From The Williston Wire -- October 16, 2015

Another housing project completed:

WILLISTON, ND – Mountain Plains Equity Group (MPEG) celebrated the completion of ParkRidge Townhomes today. The 36-unit development received support from the state’s Housing Incentive Fund (HIF) to ensure the availability of affordable housing in Williston for essential service workers.

“This project has truly been a concerted group effort, with a number of players here that deserve a lot of credit. By working together, this type of public-private partnership has produced a great housing option in Williston – and at a much more affordable price,” said Don Sterhan, MPEG president and CEO.

Eighteen of ParkRidge’s two-bedroom units are rented for $1,000 per month to law enforcement, education and medical facility staff and local and state government employees. To qualify for these units, primary household income must come from such employment. The remaining units in the development rent at market-rate.

Somehow, government incentives to ensure the availability of affordable housing for essential service workers makes more sense than $25,000 tax credits for the wealthy buying $125,000 Teslas. But then, that's just one man's opinion.

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2015 Bakken Oil Product & Service Show 

Williston – Best Show Ever Williston , ND, October 14, 2015 – The booths are packed up and the results are in.

Despite a slowdown in oil and gas activity, exhibitors and visitors describe BOPSS 2015 as the best show ever.

Expanded hours, discounted safety training, door prizes, and a Tailgate Cook - Off competition raising money for charity were all welcomed additions to the event. The pull back in craziness allowed over 1,000 people to attend and connect at the event, an increase of more than 25% from 2014.

While some companies are clawing their way through the downturn , some have closed up shop and others are taking market share from competitors, one thing is for certain: the oil and gas business in the Williston Basin is alive and kickin’ and here to stay.

Another Great Example Of State, Pipeline Operators, Surface Owners Working Together To Get Something Done; Talk Of A Bakken Bust Seems Premature; Another $80 Million Project -- Ho, Hum -- October 16, 2015

This story sent to me by a reader. Thank you.

The Bismarck Tribune is reporting:

A year from now up to 100,000 barrels per day of more Bakken crude oil will be moving through pipelines to refineries across the country.

The crude’s movement by pipeline in McKenzie County became a reality Wednesday by a vote of the North Dakota Public Service Commission.

NST Express LLC, which is part of The Woodlands, Texas-based NorthStar Midstream, plans to build a 12-inch diameter crude oil pipeline in McKenzie County. The company’s application was submitted in May. [Submitted in May; approved in October; under a river; four months to review and approve]

“This is a 23-mile pipeline in the heart of the Bakken,” commission chairwoman Julie Fedorchak said. “Everything was pretty straightforward so we were able to turn it around pretty quickly.”

Fedorchak said the pipeline would have a maximum capacity of 100,000 barrels per day of crude oil.

Oil would be transported from a new gathering facility called the NST Express Alexander Facility about 9 miles north of Alexander to its NST Transload East Fairview Facility a half-mile north of East Fairview, near the Montana state line.

Other data points:

• at 23 miles and a million dollars/mile, I estimated the cost at $25 million; in fact, it will be $60 to $80 million
• will go under the Yellowstone River; will be at least 50 feet below the river
• six pipeline interconnects
• four offload skids for trucks
• a pump station
• three crude storage tanks with a capacity of 50,000 bbls each (150,000 bbls total) 

I apologize for being so inappropriately exuberant about the Bakken, but here's another little Bakken project -- only 23 miles long, only 12 inches in diameter, but it's going to move 100,000 bopd out of the Bakken. Not trivial. And it's another $80 million project. When I was growing up in Williston a project this size would have been a big, big deal. In western North Dakota, it's just another footnote.

Now, for the rest of the story -- with photographs. Here's the website for the Northstar Transload East Fairview Facility. When you see the BNSF locomotives, think Warren Buffett. And all those trains going through MSP if the state of Minnesota keystones the Sandpiper.

In case the link is ever broken, here is a snapshot of the transloading facility in East Fairview:

The NorthStar Transloading Bakken terminal is a 400-acre rail-and-truck transportation hub serving the oil and gas industry. It is located outside East Fairview, a town in North Dakota’s McKenzie County that sits on atop the Bakken Shale play. McKenzie is among the most productive oil-producing counties in the United States.

The inbound/outbound terminal receives and stores the crucial incoming dry goods needed for oil-drilling sites, including sand, cement and construction equipment. Abundant unload racks take in crude that has been brought in by trucks from nearby wells. That fuel is then stored in onsite tanks until it can be placed onto awaiting trains. The terminal’s outbound rail services then ships the fuel to market.

Key Services

• The terminal provides unit and manifest train switching and transloading services. It currently has 14 rail tracks feeding off the main BNSF line to handle all inbound and outbound operations.

• The terminal’s 12-station truck unloading facility removes fuel from tanker trucks and pipes it into onsite storage tanks.

• Five onsite storage tanks have a combined net capacity of 515,000 bopd.

• A planned on-site pipeline interconnect facility will gather fuel from the Alexander Hub, 20 miles away. After fuel is received via the interconnect, it will be transferred over to the terminal for rail shipment. [This is the press release above.]

• The facility includes abundant indoor and outdoor storage for railcars, sand and other needed materials.

Williston is about 35 miles to the northeast of Fairview. East Fairview is on the North Dakota side of the Montana-ND state line. By the way, the best pizza in the world -- I'm not kidding -- can be found at the Powder Keg in East Fairview. Soft serve ice cream for dessert is free (Facebook).  I had the opportunity to ride shotgun transporting sugar beets during harvesting season some years ago. From personal experience, I know how dangerous that intersection (seen below) is. [Later: see comment below: a reader suggests that this intersection will be re-designed as a large (truck-sized) round-about like the one they have in/near Killdeer -- which, for those interested, can be seen on the Google satellite map]:

Don't let me be misunderstood about my inappropriate exuberance for the Bakken:

Don't Let Me Be Misunderstood, The Animals

One Of The Largest Frack Sand Deposits Lies Just North Of The Bakken; Will Help Relieve Wisconsin's Frack Sand Mining Industry; May Cut Down On Frack Sand By Rail; Great News For Truckers -- October 16, 2015

This should make the NIMBYs in Wisconsin who oppose frack sand mining happy. The press release:

From North America Frac Sand Inc.: on September 9, 2015 we announced the acquisition of North America Frac Sand (CA) Ltd. and its 30,000 acres of leases that are estimated to contain 6.4 million tonnes of recoverable reserves of frac sand, and potential reserves of at least 66 million tonnes.

After the successful sale of their sand deposits in Lloydminster, Alberta; Ray and Dwight Newton began testing some optioned acreage approximately 30 miles east of Saskatoon Saskatchewan. Expenditures of approximately $3 million for exploration, drilling, and analysis later, the testing has proved out 6.4 million tonnes of recoverable reserves of frac sand. Subsequent testing, will prove out a substantial portion of the 100 million tonnes identified.

The three challenges of discovering new frac sand reserves are:

• meeting all of the API specification with respect to size and shape of the frac sand deposits. Our frac sand deposit contain the three most common sizes 20-40,30-50, 40-70 & 70-140 all of which meet API standards.
• sufficient contiguous volume and value to be economical. Our frac sand deposit is both of sufficient volume and quality to be economic. We have minimum overburden; we have our mining permits; we are ready to continue to prove up our resource, build our plant, and start shipping.
• in close proximity to either, oil and natural gas reservoirs, or at least to rail, for cost efficient transportation.
• are truck-able distance to the major Bakken reservoir in North Dakota, Montana, Alberta and Saskatchewan; as well as the Duvernay, Horn River, Montney, Viking and Cardium reservoirs of Western Canada. Annual requirements are in the millions of tonnes for new drilling and recompletions.

We are strategically located to replace a significant portion of the 70% of the frac sand currently being imported into Canada from Wisconsin.

By trucking directly to our customers, not only do we save 1,500 km shipping costs, we by-pass the current bottlenecks of the supply chain, which are rail car availability; lack of trans-loading facilities and sand storage infrastructure; and improving last mile deliveries.

Additionally, in this short term period of low price oil, we provide a cost efficient solution to deliver the frac sand exactly when and where the drillers require the frac sand.

For the Wisconsin folks who don't like mining in their state, this is exceptionally good news.

Ten (10) New Permits; 32 Wells Sited In One Section -- North Dakota, October 16, 2016

Active rigs:

	10/16/2015	10/16/2014	10/16/2013	10/16/2012	10/16/2011
Active Rigs	67	189	184	187	195

Ten (10) new permits --

• Operators: CLR (8), Whiting (2)
• Fields: Sanish (Mountrail)
• Comments: the CLR permits will be for an 8-well-pad in section 25-153-93. The CLR wells, based on their names, will run to the west into section 26-153-93. There will be about 32 wells sited in this section with these new wells. See graphic below:

There was one (1) producing well completed:

• 30182, 41, Enduro Operating, NSCU F-721-H1, Newburg, a Spearfish/Charles well, t10/15; cum --

Random Note About Oil Activity In The Williston Basin -- October 16, 2015

In today's NDIC Daily Activity Report, about fifty (50) older wells were transferred from Whiting to White Rock, LLC. I had not heard of White Rock before but it's been around for a long time. It looks like it takes over smaller-producing, stripper wells, mostly in the southwestern corner of the state but does have wells north of Williston, also.

This is probably a typical example. This well was sold by Whiting to White Rock on May 1, 2015:

NDIC File No: 7562  
Well Type: OG     Well Status: A     Status Date: 2/17/1981     Wellbore type: Vertical
Location: NENW 33-141-100     Footages: 660 FNL 1820 FWL   
Latitude: 46.992713     Longitude: -103.363403
Current Operator: WHITE ROCK OIL & GAS, LLC
Current Well Name: FEDERAL FRANKS 33 2
Total Depth: 9700     Field: WHISKEY JOE
Spud Date(s):  8/19/1980
Completion Data
   Pool: MADISON     Comp: 2/17/1981     Status: AL     Date: 2/17/1981     Spacing: NW
Cumulative Production Data
   Pool: MADISON     Cum Oil: 666,914     Cum MCF Gas: 383577     Cum Water: 2224575
Production Test Data
   IP Test Date: 2/17/1981     Pool: MADISON     IP Oil: 125     IP MCF: 71     IP Water: 356

Last few months or production:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
MADISON	8-2015	31	1119	970	5390	783	752	0
MADISON	7-2015	31	1007	1040	5534	706	675	0
MADISON	6-2015	30	597	540	3439	311	303	0
MADISON	5-2015	30	270	414	500	104	96	0
MADISON	4-2015	29	1004	1034	5361	711	682	0
MADISON	3-2015	31	1036	1038	5528	31	0	0
MADISON	2-2015	28	930	1109	5154	1580	542	1010
MADISON	1-2015	31	1047	891	5603	687	656	0
MADISON	12-2014	31	1046	1350	5653	786	755	0
MADISON	11-2014	30	1010	682	5499	656	627	0
MADISON	10-2014	31	1029	1063	5712	716	685	0
MADISON	9-2014	30	1045	1050	5577	1548	581	937
MADISON	8-2014	31	1080	1035	5689	819	788	0
MADISON	7-2014	31	1236	1457	6184	1013	909	73

This was the first year of production:

MADISON	2-1982	28	3101	3363	4974	0	0	0
MADISON	1-1982	31	3584	3468	764	0	0	0
MADISON	12-1981	31	2791	2789	620	0	0	0
MADISON	11-1981	30	3224	3801	696	0	0	0
MADISON	10-1981	31	4221	3891	899	0	0	0
MADISON	9-1981	23	2536	2427	7304	0	0	0
MADISON	8-1981	31	3359	3538	9674	0	0	0
MADISON	7-1981	30	2937	2793	8459	0	0	0
MADISON	6-1981	30	2784	2790	8018	0	0	0
MADISON	5-1981	31	3265	3519	9403	0	0	0
MADISON	4-1981	30	2600	2407	7488	0	0	0
MADISON	3-1981	31	3019	3065	8701	0	0	0
MADISON	2-1981	13	2036	2036	5868	0	0	0

With The Glut Of Oil -- Does It Really Matter? But Setting Us Up For $200 ...... October 16, 2015

From Seeking Alpha:

• The Obama administration today closed off two avenues for new oil drilling in the Arctic Ocean, weeks after Royal Dutch Shell said it was abandoning the area. 
• The Interior Department said it was canceling scheduled auctions of drilling rights in the Chukchi and Beaufort seas, citing low industry interest, and it formally rejected bids by Shell and Statoil for more time to search for crude under their existing Arctic leases. 
• The decision to deny lease suspension requests from Shell and Statoil mirrors a similar rejection of a ConocoPhillips request for more time on its own Arctic leases; COP has challenged the decision before an Interior Department appeals board, and settlement talks are underway. 

This is incredibly good news for everyone. 

Williston Basin Deals; Why Norway Is The Ideal Place To Buy An EV -- October 16, 2015

A reminder: at the sidebar at the right, about a third of the way down or so, there is a section with links to "all" the major Williston Basin deals.

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Hardly Worth Reading ... Except To See How Well This Is All Working Out

Refinancing One's Primary Residence To Buy A Tesla

The New York Times has one of those articles I loved reading when I was a sophomore at Williston High School ... and then I entered the "real world." The story, with some excerpts, follow.

An $87,000 Tesla vs a used Skoda:

Berit Nordgarden and her husband, Eivind Tellefsen, loved their nonpolluting Nissan Leaf electric car. But they found its 85-mile battery life too short for weekend trips to their cottage with their two young children.

So the outdoorsy couple took a deep breath and bought a second car: a Tesla Model S luxury sedan with three times the battery range, the best of any electric car on the market. Buying an $87,000 car was a stretch, requiring them to refinance their primary residence, a cozy wooden home in Oslo.

But the Tesla would have been completely out of reach — costing perhaps double the price — without generous subsidies and incentives that the Norwegian government offers to encourage the adoption of e-cars.

“If there were no incentives, we couldn’t have afforded it,” said Mr. Tellefsen, a computer engineer, as he squinted into the dazzling sun of an autumn afternoon. “We’d probably have bought a secondhand Skoda.’’

There are doubts that the incentives are really cost-effective, but who cares:

No other country can yet match Norway’s proportion of all-electric cars. Though still only 2 percent, the figure is double that of the runner-up, the Netherlands, and is growing faster than anywhere else in the world. More than one-fifth of new car sales in Norway are of electric vehicles.

Some skeptics wonder whether the Norwegian program is cost-effective, or even an efficient way to reduce air pollutants. And some elements of the program simply may not be replicable in other countries. But for many, Norway is showing a path forward.

The "poor" folks splurge on a Leaf:

Ms. Nordgarden said she and her husband had made do for years with their bicycles, public transportation and a car-share service. It was the government program that induced them to choose a Leaf over a fuel-burning car two years ago.

Wouldn't work in the rest of the world:

Making Norway’s project to shift away from fossil-fuel cars all the more notable is the fact that the country is one of the world’s biggest producers of oil and natural gas. But it is also blessed with an abundance of fast rivers, allowing it to generate virtually all of its electricity from hydropower.

That makes Norway’s electricity cleaner and relatively cheap — a further impetus for adopting e-cars. (A country where much of the electricity is generated by coal-fired power plants would not see as many environmental benefits from switching to electric vehicles.)

Even with that, it still requires all these "subsidies":

The cost of operating a car in Norway can also include pricey parking fees, high tolls for bridges and tunnels, and expensive ferry tickets. So e-cars were exempted from those, too. And it doesn’t hurt that fully charging a car battery from the grid costs the equivalent of only a few dollars, while gasoline retails in central Oslo for more than $6 a gallon.

“But my wife made an Excel spreadsheet,’’ Mr. Arnberg said. And after factoring in tax breaks, fuel costs, tolls, parking and all, “the Leaf came to about half the price” of a gasoline-powered car, he said.

Fortunately, Norway is a small country because there's not many places to recharge:

Mr. Arnberg, like many Norwegians interviewed for this article, bemoaned the fact that the country’s vehicle-charging infrastructure had not kept pace with the number of new electric cars on the road. It is an issue that plagues other places that have embraced e-cars, including California, where the competition for public plug-in sites sometimes grows hostile.

Oslo now has only about 700 public charging spots, although city officials aim to raise that to above 1,000 before the end of the year. For most people, that means most of their charging is done at home.

Michael Filloon's Bakken Update -- October 16, 2015

Over at Seeking Alpha.

• The Permian Basin continues to be the top US unconventional play in the United States, with the Delaware Basin providing returns much like the Midland Basin.
• Matador is levered to the Delaware basin, providing unique exposure compared to other small and mid-cap publicly traded companies.
• Early Matador results in the Permian seem to point to positive economics at today's oil price.
• Matador well design continues to impress, using large volumes of sand and fluids per foot with tight frac cluster spacing.
• Matador's Delaware acreage is upside as the very thick source rock and multiple economic intervals are perfect for pad drilling. 

The article has an incredible amount of information as usual. This is simply the piece about the geography and stratigraphy of the Permian. 

Filloon:

When looking at specific core US unconventional plays, the Permian may have an advantage. This Basin is split into three very different basins: the Midland (to the east); the Central Basin; and, the Delaware (to the west).

(Source: Drillinginfo)

Filloon:

The Midland Basin is in the east. The central basin platform is wedged between Midland and the Delaware Basin. Midland is better known, and has seen more traffic. The Delaware Basin is less known, but could be equally important.

Delaware development occurred after Midland, so we are just beginning to see its upside. It shares some things with Midland like a very thick payzone and the Wolfcamp, but it's most important factor could be from something unique.

Filloon:

The Midland Basin gross payzone is approximately 4000 feet. The Wolfberry has been an unconventional vertical target started before horizontal techniques began. The Spraberry and Wolfcamp are the main horizontal targets in Midland.

(Source: Geological Data Services)

Filloon:

The map above provides a comparison, and the Delaware Basin has deeper intervals. This means a couple of things. Well costs will be greater. It also means well pressures could be higher. Higher pressures generally provide more resource, as it is propelled at a greater rate up and out of the wellbore.

Filloon:

Both the Midland and Delaware basins share the Wolfcamp, but the latter has Bone Spring upside.

Go to the linked article at Seeking Alpha for the analysis, a lot more data, and the ability to enlarge these maps.

Putting The Marcellus / Utica Into Perspective -- October 16, 2015 -- Part VI

From a reader:

Some numbers to give some perspective on the Marcellus/Utica supply situation:

• At the moment there are 8,000 producing unconventional wells in Pennsylvania and Ohio.
• There are over 3,000 wells that are already drilled (some frac'd) that are not yet online (producing).
• At the recent rate of three (3) wells per day being brought online, it would take over 1,000 days - over 2 1/2 years to bring these wells into production.
• A leading operator, Antero, recently said that they have less than a quarter of their leased acreage held by production (HBP).

The 'wildcatting' of the dry gas Utica has barely started and is already showing off the charts production.

One of the arguments for intermittent energy (wind/solar) is that once the farms are brought on-line, the energy source is free (wind is free; solar is free). Proponents of intermittent energy will say, that, yes, the upfront cost of building an intermittent energy farm is two, three, or several times more expensive than building a natural gas plant, but the cost of energy going forward will offset that initial upfront cost (and that's with huge government tax subsidies).

It's the same thing as buying a house. Most folks don't buy a house based on the advertised sales price. They buy what their monthly cash flow can cover. It becomes ever more difficult to convince folks to pay two times, three times, or several times the cost of an intermittent energy farm when the cost of the natural gas plant energy source will be so inexpensive going forward. I'm sure I am not articulating that well enough for Minnesotans to understand but there you are.

But with natural gas so inexpensive and so plentiful, the argument that wind/solar is free while natural gas will still incur a cost does not hold up. The on-going cost of natural gas is so inexpensive it is a minor piece of the full utility bill. The major part of the utility bill (coal, natural gas, solar, wind) is administrative costs, profits, regulatory inefficiencies, transmission costs, hidden fees, taxes, net metering, etc. Just like buying a bag of potato chips: a $4.99 bag of chips with 20 cents worth of potatoes.

On another note, regardless of how you slice and dice it, America is sitting in the catbird seat (as they say in the Midwest) when it comes to energy. Saudi Arabia and Russia see the writing on the wall. Or perhaps in the sands of the desert. Whatever. All I can say is I'm glad I'm here and not there, and I'm glad we're whining about $30 oil and not struggling with $300 oil -- where we would likely be today without the frackers. 

Natural Gas Fill Rate And Gasoline Demand -- October 16, 2015

Natural gas fill rate (dynamic link): 100. In the East Region, stocks were 16 Bcf below the 5-year average following net injections of 51 Bcf.

Gasoline demand in the US (dynamic link): 9.137 million bopd. Trending slightly up. Most recent four week averages -- 9.083 million bopd (2015); 8.782 million bopd (2014). That's a 12% increase over last year. It's hard to say it's an improving economy (maybe it is), but it certainly says something for a) cheap gasoline prices; and, b) Americans who love gas-guzzling SUVs and F-150's.

By the way, across from the swimming pool where our granddaughter practices and plays water polo, least expensive gasoline is selling for $1.89/gallon -- Southlake, Texas. Hoo-ah!

Schlumberger Beats Estimates -- October 16, 2015, Part IV

The usual disclaimer holds. By accessing this blog, or reading past this point, you, the reader, consent to a gazillion little things, especially understanding that facts and opinions are widely interspersed and commingled, and that there will be typographical and factual errors. 

In addition, there will be some Scandinavian humor that may offend some Norwegians. I try not to make fun of the Swedes. After all, it is often Swedish meatballs that "rescue" a Norwegian lutefisk dinner. 

Minnesotans should be particularly circumspect when accessing this site. The site takes the Bakken very seriously; everything else, not so much. This is not an investment site. It's also not a healthcare site even though there is quite a bit written about that trainwreck.

Reuters/Rigzone is reporting that Schlumberger beat estimates due to cost cutting.

Schlumberger Ltd, the world's No.1 oilfield services provider, reported a marginally better-than-expected quarterly profit, as deep cost cuts and efficiency improvements helped cushion the impact of weak North American drilling activity. 

With crude prices remaining under pressure, analysts and industry experts expect any pickup in U.S. drilling activity to be delayed until next year, with pricing recovery taking even longer. 

Schlumberger, which is less exposed to North America than rivals Baker Hughes Inc and Halliburton Co, said revenue from the region fell nearly 47 percent in the third quarter.
Revenue from outside North America, which accounted for nearly three quarters of the total revenue, fell about 27 percent. Schlumberger has cut 20,000 jobs this year and scaled back spending in response to weak crude prices. 

Still net income attributable to the company nearly halved to $989 million, or 78 cents per share. Total revenue fell 33 percent to $8.47 billion. Analysts on average were expecting a profit of 77 cents per share on revenue of $8.55 billion, according to Thomson Reuters I/B/E/S.

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Saudi Vs Russia: Europe

Fighting Words

Reuters/Rigzone is reporting:

From global majors such as Shell and Total to more modest Polish energy firms, oil refiners in Europe are cutting their longstanding use of Russian crude in favour of Saudi grades as the world's top exporters fight for market share.

Russia has for years been muscling in on Asian markets where Saudi Arabia was once the unchallenged dominant supplier.

But now Riyadh is retaliating in Moscow's backyard of Europe with aggressive price discounting.

This has nothing to do with Western sanctions imposed on Russia over Ukraine, which apply to energy industry equipment but not to oil or gas itself.

Instead it is a commercial battle for customers as both exporters ramp up their output despite weak world oil prices.

This is likely to complicate further a dialogue between Moscow and the OPEC exporters' group on tackling the global oil glut, with joint production cuts already looking elusive.

Trading sources told Reuters that majors such as Exxon, Shell, Total and Eni have been all buying more Saudi oil for their refineries in Western Europe and the Mediterranean in the past few months at the expense of Russian oil.

"I'm buying less and less Russian crude for my refineries in Europe simply because Saudi barrels are looking more attractive.

It is a no brainer for me as Saudi crude is just cheaper," said a trading source with one major, who asked not to be named because he is not allowed to speak to the media. 

Dumping prices.

Something tells me Russia's involvement in Syria is less about "loving" Assad than taking the fight to Saudi Arabia. Putin knows with Obama in office for another full year, Russia has carte blanche in the Mideast. 

More from the linked article:

Riyadh traditionally focused on the U.S. and Asian markets, leaving Moscow as a major supplier to Europe, especially the eastern countries that were once part of the Soviet bloc.

But Russia's most powerful oil executive, Rosneft chief Igor Sechin, said on Tuesday that Saudi Arabia had started supplying ex-communist Poland at "dumping" prices. 

Then on Wednesday, Russian Energy Minister Alexander Novak described the Saudi entry into eastern European markets was the "toughest competition".

For both Saudi Arabia and Russia, oil is an existential issue.

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Norwegian Production

EIA's "energy cookie":

Norwegian petroleum and other liquids production, which had been declining since 2001, increased in 2014 and will likely continue increasing in 2015. The production growth in 2014 was mainly the result of new fields coming online, but also included a small increase in output from existing fields. Production has continued to grow in the first half of 2015 and is expected to remain relatively stable over the next few years as growth from new fields balances declines from older fields. --- EIA

Minnesotans Concerned About The Bakken -- October 16, 2015; Part III

Being reported by CBSMinnesota:

Many grassland birds are losing habitat to drilling activity in western North Dakota’s oil patch and more needs to be done to prevent further displacement, a new federal study says.

“Lot of things go away when birds go away — the whole ecosystem gets topsy-turvy,” said Douglas Johnson, one of four federal scientists who authored the study by the U.S. Geological Survey and the Fish and Wildlife Service.

The three-year study completed in 2014 and released this week looked at 69 oil well sites and nearby gravel roads in seven of the state’s oil-producing counties.

Most oil well sites in the study had “numerous tall structures, were surrounded by barbed wire fencing, had brightly burning natural gas flares, generated relatively minor chronic noise, and were visited frequently by large trucks,” the study said.

The article fails to mention:

• blanket immunity for wind farms slicing and dicing migratory birds
• the incredibly small footprint the Bakken actually takes up
• the incredible amount of birdland taken away by ethanol (corn) farms
• the tall structures (rigs) go away in a few weeks
• in fact, the tall structures (rigs) decreased from 200 to 60 since the study began 
• once the pipelines are in, there won't even be any storage tanks
• wind turbines - also tall structures -- "never" go away
• solar farms -- completely destroys the habitat (for birds and everything else)
• flaring goes away
• hunting will be off-limits in the oil field and birds will love it (we saw the same wildlife sotry in Alaska along the above-ground pipeline -- wildlife love the warmth

This is a non-story.

It would be interesting to measure the amount of "urban oil" from highways and parking lots that end up back in the land of 10,000 lakes and streams (now "owned" by the EPA, I might add). (Pointed out by a reader.)

I wonder about the bird density in all the neighborhoods in all the new housing developments in Minneapolis/St Paul/Rochester. (Pointed out by a reader.)

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Staggering

Pipeline takeaway capacity in the Marcellus has doubled this past year, and, still, it cannot keep up with capacity. Staggering. Incredible. Which brings us to another observation -- but I will hold that thought for now.

For the first time since America’s shale boom began, the flow of natural gas from the nation’s biggest reservoir is close to dropping below year-ago levels.

Output from the Marcellus basin in Pennsylvania and West Virginia is faltering as pipeline capacity fails to keep up with the surge in production.

While space on Appalachian pipelines has more than doubled this year, it hasn’t been enough to keep the flow moving freely.

That has some producers “choking back” the output from wells in the play.

“They’re saying it’s not even worth it day to day to keep my wells online because I’m losing money on every molecule that I sell.”

Marcellus production has surged more than 14-fold in the past eight years. Now drillers are waiting on seven new Appalachian pipeline projects scheduled to enter service this quarter, with eight more scheduled for 2016.

Gas prices have tumbled 15 percent this year as mild weather limits demand and stockpiles approach a record. Without declining production and rising consumption by power plants, the price slump might have been even more pronounced. Marcellus gas production may slip 1.3 percent in November to 15.892 billion cubic feet a day from October, compared with 15.699 billion a year earlier, according to the U.S. Energy Information Administration’s monthly Drilling Productivity Report. Output is poised to drop for four straight months.

Petrochemical companies should do quite well, one would think. Wind/solar? Dead.

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GS: $20-Oil? Never Mind

I don't know how many times we've read that Goldman Sachs has warned of $20-oil. Now this from Reuters:

Goldman Sachs head of commodities research and commodities bear Jeff Currie said on Thursday that he does not see the price of oil breaking above $50 a barrel in the next year, but the chances of it dropping to $20 are below 50 percent.

Persistent oversupply, along with slowing demand from China and other emerging-markets as well as a stronger dollar, will create enough of a headwind to keep the price of oil below $50 a barrel through the coming 12 months.

Goldman is forecasting growth in oil demand of 1.62 million barrels a day this year and 1.28 million bpd next year, creating a surplus of some 400,000 bpd that will have to clear before the price can recover much beyond current levels.

I guess GS was starting to lose its credibility. 400,000 bopd? Trivial. Especially with the shooting war in Syria and where that could lead.

OXY Sells Bakken Assets To Lime Rock -- October 16, 2015; Sold At Huge Discount

Updates

October 19, 2015: what were they thinking? XOM (XTO) or COP (BR) could have added 300,000 Bakken acres to their portfolio for $1,700/acre. XOM has $4.34 billion in cash and $36.6 billion cash flow; COP has $3.81 billion in cash and $10.89 billion cash flow.

Later, 11:24 a.m. Central Time: wow, what were they (CLR, Whiting, Oasis, Slawson) thinking? Passing up an opportunity to buy 300,000 acres in North Dakota/Bakken for less than $2,000 / acre. Wow. What a sad commentary.  $500,000 vs an original sales price in the neighborhood of $3 billion. Wow.

Original Post

 

Finally, confirmed by Reuters:

Occidental Petroleum Corp's move to sell its North Dakota acreage likely removes a logjam that had impeded U.S. oilfield deals for much of the year, though the deal's price sets an unusually low bar for future deals and gives buyers the advantage over sellers.

Oxy is selling all of its roughly 300,000 acres in North Dakota's Bakken shale formation to a private equity fund in a deal valued around $500 million, sources familiar with the matter told Reuters.

The price is roughly one-sixth, though, of what Wall Street had expected Oxy to fetch for the assets as recently as last year.

Houston-based Oxy did not sell the North Dakota assets out of distress; indeed, it has $2.8 billion in cash in the bank.

Rather, the deal removes an operational distraction from managers focused elsewhere and helps the company achieve its goal of being cash-flow neutral. 

Still, for ConocoPhillips, Whiting Petroleum Corp , Oasis Petroleum Inc and other oil companies pursuing pipeline or oil acreage sales, Oxy has set the bar low.

I say "finally" because a reader passed this information on to me a couple of days ago, but I held off posting it until confirmed in mainstream media.

The linked article does not mention the buyer (unless I missed it) but the reader tells me the buyer was Lime Rock Resources. As of today (October 16, 2015), Lime Rock does not mention this on their web page. Update: a reader informs me that The Dickinson Press confirms that it was Lime Rock: link here.

Oxy executives had constantly bemoaned to Wall Street its high cost of drilling new wells in North Dakota, despite the fact that peers have consistently found ways to be more efficient.

While the high cost was partially a function of the company's geographic location, it also was born from a decision to spend more of the company's capital budget on operations in Texas, Oman and Colombia.

North Dakota "just can't compete with our Permian Basin (Texan) assets and we don't think it ever will, so we do want to monetize it," Vicki Hollub, Oxy's executive vice president and the named successor to Chazen, told analysts three months ago.

Lime Rock, which holds acreage in other U.S. shale plays, is already moving fast to cut costs by requiring all of Oxy's North Dakota employees to re-apply for their jobs, according to one of the sources.

I track Bakken operators here.

Friday, October 16, 2015 -- Part II

The president's update on the train wreck, from The Washington Post:

The Obama administration is predicting a meager increase next year in the number of Americans with private insurance through the Affordable Care Act — a forecast, far below previous government estimates, that signals the obstacles to attracting people who remain uninsured.

Health and Human Services Secretary Sylvia Mathews Burwell announced Thursday that an expected 10 million Americans will be covered by late 2016 by health plans they bought on the federal and state insurance exchanges created under the law.

That figure is just half the most recent forecast by congressional budget analysts, who have long expected 2016 to usher in the biggest surge in enrollment. The number represents a marginal increase from the 9.1 million Americans the administration believes will have ACA health plans by the end of this year.

The anemic projection comes as the sprawling law is entering a new phase. Having survived the disastrous 2013 rollout of HealthCare.gov, the federal exchange’s online enrollment system, and weathered two Supreme Court challenges, the ACA has moved past critics’ early hopes that the law might quickly collapse.

Proponents note that the statute has been responsible for the biggest gain in insurance coverage in decades. But questions linger over whether it can reach deep into the pockets of the nation’s most intractable uninsured populations and whether people who currently have health plans through the marketplaces will decide that the coverage is worth keeping.

The ACA’s third open-enrollment period starts in barely two weeks.

The new HHS prediction represents the second time that the administration has significantly undercut that of the Congressional Budget Office. The latest discrepancy is much greater than a year ago, when federal health officials predicted that enrollment through the insurance marketplaces would reach up to 9.9 million by the end of 2015, compared with the CBO’s 13 million.

Some health-policy experts suggested that the tepid 2016 forecast may be partly strategic. “The ACA has become such a numbers game,” said Larry Levitt, a senior vice president of the Kaiser Family Foundation. “So, yes — the optics of a low projection are bad, but not nearly as bad as not succeeding when the final enrollment numbers come in.”

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Sticker Shock 

Cape May Off-Short Energy, New Jersey

Bizjournals is reporting:

A Cape May-based energy company is proposing to build six turbine three miles offshore from Atlantic City after losing an appeal to build five larger turbines. The Press of Atlantic City reports the New Jersey Supreme Court rejected Fishermen's Energy LLC's latest appeal, which challenged the Board of Public Utilities rejection of the $200 million demonstration-scale wind farm. 

The article does not mention the production expected from these five or six turbines. It turns out that the company is shooting for 25 MW. Really? 25 MW? That's not even worth talking about. Cost: $200 million / 25 MW = $8 million / MW. Yes, you read that correctly. $8 million / MW. No wonder they didn't mention that in the story.

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More Sticker Shock 

Southern Company / Kemper

Who was it that said, "a sucker is born every minute"?

Just when I thought it could get no more ridiculous, I was sent this story by a reader. First, for background, re-read the Kemper story, the cost of "clean coal" in the US:

Note: at $6.1 billion this was three times more than expected; now it's up to $6.3 billion.

This is a 582-megawatt plant. So, $6.3 billion (and still rising) / 582 MW = $11 million /MW. Remember, even the most expensive solar energy / wind energy project seldom gets above $3 million / MW and even at $3 million / MW, that's outrageous -- in the US.

Fuelfix is reporting:

Atlanta-based Southern Company is teaming up with South Korea’s largest electric utility to take their carbon-capture and so-called “clean coal” technologies worldwide for coal-fired power plants.

Carbon-capture projects for coal plants have slowed of late because of high costs and the competition from low natural gas prices, but Southern Company is seeking to set the global blueprint on making projects work. Southern’s technology was developing with Houston-based KBR Inc. in concert with the U.S. Department of Energy. Capturing and storing carbon from coal plants is seen within the industry as making coal plants cleaner, but environmentalists largely deride the term clean coal as an oxymoron.

Southern Company’s new partnership announced Thursday with the state-owned Korea Electric Power Corp., called KEPCO, is intended for them to jointly explore “clean coal” power plant technologies in the U.S., South Korea and developing nations worldwide that rely on coal for power.

Much of the partnership’s focus is on expanding the usage of Southern Company’s technology used at its Kemper clean coal plant in Mississippi, which is scheduled for completion next year. The project cost more than $6 billion — nearly triple the original estimate — and it is behind schedule to the point that the company warned Sept. 29 that it may have to return $234 million in federal tax credits if it misses an April 19 startup date.

Southern Company and KBR are already jointly marketing the transport integrated gasification technology to energy companies globally. KBR developed the technology in concert with Southern Company. The Kemper facility is designed to capture at least 65 percent of the plant’s carbon emissions and then utilize the carbon for enhanced oil recovery in U.S. shale production.

"Clean coal" may not be an oxymoron, but it sure is expensive the way Southern Company and the US Department of Energy went about doing it.

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Western South Dakota Wind Farm

Still Being Considered By County Commissioners

Earlier story reported by The Rapid City Journal:

Two brothers have proposed a wind farm that could become the first in western South Dakota. John O’Meara, of Indiana, and Patrick O’Meara, of Colorado, are the chief operating officer and chief executive officer, respectively, of Wind Quarry LLC.

The company has submitted an application to the South Dakota Public Utilities Commission to build a $210 million, 45-turbine, 103-megawatt project about 10 miles northeast of Newell.

It would be Wind Quarry’s first project. John O’Meara, a chemist, said the company is the brainchild of his brother, a family-practice physician who’s had a lifelong interest in renewable energy.  

$210 million / 103 MW = $2 million / MW + eye-sore + migratory bird decimation.

My dad was born on the Oksol farm a couple of miles south of Newell, South Dakota, almost one century ago.

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Silent Intifada --> Third Intifada?

And So It Goes 

Friday, October 16, 2015

Active rigs:

	10/16/2015	10/16/2014	10/16/2013	10/16/2012	10/16/2011
Active Rigs	67	189	184	187	195

RBN Energy: why aluminum producers rely on crude refiners.

Petroleum coke (known as petcoke or “coke”) is produced by refinery coker units that break up residual fuel oil to squeeze out the last drops of lighter components used to make gasoline and diesel – leaving a solid carbon based residue. Petcoke is also the only commercial source of material used to manufacture electrolytic anodes that play a critical part in making aluminum. As a result – these industries are effectively joined at the hip - although you wouldn’t know it because the two rarely cooperate. As we explain in today’s blog - that may need to change going forward because a looming petcoke shortage could disrupt aluminum production and prices.

This blog series is based on the recently published “Alliance Anode Coke Study” prepared by Turner, Mason and Company, AZ China Ltd and Cascade Resources.

For those of you wondering why RBN Energy’s blog would suddenly veer off into the world of metals and in particular aluminum – tighten your seat belts and bear with us while we explain the relationship between crude oil and aluminum.

Aluminum is almost exclusively made using the Hall-Heroult electrolysis process where electricity at very high currents is passed through a molten electrolyte containing dissolved alumna (a compound of aluminum and oxygen produced from bauxite) at around 960 ^oC (1,760 ^oF). The alumina is reduced to its component parts – with the aluminum accumulating in reduction cells on one electrode (the cathode that transmits the current). The other electrode (the anode) is comprised of multiple blocks of carbon – typically around 1 metric tonne (MT) in weight – suspended in the electrolyte. These anodes are primarily manufactured from petcoke as well as a pitch based binder.

The anodes are consumed during the electrolysis by reaction with oxygen to form CO2.

Around 0.4 to 0.45 MT of carbon anode are consumed to produce 1 tonne of aluminum metal. Bottom line – you need about half a tonne of petcoke to make a tonne of aluminum. Who knew?

The US exports its greenhouse-gas emissions -- as coal. Profitable coal. The Washington Post is reporting (a series):

Gillette, Wyo. — A few feet below this prairie town lies one of North America’s biggest coal deposits, a 100-foot-thick slab of brittle black rock spanning an area the size of Rhode Island — nearly all of it owned by the U.S. taxpayer.Just a dozen nearby mines, scattered across a valley known as the Powder River Basin, contain enough coal to meet the country’s electricity needs for decades. But burning all of it would release more than 450 billion tons of carbon dioxide into the atmosphere — more than all greenhouse-gas emissions from all sources since 2000.

The Obama administration is seeking to curb the United States’ appetite for the basin’s coal, which scientists say must remain mostly in the ground to prevent a disastrous warming of the planet. Yet each year, nearly half a billion tons of this U.S.-owned fuel are hauled from the region’s vast strip mines and millions of tons are shipped overseas for other countries to burn. Government and industry reports predict a surge in exports of Powder River coal over the next decade, at a time when climate experts are warning of an urgent need to reduce coal burning to prevent global temperatures from soaring.
Each shipment highlights what critics describe as a hypocrisy underlying U.S. climate policy: While boasting of pollution cuts at home, the United States is facilitating the sale of large quantities of government-owned coal abroad.

“We’re a fossil-fuel-exporting super­power that goes around lecturing the rest of the world about cutting emissions,” said Paul Bledsoe, who was an adviser on climate during the Clinton administration. “The United States is reducing its domestic coal use and then simply exporting some of those emissions abroad.”

The production of electricity is the leading source of man-made greenhouse gases in the atmosphere, and the global demand for electricity, particularly in developing nations, will only grow. Coal accounts for 40 percent of the electricity produced globally — and more in China and India.

The Port of Los Angeles reports steep shipping decline in September, 2015. The Los Angles Times is reporting:

With a 9.4% drop in imports, the largest container port in the U.S. appears to be bearing the brunt of languishing trade. --That's the "story line" but there is much more to it.

Shipments through the Port of Los Angeles fell at a steep rate last month, extending a downward trend over the past year that suggests the port is bearing the brunt of sluggish U.S. international trade. In September, Los Angeles handled 124,286 loaded twenty-foot equivalent units, a standard measure for container cargo. That was off 17.5% from last September, the 12th straight month that loaded export containers declined from a year ago.

Imports declined 9.4% year-over-year, to 372,991 inbound containers. Shipping at many of the largest U.S. ports has been tepid in recent months. Foundering demand for U.S. goods in the troubled European and Asian economies has clipped exports and overstocking earlier this year by American retailers has led many of them restrain imports heading into the fall. But most ports aren’t reporting the deep declines that Los Angeles is coping with.

At the neighboring Port of Long Beach, imports fell 1.9% in September while exports were up 6.1% from the same month last year.

For January through August, the major ports of New York and New Jersey, Savannah, GA, and Seattle and Tacoma, WA, reported double-digit gains in loaded import containers.

Imports at the Port of Oakland were flat for the first nine months of 2015 through September while Long Beach has reported an increase of 2.1% in imports over the same period last year.

The East Coast ports have reaped the benefits of congestion on the West Coast earlier this year related to protracted contract negotiations with the dockworkers’ union there.

The talks wrapped up in late February, but the West Coast has been slow to fully recover their cargo volumes as many shippers shifted their goods to different routes after months of uncertainty at the Pacific ports.

Overall, including an additional 233,029 empties, Los Angeles saw a decline of 5.8% in total container volume in September—the largest drop since the height of West Coast port congestion earlier this year. The inbound container volume at Los Angeles also fell 8.5% from August to September, a break from historic patterns that see business grow as retailers bring in goods for the holiday sales season. Los Angeles is facing tough comparisons to 2014, when it handled 8.3 million containers, the most since 2007. A spokesman for the Port of Los Angeles said 2014 was a near-record year, and beating last year’s volumes has been challenging in the wake of this year’s congestion problems.

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Syria

This is why Obama refuses to meet with "Russia" to discuss Syria -- according to The Fiscal Times.

Vladimir Putin’s ongoing effort to keep the U.S. off balance has forced the White House into yet another politically awkward choice. The Obama administration has officially refused a meeting with Russian Prime Minister Dmitry Medvedev and a high-level delegation of Kremlin officials, following an offer from the Russian government to open up talks about the ongoing conflict in Syria.

The offer, extended by the Kremlin, was ostensibly an effort to begin coordinating the two countries’ military efforts against the terror group ISIS.

However, White House spokesman Josh Earnest said that the administration has no interest in aligning with the Kremlin in Syria.

The Obama administration, of course, has very obvious reasons for declining high-level talks with Russia on coordinating the two countries efforts against ISIS – not lest (sic) of which is that the White House doesn’t appear to believe that Russia really is doing much to counter the terror group that has taken over large parts of Syria and Iraq in the first place.

Syria is currently in the grip of a three-way war, in which the forces loyal to dictator Bashar al-Assad are fighting against rebel groups seeking to overthrow the regime, as well as ISIS. The rebels and ISIS, in addition to fighting Assad, are fighting each other.

For the archives:

• From the WSJ, Henry Kissinger, October 16, 2015
• Comment at this article:

Foreign policy novice Obama has destroyed 40+ years of positive American influence in the Mideast and handed Putin the keys: http://www.wsj.com/articles/a-path-out-of-the-middle-east-collapse-1445037513 "That geopolitical pattern is now in shambles. Four states in the region have ceased to function as sovereign. Libya, Yemen, Syria and Iraq have become targets for nonstate movements seeking to impose their rule. Over large swaths in Iraq and Syria, an ideologically radical religious army has declared itself the Islamic State as an unrelenting foe of established world order. It seeks to replace the international system’s multiplicity of states with a caliphate, a single Islamic empire governed by Shariah law."