News From The Oil Patch 5/21/2014

Independent Oil & Gas reorts 95 drilling permits issued for new locations in Kansas for the week ending Friday.  That's 4,013 new drilling permits so far this year.  There were 38 east of Wichita, and 57 in the western range, including two in Barton County and two in Ellis County.  There were 66 new well completions across Kansas last week for a year-to-date total of 3,270.  49 of those were in eastern Kansas, and 49 were west of Wichita, including one completion in Ellis County.
 
Baker Hughes reported 1,871 active drilling rigs across the US Friday, that's four lower than a week earlier.  Canada had 57, up two.  One rig dropped off the list of 30 active rigs in Kansas.  Independent Oil & Gas Company reported 122 total drilling rigs across the state on Friday.  That's 38 in eastern Kansas, up one, and 84 west of Wichita, also up one.
 
Land men are buying up real estate in advance of what some are touting as the biggest oil & gas boom in US history.  The latest estimates for the Cline formation in the Texas Permian basin could reach an astounding 3.6 million barrels of recoverable oil per square mile.  That would give the Cline Shale 30 billion recoverable barrels.  So, even though it's smaller in area than the other big plays in Texas, it contains more oil than the top two US producers, the Bakken and Eagle Ford, combined.  The real estate is needed for a potentially huge influx of people.
 
North Dakota's top oil regulator says the state’s oil production rose 3.6 percent in May to a new record, nearly 40-thousand barrels higher than their recent milestone of one million barrels per day.  Lynn Helms, the director of the state's Department of Mineral Resources expects five to six percent production increases each month this year, which would double the increases reported in the last couple of months.
 
Two longtime competitors based in Denver are merging to become North Dakota's largest oil and gas player, producing about ten percent of the state's output at more than 107-thousand barrels per day.  The combined company will have 855,000 net acres and 3,460 drilling sites.  Whiting Petroleum is buying Kodiak Oil & Gas for $3.8 billion and will assume $2.2 billion of Kodiak's debt.
 
Regulators report a big drop in the volumes of oil shipped by rail out of North Dakota.  The North Dakota Pipeline Authority says about 59% of the state's more than one million barrels a day was shipped by rail in May. That’s the lowest rail percentage since November 2012. In April, 63 percent of the oil produced in North Dakota was shipped by rail, down from a peak of 75 percent in April 2013.  New pipelines are picking up that slack with more expected to go online soon. 
 
Supporters of a ballot initiative to give local communities in Colorado the right to ban fracking has hit a roadblock, and now admit the measure will not make the November ballot.  The coalition of volunteer groups now says it will not be able to gather the required signatures needed by the August 4th deadline.  Look for redoubled efforts in two years.  The organizers for two pro-industry initiatives are still working to put those questions to a vote this year.  Iniative 75 was strongly worded, going well beyond a fracking ban.  It would give cities and towns "the power to define or eliminate the rights and powers of corporations or business entities."
 
The City Council in Denton, Texas took eight hours of public testimony before voting down a petition to ban further hydraulic fracturing permits.  The 5-to-2 vote sends the proposal to a public ballot in November.  Tom Phillips, a former chief justice of the Texas Supreme Court, representing the powerful Texas Oil and Gas Association, testified that some of its thousands of members would "undoubtedly sue" if the ban eventually passes.
 
Royal Dutch Shell announced the discovery of roughly 100 million barrels of oil equivalent in the Gulf of Mexico's Norphlet formation.  This marks the company's third discovery in that formation, which is roughly 75 miles off the Louisiana coast.   The company has announced similar findings at two nearby wells in recent years, and the area has the potential to become a major hub for Shell, which is already the biggest player in the Gulf.
 
The US welcomed a move by China to take that drilling rig out of disputed international waters in the South China Sea, but said the entire problem highlights the need for China and Vietnam to clarify their territorial claims in accordance with international law.  The state-run China National Petroleum Corporation announced Wednesday that the billion-dollar rig HD-981 will be relocated to an area closer to the Chinese mainland in waters that are apparently not in dispute.  The arrival of the drilling rig near the Paracel Islands in early May ramped up tensions with Vietnam, which also claims the waters, and sparked deadly riots in Hanoi. China could return to those disputed waters.  According to a release on World Oil Dot Com, the company locked the exploration targets and identified well locations, and the next phase of the project awaits a comprehensive assessment of what are described as "oil & gas shows."
 
The Obama administration is reopening the Eastern Seaboard to offshore oil and gas exploration, announcing final approval Friday of the controversial sonic cannons that can pinpoint energy deposits deep beneath the ocean floor.  The approval opens the outer continental shelf from Delaware to Florida to exploration on leases pending in 2018, when the current congressional limits expire.
 
The government will offer another 21 million acres off the Texas coast for oil and gas exploration in a sale next month in New Orleans.  The more than 4,000 lease blocks covering roughly 21.6 million acres in the western Gulf of Mexico could produce up to 200 million barrels of oil and up to 938 billion cubic feet of natural gas.
 
The dream of pollution-free coal plants is getting a boost from growing demand for carbon dioxide used to revive old oil fields.  Bloomberg reports one of the first major projects to harness CO2 at a coal plant to enhance oil recovery was expected to begin construction Tuesday.  NRG will retrofit its East Texas coal power plant and pump CO2 into a nearby oil field that it partially owns.  They'll spend one billion dollars on the project in hopes of loosining trapped crude deposits, while burying the increasingly regulated greenhouse gas.  They hope to pay for it will increased proceeds from the oil field.
 
Mexico on Friday put into effect an agreement signed in 2012 with the United States to allow companies to exploit deep water oil resources in the Gulf of Mexico that straddle the countries' maritime boundaries.  The deal lifts a moratorium and sets up a framework for companies to jointly develop any trans-boundary reservoirs.  The Mexican national Pemex is opening the country's oil & gas sector to private investment.  The Congress in Mexico is working through a series of bills needed to implement the energy reform.