Added late: Saudi's 80-year-old oil minister "forever" has taken "early retirement to spend more time with his family." Former Minister of Health will take over as Minister of Oil. Al-Naimi will forever be remembered as the "father of the trillion-dollar mistake."
Operations
Lynn Helms hints that the Red Queen has arrived
CLR with new presentation; company projects almost 200 DUCs by end of year
Statoil with another huge Skarston well
May 1, 2016: 9 of 9 new wells go to DUC status
Whiting talks $50 oil
Refinery Operations
MDU hints that the white elephant will be on the auction block in the not-too-distant future
Bakken Economy
New bank breaks ground in Watford City
Bakken's first LGBT bar to open in Williston
Optimism still exists in Williston
Bakken_101
Tyler formation oil would likely be categorized as "light" oil
Miscellaneous
Donald Trump to speak at Bismarck, ND, oil and gas conference
Halliburton/BHI merger keystoned
Friday, May 6, 2016
May 6, 2016 -- One New Permit
Active rigs:
One (1) permit --
For newbies, I track Bakken operators here (a tab at the top of each page of the blog). The Peregrine permit:
| 5/6/2016 | 05/06/2015 | 05/06/2014 | 05/06/2013 | 05/06/2012 | |
|---|---|---|---|---|---|
| Active Rigs | 27 | 85 | 186 | 190 | 210 |
One (1) permit --
- Operator: Peregrine Petroleum Partners, LTD
- Field: Hay Draw (McKenzie)
- Comments:
For newbies, I track Bakken operators here (a tab at the top of each page of the blog). The Peregrine permit:
- 32701, loc, Burlington Fee 9-16-1H, NWNW 9-146-102. There is one other well in this section, #13070, a horizontal that was drilled in 1991 (Bakken, IP 130; and then re-entered, new horizontal drilled in 2005; similar outcome; total cumulative since 1991: 143K 3/16 producing maybe 200 bbls/month but has been off-line much of the past year.
- Hay Draw is a small non-descript oil field in southwestern McKenzie County with almost no activity except for a cluster of vertical non-Bakken wells drilled decades ago; varying success.
The Jobs Report Today Was Much Worse Than Expected -- Reading The Tea Leaves -- May 6, 2016; Off The Net For Awhile
Updates
May 7, 2016: I hate to pile on, but the news keeps getting worse. Actually the news is the same -- an incredibly awful jobs report -- but analysts and journalists keep writing about it, suggesting this story may have legs. So far, none of the stories talk about any possible linkage between hiring and ObamaCare in which it now appears premiums will rise significantly. The most recent story is from The Wall Street Journal, the day after: soft jobs market clouds outlook.
Original Post
Generally when the weekly or monthly jobs report comes out, there is some initial reaction on early morning business shows but by 10:00 a.m. the news is generally over with regard to jobs.
However, now we have a headline story from Goldman Sachs saying they are "re-thinking the Fed" based on the jobs report today.
April was less than stellar for the US labor market.
Companies added just 160,000 nonfarm payrolls during the month, which was less than the 200,000 consensus estimate. Meanwhile, the unemployment rate was unchanged at 5.0%.
The economists at Goldman Sachs were particularly disappointed by the report.
The team, led by David Mericle, had forecast 240,000 new jobs, which they expected to support their call that the Federal Reserve would raise interest rates during their next Federal Open Market Committee (FOMC) meeting in June.When there are follow-up stories to the jobs report coming later in the day and especially when they are stories like this, it speaks volumes.
Think about that: GS forecast 240,000 new jobs, well above the magic number of 200,000 which is needed to avoid talk of "economic stagnation."
A report of 220,000 would have been great (in retrospect), but it would have still fallen short of GS forecasts. In fact, looking back (two hours ago) GS might have been happy with any number above 200,00 -- even 202,000.
But 190,000. Nope. 180,000. Nope. 175,000. Nope.
160,000.
Something tells me "everyone" is re-checking the numbers and I wouldn't be a bit surprised to see some extraordinary reporting to yet come out to "explain" all this.
Short-term winner, politically: Trump.
Short-term losers, politically: incumbents; establishment candidates.
This Was The Very Reason We Needed The Keystone -- May 6, 2016; Qatar Taps International Bond Market; Will Run A $13 Billion Budget Deficit This Year
Updates
May 6, 2016: a reader asked whether oil from the Tyler formation in North Dakota would be classified as "heavy" or "light." This is the best I could do. Bottom line: it appears that oil from the Tyler formation is probably about the same as oil from the Bakken formation.
1. At this post, at the bottom of the post, definition of "light" and "heavy" oil (can vary from country to country): http://themilliondollarway.blogspot.com/2016/01/look-west-january-2-2015.html.
2. At this post, a cut and paste from an earlier MRO link: http://themilliondollarway.blogspot.com/2010/10/tyler-formation-anotther-north-dakota.html.
September 26, 2013: MRO has rig-on-site targeting the Tyler; far southwest corner of the state. Marathon Oil provides some of this information which came from a reader, unidentified source.
3. An example from a Tyler well drilled back in 1958: http://archives.datapages.com/data/ndgs/data/006/011/011.html.
- 1280-acre spacing in Slope County
- lateral lengths of 4,500 feet to 10,000 feet; vertical depth of about 7,500 feet
- EURs: 380,000
- 36°API, similar to sweet Bakken crude, which ranges between 36-44°API
- USGS Tyler conventional estimates: 15 million bbls
- USGS has not provided estimate of unconventional Tyler potential
Note: some links take you to very old links on the blog. My site was "hacked" years ago and I had to change URLs. No posts were lost but some "milliondollarway" links may be broken. To get to a broken "milliondollarway" post, type in "themilliondollarway." I simply added "the" to the URL. If that doesnt' make sense or you run into problems, let me know.
On another note: many non-milliondollarway links are broken. Other sites may remove older posts; some sites have disappeared over time.
Original Post
In 2015, more than 70% of the crude oil produced in the Lower 48 states was light oil with an API gravity above 35 degrees.
At the same time, 90% of imported crude oil was heavier, with a gravity below 35 degrees API. To accommodate increasing U.S. production of light crude oil, refineries have adjusted their imports by reducing imports of light crudes.
The differences between domestic production and imports in this key oil characteristic could bring changes to petroleum refinery operations in the United States. --- EIAThat was the whole purpose of the Keystone XL. To bring heavy oil in from Canada. The oil and gas industry has this figured out years ago, optimizing their refineries for heavy oil from Canada, never expecting an administration to kill a simple pipeline.
It will take decades to undo what Obama did.
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Cash-Flow Neutrality At $35
Reuters/Rigzone is reporting:
Apache Corp's cost savings in the first three months of 2016 exceeded its own expectations and are likely to continue even if oilfield services costs rise.
The cost cuts mean the company could achieve its goal of cash flow neutrality for 2016 with oil prices at $35 per barrel and natural gas prices at $2.35 per million British thermal unit.Saudi needs $60. Just saying. And Qatar? See next story.
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Qatar: Taps Bond Markets; Will Run A $13 Billion Budget Deficit This Year
Investopedia is reporting:
Qatar became the latest Gulf Cooperation Council country intending to tap international bond markets with a planned $5 billion bond. If it is launched, it will be the first bond from the country since 2011.
With the drop in oil prices, countries across the region are turning to the debt markets.
Qatar will run a $13 billion budget deficit in 2016.
Last week, Abu Dhabi raised $5 billion from its first bond sale since 2009.
Qatar has already borrowed $5.5 billion through a bank loan concluded in January 2016. Proceeds from this bond will likely be used to repay this bridge financing. Qatar 10-year yields are currently around 2.45%.Midnight at the oasis?
**********************************
Torrance, California, Refinery Ready To Re-Start
I thought XOM sold this refinery, but the headline says it is still an XOM refinery.
The Los Angeles Times is reporting:
Exxon Mobil is expected to enter the final phases of returning its Torrance refinery to full operation this weekend, when the oil company plans to fire up a key part of the plant that helps process gasoline.
As part of its start-up procedure, Exxon Mobil plans to turn off the refinery's pollution control system for six hours, a step approved by the South Coast Air Quality Management District. That period is expected to be completed by 7 a.m. Sunday.Either the sale was delayed, or I simply forgot. [I simply forgot; it was always scheduled to close 2Q16.] Whatever.
After Torrance is fully operational, Exxon Mobil plans to sell the plant to New Jersey-based PBF Energy. The deal is expected to close by midyear.At least "they" spelled ExxonMobil correctly this time.
JCPenney: Next To Go Under? -- May 6, 2016
Updates
May 7, 2016: next? Lands' End? WSJ is reporting that the catalogue company is struggling.
Original Post
JCPenney, faced with unexpected light sales in mid-April, slashed payroll, froze overtime and took other drastic cost-cutting steps in an attempt to protect its bottom line.
As the end of its first fiscal quarter approached, the mid-priced department store told store managers to take the emergency measures because the chain faced “an expense challenge."
“We have an expense challenge for the month of April and are asking all stores to do their fair share by closely monitoring all expenses."
Employees were stunned when their hours were slashed on such short notice. The cut in employee hours saved Penney around 800 hours over two weeks — or approximately $8,000 per store.The emperor has no clothes. I may have to re-look at the rule that does not allow any individual to win multiple Geico Rock awards. Clearly, Barack Obama necessitates a re-look at this rule.
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GDP Now: May 4, 2016
Link here (dynamic link):
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 1.7 percent on May 4, down 0.1 percentage point from May 2.
The forecasts for second-quarter real nonresidential equipment investment growth and the change in private inventory investment declined following this morning's M3 report on manufacturers' shipments, inventories, and orders from the U.S. Census Bureau. While the forecasts for second-quarter real exports and real imports growth increased following the international trade report from the U.S. Census Bureau, the expected contribution of net exports to real GDP growth in the second quarter was virtually unchanged.
The Emperor Has No Clothes -- May 6, 2016
This was the headline just a few days ago: White House struggles to explain weak economy as Obama boasts of job growth.
Job growth? What job growth. For the archives: April, 2016, jobs report was simply awful. Anything less than 200,000 = "economic stagnation." The number for April: 165,000.
Economic stagnation.
"Job seekers dropping out in droves." [Their report, not mine.]
Expectation: 202,000 (some suggested 200,000).
This has been reported for several months now. I guess Bloomberg was looking for a different angle.
Job growth? What job growth. For the archives: April, 2016, jobs report was simply awful. Anything less than 200,000 = "economic stagnation." The number for April: 165,000.
Economic stagnation.
"Job seekers dropping out in droves." [Their report, not mine.]
Expectation: 202,000 (some suggested 200,000).
******************************
The Party Is Over In Alaska: For The Archives
Already An Old Story
This has been reported for several months now. I guess Bloomberg was looking for a different angle.
America’s Last Frontier is in trouble. The 40-year oil boom that turned Alaska from a frigid backwater into one of the nation’s richest states is over. Not only have petroleum prices crashed, but Alaska’s supply of crude is running out.
Thirty years ago the state was pumping 2 million barrels a day, a quarter of all U.S. output. But over the past decade, the Prudhoe Bay oil field, once the largest in North America, has started to reach the end of its life. Alaska’s output has fallen to 500,000 barrels a day, enough to fill only one-quarter of the capacity of the state’s main economic artery, the 800-mile Trans-Alaska Pipeline System.
With 90 percent of the general fund revenue tied to oil, the collapse has been devastating. Alaska, facing a $4 billion budget deficit, is one of four energy states that have slid into recession over the past year because of cheap oil. The state’s rainy day fund is burning through $11 million a day. If that keeps up, it will be out of emergency funds within two years.
The unenviable task of fixing this mess rests with Walker, a 65-year-old former carpenter who won the governor’s office by about 6,000 votes in 2014 as an independent after leaving the Republican Party. Walker came in with big plans that included expanding Medicaid and building a natural gas pipeline, all without raising taxes. He’s since had to switch to a proposal that rewrites the social compact at the heart of Alaska since it achieved statehood in 1959: Its 738,000 residents enjoy the country’s lowest tax burden and highest per capita rate of state spending.Let's keep paying out $2,000/resident, but institute a state income tax. Say what?
Walker is pushing lawmakers to impose an income tax for the first time in 35 years. He wants to double the gasoline tax and slash the generous subsidies that energy companies get. He’s also proposing going after the earnings of the $53 billion Alaska Permanent Fund.
Established in 1976 by a constitutional amendment, the fund collects a quarter of the state’s oil royalties and each year redistributes a portion of the earnings from its investments to Alaskans. Last year every man, woman, and child got a check for $2,072. Walker wants to cut that in half. The whole idea of the Permanent Fund was that it would be used to fund government when the oil fields ran dry. Lawmakers can’t touch the principal. But its investment earnings are fair game.
Holy Smokes, Batman! Even Worse Than The Headline Suggested. US Payrolls Gain Lowest In Seven Months. But Hey! Hourly Wages Up 8 Cents -- Reuters; April, 2016, Jobs Report; Private Jobs Added In April Miss Forccasts By A Country Mile; Softest Overall Monthly Jobs Report In Three Years -- May 6, 2016
Did anyone else besides me miss this? If so, you are excused. The numbers were buried deep in the story. This has to do with the number of jobs added by the private sector in April. Analysts expected to see 195,000. In fact, they came in at 165,000.
This was the softest overall monthly jobs added in three years but you would never know that. Mainstream media stories are being written and edited by the Obama administration.
In addition, the March numbers were revised down 6,000 to 194,000. See below.
The preview for today's job report:
In recent history, labor force participation peaked at 66.5% in 2007, but from there fell sharply to 62.5% in late 2015. Most recently, "we're" back to 63%.
Happy days are here again.
As usual, the 800-lb gorilla was not mentioned. A blind spot.
Two days ago, this report, from CNBC:
This was the softest overall monthly jobs added in three years but you would never know that. Mainstream media stories are being written and edited by the Obama administration.
In addition, the March numbers were revised down 6,000 to 194,000. See below.
The preview for today's job report:
- nonfarm payrolls: up 200,000
- unemployment rate: 4.9%
- average hourly earnings, mom: up 0.3%
- average hourly earning, yoy: up 2.4%
- average weekly hours worked: 34.5
The forecast for headline job gains is right where economists obsessed about just a few months ago. Anything below 200,000 was troubling.
"As we approach full employment, the monthly job growth of 200,000 may not be sustained."
"But this isn't a problem."
To put things in perspective, we haven't seen negative employment growth for 65 straight months.So, now that we are no longer obsessed with job growth, analysts are now obsessed with labor force participation: and it's going up. Huge turnaround in just the past few months. The steep downward trend turned up in the past few months.
In recent history, labor force participation peaked at 66.5% in 2007, but from there fell sharply to 62.5% in late 2015. Most recently, "we're" back to 63%.
Happy days are here again.
As usual, the 800-lb gorilla was not mentioned. A blind spot.
Two days ago, this report, from CNBC:
Private job creation slowed even further last month as firms added just 156,000 jobs in April, ADP said in a Wednesday report.
"The job market appears to have stumbled in April. Job growth noticeably slowed, with some weakness across most sectors. One month does not make a trend, but this bears close watching as the financial market turmoil earlier in the year may have done some damage to business hiring," Mark Zandi, chief economist at Moody's Analytics, said in a statement.
Economists polled by Reuters expected the number to come in at 195,000.
In March, private payrolls were revised down 6,000 to 194,000.
***********************************
The Report
The Report
The U.S. economy added the fewest number of jobs in seven months in April and Americans dropped out of the labor force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year.
Nonfarm payrolls increased by 160,000 jobs last month as construction employment barely rose and the retail sector shed jobs, the Labor Department said on Friday.
That was the smallest gain since September and below the first-quarter average job growth of 200,000.
For newbies, anything less than 200,000 suggests economic stagnation.
Forecasts were way off.
Employers added 19,000 fewer jobs in February and March than previously reported. While the unemployment rate held at 5.0 percent that was because people dropped out of the labor force.
Economists polled by Reuters had forecast payrolls rising 202,000 last month and the jobless rate unchanged at 5 percent.
Buy hey! It wasn't all bad. Average hourly earnings were up ... drum roll ... 0.3% last month -- the year-on-year increase is now 2.5% -- still below the 3.0% the Fed says it needs to see.The stepdown in job growth could raise concerns that the weakness in overall economic activity was spilling over to the labor market. Economic growth slowed sharply in the first quarter this year.
Not mentioned was the average weekly hours worked.
Remember, the Magic Numbers:
Remember, the Magic Numbers:
First time claims, unemployment benefits: 400,000 (> 400,000: economic stagnation)New jobs: 200,000 (< 200,000 new jobs: economic stagnation)
Economists estimate the labor market needs to create about 125,000 jobs a month to keep the unemployment rate steady, though estimates vary -- Reuters
May 6, 2016 -- Global Structural Shift -- The World Moving Away From Diesel; Moving Toward Gasoline -- RBN Energy
This will be another busy day. It will start with the April "Jobs Report."
Before we get to the Bakken, some stories making the rounds.
Perhaps the biggest story of the week: the EU scraps biofuel targets (hopefully you can get to the site despite the annoying "ads").
This is a fascinating story coming out of North Dakota, being reported by The Bismarck Tribune. Lots of information about the convergence of coal, natural gas and wind.
It will be fascinating to watch the grid the next few years. This is tricky, tricky stuff. The story is about Great River Energy's coal-fueled power plant, Stanton Station. The plant gets its coal from Spring Creek Mine in Montana.
Due to decreasing demand for electricity from this plant (mostly due to wind competition), the plant ran only four days in the previous 18 (at the time the story ran).
The plant sometimes had to run at a financial loss:
Batteries are going to be the answer, and Elon Musk knows this. Once we start having brownouts and blackouts because of problems with the grid, that's when we will see huge state and federal subsidies for his batteries. Wind is not going to go away no matter how many problems it creates. Times have changed.
Next, the mea culpas: why the mainstream media missed the Trump story, one man's opinion, over at Yahoo!Finance:
Gun sales: families may be earning less income, but what income they have, they are increasingly spending it on guns. April marked the 12th straight month for increased gun sales. Thank you, Mr Obama.
Active rigs:
RBN Energy: paraffinic versus naphthenic crudes; implications for US exports. More than usual posted today but the bulk of the information is not here; go to the link for the full story, a hugely important story for those interested in the Bakken.
Before we get to the Bakken, some stories making the rounds.
Perhaps the biggest story of the week: the EU scraps biofuel targets (hopefully you can get to the site despite the annoying "ads").
The European Union has scrapped post 2020 biofuel targets, thanks to pressure from green groups concerned about environmental damage.
EU laws requiring member states to use “at least 10%” renewable energy in transport will be scrapped after 2020, the European Commission confirmed, hoping to set aside a protracted controversy surrounding the environmental damage caused by biofuels.
The European Commission will table a revision of the Renewable Energy Directive at the end of 2016, aiming to further push renewable sources like wind and solar across the European Union.
On transport, “we will look specifically at the challenges and opportunities of renewable fuels including biofuels."
The current directive, adopted in 2008, requires each EU member state to have “at least 10%” renewable energy used in transport by 2020 – including from biofuels and other sources like green electricity.
This has drawn criticism in Britain, where reaching the 10% target will require doubling current biofuel supply, adding a further penny per litre on pump prices.
But the 10% target will be dropped in the new directive.I doubt the additional penny per litre had any effect on this decision. As long as Iowa is the first state to hold presidential caucuses/primaries, the biofuel mandate in this country will never be scrapped.
*******************************
Coal, Natural Gas, Wind In North Dakota
This is a fascinating story coming out of North Dakota, being reported by The Bismarck Tribune. Lots of information about the convergence of coal, natural gas and wind.
It will be fascinating to watch the grid the next few years. This is tricky, tricky stuff. The story is about Great River Energy's coal-fueled power plant, Stanton Station. The plant gets its coal from Spring Creek Mine in Montana.
Due to decreasing demand for electricity from this plant (mostly due to wind competition), the plant ran only four days in the previous 18 (at the time the story ran).
The plant sometimes had to run at a financial loss:
It takes 16 hours to bring Stanton Station to full load once it has been shut down so, in short periods where the price of power on the market drops below what Stanton could make it for, it made sense to keep it running.
With mild weather, those periods of lower prices are getting longer.The plant powered up and ran March 27-28.
“Those were not windy days. The 29th, the wind started blowing again,” said Lancaster, explaining the facility was taken offline when market prices dropped. It returned to production twice for one-day stretches.
“It’s been off ever since,” Lancaster said. “We felt like we were economically forced into this. We need to do what’s in the best interest of our members, so we’re not operating the plant at a time when we’re not even getting paid for the coal we’re burning …. We’re really affected by whether the wind blows.”
Even GRE’s larger Coal Creek Station, which sends power to Minnesota via a direct current transmission line, has been affected to some extent, reducing its load and running lower than capacity.Not only wind, but also natural gas is affecting the coal-powered plants.
“There’s a lot of natural gas in Minnesota,” Lancaster said. “That’s when we’re noticing the effect of low natural gas prices. On days when it’s not windy, the prices are not getting up to what they used to be …. Coal Creek is less affected by North Dakota wind and more affected by Minnesota natural gas.”
So far, Basin’s coal power has remained competitively priced on the power pool with a few minor instances of prices dipping below what the cooperative can make it for. The difference is coal plants can move generation at 3 megawatts a minute while natural gas can move 15 megawatts per minute.
As a result, Basin and GRE have found themselves leaning more heavily on its natural gas-fired peaking plants.No eagles were killed in the process of filing this report. How many eagles were killed by the wind turbines is anyone's guess. But it no longer matters. Times have changed.
Batteries are going to be the answer, and Elon Musk knows this. Once we start having brownouts and blackouts because of problems with the grid, that's when we will see huge state and federal subsidies for his batteries. Wind is not going to go away no matter how many problems it creates. Times have changed.
*********************************************
Next, the mea culpas: why the mainstream media missed the Trump story, one man's opinion, over at Yahoo!Finance:
Pundits and prognosticators are in a rare mea culpa moment, acknowledging how badly they misjudged Donald Trump as a presidential candidate and apologizing for being so narrow-minded. But they didn’t need to travel to dozens of campaign events or poll hundreds of Iowans to understand Trump’s appeal. All they had to do was understand one single number: $55,191.
That was median household income, adjusted for inflation, in June 2015, the month Trump declared he was running for the Republican presidential nomination. That number is neither good nor bad on its own, but when you compare it with a second number, the problem becomes clear. In January 2000, median household income was $57,371, which means when Trump declared his candidacy, the buying power of the typical family had fallen 4% during the prior 15 years.
Gun sales: families may be earning less income, but what income they have, they are increasingly spending it on guns. April marked the 12th straight month for increased gun sales. Thank you, Mr Obama.
This April saw the most gun-related background checks of any April on record, making it the 12th month in a row to achieve a high water mark for gun sales.
The FBI ran 2,145,865 checks through the National Instant Background Check System last month, according to the agency’s records. That represents more than a 400,000 increase over the previous record set in April 2014. Though the numbers represent the best April on record, the month also saw the fewest checks of any month thus far in 2016.
The trend of record-setting months began last May. In that period the background check system has seen records set for the most checks in a day, month, and year. Thus far 2016 is on pace to pass 2015 as the best year on record for gun-related background checks.It would be interesting to see a breakdown by states. My hunch where guns sales are rising:
- urban areas in the northeast where private ownership is still allowed
- along the southern border (Texas, Arizona, California east of San Diego)
- Chicago
- Florida
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Active rigs:
| 5/6/2016 | 05/06/2015 | 05/06/2014 | 05/06/2013 | 05/06/2012 | |
|---|---|---|---|---|---|
| Active Rigs | 27 | 85 | 186 | 190 | 210 |
RBN Energy: paraffinic versus naphthenic crudes; implications for US exports. More than usual posted today but the bulk of the information is not here; go to the link for the full story, a hugely important story for those interested in the Bakken.
On December 18, 2015, Congress and President Obama ended the 40-year ban on U.S. crude oil exports to countries other than Canada. Today the arbitrage window doesn’t make much economic sense for most exports – Light Louisiana Sweet on the Gulf Coast is about the same price as Brent in the North Sea. But the prospect of selling crude abroad remains tantalizing for a depressed U.S. upstream, and U.S. producers have begun to consider the possibilities for more significant export volumes. But does the U.S. have the right stuff? Will the qualities of U.S. crudes be competitive in global markets? In today’s blog, we begin a series to consider the qualities of U.S. crudes that are likely to be favored by international crude buyers.
Last month we discussed some of the changing patterns of U.S. crude exports.
Until the export ban was removed, the vast majority of U.S. export barrels moving by ship went to Canada, peaking at 354 Mb/d in July 2014 but remaining above 300 Mb/d a year later in July 2015. (Note these do not include exports to Canada from elsewhere in the U.S. – such as Bakken crude-by-rail).
Then things changed. Canadian refiners severely reduced their imports of U.S. Gulf Coast crude since October 2015, taking only 40 Mb/d in March 2016, due in part to the start-up of Enbridge’s reversed Line 9B in November 2015, which brings crude oil from Alberta into the Montreal region.
U.S. waterborne exports have remained at about the same level, but now most of the barrels are moving to Latin America, Europe and Asia instead of Canada. It is a whole new world in the U.S. crude export market.
So far the non-Canadian crude exports have been more or less loss-leaders, with overseas refiners “trying out” new U.S. crude grades, such as Gulf Coast sweet (a blend of various light crudes, including Eagle Ford), as well as testing old grades such as West Texas Intermediate (WTI) which have not been run in refineries abroad for generations.
The major factors that influence an end-user’s purchase of crude include price, distance (i.e. delivered cost), timing and suitability for processing. Price - both relative and absolute - remains the primary factor in what crude oil grades are purchased by refiners. Yet there are other fundamental factors that subtly shape buyers’ choices longer term: the physical characteristics of a crude grade beyond the basic indicators of crude quality, such as its gravity, as measured typically by its American Petroleum Institute (API) number, and its sulfur content (S%) by weight.
API and S% are the basics – the higher the API number, the lighter the crude, with the tendency of lighter crude to produce a higher proportion of light products such as gasoline and naphtha, through base refining, i.e. distillation.
In contrast, the heavier the grade, the higher proportion of heavier products such as mid-distillates (kerosene and diesel), and residual (fuel oil) in outturn, though the proportion of heavier products in yields will often be reduced through secondary processing. Sulfur is the chief (though not the sole) contaminant that must be removed from refined products to meet minimum market quality standards, and the lower the sulfur, generally the higher the value of the crude grade.
Why is all this important?
In recent years there has been a structural shift in land transport fuel use, with gasoline gaining considerable ground, even in Asia, traditionally the region with the largest volume diesel demand.
Gasoline has remained dominant in North America, with the U.S. still the world’s largest gasoline market. Latin America and Sub-Saharan Africa also have been shifting to more gasoline. And Europe, which saw “dieselization” take hold since 2000 shows signs that gasoline use may rebound.
The reasons for this move away from diesel have been varied. In Europe the fuel increasingly has been blamed for air pollution in the form of hydrocarbon particulates. Some major cities such as Paris have begun to limit the use of diesel-engine vehicles. In Asia, the shift has been simply from buyers purchasing larger and more powerful gasoline-powered cars. The Volkswagen emissions scandal further tarnished diesel’s reputation.
Consequently, the superior yield of high-octane gasoline components from naphthenic crudes is becoming more of an advantage in global crude markets. But this is a general statement, and does not apply to the refining systems of many countries that were designed to use more paraffinic crudes.
So a key question is how this will play out in future years, particularly with the possibility of more U.S. crudes being introduced into the mix? Which U.S. crudes will be most advantaged in this evolving market for different qualities of crude oil. These are questions that will be explored in the next edition of this blog series.
Whiting To Report Three Great Wells -- May 6, 2016
Wells coming off confidential list today:
No new permits issued Thursday.
No producing wells completed.
Statoil re-surveyed six sites, the Heinz and Patent Gate pad in McKenzie County, and has renamed five of the proposed wells.
Enerplus renewed one permit, a Wooly Torch in Dunn County. From the Tucson Cactus Society:
- 29413, 2,705, Whiting, P Berger 156-100-14-7-6-4H, East Forks, t11/5; cum 102K 3/16;
- 29414, 2,399, Whiting, P Berger 156-100-14-7-6-4H3, East Forks, t11/15; cum 91K 3/16;
- 29416, 1,374, Whiting, P Berger 156-100-14-7-6-3H, East Forks, t11/15; cum 84K 3/16;
| 5/6/2016 | 05/06/2015 | 05/06/2014 | 05/06/2013 | 05/06/2012 | |
|---|---|---|---|---|---|
| Active Rigs | 27 | 85 | 186 | 190 | 210 |
No new permits issued Thursday.
No producing wells completed.
Statoil re-surveyed six sites, the Heinz and Patent Gate pad in McKenzie County, and has renamed five of the proposed wells.
Enerplus renewed one permit, a Wooly Torch in Dunn County. From the Tucson Cactus Society:
Of the many white-spined cacti available in cultivation, Cleistocactus strausii is one of the best for southern Arizona. Known as silver torch or wooly torch cactus, this native of montane Bolivia and Argentina is well adapted to both the heat and cold of our desert valleys. Several to many columnar stems arise from the ground and can grow to about eight feet tall. The dense bristly white spines nearly completely conceal the stems. The narrowly tubular, deep red flowers are borne freely near the tops of the stems from February into May in our climate, and are visited by hummingbirds. This species is large and vigorous enough to be used as a landscape subject, either in the ground or large pots. Light afternoon shade is best in the desert. Hardy to at least 20 F, and even lower when sheltered by a tree or other overhang. They appreciate regular irrigation in summer, and should be kept dry in winter to prevent root rot.
Other wells on this 3-well pad:
- 29790, conf, Saguaro 149-92-35A-04H, Heart Butte;
- 31288, conf, ERG, Ocotillo 149-92-35A-04H, Heart Butte;
A neighboring pad with these three wells:
- 29819, 1,623, ERF, Rebutia 149-92-35B-05H, Heart Butte, t7/15; cum 167K 3/16;
- 29788, 1,430, ERF, Cactus 149-92-35B-05H TF, Heart Butte, t7/15; cum 144K 3/16;
- 29789, 2.028, ERF, Euphorbia149-92-35B-05H, Heart Butte, t7/15; cum 187K 3/16;
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29416, see above, Whiting, P Berger 156-100-14-7-6-3H, East Forks,
Date Oil Runs MCF Sold 3-2016 15865 7949 2-2016 16927 6161 1-2016 18880 9998 12-2015 19800 6462 11-2015 12435 1637
29414, see above, Whiting, P Berger 156-100-14-7-6-4H3, East Forks:
Date Oil Runs MCF Sold 3-2016 16056 7393 2-2016 17180 5701 1-2016 18111 9267 12-2015 22611 6188 11-2015 16538 1844
29413, see above, Whiting, P Berger 156-100-14-7-6-4H, East Forks:
Date Oil Runs MCF Sold 3-2016 13526 4015 2-2016 15500 3814 1-2016 20254 8144 12-2015 21497 6070 11-2015 30570 3780