Tuesday, August 20, 2019

Is Anyone Paying Attention? -- August 20, 2019

The big news today out of DC:
  • 78 degrees during the day
  • 82 degrees when one is sleeping
I did not read the story, but I assume it has to do with electricity demand.

Is anyone paying attention?

If the nation is unable to handle typical summer weather now, how in the world will the US be able to charge all those EVs overnight if it can't even handle typical summer weather now? And, why all of a sudden is the US unable to handle typical summer weather now?

Reminder: a great interactive site, US electricity demand.  About 5:30 p.m. both days:
  • one  year ago, August 20, 2018, lower 48 demand: 550,376 megawatthours
  • earlier this afternoon, August 20, 2019, lower 48 demand: 675,914 megawatthours  
And cardigan sweaters during the winter?

Follow-Up To An Earlier Post On 2018 - 2020 Global Crude Oil Demand -- August 20, 2019

Bottom line: global demand for crude oil was revised upward for 2018, and global demand will continue to increase through 2020, according to latest reports from OPEC.

See this note for background.

Pay particular attention to this:
  • OPEC reports July's oil output was two (2) million bopd short of global demand;
The reader who noted that, also noted this:
It should be noted, that to the best of the writer's knowledge, no one is reporting that OPEC supply in July, 2019, was two (2) million bopd less than global demand.
That was a couple of days ago.

Today, the reader provided an update and a likely explanation for the "2 million bopd" figure. From the reader today:
I now understand why no one had that 2 million barrel shortfall that the OPEC report revealed. Whoever wrote the demand summary for OPEC started with a big misdirect that was picked up by the media, who have press deadlines to meet & who thus don't have the time to dig through a hundred pages of tables ... below is the note Reuters picked up that OPEC demand intro and came up with a headline that read:
OPEC sees bearish oil outlook for rest of 2019, points to 2020 surplus despite an upward revision to demand. Nick Cunningham at Oilprice did the same thing, called the OPEC report bearish. 
The key thing to look at is the revision line on the demand table: https://rjsigmund.files.wordpress.com/2019/08/july2019opecreportglobaloildemand.jpg.

This is the explanation in greater detail:
What happened here is that whoever wrote the OPEC summary misstated what the data showed.

The Reuters article reads "the Organization of the Petroleum Exporting Countries cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market will be in slight surplus in 2020."

Since that didn't fit anything I saw when reading the report, I went back and found the summary that Reuters referred to.

On page 43 of the OPEC report, the first line of their demand summary says
"World oil demand is projected to rise by 1.10 mb/d in 2019, showing a downward revision of 0.04 mb/d from the previous month’s projection. "
The table on the same page shows the data, which I've already written about (see link to the table above);

You'll see that demand for 2019 was revised 0.05 mb/d HIGHER...but because demand for 2018 was concurrently revised 0.08 mb/d higher, the GROWTH of demand from 2018 to 2019 was revised down a rounded 0.04 mb/d.

Everyone who is writing about the OPEC report is taking that downward revision of growth to mean reduced demand, which is not the case. In fact, third quarter demand was revised 0.08 mb/d higher and came in 1.98 mb/d greater than July's global output.
Comment: I see this often: folks confusing "growth" with "demand" when looking at these reports. 

This gets deep into the weeds but it's important enough on many levels to deserve a post of its own.

Bottom line:
Demand growth was adjusted lower, not that demand was adjusted lower.

In fact, 2019 demand was adjusted higher, but 2018's demand was revised even higher, and hence the difference between 2018 and 2019, ie "growth", was less.
I get it. I wouldn't have figured it out on my own, but I get it. Because I've made that same mistake.

By the way, on another note, I pretty much ignore prognostications regarding crude oil demand put by out OPEC. 

Geico Rock Award Nominee -- August 20, 2019

Readers of the blog have been talking about this for years. An economist finally noted the phenomenon.

This is the best example for a nominee for the Geico Rock Award. I only feel badly because this is not the only "economist" who should be nominated.

Anyway, here's the story, https://www.foxnews.com/media/economist-reacts-to-high-numbers-of-new-yorkers-fleeing-to-florida-because-of-high-state-taxes#.
Heritage Foundation chief economist Steve Moore reacted to the high numbers of New Yorkers who are fleeing to Florida because of high state taxes.

“This is the big demographic story of our country that may be the biggest economic story,” Moore said."

He said there are “four states of the apocalypse” – New York, New Jersey, Connecticut, and Illinois – which have the most residents fleeing over high taxes and huge budget problems.

They are leaving for Florida, Tennessee, Texas, Utah and North Carolina.

You can buy a house just with the money you save on income taxes,” Moore noted.

A bump in moving activity started with the federal tax overhaul in 2017. Although rates were cut for corporations and individuals, the ability of residents to deduct state, city and property taxes from their federal returns in places like New York, New Jersey, and Connecticut was diminished.
The exodus began well before the 2017 tax law.

Another "Surprise" Draw -- It's Always A Suprise -- Forrest Gump -- August 20, 2019

"Surprise crude oil draw fails to lead WTI higher." -- oilprice.
  • an inventory draw of 3.45 million bbls
  • analyst expectations: a 1.889-million-bbl draw (note the false precision)
I can't get too excited about this; would this really move the needle? Nah....

Cactus II Pipeline Operational -- Keeping Texas And The US Great -- August 20, 2019

See the RBN Energy  story for background.

From S&P Global:
The first US crude cargo originating from the new Cactus II pipeline loaded onto the Aframax Paramount Hatteras out of the Buckeye Terminal in Corpus Christi, Texas.

The Paramount Hatteras is currently stationary near GOLA after arriving there Monday. It's likely the ship is headed to the terminal to conduct a reverse lightering job for a VLCC set to export.
CFlow shows the Paramount Hatteras anchored next to the Irini N Lemos, a currently unladen VLCC. SK Energy booked the Irini N Lemos for a US Gulf Coast-South Korea run at lump sum $4.975 million, loading August 17-21, according to Platts fixture logs.

".... soon be the first in the Port of Corpus Christi to export these barrels transported to South Texas via one of three large Permian long-haul pipeline projects," ...

On August 12, Trafigura announced in a press release that the 670,000 b/d Cactus II pipeline began service to Ingleside, Texas. Cactus II service to Corpus Christi is expected to start in the first quarter of 2020.

Cactus II will be joined by the 400,000 b/d EPIC crude pipeline and the 900,000 b/d Gray Oak pipeline, both expected to start up by year's end.

Eleven New Permits -- August 20, 2019

Active rigs:

$56.098/20/201908/20/201808/20/201708/20/201608/20/2015
Active Rigs6358533275

Eleven new permits, #36870 - #36880, inclusive:
  • Operators: Equinor (8); BR (3)
  • Field: Alger (Montrail); Elidah (McKenzie)
  • Comments:
    • Equinor has permits for an 8-well Jack Cvancara / Domaskin pad in section 30-155-92; Alger oil field; 
    • BR has permits for a 3-well Omlid pad in section 7-151-97; Elidah oil field
Sixteen permits renewed:
  • BR (5): five Lincoln Hill permits in Dunn County
  • Slawson (4): four Mole permits in Mountrail County 
  • CLR (4): four Putnam permits in Williams County
  • Whiting (3): one Sikes State; one Crane Creek State, both in Mountrail County; also an Iver & Minnie permit in Stark County

Random Note: The NDIC Confidential List -- August 20, 2019

1,494 oil and / or natural gas wells on the confidential list in North Dakota. Link here.

If 850 wells are drilled/completed/brought into production each year in North Dakota, 1,494 wells on the confidential list representate about two years worth of inventory.

**************************************
FWIW

Oilprice has still not reported that North Dakota set a new crude oil and natural gas production record in June, 2019. The story does not fit their "oil peak" narrative. LOL. 

In The Big Scheme Of Things, Weekly Changes In The Rig Count In The Bakken Don't Matter -- August 20, 2019

Idle rambling before I call it a day.

Back to my "rigs don't matter."

I think there's a corollary to this theme.

Unconventional plays will provide long time work to many more folks than conventional plays ever did. 

Having grown up in a conventional oil play, the Williston Basin, 1951 - 1969, it was my worldview (myth) that a few vertical wells were drilled every year; some years there were more wells drilled (a mini-boom) and then many years just a few wells drilled.

Once these wells were drilled (no fracking), a pump was placed on the well, and the wells simply pumped day in and day out. Occasionally, very occasionally, one might see a work-over rig but the work-over rigs were rare enough in the Williston Basin, 1951 - 1969, that we actually commented on them if/when we saw them.

We would see occasional oil trucks of some nature, and occasionally we would see a seismic crew with several trucks, but that was about it. Day in, day out, pumps pumping, but not a lot of activity once the wells were drilled, 1951 - 1969.

The Bakken boom, the shale revolution, 2000 - 2019 is completely different.

1951 - 1969: 18 years.

2000 - 2019: 19 years.

The Bakken boom, the shale revolution, is completely different.

Wells have become centers of activity. Unlike the conventional wells, the current horizontal fracked wells are a bundle of activity.

Drilled.

Pipelines put in: fresh water; crude oil pipelines; produced water. Pipelines or trucks.

Shut in (DUCs) for up to two years.

Fracked (which requires a whole new skill set).

Sand. Fresh water. Trucks, trucks, and more trucks. One can pipe fresh water to wells for fracking, but one can't pipe sand to pads (at last not yet). More work, more people.

Sand pits: Wisconsin, Michigan, Minnesota, Texas. More work, more people.

Ceramics: China.

While neighboring wells are fracked, older (producing) wells are shut in (which requires human resources).

Neighboring wells fracked.

Older wells: work-overs.

Older wells: mini re-fracks, work-overs, major re-fracks.

Mini re-fracks and major re-fracks need sand. The major re-fracks will use more sand than the original frack if the original frack was accomplished before 2012. Sand is not a one-time thing for unconventional wells.

And, over and over, and over.

Obviously rigs are important but in the big scheme of things, any one Bakken well will see a rig for about two weeks at most (three days to drill vertically; one day to drill the curve; three days to drill the lateral). Seven days to drill to depth is the goal.

But then, the Bakken well becomes a beehive of activity over the next ten, twenty, or thirty years. Impacted by neighboring wells; work-overs; mini-re-fracks; major re-fracks.

And flaring. In the old days, because of the spacing one might see a single well in any given section, a few more in better sections, but often a single vertical well was it. That was it. A good / great vertical well did not guarantee another good / great vertical well in the same section. So there wasn't a lot of flaring.

Now, one Bakken well in any given section is going to lead to pad drilling: four wells, eight wells, twelve wells, or more.  And they all produce a lot of natural gas over time generating more work for more folks.

And with all this activity: a typical Bakken well is going to "see" a drilling rig for seven days during those 35 years.

Just one more example at this post.

Note: some Bakken wells will be re-entered; so some Bakken will experience a second rig. But it appears that will be rare.

And we haven't even started to discuss EOR. 

Break, break, break.

I consider it a much better situation if the number of rigs drop to 30 or 20 or even 10 if production in the Bakken continues to set new records. Or if producers are meeting their production goals. CLR with its Long Creek Unit plans to drill 56 wells over the next two years with two rigs.

850 wells drilled/complete/brought on line each year divided by 56 wells = 15.

15 x 2 = 30 rigs.

Something will be drastically wrong if the rig count needs to go back to 200 to maintain production.

In fact, I'm kind of surprised that the active number of rigs in North Dakota has remained steady at around 60 rigs for so long (Baker Hughes counts 47 - 50). Why so many rigs when fewer would be adequate? Because there are so many operators in the Bakken. If there are 30 operators in the Bakken, they pretty much each need at least one rig to consider themselves "active" in the Bakken.

Texakota
Newfield
Enerplus
XTO
SHD
BR
Petro Harvester
MRO
Bruin
WPX
CLR
Equinor
Hunt
Slawson
Resource Energy CAN-AM
QEP
Hess Bakken Investments II
White Rock Oil & Gas
Sinclair Oil & Gas
Petro-Hunt
Zavanna
Oasis
Murex
EOG
NP Resources
Kraken Development
Denbury Onshore
Petrogulf
Crescent Point Energy
Missouri River Resources ND, LLC
White BUtte Oil Operations, LLC
Whiting
Nine Point Energy
Lime Rock Resources
Liberty Resources Management Company, LLC
Petroshale
Rimrock Oil & Gas
Freedom Energy Operating, LLC

We'll See If Rigs Matter When These Nine Wells Come Back On Line -- August 20, 2019

These wells are all off line for operational reasons: neighboring wells recently fracked --
  • 31962, IA/2,366, XTO, Bang Federal 21X-19E2, Lost Bridge, 4 sections, t8/18; cum 76K 3/19;
  • 31963, IA/2,596, XTO, Bang Federal 21X-19AXB, Lost Bridge, 4 sections, t8/18; cum 110K 3/19;
  • 20520, IA/1,056, XTO, Bang Federal 21X-19F, Lost Bridge, t7/12; cum 188K 3/19;
  • 31964, IA/2,823, XTO, Bang Federal 21X-19E, Lost Bridge, 4 sections; t7/18; cum 142K 3/19;
  • 31965, IA/2,446, XTO, Bang Federal 21X-19A, Lost Bridge, 4 sections, t7/18; cum 121K 3/19;
  • 20521, IA/1412, XTO, George Federal 21X-19B, Lost Bridge, t7/12; cum 265K 3/19;
  • 31966, IA/1,803, XTO, George Federal 21X-19F2, Lost Bridge, 4 sections, t7/18; cum 94K 3/19;

  • 17424, IA/497, XTO, Robert Federal 11X-20, Lost Bridge, t3/09; cum 212K 1/19;
  • 17397, 1,290, XTO, Thelma Federal 11X-20, Lost Bridge, t6/09; cum 235K6/19;; off line for less than a month

Two neighboring wells recently fracked:
  • 32921, SI/NC, XTO, Nygaard Federal 13X-5AXD, Lost Bridge, t--; cum: ; note, 12,499 bbls over 11 days extrapolates to 38K over 30 day;
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN6-2019111249912321655918678018676
BAKKEN5-20190010350000
BAKKEN4-20199518010386000
BAKKEN3-201931103506119110801108
  • 32920, 2,162, XTO, Nygaard Federal 13X-5EXH, Lost Bridge, t6/19; cum 52K 6/19:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
BAKKEN6-20193049064495643166883025083014
BAKKEN5-201932425122849507345803456

Two Equinor Wells Off Line And No Activity Noted -- August 20, 2019

Two wells have just come off line and there is no neighboring activity.

The wells:
  • 19215, IA/1,872, Equinor, State 36-1 2TFG, Stony Creek, t9/10; cum 242K 4/19;
  • 19216, 3,442, Equinor, State 36-1 3H, Stony Creek, t6/12; cum 303K 4/19;

Whiting Getting Ready To Frack Three Sanish Wells -- August 20, 2019

The graphic:

The wells:
  • 21758, 293, Whiting, Oppeboen 21-5TFH, Sanish, t5/12; cum 128K 5/19; off line as of 5/19;
  • 21759, 368, Whiting, Oppeboen 21-5H, Sanish, t3/12; cum 331K 5/19; off line as of 5/19;
  • 17072, 2,843, Whiting, Stenseth Trust 11-5H, Sanish, t7/08; cum 717K 5/19; off line as of 5/19;
  • 36325, SI/NC, Whiting, Stenseth Trust 11-5-2H,
  • 20280, 175, Whiting, Strand 11-5TFH,  Sanish, t11/11; cum 130K 5/19; off line as of 5/19;
  • 36140, SI/NC, Whiting, Oppeboen 12-5-2H, 
  • 18477, 1,685, Whiting, Oppeboen 12-5H, Sanish, t7/10; cum 393K 5/19; off line as of 3/19;
  • 36139, SI/NC, Whiting, Oppeboen 12-5-4H,
  • 19972, 2,705, Whiting, Oppeboen 14-5WH, Sanish, t7/11; cum 448K 5/19, off line as of 5/19;
  • 36323, SI/NC, Whiting, Oppeboen 14-5HU,

Back To RVs, Recession, And All That Jazz -- August 20, 2019

Wow, how many remember this story -- the sale of RVs point to "recession right around the corner"? That was posted back on July 27, 2019, linking a zerohedge story which I blew off as crazy. Apparently they're reading zerohedge or the blog over at The Wall Street Journal, link here.

Elkhart, Ind., is flashing a warning sign about the economy.

Capital of the country’s recreational-vehicle industry, the northern Indiana city and the surrounding area are watched by economists and investors for early indications of waning consumer demand for luxury items, often the first sign of economic anxiety.Shipments of recreational vehicles to dealers have fallen about 20% so far this year, after a 4.1% drop last year, according to data from the RV Industry Association. Multiyear drops in shipments have preceded the last three recessions.

“The RV industry is better at calling recessions than economists are,” said Michael Hicks, an economist at Ball State University, in Muncie, Ind. Mr. Hicks says softening consumer demand for RVs coupled with rising vehicle prices due to tariffs suggests the economy is either in a recession or soon headed for one.
**************************************
Phoning It In

"Yeah, I know. All that recession talk is crazy talk. My papa says we're doing just fine. He says to buy more Ford. What's a Ford?" 



Ten Wells Coming Off The Confidential List -- Another Boom? -- August 20, 2019

ND vs Norge: link sent to me by a reader from Norway -- link here, data points:
  • Norwegian production, June, 2019:
    • oil, NGL, and condensate: 1,409,000 bpd
      • crude oil: 1,067,000 bpd
      • NGL: 315,000 bpd 
      • condensate: 28,000 bpd
      • a decrease of 184,000 bpd compared to May 
    • natural gas sales: 9.4 billion standard cubic meters
  • crude oil production in June;
    • North Dakota: 1.424625 million bbls
    • Norway: 1.067 million bopd
  • North Dakota: 34% more oil production than Norway in the month of June, 2019
Wells coming off the confidential list today -- Tuesday, August 20, 2019: 54 for the month; 101 for the quarter:
  • 35936, SI/NC, XTO, Badlands Federal 21X-13AXD, North Fork, no production data,
  • 34873, IA, CLR, Ravin Federal 2-1HSL, 4 sections; Dimmick Lake, t--; cum --;
  • 34792, SI/NC, WPX, Sweet Grass Woman 22-15HY, 
  • 34180, IA, CLR, Ravin 12-1H2, Dimmick Lake, t--; cum --;
  • 34179, IA, CLR, Ravin 11-1H, Dimmick Lake, t--; cum --;
  • 34178, IA, CLR, Ravin 10-1H1, Dimmick Lake, t--; cum --;
  • 34154, 990, Oasis, Nelson 5298 14-26 12BX, Banks, t3/19; cum 115K 6/19;
  • 34153, 658, Oasis, Nelson 5298 14-26 11TX, Banks, t3/19; cum 68K 6/19;
  • 32398, SI/NC, Slawson, Atlantis Federal 5-34-35MLH, Big Bend, no production data,
  • 26802, SI/NC, XTO, Cole 44X-32G, Siverston; no production data;
Active rigs:

$55.988/20/201908/20/201808/20/201708/20/201608/20/2015
Active Rigs6358533275


Note rig count: second highest count in past five years for this date.

RBN Energy: an update on Marcellus / Utica natural gas processing and fractionation.
Natural gas production in the U.S. Northeast has been increasing steadily through the 2010s and now averages about 32 Bcf/d — 12% higher than last August and nearly double where it stood five years ago — despite the lowest regional spot gas prices since early 2016. This run-up in production volumes wouldn’t have been possible without the new gas-processing and fractionation capacity that MPLX and other midstream companies have been bringing online at a steady pace in the “wet” or NGLs-rich parts of the Marcellus and Utica shales. Today, we begin a short blog series on recently completed and planned gas-processing and fractionation projects in the nation’s largest gas-producing region, and the gas production growth they will help enable.
Maybe ND officials should visit the Marcellus / Utica to better understand how to handle growing production of natural gas.

From Bjorn Lomborg -- August 20, 2019

Link here.