That Ban On Leasing On Federal Land? Not So Much -- March 18, 2021

If logic prevails, pop quiz:

• prevailing theme: OPEC is in control of the price of oil this year;
• Saudi Arabia cannot survive on $60 oil
• Conclusion: fill in the blank -- ___________________________________________.

Hess: sells Danish assets to Ineos; link here;

• Ineos Energy will acquire Hess Corp subsidiary Hess Denmark for $150 million
• Ineos will acquire 61.5% of the Hess-operated South (Syd) Arne oil field in the Danish North Sea
• this will add to the 36.8% share Ineos already holds in the field:
• Ineos will also acquire 4.8% of Solsort field, which is already operated by Ineos
• lots of "green" talk in the article

Mexico: this was posted a few days ago; a prediction that Mexico would announce an oil discovery;

• such announcements are usually made about this time every year:
• generally, political announcements;
• folks not taking the announcement of the discovery very seriously;

Norway: Sweden's Lundin Energy sees growth in Sverdrup oilfield;

• Lundin is partnered with Norway developing this field
• production capacity from 2.2 billion to 3.2 billion boe;
• largest field in western Europe
• recoverable reserves already revised up several times since its startup in October, 2019;

 Natural gas: Henry Hub forwards hit two-month low as summer supply outlook turns bearish.

Shale: 0% growth, free cash flow, and inventory analysis.

Shale: first shale IPO in years leaves Wall Street unimpressed.

• Vine Energy Inc: 21.5 million shares for a total of $301 million;
• Plano, TX, based.
• Focus: natural gas, Haynesville
• planned: $16  - $19 / share IPO
• actual: $14 / share; raised $281 million
  

BLM: not Black Lives Matter. The other "BLM." BLM is now approving permits for Federal lands.

Scam: "blue hydrogen" is not green either; if anything, it's "brown"; link here;

• BP is going "green"
• BP will help the UK not use natural gas by using hydrogen made by natural gas
• which makes CO2 in the process

Vaccine: India, major vaccine producer may have trouble meeting demand; link here;

• who's to blame: the US
• why: US exports bans on specific items to make vaccines, such as specialized bags and filters
• source: BBC
• something tells me there is more to the story;

US steel:

• the south has risen again!
• the southern US has emerged as the nation's top steel-producing region in 2020;
• Alabama, Arkansas, Mississippi, and South Carolina;
  
• culminates a steady shift away from the traditional steelmaking rust-belt in the north
• coming up short: Chicago, Detroit, Cleveland, Pittsburgh;
  
• link here;

Politics: CNN has lost 47% of its primetime audience in the 25 - 54 age demographic since President Trump left office. Link here.

Ovintiv's Obenour, Sturgeon And Bernice Wells In South Tobacco Garden; Older Well With Jump In Production -- March 18, 2021

The wells:

• 37101, A/DRL, Ovintiv, Obenour 150-99-28-33-5HLW, South Tobacco Garden, first production, 3/20, t--; cum 152K 1/21;
• 36910, A/DRL, Ovintiv, Bernice 150-99-17-20-4H, South Tobacco Garden, first production, 2/20, t--; cum 242K 1/20;
• 36908, A/DRL, Ovintiv, Bernice 150-99-17-20-5H, South Tobacco Garden, first production,1/20, t--; cum 151K 1/21;
• 37105, A/DRL, Ovintiv, Obenour 150-99-28-33-1HR, South Tobacco Garden, first production, 3/20, t--; cum 182K 1/21;
• 36647, A/DRL, Ovintiv, Sturgeon 150-99-18-19-78HLW, South Tobacco Garden, first production, 1/20, t--; cum --; off line immediately after only 29 days; remains off line 1/21;
• 36648, A/DRL, Ovintiv, Sturgeon 150-99-18-19-7H, South Tobacco Garden, first production, 1/20, t--; cum 183K 1/2

Nearby wells of interest:

• 35975, 1,834, Ovintiv, Sturgeon 150-99-18-19-4H, South Tobacco Road, F, t7/19; cum 208K 1/21;
• 35976, 1,311, Ovintiv, Sturgeon 150-99-18-19-11H, South Tobacco Road, F, t7/19; cum 108K 1/21;
• 35977, 2,106, Ovintiv, Sturgeon 150-99-18-19-5H, South Tobacco Road, F, t7/19; cum 233K 1/21;
• 21192, 2,148, Ovintiv, Bernice 150-99-20-17-1H, South Tobacco Road, t1/12; cum 337K 1/21; jump in production, 1/20; full production here; a 10-fold jump in production; not re-fracked;
  

**************************************
36910

The well:

• 36910, A/DRL, Ovintiv, Bernice 150-99-17-20-4H, South Tobacco Garden, first production, 2/20, t--; cum 242K 1/20; fracked 11/24/2019 - 12/3/2019; 9.8 million gallons of water; 91.6% water by mass;
  

From the file report:

• spud: September 17, 2019
• KOP: October 1, 2019
• lateral:
• 88.23% drilled in 15' target zone
• 3.9% drilled above target in middle Bakken "D" facies
• 8.58% drilled below target in middle Bakken "B" facies
• TD: October 22, 2019
• look how long it took to drill the lateral: three days;
• lateral began October 19, 2019;
• a 10' to 15' flare was observed during the second half of the lateral

Production:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	1-2021	31	10343	10492	12035	18389	18084	168
BAKKEN	12-2020	31	12925	12923	16841	26737	26566	16
BAKKEN	11-2020	30	14346	14149	24312	23673	21972	1560
BAKKEN	10-2020	31	9510	9255	19304	13729	13216	361
BAKKEN	9-2020	30	9475	9361	15197	14357	13217	982
BAKKEN	8-2020	31	11898	12054	20748	17757	17530	56
BAKKEN	7-2020	31	16619	16660	27821	23250	22944	174
BAKKEN	6-2020	30	19614	19805	22299	25108	24822	171
BAKKEN	5-2020	31	22320	21903	23450	28111	27868	104
BAKKEN	4-2020	22	16191	16432	20249	21661	21440	130
BAKKEN	3-2020	31	39578	40155	40605	53668	43851	9692
BAKKEN	2-2020	29	58353	56739	44758	58491	0	58394
BAKKEN	1-2020	11	403	381	4553	118	0	118

Ovintiv Reports Seven Nice DUCs In South Tobacco Garden -- March 18, 2021

Brent crude sank even lower, down 8% on the day to $62.5 / bbl. It's the biggest one-day drop since last April (and excluding March - April 2020, and the 2008 - 2009 financial crisis, among the largest one-day drops of the last two decades). Wow, lots of exceptions / qualifiers in that breathless tweet. 

Before we get too excited about today, one year ago today, flashback, March 18, 2020:

• Saudi Aramco CEO "comfortable" with $30-oil; one wonders if he is comfortable with $20-oil?
• WTI: $22.87
• Breaking news: US oil prices tumble 14% as recession fears grow
• Iraq desperate for OPEC action as oil prices crash

So, that was exactly one year ago.

Now, back to the Bakken, today.

Active rigs:

$60.08	3/18/2021	03/18/2020	03/18/2019	03/18/2018	03/18/2017
Active Rigs	16	55	65	58	47

One new permit, #38213 --

• Operator: MRO
• Field: Werner (Dunn)
• Comments: MRO has a permit for a Katherine Schettler USA well in section 27-1346-92
• 883' FNL and 1798' FEL

Seven producing wells (DUCs) reported as completed:

• 37101, A/DRL, Ovintiv, Obenour 150-99-28-33-5HLW, South Tobacco Garden, first production, 3/20, t--; cum 152K 1/21;
• 36910, A/DRL, Ovintiv, Bernice 150-99-17-20-4H, South Tobacco Garden, first production, 2/20, t--; cum 242K 1/20;
• 36908, DUC, Ovintiv, Bernice 150-99-17-20-5H, South Tobacco Garden, first production,1/20, t--; cum 151K 1/21;
• 37105, A/DRL, Ovintiv, Obenour 150-99-28-33-1HR, South Tobacco Garden, first production, 3/20, t--; cum 182K 1/21;
• 36647, A/DRL, Ovintiv, Sturgeon 150-99-18-19-78HLW, South Tobacco Garden, first production, 1/20, t--; cum --; off line immediately after only 29 days; remains off line 1/21;
• 36648, A/DRL, Ovintiv, Sturgeon 150-99-18-19-7H, South Tobacco Garden, first production, 1/20, t--; cum 183K 1/21;
• 37102, A/DRL, Ovintiv, Obenour 150-99-28-33-6H, South Tobacco Garden, first production, 3/20, t--; cum 153K 1/21;

Dilles Bottom, Ohio, Cracker Plant -- Update -- March 18, 2021

In reply to an earlier post regarding the plastics shortage due to the Texas Deep Freeze, a reader mentioned the Dilles Bottom, Ohio, cracker plant. I was unfamiliar with this plant. 

Three links. The third link below was undated but it sounds like it was published back in 2016. Note that the Dilles Bottom cracker story was one of the top regional stories last year (2020).

https://www.theintelligencer.net/news/top-headlines/2020/12/the-top-stories-of-2020-pandemic-delays-ptt-project-indefinitely/

https://www.theintelligencer.net/news/community/2021/02/ptt-global-chemical-america-denies-reports-of-further-delay-in-belmont-county-cracker-decision/

From 2016? https://www.constructionboxscore.com/project-news/work-on-dilles-bottom-cracker-plant-continues.aspx

Keystone XL Lawsuit -- Op-Ed -- March 18, 2021

Op-ed piece regarding the Keystone XL lawsuit sent to me by a reader. Thank you.

The reader states that the op-ed may be a bit more optimistic than the "facts" would suggest. 

Regardless of the initial outcome, one would expect that the ruling would be appealed to the US Supreme Court. On its "merits," one would assume this would be an important case for the US Supreme Court but my hunch? The US Supreme Court doesn't like to take pipeline cases.

Anticipation -- Saudi Aramco Will Release Full Year (2020) Results On Sunday, March 21, 2021

By they way, I think I just saw a headline suggesting Saudi Arabia will extend production cuts. 

Watch for links.  

S&P Global Platts with forecast at this link. Summary:

• Saudi oil giant unveils 2020 earnings March 21
• Capex cuts expected to endure into 2021
• Cheap onshore crude production favored

From the linked article:

Oil prices have largely rebounded to pre-pandemic levels on the back of severe Saudi-led OPEC+ production cuts, but industry sources and analysts say they expect Aramco to continue postponing or even abandoning international projects and more expensive domestic offshore ventures, as it seeks to conserve cash after a fiscally brutal year.

Aramco CEO Amin Nasser has said he does not see global demand fully recovering until 2022. [That would make sense: we're well into 2021 and things are not looking good in Europe, yet.]

In its Q3 results, released in November, Aramco said its profits crashed by 44.6% to $11.79 billion compared with $21.29 billion for the same quarter of 2019, reflecting the plunge in global oil demand due to the coronavirus pandemic. [Saudi Aramco has a $75-billion-annual dividend obligation. At an annualized rate, 3Q20 profits would barely cover the dividend.]

Its 2020 capex budget was slashed by half, to under $25 billion, and the company, which holds about 12% of the world's crude production capacity, is reportedly planning a similar capex budget for 2021.

Oil Sinks To Lowest This Month On U.S. - Russia Tension, Rising Inventory -- SeekingAlpha -- March 18, 2021

Updates

March 19, 2021: see comments --

• https://www.barchart.com/futures/quotes/CLJ21/price-history/historical; April, 2021: $61.32.
  
• https://www.barchart.com/futures/quotes/CLK21/price-history/historical; May, 2021: $61.37.
  
• https://www.barchart.com/futures/quotes/CLR21/price-history/historical; Oct, 2021: $59.49.
  
• https://www.barchart.com/futures/quotes/CLJ23/price-history/historical; April, 2023: $52.32.
  

Delivery month: 

Original Post

Link here. 

Crude oil futures plunged more than 5% in their biggest intraday loss since December, 2020, with some analysts citing concerns over rising tensions between the U.S. and Russia.

April WTI crude fell 5.8% to $60.85/bbl and May Brent fell 5.5% to $64.23/bbl, both hitting at least two-week lows.

The fifth day of declines for both contracts also marks the longest losing streak for WTI since February 2020 and for Brent since September 2020.

"U.S.-Russia tensions are increasing, with the U.S. threatening sanctions on Russia," ... one way Russia could retaliate is to target shale producers by flooding the market with oil.

President Biden earlier this week essentially called Russian President Putin "a killer," prompting Russia to recall its ambassador to the U.S. for consultations.

Analysts say Europe's sluggish vaccine rollout also remains a weight on crude, raising questions about the speed of the recovery in demand.

"Even if the AstraZeneca vaccine recovers public confidence, this will likely not be the last inoculation issue to arise as countries race to vaccinate as many people as possible all while new mutations are constantly being discovered," says Rystad Energy analyst Louise Dickson.

Also, U.S. government data continues to show rising crude inventories after last month's Texas freeze forced shutdowns at refineries, and traders say stockpiles could grow further since WTI recently switched from backwardation to contango, where front-month oil is cheaper than the second-month.

"Contango is bearish because it encourages [firms to] store crude oil and sell it further down the curve at a profit," Mizuho's Bob Yawger says. 

And the latest report from the International Energy Agency said pre-pandemic global oil demand is unlikely to return for at least another two years.

Bad, bad news for Saudi Arabia. 

By the way, if you like predictions from agencies like the IEA, you will enjoy this from the Canadian Geological Survey in 2006. 

This is what should be concerning to fossil fuel energy bulls with regard to the US: no matter how you spin it, this is not encouraging.

Natural Gas -- Dire Warnings -- Canadian Geological Survey -- Flashback -- 2006 -- For The Archives -- Posted March 18, 2021

This video link was sent to me by a reader.

Could this guy have been more "far off"? This is absolutely incredible. 

Bottom line: this guy said that by 2025 natural gas supplies would be so constrained we would be in dire straits. I wonder where this guy is now?

The interesting thing was that this was from 2006.

2006 Peak Oil Conference - A Midnight Ride for Peak Oil Boston University, October 26-27.

The video was posted in 2013 so don't be confused. This speech was not given in 2013. It was given October 26 - 27, 2006. 

This was exactly one year before the Bakken shale revolution began. 

For newbies: the Bakken revolution began in 2000 with discoveries in eastern Montana, along the North Dakota state line. The "real" Bakken revolution began in 2007 with the EOG Parshall discovery. 

I assume this video was posted in 2013 just to demonstrate how "far off" this expert was.  

I doubt very many readers will actually listen to this speech, but it's incredible how "far off" he was. He was incredibly wrong.

A  huge "thank you" to the reader for sending me this.

Why Explorers Are Not Targeting More Natural Gas On The Way To Hydrogen -- Westwood -- March 18, 2021

For newbies: scope 1, 2, and 3 emissions. 

From Westwood: why explorers are not targeting more gas in response to the "Energy Transition."

There has been much talk about natural gas as a transition fuel, primarily in helping to lower emissions and pollution by displacing coal in power generation, but also in complementing intermittent renewables, and targeting the (blue) hydrogen economy in the longer term. Forecasters of energy demand, such as the IEA, tend to project gas demand holding up for longer than oil, and a number of E&P companies include natural gas as a core part of their energy transition and net-zero emissions strategies. Is there any evidence that explorers are now targeting more gas in exploration?

Not yet.  In fact, 2021 is expected to see the lowest proportion of high impact exploration wells targeting gas in more than a decade.

Overall, 32% of high-impact wells targeted gas prospects in 2011-2019. The highest proportion was  in 2019 when ~45% of high impact wells targetted gas. This was due to  drilling campaigns by BHP in deepwater Trinidad, BP in MSGBC and Exxon/Eni in the Eastern Mediterranean. There were also slight increases in 2014 and 2015 as East Africa was drilled out, however, oil has remained the primary target throughout the period accounting for two thirds of high impact exploration wells.

Reasons provided by Westwood:

So why is gas exploration not proving more popular during the energy transition?

Firstly, most of the world’s E&P companies have not yet committed to reducing their scope 3 emissions, and are therefore not specifically targeting natural gas exploration as part of an energy transition strategy. The focus is still on near term targets of reducing Scope 1 and 2 (operational) emissions to maintain a licence to operate.

Secondly, more than 60% of the discovered resource in 2012-2020 was gas, even though ~70% of high-impact wells were targeting oil. 

This was due to a number of giant gas discoveries, as well as the industry discovering gas in plays where oil was the primary target.

In fact, the industry has already found more natural gas than it needs or can commercialise in current market conditions. 

~36bnboe of gas discovered 2008-2016 remains in the ground with no current plans for development (see Westwood’s ‘Stalled Resources’ insight in October 2020). The exploration for gas that is happening now is focused on plays where the route to market is clearer, but big gas prospects with access to an attractive gas market that can be commercialized quickly are hard to find.

Until this equation changes explorers will still tend to favour oil.

Natural Gas Fill Rate -- March 18, 2021

Some years ago I started following "natural gas fill rate." After a year or two of following this "fill rate" metric, the cyclic nature was entirely predictable, and whenever the fill rate started going outside the broad band (minimum / maximum), operators were able to respond almost immediately. At least that was my take. 

So, I got bored with this whole metric and quit following it. But then a year or so ago, I started following it again. I don't remember what changed that changed my mind about following the natural gas fill rate.

After the Texas February (2021) Deep Freeze, I thought we might actually see something new. I thought natural gas inventories would plummet significantly and go well below the old minimum. Not to be.

The Texas Deep Freeze did take natural gas inventories below the five-year average and for a week or so it looked like, finally, operators were not going to be able to meet supply demand. And then, one to two weeks after the Texas Deep Freeze and the sharply downward trend started to level out. It was subtle but it was visible, and I posted that on March 4, 2021. That data would have been for week ending in late February, only two weeks after the Texas Deep Freeze. 

I will continue to post the "fill rate" but I'm not sure why. 

Link here. 

Crude Oil Peak Nowhere In Sight. Sorry. Not Sorry. -- March 18, 2021

Updates

Later, 3:21 p.m. CT: in response to the plastics shortage below a reader wrote -- 

A consequence to the Texas petchem industry curtailment might be a positive incentive to the anticipated FID for the Dilles Bottom, Ohio cracker plant build out.  

This will be a huge boost not only to the Appalachian Basin hydrocarbon industry, but the large number of downstream companies that use this ultra cheap feedstock will have strong financial encouragement to set up shop locally and greatly enhance the economic potential of this downtrodden region.

Original Post

From yesterday, a headline and story in The Wall Street Journal:

• Supply chain woes slam global manufacturing
• Texas deep freeze: triggers plastics shortage (so you think peak oil demand is so yesterday?)
• backlogs at California ports

Today -- plastics really do make a difference:   

• building on the story posted yesterday. 
• plastic prices hit record high to stoke inflation concerns;

Oh, Lordy -- This House Of Cards Is Starting To Fall -- March 18, 2021

Lordstown: 

• link here; and, here; and, here;

 ***********************************
I Give You All Of My Money

Saudi Arabia On The Ropes; Saudi: "We Won't Let This Stand" -- March 18, 2021

We've been here before -- suggesting Saudi Arabia being on the ropes --  but with oil plummeting today -- even as the global economy "returns" --  and now this from India (previously reported but the story is getting legs).

The headline story: US overtakes Saudi Arabia as India's second highest crude oil importer in February.

The bigger story: Saudi Arabia drops to fourth!

India: the story builds. Link here.

Gasoline Demand: Data Diverging -- March 18, 2021

EIA data and GasBuddy data continue(s) to diverge. 

• Gasoline demand: link here.  

The GasBuddy screenshot:

EIA data not corroborating GasBuddy data.

No matter how you spin it, this is not encouraging:

MAGA --> Build Back Better --> Make American Last --> MMGA -- Ford Moving To Mexico -- March 18, 2021

Biden's "make America last" policy will make Mexico great again. 

Link here. The headline:

The story:

The Ford Motor Company, a multinational automaker, is reportedly planning to move a $900 million investment originally intended for an Avon Lake, Ohio plant to a site in Mexico, the United Auto Workers (UAW) union alleges.

In a letter to Ohio Assembly Plant (OHAP) employees in Avon Lake, where Ford employs about 1,740 workers manufacturing its F-650 and F-750 medium duty trucks, UAW official Gerald Kariem said Ford had committed to investing $900 million in the project in 2019.

The massive investment, Kariem wrote to workers, included a Ford commitment to bring a “next-generation product” to the Ohio Assembly Plant for production by 2023 and an “exciting vision for the complete revitalization” of the plant to secure “employment well into the foreseeable future.”

“These contractual commitments were an enormous win for the UAW, for the great state of Ohio, the community of Avon Lake, and most importantly the members of Local 2000,” Kariem wrote.

Now, though, the UAW official says Ford executives are backing out of the deal and plan to move the investment to Mexico.

Reality sucks:

Despite Ford’s deep-rooted history in the United States, founded by Henry Ford in 1903, the automaker now has more plants abroad than it does in the U.S. 

For instance, of Ford’s 36 assembly plants, just eight of them are in the U.S. Meanwhile, 28 of the automaker’s assembly 36 assembly plants are in countries like China, Mexico, Germany, India, Brazil, and Vietnam. China, alone, has seven Ford assembly plants. 

The question is "why?" Let's start listing the reasons:

• taxes; 
• regulations; 
• minimum wage laws; 
• health care costs (ObamaCare) 
• Cancun vs Cleveland
  

WTI Plummets; Active Rigs In North Dakota Drops By One; No New Wells Coming Off Confidential List -- March 18, 2021

Fool's errand: predicting the price of oil. Today, WTI fell 4.2% in early morning trading. 

• WTI dropped almost $3.00; now trading under $62.
• Brent: similar story; now trading at $65.32
• OPEC basket: not quite as bad but now trading below $67; Saudi Arabia can't survive on $60 oil

Weekly natural gas fill rate: link here. 

Fast and furious:

• Hope springs eternal: the Fed. 
  
• Plastics really do make a difference:   
• building on the story posted yesterday. 
• plastic prices hit record high to stoke inflation concerns;
  
• Gasoline demand: link here.  
• India: the story builds. Link here.
  
• Renewable energy:
• EV overrated: Charles Kennedy, link here. 
• Hydrogen: German environmentalists corroborate the cost of electrolysis to generate "blue" hydrogen; Germany's plan to make "blue" hydrogen may required coal. LOL. 
• Lordstown: 
• link here; and, here; and, here;
• It's over: why the clean energy bubble is over this time (really). 
• Biden's "make America last" policy; making Mexico great again. Link here.
• Amazon: has become the top US clothing retailer, outselling Walmart, Target. Wells Fargo analysts estimate Amazon will sellm ore than $45 billion apparel and footwear in 2021

*******************************
Back to the Bakken

WTI plummets. 

Active rigs:

$61.85	3/18/2021	03/18/2020	03/18/2019	03/18/2018	03/18/2017
Active Rigs	16	55	65	58	47

No new wells being reported today.

RBN Energy: understanding the volatile relationshiop between LNG and global gas markets.

It’s been an incredibly wild year for U.S. LNG exports. In the past year, global gas prices have seen both historic lows and highs, as markets swung from extreme demand destruction from COVID-19 for much of last year, to supply shortages by late 2020 and into early 2021 due to maintenance outages, weather events, Panama Canal delays, and vessel shortages. 

The U.S. natural gas market has also dealt with its share of anomalies, from a historic hurricane season in 2020 to the extreme cold weather event last month that briefly triggered a severe gas shortage in the U.S. Midcontinent and Texas and left millions of people without power for more than a week. Given these events, U.S. LNG feedgas demand and export trends have run the gamut, from experiencing massive cargo cancellations and low utilization rates to recording new highs. Throughout this incredibly tumultuous year, U.S. LNG operators have had to adjust, managing the good times and bad and proving operational flexibility in ways that will serve them for years to come. 

Here at RBN we track and report on all things LNG in our LNG Voyager report, and we’ve been hard at work enhancing and expanding our coverage to capture the rapidly evolving global and domestic factors affecting the U.S. LNG export market, including terminal operations, marginal costs and export economics, and international supply-demand fundamentals. Today, we highlight how U.S. LNG has changed in the past year and trends to watch this spring.