Monday, January 7, 2013

Remember The Chinese Global Warming Story? Affecting CNOOC


January 8, 2013: 2012 was the hottest year in the contiguous United States on record (excluding the years that the Vikings were growing grapes in Vinland, but that's another story). It was notable that the earth's global temperature for 2012 was not noted in the linked article; perhaps that is coming. No one has yet said what the "correct temperature" for the US is; and, if the "correct temperature" for the contiguous United States is the "optimal temperature" for humans, which are apparently the most important animals on earth; the question has been asked often. (I would assume that the optimal temperature, for example, for the desert tortoise and the rattlesnake is different than the optimal temperature for humans, but tortoises and rattlesnakes do not have any wealth to redistribute.) No one has yet said who set the thermostat for the US in the first place. And, of course, there was no mention that 97% of greenhouse gases is ... drum roll ... water. Less than 3% of greenhouse gas is CO2 and if I recall correctly, only 3% of that 3% is anthropogenic. The last state to enter the contiguous US was Arizona in 1912 -- about 100 years ago; the year is about 4.5 billion years old, give or take a million years. Lots to discuss but this is a blog about the Bakken. Time to move on.

January 8, 2013: In response to the note below, one reader noted a recent story suggesting the cold in China and Russia is off-set by the record-setting heat in Australia, with temperatures soaring above 122 degrees.  As usual, key data points were not highlighted, including:
Yeah, it gets hot in Australia in January. Interestingly enough, it was "mainstream media news" in this country when Russia and China hit record lows; the Australia news was found in ... "" a site I don't often visit.

Original Post 

China's global warming story reported here earlier.

Now, is reporting that the icy weather is affecting CNOOC's operations:
 China National Offshore Oil Corp (CNOOC) revealed that oil and gas production at its largest base – the northern section of Bohai Bay – has been affected by icy weather.
According to a statement released by CNOOC in the weekend, large amounts of water in the Bohai Bay have frozen, forming a layer of ice up to 15 centimeters thick.
The country's meteorological administration also issued a statement in the weekend, warning of continued harsh conditions moving into February. In its statement, the administration said that North China experienced its coldest winter in 42 years, with temperatures hitting minus 7.4 degrees Celsius, 2.4 degrees lower than the average level in the previous years.
Forecasts of global temperatures rising one or two degrees over the next century are starting to look a bit shaky. 

Price Gap Between Brent and WTI Narrowing: Seaway Pipeline To Re-Open Later This Week

Link at the WSJ.
The price gap between the world's two most-important crude-oil benchmarks shrunk to its narrowest in more than three months Monday, as an expanded U.S. oil pipeline looks set to help relieve a domestic oil-supply glut.  
The difference between U.S.-traded West Texas Intermediate crude oil and Europe's Brent crude stood at $18.21 Monday, the narrowest since September.
The price spread has shrunk by 6.4% since the beginning of this year, due in large part to the announcement by pipeline operators Enterprise Products Partners LP and Enbridge Inc. (ENB) that 400,000 barrels a day of oil will begin to flow through their Seaway Pipeline by the end of this week.
The pipeline, which initially transported 150,000 barrels a day and was reversed earlier this year, transports oil from the oil-transit hub of Cushing, OK, to Gulf Coast refineries. Investors are betting that the pipeline will help lower record oil stockpiles in Cushing and raise the price of U.S. crude against its European counterpart.
This is not trivial.

Déjà Vu All Over Again -- The Enbridge Expansion Announcement; Seaway Pipeline Reversal Back On Line Later This Week

This is interesting.

Zacks is posting a story today that was noted last week -- but it's an important story: deserves repeating, especially in light of what's going on (or not going on) with Keystone XL.
The parent company of Enbridge Energy Partners LP  – Enbridge Inc. – announced its plans to spend up to $400 million to expand its Canadian mainline system between Hardisty, Alberta, and the U.S. border.

The pipeline is an extension of Enbridge’s pipeline construction plan at Edmonton and Hardisty, announced last November. The expansion will augment the capacity by 230,000 barrels per day (bpd) and involves increased pumping horsepower.
Okay, so that's one pipeline expansion.
But there's another one, also previously announced, and one that will go through North Dakota:
Enbridge Energy Partners also plans to expand the Lakehead System pipeline connecting North Dakota and Wisconsin. This extension will add 230,000 bpd to the capacity at an estimated cost of about $200 million.

Zacks is also reporting that the Seaway Pipeline reversal is opening sometime this week. RBN Energy has provided some interesting commentary regarding WTI pricing following this reversal. Also, the WSJ is reporting the same narrowing of benchmarks with the anticipation of the Seaway Pipeline Reversal.
Seaway Crude Oil Pipeline Company LLC –– a 50/50 joint venture between the affiliates of Enterprise Products Partners L.P and Enbridge Inc.  –– announced that the Seaway pipeline will commence operations at full rates towards the end of next week. The pipeline runs between Cushing and the U.S. Gulf Coast.

Currently, operations on the Seaway pipeline remain suspended for the completion of the final work, which includes the completion of the remaining pump station connections. The capacity of the 500-mile, 30-inch diameter pipeline is being raised to 400,000 barrels per day from about 150,000 barrels per day.
By the way, for investors: Motley Fool spoke of EPD as recently as today:
For Enterprise to improve, it needs to keep its streak of 33 consecutive quarterly payout increases alive while continuing to work on getting its debt levels down. As long as energy production remains a priority for the economy, unitholders should keep enjoying nice payouts.

Wells Coming Off Confidential LIst Tuesday

Active rigs: 180

Wells coming off confidential list Tuesday:

22207, 1,443, GMX Resources, Basaraba 34-35-1H, Magpie, t9/12; cum 20K 11/12; all natural gas being flared;
22660, drl, KOG, P Bibler 155-99-15-31-30-2H, Epping,
22769, 917, Hess, EN-Dobrovolny -155-93-2128H-2, Alger, t11/12; cum 16K 11/12; hooked up to NG line;
22779, 939, Newfield, Clear Creek Federal 152-97-36-25-3H, Westberg, t9/12; cum 27K 11/12; hooked up to NG line;
22825, 635, Whiting, Kubas 12-13PH, Bell, t7/12; cum 24K 11/12; hooked up to NG line, see below;
23052, 371, CLR, Wilhelm 3-21H, Lone Tree Lake, t11/12; cum 8K 11/12; hooked up to NG line;
23104, drl,  XTO, Hartsoch 15-35-1H, Midway,

22825, 635, Whiting, Kubas 12-13PH, Bell; hooked up to NG line, but production not exciting::

DateOil RunsMCF Sold

BEXP With Two Very Nice Wells; Another One in Banks Oil Field; Two (2) New Permits -- The Williston Basin

Bakken Operations

Active rigs: 180 (continues to flirt with the intra-low boom of 179)

Two (2) new permits --
  • Operators: OXY USA, Crescent Point Energy
  • Permits: Little Knife (Billings), Ellisville (Williams)
  • Comments: None.
Wells coming off the confidential list were reported earlier; see sidebar at the right.

Producing wells completed:
  • 23569, 439, Whiting, Miller 44-10TFH, Sanish, t12/12; cum --
  • 20714, 3,884, BEXP, Johnston 7-6 1H, Banks, t11/12; cum --
  • 22712, 2,207, BEXP, Holm 9-4 4H, Alger, t11/12; cum 14K 11/12;

2-Million-Barrel EURs in the Bakken? -- Michael Filloon

As Don says, "lots of numbers and EURs of 2 million barrels." That about sums it up, the "it" being Mike Filloon's most recent column.

Mike provides a great discussion of the various factors affecting production, decline rates, and EURs in the Williston Basin Bakken. But with modeling he shows several EOG short lateral wells in the Parshall oil field with EURs of one million bbls. Had they been long laterals, they would have modeled to two million bbls.

At the link, check out Table 5 and note the number of short lateral, Parshall oil field, EOG wells that model greater than 750,000 bbls. Here are just four of them:
  • 16713, 781, EOG, Austin 1-02H, Parshall, t12/07; cum 486K 11/12; now, 2K/month
  • 16371, 918, EOG, Ehlert 1-35H, Parshall, t4/07; cum 465K 11/12; now, 2K/month;
  • 16768, 1,441, EOG, Austin 2-03H, Parshall, t12/07; cum 535K 11/12; now 2K/month;
  • 16795, 1,519, EOG, Austin 4-09H, Parshall, t12/07; cum 545K 11/12; now 2K/month;
  • these were short laterals; most laterals in the Bakken are now long laterals
  • completion techniques have probably improved since 2007 when these wells were completed
  • northeastern McKenzie County might have even better wells than these Parshall wells
Having said that, in a recent column, Mike's modeling revealed EURs of 1.5 million bbls in Croff oil field and the "Helis Grail."  Be that as it may, these are staggering numbers.

Dominion Resources - 1; Sierra Club - 0: Cove Point, Maryland

Link here to Oil & Gas Journal.
A Maryland circuit court rejected the Sierra Club’s argument that a 2005 agreement allowing construction of a natural gas import terminal at Cove Point does not allow using it to export LNG. Dominion Resources Inc., the terminal’s owner, said it will move forward with engineering, marketing, and regulatory review processes to build a $2.5-3.5 billion gas liquefaction plant there.
And so it goes. 

Opportunities Still Exist In The Bakken: Another Modular Housing Upstart -- Laurel, MT, Firm

Link here to Billings
They opened System Building Solutions in the old Boise Cascade plant in Laurel, now owned by Fox Lumber Sales of Hamilton, on Nov. 1. Boman is the president and CEO and Auth is his plant manager. They have nine workers so far, who are getting on-the-job training by building a two-story, 20-room modular housing unit designed for use as an oil field man camp.
SBS plans to hire another nine workers in early February and then nine more every month for at least a year. Boman said they picked that number because it's the best size for training a new crew.
The production of high-density housing is the niche Boman sees his company filling, but he's open to anything his clients might want.
"What we are bringing to the market is simply construction capacity," Boman said. "If someone comes to us and says 'We want to build 500 single-family homes,' OK. We will consider that."
Laurel, Mt, 20 miles southwest of Billings, MT, on I-90, is about 330 miles from Williston, North Dakota, the heart of the Bakken. 

Camp Oil Field, The Bakken, Has Been Updated

Link here to Camp oil field.

Random Update on Oasis/CLR Activity In Area of Newest Gusher in Camp Oil Field -- The Bakken, The Williston Basin, North Dakota

Oasis reported a huge well earlier today. The well was in Camp oil field. That field caught my eye June 18, 2011, with the report of another huge Oasis well.

This is the Oasis well that came off the confidential list this weekend:
  • 22428, 4,341, Oasis, Casey 5200 13-30B, Camp, looks like a great well; t7/12; cum 91K 11/12; all natural gas is being captured and sold; this well sold >90,000 bbls of crude oil in the first five months of production, and around 100,000 boe during the same time period.
To the best of my knowledge, this well still holds the record for a reported IP in North Dakota:
  • 20589, 4,815, Whiting, Tarpon Federal 21-4H, Twin Valley, t10/11; cum 283K 11/12;  
Back to Oasis' Casey well in the Camp oil field. What else is going on in this immediate area? Running west to east, stretching less than 2.5 miles are the following wells/permitted locations (a few of these lie south of the main line):
  • 24287, loc, Oasis, Morrison 5200 11-30T, Camp,
  • 24288, loc, Oasis, Sully 5200 11-30B, Camp,
  • 22399, 3,330, Oasis, Lefty 5200 13-30H, Camp,
  • 19844, 1,760, Oasis, Hysted 5200 4-19H, Camp,
  • 19843, PNC, Oasis, Ogle 5200 44-19H, Camp,
  • 24643, loc, Oasis, Sherman 5200 41-20T, Camp,
  • 24644, loc, Oasis, Newberry 5200 41-20T, Camp,
  • 24645, loc, Oasis, Pingora 5200 41-20B, Camp,
  • 24646, loc, Oasis, Pikes 5200 41-20B, Camp, 
  • 22428, 4,341, Oasis, Casey 5200 13-30B, Camp, looks like a great well; t7/12; cum 91K 11/12;
  • 20399, 2,081, Oasis, Stewart 5200 12-29H, Camp, all NG is being sold;
  • 20400, 2,783, Oasis, Bering 5200 12-29H, Camp, all NG is now being sold;
  • 24613, loc, Oasis, Toby 5200 43-20T, Camp,
  • 24612, loc, Oasis, Leo 5200 43-20B, Camp, 
  • 24570, loc, Oasis, Shields 5200 43-20T, Camp,
  • 24569, loc, Oasis Inigo 5200 43-20B, Camp,
  • 23462, drl, Oasis, Elergy H 5200 44-20T, Camp,
  • 23463, drl, Oasis, Dois H 5200 44-20B, Camp,
  • 23703, drl, Oasis, Carol J A 5200 14-29T, Camp,
  • 23702, drl, Oasis, Taylor N 5200 14-29B, Camp,
  • 23351, conf, CLR, Missoula 2-21H, Camp,
  • 23352, conf, CLR, Missoula 3-21H, Camp,
  • 19578, 749, CLR, Missoula 1-21H, Camp, NG no longer being flared; t3/11; cum 149K 11/12;
  • 23428, conf, CLR, Missoula 6-21H, Camp,
  • 23427, conf, CLR, Missoula 7-21H, Camp,
  • 23430, conf, CLR, Missoula 4-21H, Camp,
  • 23429, conf, CLR, Missoula 5-21H, Camp,
  • 15879, 188, Oasis, Schmitz 44-30H, Camp, short lateral, a Madison well; t1/06, cum 57K 11/12;
  • 22306, 2,180, Oasis, J O Anderson 5200 31-28T, t5/12; cum 43K 11/12;
  • 18437, 2,887, Oasis, Angell 5200 31-28H, t5/10; cum 159K 11/12;
  • 24623, loc, Oasis, Crabapple 5200 44-29T, Camp,
Some comments:
  • note the balance of middle Bakken wells and Three Forks wells
  • in some areas, the Three Forks is much thicker than the middle Bakken
  • it is in this general area that CLR suggests there are four benches in the Three Forks
  • natural gas pipelines are reaching these wells and, to date, capacity meets demand
  • back in 2006, Oasis drilled a horizontal Madison well that continues to produce

Monday Links -- Wells Coming Off Confidential List Have Been Posted -- Oasis Has a Gusher

Wells coming off confidential list today and over the weekend have been posted. Oasis has a gusher; it's possible the IP of an Oasis well reported today is a record for Oasis.

RBN Energy: Ethane's price descent.
The price of ethane on Friday was only slightly above the price of natural gas on a BTU basis – a ratio of 1.03. But if you adjust the ethane price for the cost of transportation and fractionation (T&F) to get the value back to the plant level it gets a lot worse.  Assume 10 cnts/gal for T&F and the ethane price is more like 60% of the BTU equivalent price of natural gas at the plant tailgate.  These are serious ethane rejection economics for plants feeding Mont Belvieu.  And of course, Conway is worse with pricing at 19.9 cnts/gal.  Way above the prices this summer, but still in ethane rejection territory.
Grid problems unable to support India's electric vehicle industry, the New York Times.

Oil refiners using falcons to scare of starling infestations, the WSJ

For investors: KOG and CLR are recommended --