Sunday, June 24, 2018

US oil refining and distillates output at seasonal highs; largest drilling pullback in 33 weeks; smallest DUC increase in 20 months, et al

oil prices moved much higher this past week, lifted by a Friday rally that saw prices rise over 6% at one point, after OPEC announced an agreement to modestly increase their oil output in the 2nd half of this year, thereby removing the uncertainty surrounding the OPEC meeting outcome that had been holding prices lower...after falling 1% last week to $65.06 a barrel on OPEC uncertainty and trade war fears, widely quoted prices for US light sweet crude for July delivery were up 79 cents, or 1.2%, to $65.85 a barrel in volatile trading on Monday, as speculation on the outcome of the OPEC meeting drove trading...that gain was reversed on Tuesday, as oil prices fell 78 cents to $65.07 a barrel, as the escalating trade war between the US and China unleashed selling across most global markets...but oil prices jumped $1.15 to $66.22 a barrel as trading in July oil expired on Wednesday, after the EIA reported the largest weekly drop in U.S. crude supplies since quoting prices of US crude for August, that contract fell 17 cents to $65.54 a barrel on Thursday, as oil traders were reluctant to commit to further buying before the OPEC meeting the next day...however, when that OPEC meeting decided on a modest increase of roughly 600,000 barrels per day in oil output, rather than the million or 1.5 million barrel per day increase some expected, oil prices jumped nearly $4 to $69.38 a barrel after the announcement, before settling back to $68.58 a barrel at the close, with a net gain on the day of $3.04 a barrel, the largest price jump in nearly two years...

so you can see what this week's price jump looks like compared to the recent movement of oil prices, we'll include a graph of US oil prices over the past six months...

June 23 2018 oil prices

the above graph is an early Saturday afternoon screenshot of the live interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets...each bar on the above graph represents oil prices for a day of oil trading between December 22nd, 2017 and Friday of this week, wherein the green bars represent the days when the price of oil went up, and red bars represent the days when the price of oil went down...for green bars, the starting oil price at the beginning of the day is at the bottom of the bar and the price at the end of the day is at the top of the bar, while for red or down days, the starting price is at the top of the bar and the price at the end of the day is at the bottom of the bar...also visible on this "candlestick" style graph are the faint grey "wicks" above and below each bar, to indicate trading prices during the day that were above or below the opening to closing price range for that day...note that since this graph includes off market and after hours trading, the prices shown above do not correspond exactly to the NYMEX exchange prices we have been quoting..

as we can see on the graph above, oil prices have moved up over an irregular trajectory most of this year, as the global oil glut gradually evaporated in the face of the OPEC production cuts that began in January of 2017, and as threats of US sanctions against Venezuela and Iran threatened to tighten crude supplies further...however, after topping $70 a barrel and nearing $73 for the first time since November 2014 in mid May, oil prices started sliding on rumors of this month's OPEC meeting, and then plunged to $67.88 a barrel when word came from the Saudi oil minister that the Saudis and Russia were prepared to add as much as a million barrels per day to global this week's price increase is largely a reversal of that late May drop, as the uncertainly on what OPEC and Russia will be doing in the 2nd half of this year has now been removed...thus the August WTI contract, representing the benchmark US price, ended the week's trading on NYMEX 5.8% higher at $68.58 a barrel, while the international benchmark of North Sea Brent, also trading for August, ended 2.9% higher at $75.55 a barrel..

while news on natural gas seemed to have been pushed off the feeds and energy pages that i watch, prices did end lower this week, as the early summer heat wave gave way to more moderate temperatures across much of the US...after ending the prior week above $3 per mmBTU for the first time since January, natural gas prices for July fell 7.1 cents out of the gate on Monday and then another 5.1 cents to $2.90 per mmBTU on Tuesday before steadying, and then ending the week at 2.945 per mmBTU...the natural gas storage report for week ending June 15th from the EIA indicated that natural gas in storage in the US rose by 91 billion cubic feet to 2,004 billion cubic feet over the week, which left our gas supplies 757 billion cubic feet, or 27.4% below the 2,761 billion cubic feet that were in storage on June 16th of last year, and 499 billion cubic feet, or 19.9% below the five-year average of 2,503 billion cubic feet of natural gas that are typically in storage after the second week of June...the consensus forecast was for an addition of 85 billion cubic feet to gas in underground storage, so this week's 91 billion cubic foot addition was again above expectations, and was also above the average 83 billion cubic foot weekly surplus of natural gas that is typically added to storage at this time of despite the warmer than normal June temperatures, natural gas continues to be added to storage at a pace that would bring our gas supplies back up to a near normal level going into next winter....   

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering the week ending June 15th, showed that due to a jump in our oil exports and another increase in oil refining, we had to pull oil out of our commercial crude supplies for the tenth time in the past twenty-one weeks....our imports of crude oil rose by an average of 143,000 barrels per day to an average of 8,242,000 barrels per day during the week, after falling by 247,000 barrels per day over the prior week, while our exports of crude oil rose by an average of 344,000 barrels per day to an average of 2,374,000 barrels per day during the week, which meant that our effective trade in oil over the week ending June 15th worked out to a net import average of 5,868,000 barrels of per day during the week, 201,000 barrels per day less than the net of our imports minus exports during the prior the same time, field production of crude oil from US wells was reported as unchanged at 10,900,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,768,000 barrels per day during the reporting week... 

meanwhile, US oil refineries were using a near record 17,701,000 barrels of crude per day during the week ending June 15th, 196,000 barrels per day more than they used during the prior week, while at the same time 867,000 barrels of oil per day were reportedly being pulled out of oil storage in the US....hence, we can see that this week's crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 66,000 fewer barrels per day than what refineries reported they used during the account for that disparity, the EIA needed to insert a (-66,000) 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, essentially a fudge factor that is labeled in their footnotes as "unaccounted for crude oil"... (for more on how this weekly oil data is gathered, and the possible reasons for that "unaccounted for" oil, see this EIA explainer)...

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 8,080,000 barrels per day, which was 0.3% more than the 8,057,000 barrel per day average we imported over the same four-week period last year....the 867,000 barrel per day decrease in our total crude inventories included a 845,000 barrel per day withdrawal from our commercially available stocks of crude oil and a 22,000 barrel per day decrease of the oil in our Strategic Petroleum Reserve, likely part of a sale of government owned oil mandated by this year's federal budget....this week's crude oil production was apparently was reported as unchanged because the EIA has decided to round the weekly oil production estimates to the nearest 100,000 barrels per day to more closely reflect their inability to accurately model oil output from all the wells in the lower 48 states...however, that rounding creates an even greater inaccuracy in the weekly data, as our production is now shown to have jumped 100,000 barrels per day last week, and then remained unchanged this week, even as the change for both weeks was likely in line with prior weekly increases...moreover, by including one variable that's rounded to the nearest 100,000 barrels per day in the weekly U.S. Petroleum Balance Sheet, the weekly "unaccounted for crude oil" adjustment on line 13 cannot be accurate to the nearest 1,000 barrels per day, yet it continues to be shown as a factor with that degree of accuracy...

meanwhile, US oil refineries were operating at 96.7% of their capacity in using 17,505,000 barrels of crude per day during the week ending June 15th, matching the 17 year high for refinery utilization that was set during the week ending December 29, 2017...the 17,701,000 barrels of oil that were refined this week were the 2nd most barrels refined on record, topped only by the 17,725,000 barrels per day that were being refined during the last full week of August 2017....this week's refinery throughput was also 3.2% higher than the 17,152,000 barrels of crude per day that were being processed during the week ending June 16th a year ago, when US refineries were operating at 94.0% of capacity.... 

even with the increase in the amount of oil that was refined this week, gasoline output from our refineries was much lower, falling by 352,000 barrels per day to 10,099,000 barrels per day during the week ending June 15th, after our refineries' gasoline output had increased by 793,000 barrels per day during the week ending June 8th....that decrease meant our gasoline production was 0.6% lower during the week than the 10,161,000 barrels of gasoline that were being produced daily during the week ending June 9th of last year...on the other hand, our refineries' production of distillate fuels (diesel fuel and heat oil) jumped by 357,000 barrels per day to a near record high of 5,468,000 barrels per day, an output level that was only higher during the last two weeks of a result, this week's distillates production was 4.1% higher than the 5,251,000 barrels of distillates per day than were being produced during the week ending June 16th, 2017, which itself was a seasonal high at that time....   

despite the decrease in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 3,277,000 barrels to 240,040,000 barrels by June 15th, the sixth increase in 15 weeks, but the 22nd increase in 32 weeks, as gasoline inventories, as usual, were being built up over the winter months....our gasoline supplies increased because the amount of gasoline supplied to US markets fell by 553,000 barrels per day to 9,326,000 barrels per day, and because our imports of gasoline rose by 26,000 barrels per day to 850,000 barrels per day, while our exports of gasoline fell by 4,000 barrels per day to 603,000 barrels per day....even after this week's decrease, our gasoline inventories finished the week three-quarters of a percent lower than last June 16th's level of 241,866,000 barrels, even as they are now more than 11% above the 10 year average of gasoline supplies for this time of the year...   

meanwhile, with this this week's big increase in distillates production, our supplies of distillate fuels rose for just the 3rd time in 11 weeks, increasing by 2,715,000 barrels to 117,408,000 barrels during the week ending June 15th...our distillate inventories also increased because the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 579,000 barrels per day to 3,825,000 barrels per day, after increasing by 902,000 barrels per day the prior week, as distillate wholesalers and retailers rebuilt supplies after the holiday week...meanwhile, our exports of distillates rose by 193,000 barrels per day to 1,304,000 barrels per day, while our imports of distillates decreased by 55,000 barrels per day to 49,000 barrels per day...however, since this week's inventory increase comes after our distillate supplies had shrunk by 14,452,000 barrels over the six weeks to May 18th, our distillate supplies for the week ending June 15th are still 23.0% below the 152,495,000 barrels that we had stored on June 16th, 2017, and roughly 16% lower than the 10 year average of distillates stocks for this time of the year... 

finally, with our oil exports rising at the same time our refineries were using more oil, our commercial supplies of crude oil decreased for the 12th time in 2018 and for the 34th time in the past year, as our commercial crude supplies fell by 5,914,000 barrels during the week, from 432,441,000 barrels on June 8th to 426,527,000 barrels on June 15th...thus, after falling most of the past year, our oil inventories as of June 15th were 16.2% below the 509,095,000 barrels of oil we had stored on June 16th of 2017, 14.7% below the 499,994,000 barrels of oil that we had in storage on June 17th of 2016, and 1.0% below the 430,837,000 barrels of oil we had in storage on June 19th of 2015, during a period when the US glut of oil had already begun to build from the nearly stable supply levels of the prior years...      

This Week's Rig Count

US drilling activity decreased for the second time in the past thirteen weeks and for just the 3rd time in the past 18 weeks during the week ending June 22nd, as both drilling for natural gas and drilling for oil slowed simultaneously for the first time since November 3rd, 2017...Baker Hughes reported that the total count of active rotary rigs running in the US decreased by 7 rigs to 1052 rigs over the week ending on Friday, which was also the largest one week drop since November 3rd, which nonetheless left us with 111 more rigs than the 941 rigs that were in use as of the June 23rd report of 2017, while it was down from the recent high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC officially began their attempt to flood the global oil market... 

the count of rigs drilling for oil was down by 1 rig to 862 rigs this week, which was still 104 more oil rigs than were running a year ago, while it was still well below the recent high of 1609 rigs that were drilling for oil on October 10, the same time, the number of drilling rigs targeting natural gas formations fell by 6 rigs to 188 rigs this week, which was only 5 more gas rigs than the 183 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, addition, there continues to be two rigs operating that are considered to be "miscellaneous", in contrast to no such "miscellaneous" rigs in use a year ago....

with the shutdown of a rig offshore from Texas, drilling activity in the Gulf of Mexico was down by 1 rig to 18 rigs this week, which was also down from the 21 platforms that were deployed in the Gulf of Mexico a year addition, the platform that had been drilling offshore from Alaska was also shut down this week, so the total US offshore count of 18 rigs is now down from 22 rigs a year ago, when there was also a rig drilling off of the Alaskan coast...moreover, two of the platforms which had been set up to drill through inland lakes in southern Louisiana were also shut down this week, this week, so now there are only 2 such 'inland waters" rigs operating, down from the 4 'inland waters' rigs that were operating going into the same weekend a year ago...

for the second week in a row, the count of active horizontal drilling rigs decreased by 2 rigs, falling to 930 horizontal rigs this week, which was still 138 more horizontal rigs than the 792 horizontal rigs that were in use in the US on June 23rd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of addition, the directional rig count decreased by 5 rigs to 62 directional rigs this week, which was also down from the 72 directional rigs that were in use during the same week of last year...on the other hand, the vertical rig count was unchanged at 60 vertical rigs this week, which was still down from the 77 vertical rigs that were deployed on June 23rd of 2017...

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 the 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 June 22nd, the second column shows the change in the number of working rigs between last week's count (June 15th) and this week's (June 22nd) count, the third column shows last week's June 15th active rig count, the 4th column shows the change between the number of rigs running on Friday and those of the equivalent weekend report of 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 on Friday the 23rd of June, 2017...      

June 22 2018 rig count summary

as you can see, Louisiana saw the largest rig decrease this week, with the 2 rigs shutdown on inland waters, another in the Haynesville in the northwestern part of the state, and another rig on dry land in the south...on the other hand, only Alaska and Wyoming show rig increases, while none of the major basins do...the decreases in drilling for natural gas aren't entirely evident, however, as in addition to the natural gas rigs shut down in the Haynesville and Pennsylvania Marcellus, we also had the switch of a rig from natural gas to oil in both the Eagle Ford of south Texas and the Granite Wash of the panhandle region, neither of which show up in this overall summary table or as a change in the rig addition to those, 2 other rigs that had been drilling for gas in other unnamed basins not tracked separately by Baker Hughes were also shut down this week; since none of the other states showing decreases are likely candidates for those two gas rig shutdowns, we'd venture a guess that the 2 inland lakes rigs that were shut down this week had also been drilling for gas....

DUC well report for May

Monday of this past week saw the release of the EIA's Drilling Productivity Report for June, which includes the EIA's May data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions...for the 20th consecutive month, this report again showed an increase in uncompleted wells nationally, but the increase in May was the smallest over that span, as increased well completions have outpaced the growth of new drilling over each of the past 5 months...not unlike most previous months, this month's increase was mostly because of a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, while basins other than the Eagle Ford of south Texas and the Bakken of North Dakota saw more completions than new wells drilled...for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 31, from 7,741 wells in April to 7772 wells in May, the twentieth consecutive monthly increase in uncompleted wells nationally, and hence again the highest number of such unfracked wells in the history of this report....that was as 1316 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during May, up from 1297 in April, while 1285 wells were completed and brought into production by fracking, an increase of 39 completions over the prior month...hence, at the May completion rate, the 7,772 drilled but uncompleted wells left at the end of April represent more than a 6.0 month backlog of wells that have been drilled but not yet fracked...

as has been the case for most of the past two years, the May DUC well increases were predominantly oil wells, with most of those in the Permian basin...the Permian saw its total count of uncompleted wells rise by 100, from 3,103 DUC wells in April to 3,203 DUCs in May, as 572 new wells were drilled into the Permian but only 472 wells in the region were the same time, DUC wells in the Eagle Ford of south Texas rose by 14, from 1,471 DUC wells in April to 1,485 DUCs in May, as 188 wells were drilled in the Eagle Ford during May, while 174 Eagle Ford wells were addition, the number of DUC wells in the Bakken of North Dakota increased by 1 to 750, as 110 wells were drilled into the Bakken while 109 Bakken wells were fracked...on the other hand, the drilled but uncompleted well count in the Niobrara chalk of the Rockies front range decreased by 48 to 491, as just 140 Niobrara wells were drilled while 188 Niobrara wells were being fracked...similarly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 27 wells, from 771 DUCs in April to 744 DUCs in May, as 102 wells were drilled into the Marcellus and Utica shales, while 129 of the already drilled wells in the region were fracked...meanwhile, DUC wells in the Anadarko region fell by 8, from 921 DUC wells in April to 913 DUCs in May, as 147 wells were drilled in the Anadarko region in April while 155 drilled wells in the basin were completed...lastly, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory decrease by one to 186, as 57 wells were drilled into the Haynesville during May, while 58 Haynesville wells were fracked during the same period...

thus, for the month of May, DUCs in the 5 oil basins tracked by in this report (ie., Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 59 wells to 6,842 wells, while the uncompleted well count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by 28 wells to 930 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...  


Nexus pipeline project causes Arlington Road to sink in Green; thousands of vehicles must detour -- South Arlington Road between East Nimisila and Killian roads is closed after digging for the controversial Nexus natural gas transmission line caused the road to partially sink. Valerie Wolford, the city’s communications manager, said the road was closed Monday afternoon and could be opened by midday Friday. “Rest assured, we won’t allow the road to be opened unless it is safe and continuously monitored because of the people that pass here daily,” said City Engineer Paul Pickett, who with Wolford, met with media representatives at the site Tuesday morning. Pickett estimated between 5,000 and 6,000 vehicles travel that section of Arlington daily. The original road was built about 100 years ago and was last resurfaced five years ago. Pickett said the city was notified of the problem by Nexus, which installed steel plates over the depression. After inspection, the city closed the road about 7 p.m. Nexus will pay for the repairs, according to city officials. “This is not a collapse,” Pickett said. “It’s not like there is a large mine underneath here that is going to open up. It is a very small amount of material that causes settling. There is nothing that can happen that would be a danger to the community. It might become a nuisance, but it is not going to be unsafe.” But opponents of the pipeline project aren’t convinced. “I’m concerned that the construction is already causing damage to our roadways and delays for our residents,” Councilman Stephen Dyer said. “… This underscores the potential hazard of this whole project. Having trouble with the construction phase, I sure hope this doesn’t foreshadow future problems.” In February, the city reached a settlement that allowed Nexus to move forward with the pipeline in exchange for $7.5 million and 20 acres of land near Boettler Park. In return, City Hall dropped a legal challenge opposing the pipeline’s route through city-owned property. Some residents have continued to fight the settlement and the project, citing concerns that the 36-inch, high-pressure, natural gas pipeline will endanger the community and reduce property values. Nexus spokesman Adam Parker couldn’t be reached Tuesday for comment.

FERC OKs Construction on Phase II of Tetco Expansion Tied to Nexus - FERC has cleared Texas Eastern Transmission LP (Tetco) to start construction on the second and final phase of its Texas Eastern Appalachian Lease (TEAL) project, a Northeast expansion designed to connect with the Nexus Gas Transmission pipeline.Federal Energy Regulatory Commission staff on Monday issued a notice to proceed with construction on TEAL’s Phase II, approving a request Tetco had submitted last week notifying the agency that all permits had been received for the proposed facilities.TEAL’s Phase II includes the new 18,800 hp Salineville Compressor Station in Columbiana County, OH, and an additional 9,400 hp compressor unit at the existing Colerain Compressor Station in Belmont County, OH, according to FERC filings.  FERC issued a notice to proceed with construction of Phase I of the TEAL project in December. Phase I includes, among other facilities and modifications, about 4.4 miles of new 36-inch diameter pipeline looping on Tetco’s system in Ohio.The TEAL project is designed to add about 950,000 Dth/d of firm transport capacity from receipt points on Tetco’s M2 market zone and its Line 73 to an interconnect with Nexus near the existing Kensington Processing Plant in Columbiana County.Both TEAL and Nexus received FERC certificates in an order handed down in August after a six-month stretch without a quorum on the Commission had caused delays to the project’s timeline.The 255-mile, 1.5 Bcf/d Nexus is a joint venture between DTE Energy Co. and Spectra Energy Partners LP. The project is designed to transport Marcellus and Utica shale gas to existing interconnects in Michigan.Spectra and Tetco are affiliates of Calgary-based Enbridge Inc., which acquired Spectra last year. Nexus and TEAL are both slated for service in the third quarter of this year. Once online, Nexus -- about two-thirds subscribed as of last year -- will have to compete with the similarly-routed 3.25 Bcf/d Rover Pipeline, which placed a substantial portion of its final phase into service at the start of this month and has been flowing more than 2 Bcf/d.

Utica Shale well activity as of June 16:

  • DRILLED: 306 (303 as of last week)
  • DRILLING: 159 (156)
  • PERMITTED: 473 (479)
  • PRODUCING: 1,899 (1,899)
  • TOTAL: 2,837 (2,837)

No horizontal permits were issued during the week that ended June 16, and 19 rigs were operating in the Utica Shale.

Looking for gas, oil in Ohio where few are - Canton Repository -   In a bid to find the next big source of oil and gas in Ohio, preparations for two exploratory wells are underway in North Central Ohio.Cabot Oil & Gas Corporation has permits from the Ohio Department of Natural Resources to build two exploratory wells in Green and Mohican townships in southern Ashland County. Drilling on the Green Township site is anticipated to begin within the week, according to Cabot officials.It’s the first project in Ohio for Cabot, a Houston-based company. The majority of Cabot’s work has been focused on building similar wells, most recently in Susquehanna County, Pennsylvania, and using the technique known as hydraulic fracturing — more commonly known as fracking — to break through layers of rock underground to harvest trapped oil and gas.Cabot plans to construct five exploratory wells, primarily in Ashland County, but also spreading into Holmes, Wayne, Richland and Knox counties.If these test wells find recoverable natural gas and/​or if oil and production wells are drilled, landowners across the area who sign leases with Cabot could see significant financial benefits as have been seen in the eastern Ohio gas and oil boom over the past decade. It could provide a once-in-a-lifetime boost to the area’s economic landscape.On the other hand, some citizens are concerned about the safety of such drilling operations and fear the impact the potential industrialization would have on the local environment and quality of life. Potential pollution of the local water aquifer is another major concern.

DUG East: Update – Record-Breaking Utica Wells —Eclipse Resources Corp. has broken several laterals records in the Utica Shale, and President and CEO Ben Hulburt told DUG East attendees on June 20 that he expects to break more records for length.Hulburt was joined by other upstream producers as well as midstream operators and industry experts who gathered at the David L. Lawrence Convention Center in Pittsburgh for the 10th annual DUG East conference and exhibition to discuss Marcellus and Utica activity, regional infrastructure and emerging regulatory issues in Appalachia.“We believe we are the industry leader in onshore laterals," said Hulburt, who spoke during an afternoon operator spotlight session. "Frankly, we’ve become quite good at it.”  Eclipse, an E&P focused on the Appalachian region, is drilling super-laterals in the Ohio Utica and in northeast Pennsylvania, guiding to 8%-14% annual growth in 2018. The company's condensate production is also expected to grow about 42% this year. Longer laterals allow companies to maximize opportunities while also minimize footprints, Dennis Degner, senior vice president of operations at Range Resources Corp. told attendees earlier during the conference. Range projects 11% growth this year, on a steady-as-she-goes trajectory utilizing pad sites set up for long-term development of Upper Devonian, Marcellus and Utica reservoirs. The company also typically keeps well spacing between 750 ft to 1,000 ft, he said.

University of Cincinnati study undercuts concerns about fracking & water  Geologists from the University of Cincinnati, between January 2012 and February 2015, collected and tested 180 groundwater samples in several northeast Ohio counties at the center of the Utica shale oil-gas boom. Most of the samples came from Carroll, Harrison and Stark counties, located east and southeast of Canton.  According to its publication in April 2018 in the Environmental Monitoring Assessment journal, the UC geologists' peer-reviewed study “found no relationship between CH4 (natural gas methane) concentration or source in groundwater and proximity to active gas well sites.”  The oil and gas industry seized upon those findings as absolving the fracking industry in Ohio of one of its top alleged offenses, endangering nearby water supplies. In an article published on Energy In Depth’s website on May 8, the industry outreach group’s Ohio director, Jackie Stewart, hailed the UC study as more evidence that fracking doesn’t threaten or harm groundwater. The findings weren’t so clear-cut, however, according to the study’s lead author, UC associate professor of geology Amy Townsend-Small. In an email interview last Monday, she also suggested that the simplistic conclusion – study shows fracking doesn’t hurt the water – misses one of the study’s main takeaways: that it’s vitally important that “the people of eastern Ohio should have access to regular monitoring so that they know whether well-casing failures or surface spills have occurred and that their drinking water is still safe.”  Previous studies in Pennsylvania had found that residents living near fracking wells had high levels of methane in their drinking water, which unlike the water the UC scientists tested in northeast Ohio, had an isotopic signature similar to that of natural gas. The EPA’s deputy administrator at the time, Tom Burke, stated about the revised study: “We found scientific evidence of impacts to drinking water resources at each stage of the hydraulic fracturing water cycle.”

Studies suggest drinking water resilient during Pennsylvania drilling boom - Akron Beacon Journal - New research suggests drinking water supplies in Pennsylvania have shown resilience in the face of a drilling boom that has turned swaths of countryside into a major production zone for natural gas. Energy companies have drilled more than 11,000 wells since arriving en masse in 2008, making Pennsylvania the nation’s No. 2 gas-producing state after Texas. Residents who live near the gas wells, along with environmental groups and some scientists, have long worried about air and water pollution. Two new studies that looked at groundwater chemistry did not find much of an impact from horizontal drilling and hydraulic fracturing — or fracking — the techniques that allow energy companies to extract huge volumes of oil and gas from shale rock deep underground. The results suggest that, as a whole, groundwater supplies appear to have held their own against the energy industry’s exploitation of the Marcellus Shale, a rock layer more than a mile underground that holds the nation’s largest reservoir of natural gas.

Impact fee on Pa. shale wells tops $209 million this year - Pennsylvania shale gas producers paid $209.6 million in impact fees this year, the state Public Utility Commission said Thursday.The total is $36 million more than the prior year, reflecting higher gas prices and an uptick in new drilling in the Marcellus and Utica shales last year.But the final collection is about $10 million less than the state’s Independent Fiscal Office had projected in January, largely because of a higher-than-expected number of wells qualifying as low-flowing “stripper” wells that produce too little gas to have to pay the annual fee, said Mark Ryan, the fiscal office’s deputy director.Pennsylvania’s Commonwealth Court adopted an expansive stripper well definition in a 2017 ruling — exempting more wells from paying the fee than the PUC had in the past.The dispute over what counts as a stripper well is being considered by the state Supreme Court and was intentionally left out of the fiscal office’s earlier analysis.PUC spokesman Nils Hagen-Frederiksen said 17 production companies disputed the status of 294 horizontal wells and 24 vertical wells this year because of the unsettled stripper well definition. That led to a $6.1 million reduction in impact fees paid for the year.

Appalachian Basin Activity Highlights: June 2018 -Appalachian Basin gas production is on the rise and is expected to push the U.S. to a new record this year.The Energy Information Administration forecast dry natural gas production in the U.S. will average 81.2 Bcf/d in 2018, establishing a new record. Production averaged 73.6 Bcf/d in 2017, the agency said in its short-term energy outlook report on June 12.The bump in gas production is largely driven by U.S. shale producers in Appalachia, according to Tom Petrie, chairman of Petrie Partners.Petrie told attendees of Hart Energy’s DUG East conference and exhibition in Pittsburgh on June 20 that the Marcellus, and to a degree the Utica, has dominated the natural gas supply mainly due to cost as infrastructure buildout remains critical to growth in the Gulf Coast market.“We are looking at a new natural gas world unfolding as the U.S. is on the verge of becoming a top three LNG exporting country,” he said. Overall, Appalachian producers have increased production by 77% since 2015, Stephen Beck, senior director of North America Shale with Stratas Advisors, said during a conference panel at DUG East.

Natural-Gas Boom Driving Methane Leaks, Study Finds – WSJ - The country’s natural-gas boom is putting much higher rates of the potent greenhouse gas methane into the atmosphere than government estimates suggest, a challenge for efforts to slow global warming, according to new research analysis published Thursday in the journal Science.  Methane leaks are a crucial element of the country’s gas boom because raw emissions can cancel out gains made by lowering carbon emissions created by burning other fuels. The new report suggests using more gas does have major benefits at limiting climate change over 100 years, but may not help in the short term. That is because leaks and unplanned plumes vented from storage tanks and processing plants are likely larger than previously realized. They appear big enough to make a shift from coal to gas effectively meaningless over a 20-year time span, according to the assessment from about two dozen scientists working with the Environmental Defense Fund, a nonprofit environmental group. The assessment estimates the U.S. energy industry is leaking about 2.3% of all the gas it produces directly into the atmosphere, meaning that enough greenhouse gasses are coming from the gas industry to equal roughly the 20-year climate impact from all the coal-fired power plants running nationwide in 2015. The analysis offers the first comprehensive look at how America’s rise to become the world’s largest gas producer may be affecting the climate. It surveys several years of work and more than a dozen studies from researchers working with the Environmental Defense Fund. Some of those studies have received funding and access from oil-and-gas companies.  Its revelations about gas leaks raise concern about whether growing production and use of natural gas can slow climate change as many have predicted. Natural gas burns cleaner than coal or oil, but methane released directly into the atmosphere is much more potent at trapping heat for about 20 years until it dissipates. .

Oil and Gas Operations Release 60 Percent More Methane than EPA Thought, Study Finds - A study published Thursday found that U.S. oil and natural gas operations release 60 percent more methane than currently estimated by the U.S. Environmental Protection Agency (EPA), according to a press release from the Cooperative Institute for Research in Environmental Sciences (CIRES) at University of Colorado, Boulder.The study, published in Science, calculated yearly methane emissions from the oil and gas industry totaling 13 million metric tons (approximately 14.3 million U.S. tons), mostly from leaks. In fact, the amount of methane leaked by these operations in 2015 had as much impact on the climate as emissions from coal-fired plants during the same year, undermining the idea that natural gas has a lower carbon footprint than coal."This study provides the best estimate to date on the climate impact of oil and gas activity in the United States," co-author and CIRES scientist Jeff Peischl said in the release.Methane has 80 times the warming impact of carbon dioxide over the first 20 years after it is released into the atmosphere, and methane emissions estimated by the study were equal to 2.3 percent of natural gas production in the U.S.However, the study's authors said the problem could be solved if the industry worked to investigate and repair leaks."Natural gas emissions can, in fact, be significantly reduced if properly monitored," study co-author and National Oceanic and Atmospheric Administration (NOAA) scientist Colm Sweeney said in the release. "Identifying the biggest leakers could substantially reduce emissions that we have measured." Doing so would even be in the natural gas industry's best interest, since researchers concluded that two billion dollars worth of methane, which could otherwise heat 10 million homes, is lost to leaks. "This is a solvable problem because you are losing product that you could sell," Steven Hamburg, study co-author and lead scientist of the Environmental Defense Fund (EDF), which lead the research, told Reuters. "But the entire industry has to take action to stop the problem," he said.

Study: US oil and gas methane emissions have been dramatically underestimated - The US has been dramatically underestimating methane emissions from oil and gas operations, according to a new study published in Science on Thursday. The study, conducted by the Environmental Defense Fund and 15 partner universities, asserts that methane emissions from oil and gas production are likely 63 percent higher than what the Environmental Protection Agency has reported. The discrepancy stems from the way methane is measured and monitored, the authors suggest. Methane leakages are measured at known intervals and at specific parts of equipment, without verification of the leak volume at the facility as a whole. This allows the industry to avoid counting any surprise leakage events, which the authors claim are more common than not. The results are concerning because methane is a potent greenhouse gas that has more of a warming effect in the atmosphere than carbon dioxide, part for part. On the other hand, methane is shorter lived in the atmosphere than carbon dioxide, so restricting its escape can have positive short-term effects on warming. This creates a difficult situation: methane is the main component of natural gas, and natural gas burns cleaner than coal and has largely contributed to coal’s demise. Though burning natural gas results in fewer pollutants released to the atmosphere, if the gas is released before it's burned, the methane can be severely environmentally damaging. In addition, leaking natural gas is something of an economic waste, too: any amount of the colorless, odorless gas that escapes obviously can't be sold. Though natural gas is cheap right now, fixing natural gas leaks can have monetary benefit over time. The authors conducted facility-specific measurements at more than 400 well pads and "scores" of midstream facilities with the cooperation of 50 oil and gas companies. They paired this data with aircraft observations of areas that contained about 30 percent of US natural gas production. When the researchers scaled up their results to a national level, they estimated that US natural gas production is releasing gas equivalent to 2.3 percent of gross US national gas production. That number is 63 percent higher than the 1.4 percent the EPA had previously estimated. The New York Times points to a 2017 study that found that once the natural gas leakage rate hit between four and five percent of gross US natural gas production, natural gas is about equivalent to burning coal from a climate perspective.

Study shows fat cells increase in size and number upon exposure to fracking chemicals - Exposure to fracking chemicals and wastewater promotes fat cell development, or adipogenesis, in living cells in a laboratory, according to a new Duke University-led study.Researchers observed increases in both the size and number of fat cells after exposing living mouse cells in a dish to a mixture of 23 commonly used fracking chemicals. They also observed these effects after exposing the cells to samples of wastewater from fracked oil and gas wells and surface water believed to be contaminated with the wastewater. The findings appear June 21 in Science of the Total Environment."We saw significant fat cell proliferation and lipid accumulation, even when wastewater samples were diluted 1,000-fold from their raw state and when wastewater-affected surface water samples were diluted 25-fold," said Chris Kassotis, a postdoctoral research associate at Duke's Nicholas School of the Environment, who led the study. "Rather than needing to concentrate the samples to detect effects, we diluted them and still detected the effects," he said.  Previous lab studies by Kassotis and his colleagues have shown that rodents exposed during gestation to the mix of 23 fracking chemicals are more likely to experience metabolic, reproductive and developmental health impacts, including increased weight gain. Kassotis said further research will be needed to assess whether similar effects occur in humans or animals who drink or come into physical contact with affected surface waters outside the laboratory. More than 1,000 different chemicals are used for hydraulic fracturing across the United States, many of which have been demonstrated through laboratory testing to act as endocrine disrupting chemicals in both cell and animal models.

Fracking exposure leads to more fat cells -  Exposure to fracking chemicals and wastewater promotes fat cell development, or adipogenesis, in living cells in a laboratory, according to a new study. Researchers observed increases in both the size and number of fat cells after exposing living mouse cells in a dish to a mixture of 23 commonly used fracking chemicals. They also observed these effects after exposing the cells to samples of wastewater from fracked oil and gas wells and surface water believed to be contaminated with the wastewater. “We saw significant fat cell proliferation and lipid accumulation, even when wastewater samples were diluted 1,000-fold from their raw state and when wastewater-affected surface water samples were diluted 25-fold,” says Chris Kassotis, a postdoctoral research associate at Duke’s Nicholas School of the Environment, who led the study. To conduct this study, Kassotis and colleagues collected samples of fracking wastewater and wastewater-contaminated surface water near unconventional (aka, fracked) oil and gas production sites in Garfield County, Colorado, and Fayette County, West Virginia, in 2014. The researchers exposed laboratory cultures of mouse cells to these waters at varying concentrations or dilutions over a two-week period. The researchers measured how the waters affected fat cell development in the cultures. They performed similar tests exposing cell models to a mix of 23 fracking chemicals.Within each experiment, researchers exposed other cells to rosiglitazone, a pharmaceutical known to be highly effective at activating fat cell differentiation and causing weight gain in humans.The results showed that the 23-chemical mix induced about 60 percent as much fat accumulation as the potent pharmaceutical; the diluted wastewater samples induced about 80 percent as much; and the diluted surface water samples induced about 40 percent as much.In all three cases, the number of pre-adipocytes, or precursor fat cells, that developed was much greater in cell models exposed to the chemicals or water samples than in those exposed to the rosiglitazone.

TransCanada Fixes Part of Leach Xpress Natgas Pipe After West Virginia Blast (Reuters) - TransCanada Corp's Columbia Gas Transmission (TCO) unit said it fixed a section of the Leach Xpress natural gas pipeline downstream of a pipe blast in West Virginia last week. That work enabled the Stagecoach-Leach Xpress meter in southeast Ohio to return to service late Thursday, according to a notice to customers. The Stagecoach meter in Monroe County on the Ohio-West Virginia border connects to EQT Midstream Partners LP's Strike Force South gathering fields in Monroe and Belmont counties in Ohio. Strike Force can also deliver to Energy Transfer Partners LP's Rover and Enbridge Inc's Texas Eastern Transmission (Tetco) pipelines. Columbia Gas said all other meters affected by the blast will remain at zero until the pipeline returns to service. The company did not say when the full pipe would return to service, noting the site of the incident is in the restoration process. Columbia Gas told customers it will provide an update on the status of the pipe on June 18. The shutdown of Leach Xpress forced producers using the line to find other pipes to ship gas out of the Marcellus and Utica shale regions of Pennsylvania, West Virginia and Ohio. Alternative pipelines include ETP's Rover, Tallgrass Energy Partners LP's Rockies Express (REX), EQT Midstream Partners LP's Equitrans and Enbridge's Tetco, according to analysts at S&P Global Platts. Columbia Gas, which declared a force majeure after the blast, said the damaged section of pipe could affect movement of about 1.3 billion cubic feet per day (bcfd). One billion cubic feet of gas is enough to fuel about 5 million U.S. homes for a day. Energy analysts said overall output in the Appalachian region was little changed by the blast as producers, like Range Resources Corp and Southwestern Energy Co, found other pipes to ship their gas. 

Analysis: Columbia Gas Transmission sees Leach XPress natural gas pipeline force majeure lifted by early July - Columbia Gas Transmission on Monday said that its Leach XPress pipeline, currently under force majeure following an explosion earlier this month, could return to service by early July. In a notice, Columbia said it's continuing to coordinate with the US Pipeline and Hazardous Materials Safety Administration on a repair and restoration plan and would provide updates as that work continues. Related factbox: Leach XPress natural gas pipeline service could return in July.  Following a brief return to service at the Leach XPress downstream Stagecoach meter last week, Columbia said in a separate notice Monday that further investigation during the restoration process would require flows at the meter to be suspended until further notice. On Tuesday, transmission volumes at Stagecoach were reduced to zero, where they remained Wednesday. Upstream receipts at the Eureka, Gibraltar and Majorsville meters have remained at zero since the blast, data compiled by S&P Global Platts Analytics shows. On June 7, an explosion that rocked Leach XPress in Marshall County, West Virginia, caused a force majeure that immediately impacted prices and disrupted interregional gas transportation. Thanks to a dense network of alternative pipelines, regional Appalachian production was unaffected. Columbia has yet to offer an explanation for the blast. 

Two more notices of violation issued to Mountain Valley Pipeline -  State regulators have issued two more violation notices to the Mountain Valley Pipeline project, this time for for water pollution violations in Nicholas and Harrison counties.In all, the West Virginia Department of Environmental Protection has cited the 300-mile pipeline project four times for breaking water pollution rules.One violation notice, issued May 9, is for failing to implement controls, failing to keep sediment-laden water from leaving the site and failing to modify the project’s storm water pollution prevention plan for construction in Nicholas County.The most recent notice was issued June 6 for failing to comply with the project’s storm water permit and general permit.The DEP issued two violation notices earlier this year for similar problems in Monroe and Wetzel counties.The violation notice in Nicholas County lists Price Gregory, a Houston-based company, as site operator. Precision Pipeline, a Wisconsin-based construction company, is listed as the operator for the violation in Harrison County and in Wetzel County. Trinity Energy Services, a Texas company, was the operator on construction in Monroe County.None of the three companies, nor a spokesman for the DEP, responded to requests for comment Monday.Natalie Cox, a spokeswoman for Mountain Valley Pipeline, said the project welcomed the oversight, and that crews were fixing the problems. “Because the construction process is a collaborative effort with both public and private experts sharing information on an ongoing basis, the MVP project team will continue to augment the number of environmental staff, based on construction activity and location, in order to mitigate any potential issues and to assist inspectors as needed,” she said in an email.

2 pipeline projects draw more than 13,000 public comments - More than 13,000 written comments have been submitted to a state board that invited public input on how two huge natural gas pipelines will impact Virginia’s water bodies. It could take weeks to process the information and present it in a meaningful form to the State Water Control Board, a spokeswoman said Monday. Pipeline opponents are calling on the board to take swift action in reviewing a federal permit that governs how streams, rivers and wetlands will be crossed by the Mountain Valley Pipeline in Southwest Virginia and a similar natural gas transmission line to the east, the Atlantic Coast Pipeline. “It is clear that there is already damage occurring,” Del. Sam Rasoul, D-Roanoke, said at a news conference held Monday to push for a state-ordered stop to construction. At a meeting in April, the water board decided to invite written comments on the adequacy of permits issued for the projects by the U.S. Army Corps of Engineers. The deadline for emails and letters was Friday. About 2,600 emails were received about the Mountain Valley Pipeline, which will cross streams and wetlands more than 500 times on its path through six Virginia counties. Approximately 7,100 emails involved the Atlantic Coast Pipeline, according to Virginia Department of Environmental Quality spokeswoman Ann Regn. Another 3,500 letters, reports and other paper records were submitted; it wasn’t clear Monday how many of those were related to each pipeline. Regn said that the board is currently scheduled to meet Aug. 21, and that the comments must first be reviewed by DEQ staff members in a process that could take weeks. Critics are calling for a meeting much sooner. Tree cutting and land clearing by Mountain Valley have already caused environmental damage, they say, and more problems are expected when construction workers begin to blast bedrock and dig trenches for the 42-inch diameter steel pipe. The 303-mile pipeline will start in West Virginia, where environmental regulators have issued three notices to Mountain Valley that it is violating rules meant to control erosion and sediment. DEQ is investigating similar problems with runoff and mudslides in Virginia but has so far taken no enforcement action. 

Federal Court grants stay of water crossing permit for Mountain Valley Pipeline - The 4th Circuit Court of Appeals has stayed a key water crossing permit for the Mountain Valley Pipeline. Thursday evening the federal court granted a motion filed by environmental groups to halt the permit as they call into question the Army Corps of Engineer's verification of the permit. Lawyers for the environmental groups argue that Mountain Valley Pipeline cannot meet the conditions of the permit. The court's decision impacts waterways including the Greenbrier, Elk, and Gauley rivers in West Virginia. WDBJ7 reached out to Mountain Valley Pipeline for comment on the decision. In a statement, Mountain Valley Pipeline said in part: "While disappointed with this temporary setback that affects stream and wetland crossings along approximately 160 miles of the route in West Virginia, the MVP team is evaluating options to understand its ability to continue with construction activities that do not include stream and wetland crossings along this portion of the route." Mountain Valley Pipeline said it still hopes to have the pipeline in service by the end of 2018. You can read the full statement from Mountain Valley Pipeline below: 

Ethane production growth led to record U.S. natural gas plant liquids production in 2017  - U.S. natural gas plant liquids (NGPL) production has nearly doubled since 2010, outpacing the rate of natural gas production growth and setting an annual record of 3.7 million barrels per day (b/d) in 2017. NGPLs are produced at natural gas processing plants, which separate liquids from raw natural gas to produce pipeline-quality dry natural gas. Marketed natural gas includes both NGPLs and dry natural gas.  Growth in U.S. natural gas production has been driven by shale gas, particularly from the Appalachian region, and to a lesser extent by associated natural gas, a byproduct of crude oil production. The high liquids content of many shale plays means that growth in marketed natural gas production has led to increased production of NGPLs. NGPLs accounted for a growing share of marketed natural gas production between 2010 and 2017, making up 15% of total marketed production in 2017 in energy content terms, up from 11% in 2010. The increased share of NGPL production can be attributed to expanded capacity to produce, transport, and consume NGPL products. Increases in NGPL production pushed two measures of total natural gas production—gross withdrawals and marketed production—to record highs in 2017. NGPLs that come out of natural gas plants are a mix of ethane, propane, isobutane and normal butane, and natural gasoline that requires further processing to convert into separate marketable products. The yield of these liquid products, especially ethane, varies significantly depending on product prices, the ability to process and distribute them to market, and the makeup of the raw natural gas.  With the exception of ethane, natural gas plant operators may leave only trace amounts of NGPLs in dry—pipeline-quality—natural gas. Natural gas specifications set by pipeline operators allow for significant amounts of ethane to be left in dry gas at the discretion of natural gas plant operators. If ethane prices are low relative to the price of natural gas on a heating-value equivalent basis, more ethane is likely to be left in the dry natural gas stream, provided that the mix can still meet specifications required by natural gas pipeline operators.

Trade war jeopardizes China's huge investment in creation of new 'cancer alley' in Appalachia -- Doubts are growing about a Chinese company’s planned investment in a suite of natural gas-related projects in West Virginia due to the Trump administration’s intensification of a trade war between the United States and China.  From the day the agreement was announced last fall, skepticism has surrounded the issue of whether state-owned China Energy Investment Corp. would follow through on its planned $83 billion investment in energy infrastructure in West Virginia. The cost and scope of the project — known as the Appalachian Storage Hub — would be unprecedented. The massive project would include natural gas liquids storage, a major intersection of pipelines, and a petrochemical refinery row. Environmental groups have expressed concern that the construction of natural gas liquids and petrochemical processing plants could contaminate air and water resources.The escalating trade war between the United States and China is causing further uncertainty about the agreement. Global stock prices fell Monday as investors reacted to the decision last week by the United States to target an additional $50 billion in China-made goods for new tariffs.Brian Anderson, director of the Energy Institute at West Virginia University, has previously touted the positive impact of the China Energy investment. Anderson said two months ago that the agreement with the Chinese company could be coming along at the perfect time. But on Monday, Anderson adjusted his expectations, telling an energy industry conference in Pittsburgh, Pennsylvania that the trade war “has put this project in jeopardy.”

China hits pause on Appalachian energy investment citing trade war concerns - Brian Anderson was hoping to be flanked by officials from China Energy Investment Corp. and to watch the crowd’s eyes widen as the CEO of the Chinese giant announced its first few projects in the U.S.This was to be the first tangible milestone of a bombshell agreement announced in November between China Energy and West Virginia — one that promised the possibility of nearly $84 billion in Chinese investment in the tri-state area in shale gas and chemical manufacturing industries over two decades.What better venue for the mic-drop than the Northeast U.S. Petrochemical Construction Conference, perhaps even upstaging the much-anticipated annual update from Shell Chemical Co. on its ethane cracker complex in Beaver County.Three weeks ago, Mr. Anderson, who directs the West Virginia University Energy Institute, got the call he was expecting. The trip to Pittsburgh was canceled. The reason: a pending trade war between the U.S. and China. Following weeks of threats, the Trump administration announced $50 billion in tariffs on Chinese goods last week, and China retaliated with tariffs on U.S. products.Also canceled -— or postponed — was a training program that WVU prepared for a group of about 30 China Energy officials in May. Its intent was to familiarize the Chinese with how to operate in the U.S.: how to navigate tax structures, get permits, build a workforce.  Mr. Anderson has been working closely with China Energy, a company he said has “a vision to become a much more Western corporation,” but is still 60 percent state-owned.“Their orders and their travel authority comes from the Chinese government,” he said.Given escalating talk of more tariffs, “It was not the time that they were going to show up and announce the project,” Mr. Anderson said.West Virginia officials helped the Chinese investment firm map out a portfolio of possible projects to fill up that $84 billion bucket.The projects range from $600 million to $20 billion each and include anything that happens downstream from the fractionator, Mr. Anderson said. That means that however natural gas and natural gas liquids are used once they are separated in a natural gas processing plant is on the table, including chemical plants like the one Shell is building.

China Energy executives cancel West Virginia trip amid trade dispute (Reuters) - A scheduled trip to West Virginia by executives from China Energy Investment Corp to discuss a planned $83.7 billion investment in the state has been canceled, the latest victim of a growing trade war between the United States and China. The investment by China Energy, which ranks among the world’s largest power companies by asset value, was the biggest among a slew of deals signed during U.S. President Donald Trump’s state visit to Beijing in November. The total value of the deals could be as much as $250 billion. Brian Anderson, director of the West Virginia University Energy Institute, told Reuters on Wednesday the executives were due to arrive in West Virginia last weekend to discuss where to invest in shale gas, power and petrochemical projects. “The original plan was for the CEO of China Energy and a delegation to arrive over this past weekend and be here in West Virginia with our state officials and others,” said Anderson. “But that visit was canceled because it would be inappropriate in the midst of this trade dispute for China to come,” he said. China Energy could not immediately be reached for comment. Among planned stopovers by the delegation was an appearance at the Northeast U.S. Petrochemical Construction Conference in Pittsburgh on Tuesday. The gas and power agreement signed as part of Trump’s Beijing visit marked the first overseas investment for newly founded China Energy, which formed from a merger of China Shenhua Group, the country’s largest coal producer and China Guodian Corp, one of its top five utilities. The Trump administration announced $50 million in tariffs on Chinese goods last week. In return, China retaliated with tariffs on U.S. exports and threatened to impose more duties on U.S. energy exports. West Virginia Governor Jim Justice, a Trump ally, has said the investment deal would boost his economically ailing state’s natural gas and petrochemical industries and create jobs. Justice declined to comment on whether he was concerned that trade frictions jeopardized the China Energy investment, but Anderson said the governor had been in regular contact with Trump. Among the investments under consideration is an Appalachian Storage and Trading Hub for hydrocarbons, such as ethane and butane, as well as two power plants in the state. 

U.S. oil pipeline companies, producers seek relief from steel tariffs  (Reuters) - Major U.S. energy companies including Plains All American Pipeline, Hess, and Kinder Morgan Inc are among many seeking exemptions from steel-import tariffs as the United States ratchets up trade tensions with exporters including China, Canada and Mexico.  There have been nearly 21,000 requests overall for exclusions submitted to the U.S. Commerce Department since the Trump administration imposed levies this year. Of those, more than 500 petitions involve pipes and related materials.   Initial decisions are expected this month, offering the first clues as to how the administration will balance an agenda favoring oil and gas exports while also supporting the U.S. steel and aluminum industries.  For the energy industry, the potential for relief has taken on added importance after China surprised markets last week by proposing 25 percent levies on about $1 billion a month in U.S. oil imports in retaliation for U.S. tariffs.  The pipeline industry could face higher costs from tariffs as about 77 percent of the steel used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry. Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago, according to S&P Global Platts.  Pipelines from the nation’s largest oilfield in west Texas to the Gulf Coast are nearly full, depressing crude prices as output is projected to rise by about 850,000 barrels per day this year, and significant projects are not expected to be completed until at least next year.  Plains sought a tariff exclusion for its 500-mile Cactus II oil pipeline, which will connect West Texas oil fields to export docks near Corpus Christi, Texas. This month, it expects to receive its first material from Corinth Pipeworks SA, a Greek manufacturer, according to a Commerce Department filing.  No U.S. mills can produce pipe with the specifications needed for Plains’ line. Only three mills in the world make such pipe, and delivery delays could exacerbate constraints, the company wrote in its petition, affecting the price of oil from the largest U.S. oilfield.  The 585,000-barrel per day line is due to start flowing next year, just as analysts warn a bottleneck of crude could force some producers to shut in production.  Rival pipeline operator Kinder Morgan also wants an exclusion for its $1.75 billion Gulf Coast Express natural gas pipeline from West Texas to the U.S. Gulf Coast. It ordered 47 percent of specialized pipe needed for the project from Turkish steel maker Borusan Mannesmann.  Only one U.S. producer could meet Kinder Morgan’s needs, but it could not meet the volume required within the necessary timeline, Kinder said in a filing.

As oil pipeline trial begins, South Portland banks on ‘foie gras’ defense - The trial is finally set to start Monday in the Portland Pipe Line Corp.’s federal lawsuit challenging South Portland’s 2014 ban on shipping crude oil from the city’s waterfront, including controversial tar sands oil produced in western Canada. After more than three years of preliminary court filings, hearings and orders, U.S. District Court Judge John Woodcock Jr. must decide whether the city’s so-called “Clear Skies” ordinance violates the Commerce Clause, which gives Congress sole power to regulate foreign and interstate trade. The company – a Canadian-owned subsidiary of ExxonMobil, Shell and Suncor Energy – is fighting the ordinance because it effectively blocks the company from reversing the flow of its 236-mile underground pipeline, which now transports a dwindling amount of foreign crude from harbor terminals in South Portland to refineries in Montreal. The city is poised for a foie gras defense in a case that’s expected to generate interest across the energy sector and other markets that depend on interstate commerce and seaport access for foreign trade. “The cumulative impact of similar ordinances enacted in other harbor cities would be catastrophic,” the company’s lawyers wrote in a pretrial brief. “Parochial efforts designed to curtail or effectively (prevent) cross-border transportation caused our Founding Fathers to include the Commerce Clause in the Constitution in the first place.”  The city disputes the company’s claims that the Clear Skies ordinance discriminates against out-of-state competitors, attempts to regulate business outside South Portland and interferes with federal control of foreign commerce, according to the city’s pretrial brief.

With Cove Point Shale Gas Exports Underway, ICE's Updated Product Reflects Shifting Market -- With exports underway at Dominion Energy Inc.’s Cove Point liquefied natural gas (LNG) terminal in Lusby, MD, the Intercontinental Exchange (ICE) has launched a physical trading product to reflect the changing market dynamics at the facility.The new “Dominion Energy - Cove Point - on system delivery” product was begun on June 11 to reflect the physical market for deliveries into Dominion’s LNG terminal for liquefaction and export. The prior Cove Point market, which had been set up for receiving natural gas from LNG imports, was delisted simultaneously, officials with ICE confirmed to NGI.NGI has since updated the Cove Point location in both NGI’s Daily Gas Price Index and NGI’s MidDay Price Alert to reflect the changes to ICE’s Cove Point physical product.Cove Point was trading 11 cents higher at $3.110/MMBtu on 20,000 MMBtu of reported volume, according to Wednesday’s MidDay Price Alert.For Tuesday’s trade date in NGI’s Daily Gas Price Index, day-ahead prices at Cove Point averaged $3.00/MMBtu on 390,000 MMBtu of reported volume.Built in the 1970s to import LNG supplies, Dominion acquired the Cove Point terminal in 2002. Responding to the rapid rise of U.S. onshore gas output over the last decade, Dominion recently finished adding liquefaction and export capabilities at the facility, which is situated along the Chesapeake Bay on the East Coast.In March, Cove Point became the second U.S. facility to export LNG from the Lower 48 after Cheniere Energy Inc.’s Sabine Pass LNG terminal. A little over a month later in April, Cove Point officially entered commercial service.

Trump ocean order removes hurdles to offshore oil, gas drilling: industry chief - The Trump administration this week released a new federal oceans policy with a focus on offshore energy development and revoked an Obama-era policy which the industry had argued slowed new oil and natural gas drilling. "We now have the opportunity to start with a clean slate," Randall Luthi, president of the National Ocean Industries Association, said Thursday. Trump late Tuesday signed an executive order that revoked a 2010 Obama order which set protections for US oceans, coastlines and waters of the Great Lakes. The Obama order, signed roughly three months after the Deepwater Horizon oil spill, called for the federal government to work with states and municipal governments on conservation efforts. "The Deepwater Horizon oil spill in the Gulf of Mexico and resulting environmental crisis is a stark reminder of how vulnerable our marine environments are, and how much communities and the Nation rely on healthy and resilient ocean and coastal ecosystems," the order states. But the order created "more layers" of unnecessary planning, much of it already required by the Outer Continental Shelf Lands Act and the National Environmental Policy Act, Luthi said, adding the five-year planning process for offshore oil and gas lease sales already requires consultation with state governors. "The National Ocean Policy, although laden with laudable goals, brought additional and duplicative layers of bureaucracy, instead of streamlining a vital process," Luthi said. "Industry was also concerned because as the regional planning bodies started moving forward, they demonstrated a propensity to close off wide areas to exploration of oil and natural gas without having any information concerning the existence of those resources."

A Drill Down Report On Emerging Natural Gas Transportation Bottlenecks In The Bayou State - An influx of natural gas supply in northern Louisiana — from Marcellus/Utica inflows and the rebound in Haynesville Shale production — is not only reversing long-held flow patterns but is also starting to fill up existing pipeline capacity on routes to the Southeast U.S. and the Louisiana Gulf Coast, where demand is growing. As more LNG export capacity comes online in the Bayou State, more gas will be needed at the coast, and, with existing routes to the coast filling up, more pipeline capacity will be needed as well. These factors are expected to transform the Louisiana gas market over the next several years, with impacts to prices, transportation values and basis, and with repercussions for both the U.S. gas market and global LNG trade. Today, we discuss highlights from our new Drill Down Report on the fast-changing Louisiana gas flow patterns and the need for more pipeline capacity.

Enterprises fractionators and other NGL-related assets at Mont Belvieu - The fractionation and NGL storage complex in Mont Belvieu, TX, would surely qualify as one of the Seven Wonders of the Energy World, if there were such a list. With more than 250 million barrels of NGL storage carved — by water! — out of an enormous subterranean salt dome formation, and nearly two dozen fractionation plants with a combined capacity of more than 2 MMb/d, Mont Belvieu not only serves as the largest receipt point for mixed NGL streams on the planet, it is also the key hub of distribution for the ethane, propane, normal butane and other NGL purity products that are either consumed by Gulf Coast steam crackers and refineries or exported to foreign end-users. But unlike wonders of the ancient world like the Great Pyramids at Giza, Mont Belvieu is still very much a work in progress, with new storage caverns and new fractionators now under development to try to keep up with the breakneck pace of U.S. NGL production growth. Today, we begin a company-by-company review of fractionation capacity and other key infrastructure there. In Part 1 of this blog series, we discussed the current state of the U.S. natural gas liquids (NGL) sector. The condensed version goes like this: NGL production in the Permian, the Marcellus/Utica, the SCOOP/STACK and other key basins is rocketing higher, with potential U.S. NGL production from natural gas processing plants — including ethane that is rejected into natural gas — now approaching 5 MMb/d. A number of new, ethane-consuming steam crackers are coming online along the Texas and Louisiana Gulf Coast, conveniently close to the NGL storage and fractionation hub in Mont Belvieu. The export market for liquefied petroleum gases (LPG) — mostly propane but some normal butane — is through the roof too, averaging more than 1 MMb/d in the first five months of 2018 (almost all of it being shipped out of Gulf Coast ports), and ethane exports are strong as well. And, with the rapid run-up in U.S. NGL production — combined with some reluctance of producers to commit to new fractionation capacity — the existing fractionation plants in Mont Belvieu are running flat-out to keep up. More fractionation capacity is needed ASAP.

Just Released -- USGS Survey Of The Eagle Ford -- June 22, 2018 --For release, June 22, 2018 -- USGS estimates 8.5 billion bbls of oil in Texas' Eagle Ford Group. “This assessment is a bit different than previous ones, because it ranks in the top five of assessments we’ve done of continuous resources for both oil and gas,” said USGS scientist Kate Whidden, lead author for the assessment. “Usually, formations produce primarily oil or gas, but the Eagle Ford is rich in both.” Some data points:

  • map at the link: a very, very thin footprint in southern Texas, stretching from the western border with Mexico to Louisiana
  • estimate of undiscovered, technically recoverable resources in continuous accumulations
  • one of the most prolific continuous accumulations in the United States, and is comprised of mudstone with varying amounts of carbonate
  • continuous oil and gas is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences, such as those in conventional accumulations. Because of that, continuous resources commonly require special technical drilling and recovery methods, such as hydraulic fracturing
  • the USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources of onshore lands and offshore state waters. The USGS assessment of the Eagle Ford Group was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol
  • the new assessment of the Eagle Ford Formation may be found online

Why Texas officials decided not to levy penalties after pipeline leak -  A buried pipeline running across a Fayette County ranch was leaking, and at least 42 barrels, or 1,700 gallons, of liquid gas containing a known carcinogen were seeping into the ground and possibly making their way into the Central Texas water table. The landowner told the company that owned the pipeline of an unusual odor and dying mesquite trees.Officials with the pipeline giant, Denver-based DCP Midstream, said they would alert state regulatory authorities.But they didn’t do so until at least 3½ months after the spill, according to county and state officials.Company officials say they have acted responsibly and followed all regulations, but this spring an administrative law judge, deciding the company had acted “with a lack of good faith,” recommended that the state’s oil and gas regulatory agency, the Texas Railroad Commission, levy a $10,000 penalty against the $6 billion company.But instead of penalizing DCP Midstream over its failure to report the leak, which may have begun as early as 2013 before being repaired in 2014, two of the three commissioners criticized their own agency employees.In the end, the company, which says it is not to blame for any groundwater contamination, got off without a fine or reprimand. The episode, pieced together through interviews and emails, documents, and notes obtained by the American-Statesman, illuminates the close ties between the commissioners overseeing the state agency and the industry they’re charged with regulating.

Permian Discount Could Rise To $20 Per Barrel - The pipeline constraints in the Permian basin have become a hot topic lately, not least because of the steep discounts that oil producers in West Texas have been forced to accept. But the midstream bottlenecks might not get resolved soon, raising questions about the growth prospects of the Permian, and thus, the entire U.S. shale complex. The Permian pipelines are essentially at full capacity, which means that ongoing increases in output are forcing producers to try to find creative ways to get their oil to market, including shipping oil on trains and trucks, or consuming the oil locally. Ultimately, however, these methods might not be enough to soak up all the expected increase in supply.The constraints have not yet significantly altered oil growth forecasts, whether it be from the IEA, EIA, OPEC, or a range of private sector analyses. However, Goldman Sachs says that it sees the pipeline problems lingering for quite some time, and efforts to resolve the bottlenecks do not appear to be imminent.“Neither public nor private producers appear on track at present to narrow the 0.2-0.4 million bpd of regional oversupply we see in 1Q-3Q 2019,” Goldman Sachs wrote in a note, adding that “there was little optimism among most producers that there would be suf?cient trucks entering the region on a temporary basis to ?ll the gap.”  The lack of resolution for takeaway capacity will mean the painful discounts that shale producers are starting to see will stick around for a while. “We continue to see Permian oil prices of around $50/bbl in 2Q/3Q 2019 and a discount to Gulf Coast prices of around $19-$22 per bbl in 4Q18-3Q19,” Goldman wrote.  That only magnifies the recent conclusion that some analysts have come to, which is that the Permian is now made up of “Haves” and “Have Nots.” That is, shale companies that have lined up pipeline capacity under contract should emerge from this period unscathed, while those shale companies, often smaller ones, that have failed to secure pipeline space are suffering from the discounts. Goldman has Buy ratings for Occidental Petroleum, Pioneer Natural Resources and WPX Energy because of either secure pipeline contracts or because production is hedged at fixed prices for the next year.

The Permian Faces Shut-Ins Due To Oil Pipeline Shortage - The fastest-growing oil producing region in the United States, the Permian, is nearing the limits of its pipeline takeaway capacity and some producers may be forced to shut in wells within months, according to the chairman of one of the biggest U.S. shale producers, Pioneer Natural Resources.We will reach capacity in the next 3 to 4 months,” Pioner’s chairman Scott Sheffield told Bloomberg in an interview on the sidelines of an OPEC conference in Vienna, which is attended by representatives of some U.S. oil companies.“Some companies will have to shut in production, some companies will move rigs away, and some companies will be able to continue growing because they have firm transportation,” Sheffield told Bloomberg, commenting on the Permian constraints that threaten to slow down the relentless pace of production growth.Oil production in the Permian is rising by 800,000 bpd annually, with current production at 3.3 million bpd, Sheffield said, adding that total pipeline capacity is 3.6 million bpd, so producers - especially those that don’t have firm deals for pipeline transportation - will be bumping into the limit of takeaway capacity in the next three to four months.

Texas Oil Port to Raise $300MM for Work to Handle US Shale Export Boom (Reuters) - Port officials on Tuesday are expected to consider $300 million in financing that would prepare the country's largest oil-export port - Corpus Christi, Texas - to handle a surge in U.S. shale production over the next five years.International buyers would like more U.S. crude but are unable to get it because of infrastructure constraints along the U.S. Gulf Coast. Terminals originally designed for imports only recently have revamped operations to handle exports including accepting larger tankers preferred by China and other oil buyers.The Port of Corpus Christi Commission is voting on a plan that would authorize it to raise the debt next month through underwriters led by Wells Fargo & Co, Citigroup Inc and JPMorgan Chase & Co.The port is prepared to levy new user fees for the debt costs if the U.S. government does not reimburse it for spending the money to deepen and widen port facilities to accept larger ships, according to a port official. A decision to raise fees for dredging, which could begin as early as September, would be rare among U.S. Gulf Coast ports."We don't want to be the next bottleneck" to U.S. oil exports, said Sean Strawbridge, chief executive of the Port of Corpus Christi Authority.The United States is now exporting more than 2 million barrels of oil a day, but the largest tankers currently only move in and out of a Louisiana offshore port because others are not deep enough.Corpus Christi exports 800,000 barrels per day (bpd) of crude, Strawbridge said. It sits on the U.S. Gulf Coast near two of the nation's largest oilfields, the Permian Basin and Eagle Ford shale, which together produce about 4.7 million bpd, nearly half of the total U.S. production.The channel's existing 47-foot-depth restricts it from fully loading crude tankers that carry up to 1 million barrels. Smaller vessels must finish loading the tankers offshore, he said. The project will deepen the channel to 54 feet for larger tankers, he said. Oil export capacity from the Corpus Christi area is expected to rise to 3.3 million bpd by 2021 from 1.3 million bpd this year, keeping its rank as the top oil export port, according to energy research firm Wood Mackenzie.

Minnesota regulators near decision on disputed oil pipeline - Minnesota regulators will open two days of final arguments on whether they should approve Enbridge Energy's proposal for replacing its deteriorating Line 3 crude oil pipeline from Canada across Minnesota.The proposal has aroused intense opposition from tribal and climate change activists. The Public Utilities Commission is scheduled to make its final decision late this month on whether the project is needed and, if so, what route it should take.Groups on both sides are urging supporters to pack the two-day hearing, which start Monday. Some opponents plan to canoe the Mississippi River to downtown St. Paul and then carry their boat to the proceedings. Calgary, Alberta-based Enbridge wants to replace Line 3, which it built in the 1960s. For safety reasons, Enbridge runs it at only about half its original capacity and only with light crude. The replacement would restore its original capacity of 760,000 barrels per day so that it can again deliver as much light or heavy crude as Midwest refineries want. All Enbridge still needs is Minnesota's approval, through it has been a long, contentious process.The current Line 3 starts in Alberta and clips the northeastern corner of North Dakota before it traverses northern Minnesota on its way to Enbridge's terminal in Superior, Wisconsin. Enbridge wants to lay a line that would run parallel to the existing one as far as Clearbrook, Minnesota, before taking a more southerly route to Superior.Enbridge says the old line is increasingly subject to corrosion and cracking, and that its maintenance needs are accelerating. It says that without a new Line 3, its customers would have to rely more heavily on rail and truck transport, which have higher costs and risks.

US Shale Oil Production to Rise 141000 Barrels a Day in July - Between July of 2017 and July of 2018, U.S. crude oil production from seven major shale regions is forecast to rise by 1.7 million barrels of oil per day to 7.34 million barrels a day. The month-over-month increase from June to July is expected to total 141,000 barrels a day. The forecast was published Monday by the U.S. Energy Information Administration (EIA) in its monthly Drilling Productivity Report. Total production in June is forecast to reach 7.2 million barrels a day, an increase of 164,000 barrels a day compared with previously estimated May production. In March the number of drilled but uncompleted (DUC) wells rose by 94 to a total of 7,622 including 122 new wells in the Permian basin. In April the number of DUC wells rose by 55 to a total of 7,677 including 111 new wells in the Permian basin. In May the number of DUC wells rose by 31 to a total of 7,772 including 100 new wells in the Permian basin. No overall oil production declines are forecast either for June or July, and production from new wells is expected to increase by 2 barrels per day per rig to 677 month over month in July. Natural gas production is expected to increase by 1.14 billion cubic feet per day. Production in the Permian Basin is expected to rise by 229 million cubic feet in July. Haynesville gas production is forecast to rise by 235 million cubic feet per day and Niobrara production is expected to be up by 52 million cubic feet per day. WTI crude oil for July delivery traded Monday at $65.90 a barrel, up about 1.3% from Friday’s closing price of $65.06. July crude opened at $64.46 Monday morning. Natural gas for July delivery traded Monday at $2.95 per million BTUs, down about 2.35% from Friday’s closing price of $3.02. July gas opened at around $3.05 Monday morning. 

Total DUCs in US continue climbing in May: DPR - The number of DUCs, drilled, but uncompleted wells, in the Lower 48 U.S. states' seven major plays rose less than 1% from April to May, the Energy Information Administration reported Monday in its monthly Drilling Productivity Report (DPR).A total of 31 DUCs were added to the total found in the Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian plays. Total DUCs at May 31, was 7,772, up from 7,741 in April, Kallanish Energy reports.Just three of the seven plays saw a month-to-month increase in DUCs, led by the Permian Basin, which gained 100 drilled but uncompleted wells, to 3,203 from 3,103.The Eagle Ford (14) and the Bakken (1) were the other plays recording an April-to-May increase in DUCs, to 1,485 and 750, respectively.  The remaining four plays each saw their DUCs total fall, led by a 48-DUCs drop in the Niobrara, falling to 491 from 539. Appalachia (the Marcellus and Utica Shale plays combined) saw its DUCs total drop by 27, to 744, from 771.

U.S. shale producers warn Chinese tariffs would hit energy exports (Reuters) - China’s proposed tariffs on U.S. petroleum imports, part of a mounting trade war between the two countries, would crimp sales to the shale industry’s largest customer, adding new pressure on U.S. crude prices, energy executives and analysts said in interviews this week. China has said it would slap a 25 percent tariff on imports of U.S. crude, natural gas and coal on July 6 if Washington went ahead, as planned, with its own tariffs on Chinese goods that day. Energy would be added for the first time to a burgeoning trade dispute that has hit imports of Chinese metals and solar panels, and exports of U.S. medical equipment and soybeans. Targeting petroleum puts the Trump administration’s “energy dominance” agenda in Beijing’s cross-hairs as U.S. shale has grabbed share from Middle East suppliers in Asia. China is the largest customer for U.S. crude, importing about 363,000 barrels a day in the six months ended in March. Thomson Reuters shipping data shows those exports have increased since, rising to an expected 450,000 bpd in July. “It is going to hurt everyone for the short term,” While U.S. crude will continue flowing to market even with tariffs, “it’ll force you to put your oil somewhere else, and it’ll cost you more” to line up other buyers. U.S. oil exports have steadily grown since the four-decade-old ban on crude exports was lifted at the end of 2015. China’s tariff threat caught U.S. producers off guard because it had been discussing buying more U.S. energy and agricultural products to reduce its $375 billion trade surplus with the United States. The levies could boost suppliers of West African crude at the expense of U.S. exports. The tariffs are “creating a whole new set of uncertainties on top of what’s already there,” 

Cheniere pipeline to carry Oklahoma natgas output gets positive environmental review- Cheniere Energy's Midcontinent Supply Header Interstate Pipeline, which would boost takeaway capacity from Oklahoma's Anadarko Basin to support growing Gulf Coast demand for LNG exports, got a positive environmental review Thursday from the US Federal Energy Regulatory Commission. The project would result in some environmental impacts, but these would be reduced to less-than-significant levels with mitigation that is planned and being requested, the agency said in its final Environmental Impact Statement.Midship would augment Cheniere's feedgas supplies at its LNG export terminals and provide another outlet for producers in the prolific SCOOP and STACK plays to reach downstream markets. The Houston-based company has been ramping up production at its Louisiana terminal, while continuing to build two liquefaction units with plans for a third at its Texas facility. "Due to the implementation of specialized construction techniques, the relatively short construction timeframe in any one location, and resource protection and mitigation plans designed to minimize and control environmental impacts for the Midship project, we conclude that minimal cumulative impacts would occur," FERC said in its report.

Utah drillers import fracking sand from Wisconsin, but there may a cheaper place to buy it right inside the Beehive State -- A trainload of sand, enough to fill 50 or more rail cars, can disappear down a single bore hole when drillers frack oil and gas wells in eastern Utah’s Uinta Basin.    Utah energy developers must acquire their “frac sand” from Wisconsin quarries, which hold an abundance of clean silica grains of the right size, shape and hardness, a material known as “northern white.” But now alternative sources are under exploration in southern Utah’s Kane County, potentially opening the West’s first major quarries of sand needed for fracking operations. A 12,000-acre area in Kane County could yield enough to meet the needs for Utah energy developers for 40 to 50 years, according to energy industry representatives speaking last month at Gov. Gary Herbert’s Energy Summit in Salt Lake City. “We have some of the best frac sand in the country,” J.T. Martin, president of Salt Lake City-based Integrated Energy Cos., told conference attendees. “We are calling this ‘Utah pink Champagne.’ The Wisconsins have nothing on us.”

Zinke Caught in Conflict of Interest With Oil Giant Halliburton - Interior Secretary Ryan Zinke, who has spent his first 15 months opening public lands to oil and gas drilling, has been linked to a development project with Halliburton chairman David Lesar, POLITICO reported Tuesday.Lesar is backing a real estate development in Zinke's hometown of Whitefish, Montana and receiving help from a foundation started by Zinke and currently run by his wife, Lola.Lola Zinke has agreed in writing to allow the Lesar-funded development, which would convert an industrial area into a hotel and shops, to build a parking lot on land donated to the Zinke's foundation for a Veteran's Peace Park, which has remained undeveloped for nearly 10 years. The Zinkes also own land across from the development that stands to increase in value, real estate agents told POLITICO.The development would also include a microbrewery, a project for which Zinke has spent five years lobbying town officials. Whitefish city planner David Taylor told POLITICO that the developers would allow the Zinkes to own and run the microbrewery, though the developers themselves said nothing had been decided."The sad fact is that this is just the latest example of Zinke attempting to personally benefit from a resource that should benefit the public," Whitefish conservation group the Western Values Project Executive Director Chris Saeger told The Associated Press. The Western Values Project has called for an investigation into Zinke's offer of the land, donated for a park, to private interests and has asked Zinke to recuse himself from any future arrangements the Department of the Interior (DOI) makes with Halliburton. Halliburton is the largest oil services company in the U.S., and ethics experts told POLITICO any deal between the company and the Zinkes presents a conflict of interest, since Halliburton stands to benefit from DOI plans announced under Zinke to open public lands to fossil fuel interests, such as the decision to open U.S. coasts to offshore oil drilling. POLITICO highlighted the DOI's move under Zinke to loosen Obama-era fracking restrictions on federal lands after lobbying by Halliburton, one of the world's largest fracking companies. DOI is also responsible for drilling and pipeline safety standards.  Marilyn Glynn, acting director of the Office of Government Ethics under President George W. Bush, also thought the development deal meant that Zinke should now remove himself from any decisions that could impact Halliburton. "In a previous administration, whether Bush or Obama, you'd never run across something like this," she told POLITICO.

Why It Matters If Fracking Companies Are Overestimating Their ‘Proved’ Oil and Gas Reserves -- Back in 2011, The New York Times first raised concerns about the reliability of America’s proved shale gas reserves. Proved reserves are the estimates of supplies of oil and gas that drillers tell investors they will be able to tap. The Times suggested that a recent Securities and Exchange Commission (SEC) rule change allowed drillers to potentially overbook their “proved” reserves of natural gas from shale formations, which horizontal drilling and hydraulic fracturing (“fracking”) were rapidly opening up. “Welcome back to Alice in Wonderland,” energy analyst John E. Olson told The Times, commenting on the reliability of these reserves after the rule change. Olson, a former Merril Lynch analyst, is best known for seeing the coming Enron scandal 10 years before the infamous energy company imploded in 2000.Today, those same rules have allowed shale drillers to boost their reserves of oil, as well as natural gas. As a result, these “proved” reserves, which investors and pipeline companies are banking on, could potentially be much less proven than they appear. And the unprecedented degree to which this is happening in the shale industry casts a shadow of doubt on the purportedly bright future of America’s booming oil and gas industry. Under the updated SEC rules, which went into effect in 2009, drillers can count oil and gas from wells that won’t be drilled or fracked for up to five years as part of their proved reserves. Those as-yet-untapped wells can be put on a company’s books as a subset of their “proved” reserves, listed under the label “proved undeveloped” reserves. And drillers can count all of the oil and gas they expect to pump out over the well’s entire lifetime — before they’ve found out how fast that well flows or seen a single drop of oil from it. Those “proved undeveloped reserves” now make up an average of just over half of the proved oil reserves at 40 drilling companies active in shale gas basins nationwide, according to SEC filings reviewed by DeSmog. For drilling companies that are less heavily involved in shale drilling, the average mix is roughly 30 percent — similar to the industry’s average before the SEC rule change.

Oil from Alaskan refuge not coming before 2030, Energy Department says - Oil from Alaska's wilderness refuge won't be added to U.S. production until well after 2030, and much of that oil could be headed to China, the Energy Department’s analysis arm says. The Energy Information Administration said this week that it looked at several ways opening the Alaska National Wildlife Refuge to drilling, called for in the Republicans’ tax law, would affect crude oil production in the U.S. “Much uncertainty surrounds any projection of production from ANWR,” the energy agency said in a Thursday report. That's because the data it has on the area slated to be drilled in is more than 30 years old and confidential. “The only well drilled in the coastal plain was completed in 1986, and the results have remained confidential," the report read. "Federal resource estimates are based largely on the oil productivity of geologic formations in neighboring state-owned lands in Alaska and two-dimensional seismic data that had been collected by a petroleum industry consortium in 1984 and 1985.” Three estimates done by EIA, including low, average, and high, all showed that production from the Arctic refuge would not start until 2031, because of the time needed to acquire leases, explore, and develop the required production infrastructure. The oil from the refuge also faces problems in getting to market if its intended for use in the lower 48 states. Most of the fuel likely will be bound for China, because of legal constraints and other factors, the agency said.

Former Bank Of Canada Head: 'Pipeline Protesters May Be Killed...So Be It'  - As Canada's controversial Trans Mountain pipeline expansion project faces ongoingopposition, the former governor of the Bank of Canada said that protesters may die but that the government should push the project through anyway. Speaking at an event Wednesday, David Dodge said, "We're going to have some very unpleasant circumstances," the Edmonton Journal reported. "There are some people that are going to die in protesting construction of this pipeline. We have to understand that."  "Nevertheless, we have to be willing to enforce the law once it's there," Dodge said. "It's going to take some fortitude to stand up." In an interview with the Journal, he elaborated by saying, "We have seen it other places, that equivalent of religious zeal leading to flouting of the law in a way that could lead to death."Dodge's comments prompted outrage from climate activists.Author and 350-org co-founder Bill McKibben warned, "North American governments have shown the 'fortitude' necessary to kill indigenous people often enough that this is no idle threat," while Canandian author Naomi Klein called the threat a "disgrace." She added, "If the worst happens, we now know they went into this with their eyes wide open." Greenpeace climate and energy campaigner Mike Hudema, meanwhile, wondered if Canadian Prime Minister Justine Trudeau would weigh in on Dodge's remarks. Trudeau was the target of sharp criticism from environmental advocacy groups after announcing last month that the government would purchase the pipeline and expansion system, which will roughly triple the system's capacity. That $4.5 billion buyout, commented the B.C.-based Dogwood Initiative, makes every taxpayer "partial owner of a leaky 65-year-old pipeline—and the proponent of a still uncosted oil tanker expansion project."  Dodge, for his part, has been described as "not inclined to hold his tongue."

Trans Mountain pipeline expansion still has hurdles to cross - The Canadian government's deal to buy Kinder Morgan's Trans Mountain crude pipeline is far from over, with industry executives anticipating a six-month delay in the planned startup, keeping Alberta heavy oil prices at steep discounts to global benchmarks. Canada said in late May it will buy the 300,000 b/d pipeline and 590,000 b/d expansion project for $3.5 billion. Alberta producers are keen on expanding the pipeline to access Asian customers via the Westridge export terminal in Burnaby, British Columbia. The expansion was originally scheduled to start up in December 2020, but that is looking unlikely unless construction resumes soon. "Pipeline construction is a seasonal activity during summer to the fall [June to August] in Western Canada and failure to start work on the main infrastructure works will also drive up expansion costs," Chris Bloomer, president of the Canadian Energy Pipeline Association, said in an interview. "There are a few regulations that will be issued during the bird-nesting season [as ownership changes hands]," said Keith Chiasson, senior vice president for downstream with oil sands producer Cenovus Energy, noting a closer look will also be taken at the construction schedule. Kinder Morgan is now in talks with contractors on a new cost estimate and time schedule to restart work on the pipeline expansion that was stopped April 8. The expectation is the construction contracts will be revalidated, Bloomer said. Kinder could not be reached for comment on what their next steps would be in the transition process. The deal is expected to be ratified by its board by the fourth quarter. Kinder Morgan has estimated an expansion of the Trans Mountain pipeline will cost C$7.5 billion. 

Leaked letter: Kinder Morgan broke rules for months during Trans Mountain Pipeline construction - Kinder Morgan put fish, porpoises, sea lions and other marine life in danger during recent construction work near an oil terminal in Vancouver, says a leaked federal letter that warns the company could face prosecution for its violations.The letter from the federal Fisheries and Oceans Department (DFO) notes that the company also went months without filing mandatory monitoring reports to the government and First Nations before federal officials noticed the Texas company was breaking the rules.The department sent the warning to an executive at the company’s Canadian unit, Trans Mountain, in a letter dated June 6, 2018, and obtained by National Observer. That was just days after the Trudeau government announced a deal to take over the Trans Mountain pipeline expansion project and buy many of Kinder Morgan’s Canadian assets for 4.5 billion Canadian dollars ($3.4 billion).It has prompted environmental lawyer Eugene Kung to raise this question: “Down the line, if the feds become the owner, what does it look like for them to prosecute themselves?” The letter contrasts with recent assurances by the federal government that its officials have kept a close eye on the company and taken adequate measures through a “world-leading” plan to ensure that the Trans Mountain west coast pipeline and tanker expansion project will proceed without damaging the environment or public safety. The warning letter identifies four different violations related to pile driving during expansion work on the Burrard Inlet in the metro Vancouver region near the Kinder Morgan terminal between January and May 2018. The company exceeded safe underwater noise limits for such marine species as the harbor porpoise and the Steller sea lion as it proceeded with the pile driving activity, according to a separate email sent by the federal department to members of an Indigenous Advisory and Monitoring Committee that was set up to keep tabs on the project.

Canadian oil pipeline could drive famous Puget Sound whales to extinction -  Orcas are one of the Pacific Northwest’s most iconic creatures. But despite their beloved status, the local resident population known as the Southern Resident killer whales are critically endangered, with just 75 known animals left. Now, advocates worry the Trudeau government’s plan to purchase the Trans Mountain Expansion Project may push the whales to the edge of extinction. Southern Resident killer whales are acoustically, culturally, and genetically distinct from other orca populations. While they can be found from California to southern Alaska, they generally spend May through the fall in the inland waters of British Columbia and Washington state. Known as the Salish Sea, it’s one of the world’s busiest shipping routes, a reality that’s considered one of the biggest threats to the population, which has remained small and vulnerable for decades despite receiving federal protection in 2005. And the Salish Sea is about to get busier. The Trans Mountain expansion, which is the twinning of an existing oil pipeline that carries diluted bitumen from the Alberta tar sands to British Columbia’s shores, is expected to cause the number of oil tankers passing through these waters to jump from around the 60 that annually service the existing pipeline to over 400. “The ships go exactly where the whales go,” Misty MacDuffee, marine biologist and the Wild Salmon Program Director for B.C.’s Raincoast Conservation Foundation, told Earther.Earlier this spring, it looked like the whales might receive a reprieve from the increased noise, shipping traffic, and possible marine oil spills associated with the project. In April Kinder Morgan, the Texas-based company behind the expansion, made noises about shutting it down due to growing delays caused by court battles and indigenous-led resistanceagainst the project. But, after declaring the pipeline vital to national interests, in late May the Canadian government moved to purchase the expansion. Now, a project that Raincoast Conservation Foundation’s population viability analysis found “increases the risk to more than 50% probability that the population will decline below 30 animals,” is back on.

TransCanada Keystone XL May Be One Oil Pipeline Too Many - -- TransCanada Corp.’s Keystone XL may be one pipeline too many for Canada, at least for now. Construction of the export line would supply Western Canada with more pipeline capacity than needed through 2030, assuming it were operating in the next decade along with the Trans Mountain pipeline expansion and Enbridge Inc.’s Line 3, according to research released by the Canadian Energy Research Institute on Tuesday. The three lines would raise the country’s crude export capacity to about 5.5 million barrels a day from just under 4 million barrels a day last year, according to CERI. Alberta’s growing crude oil production, mostly from the oil sands, won’t exceed the capacity of existing and three planned expanded oil pipelines for another twelve years. Canadian heavy crude prices have traded at an average discount to West Texas Intermediate future of almost $22 a barrel this year, about 70 percent bigger than the average discount last year, after existing pipelines filled to capacity amid a surge of new production from Suncor Energy Inc.’s Fort Hills oil sands mine. The discount widened 50 cents to $24 a barrel on Wednesday. The $8 billion Keystone XL, approved by U.S. President Donald Trump last year, would carry 830,000 barrels of crude from Alberta to Nebraska. While TransCanada hasn’t made a final investment decision on the pipeline, the company has said it has “approximately 500,000 barrels per day of firm, 20-year commitments." A total of 12 percent of the pipeline would be reserved for uncommitted volumes, according to the National Energy Board. The company will begin clearing brush in Montana this fall, according to a U.S. State Department letter addressed to the Assiniboine and Sioux Tribes obtained by Bloomberg News. TransCanada didn’t respond to an email seeking comment. To be sure, all three pipelines will deliver crude to different markets, with Keystone XL boosting access to the U.S. Gulf Coast, where diminishing volumes of heavy crude from Latin America have increased demand for Canadian volumes, Dinara Millington, CERI’s vice president of research, said in a phone interview. Some oil sands volumes may migrate from Enbridge’s Mainline onto Keystone XL, she said. “You want that flexibility,” she said.

Province extends fracking ban 'indefinitely' after failing to meet its own conditions - Three and a half years into what was supposed to be a "temporary" moratorium on natural gas fracking in New Brunswick, the Gallant government has failed to execute key tasks it gave itself before the ban can be lifted and is citing that inaction as a reason to extend the moratorium further."Our government has put a moratorium on hydraulic fracturing, which will continue indefinitely, as it is clear that our conditions (for ending it) cannot be satisfied in the foreseeable future,"  read an update on the moratorium released by Premier Gallant last month.But critics complain the five conditions set by government in 2014 to end the moratorium are mostly assignments the Gallant government gave itself and did not complete, including failures to strengthen provincial fracking regulations or change natural gas royalty rates."We are not aware of any work the government has done in order to satisfy its own conditions," said Colleen Mitchell, president of the Atlantica Centre for Energy, an industry group that  advocates for the moratorium to be lifted.The moratorium will continue even though locally produced natural gas supplies are rapidly running dry and New Brunswick is being forced to turn to jurisdictions that do allow fracking to solve its growing gas supply problems. "There's an incredible amount of gas that's coming up from the United States," said Enbridge Gas New Brunswick general manager Gilles Volpe about how the sources of gas supplying the province have been shifting.

China's threat to U.S. crude, coal exports is a tactical masterstroke: Russell (Reuters) - China’s threat to impose tariffs on U.S. crude oil, certain refined products and coal is possibly the only sign of clear thinking in the increasingly muddled escalating trade dispute with the administration of President Donald Trump. The tariffs on energy imports were mooted by the Chinese on June 15 as part of their response to the U.S. announcement of tariffs on $50 billion worth of imports. To be clear, the tariffs on crude oil and products and coal are still in the realm of the possible, and it will likely take a further deterioration in the relationship between the world’s two largest economies to turn them into a reality. It was also curious that the list of potential targets for customs included natural gas in its gaseous form, but not as liquefied natural gas (LNG). China imports zero gaseous natural gas from the United States, but is major buyer of its LNG. The Chinese threat to impose tariffs on energy imports makes sense from two perspectives. The first is that in economic terms it’s generally best to put tariffs on goods with high elasticity, in other words goods you can substitute relatively easily from other suppliers. The second is that if the aim of your tariffs is to inflict sufficient pain on the other country, it’s best to target them where they can do the most damage to the economy, or the politicians promoting the trade war. Looking at the first point, it’s clear that China would be able to source crude oil, refined products and coal from other countries, even if it had to pay slightly more. The Chinese have become a major buyer of U.S. crude, importing about 319,000 barrels per day (bpd) in the first five months of the year, according to vessel-tracking and port data compiled by Thomson Reuters Oil Research and Forecasts. This makes China the biggest net buyer of U.S. crude and therefore an important customer for the booming shale industry. With U.S. crude exports running at about 2 million bpd, China’s purchases represent about 16 percent of the total. However, U.S. crude supplies to China account for only about 3.5 percent of the country’s total daily imports. What this is likely to mean is that China will find it easier to replace U.S. crude imports than U.S. producers will to get new customers. 

Continental Resources CEO Harold Hamm pulls out of OPEC meeting (Reuters) - Harold Hamm, founder and chief executive officer of Continental Resources Inc, has canceled a scheduled appearance at an OPEC event this week in Vienna, a company spokeswoman said.  Hamm is the third of five U.S. shale executives to withdraw from a scheduled speaking slot at the OPEC meeting in Vienna. His withdrawal comes days after a trade skirmish between China and the United States intensified, with China imposing $50 billion in tariffs on U.S. crude oil and other goods, a retaliatory measure on Washington’s tariffs of Chinese products. Continental, the largest oil producer in North Dakota’s Bakken shale formation, has been a key supplier of crude oil to China, shipping more than 1 million barrels to the country since a U.S. crude export ban was lifted in 2015. It was unclear how China will replace that source of crude, but several OPEC countries produce crude grades similar to Continental’s Bakken wells. Continental spokeswoman Kristin Thomas confirmed Hamm’s withdrawal, saying the event did not fit with his schedule. The company did not immediately respond to requests for further comment on the China tariffs. Hamm, who was an informal campaign adviser to U.S. President Donald Trump in 2016 and was considered for a U.S. Cabinet post, had been listed since at least March on the OPEC International Seminar's website as a speaker here. His attendance had been widely anticipated as he had derided OPEC as a "toothless tiger" in 2014. Trump also chided OPEC last week, blaming the group for rising oil prices and saying its 14 members were “at it again.” Yet, Hamm has appeared in recent months to be trying to reach a more conciliatory tone with OPEC producers. Last month he attended a board meeting of Saudi Aramco, the oil producer controlled by OPEC’s largest member, Saudi Arabia. He has also begun asking fellow shale producers to focus more on profitability and less on profligate production. Hamm’s withdrawal leaves only two U.S. shale executives confirmed to speak at the event, out of an original five. Centennial Resource Development Inc CEO Mark Papa and ConocoPhillips Ryan Lance also withdrew from the OPEC event.

Scottish Government Wins Fracking Case Against Ineos - (Reuters) - Scotland's highest court ruled against petrochemicals company INEOS on Tuesday, after it challenged a devolved Scottish government moratorium against fracking for oil and gas. INEOS, headed by billionaire founder Jim Ratcliffe, argued the Scottish government had imposed an unlawful ban on fracking in October 2017 and had sought a judicial review to overturn it. The Court of Session said the government had not imposed a ban, despite several statements to that effect, and had instead an "emerging and unfinalized planning policy expressing no support on the part of the Scottish government" for fracking. The extraction of oil and gas from tight rocks by fracturing them using chemicals has become a contentious issue in Europe after it helped reverse a fall in U.S. oil output, transformed its gas sector and boosted the economy of several states. Despite that, fracking is also associated with environmental issues such as increased industrial activity, fears over water contamination and objections that it boosts fossil fuel production when more renewable energy should be encouraged. INEOS holds the rights, expiring on June 30, to explore for gas over a 400 km area between Glasgow and Falkirk. The devolved Scottish government announced last October it was against fracking, in line with public opinion. It ordered local authorities to reject planning applications from companies seeking to frack, a measure that energy minister Paul Wheelhouse told parliament was "sufficient to effectively ban the development of unconventional oil and gas extraction".  . Judge Lord Pentland said, despite such ministerial statements which he cited in the court opinion, "there is indeed no prohibition against fracking in force at the present time". INEOS welcomed the court's decision which it said clarified the "confusion arising out of government announcements". "Today's judgement makes it clear the SNP government will now have to make decisions based on facts and science rather than prejudice and political expediency," it said. "With an environmental assessment and business and regulatory assessments still to be carried out, there may never be a fracking ban in Scotland." Wheelhouse said, in reaction to the court ruling, that the government's position against fracking remained unchanged. 

Herald View: The ground is shaky under the SNP on fracking - FRACKING is obviously a dangerous concept – it can undermine a government’s policy foundations and cause severe structural damage to its credibility. Yesterday, the SNP administration was accused of extracting a liquid substance with its stance on fracking, which it told the world it had banned, only to change that to having a “preferred position” against the controversial practice.  Accordingly, the Court of Session rejected a bid by would-be frackers Ineos to overturn the ban as there was no such ban, only an evolving planning policy. To that extent, yesterday’s ruling was a legal victory for the administration, but a political defeat as Ineos and the Tories cast aspersions on its competence and suggested it had performed a sleight of hand. On a day during which nothing was as it seemed, everyone was a winner, and everyone was a loser. In one sense, this was an exercise in semantics. The new party line is that there is at present a “moratorium” on fracking, and to all intents and purposes observers might conclude that there is therefore an “effective ban”. Seen thus, yesterday’s ruling is hardly as seismic as the frackers and their allies make out – particularly as they lost. But there is no doubt that it was embarrassing for the administration to learn that its previous talk of a ban was “mistaken” and that no such ban was legally in place.  To make matters worse, it looked distinctly weaselly to change the words on its website from “The Scottish Government has put in place a ban on fracking in Scotland” (Tuesday’s position) to “No fracking can take place in Scotland and that remains the case” (Wednesday’s position).

‘Plenty’ of oil discoveries to be made in Northern Seas -- A report due to be published by the Norwegian Petroleum Directorate (NPD) today will claim there are still “plenty” of oil and gas discoveries to be made in the North Sea, the Barents Sea and the Norwegian Sea. The report claims that mature and less explored regions still hold a “significant” amount of oil and gas and that exploration and discovery will hold the key to future high hydrocarbon yields. Torgeir Stordal, NPD exploration director, said: “This report includes an updated overview of undiscovered petroleum resources on the shelf. It shows that after more than 50 years of activity, about 55 percent of anticipated oil and gas resources have yet to be produced. Of these, just under half have not even been discovered.” About two-thirds of the undiscovered resources are said to be located in the Barents Sea with the rest is distributed between the North Sea and Norwegian Sea.

Exxonmobil plans LNG import terminal off east coast Australia by 2022 - Oil major ExxonMobil is planning an LNG import project off Australia's east coast, in the state of Victoria, with a potential startup as early as 2022, a spokesman said Monday. ExxonMobil's proposed project makes it the third LNG import terminal planned off Australia's east coast, based on floating storage regasification units, as natural gas shortages in the region prompt energy companies and utilities to secure supply from global LNG markets. The project comes alongside similar plans by Australian utility AGL Energy and consortium Australian Industrial Energy, which is partly backed by Japanese energy traders Jera and Marubeni. It is still in very early stages of planning, but could begin importing gas from 2022 onwards, the spokesman said via email. Details on the size of the facility are not yet available and while a number of potential locations for it are being assessed, the state of Victoria has been flagged for its location, which would see it feed into the tight east coast gas network, he said. "ExxonMobil would be able to bring world-class project experience in all facets of LNG development, production and regasification," he said. "Combined with the existing Gippsland resource and infrastructure, an LNG import facility could ensure ExxonMobil can continue to meet our customers' needs," the spokesman added. The Gippsland Basin Joint Venture oil and gas fields, located in the Bass Strait off Victoria's Gippsland coast, are owned equally by Esso Australia, a subsidiary of ExxonMobil, and BHP Billiton Petroleum

U.S. LNG not included in China’s targeted tariff list  -- It’s not a surprise the proposed retaliatory Chinese tariffs on U.S. imports doesn’t include liquefied natural gas (LNG), Wood Mackenzie’s head of Asia-Pacific Gas and LNG, Nicholas Browne, said Monday.According to Browne, China’s announcement last Friday, that it would pursue duties against the U.S. if Washington made effective its tariffs plan on July 6, excludes LNG for two key reasons. “Firstly, LNG demand is growing rapidly in China. Secondly, the U.S. will be the key source of incremental supply growth in 2018 and 2019,” he said.The list from the Chinese government includes nearly all commodities, such as mineral fuels, mineral oils, bituminous substances and mineral waxes. Although LNG seems to be excluded from the list, natural gas in a gaseous state is included. That, however, would have no significance given China can’t import pipeline gas from the U.S., Browne noted.LNG has played a crucial role in limiting the extent of gas shortages during the last Chinese winter, with demand for the liquid fuel rising by a record 12 million tonnes (MMt) to reach 38 MMt in 2017. U.S. LNG met 1.6 MMt, or 4%, of that demand last year, Kallanish Energy learns. Tariffs on US LNG would increase costs and potentially limit availability of LNG, Browne said, adding CNPC recently signed two long-term deals with Cheniere Energy, one of which starts in 2018. “For flexible U.S. volumes, the introduction of tariffs would have posed a significant challenge for Chinese buyers as they seek to meet surging demand. It would also have created logistical headaches for suppliers to optimize their portfolios to ensure they could meet Chinese demand while redirecting U.S. LNG to other markets,” he explained.  The U.S.-China trade war is at a “nascent stage” with an uncertain extent or duration. However, Browne believes LNG is clearly seen as an essential good by the Chinese government.

$1.6 Trillion Natural Gas Expansion Will Eliminate Any Chance Of Meeting Paris Carbon Goals -- When the G20 countries meet in Argentina later this year, one of the topics on the agenda will be increasing investments in natural gas production by as much as $1.6 trillion by 2030. A new report by Oil Change International finds doing so will use up the entire remaining carbon budget limitations needed to meet the climate goals of the Paris climate accords. In other words, if the world’s major economies continue on their business as usual approach, all those promises made in Paris will likely be for naught. The slogan being used to justify continued use of natural gas resources is that it is a “bridge fuel to the future.”   Indeed, in 2017, the governor of  Rhode Island used it to advocate on behalf of a utility company that wants to build three 1,000 MW gas fired generating plants in the northwestern corner of the state and in nearby Massachusetts.  One of the concerns with natural gas is leakage of methane, which is extraordinarily high from fracking operations. The Oil Change International study shows that even without such leakage, natural gas is not the bridge fuel its proponents claim it to be. “Setting methane leakage aside, we demonstrate that even in the hypothetical case of zero methane leakage, fossil gas cannot be a bridge fuel. This demonstrates that methane leakage is not the sole determinant of whether fossil gas causes net harm to the climate. To meet climate goals, fossil gas production and consumption must, as with other fossil fuels, be phased out, and reducing methane leakage does not alter that fact

Venezuela Forced To Shut Down Production As Operations Fall Apart  - Every week the crisis in Venezuela takes a turn for the worse...There are now signs that its oil industry is entering a dangerous new phase. Argus Media reports that Venezuela has begun to “proactively shut in oil production to cope with nearly replete terminal storage, further accelerating an output decline and bringing the OPEC country closer to the psychological barrier of 1mn b/d.”Venezuela’s oil production fell to an average of 1.392 million barrels per day in May, down another 42,000 bpd from a month earlier, according to OPEC’s secondary sources. However, with the crisis in Venezuela spiraling out of control at a horrific pace, the numbers from May might as well be a year ago.The May numbers don’t reflect the full ramifications of having to deal with inadequate port capacity, after PDVSA diverted operations to Venezuela from its Caribbean island refineries and storage facilities following the attempt by ConocoPhillips to take control of them.The problem of export capacity has become so acute that PDVSA is demanding customers send ships that can handle ship-to-ship loadings, since there is a backlog of ships trying to load up at the country’s decrepit ports. PDVSA is even considering declaring force majeure on contracts that it will be unable to fulfill. The upshot is that PDVSA might have only 694,000 bpd available for export in June, which is less than half of the 1.495 mb/d that it is contractually obligated to deliver this month.  As such, the 1.392 mb/d figure for May, bad as it is, is woefully out of date. Sources told Argus Media that production plunged to just 1.1-1.2 mb/d in early June, heading down towards 1 mb/d.

Factbox: Venezuela's near collapse takes toll on oil industry - Venezuela's near economic collapse has taken a toll on the country's oil production, causing shifts in oil flows as buyers look to secure alternative supplies. As workers have fled the country, state-owned oil company PDVSA has had a difficult time maintaining crude output, let alone boosting production. PDVSA's refining sector has also deteriorated on a lack of funds and manpower.PDVSA has had difficulty pulling crude from storage because its supplies are subject to seizure by creditors. Most notably, on April 26 the International Trade Court ordered PDVSA to pay $2.04 billion to ConocoPhillips for the 2007 expropriation of ConocoPhillips' 50.1% interest in its Petrozuata joint venture in PDVSA, and its 40% stake in the Hamaca project, both of which were heavy oil installations in the Orinoco Belt of eastern Venezuela. And US has sanctioned individuals in Venezuela, including President Nicolas Maduro, prohibited the purchase and sale of any Venezuelan government debt, including any bonds issued by PDVSA, and banned the use of the Venezuela-issued digital currency known as the petro. Below are some key takeaways from the current situation.
* Venezuela crude production could be on the verge of sinking to 1 million b/d, and a drop in crude exports is causing a shift in trade flows.
* Venezuela's crude output averaged 1.36 million b/d in May, down from 1.41 million b/d in April, and 1.9 million b/d in May 2017, according to S&P Global Platts. The International Energy Agency said it could fall to 800,000 b/d or even lower next year.
* S&P Global Platts Analytics sees Venezuelan production remaining above 1 million b/d during 2019. "They have a certain amount of production that they can keep going although the heavier grades would get impacted if they can no longer buy diluents," said Chris Midgley, head of Platts Analytics.
* In early June, PDVSA notified 11 international customers that it would not be able to meet its crude supply commitments in full, a PDVSA official said. It is contractually obliged to supply 1.495 million b/d to these customers in June, but only has 694,000 b/d available. The customers either would not comment, or could not be reached for comment.
* Venezuela's rig count has fallen to 28 in May from 36 in April, and 49 in January, according to Baker Hughes International Rig Counts.
* PDVSA has experienced similar drops in the past. In the 1980s, the number of rigs fell to less than 30, causing crude production to fall to 1.3 million b/d.
* Production has slowed largely because of a lack of maintenance and as skilled employees have fled the country. For instance, PDVSA Friday was operating its 202,000 b/d Petrocedeno extra heavy crude upgrader at just 39.6% of capacity, due to delayed maintenance, lack of spare parts, and electrical failures, according to an operator at the facility.
* PDVSA's three other upgraders -- the 120,000 b/d Petrosanfelix, 120,000 b/d Petromonagas and 190,000 b/d Petropiar upgraders -- are expected to be operating below capacity in June.

Venezuela Rages: U.S. Sanctions Are "An Attack On The Oil Market" - The U.S. sanctions against Venezuela are affecting consumers worldwide and are an attack on the oil market, Venezuelan Oil Minister Manuel Quevedo said on Thursday. The minister, speaking at an OPEC International Seminar today—a day before OPEC ministers meet to discuss how much production to bring back to the market to ‘ease consumer and market anxiety’—Venezuela’s Quevedo said, as carried by Platts:“These sanctions are very strong, the sanctions are practically immobilizing PDVSA.”“They are trying to asphyxiate PDVSA,” the minister added.“It affects not just the Venezuelan oil sector but the consumers worldwide,” Quevedo said, referring to the sanctions.“It’s an attack on the oil market. Oil is an instrument for development, not an instrument for a political attack.” The U.S. has been stepping up sanctions against Venezuela, after cutting off all access of PDVSA and its sovereign to U.S. banks, and cutting off all refinancing of new debt. Amid plummeting production, PDVSA fails to honor its supply obligations, and has started to refine imported crude oil.

Libya's NOC confirms two crude storage tanks destroyed in Ras Lanuf attacks - The attacks last week on Libya's eastern oil terminals destroyed two crude oil storage tanks at Ras Lanuf, cutting its storage capacity by 42% to 550,000 barrels, the National Oil Corp. said Monday, and warned of further tank losses. Storage tanks 2 and 12 at the Ras Lanuf oil terminal were destroyed by fires after armed militia assaults, the state oil company said in a statement. Ras Lanuf had five operational storage tanks, storing up to 950,000 barrels. The loss of the two tanks has reduced its total capacity by 400,000 barrels to just 550,000 barrels, NOC said. Tank 2 is in danger of leaking and spreading the blaze to tanks 1, 3 and 6, as firefighters have been unable to reach the tanks, which are still on fire, it added. NOC declared force majeure on crude oil loadings from the Es Sider and Ras Lanuf oil terminals Thursday. Libya's oil production dropped 240,000 b/d, roughly 25%, as clashes between rival militia groups halted crude oil loadings from these two key eastern oil ports. The two Libyan terminals were set to load a total of around 420,000 b/d in June. Before the attacks, Libya produced an average of 950,000 b/d, a Platts survey of OPEC and oil industry officials and analysts showed earlier this month. 

Egypt Raises Petrol Prices by up to 50 Percent - Egypt raised gasoline prices by up to 50 per cent, the oil ministry said on Saturday, under an IMF reform plan that calls for the slashing of state subsidies on some consumer products. Oil Minister Tarek El Molla said the price rises will help Egypt save up to 50 billion pounds ($2.8 billion) in allocations for state subsidies in the 2018-19 state budget.The price hike, the third since Egypt floated the pound currency in November 2016, is expected to add more pressure on Egyptian consumers struggling to make ends meet amid high unemployment and price volatility. The ministry said the price for 95 octane gasoline was increased to 7.75 Egyptian pounds a litre from 6.60 pounds; 92 octane was increased to 6.75 pounds a litre from 5 pounds and 80 octane was raised to 5.50 pounds a litre from 3.65 pounds. The ministry also raised the price for a canister of gas for Egyptian households to 50 pounds from 30, while a bottle of gas for commercial purposes was raised to 100 pounds from 60. Molla said the price rise will cut the funds allocated for fuel subsidies to 89 billion pounds from 139 billion pounds. "Moving fuel prices will help reduce petroleum products consumption by about 5 per cent," Molla said. 

China's Oil Trade Retaliation Is Iran's Gain - I’ve told you that once you start down the Trade War path forever it will dominate your destiny. Well here we are.  Trump slaps big tariffs on aluminum and steel in a bid to leverage Gary Cohn’s ICE Wall plan to control the metals and oils futures markets.   I’m not sure how much of this stuff I believe but it is clear that the futures price for most strategically important commodities are divorced from the real world.Alistair Crooke also noted the importance of Trump’s ‘energy dominance’ policy recently, which I suggest strongly you read.But today’s edition of “As the Trade War Churns” is about China and their willingness to shift their energy purchases away from U.S. producers.  Irina Slav at has the good bits.The latest escalation in the tariff exchange, however, is a little bit different than all the others so far. It’s different because it came after Beijing said it intends to slap tariffs on U.S. oil, gas, and coal imports.China’s was a retaliatory move to impose tariffs on US$50 billion worth of U.S. goods, which followed Trump’s earlier announcement that another US$50 billion in goods would be subjected to a 25-percent tariff starting July 6.It’s unclear as to what form this will take but there’s also this report from the New York Times which talks about the China/U.S. energy trade.Things could get worse if the United States and China ratchet up their actions [counter-tariffs]. Mr. Trump has already promised more tariffs in response to China’s retaliation. China, in turn, is likely to back away from an agreement to buy $70 billion worth of American agricultural and energy products — a deal that was conditional on the United States lifting its threat of tariffs.“China’s proportionate and targeted tariffs on U.S. imports are meant to send a strong signal that it will not capitulate to U.S. demands,” said Eswar Prasad, a professor of international trade at Cornell University. “It will be challenging for both sides to find a way to de-escalate these tensions.” But as Ms. Slav points out, China has enjoyed taking advantage of the glut of U.S. oil as shale drillers flood the market with cheap oil.  The West Texas Intermediate/Brent Spread has widened out to more than $10 at times. By slapping counter tariffs on U.S. oil, that would more than overcome the current WTI/Brent spread and send Chinese refiners looking for new markets. Hey, do you know whose oil is sold at a discount to Brent on a regular basis?Iran’s.  That’s whose. And you know what else?  Iran is selling tons, literally, of its oil via the new Shanghai petroyuan futures market.

Indian oil minister mum about adhering to US oil sanctions on Iran - India's oil minister on Wednesday refused to commit his country to abandoning purchases of Iranian crude after the Islamic Republic was hit by US sanctions. International buyers of Iranian oil have until November 5 to wind down contracts before the US re-imposes sanctions on the oil, energy, shipping and insurance sectors, according to a US Department of the Treasury fact sheet.However, India's top oil official, Dharmendra Pradhan, was tight-lipped Wednesday when asked about the sanctions on the sidelines of OPEC's Vienna seminar. India is the second-largest buyer of Iranian crude, with imports averaging 600,000-700,000 b/d in the past 12 months."Let's wait and watch and see how things are unfolding," he said in an interview with S&P Global Platts. "India was among the main importers of Iranian crude when there were sanctions a few years ago." Earlier this year, India's oil ministry said imports of Iranian crude in the 2018-19 fiscal year will rise by more than 30% year on year as Iran was providing Indian refiners with a "freight discount."

Pakistan Among Top 5 Countries to Discover Oil and Gas in 2017 - Pakistan made two key oil and gas discoveries in the third quarter and another three discoveries in the fourth quarter of 2017. These discoveries may have prompted the US-based Exxon-Mobil to join off-shore drilling efforts in Pakistan. American energy giant's entry in Pakistan brings advanced deep sea drilling technology, its long experience in offshore exploration and production and its deep pockets to the country. US Energy Information Administration (EIA) estimates that Pakistan has technically recoverable deposits of 105 trillion cubic feet (TCF) of gas and 9.1 billion barrels of oil. Exxon-Mobil is expected to accelerate exploration and lead to more discoveries and increased domestic oil and gas production.Russia led with 10 discoveries, followed by Australia with seven discoveries and Colombia with four discoveries. Pakistan and the UK each had three discoveries in the fourth quarter of 2017, according to Global Oil and Gas Discoveries Review.In fourth quarter of 2017, the Former Soviet Union leads with 12 discoveries, followed by Asia with eight discoveries, and Oceania with seven discoveries. Europe and South America had five discoveries each, followed by North America with two discoveries, while the Middle East and Africa had one discovery each in the quarter, according to Offshore Technology website.

How energy could play a role in North Korea denuclearization talks - The June 12 summit between President Trump and North Korean Leader Kim Jong-un offered little visibility on the path ahead for U.S.–North Korea relations. But behind the scenes, particularly in South Korea, there is great interest in using energy as a key incentive to nudge Pyongyang toward further concessions. The U.S. already has an active energy dialogue with South Korea, with imports of U.S. liquefied natural gas and crude growing dramatically. For North Korea, which has only minimal refining capacity and lacks domestic fossil fuel production, U.S. gasoline, diesel and propane would be an attractive asset. The U.S. has promised fuel exports to North Korea before, during the 1990s peace talks. But for North Korea, increased dependence on a U.S. energy supply chain could be viewed as a new source of insecurity: Like any import-dependent energy consumer, North Korea can enhance its security only through diversifying its imports across both geography and fuel source. North Korea will likely be open to U.S. energy support, but will try to hedge its bets elsewhere — particularly Seoul, which wants long-term energy infrastructure links to regional suppliers and greater access to renewable energy. The other options:

  1. A Russian pipeline that would deliver natural gas or crude through the Korean Peninsula, serving markets on both sides of the demilitarized zone — though U.S. sanctions on the Russian energy sector would complicate such a project.
  2. A “supergrid” transmission line linking the Koreas to hydroelectric and wind power resources in Western China, Mongolia and Russia. (Only 27% of North Koreans have regular electricity access.)

U.S. policymakers will likely offer bilateral incentives to North Korea in the form of petroleum products and grid-modernization investments rather than more complicated regional pipeline and transmission links. But ultimately, U.S. energy exports and investment may prove merely a bridge from the Korean Peninsula to the vast resources of neighboring Russia and China.

Russia's Oil Export, Refinery Plans Point To Increase In Output -(Reuters) - Ahead of a meeting with Saudi Arabia and other producers, Russia already plans to increase oil exports, its July-September schedule shows, which coupled with increasing refinery runs suggests Moscow is gearing up to raise production. OPEC and non-OPEC producers are scheduled to meet on June 22-23 in Vienna to discuss a possible increase in output after more than a year and a half of coordinated cuts which have taken 1.8 million barrels per day (bpd) out of the market. Those cuts, led by Saudi Arabia and Russia, having helped slash global oversupply and raised prices by almost $20 a barrel, but there are now calls, from Russia's energy minister Alexander Novak and others, that the deal be re-examined. Crude exports and transit from Russia is expected to rise to 63.34 million tonnes in the July-September quarter from 62.45 million planned for April-June, Russia's export schedule shows. That works out to an increase of around 20,000 bpd - not significant in itself - but comes alongside plans by Russian refiners to raise third-quarter throughput by 2.2 million tonnes versus the second quarter, energy ministry forecasts show. Raising both would typically require a production increase. Under the deal among OPEC and non-OPEC producers, Russia agreed to cut production by 300,000 bpd compared to its output in October 2016. It has exceeded its production quota for the last three months, however, pumping an average 10.97 million bpd in May - or around 20,000 bpd more than agreed, ministry data showed. Russia could quickly add back at least 300,000 bpd of production, the ministry has said. Top producer Rosneft could increase output by 70,000 bpd in just two days, according to analysts who have recently visited the company. 

OPEC grandee Attiyah says oil prices at $75/b are 'reasonable' -- Oil prices trading between $70-75/b are "reasonable" for consumers and producers, said Qatar's former energy minister Abdullah bin Hamad al-Attiyah in an interview with S&P Global Platts. Saudi Arabia and Russia are pushing for oil-producing group OPEC to scrap its current 1.8 million b/d production cut agreement in the wake of pressure from US President Donald Trump who has complained over high prices. "OPEC is under a lot of pressure from politics," said Al-Attiyah, a former president of the 14-member producer group and an adviser to Qatar's emir. He added that $70-75/b was "a reasonable price" for crude. Oil ministers are converging on Vienna for tense negotiations this week. Saudi and non-OPEC partner Russia are proposing the producer coalition increases output by 1.5 million b/d in the third quarter and consider further steps to manage the market, Russia's energy minister Alexander Novak said over the weekend. However, he faces stiff opposition from Iran. The Islamic Republic has stressed its opposition to changing OPEC's existing agreement without the full support of the group. "The issue of changing the agreement requires unanimity of all who have to be on board," said Hossein Kazempour Ardebili, Iran's OPEC governor, in an interview with S&P Global Platts June 14. He added that Iran, Iraq and Venezuela were aligned on the issue. 

OPEC Confident Global Oil Demand Will Stay Strong - - An OPEC technical panel has found that global oil demand is on pace to stay strong in the second half of this year, suggesting that the oil market could comfortably absorb a production increase without sending oil prices plummeting, Reuters reported on Tuesday, citing three OPEC sources.A technical panel - a kind of economic body within OPEC - met on Monday to take stock of the oil market situation and to prepare a report for the ministers of the OPEC countries at their meeting later this week.“If OPEC and its allies continue to produce at May levels then the market could be in deficit for the next six months,” one of the sources told Reuters.“The market outlook in the second half is strong,” according to another source.OPEC is up for a tough meeting in Vienna this week after the leaders of the two groups of the OPEC/NOPEC production cuts—Saudi Arabia and Russia - have signaled that they are willing to boost production to offset what is sure to be further supply disruptions, mostly from Venezuela’s collapsing oil industry and from a potential decline in Iran’s oil exports in view of the returning U.S. sanctions.But it’s Iran and Venezuela - founding OPEC members and those most affected by U.S. sanctions and unable to boost production - that are most vehemently opposing an increase in the cartel’s production.According to one of Reuters’ sources, at the technical panel on Monday, Iran and Venezuela, as well as Algeria, continued to voice opposition to a production boost.This faction is reportedly also supported by Iraq. Iran said over the weekend that it would veto any proposal for a production increase with the support of Venezuela and Iraq.

Any OPEC outcome except free-for-all could help US shale producers - US shale oil producers will likely benefit from any decision OPEC makes this week in Vienna, with the exception of a complete breakdown in unity that created the current supply quotas."The US is in a strong position either way here," director of oil and products research at Morningstar Commodities and Energy Sandy Fielden said. "I think you'll see a benefit even if OPEC increases production, provided that they don't allow prices to fall below $40/b. And there's absolutely no incentive for OPEC to allow that to happen." Permian Basin drillers are making money despite steep Midland discounts caused by a lack of Texas pipeline capacity that is expected to continue until mid-2019. Oil prices would have to fall sharply to change that picture, analysts said.US shale was long seen as a rival to OPEC, but those tensions may be subsiding as a global supply shortage looms. Several CEOs of international oil companies, including US drillers Pioneer Natural Resources and Hess, will address the OPEC International Seminar on Wednesday in Vienna, at times sharing a stage with OPEC ministers. The production group will then meet Friday to discuss changes to its supply cut agreement that took effect in January 2017. Rapidan Energy Group President Bob McNally said chaos would be the only outcome to Friday's meeting in Vienna that would be negative for US drillers."If there was a disorderly breakdown of unity, and everyone went back to maximum production, if we go back to 2016 where everyone is going to the max, that could risk a price implosion," he said. "If you're a shale oil producer, you don't want that."That's why McNally thinks US shale producers are praying this week for anything but a free-for-all.

Oil prices finish higher as traders assess trade tensions - Oil prices finished higher on Monday to recoup some of their recent losses, as traders assessed escalating trade tensions between the U.S. and China. July West Texas Intermediate crude rose 79 cents, or 1.2%, to settle at $65.85 a barrel on the New York Mercantile Exchange, after losing 2.7% on Friday and posting a loss of 1% last week. Global benchmark Brent crude for August delivery added $1.90, or 2.6%, to $75.34 a barrel on ICE Futures Europe, following a decline of 3.3% Friday and a roughly 4% loss last week.Investors were fixated on how trade-related disagreements between the U.S. and China are escalating. President Donald Trump on Friday announced tariffs on $50 billion worth of Chinese imports, and Beijing retaliated by targeting high-value American exports.The Chinese government announced plans to place tariffs on U.S. oil imports as well as other energy products, so trade war fears are “scaring oil traders into believing that we could see this trade spat lower economic growth and reduce oil demand,” said Phil Flynn, senior market analyst at Price Futures Group, in a daily email. Analysts at Commerzbank said in a note Monday that “the possible punitive tariff of 25% means that U.S. crude oil would no longer be a low-cost alternative despite the current price discount,” adding that they “therefore expect the high price gap between Brent and WTI to remain in place during the summer months.”  Flynn, however, said “U.S. crude exports to China were roughly 380,000 barrels per day in March, a large amount but not enough to shatter the global oil supply and demand balance.” He believes the White House’s announcement of planned tariffs against Chinese goods and an equal retaliation by the Chinese “will not really slow the global economy by that much.” The trade tariffs also won’t start until early July, he said, so there’s “plenty of time to cut another deal.”  On Friday, both WTI and Brent notched big drops for the session and the week, weighed by expectations that the Organization of the Petroleum Exporting Countries and its allies will agree to increase production at a meeting this Friday.

Oil hit by flaring tensions over U.S.-China trade (Reuters) – Oil fell on Tuesday as an escalating trade dispute between the United States and China unleashed sharp selloffs in many global markets. U.S. crude futures was down $1.08 to $64.77 a barrel. The crude price was also dented by expectations that producer group OPEC and partner Russia will gradually increase output in order to make up for falls in Venezuela and potential shortfalls from Iran, which is facing U.S. sanctions related to its nuclear activity. The United States and China are threatening punitive tariffs on each other’s exports, which could include oil supplies, which sent Chinese stocks to their lowest in almost a year and kept European indices and other industrial commodities such as copper and nickel under pressure. Brent crude futures fell 62 cents to $74.72 a barrel by 1120 GMT. Oil traders are closely watching a threat by China to react to U.S. tariffs by putting a 25 percent duty on U.S. crude oil imports, which have been surging since 2017 to a value of almost $1 billion per month. Global oil demand will be revised downwards and as such oil will not be immune from all of the potential negative impact of international trade wars. Energy consultancy Wood Mackenzie said the United States “would find it hard to find an alternative market that is as big as China”. It said China takes around 20 percent of all U.S. crude exports.

RBOB Slides After Surprise Build, WTI Flat On Crude Draw -  With WTI unable to rally beyond $65 today due to trade war concerns (and with OPEC on its mind), investors' expectations are for further inventory draws this week, which WTI did but an unexpected build in gasoline sent RBOB lower. “The market is in a holding pattern awaiting OPEC decisions and tethered very closely to the stock market, which is crumbling,” said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. API":

  • Crude -3.016mm (-2.475mm exp)
  • Cushing -1.594mm (-450k exp)
  • Gasoline +2.113mm
  • Distillates +750k

Another sizable draw for WTI but Gasoline surprised with a big build (as did Distillates)... WTI was unable to get back above $65 during the day session and the API print sparked a kneejerk lower in WTI/RBOB before WTI recovered...

WTI/RBOB Algos Confused As Production Stalls, Crude Draws, Product Builds -- WTI bounced off $65 this morning but RBOB is lower after API's unexpected build in gasoline as all eyes remain focused on Vienna and any OPEC headlines. However, DOE reported the biggest draw in crude since Jan (but another weekly build in Gasoline and Distillates).“The market is in a holding pattern awaiting OPEC decisions and tethered very closely to the stock market, which is crumbling,” said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida.  DOE:

  • Crude -5.914mm (-2.475mm exp) - biggest draw since Jan
  • Cushing -1.296mm (-450k exp) - biggest draw since Feb
  • Gasoline +3.277mm
  • Distillates +2.715mm - biggest build since Feb

Following inventory draws across the board last week, very mixed bag this week with crude seeing the biggest draw since Jan (over double expectations) and products seeing big builds... Gasoline stocks are near 5Y highs for this time of year and bucking the seasonals... The WTI-Brent spread has pushed back down to $10...

WTI vs. WTI vs. WTI - The degree to which the perception of quality of West Texas Intermediate crude oil influences price was on display Wednesday in the form of the following crude value indication given to S&P Global Platts: WTI Midland at Cushing, Oklahoma, is worth 90 cents/b more than WTI at Cushing. If that sounds confusing, it is, and let me explain.West Texas Intermediate is the flagship US grade of oil produced in the Permian Basins of West Texas and transported by pipe, rail and truck to refiners near and far (like India far). The value of WTI at Cushing, Oklahoma, is the most commonly accepted benchmark for crude sales in the Americas for varying types of crude oil produced onshore and offshore in the US. It’s called “Cash WTI.”WTI at Cushing also forms the backbone of the de facto North American crude oil futures contract, CME Group’s NYMEX WTI Light Sweet Crude Oil, which for simplicity’s sake we’ll call NYMEX Crude from now on. Launched in March 1983, historically, it was often colloquially referred to in the market as “NYMEX WTI,” even though WTI was one of many grades that could be delivered at Cushing against the contract, which caused uncertainty.“Confusion over what is sold has led to problems, Merc officials say,” an Associated Press article from August 1990 reads. “Some buyers who thought they were getting WTI have discovered they were getting a different grade.” That led the NYMEX at the time to tell the market it should refer to the contract as light sweet crude instead of WTI, though the three-letter acronym persists to this day.CME says NYMEX Crude represents light sweet crude oil meeting a series of specifications including 37-42 API, less than 0.42% sulfur and other parameters, which includes WTI-type light sweet crude streams as well as other blends referred to as Domestic Sweet, or DSW, that meet those specs. To simplify: NYMEX Crude is WTI that meets NYMEX parameters, as well as other crudes, which may be blends, that meet NYMEX parameters. Blended crudes aren’t bad, but the possibility that a buyer may get one is an uncertainty, and uncertainty leads to lower bids for the unknown and higher bids for the known.

Crude Oil Prices Settle Lower as OPEC Decision Looms - – WTI crude oil prices settled lower Thursday as major oil producers neared a deal to hike oil production by about one million barrels per day to avert a possible supply shortage and stabilise prices. On the New York Mercantile Exchange crude futures for July delivery fell 0.26% to settle at $65.54 a barrel, while on London's Intercontinental Exchange, Brent fell 2.22% to trade at $72.08 a barrel. Saudi Arabian Energy Minister Khalid al-Falih reportedly said OPEC and non-OPEC members were close to hashing out a deal to lift oil production, and suggested an output hike of about 1 million barrels was needed to stabilise prices. The production-cut accord – initially agreed in November 2016 – had achieved its goal of rebalancing the oil market, restoring global inventories to the five-year average, al-Falih said. The oil-cartel's attempts to reach a consensus on an output hike has been plagued by other OPEC members, who have appeared unwilling to compromise. Iran had been one of the most vocal OPEC members against an uptick in production, insisting oil prices still needed to be supported, but has since warmed up to the idea of a modest boost in output. Non-OPEC Russia, meanwhile, has taken a more hawkish stance on output hikes, calling for a 1.5 million barrel a day increase in production amid fears the market could overheat as demand picks up. OPEC is expected to announce its decision on Friday. OPEC has also come under fire – for the sharp rise in oil prices – from U.S. President Donald Trump, claiming the oil-cartel was "artificially" keeping oil prices elevated. Some analysts have suggested OPEC would strive to reach a 'goldilocks' output hike, neither too high – which would irk Iran – nor too low, which would raise the risk of higher oil prices negatively impacting oil demand. "Saudi energy minister Khalid al-Falih hinted that looking at five-year average inventory levels is not a good measure of the health of global markets," a team of analysts at Energy Aspect said in a research note. "If true, then a 1 million barrels a day increase between now and the end of the year is not warranted...half of that figure would be a good compromise."

Oil price will be driven by consumers rather than OPEC: Kemp (Reuters) - Oil traders' attention is focused this week on Vienna, where ministers from the Organization of the Petroleum Exporting Countries and its allies must decide whether to increase their output in the second half of 2018. But the direction of prices over the next year will be more influenced by less visible developments in the major oil-consuming countries, especially the United States, Europe, China and India. With available production capacity fairly fixed in the short-term, oil market rebalancing will depend on consumer reactions to higher prices ( ). Stocks of crude oil and refined products are now below their five-year averages and expected to continue falling in the second half of 2018 and through 2019. OPEC's spare production capacity has shrunk to less than 2 million barrels per day (bpd) and is expected to fall to less than 1 million bpd by the end of 2019. OPEC and its allies are discussing an output increase of 1 million bpd or more to avert future shortages and stock declines. By adding barrels to the market now, OPEC can stabilise or even increase inventories and ease shortages later in 2018/19. But the cushion of spare capacity is already low and will shrink further as OPEC boosts its output, leaving the market without much capacity to absorb further disruptions. U.S. oil production is expected to rise by 1.4 million bpd in 2018 and another 1.1 million bpd in 2019 but may not be able to rise much faster because of pipeline bottlenecks. From the supply side, therefore, the oil market's production capability now appears fairly fixed for the rest of 2018 and into 2019. Any further rebalancing will have to come from the demand side, where prices will have to rise high enough to moderate consumption growth. 

OPEC Cartel On The Verge Of Collapse -- The last time OPEC splintered, and the Saudi energy minister demonstrated that when it comes to the "cartel", the only opinion that matters was that of, well, Saudi Arabia, was on November 27, 2014, when in the infamous "OPEC Thanksgiving Massacre", OPEC effectively broke up after Saudi Arabia decided it could put shale out of business by sending the price of oil so lower, it would cause mass shale defaults and regain market share.  The result was two-fold: oil prices crashed (both immediately as shown below) and over the longer-term, while the Saudi strategy proved to be an epic disaster as it woefully miscalculated that shale's breakeven price was far lower than the Saudi advisors (Goldman and Citi, as well as a handful of hedge funds) had estimated.  We bring this bit of not so ancient history because tomorrow OPEC may break apart again, for the simple reason that Iran, OPEC's third largest producer, finds itself in a lose-lose situation, in which it either agrees with a production boost, thereby effectively greenlighting US sanctions against itself and allows Saudi Arabia to take over much of its market share, or defies Saudi Arabia, and along with Venezuela, causes OPEC to splinter again.Sure enough, with just hours to go until tomorrow's meeting, Iran has continued to reject any increase in OPEC oil production, potentially dooming any effort by Saudi Arabia and Russia to get a consensus decision tomorrow.According to Bloomberg, during today's Vienna talk, ministers from some of the world’s largest oil producers failed to secure the sought-after compromise that would allow the cartel to ease back on its production cuts. And here is where it gets interesting: while Iran alone can veto any change to the group’s output policy, there is historical precedent for the Saudis to act alone and increase supply when they see an urgent need. And even though Saudi Arabia also finds itself between a rock (the Aramco IPO which desperately needs even higher oil prices) and a hard case (President Trump who demands higher oil prices), Crown Prince MbS will have no choice but to yield to the latter, and overrule the Iran veto, concluding the process in which Trump effectively splinters OPEC.  Sensing what is about to happen, Iran - which again has virtually no upside tomorrow no matter what the OPEC decision is - was not happy:

OPEC agrees modest hike in oil supply after Saudi and Iran compromise (Reuters) - OPEC agreed on Friday on a modest increase in oil production from next month after its leader Saudi Arabia persuaded arch-rival Iran to cooperate, following calls from major consumers to help reduce the price of crude and avoid a supply shortage. However, the decision confused some in the market as OPEC gave opaque targets for the increase, making it difficult to understand how much more it will pump. Oil prices rose as much as 3 percent. “Hope OPEC will increase output substantially. Need to keep prices down!” U.S. President Donald Trump wrote on Twitter less than an hour after OPEC announced its decision. The United States, China and India had urged Vienna-based OPEC to release more supply to prevent an oil deficit that would hurt the global economy. The Organization of the Petroleum Exporting Countries said in a statement that it would go back to 100 percent compliance with previously agreed output cuts but gave no concrete figures. Saudi Arabia said the move would translate into a nominal output rise of around 1 million barrels per day (bpd), or 1 percent of global supply. Iraq said the real increase would be around 770,000 bpd because several countries that had suffered production declines would struggle to reach full quotas. The deal gave a tacit green light to Saudi Arabia to produce more than currently allowed by OPEC as the 14-nation organization avoided setting individual country targets. Iran, OPEC’s third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela. Trump slapped fresh sanctions on Tehran in May and market watchers expect Iran’s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise OPEC output, unlike top oil exporter Saudi Arabia. OPEC and its allies have since last year been participating in a pact to cut output by 1.8 million bpd. The measure had helped rebalance the market in the past 18 months and lifted oil LCOc1 to around $75 per barrel from as low as $27 in 2016. But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months. The output boost agreed on Friday had been largely priced into the market and was seen as modest. 

Oil output to rise by 1m barrels a day as Opec reaches compromise - Major oil producers have agreed to pump more crude to help reduce prices and prevent a supply shortage, in a significant reversal of Opec’s strategy of curbing output over the past 18 months. After a fraught meeting in Vienna in which Iran was initially at odds with a Saudi-led drive to boost production, ministers settled on a target they said would increase output by around 1m barrels per day (bpd). Donald Trump, who has blamed the cartel for recent oil price highs, appeared to welcome the deal. “Hope Opec will increase output substantially. Need to keep prices down!” the US president tweeted after the agreement. However, analysts and ministers said the actual amount of extra oil is likely to be around a third lower than the headline 1m figure. Joe McMonigle, an energy analyst at HedgeEye, said: “I suspect we will eventually get some calculations from Opec but [the] lack of details is bullish not bearish for oil prices.” Brent crude, the international benchmark, was up nearly 2% to $74.47 (£56.12) a barrel, shortly after the agreement was announced. It hit $80 a barrel last month before falling back. The oil cartel also failed to spell out how the extra production would be allocated among members, a key question as several have no capacity to pump more crude. 

Oil up over 2 percent as OPEC raises output modestly (Reuters) - Oil prices rose sharply on Friday as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand. Benchmark Brent crude LCOc1 jumped $2.29 a barrel, or 3.1 percent, to a high of $75.34 before slipping to around $74.60 by 1345 GMT. U.S. light crude CLc1 was $1.90 higher at $67.44. The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after its de facto leader Saudi Arabia persuaded arch-rival Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage. The group agreed OPEC and its allies led by Russia should increase production by about 1 million barrels per day (bpd), or 1 percent of global supply, OPEC sources said. The real increase will be smaller because several countries that recently underproduced oil will struggle to return to full quotas, while other producers may not be able to fill the gap. The deal looked to be broadly in line with expectations. Analysts had expected OPEC to announce a real increase in production of 500,000 to 600,000 barrels per day (bpd), which would help ease tightness in the oil market without creating a glut. “The effective increase in output can easily be absorbed by the market,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told the Reuters Global Oil Forum. 

OPEC ministers agree to raise oil production but don’t say by how much - OPEC ministers announced a deal on Friday that will increase oil supplies from the producer group, which has been capping output in order to balance the market and boost prices for the last 18 months.The agreement came after a week of tense negotiation at OPEC's headquarters in Vienna, Austria. Top OPEC producer Saudi Arabia faced the challenge of convincing a handful of reluctant producers including Iran, Iraq and Venezuela to support an output hike.While OPEC avoided the disastrous outcome of ending the week without a deal, it left the oil market somewhat disappointed by declining to announce a hard figure."With the looming threat of an Iran walkout, the best you could get was deliberate ambiguity," said Helima Croft, global head of commodity strategy at RBC Capital Markets. On Friday, OPEC members agreed to start pumping more oil, though the agreement will not end the group's 18-month-old deal to limit output. Instead the producers are seeking to cut no deeper than 1.2 million bpd, the target they set in November 2016. OPEC's official statement said members agreed to return to 100 percent compliance with the 2016 deal beginning on July 1. The group said compliance reached 152 percent in May 2018, which means OPEC was cutting about 600,000 bpd more than it intended.Ahead of the official decision, sources said the group was aiming to restore about 1 million bpd to the market. However, industry sources familiar with the oil cartel's deliberations said the actual increase is likely to total around two-thirds of Saudi Arabia's target.That's because some OPEC members would be unable to sufficiently ramp up crude production. Analysts say supply increases are more likely to fall in a range between 600,000 to 800,000 bpd.OPEC's agreement with Russia and other producers to limit oil output has helped to clear a global supply overhang that weighed on prices for years. Oil prices shot up on Friday as details of the deal leaked ahead of the statement. John Kilduff, founding partner at energy hedge fund Again Capital, said the lack of clarity in the official statement around a production target was boosting crude futures.

Oil Prices Jump After OPEC Deal to Lift Output – WSJ -- Oil prices rose by the biggest amount in nearly two years Friday after some of the world’s major oil producers agreed to boost crude output less than many investors had feared. Ministers from the Organization of the Petroleum Exporting Countries ended a contentious gathering with a loose promise to boost output by about 600,000 barrels a day. That was far less than the one million barrels many predicted.The result dashed the hopes of some big producing nations like Russia, which wanted to raise production further to sell more crude at these higher prices. The move was cheered by investors, who say they now feel more confident the global glut that dragged U.S. oil prices below $30 a barrel isn’t about to return.  U.S. oil prices surged 4.6% to $68.58 a barrel; the price of Brent, the international benchmark, rose $2.50, or 3.4%, to $75.55.    For U.S. prices, it marked the biggest one-day jump since November 2016 when OPEC agreed to cut oil output for the first time in eight years.  Oil prices have risen briskly this year amid improving global economic growth and unexpected supply outages, drawing complaints from big consuming countries, like the U.S.OPEC said Friday its members had tentatively agreed with their non-OPEC partners to end their overcompliance with production curbs they set in 2016 to add barrels to the market.On paper, such a move would add about one million barrels a day to global markets, officials said. But the boost is to be shared among all members, some of whom can’t raise output at all right now. That translates into about 600,000 barrels of new oil a day, said people familiar with the deal’s technical aspects. The 2016 cuts had helped boost oil prices to a 3½-year high earlier this year, sending U.S. crude prices above $70 a barrel and boosting the earnings of big global producers like Exxon Mobil Corp. and Chevron Corp.

Trump Tweets Hope For "Substantial Increase" After OPEC Agrees To Hike Oil Production By 700kb/d - What was expected to be a drawn-out affair, with Iran potentially resisting and even leading to the collapse of the cartel, moments ago OPEC reached a deal in principle to raise oil production by 1 million b/d on paper, and in reality by 600 kb/d as many of the OPEC nations are already tapped out and unable to produce more."Real" increase of 600,000 b/d: BBG— Vandana Hari (@VandanaHari_SG) June 22, 2018The deal is roughly what the committee had agreed to yesterday and is the plan pushed by Saudi Arabia all week.And while details haven’t yet been formally announced, the deal would mean a return to 100% compliance with output quotas.As Bloomberg notes, this is the deal traders have been waiting for:The fear was that, if the meeting broke up in disarray, Saudi Arabia would simply open the taps and other producers would follow suit, unleashing far more supply than the market needed. What this deal does is to bring some order to the process of easing supply restraint. Indeed, absent some last minute shock, Iran appears to have gone along with the majority and will comply with what is effectively A Saudi-Russian decision, prompted by Trump complaints for the cartel to produce more oil . Update: the deal is done and here are the headlines, which are as mostly reported previously - a 1 million "paper" production increase, which however will not be fully satisfied since many nations are already at their peak output, as OPEC nations comply with output quotas - with the exception of the "real" production increase, which according to the Nigeria energy minister will be 700kb/d while earlier reports had it at 600kb/d:  Here is the final full #OPEC communique |

Congress Is Considering A Bill Enabling Anti-Trust Litigation Against OPEC - Trump’s open and repeated criticism of OPEC and its influence on oil prices provides credibility to the belief that he would sign into law the NOPEC legislation that is currently making its way through Congress. The bill would allow America to pursue litigation against OPEC on anti trust grounds.NOPEC isn’t a totally new concept, as it has been drafted and voted through Congress some 16 times over the past 18 years, but never made it past the President’s desk, whether it was Bush or Obama. But Trump could give NOPEC a different sort of ending, one which could see it taking up the status of US law.  Anadolu agency reports: A legislation being debated in Congress could put pressure on OPEC if it is signed into law by President Donald Trump who has long been critical of the cartel’s practices. If the No Oil Producing and Exporting Cartels Act, or NOPEC, is signed into law, it would allow the U.S. to sue the cartel for manipulating crude prices and global oil market that caused enormous damage for the American economy and consumers.The NOPEC Act was first introduced in 2000 to allow the cartel to be sued by the U.S. in violation of anti-trust laws. It has been introduced around 16 times since then, but former presidents George W. Bush and Barack Obama were openly against it.“In the energy industry our players get hurt, because some actions by OPEC — flooding the market with oil at a time where normally they wouldn’t have in the past — ended up prices going too low during the production war, knocking out a lot of investment that we probably are going to need in future,” senior market analyst Phil Flynn from Chicago-based futures brokerage firm, Price Futures Group, told Anadolu Agency.“I would argue that OPEC conspired to knock a lot of energy producers out of business so that they could maintain the market share. And I think they succeeded in doing that in a large degree,” he said.

Rig count slides by 7 - Oil and gas companies pulled seven drilling rigs out of operation this week, the Houston energy services company Baker Hughes reported.The number of oil rigs operating in the United States fell by one while those seeking natural gas dropped by six, driving the overall rig count down to 1,052, compared to 941 a year ago.Texas lost one net rig over the week. In the booming Permian Basin, drillers pulled two rigs, bringing the rig count in the West Texas shale play to 474, compared to 369 a year ago. The Permian still accounts for more than half of the 862 oil rigs operating in the United States. The rig count was unchanged in the Eagle Ford shale, the second most active U.S. oil and gas field, with 82 operating rigs.

Rig Count Falls As US Oil Output Flatlines | - Baker Hughes reported another dip in the number of active oil and gas rigs in the United States today. Oil and gas rigs decreased by 7 rigs, according to the report, with the number of oil rigs decreasing by 1, and the number of gas rigs decreasing by 6.The oil and gas rig count now stands at 1,052—up 111 from this time last year.Canada, for its part, gained 21 oil rigs for the week—after last week’s gain of 27 oil and gas rigs. Despite weeks of significant gains, Canada’s oil and gas rig count is still down by 10 year over year. Oil benchmarks surged on Friday afternoon as the market processed OPEC’s agreement to stick more closely to the production cuts by holding the feet to the fire of those members who had underproduced its quota under the OPEC deal that went into effect in January 2017. The OPEC meeting on Friday resulted in OPEC agreeing to increase production to get back to agreed upon levels, which is about 1 million bpd more than the cartel produced in May, when compliance to the quota was about 150%. Missing from the events of the day was OPEC’s agreement to undo the production cut deal, or to gradually increase production beyond the contractual amount of 32.4 million bpd. The absence of any real change to the production quota proceeded a significant price spike of 4%, as relief set in that OPEC deal would either fall apart or come to an early end. At 11:44am EDT, the WTI benchmark was trading up 3.83% (+$2.51) to $68.05, with Brent up 2.31% (+$1.68) to $74.48. Both benchmarks are up week over week as well as on the day.US oil production continues putting downward pressure on oil prices, and for the second week in a row, US production reached 10.900 million bpd—close to the 11 million bpd production that many had forecast for the year. This week is the first week in over a quarter that wasn’t an increase. At 6 minutes after the hour, WTI was trading up 4.81% at $68.69, with Brent trading up 2.18% at $74.39.

OPEC/non-OPEC coalition to restore oil cut compliance to 100%: Falih - OPEC and its 10 non-OPEC partners have agreed to restore compliance with their production cuts to 100%, implying a nominal distribution of "just under 1 million b/d" between the 24 countries, Saudi energy minister Khalid al-Falih said Friday. How that output rise would be allocated among the members would be finalized tomorrow, Falih told reporters, emerging after nearly five hours of talks with his OPEC counterparts in Vienna. "We know that certain countries don't have the spare capacity and others do so it will be disproportional in terms of which countries are actually able to pump the additional crude, but it will not be above the 1 million for sure collectively," Falih said. Nigerian oil minister Emmanuel Kachikwu said the deal would result in the addition of 700,000 b/d in actual production among OPEC's 14 members.

Saudi pledges 'measurable' oil supply boost as OPEC, Russia agree deal  (Reuters) - OPEC agreed with Russia and other oil-producing allies on Saturday to raise output from July, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers.  The Organization of the Petroleum Exporting Countries had announced an OPEC-only production agreement on Friday, also without clear output targets. Benchmark Brent oil rose by $2.5 or 3.4 percent on the day to $75.55 a barrel. On Saturday, non-OPEC oil producers agreed to participate in the pact but a communique issued after their talks with the Vienna-based group provided no concrete numbers amid deep disagreements between OPEC arch-rivals Saudi Arabia and Iran. U.S. President Donald Trump was among those wondering how much more oil OPEC would deliver. “Hope OPEC will increase output substantially. Need to keep prices down!” Trump wrote on Twitter after OPEC announced its Friday decision. The United States, China and India had urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth. OPEC and non-OPEC said in their statement that they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction. Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC combined would pump roughly an extra 1 million barrels per day (bpd) in coming months, equal to 1 percent of global supply. Top global exporter Saudi Arabia will increase output by hundreds of thousands of barrels, he said, with exact figures to be decided later. “We already mobilized the Aramco machinery, before coming to Vienna, pre-empting this meeting,” Falih said, referring to the Saudi state oil company. Russian Energy Minister Alexander Novak said his country would add 200,000 bpd in the second half of this year.

Saudi Arabia's Economic Revamp Means More Jobs for Saudis—If Only They Wanted Them - Abdulmohsen, an executive at a Saudi logistics company, estimated that half of the Saudis on his payroll are employees in name only. “Our company can’t survive without foreign workers because there are some jobs that Saudis just won’t do, like truck driving,” Abdulmohsen says. “Where are the Saudi drivers?” Successive monarchs saw replacing expat workers with Saudis as desirable but not essential. Targets for the “Saudization” of labor were only loosely enforced. That changed under the current Saudi leadership, which has vowed to transform the sleepy petrostate into a dynamic economy, with plans that include selling a small portion of the state-owned oil giant Saudi Aramco through a public listing. For the transformation to succeed, Saudi Arabia must slash its bloated bureaucracy and find jobs for Saudis in the private sector. About two-thirds of Saudis currently working are employed by the state. Adding to the pressure to replace foreigners with locals is the kingdom’s unemployment rate of 12.8% at the end of 2017. The goal is to cut that to 7% by 2030. .Though the workforce percentage that must be Saudi varies from sector to sector and job type to job type, the quotas generally are rising. Starting this September, all salespeople at bakeries and electronics and furniture shops will have to be Saudi. When jewelry stores were forced to replace their foreign workers entirely with locals last year, the owners of a chain called Osool panicked. They had employed only expats and didn’t know where to begin to recruit Saudis. They laid off almost their entire staff of 100 and closed all but two of their 25 stores. After nearly half a century, the family-owned business was on the brink of collapse. “This is gold, it can’t be handled by just anyone,” said Ali al-Ayed, 24, whose father started the company. “There aren’t enough trained and qualified young Saudis.” The first Saudis they recruited were the founder’s four sons, who quit their other jobs and started working in two of the shops to keep them open. 

Saudi Arabia, UAE conduct air strikes on Yemen’s Hudaida airport - The Saudi and Emirati-led coalition has conducted air strikes on Yemen's Hudaida airport to support forces attempting to seize control from Houthi fighters inside, according to Saudi and Houthi media. The coalition warplanes carried out five strikes on the port city of Hudaida - a lifeline to millions of Yemenis - on Sunday in a continuation of the biggest battle of the war in three years, the Houthis' official SABA news agency said. Saudi-owned broadcaster Al Arabiya also reported strikes on the airport. The coalition launched a major offensive five days ago that could cut off supply lines to the capital Sanaa, which is controlled by the Houthis. Each side holds various parts of the airport. The UN envoy for Yemen arrived in Sanaa on Saturday for crisis talks amid growing fears that fighting between the two sides could exacerbate a humanitarian crisis. Martin Griffiths has not made any statement since his arrival in Yemen. He is expected to propose to rebel leaders that they halt fighting and cede control of Hudaida's vital port to a UN-supervised committee. Griffiths' arrival came as fighting intensified around Hudaida's airport amid conflicting claims over its fate. 

The Saudi-UAE Alliance Is The Most Dangerous Force In The Middle East Today - For three years, Saudi Arabia and the United Arab Emirates have conducted a murderous campaign to reinstall a pliable regime in the desperately poor country of Yemen. This campaign is based on a lie intended to gain American support: that the two authoritarian monarchies are responding to Iranian aggression. Now the UAE is preparing a military offensive that could split Yemen apart and create mass starvation.The Saudi-Emirati alliance is the most dangerous force in the Middle East today. Sometimes acting alone, but usually in tandem, the two dictatorships have promoted intolerant Wahhabism around the world, backed brutal tyranny in Egypt and Bahrain, supported radical jihadists while helping tear apart Libya and Syria, threatened to attack Qatar while attempting to turn it into a puppet state, and kidnapped the Lebanese premier in an effort to unsettle that nation’s fragile political equilibrium. Worst of all, however, is their ongoing invasion of Yemen.To demonstrate support for its royal allies, America joined their war on the Yemeni people, acting as chief armorer for both authoritarian monarchies and enriching U.S. arms makers in the process. America’s military has also provided the belligerents with targeting assistance and refueling services. And our Special Forces are on the ground assisting the Saudis. The result has been both a security and humanitarian crisis. Observed Perry Cammack of the Carnegie Endowment: “By catering to Saudi Arabia in Yemen, the United States has empowered AQAP, strengthened Iranian influence in Yemen, undermined Saudi security, brought Yemen closer to the brink of collapse, and visited more death, destruction, and displacement on the Yemeni population.

Coalition Ignores Famine Warnings and Continues Assault on Yemen as Critics Question US Complicity --  Ignoring international aid groups’ warnings that an attack on the Yemeni city of Hodeida, which is held by Houthi rebels, could exacerbate hunger in an impoverished and war-torn nation already on the brink of famine, Saudi-led US-backed coalition forces continued a sweeping assault on the Red Sea port city Saturday, reportedly seizing control of an airport.Since the fighting started earlier this week, thousands of Hodeida’s 600,000 civilians have evacuated and hundreds of people have been killed. The port city is the main conduit through which about 70 percent of international aid reaches Yemenis, many of whom are battling starvation and outbreaks of infectious diseases such as cholera.The Norwegian Refugee Council’s office in Yemen told Reuters that “humanitarian agencies cannot currently access areas south of the city where people are most likely to have been injured, affected, and displaced, leaving us without a clear picture of needs.” “The lack of humanitarian assistance, following suspension of aid programs and with limited NGO staff on the ground while a military offensive is ongoing, will have severe consequences on a region already facing restrictions on the import and internal transportation of vital supplies, including medicines, food, and fuel,” Frederic Pelat, head of Médecins Sans Frontières’ mission in Yemen, warned Thursday. “Yemenis living in the northern parts of the country depend on vital supplies that pass through Hodeida’s port.” The port of #Hodeida is an essential lifeline for the country: more than 70% of all food, essential medicines and healthcare supplies are brought in through this port.

UAE Officers Film Themselves Raping, Torturing Men In Yemen "Hidden Prisons" - Hundreds of prisoners in southern Yemen swept up on suspicion of belonging to al-Qaida or ISIS are being systematically raped, tortured and humiliated in at least five out of 18 UAE-controlled "hidden prisons," according to seven witnesses who spoke to AP, which also obtained letters and drawings smuggled out of one prison in Aden.Emiratis have swept up hundreds of Yemeni men into a network of at least 18 hidden prisons on suspicion of being al-Qaida or Islamic State militants. The prisoners are held without charges or trials....Witnesses said Yemeni guards working under the direction of Emirati officers have used various methods of sexual torture and humiliation. They raped detainees while other guards filmed the assaults. They electrocuted prisoners’ genitals or hung rocks from their testicles. They sexually violated others with wooden and steel poles. ...“In some cases, they rape the detainee, film him while raping, use it as a way to force him to work for them,” he said. He spoke on condition of anonymity, because of security concerns. –AP “They strip you naked, then tie your hands to a steel pole from the right and the left so you are spread open in front of them. Then the sodomizing starts,” said one father of four.  “They tortured me without even accusing me of anything. Sometimes I wish they would give me a charge so I can confess and end this pain,” he said. “The worst thing about it is that I wish for death every day and I can’t find it.”  The father of four said that sometimes the screaming from the beatings is so intense that he can feel his cell shake. “It’s beyond imagination,” he said. –AP The photos reportedly smuggled out of Aden depict a man hanging from chains while being electrocuted. In another, an inmate cowers on the floor surrounded by snarling dogs as people kick and beat him. There are also graphic depictions of anal rape. “Naked after beating,” one Arabic caption says. Another drawing shows a man’s rectum being forced open.

"Qatar Island": Saudis Launch Massive Canal Project To Cut Off Neighbor -It almost sounds too insane to be believed, but Saudi Arabia's move to further isolate neighboring Arab rival Qatar by literally turning it into an island is but the latest in an intense year long feud between the two countries that has already produced its fair share of bizarre headlines.  Tiny but ultra-wealthy Qatar is a peninsula which shares a 37.5 mile border (60km) with Saudi Arabia on the kingdom's northeast side and juts out from the Arabian peninsula about 100 miles into the Persian Gulf.  Saudi media revealed this week the kingdom is quickly moving forward with ambitious plans to dig a 200 meter wide and 15-10 meter deep canal the entire length of the land border, effectively creating 'Qatar island' as some Mideast news sources are already calling it. Of course, the Qataris don't appear to have a say in their own country's geographic fate, and the Saudis and Emirates further plan to locate nuclear waste sites and a military base along the proposed canal to boot.  The so-called “Salwa Marine Canal Project” has reportedly opened up to bidding among five international companies that specialize in digging canals, with bids closing next Monday and the project to be awarded in 90 days, according to regional sources. The canal project is estimated to cost up to 2.8 billion riyals ($750 million) according to Saudi-based Sabq newspaper. Saudi and UAE officials have long accused Qatar of supporting terrorism, aligning with Iran, and meddling in the affairs of its gulf neighbors in a crisis that has resulted in the near complete unraveling of the GCC.  The Salwa canal was first announced in April but many observers dismissed it as but the latest in outrageous Saudi claims and punitive measures aimed at Qatar.  But it now appears to be concretely advancing and not a bluff. 

Syria Sends More Troops To South Despite New US Warnings-  The United States once again warned this week it would "take firm and appropriate measures" against the Syrian government forces should they continue pushing into the southwest of the country, which has long been held by Al-Qaeda, ISIS, and other groups fighting the Assad government. The state department issued a statement Thursday saying that any Syrian government action risks igniting a broader conflict, but didn't specify what actions the US or its allies might take.  “We affirm again that the United States will take firm and appropriate measures in response to Syrian government violations in this area,” the statement said in an almost word for word repeat of a prior warning issued at the end of May. It said further that “the ceasefire must continue to be enforced and respected."As Reuters reports, the Syrian Army has continued bombarding rebel positions in the southwestern Deraa region, including the towns of Kafr Shams and al-Harah, near the border with the Israeli-occupied Golan Heights.The "ceasefire" is a reference to a tenuously-holding deal between the US, Russia, and Jordan struck last November which among other stipulations proposed efforts for "the reduction, and ultimate elimination of foreign forces and foreign fighters from the area to ensure a more sustainable peace." This was widely interpreted at the time as calling for an "Iran-free" zone in southern Syria, as Israel has long threatened to go to war should Iranian troops be present near its border.A week prior to the latest the state department warning The Wall Street Journal reported in a dubiously sourced story that Hezbollah and other Iran-linked fighters are disguising themselves as Syrian government troops to avoid being targeted by Israeli airstrikes. “It’s a camouflage,” the leader of a group called the Salvation Army told the WSJ. “They are leaving in their Hezbollah uniform and they are returning in regime vehicles and dressed in regular [Syrian] army uniforms,” the commander said, claiming further that many of the Iran-backed fighters in Syria had obtained ID cards of dead Syrian fighters. However, a report in Sputnik cites a local Israeli radio interview with Defense Minister Avigdor Lieberman as saying the Wall Street Journal story of disguised Iranian troops operating in southern Syria is falseIsrael's Defense Minister Avigdor Lieberman said that although there are several dozen Iranian "so-called advisors" in southern Syria, there are no forces there disguised as Syrian army forces or operating within its ranks.

Turkish forces begin patrolling Syria's Manbij The Turkish army has said its forces have begun patrols along the outskirts of the northern Syrian city of Manbij, in cooperation with US soldiers in the area.The announcement on Monday came after Turkish and US military officials agreed earlier this month to a plan for the withdrawal of Kurdish fighters considered "terrorists" by Ankara from the city.The Turkish army announced on Monday the launch of the operation between Manbij and an area it controls after one of its two cross-border military campaigns along with Syrian rebels in the past two years. "As per the Manbij Roadmap and Safety Principles previously agreed upon, independent patrol activities by soldiers of Turkish Armed Forces and US Armed Forces have begun on the line between (the Turkish-controlled) area and Manbij," Turkey's armed forces said on Twitter.

No breakthrough in Turkey-Iran-Russia talks on Syria constitution - A tripartite meeting between Russia, Turkey and Iran to discuss the formation of an all-inclusive committee tasked with drafting a new Syrian constitution had ended without a major breakthrough, and a plan to reconvene in a few weeks time.The officials of the three nations acting as guarantors of a ceasefire in the war-torn country met on Tuesday in the Swiss city of Geneva under the auspices of the United Nations.In a brief statement issued after the meeting, UN Syria envoy Staffan de Mistura said "some common ground was beginning to emerge" around the formation of the committee. "Constructive exchanges and substantive discussions took place on issues relevant to the establishment and functioning of a constitutional committee."For its part, the Syrian opposition said it needs to receive guarantees about the scope and form of the constitutional body before endorsing its mandate."There are many aspects that are not yet clear about the prospected constitutional committee," Yahya al-Aridi, spokesperson for the Syrian Negotiation Commission (SNC) told Al Jazeera from the Turkish city of Istanbul. "We are asking many questions about the formation, functions, terms of reference of this committee. Who will be accredited to participate? Is it going to be part of the transitional process? That is why there is a delay in the presentation of the list of names that should be part of it on behalf of the opposition."

Syria – Ready To Start The Daraa Campaign - There are signs that the long expected liberation of the Daraa region in southwest Syria is about to begin. After a month of negotiations between Russia, Israel, Jordan and the U.S. no peaceful solution has been found. The various terrorist forces in the (green) area, including al-Qaeda aligned HTS and groups loyal to the Islamic State, have rejected all negotiations. For over a month Russian negotiators tried to convince locals to give up and to reconcile with the government. But the hardliners under the rebels have killed anyone who talked with the Russians. The U.S. government has warned against a Daraa operation and threatened to intervene. First airstrikes were launched by the Syrian government today against villages in the eastern part of the Deraa area. Some local fighting is ongoing. This is not yet the expected all out attack on the 'rebel' held areas but the testing of enemy forces. The Syrian army has assembled a large force to liberate the southwest. It includes ten thousands of soldiers, more than 100 tanks and lots of artillery. Short range air defenses have been moved into the area to protect the Syrian troops. A well coordinated attack on several front and multiple axes should allow for a quick victory. Israel, with U.S. backing, might intervene in such an operation even if it makes little sense to do so. The current state can not continue indefinitely. Any intervention might well lead to a war for which Israel is unprepared. The Syrian army is willing and able to hit back into Israel. After seven years of war it is not afraid of a fight. The Russian military is warning of a false-flag "chemical incident" in Deir Ezzor governorate. The Syrian Observatory reports that Islamic State remnants in the southeastern desert and in the Rukban camp, both under cover of the U.S. occupied zone around al-Tanf, prepare for a large attack on Syrian government forces. It claims that such an attack is an attempt to occupy the zone between al-Tanf and Albu Kamal at the Euphrates. Both operation would be planned diversions intended to draw Syrian forces away from Deraa and could provide excuses for U.S. intervention on the opposition side.

Unprecedented Israeli Strikes Target Iraqi Shia Militias In Syria -  A day after a mysterious airstrike close to the Iraq-Syria border reportedly killed over 30 Syrian government soldiers and Iraqi paramilitary forces backed by Iran, a US official has told CNN the attack was carried out by Israel and not by the US coalition. Syrian state media blamed the strike on the US-led coalition — though in the immediate aftermath any level of confirmation or evidence was hard to come by. The claims prompted the US coalition spokesman to issue a formal denial, calling Syria's accusation "misinformation" as US-backed SDF forces are only operating east of the Euphrates, and not near Abu Kamal, which lies west, according to the statement.  If confirmed it would mark the first time in the war that Iraq's paramilitary forces have been targeted by Israel. The Iran-backed Popular Mobilization Units (PMU, or PMF) have increasingly coordinated with the Syrian Army as well as pro-Syrian irregular Shia fighters during anti-ISIS operations along Syria's eastern border of late.  The incident marks the second time in three weeks that the Syrian Army has accused the US Coalition of bombing their troops in southeast Syria; however it is uncertain as yet how Damascus will respond to this new claim of Israeli responsibility. The CNN source is an unnamed US official, who gave no other details on the strike, including how many jets conducted the mission or the flight path into the Iraq-Syria border area, though CNN notes, "The area is some distance from Israel and Israeli jets would have had to overcome significant logistical hurdles to strike that area."

Israel moves to ban filming soldiers after controversial videos --The Israeli government has endorsed a bill that seeks to outlaw the filming of Israeli soldiers "for the sake of shaming them".It follows the release of a number of videos which the government has deemed harmful to the army's image, including ones showing deadly shootings of Palestinians.The bill refers to the "intent" of the person recording a soldier's actions being to injure their spirit or harm national security. Rights groups say the bill is a stain on democracy and an attempt to conceal the reality of Israel's occupation.

Jewish extremists taunt ‘Ali’s on the grill’ at slain toddler’s relatives -- Far-right activists chanted slogans cheering for the death of an 18-month old Palestinian outside a courthouse in central Israel as the late toddler’s family walked near them following a hearing Tuesday.Referencing toddler Ali Saad Dawabshe, killed in a 2015 arson attack carried out by Jewish terrorists, right-wing extremists chanted “Where is Ali? Ali’s dead,” “Ali’s on the grill” and other hate slogans.Roughly two dozen youth had gathered outside the Central District Court in the city of Lod for a ruling regarding the admissibility of the confessions given by the two suspects in the firebombing of the Dawabsha home, which killed toddler Ali Saad Dawabsha and parents Riham and Saad Dawabsha. Another son, Ahmed Dawabsha, who was 5 at the time, underwent months of treatment for severe burns sustained in the attack.The chanting took place as uncle and grandfather Nasr and Hussein Dawabsha, who have served as guardians for Ahmed Dawabsha since the attack, walked out of the courtroom accompanied by Joint (Arab) List MKs Ahmad Tibi and Ayman Odeh.A spokesman for Tibi managed to capture most of the chants on video, including those of one young religious activist who approached the crowd of Dawabsha supporters and shouted, “Where is Ali? He’s burned!” as he laughed. Roughly 20 police officers were at the scene, but did not appear to react as the chants persisted.

EU Backs Effort To Prosecute Israeli Military Officials For Human Rights Violations - The European Union is funding a project to prosecute Israel Defence Forces (IDF) officers for committing violations against Palestinian civilians, according to Israel Hayom, which quotes a local human rights organisation. The pro-Israel group NGO Monitor analyses the funding and performance of non-governmental organisations which keep an eye on violations committed by the IDF. “Following the request of Israeli human rights organisations,” it reported, “the European Union has begun funding a project for the prosecution of Israeli military staff involved in the violation of human rights in the occupied Palestinian territories.” Human rights groups have confirmed their belief that Israel “does not conduct serious investigations into the violations its soldiers are committing against the Palestinians.” What’s more, they added, the military judiciary “almost always” acquits IDF personnel suspected of violations, especially those committed during raids on Palestinian homes. According to Israel Hayom, the EU allocated a budget of €250,000 until November 2019 for the project – “The Culture of Impunity among the Members of the Israeli Security Forces” – and the budget is open for the coming years. The project is expected to last until 2021. Israeli rights group Yesh Din (“There is Law”) is behind the EU project, in partnership with other organisations, including Doctors for Human Rights and the Breaking the Silence movement. The project aims to establish an “evidence bank” by collecting testimonies on IDF activities and attacks through providing Palestinian women with video cameras to record violations during house raids. Israeli human rights organisations say that they are seeking to put political pressure on the government by putting the IDF’s apparent impunity at the top of the international agenda so that it is one of the issues discussed by foreign governments and their Israeli counterpart. 

US says Israel responsible for Syria air strike that killed dozens of pro-Assad fighters - Israel has not responded to reports in US media that it was behind an airstrike in Syria which killed more than 50 regime-allied troops in the east of the country.Sunday night's attack on the town of al Hari in Deir Ezzor, near the border with Iraq, killed 52 fighters, including 22 members of an Iraqi Shia militia, the Syrian Observatory for Human Rights monitoring group said.  Syrian state news blamed the US-led coalition fighting Isis for the casualties and Damascus has demanded an explanation for the targeting from Washington. Baghdad, too, condemned the attack on Iraqi paramilitary forces, calling it “support for Isis”. US Central Command denied responsibility, however, saying in a statement there were “no strikes by US or Coalition forces in that area during the time in question”. Instead, unnamed US officials told AFP and CNN that the strike was carried out by the Israeli air force – a move that would represent several new developments for Israeli involvement in neighbouring Syria’s civil war.The Israel Defence Forces (IDF) did not comment on the strike, as per its usual policy.  If the IDF was indeed behind the attack, it is the first time Israel has targeted Iraqi Shia forces in the country, and hundreds of miles away from the area it normally operates in, which already has a heavy US, Russian and Syrian air force presence.

It’s Time To Start Getting Enraged At What Western Imperialists Have Done To Syria -  Rumors are again swirling of an impending false flag chemical weapons attack in Syria, just as they did shortly before the highly suspicious Douma case in April. Warnings from Syrian and Russian intelligence, as well as US war ship movements and an uptick in US funding for the Al Qaeda propaganda firm known as the White Helmets, give these warnings a fair bit of weight. Since the US war machine has both a known regime change agenda in Syria and an extensive history of using lies, propaganda and false flags to justify military interventionism, there’s no legitimate reason to give it the benefit of the doubt on this one. These warnings are worth taking seriously. So some people are understandably nervous. The way things are set up now, it is technically possible for the jihadist factions inside Syria and their allied imperialist intelligence and defense agencies to keep targeting civilians with chemical weapons and blaming the Assad government for them until they pull one off that is so outrageous that it enables the mass media to manufacture public support for a full-scale assault on Damascus. This would benefit both the US-centralized empire which has been plotting regime change in Syria for decades and the violent Islamist extremists who seek control of the region. It also creates the very real probability of a direct military confrontation with Syria’s allies, including Russia. But the appropriate response to the threat of a world war erupting in Syria is not really fear, if you think about it. The most appropriate response to this would be unmitigated, howling rage at the western sociopaths who created this situation in the first place. The United States and its allies started the war in Syria. The narrative that it was an organic uprising brutally attacked by the Assad government is a lie. There is no reasonable doubt about this. The former Prime Minister of Qatar said on television that the US and its allies were involved in the Syrian conflict from the very beginning. A WikiLeaks cable and a declassified CIA memo both show the US government plotting to provoke an uprising in Syria exactly as it occurred, years before it happened. Former Foreign Minister of France Roland Dumas stated that he was informed that the UK was engineering an uprising in Syria two years before the violence erupted in 2011, and General Wesley Clark stated that there were Pentagon plans to take out the Syrian government in 2001. Shortly after the violence started President Obama secretly authorized the arming and training of violent extremist factions for the overthrow of Assad in a CIA program code named Timber Sycamore, which along with Saudi finances has wound up aiding some of the most evil terror groups ever to exist.