Daily Reports
News From The Oil Patch 3/19/2013
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19 March 2013
The Kansas Supreme Court handed down a ruling Friday that will ripple through the Kansas oil patch, protecting producers and landowners alike. Northern Natural Gas Company, owned by the Warren Buffet conglomerate Berkshire Hathaway, hoped to show that natural gas that migrated outside the limits of Northern's natural gas storage facility near Pratt, Kansas still belonged to the company. Attorney Jim Goering, of the Foulston Siefkin law firm in Wichita, tells News From The Oil Patch a victory by Northern would have had a big impact on energy production across the state.
"It would have discouraged any production anywhere close to any of these gas storage fields, for fear that if they drilled a well, they might have to turn back all the revenues," Goering said. "And they would have paid royalties which can be very difficult to return. So, this is a good ruling for producers, and for production in Kansas of both oil and gas."
Goering argued the case before the high court on behalf of several firms fighting Northern, including L.D. Drilling of Great Bend, Kansas, and Nash Oil & Gas out of Pratt. Those companies are now entitled to revenues from gas produced before June of 2010. Another lawyer in the case estimates there is between six and eight million dollars currently being held in escrow because of the lawsuit. A judge in Pratt must still decide what will happen to revenues from natural gas produced after June, 2010.
Goering says the ruling is very important for Kansas landowners as well.
"Under Northern's theory, these gas storage companies could reach out for many miles." he says. "If landowners leased up their property, and were four or five miles from a storage field, they might later get sued and have to turn back every dollar they ever received in royalties, or the royalties might be suspended, literally, for years. This decision should put an end to that."
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Operators of the NCRA refinery in McPherson announced a $327 million expansion at the facility starting this spring. CHS, which is buying out its co-owners, says by early 2016 the facility will increase capacity by 100,000 barrels per day. The expansion will occur at the same time as the ongoing project to build a replacement coker. The refinery is expected to continue with normal operations during both projects. CHS said the additional refined fuels produced will be equally divided between diesel and gasoline and will allow CHS to better match production with customer demand.
The Chinese national oil firm CNOOC will retain ownership but surrender operational control of 200 deepwater leases in the Gulf of Mexico, under terms to gain US approval of China's 15-billion dollar purchase of the Canadian energy giant Nexen. The Toronto Star newspaper reports CNOOC surrendered control of the assets to quell US national security concerns.
The southern portion of the Keystone XL pipeline from Oklahoma to the Texas Gulf Coast is roughly one half complete. The Associated Press reports that the project is on target to begin sending oil toward Gulf Coast refineries by the end of the year. TransCanada tells the AP that some 3,850 workers are currently involved on a 485-mile stretch from Cushing to the Gulf Coast.
Testimony began in a bench trial in New Orleans in which a judge will weigh the negligence and assign blame among BP and others in connection with the 2010 Gulf Oil Spill. A former BP engineering consultant testified against his former bosses, saying a culture of "every dollar counts" at BP led to the fatal Deepwater Horizon explosion and oil spill. A Transocean employee who survived the rig explosion testified that a subordinate killed in the blast was one of the workers who apparently missed signs the well was about to blow out. Randy Ezell says Jason Anderson, a "top notch" toolpusher, was among those, including BP, who misinterpreted the results of a crucial safety test. Another worker said a flurry of activity on the Deepwater Horizon hindered his ability to monitor the well for signs of trouble. Joseph Keith said he never saw any indications of a blowout before drilling mud started raining down on the rig floor. The CEO of TransOcean testified that his company played a role in botching a key safety test that might have prevented the blowout, but said BP ultimately was responsible.
A lawyer for Halliburton said it discovered cement samples possibly tied to the Gulf Oil Spill that weren't turned over to the Justice Department. Donald Godwin told a federal judge the company believes the material has no bearing on the ongoing trial to assign responsibility for the spill. But a plaintiffs' attorney countered that the samples are cement a Halliburton employee used for testing the Macondo well before the disaster.
Meanwhile, BP lost a bid to dismiss the issue of gross negligence. The Financial Times reports the ruling could trigger fines of as much as $17.6-billion. BP lawyer Andrew Langan asked for a partial ruling Monday, saying BP doesn't think there has been a finding of gross negligence. But the judge was quick to rebuff the move, saying he didn't see any point in arguing it.
Platts on Friday announced it is changing the way it assesses the Brent oil market in a bid to bolster the credibility of the benchmark, which is used to set oil prices globally. The Brent benchmark is based on a dwindling supply of four North Sea crude varieties. Critics say that leads to a smaller market that is prone to manipulation and can lead to higher global prices. Platts says it will apply quality premiums to two of those varieties starting in June.
Platts is disputing Congressman Paul Ryan's claims that the Obama Administration is wasting money on two solar energy projects funded by federal load guarantees. Ryan claims the SolarReserve Project in Nevada and the Mesquite Solar One project in Arisona were ill-fated ventures. But, Platts points out that the Mesquite project is in operation and has a 20-year power purchase agreement with Pacific Gas and Electric. SolarReserve has a 25-year agreement with Nevada Energy and is expected to begin producing electricity later this year.
Here's one you might not have seen coming. Valero Energy says it will begin exporting up to 90,000 barrels per day of Texas crude oil to its refinery in Canada. CEO Bill Klesse says they have a license to ship the crude oil to Quebec for one year. The decision has reignited an already tempestuous debate over pipelines in Canada, which has billions of barrels in production in the western provinces, but oil-starved refineries in the more populous eastern provinces.
News From The Oil Patch 2/13/2013
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12 February 2013
Operators of the oil refinery in Coffeyville have agreed to pay more than 2.2-million dollars in civil penalties and reimbursements for an oil spill during a flood in 2007. The EPA announced the agreement with Coffeyville Resources Refining and Marketing on Tuesday. The agency says 2,145 barrels of crude oil, diesel fuel, and oil water from the facility spilled into the Verdigris River during the flood event.
Nostra Terra announced some big numbers on its fourth well in the Chisholm Trail Prospect in the Mississippian Lime Play in Oklahoma. The most recent ten days of production have averaged 505 barrels of oil equivalent per day significantly above expectations. Of four wells in the prospect, the company said ten day production averages totalled 1,666 barrels of oil equivalent per day. The company continues to acquire new leases and permits in the area.
The Independent Oil & Gas Service reports three new fields discovered by SandRidge Exploration and Production within the Mississippian Lime Play in Harper and Finney counties. The company established a new wildcat field three and one-half miles southeast of Harper, and another new field northeast of Bluff City. Another new field was located in Finney County northeast of Garden City. The company has not yet named the new fields and says completion details are confidential.
We also learned from the IOGS that a $25,000 reward is being offered for the arrest and conviction of those responsible for the January 2013 thefts of four C-96 oilfield motors from Lane County, Kansas. Operators are being urged to contact Lane County Sheriff Steven R. Edler in Dighton if you have information that could help investigators. Contact Sheriff Edler's officer at 144 S. Lane St., Dighton, Kansas 67839, by phone at 620-397-2828, or by fax at 620-397-5933. The motors bear the following Serial ID Numbers: 204333, 2096590, 210028C and 103874.
Shell's two offshore rigs in Alaska will be taken to Asia for repairs and upgrades, casting doubts on the company's plan to do any drilling in Arctic seas this year. Shell said in a statement issued late on Monday that no decision had been made yet about its 2013 Alaska offshore drilling programme. The company reasoned that it would receive better services in Asia than at the shipyard in Seattle where a rig was heading when it began its ill-fated crossing of the Gulf of Alaska.
After five public hearings and more than a year of deliberation, the Colorado Oil and Gas Conservation Commission on Monday approved a rule requiring a 500-foot buffer zone between buildings and oil wells. Starting August 1st, oil and gas wells and their related machinery cannot be drilled or placed within 500 feet of buildings statewide without a variance or waiver granted by the state or nearby landowners. The rule passed on an 8-1 vote. The Coloradoan newspaper reports oil & gas industry representatives on the commission voter for the measure, despite vehement opposition from the industry.
It now appears that a final decision on the Keystone Pipeline expansion may be several months away, and not weeks as indicated by the State Department just after Nebraska Governor Dave Heineman gave the project the go-ahead last month. Reuters quoted an unnamed source last week saying the decision will not be made until the beginning of summer at the earliest. The delay is painful in Canada which is suffering persistent, discounted prices for its oil because tight pipeline capacity. The premier of Alberta warned last week the province faced a $6 billion revenue shortfall because of pipeline restructions.
Sidelined for two decades by war, sanctions and political instability, Iraq passed a critical milestone last year by producing 3 million barrels a day of crude oil for the first time since 1990, before the Persian Gulf War, reaching 3.4 million barrels a day by December. Given its access to vast reserves at low costs, Baghdad is poised to play a pivotal role in determining whether the world’s growing thirst for oil drives up fuel prices to debilitating levels in coming years.
But Reuters reported that Iraqi Kurdistan will press ahead with building its own oil export pipeline to Turkey, despite U.S. objections due to fears the project could lead to the break-up of Iraq. The autonomous Kurdish region is locked in a turf war with the central government in Baghdad over how to exploit Iraq's hydrocarbon riches and divide up the proceeds. Crude from the Kurdistan region used to be shipped to world markets through a Baghdad-controlled pipeline to Turkey, but exports via that channel dried up in December due to a disagreement over payments.
Interior Secretary Ken Salazar announced plans to offer 38.6 million acres offshore Louisiana, Mississippi, and Alabama for oil and gas exploration and development. According to the statement, the sale will be held at the Superdome in New Orleans on March 20, 2013.
BP CEO Bob Dudley says the company intends to fight state economic claims for the 2010 Gulf oil spill. The demands from US state and local governments for some $34 billion could raise the overall bill for the Deepwater Horizon rig explosion and oil spill to more than $90 billion. Dow Jones newswires reports that's more than double the amount BP has already provisioned for. Alabama, Mississippi, Florida and Louisiana are seeking compensation for economic losses and property damage.
News From The Oil Patch 1/2/2013
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02 January 2013
In a new report, federal regulators say delays by Exxon Mobil made a pipeline break beneath the Yellowstone River in Montana far worse that it would have been. The July-2011 rupture spilled 63-thousand gallons of crude, fouling 70 miles of Riverbank. The oil company is reviewing the report, which assets that damage would have been reduced by about two-thirds if controllers in Houston had isolated the rupture as soon as problems emerged.
EPA Administrator Lisa Jackson is stepping down after a nearly four years marked by high-profile brawls with the energy industry and others. The Obama administration's chief environmental watchdog did not point to any particular reason for her departure. Jackson repeatedly found herself caught between administration pledges to solve thorny environmental problems and steady resistance from Republicans and industry groups who complained that the agency's rules destroyed jobs and made it harder for American companies to compete internationally.
There were 452 intent-to-drill notices filed with the Kansas Corporation Commission in December, bringing the annual total statewide to more 6,861 intents for 2012. Over the last couple of weeks, there was one intent filed in Barton County, seven in Ellis County, six in Russell County, and none in Stafford County.
Oil prices at NCRA last year ranged from a high of $99.50 a barrel February 24th, to a low of 67.50 per barrel on June 28th. The average price for Kansas Common Crude was $83.96/bbl. Wednesday's price was $82.75, up $1.25/bbl.
Nymex Benchmark Crude was up $1.02 at $92.83/bbl. Brent Crude gained $1.18 at $112.29/bbl.
Active drilling rigs across the country last year ranged from a high of 2,008 rigs on January 20th to a low of 1,774 December 21st. In Kansas, we started the year with 32 rigs drilling for oil or gas in January to 30 in December.
The shale gas drilling industry wants to use barges to move its potentially toxic wastewater across rivers and lakes to disposal sites across the country, but the U.S. Coast Guard must first decide whether it's safe. Commander Michael Rold of the Hazardous Materials Division couldn't say when the agency would decide whether fracwater can be shipped by barge.
Bloomberg reports America’s shale gas drilling boom is likely to spur U.S. steel output, along with chemicals and plastics production. The growth of drilling for natural gas and oil hidden away in rock formations is expected to create a new wave of U.S. steel plants, using cheap natural gas to purify iron ore.
One of many reports available online from the Independent Oil and Gas Service is one on new oil fields in Kansas. In the December report we spotted one in Ellis County. The Shooting Star field is in the southwest part of the county, a couple of miles west of Antonino. Klabzuba Oil & Gas is the Operator.
News From The Oil Patch 11/29/2012
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29 November 2012
The buzz in Garden City this week centers on SandRidge Energy, one of the biggest players in the Mississippian Lime Play, opening a field office in Finney County. Lona Duvall of the Finney County Economic Development Corporation tells us there are few details as to local employment or when the company will occupy the facility. Duvall says her group has been working with the exploration firm for nearly a year, and that SandRidge closed on the purchase of the former Delta Supply site a couple of weeks ago. Kevin White of SandRidge tells us the Garden City facility will be a regional field office. White says they are currently drilling horizontally in Gray, Ford and Finney counties.
The US government has temporarily banned BP from federal contracts over its "lack of business integrity" in the Deepwater Horizon oil spill in 2010. The US Environmental Protection Agency said the suspension was "standard practice" following criminal actions. The British oil major told reporters EPA is preparing an agreement that would lift the ban.
A BP rig supervisor said he is innocent of manslaughter in the deaths of 11 workers in the Gulf disaster. Robert Kaluza's lawyer says his client is a scapegoat. Kaluza and Donald Vidrine were indicted this month on manslaughter charges. The federal indictment accuses them of disregarding abnormal high-pressure readings that should have been clear indications of trouble just before the explosion.
A proposed $1.8 billion oil pipeline from North Dakota to Oklahoma has been called off because the company behind the deal couldn't find enough commitments to transport oil to Cushing. Tulsa-based Oneok Partners announced on Tuesday that the Bakken Crude Express Pipeline won't be built. At an investors conference Thursday, CEO John Gibson referred to the project as 'postponed.' Marketwatch quoted Gibson saying shippers were not interested in sending oil to the pipeline's proposed destination at the oil storage hub at Cushing, currently the site of a supply glut that has helped keep U.S. benchmark oil prices low. About 45.9 million barrels of oil were storied in Cushing during the fourth week of November, up nearly 50% from the year before, according to the U.S. Energy Information Administration.
Chevron's international relations are getting just a little odd, especially in Argentina, where a judge embargoed the US oil firms assets to support Ecuador's efforts to collect on a $19 billion dollar judgment. Chevron is being sued in Spain for cooperating with the Argentine firm YPF, which was taken from the Spanish firm Repsol. Chevron claimed in court that its operations in Argentina are conducted by subsidiaries and that the plaintiffs have no right to attach subsidiary assets. The company has taken out full page ads in Argentina's leading newspapers, saying the claims against Chevron have no legal foundation and that the embargo of its assets in Argentina will have broader consequences for the entire country. According to the ad, the embargo compromises the company's capacity to operate and reinvest, given that the order affects more than 90% of its income through crude sales. The company has filed a court appeal of the embargo.
Rara Terra Minerals has acquired a 75% working interest in oil and gas leases in Trego County for more than 393-thousand dollars. The company is hoping to "enhance shareholder value" as it waits out the winter in British Columbia, where it is pursuing exploration as well.
Shale oil production in Texas have touched off a now-familiar complaint: increased supplies cannot reach markets because pipelines are full. Production in the Lone Star State increased 35% in August compared to a year ago, to an average two million barrels a day, according to data from the Energy Department. Meanwhile, Occidental and Magellan Midstream Partners announced plans to move forward with constructioni of the BridgeTex oil pipeline to deliver 300-thousand barrels per day from Colorado City, Texas to the Gulf Coast near Houston.