News From The Oil Patch 12/4/2013
For the first month in nearly two decades, the U.S. in October extracted more oil from the ground than it imported from overseas. It's an important milestone for a nation seeking desperately to wean itself off foreign oil. Not since 1995 has the U.S produced more oil than it imported. The Obama Administration calls that a reflection of policies that promote domestic production while encourageing Americans to use less. The administration credited new fuel standards for vehicles, beginning in 2011, as one of the prime reasons for the change. Industry experts point to high prices making production more lucrative, as well as to reduced demand because of the weak economy.
A key industry statistic is heading toward record territory in the US. Zero Hedge Dot Com reports US oil inventories in storage at 391 million barrels. That's a big jump over last year's 274 million barrels in storage. Even accounting for year-end sales for tax reasons, the Web site says we could see anywhere from 416 million to 425 million barrels by year's end, a modern record.
Oil production in Texas has hit its highest monthly rate on record, more than doubling in less than three years. According to new federal data the state pumped 2.7 million barrels of crude per day during September, the highest monthly average since at least January 1981.
Oil production in Oklahoma has nearly doubled since 2005, reversing three decades of declines in the state. But at more than 300,000 barrels per day, the state's production is still well below 1980s rates of more than 450,000 barrels per day. The Daily Oklahoman reports on the benefits on Main Street for the increased activity in the patch. Three new hotels in Alva; a new hotel and three new RV parks in Chickasha. Unemployment in Alfalfa County now stands at 4 percent, down from 5.7 percent in 2009.
North Dakota oil drillers are on pace to outdo last year's record crude production and are nearing a milestone of a million barrels of oil a day. The state Industrial Commission says crude production in September totaled a record 931,940 barrels a day. Data show crude production through September totaled about 226 million barrels, just short of the record 243.1 million barrels produced in all of 2012. Current drilling activity indicates the state likely surpassed last year's record sometime in October.
The number of people reporting seven-figure incomes in North Dakota nearly doubled last year. AP reports average incomes rose 22% to an all-time high, boosted by the state's booming oil economy. Tax Department figures show a record 1,126 people reported incomes of more than $1 million on their 2012 individual tax returns, up from 634 the year before.
Apache Corp has completely eliminated its reliance on freshwater for fracking in the South Permian region of Texas. The company is taking brackish water from the Santa Rosa aquifer, treating it, and recycling frack waste water from its wells. It costs Apache around 29 cents/barrel to treat water, but $2.50/barrel to have it trucked away for safe disposal. Considering millions of gallons are often needed to frack a single well, this is a huge cost reduction.
BP has been accused of hiring internet "trolls" to purposefully attack, harass, and sometimes threaten people who have been critical of how the oil giant has handled its disaster in the Gulf of Mexico. The oil firm hired the international PR company Ogilvy & Mather to run the BP America Facebook page during the oil disaster. The page was meant to encourage interaction with BP, but when people posted comments that were critical of how BP was handling the crisis, they were often attacked, bullied, and sometimes directly threatened.
Chevron has long claimed fraud, and the courts of Ecuador are doing nothing to discredit that. On Tuesday, Ecuadors highest court cut in half the landmark environmental judgment against the oil company. That after a lower court doubled the judgment because Chevron refused to publicly apologize for the contamination, which occured under the Texas-led consortium between 1972 and 1990. The National Court of Justice said there's nothing in Ecuadorean law that justifies doubling a civil award. As of Tuesday, the penalty is pegged at $8.8 billion. Chevron has refused to pay the plaintiffs in the case, claiming fraud, and has tied them up in courts and arbitration panels on three continents.
The Kansas Geological Survey issued a report last month on horizontal drilling and the Mississippian Limestone formation in Kansas. The most prolific play in the Mississippian was SandRidge Exploration and Production's Bernice #1-7h well in Harper County, just north of the Oklahoma state line. Peak production was 849 barrels per day during its 5th month of production in December 2011. A number of operators, including Chesapeake Energy, Shell Oil Gulf of Mexico, and Apache Oil gained acreage positions in Kansas but decided not to pursue the play after initial drilling efforts. But SandRidge, Woolsey Operating Company, and several independents continue to be active in the Mississippian.
There's a new contract drilling firm in your neighborhood. Skytop Drilling, formed by Charles and Marvin Reif and Tom Engel, has its headquarters in Plainville. The company's #1 rig will be deployed in and around Barton, Ellis, Graham, McPherson, Ness and Rooks counties.
TransCanada announced quarterly results adding details on the southern leg of the Keystone Pipeline expansion. Canada's #2 pipeline operator says the pipeline from Cushing to the Gulf Coast is nearing completion, and that it expects to begin filling it with oil soon. The company did not say when it expects a decision from the Obama administration on the second international crossing. Once a permit is issued, TransCanada says that part of the project could be in service within two years. The company raised its cost estimate for the controversial pipeline by $100 million dollars, to a total projection of at least $5.4 billion. The company says the price will likely climb again once the company knows when it can proceed.
Phillips 66 submitted a draft Environmental Impact Statement for a rail terminal to be built at its Santa Maria Refinery in California, a move that could connect the refinery with the booming oil fields of the interior U.S. There are currently no pipelines with the capacity to transport meaningful quantities of oil to the West Coast.
Enbridge is inviting oil producers to bid on rights to use the largest-capacity pipeline proposed to date to transport North Dakota crude. The Canadian firm is proposing the $2.6 billion, 612-mile Sandpiper pipeline to carry 600 thousand barrels of North Dakota crude oil each day to hubs in northern Minnesota and northwestern Wisconsin.
Shell has submitted revisions to its Plan of Exploration for its program in the Arctic, although company officials say they have not decided whether Shell will proceed with operations next year. After a campaign tormented by setbacks and controversy, Shell submitted a plan calling for a narrower approach in the Arctic, focusing on the Chukchi Sea, and ruling out Beaufort Sea operations.
A cluster of 18 small earthquakes in western Texas was likely triggered by the injection of carbon dioxide into oil wells, according to a study published in the Proceedings of the National Academy of Sciences. This is the first study to link carbon dioxide injections to actual earthquakes. It may help scientists evaluate the risks of storing greenhouse gas emissions deep underground, a fledgling technology for managing climate change known as geologic carbon sequestration.
A seimologist at OU hopes to start an earthquake on purpose. Austin Holland hopes to find out if the dramatic rise in the size and number of earthquakes in Oklahoma is related to oil and gas production activity. Holland is proposing to inject pressurized water into porous rock in an area already known to be earthquake-prone, to see whether injections of oil industry wastewater are contributing to a "swarm" of earthquakes rocking the state.