Monday, September 5, 2016

US Utility Buys Mexico's Largest Wind Farm; Lots Happening In Energy -- September 5, 2016

Note: as of January 31, 2016, these were the figures for the cost of new energy plants in the US:
  • Off-shore wind: $7.5 million /MW (intermittent; requires fossil fuel back-up)
  • Solar: $3 million / MW (intermittent; requires fossil fuel back-up)
  • On-Shore Wind: $2.5 million / MW (intermittent; requires fossil fuel back-up)
  • Natural gas: $865,000 / MW

Original Post
($375 million cash + $477 million debt) / 252 MW = $3.4 million / MW.

Lots and lot of interesting things happening in wind. I posted several links earlier with regard to North Dakota. What is happening in North Dakota can be generalized globally. Proof?

Example: Sempra's Mexican unit acquires Mexico's biggest wind farm.
Infraestructura Energetica Nova SA agreed to buy the Ventika wind energy complex in northern Mexico from units of Blackstone Group LP for $375 million, the second large-scale acquisition this year by the country’s only publicly traded energy company.
Ienova, as Sempra Energy’s Mexico unit is known, will acquire 100 percent of the Ventika I and II wind parks in Nuevo Leon state from Blackstone Energy Partners, Blackstone’s Fisterra Energy unit and minority partners.
Ienova will also assume $477 million of long-term financing obtained by Ventika, the country’s biggest wind complex with an installed capacity to generate 252 megawatts from 84 turbines.
That's wind.

At the same link more about Sempra:
The Ventika purchase follows Ienova’s $1.12 billion acquisition of Petroleos Mexicanos’s 50 percent stake in pipeline company Gasoductos de Chihuahua, which is expected to close this quarter.
In June, Ienova and TransCanada Corp. won rights to develop a $2.2 billion underwater pipeline to connects south Texas with Mexico’s Tuxpan port in the Gulf of Mexico. Sempra announced in July that the company will scale back its share buyback plans and use the additional cash to help finance the marine natural gas pipeline. Sempra plans to spend more than $3 billion in Latin America through 2020, according to a July company presentation.
Maybe it's just me, and maybe I'm biased, but it sure seems like a lot is happening in energy these days.

Saudi Arabia: Oh-Oh

I've been saying for quite some time that we should see a spike in the price of oil in 2018 based on all the CAPEX that was deferred or canceled.

Not so fast.

Reuters is reporting:
Never mind the drop in crude prices, huge spending cuts and thousands of job losses - the world's top oil and gas companies are set to produce more than ever for some time.
While top oil companies struggle with slumping revenues following a more than halving of prices since mid-2014 after years of spectacular growth, their production has persistently grown as projects sanctioned earlier in the decade come on line.

Overall production at the world's seven biggest oil and gas companies is set to rise by around 9 percent between 2015 and 2018.

With an expected recovery in prices, the increased production should boost cash flow and secure generous dividend payouts, which had forced companies to double borrowing throughout the downturn.

And despite a drop in new project approvals, companies have throughout the downturn cleared a number of mammoth undertakings such as Statoil's Johan Sverdrop oilfield off Norway and Eni's Zohr gas development off the Egyptian coast. 
Much more at the link.

Saudi could be looking at a bleak, bleak future.

Another View

Consider the source.
Oil prices have continued to languish below $50 per barrel as a glut of crude oil and gasoline persist even as global demand continues to rise.
The IEA still predicts that oil consumption will expand by another 1.4 million barrels per day in 2016, while production stagnates. That dynamic suggests that the market is converging towards some sort of balance, although the speed with which that takes place is hotly debated.
Several oil analysts believe that the near record low for spare production capacity around the world actually suggests that the oil market is a lot tighter than it seems at first glance.
Most of the world’s spare capacity is located in Saudi Arabia, the one country that has the ability to substantially ramp up or down output over the course of a few weeks.
But Saudi Arabia, in a battle for market share, ratcheted up production to a record high this summer, exceeding 10.6 million barrels per day, which dumped more supply on the market but left it with less spare capacity.
OPEC as a whole has pushed output to a record high. The IEA and the EIA both estimate that OPEC’s spare capacity has dipped to just 1.4 million barrels per day, about half of what it was a few years ago and extraordinarily low by historical standards. The last time spare capacity was this low, it was between 2004 and 2008, a period of time that saw a dramatic run up in oil prices.
But this has become a meme: 
But Saudi Arabia, in a battle for market share, ratcheted up production to a record high this summer, exceeding 10.6 million barrels per day, which dumped more supply on the market but left it with less spare capacity.
In fact:
  • at 10.6 million, this may be a record, but not my much
  • Saudi production always increases during the summer for domestic consumption
Big picture:
  • Saudi Arabia spare capacity: 1 - 2 million bopd 
  • US on-shore shale spare capacity: 1 -2 million bopd  
I'm not sure where I stand on this. I still maintain:
  • WTI pricing will be very volatile through 1Q17
  • pricing in 2Q16 will telegraph where prices are headed
  • price spike in 2018 
The price spike in 2018 will be do for non-fundamental reasons, if that makes sense. 

The Andersmadson Wells -- Oasis -- The Bakken, North Dakota

The Andersmadson wells (the following wells all run south to north, except #21029, running north to south):
  • 31056, 1,259, Oasis, Andersmadson 5201 42-24 6T, 50 stages, 4.2 million lbs, t1/16; cum 96K 1/17;
  • 31055, 1,941, Oasis, Andersmadson 5201 42-24 5B, 50 stages, 4.1 million lbs, t1/16; cum 155K 1/17;
  • 31054, 1,341, Oasis, Andersmadson 5201 42-24 4T, t1/16; cum 96K 1/17;
  • 31053, 606, Oasis, Andersmadson 5201 42-24 3B, t1/16; cum 144K 1/17;
  • 30895, 869, Oasis, Andersmadson 5201 43-24 10T, 36 stages; 4.1 million lbs, t3/16; cum 56K 1/17;
  • 30894, 1,668, Oasis, Andersmadson 5201 43-24 9B, 36 stages, 4.1 million lbs, t2/16; cum 126K 1/17;
  • 30893, 984, Oasis, Andersmadson 5201 43-24 8T, t2/16; cum 69K 1/17;
  • 30892, 1,390, Oasis, Andersmadson 5201 43-24 7B, t2/16; cum 129K 1/17;
  • 30812, 1,462, Oasis, Andersmadson 5201 14-25 11B, 36 stages, 4.1 million lbs, t3/16; cum 167K 1/17;
  • 30811, 1,119, Oasis, Andersmadson 5201 14-25 12T, Camp, producing, the Andersmadson wells are tracked here; 36 stages; 4.1 million lbs; t3/16; cum 108K 1/17;
  • 30810, 2,320, Oasis, Andersmadson 5201 14-25 13BX, Camp, 4 sections, 36 stages, 4.2 million lbs, t3/16; cum 152K 1/17;
  • 21029, 981, Oasis, Andersmadson 5201 41-13H, 36 stages, 4.6 million lbs, t10/11; cum 187K 1/17; taken off-line 11/15 and sporadic production through 7/16; off-line again as of 12/16;
In the same 1280-acre spacing unit, running south to north:
  • 23480, 1,174, Oasis, Leanne 5201 41-24B, 36 stages, 2.6 million lbs, t1/13; cum 207K 1/17; was taken off-line once, from 11/15 through 1/16; no halo effect observed

A Look Back At Top Oil-Producing Counties In The US -- DrillingInfo - Forbes -- September 5, 2016

This is a bit dated; I'm not sure if there is more recent information from non-pay sites. This article in Forbes (linked below) was posted shortly after this post in the blog with the top 15 oil-producing counties in the US.

In this Forbes article, there are two story lines:
  • briefly, the "hot" spots for oil and natural gas drilling in the continental US
  • a somewhat more in-depth look at Texas counties participating in the Eagle Ford
The Forbes article has a great, great "overview" map. I was unaware that the Niobrara is doing as well as it is, apparently.

Will The September OPEC Meeting Lead To A New Organization?

Link here
The energy ministers of Russia and Saudi Arabia, which together produce more than a fifth of the world’s crude, said at the G20 in China that they could limit output in the future, while establishing a “working group” to explore other ways to reduce volatility in markets. Russia is the largest exporter outside the Opec cartel.
“Freezing production is one of the preferred possibilities but it does not have to happen specifically today,” Saudi oil minister Khalid Al Falih said.

Russia was ready to join the producers’ cartel in freezing output in April before Saudi Arabia collapsed the talks at the last minute, refusing to join any deal without the participation of its regional rival Iran.
Russia’s energy minister Alexander Novak described Monday’s agreement as “historic” but tensions remained readily apparent.
While Mr Novak said that an output cap was “the most effective instrument” with details of a plan “currently being discussed”, Mr Falih suggested that freezing production may not be necessary.
Mr Novak also said a production deal may not have to include Iran until Tehran’s production had recovered to pre-sanctions levels. Mr Falih said he believed, however, that Iran’s output was already at that level.
One can read between the lines what could be going on here.

Later, 8:08 p.m. Central Time, September 5, 2016: Reuters reports that Saudi Arabia, Russia sign oil pact; may limit output in future. Oil futures up 70 cents, trading at just over $45. Still not nearly enough for Saudi Arabia. The interesting thing: at $45 oil, Russia and US are doing just fine. It is Saudi Arabia and others in OPEC that can't live on $45 oil. Very ironic how things have worked out. 

A Note For The Granddaughters

My three most recent purchases for recreational reading:
  • Cistercian Abbeys: History and Architecture, Jean-Francois Leroux-Dhuys, c. 1998, a coffee-table book
  • How To Read Water: Clues and Patterns from Puddles to the Sea, Tristan Gooley, c. 2016
  • Dinosaurs: The Grand Tour, Keiron Pim, field notes by Jack Horner, c. 2013, 2016
It is interesting how things work out. All the time I spent reading about dinosaurs while growing up often came back to me, thinking that it was all a waste of time. They had died out -- but a footnote -- although a huge footnote -- in geologic history.

But two huge surprises: 1) much of what we know about dinosaurs came from my backyard, the Hell Creek Fossil Beds in eastern Montana and to fields in southwestern North Dakota; and, 2) hey, the dinosaurs never died out. The non-avian dinosaurs may have died out, but the birds are doing just fine, thank you.

With regard to How To Read Water: it all has to do with our older son-in-law's love of the sea; and our oldest granddaughter's desire to be a marine biologist some day, although her interests are evolving.

And finally, what a huge surprise. While visiting the Kimbell Museum last week, I happened to come across Leroux-Dhuys' Cistercian Abbeys coffee-table book.

From the book:
The Cistercians' Carta Caritatis is, even today, a model of organization. Its innovation lies in the proposal for a system that preserves the independence of each participant in the whole within an interdependence that guarantees the respect of a centralized "general line." The Constitution eliminated the rigidity and inefficiencies of the essentially feudal pyramidal system that was usual in medieval religious Orders, and particularly that of the Cluniacs.
The cult of the Virgin Mary:
Bernard of Clairvaux was well aware that he lived in a time that was marked by the emergence of a new sensibility based on the discovery of profane love, and, in particular, that of women....a number of theologians saw this as nothing but the sin that leads to Hell... Bernard took a page out of the troubadours' book.
He placed love at the heart of his mystical theology, and sublimated it into devotion to the Virgin, queen of Heaven. The Cistercians kept women out of their monasteries, but all the abbeys were placed under the protection of Our Lady, and the Salve Regina (the antiphon of Le Puy) became, under the influence of Bernard of Clairvaux, the last devotion of each day in all Cistercian communities.
Warming to his fantastic talent for writing, Bernard of Clairvaux, the "honey-tongued Doctor," developed endless elaborations on the theme of the love of God and of his Church in the extraordinary series of 86 sermons on the Song of Solomon. 
The Salve Regina can be easily found on YouTube.

I spent many, many hours and days and weeks hiking Yorkshire County in northern England. There were days when I would lay (lie) on the green grass surrounding perhaps the most famous Cistercian Abbey in England, Fountains Abbey, and walk on the yellow grass along the small creek that ran alongside it. The creek had a name, I assume. Ah, yes, ---  there over at google maps: the River Skell. A river, not a creek.

From Norah Jones:
I want to walk with you
On a cloudy day
In fields where the yellow grass grows
So won't you try to come away with me.
Come Away With Me, Norah Jones

Pipelines, CBR, Wind, More Wind, And All That Jazz; New Pipeline That Will Move 100,000 BOPD -- The Bakken Continues To Boom -- September 5, 2016

I'm not sure this pipeline will even have a name. If not, my suggestion: The Alexander Connector. Some data points from The Williston Herald:
  • Tesoro
  • 3.6 miles long
  • 8 inches in diameter
  • $6.8 million
  • origin: the existing Break-Out Tank site six (6) miles north of Alexander
  • terminus: the NST Express Alexander Facility
But then this: the NST Express Alexander Facility:
  • $60 - $80 million project 
  • nine (9) miles northwest of Alexander
  • three above-ground storage tanks, each 50,000 bbls
  • a pump station; a pig launcher
  • 100,000-bopd pipeline ties into the NorthStar facility in Fairview -- update at The Bismarck Tribune -- 23 miles long, 12-inch pipeline;
  • timeline: on track to be operational by November, 2016 (this year)
  • permit was sought one year ago
NorthStar Transloading, Fairview, on the state line
  • "a bit slow" with the downturn
  • will improve with the completion of the NST Express Alexander Facility
  • fracking sand offsets loss of crude oil business
  • 20 miles of track
  • could squeeze in 10 unit trains at once
For newbies: the Bakken may have slowed down, and major East Coast media outlets talk about a bust in the US shale industry, but when they are still putting in $75 million infrastructure facilities it speaks volumes about the future of the Bakken.

Remember: the EIA forecasts the Bakken to produce 2 million bopd through 2040 without much decline between 2030 and 2040.

Stony Creek Rail Yard

Mentioned in same story linked above.

Stony Creek Rail Yard is currently handling about 1,000 wind tower components for two projects in North Dakota. 

This is the incredible rail yard build by Red River Supply just east of Williston (if not inside city limits, very, very close; just off State Highway 1804)

Great website.  When I visit the Bakken, this will be one of my top spots to visit. More on the Stony Creek Rail Yard here. About a year ago:
Red River Supply has announced the immediate addition of industrial rail space to Williston, something that had been in high demand and short in supply. Red River is now offering 25 acres of shovel-ready, 5-to-10-acre parcels at its Stony Creek Railyard southeast of Williston and will be adding another 100-plus acres of industrial rail access through 2020. The final development will be 180 acres and include an industrial park.
I think I recall hearing that one of the wind farms being supported by Red River Supply is the Lindahl Wind Farm, a 75-turbine farm in northeast Williams County, four miles north of Tioga, developed by Enel Green Power North AmericaThe 2014 annual report for Enel Green Power shows just how international this company is. From wiki:
Enel Green Power S.p.A. is an Italian multinational renewable-energy corporation, headquartered in Rome. The company was formed as a subsidiary of the power generation firm Enel in December 2008, grouping its global renewable energy interests.
Enel Green Power has operations in over 16 countries across Europe, North America and South America. It generates energy from hydroelectricity, wind, solar power, geothermal electricity, biomass and Incineration sources. At the end of September 2011, the company's total worldwide installed capacity was 6,490 MW, which it intends to increase to 10,400 MW by 2015.
I do not know the status of the mega-wind farm proposed for Ward County, the Harland Wind Farm. The last update at wiki was in 2014.

Putting Things Into Perspective

Philae found!
Less than a month before the end of the mission, Rosetta’s high-resolution camera has revealed the Philae lander wedged into a dark crack on Comet 67P/Churyumov–Gerasimenko.

The images were taken on 2 September by the OSIRIS narrow-angle camera as the orbiter came within 2.7 km of the surface and clearly show the main body of the lander, along with two of its three legs.

The images also provide proof of Philae’s orientation, making it clear why establishing communications was so difficult following its landing on 12 November 2014.
Rosetta is "Europe's comet chaser." Its mission is about to come to an end. 

Saudi Raises Pricing On Increased Asian Demand -- September 5, 2016

Link here.
Saudi Arabia, the world’s largest crude exporter, raised pricing for October oil sales to Asia and the U.S. in a sign of strengthening demand.
State-owned Saudi Arabian Oil Co., known as Aramco, increased its official selling price for Arab Light crude to Asia by 90 cents a barrel, to 20 cents below the regional benchmark.
The company had been expected to raise Arab Light prices by 50 cents a barrel, to 60 cents less than the benchmark for Asian buyers.
We're still talking chump change but at least the trend is encouraging. 

Boom or Bust, Wes St Jon
Yes, actual video of Williston.