The Market, Energy, And Political Page, Part 4, T+10 -- November 16, 2018 -- Mexico To Ban Fracking -- That's The Least Of Their Problems

North America, far north to far south:

• Arctic: Obama ceded the Arctic to Russia; previously reported
• Canada: oil patch has lost patience with country's support (or better said -- lack of support) -- reported this morning over at Rigzone; also see story below -- Canada's crude oil crisis is accelerating;
• US: EIA is probably under-reporting crude oil production; official estimates at around 11.6 million bopd; in fact, data suggests over 12 million bopd being produced -- discussed yesterday
• Mexico: investors want clarity -- Argusmedia --

"Unconventional resources should be developed as soon as possible but it has to be backed up by certainty from the government. The current environment does not go hand in hand with certainty."

Mexican oil and natural gas production fell by almost a third during president Enrique Pena Nieto's six-year administration that ends on 31 November, as E&P spending dropped, resources matured and priorities refocused amid the historic 2014 energy reform that dismantled state-owned Pemex's monopoly.

Mexico's unconventional resources are predominantly in the Burgos Basin in northern Mexico, just south of the US Eagle Ford shale play that has revolutionized production levels in the US. Reserves are estimated at around 60bn barrels of oil equivalent, and could revert declining production levels.

But Mexico's first-ever shale tender, currently scheduled for 14 February next year, is in doubt following incoming president Andres Manuel Lopez Obrador's pledge that his administration would not allow hydraulic fracturing.

Pemex has fractured around 22pc of all wells developed in conventional resources but the Morena party, led by Lopez Obrador, said it will seek to ban the practice given concerns around water pollution and environmental damage. 

In response, the Mexican oil chamber (AMEXHI) is currently drafting a paper that seeks to explain the fracking process and environmental concerns that opponents to the practice may have.

Even if Lopez Obrador allows the shale tender to proceed, the remote areas of northern Mexico, where most unconventional resources are located, currently lack the adequate rail, road, pipeline or processing infrastructure required to develop a shale industry of any significant scale, said Victor Maldonado, member of the Coahuila energy cluster, a local energy industry association.
Insufficient and aging infrastructure is also impeding the production of conventional resources licensed under the three tender rounds administered by oil regulator CNH since 2014.

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WCS Falls To Record Low

Updates

November 19, 2018: from Bloomberg --

Heavy Western Canadian Select crude fell to a record low as several oil producers shut in production and some demand the Alberta government intervene to mandate across-the-board cuts. [Years ago, refineries along the Gulf Coast shifted from light oil to heavy oil as their preferred crude oil; that was the reason for the Keystone XL -- the pipeline killed by President Obama.]

The oil-sands benchmark fell $2.29 to $13.46 a barrel Thursday, the lowest in Bloomberg data extending back to 2008. The price broke a previous record set in early 2016, when West Texas Intermediate crude futures were trading under $30 a barrel amid a world-wide supply glut.

The price collapse comes as pipeline bottlenecks in Western Canada constrain exports just as WTI experienced a record losing streak amid rising U.S. stockpiles and projections for reduced demand.

Producers including Canadian Natural Resources Ltd. and Cenovus Energy Inc. have responded to the price drop by curtailing what could amount to as much as 140,000 barrels a day or more, according to company statements. Some operators have gone further, asking that Alberta’s government mandate production cuts across the province.

Original Post

Canada: crude oil crisis is accelerating. Nothing new here -- well, actually there. Free market capitalists -- Canadian oil companies -- are actually asking the Canadian government to step in and mandate cuts in Canadian oil production.  Other data points:

• storage capacity has reached its limits -- that may be the newest wrinkle -- to which some folks may not have been paying attention
• WCS below $18/bbl; for the first time since 2016 -- previously reported
• Iranian sanctions undermined by waivers
• Trump waived his own sanctions
• EU has undermined those sanctions further
• result: unexpected glut of global oil
• Keystone XL: construction halted this past week on judge's order

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Past Her Shelf Life?

Misstep? In The WSJ, Peggy Noonan completely mis-read Melania. Ms Noonan got too far in front of her headlights.