Wednesday, February 26, 2014

Active rigs:

	2/26/2014	02/26/2013	02/26/2012	02/26/2011	02/26/2010
Active Rigs	190	183	204	169	96

RBN Energy: shale gas implications for US manufacturing.

The convergence of hydraulic fracturing and horizontal drilling to harvest crude oil and natural gas from US shale deposits over the past 7 years is at the core of the US energy revolution. The sharp increase in crude oil production has resulted in tremendous benefits for the US –  reducing foreign oil imports, creating jobs and bringing wealth back to the US.  Many people are less aware of the larger and more far-reaching impact that the plethora of natural gas produced by “fracking” is currently having on our industrial economy and the eventual boost to our manufacturing competitiveness that will result.  The shale gas to manufacturing story ties together many of the themes discussed on a daily basis in RBN blogs to paint a hopeful picture for a portion of the US economy that has been declining for several decades.

The US shale gas boom took off in the 2007 timeframe with dramatically increasing supply causing a precipitous price drop between 2008 and 2012 from close to $10/MMBtu to a new standard of $3-4/MMBtu over the past few years, up until the polar vortex prices of this winter (which are expected to subside in the coming months).  At the start of the boom, there were around 1,000 rigs specifically drilling for natural gas (“dry gas”) in the US.  However, the greatly reduced pricing in 2009 made it difficult for drillers to cover their costs on dry gas wells, so they shifted their target to “liquids” (crude and natural gas liquids “NGLs”) and the new norm is about 300 dry gas rigs.   But despite the sharply lower dry gas rig count US natural gas production continued to increase at a healthy rate. As we explained in our recent series  “Golden Years: The Golden Age of US Natural Gas”  improved rig productivity, associated gas from liquids drilling and new production delayed by infrastructure build out have kept production growing despite lower rig counts.

Higher heating bills in New England this winter. The Portland Press Herald is reporting:

Coming soon to mailboxes across the Midwest and the Eastern Seaboard: Big gas bills.

Utilities are warning homeowners about a double whammy – higher natural gas prices and consumption, both of which have been driven to five-year peaks by the arctic cold that has gripped much of the country in recent weeks.

Con Edison in New York estimated that the typical home-heating customer would see a gas bill this month of $388, which would be nearly 17 percent above last February. Older homes are much less energy-efficient and could run up even steeper bills.
The debate over whether the surge in prices is a blip or here to stay is a critical question, because expectations of low prices have seeped into key energy policy and corporate decisions. Does it make sense to build new gas-fired power plants? Or export gas? Or channel it into feedstock for petrochemical plants? Or to fuel truck fleets that now run on diesel?

Yet forecasting gas prices is a tricky business. Over the past year, prices jumped by two-thirds, closing last Friday at more than $6 per thousand cubic feet for March delivery. Then on Monday, a national weather forecast predicting mild temperatures in early March sent prices tumbling 11 percent.

In Maine, the Public Utilities Commission approved a 7.5 percent midwinter rate increase for the state’s largest supplier of natural gas, Unitil Corp. The company cited extreme cold and high demand in making the request, which will increase an average home customer’s total winter bill of $837 by about $63.

The Wall Street Journal

Nothing of interest.

The Los Angeles Times

Hawaii health marketplace off to an especially rough start. Four months in, Hawaii Health Connector has allocated $120 million but signed up only about 4,300 people — fewer than any other state. Some lawmakers want to put the nonprofit under state control. Wow, imagine what the company could have made, had it been in the business to make a profit. $120,000,000 / 4,300 = $30,000 to sign up each individual for health care. That's just the cost to get folks to sign up; that was not the cost of health insurance.

Well, that was easy. Bitcoin virtual currency is on verge of collapse. Was this one huge scam?

In a stunning blow to a novel way to buy products and services, the world's largest exchange for trading bitcoin currency shut down Tuesday, triggering a massive sell-off and sending many prospective investors away — perhaps for good.

"This is extremely destructive," said Mark Williams, a risk-management expert and former Federal Reserve Bank examiner. "What we're seeing is a lot of the flaws. It's not only fragile, it's fragile as eggshells."

After saying users could not withdraw their funds, Mt. Gox suddenly ceased all operations, including shutting down its website. Mt. Gox users may have lost more than $300 million worth of bitcoins in what was the latest and biggest in a series of recent setbacks for the virtual currency. 

The currency exists only online, and its value is based on an algorithm. Investors buy bitcoins with dollars, euros and other real currency. A purchase with bitcoins typically involves transferring an amount from the buyer's bitcoin "digital wallet" to the seller's wallet on the Internet.

The blow to bitcoin's credibility has highlighted all the fears critics have been trying to raise. Because it is unregulated and anonymous, there is probably no way for users to know who may have seized the thousands of missing bitcoins — and no way to recover them.