Wednesday, April 17, 2013

Three Great Energy Stories Via The Oil Drum

From The New York Times via The Oil Drum:
Hoping to reverse two decades of declining oil production in Alaska, the State Legislature in Juneau has granted oil companies an estimated $750 million in annual tax relief to increase investment in the giant North Slope oil field.
The tax change, approved on Sunday, was a major victory for Exxon Mobil, ConocoPhillips and BP, which had lobbied for years to repeal a tax system put in place by former Gov. Sarah Palin in 2007 that made state oil taxes among the highest in the nation. The companies have long claimed that high operating costs and taxes in Alaska encouraged them to move their investment dollars to other states with lower tax rates, like Texas and North Dakota, where oil and gas exploration and production have been booming in new shale fields.
From Living Trading News via The Oil Drum:
While advocates of solar, wind and other “Green” energy some are saying that renewable energy is the future, technological advances in the Oil and Gas industries will lead to abundant supplies well into the future, I have been saying for years that Peak Oil is a myth, it is.
US Crude Oil production rose by an average of 790,000 bpd in Y 2012, the largest annual increase in American oil production since it began in Y 1859.
This year the Energy Information Administration EIA expects production to rise by 815,000 bpd, setting another record.
What led to these dramatic production increases is innovative drilling technology.
“he convergence of a myriad of technologies, ranging from better drill bits and seismic data to robotic rigs and high-performance pumps is allowing the Oil and Gas sector to produce staggering quantities of energy from locations that were once thought to be inaccessible or bereft of hydrocarbons.
From Forbes via The Oil Drum:
If you want to see what the natural gas revolution in America has wrought, there’s no better place than the Sabine Pass liquefied natural gas port in coastal Louisiana. There you can peer into five massive storage tanks, each almost big enough to contain Madison Square Garden. Taken together, they can hold the liquefied equivalent of 17 billion cubic feet of natural gas–a quarter of what the United States uses in a day.
They’re empty.
Built in 2008 by Houston-based Cheniere Energy when it appeared certain that the U.S. would soon run short on natural gas and need imports to make ends meet, they ran headlong into the Great American Gas Boom. Drillers in recent years have unlocked so much gas from tight rock that America now enjoys record gas supplies and prices that are just one-quarter of what buyers in Europe and Asia pay. Projections are that the annual U.S. gas supply could grow a further 25% by 2035.

Let's Enforce The Laws We Have On The Books

From 2011, and I'm sure not much has changed: weapons prosecutions decline to lowest level in a decade.
The latest available data from the Justice Department show that during January 2011 the government reported 484 new weapons prosecutions. This is the lowest level to which federal weapons prosecutions have fallen since January 2001, when they were 445 at the time President George W. Bush assumed office.
Later in the article:
None of the districts with the largest cities in the country make the top 10. In contrast, those districts ranking in the bottom tier contain a number of large metropolitan areas. These include the Northern District of Illinois (Chicago) ranked 80th, the Central District of California (Los Angeles) ranked 83rd, the Northern District of Georgia (Atlanta) ranked 85th, Massachusetts (Boston) ranked 86th, and the Northern District of California (San Francisco) ranked 87th
Wow, talk about chickens coming home to roost. 

I think if one connects the dots, one could sort out the reason for the low prosecution in Chicago, Boston, and San Francisco. The dots are easy to connect.

More Global Warming -- Winter Storm Yogi (?)

Storm hitting Wyoming and the Dakotas .... again.

The AP is reporting:
Skiers rejoiced and stores pulled snowblowers out of storage as a persistent spring storm delivered another round of wet snow to parts of Wyoming, Colorado and the Dakotas on Wednesday.
Slick conditions and reduced visibility closed big stretches of two interstates in Wyoming and Colorado. The storm delayed flights out of Denver and postponed another Colorado Rockies-New York Mets game.
Three feet of snow has fallen in Colorado's mountains so far, building the snowpack at a time when, normally, the levels have already peaked for the year. The weather also has delayed the start of wildfire season in the northern and central mountains and foothills. By this time a year ago, Colorado already had one massive wildfire that killed three people.
Yeah, thGlobal warming. And so it goes.

QEP With Permits For Twelve (12) Wells in Heart Butte: 10-149-91, Dunn County

Heart Butte.

Dunn County.

No wells in this section as of yet.

Three 4-well pads.

The three pads will be in the two middle quadrants along the west border of the section.

One pad will be about 1,550 feet from the north line, 600 feet from the west line; the wells lying slying diagonally southwest to northeast. These four wells will run from section 10 to section 11.

The four wells on the second pad will all be 248 feet from the west line, and about 2,000 feet from the the north line. These four wells will run from section 10 to section 14.

The last four wells will run pretty much horizontally east to west, about 2,600 feet from the south line, and extending from 320 to 394 feet from the west line. These four wells will run from section 10 to section 15.

Most of the areas in this field are 1280-acre spacing, but not 10, 11, 14, and 15. Those sections are part of a 2560-acre spacing unit. This 2560-acre spacing and another 2560-acre spacing unit border the river on the south side. I assume these spacing units are in the riparian zone.

The names of the wells:
  • 25406, loc, QEP, MHA 1-10-11H-149-91
  • 25404, loc, QEP, MHA 1-10-11H-149-91
  • 25405, loc, QEP, MHA 3-10-11H-149-91
  • 25403, loc, QEP, MHA 4-10-11H-149-91
  • 25410, loc, QEP, MHA 1-10-14H-149-91
  • 25408, loc, QEP, MHA 2-10-14H-149-91
  • 25409, loc, QEP, MHA 3-10-14H-149-91
  • 25407, loc, QEP, MHA 4-10-14H-149-91
  • 25414, loc, QEP, MHA 1-10-15H-149-91
  • 25412, loc, QEP, MHA 2-10-15H-149-91
  • 25413, loc, QEP, MHA 3-10-15H-149-91
  • 25411, loc, QEP, MHA 4-10-15H-149-91
The MHA: Mandan-Hidatsa-Arikara, the Three Affiliated Tribes.

Folks may be interested in a QEP 10-well section recently completed.

New Permits; Wells Coming Off Confidential List Thursday; QEP With Permits For 12 Wells In One Section

Active rigs: 185 (steady)

Fifteen (15) new permits --
  • Operators: QEP (12), XTO (3)
  • Fields: Heart Butte (Dunn), Sand Creek (McKenzie)
    Comments: All twelve QEP wells will be in section 10-149-91.
Wells coming off the confidential list today were posted earlier; see sidebar at the right.

There is only one well coming off the confidential list Thursday:
  • 22513, 699, Hess, BL-Amelia 156-95-1415H-1, Beaver Lodge; t12/12; cum 35K 2/13;

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Ms Heitkamp Says "No" To Mr Obama On Gun Control; Looks Like The Gun Bill Defeat Will Be Blamed on North Dakota; Heitkamp In Obama's Cross-Hairs; Weapons Prosecutions Decline To Lowest Level In Ten Years; Chicago Tops The List; Let's Enforce The Laws Already On The Books Instead of Attaching Unrelated Amendments To Gun Laws


April 18, 2013: Failing on "gun control," the president is truly a lame duck -- The (London) Telegraph.
Yesterday, the most modest of gun control proposals died in the Senate. It would have expanded background checks to people purchasing weapons at gun shows and online sales, enjoyed 90 per cent support among the public and came on the back of the tragedy at Newtown. Yet, despite all that it had going for it, the Toomey-Manchin bill raised just 54 votes – six short of the number necessary for passage. “This is a pretty shameful day for Washington,” said Obama afterwards. It wasn’t exactly a red letter day for him, either.
Nobody listens to what he says anymore, nobody is interested in winning his approval and nobody much cares if he thinks they have “let the country down”. This is typical for a second-term president who has lost all their leverage because they’re no longer running for office and everybody is patiently waiting for the day when he quits the White House. But Obama's difficult personality has doubled the size of the challenge. Gloating in victory, adolescent in defeat – the Prez doesn’t make it easy to work with him. Why should conservative senators give him a legislative victory after he has spent four years painting them as knuckle-dragging rednecks who hate women and the poor?
Whatever your position on gun control, yesterday’s events are a damning indictment of Obama’s presidency – a flash of style, lots of soaring rhetoric and, when the votes are actually counted, little show for any of it. America has four more years of this lame-duck president telling them that it has let him down. If only he could tear up the Constitution and rule by diktat he might save himself a little disappointment. Alas, American democracy is a stickler for rules.
Later, 9:40 pm: wow. When I wrote the post earlier I was not aware of this. This is incredible. Politico is reporting:
One administration official told POLITICO the White House was especially disappointed with Sen. Heidi Heitkamp (D-N.D), the only dissenting Democrat not up for re-election next year, who refused to go along with the bill even after White House chief of staff Denis McDonough visited her office to make Obama’s case on Tuesday.

Still, officials believed Heitkamp would have flipped if they had gotten closer to the 60 votes they needed.
“The president was tremendously committed and emotionally engaged. I watched the president with these families. He was there for them and really felt it,” said Sen. Richard Blumenthal, a Connecticut Democrat who worked closely with the White House in the aftermath of the worst school shooting in the history of his state.
I had not seen the president's speech until now (at the linked Politico article). He sure lectures. He would make a good preacher.

It looks like North Dakota will take the blame for this. Ms Heitkamp wasn't even up for re-election next year. The note below, "payback is hell" may be very, very prescient. If the president denies the Keystone XL permit, the decision might have been made today.

The word for today: petulant.

But this pretty much says it all: weapons prosecutions decline to lowest level in a decade, and topping the list: Chicago

The word for today: confused.

Later, 4:30 pm: Payback is hell. President Obama has a long memory. There's one area in which the president can affect Ms Heitkamp most visibly: in the energy sector. Keystone. Fracking. Cap and trade. Energy slush fund paid for by oil companies to build windmills. Payback is hell.

Original Post
The Bismarck Tribune is reporting:
Sen. Heidi Heitkamp Wednesday said she will not support an amended Senate gun control bill that would expand background checks.
Heitkamp, a Democrat who recently marked her first 100 days in office, in a statement said her position on new gun control laws has not changed.
“I’ve been adamant from the very beginning of this conversation that the focus should be on mental health issues, full and accurate reporting into the NICS database and ensuring that we are prosecuting criminals in possession of or trying to possess firearms,” Heitkamp said.
Let's enforce the laws that are on the books (Chicago, are you listening?). And let's do a better job protecting the unarmed in gun-free zones. 

Montana Senator Talks Of A Train Wreck


This is but another trial balloon that suggests to me that there is huge pressure to delay implementation of ObamaCare.

Sibelius is simply not ready. The Senators know it. They don't like what they see.

It will be utter chaos beginning this autumn once folks start filling out 15-page application forms, or 60-page application forms, or whatever they are.

A lot of Senators lost their jobs after ObamaCare was passed. I think there are a group of senators up for re-election outside the beltway and outside New England and know they will be blamed for the failure of ObamaCare implementation, which is all but guaranteed to happen.

The program over-promises which will make the 47% angry; and Sibelius has already announced that health care insurance premiums are going to go up. A lot. That will affect the other 52%.

The "one percent" will not be affected.

What A Great Deal For Subscribers! A Second Poll: Where Will The Next Natural Gas Processing Plant Be Located?

I was going to wait to put up this poll, but then I thought: what if I am overcome by events? What if an announcement was made before the poll was posted? I would be devastated. So here it is.

Two polls for subscribers. No extra subscription required. What a great country.

I have to thank Don for suggesting the poll.

It's obvious that there has been a surge in natural gas production in the Bakken, and it's the "good" kind of natural gas. The price of natural gas has crept up and there are indications the trend may continue (even as the price of oil continues to come down).

[The "funny" thing is that the Bakken is an oil field with producers, according to their corporate presentations, saying their oil production exceeds 92% of total hydrocarbon production. Oasis' most recent figures are consistent with everything else I have read: three percent (3%) of their Bakken revenue is attributed to natural gas; the rest to oil. And yet, here we are, talking about natural gas. The state is said to be losing $25 million/year in royalties/taxes due to flaring; the state oil Legacy fund is losing $30 million/year by not investing in MDU.]

So, with that in mind, when the next natural gas gathering and processing plant is announced, where will the new processing plant be sited? My thoughts [yes, I know I risk biasing the poll, but a) I don't mind; and, b) it helps folks think about the possibilities]:

There are four areas:
1. Northeast McKenzie county where most activity is now; but several plants already there, so less likely for the next one.

2. On/near the reservation.

3. Whiting's Pronghorn Prospect, but it seems like they have things under control there; I've lost the bubble in this area, what's there, what is needed. I think Whiting/MDU are "managing" this area.

4. Stanley, ND. See recent posts on Manitou oil field (today).
I won't post how I would vote, but I have let Don know how I would vote.

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here or what you think you read here.

Expansion In Bismarck, North Dakota -- Dan's SuperMarket Expands In Bismarck

The Bismarck Tribune is reporting:
A new mixed-use development, centered around a Dan’s SuperMarket, is planned for northeast Bismarck.
Construction will begin this fall on Sunrise Town Centre, at the northeast corner of Centennial Road and Century Avenue near the new high school site. The 72-acre, two-phase commercial area is being planned by SNT Development, said Kyle Holwagner of Daniel Companies. Sam Turnbow is the principal.
Holwagner said it will be a multi-million dollar project, but the exact cost isn’t known because stores will construct their own buildings.
Dan's SuperMarket, according to Wiki
Associated Food Stores is an American retailers cooperative that supplies about 500 independently owned retail supermarkets, including Dan's, throughout Utah, Arizona, Idaho, Colorado, Montana, Oregon, Nevada and Wyoming. The company was founded by Donald P. Lloyd in 1940, who was the president of the Utah Retail Grocers Association. It reported over US$1.6 billion in sales during fiscal year 2007 and is currently the fifty-sixth largest grocery retailer in the country by volume with 23% of its total sales coming from its corporate stores.
See comments below. I have added "North Dakota" to the wiki posting.

NDIC Expects Surge in North Dakota Oil Production This Summer

The Dickinson Press is reporting:
Oil companies operating in North Dakota are keeping the brakes on this spring, but a “big surge in production” is expected this summer and fall, the director of the Department of Mineral Resources said Tuesday.
Lynn Helms said he expects the drilling rig count will increase from today’s count of 186 to 198 this summer, bringing as many as 2,000 more workers to Oil Patch communities.
Helms said he expects winter weather and spring road restrictions will continue affecting oil production for a few more months.
“It is going to be May, maybe even June, before production seriously gets underway,” Helms said.
Oil production rose 5.6 percent in February to 778,971 barrels per day, according to preliminary figures Helms released Tuesday.
The figure represents a new all-time high for North Dakota, but Helms said the increase was more modest than what he had projected.

Time For A New Poll

... but first, the results of the current poll:

For mineral owners only: if the price of oil drops to $40/bbl, would you want to drill a new well at $40/bbl, or when oil is back to $100/bbl?
  • Drill a new well when oil is at $40/bbl: 11%
  • Drill a new well when oil is back to $100/bbl: 44%
  • Drill whenever; it doesn't matter: 45%
Folks may want to look at the tax rates on oil production.

Now, for the new poll. Lynn Helms suggests that we will see upwards of 198 rigs in North Dakota this summer. So, the new poll:

On the morning of August 14, 2013, will there be fewer than 190 rigs actively drilling in North Dakota; 191 - 200; or, more than 200?

Manitou CBR Terminal

[Wells coming off confidential list today have been posted.]

I had kind of forgotten about Manitou oil field until I started seeing the name pop up more and more often in daily activity reports.

This might be one of the reasons, from today's RBN Energy essay on CBR terminals east of the Mississippi River. [For list of CBR terminals in the Bakken, click here.] In that essay, RNB devotes a rather long section to the "Bakken St James Shuttle":
We previously covered the two companies (Plains All American and NuStar) that are unloading crude from rail at St. James in our series on Gulf Coast terminals.
The Plains All America rail terminal can offload up to 140 Mb/d from unit trains and has been running at full capacity recently.
Plains have two loading terminals in the Bakken at Van Hook and Manitou.
The larger terminal is Manitou (65 Mb/d) on the BNSF network that can ship crude direct to St. James. The NuStar terminal in St James is joint owned with EOG resources that use 80 Mb/d of the 100 Mb/d capacity to unload crude from their own production.
EOG has a rail terminal in the Bakken at Stanley that ships up to 75 Mb/d exclusively to St. James and they also have production in the Permian Basin and Eagle Ford, some of which is also shipped by rail to St. James. Like Plains, the NuStar terminal at St. James is running at close to full capacity.
NuStar is in the process of developing a second unloading terminal at St. James that will more than double their capacity to over 250 Mb/d. The new capacity will belong exclusively to NuStar.
At the moment the crude by rail shipments from North Dakota to St. James are the closest thing to a pipeline on wheels that the US energy industry has seen. As much as 240 Mb/d of crude is being loaded onto unit trains and shipped down this route with a stream of empty rail tank cars returning to load up again. That’s railing crude all right!
[NOTE: if folks are not reading the RBN Energy essays regularly, they are missing perhaps the best series on the Bakken revolution.]

Mega-Pads: Reservoir Well Spacing Pilot Projects; EOG, CLR, KOG; 12+ Wells In One Spacing Unit


This is nothing new. Regular readers are aware of all this. But it was time to put all this "stuff" in one spot for easier access.

Whiting's high-density pilot projects, December, 2013. 

Summer of 2013: 24- and 48-Well/Spacing Unit Tests
EOG's 320-Acre Downspacing Test Successful; May Go To 160-Acre Downspacing
Continental's Charlotte Wells
  • For background, visit this August 29, 2012, posting. This is one of my most visited pages, and one I am most happy to have posted. This is one of the first, if not the first post, to note the possibility of a trillion-bbl reserve in the Bakken.
  • For the graphic and better explanation of Continentals' Charlotte test program, visit this January 27, 2013, post.
Kodiak's Smokey and Polar pilot projects.

[Update: KOG asked for a longer period of confidentiality after the pilot projects came off the confidential list but that was denied by the NDIC. Status update of these wells in that request. -- July 23, 2013]

KOG has two pilot tests going on. Results from one are starting to be reported. The 12-well test on a single 1280-acre spacing unit will target the middle Bakken with 6 horizontals, the first bench of the Three Forks with 3 horizontals, and the second bench of the Three Forks with 3 horizontals. (There are some additional subtleties if the test proves to be a success and adjacent spacing units are involved. That's where overlapping spacing units become important.)

KOG provided this in their most recent presentation (OGIS, April 16, 2013) [If I'm asked to remove this graphic, I will]:

KOG's Polar Pilot Project in southeast Williams County, north/west of the river. These wells are being updated here.
  • 24374, conf, KOG, P Wood 154-98-3-27-34-14H, Truax,
  • 24375, conf, KOG, P Wood 154-98-3-27-34-14H3, Truax,
  • 24376, conf, KOG, P Wood 154-98-3-27-34-15H, Truax,
  • 24604, conf, KOG, P Wood 154-98-4-27-34-13HB, Truax,
  • 24605, conf, KOG, P Wood 154-98-4-27-34-13H3, Truax,
  • 24606, conf, KOG, P Wood 154-98-4-27-34-13HA, Truax,
  • 24607, conf, KOG, P Wood 154-98-4-27-34-14H3, Truax,
  • 24608, conf, KOG, P Wood 154-98-2-27-34-15H, Truax,
  • 24609, conf, KOG, P Wood 154-98-2-27-34-16H3, Truax,
  • 24610, conf, KOG, P Wood 154-98-2-27-34-16H, Truax,
  • 24611, conf, KOG, P Wood 154-98-2-27-34-16H3A, Truax,
  • 24649, conf, KOG, P Wood 154-98-3-27-34-14H, Truax,
  • 24650, conf, KOG, P Wood 154-98-3-27-16-3H, Truax, (running north)
KOG's Smokey Pilot Project in McKenzie County.
12+ Wells In One Spacing Unit

QEP's Heart Butte wells, 10-149-91

Wednesday Morning Links; LA Is In A $600 Million Pickle

Active rigs: 186

Wells coming off confidential list today have been posted.

RBN Energy: CBR. As much as 240 Mb/d of light sweet crude from North Dakota is currently being shipped from the Bakken to St. James LA in what has become a pipeline on wheels. More crude is also moving to the Gulf Coast from Western Canada by rail and new destination terminals are being developed along the Mississippi River. But increased pipeline capacity to the Gulf Coast is a growing competitive threat to these rail destinations. Today we survey rail destination terminals East of the Mississippi.

WSJ Links

Section D (Personal Journal):
  • For the granddaughters, can girls' building toys improve math skills? Once a well-intentioned but unsuccessful part of the toy industry is now blossoming.
  • Cars ditch familiar shift levers for knobs, push buttons, or small levers, freeing up room for all kinds of gadgets and extra space for storage.
  • Barbecue accessories: a look at popular tools in five US cities.
  • Cartography: a look at the prevalence of maps in the daily life of the US as we became a nation. This hits home: I grew up with maps. And today my wife, sister-in-law, and two granddaughters are on a cross-country trip. Whoopee! 
  • Marathons ponder the future; winning Boston never felt so empty.
Section C (Money & Investing):

Section B (Marketplace):
  • Computer outage shuts down American Airlines for an entire day; still not back to 100%. Time to go Apple.  
  • The cupcake craze is crumbling.
  • Boeing has completed all tests for its battery fixes.
  • FBI raids biggest owner of truck stops. I linked this story ("thank you, Don") two days ago. I was surprised not to see the story in the WSJ. It made me think that maybe it wasn't a big story. But here it is, in Section B of the WSJ today. It was probably in an earlier on-line edition of the WSJ.
  • A Federal Bureau of Investigation raid brought the headquarters of Pilot Flying J, North America's largest truck-stop chain, to a standstill this week.
The investigation appears to be part of a broader probe of rebate payments owed to Pilot's trucking customers, Chief Executive Jimmy Haslam III said Tuesday. It "appears to be centered on a very insignificant number of customers and the application of rebates," Mr. Haslam said at the chain's headquarters in Knoxville, Tenn.
An FBI spokesman confirmed the raid had occurred but would say only that it was "part of an ongoing investigation."
Investigators seem to be focused on whether Pilot sales representatives offered volume-based rebates to trucking companies, but then "rebates that were owed to the [trucking company] customers were not paid," Mr. Haslam said. "We of course disagree with that." He denied that the company has been involved in any wrongdoing.
This has all the hallmarks of the Obama administration. The FBI works for Mr Holder. I'm not saying where there's smoke, there's not a fire, but something feels a bit overplayed here. But I could be very, very wrong. 
  • Wow, this worked out well for Purdue Pharma: the FDA bars generic OxyContin -- worries about abuse. The patent expired yesterday, Tuesday. Not only does the FDA bar generic OxyContin but the company and physicians can market the brand name OxyContin as safer than alternatives.
Section A:
  • The Boston Marathon bombing is, of course, the lead story. 
  • NFL broadcaster Pat Summerall dies at 82. 
  • North Korea turns down offer for US-NK talks. I assume NK is holding out for a better deal.
  • Too little, too late: the Obama administration now concedes that the Islamist-dominated Syrian opposition will pose a bigger danger for the US. Who wudda guessed?
  • Op-ed: how JCP laid an egg. This is a great analysis. All should read; most won't.
LA Times Links
  • And more reality: LA's commitment to killing coal will cost them at least $600 million:
Fred Pickel, the ratepayer advocate at the Department of Water and Power, said Monday that eliminating coal from the utility's power mix ahead of a state-mandated deadline is projected to cost more than $600 million.
He added that it was unclear how much the charge would increase the electricity bills of ratepayers.
Pickel, who will present a report on the plan to the City Council's Energy and Environment Committee on Wednesday, said he will urge city and utility officials to look for ways to lower the cost.
With much fanfare last month, Villaraigosa announced plans to make the city coal-free by 2025 by dumping the utility's interest in a coal-burning plant in Arizona and converting another one in Utah to natural gas.