Three Biggest Energy Story Lines of 2013 -- The Motley Fool

I am not a fan of Motley Fool, but several times a week, the Fool comes through. Here is a feel-good story.

The three story lines:

• Buffett was right on rail.
• Bakken is still beautiful (CLR, KOG).
• Best year ever for deepwater discoveries (COP).

I still recall the comment sent into the MDW telling me the rail story would be short-lived.

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Montana Headlines has been quiet for awhile; I hope all is well in Montana.

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Rockabilly Boogie, The Obscuritones

Remember The Guy Who Tried To Corner The Silver Market and Went Broke: He's A Billionaire Again -- Because of the Bakken

Wow, I love this stuff. I always wondered who the "Hunt" was in Petro-Hunt. I didn't think it was associated with Hunt's ketchup, but maybe....but I digress. Sorry.

Bloomberg is reporting:

William Herbert Hunt was once one of the wealthiest men on Earth. With his brother, Nelson Bunker Hunt, the billionaire bought more than 195 million ounces of silver -- 60 percent of the U.S. market -- in the 1970s. By early 1980, their stake was valued at more than $9 billion. 

The Hunts’ position imploded when silver prices plummeted 80 percent over the course of a few weeks in March 1980, culminating 33 years ago this week on what traders called Silver Thursday. The crash rattled Wall Street and sent the Texas brothers into bankruptcy.  

That was 1980; flash forward to 2012:

Hunt is once again a billionaire, this time with oil. In October, he sold 43 percent of the North Dakota petroleum assets owned by his closely held Petro-Hunt LLC for $1.45 billion to Houston-based Halcon Resources Corp. The cash and stock deal made Hunt Halcon’s largest shareholder and boosted his net worth to $4.2 billion, according to the Bloomberg Billionaires Index. 

The $9,500 per acre Halcon paid for Hunt’s land is about average for recent deals in the Williston Basin, according to Eli Kantor, Senior Exploration and Production Analyst with Iberia Capital Partners LLC in New Orleans, Louisiana.  

The Williston Basin, also known as the Bakken, is a geological formation covering North Dakota as well as parts of South Dakota, Montana and Saskatchewan. The largest contiguous oilfield in the U.S., the Williston has the potential to be the largest producing field in the world over the next 30 years, according to Harold Hamm, the billionaire chairman of oil and gas producer Continental Resources Inc.

An early Bakken wildcatter, Hamm has said in company reports that the area will yield as much as 24 billion barrels of oil. He is worth $12.8 billion, according to the Bloomberg ranking. 

Go to the link for the full story. It's worth your time.

Jane Nielsen needs to read it. 

A Reminder

Wells coming off the confidential list this long weekend have been posted here.

Texas Railroad Commission to Remove Permitting Requirement If Operators Recycle

MyWestTexas is reporting:

The new rules, which will take effect April 15, are designed to eliminate the need for a recycling permit if operators are recycling fluids on their own leases or transferring those fluids to another operator's lease for recycling. The new rules also identify recycling permit application requirements and reflect exiting standard field conditions for recycling permits.

There has been a lot of talk about all the water that is used by the fracking shale oil industry and how it might be particularly problematic in drought-prone south Texas.

So, quick, an open book test: how much water, on a percent basis, is used by the fracking industry in the entire state of Texas? Choose from the following:

a) 20%

b) 30%

c) 40%

d) way more than 50%

The answer is at the linked site. If the link is broken, oh, well.

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I'm really blown away by this -- here we have a regulatory agency that is willing to treat these guys like adults. Everyone wants you to recycle; we should make it as simple as possible; remove the obstacles. So the first obstacle we will remove is the process of getting a permit. Hey, just "git 'er done." I'm sure if anyone screws up the recycling the state will come in and punish the bad boys, but let's not make folks get a permit for doing the right thing. I know in cities where recycling is required, folks don't have to get a permit to recycle their personal garbage.

March Is Trending To Be The Coldest Since 1996 In the US -- Planalytics

I try so hard to minimize stories on global warming, and now global cooling, but it just never quits. Here's another one. CNBC is reporting:

Abnormally cold weather curbs consumer demand for spring goods and apparel, but some companies, including drug chains and dollar stores, are benefiting from the spring's delay.  "Right now, March is trending the coldest since 1996 in the U.S. It's also the snowiest March since 2002," said Evan Gold, senior vice president of client services at Planalytics, a company that analyzes how weather affects consumer demand. 

That's about right. Sixteen years ago the earth stopped warming; others say the 20-year "hiatus" in warming is confusing. And still other say that we have global cooling to fear more than global warming. The only thing we have to fear is fear itself, to coin a phrase, I suppose.

Update on The "Megaloads"

The Billings Gazette is reporting.

Remember all those stories about the "megaloads" and the activist environmentalists involvement in slowing down the movement? Well, the project is pretty much completed: the Kearl Lake Oil Sands project, operated by Imperial Oil/ExxonMobil, in north Alberta, is slated to go into production sometime this week.
 
I admire Imperial Oil for putting up with all the nonsense and not giving in.

At the time, it was such a big story, the story got its own "tag" at the bottom of the MDW.

A big "thank you" to Don for sending me the story. I had not checked in on the project for several months now.

The "megaload" story, by the way, was filed under Don Quixote in my non-electronic filing system. Turns out that the story was filed in the correct location; it can now be filed in the circular file.

Pipeline Spill In Arkansas

Updates

April 1, 2013: XOM update; Oil & Gas Journal is reporting:

ExxonMobil Pipeline Co.’s 20-in. OD, 848-mile Pegasus crude oil pipeline ruptured Mar. 29 near Mayflower, Ark., about 25 miles northwest of Little Rock.

The pipeline has been shut in and crews are working to contain the spill. Cleanup crews deployed 2,000 ft of boom and are using 15 vacuum trucks to clean up the oil, recovering roughly 12,000 bbl of oil and water as of Mar. 31. Crews also deployed 3,600 ft of boom near Lake Conway as a precaution, but have so far reported no oil reaching the lake.

ExxonMobil said it observed “a few thousand barrels of oil” in the Mayflower area but was staging a response for more than 10,000 bbl to be conservative. The company was investigating the spill’s cause. Reports cited the US Environmental Protection Agency estimated as much as 2,000 bbl of oil had been released.

Original Post

Reuters is reporting the spill.

Data points:

• Pegasus pipeline; Exxon; runs from Pakota, Illinois to Nederland, Texas;
• up to 90,000 bopd
• carrying Canadian heavy oil
• pipeline ruptured in the Northwood subdivision in Mayflower, Arkansas 
• Exxon staged a response to handle up to 10,000 bbls; unknown how much has spilled
• need to excavate the site of the rupture for more information 
• 22 homes evacuated; Exxon has set up a claims contact point; 50 claims so far

Probably an old pipeline; perhaps a new pipeline would have prevented this. Just saying.

Top Ten Producers in North Dakota, Preliminary Data, 2012

I assume the Rocky Mountain Oil Journal has published its annual ranking of oil producers in North Dakota, but if they have, I have not seen it. I don't subscribe to the Journal, and last time I checked it was not available in the San Antonio Public Library -- but that was before the Eagle Ford boom south of the city. In the past, the RMOJ has published that data in mid-January. Here is the 2011 list, for example.

There is some good news. From the North Dakota Petroleum Council, here are the top 10 producers in North Dakota for 2012:

1. Continental Resources, Inc.
2. Whiting Oil and Gas Corporation
3. Hess Corporation
4. EOG Resources, Inc.
5. Brigham Oil & Gas, L.P.
6. XTO Energy Inc.
7. Marathon Oil Company
8. Burlington Resources Oil & Gas Company
9. Petro-Hunt, L.L.C.
10. Slawson Exploration Company, Inc.

Compared to 2011, #1 CLR has remained at the top. Whiting and Hess both moved above EOG. XTO moved into the top ten (was #11); Denbury, of course, dropped off the list, having pretty much left the state.

Overlapping 2560-Acre Spacing Units In The Bakken; ULW -- March 31, 2013

November 10, 2013: Note: the information on this page may be inaccurate; it has not been updated, and I have not read it recently to see if there are any obvious changes/errors.

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From an earlier post: how to identify "overlapping 2560-acre spacing units on the NDIC GIS map server:

Elsewhere, a reader asked this question: how can one tell where the overlapping spacing units are by using the GIS map server?

This is the best I can do. Go to the GIS map server. Zoom in so that you are looking at these fields: Twin Valley in the far northwest; Antelope in the far east/northeast; Reunion Bay in the far east/southeast; and, Elidah in the far southwest. At the legend on the right side, put a check mark in the square box opposite "2560 Acre"; a dot in the circle opposite "2560 Acre"; and, a check in the square box opposite "1280 Acre."   You will see a portion of the GIS map server with lots of teal (greenish-blue) and a bit of purple. The teal is 1280-acre spacing; the purple is 2560-acre spacing.

The spacing units are lined with a white border (generally - almost always -- along section lines). The teal and the purple spacing units are "standard" spacing units. Now, lean back in your chair a bit, and look for "**1280** and/or **2560** on the GIS map server. Those represent "overlapping spacing units. The number (either a **1280** or a **2560** is placed at the "bottom" of the overlapping spacing unit.

So as an example: in Blue Buttes, 151N-95W, just along the south section line of sections 9 and 10, you will see **2560**. That means that sections 4,3, 9, and 10, is an overlapping spacing unit.

Disregard the numbers preceded by a "c" in this discussion. Numbers with a preceding "c" means that these spacing units are still being considered by an active case (hearing docket case).   

Updates

September 25, 2014: wells sited in 2560-acre spacing units in such a way as to capture "orphaned" oil along section lines or 640- or 1280-acre spacing unit lines are often designated ULW: unit line wells.

April 1, 2013:  An excellent, excellent explanation over at The Bakken Shale Discussion Group. A must-read. There is one nuance that I had not thought of. It is true that each well has its own spacing unit defined by the permit. However, a producing well in any particular spacing unit holds that lease/that entire spacing unit by production, if that makes sense. That raises another question which is too hard to articulate and it really beyond what this blog is all about anyway, so I will defer for now, hoping that it is answered elsewhere. I have to agree with Teegue, that if each well has its own spacing unit defined by the permit, then a permit should pertain to one well and only one well, and should not be used to effectively unitize a spacing unit, again, if that makes sense. It has taken awhile, but I finally understand what Teegue has been saying on this issue all these years, and I agree with him in principle from a mineral owner's point of view. Right, wrong, or indifferent, I can also see the operator's side of the story. But Teegue is correct: it seems a decision was made on how to develop the Bakken on the fly without really understanding all the nuances. This is entirely an opinion. Don't take it for more than that. Simply an opinion. 

Original Post

A reminder: wells coming off the confidential list this long weekend will be posted here as soon as they become available, assuming I have found a wi-fi spot by then.

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I had planned on waiting to write about overlapping 2560-acre spacing unit the Bakken when I had more time, but I see a lot of folks don't understand the reason behind these units.

Much will be written about overlapping 2560-acre spacing units, but for a quick explanation:

1. Vertical wells, the vertical segments of horizontal wells, and horizontal laterals are required to be "set back" from spacing unit lines (generally section lines in the North Dakota Bakken) by about 500 feet.

2. If all wells and horizontal laterals are "set back" from spacing lines / section lines, a lot of Bakken oil is being missed, left behind, "orphaned." (More on that later. That in itself is very, very interesting; something that MDW has blogged about several times, and something few other sites talk about.)

3. The purpose of overlapping 2560-acre spacing units is to allow an operator to site a well/a horizontal lateral in such a location to access the Bakken Pool along spacing unit lines/section lines that would otherwise be missed.

4. Imagine a horizontal lateral running parallel to a section line five hundred feet away on the east side. Now imagine another horizontal lateral running parallel to that same section line five hundred feet away on the west side. One can immediately see one-thousand feet of Bakken without a horizontal lateral. An operator who is approved an overlapping 2560-acre spacing unit, can now run a horizontal lateral right down the middle of that section line. If one looks at the GIS server map at the NDIC web site, one will see why overlapping 2560-acre spacing units are needed, rather than overlapping 1280-acre spacing units.

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This is from the March NDIC dockets:

• 19796, Hess, amend Manitou-Bakken and Big Butte-Bakken; establish two overlapping 2560-acre units; 1 or more wells on each; Mountrail 
• 19797, Hess, amend Truax-Bakken, establish 6 overlapping 2560-acre units; one or more wells; Willliams, McKenzie
• 19798, Hess, amend Westberg-Bakken, establish an overlapping 2560-acre unit, one or more wells; McKenzie
• 19799, Hess, amend Hawkeye-Bakken, establish an overlapping 2560-acre unit, one or more wells; McKenzie
• 19800, Hess, amend Hawkeye-Bakken, establish two overlapping 2560-acre units, one or more wells; McKenzie
• 19801, Hess, amend Blue Buttes-Bakken, establish an overlapping 2560-acre unit, one or more wells; McKenzie
• 19802, Hess, amend Timber Creek-Bakken and South Tobacco Garden-Bakken to establish an overlapping 2560-acre unit, one or more wells; McKenzie
• 19803, Hess, amend Cherry Creek-Bakken to establish two overlapping 2560-acre units; one or more wells; McKenzie

Apparently this was posted in Petroleum News Bakken, according to a contributor at another site:

Hess also submitted applications asking NDIC to establish overlapping 2,560-acre spacing units, and is seeking 16 such units in McKenzie, Mountrail and Williams counties. Hess wants to drill one or more horizontal wells between existing 1,280-acre units. The new overlapping 2,560-acre units are in the Manitou, Big Butte, Truax, Westberg, Hawkeye, Blue Buttes, Timber Creek, South Tobacco Garden and Cherry Creek-Bakken pools.

The specifics, i.e., which fields or where the overlapping 2560-acre spacing units will be, really do not matter: the bottom line is that we will be seeing overlapping 2560-acre spacing units throughout the Bakken for the purpose of capturing otherwise "orphaned" oil along spacing unit lines, generally section lines in Bakken spacing.

By the way, these overlapping 2560-acre spacing units are nothing new. They have been on the NDIC dockets since at least March, 2012, and the MDW has posted them all. Prior to overlapping 2560-acre spacing units, there were 1280-acre spacing units.

It's kind of surprising that Petroleum News thinks these are a big deal. It would be much more helpful to explain "theory" behind these overlapping units.

Astute readers will also notice something else occurring in the Bakken but I will leave that to a future post. Actually two things. One has to do with the location (the fields) where these overlapping units are; one has to do with Whiting and its Pronghorn prospect.

By the way, "overlapping 2560-acre spacing units" should not be confused with "2560-acre spacing units." Their purposes and locations are different.

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At this site (also linked above, I believe), a contributor says the overlapping 2560-acre spacing units are being sought by operators to increase the number of wells on a multi-well pad. If maximum length of horizontals remains at 10,000 feet (two sections), I don't see how overlapping 2560-acre spacing makes any difference for laydown or standup spacing units, vs 1280-acre spacing units (but I may be missing something. I need an example). I can maybe see a case where a 2x2 2560-acre spacing unit would be preferred in some cases to increase the density of wells on a single pad, but those cases seem few and far between. I can possibly see them along and under the river. But again, I may be missing something. 

Non-Bakken Energy Stories; US Fracking Killed European Solar Industry -- Bosch

Keystone XL Likely To Be Approved By State Department Later This Year

The Washington Times is reporting:

The U.S. State Department is expected to give the Keystone XL pipeline the go-ahead later this year after reviewing environmental concerns.

But 51% of voters think it is possible to build the pipeline in a way that doesn’t significantly damage the environment. That’s up from 46% measured in late January but is still down from 67% in November 2011. Twenty-four percent (24%) feel it is not possible to go ahead with the pipeline without hurting the environment, while another 24% are not sure.

Sixty percent (60%) still believe building the Keystone pipeline will be good for the U.S. economy. Just seven percent (7%) think it will be bad for the economy. Twenty percent (20%) feel it will have no impact, and 14% are undecided.  These findings have changed little from previous surveys.

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Sierra Club: President's Approval of the Keystone XL 50-50

The Dickinson Press is reporting.

“I think we’re going to get an answer from the State Department or the White House in October and I put its odds of being approved at 50 percent right now,” said Marx, director of the club’s Beyond Oil campaign. “It literally could go either way. I think the president understands that this issue is catching fire. If he gives the green light to this project, the climate movement is going to go ballistic.”

Don sent me the link. My initial thoughts:

1. I think this is a trial balloon. In politics they do this all the time. The Sierra Club releases this "50%" press release for several reasons. First, to see what the pushback is. If there is not a lot of pushback, it means that the rank and file have accepted that the president will approve it. It gives John Kerry and Barack Obama the political cover they need. They will be approving something even the diehards have accepted as "going to happen."  Their approval will be a non-story for the "man-on-the-street." Even the NY Times, I'm sure, is tired of this story.

Second: this energizes the rank and file of the Sierra Club members; my hunch is a lot of rank and file Sierra Club members have lost their enthusiasm for this battle. 

Third, they will see what "new" arguments will come from the rank and file. Both sides can adapt to honing new arguments. 

Fourth, this is a veiled message from the Sierra Club to the president: although the rank and file diehards and the most activist environmentalists will go ballistic, those at the top and the more reasonable environmentalists are telling the president "we can live with your  approval; after all, you have almost no choice." We can litigate it to death in Nebraska, and Texas.

2.  The quote:

"If [the president] gives the green light to [the Keystone XL], the climate movement is going to go ballistic.”

The fringe element of the climate movement is going to go ballistic, but if anyone has been following the monthly initial unemployment claims, one will see that the economy/jobs market has gone absolutely nowhere for the past four years (scroll through the linked post). Even President Obama has to have noted that. Even Mortimer Zuckerman has seen how bad things are. Regardless of the spin Bloomberg, Yahoo, and Reuters put on the numbers each month, the fact is that job growth has gone absolutely nowhere in the last four years. But it will get worse: folks are forgetting that when ObamaCare kicks in a lot of folks are going to be laid off. Sibelius knows this and the president knows this. On top of this, the sequester job loss in the federal government has not been fully felt.

3. I think the October date is interesting. I think the President realizes the 2014-mid-term elections could be a debacle. If gasoline prices are going up and he denies the Keystone XL permit, the mid-term elections are going to be horrendous for him. Remember: Bakken oil is costing the consumer $100/bbl; Canadian oil is selling for, maybe, $60/bbl. Even Jay Leno's streetwalkers can do the math. Well, maybe they can't. Making the announcement in October is long enough for the activist environmentalists to cool down by the following November (13 months away); but early enough to allow Democratic nominees in energy states to have at least some chance of winning, campaigning on the President's answer to energy: "we support all of the above."

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US Fracking Killed European Solar Industry

Bloomberg is reporting:

Bosch, one of the world's largest auto parts suppliers, blames the U.S. fracking boom in shale gas for hurting demand for energy-efficient green technologies, its chairman told a German newspaper. 

The Stuttgart-based company recently decided to discontinue its photovoltaic solar energy activities at the cost of roughly 3,000 jobs - due largely, but not entirely, to a glut in capacity built up in China.

"Photovoltaic is going through a unique transition. But you cannot entirely dismiss that the use of energy-efficient technologies came under pressure through fracking in the United States," Bosch Chairman Franz Fehrenbach said in the Sunday weekly Frankfurter Allgemeine Sonntagszeitung. 

Sounds like a lot of sour grapes to me. Perhaps Bosch should have gotten into fracking technology. It appears that the Germany solar industry was no longer viable when the tax incentives were removed. The more I read Bloomberg, the more I am (negatively) impressed with its "objective" reporting, and failure to do any really in-depth or investigative reporting.

Germany, because of the energy situation, is in deep do-do, as they say.

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It Never Quits

  

I try so hard to minimize stories on global warming, and now global cooling, but it just never quits. Here's another one. CNBC is reporting:

Abnormally cold weather curbs consumer demand for spring goods and apparel, but some companies, including drug chains and dollar stores, are benefiting from the spring's delay. 

"Right now, March is trending the coldest since 1996 in the U.S. It's also the snowiest March since 2002," said Evan Gold, senior vice president of client services at Planalytics, a company that analyzes how weather affects consumer demand.

Consumers were shopping very differently the weeks leading up to Easter this year than they were a year ago. Last year, March was the warmest on record for more than 100 years, Gold said. This year's shoppers were not after summer dresses and sunglasses. Planalytics evaluated that demand for shorts fell 12 percent in the fourth week of March versus a year ago and 9 percent for sandals. Interest in lawn and garden items fell 21 percent, delaying the most lucrative season for home improvement stores.

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Israel  / Natural Gas

Updates

September 17, 2015: natural gas fields killed Israel's solar energy industry. No matter how little CO2 Israel emitted, it would make no difference at all globally; they need to do what is prudent.

September 16, 2015: when this story was first posted, there was jubilation in the streets of Tel Aviv. Not only might Israel be energy independent, it might have tons of natural gas to sell to Egypt. Not so fast. Egypt discovered their own huge natural gas field, dashing Israel's hopes for natural gas sales to Egypt. 

Original Post

 

Israel to start off-shore natural gas production. Bloomberg is reporting:

The Tamar (9 trillion cubic feet) and Dalit fields could supply Israel with gas for two decades. The larger Leviathan field is estimated to hold 18 trillion cubic feet of gas ...will reach Israel’s port city of Ashdod by afternoon today ...

But that's not what caught my attention (Don sent me the link):

The three fields provide Israel with reserves more than 14 times larger than Germany’s total proven gas reserves ...

Population of Israel: 8 million
Population of Germany: 80 million

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Carpe Diem and The Texas Job Explosion

From CarpeDiem:

The Texas Workforce Commission reported yesterday that the state added an eye-popping 80,600 jobs during the month of February, at a rate of more than 4,000 new jobs every business day of the month. That’s the highest monthly employment gain for the Lone Star State back to at least 1990, and possibly the highest monthly job gain since the U.S. Bureau of Labor Statistics began tracking such data in 1939, according to the Dallas Morning News. 

The 80,600 job gain in Texas last month means that more than one out of every three of the 236,000 jobs added to US payrolls in February were in Texas, even though the state represents only 8.3% of the nation’s population. 

As usual, the comments are entertaining.

There are a lot of nice golf courses in Texas. It would be nice for the president to take advantage of that.  He could announce approval of the Keystone XL while vacationing in the Lone Star State. Speaking of which, I assume we should start hearing plans for the Obama Presidential Library.  My hunch is it will be in Illinois, perhaps across the street from the Lincoln Home NHS in Springfield, Illinois. The Nobel Peace Prize.

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Is It Just Me, Or Does It Seem Folks Are Looking For Things To Worry About?

• The Cyprus story turned into a non-story. That pretty much goes for the PIIGS also.

• The North Korean "crisis" is hardly worthy of being called a crisis. Yes, it could be a painful first 72 hours for South Korea if North Korea unleashed, but within 24 hours North Korea would be no more -- at least not the capital and any military base.

• Global warming: 1 degree over one century; and now there is strong evidence the earth has not warmed in 16 years, maybe 20 years, and there is evidence that the earth is now cooling.  

• Fracking causing earthquakes.

• Peak oil.