Monday, October 12, 2015

Russia, Saudi Arabia Talking In Light Of New Mideast Developments -- October 12, 2015

I was re-reading this post and saw again this bullet:
  • Saudi has been told explicitly by President Obama that the US has no responsibility to guarantee Saudi Arabia' security
I assume everyone saw the stories of talks between Russia and Saudi Arabia over the weekend. I did not link them at the time, thinking them relatively unimportant. I would assume diplomats are always talking. But in light of the "bullet/data point" above, it makes me wonder if I was too hasty not linking those stories.

Here's one story:
Russian President Vladimir Putin has launched a diplomatic offensive trying to reassure Saudi Arabia that his intervention in Syria is aimed at defeating terrorism.

During a meeting in Sochi on the sidelines of a Formula 1 Grand Prix race the Russian leader and Foreign Minister Sergei Lavrov tried to find common ground with the enemies of Syria’s President Assad.

“In the first place (this operation) is aimed at preventing the formation of a terrorist caliphate. In this connection President (Putin) has clearly confirmed that our (Russian) military in Syria are fighting explicitly the so called Islamic State…” said Lavrov after meeting with Saudi Arabia’s Defense Minister Sheikh Mohammed bin Salman.

Saudi Arabia is at odds with Russia in wanting Syria’s President Assad to be removed from power while Moscow says his government should be the centre piece of international efforts to fight extremism.

Riyadh is also concerned that Russian air strikes are not just targeting ISIL fighters but have also been causing casualties among rebels fighting the Assad regime.
Not All Lives Matter

From Liberal Logic 101
Disability rights advocates are fighting back after Gov. Jerry Brown, D-Calif., authorized assisted suicide in California.

Opponents, however, object to the willful termination of human life that the bill permits and are concerned that it would allow elderly, ill, or disabled patients to be coerced to choose death.

“Human life need not be extended by every medical means possible, but a person should never be intentionally killed,” Anderson wrote. “Doctors may help their patients to die a dignified death from natural causes, but they should not kill their patients or help them to kill themselves. This is the reality that such euphemisms as ‘death with dignity’ and ‘aid in dying’ seek to conceal.”
No mention of Planned Parenthood, third-trimester abortions, or selling "baby parts" was mentioned in the article.

One (1) New Permit; Five High-IP Bakken Wells Reported -- October 12, 2015

Active rigs:

Active Rigs68190184192197

One (1) new permit --
  • Operator: Hess
  • Field: Alger (Mountrail)
  • Comment:
Emerald Oil renewed eight permits: Beaver Creek, Brugh Bear, Zion, Griswold Federal (2), and Billy Ray Valentine (2), all in McKenzie County.

Whiting canceled two permits: P Wood permits in Williams County.

Five (5) producing wells completed:
  • 25508, 1,202, BR, CCU Powell 41-29TFH-R, Corral Creek, t8/15; cum 4K 8/15;
  • 29233, 2,285, Statoil, Smith Farm 23-14 7H, Cow Creek, t9/15; cum --
  • 29234, 1,553, Statoil, Smith Farm 23-14 4TFH, Cow Creek, t9/15; cum --
  • 30090, 2,585, BR, CCU Dakotan 6-8-17MBH, Corral Creek, t9/15; cum --
  • 30092, 2,664, BR, CCU Dakotan 7-8-17MBH, Corral Creek, t9/15; cum --

Another Random Look At The Niobrara -- October 12, 2015

On the way to looking up something else, I came across an article in The Bismarck Tribune that I don't recall seeing before. I know I've linked stories like this before, and it's possible I've linked this story before:
Strike a 500-mile-long line due south from Williston (along the 103rd west meridian), and you'll eventually light in an area that is a near mirror-image of Bakken country. Just a few dozen or so miles east of the Rocky Mountain Front, the prairies of eastern Colorado, western Nebraska and Kansas, and southeastern Wyoming are home to an oil and gas play that has all of the earmarks of the Bakken, including technology, infrastructure and the companies punching holes. The play is called the Niobrara and it is so much like the Bakken that it's been tagged with the moniker "NeoBakken."

The Niobrara is one of North America's most extensive geologic formations. It underlies much of the American Great Plains, Rocky Mountain basins and northward into the Canadian prairies. In fact, if you're standing anywhere in North Dakota west of the Red River Valley, the Niobrara is somewhere under foot. Unlike the Bakken, however, the Niobrara is actually exposed at the surface, primarily in a thin belt from Cavalier County in the north to Sargent and Dickey Counties in the south. Whisk away the overlying glacial debris here and there, and you can easily see and touch the Niobrara.

The Bakken was more than a quarter billion years old when the Niobrara was deposited between 87 million and 82 million years ago. Geologists call that period the "Cretaceous" (Latin for "chalky"). At that time, North America was split by the Western Interior Seaway, which extended from what is now the Arctic Ocean to the Caribbean. The seaway endured for some 40 million years and reached depths of 2,500 feet and a width of up to six hundred miles.

In those days, what is now North America was much closer to the Equator, so the Seaway teemed with subtropical marine life ranging from microscopic plants and animals to sharks and mosasaurs (giant marine reptiles). While the eastern region of the Seaway bordering the Appalachians was relatively quiet, the western area received a near-continuous supply of sediments being washed in from the highlands to the west in what would later become the Rockies. The microscopic marine life mixing with sediments and rising and falling sea level was the perfect recipe for the formation of oil and natural gas - right out of a Geology 101 textbook.

Current oil and gas activity in the Niobrara is centered in the Denver-Julesburg Basin, a deep geologic structure that underlies eastern Colorado and adjacent parts of Wyoming, Kansas, and Nebraska. The basin is nestled against the Rockies to the west. The City of Denver is situated above its thickest point - some 14,000 feet, which is comparable to the Williston Basin's thickest point in northwestern North Dakota.

The Niobrara (sometimes called the Niobrara shale) is made up of two general units. The Fort Hays limestone (including shale layers), the lower unit, ranges between 10 feet and 60 feet in thickness. The Fort Hays is overlain by the Smoky Hills chalk, 200 feet to 1,400 feet thick. The Niobrara is found at depths of 8,000 feet (northwest of Denver). It outcrops in central Kansas and eastern Nebraska, as it does in North Dakota and South Dakota.
This story is timely for a number of reasons. First and foremost: look when the story was published -- April 9, 2015 -- well into the deep slide in the price of oil. This is not exactly the time one would think about looking at a "new" play.

Second, it is timely because RBN Energy just had an excellent blog on the Niobrara. I linked it earlier this morning and posted a bit of the essay but there was much, much more at the link. RBN Energy will archive its stories a few days after they've been posted. This is one you may want to read before you need to have a subscription to access it. 

There is another reason why The Bismarck Tribune story is very, very timely.  It has to do with one of the polls that was just closed out late last night. That's all I can say. Stay tuned.

By the way, for those keeping scorecards, I always though the big three tight oil plays were the Permian, the Bakken, and the Eagle Ford, with the Eagle Ford, dropping back a bit. I'm beginning to think that I have to add the Niobrara to either the top four or the top three.

Hollywood Movie Set?

This had all the feeling of a Hollywood medieval setting. Any minute I thought I would see marauding Vikings attacking this peaceful little pumpkin patch:

Colleyville/Grapevine 2015

Was The Bakken Collateral Damage? -- October 12, 2015

On October 3, 2015, I posted this note which caught me by surprise. I assumed it was just a Saudi official with typical "political" talk. The story surprised me because it was not in line with what everyone else was reporting. This is the news item that caught me by surprise:
But this story is probably the most important: Saudi Arabia will maintain spending. From Rigzone/Reuters:
Saudi Arabia is continuing with its investments in the oil and gas industry as well as solar energy despite the current drop in oil prices, the kingdom's oil minister was quoted as saying on Friday.
That part about solar energy? I think you can ignore it. With regard to oil production, we'll let the numbers speak for themselves.
In fact, this is the new reality which has been posted more than once on the blog:
Read the rest of the story at the link and see if the writer said anything more or less than what I wrote over the weekend:
  • Saudi is losing about 10% of their cash reserves annually by giving away oil for $50/bbl (but the article above suggests it could be significantly more)
  • Saudi apparently had an unsuccessful 5-year, $35 billion program to significantly hike crude oil production
  • Saudi recently completed two new refineries
  • Saudi has huge desalinization electricity demands -- and growing annually; oil used to produce electricity
  • Saudi recently canceled huge solar energy projects
  • Saudi put on hold all new capital-intensive projects in addition to aforementioned solar energy projects
  • Saudi has been told explicitly by President Obama that the US has no responsibility to guarantee Saudi Arabia' security
  • Saudi has major terrorist threat in Yemen
  • Saudi has embarked on major weapons acquisition program to defend itself against regional neighbors
  • sanctions on Iran recently lifted resulting in a) Mideast nuclear arms race; and, b) $100 billion in "new" money for Iran to pursue military objectives (I thought it was $156 billion but this article says $100 billion).
I didn't post it because it was simply background noise without a historical picture to compare, but last week there was a story of the crude oil rig count globally. With minor exceptions, the only country with more rigs, month-over-month, is Saudi Arabia. [Later, a reader tells me, with regard to Saudi Arabian rig count: the Saudis had 125 rigs working in September, up from 120 in August and up from 119 a year ago.]

Regular readers are aware that despite huge outlay in capital, Saudi Arabia has not significantly increased production, and any production increase could easily be offset by increased domestic consumption, including the new refinery (or is it refineries) that Saudi has recent brought on-line in the desert.

Now, with a story that is more likely to be more accurate than the political talk by the Saudi oil minister, Oilprice is reporting:
Saudi Arabia has reportedly resorted to spending cuts to cope with a budget deficit caused by the steep decline of oil prices over the past year.

Bloomberg reported Oct. 8 that the Saudi Finance Ministry has directed government agencies not to embark on any new spending initiatives for the rest of the year. It also froze government hiring and promotions, suspended the purchase of furniture and vehicles and urged revenue collectors to accelerate their operations.

The primary reason for the spending cuts is the drop in oil prices since June 2014, from over $110 per barrel to around $50 today; oil accounts for around 90 percent of Saudi revenue.
But the kingdom’s finances also have been strained by its involvement in wars in Syria and Yemen.
As a result, Saudi Arabia’s ratio of debt to GDP is in danger of rising to 33 percent in five years, according to a new report by the International Monetary Fund (IMF). The report says the Saudi budget has gone from a surplus to a deficit of more than 20 percent of GDP, more than twice as deep as those that beset the United States and Britain in 2008 and 2009, the darkest period of the recent recession.
I don't think the demise of the Kingdom of Saudi Arabia is likely to happen in my lifetime (as suggested by one of the stories at one of the links above), but Saudi Arabia is facing a number of headwinds, the least of which is the low price of oil right now. They have ISIS and other terrorists to contend with; they have an "Iran without sanctions" to contend with; they know the US is no longer a reliable ally; and, oh by the way, their major global competitor, Russia, has just moved into Syria.

Was The Bakken Collateral Damage?


November 9, 2015: a Wall State Journal update on "yieldcos." Not good news.

Original Post
I don't recall if I ever posted my thoughts on this or now; it would be difficult to find, if I did.  I've always thought Saudi's biggest concern was "intermittent energy" (wind/solar) and the world, especially China, buying into the "global warming/climate change" scam.

When the Kingdom elected to flood the market with oil, they hoped a) to stop the intermittent energy movement; and, b) get the world "hooked" on crude oil again.

Now we have this story from The New York Times: intermittent energy financing has hit a snag (if you hit a paywall, google renewable energy financing hits a snag).
Only a few months ago, it seemed that the renewable energy sector could do little wrong: Stock prices were soaring and money was pouring in as investors flocked to get in on the action.
That is no longer the case. Low oil and gas prices have roiled the energy markets, and the specter of rising interest rates has rattled investors’ confidence in the industry’s returns. Although energy and financial experts say that the basics of the business remain sound, the lofty stock prices have tumbled, leading renewable energy companies to scramble for new approaches to their businesses.
Nowhere has the retrenchment been more acute than in a newfangled financing mechanism called a yieldco. Yieldcos, public companies conceived by renewable energy companies as a way to raise cheaper capital for project development, have attracted billions in new investments.
The yieldcos buy and operate power plants, mainly those that their parent companies develop. The yieldcos then collect the contracted electricity fees and pay the bulk of them out as dividends. With investors hungry for stable returns, energy yieldcos were greeted with enthusiasm through initial public offerings of their stocks over the last year and a half.
Last week, though, one of the most aggressive companies in the sector called a timeout.
SunEdison, which has bought several companies in recent months in a bid to become the world’s largest renewable energy developer, told investors it would not sell any more projects to its yieldcos, TerraForm Power and TerraForm Global, until conditions change.
The company said it would trim expenses and streamline operations, including reducing project development by 20 percent, withdrawing from Britain and cutting roughly 15 percent of its work force.
I've always thought that Saudi Arabia was more concerned about the intermittent energy surge than US shale. If so, perhaps the US "tight" oil industry was a victim of collateral damage. But I won't argue with those who say maybe the Kingdom was concerned about both equally. 

Monday, October 12, 2015, Columbus Day

Active rigs:

Active Rigs68190184192197

RBN Energy: infrastructure overbuilt in the Niobrara?
Crude production in the Niobrara shale formation is focused on two areas, the Denver-Julesburg (DJ) Basin in Northeast Colorado and the Powder River Basin (PRB) in Wyoming. Production has expanded in both basins (current output is about 435 Mb/d according to the Energy Information Administration) but much of the recent volume growth has come from the DJ basin.
Expectations as recently as last year that production would expand to over 700 Mb/d in the next 4 years have been tempered by the crude price crash. A couple of large pipeline projects prompted last year by those production expectations have been cancelled since but others are still being built. Today we assess crude takeaway infrastructure in the DJ basin.
We described these new projects last October showing all the projects – although (as we shall see) some have now been cancelled. 
In the northern part of the play crude flows into the region from Canada on the Spectra Express and from the Bakken on the Bridger Butte Loop and Kinder Morgan Double H pipelines.
Last year Enterprise Product Partners proposed the new-build 340 Mb/d Bakken to Cushing (BTC) pipeline that would ship crude from the Bakken as well as the PRB. Spectra Energy proposed a new 400 Mb/d pipeline from Guernsey, WY to Patoka. 
The newly completed Tallgrass Pony Express pipeline now carries up to 330 Mb/d from Guernsey to Cushing. Pony Express also has a 90 Mb/d lateral in Colorado that serves the southern part of the play that came online in April 2015 serving the DJ basin. Also serving the DJ basin is the 150 Mb/d SemGroup White Cliffs pipeline to Cushing that is expanding this month (October 2015) by 65 Mb/d to a total 215 Mb/d. SemGroup also talked to shippers last year about building a twin pipeline on the same route to double the White Cliffs capacity.
Two additional new projects announced in 2014 from the DJ to Cushing are the NGL Energy Grand Mesa project (220 Mb/d) and the Magellan Midstream Partners Saddlehorn pipeline (200 Mb/d).
Chevy Volt Vs Tesla

Seeking Alpha. Some interesting trivia. It looks like the Tesla will be the only luxury car that doesn't have CarPlay. Provides a bit of background to recent comments by Elon Musk.

Below 10 Million Enrolled

The New York Times is reporting:
On Nov. 1, a new sign-up period for health insurance under the Affordable Care Act will begin, and insurers, health care providers and enrollment groups are ramping up campaigns to encourage 10.5 million eligible uninsured people to buy policies. But even as those efforts begin, the public insurance exchanges, also known as marketplaces, created by the law are facing another challenge: keeping the customers they already have.
About 9.9 million people were enrolled in the federal and state marketplaces at the end of June, a drop of about 15 percent from the 11.7 million who the Obama administration said selected plans during the open enrollment period that ended in February.
Wildcards (in progress)

2016 US presidential race: three wildcards
  • will Donald Trump stay the distance?
  • will Joe Biden jump in?
  • will Hillary sustain a medical setback?
Mideast: one wildcard
  • will Russia establish a permanent presence in Syria?