OPEC Basket Tanking -- So Much For All That "We Can't Survive Without Iranian Oil" -- September 17, 2018

Feinstein: well-played. [Question: when should have Mitch McConnell seen things unraveling?]

Must read: today's RBN Energy post on NGL fractionation. See below. It starts with ethane. Over the weekend a reader sent me the link to a 3-part series in the Houston Chronicle on fractionation. One is allowed three free articles/month over at the Chronicle. Hopefully, you still have three free articles. The link to part 3 will get you to all three parts in the series. If you get to the articles, don't close the window; if you open it again, it will count against your free articles. I've archived all three.

Bakken redux: Permian highways desperate for traffic relief. Link here.

Tanking? Okay, I agree. That was uncalled for. OPEC basket is not tanking. But it is down almost 1% in pre-market trading whereas the rest of the oil market, generally, is up.

Iran sanctions: the general consensus is the world can't go on without Iranian sanctions. No link. Story everywhere. Yawn. If accurate, OPEC basket should also be spiking.

WTI, Brent, OPEC basket: up 0.74%; up 0.58%; down 0.91%.

Venezuela: more oil presence for China ... but no mention of any new funds from China. Several story lines in that article. The first story line coming up shortly --- from The WSJ.

China: from The WSJ -- Chinese shares, rattled by trade impasse, hit lowest level since 2014.

The Shanghai Composite Index closed at 2651.79, its lowest since November 2014. That was in the early days of what proved to be a spectacular boom and bust cycle, in which the index almost doubled by mid-2015 before falling back sharply in the following months.

Trading volume has tumbled in both Shanghai and Shenzhen. On Monday, the value of shares changing hands reached a combined 245 billion yuan ($35.7 billion)—half the daily average of 500 billion yuan seen at the start of this year, and a fraction of the record 2.4 trillion yuan ($349.20 billion) just before the 2015 market crash. 

Time for the US Congress to say "enough is enough" and bail the Chinese out.

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Back to the Bakken

Wells coming off the confidential list over the weekend, Monday:

Monday, September 17, 2018

• 34358, SI/NC, XTO, Bobcat Federal 14X-35EXH, Bear Creek, no production data, 
• 34245, 2,535, WPX, Otter Woman 35-36HU, Mandaree, 51 stages; 8.5 million lbs, t8/18; cum --
• 33738, SI/NC, Hess, BB-Federal B-151-95-2122H-7, Blue Buttes, no production data,
• 32130, 895,  CRL, Burr Federal 4-26H, Sanish, 62 stages; 9.9 million lbs, a nice well, t6/18; cum 40K 7/18;

Date	Oil Runs	MCF Sold
7-2018	29354	21012
6-2018	6894	4608

Sunday, September 16, 2018

• 34563, SI/NC, Abraxas, Ravin 9H, North Fork, no production data,
• 33737, SI/NC, Hess, BB-Federal B-151-95-2122H-7, Blue Buttes, no production data,
• 33561, 1,861, CLR, Mountain Gap 12-10H, Rattlesnake Point, a huge well, 64 stages; 15.3 million lbs, t6/18; cum 57K 7/18; Mountain Gap wells are tracked here;

Date	Oil Runs	MCF Sold
7-2018	24206	22550
6-2018	31749	35547
3-2018	871	0

• 32962, 827, Oasis, Ceynar 5198 12-5 7T, Banks, a huge well, 50 stages; 4 million lbs, t3/18; cum 92K 7/18;

Date	Oil Runs	MCF Sold
7-2018	16	159
6-2018	28119	84867
5-2018	20667	59256
4-2018	33464	77041
3-2018	9322	17046

Saturday, September 15, 2018

• 34357, SI/NC, XTO, Bobcat Federal 14X-35AXB, Bear Creek, no production data,
• 34246, 2,913, WPX, Otter Woman 35-36HG, Mandaree, a nice well, 51 stages; 8.5 million lbs; t7/18; cum 11K 7/18;
• 33736, SI/NC, Hess, BB-Federal B-151-95-2122H-9, Blue Buttes, no production data,
• 31516, IA/320, CLR, Lansing 5-25H1, Banks, producing, 4 stages; 488K lbs, t3/18; cum --; a liner failure before stage 5; will repair and finish stim at a later date;

Records: the Bismarck Tribune  -- ND oil, gas production returns to record levels (by the way,  technically that headline is incorrect). The big story line: 60 years of more drilling. Not 60 years of more production but 60 years of more drilling based on 1,600 new wells per year.


Active rigs:

$69.50↑	9/17/2018	09/17/2017	09/17/2016	09/17/2015	09/17/2014
Active Rigs	65	56	32	67	198

RBN Energy: far-reaching impact of the unprecedented shortfallin NGL fractionation capacity.

Y-grade, welcome to the Hotel Fractionation. You can check in any time you like, but you can never leave!  OK, so that’s a bit of an overstatement.

But there is no doubt that the U.S. NGL market has entered a period of disruption unlike anything seen in recent memory. Mont Belvieu fractionation capacity is, for all intents and purposes, maxed out.

Production of purity NGL products is constrained to what can be fractionated, and with ethane demand ramping up alongside new petchem plants coming online, ethane prices are soaring.

But that’s only a symptom of the problem. Production of y-grade — that mix of NGLs produced from gas processing plants — continues to increase in the Permian and around the country. Sooo … If you can’t fractionate any more y-grade, what happens to those incremental y-grade barrels being produced?  How much can the industry sock away in underground storage caverns?  Does it make economic sense to put large volumes of y-grade into storage if it will be years before it can be withdrawn? — i.e., “you can never leave.” And what happens if y-grade storage capacity fills up? Today, we begin a blog series to consider these issues and how they might impact not only NGL markets, but the markets for natural gas and crude oil as well.

Fractionation, the process of splitting natural gas liquids (NGLs) into purity products — ethane, propane, butanes and natural gasoline — is as important to the NGL market as refining is to the crude and products markets. In fact, the functions are quite similar — take a raw material with no direct use and transform it into usable products.

In the past, we considered the implications of a tight fractionation market, but did not get the NGL heebie-jeebies. So what has changed? The answer is mostly one of magnitude.

The situation is quickly becoming more dire. Fractionation capacity in Mont Belvieu, the rest of Texas and Louisiana is running at or near full capacity. Railcars of “x-grade” NGLs (mixed NGLs with less ethane than y-grade that can be transported by rail) are fanning out across the country looking for open fractionator space.  Marcellus/Utica fractionators are being inundated with barrels from as far away as the Permian. Some midstream companies that move y-grade from the Permian through Mont Belvieu fractionation are said to be charging between 70 and 80 c/gal for spot transportation and fractionation fees (T&F), up from 15 c/gal before all this started. 

I remember years ago, when I first started blogging, I had no clue about y-grade, ethane rejection, fractionation, etc., but thanks to readers I understand it a bit better.

Those receiving royalties from North Dakota operators may have noticed it also.

From the FAQ page:

39. With regard to proceeds on a royalty check, what do the letters "O," "G," and "P" stand for?

"O" for oil. "G" for natural gas. "P" for plant products.  As the gas is processed and purified for transportation, by products like natural gas condensate, sulfur, ethane, and natural gas liquids like butane, propane, isobutane, and pentanes are produced and sold. Source. On some royalty checks "P" will be abbreviated at "PPROD." The Bakken Shale Discussion Group has a nice discussion on "plant products" (this site is down).

57. Oil is generally "measured" in barrels (bbls). Is the volume of natural gas liquid (NGL) ("wet" natural gas) also expressed in bbls? No, NGLs are generally expressed in gallons, according to a comment sent in by a chemical engineer.  Incidentally, some think the "additional" "b" comes from "blue barrels." From RBN Energy:

There’s one more aspect of NGL markets that must have been designed to confuse outsiders, because it certainly does.  NGL quantities are quoted in barrels.  NGL prices are quoted in gallons.  Really.  So I’ll sell you 10,000 barrels of non-TET normal butane for $1.36 per gallon.  It never occurs to NGL people to convert either the quantity to gallons or the price to a per barrel number.  They think of everything multiplied by or divided by 42.  Go figure.  And BTW, propane retail people do think in gallons - but that’s another story.

58. What is meant by natural gas liquids? RBN provides a great primer on natural gas liquids, or wet natural gas. Briefly: Natural Gasoline  - C5s; Normal Butane – NC4, Isobutane  - IC4.