Global Warming Hits Denver -- December 30, 2014; Earthquake Hits The Homestead; No Fracking In The Immediate Area

Tweeting now:

The temperature at Denver International dropped to a record -19° at 9:05 pm MT, breaking the previous mark (-11°) set on this date in 1898 - @NWSBoulder

1898 AD. That's like more than a hundred years ago. 

Just think, with global warming, the record -19 would have only been a -17.

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A Note to the Granddaughters

That's cool, but this is even cooler. I felt my first California earthquake today.  The Los Angeles Times is reporting:

A shallow magnitude 3.9 earthquake was reported Tuesday afternoon 12 miles off the coast from San Pedro, according to the U.S. Geological Survey. The temblor occurred at 3:26 p.m. Pacific time at a depth of 1.9 miles.

According to the USGS, the epicenter was 14 miles from Rancho Palos Verdes, 15 miles from Long Beach and 16 miles from Seal Beach.

Shallow earthquakes do not result in tsunamics, if I recall correctly; it's the deep earthquakes.

We're spending Christmas in San Pedro. My son-in-law, younger daughter, and I were visiting a hobby store in downtown San Pedro when the earthquake shook -- about 3:20 p.m. (I see the article gave the exact time. Sorry.)

it was very, very, short, maybe measured in one second -- maybe two seconds, but that might be a stretch. We thought it was construction workers on the roof of the building. Our daughter saw the huge front department store window "move." No damage. We really didn't know that it was an earthquake until we heard it on the news moments later (the store owner had his television set on). 

Prior to visiting the hobby store, we were out visiting Cabrillo Beach Aquarium and Research Library, perhaps one of the best marine research libraries in the United States. We were told that the aquarium has the largest student program in the US. It's a small museum in one sense, but a huge museum in another sense. For all its press, the aquarium at Woods Hole, Massachusetts, is about the size of a large closet compared to the very good-sized Cabrillo Aquarium. Just saying. In addition, at Woods Hole, there's really nothing to visit unless one is a research scientist from what I could tell after a couple of visits; on the other hand, the Cabrillo Aquarium is all about hands on.

The Cabrillo Aquarium is free, though it's nice to donate $5/adult to visit. Parking: $1/hour. 

I took advantage of the opportunity to learn a bit more about the history of the San Pedro area. It turns out that the whole southland (from Compton and Torrance, south to the Pacific Ocean; east to the Los Angeles River (separating Wilmington and Long Beach); and west to the Pacific Ocean, began as one large Spanish land grant to a Manuel Dominguez, or at least I think it was Manuel. It was definitely Dominguez. The area was composed of two Spanish ranches, Rancho Palos Verdes and Rancho San Pedro. The "ranch" encompassed about 118 square miles. Manhattan Island, in comparison, bought for $24 in trinkets and beads (obviously an apocryphal story), is 23 square miles in comparison.

By the way, there is no fracking in the immediate San Pedro area. At least as far as I know. There are a few vertical wells that were drilled a long, long time ago, but no rigs in the immediate area either.

As long as I'm rambling, I might as well mention we also visited the marine mammal care center at the southern tip of San Pedro, overlooking the Pacific Ocean. There are seven such centers up and down the California coast; the largest is in Sausalito; the San Pedro care center is the second largest. They are expanding, building two more pens. The fur seals were sleeping, seemed content. A few sea lions were enjoying the water, but most were also dozing. I think I can finally tell the difference between seals and sea lions: think ears and the two rear extremities. The marine mammal care center is one of my favorite places to visit when in San Pedro.

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The UE Boom

By the way, the other day I mentioned how "perfect" the UE Boom speaker is -- the gift I gave my wife. She was curious whether it works with the MacBook Pro laptop. It does. At first I couldn't get it to work, trying to figure it out intuitively. A quick google search provided the answer. Done. It's an incredible speaker.

Gotta Know The Denominator -- December 30, 2014

This must be a fact. I read it elsewhere. Bakken.com is reporting:

There have been 25 traffic crash fatalities on the U.S. Highway 85 corridor in the past two years. The Department of Transportation this month launched a safety review that officials say will continue into January and February.

The review will include an evaluation of the portion of the highway between Williston and Watford City, which officials are spending about $300 million on to make it four lanes. The review will be done by a team of local law enforcement officials and local, state and federal highway officials.

“The recently constructed portions of the US 85 corridor were designed to meet all federal safety requirements."

I can't recall if the $300 million includes the four-lane bridge that will have to be built across the wide Missouri southwest of Williston. 

It would be interesting to know the number of crash fatalities per passenger mile traveled in the two years between Williston and Watford City and compare it to the crash fatality data between Bitburg, Germany, and Trier, Germany.

Just What We Need -- More Oil -- December 30, 2014

Disclaimer: a lot of stuff in my blog is opinion. Just 'cause I say it or write it doesn't mean it's a fact. It can be difficult telling the difference between fact and opinion in a blog. Sometimes even in Washington, DC. If something seems wrong, it probably is. On the other hand, if something seems wrong, it could be an opinion. If this stuff is important to you, go to the source. This is not an investment site. Do not make any investment, financial, or relationship decisions based on what you read here. And always assume there are typographical and/or factual errors. This site is for entertainment purposes only; mostly to entertain the author.

Yes, .... oil down to $30.

Just what we need, more oil.

First, from Reuters at Rigzone:

BP has started producing oil from its Kinnoull field in the central North Sea bringing on stream a new field that feeds into BP's existing Andrew platform off the coast of Scotland.

Oil and gas produced at Andrew and Kinnoull is expected to peak at over 50,000 barrels of oil equivalent per day and will be transported to the mainland via the Forties oil pipeline and CATS gas pipeline.

The contribution from Kinnoull should help to offset some of the decline in Forties production from the Nexen-operated Buzzard field. Forties is the biggest of the four crude streams that underpin the price of dated Brent and Brent futures so fluctuations in Forties supply can impact global oil prices.

Traders said that Buzzard is becoming well-constrained and is currently pumping at about 180,000 barrels per day (bpd), down from its previous maximum operating capacity of about 205,000 bpd. The latest updates on the Forties Pipeline System website indicate a smaller contribution to the Forties blend from Buzzard in the first quarter of 2015, dropping to around 30 percent in April from 43 percent in the week Dec. 22-28.

BP said it was investing, together with project partners, more than 7 billion pounds ($10.9 billion) in the North Sea over the next five years and that it had won licences in 7 new North Sea blocks in the government's latest allocation round.

And even more oil, from Rigzone:

BG Group announced Tuesday that its partner Petróleo Brasileiro S.A. (Petrobras), as the operator of block BM-S-11 in the pre-salt Santos Basin, has submitted the Declarations of Commerciality (DoC) to the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) for three separate oil and gas accumulations in the Iara area, offshore Brazil.

As part of the DoC, the consortium has suggested that the new fields be designated Berbigão, Sururu and Atapú West.

The Iara area is located approximately 155 miles (250 kilometers) off the coast of Rio de Janeiro, in water depths of around 7,448 feet (2,270 meters). All fields contain good quality oil, of approximately 24 to 30 degrees API. The DoC submission follows an exploration and appraisal program which began in 2008 and consisted of acquiring 3D seismic data, drilling seven wells as well as performing an extended well test. The encouraging results from this program continue to reinforce BG Group’s view of gross recoverable volumes in the BM-S-11 Iara area. The DoC notification to the ANP includes the operator’s estimates of total recoverable volumes of the three accumulations.

Peak oil? What peak oil? Drill, baby, drill -- this would make that old guy on the Kudlow Report happy. 

Seriously, this is very interesting. It seems back in 2008 or thereabouts, the oil companies were investing a lot of CAPEX into deep-sea drilling. Now, just as shale oil hits its stride, deep-sea oil projects are coming on line. Let's hope they keep having problems in Kashagan. Can I say that without anyone getting angry with me?

By the way, there are winners and losers in all of this. Also from Rigzone:

The slump in international oil prices and increased domestic output will reduce Argentina's energy trade deficit by 16 percent next year to $5.6 billion, the government said on Tuesday, helping to ease strains on the balance of payments. Argentina is grappling with pressure on its foreign currency reserves after being largely shut out from global debt markets for more than a decade and with tight trade and currency controls stifling investment and stunting exports. 

Maybe the slump in the price of oil will also help Greece. LOL. 

So Many Story Lines In This Article, Starting With "Mid-Term Elections" -- December 30, 2014; Will He Or Won't He: "Ban Oil Exports?

Printed in full now, but will be truncated in a day or so.

From Rigzone:

WASHINGTON, Dec 30 (Reuters) -

The Obama administration on Tuesday bowed to months of growing pressure over a 40-year-old ban on exports of most domestic crude, taking two steps expected to unleash a wave of ultra-light shale oil onto global markets.

The Bureau of Industry and Security, or BIS, which regulates export controls, said it had granted permission to "some" companies to sell lightly treated condensate abroad. Condensate is a form of ultra-light crude.

Some two dozen energy companies had asked the agency for clarification on permissible exports earlier this year, but until Tuesday those requests had been put on indefinite hold.
The BIS also released guidance in the form of frequently asked questions, or FAQs, to explain what kind of oil was generally allowed under the ban, the first effort by the administration to clarify an issue that has caused confusion and consternation in energy markets for more than a year.

The two measures are clearest signs yet that the administration is ready to allow more of the booming U.S. shale oil production to be sold overseas, where drillers have said it can fetch a premium of $10 a barrel or more.

They follow a year of murky messages and widespread uncertainty over what is or is not allowed under a trade restriction that critics say is a relic of a bygone age, when oil was seen as scarce after the 1970s Arab oil embargo.

A domestic drilling boom of the past six years has transformed the United States into an energy powerhouse, boosting U.S. production by more than 50 percent and reversing decades of decline.

Output of very light oil has been especially strong, leading to a glut that threatens to overwhelm domestic demand. The constraints helped fuel bumper profits for refiners such as Valero Energy Corp and PBF Energy Inc, but angered drillers such as Hess Corp that say they were selling at a discount.

Jamie Webster, the senior director of oil markets at research firm IHS, said the FAQ "takes the leash off of (the U.S. Department of) Commerce" and signals it may take additional action on crude exports after several months of inaction.

While likely to draw broad support from many quarters, the measures also open the Obama administration to attack by environmentalists and Democrats who may see it encouraging more hydraulic fracking and as a sop to big oil companies.

Steps to Clarify

How the measures will affect flows of condensate is uncertain, particularly given the dramatic slump in global oil markets, where prices have nearly halved since the summer.
An administration official said that the oil market - not a "fairly arcane clarification" in guidelines - would ultimately determine how much oil is exported. That echoed the Obama administration's policy on exports of liquefied natural gas, or LNG, which are also now generally allowed.

The steps on Tuesday were "certainly not designed to add or detract from what can be exported. We are trying to make the boundary line clearer," said the official.

In its FAQ, which the agency has been working on for most of this year, the BIS confirmed or clarified a number of nuanced issues related to the rules, including:

* Confirmation that lease condensate processed through a distillation tower is considered a petroleum product, and therefore can be exported without constraint.
* Clarification of what constitutes "distillation" for export, including the fact that pressure reduction alone, and flash drums with so-called heater-treaters or separators, would not be sufficient to qualify oil for overseas sales.
* A reminder that most petroleum products may be "exported to most of the world without a license," a message seen by many analysts as blessing the process of self-certification.
* And clarification that "a minimum amount of mixing" between exportable foreign crude and restricted domestic crude may be allowed, a note likely making it easier to ship Canadian crude through U.S. pipelines and ports.

(For the FAQ, see: http://www.bis.doc.gov/index.php/policy-guidance/faqs)

Frustration Building

Uncertainty about what kind of petroleum can be shipped abroad has frustrated oil market players since the BIS, an office of the Commerce Department, quietly gave permission in 2013 to a small company, Peaker Energy, to export minimally treated light oil called condensate.

Last spring BIS gave permission to export treated condensate in private letters to two other companies, Pioneer Natural Resources Co and Enterprise Products Partners LP .
The private nature of the communications between the government and the three energy companies left a wide range of other drillers in the dark about investing in expensive infrastructure to process condensate.

One company, Australia's BHP, said last month it would press ahead with exports without having received a formal approval from the BIS, but other energy companies have been reluctant to follow suit without further guidance.

Domestic pressure has also grown. Several lawmakers in the House of Representatives and Senate have said that unless energy companies can export oil to Asia and Europe, the drilling boom will eventually choke on its own output.

"They Didn't Build It" -- December 30, 2014

Disclaimer: an op-ed. Just an opinion. Nothing more, nothing less. Numbers rounded. This and $1.89 will get you a cup of Starbucks coffee. 

I doubt anyone cares; it's just a number, but I think it's pretty remarkable: 3,000 oil and gas permits in 2014. The boom was supposed to have ended two years ago according to The Atlantic Monthly.

• The Atlantic Monthly asks (back on Feb 12, 2013 ) whether the "miraculous" ND boom is ALREADY over?
• even if the boom is over, there's a lot of work yet to do

Whatever.

3,000 permits in 2014. I thought last year was supposed to be the big year. I thought the year before that was supposed to be the peak of the boom. And the year before that? Every year, until this year: about 2,000 permits.

This year: 3,000 permits.

That's a 50% increase in the number of permits. You can argue the effect the price of oil had either way -- either it affected the number of permits or it didn't. The price of oil started to slide in June, 2014, which was more than enough time for permits to drop off; they didn't drop off (in fact, they surged in October, November, December).

Or you can argue that the real plunge in the price of oil began after the OPEC meeting at the end of November, clearly not enough time to make a huge effect on the total number of permits this year. So, say what you want. I think 3,000 permits -- for a 30-second sound bite, almost 50% more than each of the previous three years -- is pretty remarkable. For newbies: permits are only issued by the NDIC if "they" think the operator has the capability of drilling those wells in the "near future," which generally means in the next 6 to 12 months.

And remember, the drilling is much more effective in 2014 than it was in 2011. I've discussed this before; won't go through it again.

Of course, if you told some folks in Washington, DC, that North Dakota did that much work in one year, I'm sure we would get ....

They Didn't Build That
By the way, what a great way to finish the year with regard to Statoil IPs. Did you all see this in today's daily activity report:

• 26155, 4,076, Johnston 7-6 6H, Banks, t11/14; cum --
• 26156, 3,657, Johnston 7-6 5TFH, Banks, t11/14; cum -- 

Disclaimer: if you feel IPs mean squat, ignore the last couple of bullets.