January, 2011, Oil Imports Jump: Raises Questions

I was sent a copy of T. Boone Pickens' most recent memo regarding recent events in Egypt.

(Note: this is not a private memo. Mr Pickens sends out these memos on a regular basis and easily accessible to all.)

• Mr Pickens continues to advocate for his natural gas plan, using natural gas as a "bridge" to America's energy future.
• In his memo, he noted that the United States imported 366 million barrels of oil in January (2011) at an average price of $89.17/barrel. The amount imported represented 62 percent of America's requirements. Sixty-two percent.
• According to Mr Pickens, importing oil cost America $32.6 billion which was the most spent in any month since September, 2008, when the economic downturn began.
• Mr Pickens opines that "we'll" see gasoline prices hit $4.00/gallon this summer.

I was vaguely aware that January was a big month for oil imports but did not know that it was the most spent in any one month in the last two years.

*******

(For the rest of the discussion, I am just looking at volume; Mr Pickens was looking at dollars spent.) 

Going back to EIA data, these are the import numbers. In the summer of 2008, the US hit a recent high for imports. The imports dropped to a recent low during the economic depression:

• August, 2008: 10.128 million barrels/day imported
• December, 2008: 9.790 million barrels/day imported
• August, 2010 (one year ago): 8.816 million barrels/day imported
• December, 2010 (two months ago): 8.552 million barrels/day imported
• January, 2011 (most recent month): 8.879

Those are EIA numbers.

The Pickens' number (11.806) is such a huge jump it's possible that Pickens is including something the EIA does not include. But Mr Pickens said 366 million barrels in the month of January which is 11.806 million barrels/day (366/31 = 11.806 million barrels).  EIA data.

Regardless, the increase can only mean: a) the US economy is truly gaining speed and we consumed more oil; b) US production declined; or, c) a little of both.

My hunch is that it was a bit of both. Remember: the Gulf "permitorium" continues.

What doesn't make sense is why we imported so much foreign oil when the tanks at Cushing are maxed out.

Update on Three SuperLongLaterals -- Bakken, North Dakota, USA

Technically these are not the "super long laterals" that folks talk about in deep water drilling, but they are longer than the typical long laterals in the Bakken, and in one case, significantly longer.

The Van Hook field is a very good field, but some of it lies under the wide part of the lake (as does the Big Bend oil field). In most cases, the middle of the lake can be reached from the edge of the river with a "typical" long lateral. However, in three cases, the laterals are going to set new records in the Bakken.

18749, 502, Slawson, Osprey Federal 1-26-25-30H

This one is in Big Bend oil field, on the west side of the river. Looking at the GIS map server, it appears that it was set back quite a bit from the lake, resulting in a total depth of 21,910 feet. I think it set a record for total depth at the time it was completed. It was completed in September, 2010, and has produced 42K bbls to date.

19720, EOG, Liberty LR 14-23H

This one, located in the Van Hook oil field, is being drilled and is almost complete. It is located on the east of the lake, almost directly across the river from #18749, described above. Based on the well file, it reached TD on January 1, 2011 (it was spud December 13, 2011). Its total depth is 22,212 feet, and thus, appears to hold the record for total depth for a Bakken well. The length of lateral was 12,221 feet (2.3 miles).  It took 18 days from spud to total depth.

19433, EOG, Liberty LR 17-11H

This one is also in the Van Hook field, on the east side of the lake, about a mile north of #19720 noted above. They've started drilling the well; it was spud January 25, 2011. The estimated total depth for this well is 24,496 feet, which would be the new record for a Bakken well. My original posting regarding this well is linked here.

Again, these are not the "super laterals" folks talk about in deep water drilling, but we are seeing some new records set in the Bakken.

In fact, I think a better term for these longer laterals in the North Dakota Bakken is: "extended long laterals."

Whiting: 15 Wells in 3 1280-Acre Spacing Units: Room For More? -- Bakken, North Dakota, USA

Periodically I enjoy taking a look at a random spot on the NDIC GIS map server to see what is going on.

It's been a long time since I've looked at the Sanish oil field, one of the two best fields in the Bakken (the other being the Parshall oil field) and so I thought I would take some time and look at it today.

There are still nine (9) active rigs in the Sanish today, just as there were back in November, 2010.

The number of long laterals in the Sanish is astounding. As an example, Whiting has a string of ten producing wells and five permits in block of six sections (5, 6, 7, 8, 17, 18) in T153N-R91W. These fifteen pads run in a north-south line (technically there are two more, but their laterals run in the opposite direction, away from these six sections).

This is the status of these 15 wells / permits (updated June 10, 2012):

• 18804, 1,561, TTT Ranch 4-6TFH, cum 134 4/12;
• 17603, 2,825, TTT Ranch 11-6H, cum 335K 4/12; 
• 20374, 980, Troy TTT 12-6TFH, t8/1; cum 31K 4/12;
• 18297, 2,762, TTT Ranch 12-6H, t3/10, cum 282K 4/12;
• 18876, 3,023, Rohde 14-6XH, t8/10, cum 226K 4/12;
• 17133, 2,195, Smith 11-7H, t8/09, cum 254K 4/12;
  
• 20041, conf, Merilyn Smith 12-7TFH;
• 18392, 2,530, Smith 12-7H, t3/10; cum 222K 4/12;
• 18853, 1,485, Moore 14-7XH, t7/10; cum 162K 4/12;
• 16852, 1,765, Abbott 11-18H, t6/08, cum 332K 4/12;
• 19992, 1,181, Marmon 11-18TFH, t8/11; cum 36K 4/12;
• 18500, 1,073, Marmon 12-18TFH; t8/10, cum 24K 4/12;
• 17443, 1,663, Fladeland 12-18H, cum 308K 4/12;
• 20293, 425, Fladeland 13-18TFH, t7/11; cum 14K 4/12;
• 20227, 1,060, Fladeland 14-18WH, t7/11; cum 88K 4/12;

That's 15 locations in three 1280-acre spacing units.

Back-of-the-envelope calculations:

• If one multiples 3 x 1280 = 3840 acres
• 3840 acres/15 = 256 acre spacing (another way of looking at it)

According to Micheal Filloon in a piece this week about KOG, also in a very good Bakken area:

The story of the Bakken seems to be new techniques in the area. Some of the competitors have started offset drilling with 160 acre spacing, and are getting decent results. Kodiak claims these changes are making decent production increases in the area.

If one divides 3840 acres by 160 acres/well, one gets 24 wells. Obviously WLL has not mentioned any plans to go to 160-acre spacing in this area, but WLL has talked about as many as 8 wells in a 1280-acre spacing unit.

3 x 8 = 24.

So, using two different methods, one can arrive at the possibility of 24 wells where there are now 15 Whiting wells/permits.

I think it's very likely.

How Long to Drill Out the Bakken/TF? >22 Years With 7 Rigs: Oasis Corporate Presentation - February, 2011

Link  here. At that site, select "Investors," and the select "Presentations" on the drop-down menu.

Net acreage

• West Williston: 191,552 net acres. Includes Hebron Area in Montana
• East Nesson: 102,790 net acres
• Sanish: 8,889 net acres

Net wells: identified drilling locations

• West Williston: 859 gross; 393 net
• East Nesson: 255 gross; 128 net
• Sanish: 1,303 gross; 537 net

Currently: 2,458 drilling locations identified
With a 7 rig program: over 22 years of drilling inventory
2011 Plans

• 2011 CAPEX: six rigs in West Williston; one rig in East Nesson
• Six rigs in WW will be one additional rig in this area; currently 5 rigs
• $441 million 2011 CAPEX for drilling
• Continue acquiring acreage

IPs: Oasis uses a 7-day average

• West Williston: 567 - 708
• East Nesson: 547 - 836 bbl

Hebron Operating Area: part of the West Williston Prospect; in Montana

• North of Elm Coulee (Richland County)
• Included in the West Williston prospect
• Before 11/5/10: 17,300 net acres
•  11/5/10: acquired 16,700 net acres; $3,000/acre, Roosevelt County, north
• 12/10/10: acquired 10,000 net acres: $3,000/acre, Richland County, south

Pad Configuration: 2 x 1280-acre spacing unit

• Three pads in line, centered
• Each pad with two horizontals: one south, one north
• Six horizontals in each 2 x 1280-acre unit
• Three horizontals in each 1280-acre unit

Pipelines: Update on the Kinder Morgan IPO -- Not A Bakken Story

Huge success for the Kinder Morgan IPO.

The pipeline company Kinder Morgan raised $2.86 billion in the biggest ever initial public offering for a U.S. company backed by private equity firms.

Kinder Morgan was able to sell more shares at a higher price than it anticipated. Investors pushed shares more than 3 percent above their $30 offering price in afternoon trading.

I do like pipelines. 

Kinder Morgan, based in Houston, moves gas, oil and other fuels through 37,000 miles of pipeline and 180 terminals. Investors hope the company will benefit from increasing production from newly unlocked natural gas and oil in shale formations across the U.S.

Ticker symbol: KMI.

Megaload Update: COP's First Megaload Enters Montana Today

The megaload is expected to reach the top of Lolo Pass today. See update here.