Norway Has More Problems Than $40 Oil -- March 31, 2016

Updates

June 27, 2020: Norway's giant field pumps "flat out."

February 4, 2019: Bloomberg update.

January 2, 2019: Norwegian production to fall to 30-year low.

December 8, 2018: from Equinor's website, this date -- Johan Sverdrup—the North Sea giant Johan Sverdrup is one of the five largest oil fields on the Norwegian continental shelf.

With expected resources of between 2.1—3.1 billion barrels of oil equivalents, it will also be one of the most important industrial projects in Norway in the next 50 years. The development and operation of this enormous field will generate revenue and provide jobs for coming generations.

August 6, 2017: Lofoten Islands and $65 billion in oil off-limits to oil companies.

Original Post 

There was a long story yesterday about the problems the Norwegian economy has secondary to the oil and gas industry in their neck of the woods. Here are data points from the original article:

First problem: $40 oil.

Second problem: discovery wells disappointing.

• 2015: discovery wells off Norway averaged 5 million bbls of oil and gas
• for past 25 years: discovery wells off Norway have averaged 27 million bbls of oil and gas 
• dismal results due in part to depletion of the reserves in the North Sea
• Norway's oil production has shrunk by half since 2000
• Norway has the world's biggest sovereign wealth fund; in January, 2016, the government made its first withdrawal from the fund since it was set up in the 1990s

Third problem: challenges going where the oil is.

• operators are giving up on the Arctic around Alaska and Greenland
• operators now looking to the Arctic areas around Norway and bordering Russian waters
• Norway planning to award licenses in an area known as the Barents Sea Southeast
• apparently these Arctic waters are less hostile (due to the Gulf Stream); also shallower and mostly ice-free
• Barents Sea Southeast
• bilateral border order agreement reached with Russia in 2010
• drillers have started drilling discovery wells
• oil companies will cut spending for third consecutive year
• will drill only half as many exploration wells in 2016 as in 2015
• CAVE dwellers not happy

Johan Sverdrup field: not in the Barents Sea, but in the North Sea

• the largest discovery "in" Norway in recent years; discovered by Lundin in 2010
• could hold as much as 3 billion bbls of oil (I assume that's "recoverable," not OOIP)

Thursday, March 31, 2016. Wow -- Claims Surge 11,000! There's That Word Again: "Unexpectedly"

Active rigs:

	3/31/2016	03/31/2015	03/31/2014	03/31/2013	03/31/2012
Active Rigs	30	99	194	188	206

RBN Energy: ports and pipelines delivering East Coast refined products.

On glide path for record gasoline demand this summer. WSJ on gasoline demand.

San Antonio Spurs break record for most home wins to start NBA season. Link over at Bleacher Report.

The Golden State Warriors may be dominating headlines as they pursue the NBA's single-season wins record, but the San Antonio Spurs made history of their own Wednesday night when they broke the 1995-96 Chicago Bulls' record for the most home wins to start an NBA season. 

The Spurs, who look like a virtual lock to capture the Western Conference's No. 2 seed, improved to 38-0 at with a 100-92 win over the New Orleans Pelicans at AT&T Center and secured a spot in the league's record books.

Unemployment claims, first-time: forecast --  an increase of 2,000 claims; up to 267,000 from last week's 265,000.  Actual: first time claims surge 11,000 -- completely unexpected! The four-week average also jumped significantly: it rose 3,500 to 263,250. From Reuters:

The number of Americans filing for unemployment benefits unexpectedly rose last week, but remained below a level associated with a strong labor market.

Initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 276,000 for the week ended March 26, the Labor Department said on Thursday. The prior week's claims were unrevised. 

Economists polled by Reuters had forecast claims remaining unchanged at 265,000 in the latest week. 

Applications for unemployment benefits have now been below 300,000, a threshold associated with healthy labor market conditions, for 55 weeks, the longest stretch since 1973. With the labor market continuing to tighten, there is little scope for significant further declines in claims. [This is boilerplate; probably written before the numbers were known.]

Tesla Model 3 to be unveiled tonight. Elon Musk promises a car for the masses at $35,000. Will likely come in at higher price than $35,000 initially; doubt "confirmed" price will be announced tonight. No link. Stories everywhere. In fact, it's the headline story over at Yahoo!Finance at the moment.

Norway Has More Problems Than Just $40 Oil -- Bloomberg -- March 30, 2016; Iran Won't Be "Moving" As Fast As Earlier Expected

Wow: Over the past 25 years, exploration wells off Norway averaged 27 million bbls -- 27 million bbls/exploration well -- until this past year. This past year, on average, each exploratory well off Norway averaged less than 5 million bbls of oil and gas. 
 
Bloomberg is reporting Norway has more problems than $40 oil:

The collapse of crude prices isn’t the only problem facing energy companies in Norway: Explorers in western Europe’s biggest oil-producing nation also have had their leanest drilling spell in almost a decade.

Companies searching off Norway found less than 5 million barrels of oil and gas for every exploration well drilled last year, the lowest ratio since 2006. That compares with a 27 million-barrel average over the past 25 years.

The dismal results, due in part to the depletion of the North Sea, are bad news for a country whose oil production has shrunk by half since 2000. The slump in prices has already dried up income from crude extraction, which feeds the world’s biggest sovereign wealth fund and has made Norwegians some of the richest people on the planet. In January the government made its first withdrawal from the fund since it was set up in the 1990s as the market rout eroded growth.

The dwindling drilling success has left the country’s top explorers -- Statoil ASA and Lundin Petroleum AB -- impatient to tap an entirely new region of the nation’s Arctic, bordering Russian waters. Norway plans to award licenses in an area known as the Barents Sea Southeast before summer and drilling could begin as soon as 2017.

Much more at the link.

*********************************

Iran

Reuters/Rigzone is reporting:

Iran is expected to add half a million barrels of oil supply a day within a year from its existing oilfields after the lifting of sanctions against Tehran in January, but developing new fields would take time, the head of the International Energy Agency said on Wednesday.

Iran, previously OPEC's second-largest exporter, would need to prove that the investment conditions were profitable to the international investors and also that there was predictability in the markets.

[IEA's] estimate of Iran's supply increase from existing oilfields was in line with previous market estimates. And increases in Iranian gas supplies would come after oil.

"It was misleading to believe that there would be a huge amount of new Iranian crude and natural gas production entering market in the short term," [IEA head] said.

"It would take some time in terms of developing new oil fields, finding transmission routes and having the necessary market conditions."

Iranian oil officials were hoping for a quick rebound in oil sales to European clients, which accounted for over a third of Iran's exports, or 800,000 barrels per day, before the European Union imposed sanctions in 2012 over Tehran's nuclear programme.

If Something Is Shut Down For Six Months, Is It Really Needed? -- March 30, 2016

Updates

April 4, 2016: The New York Times is reporting that the nation's capital's subway, only 40 years old, is creaky and at a mid-life crisis --

The Federal Transit Administration has issued a blistering indictment of the system, warning in a June report of “serious safety lapses.”

That month, the National Transportation Safety Board convened hearings revealing that employees of the Washington Metropolitan Area Transit Authority — which runs Metro, as well as a regional bus service — often felt afraid to report safety concerns.

Commuters are frustrated and are abandoning the subway. Weekday ridership declined 6.1 percent in the last half of 2015, Metro officials say, compared with the same period the previous year. Metro’s new general manager, Paul J. Wiedefeld, who shut down service last month for a daylong emergency inspection after a tunnel fire similar to one that killed a passenger in January 2015, concedes that the public is losing faith.

I was unaware of that: more folks have been killed in Washington, DC, metro (subway) fires in recent history than have been killed in the US from CBR explosions/fire during the nine (9) years of the Bakken boom/bust.

I assume Hillary will hear this -- about the lack of safety on light rail, connect the dots with CBR, and propose to ban fracking. She proposed banning fracking as a solution to lead-contamination problem that Flint, MI, has. I can't make this stuff up.

Original Post

 

Uber could get huge Lyft in DC.

The Washington Post is reporting that the city's metro authorities are considering shutting down the entire system for six months for system-wide maintenance.

Metro’s top officials warned Wednesday that the transit system is in such need of repair that they might shut down entire rail lines for as long as six months for maintenance, potentially snarling thousands of daily commutes and worsening congestion in the already traffic-clogged region.

[Authorities] put rail riders on notice about possible extended closures at a high-level conference of local leaders.

The discussion also revealed strong resistance to what Evans said was a “dire” need for more than $1 billion a year in additional funding for Metro.

Yes, six months, not six weeks.

Funny how things work out. The metro authorities couldn't even think of doing this if Uber and Lyft didn't exist.

John Kemp's Weekly Energy Tweets -- March 30, 2016; Payback!

US gasoline stocks, adjusted for demand: 26 days in 2016; 26 days in 2015; 10-yr range 22 - 26 days; average 24 days; at high end of normal, but manageable

US gasoline stocks fell 2.5 million bbl last week; only 6% higher than 2015 at this time; gasoline stocks have come way, way down but still well above historical levels

I talked about US gasoline consumption earlier (at this link); looking for gasoline demand record this calendar year

US commercial crude stocks continue to rise, but perhaps at a slower rate: increased another 2.3 million bbls last week; now at +63 million bbls (+13%) over 2015 level; the graph needs to be reset

US crude oil imports eased back a bit from previous week's very high 8.4 million bopd to a more normal 7.8 million bopd

US refinery throughput accelerated last week to 16.2 million bopd, up by one-half million bopd (+3.2%) compared with 2015

US distillate stock adjusted for consumption (44 days) is still far above 2015 (33 days) but not getting worse

 US distillate consumption is finally back within the 10-year max-min range; but very, very low consumption

***********************************

John Kemp also had several slides showing Saudi Arabia reserve assets in free fall as well as other data points suggesting the crude oil slump is having a very, very big impact on Saudi Arabia. I think we will get a better feeling just how severe the Saudis think this is when the April 17, 2016, meeting is held.

I find this graph particularly interesting; many, many story lines:

************************************

Payback

The feud between Apple and the FBI apparently goes back many years, maybe as far back as 2008, it seems I've read somewhere. Whatever.

The FBI, no doubt, was really, really peeved when Apple would not help them with the most recent high-profile case, the San Bernardino terrorist shooting. Not only was FBI peeved, they were made to look inept not being able to hack a simple telephone.

But now that they have the "key to the magic kingdom" -- or at least access to the Israelis who have access to the "key" -- it looks like the FBI is going to make the most of it. The headline in tonight's Los Angeles Times on-line edition:

FBI Agrees To Help Arkansas Prosecutors Open iPhone After Hack of San Bernardino Device. 

This particular iPhone may hold evidence in an Arkansas murder trial.

Payback.

I have no dog in this fight. This chess game between the FBI and Tim Cook is getting as good as the chess game between Obama and Putin.