We'll See: The Dakota Access Pipeline -- September 11, 2015

The AP is reporting, out of Bismarck:

Mountainous piles of steel pipe are being staged across four states in anticipation of building the biggest-capacity pipeline proposed to date to move crude from North Dakota's prolific oil patch.

But stockpiling the pipe is a gamble for the Dallas-based Energy Transfer Partners' Dakota Access Pipeline, a $3.8 billion, 1,130-mile project that still needs approval from regulators in North Dakota, South Dakota, Iowa and Illinois.

My hunch: North Dakota will approve; South Dakota and Illinois will delay decision; and Iowa will block. Remember, Bernie Sanders is leading Hillary Clinton in Iowa. That's all I need to know. 

Organizers learned a lot from the Keystone. And there's no pressing need.

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Storage In America

Reuters (Jack Kemp) is reporting:

U.S. commercial crude stocks are still close to their highest levels in over 80 years, but operational requirements prevent refineries filling on-site storage facilities to their maximum capacity.

An increasing proportion of U.S. crude oil stocks is held in off-site tank farms, some owned or leased by refiners themselves, but many owned or leased by marketers and traders.

According to the Energy Information Administration (EIA), which surveys storage capacity every six months, total crude in storage at the end of March was 475 million barrels, and the country had capacity to store up to 660 million.

Only 182 million barrels of storage capacity, around 28 percent, was on site at oil refineries. The rest was off site at tank farms or in pipelines, railroad tank cars, barges and oilfield tanks.

Most of the crude at refineries and tank farms is stored in giant cylindrical tanks with a roof that floats directly on the surface of the oil.

Storage tanks need to be kept filled to a minimum of around 20 percent to support the roof and operate the pipes and other equipment.

Living in America, Neil Diamond

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Putting Things Into Perspective

Yesterday I was surprised to see the EIA headline that California was #3 among the US states for refining capacity. #3? Then I went to the link: #3 accounts for about 10% of total US refining. In other words, if California refining went away, it would have no -- okay, minimal -- impact on US refining. It would be painful for Californians, but for the US, it's all about Texas and Louisiana when it comes to refining.

The tea leaves suggest that refining capacity will not change much for California going forward.

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One Last Thought Before I Leave The Bakken

I have coffee in the morning at the Daily Addiction on Main Street in Williston for the wi-fi. The music is alternative music, reggae, etc. At least that's what it is now and was yesterday at this time.

They have a single flat-screen television which is placed in a pretty good spot for viewing; of course, only video, no sound. And what do they run, apparently all day long? C-Span. I kid you not. Speeches in front of empty chambers.

It really doesn't matter. Ninety percent of business is take-out. I'm the only one sitting here now. At the height of the boom, it was hard to find an empty chair. At the height of the boom, lines stretched from the counter to the front door; now one or two in line at most.

But C-Span?

Shale 2.0 -- September 11, 2015

My observations in the Bakken suggest the same thing as this writer suggests. From economics21:

It is true that the oil-price collapse was caused by the astonishing, unexpected growth in U.S. shale output, responsible for three-fourths of new global oil supply since 2008. And as lower prices roil operators and investors, the shale skeptics’ case may seem vindicated.

But their history is false: the shale revolution, “Shale 1.0,” was sparked not by high prices—it began when prices were at today’s low levels—but by the invention of new technologies. Now, the skeptics’ forecasts are likely to be as flawed as their history. Continued technological progress, particularly in big-data analytics, has the U.S. shale industry poised for another, longer boom, a “Shale 2.0.”

John Shaw, chair of Harvard’s Earth and Planetary Sciences Department, recently observed: “It’s fair to say we’re not at the end of this [shale] era, we’re at the very beginning.” He is precisely correct. In recent years, the technology deployed in America’s shale fields has advanced more rapidly than in any other segment of the energy industry. Shale 2.0 promises to ultimately yield break-even costs of $5–$20 per barrel—in the same range as Saudi Arabia’s vaunted low-cost fields.

The shale industry is unlike any other conventional hydrocarbon or alternative energy sector, in that it shares a growth trajectory far more similar to that of Silicon Valley’s tech firms. In less than a decade, U.S. shale oil revenues have soared, from nearly zero to more than $70 billion annually (even after accounting for the recent price plunge). Such growth is 600 percent greater than that experienced by America’s heavily subsidized solar industry over the same period.

Shale’s spectacular rise is also generating massive quantities of data: the $600 billion in U.S. shale infrastructure investments and the nearly 2,000 million well-feet drilled have produced hundreds of petabytes of relevant data. This vast, diverse shale data domain—comparable in scale with the global digital health care data domain—remains largely untapped and is ripe to be mined by emerging big-data analytics.

Shale 2.0 will thus be data-driven. It will be centered in the United States. And it will be one in which entrepreneurs, especially those skilled in analytics, will create vast wealth and further disrupt oil geopolitics.

Archived. Incredibly good article. A must-read.

EVs Sales Down 25% Year-Over-Year

Normally this story would simply be an add-on, but when you see a headline suggesting that EV sales were down 25% year-over-year, it needs a stand-alone post, or at least at the top of a new post. A trade magazine is reporting:

If you have been a follower of plug-in vehicle sales in the United States this year, then you knew this month was coming – the bottom of the barrel as it were. Compared to a year ago, August 2015 is EV sales-armageddon!

Put another way, with only the last inventory scraps of the first generation Chevrolet Volt, Toyota Prius PHV, and now obsolete Nissan LEAF left on lots to compete against a strong August of 2014 – it was a total comparative bloodbath.

For August, an estimated 8,972 plug-ins where sold, a slight gain over July, but significantly off 25% from the ~12,172 moved a year ago.

But, according to the linked article, sales will jump come September.

August, 2015, sales: 8,972
August, 2014, sales: 12,172

As usual, a lot of attention to EVs and intermittent energy, but in the big scheme of things, not a lot going on.

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Russia? Doing Just Fine, Thank You -- Bloomberg

Bloomberg/Rigzone is reporting:
At a time when the collapse in crude prices pushes Russia’s economy into a recession, the nation’s oil producers are managing to beat their western counterparts. On measures including cash flow, profit margins and share prices, OAO Rosneft, Lukoil PJSC -- Russia’s two largest oil producers -- and OAO Gazprom Neft are performing better than Royal Dutch Shell Plc, BP Plc or Exxon Mobil Corp.

Friday, September 11, 2015

Active rigs:

	9/11/2015	09/11/2014	09/11/2013	09/11/2012	09/11/2011
Active Rigs	69	198	180	193	199

RBN Energy: dreaming of a white Christmas.

U.S. natural gas production has been essentially flat this summer as many producers curtailed, deferred or delayed drilling and well completions earlier in the year. However, some of the same producers, particularly in the Northeast, in their most recent earnings calls, indicated they expect to meet their 2015 production targets by increasing output this winter. In today’s blog, we look at how and why producers defer production and the potential impacts on the market in Q4.

It’s not surprising that some gas producers deferred well completions this summer. Rates of return have been squeezed all year by a combination of low oil, liquids and gas prices. In response to lower prices, producers have made significant capital budget cuts.

And besides low prices and returns, Northeast producers in particular have faced midstream capacity constraints that push down prices to bargain basement levels and make it harder to find economically viable routes to market for new production. Producers responded by laying down rigs and shifting their drilling activity and spending towards their most productive acreage (thereby cutting costs and increasing rig efficiency).

Additionally, those producers that can afford to hold off production (losing cash flow in the short term – something not all have deep enough pockets to do) have used numerous tools and tricks for delaying production while they weather this tough market environment. These include drilling the minimum required to hold on to leases for future development, not completing (i.e. fracking) already drilled wells and choking back big initial production (IP) rates  to restrain output until a pipeline tie-in or better pricing becomes available. Producers typically prefer to defer new production volumes in these ways rather than to shut-in existing wells that are producing, because (as we explained in shut-in economics rarely make sense long term.

The gas production picture has varied across the country with slight growth in the Northeast being offset by declines elsewhere. The Northeast (Marcellus and Utica) continues to drive production growth as it has for the past few years, in particular buoyed by new drilling and record IPs in the dry gas window of the Utica Shale. However, if Northeast producers have delayed completing and tying in wells because of low prices then they could rapidly increase production when conditions improve.  Recent earnings calls suggest that some Northeast producers believe that the last quarter of 2015 (i.e. winter) is the time when they could crank up output from deferred wells in order to meet 2015 targets.

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EIA "energy cookie":

In the first half of 2015, Saudi Arabia exported on average 4.4 million barrels per day (b/d) of crude oil to seven major trading partners in Asia, making up more than half of Saudi Arabia's total crude oil exports over that period. Even as global crude oil prices fell in 2014 and 2015, Saudi Arabia increased production and kept its export levels high, enabling it to maintain its market share in these countries. However, long-term trends within Saudi Arabia's energy sector may reduce its global crude oil market share. --- EIA

Reported yesterday on the blog: year-over-year, June oil imports into the US from Saudi Arabia increased despite American glut in crude oil.

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Mexico Cuts

Bloomberg/Rigzone is reporting:

Mexico plans to spend the least in nine years to explore for oil, relying instead on foreign companies to help reverse a decade-long decline in production.

The Mexican state-owned oil producer, which has lost money 11 quarters in a row, is for the first time in 77 years making room for foreign firms to bid for the right to drill in Mexican territory.

Pemex contends that the formation of 10 joint ventures with private companies at declining fields this year will boost output that has fallen to its lowest levels since at least 1990. Mexico forecasts oil production of 2.25 million barrels a day in 2016 and a price of $50 per barrel, according to the budget proposal.

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Not News -- But Still Pretty Cool

This has already been reported everywhere (see tag), but "cool" to see it in The (London) Independent: North Dakota becomes first US state to legalise (sic) use of armed drones by police.

Armed drones could be used by police in the US state of North Dakota after local lawmakers legalised their use.

While they will be limited to “less than lethal” weapons, tear gas, tasers, rubber bullets and pepper spray could all be used in theory by the remote controlled flying machines.

In a classic case of unintended consequences, the original sponsor, Republican state representative Rick Becker said he was unhappy with the way legislation turned out. 

The Brits are the most "concrete-thinkers" in the world when it comes to names: it's not drones, but "remote controlled flying machines. And "armed'? Tasers?