Saturday, December 6, 2014

Bakken Regains Its Position As Largest Tight Oil Play In The US -- Obama Administration Reports -- December 6, 2014

The Dickinson Press is reporting:
Proven crude oil and lease-condensate reserves in the United States increased 9.3 percent to 36.5 billion barrels in 2013, up from 33.4 billion barrels in 2012.
That was the fifth year in a row of increases, with reserves exceeding 36 billion barrels for the first time since 1975.
Collectively, North Dakota and Texas accounted for 90 percent of the overall net increase in U.S. proved oil reserves in 2013.
Tight oil plays accounted for 28 percent of all U.S. crude oil and lease condensate proved reserves, EIA said, noting the Bakken/Three Forks play covering parts of North Dakota, Montana, and South Dakota regained its position as the largest tight oil play in the nation.
Regular readers are aware that state and federal agencies are very, very conservative in their Bakken/Three Forks reserves estimates.

One just wonders when XOM will simply buy the whole thing and call it a day.

Propelled By The North Dakota Shale Boom, US Became A Net Exporter Of Petroleum Products In 2011; First Time Since 1949 -- Bloomberg; CA Hiway Funding Issues Trace To Bullet Train

Earlier I posted the link to a story on ethanol -- sent to me be a reader. It's worth another read.

Deep in the article, this data point:
Propelled by the shale boom in North Dakota’s Bakken and other regions, the U.S. became a net exporter of petroleum products in 2011 for the first time since 1949, according to the Energy Information Administration.
That’s also made the U.S. less dependent on foreign supplies. Imports of finished crude products were the lowest last year in records going back to 1981.
As more countries institute pollution policies, the U.S. could expand its list of ethanol customers.
I think North Dakota also leads in honey production and nuclear missiles (or somewhere in the top three) among the 57 US states.

Update On Corn

Earlier I posted a note on corn but was too lazy to check the facts. Turns out I was spot on:
About that comment about farming corn instead of wheat, regarding the 2014 North Dakota corn harvest, from agweb:
North Dakota has increased corn production more than any other state in the past decade.
“Replacing 60-bu. wheat with 120-bu. corn doubles the grain volume."
And doubles the pressure on the railroads.

The Problem Seems To Be Exaggerated

Later: in the original post below, I thought the problem was exaggerated, and the whole issue bogus. But this is why I love to blog. An astute reader noted that the highly inflated $8 billion needed every year (and rising every year) was due to the funding required for the $120-billion-bullet train project. Two things: a) money will be siphoned off highway taxes to fund the bullet train; and, b) it will be justified to pay for overpasses and underpasses for the bullet train. A huge "thank you to the reader. Some of the highway funding will be used for other mass transportation programs such as buses.]

Original Post the problem seems to be exaggerated:

The Los Angeles Times is reporting (again -- this story makes the news about every six months):
Faced with growing shortfalls in highway funding as drivers give up their gas-guzzling cars, California officials are trying to determine if a mileage fee would be more effective at raising revenue for road projects than the state tax of 36 cents per gallon. 
So, let's run the numbers. The state says it needs $8 billion to "maintain, rehab, and operate" the California highway system, up from $3 billion in 2004. Assuming there's a bit of "gold-plating" by proponents, let's say the real cost is closer to $6 billion.

The population of California is 38 million; let's call it 40 million.

$6,000,000,000 / 40,000,000 = 6,000 / 40 = $150 / California resident. Even assuming the full $8 billion, gets us to only $200 / California (and you know they aren't going to spend that entire amount each year).

Gasoline taxes: 12,000 miles driven/year; average 20 mpg = 600 gallons x 36 cents/gallon = $216/automobile. Assuming one-fourth of the 40 million Californians drive, that gets us to $2 billion.

Back to the $6 billion that actually might be needed; subtract the $2 billion from gasoline taxes, leaving $4 billion / 38 million Californians = $105.

So, for each Californian, we are talking a whopping $100  (minimum) - $200 (gold-plate) for the state's highway transportation needs. Assuming the average family is four members, and we get $400 to $800/annually/family to maintain the California highway system. $800 / 365 days = $2.20/day, about the cost of a daily Starbucks.

I hardly see any emergency. Especially if one has a progressive tax, requiring the upper 1% to shoulder most of the burden, most Californians would not even be aware of much added expense.

It would be a lot cheaper than retro-fitting every car with an odometer-reading, GPS system, that sends data to the state, where a highly paid contractor would manage the scheme.

Going, Going, Go n e .. . .. M a r y L a n d r i


Later, 10:00 p.m. CT: Landrieu down.
On Dec. 24, 2009, the Democratic-controlled Senate passed President Obama’s healthcare law with a filibuster-proof 60-vote majority, triggering a massive backlash that propelled Republicans to control of the House the following year.
On the Senate side, going into this year's midterm elections, 25 senators who voted for Obamacare were already out or not going be part of the new Senate being sworn in next month. After Democratic losses on Nov. 4 and Saturday's defeat of Sen. Mary Landrieu, D-La., the number has risen to 30.
In other words, half of the Senators who voted for Obamacare will not be part of the new Senate.
Later, 8:00 p.m. CT: results pending (click to refresh). An alternate, and perhaps better, site.
Original Post
The AP is reporting:
In the last election of the 2014 midterms, Louisiana voters Saturday decide the political fate of Democratic Sen. Mary Landrieu, who is struggling to win a fourth term against a wave of GOP gains across Southern states.
If Cassidy is successful, his win would add a ninth Senate seat pickup for the GOP, pushing their new majority to 54 seats in January and costing Democrats their last Senate seat in the Deep South.
Look how long this has taken:
  • 1964: Southern Strategy -- five southern states give their electoral votes to Barry Goldwater, the start of the Republican takeover of the Deep South.

She's A Lady, Tom Jones

Completely inappropriate, but making the internet rounds:
I love Christmas lights! They remind me of the people who voted for Obama. They all hang together, half of them don't work, and the ones that do, aren't all that bright.

JoNova is reporting in black, blue, and green. I believe the trees. I don't believe Algore.

Slump In Oil Price, October 1, 2014 -- December 31, 2014: Saudi Arabia Market Share

Saudi Arabia and Market Share

Comment: the slump in the price of oil began in October, 2014, and accelerated in December, 2014, when OPEC announced no cut in production at their Thanksgiving week meeting. The 30-second Saudi soundbite: they made the decision unilaterally, and they were protecting their "market share."

"The world" interpreted this to mean a price war with shale producers in the US and oil sands in western Canada. Interestingly enough, the international press keeps talking about Libya, and back in 2013, OPEC did away with its quota-monitoring committee. I think Saudi has three issues:
  • OPEC members cheating (that's their "real" market share at risk)
  • terrorist nations (Libya, ISIS, Iran)
  • North American energy revolution
The entire US oil and gas industry will suffer; some companies will go bankrupt. But the US will do just fine. On the other hand, one cannot say the same for some OPEC countries like Venezuela.

US crude oil imports from Saudi Arabia:
  • recent historical 30-second sound bite: 1.5 million bopd
  • August, 2014: 0.1 million bopd
  • September, 2014: 1.0 million bopd 
Back of the envelope calculations:
From the Fitzsimmons link, $138 million per day / 600,000 bopd = $230 / bbl.

Links and Updates
L'Arena, Il Mercenario, Ennio Morricone

Saudi Imports, Update -- December 6, 2014

First, review this post.

Now, the most recent figures.  The EIA link is here. Right at one million bbls of Saudi crude oil per day was imported in to the US for September. This is about the same as the previous month, and represents a 50% decrease from recent historical levels (1.5 million bopd vs 1.0 million bopd). 

Slump In Oil Price, October 1, 2014 -- December 31, 2014: OPEC Realities

OPEC is dead. The beginning of the end began in 2013 when OPEC disbanded its quota-observation committee, or whatever it was called at the time. Saudi Arabia finally had enough of the charade of quotas.


Saudi Arabia says "no" on production freeze at Doha, posted April 24, 2016
How Saudi Arabia overplayed its hand, NY Times, March 12, 2016.
Petrobras slashes oil reserves to lowest level in 14 years, January 31, 2016.
Venezuela - Tick, Tick, Tick; Saudi Arabia facing more austerity; January 31, 2016
OPEC's trillion-dollar miscalculation, Forbes, January 8, 2016
OPEC is not dead, but ..., January 23, 2015
OPEC chief says the group will "try" to ride out the slump; he said the ministers made their decision; will stick by it, "for now" -- December 15, 2014
China buying a gazillion bbls of oil and storing it in super-tankers off-shore -- December 12, 204
OPEC collapsing as oil heads to $50/bbl; important graphic -- December 10, 2014
Oil resumes drop as Iran see oil at $40/bbl if there is OPEC discord -- December 10, 2014
Iran: fall in oil prices is treachery -- December 10, 2014
Blink? Algeria oil minister says OPEC may hold emergency meeting earlier than scheduled June, 2015 meeting -- December 9, 2014


OPEC chief says the group will "try" to ride out the slump; he said the ministers made their decision; will stick by it, "for now" -- December 15, 2014. The most interesting thing about this story: the OPEC chief argued that "market weakness did not reflect supply and demand fundamentals and could have been driven by speculators." This comment and the fact that he made it all suggests a) OPEC was blindsided by how fast and how far the price of their only resource would fall; and, b) that it was speculators causing the fall, suggesting that supply and demand should drive significantly higher prices. 

85 Disruptive Ideas -- Ranked -- BloombergBusinessweek

This week's issue of Bloomberg Businessweek is pretty good. It celebrates its 85th birthday by "chronicling the most disruptive ideas of the past 85 years, those entrepreneurial earthquakes whose tremors are still being felt. Disruption is a trendy word, but it's used here without endorsement. To add a little tension, we've gone to the trouble of ranking these 85 disruptions and counting down to an overall world-changing champion."

I think they got it about right. I certainly cannot argue with their "85-disruptive-idea-countdown."

It would be interesting to go back and look at how many of the 85 disruptive ideas had their beginnings between 1960 and 1969 (inclusive).

Ranking, year, disruptive technology:
  • 71. 1965: Singapore expelled from federation with Malaysia, Singapore becomes an independent state.
  • 67. 1964: Southern Strategy -- five southern states give their electoral votes to Barry Goldwater, the start of the Republican takeover of the Deep South.
  • 64. 1967: Super Bowl I.
  • 63.  1960: OPEC.
  • 14. 1968: the cubicle.
  • 9. 1960: the pill.
  • 4. 1962: Wal-Mart.
  • 3. 1965: Green Revolution. Disease-resistant wheat seeds developed by Norman Borlaug are introduced in India and Pakistan.
Missing from the list:
  • hydraulic fracking, probably goes back to the 1940's
  • the Bakken (as a phenomenon, not a geographic location); perhaps, 2000
  • identity theft, perhaps the Target breach in 2013
  • deep-sea drilling, date unknown, maybe 1961
  • Apollo, 1969
  • US as world policeman (remember, these are disruptive "ideas" -- not technology per se), 1945
  • US interstate system, 1956
  • impeachment, as a viable political tool, 1974
  • triangulation, as a viable political strategy, 1996
  • assassinations, as a viable political strategy, zenith in the 60's, 1963
  • international terrorism, as a viable geo-political strategy, 1966

Halcon In The Eagle Ford Update -- Zeits, Seeking Alpha -- December 5, 2014

Richard Zeits over at Seeking Alpha updates Halcon in the Eagle Ford.

At Least It's Easy To Leave

Being tweeted right now, 11:36 a.m. CT, December 6, 2014:  Up to 10,800 American troops to remain in Afghanistan, 1,000 more than previously announced, US Secretary of Defense Chuck Hagel says - press conference.

"... more than previously announced"? I thought we were getting out -- that's what I thought the Nobel-Peace-Prize President said. 

One Ethanol Mystery Solved -- December 6, 2014

Do me a favor.

Go to this link (

Then scroll down and look at two graphs regarding ethanol.

Note that ethanol reserves in the US decreased (that I expected).

The amount of ethanol produced by the US is increasing significantly (second graph). That I did not expect and could not explain.

Until now.

A reader sent me this link. Bloomberg is reporting:
The U.S. is adding ethanol to the list of fuels it dominates in world markets.
Exports of the additive derived from corn rose 31 percent this year to the highest level since 2011, meeting demand from South Korea to Persian Gulf oil producers. The growth in sales follows a tripling of gasoline and diesel exports since 2009.
While the shale-oil boom created a stream of refined products flowing overseas, the ethanol surge is being driven by record crops. The U.S. is producing about 66 million metric tons more corn than a decade ago, almost as much as the rest of the world will export this year. Global demand for U.S. ethanol is helping ward off a glut after the government eased obligations to blend the fuel with gasoline. 
I think this is incredibly cool. It takes slightly more fossil fuel energy to produce a similar amount of ethanol which is good for fossil fuel investors.

But even more so, this is huge for American farmers, exporting fuel made from food. I think North Dakota farmers are taking more virgin prairie and converting it to corn. Same with wheat; taking wheat out of production and going to corn where the prices are better. That, of course, changes from year to year, and I'm not going to bother confirming my worldview/myth with data.

[Later. About that comment about farming corn instead of wheat, regarding the 2014 North Dakota corn harvest, from agweb:
North Dakota has increased corn production more than any other state in the past decade. “Replacing 60-bu. wheat with 120-bu. corn doubles the grain volume."]
I could be wrong, but I think most people associate "green energy" / ethanol with one US political party more than the other US political party. Warren, shipping ethanol and corn by railroad, certainly supports "green energy" / ethanol. No wonder he supports Hillary; it makes good business sense. For investors, this is an open-book test.

This is part of Obama's "from all the above (except coal)" energy plan. I love it.

We can't export crude oil but we can export ethanol. Congress works in mysterious ways. LOL.

The smartest thing Iowa ever, ever did was declare itself the first primary.

North Dakota On Track To Issue Exactly 3,000 Oil And Gas Permits This Calendar Year (2014) -- December 5, 2014

See this post for background. In that post, earlier in November, North Dakota was on track to issue 3,016 permits.

As of Friday, December 5, 2014, North Dakota is on track to issue exactly 3,000 oil and gas permits this year.

One can track this data here, but the page has not been fully updated. 

No Hurricanes In 2014; Why Antarctic Ice Is Increasing Despite Algore's PowerPoint Presentation

As usual, Don caught this. The 2014 Hurricane Season ended November 30, 2014, at 11:59 p.m.

There were no hurricanes in 2014.

Atmospheric CO2 surged passed critical mass of 400 ppm in 2014.

Long live global warming. No hurricanes is not necessarily a bad thing.

For warmists, the data is striking. This was tweeted by Met Storms on Labor Day, 2014:
Today is the first time for almost 70 years that there have been no tropical storms active anywhere in the world on 1st September.
Again, atmospheric CO2 surged past critical mass of 400 ppm in 2014 and we are all still blogging.

Not only no hurricanes, but warmists had trouble coming up with "tropical storms" this past summer.

I guess there was one major storm of 2014, it affected the entire United States on Tuesday, November 4, 2014. That storm spawned one tornado that will play out in Louisiana today.

Antarctic Ice

Okay, it's agreed by all:
  • sea ice is increasing
  • the amount of sea ice does not correlate with global temperature
The second bullet is still argued by some, and I will continue to post stories about sea ice because I enjoy the story but that's about all. The first bullet is fact, Jack.

But I'm meandering.

The warmists now have an explanation why global warming is causing sea ice to actually increase. I cannot make this stuff up.  Business Insider is reporting:
Antarctic sea ice reached a record high this year, topping 20 million square kilometers (nearly 8 million square miles) in September — a milestone it hadn't touched since 1979.
It's a fact climate change deniers are fond of repeating. If the planet is warming, shouldn't sea ice be melting away rather than growing?
It's true that the phenomenon is a confusing one — but it's no proof that climate change isn't happening. In fact, scientists believe that climate change is actually responsible for the strange events down in the Antarctic. Walt Meier, a scientist from NASA's Goddard Space Flight Center, explains how this is possible in a new video from Science@NASA.
And, no, I did not look at the video. I think we now have 462 reasons (and even more videos and press releases) from the NASA Goddard Space Flight Center on why global warming FACTS don't fit the Algore PowerPoint Presentation.

By the way, my freezer ice maker makes ice cubes a whole lot faster when I leave the freezer door open, also. When I find some time, I'm going to make a video of the phenomenon and explain why this is true.

A Note to the Granddaughters

The last note above about the ice cube maker in the freezer reminds me of a story from my "P Chem" (physical chemistry) course in college many decades ago. I had great difficulty with calculus and I believe this problem could have been easily solved using calculus but I had to use non-calculus to get the answer, and it took me most of a Thanksgiving four-day break at my grandmother's house in Storm Lake, Iowa, to solve the problem. (No, my grandmother, an English teacher in her younger days, did not help me with the problem.)

The problem had to do with kitchen / room temperature. The professor's problem stated that the temperature in the kitchen was a certain number, without the refrigerator/freezer being turned on.  He then asked, based on the parameters of the refrigerator/freezer, he gave us, whether the temperature in the kitchen / room would increase/decrease/stay the same over 72 hours and by how much (in degrees) once he plugged in the refrigerator.

I came up with an answer; I did not get full credit for my results but I did pass the test (that was just one question; I believe there were eight problems).

Slump In Oil Price, October 1, 2014 -- December 31, 2014: Pricing, Part I

Musings on pricing.

There are two questions to ponder:
  • what is the right price for oil?
  • when will we see the right price of oil?
For now I will just cut to the chase, and develop the argument at a later date, if the spirit moves me.

  • oil is not a typical commodity: one producer has historically been able to affect global supply and prices to a greater extent than other producers; a relative monopoly
  • the US is or soon will be the world's #1 producer of oil; and the US, by law, cannot export oil (there are exceptions)
One of many unknowns:
My conclusions:
  • more and more, "like" oils, regardless of origin, will be driven by market (supply and demand) forces
  • the "right" price for Brent, OPEC, and WTI oil is $100/bbl (baseline year, 2014)
  • we will see the "right" price not earlier than December, 2015
Other media links:
Updates and News

December 30, 2014: break-even points for five largest producers in the Bakken.  

Slump In Oil Price, October 1, 2014 -- December 31, 2014: Permitting

Disclaimer: all data is unofficial; all data is subject to error. Assume there are typographical and/or factual errors. If this information is important to you, go to the source. Everything about the Bakken is posted in good faith. This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here.
Slump In Oil Price, October 1, 2014 - December 31, 2015
Permitting, October 1, 2014 - December 31, 2014
Permitting, January 1, 2015 - December 31, 2015
Pricing, Part I
Pricing, Part II
Saudi Arabia Market Share
Mid-East Geo-Politics
OPEC Realities

For permitting in 2014, note the surge in permitting after the Saudis said they were going to maintain production and oil prices plummeted (after November, 2014). 

Total permits. This is from my database. See disclaimer above. I assume my numbers are different from those of the NDIC, but I also assume they are very close. These are only oil and gas permits, not salt water disposal permits. If this information is important to you, go to the source:
  • 2014: 3,012
  • 2013: 2,247
  • 2012: 2,187
  • 2011: 1,916
Real time (date, # of permits; projection to end of year)
  • December 31, 2014: 3,012, 3012
  • December 30, 2014: 3,003, 3,011
  • December 29, 2014: 2991, 3007
  • December 26, 2014: 2977, 3018
  • December 24, 2014: 2969, 3027
  • December 23, 2014: 2967, 3033
  • December 22, 2014: 2948, 3023
  • December 19, 2014: 2928, 3028
  • December 18, 2014: 2919, 3,027
  • December 17, 2014: 2908, 3,024
  • December 16, 2014:  2897, 3,021
  • December 15, 2014: 2879; 3,011
  • December 12, 2014: 2860; 3,017
  • December 11, 2014: 2839; 3,004
  • December 10, 2014: 2825;  2997
  • December 9, 2014: 2811; 2991
  • data is from my data base
  • only oil and gas permits; no salt water disposal well permits
  • may not agree with NDIC data
  • errors are likely; I will correct them when found
Projected Permits For Calendar Year 2014 At Various Points in 2014

Date; number of permits on that day; number of days so far in the calendar year as of that date; projected number of permits for the entire calendar year (2014) based on that data:
  • January 31, 2014: 253 permits; 31 days; projected permits by end of 2014: 2,979
  • June 30, 2014:  1398; 181 days; 2,819
  • September 30, 2014: 2154; 273 days; 2,880
  • October 31, 2014: 2241; 304 days; 2,691
  • November 30, 2014: 2761; 334 days; 3,017
The "October number" of 2,691 is so far from the others, I suspect an error, but haven't found it yet. I will keep looking. If there are not errors, one has to chuckle. The number of permits projected was actually decreasing (of the dates provided above, until November, (the month of the OPEC meeting) when permit projections jumped. Again, subject to error. And it doesn't take much difference in the number of permits in one month to make a big difference in projected permits.

Change in Number of Permits October / November 2014

Fitzsimmons said the number of permits declined by 29% Oct/Nov. My data suggested 28% which is pretty good, if you ask me, with regard to data accuracy, and basic arithmetic (month, ending permit number - starting permit number; number of permits for that month:
  • July: 1665 - 1397: 268 permits
  • August: 1938 - 1665: 273 permits
  • Sept: 2200 - 1938: 262 permits
  • Oct: 2526 - 2200: 326 permits
  • Nov: 2761 - 2526: 235 permits (calculations: 91 fewer than October; 28% fewer; Thanksgiving week; last permit on November 28; there were no permits issued on the holiday, November 27, and only four permits issued the next day, Friday, last business day of the month)
I think it was too early to suggest the decrease in permits month-over-month, October to November, to draw any conclusions, but it's a nice baseline going forward. Remember, the OPEC meeting that started all of this was on Thanksgiving, last week in November, 2014.

Regardless of where we end in calendar year 2014 with regard to permits, I think 2014 permitting data is irrelevant with regard to the slump in the price of oil. The year was pretty much decided by the end of October with regard to permits, and by the end of November, the number of projected permits for the entire year had jumped significantly, to over 3,000.

There is one month left, and a huge holiday month could impact the final number.

If folks are looking at the number of permits to judge activity in the Bakken, I would say that this year (2014) is pretty much over. The year to follow will be calendar year 2015 and compare that year with previous years.

  • during the boom, permits came fast and furious to get wells spud to "hold by production"
  • during the initial manufacturing phase, more permits had been issued than could be drilled by the end of any given year; there has always been a backlog of permitted locations at the end of every year
  • as the middle Bakken matured, no one could say what the pace of future permitting would be (with or without a slump in oil prices)
  • there was (and, is) no need to be fast and furious in exploring and delineating the Three Forks; to the best of my knowledge, in all areas of North Dakota (for that matter), the NDIC has determined that the Three Forks is "part of the Bakken" 
  • unlike the middle Bakken boom, there was no need for "fast and furious" permitting to "hold by production" in the Three Forks (repeats previous bullet)
  • operators moved to other shale plays in the US once the Williston Basin boom declared itself; no one could say what the pace of future permitting would be in the Three Forks (with or without a slump in oil prices) if the price of oil remained high -- because of competing plays (operators used high prices to pay for exploration; lower prices will change the "E&P" equation
  • even with the "fast and furious" permitting during the "boomiest" years, records were still being set each year with regard to number of permits; at some point one would expect permits to decrease, all things being equal
Conclusion: the jury is out with regard to the relevancy of permitting in North Dakota. It is counter-intuitive, but I can argue both sides of the same coin (and in fact I have posted my thoughts on this elsewhere for the date/time stamp but will not share it now)


December 26, 2014: terrifying headline -- number of Texas oil & gas permits halved in November following OctoberReally terrifying.

Week 49: November 30, 2014 -- December 6, 2014

Operators are circling the wagons 
Operator to re-enter Amber Renee
Just how good is the Bakken? Look at some of these wells 

Bakken economy
Home Depot coming to Williston

For investors
Whiting shareholders overwhelmingly approved KOG merger/acquisition

North Dakota, third consecutive year: 24/7 Wall Street's Best-Run State
Handbook for Mineral Owners now available at
New Facebook Bakken community group for mineral rights owners