Sunday, December 6, 2015

the COP-21 and OPEC meetings, increases in US imports, refining, and oil glut

it seems like most of the energy & environment related news this week was about or emanating from international conferences being held off in the middle of Europe...first there was the 2015 United Nations Framework Convention on Climate Change (UNFCCC), more often known as COP-21, or the 21st conference of the parties, wherein politicians and news media from over 190 countries worldwide boarded jet planes, which consume more than 10% of our oil, to fly off to Paris to discuss how to wean the planet off of such fossil fuels, in the hopes of heading off catastrophic global warming...then there was the semi-annual meeting of OPEC in Vienna Austria, which a year ago at this time resulted in the decision not to cut back on output that started the crash in oil prices that continues to this day...

COP-21 started on Monday and still has a week to go, and if any agreement comes out of it, we'll have to wait years to find out if the promised emission reductions have been met...right now, it doesn't look good; China has already approved construction of an additional 155 coal generation power plants in the first 9 months of this year; India has permitted a similar number of new plants, as their coal-fired electric generating capacity grew 9.4% this year, Japan is building an additional 40 coal fired plants to replace their mothballed nuclear generating capacity, and Germany has also increased coal generation as they've shut down their nuclear plants...all told, the countries meeting in Paris are currently planning to build 2,440 coal-fired power stations in the not too distant future; so by 2030, plants now planned or under construction will increase global coal generating capacity by 40%...most of these new plants have 40 year life spans, which will at least serve to keep private coal mining from Federal lands in Wyoming and Warren Buffett's oil & coal hauling railroads in business for years....

Obama did announce that we would be contributing $30 million to climate risk insurance initiatives in the Pacific, the Caribbean, and Africa, for poor countries at risk of flooding from rising seas that threaten to submerge their populated areas...that's a big outlay; it's actually more than 1% of the cost of a new stealth bomber...meanwhile, back in the US, Americans bought new vehicles at a 18.12 million annual rate in November, marking the first time in our history we've bought new cars at that rate three months in a row...59% of November’s vehicle sales volume was classified as light trucks, ie, pickups and SUVs, as light trucks accounted for three out of every four vehicles sold by US auto makers last month, the highest mix of pickup and SUV deliveries as a percentage of vehicle sales in history.. and while Obama was speechifying in Paris, US trade negotiators were in Geneva working on the “technological neutrality” provisions of TISA (the Trade in Services Agreement), wherein frackers could dispute subsidies for solar or wind power as unfair, while US trade rep Michael Froman was back on Capitol Hill pushing the TPP and other trade agreements that would mandate the exports of our coal, oil & gas to half the world...

the point is that we have to judge what is actually accomplished as a result of this conference, rather than what is promised by the politicians coming out of it...if this conference ends with a plan to tear down all the coal generating capacity now being built, abrogate the trade agreements that we've already signed, and confiscate and junk all the newly purchased gas-guzzlers, then we'd judge that we're making progress towards a global climate solution.....but if it ends with speech making and platitudes like each of the prior climate conferences have, just figure COP-21 is all hot air, it's business as usual, and understand that a lot of jet fuel was burned for no good reason to boot...

Semi-Annual OPEC Meeting

meanwhile, this week's lead up to and speculation before the OPEC meeting was more interesting than the meeting itself, which essentially confirmed the status quo....Venezuela and Ecuador went to Vienna seeking an agreement to cut oil production to support prices, and on Wednesday the word came out of Shana, the Iranian oil ministry, that the majority of OPEC members favored an output oil prices quickly jumped a dollar in the hopes that cuts would be forthcoming, only to have the Saudis and other Gulf producers crush the rally with word they didn't support those cuts...the next day, probably playing to the media themselves, the Saudis then said they'd agree to production cuts if Iran, Iraq, and other non-OPEC countries, including Russia and Mexico, would also...but Iran has consistently maintained that any output cuts would have to be from other OPEC members, further stressing any OPEC limits would not be binding on them, and the Russians have never been party to any cutbacks, so OPEC pretty much went into Friday's meeting with little expectation of any agreement on production cuts...

so with the Saudis and other Gulf nations dictating policy, there was little room for disagreement, and the OPEC members emerged from their Friday meeting with the current output policies remaining in place...if there was a surprise, it was that they actually lifted their output ceiling to 31.5 million barrels per day, up from the current quota of 30 million barrels per day, which most analysis saw as just an acknowledgement of the reality that they're producing that much already; their October output was roughly 31.4 million barrels per current levels, the global oil market remains oversupplied by as much as 2 million barrels a day, or about 2 percent of global judging what the new OPEC production ceiling really means, the following chart from Bloomberg appears to be instructive...

OPEC targets and production December 4 2015

the above chart is pretty simple; in blue, they track the official OPEC output ceiling in mb/d (million barrels per day) as it's come from OPEC meeting communiques since early 1998, and in red they track the actual output of OPEC oil monthly over the same period...although the Bloomberg caption says they've exceeded their target for 18 months straight, perhaps it would be more accurate to say that they've exceeded their quota for 18 years straight...and looking at that graph for the times when they raised their quota to meet the actual production level like they did this week, it seems like each time they raised their quota, their output went up and away from the target shortly thereafter...

oil prices fell below $40 a barrel after the meeting, from $41.08 a barrel the day before, but the real crash in oil prices this week came after the EIA reports on Wednesday, when the US production and inventory buildup was larger than expected, and oil prices fell 4%, from a close of $41.85 on Tuesday to $39.94 on Wednesday...oil prices had been slightly lower in August, but this week was only the second time since 2009 when US prices closed below $40, and the selloff at the end of the day on Friday that drove prices to that level indicates that traders did not want to own oil at a price above $40 over the even larger drop was seen in international oil prices, as Brent, the international benchmark,fell to a 6-Year Low at $42.49/bbl....for perspective, we'll include a graph of recent US prices here...

December 4 2015 oil prices

the above graph shows prices per barrel over the last 6 months for the January contract of the US benchmark oil, West Texas Intermediate (WTI), when it's stored at or contracted to be delivered to the oil depot in Cushing Oklahoma; trading for the contract for December delivery, with a similar price track, expired a couple weeks ago....other than the brief drop to $35 a barrel during the darkest days of the 2009 global financial crisis, we'd have to go back a dozen years to find a time when US oil prices were regularly below this level..

The Latest Oil Stats from the EIA

as noted, there was a small surprise in the latest oil patch data from the US Energy Information Administration, in that production of oil from US wells jumped enough to take it out of the range that it had been in 11 weeks...that was accompanied by a large jump in our oil imports, and an equally large increase in the amount of oil refined, which nonetheless still left us with more unused oil left over, which had to be added to our near record stores...our field production of crude oil rose to 9,202,000 barrels per day in the week ending November 27th, our greatest weekly output since August, and an increase of 37,000 barrels per day from the production rate of 9,165,000 barrels per day during the prior week...that was 1.3% greater than our production of 9,083,000 barrels per day during the 4th week of November last year, although it was still 4.2% below the modern weekly record production of 9,610,000 barrels per day that was set in the first week of June this surprisingly, with all the oil company layoffs and cutbacks on capital spending we've seen this year, and oil drilling down by almost two-thirds, our output of oil remains elevated, and even looks like it's beginning to rise...

in addition to our increasing oil output, our imports of crude oil rose by 414,000 barrels per day to 7,747,000 barrels per day during the last week of November, which was also the most we've imported since the last week of August, when we imported 7,855,000 barrels per day, and the 5th largest weekly crude imports we've seen over the past year...not only was that 6.1% higher than our imports of 7,303,000 barrels per day in the last week of November 2014, the weekly Petroleum Status Report (62 pp pdf) tells us our imports have averaged 7.4 million barrels per day over the last 4 weeks, 0.5% more than the same 4 week period last year...

more than matching the increase in our imports, crude oil used by US refineries jumped by another 423,000 barrels per day in the week ending November 27th, as they're now processing 16,803,000 barrels per day of crude oil, the most since the record refinery throughput we saw during first week of August this year...crude oil consumption by US refineries has now increased by 1,166,000 barrels per day over the last 4 weeks and is 2.7% above the 16,356,000 barrel per day refinery throughput of the same week a year ago, as the US refinery utilization rate rose to 94.5%, up from 92.0% last week and up from 86.4% as recently as the 3rd week in October...with refineries running near flat out, our production of gasoline rose by 208,000 barrels per day to a 9,752,000 barrel per day rate, up from 9,544,000 barrels per day in the week ending November 20th, our production of distillate fuels, such as diesel and heat oil, rose from 5,023,000 barrels per day to 5,168,000 per day, and our production of kerosene type jet fuels rose from 1,648,000 barrels per day to 1,761,000 barrels per day during the week ending November 27th...only our production of propane/propylene feedstocks fell slightly, from 1,668,000 barrels per day in the week ending November 20th to 1,641,000 barrels per day during the week ending November 27th, the current week for this report...

you may recall that even last week we pointed out that refineries were now producing way more product that we were using, leading to building gluts in most of the refined products, so it only goes to reason that would have continued this week...our week ending supplies of gasoline rose by 135,000 barrels to 216,867,000 barrels as of November 27th, which was more than 8 million barrels above the year ago 208,567,000 barrels, and well above the upper limit of the average range for this time of year, even as we managed to increase our gasoline exports from 439,000 barrels per day to 616,000 barrels per day over the last 2 weeks...distillate fuel inventories (ie, diesel fuel and heat oil) jumped by more than 3 million barrels, rising from 141,364,000 barrels last week to 144,415,000 barrels as of November 27th, up 24.3% from 116,174,000 barrels the same week a year ago, as current heat oil consumption has collapsed.. inventories of kerosene type jet fuels also rose, from 37,216,000 barrels last week to 38,052,000 barrels this week, but remain the only major refined product where supplies remain in the lower half of their average range for this time of year...only stockpiles of propane/propylene fell from the record high they set last week, dropping from 106,202,000 barrels last week to 104,103,000 barrels this week, but they're still way above the average for this time of year, and up 31.1% from the 79,416,000 barrels we had stored on November 28th last year...

and once again this week, even with the big increase in refinery throughput to above normal levels, the nearly equal increase in our oil imports combined with the bounce in production left us with more than a million more barrels than we could a result, our inventory of crude oil in storage, not counting what's in the government's Strategic Petroleum Reserve, rose for the 10th week in a row, increasing from 488,247,000 barrels on November 20th to 489,424,000 barrels on November 27th, which works out to 110.1 million more barrels, or 29.0% more oil in storage, than the 379,335,000 barrels we had stored on November 28th a year we added nearly 35.5 million barrels to our stores in the last 10 weeks, and we now have the most oil we ever had stored anytime in November in the 80 years of EIA record keeping, which had never seen more than 400 million barrels stored before this year...

This Week's Rig Counts

the total number of active drilling rigs deployed in the US fell for the 6th week in a row in the week ending December 4th, despite an increase in gas drilling activity....Baker Hughes reported that the total active rig count fell by 7 to 737, as their count of active oil rigs fell by 10 to 545 while their count of active gas rigs rose 3 to 192...those totals were down from 1575 oil rigs, 344 gas rigs and 1 miscellaneous rig that were active as of the first weekend of December a year ago, as the count a year ago had already fallen from the peaks in October and November...notable this week was that a net of 5 Gulf of Mexico offshore platforms were shut down, leaving just 25 in use, down from 56 in the Gulf and 58 total offshore a year ago...however, we did see a new drilling rig set up on an inland lake in southern Louisiana, so there are now two operating on inland waters, down from 12 a year ago...

this week it was the vertical drillers who saw the largest decrease, as they were reduced by 5 to 104, which i imagine only goes to reason, since the Gulf of Mexico rigs must have been vertical...vertical rigs are now down from 354 a year ago, while this week the net count for active horizontal rigs was unchanged at 569, down from the 1368 horizontal rigs that were operating in the same week a year ago....two directional rigs were also removed, leaving 64, down from 198 direction rigs that were being run during the same week last year..

of the major shale basins, the Permian of west Texas again saw the largest reduction for the 4th week in a row, with 4 rigs removed, leaving them with 217, which was down from 568 in the same week last year...2 rigs were also pulled from the Williston basin of North Dakota, leaving that Bakken shale area with 60 active rigs, down from 189 a year earlier...the DJ-Niobrara chalk of the Rockies front range also saw a rig idled, leaving 25 active in the region, down from the 61 that were drilling there on the 5th of December 2014...meanwhile, both the Granite Wash of the Oklahoma-Texas panhandle region and the Cana Woodford of central Oklahoma saw single rigs added; the Granite Wash now has 13 rigs drilling it, down from 63 a year ago, while the Cana Woodford has 35, down from the 43 rigs that were active there a year ago at this time..

the Baker Hughes state count tables show that Louisiana saw the greatest rig reduction, as their net count was down by 4, as they saw 6 offshore rigs removed while 1 rig was set up on the aforementioned inland lake and another land rig started drilling on land nearby...the net Texas rig count was reduced by 3, as drillers added a rig offshore in the Gulf to the 2 they already had there, leaving Texas with 333, down from 896 a year ago...North Dakota drillers were down 2 rigs to 60, down from 180 a year ago, and Colorado and Utah both saw a rig idled...Colorado now has 27 active rigs, down from 70 a year ago, while Utah has 4 rigs deployed, down from last year's 23....meanwhile, both Oklahoma and Wyoming saw their active rigs increase by 2...Oklahoma is back up to 84, but still down from 211 a year ago, while Wyoming is back up to 22, but down from 59 a year ago...the rig counts in all other states were unchanged this week, and all but Alaska, where they have 12, up from 11, were lower than a year earlier...


Local Officials Fight State For More Say In Location Of Wind Turbines - WOSU --There’s a new fight brewing over green energy laws, as some local officials want more control over the location of wind turbines. When wind energy companies started laying out plans in northwest Ohio, landowners were hoping for the same kind of deal that mineral owners got. But the state’s new laws on where wind turbines can go have greatly limited development projects. These are known as setback laws. Susan Munroe, a Van Wert county commissioner, is fighting for a bill to give local officials the right to create their own setbacks. “What may work in one community, may not work in another. It’s a practical and really, very conservative way to approach economic development to give that authority to each county instead of having like an overriding state rule," Munroe said.That so-called overriding state rule went under the radar after being slipped into a budget update bill last year. Some wind energy officials say those new laws significantly handcuffed pending projects. Ronald Wyss lives in Hardin County. He would like to sign with a new wind farm project but the revamped laws won’t let him put a wind turbine on his land.  “What they’re basically doing is making it impossible for my acres to be joined to the existing approved project which takes away from my ability to reap the benefits of allowing them to lease my property for wind development," said Wyss.  Republican Representatives Tony Burkley and Tim Brown, both from northwest Ohio, introduced a bill to send this power back to the local level. But Republican Senator Bill Seitz of Cincinnati says it’s important to keep these laws uniform across the state. He adds that leaving it up to local officials opens the door to potential conflicts of interest.

Hand recount confirms defeat of anti-fracking charter amendment -  — A hand recount of an anti-fracking charter amendment, the so-called Bill of Rights, confirmed that the issue was indeed defeated in the Nov. 3 general election. During a special meeting Tuesday, the Mahoning County Board of Elections certified a new vote total — 6,151 against and 5,852 for the amendment. The official result on election night was 6,143 against and 5,839 for the anti-fracking issue, according to the county elections board. About 15 people attended Tuesday’s board meeting, including anti-fracking supporters who praised the thoroughness and accuracy of the recount process.“The [election board] counters I worked with checked and double-checked. I saw very little room for error,” said Ed Knight, an anti-fracking advocate.“The process went smoothly, and the results of the hand count and the scanners matched,” said Ray Beiersdorfer, one of the backers of the anti-fracking amendment. Beiersdorfer said the margin of the anti-fracking loss went from 345 on election night, to 304 after provisional ballots were counted, to 299 after the hand recount.

City Council Should Focus on Abolishing, Not Rerouting, NEXUS Pipeline -- Oberlin Review Editorial - In a special meeting on Monday, Nov. 30, City Council decided to hire the law offices of D.C.-based Carolyn Elefant to represent the city of Oberlin in a lawsuit aimed at rerouting the NEXUS pipeline. The proposed 250-mile pipeline, to be constructed and operated by Houston-based Spectra Energy, is slated to run from Ontario, Canada to Kensington, Ohio — a town just 76 miles southeast of Oberlin. Based on the intended route, the pipeline will run as close as 95 feet from residences on Reserve Avenue as well as near the Welcome Nursing Home and the fire station, among other city buildings. The Medina County-based Coalition to Reroute Nexus, along with the city officials of Green, Ohio, devised a rerouting plan that would add 9.9 miles to Spectra’s route and move the three-foot-wide pipeline farther from Oberlin and closer to the village of Wellington, which lies about 9 miles directly south on Main Street. This relocation would avoid the pipeline’s proximity with residences and city buildings, which concerned citizens in case of a spill on their property or the wetlands nearby.While efforts by CORN and communities from Medina, Fulton, Erie and Summit Counties to reroute the NEXUS project are commendable, protests against Spectra have evolved from committed community discussions about abolishing the pipeline to “not in my backyard” opposition from landowners. Students for Energy Justice, previously Oberlin Anti-Frack, and Communities for Safe and Sustainable Energy — Oberlin’s community environmental group — opposed the reroute plan for precisely this reason.What is the point of rerouting the pipeline where it would cause the same disturbances in someone else’s backyard? These environmental organizations should take advantage of their large membership bases and community following to back the pipeline’s abolition. Indifference toward the abolition or reroute debate will only allow for a diversion plan that, if implemented, would burden another community with the environmental and public health dangers of the fracking industry — not to mention perpetuate the cycle of environmental injustice.

Tests show no water contamination at Athens injection well - Akron Beacon Journal -  After an anti-fracking protest led to an arrest at a K & H injection well site in 2014, activists in Athens, Ohio have since been on a mission to prove that injection wells cause groundwater contamination to aquifers, despite the fact that there has not been one single case of groundwater contamination in Ohio from injection wells. Today, we learned that new testing for volatile organic compounds in Ohio private water wells located near the K & H injection wells in Athens, Ohio showed no signs of oil and gas influence, according to reports from the Ohio University Voinovich School. The news comes after Athens County Commissioners announced joint partnerships last month with Ohio University to conduct a study to undertake the impact from injection wells on private water wells. Testing was conducted this fall and will be repeated in March. The injection well site and water sampling are located close to both the Hocking and Ohio Rivers. It is also the same injection well site where an anti-fracking activist was arrested in 2014 for protesting. According to the Columbus Dispatch, the activist was “not convinced those measures (regulatory measures by the Ohio Department of National Resources to protect groundwater) will keep the county’s drinking water safe”. The same sentiment was echoed by the Buckeye Forest Council, and other activists groups who called upon the U.S. EPA to audit Ohio’s injection well program, citing groundwater contamination from injection wells as a root source to their claims that Ohio’s program is unsafe. In their letter they claimed, “The Profoundly Weak Federal Requirements for Class II Injection Well Delegation under Section 1425 of the Safe Drinking Water Act.” However, as EID has reported time and time again, the allegations against Ohio’s Class II Underground Injection Control (UIC) program are simply not factual. Ohio has some of the most stringent regulations in the country, and has been regulating the process since 1983, when EPA gave the state primacy over its program.

Proposed fracking in Ohio national forest gets hearings - Akron Legal News (AP) — Both opponents and supporters of opening Wayne National Forest in southeastern Ohio to oil and gas drilling have been out in force at public hearings recently. The U.S. Bureau of Land Management has proposed allowing drilling beneath about 31,900 acres of the forest through hydraulic fracturing, or fracking. It is determining who owns mineral rights, assessing potential environmental risks and gathering public input.  An activist coalition including the Buckeye Forest Council, Sierra Club and other fracking opponents has called for a "full-scale environmental report" before proceeding. Environmental concerns led the bureau to drop an earlier drilling proposal in 2011. Many landowners and companies favorable to fracking also have spoken out. About 250 of them showed up to a hearing last Wednesday night.Those in attendance heard the complicated issue arose following more than 100 expressions of interest from approximately 20 oil and gas companies looking to set up well pads in Monroe, Noble and Washington counties in eastern Ohio, according to The Marietta Times. "Wayne National Forest is in a patchwork quilt sprinkled with private properties," said Becky Clutter, 53, who owns 20 acres surrounded by the forest on three sides in Monroe County. "And like a quilt there's the surface properties owned by both the forest and private entities, but then there's that batting beneath it which is the mineral rights."  Clutter has for the past month been organizing a group of landowners in all three counties in support of this movement. At the hearing her organization, Landowners for Energy Access and Safe Exploration, gathered 200 signatures in support of opening the areas to drilling. Others voiced concern about the potential environmental and tourism impacts of drilling in the protected federal forest.

Letter: Concerned about fracking chemicals - - Fracking or hydraulic fracturing is one means by which gas and petroleum from source rocks may migrate to reservoir rocks. This process is used to release petroleum, natural gas, shale gas, tight gas and coal seam gas. This practice has come under scrutiny internationally, and its possible has environmental impacts, including contamination of ground water, risks to air quality, the migration of gasses and hydraulic fracturing chemicals to the surface, contamination from spills, and the health effects of these. Here in Ohio, after tens of thousands of gallons of fracking chemicals flowed into a creek, officials with the state and federal environmental protection agencies who oversee the safety of drinking water, were forced to wait for five days before learning the identity of some chemicals. According to NRDC the incident occurred -- "after a fire started at the well site, triggering multiple explosions, fuel, fracking chemicals, and radioactive elements were all being stored onsite and were lost during the incident. The spill flowed into the Ohio River, and two days later they found about 70,000 dead fish." But Haliburton, the company hired to frack the well, withheld information on some of the chemicals at the site until five days after the accident occurred! In Ohio, companies are allowed to keep chemicals secret, even from the state, if they claim, they are a confidential "trade secret."  It is kind of dangerous to realize that although the law states that the division "shall not disclose the information," it is not clear enough if the information can be shared with other agencies or emergency responders like local fire departments.

Ohio’s horizontal shale well production breaks records in third quarter — During the third quarter of 2015, Ohio’s horizontal shale wells produced 5,696,780 barrels of oil and more than 245 billion cubic feet of natural gas, according to figures released Thursday by the Ohio Department of Natural Resources. The report shows the state’s production continues to set records as horizontal shale well production totals have increased by more than 100 percent from 2014’s third-quarter totals. Additionally, Ohio’s horizontal shale wells have produced more oil and gas in the first nine months of this year than all of Ohio’s wells produced in 2014. Related: Ohio’s Utica Shale development grows by $5.7 billion or 20.4 percent since last spring In 2014, Ohio’s wells produced 15,062,912 barrels of oil and more than 512 billion cubic feet of gas for the entire year. The report lists 1,134 wells, 1,087 of which reported production results. Forty-seven wells reported no production as they are waiting on pipeline infrastructure. Of the 1,087 wells reporting production results, the average amount of oil produced was 5,241 barrels; the average amount of gas produced was more than 226 million cubic feet. The average number of third-quarter days in production was 78.  In the Mahoning Valley, production from Columbiana County’s 65 wells totaled 43,133 barrels of oil and 6,899,553 billion cubic feet of gas; production from Mahoning County’s 13 wells totaled 5,409 barrels of oil and 929,013 million cubic feet of natural gas; and production from Trumbull County’s five wells totaled 2,438 barrels of oil and 148,915 million cubic feet of natural gas.

Marathon to invest $4.2B next year -  Marathon Petroleum Corp. plans to invest $4.2 billion into its business next year, with much of the money aimed at building up the refining giant’s pipeline infrastructure. Expanding that pipeline segment, which moves crude oil, natural gas, and other petroleum products throughout Marathon’s refining network, has been a key focus of Chief Executive Officer Gary Heminger. During a presentation on Thursday to analysts and investors, Mr. Heminger said by 2020 Marathon expects cash flows from the pipeline transportation operations to nearly equal that of the company’s refining and marketing business. Marathon, through its MPLX LP subsidiary, is just days removed from closing on a $10 billion deal to acquire MarkWest Energy Partners LP. MarkWest is a leading natural gas processor and a major player in the shale gas region of the eastern United States. “This wasn’t just a shooting-from-the-hip type of transaction,”. “We’ve studied this for the last two years on where do we see the business going strategically, and it was very evident that the natural gas liquids side of the business is where the predominance of investment was going to be.”

Hydraulic fracturing risks outweigh drop in oil prices - Although hydraulic fracturing, or “fracking,” has increased job opportunities in 32 states and decreased oil costs across the U.S., University of Cincinnati students and faculty presented research Monday regarding downfalls of the drilling process.   Problems arising from fracking include a downgrade in U.S. drinking water quality, as well as the health concerns of well workers and community members in surrounding areas, according to Amy Townsend-Small, an assistant professor of geology, ecologist and the course instructor for Monday’s symposium. “I was a proponent for fracking, but now, I don’t know,” Townsend-Small said. She explained the flowback water — a remaining 10 to 15 percent of water returning to the surface following the drilling process — becomes so contaminated during the process of hydraulic fracturing that there is little to no ability for further use of the water. “It’s saltier than seawater,” Townsend-Small said. “It uses too much energy, the cost isn’t worth it.” Utica shale formation substantially uses more water than any other oil formation in the U.S., according to the U.S. Geological Survey (USGS), with each well requiring approximately 5.1 million gallons of water per fracking operation. From 2001 to 2014, Ohio has totaled 4 billion gallons of water for the use of fracking. .The flowback water is handled in multiple ways following the operations, including, but not limited to, underground disposal, treatment followed by disposal to surface water bodies or recycled for use in future fracking operations, according to USGS. A February 2015 report conducted by Food & Water Watch summarizes that respirable silica can cause silicosis, lung cancer and holds association with disease like tuberculosis, chronic obstructive pulmonary disease, kidney disease, among other autoimmune diseases.

Impact fees buy goodwill in drilling communities: Although many of drilling crews have left northern Pennsylvania gas fields for now, there was a time when the rush of workers created higher rents and more crime. In Bradford County – one of the busiest drilling communities – new criminal cases filed with the district attorney’s office jumped more than 40 percent from 2007 through 2013. In the next two busiest places, Susquehanna and Tioga counties in Pennsylvania, criminal caseloads grew by more than 20 percent and 40 percent respectively. At the same time, housing agencies and community groups reported a flood of complaints that tenants were being priced out of apartments. The labor pool for the gas rush consisted largely of young, single men, many from outside the area with few if any community ties. They had the muscle and stamina necessary for long hours on the job in all kinds of conditions. But some of them also managed to live up to the roughneck stereotype – itinerant, brawling and boozing. “When you have a lot of people move to an area without friends, family or social networks, you are going to run into problems,” Along with the housing crunch, issues ranged from increased traffic accidents and bar fights, Barrett said. There were also spikes in property damage, vandalism and theft – not all necessarily acts of workers, but a result of more people, and more equipment and belongings making for accessible targets.Pennsylvania’s answer was to impose an “impact fee” in 2012. Unlike a severance tax used by established oil and gas states, the Pennsylvania impact fee is levied annually on new wells for 15 years, beginning with the year the well was drilled. The more new wells that are drilled in an area, the more the community receives – up to half a municipality’s budget. The fee varies based on the age of the well, the type of well and the price of gas.

Livestock Falling Ill In Fracking Regions - Are dying cattle the canaries in the coal mine? Farmers and ranchers are sounding alarms about the risks to human health of hydraulic fracturing.   In Pennsylvania, the oil and gas industry is already on a tear—drilling thousands of feet into ancient seabeds, then repeatedly fracturing (or “fracking”) these wells with millions of gallons of highly pressurized, chemically laced water, which shatters the surrounding shale and releases fossil fuels. New York, meanwhile, is on its own natural-resource tear, with hundreds of newly opened breweries, wineries, organic dairies and pastured livestock operations—all of them capitalizing on the metropolitan area’s hunger to localize its diet. But there’s growing evidence that these two impulses, toward energy and food independence, may be at odds with each other. Tonight’s guests have heard about residential drinking wells tainted by fracking fluids in Pennsylvania, Wyoming and Colorado. They’ve read about lingering rashes, nosebleeds and respiratory trauma in oil-patch communities, which are mostly rural, undeveloped, and lacking in political influence and economic prospects. The trout nibblers in the winery sympathize with the suffering of those communities. But their main concern tonight is a more insidious matter: the potential for drilling and fracking operations to contaminate our food. The early evidence from heavily fracked regions, especially from ranchers, is not reassuring.

Pennsylvania Game Commission reaps revenue from shale gas under game lands -- Gov. Tom Wolf’s reinstatement this year of a ban on new leases for oil and gas drilling beneath state parks and forests does not extend to land owned by the Pennsylvania Game Commission, whose lease revenue has increased nearly fivefold in four years. “Because the Game Commission is an independent agency, we could not bind them to an executive order,” said Wolf’s spokesman, Jeff Sheridan. The commission’s revenue from such leases increased from $4.7 million in fiscal year 2011 to $22.1 million, or 20 percent of its $100.5 million budget in the fiscal year that ended June 30. The money helps support operations and training of new staff at the agency. Three shale gas producers will pay the most to the commission this year in lease fees and royalty payments: Seneca Resources, $2.9 million; Southwestern Energy, about $2 million; and Chesapeake Energy, $857,000. The operations benefit hunters with upgraded access roads, said Seneca spokesman Rob Boulware. The company and the Marcellus Shale Coalition have worked with hunters to make sure there are no safety issues, he noted, such as during the deer season that starts Monday. “A lot of our folks, because we’ve been here for over 100 years … our employees live in these areas where we work,” he said, adding that many employees hunt. Drilling has increased greatly over the past decade with shale exploration, but industry activity on state land and the Allegheny National Forest dates back more than a century.

America's biggest gas field finally succumbs to downturn - The drilling boom of the past seven years is over, even though thousands of existing wells in the Marcellus region still produce a fifth of U.S. natural gas supply. Now, exclusive data made available to Reuters points to a slump in drilling that could hit production next year, defying government and industry expectations of a further rise in output. Preliminary figures provided by DrillingInfo, which monitors rig activity, showed drilling permits issued for the 90,000-square mile (233,100 sq km) reservoir beneath Pennsylvania, Ohio, and West Virginia, slumped to 68 in October from 76 in September. There were still 160 permits issued in June and over 600 a month at the peak in 2010.  (Graphic:  "The fact that it is slowing and the speed at which it is slowing" sums up the state of U.S. shale gas industry, Allen Gilmer, chief executive officer of DrillingInfo, told Reuters.  Recent months are subject to revisions, DrillingInfo said, but a retreat of such magnitude, combined with falling output from older wells, would mark a turning point for the Marcellus - and the whole U.S. gas market. The Energy Information Administration now forecasts overall U.S. gas output to hit a record in 2016 for the sixth year in a row. A drop in Marcellus production could snap that streak and help prop up prices that have fallen by two thirds since 2010.  The Marcellus area makes up nearly half of those shale reserves and the government expects the region to keep producing more in the coming years, albeit at a less furious pace.  To be sure, the impact of the slump in drilling permits could be mitigated by other factors. New pipelines coming online in 2016 will allow hundreds of wells already drilled to be hooked up to the grid. A harsh winter could also boost heating demand for natural gas. Still, the retreat could weigh on Marcellus production well into next year, said Grant Nulle, an oil and gas economist at the EIA.  An as yet unpublished outlook from the EIA, which does not take into account the permit numbers, anticipates lower Marcellus production only through March, and a rise for the rest of the year. The EIA does not expect a full year's decline until 2019.

Hedge protection for gas producers continues to melt away - U.S. oil and gas companies currently have hedge protection in place for less than one-fifth of their expected 2016 production, and the strike price of the remaining derivatives is significantly lower than in previous years. With a bleak gas price outlook for 2016, the result could be even more severe capital spending reductions, potential production curtailments, and increased financial stress for mid-size and smaller firms. In today’s blog, we examine what has happened to producer hedging protection and the implications for capital spending and production trends.  In recent weeks there have been a spate of reports from banks and consultants that warn of more pricing problems facing U.S. gas producers.  During 2015, about half of gas production was hedged out.  But that will drop like a rock in 2016, down below 20% according to most reports.  Worse yet, the price of those hedges is also headed south.  Given the potential impact on producer drilling activity and ultimately on production, we thought it would be a good idea to look at the numbers.  Current natural gas market conditions make this a particularly bleak time to be exposed to market prices. Henry Hub spot prices averaged $2.07/MMbtu in November; the lowest level seen since 1998, and according to NGI the spot price plunged below $2.00/MMbtu in the first week of November for the first time since the summer of 2012. As we pointed out in “Breakdown: U.S. Natural Gas Storage Hits 4 Tcf for the First Time”, working natural gas inventories recently reached an all-time high.

Pipelines a familiar reality for school district, park system - The proposed PennEast natural gas pipeline would run through several state parks and near the Dallas district schools. But neither entity is a stranger to pipelines. Officials from the Dallas school district, which has other pipelines close to its campus, say they have a good working relationship with the pipeline company. And the state agency in charge of the parks has requirements in place to try to minimize damage whenever a new pipeline comes through. PennEast Pipeline Co., LLC, wants to build a $1 billion pipeline that would stretch 114 miles from Dallas Township to Mercer County, N.J. Currently the project is in the stage where it is under review by the Federal Energy Regulatory Commission. FERC Spokeswoman Tamara Young-Allen said the agency’s “staff is in the process of doing all the analyses needed to prepare their draft environmental impact statement.” PennEast submitted its application to FERC on Sept. 24, starting a 30-day period for interested parties to intervene or file comments that ended Oct. 29. More than 1,500 people, organizations and government entities filed to intervene, or have legal standing in the case. Although the deadline has officially passed, there will be another comment period after the draft environmental impact statement is complete, Young-Allen said.

Fracking’s promise: When it comes to drilling, New York zigs while Pennsylvania zags - Underlying the debate over the promises and perils of fracking is an often-overlooked number: 1.35 trillion. That’s the cubic feet of natural gas New Yorkers consumed last year, according to the federal Energy Information Association. New Yorkers use more than twice the volume of gas consumed by Connecticut and Massachusetts combined. The economics and risks of leasing, drilling and fracking tend to headline the shale gas story. Yet the promise of fracking is as much about how gas is consumed as how it’s produced. As the top natural-gas-consuming state east of Louisiana, New York is a major player. By enacting a ban on fracking earlier this year, the administration of New York Gov. Andrew Cuomo has shown zero tolerance for shale gas risks to the environment and health. Yet New York’s appetite for cheap gas produced by the shale boom in Pennsylvania and Ohio is big and growing bigger — a jump of nearly 18 percent from 2009, according to figures from the federal EIA. For New Yorkers looking for cheap energy, the gas boom in Pennsylvania has lived up to its promise. This is the last story in a three-part series:

Frackos Incited to Violence at Seneca Lake: “Open Season on Protestors” - Original audio source It’s easy to incite gun nuts to violence. Sara Palin was a master at inciting political assassinations. She even provided gun nuts with maps and targets.  Carly Fiorina is the reigning champion with Planned Parenthood as the “target audience”. Now it’s the Seneca Lake gas storage protestors turn to be targeted by local frack shils, that have publicly declared open season on protestors:   On Wednesday, November 18, County legislator Philip C. Barnes posted a comment on Facebook below a photograph of We Are Seneca Lake protesters that was part of our announcement of last Sunday’s Finger Lakes March for Climate Action in Watkins Glen. The comment read, Remember Deer season starts Saturday.” To the steering committee, this warning was troubling. Whatever its intent, we felt that Mr. Barnes’ message could function as an veiled incitement to others to consider violence against us and was inappropriate coming from an elected official. To joke on social media about climate protestors meeting with stray bullets in downtown Watkins Glen—just days after events in Paris—was, to us, reckless and offensive. We write now to share with you what steps we have taken and to report the response we’ve received.

James Hansen: Fracking is ‘Screwing Your Children and Grandchildren’ -- Speaking to Carbon Brief at the COP21 climate conference in Paris, Dr. James Hansen, one of the world’s most prominent climate scientists, has strongly criticized the UK government’s pursuit of fracking for shale gas. Asked what he thought of the UK government’s policy of seeking to copy the U.S.’s fracking revolution, Hansen said:  Well, that’s screwing your children and grandchildren. Because if you do that, then there’s no way to avoid the consequences [of] multi-meter sea-level rise. But we can’t do that. And that’s what the science says crystal clear. And yet politicians pretend not to hear it, or not to understand it. Hansen, the former director of the NASA Goddard Institute for Space Studies who famously warned the U.S. Congress about global warming in 1988, also responded to Carbon Brief’s questions about other areas of UK energy policy, such as the proposed new Hinkley C nuclear plant Somerset (“more expensive than it should be”), carbon capture and storage (“a mirage”) and the reining back on support for renewables. Asked if he thought there were risks switching from coal to gas, Hansen said: If gas were truly used as a very temporary bridge to replace coal … But that’s not what’s happening. If you build a new power plant, you don’t plan to shut it down in 10 years. There’s way too much gas in the ground. It would put us way over 2C, 3C, 4C. There’s a huge amount of gas in the ground. What political leaders have not been willing to do is face the truth that you can’t burn all of that. They’re allowing, even bragging about, having found the technology to get more of the gas out of the ground with fracking. Listen here:

Sanders aligns against proposed natural gas pipeline — U.S. Sen. Bernie Sanders, I-Vt., is the first presidential candidate to publicly take a position on the proposed Northeast Energy Direct pipeline. And the Democratic hopeful’s opposition to the project has many Northeast Energy Direct pipeline opponents praising him. In prepared remarks given during the New Hampshire Democratic Party’s annual Jefferson-Jackson Dinner Sunday night, Sanders said he’s against the proposed natural gas transmission pipeline because “climate change is the greatest environmental challenge of our time. “And that is why — right here in New Hampshire — I believe the Northeast Energy Direct pipeline that would carry fracked natural gas for 400 miles through 17 communities is a bad idea — and should be opposed,” he said. The pipeline route is planned to run through southern New Hampshire communities including Fitzwilliam, Richmond, Rindge, Troy and Winchester, and continues to meet strong resistance from residents and local officials in towns along the proposed path. Among their concerns for the pipeline are its potential environmental and health effects, and the federal government possibly taking property by eminent domain for the project. “God bless the Brooklyn-born Senator from Vermont for taking a position that our very own local elected officials have been too cowardly to do till now,” Susan L. Durling, co-founder of the pipeline opposition group Winchester Pipeline Awareness said in a Facebook message that elected officials need to “start worrying about the planet they will leave their kids and grandchildren, and not about the campaign contributions they get.”

Maine stops providing details of oil by rail shipments to public – Maine will no longer disclose to the public any details about shipments of crude oil by rail through the state, an official said on Wednesday, a move that has angered activists who say the information is critical to public safety. The state’s Department of Environmental Protection on Wednesday declined a reporter’s request for monthly volumes of crude oil shipped by rail, citing a June law that prohibits emergency responders from disclosing certain details about rail shipments of hazardous materials through the state. “When people are aware of what’s coming through their community, they pay attention,” said Bob Klotz, a spokesman for 350 Maine, an activist group that has protested oil-by-rail cargoes in the state. “To take that information away is very concerning.” The U.S. and Canada are grappling with environmental and safety risks posed by a surge in oil-by-rail cargoes, following several fiery derailments of trains carrying Bakken crude oil in North America. A U.S. Department of Transportation Executive Order in 2014 required railroads to inform emergency responders about large cargoes of Bakken oil passing through their states. But many railroad companies, citing security concerns along their tracks, have lobbied to keep that information from the public. A spokesman for the Association of American Railroads, which represents freight railroad operators, declined to comment on the Maine law, but said the group supports the federal order requiring cargoes be disclosed to emergency responders.

Anti-fracking movement a religious conspiracy - The anti-fracking movement is a religious conspiracy.Yes, I said religious, because the movement is part of a progressive narrative aided by environmental fanatics that view fossil fuels as the world's greatest danger.This movement is led by a president who also believes that manmade climate change is our most pressing danger, while Christians are beheaded, Jihadist terrorists kill innocents and threaten Western democracies, and millions of refugees are being driven out of their homeland.Anyone who rejects this narrative is labeled a "denier," because to them manmade climate change is an absolute truth, even though it is not backed by credible scientific evidence and an army of scientists rejects it. Therefore, it really is a religion.They even call for non-believers to be vilified and subject to criminal prosecution.Welcome to the 1630s when Galileo was convicted of heresy and spent his last years under house arrest. That's when science became a religious pastime. Looks like the current pope is headed in the same direction.The key precept of this religion is that global warming will kill this planet and that the culprit is CO2, a minor greenhouse gas which comes from burning fossil fuels. Therefore, we must eliminate this energy source.Since fracking allows us to produce more oil and gas and will increase our reserves for another 100 plus years, and lower fuel prices, and increase the use of clean-burning natural gas, and permit us to achieve energy self-sufficiency soon, it must be stopped.Their greatest fear is that your fossil energy will be cheaper and cleaner and their expensive and inefficient alternative methods will not be competitive.

Challenging times continue for oil and gas companies -- "Lower for longer” are the words being used to describe the oil and natural gas economic outlook for 2016, creating another whack at West Virginia’s energy sector. U.S. natural gas production could decline in 2016 for the first time in a decade, driven by low oil prices after 10 years of gangbusters growth from shale plays. To understand the decline in the shale market, look no further than the north-central part of West Virginia. The U.S. Energy Information Administration says production in that fast-growing field will decline primarily because of depressed gas prices. Recent data supports signs of a slowdown. The number of rigs in the state’s oilfields has dwindled in recent months to its lowest since 2011, and drillers — including Chesapeake Energy Corp. and Cabot Oil & Gas Corp. — have temporarily shut down some production due to weak regional prices. “Relatively low gas prices, combined with low oil prices, have slowed drilling in the Marcellus (Shale) so production from new wells is only offsetting the decline in old wells,” said EIA lead upstream analyst Dana Van Wagener. The EIA forecast prices in parts of the Marcellus would remain below $2 through 2016 and not exceed $4 until 2020. “Many of the noncore areas of the Marcellus need prices to be sustained near $5 or above to be economic to develop,”

Virginia groups want stronger safeguards on fracking - (AP) — Environmental and public interest groups are urging officials to halt any new fracking efforts in Virginia until they complete a thorough review of the state's standards. The groups say Virginia's current safeguards on fracking are inadequate and outdated. They're urging Gov. Terry McAuliffe to conduct a comprehensive review before approving any new permits for oil and gas drilling that would require fracking. Fracking, or hydraulic fracturing, is a high-pressure technique for extracting oil and gas from shale deposits. The groups pushing for the review are the Virginia Organizing Washington County Chapter, Clean Water Action, Virginia Sierra Club and Shenandoah Riverkeeper. Virginia's Department of Mines Minerals and Energy has proposed changes to some aspects of the state's fracking laws. But the groups say more are needed.

20 Florida counties and 40 cities have passed ordinances to ban fracking: Dozens of Florida cities and counties oppose a plan to give the state control over the oil and gas exploration process known as fracking. The Tallahassee Democrat ( reported on Saturday that 20 counties and nearly 40 cities in Florida have passed regulations banning fracking. The cities and counties represent about 8 million people or 43 percent of the state's population. Two Republican legislators, Rep. Ray Rodrigues of Estero and Sen. Garrett Richter of Naples, have proposed bills that would give the state authority to regulate oil and gas exploration, production, processing, storage and transportation. Local leaders say the move wrongly takes away their right to regulate activities in their areas and that fracking could harm the environment and hurt Florida's tourism economy. The Florida Association of Counties' general membership voted unanimously in November to oppose the legislation. The association also voted in favor of a moratorium on fracking until independent and comprehensive studies on fracking are completed. "Whether you like fracking or don't like fracking, to have the county's powers usurped by the state is just the complete antithesis of local government," Wakulla County Commissioner Howard Kessler said he's concerned about the impact hydraulic fracturing could have on the environment, public health and major industries like tourism and agriculture.

Fracking bill moves forward in Florida Legislature -- A bill that would create regulations for fracking was approved by a House committee Wednesday despite strong opposition from environmentalists who said the method of oil and gas drilling could contaminate drinking water and cause health problems. The bill calls for the Department of Environmental Protection to conduct a $1 million study on how fracking would affect surface and groundwater and underground geology and then set regulations for the fracking industry. It will also look at how water and chemicals will be disposed of and any potential for contamination once a well has been plugged. The Agriculture and Natural Resources Appropriations Subcommittee voted 9-3 for the bill (HB 191) after hearing about 30 members of the public and lobbyists comment on the measure, nearly all of whom opposed it out of environmental and health concerns. The vote was along party lines, with Republicans in favor and Democrats against. Republican Rep. Cary Pigman, who is a medical doctor, said he is skeptical of studies that indicate fracking has a greater health risk than traditional oil and gas drilling, adding any health issues may be a result of the product rather than the process. "No one is disputing that there are volatile hydrocarbons around the fractured well site, but there's also volatile hydrocarbons at a gas station, there's also volatile hydrocarbons in your car," Pigman said. "You don't want to live right next to an oil well; you don't want to live right next to a car that's leaking gas."

Fracking Legislation Approved: Local governments won’t be able to stop fracking for natural gas under legislation approved by a House Committee in the State Capitol today. the measure was opposed by cities and counties, but sponsor Ray Rodrigues of Ft. Myers says drilling is safe and local governments should be able to put up roadblocks. “Two municipalities have interjected themselves into the permitting process. This bill is clarifying there is no implied preemption. we’re going to make that express so that you know oil and gas regulation resides with he state” says Rodrigues. In additional to local government opposition. Most environmental groups, are against Fracking Dave Cullen of the Sierra club says there are two reasons not to allow fracking. the first is that Florida shouldn’t be looking to fossil fuel for the future. “The other is the potential for the contamination of the water we depend on. And it’s not only for our drinking, but our clean water supports so much of our economy. Our tourism, our commercial and recreation fishing, All of those things need clean water” says Cullen. The committee approved the measure on a 9 to 3 vote along party lines with all three Democrats voting no.

Fracking bill surfaces again despite opposition, and is getting House support - The three-year effort to make it easier for oil and gas companies to bring the controversial drilling technologies known as fracking to the state is making headway in the Florida House, despite opposition from environmentalists and local governments. The House Agriculture and Natural Resources Appropriations Subcommittee on Wednesday voted 9-3 for the bill (HB 191).  A companion bill has not yet had a hearing in the Senate. The proposal would establish new regulations over fracking, remove the ability of local governments to write local ordinances, and require state regulators to conduct a $1 million, one-year study to determine what impact the chemicals used in the process would have on the state drinking water supply before the rules are written in 2017. The regulations would include how the contaminated water and chemicals will be disposed of and the study will consider the potential for water contamination once a well has been plugged. Unlike last year, the measure does not include a new public records exemption for the chemicals used in the process but continues to allow companies to shield the names of the chemicals under the trade secrets law.

Permian Delaware and Midland Crude Gathering Build Out Continues.  While crude oil takeaway capacity out of the Permian Basin from major hubs is probably overbuilt for the time being that is not the case for gathering systems bringing barrels from the wellhead to mainline terminals. Production in the Permian has slowed since the drop in oil prices reduced drilling activity but is still increasing from sweet spots in the Midland and Delaware basins in West Texas where pipeline gathering can save producers as much as $2/Bbl in trucking fees. Today we continue our review of gathering infrastructure build out to deliver more crude to takeaway hubs in the Permian.

National Fuel teaming with Texas firm to drill up to 80 wells -- National Fuel Gas Co. has signed a deal to partner with a Texas investment firm to fund the development of as many as 80 natural gas wells in the Marcellus Shale region in Pennsylvania, the Amherst-based energy company said. The deal with IOG Capital, which will give the Dallas-based firm an 80 percent stake in each of the wells, will reduce National Fuel’s cash needs during a time of low natural gas prices, while allowing it to continue to fund the development of new wells that are needed to fill up the expanding network of pipelines that National Fuel is building to move gas from Pennsylvania to markets in Canada, Western New York and elsewhere. But because National Fuel will get only about 26 percent of the revenues produced by the wells drilled under the first portion of the agreement, the deal also will weaken the company’s earnings during the current fiscal year, reducing its expected profits by about 5 percent, or 15 cents per share. The joint development agreement will cut National Fuel’s capital spending within its oil and gas drilling business almost in half from what the company initially had planned for the current fiscal year. With IOG now providing most of the funding for as many as 80 Marcellus wells, National Fuel now expects to spend about $225 million on new wells this year, down from its earlier forecast of about $425 million.

Report: Oil, gas helps fund Texas schools -- A report by North Texans for Natural Gas explains how the oil and natural gas industry contributes more than $4 billion per year to the Texas education system. Texas schools benefit from oil and gas royalties that are paid into the state’s Permanent School Fund and the Permanent University Fund. Local independent school districts also benefit from property taxes paid by the oil and natural gas industry. The report shows oil and gas revenue deposited $676 million into the Permanent School Fund in 2014. Tax revenues also added $1 billion to the Foundation School Fund. Texas universities also benefit from oil and gas revenues. The Permanent University Fund was established in 1923 when 2.1 million acres of land was set aside to help pay for higher education. Since 1923, royalties from oil and natural gas have added billions of dollars to the fund. In 2014, those royalties generated $1 billion for the Permanent University Fund. According to the report, oil and natural gas production generated over $1.5 billion in property tax revenue for Texas schools in 2014. For more than 100 school districts, this revenue accounts for more than half of the total tax base. Several companies have also partnered with local high schools to create programs that train students interested in entering the oil and gas field.

Bush's agency joins lawsuit alleging federal land overreach — Land Commissioner George P. Bush and his little-known but powerful agency, Texas’ General Land Office, joined a lawsuit Tuesday suing the federal government for what the suit calls an unconstitutional seizure of land. Filed last month by seven landowning families, the lawsuit accuses the federal Bureau of Land Management of a “blatant land grab” involving a 116-mile tract along the Red River that marks the border between Texas and Oklahoma, but whose waters have shifted for decades — raising ownership and demarcation questions. “Unfortunately, with this president and with this bureaucracy composed of unelected folks, we can’t leave this to chance,” Bush — whose grandfather and uncle were president and whose father, Jeb, is seeking the 2016 GOP White House nomination — told The Associated Press. If the Bureau of Land Management gets its way, 113 acres of public land could fall under federal control and, unchecked, the agency could set a precedent that jeopardizes Texas’ entire 13 million acres of public territory, Bush said. The lawsuit, which his office joined in a motion filed in U.S. District Court in Wichita Falls, “sends a clear message that the federal government shouldn’t be in the business of seeking to claim ownership over the state’s assets,” he said. Three Texas counties and a county sheriff’s office also have filed motions to join.

Another Earthquake Hits Oklahoma: Officials Worry Stronger Quake Could Threaten National Security -- Officials in frack-happy Oklahoma are continuing to express concern over the state’s alarming earthquake boom. If a strong one strikes the northwestern city of Cushing—one of the largest crude oil storage facilities in North America, if not the world—it could disrupt the U.S. energy market and become a national security threat, NPR reports.  Mike Moeller, senior director of mid-continent assets for Unbridle Energy, explained to NPR that, so far, the state’s uptick in tremors have not affected company operations. However, Moeller noted that the company’s 18 tanks, which hold between 350,000 to 575,000 of oil, are not built to withstand serious earthquakes, especially since earthquakes used to be so rare in Oklahoma. As EcoWatch reported in September, before 2009 Oklahoma had two earthquakes a year, but now there are two per day. Oklahoma has more earthquakes than anywhere else in the world, a spokesperson from the Oklahoma Corporation Commission said earlier this month.  The possibility of a Big One striking Cushing, which holds an estimated 54 million barrels of oil, could be a national security issue. “I have had conversations with Homeland Security. They’re concerned about the tanks mostly,” Daniel McNamara, a U.S. Geological Survey Research geophysicist, told NPR. He added that the faults underneath Cushing could be prime for more shaking.

Oklahoma Corporation Commission’s response to earthquakes spurs further debate -- The earthquakes just keep coming. Four days after a 4.7 magnitude earthquake was recorded southwest of Cherokee, a 4.4 magnitude earthquake was recorded Monday near Hennessey and Tuesday a 3.0 magnitude quake sprang up about 40 miles southeast of Norman, capping off a run of 23 earthquakes of magnitude 3.0 or higher in a seven-day period. In response to Thursday’s quake, the Oklahoma Corporation Commission released a plan calling for two disposal wells to stop operations and for many others to cut down in volume. Oklahoma Geological Survey Director Jeremy Boak said it’s a smart move because he said there’s a clear link between disposal wells and seismic activity in Oklahoma and he would like to see a balanced approach that allows scientists and policy makers to gather more information. Jack Dake, a land manager for Baron Exploration Company, said the OCC’s measured approach is a good one, but may not be worth the trouble. Make, who has been in the industry since 1978, doesn’t believe that human activity is responsible for Oklahoma’s uptick in quakes and believes the commission may be taking action just to take action. “The commission was one of the first groups to look at earthquake causation and to consider whether or not oil and gas activities were a factor,” Dake said. “The commission has reason behind what they’re doing, but it’s not proof. This is simply to see if, and that’s a big if, if it’s related and perhaps there is no more prudent effort that the OCC can institute than what they’ve done, but as of today, to the best of my knowledge and belief, no one knows whether this means anything or not, other than they feel like the commission is doing something.” The commission’s efforts are focused on injection disposal wells. According to Boak, about 95 percent of the water being injected into disposal wells is formation water — water that was already present in the ground prior to fracking operations.

Disposal well plan expected after latest Oklahoma quakes — The Oklahoma Corporation Commission was working Wednesday to finalize a plan for wastewater disposal well operators to shut down or reduce volume in north-central Oklahoma, which has been rattled by a swarm of earthquakes. Commission spokesman Matt Skinner said the agency’s oil and gas division was working on a plan that could be released this week. The largest quake early Monday was measured by the U.S. Geological Survey at magnitude of 4.7 and struck about 15 miles southwest of Medford. That was followed by at least 15 earthquakes of a magnitude 2.5 or greater in the last few days. Jeremy Boak, the new director of the Oklahoma Geological Survey, said that while there has been a slight reduction in the number of significant earthquakes in the region over the last several months, it’s difficult to determine exactly how the changes in disposal well volume is affecting the seismic activity. “I think that some of the decline we’ve seen since July does in fact relate to reduced injection,” Boak said. “But when you shut in a well, it takes a while for it to take effect, because we’ve injected a very large amount of water in there. Just slowing it down or cutting some of it off does not produce an immediate response.”Meanwhile, Gov. Mary Fallin announced Tuesday the creation of a “fact-finding work group” to explore ways that wastewater, a byproduct of oil and natural gas operations, may be recycled or reused instead of being injected underground.About 1.5 billion barrels of wastewater was disposed underground in Oklahoma in 2014, according to statistics released by Fallin.

Environmentalists want stronger methane rule - Environmentalists on Tuesday joined local activists to express support for proposed Environmental Protection Agency regulations on oil and gas industry atmospheric methane emissions. Alex Renirie and Camilla Feibelman of the Sierra Club held a conference call with Victoria Gutierrez of Diné Citizens Against Ruining Our Environment and Tweeti Blancett, a sixth-generation New Mexico rancher and former state legislator. Feibelman said the four were using the call to announce that a coalition of environmentalists in New Mexico had collected 25,000 public comments in favor of the Obama administration’s proposed rule even as President Barack Obama was in Paris talking with the leaders of other nations about ways of slowing climate change. However, Renirie said the proposed EPA rules on methane don’t go far enough. For example, the proposed rule lacks specific language on flaring to make it “an option of last resort,” she said. “This rule limits emissions only on newly installed or modified equipment in the oil and gas industry, but not on distribution,” she said. Renirie also said that the proposed rule should include tighter restrictions such as more frequent leak detection and repair, or LDAR, inspections. She would also like to see liquid-unloading events, storage tanks and compressors at wellheads included. Oil and natural gas producers in New Mexico emitted more than 250,000 metric tons of methane in 2013, she said. According to the EPA, the oil and gas industry leads all U.S industries in methane emissions.

Life around New Mexico’s gas wells: how fracking is turning the air foul: "My daughter has asthma. She is not the only one around here, something is wrong here, our air quality shouldn’t be this way.” Shirley “Sug” McNall is leaning up against a fence staring at a natural gas well about 40 meters from a playground behind the primary school where her daughter used to teach in Aztec, New Mexico. She believes that the gas industry and the explosion of fracking in her state is responsible for serious impacts on local air quality which are affecting people’s health. Her fears were boosted last year when Nasa satellites identified a methane bubble over Aztec visible from space. The bubble suggests that during drilling and production the natural gas industry is not capturing all of the gas they unlock from deep in the ground and significant amounts of this methane and other chemicals are leaking into the sky. McNall believes that other more dangerous gasses are being released too. McNall’s fears that the emissions from the gas industry are potentially dangerous are backed up by scientists. Dr Detlev Helmig is a research professor at the University of Colorado in Boulder. His group works with the US National Oceanic and Atmospheric Administration (Noaa), Nasa and other groups to monitor the emissions coming from the gas industry. His study from a Utah gas field shows that “on the order of 7-8 % of the overall produced natural gas is vented into the atmosphere,” suggesting that gas companies are releasing hundreds of millions of tons of pollutants straight into the air. Leaks in Uintah, Utah are so bad that in his words, “the air is worse than downtown LA”.And it is not only methane that is leaking out of these gas wells but a host of other dangerous gasses, collectively known as volatile organic compounds (VOCs). They read like a devil’s cookbook of nastiness, for example benzene, which causes leukemia and other health problems ; polycyclic aromatic hydrocarbons that can cause cancer ; and toluene, which is known to cause birth defects at high doses .

Utility steps up efforts to plug massive California methane leak | Reuters: The head of Southern California Gas Co said it would take at least three more months to plug a massive underground leak of natural gas that has been seeping into the air since mid-October and now accounts for a quarter of the state's entire methane emissions. The utility's president and chief executive officer, Dennis Arriola, also said on Tuesday the company would begin this week drilling a relief well designed to intersect the damaged pipeline hundreds of feet beneath the surface and inject it with fluids and cement. The utility's latest strategy and time frame for addressing the stench of gas fumes that have sickened nearby residents for weeks and led to the temporary relocation of 200 families was laid out during a Los Angles City Council hearing. SoCal Gas, one of the biggest gas utilities in the nation, is owned by San Diego-based Sempra Energy. Its leaking storage field at Aliso Canyon, just outside the northern Los Angeles community of Porter Ranch, is the second largest such facility in the Western United States by capacity, after a field in Montana. The company pumps gas into storage wells some 8,500 feet below the site during the summer and draws on those supplies to meet higher energy demand in the winter. The leak, detected on Oct. 23, is believed to have been caused by a broken injection-well pipe several hundred feet beneath the surface of the 3,600-acre field.

Class-action lawsuit filed over Porter Ranch gas leak - A group of Porter Ranch residents are suing Southern California Gas Co. and a state regulatory agency over a gas leak at a nearby storage facility that has gone on for more than a month. Residents have been complaining of health problems, including nausea, headaches and nosebleeds, since the leak began at the Aliso Canyon facility on Oct. 23. The leak from an underground well is releasing large quantities of methane, a greenhouse gas. It is also releasing mercaptans, odorants added to the gas to aid in leak detection. County health officials said the mercaptans could produce the symptoms being reported by the Porter Ranch residents.  A group of residents and the local advocacy group Save Porter Ranch filed a suit in Los Angeles Superior Court on Wednesday, alleging that the company and state officials had been negligent in allowing the leak to occur and had shown “willful disregard for public health” through their “failure to abate the harm after more than a month.” Attorney R. Rex Parris, who is representing the plaintiffs — and is mayor of the city of Lancaster in northern Los Angeles County — said Wednesday that the plaintiffs are concerned not only about the chemicals being released into the air, but about potential contamination of the water table.

Montana's inability to fund infrastructure leaves communities in trouble -- For six years, eastern Montana communities have sent more than $200 million in annual oil and gas production taxes to Helena. Aside from the usual share that returns to county and school coffers, no cash has come back to cities to help offset the cost of expensive infrastructure projects forced by the Bakken boom. “It leaves a bitter taste in your mouth that they’re not helping when we send them all this money,” he said as he slipped receipts into the register drawer. “We’re taking care of ourselves and getting it done ourselves. The local cities have had to bear the brunt of infrastructure costs.” Even outside oil-impacted areas, the repetitive failures of legislators and the governor to approve major infrastructure and building bills have left communities statewide with few choices. Local leaders can delay critical projects and watch construction costs climb, or they can raise rates on local residents, who sometimes struggle to pay when water and sewer bills as much as triple in a few short years. And that’s on top of any local levies sought for the projects and updated property appraisals by the state Department of Revenue, which will spike many Montana tax bills.

Declining prices hit energy-producing states hard | — While other states were tightening their belts during the dark days of the Great Recession, Wyoming was socking away billions of dollars in energy revenues in the bank, building new schools and funding an endowment that offers college scholarships to its high school grads. But with the recent slide in energy prices, fuel-rich states like Wyoming and Alaska are now facing the same sort of budget crises that had hit the rest of the nation. Commodity prices have plunged over the past two years. That’s forced some energy states to dip into their “rainy day funds.” And state officials say they’re worried that they don’t know when the rain’s going to stop. Several energy-producing states were counting on oil prices to hold steady at $50 to $60 a barrel or more this year when they mapped out their budgets this year. Their plans are crumbling now that crude prices are barely breaking $40. Natural gas prices also are down sharply and the future for coal looks bleak. “There’s no question about it, we’re going to face a serious shortfall,” Wyoming Gov. Matt Mead said this week when he rolled out his budget proposal for the coming two years.The problem may be most dramatic in Alaska, which long has relied on oil revenues to help fund state government. Alaska now faces an estimated budget gap of about $3.5 billion, even after a round of furloughs, eliminating positions and other austerity measures. Alaska hasn’t ruled out the prospect of additional cuts or even new taxes — a shocking notion in a deeply conservative state proud of its lack of an income tax. Lawmakers in Oklahoma also recently raided that state’s constitutional Rainy Day Fund for about $150 million to help close a $611 million hole in the budget for the current fiscal year. 

Colorado wells booming despite oil slump — Despite a general slowdown in oil drilling across the Denver-Julesburg Basin and elsewhere, Weld County is on track to top 100 million barrels of oil this year. More than 89 percent of the state’s production this year is coming from Weld, The Greeley Tribune reported. That’s up from 85 percent last year. Industry analysts say operators are getting more oil from every well by drilling the best parts of the basin. They’re also using improved techniques for well fracturing, or fracking. “We are seeing a relentless drive to push down costs across the basin,” said Reed Olmstead, manager of North America supply analytics, upstream strategy and competition at IHS Energy in Englewood. Statewide oil production for 2015 so far is at 79.46 million barrels. For the first half of 2015, Weld oil production averaged 8.7 million barrels per month, according to the Colorado Oil & Gas Conservation Commission. Statewide oil production for 2015 so far is at 79.46 million barrels.

Radioactive Frack Waste – Too Much of A ‘Good’ Thing! -  If the Oil & Gas Industry were held to the same environmental standards as other American Industries, they would not be ale to operate with a profit due the enormous amount of pollution and extensive environmental degradation – and public health problems – they create!   “Scientists warn that if this radioactive waste is dumped in regular landfills, water running off from the landfills after rainstorms could carry radioactive materials into rivers, streams and drinking water supplies…”  had this been uncovered as part of a terrorist plot, you can bet Homeland Security would be all over it… Western State Regulators Struggling to Keep Up With Radioactive Fracking and Drilling Waste - The question of how to handle the toxic waste from fracking and other oil and gas activities is one of the most intractable issues confronting environmental regulators. Not only because of the sheer volume of waste generated nationwide, but also because some of the radioactive materials involved have a half-life of over 1,500 years, making the consequences of decision-making today especially long-lasting.Every year, the oil and gas industry generates roughly 21 billion barrels of wastewater and millions of tons of solid waste, much of it carrying a mix of naturally occurring radioactive materials, and some of it bearing so much radioactive material that it is not safe to drink or even, on far more rare occasions, to simply have it near you. Over the past decade, states have often proved ill-prepared to handle the flood of waste from the shale drilling rush, sometimes because drillers struck oil or gas in a region with little prior experience with drilling’s unique hazards, and other times because the political sway of a wealthy and well-connected industry or a lack of resources for environmental regulation left state rules vague or poorly enforced, environmentalists say.Both types of problems are highlighted in a new report, titled No Time To Waste, published Nov. 19 by the Western Organization of Resource Councils (WORC), that examines how radioactive wastes are handled under various state laws.

Groups appeal suspension of federal oil, gas drilling rules — Environmental groups have appealed a judge’s decision to suspend new rules for oil and gas drilling on federal land across the U.S. pending the outcome of a legal challenge to those rules. The rules should be allowed to take effect to protect land, water and wildlife from practices including hydraulic fracturing, the Sierra Club and others argue in court documents. On Sept. 30, U.S. District Judge Scott Skavdahl in Wyoming disagreed and blocked the rules from taking effect while the lawsuit contesting them moves ahead. The environmental groups, which have sided with the federal government in the case, appealed Skavdahl’s decision Nov. 27 to the 10th U.S. Circuit Court of Appeals. The case itself remains before Skavdahl in Casper.   The plaintiffs are Wyoming, Colorado, Utah, North Dakota, the Ute Tribe and two petroleum industry groups, the Western Energy Alliance and the Independent Petroleum Association of America. They say the rules would be costly for industry and cause economic harm to the states. The rules initially were set to take effect June 24 but Skavdahl suspended them the day before, telling federal officials to submit more information about how they developed their regulations. The rules would require petroleum developers to disclose to regulators the ingredients in the chemical products they use to improve the results of fracking. Developers also would have to pressure-test well bores to make sure they wouldn’t leak.

Bakken pipeline hearing questions environmental impact of project - The Iowa Utilities Board’s evidentiary hearings for the Bakken pipeline are now through its second week of testimony and will begin to wrap up the proceedings that were scheduled to last 10 days. The hearings will be used to decide if Texas-based company Dakota Access LLC and its parent company Energy Transfer Partners will be allowed to use eminent domain to acquire rights to land needed by the companies to build a crude oil pipeline through the state. The pipeline would transport crude oil from North Dakota’s Bakken Shale through South Dakota and Iowa en route to a hub in Pakota, Ill., that connects to a Texas-bound pipeline. It would extend 343 miles through Iowa and traverse 18 counties in the state, including Story and Boone. The pipeline would initially carry 320,000 barrels each day but could reach up to 450,000 barrels per day. During the first two weeks of the hearings, the IUB, which includes Chairwoman Geri Huser, a former Democratic state legislator, as well as Nick Wagner and Libby Jacobs, both former Republican state legislators, all appointed by Iowa Gov. Terry Branstad, listened to testimony from experts in various fields, Dakota Access and Energy Transfer Partners personnel, witnesses supporting the project and witnesses opposing the project. The witnesses that support the construction of the pipeline have argued that the pipeline will lead to energy independence and the creation of jobs for people who would be hired to build the pipeline. The opposition voices have stated their fears about possible environmental impacts if a spill were to occur and that the jobs created would only be temporary, which would not help the state’s economy in the long run. There is also concern that the oil traveling through the pipeline would not do anything to benefit Iowans, which is a requirement if eminent domain is to be used.

State regulators to decide on Dakota Access pipeline — South Dakota regulators are expected to decide Monday whether to grant a construction permit for a pipeline that will cross through the state as it carries oil from North Dakota to Illinois. The 1,130-mile Dakota Access Pipeline proposed by Dallas-based Energy Transfer Partners would move at least 450,000 barrels of crude daily from the Bakken oil patch in western North Dakota through South Dakota and Iowa to an existing pipeline in Patoka, Illinois, where shippers can access Midwest and Gulf Coast markets. It needs approval in all four states. South Dakota’s Public Utilities Commission held a public hearing on the project in late September and early October. Supporters of the project cite a need for energy security, point to the jobs it would create and maintain that transporting oil by pipeline is safer than moving it by rail or truck. Opponents worry the pipeline could contaminate water supplies, farmland and archaeological sites, and harm habitat for wildlife, including endangered species. Opponents have submitted written comments to the commission since the hearing, and Dakota Access has offered a set of stipulations for its permit. In addition to complying with state and local laws, officials say they would offer quarterly reports to the commission, hire a liaison officer approved by the commission to deal with landowner disputes and log landowner concerns. The commission will decide whether to grant a construction permit, grant a permit with conditions or deny a permit, the Argus Leader newspaper reported.

South Dakota Approves Its Segment Of The ETP Dakota Access Pipeline -- The Gazette is reporting: The South Dakota Public Utilities Commission voted 2-1 Monday to approve the Bakken crude oil pipeline, but added conditions to better protect landowners along the route.  “It is crucial that we do this right so that our farmers and ranchers can get back to doing what they do best, producing food for the world,” Chairman Chris Nelson said.  The 1,134 mile pipeline proposed by Energy Transfer Partners of Texas would carry Bakken crude from North Dakota to Patoka, IL, crossing 18 Iowa counties. The $3.7 billion pipeline would initially carry 450,000 barrels of crude per day and could be expanded to 570,000 barrels.  In South Dakota, the pipeline travels 272 miles and extends through 13 counties. The conditions include requirements for construction and reclamation to better protect landowners.  Commissioner Gary Hanson, the lone dissenting vote, argued that the pipeline route would unduly harm development for the communities in the Sioux Falls area. Hanson said he suspects the decision to grant the permit will be appealed to the South Dakota court system.

Train safety provisions included in U.S. transportation bill - The mammoth five-year federal transportation bill that lawmakers hope to send to President Barack Obama early next week includes provisions, championed by Sen. Tammy Baldwin (D-Wis.), that would require railroads to share critical safety information with local communities. “This legislation provides the transparency we’ve been begging and asking Canadian Pacific railroad for,” Milwaukee Common Council President Michael Murphy said during a news conference Wednesday outside a fire station at 100 W. Virginia St. “It isn’t too much to ask a company that is using our public right of way to let us know if their bridges are safe and secure,” he said. As if to illustrate Murphy’s point, a Canadian Pacific train pulling oil tankers rumbled across the bridge over S. 1st Street a few blocks to the north. Milwaukee is in a rail corridor that ferries crude oil from North Dakota to refineries in metropolitan Chicago and beyond. Since spring, Murphy and other city officials have been sparring with Canadian Pacific over its refusal to share with city engineers the results of its inspection of a rusty-looking bridge crossing W. Oregon St. at S. 1st St. Canadian Pacific officials have insisted the bridge is safe, but they announced in August that the railroad plans to encase 13 of the bridge’s steel columns in concrete to protect them from further corrosion. “Five to six months ago, the Milwaukee Common Council asked for information on bridges,” Ald. Terry Witkowski said. “We were greeted with silence.” “With the stroke of a pen, the ball game has changed,” he said.

Bakken Refinery Rush Cools Down --  The 20 Mb/d Dakota Prairie refinery commenced operation on May 4, 2015 – becoming the first brand new U.S. crude processing plant to startup in nearly 40 years. The rationale behind this refinery and plans for others like it was surging demand for diesel driven by the shale oil boom in North Dakota. However the market conditions that prompted interest in building refineries in the Bakken region have changed considerably in the past year and led to an unprofitable first quarter for Dakota Prairie. Today we explain why the new refinery made sense at one time and what has changed in the past year.  Despite the oil price crash last year (2014) and consequent fall off in drilling - North Dakota is still producing over 1.1 MMb/d of crude as of September (according to the North Dakota Industrial Commission – NDIC) – the vast majority of which (all but about 100 Mb/d) leaves the State for Midcontinent or Coastal refineries by rail or pipeline. Up until May 2015 the only refinery operating in North Dakota was the Tesoro Mandan facility that processes about 70 Mb/d of crude. As we have previously described - the lack of local refining capacity in a state sitting on top of bounteous crude supplies as well as the prospect of high margins - attracted the attention of several companies looking to build new refineries. We first covered the topic back in April 2013 when plans for three new refineries were getting off the ground. A year later in June 2014, at least 5 companies were planning to build “micro” refineries that hoped to process 20 Mb/d of crude each. . However - as we shall see – changing demand for diesel fuel in North Dakota and a reduction in the price advantage for Bakken crude made the new refinery’s first quarter unprofitable and appears to have chilled progress on the other projects.

More than 17K gallons of saltwater spill near Watford City — North Dakota oil regulators say more than 17,000 gallons of saltwater have spilled from a disposal well near Watford City. The North Dakota Oil and Gas Division says Wyoming-based True Oil LLC on Monday reported that the 17,640 gallons were released, contained and recovered at the disposal well located about 15 miles southwest of Watford City. The cause of the spill is listed as a pump leak. The division says a state inspector has been at the site of the release. Saltwater, or brine, is an unwanted byproduct of oil production. It is many times saltier than sea water and can easily kill vegetation.

The U.S. Has An Oil Train Problem -  Recipe for disaster: Put a flammable substance under pressure into a metal container, then rumble it at 50 miles an hour down a metal rail, across hundreds or even thousands of miles, through towns and cities and over bodies of water. Repeat, as necessary.  The United States is coming to the end of the costliest year on record for oil train explosions, Bloomberg News reported Tuesday, as crude oil travelling by rail has reached its highest levels ever. This past year saw a town in North Dakota evacuated after a May derailment and explosion; another major derailment and explosion in Illinois in March; and a February derailment and explosion in West Virginia, which destroyed a home, forced the evacuation of 1,000 people, and caused the governor to declare a state of emergency.  At the beginning of 2010, the United States was shipping about one million barrels of oil by rail every month. By mid-2014, though, that number was around 25 million. Imports from Canada increased 50-fold during that time. The resulting surge in accidents — including a Quebec derailment in 2013 that killed 47 people — prompted the Department of Transportation to enact new safety rules in May 2015.  But those rules didn’t prevent costs from ballooning from $7.5 million in damage in 2014 to $29.7 million in 2015, according to Department of Transportation data. Still, carloads of petroleum products have declined significantly since their peak in December 2014, and Bloomberg reporter Mathew Philips suggests that we are unlikely to see this amount of crude by rail in the future.

Oil companies lose pipeline case that could be worth hundreds of millions to Alaska - A federal agency has ruled that the oil-company owners of the trans-Alaska pipeline had so badly managed an upgrade project, they can’t recover their costs by charging higher fees for moving oil, a decision that could save the state and independent producers hundreds of millions of dollars over the life of the pipeline. The “imprudently” managed project to update four pump stations and control systems along the 800-mile line, known as Strategic Reconfiguration, lasted years longer and cost hundreds of millions dollars more than anticipated, said the Federal Energy Regulatory Commission in a 67-page decision issued last week. The ruling means the pipeline’s oil company owners, primarily BP, ConocoPhillips and ExxonMobil, will collect at least $1.5 billion less in rates than they otherwise would have collected in the decades to come, said Robin Brena, lead counsel for prevailing parties Anadarko Petroleum and Tesoro Alaska, two companies that don’t own a piece of the Trans-Alaska Pipeline System. The lower rates, roughly estimated at 20 percent, will help refiners and independent producers and shippers, a group that currently includes refiner Tesoro, as well as Anadarko, a minority partner in ConocoPhillips’ Alpine field, and others, such as North Slope newcomer Hilcorp Alaska. The state will also benefit to the tune of about $500 million in additional revenues because lower rates mean lower transportation costs that the oil companies can deduct from royalty and severance taxes paid to the state, Brena said. “It increases the value of the resource and opens up the basin for independents,”

U.S. oil companies' restructuring plans founder as prices plunge  -- When Samson Resources Corp filed this year's biggest energy-related bankruptcy in September, the oil and gas company said it had a deal to emerge from Chapter 11 protection by year-end. Just a few weeks later, plunging gas prices had left the deal in tatters. Samson joins about a half dozen troubled energy producers that have sought court protection from creditors this year and discovered asset values have evaporated or that a restructuring plan has unraveled as commodity prices plunge. Bankers, lawyers and advisers involved in the cases blame the steep drop in energy prices and the industry's huge need for constant, capital-intensive drilling and exploring to sustain production. In the past 16 months, the price of oil has sunk to around $40 per barrel from about $100, ending years of elevated crude prices that fueled oil companies' debt-financed expansion. "It can be a really tough spot especially when you have the bottom drop out," said Michael Cuda, a bankruptcy lawyer with Squire Patton Boggs in Dallas, who represents a lender in the Samson case. "A lot of assets suddenly become valueless," he said, speaking of energy companies generally.

Schlumberger to cut more jobs as drilling downturn bites -- Oil service company Schlumberger announced another round of job cuts on Tuesday, adding to 20,000 already this year, as low oil prices and a slowdown in drilling was expected to continue into next year. The layoffs, which will incur a pretax restructuring charge of about $350 million in the fourth quarter, are the latest sign of continued pain in the oil industry as oversupply continues to weigh on prices and cut profits for even the largest companies. The size, location and timing of the cuts were unclear. “The latest leg down in activity has led us to again evaluate our staffing levels against expected activity. Following which, we will further right-size the organization based on the activity outlook for 2016,” said Patrick Schorn, Schlumberger’s president of operations, at a speech on Tuesday in New York. “It has become clear that any recovery in activity has been pushed out in time,” he said. A glut of oil and a steep drop in prices from over $100 a barrel in June last year to $40 this week has rattled the industry and forced drillers to idle rigs and let workers go. Schlumberger, the biggest oil service company globally, has led the jobs cull in a series of layoffs this year. Rival service firm Baker Hughes has cut over 16,000 jobs, while Halliburton has cut around 18,000. Oil producers, including Chevron and Shell, have added to those numbers.

"On The Cusp Of A Staggering Default Wave": Energy Intelligence Issues Apocalyptic Warning For The Energy Sector -- The Energy Intelligence news and analysis creator and aggregator is not one to haphazradly throw around hyperbolic claims and forecasts. So when it gets downright apocalyptic, as it did this week in a report titled "Is Debt Bomb About to Blow Up US Shale?", people listen... and if they are still long energy junk bonds, they panic. The summary: "The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices -- which few experts foresee in the near future -- an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get?" The full report by Paul Merolli, a senior editor and correspondent at Energy Intelligence: The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices — which few experts foresee in the near future — an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get and when? It increasingly looks like a number of the weakest companies will run out of financial stamina in the first half of next year, and with every dollar of income going to service debt at many heavily leveraged independents, there are waves of others that also face serious trouble if the lower-for-longer oil price scenario extends further.

House backs sweeping energy bill to boost oil, natural gas - — Defying a White House veto threat, the Republican-controlled House on Thursday approved a sweeping bill to boost U.S. energy production, lift a four-decade ban on crude oil exports and modernize the aging electric grid. The first major energy legislation in nearly a decade, the bill would also speed natural gas exports and hasten approval of natural gas pipelines across public lands. It also would advance cross-border projects such as the Keystone XL oil pipeline, which lingered for more than seven years before being rejected last month by President Barack Obama. The vote was 249-174. The Senate still must consider the measure. “The days of energy scarcity are long in the rearview mirror, and passing (the energy legislation) takes an important and necessary step forward,” said Rep. Fred Upton, R-Mich., the chairman of the House Energy and Commerce Committee and the bill’s chief sponsor. Passage of the legislation comes just days after Obama traveled to Paris for an international conference on climate change. Administration officials involved in negotiations are pressing for a far-reaching agreement designed to put the world on a path toward reducing the carbon pollution blamed for global warming. Democrats criticized the House bill as “backward-looking,” saying it promotes fossil fuels such as oil and gas while doing nothing to support renewable forms of energy such as solar and wind power.

Manslaughter charges dropped for BP supervisors in oil spill - The Gulf of Mexico rig explosion that killed 11 workers and unleashed the nation’s worst offshore oil spill also led to criminal charges against four BP employees, who faced prison time if convicted. But the Justice Department’s decision to drop manslaughter charges against two BP rig supervisors makes it increasingly likely that nobody will spend a day behind bars for crimes associated with the deadly disaster. One of those rig supervisors, Donald Vidrine, pleaded guilty Wednesday to a misdemeanor charge of violating the Clean Water Act after a judge agreed to dismiss 11 counts of involuntary manslaughter against him and Robert Kaluza. The cases against two other former BP employees already have been resolved — one with an acquittal and another with a sentence of probation. Keith Jones, whose son Gordon Jones died in the rig explosion, attended Wednesday’s hearing with his other children and expressed disappointment that prosecutors dropped the most serious charges against Kaluza and Vidrine. “As a result of this court proceeding today, no man will ever spend a moment behind bars for killing 11 men for reasons based entirely on greed,”

The Obama Administration Should be Investigated over Handling of Keystone Pipeline -- The Keystone Pipeline was turned into one giant debate over ‘Environmental Concerns’ it became a symbol for the fake environmentalists to rally around, and became politicized far beyond the scope of common sense reasoning on the issue. Pipelines that deliver natural gas, oil, and other petroleum products underlie and support every major US city and geographical region, they have been one of the core infrastructure elements, and a mainstream of efficient, safe transportation of energy for the last 50 plus years. If one stepped back and took a Bird`s eye view of a map of the contiguous United States with an overlay of existing pipelines interwoven on this map, one would see just how much modern civilization relies on this successful infrastructure invention in the pipeline.We have seen what the alternatives to Keystone Pipeline were for safely transporting oil from Canada to the United States in the form of railroad transportation which is a much more dangerous, environmentally hazardous, and inefficient mode of transportation of this energy resource. There have been three major railroad disasters over the last two years all revolving around the issue of oil transportation via trains, which is just ludicrous even on the most critical interpretation of logistics when seen through the warped lenses of the lunatic environmentalist.The Keystone Pipeline debate isn`t really about the environment at all, but rather money. I find it rather convenient that one of the biggest supporters of the Obama administration is namely Warren Buffet who just so happens to have major railway exposure both in terms on owning a railroad outright, but also owning shares in other railroad companies. Who benefits and is hurt if Keystone Pipeline gets blocked or tied up in legislative procedure and governmental red tape?  I hazard to bet if Warren Buffet bought a pipeline company instead of a railroad company that Keystone would have been passed long ago.

Fire erupts at Mexico's biggest oil refinery, some hurt – A fire broke out at Mexico’s biggest oil refinery on Tuesday and some staff were evacuated, a spokesman for state-run oil company Pemex said, the latest in a string of incidents to hit the company’s refineries. The Red Cross said nine people were injured, while Pemex said eight people suffered minor injuries and were being treated. A Pemex spokesman said the fire had been controlled and that the refinery, which supplies fuel for the domestic market, was operating normally except for an alkylation unit. The refinery has the capacity to process 330,000 barrels per day. Photographs taken by emergency services workers showed a blazing fireball and a thick black plume of smoke rising up into the sky from the facility located in the city of Salina Cruz in the southern state of Oaxaca. Luis Velazquez, a civil protection agency official in Oaxaca, said that nearby schools had been evacuated and that local hospitals were on red alert to treat any injured. “This is a highly populated zone,” he said.

Pemex sees total debt rising above $100 billion next year - Total debt at Petroleos Mexicanos may rise to more than $100 billion in 2016 as the state-run oil producer plans to issue more debt amid a slump oil prices and continued production declines. Pemex, as the world’s eighth-largest oil producer is known, estimates it will borrow $21 billion in 2016, with as much as $20 billion budgeted for national and international debt issuance and a reduction in bank loans, according to an investor presentation posted on the company’s website. The company plans debt payments of $5.3 billion next year, meaning the existing $87 billion in debt would be increased by an estimated $15.7 billion. The state-owned producer reported a record $10.2 billion loss in the third quarter as crude output heads towards an eleventh straight year of declines. Moody’s Investors Service, which downgraded Pemex’s credit rating on Nov. 24, expects Pemex’s “credit metrics will deteriorate further, and its financial leverage will remain high as its capital spending needs continue to be financed with debt in the context of low oil prices and declining production,” Mauro Leos, senior analyst at Moody’s, wrote in a Nov. 30 research note. Pemex will improve its financial standing through a series of joint ventures with oil companies to increase production at mature fields and with the modification of its pension structure, which was approved last month. The company, which sold a 50 percent stake in the pipeline company Gasoductos de Chihuahua for $1.3 billion in July, will likely consider selling additional assets next year to free up capital, according to Moody’s.

Exxon seeks first fracking permit in Colombia - Exxon Mobil Corp. has filed for an environmental permit to explore for shale oil and natural gas in Colombia using hydraulic fracturing technology, in a bid to become the first driller to use the controversial technique in the Andean nation. The company submitted an environmental impact assessment for fracking in the VMM-37 block to Colombia’s environmental agency ANLA, Exxon said in an e-mailed response to questions Thursday. If an agreed work program is completed, the Irving-based company will acquire a 70 percent interest in the unconventional play, with 30 percent for Sintana Energy Inc., according to a 2012 statement. ANLA had no requests for fracking permits, the agency said in e-mailed response to questions in February. It did not respond to a request for comment last week. Exxon’s move comes amid a slump in global oil prices that has dissuaded other companies including state-controlled Ecopetrol SA from seeking permits. Colombia published rules last year governing how companies can explore for oil and natural gas using hydraulic fracturing. Production regulations will be published in the first quarter of 2016, although whether fracking actually takes place next year will depend on oil prices, according to the Agencia Nacional de Hidrocarburos, or ANH. “Fracking is not fancy work but it is expensive,” . “And of course companies won’t put money into something that’s expensive right now.”

Proposed KZN fracking raises agricultural concerns -  The KwaZulu-Natal Agricultural Union (KWANALU) has warned of the possible dangers to agriculture should proposed fracking, to search for gas, go ahead in the province. An American-based petroleum company has made an application for the exploration rights for minerals which include oil, gas and coal bed methane in large parts of the province. These areas include Pietermaritzburg, Ulundi, Colenso and Richmond. Environmental Activists are against the move, saying it could pose grave dangers to the environment and the limited water supply in the drought-stricken province. Fracking is a process which entails drilling and injecting fluid into the ground under high pressure to fracture shale rocks and release natural gas. Activists say the chemicals used during this process could have negative impacts on the environment. They say fracking could also contaminate the limited water supply currently available in the province. Concerned community member, Penelope Malinga from Mphophomeni in the Midlands, says the large water quantities used during the process is a waste. “KZN is water stressed and we live in one of the places where it’s the headquarters of the water factories of KwaZulu-Natal just below the Drakensburg and some of these areas which are in their exploration zone are within those water factories most of them are. The exploration of gas in these areas would lead to the pollution of the water the water that is underneath the ground and the surface water as well,”

Botswana sells fracking rights in national park - The Botswana government has quietly sold the rights to frack for shale gas in one of Africa’s largest protected conservation areas, it has emerged. The Kgalagadi transfrontier park, which spans the border with South Africa, is an immense 3 6,000 sq km wilderness, home to gemsbok desert antelope, black-maned Kalahari lions and pygmy falcons. But conservationists and top park officials – who were not informed of the fracking rights sale – are now worried about the impact of drilling on wildlife. Prospecting licences for more than half of the park were granted to a UK-listed company called Nodding Donkey in September 2014, although the sale has not been reported previously. That company changed its name earlier this month to Karoo Energy. Park officials said that no drilling has yet taken place, but the Guardian found oil sediment on the ground near a popular camp site. There was an overwhelming smell of tar and a drill stem protruded from an apparently recently drilled hole. It is not known who had carried out the drilling or when. Scientist Gus Mills worked and lived in Kgalagadi for 18 years studying cheetahs and hyenas. He said he is worried about the impact on wildlife and environment. “The development that is going to have to go on there, with infrastructure that has to be moved in, seems to be yet another nail in the coffin of wild areas in the world.”

Can The Oil Industry Really Handle This Much Debt? -- As the crude industry has been wrestling with low oil prices that declined by over 50 percent since its highest close at $107 a barrel in 2014, many exploration and production companies worldwide and in the U.S., in particular, have faced large shortfalls in revenue and cash flow deficits forcing them to cut down on capital expenditures, drilling and forego investments in new development projects. High debt levels taken on by the U.S. oil producers in the past to increase production while oil prices soared, have come back to haunt oil and gas companies, as some of the debt is due to mature by the end of this year, and in 2016. Times are tough for U.S. shale oil producers: Some may not make it, especially given that this month, lenders are to reassess E&P companies’ loans conditions based on their assets value in relation to the incurred debt. Throughout the oil price upturn that lasted until the middle of 2014, companies sold shares and assets and borrowed cash to increase production and add to their reserves. According to the data compiled by FactSet, shared with the Financial Times, the aggregate net debt of U.S. oil and gas production companies more than doubled from $81 billion at the end of 2010 to $169 billion by this June In the first half of 2015, U.S. shale producers reported a cash shortfall of more than $30 billion. The U.S. independent oil and gas producers’ capital expenditures exceeded their cash from operations by a deficit of over $37 billion for 2014. In July – September 2015, after a couple months of a rebound, a further slump in crude futures prices fluctuated between $39-47/bbl, thus putting more strain on the oil-and-gas producers, and making them feel an even tighter squeeze.

U.S. oil and natural gas reserves both increase in 2014 - Today in Energy - U.S. Energy Information Administration (EIA): U.S. crude oil and lease condensate proved reserves increased by 9% to 39.9 billion barrels, and natural gas proved reserves increased by 10% to 389 trillion cubic feet in 2014, according to EIA's U.S. Crude Oil and Natural Gas Proved Reserves report. U.S. crude oil and lease condensate proved reserves reached the highest level since 1972, and natural gas proved reserves surpassed last year's record level.   Proved reserves are volumes of oil and natural gas that geologic and engineering data demonstrate with reasonable certainty to be recoverable under existing economic and operating conditions Because they depend on economic factors, proved reserves shrink or grow as commodity prices and extraction costs change. EIA's estimates of proved reserves are based on an annual survey of domestic oil and natural gas well operators. Texas had the largest increase in proved reserves of crude oil and lease condensate, representing 60% of the nation's total net increase in 2014. This increase was driven by development of tight oil plays (e.g., Wolfcamp, Bone Spring) in the Permian Basin and the Eagle Ford Shale play. North Dakota had the second-largest increase, 362 million barrels, which came mostly from the Bakken tight oil play in the Williston Basin.

Quiet Gulf Hurricane Season End Leaves Oil Drowned in Oversupply  - Oil bulls can say farewell to another quiet Atlantic hurricane season in the Gulf of Mexico, which ends Monday without a storm-induced price rise to lift crude from its once-in-a-generation slump. Barely an oil worker was evacuated from the Gulf of Mexico and the biggest storm this year -- the strongest hurricane ever in the Western Hemisphere, actually -- tore through the Pacific. The subdued June-November season overlapped with a four-month stretch of oil prices averaging less than $50 a barrel, the longest run since the global financial crisis. As well, the epicenter of U.S. production has moved onshore to shale fields spanning North Dakota and Texas. “Once upon a time we would have been watching very closely to what’s happening in the Gulf of Mexico,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “We’ve seen a few disasters from hurricanes, but the shale phenomenon has really taken the sting out of lost Gulf production.” Aided by shale oil developments, U.S. production is at such a rate that oil stockpiles are more than 100 million barrels, or about one-third, above the five-year average, buffering the impact from hurricanes. While prices surged 44 percent in 2008 after Hurricane Ike struck, markets barely blinked four years later after Hurricane Isaac hit and curbed more than 90 percent of crude output in the Gulf of Mexico.

November Car Sales Drive Toward Record - WSJ: U.S. new-car sales in November continued to run at a blistering pace, putting the auto industry on track to challenge the 17.35 million sales peak reached in 2000. A spate of Black Friday deals coupled with cheap gasoline and low financing costs helped auto makers overall deliver a 1.4% increase over the same month last year, offsetting what historically is a sluggish sales month. The tally brings the industry this year to 15.82 million vehicles through November. The results continued an annual sales pace that is tracking to be among the best in U.S. history, and raised industry optimism for a new annual record, barring a string of bad weather or other unexpected woes. Ford Motor Co. F -0.73 % said on Tuesday it would spend $1.3 billion, about a fifth of its typical annual capital-expenditure budget, to upgrade a pickup truck plant in Kentucky. “There is a lot of inventory and auto makers are going to come out with guns blazing,” said Ernie Boch Jr., chief executive of Boch Automotive, a Norwood, Mass., dealership. “Right now, I don’t see any signs of [demand] letting up.” With gasoline prices nationwide hovering around $2 a gallon, sales of the heavier vehicles that deliver substantially higher profits to auto makers are driving the industry. Nearly 59% of November’s volume was classified as light trucks, according to researcher Autodata Corp., including smaller SUVs. These light trucks represented three out of every four vehicles sold by Detroit auto makers last month, representing nearly the highest mix of pickup and SUV deliveries as a percentage of sales in history. More than 80% of Fiat Chrysler Automobiles FCAU -1.62 % NV sales last month were light trucks.

U.S. propane stocks hit record despite strong exports -- Liquefied petroleum gases (LPG) are the fastest-growing category of hydrocarbon exports from the United States, with volumes up almost four-fold since 2012. Exports have grown from less than 200,000 barrels per day in 2012 to an average of 743,000 bpd so far in 2015 and as much as 821,000 bpd in July, according to the U.S. Energy Information Administration. LPG exports include a range of light hydrocarbons ranging from ethane, ethylene, propane and propylene to normal butane, butylene, isobutane and isobutylene which are pressurized for convenient transportation. LPG is produced from natural gas processing plants, condensate splitters and oil refineries and has a wide range of applications from petrochemical feedstocks to motor fuel, grain drying and residential heating and cooking. Unlike crude oil, LPG is treated as a refined product and can be exported with few restrictions, a position the U.S. Department of Commerce confirmed in 2014. Traditionally, most LPG has been marketed in neighboring countries, including Canada, Mexico, Central America and the Caribbean.Exports to Europe, Africa and especially Asia have surged and now account for nearly half of all the LPG shipped abroad. China has overtaken Canada and Mexico as the most important export market for U.S. LPG, taking more than 24 million barrels, almost 100,000 bpd, in the first eight months of 2015.

Oil tanker rates jump to seven-year high as ships forced to wait - Fuel Fix: Oil tanker rates soared to the highest in seven years amid an acceleration in the number of bookings and signs that the ships are being delayed when unloading due to a lack of space in on-land storage tanks. Day rates for 2 million-barrel carrying ships sailing to Japan from Saudi Arabia, the industry’s benchmark route, surged to $111,359, the highest since July 2008, according to the Baltic Exchange in London. The Organization of Petroleum Exporting Countries is helping to keep the world flooded with oil by persisting with a strategy of defending its share of the global crude market, rather than propping up prices. It meets Friday to discuss that policy. Oil tankers are increasingly having to store cargoes while they wait for space to clear in on-land storage tanks that are too full, according to Erik Nikolai Stavseth, a shipping analyst at Arctic Securities ASA in Oslo. Vessels able to hold more than 100 million barrels of crude were waiting days or weeks at a time off the coasts of oil consuming countries in mid-November, vessel-tracking data compiled by Bloomberg show. “We’ve seen the number of vessels for storage move higher,” Stavseth said. “There have been several reports of congestion in Chinese ports” while the flow of cargoes being transported toward the U.S. Gulf is also rising, employing a growing number of vessels, he said.

Oil slides 4 percent on U.S. stock build, OPEC worry | Reuters: Oil prices tumbled more than 4 percent on Wednesday as surging U.S. stockpiles and a rallying dollar prompted traders to dump crude contracts amid signs the world's largest oil producers will not cut production when they meet this week. Warmer-than-usual weather in the Northeastern United States, a major market for heating oil, also weighed on the petroleum complex. U.S. crude's West Texas Intermediate (WTI) futures hit contract lows after government data showed a 10th straight week in crude builds. Brent futures approached new lows since March 2009, with the Organization of the Petroleum Exporting Countries (OPEC) widely expected to uphold at its meeting in Vienna on Friday a decision from last year to pump oil vigorously to protect market share from non-OPEC members like the United States and Russia. The dollar's .DXY surge to 12-1/2-year highs further pressured prices for oil and other commodities denominated in the greenback.[USD/] "From the looks of it, we could be trading below $40 a barrel by the time OPEC concludes on Friday,"

Crude Oil Price Dives Below $41 a Barrel After Inventory Report - The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 1.2 million barrels last week, maintaining a total U.S. commercial crude inventory of 489.4 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years.  Tuesday evening, the American Petroleum Institute (API) reported that crude inventories rose by 1.6 million barrels in the week ending November 27. For the same period, analysts had estimated a decrease of 300,000 barrels in crude inventories. Total gasoline inventories increased by 100,000 barrels last week, according to the EIA, and remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged about 9.2 million barrels a day for the past four weeks, down by 0.9% compared with the same period a year ago. The Organization of the Petroleum Exporting Countries (OPEC) begins its last meeting of the year on Friday, and while the Saudis say they are willing to listen to arguments for production cuts there is, in all likelihood, little chance that will happen. Non-OPEC production, particularly in the United States, has dropped and, though there is still a lot of extra crude oil sloshing around in storage tanks and VLCCs, the impact of lower U.S. production won’t be felt immediately, or even in the next few months.

Crude oil storage and capacity has increased at Cushing, OK, and along the Gulf Coast – EIA - Commercial crude oil inventories in Cushing, Oklahoma (located in Petroleum Administration for Defense District 2) and the U.S. Gulf Coast (PADD 3) totaled a record-high 309.4 million barrels as of the week ending November 27. Based on the recently released storage capacity and line fill data in the September Petroleum Supply Monthly (PSM), EIA estimates 70.2% utilization of working crude oil storage capacity in Cushing and the Gulf Coast on a combined basis, only slightly below the record utilization level of 71.2% set in the week ending April 24 of this year. The U.S. Gulf Coast region contains 55% of the nation's crude oil storage capacity, and Cushing contains another 13%. As of the week ending November 27, these two locations contained 67% of the nation's crude oil inventories. They are also home to most of the growth in crude oil storage capacity over the past four and a half years. Since March 2011, the Gulf Coast and Cushing have accounted for about 85% of the nation's increase in crude oil storage capacity, growing by 55.7 million barrels and 25.0 million barrels, respectively. Although storage utilization levels along the Gulf Coast and at Cushing are often assessed separately, their combined utilization is currently most relevant given the increased pipeline capacity to move crude oil south from Cushing to the Gulf Coast during a time of high global crude oil inventory builds. Despite relatively high crude oil inventories and storage capacity utilization, there are still more than 100 million barrels of capacity available in these two areas. More information about the interplay between crude oil storage patterns and financial markets is available in This Week in Petroleum.

Crude Tumbles As Inventories Surge For 10th Week In A Row And Production Rises Despite Demand Drop -- Confirming last night's API report, DOE reports that total crude inventories rose for the 10th week in a row (up by 1.177mm barrels) This is a huge surprise relative to the 1mm draw that was expected as total product demand dropped 1.6% relative to last year. Which all makes panicked cash-flow sense as production rose by 37k bpd. Production rises to highest since Aug 28th... And the reaction... Charts: Bloomberg

US crude oil fell below $40 a barrel for just the second time since the recession - Quartz: It’s that time of the week when the Energy Information Administration releases its weekly peek (pdf) at US oil production. For the past year or so it’s been a dizzying climb as stockpiles climbed to record highs. Though supplies had begun to fall earlier in the year as shale producers finally pumped the brakes on their pumping, the latest figures show that commercial supplies are fewer than 2 million barrels shy of a fresh record high. Since commodity markets abhor a glut—and are especially shaky ahead of the upcoming OPEC meeting, which is expected to do little to end the stalemate with US shale producers—things went south quickly. Nine of the 15 worst-performing stocks in the S&P 500 today were energy companies. West Texas Intermediate crude, the US domestic oil benchmark, briefly dipped below $40 a barrel today (Dec. 2). That’s something it hadn’t done since August’s global market meltdown, when it fell to $38.60 before quickly recovering. The last time before that? June 2009.

WTI Breaches $40 Level; Brent Falls to a 6-Year Low at $42.49/bbl - The WTI front-month contract settled on the NYMEX at $39.94/bbl Wednesday, down about 4 percent; Brent on the ICE, settled at $42.49/bbl, down about 4.4 percent. WTI’s fall below the $40/bbl level was the first time since August of this year, and Brent’s collapse was a low not seen since March 2009. In Wednesday’s trading, WTI fell more than 3 percent and traded close to the $40/bbl level after the Energy Information Agency (EIA) released its Weekly Petroleum Status report showing an unexpected build in crude inventories of 1.2 million barrels (versus expectations of a 300,000 barrel draw), representing the tenth consecutive week of a stock increase. WTI breached the $40/bbl threshold later in the day, an important psychological level that could possibly open up doors to prices tumbling further in the coming weeks. The report also showed that oil production in the United States rose week-over-week by 37,000 barrels per day (bpd) to 9.2 million bpd – further evidence that the greatly anticipated rollover in U.S. output (from a high of 9.6 million bpd in April 2015) is not playing out despite drastic cuts in rig count and operators' spending budgets. Many market observers view a significant falloff in U.S. oil output as a potential indicator that the global oil supply/demand situation is moving toward equilibrium. Oil markets rose briefly Wednesday morning on reports that an Iranian oil minister had been quoted saying that there was “OPEC agreement” around an output cut. The market soon read-through the headlines after it was apparent Saudi Arabia was not a party to that agreement. Some traders were expecting to see from the EIA report that there was some decrease in U.S. crude inventories due to destocking activity that typically takes place at the end of the year among refiners and other holders of crude in order to benefit from a lower tax base (if using a LIFO accounting method, or “last-in-first-out”, companies can value inventories at January oil prices). But, with prices significantly lower than in January 2015, plus other factors at play, the incentive to drawdown inventories might not be as strong this year and instead, inventories showed a surprise increase.

Oil-Rig Count Slides for Third Consecutive Week - WSJ: The U.S. oil-rig count fell by 10 in the most recent week, according to Baker Hughes Inc., BHI 0.00 % marking the third consecutive week of declines. The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year. At the count of 545, there are 66% fewer rigs from a peak of 1,609 in October 2014. A modest increase was reported three weeks ago, snapping a 10-weak decline, though that improvement appears to have been short-lived. According to Baker Hughes, the number of gas rigs rose by three to 192. The U.S. offshore-rig count was 25 in the latest week, down 5 from last week and 33 from a year earlier. For all rigs, including natural gas, the week’s total declined by 7 to 737. Oil prices recently were down 2.3% to $40.12 a barrel.

Oil Unmoved As US Rig Count Tumbles To May 2010 Lows -- For the 13th week of the last 14, US Oil rig counts declined. Down 10 to 545 rigs, this is the lowest since May 2010 as the temporary respite in the early Fall has given way to reality and rig counts track the lagged crude price lower...Charts: Bloomberg

US oil ends 2.7% lower on OPEC decision, rig count: Oil prices settled lower on Friday after OPEC announced it had agreed to roll over its policy of maintaining crude production in order to retain market share. Also on Friday, oilfield services firm Baker Hughes reported its weekly count of U.S. oil rigs fell by 10 to a total of 545, compared with 1,030 a year ago. This is the third consecutive week of declines. Internationally traded Brent was down 80 cents, or 1.8 percent, at $43.05 at 2:33 p.m. EDT, having fallen earlier this week to a low of $42.43, within cents of August's 6-½ year trough. U.S. crude settled 2.7 percent lower at $39.97 a barrel. OPEC had been widely expected to stick with its year-old policy, despite pressure from poorer members of the cartel for a cut in output to prop up the price of oil. During OPEC's press conference, OPEC President Emmanuel Ibe Kachikwu said the producer group was taking a "wait and watch" approach. The cartel will meet again in June 2, 2016 to reassess policy. He said OPEC members would keep current actual production levels steady. The target heading into the meeting was 30 million barrels per day. OPEC sources had earlier told Reuters it had agreed to raise its output ceiling to 31.5 million bpd at its meeting in Vienna, in what appeared to be an effective acknowledgement of existing production. But the official statement did not mention a target production level.

Oil price predictions for 2016 lower still: poll - Depressed oil prices are likely to linger longer as analysts dropped their predictions further for next year, according to a Reuters poll, assuming OPEC will not cut output when it meets on Friday. The average price forecast for benchmark North Sea Brent crude futures for 2016 at $57.95 a barrel is 57 cents below last month’s poll, the survey of 31 analysts showed. Analysts surveyed by Reuters have become increasingly bearish as the year has worn on. Six months ago, the monthly poll showed they expected Brent to average $70.90 next year and they have cut their estimates every month since then. OPEC is determined to keep pumping oil vigorously despite the resulting financial strain even on the policy’s chief architect, Saudi Arabia, alarming weaker members who fear prices may slump further towards $20. Standard & Poor’s rating agency forecasts Saudi Arabia’s budget deficit will rocket to 16 percent of GDP in 2015 from 1.5 percent in 2014. But analysts said a cut from OPEC would be highly unlikely, given its pressure on non-OPEC producers to curtail output. “We are seeing capex reductions with oil companies in 2015 and 2016 and, secondly, the lower oil price environment has arrested the growth of U.S. shale supply,” . “There is no reason for Saudi Arabia to change its strategy because it’s working and needs to continue this a little while longer in order to entrench the gains it has achieved.”

Yergin: Why oil prices cannot stay this low: The next two quarters will be tough on crude prices, but 2016 will be a year of transition for oil markets, IHS Vice Chairman Dan Yergin said Friday. Yergin told CNBC's "Squawk Box" he expects oil markets to begin to balance next year or in 2017. "The oil market "can't stay low like this because you're not going to have the investment you need," he said." "By 2020, the world oil market is going to need another 7 million barrels a day of production." "Right now, the whole mantra is slow down, postpone, cancel projects," he added. Multinational energy companies and U.S. shale oil producers have slashed capital spending in order to protect their balance sheets as their revenues plummet and cash flow dries up. Crude prices began to sink from historic highs last fall, and the downturn accelerated after OPEC announced it would not cut supply to balance oil markets. Despite expectations that high-priced American crude production would collapse at $70 a barrel, U.S. producers can perform well at $55 to $60 per barrel. However, current prices in the $40 to $50 range are creating "great pain," he said.

Saudi Oil Imports Into The US Plummet -- Most recent EIA data, in thousands of bopd, how much Saudi Arabian oil is imported into the US. The most recent data is from September, 2015. It's been this low before, but not often: Total imports haven't changed a whole lot. It looks like Kuwait, Iraq, and west Africa are making up the difference, at least for this most recent reporting period. Remember, Saudi Arabia has a huge refinery along the US Gulf coast.  This was totally unexpected. US gasoline demand has fallen below what it was one year ago:

Understanding the new global oil economy  --Why have oil prices fallen? Is this a temporary phenomenon or does it reflect a structural shift in global oil markets? If it is structural, it will have significant implications for the world economy, geopolitics and our ability to manage climate change. With US consumer prices as deflator, real prices fell by more than half between June 2014 and October 2015. In the latter month, real oil prices were 17 per cent lower than their average since 1970, though they were well above levels in the early 1970s and between 1986 and the early 2000s. (See charts.) A speech by Spencer Dale, chief economist of BP (and former chief economist of the Bank of England) sheds light on what is driving oil prices. He argues that people tend to believe that oil is an exhaustible resource whose price is likely to rise over time, that demand and supply curves for oil are steep (technically, “inelastic”), that oil flows predominantly to western countries and that Opec is willing to stabilise the market. Much of this conventional wisdom about oil is, he argues, false. A part of what is shaking these assumptions is the US shale revolution. From virtually nothing in 2010, US shale oil production has risen to around 4.5m barrels a day. Most shale oil is, suggests Mr Dale, profitable at between $50 and $60 a barrel. Moreover, the productivity of shale oil production (measured as initial production per rig) rose at over 30 per cent a year between 2007 and 2014. Above all, the rapid growth in shale oil production was the decisive factor in the collapse in the price of crude last year: US oil production on its own increased by almost twice the expansion in demand. It is simply the supply, stupid. What might this imply? One implication is that the short-term elasticity of supply of oil is higher than it used to be. A relatively high proportion of the costs of shale oil production is variable because the investment is quick and yields a quick return. As a result, supply is more responsive to price than it is for conventional oil, which has high fixed costs and relatively low variable costs. This relatively high elasticity of supply means the market should stabilise prices more effectively than in the past. But shale oil production is also more dependent on the availability of credit than is conventional oil. This adds a direct financial channel to oil supply.

Tehran Presents New Model for Oil-Development Contracts - WSJ --Iran on Saturday presented a new model for oil contracts it could offer to foreign oil firms as it seeks to attract Western investors ahead of an end to sanctions.  Though the terms of the contracts’ framework had been previously released, the official release coincided with the first international summit specifically focused on the new deals.  Iran announced it would revise its oil contracts two years ago following the election of moderate President Hassan Rouhani and the clinching of an interim nuclear agreement with world powers. Bijan Zanganeh, Iran’s oil minister, told investors he is looking for opportunities for $30 billion in spending in 52 fields soon to be on offer. With the investment, Iran plans to double its production to 5.7 million barrels a day by the end of the decade, compared with 2.7 million barrels a day today.  Under Iran’s previous oil contract model for foreign oil firms, called buybacks in the industry, investors were required to keep the costs of oil projects within an agreed level; most investors lose money on the deals if they find more oil than expected. The proposed new deals will allow more flexibility in recovering costs—including the possibility of choosing repayment in oil or cash—Iranian oil officials said in the presentations. Investors will also be allowed to remain involved in projects for 15 to 20 years—in contrast to previous deals that only entailed developing fields for 5 years or until they reached production.

Iran offers 50 oil projects to foreign investors: media – Iran offered on Saturday about 50 oil and gas projects to be developed by foreign investors with local partners under a new scheme it hopes will initially generate $25 billion in investments, state media reported. Iran reached a deal with world powers in July, under which sanctions will be lifted in return for it scaling down its nuclear program. It has outlined plans to rebuild its main industries and trade relationships following the agreement, targeting oil and gas projects worth $185 billion by 2020. Some 135 energy companies attended a conference in Tehran to hear the terms of a new energy contract – which it calls its integrated petroleum contract (IPC). “The estimate is that if we can draw about $25 billion (in foreign investments) in a first phase, that would be a very good figure,” Oil Minister Bijan Zanganeh told reporters in remarks carried by state television. Iran needs Western oil companies to help revive its aging oilfields and develop new oil and gas projects and the new oil contracts are part of its drive to attract Western investors. “The current (crude oil) prices and even less will not create a problem for the projects’ reimbursement or profits because of low finished cost in our industry,” Shana quoted Zanganeh as saying, adding that Iran’s production cost was $10 per barrel.

OPEC Rivals Become Unwitting Allies in Push for Oil-Market Share  |  Rigzone: -- Almost by accident, OPEC adversaries Saudi Arabia and Iran are about to work as a team. When the Saudi kingdom decided last year that OPEC should keep pumping to counter a surge in U.S. shale oil, Iran spearheaded resistance to the idea, saying output cuts were needed to buoy prices. Still a critic, Iran is nonetheless poised to amplify the strategy as it ramps up crude exports with the end of sanctions. “Iran’s return is effectively the Saudi policy on steroids,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “The policy is that low-cost Middle East crude should be gaining market share, and that it’s shale and other expensive non-OPEC supply that should be cut. So to use the Saudis’ own logic, as far as Iranian production goes -- bring it on.” By rebuffing calls to cut supply, the Organization of Petroleum Exporting Countries has sought to protect its market share by battering other producers with lower prices. That’s paying off, according to the International Energy Agency, as some U.S. shale drillers scale back and global oil majors slash investment, leaving OPEC to fill the gap. The 12-member group is likely to keep its output policy unchanged when it meets in Vienna on Dec. 4, a Bloomberg survey shows.

More Russian oil drilling shows its resolve to OPEC -– Russian oil firms are drilling more, showing the world’s top crude producer is ready for a longer fight for market share with OPEC, as its industry can carry on even if oil prices reach $35 per barrel. As OPEC prepares to meet on Friday in Vienna, Russia is sending a low key delegation for talks which are very unlikely to result in any output deal. OPEC oil ministers have repeatedly said they would only cut production in tandem with non-OPEC. According to Eurasia Drilling Company (EDC), the largest provider of land drilling services in Russia and offshore in the Caspian Sea, Russian drilling measured in meters rose 10 percent in the first six months of this year from a year ago, despite a decline in oil prices to less than $50 per barrel from their peaks of $115 in June 2014. “Despite the recent fall in oil prices, Russian production continued to accelerate as oil producers remained profitable even in the lower oil price environment, helped by the effect of a weak rouble on costs and lower taxes, which decline in a lower oil price environment,” Bank of America Merrill Lynch said in recent research. Moscow has surprised the Organization of the Petroleum Exporting Countries by ramping up output to new record highs this year despite low oil prices, which OPEC had hoped would depress production from higher cost producers. Moscow responded by steeply devaluing the rouble, giving an edge to its exporters. In many OPEC Gulf producers currencies are firmly pegged to the dollar.

Saudi Interbank Rates Soar, Deposits Flee As Cash Crunch Intensifies  -- If you frequent these pages, you’re probably well aware that the Saudis are in trouble.  Exactly a year ago, Riyadh decided to embark on an epic quest to send crude prices plunging on the way to, i) bankrupting the US shale complex and ii) achieving “ancillary diplomatic benefits,” like tightening the screws on Moscow’s energy-dependent economy in hopes of forcing Putin to give up Assad.  Long story short, the kingdom’s plan didn’t work.  Thanks to ZIRP, legions of yield-starved investors in the US ensured that capital markets remained open to otherwise insolvent drillers, allowing US producers to stay in business longer than the Saudis anticipated. Meanwhile, not only did Putin not give up Assad, he actually sent the Russian air force to Latakia and to add insult to injury, Moscow’s warplanes are now bombing Saudi-financed Sunni militias in Syria.  Meanwhile, slumping crude prices wreaked havoc on the kingdom’s finances. As we’ve documented extensively, the Saudis are now staring down a deficit on both the fiscal and current accounts with the former amounting to some 20% of GDP and the latter representing the first negative balance in at least 15 years.

Saudi Borrowing Rate Soars in November as Bank Deposits Drop - Saudi Arabian banks are feeling the squeeze from falling oil prices. The rate at which banks in the biggest Arab economy lend overnight to each other jumped the most in seven years in November, the fifth straight month of increases, following a slump in deposits the previous month that forced lenders to seek more funds from each other. "The drop in deposits in October, in absolute amount, is probably the biggest since the 1990s," Murad Ansari, a bank analyst at EFG-Hermes Holding SAE, said by phone from Riyadh on Monday. "There are payment delays from the government to contractors, which is one of the reasons for the decline in private sector deposits, and public sector deposits are shrinking as the government is running a deficit." The jump in bank borrowing costs provides further evidence of the impact oil’s 37 percent price drop in the past 12 months is having on a nation that gets about 90 percent of government revenue from energy. Traders are already boosting bets the Saudi riyal may be devalued. Standard & Poor’s last month lowered the country’s credit rating. Now liquidity in the banking system is being squeezed, with demand for deposits dropping 4.7 percent in October as businesses, individuals and government entities withdraw cash.

Saudi wake-up call --  Inside the sprawling royal court in Riyadh, a team of technocrats is putting the final touches to plans for a drastic overhaul of the Saudi Arabian economy. Backed by an army of highly paid western consultants, the royal aides have identified billions of dollars of waste and government largesse that the desert kingdom can no longer afford.Ten months after acceding to the throne, King Salman bin Abdulaziz, 79, faces the daunting challenge of managing a new era in Saudi Arabia. The world’s largest oil producer and longstanding US ally has adopted a policy that protects its market share rather than the price, which has more than halved since June 2014. But while the effect has been cushioned by $640bn in foreign-exchange reserves, the age of $100-a-barrel oil has receded and budget surpluses have been replaced by yawning deficits.“The collapse in oil prices is a wake-up call,” says an official in Riyadh. “We’ve had a long history of bad practices because of our overreliance on oil.”The belt-tightening comes at one of the most testing times in the kingdom’s history, with the Sunni Saudi monarchy locked in a regional power struggle with Shia Iran and sectarian tensions flaring across the region. Determined to reassert its leadership role in the Sunni Muslim world and confront Tehran, Riyadh in March launched a military campaign in neighbouring Yemen to push back Iran-backed Houthi rebels.Amid the turmoil of the Arab uprisings that convulsed the region in 2011, Saudi Arabia has positioned itself as one of the last bastions of stability compared with Iraq, Syria and Yemen, the failing states from which the Sunni jihadis of Isis have projected terrorist power across the Middle East and beyond. A senior western diplomat in Riyadh says: “Whatever you think about the policies of the government, the stability of Saudi Arabia really matters.”

Sovereign wealth funds in the new era of oil - As a result of the oil price plunge, the major oil-exporting countries are facing budget deficits for the first time in years. The growth in the assets of their sovereign wealth funds, which were rising at a rapid rate until recently, is now slowing – and some have started drawing on their buffers.  In the short run, this phenomenon is not cause for alarm. Most oil exporters have enough buffers to withstand a temporary drop in oil prices. But what will happen if low oil prices persist, and how will policymakers react? We explore here the fallout from low oil prices on sovereign wealth funds in oil-exporting countries and find that that they have important domestic implications. The impact on global asset prices will depend on the extent of unwinding of the sovereign wealth funds of oil exporters that will not be compensated by portfolio adjustment in other parts of the world that will in turn depend on their economic prospects.

OilPrice Intelligence Report: Energy Markets On Edge As OPEC Meeting Nears- It is a busy week for the world of energy. The Paris climate change talks could mark a more determined international effort to transition away from oil, gas, and coal. While nothing monumental is expected from the negotiations, countries will continue to pursue policies at the national level to reduce emissions. More important for energy markets in the near term is a summit taking place in Vienna at the end of the week, where OPEC convenes for its latest meeting. The summit is expected to be more contentious than the June meeting as the cartel’s strategy of pursuing market share is bearing little fruit. OPEC may be holding on to market share, but U.S. oil production is contracting much more slowly than many expected. That is leaving the more vulnerable members of OPEC reeling. Countries like Venezuela, facing an economic crisis, are pressing fellow OPEC members to overhaul its strategy and cut output. Saudi Arabia, by all accounts, is expected to stay the course. In fact, OPEC may announce a “technical” increase in its oil production quota, but that will simply reflect the inclusion of Indonesia’s output.  Speaking of OPEC’s strategy, Saudi Arabia and Russia are increasingly fighting over the European market. Selling oil and refined products to Central and Eastern Europe has long been the domain of Russia. But Saudi Arabia is aggressively seeking to capture customers by discounting its oil, and it is encroaching on Russia’s turf in Poland and Sweden, places that Saudi Arabia has not been in years. The strategy is not only cutting into Russia’s market share, but it is also forcing Russia to discount its own oil in order to keep up. That has the Urals benchmark trading at a wider discount to Brent, further sapping revenues to Moscow. Meanwhile, Iran is planning to return 500,000 to 1 million barrels per day in lost production once sanctions are removed, which could heat up competition in Europe. Iran sold a significant portion of its exports to Europe before the 2012 sanctions were slapped on. No doubt it wants to regain its lost share.

Saudis Prepared To Listen At OPEC Meeting - As energy analysts closely watch for any clues emerging from Vienna, where OPEC is set to meet on December 4, global oil markets remain stubbornly oversupplied. Last year, OPEC surprised the world by leaving its output quota untouched amid rapidly growing global supplies, a decision that sent oil prices spiraling downwards.As the group’s strategy became clear, there were fewer surprises in the follow up meeting in June 2015. This time around, however, while an about-face is not expected, given Saudi Arabia’s determination to see its course of action through, there will at least be a lot more debate and protest from fellow OPEC members. Not all of OPEC’s member countries are as well-endowed as Saudi Arabia, and a few are facing economical and financial pressure with varying degrees of hardship.Venezuela and Libya stand out in terms of facing full-blown crises, but Iraq, Iran, Ecuador, and Nigeria are also suffering from the fiscal vice of low oil prices. Of course, no production cut can work unless all members agree to a plan and implement it cohesively. Aside from a select few Gulf States, most of the OPEC membership is expected to heavily lobby Saudi officials to cut production. But in reality, Saudi Arabia will be the one to determine OPEC’s next step. As the only country with significant spare capacity, not to mention cash reserves and the political wherewithal to actually impose production cuts, Saudi Arabia will decide whether or not OPEC moves to cut its output quota. Despite al-Naimi’s assurances that the Saudi delegation won’t dictate policy to OPEC, his voice is the only one that counts.

Venezuela, Ecuador to Propose Output Cuts: OPEC Reality Check  |  Rigzone: -- As the last of the OPEC ministers make their way to Vienna, Venezuela and Ecuador said they would seek curbs on production at Friday’s meeting in order to boost prices. Venezuela will propose a 5 percent production cut, state newspaper Correo Del Orinoco reported, citing President Nicolas Maduro. Ecuador will suggest ways to improve oil prices through output controls, the South American nation’s oil ministry said on its Twitter account. While the majority of OPEC members would agree to a reduction in output, Saudi Arabia and other Persian Gulf Arab countries are opposed, Shana reported Wednesday, citing Mehdi Asali, director general of OPEC and energy forums at the Iranian Ministry of Petroleum. The group needs to reach a consensus among all members before it can change its output target. OPEC pumped 32.1 million barrels a day in November, exceeding its 30 million-barrel quota for an 18th month, according to a Bloomberg survey of companies and analysts. Iran has said it plans to pump an additional 500,000 barrels a day once international sanctions over its nuclear program are lifted. Ministers are expected to decide against cutting production on Dec. 4 even as crude prices languish near a three-month low. That will leave most OPEC members unable to balance their budgets, with only Qatar able to do so if Brent crude averages $57.50 a barrel next year, as forecast.

OPEC likely won’t move to boost oil price amid infighting — Cheap oil that could get even cheaper: That’s the challenge OPEC ministers face as they try to cut their losses at a time when supply is outstripping demand. But their hands appear tied. Ahead of their meeting Friday, there is recognition that the 12-member Organization of the Petroleum Exporting Countries will be unable to nudge up prices, at least in the short term. Non-OPEC countries like Russia and the U.S. continue to challenge OPEC for customers. And within the cartel, Iran and Iraq want to start pumping more, even though regional rival Saudi Arabia appears unwilling to play along by reducing its own output. The Saudis and other OPEC states are looking to maintain their market share at a time when low prices are already cutting into their revenues. The upshot is the meeting will likely decide to maintain the official OPEC level of 30 million barrels a day, urge members to cut back on overproduction and hope for better times next year. That means oil could get even cheaper. Iran’s comeback is tied to the looming end of sanctions imposed over its nuclear program. Embargoes on Iranian oil are to be lifted over the next few months once a nuclear deal it signed with six world powers goes into force. Senior oil official Amir Hossein Zamaninia said last week Iran hopes to bring an extra 500,000 barrels on the market by early next year. He said he hopes the extra output will be accommodated within OPEC’s formal ceiling of 30 million barrels a day.

Saudis throw down oil production cut challenge -- Saudi Arabia has thrown down a challenge to other big oil producers ahead of this week’s Opec meeting, saying it would back output cuts as long as they were supported by countries both inside and outside the cartel. The kingdom, Opec’s de facto leader, has set a very high bar for a deal that is unlikely to be met by the time of Friday’s meeting in Vienna, but it leaves open the possibility of an agreement in 2016. Its move indicates a further softening in tone from the world’s largest oil exporter, which led the cartel’s landmark shift in policy a year ago, arguing that keeping the taps open would put pressure on high-cost rival producers. Opec’s strategy shift upended the oil industry and triggered the biggest price slump in at least a decade. But in recent weeks Riyadh has sought to counter the mantra of “lower for longer” prices that has taken hold in the industry. “The only thing that we are sure of is that Saudi Arabia has changed its tone versus a year ago,” said Olivier Jakob of Petromatrix, an oil consultancy. “That does not automatically translate into a cut at this meeting, but on our side we cannot write that nothing has changed in the Saudi approach versus a year ago.” A senior Opec delegate said there was no question of Saudi Arabia lowering its production without backing from Iraq and before Iran’s full return to international markets. Co-operation from producers outside the cartel, such as Russia, would also be needed. Moscow has repeatedly rejected calls to join output cuts and has raised production to record levels. “In order for there to be a cut in production, non-Opec must participate, Iraq has to participate and the Iran output picture has to be clear,” the delegate said.

OPEC Won’t Cut, Markets Remain Oversupplied -- Today is OPEC day, and as expected, the meeting in Vienna has roiled oil markets. There was little expectation of an agreement on production cuts, despite the majority of OPEC members pleading with Saudi Arabia to reverse course and cut back the cartel’s output target level, which stood at 30 million barrels per day (mb/d) heading into the meeting.  There were rumors that Saudi Arabia floated the idea of agreeing to a production cut of 1 million barrels per day, but only if several major non-OPEC oil producers also agreed to restrict output. The Saudi proposal reportedly included countries like Mexico and Russia, a longshot bid to spread the burden across oil producers worldwide. It would obviously also put restrictions on output from several OPEC members that are in serious financial trouble. More news ahead of the meeting: an internal OPEC report concluded that even if the group decided to cut its production target, it probably wouldn’t be enough to significantly boost prices, due to the vast levels of oil currently in storage. The OPEC report was not made public, but was obtained by The Wall Street Journal. It illustrates the anxiety within OPEC, and its likely inability to increase prices. Only a massive cut in output levels – something that is off the table for OPEC member countries – could increase prices substantially in the short-term. Thus, there was little room for agreement on changing course. At the time of this publishing, it appears that OPEC emerged from its meeting with no decision on a change in the production target. Confusingly, media reports surfaced that said OPEC agreed to lifts its output target to 31.5 mb/d, a 1.5 mb/d increase over the current target. 

OPEC sticks to output policies as global glut grows | Reuters: OPEC maintained its policy of pumping near-record volumes of oil at a meeting on Friday, according to sources at the group, taking no steps to reduce one of the worst crude gluts in history which has driven down prices. The group, which produces a third of global oil, decided to increase its collective output ceiling to 31.5 million barrels per day (bpd) from the previous 30 million, the two OPEC sources said, in a move that effectively acknowledged that members are pumping well in excess of the current ceiling. Benchmark Brent oil futures LCOc1 - which are near a six-year low - lost nearly $2 on the news, falling 1.5 percent to trade slightly above $43 a barrel by 1455 GMT. It was not immediately clear if rejoining member Indonesia, which produces 0.9 million bpd, was included in the new ceiling. One source said Indonesia was not included. Either way, the decision failed to address growing global supply. The poorer members of the Organization of the Petroleum Exporting Countries (OPEC) have been piling pressure on its wealthier members, led by Saudi Arabia, to curb supply. But Riyadh and its Gulf allies decided on Friday to stick to their strategy of defending market share, hoping that lower prices would ultimately drive higher cost producers, such as U.S. shale oil firms, out of the market.

OPEC Said to Lift Oil Target in Line With Current Output  -  Rigzone -- OPEC agreed to set a new oil-output ceiling of 31.5 million barrels a day, a level that’s in line with the group’s most recent production estimate. Crude fell as much as 3.6 percent in New York. The increase is from a previous output target of 30 million barrels and does not include production from Indonesia, which joined the producer group after a break of almost seven years, according to a delegate with knowledge of the matter, who asked not to be identified because the decision hasn’t been made public. OPEC pumped about 31.4 million barrels a day of crude in October, according to estimates in its monthly market report.  OPEC’s policy is squeezing incomes for its members, whose combined annual revenue could fall to $550 billion from an average of more than $1 trillion in the past five years, the International Energy Agency said Nov. 10.“The OPEC member countries have lost so much money,” Iranian Oil Minister Bijan Namdar Zanganeh said Thursday in the Austrian capital.Venezuela, whose foreign currency reserves are at the lowest level in 12 years, led calls for a reduction in output, supported by Ecuador. Iran is poised to boost output after sanctions over its nuclear program are lifted and it won’t seek permission from OPEC to do so, Zanganeh said last month. OPEC requires consensus among members to alter its output ceiling.  Global oil stockpiles have risen to record levels as Saudi Arabia, Russia and Iraq boosted supply, the IEA said on Nov. 13. The market is oversupplied by as much as 2 million barrels a day, Zanganeh said this week, equivalent to about 2 percent of global output.

Crude Tanks As OPEC Refrains From Cutting Production - Given it is ‘National Dice Day’, it is apt that OPEC has left it to chance how the market will react to an adjustment to its production quota. The cartel appears to be setting an output ceiling of 31.5 million barrels per day, as opposed to the prior arbitrary quota of 30 million. This does not mean the cartel is raising production; it is instead putting its production target more in line with reality. Nonetheless, the market wonders whether this includes new member Indonesia, or whether it is to account for impending Iranian barrels returning to market. Either way, the crude complex is getting absolutely trounced. A couple of hilarious tidbits have come from the two key countries at this meeting: Saudi and Iran. The first one is from the inimitable Saudi oil minister, Ali al-Naimi, who said ‘there is absolutely no disagreement anywhere (in OPEC)’. Which is rather hard to believe. The second is from Iran, who has said it can join future OPEC output cut discussions…once production is back up to 4 million barrels per day.

Oil near $40 a barrel as OPEC rolls over policy: Oil prices fell on Friday after sources said OPEC had agreed to roll over its policy of maintaining crude production in order to retain market share and raise its output ceiling. Internationally traded Brent was down 91 cents, or 2 percent, at $42.93 at 10:13 a.m., having fallen earlier this week to a low of $42.43, within cents of August's 6-½ year trough. U.S. crude was trading down $1.12, or 2.7 percent, at $39.96 per barrel. OPEC had been widely expected to stick with its year-old policy, despite pressure from poorer members of the cartel for a cut in output to prop up the price of oil. OPEC sources said it had agreed to raise its output ceiling to 31.5 million bpd at its meeting in Vienna, in what appeared to be an effective acknowledgement of existing production. OPEC supply rose in November to 31.77 million barrels per day (bpd) from 31.64 million in October, according to a Reuters survey, based on shipping data and information from sources at oil companies, OPEC and consultants. "Overall, it looks like business as usual. The production cut needs to come from outside OPEC, so attention turning back to U.S. producers,"

Oil Holds Losses as OPEC Opts to Maintain Production Levels - WSJ: —Oil prices held their losses Friday after the Organization of the Petroleum Exporting Countries said the group would maintain production at current levels and reassess the situation later. Light, sweet crude for January delivery recently fell 89 cents, or 2.2%, to $40.19 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, dropped 51 cents, or 1.2%, to $43.33 a barrel on ICE Futures Europe. The OPEC meeting was marked by deep fissures within the group, as many members pushed hard for a cut in production that might push oil prices up from their recent $40-$50 a barrel range, less than half what they were 18 months ago. In addition, oil prices came under pressure as the dollar rose against other major currencies on stronger-than-expected U.S. employment data. A stronger U.S. currency weighs on dollar-priced commodities, including oil, by making them more expensive for buyers using foreign currencies. The dollar has posed a headwind for oil prices, with the WSJ Dollar Index up about 8% on the year. “The generally strong dollar trend [is] just one additional bearish item that the oil complex will need to contend with” this month.

Kemp: OPEC Risks Pyrrhic Victory With Oil Policy  |  Rigzone: As ministers from the Organization of the Petroleum Exporting Countries meet in Vienna, some may wonder if the strategy of maintaining output to defend market share risks securing a Pyrrhic victory. OPEC has put shale producers on the defensive and forced the cancellation of many ambitious oil projects with its strategy of going for volume over price. But members are gradually running out of money and the shale industry is waiting for any upturn in prices to start ramping up production again. Meanwhile Iran is set to boost its oil exports once sanctions lifted, which will make the supply glut worse, and the risks of recession in developed and developing countries alike are increasing. Some OPEC members, led by Saudi Arabia, remain hopeful that they will secure an eventual victory. The question is whether all the short-term pain will be worth it in the longer run. In November 2014, OPEC ministers decided to maintain their production unchanged even though oil prices had already fallen $40 per barrel, 37 percent, over the previous five months.In choosing this course, which was led by Saudi Arabia but endorsed by other members, ministers expressed concern about the increase in non-OPEC supply and the continued rise in both developed and developing country stocks. Twelve months later, oil consumption is growing at some of the fastest rates in over a decade, U.S. shale production has peaked for the time being and non-OPEC oil output is forecast to decline in 2016.

ISIS: Oil as a Strategic Weapon –- According to FT, ISIS oil strategy has been long in the making since the group emerged in Syria in 2013. The group saw oil as a funding source for their vision of an Islamic state, and identified it as fundamental to finance their ambition to create a caliphate. ISIS controls most of Syria's oil fields where it created a foothold in 2013. Crude is the militant group's biggest single source of revenue.  ISIS has derived its financial strength from being the monopoly oil producer in a huge captive market in Syria and Iraq. Despite a US-led international coalition to fight ISIS, FT describes a "minutely managed" sprawling ISIS operation akin to a national oil company in just two years with an estimated crude production of 34,000-40,000 barrels per day (bpd).  The group sells most of its crude directly to independent traders at the wellhead for $20-$45 a barrel earning the group an average of $1.5 million a day. Without being able to export, ISIS brought hundreds of trucks and started to extract the oil and transport it. According to an FT interview of a local sheikh, an average of 150 trucks is filled daily with about $10,000 worth of oil per truck. Most traders can expect to make a profit of at least $10 per barrel. The arbitrage had the potential to go a lot more than $10 a barrel when oil prices were high. Russia has accused Turkey of buying ISIS oil (allegedly the son of Turkey's President is involved, and also allegedly the U.S. is aware of it), reselling it to Japan and Israel for huge profits. Smugglers have been using boats, pumps, carrying on foot, by donkey or horse. Some see the oil production from ISIS as a contributing factor to the global oil glut pushing down oil prices. However, the biggest threat to ISIS oil production has been the depletion of Syria's aging oilfields despite the group's efforts to recruit skilled oil workers. ISIS does not have the technology of major foreign oil companies to counter the production decline.

Three quarters of Israel’s oil imported from Iraqi Kurdistan: Israel is importing over three-quarters of its oil from Iraqi Kurdistan, according to the Financial Times. Between May and August 11, the newspaper reports, Israel imported 19 million barrels of Kurdish oil, equivalent to 77 percent of average demand in Israel, worth almost $1 billion. This information came from shipping data, trading sources and satellite tanker tracking. The Kurdistan Regional Government (KRG) did not admit selling oil to Israel. However, a senior government adviser in Erbil said: "We do not care where the oil goes once we have delivered it to the traders... Our priority is getting the cash to fund our Peshmerga forces against Daesh [the Islamic State group] and to pay civil servant salaries." Nineteen million barrels of oil would represent about one third of the KRG’s oil exports during this period, which go through the Turkish Mediterranean port of Ceyhan. Other destinations for the KRG’s oil include Italy and Cyprus. The KRG reached a budget deal with Baghdad last year under which the KRG would export 550.000 barrels of crude oil through official state channels in return for a 17 percent share of central government revenues. However the deal has effectively collapsed as falling oil revenues have meant Baghdad has only made limited payments to the KRG.

Raqqa's Rockefellers: How Islamic State oil flows to Israel: Oil produced from fields under the control of the Islamic State group is at the heart of a new investigation by al-Araby al-Jadeed. The black gold is extracted, transported and sold, providing the armed group with a vital financial lifeline. But who buys it? Who finances the murderous brutality that has taken over swathes of Iraq and Syria? How does it get from the ground to the petrol tank, and who profits along the way? The Islamic State group uses millions of dollars in oil revenues to expand and manage vast areas under its control, home to around five million civilians. IS sells Iraqi and Syrian oil for a very low price to Kurdish and Turkish smuggling networks and mafias, who label it and sell it on as barrels from the Kurdistan Regional Government. It is then most frequently transported from Turkey to Israel, via knowing or unknowing middlemen, according to al-Araby's investigation. The Islamic State group has told al-Araby that it did not intentionally sell oil to Israel, blaming agents along the route to international markets.

‘Commercial scale’ oil smuggling into Turkey becomes priority target of anti-ISIS strikes -- Islamic State’s daring and impudent oil smuggling into Turkey should become a high-priority target in order to cripple the terrorist group, President Putin said, backed by French President Francois Hollande. Both agree that the source of terrorist financing must be hit first and foremost.  Commercial-scale oil smuggling from Islamic State controlled territory into Turkey must be stopped, Putin said after meeting Hollande in Moscow. “Vehicles, carrying oil, lined up in a chain going beyond the horizon,” said Putin, reminding the press that the scale of the issue was discussed at the G20 summit in Antalya earlier this month, where the Russian leader demonstrated reconnaissance footage taken by Russian pilots. The views resemble a “living oil pipe” stretched from ISIS and rebel controlled areas of Syria into Turkey, the Russian President stressed. “Day and night they are going to Turkey. Trucks always go there loaded, and back from there – empty.” “We are talking about a commercial-scale supply of oil from the occupied Syrian territories seized by terrorists. It is from these areas [that oil comes from], and not with any others. And we can see it from the air, where these vehicles are going,” Putin said.

ISIS' Oil and the Turkish Connection --With Turkey sitting on the doorstep of the Syrian civil war and their recent involvement with the downing of a Russian fighter, it is important to have a better understanding of the commercial relationship between one of the key players in Syria and how it raises money to fund its operations. A paper by George Kiourktsoglou and Dr. Alec Coutroubis looks at suspicious trends in illicit oil trade through an examination of spikes in tanker charter rates from ports on the Mediterranean that could be used by ISIS to export their crude and compares it to ISIS operations over the period from the late spring of 2014 when ISIS began to take over oil fields in Syria.  By early 2015, ISIS controlled approximately 60 percent of Syria's oil assets and seven of Iraq's oil producing assets.  Before the conflict, Syria's production capability stood between 385,000 and 400,000 BOPD, however, according to the Brookings Institute, ISIS is only producing around 50,000 BOPD.  In addition, ISIS controls about 80,000 BOPD of oil producing assets located in Iraq which were producing about 20,000 BOPD last year.  Here is a map showing Syria's oil and natural gas infrastructure:  ISIS controls Syria's oil infrastructure that is located in the eastern part of the country, adjacent to the border region shared with Iraq.  These fields were originally assets owned by the Al-Furat Petroleum Company, an affiliate of Royal Dutch Shell.   The authors of the study note that ISIS has set up a network of middlemen in neighbouring countries that can be used to trade crude for much-needed cash.  The oil is lightly refined on site (if it is refined at all) and the oil is trucked to its export point in convoys of up to 30 trucks.  A large tanker truck carrying 30,000 litres of crude can make a profit of up to $4000 for one trip to port lasting a few days.   Here is a map from the study showing the string of smuggled crude oil trading hubs that have been set up by ISIS along European route E90:  The authors then looked at all potential oil loading terminals that fall within or close to the region that ISIS controls and looked at the charter rates for tankers from the period falling after July 2014.  This led the authors to focus on the port at Ceyhan located in Turkey.  For those of you who aren't aware, Ceyhan is located in southeastern Turkey on the far northeastern coast of the Mediterranean Sea as you can see on this screen capture from Google Earth:

Russia says it has proof Turkey involved in Islamic State oil trade -- Russia’s defence ministry said on Wednesday it had proof that Turkish President Tayyip Erdogan and his family were benefiting from the illegal smuggling of oil from Islamic State-held territory in Syria and Iraq.  Erdogan responded by saying no one had the right to “slander” Turkey by accusing it of buying oil from Islamic State, and that he would stand down if such allegations were proven to be true. But speaking during a visit to Qatar, he also said he did not want relations with Moscow to worsen further. At a briefing in Moscow, defence ministry officials displayed satellite images which they said showed columns of tanker trucks loading with oil at installations controlled by Islamic State in Syria and Iraq, and then crossing the border into neighbouring Turkey. The officials did not specify what direct evidence they had of the involvement of Erdogan and his family, an allegation that the Turkish president has vehemently denied. “Turkey is the main consumer of the oil stolen from its rightful owners, Syria and Iraq. According to information we’ve received, the senior political leadership of the country – President Erdogan and his family – are involved in this criminal business,” said Deputy Defence Minister Anatoly Antonov. “Maybe I’m being too blunt, but one can only entrust control over this thieving business to one’s closest associates.”  “In the West, no one has asked questions about the fact that the Turkish president’s son heads one of the biggest energy companies, or that his son-in-law has been appointed energy minister. What a marvellous family business!”

Putin Says Has More Proof ISIS Oil Routed Through Turkey, After Erdogan Slams Claim --“I’ve shown photos taken from space and from aircraft which clearly demonstrate the scale of the illegal trade in oil and petroleum products,” Vladimir Putin told reporters on the sidelines of the G-20 summit in Antalya. Putin was of course referencing Islamic State’s illicit and highly lucrative oil trade, the ins and outs of which we’ve documented extensively over the past two weeks:

Turkey’s move to shoot down a Russian Su-24 warplane near the Syrian border afforded the Russian President all the motivation and PR cover he needed to expose Ankara’s alleged role in the trafficking of illegal crude from Iraq and Syria and in the aftermath of last Tuesday’s “incident,” Putin lambasted Erdogan. “Oil from Islamic State is being shipped to Turkey,” Putin said while in Jordan for a meeting with King Abdullah. In case that wasn’t clear enough, Putin added this: “Islamic State gets cash by selling oil to Turkey.”

Columbia University Researchers Confirm Turkey’s Links to ISIS - A team of Columbia University researchers from the United States, Europe, and Turkey confirmed last week that the Turkish government has provided to ISIS: military cooperation, weapons, logistical support, financial assistance, and medical services. This detailed investigation was headed by David L. Phillips, Director of the Program on Peace-building and Rights at Columbia University’s Institute for the Study of Human Rights. He had served as Senior Advisor and Foreign Affairs Expert for the U.S. Department of State. Here are brief excerpts from the extensive research documenting the direct links between Turkey and ISIS:

  1. Turkey Supplied Military Equipment to ISIS
  • An ISIS commander told The Washington Post on August 12, 2014: “Most of the fighters who joined us in the beginning of the war came via Turkey, and so did our equipment and supplies.”
  • Kemal Kiliçdaroglu, head of the Republican People’s Party (CHP), disclosed on Oct. 14, 2014, documents from the Adana Office of the Prosecutor, revealing that Turkey supplied weapons to terrorist groups. He also produced transcripts of interviews with truck drivers who delivered the weapons to the terrorists.
  • According to CHP Vice President Bulent Tezcan, Turkish agents drove three trucks loaded with rockets, arms, and ammunition to ISIS in Syria, on January 19, 2014.
  • Cumhuriyet newspaper quoted Fuat Avni as stating that Germany and the United States had audio tapes confirming that Turkey provided financial and military aid to terrorist groups associated with Al Qaeda on Oct. 12, 2014.
  • Documents made public on Sept. 27, 2014, revealed that Saudi Prince Bandar Bin Sultan financed the transportation of arms to ISIS through Turkey.

Facts Back Russia on Turkish Attack -- Although the Obama administration is not about to admit it, the data already available supports the Russian assertion that the Turkish shoot-down was, as Russian President Vladimir Putin asserted, an “ambush” that had been carefully prepared in advance. The central Turkish claim that its F-16 pilots had warned the two Russian aircraft 10 times during a period of five minutes actually is the primary clue that Turkey was not telling the truth about the shoot-down. The Russian Su-24 “Fencer” jet fighter, which is comparable to the U.S. F-111, is capable of a speed of 960 miles per hour at high altitude, but at low altitude its cruising speed is around 870 mph, or about 13 miles per minute. The navigator of the second plane confirmed after his rescue that the Su-24s were flying at cruising speed during the flight. Close analysis of both the Turkish and Russian images of the radar path of the Russian jets indicates that the earliest point at which either of the Russian planes was on a path that might have been interpreted as taking it into Turkish airspace was roughly 16 miles from the Turkish border – meaning that it was only a minute and 20 seconds away from the border.Furthermore according to both versions of the flight path, five minutes before the shoot-down the Russian planes would have been flying eastward – away from the Turkish border. In order to carry out the strike, in fact, the Turkish pilots would have had to be in the air already and prepared to strike as soon as they knew the Russian aircraft were airborne.

Donald Trump Dares To Say That Turkey ‘Looks Like They’re On The Side Of ISIS’-  Donald Trump just said something that he was not supposed to say, and it is something that Barack Obama will never admit. During an appearance on Sirius XM’s “Breitbart News Daily” on Tuesday morning, Trump stated that the Turkish government “looks like they’re on the side of ISIS more or less based on the oil”. This makes Trump the first presidential candidate to tell the truth about this to the American people. By now, just about everyone knows that ISIS is using Turkey as a home base, and I have previously written about how Turkey is “training ISIS militants, funneling weapons to them, buying their oil, and tending to their wounded in Turkish hospitals”. But a major U.S. politician, especially one running for the White House, could get into really hot water for saying these kinds of things about our NATO ally. You see, the truth is that the American people are not supposed to know that Turkey is actually on the same side as ISIS and has been facilitating the sale of hundreds of millions of dollars of oil that has been stolen by ISIS.  The following comes from PoliticoDonald Trump aligned himself with Vladimir Putin on Tuesday, saying that Turkey appears to be on the side of Islamic State. “Turkey looks like they’re on the side of ISIS more or less based on the oil,” Trump said in an interview with Sirius XM’s “Breitbart News Daily” Tuesday morning, echoing comments from the Russian president on Monday.

General Wesley Clark: ISIS Serves Interests Of US Allies Turkey And Saudi Arabia "Let’s be very clear: ISIS is not just a terrorist organization; it is a Sunni terrorist organization. That means it blocks and targets Shi’a. And that means it’s serving the interests of Turkey and Saudi Arabia - even as it poses a threat to them." - Retired Gen. Wesley Clark Former NATO Supreme Allied Commander General and retired U.S. General Wesley Clark revealed in an interview with CNN that the Islamic State (Daesh, ISIS) remains geostrategically imperative to Sunni nations, Turkey and Saudi Arabia, as they clamor for strategic power over Shi’a nations, Syria, Iraq, and Iran. He explained that “neither Turkey nor Saudi Arabia want an Iran-Iraq-Syria-Lebanon ‘bridge’ that isolates Turkey, and cuts Saudi Arabia off.” When asked by the CNN host if Russian President Vladimir Putin’s suggestion that Turkey was “aiding ISIS” had any validity, he responded: “All along there’s always been the idea that Turkey was supporting ISIS in some way. We know they’ve funneled people going through Turkey to ISIS. Someone’s buying that oil that ISIS is selling; it’s going through somewhere - it looks to me like it’s probably going through Turkey - but the Turks haven’t acknowledged that.”

Chairman of the U.S. House Foreign Affairs Subcommittee on Europe, Eurasia, and Emerging Threats: "Either [Turkey] Shouldn’t Be in NATO or We Shouldn’t" -- Congressman Dana Rohrabacher – Chairman of the House Foreign Affairs Subcommittee on Europe, Eurasia, and Emerging Threats – wrote last week:Assad, like Iraq’s Saddam Hussein, is no threat to the United States or the Western world. If Assad is forced out of power he will eventually be replaced by an Islamic terrorist committed to raining down mayhem on Western countries. Today we witness the spectacle of American decision- makers, in and out of the Obama administration, joining forces with a Turkish regime that grows more supportive of the radical Islamist movement. There is ample evidence of President Erdogan’s complicity in ISIS’s murderous rampage through Syria and Iraq. Yet, we hold our public rebukes for the Russians, who are battling those terrorists. A Russian plane on an anti-terrorist mission did violate Turkish airspace, just as Turkish planes have strayed into Greek airspace hundreds of times over the last year. This overflight was no threat to Turkey. Still, it was shot down, as was a Russian helicopter on the way to rescue the downed Russian pilot. Why do Americans feel compelled to kick Russia in the teeth? Russia’s military is attacking an enemy that would do us harm. Why ignore the hostile pro-terrorist maneuvering of Turkish strongman Erdogan?

ISIS Oil Plot Thickens: Turkish MP Has Evidence Erdogan's Son-In-Law Involved In Illegal Crude Trade -- Of course the thing about being an autocrat - and thats most certainly what Erdogan is despite the West’s ridiculous contention that Turkey is a democracy - is that you make a whole lot enemies in your own country and while you can suppress dissent with force, eventually it all catches up to you and between Russia™s accusations and opposition political parties still stinging from AKP™s move to nullify June’s election outcome by starting a civil war and calling for snap elections, Erdogan may be in trouble.  Underscoring that contention is CHP lawmaker Eren Erdem who says he, like Moscow, will soon provide proof of Erdogan’s role in the smuggling of Islamic State oil. "I have been able to establish that there is a very high probability that Berat Albayrak is linked to the supply of oil by the Daesh terrorists,†Erdem said at a press conference on Thursday (seemore from Sputnik). Berat Albayrak is Erodan’s son-in-law and is Turkey’s Minister of Energy and Natural Resources.

Are These The Tankers Bilal Erdogan Uses To Transport ISIS Oil?  -- Regular readers are by now well acquainted with Bilal Erdogan, the son of Turkish autocrat Recep Tayyip Erdogan. Although Erdogan senior masquerades as President of a democratic society, he is in reality a despot who just weeks ago, capped off a four-month effort to nullify an undesirable ballot box outcome by scaring the electorate into throwing more support behind the ruling AKP in a do-over vote designed specifically to undermine the pro-Kurdish HDP, which put up a strong showing in the last round of elections, held in June.  As the world’s interest in Islamic State’s illicit oil trade has grown over the past 60 or so days, so too has the scrutiny on how the group gets its stolen crude to market. In the seven days since Turkey shot down a Russian Su-24 near the Syrian border, Moscow has done its best to focus the world’s collective attention on the connection between ISIS and Turkey. It’s common knowledge among those who pay attention to such things that Ankara is part of an alliance that includes Riyadh, Doha, and Washington whose collective goal is to fund and arm the Syrian opposition. What’s up for debate is the extent to which that alliance supports ISIS and, to a lesser extent, al-Nusra.  Earlier today, Vladimir Putin explicitly accused Ankara of attempting to protect ISIS oil routes by shooting down Russian warplanes which have destroyed hundreds of Islamic State oil trucks in November.  Erdogan of course denies the allegations, but as we’ve shown, it would be very easy for Turkish smugglers to commingle ISIS and KRG crude (which, by the way, is also technically illegal), effectively using Kurdish oil to mask Turkey’s participation in the Islamic State oil trade.  Here’s what Syrian Information Minister Omran al-Zoub said on Friday:“All of the oil was delivered to a company that belongs to the son of Recep [Tayyip] Erdogan. This is why Turkey became anxious when Russia began delivering airstrikes against the IS infrastructure and destroyed more than 500 trucks with oil already. This really got on Erdogan and his company’s nerves. They’re importing not only oil, but wheat and historic artefacts as well."

Turkey Tries to Lure NATO Into War Against Russia -- When Turkey shot down a Russian bomber in Syria on November 24th, Turkish officials did so with the confidence that America’s anti-Russian military alliance, NATO, would protect Turkey against any possible military retaliation by Russia. And, so, Russia restricted its retaliation to merely economic measures.  Sunni Turkey is the increasingly fundamentalist and anti-Shiite NATO member-nation; and, as such, it’s doing what it can to draw the rest of America’s anti-Russian alliance, NATO, into a war by all of them to defeat Russia, because Russia is allied with the Shiite-led nations of Iran and Syria — nations that the Sunni aristocracies (especially the Sauds of Saudi Arabia, and the Thanis of Qatar) want to control, so as to have complete dominance over the Islamic world. Once they achieve that, they can then overtly and publicly support their jihadists to take over Western nations, as well, so as to establish the intended global “Caliphate.”  Turkey’s government is doing all it can to bring down the non-sectarian Shiite leader of its neighboring nation of Syria, Bashar al-Assad. America’s war to take over Russia (first taking down Russia-ally Saddam Hussein in 2003, then Russia-ally Muammar Gaddafi in 2011, then Russia-ally Viktor Yanukovych in 2014, and now trying to take down Russia-ally Bashar al-Assad) is therefore being tugged at by NATO’s lone Sunni member Turkey. Turkey wants America and ‘the West’ to join their (and their Sunni friends, Saudi Arabia’s and Qatar’s) anti-Shiite war, so as to unify the Islamic powers as being all-Sunni, and thus enable them together to crush the other religions and beliefs.

Russia Sends NATO A Clear Message By Arming Fighter Jets With First Air-To-Air Missiles -- A month ago, US and Russian military officials signed a memorandum of understanding that included steps their pilots should take to avoid an inadvertent clash over Syria as they carry out separate air strikes against armed groups. That MoU has now been shredded, as it certainly did not involve Russian fighter jets operating above Syria being armed with short and medium range air-to-air missiles as a direct threat to other fighter jets also operating above Syria - mostly those of Turkey, France and the US. Which is precisely what Russia has done as disclosed in an announcement moments ago by the Russian defense ministry, and furthermore, has released a clip as a warning to not only Turkey, but all NATO forces in the region, that any further provocations at its jets will be met with an immediate and proportional response. Igor Klimov, spokesman for the Russian Air Force, said that "today, Russian Su-34 fighter-bombers have made their first sortie equipped not only with high explosive aviation bombs and hollow charge bombs, but also with short- and medium-range air-to-air missiles The planes are equipped with missiles for defensive purposes." "The missiles have target-seeking devices and are capable of hitting air targets within a 60km radius."

Russia Retaliates: Putin Reveals Sanctions Against Turkey - While many in The West had hoped for a "see, we told you so" strongman military response from Vladimir Putin, it appears the Russian leader has, for now, taken a more practical approach. The wide-ranging sanctions unleashed on Turkey (by its 2nd largest trade partner) include a ban on Turkish workers (with estimates that 90,000 will be fired by Jan 1 2016),restrictions on imported goods and services provided by Turkey, and scraps visa-free travel and bans charter flights (implicitly hurting a major part of Turkey's domestic industry). Finally, Putin calls for "strengthening of port control and monitoring to ensure transport safety,"hinting at the fears many have voiced over whether Turkey shutting the Bosphorous in an escalation would be seen as an act of war. As Interfax reports, Russian President Vladimir Putin has signed a decree "On measures to ensure Russian national security and to protect Russian citizens from criminal and other unlawful actions and the application of special economic measures with respect to the Turkish Republic," the Kremlin press office said on Saturday. The decree introduces temporary ban or restrictions on import by Russia of certain types of goods, whose country of origin is Turkey, which are stipulated in the list determined by the Russian government (except the good imported for personal use in an amount permitted by the law of the Eurasian Economic Union). The decree also bans or restricts organizations, which fall under the Turkish jurisdiction, from providing certain types of services in Russia,which are stipulated in the list determined by the Russian government. In addition, employers and contractors of services which are not stipulated in the list determined by the Russian government, are banned, starting from January 1, 2016, from employing Turkish citizens who were not employed or contracted by such employers and contractors as at December 31, 2015.

How Russia is Smashing the Turkish Game in Syria: So why did Washington take virtually forever to not really acknowledge ISIS/ISIL/Daesh is selling stolen Syrian oil that will eventually find is way to Turkey?Because the priority all along was to allow the CIA – in the shadows – to run a “rat line” weaponizing a gaggle of invisible “moderate rebels”.As much as Daesh – at least up to now– the Barzani mob in Iraqi Kurdistan was never under Washington’s watch. The oil operation the Kurdistan Regional Government (KRG) runs to Turkey is virtually illegal; stolen state-owned oil as far as Baghdad is concerned.Daesh stolen oil can’t flow through Damascus-controlled territory. Can’t flow though Shi’ite-dominated Iraq. Can’t go east to Iran. It’s Turkey or nothing. Turkey is the easternmost arm of NATO. The US and NATO “support” Turkey. So a case can be made that the US and NATO ultimately support Daesh.What’s certain is that illegal Daesh oil and illegal KRG oil fit the same pattern; energy interests by the usual suspects playing a very long game.The same desperation applies to the Aleppo-Azez-Killis route, which is also essential for Turkey for all kinds of smuggling. The advanced arm of the “4+1” alliance – Russia, Syria, Iran, Iraq, plus Hezbollah – is taking no prisoners trying to re-conquer these two key corridors.

Turkey's Trump Card: Erdogan Can Cut Russia's Syrian Supply Line By Closing Bosphorus - On Saturday, Russia unveiled a raft of economic sanctions against Turkey in retaliation for Ankara’s brazen move to shoot down an Su-24 warplane near the Syrian border. Charter flights to Turkey are now banned, Turkish imports will be curbed, visa-free travel is no more, Russian tourism companies are forbidden from selling travel packages that include a stay in Turkey, and Turkish firms will face restrictions on their economic activity.  “It’s not just Turkey that has economic interests, Russia too has economic interests in relation to Turkey,” Turkish PM Ahmet Davutoglu said on Saturday, adding that he hoped Putin would act in a "cool-headed" manner.  Russia does indeed have economic interests in Turkey. Ankara paid Gazprom some $10 billion last year and Turkey accounts for nearly a third of the company's nat gas exports: Ultimately, it's difficult to say who has the stronger hand. Russia and Turkey - despite an otherwise tenuous relationship set against a history of confrontation (see The Czar vs. the Sultan from Foreign Policy) - have developed a lucrative trade partnership that neither side is particularly keen on scrapping. That said, the stakes are high and now that Moscow has hit back with sanctions, the ball is in Ankara's court.  Despite bombastic rhetoric from Erdogan (whose tone has softened at bit over the last 48 or so hours), Turkey cannot shoot down another Russian warplane. If they do, they risk an outright military confrontation with Russia. So unless Erdogan intends to plunge NATO into an armed conflict with the Russians, he'll need to find other ways to retailiate and refusing to buy from Gazprom probably isn't the the first, best option from a practical point of view.  What Turkey could do, however, is close the the Bosphorus Strait which would effectively cut Russia's supply line to Latakia.

Turkey Denies Russian Ships Access via Bosporus --What is becoming clear is that Turkey has most likely NOT acted alone against Russia. They have more likely than not fired the first shot in what may become World War III. Turkey has been buying the oil from ISIS and thus funding them. Yet at the same time, they are part of NATO and have probably acted with the FULL consent of NATO including the Obama Administration. The entire Syrian incident I reported back in 2013 that from the outset it was secretly all about getting a pipeline through Syria to Europe so Saudi Arabia could compete with Russia in supplying Europe with natural gas.There is absolutely no way this shooting down of a Russian plane was Turkey alone nor was it an accident. The plane was over Turkey air space for a few seconds and was shot down in Syria. There was a TV crew there to film the event and within 15 minutes NATO was informed. This was a DELIBERATE act to provoke war. Now Turkey is escalating it further by blockading all Russian ships to prevent them from accessing the Bosporus. This is clearly an act of war and Russia has defended Syria and its economic interests no different than the USA who has had far less of any economic interest at stake in any other situation.

Tensions With Russia Add to a Chill in Turkey’s Economy - Yet despite the prosperous appearance, a chill has already settled over Eskisehir’s economy, and Turkey’s, as exports to China and the Middle East falter. And as Russia has halted most tourism to Turkey and threatened to stop food imports from the country after Turkish F-16 fighter jets shot down a Russian combat jet along the Syrian border last Tuesday, the risk of further economic trouble is clear.With unemployment already surging here, “our economy has slowed down,” Eskisehir (pronounced Es-ki-SHARE) itself has a large sugar refinery, using sugar beets from nearby fields as its raw material; the city exports about $30 million worth of cookies, cakes, crackers and other foods to Russia, according to the local chamber of commerce. Turkey had been stepping up food exports to Russia in recent months as political frictions between Russia and the West led to a reduction in Russian food imports from the European Union.Russia had also been one of Turkey’s biggest sources of tourists until the past year, when the combination of the fall of the ruble and Western sanctions on Russia for its support of Ukrainian insurgents began steeply eroding the number of Russians who could afford to travel. The decline in tourism was a worry for economists here even before the Russian jet was shot down.“The trade deficit is out of hand, exports cannot meet the import bill, so tourism revenues are a major item in our balance sheet,”

Central, eastern Europe protest Russian gas pipeline project — Slovakia’s economy minister says his country will join forces with other Central and Eastern members of the European Union to protest a recent deal to expand a pipeline that delivers natural gas directly from Russia to Germany. The plan, known as Nord Stream 2, already received angry reactions from some, including Ukraine and Slovakia, as the pipeline bypasses the traditional transit countries for Russian gas to Europe. It is meant to expand the current Nord Stream pipeline under the Baltic Sea that directly links Germany with Siberia’s gas reserves. Vazil Hudak says the plan goes against the interest of the entire EU and harms Ukraine. He says the nations will send a letter to EU leaders, demanding the deal is on the agenda of the EU summit in December.

Mainstream Media: “Gas Pipelinestan War is About Gas Pipelines!”  -- Two years after the oil and gas industry press was talking about it – the popular press has figured out what the Syrian Gas Pipeline War is about- gas pipelines – including lines that go through Turkey. Imagine that. Factor in this detail and suddenly the war begins to make more sense, here’s how it works: As Harvard Professor Mitchell A Orenstein and George Romer wrote last month inForeign Affairs, Russia currently supplies Europe with a quarter of the gas it uses for heating, cooking, fuel and other activities.In fact 80 per cent of the gas that Russian state-controlled company Gazprom produces is sold to Europe, so maintaining this crucial market is very important. But Europe doesn’t like being so reliant on Russia for fuel and has been trying to reduce its dependence. It’s a move that is supported by the United States as it would weaken Russian influence over Europe. Before the civil war, two competing pipelines put forward by Qatar and Iran aimed to transport gas to Europe through Syria.Qatar’s plans were first put forward in 2009 and involved building a pipeline from the Persian Gulf via Saudi Arabia, Jordan, Syria and Turkey.The gas field located 3000 metres below the floor of the Persian Gulf is the largest natural gas field in the world. Qatar owns about two-thirds of the resource but can’t capitalise on it fully because it relies on tankers to deliver it to other countries and this makes its gas more expensive than Russia’s.It was hoped the pipeline would provide cheaper access to Europe but Syrian President Bashar al Assad refused to give permission for the pipeline to go through his territory. Some believe Russia pressured him to reject the pipeline to safeguard its own business. In the meantime Iran, which owns the other smaller, share of the Persian Gulf gas field, decided to lodge its own rival plan for a $10 billion pipeline to Europe via Iraq and Syria and then under the Mediterranean Sea. These plans apparently had Russia’s blessing, possibly because it could exert more influence over Iran, which, unlike Qatar, did not host a US air base.

Russian oil tanker grounded in north Pacific— Russian emergency services say cleanup operations are underway after an oil tanker was grounded, damaging one of its fuel tanks. The tanker Nadezhda hit a reef during a storm on Saturday near the port city of Nevelsk on Sakhalin Island in Russia’s Far East. It was carrying 786 tons of fuel oil and diesel fuel. The amount of oil spilled and the extent of any environmental damage was not immediately clear. The emergency services said operations were taking place on Sunday to collect spilled oil and also contaminated soil from along the shore, while oil remaining on the vessel was being pumped onto other tankers. Sakhalin Island, located in the north Pacific just north of Japan, is a major producer of oil and natural gas.

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