The Million Dollar Way (The Bakken Oil Blog)

Thursday, May 28, 2015

Refracking -- May 28, 2015

This is a huge story; we've been talking about it for quite some time. Investopedia is reporting:

There was an interesting theme running through the conference calls of energy giants and oilfield service companies this past quarter. From Chesapeake Energy to Halliburton to Schlumberger, the one theme that kept coming up, other than oil prices, was the potential for refracking. It's a trend that could have enormous potential for Chesapeake Energy in the years ahead.

I have a tag for refracking. It began with MRO.

From the linked article:

Jason Pigott, Chesapeake's EVP of its Southern Division, noted the company's refracking potential on its first-quarter conference call:

Within our retained portfolio, Chesapeake has drilled 6,750 horizontal wells since 2004. Of these wells, nearly 4,600 were drilled prior to 2012, and we consider these wells understimulated, compared to our current designs, and based on their vintage.
In other words, 68% of the company's wells could be refracked because they were drilled before 2012 and therefore aren't using the latest technology and techniques that have really driven the company's operations over the past few years.

EOG says it's cheaper to simply drill a new well (to include fracking) rather than go back in and re-frack.

It really doesn't matter to Schlumberger or Halliburton whether one re-fracks or drills a new well (in fact, it would be better for SLB and HAL if new wells were drilled, rather than just refracking old wells).

Staggering -- If You Think About It -- May 28, 2015

From RBN Energy today, a most remarkable blog. One can talk all day about solar and wind energy, but when it comes down to reality, in global energy, it's all about coal and natural gas. Today's RBN Energy post is about LNG exports to Asia. Maybe some day they will find huge natural gas reserves in Asia, but apparently not there yet.

From RBN Energy today:

Asian consumers of liquefied natural gas hope to use the current supply glut—and the start-up of U.S. LNG export facilities--to their long-term advantage. Their very understandable goal is to up-end the old market structure, which for years has had them paying far more for LNG than their Western European counterparts. How will the coming revolution affect U.S. natural gas producers and the next round of U.S. LNG export projects? Today, we continue our review of the fast-changing global market for LNG with a look at a new set of Asian LNG buyers and at the region’s fast-changing supply/demand dynamics.

Most of Asia has experienced significant economic growth in the first 15 years of the 21^st century—not just powerhouses like China and India but smaller, more mature economies like South Korea’s, Taiwan’s and Singapore’s, and still-developing nations like Pakistan, Bangladesh, Thailand and Vietnam. In most places that growth is being fueled in large part by energy from natural gas, and that trend is very likely to continue, especially if (as seems probable) gas prices remain competitive with oil and coal. Asia’s gas reserves are spotty, though, forcing many countries (Japan, Korea, China and India among them) to turn to LNG imports and—if possible—gas delivered by pipeline.

As we said in Episode 1 of our series, the market for LNG has evolved gradually over the last 50-odd years, but it remains dominated by long-term LNG supply deals. At first LNG prices were fixed, but starting with the OPEC oil crisis in 1973-74, oil and LNG prices were linked, with the goal of mitigating risks for buyers and sellers.

In Episode 2, we ran through five major catalysts shaking up the LNG trade:

1) New LNG capacity coming online, mostly in Australia and the U.S.;

2) Fixed liquefaction tolling agreements being offered by U.S. LNG developers and natural gas costs tied to price index percentages (typically 115%) of the U.S. Henry Hub, LA benchmark;

3) The collapse in oil prices and the resulting drop in oil-indexed LNG prices;

4) The roll-off of long-term LNG supply deals and the increasing share of LNG capacity available to the spot market; and

5) The recent slump in Asian LNG demand-and prices--that have occasionally made Western Europe a more attractive market for spot LNG sales.

In Episode 3, we looked at existing and future demand in China and India, which are expected to be the world’s biggest LNG growth markets—along with the use of LNG as a ship bunker fuel.

And in Episode 4, we considered Japan and Korea, by far the world’s largest LNG consumers, and (with China and India) the driving forces behind reshaping the Asian market.

In RBN Energy's next episode, RBN Energy will look at why the Asian and European sub-markets for LNG have been so different, and at whether there’s a chance that, with lots of new LNG capacity coming online, those sub-markets might finally start to look more alike. RBN Energy will also consider Asian LNG-buying alliances and the potential for an Asian LNG hub—two things that could help keep a lid on LNG prices in the region.

Population:

China: 1.357 billion (10x Japan; 27x Korea)
India: 1.252 billion
Japan: 127 million
South Korea: 50 million

And everyone in China and India wants to have the lifestyle of the Japanese and/or the South Koreans.

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Apple Page

Apple, also, has some exciting news today. Apple announced a new retail store to open on Saturday, June 13 in Upper East Side, Manhattan, NYC.

The comments were interesting: mostly a complaint that there were not enough Apple retail stores in NYC. As hard as it is to believe, there is no Apple retail store near Wall Street. Apple must have a very, very interesting algorithm when determining when/where to open a new retail store.

This is only Apple's seventh store in NYC, and apparently some New York boroughs still have no Apple stores.

Apple overnight added signage to its upcoming retail location in the Upper East Side of Manhattan that confirms the store will open on June 13. The new store will be located at 940 Madison Avenue, on the corner of 74th Street, and remains under construction ahead of opening. The new store will be Apple's seventh retail location in New York City alongside Fifth Avenue, Grand Central, SoHo, Upper West Side, West 14th Street and Staten Island stores.

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Wow, Will This Year's Global Warming Ever Quit?

Caribou, Maine, Reporting Record Snowfall Today

Ice Age Now is reporting:

Not much, but it’s still a record.

“The 0.3″ of snow observed at Caribou yesterday was the greatest snowfall on record so late in the season,” says National Weather Service Tweet.

“Old record 0.2″ on 5/25/74.

QEP With Three 4-Well Pads In One Section, 2560-Acre Spacing, Heart Butte -- May 28, 2015

Update: Canadian Wildfires In Oil Sands Area; Peak Oil? What Peak Oil -- Norway Has More Oil Than Ever Before-- May 28, 2015

Reuters via Rigzone is reporting:

A wildfire raging in northeastern Alberta near two major oil sands projects nearly doubled in size to 17,000 hectares on Wednesday, although firefighters made some progress tackling blazes elsewhere in the oil-rich Western Canadian province.

The fires have forced energy companies operating in Alberta, the largest source of U.S. oil imports, to shut in 233,000 barrels per day of production, or roughly 10 percent of total oil sands output.

Scott Long of the Alberta Emergency Management Agency said the fire on the Canadian military's Cold Lake Air Weapons Range, near the oil sands projects, was still out of control even though 250 firefighters were battling to contain it.

It advanced on Cenovus Energy Inc's Foster Creek project and Canadian Natural Resources Ltd's Primrose oil sands facilities, both of which were shut down and evacuated over the weekend after the blaze, which began on Friday, closed the only access road to the sites.

Peak oil? What peak oil? Norway has more oil than it had a decade ago. Rigzone is reporting:

The Norwegian Petroleum Directorate reported Wednesday that current recoverable oil on the Norwegian Continental Shelf exceeds the estimated figure for 2005.

A select number of producing fields and 62 discoveries, for which development decisions had not been made in 2005, were reviewed in order to determine the latest figures.

Over the course of the ten-year period, 28 of these discoveries were developed and their oil reserves have nearly doubled.

The NPD has attributed this to new information, better reservoir understanding and optimization of development solutions and drainage strategies.

Discoveries made after 2004 also led to development decisions for 13 new fields, according to the NPD, which have contributed an overall resource growth totaling 2.8 billion standard cubic feet of oil. The Edvard Grieg, Ivar Aasen and Knarr fields account for more than 75 percent of this volume. The NPD’s latest review was a way to track the agency’s goal from 2005, which was to achieve an oil reserve growth of 28 billion cubic feet, or five billion barrels, over ten years. Although the reserve growth turned out to be significantly less, the goal would have been reached if the development plan for Johan Sverdrup had been submitted before the end of 2014, instead of February 2015.

Remember, the Bakken was pretty much "discovered" in 2000 (Montana) and then, again, in 2007 (North Dakota). That's about the same time period as the Norway story (2005) above. Imagine what the numbers might show if the USGS re-evaluates the Bakken in ten years, let's say, 2017.

Thursday -- Unemployment Claims Surge -- May 28, 2015

Thursday is always a big day for posting data, stories. I think I will quit updating everything below. Any new updates will be clearly marked as updates.

Coolest thing today: bobcat (cougar, puma, big non-domestic cat) outside Starbucks this morning here near DFW.

Second coolest thing today: activity continues to heat up around Richardton, ND. I got a report from Don that pipe is being brought in / pre-positioned / near Richardton, probably for the ETP pipeline. If so, it would so southeast from there towards South Dakota (reminder: the Aberdeen story). In addition, progress should be continuing on the Richardton trans-loading terminal. The terminal is south of the railroad (between the railroad track and I-94), west of Richardton. Connect that dot with the fact that last autumn there was a report from the field that "earth was starting to be moved" for this project. Connect that dot with an earlier dot that Halliburton was shutting down its operations in Minot. And finally connect that dot with the Chesapeake story below from Investopedia on re-fracking. It could be quite a story line if one wanted to pursue it.

Jobs: economists had forecast a drop in unemployment claims by 5,000; in fact, the number of first-time unemployment claims surged 7,000 -- a delta of 12,000 between expected and reality.

Re-fracking: Chesapeake, being reported over at Investopedia. If the link is broken, consider this link.

Active rigs:

	5/28/2015	05/28/2014	05/28/2013	05/28/2012	05/28/2011
Active Rigs	84	189	186	216	172

RBN Energy: Asian LNG demand set to rise -- as prices plummet

Asian consumers of liquefied natural gas (LNG) hope to use the current supply glut—and the start-up of U.S. LNG export facilities--to their long-term advantage. Their very understandable goal is to up-end the old market structure, which for years has had them paying far more for LNG than their Western European counterparts. How will the coming revolution affect U.S. natural gas producers and the next round of U.S. LNG export projects? Today, we continue our review of the fast-changing global market for LNG with a look at a new set of Asian LNG buyers and at the region’s fast-changing supply/demand dynamics.

I will post this again as a stand-alone, if I remember. It's a big, big story. It dwarfs the EIA renewable story being reported below.

Belfast: Baltimore. CBSLocal is reporting that, not me.

Spin: four words Janet Yellen hates to see in the same sentence -- Reuters is reporting:

unemployment claims unexpectedly surge

Lucia Mutikani says this unexpected surge is nothing to worry about; the job market is still on track, still consistent with a strengthening labor market. Indications are that these boiler-plates are posted the night before, in draft form, and as soon as the numbers are released, the numbers are put into the story and released. So these are the data points today:

unemployment claims surge unexpectedly by 7,000; now up to an adjusted 282,000

this is the beginning of the very, very buy summer hiring season for all those high-paying construction jobs, especially in the oil and gas industry

last week's number was also raised, adjusted up by another 1,000 -- not trivial -- last week was already a high number

without getting into specifics (which suggests bad news), Lucia says the 4-week average stayed under 300,000 -- but the trend must be going the wrong way, and it must be just barely under 300,000 -- based on the fact specifics were not given

economists expected the number to be "slipping" -- as in decreasing -- to 270,000 -- which would have been a drop of 5,000; instead of dropping 5,000, it rose 12,000

wow, I was correct -- deep in the story, the 4-week average which is supposed to be much less volatile soared by 5,000 -- that is amazing

Lucia was the name of James Joyce's only daughter.

More spin, the EIA "energy cookie":

Renewable energy accounted for 9.8% of total domestic energy consumption in 2014. This marks the highest renewable energy share since the 1930s, when wood was a much larger contributor to domestic energy supply…Renewable energy use grew an average of 5% per year over 2001-2014 from its most recent low in 2001. The increase over the past 14 years was in part because of growing use of wind, solar, and biofuels. -- EIA

Comments: so many story lines -- some quickies
a) wind farms being paid not to produce electricity in the northwest
b) "in part" -- the key renewable that was not mentioned: hydroelectric -- that's where the biggest increase in renewable energy has been
c) note well -- that 5% increase was NOT 5% of the TOTAL increase in energy production; this was 5% increase in renewable energy; solar energy accounts for zero percent of US electricity consumption when rounded to the nearest whole number (nada, zilch, nil); 5% of 0% is still a pretty small number
d) renewable projects are fast-tracked; oil and gas industry projects are sandbagged, delayed (Keystone XL was killed; Sandpiper was sandbagged)
e) the 5% was an average over each year; it would be interesting to see the trend line
f) this 5% growth comes after gazillions of dollars in tax breaks, subsidies
g) EV sales have been a disaster
h) EIA comments are US-centric, see RBN Energy story above

NG fill rate: 112, right at the 5-year average; remember -- roughnecks are producing natural gas at record levels as consumers switch from coal to natural gas, and the roughnecks are still having trouble keeping up. Fill rate is right at the 5-year average.

Gasoline demand: apparently the EIA is still massaging the data; the data is supposed to be released today (the website confirms it is to be released today); and on the day it is released, it is always released at 10:30 a.m. ET. It's possible the 3-day holiday will delay the report until tomorrow -- but one would assume they knew a week ago that there was a 3-day weekend this week. [Update: the data was finally released; I remembered to check about 8:30 p.m. and there it was.]

Whose side is he on, anyway? This should be the most disturbing story all day -- it appears the President is purposely holding back in taking on the JV team. One has to ask the question, if the US has such a strong presence in the Mideast, and as the president once said, he could take out the JV team if he wanted, why is that not happening? It appears the pilots have the answer. It certainly fits the story line.