Off The Net For Awhile -- February 13, 2016

Anything posted in last several days subject to more typographical and factual errors than usual. Posted quickly. Will correct errors when I find them later next week.

Catching Up From Friday; RBN Energy Updates Canadian Crude Challenges -- February 13, 2016

No new permits announced Friday.

Whiting renewed one permit, a Kaldahl permit in Williams County.

EOG canceled four permits, these were four Wayzetta permits in Mountrail County, section 25-153-90.

Seven (7) producing wells completed:

• 26774, 419, Zavanna, Double Down 24-13 4TFH, East Fork, t1/16; cum --
• 28894, 623, Zavanna, Blackjack 24-13 3H, East Fork, t1/16; cum --
• 29384, 1,931, MRO, Ulmer 24-21H, Bailey, t1/16; cum --
• 29765, 648, Hess, EN-L Cvancara-155-93-2627H-7, Robinson Lake, t1/16; cum --
• 29537, 681, Hess, EN-Sorenson B-155-94-3526H-6, Alkali Creek, t1/16; cum --
• 29766, 729, Hess, EN-L Cvancara-155-93-2627H-8, Robinson Lake, t1/16; cum --
• 30884, 1,097, XTO, Sorenson 31X-28G, Siverston, t12/15; cum 2K over four days;

Active rigs:

	2/13/2016	02/13/2015	02/13/2014	02/13/2013	02/13/2012
Active Rigs	41	137	188	183	205

RBN Energy: Higher Costs and Lower Prices Beat Down Canadian Crude Producers.

If you think that yesterday’s 13 year-low CME/NYMEX crude settlement price ($26.21/Bbl – February 11, 2016) is bad news for struggling U.S. producers then try putting yourself in Canadian producer’s shoes! The headwinds facing Western Canada’s heavy oil sands these days would try the patience of a saint. Prices for benchmark Western Canadian Select (WCS) blend in Alberta traded as low as $12.50/Bbl in January 2016 – clawing back to $14.06/Bbl on February 10, 2016. But by the time gathering, transport and diluent purchase costs are subtracted, the netback (market price less transport cost) at the lease is negative for many producers – especially when shipping by rail.  To be clear, that’s below zero at the wellhead!  Yet there are few signs that production is falling off – at least in the short term. Today we lament the ongoing plight of Canadian producers.

The last time we looked at the fortunes of Canadian crude producers was back in July 2015. Most production from our northern neighbors comes not from shale but from heavy oil sands in Western Canada – where output has been increasing steadily for decades. The heavy bitumen produced in this region is extracted using various technologies with some mined at the surface (mostly upgraded in the region to produce light synthetic crudes) and most of the rest extracted underground or in-situ using steam assisted gravity drainage (SAGD). Much of the recent expansion has involved SAGD – that requires high upfront expenditure in plants that produce steam used to heat and extract bitumen underground. These plants produce crude for decades once they are up and running. The bitumen produced is very heavy, which means high viscosity.

Consequently, it only flows when heated mixed with another hydrocarbon that reduces the viscosity. Practically speaking this means that it must be mixed with a lighter diluent hydrocarbon such as condensate or natural gasoline to make blended crudes - known as dilbit - in order to flow to downstream markets in pipelines.

Later in the article, and as you read this paragraph, note that Iowa is likely to block the proposed Bakken crude oil pipeline. 

"Nebraska Lite" -- February 13, 2016

On January 30, 2016, I wrote:

The Dickinson Press is reporting:

Phillips 66 may consider increasing its 25 percent stake in Energy Transfer Partners' pipeline project to move North Dakota Bakken oil to Illinois and Texas, but likes its current commitment as is, President Tim Taylor told analysts on Friday.

This was my last entry regarding this pipeline:

January 20, 2016: North Dakota approves Dakota Access Pipeline; only Iowa is yet to approve; company expects Iowa to approve "next month." I'll believe it when I see it.

This week from The Des Moines Register:

The Iowa Utilities Board concluded its fourth day of deliberations Thursday without reaching a decision on a request for a state permit to construct the Bakken pipeline, which would transport North Dakota crude oil through 18 Iowa counties en route to an Illinois distribution hub.

Chairwoman Geri Huser said deliberations will resume Feb. 19, and the board has reserved March 9 and March 10 for additional meetings if necessary.

The three-member state panel appeared to struggle at times this week as it weighed evidence in what a board lawyer described as a first-time regulatory case.

One can see the writing on the wall: "Nebraska Lite." Each day deliberations are delayed, it provides additional time for opposition to mount its forces. It really won't matter if the IUB grants the request. That decision will end up in court. 

The good news: the pipeline is not needed. Plenty of existing pipeline and plenty of rail. And if push comes to shove, simply truck/CBR the oil across the state of Iowa. I'm sure it wouldn't cost that much to put in a pipeline-to-CBR-transloading terminal near Sioux Falls, SD.

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ObamaCare Again Not Mentioned

CNN Money reports:

Workers at the Carrier manufacturing plant in Indianapolis were caught on video booing and jeering after being told that the plant would be relocated to Monterrey, Mexico. A YouTube video showed Chris Nelson, the company's president, delivering the news on Wednesday. The plant employs roughly 1,400 people.

At least ObamaCare helps people forget about NAFTA. This is the first year (2016) that the entirety of ObamaCare is finally in play; all delays, deferrals, waivers (with some exceptions, I suppose) have come to an end. Unfortunately even if Congress were to "end" ObamaCare (and it won'), the country will never get these jobs back that have gone south of the border.