Two More Natural Gas Plants -- Northwest of Williston -- This Really Is Incredible

It is impossible to articulate the immensity of the boom in western North Dakota. Even if there was nothing new being announced, the amount of activity would be impressive. But it seems every day we hear another announcement of another project coming on-line.

Here is an update of an ONEOK story posted on January 23, 2011: Bear Paw Energy has the permits to build the two natural gas gathering and processing plants northwest of Williston mentioned in the January 23, 2011 post (in that post, it was noted that three NG plants would eventually be built. (Regional links break early and break often.)

• Bear Paw Stateline I will be built 15 miles northwest of Williston in Hebron Township. The plant will be built on a 40-acre site near the corner of County Road 5 and 56th Street Northwest.
• A second plant, called the Stateline II plant, is planned for a 40-acre site next to the first plant. Link here (regional links break early and break often).

In addition, as a reminder, also in that ONEOK link, Bear Paw will build a 64-mile pipeline to carry natural gas liquids into Montana.

Bear Paw Energy, LLC, is a subsidiary of ONEOK. 

Some data points:

• The two plants will be capable of processing 200 million cubic feet of natural gas/day
• The plants will cost about $275 million to build
• The pipeline will cost about $24 million; capacity of the pipeline -- 65,000 bopd
• Currently one-fourth of North Dakota's natural gas is being flared (burned off)

The amount of activity around Williston is incredible. As an oil man with 30 years of experience in the oil business said, he has never seen anything like this.

More Global Warming Hits The Heart of the Bakken -- Williston, North Dakota, USA

Williston's 6.4 inches of snow two days ago set new records. Incredible. 6.4 inches in one day. Hmmm.

Carpe Diem

One of the best things about maintaining a blog: I find other interesting blogs.

I had forgotten all about "Carpe Diem." Once when I had more time to surf the net, this was one of my favorite blogs, but somehow I gradually wandered away.

This is a very, very good blog. I highly recommend it for an eclectic look at our national economy.

Bakken's Best Buys -- Bakken, North Dakota, USA

Investors.com opines on Bakken's best companies: BEXP, CLR, and OAS.

My favorite company to watch in the Bakken: Whiting.

KOG has been very, very interesting to watch; could become even more interesting with the XOM nexus.

NOG: fascinating to watch.

BEXP at the top of this list is absolutely incredible. I can't disagree. BEXP has the data to support CLR's contention that high IPs are associated with higher EURs, and the faster the well will pay for itself.

Note: this is not an investment site. I am inappropriately exuberant about the Bakken and I am only interested in Bakken story. It is difficult to separate stories on investing from the "Bakken story" but that does not mean I recommend that anyone invest any money in any Bakken company.

Flashback: Gulf CEO Predicted $20 oil, $1 gasoline in early 2009.

Flashback, 2008: Gulf CEO predicted $20 oil, $1 gasoline in early 2009. That prediction was made on July 24, 2008.

Hmmm.

Regime Change in Syria? Wow, This Is Incredible. -- Keep Accumulating Bakken Acreage (or Gold)

It appears the US administration is advocating regime change in Syria. This is very, very interesting. This would be awesome. Three possible outcomes (and I'm sure others can think of additional possibilities):

• a) a pro-Israeli regime (LOL)
• b) the Syrian government is able to channel anger of the masses against Israel (most likely, and being talked about on MSNBC today) with open conflict (again) between Syria and Israel
• c) Iran officially recognizes Syria as its first territory [more likely than (a) above]

This will be interesting. All I can say is keep accumulating Bakken acreage. One almost gets the feeling there is a self-fulfilling prophecy to get oil to $120.

(I wasn't going to add this, but this is all happening during the first term of a president who was awarded a Nobel peace prize shortly after he came to office.)

Note: this is not an investment site. The comment about "accumulating Bakken acreage" is simply tongue in cheek.

US Spending Billions to Restore Libyan Oil to France; Meanwhile France Puts a Moratorium On Their Own Domestic Drilling Program; Sound Familiar?

I had no plans to post this or link this story. I saw it a few days ago but felt it was not worth it to post it.

French Prime Minister Francois Fillon extended a moratorium on research and drilling for shale oil and gas until mid-June, pending reports commissioned by the government to establish their impact on the environment.

France has large oil and gas shale reserves, but projects have sparked controversy due to the possible impact on the environment caused by drilling techniques used on such deposits.

The hydraulic fracturing, or fracking, technique involves injecting water, sand and chemicals into rock formations at high pressure to force out oil and natural gas.

The story will become newsworthy if this is a permanent moratorium. A temporary delay is fine. But if it is permanent, it explains why France took the lead in attacking Libya.  Sad. If only the average person in the US realized that we are spending billions so France can have Libyan oil because France won't drill on its own soil. 

"Oil projects have sparked controversy due to the possible impact on the environment caused by drilling techniques" but apparently there was less controversy to attack another country for its oil. I wonder if the Libyan war would have been delayed had environmental impact statements been required?

The Paris Basin would ultimately produce more oil than Libya is exporting to France.  North Dakota currently produces more oil than Libya.

I.N.C.R.E.D.I.B.L.E. --> Twelve (12) New Permits Today -- Bakken, North Dakota, USA

Producers: CLR (4), Whiting (2), Marathon (2), Hess (2) , EOG, Samson Resources.

Fields: Sanish, Moccasin Creek, Parshall, Haystack Butte, Ambrose, North Tioga, Robinson Lake, McGregor, Dollar Joe, and a wildcat.

The two Marathon wells will be on the same pad in Moccasin Creek oil field.

The Two Hess wells will be on the same pad in Robinson Lake oil field.

Whiting continued a pattern noted some time ago earlier this year: one permit in its cash cow, the Sanish field, and a wildcat (this one in McKenzie County). If one wants to see how Whiting is financing its wildcats in the Williston Oil Basin, click here. Remember, once a well has produced 100,000 barrels of oil, it is on its way to paying for itself. Most of these Whiting wells will have reached 100,000 barrels in less than two years. Bakken wells are expected to produced for 25 - 30 years and EURs in the best Bakken are expected to reach 750,000 and more. Considering some are already at 300,000 bbls and less than three years old, I expect we could see even better numbers. I probably won't be around to see them.

No IPs were reported today on the daily activity report.

Is the Permitorium Coming To An End?

Updates

July 17, 2012: oil leak off-shore UK -- [if link breaks, googles, the Osprey] -- let's see how the Brits handle the post-spill response. Something tells me they (the Brits) won't close down drilling in the North Sea for any length of time.

April 8, 2011: Chevron says the permitorium continues.

March 28, 2011: There is no denying that the permitorium continues. CNBC today reports on a conference in New Orleans to see just exactly how fast a return to drilling in the Gulf will commence.

The reporter in New Orleans noted that just before the spill, there were 20 deep water drilling rigs in the Gulf and a push suggesting there would be 40 deep water rigs in the Gulf soon. Now there are only 15 deep water rigs in the Gulf. The most optimistic reports are that drilling will get back on track the second half of this year. The CNBC reporter at the conference sounded less optimistic. The reporter said any improvement in the Gulf would be a "slow bleed higher." Pretty sad commentary on our administration's ability to feel the pain of consumers paying $4.00/gallon of gasoline.

Original Post

A fifth deep water drilling permit has been issued for the Gulf of Mexico.

The US Bureau of Ocean Energy Management, Regulation, and Enforcement approved a fifth deepwater drilling permit for exploration in the Gulf of Mexico since the lifting of a moratorium imposed following the Macondo well accident and oil spill in the gulf.

BOEMRE said the latest deepwater exploration permit under its new regulatory regime went to Chevron USA Inc. for its Well No. 1 on Keathley Canyon Block 736 in 6,740 ft of water 216 miles off Louisiana.

It was being drilled when the moratorium was imposed. Initial activity on it began in March 2010 and was suspended June 9. 

I don't follow the Gulf closely enough to know if this is "big news" or not, but it certainly seems so. These first five permits have been issued in the past ten days or so, suggesting the process is gaining momentum.

With regard to the permitorium, this is a great op-ed in the Wall Street Journal back in November, 2010.

One of my favorite authors is JRR Tolkien, a philologist, and editor of the Oxford English Dictionary. It is a real hoot for me to see new words enter the lexicon, and it appears "permitorium" is a new word. It's not quite a portmanteau but comes close. It has been used enough in the print media to justify being added to the dictionary, but it's hard to say. It has been added to the oil industry lexicon.

Shale Gas Industry Avoids an "Erin Brockovich" Moment --

Updates

June 3, 2014: end of story? TRR absolves Range Resources completely. Rigzone is reporting:

Water contamination from explosive gas in the water supply of a North Texas neighborhood cannot be linked to nearby drilling, the Texas Railroad Commission (RRC) said in a recent report.

The investigation began after seven property owners in the neighborhood contacted the RRC about rising levels of methane in their water wells. An eighth property owner also found an increase of chloride in two water wells. In its finding that there was an insufficient link between the contamination of well water in the Silverado on the Brazos (Silverado) neighborhood in southern Parker County and drilling in the nearby Barnett Shale, the RRC, which regulates the state’s oil and gas industry, noted that the contamination has worsened in five of the eight private water wells it tested in September 2013, compared to the contamination measured in the same wells in 2010 and 2011.

However, the RRC geologist, Peter Pope, concluded that there was not sufficient evidence to reach a conclusion that drilling in the nearby Barnett Shale “caused or contributed to methane contamination beneath the neighborhood.” In its report, the RRC said that “the occurrence of natural gas in the complainants’ water wells may be attributed to processes unrelated to recent Barnett Shale gas production.”

It's a very, very long article for Rigzone. A great article; under normal circumstances this would be the end of the story, but under normal circumstances we would have different leaders in Washington, DC.
 

Original Post

This is a long involved story.

Synopsis:

A Fort Worth, Texas, resident found methane in his water wells. He sued the natural gas driller in the area, Range Resources.

Analysis of the "methane fingerprint" revealed that the methane in the plaintiff's wells was not coming from methane produced by Range Resources.

Range Resources can continue to drill.

Meanwhile, the Texas agency responsible for oversight of the oil industry in Texas is continuing to research the source of methane in the individual's water wells.

A couple of data points from the linked article:

On December 7, 2010, the EPA issued an endangerment order, ordering Range Resources “to take immediate action to protect homeowners living near one of its drilling operations who have complained about flammable and bubbling drinking water coming out of their tap.”

The federal agency said tests confirmed high levels of methane in the water, which could pose a risk of explosion or fire, and noted benzene, a known carcinogen, in the water.

During a hearing in January, David Poole, Range Resources’ general counsel, said the expert testimony would show the company’s gas wells were not responsible for the contamination of nearby water wells. The EPA did not send witnesses to testify at the January hearing.

Complete story here. Regional links break early and break often.

I have no idea why Range Resources was ordered to protect the homeowners in this case when it had nothing to do with the problem. Is this "guilt by association" or "guilty until proved innocent"? It seems that was a responsibility for public officials to protect homeowners.

By the way, I had forgotten this, North Dakota has a similar issue. Mike sent this in (see comments below): "While the EPA wasn't involved, the story reminds me of the study where they found shallow gas deposits in all of the counties in North Dakota., and found natural gas in 21% of their water testing sites." I guess the EPA folks are learning about the oil and gas industry as they go along.

Natural Gas Futures: Still Over $4.30 -- Supplies Down a Bit -- In Line With Expectations

CNBC, March 24, 2011, 10:30 a.m. EST.

That was posted earlier today. Now, 3:15 p.m. EST, I am posting this story:  Japan's requirements for fossil fuels will rise this summer as rebuilding moves into next phase. 

All four refineries of the ExxonMobil Japan Group are fully operational.

Meanwhile, undamaged refineries, such as JX Nippon’s Mizushima facility in Okayama Prefecture and Cosmo Oil Co.'s Yokkaichi refinery in Mie Prefecture, are expanding capacity.


According to the Petroleum Association of Japan, domestic demand for petroleum products totals 3.3 million b/d, and the industry soon should be able to meet most of that demand.

But that could change later this summer when the supply of electricity in the Tokyo area could fall as much as 15 million kw short of demand, about 25% of projected peak demand.

Tokyo Electric Power Co. (Tepco) is trying to fill the gap through by restarting an idle fossil-fuel power plant and repairing others damaged by the recent earthquake.

The government thinks such steps would help restore the region's power supply to 45 million kw—still be 25% less than the 60 million kw needed on the hottest days, when air-conditioning demand spikes. 

As noted in an earlier post, it's hard to say what's pushing the price of oil: Mideast tensions or Japan's rebuilding needs. It's obviously both and it will last longer than expected. 

More on the Whiting Wells in the Sanish Updated -- March 24, 2011

I have just completed a third township of data for Whiting wells in the Sanish.

These are incredible numbers. As a rule of thumb, once cumulative production hits 100,000 bbls of oil, the well is reaching point of being paid for.

Investors Only: This Should Be An Incredible Quarter for XOM

Updates

March 29, 2011: XOM increases energy supplies to Japan by 140%.

In an ongoing effort to quickly and safely supply much needed fuel to the areas in Japan hardest hit by the earthquake, ExxonMobil Group Japan has increased fuel supply into its Tohoku region dealer service station network by 140 percent above pre-earthquake levels. Since the March 11 earthquake and tsunami, ExxonMobil has moved more than 24 million liters of fuel, including gasoline, diesel, and kerosene, into the Tohoku region in northeast Japan, enough to fill 1,200 tank trucks. 

Original Post

This should be another incredible quarter for XOM.

Exxon has re-opened its Japanese terminal, and has opened the terminal to other suppliers, as Japan has asked for increased oil and kerosene to be delivered. I assume XOM will be reimbursed for use of their terminal.

In addition, XOM has now re-started all four of its Japan Group refineries, and they are working at near capacity. I recall that nuclear power provided 30 percent of energy to Japan, and I would assume much, if not most, of that has been curtailed.

When the world needs a policeman, they call the US military.

When the world needs energy, they call XOM. (More on that later, perhaps.)

Nice Overview of The Bakken -- Seeking Alpha

Very, very nice overview of the Bakken on SeekingAlpha.com for "newbies," and perhaps, seasoned investors. Of particular note, among CLR, WLL, Hess, etc., the writer highlighted Denbury which caught me by surprise.

Several Interesting Stories About Coal Industry Coming Out of Wyoming

An entire wrap-up of the Wyoming energy industry can be found here.

These are the stories that got me excited, considering this was the administration that was out to kill the coal industry, or at least bankrupt domestic coal-using utilities.

There is just to much to cover, so only the headlines, some data points, and the links:


Secretary of Interior to Wyoming to make major announcement.

Feds open 750 million tons of Wyoming coal to miners.

• "Vast amount" of coal; will take years to mine.
• Salazar: coal will remain important part of nation's energy policy for some time.
• Administration continues to support nuclear industry (comment: of course, they do: GE/CEO is the economic czar; nuclear energy industry provides campaign contributions; hunch: we are not going to see a new nuclear reactor built in this country in a new location in my investing lifetime)

Obama administration touts conventional energy 

By the way, who is shipping all that coal? Burlington Northern Santa Fe, a wholly-owned subsidiary of the "sage of Omaha."

My hunch is that there was a bit of double-speak with regard to "coal being an important part of this nation's energy policy for some time." My hunch is that utilities will be moving toward natural gas, and this coal will be shipped to China.

Coal will be major source of electricity for decades to come.  Yup, especially in light of recent Japanese nuclear disaster.

Thursday Morning Musings -- Bakken, North Dakota, USA

Flashback:

"So nothing has really changed in our thinking about the Bakken. It was just a timing thing related to the oil price shock in early 2009. Again, I’d like to remind everyone the Bakken is robust at $40. It returns the cost of capital at $40. So that’s why we feel very confident kind of pulling the trigger on the Bakken now and aggressively going after a five year program." -- Greg Hill, Hess, January 27, 2010, 4Q09 earnings conference call.

To repeat: "the Bakken is robust at $40." That was more than a year ago.

******

The Bakken never ceases to surprise me.

The volatility of the oil market never ceases to surprise me.

The current price of oil really surprises me.

******

Yesterday, it was reported that gasoline demand in the US has increased despite the increased price of gasoline. That is very, very remarkable. Much could be written on that.

Pundits continue to remark that price of oil at this level will not adversely impact economy of US. So far, they appear to be correct, and the market supports that view.

This a.m. I see that futures are up almost another buck for oil, now solidly over $106; and, the Dow futures are up another 45 points, coming on top of the modest rise yesterday. Natural gas is up another nickel, now up to $4.35.

******

I was not surprised that shares in oil companies in the Bakken took a hit yesterday with recent concerns about NOG.

My gut feeling is that shares in Bakken companies were based on EURs, "never" hitting a dry hole, and price of oil would remain at $60. Two of those three remain intact.

The question is whether oil is at $106 today because of a) concerns about the Mideast; or, b) the Japanese nuclear disaster.

My hunch is this. I was once told that the market looks out about six months. That was before the internet. With information moving so quickly, I think the market now looks out about two or three months. If so, the Mideast tensions are driving the current price of oil. But the stories coming out of Asia suggest that there is going to be a huge shift in what Japan, China, Indonesia use to supply their energy needs. There have been several stories in the past 24 hours of China's record use of oil, and tankers moving oil to Japan.

So, when and if the Mideast settles down (again), the amount of oil being delivered to Japan and China will become the next story to support the price of oil.

******

The recent pullback in shares in Bakken companies is offering another great opportunity to accumulate shares in the Bakken. It will be interesting to see what they do today if oil opens above $106.

If shares in the Bakken continue to be hit (if oil opens above $106 and the rest of the market is "green," it will suggest to me that we are being given another opportunity to enter the Bakken. 1Q11 earnings should be huge with price of oil at this level had it not been for the fact that the Bakken was shut in during the month of January. 1Q11 earnings will probably be a wash: high margins vs lack of production in January. But 2Q11 should be outstanding.

I've never been more bullish. I used to get concerned about $100 oil but when I read the story yesterday that gasoline demand in US grew, I was quite surprised, and my views have changed.

******

I do remember pundits on CNBC repeating often that fundamentals do not support $60 oil. It was hard for me to argue; supplies at Cushing were overflowing. Deliveries of Bakken oil to Cushing were being decreased; producers were looking for other places to send their oil.