The Million Dollar Way (The Bakken Oil Blog): 06/17/14

Tuesday, June 17, 2014

More Background To The Hess Tioga Gas Plant And Expansion

Earlier today, in the June Director's Cut, reference was made to the completion of the expansion of the Hess Tioga gas plant.

Rigzone also had a story on same subject, posted today:

After making a $1.5 billion infrastructure investment in North Dakota made by Hess Corp. between 2012 and 2014, the company more than doubled the operational capacity of its Tioga Gas Plant in North Dakota, while also reducing its natural gas flaring by a substantial amount, the company said in a recent release.

The expansion of the plant enabled the company to significantly increase its production of propane, methane, butane and natural gasoline, as well as ethane, which was not previously produced in the state. The operational improvements to efficiency and production showed that Hess is committed to North Dakota, John Hess, company chief executive officer, said in a press release.

“The Tioga Gas Plant was built in 1954, just three years after we drilled the very first oil well in the state of North Dakota. Today, as one of the largest oil and gas producers in the Bakken, we are committed to responsible long-term growth in North Dakota and proud to contribute to the state’s infrastructure,” Hess added.

The plant is processing about 120 million cubic feet of gas per day (MMcf/d), with the potential to handle more than 300 MMcf/d, compared with the previous processing figure of 100 MMcf/d figure prior to the expansion. In addition to the expansion of the Tioga Plant, Hess used some of the investment on four new gathering projects which are expected to be completed by the end of 2014.

There is more at the link.

Montana Completions

The Fairfield SunTimes is reporting: in Richland County (west of McKenzie County in North Dakota), there were two completions.

CLR, 691, Fisher 1-29H, Bakken, three laterals (15,797 feet; 18,026 feet; and, 18,615 feet)
Whiting, 597, Iversen Bros 31-1-1H, Bakken, 21,400 feet

Global Energy, 2014: An Inconvenient Truth -- Oil Demand In The US Grew At The Fastest Pace In The World In 2013 -- Outstripping China For The First Time Since 1999 -- Think About The Implications

I posted this earlier as part of another post but this is so important, I posted it separately, and gave it the appropriate tags. In addition, it will be linked at the sidebar at the right, not quite sure where, but it will be one of the "Big Stories."

Reuters over at Rizone is reporting:

Oil demand in the United States grew at the fastest pace in the world in 2013, outstripping China for the first time since 1999 as the globe's top economy reaped the benefits of a shale boom, oil company BP said on Monday.

In its annual review of energy statistics unveiled in Moscow, BP also raised its global oil reserves estimate by 1.1 percent after revising U.S. reserves upwards by more than a quarter.

Global natural gas reserves were cut for a second year as lower provisions for Russia and Qatar offset a significant uptick in U.S. estimates.

BP also said the United States recorded its largest-ever annual rise in oil production for a second year in a row with a 13.5 percent increase to above 10 million barrels per day (bopd).

The annual review, first published in 1951 and considered an industry benchmark, showed U.S. oil consumption in 2013 grew by 400,000 bpd to 18.9 million bpd, the sharpest gain in the world, followed by China's rise of 390,000 bpd to 10.8 million bpd.

The consumption growth was led by an expansion of the U.S. industrial sector as the world's top economy emerged from the 2008 financial crisis, BP Chief Economist Christof Ruhl said.

The linked article goes on for three internet pages.

There are so many story lines here. But let's just go down one story line: if oil demand surges like this, one would assume the price of oil (and natural gas) would also increase (sort of "Economics 101, Supply and Demand"). If oil and natural gas got more expensive last year, and if Germany is shutting down their nuclear program (as Japan did), what do you think is the likely outcome? That brings us to the story.

The St Louis Post-Dispatch is reporting:

Coal dominated world energy markets last year by supplying the biggest share of demand since 1970, making it the fastest growing fossil fuel, according to an annual review by BP.

Consumption grew 3 percent last year, driven by coal use in developing nations, according to a statement Monday from Europe's third-largest oil company. Use of renewables such as solar and wind also reached a record, accounting for 2.7 percent of all energy demand.

The findings are another indication that consumers are prioritizing cheap fuels over efforts to rein in greenhouse gas emissions blamed for global warming. Coal is the dirtiest fossil fuel, and use of it expanded at utilities from China to Germany.

"Europe is increasing its carbon emissions because it's using too much coal because it's cheap," Royal Dutch Shell's Chief Financial Officer Simon Henry said in an interview on Bloomberg Television June 3.

Coal's share of global energy use reached 30.1 percent, just below the 32.9 percent share for crude oil, which lost market share for a 14th consecutive year. China was the world's biggest coal consumer, followed by the U.S. and India.

In China, coal accounted for 67.5 percent of the total energy demand, the lowest on record because of new measures to combat pollution. Carbon dioxide emissions from fossil fuels use grew by 4.2 percent, or 358 metric tons, the slowest in five years, the report showed.

And the article goes on and on.

Enbridge 1, Activist Nuts 0

I assume the activist environmentalists who showed up to protest, drove up in their gas-guzzling SUVs.

Sorry about that. My editor posted the headline and the line above; by contract I am not allowed to change it.

The New York Times is reporting:

The Canadian government’s approval of a major pipeline running from the Alberta oil sands to a new port on the coast of British Columbia has intensified opposition from aboriginal groups, environmentalists and community advocates.

The Northern Gateway project, which the government approved on Tuesday as expected, would send heavy, oil-bearing bitumen to Asia, giving Canadian producers better access to the world markets. The pipeline, being built by Enbridge, has been championed by the federal government as a way to diversify Canada’s energy industry from its current dependence on exports to the United States.

But opponents in British Columbia, who span the political spectrum, threatened to block the pipeline altogether. The fear is that the pipeline would make the province vulnerable to an oil spill, damaging the rugged and scenic coastline.

Whatever. Something tells me I won't see this pipeline completed in my investing lifetime. Which is not all bad.

Snowing In The Rockies; Eighteen (18) New Oil And Gas Permits, North Dakota; Several New Sanish Wells In The Antelope Field By Different Operators

Wells coming off the confidential list Wednesday:

24652, 570, OXY USA, Henry Kovash 3-7-6H-142-95, Manning, t12/13; cum 22K 4/14;
26021, 331, North Plains Energy, State 160-100-3-10-36-15E-1H, Smoky Butte, t5/14; cum --
26022, 439, North Plains Energy, State 160-100-4-9-36-15A-1H, Smoky Butte, t3/14; cum 26K 4/14;
26157, drl, Statoil, Johnston 7-6 4H, Banks, no production data,
27024, drl, Hess, HA-Nelson A-152-95-3427H-3, Hawkeye, no production data

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Kennedy Snow Alert

I'm getting ready to post a summary of today's daily activity report but if anyone in the Kennedy clan happens to be reading this, note: there is still an opportunity for you children and grandchildren to see snow -- in the middle of the summer, yet, from a Facebook posting:

BEARTOOTH PASS HAS BEEN CLOSED FROM VISTA POINT ON THE MONTANA SIDE TO LONG LAKE ON THE WYOMING SIDE due to falling snow on top of the pass plus high winds creating blowing and drifting conditions. Travelers on the MT side will need to turn around at Vista PT and come back down to Red Lodge. Travelers on the Wyoming side will be turned around at Long Lake. Updates will occur as they are received. Montana Dep't of Transporation and the National Park Service are both up on the pass plowing at this time but it is drifting as soon as they go through with their plows.

This ends the "Kennedy Snow Alert" but a picture is worth a thousand words"

Global Warming, June 16, 2014

On July 1, 2014, I will be using the new tag "Global Warming 2014 - 2014; just a couple more weeks to use the current tag.

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Active rigs in North Dakota:

	6/17/2014	06/17/2013	06/17/2012	06/17/2011	06/17/2010
Active Rigs	187	184	214	173	129

Eighteen (18) new permits --

Operators: Oasis (7), CLR (6), Whiting (3), American Eagle, XTO,
Fields: Baker (McKenzie), Brooklyn (Williams), Sanish (Mountrail), Skjermo (Divide), Capa (Williams),
Comments: All the CLR permits are for the Brooklyn; all the Oasis permits are for the Baker oil field

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

Twelve (12) producing wells completed:

22555, loc, Whiting, Tarpon Federal 44-19-2RTF (name change, was Taron Federal 44-19-2H), Sand Creek,
22682, 912, Hess, EN-Jeffrey A-155-94-2734H-3, Alkali Creek, 4 sections, t6/14; cum --
22707, 1,959, HRC, Fort Berthold 151-94-26B-35-3H, Antelope, a Sanish well, t4/14; cum --
22708, 1,776, HRC, Fort Berthold 151-94-26B-35-2H, Antelope, a Sanish well, t4/14; cum --
24807, 354, CLR, Wahpeton 11-16H1, Banks, t6/14; cum --
25700, 1,263, Hess, AN-Evenson 152-95-0310H-3, Antelope, a Sanish well, t5/14; cum --
25814, 1,256, CLR, Salers 1-27H, Antelope, a Sanish well, t5/14; cum --
25815, 1,351, CLR, Salers 2-27H, Antelope, a Sanish well, t6/14; cum --
25986, 490, Hess, EN-Frandson-154-93-2116H-5, Robinson Lake, t5/14; cum --
26115, 364, Hess, EN-Chamley 156-93-0508H-5, Baskin, t5/14; cum --
26173, 1,066, Hess, SC-4WX-153-98-3130H-3, Banks, t5/14; cum --
26380, 1,371, Hess, HA-Chapin-2560-152-95-3229-3328H-1, Hawkeye, 4 sections, t5/14; cum --

1,001,149 -- North Dakota Reaches The Million BOPD Milestone In April, 2014

Updates

June 18, 2014: Boomberg is reporting that production will go up this summer --

North Dakota, which yesterday became just the fourth state to record oil production above 1 million barrels a day, could see even stronger growth over the summer as improved weather makes life easier for drilling crews.

Output increased to 1,001,149 barrels a day in April, the state’s Department of Mineral Resources reported yesterday. Texas, California and Alaska have crossed the million-barrel mark. Only Texas remains above the state, at almost 3 million barrels a day.

April oilfield work was hampered by heavy rain that shut roads and strong winds that closed down operations. Crews completed 200 wells during the month, and another 600 are already drilled and just waiting on hydraulic fracturing, or fracking. Better weather in the summer months should allow more new wells to start gushing oil.

“As the weather improves, operators should have full utilization of all their rigs, and possibly additional completion crews to whittle down the backlog,” Jonathan Garrett, an upstream analyst at Wood Mackenzie Ltd. in Houston, said in a phone interview today. “I wouldn’t be surprised to see quite a bit of production growth over the summer. It should be pretty impressive.”

Original Post

Director's Cut was released at 1:00 p.m. CDT, June 17, 2014.

The June Director's Cut is out.

Oil:

April, 2014: 1,001,149 bopd
March, 2014: 977,178 bopd (revised) 977,051 bopd (original)

that's almost a difference of 24,000 bbls / day (March to April)
the increase represents almost a 2.45% increase

Disclaimer: this update is always done in haste; typographical errors are likely. This is for my use only. Others should go to the source.

Producing wells:

April, 2014: 10,658 (new all-time high)
March, 2014: 10,457

Permitting:

April, 2014: 233
March, 2014: 250
All time high was 370 in 10/2012

Pricing:

Today, 2014: $91.71
May, 2014: $88.31
April, 2014: $85.68
March, 2014: $86.72
February, 2014: $86.89

Rig count:

Today: 189
May, 2014: 189
April, 2014: 188
March, 2014: 193

Director's comments:

The number of well completions was unchanged at 200. The Tioga gas plant conversion transitioned from approximately 25% capacity at the beginning of the month to full capacity by the end of April. The percentage of flared natural gas dropped to 30% as the Tioga plant came back on line; the historical high was 36% in September, 2011.

In the previous report: about 635 wells waiting to be completed, a decrease of 15 from previous month. At the end of the most recent month for full reporting, April, 2014, there were about 600 wells awaiting completion.

Wells waiting to be completed: in the big scheme of things, I don't think there is any shortage of frack spreads right now. The big reason for wells waiting to be completed, I think, is due to pad drilling. Generally, operators wait until all wells on a pad are drilled to total depth before they frack all the wells. There are exceptions.

For Investors Only; MRO's Tyler Information Released; Price Of Gasoline Hits 6-Year High; North Dakota Crosses The One-Million BOPD Threshhold

North Dakota crossed the one-million bopd threshhold in April, 2014. Data was released at 1:00 p.m., Tuesday, June 17, 2014. The Director's Cut is here.

Price of gasoline hits 6-year high. Bloomberg is reporting.

Trading at new 52-week highs: DVN, ERF, LGCY, NFX, NRG, SD, WIN.

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MRO's Tyler Rundle Trust Well -- file report released

26794, 88, MRO, Rundle Trust 21-29TH (second attempt; first attempt: Rundle Trust 11-29TH)

From the well file report:

24 stages; 1,676,220 lbs of proppant which is the amount they used to use in the Bakken; now it is not uncommon to go to 36 stages and 3 to 4 million lbs of proppants
Helmerich and Payne #259
spud October 28, 2013
"the second well of MRO's new exploration program in the Tyler Formation
"after completing a vertical pilot and coring the Tyler & Three Forks formations, and attempting lateral drilling on the Rundle Trust 11-29TFH, the decision was made to skid H&P 259 to make another attempt to drill a two-section lateral in the Tyler Formation. This lateral is aimed to prove that a two-section lateral can be drilled in the Tyler, and that the Tyler is a viable zone for oil production."
MRO is targeting an interbedded limestone and shale interval that is approximately 50' below the top of the Tyler Formation and was expected to be 8 feet thick. Staying in the target proved very difficult. There is a significant hardness difference between the primary limestone target and the interbedded shale units. The limestone is firm; the bounding shale layers were soft
very little natural gas; no flaring or backside pressure was observed or held while drilling
reached total depth of the lateral on December 7, 2013, after 40.5 days from spud
the curve showed that the Tyler has two prospective targets: one approximately 12 feet thick; and another (thickness not specified, but sounds like 8 feet thick)
the challenge is keeping the drill bit in the target zone

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Pulling A Bergdahl

A reader sent me a link to this article in which The Chicago Tribune lists all of President Obama's failures (and the list seems endless). The Tribune says President Obama failed, because like President Bush, he is a poor manager.

Regardless of whether one feels President Obama has made any mistakes or not, and let's for argument's sake say he has been perfect, making no mistakes, there's something inherently wrong with the writer's premise.

My response:

The article says the mistakes were because President Obama was a poor manager. I disagree with that: Presidents, just like four-star general officers, are not "managers." Presidents are not elected and general officers are not promoted for being "good managers."

Presidents and four-star general officers are leaders and change-agents.

This is what Obama and Bush both had in common: they held no one accountable. President Obama should have fired the cabinet head as soon as the specific debacle surfaced. He should have fired Hillary after Benghazi. That would have gotten the attention of everyone in his administration; no one is "holier" than Hillary among the Democrats; she is THEIR sacred cow. He should have fired Sebelius as soon as the first word of disaster in ObamaCare. Shinseki should have been fired a year earlier.

However, that is past.

I think with the Iraqi "thing," I think we are seeing something entirely new with regard to President Obama.

I don't have any clue how "being a poor manager" would have resulted in losing Iraq, as we are now doing. It was his decision not to make a preemptive strike: his decision alone. That's not a failure of management; that's a failure of leadership.

No, starting about six months ago, maybe a year ago, Obama went AWOL. He has simply walked away from the presidency.

While CNN video was showing a professional army sweeping through Mosul and then Tikrit, to the doorsteps of Baghdad, the President walked (actually he literally flew) away from Washington (just as he walked away from the situation room the night Benghazi fell).

While video was showing a professional army sweeping through Iraq, President Obama left Washington, DC, to a) watch native Americans dance in a remote location of North Dakota/South Dakota (really?); b) to talk about global warming to college students at a non-descript venue in southern California (UC Irvine? Really?); and, c) and I can't make this up, went golfing, according to his mouthpiece, The New York Times.

President Obama understands the frustration of Sgt Bergdahl who also walked away from his post, frustrated with the US Army.

President Obama has similarly telegraphed his frustration with Washington, DC; Congress; and, the Drudge Report, and is simply pulling a Bergdahl. So, I don't think it has anything to do with poor management. It was his lack of leadership (not holding anyone accountable) that resulted in the failures prior to Iraq, and now the "failure in Iraq," is due to walking away from the job.

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In my 21 years of formal education (I include one year of kindergarten though I only attended half-days, all that was offered at that time), I never once heard Presidents Washington, Jefferson, Lincoln, Roosevelt (both of them), Kennedy, or even Bill Clinton referred to as great managers. Likewise, I have never once considered Generals US Grant, Robert E Lee, George Custer, Douglas MacArthur, George Patton, great managers.

Even Elizabeth Warren (is she the only Native American currently serving in the US Senate?) would not refer to the four great Native American Indian chiefs -- Crazy Horse (the greatest), Sitting Bull (a close second), Red Cloud, and Spotted Tail -- as "managers." They were leaders, each one of them and many, many others.

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One of the best stories of leadership I have ever read was John Hershey's 1944 account of JFK's surviving and saving his men when his PT 109 was cut in half by a Japanese destroyer in the Pacific in WWII. I did not understand the weight on President Lincoln's shoulders during the Civil War until I saw "the movie."

Tioga To Celebrate June 25, 2014; US Oil Demand Grew At Fastest Pace In The World In 2013; US Oil Demand Outstripped Chinese Demand For The First Time Since 1999; BP Raises Its US Reserves By 25% -- Shale Boom; But Coal Is Still King -- Supplying The Biggest Share Of Energy Demand Since 1970

Tioga, the oil capitol of North Dakota, to celebrate June 25, 2014, the million-bopd threshold, set in April, 2014; officially announced on June 17, 2014, by the NDIC.

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If you only read one "thing" on global energy this week, read the annual BP global energy review.

This is absolutely incredible. This article is full of surprises. A must-read, must-bookmark article.

This caught me by surprise. Reuters over at Rizone is reporting:

Oil demand in the United States grew at the fastest pace in the world in 2013, outstripping China for the first time since 1999 as the globe's top economy reaped the benefits of a shale boom, oil company BP said on Monday.

In its annual review of energy statistics unveiled in Moscow, BP also raised its global oil reserves estimate by 1.1 percent after revising U.S. reserves upwards by more than a quarter.

Global natural gas reserves were cut for a second year as lower provisions for Russia and Qatar offset a significant uptick in U.S. estimates.

BP also said the United States recorded its largest-ever annual rise in oil production for a second year in a row with a 13.5 percent increase to above 10 million barrels per day (bopd).

The annual review, first published in 1951 and considered an industry benchmark, showed U.S. oil consumption in 2013 grew by 400,000 bpd to 18.9 million bpd, the sharpest gain in the world, followed by China's rise of 390,000 bpd to 10.8 million bpd.

The consumption growth was led by an expansion of the U.S. industrial sector as the world's top economy emerged from the 2008 financial crisis, BP Chief Economist Christof Ruhl said.

Coal dominated world energy markets last year by supplying the biggest share of demand since 1970, making it the fastest growing fossil fuel, according to an annual review by BP.

Consumption grew 3 percent last year, driven by coal use in developing nations, according to a statement Monday from Europe's third-largest oil company. Use of renewables such as solar and wind also reached a record, accounting for 2.7 percent of all energy demand.

The findings are another indication that consumers are prioritizing cheap fuels over efforts to rein in greenhouse gas emissions blamed for global warming. Coal is the dirtiest fossil fuel, and use of it expanded at utilities from China to Germany.

"Europe is increasing its carbon emissions because it's using too much coal because it's cheap," Royal Dutch Shell's Chief Financial Officer Simon Henry said in an interview on Bloomberg Television June 3.

Coal's share of global energy use reached 30.1 percent, just below the 32.9 percent share for crude oil, which lost market share for a 14th consecutive year. China was the world's biggest coal consumer, followed by the U.S. and India.

In China, coal accounted for 67.5 percent of the total energy demand, the lowest on record because of new measures to combat pollution. Carbon dioxide emissions from fossil fuels use grew by 4.2 percent, or 358 metric tons, the slowest in five years, the report showed.

And the article goes on and on.

North Dakota Study: CO2 Injection To Increase Production From The Bakken

A reader sends this very, very interesting link -- using gas (CO2 or methane) injection to increase recovery of oil from the upper, lower, and middle Bakken rock.

The link: http://www.business.nd.gov/uploads/14/april102014empowerndcommissionminutes.pdf

It's a PDF link and it may take a few minutes to download.

After reading the four pertinent slides at the link, this will make more sense: when one is talking about a reservoir with 903 billion bbls of original oil in place (OOIP), a one-percent increase in production equates to 9 billion bbls of additional recoverable oil.

As a reminder, the USGS estimates there is about 7.6 billion bbls of recoverable oil from the Bakken/upper Three Forks using current technology, completion methods, and strategies. That was back in 2010, I believe.

For Investors Only; Fitzsimmons With Excellent Article Over At Seeking Alpha; We're Not Going To Run Out Of Oil -- Former BP CEO

It's been removed from Yahoo!Finance but early this morning RBC had a story listing six oil companies they suggest for traders who think the Iraq uncivil war could result in a relative shortage of oil this summer. The analysts recommended six companies: I recall four of them: Continental Resources, Whiting, Kodiak Oil & Gas, and Oasis Petroleum. The other two were not Bakken-related and the other two did not include EOG or any of the majors. I will look for the sttzsory later; if I have time I will come back to this. It's an interesting list to say the least.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you may have read here.

Mike Fitzsimmons has a nice article on LNG transportation over at Seeking Alpha. This is another really, really good article by Fitzsimmons, and I may come back and re-post this as a stand-alone post. It helps explains the geo-political background for some of the decisions / non-decisions being made in the Mideast. This paragraph, for example, stood out:

So why not let the region come to some sort of three-state "equilibrium" and then deal with each faction (Shia, Sunni and Kurd) individually? This was how General Petraeus met with some level of success. The answer is likely that even a temporary interruption of Iraqi oil production in the south (i.e. the maroon color on the map) would expose the US economy to much higher oil prices. And oil prices are already high: currently $112.60 for Brent and $107.11 for WTI.

For investors interested in KOG, there is also an article on KOG over at Seeking Alpha.

By the way, did anyone else catch this? I think I know what this story is all about , but I could be wrong. Over at Yahoo!In-Play:

Weatherford announces registration of merger in commercial register of the Canton of Zug : Co informs its shareholders that the merger of Weatherford Switzerland with and into Weatherford International plc, the new public holding company and parent of the Weatherford group of companies incorporated under Irish law, has been registered in the commercial register of the Canton of Zug, Switzerland, and has thereby become effective. The effective day of delisting of Weatherford Switzerland's shares from the SIX Swiss Exchange will be June 19, 2014.

Also, Samson Oil & Gas provides it weekly update in Stockyard Creek in the Bakken:

The work over rig on the Billabong well has now recovered 20 of the 26 joints in the hole. Of the remaining 6 joints, 2.5 joints have been washed over in the hole, as recovery operations continue.
The Bootleg 5-14-15TFH well has been drilled to a total depth of 19,076 feet in the Three Forks, where a 4.5 inch cemented liner was run. This means that both Bootleg 4 and 5 are ready to be fracture stimulated. Frontier 24 is moving to the Three Forks South pad where it will batch drill the next 4 wells (Bootleg 6 and 7, and Ironbank 6 and 7).

The top story over at Yahoo!Finance right now, not exactly a reason to feel comfortable about the price of oil -- former BP CEO says it's not time to panic. We're not going to run out of oil. He is absolutely correct. but it brings up the point that others have often remarked: it is not the availability of the first drop of oil that affects the price of oil, but the availability of the last drop of oil. And that I think is the risk. From the linked article:

If you want to gauge the market impact of the latest turmoil in Iraq, just watch oil prices. This most political of global markets is trading near its highest prices in nine months because of new battles raging in the region.

Sunni rebels from the Islamic State in Iraq and Syria (ISIS) captured Mosul and Saddam Hussein’s hometown of Tikrit last week and on Monday they took over the small city of Tal Afar in northwestern Iraq, according to Iraq security officials. Shelling continues in the capital of Baghdad.

The situation is so serious that U.S. Secretary of State John Kerry Monday said the White House is "open to discussions" with Iran and wouldn't rule out possible military cooperation with the Shiite-led country.

And then this:

So far oil production in Iraq has not been affected, says Browne, who adds that "plenty of people are heavily engaged in making sure" that continues.

Iraq is the second largest oil producer in OPEC after Saudi Arabia, producing over 3 million barrels a day. Its production has helped to stabilize the oil market, which is already subject to declining production in Libya and Nigeria.

But if Iraqi production is disrupted, Browne is not very concerned. He says Saudi Arabia and others could "certainly make up for" the decline, and the U.S. has "plenty of domestic supply and other sources coming in."

Just one week before the Iraqi uncivil war began, there was already talk of oil supply and demand issues. And now, with Iraq imploding, folks are telling us not to be concerned -- that Saudi Arabia can make up the difference. We'll see.

In fact, oil production has already been affected in Iraq; it occurred prior to the outbreak of current hostilities. I believe the number was about 250,000 or 350,000 bopd of Iraqi oil lost due to conflict. And I think that was in the south, not in the northern (Kurdish) area of Iraq. I don't think these fields can operate without western companies: the canary in the coal mine will be when the first western oil company or oil services company says they are evacuating their employees.

No, we're not going to run out of oil. We're going to run out of affordable, reliably-accessible oil. There's a huge difference.

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Random Note On The Monterey Shale From A Reader

This was sent in as a comment from a reader. It is not possible to google search comments, so I brought this comment up as a stand-along post. It's too important to lose. The reader references this link: http://sogistx.blogspot.com/2014/04/latimescom-vast-oil-trove-trapped-in.html

A bustling city is sprouting on five acres here, carved out of a vast almond grove. Tanker trucks and heavy equipment come and go, a row of office trailers runs the length of the site and an imposing 150-foot drilling rig illuminated by football-field-like lights rises over the trees.

It's all been hustled into service to solve a tantalizing riddle: how to tap into the largest oil shale reservoir in the United States.

Across the southern San Joaquin Valley, oil exploration sites have popped up in agricultural fields and on government land, driven by the hope that technological advances in oil extraction — primarily hydraulic fracturing and acidization — can help provide access to deep and lucrative oil reserves.

To me, the activity sounds like Texas or ND-maybe our "Shale is a Bubble" people have written off the Monterey Shale too soon.

Tuesday, June 17, 2014

Active rigs:

	6/17/2014	06/17/2013	06/17/2012	06/17/2011	06/17/2010
Active Rigs	188	184	214	173	129

RBN Energy: continues the discussion on natural gas supply and demand; fill rate this summer.

Are lower storage spreads in the futures curves telling the market that with all the new shale gas production coming online and setting records every other week, there is no need to be worried about storage anymore? That seems counter intuitive given the impact of this past winter in drawing down gas inventories so low by March. And don’t forget that by the time we get to 2020 we could have upwards of 6 Bcf/d of gas being exported from US liquefied natural gas (LNG) terminals as well as countless new industrial plants on the Gulf Coast sucking up gas, not to mention new gas fired generation to replace retiring coal plants. That’s a lot of new demand. We at RBN are optimistic that production will meet these increased demands, but we doubt if that will be smooth sailing without adequate use of storage. How that will play out with the current storage spreads is a big question.

The Wall Street Journal

The Iraqi uncivil war continues. By the way, speaking of which, the New York Times has an interesting story from a photographer who has been there, done that, wants to go back. This is a very, very good article: the current Iraq uncivil war was foretold as soon as the US left.

The long reach of the US government: the US Supreme Court handed Argentina a major setback in its long-running battle with a small group of determined creditors, heightening the risk the country will default for the second time in 13 years. The third time, they say, is the charm.

this was reported elsewhere yesterday, in a story from Sea Coast Online sent to me by a reader. Now it's a front section story in the WSJ: states and cities could be forced to report than $500 billion in additional liabilities for retiree benefits under ObamaCare.

Also reported yesterday, and now a front section WSJ article: IMF cuts growth forecast for the US. Sylvia Nassar/Keynes argues convincingly that instituting huge new taxes during a recession is a recipe for disaster. ObamaCare was a huge new tax. In her same book, it was argued that restricting the flow of capital restricted growth, again exactly what Dodd-Frank is doing.

Reported yesterday, and a front section story: Russia shuts off natural gas to the Ukraine.

This should move the US market: EU inflation falls; raises stimulus expectations.

The states get it: cut business taxes to spur growth.

GM recalls 3.4 million more cars. It's becoming a dog-bites-man story; no longer even in the front section of the newspaper, much less the front page.

The Los Angeles Times

The Obama administration said they were, then they weren't, now they are, does it really matter? Headline story in the LA Times: US and Iran in talks on how to cooperate with regard to Iraq.

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Tuesday, June 17, 2014