Why I Love To Blog -- Reason #56 -- February 2, 2018

Updates

February 4, 2018: and, yes as predicted. South Australia awards Tesla with the contract to save their grid. From Bloomberg:

South Australia plans to roll out solar panels and Tesla Inc. batteries to at least 50,000 homes to form what its government says will be the world’s largest virtual power plant. 

If you encounter a paywall, the story is also at The Guardian:

The South Australian premier said a trial was already under way to install solar panels and Tesla batteries on 1,100 Housing Trust homes. The cost would be financed by the sale of electricity. The power generated by the solar panels and the batteries would not be owned directly by the households.

The program would later be rolled out to another 24,000 public housing properties and also offered to other households with a view to having at least 50,000 Adelaide homes connected.

Not even gonna comment.

Original Post

 

I have long forgotten the origin of this story. It began at least a year or so ago. Maybe longer. I've long forgotten.

One reader from Australia alerted me to the pending implosion of the electric grid in south Australia. a year or so ago. Another reader, closer to home, alerted me to JoanneNova.com.

To make a long story short, to save the world from global warming, Australia decided some years ago -- and very recently in the big scheme of things -- to move electricity generation from coal to wind.

Coal in Australia is very, very cheap. Wind is free.

At least that's what we're told.

On January 18, 2018, spot price for electricity South Australia and environs went as high as ... hold on to your hat ... $14,000 / MWh (no typo).

When I started watching what I call "ISO Australia" (its actual name is AMEC: the Australian Energy Market Commission) I never knew where the story would go. I was simply fascinated by how the Australian grid seemed to be falling apart.

The commission set the bar low: as long as the grid held -- no brownouts or blackouts -- regardless how much it might cost the ratepayer -- the commission declared success: they were saving the world from global warming and Australians were adapting to $14,000/MWh electricity.

Well ... as noted, when I first started following "ISO Australia" I had no idea where it was going. Tonight I found out.

A reader sent me this: AEMC wants input on how to save Australia's electricity grid -- due Monday, February 6th.

As the reader noted, the commission is desperate; the commission needs help and they need it fast. Their phones must be ringing off their hooks (as we used to say).

A scary word in that sentence: "save."

The scariest words in that sentence: "by Monday February 6th."

Let's see -- it's Friday, here, February 2nd. That would make Monday, February 5th.

February 6th would be a Tuesday. Maybe AEMC, along with saving the world from global warming, uses a different calendar ... or maybe it has something to do with the International Date Line. I don't know.

But I digress. [Something tells me I'm on thin ice here; maybe Monday really is February 6th in Australia. Check Australian calendar.]

But the AEMA needs help; and they need help now. To save the grid.

They'll worry about saving the world later.

By the way, if you take time to read the story at the link, be sure to read the comments. The commission is already getting advice.

The big question is whether Elon Musk has time to save the Australian electricity grid. 

Update On Massachusetts' Plan To Bring Hydro-Electricity In From Canada -- February 2, 2018

The continuing balkanization of America.

See this note from January 28, 2018, for background. 

From Worcester Business Journal:

A permit that the Northern Pass project had been counting on was denied by New Hampshire site evaluators on Thursday, jeopardizing the Bay State's newly minted plan to transmit hydropower from Quebec to Massachusetts.

The New Hampshire Site Evaluation Committee's (SEC) unanimous vote occurred a week after Massachusetts officials and utilities selected the project – a joint effort of Eversource and Hydro-Quebec to run transmission through the White Mountains – after a major renewable energy procurement.

My thoughts, not ready for prime time, when a reader sent me that note:

Some years ago I suggested (to myself) that we were seeing the Balkanization of the US.

Balkanize: divide (a region or body) into smaller mutually hostile states or groups.

I don't recall what was happening then that made me think of the balkanization of the US but it certainly seems that is what we are seeing here. I thought the balkanization of America would end at the regional level (south vs north; west vs east; west vs midwest; etc) but now we are seeing it intra-regionally: states with similar values and background are unable to come together to help each other out. 

It seems Massachusetts could find some help from the federal government but because the "trade" is coming from Canada, maybe there is no case of "restraint of interstate trade."

The New Hampshire vote appeared not to be close. 

Atmospheric CO2 -- FWIW -- February, 2018

Scripps data:

Previously:

• December, 2017 (last month): 407.01
• May, 2017 (seasonal variation noted): 409.65
• February, 2017: (one year ago): 406.42
• Delta over one year: 1.3 ppm 
• 1.3 / 1 million =  0.0000013
• neither reproducible, nor statistically significant

Except For One Or Two Laggards, All EV Manufacturers Have Reported For January, 2018

Link here.

The most striking data point: the year-over-year change in sales/deliveries.  

One year ago, January, 2017, a total of 11,004 EVs were sold/delivered.

For January, 2018: 11,906.

That is an 8% jump in sales, year-over-year, so that is impressive, but in absolute numbers, both months below 12,000. Tesla had said that by this time it would be delivering 5,000 units of its Model 3. 

The other striking data point: how far the Nissan Leaf has fallen in sales, from #5 (last year) to #19 (this year). It would help if Insideevs would put asterisks on models that are being phased out. That would explain drop in some sales. 

Two New Permits, Not Much Else -- February 2, 2018

Active rigs:

$65.06↓	2/2/2018	02/02/2017	02/02/2016	02/02/2015	02/02/2014
Active Rigs	57	40	44	145	192

Two new permits: pending

• Operator: MRO
  Field: Killdeer (Dunn County)
  Comments:

One permit canceled: a Lime Rock Dora permit in Mountrail County

Nine permits renewed:

• CLR (6): six Sorenson permits in Mountrail County
• Kaiser-Francis Oil (2): an Albert permit and an Agnes permit, both in Stark County
• Sinclair: a Highland permit in Mountrail County

No producing wells (DUCs) reported as completed.

And that was all.

Richard Zeits On Ten Million BOPD And What It Means For The US, Saudi Arabia -- February 2, 2018

I have a fairly long post with updates regarding all the hand-wringing about "decreased conventional discoveries" and how that will lead to a scarcity of oil in the "near future." Some refer to this as "peak oil."

Richard Zeits has an incredibly good column today over at SeekingAlpha further suggesting that "peak oil" will be pushed further to the right. Archived.

It's one thing to read "ten million bopd" but when one sees the graphic, it's absolutely stunning.

It should be noted that the US is producing way below its potential. The Bakken has about 2,000 wells that are either DUCs or completed/shut in for operational reasons. I don't think 2,000 wells have ever been drilled in one year in North Dakota, even at the peak of the boom. In addition, there are less than 60 active rigs in North Dakota; at the peak of the boom, more than 200. Everyday more and more infrastructure is being put in place in North Dakota. Unfettered, North Dakota will produce 2.2 million bopd.

By the way, this is the third or fourth article by Richard Zeits regarding ultra-lights. Others have referred to 'ultra-lights" as "light ends" and that's how I've tagged articles on "ultra-lights." I may start using both tags ("light ends"; and, "ultra-lights"). 

And then there's the Permian. Oasis just moved into the Permian this past year. And Exxon, too, just moved in this past year. Exxon may not be in a panic, but investors are not happy; something tells me Exxon will hit the Permian, "full speed ahead, damn the torpedoes."

Much could be written but it's easier to just go to the linked article by Zeits.

By the way, the "peak oil" folks are now talking about the end of Tier 1 drilling locations. "Peak oilers" never quit.

Chevron Posts Strongest Year Of Crude Oil Discoveries Since 2011 -- February 2, 2018

I have a fairly long post with updates regarding all the hand-wringing about "decreased conventional discoveries" and how that will lead to a scarcity of oil in the "near future." Some refer to this as "peak oil."

Two graphs at that link:

Today, Don sends me the link to this article from Bloomberg: Chevron posts strongest year of crude discoveries since 2011.

Chevron found enough untapped fields to replace 155 percent of the crude and gas it pumped last year, the highest reserves replacement since 2011. The biggest additions were in the U.S. Permian Basin and Australia, the company said in a statement on Friday.

Yes, much of that is shale, but oil is oil.

From MarketsInsider:

"We replaced more than 150 percent of the reserves we produced, and reached several significant upstream project milestones in 2017,” Wirth added. "These included our first LNG shipments from Train 3 at Gorgon and Train 1 at Wheatstone in Australia. We also posted impressive production growth in the Permian Basin in the U.S.”

The company added approximately 1.54 billion barrels of net oil-equivalent proved reserves in 2017. These additions, which are subject to final reviews, equate to approximately 155 percent of net oil-equivalent production for the year. The largest additions were from the Permian Basin in the United States and the Gorgon Project in Australia. The company will provide additional details relating to 2017 reserve additions in its Annual Report on Form 10-K scheduled for filing with the SEC on February 22, 2018.

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

When Your Home Really Is Your Castle

In today's print edition of The Wall Street Journal, the "Mansion" section features three homes from across the US modeled after medieval castles that are up for sale.

We are quite familiar with this one, just a few miles down the road from us, in Southlake, Texas: if there are no soccer fields available, the lot is big enough for teams to practice.

The mansion above does not have a wall, per se (it has a wrought-iron fence), unlike the house of Joe Kennedy, III, who is very, very much against the Trump wall. Via Twitter, posted earlier today:

And, wow, that's an awful-looking wall.

Petrolithium -- For The Archives -- From Platt's -- February 2, 2018

Link here.

Lithium is one of the main ingredients of the lithium-ion battery used for electric vehicles and has been on a bull run since 2015. Production increased substantially in 2017 with a flurry of new investors bringing capacity on stream, so there's no sign of deficit, but lithium prices doubled in 2016 and remain lofty.

[MGX]  has acquired more than 2 million acres of brine-bearing formations in North America and just recently ventured into Chile. "The real prize is in South America," Lazerson said.

This is where there is higher value -- up to 1,000 ppm of lithium compared to other brine formations in North America where, typically, 300 ppm is present. Its North American lithium holdings are in Alberta, Canada and Utah in the US.

Earlier this week, MGX said that its operating partner received approval from the State of Utah Division of Oil, Gas & Mining to conduct a 3D geophysical survey on the Blueberry Unit at its Paradox Basin Petrolithium Project.

"The project represents the first large scale integrated petroleum and lithium exploration project in the United States and is located proximate to the Lisbon Valley oilfield within the Paradox Basin, which has shown historical brine content as high as 730 ppm lithium," MGX said.

The Paradox Basin is linked at the sidebar at the right.

EIA Posts Update On Elk Creek Pipeline Project -- February 2, 2018

Is it worth it to the states to have pipelines? From The Bismarck Tribune, October 10, 2017:

The Dakota Access Pipeline has boosted North Dakota’s tax revenues by $19 million in its first three months of operation, according to an analysis by the North Dakota Pipeline Authority.

But I digress.

From Twitter, twelve minutes ago, we've discussed the Elk Creek pipeline project earlier:

Story here.

Route runs nowhere near Standing Rock Indian Reservation in North Dakota and does not enter Nebraska. Whoo-hoo! Even Iowa is out of play. LOL. Even though Iowa is out of play, the green arrows suggest Iowa will gladly accept the energy once it's been produced, transported, processed, and delivered, maybe even subsidized by the state. Oh, no, that's wind energy that's subsidized. My bad. One of my favorite books in kindergarten when growing up in Williston, The Little Red Hen.

See RBN story here.

At the blog, January 5, 2018.

As we see more and more of these stories, we start to see a real buildout of another geographical energy sector in the US. For the first five or six years of the Bakken, it seemed many folks considered exploration and production of Bakken oil from North Dakota as simply a one-off, that it would peak and then slowly become a "backwater" energy play. As more and more infrastructure goes in, more and more production comes on line.

It's fun to read the history of Calgary.

The Market And Energy Page, T+12 -- February 2, 2018

Ford: selling $100,000 SUVs faster than they can make them. What a great country.

January auto sales: January, down.

Tesla: slashes return on bonds; investors "can't get enough of them" -- Bloomberg; sold $546 million of auto lease-backed bonds; the article doesn't say, but a fairly recent article suggested that slightly more than 50% of Tesla deliveries are leases.

Hostess Brands: $1.250 bonuses; and free snacks under Trump. Under Obama, Hostess Brands declared bankruptcy.  Don reminded me that under Obama's oppressive regime (high taxes; heavy regulation), Hostess Brands declared bankruptcy.

Friday, February 2, 2018 -- Solid Unemployment Report

Monthly jobs report: pending.

• Forecast: 177,000 added
• unemployment rate: 4.1%
• actual: 200,000 jobs added
• unemployment rate: 4.1%
• U6: 8.2%
• African-American unemployment: 7.7%, up from 6.7%
• average hourly earnings: up 0.3% -- it's been a long time since hourly wages "popped" this much
• market reaction: Dow futures down 228 points
• market reaction: 10-yr-T-note: 2.83%  (up 0.059)
• December payrolls increased to 160,000 from original report of 148,000 jobs added
• "a very solid unemployment report" -- CNBC  
• most important number: labor force participation -- 62.7%
• second most important number: the jump in hourly wages

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

Back to the Bakken

Black gold: Goldman says oil to surpass $80 with market likely balanced.

Goldman Sachs Group Inc. hiked its short-term crude oil price forecast by as much as 33 percent, saying the market is now likely balanced. 

The bank now estimates Brent will reach $75 a barrel over the next three months and will climb to $82.50 within six months, analysts including Damien Courvalin wrote in an emailed report. Their previous estimate for both time periods was $62 a barrel.

“The rebalancing of the oil market has likely been achieved, six months sooner than we had expected,” Goldman’s analysts wrote. “The decline in excess inventories was fast-forwarded in late 2017 by stellar demand growth, high OPEC compliance, heavy maintenance as well as collapsing Venezuela production.”

Goldman joins other Wall Street banks including Morgan Stanley and JPMorgan Chase & Co. in ratcheting up its outlook, as economic growth and output cuts led by the Organization of Petroleum Exporting Countries have helped to boost prices. Morgan Stanley recently said Brent will reach $75 a barrel this year, while JPMorgan said it could rise to near $78 as oil markets tighten more rapidly than expected.

Bloomberg on the Bakken: link here, February 1, 2018.

Minneapolis Fed on the Bakken: link here, February 1, 2018.

Active rigs:

$65.73↓	2/2/2018	02/02/2017	02/02/2016	02/02/2015	02/02/2014
Active Rigs	58	40	44	145	192

RBN Energy: streamlining Permian water delivery and produced water takeaway, part 3.

The Permian is experiencing the build-out of a wide variety of midstream infrastructure: crude oil and natural gas gathering systems, gas processing plants and crude, gas and NGL takeaway pipelines.

Lately, there’s also been a rush to develop pipelines to deliver water to wells for use in hydraulic fracturing, as well as pipes to transport produced water from the lease to disposal wells and produced-water recycling plants. By installing and expanding these water and produced-water pipeline systems — some of them hundreds of miles long — Permian producers and third-party water-logistics providers are reducing the need for trucks on the Permian’s congested roads and significantly reducing per-barrel water transportation costs. Today, we continue our blog series on water-related pipeline, storage and treatment infrastructure in the Permian’s Delaware and Midland basins.

RBN’s middle-of-the-road Growth Scenario shows Permian crude oil production rising by about 500 Mb/d a year through the early 2020s — topping 3 MMb/d late this year, 4 MMb/d in late 2020 and 5 MMb/d in late 2022 — and recent increases in oil prices could accelerate the pace of that growth.

The Permian’s expansion is driven by what you might call the supersizing and “assembly-lining” of production in the play. Producers are piecing together ever-larger leaseholds in the parts of the Delaware and Midland basins they have determined to be the most promising, and filling in gaps so their holdings are contiguous and are not interspersed with leases held by other producers. That is enabling producers to drill longer horizontal wells or laterals (now often 7,500 to 10,000 feet, and sometimes longer). And they are intensifying their well completions with the use of more pressure, more water, more frac sand per linear foot of lateral and more frac stages.