Tag Archives: #TheFrackers

U.S. To Dominate World Oil Markets

Issue 122 – U.S. Historic Oil Surge

Introduction…The U.S. will be a dominant force in global oil and gas markets for years to come as the shale oil boom becomes the biggest supply surge in history.  This predicted by the International Energy Agency (IEA,)

The report...U.S. production surge to equal Saudi Arabia expansion at its highest point.  The natural gas increases will surpass the former Soviet Union.  This stated in the annual World Energy Outlook.  This boom will turn the U.S. from an oil importer to the biggest exporter of fossil fuels.

“The United States will be the undisputed leader in global oil and gas markets for decades to come,” IEA Executive Director Fatih Birol said Tuesday in an interview with Bloomberg television. “There’s big growth coming from shale oil, and as such there’ll be a big difference between the U.S. and other producers.”

Conclusion...The United States oil and gas production has come a long way since OPEC was able to create the 1973 Oil Embargo.  A sleeping giant was awakened causing the massive development of shale oil and gas fracking.

Source: Grant Smith, “U.S. to Dominate Oil Markets After Biggest Boom in World History,” Bloomberg Markets, 13 November 2017.

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 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.

On Saudi Pledge Oil Climbs To 17-Month High

Bloomberg: Non-OPEC Producers Join Deal to Cut Production

Introduction:  Largest oil producers strengthen commitment to tighten supply, Non-OPEC countries agree to trim output 558,000 barrel per day next year.

Oil advanced to the highest since July 2015 after Saudi Arabia signaled it’s ready to cut output more than earlier agreed and non-OPEC countries including Russia pledged to pump less next year.  WTI closed Monday at $52.83 P/B.

Futures climbed 2.6 percent in New York and 2.5 percent in London. Saudi Energy Minister Khalid Al-Falih said Saturday the biggest crude exporter will “cut substantially to be below” the target agreed on last month with members of OPEC. His comments followed a deal by 11 non-OPEC countries to join forces with the group and trim output by 558,000 barrels a day next year, the first pact between the rivals in 15 years.

U.S. oil futures have gained almost 20 percent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to cut output for the first time in eight years. Saudi Arabia, which initiated OPEC’s decision in 2014 to pump without limits, is leading efforts to regain control of the market. The OPEC and non-OPEC plan encompasses countries that produce about 60 percent of the world’s crude.

OPEC Collaboration…”The main impact of the non-OPEC collaboration is to pull the global market into balance, if not in deficit, in the second quarter of 2017, rather than in the third quarter,” said Sarah Emerson, managing director of ESAI Energy in Wakefield, Massachusetts. “On an annual average basis, this pushed the global balance into a 200,000 to 300,000 barrel-a-day deficit for the year.”

Oil prices at $60 a barrel would be “ideal” for OPEC as higher levels risk sparking a recovery in competing supplies from the U.S., Nigerian Minister of State for Petroleum Emmanuel Kachikwu said in a Bloomberg Television interview.

Conclusion…U.S. exporters rushed back to the shale patch with the largest weekly addition of oil rigs since July 2015 according to Baker Hughes.  OPEC deal cous drain almots half of the global oil surplus.

Sources:  Mark Shenk, Oil Climbs to 17-Month High on Saudi Pledge, Non-OPEC Output Cut, Bloomberg, December 11, 2016; Gran Smith, OPEC-Russia Deal Could Drain Almost Half the Global Oil Surplus, Bloomberg December 12, 2016; Non-OPEC oil producer to cut output 558,000 barrels a day, CNBC, December 10, 2016

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

New Shale Boom On Horizon?

w-texas-oil-boom Oil Shale Boom?

OPEC surprised the markets when for the first time in eight years’ oil production limits will be put in place at its November meeting. The September 29th announcement from OPEC sent markets up by almost $3 per barrel.   The rally continued with the WTI week closing at $48.24.

Hundreds of oil and gas bankruptcies are an ugly background for recent predictions for continued records inventory levels.

The projected changes would be caused by an unprecedented agreement between arch-rivals Saudi Arabia and Iran.

In its announcement, OPEC stated:

“In the last two years, the global oil market has witnessed many challenges, originating mainly from the supply side. As a result, prices have more than halved, while volatility has increased. Oil-exporting countries’ and oil companies’ revenues have dramatically declined, putting strains on their fiscal position and hindering their economic growth. The oil industry faced deep cuts in investment and massive layoffs, leading to a potential risk that oil supply may not meet demand in the future, with a detrimental effect on security of supply.”

“The Conference opted for an OPEC-14 production target ranging between 32.5 and 33.0 mb/d, in order to accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward.”

“What we are looking at here at the very least is a freeze,” Paul Sankey host of the conference call said. “We were looking for more OPEC production growth but now we no longer think so.”

Why did OPEC do it?

“With weaker demand predicted through 2017 they could see a rough market coming,” the analyst theorized. “Being a cartel the economics were overpowering: a 10 percent cut could give as much as a 30 percent rise in oil prices.

In conclusion...If a 30% oil price rise is realized, then oil shale could boom again.

Reference:  September 30, 2016, Will The OPEC Deal Lead To A New Shale Boom? Oil & Gas 360, www.oilandgas360.com

Crude Drops After Producers’ Fail To Cut Output

Forget Doha

Almost 60% of the world’s oil producers gathered in Doha on Aril 17 to discuss freezing their production output at January levels in effort to stabilize prices.  Russia, Saudi Arabia, Qatar, and Venezuela made a preliminary deal in February and were seeking to add more producers and extend the recent price recovery.

The oil producers failed to reach an agreement to freeze production.  Just after the futures market opened Monday. April 18th around 6 P.M. ET, West Texas Intermediate fell 6% to a low of $39.02. However, by the close on Monday he price had risen to $40.36 or producing only a 4% decline since April 12th recent high.

Some of the headlines said, “Crude Crashes…” or “Crude Oil Plunges…”  A 4% drop to $40.36 from the April 12th high, hardly seems like a crash, but the news must be sold.

A several mediating factors may be at work.

  1. Striking oil workers disable 60% of Kuwait’s production
  2. U.S. production drops below 9 million bpd law week according to EIA
  3. Canada oil industry to see 62% decline in investment
  4. Drop in non-OPEC supply should accelerate through rest of year and into 2017

In conclusion, regardless of what didn’t happen in Doha, the market is starting to rebalance.  And read the news, not just the headline.

The Water Contamination By Fracking Myth

YaleStudy

The Myth Has Been Disproved

Yale researchers have confirmed that hydraulic fracturing – also known as “fracking” – does not contaminate drinking water.

The process of extracting natural gas from deep underground wells using water has been given a bad reputation when it comes to the impact it has on water resources but Yale researchers recently disproved this myth in a new study that confirms a previous report by the Environmental Protection Agency (EPA) conducted earlier this year.

After analyzing 64 samples of groundwater collected from private residences in northeastern Pennsylvania, researchers determined that groundwater contamination was more closely related to surface toxins seeping down into the water than from fracking operations seeping upwards. Their findings were recently published in the journal Proceedings of the National Academy of Science.

Researchers from Duke University also recently gave people a reason to trust fracking companies. In a study published in Environmental Science & Technology Letters, scientists explained that hydraulic fracturing accounts for less than one percent of water used nationwide for industrial purposes. This suggested that the natural gas extraction processes are far less water-intensive than we previously thought.

It’s hoped that these studies will help people better understand the safety of fracking.

In conclusion, underground drinking water contamination myth has been disproved by the Yale researchers which confirmed a previous report by the Environmental Protection Agency.

Oil Pricing Heads To Bear Market?

Screenshot 2015-07-26 13.19.42Crude oil slipped back into a bear market Thursday, disappointing U.S. shale drillers that pinned their hopes on higher prices.

West Texas Intermediate, the benchmark U.S. contract, tumbled 22 per cent since June 10 to US$48.14 a barrel on Friday, erasing more than US$100 billion in market value from the companies in the Bloomberg Intelligence North America Independent Explorers and Producers Index.

Crude oil pricing are down roughly 55% from their peak of nearly $107 in June of last year and have lost about 27% from the $66.15 low in November, which at the time was the lowest settlement in 5 years

Crude’s recovery fizzled amid a worldwide glut that shows little sign of abating. U.S. production remains near the highest level in four decades, output from Saudi Arabia and Iraq surged to record levels, and Iran is focused on resuming exports after reaching a nuclear agreement with world powers.

“Just when you thought it was safe to go back into the oil patch.”   Phil Flynn, senior market analyst for Price Futures Group Inc., said by phone from Chicago.   “The bear market is definitely putting another round of fear into the shale patch and the bankers of the shale patch.”

Source: “Oil reverts back to bear market, erasing more than US$100 billion for shale drillers,” Financial Post, Asjylyn Loder and Dan Murtaugh, Bloomberg News | July 24, 2015; “It’s bad-news bear market for crude oil,”  Market Watch by Myra P. Saefong, July 24, 2015; “Sudden Drop in Crude-Oil Prices Roils U.S. Energy Firms, Major job cuts, asset sales are expected: layoffs texted to engineers and scientists,” Wall Street Journal by Lynn Cook, July 26. 2015

U.S. Oil Production At 45-Year High

Screen Shot 2015-07-13 at 5.38.12 PMBig Dog Drilling Rig

U.S. oil production has peaked…at least for now.

“Even if production growth comes to a halt, it comes in at higher level than analysts expected earlier this year,”  said Jim Burkhard, head of global market research for IHS.

Despite the slowdown in U.S. oil patch, producers are expected to pump more oil in 2015 than in 45 years.  Expected average production is 9.5 million barrels per this year.  This equals about 40,000 more barrels per day than the EIA projected last month.

The domestic benchmark is expected to average $55 per barrel the rest of the year, which still allows the Bakken, Eagle Ford, Niobara, and Permian Basins to remain economically viable to support development and drilling.  The rigs and wells are becoming more efficient and productive, and the cost to drill and complete continue to fall allowing onshore drilling to grow again in 2016.

The EIA expects oil prices at $62 per barrel next year.

Sources: “EIA Confirms: Oil Production Peaked,” By Nick Cunningham, Oil Price.com, July 12, 2015; “U.S. oil output still barreling toward 45-year record,” by Rhiannon Meyers, Houston Chronicle, July 7, 2015;