Sunday, December 25, 2016

oil rigs at a 2016 high, distillates use at a 23 month high, a 6 year high drawdown of natural gas, etc

oil prices were generally higher this week on half of normal trading volume, as many traders apparently took an early holiday vacation...after closing last week at $51.90 a barrel, the contract for US oil for January delivery rose 22 cents on Monday to settle at $52.12 a barrel, while the more-active February contract rose 11 cents to $53.06 a barrel, as news of the assassination of the Russian ambassador to Turkey brought out fears of political instability in the Middle East...with trading in the January oil contract expiring on Tuesday at $52.23 a barrel, the February contract rose 24 cents, or 0.5%, to $53.30 a barrel, on forecasts of a large draw in U.S. crude supplies that would give credence to the belief that the oil glut was ending, and a bigger than expected inventory draw as reported by the American Petroleum Institute...however, oil prices fell 1.5% on Wednesday when the EIA reported that US crude inventories had actually increased, and ultimately closed down 81 cents at $52.49 a barrel...crude prices resumed their upward march on Thursday on strong U.S. economic data, a pause in the U.S. dollar rally, and optimism that crude producers would abide by an agreement to limit output, and closed up 46 cents at $52.95 a barrel...prices then drifted a bit higher on light trading, not even reacting to the 3rd consecutive double digit jump in the oil rig count, and closed the week at $53.02 a barrel, a price quote not comparable to last week's because it's now referencing a different contract month...

it might be worth it to take a closer look at the oil futures market, since we've just been through a week when the reference month for the widely quoted "price of oil" changed, and the price of oil jumped nearly a dollar a barrel as a result...over the past two years, we've often mentioned in passing that future contract prices for oil were higher than were current prices, whether we were referencing contango trading, which had made it profitable to buy and store oil, or whether we were talking about the economics of completing wells at a given price...but while we've linked to pages of those futures price quotes, i don't think we've never shown them, and i wouldn't expect that most of you would have had the time to follow all the links that i've used in these today we'll just copy part of a page showing quotes for the first handful of oil futures quotes, and explain what it shows...

December 24 2016 oil futures

the above table, which shows oil futures prices for the next 14 months, comes from, who calls themselves a "provider of market data solutions for individuals and businesses"...technically, each line on that table shows Friday's trading in a contract to deliver West Texas Intermediate grade (WTI) oil to (or to buy WTI oil from) the depot at Cushing Oklahoma for one month in the future, as noted in the blue parenthesis in the first column... the contracts are further identifiable by the 5 digit ticker symbol, wherein CL is the symbol for WTI light crude oil (the US benchmark oil), the next letter is a symbol for the month (ie, G=February, H=March, etc), and the last two digits are the year...the 2nd column has Friday's closing price for each of those contracts, and the 3rd column has the change in price from Thursday to Friday for each contract...note that this is just a small part of the list; the page i took this from includes monthly oil futures quotes going out to 2022, and then quotes for December and June through the year 2025..

the "price of oil" that's given in the media (and which we quote) is always for the current front month, which in this week's case was for January on Monday and Tuesday, and for February'll see there's also a cash price listed, CLY00 at $52.98 a barrel, but note that there's a zero in the volume column, because no one bought oil for cash on Friday, which we'd expect to be the case on most days, and that's why that cash price is never an over-simplification of the practice, oil refineries will contract for their oil needs based on these futures prices many months or years in the future, just as oil well drillers will contract to sell their future production at some future date based on these prices, and thus whatever price changes occur between now and that time in the future will thus not affect them, because they've got their selling price locked in...thus though Friday's quoted price of oil was $53.02 a barrel, a hypothetical fracker who may been planning to start drilling after the first of the year might not be able to schedule a fracking crew until April, and thus might contract to sell his expected initial output in May, at prices of $55.24 a barrel...of course, the reality is more complex, as a driller in the Bakken who must ship by rail may receive a well head price that is a set steep discount from WTI, and may engage in much more complicated hedging strategies than simple selling oil futures contracts for given months, but the underlying pricing principle is the's also important to remember what we showed last January; that it's not the oil users or the oil producers who set the price, it's the oil traders in New York,.because daily oil trading for just one oil contract in New York has been running well more than 100 times the amount of oil produced in the entire US daily, and because daily oil trading for just one contract in New York electronically swaps more than twice the quantity of oil that exists anywhere above ground in the entire country, oil producers have no real say in what price they'll receive for their oil, nor do refiners in what price they'll ultimately pay.

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we missed coverage of natural gas prices last week, so we'll pick up on what happened to them over the past two weeks now...when we looked at natural gas prices two weeks ago, they had just run up almost $1 per mmBTU (million British thermal units) to $3.75 per mmBTU in a month's time, as the the warmest Fall in US weather history was giving way to forecasts of a colder than normal La Nina winter...but no sooner than we sounded the alarm on that price spike, natural gas prices began to fall back, dropping 23.9 cents to $3.507 per mmBTU on Monday of last week, and then dropping lower for three out of the next four days to end last week at $3.415 per mmBTU...that collapse continued early this week, as natural gas prices fell to $3.392 per mmBTU on Monday, then to $3.263 per mmBTU on Tuesday, as increasingly milder weather forecasts continued to weigh on the market...but it appears someone got wind of the Thursday natural gas storage report on Wednesday, because nat gas prices spiked 18.1 cents, or 5.5% in the first hour of trading on rumors of an inventory draw in a range between 197 and 210 billion cubic feet, and went on to close up 27.9 cents at $3.542 per mmBTU...that natural gas storage report did indeed showed we had to pull 209 billion cubic feet of natural gas out of storage to meet our heating needs during the week ending December 16th, the biggest withdrawal for the week since 2010, which left us with 3,597 billion cubic feet of gas left, 5.9% less than a year earlier, a warm week which only required a 32 billion cubic feet withdraw...gas prices then went on to close $3.538 per mmBTU on Thursday and $3.662 per mmBTU on Friday, which you can see in the graph below..

December 24 2016 natural gas prices

again, this familiar graph shows the contract price over the last 3 months for a million British thermal units (mmBTU) of natural gas at or contracted to be delivered in January at the Louisiana interstate natural gas pipeline interconnection known as the Henry Hub, which is the benchmark location for setting natural gas prices across the we made note of two weeks ago, January natural gas futures are invariably higher than for the other months, and if we navigate to the page of natural gas futures prices similar to the oil futures table above we find that May prices for natural gas are more than 20 cents lower than January's, and most natural gas prices after April 2018 are below $3 per mmBTU, so it does a fracker no good to start drilling now on these temporary higher January prices, facing the inability to contract for sale at prices at these levels in the out months, and the likelihood that prices will be much lower in the future...

btw, you might have noted that i've been reluctant to ascribe a reason for most gas prices moves, simply because such large price moves for such small changes in expectations seem irrational to RBN Energy explained the natural gas markets last week, "natural gas inventory—as reported by the EIA each week—is regarded as an ever-present bellwether for price direction in the natural gas market. Gas market participants and analysts train their eyes on weather forecasts—and the constant daily, or even intraday, revisions to the forecasts—along with natural gas flow data and other fundamental factors to see how they might change the storage picture.."

The Latest Oil Stats from the EIA

this week's oil data for the week ending December 16th from the US Energy Information Administration indicated a big jump in our imports of crude and a modest increase in our refining, but not enough to use all those extra imports, leaving our supplies of crude oil somewhat higher than the prior week...our imports of crude oil rose by an average of 1,111,000 barrels per day to an average of 8,471,000 barrels per day during the week, while at the same time our exports of crude oil rose by an average of 72,000 barrels per day to an average of 557,000 barrels per day, which meant that our effective imports netted out to 7,914,000 barrels per day for the the same time, our crude oil production fell by 10,000 barrels per day to an average of 8,786,000 barrels per day, which means the daily supply of oil from imports and wells totaled 16,700,000 barrels per day...refineries reportedly used 16,658,000 barrels of crude per day during the week, an increase of 184,000 barrels per day from the week ending the 9th...but at the same time, 322,000 barrels of oil per day were being added to storage facilities in the US, virtually reversing the 366,000 barrels of oil per day of stored oil that was used up in the prior week...

thus, this week's EIA figures seem to indicate that we ended up with 280,000 more barrels of oil per day than were accounted for by our oil imports and production, and therefore the EIA inserted that 280,000 barrels per day into the weekly U.S. Petroleum Balance Sheet (line 13) to make it balance...the EIA footnote to that line 13 calls it "unaccounted for crude oil", which is further described on page 61 in the glossary of the EIA's weekly Petroleum Status Report as "the arithmetic difference between the calculated supply and the calculated disposition of crude oil." you know, we've been calling that number the EIA's weekly fudge factor...

from that same weekly Petroleum Status Report we find that the 4 week average of our oil imports rose to an average of 7.9 million barrels per day, now 0.9% higher than the same four-week period last year, which has also become somewhat meaningless as our weekly oil imports rise and fall on the order of a million barrels per day....our oil production for the week of the 16th was 4.3% lower less that the 9,179,000 barrels of crude we produced during the week ending December 18th of last year, and 8.6% below our record 9,610,000 barrels per day of oil production that we saw during the week ending June 5th 2015...

US refineries operated at 91.5% of capacity in using those 16,658,000 barrels of crude per day, up from 90.5% the prior week and up from 91.3% during the same week a year ago, as they also refined 190,000 more barrels of crude per day than they did during the same week last year...gasoline production from those refineries rose by 322,000 barrels per day to 10,150,000 barrels per day during the week ending December 16th, which was 8.6% more than the 9,346,000 barrels per day of gasoline produced during the week ending December 18th a year ago, but just 2.3% more than the 9,920,000 barrels per day of gasoline produced during the week ending December 19th the same time, refineries' output of distillate fuels (diesel fuel and heat oil) rose by 113,000 barrels per day to 5,122,000 barrels per day during the week ending December 16th, which was 3.7% higher than the 4,938,000 barrels per day that was being produced during the week ending December 18th last year, but 2.2% lower than the 5,236,000 barrels per day of distillates produced during the same week of 2014...     

even with the week's increases in gasoline and distillates production, however, supplies of both reportedly dropped...our gasoline supplies fell by 1,309,000 barrels to 228,736,000 barrels as of December 16th, as our domestic consumption of gasoline increased by 395,000 barrels per day to 9,269,000 barrels per day, our gasoline imports fell by 177,000 barrels per day to 447,000 barrels per day, and our gasoline exports fell by 336,000 barrels per day from last week's record high of 1,131,000  barrels per day...nonetheless, our gasoline inventories as of December 16th were still 3.7% higher than the 220,495,000 barrels of gasoline that we had stored on December 18th of last year, and 1.2% higher than the 226,097,000 barrels of gasoline we had stored on December 19th of the same time, our distillate fuel inventories fell by 2,420,000 barrels to 155,935,000 barrels by December 16th, as with the sudden burst of arctic weather our consumption of distillates rose by 519,000 barrels per day to 4,549,000 barrels per day during the week ending December 16th , the most distillates we've used in any week since January 23rd, 2015....nonetheless, our distillate inventories remained 1.5% higher than the distillate inventories of 151,315,000 barrels of December 18th last year, and 24.0% above the distillate inventories of 123,847,000 barrels of December 12th, 2014…

finally, mostly due to the big jump in our oil imports, our inventories of crude oil rose by 2,563,000 barrels to 485,449,000 barrels by December 16th, still 5.2% below the April 29th record of 512,095,000 barrels...and we thus ended the week with 7.3% more crude oil in storage than the 452,477,000 barrels we had stored as of the same weekend a year earlier, and 36.8% more crude than the 354,733,000 barrels of oil we had in storage on December 19th of 2014...   

This Week's Rig Count

drilling activity rose for the 13th time in the past 14 weeks during the week ending December 23rd, as ongoing higher prices for gas and oil underpinned increased fracking of completed wells....Baker Hughes reported that the total count of active rotary rigs running in the US rose by another 16 rigs to 653 rigs by this Friday, which was still down from the 700 rigs that were deployed as of the Wednesday December 23rd report last year, and down from the recent high of 1929 drilling rigs that were in use on November 21st of 2014... 

rigs drilling for oil increased by 13 rigs to 523 rigs during the week, which was the most oil drilling rigs that have been in use in any week this year, as oil drilling activity has only retreated once in the past 25  weeks...but oil drilling was still down from the 538 oil directed rigs that were working in the US on December 23rd last year, and down from the recent high of 1609 oil rigs that were drilling on October 10, the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 129 rigs, which still left active gas rigs down from the 162 natural gas rigs that were in use a year ago, and down from the recent natural gas rig high of 1,606 natural rigs that were deployed on August 29th, rig that was classified as miscellaneous also remained active, in contrast to a year ago, when no such miscellaneous rigs were deployed...

two offshore platforms began drilling in the Gulf of Mexico this week, both offshore from Louisiana, which brought the Gulf of Mexico rig count up to 24, same as a year the same time, another drilling operation began in the offshore waters of Alaska, which means the total US offshore count of 25 rigs has surpassed last year's offshore count of 24...the number of working horizontal drilling rigs increased by 14 rigs to 526 rigs this week, which was still down from the 554 horizontal rigs that were in use in the US on December 23rd last year, and down from the record of 1372 horizontal rigs that were deployed on November 21st of the same time, 4 directional drilling rigs were added, increasing the directional rig count to 58, which was down from the 60 directional rigs that were deployed during the same week last year...meanwhile, the vertical rig count fell by 2 rigs to 69 rigs as of December 23rd, which left the vertical rig count down from last December 23rd's deployment of 86 vertical rigs...

as usual, the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas both tables, the first column shows the active rig count as of December 23rd, the second column shows the change in the number of working rigs between last week's count (December 16th) and this week's (December 23rd) count, the third column shows last week's December 16th active rig count, the 4th column shows the change in the number of rigs running this Friday from the Wednesday before Christmas a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this case was for December 23rd of 2015...      

December 23 2016 rig count summary

there's not much that's particularly noteworthy in this week's state or basin rig variances...once again, the increase of 4 rigs in the Permian was the most in the country, but that's still down from the 12 rigs Permian drillers added last week or the 11 rigs they added the week before...the 262 rigs now working in the Permian is now almost double the 137 rigs that were drilling there during the last week of May, and the 125 rigs they've added over the ensuing 29 weeks thus accounts for nearly 60% of the 212 horizontal drilling rig increase that's occurred nationally since then...Oklahoma topped he Texas addition this week by adding 6 rigs, with 2 of those targeting the Cana Woodford, and 1 in the Ardmore Woodford, the first rig working in that basin since September 23rd...i'll assume you've all also noticed there was also a rig addition in the Utica; that means we now have 20 rigs running, up from 16 rigs a year ago, with one of those Utica rigs just across the state line in PA...changes not shown on the tables above include the addition of another rig in Indiana, where there are now 3 rigs running, up from none a year ago, Mississippi, where they shut down 1 rig and now have 2 rigs active, down from 5 rig a year ago, and Illinois, where their last active rig was shut down this week, while a year ago they had two...


Bill would give $264 million tax break to Ohio oil and gas industry | The Columbus Dispatch: Ohio's oil and gas industry would get a windfall retroactive tax break, costing the state $215 million and local government $49 million, under a bill passed by the legislature. Senate Bill 235 has reached Gov. John Kasich's desk and is ready for his signature or veto, which is expected soon. Kasich's office declined comment. Kasich has attempted numerous times to increase taxes on shale fracking in Ohio, not cut them, arguing Ohio's severance tax rate is "a big fat joke" that lets out-of-state companies extract Ohio resources at little cost. GOP lawmakers have repeatedly blocked Kasich's proposed fracking tax hikes. The heavily amended bill, which was approved by the Ohio House and Senate during the recent lame duck session, includes a provision expanding the sales tax exemption for tangible personal property for the oil and gas industry, resulting in tax breaks estimated by the Ohio Department of Taxation at $264 million. In an unusual move, the General Assembly made the tax breaks retroactive to June 30, 2010, requiring the state to make sizable refunds. Taxation officials said tax breaks would amount to $211 million for oil and gas conduit pipe companies, $46 million for horizontal well operators, $7 million for injection well operations, and an indeterminate amount for other minerals producers. The bill was originally introduced more than a year ago as a bill to provide property tax breaks for developers, but underwent major changes on Dec. 8, when 20 amendments were added, including the tax breaks for the oil and gas industry. Lawmakers argued the oil and tax provision is a "clarification."

Ohio bill would allow boards of elections and Secretary of State to invalidate local initiative petitions like fracking and marijuana go against state law - Dayton Business Journal: Ohio communities that try to ban fracking with a citizen referendum would no longer be able to do so under legislation awaiting Gov. John Kasich’s signature, although it may not hold up to legal challenges. Inside a bill that started out addressing foreclosures and expanded to increasing coverage for people with autism is a small portion with big implications for some local communities. The amendment would allow boards of elections or the Ohio Secretary of State to invalidate local initiative petitions if either determines the petition is in conflict with state law or the Ohio Constitution.Some Ohio communities have brought ballot measures seeking to ban oil and gas drilling activity related to hydraulic fracturing, or fracking. Most notably Youngstown voters have since 2013 voted six times against a Community Bill of Rights that, if passed, would have banned the practice. During the Ohio Senate’s 26 to 5 acceptance of House Bill 463, Sen. Kevin Bacon, R-Minerva Park and chairman of the Senate Civil Justice Committee, cited Youngstown and a Newark measure that decriminalized small amounts of marijuana as reasons for the bill. Both local issues go against state rules. The Ohio Department of Natural Resources allows fracking and while Ohio has legalized medical marijuana, state law does not allow for any possession of marijuana. Newark officials have said they’ll still enforce the state's marijuana laws, despite their voters' intentions.

Northeast Ohio gas pipeline opponents vow to delay project - (AP) — Northeast Ohio residents who have tried to get a natural gas pipeline moved away from their communities are vowing to engage in delay tactics after a federal agency dismissed their suggested alternate routes. Opponents say they will not allow surveys or sell easements for the $2 billion NEXUS Gas Transmission project unless ordered to do so by a court."I will stand my ground, as everyone else is standing, until all of our resources and options are exhausted," said Medina County resident Jon Strong, who has helped lead the effort to reroute the pipeline the last 2 ½ years.The 255-mile-long line would carry gas from Appalachia across northern Ohio and into Michigan and Canada. Most of the high-pressured line would be in Ohio. Construction is slated to begin by March.Federal law gives companies wide latitude to build interstate pipelines, and NEXUS Gas officials say the Federal Energy Regulatory Commission's environmental impact study was a milestone move forward on the plans. Company spokesman Adam Parker said the alternate routes would take the pipeline away from its market areas and "does not accomplish the project's purpose and need."The company's last regulatory hurdle is winning a certificate of public convenience and necessity, which the company expects to get in early 2017. It also must complete surveys for the proposed route and pay land owners to bury the line on their properties. The most fervent opposition has been centered in Medina and Summit counties, where opponents say the pipeline will come too close to homes and businesses. Officials in Green in southern Summit County provided three alternative routes to the commission to move the pipeline away from their city.

Ohio environmental group challenges fracking in Wayne National Forest - An environmental group in Ohio plans to challenge the leasing of land in the state's only national forest to oil-and-gas drilling companies.The Ohio Environmental Council is asking President Barack Obama to stop the leases and says it will look at taking legal action.The U.S. Bureau of Land Management announced this past week that it has leased 759 acres of land in southern Ohio's Wayne National Forest to several fossil fuel development companies with future hydraulic fracturing in mind.Opponents contend that opening the land to fracking will threaten public health and local wildlife by polluting the air and water.But those leasing the land are still required to get a permit before any drilling can begin.  Some national forests in other states already allow hydraulic fracturing.

Shale gas drilling permits increase in Ohio, Pa. -The Pennsylvania Department of Environmental Protection issued 179 horizontal drilling-related permits between Nov. 1 and Dec. 16, 2016. In western Pennsylvania, 42 permits were issued in Washington County, double the number of permits issued there in October and also September. Range Resources received 26 permits; EQT Production, 13; Antero Resources, two; and Rice Drilling received one.  Range received three permits for the Sheller well site in West Finley Township; seven permits for new wells on the Munce unit in South Strabane Township; three permits for the Harmon Creek C well in Smith Township; three permits for the Harmon Creek B well in Hanover Township; three permits for the Harris wells in East Finley Township; and seven permits for drilling on the Robert Jones wells in Donegal Township. EQT Production received three permits for the Harbison well site in Nottingham Township; one permit for the Kevech well site in Fallowfield Township; three permits for the R. Smith wells in Carroll Township; two permits for the Haywood wells in Carroll Township; three permits for the Cogar wells in Amwell Township; and one for the Gallagher well in Amwell Township.   The Ohio Department of Natural Resources granted 35 Utica/Point Pleasant Shale well drilling permits in November and another eight so far in December.Columbiana County was back in action with 11 permits, all issued to HilCorp Energy Company and for sites and legs on the Unkefer farm in Fairfield Township.The ODNR issued 14 permits in Monroe County in November. Antero Resources Corporation received six permits in Malaga Township, three for the Caddis units and three for the Streamer wells.Statoil USA Onshore Properties received two permits in Monroe County’s Salem Township for the Pfalzgraf wells, and EM Energy Ohio LLC received a permit for the Nick Nack well in Perry Township. Eclipse Resources also received two permits for the Moser wells in Salem Township, and the CNX Gas Company received a permit for drilling at the Francis and April Kinzy well site in Switzerland Township, and commenced drilling.  In December, the ODNR issued eight drilling permits, as of Dec. 10, in the Utica shale. Three permits were issued in Monroe County to Antero Resources Corporation, all for sites in Seneca Township on the E.T. Rubel unit. All three wells are now producing. Another permit was issued in Monroe County to Statoil USA Onshore Properties, for the Pfalzgraf N U4H site in Salem Township.

A Wave Of New Fracking Is About To Hit Appalachia - Daily Caller State governments in Appalachia have issued 229 new permits for hydraulic fracturing, or fracking, since November, according to analysis by a trade publication. Pennsylvania’s government issued 179 permits since Nov. 1. Ohio issued 43 permits and West Virginia issued seven. This is almost double the average number of permits issued during a similar period, indicating that a fracking boom could soon occur in Appalachia.  Ohio is producing 1,000 percent more oil and natural gas than it was in 2006 and its natural gas production grew 41 percent faster last year than it did in 2014, according to the U.S. Energy Information Administration (EIA).  America produced 79 billion cubic feet per day of natural gas in 2015, breaking the previous record by 5 percent, according to the EIA. Most of that natural gas boom was concentrated in Pennsylvania, Ohio and West Virginia. Together, these states accounted for 35 percent of total American natural gas production — the rest of the country saw a modest decline. Much of this boom is due to a favorable regulatory and legal environment. Ohio Supreme Court’s struck down local fracking bans and concluded that local governments can’t hold referendums to amend charters to ban fracking.

Earthquake protections to be built into Pa. permits for fracking waste disposal wells - Pennsylvania environmental regulators are on the verge of approving two planned disposal wells for oil and gas waste fluids, on the condition that the operators take steps to limit the chances the wells will cause the kinds of earthquakes that have rocked other oil and gas producing regions. Department of Environmental Protection officials said they will soon issue long-delayed permits to Pennsylvania General Energy Co. and Seneca Resources Corp. for disposal wells in Grant Township, Indiana County, and Highland Township, Elk County. “The answer is going to be yes. It is just a question of what the conditions finally look like,” Scott Perry, DEP’s deputy secretary for oil and gas management, said at an advisory board meeting late last month. He said the agency expects to act on the applications “in the extremely near future.” A DEP spokesman could not say, specifically, when the permits will be issued. The applications for the wastewater wells have inspired an extraordinary degree of local opposition, especially for regions of the state that have a history of oil and gas development. Voters in Highland Township, population 492, adopted a new form of local government in November with a home rule charter that makes it illegal to deposit oil and gas waste in the township. Grant Township voters took the same step a year earlier. Both tiny communities (Grant’s population is about 740) decided to pursue the new charters despite having settled or lost earlier rounds of legal challenges brought by the oil and gas companies, which are suing the townships over their attempts to ban the wells. The permits — and all other injection well applications that DEP reviews in the near term — will carry three common conditions, as well as individualized requirements, DEP officials said.  They will require the operators to perform seismic monitoring around the wells and to make the data picked up by the sensors publicly available — ideally in real time as an extension of the state’s established monitoring network. They will also force the operators to shut down wells that cause earthquakes of magnitude 2.0 or greater. Magnitude 2.0 and smaller seismic events are considered microearthquakes and are generally too subtle for humans to feel.

Anadarko, big Marcellus driller in state forests, to leave Pa. - - Anadarko Petroleum Corp., has sold its Marcellus Shale operations in north-central Pennsylvania to a subsidiary of Alta Resources Development LLC for $1.24 billion, marking the exit of one of the larger shale gas developers in state forests. The company’s assets include drilling rights in the Loyalsock State Forest in Lycoming County, where Anadarko’s controversial extraction plans have been blocked by legal and administrative obstacles.Anadarko, which is based in The Woodlands, Texas, said its Marcellus Shale divestiture includes about 195,000 net acres, which produced about 470 million cubic feet of gas per day. The oil and gas company, which has international operations, has announced $5 billion in asset sales this year. The sale to Alta Resources represents the return of a company that explored the Marcellus in Susquehanna County from 2008 to 2010, before divesting its holdings. The late George P. Mitchell, who was widely regarded as the father of shale gas for his development of hydraulic fracturing techniques, was an early partner in Alta. The transaction is expected to close during the first quarter of 2017. Anadarko’s regional headquarters are in Williamsport.

Anadarko sells Marcellus shale natural gas assets: Anadarko Petroleum Corporation has agreed to sell its operated and non-operated upstream assets and operated midstream assets in the Marcellus Shale of north-central Pennsylvania to Alta Marcellus Development, LLC, a wholly owned subsidiary of Alta Resources Development, LLC, for approximately $1.24 billion. The midstream assets in the Marcellus owned by Western Gas Partners, Anadarko's sponsored master limited partnership, are excluded from the agreement. "With this transaction, we have announced or closed monetizations totaling well in excess of $5 billion in 2016, while principally focusing Anadarko's U.S. onshore activities on our world-class oil-levered assets in the Delaware and DJ basins," said Al Walker, Anadarko Chairman, President and CEO. "Our Marcellus team has done a superb job of maximizing the value of our position in this natural gas play, and we are grateful for their efforts and dedication." The Marcellus Shale divestiture includes approximately 195,000 net acres and, at the end of the third quarter of 2016, sales volumes from these properties totaled approximately 470 million cubic feet per day. The transaction is expected to close during the first quarter of 2017, subject to customary closing conditions and adjustments.

This Pipeline Would Cut Through America's Most Celebrated Hiking Trail -  The proposed Mountain Valley Pipeline would carry natural gas 300 miles from northwest West Virginia to southern Virginia, crossing the Appalachian Trail and clearing trees on its way.  Cutting through one of the most celebrated hiking trails in America , the proposed Mountain Valley Pipeline threatens wildlife habitat, recreational lands and the health of local Appalachia communities, while setting a terrible precedent of building energy infrastructure through our national forests.  The construction of the pipeline sets a dangerous precedent, requiring the clearing of 125 foot wide corridor of forest lands protected by the Forest Service's Roadless Rule . Under the protection of the Roadless Rule, these unspoiled forest lands are protected from road building, logging, mining and other development.  Starting 90 minutes south of Wheeling, West Virginia, the pipeline would wind south through the state before cutting east across Appalachian Trail and ending 30 minutes north of Danville, Virginia.  Through Dec. 22 the Federal Energy Regulatory Commission (FERC) is seeking public input on the proposed plan to build the Mountain Valley Pipeline. We need to speak up and tell FERC Secretary Kimberly Bose to revise the current plan and more directly address the pipeline's lasting impacts on the Appalachian Trail and adjacent wildlands, like Brush Mountain Wilderness Area and Peter Mountain Wilderness Area.

This Proposed Pipeline Would Cut Right Through The Appalachian Trail | The Huffington Post - Environmental groups are voicing opposition to a proposed natural gas pipeline that would cut across the Appalachian Trail in Virginia and require clearing a previously protected corridor of forest. The Mountain Valley Pipeline would transport natural gas from northwest West Virginia to southern Virginia, according to The Wilderness Society, which published an editorial this week saying the pipeline would set a “dangerous precedent.” That’s because construction would involve clearing a 125-foot-wide section that would cross 3.4 miles of forest protected under the Forest Service’s “roadless rule ― litigation meant to protect lands from road construction and logging.“Some of the most iconic viewpoints, like Angels Rest, along the Appalachian Trail in Virginia will look out upon an ugly swath of destruction that dissects habitat and threatens waterways,” the Wilderness Society writes.Specifically, the pipeline would cross Jefferson National Forest in West Virginia and Virginia, pass through the Appalachian National Scenic Trail Corridor and cross the Appalachian Trail near Virginia’s Peters Mountain Wilderness Area, according to the conservation group Wild Virginia. Multiple environmental groups said this month that they refused to even comment on the government’s Draft Environmental Impact Statement for the project because the draft has so many errors. Other concerns include the public safety of residents, businesses and community organizations that would find themselves in the “blast zone” — a radius of about 1,115 feet around the pipeline where an explosion could have a “significant impact on people or property.” In Newport, Virginia, that zone includes historically significant buildings as well as residents’ homes, according to The Roanoke Times. Other Virginians have expressed fear about threats to groundwater, given the porous nature of the karst landscape of the state’s Giles County where some of the pipeline is slated to go.

Natural Gas Prices Sink on Warm Weather - WSJ: Natural gas plunged to a three-week low Tuesday with warmer weather and expectations for soft demand causing a selloff before the holidays. The market is now down in six of seven sessions since it closed at a two-year high Dec. 9. Natural gas has been one of the best performing commodities of the year, but is still dependent on cold weather to drive demand for winter heating. A combination of higher prices and tepid heating demand could end up diverting more of the near-record-high production from shale into storage sites that are already bloated. Natural-gas futures for January delivery settled down 12.9 cents, or 3.8%, at $3.263 a million British thermal units on the New York Mercantile Exchange. It has lost nearly 13% since gas hit that high point. “The whole thing is weather,” said Mark Waggoner, president of brokerage Excel Futures. Weather forecasts have been predicting far-above average temperatures for several days, but Tuesday’s forecasts grew even warmer. MDA Weather Services in Maryland is forecasting an expanding area of temperatures 5 to 15-degrees-Fahrenheit-above normal covering the eastern half of the country, from San Antonio to Albany, into early January. About half of all U.S. homes use natural gas for heat. And recent cold had been lifting prices until forecasts showed a dramatic change from cooler-than-normal weather to warmer-than-normal starting the last two weeks of December.

NYMEX January gas futures settle at $3.263/MMBtu, down 12.9 cents - The NYMEX January natural gas futures contract traded lower for a fourth straight day Tuesday as increasingly bearish weather forecasts continued to weigh on the market. The contract settled at $3.263/MMBtu, down 12.9 cents. The January contract has now fallen in each of the previous four trading sessions, giving up a combined 30.4 cents, or 8.5%. The fall in the prompt-month contract comes as the latest six- to 10-day and eight- to 14-day outlooks from the US National Weather Service, issued Tuesday afternoon, continued to call for above-average temperatures across the eastern half of the country. "The natural gas market continues to collapse its premium over the $3.20/MMBtu five-year-average price for this time of year as the temperature forecast for the next two weeks trended warmer than a day ago," Citi Futures' Tim Evans said in an email Tuesday. "Warmer-than-normal temperatures from the Southwest and Texas to the Great Lakes and East Coast are seen limiting overall heating demand." Last week, US working gas storage fell by 147 Bcf, nearly double the five-year average, according to Thursday's weekly gas storage report from the Energy Information Administration. Despite early expectations calling for another outsized withdrawal this week, bullish weekly storage numbers have been unable to provide support to prices. Over the next seven days, total US gas demand is expected to average 93.6 Bcf/d, down from the sustained triple-digit levels reached in the previous week, data from Platts Analytics' Bentek Energy showed.The January contract so far on Tuesday has traded in a range between $3.242/MMBtu and $3.408/MMBtu.

U.S. natural gas spikes 5% on bets for massive supply withdrawal  - U.S. natural gas futures snapped a five-session losing streak on Wednesday, as investors bid up prices on expectations of a massive U.S. inventory draw. Natural gas for January delivery on the New York Mercantile Exchange jumped 18.1 cents, or 5.5%, to $3.445 per million British thermal units by 8:45AM ET (13:45GMT). Market participants awaited weekly supply data due on Thursday, which is expected to show a draw in a range between 197 and 210 billion cubic feet in the week ended December 16. If confirmed it will be the biggest withdrawal for the week since 2010. That compares with a decline of 147 billion cubic feet in the preceding week, 32 billion a year earlier and a five-year average drop of 101 billion cubic feet. Total natural gas in storage currently stands at 3.806 trillion cubic feet, according to the U.S. Energy Information Administration, 1.3% lower than levels at this time a year ago and 4.9% above the five-year average for this time of year. Futures slumped to a three-week low of $3.242 a day earlier as forecasts for less cold weather and lighter heating demand through the end of the year dragged down prices. About half of U.S. homes use natural gas for heating.

US Shale Gas Industry: Countdown To Disaster -- The countdown has started as the demise of the great U.S. shale gas industry has begun.  This will have a disastrous impact on the U.S. economy as shale gas production declines in a big way.  Unfortunately, very few Americans understand how sickly the domestic shale gas industry truly is, because they have been brainwashed to believe the United States is heading towards energy independence. For the U.S. to become energy independent, it would have to add at least another five million barrels per day of oil production.  At the peak in February 2015, the U.S. shale oil industry produced a little more than five million barrels of oil per day.  However, the real problem is not the doubling of U.S. shale oil production, rather it's being able to make a profit in the process. The U.S. shale oil and gas industry hasn't made any real money since 2009.  This is especially true for one of the largest natural gas producers in the United States.  Chesapeake Energy, which is the second largest natural gas producer in the country, hasn't made a lousy nickel for at least the past ten years:This table comes from the website,  If you click on the Chesapeake Free Cash Flow link at, you will see the very same table by scrolling down the page.  According to gurufocus, their definition of Free Cash Flow is the following: Free Cash Flow is considered one of the most important parameters to measure a company?s earnings power by value investors because it is not subject to estimates of Depreciation, Depletion and Amortization (DDA).  Over the long term, Free Cash Flow should give pretty good picture on the real earnings power of the company.As we can see in the table above, Chesapeake Energy is completely in the RED as it pertains to free cash flow or real profits since 2006.  This is quite an amazing accomplishment from the second largest natural gas producer in the country.  You would think, being BIG would guarantee profits.  I gather someone forgot to tell Chesapeake's management the important financial tidbit called, "Economies of scale." To get an idea of the top five natural gas producers in the United States, I listed them below.

An Inconclusive Conclusion: The EPA's Fracking Study - The EPA recently released the final version of its report on the potential impacts of hydraulic fracturing on water sources. The new version, the culmination of six years of research, reveals gaps in substantive data and excludes a statement printed in the earlier draft report that it found “no evidence that fracking systemically contaminates water” supplies.“EPA scientists chose not to include that sentence,” Thomas Burke, the EPA’s science adviser and deputy assistant administrator of the agency’s Office of Research and Development told the New York Times. “The scientists concluded it could not be quantitatively supported.”The report suggests the possibility that fracking for oil and gas could affect local drinking water. But it explains that certain avoidable conditions are more likely to result in drinking water contamination than others—circumstances such as those created by chemical spills, improper wastewater storage, or mechanical failures while drilling wells.The report’s release is timely. It comes as President-elect Donald Trump, a proponent of oil and gas development who promises to expand fracking and loosen regulations, prepares to take office. This means that going forward, his team of advisors will have to contend with the study’s cautionary scientific findings.While the EPA found some cases of contamination, it concluded that there was not enough substantive data to determine that the drilling technique posed a threat to water supplies. The agency further explained that its conclusions were restricted by available information: “Data gaps and uncertainties limited EPA’s ability to fully assess the potential impacts on drinking water resources both locally and nationally . . . Because of these data gaps and uncertainties, as well as others described in the assessment, it was not possible to fully characterize the severity of impacts, nor was it possible to calculate or estimate the national frequency of impacts on drinking water resources from activities in the hydraulic fracturing water cycle.”

Why some language was removed from new EPA report on fracking - An EPA report about fracking is reigniting fears over the extraction of oil and gas from rock below the earth. The agency says it’s unable to fully characterize the severity of fracking’s impact on drinking water. But it does point to circumstances that could make groundwater vulnerable. The majority of U.S. fracking happens in seven zones – three of them at least partially in Texas, and some residents are concerned, reports CBS News correspondent Manuel Bojorquez.  Elizabeth Falconer has installed a $30,000 water filtration system in her garage. She said she’s had her water tested and it came back with chemical levels higher than the EPA recommends.Falconer said the water in her Weatherford, Texas home is undrinkable, even with an expensive filter. “Is there at this point a smoking gun -- something that you could point to to say this is directly linked to fracking?” Bojorquez asked.“Again, I’m not a scientist. I can only say here’s the sequence of time and the only intervening variable between good water and bad water was fracking,” Falconer said. In a report, the EPA described how hydraulic fracturing or fracking activities “can impact drinking water resources under some circumstances,” but the agency can’t say how severely.The EPA is taking a tougher stance than ever before. Language in an earlier draft of the report downplaying fracking concerns was removed. It said: “We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources.”  Burke explained why they omitted the lighter language.  “The gaps in information unfortunately do not allow us to say how much, what is the rate of the impact. And so that sentence was removed,” Burke said.

Twofer: Editorial Proves Wall Street Journal Is In Denial About Fracking AND Climate Change - The Environmental Protection Agency’s (EPA) final report on the drinking water impacts of hydraulic fracturing (aka fracking) has provoked howls from The Wall Street Journal’s editorial board, which blasted EPA analysts as “science deniers” pushing “fake news.” But the editorial’s deeply flawed reasoning is the latest evidence that the Journal is in denial when it comes to scientific findings that conflict with its pro-fossil fuel agenda, whether they relate to fracking or climate change.In the December 18 editorial, the Journal misrepresented the changes the EPA made to its draft version of the report, which was released in June 2015:After being barraged by plaintiff attorneys and Hollywood celebrities, the EPA in its final report substituted its determination of no “widespread, systemic impact” with the hypothetical that fracking “can impact drinking water resources under some circumstances” and that “impacts can range in frequency and severity” depending on the circumstances.[...]The EPA now asserts that “significant data gaps and uncertainties” prevent it from “calculating or estimating the national frequency of impacts.”In reality, all of the findings the Journal pointed to in the final version of the report were also present in the draft version. The draft version stated that “there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources,” identified “factors affecting the frequency or severity” of those impacts, and acknowledged that "data limitations" prevent the agency from having "any certainty" of how often fracking has actually impacted drinking water. The one change the Journal correctly identified was that in the final version of the report, the EPA rescinded its draft conclusion that there was no evidence fracking has “led to widespread, systemic impacts on drinking water resources.” But contrary to the Journal’s claim that the EPA disavowed that finding because the agency had been “barraged by plaintiff attorneys and Hollywood celebrities,” it was actually changed after the EPA’s scientific advisory board, which evaluates the agency’s “use of science,” pointed out that the draft conclusion wasn’t supported elsewhere in the report:

FERC Suggests Spectra Energy Gas Facility Would Not Pose Cancer Risk, Based on Study by Spectra Consultant - DeSmogBlog - The Federal Energy Regulatory Commission (FERC) concluded in an environmental assessment that a proposed Spectra Energy gas compressor station in a residential Massachusetts neighborhood would not increase the risk of cancer in nearby residents.  However, it came to this conclusion via a questionable route — by citing a study done by a firm simultaneously working for Spectra.  In May this year, FERC published its environmental assessment for Spectra’s proposed Atlantic Bridge Project, an upgrade to its Algonquin Pipeline.  One of the most controversial segments of the project is the construction of a gas compressor station in the town of Weymouth, Massachusetts. The proximity of the station to private homes and a school triggered fierce opposition from many of the town’s residents and elected officials.  To address these concerns, FERC staff used a recent study on pollution and cancer risks conducted on compressor stations for a different project, Dominion Transmission Inc.’s New Market.  That study found that those compressor stations, which were supposedly larger in size than the proposed Weymouth station, would not pose an increased risk to human health. The study based its findings on air samples provided by the applicant company, Dominion, rather than by an independent third party. To assist its staff in the New Market study, FERC hired TRC, a private environmental and engineering consulting firm. Yet TRC is also Spectra’s main environmental contractor for the Atlantic Bridge pipeline upgrade project. In fact, TRC has been working continuously for Spectra on its various upgrades to the Algonquin Pipeline since at least 2012. TRC and FERC’s staff conducted the study on the proposed compressor stations for the New Market Project throughout the greater part of 2015.  During this entire time, TRC was also working directly for Spectra on Atlantic Bridge and its related gas pipeline project, Algonquin Incremental Market. FERC documents show that one of TRC’s employees who participated in the New Market study, Ryan Hale, even worked on Algonquin Incremental Market until at least 2014. 

Customers Foot Bill for Florida Utilities to Build ‘Unnecessary’ Gas Infrastructure For Excess Profit - On an August 2015 earnings call, Kelcy Warren, CEO of natural gas company Energy Transfer Partners, acknowledged that “the pipeline business will overbuild until the end of time.” Critics of Florida’s utilities say they believe Warren. They point to state regulators allowing Florida Power and Light (FPL) to build not only new power plants using fracked gas from as far away as Pennsylvania and Texas but also natural gas infrastructure that includes the $3 billion Sabal Trail Pipeline. And Florida residents are footing the bill for these efforts. As Frank Jackalone, Director of Sierra Club Florida, said in recent blog post: FPL has admitted that homegrown solar and batteries could do at least as good a job of powering Floridian homes and businesses — at competitive prices. To make matters worse, FPL is also using these power plants to try to justify building unnecessary gas pipelines such as Sabal Trail and Atlantic Sunrise. In January FPL customers will see their utility bills rise by $400 million, to be followed by $411 million in rate hikes over the next three years. Florida Power and Light, the largest utility in the state, justified the rate increase in a prepared statement, saying it would “support continued investments in FPL’s infrastructure, including the implementation of innovative technologies that help reduce and shorten outages, generate power more efficiently, and curtail fuel consumption and air emissions.” The statement went on to say that FPL expects to continue investing $3.5 billion a year in its infrastructure for the next four years. Detractors say that infrastructure is largely based on producing electricity from fracked gas, not solar, and that much of that natural gas infrastructure is unnecessary, based on demand.

Huge Victory: Winona County, Minnesota Bans Frac Sand Mining -- Winona County, Minnesota has placed a total ban on the strip-mining of frac sand , a necessary component of fracking . This is thought to be the first such countywide ban in the nation.  The Winona County Board of Commissioners on Nov. 22 voted 3-2 to ban the mining, processing or trans-loading of frac sand in the county, which is located in the environmentally delicate and beautiful Mississippi River bluff lands of southeast Minnesota.  Frac sand is an essential ingredient in fracking, which fractures shale deep underground. The frac sand (also known as silica sand) props open those fractures so that bubbles of oil or gas can flow to the surface. Fracking, a type of extreme energy extraction, cannot take place without this special silica sand. (Although there are more expensive alternatives such as imported ceramic beads or resin-coated sand.)  The sand we're familiar with (sand boxes or beach sand) is angular and variable in size, whereas frac sand is almost pure quartz and must be spherical, extremely crush-resistant and uniform in size. The best type of this valuable sand is found in the Upper Midwest, with Wisconsin holding 75 percent of the nation's frac sand market. But the industry has been somewhat stymied in Minnesota due to intense and organized citizen opposition by such groups as Winona County's Citizens Against Silica Mining (CASM) and Minnesota's Land Stewardship Project which spearheaded the ban campaign.

Abandoned Texas oil wells seen as "ticking time bombs" of contamination - — Peculiar things can happen after folks drill deep into the earth — looking for oil, water or whatever — and leave a bunch of holes in the ground. Fluids can gurgle and leak, migrating where they don’t belong. In rare instances, land could even sink or collapse. The oddest unintended consequences tend to bubble up in this pockmarked slice of West Texas, where wildcatters started poking holes in the ground nearly a century ago. “If this stuff was even close to Austin, hell, it’d be national news,” said Ty Edwards, the fresh-faced assistant general manager of the Middle Pecos Groundwater Conservation District, as he barreled down an empty stretch of highway during a June tour of the some of the standouts. Texas, the nation’s petroleum king, is home to nearly 300,000 wells currently pumping oil, gas and dollars into the economy. But those are hardly the only holes that petroleum companies have bored into the Texas landscape. As far back as 1990, Texas touted more than 1.5 million oil and gas-related holes, including hundreds of thousands of test wells, service wells and those that came up dry.

Plan announced to mitigate potential fracking earthquakes in new oil and gas developments - Tulsa World: Latest Earthquake Information From The U.S. Geological Survey: State regulators have announced a plan to regulate new oil and natural gas developments in a proactive approach to mitigate earthquakes potentially caused by fracking. The Oklahoma Corporation Commission issued a news release Tuesday morning stating that state regulators in conjunction with the Oklahoma Geological Survey have developed induced seismicity guidelines focused on two areas expected to account for the vast majority of new oil and gas activity in the state — the SCOOP and STACK. In a prepared statement, OGS director Jeremy Boak said a former state seismologist studied small earthquakes "some years ago" in what is now known as the SCOOP and STACK, with his research showing some of the quakes may have been related to hydraulic fracturing — more commonly known as fracking. Boak noted that more recent small seismic events outside of a large area of interest may also be linked to fracking. Data indicates quakes related to the SCOOP and STACK "would be far less frequent and much lower in magnitude" than seismicity tied to disposal wells in central and northwestern Oklahoma in a 15,000-square-mile area of interest, he said. “We have enough information to develop a plan aimed at reducing the risk of these smaller events as operations commence,” Boak said. “Unlike the strong earthquake activity in areas of the (area of interest) linked to disposal activity, response to seismic activity that might be related to hydraulic fracturing can be more precisely defined and rapidly implemented.”

Oklahoma regulators release 'fracking' plan for induced earthquakes | News OK: Oklahoma regulators released details Tuesday of new guidelines to deal with the risks of earthquakes induced from hydraulic fracturing operations in oil and gas development, an expansion of their previous responses to earthquakes linked to wastewater disposal wells. The hydraulic fracturing plan is an attempt to get ahead of rapid development in the SCOOP and STACK formations in west central and south central Oklahoma. Almost half the 78 rigs drilling in Oklahoma are in those two areas. Regulators and scientists began looking at hydraulic fracturing operations after several small earthquakes were reported south and west of the Oklahoma City area earlier this year. Those areas were outside the large, regional plans to reduce wastewater injection into deep Arbuckle disposal wells that have been linked to induced seismicity. The Oklahoman reported earlier this month that regulators with the Oklahoma Corporation Commission were working on the hydraulic fracturing plan.The guidance document, which was mailed to operators on Friday, establishes a "traffic light" system for dealing with earthquakes potentially linked to hydraulic fracturing operations. Different actions are required after reported earthquakes greater than magnitude-2.5; magnitude-3.0; and magnitude-3.5. The guidelines set up a 2-kilometer (1.25 miles) radius around an earthquake. The guidelines are similar to those developed in Canada and Ohio for dealing with earthquakes linked to hydraulic fracturing. The Oklahoma guidelines escalate from informal conversations to a pause of operations for at least six hours. The "red light" — at earthquakes greater than magnitude-3.5 — involves a suspension of operations and a formal technical conference with regulators. Hydraulic fracturing has long been known to induce earthquakes of very small magnitudes, known as microseismicity. Those quakes are rarely felt at the surface. However, the earthquakes recorded earlier this year near Blanchard and Calumet ranged from magnitude-3.0 to 3.4. Both areas are in SCOOP and STACK plays.

Natural gas production trends in the SCOOP and STACK, Part 1 - The SCOOP and STACK combo play in central Oklahoma recently has emerged as one of the most prolific and attractive shale production regions in the U.S. Like the Permian Basin (albeit on a much smaller scale), rig counts in this play have weathered the crude oil price decline better than most of the rest and, along with the Permian, are leading a rebound as prices move higher. These days, SCOOP/STACK producers are primarily targeting crude oil and condensates, but the area also is seeing a resurgence of natural gas output from associated gas. More than that, given its economics, location and ample infrastructure, gas supply from the region has the potential to be directly competitive with Marcellus/Utica supply. Today, we begin a series analyzing production trends in the SCOOP/STACK, with a focus on natural gas.

‘New Mexico’s DAPL’ is dead — High Country News: The Piñon Pipeline, touted as the Southwest’s version of the Dakota Access Pipeline, has perished, even before the real battle over it began. In mid-December the project’s proponents formally withdrew their right of way application, which was being reviewed by the Bureau of Land Management. Saddle Butte San Juan LLC first proposed Piñon at the height of the oil boom, in 2014. About 50 miles of gathering lines would have taken crude oil from wells in the San Juan Basin’s Gallup Sandstone play to the 100-mile main line near Lybrook, New Mexico. From there, the pipeline would have carried as much as 50,000 barrels of oil per day south — crossing Navajo tribal, federal and state lands along on the way — to a rail terminal between Grants and Gallup, New Mexico. Opponents were concerned not only about how yet another pipeline and potential leaks from it would affect a 100-mile-long swath of land, but also that it would facilitate the fracking frenzy then underway in and around Navajo communities and the Greater Chacoan Cultural Landscape that surrounds Chaco Culture National Historical Park. With some 40,000 wells, the 10,000-square-mile San Juan Basin has produced more natural gas than just about anywhere else. After a nation-wide glut crashed prices and ended the natural gas boom in 2008, however, the Basin’s producers turned almost exclusively to oil, which was still enjoying record high prices at the time. Wells were put in near the Great North Road, a 30-mile long, 30-foot wide architectural feature constructed by the Ancestral Puebloans more than 1,000 years ago. Bulldozers scraped well pads into the badlands immortalized by Georgia O’Keefe in her “Black Place” paintings. And the companies erected huge drill rigs, bulldozed roads and installed sundry infrastructure near homes and even a school in the tiny, loose-knit Navajo communities. In July 2016 three dozen storage tanks near Nageezi caught fire and filled the high desert air with thick, black smoke, as if demonstrating what could go wrong. Since oil pipeline capacity leading out of the Basin is limited, most of the newfound petroleum is trucked from the wells, down dusty dirt roads to the already notoriously dangerous Highway 550, where it continues by truck to larger storage areas, rail tankers or refineries. Thus the proposed Piñon Pipeline would have made moving the oil cheaper and, proponents argued, safer. Soon, the battle was being waged on two fronts: Over the pipeline, and over drilling.

Bonanza Creek, other U.S. energy firms announce Chapter 11 plans - (Reuters) - Bonanza Creek Energy Inc and two other energy firms announced on Friday plans to file for bankruptcy in coming weeks, joining a long list of U.S. energy companies that have succumbed to a drop in oil prices. Oil and gas producers Bonanza Creek and Memorial Production Partners LP and oilfield services provider Forbes Energy Services Ltd each said they had a plan to reduce debt and transfer ownership to creditors. . As of Dec. 14, 114 oil and gas producers had filed for bankruptcy in 2016 with $57 billion in total debt, more than double the number of filings in 2015, according to Haynes & Boone, a law firm that specializes in energy restructuring. Among companies like Forbes that provide well-site services to energy exploration firms, 110 had filed for Chapter 11 protection with $17 billion of debt as of Dec. 14, also more than double the 2015 number, according to Haynes & Boone. Looking ahead to next year, restructuring advisers said they expect more energy-related bankruptcy filings, as the sector prepares for an upturn that could follow implementation of President-elect Donald Trump's pro-drilling agenda or OPEC's plan to cut oil production for the first time in eight years. Denver-based Bonanza Creek, with oil and natural gas assets in Colorado and Arkansas, said it would file for bankruptcy on or before Jan. 5 with a plan to eliminate $850 million in debt and provide $200 million in new equity. The company said it expects to exit bankruptcy in the first quarter of 2017. Bonanza Creek's shares slid 55 percent to $0.88 in morning trade. Memorial Production, with oil and gas assets in Texas, Louisiana, Colorado and California, said it would file for Chapter 11 in coming weeks with a plan to eliminate $1.3 billion of debt. Its shares were down 55 percent to $0.18. Meanwhile, Forbes Energy said it had reached a prepackaged plan with lenders and would file for bankruptcy in Houston on or before Jan. 23, 2017. Its shares lost 6.3 percent to $0.04 in over-the-counter trading on Friday. Earlier this month, Stone Energy Corp filed for Chapter 11 bankruptcy and said it would eliminate about $1.2 billion in debt by transferring control of the company to its noteholders.

Continental's New Well Design In 2015 Reaches Payback In 24 Months -  Well design and its effect on production has been the focus of a large number of our analyses. It continues to improve along with volumes of resource recovered per foot. This is being seen in all plays. The complexity of well design is beyond the scope of most investors, so we try to simplify. Well design changes many times refers to increased fluids or proppant usage. While important, it would do little without better stimulation. During completions, or more specifically frac'ing, source rock stimulation is the fracturing of rock. The interval or target, contains oil and natural gas. The resource is trapped in rock, which is opened for the resource to flow. Natural fracturing is sometimes present, but induced fractures must be created to for a horizontal to be a good producer. Frac' jobs have gotten bigger. This has occured through a change from sliding sleeves to plug and perf (shown above). Sliding sleeves are much faster and cheaper, but have limited access points. More perforation clusters are used with plug and perf. The closer these access points are, the greater number of frac's. Operators are finding that cheaper isn't always better. Going back to plug and perf is the continued theme. Most are doing this. Better well design has been seen throughout the industry. Operators like Exxon, Chevron,  Conoco, Devon, and Concho ) are just a few names to change to plug and perf or improve on that design.

Random Look At Production Change Month-Over-Month By Operator In The Bakken -- The following table was based on data previously posted on the blog. In previous posts, I posted the same information but at one post I had the September, 2015, data; and, at another post, I had the September, 2016, data. But to the best of my recollection, I never put the data side-by-side, comparing the change year-over-year by operator. I was reminded to do this y-o-y comparison after reading this quote from COP's 2016 analyst day presentationAt last year's Analyst Meeting, we thought we needed 12 to 13 rigs to hold this production [unconventional output] from these three areas flat. We now estimate that off the low point in 2017 we could hold production with only six rigs -- half as many rigs -- and we could grow production about 20% in these three areas by running about 15 rigs. These are the kinds of changes that allow us to hold our production flat for just $4.5 billion of capex per year. That's a pretty startling comment. This has to do with COP's activity in its unconventional plays, the Bakken, the Eagle Ford, and the Permian. COP clearly stated that the engineers thought they would need 12 to 13 rigs to hold production flat year-over-year, but new data showed that COP could hold production flat year-over-year with only six rigs.  Assuming all things otherwise equal, if production remains the same year-over-year with half as many rigs, one of two or three or more things, or a combination of these things, must be occurring:

  • the geologists are getting better and better at locating "tier 1" spots
  • operators will concentrate on "tier 1" spots in 2017 and reserve "less good" spots for the out years
  • roughnecks, geologists, and technology are getting better at keeping the horizontal in the seam
  • the newer rigs are more effective / efficient producing oil (for example, reaching TD more quickly)
  • less down time for rigs moving between wells
  • completion techniques improving
  • decline rates "improving" (for many of the same reasons noted above)

Massive North Dakota Oil Spill Still Not Cleaned Up 3 Years Later - In September 2013, a Tesoro Corp. pipeline ruptured in a wheat field near Tioga, North Dakota, spewing 840,000 gallons of fracked oil from the Bakken Shale, causing one of the biggest onshore oil spills in recent U.S. history. More than three years later, only a third of the spill has been recovered. To make matters worse, as the Associated Press reported, Tesoro has not even set a date for clean-up completion despite 'round-the-clock work to fix the break.  Cleaning up the spill will set Tesoro back an estimated $60 million. Crews have had to dig 50 feet underground to remove hundreds of thousands of tons of oil-tainted soil, North Dakota Health Department environmental scientist Bill Suess told the AP, adding that he worries that much of the oil may never be completely removed.  Critics of oil pipelines argue that spills are not just a question of "if" but "when." Spills are a common occurrence across the country. In fact, there have been more than 3,000 significant incidents since 2006, at a cost of $4.7 billion.  "The fact that crews are still trying to clean up Tesoro's spill from over three years ago shows just how unsafe these pipelines are," Greenpeace spokesperson Perry Wheeler told EcoWatch.  “There have been well over 200 significant spills across the country in 2016 alone, yet we continue to see fossil fuel companies downplay their impacts and rush them through approval processes," Wheeler added.

Massive Oil Spill Under Farmer’s Crop 3 Years Ago — Still Not Cleaned Up — 200 Miles from DAPL — When North Dakota farmer Steve Jensen discovered crude oil saturating his wheat field in September 2013, he had no idea a pipeline break had belched nearly 1 million gallons of the hydrocarbon onto his precious land — or that, three years later, the company responsible would still be far from cleaning up the toxic mess. “What happened to us happened and we can’t go back,” said Patty Jensen, Steve’s wife, of one the largest onshore oil spills in U.S. history, which happened on their property. “But I get really upset when I hear of a new one and I wonder what is being done to prevent these spills,” she added, according to the Associated Press, of a recent spill that sent 176,000 gallons of crude from a Belle Fourche pipeline in Belfield into the Ash Coulee Creek, a tributary of the Little Missouri River. Oil is believed to have traveled as far as six miles downstream, sullying an untold expanse of private and U.S. Forest Service land — and likely compromising sensitive ecosystems.  Despite various criticisms of opposition to Dakota Access, the two crude spills — both from 6-inch steel lines — evince precisely why pipeline opponents cite the oil and gas industry’s astonishingly poor safety record in calls to end all construction of new oil infrastructure. In fact, the 840,000 gallons of crude in the Jensens’ field — despite being one of the largest inside the U.S. — represents a mere fraction of a potential leak from the 30-inch Dakota Access Pipeline. The AP explains:Both the Tesoro break and the Belfield break occurred on 6-inch steel pipelines — a part of a large network pipelines that crisscross western North Dakota’s oil patch. By comparison, the Dakota Access pipeline is made of 30-inch steel and will carry nearly 20 million gallons daily.” And the Tesoro break occurred on land, away from any waterways and some distance from the nearest residences — Dakota Access is slated to run underneath Lake Oahe — the sole drinking water supply for the Standing Rock Reservation and, downstream, the source of water for some 18 million people.

Only the hardiest remain at Dakota protest camp | Reuters: Two weeks after a victory in their fight against the Dakota Access Pipeline, most protesters have cleared out of the main protest camp in North Dakota - but about 1,000 are still there, and plan to remain through the winter. These folks say they are dug in at the Oceti Sakowin Camp in Cannon Ball, North Dakota, despite the cold, for a few reasons. Most are Native Americans, and want to support the tribal sovereignty effort forcefully argued by the Standing Rock Sioux, whose land is adjacent to the pipeline being built. Others say they worry that Energy Transfer Partners LP (ETP.N), the company building the $3.8 billion project, will resume construction without people on the ground, even though the tribes and the company are currently locked in a court battle. Future decisions on the 1,172-mile (1,885-km) pipeline are likely to come through discussions with the incoming administration of Donald Trump, or in courtrooms. “I’ve seen some of my friends leave but I will be here until the end and will stand up to Trump if he decides to approve the permit,” said Victor Herrald, of the Cheyenne River Sioux Tribe in South Dakota, who has been at the camp since August. At one point the camp had about 10,000 people, including about 4,000 veterans who showed up in early December - just before the U.S. Army Corps of Engineers denied a key easement needed to allow the Dakota Access Pipeline to run under Lake Oahe, a reservoir formed by a dam on the Missouri River. After the Corps decision, Standing Rock chairman Dave Archambault asked protesters to go home. The camp's population now runs from 700 to 1,000, depending on the day, and many come from the nearby Standing Rock reservation where they live.

North Dakota pipeline battle far from over as protesters dig in - By the sacred fire at the heart of the Oceti Sakowin camp, a woman swaddled in layers of clothing makes announcements over a small loudspeaker. “We have a missing woman,” she calls. “Has anyone seen a woman: tall, blonde hair, a blue poncho, and no shoes?”   The camp is here, on the border of the Standing Rock Sioux Reservation in North Dakota, to oppose the Dakota Access oil pipeline. But right now the priority is keeping people alive. The temperature is minus 14 centigrade and several inches of snow have fallen. Exposed skin can suffer frostbite in 30 minutes.    The missing woman is soon found, but she is one of many people at the camp unprepared for the brutal North Dakota winter. Thousands of environmental activists from the US and around the world have come to support the Native Americans’ battle against the pipeline, many mobilised by the campaign’s popular Facebook pages. The pipeline’s route, which passes the camp about half a mile away, is intended to run under Lake Oahe on the Missouri river, raising fears about possible spills into the water used by the Standing Rock tribe. Earlier this month the Obama administration granted the protesters a temporary victory, denying Dakota Access the permit it needs to sink the pipeline about 100 feet below the lake bed.  Dave Archambault II, the chairman of the Standing Rock tribe, told the protesters it was “time to go home”. Many have obeyed him, some leaving their flimsy tents behind them. But thousands are still here, and the battle over the pipeline is far from over. President-elect Donald Trump told Fox News recently that he would “have it solved very quickly” once in office, and is expected to overturn the Obama administration’s decision. At the Oceti Sakowin camp — the name is the Sioux people’s term for their nation — many of the protesters who were leaving said they planned to return next year. Others were hunkering down to last out the bitter winter cold. They have been building wooden huts for shelter, and installing new composting toilets.

Blackstone in talks to buy stake in Energy Transfer assets | Reuters: Private-equity firm Blackstone Group LP (BX.N) is in talks to buy a stake in assets owned by Energy Transfer Partners LP (ETP.N), the company building the controversial Dakota Access pipeline, a source familiar with the situation said on Thursday. Blackstone is discussing joining the deal with Jamie Welch, who previously served as chief financial officer of ETP parent Energy Transfer Equity LP (ETE.N). The deal is expected to be valued at about $5 billion or more, the Wall Street Journal, who first reported the proposed deals, said earlier on Thursday. Blackstone declined to comment while Energy Transfer Partners did not immediately respond to requests for comment. The source requested anonymity because the conversations are not public. It could not be immediately determined whether the stake would support the Dakota Access pipeline, which has been the subject of protests for months because its route runs adjacent Native American land in North Dakota. Protesters have argued that the 1,172-mile (1,885-km) project would damage sacred lands and could contaminate the tribe's water source.U.S. President-elect Donald Trump, who until June had a stake in ETP, has said he is in favor of the pipeline project. Blackstone Chairman and CEO Steve Schwarzman was recently picked by Trump to chair a panel of business leaders who will give him advice. Schwarzman has said he expects to see a "very substantial reversal of regulations of all types," for the financial sector in the wake of Trump's election.

Black Snake Bleeding Out: How DAPL Is Duping Investors - After reaching a peak of over 1 million barrels in December 2014, the Bakken oil field has been in decline. In fact, per a report released by the Institute for Energy Economics and Financial Analysis (IEEFA) and the Sightline Institute last month, Bakken oil output has plunged 20 percent since last year, and by more than 25 percent since that 2014 peak. The downward spiral is not just limited to the Bakken. The United States continues to experience a sharp decline in the amount of oil produced each month. Last month the U.S. Energy Information Administration (EIA) reported that domestic crude supplies fell by 2.4 million barrels, which is larger than the 2.2 million barrel drop reported by American Petroleum Institute (API)—a decline that was anticipated to be 1.7 million. The Bakken Peak has sounded an alarm throughout the local oil and gas industry, which can be heard from construction workers to executives to everyone in between. For instance, the three largest Bakken drillers have experienced a precipitous collapse in revenue of 70 percent since 2014. According to the North Dakota Department of Mineral Resources, oil drillers were adding roughly 157 new producing wells per month during the Bakken peak. In 2016, they were averaging only 44 per month. And the number of oil rigs is not the only thing dropping faster than Alex Rodriguez’s 2016 batting average: Moody’s and S&P have both downgraded the credit ratings for each of those top three Bakken drillers. But oil prices don’t appear poised for a Barker-style comeback. And this is a big problem for ETP, one that may lead to a Showcase Showdown with its backers. That’s because when the oil shippers who want to use DAPL agreed to terms with ETP in 2014, oil prices were roughly $95 per barrel. Since then, oil prices have dropped by over 70 percent, leading to numerous bankruptcies and the loss of approximately 250,000 oil worker jobs—50 percent of the nationwide total. Moreover, while prices have slightly rebounded in recent months, analysts are skeptical that the recovery can be sustained. The bottom line is that there are real questions about whether DAPL investors can actually make money on this pipeline, given that the project’s current contracts with shippers expire on January 1, 2017. Even if it was operational by January 1, 2017, which is now impossible due to the Army Corps decision, the price of oil still would not be at 2014 levels. ETP knows this better than anyone, which may help explain why the company sold almost half of its stake in DAPL this past August to a joint venture involving Enbridge Energy Partners and Marathon Petroleum.

Feds Sued by State of California Over Offshore Fracking -- Citing risks to public health and marine life, California Attorney General Kamala Harris and the California Coastal Commission filed a lawsuit Monday challenging the federal government's inadequate analysis of offshore fracking's threats to the California coast.  Monday's suit comes after an oil company proposed to conduct California's first offshore frack in almost two years. The oil company, DCOR, LLC, hopes to frack an offshore well in the Santa Barbara Channel. The company would be allowed to discharge chemical-laden fracking flowback fluid into the ocean.  "Kudos to Kamala Harris for fighting to protect our ocean from fracking chemicals," said Kristen Monsell, an attorney with the Center for Biological Diversity . "Offshore fracking raises deep concerns among the millions of people who live, work and play on California's beautiful coast. Whether it's done on land or off our shores, fracking is a toxic threat to our state's air, water and wildlife ."  Fearing expanded offshore oil development under the Trump administration , the center and the Wishtoyo Foundation last month filed their own offshore fracking lawsuit against U.S. officials. That suit points to offshore fracking pollution's threats to the ocean, public health, imperiled wildlife and sacred Chumash cultural resources and places.  The Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement decided to allow offshore fracking in federal waters off California in May, after releasing a cursory environmental assessment of the practice.  The federal assessment failed to fully disclose the chemicals used by oil companies and their effects on marine life and water quality, citing information gaps, yet it acknowledged that those chemicals can be hazardous. The assessment admitted that offshore fracking will prolong offshore oil and gas activities, extending the life of aging infrastructure and increasing the risk of yet more devastating oil spills.

Dirtier than tar sands: California's crude oil secret -- The oil extracted from San Ardo field in Monterey County, California, is known in the trade as “heavy”. It “has the consistency of ketchup”, as Chevron expressed it in legal papers. The company injects steam in the well to soften it up and get the crude flowing to the surface. This high-energy process makes San Ardo one of the most climate polluting sources of oil in the world – worse, even, than Canada’s notoriously dirty tar sands. And it is at the centre of a legal battle brewing between three oil majors and a coalition of community organisers and environmental lawyers. On 8 November, Monterey County passed “Measure Z”, a package of regulations to effectively halt new oil and gas production, with 56% of the vote. Chevron and Aera Energy, a Californian outfit co-owned by affiliates of Exxon Mobil and Shell, sued to block the initiative last Wednesday. The stage is set for a courtroom drama next year pitting corporate property rights against growing concerns about the oil sector’s impact on water resources and the climate. Measure Z was billed as a fracking ban, the seventh at county level in California and the first from a major oil producing area. In fact, its scope is wider, prohibiting a range of practices including disposal of wastewater in aquifers. “Protect our water” is the rallying cry, with California’s ongoing – if easing – drought focusing attention on the importance of groundwater resources. The initiative also makes the case for a local economy based around agriculture and tourism, highlighting the beauty of the landscape. “Oil and gas development projects are industrial operations at odds with the qualities and values that make Monterey County unique and prosperous,” it states.

Obama blocks drilling in Arctic, Atlantic oceans | TheHill: President Obama on Tuesday formally blocked offshore oil and gas drilling in most of the Arctic Ocean, answering a call from environmentalists who say the government needs to do more to prevent drilling in environmentally sensitive areas of U.S.-controlled oceans. Obama is invoking a 1953 law governing the Outer Continental Shelf to block drilling in federal waters in the Arctic's Chukchi Sea and most of its Beaufort Sea. He also protected 21 underwater canyons in the Atlantic Ocean from drilling, White House officials said Tuesday. Canada will block drilling in all of its Arctic Ocean acreage, a moratorium officials will review every five years, the White House said.“These actions, and Canada’s parallel actions, protect a sensitive and unique ecosystem that is unlike any other region on Earth,” Obama said in a statement.   “They reflect the scientific assessment that, even with the high safety standards that both our countries have put in place, the risks of an oil spill in this region are significant and our ability to clean up from a spill in the region’s harsh conditions is limited.”The announcement locks in a decision Obama made last month to block drilling in the Atlantic and Arctic Oceans during an offshore leasing plan that runs through 2022. It also cements Obama’s legacy as a president who has taken aggressive unilateral action against climate change and protected more land and water than any previous president.Environmentalists supported Obama’s November leasing plan, but many said he needed to go further and block drilling in the Atlantic and Arctic Oceans once and for all. After he takes office, President-elect Donald Trump could undo the 2017-2022 leasing plan, though it would be a lengthy process. But it’s unclear how Trump could undo Obama's Tuesday announcement: The White House said no previous president has tried to undo a drilling withdrawal under the 1953 law, and that there is no provision to do so.

Obama Administration to Block Drilling in Parts of Atlantic, Arctic Oceans - WSJ: —The Obama administration announced Tuesday that it would indefinitely block oil and natural-gas drilling in vast swaths of the Arctic Ocean and smaller parts of the Atlantic Ocean, the latest in a string of last-minute actions in the face of President-elect Donald Trump’s vows to undo President Barack Obama’s environmental agenda. The announcement carries symbolic significance but little immediate impact, since no commercial drilling is currently taking place in U.S. federal waters of either the Atlantic off the East Coast or the Arctic north of Alaska. Persistently low oil prices have depressed the oil industry’s appetite to make big investments in new offshore projects, and any production would take the better part of a decade to come online. Still, the move shows the efforts to which the departing administration will go to lock in Mr. Obama’s environmental legacy before Mr. Trump takes office in January. Mr. Obama announced the move Tuesday in coordination with parallel actions by the Canadian government, the White House said. “Today, in partnership with our neighbors and allies in Canada, the United States is taking historic steps to build a strong Arctic economy, preserve a healthy Arctic ecosystem and protect our fragile Arctic waters,” Mr. Obama said.Tuesday’s moves, combined with earlier administration action less sweeping in scope, indefinitely block future oil and gas leasing across 125 million acres of the U.S. Arctic Ocean and 3.8 million acres of the Atlantic Ocean, the latter focused on offshore areas from Maryland to Massachusetts, according to the White House. This amounts to one of the largest such withdrawals under current law to date, according to a fact sheet by the Natural Resources Defense Council. Canada’s move, which was to impose a ban on new leasing in its Arctic waters subject to a regular five-year review, is also not expected to have an immediate impact, but it could complicate ongoing efforts by companies such as Exxon Mobil Corp. to extend leases beyond expiration in 2020 or to resume exploration. Other 11th-hour actions by the Obama administration so far include a determination by the Environmental Protection Agency to keep intact tougher fuel-economy standards, a step the EPA accelerated by several months; an Interior Department regulation putting tighter restrictions on coal mining near streams; and an indefinite pause in issuing a final decision on the Dakota Access pipeline in North Dakota.

Eyeing Trump, Obama Bans Arctic Drilling -  By Steve Horn - President Obama announced Tuesday what amounts to a ban of offshore drilling in huge swaths of continental shelf in both the Alaskan Arctic Ocean and Atlantic Ocean, a decision which came after years of pushing by environmental groups.  Using authority derived from Section 12(a) of the Outer Continental Shelf Lands Act , the White House banned drilling in a 115 acre area making up 98 percent of federally owned lands in the Alaskan Arctic and a 3.8 million acre stretch of the Atlantic extending from Norfolk, Virginia, to the Canadian border. By taking this route, rather than issuing an Executive Order, Obama made it legally difficult for Republican President-elect Donald Trump 's administration to reverse this action.  Environmental groups and Democratic senators have praised the decision, while Republican congressional members and industry groups have denounced it.  "Today … the United States is taking historic steps to build a strong Arctic economy, preserve a healthy Arctic ecosystem and protect our fragile Arctic waters, including designating the bulk of our Arctic water and certain areas in the Atlantic Ocean as indefinitely off limits to future oil and gas leasing," the White House said in a statement , which also pointed to the "need to continue to move decisively away from fossil fuels," as guided by climate science.  President-elect Donald Trump is a climate change denier who repeatedly promised on the campaign trail and during his post-election "Victory Tour" that he would "unleash" more hydraulic fracturing (" fracking ") of oil and gas, and push for more "clean coal" production. Trump also supports increased offshore drilling .  U.S. Sen. Lisa Murkowski (R-Alaska), Chair of the Senate Energy and Natural Resources Committee, came out strongly against the Obama administration's move.   "The only thing more shocking than this reckless, short-sighted, last-minute gift to the extreme environmental agenda is that President Obama had the nerve to claim he is doing Alaska a favor," she said in a press release , which featured the state's congressional delegation slamming Obama for making the decision.  "President Obama has once again treated the Arctic like a snow globe, ignoring the desires of the people who live, work and raise a family there. I cannot wait to work with the next administration to reverse this decision."

Obama Offshore Oil Drilling Ban: U.S., Canada Block Exploration In Arctic, Atlantic Ocean - Before leaving office, President Barack Obama has taken one more action in his efforts to combat climate change by banning oil exploration across much of the Arctic and a stretch of sea canyons in the Atlantic Ocean, according to a report from BuzzFeed.  The offshore oil drilling ban was issued by Obama in partnership with Canadian Prime Minister Justin Trudeau as a part of an order that will protect about one quarter of the Arctic waters from oil drilling, including offshore areas in northern Alaska and the Canadian Arctic. The U.S. block exploration at 31 undersea canyons and will prevent drilling across 3.8 million acres of federal waters.The orders from the two North American countries will also set up safe shipping lanes across the Arctic, allowing passage through the area—a feat that is possible thanks to the ongoing melting of the Arctic ice cover. Canada’s ban will require a review every five years. The U.S. ban will be in place “indefinitely,” though may be at risk of reversal under President-elect Donald Trump, who has promised to expand oil exploration and named Exxon Mobil CEO Rex Tillerson as his Secretary of State.“President Obama and Prime Minister Trudeau are proud to launch actions ensuring a strong, sustainable and viable Arctic economy and ecosystem, with low-impact shipping, science based management of marine resources, and free from the future risks of offshore oil and gas activity,” the world leaders said in a statement. “Together, these actions set the stage for deeper partnerships with other Arctic nations, including through the Arctic Council.”The action comes after a considerable push made by environmental groups and a collection of 14 Democratic senators. The group was led by Senator Ed Markey of Massachusetts, who issued a letter to President Obama in October asking the commander-in-chief to place a ban on oil and gas leases in federal waters. According to Markey’s letter, the ban issued by President Obama would be permanent and wouldn’t be subject to reversal under the incoming administration.

Alaska lawmakers mull legislation to block Obama drilling ban | TheHill: Congressional Republicans and their oil industry allies are gearing up to fight President Obama’s new bans on oil drilling in parts of the Arctic and Atlantic oceans. Two Alaska lawmakers are exploring whether they should propose legislation to overturn Obama’s actions. Spokesmen for Sen. Dan Sullivan and Rep. Don Young, both Alaska Republicans, said the lawmakers would consider proposing legislation to help President-elect Donald Trump overturn the bans if necessary. The legislation could either authorize the president to undo any prior offshore protections, or simply overturn the specific bans from Obama.“The Congressman believes this decision can be overturned by the incoming Administration and will be encouraging President Trump to do so. In addition, Congressman Young will also pursue legislation to overturn this decision,” Matt Shuckerow, Young’s spokesman, told The Hill. With both sides in the fight bracing for the long haul, and for the likelihood that it could end up in the courts, the lawmakers want to make Congress's views clear. “Ambiguities in the law will create an opportunity for litigation by the very extreme environmental groups that President Obama was pandering to,” said Mike Anderson, Sullivan’s spokesman. “It doesn’t mean their litigation would succeed, but just as with any number of actions the new administration might undertake, Congress can buttress those decisions with statutory support."

Canada’s Trudeau Plans to Work with Trump Admin to Approve Keystone XL, Pump Exxon-owned Tar Sands into U.S. - Steve Horn - At a speech given to the Calgary Chamber of Commerce, Canada's Prime Minister Justin Trudeau said he intends to work with President-elect Donald Trump to approve the northern leg of TransCanada's Keystone XL pipeline.  The speech comes as Trump revealed in a recent interview with Fox News that one of the first things he intends to do in office is grant permits for both Keystone XL and the perhaps equally controversial Dakota Access pipeline. Because Keystone XL North crosses the U.S.-Canada border, current processes require it to obtain a presidential permit from theU.S. Department of State, which the Obama administration has denied. The next State Department, however, could be led by the recently retired CEO of ExxonMobil, Rex Tillerson, who was just nominated to be U.S. Secretary of State and soon will face a Senate hearing and vote. Potentially complicating this situation is the fact that Exxon holds substantial interest in both tar sands projects and companies, which stand to benefit from the Keystone XL pipeline bringing this carbon-intensive crude oil across the border. Exxon, along with its subsidiary Imperial Oil, owns both the Kearl Oil Sands Project and Cold Lake tar sands production facilities, and a 25 percent stake in the tar sands production company Syncrude. According to Bloomberg, Trump's team has shown interest in getting rid of the Executive Order which created the presidential permit process altogether, which President Barack Obama and Secretary of State John Kerry used in November 2015 to axe the pipelineOn the campaign trail and during his post-election “Victory Tour,” Trump has pledged to rescind all of Obama's Executive Orders. Unsurprisingly, Tillerson has stated his support for Keystone XL, as well. As reported in a recent investigation by InsideClimate News, nearly a third of Exxon's global reserves is situated in Alberta's tar sands, an oil patch which covers about 55,000 square miles, or roughly the size of New York state. Alberta's tar sands represent the third largest oil reserves on the planet. Processing and producing tar sands crude emits roughly 17 percent more carbon into the atmosphere than conventional crude oil, according to State Department figures cited by InsideClimate News. Exxon's website says that by 2040 the company will provide a quarter of the oil for the Americas via the tar sands.

Huge Decline In U.S. Proved Oil And Gas Reserves -- EIA has downgraded its estimates of proved oil and gas reserves in the U.S., according to its Crude Oil and Natural Gas Proved Reserves, Year-end 2015 report, released today. Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased 64.5 Tcf to 324.3 Tcf, a 16.6 percent decline. Average oil and gas prices in 2015 dropped 47 percent and 42 percent, respectively, from 2014, resulting in more challenging economic and operating conditions. This caused operators to postpone or cancel development plans and revise their proved reserves downward. Proved reserves are volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.  The charts below break down the different additions and revisions contributed to the changes. Total discoveries of crude oil kept pace with reserve decreases from production, with 150 million more barrels of crude and lease condensate produced than were found. Discoveries are defined as new fields or reservoirs in previously discovered fields. Extensions are additions to reserves that resulted from additional drilling and exploration in previously discovered reservoirs. In a given year, extensions are typically the largest percentage of total additions while discoveries are usually a small percentage of annual reserve additions. Revisions primarily occur when operators change their estimates of what they will be able to produce from the properties they operate in response to changing prices or improvements in technology.  Natural gas extensions and discoveries grew faster than production by 5.4 Tcf.

EIA Admits Huge Decline In U.S. Proved Oil And Gas Reserves - Proved oil and gas reserves down 11.8 percent and 16.6 percent, respectively, from year-end 2014. EIA has downgraded its estimates of proved oil and gas reserves in the U.S., according to its Crude Oil and Natural Gas Proved Reserves, Year-end 2015 report, released today. Proved reserves of crude oil in the U.S. declined by 4.7 billion barrels or 11.8 percent from their year-end 2014 level to 35.2 BBbls at year-end 2015. Natural gas proved reserves decreased 64.5 Tcf to 324.3 Tcf, a 16.6 percent decline. Average oil and gas prices in 2015 dropped 47 percent and 42 percent, respectively, from 2014, resulting in more challenging economic and operating conditions. This caused operators to postpone or cancel development plans and revise their proved reserves downward. Proved reserves are volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. The charts below break down the different additions and revisions contributed to the changes.

Has tight oil put ‘peak oil’ to rest? Not so fast - Eighteen years ago, the International Energy Agency made an alarming and, by its own admission, controversial prediction. Global conventional oil output would peak well before 2020, it said, based on global oil reserve modeling of the day. Pondering the potential repercussions of Peak Oil for the first time, the West’s energy watchdog concluded that the world would need to rely increasingly on future supplies of so-called unconventional oil. The need for more shale oil, tar sands, and coal and gas-to-liquids projects to meet oil demand seemed a given even then. The alarming part was that many of the new resources needed to plug the supply gap were ominously deemed as “unidentified.” Despite only a passing mention of the potential for US oil shales—which at that time were producing only small volumes—that call in the IEA’s flagship long-term outlook proved largely prophetic. Global conventional crude output peaked in 2006 at 70 million b/d and within a decade of the 1998 report, the US shale oil boom had started to take root. Fast forward to 2016 and the IEA’s latest World Energy Outlook again shines a light on the need for more unconventional oil but for different reasons. Back then, the IEA’s bullish economic forecasts saw global liquids demand exceeding 111 million b/d by 2020, a figure which now stands more than 13 million b/d above current forecasts. The concern over a supply shortfall today comes from the collapse of industry spending on new oil projects during the price downturn. With the oil price slump pulling the rug from under upstream spending and investment decisions, the IEA foresees a potential oil supply “gap” of 16 million b/d opening up by 2025.

Peak Oil? Food For Thought -- Platts -- - Some great statistics in this article. The theme: despite the current glut in oil, much of that due to the shale revolution, demand is likely to put stress on supply in the future. It appears, bottom line, IEA has simply moved the "peak oil" concern from 2020 to 2040. Some data points:

  • 1998: IEA forecast peak oil in 2020
  • how far was the IEA off? IEA projected demand at 111 bopd by 202; in fact, current demand is struggling to hit 99 bopd
  • today: IEA says CAPEX slumped in past two years due to price downturn; price downturn "pulled the rug out from under upstream spending and investment decisions": IEA sees a potential oil supply "gap" of 16 million bopd by 2025
  • the gap of 16 million bopd by 2025 threatens new spike in oil prices
  • global tight oil: 4.6 million bopd in 2015; will peak at 7.5 million bopd in 2035
  • IEA predicts decline by 23.7 million bopd over the next decade alone, the IEA forecasts, the equivalent of losing the entire output of Iraq every two years
So, we'll see.

Stock levels whipsaw the propane market. U.S. propane inventories rose by an impressive 55 million barrels (MMbbl) during the spring/summer/fall of 2014, and the mild winter of 2014-15 left propane stocks at well-above-normal levels the following spring. Another impactful inventory build—53 MMbbl—occurred during 2015’s March-to-November stock-building season, leaving propane stocks at a record 104 MMbbl as the freakishly mild winter of 2015-16 started. But propane inventories grew much more slowly through the spring/summer/fall of 2016, due in part to rising exports, and—while stocks are high as this winter begins—even-higher exports and the possibility of real winter weather raise the specter of an especially big drop in stored volumes. In today’s blog we begin a series on the significance of propane inventory levels with a look at why propane stocks rose so much in the 2014 and 2015 stock-building seasons. If you follow the RBN blogosphere closely you know that we pay a lot of attention to natural gas liquids (NGL) markets in general, and the propane market in particular. In Sail Away, we discussed the growing supply of propane, falling prices and increasing export volumes, while we examined the impact weather has on propane markets in A Perfect Storm, and how prices impact propane as a petrochemical feedstock in Beyond Hypothermia. Last year we produced a comprehensive study for the Propane Education and Research Council (PERC) to assess how propane market developments could impact the prospects for disruptions similar to those that occurred during the “Perfect Storm” winter of 2013-14, a summary of which was published in our Drill Down Report: Next To You and an extensive blog series including Can’t Get Next To You. We’ve also covered the impact falling crude prices are having on NGL markets, including propane supply and demand, pricing, infrastructure and petrochemical margins in our Drill Down Report: It's Not Supposed To Be That Way (Part 1) and (Part 2) and a blog series that included Developing NGL Supply/Demand And Price Scenarios.

Trump's Oil Price Dilemma - President-elect Donald Trump has started naming his picks for key administration offices, and it looks like he is beginning to assemble a team to deliver on at least part of his campaign promises of An America First Energy Plan.Trump’s agenda includes lifting restrictions and opening onshore and offshore leasing on federal lands, eliminating the moratorium on coal leasing, and opening shale energy deposits. The President-elect’s key arguments for these policies are creating high-paying jobs, lessening and even eliminating America’s energy dependence, increasing tax revenues, and adding billions of dollars in economic activity.Even if Trump were to deliver on all his pledges - as far as federal law and federal regulations are concerned - the U.S. oil production would be driven by the market—the economics of the supply and demand that determine the prices of oil.At the time of Trump’s inauguration on January 20, OPEC and a dozen non-OPEC nations are set to begin to reduce crude oil supply with the purpose of killing the global glut and lifting oil prices. Ideally, OPEC/NOPEC taking 1.8 million bpd off the market would speed up the drawdown in global stockpiles and prop up prices.In reality, few expect OPEC to stick to its commitments and cut as much as promised.Still, oil prices are now north of US$50, and OPEC (even if some members cheat) may be able to talk prices up a month or so more. American production has been suffering the consequences of the two-year oil price rout, but if oil stays over US$50 for longer, it would entice more U.S. producers to return to work. Oil prices at US$60 or more would lead to even more confidence among U.S. producers—producers who are now ‘leaner and meaner’ and carefully choosing how to invest.Essentially, Trump’s vision that the oil and natural gas industry could lead to the creation of “another 400,000 new jobs per year” depends on a resurgence in U.S. production, based on higher oil prices. And oil and gas companies in a recovering market may really need to add more jobs after having cut thousands of jobs over the past two years.

Who Won The 2016 Oil War? - Heading into the New Year with oil prices above US$50, both OPEC and the U.S. shale industry are claiming victory in the latest oil war battle—and both expect to benefit from higher prices, but there can really only be one winner here. The oil price crash of 2014 has left OPEC scrambling to offset declining revenues while trying to maintain their much-coveted market share. The price bust - the consequence of a shale boom and the pump-at-will policy of that very same OPEC despite the global oil glut – has sent the U.S. shale patch trying to adapt to lower crude prices by slashing investments and costs and scaling back production. After the failed Doha attempt in April at reaching an agreement, OPEC managed last month to reach a deal on cutting collective output to 32.5 million bpd as of January. It even managed to convince 11 non-OPEC producers – including Russia - to join the global supply reduction with another 558,000 bpd in an attempt to prop up crude oil prices. Saudi Arabia – OPEC’s largest single producer and de facto leader – saw its oil revenues shrink in the past two years to the point of leading to fiscal deficits, a concept unthinkable three years ago. Having recorded fiscal surpluses of 11.2 percent, 12 percent, and 5.8 percent, respectively in 2011, 2012, and 2013, Saudi Arabia has now been running fiscal deficits, which stood at 3.4 percent in 2014 and a massive 15.9 percent last year, figures by the International Monetary Fund (IMF) show. This year’s deficit is expected at 13 percent. The Saudis are canceling projects worth billions of dollars, cutting perks for civil servants, and raising fuel prices. Now the OPEC/NON-OPEC deal to cut global supply – if producers stick to promised cuts – would give the Saudis some respite for their heavily-oil-dependent economy. Still, they believe they won the 2014-2016 oil war with U.S. shale. According to Saudi officials quoted by The Wall Street Journal, the sting to U.S. shale output was worth Saudi Arabia’s and OPEC’s tactics to pump as much as they saw fit.

The End Of The Downturn? BP Steps Up Spending As Oil Prices Rise -- With the rebound in oil prices underway and the astronomic costs stemming from the 2010 Deepwater Horizon disaster in the rear view mirror, BP is once again looking to make large investments. In just the past few days, BP announced a rash of deals in different parts of the world, signaling the British oil major’s intent to grow after several years of shrinking. Over the course of three days, BP announced a $2.2 billion expansion of its existing facility in Abu Dhabi, as well as a nearly $1 billion investment in natural gas fields off the coast of Mauritania and Senegal. Bloomberg calculates that BP has spent $3.8 billion on acquisitions in 2016, the highest tally in four years. BP’s CEO Bob Dudley finds himself in an unfamiliar position – the CEO of a growing company. He took the helm shortly after the Deepwater Horizon disaster, which saw nearly a dozen workers killed and nearly 5 million barrels of oil spilled into the Gulf of Mexico. Since then, he has been cutting costs and selling off assets in order to pay an army of lawyers and court fees. Ultimately, years of litigation and fines cost BP more than $50 billion, and it is much smaller company than it used to be. The shrinking of BP occurred at a time when oil prices traded above $100 per barrel. But the crash of oil prices in 2014 meant that even with the costs of the 2010 disaster mostly accounted for, BP had to undertake a new round of cuts. Now, for the first time in more than a half decade, BP will expand investments around the globe. “It’s time for BP to start growing,” Dudley told Bloomberg TV. “We’ve walked through so many difficulties in the U.S. that I think the company now is well-positioned for growth.”

Is Koch Industries Set To Join The Oil Sands Exodus?  - Koch industries Inc. has become the latest in a long line of companies to move away from the Canadian oil sands, stating that it wants to pull out of a project in the Muskwa region. Previously the third largest leaseholder in the sector, Koch Industries cited both economic and regulatory uncertainties as the reason behind its decision. It has been a particularly tough year for Canada’s oil sands, struggling through the oil price crash, witnessing severe disruption due to the Alberta wildfires, and coming under intense scrutiny from environmentalists – most notable Leonardo DiCaprio in his recent climate change documentary “Before The Flood”.Justin Trudeau’s government rubbed salt into the oil sands’ wound earlier this month, announcing a deal to introduce its first federal carbon tax. Critics have claimed that this decision is bound to make the country less attractive to investors, an argument that is gaining traction following Statoil’s recent decision to sell its Kai Kos Dehseh assets and now this latest news from Koch Industries Inc. That being said, the mass exodus from Canada’s oil sands was underway well before Trudeau’s carbon taxation was announced, with Royal Dutch Shell pulling the plug on its Carmon Creek project last year and Exxon Mobil writing down 3.6 billion barrels from the Kearl oil sands project in October. Regardless of the environmental impact, the high capital investment required and the low quality of oil produced makes the oil sands an economically challenging sector. With increasing regulatory uncertainty and pressure from environmental groups, the likelihood of more project sales and cancellations remains high.

Canada’s Oil Exports Are Dead Without U.S. Shale Production - How is it that Canada could be dependent on U.S. oil production? As of 2015, 36 percent of total US crude imports come from Canada. As Canada continues to exports over 3 million barrels per day of oil to the U.S., what direct role does the U.S. have in allowing Canadian oil to flow southward? Canada is a large exporter of low API grade crude referred to as heavy crude oil, most of which comes from Canada’s bituminous Oil Sands deposits. If heavy crude has the consistency of syrup, Canada’s Oil Sands bitumen has the consistency of Kraft peanut butter. Heavy oil and bitumen exports from Canada make up 56% of total conventional oil exports.  To deal with the lack of fluid-flow of Canadian heavy oil and bitumen, some oil production is partially refined to produce synthetic crude, which creates more fluidity and allows oil to more easily flow into pipelines and receives a premium price in the crude oil market. Another alternative is that producers blend heavy oil and bitumen with lighter oil that increases the flow of the blended product. One of the common oil products used to blend with heavy oil and bitumen is condensate.When light oils like condensate are blended with heavier oils, the light oil is referred to as a diluent and the blended material is referred to as dilbit. Light synthetic crude is also used in blending with heavy oil and bitumen and the blended product is referred to as synbit. Dilbit consists of 70% bitumen and 30% diluent and synbit consists of 50% bitumen and 50% synthetic crude oil. As Canada’s heavy oil and bitumen production grew over the years, producers’ appetite for condensate grew disproportionately to the domestic supply of condensates. The U.S. has been filling Canada’s condensate gap with light oil production from US shale formations, specifically in the Eagle Ford. Without U.S. imports of condensate, 1.2 million barrels of heavy oil and bitumen would be land locked in Canada and unable be moved through pipelines due to its viscosity.

India data: Nov crude oil imports rise 12.7% on year - India's crude oil imports in November rose 12.7% year on year to 18.76 million mt, or an average 4.58 million b/d, latest provisional data from the country's Petroleum Planning and Analysis Cell showed. The imports in November were 3.3% higher than October. Domestic refiners have been trying to run refineries at over 100% capacity as local demand soar. Crude imports are expected to rise in financial year 2016-17 (April-March) as the newly commissioned 15 million mt/year Paradip refinery on the east coast ramped up to capacity, and the west coast Kochi refinery completed an expansion to 15.5 million mt/year in May, from 9.5 million mt/year. LPG imports in November rose 38.2% year on year to 1.01 million mt and also 0.5% higher than October. Naphtha imports in November rose 26.6% year on year to 200,000 mt, but fell 7.0% from October.

Russia, Japan deepen ties with agreements on upstream, LNG cooperation - Russian and Japanese companies Friday signed a number of memoranda and agreements on cooperation in hydrocarbons development during the first visit to Japan in 11 years by a Russian president. The agreements included joint exploration offshore Sakhalin, technological and financial collaboration in oil, gas and LNG, and established a mutual fund for such projects. The documents -- 23 of them energy-related -- signed in the presence of President Vladimir Putin and Japan's Prime Minister Shinzo Abe, include three Japanese companies joining Rosneft in hydrocarbons exploration offshore Sakhalin, expanding LNG partnership with Gazprom and Novatek, opening a credit line for Yamal LNG plant and setting up a mutual fund, among other agreements. With a total of more than 80 projects outlined and signed off, the collaboration entered a level "unprecedented in the history of Russia-Japan relations," Abe said in a briefing following the signing ceremony in Tokyo, adding the countries can have "a win-win economic partnership." With Moscow's turn to Asia in search of investors in light of western sanctions targeting the country's energy sector among other areas since 2014, Japan has been conspicuously absent from new deals, while companies from China and India signed numerous agreements to enter the Russian upstream. Ties with Japan have been complicated by a long-lasting territorial dispute over the four Kuril Islands, as well as by Japan joining sanctions, even if in the form of milder restrictions not preventing its companies from taking an active role in oil exploration and production in Russia. The sanctions, as well as volatile commodity prices and resulting currency fluctuations, have led to a 28% year-on-year drop in trade turnover this year, Putin said, expressing the will to turn the situation around, including through greater energy cooperation.

A New World Order Is Emerging In Natural Gas - Brazil’s Petrobras and partners produced their billionth barrel of oil from presalt fields this month. Underlining one of the biggest shifts to happen this decade in global crude output.And news yesterday suggests we may be about to see another mega-shift in energy. In the worldwide natural gas business.That was a deal struck by petro-major BP. Which is spending nearly a billion dollars to get into projects in an unexpected part of the world: western Africa.BP said it has reached an agreement to buy stakes in development projects in Senegal and Mauritania. Which the major is acquiring from junior developer Kosmos Energy, in exchange for $162 million cash — and subsequent payment of $754 million in appraisal and development expenses.That’s a big outlay for BP. But the prize on the western African licenses is commensurate — with Kosmos’ recently-discovered Tortue field in Mauritania holding a currently-estimated 15 trillion cubic feet of natural gas.In fact, BP said it believes the complete acreage acquired under this deal could hold up to 50 trillion cubic feet. And those big numbers have the major eying the region as the world’s newest center for natural gas development.BP’s chief executive officer Bob Dudley summed up these ambitions succinctly. Saying the company is looking to “create a new LNG hub in Africa.” One which he noted will be supported by low production costs and “advantaged access” to global gas markets. Indeed, as the map below shows, Mauritania is well-located for shipping LNG to key markets in South America and Europe. Markets that are distant from much of the Asia-focused LNG production building taking place in countries like Papua New Guinea and Australia.

China LNG Imports Hit Record as Memories of Freeze Linger - China’s liquefied natural gas imports surged to a record last month as the world’s third-biggest buyer boosted shipments to offset winter demand and avert shortages that struck cities including Beijing last year. Inbound LNG shipments jumped 46.6 percent to 2.66 million tons in November from a year earlier, according to General Administration of Customs data released Wednesday. Natural gas imports via pipelines increased 7.3 percent to 1.96 million tons in the same period. The rush to shore up supplies comes after Beijing last winter ordered heating to be cut to a low of 14 degrees Celsius on a supply shortage China National Petroleum Corp. said was caused by weather that delayed tanker unloadings. The National Development and Reform Commission, the country’s price regulator and economic planner, in October urged major natural gas suppliers including CNPC to implement plans to increase supply. “LNG suppliers are seeking to avoid the gas shortages seen last winter,” Liu Guangbin, analyst with Shandong-based SCI International, said by phone. “We expect imports to remain high through out the winter months.” China imports are set to hit another record this month, according to a Dec. 21 note from BMI Research. Demand from the country will keep the LNG market tight in the first quarter of next year before new supplies and warmer weather bring prices down in the second quarter, according to the analysts. Beijing’s monthly gas consumption record in winter is six to eight times the minimum monthly usage in summer and the city’s daily consumption during winter increases by 3 million to 3.5 million cubic meters when the temperature falls by 1 degree Celsius, according to CNPC.

Russian 2016 gas output nearly flat on year at 637 Bcm: minister - Russia's gas production, including associated petroleum gas, is estimated at 637 Bcm in 2016, which would represent a marginal increase of 0.2% year on year, energy minister Alexander Novak said late Tuesday. At the same time, gas exports from the country are estimated to have risen around 5% at 202.3 Bcm, Novak said. The figure includes LNG deliveries. The increase in exports was mainly supported by purchases of pipeline gas by European clients earlier this year. Total Russian gas supplies to Western Europe and Turkey in the first nine months of the year rose 8.8% to 103.25 Bcm, on the back of strong Russian flows in the first quarter of 2016, when Russian oil-indexed contracts were relatively cheap following the oil price crash. Coal output is expected to rise 3.2% year on year to 385.4 million mt, with exports increasing 5.8% to 165 million mt, Novak said.

Iran, Russia hope to restart 150,000 b/d oil swaps: report - Iran hopes to restart crude oil swaps of 150,000 b/d with Russian oil companies, oil minister Bijan Zanganeh said Saturday. "During the trip by the Russian energy minister to Tehran, we didn't discuss it, but Lukoil is following this plan up," Zanganeh was quoted as saying by the state IRNA news agency Saturday. Oil swaps between Iran and the Caspian states, which include Russia, stopped in 2010, when Iran's then oil minister Masoumi Mirkazemi described the terms of the swaps an "unfair deal" and strengthened international sanctions forced the oil companies involved to pull out. "Russia's Gasprom is also taking some measures to cooperate with Iran for gas swap," Zanganeh was quoted as saying Saturday. As part of an oil-for-goods deal, Iran is ready to sign an agreement to supply 100,000 b/d of crude to Russia, Zanganeh said earlier this month, in the latest sign of the two nations' strengthening mutual ties in the face of Western sanctions. Iran has also signed an agreement with Russia's Gazprom Neft for development studies on the Changouleh and Cheshmeh-Kosh onshore oil fields. Along with a deal for development studies with Lukoil, Zarubejneft and Tatneft, Russian oil companies have become the most active potential investors in Iran's oil and gas sector.

After Agreeing To Cut, Is OPEC’s No.2 Going Rogue?  - Just a week after it agreed to OPEC’s output-cut deal, Iraq is showing signs of going rogue, and instead of cutting crude exports—a logical byproduct of lowered production—it plans to increase oil sales in January. According to an oil-loading schedule dated December 8 and viewed by The Wall Street Journal, Iraq’s state-owned oil marketing company SOMO plans to increase shipment of its Basra export grades to 3.53 million barrels per day in January, which would be a 7-percent increase from October volumes—an increase that is no small matter, as Basra grades sales account for around 85 percent of Iraqi crude exports.While production and exports do not necessarily rise and fall at the same time due to storage and domestic consumption, Iraq’s consumption is only 15 percent of its oil output and relatively stable. In addition, the country’s total maximum storage capacity is just over 10 million barrels, a capacity insufficient to fully account for higher Basra exports.According to the documents the WSJ has seen, Iraq’s planned sales to Indian and Chinese refiners in January would be 390,000 bpd higher than its December deliveries.In contrast with Iraq, some other Middle Eastern producers are already adjusting their January exports to comply with the cuts. Abu Dhabi National Oil Company (ADNOC), for example, has said that it would reduce crude oil supplies next month in line with OPEC’s decision. In OPEC’s November 30 deal, Iraq committed to cut production by 210,000 bpd effective January, from a reference production level of 4.561 million bpd. Iraq was one of the last holdouts of the OPEC deal in the months leading to the decision to curtail production: first disputing the sources that OPEC uses to estimate members’ output, then demanding exemption on the grounds that it needs oil revenues to fight Islamic State.

We Need to Accept That Oil Is a Dying Industry - Motherboard has an article from Nafeez Ahmed on the dim long term prospects for the oil industry - We Need to Accept That Oil Is a Dying Industry. The future is not good for oil, no matter which way you look at it. A new OPEC deal designed to return the global oil industry to profitability will fail to prevent its ongoing march toward trillion dollar debt defaults, according to a new report published by a Washington group of senior global banking executives. But the report also warns that the rise of renewable energy and climate policy agreements will rapidly make oil obsolete, whatever OPEC does in efforts to prolong its market share. ...  As oil gets more expensive again, there is more incentive to use alternative, cheaper forms of energy—like solar photovoltaics, which can now generate more energy than oil for every unit of energy invested. ...  A report published in October by the Group of 30 (G30), a Washington DC-based financial advisory group run by executives of the world’s biggest banks, warns investors that the entire global oil industry has expanded on the basis of an unsustainable debt bubble. ...  The industry’s long-term debts now total over $2 trillion, the report concludes, half of which “will never be repaid because the issuing firms comprehend neither how dramatically their industry has changed nor how these changes threaten to soon engulf them.

Hedgies Have Never Been More Bullish On Oil As Shorts Crushed For 5th Time -- Despite extending gains overnight on the heels of Libya's planned production boost stalling, oil prices are sinking back into the red this morning as yet another major short-squeeze appears to have run its course for now. As Bloomberg reports, oil extended gains (over $53 a barrel for Feb 2017 WTI) overnight as a planned production boost from Libya stalled amid continuing tension in the OPEC member that’s exempt from output cuts. Libyan oil-facility guards backtracked on an agreement to allow supply to flow from the El Feel and Sharara fields, two of the country’s biggest, according to an engineer that operates El Feel. A group of Libyan guards prevented the flow of oil by pipeline, Khaled Hadloul, an engineer at Mellitah Oil & Gas, which operates El Feel, said by phone. The Repsol SA-operated Sharara field is also yet to restart because both fields feed into the same pipeline network, Hadloul said. But prices are sliding back into the red this morning as the dollar gathers steam once again...

Oil prices rise on expected decline in U.S. crude stocks | Reuters: Oil prices rose on Tuesday on forecasts of a steep draw in U.S. crude stocks that could indicate global oversupply is starting to shrink. Benchmark Brent crude oil futures were trading up 56 cents, or 1 percent, at $55.48 a barrel at 1329 GMT. U.S. West Texas Intermediate (WTI) crude futures CLc1 were up 29 cents at $52.41 a barrel, not far off a one-week high of $52.52. Analysts polled by Reuters expected weekly U.S. crude oil inventories to show a draw of 2.4 million barrels in the week to Dec. 16. Stocks fell more than expected in data published last week, lifting expectations for another large drop in this week's data. A deal to cut global supply among OPEC and non-OPEC producers struck this month has boosted oil prices to 17-month highs. The gains have set up 2016 to be the first year since 2012 in which Brent has risen. Russian Energy Minister Alexander Novak told Russian newspaper Vedomosti that Russia may extend a production cut beyond the first half of 2017 if needed. "We are in a wait-and-see mood after OPEC newsflow caused much volatility," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg. "The new balance seems to be between $53 and $57 a barrel on Brent for the next weeks."

Oil Holds Steady On Holiday Trading  --  Oil prices were up slightly to start the week, but trading has been relatively light due to the holiday season. With the OPEC and non-OPEC negotiations in the rear-view mirror, there are fewer headline catalysts for oil prices, softening volatility a bit. The U.S. added more rigs to the shale patch last week, further evidence that the industry is getting back to work. Weekly production figures also continue to climb. Meanwhile a handful of terrorist attacks were seen around the world on Monday – the assassination of the Russian ambassador to Turkey and the running down of about a dozen people in Berlin by a truck. Oil markets, however, did not seem rattled by the horrific news.  On Monday an oil tanker docked at the Es Sider port, Libya’s largest crude oil export terminal, to load the first cargo following two years offline. The port reopened in September but has been under repair since then. Before the outage, Es Sider exported 350,000 bpd of supply. Other ports have come online in recent months, allowing Libya to double production to 600,000 bpd. The country has a target of ramping up to 900,000 bpd next year, and Es Sider will be crucial to the achievement of that target.   While the Obama administration has already withdrawn lease sales for the Chukchi and Beaufort Seas as part of the Interior Department’s Five Year Drilling Plan for 2017-2022, President Obama is reportedly considering a bolder move to block Arctic drilling more or less permanently. Bloomberg reports that the President could use a 1953 law that would allow him to remove U.S. waters from future lease sales. The law has been used to conserve sensitive marine areas such as coral reefs, but environmental groups have been pressing him to invoke the law to make it more difficult for future administrations to open up the Arctic for drilling. There is not much of a legal precedent on this issue, so the effect would be uncertain. On the one hand, the move could make it difficult for the Trump administration to reverse, delaying Arctic drilling for years. On the other hand, it could backfire: a Republican-led Congress could vote to repeal the law altogether, removing the ability of future presidents to conserve marine territory. Bloomberg says a decision could come as soon as Tuesday.

Oil Jumps After Bigger Than Expected Inventory Draw - Expectations were for more inventory draws in total crude levels (and another build in Cushing), but API reported a considerably larger than expected 4.15mm draw in overall crude inventories. Both Gasoline and Distillates saw notable draws and Cushing built for the 4th week in a row (but less than expected). WTI crude kneejerked higher on the news... API

  • Crude -4.15mm (-2.5mm exp)
  • Cushing +690k (+1.9mm exp)
  • Gasoline -1.96mm
  • Distillates -1.55mm

4th weekly build at Cushing but 5th weekly draw in overall crude inventories...

WTI Sinks On Libya Production Fears (Again) - The overnight rally in crude following API's unexpectedly large crude inventory drawdown has been erased as more headlines from Libya send WTI lower. Bloomberg reports that output will be 900k b/d beginning next yr, NOC Chairman Mustafa Sanalla says in Cairo, and is expected to reach 1.2mm barrels per day by the end of 2017. And the reaction is fear.. As Bloomberg Briefs details, Libya reopened two of its biggest oil fields and is set to load its first crude cargo in two years from its largest export terminal as the war-torn country pursues plans to almost double output in 2017. Pipelines connecting the Sharara oil field to Zawiya refinery, and the El-Feel deposit to the Mellitah energy complex, reopened at the town of Rayayina, according to a statement by the state-run National Oil Corp. The reopening of the fields will help boost the country’s oil production by 175,000 barrels a day within one month and 270,000 barrels a day within three months, it said. Also, a tanker is set to load the first export from Es Sider oil port since the terminal was closed in 2014. “I welcome the statement by the Rayayina Patrols Company of the Petroleum Facilities Guard, Western Branch, announcing lifting of the blockade on all the pipelines,” NOC Chairman Mustafa Sanalla said in the statement posted yesterday on the company’s website. “There were no payoffs and no backroom deals. For the first time in nearly three years, all our oil can flow freely. I hope this marks the end of the use of blockade tactics in our country.” Libya’s comeback will put more pressure on OPEC and other major producers that agreed over the past three weeks to cut their output to rein in an oversupply and shore up prices. The North African nation, which was exempted from OPEC’s planned cuts because of its internal strife, is currently producing 600,000 barrels a day, less than half of the 1.6 million it pumped before a 2011 uprising.

Oil Declines as U.S. Crude Inventories Unexpectedly Increase - Oil declined after a government report showed U.S. crude stockpiles increased for the first time in five weeks.Crude stockpiles rose 2.26 million barrels last week, according to the Energy Information Administration. A 2.5 million decrease was forecast by analysts surveyed by Bloomberg. More than half of the gain was on the West Coast, where the distribution system is isolated from the rest of the country. The industry-funded American Petroleum Institute reported Tuesday that crude supplies declined 4.15 million. Oil has traded near $50 a barrel since the Organization of Petroleum Exporting Countries agreed Nov. 30 to cut output for the first time in eight years. Non-OPEC producers including Russia will also trim supply. "The number was clearly a surprise after the big draw last night," "Inventories have fallen substantially in recent weeks, and I bet there will be another big draw next week. Refineries are running pretty hard right now." West Texas Intermediate for February delivery fell 81 cents, or 1.5 percent, to settle at $52.49 a barrel on the New York Mercantile Exchange. The January contract expired Tuesday. Total volume traded was about 24 percent below the 100-day average. Brent for February settlement slipped 89 cents to $54.46 on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $1.97 premium to WTI. Nationwide inventories increased to 485.4 million in the week ended Dec. 16, and are at the highest seasonal level since the EIA began tracking weekly data in 1982. Supplies on the West Coast, known as PADD 5, increased by 1.28 million barrels to 51.8 million. Stockpiles in the Midwest, or PADD 2, advanced by 1.02 million barrels to 149.3 million.

WTI Tumbles To $52 Handle After Surprise Crude Inventory Build - Following API's reported across the board inventory draws, DOE refuted this and saw a surprise notable 2.256mm build (most in 5 weeks). Cushing inventories fell very modestly (biggest draw in 2 months) and Gasoline and Distillates also saw further inventiry dras. Production slid very modestly. WTI is being sold on this print, testing back to a $52 handle. DOE:

  • Crude +2.256mm (-2.5mm exp)
  • Cushing -245k (+700k exp)
  • Gasoline -1.309mm (+1.375mm exp)
  • Distillates -2.42mm (-1.625mm exp)

First overall build in 5 weeks but biggest Cushing draw in 2 months...As Reuters notes also, US Crude stocks have not exhibited normal drawdown before the end of the year. Stocks now +171 million bbl (+54%) over 10-yr average

Oil prices fall on U.S. inventory build; Libya output ramps up | Reuters: Oil futures fell on Wednesday after Libya said it expects to boost production over the next few months and a report showing a surprise build in U.S. crude inventories last week. Brent futures for February delivery fell 89 cents, or 1.6 percent, to settle at $54.46 a barrel, while U.S. West Texas Intermediate crude for February lost 81 cents, or 1.5 percent, to $52.49 per barrel. Even though WTI futures for February were down, the U.S. front-month gained about 0.5 percent due to the contract roll from lower-priced January to the higher-priced February on Tuesday and closed at its highest level in over a week. "The big news of the day is that it looks like we're going to get more crude out of Libya," said James Williams, president of energy consultant WTRG Economics in Arkansas. Libya's National Oil Corporation (NOC) confirmed on Tuesday that pipelines leading from Sharara and El Feel fields had reopened, saying it hoped to add 270,000 barrels per day (bpd) to national production over the next three months. "The big question is what will OPEC do about the Libyan increase. With Libya excluded from the production cut agreement, I anticipate the Saudis will unilaterally balance the Libyan crude," WTRG's Williams said. On Nov. 30, OPEC agreed to cut output by 1.2 million bpd for six months from Jan. 1, with top exporter Saudi Arabia cutting around 486,000 bpd. On Dec. 10, non-OPEC countries including Russia agreed to reduce output by 558,000 bpd, the largest-ever contribution by non-OPEC producers.In the United States, U.S. crude stocks rose by 2.3 million barrels in the week to Dec. 16 even as refineries hiked output, while gasoline stocks and distillate inventories fell, the U.S. Energy Information Administration said. That was the first weekly build in crude stockpiles in five weeks. Analysts were expecting U.S. crude inventories to fall by 2.5 million barrels, according to a Reuters poll.

OilPrice Intelligence Report: Libyan Supply Fears Dampen Oil Price Optimism: Oil prices remained mostly stable this week on light trading and few major price-altering headlines. However, some weakness in the rally emerged as fears over restored Libyan supply weighed on prices. The influence of the OPEC production cut appears to have all but left the markets now, with trading slowing down into the new year.Libya’s oil output is set to surge in the next few months as long shuttered pipelines restart operations. The pipelines can carry 270,000 bpd, which is equivalent to almost half of the country’s current output. The restart of operations could bring lost output online within the next three months, the National Oil Company says. Great news for Libya, but bad news for OPEC. Libya is exempt from any cuts as part of the November agreement, and if Libya succeeds in adding back 270,000 bpd, it would wipe out roughly a quarter of the OPEC reductions. Additionally, that comes on top of nearly 300,000 bpd the country has added since this past summer, taking output up to 600,000 bpd.  Canadian Prime Minister Justin Trudeau said that he talked with President-elect Donald Trump, who expressed his support for reviving the Keystone XL Pipeline. Trudeau supports the pipeline. At the same time, Trudeau said that Canada could take advantage of the vacuum left by the U.S. backing off support for renewable energy, which would allow Canada to attract more green tech investment.  U.S. federal regulators issued a crucial permit for a new LNG export terminal along the U.S. Gulf Coast. The Golden Pass LNG facility was originally an import terminal but has undergone a $10 billion retrofit to turn it around for export. The project is owned by Qatar Petroleum (70 percent), along with smaller stakes held by ExxonMobil and ConocoPhillips. The facility will be able to export 2 billion cubic feet of gas per day.  Anadarko Petroleum announced its decision to sell off natural gas fields in Pennsylvania’s Marcellus Shale for $1.2 billion. The company will use the proceeds and smaller footprint to expand in the booming oil fields of the Permian Basin in Texas and the DJ Basin in Colorado. The move is a sign of the times: more and more shale companies are pulling capital out of less competitive areas and concentrating funds in a few prized shale basins.

Oil rig count rises for 8th straight week, Baker Hughes says - -The US rig count jumped by 13 to 523 this week, according to oilfield-services company Baker Hughes. The oil rig count is about 13 rigs away from recovering all the losses recorded this year. The addition of rigs in recent weeks, in response to more stable oil prices, has already proven to be a streak not seen since prices crashed two years ago. Gas rigs increased by three to 129, and miscellaneous rigs were unchanged at one, taking the total up by 16 to 653. Last week, the oil rig count jumped by 12. West Texas Intermediate crude oil futures traded lower but little changed on Friday, down 0.2% to $52.84 per barrel on a quiet day for global markets.

The U.S. Oil Rig Count Hits Its Highest Level Since January (graphs) Baker Hughes has reported yet another increase in the U.S. oil and gas rig count this week, with 16 more rigs coming online. The previous two weeks have seen increases of 13 and 27 respectively, bringing the total number of active rigs to 653. The U.S. is now just 47 rigs below the count this time last year, evidencing the recovery that is being seen in both U.S. oil and gas. The most recent climb has largely been fueled by the OPEC production cut agreement, and while not a single barrel has yet been cut by the cartel, the promise to reduce supply has clearly been enough for the U.S. shale patch to begin bringing rigs back online. The oil rig count continues to follow the lagged oil price perfectly, suggesting that we are far from seeing an end to the recent climb in oil rigs. Oil rigs once again led the way this week, with an increase of 13 compared to just 3 gas rigs. While the oil rig count has seen a remarkably strong rebound since the OPEC agreement, it remains far below the highs of 2014. Oil prices continued to trade slightly lower following the rig count release, with WTI trading at $52.84 and Brent trading at $54.99 at the time of writing.

US Oil Rig Count Surges To Highest Since First Week Of January --Following a dramatic surge in US oil rig counts the last two weeks, Baker Hughes reports oil rigs rose once again (the 28th weekly rise of the last 30) by 13 to 523 - the highest since the first week of January 2016..  The oil rig count is tracking the lagged oil price perfectly still... US crude production looks set to continue to rise - tracking the lagged rig count rise - much to the chagrin of the Saudis... There was no reaction in crude futures prices at all.. (graphs)

Russia says trust needed for global oil output deal to be success | Reuters: Trust between oil producing countries is important if a global deal to curtail output is to succeed, Russian Energy Minister Alexander Novak said on Wednesday. Earlier this month, OPEC and non-OPEC oil producers led by Russia signed a deal to cut oil output by almost 1.8 million barrels per day in order to prop up weak prices. OPEC countries have had a mixed history when it comes to complying with output targets, often reneging on their pledges. But Novak said he was sanguine about the latest deal. "We have no grounds to believe that someone will deviate (from the deal)," Novak told the Rossiya-24 TV channel. "It is important to keep trust between countries, If we fail, we will hardly be able to reach such deals in the future. The countries have to stick to these agreements," he said. Novak also said Russia's output of hard-to-recover oil would increase by 20 percent this year compared to 2015.

Feature: Cheating on OPEC-led output cuts difficult to track, buying producers time - The five-country committee to monitor the OPEC-led global oil production cut meets in early January to hash out the politically sensitive particulars of how to adjudicate and enforce compliance. But the reality that the committee -- and the oil market at large -- faces is that any cheating on quotas is unlikely to become fully apparent until several months into the six-month deal, which begins January 1. OPEC has agreed to use the six independent sources its analysts have adopted to track production in the organization's monthly oil market reports.Those secondary sources -- which include S&P Global Platts -- compile monthly estimates of each country's output for the preceding month. So, production in January will be reported by the secondary sources in early February. The market will clearly be watching those February reports for the first signs of noncompliance, but it could take a few months before more definitive trends emerge, since the quotas are meant to be an average of production over the six months of the deal. Despite this and OPEC's historical "tendency to cheat," as former Saudi oil minister Ali al-Naimi recently put it, the market has responded bullishly to the deal, sending prices up some 18% since November 29, the day before OPEC met in Vienna and finalized its 1.2 million b/d in cuts. Eleven non-OPEC countries, led by Russia, followed up with 558,000 b/d in committed cuts on December 10. "The market is probably expecting some kind of cheating but for now the cartel has once again bought themselves some time, which funds have bought aggressively into," said Ole Hansen, an analyst with Saxo Bank. The non-OPEC commitments will be even harder to verify.

Russia suggests to hold 1st OPEC/non-OPEC monitoring group meeting around Jan 20 -  Russia suggested to the five-country committee monitoring the OPEC-led global oil production cut to meet around January 20 to look into the participants' compliance but no final decision on the date has been taken so far, Russia's energy minister Alexander Novak said. "The dates have not been agreed on. The work is under way. We believe we have to meet around the 20th," Novak said late Tuesday. Following the landmark six-month agreement by OPEC countries to cut their crude output by 1.2 million b/d from October levels, 11 non-OPEC countries led by Russia agreed to join the initiative by cutting their combined output by 558,000 b/d. Of this, Russia's commitment is 300,000 b/d cut. There is still a widespread skepticism in the market whether the countries will be able to fully deliver on their commitments. The monitoring committee's discussion is to focus on the mechanism of monitoring each country's production cuts and enforcing the agreement, although what the committee can and will do in the case of non-compliance remains an open question. Chaired by Kuwait, the committee also includes Venezuela and Algeria from OPEC, as well as non-OPEC Russia and Oman. Regarding OPEC, the group has agreed to use the six independent sources its analysts have adopted to track production in the organization's monthly oil market reports. Those secondary sources -- which include S&P Global Platts-- compile monthly estimates of each country's output for the preceding month. So, production in January will be reported by the secondary sources in early February.

Oil, Chaos And Geopolitics In The New Year - This year, oil prices have sunk and risen at the whim of speculation regarding an agreement to reduce production by OPEC, which controls roughly 40 percent of the world’s oil exports.  Negotiations on the terms of the deal occurred against the background of major geopolitical conflicts, with governments and non-state actors struggling to gain recognition and/or notoriety to further their own agenda. These are their stories, and this is where you can look for geopolitical chaos and volatility in the oil patch in the New Year:

  • Libya: The second half of 2016 has been a comeback period for Libya – a country that has begun to revive its oil sector after four years of civil war and terrorist insurgencies in the aftermath of the fall of dictator Muammar Gaddafi. The government’s latest forecasts put national production at 900,000 barrels per day over the next couple of months – a more than 30 percent increase on the 600,000-barrel rate the nation is currently pumping.
  • Iraq: Despite Iraq’s insistence on being exempted from any OPEC freeze deal due to the high costs of fighting the Islamic State - particularly in the oil-rich areas of Fallujah, Mosul and beyond – the terms of the agreement have the country cutting output by nearly 20 percent to achieve the bloc’s 32.5 million-barrel-per-day limit.
  • Kurdistan Regional Government: An additional challenge to Iraq’s financial situation is the Kurdistan Regional Government’s (KRG) reluctance in implementing oil production limits agreed upon by Baghdad at the November 30th meeting in Vienna. To make good on the OPEC deal, Iraq must reduce crude output by 210,000 barrels a day from October levels. Kurdistan controls about 600,000 barrels a day of oil production, or approximately 12 percent of Iraq’s total output.
  • Iran: Tehran walked out of the OPEC deal a star. Members of the national parliament declared Iran’s 3.797 million-barrel cap a diplomatic victory, even if the country did not manage to secure the exemption it had desired. As Saudi Arabia prepares to carry out the bulk of the cutting, as outlined by the agreement, Iran can begin to win back market share that the KSA had stolen during Tehran’s period of economic isolation. Saudi Arabia’s retreat – coming on the heels of the Kingdom’s over-eager production increases – will be a boon to Iran’s new rise as an oil supplier in 2017.
  • Nigeria: The Niger Delta Avengers (NDA) have wreaked havoc on the country’s oil profits, causing an estimated $4.8 billion in lost revenues. Tacked on to the cost of hunting down the militiamen in the Niger Delta, 2016 could not have been a worse year for Nigeria’s budgetary woes.New arrests and oil finds – as well as an exemption from OPEC’s freeze deal – leave Nigeria in the position to fight back in 2017.
  • Venezuela: Venezuela’s economy has tanked so badly from fallen oil revenues this year that it opened its borders with neighbor Colombia several times to allow its citizens to buy medical and day-to-day supplies from the rival country.  An economic crisis that began before the start of the oil price crash in 2014 has only been furthered by two years of an under-$50 barrel. Brewing social unrest leaves Venezuela’s political future uncertain, even as oil prices recover in the coming years.
  • Brazil:  Petrobras, Brazil’s national oil and gas company, has been on a liquidation spree in 2017 with a plan to eliminate $4 billion in assets by the end of December and $15.1 billion by 2018. Last week, Petrobras announced that it had entered into a 10-year, $5 billion financing deal with China Development Bank Corp and will be selling over a period of 10 years a total volume of 100,000 bpd to China National United Oil Corporation, China Zhenhua Oil Co. Ltd, and Chemchina Petrochemical Co. Ltd, Still, the deal represents a tiny portion of the funds the company needs to truly get back in the oil game – funds that it can only generate through a solid price recovery.

Saudis Forecast $51 Oil In 2017 Rising To $65 By 2019; Will Spend 20% Of Total Budget On Military - After suffering two record budgets shortfalls in 2015 and 2016 as a result of plunging oil prices, and which nearly brought both Saudi Arabia's economy and banking sector to a standstill, not to mention billions in unpaid state worker wages at least until generous foreign investors funded the Kingdom's imminent cash needs with its first, and massive, bond sale ever, today Saudi Arabia released it budget outlook for the next year. And while the Saudis believe the country's budget deficit will fall modestly next year even with an increase in spending, it is still set to be a painful 8% of GDP suggesting the Saudi cash burn will continue even with some generous oil price assumptions. The budget deficit for 2017 is expected decline 33% to 198 billion riyals ($237 billion), or 7.7% of GDP, from 297 billion riyals or 11.5% of GDP in 2016 year and 362 billion riyals in 2015, the Finance Ministry said in a statement on its website on Thursday. In 2016, the finance ministry said its spending of 825 billion riyals ($220 billion) was under the budgeted 840 billion, and the 2016 budget deficit came to 297 billion, below the 362 billion in 2015.

Saudi 2017 budget projects 46% rise in oil revenues, no details on fuel price hikes - Saudi Arabia expects to earn 46% more from oil revenues in 2017 compared to this year, with expectations of rising global demand combining with the OPEC-led global production cut to push prices higher. In its annual budget unveiled Thursday, the kingdom said its oil revenues were projected to hit Riyals 480 billion ($128 billion) next year, up from Riyals 328 billion ($88 billion). The budget did not reveal any details about Saudi Arabia's oil production plans or targets, nor does it say what price it expects to receive for its oil, though it cited the International Monetary Fund's estimate of 2017 oil prices at $50.60/b. Oil prices in 2016 averaged $43/b, the budget document said. Overall revenues for 2017, including non-oil revenues, are expected to rise 31% from 2016 levels to Riyals 692 billion. With the budget laying out an expenditure plan for Riyals 890 billion ($237 billion), an 8% increase over this year, this means the kingdom will be facing a deficit of 198 billion riyals ($53 billion), down 33% from this year, as Saudi Arabia has had to tap into its reserves to withstand the low oil price environment of the last two years. "The 2017 budget was prepared in light of developments in the local and global economy, including the estimated price of oil," the budget document states, attributing the increases in projected revenues and expenditures to energy pricing reforms. "As the kingdom's economy is strongly connected to oil, the decrease in oil prices over the past two years has led to a significant deficit in the government's budget and has impacted the kingdom's credit rating." Total national debt for 2016 was about Riyals 316.5 billion ($84 billion), or 12.3% of projected GDP.

Saudis Brace for More Economic Pain - The cost of living in Saudi Arabia rose over the past year as the kingdom contends with lower oil prices and slashes to subsidies. Now Saudis are girding themselves for additional cuts that risk provoking public ire.  Subsidies have long insulated Saudi citizens from economic uncertainty, but already reduced government assistance to pay for fuel, electricity and water and the prospect of less aid down the road have raised concerns among jittery Saudis.  Saudis have for decades enjoyed a comfortable lifestyle supported by the kingdom’s oil wealth. They are closely watching the government’s budget announcement, which is expected Thursday, to see if it includes further austerity measures that could crimp their means. The country is still a long way from achieving its target of substantially increasing non-oil income to balance its budget.  King Salman acknowledged Saudi concerns when he told the consultative Shura Council last week that some measures taken by the government “may be painful in the short run but ultimately aim to protect the economy of your country from worse problems.” Saudi Arabia’s fiscal deficit ballooned to a record deficit of $98 billion, or about 16% of gross domestic product, in 2015 due to a sharp drop in the price of oil. Oil sales account for more than two-thirds of government revenue. The budget gap is expected by the International Monetary Fund to narrow this year after the government reduced subsidies, raised fees, introduced new taxes and slashed many government salaries.

Saudis dropped British-made cluster bombs in Yemen, Fallon tells Commons -- The defence secretary was forced to tell the Commons that British-made cluster bombs had been dropped by Saudi Arabia in Yemen, prompting MPs and charities to say that the UK should stop supporting the Gulf state’s military action. Sir Michael Fallon said that a “limited number” of the controversial BL755 bombs had been used by Saudi Arabia, shortly after the Gulf state formally admitted it had deployed the weapons in the Yemeni conflict. Although an international treaty bans the use of cluster bombs, Fallon defended Britain’s support for Saudi Arabia and insisted there was no breach of international law because they were used against “legitimate military targets”. The UK is one of 120 countries to have signed the 2008 Ottawa convention on cluster munitions, banning their use or assistance with their use. Saudi Arabia is not a signatory to the treaty. The munitions pose an indiscriminate risk to civilians because they contain dozens of bomblets that can explode long after they are dropped. Fallon made the statement to the House of Commons after the Guardian revealed he had known for around a month about a government analysis pointing to Saudi having used the UK-made bombs. Shortly before he spoke, Saudi Arabia made a statement overturning previous denials that it had used the weapons and declaring it would not deploy them again. The Scottish National party, which has led calls for the UK to come clean about the use of cluster bombs, said it was a “shameful stain on the UK’s foreign policy and its relationship with Saudi Arabia, as well as a failure by this government to uphold its legal treaty obligations”.

Aramco IPO Could Still Be in U.S. as Kingdom Plays Down Rift - The kingdom is looking at markets from Hong Kong to New York as possible international venues of what could be one of the biggest share sales in history, al-Jubeir told a news conference with U.S. Secretary of State John Kerry in Riyadh on Sunday. The decision is still a “work in progress,” he said. Saudi authorities plan to sell less than 5 percent in Saudi Arabian Oil Co. by 2018 as part of a plan by Deputy Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and help reduce the economy’s reliance on hydrocarbons. In addition to the Sept. 11 law, tensions have arisen over a U.S. decision to block an arms sale to Saudi Arabia because of concerns about rising civilian casualties in the war in Yemen. The kingdom is backing forces of an internationally recognized government against pro-Iranian rebels. Al-Jubeir dismissed speculation that Saudi Arabia would reduce its U.S. investments. “Saudi Arabia has tremendous investments in the United States and we review those investments on a regular basis,” he said. “There are issues associated with risk, but our objective is to increase those investments, we will not decrease them.”

Syrian "Rebels" Attack, Burn Aleppo Evacuation Buses --While the UN condemns Syrian and Russian atrocities in the battle over East Aleppo, which as noted previously was a key victory for the Assad regime in the past week and likely to sway the balance in the ongoing war between regime forces and US-coalition armed rebels, little attention has been paid to the subversive tactics employed by such "moderate rebels" as the al Qaeda linked al-Nusra front. That may change after several buses en route to evacuate the sick and injured from two government-held villages in Syria's Idlib province were attacked and burned by rebels.PHOTOS: Reports coming in that an "unknown rebel group" has attacked buses going to evacuate civilians from Kafraya and Fuah - MORE: According to reports, civilians had not yet gotten on the buses. They were on their way to pick them up when the attack happened. As BBC reports, the convoy was travelling to Foah and Kefraya, besieged by rebel fighters. Pro-government forces have been demanding that people be allowed to leave the mainly Shia villages in order for the evacuation of east Aleppo to restart, with thousands of people waiting to leave in desperate conditions, reports say.

Sabotage Of East-Aleppo Evacuation Is Part Of A Plan - The removal of defeated al-Qaeda fighters and their families from east-Aleppo has been on and off for several days now. The agreement between Turkey and Russia on which the evacuation is based stipulates the parallel evacuation of wounded people from the al-Qaeda besieged Shiite village Fu'a and Kafraya in Idleb province. Note that neither the U.S. nor the (partisan) UN were involved in these negotiations. The process was interrupted on Friday after al-Qaeda fighters in east-Aleppo opened fire on evacuating civilians. In parallel buses moving into Fu'a and Kafraya to evacuate the wounded were held up by al-Qaeda aligned groups in the area. Opposition claims that Hizbullah fighters was killing people that were evacuating from east-Aleppo were, according to a BBC producer, lies. Today's evacuations were again sabotaged by al-Qaeda forces:Several buses en route to evacuate the sick and injured from two government-held villages in Syria's Idlib province have been burned by rebels. The convoy was travelling to Foah and Kefraya, besieged by rebel fighters.Pro-government forces are demanding people be allowed to leave the mainly Shia villages in order for the evacuation of east Aleppo to restart.Thousands of people are waiting to leave in desperate conditions, reports say. Al-Qaeda gangs themselves provided video of the bus burning. The bus drivers were likely murdered which pretty much guarantees that no further buses will come or go. I doubt that this is a solely al-Qaeda induced incident. It seems to me that the certain U.S. forces (aka the CIA) are trying to prolong the removal of al-Qaeda from east-Aleppo for their own purpose. Just yesterday even the Washington Post (again) reported on the years long collusion between the CIA and al-Qaeda in Syria:  The CIA meanwhile continued to push a program that targeted Russia and its Syrian and Iranian allies — and helped shield Jabhat al-Nusra. There are several "western" groups that want to keep the evacuation stalled to continue their anti-Syrian, anti-Russian and anti-Iran agenda.

Aleppo battle: Hundreds leave Syria city as evacuations resume - BBC News: Evacuations have resumed from east Aleppo, with buses and ambulances leaving rebel areas of the Syrian city. At least 350 people reportedly left rebel enclaves late on Sunday, heading towards other rebel-held territory. Among those to have left is seven-year-old Bana Alabed, who had tweeted about conditions in besieged areas of Aleppo. A separate evacuation of government-controlled parts of Idlib province, besieged by rebels, started early on Monday. Thousands more are waiting to leave east Aleppo amid dire conditions. The UN Security Council is said to have agreed a compromise to allow UN monitoring of the operation. Russia earlier rejected a French-drafted plan to send UN officials to east Aleppo as "a disaster". "We expect to vote unanimously for this text," said US Ambassador to the UN Samantha Power. The Security Council meeting will start at 09:00 (14:00 GMT) in New York. Initial efforts to evacuate the last rebel-held enclaves in the city collapsed on Friday, leaving civilians stranded at various points along the route out without access to food or shelter. Bombardment of east Aleppo has left it virtually without medical facilities.

Iran, Turkey and Russia Meet to Control Syria’s Gas Pipelines - The reason why Iran is at the peace talks is because it’s their gas. The reason why Turkey is a the table is because the pipeline will go through them to EuropeThe Russia hosted the meeting because they want to maintain their hegemony on gas to Europe. The reason why the Arabs aren’t there is because Russia, Syria and Turkey control access to Europe; and because the Arabs tried to overthrow Assad when he granted the pipeline concession to Iran. Anybody in the oil business understands this.  Now you do. Any questions ?  (We’ve been over all this before)Russia, Iran and Turkey have agreed to help broker a Syrian peace deal after they held talks in Moscow yesterday. The three countries adopted a declaration setting out the principles that needed to be adhered to. Russian Foreign Minister, Sergey Lavrov, said that an agreement had been reached. The priority was to fight terrorism rather than to remove the Syrian regime led by Bashar Al-Assad. The declaration stated that any settlement over Syria had to respect the country’s territorial integrity. Russia’s Minster of Defence, Sergey Shoigu, referring to the principals as the “Moscow Declaration”, said that the trio was confident it would revive the moribund peace process. “Iran, Russia and Turkey are ready to facilitate the drafting of an agreement, which is already being negotiated, between the Syrian government and the opposition, and to become its guarantors,” the declaration said.

U.S. plays down absence from Moscow talks on Syria, says not 'sidelined' | Reuters: The United States on Tuesday sought to downplay its absence from talks on the Syrian conflict among Russia, Iran and Turkey in Moscow, saying it was not a "snub" and did not reflect a decline of U.S. influence in the Middle East. However, President Barack Obama's decision to offer only limited support to moderate rebels has left Washington with little leverage to influence the situation in Syria, especially after Moscow began launching air strikes against rebels fighting President Bashar al-Assad. Although Washington has long been a player in efforts to end the Syria civil war and other Mideast conflicts, the United States was forced to watch from the sidelines as the Syrian government and its allies, including Russia, mounted an assault to pin down the rebels in east Aleppo that culminated in a ceasefire deal. Dennis Ross, a fellow at the Washington Institute for Near East Policy who was an adviser on Iran and the Middle East to both Democratic and Republican administrations, said the United States had made itself "irrelevant" in Syria. "The opposition finds little reason to be responsive to us and Assad. The Russians and Iran know that there is nothing we will do to raise the costs to them of their onslaught against Aleppo and other Syrian cities," Ross said. "Russia, having changed the balance of power on the ground, without regard to civilian consequences, has moved to make itself an arbiter." A spokesman for U.S. Secretary of State John Kerry dismissed suggestions that America's absence from the meeting indicated a change in influence. "The secretary doesn't see this as a snub at all. He sees it as another multilateral effort to try to get a lasting peace in Syria and he welcomes any progress towards that," State Department spokesman John Kirby said on Tuesday.

How The Military Excluded The White House From International Syria Negotiations - The NYT laments today that international negotiations about the situation in Syria now continue without any U.S. participation: Russia, Iran and Turkey Meet for Syria Talks, Excluding U.S.  Russia, Iran and Turkey met in Moscow on Tuesday to work toward a political accord to end Syria’s nearly six-year war, leaving the United States on the sidelines as the countries sought to drive the conflict in ways that serve their interests.Secretary of State John Kerry was not invited. Nor was the United Nations consulted. Russia kicked the U.S. out of any further talks about Syria after the U.S. blew a deal which, after long delaying negotiations, Kerry had made with the Russian Foreign Minister Lavrov. In a recent interview Kerry admits that it was opposition from the Pentagon, not Moscow or Damascus, that had blown up his agreement with Russia over Syria:More recently, he has clashed inside the administration with Defense Secretary Ashton Carter. Kerry negotiated an agreement with Russia to share joint military operations, but it fell apart. “Unfortunately we had divisions within our own ranks that made the implementation of that extremely hard to accomplish,” Kerry said. “But I believe in it, I think it can work, could have worked." Kerry's agreement with Russia did not just "fell apart". The Pentagon actively sabotaged it by intentionally and perfidiously attacking the Syrian army. The deal with Russia was made in June. It envisioned coordinated attacks on ISIS and al-Qaeda in Syria, both designated as terrorist under two UN Security Council resolutions which call upon all countries to eradicate them. The Pentagon still did not like it but had been overruled by the White House: Although President Obama ultimately approved the effort after hours of debate, Pentagon officials remain unconvinced. ..“I’m not saying yes or no,” Lt. Gen. Jeffrey L. Harrigian, commander of the United States Air Forces Central Command, told reporters on a video conference call. “It would be premature to say that we’re going to jump right into it.” The CentCom general threatened to not follow the decision his Commander of Chief had taken. He would not have done so without cover from Defense Secretary Ash Carter. Three days later U.S. CentCom Air Forces and allied Danish airplanes attack Syrian army positions near the ISIS besieged city of Deir Ezzor. During 37 air attacks within one hour between 62 and 100 Syrian Arab Army soldiers were killed and many more wounded. They had held a defensive positions on hills overlooking the Deir Ezzor airport. Shortly after the U.S. air attack ISIS forces stormed the hills and have held them since. 

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