US oil supplies are at a 13½ year low, but oil exports are at a 8 month high; SPR at a 19½ year low after biggest draw since August 2011; gasoline exports are at a 39 month high; distillate supplies are at a 95 month low; total oil + products supplies also at a 95 month low after across the board drawdowns; DUCs are lowest on record; 4.7 month DUC backlog is lowest in 7 years
oil prices rose this week for the first time in three weeks after a major Russian and Kazakh export pipeline was shut down while Saudi oil facilities were coming under increasing missile attacks...after falling 4.2% $104.70 a barrel last week as China locked down its financial and industrial hubs to control a new Covid outbreak, and as hedge funds reversed their earlier bullish oil bets ahead of a Fed interest rate hike, the contract price for US light sweet crude for April delivery opened higher and jumped $3 early Monday after a Houthi attack on a Saudi facility caused a temporary drop in output at an Aramco refinery and after weekend talks between Ukraine and Russia showed little signs of progress, and then rallied another 4% to settle $7.42 higher at $112.12 a barrel as European Union nations considered joining the US in an embargo of Russian oil...prices rose sharply again early Tuesday on escalating jitters over supply shortages due to the attack on Saudi facilities, coupled with EU talk of an embargo on Russian oil exports, but reversed to settled 36 cents lower at $111.76 a barrel after reports emerged that European Union foreign ministers were split on whether to join the US in banning Russian oil, as trading of the April oil contract expired... with the media now quoting the contract price for US light sweet crude for May delivery, which had been trading 2% lower than April oil and had settled Tuesday down 70 cents at 109.27 a barrel, that new lower oil price jumped in early Wednesday trading, as Russian and Kazakh crude exports via the CPC pipeline to the Black Sea coast were fully halted, raising fears that Moscow would interrupt energy supplies just as Biden arrived in Europe to press for military escalation against them, and then extended those gains after the EIA reported crude oil and fuel stockpiles fell last week as demand jumped to settle $5.66 cents higher at $114.93 a barrel...oil prices stalled while nearing 14-year highs in mixed trading early Thursday, as traders assessed the implications of the disruption of the Caspian Pipeline, which could remove up to 1 million bpd of crude oil from an increasingly tightened global market, but tumbled in afternoon trading to close $2.59 lower at $112.34 a barrel, after the EU failed to agree on a plan to boycott Russian oil, and on reports that exports from Kazakhstan's Caspian Pipeline Consortium terminal might partially resume...oil prices tumbled more than 3% early Friday in reaction to reports suggesting the Caspian Pipeline partially resumed operations at the Black Sea terminal after an inspection revealed limited damage to the loading infrastructure, easing concern that a prolonged disruption of Kazakhstan oil exports would exacerbate a shortfall of available supplies on the global oil market, but then flipped higher after reports of a big fire at the facilities of state-owned Aramco in the Saudi city of Jeddah, following a missile attack claimed by the Houthi rebels, and settled with a $1.56 gain at $13.90 a barrel, thus finishing $9.20 or 8.8% higher for the week, while the May oil contract itself, which had finished last week priced at $103.09 a barrel, logged a 10.5% gain...
natural gas prices also finished higher for the 5th time in six weeks, as forecasts turned cooler and demand from Europe increased....after rising 2.9% to $4.863 per mmBTU last week as near record LNG exports offset the bearish impact of rapidly receding winter weather, the contract price of natural gas for April delivery trended lower much of Monday as gas production increased and forecasts showed light weather-driven demand across most of the Lower 48, but moved higher in late trading to log a 3.7 cent gain at $4.900 per mmBTU, as traders focused more on spiking oil prices than on higher gas output and forecasts for milder weather....natural gas prices then jumped 6% on Tuesday on a shift to cooler weather forecasts and on record demand for US LNG exports and settled 28.7 cents higher at $5.187 per mmBTU, even as European natural gas prices were still six times higher than those in the US....prices inched up another 4.5 cents to a seven week high at $5.232 per mmBTU on Wednesday as forecasts for cooler weather and higher heating demand over the next two weeks continued to firm, and then continued to surge on Thursday even though natural gas in storage dropped by less than was expected in what might have been the final draw of the heating season to settle 16.9 cents higher at $5.401 per mmBTU....natural gas prices spurted 17.0 cents or 3% more to an 8 week high of $5.71 per mmBTU on Friday, after the Biden administration and EU leaders announced a deal to send an additional 15 billion cubic meters of LNG to EU countries in 2022 – about 1.5 Bcf/d — with “expected increases going forward,”....with natural gas prices thus rising every day this week, they thus closed 14.6% higher on Friday than their prior week's close, the biggest jump since January....
The EIA's natural gas storage report for the week ending March 18th indicated that the amount of working natural gas held in underground storage in the US fell by 51 billion cubic feet to 1,389 billion cubic feet by the end of the week, which left our gas supplies 366 billion cubic feet, or 20.9% below the 1,755 billion cubic feet that were in storage on March 18th of last year, and 293 billion cubic feet, or 17.4% below the five-year average of 1,682 billion cubic feet of natural gas that have been in storage as of the 18th of March over the most recent five years....the 51 billion cubic foot withdrawal from US natural gas working storage for the cited week was less than the average forecast for a 62 billion cubic foot withdrawal as expected by an S&P Global Platts survey of analysts, and it was also equally less than the average withdrawal of 62 billion cubic feet of natural gas that have typically been pulled out natural gas storage during the same week over the past 5 years, but it was still more than the 29 billion cubic feet that were pulled from natural gas storage during the corresponding week of 2021...
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending March 18th indicated that after a second straight big increase in our oil exports, we had to pull oil out of our stored commercial crude supplies for the twelfth time in 17 weeks and for the 28th time in the past forty-two weeks, despite another big increase to oil supply that could not be accounted for…our imports of crude oil rose by an average of 92,000 barrels per day to an average of 6,486,000 barrels per day, after rising by an average of 76,000 barrels per day during the prior week, while our exports of crude oil rose by an average of 908,000 barrels per day to an 8 month high of 3,844,000 barrels per day during the week, after our exports had risen 514,000 barrels per day the prior week...applying our oil exports to offset our oil supplies coming from imports, that meant that our effective trade in oil worked out to a net import average of 2,642,000 barrels of per day during the week ending March 18th, 816,000 fewer barrels per day than the net of our imports minus our exports during the prior week…over the same period, production of crude oil from US wells was reportedly unchanged at 11,600,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 14,242,000 barrels per day during the cited reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,878,000 barrels of crude per day during the week ending March 18th, an average of 276,000 more barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 957,000 barrels of oil per day were being pulled out of the supplies of oil stored in the US….so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from storage, from net imports and from oilfield production was 678,000 barrels per day less than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (+678,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet in order to make the reported data for the daily supply of oil and for the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been a error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed....however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it's published, and just as it's watched & believed to be reasonably accurate by most everyone in the industry...(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….
This week's 957,000 barrel per day decrease in our overall crude oil inventories left our total oil supplies at 984,722,000 barrels at the end of the week, the lowest since September 26th, 2008, or virtually a 13 1/2 year low (see graph above)...this week's oil inventory decrease came as 358,000 barrels per day were being pulled our commercially available stocks of crude oil, while 599,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, which appears to include the first withdrawal under the recently announced 30,000,000 million barrel release from the SPR to address Russian related shortfalls, as well as an ongoing withdrawal under the administration's earlier plan to release 50 million barrels from the SPR to incentivize US gasoline consumption....including other withdrawals from the Strategic Petroleum Reserve under similar recent programs, a total of 84,824,000 barrels have now been removed from the Strategic Petroleum Reserve over the past 20 months, and as a result the 571,323,000 barrels of oil remaining in our Strategic Petroleum Reserve is now the lowest since May 31st, 2002, or at a new 19 1/2 year low, as repeated tapping of our emergency supplies for non-emergencies has already drained those supplies considerably over the past dozen years....based on an estimated average daily oil consumption of 18,000,000 barrels per day, the US will have roughly 28 1/2 days of oil supply left in the Strategic Petroleum Reserve after the current SPR withdrawal programs have run their course...
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports slipped to an average of 6,242,000 barrels per day last week, which was still 9.1% more than the 5,723,000 barrel per day average that we were importing over the same four-week period last year….this week’s crude oil production was reported to be unchanged at 11,600,000 barrels per day as the EIA's rounded estimate of the output from wells in the lower 48 states was unchanged at 11,200,000 barrels per day, while Alaska’s oil production fell by 10,000 barrels per day to 431,000 barrels per day but had no impact on the rounded national total....US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure was 11.5% below that of our pre-pandemic production peak, but 37.6% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016...
US oil refineries were operating at 91.1% of their capacity while using those 15,878,000 barrels of crude per day during the week ending March 18th, up from a utilization rate of 90.4% the prior week, and ia bit higher than the historical utilization rate for mid March refinery operations, when the need for seasonal maintenance typically causes rotating shutdowns…the 15,878,000 barrels per day of oil that were refined this week were 10.3% more barrels than the 14,389,000 barrels of crude that were being processed daily during week ending March 19th of 2021, when refineries were still recovering from winter storm Uri, and fractionally more than the 15,838,000 barrels of crude that were being processed daily during the week ending March 20th, 2020, when US refineries were operating at what was then a lower than normal 87.3% of capacity at the onset of the pandemic...
With the increase in the amount of oil being refined this week, gasoline output from our refineries was also higher, increasing by 424,000 barrels per day to 9,804,000 barrels per day during the week ending March 18th, after our gasoline output had decreased by 197,000 barrels per day over the prior week.…this week’s gasoline production was 14.3% more than the 8,577,000 barrels of gasoline that were being produced daily over the same week of last year, but 1.7% less than the gasoline production of 9,974,000 barrels per day during the week ending March 13th, 2020, after which gasoline production began to fall in response to the onset of pandemic impacts....meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 24,000 barrels per day to 4,979,000 barrels per day, after our distillates output had increased by 305,000 barrels per day over the prior week…with those increases, our distillates output was 8.2% more than the 4,601,000 barrels of distillates that were being produced daily during the storm impacted week ending March 19th of 2021, and 2.1% more than the 4,838,000 barrels of distillates that were being produced daily during the week ending March 20th, 2020...
Even with the big increase in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the seventh consecutive week, decreasing by 2,948,000 barrels to 238,043,000 barrels during the week ending March 18th, after our gasoline inventories had decreased by 3,615,000 barrels over the prior week....our gasoline supplies decreased again this week even though the amount of gasoline supplied to US users decreased by 307,000 barrels per day to 8,637,000 barrels per day, and even as our imports of gasoline rose by 190,000 barrels per day to 721,000 barrels per day, because our exports of gasoline rose by 378,000 barrels per day to a 39 month high of 1,058,000 barrels per day.…but even after 7 straight inventory drawdowns, our gasoline supplies were still 2.5% higher than last March 19th's gasoline inventories of 232,297,000 barrels, when shortages in the wake of Winter Storm Uri had resulted in back to back record draws, while they're slightly below the five year average of our gasoline supplies for this time of the year…
Meanwhile, with this week's modest increase in our distillates production, our supplies of distillate fuels decreased for the ninth time in ten weeks and for the 21st time in twenty-nine weeks, falling by 2,071,000 barrels to a 95 month low of 112,135,000 barrels during the week ending March 18th, after our distillates supplies had increased by 332,000 barrels during the prior week…our distillates supplies fell this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, jumped by 812,000 barrels per day to 4,516,000 barrels per day, and because our imports of distillates fell by 50,000 barrels per day to 172,000 barrels per day, while our exports of distillates fell by 484,000 barrels per day to 931,000 barrels per day....after thirty-five inventory decreases over the past fifty weeks, our distillate supplies at the end of the week were 20.8% below the 137,747,000 barrels of distillates that we had in storage on March 19th of 2021, and about 17% below the five year average of distillates inventories for this time of the year…
Meanwhile, after the big jump in our oil exports, our commercial supplies of crude oil in storage fell for the 21st time in 33 weeks and for the 36th time in the past year, decreasing by 2,5008,000 barrels over the week, from 415,907,000 barrels on March 11th to 413,399,000 barrels on March 18th, after our commercial crude supplies had increased by 4,345,000 barrels over the prior week…with this week’s decrease, our commercial crude oil inventories slipped to roughly 13% below the most recent five-year average of crude oil supplies for this time of year, but were still 29.4%% above the average of our crude oil stocks as of the third weekend of March over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels....since our crude oil inventories had jumped to record highs during the Covid lockdowns of spring 2020 and jumped again after last year's winter storm Uri froze off Gulf Coast refining, our commercial crude oil supplies as of this March 11th were 17.8% less than the 502,711,000 barrels of oil we had in commercial storage on March 19th of 2021, and were also 9.2% less than the 455,360,000 barrels of oil that we had in storage on March 20th of 2020, and 6.5% less than the 442,283,000 barrels of oil we had in commercial storage on March 22nd of 2019…
Finally, with our inventory of crude oil and our supplies of all products made from oil remaining near multi year lows, we are continuing to keep track of the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR....the EIA's data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 10,889,000 barrels this week, from 1,719,027,000 barrels on March 11th to 1,708,138,000 barrels on March 18th, after our total supply had decreased by 5,567,000 barrels over the prior week, and are now down by 80,295,000 barrels so far this year...that left our total supplies of oil & its products now at the lowest since April 4th, 2014, or at a new 95 month low, after this week's across the board drawdown in crude and product inventories..
This Week's Rig Count
The number of drilling rigs running in the US rose for the 66th time over the prior 78 weeks during the week ending March 25th, but it still remained 15.5% below the prepandemic rig count....Baker Hughes reported that the total count of rotary rigs drilling in the US increased by seven to 670 rigs this past week, which was also 253 more rigs than the pandemic hit 417 rigs that were in use as of the March 26th report of 2021, but was still 1,259 fewer rigs than the shale era high of 1,929 drilling rigs that were deployed on November 21st of 2014, a week before OPEC began to flood the global market with oil in an attempt to put US shale out of business….
The number of rigs drilling for oil was up by 7 to 531 oil rigs during this week, after rigs targeting oil had decreased by 3 during the prior week, and there are now 207 more oil rigs active now than were running a year ago, even as they still amount to just 33.0% of the shale era high of 1609 rigs that were drilling for oil on October 10th, 2014, and as they are still down 22.3% from the prepandemic oil rig count….meanwhile, the number of drilling rigs targeting natural gas bearing formations was unchanged at 137 natural gas rigs, while they were still up by 45 natural gas rigs from the 92 natural gas rigs that were drilling during the same week a year ago, and while they were still only 8.5% of the modern high of 1,606 rigs targeting natural gas that were deployed on September 7th, 2008…in addition to rigs targeting oil and gas, Baker Hughes lists two active "miscellaneous" rigs; one is a rig drilling vertically for a well intended to store CO2 emissions in Mercer county North Dakota, and the other is also a vertical rig, drilling 5,000 to 10,000 feet into a formation in Humboldt county Nevada that Baker Hughes doesn't track...the "miscellaneous" directional rig that had been set up to target the Marcellus shale in Schuyler County, New York last week appears to have already been shut down this week...
The offshore rig count in the Gulf of Mexico was up by two to fourteen rigs this week, with thirteen of this week's Gulf rigs drilling for oil in Louisiana waters and another rig drilling for oil in Alaminos Canyon, offshore from Texas....that's two more than the 12 offshore rigs that were active in the Gulf a year ago, when 10 Gulf rigs were drilling for oil offshore from Louisiana and two were deployed for oil in Texas waters…since there is not any drilling off our other coasts at this time, nor was there a year ago, those Gulf of Mexico rig counts are equal to the national offshore totals for both years....
In addition to those rigs offshore, we continue to have 3 water based rigs drilling inland again this week; one is a horizontal rig targeting oil at a depth of between 5000 and 10,000 feet, drilling from inland waters in Plaquemines Parish, Louisiana, near the mouth of the Mississippi, another is a directional rig drilling for oil at a depth of over 15,000 feet in the Galveston Bay area, while the third inland waters rig is a directional rig targeting oil at a depth of between 10,000 and 15,000 feet in St. Mary Parish, Louisiana...during the same week of a year ago, there were no inland waters rigs deployed..
The count of active horizontal drilling rigs was up by 4 to 610 horizontal rigs this week, which was also 230 more rigs than the 380 horizontal rigs that were in use in the US on March 26th of last year, but still 55.6% less than the record 1,374 horizontal rigs that were drilling on November 21st of 2014...at the same time, the vertical rig count was also up by four rigs to 25 vertical rigs this week, and those were also up by 3 from the 22 vertical rigs that were operating during the same week a year ago….on the other hand, the directional rig count was down by one to 35 directional rigs this week, while those were still up by 20 from the 15 directional rig that were in use on March 26th of 2021….
The details on this week’s changes in drilling activity by state and by major shale basin are shown in our screenshot below of that part of the rig count summary pdf from Baker Hughes that gives us those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the table below that 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 March 25th, the second column shows the change in the number of working rigs between last week’s count (March 18th) and this week’s (March 25th) count, the third column shows last week’s March 18th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same 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 26th of March, 2021...
With the six rig increase in Texas and the three rig increase in the Permian basin, we'll start by checking the Rigs by State file at Baker Hughes for the Texas changes in that basin...there we find that four rigs were added in Texas Oil District 8, which encompasses the core Permian Delaware, and that another new rig was set up in Texas Oil District 7C, which includes those Texas counties in the southern part of the Permian Midland, but that a rig was pulled out of Texas Oil District 8A, which includes the counties of the northern part of the Permian Midland, at the same time...since the Texas Permian thus shows a net four rig increase while the national Permian basin count was up by three, we have to figure that the rig that was pulled out of New Mexico this week had been drilling in the far western Permian Delaware, in the southeast corner of that state, for the national Permian total to balance...
elsewhere in Texas, we find that a rig was added Texas Oil District 1, another rig was added in Texas Oil District 3, and another rig was added in Texas Oil District 4; any one of those three could have accounted for the rig added in the Eagle Ford shale, which stretches in a narrow band through the southeast quadrant of that state...finally, Texas also saw a rig pulled out of Texas Oil District 10, or the panhandle region...since that was probably a Granite Wash rig, and since the Granite Wash basin count was up by one rig, that strongly suggests that two rigs were added in the portion of the Granite Wash basin that lies in Oklahoma, to the east of the Texas panhandle...that would still leave two Oklahoma rigs unaccounted for by Baker Hughes, since all four of the rigs removed from the Cana Woodford necessarily had been drilling in the center of that state...
Among the other states showing changes this week, the two rig increase in Louisiana was due to the two new oil rigs set up to drill in the state's offshore Gulf of Mexico waters, and North Dakota had a rig added in the Williston shale, while a North Slope oil rig, not tracked by Baker Hughes, was pulled out of Alaska...meanwhile, while we know there was an oil rig added in the Haynesville shale, there is no indication of a change in either northern Louisiana or Texas Oil District 6, where the Haynesville shale is located....that could have only have happened if a rig in the same region that was not targeting the Haynesville had been pulled out at the same time, which would be unusual but not uncommon...note, for instance, that the Marcellus shale shows no change despite the addition of a natural gas rig in the Pennsylvania Marcellus because that PA rig was offset by the removal of the "miscellaneous" Marcellus rig, targeting neither oil nor gas, from Schuyler County, New York at the same time....the natural gas rig count change was then reduced to zero nationally because a natural gas rig was pulled out of Ohio's Utica shale at the same time...
DUC well report for February
Last week saw the release of the EIA's Drilling Productivity Report for March, which included the EIA's February data on drilled but uncompleted (DUC) oil and gas wells in the 7 most productive shale regions (under the report's tab 3)....that data showed a decrease in uncompleted wells nationally for the 21st consecutive month in February, as both completions of drilled wells and drilling of new wells increased in February, but remained well below average pre-pandemic levels...for the 7 sedimentary regions covered by this report, the total count of DUC wells decreased by 156 wells, falling from 4,528 DUC wells in January to 4,372 DUC wells in February, which was the lowest number of US wells left uncompleted on record, and also 40.0% fewer DUCs than the 7,295 wells that had been drilled but remained uncompleted as of the end of February of a year ago...this month's DUC decrease occurred as 775 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during February, up from the 728 wells that were drilled in January, while 931 wells were completed and brought into production by fracking them, up by 20 from the 911 well completions seen in January, and up by 387 from the winter storm impacted 544 completions seen in February of last year....at the February completion rate, the 4,372 drilled but uncompleted wells left at the end of the month represents a 4.7 month backlog of wells that have been drilled but are not yet fracked, down from the 5.0 month DUC well backlog of a month ago, and the lowest backlog since December 2014, despite a completion rate that is still more than 20% below 2019's pre-pandemic average...
once again, both oil producing regions and natural gas producing regions saw DUC well decreases in February, while none of the major basins covered by this report reported a DUC well increase....the number of uncompleted wells remaining in the Permian basin of west Texas and New Mexico decreased by 86, from 1,482 DUC wells at the end of January to 1,396 DUCs at the end of February, as 343 new wells were drilled into the Permian basin during January, while 429 wells in the region were being fracked...meanwhile, DUCs in the Eagle Ford shale of south Texas decreased by 19, from 683 DUC wells at the end of January to a record low of 664 DUCs at the end of February, as 81 wells were drilled in the Eagle Ford during February, while 100 already drilled Eagle Ford wells were completed....in addition, DUC wells in the Niobrara chalk of the Rockies' front range decreased by 14, falling from 343 at the end of January to a record low of 329 DUC wells at the end of February, as 89 wells were drilled into the Niobrara chalk during February, while 103 Niobrara wells were being fracked....at the same time, there was also a decrease of 13 DUC wells in the Bakken of North Dakota, where DUC wells fell from 436 at the end of January to a record low of 423 DUCs at the end of February, as 62 wells were drilled into the Bakken during February, while 75 of the drilled wells in the Bakken were being fracked....meanwhile, the number of uncompleted wells remaining in Oklahoma's Anadarko basin decreased by 10, falling from 773 at the end of January to 761 DUC wells at the end of February, as 57 wells were drilled into the Anadarko basin during February, while 67 Anadarko wells were completed.....
among the natural gas producing regions, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 14 wells, from 457 DUCs at the end of January to a record low of 443 DUCs at the end of February, as 84 wells were drilled into the Marcellus and Utica shales during the month, while 98 of the already drilled wells in the region were fracked....meanwhile, the uncompleted well inventory in the natural gas producing Haynesville shale of the northern Louisiana-Texas border region remained unchanged at 369 DUCs, as 59 wells were drilled into the Haynesville during February, while 59 of the already drilled Haynesville wells were fracked during the same period....thus, for the month of February, DUCs in the five major oil-producing basins tracked by this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) decreased by a total of 142 wells to 3,560 DUC wells, while the uncompleted well count in the major natural gas basins (the Marcellus, the Utica, and the Haynesville) decreased by 14 wells to 812 wells, although as this report notes, once into production, more than half the wells drilled nationally will produce both oil and gas...
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Cuyahoga County has more than 300 orphan oil and gas wells that may need plugging - The Ohio Department of Natural Resources has been busy letting contracts to plug orphan oil and gas wells across the state in recent years, including a number in Cuyahoga County, and business should pick up even more with a shot of federal money on the way. The wells aren’t just found in the countryside, but in backyards, beneath parking lots, near schools and under roads. “We’ve plugged them on the banks of Lake Erie,” said Jason Simmerman, well program engineer with the ODNR’s Division of Oil and Gas Resources Management. One of the wells, plugged in late 2017, was located 5 feet from a home in Westlake. It was discovered during landscaping of the front yard and after methane was smelled in the basement, Simmerman said. It’s not clear when the well was dug as is the case with most of the 330 documented orphan wells in Cuyahoga County that have yet to be plugged. An orphan well is one that is not only inactive but has no owner of record to assume responsibility. In most cases, the wells were abandoned before 1965, which is when the state created the Division of Oil and Gas Resources Management and started regulating the industry. Many of the wells go back to the days of John D. Rockefeller and Standard Oil. They could have been used for industrial or agricultural purposes or perhaps just to heat a home. Many are in rural areas, perhaps discovered by a farmer working his fields or a hunter traipsing through the forest, said division spokesman Adam Schroeder. “We really do rely on Ohio citizens to help us find these wells,” he said. But orphan wells are also found in populated areas, such as Westlake or Cleveland, although those wells may have been drilled when the area around them was more rural, and then only to go unnoticed or ignored when construction went up around them. Elsewhere in Greater Cleveland, the state has documented 423 orphan wells in Medina County, 389 in Lorain County, 121 in Summit County, 95 in Lake County, 29 in Portage County and eight in Geauga County. The state created its orphan well program in 1976 and it has since been funded by a severance tax on the extraction of oil and gas. Activity has picked up considerably since 2018 with passage of House Bill 225, which provided more money to plug orphan wells. Of the nearly 20,000 orphan wells documented by the state, it is ready to plug 1,053 of them. The pace of work is expected to pick up considerably now that the state has a huge influx of funding heading its way. Plugging the wells is “good from both a climate and a public health perspective,” said Nolan Rutschilling interim managing director of energy policy for the Ohio Environmental Council. Even if a well is buried or partially buried it still could be leaking methane, which is a far more potent greenhouse gas than carbon dioxide, he said, although it doesn’t remain in the atmosphere as long. “In addition to methane, benzene leaks out from the wells and that is really bad for folks with asthma and has negative effects on lung development in children,” Rutschilling said. If a well presents an immediate risk, perhaps due to a strong leak of oil and gas, it will be plugged on an emergency basis, Schroeder said. Otherwise, the wells are graded and prioritized, with some in close proximity to each other lumped together in a single contract.
Ohio's fracking industry - boon as promised or something less? - — A Cleveland State University report in 2012 predicted that Ohio’s then-growing fracking industry would add 66,000 direct and indirect jobs and $5 billion a year to the state’s economy by the end of 2014.Predictions only grew from there. A decade later with operations spread out across the eastern side of the state to cash in on shale drilling’s economic potential, many numbers are in. But they are fuzzy and tell different stories from different viewpoints. And like many things perceived political, the industry’s successes and failures depend largely on who is doing the explaining.There are more than 3,600 permits to operate such wells in Ohio. One estimate tied more than 200,000 jobs to the industry, directly or indirectly, though the state acknowledges that count is exaggerated. And Ohio ranks sixth in the country for natural gas production and 13th for oil production. Yet environmental concerns remain. For people who live there, the industry did bring jobs and money.. “There was an influx into the economy that would have never happened. But some opponents of the industry’s proliferation in Ohio and surrounding states have said any job growth would likely be short-lived. Sean O’Leary, a senior researcher at the environmental and public policy think tank Ohio River Valley Institute, said that after drilling is completed, it takes fewer workers to extract gas and oil. “And so as the industry gets more mature, it requires fewer and fewer employees,” O’Leary said.Ohio has 81 wells permitted for the Marcellus shale and 3,591 permits for the Utica shale as of March 12. Most are listed as active and producing, according to the Ohio Department of Natural Resources.There are also 226 active underground injection wells that companies use to store brine, the liquid waste produced after blasting underground shale with water, according to 2020 numbers from ODNR.Wells produced 180.2 million barrels of oil and 12.5 billion thousand cubic feet of gas from 2010 to 2020, according to ODNR. Companies also injected at least 142.5 million barrels of brine.During that time, the amount of severance tax – 10 cents per barrel of oil and 2.5 cents per thousand cubic feet of natural gas – grew nearly every year. In fiscal year 2011, the state collected $11.6 million from that tax, which also includes payments for coal and other mining operations. Last year, that number was more than five times higher – at $63 million – with all but about $5 million coming from natural gas, according to the Ohio Department of Taxation.Backers of such operations also like to boast that the industry directly and indirectly supports 208,000 jobs. And a study by researchers at CSU’s Maxine Goodman Levin College of Urban Affairs, done at the behest of the state’s economic development arm JobsOhio – said the industry directly and indirectly involving shale pumped $90.6 billion into the economy between 2012 and the first half of 2020. The state, by comparison, had a $695 billion total economy in 2020.But take some of the numbers that backers push with a grain of salt, say detractors. For example, the 208,000 jobs number was pulled out of a Department of Jobs and Family Services report from 2019. It counts every person the U.S. Census Bureau codes in its surveys as working both in the drilling field and the sectors supporting it.That includes, say, truck drivers, who haul a lot more than fracking materials. So there are more workers in that number than just those tied to oil and gas.
Gulfport Energy Discusses Merger With Rival Ascent Resources - Gulfport Energy Corp. has discussed merging with rival oil and gas explorer Ascent Resources, according to people familiar with the matter, as U.S. energy companies consider pairing up amid rebounding commodity prices. Gulfport and Ascent have discussed a transaction that would value the combined company at about $8 billion, said one of the people, who asked to not be identified because the matter isn’t public. Ascent management would run the company under one structure they’ve discussed, this person said. No deal is imminent and the companies could opt to not proceed with a merger, the people added. Gulfport rose 4% to close at $87.08 in New York trading Friday, giving the Oklahoma City-based company a market value of about $1.9 billion. Closely held Ascent Resources is backed by private equity firm First Reserve. Oil and gas explorers are increasingly looking to pair up as oil prices surge. PDC Energy Inc. agreed to buy Great Western Petroleum for $1.3 billion in February while Oasis Petroleum Inc. agreed to a $6 billion combination with Whiting Petroleum Corp. this month. Gulfport and Ascent are both active in the natural-gas rich Utica Shale of Ohio. Gulfport emerged from bankruptcy last year.
'Drill, buddy, drill!!!!' Inside FERC's $40M Rover fine - Tunneling under the Tuscarawas River was not going well. It was early April 2017, and construction on the Rover pipeline across Ohio had just begun. At a worksite near Canton, Ohio, a drilling device was stuck, probably caked with mud. And drilling fluid that should circulate back to the surface was instead disappearing underground.So the night foreman of a contractor crew started adding diesel fuel to the mix to lubricate the drill and get it unstuck, according to an enforcement report from the Federal Energy Regulatory Commission. Other workers followed his lead.It’s an old trick. It was also against the law.The drilling fluid — about 2 million gallons of it — later surfaced in a pristine wetland across the river. The mud was at least a foot and laced with the toxic fuel.Now, FERC is seeking a $40 million fine from Rover’s developer, Energy Transfer LP (Energywire, Dec. 17, 2021). In its report issued late last year, agency enforcement staff said the company fostered a speed-justifies-the-means attitude and passed it on to its roughly 12,000 contract employees, all the way to the laborers in the mud pits.“These violations were the product of a corporate culture that favored speed and construction progress over regulatory compliance that Rover pressed upon its contractors,” FERC’s enforcement staff wrote.Energy Transfer has blamed “a rogue employee” of a contractor for adding the diesel. In a filing this week, the company argued it cannot be held liable for the actions of its contractor.“What the Report does reveal,” company attorney William Scherman wrote in the filing this week, “is a stunning rush to judgment in a desperate attempt to blame the innocent for the alleged deliberate misdeeds of third parties multiple steps removed from those who stand charged.”Rather than pressure to speed up drilling, the filing suggested the contract crew was in disarray because of interpersonal problems, including rumors that another foreman was “having an affair with the wife” of one of his workers.Either way, critics say, the failures laid out by FERC investigators show the agency has little ability to prevent environmental damage once it approves a project.It took four years of investigation before the agency sought the $40 million fine last December. That case appears likely to be tied up in litigation for months or longer. Meanwhile, the pipeline has been pumping gas for more than three years, netting at least $1.4 billion. For Energy Transfer, critics say, the $40 million fine will simply be the cost of doing business.
Cleanup continues for oil spill at Oswego Harbor — Oil spill cleanup operations at Oswego Harbor have “greatly diminished signs” of the polluting agent, according to Oswego Harbor Generating Station officials. Cleanup efforts are still ongoing at Oswego Harbor after an underground oil pipe coming from the Oswego Harbor Power Station spilled “No. 6 fuel oil” into Lake Ontario earlier this month. Plant personnel — alongside officials from Mayor Billy Barlow’s office and the Oswego Fire Department, members of the U.S. Coast Guard, and State Department of Environmental Conservation (DEC) officials — continue to assess the source of the leak, as well as the volume of oil that spilled into the harbor, an Oswego Harbor Generating Station spokesperson said. So far, cleanup crews have deployed booms to contain the spread of the contaminant, as well as remove any visible traces of oil utilizing special sponges, the spokesperson said. No. 6 fuel oil, according to the National Oceanic and Atmospheric Administration (NOAA), is a “ dense, viscous oil produced by blending heavy residual oils with a lighter oil (often No. 2 fuel oil) to meet specifications for viscosity and pour point.” Information materials on oil spills provided by NOAA indicate that the fuel usually spreads into thick, dark, colored slicks that can contain large amounts of oil. An investigation is underway to determine the amount of fuel spilled, DEC officials said.
Eastern Shore Natural Gas pipeline expansion approved by Sussex County Council - The expansion of a natural gas facility in Sussex County clears its final hurdle in Delaware. The Sussex County Council voted 4 to 1 this week to approve a pipeline capacity expansion at Eastern Shore Natural Gas’ (ESNG) Bridgeville facility. Councilman John Rieley cast the lone “no” vote citing the pipelines’ location, “I love natural gas. I absolutely think it’s the right thing to do - to expand the plant. I just wish it wasn’t there - in that particular location. I’ve often used the example of - you don’t want to put a leather tanning factory in the middle of a residential neighborhood, which seems pretty intuitive. I have to be honest, this strikes me a little bit too close to that type of scenario. And I’m going to vote “no.” The plan has faced criticism by community members and environmental advocates. But Matt Parker - ESNG’s engineering manager - says the proposed facility and trucks involved will be 1,300 feet away from Phillis Wheatley Elementary School, and almost 1,100 feet away from the schools’ playground, “There’s no gas processing that takes place at this facility. So truck offloading and above grade piping are approximately 800 feet from the nearest residence, it’s over 1,000 feet from the playground at Phillis Wheatley Elementary School and 1,300 feet away from the school structure itself.” ESNG claims those distances are safe since the gas is only offloaded and not treated or processed. Parker noted that the proposed facility has three offload points with an approximate 18 trucks coming and going on a daily basis. The project still needs approval from the Federal Energy Regulatory Commission.
Plans for Gibbstown LNG terminal on hold - Plans to build New Jersey’s first terminal to export liquefied natural gas took a step back when the developer of a plant where natural gas would be turned into liquid agreed not to build it under a current permit. Bradford County Real Estate Partners said it wouldn’t have time to build the plant at Wyalusing, Pennsylvania before its air-quality permit expires in July. As part of a court settlement last week, the company will let that permit expire and apply for a new one if it decides to revive the project. That settlement came after three environmental groups in Pennsylvania challenged the project which would export liquefied natural gas from a new terminal on the Delaware River at Gibbstown in Gloucester County to overseas markets where the price of natural gas is much higher than in the U.S. Gas would be pumped from the abundant Marcellus Shale field in northeastern Pennsylvania to the Wyalusing plant. It would then be shipped via train or truck about 175 miles to a former DuPont explosives-manufacturing site at Gibbstown where it would be loaded onto ocean-going tankers. Construction of the dock has been approved by the Delaware River Basin Commission but is on hold from March 15 to Sept. 15 to protect migratory fish, including the endangered Atlantic sturgeon, to comply with permit conditions set by the Army Corps of Engineers. The project also faces a possible study of its environmental impacts by the federal government if the Federal Energy Regulatory Commission decides in a current review that it has jurisdiction. Any such review would add another delay. The project is fiercely opposed by environmentalists who say it would encourage more production of climate-warming natural gas by fracking, expose residents along the route to the risk of catastrophic explosions, and subject residents near the terminal to round-the-clock truck and train traffic. “This is a great victory for the environment and people’s health because the liquefaction plant is highly polluting and would spur new fracking to feed the LNG trains to Gibbstown, causing more pollution and health harms,” said Tracy Carluccio, deputy director of the environmental group Delaware Riverkeeper Network. While the project appears to be on hold at both ends of the route, it has not been abandoned by New Fortress Energy, parent of the Bradford County group, and of Delaware River Partners, which heads construction of the Gibbstown terminal. New Fortress told the Federal Energy Regulatory Commission that it plans to ship the liquefied gas to Gibbstown from the proposed Wyalusing plant, or from unspecified “third-party liquefaction facilities.”
Ohio Chamber wants Michigan pipeline to remain open – The Ohio Chamber of Commerce has joined the legal fight to keep a Michigan pipeline open, urging a U.S. district court to rule against Gov. Gretchen Whitmer as gas prices continue to rise across the country. The Ohio Chamber, along with five other business organizations that include the U.S. and Canadian chambers of commerce, filed a friend of the court brief in federal court supporting Enbridge’s ongoing attempt to keep the Line 5 pipeline open. U.S. District Court Judge Janet Neff is expected to rule any day on whether the case will be heard in state or federal court. The Ohio Chamber believes closing the pipeline under the Straits of Mackinac could be disastrous for consumers and developing U.S. oil production, rather than limiting it, should be the focus. “At a time when the national average for gas is over $4.30 per gallon, policymakers need to look for ways to drive up oil production domestically and in North America. That is why the Ohio Chamber continued our legal efforts to stop Michigan’s governor from single-handedly stifling oil production in our state,” Ohio Chamber President and CEO Steve Stivers said. “The Line 5 pipeline is a critical part of reducing America’s demand for Russian oil because it accounts for 43 percent of the Great Lakes’ refinery capacity and transports half a million barrels of crude oil per day.” Whitmer revoked a land use agreement in 2020 that allowed Enbridge to operate the pipeline, which has been stuck in legal disputes since then. Refineries in Toledo produce 30% of the gasoline and 35% of the diesel used in Ohio, according to the chamber, which added limiting production at the state’s refineries could drive up fuel prices by 10%. Ohio officials said closing the line would cause a significant disruption in the supply chain, which serves as a source of jet fuel for several regional and international airports, particularly in Cleveland and Detroit. It also could affect 20,000 Ohio jobs. Ohio lawmakers, Gov. Mike DeWine and Lt. Gov. Jon Husted also have pressured Michigan to allow the pipeline to remain open. Consumers throughout the Midwest may face up to a combined $5.9 billion annual spike in gas and diesel costs if Whitmer is successful in shuttering the Enbridge Line 5. Over the next five years, the cost could exceed $23.7 billion in additional transportation costs across the region. The estimates come from a study conducted by Consumers Energy Alliance.
Republicans Renew Criticism Of Efforts To Shut Key Oil Pipeline Amid Energy Crisis -Republicans have renewed pressure on the State of Michigan to reverse course on its attempts to shut down Line 5, an operational oil pipeline that supplies much of the Midwest with energy.The GOP leaders argued that Democratic Michigan Gov. Gretchen Whitmer should halt her effort to shutter the pipeline in light of the Ukraine crisis which has threatened a “global oil supply shock.” Since Russia invaded neighboring Ukraine, oil prices skyrocketed above $100 per barrel, touching $120 per barrel at one point, and gasoline prices have hit record levels nationwide.“Let’s get real, the last thing this nation needs is to choke off even more domestic energy production which will push gas prices even higher,” Michigan Rep. Fred Upton, the top Republican on the House Energy and Commerce Subcommittee on Energy, told the Daily Caller News Foundation. “Yes, Line 5 needs to be replaced. Shutting it down, however, would cause real economic havoc.”“Proceeding with replacement rather than shutting it down is the proper safe approach to protect the Great Lakes and our consumers,” he continued. Line 5, which was built in 1953, carries about 540,000 barrels of oil and gas per day from Canada to Michigan, according to the pipeline’s operator, Enbridge. The pipeline provides energy to several Midwestern states, including Michigan, Pennsylvania, Ohio and Indiana. The pipeline transports 4.2-7.8 million gallons of refined products to Michigan per day, including the majority of the state’s propane supply. Shutting Line 5 would lead to refineries in Michigan, Ohio and Pennsylvania receiving about 45% less crude oil leading to a 14.7-million-gallon-per-day shortage of gas, diesel and jet fuel in the region, according to Enbridge. But in late 2020, Whitmer revoked a 1953 easement allowing Enbridge to operate pipelines in the state after asking the company to halt operations over environmental concerns. Enbridge then filed a federal lawsuit against Whitmer, arguing that the authority to regulate international pipelines was given to the federal government.“Line 5 is absolutely essential for not only northern Ohio, but also for Michigan,” Republican Ohio Rep. Bob Latta, a member of the House Energy and Commerce Committee, told the DCNF in an interview. “When you look at it, it’s over 540,000 barrels of product that goes through it a day and it has a $5 billion economic impact into our area.”
Ohio Lt. Gov blasts Michigan Gov. Whitmer for 'unreasonable, irresponsible' effort to shut down oil pipeline - Republican Ohio Lt. Gov. Jon Husted is calling out Michigan Gov. Gretchen Whitmer for her efforts to shut down a major oil pipeline that carries Canadian oil across the Midwest. Whitmer, a Democrat, contends that Enbridge Energy’s Line 5 poses a risk of a "catastrophic" oil spill in the Great Lakes. She and Michigan Attorney General Dana Nessel have launched legal challenges to close the pipeline built in 1953 that moves oil through northern Wisconsin and Michigan to refineries in Ontario.The ongoing Line 5 dispute is getting renewed focus at a time of high gas prices, a ban on Russian oil imports and efforts to boost oil and gas supplies domestically. Husted said Michigan needs to end its legal effort to shut off a friendly source of energy from the Canadian pipeline. Whitmer's actions threaten Ohio's economy and could deliver more pain at the gas pump, the Republican said."With what’s going on with Russia and Ukraine, I think the world is learning right now that we can't be dependent on other nations for the supply of our oil and gas who are adversarial to us," Husted told Fox News Digital in an interview. "We can work with nations who are allies — in this case, with Canada and Line 5 — but Michigan is being unreasonable and irresponsible with their actions."Ohio Lt. Gov. Jon Husted is calling out Michigan Gov. Gretchen Whitmer for her efforts to shut down the Line 5 oil pipeline that supplies crude oil to Ohio refineries. (Governor Jon Husted's office)The Russia-Ukraine war, however, hasn’t prompted the Whitmer administration to end its pipeline fight. Nessel, the Michigan AG, recently said she hopes the Biden administration would be more "vocal" on shutting down the pipeline and contends that the impact on Michigan gas prices would be "incredibly minimal.""I do wish that the Biden administration would be even a fraction as vocal about the importance of shutting down Line 5 as Justin Trudeau and his government have been about, you know, maintaining a pipeline that has outlasted its lifespan by, you know, two times," Nessel reportedly told the Royal Oak Area Democratic Club in March. The increased consumer energy prices have signaled to Whitmer a need to develop alternatives to oil, rather than become more dependent on fossil fuels, her office claimed.
Pro-Line 5 businesses, critics argue whether legal fight should be in federal court - Dueling court filings in recent days pit certain business interests against others in the legal fight between Michigan’s governor and Enbridge over the Canadian company’s Line 5 pipeline. Amicus briefs filed a few days apart last week in federal court by the Great Lakes Business Network and a group of six large chambers of commerce argue opposing sides of the battle between Gov. Gretchen Whitmer and the energy transportation company. The governor wants Enbridge’s countersuit tossed out of federal court after she dropped her case to halt the flow of Line 5. Whitmer opted to instead support the pending case state Attorney General Dana Nessel filed against the company, also meant to halt the pipeline’s use. Representatives from the chambers argued to keep Enbridge’s case in federal court as a matter of national energy policy, while the business network officials want state authorities to shut down Line 5 because of the oil spill risk it poses to freshwater in the Great Lakes. “At a time of geopolitical uncertainty, energy security has taken on a renewed importance. Given the current disruptions to energy supplies and rapid increases in prices at the pump, we need to be firing on all cylinders to provide consumers with safe and reliable access to a menu of energy sources,” said Mark Agnew, Canadian Chamber of Commerce senior vice president of policy and government relations. The U.S. Chamber joined Canada’s in the brief filing, along with state chambers from Michigan, Ohio, Pennsylvania, and Wisconsin. The briefs are the latest blows in the bout over the fate of the section of Enbridge’s Line 5 pipeline that runs beneath the waters of the Straits of Mackinac between the Upper and Lower peninsulas as a shortcut for the Canadian company. The segment is a section of the pipeline that daily moves about 23 million gallons of crude oil and natural gas from Alberta oil fields to petrochemical refineries in Sarnia, Ontario, picking up some fuel from northern Michigan along the way. The chambers argue only the federal government can make interstate oil pipeline decisions, but that’s just not true, said Bentley Johnson, federal government affairs director for the Michigan League of Conservation Voters. He said the location of the disputed section of pipeline in the water is what makes it inherently unsafe and as a result, a state matter. “Enbridge could put every pipeline safety measure available to the industry on Line 5 and it would still be an unacceptable threat to our state to have it sitting on the bottom of the Great Lakes, vulnerable to ship anchors and other threats. The State of Michigan has the legal and moral duty and obligation to protect these water resources that they manage in the public trust, and so the case belongs in state court, to be decided by state judges and decision-makers,” he said. The brief filed by the business network – a collection of tourism and freshwater-dependent companies across Michigan – argues any underwater Line 5 rupture would devastate the economy across the Great Lakes Basin. Further, it contends such an ecological disaster would have far larger negative effects than any economic hardship Enbridge would experience should it lose its shortcut through Michigan.
Big Oil in the Mackinac Straits Is a Disaster Waiting to Happen --“Native American sovereignty supersedes Big Oil’s authority.” This was the thought that occurred to me as I made my way home from Lansing, through the Mackinac Straits, the body of water that connects Lake Michigan to Lake Huron, last month. I had just made a presentation to the Mackinac Straits Corridor Authority (MSCA) as part of the Indigenous community’s ongoing battle to shut down a 1950s-era oil pipeline built and operated by the Canadian company Enbridge. Given the volume of water that passes through the straits and the direction of the currents in the area, the University of Michigan Water Center has determined that the Mackinac Straits are the very worst place in the Great Lakes for an oil spill to happen. The pipeline should not be there at all, but now Enbridge wants to go even further, blasting a new underground tunnel beneath the straits to replace the existing underwater pipeline. A broad coalition of Michiganders have come together to oppose Line 5, including Michigan Governor Gretchen Whitmer and Attorney General Dana Nessel.The MSCA was created by the state’s former Republican Governor Rick Snyder during his last days in office as a rubber-stamp organization to legitimize Enbridge’s interests. So we were not surprised when the authority granted Enbridge permission to move forward on the project. But a storm is coming. An elder woman from my tribe once recounted an Anishinaabek prophecy to me: A black snake would come to our land and try to poison our waters—but would end up uniting our people as never before. This has come to pass. In an unprecedented action, all 12 federally recognized tribes in Michigan came together to write a joint letter to President Joe Biden, arguing that Enbridge’s black snake under the straits violates treaties that the United States made with us, as sovereign nations, when it forced us to cede our land. The Standing Rock movement woke me up—as it did so many Native people of my generation. The following year, I returned to Michigan, and worked as a visual artist and musician in Detroit. I soon became increasingly interested in the water that surrounds us in the Great Lakes region. After all, the Anishinaabek first migrated here from the east hundreds of years ago because of a prophecy that requires us to protect the water.
Enviros say GOP, oil industry are using high gas prices to fearmonger about pipeline shutdowns ⋆ Gas prices have soared in recent weeks amid inflation and the Russian invasion of Ukraine, with some Democrats raising concerns about price gouging.Although they’re starting to drop, many Republicans and oil companies are still using gas prices to criticize Democrats President Joe Biden and Gov. Gretchen Whitmer for efforts to shut down oil pipeline projects.This is not the first time GOP lawmakers have focused on gas prices to make the case against the decommissioning of Line 5 and other pipelines. But when gas prices reached a record average high of $4.33 per gallon on March 11, the highest since 2008, that argument has ramped up.On his first day in office, Biden revoked the Keystone XL pipeline extension permit, which would have transported tar sands oil across three states — Montana, South Dakota and Nebraska. In Michigan, Whitmer and Attorney General Dana Nessel have been working to stop the Canadian-owned Line 5 pipeline in the Straits of Mackinac.Right-wing media has been a key place for pro-pipeline arguments. In the fall, as Line 5 lawsuits between Enbridge and the state of Michigan played out, GOP lawmakers, conservative figures and media ramped up the pro-pipeline rhetoric and put a highly politicized lens on the debate, as the Advance previously reported.Those include a tweet from GOP gubernatorial candidate Ryan Kelley, claiming that “Biden and his progressive leftist agenda [are] taking aim at Line 5” (despite Biden still not taking a public stance on the pipeline); and remarks from groups and lawmakers in office slamming both Biden and Whitmer over Line 5. That rhetoric has reemerged as gas prices took off. “Whitmer wants higher gas prices,” is the title of a Wall Street Journal editorial last week. Arguing that a Line 5 shutdown would raise costs at the pump for Midwesterners, the editorial heavily cites a newstudy from Consumers Energy Alliance (CEA) that claims Midwesterners will spend “at least $23.7 billion more on gasoline and diesel” in the five years following a shutdown.The nonprofit Consumers Energy Alliance is a front group for the energy industry that pushes pro-oil and gas messaging in the United States, according to SourceWatch.Enbridge spokesperson Ryan Duffy, referring to the CEA report, said it is “clear that a shut-down of Line 5 would only add to the current disruption of the energy market, and would hurt small businesses and the hard-working families in Michigan and throughout the region, at a time when they can least afford it.” But environmentalists say the attempt to connect currently high gas prices with these pipeline shutdowns is nothing more than empty rhetoric.“What’s been alarming to me is how that report is being picked up as fact,” said Beth Wallace, National Wildlife Federation (NWF) Great Lakes campaign manager, “whereas several other reports that use sourcing and facts and regional dynamics are being brushed off.”
Illinois AG files suit against Marathon over crude oil spill | ksdk.com— The Illinois Attorney General is suing an oil company after more than 160,000 gallons of crude oil leaked into Cahokia Creek. When a leak was identified in the Marathon Pipe Line near Edwardsville, Illinois, Virginia Woulfe-Beiley was initially satisfied with the response. "Illinois regulators took really swift action containing and determining the cause of the leak,” said Virginia Woulfe-Beiley. However, the Sierra Club-Piasa Palisades member said she was shocked when she found out more than 160,000 of crude were spilled into Cahokia Creek. "My first thoughts really went to public safety, clean air, clean water, and the wildlife in our area,” said Woulfe-Bailey. "Unfortunately, we have seen a number of animals that have had to be treated for exposure to the pipeline release,” said Andrew Armstrong, Chief of the Environmental Bureau of the Illinois Attorney General’s Office. That's why the Illinois Attorney General's Office is stepping in. "It's a very serious case in terms of the amount of the release,” said Armstrong. “That's why our office is acting so quickly." A lawsuit filed against Marathon Pipe Line in Madison County Court alleges multiple violations of the Illinois Environmental Protection Act. "This amount of oil can create fumes that can threaten public health,” said Armstrong. “Certainly it has already impacted the environment and the surrounding river and wetlands." A Marathon spokesman says the company has already removed more than 5,300 cubic yards of contaminated soil along with more than 11,000 barrels of oil and water. "We need to see a complete and total cleanup of the release,” said Armstrong. “We need to make sure that Marathon is taking all actions it can to prevent all future releases in our state." "We're hoping that it's a long time before we see anything else like this,” said Woulfe-Beiley. “We have to stay vigilant." As part of its lawsuit, the state of Illinois is seeking civil penalties of $50,000 for each violation of the Illinois Environmental Protection Act and Illinois Pollution Control Board regulations, as well as an additional penalty of $10,000 for each day of each violation
Cleanup of big Edwardsville oil spill continues, but pipeline concerns persist - An oil spill in Edwardsville unleashed an estimated 165,000 gallons of crude oil into Madison County waterways earlier this month. It’s among the largest local spills on record — but for residents near the spill site, it wasn’t clear at first that anything was wrong. The first local observation started with a smell. On March 11, the Edwardsville Fire Department alerted residents on Facebook to “multiple calls this morning for an odor of natural gas in the air.” But it wasn’t natural gas. Instead, it was an oil spill from Marathon Petroleum, which maintains a 75-mile pipeline that runs for part of its length parallel to Cahokia Creek. On Wednesday’s St. Louis on the Air, Edwardsville resident Toni Oplt recalled detecting the smell but not knowing what it meant: One of her neighbors believed that a work crew was tarring a road. Days later, another complained the smell was giving her headaches. Oplt is an environmental activist, a member of the Sierra Club and chairperson for the Metro East Green Alliance. She argues Edwardsville could have done more to alert residents to the environmental disaster taking place inside its borders. Although the city did share the alert and updates from its Fire Department to its main Facebook group, officials didn’t reach out to those directly affected. Said Oplt, “For people like myself, for community members, it becomes a long series of questions that don't get answered.” Cahokia Creek and the bike trail alongside it are frequented by nature lovers and young people during the warmer months, Oplt said. She’s concerned about health effects. On March 12, one day after the spill was first reported, Oplt snapped a photo from the trail where it passes over the creek — the picture shows a sheen of oil sliding across the water’s surface. In a statement to St. Louis on the Air, Marathon Petroleum said that its crews are continuing to work along the area of the spill near the Cahokia Creek. The statement added that the spill is being “monitored 24 hours a day for impacted wildlife and audible deterrent is being used to keep any animals from entering the affected area.” In an earlier statement, the company claimed it had already recovered between 2,200 and 3,000 barrels of oil that had spilled from the pipeline, KMOV reported. Hannah Flath, communications coordinator for Sierra Club Illinois, cautioned that Marathon’s recent actions appear limited to the short-term problems raised by the spill. “The Metro East area, and really Illinois more broadly, is unfortunately at risk for these incidents because of the network of pipelines underneath the ground,” she said. “We are of course at the center of the country, which makes us home to more miles of fossil fuel pipelines and most other states, putting our communities at risk.” On Monday, the St. Louis Post-Dispatch reported on “the web of pipelines that crisscross the St. Louis region” — and the prevalence of oil spills. Reporters Bryce Gray and Janelle O’Dea revealed the numbers behind the incidents: 432 combined spills in Missouri and Illinois since 2020, 72 resulting in spills of 1,000 gallons or more; 36 spills exceeded 10,000 gallons, while 13 — not including the recent Edwardsville spill — exceeded 100,000 gallons. Flath said those numbers raise a bigger issue about the pipelines running beneath our feet. It’s not just about keeping them well-maintained and less likely to spill, she said, “but also to ultimately do whatever we can to end our reliance on these pipelines.” “Down the road, we need to think about not just this spill,” Oplt said. “We need to think about the next one.”
Amazon's NKY cargo hub spills 1,700 gallons of jet fuel — The Kentucky Energy and Environment Cabinet says a mechanical failure caused a jet fuel spill at Amazon Inc.’s air cargo hub at CVG Airport in Hebron, Ky., but the March 15 spill was contained before it caused environmental damage. An incident report from the Cincinnati/Northern Kentucky International Fire Department said Amazon mechanics initially estimated the spill at between 15,000 and 16,000 gallons of jet fuel. But Amazon later informed the airport that the spill was 1,700 gallons, or 13% of the fuel tank that had a defective valve. “The incident was handled in accordance with our approved environmental containment and remediation plans and at no point did it present any safety concerns to personnel or operations at our facility,” said Amazon spokeswoman Alisa Carroll. John Mura, spokesman for the environmental cabinet, said the spill was contained. “The fire department flushed the material into the drainage system that leads to an oil-water separator,” Mura said. “An environmental contractor pumped out the spillage and there is no indication that water ways were impacted.” James McCloud, environmental inspector on Kentucky’s emergency response team, said it was one of the largest fuel spills he could recall at CVG in the last several years.
Jury boosts landowners' compensation for Bent Mountain property taken by Mountain Valley Pipeline - A jury ordered Mountain Valley Pipeline to pay $523,327 Thursday for a prime piece of Bent Mountain real estate that it took, against the owners’ wishes, using its power of eminent domain. The company building a natural gas pipeline first offered about $119,000 for an eight-acre easement through the 560-acre tract. After the Terry family refused to sell, Mountain Valley took possession of a 125-foot-wide right of way and quickly began cutting trees on land that includes old-growth forests, meadows and the headwaters of Bottom Creek. Four years later, company attorneys argued this week that the Terrys deserved $151,850 for their loss. The jury saw it differently, awarding most of the $570,000 the family had sought. The verdict in Roanoke’s federal court came after four days of often conflicting testimony from appraisers who were asked to put a price on land that has been with the Terry family for seven generations. “I think it was a great thing for the jury to do,” said Frank Terry, who lives in a circa-1890 farmhouse on property that he jointly owns with his brother and sister, John Coles Terry and Elizabeth Terry Reynolds. “I don’t want them on my property, and if I could I’d keep them off,” Terry said of construction crews building the deeply controversial project that slices through the rural heart of the New River and Roanoke valleys. Joe Sherman, a Norfolk attorney who represented the family, told the jury that the only measure of justice would be to award just compensation, or the difference between the fair market value of the land before and after it was condemned for the pipeline. “The Terrys can’t stop this project,” he said. “That’s been decided. So their only remedy is money.” Jurors were asked to sort through the work of four different appraisers, who offered widely different values and accounting methods in testimony that was both dry and sometimes contentious. Joseph Thompson, a Roanoke appraiser hired by Mountain Valley, said he found the property to be worth $1.2 million before the taking. The pipeline easement reduced the value by 12%, he testified, which worked out to a just compensation figure of about $150,000. The Terrys countered with an initial assessment of $1.9 million and a diminution of 30%. That put just compensation at $570,000, Sherman told the jury. In 2017, after proposing a 303-mile pipeline that would run through West Virginia and Southwest Virginia, Mountain Valley began to approach landowners in its path. About 85% of the property owners agreed to sell their land, the company says. Those who did not – including the owners of about 300 parcels in Southwest Virginia – were sued by Mountain Valley, which had the power of eminent domain on its side. Over the years, eminent domain has traditionally been used for government projects to take private land for a public good, such as the construction of highways. But the Natural Gas Act gives private companies like Mountain Valley the authority to condemn land for pipelines when there is a determination of public necessity, which the Federal Energy Regulatory Commission found in 2017. U.S. District Judge Elizabeth Dillon ruled the company had the right to immediate possession of the land in early 2018. Tree cutting began shortly afterward, and Mountain Valley was allowed to work out just compensation for the owners in the years that followed.
With construction at a standstill, Mountain Valley Pipeline looks for solutions -Adding a splash of yellow to the drab winter landscape, dozens of excavators and bulldozers sit in rows on a gravel lot, idled by the latest stop in construction of the Mountain Valley Pipeline. Developers had hoped the equipment would be in the field by now, finishing work on a natural gas pipeline that was supposed to be done four years ago. But on a mild afternoon last week, crews loaded one of the excavators onto a tractor-trailer bound for a different construction job, one with more promise. Mountain Valley — which lost two permits this year to a federal appeals court that has repeatedly struck down its government-issued approvals — is facing the greatest danger of collapse since the $6.2 billion infrastructure project was authorized in 2017. While construction remains at a standstill, efforts to revive the pipeline continue on several fronts: Attorneys for Mountain Valley have asked the full 4th U.S. Circuit Court of Appeals to reconsider decisions by a three-judge panel, which in late January struck down a permit allowing the pipeline to pass through the Jefferson National Forest and the following week invalidated an opinion from the U.S. Fish and Wildlife Service that work would not jeopardize endangered species. U.S. Sen. Joe Manchin of West Virginia is calling for legislative or executive action to advance the project. The 303-mile pipeline will start in the Mountain State before passing through the Roanoke and New River valleys. And with Russia’s invasion of Ukraine tightening the global energy market, supporters of Mountain Valley say it’s needed more than ever for a steady supply of natural gas. Seeking legal relief A federal appellate court based in Richmond — and in particular, three judges on the 15-member court — has been perhaps the sharpest thorn in the side of a joint venture of five energy companies that make up Mountain Valley Pipeline LLC. Chief Judge Roger Gregory and judges Stephanie Thacker and James Wynn have presided over 12 cases in which environmental groups challenged permits issued to Mountain Valley and the Atlantic Coast Pipeline, a similar project that was canceled in 2020 as legal problems mounted. “That panel’s record speaks for itself,” pipeline attorneys wrote in a recent court filing, stating that all but two of the 12 contested permits have been vacated or stayed over the past four years. On March 11, a petition filed by Mountain Valley asked the full Fourth Circuit to consider the decisions of the three-judge panel in a rare proceeding known as an en banc hearing. “The consequences of the panel’s actions are grave,” the petition states. “Its errors have trapped Mountain Valley and the agencies in a perpetual loop, ordered to redo work that was neither arbitrary nor capricious, knowing that revised analysis will yet again be subject to inappropriately aggressive review.”
EPA eyes new rule for gas-fired power plants - EPA Administrator Michael Regan confirmed earlier this month that his agency plans to focus on gas-fired power in its updated carbon rule for new power plants. But how to do it raises a barrage of legal and technological questions that will have implications for how — and whether — the United States can decarbonize its power grid. The forthcoming rule would replace a 2015 standard that’s still on the books and covers carbon from new coal and new gas power plants. While the Obama-era rule effectively mandates that new coal-fired units reduce emissions through partial carbon capture and storage, its requirements for gas are lax enough to be met easily by most new builds. EPA data shows that the average existing gas combined cycle power plant in 2020 emitted 865 pounds of CO2 per megawatt-hour. The Obama-era rule allows it to emit 1,000 pounds of CO2 per MWh. Now EPA is preparing to ask gas plants to do more. Regan told an audience at CERAWeek by S&P Global in Houston two weeks ago that EPA would release a white paper this spring on “readily available” mitigation techniques for new natural gas combustion turbines, followed by a public comment period, final paper and draft rule later this year. Instead of laying out policy, he said, the paper “frames the public dialogue on approaches to reduce climate pollution from new gas-fired units.” EPA told E&E News that the paper would be out in the next few weeks. In starting with a white paper, EPA is adding at least one step to its usual rulemaking process. Typically, the agency would roll out a so-called advanced notice of proposed rulemaking to signal its intent to regulate and collect information on technologies and measures that should form the basis for a rule. But EPA has started work on this as it awaits a Supreme Court decision that could make regulating for climate change harder, at least until Congress passes a new law. While the new power plant carbon rule isn’t the focus of West Virginia v. EPA, an expansive decision in that case could curtail the agency’s regulatory authority in ways that would affect it. “It may not want to antagonize the Supreme Court,” he said. Utility experts say a new gas plant rule that seeks to limit carbon beyond what could be accomplished through simple heat-rate improvements on-site likely would be based either on co-firing of gas with a lower-carbon fuel like hydrogen or on carbon capture and storage, called CCS. Both options present their own challenges. And experts say that a rule based on them might have broader implications for the power system if they make new gas plants less competitive and shift the industry toward reliance on older gas and new renewables.
19 states appeal FERC natural gas policies --The "Commission cannot wield jurisdiction over activities such as upstream development of natural gas wells or downstream combustion of natural gas by utilities or end-users, all of which exceeds the Commission’s authority," the appeal said.Nineteen states are challenging two natural gas policies recently established by the Federal Energy Regulatory Commission, arguing that the changes infringe on states' rights to pursue the energy resources of their choice.Led by Louisiana Attorney General Jeff Landry (R), the states appealed FERC policies last week that they say prioritize concerns about climate change over the commission's obligation to ensure energy is reliable and available at a reasonable cost.Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Idaho, Kansas, Kentucky, Mississippi, Missouri, Nebraska, Ohio, Oklahoma, South Carolina, Utah and West Virginia joined Louisiana in signing on to the request for rehearing. Texas also filed a similar request of its own. All proposed natural gas pipelines and export facilities will be subject to the new policies, inflicting "major new costs and uncertainties" for project developers and potentially depriving states of tax revenue from the projects, the states charged. Some of the signatories produce significant volumes of oil and gas.
FERC retreats on gas policies as chair pursues clarity -The Federal Energy Regulatory Commission has rolled back sweeping new policies for large natural gas projects, including a framework for assessing how pipelines and other facilities contribute to climate change, weeks after prominent lawmakers panned the changes. In a decision issued unanimously at the commission’s monthly meeting yesterday, FERC will revert back to its long-standing method for reviewing natural gas pipeline applications — while opening changes announced in February to feedback rather than applying them immediately. The commission also signed off on three new natural gas pipelines, one of which will pump more natural gas into New York state in a project described by utilities as essential for reliable gas service. While the policy changes issued in February were intended to update and improve the agency’s approach for siting new gas projects, the commission has concluded that the new guidelines “could benefit from further clarification,” said FERC Chair Richard Glick. “I’m all for providing further clarity, not only for industry but all stakeholders in our proceedings, including landowners and affected communities,” said Glick, a Democrat who supported the initial changes. In a pair of orders condemned by the commission’s Republican members, FERC’s Democratic majority voted last month to advance new policies altering the commission’s process for reviewing new natural gas projects (Energywire, Feb. 18). One of the policies expanded the range of topics included in FERC’s reviews of interstate pipelines, adding new consideration for environmental and social issues. It explained that the commission would consider four major factors before approving a project: the interests of the developer’s existing customers; the interests of existing pipelines and their customers; environmental interests; and the interests of landowners, environmental justice populations and surrounding communities. The other policy was an “interim” plan for quantifying natural gas projects’ greenhouse gas emissions. It laid out, for the first time, how the agency would determine whether new projects’ contributions to climate change would be “significant,” and encouraged developers to try to reduce their greenhouse gas emissions. Environmental advocates had praised the changes, with some saying the new policies were long overdue for an agency that has historically signed off on nearly all the natural gas projects that have come before it, with little consideration of climate change impacts. But natural gas companies said the changes would chill investments in new pipelines and gas export terminals at a time when some foreign policy experts have called for shipping more gas to Europe. Sen. Joe Manchin (D-W.Va.), chair of the Senate Energy and Natural Resources Committee, called the policies a threat to national security and energy independence.
Federal regulators pulls back plan to assess climate impact of gas pipelines (AP) — Amid pushback from industry and lawmakers in both parties, federal energy regulators on Thursday scaled back plans to consider how natural gas projects affect climate change and environmental justice. The Federal Energy Regulatory Commission said a plan to consider climate effects will now be considered a draft and will only apply to future projects. Industry groups and key lawmakers had criticized a proposal approved last month to tighten climate rules, saying it was poorly timed amid a push for increased natural gas exports following Russia’s invasion of Ukraine.Senate Republican Leader Mitch McConnell called the climate policy “baffling,” while Senate Energy Committee Chairman Joe Manchin, D-W.Va., said the agency’s “reckless decision to add unnecessary roadblocks” to approval of natural gas projects “puts the security of our nation at risk.”“At a time when we should be looking for ways to expedite the approval of these important projects, the (energy) commission has chosen on a purely partisan basis to do the exact opposite,” McConnell wrote in a letter Thursday, hours before the panel backtracked on the climate proposal. Climate activists accused FERC of bowing to political pressure, a claim FERC Chairman Richard Glick denied. “I’m not going to do anything for political purposes,” he told reporters, adding that he and other commissioners have had discussions with numerous pipeline and natural gas companies since the panel approved the climate policy last month. Industry leaders told them the policy changes “raise additional questions that could benefit from further clarification,” Glick said. At a Feb. 17 meeting, the energy commission approved policy statements directing officials to consider how pipelines and other natural gas projects affect climate change and environmental justice. The statements were approved on a 3-to-2 vote along party lines, with Glick and two other Democratic commissioners supporting the policy changes and two Republicans opposed.The panel said at the time that the new guidance would take effect immediately and apply to pending and future gas projects. The panel voted unanimously Thursday to step back from that commitment, which is now labeled as a draft and would apply only to projects filed after FERC finalizes the policy statements. The commission said it will seek further public comment before making a final decision. In a related development, FERC approved three natural gas projects that have been pending before the panel for months. Two of the projects will expand gas production in the U.S. Gulf Coast, while the third is located in New York State. One of the projects will connect with an export terminal in Louisiana for liquefied natural gas.The U.S. sharply increased LNG exports to Europe in the runup to the Ukraine war and is looking for ways to “surge” LNG supplies to Europe to help reduce the European Union’s dependence on Russian gas, said Jake Sullivan, President Joe Biden’s national security adviser.The EU imports 90 percent of the natural gas used to generate electricity, heat homes and supply industry, with Russia supplying almost 40 percent of EU gas and a quarter of its oil.
API comments on SEC proposed climate disclosure rule - American Petroleum Institute (API) Senior Vice President of Policy, Economics and Regulatory Affairs Frank Macchiarola issued the following statement in response to the Securities and Exchange Commission’s (SEC) proposed climate disclosure rule. “The U.S. oil and natural gas industry has a long history of sustainability reporting, and achieving greater comparability and transparency across those efforts is a leading priority. We are concerned that the Commission’s sweeping proposal could require non-material disclosures and create confusion for investors and capital markets. As the Commission pursues a final rule, we encourage them to collaborate with our industry and build on private-sector efforts that are already underway to improve consistency and comparability of climate-related reporting.”
Will Russia-Ukraine Crisis Prompt Biden Administration Reset for Natural Gas and Oil Policy? - The backdrop of the Russia-Ukraine conflict could be an opportune time for the Biden administration to improve the United States’ oil and gas investment climate and bolster domestic energy security, the North Dakota Petroleum Council (NDPC) and other industry organizations told NGI. dg6 NDPC’s Brady Pelton, vice president, said that Biden “has not really been a supporter of the fossil fuel industry” and has “soured up investors in the oil and gas plays and put them at a disadvantage.” Pelton, whose organization represents oil and gas industry players in the Dakotas and the Rocky Mountain region, said the administration “from Day 1, pre-Day 1, has been so focused on eliminating the oil and gas industry.” Pelton’s comments on behalf of NDPC echo those from across the U.S. oil and gas industry, which has criticized the administration for taking actions such as halting leasing on federal land, suspending leasing in Alaska’s Arctic National Wildlife Refuge, and trying to cancel a Gulf of Mexico lease auction that a federal judge later invalidated.. In response to Russian hostilities in Ukraine, the Biden administration and Congress have taken steps to make the United States off-limits to Russian natural gas and crude oil. Actions have included Biden’s executive order banning imports of Russian oil, liquefied natural gas (LNG), and coal as well as a legislative ban making its way through Congress. “The Biden administration has immense power today to change the narrative,” Pelton said. In North Dakota, for instance, Pelton said the administration could work on approving federal drilling permits. “We have about 1,000 wells that aren’t being drilled because of a halt to leasing” in the Bakken Shale, he said. Although many of the wells would be drilled on privately owned land, Pelton said that federal approval would be needed when a nexus – in this case an extension into federal land via horizontal directional drilling – exists. “When you have a well that’s located on private, non-federal land with a lateral that extends into a unit that has federal minerals in it, a federal permit is needed,” he explained. “I think that expanding the ability to produce those wells would have a great impact,” said Pelton. “It would also send a great message to the market that this administration supports the development of domestic natural resources.” Along those lines, the Alaska Oil and Gas Association’s Kara Moriarty, CEO, told NGI the Russia-Ukraine conflict and its effects convey another message: the United States needs to be “truly energy independent. “The demand for oil and gas remains, and America has plentiful resources,” she said. “We just need the right investment and regulatory framework to deliver these energy sources to the market and consumers.” Texas Oil and Gas Association’s Todd Staples, president, said the Russia-Ukraine situation “should help reset American priorities and recognize that American oil and natural gas are produced in more environmentally responsible ways than in any other country in the world.” Staples said the high fuel costs U.S. motorists are paying at the pump highlight “the importance of domestic energy production,” with consumers “feeling the repercussions of canceled pipeline projects, delayed approvals for permits and the discouragement of additional expansion, poor decisions exacerbated by the war. “The administration calling on foreign countries to increase production…, rather than encouraging local jobs and local investment, had a chilling effect on expansion,” he said. The Ohio Oil and Gas Association (OOGA) backs Biden’s move to curb Russian imports, but the action represents “only one small part of the solution,” OOGA’s Mike Chadsey, public relations director, told NGI. “Our call to the White House is to unleash American energy by restarting the federal leasing program, approve the permits that have already been filed, and approve the delayed or canceled pipeline projects,” he said. “
U.S., EU reach LNG supply deal to cut dependence on Russia — The U.S. and the European Union will push to boost supplies of liquefied natural gas to European countries by the end of 2022 in a bid to begin to displace some Russian gas, a political framework that now leaves companies to sort out the details. Under the agreement, Europe will get at least 15 billion cubic meters of additional LNG supplies by the end of the year, though it’s not clear where it will come from. Member states will also work to ensure demand and facilities to take in up to 50 billion cubic meters of American fuel until at least 2030. The aim is to work with international partners to help the continent wean itself off Russian gas, which accounts for about 40% of Europe’s needs. “We’re coming together to reduce Europe’s dependence on Russian energy,” U.S. President Joe Biden said at a joint press conference with European Commission President Ursula von der Leyen, who added that 15 billion cubic meters this year “is a big step in that direction.” Europe is trying to diversify its energy sources in a bid to starve Russia of the revenues it needs to fund the war in Ukraine. But that’s a mammoth task. Russia ships about 150 billion cubic meters of gas to Europe via pipelines every year, and another 14 billion to 18 billion cubic meters of LNG. That means any disruptions to flows of pipeline gas from Russia would hard to cope with. “It’s a start, but relatively small compared to the overall supplies from Russia,” said Jonathan Stern, a research fellow at the Oxford Institute for Energy Studies. “All contributions will be welcome but the task is huge.” Details of the 15 billion cubic meters are vague. Contracts have not been signed for the full volume, U.S. National Security Advisor Jake Sullivan said. It will come from “a variety of sources,” and not just the U.S., he said. “We believe that we’ve identified the sources to be able to hit that target,” Sullivan told reporters on Air Force One on Friday. The U.S. has expanded the number of countries that can receive gas from its own terminals, worked already to divert existing orders and also had Biden engage with other countries, including Qatar, he said. “So when you put all of those pieces together, we feel quite confident that we’ll hit our mark,” Sullivan said. The issue is critical as Russia is the EU’s biggest gas supplier. The EU also relies on the country for the biggest share of its coal and oil imports, and has struggled to shift its energy policy away from Moscow. The details of how the plan works is now in the hands of energy companies, with American LNG shippers and German buyers set to meet next week in Berlin to hash out possible deals. “While gas is still a substantial part of the energy mix, we want to make sure that the Europeans do not have to source that gas from Russia,” Sullivan said. The U.S. has already been providing more LNG to Europe, with shipments doubling to record 4.4 billion cubic meters in January and a similar level in February. Supplying another 15 billion cubic meters could be feasible as long as Europe continue to pay a premium to cargoes compared to Asian buyers. A significant boost to global LNG supplies will only come from 2025, when new projects are scheduled to come online. It’s also unclear whether the supplies would be coming from additional production or from cargoes being redirected from other regions. Currently, European buyers are competing with Asian countries for the world’s limited supply of LNG cargoes.
API welcomes Biden administration's LNG agreement with EU -American Petroleum Institute (API) President and CEO Mike Sommers and Energy Workforce & Technology Council CEO Leslie Beyer said their associations welcome the announcement by President Biden and European Commission President von der Leyen establishing a joint task force to help increase U.S. LNG exports to Europe and reduce their dependency on Russian natural gas. “We welcome the president’s focus on expanding U.S. LNG exports to our European allies during this crisis, and we applaud the administration’s continued leadership in ensuring a unified international response to maximize pressure on Russia through additional sanctions,” Sommers said. During recent months, American producers have significantly expanded LNG shipments to allies, establishing Europe as the top US LNG export destination, he said. “With effective policies on both sides of the Atlantic, we could do even more to support Europe’s long-term energy security and reduce their reliance on Russian energy,” Sommers said. “We stand ready to work with the administration to follow this announcement with meaningful policy actions to support global energy security, including further addressing the backlog of LNG permits, reforming the permitting process, and advancing more natural gas pipeline infrastructure.” “We welcome the call for more exports of LNG to Europe and for increased domestic production," Beyer said. "Our industry is ready to help fill the gap as the world continues to shun Russian oil and gas." U.S. production is on the rise and can continue to ramp up, but the Administration must pullback excessive regulatory hurdles, and support and encourage long-term investment in domestic oil and gas production and infrastructure, Beyer said. "We were encouraged by FERC’s actions yesterday to approve three pending applications and to hold off on implementing detrimental policies on applications until the policies are finalized. Rapid increases in domestic production won’t happen overnight, but we are confident that the industry can step up and satisfy the energy needs of the U.S. and our allies."
Drillers say there are still questions overhanging Biden LNG deal with Europe - Oil and gas producers said Friday's announcement that the Biden administration pledged to dramatically increase the amount of liquified natural gas to make up for Russian gas has a number of questions still be resolved, including how the pipelines and export terminals required will be built as smoothly and as quickly as possible. Shale companies have long looked to LNG, a form of natural gas that comes out of the Marcellus and Utica that can be shipped overseas, as a potential global market. That's certainly occurred in recent years, when LNG exports from the United States has gone from 3 billion cubic feet/day to 13 billion cubic feet/day in short order. But LNG exports are at capacity, both in pipeline capacity and export terminals. The gas is in the ground and could be produced, but drillers say it's difficult without being able to take it to market. That would require building more pipelines and export terminals, although regulatory and legal climates haven't favored either lately. The Biden administration's agreement with the European Commission calls for an additional 1.5 billion cubic feet of LNG exports to the European Union in 2022 alone and a potential for 5 billion cubic feet per year of additional LNG a year until 2030 while retaining climate-change goals. But the details remain murky, as does how producers will provide LNG. There's the capability — and more importantly the economical raw material — but not immediately on tap."It's unclear frankly whether they are talking about doubling or tripling LNG exports to Europe in the next decade," said Hardy Murchison, CEO of Encino Energy, the second-largest producer of natural gas in Ohio and the fourth-largest privately owned shale company in the U.S. "Whatever scale it's on, the next step is we're going to have to hold them to it, and that means we're going to have to get some infrastructure built." Encino, an 11-year-old company that purchased Chesapeake Energy's large stake in the Ohio Utica in 2018, is a major LNG producer. About 70% of Encino's gas production goes down to the Gulf Coast and becomes LNG through a deal with Cheniere Energy, the Houston-based global leader in LNG. Murchison said that carrying out the plan requires a lot more infrastructure, including pipelines to the East Coast, Gulf Coast and elsewhere, as well as export terminals along the U.S. East and West coasts and import terminals in western Europe. But he said the industry isn't looking for handouts, just to allow the markets to work naturally. The infrastructure spend would be born by the companies themselves, producers have said, as long as there's a guarantee of the market. Anne Bradbury, CEO of the American Exploration and Production Council trade group for shale drillers,, said that regulatory agencies need to put in place policies to support LNG exports. “In recent months, U.S. producers have significantly expanded LNG shipments to our European allies. With an abundance of natural gas in the Marcellus and Utica shales, Pennsylvania is the second-largest producer of natural gas and a key energy exporter," . "We could do even more to support Europe’s long-term energy security and reduce their reliance on Russian energy with effective policies, such as addressing the backlog of LNG permits, reforming the permitting process and expanding natural gas pipeline infrastructure.
Rice: European LNG agreement important first step - EQT Corp. CEO Toby Z. Rice on Friday welcomed the Biden administration's agreement with western Europe to increase exports of liquified natural gas from the U.S. as a first step toward helping to boost allies' energy security and the American economy.Rice was, well before the energy crisis and Russia's invasion of Ukraine, was one of the chief advocates of LNG on the global stage and the Marcellus and Utica shale's role. Rice earlier this month unveiled a wide-ranging proposal for the industry to boost natural gas production by 50 billion cubic feet per day of natural gas by an additional 50 or so rigs around the country — but especially in Appalachia. Rice and EQT made the case that dramatically increasing the industry's LNG production made sense on the world stage as well as in lower energy costs in the U.S. The Biden administration, in a deal with the European Commission, committed to increasing LNG exports from the United States to Europe by about 1.5 billion cubic feet per day in 2022 beyond the roughly 13 billion cubic feet of LNG that the U.S. exports around the world now. The long-term goal is about 5 billion cubic feet/day additional of LNG exports to Europe by 2030, which producers say is achievable as long as the regulatory and legal climates for pipelines and export infrastructure turn favorable. Pipelines in particular have been difficult to build. In an interview with the Business Times, Rice said that the company's analysis finds that there's the ultimate potential of 50 billion cubic feet per day of LNG that could be produced with the resources on hand. He called the administration's commitment announced Friday "a big step" toward the longterm goal. "The actions today validate the things we've been saying. I think people need to look at this as the political sign that natural gas is going to be play a key role in our energy future," Rice said. "What's really great is the moves today to help unleash US LNG are consistent with the administration's climate ambitions. As we've articulated (in the EQT plan), U.S. LNG is the biggest green initiative on the planet." That's because not only could LNG replace the Russian natural gas imports to western Europe, but it also would displace international coal production whose emissions are warming the planet from places like Asia. Just the new coal production that has come into operation outside the U.S. has led to higher greenhouse gas emissions despite progress on that front, from lower emissions from fossil fuels as well as renewables."That has the impact of wiping out all the emissions reductions from wind and solar in the United States" in the past 15 years, he said."International coal is a heavyweight problem and you need a heavyweight solution, and U.S. LNG is that solution," he said.But Rice also stressed that this was a first step that would need to be followed up by actions that allow the market and the industry, along with its investors, to feel confident that the market is big enough and long-lasting enough to make the big investment commitment that would be required for pipelines and export terminals.
TN Pipeline Bill Controversy: Who would determine where pipelines are built? -– Soon the state of Tennessee could decide if a pipeline shows up in your backyard and your local government could have little to no say. That’s because a bill proposed in the state legislature would prohibit counties and cities from stopping a pipeline from being built and leave that decision to the state. The bill (HB 2246/SB 2077) being guided by GOP lawmakers is moving to limit the ability for localities to decide if a pipeline should run through their communities. “It preempts political subdivisions of this state from taking any action to restrict, prohibit or otherwise impair the development and implementation of the types of the sources of energy that may be used, delivered, or converted or supplied,” said Sen. Ken Yager (R-Kingston) during committee. Yager, who is sponsoring the Senate version, is using this bill to take aim at local governments like Shelby County which fought against a pipeline that would have run through a primarily Black neighborhood. “We’ve actually had one of our political subdivisions try to use the power of ordinance to stop and did stop a pipeline,” Yager said. It’s a controversial issue that could lead to environmental concerns, as well as significant changes to all counties, according to an environmental lawyer who testified on Capitol Hill. “If it passed, it would affect every county commission, city government, school board, and local water authority in all 95 counties, and it would tell each of those local governments that when out of state companies want to run high-pressure crude oil petroleum or methane gas pipelines through their communities, local government will have no say about where that infrastructure is placed,” said George Nolan, an attorney for the Southern Environmental Law Center. Democrats say local control over pipelines is proper and shouldn’t be usurped by state government. “When you want to put something as serious as a pipeline with such high pressure that if something happens it will absolutely devastate the community—that is not something you should have to appeal to the state,” said Sen. Raumesh Akbari (D-Memphis).
Bill to override local control of pipelines spurs statewide backlash – On March 2, a seemingly innocuous bill in the Tennessee General Assembly proposed a study on energy infrastructure, but an amendment to remove local government’s ability to regulate fossil fuel infrastructure threw up red flags with legislators, local government officials and environmental groups. The bill was advancing quickly, and before a Senate committee meeting scheduled on March 15 , those critical of the bill met with Rep. Kevin Vaughan, R-Collierville, to discuss possible amendments. Almost immediately, Vaughan addressed the crowd that the conversation before them was not about debating fossil fuels but “the best way to have one community not be able to derail projects outside its jurisdictional boundaries,” he said. Despite those intentions, Vaughan’s bill, HB2246 and its Senate companion, SB2077, attracted controversy across the state, especially from Memphis and Shelby County officials who spent more than a year making attempts to protect communities from unwanted fossil fuel infrastructure. “Two weeks ago I was a Marxist and a socialist in my email and now I’m a genocidal shill for the oil company. I’m somewhere in the middle,” said Vaughan. Although SB2077/HB2246 would affect local governments statewide, Memphis residents and officials allege the bill directly targets Memphians’ fervent fight against the now-defunct Byhalia Pipeline, a 49-mile natural gas pipeline that was proposed to run through a historically Black Memphis neighborhood. Memphis communities protested against Texas-based Plains All American Pipeline and Valero Energy Corporation’s efforts to use eminent domain to acquire private property needed to finish building the pipeline, and the movement received national attention as a fight against environmental racism, after primarily Black and impoverished communities were labeled by pipeline officials as the “path of least resistance.” Justin J. Pearson, a founder of Memphis Community Against the Pipeline–now Memphis Community Against Pollution–read a prepared statement and said the legislation had been crafted behind closed doors and sprung on unsuspecting Tennesseans. And due to the ambiguity of the bill, Pearson added that local governments have sought guidance from him and others over what the bill intended to do. Pearson concluded that he, environmental advocates and local government officials were concerned about the consequences of unhindered business interests and that everyone had a right to be concerned.
Williams, Context Labs to Verify Natural Gas Emissions Data in Haynesville, Beyond - - Tulsa-based Williams has selected Context Labs technology to provide end-to-end emissions data for certified natural gas that it transports, with utilization now underway in the Haynesville Shale. Context’s decarbonization as a service (DaaS) technology is used to verify the emissions profiles and capture the progress of greenhouse gas (GHG) mitigation across the natural gas value chain. The DaaS technology leverages asset grade data-generated continuous satellite and sensor emissions monitoring to provide analyses and decarbonization solutions to customers.Context also is working with BP Energy Partners LLC, which is one of a group of strategic investors that also includes Equinor Ventures, KPMG LLP, Shamrock Ventures, Neglected Climate Opportunities LLC and i(x) investments.Williams has integrated its assets and third-party emissions monitoring data with the first implementation in the Haynesville. The midstream giant earlier this month more than doubled its footprint in the East Texas/Northwest Louisiana play via agreements with Quantum Energy Partners. At the time, CEO Alan Armstrong said the deal would help prove up “what an important role natural gas can play in reducing emissions, lowering costs and providing secure, reliable energy here and around the world.”The partnership with Context is the latest move in advancing Williams’ energy transition strategy. The midstreamer also has announced deals with Gas Technology Institute and joined the Collaboratory for Advancing Methane Science, which is sharing best practices.Though its primary focus remains natural gas, with more than 30,000 miles of pipeline in North America, Williams also is looking to commercialize innovative technologies, markets and business models to support less emissions. The company is developing hydrogen, along with carbon capture, utilization and storage, solar andrenewable natural gas projects.
Natural Gas Futures, Cash Prices Eke Out Gains Even as Output Climbs, Demand Ebbs -- Natural gas prices trended lower much of Monday as production increased and forecasts showed light weather-driven demand across most of the Lower 48. Still, futures crept back into positive territory in afternoon trading amid the persistent global supply pressures amplified by Russia’s war in Ukraine. The April Nymex gas futures contract settled at $4.900/MMBtu, up 3.7 cents. May rose 3.2 cents to $4.934. NGI’s Spot Gas National Avg. climbed 5.0 cents to $4.285, led higher by gains in West Texas. Bespoke Weather Services said that, despite a round of spring storms early this week and the potential for chilly low temperatures in the Midwest and Northeast by the weekend, forecasts broadly showed overall mild conditions and “rather weak” domestic demand. Gas-weighted degree days are expected to run below normal over the next two weeks, the firm said. “The pattern exhibits a warm lean, especially in the near term, though some high-latitude blocking is projected in the medium range,” Bespoke said. This blocking “is not as significant this time of year, compared with back in winter, but is enough to take the pattern closer to normal, with more variability as we head into early April.” At the same time, production climbed back to about 95 Bcf on Monday, according to Bloomberg’s estimate, after hovering around 93 Bcf most of last week amid maintenance work and the lingering effects of freeze-offs early in March. “Dry gas production is showing a rebound to two-week highs,” said EBW Analytics Group senior analyst Eli Rubin. “The combination of warming weather and favorable intra-month trends suggest further gains may be coming over the next seven to 10 days.” Demand for U.S. exports of liquefied natural gas (LNG), however, remain elevated amid Russia’s invasion of Ukraine and Europe’s related race to “wean itself off of cheap Russian pipeline gas” in protest of the war, Rubin said. LNG feed gas volumes topped 13 Bcf most of March so far, holding near record levels amid the conflict, now in its fourth week.
-U.S. natgas jumps near 6% on cooler forecast, record LNG exports (Reuters) - U.S. natural gas futures climbed almost 6% to a near seven-week high on Tuesday on forecasts for cooler weather and higher heating demand next week than previously expected. That price increase also came as global demand for gas to replace Russian fuel after its invasion of Ukraine keeps U.S. liquefied natural gas (LNG) exports near record highs and European gas prices about six times over U.S. futures. U.S. front-month gas futures rose 28.7 cents, or 5.9%, to settle at $5.187 per million British thermal units (mmBtu), their highest close since Feb. 2. The U.S. market remains mostly shielded from much higher global prices - European gas traded around $31 per mmBtu on Tuesday - because the United States has all the fuel it needs for domestic use, and the country's ability to export more LNG is constrained by limited capacity. The United States is already producing LNG near full capacity. So, no matter how high global gas prices rise, it will not be able to export much more of the supercooled fuel. Data provider Refinitiv said average gas output in the U.S. Lower 48 states was on track to rise to 93.3 bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 bcfd in December. With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 95.8 bcfd this week to 99.6 bcfd next week. The forecast for next week was higher than Refinitiv's outlook on Monday. The amount of gas flowing to U.S. LNG export plants rose to 12.78 bcfd so far in March from 12.43 bcfd in February and a record 12.44 bcfd in January. The United States has the capacity to turn about 12.7 bcfd of gas into LNG. The rest of the gas flowing to the plants is used to operate the facilities. Gas stockpiles in Western Europe (Belgium, France, Germany and the Netherlands) were about 37% below the five-year (2017-2021) average for this time of year, according to Refinitiv. That compares with inventories about 17% below normal in the United States.
U.S. natgas futures hit 7-week high on cooler forecasts -(Reuters) - U.S. natural gas futures edged up to a seven-week high on Wednesday on forecasts for cooler weather and higher heating demand over the next two weeks than previously expected. That price increase also came as global demand for gas to replace Russian fuel after the country's invasion of Ukraine keeps U.S. liquefied natural gas (LNG) exports near record highs and European gas prices about seven times over U.S. futures. U.S. front-month gas futures rose 4.5 cents, or 0.9%, to settle at $5.232 per million British thermal units (mmBtu), putting the contract on track for its highest close since Feb. 2 for a second day in a row. The United States is already producing LNG near full capacity. So, no matter how high global gas prices rise, it will not be able to export much more of the supercooled fuel. European gas jumped about 15% to around $37 per mmBtu on Wednesday after Russia demanded payment for gas in roubles. Before Russia's Feb. 24 invasion of Ukraine, the United States worked with other countries to ensure gas supplies, mostly from LNG, would keep flowing to Europe. Russia has provided around 30% to 40% of Europe's gas, which totaled about 18.3 billion cubic feet per day (bcfd) in 2021. Russia is the world's second-biggest gas producer, after the United States. Data provider Refinitiv said average gas output in the U.S. Lower 48 states was on track to rise to 93.2 bcfd in March from 92.5 bcfd in February as more oil and gas wells return to service after freezing earlier in the year. That compares with a monthly record of 96.2 bcfd in December. With cooler weather coming, Refinitiv projected average U.S. gas demand, including exports, would rise from 96.4 bcfd this week to 102.6 bcfd next week. Those forecasts were higher than Refinitiv's outlook on Tuesday. Even though it will be cooler next week, meteorologists forecast U.S. weather will remain at near normal levels through at least early April, which should keep heating demand low enough to allow utilities to inject gas into storage this week - about a week earlier than usual.
US natural gas inventories slip less than expected but price surge continues - US natural gas in storage dropped by less than expected in what might be the final draw of the heating season, yet Henry Hub futures continue to build on recent gains as the summer and winter strips sail higher above $5/MMBtu. Storage fields withdrew 51 Bcf for the week ended March 18, according to data released by the US Energy Information Administration on March 24. Working gas inventories decreased to 1.389 Tcf. US storage volumes now stand 366 Bcf less than the year-ago level of 1.784 Tcf and 293 Bcf less than the five-year average of 1.744 Tcf. The withdrawal was weaker than the 62 Bcf draw expected by an S&P Global survey of analysts. Responses to the survey were wide, as they have been much of the current shoulder season, ranging from from 50 to 96 Bcf withdrawal. It was less than the five-year average pull of 62 Bcf but more than the 29 Bcf draw reported in the corresponding week in 2021. The only EIA storage region to report a net injection during the week was the Pacific. The region is also the closest to the five-year average at a 9% deficit. Supply issues have caused extreme price volatility in the region during high demand periods of summer over the past several years. However, adequate supply for the upcoming summer might keep that in check this year. SoCal Gas demand has been flat this winter from last winter at 2.8 Bcf/d, according to data by S&P Global Commodity Insights. Receipts, however, have jumped roughly 120 MMcf/d winter over winter to 2.7 Bcf/d. The stronger receipts and flat demand throughout the whole of the winter allowed injections to average 62 MMcf/d, over 100 MMcf/d lower year on year from last winter. This expanded year-on-year gains to 17 Bcf by March 11, when inventories fell to 71 Bcf. Since March 11, the region has flipped to only net injections, suggesting March 11's 71 Bcf is the low of this season. NYMEX Henry Hub April contract surged 15 cents to $5.37/MMBtu following the EIA's storage report release on March 24. The summer strip, April through October, jumped 14 cents to $5.46/MMBtu. The 2022-23 winter strip, November through March, added 12 cents to $5.53/MMBtu. Henry Hub futures across the board have climbed steadily over the past week. A forecast by S&P Global calls for a 50 Bcf injection for the week ending March 25. This would be a dramatic departure from the average for the week, which is a 23 Bcf withdrawal.
With Bulls on Extended Parade, Natural Gas Futures Post Fifth Consecutive Gain; Cash Cruises - Natural gas futures forged higher on Friday, as they did every day of the week, fueled by the uncertainty of war in Ukraine and the related prospects of long-term demand for U.S. liquefied natural gas (LNG). The April Nymex gas futures contract settled at $5.571/MMBtu, up 17.0 cents day/day. May advanced 16.5 cents to $5.611. Futures were up nearly 15% for the week.Cooler weather patterns expected early in the next few days boosted cash prices. NGI’s Spot Gas National Avg. surged 57.5 cents to $5.275.As Russia’s war against Ukraine raged into a second month, the Europe Union (EU) hastened efforts to wean its member countries from Kremlin-backed natural gas. European countries, reliant on Russian gas, have expressed worry that Russia’s relentless bombing of Ukraine could damage pipelines in the country through which gas flows to the continent.More broadly, the EU views energy ties to Russia as security vulnerabilities, and the United States shares that and economic concerns with Europe.Against that backdrop, the Biden administration and EU leaders on Friday announced a joint goal to send an additional 15 billion cubic meters of LNG to EU countries in 2022 – about 1.5 Bcf/d — with “expected increases going forward,” according to the White House. The United States will also maintain “an enabling regulatory environment with procedures to review and expeditiously act upon applications to permit” additional LNG export capacity for energy security purposes.Friday’s futures advance coincided with “a wave of headlines” about the deal, Bespoke Weather Services noted, though the firm emphasized the pact is not a panacea for Europe. U.S. exporters have already operated near capacity throughout the war – above 13 Bcf most days – and would need a few years to ramp capabilities substantially. As such, Bespoke said, it “simply means a higher percentage of our current LNG exports may be sent to Europe, as opposed to other places,” Bespoke said. Australia and other LNG exporters may also ship more to Europe.The shift away from Russia may mean sustained lofty gas prices in Europe, Biden and EU leaders acknowledged. They noted that countries on the continent would still have to outbid buyers in Asia and elsewhere to secure shipments of the super-chilled fuel.“Eliminating Russian gas will have costs for Europe,” Biden said Friday in televised remarks. “But it’s not only the right thing to do from a moral standpoint, it’s going to put us on a much stronger strategic footing.”
U.S. natgas hits 8-wk high on cooler forecasts, record LNG exports (Reuters) - U.S. natural gas futures climbed about 3% to an eight-week high on Friday on forecasts cold weather next week will cause utilities to pull gas out of storage to meet an increase in heating demand. Analysts said those utilities likely injected gas into storage this week because the weather was mild and heating demand low. U.S. prices also gained on Friday as rising global demand for gas to replace Russian fuel after Russia's invasion of Ukraine keeps U.S. liquefied natural gas (LNG) exports near record highs and European gas prices about seven times over U.S. futures. Front-month gas futures rose 17.0 cents, or 3.1%, to settle at $5.571 per million British thermal units (mmBtu), their highest close since Jan. 27. That also puts the contract up for a fifth day in a row for the first time since January, and kept it in technically overbought territory with a relative strength index (RSI) over 70 for a third day in a row for the first time since September 2021. For the week, the front-month was up about 15%, its biggest weekly gain since January. Last week, the contract gained about 3%.
US Natural Gas Drilling Activity Unchanged as Oil Patch Notches Further Gains - The U.S. natural gas rig count went unchanged at 137 during the week ended Friday (March 25), while a week of strong growth in Texas accompanied continued activity gains in the oil patch, according to updated figures from Baker Hughes Co. (BKR). U.S. oil-directed rigs increased by seven overall for the period, helping to lift the combined U.S. rig count to 670, up 253 rigs from its year-earlier total of 417, according to the BKR numbers, which are partly based on data from Enverus. Land drilling increased by five units domestically, while the Gulf of Mexico added two rigs to end the period with 14 overall. Horizontal and vertical rigs each increased by four, partially offset by a one-rig decline in directional units.The Canadian rig count, meanwhile, dropped 36 units overall for the period, ending at 140, versus 81 in the year-ago period. Declines included 27 oil-directed rigs and nine natural gas-directed units.Broken down by major drilling region, the Cana Woodford saw a net decline of four rigs week/week, with the Utica Shale dropping one unit. The Permian Basin, meanwhile, added three rigs for the period to grow its total to 319. The Eagle Ford Shale, the Granite Wash, the Haynesville Shale and the Williston Basin each added one rig to their respective totals during the period, the BKR data show.Counting by state, Texas recorded a net gain of six rigs overall for the period, while Louisiana added two rigs week/week. Pennsylvania and North Dakota added one rig apiece, while Alaska, New Mexico and Ohio each recorded one-rig declines for the period, according to BKR.The Energy Information Administration (EIA) in its latest Weekly Petroleum Status Report said U.S. crude production was flat in the week-earlier period. Output for the week ended March 18 held at 11.6 million b/d, even with the prior week and a month earlier, EIA said.The steady domestic supply output comes despite intensifying global supply worries surrounding Russia’s invasion of Ukraine.jeremiah.shelor@naturalgasintel.com
US Natural Gas Production Growth Said Pricey; Efficiencies Needed in Pipeline Permitting - Infrastructure constraints and a slow pace of project approvals have hampered natural gas production growth, but rising output is coming – albeit at a slower pace and higher price, industry executives said earlier this month in Houston. Goldman Sachs’ Samantha Dart, head of natural gas research, said dry gas growth was the “single biggest contributor” of domestic growth in 2018-2019. However, bottlenecks have once again emerged after an earlier buildout in Appalachia, where the Marcellus and Utica shales accounted for 34% of all U.S. output in the first half of 2021.The constraints, combined with a difficult political environment for building pipelines to move supply to demand centers, mean the gas market “can’t really count on that to drive growth significantly at really low prices,” Dart said on a panel at CERAWeek by S&P Global. “You have to go to the next best guy. That’s going to be Haynesville producers.”However, investors in public exploration and production (E&P) firms continue to push for free cash flow generation, with little reward for “fast growth,” according to Dart. “So you get growth, but you don’t get it at the same pace as before. You don’t get it from the same region as before. And you don’t get it at the same prices as before, in our view.”Chesapeake Energy Corp. CFO Mohit Singh, who shared the panel with Dart, said drilling a well essentially exposes a company to a long duration project against the backdrop of fluctuating commodity prices. This is a topic of an “ongoing, intellectual debate” within the Oklahoma City-based E&P. For now, Chesapeake plans to “keep our head down,” staying within budget and delivering the volumes it has promised.The E&P has set its sights on the Eagle Ford, Haynesville and Marcellus shales this year, with 85% of its capital spending directed to the “highest return opportunities” in those plays. Mingh last month noted that Chesapeake would continue to chase any opportunity to fill any available pipeline capacityin the Marcellus. The company also would jump at the chance to grow volumes if circumstances arose. Williams’ Chad Zamarin, senior vice president (VP) of Corporate Strategic Development, said infrastructure projects need to be permitted more efficiently in order to ease constraints. While Appalachian bottlenecks have been ongoing, pipeline capacity is expected to tighten in the Permian Basin in the next few years. Some estimates put the region maxed out on gas capacity as early as next year, with no new projects announced. Williams canceled its planned Constitution Pipeline to move Appalachian gas after an arduous eight-year battle to gain approval. Proposed in 2012, the 124-mile pipeline would have carried 650 MMcf/d from Pennsylvania. Williams, citing regulatory delays, also received a two-year extension to build and place into service its proposed Northeast Supply Enhancement Project.
Help Is On Its Way - How Much More LNG Can The U.S. Send To Europe? -U.S. LNG exports are at an all-time high, driven primarily by new capacity online or commissioning, but the existing terminal fleet has also been pushing production to the max as offtakers, particularly in Europe, hunt for every spare molecule they can find. Every single terminal in the U.S. set a new monthly export record in either December or January. But is it enough? With the ongoing and tragic war in Ukraine threatening energy security and reliability in Europe, where gas storage inventories are already running low, the focus increasingly turns to LNG to replace at least some of the gas it typically imports from Russia. It sounds great in theory, and in the long term more LNG capacity will be added, but for now, we’re stuck with the infrastructure we’ve got, putting a ceiling on both how much Europe can take and how much exporters, including the U.S., can send. In today’s RBN blog, we look at the potential for incremental LNG exports from the U.S. to Europe to help offset Russian gas.In our recent blog, You Don’t Own Me, we provided a primer on European gas markets and the European Commission’s (EC) new plan to reduce the European Union’s (EU) Russian gas imports by two-thirds (or 10 Bcf/d) by the end of this year, an extremely tall order as Russia has been supplying about 45% of Europe’s natural gas. Of course, not all of the Russian gas being replaced is expected to come from LNG — that’s not remotely possible given existing infrastructure. But the plan calls for 50 billion cubic meters (Bcm) more LNG, which is equal to about 1,765 Bcf, or around 519 additional LNG cargoes. [Prior to the EC’s announcement, the International Energy Agency (IEA) laid out a similar but less-aggressive plan, which calls for about half that level of additional LNG imports.] You Don’t Own Me goes into some of the potential pitfalls of the EC plan, like connectivity within Europe to distribute the imported LNG, but putting that aside and taking the EC at its word about what European import terminals can handle, can European buyers even get their hands on an additional 500 cargoes this year? Or even an additional 200, per the IEA plan?Most of the world’s LNG supply is produced in the U.S., Australia, and Qatar [see Three’s (Not Always) a Crowd], with the U.S. surpassing the other two for the first time this winter. More importantly for increasing exports to a very specific market (in this case, Europe), the U.S. LNG sector also is the source with the greatest destination flexibility. Further, the U.S. is the closest of the three major suppliers from a days-on-the-water perspective to where the bulk of the cargoes land in Northwest Europe. Between the contract flexibility and proximity of U.S. offtake, many of the additional cargoes Europe will likely need to come from the U.S. The question is, how much more U.S.-produced LNG can be delivered to Europe this year.
LNG projects in the Gulf of Mexico boosted as Russian gas alternative - Two years ago, the American liquified natural gas (LNG) company Tellurian was in free fall: Its stock price collapsed, it laid off 40 percent of its staff, and suspended a key project in Louisiana. Now, executive chairman Charif Souki says investors "are lining up at the door to ask me: 'Can we finance your project?'" At the annual CERAWeek energy conference in Houston, Souki told AFP that LNG projects have been boosted by the renewed emphasis on energy independence after Russia's invasion of Ukraine. "Global market demand and the desire of the Europeans to divest from their reliance on Russian gas... those are all positive market signals, which will obviously help stimulate those projects and get them moving towards final investment decisions," On March 8, the United States banned all imports of LNG, petroleum and coal from Russia, and has for years encouraged its European allies to decrease their dependence on their eastern neighbor. Eight LNG terminals operate in the United States, pumping out 14 billion cubic feet (400 million cubic meters) per day, and fourteen other terminals have already been approved by the Federal Energy Regulatory Commission (FERC). That's the case for Driftwood LNG, Tellurian's future liquefaction plant and export terminal, south of Lake Charles, Louisiana. Stalled for a year and a half, the company will finally break ground on the massive project next month. Once completed, the site will be able to export 3.6 billion cubic feet per day. Charif said that "in principle, we should be able to provide LNG in 2026" to the oil companies Shell, Vitol and Gunvor. The Gulf Coast will see plant construction accelerate in the coming months: Five projects have already been approved by FERC in Louisiana, with seven more in Texas and Mississippi. Since its first exports in 2016, the Gulf Coast has become a key hub for global LNG shipments. A network of pipelines connects the states' ports to gas fields across the country, from the Permian and Haynesville basins in the south to the Marcellus, the country's largest onshore reserve, in the northeast. Once the gas arrives on the coast, it is liquified and transferred onto LNG tankers, most of which head off to Europe.
North Platte Deepwater Project, Gulf of Mexico, US -- The North Platte oil field is planned to be developed in 1,300m-deep waters of the Gulf of Mexico, about 275km offshore Louisiana, US. Norwegian oil and gas company Equinor holds 40% non-operating interest in North Platte. TotalEnergies (Total), a French oil and gas company and the operator of the project, held the remaining 60% interest in the deepwater oil field. Cobalt International Energy (Cobalt) had 60% operating interest in the North Platte discovery. Total, which had held the remaining 40% interest, acquired an additional 20% interest from Cobalt for $339m, as part of the latter’s bankruptcy auction sale, in March 2018. Equinor joined as a partner by acquiring Cobalt’s remaining 40% interest in North Platte. The front-end engineering and design (FEED) for the project was launched in December 2019. The North Platte deepwater oil development project spans four blocks in the Garden Banks area of the US Gulf of Mexico. Total and Cobalt discovered the oil field by drilling an exploratory well to a total depth of 10,520m (34,500ft) in December 2012. The discovery well intercepted several hundred feet of net oil pay and a number of high-quality intervals in the Lower Tertiary sandstones of the Wilcox Formation. The field was subsequently appraised by three appraisal wells and three sidetracks. North Platte is considered a high-quality asset, both in terms of porosity and permeability, with the thickness of the reservoir exceeding 1,200m in several locations. The deepwater oil field is planned to be developed by drilling eight wells from two subsea drilling facilities and tying back the subsea wells to a new, lightweight semi-submersible floating production unit (FPU) through two production loops. The FPU will be designed to accommodate additional tie-ins in future. Valaris DS-11 drillship will be utilised to perform development drilling for the project. The drillship will be upgraded with the installation of a 20,000 pounds-per-square-inch (psi) well control equipment before starting drilling at the high-pressure oil field. The North Platte oil field is expected to produce 75,000 barrels of oil per day (bpd) at plateau level. The output will also include associated gas.
Oil and gas groups call out Biden: 'We would love to produce more, bring gas prices down' --Oil and gas industry representatives blasted President Biden Wednesday for blaming companies for the gas price surge. "Which is it? You can’t blame Putin and us at the same time. The bottom line is we are not price makers, we are price takers. We suffer from low prices and then we have higher prices. That is based on the price of oil globally," Western Energy Alliance President Kathleen Sgamma told "Fox & Friends." Sgamma said that demand for oil has risen and there are "various factors" that go into the price of oil, including the fallout from Russia's invasion of Ukraine."But we are not setting that price. We would love to produce more in the United States and help to bring those prices down."At first, Biden blamed Russia for spike in gas prices. Recently, the commander-in-chief cast blame on U.S. energy companies. President Biden posted a tweet on March 16th claiming oil and gas companies were padding their profits at the expense of hardworking Americans."Oil prices are decreasing, gas prices should too," the president tweeted. "Last time oil was $96 a barrel, gas was $3.62 a gallon. Now it's $4.31. Oil and gas companies shouldn't pad their profits at the expense of hardworking Americans."Independent Petroleum Association of America Executive Vice President Dan Naatz said gas and oil companies are "frustrated" with the Biden administration’s "relentless assault" on American oil and natural gas producers over the past year."Increased regulations, talk of taxes, our members get frustrated when the administration, Jen Psaki just seem to say, now that we are facing an energy crisis, go out and produce like the snap of a finger. It is just not possible and as we face this relentless attack, we will have to do a lot of work. And you want to start a dialogue with the administration to address the challenges," he told host Ainsley Earhardt. The trade groups sent a letter to the White House Friday criticizing the administration's "deep hostility" toward oil and gas companies and their workers.
Producing and exporting more US gas helps Putin - Vladimir Putin’s horrific war against the Ukrainian people has all of us talking about how to prevent him—and other fossil fuel autocrats—from holding the global economy hostage as he funds his war machine. In response, the fossil fuel industry is attempting to convince lawmakers and the public that the solution is more fossil fuels.This is a lie. Increasing our economy’s dependence on fossil fuel increases our exposure to fossil fuel volatility. The industry doesn’t want to export U.S. supply to Europe for humanitarian reasons—it wants more access to a higher priced market. Fossil fuel executives and the conservative politicians they bankroll want to exploit a tragic situation for profit. Americans deserve the truth. The truth is, there is only one solution: doubling down on our transition to clean, cheap American-made energy.Putin’s power comes from the world’s dependence on fossil fuels. Russia is a petrostate, and fossil fuels are funding Putin’s war crimes. Putin created market turmoil by reducing gas flows to the EU by 25 percent from levels one year ago and, as he expected, European methane gas prices surged more than 400 percent. U.S. oil and gas companies claim the solution is more production. But we can’t build those assets quick enough to displace Russian supply. Design and construction times are measured in years, not hours. According to industry analysts, it typically takes four to five years to build new export terminals. And let’s be honest: Russia would love nothing more than for the U.S. to become more economically dependent on a commodity that empowers Russian oligarchs. Our citizens, and indeed the world, deserve a foreign policy that puts the interests of the United States over those of Vladimir Putin. Moreover, the U.S is already the world's leading exporter of liquefied natural gas. Our gas exports have grown rapidly since the first LNG cargo was shipped from the lower 48 states in 2016. And the U.S. will remain the world’s largest exporter through 2022, according to the U.S. Energy Information Agency.President Biden’s recent announcement means that every operating LNG export terminal can export its full capacity. As Energy Sec. Granholm explained this week, "the U.S. is exporting every molecule of liquified natural gas that we can to alleviate supply issues in Europe." To suggest we can flip a switch and create more export capacity is deceptive. The only LNG export terminal currently under full construction will not be online until 2024.Even fossil fuel investors are not eager to build new gas export terminals. Of the 21 proposed U.S. export terminals, 18 appear to lack direct project finance, and “[n]o proposed US LNG export terminals reached final investment decisions (FIDs) or advanced to the construction phase in 2021.” LNG investments have been characterized as “fundamentally unsustainable . . . in light of cleaner, more economically viable renewable energy alternatives.” Conversely, investments in renewable energy generate roughly three times more direct and indirect jobs than comparable investment in fossil fuels. The U.S. can create 25 million new jobs by 2035 by investing in projects that cut carbon pollution using existing technologies. Building a 90% clean grid can support more than 500,000 jobs each year, many of which are family-sustaining union jobs. And renewable energy plus battery storage is increasingly cheaper than gas, and, unlike fossil fuels, consumers can count on predictably low costs over time. Producing and exporting gas from the U.S. also is really bad for the climate, because gas is just as dirty as coal, if not dirtier. For this reason, the International Energy Agency has cautioned, meeting our climate goals to limit global warming to 1.5°C requires that “no new [gas] fields or export projects are developed[.]” Finally, exporting U.S. gas to international buyers drives up domestic energy prices for all of us, with some Americans seeing increases of more than 90 percent. So long as our country depends on this volatile fossil fuel, Americans will continue to be subject to wild price fluctuations.
Louisiana oil companies face challenges trying to ramp up production: 'We're doing all we can' - – Oil prices continue to jump as European Union nations consider joining the United States in the ban on Russian energy. There's a new pressure to increase U.S. oil production, but experts in the industry say it's not that simple. "It's not just turning a switch like they think," said Mike Moncla, the president of the Louisiana Oil & Gas Association. Companies need rigs to get wells back online and produce more oil, but many had "stacked" or stored their rigs as they weren't in use. "Oil companies are doing all they can to get rigs back out, but when metal stacks, in this humid, south Louisiana environment, you get rust," Moncla said. Many companies stacked rigs when they were no longer needed. This can lead to rust and engine problems when it's time to get the rig back up and running. Moncla said fixing a rig can take between $75,000 to $125,000. "It's hard to afford to fix all these rigs when you don't know how long this is going to last," Moncla said. "We were all struggling to stay alive a year ago." (Fox News) The U.S. oil industry has faced a downturn over the past several years after Saudi Arabia flooded the market and the COVID-19 pandemic decreased demand for gas. Many companies declared bankruptcies or downsized. Therefore, business owners not only need money to repair equipment; they also need workers. "Years ago, we had 633 employees, just seven years ago," Moncla said. "We got all the way down to 150 and today we're back up to 300."
Oil Workers Don't See Higher Pay as Prices Surge, Consider Switching Fields - Most oil workers around the world have yet to cash bigger paychecks despite the run up in crude prices, with many ready to leave the oil patch. Less than a third of surveyed oilfield employees report receiving a pay bump in the past year, while another 21% said pay was actually cut. That’s according to the latest Global Energy Talent Index released by recruiting firms Airswift and Energy Jobline. The good news: A little more than half of those workers say they expect to get a boost in pay sometime in the next 12 months.
US Oil Inventory Unexpectedly Plummeted Last Week As Pressures Mounted - Oil supply strains are already hitting the US harder than expected. The country's commercial crude oil inventory dropped by 2.5 million barrels to 413.4 million barrels last week, the Energy Information Administration said Wednesday. The total supply now sits roughly 13% below the five-year average for this time of year, meaning oil is in unusually short supply. The print also falls extremely short of economists' expectations. Experts surveyed by Bloomberg projected a 114,000-barrel increase in supply through the week. The 2.5-million-barrel decline doesn't just blow their forecasts out of the water, it also marks the largest one-week drop in oil supply in a month. Wednesday's inventories data sparked the latest upswing in oil prices. West Texas Intermediate crude — the US's benchmark for oil prices — gained as much as 6.2% on Wednesday as traders digested the huge miss in US inventories. Brent crude — the international oil benchmark — also rose on the news, trading as much as 6.8% higher to $122.34 per barrel. Gas supply is also under pressure. Motor gasoline inventories slid by 2.9 million barrels last week and now sit at the bottom end of the five-year average for this time of year. The declines extend a broad, months-long slump in US oil and gas supply and leave overall oil and petroleum product inventory at extremely tight levels. The report adds even more gloom to an already bleak outlook for US gas prices. Russia's invasion of Ukraine drove crude prices sharply higher as investors feared the conflict would curb production. The Biden administration's ban on Russian energy commodity imports including crude oil and natural gas lifted prices higher still in early March. Crude has since retraced some of its surge, but prices remain at historically high levels. The plateauing of crude prices has kept gas pricier at the pump. The US average gas price edged slightly lower to $4.237 per gallon on Wednesday, according to AAA. While that's down from yesterday's level and the week-ago reading, it still sits near record highs and $1.36 higher than the year-ago average. Several factors stand to boost crude prices even higher in the coming months. While the US and UK already announced plans to cut themselves off from Russian crude, the EU is still mulling whether to take such action. Doing so would likely drive prices to record highs and further pressure supply in the US.
US oil, gas rig count drops one to 780 on week; Eagle Ford growth strongest: Enverus - S&P Global - The US oil and gas rig count shed one rig in the week ended March 23, leaving 780, energy analytics and software company Enverus said March 24, with the Eagle Ford Shale now at its highest level since March 2020. The week ended March 23 was also the first time the total domestic rig count recorded a loss since the end of 2021. So far in 2022, the rig count is up 73 rigs. Still, oil rigs gained three rigs to 609, while rigs chasing gas dropped by four to 171. Most basins moved little in either direction, while three basins did not change at all. The Eagle Ford, located in South Texas moved up the most, as the former gained two rigs to 68. The SCOOP-STACK in Oklahoma and the Permian Basin of West Texas/New Mexico dropped the most at two each. That left the Permian with 328 and the SCOOP-STACK with 42. Otherwise, the Williston Basin mostly in North Dakota/Montana, and the Marcellus Shale, mostly in Pennsylvania and West Virginia, moved by one each but in different directions. The Williston was up one rig to 35, while the Marcellus lost a rig for a total of 40. Three basins -- the Haynesville Shale of East Texas/Northwest Louisiana, the DJ Basin mostly in Colorado and the Utica Shale largely in Ohio -- stood still rig-wise. That left the Haynesville at 71, the DJ at 18 and the Utica at 14. The week ended March 23 is the fourth consecutive week Haynesville has been at 71 rigs. It reached 73 the week ended February 23 and was again at 71 the week before that. Previously, Haynesville drilling activity had not been in the 70s for at least three years. So far in March, the rig count has gained 20 rigs and another 19 rigs in February, but added 34 in January. Many analysts had expected the gains to slow but the level of growth so far in 2022 has been brisk. But, as Evercore ISI analyst James West notes, upstream operators' strict capital discipline, coupled with labor, equipment and materials shortages, make a North American "accelerated oil supply response [to any potential global shortages] ... unlikely." "We believe that the bottleneck for further US production growth will be the availability of frac [hydraulic fracking] fleets," West said. "US frac utilization is quickly approaching 90%. We believe there are approximately 240-250 frac spreads deployed in the market out of a potential 265 that the industry can potentially deploy." For the week ended March 18, the Primary Vision US frac count stood at 266. By contrast, the pre-coronavirus pandemic frac count was 324. "US completion activity is having its seasonal dip in March, which will start to shift higher as we approach April, Mark Rossano, energy analyst for Primary Vision, said. "The spring is a period of accelerating activity that will carry us through the summer until we start to see a slowdown in September/October," Rossano said in his most recent Primary Vision blog post March 18. "We have seen activity remain strong in the Anadarko [Basin of Oklahoma] while the Haynesville has slowed down a bit, which is 100% normal for this time of year."
Shale drillers foresee ‘world of hurt’ in Biden’s green economy— U.S. shale drillers are incurring record labor and equipment costs so they can cash in on the highest oil prices in 14 years. They say one of the reasons they’re not doing more is because of President Joe Biden’s perceived hostility to the traditional energy industry. Even as the Biden administration urges oil companies to boost production to offset the absence of Russian cargoes, many executives told Federal Reserve Bank of Dallas researchers they’re worried about investing in new shale wells because of the president’s long-term goal of phasing out fossil fuels. “The current administration will only hurt energy companies, driving up prices and severely affecting the middle guy that drives the economy,” one unidentified respondent said in the Dallas Fed’s quarterly energy survey released on Wednesday. “We are in for a world of hurt for the next three years.” Russia’s invasion of Ukraine — and the oil-market disruption that ensued — heightened tensions that already were simmering between the White House and oil CEOs who accuse the federal government of slow-walking drilling permits and overly onerous regulation. Their line of work is risky enough without having to worry that a new law or presidential decree may make some facet of their business obsolete or illegal, they say. But that hasn’t stopped drillers in the Dallas Fed’s territory that covers Texas and parts of New Mexico and Louisiana from pushing oilfield activity up 31% during the first three months of this year while increasing hiring, hours worked and wages, the survey found. In recent weeks, the Biden administration has accused the oil industry of leaving thousands of federal drilling permits untapped while questioning if some in the industry are gouging consumers with gasoline prices around $4 a gallon. “The talk about price gouging is tiresome,” said another respondent. “Discussion of federal leases and those leases being unused without an honest discussion about all the constraints and regulatory issues to drill is also unhelpful.” RELATED NEWS ///
Shale companies drilling more, but oil output growing little - American frackers are raising the number of drilling rigs in oil fields by more than 20%, but don’t expect a similarly sized increase in production.Though the number of active U.S. oil-directed rigs has grown by roughly one-fifth in the past six months, much of the new activity is to make up for a depleted inventory of wells drilled before the pandemic, executives said. Frackers brought the best of those online last year instead of drilling new ones and will have to drill more than usual this year to offset those lost wells.Following calls by the Biden administration and others to raise production and help quell rising oil prices following Russia’s invasion of Ukraine, shale executives have pointed to a number of bottlenecks that limit their ability to increase production quickly this year, including supply-chain issues, wary investors and limits to their remaining drilling inventory.Another significant constraint is the loss of thousands of ready-to-go wells, known as drilled but uncompleted wells, or DUCs, which companies had amassed last decade, then used up to survive the pandemic. Those wells could have helped speed the industry’s response to high oil pricesby several months, executives and analysts said.Diamondback Energy Inc., one of the largest oil producers in the Permian Basin of West Texas and New Mexico, has added seven drilling rigs to the five it had working during the pandemic—not to increase production but because it needed to drill more to maintain output. It had brought scores of DUCs into production since mid-2020.“The industry has now worked off all of the voluntary DUCs," said Diamondback President Kaes Van’t Hof, referring to wells companies intentionally left dormant.Mr. Van’t Hof said about 40% of about a $300 million increase in the company’s planned spending for the year is to compensate for its depleted inventory of DUCs, while another half of that increase will cover oil field cost inflation. Even with the additional spending, Diamondback expects to produce about the same amount of oil and gas.Smaller, private oil companies that have been more aggressive in increasing oil field activity and production over the past year might have to slow down as costs rise and finding labor remains a challenge, executives said.“Even if oil jumps to $200 a barrel today, there’s nothing more that can easily be done," said Manish Raj, chief financial officer at private oil producer Velandera Energy Partners LLC in Louisiana. Mr. Raj said many drilling contractors his company recently contacted have said their rigs are fully booked through the end of 2022. U.S. oil prices surged to the highest levels since 2008 following Russia’s invasion of Ukraine, but have eased lower since then, to $104.70 per barrel as of Friday. Executives and analysts said they expect U.S. oil production to grow between about 6% and 9% this year.
Gas prices are high. Oil CEOs reveal why they're not drilling more - The US oil industry doesn't appear to be in any rush to come to the rescue of Americans struggling with high gas prices. Oil company CEOs say Wall Street is to blame. Fifty-nine percent of oil executives said investor pressure to maintain capital discipline is the primary reason publicly traded oil producers are restraining growth, according to a Federal Reserve Bank of Dallas survey released Wednesday. For years, the boom-to-bust oil industry spent lavishly to fund all-out production growth. US oil output skyrocketed, keeping prices low. Yet sustaining profits proved elusive. Hundreds of oil companies went bankrupt during multiple oil price crashes, leading investors to demand more restraint from energy CEOs. Today, oil companies are under enormous pressure from Wall Street to return cash to shareholders through dividends and buybacks, instead of investing in badly needed supply. "Discipline continues to dominate the industry," an executive from an oilfield services firm told the Dallas Fed in the survey. "Shareholders and lenders continue to demand a return on capital, and until it becomes unavoidably obvious that high energy prices will sustain, there will be no exploration spending." US output is down even as prices skyrocket Although US oil supply is expected to rise in the coming months, it remains well below pre-Covid output. That's despite the fact that oil prices have spiked to levels unseen since 2008. The United States produced 11.6 million barrels per day in the week ending March 18, according to the US Energy Information Administration. That's down 10% from late 2019. Prices, on the other hand, have surged. US crude oil closed at $114.93 a barrel Wednesday, up 88% from the end of 2019. Current prices are well above the $56 per barrel average that oil companies told the Dallas Fed they need to profitably drill. Larger companies said they need per barrel prices of just $49 to turn a profit. Yet oil executives and investors don't want to add so much supply that it causes another glut that crashes prices. And shareholders want companies to return excess profits in the form of dividends and buybacks, not reinvest them in increasing production. One executive surveyed pointed to the staggering losses suffered by shareholders in recent years. The energy sector, comprised largely of oil-and-gas firms, was easily the worst performer last decade. "Investors dumped huge funds into shale drilling only to discover that when oil prices dropped, very little value existed at the end of the day," the executive said.
Top shale oil boss warns US can't replace any Russia shortfall - The head of the US’s biggest shale oil operator said the country would be unable to replace crude supplies from Russia this year, even as he backed calls for a global embargo on its energy exports.Scott Sheffield, chief executive of Pioneer Natural Resources, joined a broadening group of politicians calling for sanctions against Russia to be extended to its oil industry in response to Moscow’s invasion of Ukraine.But he acknowledged such a move could send crude prices soaring, with US producers unable to plug the supply gap quickly. West Texas Intermediate crude was $112 a barrel on Friday, 90 per cent higher than a year ago.“The only way to stop Putin is to ban oil and gas exports,” Sheffield told the Financial Times in an interview on Friday. "[But] if the western world announced that we’re going to ban Russian oil and gas, oil is going to go to $200 a barrel, probably — $150 to $200 easy.”Both Democratic and Republican politicians have called in recent days for a US embargo on Russian oil, including Nancy Pelosi, the Speaker of the Democrat-controlled House. The White House has resisted, fearing the impact of such a move on US energy prices.Joe Manchin, the Democratic senator from West Virginia, has also called for sanctions, and said on Thursday that American companies “can basically produce whatever needs to be produced”.But Sheffield said America’s shale oil patch — hampered by supply chain constraints and demands from Wall Street that operators use their oil price windfall to pay dividends rather than drill more wells — would take many months to sharply boost output.US oil production is currently 11.6mn barrels a day, well below its pre-pandemic peak near 13mn b/d. Pioneer, based in Texas, has previously disclosed plans to increase oil production by no more than 5 per cent this year.Shale regions such as western Texas would increase output by about 700,000 b/d this year, Sheffield said, and the growth rate could double to 1.4mn b/d in 2023 and 2024. But replacing lost Russian supplies would require a “global co-ordinated effort,” he said.“We can’t change this year,” Sheffield said, referring to shale operators’ output plans.“I’m talking about a two- to three-year plan,” he said. “Because US shale, even if somebody adds a [drilling] rig . . . it takes six to eight months to get first production. There’s labour shortages, there’s frack fleet shortages, there’s rig shortages, there’s sand shortages.”
In Texas, calls to boost U.S. oil production run into hard realities | The Texas Tribune -Labor shortages, supply chain issues, hesitant financial backers and a frosty relationship with the Biden administration have limited how much Texas oil and gas companies are ramping up production.— After Russia invaded Ukraine last month and the U.S. and major energy companies boycotted Russian oil and gas, some politicians quickly called for cranking up American energy production to fill the void. A Republican member of Congress attended President Joe Biden’s State of the Union address earlier this month wearing a shirt emblazoned with “Drill baby drill.” U.S. Rep. Filemon Vela, a Democrat from Brownsville, tweeted, “Save Ukraine! Unleash American Oil and Gas!” And U.S. Rep. August Pfluger, R-San Angelo, who represents the heart of Texas’ oil patch, has printed red, white and blue baseball caps with an oil pump jack next to the words “Midland over Moscow.” “The energy producers of [West Texas] and America are READY to produce the energy our nation and allies need!” Pfluger wrote on Twitter. But in Texas’ Permian Basin — the nation’s most productive oil region and the place that would have to lead any jump in U.S. production — people in the industry, energy analysts and local leaders say there’s no quick or easy way to make that happen. Cranking up production requires more workers, materials and money, and people in the industry say they’re facing the same labor shortages and supply chain issues that have plagued countless businesses throughout the COVID-19 pandemic. On top of that, they say Wall Street investors have become more hesitant about pouring money into fossil fuels, and the Biden administration’s policies are hampering the oil and gas industry. “It’s hard to get pipe, sand, crews for drilling rigs, truck drivers,” said Mike Oestmann, CEO of Tall City Exploration, a company that drills oil wells in West Texas and has two active rigs that drill 32 wells per year combined. He said the scarcity of supplies, equipment and people “is unlike anything I’ve ever seen.” He said frac sand — a key ingredient in the hydraulic fracturing process — has been particularly hard to find due in part to labor shortages, even though much of the supply comes from Texas. The price of steel has increased so much that supply shortages make it hard to get pipe for drilling wells, he added. Oestmann said his company has no plans to add more drilling rigs, but even if it did, he said it probably wouldn’t be able to find the supplies to do so. “And I talked to a guy yesterday — a bigger company than us — trying to ramp up his operation to six rigs, and he goes, ‘I don’t know if I can get all the things I need to do that,’” Oestmann said. John Volke, CEO of Crew Support Services — a company that houses oil field workers in temporary quarters known as “man camps” — says his company has filled every one of its 1,500 beds in the Permian. “Every one of our clients are trying to hire 20 to 40 people — field hands, labor for rigging pipe,” Volke said. “I don’t know where these people went to work, Amazon?”
Sand for fracking is now 3 times as expensive as it was last year, and it's one of several reasons US oil production isn't increasing - - With Russian oil on the international blacklist due to the invasion of Ukraine, the world is seeking a replacement for as many as 4.5 million barrels per day. Indeed, analysts at Rystad energy consultancy estimate that global trade of crude is down by an average of 1.5 million barrels per day since the beginning of Russia's assault on its Eastern European neighbor. Nearly a month on, crude oil is trading at over $110 per barrel, a price which has historically motivated oil companies to ramp up production, but the output of US drillers hasn't appeared to move significantly. One of the key reasons actually predates the war in Ukraine: the special sand required for hydraulic fracturing (frac sand) in shale oil production has gotten a lot more expensive. Frac sand is made of silica crystals processed from pure sandstone, with a small grain size and round shape that allows natural fluids like oil and water to pass between them. At a drilling site, sand is mixed with water and special chemicals, then injected into the ground at high pressure to break up shale to release and pump out the oil inside. That material now costs between $40 and $45 per ton, Rystad Energy analyst Ryan Hassler told Axios — nearly 185% higher than last year. Two years ago, sand prices were in the teens. While some of the frac sand used by drillers in Texas and New Mexico is sourced locally, a lot is actually shipped in from Wisconsin via rail. In either case, shortages of labor and transportation capacity have been complicating drillers' efforts since at least early February, according to Reuters. "We can't get enough sand," Tall City Exploration CEO Michael Oestmann told the wire service last month. "We're running less than the number of (fracking) stages we could pump in a day because we've run out of sand every day." On top of those logistical challenges, investors are urging caution and "capital discipline" after large numbers of speculative companies went out of business in the previous boom-and-bust cycle. Economists at the Dallas Federal Reserve project that whatever additional capacity US producers can develop will take a minimum of six months, and that's if everything works perfectly. But even if US shale oil producers do manage to step up production, it may not be sufficient to replace what is missing, since shale oil is a much lighter crude compared with Russia's heavier oil. Ultimately it's not clear how US producers — much less the rest of the world — is going to bridge the gap left by Russia's continued exclusion from the oil market.
Occidental to spend 5% of 2022 capital on Permian carbon removal plant - U.S. oil and gas producer Occidental Petroleum Corp. will spend roughly 5% of its 2022 capital budget to start construction of an industrial-scale direct air carbon capture plant in the Permian Basin of Texas and New Mexico. The company will combine decades of experience in using carbon dioxide to boost oil production with new technology and chemistry that will pluck carbon directly from the atmosphere and store it underground. Occidental's 2022 capital budget is $4.1 billion at the midpoint, executives told analysts on a March 23 conference call. The company plans to spend between $100 million and $300 million this year on the plant, which it estimated will eventually cost roughly $800 million. President and CEO Vicki Hollub told analysts that tax credits in the $1.2 trillion infrastructure bill that President Joe Biden signed Nov. 15, 2021, plus the evolution of voluntary and involuntary carbon offsets have created an opportunity for Occidental. The company expects the voluntary carbon reduction market to reach $50 billion by 2030. Occidental already has customers, including aircraft-maker Airbus SE and e-commerce services provider Shopify Inc., lined up to buy carbon credits from the new plant when it begins operation. "When is it going to happen and how is it going to happen? I think there's bipartisan support for that," Hollub said. "And for us to achieve the goals that President Biden has set out for our climate mitigation, it's going to require some acceleration." The Permian Basin direct air capture plant will be hooked into Occidental's existing network of carbon dioxide pipes and storage caverns. This could establish a carbon removal hub that can be replicated across the world, executives said. The plant will initially be able to remove 500,000 tonnes of carbon per year from the atmosphere, with a planned expansion to 1 million tonnes per year. While it is building the Permian plant, Occidental will be leasing land around the country for more carbon sequestration hubs, CFO Robert Peterson said. "Sequestration hubs, which will be located in the U.S., support our direct air capture and point source capture development by serving as an accessible location for the safe and economical storage of CO2 in saline formations." Occidental is looking outside the Permian Basin for a location for its second carbon hub. It would like to build more than 70 direct air capture plants around the world, executives said.
Methane survey from small plane finds more pollution, waste (AP) — A pollution survey using sensors on small airplanes to detect methane emissions across a major U.S. oil and natural gas production zone points to greater releases of the potent climate-warming gas than previous estimated by other methods, according to results published Wednesday.Underwritten by philanthropists and the fossil fuel industry, the study examined emissions from October 2018 through January 2020 across New Mexico’s portion of the Permian Basin, one of the world’s largest sources of oil and natural gas that extends into West Texas. The study estimated that methane emissions are equivalent to roughly 9% of the overall gas production in the surveyed area. That’s more than double the rate in several previous studies of the Permian Basin and national estimates by the U.S. government of natural gas lost to leaks and releases.“The bad news is that emissions in this time and this region were as high as they are,” said Evan Sherwin, co-author of the study and a research fellow at Stanford University’s department of energy resource engineering. “The good news is it was only about 1,000 sites out of 26,000 active wells. ... It’s just a few percent that were emitting during this extensive study.” The study arrives during a pivotal period for efforts by government regulators and industry to measure and rein in greenhouse gas emissions from oilfield infrastructure. For more than a decade, government auditors have warned that bad data was blinding regulators to the amount of greenhouse gases being pushed into the atmosphere by the oil and gas industry’s flaring and venting. The U.S. Environmental Protection Agency has proposed new regulations to eliminate venting at both new and existing oil wells and require companies to capture and sell gas whenever possible.
Exxon is mining bitcoin in North Dakota as part of its plan to slash emissions - ExxonMobil, the top oil and gas producer in the U.S., is piloting a project to mine bitcoin in North Dakota, according to people with knowledge of the matter.For over a year, Exxon has been working with Crusoe Energy Systems, a company based in Denver, said the people who asked not to be named because details of the project are confidential. Crusoe's technology helps oil companies turn wasted energy, or flare gas, into a useful resource.Similar to ConocoPhillips' mining scheme in North Dakota's Bakken region, Exxon is diverting natural gas that would otherwise be burned off into generators, which convert the gas into electricity used to power shipping containers full of thousands of bitcoin miners. Exxon launched the pilot in late January 2021 and expanded its buildout in July.While Exxon hasn't talked publicly about its work in the space, Eric Obrock, a 10-year veteran at the company, said on his LinkedIn profile that from February 2019 to January 2022, he "proposed and led the first successful commercial and technical demonstration of using Bitcoin Proof-of-Work mining as a viable alternative to natural gas flaring in the oil patch."Obrock's title on his profile is NGL industry outlook advisor, referring to the natural gas liquids market. Obrock told CNBC through a LinkedIn message that he's been advised that he can't speak to the media on this topic. Exxon didn't respond to a request for comment.Exxon's bitcoin project isn't really about making money from the cryptocurrency. Rather, the company has pledged to reduce emissions as part of an industrywide effort to meet higher environmental demands. In early March, Exxon joined other oil companies in committing to the World Bank's "Zero Routine Flaring by 2030" initiative introduced in 2015.The type of crypto mining arrangement it's pursuing with Crusoe reduces CO2-equivalent emissions by about 63% compared with continued flaring.Exxon's bitcoin mining work in North Dakota was first reported byBloomberg, which said the company is also considering similar pilots in Alaska, the Qua Iboe Terminal in Nigeria, Argentina's Vaca Muerta shale field, Guyana and Germany.
Petroleum expert discusses the 'Big Oil Windfall Profits Tax' — The oil and gas industry is something many West Texans know and love. Recently, the industry has been getting a lot of national attention since gas prices skyrocketed. Some leaders in Washington D.C. are trying to give Americans relief at the pump by taxing oil and gas companies. Sen. Sheldon Whitehouse (D., R.I.) and Rep. Ro Khanna (D., Calif.) are the two lawmakers that have introduced the "Big Oil Windfall Profits Tax." The act would put a 50% tax, on the price difference between the current cost of a barrel of oil and the average cost for a barrel between the years of 2015 and 2019. Kirk Edwards, former Chairman for the Permian Basin Petroleum Association, said that this tax would not be appropriate because it seems like a one-size-fits-all solution and not focused state by state. "They think it's easy to say 'let's just put this on the gasoline tax' and increase it, like in California, that is what they have done," said Edwards. "So many of their initiatives in that state are paid by putting it on the gasoline. When you compare, gas is up to $7 a gallon versus $4 a gallon in Texas." Edwards said gas prices seem to be hurting everyone's wallets lately, but the reason why goes beyond just the oil and gas industry. "People are seeing high gasoline prices and blaming it on oil and gas companies making huge profits off that," said Edwards. "The oil price is up but what people have to realize is that oil companies sell the oil to refiners, and the refiners are what make it into gasoline. Everybody gets the same prices out of the refinery, but what happens from there is where people take it to their service stations and can mark it up as high as they want." Edwards told NewsWest 9 that gasoline is not the only thing that is expensive right now. "We are having inflation in everything," said Edwards. "We are having inflation in everything from refrigerators, to wood, to homes, and in every aspect we see. You can't just blame the oil and gas industry for prices going up when we see it across the board." It is important to note that as of right now, the bill has only been introduced and it is making its way to the Ways and Means House Committee.
The Oil and Gas Industry is Using the War in Ukraine to Profit and Push Its Interests – DeSmog -- When Russia invaded Crimea, the EU and United States issued a joint statement stressing the importance of promoting U.S. liquefied natural gas (LNG) exports for Europe. It was 2014 and “American gas” would save Europe from being dependent on Russian gas imports. Eight years later, Russia again invaded Ukraine on February 24. Europe still imports more than 40 percent of its gas from Russia, and the American fossil fuel industry is still pushing the U.S. government to implement policies that “ensure long-term American energy leadership and security,” as the American Petroleum Institute wrote in a February 28 letter to the U.S. Department of Energy.“It’s time to change the course and return America to its dominant role in global energy,” read another letter that Republican members of the Senate Committee on Energy and Natural Resources sent to President Joe Biden several days later. These are just two examples of the wider trend of the fossil fuel industry and its allies “using the crisis as a proxy to expand U.S. energy exports,” said Julieta Biegner, U.S. campaign and communications officer for Global Witness. “We’ve seen a PR blip of executives and representatives [from the fossil fuel industry] claiming that the U.S. can come to Europe’s rescue.”Ukrainian environmental lawyer and climate change strategist Svitlana Romanko calls this “peace washing.” Many fossil fuel companies are doing it today, she explained, and “the profits that they are making are really huge.”In Europe, oil and gas companies are profiting off higher energy prices, and in the United States, Big Oil CEOs are “billions of dollars richer” than they were at the start of the Biden administration. Since the war “became inevitable,” they have sold shares in their companies worth millions of dollars, a recent analysis found. And now they are using windfall profits to get richer. As a result, members of Congress have proposed a windfall profits tax on Big Oil, an idea supported by a new campaign, Stop the Oil Profiteering. The proceeds of a windfall tax would be used to provide relief from higher gas prices. Not only are Western fossil fuel companies cashing in on this global crisis — which is not new — they also “played a critical role in getting Putin to this point,” Jamie Henn, director of Fossil Free Media, said. “There’s no way that Putin would be in the position he is to launch this terrible war and invasion, if it wasn’t for the profits that come from fossil fuels,” Henn added. “And that’s the terrible irony of this moment — that oil and gas companies helped create this crisis.” BP, Exxon, Shell, Equinor, Eni — many of the major fossil fuel companies — have all had long-standing stakes in Russian gas. It took pressure from the whole world seeing Putin’s “horrific international law and human rights abuse,” Romanko said, for most of them to publicly announce they would pull out of their stakes in Rosneft, Gazprom, or other joint ventures. According to Climate Investigations Center founder and director Kert Davies, continued involvement was a “reputational risk” too big even for these companies.
DNR releases details of two more Line 3 aquifer breaches - The Minnesota Department of Natural Resources has released details of more groundwater leaks caused by the construction of the Line 3 oil pipeline last year.The DNR has completed its investigation of three sites where crews installing the pipeline breached underground aquifers, causing uncontrolled — and unauthorized — flows of groundwater.State regulators previously identified one of the three locations, near Enbridge’s Clearbrook terminal. In January 2021, crews installing the replacement pipeline dug deeper than planned, piercing the top layer of an aquifer under pressure.Enbridge reported that flow was stopped nearly a year later, after releasing at least 50 million gallons of groundwater.The DNR now says a second breach occurred around Aug. 2 near LaSalle Creek in Hubbard County, and released about 9.8 million gallons of groundwater before Enbridge reported it had stopped the flow four months later.A third breach was identified around Sept. 10 near the Fond du Lac Band of Lake Superior Chippewa reservation in St. Louis County, when groundwater began welling up as crews removed sheet piling after finishing construction on that stretch of pipeline.The DNR said Enbridge has substantially slowed — but not completely stopped — that leak, which has resulted in the release of nearly 220 million gallons of groundwater. The agency said the breach potentially could affect nearby Dead Fish Lake, an important wild rice water for the Fond du Lac Band.State regulators ordered Enbridge to stop the groundwater flows and restore the sites. The company already has paid more than $3 million for the violations, and could face additional penalties. The DNR said it has investigated whether other aquifer breaches occurred along the Line 3 route, but has not confirmed any other breach sites. The agency said it will complete its final assessment following the spring thaw.
Climate groups sue Interior Department over controversial Black Friday report on oil and gas leasing - Several climate and conservation groups are suing the US Department of the Interior to get more information about the department's November review of its oil and gas leasing program -- a report that was widely criticized for sidestepping the program's impact on the climate crisis. Represented by the Western Environmental Law Center, the groups -- Montana Environmental Information Center, Center for Biological Diversity and WildEarth Guardians -- filed multiple Freedom of Information Act requests last year to access correspondence between federal officials on the drafting of the report. They received documents in two responses from bureaus within DOI, including the Bureau of Ocean Energy Management, but they were redacted, Barbara Chillcott, a senior attorney at the Western Environmental Law Center, told CNN. Chillcott estimated that of the documents provided so far, about 75% of the information has been redacted. Interior released its long-awaited review of drilling on federal lands and oceans on Black Friday last year. The review recommended an increase in leasing fees and consideration of environmental concerns in leasing decisions. But the report largely sidestepped the issue of climate change and didn't recommend a halt to new oil and gas leasing -- a promise President Joe Biden campaigned on. "The climate crisis is a public issue; these are public agencies," Taylor McKinnon, senior public lands campaigner at the Center for Biological Diversity, told CNN. "We want to see communications, we want to see those drafts, we want the public to be able to understand why and how the administration backpedaled from its climate promise in federal oil and gas leasing."Climate groups roundly criticized the report for not doing enough to address climate change. "From our perspective, the report really fell flat in terms of meeting the needs of addressing the climate crisis and seemed to be unresponsive to President Biden's executive order on tackling the climate crisis," Chillcott said. "It was a big disappointment for us. The word comprehensive does not come to mind whenever I think of that report." An Interior Department spokesperson declined to comment on the lawsuit. The government has 30 days from the complaint to file a response. Chillcott said she was hopeful the environmental groups could eventually prevail, given US Attorney General Merrick Garland recently issued new FOIA guidelines pushing agencies to be more transparent.
Rich countries must end oil and gas production by 2034, report says - The Washington Post - Rich nations must end oil and gas production within 12 years to give the world a shot at meeting the goal of the Paris agreement — and to give poor countries a “fair chance” to replace their lost income from fossil fuels, according to a report by the Tyndall Centre for Climate Change Research at the University of Manchester released late Monday. The report looked at the global carbon budget — the amount of carbon that the world can afford to emit without blowing past 1.5 degrees Celsius (2.7 degrees Fahrenheit) of global temperature rise, the more ambitious goal of the 2015 Paris accord. Advertisement It found that to have a 50 percent chance of meeting this target, developed countries must phase out oil and gas production by 2034. Developing countries would have until 2050 to end their production. “This is what the science is clearly telling us. It's a bit of basic arithmetic. That's all it is,” Kevin Anderson, a co-author of the report and a professor of energy and climate change at the University of Manchester, told The Climate 202. Anderson co-authored the report with Daniel Calverley, an independent climate researcher. Their work was commissioned by the International Institute for Sustainable Development, a think tank focused on sustainability. The researchers classified each country by its capacity to maintain a vibrant economy without revenue from oil and gas. Their main findings were:
- “Highest capacity” countries with average non-oil gross domestic product per person of $50,000 must end production by 2034, with a 74 percent cut by 2030. They include theUnited States, United Kingdom, Canada and Australia.
- “High capacity” countries with average non-oil GDP of nearly $28,000 must end production by 2039, with a 43 percent cut by 2030. They include Saudi Arabia, Kuwaitand Kazakhstan.
- “Medium capacity” countries with average non-oil GDP of $17,000 must end production by 2043, with a 28 percent cut by 2030. They include China, Brazil and Mexico.
- “Low capacity” countries with average non-oil GDP of $10,000 must end production by 2045, with an 18 percent cut by 2030. They include Indonesia, Iran and Egypt.
- “Lowest capacity” countries with average non-oil GDP of $3,600 must end production by 2050, with a 14 percent cut by 2030. They include Iraq, Libya and South Sudan.
IEA Releases 10-Point Plan to Curb Oil Use: The U.S. Is Unlikely to Follow Much – If Any – of It -- Jerri-Lynn Scofield --The International Energy Agency (IEA) last week released A 10-Point Plan to Cut Oil Use. Many of the steps seem to be no more than common sense – and would not prove unduly difficult to implement. And Asian and European countries are expected to follow at least some of these recommendations.Alas, the U.S. is not expected to comply with any provisions. Now, to be sure, skyrocketing oil and gasoline prices may independently cause U.S. households to curb their fossil fuelconsumption. Many can’t afford to do otherwise.The IEA, founded in 1974 by seventeen countries – mainly from Europe, but also including Japan and the United States – was intended to counteract the activities of Organization of the Petroleum Exporting Counties (OPEC). The IEA now has thirty-one members, and as Motherboard reports , has “the goal of “cooperation on a variety of issues” relating to energy supply including a “collective emergency response mechanism” that ensures a “stabilizing influence” during times of energy crises.”The report addresses some cursory measures to increase supply – which I won’t consider in this post. Instead, I’ll examine the proposed measures the IEA has put forward to reduce demand for oil. Per the IEA report: Another way to help balance the market and reduce the pain caused by high oil prices is to bring down demand. Following Russia’s invasion of Ukraine, the IEA’s March Oil Market Report lowered its forecast for global oil demand in 2022 by 950 thousand barrels a day (kb/d) because of the expected impacts of higher prices and weaker GDP growth. But this would still leave the oil market very tight, with upward pressure on prices likely to remain in an uncertain geopolitical environment.Further reductions in demand are possible in the near term, however, through actions by governments and citizens. The world’s advanced economies together account for around 45% of global oil demand, and most of them are members of the IEA. Demand restraint (see annex) is one of the emergency response measures that all IEA member countries are required to have ready as a contingency at all times – and that they can use to contribute to an IEA collective action in the event of an emergency.In view of this and the potential emergency the world is facing, the IEA is proposing 10 immediate actions that can be taken in advanced economies to reduce oil demand before the peak demand season. We estimate that the full implementation of these measures in advanced economies alone can cut oil demand by 2.7 million barrels a day within the next four months, relative to current levels.1 The analysis in this report focuses on the potential effect of these measures in advanced economies, but their adoption in more countries would further increase their impact. Ensuring local and regional coordination of their implementation would maximise the impact. [IEA Report, pp. 5-6].
Ukraine crisis forces world to confront its oil and gas addiction (Thomson Reuters) - As the war in Ukraine highlights the perils of relying on Russian fossil fuels, France has been fast-tracking efforts to wean households off oil-fired heating, insulate their homes better and swap petrol and diesel cars for electric. Climate policy discussions in recent years have focused on phasing out coal - the most carbon-polluting fuel - but the Ukraine crisis is pushing some governments to confront their ongoing addiction to oil and natural gas, too. "Whatever the obstacles before us, the transition to a world without fossil fuels is more than ever the safest and most effective way to guarantee our future and our energy sovereignty," French ecological transition minister, Barbara Pompili, told reporters last week. With energy shipments disrupted and prices skyrocketing, the war has made switching away from oil and gas even more urgent, Pompili said at the launch of a 10-point plan to cut oil use from the International Energy Agency (IEA). France aims to end the use of oil to heat buildings by 2030, boosting subsidies to make choosing heat pumps or biomass boilers a more affordable choice for lower-income families. But as countries hurry to shore up their energy supplies in uncertain times, U.N. Secretary-General Antonio Guterres warned that some might be tempted to "neglect or knee-cap policies to cut fossil fuel use". That would be "madness", he said on Monday, adding that short-term measures could create long-term fossil fuel dependency and shut the small window for limiting global warming to 1.5 degrees Celsius, the most ambitious international goal. Guterres wants wealthy governments to put an end to coal production and use by 2030, with less-developed countries following suit by 2040. But global deadlines for phasing out oil and gas have yet to receive much attention, in the interests of richer nations that want to keep powering their economies with those fuels, climate scientist Kevin Anderson told the Thomson Reuters Foundation. A new report co-authored by Anderson, energy and climate change professor at Britain's University of Manchester, says there is no room for any nation to boost oil and gas output if the world is to have a 50% chance of staying below 1.5C of warming. The effort required to cut production must be shared fairly, the report says, with poorer countries given longer to replace the income they receive from oil and gas, in line with its greater importance to their economies.The report, released on Tuesday, calculates that rich countries - including the United States, Britain, Norway, Canada, Australia and the United Arab Emirates - must end oil and gas production by 2034 and cut it by about three-quarters by 2030, to stay on track for the 1.5C target.Those least able to make a so-called “just transition” away from fossil fuels, such as Iraq, Libya, Angola and South Sudan, should be given until 2050 to end output, as doing so abruptly could threaten their political and economic stability.
Biden, allied leaders discuss new round of oil reserve release— The U.S. and other major economies this week discussed oil supply and the potential for another round of releases, President Joe Biden’s top national security aide said, raising the prospect of new government intervention to ease supply strains. National Security Advisor Jake Sullivan said oil prices a nd tapping emergency stockpiles were discussed in sessions Thursday in Brussels, where Biden met with NATO, Group of Seven and EU counterparts. It came up in particular with the G-7, and it was a “major topic of conversation,” he said. “This was not just about talking; it was about thinking about the steps we can take,” Sullivan said, before signaling there could be an announcement in the near future. “I will not steal the thunder of of the administration on that issue.” The U.S. has in recent months announced releases from the Strategic Petroleum Reserve in a bid to curb oil price increases. Russia’s invasion of Ukraine last month, and ensuing sanctions, sent the price of crude soaring. Prices eased earlier this month before resuming their climb again. Sullivan spoke after Biden announced a separate pact, with the EU, to try and ease Europe’s dependence on Russian natural gas exports. The U.S. is aiming to coordinate a boost of non-Russian gas supply this year, while Europe is pledging a de facto minimum purchasing level to encourage increased U.S. production.
Bitcoin Miners Eyeing Argentina's Natural Gas Cash Cow - British company FMI Minecraft is working on a project to mine the cryptocurrency Bitcoin using natural gas from Argentina’s Vaca Muerta.The project would be in the Zapala free trade zone in the province of Neuquén and source gas from the Vaca Muerta, or ‘Dead Cow’ shale formation.“Vaca Muerta is great because there are more than 20 producers of good quality gas,” FMI partner Eduardo Meyer told NGI. The mining operation would initially involve 100 MW of gas-fired power, which would be expandable to 250 MW. Meyer said Argentina has “good suppliers of turbines and generators, and human resources.” He added, “there is a big oil and gas scene in Argentina.”The project would expand local gas transport capacity, provide jobs, and all suppliers would be local, Meyer said. “Our plan is to work with the local university to create a service hub to fix mining machines.”With China outlawing cryptocurrency, most Bitcoin mining is done in North America, but that market has become saturated, Meyer said. Natural gas for power is cheap in Argentina and the free trade zone makes the project attractive.Bitcoin mining is the process through which specialized computers verify bitcoin transactions. The process allows miners to add “blocks” of the distributed public ledger, aka the blockchain, on which transactions are recorded. “Mining is the way we can make the network safe and secure,” Meyer said. “By doing so the miner receives an incentive as the network mints a new bitcoin as payment to the miner.”The key to the success of a project is access to the mining machines, which mainly come from China and are backlogged, Meyer said. The other essential component is energy.The mining process is highly energy intensive. In the course of the last year, Bitcoin mining consumed 204 TWh, as much energy as the country of Thailand, according to a study by technology analysis platform Digiconomist.
The Future of Oil-Soaked Eider Ducks in Suðureyri Uncertain - A week has passed since an oil spill was reported in the town of Suðureyri in Northwest Iceland. Over the past days, residents have set up makeshift facilities to clean affected eider ducks – and have managed to save almost two dozen birds since last weekend. An expert with with the Natural Science Institute of the Westfjords believes that these efforts may only serve to protract the birds’ suffering, Fréttablaðið reports.Over 9,000 litres of diesel oil spilt into Suðureyri harbour on Thursday, March 3. The leak, which originated from a reserve tank owned by the power company Orkubú Vestfjarða – and which was buried in snow – was discovered by residents the following morning.They could smell it.“I still smell like diesel oil, despite having showered twice since yesterday,” Auður Steinberg, a resident in Suðureyri, stated in an interview with Vísir last Sunday.The oil found its way into a pond near the local swimming pool – which was subsequently closed alongside the elementary school – and from there into the harbour. It wasn’t until Monday, three days after the leak was reported, that hoses were submerged in water to try to prevent the leak from spreading.Although there was less soil pollution than initially suspected, hundreds of eider ducks were badly affected by the leak. Many of them fled the harbour, where they commonly spend their nights, onto nearby roads and neighbourhoods.In an interview with RÚV on Wednesday, eider duck expert and Suðureyri resident Einar Mikael Sverrisson described the conditions as “nightmarish.” According to Einar, “there were hundreds of birds that needed help.”He got to work right away.Having converted baiting facilities into a bird-rescue centre, Einar and his neighbours had, as of yesterday, managed to save nineteen out of the twenty-eight birds that they had collected last weekend. “But over a hundred birds remain, completely helpless, most of them already dead,” Einar told Fréttablaðið in another interview yesterday. He predicts that hundreds of birds will perish over the coming weeks and months if nothing is done.’
Oil Spill in Westfjords Cleaned Up - The diesel oil that leaked from a reserve tank into Suðureyri harbour, in the Westfjords, has now been cleaned up, RÚV reports. The location will be monitored to determine whether there is still contamination once the snow melts. Over 9,000 litres of diesel oil spilt into Suðureyri harbour on Thursday, March 3, more than two weeks ago. The leak, which originated from a reserve tank owned by the power company Orkubú Vestfjarða – and which was buried in snow – was discovered by residents the following morning. The oil found its way into a pond near the local swimming pool, and from there into the harbour. It wasn’t until three days after the leak was reported that hoses were placed in the water to try to prevent the leak from spreading. The oil was particularly harmful to local birdlife: hundreds of eider ducks died or had to be put down as a result of the oil, though some were saved thanks to locals’ efforts. Sigríður Kistinsdóttir, team leader of pollution prevention at the Environment Agency of Iceland, says cleaning of the pond and harbour has gone well and will be completed this weekend. Stormy weather has also helped disperse the oil, she added. A town meeting will be held in Suðureyri this week, where representatives of Orkubú Vestfjarða and the Westfjords Public Health Authority will be present. Residents and others involved in the clean-up efforts can attend.
Geopolitical Tensions on Europe’s Southwestern Flank Threaten to Exacerbate EU’s Natural Gas Shortages -For the first time in 42 years Spain has decided to support Moroccan claims to sovereignty over Spain’s former colony, Western Sahara. In the process it risks alienating its largest natural gas provider, Algeria, which fiercely opposes Morocco’s territorial claims.On Friday, Spain’s foreign minister, José Manuel Albares, called a proposal launched by Rabat in 2007 to grant Western Sahara limited autonomy “the most serious, realistic and credible” initiative for resolving a decades-long dispute over the vast Saharan territory. This threatens to open up a whole new geopolitical can of worms at the worst possible time for Europe’s energy-starved markets.For decades Spain, like most countries, had supported the idea of holding a referendum to resolve the territorial integrity of Western Sahara — which was agreed as part of the 1991 ceasefire and is also strongly supported by Algiers. As such, this represents a sea change in policy.But Spain is caught between a rock and a hard place in its relations with the neighboring North African countries of Morocco and Algeria. On the one hand, it depends on Algeria for almost half of the natural gas it consumes. However, Algeria — like the United Nations — supports the right of the Sahrawi people to self-determination. On the other hand, Morocco, which took over the lion’s share of Western Sahara after Spain relinquished the colony in 1975, controls a key gateway for African migrants trying to reach Europe via Spain.Like Erodgan’s Turkey, Morocco is not afraid of using that power as leverage. In May 2021, Rabatwithdrew all of its border guards from a breakwater separating the Moroccan city of Fnideq with Ceuta, one of two Spanish enclaves in northern Morocco, after Moroccan intelligence had discovered that Braham Gali, the secretary general of the Sahrawi nationalist movement, the Polisario Front, had been treated in a Spanish hospital after contracting COVID-19. Within just a few hours some 1,500 African migrants crossed the water into Ceuta, according to Spanish authorities. Rabat also recalled its ambassador to Spain in protest. Spain’s foreign minister, José Manuel Albares, suggested on Friday that working with Morocco to tackle migration from sub-Saharan Africa was more important that Spain’s energy dependence on Algeria. “We want to strengthen cooperation in the management of migration flows in the Mediterranean and the Atlantic,” Albares said.
Russia used 'soft power' to influence EU policies and anti-fossil fuel efforts -U.S. policymakers are finally realizing that Russia may have been covertly funding U.S. environmental organizations to shape public opinion and policies – especially energy and anti-fossil fuel policies – to Russia’s liking and benefit. Such Russian skullduggery has long been an open secret in Europe. I recently wrote about U.S. efforts to identify and expose Russian anti-fossil fuel activities. In 2017, former chairman of the House Committee on Science, Space, and Technology Lamar Smith (R-Texas) and Rep. Randy Weber (R-Texas), who was chairman of the Subcommittee on Energy, sent a letter to then-Treasury Secretary Steve Mnuchin revealing a possible covert funding scheme. Now, Rep. Bill Johnson (R-Ohio) and other members of Congress are calling for investigations. Europe got a head start in exposing Russian actions. In 2016 four researchers with the Brussels-based Wilfried Martens Centre for European Studies published “The Bear in Sheep’s Clothing: Russia’s Government-Funded Organizations in the EU,” identifying various ways Russia tried to influence European Union policies. That report states: “This paper sheds light on organisations operating in Europe that are funded by the Russian government, whether officially or unofficially…. Their number and activities have been growing, but their financing is often complex and hidden from the public eye.” Notice the part about financing being “complex and hidden from the public eye.” Russia doesn’t want EU officials, the public and other countries (e.g., the United States) to know what it’s up to. Echoes of Russia’s EU efforts were exposed in the Smith-Weber letter. The Martens Centre paper says Russia’s influence peddling is an example of “soft power,” which it defines as a “broad range of methods and institutions that the Russian government is using to influence decision-makers and public opinion in the EU.” In 2012 Russian President Vladimir Putin described soft power as “a matrix of tools and methods to reach foreign policy goals without the use of arms but by exerting information and other levers of influence,” according to the paper.By trying to turn public opinion and policy against fossil fuel production, especially fracking, Russian oil and natural gas producers would face less competition, allowing them to charge higher prices, realize greater profits and make Europe even more dependent on Russian oil and gas. Mission accomplished! Unlike the United States, Europe never embraced fracking. The Smith-Weber letter exposes similar Russian efforts to launder money intended to fund anti-fracking efforts in the United States. They write, “This scheme allows money originating from foreign countries like Russia to funnel money through Bermuda-based shell companies to environmental groups in the United States with the aim of disrupting the U.S. energy industry.” And their letter names names.
Why Biden can't help Europe rid itself of Russian gas - -The European Union wants the United States’ help in kicking its addiction to Russian natural gas. But President Joe Biden faces big limits in what he can promise when he visits the continent this week. Europe’s main request is more liquefied natural gas from the U.S., whose output of the fuel has surged over the past five years. But American gas exporters are already shipping their LNG overseas nearly as fast as they can, with little new capacity due to come online during the next two years. And Biden cannot command the activities of private oil and gas companies — who will typically sell their product wherever in the world they can fetch the highest price. “Governments don’t make deals” when it comes to directing U.S. oil and gas resources to specific nations, “You don’t have government-to-government oil companies.” That means the United States may not be able to do much to immediately ease the energy crunch for European states that are seeking to cut their imports of natural gas from Russia by two-thirds this year in response to Vladimir Putin’s invasion of Ukraine. Russian gas shipments to Europe reached 5.5 trillion cubic feet of gas in 2020, up more than 25 percent from a decade ago. The energy crisis for America’s cross-Atlantic allies is still forcing a shift in policies for the Biden administration, which had come into office pledging to drive a transition away from fossil fuels and toward clean energy. Republicans and European leaders alike are pushing the White House to use U.S. energy production as a way to help Germany and other countries reduce their dependency on Moscow. “Hopefully, we are beyond [European dependence on Russia] and producing more energy to provide them by next winter,” Republican Alaska Sen. Dan Sullivan said in an interview. The issue is expected to be a central topic when Biden visits Europe to attend a NATO summit and a European Council meeting scheduled for Thursday. The White House’s senior adviser for energy security, Amos Hochstein, and members of the State Department’s Bureau of Energy Resources are expected to accompany him, a person familiar with the plans said.
Biden and Europeans to announce major plan to redirect gas to Europe — President Biden and European leaders are expected to announce a major initiative to direct shipments of liquefied natural gas to Europe during his visit to Brussels this week, part of a broader effort to help reduce Europe’s dependence on Russian energy, according to three U.S. officials familiar with the plan. The announcement, a dramatic effort to deprive Russia of leverage as it continues to batter Ukraine, would mark an unusual move to reorder the world’s energy flow — a shift that could have an impact long after the war is over. It comes as European officials have asked the United States to do more to help them cut their reliance on Russia for oil and natural gas. Biden is also expected to use his stop in Brussels on Thursday and Friday — where he is meeting with NATO, the Group of Seven and the European Council — to announce additional sanctions against Moscow, as well as a crackdown on evasions of the current sanctions. The sanctions are expected to hit numerous members of Russia’s parliament, defense companies and subsidiaries, and additional sectors of its economy, according to two people familiar with the matter, who spoke on the condition of anonymity to describe matters not yet made public. They cautioned that planning was fluid and subject to change. Taken together, the expected actions by America and Europe amount to an escalation of the sweeping push by a U.S.-led coalition of democracies to punish and deter Russia as it pursues its war against Ukraine. The past four weeks have seen a nearly unprecedented coalescence of democratic countries to impose costs on a belligerent foe and provide aid to its victim. The initiative to ship liquefied natural gas, or LNG, whose details have yet to be finalized, will come Friday when Biden meets with European Commission President Ursula von der Leyen in Brussels before departing for Poland. Advertisement Speaking to European Union lawmakers in Brussels on Wednesday, von der Leyen said that all E.U. members “can contribute in reducing our dependency on Russian gas” and said it was a topic she planned to take up with Biden on the first day of his visit Thursday. “Tomorrow, I will discuss with President Biden how to prioritize LNG deliveries from the United States to the European Union in the coming months,” von der Leyen said. “We are aiming at having a commitment for additional supplies for the next two winters.”
Why the U.S. Can’t Quickly Wean Europe From Russian Gas - The New York Times — President Biden announced Friday that the United States would send more natural gas to Europe to help it break its dependence on Russian energy. But that plan will largely be symbolic, at least in the short run, because the United States doesn’t have enough capacity to export more gas and Europe doesn’t have the capacity to import significantly more.In recent months, American exporters, with President Biden’s encouragement, have already maximized the output of terminals that turn natural gas into a liquid easily shipped on large tankers. And they have diverted shipments originally bound for Asia to Europe.But energy experts said that building enough terminals on both sides of the Atlantic to significantly expand U.S. exports of liquefied natural gas, or L.N.G., to Europe could take two to five years. That reality is likely to limit the scope of the natural gas supply announcement that Mr. Biden and the European Commission president, Ursula von der Leyen, announced on Friday.“In the near term there are really no good options, other than begging an Asian buyer or two to give up their L.N.G. tanker for Europe,” said Robert McNally, who was an energy adviser to former President George W. Bush. But he added that once sufficient gas terminals were built, the United States could become the “arsenal for energy” that helps Europe break its dependence on Russia.Friday’s agreement, which calls on the United States to help the European Union secure an additional 15 billion cubic meters of liquefied natural gas this year, could also undermine efforts by Mr. Biden and European officials to combat climate change. Once new export and import terminals are built, they will probably keep operating for several decades, perpetuating the use of a fossil fuel much longer than many environmentalists consider sustainable for the planet’s well-being.For now, however, climate concerns appear to be taking a back seat as U.S. and European leaders seek to punish President Vladimir V. Putin of Russia for invading Ukraine by depriving him of billions of dollars in energy sales.The United States has already increased energy exports to Europe substantially. So far this year, nearly three-quarters of U.S. L.N.G. has gone to Europe, up from 34 percent for all of 2021. As prices for natural gas have soared in Europe, American companies have done everything they can to send more gas there. The Biden administration has helped by getting buyers in Asian countries like Japan and South Korea to forgo L.N.G. shipments so they could be sent to Europe.The United States has plenty of natural gas, much of it in shale fields from Pennsylvania to the Southwest. Gas bubbles out of the ground with oil from the Permian Basin, which straddles Texas and New Mexico, and producers there are gradually increasing their output of both oil and gas after greatly reducing production in the first year of the pandemic, when energy prices collapsed.But the big problem with sending Europe more energy is that natural gas, unlike crude oil, cannot easily be put on oceangoing ships. The gas has to first be chilled in an expensive process at export terminals, mostly on the Gulf Coast. The liquid gas is then poured into specialized tankers. When the ships arrive at their destination, the process is run in reverse to convert L.N.G. back into gas.A large export or import terminal can cost more than $1 billion, and planning, obtaining permits and completing construction can take years. There are seven export terminals in the United States and 28 large-scale import terminals in Europe, which also gets L.N.G. from suppliers like Qatar and Egypt.Some European countries, including Germany, have until recently been uninterested in building L.N.G. terminals because it was far cheaper to import gas by pipeline from Russia. Germany is now reviving plans to build its first L.N.G. import terminal on its northern coast.
The US wants to send more gas to Europe, but has almost none to spare — Europe has a Russia-sized hole in its natural gas supply, and the US wants to help fill it. Today (March 25), US officials agreed to supply the EU with an additional 15 billion cubic meters of liquified natural gas by the end of 2022, to offset imports from Russia. It’s a nice political gesture, as Europe scrambles for any way to stop paying Vladimir Putin’s government hundreds of millions of dollars per day for gas. But it only accounts for about 10% of Russian gas exports to Europe. And there’s one other little problem: The US is already exporting nearly every drop of LNG it can.Global LNG demand was already surging prior to the Ukraine conflict as countries everywhere seek to lower than reliance on coal. US exporters have been racing to bring more shipping terminals online for the last few years, and in December 2021 finally surpassed Qatar and Australia as the world’s top LNG exporter. In February, US LNG exports hit a record of 13.3 billion cubic feet per day, the first time that all seven US terminals were fully docked by tankers at once. Once the most recently completed new terminal, Calcasieu Pass in Louisiana, is fully operational by the end of this year, total US export capacity will be 13.9 bcf/d. It takes years to build new LNG export infrastructure, so it’s not clear how the US can meet its near-term promise to Europe other than talking Asian customers like China and Japan into reselling some of their American LNG to Europe. Longer-term, European buyers are already signing advance contracts for US LNG that won’t be delivered until 2025 or later. Europe will also need to expand its import terminal infrastructure. No matter what happens in the coming weeks in the Ukraine conflict, Europe is preparing to make its shift away from Russian gas permanent.
Europe Can Survive Throughout Summer Without Russian Gas - If Russian gas flows to Europe were interrupted now, Europe would have enough gas to last it through the end of this winter and the following summer without having to curtail demand, energy consultancy Wood Mackenzie said on Friday.European gas storage levels will likely be within the five-year range by the end of this winter, thanks to mild weather, more arrivals of liquefied natural gas (LNG) and sustained imports from Norway, according to WoodMac.If Russian flows continue, the European Union (EU) and the UK will end this winter’s heating season with 27 billion cubic meters (bcm) of gas in storage, which is a level within the five-year range.Although energy exports are not part of the sanctions against Russia currently, there is a risk that Moscow could stop flows as a countermeasure to intensifying sanctions over the Russian invasion of Ukraine. While this winter and the summer could be easier for Europe without Russian gas, some demand curtailments in the 2022-2023 winter will be inevitable, according to WoodMac’s Filippenko.Higher natural gas imports from Norway and Algeria, more LNG, slowing the phase-out of coal, and delaying maintenance shutdowns on nuclear power plants could also free up some gas for the power generation sector, perhaps as much as 13 bcm until the end of October 2022, according to Wood Mackenzie.The EU is overhauling its energy strategy following the Russian invasion of Ukraine, and the European Commission unveiled last week a plan to make Europe independent from Russian fossil fuels well before 2030, starting with gas. The EU will seek to diversify gas supplies, speed up the roll-out of renewable gases, and replace gas in heating and power generation—all this can reduce EU demand for Russian gas by two-thirds before the end of the year, the Commission says. In addition, the Commission will propose that by October 1, gas storage in the EU has to be filled up to at least 90%.
Germany seals gas deal with Qatar to reduce dependence on Russia -- "The energy supply constraints resulting from the Russian invasion of Ukraine and the increased prices created by big oil companies has highlighted how important it is to ensure that Michigan is not overreliant on one source and has energy independence to protect Michiganders’ pocketbooks and our state’s economic security," Bobby Leddy, Whitmer's press secretary, told Fox News Digital in a statement. Germany and Qatar have reached a long-term energy partnership, a German official has said, as Europe’s biggest economy seeks to become less dependent on Russian energy sources.Russia is the largest supplier of gas to Germany and German economy minister Robert Habeck has launched several initiatives to lessen Germany’s energy dependence on Russia since it invaded its neighbour Ukraine. Qatar’s Emir Sheikh Tamim bin Hamad Al Thani met Habeck on Sunday and the two discussed ways to enhance bilateral relations, particularly in the energy sector, the Emiri court said in a statement.A spokesperson for the German economics ministry in Berlin confirmed on Sunday that a deal had been clinched.“The companies that have come to Qatar with (Habeck) will now enter into contract negotiations with the Qatari side,” the spokesperson said.In a statement, Qatar said that for years it had sought to supply Germany but discussions never led to concrete agreements.Qatar said it agreed with Germany that “their respective co mmercial entities would re-engage and progress discussions on long term LNG supplies”.Habeck also met Qatari Minister of State for Energy Affairs Saad Sherida al-Kaabi in Doha, where they discussed energy relations and cooperation between Qatar, one of the world’s top natural gas exporters, and Germany, and ways to enhance them, according to a statement from al-Kaabi.In late February, German Chancellor Olaf Scholz announced the construction of two new terminals for liquefied natural gas in response to what some critics said was Germany’s over-reliance on Russian gas. The terminals are to be located in Brunsbuttel and Wilhelmshaven in northern Germany.Following Russia’s invasion of Ukraine, Germany put on hold the Nord Stream 2 gas pipeline project designed to bring Russian natural gas directly to Germany via the Baltic Sea. Germany intends to phase out its nuclear power production by the end of this year, leaving observers questioning how Europe’s biggest economy will fulfill all of its energy needs.
Schlumberger suspends new investment and technology deployment in Russian operations— Russian refiners are trimming their output, exacerbating a shortfall in European diesel supply, Gunvor Group Chief Executive Officer Torbjorn Tornqvist said. “This is a global problem but for Europe it’s very hard because Europe is so short” of diesel, Tornqvist said at the Financial Times Commodities Global Summit. Diesel is still flowing from Russian refineries to Europe but the trade is becoming more problematical. Shipping companies, banks and buyers are shying away from dealing with Russian energy products in what is being termed “self-sanctioning,” following Russia’s invasion of Ukraine. “That will force Russian refiners to cut back, in fact we already see that,” said Tornqvist. “What does that mean? It means more crude oil will need to be exported instead of the products, and we believe that is not possible and will lead to cutbacks in Russian production.” European diesel stockpiles are expected to fall to the lowest level since 2018 this month, according to an Energy Aspects presentation. Some 500,000 tons of Russian diesel exports are at risk in March, the analyst said, leave “physical supply tighter than ever.” Diesel prices in Europe have surged in recent weeks. Earlier in March, gasoil futures traded on the Intercontinental Exchange jumped to a record as fears of supply disruption from Russia, Europe’s largest supplier, compounded an already tight market. Heating oil prices in Germany were up more than 50% week-on-week through March 14, according to data compiled by Bloomberg
Russia Sanctions Collateral Damage: Diesel Shortage Risk Worsening, EV Batteries by Yves Smith - Forgive me for what amounts to news snippets,but the Russian sanctions induced energy squeeze looks to be bearing down on Europe and the US even faster that most sources anticipated. First are diesel shortages, which we had warned about virtually from the get go. Russian gas is heavier than either fracked gas or Saudi light sweet crude. Heavier means more long chain hydrocarbons which are more energy dense. Lighter grades can be used to make diesel…but that’s at the expense of the gas which you presumably also wanted to have.We had pointed out that diesel shortages are so imminent that the IEA is recommending aggressive energy conservation measures now, like more work at home, more ride-sharing, cutting air travel, so as to reduce the severity of the crunch they expect to kick in over the next four months.The news on the diesel front is only getting worse. From the first of two germane stories on OilPrice, an overview called Europe Faces Systemic Diesel Supply Crunch: Europe risks being exposed to a “systemic” deficit of diesel supply that could worsen and even lead to rationing of fuel, the top executives of the world’s largest independent oil traders said on Tuesday….“This is a global problem but for Europe it’s very hard because Europe is so short” of diesel, Gunvor CEO Torbjorn Tornqvist said at the Financial Times Commodities Global Summit as carried by Bloomberg.Europe’s diesel shortage is worsening as Russian oil refiners have started to cut back on refinery throughput, Tornqvist added.Diesel stocks globally were already low even before the Russian invasion of Ukraine, but the shortage has now been exacerbated by the lower global diesel supply from Russia.In the highly volatile global energy markets since Russia’s war in Ukraine began, even the biggest traders are exposed to rising margin calls. The possibility of a derivatives shock blowing back to the physical market is a new angle, but after the LME canceled a full day of nickel trades so as not to blow up the exchange or too many big fish, do not underestimate the extreme measures that will be taken to keep perceived-to-be-too-critical-to-fail institutions and players alive. A more specific wrinkle on the diesel squeeze story, mentioned in the piece above, is Russia Cuts Refinery Output As Diesel Shortage Worsens:Diesel stocks globally were already low even before the Russian invasion of Ukraine. According to estimates from Reuters’ John Kemp, diesel fuel stocks in Europe are at their lowest since 2008, and 8 percent—or 35 million barrels—lower than the five-year average for this time of the year.In the United States, the situation is graver still. There, diesel fuel inventories are 21 percent lower than the pre-pandemic five-year seasonal average, which translates into 30 million barrels.In Singapore, a global energy trade hub, diesel fuel inventories are 4 million barrels below the seasonal five-year average from before the pandemic.On top of exacerbating a global diesel supply crunch, the sanctions against Russia are also likely to force Russian firms to shut in some crude oil production, analysts say. Russia will have to shut in some of its oil production as it will not be able to sell all the volumes displaced from European markets to other regions, with Russian crude production falling and staying depressed for at least the next three years, Standard Chartered said earlier this month.So the perceived need to stay well away from anything Russian, even when it’s energy and other commodities that the sanctions were originally designed to carve out, is going to create quite a bit of pain. Yet even though this impact is widely acknowledged in the business press, there seems to be no will to do anything about it. RT has a new story about how damage to a key pipeline to Europe is going to make the energy crunch worse over the next three weeks, if not longer. The pipeline operators made dutifully sincere noises about how sorry they were and how they would get everything fixed up as soon as possible. The article also said that the pipeline would be back to its old delivery level by the third quarter, so not to worry. But it is instructive to note the peculiar sensitivity about oil delivered via Russian tankers, versus the lack of much revulsion about gas and oil sent through pipelines.
TotalEnergies to stop purchasing oil, petroleum products from Russia - French energy giant TotalEnergies said Tuesday that it will stop buying Russian oil and petroleum products by the end of this year as well as suspend activities in the country amid Russia’s war on Ukraine. The company said it has committed to 'act responsibly' and strictly comply with European sanctions with regard to its business in Russia given the worsening situation in Ukraine. It will now procure oil and gas for European countries from Poland and Saudi Arabia. 'TotalEnergies has unilaterally decided to no longer enter into or renew contracts to purchase Russian oil and petroleum products, in order to halt all its purchases of Russian oil and petroleum products as soon as possible and by the end of 2022 at the latest,' it said. The company will terminate contracts with the Druzhba pipeline from Russia for oil supply to the Leuna refinery in eastern Germany and replace it with oil imports from Poland. For the gasoil shortfall in Europe, it will import petroleum products from the Satorp refinery in Saudi Arabia and other continents. The company rebuffed accusations of 'complicity in war crimes' for continuing projects in Russia and said they were 'unfounded.' It clarified that TotalEnergies does not operate any oil and gas fields or any liquefied natural gas (LNG) plants in Russia. It is, however, a minority shareholder in several non-state-owned Russian companies, including Novatek (19.4%), Yamal LNG (20%), Arctic LNG 2 (10%) and TerNefteGaz (49%), and is a 20% partner in the Kharyaga joint venture operated by Zarubezhneft.
Russian oil seeps into global market to ease supply fears for now --Millions of barrels of Russian oil are still finding a way to buyers almost a month after the country first invaded Ukraine, tempering concerns that a sanctions backlash would all but choke off supply and cause the market for physical cargoes to overheat.India’s oil refiners grabbed multiple cargoes of Russia’s flagship Urals crude this month, potentially supplanting the Middle Eastern varieties they normally purchase from Abu Dhabi and Iraq. Meanwhile, China’s private processors are still thought to be targeting their favored cargoes from the east of Russia -- likely at knock-down prices.Since Russia invaded Ukraine late last month, the market has been twisting on two vital questions: how much crude will Moscow end up selling, and where? There's been a buyers' strike across swaths of Europe in response to the invasion, but what's less clear is how much other regions -- especially Asia, the top demand center -- will purchase. "Russian barrels must look tempting," said John Driscoll, chief strategist at JTD Energy Services, adding that his view is that measures against the country will nonetheless curb buying of its crude over time. "Resourceful traders may explore ways to move cargoes -- the Chinese won't be intimidated by U.S. sanctions, and will remain the largest importer of Russian crude. India is the next one to watch." At least for now, what’s going on with the buying and selling of non-Russian oil suggests traders are becoming less fraught about the threat of supply shortages, even if trading the nation’s barrels isn’t risk-free, and spreads on Brent oil point to a market that remains incredibly tight by historical standards. At the moment, there are no sanctions directly prohibiting purchases but there are worries about what steps might ultimately be taken if the war drags on. Financing, insuring and shipping of Russian petroleum have also become much more complicated by the measures that the west has taken.
Oil prices jump again on Russia-Ukraine fears, as IEA calls for cut in energy usage - Oil prices jumped even higher on Monday after Russia-Ukraine talks appeared to yield no sign of progress, and markets continued to fret over tight supply — sparking a call by the International Energy Agency to reduce oil demand. Crude futures were up more than 3% on Monday morning during Asia trading — international benchmark Brent crude was at $111.46, and U.S. futures at $108.25. Oil prices have been volatile in recent weeks – soaring to record highs in March before tumbling more than 20% last week to touch below $100. They jumped again in the latter half of last week to rise above that level. In a note on Monday, Mizuho Bank said two factors were pushing oil prices higher: lingering Russia-Ukraine uncertainty as well as hopes that China's latest Covid impact could be less dire than anticipated amid expectations of easing restrictions. The key hub of Shenzhen partially opened up Friday, as five districts were allowed to restart work and resume public transportation, Reuters reported. Ukrainian and Russian officials have met intermittently for peace talks, which have so far failed to progress to key concessions. Still, Ukrainian President Volodymyr Zelenksyy has called for another round of talks with Moscow. "If these attempts fail, that would mean that this is a third world war," Zelenskyy told CNN's Fareed Zakaria in an interview that aired Sunday morning. "The breakdown of peace talks between Russia and Ukraine saw crude oil prices extend their rebound on Friday," "However, it failed to offset the losses earlier in the week, with Brent crude ending down more than 4%." The industry's apparent inability to fill any potential gap has seen calls for consumption to be reduced. Meanwhile, tight supply continued to worry markets, sparking a call by the International Energy Agency (IEA) on Friday for "emergency measures" to reduce oil usage. The Russia-Ukraine war has led to worries over supply disruptions as a result of U.S. sanctions on Russian oil and gas. The U.K. and European Union also said they would phase out Russian fossil fuels. Russia supplied 11% of global oil consumption and 17% of global gas consumption in 2021, and as much as 40% of Western European gas consumption in the same period, according to statistics from Goldman Sachs. European Union governments are set to meet U.S. President Joe Biden this week as the EU considers an oil embargo on Russia over the unprovoked invasion of Ukraine. The Commonwealth Bank of Australia warned Monday that oil prices have fallen below recent peaks because markets are still largely pricing oil by "assessing the likelihood of a diplomatic solution to the Ukraine conflict." "Physical shortages, linked to current sanctions on Russia, though will eventually play a more dominant role in oil price determination,"
Crude extends rally as market eyes EU sanctions on Russian energy - Crude futures extended their rally in midday US trading March 21 as the possibility of EU sanctions on Russian oil raised supply concerns. At 1550 GMT, NYMEX April WTI was up $5.17 at $109.87/b and ICE May Brent was $6.43 higher at $114.36/b. The foreign ministers of Lithuania and Ireland said March 21 that it was time for the EU to start looking at sanctions on Russian oil, according to a Reuters report. Current EU sanctions packages have refrained from targeting the energy sector. "Looking at the extent of the destruction in Ukraine right now, it's very hard to make the case that we shouldn't be moving in on the energy sector, particularly oil and coal," said Irish Foreign Minister Simon Coveney, according to a report from the news agency. "[The market] is starting to see this growing belief that eventually the EU is going to be put in a position where they will have to ban Russian energy supplies," "this drastic measure will really hurt the Russian economy, and you will see this market subject to some potentially severe disruptions in the near future." NYMEX April RBOB traded 13.35 cents higher at $3.3723/gal and April ULSD was up 23.23 cents at $2.8304/gal. The US has already imposed a ban on Russian oil imports, and further sanctions against Moscow are expected to be announced later this week. A drone attack perpetrated by Yemeni Iran-aligned Houthi rebels on the Yasref oil facilities in Saudi Arabia over the weekend added to supply risks. According to media reports, the attack had resulted in a temporary decrease in output at the refinery, but there were no casualties. "The assault on Yasref facilities has led to a temporary reduction in the refinery's production, which will be compensated for from the inventory," the company said. Falling COVID-19 cases in China have eased investor fears of infections spiraling out of control in the world's second largest economy. The country's National Health Commission reported 1,656 locally transmitted cases March 19, down from 2,157 the previous day. "Falling new cases underscored the country's prompt and stringent measures, including lockdowns and mass tests, in containing the rapid spread of the virus. This may help boost investor confidence amid the country's most severe viral outbreak since 2020," Chinese authorities had imposed restrictions across nearly 20 provinces and municipalities in recent weeks in a bid to contain the outbreak. The areas of Guangdong, Shandong, Jilin and Shanghai, which are among the epicenters of the COVID-19 outbreak this time, accounted for around 30% of China's oil consumption in 2021, data from S&P Global Commodity Insights showed. The lockdowns had prompted concerns of demand destruction that weighed on crude prices during the week ended March 18.
S. Arabia will not take responsibility for global oil supply disruptions: foreign ministry - Saudi Arabia will not take any responsibility for global oil supply shortages in light of the attacks on its oil facilities from Iranian-backed Houthis in Yemen, the kingdom's foreign ministry said on Monday. The statement stressed 'the importance of the international community realizing the gravity of Iran's continued behavior of equipping the Houthis with the technology of ballistic missiles, and unmanned aerial vehicles (UAV).' It also confirmed that the Houthis have targeted the kingdom's oil, gas and refined products facilities that have affected its production capability and ability to fulfill its commitments, resulting in serious consequences for the upstream and downstream sectors. The ministry urged the international community to take responsibility for preserving energy supplies given that the attacks are undermining 'the security and sustainability of energy supply to global markets.' Early Sunday, the Saudi-led coalition said air defenses had intercepted a ballistic missile and nine drones fired by Houthi rebels towards Saudi Arabia. A coalition statement said the rebel drones targeted a water desalination plant in Al-Shaqeeq, a facility run by Aramco in Jazan, a power station in the southern Dhahran al Janub city, a gas station in Khamis Mushait, and an Aramco plant in Yanbu. The coalition also said it had intercepted and destroyed three drones that targeted economic facilities. Yemen has been engulfed by violence and instability since 2014, when Iranian-aligned Houthi rebels captured much of the country, including the capital Sanaa. The conflict has created one of the world's worst man-made humanitarian crises, with nearly 80% of the country, or about 30 million people, in need of humanitarian assistance and protection and more than 13 million are in danger of starvation, according to UN estimates.
Crude jumps more than 7% as EU mulls Russian oil ban - Oil prices soared more than 7% on Monday, with global benchmark Brent crude climbing above $115 a barrel, as European Union nations considered joining the United States in a Russian oil embargo and after a weekend attack on Saudi oil facilities. Brent rose 7.12% to end the day at $115.62, while U.S. West Texas Intermediate (WTI) crude futures settled 7.09%, or $7.42, higher at $112.12. European Union governments will consider whether to impose an oil embargo on Russia over its invasion of Ukraine as they gather this week with U.S. President Joe Biden for a series of summits designed to harden the West's response to Moscow. "It could be the precipice for global trouble supply-wise," Ukraine defied a Russian demand that its forces lay down arms before dawn on Monday in Mariupol, where hundreds of thousands of civilians have been trapped in a city under siege and already laid to waste by Russian bombardment. With little sign of the conflict easing, the focus returned to whether the market would be able to replace Russian barrels hit by sanctions. "Optimism is seeping away about progress in talks to achieve a ceasefire in Ukraine and that's sent the price of oil on the march upwards," Over the weekend, attacks by Yemen's Iran-aligned Houthi group caused a temporary drop in output at a Saudi Aramco refinery joint venture in Yanbu, feeding concern in a jittery oil products market, where Russia is a major supplier and global inventories are at multi-year lows. Saudi Arabia on Monday said it would not be responsible for any global oil supply shortages after these attacks, in a sign of growing Saudi frustration with Washington's handling of Yemen and Iran. The latest report from the Organization of the Petroleum Exporting Countries and allies including Russia, together known as OPEC+, showed some producers are still falling short of their agreed supply quotas. Oil prices were also sensitive to talk of Hong Kong lifting COVID-19 restrictions, which could increase demand, and in response to the growing list of U.S. companies retreating from Russia - including Baker Hughes, ExxonMobil, Shell, and BP.
Oil Prices Retreat As EU Splits On Russian Embargo - Crude oil prices gave up early gains to turn lower on Tuesday after reports emerged that European Union foreign ministers are split on whether to join the United States in banning Russian oil.Brent crude futures dropped 1.4 percent to $113.88 per barrel, while WTI futures were down 1.9 percent at $107.86.Targeting Russian energy exports is a divisive choice for the 27-nation EU, which relies on Russia for 40 percent of its gas."The question of an oil embargo is not a question of whether we want or don't want (it), but a question of how much we depend on oil," German Foreign Minister Annalena Baerbock told reporters.Meanwhile, reports emerged that Ukrainian President Volodymyr Zelensky was prepared to discuss a commitment from Ukraine not to seek NATO membership in exchange for a ceasefire, the withdrawal of Russian troops and a guarantee of Ukraine's security. The prospect of a sharper hike in U.S. interest rates and concerns over demand arising from a surge in Covid-19 cases in China also prompted traders to book profits after strong gains in recent sessions.
Oil climbs on supply fears after Saudi oil facility attack, Russian oil ban risk - Oil prices rose sharply on Tuesday on escalating investor jitters over supply shortages due to an attack on Saudi oil facilities, coupled with EU plans to impose an embargo on Russian oil exports. International benchmark Brent crude was trading at $118.56 per barrel at 0633 GMT for a 2.54% gain after closing the previous session at $115.62 a barrel. American benchmark West Texas Intermediate (WTI) traded at $112.55 per barrel at the same time for a 2.34% increase after the previous session closed at $109.97 a barrel. Early Sunday, the Saudi-led coalition said air defenses had intercepted a ballistic missile and nine drones fired by Houthi rebels towards Saudi Arabia. A coalition statement said the rebel drones targeted a water desalination plant in Al-Shaqeeq, a facility run by Aramco in Jazan, a power station in the southern Dhahran al Janub city, a gas station in Khamis Mushait, and an Aramco plant in Yanbu. Saudi Arabia said it would not take any responsibility for global oil supply shortages in light of the attacks on its oil facilities from Iranian-backed Houthis in Yemen.
U.S. crude, fuel stockpiles fall as demand jumps - EIA (Reuters) - U.S. crude oil and fuel stockpiles fell last week as demand jumped, the Energy Information Administration said on Wednesday, further exacerbating tight world supplies following Russia’s invasion of Ukraine. Commercial crude inventories fell by 2.5 million barrels in the week to March 18 to 413.4 million barrels, even as the United States released 4.2 million barrels from its Strategic Petroleum Reserves (SPR), a signal of strong demand from both U.S. refineries and international buyers. Both gasoline and distillate stocks fell in the most recent week while product supplied - a rough proxy for demand - jumped 400,000 barrels per day (bpd) to 21.1 million bpd. U.S. gasoline stocks fell 2.9 million barrels to 238 million barrels, while distillate inventories , which include diesel and heating oil, decreased 2.1 million barrels. “Draws across the board constitute a very bullish report, especially given we tapped the SPR in this report. Refiners are storming back with utilization and the crack spreads have been terrific. It should give consumers some relief that there is supply being manufactured,” Oil prices extended their gains after the data, with U.S. crude trading $5.88, or 5.4%, higher on the day at $115.13 a barrel by 10:55 a.m. EDT (1455 GMT), while Brent rose by $6.40, or 5.6%, to $121.89. Prices have been surging in recent days once again as the world confronts a sharp drawdown in available supply due to heavy sanctions on Russia from the United States and its allies.
Major Russian pipeline fully halts oil exports, sending crude prices higher - Oil exports from a crucial pipeline on Russia’s Black Sea coast were fully halted on Wednesday, pushing crude prices higher amid fears that Moscow would interrupt energy supplies just as US president Joe Biden arrives in Europe to discuss the war in Ukraine. The Caspian Pipeline Consortium, the Moscow-headquartered group running a pipeline linking Kazakh oilfields with Russia’s Novorossiysk port, said on Wednesday that it was shutting down all three units used to load oil from the more-than-1,500km artery on to tankers, blaming storm damage. “The loading is fully stopped due to objective reasons because of abnormal storms,” said Nikolay Gorban, CPC’s chief executive, on Wednesday. “We have found some damage that does not allow [us] to operate the single point moorings further safely.” Gorban said two of the terminal’s three mooring units had suffered “critical” damage and were completely inoperable. A third was awaiting an inspection, but divers could not survey the damage until the storm cleared, he said. He added that any repair work would be delayed by western companies’ unwillingness to supply parts. Biden this month prohibited investments by US companies in Russia’s energy sector and banned on imports of oil from the country. The full closure comes as EU leaders prepare to discuss deeper sanctions on Moscow for its decision to invade Ukraine. The full shutdown on Wednesday came less than a day after Moscow said it would partially shut the infrastructure to assess storm damage to the port’s single point moorings. Florian Thaler, chief executive of OilX, an oil tracking firm, said repairs could be relatively simple, but “political problems may lengthen and actually worsen any shutdown”. The latest move will halt the export of 1.4mn barrels a day of oil, higher than the 1mn a day expected from the partial shutdown on Tuesday. Brent crude, the international oil marker, rose by 5 per cent to more than $121 a barrel on Wednesday. Gorban said the pipeline could continue to pump oil to the coast for another day, but with no way of exporting the crude the storage tanks at Novorossiysk would be filled by the end of Thursday, prompting a total closure of the pipeline. The CPC mainly ships oil produced in Kazakhstan by companies including Chevron and ExxonMobil, as well as some Russian crude from fields along the route. Chevron said earlier on Wednesday that exports from its Tengiz field continued uninterrupted. Exxon did not immediately respond to a request for comment. Thaler said about 10 per cent of the CPC’s oil could be shipped through another pipeline between Baku, in Azerbaijan, and Ceyhan, in Turkey. However, some production in Kazakhstan may have to be idled until the CPC reopened. According to the CPC, 213 of the 585 tankers loaded from the pipeline in 2021 went to Italy. Another 41 went to Spain, 39 to France and 26 to the US. The US import ban exempts oil produced in Kazakhstan, which accounts for roughly 90 per cent of the pipeline’s flows.
Oil jumps in volatile trade amid CPC pipeline disruption - Oil prices rose in volatile trading on Wednesday, supported by disruption to Russian and Kazakh crude exports via the CPC pipeline. Brent crude futures were up $6.35, or 5.5%, at $121.80 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose $5.72, or 5.2%, to $115 a barrel. The market remains on edge over the ripple effect of heavy sanctions on Russia, the world's second-largest crude exporter, after its invasion of Ukraine. The oil market has been volatile for weeks, and after a sharp drop last week, crude futures in recent days have been steadily advancing due to uncertainty over current supply. Russia on Tuesday warned of a drop in oil exports via the Caspian Pipeline Consortium (CPC) of up to 1 million barrels per day (bpd), or 1% of global oil production, because of storm-damaged berths. CPC exports stopped fully on Wednesday and repairs will take at least one and a half months, according to a port ship agent. "Prices are primarily rising on the loss of CPC Blend crude exports out of Novorossiisk, which accounts for about 1.3 million barrels per day of exports, adding further bullish fuel to the fire as the drop in Russian crude exports finally appears underway," said Matt Smith, lead oil analyst for the Americas at Kpler. U.S. President Joe Biden is set to announce more Russian sanctions when he meets with European leaders on Thursday in Brussels, including an emergency meeting of NATO. Russia refers to the invasion, which is now a month old, as a "special operation." European Union member countries remain split on whether to ban imports of Russian crude and oil products, but this might change once short-term contracts run out. "You'll know at the end of April what the total loss of Russian oil is," said Trafigura's Ben Luckock, at the FT Commodities Global Summit. He said it was possible that oil could reach $200 a barrel. Plunging crude stockpiles in the United States, the world's biggest oil consumer, added to the apprehension around supply. U.S. crude stocks fell by 2.5 million barrels for the week ended March 18, federal data showed, compared with expectations for a modest increase. Production remained flat at 11.6 million barrels per day for the seventh straight week. Evidence of concern about supply can be seen in the market structure, where front-month prices are trading at a heavy premium to following months, as buyers scramble to secure supplies. "I think you will see record backwardation and you will see $150 a barrel this summer," Luckock said. The one bit of supportive news from the report was the second straight increase in inventories at the Cushing, Oklahoma hub, the delivery point for U.S. crude futures contracts, where stocks rose by 1.2 million barrels.
Oil climbs 5% after Russia warns of prolonged pipeline outage - Oil prices rose sharply Wednesday after Russia warned a major oil pipeline could be out of service for more than a month due to storm damage, amplifying supply shortfalls caused by the war in Ukraine. News of the outage helped drive US oil prices nearly 5% higher to $114.60 a barrel in recent trading. Brent crude, the world benchmark, jumped 5.2% to $121.50 a barrel. The Caspian Pipeline Consortium, a system that carries oil from West Kazakhstan and Russian oil producers to the Black Sea, said in a statement Tuesday that an inspection revealed damage to a marine terminal. The group said some operations are being temporarily suspended to make repairs. A Russian energy official, quoted by Russian state news agency TASS, said Tuesday that the repair of the marine terminal near the Black Sea port of Novorossiysk could take six weeks to two months and may shrink oil exports by about 1 million barrels per day. "This is a rather serious timeframe," Pavel Sorokin, Russia's deputy energy minister, was quoted as saying by TASS. He added that a heavy storm damaged at least one of the three oil loading facilities and assessments are ongoing. The Russian government and Chevron own stakes in the Caspian Pipeline Consortium, which carries oil out of landlocked Kazakhstan. Chevron did not respond to a request for comment."This is quite a significant supply shock,"
Global diesel shortage pushes oil prices higher: Kemp - Chartbook: https://tmsnrt.rs/3qtkzbh (Reuters) - Worsening diesel shortages in the United States and the rest of the world are intensifying upward pressure on petroleum prices and threaten to recreate the conditions that led to the record price spike in 2008. U.S. distillate fuel oil inventories, the category including diesel, fell by 2 million barrels to 112 million barrels last week, according to high-frequency data from the U.S. Energy Information Administration (EIA).Distillate stocks have declined in 52 of the last 79 weeks by a total of 67 million barrels, and are at the lowest for the time of year since 2014 and before that 2008 (“Weekly petroleum status report”, EIA, March 23).Distillates have emerged as the tightest part of the oil market: U.S. inventories are 20% below the pre-pandemic five-year average for 2015-2019 compared with deficits of 11% in crude and 1% in gasoline.If stocks move in line with seasonal patterns over the last ten years, inventories are expected to drop to a low of 104 million barrels before the middle of the year, which would make them as tight as they were in 2008.In the reasonable worst case scenario, however, stocks could deplete to as little as 93 million barrels, which would be critically low and lead to explosive upward pressure on prices.Similar distillate shortages have emerged in Europe and Asia as the rapid recovery in consumption after the pandemic has outrun increased output of crude oil and refinery production of diesel.By the end of February, Europe’s distillate stocks had already fallen to the lowest seasonal level since 2008. Singapore’s stocks are currently at the lowest seasonal level since 2006.Middle distillates such as diesel and gas oil are primarily used in freight transport, manufacturing, farming, mining, and oil and gas extraction, making them the most cyclically sensitive part of the oil industry.Synchronised global expansion in North America, Europe and Asia has created an acute shortage much as it did in 2007/2008.In consequence, distillate pries are leading the entire oil market higher, with upward pressure on diesel prices spilling over into the adjacent market for gasoline and the upstream market for crude.In the United States, the average on-road price of diesel has climbed by 61% over the last year compared with a 47% rise in gasoline prices, according to the EIA.In 2008, distillate shortages helped to push crude to an inflation-adjusted peak over $187 per barrel around the middle of the year, after distillate stocks hit abnormal seasonal lows a few months earlier.Russia is a major exporter of middle distillates as well as distillate-rich residual fuel oil and crude, primarily to countries in Europe.Russia accounted for 29% of Europe’s imported crude oil and 39% of its imported products in 2020, according to BP (“Statistical review of world energy”, BP, 2021).Futures markets have anticipated a possible disruption by pushing distillate prices to an enormous premium over crude.Front-month European gas oil futures prices are trading at a premium of $46 per barrel over Brent, up from $15 before the invasion and less than $4 a year ago.In real terms, current gas oil prices of around $167 per barrel are already in the 97th percentile for all months since 1990, though still well below the inflation-adjusted peak of $226 in 2008.Ultra-high prices are a signal to refiners to maximise crude processing and distillate production, and to consumers to reduce diesel use as much as possible, to rebuild depleted inventories.
‘Wakey, wakey. We are not going back to normal business in a few months’: A top hedge-fund manager says crude oil prices could hit $250 this year - Energy industry experts are warning oil prices could double from current levels to $250 per barrel this year amid an ongoing international boycott of Russian energy supplies. There simply aren’t sufficient supply alternatives available outside of Russia, according to Pierre Andurand, who runs Andurand Capital Management and is known as one of the top hedge fund managers in the energy sector. “Wakey, wakey. We are not going back to normal business in a few months,” Andurand said on Wednesday at the FT’s Commodities Global Summit in Lausanne, Switzerland. “I think we’re losing the Russian supply on the European side forever.” The price of Brent crude oil, the international benchmark, rose as high as $139 per barrel after Russia’s invasion of Ukraine caused the six-largest disruption in oil’s supply since WWII. And despite a subsequent pullback, prices have begun to climb again in the past week, rising nearly 20%. On Thursday, Brent crude was back to trading near $120 a barrel, as renewed fears of a disruption in energy supplies from Russia continue to shake the market. Andurand isn’t the only top commodities expert predicting oil prices will soar to record highs. Doug King, the chairman of RCMA’s Merchant Commodity Fund, said at the FT Commodities Global Summit this week that he also believes oil prices could move as high as $250 a barrel this year. “This is not transitory. This is going to be a crude supply shock,” he said. Oil prices have experienced volatile trading since Russia invaded Ukraine, but things could get far worse if the E.U. decides to follow the U.S. in banning Russian oil imports. The E.U. buys roughly a quarter of its oil and more than 40% of its natural gas from Russia. Russian President Vladimir Putin’s decision to force "unfriendly" countries, including the U.S., E.U., U.K., and Japan, to settle energy transactions in rubles, rather than in U.S. dollars or euros, has also added to fears that Russia may be willing to retaliate for sanctions by restricting energy exports. Russian authorities also closed an oil pipeline that carries over 1% of global oil demand on Wednesday, citing storm damage. “If a weather-related ‘accident,’ it is certainly a convenient one from Moscow’s standpoint,” Bob McNally, head of consultancy Rapidan Energy Group, told the Financial Times on Wednesday.
Brent Tops $120 on Russia Choking Off Pipeline, Stock Draws - -- Oil futures nearest delivery settled Wednesday's session sharply higher, with both U.S. and international crude benchmarks spiking more than 5%. The gains came after Russian officials warned the Caspian Pipeline Consortium pipeline sustained extensive damage from storm-like conditions over the Black Sea, potentially removing up to 1 million barrels per day (bpd) or 1% of oil supply from the global market for two months, while larger-than-expected declines in U.S. commercial crude and petroleum product inventories lent additional support. Russia announced on Tuesday it throttled throughput on the major pipeline that carries crude oil from Kazakhstan's Tengiz oilfields along the Caspian Sea to ports on the Russian coastline of the Black Sea. According to Russian officials, part of a marine port sustained severe damages that could take 1-1/2 to 2 months to repair given "current market conditions," an apparent reference to recent Western sanctions. The pipeline's capacity is about 1.4 million bpd, and accounts for transporting about 2.5% of global seaborne oil trade and around two-thirds of Kazakhstan's oil exports, making it a vital artery for the country's economy. Refiners in the Mediterranean and Western Europe are the largest buyers of CPC Blend, with refiners in Italy, the Netherlands, France, and Turkey being the largest buyers of the grade last year. Millions of barrels of Russian oil are still finding a way to buyers despite the reluctance of U.S. and European companies to deal with Russian cargos, according to traders and analysts. Some suggest Russian oil exports "have gone underground" as the market adjusts to new risks in dealing with Russian oil. So far, combined exports of crude and products appear to be running at normal levels, with Baltic port activity at 1.55 million bpd and the Black Sea at 325,000 bpd. Much of this oil might be going into storage from where it could be resold to refiners, bypassing reputational risk and sanctions. Others suggest that Russian oil exports will collapse by 2 million to 3 million bpd in coming weeks as Western companies shun any dealings with oil shipments from the sanctioned country. Chaos in global supply chains is unlikely to ease anytime soon, according to Federal Reserve Chair Pro Tempore Jerome Powell, who gave a pivotal speech this week in front of the National Association of Business Economics, citing COVID-related shutdowns in China and the blockade of Ukraine's Back Sea ports of Mariupol and Odessa. With Moscow's war raging in Ukraine, exporters and logistics firms are now forced to find new transportation routes that would avoid combat zones and Russia's massive landmass. Further supporting the oil complex, U.S. total oil and petroleum products stocks fell 6.7 million bbl in the week ended March 18 to the lowest inventory level since November 2014 at 1.136 billion bbl. Included in the draw was a 2.5 million bbl decline in commercial crude oil inventories that now stand more than 13% below the five-year average. Domestic refiners increased run rate last week by a larger-than-expected margin to 91.1% of capacity, while processing 276,000 bpd more crude from the previous week. Surprisingly, domestic oil production once again showed no response to $100 bbl oil prices, stalling near 11.6 million bpd since the start of February. At this production rate, domestic oil output is still below its 13 million bpd record high reached before the pandemic. Gasoline inventories declined 2.9 million bbl in the reviewed week compared with expectations for inventories to have been drawn down by 1.5 million bbl. Distillate stocks fell 2.1 bbl to 112.1 million bbl, and are now about 17% below the five-year average, EIA data shows. Demand for distillate fuels increased 812,000 bpd from the prior week to 4.516 million bpd. On the session, NYMEX May West Texas Intermediate futures advanced $5.66 per bbl to settle a tad below $115 at $114.93 bbl, and ICE May Brent futures rallied to $121.60 per bbl, up $6.12 since Tuesday's settlement. NYMEX April RBOB futures registered a 10.80-cent gain for a $3.4387-per-gallon settlement, and April ULSD futures spiked 25.06 cents or 6% to $4.1148 per gallon.
Oil Futures Steady After CPC Closure, Eurozone Growth Slows -- Oil futures nearest delivery moved mixed in early trade Thursday, with both U.S. and international crude benchmarks stalling near 14-year highs as investors assess implications from the disruption of the Caspian Pipeline Consortium network on global supply balances, with the closure of the infrastructure threatening to remove up to 1 million bpd of crude oil from an increasingly tightening global oil market. Kazakhstan Energy Minister Bulat Aqchulaqov said on Thursday that closure of the CPC pipeline could last up to six weeks due to ongoing repairs at the Novorossiysk export terminal that allegedly sustained extensive damages from storm-like conditions this week. The pipeline's capacity is estimated at 1.4 million bpd and accounts for two-thirds of Kazakhstan total oil exports, making it a vital artery for the country's economy. Organization of the Petroleum Exporting Countries pegged Kazakhstan oil production close to 2 million bpd at the start of the year after antigovernment protests briefly shuttered operations at the country's major oil fields of Tengiz and Kashagan. The timing of the shutdown is curious considering European governments are in discussions this week over sanctioning Russian oil exports in response to Moscow's aggression in Ukraine. U.S. President Joe Biden landed in Brussels on Wednesday for an emergency summit among North Atlantic Treaty Organization that will address Russia's invasion of Ukraine. So far, combined Russian exports of crude and products appear to be running at normal levels, with Baltic port activity at 1.55 million bpd and the Black Sea at 325,000 bpd. Much of this oil might be going into storage from where it could be resold to refiners, bypassing reputational risk and sanctions. Others suggest that Russian oil exports will collapse by 2 to 3 million bpd in coming weeks as Western companies shun any dealings with oil shipments from the sanctioned country. Offsetting losses for the oil complex, Energy Information Administration said U.S. total oil and petroleum products stocks fell 6.7 million bbl in the week-ended March 18 to the lowest inventory level since November 2014 at 1.136 billion bbl. Included in the draw was a 2.5 million bbl decline in commercial crude oil inventories that now stand more than 13% below the five-year average. Domestic refiners increased run rate last week by a larger-than-expected margin to 91.1% of capacity, while processing 276,000 bpd more crude from the previous week. Near 7:45 AM ET, NYMEX May West Texas Intermediate futures slipped $0.35 bbl to trade near $114.56 bbl, and ICE May Brent futures traded near $121.32 bbl, down $0.31. NYMEX April RBOB futures fell 2.33 cents to $3.4154 gallon, and April ULSD futures advanced 2.83 cents to $4.1431 gallon.
Oil prices fall as U.S., allies consider further oil stock release - Crude prices fell on Thursday as the United States and its allies discussed a possible further coordinated release of oil from storage to help calm energy markets in the wake of Russia's invasion of Ukraine. Benchmark Brent fell by $1.99, or 1.6% to $119.61 a barrel. U.S West Texas Intermediate (WTI) was down $2.10, or 1.8%, at $112.82 a barrel. "With respect to the emergency stockpiles, these are ongoing discussions and all those tools are certainly on the table," U.S. energy secretary Jennifer Granholm said at a news conference at the headquarters of the International Energy Agency in Paris. IEA Executive Director Fatih Birol said IEA countries were united in seeking to radically reduce Russian oil and gas imports. Further adding to bearish sentiment, officials of the Organization of the Petroleum Exporting Countries (OPEC) have expressed to the EU their unease about a proposed ban on Russian oil, OPEC sources said. Trading was volatile though. Earlier in the session WTI and Brent rose by around $2 a barrel on lingering supply concerns including reports that crude exports from Kazakhstan's Caspian Pipeline Consortium (CPC) terminal had completely halted following storm damage. Investors were also waiting to see how Western sanctions will be tightened on Russia over its invasion of Ukraine. Commerzbank analyst Carsten Fritsch said sanctions were unlikely to have a major impact on the oil market because they "will probably not include an oil embargo by the EU, as a number of countries that are heavily depend on Russian oil — such as Germany — have opposed this." Thursday's price fall was capped by a drop in U.S. crude in the Strategic Petroleum Reserve (SPR), which fell to the lowest level since May 2002, the U.S. Energy Information Administration (EIA) said on Wednesday. Adding to concerns about available supply, slow progress in talks on a deal between world powers and Iran over Tehran's nuclear work means prospects for Iranian crude returning to the market have been pushed back. "Unless Iran is allowed back to the market quickly it is hard to see how further price increase, potentially above the recent peaks, can be avoided," PVM oil broker Tamas Varga said.
Oil slides 2% as EU fails to boycott Russian crude - Crude prices slid 2 per cent on Thursday (Mar 24) after the European Union (EU) could not agree on a plan to boycott Russian oil and on reports that exports from Kazakhstan's Caspian Pipeline Consortium (CPC) terminal could partially resume. European Union leaders are set to agree at a 2-day summit starting on Thursday to jointly buy natural gas as they seek to cut reliance on Russian fuels, with some saying they would not comply with Moscow's demand to buy oil and gas using roubles. But EU countries remain divided on whether to sanction Russian oil and gas directly, a move already taken by the United States. Brent futures fell US$2.57 or 2.1 per cent to settle at US$119.03 a barrel, while US West Texas Intermediate (WTI) crude fell US$2.59 or 2.3 per cent to settle at US$112.34. On Wednesday, both benchmarks closed at their highest since Mar 8. Russia's invasion of Ukraine on Feb 24 has prompted the EU to pledge to slash reliance on Russian fossil fuels by hiking imports from other countries and quickly expanding renewable energy. The North Atlantic Treaty Organization (Nato) offered Kyiv new military assistance and assigned more troops to its eastern flank as London and Washington imposed fresh sanctions on Moscow. But without an EU embargo of Russian oil, Commerzbank analyst Carsten Fritsch said sanctions were unlikely to have a major impact on the oil market. As the EU remains split on imposing outright bans on Russian oil, analysts at Rystad Energy said India and China could import more Russian barrels to boost their refined products output. The United States and its allies, meanwhile, were discussing a possible further coordinated release of oil from storage to help calm oil markets. Also weighing on crude prices, the dollar strengthened for the fourth time in 5 sessions. A stronger dollar makes oil more expensive for holders of other currencies. Oil prices fell further after ICE increased margins for May Brent crude futures by 19 per cent effective Mar 25, the third margin update this year. Trading was volatile for both crude benchmarks, which rose to fresh 2-week highs early in the session on lingering supply concerns including early reports that crude export loadings were suspended at Kazakhstan's CPC terminal following storm damage. But 4 sources familiar with the matter said oil exports via the CPC pipeline will partially resume on Thursday. "Reports that the CPC pipeline would return was a big relief to the market," Crude prices drew some support from the drop in US crude in the Strategic Petroleum Reserve (SPR) to the lowest level since May 2002. US crude at the Cushing storage hub in Oklahoma fell in the week to Mar 22, traders said, referring to a report from data provider Genscape. US government data has shown stockpiles there rising for the past 2 weeks. Canada said it has capacity to increase oil and natural gas exports by up to 300,000 barrels per day in 2022 to help improve global energy security.
Oil Falls as CPC Pipeline Restarts, EU Avoids Oil Sanctions -- Oil futures nearest delivery fell more than 2% early Friday in reaction to reports suggesting the Caspian Pipeline Consortium network partially resumed operations at the Black Sea terminal after a successful inspection of a single port mooring (SPM-1) revealed limited damage to the loading infrastructure, easing concern that a prolonged disruption of Kazakhstan oil exports would exacerbate a shortfall of available supplies on the global oil market. Oil loadings at the Novorossiysk export terminal on the Black Sea resumed sooner-than-expected, according to Kazakhstan's energy minister Bulat Aqchulaqov, who indicated that one of the three moorings at the site sustained little damage from an alleged storm. Earlier this week, Russian officials argued that it could take up to six weeks to fix damaged infrastructure at the port that processes up to 90% of Kazakhstan oil exports. The CPC pipeline has a 1.4 million bpd capacity that carries crude oil from oilfields in central Asia to export terminals on the Black Sea. A prolonged disruption of the CPC pipeline could have forced Kazakhstan to shutter producing wells because of limited storage capacity that could have inflicted long-lasting damage to the country's production capacity. European leaders this week decided against sanctions on Russian oil and gas exports as part of a response to Moscow's aggression in Ukraine -- a decision that could have removed up to 3 million bbl in daily crude exports from Russia. Speculation had been building for weeks that a potential ban on Russian oil could in fact be implemented after some European leaders voiced support for the embargo. Countries that are less dependent on Russian oil, such as Sweden, Ireland, and the Czech Republic, view an oil ban as an option while some of the bloc's largest importers, like Germany and Netherlands, remain opposed to the idea. . The United States and European Union inked a deal on Thursday that would deliver an additional 15 billion cubic meters of liquified natural gas to the bloc, part of efforts to ease the region's reliance on Russian energy supplies. Near 7:30 a.m. ET, NYMEX May West Texas Intermediate futures fell more than $2 bbl to $110.22 bbl, and ICE May Brent futures declined to $117 bbl, also down $2 on the session so far. NYMEX April RBOB futures fell 2.72 cents to $3.3625 gallon, and April ULSD futures dropped back 4.38 cents to $4.1096 gallon.
Oil rises to over US$120/barrel after attack on Saudi facilities - Crude prices rose more than 1 per cent to over US$120 a barrel on Friday, as traders reconciled the impact of a missile attack on an oil distribution facility in Saudi Arabia with a possible release of oil reserves by the United States. Brent crude settled up US$1.62, or 1.4 per cent, to US$120.65 a barrel and US West Texas Intermediate (WTI) crude ended US$1.56, or 1.4 per cent higher, at US$113.90. Both had dropped US$3 earlier. Both benchmarks notched their first weekly gains in three weeks - Brent rose more than 11.5 per cent and WTI gained 8.8 per cent. Yemen's Houthis said they launched attacks on Saudi energy facilities on Friday and the Saudi-led coalition said Aramco's fuel distribution station in Jeddah had been targeted by an attack, but that a fire in two tanks at the facility had been brought under control. Saudi Arabia said it will not hold responsibility for any shortage of oil supplies in global markets caused by Houthi attacks on its oil facilities. The Iran-aligned Houthi movement that has been battling a coalition led by Saudi Arabia for seven years launched missiles on Aramco's facilities in Jeddah and drones at Ras Tanura and Rabigh refineries, the group's military spokesman said. "The market, which was already shunning Russian oil supplies, has another thing to worry about with Houthi attacks potentially impacting Saudi Arabia's production," said Andrew Lipow, president of Lipow Oil Associates in Houston, noting that the Houthi attacks were becoming more frequent. The attack comes just five days after the Houthi group fired missiles and drones at Saudi energy and water desalination facilities, causing a temporary drop in output at a refinery. With global stockpiles at their lowest since 2014, analysts have said the market remained vulnerable to any supply shock. The Biden administration is considering another release of oil from the Strategic Petroleum Reserve that, if carried out, could be bigger than the sale of 30 million barrels earlier this month, a source said. The US oil rig count, an early indicator of future output, rose seven to 531 this week, its highest since April 2020, as the government urged producers to boost output in the wake of Russia's invasion of Ukraine. Even though the oil rig count has climbed for 19 straight months, the increases have been small and slowed down recently because many companies focus on returning money to investors rather than boosting output and are facing supply constraints. Oil prices slipped earlier in the session as exports from Kazakhstan's CPC crude terminal partially resumed and the EU held off on imposing an embargo on Russian energy as members remained split on the issue.
Oil Settles Up this Week with Saudi Arabian Facilities Under Attack -Oil posted its first weekly gain in three weeks as the European Union continued to debate how it can decrease its reliance on Russian exports and Saudi Arabian energy assets came under attack. Futures in New York gained $9.20 this week, the second biggest dollar gain since 2011. Oil reversed its losses earlier in Friday’s session as Yemen’s Houthi rebels claimed responsibility for a series of attacks on Saudi Aramco facilities, including an oil storage site in Jeddah. Saudi Arabia warned this week that crude supplies are at risk, and called on the U.S. to do more to counter attacks from the Iran-backed rebels. The attack on Aramco facilities is likely to cause some short-term operational disruptions, and may temporarily reduce Saudi supply, said Rohan Reddy, a research analyst at Global X Management, a firm that manages $2 billion in energy-related assets. “The broader geopolitical issues that continue in the country could lead to lingering supply reductions, and put upside pressure on oil prices.” Oil is up this week as the war in Ukraine continues to roil an already tight commodities market. The U.S. and U.K. have moved to bar Russian oil in response to the invasion and many energy firms are also choosing to shun the nation’s crude. Yet buyers in China and India appear to be soaking up some of those barrels. Russia is now aiming to ship the largest amount of its flagship Urals crude in almost three years next month, dangling a supply carrot to oil refineries in Europe who face surging energy prices. EU industrial powerhouse Germany has said it plans to quickly wean itself off Russian fossil fuels, though warned an immediate embargo is not possible because of the damage it would cause to Europe’s biggest economy. The task will be difficult, especially without decreasing Germany’s demand at the same time. Austria also said it won’t agree to an embargo of Russian oil and gas, calling the ban “unrealistic” for the country. West Texas Intermediate for May delivery rose $1.56 to settle at $113.90 in New York. Brent for May settlement rose $1.62 to settle at $120.65 a barrel. Oil markets remain backwardated, a bullish pattern marked by higher prices for near-term barrels than those further out. Brent’s prompt spread -- the difference between its two nearest contracts -- was $3.28 a barrel on Friday, up from 41 cents at the start of the year. Initial margins have also surged, adding to trading costs and compounding the retreat by traders.
Yemen's Houthis claim attack on Aramco facility after reports of a huge fire in Saudi city of Jeddah - A huge plume of smoke could be seen above an oil facility in the Saudi city of Jeddah on Friday, according to multiple media reports, with Yemen's Houthi group claiming they had attacked a Saudi Aramco site with missiles. The Associated Press cited videos of a raging fire at an oil depot, saying the location of the blaze was near the North Jeddah Bulk Plant — which is southeast of the city's international airport. Meanwhile, a Reuters source said a Saudi Aramco facility had been hit. A Formula One auto race is due to take place in Jeddah this weekend. The Iran-backed Houthis claimed they were behind the strike with a military spokesperson adding that they had also used drones to hit the Ras Tanura and Rabigh refineries, according to Reuters. The additional strikes could not be confirmed. Brent crude settled 1.36% higher at $120.65 per barrel, while U.S. West Texas Intermediate crude added 1.39% to end the day at $113.90. Both had traded in negative territory earlier in the session. A spokesperson for Saudi Aramco was not immediately available for comment when contacted by CNBC. On Sunday morning, Saudi authorities confirmed an attack on Aramco facilities last weekend, with Houthi rebels using missiles and drones to target at least six sites across the kingdom, including an Aramco fuel depot and a liquefied natural gas plant. "There were no injuries or fatalities, and no impact on the company's supplies to customers," Aramco CEO Amin Nasser said Sunday on an earnings call. The Houthis have carried out thousands of cross-border missile and drone attacks into Saudi Arabia in the years since Riyadh launched its aerial assault on Yemen, which has killed tens of thousands of Yemenis. Aramco suffered a major attack on its facilities in 2019, when strikes on the Abqaiq and Khurais facilities cut off roughly half the kingdom's oil production in one day. Abqaiq, in Saudi Arabia's eastern province, is the world's largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day. Khurais is the second-largest oil field in the country with a capacity to pump around 1.5 million bpd.
Saudi Aramco's full-year profit more than doubles on soaring oil prices -Saudi Arabian oil giant Aramco reported blowout full-year earnings on Sunday, posting a more than doubling in year-on-year net profit to $110 billion. Aramco's 2021 net income increased by 124% to $110 billion in 2021, compared to $49 billion in 2020, citing higher crude oil prices, stronger refining and chemicals margins, and the consolidation of its chemicals business, SABIC's, full-year results. The numbers were in line with expectations, with analysts surveyed by Reuters forecasting net income of $109.7 billion for the full year. Aramco shares on the Saudi Tadawul Exchange rose almost 4% in Sunday trading after the result. Aramco benefitted from surging oil prices during 2021, with international benchmark Brent crude rising above $80 a barrel by the end of the year, up roughly 50% for the 12-month period. Supply shortages added to a complex slew of factors driving major uncertainty across the energy and commodity complex, even before Russia's invasion of Ukraine. "Although economic conditions have improved considerably, the outlook remains uncertain due to various macro-economic and geopolitical factors," It comes after the IEA warned that the oil market was heading for its "biggest supply crisis in decades" as Russian sanctions hit and buyers shun its exports. "We see healthy oil demand. Unfortunately there is shrinking global spare capacity, combined with low inventories and a lack of investment," Nasser said on an earnings call Sunday. He also blamed "a transition plan that is totally unrealistic" for the current pricing dynamic. The result and earnings call also came just hours after Saudi authorities confirmed another attack on Aramco facilities on Sunday, with Houthi rebels using missiles and drones to target at least six sites across Saudi Arabia, including an Aramco fuel depot and a liquefied natural gas plant. "There were no injuries or fatalities, and no impact on the company's supplies to customers," Nasser said. "We were able to restore operations rapidly, while ensuring reliability of supply to our customers." Aramco also declared a fourth quarter dividend of $18.8 billion, to be paid in the first quarter of 2022. The dividend is covered by a rise in free-cash flow to $107.5 billion in 2021, compared to $49.1 billion in 2020. The profit figures are a stark contrast from the company's 2020 earnings, which saw a 44% drop on the previous year due to demand collapse brought on by the coronavirus pandemic. The company also said it would invest to increase crude oil production capacity to 13 million barrels per day by 2027, expand its liquid to chemical production, and look to increase gas production by more than 50% by 2030. Aramco has also said it wants to achieve net-zero Scope 1 and Scope 2 greenhouse gas emissions across its wholly-owned operated assets by 2050. Scope 1 refers to direct emissions from sources owned or controlled by the company, while Scope 2 covers indirect emissions from the generation of purchased power consumed by the company. s. Capital expenditure in 2021 was $31.9 billion, an increase of 18% from 2020, primarily driven by increased activities in relation to crude oil increments, the Tanajib Gas Plant and development drilling programs. Aramco expects 2022 capital expenditure to be approximately $40-50 billion, with further growth expected until around the middle of the decade.
Russia is considering selling its oil and gas for bitcoin as sanctions intensify from the West - Faced with stiffening sanctions from Western countries over its invasion of Ukraine, Russia is considering accepting bitcoin as payment for its oil and gas exports. In a videotaped news conference held on Thursday, the chair of Russia's Duma committee on energy said in translated remarks that when it comes to "friendly" countries such as China or Turkey, Russia is willing to be more flexible with payment options. Chair Pavel Zavalny said that the national fiat currency of the buyer — as well as bitcoin — were being considered as alternative ways to pay for Russia's energy exports. "We have been proposing to China for a long time to switch to settlements in national currencies for rubles and yuan," Zavalny said in translated comments. "With Turkey, it will be lira and rubles." He didn't stop with traditional currencies. "You can also trade bitcoins," he said. Bitcoin is up close to 4% over the last 24 hours to about $44,000. The price of the cryptocurrency spiked around the time that news reports of Zavalny's remarks first crossed. The energy chair also doubled down on President Vladimir Putin's promise on Wednesday to require "unfriendly" countries to pay for gas in Russian rubles. Putin's announcement sent European gas prices soaring over worries the move might aggravate an energy market already under pressure. "If they want to buy, let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency," Zavalny said, in comments that echoed the president's warning from the day before.
Russia will only accept rubles for gas deliveries to Europe: Putin - President Vladimir Putin said Wednesday Russia will only accept payments in rubles for gas deliveries to “unfriendly countries,” which include all EU members, after Moscow was hit by unprecedented sanctions over Ukraine. “I have decided to implement a set of measures to transfer payment for our gas supplies to unfriendly countries into Russian rubles,” Putin said during a televised government meeting, ordering the changes to be implemented within a week. He said Russia will stop taking payments in currencies that have been “compromised.” “Russia will continue supplying gas in the volumes fixed in earlier contracts,” Putin added. Putin also described as “illegitimate” the freezing of Russia’s assets abroad. He said the United States and the European Union have declared a “real default” on their obligations to Russia. “Now everyone in the world knows that obligations in dollars can be defaulted,” Putin said. Immediately after the announcement, the ruble strengthened against the US dollars and the euro.
Some Additional Comments on the Russian Counter-Sanction of Requiring Gas Payments in Roubles - Lambert and I noticed that the news flow today seems peculiarly, erm, flaccid. That seems peculiar since the geopolitical-fault-lines testing war in Ukraine is still on, and NATO and the G7 had a summit in Brussels yesterday, plus we have the new elephant in the room of the Russian only-rouble-payments-for-gas-if-you-whacked-our-banks counter-sanction.Normally big players have some press set pieces ready to launch after major meetings, as foretold by Reuters: Biden’s Brussels trip to highlight new Russia sanctions, NATO posture plans. Japan was also set to announce additional sanctions and actually will, according to Nikkei:Japanese Prime Minister Fumio Kishida promised to impose high tariffs on Russian imports on Thursday as the leaders of the Group of Seven nations gathered here to turn up the diplomatic and economic pressure on Moscow.It turns out this centerpiece is ending Russia’s most favored nation status, which the countries that participated in the economic sanctions pledged to implement, so moving forward with that measure isn’t exactly a new sanction. However, Japan is barring exports to Russian defense-related companies and of luxury goods, and will try to prevent cryptocurrencies from being used to evade sanction.But according to Nikkei the US did add to its Russian sanctions, although it’s not surprising that the press didn’t tout them, since they are symbolic: The U.S. also announced a wave of fresh sanctions Thursday against Russian lawmakers, defense companies and individuals including the head of Sberbank, Russia’s largest bank.Nikkei confirmed no big actions were taken at the summits:The first face-to-face G-7 summit since Russia’s invasion of Ukraine served to showcase unity against Moscow. But the bloc’s joint statement includes no specific proposals for new responses or additional sanctions. It is unclear whether the meeting alone can alter Russian President Vladimir Putin’s behavior. So one has to wonder what happened, since the intent of a session like this is to convey resolve. Was it that the leaders got realistic briefings on how the war is going? Or did Russia’s gas counter-sanction rearrange the agenda? As far as the Russia gas-only-for-roubles counter-sanction, a lot of the commentary, particularly from officials, was not well informed. But this one at Reuters was an eye-opener: Asked whether the United States would allow European nations that cannot manage without Russian gas to process payment in roubles without finding themselves in a breach of sanctions, a White House official said Washington was consulting with its allies.So much for national sovereignty.The Wall Street Journal reports that the US is happy to take advantage of the gas price squeeze taking steps to reduce the impact of the economic war it set off: U.S. to Boost Gas Deliveries to Europe Amid Scramble for New Supplies. But the IEA had already pointed out that Europe was going to need to do a lot of energy belt-tightening over the next four months alone. And I have yet to see any energy expert indicate that it is possible for Europe to plug its energy hole in anything less than a few years, let alone the even bigger gap set to open up for countries who refuse to authorize payments in roubles.
Michael Hudson Talks with the Saker About the Russian Counter-Sanction of Paying for Its Gas With Roubles Originally published at Vineyard of the Saker: Following Putin’s announcement about selling gas for Rubles only to hostile nations, I decided to reach out to Michael Hudson and ask him (my level, primitive) questions. Here is our full email exchange:
- Andrei: Russia has declared that she will only sell gas to “hostile countries” for Rubles. Which means that to non-hostile countries she will continue to sell in Dollars/Euros. Can these hostile countries still purchase gas from Russia but via third countries?
- Michael Hudson: There seem to be two ways for hostile countries to buy Russian gas. One seems to be to use Russian banks that are not banned from SWIFT. The other way would indeed seem to be to go through what looks to develop as a formal or informal third-country bank or exchange. India and China would seem to be the best positioned for this role. U.S. diplomats will be pressing India to impose its own sanctions on Russia, and there is a strong pro-U.S. constituency there. But even Modi sees the obvious superior benefits of benefiting from India’s geopolitical position with Russia and China’s Belt and Road Initiative relative to whatever the U.S. has to
- Back in the 1960s the West dealt with the Soviet Union using barter deals. Arranging this barter became a big banking business. Barter is the typical “final stage” of the deterioration of a credit economy into a money economy that breaks down. Over the medium term, a new international financial organization needs to be created as an alternative to the dollarized IMF to handle such intra-bloc transactions in today’s new multipolarizing world.
- Andrei: These hostile nations would pay extra for that service, but they would not have to get Rubles. Is that even possible?
- Michael Hudson: Presumably Russia would not absorb the added bank costs of avoiding U.S. sanctions. It would simply add them on to the price, after setting the price at which it hopes to end up with – preferably at the original “old” ruble/euro or ruble/dollar exchange rate, not the post-attack depreciated rate.
- Andrei: Question: Do you believe that the EU will agree to pay Roubles or will they take the total loss of 40% of their energy?
- Michael Hudson: They will pay – or be voted out of office. If they WERE to cut their energy imports from Russia, the distress-price of gas would soar and there would be drastic shortages disrupting the economy. Energy is productivity and GDP. For Russia, of course, this is an opportunity to make the break now instead of later – and leave NATO to take the blame for the interruption of supply. So if I were Russia, I would not be in a hurry to help solve the foreign-payment problem. The same goes for non-oil raw materials, from neon to palladium to titanium, nickel and aluminum.
- Andrei: So far, this applies only to natural gas. Do you believe that Russia will extend this to petroleum, wheat and fertilizers and, if yes, what will the effect from this be for the world economy?
- Michael Hudson: All Russian exports are affected by these currency controls, because all bank transfers are sanctioned in the way discussed above. Russia has no use for dollars or euros, because these can be grabbed. It needs to have complete control over whatever monetary assets it receives, now that past norms of international law and financial policy no longer apply.
Japan unsure how Russia will handle energy payments sold to ‘unfriendly’ nations - Japan does not know how Russia will handle the required ruble payments for its energy sold to “unfriendly” countries, the finance minister said on Thursday. Japan accounted for 4.1 percent of Russia’s crude oil exports and 7.2 percent of its natural gas exports in 2021. “Currently, we’re looking into the situation with relevant ministries as we don’t quite understand what is (Russia’s) intention and how they would do this,” Finance Minister Shunichi Suzuki said in a parliament session. The government will also coordinate with Japanese companies to collect information about the move, Chief Cabinet Secretary Hirokazu Matsuno told a Thursday news conference. Russia’s President Vladimir Putin said on Wednesday his country would seek payment in rubles for gas sales to “unfriendly” countries in retaliation for Western sanctions against its invasion of Ukraine. Russia has put Japan on its “unfriendly” nation list along with the United States, European Union member states, and others. Japan has revoked Russia’s most-favored nation trade status, banned exports of certain goods to the country and frozen assets of about a hundred Russian individuals, banks and other organizations after the invasion, which Moscow calls a “special military operation. Suzuki said the government would closely monitor the “side effects” of the sanction measures on the Japanese economy and financial markets and continue to take appropriate steps in coordination with the Group of Seven (G7) and the international community. On Wednesday, Japan’s Prime Minister Fumio Kishida said he planned to announce further sanctions against Russia at an upcoming G7 meeting in Brussels.
China to release enough emergency oil reserves to meet its own needs -China will release enough oil to meet the country's needs from its strategic reserves, a foreign ministry spokesman said without commenting on the country’s role in the US-led initiative of a coordinated emergency stock sale from major oil consumers, according to international media reports on Wednesday. Speaking at a press conference, Zhao Lijian said 'the Chinese side will organize a release of crude oil from state reserves according to its own actual needs,' adding that details of the sale would be publicized as soon as possible. His remarks came one day after US President Joe Biden announced his much-expected oil sale from the Strategic Petroleum Reserves (SPR) to provide additional market supply and lower crude prices. The US Department of Energy will release 50 million barrels of oil from the SPR, the largest petroleum stockpile in the world used for emergencies. While 32 million barrels will be exchanged over the next several months, 18 million barrels will be accelerated from a previously authorized sale by Congress, according to the White House. The move is a coordinated effort, a first of its kind, along with other major energy-consuming nations, including China, India, Japan, the Republic of Korea and the UK 'to maintain adequate supply as we exit the pandemic,' the White House said.
Ukraine war ripples to Yemen where no funds mean no food - Russia’s war on Ukraine has sent wheat prices soaring. U.N. agencies have cut food aid. As famine looms, Yemeni parents face the worst choice: save one sick child or feed another. (Thomson Reuters) - Ali's brittle legs stuck out awkwardly from a gray onesie that hung off him, although it was meant for his age. At three months old, the Yemeni infant has already spent a third of his life fighting to keep it.Ali was treated for acute malnutrition free of charge at the run-down Sadaqah public hospital in the southern port city of Aden. But the fragile lifeline extended to him and millions of hungry Yemeni children may snap soon."You have a perfect storm gathering on the horizon," warned Philippe Duamelle, spokesman for the United Nations agency for children (UNICEF).Russia's invasion of Ukraine in February has sent global wheat and fuel prices skyrocketing just months after cash-strapped United Nations agencies cut food aid to 8 million Yemenis.Further cuts are expected, as donor countries on Wednesday pledged only $1.3 billion of the $4.2 billion requested in humanitarian assistance to Yemenis over the next year.That could threaten the international aid that helps Yemeni hospitals keep their lights on, stock their medicine cabinets, and subsidize transport for patients from far-flung provinces – like Ali's family, who traveled more than 480 km to reach Aden."We need more, not less. But we have reached a level where we need to start scaling down," Duamelle told the Thomson Reuters Foundation."This is insane. This is just insane."UNICEF predicts that 19 million Yemenis will need food assistance by the end of 2022 - an increase of 2 million from the beginning of the year.
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