Sunday, January 31, 2016

Someone At The New York Times Must Be Reading This Blog -- January 31, 2016

Just a couple of days ago I asked: with a global glut of oil and gasoline that isn't going to end any time soon, and the price of oil / gasoline at record lows, "tell me again why we're adding ethanol to gasoline? Oh, that's right. The first presidential "primary" is held in Iowa." 

Someone at The New York Times must have been reading the blog, because tonight the newspaper has this story/headline Ethanol Mandate, a Boon to Iowa Alone, Faces Rising Resistance. LOL. What a coincidence!

From the story:
And now a powerful coalition including oil companies, environmentalists, grocery manufacturers, livestock farmers and humanitarian advocates is pushing Congress to weaken or repeal the mandate. As soon as this week, the Senate could vote on a measure to roll back the Renewable Fuel Standard, just days after the Iowa caucuses close and the issue largely goes to rest for another four years.
Even here, as Iowa urbanizes and diversifies, ethanol may be losing its once-powerful hold, some political consultants say. Senator Ted Cruz of Texas, one of the Republican front-runners in Iowa, has called for an end to subsidies for all forms of energy, as well as a five-year phasing out of the renewable fuel mandate that created the ethanol economy here.
That position drew an unusual repudiation from Iowa’s governor, Terry E. Branstad, a Republican who has not endorsed any candidate. “It would be a big mistake for Iowa to support him,” Mr. Branstad told reporters at a forum held by the Iowa Renewable Fuels Association.
At the same forum, the other front-runner, Donald J. Trump, said he was “100 percent” behind the ethanol mandate and would even support increasing it further.
At least now, on this single wedge issue I know who I support. LOL. 

No New Permits Were Issued In North Dakota On The Last Business Day Of January, 2016

No new permits were recorded on the last full business day of January, 2016.

Four (4) Whiting P Earl Rennerfeldt wells were approved for "tight hole" status. The Rennerfeldt wells are in Stockyard Creek, oil field, Williams County, east of Williston.

Whiting canceled three (3) permits, including:
  • one Schilke permit in McKenzie County,
  • two Beaver Creek State permits in Golden Valley County
Twenty (20) permits were renewed, including:
  • EOG, 9: six (6) Sidonia permits in McKenzie County; three (3) Liberty LR permits in Mountrail County
  • QEP, 5, all Tipi V permits in Mountrail County; we talked about the Tipi V wells in Spotted Horn oil field just a couple of days ago; 
  • Sinclair Oil and Gas, 2, both Ersa Federal permits in McKenzie County
  • Whiting, 2, both Charging Eagle permits in Dunn County
  • Emerald Oil, 2, a Harry Dunne permit in Stark County, and a Robert The Bruce permit in McKenzie County (just for the fun of it, readers may want to google "Harry Dunne")
There was one (1) producing well reported as completed:
  • 29795, 1,283, BR, Morgan 24-21TFH, Pershing, in the target 94% of the time; above the drilling target 6% of the time; low background, and minimal flare; API 33-053-06403; FracFocus shows this well fracked 11/9-11/15, but no frack data at the well file report yet; according to FracFocus, 1.728 million gallons of water; back-of-envelope - 14,424,764 pounds of water; water accounted for 90.57% of total fracking fluid; total fracking weight, 15,926,344 lbs; sand was 6.28% of total weight or 1 million lbs; another 3.4% (or about 500,000 lbs) of corundum/mullite was used; if 30 stages, that's only about 50,000 lbs/stage; t1/16; cum 818 bbls in 7 days; the back-of-the envelope calculations are probably close based on data from the sister well (#29797):
  • 29797, 2,084, BR, Morgan 24-21MBH, t12/15 cum -- ; 2.549 million lbs of water; the water represented 83% of the fracking fluid weight; the amount of sand was 11% of the total weight; and corundum/mullite represented 6% of the total fracking fluid weight; according to the sundry form, this sister well was fracked with 4 million lbs of sand, in 35 stages.
Triangle USA temporarily abandoned four wells, two State wells in Williams County and two Larsen wells, also in Williams County. 

The February, 2016, NDIC Hearing Dockets Agenda

Highlights were posted earlier; this is the full summary of the agenda.

For newbies: during the boom, there were usually two to three days of hearing, and the agenda for each day was as many as 20 pages long. The February, 2016, hearings: two days; 7 pages of agenda for each day, and many of them are continued cases. It is very, very quiet with regard to the dockets right now. However, with the transfer of wells among existing and new operators is probably taking a lot of NDIC human resources to complete.

I remain impressed with all parties involved with the oil and gas industry in the great state of North Dakota.

Wednesday, February 24, 2016: seven pages
  • 24822, NDIC, bond consideration prior to transfer of the Wabek Madison unit to a new operator
  • 24823, NDIC, bond consideration prior to transfer of the Plaza Madison unit to a new operator
  • 24824, BR, Fancy Buttes-Bakken, redefine field limits, McKenzie
  • 24825, Whiting, Twin Buttes-Bakken, establish a 2560-acre unit; 1+ wells, Dunn County
  • 24826, Whiting, Twin Buttes-Bakken, to establish a 5120-acre spacing unit, one or more wells; Dunn County 
  • 24827, Whiting, Twin Buttes-Bakken, extend the boundaries, to establish a 1280-acre unit; 1+ wells, Dunn County 
  • 24828, Whiting, Twin Buttes-Bakken, extend the boundaries, establish a 1280-acre unit, 1+ wells, Dunn County
  • 24829, Cornerstone Natural Resources, Customs-Bakken, redefine field limits; Burke County
  • 24830, Cornerstone Natural Resources, Pickett-Bakken, redefine field limits, Burke County
  • 24831, Hess, Cherry Creek-Bakken, proper spacing, redefine field limits, McKenzie County
  • 24832, Hess, Alger-Bakken, waiver for location of a specific well, Mountrail
  • 24833, Hess, Elm Tree-Bakken; establish an overlapping 2560-acre unit, 1 well; authorize 12 wells on a 1280-acre unit; McKenzie 
  • 24834, Hess, Elm Tree-Bakken, establish an overlapping 2560-acre unit; 1 well, McKenzie
  • 24835, MRO, Lost Bridge-Bakken, establish a 2560-acre unit; 1 well, Dunn
  • 24836, MRO, Lost Bridge-Bakken, establish a 3840-acre unit, 1 well, Dunn
  • 24837, MRO, McGregory Buttes-Bakken, 21 wells on a 2560-acre unit, 14/15/22/23-147-94; establish a 2560-acre unit, 15/16/21/22 and a bit more, 1 well; Dunn
  • 24838, NDIC, review the TA status of Petro Harvester #11649, Flaxton Field, Burke County 
  • 24839, Hess, pooling
  • 24840, Hess, pooling,
  • 24841, Hess, pooling,
  • 24842, Hess, pooling,
  • 24843, Hess, pooling
  • 24844, Hess, pooling,
  • 24845, Hess, pooling,
  • 24846, Hess, pooling,
  • 24847, Hess, pooling,
  • 24848, Hess, pooling,
  • 24849, Hess, pooling,
  • 24850, Hess, pooling,
  • 24851, Hess, pooling,
  • 24852, Hess, pooling,
  • 24853, Hess, commingling,
  • 24854, Hess, commingling,
  • 24855, Hess, commingling,
  • 24856, MRO, Reunion Bay-Bakken, 9 wells on a 1280-acre unit; McKenzie, Mountrail counties
  • 24857, MRO, Lost Bridge-Bakken, 18 wells on a 2560-acre unit, 1/12/13/24-148-96; Dunn County 
  • 24858, QEP, poolng,
  • 24859, QEP, pooling, 
  • 24860, QEP, pooling, 
  • 24861, Petro-Hunt, pooilng
  • 24862, Gadeco, LLC, Epping-Bakken, 12 wells on an existing 1280-acre unit, 25/36-155-99; Williams County
Thursday, February 25, 2016: seven pages
  • 24863, Hunt, Zahl-Bakken, proper spacing, Williams
  • 24864, Triangle, Rawson-Bakken waiver for a specific well, McKenzie
  • 24865, CLR, Elm Tree-Bakken, i) establish an overlapping 3840-acre unit, 4/5/8/9/16/17-153-94; 2 wells; ii) establish two overlapping 5120-acre units, 3/4/9/10/15/16/21/22-153-94, 3 wells; and, iii) establish an overlapping 5120-acre unit, 13/14/23/24/25/26/35/36-153-94, 4 wells; McKenzie, Mountrail 
  • 24866, CLR, Elm Tree-Bakken, field rules putting wells closer to spacing unit lines, McKenzie
  • 24867, CLR, Alkali Creek-Bakken, establish an overlapping 2560-acre unit; 1 well, Mountrail, McKenzie 
  • 24868, NDIC, Leaf Mountain-Bakken, specific well spacing, Burke County
  • 24869, Denbury Onshore, Eland-Lodgepole, waiver for specific well, Stark County
  • 24870, NDIC, Flatland Management, treating plant, McKenzie
  • 24871, NDIC, IHD Liquids Management, treating plant, McKenzie
  • 24872, NDIC, ICAN Technology, treating plant, McKenzie
  • 24873, Sinclair Oil & Gas, pooling,
  • 24874, Sinclair Oil & Gas, pooling, 
  • 24875, Newfield, pooling,
  • 24876, CLR, pooling,
  • 24877, CLR, pooling,
  • 24878, CLR, pooling,
  • 24879, CLR, pooling,
  • 24880, CLR, pooling,
  • 24881, CLR, Elm Tree-Bakken, 22 wells on an existing overlapping 2560-acre unit, 14/23/26/35-153-94, McKenzie
  • 24882, XTO, commingling,
  • 24883, XTO, commingling,
  • 24884, XTO, commingling,
  • 24885, XTO, commingling,
  • 24886, XTO, commingling,
  • 24887, XTO, commingling,
  • 24888, XTO, commingling,
  • 24889, Secure Energy Services, SWD well, McKenzie
  • 24890, Bosque Disposal Systems, SWD, McKenzie

Halcon, CLR Will Each Report A Nice Bakken Well Monday -- January 31, 2016

Reporting tomorrow:
  • Cardinal Health, $1.26 forecast; beats forecast at $1.30; revenue up 23%
  • Tesoro, $2.08 forecast after market close, from 4Q14 (one year ago): TSO ($0.31):  $1.13 per share. Earnings, adjusted to account for discontinued operations and non-recurring costs, came to $1.46 per share; increased its quarterly dividend by 40% to 42.5 cents a share.

Wells coming off confidential list over the weekend, Monday:

Monday, February 1, 2016
  • 29534, SI/NC, Hess, EN-Sorenson b-155-94-3526H-3, Alkali Creek, no production data,
Sunday, January 31, 2016
  • 29453, 219, Triangle USA, Little Muddy 10TFH, Williston, t8/15; cum 22K 11/15;
Saturday, January 30, 2016
  • 28297, 2,073, HRC, Fort Berthold 152-94-19D-18-11H, Four Bears, t8/15; cum 85K 12/15; only 2 days in 12/15;
  • 29670, 1,195, CLR, Thronson Federal 7-21H, Alkali Creek, t8/15; cum 82K 12/15;
  • 31206, SI/NC, EOG, Van Hook 46-3625H, Parshall, no production data,
  • 31309, SI/NC, EOG, Wayzetta 98-3019H, Parshall, no production data,
  • 31401, 1,848, BR, CCU Golden Creek 34-23 TFH, Corral Creek, t12/15; cum 5K 12/15; only 1 day in 12/15; only 14 days in 11/15;

 31401, see below, BR, CCU Golden Creek 34-23 TFH,  Corral Creek:

DateOil RunsMCF Sold

29670, see above, CLR, Thronson Federal 7-21H, Alkali Creek:

DateOil RunsMCF Sold

 28297, see above, HRC, Fort Berthold 152-94-19D-18-11H, Four Bears:

DateOil RunsMCF Sold

29453, see above, Triangle USA, Little Muddy 10TFH, Williston:

DateOil RunsMCF Sold

Enjoying her new shoes and enjoying 70-degree weather in north Texas.

For Those Trying To Better Understand The Bakken, An Interesting "New" Site - January 31, 2016 -- Saudi US Imports; Venezuela -- Tick, Tick, Tick; Saudi Learns To Spell Austerity; Oil-Rich Nigeria Borrowing Billions; A Free-For-All In The Mideast


February 2, 2016: Saudi Aramco confirmed it is looking at an IPO, selling off part of its company. Bloomberg has the story

Later, 6:49 p.m. Central Time: the "global wrap" at the bottom of this page reports on several countries who are facing existential crises. This is what the tea leaves are telling me: 
The American, Russian, Chinese, North Korean, German, and French arms industries are going to do very, very well supplying guns and ammunition to all the combatants: Syria, Iran, Iraq, Saudi Arabia, Yemen, just to name a few.
It's a free-for-all in the Mideast.
The one country that might do the best: Iran.
They've been to hell and back; and now that sanctions have been lifted, their morale is rising, and their bank accounts building.
It's a free-for-all in the Mideast, a good ol' traditional "capture the flag." ISIS, of course, will do well in a free-for-all.
Wildcards: Turkey, Egypt, Palestine, Kurdistan, Lebanon, Afghanistan.

Original Post
A reader sent me this link. This may be one of the best graphic-analytic sites I have seen on the Bakken. A huge "thank you" to the reader who sent me this.

If you do only one thing today with regard to the Bakken, visit this site: visualizing US shale oil production.

This site will be linked on my "Data Links" page.

Global Wrap
Saudi Arabia

I'm going off the net for several hours but I will be back but before I leave, Saudi import data as well as selected import data.

I believe the previous update was this post, back on January 8, 2016.

The actual spreadsheet since 2000:

Now look at that graphic/spreadsheet in light of the Argus article just sent to me by a reader:
US crudes in domestic refineries are losing out to heavier feedstocks and imports, independent refiner Valero said today, but they should regain competitiveness later this year.
Valero cut its throughputs of continental US crudes by 400,000 b/d from the previous quarter as it increased runs of medium sour crudes and light, sweet imports. Valero averaged 1.2mn b/d in light, sweet throughputs in the fourth quarter. The heavy crude diet remained the same.
Light Louisiana Sweet, a key domestic sweet crude marker for the US Gulf coast, traded at a premium to import benchmark Brent and encouraged imports of foreign crudes during the quarter.
Rising US inventories indicated that LLS was overpriced and would come down to compete with the waterborne imports.
The movement welcomes light, sweet crude imports to a region that had almost completely shut them out just a year ago. The US Gulf coast imported 1.3mn b/d of light, sweet crude in January 2007, before the boom in onshore domestic crude production. Imports of crude higher than 30°API averaged just 47,484 b/d last year and 3,677 b/d the year before, according to the Energy Information Administration. Import data for 2016 is not yet available.
Shifting away from light crude will not curb the refiner's production of gasoline or change the conditions that helped create a glut of naphtha.West African sweet barrel yields are similar to US Eagle Ford and Bakken crude, while highly complex refining units wring comparable volumes of gasoline out of medium sour barrels, the company said.
Shift could create export opportunity.
Valero's US Gulf coast dock capacity, developed with the rise of Eagle Ford production, could also see export business. The facilities were used to send up to 90,000 b/d of the south Texas crude to its 265,000 b/d St Romuald refinery in Quebec. But North Atlantic imports are once again economic at the facility, along with new deliveries of Bakken that began in December off of Enbridge's Line 9.
Global Wrap 
Venezuela: On Brink of Economic Collapse

Update, February 3, 2016: in the Financial Times (archived) -- it may be too late --

As markets brace themselves for the negative effects of the decline in oil prices, Venezuela will probably be the first big domino to fall.
Domestically, the most likely scenario is an imminent economic collapse and a humanitarian crisis. Internationally, it will imply the largest and messiest emerging market sovereign default since the Argentine crisis of 2001. The situation is made worse by the inability of the political system, at present, to address the situation.
Why Venezuela? First, because while most other oil exporters used the boom to put some money aside, former president Hugo Chávez, who died in 2013, used it to quadruple the foreign debt. This allowed him to spend as if the average price of a barrel of oil was $197 in 2012, when in fact it was only $111. He also used it to maim the private sector through nationalisations and import controls. With the end of the boom, the country was put in a hopeless situation.
Jeff Bezos is reporting:
The only question now is whether Venezuela's government or economy will completely collapse first.
The key word there is "completely." Both are well into their death throes. Indeed, Venezuela's ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it's hard to see that getting any better for them any time soon — or ever. Incumbents, after all, don't tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent.
It's no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

That's not an easy thing to do when you have the largest oil reserves in the world, but Venezuela has managed it. How? Well, a combination of bad luck and worse policies. The first step was when Hugo Chávez's socialist government started spending more money on the poor, with everything from two-cent gasoline to free housing.
Now, there's nothing wrong with that — in fact, it's a good idea in general — but only as long as you actually, well, have the money to spend.
And by 2005 or so, Venezuela didn't. Why not? The answer is that Chávez turned the state-owned oil company from being professionally run to being barely run. People who knew what they were doing were replaced with people who were loyal to the regime, and profits came out but new investment didn't go in. That last part was particularly bad, because Venezuela's extra-heavy crude needs to be blended or refined — neither of which is cheap — before it can be sold.
So Venezuela just hasn't been able to churn out as much oil as it used to without upgraded or even maintained infrastructure. Specifically, oil production fell 25 percent between 1999 and 2013.
Note: Venezuela's production fell 25% well before the "Saudi Surge/Slump." Well before the price of oil plummeted (October, 2014), Venezuela's production collapsed (between 1999 and 2013).

Global Wrap
Saudi Austerity

The [London] Telegraph is reporting that the Saudis are being told to "embrace austerity" as debt defaults loom. The Kingdom faces a future of higher taxes and low fuel subsidies amid fears the world's weakest oil producers will soon begin to buckle.
The Saudis have been burning through their reserves at a record pace to protect the riyal's fixed value against a soaring dollar, and should continue to preserve the peg at all costs, said the IMF.
Mr Ahmed said it was "neither necessary nor appropriate" for Riyadh to move to a floating exchange rate, forcing it to undertake record levels of expenditure cuts instead.
"The currency peg has served Saudi Arabia well. It's appropriate for the structure of the economy".
His comments echo concern that any moves to jettison a stable currency, or embark on massive fiscal austerity, could erode the social fabric of the Gulf oil producing nations five years on from the Arab Spring.
Saudi Arabia is set to slash subsidies on water and electricity, and must begin to overhaul its generous fuel subsidies for its 30 million people, recommended the Fund.
"Energy price reform is key. It has been part of the social contract but that will now need to change".
IMF calculations suggests Saudi Arabia could be running a deficit of around $140bn , far above the government's own estimates of around $98bn, or 15 percent of GDP.
Global Wrap

The New York Times is reporting Iraq now faces calamity from dropping oil prices after being batted by war:
Iraqis seeking to withdraw money from banks are told there is not enough cash. Hospitals in Baghdad are falling back to the deprivation of the 1990s sanctions era, resterilizing, over and over, needles and other medical products meant for one-time use.
In the autonomous Kurdish region in the north, the economic crisis is even worse: government workers — and the pesh merga fighters who are battling the Islamic State — have not been paid in months. Already, there have been strikes and protests that have turned violent.
These scenes present a portrait of a country in the midst of an expensive war against the Islamic State that is now facing economic calamity brought on by the collapse in the price of oil, which accounts for more than 90 percent of the Iraqi government’s revenue.
Analysts and officials, though, say much tougher economic times are ahead, even as they insist the war will be largely unaffected because of help from foreign powers determined to defeat the Islamic State.
The United States, for instance, recently extended new loans to Iraq to buy weapons, and other countries are stepping up with donations of arms and ammunition.

Global Wrap
Egypt: No Dollars

Egypt suffering from shortage of dollars. No tourists. Ability to import essential goods from drugs to wheat is threatened. Looking for aid from Saudi Arabia. Don't hold your breath. WSJ reports:
The government also is canvassing Gulf neighbors such as Saudi Arabia for more aid and investment, though plummeting oil prices may curb their capacity to help. Since October, Egypt’s new central-bank governor, Tarek Amer, has relaxed some restrictions on Egyptian banks dealing with dollars to free up more foreign exchange.
As Egypt struggles to cope with the dollar shortage and keep its economy ticking, analysts warn the country risks having to devalue its currency to boost itscompetitiveness and bring foreign investors back.
Global Wrap
Nigeria: Borrowing

According to Bloomberg, Nigeria is in talks to borrow $3.5 billion as oil saps budget.
Nigeria’s government is in talks for concessionary loans worth $3.5 billion from the World Bank and African Development Bank to help finance a planned record budget this year.

Lawmakers in Nigeria’s parliament will begin deliberations this week on the record $30.7 billion 2016 spending plan.

Africa’s top oil producer wants to spend its way out of slowing economic growth. To plug a record budget gap of $15 billion authorities will borrow about $5 billion in external debt from multilateral agencies and the Eurobond market.

Global Wrap
Pemex: Even Shakier Footing
From Platts:
Unfortunately, the deep dive in the price of oil has put Pemex on an even shakier footing, with the company now losing money on crude production, its core business, for the first time since it emerged as a major producer in the late 1970s.
For years, the profitable upstream division of Pemex shouldered the losses of petrochemicals, refining and other businesses. No longer.
“To my surprise, during the first three quarters of 2015, the upstream division was making a loss, just like the others,” Carranza said.

Including all its divisions, Pemex had net losses of almost $10 billion in the first three quarters of last year.
But turning around a state-run enterprise with 77 years of inertia behind it, can’t happen overnight and while steps are slowly being taken to turn things around, more pain is likely.
The first barrels of oil from private-sector newcomers following Round One of the reform effort are not expected until at least 2018. This makes arresting steadily falling crude production difficult as low oil prices have deprived Pemex of investment capital of its own.
Mexico’s crude oil production fell to 2.275 million b/d in December, down nearly 12% from 2010, according to Pemex data.
Since Pemex favored the crude production side of its business over others, the downstream refining business is in sore need of repair. This is one reason the company’s refined product output has decreased over the years.
This is now changing with the Los Ramones pipeline that will allow Mexico to import natural gas from US shale plays. Not only will the pipeline bring gas to a Mexican market hungry for it, but now the US price will have an element of the Mexican market.
Much, much more at the linked story.

Petrobras Slashes Oil Reserves To Lowest Level In 14 Years -- Reuters -- January 13, 2016

Note: in a long note like this there will be typographical and factual errors. It has not been triple-checked. Facts and opinions of the writer are commingled. There may be some unintentional flaring. This is not an investment site. Do not make any investment, financial, or travel decisions based on what you read here or think you may have read here. If this is important to you, go to the source. By the asterisks at the bottom of the article, it appears the article is still in progress. The writer is a huge fan of the oil industry. And a huge fan of Ayn Rand as was Alan Greenspan. 

From Reuters/Rigzone: Petrobras Slashes Oil Reserves to Lowest Level in 14 Years.

Lowest level since 2001. 

This is one of the nice things for me about the blog. I started the blog in 2007 simply to learn about the Bakken. I discuss that at length at the "Welcome" post.

One of the things that always confused me was the issue of "oil reserves." For example, when I started the blog, I would not have understood how Brazil's oil reserves could be "slashed to the lowest level in 14 years" overnight by some bureaucrats sitting in high-rise cubicles. Now I understand.

The reserves are based on what is likely to be produced over the next five years based on current technology (with some slack for innovation) and what the market will need (often expressed in the likely price of oil over the next five years) in addition to other factors, like financial capability. So, "oil reserves" does not equal "original oil in place" (OOIP).

If nothing else, that one "a-ha" has made the blog worthwhile, at least for me.

Back to the Petrobras story linked above, an incredibly interesting article. Here are the data points in easy-to-read bullet format:
  • Petrobras slashed it oil and natural gas reserves by 20%
  • current reserve estimates: 10.52 billion boe; their lowest since 2001
  • reserve estimates one year earlier: 13.13 billion boe
  • the reasons: 
    • plunge in energy prices
    • a heavy debt load
    • high costs
    • corruption scandal
  • bigger-than-expected cut surprised the market 
  • reserves are a key factor in determining a company's ability to borrow and provide a return on investment
  • one analyst: "it's a classic case of mismanagement and government interference (I will get back to this later when I discuss the Bakken)
  • in the last decade, Petrobras spent $350 billion to find some of the world's largest-ever offshore discoveries but the company now has less commercially viable oil and gas than it did 14 years ago
  • 2010: CEO forcast 30 billion reserves by now (2016)
  • 2016: 10 billion boe
And then this:
  • a rebound, though, could be limited. Even if oil doubles to about $70 a barrel much of what Petrobras owns may still be uneconomic.
Definition of the Bakken

When I talk about the Bakken, I am generally talking about the "geographical Bakken" in western North Dakota, and to some extent eastern Montana. I don't talk much about the "geographical Bakken" in Canada.

But in addition to the "geographic Bakken" I often talk about the Bakken in two different aspects.

I talk about the Bakken as a revolution in the oil and gas industry across the US, not just the "geographical" Bakken. The "revolutionary Bakken" includes the Permian, the Eagle Ford, the Niobrara, and a dozen other tight oil plays in the US.

The third Bakken is the "experimental Bakken" in which this has been one of the biggest success stories in the US oil and gas industry as an experiment. I limit the "experimental Bakken" pretty much to North Dakota (for reasons that will be evident a bit later) but the "experimental Bakken applies across other places in the US as well. The experiment that simply amazes me is the coordination and cooperation in an Ayn-Rand-free-market-capitalism framework among the oil and gas industry (drillers and infrastructure), the state agencies, and the surface and mineral owners. North Dakota was fortunate that a major portion of its oil wealth was outside federal jurisdiction, making it easier for the state to control its own destiny. The federal government, in the big scheme of things with regard to the Bakken, had one decision to make and I think it took eight years for the federal government to make a decision on a single pipeline. Had the North Dakota state government worked at that glacial speed, the Bakken would not have happened. And instead of $30 oil, we might be talking about $150 oil -- which we were some years ago.

From my armchair, I think the state, the NDIC, the oil industry, the surface owners, local county and state jurisdictions, private citizens did incredibly well to manage this boom. I've talked about this before and could go on forever, but I will stop here.

I was reminded of this by the Petrobras story linked above. Look at the bullets up above again.

Specifically, look at bullet #4, the reasons for the Petrobras problem which include "corruption scandal." With the amount of money pouring into North Dakota since 2007 and politicians' involvement there was always a risk of corruption, broadly defined. If one wants to see how a state governor can cause considerable damage through corruption this article in The American Spectator will be quite enlightening. Far-fetched? Okay, re-read the history of the "Teapot Dome Scandal" which involved the federal government. (By the way, the "teapot dome scandals of the past have simply moved to something new and different: the laundering of federal tax dollars through wind/solar scams back to a certain national political party, but I digress.)

Specifically, look at bullet #7: it's a classic case of mismanagement and government interference. I can come up with a dozen great decisions that the NDIC made since 2007 that probably did more for the success of the Bakken (geographic, revolutionary, and experimental Bakkens) than anything the operators did. And that's saying a lot. But mismanagement and government interference could have resulted in a very different outcome in te Bakken.

When the Bakken boom was just starting, there was a very, very active Google discussion group on the Bakken in which members Monday-morning quarterbacked the NDIC. I remember the complaints and concerns. At the time I pointed out the pettiness of these complaints and concerns. I am unable to recall or provide one example of a legitimate concern brought up by those ankle-biters biting the ankles of the commissioners. That tells me, in retrospect, how well the NDIC has done balancing the demands and concerns of the industry, the state, and private individuals with interests as far ranging as mineral rights, surface rights, real estate, farming, dust, traffic congestion, highway construction, highway maintenance, schools, strip clubs, and Wal-Mart.

It's very possibly and quite likely there will be much more "blood on the scoria roads and pads in the Bakken" before this is all over. But the OOIP in the Bakken (the revolutionary Bakken) is not going anywhere, except to the surface, eventually.

Costs to life oil in the Bakken will continue to fall. When I read that last bullet regarding Petrobras .. wow, that was an eye-opener: Even if oil doubles to about $70 a barrel much of what Petrobras owns may still be uneconomic.

I doubt deep-sea drilling any easier or less expensive than the freezing, turbulent north Atlantic. If $70 oil is not economic for Petrobras in the warmer, calmer oceans off Brazil, it's hard to see how its economic for some operators in the northern seas. 

Oh, by the way, Petrobras has one more problem that was not mentioned in the article, but one that I mentioned years ago when I first saw huge troubles for Petrobras. The biggest problem Petrobras may have has to do with the pristine beaches: the government will take no chances with an oil spill that could affect its tourism industry.

Don't be surprised if in the next iteration, those bureaucrats in those high-rise cubicles but Petrobras' reserves by another 20%. The 2016 Summer Olympics in Brazil is just a few months away.

A Note to the Granddaughters

When we first moved to the DFW area (Dallas-Ft Worth, just west, maybe just ever-so-slightly-north) of the airport, I gave myself a challenge: to see something or do something new every day. I haven't been fully successful, but considering some days I do multiple new things or see multiple new things, it may average out a lot better than I first supposed.

This past week I struck a mother lode of reading material that will keep me busy for weeks. It started with our visit to the Dallas Museum of Art. We delayed going to the DMA for a number of reasons, most of which centered around traffic congestion, potholes on I-35W, and lack of parking. Last week after reading about the refugees streaming into Germany, I figured I could manage a drive into Dallas.

Wow, what an incredible surprise. This is a gem of which few people are aware, even those who have contributed to the DMA or who visit it regularly. I can say that with some sense of sureness because of the comments made in a small monograph published by the museum just this past year, c. 2015: From Chanel to Reves: La Pausa and its Collections at the Dallas Museum of Art. Near the beginning of the monograph:
Thus, by an extraordinary coincidence, only recently discovered and publicized, the Dallas Museum of Art became the major repository of objects that had once belonged to "Coco" Chanel.
To understand the "importance" of this one needs to read the national bestseller, Mademoiselle: Coco Chanel and the Pulse of History, by Rhonda K. Garelick, c. 2014.

For Military -- Active and Retired

A non-discounted "regular" ticket price for a three-day hopper ticket for Disneyland, Anaheim, California, costs $275, or roughly $100/day. (A hopper ticket allows one to hop from the "original" Disneyland theme park to the adjacent Disney theme park, California Adventure.

I was blown away by the deals offered military active and retired: $143 for the same ticket.

I had forgotten all about that discount. We used it back in 2010 or thereabouts -- it really was (and is) an incredible deal. It was introduced by Disney back in 2009 and has been renewed yearly since then. 

Speaking of Great Deals

Look for the $49.99 Omaha Steak deal in this week's Parade Magazine that comes with many Sunday newspapers.

The $49.99 deal (with an additional $15 - $20 shipping charge) is a great introductory offer and has been offered weekly for quite some time now. I don't think you can find it on the Omaha Steak website but you can order it through the site, if you have the product code: 46191WNS. This particular offer (but there will always be more) expires April 30, 2016, so if you expect a refund from the IRS, you now have at least one idea how to spend it. The other idea, much more likely to occur, is to simply give the refund to your spouse.