Why I Love To Blog, Reason #5 -- September 28, 2015

Why I love to blog. Yesterday I asked rhetorically "how is Saudi's oil strategy working out?" I thought I might be getting ahead of my headlights on that one, and then Don sends me this very, very interesting link. Peak Oil is reporting:

On Tuesday 22 September, Middle East Eye broke the story of a senior member of the Saudi royal family calling for a “change” in leadership to fend off the kingdom’s collapse.

In a letter circulated among Saudi princes, its author, a grandson of the late King Abdulaziz Ibn Saud, blamed incumbent King Salman for creating unprecedented problems that endangered the monarchy’s continued survival.

“We will not be able to stop the draining of money, the political adolescence, and the military risks unless we change the methods of decision making, even if that implied changing the king himself,” warned the letter.

Whether or not an internal royal coup is round the corner – and informed observers think such a prospect “fanciful” – the letter’s analysis of Saudi Arabia’s dire predicament is startlingly accurate.

Like many countries in the region before it, Saudi Arabia is on the brink of a perfect storm of interconnected challenges that, if history is anything to judge by, will be the monarchy’s undoing well within the next decade.

Read the rest of the story at the link and see if the writer said anything more or less than what I wrote over the weekend:

• Saudi is losing about 10% of their cash reserves annually by giving away oil for $50/bbl (but the article above suggests it could be significantly more)
• Saudi apparently had an unsuccessful 5-year, $35 billion program to significantly hike crude oil production
• Saudi recently completed two new refineries
• Saudi has huge desalinization electricity demands -- and growing annually; oil used to produce electricity
• Saudi recently canceled huge solar energy projects
• Saudi put on hold all new capital-intensive projects in addition to aforementioned solar energy projects
• Saudi has been told explicitly by President Obama that the US has no responsibility to guarantee Saudi Arabia' security
• Saudi has major terrorist threat in Yemen
• Saudi has embarked on major weapons acquisition program to defend itself against regional neighbors
• sanctions on Iran recently lifted resulting in a) Mideast nuclear arms race; and, b) $100 billion in "new" money for Iran to pursue military objectives (I thought it was $156 billion but this article says $100 billion).

My disclaimer still holds. 

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Theory Of Law Evolves ... 

Or Have We Already Seen This Movie?

My hunch is that the Hillary e-mail issue will evolve into a new theory of law for the US. [I'm not sure if I'm using the phrase correctly, but it's good enough for now.]

My hunch is that "transgressions by the president, vice president, and certain cabinet members are political and not legal issues as long as they do not rise to the level of treason." Transgressions by select members of that oligarchy will rest in the hands of the US Attorney General and short of treason will be allowed to play out in the court of public opinion.

There is a precedent (there are probably many precedents) but this one is perhaps most famous and least contentious. From wiki:

In 1804, the last full year of his single term as Vice President, Aaron Burr killed his political rival Alexander Hamilton in a famous duel. Burr was never tried for the illegal duel, and all charges against him were eventually dropped, but Hamilton's death ended Burr's political career.

And perhaps once we get through this (the most recent Clinton scandal), ten or twenty or thirty years from now, maybe even treason by select members of the oligarchy will be a matter for the voters to decide.

Petroleum News Bakken Suspended For The Time-Being? -- September 28, 2015

It looks like the suspension occurred in July, 2015. Petroleum News is based out of Alaska, I believe.

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More Story Lines From Shell Calling It Quits In The Arctic

Oil & Gas Journal is reporting:

... the move “reinforces the idea that conventional drilling is fading fast and nonconventional is not going to fall by the wayside.” 

Investment in conventional drilling is waning in not only the US but around the world, ... Shell’s projects “in other areas of the world may also be dragging down their capital. 

“In areas such as the North Sea and Nigeria, we have production that remains viable, but at a loss to find consumers.”

“America was once the largest consumer of said areas, but has since dropped Nigerian crude imports to about 50,000 b/d this year,” he said. “That alone is a significant decline from 2012 when Nigeria was supplying the US with over 1 million b/d.”

Another shift in the import-export picture comes by way of US refinery utilization and production, which have hit record levels this year.

“America once was a major gasoline importer, mainly from Europe, and now has cut that number in half from peaks seen prior to 2011."

“The business about production in Alaska and the Arctic has always been a political hotbed,” he added. “As we head into the 2016 presidential elections, Keystone may not be the only oil-related argument on the table.”

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Meanwhile In Afghanistan

Being reported now:

The AP and New York Times, in reports on the fall of Kunduz, Afghanistan, describes it as a significant win for the Taliban. It marks the first time the Taliban has captured a major Afghan city since 2001.

Meanwhile, the President continues to talk about global warming with the Chinese.

Note Some Details Of Wells Being Reported In The Bakken Today -- September 28, 2015

Wells coming off the confidential list over the weekend today are being updated. Almost all of the wells have been updated -- still waiting for QEP wells. But note the specifics on the wells have have been reported.

For example, QEP used 49 stages, 9.5 million lbs proppant in a Grail well.

Note the detail in the Hess well; only 5.08 drilling days.

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Tweeting now, from Jack Kemp:

UK petroleum consumption is rising at some of the fastest rates since 2005

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Coal Update

This is a dynamic link. Some interesting information regarding coal.

Since falling to 118 million tons in March 2014, the lowest level since March 2006, coal stockpiles at electric power plants have returned to quantities that are more in line with same-month totals from previous years. December 2014 marked the first time since December 2012 that stockpiles were higher than they had been in the same month of the previous calendar year. Additionally, since December 2014, coal stocks have been higher than the same month of the previous year every month through July 2015.

The winter of 2013-14 was extremely cold relative to both the previous winter and normal winters, and more fuel, including coal, was burned to generate electricity to meet higher heating loads across the northern United States. This increased fuel use, coupled with limited coal deliveries in the Midwest from the Burlington Northern Santa Fe (BNSF) system, contributed to the significant drawdown in coal stockpiles. Total U.S. net electricity generation was 5.3% higher from November 2013 through February 2014 than it had been in the November 2012 through February 2013 period, and 59% of that increase in electricity was supplied by coal generation, which was up 8% from levels a year earlier.

Conversely, temperatures in the winter of 2014-15 were higher than normal, and a lot less fuel was needed to generate electricity for heating purposes. Subbituminous coal stocks at electric power plants actually increased - highly atypical in winter months - because February 2015 in the western states, where most but not all subbituminous coal is burned, was one of the warmest on record. The BNSF delivery problems that contributed to shrinking piles the year before were mitigated as well, leading to larger stockpiles.

In addition, less coal is being used (resulting in higher stockpiles) as more natural gas is used (pricing, government mandates).

OXY Rumor -- September 28, 2015

Updates

November 27, 2015: Lime Rock Resources announces the deal is closed on Russian Creek acquisition. 

October 16, 2015: sold. 300,000 acres for $500 million.  $1700/acre (rounded). See Lime Rock Resources. 

Earlier Posts

 
Link.

Flashback:

February 2, 2015:  MDU sale of assets to Lime Rock: Fidelity Exploration transferred about 81 gross wells, of which 49 are operated by Fidelity to Lime Rock Resources III-A. All of these were in Mountrail County; 6 in Alger field, 43 in Stanley field. The sale included 4,363 acres with production of about 2,000 bopd. The earlier permit/well file number was #17359; the most recent permit/well file number was #27192. According to the NDIC, Lime Rock has 51 wells/permits, so this is a new operator in North Dakota, also. Or it appears to be a new operator. If this is their website, the company previously had three core areas, all outside of the Bakken (mid-continent -- Louisiana, Arkansas, Mississippi); the Permian Basin; and, the Texas Gulf Coast). If this is the right company, this is their first property in the Bakken. [Update: Don sent me the link to the original press release which provides more background information: http://www.mdu.com/news/2014/07/21/mdu-resources-announces-sale-of-certain-mountrail-county-north-dakota-production-assets.]

This is not an investment site. Do not make any investment or financial decisions based on what you read here or think you may have read here. I do not trade or invest in OXY and don't know anyone who does.

Lime Rock Resources.

I track major Bakken operators here and other Bakken operators here. To some extent, it is arbitrary on which list a Bakken operator may appear. Generally once on the "major Bakken operator" list, they are not removed, even if they are no longer operating. On the other hand, operators on the "other" will occasionally be moved to the "major" list. Again, often arbitrary.

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Background -- OXY And The Bakken

Back on February 8, 2015, in Petroleum News, OXY announced it has no plans for further Bakken development in 2015. See page 5 of this 16-page pdf.  In that article, OXY said its Bakken returns were sub-par; and, that OXY would focus on the Permian in this country, and overseas, it would focus on the Mideast.

The article also noted that OXY considered selling its 330,000 Bakken acreage back in 2013; most of OXY's acreage is in south-central and west-central Dunn County with a small amount in southeast Burke County. Then OXY backed off but then in October, 2014, Bloomberg reported that OXY might see its Bakken acreage for as much as $3 billion ($3 billion / 330,000 = $9,000/acre). 

Monday, September 28, 2015; Shell Calls It Quits In The Arctic; Apple Reports Record Weekend

Apple reports record sales of iPhone 6S, 6s Plus in first weekend:  13 million vs previous record of 10 million (2014) -- though most recent numbers included China whereas not so in 2014;

Shell Oil in Arctic: not enough there to justify drilling. Will quit drilling; call it quits. See more at the bottom of this post -- scroll down.

Alcoa to split into two companies.

Russia surprises US with accord to fight ISIS. President Obama may agree to keeping Assad in power.

Williams and ETE reach deal.

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Active rigs in North Dakota:

	9/28/2015	09/28/2014	09/28/2013	09/28/2012	09/28/2011
Active Rigs	70	190	184	190	195

RBN Energy: 7th of 8 in the series on propane.

This is the seventh episode in the series. Episode 1 provided an overview and introduction to the analysis – beginning with the dramatic increase in propane production over the past 7 years.

Total U.S. propane output has increased by nearly 70% from an average of 0.8 MMb/d in 2008 to 1.4 MMb/d during the 1^st half of 2015. Most of that growth has been driven by production from gas processing plants that has more than doubled from 0.5 MMb/d in 2008 to 1.1 MMb/d in 2015. The overall growth in propane has outpaced domestic demand such that as much as 50% of the total is now exported to balance the market – even as inventories are at all time high levels. [Back on September 23, 2015, Jack Kemp reported: Record propane stocks show first weekly drawdown since March; graphs are incredible; huge records being set.]

RBN’s analysis for PERC sought to understand changes to the propane market since the disruptive winter of 2013-14 as well as how susceptible today’s market is to similar events and what actions should be taken to reduce the risk of it happening again.

Our approach to the analysis involved developing a monthly model of U.S. propane supply, demand, logistics and pricing at the PADD (Petroleum Administration District for Defense) level using historic propane market data.

In Episode 2 we outlined supply and demand scenarios for the model based on oil price Growth and Contraction as well as Normal and Severe weather patterns. Episode 3 took a closer look at propane production by PADD region – noting the dramatic growth in the Northeast as well as the Midwest.

Episode 4 detailed regional historic and future projected propane demand by PADD and Episode 5 looked at the main domestic propane demand sectors. Episode 6 highlighted how new infrastructure has improved interregional connectivity across the propane market. This time in Episode 7 we consider how developing regional supply/demand balances and infrastructure could be impacted by a worst-case combination of low propane production and severe weather.

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$7 Billion, 7-Year Disappointment

FuelFix is reporting:

Royal Dutch Shell on Monday said it was abandoning a $7 billion, seven-year quest for crude under Arctic waters, after an exploratory well failed to find significant amounts of oil and gas.

Shell’s exploratory oil well in the Chukchi Sea north of Alaska encountered “indications of oil and gas” but the company said they were “not sufficient to warrant further exploration” — a significant blow for the Anglo-Dutch firm that had hoped to find a multibillion barrel crude reservoir in those remote waters.

“Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.,” said Marvin Odum, the Houston-based director of Shell Upstream Americas. “However, this is a clearly disappointing exploration outcome for this part of the basin.”

Shell said in a statement that it would cease further exploration activity off the coast of Alaska “for the foreseeable future.” “This decision reflects both the Burger J well result, the high costs associated with the project and the challenging and unpredictable federal regulatory environment in offshore Alaska,” the company said.

Shell also will take a financial charge from the decision, since the firm’s Alaska assets have a carrying value of about $3 billion and the company still has an additional $1.1 billion already committed in existing contracts for rigs, ships and other assets. Shell could pare its potential $4.1 billion write down by putting some of those contracted vessels to work elsewhere or subcontracting them to others.

The full extent of the financial damage will be described on Oct. 29, when Shell announces its third-quarter earnings. But the blow could be especially significant when cast against falling earnings. Shell’s second quarter profit was $3.8 billion, compared with $6.1 billion for the same period last year. First quarter earnings were $3.2 billion, down from $7.3 billion in the first quarter of 2014.

Shell was pursuing a major Arctic oil discovery after spending a record-setting $2.1 billion to buy 275 Chukchi Sea oil and gas leases in a 2008 government auction.
Because of the costs of extracting oil and building the infrastructure to deliver it to market, Shell CEO Ben van Beurden bluntly warned earlier this year that the economics of Shell’s Arctic project would only work “if the structures are full of oil.”

For $7 billion, an operator could drill 1,000 wells in the Bakken with an almost-predictable guaranteed return.