Monday, March 19, 2012

March Madness -- Saudi Moving To Calm Fears -- But Few Details

Drudge: gasoline -- highest price recorded in March history

Financial Times story here.
Saudi Arabia is taking steps to cool the overheating global energy market, boosting its exports to the US and re-opening old oilfields to expand production, as the world’s largest oil producer tries to prevent damage to the global economic recovery. 
The Saudi cabinet on Monday said the kingdom would work “individually” and with others for the “return [of] oil prices to fair levels.” Riyadh recently said it aimed to keep oil prices at $100.
And then this:
The kingdom has not yet publicly disclosed its moves, but Gulf and western officials and traders said the kingdom was boosting its oil exports to the US, after hiring more super-tankers last week. They said it was also reviving production at oil fields mothballed decades ago.
So, we will see. 

By the way, President Obama will be at a Carlsbad, New Mexico, oil field on federal land tomorrow, as well as a photo op at Cushing, Oklahoma, later. Rumors are he will mention that he supports the southern portion of the Keystone XL pipeline which will run from Cushing to the gulf.

Wow, banning oil from Canada -- bright idea.  [Update: March 20, 2012 -- energy workers not too happy with President Obama showing up in Cushing, Oklahoma.]

Elk Oil Field South Has Been Updated

Elk oil field, just across the river south/southwest of Williston has been updated.

Keystone and The President -- Not About the Bakken

I remember distinctly posting a story on the Keystone early on but said that would be my last Keystone XL posting  -- since the Keystone pipeline had so little to do with the Bakken.

And then, to my surprise, the Keystone took on a life of its own, and I've posted regularly on it.

Earlier tonight on CNBC ("Kudlow"), the governor of Montana, of the same party as Obama's, pointed out that not only is the Keystone XL 1.0 dead, but that there is no Keystone XL 2.0.

I was under the impression that TransCanada had come up with an alternate route across Nebraska, but the Montana governor said that was not the case. He said that the Nebraska legislature had called a special session to work out legislation that would govern any new route. The governor said that Nebraska hoped (there's that word again, as in "hope and change") to have the legislation completed by September/October so that TransCanada could submit a new route proposal.

I've said all along the killing of the Keystone XL would have no effect on the price of gasoline this summer, but Obama's enemies could demagogue it for all it was worth.

Keith Koffler, veteran White House reporter says it very, very well:
In what may go down as one of the worst political blunders of his presidency, Obama late last year bowed to environmentalists’ pressure and rejected the Keystone pipeline’s route through part of Nebraska, delaying by at least a year a major new source of oil just as gasoline prices started going through the roof.

Wednesday, he’ll be in Carlsbad, New Mexico to inspect oil and gas production fields located on federal lands.

The White House is desperate to repair the damage being done to Obama’s campaign by the price at the pump, and aides have suddenly begun portraying him as a great apostle of oil and gas drilling.
I can't wait for the story and the video coming out of Carlsbad. 

Koffler noted that Air Force One would be using fossil energy-energy-derived fuel and not algae-derived jet fuel.

Fourteen (14) New Permits -- The Williston Basin, North Dakota, USA

Daily activity report, March 19, 2012 --

Operators: Baytex (2), CLR (2), BEXP (2), Oasis (2), Denbury (2), Hess (2), Hunt,  Sinclair

Fields: Sanish, Patent Gate, Skabo, Big Butte, Werner, Alger, Tyrone, Siverston, Truax,

CLR has a wildcat permit in Billings County.

Seven (7) wells were released from "tight hole" status; four were completed and reported IPs, none of them remarkable.

Natural Gas Frack Crews Heading to North Dakota -- Just in Time for Summer -- The Bakken, North Dakota, USA

  .... energy companies in January fracked more wells than they drilled 
for the first time in five months, 
suggesting oil output could grow even faster 
than last year's 35 percent surge as 
a year-long shortage of workers and equipment 
finally begins to subside...


March 20, 2012: we had a foreshadowing of this issue in the February 12, 2012, conference call with Halliburton. (I assume Schlumberger and Halliburton have the biggest frack operations in the Bakken; Sanjel has a huge operations complex in Williston, but there are growing frack companies building in industrial parks west of Williston). See my list of fracking companies in the Bakken.
Let me start by providing some commentary on North America. The shift from natural gas to liquids-rich plays continues and was quite apparent in the fourth quarter. The U.S. rig count grew 3% sequentially, with oil-directed rigs up 8% and natural gas rigs down 2%. The shift toward oil and liquids-rich plays are a direct result of the stability of higher -- of oil prices and higher operator returns for these resources. Completing these wells requires higher levels of service intensity due to advanced fluid and completion technologies and creates an additional opportunity for us to otherwise differentiate ourselves from the competition.

...the Rockies and the Bakken are 2 areas where we have a particularly high market share, and both markets experienced some seasonal impacts yielding inefficiencies, particularly with our commuter crews.

We have moved or are in the process of moving 8 frac fleets from primarily natural gas plays to liquids plays. This requires redeployment of people and equipment. It disrupts a very efficient operation, and as well, it is requiring us to make adjustments to our supply chain. It's important to understand that these fleets that are moving are not looking for work but in each case now are committed to an existing customer or one who we could not serve before and, in each case, has or will deplace a competitor in the liquids plays.
Original Post

Repeat: for the first time in five months, more wells were fracked than were drilled in January -- this was the middle of the winter, when fracking generally slows down.

A huge "thank you" to a reader for alerting me to this story, perhaps the biggest story of the day. Maybe the Chicago investors will actually learn something about the Bakken.
Collapsing natural gas prices have yielded an unexpected boon for North Dakota's shale oil bonanza, easing a shortage of fracking crews that had tempered the biggest U.S. oil boom in a generation.

Energy companies in the Bakken shale patch have boosted activity recently thanks to an exceptionally mild winter and an influx of oil workers trained in the specialized tasks required to prepare wells for production, principally the controversial technique of hydraulic fracturing.
This is a huge story.
Six new crews trained in "well completion" -- fracking and other work that follows drilling -- have moved into North Dakota in the past two months alone, according to the state regulator and industry sources. Back in December, the state was 10 crews short of the number needed to keep up with newly drilled wells.
It's funny how things work out. A year ago I was worried about frack crews leaving cold, austere North Dakota for the greener fields in Ohio and Pennsylvania. Who wudda guessed?

Folks, we're still in the early innings in the Bakken.

Chevron Suspends Production Off-Shore Brazil After Fresh Leak

One of several stories at this link

The little bit I know about this story suggests is it naturally-occurring leakage.

Whether it is or not, two things: a) the Brazilians have learned how to impose huge penalties on Big Oil when given the opportunity (they learned this from US actions in the Gulf); and, b) it's going to be a tad bit more difficult to develop the Brazilian oil fields than anyone thought.

Technologically it's going to be a challenge, and it's clear the political environment is not good. The last thing the Brazilians want to see is an oil slick on their pristine beaches when the Olympic torch is lit. Although the reflection of the light on the oil sheen might rival any one of the seven wonders of the world.

But I sure don't understand the market. Chevron says it will suspend production in one of the biggest oil fields in the world, and is even considering leaving Latin America altogether, and, despite this, Chevron shares open slightly higher, flirting with a new high, after posting all-time highs last week.

This is not an investment site. This is simply an observation.

For those of us who love the Bakken, I can't think of a nicer story on a Monday morning than to find that one of the biggest oil fields in the world is going to be a technological and political minefield.

By the way, for those who have not heard, the Brazilians confiscated the passports of 17 American citizens (?) -- Chevron executives working in Brazil -- and will not allow them free passage back to the states because of the "leak." Hostages? Any different than the Iranians holding American hostages under the Carter administration?

List of Refineries That Have Shut Down, More to Come -- Not About The Bakken


Later: a reader send me the link to an analysis by the US EIA of the potential impact of the shutdown of the three refineries in the Philadelphia area. This is the link:

A long comment below also summarizes some of the high points of the article. Neither the EIA report nor the comment mentioned anything about the lost jobs. 

Oil and Gas Journal has a story on this EIA analysis

Original Post

List here.

Meanwhile, elsewhere:
The U.S. Congress' Joint Economic Committee will hold a hearing in April on the potential consumer impact of the shutdown of oil refineries, including three refineries in the Philadelphia area that represent half the refining capacity in the Northeast.

"Rising gas prices coupled with decreasing refining capacity on the East Coast raise serious questions about our ability to ensure an adequate supply of affordable fuel for American consumers," said U.S. Sen. Bob Casey (D., Pa.), the chairman. The hearing will be held at 2:15 p.m. April 26.
Maybe it's just me, but shutting down three refineries that represent HALF the refining capacity in the northeast suggests that the US has way too much refining capacity or .... nah, it must just be me.

The three under consideration for closing:
(I wonder if the administration has given any thought to nationalizing or buying these refineries, sort of like buying GM?)

Fewer refineries for Bakken oil? Short term pressure on Bakken pricing.

Shutting down refineries just as US goes into peak driving season. I guess that's an energy policy. Not one I would opt for, but an energy policy, nonetheless, I guess.

Oh, as long as I'm on the subject. These three Philadelphia-area refineries must have been completely automated, run by robots. I've not heard any concern about impact on jobs.

Next story: global oil supplies stretched by Chinese demand. And so it goes.

A Note to the Grandaughers

About a year ago my wife cut out a clipping from the Boston Globe Sunday magazine on Mt Auburn Cemetery, Cambridge, Massachusetts. The clipping included a full-page, color map of the cemetery. As mentioned earlier, my older granddaughter and I went birding there last Wednesday. The map came in quite handy. The cemetery is way too big to cover in one day. It was not a great day for birding; I thought it was too cool, but now I've learned the real reason. More on that in a moment. But we had a great day learning to recognize trees, or at least start learning to recognize trees. It will now be a lot easier when the leaves come out.

Now back to birding. Yesterday there was a long article in the Boston Globe on birding at Mt Auburn Cemetery.
Mount Auburn was founded in 1831 as the country’s first garden cemetery, a place of respite with rolling hills, ponds, flowering shrubs, and a mix of broad-branched trees that provided shade not only for those in mourning, but also for the public visiting with a picnic lunch. It would be such a success that it laid the groundwork for Frederick Law Olmsted to create the Emerald Necklace a half-century later.

Today, more than 200,000 visitors enter the gates of Mount Auburn annually. Sure, they might come to visit the final resting spot of a relative or to pay their respects to one from a long list of luminaries in American arts and letters such as Henry Wadsworth Longfellow, Winslow Homer, and Buckminster Fuller. Others like me follow in the footsteps of Roger Tory Peterson, the renowned 20th-century ornithologist who once led bird walking tours here in search of warblers, whom he called the “butterflies of the bird world.’’

.... As if on cue, a red-tailed hawk flew overhead, while to our left, a vibrant Baltimore oriole sat on a branch, twig in beak.

.... the orioles, scarlet tanagers, vireos, and the queen of neotropical migrants, the warbler, that had coaxed us to leave our pillows and arrive at this birding hot spot. Wintering in the Caribbean, Mexico, Central America, even South America, these enticing songbirds make their way north to New England and Canada to breed in the summer months. Mass Audubon schedules most of its spring walks at Mount Auburn the first two weeks of May, when the warbler migration reaches its peak.
So, my older granddaughter and I have a date to visit Mt Auburn during the first two weeks in May. I can hardly wait.

This morning on the way to school, the younger granddaughter, age 5, and I played 20 questions, "animal, plant, or mineral." She drives me nuts with that game. We have to play it every day on the way to school. Today, her winner was the "red-tailed hawk."

Sometime ago, when playing the same game, the older granddaughter's "animal, plant, or mineral" was oil. I was unable to guess it in 20 questions. Go figure.