Anticipating Thursday -- February 28, 2018

Updates

March 1, 2018: And here it is. From CNBC -- the US will institute tariffs on steel and aluminum imports next week.  

Original Post

 

From The Wall Street Journal:

Idle Chatter -- Average Daily Production Per Well -- February 28, 2018

During the early days of the blog, one of the metrics I tracked was the average crude oil production/well/day on a monthly basis. For newbies, I thought it was quite striking. In broad brush:

• prior to the Bakken: 35 bopd/well
• when the Bakken hit its stride: 100 bopd/well
• during the Saudi surge, late 2014 - late 2016: trended toward 75 bopd/well
• lately, as WTI trends higher: trending back toward 85 bopd/well

The tables below are from the NDIC.

First table: 2006 - 2009. The "Bakken discovery well" was discovered in 2007.  The last column shows the increase in production/well.

Second table: 2011 - 2014:  By now, the Bakken had hit its stride, and reached a peak of 100+ bopd/well. It was heady days for the Bakken.

Third table: 2015 - 2017. But then the Saudi Surge, late 2014 through late 2016, with an overhang through early 2017. By November, 2016, average daily crude oil production per well had dropped to 72 bopd, a considerable drop from a high of 104 bopd. Looking back, it's amazing companies did as well as they did to stay in business. Some did not.

With the price of WTI trending toward $60+, North Dakota wells (for the most part, Bakken/Three Forks wells) are clawing their way back toward the mid-80's.

There's something else to consider. Some folks made a big deal out of the fact that daily oil production dropped 1.3% from November, 2017, to December, 2017.

But note that there were 17 fewer wells operating in December, 2017, than in the previous month. Most wells in the Bakken come off line for operational reasons.

In addition, the number of operating wells generally increases anywhere from 50 to 250 wells, month-over-month. That decreased number of wells in December, 2017, goes a long way explaining the drop in production, December over November. Weather may have also played a part.

With wells getting better and better, one should see the last column -- average daily production/well -- improve sooner than later. Assuming the decline rate of existing wells can also be managed.

Peak Oil? What Peak Oil? ExxonMobil Reports Another Successful Off-Shore Guyana Well -- February 28, 2018

On February 23, 2018, this from the blog:

Peak oil? What peak oil? During the past two years there have been numerous articles on lack of investment in offshore projects which some suggest are desperately needed to forestall a shortage of oil in the out year (think, "Peak Oil"). Today, from a GlobalData press release: investment of $97 billion on top ten offshore oil projects will add 1.6 million bopd by 2025. Looks like we have a successful project

Looks like we have a success project. ExxonMobil projects 500,000 bopd from the Guyana play. Data points: 

• ExxonMobil has made a seventh oil discovery off-shore Guyana's deepwater Stabroek blck; this play will eventually expand to 500,000 bopd
• reservoir: 65 feet of high-quality, oil-bearing sandstone
• ExxonMobil's first discovery in this area was back in May, 2015: discovered more than 1 billion bbls of oil equivalent; API 32 crude (heavy oil)
• estimated recoverable resources from Stabroek exceed 3.2 billioin of boe

Much more at the link.

But look at that: the GlobalData article suggested an additional 1.6 million bopd by 2025. ExxonMobil added one-half million after one successful well. This suggests to me that the "1.6 million bopd" figure is on the low side. By a lot.

The Political Page, T+38 -- February 28, 2018 -- WalMart Joins Dick's In Limiting Gun Sales

Wouldn't it be something if the president the Democrats hate and Hollywood loathes, actually made the first successful effort in a long time to address the "gun issue." From twitter:

WalMart joins Dick's in limiting gun sales; Trump stuns by embracing gun law changes. Is the tide turning on gun control?

One store at a time.

Has This Been Posted? US Crude Oil Production Hit Record High In November, 2017 -- Shattered A 47-Year Output Record

From Reuters via Rigzone:

• US crude oil production shattered a 47-year output record in November; retreated slightly in December
• oil production from shale continued to upend global supply patterns (memo to self: note to Jane Nielson)
• oil output rose to 10.057 million bopd in November, a revision from earlier estimates
• December production fell to 9.949 million bpd (a decrease of 108,000 bopd)
• November output exceeded the 10.044 million bbls produced in November, 1970
• only Russia now has a greater daily output
• the new record is not likely to last; the US government forecasts 11 million bopd later this year
• the gains are primarily due to production in Texas and North Dakota

Much more at the link.

Pretty much puts another nail in the Hubbert "peak oil" theory, at least as I understand it.

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"It's Time For Us To Get On The Same Page As A Country And Get These Pipelines Built" -- Alberta, Canada, Finance Minister

Hope springs eternal.

Data points:

• stalled Keystone XL may be costing Alberta as much as $400 million in lost royalties during the current fiscal year
• regardless: Alberta is booming
• province GDP grew at 4.5% last year, the fastest rate in Canada; and, more than 2.6% it initially projected (can you spell "CBR"?)
• in 2018, economy forecast to expand 2.8%

Much more at the link.

This Is Really Quite Amazing: For Williston, A "New" Rickard Elementary School; A "New" Wilkinson Elementary School; And An Addition To The Brand New Williston High School -- February 28, 2018

From The Williston Herald.

Drawing for the proposed "new" Rickard Elementary School

The bond referendum will be voted on by Williston residents on March 20, 2018. Williston taxpayers will be asked to approve almost $80 million in bonds for school construction.

If approved, the schools will completed by the all of 2019 -- "in time to beat the majority of (enrollment) growth."

The district is expected to enroll 5,300 students by the year 2024. For some perspective, the entire population of Williston was somewhere between 8,000 and 10,000 when I attended school there.

Other data points for the elementary schools:

• each elementary school: capacity for 600 students
• two separate areas to pick up and drop off students
• larger windows to make it easier to see who's approaching the school
• the library will be close to the main entrance

Data points for the high school addition:

• additions will be accomplished at each end of an already existing classroom wing 
• the existing wing/additions: three stories
• will ad 15 classrooms to the high school
• will expand space for special education

Nine New Permits; Eight Permits Renewed -- February 28, 2018

Active rigs:

$61.63↓↓	2/28/2018	02/28/2017	02/28/2016	02/28/2015	02/28/2014
Active Rigs	58	41	38	119	192

Nine new permits:

• Operators: Whiting (5); MRO (2); Kraken Operating; CLR
  Fields:Sand Creek (McKenzie); Killdeer (Dunn); Ellisville (Williams); Willow Creek (Williams)
• Comments: Whiting has permits for another 5-well Tarpon Federal pad in SWSE 20-153-96

Eight permits renewed:

• MRO (5): one permit each -- a Winnie USA; a Black USA; a St Pierre USA; a Robin USA; and a Cavanaugh USA, all in McKenzie County
• BTA (3): three Barkland permits in Golden Valley

CLR report four DRY holes:

• 34506,  Anderson 11-4HS; Williams County; from a note dated February 22, 2018 -- "Due to the water flow encountered in the Dakota at 5,414 feet while drilling the Anderson 4-4H1, it has been decided to P&A the Anderson 11-4HSL and drill a replacement well with an alternative casing plan.
• 34505, Anderson 10-4HS; Williams County;
• 34504, Anderson 9-4H; Williams County;
• 34441, Anderson 8-41; Williams County;

Graphics Don't Always Tell The Whole Story: Tell Me Again Why The Price Of Gasoline Is Going Up Here In Texas -- February 28, 2018; Filloon On Newfield

US gasoline inventory: tell me again why gasoline prices are rising, and why regular unleaded gasoline/gallon isn't below $2.00 in Texas?

US crude oil inventories. Some things to note about the graph below:

• the 10-year median includes the two years (end of 2014 to the end of 2016) that Saudi Arabia flooded the market with oil, in an unsuccessful attempt to "break" US shale producers;
• during nine of the ten past years the median has been affected by the fact that there has been no effort to curb global production by anyone, not even OPEC;
• it was only in the past year or so, that OPEC and Russia have tried burned off inventory and made a concerted effort to cut production; meanwhile, US producers are setting new production records;
• a 20-year median might be a bit more helpful but even that would be skewed by change in gasoline demand over the past 20 years;
• the best chart to follow crude oil inventories? The number of days of supply which is currently running about 24 days, well below the recent peak of 32 days but somewhat greater than bulls would like to see (18 - 20 days)

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Filloon: Newfield

FWIW, Mike has another of his SeekingAlpha contributions: Newfield well deisng improvements increase oil production over 30%.

• NFX overall oil production up over 30%.
• Utah has seen the biggest improvement followed by North Dakota.
• Oklahoma results have shown little improvement, but other areas more than offset. 

It has been a long time since Newfield  announced it was leaving the Bakken to focus on wells in Utah. While that idea didn't seem to work out, its leasehold in the SCOOP/STACK has interesting potential.

Play results have been inconsistent, but we are beginning to figure out what the play can do. Newfield is active in three main plays. The other two are the Uinta in Utah and Bakken in North Dakota. In this data analysis, we break down and model oil production as a whole and then broken down by play over time.

The Road To Mexico -- February 28, 2018

Two big stories coming out of Mexico:

• Mexico will elect a leftist for president this summer -- think Bernie Sanders on steroids
• Mexico's annual oil output falls below two million bopd

From PennEnergy:

• Mexico's annual crude oil and gas output has fallen below 2 million barrels per day for the first time since comparable records were kept starting in 1990
• state-owned oil company Petroleos Mexicanos reports on its website that average daily output in 2017 was about 52,000 barrels short of the 2 million mark
• production has fallen steadily for the past decade; after peaking at almost 3.4 million barrels per day between 2003 and 2005
• the drop is largely due to the company's inability to find new reserves to replace aging, shallow water fields

Finally, "peak oil" proponents might have a poster child for peak oil.

I can't imagine a leftist president making things better. But I could be wrong. It wouldn't be the first time I've been wrong.

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WSJ Op-Ed: Good Climate News Isn't Told

Another incredibly good op-ed by Holman W. Jenkins, Jr. The article attracted a lot of attention: 425 comments: about 420 more comments than most Journal articles get.

Data points:

• the biggest lie in American climate journalist is that reporters cover climate science as science
• Holman quotes an exemplary French report that begins: “But uncertainty about how hot things will get also stems from the inability of scientists to nail down a very simple question: By how much will Earth’s average surface temperature go up if the amount of CO2 in the atmosphere is doubled?”
• “That ‘known unknown’ is called equilibrium climate sensitivity (ECS), and for the last 25 years the U.N.’s Intergovernmental Panel on Climate Change (IPCC)—the ultimate authority on climate science—has settled on a range of 1.5 C to 4.5 C.”
• the French report describes a new study by climate physicists Peter Cox and Mark Williamson of the University of Exeter and Chris Huntingford of the U.K.’s Center for Ecology and Hydrology. Not only does it narrow the range of expected warming to between 2.2 and 3.4 degrees Celsius, but it rules out the possibility of worrying outcomes higher than 4 degrees.
• more to the point, this 2013 move was a much-needed confession of scientific failure that the Exeter group and others now are trying to remedy. The IPCC’s estimate was no more useful or precise than one developed in 1979 by the U.S. National Research Council, when computers and data sets were far more primitive.
• this 40-year lack of progress is no less embarrassing for being thoroughly unreported in the mainstream press. The journal Nature, where the new study appears, frankly refers to an “intractable problem.” In an accompanying commentary, a climate scientist says the issue remains “stubbornly uncertain.” 
• No better example exists than their gullibility in the face of U.S. government press releases pronouncing the latest year the “warmest on record.” Scroll down and the margin of error cited in the government’s own press release would lead you rightly to suspect that a clear trend is actually hard to find in recent decades despite a prodigious increase in CO2 output.
• Well, guess what? Taking account of the actual temperature record and its tiny variations is exactly what the Exeter group and others have been doing in order to make progress on the 40-year problem of climate sensitivity. And they are finding less risk of a catastrophic outcome than previously thought.

This is the most important data point in the whole op-ed:

This question of climate sensitivity goes not just to how much warming we can expect. It goes to the (almost verboten) question of whether the expected warming will be a net plus or net minus for humanity. And whether the benefit of curbing fossil fuels would be worth the cost.

And, of course, again, as good as the op-ed, it fails to ask the most important question: to what extent is human activity contributing to climate change?

Back to the most important data point in the whole op-ed:

This question of climate sensitivity goes not just to how much warming we can expect. It goes to the (almost verboten) question of whether the expected warming will be a net plus or net minus for humanity. And whether the benefit of curbing fossil fuels would be worth the cost.

Everything I've read suggests that climate warming will actually be a net plus for the northern tier of the United States, and probably great swaths of Canada and Siberia.

Even Tuvala, the poster child for sinking islands due to rising seas, is actually growing in land mass (previously posted).

Now to read some of those 425 comments.

The Market And Energy Page, T+38 -- February 28, 2018

PentagonAmazon: ya gotta love it. From nextgov.com --

In early February, a small Virginia-based company—REAN Cloud—that partners with Amazon Web Services announced a nearly $1 billion deal to provide cloud computing services for the Defense Department.

The contract caught many industry players by surprise, in part due to the $950 million value and partly because it was awarded without a traditional government procurement. This deal may be a harbinger for how the Defense Department plans to purchase certain technologies moving forward.

Using buying powers quietly imbued by Congress over the past three years, U.S. Transportation Command made the award to REAN Cloud under an other transaction production contract based on a prototype project last year to migrate military applications to Amazon Web Services GovCloud region. The contract is a type of other transaction authority, commonly called an OT or OTA.

Led by the Defense Innovation Unit Experimental, which acts as a liaison between the Pentagon and industry, the Defense Department is targeting non-traditional suppliers to rapidly provide cutting-edge commercial technologies that address national security and military challenges.

Boston: if I had all the money in the world, I would have two (town) homes in eastern Massachusetts. One in downtown Boston and one along the North Shore (think Gloucester) or at the end of Cape Cod (think Provincetown). I'll have to settle for the next best thing, I guess. LOL. I'm going to subscribe to the digital edition of the Boston Globe. I would like the print edition but they don't mail their newspaper to subscribers as far as I can tell. We loved the Boston Globe when we visited Massachusetts, and among the on-line newspapers, both my wife and I think it is the best.

BostonAmazon: speaking of Boston, some big things are happening. Headline story in the Boston Globe today: "Amazon set to bring at least 2,000 more jobs to the Seaport. In an effort separate from the company's search for a second headquarters, Amazon is poised to lease a massive new office space in Boston's Seaport District and hire at least 2,000 employees in the city over the next few years." Warren Buffett, in his treacly interview with Becky Quick admitted that he "missed" buying shares in Amazon and now he felt it was too late. Color me "not impressed." Amazon's upside is incredibly better than what I see in Wells Fargo. Oh, that's right -- I'm reminded: Amazon doesn't pay dividends. And Buffett loves dividends -- as long as they are not from his company.

Logan Airport: from the Boston Globe today, "How Logan Airport bounced back from the snowstorm that crippled JFK."

Crime and Corrections: the Boston Globe notes that on the just-released "best states" list compiled by US News, Massachusetts dropped from 1st last year to 8th this year, and the Boston Globe had a very, very good article regarding the survey/ranking. I agree with the Tufts professor who said, "garbage in, garbage out." He noted that US News changed the weighting of the criteria on which the states were based. Topping the list was ... Iowa. North Dakota was number 4. North Dakota would have moved higher on the list, possibly to #1, had its "crime and corrections" been rated better. As it was, here's the "crime and corrections" rating for selected states (the lower the number, the better the state scored): the state ranked #1 for "crime and corrections" / best in the country was Maine. North Dakota was ranked among Maryland (think Baltimore) and Texas and not much better than Florida). Other selected states, "crime and corrections":

The best:

• Maine: 1
• New Jersey: 3
• Massachusetts: 5 
• New York: 10
• Minnesota: 11
• Iowa: 15

In the middle:

• North Dakota: 23 (20 spots below New Jersey; 13 spots below New York; in same group as Baltimore) and not much better than Florida
• Maryland (think Baltimore): 26
• Texas: 27 

The bottom:

• Florida: 31 (didn't they just have a school shooting recently? like the worse in US history?) 
• California: 32
• Montana: 36
• South Dakota: 40
• Nevada: 44
• Missouri (think St Louis): 45

This is what's wrong with the criteria:

• no one cares about the fiscal stability of a state when they are deciding where to live
• the eight criteria that Americans would like to see in their state
• beaches for sun-bathing, and swimming
• longer summers, shorter winters, less snow
• malls
• winter downhill skiing
• low tax rates
• McMansions for the price of bungalows
• abundant, uncongested freeways and highways; roller-skating asphalt trails along the ocean
• inexpensive gasoline; cheaper liquor

Use those eight criteria and I can guarantee you the rankings will change.

Most glaring, of course, was "crime and corrections." "Tough on crime" states fared much worse. Sanctuary states scored better. Remember, this was a US News survey/ranking.

Re-Balancing Back Up To 28 Weeks; WTI Down To $62.26 -- February 28, 2018

EIA weekly petroleum report: link here. 

• see graphics here
• US crude oil inventories: increased by 3 million bbls; now at 423,5 million bbls;  
• refineries operating at 88% of their operable capacity
• gasoline production decreased; down to 9.4 million bpd (number to watch: 10 million bbls)
• distillate fuel remain unchaned, at 4.5 million bopd (number to watch: 5 million bbls)
• total products supplied, up 2.7% from same period last year
• gasoline product supplied over last four weeks, averaged 9.0 million bbls, up almost 4% from same period last year

Gasoline demand chart: pending.

Re-balancing:

Week	Date	Drawdown	Storage	Weeks to RB
Week 0	Apr 26, 2017		529.0	180
Week 24	October 12, 2017	2.8	462.2	40
Week 25	October 18, 2017	5.7	456.5	37
Week 26	October 25, 2017	-0.9	457.3	39
Week 27	November 1, 2017	2.4	454.9	38
Week 28	November 8, 2017	-2.2	457.1	42
Week 29	November 15, 2017	1.9	459.0	43
Week 30	November 22, 2017	1.9	457.1	42
Week 31	November 29, 2017	3.4	453.7	41
Week 32	December 6, 2017	5.6	448.1	37
Week 33	December 13, 2017	5.1	443.0	36
Week 34	December 20, 2017	6.5	436.5	30
Week 35	December 28, 2017	4.6	431.9	28
Week 36	January 4, 2018	7.4	424.5	25
Week 37	January 10, 2018	4.9	419.5	23
Week 38	January 18, 2018	6.9	412.7	20
Week 39	January 24, 2018	1.1	411.6	20
Week 40	January 31, 2018	-6.8	418.4	24
Week 41	February 7, 2018	-1.9	420.3	26
Week 42	February 14, 2018	-1.8	422.1	27
Week 43	February 21, 2018	1.6	420.5	27
Week 44	February 28, 2018	3.0	423.5	28

Gasoline demand: link here.

Wednesday, February 28, 2018

Updates

March 15, 2018: Chinese battery material manufacturer Gem has signed a three-year cobalt offtake agreement with Switzerland-based mining and trading company Glencore, tying up increasingly tight supplies of cobalt for use as feedstock in its production of ternary battery materials.

Spot cobalt metal prices in China have risen by nearly 50pc in the past year to 600-635 yuan/kg, according to Argus' latest assessment on 13 March. The rise in cobalt prices has forced many Chinese battery manufacturers to consider using substitute materials or to reduce the cobalt ratio in NCM ternary cathode material.

NCM lithium-ion material typically comprises 50pc nickel, 20pc cobalt and 30pc manganese (5-2-3 NiCoMn) in China. But many producers aim to change the proportion to 6-2-2 or 8-1-1 NiCoMn by the second half of 2018.

Later, 12:45 p.m. CT: why I love to blog. About three days ago I sent Don an e-mail regarding cobalt. He replied with a link to USGS Minerals -- see the original post for the link. Now, this morning, this from Argus Media: low-cobalt batteries "vital to EV development." Data points:

• a trade group: the development of low-cobalt rechargeable batteries is crucial for the widespread adoption of EVs
• European EV manufacturers already require 25% of global cobalt capacity for the production of rechargeable batteries
• requirement is expected to rise significantly
• greater availability of boron and borates could lead to wider adoption of lithium borate batteries
• cobalt is a crucial cathode component in rechargeable lithium ion batteries
• the Democratic Republic of Congo is home to about half of the world's cobalt reserves
• by the way, I believe there is a trope / meme repeated in the article: "Sweden's Volvo will halt the development of gasoline engines from 2019"; this trope / meme has been stated many ways; some have said that Volvo will no longer manufacture vehicles using ICE. In fact, it is my understanding that after 2019, Volvo will produce hybirds and EVs. It's hard for me to believe that Volvo, in just two years would have absolutely no ICEs in their vehicles. My hunch: 90% hybrids initially (the other 10%, EVs) and then a plan to gradually reduce that figure

Original Post 

USGS Minerals Information: link here.  At the link, clicking on the "year" will download a pdf. Check out cobalt, page 50 of the 2017 update. It should scare every company that relies on batteries, including Apple. And Tesla. Speaking of Tesla, see chart below.

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Chart of the day:

Headlines from Rigzone today:

• Texas governments gain from US "global power broker" status
• US to overtake Russia as top oil producer by 2019 at latest -- IEA
• Big Corn says "no deal" after White House biofuels meeting; Iowa (6) wins; Pennsylvania (20) loses
• Saudi Arabia won't substantially raise output over the next 2-3 years even if OPEC production cut agreement not extended
• SandRidge lays off 30% of Oklahoma City staff 
• Oil dips as industry report shows swelling spare US -- posted yesterday: the American Petroleum Institute was said to have reported U.S. crude stockpiles expanded by 933,000 barrels last week. If confirmed in a government tally scheduled to be released on Wednesday, inventories will have racked up increases in four of the past five weeks: consistent with my re-balancing data
• Total interesting in building 150,000 bpd refinery in Iraq

Making America great again:

Bakken chart of the day:

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 Back to the Bakken

Active rigs:

$62.98↓↓	2/28/2018	02/28/2017	02/28/2016	02/28/2015	02/28/2014
Active Rigs	57	41	38	119	192

RBN Energy: How much Canadian gas can the US west coast take? Wow, that's a great question, after all the articles about the difficulty getting "the pipeline" through British Columbia to the west coast.