WTI Snaps Back -- February 12, 2018 -- RBN Provides Great Update On Permian Takeaway

Via Twitter:

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Global Warming Update

Global warming smacks the Olympics: from Bloomberg:

And from the AP. I guess they were hoping for a "warmer" Olympics.

 

As Don noted: the first word in "Winter Olympics" is ....

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Hubbert's Theory: Put To Rest

From Mark Perry, the Texas miracle: only five countries now produce more oil than Texas. And based on the data provided in the RNB Energy post today, Texas may soon produce more oil than Canada. Then only Russia, Saudi Arabia, Iran, and Iraq would produce more oil than Texas.

Mark has an interesting graph at the link which should pretty much ends the discussion on peak oil.

The graph above shows only one peak. In addition, there was a second peak, at this link. After 1980, Texas entered into a long decline in production (consistent with Hubbert's theory) but then surged after 2010). Hubbert's theory would never have predicted the surge in oil production after 2010 (as noted in the graph), so, in fact, with regard to Texas there are at least two points in which Texas reached "peak production," entered Hubbert's "terminal decline," only to come roaring back.

From wiki:

Peak oil is a concept, first presented in 1956, as the theorized point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline. Peak oil theory is based on the observed rise, peak, fall, and depletion of aggregate production rate in oil fields over time. It is often confused with oil depletion; however, whereas depletion refers to a period of falling reserves and supply, peak oil refers to peak, before terminal depletion occurs. The concept of peak oil is often credited to geologist M. King Hubbert whose 1956 paper first presented a formal theory.

By the way, same with both Russia and Saudi Arabia. At the link to Mark Perry's post (above), one will see that production from both Russia and Saudi Arabia hit a peak some time ago, only to come roaring back in the last few years.

It appears we will likely see that occur off Norway and probably in the Arctic.

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Artificial Reef In The GoM: Courtesy of The Oil Industry

Link here. Another story we won't see on the evening news.

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Back To The Bakken

Active rigs:

$60.34↑↑	2/12/2018	02/12/2017	02/12/2016	02/12/2015	02/12/2014
Active Rigs	58	36	41	137	189

RBN Energy: Midland crude production, takeaway capacity and price differentials.

Permian crude oil production continues to march steadily upward, headed toward 3.0 MMb/d sometime in the next few months.

Most of the recent growth responsible for pushing total U.S. output past 10 MMb/d has come from increases in Permian volumes. Pipeline capacity out of the super-hot play is on the ragged edge of maxing out, and a myriad of new projects to relieve capacity constraints are in the works. Why then has the price differential between Midland, TX, and the Gulf Coast dropped over the past few weeks? Why did the Brent vs. WTI/Cushing spread crater? And what does this all mean for Midland-to-Gulf Coast transport deals getting struck for $2.00/bbl or less?

Today, we look at these developments, try to make sense out of the Permian/Midland crude oil market, and consider what the future might hold for West Texas barrels moving to the Gulf Coast.

We’ve talked frequently about increases in Permian crude oil production and the need for new pipeline takeaway capacity here in the RBN blogosphere. In December (2017), we detailed the latest wave of Permian pipeline projects including briefs on

• the planned Phillips 66/Enbridge Gray Oak Pipeline; 

• Magellan Midstream Partners’ plan to build a set of connecting pipes between Midland, Corpus Christi and Houston; 

• an expansion of the Magellan/Plains All American BridgeTex Pipeline from Midland to Houston; and, 

• the latest from Enterprise Products Partners: the planned conversion of one of its NGL pipes out of the Permian to crude service, also targeting Houston.

Through all of this, Enterprise continues to ramp up volumes on its Midland-to-Sealy pipeline, which is said to be flowing more than 200 Mb/d with expectations to hit its 450-Mb/d full volume by June.

Also, EPIC is said to be laying pipe for its 550-Mb/d, 700-mile line from the Permian and Eagle Ford to Corpus Christi, and Plains announced the 185-Mb/d Cactus II expansion (to a total capacity of 575 Mb/d) from West Texas’s Orla, Wink South, Midland, Crane and McCamey points down to Corpus Christi.And the announcements keep on coming. Two weeks ago, Trafigura signed a long-term commitment with Plains to move 300 Mb/d of Permian crude to Corpus on Cactus II. We understand that this brings the Singapore-based global commodity trading company to 450 Mb/d of outbound capacity, making it the largest holder of takeaway out of the Permian. The capacity provides Trafigura with direct access to export dock capacity and the two 50-Mb/d condensate splitters at Corpus, where the trading company holds 100% of the capacity on units operated by Buckeye Partners and Magellan.

We don’t know the transport rate on that deal, but if announcements from Magellan and Plains for their new capacity on BridgeTex are any indication, the market for transport capacity from Midland to Houston is sub-$2.00/bbl. A January 30 (2018) BridgeTex press release indicated that 10-40 Mb/d from Midland to East Houston is going for $2.10/bbl, while the same volume from Colorado City, TX, to East Houston is priced at $1.85/bbl. We’ve heard numbers for capacity out of the Permian lower than that being talked about and done. For example, we understand that Chevron has taken out capacity on Enterprise’s Midland-to-Sealy line at something well below $2.00/bbl for a term of 15 years, which Chevron will need, given that it has announced it will be increasing its Permian rig count by 25% — to 20 from the current 16 — over the coming months.

And there’s talk of other projects offering Permian-to-Gulf Coast transport for $1.50/bbl or even lower. Clearly, there is a lot of competition among pipeline projects for locked-in Permian barrels these days.

Much, much more at the link.

All this pipeline and the Keystone XL is idled.