Short Crude Oil Pipeline Approved By North Dakota Regulators -- June 8, 2016

Updates

June 9, 2016: note -- in the article below FuelFix did something odd -- talked about moving oil in a pipeline using "gallons per day."

The Bismarck Tribune, from which FuelFix got the article, says:

The project has an estimated cost of $9 million and would be able to move up to 25,000 barrels per day of crude oil at full capacity. A company official said construction was expected to be completed this summer.  

For me, media outlets like FuelFix lose a bit of their "integrity" when they do things like that. "A million" get one attention but seems to ...

Original Post

From FuelFix today: Plains All American Pipeline project gets OK in North Dakota. Anyone surprised?

North Dakota regulators have approved a short crude oil pipeline project in Mountrail County.

the 10-mile pipeline will be able to move up to 1 million gallons per day at full capacity. Cost is estimated at $9 million.

Officials with Houston-based Plains All American Pipeline LP say the project should be completed this summer. It will begin at the company’s Robinson Lake facility and end at the Van Hook rail facility southeast of New Town.

Reason #14 Why I Love To Blog -- June 8, 2016: New Non-Operated E&P Player In The Bakken

Does anyone ever remember my post on Crestview Partners? LOL. I certainly did not.

But if you read carefully you will see that Crestview Partners was mentioned on the blog back on November 18, 2012.

Now, why would I bring that up? It's the only time I ever mentioned Crestview Partners on the blog as far as I know.

Here's why (I bring it up now). A reader just sent me this story, a press release:

Crestview Partners, a New York based private equity firm, announced an investment in a newly-formed company, W Energy Partners.

Crestview Partners III, L.P. and its affiliated funds, will invest up to $150 million in W Energy to capitalize the business and fund the acquisition and development of high quality exploration and production ("E&P") assets in the Bakken shale play.

Based in Dallas, Texas, W Energy is an E&P company that acquires non-operated working interests in acreage and producing wells.

The Company will seek to partner with best-in-class operators in the core of the Williston Basin in North Dakota.

W Energy is led by an experienced management team that has been investing in non-operated interests in North Dakota for over 10 years. John Wunderlick, CEO, formed the predecessor to W Energy in 2011 and invested $225 million pursuing this strategy in the Bakken. Prior to this, he worked in the Land and Business Development group at Petro-Hunt LLC and managed operations in several major U.S. basins including the Williston. 

Mr. Wunderlick is joined by Shane Hannabury, President of W Energy. Mr. Hannabury previously served as a partner at the predecessor to W Energy.  Before this, he worked as an investor at EnCap Investments, an energy-focused private equity firm, and spent significant time working with management teams in the Williston Basin. Before EnCap, Mr. Hannabury worked as an energy investment banker at Raymond James. 

And now that you know, you can go back and read the WSJ article that was linked earlier today, about the vultures circling the Bakken. 

Hess Has Permits For A New 5-Well Grimestad Pad In McKenzie County -- June 8, 2016

Active rigs:

	6/8/2016	06/08/2015	06/08/2014	06/08/2013	06/08/2012
Active Rigs	26	82	194	189	214

Seven (7) new permits --

• Operators: Hess (5), BR (2)
• Fields: Hawkeye (McKenzie), Blue Buttes, McKenzie
• Comments: The Hess permits will be for a 5-well pad, another Grimestad pad; see graphic below

Wells coming off confidential list Thursday;

• 30422, drl, Hess, HA-Sanford-152-96-1819H-7, Westberg, no production data,
• 30772, SI/NC, XTO, FBIR Grinnell 34X-33E, Heart Butte, no production data,

Seven permits were renewed:

• Crescent Point Enerugy (5), three Paopao permits, one Aldag permit, and one Dressler permit; all in Williams County
• Whiting (2), two Evitt permits, both in Williams County

Two permits canceled: one by Reource Energy Can-Am, a Wormac permit in Divide County; and, one by Petroshale, a Petroshale permit in McKenzie County

Pennsylvania Needs To Remember That The Presumptive Democratic Nominee Wants To Ban Fracking; Supports Ban On Fracking In Her "Home" State -- June 8, 2016

The Wall Street Journal reports that Shell plans to go ahead with petrochemical plant in Pennsylvania. It will create 600 permanent jobs.

PITTSBURGH— Royal Dutch Shell PLC gave the long-awaited go-ahead to a multibillion-dollar petrochemical plant that is expected to give a lift to Pennsylvania and the struggling shale-gas industry.

The company first announced in 2012 that it was considering building a plant about 30 miles north of Pittsburgh in a faded industrial area along the Ohio River once lined with steel mills. The plant is expected to create 6,000 construction jobs and 600 permanent jobs and draw chemical companies and other manufacturers to the region.

The news was welcome in a state that has been hard hit by low energy prices, causing several thousand layoffs and a squeeze on local government revenues. The number of drilling rigs operating in Pennsylvania fell to 14 last week, down from more than 140 in early 2011, according to an industry official.

Of Course, You Can Any Position On Any Subject When It Comes To Hillary   Someone needs to remind the Pennsylvania Democratic governor, a superdelegate who undoubtedly supports Hillary, that, of course, the plant is dead, if the president bans fracking.

Pennsylvania Gov. Tom Wolf, a Democrat, called the plant “game-changing” and said it would give a much-needed economic boost to the entire state.

He thanked his predecessor, Republican Tom Corbett, who had initially courted the company which chose Pennsylvania over Ohio and West Virginia.

“This is a foundational investment,” Gov. Wolf said in an interview. “This should mean a lot of great new manufacturing jobs—and change the shape of Pennsylvania’s economy.”
Known as an ethane cracker, the plant will convert enough natural gas from the region’s Marcellus and Utica shale formations each year to create 1.6 million metric tons of polyethylene, a core component for plastics used in food packaging and containers to automotive parts.

The presumptive GOP presidential nominee is very, very clear on fracking.

Meanwhile, being reported in multiple locations, BASF puts kabosh on proposed propylene plant in Texas:

BASF SE, the world's largest chemical producer, said on Monday it would refrain for now from building a propylene plant in Texas because of volatile commodity prices, a sign that an aggressive U.S. Gulf Coast petrochemical building boom announced earlier this decade could be cooling.

Falling oil prices in the past two years have eroded the profitability of some chemical plants, which typically prefer to have a wide spread between prices for oil and the natural gas they process. With oil prices down more than 50 percent from 2014 highs, BASF decided that now was not the best time to begin construction of a methane-to-propylene plant in Freeport, Texas. Methane is a key component of natural gas.

And more:

The cancellation comes as Dow Chemical Inc recently brought online a similar plant and Enterprise Product Partners LP and Formosa Plastics Corp have plans to open similar plants during the next two years.

Nearly $50 billion in petrochemical projects have been announced in Texas over the last decade, with many companies eager to capitalize on the surge in domestic oil and gas production. LyondellBasell and Exxon Mobil Corp are among some of the largest companies to announce construction plans. BASF's announcement could dent the region's economy, which has been helped in part by chemical plant construction activity that partially offset job losses in oil exploration and production since prices cratered in mid-2014.

This BASF project was first announced in March, 2015, and would have been BASF's largest single-plant investment to date. 

From The Wall Street Journal Today -- The Bakken -- June 8, 2016

Updates

Later, 8:26 p.m. Central Time: a new non-operated E&P company -- a new vulture -- W Energy Partners -- circling over the Bakken.
  

Original Post

 

The epicenter of America's oil bust is drawing buyers. Link here.

The vultures are descending on North Dakota.

Investors hoping for a bargain are buying up oil and gas wells from cash-strapped operators in the state’s Bakken Shale, a bet they will eventually be able to profit off one of the country’s hardest-hit oil plays. Hundreds of wells have changed hands or are in the process of being sold, state figures show, to a grab bag of fortune seekers ranging from industry experts to first-time wildcatters. They are picking up properties as more established producers scale back or shed assets to pay creditors.

Houston-based Lime Rock Resources, founded by a former Goldman Sachs Group Inc. banker and an oil-industry veteran, bought more than 340 North Dakota wells from Occidental Petroleum Corp. in November. The firm says it has at least $1.6 billion in private-equity money to invest, a portion of which it has spent on the Bakken.

In another pairing of Wall Street and oil-patch veterans, NP Resources LLC bought 53 wells from Whiting Petroleum Corp. in December and is looking for more Bakken acreage.

These stories have been previously reported on the blog, see sidebar at the right. For example: NP/Whiting was posted here. Much more at the linked WSJ article.

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Solar Energy? No, It's LED Energy

This is really quite interesting. From The Wall Street Journal today:

Inside the cavernous interior of a former Boston-area taxi depot—walls covered in graffiti, pools of water on the concrete floors—three gleaming green-and-white containers sit side by side. The steel boxes are former “reefers”—refrigerated shipping containers used to transport cold goods. Bone-chilling rain is falling outside, but inside the 320-square-foot boxes, it’s a relatively balmy 63 degrees, and the humid air is heavy with the earthy smell of greens. Filling each box are 256 neat vertical towers of plants, bathed in a noonday-intense pink light.

The crops being cultivated here—lettuce, herbs and other leafy greens—are not what we’ve come to expect from this kind of operation. But the company behind this agricultural innovation owes a large debt to America’s pot farmers. Freight Farms was founded in 2010, its existence predicated on a bet that LEDs would soon become efficient enough for farming as if the sun had disappeared—without breaking the bank. Co-founder Brad McNamara puts it this way: “Traditional research said, yeah, LEDs are good, but the more important research was that they were improving at a Moore’s-Law rate.” Moore’s Law, used to describe the exponential increase in computing power over the past 50 years, can be applied to LEDs thanks in part to the needs—and considerable resources—of marijuana growers.

In addition to 128 LED strips, each “farm” has a water circulation system, 8 gallon-size tanks of liquid fertilizer and a propane tank for producing supplemental CO2—all running on as little as 10 gallons of water and 80 kWh of energy per day. Under the right conditions, a grower can go from seeds to sellable produce within six weeks. According to data pooled by the company, an average Freight Farms box can produce 48,568 marketable mini-heads of lettuce a year—the growing power of two acres of farmland.

Freight Farms is part of a rapidly expanding field: Food and agricultural technology startups received $4.6 billion in investment in 2015, almost double the $2.36 billion that poured into the sector in 2014, according to a report from agriculture investment platform AgFunder. Companies like John Deere and Monsanto have long invested in new technology for conventional farming, but we’re now seeing a disruption of farming itself.

There are more than 60 Freight Farms containers installed in 22 states and two Canadian provinces, in climates ranging from the long winters of Ontario to the sweltering heat of Texas. In a development that surprised even the company’s founders, the containers are increasingly making their way onto traditional farms for supplemental income outside the growing season. But most are parked in the interstitial spaces of cities, from warehouses and underneath highway overpasses to alleyways behind the restaurants where their crops are served. The result is hyperlocal produce, which sometimes travels just a few feet from farm to table.

Later: I may have to link this website in the sidebar at the right -- not! With regard to CO2:

Plants use CO2 for growth. It is the essential building block for photosynthesis (along with light and water). Plants cannot grow without CO2. The current levels in the atmosphere are about 350 parts per million (PPM). It is theorized that millions of years ago, levels of CO2 were about 1,500 PPM. Throughout the years, plants have evolved in many ways-and in many ways have stayed the same. Knowing this can be advantageous for us all.

It seems that plants have not lost the ability to use up to 1,500 PPM of CO2. Plant growth can be accelerated by increasing the CO2 levels in your growing area.

Conversely, CO2 levels below 250 PPM have a detrimental effect on your plants. If you have six plants growing in your closet, and there is no ventilation, your plants can use the CO2 in a few hours. They then stop growing. You must, at a minimum, provide fresh air for your plants every hour or so. An even better way is to provide supplemental CO2 for your plants by using either a CO2 generator or bottled CO2. Any of these solutions will keep your plants growing at optimal rates.

It has been proven that you can increase your growth rates by up to 20 percent and size by up to 30 percent by providing supplemental CO2 at levels over 1,200 PPM. You should never go over 1,500 PPM, as this soon becomes toxic for the plants, and they tend to grow very stringy. 

I'm glad "they" explained that -- how plants "use" CO2, unlike humans who exhale CO2. There's probably a lot of folks using marijuana that did not know that. 

June 8, 2016: The Market Closes With 248 Issues Hitting 52-Week Highs; Only 5 Issues Hitting New Lows

Another incredible day in north Texas, and maybe more on that later. But let's get started. Top story over at GoogleFinance: Jeff Bezos says Amazon will invest $3 billion in India. By the way, I don't know if you heard: Tim Cook was able to convince India to allow Apple to have retail stores for the next three years despite the "30% rule." Tim Cook -- with that one deal -- has earned his CEO pay this year.

Tweeting now:

• John Kemp: US gasoline consumption will grow by 170,000 bopd to a record 9.33 million bopd in 2016, revised up from 160,000 forecast in May -- one month ago).
• Rigzone: the UK is going to spend $87 billion decommissioning oil rigs off its continental shelf over the next 30 years; the fields are drying up.
• Platts Oil: China's May crude oil imports surged almost 40% on year-over-year (month of May -- but last year was a "base low".
• Rigzone: from Norway, 60,000 oil workers set to strike over wage disputes.
• EIA: fires continue to reduce oil production near Fort McMurray. 
• Platts Oil: North Sea crude oil remains "under pressure" as French refinery strikes continue.

From EIA on Fort McMurray:

While evacuees from the ongoing fires in Fort McMurray have begun to return to the city, a state of emergency remains in place throughout Alberta, Canada, and the temporary shutdown of the area's oil sands production sites continues. EIA estimates that disruptions to oil production averaged about 0.8 million barrels per day (b/d) in May, with a daily peak of more than 1.1 million b/d. Although projects are slowly restarting as fires subside, it may take weeks for production to return to previous levels. EIA expects disruptions to average 400,000 b/d in June. -- EIA

Add the Canadian sands oil shortage to the OPEC shortages.

Over at Yahoo!Finance, it looks like oil will begin the day at $51 and change. The 30-second soundbite: Nigeria. The market is already up about 75 points. Top story: no direct evidence that Aubrey McClendon deliberately killed himself the day after he was indicted.

Reuters/Rigzone has this story: Saudi Arabia could import natural gas to boost use in energy mix.

Even though it is the world's largest oil exporter, Saudi Arabia has struggled to keep pace with domestic gas demand in recent years as increased use from industry and power generation put pressure on supplies. "Gas makes up 50 percent of our energy mix now and we aspire to raise this to 70 percent from all sources, be it local or, if it is possible, from a source to import from at a competitive price," Khalid al-Falih told a news conference announcing the kingdom's National Transformation Plan.

At the close, on the NYSE, 248 issues reporting 52-week highs; only five issues reporting 52-week lows. Among the new highs: Allete, Black Hills, CenterPoint Energy, ExxonMobil, MDU, Medtronic, Newfield Exploration, ONEOK Partners, QEP, TransCanada.

I may or may not read this story: Walmart sells more than Apple, Amazon, and Microsoft combined.

Speaking of Walmart and Apple, a possible competitor to ApplePay has called it quits; a huge failure. CurrentC made the announcement in the past 24 hours that it was done. From the beginning, it had as much chance as Bernie Sanders did. Unlike Bernie Sanders, CurrentC made the decision to drop out.

Sticking with Apple, Coach has announced it will begin selling designer Apple Watch bands, created to match Coach handbags; expected to debut on June 12, next week, the day before the WWDC. Unlike CurrentC, Coach Apple Watch bands won't disappoint.

Timing on this one could not have been better. Our two older granddaughters, age 9 and 12, are "attending" computer camp this week at the University of Texas - Dallas. Today, this article in The Wall Street Journal: Is Your Child Coding Yet? New Building Blocks Teach Programming Basics. Last year the girls took a week-long course in coding in Arlington; I'm not sure what language they learned last year, maybe some basic Javaj or maybe Oz or maybe Standard. I have no clue. This year they are learning to code in Alice. For those that do not know (include me), this from wiki:

A.L.I.C.E. (Artificial Linguistic Internet Computer Entity), also referred to as Alicebot, or simply Alice, is a natural language processing chatterbot—a program that engages in a conversation with a human by applying some heuristical pattern matching rules to the human's input, and in its online form it also relies on a hidden third person.

It was inspired by Joseph Weizenbaum's classical ELIZA program. It is one of the strongest programs of its type and has won the Loebner Prize, awarded to accomplished humanoid, talking robots, three times (in 2000, 2001, and 2004).

However, the program is unable to pass the Turing test, as even the casual user will often expose its mechanistic aspects in short conversations.

Spike Jonze has cited ALICE as the inspiration for his academy award-winning film Her, in which a human falls in love with a chatbot. In a New Yorker article titled “Can Humans Fall in Love with Bots?” Jonze said “that the idea originated from a program he tried about a decade ago called the ALICE bot, which engages in friendly conversation.”

I understood everything up to "heuristical."

Their dad is really, really smart in computers and engineering, and I'm sure he did a lot of research to determine which programming language to engage his daughters in.

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Back To Coding

The Next Big Thing

If you understood the note on ALICE programming, this next little bit might blow you away. This was in today's Google Finance. This is one of five things Walter Mossberg learned from Jeff Bezos during an interview at the annual Code Conference:

Bezos, along with other Code speakers like Google CEO Sundar Pichai and Facebook COO Sheryl Sandberg, talked about artificial intelligence being the next big tech innovation and battleground.

"I think it’s gigantic," Bezos said. "It’s probably hard to overstate how big of an impact it’s going to have on society over the next 20 years. It has been a dream since the early days of science fiction to have a computer that you can talk to in a natural way and actually ask it to have a conversation with you and ask it to do things for you. And that is coming true."

He said he is "deeply committed" to AI being a huge part of Amazon’s business and that the company has worked secretly on it for four years.

But, even though Amazon has jumped out ahead in voice-controlled smart assistants with its Echo hardware powered by its Alexa AI platform, Bezos predicted that "all the major tech companies will do this, but there’ll also be hundreds of startup companies." He predicted that people will use different AI "agents" for different things.

EOR In The Bakken -- June 8, 2016

Active rigs:

	6/8/2016	06/08/2015	06/08/2014	06/08/2013	06/08/2012
Active Rigs	26	82	194	189	214

RBN Energy: the potential for enhanced oil recovery in shale plays.

While EOR on conventional, vertical wells continues—even with the low-price challenges that all producers face—shale producers may finally be getting a handle on how to cost-effectively employ EOR in horizontal wells that were hydraulically “fracked” a few years back and have since experienced typical (steep) shale production declines.   

EOG Resources, a leading innovator in shale production, in May (2016) confirmed what it said was four successful pilot tests of an internally developed EOR process on a total of 15 producing horizontal wells in the Eagle Ford shale play (one well in the first pilot, then four wells, then four again, then six).  

A fifth—and much larger--“field-scale” pilot involving 32 producing wells is planned for  2016, with the expectation that from 2017 on EOR will be a regular part of EOG’s Eagle Ford development.  EOG’s EOR process, developed over the past three years, is proprietary, but what we can glean from what’s been said is this:

• The process involves the injection of natural gas produced by EOG in the same Eagle Ford fields in which the pilots have been place—in other words, the gas was readily available at low cost, unlike CO2, which Oxy needs to pipe in from afar to its Permian EOR operation at considerable cost. (EOG’s EOR is still economically viable at $5/MMBtu gas.)
• The EOR technique is not all that capital intensive, averaging only about $1 million/well. Operating costs are low too, and the “finding cost” of adding to EOG’s potential reserves is $6/bbl or less.
• EOG’s Eagle Ford shale acreage positions (including 529,000 acres in the play’s “oil window”) feature unique geologic properties—including “strong geologic containment” (that is, virtually impermeable layers above and below the seam where the horizontal drilling was done)—that provides vertical containment for initial, high-density completions and then, during the EOR process, keeps the gas injection in contact with the targeted reservoir.  (In other words, if the production layer isn’t well-sealed top and bottom, the injected gas can’t do its job, which is to become “miscible”—or mixed in with—the oil remaining in the seam and drive incremental oil recovery.)
• The incremental production response occurs quickly, typically within the first two to three months of gas injection, and holds steady for longer than initial production (IP) from the primary well completion.
• The combination of lower operating costs and steady production delivers a return profile that complements EOG’s primary horizontal drilling and fracking program.  That is, primary drilling focused on areas with high IP rates deliver high returns and short paybacks, while the EOR pilots have a very different profile: more modest upfront capital investment followed by a more sustained period of incremental oil production and cash flow.
• The rate of return is reported to be on par with EOG’s primary drilling; at $40/bbl oil, the after tax rate of return (ATROR) for EOG’s EOR is greater than 30% (at $50/bbl the ATROR tops 50%), and the present value index (PVI)—the net present value (NPV) divided by the capital investment (an efficiency measure for investment decisions)--is greater than 2.