News From The Oil Patch 3/24/2015
24 March 2015
The Kansas Corporation Commission last week issued new rules to reduce the amount of wastewater injected into disposal wells in Sumner and Harper counties in Kansas. The commission and the Kansas Geological Survey are looking at Class-II disposal wells as a likely cause of an increase in the number of earthquakes in the area. We reported that, based on the latest data available (2013), only three wells and one operator would be affected by the new limits, which start at 16,000 barrels per day this week, and drop to 8,000 barrels per day by this summer. But there are other new rules contained in the order. And officials say there was a dramatic increase in the amount of water injected in that area in 2014. Amy Gilbert of the KCC staff tells us that from now on, no wells in Sumner or Harper County will be allowed to inject water into the Arbuckle formation in excess of 25,000 barrels per day. Ms Gilbert says that portion of the commission's order will affect 22 wells in the two counties. The KCC will no longer issue new permits for large-volume Arbuckle injection wells located in Harper or Sumner County. We expect to receive the complete reports on injection wells from 2014 in about three weeks, and we will report back at that time. You can find the order on the commission's Web site at http://kcc.ks.gov under the heading "What's New")
The number of stacked drilling rigs in Kansas is on the increase, but slowly. A year ago there were 76 rigs listed as stacked or idle. On January 16th, there were 89. Today Independent Oil & Gas reports that number is 113. Independent listed 54 active rigs statewide last week, with 15 in the eastern half of the state, up one, and 39 in western Kansas, down two.
The national rig count from Baker Hughes was 1,069 active drilling rigs, down 56 for the week. In Canada there were 140 active rigs, down 80 from last week.
A report from earlier this month on oil supplies at the Cushing tank farm is raising an alarm in some quarters amid speculation that prices could drop further as the nation's storage tanks fill up. The amount of oil stored at Cushing has soared 69% so far this year as domestic production reached its highest level in thirty years. The Energy Information Administration said Cushing stockpiles rose 2.87 million barrels in the week ending March 14 to 54.4 million barrels total. That's the highest level since EIA began tracking inventories in 2004.
The Obama Administration unveiled the nation's first major federal regulations on hydraulic fracturing on federal public lands. The rules would cover about 100,000 wells, but does not change the rules on private property, where the vast majority of fracking is done. When they go into effect in 90 days, federal workers will inspect the cement barriers that line the well bore, and require companies to publicly disclose the chemicals used in fracturing. They will also set new safety standards for how companies can store used fracking chemicals and submit detailed information on well geology to the government.
Independent Oil & Gas Service reports 105 new well completions last week, for a year-to-date total of 1,251. There were 68 completions in eastern Kansas. West of Wichita, there were 37 completions reported, including 12 dry holes. There were two completions in Barton County, one in Ellis County and one in Stafford County.
There were just 77 drilling permits issued last week for new locations across Kansas, 58 in eastern Kansas, and 19 west of Wichita, including one in Barton County, three in Ellis County and two in Stafford County.
According to the government, some, but not all of the nation's largest oil plays are showing declines in production. The Eagle Ford Shale in south Texas showed the largest decline, down 10,000 barrels a day in February. The Dallas Business Journal reports average well data showing new wells going into production are expected to pump about 20 barrels more per well. The Bakken Shale in North Dakota and Montana is down 8,000 barrels per day, but new wells are producing 15 barrels per day more in the Bakken. In the Permian Basin of Texas and New Mexico, production is growing by about 21,000 barrels per day. Average production per well is up 38 barrels per day.
The downturn in oil prices is having a dramatic impact on another job sector in the patch, at least in Texas. Bloomberg reports land managers, or "land men" in the Lone Star State are "taking pay cuts, working part time, or being laid off. According to a recent report from the Federal Reserve Bank of Dallas, as many as 140,000 oil-patch jobs in Texas are at risk. A report from the Federal Reserve in Kansas City indicates that the energy sector in Oklahoma, will likely take a big hit in the months to come as well. For the entire Midwest region, a survey of employers showed that many of them expect either a slight decline or slight growth in employment, but about one fourth anticipated significant job cuts this year.
Oklahoma, the fifth-largest oil-producing state, has frozen state hiring and salaries and is considering tapping fiscal reserves to address shortfalls caused by the free fall in crude oil prices. Revenue projections dwindled by more than $300 million from December to February. That's expected to more than double the state's expected budget deficit to $611 million. Lawmakers must plug that budget gap by July 1.
The vice chairman of China's biggest state-owned oil producer, PetroChina Ltd., is under investigation by the ruling Communist Party amid an anti-graft probe of the company for possible "serious violations of the law." A company statement said he was suspected of what the party calls "violating discipline," a term for corruption. PetroChina has been a focus of an anti-corruption campaign led by the Chinese President.
Brazilian prosecutors have charged the treasurer of the ruling Workers Party with corruption in connection to a sprawling graft scheme at state-run oil company Petrobras. Workers' Party Treasurer Joao Vaccari Neto was accused of disguising over $1.2 million in bribes as campaign contributions between 2008 and 2010. Over 100 people are facing charges in what's being called the biggest corruption scheme ever in Brazil.