Monday, May 23, 2016

OPEC's Death Knell -- May 23, 2016

Bloomberg/Rigzone is reporting:
Saudi Arabia, one of the founders of OPEC, is sounding the group’s death knell.

The world’s biggest crude exporter has already undermined OPEC’s traditional role of managing supply, instead choosing to boost output to snatch market share from higher-cost producers, particularly U.S. shale drillers, and crashing prices in the process.

Now, under the economic plan known as Vision 2030 promoted by the king’s powerful son, Deputy Crown Prince Mohammed bin Salman, the government is signaling it wants to wean the kingdom’s economy off oil revenue, lessening the need to manage prices. Moreover, the planned privatization of Saudi Arabian Oil Co. will make the nation the only member of the Organization of Petroleum Exporting Countries without full ownership of its national oil company.

“The main take-away from Saudi Vision 2030 is that there’s just no role for OPEC,” Seth Kleinman, head of European energy research at Citigroup Inc. in London, said by phone on May 16. “Or, you can have an OPEC without Saudi Arabia, which just isn’t much of an OPEC.”

The first change of oil ministers in more than 20 years may also recast the country’s relationship with OPEC. The group’s 13 members, which contribute about 40 percent of the world’s supply, gather in Vienna on June 2.
Regular readers know my thoughts about OPEC.

Over at "big stories," the Saudi-OPEC myth

The Apple Page: No Shortage This Time Around?

Macrumors is reporting:
Directly contradicting a previous claim of projected weak demand for the iPhone 7, Apple has reportedly asked its Asian suppliers to prepare for the highest iPhone production target in "about two years."

Apple has requested between 72-78 million units of the new iPhone, which is much higher than the 65 million handsets that Wall Street analysts previously predicted.

Canadian Oil Sands Producers Already Bringing Workers Back In -- May 23, 2016

Link here.

Spring Has Finally Arrived 

80 degrees at 10:00 p.m. Finally.


I've probably lived in thirty different places over the years, moving every one to three years in the USAF, plus the years in undergraduate and then graduate school.

I can unequivocally say that the apartment we are currently in is perhaps the "best" place I have ever lived. I love it.

Entertainment Tonight

The DVD Woodstock: Three Days of Peace & Music. I can compare it to Monterey Pop Festival. The former, 1969; the latter, 1968. 

Cosmos Sapiens

As mentioned earlier, I continue to enjoy John Hands Cosmos Sapiens, c. 2015, first published, 2016.

John Hands is clearly in the same camp as the authors of The Privileged Planet though I doubt he would want to admit that. The authors of The Privileged Planet and John Hands all seem to agree that from the time of the Big Bang (if that did indeed occur) to the rise of humans, an infinite number of things had to have happened "just right."

John Hands said he was born and raised a Catholic; he became an atheist and now says he's agnostic. The more one reads of his book, the more difficult it is to accept that he is "simply" an agnostic. One gets the feeling he is an unwilling agnostic. Sort of like the folks who will end up voting for Hillary.

Starting on page 132, at the bottom of the page, John Hands delves into several "coincidences" that had to occur for life to begin.
One element deemed essential to humans and all known forms of life is carbon, more specifically the stable isotope carbon-12. But as Hoyle pointed out, three parameters must be highly tuned for sufficient carbon-12 to be produced in stars.
The author then provides the two nuclear-chemical equations that were required. The first was the fusion of two helium molecules to form beryllium. The second was a molecule of beryllium and a molecule of helium fusing to form carbon-12.

For these reactions to proceed three conditions must be fulfilled:
  1. The lifetime of Be-8 (about 10^17 seconds) must be sufficiently long compared with the He-4 + He-4 collision time (about 10^21 seconds) to allow the first reaction to occur, but it must not be so stable that the chain of reactions stops here; it is.
  2. Fred Hoyle predicted that the yield of carbon would be negligible unless the reactions were resonant, with the vital resonance level of the carbon-12 nuclear lying near 7.7 MeV. A resonance in nuclear fusion is an energy peak at which the reaction is maximally efficient. Experimenters later confirmed that the resonance level of carbon-12 nucleus is 7.6549 MeV. This lies just above the 7.3667 MeV energy needed to fuse helium-4 and beryllium-8 and so enables this reaction to proceed.
  3. The fusion of carbon-12 with another helium-4 nucleus would produce an oxygen nucleus. However, oxygen-16 nucleus has an energy level at 7.1187 MeV. This lies just below the total energy of carbon-12 + helium-4 at 7.1616 MeV. If it had been higher, then nearly all of the carbon would have been rapidly removed from stellar interiors by conversion into oxygen.
At the end of each chapter, Hands provides his conclusions. In this case, this is his fourth of five conclusions:
Though necessary, even the conservation principles and quantum theory are not sufficient to explain how the complex organic molecules, of which we and known forms of life consist, evolved. If the values of three nuclear parameters (as noted above) were slightly different, insufficient carbon would have been generated in stars to produce organic molecules; if the values of two dimensionless constants -- the fine-structure constant and the proton-to-electron mass ratio -- were slightly different, no atoms or molecules at all would have been formed. No theory explains why these parameters have the values they do.
Others have noted the same thing.

One gets the feeling that John Hands is having trouble "believing" that all this "just happened" to work out. 

Just saying.

Israelis In North Dakota To Test Drones -- May 23, 2016; Israelis Set Drone Record In North Dakota


May 30, 2016: The Bismarck Tribune is reporting that North Dakota claims drone record --  
What's believed to be the world's first test of its type using large unmanned aerial systems for agricultural data gathering in a public-private partnership took place at the Hillsboro [North Dakota] Municipal Airport.
John Nowatzki, the North Dakota State University agricultural machine systems specialist for the Extension Service, says a May 20 test was the first test of UAS vehicles for agricultural data gathering he's heard of in the U.S. It is the first in the world, he says.
"We're flying over large areas," Nowatzki says, noting the footprint of the study corridor is 40 miles by 4 miles.
The Extension Service preceded the tests with Steele and Traill county public meetings and notices, specifically to address privacy concerns.
The project uses the Hermes 450, a plane that weighs 1,200 pounds and has a 35-foot wingspan.
The plane is owned by Elbit Systems of Haifa, Israel. It carries up to 400 pounds of equipment and can scan at 92 mph, using an internal combustion engine.
The aircraft has the ability to stay in the area for more than 12 to 15 hours and collect imagery at more than 50,000 acres per hour at 2-inch ground sample size, Nowatzki says. Before this aircraft, small UAS vehicles have been able to collect imagery at only about one square mile per hour.
North Dakota was one of six states to get FAA permission to test drones. From what I have read, North Dakota leads the other states in testing. California applied for permission to be one of the six states but was denied by the FAA. If one reads between the lines of this story, one can understand why California's application was denied.

Original Post
From the
HILLSBORO, N.D. — A high-flying drone that will be used to test precision agriculture methods made its inaugural flight Friday in North Dakota amid handshakes and smiles from aircraft operators and farm officials.
The Israeli-manufactured Elbit Systems Hermes 450 aircraft took off from the Hillsboro airport to start a summer-long project that will take pictures of farmland in the fertile Red River Valley. The test is meant to show whether the larger drone is more efficient to capture imagery of agricultural land than satellites or smaller unmanned aircraft.
“Absolutely, this is really exciting,” said drone pilot Matthew Mason, a New Hampshire resident who is spending the summer in a Fargo hotel. “With this camera we can count seeds and all sorts of stuff. The capabilities are like, wow, this is crazy.”
North Dakota is believed to be the only state qualified to fly the aircraft because it has clearance from the Federal Aviation Administration to fly drones at higher altitudes.
The FAA in 2013 selected North Dakota as one of six drone test sites in the U.S. and has since approved the site to fly above the current 200-foot blanket for most of the country.
The Hermes 450, which is 20 feet long with a 35-foot wing span, is expected to take pictures as high as 8,000 feet. It will cover an area about 4 miles wide by 40 miles long.
I replied in an e-mail to the reader who sent me this:
The agricultural uses are endless.
I spent several months some years ago filling out hail crop insurance for farmers in western North Dakota. The forms are somewhat difficult to complete, and incredibly tedious. That's at the front end.
If the farmer has a hail damage loss to report, an insurance adjuster from somewhere -- could be one or two days away -- has to drive out to western North Dakota, survey the damage from the ground, which is hardly very accurate or efficient -- insurance companies are going to use drones to assess crop damage in the future. I would bet on it.
Another drone use for agriculture: aerial spraying. Drones don't have to be small.

Four Consecutive Years Of Declining Conventional Oil Volumes Which Has Never Happened Before -- IHS -- May 23, 2016

Oil & Gas Journal is reporting that the conventional discoveries of oil and gas outside North America have fallen to the lowest level since 1952. Some data points:
  • outside of North American in 2015: just 12 billion boe recoverable resources were discovered from conventional wells
  • lowest level since 1952 (about the time I was born)
  • wow: the volume of oil alone discovered in 2015 totaled just 2.8 billion bbl -- also a record on the downside -- since the ramp-up of oil and gas exploration following WWII
  • 9 million boe of conventional gas discovered: fifth straight year that gas discoveries have exceeded oil discoveries
  • the fall in discovered volumes for conventional oil outside North America has been stead and dramatic during the past few years
  • four consecutive years of declining oil volumes, which has never happened before
  • the bottom has completely fallen out of conventional exploration
  • the supply gap in the future is going to be challenging to overcome

Oil Production Won't Meet Demand In Five (5) Years -- Former Shell CEO

CNBC is reporting:
"We cannot ever produce enough oil, in my opinion, to satisfy global demand five or 10 years out. We have to start using natural gas and more biofuels as a source of transportation fuel," former Shell Oil CEO John Hofmeister said in an interview with CNBC.
On Thursday, the American Petroleum Institute reported petroleum deliveries rose by 3.6 percent from a year ago to 19.7 million barrels a day, making it the highest April deliveries in eight years.
This is not an investment site. Do not make any investment, financial, travel, work, or relationship decisions based on what you read here, but as for me, I'm looking around. 

Russia Overtakes Saudi Arabia As China's Leading Supplier Of Crude Oil -- EIA -- May 23, 2016 -- Prince Salman: Welcome To The World Of Realpolitik

Over at "Big Stories" I have a link to "the global power shift: Russia-China hegemony." Note: that initial post on this "big story" was posted on May 15, 2016, just months before Saudi Arabia turned on the spigots, saying that it was all about protecting "market share."

The most recent update at that page was about a year later, November 16, 2016, a story about the war of attrition between Russia and Saudi Arabia.

That is the background to this story, sent to me by a reader today, thank you very much. From Saudi Market Share Takes A Hit As Russia Doubles Oil Exports To China. Some data points from that article:
  • Russian oil exports to China more than doubled in April, 2016, year-over-year
  • in April, Chinese crude oil imports from Russia: 4.81 million metric tons
  • in March, one month earlier, almost as much: 4.65 million tons
  • whereas, two of China's three major oil suppliers saw a decline: Saudi Arabia and Iran
  • Saudi crude oil exports to China fell an astonishing 22 percent to 4.12 million tons
  • Iran crude oil exports to China fell 5.1 percent o 2.76 million tons
  • Angola: increased its business with China by 39 percent to 3.98 million tons
EIA: Russia has overtaken Saudi Arabia as China's leading supplier of crude oil at the end of 2015
And more: new projects worth several billion dollars between Russia and China have led the two countries to cooperate closely regarding energy industry issues.
One or two swallows does not a spring make, but this is incredibly interesting on many accounts.

Some One-Liners

Prince Salman: welcome to the world of realpolitik.

Vietnam, Kissinger, China, Russia: what goes around, comes around.

I can imagine Russia and China have a lot more joint ventures that make sense than any with Saudi Arabia.

Saudi may be in worse shape than we realize.

Even if it didn't make sense economically for Russia to work with China, politically it is definitely in Russia's interests.

China will probably do things based on economic / financial basis alone. Russia will think politically as much as economically / financially. 

It will be interesting if The Wall Street Journal or Business Insider picks up on any of this.

Halcon With Three High-IP Wells In Eagle Nest -- May 23, 2016

Active rigs:

Active Rigs2582189185211

No new permits; however, fifteen (15) permits renewed --
  • Hess (5), four EN-VP and R- permits, all in Mountrail County; and an Ocotillo permit in Dunn County
  • Kaiser-Francis (4), a Liberty, a Sikes, a Knife River, and a Rat Lake permit, all in Mountrail County
  • QEP (4), three MHA permits, all in Dunn County
  • Enerplus (2), a Copper and a Rocket permit, both in Dunn County
Three producing wells completed:
  • 22503, 3,244, HRC, Fort Berthold 148-95-25B-36-2H, Eagle Nest, t5/16; cum --
  • 27414, 2,712, HRC, Fort Berthold 148-95-25B-36-6H, Eagle Nest, t4/16; cum --
  • 27415, 3,158, HRC, Fort Berthold 148-95-25B-36-5H, Eagle Nest, t4/16; cum --

Six More DUCs In The Bakken -- May 23, 2016

Even when you know it's coming, it's quite something to see: six more DUCs in the Bakken.

From the EIA today:
The United States remained the world's top producer of petroleum and natural gas hydrocarbons in 2015, according to U.S. Energy Information Administration estimates.
U.S. petroleum and natural gas production first surpassed Russia in 2012, and the United States has been the world's top producer of natural gas since 2011 and the world's top producer of petroleum hydrocarbons since 2013. --- EIA
I'm looking forward to John Kemp's tweets and photographs today. He's the Reuters/London oil analyst; does a fantastic job. Perhaps one of the most accessible analysts and tweeters out there. Seems like a straight-shooting guy with no hidden agenda. Seems to love life, sense of adventure. Photograph suggests he's in his late 20's. Ah, to be young, footloose and fancy free again.

Our older granddaughter and our son-in-law recently visited the Bakken. She has loaded all her photos. I was thrilled that she and he were able to visit the north unit of "the park." Wow, they saw a lot of wildlife, and the scenery, as usual, was breathtaking. I never get tired of looking at North Dakota scenery. The first thing that pops out at me: minimal signs of development, people. A lot of open, open space. Her flickr photostream:


First, no-bake cookie recipe -- 

Second, from the May 16, 2016, issue of The New Yorker, p. 28: Where There's Smoke. On the internet:
It looks like The New Yorker pear liqueur and mezcal is likely a variation of Fire in the Orchard.

Monday, May 23, 2016

Active rigs:

Active Rigs2582189185211

RBN Energy: update on the Eaglebine. The Eaglebine is tracked here at the blog.
Drill-rig counts and crude oil production are down sharply in the Eaglebine, one of many less-than-stellar shale plays that drillers and producers have mostly abandoned in favor of superstar counties in the Permian Basin, the southern Eagle Ford and the STACK play in Oklahoma. It’s understandable; in today’s low-oil-price/high-stress environment, everyone’s chasing the sky-high initial production (IP) rates that provide the biggest, quickest returns and help pay the bills. Still, as we will discuss today, there are at least a few glimmers of hope in the Eaglebine, including a possible pipeline restart and a new pipeline tie-in that will reduce crude-delivery costs. Now all we need is $60+/bbl oil.
The Eaglebine is an “emerging” shale play that never quite emerged, mostly because the oil price collapse that started in mid-2014 sucker-punched Eaglebine drillers and producers just as they were ramping up their output, benefiting from new pipeline takeaway capacity, and dreaming big.
As we said in our series a while back, the play is located within an 11-county area east of Austin, TX, south of Dallas and north of Houston, where the Eagle Ford Shale meets the Woodbine Sandstone (hence the clever combo-name).
The play got off to a slower start than the Eagle Ford, in part because the Eaglebine formation (up to 1,000 feet thick, and found at depths of between 6,500 and 15,000 feet) has been more complex for drillers to exploit.
The Eaglebine and Eagle Ford share similar geology--both are situated above the Buda Formation and below the Austin Chalk—but the Eagle Ford is a carbonate rich organic, while the Eaglebine contains a large percentage of silica-rich sands interlaced in the organic rich shale—a characteristic that makes Eaglebine completion and production a tad (or two, or three) more complicated.
Still, the Eaglebine has high hydrocarbon potential, including a mixture of oil and condensate liquids. In other words, in the high-flying days of 2011-14 it was considered too promising a play to ignore, particularly given its handy location, less than a two-hour drive from Houston-area refineries. With prices for West Texas Intermediate (WTI) bouncing above $90/Bbl throughout the period, crude production from the Eaglebine soared. Output continued rising into early 2015, even as WTI prices were plummeting to less than half their 2011-14 average.
A Note for the Granddaughters

Yesterday (Sunday) I took our older granddaughter to water polo practice up at the Denton (TX) natatorium. Turning the corner at Texas State Highway 114 and I-35W, I was surprised by all the building that was going on across from the Texas Motor Speedway. I don't know if it's another mall -- if so, it's one of the bigger ones I've seen, and then a whole new development seems to be going in a bit to the southeast of the corner. And the other day it was mentioned that the business park at Solana (in the same general area) was undergoing a $65 million renovation project that would be completed this summer.

I say all that to say this: Arianna mentioned that she saw the new Buc-ee's, and then told me all about Buc-ee's. I was vaguely aware of these "service stations" but had not paid much attention; the logo always seemed a bit .... well, creepy. But it turns out Buc-ee's is huge down here. The folks are really excited. Radio interviews this morning suggested folks are thrilled; it was mentioned that the station would have 96 pumps.

It turns out the first Buc-ee's inside the metroplex (DFW) is now opened. Some data points from The Star-Telegram: new hires: $13/hour; assistant managers, $18/hour; around 60,000 square feet, 225 employees.

The "next" Buc-ee's will open in Denton on I-35 sometime in 2018.

My wife generally doesn't like to take "aimless" drives but the amount of building activity across fro the Texas Motor Speedway might be worth another trip.

Weather forecast for today: slight chance for rain late this afternoon. Actual: it's pouring rain right now. I think this is going to be another very wet spring for north Texas. Grapevine Lake which flooded last year (?) has not yet completely receded, and it looks like it's not going to get any better much sooner.

Now, back to that new mall (?) across form the TMS. Data points from The Dallas Morning News from March 16, 2016:
  • Champions Circle complex: 279 acres; developed by Fine Line Diversified Development, controlled by Ed Bass
  • Tanger Factory Outlets: 350,000-square-foot shopping center
  • Tanger Center: 70 brand stores, including Nike, Levi's, Banana Republic, Gap, etc., etc.
  • additional 540,000 square feet of space for free-standing stores and restaurants
  • other recent additions in the area: Marriott Hotel, the aforementioned Buc-ee's Travel Center, conference center, and golf club, the 137-unit Churchill Apartments, and the 700-unit Gray Dove Apartments 
  • Buc-ee's with 96 pumps