Clearing Out The In-Box -- January 23, 2016; The Entire World Is Under A "Snow Watch": Snowiest Day In NYC HIstory; First Snow In Taiwan In 80 Years; Hong Kong, No Snow (Yet) But Coldest Day In 59 Years

Updates

January 24, 2016: tweeting now, at 9:25 p.m. Central Time -- Local media: At least 60 dead in Taiwan due to record-low temperatures - CCTV News

January 24, 2016: earlier this month, SecState John "I served in Vietnam" Kerry announces sanctions lifted on Iran. On Friday, two days ago, largest Iranian mosque with thousands shout "Death To America"; and, today The Financial Times provides an update on the news report that Iran will buy 114 commercial jets from .... nope, not the US, but Europe -- 114 airliners from Europe. The Art of the Deal is probably a book neither Kerry nor Obama has read. 

January 24, 2016: the Kennedy clan may be on its/their way to Taiwan just to show the grandkids THERE IS SNOW! First snow in Taiwan in 80 years. Link at iceagenow.com.

January 24, 2016: the reports keep coming in from the US east coast -- snowiest day EVER in NYC, apparently. Forty-plus inches in West Virginia. The Kennedys don't believe this; they donated their sleds to charity years ago. Robert Kennedy, Jr, opined back in 2008 most kids in Virginia probably don't even own sleds and may never see snow again, or at least not much. 

January 24, 2016: it's cold in Hong Kong, also. So cold that they will close schools Monday. It's the coldest recorded in Hong Kong in 59 years. 

Later, 8:12 p.m. Central Time: it's official. Way over 20 inches in NYC, BWI airport, Washington, DC. Global warming, my foot. 

Later, 7:32 p.m. Central Time: it's official -- the snowiest day in NY city history. Atmospheric CO2 at 401+ (almost 402, a dynamic link). Who wudda thought? How are the Maldives doing? By the way, if atmospheric CO2 hits 402, that's almost a rise of 2 parts per million (0.0002%) change. It's hard to believe that 0.0002% is measurable, repeatable. statistically significant. Just joking. It isn't.

Original Posts

Alcoa Smelters

Reuters is reporting an update on Alcoa's US smelters.

Alcoa has four US aluminum smelters. It plans to close or curtail output at three of those smelters. If all the cuts go through as planned, Alcoa's only remaining US smelter would be its 130,000 tonne-per-year Massena West smelter, which "received" nearly $70 million in aid from New York state to keep running.

A smelter in Washington state, the 279,000 tonne-per-year Intalco smelter, was also on the chopping block. But ... whoa, hold your horses ...

The Intalco smelter was initially slated to be curtailed by the end of the first quarter, but Alcoa on Tuesday announced a delay until the end of the second quarter due to changes in energy and raw materials costs.

The smelter is run on hydropower from the Bonneville Power Administration.

The decision to be made will be based on the cost of electricity. And the aid package from Olympia, I suppose.  It will be interesting to see what Olympia and Bonneville come up with. I suppose some would call this corporate welfare. Whatever.

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Coal Mine In North Dakota To Close

95 Employees To Lose Jobs

The Dickinson Press reports:

The Coyote Station switched suppliers and, in May, will start taking coal from a new North American Coal Corp. operation called the Coyote Creek Mining Co. now poised to dig just to the southwest of Dakota Westmoreland. North American is already the biggest coal operator in North Dakota with the Coteau Freedom mine north of Beulah and the Falkirk Mine near Underwood.

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This Is Not An Investment Site

Do Not Make Any Investment, Financial, or Travel Decisions 
Based On What You Read Here

From Seeking Alpha:

• A new report from Sterne Agee CRT analyst Tim Rezvan suggests the situation for oil and gas E&P stocks is not as bad as the market fears for many companies
• After studying liquidity positions of the E&P names under the firm's coverage, Rezvan concludes that only Chesapeake Energy, Gastar Exploration and Ultra Petroleum face potential credit issues prior to 2018
• Conversely, Rezvan says Oasis Petroleum and Whiting Petroleum  maintain strong liquidity despite sharp equity underperformance and can withstand the reduction in credit facilities expected this spring from lending banks feeling stress in their energy loan portfolios.
• The firm has Buy ratings on OAS and WLL, and Neutral ratings on CHK, GST and UPL

CBC News reports that Canadian Pacific Railway to cut up to 1,000 jobs as rail volume slumps.

Shell / BG merger will result in 10,000 jobs cut, reported by Rigzone.

Richard Zeits on Whiting, over at Seeking Alpha.

Going in 2016, Whiting expects to direct 90% of its capital budget towards drilling and completions.

The number of rigs that the company will end up running in 2016 is uncertain, in my opinion, given that drilling new wells in a sub-$30 price environment makes no economic sense.

As a reminder, Whiting had 24 operated rigs running at the peak in 2014. By mid-2015, the rig count was reduced to 11. Whiting dropped three additional rigs in September and was running 8 rigs as of December. The capex reduction benefit of the September reduction in the rig count will be felt in Q1 2016, once all the wells drilled by the three released rigs are completed.

Whiting has also reduced capital spending on its North Ward Estes EOR project. Lease operating costs were reduced substantially, as the company is now putting in the minimum contractual amount under its CO₂ contracts and is essentially in a cash flow harvest mode.

The company has commented that it has the option of canceling two additional rigs at a total early termination fee of ~$10 million. Given the price environment, the cancellation may have already taken place.

Whiting has estimated its drilling and completion budget to decline to approximately $200-250 million per quarter, based on an 8-rig program.

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Statoil Will Drill The Arctic

Bloomberg is reporting:

Norway’s Arctic ambitions just got a $7 billion boost from Statoil ASA.

Norway’s largest oil company was able to halve its expected development costs to keep alive its delayed Johan Castberg development in the Barents Sea.

The decision comes as welcome news for an industry that’s struggling with a deep plunge in oil prices and tens of thousands of job cuts. Statoil’s plans will also benefit other companies that have made discoveries in the Barents Sea, such as Lundin Petroleum AB with its Gohta and Alta finds.

Statoil announced that the project will proceed after it managed to lower estimated investments to 50 billion kroner to 60 billion kroner ($7 billion) from an earlier estimate of 100 billion kroner. The owners of the oil deposits, which include state-owned Petoro AS and Eni SpA, agreed on using a floating production, storage and offloading facility, with a final investment decision planned for next year and possible production start in 2022.

Statoil will seek to make the project even cheaper.

The decision breaks a string of delays for the project that has suffered from high costs, a tax increase and, most of all, a plunge in oil prices. It goes against a trend of cancellations of energy projects worldwide, not least in the high-cost Arctic, where Statoil and others have abandoned exploration plans from Alaska to Greenland.

Castberg, which holds as much as 650 million barrels of oil, was considered a breakthrough venture to unlock oil resources in the Arctic after Norway’s crude production has dropped by half since a 2000 peak. It’s also a welcome boost to the country’s supplier industry that’s being squeezed as spending is due to fall for a third year.

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Geico Rock Awards

Another Geico Rock Award nomination, though, at best, he might get an honorable mention. We've heard this story so many times it has become a joke. Climate Depot is reporting that "warmist" Eric Holthaus says global warming is making this most recent winter storm worse:

Warmist Meteorologist Eric Holthaus: 'In addition to El Niño, human-caused global warming has helped lift current Gulf Stream water temperatures just off the East Coast to record levels.

Sea levels are rising in the Northeast at a faster rate than almost anywhere else on Earth, and climate change is already adding about a foot to each coastal flooding event, as it will with this one.

The extra boost from the warmer water is adding even more energy into this storm system, increasing the availability and transport of moisture toward land and producing more efficient wind gusts to the surface. In short, climate change is making this blizzard worse.'

Technically, this does not qualify for the Geico Rock Award but rules were meant to be bent. Ask Hillary.

Note that he calls it "global warming." I thought we had moved on from "global warming" to "climate change" to "extreme weather." I guess with the record East Coast snowstorm we are back to "global warming." It must be reassuring to the folks living on/in the Maldives, that sea levels are rising in the Northeast at a faster rate than almost anywhere else on Earth. I can't make this stuff up. Geico Rock nominations are tracked here.

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Wasn't Supposed To Happen With All The "Global Warming" Talk

Granted, this is likely to be one of top five blizzards in NYC. [To be declared one of the top five, twenty (20) inches of snow must fall before the blizzard stops.] As I was saying, this is likely to be one of the top five blizzards in NYC, but I think what really has "made this storm bigger" in the minds of folks across the country is that "this was not supposed to happen." With all the talk of global warming and the Kennedys telling us our grandchildren wouldn't see snow, a lot of folks just cannot imagine all this snow. It simply doesn't make sense.

And, of course, coming on the weekend when news is slow anyway, this is perfect for the media.

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Malagueña Salerosa, Kill Bill

Wrecks -- January Something, 2016

The Disclaimer

 
That below the asterisks was the original post. I would ignore it. It is long and probably incorrect; I was just trying to figure out the article. While strolling our youngest granddaughter, I think I have the 30-second soundbite or the "elevator explanation."

Vermont residents who pay high electricity prices for the privilege of solar energy are simply providing a "subsidy" (called a "REC") to the big, bad utility companies in neighboring states like Massachusetts and Connecticut so they can continue burning fossil fuel.

Meanwhile, the Massachusetts / Connecticut utilities are burning very, very inexpensive fossil fuel and charging their customers as if they are paying for expensive solar energy. At least that's how I see it.

I'm probably wrong. 

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The Article

This is one of those intermittent energy articles that is hard to understand. This is how I read it.

If I live in Vermont, my local utility company tells me that to do my part in fighting global warming, I should buy electricity from my local utility because some of its electricity comes from the solar array it built on the edge of town.

So, if I'm a hippie-dipper bicyclist who lives in Vermont, I gladly pay a bit more for electricity, knowing that even though solar is a bit more expensive, it's well worth it: I'm doing my part to fight global warming.

To ensure the electricity you are buying  -- that solar energy -- can compete with electricity provided by coal or natural gas -- the state of Vermont grants the utility a break in taxes they would otherwise pay, let's say, a penny for each kilowatt. So everybody's happy:

• people across the state pay their state income taxes, to include a little bit for the local utility to provide solar energy, to make it competitive it with cheap natural gas or coal
• these grants the state pays to the utility companies are called renewable energy credits
• the utility companies then take those renewable energy credits and sell them to utilities in other states like Massachusetts, Connecticut, California, or Minnesota who have state-mandated intermitttent energy requirements
• let's say they sell them for two pennies for each kilowatt -- they got a tax break of one penny per kilowatt hour and now they sell those credits to a third party for two pennies

From the linked article:

The attorney general’s warning says in part, “If your solar project sells the RECs, do not make any statements or suggestions that consumers are using renewable energy from your project.”

SunCommon’s website has four alternating front pages advertising “solar at no upfront cost,” ‘’Ditch fossil fuels, invest in solar” and saying its “mission is to tear down the barriers to renewable energy.”

In a web-based ad for a community solar project in Bridport, posted in July, there was no mention that RECs would be sold out-of-state.

Since the attorney general’s warning letter last month, SunCommon has added information about RECs to its website, but it’s still on an inside page of the site, near the bottom.

The nation’s largest solar marketer, San Mateo, California-based SolarCity, promises on its website that customers can “power your home with clean energy. ... Move to a cleaner, renewable energy today.” But the contract notes that the green aspects of the power can go elsewhere.

The reason it is complicated is because the snake-oil salesman says that regardless of who pays for what, the utility is doing its part to fight global warming by installing solar panels. The RECs and the money trail are simply business sideshows.

At the end of the day, you are paying a big more for electricity to help neighboring states meet their state-mandated intermittent energy requirements.

It's interesting that the states have told the attorneys general to take action on any false advertising. I assume the natural gas and coal industries are behind this "truth in advertising."

This reminds me of the Enron scam some years ago.

I guess at the end of the day, the utilities are doing their part by providing intermittent energy to fight global warming -- "you" just aren't being told why your participation means nothing.

Iranian Oil Production -- Another Drop In The Bucket? -- Rigzone, January 23, 2016

From Rizone today:

The world is awash in crude and overwhelming dwindling consumer demand. And just this week, the Western world responded by unleashing half a million barrels every day of Iranian oil, threatening to crush dismal commodities prices to stupefying lows.

Or so many theories go.

But the energy sector in 2016 is in a different world than the one that existed in 2012, when those sanctions restricted Iran’s participation in the world market. Despite the vast volumes of hydrocarbons beneath Iran’s salty deserts, its production was weakening. Since that time, capital and technology have abandoned the country.

David Pursell, managing director and head of macro research at Tudor, Pickering Holt and Co. in Houston, said some estimates suggest Iran produced half of its fields years ago.

Resuscitating them would require an influx of expensive technology when cash is in short supply. “If Iran was on a decline before sanctions, and all of a sudden, it’s pulling the fields less hard, but also underinvesting in both capital and technology, we would argue there’s a chance that 500,000 barrels a day might be a stretch,” Pursell told Rigzone. “The market is worried, if not scared, that it could be more than half a million barrels a day.” 

Great article. Some good points. I agree completely. Based on the graphs / statistics presented earlier this week, I just don't see that big an impact in the near term -- except the psychological / emotional effect that the talk about Iranian oil will generate.

I also agree that there is likely to be no rush by oil companies to start pouring money into Iranian oil fields; they might start negotiating contracts for future drilling, but nothing quite so soon.

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Schlumberger

Reuters/Rigzone:

• no "significant" recovery in activity until 2017
• company may have trouble meeting current-quarter estimates by analysts
• will spend $10 billion on share buyback program
• will lay off another 10,000 employees in the fourth quarter
• total job cuts will reach 34,000; 26 percent of its workforce, since November, 2014

That date, November, 2014, is important. I put October, 2014, as the start of the current crude oil "depression."

The CEO said:

Although North American oil companies have scaled back spending, their output remains high as they steer drilling rigs to the most prolific shale spots and frack wells more intensely. Production in North America and outside of OPEC is resilient because oil companies, looking to maximize cash flow, are keeping "taps wide open," Kibsgaard said.

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CBR

ArgusMedia is reporting:

The former US regulatory chief who oversaw the kickoff of new tank car designs and other controversial safety rules said that railed crude movements have entered a permanent decline. Former Pipeline and Hazardous Materials Safety Administration (PHMSA) head Cynthia Quarterman told attendees of the Argus Americas Crude Summit today that safety concerns, coupled with a changed oil market and new infrastructure, promise to move crude back onto more traditional modes like pipelines.

"I would bet my money on crude by rail diminishing back into history over the next five years," Quarterman said.

Quarterman left the agency in October 2014 to take a position as a distinguished fellow at the Atlantic Council think tank. PHMSA released new design and retrofit standards for cars that carry crude and ethanol last May, and the omnibus transportation law passed late last year tweaked some of those regulations.

I don't think that should come as a surprise to anyone, that CBR will "diminish back into history over the next five years." Although I'm not quire sure what "diminish back into history" means -- perhaps "diminish back to more historical numbers."

Whatever.

I think most folks knew that CBR was a temporary thing, like man-camps -- a temporary solution to a temporary problem caused by the boom. It was amazing how fast they could lay track, build tank cars, etc., while waiting for pipeline to be laid. CBR was much like the short-lived Pony Express that served a certain purpose until more efficient means to move mail were found.

Week 3: January 17, 2016 -- January 23, 2016

The big story this week was the announcement that TransCanada and First Nations have come to an agreement on a pipeline from landlocked Canadian natural gas to the Canadian west coast, through the pristine and Native-American owned British Columbia. That's a huge, huge story

In the Bakken, the big story was the data we learned from a CLR Three Forks second bench well. The other big story, of course, was finally learning who bought most of Fidelity. If Kaiser-Francis develops this asset play and doesn't simply "flip" it in pieces, we could see Kaiser-Francis back among the top private crude oil producers in the US. What a huge opportunity.

The other big story had to do with the announcement that MDU/Knife River was awarded its largest contract in history, on the heels of all its success stories in the Bakken, western North Dakota. Good going.

Operations
Majority of Fidelity wells sold to Kaiser-Francis
Number of active rigs ends week at new post-boom low: 47
Thirty-five (35) wells to be sited in one section
Random look at a CLR Three Forks Second Bench short lateral in Alkali Creek
On Monday: nine (9) huge Bakken wells reported; five (5) more DUCs
ND oil production defies calls for a decline -- Rigzone 

Pipelines
TransCanada, First Nations reach agreement on pipeline through British Columbia

Bakken Economy
Record number of births at Williston hospital in 2015 
MDU/Knife River awarded largest contract ever 

Keeping fossil fuels in the ground

US gasoline demand plummeting -- despite lowest prices on record

Bakken 101
Understanding the Bakken: overlapping units

Miscellaneous
Drilling into oldest rock on the planet near Rugby, ND 
First ship to deliver US crude oil overseas under relaxed export rules arrives at destination
Geico Rock Award nominations for 2016 finally posted; nominations accepted through mid-December, 2016