Category Archives: Shale Oil

What Researchers Say About Ethanol CO2

 Issue120  – The environmental problem with Ethanol

Introduction..A new study from the University of Wisconsin researchers shows that crop expansion in the U.S. from 2008 to 2012 emitted 115 million tons of CO2 and that much of that can be attributed to biofuels.  It was during that time period that policy-driven biofuels production increased.

Why the increase…The researchers said that the carbon emitted from land clearing of soils runs contrary to the intent to reduce climate change and rather increases it instead.  It can take hundreds of years to recapture carbon stored in the soil.

An earlier report in this newsletter…The Intergovernmental Panel On Climate Change (“IPC.”) in its Reports (WGI and WGIII) said, “Biofuels have direct, fuel‐cycle GHG emissions that are typically 30–90% lower than those for gasoline or diesel fuels. However, since for some biofuels indirect emissions—including from land use change—can lead to greater total emissions than when using petroleum products, policy support needs to be considered on a case by case basis” (IPCC 2014 Chapter 8).  To read continue reading click here.

In conclusion…Did you catch that both reports said that the production of corn-based Ethanol can increase pollution?  The original purpose of Ethanol was to reduce our dependence on OPEC produced oil.  Now the frackers have done that and changed the balance of oil production power in the world.  And since it appears Ethanol production can lead to greater emissions, it’s now time to end this Federal Government subsidy and let the markets work.

Oil Prices Below $60 BBL Seen Through 2018 By Executives

Issue 115 – Expected Oil Pricing

Introduction…Almost two-thirds of U.S. oil executives expect oil prices below $60 per barrel through 2018 and not hitting $70 for two years.  This survey was published by Deloitte Services.

What the survey revealed…250 executives at companies that produce, transport, and refine oil and natural gas surveyed reflects a shift from last year when they expected commodity prices would rise and capital spending budgets would grow.

This year’s view comes as executives focus o cost controls and not on rising in commodity prices.  The new paradigm encourages shale producers to base executive compensation on the best uses of capital designed to keep costs low.

In summary…“The bottom line is that companies should focus on cost discipline and operational efficiency,” said Andrew Slaughter, head of Deloitte’s Center for Energy Solutions.

“The new reality seems to have set in; waiting for a significant price recovery may be a long haul.”

For more information, contact Bill Moist at bill@billmoist.net

Source:  “Most U.S. Oil Executives See Prices Below $60 barrel Through 2018, Oil Industry News, 13 October 2017

What Impact Will Hurricane Harvey Have On Gasoline And Crude Pricing?

 Issue 108 – Harvey Rainfall In Texas Beyond Anything Experienced

Introduction…Hopes for an immediate relief from Hurricane Harvey’s wrath in Houston and along Gulf Coast seem unlikely. The National Weather Service calls the flooding “unprecedented” and warns things may become more dire if a record-breaking 50 inches of rain falls on parts of Texas in coming days.  How will Harvey disrupt gasoline and crude supplies and pricing?

Impact on Texas refining capacity…So far 10 refiners close as Harvey brings havoc to the hub of Texas energy.  Here is the short list of the top refineries closed:

By late afternoon Sunday, refineries run by Exxon, Citgo, Petobras, Flint Hills, Magellan, Buckeye, Shell, Phillips 66, and two plants run by Valero Energy were closed according to S&P Global Platts and the companies.  Total refining shut down estimated to be 2.2 million barrels per day or one-third of the nation’s capacity to refine oil into gasoline, diesel and other products.

Also 22% of the oil and 26% of the natural gas produced in the gulf was closed.

Bull and Bear response to Harvey...”It’s a gasoline story more than a crude oil story at the moment,” Ed Morse, Citi’s global head of commodities research, told CNBC’s “Squawk on the Street” on Friday.

Gulf Coast gasoline for spot delivery was at $1.73 per gallon, up 23 cents from Tuesday, according to Oil Price Information Service. Nymex gasoline was up about 5 cents over the same period.

“If we get rapid accumulation in 24 hours the refineries simply can’t pump the water fast enough out of the location,” he told CNBC’s “Squawk Box.” That could lead to damage to electric pumps in refineries, potentially requiring repairs that could take weeks or months, he added.

As the consensus estimate begins forming around a weeks-long outage, the picture for crude demand just becomes worse and worse, said John Kilduff, founding partner at energy hedge fund Again Capital due to deduction in demand by the refineries.

In summary…The full impact of Harvey on gasoline and crude inventories and pricing will be determined in the next three or four days until the storm damage to the refineries is fully determined.

More than 6.5 million people live in the region impacted by Harvey and several deaths have been reported.  The flooding impact is “unprecedented.”  Our thoughts and prayers go out to those suffering.

Oil Markets Rebalance On Strong Demand

 Issue 106 – Oil Demand Strong

Introduction…World oil demand will grow more than expected this year, helping to ease a global glut despite rising production from North America and weak OPEC compliance with output cuts, the International Energy Agency said on Friday.

The 2017 demand growth forecast to 1.5 million barrels per day (bpd) from previous month report of 1.4 million bpd.  The report said it expected demand to expand further next year.

OPEC is cutting output by 1.2 million bpd. while Russia and other non-OPEC producers are cutting production by 600,000 bpd until Mach 2018.

Compliance by OPEC cuts in July fell by 75%, the lowest level since cuts began in January according to the IEA.

The net result is the overall oil supply in July rose by 520,000 bpd which is 500,000 bpd abovet last year’s levels.

The strain on oil producers to support oil prices as the non-OPEC output is expected to expand by 0.7 million bpd in 2017 and by 1.4 million bpd in 2018.  There are strong gains in U.S. production as we are not participating in the output caps.

In conclusion…Strong oil demand growth is helping to clear the excess oil inventories in industrialized nations in both June and July.

Source: Dmitry Zhdannikov, “IEA Says strong oil demand growth helping market rebalance,” Reuters, 11 Aug 2017.

What State Is The Top Energy Consumer? California, NY, Texas

Issue 105 – Texas Windfarm

Introduction…Texas has many firsts.  Texas is the first in oil and gas production as well number as wind farm producer in the United States.

According to U.S. Department of Energy…Texas produces a third of the nations oil and gas and more than a fourth of all wind power generated in the U.S.

Texas is also number one leading in curde oil refining.

The Texas first you may not have expected, Texas is the top energy consumer in the U.S.  The state’s demand for energy grows every year as its population grows.

The energy required to develop, produce, refine, and bring petroleum products to market is also a large part of that energy usage.  However, that statistic was not available.

One more first…Thirty states adopted energy efficient policies as reported by the U.S. Energy Information Administration.  Texas became the first state with an energy efficiency resource standard (ESSA) in 1999.

In conclusion…Texas is not only number 1 in oil, gas, wind energy production, It is also number one enegy consumer in the United States.  On the green side, it was also the first state to adopt the ESSA.

U.S. Becoming World’s Largest Natural Gas Exporter

 Issue 104- LNG Ship Loading Sabine Pass

Introduction..The United State is already the world’s largest producer of natural gas.  The International Energy Agency (IEA) expects by 2022 U.S. will be the world’s largest exporter of natural gas.  The U.S.  is expected to produce 890 billion cubic meters (bcm,) more than a fifth of the global gas output.

The demand…Global natural gas demand is expected to grow 1.6% a year for the next five years, with consumption on track to hit almost 4,000 billion cubic meters by 2022.

“Also, the rising number of liquefied natural gas (LNG) consuming countries, from 15 to 30 this year, shows that LNG attracts many new customers especially in the emerging world,” said IEA Executive Director Fatih Birol said in a statement Thursday.

The supply…”The U.S. shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies,” Birol.  Three major LNG terminals are under construction on Texas coast will double the number of U.S. ports currently in use.

What this means to us…This continued demand for natural gas will keep the drillers active in the Utica/Marcellus shale play where our newest projct is located.  The project cleans drilling mud and produced water benefiting from the increased LNG shipping capacity.  Send me an email at bill@billmoist.net for insider information.

Source: David Reid, “U.S. on course to become world’s largest exporter of natural gas: IEA,” CNBC, 13 Jul 2017

Texas Oil & Gas Expansion Cycle

Texas Oil & Gas Expansion

Introduction…Crude oil and natural gas drilling and development in Texas has embarked upon a new cycle of expansion, according to the latest Texas Petro Index (TPI), which improved to 160.4 in March to post its fourth straight monthly increase.

Expansion is here…Driving the TPI upward during first quarter 2017 were crude oil and natural gas prices, drilling activity, the number of drilling permits issued, and the value of statewide oil and gas production, which were all higher compared to year-ago levels. However, the TPI is only about half the value of the record TPI of 313.5 in November 2014, and it still has not caught up in some other economic arenas.

Employment is increasing, but it still lags behind last year after the loss of well over 100,000 upstream jobs, said Ingham. An estimated 9,000 jobs have been added back since reaching the low point in September 2016.

Conclusion…”We still have a long way to go,” Ingham said, “but 2017 is going to be a year of recovery and expansion in the Texas statewide oil and gas exploration and production economy. “Activity levels will continue to expand, jobs will continue to be added, and the industry will support the broader state economy again, rather than acting as a drag on growth as it has for the prior two years.”

Source: “Oil and gas economy in Texas enters expansion cycle,” Oil & Gas Journal, 20 April 2017

Why Billions Are Pouring Into U.S. Shale

U.S. Shale Oil Boom

Introduction…Private equity funds raised $19.8 billion for oil ventures in the first quarter.  That is nearly three times the total raised the same period last year.

The accelerating pace of oil private equity, along with hedge funds and investment banks, arrives even as the recovery in oil prices from 8-year low has stalled at $50 per barrel due to stubborn oil glut.

Why the increase investment now?  The shale sector has become increasingly attractive to investors not because of rising oil prices, but rather because producers have achieved startling cost reductions – slashing up to half the cost of pumping a barrel in the past two years. Investors also believe the glut will dissipate as demand for oil steadily rises.

The financiers are confident that they can squeeze increasing returns from shale fields – without price gains – as technology continues to cut costs.  In addition, “Demand for oil has been more robust than anyone imagined three years ago,” said Mark Papa, chief executive of Centennial Resource Development Inc. (CDEV.O).

What now…This year’s drilling rush could be tested if global supplies grow too fast or if demand cools. The U.S. drilling rig count is rising at its fastest pace in six years and U.S. crude stockpile are close to 533 million barrels – near an all-time high and enough to supply the United States for 25 days.

In summary...”Shale funders look at the economics today and see a lot of projects that work in the $40 to $55 range” per barrel of oil, said Howard Newman, head of private equity fund Pine Brook Road Partners, which last month committed to invest $300 million in startup Admiral Permian Resources LLC to drill in West Texas.

Source: Earnest Scheyder, “Undaunted by oil bust, financiers pour billions into U.S. shale, Reuters, 17 April 2017

Why Major Oil Company Goes Big On US Shale

 Apache Oil Co. Drilling Near Davis Mountains

Introduction…A major oil company does big on US shale drilling.  Here’s why.

Exxon goes big on U.S. shale. New ExxonMobil (NYSE: XOM) CEO Darren Woods gave his first presentation to investors this week, where he outlined a strategy to step up investment in U.S. shale.

Exxon will allocate a quarter of its 2017 budget to short-cycle shale projects. The move will help the oil major navigate an uncertain market, as cash can be returned to the company much quicker from shale drilling than it can from the major offshore projects that Exxon has long been accustomed to.

Still, Exxon will move forward aggressively on its large offshore discovery in Guyana, hoping to bring it online in the next few years.

Conclusion…It’s quicker positive cash flow that brings ExxonMobil to shale oil production.  Even a company this big wants a quicker return on its capital expenditures.

20 Billion Barrels Of Oil North Of Midland Says USGS

wolfcamp-03-jpg-scale-largeThe Wolfcamp Is Largest US Shale Play

Introduction...The Wolfcamp Shale Formation is the largest continuous oil that the USGS has ever assessed in the United States.  Many are calling this discovery just north of Midland and west of Abiliene ‘world class.’

“The Wolfcamp could possibly become the largest oil and gas discovery in the world,” said Scott Sheffield, chief executive officer, Pioneer Natural Resources Co.

The operator is the largest acreage holder in the Spraberry/Wolfcamp field with about 900,000 gross acres (730,000 net acres), the majority of which could be prospective for the horizontal Wolfcamp shale.

Based on Pioneer’s extensive geologic database, petrophysical analysis, and successful drilling results to date, there is significant horizontal Wolfcamp shale resource potential in this acreage.

A vast resource...”The Wolfcamp is interesting because it’s been out there,” said J. Ross Craft, chief executive officer, Approach Resources Inc. Since the onset of Permian development in the early 1920s, operators have drilled through this formation. “Early in my career, we knew the Wolfcamp as a nonproductive shale that would put oil in the pits every once in a while,” Craft said. “That was about it.”

Today, Approach Resources holds 170,000 gross acres (mostly contiguous) in the Permian basin with a reported production of 8.4 MMboe/d as of the first quarter of 2013. In 2012, then company held 95.5 MMboe of proved reserves, with 69% represented by oil and natural gas liquids. “When we first started the company in 2006, we had a $5 million commitment, 0 acres, and 0 reserves,” Craft said.

Both Pioneer and Approach Resources tout Wolfcamp potential as a boon for the industry. According to Sheffield, Pioneer’s Eagle Ford success has provided a smooth transfer into the Wolfcamp. “When comparing phases of development, we see the Wolfcamp trending higher than the Eagle Ford based on activity and production,” he said.

According to Sheffield, the company will test 13 zones within the next 3 years. Sheffield noted that recoverable reserves were based solely on the Wolfcamp A, B, and D shelves and the Jo Mill formation. The potential is enormous, and “more reserves are yet to be discovered,” Sheffield said.

Pioneer combines its Spraberry/Wolfcamp acreage. It operates on the northern end of the play, which is said to contain an estimated 3,500-4,000 ft of shales, which translates to nearly 3 to 4 million acres when considered in 3D space as opposed to surface area. “Compare that to the Eagle Ford shale formation, which is about 300 ft thick and the Spraberry/Wolfcamp shale, with its 50 billion boe, begins to dwarf the Eagle Ford and the Bakken with 27 billion boe and 13 billion boe, respectively,” Sheffield said.

Conclusion…The United States is not running out of oil and gas anytime soon as new application of technology is discovering vast resources.

Take away...Some in the oil and gas industry are saying that the produciton costs of thi new shale play make it uneconomical and this is a just a stock price publicity push for Pioneer and Apache.  Time will tell.

References:  USGS Estimates 20 Billion Barrels of Oil in Texas’ Wolfcamp Shale Formation, USGS.gov., November 15, 2016; Permian’s Wolfcamp formation called biggest shale oil field in U.S., Joe Carroll, Bloomberg News, November 15, 2016