Week 2: January 6, 2013 -- January 12, 2013

National
Seaway reversal complete

Bakken operations
Whiting's Sanish wells model to 2 million bbl-EURs 
2 million-bbl EURs in the Bakken
Hunt Oil to begin major drilling operations in Divide County
North Dakota oil production drops month-after-month; first time in recent boom
Emerald Oil selling Colorado acreage; focus on the Bakken
OXY USA says it has cut drilling cuts
Burke County may be the eastern edge of the Bakken
Huge Oasis well; record IP for the company?

Pipeline
Enbridge to add another $600 million to $6 billion pipeline project

Rail
Canadian oil sands shipping oil via rail to Mississippi
RBN Energy: Bakken oil to the St James rail yards in Louisiana

Economic development
Fuddruckers coming to Williston
Five Guys Burgers and Fries could come to Williston
Hyatt House to open in Minot
Update on $140 million development in Stanley
Eastern North Dakota development: Jamestown Expansion; John Deere in Fargo
Developers eying Beach, ND
Another modular housing upstart serving the Bakken; out of Laurel, MT

Apache Looking to Use Natural Gas, Not Diesel, To Power Pumps

This post has been revised substantially. See first comment. I misunderstood the issue; and the original post was in error. A huge "thank you" for a reader for setting me straight.

It looks like Apache is looking to use natural gas instead of diesel to power the pumps used for hydraulic fracking:

Apache Corp., Houston, said it has partnered with Halliburton and Schlumberger to find ways to use natural gas to power hydraulic fracturing, one of the most energy-intensive processes employed by the industry.

Only 1% of drilling rigs and zero full frac spreads are powered by gas, Apache said. In 2012, the industry will have used more than 700 million gal of diesel to pump sand and water during fracture stimulation. That’s $2.38 billion spent on diesel at a recent average of $3.40/gal.

Converting the process to using field gas would reduce fuel costs by 70%, said Mike Bahorich, Apache’s executive vice-president of technology.

“When I approached Halliburton and told them Apache wanted to do this, they told me that the reason that frac spreads that moved every week did not run on natural gas was due to the complexity of the natural gas supply and support infrastructure,” Bahorich said. “I also contacted Schlumberger. It didn’t take long for both companies to call back and tell me it could be done.”

A lot more detail at the link. 

Nine (9) New Permits -- The Williston Basin, North Dakota, USA

Bakken Operations

Active rigs: 182

Nine (9) new permits -- 

• Operators: Hess (3), Petro-Hunt (3), Whiting (2), Zenergy,
• Fields: Cedar Coulee (Dunn), Robinson Lake (Mountrail), Antelope (McKenzie), Sanish (Mountrail) Foreman Butte (McKenzie)
• Comments: None.

Wells coming off confidential list were posted earlier; see sidebar at the right.

Seaway Reversal Complete -- Crude Starts Flowing Again

At least two links. The first link from Wall Street Cheat Sheet:

Enterprise Products Partners and Enbridge Energy Partners  are contributing to record levels of oil supplies held at the transit hub in Cushing, Oklahoma. The 500-mile, 30-inch diameter Seaway Pipeline, a joint venture between the two oil companies, resumed service on Friday with an improved capacity of 400,000 barrels per day, an increase of 150,000 barrels.

With the pipeline’s expansion enabling increased volumes of crude oil from the Midwestern United States to reach refineries along the Gulf Coast, prices on Europe’s Brent crude oil benchmark fell.

On Friday, Brent for February settlement dropped 1.5 percent to $110.27 per barrel on the London-based ICE futures exchange, which was the greatest decrease since December 6. As a result, the gap between the European benchmark and the U.S.-traded West Texas Intermediate crude oil shrank by $1.01 to $17.06 a barrel, the narrowest premium since September 21.

Reuters take on this story:

The Seaway pipeline expansion start-up is continuing as planned, and crude oil is flowing through the line, a spokesman at Enbridge said on Friday. The expanded 400,000-barrel-per day line, more than twice the 150,000 bpd previously, started up Friday.

And Bloomberg's report, on pricing:

Light Louisiana Sweet, the benchmark low-density, low- sulfur crude on the Gulf Coast, weakened 25 cents to a premium of $16.85 a barrel more than West Texas Intermediate in Cushing, according to data compiled by Bloomberg at 11:30 a.m. in New York. That’s LLS’s lowest premium to the U.S. benchmark since Sept. 6.

Heavy Louisiana Sweet oil’s premium to WTI shrank 50 cents to a $16.50. Mars Blend, a medium-gravity, high-sulfur crude from the Gulf of Mexico, weakened by $1 to a $12.25-a-barrel premium to WTI.

Wyoming Shenanigans Updated ... and Comment Period Extended For About Another Year

Updates

January 21, 2013: Writer suggests EPA owes Wyoming an explanation. Don't hold your breath. 

Original Post

... I assume the EPA is just hoping folks forget about this one....

Link to trib.com.

Federal environmental regulators have once again lengthened their investigation into potential groundwater contamination at a west-central Wyoming natural gas field, riling the operator in the field and area landowners, who are both fed up with the delays.

The U.S. Environmental Protection Agency on Thursday stretched to Sept. 30 [2013] the public comment period on its investigation of the natural gas field near Pavillion, its third such extension.

The agency is trying to discover if natural gas drilling and hydraulic fracturing contaminated groundwater near the town. Its draft report issued in December 2011 implicated drilling and specifically hydraulic fracturing, or fracking, in contamination it found in test wells.

The announcement marks the third time the agency has extended a public comment period on the investigation, which first opened Dec. 14, 2011. The period was extended in early 2012 after the agency agreed to additional tests in the area by the U.S. Geological Survey, and again in October.

Director's Cut: November, 2012 -- North Dakota Oil Production Drops Month-Over-Month; Weather Cited As Factor; Snowiest Day in Williams County Since 1901; Permitting Less Than Half Just Two Months Earlier

Updates

January 13, 2013: The Minot Press has a story on the drop in production. 

Original Post 

Director's Cut, November, 2012 --  Link here to the NDIC site.

Oil

• Nov: 733,078 bopd (~ 2.0 % decrease; see comments from director below)
• Oct: 747,212 bopd (all-time high)(~ 2.5% increase)
• Sept: 729,248 bopd
• Aug: 701,409 bopd

Producing wells

• Nov: 8,101 (preliminary) (new all -time high)
• Oct: 8,035
• Sept: 7,899

Permitting

• Dec: 154 ( significant decrease)
• Nov: 211 (all-time high was 370 in Oct 2012)
• Oct: 370 (all-time high)
• Sept: 273
• Aug: 261

Pricing

• Dec: $77/bbl
• Nov: $81/bbl
• Oct: $87/bbl
• Sept: $85/bbl
• Aug: $81/bbl

Rig count

• Dec: 184
• Nov: 186
• Oct: 188
• Sept: 190
• Aug: 198

Month-over-month production gains came to an end in November. This was due to a number of factors according to the Director, NDIC. The two majors reasons: a) companies cutting back on fracking at end of year for cost control; and, b) weather.

Cost control: as the year came to an end, companies simply found they had spent their CAPEX for fracking for calendar year 2012.

Weather: Director, NDIC, considers weather to be the main reason why fracking was significantly decreased in November, and specifically the winter storm Brutus. "Williams County was impaced the most with November 10, 2012, being the snowiest day since 1901. The idle well count rose shaprly indicating an estimated 410 wells waiting on fracturing services."

MDW comments

• with price of oil down for the month of November, maybe that was not so bad that production was held back (idle chatter; I don't really subscribe to that theory because most oil is sold by contract; prices hedged long before actual date of sale)
• we may need to start comparing year-over-year production numbers (for example, November, 2012, with November, 2011), now that we're moving into the manufacturing phase, rather than consecutive month-over-month due to significant weather changes during some periods

Also, note the significant drop in leasing. This doesn't seem surprising. When I update the various oil fields, I note that more and more fields are entirely held by production. By the way, I would assume that if leasing is coming down, the Bakken-centric operators are starting to see a huge decrease in new lease expenses.

Pipelines Will Be the Energy Story of 2013

This is just a snippet of an energy interview conducted by the WSJ but even this much provides a bit of data to consider.

This is the teaser the WSJ provides:

TWST: You expect 2013 to be the year of the pipeline. What developments do you think we will see and who will be the key players? 

Mr. Sankey: Yes, so you've had a revolution in U.S. oil and gas, a total revolution. 

And what happened is, previously looking at a 30-year trend of falling supply in the U.S. and rising demand, we now have falling demand and rising supply. And essentially over 30 years, you developed infrastructure to increasingly import oil and gas in order to make up for the shortfall between rising demand and falling supply. 

What's happened in the last five years is, we've turned into a market where certainly from the unconventional oil and gas revolution, supply is rising right when we've seen the peaking of oil demand and demand has started to fall, and there's also a total reversal of the dynamic of imports coming into the center of U.S. now turning into production coming from the center to the outside. So the net result has been that you had some massive breakdown in prices in various places where there simply isn't the right infrastructure which is designed to be the opposite of what it's required to do. As a result of that, an enormous boom similar to what we saw in natural gas a few years ago is now happening in oil because of the very wide differentials and because of the economics of building pipelines to take advantage of these. 

We have 20 major pipeline projects being developed and starting in 2013 alone for about 4 million barrels a day of oil transport into Houston by 2015, which we think is the biggest single oil pipeline infrastructure addition ever seen in the world. And by the way, we have same thing happening in 2014, another 20 pipelines for a similar amount for additional oil transport. 

So it's a huge story that I think a lot of people don't fully appreciate. 

TWST: What do you expect to be the implications of the U.S. crude export ban? 

Mr. Sankey: The current market is less impacted because you are still importing fairly significant quantities of light sweet oil. 

The mistake people make is that they look at the total quantity of imports of crude oil, which is about 8.5 million barrels a day, and don't appreciate that the growth in U.S. oil supply is light sweet oil. 

There are significant differences between qualities in crude oils, especially in regards to what's attractive and what makes money for refiners, and what we are essentially doing is very rapidly substituting away all our light sweet imports, which is now down to only about 0.5 million barrels a day remaining on the Gulf Coast, which is the main refining center. 

And as I said, with the 4 million barrels a day of pipeline capacity that we see by 2015, we expect total substitution of light sweet crude imports into the U.S. by middle of this year, mid 2013. The net effect will be the beginning of significant oversupply...

Many, many story lines. 

Wonderful Warm Spell Here In The East -- Lovin' It

Record-breaking temperatures expected in the East. I don't hear anyone complaining!

Daily record highs will fall by the wayside through the weekend in the South and East.  

In fact, records for the month of January were tied Wednesday in 4 Florida cities Wednesday:

• Ft. Myers:  88
• Lakeland:  87
• Sarasota-Bradenton:  87
• Tampa:  85

But back, closer to home, they, too are apparently enjoying great temperatures: on Thursday, International Falls, MN, reached 48 degrees, beating its previous record high for the day by seven degrees.

Meanwhile, as reported yesterday, California is facing an epic cold spell; the Grapevine in southern California was closed; I don't know if it's been opened yet. I assume it has.

Developers Eyeing Beach, ND, For Development

Link here to The Dickinson Press.

Although it has been on the fringes of recent Bakken oil play-related development, the city of Beach could soon be changing.

In the next few years, the town of just more than 1,000 people could nearly double in population thanks to a proposed 240-acre development that would sit just north of Interstate 94 on land that has been annexed by the city.

Representatives from Bakken Development Fund, a Salt Lake City-based company, were in Beach this week, .... the development .... would be split into two parcels of 160- and 80-acres each.

...  single-family housing, apartments, retail space and industrial uses. .... as many as 380 single-family residences could be constructed.

Go to the link for the full story.

Gandolf the White Is Coming -- And We're Not Talking About TLOTR

Link to The Dickinson Press here.

A winter storm — named “Gandolf” by The Weather Channel — is set to pummel most of North Dakota and about two-thirds of South Dakota today, bringing with it barely above-zero temperatures that will hang around through the weekend.

Dickinson and the rest of southwest North Dakota is forecast to experience 4 to 8 inches of snow while Bismarck, Jamestown and the rest of the central part of the state is expected see between 6 and 10 inches, said Bismarck-based National Weather Service meteorologist Lindsay Tardif-Huber.

Follow road conditions in North Dakota at this link.

In The Lord of the Rings, the guardian angel was referred to as Gandalf the Grey before his death; and Gandalf the White when he returned.

Friday Links: Relief For Hurricane Sandy Should Be Huge Boost To Economy -- $70 Million Per Linear Mile of Coastline from Maine to Maryland

Wells coming off confidential list today have been posted. BEXP has a nice well. OXY reports a well.

RBN Energy: Across the Rio Grande -- the natural gas pipeline boom; US/Mexico

WSJ

Section M (Mansion): did not read

Section D (Arena):

• DVD release of note: Coal Miner's Daughter, 1980, Sissy Spacek as Loretta Lynn

Section C:

• AmEx to cut 8.5% of staff -- lead story; already posted at the blog earlier
• Wads of cash squeeze bank margins; US bank deposits at end of 2012, at record high -- $10.6 trillion; 5.3% decline in loans outstanding at US banks since 2008; 
• Oil rises on Saudi cutback -- already posted at the blog earlier
• Boeing buyers can't sleep easy -- and still more reports of growing pains on CNBC this a.m.
• By the way, how did Wells Fargo earnings come in? 

The raw numbers show Wells Fargo topped Wall Street’s predictions for earnings and revenue. 

Profit rose to $5.09 billion in the fourth quarter from $4.11 billion last year and on a per share basis hit 91 cents, above the 89 analysts had expected, according to Thomson Reuters.

Revenue rose 6.5% to $21.95 billion, above the $21.3 billion analysts expected.

But investors are concerned about decreasing margins at Wells (see story above).

Section B:

• Apparently US aviation regulators were concerned with the Dreamliner during long transocean flights some time ago
• GM tech center in Atlanta part of bigger push; hiring 1,000 high-tech workers in another right-to-work state; GM moving some operations to Georgia is as a big a story as COP moving some of its workers from its California headquarters to Houston (posted some weeks ago)
• Holiday PC sales fell; soft reception for computers with Windows 8; links easily found if interested

Section A:

• Front page: photo of Mr Karzai; will meet with Mr Obama; Mr Karzai will learn that the drawdown is faster than he had hoped
• Wow! Huge story on page A2 -- long-term unemployed begin to find work
• Mr Sandusky -- remember him? -- wants a new trial
• Op-ed: Sandy Relief should result in gold-plated boardwalks -- the $61 billion "proposal" in relief equates to $69 million per linear mile of coastline from Maryland to Maine; several story lines here, not the least of which is the exaggeration of actual damage caused by the "monster" storms; and note -- from Maine to Maryland -- if one recalls, the most damage in terms of dollars was, well, it did not stretch from M-to-M

New York Times

Yahoo!Finance took me to this story. It's a very nice analysis and explains why re-training the long-term unemployed is non-helpful; something that is fairly intuitive; and why unemployment is unlikely to come down much going forward

Market

In early trading, ENB hits a new high; BRK-B hit a new high on opening, but has pulled back slightly; EOG flirting with new high, but down a bit. KOG is relatively flat and CLR down slightly. Interestingly OAS is up a bit. [Update: EOG did hit a new 52-week high intra-day but settled back below the high. Same with BRK-B. ENB did finish with a new 52-week high.]