewhere for market direction, and seemed to find aspects of the EIA report bearish enough to cause prices to weaken Wednesday morning. Other factors behind the price reaction were drops in product demand and refinery utilization, said Ryan McKay, commodity strategist at TD Securities. "It seems like we're starting off fall maintenance," he said. Every region saw its utilization rate decline, pulling the total rate 4.7 percentage points lower to 84.5% of capacity. The extent of last week's pullback was unexpected, with analysts looking for a more modest drop of 0.7 percentage points. NYMEX November crude touched a low of $51.69/b Wednesday. ICE December Brent traded as low as $57.74/b at one point. Two factors helping pull crude stocks lower were crude exports, which rebounded 528,000 b/d to 1.798 million b/d, and less crude output. EIA estimates put production at 8.406 million b/d last week, the lowest amount since May 2014. Tropical Storm Nate, which strengthened into a hurricane in the Gulf of Mexico before landing on the Gulf Coast, forced offshore operators to evacuate personnel and shut-in production last week. Despite a decline in refinery utilization, inventories of gasoline and distillates both increased last week. Gasoline stocks rose 908,000 barrels to 222.334 million barrels the week ending October 13, EIA data showed. Analysts were looking for a decline of 340,000 barrels.

Oil ekes out 3-week high as U.S. crude supplies drop, but product stocks rise - Oil futures ended with a minor gain Wednesday, barely notching a three-week high, supported by a fourth straight weekly decline in U.S. crude supplies and escalating tensions in the Middle East.But pressure from unexpected increases in petroleum-product supplies kept prices in a tight trading range. November West Texas Intermediate crude added 16 cents, or 0.3%, to settle at $52.04 a barrel on the New York Mercantile Exchange. Prices pulled back from the $52.23 level hit before the supply data, but still logged their highest finish since Sept. 27.On ICE Futures Europe, Brent crude for December rose 27 cents, or 0.5%, to $58.15 a barrel—for its highest settlement since late September. The U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 5.7 million barrels for the week ended Oct. 13. That was higher than the forecast for a drop of 3.9 million barrels by analysts surveyed by S&P Global Platts, but below the 7.1 million-barrel decline reported by the American Petroleum Institute late Tuesday. “Lower offshore domestic production due to Hurricane Nate, strong exports and subdued imports have been offset by refinery runs dropping by a whopping 820,000 [barrels a day],” said Matt Smith, director of commodity research at ClipperData. He said the market was actually “positioned for a larger draw” and that’s why it pared gains. Unexpectedly, gasoline stockpiles were up 900,000 barrels for the week, while distillate stockpiles rose by 500,000 barrels, according to the EIA. The S&P Global Platts survey forecast drops of 340,000 barrels for gasoline and 2 million barrels for distillates. “The size of the crude-supply draw underwhelmed expectations due to refinery maintenance” leading to drop in refinery runs, said Troy Vincent, oil analyst at ClipperData. That “helped offset the 1 [million barrels-per-day] supply shortfall as a result of the hurricane,” which passed through the Gulf earlier this month.

'Oil ends lower after 4-session climb sends prices to highest levels in weeks - Oil futures ended lower Thursday, pulling back after four-consecutive sessions of gains lifted prices to their highest levels in weeks. Tensions in Iraq and uncertainty surrounding Iran’s nuclear deal have raised the risk to global crude supplies as expectations for stronger oil demand boosted prospects for a more balanced market. “Although there are heightened geopolitical tensions between the United States and Iran over the Joint Comprehensive Plan of Action (JCPOA) and ongoing conflicts in Iraq, optimism over global demand for oil increasing in 2017, have supported oil markets,” said Lukman Otunuga, research analyst at FXTM. “The question is, for how long?” November West Texas Intermediate crude lost 75 cents, or 1.4%, to settle at $51.29 a barrel on the New York Mercantile Exchange. December Brent crude fell 92 cents, or 1.6%, to $57.23 a barrel on ICE Futures Europe. Both contracts settled Wednesday at their highest since late September, according to FactSet data. “Much attention should be directed to how OPEC deals with rising production from Nigeria and Libya,” said Otunuga. “With increased output from these two suppliers potentially disrupting the efforts made by the rest of the group to tackle the oversupply woes, OPEC may request that they also cut production.” He said that from a technical standpoint, WTI crude is at risk of depreciating further,” if prices fall below $51, which may “encourage: a further decline back towards the $50 level.

OilPrice Intelligence Report: Has Oil Become Range Bound Again? - Oil seems to have found a relative bottom after the declines over the past few weeks, with WTI firming up at the $50-per-barrel level. Tension in the Middle East, combined with growing confidence in the likelihood of an OPEC extension, has very few analysts seeing a lot of downside risk. “The oil market is tightening gradually,” Tamas Varga, analyst at brokerage PVM Oil Associates, told Reuters. “OPEC is expected to roll over output restrictions for another nine months, supplies are at risk in the Middle East and U.S. inventories are falling.” Still, prices showed some weakness on Thursday and Friday, and benchmark prices are set to post a loss on the week. Without some major bullish or bearish catalysts, prices could bounce around for the next few trading sessions.   Geopolitics are back at the forefront of market concern after years of irrelevance. Citi said that five key oil producers – all OPEC members – should be on everyone’s mind. “The ‘Fragile Five’ petrostates - Iran, Iraq, Libya, Nigeria and Venezuela - continue to see supply disruption potential, with northern Iraq crude exports at risk due to an escalation of tensions between the (Kurdistan Regional Government), Baghdad and Turkey, while the United States has decertified the 2015 Iran nuclear deal,” Citi concluded.   The so-called “shale band” continues to cap oil prices at the $60-per-barrel ceiling, according to oil analysts. Any move above that threshold is widely seen as a likely catalyst for more shale production. This is why even the serious tension in the Middle East can seem to push Brent above $60. “The market is frightened by the shale oil band,” Olivier Jakob at PetroMatrix, who helped coin the term “shale band,” told the FT. “But it’s not just traders — we’ve seen indications from OPEC and Russian oil companies that even they think going above $60 a barrel right now would be too much and would bring on more oil from shale. They don’t want it.”

Baker Hughes: US rig count falls 15 units to 913 - Oil & Gas Journal: The US rig count during the week ended Oct. 20 declined for the ninth time in 12 weeks. Baker Hughes’ tally of active rigs fell 15 units this week to 913. US oil-directed rigs dropped for the eighth time in 10 weeks, shedding 7 units to 736. Gas-directed rigs lost 8 units to 177. There continued to be no unclassified rigs drilling this week. Land-based rigs were down 15 from a week ago, reaching 892. Unchanged from a week ago, there was 1 rig drilling in inland waters and 20 units drilling offshore in the Gulf of Mexico. Texas led the major oil- and gas-producing states with an 8-unit decline to 436. Wyoming and Alaska were both down 2 units to respective counts of 21 and 4. New Mexico and Utah were both down 1 rig each, reaching 68 and 11, respectively. There were 10 states unchanged this week, namely Oklahoma, 124; Louisiana, 65; North Dakota, 51; Colorado, 34; Pennsylvania, 32; Ohio, 29; West Virginia, 15; California, 14; Kansas, 1; and Arkansas, 0.

US Oil Rig Count Drops by 7, Total Rigs Down by 15 - In the week ended October 20, 2017, the number of rigs drilling for oil in the United States totaled 736, seven fewer compared with the prior week and up by 293 compared with a total of 443 a year ago. Including 177 other rigs drilling for natural gas, there are a total of 913 working rigs in the country, down by 15 week over week and up by 360 year over year. The data come from the latest Baker Hughes North American Rotary Rig Count released on Friday. West Texas Intermediate (WTI) crude oil for November delivery settled at $51.29 a barrel on Thursday and traded up about 0.3% Friday afternoon at $51.43 shortly before regular trading closed. The natural gas rig count decreased by eight to a total of 177 this week. The count for natural gas rigs is now 69 higher year over year. Natural gas for November delivery traded up about 1.2% at around $2.90 per million BTUs before the count was released and rose to $2.93 afterward. The Federal Reserve Bank of Dallas noted this week that the futures curve from Brent crude went into backwardation (a commodity market condition where current spot prices are higher than futures prices) in late September. Backwardation is a signal that near-term demand is outpacing supply, giving market participants an incentive to sell now rather than to store and hold supplies for the future. The Dallas Fed said that strong OPEC compliance with the cartel’s production cuts, additional signals that the global market is rebalancing and higher-than-expected global demand have pushed near-term prices higher. The following graph from the Dallas Fed’s report shows the price curves for Brent crude as of June 29, August 30, and September 25.Among the states, Texas had eight fewer rigs this week, while Alaska and Wyoming lost two each and New Mexico and Utah each lost one rig. No state added a rig this week. In the Permian Basin of west Texas and southeastern New Mexico, the rig count now stands at 378, down by six compared with the previous week’s count. The Eagle Ford Basin in south Texas has 65 rigs in operation, two more week over week, and the Williston Basin (Bakken) in North Dakota and Montana now has 51 working rigs, unchanged for the week. 

Oil Trades Above $51 as Heightened Risk Appetite Props Up Prices - Oil rebounded as a risk-on appetite is seen coming back into financial markets. West Texas Intermediate futures closed 0.4 percent higher in New York as U.S. equities rallied. In the U.S., oil rigs slid for a third week, according to Baker Hughes data. Meanwhile, supply from Kurdistan remains uncertain. WTI’s 50-day moving average rose above the 200-day one, a bullish signal know as a golden cross. “The stock market is hitting new highs. The risk-on appetite is coming back,” Michael Loewen, a commodities strategist at Scotiabank in Toronto, said by telephone. “The general rhetoric has been OPEC is going to be extending their cuts. We’ve been seeing good demand in the U.S. At the end of the day, the market is shaping up a lot more firmly than most were anticipating.” The U.S. oil rig count fell by seven to 736 rigs this week, as Schlumberger Ltd. and Baker Hughes, the world’s two biggest oilfield service companies, say North America’s growth engine is slowing. OPEC is seen willing to extend its deal to reduce output, with the Russian President Vladimir Putin saying if OPEC and allies did agree to an extension, it should run through at least the end of next year. West Texas Intermediate crude for November delivery, which expires Friday, rose 18 cents to settle at $51.47 a barrel on the New York Mercantile Exchange. Total volume was about 23 percent below the 100-day average. The more-actively traded December contract added 33 cents to end the session at $51.84. Brent for December settlement climbed 52 cents to settle at $57.75 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.91 to December WTI. 

OPEC seeks to institutionalize partnership with non-OPEC: Barkindo -- OPEC aims to discuss making permanent its coalition with 10 and possibly more non-OPEC producers to manage oil market balances at its November 30 meeting, the organization's secretary general, Mohammed Barkindo, said Thursday. "This platform of 24 countries, now hopefully growing, should be institutionalized," Barkindo told reporters at the Oil and Money conference in London. "We should have a permanent framework to sustain this platform." Barkindo said the proposal to formalize cooperation with non-OPEC countries should "give comfort" to some currently non-participating countries, an apparent reference to efforts to get more countries to join the cuts. OPEC late last year agreed with 10 non-OPEC countries, led by Russia, to cut a combined 1.8 million b/d in supplies to support the market's rebalancing. Asked about projections by the IEA of oversupply in the first quarter of 2018 and how that would play into discussions about renewing supply cuts which expire at the end of March, Barkindo cast doubt on the projections. "For us the projections for 2018 remain robust. We are looking at growth of about 1.4 million b/d" for the year. "With this strong demand growth and all the challenges that the non-OPEC supply is facing, I have my doubt on the projections of the IEA for 2018. You have had the various headwinds that the shale producers...are facing," he said. "It is expected normally for companies to put on a brave face, especially companies that are financed by private equity, to paint a very robust picture. We know that private equity is not patient capital." Barkindo said he would not pre-empt the OPEC's next meeting, particularly while Saudi oil minister Khalid Al-Falih and Russian energy minister Alexander Novak consult with the countries involved.

OPEC Looks To Permanently Expand The Cartel -- At its November 30 meeting, OPEC will seek to discuss making its current partnership with non-OPEC producers permanent, OPEC’s Secretary General Mohammad Barkindo told reporters at the Oil & Money conference in London on Thursday. “This platform of 24 countries, now hopefully growing, should be institutionalized,” Barkindo said, as quoted by Platts. “We should have a permanent framework to sustain this platform,” OPEC’s secretary general added. “We are working with the Russian and Saudis on how we can structure this platform to sustain it.” Referring to the U.S. shale producers, Barkindo reiterated his view that American producers should have a “shared responsibility”, and said that some of them are “playing the proverbial ostrich.” In an unconventional plea to U.S. shale drillers last week, Barkindo urged North American producers to share the responsibility for drawing down the global oil overhang.

Trump Disavows Iran Deal: What's at Stake for Oil Markets -  Iran, already struggling to attract investors to its energy industry, may find things tougher still as U.S. President Donald Trump refuses to certify the nuclear deal that eased sanctions on OPEC’s third-largest crude producer.In a speech Friday, Trump stopped short of abandoning the nuclear agreement but said he would impose new sanctions on Iran, particularly its Revolutionary Guard Corps, a branch of the armed forces that owns many businesses including in the oil industry. The move won’t immediately curb the flow of some 2.3 million barrels of daily Iranian crude exports -- more than three times the amount of oil the U.S. has sold abroad over the past year.For energy producers, however, the administration’s more confrontational approach does raise the risk of doing business in the Middle Eastern nation. Companies such as Total SA, which in July became the first major Western energy company to sign a production deal with Iran since the 2015 accord, may face new hurdles in contributing to the country’s estimated $100 billion need for oil and natural gas investment.Trump has potentially weakened, but for the moment left largely intact the accord that world powers reached with the Persian Gulf nation two years ago. The White House has argued that Iran’s actions, including missile tests and support for groups like Hezbollah, violate the spirit of the deal. “It is time for the entire world to join us in demanding that Iran’s government end its pursuit of death and destruction,” Trump said in a statement issued by the White House. The Persian Gulf nation says its complying with the pact, which was intended to prevent it from developing nuclear weapons. Foreign Minister Javad Zarif said before Friday’s announcement that the U.S. has “failed to implement its side of the bargain.” The immediate effect on Iran’s crude sales may be limited. Under the last round of sanctions, the U.S. relied on the willingness of Asian customers to buy less Iranian oil, while the European Union imposed a full embargo. Unless other parties to the deal are willing to renegotiate or scrap it -- which so far they have shown little desire to do -- the U.S. under Trump is likely to be isolated this time if it targets oil sales. 

Trump’s Iran Decision Haunts Big Oil - United States President Donald Trump’s decision to “decertify” the Iran nuclear deal probably won’t have an immediate impact on oil prices, but the decision could plant the seeds of problems further down the road. That is because nothing happens right away—Trump kicked the decision to Congress. But he still significantly increases confrontation with Tehran, and is somewhat backing himself into a corner if Congress does nothing, or if Iran doesn’t offer concessions regarding its missile program—two scenarios that seem more likely than not. With little chance of making headway, Trump may leave himself with few options beyond escalation. Geopolitical risk has had very little influence on oil prices in the last three years due to the enormous glut of supply. But by 2018, the market will be much closer to balance, with inventories falling back to average levels. With tighter conditions, geopolitical risk will have greater salience. The timing of that lines up with a potential deterioration in relations between the U.S. and Iran. "The president has made it very clear that he wants to escalate the pressure on Iran. So sometime middle of next year you could see the deal start to deteriorate and then you could have meaningful impact on oil supplies right when the market is tightening," Benjamin Salisbury, energy policy analyst at FBR Capital Markets, told CNBC. It’s unclear if the U.S. will reimpose sanctions, but if it does, the impact will be uncertain. Most likely, they’ll be substantially less effective than the sanctions coordinated by the international community prior to 2016. That’s because the U.S. will probably go it alone. Shortly after President Trump announced that he was decertifying the nuclear deal, the leaders of France, Germany and the UK issued a joint statement supporting the continuation of the agreement. Iran also said that it will continue to abide by the agreement. “This creates a giant wedge—it’s Iran and the rest of the world on one side and the U.S. on the other,” John Glaser, director of foreign policy studies at the Cato Institute in Washington, told Bloomberg.

Saudi Arabia welcomes ‘firm’ US strategy on Iran | Arab News Saudi Arabia has welcomed Donald Trump’s “firm” strategy on Iranafter the US president declined to certify Tehran’s compliance with the nuclear deal, according to the Kingdom’s state news agency. Trump on Friday warned he might ultimately terminate the deal, as he announced a new Iran strategy that includes additional measures to ensure the “rogue regime” in Tehran does not destabilize the region or acquire nuclear weapons. The nuclear deal — known as the Joint Comprehensive Plan of Action (JCPOA), which Iran signed with six nations including the US — limits Iran’s nuclear enrichment activities in return for sanctions relief. Trump announced the major shift in US policy in a speech in which he detailed a more confrontational approach to Iran over its nuclear and ballistic missile programs and alleged support for extremist groups in the Middle East, Reuters reported. “I am directing my administration to work closely with Congress and our allies to address the (nuclear) deal’s many serious flaws so that the Iranian regime can never threaten the world with nuclear weapons,” Trump said. Saudi Arabia praised Trump’s “vision” and commitment to work with US allies in the region in order to face “common challenges, particularly Iran’s aggressive policies and actions,” according to the Saudi Press Agency. A statement stressed that Saudi Arabia had previously supported the nuclear agreement between Iran and the “5 + 1” powers, in the belief that it is necessary to limit the proliferation of weapons of mass destruction. But it added that Iran had “exploited” the economic benefits of eased sanctions and continued to “destabilize the region.”     The Saudi statement pointed to Iran’s ballistic missile development program and alleged support of terrorism in the region, including its backing of Hezbollah and Houthi militias in Yemen.

Trump hostility set to deepen Iran power struggles  (Reuters) - Iranians quickly closed ranks against a hawkish new U.S. approach to Tehran, but Iran’s powerful hardliners are set to exploit the latest dispute with Washington to weaken domestic rivals who are open to the West, analysts and insiders say. President Donald Trump’s warning on Friday that he might ultimately terminate a landmark 2015 nuclear deal sets the stage for an eventual resurgence of political infighting within Iran’s complex power structures, officials said. If the accord signed by Iran and six major powers does start to fall apart, anyone who strongly promoted it, such as pragmatist President Hassan Rouhani, could face a career-damaging backlash. That could leave Iran’s security hardliners unchallenged at home, enabling greater Iranian assertiveness abroad that could worsen tensions in the Middle East, analysts say. For the moment, solidarity within the Islamic Republic’s faction-ridden political elite is the priority. “What matters now is unity against the foreign enemy,” a senior official told Reuters on condition of anonymity, like other figures contacted within Iran because of the sensitivity of the matter. “Our national interest is a priority for all Iranian officials.” But Rouhani and pragmatists and reformist allies who promoted the deal, which lifted sanctions in return for Tehran rolling back technologies with nuclear bomb-making potential, may become increasingly politically vulnerable at home.

Analysis: Business as usual for Iran oil exports as market eyes US sanctions threat -- The oil and shipping markets remain in limbo as the world awaits action from US Congress on sanctions targeting Iran, in the wake of President Donald Trump last week declaring Tehran noncompliant with the nuclear deal. With the deal, called the Joint Comprehensive Plan of Action, still in place for now, Iran continues to sell and ship oil internationally. Traders, brokers and shipowners say any reimposition of sanctions targeting Iran's oil sector might take months, if not a few years, to be fully implemented, as this would require consensus among US policymakers as well as the skeptical international community, which has urged the US not to jeopardize the JCPOA. Even so, they are already eying potential consequences if the US snaps back sanctions or imposes other measures that prompt Iran to withdraw from the agreement.  “There could be many marine insurers unwilling to cover any Iran-related vessels so we just might see buyers asking for less [term] barrels" going forward, said a crude trader at a Chinese company, who spoke on condition of anonymity. S&P Global Platts trade flow software cFlow shows that Iran's crude and condensates exports are expected to average 2.256 million b/d in October. That would be a significant fall from 2.52 million b/d in September, though much of this is due to unscheduled maintenance at the South Pars condensate field and increased internal consumption.

Saudi Arabia’s Footprints in Southeast Asia - When King Salman bin Abdulaziz Al-Saud of Saudi Arabia embarked on a month-long trip to Asia in February this year, Western media outlets led with incredulous stories about the monarch’s large entourage and their mountain of luggage. Traditionally obsessed with the desert kingdom’s human rights record and the state-sponsored brand of Islam, those same outlets took delight in touting the trip as a sign of Saudi economic weakness. However, they missed out on a far more important development – in venturing eastward, Saudi Arabia seeks to secure its leadership of the Islamic world. In doing so, its engagement with Southeast Asia is likely to have significant short-term ramifications for the region’s politics and, in the long run, deepen the cultural divide while raising difficult questions about ASEAN’s unity and security. Besides the economic powerhouses of China and Japan, the King chose to visit only Muslim-majority countries in Southeast Asia – Brunei, Malaysia, and Indonesia. It might have been easier to corral investments from other Southeast Asian markets like Thailand or Singapore; that the King chose to skip those destinations illuminates the fact that this trip was organized with more than just economic motivations in mind. Saudi Arabia has long seen itself as the leader of the Islamic world, but since the ascendance of a theocratic Iranian government in 1979, that position has consistently been challenged. With the Obama administration’s conclusion of the Joint Comprehensive Plan of Action with Iran and the P5+1 countries, the threat of a resurgent Iran has been looming large in the Saudi psyche. The King’s February trip was undoubtedly a means of cementing the desert kingdom’s leadership status before Iran is fully reintegrated into the world order. While Southeast Asian Muslims are predominantly Sunni and thus unlikely to come under Iranian influence, making a big show of its leadership and influence across the world will go some way in securing Saudi Arabia’s stature.

Can Trump Drive A Wedge Between Saudi-Russian Alliance? --Together, Russia and Saudi Arabia produce a fourth of the world’s oil. The laws of competitive international commodity trading have pit the two petrostates on opposite poles of the U.S.-Russia geopolitical rivalry. But a new era of American oil exports and ailing national budgets is pulling Moscow and Riyadh together in trying financial times. President Barack Obama’s administration maintained a cold distance from Saudi Arabia in its final years. As the United States and its European allies began a war against the Islamic State in 2014, Saudi Arabia focused its military might on Yemen—a country on the Arabian Peninsula facing the brutal consequences of an extended Arab Spring. Iranian arms and funding reached the pockets of the Shiite Houthi rebels, who hoped to build a new regime in Yemen, to the chagrin of Wahabbi Saudi Arabia.   President Donald Trump’s White House has extended an olive branch towards Riyadh as the new State Department lays out its foreign policy agenda. But this new diplomatic program runs contrary to the KSA’s economic goals. American oil exports, reinstated back in December 2015, counter the effects of OPEC’s landmark agreement to lower bloc-wide output by 1.2 million barrels per day in an effort to alleviate an international supply glut.  As a major oil exporter, Russia was invited to participate in the agreement when it was being discussed back in 2016. American exports were still limited to specific destinations back then, and U.S.-based companies had only just begun to secure supply contracts in Asian and European markets. Any threat to the success of the deal from the other side of the Atlantic seemed far-fetched just a year ago.  But the tables have turned. Washington doesn’t rely on oil profits to run its nation. Moscow and Riyadh do—and heavily so. A boost in active rigs in the Permian basin, as well as other areas in the north of the country, has put shale oil and gas in the center of Russo-American geopolitics. As Moscow approves an extension of its 300,000-bpd output drop commitment with OPEC, the U.S. department of energy eyes new markets for American fossil fuels. Energy Secretary Rick Perry made his rounds to Japan in May to open the world’s largest liquified natural gas (LNG) consumer’s doors to U.S.-drilled supplies. The carbon-light fuel is considered a gateway energy source for developed countries as grid systems shift to renewable and alternative power options. This new landscape puts Saudi Arabian interests in line with those of Russia. Both mega producers need to contain the growth of the outbound American fossil fuel industry, but the Iran issue remains a key point of contention between Riyadh and Moscow. . New Crown Prince Mohammad bin Salman’s assertive stance locks the country in an irreconcilable rivalry with Iran. In contrast, Moscow stood by Iran through the latter’s experience as an international global pariah.

First Footage Emerges Of Armed Clashes Between Kurdish And Pro-Baghdad Forces Near Kirkuk -- After last month's controversial Kurdistan referendum in northern Iraq, both Baghdad and the Kurdistan Regional Government (KRG) in Erbil vowed to do everything possible to avoid direct military confrontation, even as the Iraq central government took aggressive steps to isolate Kurdistan after the pro-independence "yes" vote. But as many predicted, clashes are now underway near the disputed and oil-richKirkuk province between Kurdish Peshmerga fighters and Shia milita forces (PMU, Popular Mobilization Units) backing the central Iraqi government. Last night fighting erupted in Khurmatu - a city which lies in a disputed area claimed by Kurdistan just south ofKirkuk. Kurdistan media is claiming that amidst the fighting 70 Kurdish families were expelled from their homes by pro-Baghdad Shiite militias.  Kirkuk has long been a potential flash point as it lies on the "border" of the northern Iraqi Kurdistan region and as it produces 10% of Iraq's total oil. Things especially intensified after last month's vote when Baghdad demanded all oil and military facilities be handed over to the central government, after which Kurdish forces rallied to fortify their positions within Kirkuk city, which they see as fundamentally Kurdish in identity, though the population includes Kurds, Arabs, Turkmens, Assyrian Christians, Sunnis and Shiites. This week the Iraqi government began staging forces outside the contested city, while also allying with Iran along Iraq's eastern border to impose a full land and air blockade on all territory claimed by the KRG.

Casualties Reported After Iraqi Troops Enter Oil Rich Kurdish City Of Kirkuk; Oil Spikes -- In a major escalation involving the disputed Iraqi Kurdish region, which last month declared independence following a referendum which was not recognized by any of its neighbors - or Baghdad - Iraqi state media reported that federal troops have entered territories occupied by the nation’s Kurds with the FT adding that Iraqi federal forces moved to enter the city of Kirkuk early on Monday morning. The Iraqi advance comes three years after Kurdish militias seized the areas outside their autonomous region as a pretext to defend against an advance by the Islamic State extremist group. Al-Iraqiya TV said the military, anti-terrorist units and federal police have taken control of "vast areas" around the oil-rich city of Kirkuk which has long been one of the country’s deepest faultlines, claimed by both Erbil and Baghdad. While the TV report said the Iraqis advanced without firing a shot and "without opposition from Kurdish Peshmerga", unconfirmed social media reports suggest that at least one peshmerga has been killed in the fighting: First casualty in Kurdish, Baghdad/militia fighting around Kirkuk.  Separate twitter reports showed fighting in the south region of Kirkuk where Iraqi forces are said to have made their move:  Yet another explosion in Duz Xurmatu right  Additionally, the FT writes that Najmaddin Kareem, Kirkuk’s governor, was shown on pro-Kurdish channel Rudaw urging the people of the city to take up arms in its defence. Assuring further bloodshed appears inevitable, Hemin Hawrami, a senior adviser to Masoud Barzani, KRG president, told the Financial Times that the peshmerga forces would defend the city. “We have orders, if they come close, all Peshmerga forces will respond very strongly,” Hawrami said. He added that the KRG president had held talks on Sunday with Muhammad Fuad Masum, the Iraqi president, that aimed to resolve the stand-off, saying that it sought “peace and dialogue”. “It seems that Iraqi government and PMF (Popular Mobilisation Forces) made their decision to launch the offensive without even waiting for President Masum to go back to Baghdad tomorrow to take our proposals for talks,”Mr Hawrami said.

Iraqi forces launch operation for Kurdish-held oil fields, military base — Clashes broke out early Monday in northern Iraq as Iraqi forces moved to recapture Kurdish-held oil fields and a military base near the city of Kirkuk, setting the stage for a battle between two U.S. allies. After a three-day standoff, Iraqi forces advanced into the contested province with the goal of returning to positions they held before 2014, when they fled in the face of an Islamic State push. The positions have since been taken over by Kurdish troops. The conflict between Kurdi­stan and the Iraqi government over land and oil is decades old, but a Kurdish referendum for independence last month inflamed the tensions. The Iraqi government, as well as the United States, Turkey and Iran all opposed the vote. The flare-up presents an awkward dilemma for the United States, which has trained and equipped the advancing Iraqi troops, which include elite counterterrorism forces, and the Kurdish peshmerga on the other side. But the Iraqi side is also backed up by Shiite militia forces close to Iran, at a time when the Trump administration has been vocal about curbing Iranian influence in the region, having sanctioned Iran’s Islamic Revolutionary Guard Corps last week. Iraqi forces said they were under instructions to avoid violence, but Kirkuk residents said that gunfire and explosions could be heard in the city in the early hours of the morning. Kurdish media reported that thousands of Kurdish volunteer fighters had rushed to take up arms. Kurdish forces took full control of the ethnically and religiously mixed city of Kirkuk after the Iraqi military fled from large swaths of northern Iraq in 2014 in the face of an Islamic State push. It also seized oil fields formerly run by Baghdad that pump hundreds of thousands of barrels of oil per day. Now Iraq wants that ground back.

Iraqi forces seize Kirkuk governor’s office in push against Kurds - (AFP) - Iraqi forces seized the Kirkuk governor's office, key military sites and an oil field as they swept across the disputed province following soaring tensions with Kurds over an independence referendum. The rapid advance, involving troops, tanks and armoured vehicles, aims to recapture oil and military targets that Kurdish forces took over during the fightback against the Islamic State group (IS). Iraqi forces thrust into Kirkuk city, capital of the oil-rich province, and took control of the governor's office, which had been left deserted, the federal police chief said. Thousands of residents fled Kurdish districts, heading in buses and cars towards the autonomous Kurdistan region of northern Iraq. "We're leaving because we're scared there will be clashes" in the ethnically mixed city of 850,000 people, said 51-year-old Chounem Qader. Meanwhile crowds on the streets of Kirkuk's southern outskirts welcomed Iraqi forces as they entered the city, where they were seen raising Iraqi flags in the place of Kurdish ones.

Iraqi forces seize oil city Kirkuk from Kurds in bold advance (Reuters) - Iraqi government forces captured the major Kurdish-held oil city of Kirkuk on Monday, responding to a Kurdish referendum on independence with a bold lightning strike that transforms the balance of power in the country. A convoy of armored vehicles from Iraq’s elite U.S.-trained Counter-Terrorism Force seized Kirkuk’s provincial government headquarters on Monday afternoon, less than a day after the operation began, a Reuters reporter in Kirkuk said. Neither side gave a casualty toll for the operation. But an aid organization working in Kirkuk said several Peshmerga and members of the Iraqi forces had been killed in an overnight clash south of Kirkuk - the only serious fighting reported. As Iraqi forces advanced, Kurdish operators briefly shut some 350,000 barrels per day of oil output at two large Kirkuk fields, citing security concerns, oil ministry sources on both sides said. But production resumed shortly thereafter following an Iraqi threat to seize fields under Kurdish management if they did not do so, according to the sources. It was not immediately clear whether or when the Iraqi government would seek to retake control of all Kirkuk oilfields, a vital source of revenue for the autonomous Kurdistan Regional Government (KRG). The short suspension in production helped push up world oil prices as the shutdown represented more than half of total Kurdish output.[O/R] A dozen Iraqi armored vehicles arrived at the provincial government headquarters in Kirkuk and took up positions nearby, alongside local police. They pulled down the Kurdish flag and left the Iraqi flag flying. Thousands of Kurdish civilians fled the city of 1 million people for fear of reprisals.

After Lightning Offensive, Kirkuk Is Now Fully Under Iraqi Military Control --- Iraq's military has effectively gained control of major assets and government buildings in Kirkuk city, and is now set to fully pacify it after overnight clashes at a moment when oil prices rose toward a six month high as the conflict now threatens output. Iraq’s elite U.S.-trained Counter-Terrorism Force has taken over the provincial government headquarters in the center of Kirkuk after operations to seize the city from Kurdish forces began overnight - the contested city is now reportedly under the control of Iraqi national forces. Some of the first footage Western audiences woke up to Monday morning were of (ironically enough) US supplied equipment - including tanks, being used to bulldoze images of Iraqi Kurdistan President Masoud Barzani. Iraqi forces have further pulled down Kurdish flags flying over government buildings throughout the city, while leaving the Iraqi flag flying. The Iraqi advance on the oil-rich and ethnically diverse previously Kurdish-held city was lightning fast and largely without a major fight - aided by the fact that some Kurdish Peshmerga fighters fled their posts as national militias advanced, which is a reflection of Iraqi Kurdistan's own political divide: one faction within the PUK Peshmerga (Patriotic Union of Kurdistan) is relatively pro-Baghdad, making the Iraqi advance easy in sections of the city held by the group. And though Kurdish media frequently highlighted footage of armed civilians taking to the streets Sunday and Monday, the city's 1 million plus Turkmen population as well as the up to 20% Arab and Assyrian population generally fears and rejects Kurdish dominance over the region.

US military rushes to defuse looming crisis in Kirkuk after Iraqi army advances -- US military commanders are scrambling to stop a conflict escalating between two forces they arm and train, after the Iraqi army seized the contested, oil-rich city of Kirkuk, from Kurdish peshmerga.  The Pentagon sought to play down the scale of clashes between the two sides, after forces loyal to the central government in Baghdad rapidly took over nearly all the city on Monday, and Kurdish forces abandoned their positions, retreating to nearby oilfields. Video footage showed streams of Kurdish refugees leaving Kirkuk in cars.  Baghdad’s move came three weeks after a referendum on Kurdish independence included the ethnically diverse oil city – a contentious move that Baghdad viewed as an effective annexation  The peshmerga withdrawal delivered decisive military and political gains to Baghdad and a devastating blow to the Kurdish region’s de facto president, Massoud Barzani, who had staked much of his legacy on the referendum and aimed to use it as a stepping stone to consolidate Kurdish autonomy.  Col Robert Manning, a Pentagon spokesman, described the takeover, as “coordinated movements, not attacks” and said an exchange of fire that is reported to have resulted in several casualties was “an isolated incident”.  “We have not seen levels of violences suggested in some of the media reports,” Manning said, urging both parties to focus on the “common threat” of the Islamic State. “This is certainly not helpful and again we encourage both sides to not fight each other.”  He added that US commanders in the region were active in trying to mediate between the two sides in the city. “Coalition leaders at all levels are engaging with their counterparts in the Iraq security forces to encourage dialogue and de-escalation,” Manning said.  Speaking at the White House, Donald Trump said: “We don’t like the fact that they are clashing, but we’re not taking sides.”

Iraq Conquers Kirkuk - The central Iraqi government based in Baghdad has conquered oil-rich and ethnically-mixed Kirkuk from its recent Kurdish rulers, who hoped to continue ruling it as part of their recently declared independent state of (Iraqi) Kurdistan, clearly consisting of three provinces, but which they also wanted to include the fourth one of Kirkuk province. This now appears not to be going to happen. Juan Cole has made an excellent discussion of this, noting 7 reasons why this is not about Iran as many commentators in the US claim. I shall not repeat most of his arguments here but suggest people look at the link. I shall note the crucial point that what looked like it was going to be a major military conflict over Kirkuk thankfully turned out not to be is that the Kurdish Pesh Merga, who were ruling Kirkuk, actually are tied to the main opposition party in Kurdistan, the Patriotic Union Party (PUK) led by the Talabani family,whose old patriarch, once a president of all of Iraq, has just died. The Pesh Merga has simply withdrawn peacefully from Kirkuk, handing a major embarrassment to Massoud Barzani, the current president of newly independent (maybe) Kurdistan, who leads the center right Democratic Party of Kurdistan (DPK). This suggests that while the opposition nominally supported Barzani’s independence referendum, they lack enthusiasm, and Barzani may end up in trouble as things are not going well with this. As I noted in a previous post, Barzani is in a tight position because he canceled an election in 2015, and Kurdistan’s economy has been weak due to low oil prices.

Iraq's NOC vows to maintain Kirkuk oil flows after ousting Kurds - Iraq's state-run North Oil Company vowed to maintain continuity in production and exports of Iraq's northern crude flows Monday after an advance by federal forces ousted Kurdish troops controlling parts of the key disputed oil region. The Iraqi army captured the headquarters of state-owned North Oil Co. from Kurdish Peshmerga forces early Monday and all NOC's producing assets in the Kirkuk oil producing area, local sources said. Federal forces regained control of Kirkuk field's southern Baba Dome as well as the Avana Dome and the nearby Bai Hassan field, Farid al-Jadir, the director general of the NOC, told S&P Global Platts. Of Kurdistan's roughly 600,000 b/d average production from fields under its control, nearly half was produced from the Avana Dome and Bai Hassan fields, which the KRG annexed during the 2014 security vacuum after the Islamic State militant group invaded northern Iraq. Oil production from the giant Kirkuk field, which straddles the semi-autonomous Kurdistan region, was pumping at normal levels late Monday but export flows to Turkey's port of Ceyhan were "temporarily decreased," an official close to Iraq's northern oil exports said. He attributed the fall in export flows to the return of control to the Iraqi government and not a sign that oil fields are going to be shut in.

Iraqi Kurd Army Agrees To Return To 2003 Border, Oil Slides -- In a dramatic de-escalation of recent hostilities in Iraqi Kurdistan, where in a blitz campaign the Iraqi army was able to recapture Kirkuk , effectively regaining control of the oil-rich region, the Kurdish Peshmerga forces, i.e. the army of the autonomous region of Iraqi Kurdistan told Sky News Arabia that it has agreed to return to the 2003 Iraq border, which if confirmed would be a major concession to Iraq which has been pushing for just this conclusion for the past month.The opportunistic Kurdistan Regional Government increased its territory by at least 40% during the war with Islamic State, bringing many of these disputed areas under its control after the Iraqi army withdrew in the face of advancing ISIS militants. However, as Iraqi forces and pro-govt militias have already regained control of many of these areas, including Kirkuk, over the past 48 hours, the Iraqi Kurdistan region had no other choice. According to the Kurdish news service Rudaw, the pre-2003 borders "exclude disputed areas such as Kirkuk, Khanaqin, Tuz Khurmatu, Makhmour, and Zumar from the Kurdistan Region." Incidentally, at the start of September, Rudaw reported that Baghdad wants the Kurdistan Region to withdraw from disputed areas and return to pre-2003 borders between the autonomous region and Iraq, said Kurdistan President Masoud Barzani. At the time Barzani vowed that the Peshmerga will not retreat from any areas that were taken "with the blood of fallen soldiers." It took one month for him to change his tune.

Russia’s Rosneft to take control of Kurdish oil pipeline - Russian energy major Rosneft has agreed to take control of the main oil pipeline in Iraq’s Kurdistan, further boosting its role as the main international investor in the semi-autonomous region. The move is an apparent part of a broader strategy by President Vladimir Putin to ratchet up Moscow’s political and economic influence in the Middle East.  Rosneft’s investment comes amid a crisis in Kurdistan’s relations with the central government in Baghdad since the region held an independence referendum last month, which angered neighbors Iran and Turkey. The United States called the referendum a provocation but Moscow has effectively supported the vote, saying it understood Kurdish aspirations for independence. Rosneft said it would own 60 percent of the pipeline, with current operator KAR Group retaining 40 percent. Sources familiar with the deal said Rosneft’s investment in the project was expected to total about $1.8 billion. That comes on top of $1.2 billion that the Russian firm, which has struggled to raise Western loans due to U.S. sanctions, lent Kurdistan earlier this year to help fill holes in its budget. Rosneft also agreed to invest another $400 million in five exploration blocks.   Sechin called on Baghdad and Erbil to settle their differences.  But with Rosneft effectively becoming a controlling stakeholder in Kurdish oil infrastructure, the move should help shield Erbil from pressure from Baghdad and its neighbors.

US-Backed Syrian Kurds Transfer Key Gas Field To Russians After Secret Talks -- In a move that surprised many observers of the ongoing war for Deir Ezzor province, the US-backed Syrian Democratic Forces (SDF) handed over one of Syria's largest gas fields to Russian forces on Thursday, possibly as the result of unprecedented direct talks between high ranking Russian officials and Kurdish leaders in Qamishli in northeastern Syria. Conoco gas plant (also locally called Al-Tabiya, which is the plant's main feeder field) lies on the eastern side of the Euphrates outside of Deir Ezzor city - which was recently liberated from ISIS as the Syrian Army and Russian forces approached from the west of the Euphrates. The Conoco field had been held by ISIS since 2014, and was taken by the SDF on September 23rd as the mainly Kurdish force advanced from the east. The now fast crumbling Islamic State relied on much of its financing through its prior consolidation over many oil and gas sites in the resource rich Deir Ezzor province. The gas field, which had the largest capacity of any in Syria prior to the conflict, is capable of producing 450 million cubic feet (13 million cubic meters) of natural gas per day. It is named for the American company which first discovered gas reserves and built a processing plant at the location, however, ConocoPhillips turned the facility over to the state-run Syrian Gas Company in 2005 and has no current association with it.Beirut-based al-Masdar News broke the story based on Syrian military sources:The information, disseminated by Syrian military reports, claims that an agreement has been brokered between Russia and the US-backed Syrian Democratic Forces whereby the Syrian government will be allowed to assume control over the gas field.If true, then the scope of any backdoor agreements reached between Moscow and Washington regarding the transfer of energy assets held by Kurdish-led militias back to the rightful ownership of the Damascus government may yet encompass wider dimensions (i.e. future transfers) – although there is absolutely no evidence to suggest this is in fact the case. Nonetheless, the unexpected transfer of the Conoco Gas Field by the SDF to the Syrian government does now raise questions as to whether or not the hitherto competition between the Syrian Arab Army and Kurdish-led militias to seize control of the much larger Al-Omar Oil Field from ISIS further south is still on.

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