Wednesday, December 23, 2015

Three (3) New Permits -- North Dakota, December 23, 2015; 11/13 Bakken Wells To DUC Status

Active rigs:

Active Rigs65172189187197

Three (3) new permits --
  • Operators: EOG (3)
  • Fields: Parshall (Mountrail)
  • Comments: --
Six (6) permits were renewed, including --
  • Hess, 4, all EN-Weyrauch C permits in Mountrail County
  • Murex, 2, a Barrett Leigh permit (Williams County) and a Sophia Drake permit (Mountrail County),
Twelve (12) permits canceled; among the most I've seen in one day --
  • Whiting, 5, all Moccasin Creek permits in Dunn County
  • Newfield, 6, all Prairie Moon permits in McKenzie County
  • EOG, 1, a West Clark permit in McKenzie County
Wells Coming Off The Confidential List Over The Next Few Days

Wells coming off the confidential list through next Monday, December 28, 2015 (the rest of the data will be completed later, closer to the time they come off the confidential list):

Monday, December 28, 2015
  • 29448, SI/NC, WPX, Emma Owner 23-14HD, Spotted Horn, no production data,
  • 30535, SI/NC, XTO, Dakota Federal 41X-16D, Haystack Butte, no production data,
  • 30940, SI/NC, BR, CCU Bison Point 34-34MBH, Corral Creek, no production data, 

Sunday, December 27, 2015
  • 30534, SI/NC, XTO, Dakota Federal 41X-16H, Haystack Butte, no production data,
  • 30939, SI/NC, BR, CCU Bison Point 34-34TFH, Corral Creek, no production data,  
Saturday, December 26, 2015
  • 29447, SI/NC, WPX, Emma Owner 23-14HC, Spotted Horn, no production data,
  • 30938, SI/NC, BR, CCU Bison Point 24-34MBH, Corral Creek, no production data,  
Friday, December 25, 2015
  • 29446, SI/NC, WPX, Emma Owner 23-14HX, Spotted Horn, no production data,
  • 29868, 2,045, Whiting, P Wood 154-98-13-22-16-12H, Truax, t7/15; cum 91K 10/15;
  • 30533, SI/NC, XTO, Dakota Federal 41X-16C, Haystack Butte, no production data,
  • 30937, SI/NC, BR, CCU Bison Point 24-34TFH, Corral Creek, no production data,
Thursday, December 24, 2015
  • 29225, 1,063, Whiting, P Jackman 156-100-2-18-6-2H3A, East Fork, 35 stages, 4.4 million lbs, t6/15; cum 43K 10/15;
  • 30258, SI/NC, Sinclair, Uran 4-15TFH, Sanish,
  • 31408, 1,100, Hess,EN-KMJ Uran-154-93-2734H-10, Robinson Lake, frack 10/22 - 10/23, 84% water, 15% proppant, 1,626,114 gallons of water (13.6 million lbs) 2.5 million lbs proppant (?), API 33-061-03729, t11/15; cum -- 
December 24, 2015:
  • Murex renewed two permits, Michael Douglas and Patricia Ann, both in Williams County (a little trivia: Patrician Ann ("Tisha") Sterling played opposite Michael Douglas in PBS Playhouse, one episode, 1969).

Who Will Be First? -- December 23, 2015


January 1, 2016: this ship has sailed

December 31, 2015: 24/7 Wall Street provides an update
Thursday's posted price from Enterprise for Eagle Ford crude is $33 a barrel. Last Saturday the posted price was $33.90. Since the export ban was lifted, the posted price of a barrel of Eagle Ford crude has risen by $1.87 a barrel. 
West Texas Intermediate has risen by the same amount, and North Dakota Light Sweet crude has risen by $2.30 a barrel. The moral of this litany: the price of crude does not appear to have much to do with proximity to a port where crude can be loaded for export.

That may all change as time passes, but any large near-term impact on crude prices really doesn't look like it's in the cards. The horse race to load and ship the first cargo is mainly a race for bragging rights. At this point, Conoco and NuStar appear to be leading into the backstretch.
I doubt these guys are doing this for bragging rights. 

December 30, 2015: bizjournals provides additional background to the story here --
Two Texas energy companies claim to have taken the lead in the race to ship the first U.S. crude oil following the end of a 40-year ban.
Houston-based ConocoPhillips and San Antonio-based NuStar Energy (NYSE: NS) announced on Dec. 30 they are loading U.S.-produced light crude oil at NuStar's North Beach Terminal in the Port of Corpus Christi. ConocoPhillips is selling the Eagle Ford light crude oil/condensate to international trading company Vitol. The loading is expected to be complete Dec. 31.
December 24, 2015: Bloomberg has the story here.
The U.S. restricted most exports of unrefined crude as part of its response to the Arab oil embargo that caused fuel shortages in the earlier 1970s. For decades it didn’t much matter, as declining U.S. oil production and rising demand put the focus on imports.
That started changing five years ago, when companies like Continental Resources Inc. and ConocoPhillips began ramping up oil production from shale rock in Texas and North Dakota, raising U.S. output by 65 percent and creating supply gluts that forced producers to offer steep price discounts.
U.S. companies were already allowed to export oil to Canada, and boosted shipments to almost 500,000 barrels a day this year. That’s more than some members of the Organization of Petroleum Exporting Countries export.
West Texas Intermediate, the U.S. benchmark crude, settled at $37.50 a barrel Wednesday, 14 cents higher than Brent, the international marker. Brent has been more expensive than WTI for most of the past five years, reaching a premium of $27.88 a barrel in 2011.
Original Post
This is a big, big story. I've only posted a few paragraphs from the story but the Platts story (linked below) is a must-read for those interested in the US light crude oil export story. I don't know if the link will eventually be broken, but I've archived the article.

In addition, for those interested in Vitol, there was an earlier post on Vitol. Pretty interesting.

Tweeting now: 
  • Vitol to export first US crude oil cargo from Enterprise Houston terminal in first week of 2016: company.
From Platts:
Switzerland-based trading company Vitol Inc. is scheduled to load during the first week of 2016 a US crude oil cargo from Enterprise Products Partners L.P.'s Houston terminal, an Enterprise spokesman said Wednesday.

The 600,000 barrel cargo of domestic light crude oil is scheduled to load from the Enterprise Hydrocarbon Terminal (EHT), Enterprise said.

Enterprise made the announcement on its website Wednesday morning saying it had "agreed to provide pipeline and marine terminal services to load its first export of crude oil produced in the United States under the law enacted earlier this month."

The name of the crude oil is South Texas Sweet crude with a 46-48 API gravity.
More at the link.

Remember: less than a week ago, analysts said there was no market for US light crude oil. I thought the same thing. We were all wrong. Memo to self: send note to RayJa and Mr Hirs.

Merry Christmas!

 Photo by daughter Laura, from Portland, OR.

I'll Bet A 6-Pack On This One

I will bet that Bette Midler's carbon footprint is 100x bigger than mine, and 10,000x bigger than any one Syrian refugee. 

I will bet that Bette Midler's walk-in closet in her guest room is bigger than our entire 700-square foot apartment.

I will bet that Bette Midler's kitchen sink is bigger than our bathtub. 

One (of many things) that I won't bet on is who owns more SUVs: Bette Midler or Algore. Too close to call, but I would give the edge to Algore since he owns more homes.

Meanwhile, Back At The Mall Of America ... 

BlackLivesMatter have just about worn out their welcome in the Twin Cities, I suppose. They're getting a lot more press than they deserve; it looks like the MOA demonstration was a bust, and the airport demonstration merely infuriated thousands of travelers. This is probably the best example of piss-poor planning -- disrupting Christmas shoppers and folks trying to get to the airport during the busiest season of the year. BlackLivesMatter certainly won few friends in MSP today. [Fail: at 8:00 p.m. Central Time, same day, this story was not even linked at Drudge Report. Turned out to be a non-story except for disrupting the lives of thousands of folks simply trying to get to the airport during the busiest time of the year.] [December 24, 2015, 9:01 p.m. Central Time: they continue to wear out their welcome. Politicians aren't watching; they are all on vacation. Law-abiding folks who just want to go on about their business are getting a mite tired of all this. By the way, another fail; the only national news media carrying the story is the most liberal Los Angeles Times. ]

They Must Be Fracking In Reno
Injecting Water Into Salt Water Disposal Wells

rgj is reporting:
That's the exact location of a magnitude 4.4 quake at 10:45 p.m. - the biggest in a swarm of six quakes that hit Reno - according to the Nevada Seismological Laboratory at the University of Nevada, Reno....
4.4 is a pretty good seismic event...

Chevron Will Sell A Gazillion Tonnes Of LNG To China From Its Australian Source -- December 23, 2015

December 23, 2015: Rigzone/Reuters is reporting that Chevron agrees to sell Australian Gorgon LNG to Chinese firm.
 Chevron Corp on Tuesday said it has agreed to sell up to 1 million tonnes a year of liquefied natural gas (LNG) from its Australian Gorgon project to China Huadian Green Energy Co over 10 years starting in 2020.
The non-binding heads of agreement comes amid a deterioration in Asian LNG prices, aggravated by mounting supply from Australia, which aims to overtake Qatar as the world's top producer in coming years.
The price has slid two-thirds since 2014 to under $7 per mmBtu. "This is an important step in the commercialisation of Chevron's natural gas holdings in Australia," Pierre Breber, executive vice president of Chevron Gas and Midstream, said in a statement. 
Let's go back and look at the global reserves of natural gas as reported earlier at wiki
  • Australia is #11 in global reserves at 152 trillion cubic feet (as of January, 2014).
Wow, there are a lot of story lines in that short, short article. 

Meanwhile in western Canada, Rigzone/Bloomberg is reporting:
As Canadian Oil Sands Ltd. tries to fend off Suncor Energy Inc.’s $3.2 billion bid, the latest upset at its only business couldn’t have come at a worse time.
After missing production targets each year since 2010, Chief Executive Officer Ryan Kubik is trying to convince investors that this time he’ll deliver on what’s been promised.
A December 8, 2015, production cut at the Syncrude oil-sands project only adds to the performance concerns.
“Performance is a big factor” for shareholders considering whether to sell to Suncor, said Michael Dunn, an analyst at FirstEnergy Capital Corp in Calgary. “This was supposed to be the year when things got better. Instead, they’ve got worse.”
The production cut at Syncrude highlights the challenges Kubik faces as he defends Canadian Oil Sands and its only asset against Suncor, whose market value is more than 12 times larger and which operates additional mines in Alberta, four refineries, almost 1,500 Petro-Canada service stations and oil wells in the North Sea. Extracting bitumen and converting it into crude is increasingly dominated by large, diversified companies like Suncor, Canadian Natural Resources Ltd. and Imperial Oil Ltd.
Again, the disclaimer for this site. This is not an investment site. Do not make any investment, financial, or travel decisions based on what you read or think you may have read at this site. If this is important to you, go to the source. 

Remember: Saudi Arabia Budgets For $100 Oil -- December 23, 2015

[Snide remark: for all those folks who keep writing me to tell me that the break-even price for crude oil for Saudi Arabia is $7, please see the graph below. It never was $7; it never will be $7.]

Two years ago, Saudi Arabia set its budget based on "$100 oil."

With the incredible slump in the price of oil -- a huge miscalculation on the part of Saudi Arabia -- it is now estimated that Saudi Arabia requires "$106-oil" vs the posted $40-oil, give or take a few dollars.

This is an existential issue for Saudi Arabia.

Fortunately, oil will eventually get back to $100. Twenty-four (24) years from now. CNBC is reporting:
Oil prices will take decades to recover and will still not reach the peak seen in recent years, according to the latest World Oil Outlook (WOO) from OPEC.

In the group's latest outlook on supply, demand and prices to 2020 and 2040, OPEC predicted that a barrel of oil would cost (in real terms) around $70 by 2020 and $95 by 2040, a far cry from a high point of $114 a barrel last seen in June 2014 before prices began to plunge on oversupply. On Wednesday, a barrel of benchmark Brent crude cost $36.51, a shade above WTI at $36.47.

Price declines were exacerbated by the decision last year by OPEC, the 12-member producer group led by Saudi Arabia, not to cut production. Still, OPEC's Secretary General Abdalla Salem El-Badri said OPEC had been a bastion of stability amid volatile times for the oil industry.

"The supply and demand balance in 2015 has been one of oversupply, with stock levels rising to well above the five-year average. Despite this market instability, OPEC has continued to be an efficient, reliable and economic supplier of oil," El-Badri noted in the foreword of report.
Later in the report El-Badri talks about el-unicorns.
By the way, CNBC's analysis is wrong on several points, but the general thesis is correct.

I was unable to post the above due to wi-fi problems. While waiting, a reader sent me this story from The [London] Telegraph: it's now becoming clear -- OPEC has no grand strategy.
About a year ago, Saudi Arabia turned its oil spigots on full in an attempt to maintain market share, the other Opec countries followed suit, and the world was flooded with cheap crude.

The received wisdom is that the club of 13 oil-producing countries is trying to squeeze higher-cost producers like the US shale industry. But that theory is looking increasingly fragile in the face of the facts.

The most telling of these is that US oil production has almost doubled in the past four years from around 5.5m barrels a day in 2011 to a peak of 9.7m in April this year.

The recent oil glut has merely forced shale producers to become more efficient. The increase in output has been achieved, despite a reduction in the number of rigs, thanks to a startling rise in productivity – up by 30pc a year between 2007 and 2014.

It is true that there are some signs of strain. The US energy revolution has been financed with cheap debt: the two biggest months for bond issuance by American oil and gas companies since 2014 were February and March this year.

And that party could soon come to an end now that the Federal Reserve has slowly started to extricate the punchbowl. Two-thirds of bank loans tracked by the S&P oil and gas index were trading at distressed levels at the end of November, up from 13pc in May. US shale production has also started to tail off a little in recent months (though nowhere near as much as was expected).

But even if there is a financial reckoning, and a number of shale companies go bust, their operations will merely be taken over by better-run rivals.

The oil is certainly not going to disappear. Experts now believe that the Permian Basin in Texas is capable of producing up to 6m barrels a day – more than Ghawar, the world’s biggest field, in Saudi Arabia. And shale production is relatively flexible – shut it down for a while and it will bounce right back as soon as prices start rising.
Venezuela: Tick, Tick, Tick

Old, old news but Rigzone provides an update:
Forget the opposition. OPEC is doing more to ruin the holiday season for Venezuela President Nicolas Maduro than any of his rival lawmakers.
Maduro stepped up attacks on his opponents this month after they won enough seats in congressional elections to challenge his government.
While bonds initially rallied on optimism the opposition victory could lead to more market-friendly policies, Maduro’s comments quickly killed that euphoria.
Now, it’s the rout in oil that’s doing the most damage to the prices of the securities.
Oil, by far Venezuela’s biggest export, has plunged 17 percent to an 11-year low since the Organization of Petroleum Exporting Countries abandoned production limits at its December 4, 2015, meeting.
Venezuela’s benchmark bonds due in 2027 are at the cheapest since August, and traders see a 71 percent probability that the country will default in the next 12 months, credit- default swaps show.
That’s up from 61 percent the day before the OPEC decision.
“The initial reaction to the election results was positive, but then oil just collapsed,” said Phillip Blackwood, a managing director at EM Quest, which advises Sydbank A/S on its debt holdings.
“The bills still need to be paid and that comes from oil.”
Oil at these levels could prevent Venezuela from meeting its debt obligations as soon as February.
The OPEC member relies on income from oil sales for almost all of its hard currency. It may need to sell $20 billion of gold or other assets to meet next year’s commitments.
Venezuela’s crude basket fell to an 11-year low $29.17 last week. “The latest decline in oil may have undermined government confidence, putting even this payment at risk.”
71%? My analysis suggests 73% but I'm often wrong.

Snapshot Of SI/NC (DUCs) In The Bakken -- December 23, 2015

The number of wells currently on the SI/NC (DUC) list:
At any given moment the number could change, but these were the number of wells on SI/NC status as of the date of the original post. I do not remember when I last updated these pages, so the numbers could be significantly different by now. I will update the numbers periodically.

For newbies: until November, 2014, operators had one year to complete a well once it had been spud (and there were quibbles about when the clock actually started ticking, but that's another story for another time). With the glut of oil and the slump in oil prices, the NDIC gave operators an additional year to complete their wells in North Dakota. I'll talk more about this later. Currently, the NDIC estimates there are about 975 wells on the SI/NC (DUC) list.


BloombergBusiness is reporting:
At Chipotle, three different pathogens caused the five known outbreaks. That wasn’t inevitable or coincidental. “There’s a problem within the company,” says Michael Doyle, the director of the center for food safety at the University of Georgia.
Chipotle has gotten big selling food that’s unprocessed, free of antibiotics and GMOs, sometimes organic, sometimes local.
“Blah, blah, blah,” says Doug Powell, a retired food-safety professor and the publisher of “They were paying attention to all that stuff, but they weren’t paying attention to microbial safety.” Whatever its provenance, if food is contaminated it can still make us sick—or even kill. Millennials may discriminate when they eat, but bacteria are agnostic.
By the way, have you ever wondered why "organic'" vegetables and fruits look as good as or even better than insecticide-treated conventional vegetables and fruits? Certainly, insecticide-free vegetables and fruits are being attacked by insects; and certainly without any insecticides, the vegetables and fruits would have evidence of insect damage. Certainly, organic farmers are not picking one or two perfect pieces of produce out of a hundred.

This is the story. To be declared "organic," the government requires that no insecticide be sprayed directly on the plants. Large corporate farms are spraying heavy amounts of insecticide on every other row of plants. Much of that excess insecticide will blow over to the neighboring rows of "organic" plants.

At least that's what I'm told. Could be wrong. But it would explain a lot. There's no way "organic" fruits and vegetables look that good without insecticides.

Back to Chipotle and microbes: Shiga-toxin-producing E. coli 026 was one of the culprits and apparently there were five strains (so far).

Shiga toxin is no laughing matter. Very, very scary.

Shiga? Shigella. 

Weekly Crude Oil Inventories Down In The US; Twitter Energy Tweets -- Platts, John Kemp, EIA -- December 23, 2015; US Natural Gas Reserves Staggering


December 23, 2015: for easier googling, I will bring the first comment up here (google does not search comments as far as I know):
I have been following the goings on in the Appalachian Basin (Marcellus, Utica, Upper Devonian, the deeper formations including the Trenton Black River) for over a year now.
Simply staggering developments as well as future potential.

The recent Deep Utica wells (Richard Zeits has the best analysis on Seeking Alpha) are showing that the Utica may well surpass the Mighty Marcellus in both output and economic viability.

People who 'knock' the Utica simply are unaware of what is going on there.
Observations that Utica wells decline rapidly are refuted by the 14 wells Rice Energy has producing on restricted choke with NONE showing ANY decline yet and the output is 15MMcfd/17MMcfd (boe near 3,000 boepd).
Range had a highly publicized Utica well that declined dramatically (Claysville 11H).
However, a sister well on the same pad (Clsysville 9H has INCREASED output from 11 to 12MMcfd. Range has learned from their first Utica, and the other operators are progressing as well.
Gulfport, in the slightly shallower Ohio Utica, recently reported about 15 wells that cumulatively produced 18Bcf in this past 3rd Quarter. (Over one million barrels oil - energy equivalent).
Original Post
The tweets:
  • U.S. commercial crude oil inventories week ending 12/18/2015 DOWN 5.9 MMbbl, refinery utilization= 91.3%
  • North Sea Brent Blend crude oil loadings down 7,976 b/d at 173,301 b/d in week to Dec 22
  • Global oil market balance will be restored in 2016, says UAE energy minister Mazrouei
  • OPEC assumes average 2015 crude oil price will be $55/b, gradually rising $5/b each year to $80/b in 2020
  • E. Canadian crude oil production doubles, reach highest output since early spring following turnarounds
The East Canadian crude oil story: some data points --
  • 6 million bbls/month of November vs 3 million bbls/month of October (two of the four fields down for maintenance)
  • the four offshore Canadian fields produced 56 million bbls in first 11 months of 2015, vs 72 million bbls in same period of 2014
  • For newbies: North Dakota produced 1.2 million bbls/day; and, unfettered, could produce 2 million bopd
Another Under-Reported Story

A link to convert cubic meters to cubic feet.

The wiki link for global natural gas reserves.

I've always considered Qatar the story to follow when it comes to natural gas. At the wiki link, Qatar ranks #3 in the world for natural gas reserves.

Disclaimer: I often make simple arithmetic errors. Numbers rounded. Natural gas reserves according to BP/wiki, 2013 - 2014 (US estimate as of December 2013). Top five countries:
  • Russia: 6,000 trillion cubic feet
  • Iran: 1,000 trillion cubic feet
  • Qatar: 900 trillion cubic feet
  • Turkmenistan: 600 trillion cubic feet
  • US: 350 trillion cubic feet
  • #11: Australia: 152 trillion cubic feet (as of January, 2014). (See this post.)
Now, let's go back and re-run the numbers that were posted earlier:
  • that recent huge Mediterranean natural gas find: 30 trillion cubic feet
  • Barnett, revised USGS figures: 53 trillion cubic feet
  • Utica, newly revised figures: 782 trillion cubic feet
  • Marcellus, EIA revised estimates: 65 trillion cubic feet, "proved" reserves
  • Bakken/Three Forks, USGS estimate: 7 trillion cubic feet
  • Qatar: 800 trillion cubic feet, wiki, conversion
Maybe it's just me, and maybe I made a colossal mistake, but if I did not make a mistake -- and I often make horrendously simply arithmetic errors -- but if I did not make a mistake:
  • the Utica alone, newly revised, has more reserves than Turkmenistan, #4
  • the Utica and the Marcellus, along, would put the US in the #3 position, ahead of Qatar
  • if the US fields not included are similarly revised, it's possible the US would move to #2, second only to Russia
If this is accurate, this is another under-reported story in the US. I don't always agree with Thomas Boone Pickens, but in this case, I think he had it right. It's a crying shame what the Obama administration is doing to the US.

There is some question on the accuracy of my interpretation of the data: the Marcellus link references the 2013 data for the US but does not make it clear whether the 65 trillion cubic feet for the Marcellus is new data or 2013 data. It makes no difference. Look at the final statement in that linked article:
But Penn State geoscientist Terry Engelder said their work assumes current prices. He said that ignoring prices, there is likely 480 trillion cubic feet of gas that is technically recoverable in the Marcellus.
Again, for newbies, reserves are based on "five years going forward": technology, prices, politics, geo-politics, the whole shebang. 

The USGS is incredibly conservative; oil men are incredibly optimistic; and, state geologists are perhaps the most "honest."

Remember, much of the Marcellus is off-limits for production (New York state bans fracking).

Wednesday, December 23, 2015

Active rigs:

Active Rigs65172189187197

RBN Energy: congestion on the Colonial refined products pipeline.
While recent analysis has raised concerns crude oil pipelines are running half empty the opposite is true for many of the nations’ refined product distribution pipes. Take the huge Colonial Pipeline system that delivers as much as 2.7 MMb/d of refined products from Gulf Coast refineries to destinations up the East Coast as far as New York. The southern stretch of the pipeline from Pasadena near Houston to Greensboro, NC has been running full since 2012 - meaning that shipper volumes are subject to rationing or apportionment. Today we start a two-part series explaining why the Colonial pipeline is so congested and how it operates.
We previously detailed the woes of East Coast refineries back in June of 2012 when plants had been shuttered due to poor refining margins. Since then refinery fortunes in the region that the Energy Information Administration (EIA) calls Petroleum Administration for Defense District (PADD) I - have recovered somewhat – starting with the “rescue” purchase by Philadelphia Energy Solutions of a former Sunoco refinery in Philadelphia (see Beginning To See The Light). This refinery renaissance was in large part due to processing cheaper domestic crude railed from the Bakken instead of more expensive imports. In the case of two refineries in Delaware City and Paulsboro, NJ owned by PBF Energy – the revival formula also involved railing in heavy crude from Canada (see Masterpiece Refining). But despite the fact that refiners have done well in the shale era because of access to cheaper “advantaged” crudes (see Living With A Material Surge), East Coast refineries still don’t produce enough refined product to meet local demand – particularly heating oil during the peak winter season (see New York State of Contango) and gasoline in the summer. The shortfall is made up by a combination of shipments from the nation’s largest refining center – the Gulf Coast (PADD III - which hosts just over 50% of U.S. refinery capacity – 9.4 MMb/d) and imports, mostly from overseas.