Oil Supply

Oil’s Bad Timing Pressures Drillers as Banks Review Loans

22 Mar 2017   Shale Oil

‘The next month is going to be absolutely critical’: analyst Photographer: Brittany Sowacke/Bloomberg The rally in global oil prices has stalled at the worst possible time for explorers, just as banks reassess credit lines crucial to their growth. This year’s reviews, due to start next month, will arrive with the industry nursing a nasty case of whiplash. Spot prices surged late last year on OPEC’s pledge to cut output, hitting $54.06 a barrel in New York. Since then, they’ve fallen 12 percent, undercut by rising U.S. rig counts. Futures contracts show longer-term prices deteriorating as well. A drop below $45 would likely spur credit-line reductions, raising the specter of cuts that crippled drillers a year ago, said Kraig Grahmann, a partner in Houston for law firm Haynes & Boone LLP . Between the end of 2015 and October, when credit lines were last reassessed, the average borrowing base for […]

New projects, shale boom could trigger oil oversupply by 2018-19: Goldman

22 Mar 2017   Shale Oil

New production projects and a fresh shale boom could boost oil output by a million barrels per year and result in an oversupply in the next couple of years, according to Goldman Sachs. “2017-19 is likely to see the largest increase in mega projects’ production in history, as the record 2011-13 capex commitment yields fruit,” the U.S. investment bank said in a research note on Tuesday. OPEC’s landmark decision to limit output for the first time in eight years in a bid to arrest the existing supply glut reduced price volatility and increased stability, unintentionally helping the shale producers, the bank said. ADVERTISING “OPEC’s decision in November 2016 to cut production was rational, in our view, and fit into its role of inventory manager of last resort,” Goldman said. “However, the unintended consequence […]

Big Oil’s Plan to Buy Into the Shale Boom

22 Mar 2017   Shale Oil

Exxon, Shell, and Chevron plan to spend $10 billion in the U.S. shale patch this year. A gas flare is seen through the window as Royal Dutch Shell’s Scott W. Scheffler drives near Mentone, Texas, in Loving County situated in a central portion of the Delaware Basin, on Thursday, March 2, 2017. Big Oil is muscling in on shale country. Exxon Mobil Corp. , Royal Dutch Shell Plc and Chevron Corp. , are jumping into American shale with gusto, planning to spend a combined $10 billion this year, up from next to nothing only a few years ago. The giants are gaining a foothold in West Texas with such projects as Bongo 76-43, a well which is being drilled 10,000 feet beneath the table-flat, sage-scented desert, and which then extends horizontally for a mile, blasting through rock to capture light crude from the sprawling Permian Basin. While the first […]

U.S. oil production keeping oil prices low

22 Mar 2017   Prices, Shale Oil

Crude oil futures started the day slightly improved Tuesday after falling for seven of the last 10 sessions.  Prices remained below the $50 per barrel mark, an improvement on January 2016’s fall to below $30 per barrel, but well below the $100 per barrel seen 2014. Oil is regarded as a barometer of the global economy, and while stocks have traded up since the start of President Donald Trump‘s administration, the bump seen in stock prices in other sectors of the economy may not be showing up for the oil industry soon.  Producers in the United States are partially responsible for the current oversupply in oil. Global supply increased by 260,000 barrels per day in February, to 96.52 million barrels per day, and U.S. production is the highest it has been in a year, at 9.1 million barrels per day, roughly the amount Saudi Arabia produced in February.  The United States also has 528.4 million barrels in storage, seven percent more than it stored a year ago. The U.S. effort largely nullified a 2016 agreement by OPEC, Russia and 10 non-OPEC oil producing nations to limit production, which sent oil prices to about $55 per barrel but encouraged U.S. producers to pump more oil.

Oil, Gas Job Recovery Much Slower Than Industry Rig Count, Spending Growth

22 Mar 2017   Shale Oil

Higher oil prices and a US rig count surge propel industry earnings toward recovery, but hiring is expected to lag behind, according to Moody’s Investors Service. The U.S. rig count has almost doubled during the last 10 months and upstream spending is on track to increase up to 30 percent this year – but the workforce recovery is traveling at a much slower step. More rigs are back to work based on shale’s quick development cycle, minimal geological risk and producers’ nimble action to reduce costs, analysts at Moody’s Investors Service said in a new report. Since bottoming out in May, 357 land rigs have gone to work in onshore U.S. activity. About 48 percent of the total has joined the ranks in the Permian Basin, but lucrative plays in Texas’ Eagle Ford, as well as the STACK and SCOOP in Oklahoma, have also grown. The increased drilling activity […]

Can Big Oil Survive A CO2 Crackdown?

22 Mar 2017   Peak Oil

Over the long run, the oil business is under threat. There are various arguments about why that might happen. Peak supply people argue we are running out of oil. Peak demanders say that market saturation, efficiency, and new technologies will cause oil demand to peak and decline. Similarly, clean energy proponents argue oil will be undercut by electric vehicles. Another variation of this argument can be found in the “stranded assets” theory, which posits that low oil prices, cheaper alternatives or strict climate regulation – or some combination of the three – will keep vast volumes of unprofitable oil in the ground. A shrinking number of people see oil dominating the energy landscape decades from now. Or, even though it will likely still be a major source of fuel in, say, 2040, its growth is capped. Reasonable people can argue about how much oil will be consumed at what […]

Why Shell’s Oil Sands Sell Off Is Great News For Canadian Oil

22 Mar 2017   Canada, Tar Sands

There was a time when if a Canadian exploration and production (E&P) company bought out a foreign-controlled competitor, it was not only good for the country but financially beneficial because it qualified for government incentives. That Canada’s E&P industry was in the hands of too many foreign operators was regarded as a big problem in the National Energy Program of 1980. Patriating this key industry became a priority if not an obsession. Thirty-seven years later, this is clearly not an issue. However, industry watchers must reflect upon the multitude of responses to the announcement by Canadian Natural Resources Limited (CNRL) it was purchasing effectively all (except 10 percent of Athabasca Oil Sands Project or ASOP) of the oil sands production operations and leases held by the Shell Canada affiliates – Shell Canada Energy, Shell Canada Limited and Shell Canada Resources (Shell) for cash and shares totaling $11.1 billion. The […]

BP orders construction for new subsea production system

22 Mar 2017   Offshore

 Schlumberger subsidiary OneSubsea has been contracted to provide a subsea production system for BP’s Mad Dog 2 project in the Gulf of Mexico. The Mad Dog Phase 2 project is BP’s second stage of development for a planned offshore oil field. The phase builds on BP’s largest oil field discovery in the Gulf of Mexico. OneSubsea will be tasked with supplying undersea wells that extract petroleum. Company officials are confident their products will yield positive results for all industry partners while reducing risks. “Our equipment reliability is a key factor in mitigating project risk and this project will benefit from the supplier-led approach of using standardized equipment designs and specifications,” OneSubsea president Mike Garding said in a press release . The production contract includes […]

Plenty of Cash Lies Buried on Canada’s Oil Sands

21 Mar 2017   Canada, Tar Sands

Earlier this month, Marathon Oil agreed to spend more than $1 billion on acreage in the Permian Basin, the very hottest place on the planet to drill for oil. On the same day, it announced the sale of other properties 2,000 miles due north in Canada’s oil sands, a significantly less popular place to invest right now. Shareholders applauded, sending Marathon’s shares up 8% on the news, but the price of the company buying its unwanted…

Despite growth late in the year, U.S. crude oil production decreased in 2016

21 Mar 2017   Oil Supply, USA

Despite increasing crude oil prices throughout most of 2016, total U.S. crude oil production in 2016 was below its 2015 level . However, monthly production began growing in the fourth quarter of the year after declining over the first three quarters. Total 2016 production remained above the five-year average. With the removal of restrictions on exports of domestically produced crude oil at the end of 2015, crude oil exports increased. At the same time, the difference between Brent and West Texas Intermediate (WTI) crude oil prices narrowed, which made crude oil imports relatively more attractive and caused total imports of crude oil in 2016 to also increase. Both Brent and WTI crude oil spot prices increased in 2016. The Brent spot price increased from $31 per barrel (b) in January to $53/b in December, while the WTI spot price increased from […]

Peak oil? Sooner than you think

21 Mar 2017   Peak Oil

For some time, there has been speculation about when global oil demand may peak – not because we will run out of oil or prices will spike making oil unaffordable, notions that are now considered passé – but because we won’t be needing as much of the stuff as we thought we would. And once the peak is finally reached – whenever that is – demand will begin to drop thereafter, perhaps precipitously. What is radically different about the new thinking about oil demand is that price, while still an important factor, no longer seems as important as it used to be. As further described alternatives to oil are or will soon be cheaper making the price of oil far less significant. Witness the fact that global oil has been growing at much slower clip in the last few years even though prices, hovering in the $40-60 range per […]

Shell Goes on a Deep-Water Drilling Diet

21 Mar 2017   Offshore

Shell, the world’s second-largest publicly traded energy company, is making a high-stakes bet that it can take highly efficient technology and processes perfected onshore and deploy it in deep-sea production.  It hopes to squeeze more oil out of existing undersea wells, like those that ring the platform, which weighs 82 million pounds and floats in 3,000 feet of water over the Mars oil field in the Gulf of Mexico. It also wants to make new deep-water projects cheaper and faster, especially in Brazil, where it acquired a bevy of offshore prospects as part of its $50 billion purchase of BG Group PLC last year.  It is a strategy born of necessity. Big oil companies have traditionally needed prices of $70 a barrel or more just to break even on new deep-water projects, which take years to begin paying off.  But with onshore shale oil flooding the market, Shell executives aren’t sure when crude, currently around $50 a barrel, will fetch more again. And with electric cars and other technologies threatening to eat into demand, they believe the world’s thirst for oil may peak as soon as the end of next decade.

Halfway into 2017’s oil supply cut, Asia remains awash with fuel

17 Mar 2017   Oil Supply

Halfway into an OPEC-led oil supply cut, Asia remains awash with fuel in a sign that the group’s efforts to rein in a global glut have so far had little effect. The Organization of the Petroleum Exporting Countries (OPEC) and other suppliers including Russia have pledged to cut production by almost 1.8 million barrels per day (bpd) during the first half of this year to rein in oversupply and prop up prices. Yet almost three months into the announced cuts, oil flows to Asia, the world’s biggest and fastest growing market, have risen to near record highs. The Asian surplus will pressure global oil prices and weigh on the budgets of major oil producing nations but may also help spur growth in demand needed to soak up the excess. […]

Citi Tells Investors to Stop Worrying and Learn to Love Oil

16 Mar 2017   Oil Supply, Prices

Buy oil now, and count on Saudi Arabia for support, according to Citigroup Inc.  OPEC’s output cuts aimed at easing a global glut are “real” and is cleaning up the market, analysts including Seth Kleinman wrote in a report dated March 14. While prices have dropped recently amid rising U.S. inventories and drilling activity, investors should take advantage of the slide because the Saudis are likely to defend prices this year, according to the bank.  The bank’s comments are similar to Goldman Sachs Group Inc., which called for investors to be patient and said they should go, or stay, long on oil. Prices last week fell below $50 for the first time since December on concern rising U.S. output will offset curbs by the Organization of Petroleum Exporting Countries and other producers. While Saudi Arabia told OPEC it dialed back on some of its cuts last month, the extra supplies were moved into storage and the kingdom said it remains determined to stabilize the market.

View full article at www.bloomberg.com

Has OPEC Underestimated U.S. Shale Once Again?

16 Mar 2017   OPEC, Shale Oil

The U.S. shale cowboys are back on their horses and leading a strong recovery in the oil patch that is not expected to falter even as WTI prices dropped last week below $50 per barrel for the first time in more than two months. With lessons learned from the oil price crash and budgets streamlined and focused on the most prolific shale plays, U.S. drillers are giving OPEC a hard time by raising output and hedging future production. Meanwhile, the cartel members are trying to cut supply and fix the price of oil at such a range that would allow them to reap higher oil revenues, but not allow the shale patch to recover too much too fast. Two and a half months into the supply-cut deal, it looks like OPEC is losing the campaign to prop up oil prices. The drop in prices that began last week saw […]

What Really Caused The EIA Oil Draw?

16 Mar 2017   Oil Supply, USA

Crude prices are rebounding today, bouncing off the trampoline of price support at $48 for WTI and $50 for Brent. A surprise draw to U.S. crude inventories ( not to some ) has been behind the rally (see more below), while the monthly IEA report followed in OPEC’s footsteps by showing higher Saudi production, and higher OECD petroleum inventories. All that said, hark, here are five things to consider in oil markets today: 1) Hot on the heels of yesterday’s OPEC report, the IEA has released its respective monthly report today. In similar fashion to OPEC, the Paris-based agency has highlighted how OECD inventories have increased . After six consecutive months of dropping, stockpiles have rebounded by 48 million barrels in January, to back above 3 billion (beeelion) barrels. As we pointed out yesterday , the goal of the OPEC production cut is to reduce OECD inventories back in […]

U.S. oil stockpile decline reverses nine weeks of builds: EIA

16 Mar 2017   Oil Supply, USA

U.S. crude stocks fell last week as imports plummeted, dropping after nine consecutive increases, while gasoline and distillate inventories declined more than expected, the Energy Information Administration said on Wednesday. The stockpiles have been closely watched by oil traders eager to determine whether a November agreement to cut output by the Organization of the Petroleum Exporting Countries is reducing a global supply glut. [O/R] Crude inventories fell by 237,000 barrels in the last week, compared with analysts’ expectations for an increase of 3.7 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 2.13 million barrels, EIA said. U.S. crude oil imports fell by 565,000 barrels per day to 6.69 million bpd last week, the lowest level in a month, mostly due to large declines from […]

Global oil stocks rise, but IEA says OPEC curbs may create H1 deficit

15 Mar 2017   IEA, Oil Supply, OPEC

Global oil inventories rose for the first time in six months in January, despite OPEC’s production cuts, but if the group maintains its output limits, the market may tilt into deficit in the first half of 2017, the International Energy Agency said on Wednesday. The IEA said crude stocks in the world’s richest nations rose in January for the first time since July by 48 million barrels to 3.03 billion barrels. “The actual build in OECD stocks in January reminds us that it may be some time before global stocks start to fall,” the agency said. Compliance by the Organization of the Petroleum Exporting Countries with its agreed output cut of 1.2 million barrels per day in the first half of this year […]

Big energy fears peak oil demand is looming

15 Mar 2017   China, Peak Oil

In an attempt to improve the quality of Beijing’s polluted air , the authorities are planning to mandate that every new taxi in the city must be electric or gas-fuelled, China’s National Business Daily reported last month. Beijing’s taxi drivers are no fans of the electric cabs in use there since 2014, complaining about inadequate battery range, alarming performance dips in cold weather and insufficient charging stations. But the thought of the Chinese government taking concerted action to push road transport towards alternative fuels will send chills down the spine of every oil producer worldwide. The prospect of “peak demand” for oil — an end to growth in global consumption — has been discussed in the energy industry for many years, without apparently coming much closer. But some of the world’s leading oil companies now see peak demand and sustained lower crude prices as a risk that they need […]

OPEC says oil stocks keep rising despite supply cut deal

15 Mar 2017   Oil Supply, OPEC

OPEC said on Tuesday oil inventories had continued to rise despite the start of a global deal to cut supply and raised its forecast of production in 2017 from outside the group, suggesting complications in the effort to clear a supply glut. The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1, the first cut in eight years. Russia and 10 other non-OPEC producers agreed to cut half as much. But in its monthly report OPEC said oil stocks in industrialized nations rose in January to stand 278 million barrels above the five-year average, of which the surplus in crude was 209 million barrels and the rest products. “Despite the supply adjustment, stocks have continued to rise, not just in the U.S., but also in Europe,” OPEC said in the report. “Nevertheless, prices have undoubtedly been provided […]

Oil Supplies Rise as OPEC and Non-OPEC Countries Pump More Crude

15 Mar 2017   Oil Supply

Global oil supplies rose by 260,000 barrels a day in February to 96.52 million b/d, as both OPEC and non-OPEC producers pumped more crude, the International Energy Agency said on Wednesday. In its closely watched monthly report, the agency, which advises industrialized nations on energy policies, said output from the Organization of the Petroleum Exporting Countries rose by 170,000 b/d in February to 32 million b/d. This…

Peak Oil – Apocalyptic Environmentalism and Libertarian Political Culture

15 Mar 2017   Peak Oil

In 2011, while working toward a Ph.D. in American Studies at the University of Minnesota, Matthew Schneider-Mayerson began a study into the peak oil community. Approaching his subject from the perspective of a social scientist, he conducted his research by way of surveys, interviews, field notes and participant observation (the latter two gleaned through attending the 2009 Association for the Study of Peak Oil and Gas international conference in Denver). His book Peak Oil: Apocalyptic Environmentalism and Libertarian Political Culture is the result of this research. It investigates the ideology and subculture of “peakists,” explores how their movement was influenced by the ascendancy of libertarianism into mainstream American politics and the rise of Internet technology, analyzes peak oil-themed fiction, probes the reasons behind peakists’ political quiescence and discusses the peak oil subculture within the context of […]

Oil at $40 No Problem as U.S. Drillers Snub OPEC With Hedges

15 Mar 2017   Shale Oil

OPEC’s worst enemy isn’t U.S. shale drillers. It’s the hedges propping them up. American oil explorers who survived the worst of the 2014-2016 market rout are shrugging off the 14 percent slide in prices this year from a high of $55.24 to less than $48 a barrel Tuesday. The price would have to drop to the $30s or lower to dent the bottom line of many drillers now working U.S. shale fields, said Katherine Richard, the CEO of Warwick Energy Investment Group, which own stakes in more than 5,000 oil and natural gas wells. That’s because many producers have already locked in future returns with financial contracts that guarantee the price of their oil for most of the rest of the decade. Such resilience poses a dilemma for countries that agreed to an OPEC-led production cut aimed at tightening supplies to raise prices and relieve their distressed national economies. […]

U.S. shale oil output to soar in April, Permian to hit fresh record

14 Mar 2017   Shale Oil

U.S. shale oil production in April was set for its biggest monthly increase since October as output in the Permian Basin, America’s fastest growing shale oil region, was expected to hit another record high, government data showed on Monday. Total shale oil production was expected to rise 109,000 barrels per day to 4.96 million bpd, according to the U.S. Energy Information Administration’s drilling productivity report. Oil production in the Permian Basin in Texas and New Mexico, the largest U.S. shale oil field, was set to rise 79,000 bpd to 2.29 million bpd, the highest level on records dating back to 2007. In the Eagle Ford region in Texas, output was expected to grow nearly 28,000 bpd to 1.14 million bpd, the highest level since November. Production in the Bakken, however, was set to […]

U.S. Shale Faces A Workforce Shortage

14 Mar 2017   Shale Oil, USA

A problem for the U.S. shale oil and gas industry that analysts and observers have warned about for a long time has materialized: there is a shortage of workers. According to one service provider for E&Ps, trucker jobs remain vacant even with an annual paycheck of $80,000 , which is certainly a big change from a couple of years ago when layoffs were sweeping through the shale patch. This shortage could dampen the prospects of not just shale producers, who are eager to ramp up production as quickly as possible and take advantage of higher international oil prices, but it will also seriously hamper the recovery of the oilfield services segment, which has been hit harder than E&Ps by the price crash. We wrote earlier this year how oilfield service providers are starting to get back at producers with higher fees for their services, to make up for the […]

Russian oil major says U.S. shale growth imperils OPEC deal

14 Mar 2017   -, Russia, Shale Oil

A recovery in U.S. oil output may deter OPEC and non-OPEC producers from extending production cuts beyond June and might lead to a new price war, Russia’s top oil major said on Monday. U.S. shale oil production had been in retreat as oil prices tumbled from above $100 a barrel in 2014 to below $30 in 2015, making costly fracking processes less profitable. A deal by the Organization of the Petroleum Exporting Countries with Russia and other producers to rein in output by 1.8 million barrels per day (bpd) for six months from Jan. 1 lifted prices but also encouraged U.S. firms to boost supplies. “It became evident that U.S. shale oil output has become and will remain a new global oil price regulator […]

Race to Bottom on Costs May Cause Oil to Choke on Supplies

13 Mar 2017   Oil Supply, Prices

Houston hosted two events this week: the nation’s largest energy conference and the town’s famous rodeo. They have more in common than you’d think. In both cases, the key for top performers is how efficiently they perform. For cowboys, it means tightly controlling every muscle to stick on a bucking bronco. For energy executives, it means controlling every cost to lower the break-even price and survive what’s been a wild ride on the oil market. When companies can lower the price at which they break-even, it means they can approve more projects and produce more oil, keeping dividends safe and investors happy. The risk: By drilling up their share price, they can also end up drilling down the price of oil. Welcome to 2017, the year after a two-year market rout made companies more efficient. At the CERAWeek by IHS Markit conference this week, fears of too much supply […]

U.S. Oil-Rig Count Climbs by Eight

11 Mar 2017   Oil Supply

The number of rigs drilling for oil in the U.S. rose by eight in the past week to 617, according to oil-field services company Baker Hughes Inc. The U.S. oil-rig count is typically viewed as a proxy for activity in the sector. After peaking at 1,609…

Oil industry revives quest for deepwater reserves

10 Mar 2017   Offshore

Deepwater oil drilling can be expensive, time-consuming and a hard sell to investors. But the world’s top energy firms are restarting their search for giant oilfields under the ocean after a two-year lull. A recovery in oil prices to about $50 a barrel from a 12-year low in 2016 is reviving oil majors’ appetite for risk. Reductions in offshore production costs mean that some projects may be able to compete with North American shale fields, executives said at an energy conference in Houston this week. The recovery in the industry has so far been focused on onshore shale output from the largest U.S. oilfield, the Permian Basin. “Our competition over the past years has evolved from ‘we want […]

CERAWeek Factbox: The oil themes of this year’s conference

10 Mar 2017   Oil Supply

The landmark supply cut agreement between OPEC and non-OPEC producers, the second wave of US shale growth and a looming global supply crisis dominated much of the talk at this year’s CERAWeek by IHS Markit, the mammoth conference which drew global oil market players to Houston this week. The consensus was that the festivities were generally more jovial this year compared with last, when $30/b prices and a sustained market slump cast a pall over the proceedings. “Even the food is better than last year,” joked Fatih Birol, executive director of the International Energy Agency, on Tuesday. Related CERAWeek story: Shale boom may threaten OPEC/non-OPEC deal, but more investment needed Here’s a look at some of the bigger moments from CERAWeek this week: Article continues below… Oilgram News brings you fast-breaking global petroleum and gas news on and including: Industry players, upstream and downstream markets, refineries, midstream transportation and […]

Can The Permian Outgrow The Giant Saudi Ghawar Field?

10 Mar 2017   Shale Oil

When the Permian Basin in West Texas—which has been pumping oil for nearly a century—was fueling the U.S. and Allied forces in World War II, currently the world’s biggest conventional oil field, Saudi Arabia’s Ghawar, had not even been discovered. Ghawar, discovered in 1948, was put in production in the 1950s, and is now thought to be producing oil at a rate of 5 million barrels per day. Meanwhile, the Permian had been set for a decline in output until a decade or so ago. Hydraulic fracturing technologies allowed drillers to start fracking through shale formations which gave new life to the basin, whose current production is around 2.2 million bpd of oil. Now, a shale patch executive believes that the Permian can outgrow Ghawar in terms of oil production, thanks to substantially increased efficiency and lowered breakeven costs. Scott Sheffield, the founder of one of the companies with […]

Marathon Oil to buy Permian acreage for $1.1 billion

10 Mar 2017   Shale Oil

Marathon Oil Corp. has agreed to acquire 70,000 net surface acres in the Permian basin from BC Operating Inc., Midland, Tex., and other entities for $1.1 billion in cash.The deal, effective Jan. 1 and expected to close in the second quarter, includes 51,500 acres in the northern Delaware basin of New Mexico and current production of 5,000 net boe/d.Marathon will receive as many as 10 target benches within 5,000 ft of stacked pay and 900 million boe of total resource potential with 1,700 total upside locations from both tighter density and secondary targets.

Primary targets on the acreage are in Wolfcamp and Bone Spring areas. The leasehold has one operated rig drilling, and there are plans to add a second rig midyear. The firm also envisions further opportunities for growth from acquired acreage in the Northwest Shelf as well as further bolt-on acquisitions.“The northern Delaware basin features outstanding well economics that compete at the top of our organic portfolio and is experiencing a positive rate of change in well performance unrivaled in US unconventional basins,” commented Lee Tillman, Marathon Oil president and chief executive officer.Marathon also reported Mar. 9 that it has agreed to sell its Canadian subsidiary, which includes its 20% non-operated interest in the Athabasca Oil Sands Project (AOSP), to Royal Dutch Shell PLC and Canadian Natural Resources Ltd. for $2.5 billion in cash (OGJ Online, Mar. 9, 2017).

Bakken January Production Data

10 Mar 2017   Shale Oil

North Dakota has published January production data for the Bakken and for all North Dakota . Bakken production was up 37,617 bpd to 932,817 bpd while all North Dakota’s production was up 37,972 to 980,294 bpd. Bakken bpd per well was up 3 to 86 while the average bpd per well for all North Dakota wells was up 4 to 76. The North Dakota stats have “Wells Producing” dropping by 189 in December and dropping another 35 in January for a total decline of 224 over the two months. The total number of producing wells in North Dakota in January stood at 12,976. You will notice these numbers differ quite a bit from Lynn Helms’ numbers below. I have no explanation for this. From the Director’s Cut : Oil Production December 29,211,993 barrels = 942,322 barrels/day January 30,389,117 barrels = 980,294 barrels/day(preliminary) (all-time high was Dec 2014 at 1,227,483 […]

CERAWeek: North American producers find adaptation key in challenging environment

10 Mar 2017   Shale Oil

North American producers such as EQT and BHP Billiton have had to adjust strategies to continue operating in challenging economic times, squeezing out operational efficiencies or shifting focus to concentrate on different regions or commodities, speakers said Wednesday at CERAWeek by IHS Market. Appalachian-focused producer EQT has concentrated on achieving efficiency gains as the company developed its assets in the Marcellus and Utica shales, Blue Jenkins, chief commercial officer of the Pittsburgh-based company, said at the energy conference. EQT, an early entrant into the Appalachian Basin play, has seen its production in the basin increase about fivefold, to about 2.2 Bcf/d in 2017 from 500,000 Mcf/d in 2011, making it the fifth-largest US gas producer, Jenkins said. Article continues below… Your source for actionable intelligence across the entire gas marketplace: Market commentary recaps prior day’s spot and futures trading activity Natural gas news, including FERC rulings and insights Price […]

Harold Hamm: U.S. Shale Spending Binge Could Destroy Oil Market

10 Mar 2017   Prices, Shale Oil

In a rather unconventional warning, Continental Resources chief executive Harold Hamm said on Wednesday that should the U.S. oil industry embark on another spending spree, it could “kill” the market. Speaking at the CERAWeek conference in Houston – one of the largest gatherings of oil executives and ministers, including this year Saudi Arabia’s oil minister Khalid Al-Falih – Hamm said that U.S. crude oil output “could go pretty high”. But Hamm was quick to add, as quoted by Bloomberg : “But it’s going to have to be done in a measured way, or else we kill the market.” The warning of Hamm came on the day in which WTI prices plunged 5 percent, to below US$50 for the first time since December amid concerns over record-breaking inventories in the U.S. Many U.S. companies have announced higher spending plans for this year, having seen prices stable above US$50. Hamm’s Continental […]

U.S. shale firms lift reserves while oil majors take Canada hit

10 Mar 2017   Shale Oil

Top shale oil producers are lifting their crude and gas reserve estimates for the first time in two years – even as many major oil companies are cutting the same projections and taking write downs on more expensive fields. Rising confidence in the growth prospects of the U.S. shale patch is in striking contrast to the retreat of the world’s top oil firms from the high-cost oil sands of Canada. The increase in reported shale reserves is driven by new drilling efficiencies, leaner operations and improved well completion techniques, industry experts said. “Many wells that were not profitable a year ago have become profitable” because those advances have cut the cost of producing from shale, said Per Magnus Nysveen, a senior partner at consultancy Rystad Energy. The top 20 U.S. shale firms – […]

U.S. oil production forecasts revised higher:

10 Mar 2017   Oil Supply, USA

U.S. oil production forecasts for 2017 and 2018 have been boosted significantly as a result of rising prices as well as improved modeling techniques for predicting output down to the well level. Crude production is expected to reach 9.53 million barrels per day (bpd) in December 2017, according to the latest forecasts from the U.S. Energy Information Administration (EIA). Forecast output for December 2017 has been revised up from 8.29 million bpd when the agency prepared its predictions in March last year ( tmsnrt.rs/2moZoqc ). The forecasts are contained in the “Short-Term Energy Outlook” EIA publishes every month. Forecast output has been revised higher every month since September 2016. Revisions are concentrated in output from the Lower 48 states, excluding federal waters in the Gulf of Mexico, so they are mostly about shale output, rather than […]

‘Decade of Disorder’ Looms Without Global Energy Investments, Says Former EIA Chief

9 Mar 2017   Oil Supply

Global oil markets are facing down a “decade of disorder” if long-term supply projects aren’t put into the pipeline, a former chief of the Energy Information Administration (EIA) said Tuesday. Adam Sieminski, who headed EIA from June 2012 until January, discussed global supply trends during a panel discussion in Houston on the second day of CERAWeek by IHS Markit. He now is the James R. Schlesinger Chair for Energy and Geopolitics at DC-based Center for Strategic and International Studies, a bipartisan, nonprofit policy research organization. A wave of global populism, evidenced by the United Kingdom’s potential exit from the European Union, geopolitical events and trade wars, create “a lot of uncertainties…in a lot of different areas,” Sieminski told the audience. An uplift in oil prices has encouraged U.S. unconventional producers to raise rigs and ramp up output. However, those short-term supply projects aren’t enough to compensate for depressed conventional […]

U.S. shale plots production growth despite OPEC’s warning

9 Mar 2017   Shale Oil

U.S. shale oil producers are plotting ambitious production growth outside the red-hot Permian Basin in Texas, widening a resurgence that could confound OPEC’s strategy to tighten global supplies. As shale firms rebound from a two-year price war with OPEC, many are planning to expand production in North Dakota, Oklahoma and other shale regions. The Permian – America’s largest oilfield – has already seen output jump in the past six months. Hess Corp, Chesapeake Energy Corp, Continental Resources Inc and other firms detailed their growth plans at an energy conference in Houston this week. The projects they outlined would result in a steady supply of American crude exports through the next decade. Rising U.S. energy clout has frustrated efforts by the Organization of the Petroleum Exporting Countries to control global oil prices […]

OPEC Offers Olive Branch To U.S. Shale

9 Mar 2017   OPEC, Shale Oil

Anybody who is anybody in the world of oil is gathering in Houston this week for the IHS CERAWeek Conference, an annual get-together of top industry analysts, executives and government ministers. The mood in Houston is notably different from a year ago, when oil prices languished in the $30s per barrel. Everyone can thank OPEC for the renewed sense of optimism. At the conference, OPEC said that it would continue to be the “only catalyst” for balancing the market, a comment meant to emphasize OPEC’s significance after several years of infighting. But it was also a welcome assurance for shale producers hoping that OPEC will intervene for the sake of market stability. OPEC also tried to assure the markets that compliance on the production cut deal has been high and will continue to rise. Russian officials added that in the coming weeks they will fully comply with the 300,000 […]

U.S. crude stockpiles soar, gasoline inventory plunges: EIA

9 Mar 2017   Oil Supply, USA

Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016. U.S. crude oil inventories surged last week to another record high, while gasoline stocks went the other direction, posting their largest one-week drop in nearly six years, the Energy Information Administration said on Wednesday. Crude inventories rose 8.2 million barrels in the week to March 3, compared with analysts’ expectations for a 2 million-barrel build. Most of that – 4.6 million barrels – came from an unexpectedly large surge in stocks on the west coast. The ninth weekly crude build boosted total stockpiles, excluding the nation’s strategic petroleum reserves, to a fresh record of 528.4 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures also rose 867,000 barrels, the EIA said. On the other side of the refining equation, gasoline posted its biggest weekly inventory […]

Shale Billionaire Hamm Says Industry Binge Can ‘Kill’ Oil Market

9 Mar 2017   Shale Oil

Harold Hamm, the billionaire shale oilman, said the U.S. industry could “kill” the oil market if it embarks into another spending binge, a rare warning in a business focused on fast growth to compete with OPEC. The statement, at an energy conference in Houston on Wednesday, comes as top shale companies announce large increases in spending for this year, and the U.S. government says domestic oil output next year will surpass the record high set in 1970. OPEC ministers have said they are keeping a close watch on shale production to decide in late May whether to extend their oil-supply cuts into the second half of the year. Oil prices plunged 5 percent on Wednesday to their lowest level this year, falling just above $50 a barrel, on investor concerns about unbridled growth in America’s shale basins swelling U.S. inventories. U.S. production “could […]

Shell agrees $7.25 billion Canadian oil sands sale

9 Mar 2017   Canada, Tar Sands

Royal Dutch Shell has agreed to sell most of its Canadian oil sands assets for $7.25 billion to Canadian Natural, the company said on Thursday. The deal also includes a joint acquisition by Shell and Canadian Natural of Marathon Oil Canada Corporation, a subsidiary of Marathon Oil, for $1.25 billion each to be paid in cash, Shell said. Shell will sell its existing and undeveloped Canadian oil sands interests and reduce its share in the Athabasca Oil Sands Project (AOSP) to 10 percent, but it will remain as operator of the AOSP Scotford upgrader and the Quest carbon capture and storage project. (Reporting by Karolin Schaps; editing by Jason Neely)

Shell Cuts Debt With $7.25 Billion Sale of Canada Oil Sands

9 Mar 2017   Canada, Tar Sands

Royal Dutch Shell Plc will sell almost all of its production assets in Canada’s oil sands in a $7.25 billion deal that cuts debt and reduces involvement in one of the most environmentally damaging forms of fossil-fuel extraction. All of the company’s oil-sands interests apart from a 10 percent stake in the Athabasca mining project will be sold to Canadian Natural Resources Ltd., Shell said Thursday. The Hague-based company will continue as operator of the Scotford upgrader, which converts heavy oil to lighter liquids for easier transport, and the Quest carbon capture and storage project. The Anglo-Dutch producer is almost two-thirds of the way through a $30 billion divestment program to reduce debt, which soared following its biggest-ever acquisition of BG Group Plc last year. The company this week ended an almost two-decade old U.S. refining partnership with with Saudi Arabian Oil Co. and earlier this year sold a […]

Can U.S. Shale Fight Off Rising Costs?

9 Mar 2017   Shale Oil

Shale drilling has become a lot cheaper over the past three years, with new drilling techniques, efficiency gains and learning-by-doing helping to lower breakeven costs. The IEA says that U.S. shale has achieved cost reductions on the order of 30 percent in 2015 and another 22 percent in 2016, although individual shale basins have seen much larger cost declines. Still, some of the “efficiency gains” could be temporary, as I have discussed in previous articles. As drilling picks up, the supply of oilfield services and equipment will tighten, putting upward pressure on the cost of contractors for oil producers. Rystad Energy sees cost inflation of about 10 to 15 percent this year. There are more signs of this phenomenon playing out. Bloomberg reports that some Permian oil producers are having trouble hiring workers, even when their job listings advertise an enticing salary of $80,000 per year for truckers. “It’s […]

Shale Helped Offset Some Global Declines in Oil Production, OPEC Leader Says

8 Mar 2017   OPEC, Shale Oil

Without the U.S. shale revolution, the global economy probably would have been mired in deep crisis, said Mohammad Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, on Tuesday. When American drillers began using advanced technologies to tap new wells from Texas to North Dakota, a lot of global oil production was in peril, with output falling in Nigeria, Iran, Libya and other hot spots. …

IEA warns of potential shortage of global oil supplies in 3 years

8 Mar 2017   IEA, Oil Supply

The recent drop in oil industry investment brought on by weak prices threatens to significantly slow supply growth in the long term, and could lead to a shortage when it comes to meeting global demand, the International Energy Agency said in its five-year oil market forecast released Monday. That may happen even as crude stockpiles in the U.S. and elsewhere climb over the next few years, the IEA said in its “Oil 2017” report. “If the record two-year investment slump of 2015 and 2016 is not reversed,” supply growth may stall by 2020, it said, pointing out that global oil and gas upstream, or exploration and production, investment fell by 25% in 2015 and by another 26% in 2016. This year, it’s “evident” that under the Organization of the Petroleum Exporting Countries-led production cut agreement, output reductions are taking place just as production from the non-OPEC sector, led by […]

IEA: Huge Oil Price Spike Inevitable

8 Mar 2017   IEA, Oil Supply, Prices

Three years of drastic cuts to upstream spending because of the meltdown in oil prices could result in a shortage of oil supply in a few years, according to a new report from the International Energy Agency. When oil prices collapsed in 2014, oil producers quickly took an ax to their spending. Global oil and gas investment dropped by a quarter in 2015 and by an additional 26 percent last year, the IEA estimates. A long list of projects, particularly very large ones, were put on ice. Because many of these projects take years to develop, the sharp slowdown between 2014 and 2016 could result in very few sources of new supply hitting the market towards the end of the decade. To be sure, supply is already coming back. The U.S. has added more than 500,000 bpd since last summer, and shale drillers are ramping up activity. The IEA […]

Saudi Energy Boss Al-Falih Says Peak Oil Demand Talk Misguided

Saudi Arabia ’s top oil official dismissed the notion that global demand may soon peak and leave billions of barrels of untapped crude stranded in fields that will never be drilled. Khalid Al-Falih, energy minister for the world’s biggest oil-exporting nation, called talk about peak demand among energy executives, analysts and activists “misguided,” and predicted worldwide demand will reach 100 million barrels a day “very soon.” Al-Falih made his remarks Tuesday in a packed-house address at CERAWeek by IHS Markit in Houston, the most influential oil industry conference of the year. Although Al-Falih framed his comments in the wider context of the need to invest in future oil production, his warning comes as the kingdom prepares to sell shares in its state-owned energy giant Saudi Aramco . The Aramco public offering is on track for a 2018 listing, he said. The company and government officials are working on bringing […]

What the Saudi Aramco sale says about the state of the oil industry

As the oil and gas industry gathers in Houston for CERAWeek, a major annual event, geopolitical drivers to oil prices will be a focus. U.S. shale producers will be particularly attuned to backroom discussions about how Saudi Arabia and Russia are viewing new indications of restored momentum in drilling in the U.S. tight oil patch. The bullish reports on U.S. drilling rates come against the backdrop of statements from close advisers to President Donald Trump that the Organization of Petroleum Exporting Countries (OPEC) will make room for U.S. shale. Chances are OPEC will not abandon attempts to shore up the global oil market, regardless of the newfound staying power of U.S. production. That’s because Saudi Arabia has bigger fish to fry when it comes to oil prices. Saudi Arabia’s leaders are betting the farm that the sale of 5 percent of Saudi Aramco, the country’s national oil company (NOC), […]