Preview Of The Bakken And Horizontal Drilling -- 1993 -- September 24, 2015

For the archives, this is a great paper. I will link it at several places in the blog. Hopefully it's never removed from the internet by those who posted it. A huge thanks to the reader who sent it this way.

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Why WTI Is Down -- Just One More Reason

Tweeting now: upcoming Basin pipeline closure adds to pressure on Light Houston Sweet crude oil. See story here. 

Plains All American Pipeline's Basin pipeline is expected to close in November, limiting the flow of crudes sourced in the Permian Basin and shipped to Cushing, Oklahoma, the delivery point for the NYMEX light crude futures contract. Those barrels will instead seek homes at US Gulf Coast refineries.

During the 10-day closure, a segment of the 450,000 b/d pipeline between Midland, Texas, and Colorado City, Texas, is expected to undergo hydro-testing, the company said in a notice.

As a result, more volumes of crude produced in West Texas are likely to be marketed through Magellan Midstream Partners' 275,000 b/d Longhorn Pipeline and the 300,000 b/d BridgeTex Pipeline systems, which both head toward Houston-area refineries.

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The Apple Page

The lines are back! 

North Dakota Delays Stricter Flaring Deadlines -- Seeking Alpha -- September 24, 2015

Seeking Alpha is reporting:

Headline: North Dakota delays plan to limit natural gas flaring
Story:

• North Dakota regulators approve an industry-backed proposal to delay further cuts to associated gas flaring by 10 months while also easing more long-range flaring reduction targets
• Gov. Dalrymple and the two other members of the North Dakota Industrial Commission voted to change the date when companies must capture 85% of natural gas produced from their wells to November 1, 2016
• The regulators agreed with industry arguments that the delays and revisions were needed because of the lack of new gas capture and pipeline infrastructure, which have been delayed for a variety of reasons, including low oil and gas prices, right-of-way disputes and pad size limitations.

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Very, Very Interesting

Ford, I Think, Can Take Credit For Getting This Ball Rolling

Seeking Alpha is reporting:

Alcoa says it has completed a $300M expansion project in Tennessee that will provide aluminum sheet to automakers, its second major automotive expansion in less than two years as it continues to see strong long-term customer demand.

The amount of aluminum body sheet content in North American vehicles is expected to grow by 3x from 2012 to 2015 and increase 11x by 2025 from 2012, and Alcoa estimates it will grow its automotive sheet revenue ~6x to $1.3B in 2018 from $229M in 2013.

Alcoa previously completed a $300M automotive expansion at its Davenport, Iowa, facility in January 2014.

Newfield, BR Report High-IP Wells; Four (4) New Permits; Whiting Cancels Five Permits, Including Two Smokey Permits; Three More DUCs -- September 24, 2015

Active rigs:

	9/24/2015	09/24/2014	09/24/2013	09/24/2012	09/24/2011
Active Rigs	70	193	187	188	195

Wells coming off confidential list Friday:

• 29508, SI/NC, Zavanna, Shepherd 3-11 2TFH, Stony Creek, no production data,
• 30355, SI/NC, Hess, BL-Kerbaugh-156-96-3427H-4, Beaver Lodge, no production data,
• 30682, drl/NC, MRO, Bingo 24-10TFH, Reunion Bay, no production data,

Four (4) new permits --

• Operator: CLR
• Field: North Tobacco Garden (McKenzie)
• Comments:

Whiting cancels five (5) permits: two in Golden Valley (Abraham and Rojic); three in McKenzie County (Peterson, and two Smokey wells)
Three (3) producing wells completed:

• 28959, 1,090, Newfield, Skaar Federal 153-96-29-11H, Sand Creek, t5/15; cm 28K 7/15;
• 29979, 1,824, BR, CCU Dakotan 2-7-17MBH, Corral Creek, t8/15; cum --
• 30115, 1,823, BR, CCU Dakotan 3-8-17MBH, Corral Creek, t8/15; cum --

Oasis converted two Bakken wells to salt water disposal wells, both in McKenzie County.

OPEC Is Winning The Battle To Get Americans Hooked On Oil -- Again -- Jack Kemp, Reuters -- September 24, 2015

This is really cool. Reuters appears to be reading my blog -- echoing what I've been saying for quite some time and then very explicitly just the other day -- and now Reuters seems to be quoting me almost exactly: "OPEC is winning battle to stimulate gasoline demand." LOL.

OPEC's bid to curb production of high-cost oil is taking time to produce results but the organisation is already making good progress on its other objective of stimulating fuel demand.

In the first half of the year, gasoline deliveries into U.S. local markets jumped by 4.3 percent compared with the same period in 2014, according to the U.S. Energy Information Administration.

The United States is the world's largest gasoline consumer and its gasoline demand accounts for 10 percent of all crude and condensates produced worldwide.

In the first six months of 2015, U.S. gasoline consumption rose at the fastest rate since 1985 - another occasion on which the real price of oil halved over 12 months and stimulated demand.

U.S. gasoline sales have fallen or stagnated for the last decade as the high cost of fuel encouraged motorists to use their cars less and buy smaller and more fuel efficient vehicles.

But the sharp drop in fuel prices since the middle of last year is stimulating demand again by encouraging more driving and motorists to purchase much bigger and heavier vehicles.

Zeits On Oasis Over At Seeking Alpha -- September 24, 2015; Oasis Now Reporting Wells That Will Produce 340,000 Bbls In First Year

Zeits on Oasis over at Seeking Alpha. It will be archived at the source in the not-too-distant future.

• Oasis’ recent well results show a strong improvement versus a year ago
• the best of the recent wells is on track to produce ~340,000 Mboe in the first year
• $55 per barrel WTI may be sufficient for Oasis to keep its production flat in 2016 while spending within cash flow 

Completion techniques still being analyzed, tested:

• slickwater: 100% ceramic; 4 million lbs; 220K fluid; $7.8 million
• high proppant: 100% sand; 9 million lbs; 150K fluid; $8.3 million

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In 2050, Angela's Great-Grandchildren Will Be Asking: What Was She Thinking?

This article will be archived. It's a keeper. It will be interesting to watch this all implode.

I'm really beginning to wonder about Germany's collective sanity:

• continue to bailout Greece, thinking Greece will actually pay them back (with interest, LOL)
• thinking they have enough land for all those intermittent energy projects would require
• forgetting solar energy is produced less than 40% of the time in Germany
• not telling the USA EPA about VW deliberately cheating 
• thinking those Syrian refugees are the answer to their zero replacement birthrate

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Comparing US Metro-Area GDP With Other Countries

As Mark Perry himself says: ridiculous. Link here.

Some examples:

• DFW: Norway
• Detroit: Greece
• MSP: Portugal
• The Bakken: Germany (just joking)

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Big Lebowski Party

I would attend if I were in Williston.

A Big Lebowski Party in Williston, October 3rd, is planned. Dudes only, due to severe space constraints. No Dudettes.

Specifics were sent to me, but for now, I won't post -- I don't want to be responsible for a Sturgis rally-like event. Smile.

Thursday Data -- September 24, 2015; Natural Gas Fill Inject Huge -- Close To Surpassing 5-Year Maximum

Market

Dow drops below 16,000; in new trading range.

First-Time Claims For Unemployment Benefits; Other Data points

Econoday: increase by 3,000 to 267,000. Four-week average down slightly to 271,750. Bloomberg reports here. Background noise.

Gasoline demand: up slightly (dynamic link); this time last year was still falling;

Natural gas fill-rate: huge inject -- up 106 (dynamic link); close to exceeding 5-year max. In the East Region, stocks were 30 Bcf below the 5-year average following net injections of 62 Bcf.

Durable goods orders down 2%. 

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Other Stories

Caterpillar to cut up to 10,000 jobs through 2016; most of the cuts will be front-loaded, in 2015.

Well, duh. The EIA "energy cookie":

Low oil prices, if sustained, could mark the beginning of a long-term drop in upstream oil and natural gas investment. Oil prices reflect supply and demand balances, with increasing prices often suggesting a need for greater supply. Greater supply, in turn, typically requires increased investment in exploration and production (E&P) activities. Lower prices reduce investment activity...Given the fall in oil prices that began in mid-2014 and the relationship between oil prices and upstream investment, it is possible that investment levels over the next several years will be significantly lower than the previous 10-year annual avera. --- EIA

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Two Revolutions In Crude Oil History

The first revolution resulting in saving the whales. Had Rockefeller not standardized gasoline and kerosene from crude oil, the whales would have gone extinct. The world was probably a few decades away from extinction of whales when Rockefeller saved them.

The second revolution: technology that opened up decades of more crude oil. I'm thinking of the one-trillion Piceance reservoir. The Bakken is estimated at 500 billion bbls, though Harold Hamm once estimated as much as 903 billion bbls.

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Papo-Critical

For someone concerned about the starving, it doesn't look like the Pope has missed many meals. 

Idle Chatter Waiting For Weekly Jobs Reports, Gasoline Demand, And Natural Gas Fill Rate Data -- September 24, 2015

This is the kind of stuff that is simply background noise in the world energy; it's reported day-in and day-out; and simply changes with the tide. But I find it fascinating.

Platts is reporting, that, for the first time in six weeks, jet fuel imports fell to zero on the West Coast. Apparently stronger US West Coast supplies as well as Asian refiners finding alternative export destinations (Europe) accounted for the fact there were no jet fuel imports on the West Coast last week.

It was noted that there are questions how long Europe can keep importing jet fuel; the storage tanks in Europe are almost filled to capacity (where have we heard that before?), especially in Amsterdam-Rotterdam-Antwerp hub. Some traders have resorted to story jet fuel stocks in offshore tankers.

It was also noted that jet fuel availability had increased because of Middle Eastern refineries (previously reported on the blog that Saudi Arabia has two new large refineries).

And this is what I find most fascinating. Much of the speculation is simply that, speculation. Much of the information is kept secret and information is obtained from tank-spotters who watch the global movement of oil and refined products. For example, this paragraph in Platts:

The Iver Experience, heard to be carrying jet fuel, according to market sources, was seen heading to Los Angeles, according to cFlow, Platts trade flow software, and was set to arrive September 29.

If one is so inclined, one can track the Iver Experience here. I am not so inclined, but I find all of this fascinating. Herman Melville would have had a blast. 

Thursday, September 24, 2015; Native Americans Wanted $10 Million/Mile For Pipeline Easement

Futures suggest Dow could drop below 16,000 today.

Active rigs:

	9/24/2015	09/24/2014	09/24/2013	09/24/2012	09/24/2011
Active Rigs	70	193	187	188	195

RBN Energy: Time is on Shell's side -- the latest offshore Gulf of Mexico "Stones" play to use FPSO.

Floating production, storage and offloading vessels—FPSOs, for short—allow for hydrocarbon production in waters too deep for conventional offshore platforms. While FPSOs have been in limited use around the world since the mid-1970s, they remain a relative rarity in the Gulf of Mexico (GOM), mostly because oil and natural gas has been available in shallower parts of the Gulf closer to shore. Now, Royal Dutch Shell will be taking a spanking-new FPSO into the deepest waters yet--9,500 feet, or almost two miles down--for its mammoth Stones development 200 miles off the Louisiana coast. Today, we look at the Stones project, the growing role of FPSOs, and the long-term perspective taken by exploration and production (E&P) companies in the GOM.

Crude oil production in the GOM has been rebounding gradually from two headline events of the past decade: Hurricane Katrina in August 2005 and the BP/Macondo disaster in April 2010. According to the U.S. Energy Information Administration (EIA), GOM production (mostly medium sour crude) averaged 1.5 million barrels/day (MMb/d) in the first six months of 2015, up from 1.4 MMb/d in 2014 but still off from the all-time peak of 1.56 MMb/d in 2009. In its Annual Energy Outlook report for 2015, EIA said it expects GOM production to continue rising through the end of the decade (even with lower oil prices) as deepwater and ultra-deepwater projects with long development cycles (including Shell’s Stones project) continue to come online.

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Back To The Bakken 

Bakken man camps dwindling to ghost camps.

West Coast to get Bakken oil via rail indefinitely.

Williston gets $27 million federal grant for airport relocation, expansion.

Fracking firms that drove oil boom struggle to survive.

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North Dakota set to extend deadline for flaring rules.

The state's oil companies flared 20 percent of the natural gas they produced in July, the latest month for which data are available. That went beyond current standards to flare no more than 23 percent.

The standards tighten to 15 percent in January, a goal the industry says is untenable.

Oneok's decision to cancel its Lost Creek pipeline and delays in federal approval for Hess Corp's Hawkeye pipeline dashed hopes the January standards could be met, Ness said.

Oil producers want two extra years to comply with the rules. Lynn Helms, who advises the NDIC as head of the state's Department of Mineral Resources, recommends a 10-month extension. Goehring, the NDIC commissioner, said he does not have a preferred timeline.

"That went beyond current standards ...." That's a funny way to write that.  

That Lone Creek Pipeline has an interesting story. It was all of 4.8 miles long but ONEOK couldn't get approval from Three Affiliate Tribes on the reservation. I can't recall if I previously reported that. The story is here:  

Oneok’s attempts to obtain right-of-way approval from the Three Affiliate Tribes to connect a 4.8-mile section of gas pipeline running from its Lost Bridge to Sand Stone Blue Buttes compressor stations were unsuccessful, which in turn prompted XTO Energy to request flaring exemptions from the North Dakota Industrial Commission for the gas from 143 wells that was slated to be sent to that pipe.

While a typical easement payment to a landowner runs between $50,000 to $75,000 per mile, according to the state’s Department of Mineral Resources Director Lynn Helms, the tribe rejected Oneok’s offer to pay nearly $10 million a mile.

“As opposed to a payment for use of the land,” Helms said, “they wanted a tariff on every mcf of gas that moved through that pipeline during the life of the pipeline and that was just a no-go with the operators.”

I think there's a word for that in the English language; not sure if there is a word for that in the Lakota language.

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China sitting on an "ocean" of diesel fuel.