Seven New Permits; Nine DUCs Completed; MRO Reports Two Huge Wells -- September 22, 2017

Active rigs:

$50.66→	9/22/2017	09/22/2016	09/22/2015	09/22/2014	09/22/2013
Active Rigs	57	33	68	196	185

Seven new permits:

• Operator: MRO
• Field: Bailey (Dunn County)
• Comments: MRO has permits for a 4-well pad in SWSE 35-146-94; and a 3-well pad in SWSW 36-146-94

Five permits renewed:

• Hess (2): two TI-Beauty Valley permits in Williams County
• Whiting (2): two MC MHA permits in Dunn County
• QEP: one Vegas permit in McKenzie County

Nine producing wells (DUCs) reported as completed:

• 29248, 784, Zavanna, Sigurd 5-8 1TFH, Crazy Man, t8/17; cum --; (#19982, #20375)
• 29249, 350, Zavanna, Sigurd 5-8 3H, Crazy Man, t8/17; cum --; (#19982, #20375)
• 29250, 540, Zavanna, Sigurd 5-8 5TFH, Crazy Man, t8/17; cum --; (#19982, #20375)
• 29251, 557, Zavanna, Sigurd 5-8 7H, Crazy Man, t8/17; cum --; (#19982, #20375)
• 29252, 548, Zavanna, Sigurd 32-29 2H, Crazy Man, t8/17; cum --; (#19982, #20375)
• 29254, 881, Zavanna, Sigurd 32-29 6H, Crazy Man, t9/17; cum --; (#19982, #20375)
• 29255, 294, Zavanna, Sigurd 32-29 8TFH, Crazy Man, t9/17; cum -- ; (#19982, #20375)
• 32524, 2,535, MRO, Reno USA 24-9TFH-2B, Sanish, t7/17; cum --; (#32454, #32455, #32453, #32452, #20602, #19790)
• 32525, 4,984, MRO, Kermit USA 14-9H, Sanish, t8/17; cum --; (#32454, #32455, #32453, #32452, #20602, #19790)

Statoil temporarily abandons nineteen (19) wells in McKenzie County, on the following pads:

• Sax, Samson, Topaz, Enderud; all in/near T153N-98W, T153N-97W, T152N-98W

EOG abandons one Mountrail well:

• 30950, Van Hook 71-141-1H

The Energy And Market Page, T+245 -- September 22, 2017 -- Polish Coal Oversupply Turns To Shortage

Link here.

Phillips 66 Partners LP will buy more assets from Phillips 66 for $2.4 billion, the Houston-based companies announced Sept. 22.

The deal is expected to close in early October, and it's the largest acquisition the master limited partnership has made in its four-year history. Prior to this deal, the MLP’s largest was a $1.3 billion drop-down announced last October.

Phillips 66 is dropping down its 25 percent interest in both Dakota Access LLC and Energy Transfer Crude Oil Company LLC — Bakken Pipeline joint ventures — and its 100 percent interest in Merey Sweeny LP, which owns fuel-grade processing units at the Phillips 66 Sweeny Refinery.

Cheaper to buy than to build?

**********************************

Polish Planning

Polish coal oversupply turns to shortage.

Poland is facing a coal shortage before the heating season, which will test the government's long-term strategy of domestic coal dependency for power generation.

Polish coal producers may have gone too far in their efforts to redress production oversupply in 2012-16. They have reduced output capacity to a point where the government is concerned that production will not be able to satisfy domestic coal demand in the coming months.

Polish thermal and coking coal output in January-July fell by 5pc on the year to 38mn t, data from national statistics office GUS show. Falling supplies pushed stocks of unsold thermal coal below 1.5mn t in June last year, which was the lowest level since 2011. Producer stockpiles have declined, despite them mainly comprising low-calorie supply, which is usually blended with higher-quality coal.

Environmental Activisim -- A Reader Comments -- September 22, 2017

This is important enough to be posted more than once or twice. Expect to see this data posted at least a few more times over the next few months.

For now, no editing: simply re-posting data points that came in from a reader commenting on an earlier post.

The reader's comments:

Californians pay dearly for their environmental activism.

• Retail price of regular gasoline:
• California: $3.01
• Texas: $2.16
• https://s26.postimg.org/tfessjo49/Captura_de_pantalla_1457.png
• Retail price of industrial electricity:
• California: 12.07₡ per kilowatthour
• Texas: 5.22₡ per kilowatthour
• https://s26.postimg.org/s471k2sih/Captura_de_pantalla_1389.png
• Do the high energy prices have anything to do with the following?
• Growth in economy 2006 to 2015:
• California: 12.6%
• Texas: 35.8%
• https://s26.postimg.org/azyx8vzdl/Captura_de_pantalla_535.png
• California has the highest real poverty rate in the United States (adjusted for prices and other local factors):
• https://s26.postimg.org/3le6u92vt/Captura_de_pantalla_990.png
• Violent crime in California in 2016 was up 15.4% over 2014, and property crime was up 5.8%
• http://www.sacbee.com/news/politics-government/capitol-alert/article167879952.html

My comments:

• these data points have great implications for a "Trump economy" vs a "Hillary economy" 
• these data points have great implications for a "US economy" vs a "EU economy"
• it won't happen "overnight" and it may never be "big enough" to amount to much, but there will be a perception that road and state highway infrastructure paid for by gasoline taxes at the pump will take a significant hit as more and more EVs (or perhaps even worse, hybrid EVs) come to market in California 
• RBN Energy did not seem to come out and say this explicitly, but my reading of the tea leaves suggests that the price of gasoline in California suggests that production is barely -- and that may be a bit of hyperbole -- meeting demand. It would not take much to result in a shortfall of production in the near term (if one refinery goes down for any reason) but over the next decade, the tea leaves suggest to me that production of gasoline in California will not be able to keep up with demand; one wonders how much Sacramento analysts are counting on light rail; the "bullet train"; new CAFE standards; and, EVs to reduce gasoline demand -- I don't any of that happening; in fact, new CAFE standards are probably going to be pushed to the right (delayed)

Update On Preferred Route For Trucks Around Northeast Side Of Williston -- September 22, 2017

This is simply an update; nothing in stone (or, better said, nothing in asphalt or cement) yet.

From The Williston Herald:

City and county officials have signed off on a preferred route that will divert heavy truck traffic from downtown Williston.

The votes allow the state Department of Transportation to continue an environmental study on the area that will determine where exactly the road will go. 

The proposed 9-mile truck reliever route will connect U.S. Highway 2 and North Dakota Highway 1804 northeast of the city of Williston.

Actually in my mind, it makes more sense to say, the 9-mile route that will connect ND Highway 1804 east of Williston with US Highway 2 northeast of Williston, swinging north around Spring Lake Park, if that make sense.

This is the map that The Williston Herald posted to show the proposed routes and the preferred route (the thick black line).

I had a little trouble sorting out exactly where that thick black line ran, and tried to duplicate an "idealized" representation on a non-satellite Google map. This is my graphic and it may be very, very wrong. As noted, I had a bit of trouble sorting out the City of Williston map. 

Who Are You Gonna Believe? EIA Or OPEC? -- September 22, 2017

Updates

September 24, 2017: Irina Slav over at oilprice agrees that OPEC's hands are tied.

Original Post

 

Over at Reuters via Twitter: OPEC says it is winning the battle to curb the oil glut (which, by the way, was a self-inflicted wound).

Output cuts by OPEC and other oil producers are clearing a supply glut that has weighed on crude prices for three years, ministers said at a meeting on Friday to review the pact that expires in March 2018.

The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since January.

The group is considering extending the deal beyond its March expiry, although two sources said Friday's gathering was unlikely to make a specific recommendation on an extension.

So, is OPEC winning that battle? Not if you look at US crude oil supply data for the past three weeks. 

EIA data shows that US crude oil inventories have increased significantly for each of the last three weeks. The time to re-balance, once down to 27 weeks is now back up to 46 weeks. This factoid has never been reported on CNBC to the best of my knowledge.

Source for the following data. 

First the graph:

Data for the past two years reveals that the current number of days of gasoline supply has hit a recent record (30.8 days) and rarely has it gotten above 31 days and never 32 days. So at 30.8 days, at the upper end of the range:

But then, compare the days of gasoline supply for the last two years with a more "historical look." This is for the 2006 - 2008 period. Note that, in general, we are talking about less than 20 days of gasoline supply in the US. Only twice did the supply hit greater than 22 days.

It may not sound like much, the difference between 30 days and 20 days but in weeks, the former rounds to about four (4) weeks and the latter rounds to three (3) weeks. A ten-day difference starts to approach two weeks, which is a very significant length of time for those studying "US logistics" for any product.

In general, starting about 30 years ago, it was determined that a two-week supply chain for almost any product in the US was "just about right." Prior to that time, it was felt that a longer period was needed to ensure adequate "product on the shelf." Today, storing stuff longer than two weeks at the retail point-of-sale is not economically sound.

Going forward:

• demand is likely to taper off and won't pick up until the driving season begins next spring
• supply is likely to remain about the same if WTI remains above $50
• the question is, with a 30-day supply of gasoline and demand tapering off, how much increase in crude oil production will occur if the price of oil trends toward $60
• I think the answer to the last question depends a lot on global demand, less on US demand for the next nine months

Are Higher California Margins Worth The Hassle For Refiners? -- RBN Energy -- September 22, 2017

Updates

Later, 11:27 a.m. Central Time: see first comment. I've brought the reader's comments up here for easier access:

The reader's comments:

Californians pay dearly for their environmental activism.

• Retail price of regular gasoline:
• California: $3.01
• Texas: $2.16
• https://s26.postimg.org/tfessjo49/Captura_de_pantalla_1457.png
• Retail price of industrial electricity:
• California: 12.07₡ per kilowatthour
• Texas: 5.22₡ per kilowatthour
• https://s26.postimg.org/s471k2sih/Captura_de_pantalla_1389.png
• Do the high energy prices have anything to do with the following?
• Growth in economy 2006 to 2015:
• California: 12.6%
• Texas: 35.8%
• https://s26.postimg.org/azyx8vzdl/Captura_de_pantalla_535.png
• California has the highest real poverty rate in the United States (adjusted for prices and other local factors):
• https://s26.postimg.org/3le6u92vt/Captura_de_pantalla_990.png
• Violent crime in California in 2016 was up 15.4% over 2014, and property crime was up 5.8%
• http://www.sacbee.com/news/politics-government/capitol-alert/article167879952.html

This is important enough to be posted more than once or twice. Expect to see this data posted at least a few more times over the next few months.
 

Original Post

Active rigs:

$50.45→	9/22/2017	09/22/2016	09/22/2015	09/22/2014	09/22/2013
Active Rigs	57	33	68	196	185

RBN Energy: Are higher California margins worth the hassle for refiners? Bottom line:

Caught in a stifling regulatory environment and with the state chipping away at their market share in favor of electric cars and renewables, California’s refiners have to weigh the rewards of higher margins today against a questionable future tomorrow.

During years like 2015 when the Torrance refinery was offline, higher margins benefited those refineries left standing. And similar price spikes are bound to recur whenever unexpected outages bring down one or more plants in the future.

But such boosts in margin are limited and random in nature and arguably don’t compensate for an environment in which plant upgrades and expansions face a minefield of regulatory constraints. Unfortunately, the situation is unlikely to improve as electricity and renewables grab a bigger bite of the transport fuel market.

Saudi: their challenges never end. Russia is now adding more pipeline to China, stepping up race with Saudis -- Reuters via Rigzone.

Chinese oil refineries are gearing up to receive more Russian oil transported through an expanded Siberian pipeline network from January, likely cementing Russia's position as China's largest oil supplier in a close race with Saudi Arabia.

The planned ramp-up in pipeline supplies agreed in contracts signed in 2013 comes amid a pledge by producers to cut output to tighten global markets and illustrates the nip-and-tuck contest between the world's top oil exporters, Russia and Saudi Arabia, for dominance in the biggest crude importer, China.

Russia's top oil producer Rosneft said it is set to supply under government agreement 30 million tonnes of ESPO Blend crude to PetroChina in 2018, or 600,000 barrels per day (bpd), an increase of 50 percent from this year, after completion of the second East Siberia Pacific Ocean (ESPO) pipeline, which has a main spur to Chinese border town Mohe.

"Rosneft has enough resources to supply under all its existing contracts, including the planned increase of supplies to China by 10 million tones next year," Rosneft said in a statement emailed to Reuters on Thursday.

Top state oil firm PetroChina has designated three refineries in northeast China as the main receivers of Russian oil, with one of them undergoing an $880 million upgrade.

California Blue, Roy Orbison