oil prices managed to eke out a small increase this week, but not before hitting a new 5-month low and crashing into a bear market mid-week...after falling 9% to $53.50 a barrel last week after Trump had threatened new tariffs on Mexico, the price of US crude for July delivery opened lower and fell as much as 2.6% early Monday, as traders remained rattled by Trump's tariff threats and his termination of India's trade status until Saudi comments that OPEC would continue their cuts through the second half of the year changed their focus and stabilized prices, which recovered to end 25 cents, or 0.5%, lower at $53.25 a barrel...oil prices started lower again on Tuesday on evidence that an economic slowdown would dent energy demand but again recovered in the afternoon to end 23 cents higher at $53.48 a barrel...however, oil prices tumbled in after hours trading after the API reported major inventory increases and thus opened lower again on Wednesday, and subsequently crashed Into a bear market after the EIA reported the biggest stock build in 30 years, with prices falling more than 4% to $50.60 a barrel before recovering near the close to finish down $1.80 at $51.68 a barrel...oil prices initially drifted lower again on Thursday but turned sharply higher near the close on a report that the Trump administration might delay its tariffs on Mexican imports, and closed up 91 cents at $52.59 a barrel...prices continued to rally on hopes for a deal with Mexico early Friday, then rose nearly 3% after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June to close $1.40 higher at $53.99 a barrel...oil prices thus erased their early losses and ended with a gain of nearly 1% for the week, despite having crossed the 20% loss threshold that is considered a bear market earlier in the week...
natural gas prices, meanwhile, tumbled to successive new three year lows, first on ongoing forecasts for below normal mid-June temperatures in the Great Lakes and Midwest states, which would delay air conditioning demand, and then on a near record storage build that exceeded analysts expectations...after falling 15.7 cents to a 35 month low of $2.454 per mmBTU last week, natural gas for July delivery fell 5.1 cents to a three year low of $2.403 per mmBTU on Monday, as the 11 to 15 day forecast called for below normal temperatures from the Rockies south to Texas and east to the Appalachians...persistence of that cool June forecast drove prices to another 3 year low of $2.378 per mmBTU on Wednesday, and then the EIA's report of a larger-than-expected increase in natural gas supplies knocked prices down 5.4 cents to yet another 3 year low of $2.324 per mmBTU on Thursday...to show you what this week's prices look like compared to the recent price trajectory, we'll include a graph of natural gas prices over the past 3 years...
the above graph is a Saturday afternoon screenshot of the interactive US natural gas 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 portion above represents natural gas prices for a week of trading between the last week of May 2016 and this past week, wherein the green bars represent the weeks when the price of natural gas went up, and red bars represent the weeks when the price of natural gas went down...for green bars, the starting natural gas price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the end of the week is at the bottom of the bar...also barely visible on this shrunken "candlestick" style graph are the very faint grey "wicks" above and below each bar, to indicate trading prices during the week that were above or below the opening to closing price range for that week...(the lighter red & green bars at the bottom of the graph represent the trading volume for each day, which doesn't concern us today)...as you can see, natural gas prices have rarely plumbed this depth, and the last time they did, drilling new wells for natural gas virtually dried up, with the national natural gas rig count falling to as low as 81 rigs the following summer, which was the lowest natural gas rig count over the time Baker Hughes had been keeping records...
the natural gas storage report from the EIA for the week ending May 31st indicated that the quantity of natural gas held in storage in the US increased by 119 billion cubic feet to 1,986 billion cubic feet by the end of the week, which meant our gas supplies were 182 billion cubic feet, or 10.1% more than the 1,804 billion cubic feet that were in storage on June 1st of last year, while still 240 billion cubic feet, or 10.8% below the five-year average of 2,226 billion cubic feet of natural gas that have typically been in storage as of the end of May in recent years....this week's 119 billion cubic feet injection into US natural gas storage was above the median forecast of a Reuters' poll of analysts for a 109 billion cubic foot increase in supplies, and likewise much higher than the average 102 billion cubic feet of natural gas that have been added to gas storage during the same week of spring in recent years....the 119 billion cubic feet injection also appears to be the third largest injection over the past 5 years, and the 879 billion cubic feet of natural gas that have been added to storage over the past 10 weeks has been the largest injection of gas into storage on record for any similar period this early in the injection season...
The Latest US Oil Supply and Disposition Data from the EIA
this week's US oil data from the US Energy Information Administration, reporting on the week ending May 31st, showed that a big increase in our oil imports resulted in a similar increase in our stored crude supplies, the eighth such increase in 11 weeks...our imports of crude oil rose by an average of 1,065,000 barrels per day to an average of 7,927,000 barrels per day, after falling by an average of 81,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 19,000 barrels per day to 3,298,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,629,000 barrels of per day during the week ending May 31st, 1,084,000 more barrels per day than the net of our imports minus exports during the prior week...over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at a record 12,400,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 17,029,000 barrels per day during this reporting week...
meanwhile, US oil refineries were reportedly using 16,938,000 barrels of crude per day during the week ending May 31st, 171,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net of 967,000 barrels of oil per day were being added to of the oil that's in storage in the US....hence, it appears that this week's crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports and from oilfield production was 876,000 barrels per day short of what was added to storage plus what the oil refineries reported they used during the week...to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+876,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as "unaccounted for crude oil"....with that much oil unaccounted for, we have to figure one or more of this week's crude oil metrics are off by a statistically significant amount...(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) indicated that the 4 week average of our oil imports rose to an average of 7,336,000 barrels per day last week, still 7.5% less than the 7,934,000 barrel per day average that we were importing over the same four-week period last year...the 967,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the amount of oil stored in our Strategic Petroleum Reserve was unchanged...this week's crude oil production was reported to be 100,000 barrels per day higher at a record 12,400,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at a record 11,900,000 barrels per day, while a 4,000 barrel per day increase to 478,000 barrels per day in Alaska's oil production was not enough to impact the final rounded national total...last year's US crude oil production for the week ending June 1st was rounded to 10,800,000 barrels per day, so this reporting week's rounded oil production figure was roughly 14.8% above that of a year ago, and 47.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016...
meanwhile, US oil refineries were operating at 91.8% of their capacity in using 16,938,000 barrels of crude per day during the week ending May 31st, up from 91.2% of capacity the prior week, but still a bit below the recent historical refinery utilization rate for this time of year, when refineries are often running flat out....likewise, the 16,938,000 barrels per day of oil that were refined this week were 2.5% below the 17,369,000 barrels of crude per day that were being processed during the week ending June 1st, 2018, when US refineries were operating at 95.4% of capacity...
with the increase in the amount of oil being refined, gasoline output from our refineries was similarly higher, increasing by 186,000 barrels per day to 10,049,000 barrels per day during the week ending May 31st, after our refineries' gasoline output had decreased by 20,000 barrels per day the prior week....with that increase in gasoline output, this week's gasoline production was 4.0% more than the 9,658,000 barrels of gasoline that were being produced daily during the same week last year....meanwhile, our refineries' production of distillate fuels (diesel fuel and heat oil) jumped by 222,000 barrels per day to 5,404,000 barrels per day, after our distillates output had decreased by 24,000 barrels per day the prior week...but even with this week's big increase, the week's distillates production was only 1.5% more than the 5,324,000 barrels of distillates per day that were being produced during the week ending June 1st, 2018....
with the increase in our gasoline production, our supply of gasoline in storage at the end of the week rose for the fourth time in 16 weeks, increasing by 3,205,000 barrels to 234,149,000 barrels over the week to May 31st, after our gasoline supplies had increased by 2,204,000 barrels over the prior week....our gasoline supplies rose this week as our imports of gasoline rose by 8,000 barrels per day to 1,095,000 barrels per day, and as our exports of gasoline fell by 38,000 barrels per day to 679,000 barrels per day, while the amount of gasoline supplied to US markets increased by 47,000 barrels per day to 9,441,000 barrels per day....after our gasoline supplies had reached an all time record high seventeen weeks ago, and then had fallen by nearly 13% over 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, our gasoline supplies have now recovered by over 4% in the past 3 weeks and now are back to 2% above the five year average of our gasoline supplies at this time of the year (while still 2.0% lower than last June 1st's inventory level of 239,034,000 barrels), as replacement gasoline supplies have been arriving from Asia & Europe at a 1.2 million barrel per day clip over that span...
meanwhile, with the big increase in our distillates production, our supplies of distillate fuels rose for the 4th time in 12 weeks, increasing by 4,572,000 barrels to 129,372,000 barrels during the week ending May 31st, after our distillates supplies had decreased by 1,615,000 barrels over the prior week....our distillates supplies reversed & rose this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 895,000 barrels per day to a 5 month low of 3,387,000 barrels per day, while our imports of distillates fell by 65,000 barrels per day to 112,000 barrels per day, and while our exports of distillates rose by 168,000 barrels per day to 1,476,000 barrels per day....after this week's inventory increase, our distillate supplies were 10.8% higher than the 116,794,000 barrels of distillate that we had stored on June 1st, 2018, even as they were still 3% below the five year average of distillates stocks for this time of the year...
finally, with much higher oil imports and record oil production, our commercial supplies of crude oil in storage increased for the fourteenth time in 20 weeks, rising by 6,671,000 barrels, from 476,493,000 barrels on May 24th to 483,264,000 barrels on May 31st...with that increase, our crude oil inventories rose to 6% above the recent five-year average of crude oil supplies for this time of year, and were well more than 35% higher than the prior 5 year (2009 - 2013) average of crude oil stocks as of the end of May, with the disparity between those comparisons arising because it wasn't until early 2015 that our oil inventories first rose above 400 million barrels...since our crude oil inventories have generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of May 31st were 10.7% above the 436,584,000 barrels of oil we had stored on June 1st, of 2018, but at the same time still 5.8% below the 513,207,000 barrels of oil that we had in storage on June 2nd of 2017, and 3.7% below the 501,844,000 barrels of oil we had stored on June 3rd of 2016...
with that large increase in our crude oil supplies, combined with similar larger than normal increases in supplies of the products made from oil, it turns out that this week saw the largest increase in oil & oil product inventories on record, as you can see in the graph below...
the above graph was taken from a Zero Hedge post titled Oil Crashes Into Bear Market After Biggest Stock Build In 30 Years and it shows the weekly change in millions of barrels in the amount of oil & oil products in storage in the US from 1990 to the current week, which is the extent of the EIA's records on this metric....over that period, the weeks when total inventories increased are represented by a line above the horizontal zero axis, whereas the weeks when total inventories decreased are represented by a line pointing down from the zero line...in the upper right corner, they have marked the total increase for this week at 22.4 million barrels, and then have extended a green dashed line back from that marker across the length of the graph to illustrate that no prior week had such a large increase...in addition to the 6,671,000 barrel increase in oil inventories, the 3,205,000 barrel increase in gasoline inventories, and the 4,572,000 barrel increase in distillate inventories we have covered today, the past week also saw a 2.5 million barrel increase in propane/propylene inventories, a 4.6 million barrel increase in inventories of 'other oils', which includes asphalt, road oil, kerosene, and unfinished oil, and modest increases in inventories of jet fuel, residual fuel oil and other minor products to get to the record inventory increase you see graphed above...
This Week's Rig Count
the US rig count fell for the 14th time in sixteen weeks this past week and in so doing fell to a 16 month low, equaling the rig count of early February 2018....Baker Hughes reported that the total count of rotary rigs running in the US decreased by 9 rigs to 975 rigs over the week ending June 7th, which was also down by 87 rigs from the 1062 rigs that were in use as of the June 8th report of 2018, and quite a bit below the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market...
the count of rigs drilling for oil fell by 11 rigs to 789 rigs this week, which was also a 16 month low, 73 fewer oil rigs than were running a year ago, and less than half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014...at the same time, the number of drilling rigs targeting natural gas bearing formations rose by 2 rigs to 186 natural gas rigs, which was still down by 12 rigs from the 198 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008...
the rig count in the Gulf of Mexico was unchanged at 23 rigs this week, with 2 rigs deployed offshore from Texas and 21 rigs running offshore from Louisiana, which was a decrease of 1 rig for Texas offshore and an increase of 1 rig for Louisiana offshore....those totals are still an increase from the 19 rigs that were deployed in the Gulf in the same week a year ago, when 18 rigs were drilling in Louisiana waters and one was offshore from Texas, and up from the national total of 20 offshore rigs a year ago, when there was also a rig deployed in the waters offshore from Alaska at the time...
the count of active horizontal drilling rigs was down by 7 to 855 horizontal rigs this week, which was a 15 month low for horizontal drilling and 79 fewer horizontal rigs running this week than the 934 horizontal rigs that were in use in the US on June 8th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, the vertical rig count was down by 6 rigs to 46 vertical rigs this week, which was also down from the 66 vertical rigs that that were operating during the same week of last year... on the other hand, the directional rig count was up by 4 rigs to 74 directional rigs this week, and those were up by 7 rigs from the 67 directional rigs that were in use on June 8th of 2018...
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 oil & gas producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of June 7th, the second column shows the change in the number of working rigs between last week's count (May 31st) and this week's (June 7th) count, the third column shows last week's May 31st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent weekend 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 the 8th of June, 2018...
as you can see, the largest decreases this week were in Texas, and specifically in the Permian basin in the western part of the state....of those, four rigs were shut down in Texas Oil District 8, which would be the core Permian Delaware, while single rigs were also idled in Texas Oil District 8A, or the northern Permian Midland basin, and in Texas Oil District 7C, or the southern Permian Midland basin...the other Texas decrease came out of the Eagle Ford shale in the southeast part of the state, as two Eagle Ford oil rigs were shut down, leaving 66, while an 8th rig targeting natural gas in the Eagle Ford was started up at the same time, which shows up as a decrease of two rigs in Texas Oil District 1 and a single rig increase in Texas Oil District 2....two natural gas rigs were also added in Texas Oil District 10, the panhandle's Granite Wash, where an oil rig was shut down at the same time, leaving the Granite Wash with 5 oil rigs and 3 targeting natural gas....elsewhere, two more natural gas rigs were added in northern Louisiana's Haynesville shale, while another natural gas rig started up in an "other" basin not tracked separately by Baker Hughes...at the same time, 3 natural gas rigs were shut down in the Marcellus, one in West Virginia and two in Pennsylvania, and another natural gas rig was idled in the Niobrara chalk of the Rockies front range, which is now back to being all oil rigs...meanwhile, other than the changes in major producing states shown above, Alabama drillers also added a rig this week and now are running three, the most in the state since July 14th of last year, while the only rig deployed in Florida was pulled out, leaving Florida with none, par for the course in the state over the last four years...
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Opponents of pipeline argue land was improperly seized — Landowners in Ohio hope to convince a federal appeals court that they were forced by a federal agency to sell their property to a pipeline builder sending large quantities of natural gas to Canada. At issue is the Federal Energy Regulatory Commission’s approval of a project that allowed for the use of eminent domain to build of the 256-mile-long (412-kilometer-long) NEXUS Gas Transmission pipeline across northern Ohio and into Michigan that went into service in October. A three-judge panel from the U.S. Court of Appeals for the District of Columbia heard oral arguments May 6 on a petition filed by the city of Oberlin, Ohio — one of the communities the pipeline crosses — and a group called Coalition to Reroute Nexus. The petition seeks to have the regulatory commission reconsider the certificate it granted to build the pipeline. The panel is expected to rule in the next several months. The opponents’ main argument is that the commission approved an interstate pipeline, which allows for the taking of property through eminent domain, when it should have considered it an export pipeline for which eminent domain is not permitted. Eminent domain allows a government to seize private property, with compensation, for a public use. Nearly a third of the pipeline’s daily capacity of 1.5 billion cubic feet (40 million cubic meters) of gas is headed to Canada, attorney Carolyn Elefant told the panel. “This case implicates constitutional rights,” Elefant said. Carol Banta, an attorney for the regulatory commission, argued that most of the gas being shipped through the pipeline will be consumed in the U.S. She said some of the gas being sent to southern Ontario’s Dawn Hub could be sold back to the U.S. The pipeline is a partnership between Calgary, Canada’s Enbridge Inc. and Detroit’s DTE Energy. Banta told the panel that 93% percent of the pipeline was built without using eminent domain, a figure she called “unusually large.” Judge Robert Wilkins responded: “Even if it’s 1% of eminent domain needed, that’s someone’s property being taken, and that raises constitutional issues.” NEXUS took dozens of property owners to federal court to build the pipeline. The last settlement was reached last week with Elaine Selzer, a resident of Green, Ohio, which the pipeline also passes through. Selzer, a petitioner in the appeals court case, said she is not allowed to divulge the amount she and her family were paid for roughly 2 acres (8,000 square meters). She has told The Associated Press that months ago she rejected NEXUS’ initial offer of $100,000.
Will Ohio River Get Optional Pollution Limits as New Fracking-Reliant Plastics Industry Moves in? – DeSmog - The Ohio River Valley Water Sanitation Commission (ORSANCO), an eight-state compact responsible for setting water pollution control standards for the 981-mile Ohio River, is considering a proposal to make its water pollution standards — designed to coordinate pollution rules the length of the river — voluntary amid a brewing battle over the fate of a river that’s both the source of drinking water for 5 million people and central to the petrochemical industry’s plans for a new fossil-fueled plastics manufacturing network. In February, ORSANCO backed away from a 2018 plan to simply stop issuing regional pollution control standards for the Ohio River, which has for years topped the list of the nation's most polluted rivers. Now, environmental groups warn,ORSANCO’s compromise solution could let states decide whether or not to accept ORSANCO’s water quality rules. “If the agency chooses to go that route during its June 6 meeting in Covington, Kentucky,” Rich Cogan, executive director of the Ohio River Foundation wrote in a Cincinnati.com op-ed, “the result would be conflict among states, different compliance standards for businesses in different states and increased costs for utilities, businesses, and consumers for treatment of increased pollution due to weaker standards.” The Ohio River Valley may have outsized importance for the fossil fuel industry, which has laid plans for a massive build-out of petrochemical facilities on the banks of the Ohio, including a Royal Dutch Shell plastics plant currently under construction in Potter Township, Pennsylvania. The petrochemical industry often selects sites that are along waterways like the Ohio River, in part because builders can use barges to bring in large equipment and plant components by water rather than on roads. Shell, for example, was able to ship in 42 100-foot long aluminum silos by barge in October 2018, part of construction underway at Shell's Potter Township plastics plant. Oil and gas executives predict that even if demand for fossil fuel energy falls amid concerns over climate change, demand for plastics and petrochemicals will remain a growth area for the industry. “Unlike refining, and ultimately unlike oil, which will see a moment when the growth will stop, we actually don’t anticipate that with petrochemicals,” The impacts from construction will reach far beyond the waters of the Ohio River.
Prosecutors Eye Pa.'s Fracking Boom - West Virginia Public Broadcasting – podcast - On this West Virginia Morning, residents in West Virginia and surrounding states living near fracking sites, pipelines and other oil and gas infrastructure have complained about impacts like pollution for years. Now, prosecutors in Pennsylvania have launched criminal probes into the state’s fracking boom. For State Impact Pennsylvania, the Allegheny Front’s Reid Frazier looks ahead to where these investigations might go.
$3 Million Settlement Revealed In High-Profile Fracking Case - In an unusual event, a legal settlement in a high-profile fracking case has been made public because of a computer error. The document, dated Aug. 31, 2018, shows that the gas drilling company Range Resources and other defendants agreed to pay $3 million to three Washington County, Pa., families who alleged that nearby fracking contaminated their properties and made them sick. The court document was issued under seal but was discovered last week in a public database by a reporter with the public radio program The Allegheny Front and the StateImpact Pennsylvania project. After issuing an injunction, Judge Katherine B. Emery on Tuesday ruled that it could be published. The Pittsburgh Post-Gazette is suing to have the entire agreement made public. The families' ordeal was detailed by journalist Eliza Griswold in the book Amity and Prosperity, which was awarded the 2019 Pulitzer Prize in general nonfiction. Nearly a decade ago, Stacey Haney, Beth Voyles and others said they began smelling foul odors in the air and water in their homes, according to court records. Haney's son was diagnosed with arsenic poisoning. He and other family members visited doctors to complain of nosebleeds, headaches, dizziness, extreme fatigue and rashes. The suit also alleged Range Resources and two contracted laboratories committed fraud and conspiracy by manipulating test results to obscure their findings from the plaintiffs. In 2014, the Pennsylvania Department of Environmental Protection imposed a $4.15 million penalty on the company for violations at six wastewater impoundments in Washington County, including the one near the Haney and Voyles homes. The newly public document does not say how much each of the eight individual plaintiffs were to receive or how much Range and 10 other co-defendants in the case were to pay out. In a separate release, Range said its settlement is for a total of $1.88 million to eight individuals. The settlement includes:
- a blanket release of claims against Range and the co-defendants;
- a clause preventing the plaintiffs from making disparaging comments about the defendants; and
- language giving Range Resources the right of first refusal to buy the properties of Stacey Haney and Beth Voyles, unless they wished to sell or transfer the property to the Voyles children.
The settlement marked a turning point in a long-standing legal dispute that pitted Range, which pioneered hydraulic fracturing, or fracking, in Pennsylvania, against Haney, Voyles and Kiskadden. In November, a few months after the settlement, Kiskadden died.
Judge bars release of document in gas drilling suit - A Washington County judge has issued a court order barring The Allegheny Front, StateImpact Pennsylvania and 90.5 WESA from publishing the content of a publicly available legal document obtained by a reporter for the news organizations, pending a hearing next week. The legal document is an Aug. 30, 2018 Memorandum Order entered in the case of Stacey Haney and several of her Washington County neighbors. The group sued gas-drilling company Range Resources in 2012 for allegedly contaminating their air, groundwater, and soil from activities related to fracking. The suit alleged Range and two contracted laboratories committed fraud and conspiracy by manipulating test results to obscure their findings from the plaintiffs. The case was settled in 2018. The settlement reached at that time is filed under seal. Washington County Prothonotary Joy Ranko said Thursday the memorandum order should not have been public. But the document was publicly available over the course of at least two days, May 28 and May 29, on the Washington County Prothonotary’s Public Case File Database. Reid Frazier, a reporter for The Allegheny Front and StateImpact Pennsylvania, printed it off the prothonotary printer at 25 cents a page. The Pittsburgh Post-Gazette has been involved in ongoing litigation to get the court to unseal the settlement. Range Resources, however, is arguing that it should remain sealed. When Range Resources attorneys learned that Frazier had a copy of the order, they sent him a cease-and-desist letter. Attorneys for the plaintiffs and Range Resources both informed Judge Katherine Emery of the release of the document. Emery then issued the injunction and set the hearing date. The injunction bars the news organizations from “directly or indirectly publishing, circulating, disseminating, disclosing, describing, duplicating, or otherwise sharing in any way contents of the Sealed Documents.” The Haney case and lawsuit are detailed in the Pulitzer Prize-winning book, “Amity and Prosperity,” by the journalist Eliza Griswold.
Washington County judge lifts order that prohibited publication of document in drilling suit --After a nearly hourlong court hearing Tuesday morning, Washington County President Judge Katherine Emery lifted a gag order that prevented Allegheny Front and StateImpact Pennsylvania reporter Reid Frazier from publishing terms of a confidential 2018 settlement between a property owner and natural gas-driller Range Resources.The ruling set the stage for publication of the agreement’s terms today. Frazier would not comment after the hearing. But Emery’s ruling was hailed as a First Amendment victory by David A. Strassburger, an attorney for Frazier and media outlets StateImpact Pennsylvania, Allegheny Front and WESA, which broadcast his work. “If [Range Resources] didn’t want the public to know, they shouldn’t have come to court” to resolve their legal dispute, he said after the hearing. The settlement resolved a civil suit in which Haney and others alleged that they suffered health effects from pollution caused by Range Resources drilling operations, and that the company sought to hide evidence of contamination in water tests. Haney became a central figure in the 2018 book “Amity and Prosperity: One Family and the Fracturing of America,” which won a Pulitzer Prize this year. The Pittsburgh Post-Gazette has been seeking to unseal the settlement for months. But after attending a hearing on that dispute last week, Frazier discovered the document was available to the public on a database operated by the Washington County Prothonotary’s office, which keeps records for the county’s civil courts. Frazier printed a copy at the prothonotary’s office and left with it. The prothonotary’s office later confirmed that the material had been made publicly accessible due to an error. At the outset of the hearing, Emery said the problem arose after the office had inadvertently revealed the document while sending it to an Allegheny County judge hearing a related lawsuit filed by Haney.
Report: Pennsylvania natural gas production shows ‘significant’ jump - Total natural gas production in Pennsylvania grew by 14.7% in the first quarter of 2019 compared to the same period last year, a report by the Pennsylvania Independent Fiscal Office said.“Despite decelerating from the previous two quarters, production growth continued to show significant strength,” the report said.Pennsylvania remains the second-highest natural gas producing state after Texas, with 6.1 trillion cubic feet of natural gas produced in 2018.Production volume for horizontal wells in the first quarter of 2019 reached 1,653.9 billion cubic feet, the report said. All of the production growth for the quarter was from unconventional wells — i.e., wells requiring horizontal drilling into deep formations and fracturing with fluids — spud in 2017 and 2018.Horizontal well production has grown for 11 consecutive months, and average production per well has grown for 10 consecutive months, the report said.There were 8,765 producing horizontal wells in the state in the first quarter of 2019 — a 10.7% increase over the previous year. Since the first quarter of 2017, total producing wells increased by 20.1%, the report said. Allegheny County, although representing only 2.4% of the production volume in the state, had the highest rate of production growth — 89.3% — from the first quarter of 2018 (21.4 billion cubic feet) to the first quarter of 2019 (40.4 billion cubic feet), the report said.
Woman who fears for granddaughter’s health lacks legal standing to fight natural gas well, Pa. court rules - A grandmother’s attempt to block a proposed natural gas well she claims would endanger the health of her benzine-sensitive granddaughter was nixed by a Commonwealth Court panel Thursday. In an opinion by Judge Anne E. Covey, the judges rejected Jane Worthington’s argument that she should have been granted legal standing to challenge the siting of the Range Resources well near the Washington County elementary school her 12-year-old granddaughter attended. She claimed during a public hearing on the project that fumes from the well, which was to be located less than a mile from the school, would waft over and cause her granddaughter severe health problems, Covey noted. Worthington didn’t oppose the construction of the well. She just wanted it moved farther away from the Fort Cherry Elementary School. Despite her health concerns, Worthington lacked a direct interest in the effects of the well project, which was approved by the Mount Pleasant Township supervisors in 2016, Covey concluded. Her ruling upholds the findings of the supervisors and a Washington County judge.
Supreme Court ruling gives residents more say over natural gas drilling -- Natural gas producers in West Virginia no longer can drill on one person’s property to reach gas reserves under adjoining or neighboring tracts, the state Supreme Court said Wednesday in a much-anticipated ruling that gives additional leverage to residents struggling with the effects from the booming industry. In a 5-0 ruling, the justices upheld a lower court ruling and jury verdict against EQT Corp., siding with two Doddridge County residents who had sued the state’s second-largest gas company. Justice John Hutchison wrote that gas and other mineral companies must obtain permission from surface owners to use their land to reach reserves under other properties. “The court will not imply a right to use a surface estate to conduct drilling or mining operations under neighboring lands,” Hutchison wrote. “The right must be expressly obtained, addressed, or reserved in the parties’ deeds, leases, or other writings.” In the case, two people who live on a 300-acre farm in Doddridge County said EQT came onto their land to extract gas from underneath adjacent properties. The two people, Beth Crowder and David Wentz, warned EQT that the company would be trespassing. EQT entered the property anyway. Crowder and Wentz sued, and a local circuit judge ruled in their favor, and a jury two years ago awarded them nearly $200,000 in damages. EQT appealed that decision to the West Virginia Supreme Court, and the justices heard oral arguments in the case in March. “To us, the point was kind of obvious, and what’s disappointing is that it took all these years to get the Supreme Court ruling saying so,” said Dave McMahon, one of the lawyers for Crowder and Wentz, who came to the farm in 1975 but divorced in 2005 and now live in separate homes on the property. The case is one of two major gas property-rights and drilling cases heard this term. In a case heard by the Supreme Court in January, Harrison County residents said Antero Resources’ fracking was creating a nuisance. A ruling on that case hasn’t yet been issued.
Court to Big Fracking Company: Trespassing Still Exists — Even For You -- Seven years ago this month, Beth Crowder and David Wentz told natural gas giant EQT Corp. that it did not have permission to come onto their West Virginia farm to drill for the natural gas beneath neighboring properties. EQT had a lease that entitled the company to the gas directly beneath their farm, but it also wanted to use a new, 20-acre well pad to gather gas from 3,000 acres of adjacent or nearby leases. The company ignored their warnings. It built roads and drilled a well, and it put in horizontal pipes stretching for miles in all directions. Crowder and Wentz sued — and they’ve been fighting EQT in court ever since. On Wednesday, the West Virginia Supreme Court ended the matter with a surprisingly straightforward and unanimous conclusion: Going onto someone else’s land without their permission is trespassing. Gas and other mineral companies must obtain permission from surface owners in order to use their land to reach reserves under other properties, Justice John Hutchison wrote for the court. “The right must be expressly obtained, addressed, or reserved in the parties’ deeds, leases, or other writings,” he wrote. The 22-page court ruling Wednesday represents a rare victory for residents in a state where economics and politics are increasingly controlled by the natural gas business after decades of domination by the coal industry. Making it more gratifying for Crowder and Wentz, the court that ruled in their favor has beenunder the microscope because of connections to the gas industry. Much of the land in mineral-producing parts of West Virginia has split ownership. Someone might own the surface land, while someone else owns the coal, oil or gas underneath. Gas is generally produced under leases, in which gas owners or their ancestors granted a production company the right to drill. But often, the leases are so old the current owners didn’t sign them, and certainly the advanced types of gas-production techniques used today were not anticipated.
Landslides, explosions spark fear in pipeline country — TransCanada Corp. CEO Russ Girling pledged "years of safe, reliable and efficient operation" last year when his company launched the Leach Xpress natural gas pipeline. Five months later, it blew up, snapped by a landslide. "It was 4:10 in the morning, and it was like daylight," recalled Charlie Friend, who lives here, near the steep hollow where the 36-inch pipe ruptured about a year ago. The blast was one of at least six pipeline explosions caused by landslides and similar hazards since early 2018 in Appalachia. They're piling up just as companies work to export the bounty of the Marcellus Shale by planting a new crop of pipelines across the region's valleys, ridgetops and hillsides. The blasts are alarming federal pipeline safety regulators and inspiring fear along the paths of the big, high-pressure gas lines. "We have those same steep slopes," said Tina Smusz, a retired physician fighting the Mountain Valley pipeline being built through the area where she lives near Roanoke, Va. "I don't know what they're thinking. This is such a setup for ruptured pipelines." The Moundsville blast even contributed to the Atlantic Coast pipeline getting put on hold by a federal appeals court, which cited it in a ruling. Pipeline industry representatives acknowledge the danger and difficulty of building pipelines in the mountains. But they say they can build them safely, and technology is continually making them safer. They also stress that design and construction of the lines is closely monitored by the Pipeline and Hazardous Materials Safety Administration, or PHMSA. But federal law forbids PHMSA from getting involved in where pipelines should be built. Pipeline expert Rick Kuprewicz says that creates a big gap in pipeline oversight that's been highlighted by the landslide-linked blasts. "No one is really saying, 'We've looked at this and this line is safe,'" Energy Transfer Partners LP, pledged to fix mistakes after a landslide-linked explosion burned up a home in the Pittsburgh suburbs last year (Energywire, Feb. 22). The company also blamed record rainfall, as did developers of the Mountain Valley pipeline, which has been dogged by washouts and landslides. The developers of the Atlantic Coast pipeline, though, say critics' landslide protests are diversionary tactics. "This is another attempt to cause a pointless delay,"
Court: Climate Impacts of Pipeline Projects Cannot Be Ignored - The Federal Energy Regulatory Commission, a little-known agency that oversees energy infrastructure, receives far less attention when it comes to climate change than the Environmental Protection Agency. But a recent court ruling upheld that it must consider climate impacts in its decisions to approve certain natural gas infrastructure, hindering Trump administration efforts to speed construction on those projects with no regard to their impact on the climate.The ruling, issued Monday by the District of Columbia Court of Appeals in Lori Birckhead et al v. FERC, emphasized that FERC must consider greenhouse gas emissions during its review process of fossil fuel projects. The court upheld that the commission is obligated by law to follow the National Environmental Policy Act(NEPA), which states that FERC must consider the “environmental and related social and economic effects” of a proposed project and disclose them to the public.It added another court defeat to the Trump administration’s attempt to roll back regulation of the energy industry. The administration has been appointing industry-friendly commissioners to FERC’s five-member panel with the goal of approving more infrastructure, such as compressor stations and pipelines, with little to no regard to their climate impacts. Perhaps most controversial was the nomination and approval of Commissioner Bernard McNamee, who formerly represented fossil fuel companies. McNamee drew sharp criticism during the nomination process forhaving said that carbon dioxide is “not a real pollutant” and fossil fuels are “key to our way of life.”
Amid coal unit retirements, FERC receives three new gas pipeline pitches | S&P Global Platts — The Federal Energy Regulatory Commission has received several new applications for short pipeline projects that would help serve gas-fired generation displacing coal-fired units. Equitrans has proposed a 140,000 Dt/d natural gas pipeline project to serve an 830-MW, combined-cycle power plant planned in Brooke County, West Virginia, by ESC Brooke County Power to sell generation into PJM Interconnection through existing transmission lines nearby. According to a Public Service of Commission of West Virginia order granting a siting certificate, the power plant will "help meet PJM's projected load forecast in light of many coal-fired plant closures" and help balance intermittent output of renewables or variation in supply and demand. It referenced 29,192 MW of retirements in PJM from 2011 through 2020. The 16.7-mile, 16-inch-diameter Tri-State Corridor Project would run from Washington County, Pennsylvania, to Brooke County. It is designed to receive its supply from Rover Pipeline and two intrastate pipelines, according to the application filed with FERC May 31 (CP19-473). The power plant developer has a binding precedent agreement for the full capacity. Equitrans is seeking certificate approval by May 31, 2020, to meet an August 2021 in-service date that would allow the power plant to receive test gas by September 2021, to begin the commissioning process so that the plant can start full operations in June 2022. Separately, Florida Gas Transmission has proposed a 21-mile, 169,000 MMBtu/d, pipeline project to increase Seminole Electric Cooperative volumes at the SeaCoast Gas Transmission delivery point in Putnam County, Florida. The Putnam Expansion Project would allow previously unsubscribed firm capacity available on FGT's West Leg system to be moved to FGT's East Leg mainline, according to an application filed with FERC May 31 (CP19-474). This would be accomplished through loop extensions on the East Leg mainline to meet SECI's contractual firm volumes at the SeaCoast Gas Transmission delivery point in Putnam County. Gulfstream Natural Gas System also proposed the Phase VI Expansion project, designed to add about 78,000 Dt/d of mainline capacity from receipt points in Mississippi and Alabama to a delivery point in Manatee County, Florida. Tampa Electric, which is transforming one unit at a coal-fired station in Hillsborough County, Florida, into a combined-cycle gas generating unit, has a 25-year precedent agreement for the full capacity.
Opponents hope New Jersey scuttles gas pipeline to New York – WHYY --A proposal for a nearly $1 billion pipeline that would carry natural gas from Pennsylvania’s shale fields through New Jersey, a bay and the ocean en route to supplying New York City and Long Island faces some key hurdles this week. New Jersey environmental officials are due to decide Wednesday on several permits for the proposed Northeast Supply Enhancement pipeline. This is the latest pipeline project to stir emotions in the long-running jobs-versus-the environment debate. Opponents hope a denial will stop the project — even though it survived a similar rejection last month in New York and remains under consideration there. Williams Companies, the Oklahoma firm planning to spend $926 million on the project, says it is needed to ensure adequate heating and energy supplies to New York City and Long Island, and that it can be built safely with minimal environmental disruption. Environmental groups and other opponents say the project would stir up tons of highly polluted sediment and reverse decades of hard-won environmental improvements in Raritan Bay, which has been struggling with pollution. “It could kill the bay,” said Rich Isakson, president of the Belford Seafood Cooperative, a group of Raritan Bay fishermen. “Once you dig up all that stuff, it could take 40 years to settle down again. That’s prime fishing and crabbing grounds they’re going right through.” The company counters that its construction method would retain “nearly all” of the sediment loosed during the pipe-laying in a trench, and that remaining sediments would stay in the lower half of the water column. Williams and its customer, the National Grid utility, say the pipeline is needed in order to get the gas to customers. The utility says without the project, it may have to declare a moratorium on gas customer hookups. It is still taking applications from potential new customers but will not process them until after the project is approved, spokeswoman Wendy Ladd said. Opponents say the project would lead to the burning of more fossil fuels, thus contributing to climate change. They also cite a study by 350.org, an anti-fossil fuel group, that claims the demand for natural gas in New York and Long Island is far less than what Williams asserts.
New Jersey denies key permits for Williams' NESE natural gas project. New Jersey regulators have rejected key wetlands, water quality and land use approvals for Williams' Northeast Supply Enhancement project, in another blow to the pipeline expansion that would bring 400 MMcf/d of incremental natural gas supply into New York markets.The project only three weeks earlier was denied a water quality certificate by New York state regulators, though Williams has expressed optimism it could answer New York's "technical concern" and meet its in-service target.The New Jersey Department of Environmental Protection, in a decision released late Wednesday, found that Williams' Transcontinental Gas Pipe Line had not fully shown how it could avoid or minimize adverse impacts to surface water quality caused by dredging to build a segment of the pipeline that would run through New Jersey waters of the Raritan Bay. The decision was without prejudice to Transco submitting future modeling analysis to demonstrate that mitigation.The state regulators also found Transco had not shown there were no alternatives that ease impacts of a proposed compressor station to freshwater wetlands and riparian areas, and had not shown a compelling need warranting the compressor station as presently proposed. New Jersey portions of the project include a 32,000 horsepower compressor station in Franklin Township, the 5.96-miles Madison Loop, and the roughly 6-mile Raritan Loop in New Jersey waters.
Firm to reapply for permits to build northeast gas pipeline (AP) — An Oklahoma company says it will reapply to build a hotly contested pipeline that would carry natural gas from Pennsylvania through New Jersey, and under a bay and the ocean to New York. Tulsa-based Williams Companies says it will reapply for key environmental permits that were rejected Wednesday night by New Jersey regulators. The New Jersey Department of Environmental Protection rejected the permits without prejudice, meaning the company can reapply. On Thursday morning, the company said it would do just that. "We are currently assessing the discrete technical issues raised by the New Jersey Department of Environmental Protection related to our application for water quality certification," Williams said in a statement. "We believe that we can be responsive to the issues raised by the agency and intend to resubmit the application to the agency in a timely manner to maintain the customer's in-service date requirement." It marked the second time in a month that the proposal survived a rejection by state regulators in the region. Last month, New York regulators determined the project did not meet their standards, but like this one, their decision was made without prejudice, allowing Williams to reapply. "While this is a good victory, it is short-lived," said Cindy Zipf, executive director of the Clean Ocean Action environmental group. "It ensures Williams will be back, and indeed, they already made statements to that effect. COA will continue to battle on with the defenders of the bay and ocean, so this project never sees the light of day." Jeff Tittel, director of the New Jersey Sierra Club, said the project would hurt New Jersey without offering it any benefits.
Whitmer wants Line 5 out of Straits of Mackinac sooner than 2024 — Enbridge’s best case, five-year timeline for construction of a utility corridor in the Straits of Mackinac may not be quick enough for state leaders concerned about the possibility of a leak from the 65-year-old Line 5 oil pipeline. Gov. Gretchen Whitmer told reporters Friday that she’ll be meeting with Enbridge next week, after the utility giant said it could shorten its construction timeline from 10 years to five. “I think we’ve got a duty to get it out quicker than that, and I think that the attorney general feels the same way and that’s my goal,” Whitmer said. Line 5 transports about 23 million gallons of oil and natural gas a day through the Upper Peninsula, including a four-mile, dual-pipeline stretch through the Straits of Mackinac. Enbridge still believes the tunnel is the safest, quickest option for removing Line 5 from the bottom of the Straits of Mackinac, and negotiations are ongoing regarding the timeline for its closure, company spokesman Michael Barnes said Friday. "We are committed to working with the governor absolutely and finding a path forward for the tunnel project," Barnes said. "I believe that we all have a shared vision to reduce risk.” Whitmer’s comments came on the final day of the Mackinac Policy Conference, where Attorney General Dana Nessel, the governor and Enbridge have floated threats, negotiations and proposals regarding the controversial pipeline. Earlier this week, Nessel said she would move to shutter Line 5 by the end of June if Whitmer didn’t reach a new agreement with the company. Whitmer has been in discussions with the company for several weeks after Nessel in March issued a formal legal opinion declaring unconstitutional a law passed by the Republican-controlled Legislature at the end of 2018 creating an authority to oversee construction of a tunnel to house Line 5 and other utilities. Whitmer halted state agency work on the project shortly after Nessel issued her opinion.
Enbridge, Gov. Whitmer fail to reach new Line 5 deal -- Enbridge Energy is taking legal action to circumvent Gov. Gretchen Whitmer after they were unable to reach a deal on shutting down the Line 5 oil and gas pipeline in the Straits of Mackinac.The Canadian energy company announced Thursday, June 6, it is asking the Michigan Court of Claims to effectively reinstate the Line 5 tunnel dealthey made with former Gov. Rick Snyder. Enbridge Executive Vice President Guy Jarvis says they are unable to negotiate with Whitmer, claiming she is holding firm to shutting down the controversial pipeline within two years. Jarvis told reporters that to shut down Line 5 in two years without a replacement would cause a “serious disruption of the energy market in the state.” A Line 5 replacement housed in a utility tunnel underneath the Straits wouldn’t be operational until 2024, the company has previously said. Whitmer previously said construction delays and potential litigation could delay that target by several years. Even if Whitmer proposed a shutdown in three years’ time, Jarvis said his company wouldn’t agree. In a statement, Whitmer’s office said the governor “remains committed to protecting the Great Lakes and getting Line 5 out of the water as quickly as possible." “This Tuesday, Enbridge walked away from the negotiating table with the governor, and has now chosen to pursue litigation rather than negotiate in good faith to find a reasonable solution that includes a date certain for decommissioning Line 5,” the statement read. “It is now abundantly clear that Enbridge -- which is responsible for the largest inland oil spill in American history in Marshall, Michigan -- is only interested in protecting its bottom line.”
Federal report says human error led to anchor strike that dented Line 5 - In a new report, the National Transportation Safety Board blames human error that led to equipment failures for an anchor strike in April 2018 that dented the Line 5 twin pipelines. Attorney General Dana Nessel says the report is evidence the pipelines need to be removed from the Great Lakes.The NTSB report says the vessel was short staffed during the Easter weekend as mistakes were made that allowed an anchor to drag on the lake bed. It struck Line Five and the pipelines were dented.The anchor strike also caused damage to electric cables and a mineral oil leak. Kelly Rossman-McKinney is the attorney general’s communications director. She says the incident is further proof Line 5 needs to be shut down. “What that report does is reinforce what we already know, which is that it is that is incredibly dangerous to continue operating in the Straits of Mackinac,” says Rossman-McKinney. “We are really just an, I mean seriously, an anchor strike, a total unintended anchor strike, away from devastation in the Great Lakes.” Governor Gretchen Whitmer says she wants a deal on the future of Line 5 by June 10th. In a statement, Enbridge said it's standing by plans to construct a tunnel that would house a replacement section of Line 5:
MN court says PUC didn't weigh oil spill impact in Line 3 pipeline decision - In a victory for Line 3 oil pipeline opponents, the Minnesota Court of Appeals on Monday reversed the state Public Utilities Commission's approval of the Line 3 replacement project's environmental review, saying it didn't adequately address the potential impact of a spill in the Lake Superior watershed. Last June, the PUC approved Enbridge Energy's plan to replace its aging Line 3 oil pipeline, which has been transporting oil across northern Minnesota from Alberta, Canada, since the 1960s. As part of that process, the PUC approved an environmental impact statement — a review of potential impacts the project might have on the surrounding environment. The environmental groups Friends of the Headwaters and Honor the Earth, as well as the Mille Lacs Band of Ojibwe, the White Earth Band of Ojibwe and the Red Lake Band of Chippewa Indians appealed the PUC's decision to approve that environmental impact statement. They argued that the environmental review of the Line 3 project did not adequately analyze the potential impacts of oil spills along the route or the potential harm to tribal resources. At the same time that it rejected the review's treatment of a spill near Lake Superior, the court also upheld the majority of the more than 3,000-page environmental impact statement. It also rejected most of the arguments made by pipeline opponents, including their contention that the study didn't sufficiently take into account the climate impacts of the pipeline, and didn't adequately analyze impacts on tribal cultural resources. Supporters of the project say they're heartened that the court upheld the majority of the environmental study's findings. "While no one likes further uncertainty, what's important is the court reaffirmed on numerous counts that the [Public Utilities] Commission acted correctly and produced a final [environmental impact statement],"
Another Oil Pipeline Blow As Court Rules Against Enbridge Line 3 - Enbridge’s Line 3 pipeline replacement project ran into another unsurprising roadblock on Monday after a Minnesota State Court of Appeals ruled that its environmental assessment just wasn’t good enough.The ruling is a reversal of Minnesota Public Utilities Commission’s decision that approved the environmental impact statement for the pipeline replacement.The project plans to replace Enbridge’s existing 282 miles of 34-inch pipeline with 337 miles of 36-inch pipe. The appellate court found today that the Commission erred when it approved the plan, and found that Enbridge’s environmental impact statement lacked in specificity, specifically where it deals with oil spills in relation to Lake Superior.The new Line 3 would have the capacity to move 370,000 barrels of oil per day, alleviating the takeaway capacity constraints that Canada is facing. Line 3 is one of two pipeline projects in the works that are—in their unfinished state—keeping Canada’s oil industry from reaching its potential.Line 3 has faced numerous legal challenges and has been approved and disapproved several times over.Enbridge has pushed back its startup date, which was originally supposed to be at the end of 2019. The latest date given, prior to today’s loss, was in H2 2020.Enbridge Inc. was trading down on the unfavorable news at $35.53 per share (-3.64%).Enbridge is also struggling to get its Line 5 replacement project in Michigan off the ground. The company is in talks with Michigan Governor Gretchen Whitmer on how to proceed. One option being considered is shutting the aging Line 5. Meanwhile, oil is still flowing through both of the aging lines—a real concern as aging pipelines come with a higher risk of leakages.
A setback for Line 3: What the latest court ruling means for the future of the project - The Minnesota Court of Appeals ruled Monday that state regulators failed to consider the impact of an oil spill in Lake Superior’s watershed when they approved an environmental review for Enbridge’s Line 3 project and dealt a setback to plans for the controversial oil pipeline.The court sided with a coalition of tribes and environmental nonprofits in reversing a decision by the state’s Public Utilities Commission. The ruling may delay Enbridge’s progress toward building the $2.6 billion project.While the environmental impact study (EIS) — a 13,500 page document — was approved unanimously by the five-member PUC last year, Judge James B. Florey wrote that its failure to address an oil spill that could flow into Lake Superior ultimately made it deficient. “The bottom line is the court decided that the environmental impact statement that was prepared for Line 3 does not meet the statutory standards,” said Scott Strand, an attorney representing Friends of the Headwaters in the lawsuit. “It’s not adequate.”Enbridge hopes to build Line 3 to replace an aging and corroding 34-inch pipeline that is currently operating at about half capacity. The new 36-inch pipeline would traverse a similar, but altered, 337-mile route through north-Central Minnesota, passing through the Mississippi Headwaters region before reaching a terminal in Superior, Wisconsin. It would carry about 760,000 barrels of oil per day. Enbridge still needs a few state permits and approval from the Army Corps of Engineers before it can begin Line 3 construction. The company had hoped to start building earlier this year, but extended its timeline to November. Enbridge’s timeline could now be pushed even further back if the PUC takes a harder look at the potential impact of spills near Lake Superior.
Exclusive: Enbridge Is Behind This Front Group Pushing the Company’s Line 3 Oil Pipeline Project | DeSmogBlog -- Minnesotans for Line 3, a group established last year to advocate for an Enbridge oil pipeline project, presents itself as a grassroots organization consisting of “thousands of members.” But a DeSmog investigation has found that behind the scenes, the Calgary-based energy giant is pulling the strings. Enbridge has provided the group with funding, public relations, and a variety of advocacy tactics.The investigation has also found that a public relations firm behind the operation recently tried to erase its ties to Enbridge. Minnesotans for Line 3 first appeared in the battle over Enbridge’s Line 3 Replacement Project early last year.Opponents, who this week employed direct action tactics to block initial work on the project and delivered a petition to Minnesota Governor Tim Walz, include several Native communities — among them the White Earth and Mille Lacs Bands of Ojibwe and the Red Lake Band of Chippewa. Of their main concerns, these groups cite violation of Indigenous rights, risks associated with oil spills, and climate change impacts.Through a series of TV ads and op-eds, along with a social media campaign and a petition delivered to state authorities, Minnesotans for Line 3 called for approving Enbridge’s multi-billion dollar plan to replace and reroute its aging pipeline that transports Canadian tar sands oil through North Dakota and Minnesota to Superior, Wisconsin.
Trump administration seeks criminal crackdown on pipeline protests – - The Trump administration is joining calls to treat some pipeline protests as a federal crime, mirroring state legislative efforts that have spread in the wake of high-profile demonstrations around the country. The Transportation Department’s Pipeline and Hazardous Materials Safety Administration released a proposal Monday calling for Congress to expand a law that threatens fines and up to 20 years' prison time for "damaging or destroying" pipelines currently in operation. The expanded version would add "vandalism, tampering with, or impeding, disrupting or inhibiting the operation of" either existing pipelines or those "under construction." While House Democrats will almost certainly block the proposal, it intensifies fights already underway in several energy-producing states to tamp down the waves of pipeline protests launched by progressive environmental advocates around the country as they seek to stop production of fossil fuels. PHMSA insists it doesn't want to inhibit legitimate protests, but free speech advocates worry that efforts to impose massive fines and years in prison for “impeding” pipeline construction could also infringe on activists' First Amendment rights. “The proposed penalty is far and away more extreme than what we’ve seen at the state level,” said Elly Page, attorney for International Center for Not-For-Profit Law, a nonprofit group that has tracked anti-protest bills through state legislatures. “When you combine provisions that vague to penalties that extreme, that creates uncertainty about what is and isn’t legal.” PHMSA included the proposal, which appears similar to model legislation that conservative American Legislative Exchange Council created, in a longer list of changes the department would like to see in pipeline safety standards that Congress is set to reauthorize. A spokesperson for Energy and Commerce Chairman Frank Pallone said he "has no intention of allowing a pipeline safety bill to be used as a vehicle for stifling legitimate dissent and protest," and is concerned that is what the proposal would do.
Pipeline Protesters Could Face up to 20 Years in Prison Under New Trump Proposal - Building on efforts by multiple states to crack down on those fighting the construction of climate-destroying fossil fuel infrastructure, the Trump administration unveiled a proposal on Monday that would criminalize pipeline protests at the federal level and hit demonstrators with up to 20 years in prison.The new proposal, released by Transportation Department's Pipeline and Hazardous Materials Safety Administration, was immediately denounced by environmentalists as a serious threat to the First Amendment. "This dangerous proposal threatens to undermine Americans' right to peaceful assembly and free speech," Kelly Martin, director of the Sierra Club's Beyond Dirty Fossil Fuels campaign, said in a statement. "It is a blatant attempt to intimidate those who would exercise their First Amendment rights to speak out against pipeline projects that put our clean water, communities, and climate at risk.""Rather than focusing on shielding corporate polluters from public protest," Martin said, "the administration should be working to ensure that communities are protected from dirty, dangerous fossil fuel projects."As Politico reported Monday, the Transportation Department's proposal would "treat some pipeline protests as a federal crime, mirroring state legislative efforts that have spread in the wake of high-profile demonstrations around the country." The Trump administration, according to Politico, is "calling for Congress to expand a law that threatens fines and up to 20 years' prison time for 'damaging or destroying' pipelines currently in operation. The expanded version would add 'vandalism, tampering with, or impeding, disrupting, or inhibiting the operation of' either existing pipelines or those 'under construction.'"
Trump’s offshore policy stalled, but industry continues eastern Gulf push – Platts podcast - Some view the Trump administration's push to expand offshore oil and gas drilling to most federal waters as a failure. But with plans for oil and gas lease sales for the Atlantic and Arctic on an indefinite hold, amid court battles and leadership changes, the industry continues to push for access to the Norphlet play in the eastern Gulf. Much of the deepwater play is under a federal moratorium until 2022 and leases there will be highly sought after when that expires. But drilling in the eastern Gulf is fiercely opposed by Florida lawmakers and a compromise has proved difficult. On today's Capitol Crude, Erik Milito, the American Petroleum Institute's vice president of upstream and industry operations, and Christopher Guith, acting president of the US Chamber of Commerce's Global Energy Institute, talk about future output hopes for the Norphlet, the challenges of opening the eastern Gulf to drilling and the consequences of not expanding lease sales.
GOM Production Poised to Set New Records --Oil production in the U.S. Gulf of Mexico (GoM) is poised to set new records in the imminent future.That’s what energy research and business intelligence company Rystad Energy said in a statement posted on its website recently.Rystad forecasts that 2019 oil output from the region will average 1.95 million barrels per day (bpd), with some months “potentially touching the two million bpd ceiling”. GoM oil production averaged 1.28 million bpd in 2013 and steadily rose to average a record high of 1.79 million bpd in 2018, Rystad highlighted.“With earlier than planned production, Appomattox will be a key growth contributor to help push U.S. Gulf of Mexico oil production toward a new record high before year-end,” Joachim Milling Gregersen, an analyst on Rystad Energy’s upstream team, said in a company statement.The deepwater Appomattox project is Shell’s largest floating platform in the GoM, according to Shell’s website. The company produced first oil from the development last month and anticipates an average peak annual production of 175,000 barrels of oil equivalent (boe) from the project. Rystad forecasts that plateau production at the Appomattox development will be around 140,000 boe per day.Shell will be one of the top 2019 GoM equity producers, according to a list published by Rystad back in April. Other top equity producers from the region this year, according to Rystad’s list, will include BP, Equinor and ExxonMobil. A combined Chevron and Anadarko Petroleum entity took first place in the list, with Rystad predicting that such a company would produce just above 400,000 boe per day. Chevron ended up bowing out of the chase for Anadarko after Occidental Petroleum made a proposal to acquire the company. Last month, Occidental agreed to buy Anadarko for $57 billion.
GOM Workers Missing After Pair of Incidents - The U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement (BSEE) and the U.S. Coast Guard (USCG) are investigating the exact causes of two recent incidents in which Gulf of Mexico (GOM) workers fell through platform deck openings. On May 29, a production operator on Renaissance Offshore’s platform in Eugene Island Block 331 apparently fell through a displaced section of grating, according to BSEE and USCG reports. The 54-year-old employee was reported missing from the offshore Louisiana platform after personnel onboard found his hardhat and clipboard next to an opening in the wellbay deck, BSEE reported on June 4. According to the bureau, the open hole measured approximately 93 inches long by 13.5 inches wide and was approximately 45 feet above the water’s surface. Although the investigation is ongoing, BSEE stated that preliminary information indicates that the wellbay deck area was taped off with red “DANGER” tape before the incident but that the area had not been hard-barricaded to prevent the flow of personnel. USGC reported June 1 that it had called off the search for the missing worker. Late on June 1, a similar second incident occurred on the Chevron-operated Platform A in Green Canyon Block 205. According to BSEE, two employees went to replace the well access hatch cover over the well on the drill deck at approximately 11 p.m. “Preliminary information indicates that each of the two employees inadvertently picked up the wrong hatch cover,” stated BSEE. “Each employee grabbed one handle of the cover, which was the same color as the deck and had no well identifying information on it.” BSEE added that the action “unknowingly created an open hole” into which one employee stepped in and fell through as the hatch was moved. The hole was approximately 90 feet above a lower deck, BSEE also stated. The BSEE link above includes photos of the openings on the Renaissance Offshore and Chevron platforms.
BSEE forms panels to investigate two Gulf incidents - Bureau of Safety and Environmental Enforcement (BSEE) Gulf of Mexico Regional Director Lars Herbst has established two panels to investigate two serious incidents that occurred in the Gulf of Mexico last week, the agency states. The first investigation will focus on a man-overboard/missing person incident that occurred Wednesday at Eugene Island Block 331, Platform “B”. The Renaissance Offshore LLC platform is located about 170 miles southwest of New Orleans. The second will investigate a fatality that occurred Saturday, at Chevron’s Green Canyon Block 205, Platform “A” (Genesis) about 150 miles southwest of New Orleans. “The safety of workers must be of the utmost priority for offshore operators,” Herbst said. “Both incidents last week involved workers falling through platform decks to a lower elevation or to the water’s surface. We are issuing a safety alert to the industry with recommendations to reduce the likelihood of similar incidents in the future.” A safety alert is a tool used by BSEE to inform the offshore oil and gas industry of the circumstances surrounding a potential safety issue. It also contains recommendations that help operators avoid potential similar incidents. BSEE will work closely with the U.S. Coast Guard’s New Orleans Investigations Unit to review the information provided through interviews by the operator, the contract employees, witnesses and subject matter experts. Investigators will also analyze evidence from forensic testing. Each panel will consist of a team of BSEE investigators, inspectors and engineers.
Biden’s Climate Plan: Much More than Natural Gas, But Still Natural Gas -- On Tuesday, Democratic presidential hopeful and former vice president Joe Biden released his highly anticipated plan to address climate change. Billed as a “revolution,” it amounts an aggressive ‘all of the above’ strategy that draws from the Green New Deal while allowing for the continued production and development of natural gas and natural gas infrastructure at home and abroad. Speculation about the plan had been swirling since Reuters reported early last month that Biden was seeking a “middle ground” on climate change—a claim his campaign denied. The response to that news from progressives was swift and angry. Senators Bernie Sanders and Elizabeth Warren, both presidential contenders, seized on the story to draw immediate contrast with Biden.But with the $1.7 trillion package—dubbed the Plan for a Clean Energy Revolution and Environmental Justice—now released, the heat seems to have tapered off a bit—though news outlets were quick to point out that several lines contained within were lifted from other organizations, calling to mind the plagiarism scandal that ended Biden’s 1988 presidential campaign. Much of the coverage of the plan, however, focused on the ambitious nature of its proposals. Despite its big goals, the Biden climate plan has serious weaknesses. It leaves wide open a lane for natural gas. Not only does it lack a ban on fracking, but there’s also language suggesting the practice could expand under a Biden administration. That language is located quite literally in the first substantive section, which outlines promised executive actions.“On day one, Biden will use the full authority of the executive branch to make progress and significantly reduce emissions,” it reads. “Biden recognizes we must go further, faster, and more aggressively than ever before by: Requiring aggressive methane pollution limits for new and existing oil and gas operations.” It seems clear that natural gas is treated as a cleaner-burning transition fuel, which casts a dubious light on the plan’s promise to “re-claim the mantle as the world’s clean energy leader and top exporter.” Democrats have been pushing the gospel of natural gas since the Obama years. In April, the Democratic House overwhelmingly voted for a bill allocating $580 million in federal funding to help Europe transition its energy economy by building natural gas infrastructure.
It's Time to Stop Calling Natural Gas a 'Bridge Fuel' to a Safe Climate, Says New Report – DeSmog - Natural gas, marketed for years as a “bridge fuel” to cleaner energy sources, cannot be part of any climate solution, according to a new report from Oil Change International. While its authors outline a range of arguments, the report, Burning the Gas “Bridge Fuel” Myth: Why Gas is Not Clean, Cheap, or Necessary, highlights this simple reason: There is no room for new fossil fuel development — natural gas included — within the Paris Agreement goals. Therefore, plans to transition to a natural gas-based system are incompatible with international climate goals. “We simply have no more time to debate what’s already been settled. We must move swiftly to a fully renewable energy economy and leave all fossil fuels, including gas, behind,” said Lorne Stockman, report author and Senior Research Analyst for Oil Change International. “Despite desperate attempts by the oil and gas industry to persuade policymakers that their products have a future in a climate-safe world, a rational look at the data clearly shows otherwise.” While this fact alone should be enough to counter the industry’s attempt to sell natural gas — which is mostly the potent greenhouse gas methane — as a “clean” fuel, there are plenty of other reasons to move on from all fossil fuels, including natural gas. The low cost of renewable energy has helped end the future of the coal industry and is now poised to do the same to natural gas. The concept of natural gas as a “bridge fuel” was based on the idea that the world needed a reliable and economical energy source to cover the transition until renewables plus storage were a viable alternative. That time is now. And this is happening as the world is awash in very cheap natural gas. In America, the price of natural gas has gone negative in places like the Permian Basin in Texas. In North Dakota, oil and gas producers are currently flaring 20 percent of the gas they produce because it isn’t worth capturing. Natural gas prices can’t go lower and can only go up from here. Meanwhile, the costs of renewables continue to fall, and energy analysts predict that the costs of battery storage will continue dropping rapidly. The economics of renewables plus storage are competitive with natural gas now and appear poised to widen the gap in the near future.
Natural Gas Prices Plunge To New Multi-Year Lows - How low can you go? That's the question that is on the minds of many in the natural gas world, as we had our third consecutive session with a noteworthy decline, sending the July contract another 5 cents lower today, barely closing above the $2.40 level. These levels are quite uncommon for this time of the year, especially considering we are still (for now) at storage levels that are under the 5-year average. Mother Nature is not helping out lately, however. Last week we looked at El Niño and pointed out how this phenomenon was something to watch as we move forward, and how it had gained some strength last week. This week's data shows some further strengthening as well, as seen in the latest sea surface temperature anomalies posted by NOAA. No, this doesn't mean El Niño is now a lock to rule the weather pattern, but the recent strengthening is having an impact. Here is the typical summer correlation with El Niño and summer temperature departures: As you can see, it's a fairly widespread cooler signal. Now let's check the latest GEFS for the 6-10 day period: And the 11-15 day time frame: That's a lot more "blue" than what we saw previously, as the atmosphere is responding to the push farther into El Niño territory. It results in demand levels that now have fallen a little below the long term 30-year normal, and well under levels seen last year. Of course, weather is not the only reason prices are where they are, but it isn't exactly being friendly to bulls either. Time will tell if that changes..
Back-to-Back Bearish Storage Surprises Open Floor for Natural Gas Futures - One week after delivering a massively bearish storage injection, the Energy Information Administration (EIA) reported another triple-digit whopper that sets the stage for more downside in natural gas futures prices. The EIA reported a 119 Bcf injection into storage inventories for the week ending May 31. The build was well above last year’s 93 Bcf injection and the five-year 102 Bcf average build. Ahead of the report, analysts had expected a build closer to 110 Bcf. A Bloomberg survey of 16 analysts showed injections ranging from 103 Bcf to 121 Bcf, with a median of 109 Bcf. A Reuters poll of 19 analysts had a range reflecting a build between 104 Bcf and 124 Bcf, with a median of 109 Bcf. Intercontinental Exchange settled Wednesday at a 110 Bcf injection. NGI projected a 111 Bcf build. “I think there was Memorial Day impact. Just didn’t see it in the scrapes I saw. Shouldn’t have assumed it away,” said Flux Paradox LLC President Gabriel Harris on Enelyst, an energy chat room hosted by The Desk. Nymex gas futures responded swiftly to the EIA data. The July contract was trading about a penny higher day/day at around $2.39 about 10 minutes ahead of the EIA’s 10:30 a.m. ET report. The prompt month then fell to $2.354 as the print hit the screen. By 11 a.m. ET, the July contract was down to $2.333, down 4.5 cents on the day. While some analysts believe prices are already nearing a bottom with little room for additional downside ahead, Harris said he didn’t see a reversal on the recent price trend until August becomes the prompt month. “Anyone who will get desperate for supply in July is already in decent shape.” Balance wise, the 119 Bcf build is barely tighter than last week’s extremely loose 114 Bcf print, indicating that there is simply more supply in the market than what the data is showing, according to Bespoke Weather Services. The firm had projected a build of 110 Bcf. “Given the improvement we have seen in balance data for the current week, we still believe next week’s number will reveal tightening has occurred, but it is harder to trust given the perceived supply inaccuracies in the data,” Bespoke chief meteorologist Brian Lovern said. Broken down by region, 37 Bcf was injected into Midwest facilities, 31 Bcf was added in the East and 15 Bcf was injected into the Pacific region, according to EIA. The South Central saw 28 Bcf added to inventories, including 25 Bcf into nonsalt facilities and 3 Bcf into salts. Total working gas in storage as of May 31 stood at 1,986 Bcf, which is 182 Bcf above last year and 240 Bcf below the five-year average, EIA said.
Natural Gas Plunges on Supply Data, Hits Fresh 3-Year Lows - The U.S. Energy Department's weekly inventory release showed another larger-than-expected increase in natural gas supplies. The bearish injection, which was also higher than the five-year average, intensified a sell-off that left the U.S. benchmark with its lowest close in three years. Analysis: Another Massive Supply Build Stockpiles held in underground storage in the lower 48 states rose by 119 billion cubic feet (Bcf) for the week ended May 31, above the guidance (of 111 Bcf gain) as per the analysts surveyed by S&P Global Platts. Moreover, the increase was higher than the five-year (2014-2018) average net injection of 102 Bcf and last year’s increase of 93 Bcf for the reported week. The latest rise in inventories puts total natural gas stocks at 1.986 trillion cubic feet (Tcf) - 182 Bcf (10.1%) above 2018 levels at this time but 240 Bcf (10.8%) under the five-year average. Fundamentally speaking, total supply of natural gas averaged around 94.2 Bcf per day, essentially unchanged on a weekly basis even as dry production fell by 1%. Meanwhile, daily consumption increased 2.4% to 81.1 Bcf primarily due to strong power sector demand. Natural Gas Prices Hit Fresh 3-Year Low Natural gas futures extended losses on Thursday to touch fresh three-year lows – following a 1.6% drop in the previous session on Wednesday – after U.S. government data revealed a weekly injection in domestic stockpiles that was much more than expected. The commodity edged lower by 5.4 cents yesterday, at $2.324 per MMBtu, after earlier dropping to a new low since June 2016 at $2.305 per MMBtu. Natural gas is now 38% down from its Jan 15 high of $3.722 per MMBtu. Can it Rebound? The fundamentals of natural gas consumption continue to be favorable. The demand for cleaner fuels and the commodity’s relatively lower price has catapulted natural gas' share of domestic electricity generation to 35%, from 25% in 2011. Moreover, new pipelines to Mexico, together with large-scale liquefied gas export facilities have meant that exports out of the U.S. are set for a quantum leap. Finally, higher consumption from industrial projects will likely ensure strong natural gas demand. However, record high production in the United States and expectations for explosive growth through 2020 means that supply will keep pace with demand. Therefore, prices are likely to trade sideways but for weather-driven movements. Also, with the traditional withdrawal season (when supplies fall on heating demand due to cold weather) having ended in March and predictions for a cooler early summer, consumption is likely to decline in the near term.
What's Up With The EIA Misses? --For the second consecutive week, the natural gas market was hit with an EIA report that showed a much higher build than almost all of the market estimates, with today's report showing an injection of 119 bcf compared to market consensus, and our own estimate, of 110 bcf, which again reflected supply / demand balances that were very loose. This led to the July contract closing over 5 cents lower, making yet another multi-year low. This begs the question, what is behind the recent misses? It doesn't seem to be the supply side, as we continue to see production failing to get back to its previous highs. But is there more supply out there than is being indicated? We cannot be sure of this, although the extreme weakness in physical cash markets suggests it is a possibility. Another explanation could relate to the weather. Last week we discussed the possibility that the 114 bcf build could have been high at least partially due to higher wind generation. That is not as much of a factor in this week's report, but let's dig a little deeper into the week's weather. Here are the daily GWDDs for the week ending 5/31: Focus on the period highlighted in yellow. That was the Memorial Day weekend. Some of the week's highest demand happened to fall right on the holiday weekend. This could mean the overall impact of less actual demand due to the long holiday weekend was simply underestimated.Either option is viable, or perhaps more likely, it is a combination of both. The truth will reveal itself soon enough, with a very important EIA report on tap for next week.
The Next LNG Boom Will Dwarf The Last One - Demand for liquefied natural gas (LNG) will continue to rise in the foreseeable future as global natural gas demand will grow exponentially with major emerging economies raising the share of gas in their energy mix. LNG plant developers are already planning the next wave of a new investment boom in the industry, following the first global LNG development surge at the beginning of this decade. But as the new wave of project approvals and investments is set to sweep the market over the next few years, one question is on analysts’ minds—will the new LNG projects avoid the fate of the previous wave of LNG development, when cost overruns and delays were the rule rather than the exception. This year could be the biggest year yet in terms of LNG volumes of projects given the go-ahead, analysts say. This year is likely to set a record for volume of new project approvals, Michael Stoppard, Vice President and Chief Strategist for Global Gas at IHS Markit, wrote in March this year. “The projects first out of the gates seem likely to serve as a “firing pistol” to initiate a new phase of development,” he said, noting that IHS Markit sees LNG demand rising from 320 million tons (mt) in 2018 to 465 mt by the mid-2020s, and exceeding 630 mt by the mid-2030s.
Cheniere makes positive FID on 6th LNG train at Sabine Pass in Louisiana - Cheniere Energy advanced plans Monday for a sixth liquefaction train at its Sabine Pass export terminal in Louisiana and disclosed an arrangement that would tie a natural gas producer to an international price index and help support an expansion at its Corpus Christi facility in Texas. Executives promised investors steady growth heading into the next decade, at a time when other developers are starting up export facilities along the US Gulf and Atlantic coasts and proposing new ones. Looking to distance itself from its competition, the biggest US LNG exporter said optimization efforts will allow it to boost the average production of all of its trains to as high as 5 million mt/year. The difference now, compared with when Cheniere first contemplated being an exporter a decade ago, is that, as it has matured, it has built a portfolio with its long-term supply contracts that can be used to support production units across its facilities, rather than necessarily being tied to a specific train. That has given it, and the banks that are helping finance its latest train, confidence. The positive final investment decision to advance a sixth train at Sabine Pass was largely expected by the market after Cheniere announced in December 2018 an offtake deal with Malaysia's Petronas to support the production unit. Cheniere said in its presentation that an offtake agreement with commodity trader Vitol announced in September 2018 will also be used to support Train 6. Mostly what was left in recent months was for Cheniere to obtain financing to help pay for building the train. Cheniere said it has obtained $1.5 billion in financing. When the Petronas and Vitol offtake that is being assigned to the Sabine Pass unit are combined, about 40% of the original capacity from Train 6 is covered directly by long-term contracts. When Cheniere made a positive FID on the third train at its facility in Texas, it did so with 66% of the capacity covered by long-term contracts tied specifically to the unit, compared with the roughly 87% of capacity that Cheniere contracted for earlier trains at both of its terminals.
Cheniere inks long-term deal with Apache, firms up 6th LNG train— Cheniere Energy firmed up a pair of deals while moving ahead with the planned expansion of its Gregory export terminal and another facility in Louisiana. The company's subsidiary, Cheniere Corpus Christi Liquefaction Stage III, inked a long-term gas supply agreement with Apache Corp., a Houston-based oil and gas exploration and production company. Cheniere has a permit for three production units at its facility off State Highway 35 and is waiting for a permit to construct seven mid-scale production units. Together, they will be able to produce 9.5 million metric tons of LNG per year. Under the deal, Apache will sell 140 million cubic feet of natural gas daily that can be used to make 850,000 metric tons of LNG annually to Cheniere's Corpus Christi Stage III. The agreement is for 15 years. “This first-of-its-kind long-term agreement with Apache represents a commercial evolution in the U.S. LNG industry,” said Jack A. Fusco, Cheniere’s President and CEO. “This commercial agreement, which is expected to support the Corpus Christi Stage III project, reinforces Cheniere’s track record of creating innovative, collaborative solutions to meet customers’ needs and support Cheniere’s growth.” The use of natural gas is expected to climb in the coming years as China and other major consumers look to wean their industrial and power sectors off other dirtier fossil fuels, such as coal. Cheniere, a Houston company, is the biggest supplier of U.S. LNG and also the biggest buyer of gas in the country. Cheniere also announced it will build the sixth liquefaction train at its Sabine Pass LNG export terminal in Cameron Parish.
Leaks threaten safety — and success — of America's top natural gas exporter – In just three years, a 1,000-acre complex surrounded by Louisiana swampland has become the unlikely epicenter of America’s booming natural gas business.Sabine Pass terminal is the crown jewel of Cheniere Energy, a Houston company that had a virtual monopoly on U.S. exports of liquefied natural gas, or LNG, until last spring. In November, Cheniere opened a second terminal — eclipsing competitors racing to construct their first sites. The company is in talks to close its third deal with China, worth an estimated $18 billion. But cracks in Cheniere’s runaway success story have started to show.Last year gashes up to six feet long opened up in a massive steel storage tank at Sabine Pass, releasing super-chilled LNG that quickly vaporized into a cloud of flammable gas. Federal regulators worried the tank might give way, spilling the remainder of the fuel and setting off an uncontrollable fire. It wasn’t an isolated event: Another tank was leaking gas in 14 different places. Both tanks remain out of service over a year later.Investigators soon discovered that Cheniere grappled with problems affecting at least four of the five tanks at the terminal over the past decade. And officials at the Pipeline and Hazardous Materials Safety Administration, known asPHMSA, have found the company to be less than forthcoming in the ongoing investigation, noting Cheniere’s “reticence to share [its] sense of what might have gone wrong.”The leaks are a red flag at a time of unprecedented expansion in the LNG industry, which promotes the fuel as not only safe but also a clean, more climate-friendly alternative to coal. The problem is that natural gas is made up mostly of methane, a greenhouse gas far more potent than carbon dioxide at warming the Earth’s atmosphere. Leaks erode the fuel’s climate advantage over coal. Cheniere spokesman Eben Burnham-Snyder said workers and the public were never in danger, and last year’s leaks were about one hundredth of a percent of the facility’s permitted greenhouse gas emissions for the year. The tanks, he added, meet “all federal and state safety requirements.” But some other LNG export projects — including Cheniere’s newest terminal in Corpus Christi, Texas — have opted to use more expensive tank designs that offer greater protection against leaks and fires.
Pipeline Protest Laws Spark First Amendment Concerns - LAWMAKERS IN TEXAS passed a bill last month that they say will speed the construction of some 11,000 miles of pipeline by 2050 that is needed to keep the state's oil boom going: Any protester who blocks or otherwise "interferes" with the construction of an oil and gas pipeline, transmission line or other "critical infrastructure" project will face up to 10 years in prison – the same sentence given to some sex offenders, triggermen in driveby shootings and other felonies. The bill is expected to be signed by Republican Gov. Greg Abbott. If he does, Texas will become the latest state to institute tough penalties aimed squarely at pipeline protesters. Such laws have been adopted in six states – Indiana, Louisiana, North Dakota, Oklahoma, South Dakota and Tennessee – and are pending in another seven, including Texas, according to the International Center for Not-for-Profit Law, which is tracking the measures. Opponents warn that the laws – by singling out a particular type of protest – mark a dangerous infringement on First Amendment protections of free speech and assembly. The measures, they contend, ultimately do little to accelerate pipeline construction that existing laws don't already accomplish, while needlessly instituting draconian penalties for activity that hardly presents the kind of harm inflicted by the violent crimes that come with similarly harsh sentences.
As Permian oil production turns lighter, price outlook darkens - (Reuters) - The United States may now be the world’s biggest crude producer, but the oil being produced in its prolific Permian basin is increasingly too light in density for domestic refiners or for exports, eroding prices for these orphan barrels. Over the past year, production from the Permian in West Texas and New Mexico has changed, with more super-light oil being extracted, as producers focus drilling in the western part of the basin. As those volumes increase and heavy crude supplies shrink, refiners are grappling with the mismatch in the density of oil they require and what the country produces, traders said. U.S. refineries, geared to mostly process heavier and medium crudes that are imported from neighboring producers, are struggling to blend the lighter oil efficiently, market sources said. That problem has grown more acute this year with heavier crude in short supply after U.S. sanctions on Venezuela, production declines in Mexico and transportation bottlenecks in Canada. “That’s a big structural problem that’s not going to go away anytime soon. We’ve got this mismatch in the country,” Jennifer Rowland, analyst with Edward Jones said. “We’ve got refineries that want heavy oil and producers that make light oil.” As weekly U.S. crude production jumped to over 12 million barrels per day (bpd) earlier this year, exports too soared to a record at 3.6 million bpd in week to Feb. 15, government data showed. However, the export market for super-light crude has so far been limited, traders said, because there are only a few condensate splitters, or simple refineries designed to handle light crude, in Europe, along with Asian petrochemical plants that could process the grades.
Kairos Aerospace conducting Permian-wide scan in search for methane leaks - Aircraft have been flying over Permian Basin energy operations for decades, mapping pipeline routes and checking for pipeline or tank battery leaks and emissions. Drones may be filling the skies these days, but one company sees a more efficient way to scan the Permian Basin for emissions. Kairos Aerospace is attaching pods to the Cessna airplanes that fly around the region. "We fly two or three planes daily in the Permian Basin; we're flying out of MidlandOdessa airports," Steve Deiker, Kairos chief executive officer and co-founder, said in a phone interview. He said Cessnas, the most common plane in the world and widely available for lease, can cover 50 to 100 square miles compared to the three or four miles a drone can cover, and the company's imaging spectrometer detects methane plumes from 3,000 feet at 120 miles per hour. Deiker said one of his company's clients is Pioneer Natural Resources, which had Kairos survey its assets last year and will have the company do so again this year. In talking with customers or potential customers, he said "everyone we talk to wants to stop gas leaks – they're a safety hazard and they cost the operator. The challenge is knowing where to look and where to do maintenance." Rather than doing scans of specific assets for individual customers, Kairos has also launched a program to scan the entire Permian Basin for methane leaks and then sell that information to its customers. "It's more efficient to do the scan one time and then parcel that data out to operators – they're so intermingled," The company is active not only in the Permian Basin but in the Fayetteville play and is also active in Pennsylvania, West Virginia, Ohio, California and Colorado as well as Alberta, Ontario, Canada. Deiker said the company will begin operations next year in the Middle East and in North Africa. "It seems like there's a lot of interest from the industry, and as long as there's interest, we hope to provide data," he said.
Natural gas flaring hits record high in Q1 in U.S. Permian Basin (Reuters) - Natural gas flaring and venting in the top U.S. oil field reached an all-time high in the first quarter of the year due to the lack of pipelines, at a time of increased focus on environmental concerns about methane emissions. Producers burned or vented 661 million cubic feet per day (mcfd) in the Permian Basin of West Texas and eastern New Mexico, the field that has driven the U.S. to record oil production, according to a new report from Rystad Energy. The Permian’s first-quarter flaring and venting level more than doubles the production of the U.S. Gulf of Mexico’s most productive gas facility, Royal Dutch Shells Mars-Ursa complex, which produces about 260 to 270 mcfd of gas. A lack of pipelines and pipeline outages drove the first quarter numbers to a new record. “Its very persistent issue with infrastructure,” Natural gas that emerges alongside crude oil is often treated as a byproduct of oil drilling. Crude oil can move by pipe, train or truck, but natural gas can only move by pipeline, and construction has Permian has not kept up with output. The Permian is expected to flare more than 650 mcfd until the second half of the year when the Gulf Coast Express pipeline comes online, Abramov said. The Gulf Coast Express is designed to transport up to 2 billion cubic feet of natural gas and is scheduled begin operations in October. “It will be a temporary solution,” said Abramov. “We dont have any other major project coming online until late in 2020.” The Bakken shale field in North Dakota also continued to flare a high level in the first quarter, around 500 mcfd, according to Rystad. Together, the two oil fields on a yearly basis are burning and venting more than the gas demand in countries that include Hungary, Israel, Azerbaijan, Colombia and Romania, according to the report.
Joint venture moves forward on Waha Hub to Agua Dulce natural gas pipeline - A joint venture between the logistics arm of Marathon Petroleum and three other companies has entered to a deal to finance the construction of a new pipeline that will move natural gas from the Permian Basin of West Texas to the Agua Dulce hub near Corpus Christi. In a statement issued late Wednesday afternoon, Ohio-based MPLX LP, Austin pipeline operator WhiteWater Midstream and a joint venture between New York private equity firm Stonepeak Infrastructure Partners and Midland pipeline operator West Texas Gas announced a final investment decision on the Whistler Pipeline. "The decision to move forward with this project after securing sufficient commitments from shippers demonstrates our disciplined approach to investing," MPLX President Michael Hennigan said in a statement. "Whistler is expected to provide reliable residue gas transportation out of the Permian Basin, which is vital to our growing gas processing position and producers in the region." Spanning some 475 miles, the 42-inch pipeline will move 2 billion cubic feet of natural gas per day from the Waha Hub in the Permian Basin to the Agua Dulce Hub of South Texas. Expected to be in service by the third quarter of 2021, the Whistler Pipeline will connect with various processing facilities and pipelines along its route — including some that feed liquefied natural gas export terminals along the Texas Gulf Coast and pipelines to Mexico. A publicly traded subsidiary of refining company Marathon Petroleum, MPLX owns and operates more than 8,000 miles of pipelines in 17 states.
U.S. hydrocarbon gas liquids production reaches 5 million barrels per day in 2018 -- U.S. production of hydrocarbon gas liquids (HGLs) reached 5 million barrels per day (b/d) in 2018, an increase of more than 0.5 million b/d (13%) over 2017 levels. HGLs accounted for over a quarter of total U.S. petroleum products output in 2018. The increase in HGL production since 2010 is largely a result of growing domestic natural gas production. In 2018, U.S. natural gas production, measured as gross withdrawals, averaged 101.3 billion cubic feet per day (Bcf/d), a 38% increase over 2010 levels and the highest volume on record. As natural gas production has grown, an increasing share of HGLs are produced at natural gas processing plants, from about 75% in 2010 to nearly 90% in 2018. HGLs produced at natural gas processing plants are called natural gas plant liquids (NGPL), which include ethane, propane, normal butane, isobutane, and natural gasoline. A smaller share of HGLs are produced at petroleum refineries, which include refinery olefins and refinery liquefied petroleum gases (LPG). HGL production has been relatively flat at petroleum refineries since 2010, averaging about 630,000 b/d.Ethane and propane account for two-thirds of HGL production. Ethane production reached 1.71 million b/d in 2018, a 20% increase over 2017 levels. Ethane, the lightest NGPL, can (within some limits) be left in the processed natural gas stream at natural gas processing facilities—a process called ethane rejection—or it can be recovered from natural gas if ethane’s value is sufficient to cover the additional costs to produce and distribute the ethane to markets. Demand for ethane in 2018 was driven by increased use in the petrochemical sector, which converts ethane into ethylene for use in the production of plastics, resins, and fibers that go into the production of many consumer goods. Several new petrochemical crackers were commissioned in the United States in 2018. Chevron Phillips Chemicals and ExxonMobil each commissioned facilities that process an estimated 90,000 b/d of ethane as feedstock. Indorama Ventures commissioned a smaller petrochemical cracker estimated to consume 20,000 b/d of ethane as feedstock.International demand for ethane also increased, and new export infrastructure—the 50,000 b/d Utopia pipeline to Canada—has increased the capacity to ship ethane abroad.
Trump Tariff on Mexican Oil Would Hurt US Gulf refiners -- U.S. oil refiners could get hit if crude is included in President Donald Trump’s threatened 5 percent tariff on Mexican goods. Trump announced the tariff in a Twitter post on Thursday, without giving details. Mexico accounts for about 10 percent of U.S. oil imports, with sophisticated refineries along the Gulf Coast geared to turn Mexico’s sludgy Maya crude into gasoline and diesel. A 5 percent tariff would add about $3 a barrel to the cost of Maya, which was worth about $58 on Friday, according to data compiled by Bloomberg. The profit margin for using Maya to make fuels is $6.86 a barrel, according to Oil Analytics data, so the increase in crude cost could slash that almost in half. West Texas Intermediate, the U.S. benchmark, dropped 2.3 percent at 10:32 a.m. on the New York Mercantile Exchange, after earlier trading at the lowest since March 8. Trump’s tweet also rattled U.S. equities, with the Dow Jones Industrial Average sinking deeper into its longest streak of weekly losses since 2011. Worst-hit among refiners would be Royal Dutch Shell Plc’s Deer Park plant in Texas, which is a joint venture with Mexico’s state oil company Petroleos Mexicanos. Shell is the biggest importer of Mexican crude, bringing in 148,000 barrels a day in February, according to data from the Energy Information Administration. American companies Valero Energy Corp. and Chevron Corp. are the next-biggest purchasers, bringing in more than 200,000 barrels a day combined. “At the moment the gas cracks look favorable for the refiners” in the U.S. Gulf, said Wood MacKenzie analyst Ixchel Castro in Mexico City. “But an increase in the price of Maya would affect the margins of those who already have the oil contracted and other producers will try to take advantage to place their heavy crudes at a more competitive price.” There is some maneuver room for Pemex to send oil to Asia, but Mexico’s “contractual commitments limit this flexibility,” she added. The proposed tariffs come at a time when the international market for heavy crude is tightening amid sanctions on Venezuela and Iran, ‘‘making it difficult for investors to ascribe value to widening crude quality differentials,’’ Cowen Inc. analysts led by Jason Gabelman wrote in a note to clients. The impact of the tariffs on refiners will start to show up in third-quarter earnings, the analysts said. ‘‘PBF Energy Inc. and Valero are most exposed to these impacts, while Phillips 66 and Marathon Petroleum Corp.’s exposure is less pronounced due to their more diversified nature,’’ the analysts said.
It’s Adapt Or Die For U.S. Refiners -- The downstream sector of the oil and gas market may be facing challenging times ahead as the demand picture for refined products such as diesel, gasoline, and petrochemicals is expected to shift, and as heavy crude oil supplies shrinks.The downstream sector in the oil industry, for those not in the know, include all the last-stage operations of the entire oil process—namely refineries and distributors, or generally speaking, anything post-pumping. While the downstream oil sector may be more insulated than the upstream sector (drilling, exploring) from the volatile prices that have plagued the industry as of late, it does face new challenges in the volatile crack spread and shifting landscape that has prompted refineries to adapt to survive.Unlike the upstream sector, the downstream sector derives profit from the spread between the price of crude oil and the price of the end product—such as gasoline—also known as the crack spread. This means that the downstream sector has had an easier time withstanding the recent crude oil price volatility than its upstream sibling. But that doesn’t mean it is without its challenges, and the downstream sector is now facing a whole new set of challenges that will cause downstream companies to adapt or die. The type of crude oil available plays a major role in determining refining profits. Refiners are equipped to deal with usually one specific grade of oil, and US sanctions on Venezuela and Iran and pipeline capacity constraints in Canada have resulted in decreased heavy crude supplies for US refineries that are equipped for the most part to refine heavy oil into a usable product, pushing up the price of the heavy grade and cutting into refining profits in the process. Reconfiguring a refinery to process a different grade of crude oil is no small matter and requires time and investment. And this current constraint on heavy crude may be somewhat temporary—something that doesn’t inspire refineries to sink money into reconfiguring. Many of the Gulf Coast refineries rely on these heavy crude supplies that are now dwindling—and the spread between what little there is of this heavy crude and the finished product are now at an all-time low, according to data from Oil Analytics Ltd, as cited by the Vancouver Sun. This lower spread is eating into refinery margins.
Building Boom Shows Biggest U.S. Oil Hub Hasn't Lost Its Allure -- America’s largest oil hub in Cushing, Oklahoma, is growing even as producers and traders look to move surging West Texas production to the coast for export. The U.S. petroleum industry is planning to build about 4.8 million barrels of storage capacity and as many as seven new pipelines to move oil to and from the hub. The growth is a reminder of Cushing’s significance as a key trading hub for U.S. and Canadian crudes despite booming exports, according to speakers at last week’s Crude Oil Quality Association meeting in Oklahoma City. Companies are building up Cushing, the delivery point for West Texas Intermediate futures, even as pricing in Houston is growing in importance for overseas markets. U.S crude exports reached 3.6 million barrels of crude per day during the week ended February 15, the highest since Washington ended restrictions in late 2015. Six pipeline projects have been planned to move about 2 million barrels a day of crude away from Cushing by the end of 2021, but it’s unlikely they’ll all get built, according to Hillary Stevenson, Genscape Inc’s director of oil market business development. A more conservative estimate would be close to 750,000 barrels a day of new outgoing capacity, she said. The majority of the new storage is from Keyera Energy Corp’s proposed 4.5 million-barrel Wildhorse terminal that is set to be complete by the middle of next year. Magellan Midstream Partners LP and Plains All American Pipeline LP will also add new storage, Stevenson added.
Iowa Supreme Court affirms Dakota Access pipeline project (AP) — The Iowa Supreme Court said Friday that a crude oil pipeline running across Iowa was legally permitted to be built dashing the hopes of a group of farmer landowners who wanted the pipeline moved off their land and an environmental group that wanted it shut down. A four-member majority of the court agreed with an Iowa court judge who in in February 2017 concluded the Iowa Utilities Board properly considered public benefits of the pipeline. A group of 14 landowners and the environmental group Sierra Club of Iowa sued the board and the company that built the pipeline claiming the pipeline carrying crude oil from North Dakota to Illinois provides no benefit to Iowans and forced taking of land to build it is unlawful. The decision will have far-reaching impact for landowners in Iowa because it opens the door for more developer driven condemnations, said Bill Hanigan, the attorney for the landowners. “This sets a precedent for wealthy developers seizing Iowa farmland for private ventures that bring no measurable benefit to Iowans,” The pipeline passes through 18 Iowa counties cutting diagonally across the state from the northwest to the southeast over about 340 miles. Construction began in June 2016 it began pumping oil in 2017. The court concluded that the board’s weighing of benefits and costs supports its determination that the pipeline serves the public convenience and necessity adequately enough to satisfy Iowa law. The court points out that Iowa consumes the equivalent of 85.2 million barrels of oil per year but produces no oil itself. Iowa ranks eighth in the country in per capita gasoline consumption, the court said. Since the pipeline is expected to lead to longer-term reduced prices on products using crude oil, the court concluded these public benefits justify the board’s decision. . The farmers also claimed the forced taking of private land through eminent domain for a privately owned pipeline that provides no real benefit to Iowans is unconstitutional. The majority of the court, however, said the use of eminent domain for a traditional public use such as an oil pipeline does not violate the Iowa Constitution or the United States Constitution simply because the pipeline passes through the state without taking on or letting off oil.
Judges remove remaining barrier to Keystone XL construction - A 9th U.S. Circuit Court of Appeals panel nullified a key barrier to the construction of the Keystone XL pipeline, arguing that it no longer applies after the Trump administration replaced a permit earlier this year. The court ruled Thursday night in favor of the Trump administration and TransCanada Corporation’s motion to dismiss. The ruling sided with arguments that the old permit for the pipeline, which was replaced by the Trump administration in March, is no longer valid and therefore the injunction associated with it also no longer applies. The action hands a victory to the Trump administration, which has long fought to finish construction of the international pipeline. It also opens up the door to restarting construction of the Keystone XL pipeline, which was halted in courts in the fall in part due to failure to properly account for the cumulative impacts of greenhouse gases from the construction. Trump in May signed a presidential permit as a way to jump-start the delayed construction of the 1,179-mile pipeline. The order superseded a March 2017 order. “For the avoidance of doubt, I hereby revoke that March 23, 2017, permit,” Trump wrote in the order. A White House spokesperson told The Hill at the time that the new permit "dispels any uncertainty."
Court throws book at BLM over fracking Chaco — High Country News - In the high desert in New Mexico’s Chaco region, a single cornfield can serve as a landmark here. So it’s disconcerting to see truck after truck pass that same cornfield loaded down with water, bound for newly drilled oil wells that will be hydraulically fractured. Over a few days, the frackers shoot 1 million or more gallons of water — at least twice as much as that cornfield needs in a year — mixed with sand and chemicals into each of the hundreds of horizontal wells here. When the water bubbles back up, it is tainted with hydrocarbons, fracking chemicals and brine. This water gluttony now has the industry, and the federal agency charged with overseeing it, in trouble. In May, the 10th District U.S. Court of Appeals ruled that the Bureau of Land Management had failed to consider cumulative water use when it allowed drilling in the Chaco region, therefore violating federal environmental law. Yet the agency continues to issue new drilling permits, in defiance of the court’s decision. The court’s ruling concerns the BLM’s Farmington Field Office’s 2003 resource management plan for the San Juan Basin, a 10,000-square-mile geological bowl replete with natural gas, oil and coal. The plan gave the preliminary go-ahead to 9,942 natural gas wells, drilled vertically, primarily in the northeastern corner of the office’s jurisdiction, far from Chaco Culture National Historic Park. But several years after the plan came out, “fracking” — the horizontal drilling and multistage hydraulic fracturing used to extract oil and gas from shale formations — arrived in the San Juan Basin. Armed with bigger, shale-busting drill rigs, companies shifted their attention south, toward the oil-bearing Mancos Shale near Chaco Canyon and several Navajo communities. The BLM predicted that 3,960 new horizontal wells would be drilled in coming years, and in 2014, it launched a multi-year process to amend the old plan with regard to the shift in drilling techniques and geographical and geological targets. Environmentalists and community advocates begged the agency to hold off on issuing any new permits for horizontal drilling until the amendment was complete. But the Farmington office, which has a reputation for kowtowing to industry, paid no heed. They’ve already leased out more than 50,000 acres and issued over 500 permits over the last decade. “If they (critics) think it’s illegal,” said David Mankiewicz, assistant field manager of the Farmington office, “then sue us and lose.”
Lawsuit claims oil boom imperils Carlsbad Caverns — U.S. land managers violated environmental laws and their own regulations when issuing dozens of leases to drill in one of the nation’s busiest oilfields, environmentalists claimed Monday in the latest lawsuit aimed at getting the federal government to consider the cumulative effects of oil and gas development. WildEarth Guardians filed its complaint Monday in U.S. District Court, claiming the oil boom in southeastern New Mexico is a threat to Carlsbad Caverns National Park and the surrounding area’s cave systems and desert slopes. The group also is concerned about deteriorating air quality, arguing that the Bureau of Land Management failed to weigh the effects of more leases with the surge in development across the Permian Basin. Energy companies have invested billions of dollars in the region in recent years. At a shareholders meeting last week, Exxon Mobil Chairman and CEO Darren Woods said production in the Permian Basin — which straddles West Texas and southeastern New Mexico — is growing faster than expected. The Bureau of Land Management has been working on an updated plan to guide development in the area, but environmentalists contend more than 200 leases awarded in late 2017 and 2018 could compromise that effort. “This case raises many issues, but fundamentally it’s all about climate,” said Jeremy Nichols, the climate and energy program director for WildEarth Guardians. Nichols said there has been no effort by the Trump administration to curb fossil fuel production or reduce emissions. Earlier this year, a judge blocked oil and gas drilling across almost 500 square miles in Wyoming, ruling that the government must consider climate change impacts more broadly as it leases public land for energy exploration. That followed a ruling in Montana that faulted the government for inadequate consideration of emissions when approving projects on federal land. .
Multiple Colorado communities pass drilling permit moratoriums — Seven municipalities and one county scattered around the Denver-Julesburg Basin had passed some sort of drilling or permitting moratorium through Monday since the Colorado governor signed a law giving local governments greater control over oil and natural gas development, and that number may be higher by Tuesday. The latest community to halt development was Broomfield, where the city council voted last week to stop the processing or approval of applications for use by special review or operator agreements to allow oil and gas operations in Broomfield for the next six months. "I want to believe that the oil and gas companies want to produce this product and respect everybody that's around them," council member Mike Shelton said during the meeting. "I just haven't seen it that way. We definitely need a six-month moratorium if we're going to have companies operate under new regulations." Extraction Oil and Gas is the most active driller in Broomfield. It is currently developing up to 84 new wells within the city limits. However, Extraction reached an agreement with the city in 2017, and its plans are not affected by the state law or the moratorium. The Colorado Oil and Gas Conservation Commission, the state agency charged with overseeing oil and gas development, is currently in the process of updating its rulebook to align with Senate Bill 181. The bill grants greater authority to local governments in approving drilling permits and shifts the main aim of the COGCC from fostering energy development to protecting health and the environment. The process might take as long as two years. In May, COGCC commissioner Dan Gibbs said lawmakers never intended for regulators to stop issuing drilling permits while the rules are updated. In addition to Broomfield, the Front Range communities of Erie, Superior, Lafayette, Berthoud, Timnath, Boulder and Adams County, have all passed similar moratoriums. However, most of these moratoriums are being imposed outside of Weld County, where the vast majority of Denver-Julesburg oil and gas is produced and where most local leaders are supportive of the industry. Adams, Arapahoe, Boulder, Broomfield and Denver counties combined to produce an average of 36 MMcf/d in 2018, according to S&P Global Platts Analytics. In comparison, Weld County produced an average of 2.06 Bcf/d in 2018. Denver-Julesburg gas production is currently at 2.09 Bcf/d while oil production averages 512,000 b/d.
E&P Companies' Costs Hit 10-Year Low in 2018 -The world’s total exploration and development (E&D) costs in 2018 was the lowest since 2009, according to a May 30 release from the U.S. Energy Information Administration (EIA). The findings, based on analysis of 116 E&P companies’ annual reports, show that the companies added a net 10.3 billion barrels of oil equivalent (boe) to their proved reserves during 2018. Total E&D costs for these companies declined nine percent from 2017 when calculated as dollars per BOE of proved reserves added. The EIA found that global E&D costs increased in 2018 for the second year in a row, with changes in nominal year-over-year costs varying among regions. The oil and gas industry has experienced significant cost deflation since the onset of the downturn in 2014, therefore nominal costs incurred in different years may not be directly comparable. The costs provide an idea of the expenditures needed to add one barrel of proved reserves. The disparity between the timing of companies’ capital expenditures and the formal reporting of changes to their proved reserves is the reason why standard practice is to average results over several years. Analyzed this way, the 2018 E&D costs incurred at $15.20 per additional boe of proved reserves was the lowest it’s been since 2009.
North Dakota tribe defends its rights to minerals from state (AP) — For nearly two centuries, the federal government has repeatedly assured a Native American tribe in North Dakota that it has rights to a reservation river and the issue stayed relatively quiet until oil companies figured out a way to drill under the waterway, which is now a man-made lake. With an estimated $100 million in oil royalties waiting in escrow to be claimed and future payments certain to come, the state has become more involved in seeking ownership rights. It successfully lobbied the U.S. Interior Department to suspend a last-minute Obama-era memo stating that mineral rights under the original Missouri River bed should belong to the Mandan, Hidatsa and Arikara Nation, which is also known as the Three Affiliated Tribes. The Interior Department put the minerals issue on hold last summer and ordered a review of the “underlying historical record.” The state maintains that it assumed ownership of the riverbed when North Dakota became a state in 1889, citing a constitutional principle known as the equal footing doctrine. The state’s immersion in the issue isn’t sitting well with tribal members, who say it’s between them and the Trump administration. “Now that there might be $100 million there, all of a sudden the state really cares, right?”The January 2017 memo by former Interior Department Solicitor Hilary Tompkins, an enrolled member of the Navajo Nation, is one of numerous federal declarations since the 1820s that have confirmed the tribes’ ownership of the river, which was altered when the U.S. Army Corps of Engineers built the Garrison Dam in the 1950s and created Lake Sakakawea.In her ruling, Tompkins cited both a 1936 opinion by the Interior Department that granted the tribes ownership of a Missouri River island and a wider-ranging 1979 conclusion by the Interior Board of Land Appeals that the entire bed of the river within the reservation boundaries didn’t pass to North Dakota’s control when it became a state. The state didn’t appeal the 1979 decision, which Tompkins said rejected the relevance of the equal footing doctrine.Tribal officials have recently taken to social media and penned op-eds a sking state leaders to come out in support of the tribes’ ownership rights, much like they did during the last legislative session regarding an oil and tax agreement with the tribes.
2 brine spills reported in northern, western North Dakota - (AP) — The North Dakota Oil and Gas Division says two releases of brine were reported in northern and western parts of the state this week. One release happened Tuesday at the Fossum B 2R Water Injection Plant about four miles northwest of Maxbass, in Bottineau County. Scott Energy Partners reported that 33,600 gallons of brine were released due to a valve-piping connection leak. Cleanup is nearly complete. On Wednesday, Missouri Basin Well Service reported that 143,094 gallons of brine were released due to a fire caused by a lightning strike at the Hydro Clear SWD 1, about 16 miles northeast of Alexander in McKenzie County. Cleanup is getting underway after all hot spots were eleminated.
Horizontally drilled wells dominate U.S. tight formation production – EIA - Wells drilled horizontally into tight oil and shale gas formations continue to account for an increasing share of crude oil and natural gas production in the United States. In 2004, horizontal wells accounted for about 15% of U.S. crude oil production in tight oil formations. By the end of 2018, that percentage had increased to 96%. Similarly, horizontal wells made up about 14% of U.S. natural gas production in shale formations in 2004 and increased to 97% in 2018. Although horizontal wells have been the dominant source of production from U.S. shale gas and tight oil plays since 2008 and 2010, respectively, the number of horizontal wells did not surpass the number of vertical wells drilled in these plays until 2017. About 88,000 vertical wells in tight oil and shale gas plays in the United States still produced crude oil or natural gas at the end of 2018, but the volume produced by these wells was minor compared with the volume produced by horizontal wells. Many of these remaining vertical wells are considered marginal, or stripper, wells, which will continue to produce small volumes until they become uneconomic. Drilling horizontally, parallel to the geologic layers in tight formations, allows producers to access more of the oil- and natural gas-bearing rock than drilling vertically. This increased exposure allows additional hydraulic fracturing with greater water volumes and pounds of proppant (small, solid particles, usually sand or a manmade granular solid of similar size). The lateral length of horizontal wells has also increased, allowing for more exposure to oil- and natural gas-producing rock from a single well. Because tight formations have very low permeability, which prevents oil and gas from moving toward the well bore, using hydraulic fracturing to increase permeability, along with horizontal drilling, is necessary for oil and gas to be produced from these formations economically. The production history of horizontal versus vertical wells varies by play. For example, some tight formations in the Permian Basin have a long history of vertical well production. In 2004, vertical wells generated nearly all (96%) crude oil production from these formations. As late as 2014, vertical wells accounted for as much as half of Permian production, but by 2018, vertical wells accounted for only 7% of that production. By contrast, modern production in the Marcellus formation in the Appalachian Basin is almost entirely from horizontal drilling.
California's Gas Plant Pipeline Dwindles as Calpine Drops Mission Rock Application - Independent power producer Calpine has abandoned plans to build a new natural-gas plant in Southern California, swelling the ranks of recently canceled fossil fuel plants in the state.The company withdrew its application for the Mission Rock plant in a letter to the California Energy Commission dated May 21. That decision ended a years-long conflict over the permitting of the plant, a 255-megawatt combustion turbine facility planned on the banks of the Santa Clara River in Ventura County, northwest of Los Angeles. The Native American Chumash people opposed the plant as a disruption to a river environment that they consider sacred.The permitting battle also became a test case for new fossil fuel plant development as the Golden State moves toward its legislative goal of carbon-free electricity by 2045. Mission Rock joins a string of recent gas plant cancellations in California. The state still relied on natural-gas generation for 34 percent of its electricity in 2017, but new gas construction there has become a rarity as market and policy headwinds intensify. Earlier this year, Los Angeles Mayor Eric Garcetti opted to retire rather than replace three coastal gas plants serving the municipal utility. Last year, Glendale's city council paused a$500 million gas peaker project that its municipal utility staff wanted to build, choosing instead to solicit clean energy alternatives. CEC regulators objected in 2017 to the siting of NRG’s Puente Power Plant on the shores of Oxnard, prompting utility Southern California Edison to replace the gas project with aportfolio of energy storage facilities that were announced last month.
Clean-up response continues for Goleta crude oil spill - A Unified Command has been established to respond to a May 28 crude oil release that occurred at Pier 421 at Haskell’s Beach. The incident occurred while crews were working to plug an abandoned well, releasing an estimated 80 to 125 gallons of crude oil. Multiple assessments have not detected any sheen on the water, but ground crews have discovered oil and oily debris along the shoreline in the vicinity of Pier 421 and points east. A team of cleanup contractors are working to remove this material. Scientists continue to assess sensitive environmental sites in the area including snowy plover nesting sites near Coal Oil Point. No impacts to those areas have been observed. Crews from the Oiled Wildlife Care Network (OWCN) have also been activated and will be out assessing the area again tomorrow. At this time, ten birds have been collected. The public is asked to avoid any potentially-oiled wildlife, as approaching or trying to help them can do more harm than good. Anyone seeing oiled wildlife is asked to call the OWCN at 1-877-823-6926. All beaches will remain open throughout the cleanup process and there are no impacts to public health, safety or recreational fishing. However, the public is asked to refrain from entering areas where crews are working or cleanup efforts are taking place. Responding agencies include Santa Barbara County Fire, the United States Coast Guard, the California Department of Fish and Wildlife’s Office of Spill Prevention and Response, the City of Goleta, and the California State Lands Commission. Public volunteers are not currently needed.
Judge Rejects Oil Company's Request to Frack Off SoCal Coast – Environmental groups have won another round in the battle over fracking in federal waters off the coast of California. Late Tuesday, a judge denied an oil company's request to frack in the Santa Barbara Channel.The company, called DCOR LLC, had asked for an exception to a moratorium put in place last December.That ruling forbids the Trump administration from approving permits for fracking or acidizing in the Pacific until a proper environmental review is done. Steve Jones, a spokesman for the Center for Biological Diversity, called the company's request "ridiculous.""DCOR had no good reason for wanting to do this, other than increase its profits at the cost of marine wildlife and coastal communities," he states.The ruling only applies to fracking and acidizing at existing platforms and would not prevent the Trump administration from issuing permits to expand drilling in federal waters – and the revised five-year plan for that is expected to come out very soon. DCOR maintained in court papers that the moratorium would hurt company finances, but the judge said the protection of marine life takes priority.The judge ruled that the federal government violated the Endangered Species Act when it approved the permits, citing concerns for the health of sea otters. Jones says the animals are bouncing back, but are very sensitive to the chemicals used in fracking for oil.
Trump administration's California fracking plan is 'dangerous,' environmental groups say - CNBC— The Trump administration’s plan to open up more than 1 million additional acres of public and private land in California to fracking is raising alarm in the environmental community.Environmentalists are challenging the proposal as “dangerous” to humans and iconic national parks nearby, including Yosemite and Sequoia-Kings Canyon National Parks.Last month, the U.S. Bureau of Land Management issued a draft supplemental environmental impact statement on the plan that includes using hydraulic fracturing, or fracking, to extract oil and gas from eight central counties in the state.“The risks posed to our national parks by further oil and gas development, particularly these iconic treasures that helped to inspire the modern-day conservation movement, is saddening to say the least,” Mark Rose, National Parks Conservation Association’s Sierra Nevada field representative, said in a statement. “Yosemite, Sequoia and Kings Canyon already experience some of the worst air quality within the park system, posing unprecedented threats to visitors and the natural resources that call these places home.”Rose further warns that allowing more “fracking near these treasured lands and the more than 1 million acres spanning from the Central Valley to the coast could be disastrous for our national parks, surrounding communities and other public lands.”California now ranks as the seventh largest state in terms of crude oil production, after being in third place until 2016. The state has already issued 121 permits for fracking so far this year, according to the California Department of Conservation. The BLM proposal includes additional oil and gas development in Fresno, Kern, Kings, Madera, San Luis Obispo, Santa Barbara, Tulare and Ventura counties. The agency plans to hold hearings in California on its proposal starting May 21 and indicated the 45-day public comment period ends June 10.
US wildlife refuge to be opened up for oil drilling -- The US Interior Department is determined to sell oil leases for the first time this year in the ecologically sensitive but presumably petroleum-rich coastal plain of Alaska's Arctic National Wildlife Refuge, a Trump administration official says."That lease sale will happen in 2019," Joe Balash, the assistant Interior secretary for lands and minerals management, told an oil industry conference.The decision marks a likely turning point in a decades-long battle between environmental groups and fossil energy companies over the Beaufort Sea coast of the wildlife refuge, home to caribou, polar bear and other Arctic wildlife east of Alaska's North Slope oil fields.The refuge had been off-limits to oil and gas drilling until the end of 2017, when Congress passed a tax overhaul that included a mandate for oil leasing there. The tax bill requires the Interior Department to hold a lease sale within four years, offering at least 400,000 acres to development within the coastal plain of ANWR, America's largest wildlife sanctuary.Interior's Bureau of Land Management issued a draft environmental impact statement last year and will follow up with a final report in about August. Environmentalists have criticised the swiftness of the environmental review and one environmental leader predicted legal challenges. "If they really stick with that timeline, then they're likely going to be violating several environmental laws," said Adam Kolton, executive director of the Alaska Wilderness League. "This is being rushed faster than any area we've ever seen in the American Arctic and almost any area in the United States. It's about meeting a political clock."
U.S. vows first oil lease sale in Alaska Arctic refuge this year (Reuters) - The U.S. Interior Department is determined to sell oil leases for the first time this year in the ecologically sensitive but presumably petroleum-rich coastal plain of Alaska’s Arctic National Wildlife Refuge, a Trump administration official said on Thursday. “That lease sale will happen in 2019,” Joe Balash, the assistant interior secretary for lands and minerals management, told an oil industry conference in Anchorage. The decision marks a likely turning point in a decades-long battle between environmental groups and fossil energy companies over the Beaufort Sea coast of the wildlife refuge, home to caribou, polar bear and other Arctic wildlife east of Alaska’s North Slope oil fields. The refuge had been off-limits to oil and gas drilling until the end of 2017, when Congress passed a tax overhaul that included a mandate for oil leasing there. The tax bill requires the Interior Department to hold a lease sale within four years, offering at least 400,000 acres for development within the coastal plain of ANWR, America’s largest wildlife sanctuary. The Interior Department’s Bureau of Land Management issued a draft environmental impact statement last year and will follow up with a final report this summer, likely by August, Balash said. A record of decision and notice of lease sale will follow, he said. Environmentalists have criticized the swiftness of the environmental review. One environmental leader predicted legal challenges. “If they really stick with that timeline, then they’re likely going to be violating several environmental laws,”
Alberta Imposes New Fracking Restrictions Near Dam after Quakes - In a significant development, the Alberta Energy Regulator has acknowledged that hydraulic fracturing operations can impose high risks to critical infrastructure such as dams, an issue of growing concern at British Columbia’s Site C mega-project on the Peace River. The regulator’s new regulations follow a wave of tremors set off by Canada’s oil and gas industry, as well as the release of major scientific papers documenting how fracking and other forms of fluid injection have caused devastating earthquakes. Such industry-triggered events, some as great as magnitude 5.7, have destroyed homes, caused landslides, and left taxpayers with millions of dollars of damage in Oklahoma, Korea and in China, where citizens have been killed. Last week, the industry-funded regulator issued an order restricting fracking activity near TransAlta’s Brazeau Dam located 55 kilometres southwest of the densely drilled Drayton Valley following a magnitude 4.3 earthquake in the region last March. The exact cause of that earthquake is not known, but the oil and gas industry has previously rocked the region with tremors caused by wastewater injection or by gas extraction, which causes rock to fracture and collapse. The regulator officially banned fracking within five kilometres of the dam site in the deep Duvernay formation, and within three kilometres of the dam site in the shallower formations above the Duvernay. It also imposed requirements that any fracking operator in the three-to-five-kilometre zone that causes a magnitude 1.0 earthquake must now report the event to the regulator and cease operations totally if it triggers quakes greater than magnitude 2.5. A regulator spokesperson told The Tyee in an email that the agency “issued the order as a precaution to limit the potential for an induced earthquake to happen near the Brazeau Dam. There has been no induced seismicity within 25 kilometres of the Brazeau dam and no reported impacts to the public, infrastructure, or the environment.”
Mexico Kicking Off $7.7B Refinery Project-- Mexico is kicking off the construction of its 150 billion peso ($7.7 billion) oil refinery amid a call by President Andres Manuel Lopez Obrador for the country to become self-sufficient in energy production. The nation “depends too much on buying foreign gasoline,” the president, commonly known as AMLO, said at an event Sunday in Paraiso, Tabasco, where the seventh refinery will be built. The bidding process for the six phases of the refinery begins at the end of June. The leader also used the platform to rally the country after U.S. President Donald Trump threatened in the past week to slap a 5% tariff on all goods from Mexico if it doesn’t curb an unprecedented surge in migrants over the U.S. border. The Mexican peso slumped and was the worst performer among major global currencies in the past week. AMLO, who is sending a delegation to Washington this week, said Mexico wants to continue to be friends with the U.S. and reiterated his country’s good relations with its northern neighbor. However, he also said that Mexico “isn’t a colony of any foreign country.” “The president of Mexico wants to continue being a friend of President Donald Trump. But above everything, Mexicans are friends of the people of the United States,” AMLO said to cheers from crowds that had gathered at the Dos Bocas port following a critical tweet from Trump. “To them, I dedicate this message from Paraiso, Tabasco. We want nothing and nobody to separate our beautiful and sacred friendship.”
Venezuela’s oil exports drop 17% in May as sanctions kick in: data - Venezuelan PDVSA’s oil exports took another hit in May, following a deadline for customers to wind-down purchases in order to comply with U.S. sanctions, according to documents from the state-run company and Refinitiv Eikon data. The energy firm’s exports of crude and refined products fell 17% in May from the previous month to 874,500 barrels per day (bpd), mainly due to difficulty in selling off barrels of upgraded crude that used to be bought by U.S. refiners. Venezuela has drained oil inventories since late January, when Washington imposed sanctions on PDVSA, to offset declining crude output, according to analysts. That allowed the firm to maintain exports around 1 million bpd for the following three months despite the measures. But some customers ended purchases of Venezuelan oil in late April to comply with sanctions, leaving PDVSA with an accumulation of upgraded oil and further reducing its portfolio of regular buyers, according to the reports and data. PDVSA did not respond to requests for comment. In May, PDVSA shipped a total of 33 cargoes of crude and fuel, mainly to Asian destinations. Exports to India fell over a third to 187,000 bpd while shipments to China remained around 450,000 bpd. Russia’s Rosneft, which takes PDVSA’s barrels as repayment of billions of dollars in loans to Venezuela, was the largest recipient of the OPEC member’s oil.
Tanker Sabotage: Venezuela’s Crisis Worsens - Tankers carrying gasoline and ships transporting food for Venezuela were sabotaged last week to prevent them from reaching Venezuela, Nicolas Madurosaid in a televised speech late on Monday.“Last week, sabotage was committed against ten tankers [with gasoline] to prevent them from reaching the Venezuelan coast,” Russian news outlet Sputnik quoted Maduro as saying.Amid political chaos and a raging economic crisis, Venezuela’s oil production has been crumbling, and most refineries and upgraders have stopped producing entirely, operating at zero capacity merely to keep the facilities from being damaged as its buyers look for alternate supplies in the face of US sanctions.Venezuela, the country sitting on top of the world’s largest crude oil reserves, is now producing less than 1 million bpd of oil - just over 750,000 bpd in April, compared to average production of 1.9 million bpd for 2017, as per OPEC’s secondary sources. While Maduro and opposition leader Juan Guaidó, recognized as the country’s interim president by the U.S. and many other countries, vie for Venezuela’s presidency, the tightened U.S. sanctions on Venezuela that began in February are constraining Venezuela’s ability to produce, refine, and export oil. Venezuela’s gasoline production has slumped as the second-largest refinery in the country stopped operating, and gasoline import shortages have caused lines at gas stations.
Russia's May oil output hits 11-month low on dirty oil crisis (Reuters) - Russian oil output fell to 11.11 million barrels per day (bpd) in May, its lowest level since June 2018, from 11.23 million bpd in April, Energy Ministry data showed on Sunday. The production fall resulted mainly from the closure due to oil contamination of Russia’s Druzhba pipeline, which usually ships 1 million bpd, or 1 percent of global oil demand. As a result, Russian oil production during May fell by more than stipulated in a global deal with the Organization of the Petroleum Exporting Countries (OPEC). The Energy Ministry data showed Russian oil pipeline exports in May fell to 4.209 million bpd, from 4.494 million bpd in April, as supplies via the Druzhba pipeline almost dried up, while seaborne exports jumped by 11.5 percent. Russia expects to clean up the pipeline, which was built in the 1960s and carries Russian oil to Europe, including Germany, Hungary, Poland and Slovakia, within six to eight months. June 2018 production was 11.06 million bpd. In tonnes, oil output reached 47.004 million in May versus 45.975 million in April, which is one day shorter than May. Reuters uses a tonnes/barrel ratio of 7.33. Russia’s largest oil producer Rosneft accounted for most of the cuts, with a month-on-month reduction of 2.9 percent in May, while domestic output at Russia’s No.2 oil producer Lukoil edged up 0.7 percent last and Gazprom Neft boosted its output by 4.7 percent. Both Lukoil and Gazprom Neft have their own exporting terminals in the Arctic. OPEC and other large oil-producing countries led by Russia agreed to curb output by a combined 1.2 million bpd for six months from Jan. 1, in order to balance the global oil market. Of this, Russia pledged to cut its production by 228,000 bpd from the deal baseline of the October 2018 level, to 11.18 million bpd. OPEC and Russia are excepted to gather in Vienna later this month or in early July to discuss what to do in the second half of the year. Top oil exporter Saudi Arabia has raised production in May, a Reuters survey found, but not by enough to compensate for lower Iranian exports that collapsed after the United States tightened the screw on Tehran.
2018 Oil Production and Demand - Total world crude oil production increased by 1.213 million barrels per day (MMbpd) in 2018 to reach 75.78MMbpd, according to OPEC’s latest Annual Statistical Bulletin (ASB). The rise marked the highest annual growth since 2015, according to the ASB, which revealed that OPEC crude oil output declined year on year by 415,000 barrels per day, while crude production by non-OPEC countries grew by 1.628MMbpd. The top three crude oil producing countries last year were the United states with 10.96MMbpd, Russia with 10.53MMbpd and Saudi Arabia with 10.32MMbpd, according to the ASB. World oil demand grew by 1.5 percent year on year to average 98.73MMbpd in 2018, the ASB highlighted. The largest increases were recorded for the Asia and Pacific region, particularly China and India, and North America, the ASB revealed. OECD (organization for economic cooperation and development) oil demand was said to have grown “solidly” for the fourth consecutive year in 2018, while oil demand in OPEC member countries declined “slightly” after increasing during 2017. Oil demand growth is expected to slow significantly from next year, according to McKinsey Energy Insights’ (MEI) Global Energy Perspective 2019 Reference Case, which was launched in February. Global oil demand growth is projected to slow to 0.7 percent per year from 2020 to 2030, before dropping to -0.2 percent per year from 2030 to 2040 and -0.6 percent per year from 2040 to 2050, the Reference Case highlights. According to Rystad Energy’s long term-outlook released in January, oil demand will grow steadily in the 2020s and peak in the late 2030s.
Is There Really a Global Shortage of Crude? - There's certainly no shortage of light crude, but the picture is very different for the medium and heavies. (Bloomberg) -- From Russia to Saudi Arabia, Iran to Venezuela, the list of crude oil supplies being curtailed or disrupted around the world is growing longer by the month. This story examines whether the market’s biggest supply shifts are actually netting out into a global shortage of oil or not. The answer is a complex one, hinging on the type of crude in question and the time-frames selected. The simplest supply measure is all the oil pulled out of the ground globally. On this view it does indeed look like global production has fallen sharply over the past six months, as the OPEC+ group of countries slashed supply, while the U.S. has toughened sanctions on the oil industries of Iran and Venezuela. Figures published by the Energy Intelligence Group show that global oil production was 96.79 million barrels a day in April. That is a drop of more than 2 million barrels a day since the end of last year. But just a slightly a longer time-frame gives a different picture. If you compare April with a year earlier, production is actually up, by 570,000 barrels a day -- pretty much in line with oil demand growth. While such a broad look at global oil production data offers some insight, it misses a lot of important detail. Most of the new refineries built in Asia and the Middle East in recent years were designed to run on a diet of heavy, sour crudes. These barrels feature a high proportion of large hydrocarbon molecules that need to be broken down into smaller ones to make high-value transport fuels. They also tend to contain relatively high concentrations of sulfur that have to be removed to meet anti-pollution regulations. But that’s not where the growth in oil supply has been. Booming production from the U.S. Permian Basin has driven a surge in the supply of light crude, which was up year-on-year by more than 1.8 million barrels a day in April. By contrast, the increase since the end of 2018 has been much smaller, at 160,000 barrels a day. The picture for heavy crude is completely different. Slumping output from Venezuela, where years of mismanagement and under-investment have been compounded by the impact of U.S. sanctions on the state oil company, has driven a sharp drop in global supply, both year-on-year and year-to-date. The impact of Venezuela’s difficulties has been exacerbated by continuing declines in Mexico’s oil production, which was previously expected to be reversed this year. An uptick in Canadian output, which had been curtailed by government-imposed restrictions in the first months of this year, has done little to offset the recent declines in heavy oil production elsewhere. And then there’s that big bit in the middle of the range -- medium crude -- that’s dominated by Russia and Saudi Arabia and includes most of the other Persian Gulf producers.
Fracking the World: Despite Climate Risks, Fracking Is Going Global – DeSmog - The U.S. exported a record 3.6 million barrels per day of oil in February. This oil is the result of the American fracking boom — and as a report from Oil Change International recently noted — its continued growth is undermining global efforts to limit climate change. The Energy Information Administration predicts U.S. oil production will increase again in 2019 to record levels, largely driven by fracking in the Permian shale in Texas and New Mexico.And the U.S. is not alone in trying to maximize oil and gas production. Despite the financial failures of the U.S. fracking industry, international efforts to duplicate the American fracking story are ramping up across the globe. The CEO of Saudi Arabian state oil company Aramco recently dismissed the idea that global demand for oil will decrease anytime soon and urged the oil industry to “push back on exaggerated theories like peak oil demand.”But Saudi Aramco also is gearing up for a shopping spree of natural gas assets, including big investments in the U.S., andincreasing gas production via fracking in its own shale fields. Aramco is deeply invested in keeping the world hungry for more oil and gas.Khalid al Falih, Saudi Arabia’s energy minister, told the Financial Times, “Going forward the world is going to be Saudi Aramco’s playground.” But not if other countries frack there first. As a major importer of oil and natural gas, it is no surprise that China is trying to exploit its own shale formations, which are rich with oil and gas. China is estimated to have the largest shale gas reserves of any country. However, China’s shale formations present different challenges than those in the U.S., including gas deposits at significantly greater depths.China's national oil and gas companies are making gains in fracking and lowering costs to produce gas but are still only producing a small fraction of the gas of U.S. frackers. In addition to technical challenges, China also faces local opposition in regions where fracking is occurring. One county in China's Sichuan province recently suspended fracking efforts after an earthquake killed two people. The event resulted in massive public protests against fracking, which protesters blame for the earthquakes.
BP to pay billions for suspicious Senegal gas deal -- BP has agreed to pay around $10bn (£8bn) to a businessman involved in a suspicious energy deal. The energy giant bought Frank Timis' stake in a gas field off the coast of Senegal for $250 million in 2017. But documents obtained by BBC Panorama and Africa Eye reveal that BP will also pay his company between $9bn and $12bn in royalties. Both BP and Mr Timis deny any wrongdoing. Read the full statement from Mr Timis here.
World's Largest LNG Producer Set to Change - Australia is poised to dethrone Qatar as the world’s largest producer of liquefied natural gas (LNG) next year.That’s according to Rystad Energy, which forecasts that Australia will stay in top spot until Qatar eventually reclaims the position in 2024.“Over the next two years, pending approvals on up to seven Australian integrated LNG projects could challenge Qatar as the country with the largest sanctioned LNG volumes from integrated projects during that period,” Readul Islam, a research analyst at Rystad Energy’s upstream team, said in a company statement.“However, though sanctioned Australian LNG supply volumes could run neck and neck with Qatar over the next couple of years, Qatari LNG production should retake the top producer crown midway through the next decade,” he added.Rystad highlighted that, following the 2017 lifting of Qatar’s North Field moratorium, Qatar Petroleum has revealed a plan for four additional production facilities to supply 33 million tons per annum of LNG. When these expansion trains reach plateau rates during the mid-2020s, Qatar will regain the top LNG producer spot, according to Rystad Energy.Islam said the jostling for the top LNG producer crown “probably is of cursory interest to oilfield service specialists”.“If we add proposed onshore LNG projects in Papua New Guinea to the tally from Australia, a $40 billion wave of LNG projects will wash over the region over the next couple of years. Service players won’t want to miss a slice of this world-class pie,” he stated.According to a recent report published by DNV GL, the majority of LNG-focused oil and gas professionals believe several new LNG infrastructure projects will need to be initiated this year to ensure supply can meet demand after 2025.The report also revealed that more than two thirds of these professionals think price uncertainty is limiting investment in LNG megaprojects and that more than a third expect the United States to experience the greatest growth in LNG exports over the next three years. China is the country expected to have the greatest growth in LNG imports over the next three years, according to the report. Last month Rystad Energy revealed that the escalation of the trade war between the United States and China could jeopardize several LNG mega projects awaiting final approval.
The global boom in natural gas demand is about to slow, the International Energy Agency says - The world’s appetite for natural gas grew at the fastest pace since 2010 last year, but that blockbuster growth is shifting into lower gear, according to the International Energy Agency. Global demand for natural gas surged by 4.6% in 2018, driven by strong economic growth, the transition away from coal-fired electric power and weather-related demand. Gas accounted for nearly half of the world’s growth in energy demand, with most of the higher consumption coming from China and the United States, says IEA. “In 2018, natural gas played a major role in a remarkable year for energy. Global energy consumption rose at its fastest pace this decade, with natural gas accounting for 45% of the increase,” IEA Executive Director Fatih Birol said in the agency’s annual natural gas report. However, the Paris-based adviser to energy-importing nations says that extraordinary growth rate is not sustainable. Over the next five years, IEA expects gas demand to increase by 1.6% per year on average, marking a return to levels seen before 2017, when growth suddenly gained steam. IEA chalks up the slowdown to forecasts for weaker economic growth, a return to average weather conditions and diminishing opportunities to switch from coal to gas in electric power plants. Adoption of natural gas is the biggest contributor to the steady decline of coal-fired power in the U.S. energy mix. China, the world’s second largest economy, is following a similar path as Beijing seeks to quickly improve the nation’s air quality. IEA forecasts China will account for 40% of global gas demand growth during the next five years. Yet the slowdown will be pronounced in the Middle Kingdom. After surging by 14.5% in 2017 and 18.1% in 2018, Chinese gas consumption is projected to rise by just 8% per year through 2024, owing largely to slower economic growth. Other parts of the world that will underpin future growth include the U.S., Middle East and North Africa — all of which produce cheap, abundant supplies that can be consumed at home by industry and power plants.
Hedge funds accelerate oil sales as economy worsens (Reuters) - Hedge fund managers have stepped up their sales of crude oil and refined fuels amid growing concerns about the outlook for the world economy and oil consumption. Hedge funds and other money managers sold 122 million barrels in the six major petroleum futures and options contracts during the week to May 28, the heaviest one-week selling since October 2018. Fund managers sold Brent (41 million barrels), NYMEX and ICE West Texas Intermediate (38 million barrels), U.S. gasoline (11 million barrels), U.S. heating oil (12 million barrels) and European gasoil (20 million barrels). Funds have now sold 186 million barrels of petroleum futures and options over the five weeks since April 23, after buying 609 million barrels over the previous 15 weeks since Jan. 8. In retrospect, April 23 proved to be an important turning point when funds switched from accumulating bullish long positions and initiated a new cycle of short sales. In its early stages, the shift from accumulation to liquidation was probably driven mostly by concerns the market had become overstretched and was due a correction (https://tmsnrt.rs/2WHH9PE ). By April 23, hedge fund managers held almost nine bullish long positions for every bearish short one, up from a ratio of less than 2:1 at the start of the year. In recent years, large concentrations of long or short positions have usually presaged a reversal in the price trend, and hedge fund positions had become very lopsided by April. More recently, however, the pace of short-selling has accelerated as portfolio managers became more concerned about a possible slowdown in the global economy and oil consumption growth. Liquidation of previous long positions has now been joined by the initiation of fresh shorts as portfolio managers anticipate a deeper pullback in prices.
Oil Flirts with Bear Market-- Oil extended declines -- and was close to bear-market territory -- as an increasingly aggressive U.S. trade policy fueled fears the world could be heading for a significant economic slowdown. Futures in New York fell as much as 2.6% after slumping 5.5% Friday. China struck a combative tone in a white paper released Sunday, blaming the U.S. for the collapse in trade talks and saying it won’t be pressured into concessions. That came after the White House rattled markets Friday by announcing tariffs on Mexican goods and terminating India’s designation as a developing nation, stopping it from exporting products to the U.S. without duties. Oil has now fallen almost 20% from a high in late April, wiping out about half of its rally in the earlier part of the year, mainly due to the increasingly fraught global trade environment. While a tense situation in the Middle East has been supporting prices somewhat, the White House indicated over the weekend that it would be willing to negotiate with Iran without preconditions. Meanwhile, whether Russia keeps cooperating with Saudi Arabia on production cuts is shaping up as an important price driver over the next few months. "The oil market continues to trade with extremely high beta to risk as concerns over a global slowdown escalate,” West Texas Intermediate crude for July dropped 42 cents, or 0.8%, to $53.08 a barrel on the New York Mercantile Exchange at 7:25 a.m. in London after falling as much as $1.39 earlier. The contract is now down 19.9% from its closing high on April 23. If it finishes more than 20% lower than the April peak it will officially be in a bear market. Brent for August settlement fell 79 cents, or 1.3%, to $61.20 a barrel on London’s ICE Futures Europe exchange. The July contract closed 3.6% lower at $64.49 before expiring on Friday. The global benchmark crude was trading at a premium of $8.02 to WTI. There could be a recession in nine months if the U.S. imposes 25% tariffs on an additional $300 billion of Chinese exports and Beijing retaliates, according to Morgan Stanley. Investors may still be underestimating the risks to the global economy from the trade war, Chetan Ahya, chief economist, wrote in a note released Sunday. “There’s an increased likelihood the U.S. slaps tariffs or implements measures to restrict trade against any countries it sees as engaging in unfair practices, such as China, Mexico and India,” ”Even Japan could be a target.”
Oil prices extend drop as trade wars stoke global economic fears - Oil prices fell more than 1% on Monday, extending losses of over 3% from Friday, when crude markets racked up their biggest monthly losses in six months amid stalling demand and as trade wars fanned fears of a global economic slowdown. Front-month Brent crude futures were at $61.16 at 0109 GMT. That was 83 cents, or 1.3%, below Friday’s close. U.S. West Texas Intermediate (WTI) crude futures were at $52.88 per barrel, down 62 cents, or 1.2% from its last settlement. The drops followed price slumps of more than 3% on Friday, which made May the worst-performing month for crude futures since last November. “Oil prices slid on fresh trade worries after U.S. President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, which is one of the largest U.S. trade partners and a major supplier of crude oil, ” said Mithun Fernando, investment analyst at Australia’s Rivkin Securities, in a note on Monday. Edward Moya, senior market analyst at futures brokerage OANDA in New York, said last month’s crude oil price fall of more than 10% was “the worst May performance in seven years as the escalation of the global trade war saw the global growth outlook crumble.” Moya warned “geopolitical risks remain in place” and added that “oil remains vulnerable” because of a weakening demand outlook for crude. “The U.S.-China feud remains most critical to the global growth outlook, but the addition of trade tensions between the U.S. and Mexico raised the slower demand picture for the Americas, ” he said. Barclays bank said in a note published last Friday that U.S. March oil consumption “declined significantly year-on-year for the first time since September 2017 ...(as) petroleum demand fell almost 370,000 barrels per day (bpd) year-on-year on weak consumption across the barrel.”
Oil falls as trade worries mount, Saudi comments limit losses - (Reuters) - Oil fell on Monday as U.S. trade disputes with Mexico and China deepened concerns about weakening global crude demand, while a slump in equities also weighed on crude futures. Brent crude futures settled at $61.28 a barrel, losing 71 cents, or 1.2%. U.S. West Texas Intermediate (WTI) crude ended 25 cents, or 0.5%, lower at $53.25 a barrel. Mexico said it would reject a U.S. idea to take in Central American asylum seekers if it is raised at talks this week with U.S. President Donald Trump’s administration, which is threatening the tariffs over immigration concerns. The possibility of tariffs on Mexico comes on top of a drawn-out trade war between the United States and China that has bruised oil prices. “Focus has shifted from the supply to the demand side as a U.S.-China trade agreement has proven elusive and as worries over the debilitating effects of tariffs on global economic growth have now shifted to Mexico,” Jim Ritterbusch of Ritterbusch and Associates said in a note. A downturn on Wall Street, which crude prices sometimes follow, worsened losses in oil futures, analysts said. Comments from Saudi Arabia, OPEC’s de facto leader, indicating that the Organization of the Petroleum Exporting Countries and its allies would continue working towards oil market stability in the second half of the year, helped limit Monday’s loses. “We will do what is needed to sustain market stability beyond June. To me, that means drawing down inventories from their currently elevated levels,” Energy Minister Khalid al-Falih was quoted as saying by the Saudi-owned Arab News newspaper. Brent futures have dropped almost 20% from their 2018 peak as global supplies tighten following output curbs by OPEC and Russia, as well as a reduction in Iranian and Venezuelan exports due to U.S. sanctions. The recent selloff in crude will likely solidify Saudi Arabia’s intention to maintain output reductions, analysts said.
Oil prices fall as energy demand set to take a hit amid economic slowdown - Oil prices fell on Tuesday as an economic slowdown starts to dent energy demand, but markets won some support after Saudi Arabia said a consensus was emerging with other producers about extending supply cuts. Front-month Brent crude futures were at $60.97 at 0648 GMT. That was 31 cents, or 0.5%, below last session’s close. U.S. West Texas Intermediate (WTI) crude futures were at $53.05 per barrel, down 20 cents, or 0.4%, from their last settlement. Oil futures are around 20% below 2019 peaks reached in late April, with May posting the sharpest monthly declines since November. Other energy prices, like coal and gas, are also being hit hard by the downturn. That has come as financial traders sell out of energy markets amid growing concerns about the outlook for the world economy amid the trade war between the United States and China. “The prolonged trade war has sparked fears of a global economic slowdown as well as weaker oil demand,” tanker brokerage Eastport said on Tuesday. To prevent oversupply and prop up the market, the Middle East dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC), together with some allies including Russia, has been withholding supply since the start of the year to prop up the market. The group plans to decide later this month or in early July whether to continue withholding supply. Saudi Energy Minister Khalid al-Falih said on Monday that a consensus was emerging among producers to continue working “to sustain market stability” in the second-half of the year. Producers are concerned that the economic slowdown will reduce fuel consumption.
Oil, gas and coal markets pummeled by economic slowdown - (Reuters) - Energy markets are being battered by spreading concerns that an economic slowdown will hit consumption of oil, natural gas and coal. Oil, the world’s most used fuel, has seen prices fall by 20% from their 2019 peak in late April, with Brent crude oil futures threatening to fall below $60 per barrel for the first time since January. Meanwhile, prices for thermal coal and liquefied natural gas (LNG), mostly used in power generation, have dropped to multi-year lows amid tepid demand. The slumps come amid an economic slowdown and escalating global trade tensions, especially between the United States and China. “Fear of global economic growth slowing,” said Peter Kiernan, lead energy analyst at the Economist Intelligence Unit (EIU), “afflicting the entire energy complex with worries that demand growth will be bearish this year.” Kiernan added that the EIU had downgraded its forecast for global economic growth to 2.6% in 2019, down from 2.7%. At the start of the year, most forecasts for world growth were still at or above 3%. Some economists are gloomier still. “Calls in the market foreseeing a global recession have not helped sentiment,” ANZ bank said in a note on Tuesday. “The continued escalation in trade tensions and broad-based fall in manufacturing...suggest that the downside risks to growth are becoming more prominent,” said U.S. bank Morgan Stanley.
WTI Tumbles After API Reports Major Inventory Builds -Oil managed gains today after 4 straight days lower as Saudi Energy Minister Khalid Al-Falih said he’s committed to doing whatever it takes to stabilize markets.“Underpinned by rising trade tensions, the global economic picture has deteriorated,” said analysts at Citigroup Inc. led by Ed Morse. “Yet this macro pessimism masks tangible bullish oil market fundamentals.” API
- Crude +3.55mm (-1.8mm exp)
- Cushing +1.408mm (-800k exp)
- Gasoline +2.696mm (+500k exp)
- Distillates +6.314mm (+600k exp)
After last week's small draw, expectations were for another larger crude draw this week, but API shocked markets with a 3.55mm build (along with builds across all Cushing and a huge distillates build)... "It’s pretty clear that demand concerns still have the market at its grip," said Gene McGillian, manager of market research at Tradition Energy. "But, maybe some of these demand fears may have extended itself. Refinery utilization jumped back above 90 percent and WTI should pick up again."WTI managed some gains on the day, hovering around $53.50 ahead of the API print but tumbled after the data hit
Oil Crashes Into Bear Market After Biggest Stock Build In 30 Years - Oil prices collapsed into a bear market today (down 22% from highs) after a surprise build across all products produced the biggest aggregate inventory build since 1990... “It’s the perfect storm, in a way, of increased supply coupled with perceptions of slowing demand growth," said Marshall Steeves, energy markets analyst at Informa Economics in New York. WTI tested down to a $50 handle (before ramping into the close) - the lowest since January 9th... Brent fell back below $60 for first time since Jan... Both down around 22% from recent highs, which stocks are summarily ignoring for now...
Oil sinks 4% as US crude stockpiles unexpectedly surge by 6.8 million barrels - Oil prices plunged 4% on Wednesday, with futures falling to their lowest since January, after the U.S. government reported an unexpected surge in the nation’s crude stockpiles. U.S. commercial crude inventories jumped by 6.8 million barrels in the week through May 31, the U.S. Energy Information Administration reported. Stockpiles jumped despite refineries increasing activity and as U.S. crude imports jumped by more than 1 million barrels per day. That trumped an earlier reading from the American Petroleum Institute that suggested stockpiles rose by 3.5 million barrels in the week. Analysts’ had expected stocks to drop by 849,000 barrels, according to a Reuters poll. U.S. West Texas Intermediate crude fell to a session low of $50.66 after the report, the lowest level since Jan. 15. WTI was down $2.19, or 4.1%, at $51.29 a barrel around 12:25 p.m. ET (1625 GMT). Brent futures sank as low as $59.45, also its lowest since mid-January. Brent was last down $1.78, or 2.9%, at $60.19 a barrel. U.S. gasoline inventories also rose by 3.2 million barrels during the week. Stockpiles of distillates, including diesel and home heating fuel, jumped by 4.6 million barrels. Meanwhile, weekly U.S. oil production ticked up to an all-time high 12.4 million bpd, according to a preliminary reading from EIA. “You had that record U.S. production again and that surge in imports really just overwhelmed the report, and it came in the face of refinery runs ticking up,” said John Kilduff, founding partner at energy hedge fund Again Capital. “Obviously it’s more than enough to satisfy demand by a lot and just makes for a really bearish report across the board.” Oil prices have fallen sharply on concerns about slowing demand, but won some respite on Tuesday after a global stock market rally on hopes the Federal Reserve may trim interest rates. Equities extended gains on Wednesday. The oil market has been weighed down by concerns about slowing global growth due to the U.S.-China trade war and President Donald Trump’s threats last week to place tariffs on Mexican imports.
Lower oil prices start to rebalance the market- Kemp (Reuters) - Lower oil prices are starting to rebalance the oil market by slowing the rise in U.S. crude output and encouraging Saudi Arabia and its allies to extend production cuts through the end of 2019. U.S. crude production rose 241,000 barrels per day (bpd) to 11.905 million bpd in March from February, according to the U.S. Energy Information Administration (“Petroleum Supply Monthly”, EIA, May 2019).U.S. crude output during the first three months of the year was up 1.575 million bpd compared with the same period a year earlier, but the growth rate has slowed from 1.920 million bpd in the third quarter of 2018. Onshore production from the Lower 48 states excluding federal waters in the Gulf of Mexico was up 1.425 million bpd year-on-year in the first quarter, down from an increase of 1.817 million bpd in the third quarter of 2018. Falling prices since the start of the fourth quarter, renewed since the end of April, have slowed the rate of new drilling and fresh well completions in the major shale plays (https://tmsnrt.rs/2QSbxBL). The number of rigs drilling for oil fell to just 800 at the end of May, down by almost 10 percent from a current-cycle peak of 888 in November 2018, according to oilfield services company Baker Hughes. Experience suggests changes in wellhead prices filter through to changes in the number of rigs drilling for oil with a lag of 3-4 months, and to changes in production with a lag of around 9-12 months. The full impact of recent price declines will therefore continue to filter through into slower production growth in the second half of 2019 and into the first part of 2020. Lower prices are also pushing Saudi Arabia and its allies within the expanded OPEC+ group of oil exporting countries to extend their current production cuts for the second half of the year. The combination of slower supply growth from U.S. shale and continued restraint by Saudi Arabia and its allies should eliminate the prospective oversupply of oil later in 2019 and 2020.
A trade war deal is what the oil market needs to break out of bear market territory, RBC’s Helima Croft says - RBC Capital Markets’ Helima Croft blames the U.S.-China trade war for oil’s drop into bear market territory. According to the firm’s global head of commodity research, bullish sentiment around crude has been damaged by global growth fears sparked by tensions between Washington and Beijing. “What is the demand driver for oil? It’s China. There is a real fear of a slump in Chinese oil demand growth,” she told CNBC’s “Futures Now ” on Thursday. “One of the things that has kept this market tight this year has been really high Chinese oil imports.” Without a sign that President Donald Trump and Chinese President Xi Jinping are closing in on a resolution, she contends the commodity will continue to struggle. Croft, a CNBC contributor, contends Trump’s May 5 tweet that indicated a trade deal wasn’t close anymore stopped the oil rally cold. “Oil was moving higher, you know, the first part of May, and then you had the trade war resume,” she added. Over the past month WTI oil is off 15%. International benchmark Brent is also struggling, down 13% in that time frame. Croft points out there’s a second issue adding to the bearishness surrounding oil: a large U.S. inventory build. “This is a counter-seasonal build. It’s leading to concern of U.S. production being higher than anticipated,” she said. “That’s a second whammy for the oil market right now.” However, Croft predicts the bearishness could turn on a dime on positive news of a trade deal.
Oil pops 3%, rallying with stocks after report US may delay hitting Mexico with tariffs - Oil futures turned sharply higher heading into Thursday’s settlement, tracking a rally in equities on a report that the Trump administration may delay tariffs on Mexican imports. Crude futures traded mostly flat throughout Thursday’s session as sentiment remained weak amid fresh signs of a stalling global economy and ongoing concerns about growth in supply. U.S. West Texas Intermediate crude futures settled 91 cents higher at $52.51 per barrel, posting a 1.8% gain on the day. WTI was last trading up $1.50, or 2.9%, at $53.18 after the settlement. International benchmark Brent crude futures rose $1.04, or 1.7%, at $61.67 a barrel on Thursday. Brent also extended gains after its settlement and was last up $1.67, or 2.8%, at $62.30 per barrel. On Wednesday, the two benchmarks hit their lowest levels since mid-January at $59.45 and $50.60, respectively, after U.S. crude production hit a new record high and stockpiles hit their highest since July 2017. Signs of slowing global economic activity have increased in recent months, fueled by trade tensions between the United States and China, the world’s top two energy consumers. “Worries about demand destruction are really driving prices lower,” said Gene McGillian, vice president of market research at Tradition Energy. U.S. President Donald Trump added to the market’s worries after threatening last week to slap tariffs on Mexican goods unless the nation clamps down on illegal border crossings into the U.S. Mexico is a major source of crude oil to U.S. refineries and the biggest purchaser of American gasoline exports. Oil futures “got hit earlier in the week in anticipation of the Mexican tariffs being implemented and now it’s kind of reversing that stance,” said Andrew Lipow, president of Lipow Oil Associates. “The ongoing friction between the U.S. and China, the U.S. and Mexico and the U.S. and others on the trade front is really having a negative impact on the sentiment for economic growth around the world, which would lead to a reduction in the rate of growth of oil demand.”
US oil settles up 2.7% at $53.99 per barrel as Saudi Arabia signals OPEC deal extension - Oil prices rose on Friday, climbing further from five-month lows hit this week, after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June. Brent crude futures rose 2.7% to $63.33 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 2.7% to $53.99 a barrel. Both benchmarks were on track for a third weekly decline. On Wednesday they hit their lowest since January. Saudi Energy Minister Khalid al-Falih told a conference in Russia that the Organization of the Petroleum Exporting Countries (OPEC) and its allies should extend oil production cuts. He said that while OPEC was close to agreement, more talks were needed with non-OPEC countries that were part of the deal to reduce output by 1.2 million barrels per day (bpd), which runs out at the end of this month. Supply has also been limited by U.S. sanctions on oil exports from Venezuela and Iran. On Thursday, Washington tightened pressure on Venezuela’s state-owned oil company by making clear that exports of diluents by international shippers could be subject to sanctions. Demand sentiment remains weak as investors worry about a stalling global economy and an intensifying trade war between the United States and China. The United States has also threatened tariffs on goods from major trading partner Mexico. U.S. President Donald Trump vowed that tariffs of 5% will be imposed on all Mexican exports to the United States on Monday if Mexico does not step up efforts to stem an increase in migrants heading for the U.S. border. U.S. and Mexican negotiators resumed migration talks on Friday. Marc Short, chief of staff to U.S. Vice President Mike Pence, said the administration planned to move forward with a legal notification of its planned 5% tariff. But some market participants were skeptical the tariffs would go into effect on Monday.
Oil rises nearly 3% as Saudi signals OPEC deal extension, stocks rally (Reuters) - Oil prices rose nearly 3% on Friday, climbing further from five-month lows hit this week, after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June and as Wall Street rallied. Brent crude futures gained $1.62, or 2.6%, to settle at $63.29 a barrel. U.S. West Texas Intermediate (WTI) crude ended at $53.99 a barrel, up $1.40, or 2.7%. Brent posted its third weekly decline, dropping nearly 2%, while WTI gained about 1% for the week. On Wednesday both benchmarks hit their lowest since January. Saudi Energy Minister Khalid al-Falih told a conference in Russia that the Organization of the Petroleum Exporting Countries (OPEC) and its allies should extend oil production cuts. He said that while OPEC was close to agreement, more talks were needed with non-OPEC countries that were part of the deal to reduce output by 1.2 million barrels per day (bpd), which runs out at the end of this month. Supply has also been limited by U.S. sanctions on oil exports from Venezuela and Iran. On Thursday, Washington tightened pressure on Venezuela’s state-owned oil company by making clear that exports of diluents by international shippers could be subject to sanctions. In the United States, energy firms this week reduced the oil rig count to the lowest since February 2018. Drillers cut 11 rigs in the biggest weekly decline since April, bringing the total count down to 789, General Electric Co’s Baker Hughes energy services firm said. Oil prices were also supported by a rise in equity markets after a sharp slowdown in U.S. job growth raised hopes of an interest rate cut by the Federal Reserve.
Oil Prices End Tough Week on Strong Note - At the end of a week when crude oil officially entered a bear market, the West Texas Intermediate (WTI) and Brent benchmarks posted strong day-on-day increases. The July WTI contract price gained $1.40 to settle at $53.99 per barrel. The WTI traded within a range from $52.62 to $54.32. Compared to the May 31 settlement, the WTI is up nearly one percent for the week. Brent crude oil for August delivery also ended the day higher. The benchmark settled at $63.29 per barrel, reflecting a $1.62 gain for the day. Week-on-week, the Brent is up 2.1 percent.As Bloomberg reported earlier in the day, oil traders were buoyed by reports that the Trump administration planned to resume trade negotiations with Mexico and that proposed U.S. tariffs on Mexican goods might be delayed. In fact, President Trump tweeted Friday morning “there is a good chance” a trade deal with Mexico is forthcoming. Trade tensions between the U.S. and Mexico, along with lingering challenges in U.S.-China trade, have contributed to oil demand concerns.Oil market-watchers are also anticipating what the OPEC+ alliance will decide when it meets later this month. In a research note Friday, ABN-AMRO Senior Energy Economist Hans van Cleef opined that the group’s 1.2 million-barrel-per-day production cut deal will likely hold until the end of this year.“This would give OPEC time to see how global oil demand will evolve in the course of the year as trade tensions will continue to dominate the headlines,” noted van Cleef. “Besides that, there is also more time to evaluate the level of production of sanctioned OPEC countries and to see whether the drop of oil prices would affect the crude offering/production.”Reformulated gasoline (RBOB) also edged upward Friday. The July RBOB contract gained three cents, ending the day at $1.74 per gallon. Compared to the May 31 close, however, RBOB is down 3.4 percent for the week. Henry Hub natural gas also showed positive momentum Friday. July gas futures added more than a penny to settle at $2.34. Despite Friday’s increase, however, gas is down 4.5 percent week-on-week.
Here's how high the price of oil could go if conflict broke out with Iran - Oil is in the crosshairs as the prospect of confrontation brews between the U.S. and Iran. At least, that’s how Iranian officials would have it. A top military aide to Iran’s supreme leader Ayatollah Ali Khamenei, Yahya Rahim Safavi, warned over the weekend that “The first bullet fired in the Persian Gulf will push oil prices above $100.” He added, “This would be unbearable to America, Europe and the U.S. allies like Japan and South Korea.” More than a million barrels of oil per day have been wiped off the market as U.S. sanctions, imposed after the Donald Trump administration withdrew from the 2015 Iran nuclear deal last year, endeavor to bring the exports of OPEC’s third-largest producer to zero. This has contributed to the crippling of Iran’s economy, which the U.S. administration says will continue unless Iran “acts like a normal country” and ceases its support of terrorist proxies in the region and ballistic missile testing. Iran has responded to the sanctions by threatening to ditch its obligations under the nuclear deal — which had promised economic relief in exchange for limits to its nuclear development — and return to higher levels of uranium enrichment. A series of attacks in the United Arab Emirates (UAE) and Saudi Arabia that are being blamed on Iran have now pushed tensions to new highs, and prompted the U.S. to deploy more troops and military hardware to the region. In an area responsible for the shipment of one-third of the world’s seaborne oil, just how high could military confrontation — or indeed, an outright war — send the price of crude? Not as high as you might think, according to some experts. “I think that $100 per barrel is ambitious,” Stephen Brennock, an oil analyst at PVM Oil Associates in London, told CNBC via email on Tuesday. He pointed out that the oil market has “more or less shrugged off” the disappearance of a further 500,000 barrels per day of Iranian oil since Washington terminated its sanctions waivers in May.
Saudi Arabia used less crude oil for power generation in 2018 – EIA - In 2018, Saudi Arabia reported burning an average of 0.4 million barrels per day (b/d) of crude oil for power generation, the lowest amount since at least 2009, the earliest year that data are available from the Joint Organizations Data Initiative (JODI). Saudi Arabia burns considerably more crude oil directly for power generation than any other country. Between 2015 and 2017, Saudi Arabia used more than three times the amount of crude oil for power generation than Iraq, the second-largest user of crude oil for power during those years.Saudi Arabia relies on crude oil and other fossil fuels, such as petroleum products and natural gas, for power generation. During the summer months, Saudi Arabia’s electricity consumption increases as domestic demand for air conditioning rises. Saudi Arabia’s direct crude oil burn for power generation reached a record high during the summer of 2015, averaging 0.9 million b/d from June to August. In comparison, direct crude oil burn in the summer of 2018 was 41% lower at 0.5 million b/d.Despite steady increases in both population and electricity consumption, Saudi Arabia reduced its reliance on crude oil for power generation by increasing the use of other energy sources, such as natural gas and fuel oil. Most of the natural gas that Saudi Arabia produces is associated gas, which is natural gas produced along with crude oil from an oil well. Yet Saudi Arabia’s production of natural gas from wells not associated with oil production has also increased, leading to higher consumption of natural gas in the country. Natural gas processing capacity is also increasing. Consumption of natural gas in Saudi Arabia reached 10.6 billion cubic feet per day in 2017, the latest year for which data are available. In addition to natural gas, Saudi Arabia has also been using fuel oil as a partial replacement of crude oil in power generation. Saudi Arabian fuel oil consumption has increased despite fuel oil consumption declining in most regions of the world because of environmental concerns and competition with other fuels. Some trade press reportsindicate that one potential side effect of the upcoming changes to the sulfur limits in marine fuels in 2020 is that the stranded high-sulfur fuel oil could be sent to Saudi Arabia to further replace crude oil in power generation.
French Weapons Sales to Saudi Arabia Jumped Fifty Percent Last Year - France’s weapons sales to Saudi Arabia rose 50 pct in 2018 despite the government calling for an end to the “dirty war” in Yemen, figures released on Tuesday showed, Reuters reports. An annual government report showed that total arms sales rose 30 percent to 9.1 billion euros in 2018, driven by a sharp increase in sales to European allies. France sold about 1 billion euros worth of arms to Saudi Arabia, with the main item being patrol boats. A partial naval blockade of ports controlled by the Houthi movement is one of the tactics used by a Saudi-led coalition in Yemen that has been criticized by campaigners for worsening a humanitarian crisis. “With such transfers revealing a geopolitical alliance with these regimes and total violation of international commitments, one can only expect worsening conflicts in Yemen or the Horn of Africa, where the United Arab Emirates and Saudi Arabia are beginning to redeploy in partnership with France,” said Tony Fortin at the Paris-based Observatory for Armament.
The Most Powerful Arab Ruler Isn’t M.B.S. It’s M.B.Z. - NYT — In 1991, in the months after Iraq’s invasion of Kuwait, Prince Mohammed bin Zayed, the 29-year-old commander of the almost negligible air force of the United Arab Emirates, wanted to buy so much military hardware to protect his own oil-rich monarchy — from Hellfire missiles to Apache helicopters to F-16 jets — that Congress worried he might destabilize the region. But the Pentagon, trying to cultivate accommodating allies in the Gulf, had identified Prince Mohammed as a promising partner. The favorite son of the semi-literate Bedouin who founded the United Arab Emirates, Prince Mohammed was a serious-minded, British-trained helicopter pilot who had persuaded his father to transfer $4 billion into the United States Treasury to help pay for the 1991 war in Iraq. Richard A. Clarke, then an assistant secretary of state, reassured lawmakers that the young prince would never become “an aggressor.” “The U.A.E. is not now and never will be a threat to stability or peace in the region,” Mr. Clarke said in congressional testimony.” Thirty years later, Prince Mohammed, now 58, crown prince of Abu Dhabi and de facto ruler of the United Arab Emirates, is arguably the most powerful leader in the Arab world. He may be the richest man in the world. He controls sovereign wealth funds worth $1.3 trillion, more than any other country. He is also among the most influential foreign voices in Washington, urging the United States to adopt his increasingly bellicose approach to the region. His influence operation in Washington is legendary (Mr. Clarke got rich on his payroll). His military is the Arab world’s most potent, equipped though its work with the United States to conduct high-tech surveillance and combat operations far beyond its borders. His special forces are active in Yemen, Libya, Somalia and Egypt’s North Sinai. He has worked to thwart democratic transitions in the Middle East, helped install a reliable autocrat in Egypt and boosted a protégé to power in Saudi Arabia. Rights groups have criticized him for jailing dissidents at home, for his role in creating a humanitarian crisis in Yemen, and for backing the Saudi prince whose agents killed the dissident writer Jamal Khashoggi. Yet under the Trump administration, his influence in Washington appears greater than ever. He has a rapport with President Trump, who has frequently adopted the prince’s views on Qatar, Libya and Saudi Arabia, even over the advice of cabinet officials or senior national security staff. Western diplomats who know the prince — known as M.B.Z. — say he is obsessed with two enemies, Iran and the Muslim Brotherhood. Mr. Trump has sought to move strongly against both and last week took steps to bypass congressional opposition to keep selling weapons to both Saudi Arabia and the United Arab Emirates.
IAEA Confirms Iranian Compliance for the Fifteenth Time --Despite more than a year of U.S. violations and unjustified sanctions, Iran is still complying with the nuclear deal. This is the fifteenth consecutive report from the IAEA that confirms Iranian compliance:The U.N. atomic watchdog says Iran continues to stay within the limitations set by the nuclear deal reached in 2015 with major powers, though its stockpiles of low-enriched uranium and heavy water are growing.In a confidential quarterly report distributed to member states Friday and seen by The Associated Press, the International Atomic Energy Agency said Iran has stayed within key limitations set in the so-called Joint Comprehensive Plan of Action, or JCPOA. Iran has honored its commitments under the JCPOA without interruption for more than three and a half years. In exchange, Iran’s trust was betrayed and the Iranian people have been punished with a severe sanctions regime. The nuclear deal did exactly what it was supposed to do for the P5+1, but the promised sanctions relief for Iran was slow in coming and then arbitrarily snatched away for no good reason. Iranians can be forgiven for thinking that it was a mistake to negotiate away their leverage with the U.S. and the other major powers, and that is what most Iranians now believe. Iran’s continued compliance in the face of the outrageous treatment from the Trump administration has been remarkable, and all the more so when we remember that opponents of the agreement insisted that Iranian cheating was a foregone conclusion. The JCPOA is still alive, and it may survive until there is a new administration in Washington, but it won’t last much longer if the next administration does not hasten to rejoin it and lift all of the sanctions that have been imposed since May 2018.
Explosions Rock Iran’s Largest Port As Oil Products Catch Fire - A fire broke out at Iran’s largest container shipping port, setting off explosions as oil products perpetuated the blaze, according to the Islamic Republic News Agency.The fire broke out in the facility at the port used for storing oil products.Iran’s Shahid Rajaee port on the Gulf Coast is North of the Strait of Hormuz—a critical chokepoint for oil tankers traveling to a variety of destinations.INRA reported that the blaze was currently under control per local officials, but that due to the flammable nature of the oil products near the blaze, it is possible that fires will flare up again.The port is critical for Iran, handling 39 percent of all cargo transit in Iran as of 2017, including oil product shipments.Iran’s crude oil exports remain in the spotlight as the United States appears steadfast in its resolve to bring the sanction nation’s oil exports to zero. Oil exports from Iran have fallen to 400,000 barrels per day in May due to the sanctions, which is significantly down from April. In April 2018, Iran exported 2.5 million bpd of crude oil—a far cry from today’s 400,000 bpd.Reports have surfaced, however, suggesting that this 400,000 bpd might be lower in reality, as Iran attempts to circumvent Washington’s sanctions by turning off transponders, making it impossible to track Iran’s shipments and calculate the total exported. Iran has long insisted that the United States will be unable to bring its exports to zero. Today’s fire could provide some cover for Iran on that point, should oil flows drop further this month.
Iran attacks US warships in the Gulf of Tonkin - —Iran has staged a failed hit-and-run attack on U.S. warships, the Navy has reported.According to Pentagon officials, vessels secretly controlled by Iran’s Islamic Revolutionary Guards Corps Navy (IRGCN) fired several missiles at the U.S. destroyers USS Maddox (DD-731) and USS Turner Joy (DD-951) yesterday while they cruised in the Gulf of Tonkin, just off the coast of Vietnam. The missiles failed to strike either warship.The move came as a shock to Seventh Fleet, which expected Iran to attack U.S. forces on the other side of the world in the Persian Gulf.“This shows just how devious the Ayatollahs are,” said a senior U.S. official who spoke anonymously so he would not be tweet-fired, referring to Iran’s religious leaders, who control the country. “Clearly, the Persians realize that we have achieved local superiority in the Middle East and are pursuing asymmetric responses.”Earlier this month, the U.S. sent an aircraft carrier strike group to the Persian Gulf to deter what U.S. officials claimed was an impending Iranian attack. More recently, officials claimed the Iranian threat had faded. The vessels that staged the attack are traditional Iranian sailing vessels, called dhows, and did not have military markings. The dhows departed immediately after the incident and have not been located since, according to several Pentagon officials.
Kushner: Palestinians not yet capable of governing themselves - White House Senior Adviser Jared Kushner has said that the Palestinians deserve "self-determination," but stopped short of backing Palestinian statehood, expressing uncertainty over their ability to govern themselves. Kushner, who is President Donald Trump's son-in-law, made the comments in a television interview with the Axios on HBO programmes, broadcast on Sunday. Asked whether he believed the Palestinians were capable of governing themselves without Israeli interference, Kushner said: "That's one that we'll have to see. The hope is that they, over time, will become capable of governing". The Palestinians, he said, "need to have a fair judicial system ... freedom of press, freedom of expression, tolerance for all religions" before the Palestinian areas can become "investable". One of the architects of the United States's yet-to-be-released Middle East peace plan, Kushner said it would be a "high bar" when asked if the Palestinians could expect freedom from Israeli military and government interference. The Palestinian leadership has boycotted the diplomatic effort that Trump has hailed as the "deal of the century". Although Kushner has been drafting the plan for two years under a veil of secrecy, it is seen by Palestinian and some Arab officials as tilting heavily in Israel's favour and denying the Palestinians a state of their own.
US Forces Blow Up Three Oil Tankers In Syria Enforcing Oil Embargo - US-led forces have blown up three oil tankers in Syria as the United States increases its pressure on Syria by thwarting the oil trade between the PKK/YPG and the Assad regime, according to local sources quoted by several media sources. The strike was carried about by coalition planes, which hit three oil tankers, leaving four dead. The coalition has not yet made a statement about the attack. In the area controlled by Assad, oil consumption stands at around 136,000 bpd. Production, meanwhile, is only 24,000 barrels per day. This means that the regime must import significant volumes of crude oil at an estimated expense of more than$2 billion per year. The attack comes a couple weeks after the EU extended its sanctions on the Assad regime for one year after the Syrian regime upped the ante in repressing the Syrian people, bringing the Syrian crisis to a boiling point.Reports surfaced weeks ago that Iran had resumed oil shipments to Syria in the wake of US sanctions on the former, with a million barrels arriving in Syria from Iran on May 5. Further illicit oil shipments may be coming, as a new border crossing between Iraq and Syria is currently under construction, Fox News reported last week, based on satellite imagery revealing that construction is underway.In Syria, Arab residents of oil-rich Deir Ezzor area began protests in April against US-backed Kurdish forces that control the region to the East of the Euphrates. The protests disrupted the oil flows from nearby fields, most of which have been controlled by the US-backed Syrian Democratic Forces since the end of 2017. The fuel and electricity shortages that are occurring now in Syria have soured previous supporters of Assad against his rule. Iran, who has poured billions into Syria to prop up the Assad regime in recent years, is now feeling US pressure on both fronts—one at home as its oil exports are restricted, and another in Syria.
Israel Continues Airstrikes Against Syria, Killing 15— After killing ten people in a flurry of attacks early Sunday, Israeli warplanes continued with a second round of strikes into the evening, killing at least five more, and bringing the death toll to 15. Overall, four Syrian soldiers have been confirmed killed in the attacks, while seven others from the early attacks were described as foreign fighters. Four of the five killed in the later strikes have yet to be identified. The attacks broadly targeted military facilities, as well as sites for Syrian air defense. The evening strikes reportedly destroyed a warehouse that was believed to be storing rockets. Israel has not commented on these later attacks. The early attacks, however, followed Saturday rocket fire from southern Syria crossing the border. Of two rockets fired, one entered Israeli-occupied territory, but did no damage. Israel reports suggested that a military outpost might well have been the intended target, and responded with the attack.
'Bloody massacre': Sudan forces kill at least 30, protesters say -- Sudanese protesters say more than 30 people have been killed after security forces stormed the main protest camp in the capital Khartoum in the worst violence since the overthrow of President Omar al-Bashir, drawing global condemnation. The Sudanese Professionals' Association (SPA), which spearheaded nationwide protests that started in December, said Monday's crackdown amounted to a "bloody massacre". "We are holding the Transitional Military Council (TMC) responsible for what happened this morning," the SPA said, referring to the ruling military council, which currently runs the country. Pro-democracy leaders have called on people to take part in night marches and block the main roads as part of "total civil disobedience" to "paralyse public life" across the north African country. The Sudan Doctors' Committee said on Monday that the death toll, which includes at least one child, is rising and has been difficult to count in the sit-in area outside the military complex in Khartoum. The group said hundreds of people have been wounded, mostly from gunfire, and that according to witnesses, bodies of protesters shot dead were disposed of in the Nile River near the site of the protest sit-in. The United Nations condemned the use of excessive force by the security forces against protesters and called for an independent investigation into deaths from the violence. UN Secretary-General Antonio Guterres said in a statement that he was "alarmed" by reports that security forces had opened fire inside a hospital in Khartoum. "What is clear to us is that there was use of excessive force by the security forces on civilians. People have died. People have been injured,"
Military junta launches counter-revolution in Sudan - The counter-revolutionary bloodbath launched by the junta in Sudan’s capital Khartoum and its twin city Omdurman ongoing since Monday has killed some 100 people, including an eight-year old child, and injured hundreds more. The number of victims includes 40 bodies pulled from the Nile River that the army dumped there. But with many protestors still unaccounted for the final total is likely to rise. A Sudanese journalist on Britain’s Channel 4 cited a former security officer who said that some of those thrown into the Nile had been beaten or shot to death and others hacked to death with machetes, declaring, "It was a massacre." The bloodbath is part of a broader move by the Transitional Military Council (TMC) to forcefully close down the protests and sit-ins in Khartoum and throughout the country. The TMC had seized power on April 11 after months of mass protests, in a preemptive coup against the 30-year rule of President Omar al-Bashir in a bid to preserve the military-dominated regime. It is a prelude to a bloody military dictatorship along the lines of General Abdel Fattah el-Sisi’s Egypt, with the full backing of Washington’s reactionary and ruthless regional allies, Saudi Arabia, the United Arab Emirates and Egypt. It was el-Sisi, then the Defence Minister in the elected government of Mohammed Mursi’s Muslim Brotherhood-led government, who led the murderous assaults on pro-democracy demonstrators in Cairo in 2013.
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