Thursday, June 9, 2016

Another Huge Pipeline Story: Sempra Energy/TransCanada Win Bid For Tex-Mex NG Pipeline -- June 9, 2016

Link here. And here.

Bloomberg is reporting:
The prospect of building an underwater pipeline from Texas to Mexico is making Sempra Energy’s Ienova one of the top-performing stocks south of the border.

Infraestructura Energetica Nova SAB, as the unit is formally called, had the second-biggest gain on the Mexican Stock Exchange since announcing plans on May 19 to bid to develop the $2.1 billion project in a joint venture with TransCanada Corp. The venture was the sole bidder to qualify for a June 13 auction of the project, boosting optimism that Ienova, the country’s only publicly traded energy company, will sustain the rally throughout the year.

"It’s very likely that the Ienova and TransCanada bid will have a favorable outcome in the auction for the pipeline,” Jean-Baptiste Bruny, BBVA Research analyst, said in a telephone interview from Mexico City. "The company’s shares are likely to have a positive impact if they win rights to the project."

The 800-kilometer (497-mile) pipeline will run from the U.S.-Mexico border to the Tuxpan port, a shipping hub for tankers supplying petroleum products to state-run Petroleos Mexicanos, or Pemex.
The line will transport natural gas to power plants in northern and central Mexico and is forecast to be completed in 28 months. Last year, TransCanada won a bid for a gas pipeline connecting Tula, where Pemex’s second-largest refinery is located, to Tuxpan.
The US may not want TransCanada pipelines, but Mexico certainly seems to want these pipelines.

The Widened Panama Canal -- June 9, 2016

Bloomberg is reporting:
Panama said it expects 20 million tons of liquefied natural gas to pass through its canal annually once the newly widened waterway is opened this month. That’s almost a tanker of gas a day traveling through, based on Bloomberg calculations.

“The canal opens the possibility for that gas to reach Asian markets in a more competitive way because the Panama Canal route is the shortest,” said Manuel Benitez, deputy administrator of canal authority, in an interview in Panama City on Wednesday. “We’ve already seen that many very large gas carriers have already made reservations.”

The $5.3 billion expansion to the canal is set to be inaugurated June 26, allowing it to handle the kind of massive tankers that transport liquefied natural gas. Its debut is fortuitous for U.S. gas producers as the shale boom has sent domestic supplies surging and drillers are looking to get their fuel to markets abroad.

The expanded canal will help U.S. gas producers by cutting the shipping time to markets in Asia, according to Skip Aylesworth, who manages $1.5 billion in holdings at Hennessy Funds in Boston, and who holds shares in LNG producer Cheniere Energy.
20 million tons of LNG converts to 168 million boe

Two New Permits -- June 9, 2016

In the background is Leonard Cohen's I'm Your Man. I have just had a full evening with Sophia: swimming, the park, a snack. And now I'm resting with some Blue Diamond almonds with Leonard Cohen in the background and Ernest Hemingway on my mind. Funny how the mind works. It is difficult to press on with the Bakken, but ...

Active rigs:


6/9/201606/09/201506/09/201406/09/201306/09/2012
Active Rigs2782192189213

Wells coming off the confidential list Friday:
  • 30423, drl, Hess, HA-Sanford-152-96-1819H-8, Westberg, no production data,
  • 30773, SI/NC, XTO, FBIR Grinnell 34X-33A, Heart Butte, no production data,
  • 30853, 1,452, Whiting, Ronna 21-4TFH,  Stockyard Creek, t1/16; cum 66K 4/16;
Two new permits --
  • Operator: CLR
  • Field: Jim Creek (Dunn)
  • Comments: 
One producing well completed:
  • 31429, 1,313, EOG, Liberty 35-1413H, Parshall, t5/16; cum --
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Everybody Knows, Leonard Cohen, Rufus Wainwright

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30853, see above, Whiting, Ronna 21-4TFH,  Stockyard Creek:

DateOil RunsMCF Sold
4-20161145917822
3-2016898412501
2-201672348772
1-20162667118547
12-2015107194124

June 9, 2016

NYSE ends the day down slightly.

There were 187 new 52-week highs compared to six issues reporting 52-week lows. Among the new 52-week highs:
ATT, Allete, Black Hills, CenterPoint Energy, MDU, ONEOK, and Raytheon.

Fracture Flooding In The Williston Basin -- Conrad Ayasse -- From The Williston Basin Petroleum Conference, May, 2016

Link here to the slides.

Other presentations from the 2016 conference can be found here.

Bombshell -- Stick With Me -- Read This Closely -- The Piceance In Colorado May Rival The Marcellus In The Northeast -- USGS

Updates


June 10, 2016: Seeking Alpha:
  • Western Colorado has 40x more natural gas than previously thought, potentially making it the second-largest formation in the U.S., according to a new estimate from the U.S. Geological Survey.
  • The Mancos Shale formation in Colorado’s Piceance Basin holds ~66.3T cf of gas, up from just 1.6T estimated in 2003, the USGS says, and the revision puts the basin second only to the Marcellus Shale in terms of the largest total gas reserves in the U.S.
June 10, 2016: Utica and Marcellus numbers are updated here

Later, 8:54 p.m. Central Time: see first comment. 

Later, 1:58 p.m. Central Time: the BizJournals are also reporting this story. The stories begin:
Colorado is home to the second-biggest field of recoverable natural gas in the United States, according to a new assessment by the U.S. Geological Survey.
It's hard to get pass some paywalls, but the story is appearing everywhere, for example from The AP, and as expected, the article emphasizes the difficulty and expense of getting to this natural gas. It doesn't matter: this is the bottom line -- the US is going to have inexpensive, almost inexhaustible, relatively accessible energy for a long, long time to come.

Once you start adding up "total recoverable reserves" across the US: the Marcellus, the Barnett, the Utica, the Piceance ... after awhile one gets to some serious reserves.

Original Post
 
A huge "thank you" to a reader for alerting me to this.

This defies .... I am "blocking" on the word ... this defies ... I don't know what it defies but it defies something.... maybe "my imagination."

The story was posted 22 hours ago. I follow energy news pretty closely. I have a fair number of folks who send me notes on energy, and yet, this story seems to have been missed by almost everyone.

The only reason I think it is not getting national attention is because the numbers are just too hard to believe. Maybe I'm missing something, or misreading something. Maybe I'm being inappropriately exuberant.  This is what makes these stories confusing:
  • the numbers are huge to begin with (trillions)
  • crude oil and natural gas are measured in different units (bbls vs cubic feet)
  • combining both crude oil and natural gas, there is still a different unit: bbls of equivalent oil (boe)
  • original oil in place (OOIP) vs technically recoverable oil (and same for natural gas)
But this seems incredible. Almost beyond one's imagination.

To bring you up to speed, read about the Piceance Basin in western Colorado at this post

Twenty-two hours ago, this USGS headline. USGS Estimates 66 Trillion Cubic Feet of Natural Gas in Colorado’s Mancos Shale Formation.

The headline fails to note that the previous USGS assessment was less than 2 trillion cubic feet of natural gas

The report begins: This is the second-largest assessment of potential shale & tight gas resources that the USGS has ever conducted. [Natural gas: Marcellus was probably the largest?]

Then this bombshell:
The Mancos Shale in the Piceance Basin of Colorado contains an estimated mean of 66 trillion cubic feet of shale natural gas, 74 million barrels of shale oil and 45 million barrels of natural gas liquids, according to an updated assessment by the U.S. Geological Survey.
This estimate is for undiscovered, technically recoverable resources.
The previous USGS assessment of the Mancos Shale in the Piceance Basin was completed in 2003 as part of a comprehensive assessment of the greater Uinta-Piceance Province, and estimated 1.6 trillion cubic feet of shale natural gas.
This is extraordinary by any standard. Natural gas:
  • In 2003, the USGS estimated the Piceance to hold 1.6 trillion cubic feet of natural gas.
  • Now, in 2016, the USGS revises that estimate to 66 trillion cubic feet of natural gas.
  • If I'm reading this correctly, this is not original natural gas-in-place but what is considered technically recoverable
This is extraordinary by any standard. Oil:
  • Seventy-four million bbls of shale oil doesn't seem to be trivial either. 
  • Original oil in place (OOIP) in the Bakken is estimated to be around 500 billion bbls of oil. At 5% primary recovery rate, that works out to 25 billion bbls of oil.   
  • So, 75 million bbls of recoverable oil in this basin seems to be a pretty big story.
The Bakken / Three Forks: probably less than 150 feet thick including all the non-pay zones. What about the Piceance? Back to wiki:

For natural gas:
The basin has come to increasing public attention in recent years because of widespread drilling to extract natural gas. The primary target of gas development has been the Williams Fork Formation of the Mesaverde Group, of Cretaceous age. The Williams Fork is a several-thousand-foot thick section of shale, sandstone and coal deposited in a coastal plain environment. 
Not one thousand feet thick; not two thousand feet thick; not three thousand feet thick, but "several thousand feet thick."

For oil:
The Piceance Basin contains one of the thickest and richest oil shale deposits in the world and is the focus of most on-going oil shale research and development extraction projects in the U.S. The Piceance Basin has an estimated 1.525 trillion barrels of in-place oil shale resources. 
The 1.525 trillion bbls of original oil in place (OOIP) almost seems to be a typographical error, but Leigh Price estimated the Bakken to hold 500 billion bbls OOIP and the Bakken is less than a hundred feet thick.

But 75 million bbls recoverable oil from 1525 trillion bbls OOIP does not compute. At 3% primary recovery rate, 1.525 trillion bbls OOIP works out to ... well, a whole lot more.

Back to the USGS results posted yesterday:
The Mancos Shale is a significant potential source of natural gas. For comparison, the assessed mean resources in the Mancos Shale of the Piceance Basin are the second-largest assessment of potential continuous gas resources that the USGS has ever conducted.
Since the last USGS assessment, more than 2,000 wells were drilled and completed in one or more intervals within the Mancos Shale of the Piceance Basin. In addition, the USGS Energy Resources Program drilled a research well in the southern Piceance Basin that provided significant new geologic and geochemical data that were used to refine the 2003 assessment.
The Mancos Shale is more than 4000 feet thick in the Piceance Basin, and contains intervals that act as the source rock for shale gas and oil, meaning that the petroleum was generated in the formation.
Some of the oil and gas migrated out of the source rock and into tight (low permeability) reservoirs within the Mancos, as well as into conventional reservoirs both above and below the formation. Oil and gas also remained in continuous shale gas and shale oil reservoirs within the Mancos.
Additional links from the USGS story posted yesterday:
The Mancos Shale is not the only formation that USGS has reassessed as technology and geologic understanding have advanced. 
The Marcellus according to the 2011 USGS survey:
The Marcellus Shale contains about 84 trillion cubic feet of undiscovered, technically recoverable natural gas and 3.4 billion barrels of undiscovered, technically recoverable natural gas liquids according to a new assessment by the U. S. Geological Survey (USGS).
The Barnett according to the 2015 USGS survey:
The Barnett Shale contains estimated mean volumes of 53 trillion cubic feet of shale natural gas, 172 million barrels of shale oil and 176 million barrels of natural gas liquids, according to an updated assessment by the U.S. Geological Survey. This estimate is for undiscovered, technically recoverable resources.
The Bakken/Three Forks according to the 2013 USGS survey:
The United States Geological Survey (USGS) today released an updated oil and gas resource assessment for the Bakken Formation and a new assessment for the Three Forks Formation in North Dakota, South Dakota and Montana.
The assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil. The updated assessment for the Bakken and Three Forks represents a twofold increase over what has previously been thought.
The USGS assessment found that the Bakken Formation has an estimated mean oil resource of 3.65 BBO and the Three Forks Formation has an estimated mean resource of 3.73 BBO, for a total of 7.38 BBO, with a range of 4.42 (95 percent chance) to 11.43 BBO (5 percent chance). This assessment of both formations represents a significant increase over the estimated mean resource of 3.65 billion barrels of undiscovered oil in the Bakken Formation that was estimated in the 2008 assessment.
When you go back through this post, and check out the USGS links, remember a couple of other points:
  • the USGS is very, very conservative in its estimates
  • estimates never seem to be revised downward
  • the surge in estimates is due to US ingenuity, technology, entrepreneurial, free-market capitalism 

Something Lost In Translation -- June 9, 2016

I have no idea what to make of this. From Rigzone:
  • a new gas-to-liquids (GTL) joint venture between Chevron/Nigerian government is coming on line
  • originally projected to cost about $3 billion
  • "astronomical" overrun when current costs are shown to be $10.3 billion
  • Sasol Ltd, the world's biggest producer of fuel from coal, had a 27.5% stake in this venture, but sold their stake to Chevron in 2008 after the project's cost more than doubled
  • will produce 33,000 bbls per day, mostly synthetic diesel
BOE calculations:
  • if a bbl holds 42 gallons, that works out to 1,400,000 gallons/daily
  • at $3.00/gallon = $4 million daily sales (not profit)
  • $10 billion / $4 million = 2,500 days or about 7 years of sales to pay for plant
  • of course, a dozen other factors are not being considered
My hunch with regard to original estimate of $3 billion "skyrocketing" to $10 billion was simply something "lost in translation."

Weekly Energy Data -- June 9, 2016; Oil Consumption Growth Hitting New Records Globally; India Surpasses Japan As The World's Third-Largest Oil Consumer

Updates

June 15, 2016: Tom Doggett's nugget today --
India was the fourth-largest consumer of crude oil and petroleum products after the United States, China, and Japan in 2015, and it was also the fourth-largest net importer of crude oil and petroleum products. [See original post: BP says India passed Japan in 2015 among oil-consuming nations.]
The gap between India's oil demand and supply is widening, as demand in 2015 reached nearly 4.1 million barrels per day (b/d), compared to around 1 million b/d of total domestic liquids production.
EIA expects demand to accelerate in the 2016 through 2017 timeframe as India's transportation and industrial sectors continue to expand under economic development, oil price declines since mid-2014, and recent government policy initiatives to increase highway and road infrastructure and promote Indian manufacturing. --- EIA 

June 10, 2016: India's consumption of gasoline increased almost 14% in May, 2016, year-over-year.


Original Post 

Biggest story of the year? Oil gained global market share in 2015 for first time in 16 years. Being reported at Oil & Gas Journal. Link here




From BP:
Although crude oil prices in 2015 recorded their largest annual decline on record in dollar terms and their largest percentage decline since 1986, oil gained market share for the first time since 1999, according to the 65th edition of BP PLC's Statistical Review of World Energy.
Some data points:
  • oil remained the world's leading fuel, at almost 33% of global energy consumption
  • global oil consumption grew almost 2% in 2015; grew at almost 2 million bopd; nearly double the recent historical average of 1% and significantly stronger than the increase of 1.1 million bopd seen in 2014
  • growth driven by OECD where consumption increased 1.1%, compared with an average decline of 1.1% over the past decade
  • growth was well above recent historical averages in the US at 1.6%; EU at 1.5%
  • Japan was an outlier: Japan recorded the largest decline in oil consumption, down almost 4%
  • outside the OECD: China, up 6.3%; India, up an astounding 8.1%, surpassing Japan as the world's third-largest oil consumer   
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US natural gas inventories are still "off the charts" and setting new seasonal records. Inventories rose 65 billion cubic feet from the previous week.

Gasoline demand for most recent week declined slightly; almost unchanged. Four-week average right at 6.639 million bbls/day vs 9.661 million bbls/day the previous week. 

Norwegian strike threat increases.

Putting on a very brave face, from Reuters/Rigzone
Saudi Arabia's Economy and Planning Minister Adel Fakieh said on Wednesday that the kingdom could live comfortably with oil prices even as low as they were late last year

Sharapova: The Best Thing About The Story -- I Learn How To Spell Her Name

This past week could have been a horrendous week of driving. It was a very, very challenging week of driving and some days I referred to the driving as horrendous, but all-in-all, it was not that bad. I've been driving our two older granddaughters to "computer coding camp" every day -- a 30-mile drive each day through rush-hour traffic on the north side of Dallas.

It was my experience that, in general, the Texas drivers are most courteous There may be some issues on the interstates, and the parkways, and the tollways, where there may not be a lot of signalling at 70+ mph, but when one gets to the transition choke points, from one high-speed highway to another high-speed highway where everything comes to a stop, everyone is most courteous. It's an interesting phenomenon. For now, I will leave it at that.

When I get home, I go swimming with Sophia.

At her house. 
One week ago she was terrified to get on the alligator -- 
now she lets me get out of the water to set up the camera for a selfie.

***********************************

This has nothing to do with the Bakken or with anything else I really follow, but the Sharapova story really, really bothers me for some reason. Anyone who falls for her story that she was unaware the drug was banned, and anyone who falls for her story that she had medical conditions requiring her to take the medicine, are automatic nominees for the 2016 Geico Rock Award.

A world-class athlete in a competitive sport like tennis with medical conditions requiring medication? Give me a break.

A multi-millionaire with an entire medical staff at her disposal and no one knew that the drug was banned? Give me a break.
Sharapova admitted in March that she failed a drug test at the Australian Open. She'd been found to have been taking meldonium, a drug added to the World Anti-Doping Agency's list of banned substances in January 2016.
She's banned for two years, but she has appealed. If she wins the appeal, the ITF loses all credibility. But nothing will surprise me any more when it comes to professional sports, especially like biking, tennis, and soccer.

The drug -- whatever it's called -- this is what it does: is used to treat inadequate blood flow to the organs, especially the heart. Now, how is that different that doping? Give me a break. This is why she said she took the drug:
Sharapova said she'd been taking the drug since 2006 because of several health concerns, including magnesium deficiency, irregular results on a heart function test called an EKG, and diabetes, which she said runs in her family.
Irregular EKG? She probably had an occasional "escape beat" because of an extraordinarily slow heart rate (bradycardia) seen in most world-class athletes. Her doctors knew exactly what she was doing; she knew exactly what she was doing. A magnesium deficiency? Know where you see magnesium deficiencies? In bulemics.

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Bakken Man-Camps

I think the only other thing that bugs me as much as the Maria Sharapova story at the moment (and this moment will only last ... a moment) is the man-camp story in Williston. I am more than a bit upset about the "man-camp" folks -- everyone knew man-camps were a temporary solution to a temporary problem.

For now, Williston is "winning." A Williams County judge has denied a workforce housing company's requests to force Williston officials to extend its permits and delay enforcement on an ordinance requiring crew camps to shut down next month.

There are so many story lines here, but it's not worth the time to talk about them. 

Halliburton says it will cost them $3 million to shut down their facility. Bit whoop. A single well costs $6 million. Halliburton's balance sheet shows HAL has $9.66 billion CASH sitting in the bank.

June 9, 2016 -- No Sign Of Rising Layoffs Even As Companies Cut Back On Hiring

It's Thursday, so it's the jobs data we'll start with, as usual. I'm off to a later start than usual due to driving granddaughters to computer coding camp at UT-Dallas. Traffic was horrendous coming out of Grapevine but after that it was clear sailing, but the trip was about 25 minutes longer than usual.

Of course, after the past few reports, things got so bad, I assume the spinmeisters worked overtime to a) get a better number; and, b) find a way to spin it to make whatever the number is look better than it really is. So, here we go. From MarketWatch: jobless claims drop 4,000 to 264,000. At 264,000, this is the lowest level in six weeks, "showing that layoffs remain low despite a nationwide slowdown in hiring."

You know, that pretty much makes sense when you think about it. Analysts had forecast new claims to hit 270,000. The 4-week average dropped 7,500 to a seasonally adjusted 269,500.

***********************
Energy Data

Thursday is also the day we start seeing energy data for the week. I'm most interested in gasoline demand, of course, and we will see that later.

French strikes are still affecting refineries in that country, and now Belgium's labor unions call for a nationwide strike on June 24th. Doesn't this happen every summer somewhere in the EU?

Japan buys Alaskan crude oil for first time since 2000. Platts has the interesting story:
JX Nippon Oil & Energy received an Alaskan North Slope cargo earlier this month, Japan's first ANS crude imports since May 2000 and surprising markets at a time when arbitrage economics are heavily loaded in favor of Asian and Middle Eastern crudes.

JX took the cargo on a Suezmax tanker at its Kiire oil storage terminal in Kagoshima prefecture in Japan's southwest on Saturday. The size of the cargo was not known. The US-flagged Alaskan Legend, a 193,050 DWT Suezmax tanker, loaded ANS from Valdez, Alaska, on May 16, to be delivered on a CFR basis to the buyer.

Alaskan crude was exempted from the US' 1975 crude export ban in 1995.
Two EIA graphs spotted by John Kemp (and others) are also very, very interesting:



And this one:

June 9, 2016

Active rigs:


6/9/201606/09/201506/09/201406/09/201306/09/2012
Active Rigs2782192189213

RBN Energy: evaluating the economics of a new gas pipeline.