Tag: fracking

It’s Dead, Jim: Trump to Sign Executive Order Ending EPA Clean Power Plan

It’s Dead, Jim: Trump to Sign Executive Order Ending EPA Clean Power Plan

President Trump will use an executive order today to dismantle the Obama administration’s climate change agenda, according to Environmental Protection Agency Administrator Scott Pruitt.
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The order will compel the EPA to review the Obama administration’s chief climate rule for power plant emissions, the 2015 Clean Power Plan, Pruitt said.
“We’ve made tremendous progress on our environment, and we can be both pro-jobs and pro-environment,” Pruitt told ABC’s George Stephanopoulos on “This Week.” “And the executive order’s going to address the past administration’s effort to kill jobs across this country through the Clean Power Plan.”
The action will order several other federal agencies to undo the Obama administration’s climate change work: It will tell the Interior Department to end a moratorium on new coal leasing on federal land, the official said, and the Obama administration’s assault on methane emissions — outlined in early 2014 and overseen by Interior and EPA — will be ended, too.
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A major hydraulic fracturing regulation from the Bureau of Land Management will be reviewed under the order. It will also end President Obama’s climate action plan, the main 2013 directive outlining the federal government’s response to climate change.

Oil Prices: So Long OPEC, American Gas and Oil Exploration — North and South — is Expanding

Oil Prices: So Long OPEC, American Gas and Oil Exploration — North and South — is Expanding

The Organization of Petroleum Exporting Countries in general, and Saudi Arabia in particular, have done the U.S. oil industry a massive favor, and they are probably ruing the day they tried to squeeze America’s shale industry out of existence.
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The collapse in oil prices that ensued after Saudi Arabia-led OPEC opened the spigots two years ago forced American companies, and their many subcontractors, to innovate in a way that would never have happened so fast or gone so far without the imminent threat of survival forcing the pace.

Oil Prices Allow Reopening of Old Wells

Now, U.S. shale producers have achieved economies of scale that allow them to return to previously closed wells in fields like Eagle Ford and achieve 30% returns even at $40 a barrel. U.S. explorers may be making hay in the domestic market, but huge potential exists for these same firms to take their technology abroad.
An OilPrice.com post describes how oil majors are drawing on their experience in the U.S. tight oil market to open up vast fields in South America. Even legally strapped ,Argentina foreign investors are doing the unthinkable and being lured back in by the opportunities.
The hottest play currently, the article says, is Chevron/YPF’s Loma Campana, which is ramping up production steadily and will peak around 2025 with production reaching annual volumes of 2.5 million of oil and 1 billion cubic meters of natural gas. The largest shale development in Latin America, with reserves of 8.7 trillion cubic meters of gas and 16 billion barrels of oil, is Argentina’s Vaca Muerta formation in Neuquén Province but development has been delayed by poor politics.
Argentina holds the largest reserves in South America. In June 2013, the Energy Information Administration estimated that Argentina held 802 trillion cubic feet of recoverable shale gas reserves, the third largest in the world, and 27 billion barrels of oil. The failure to exploit them in the past is laid at the door of Argentina’s erratic former president, Cristina Fernandez, whose exit in December 2015 allowed many to hope the energy market would be put on a more stable footing and investment could resume.

South America Steps Forward

Argentina could be self-sufficient in oil and gas if it gets its act together. Larger neighbor Brazil appears, so far, not to be as well endowed with tight oil and gas as Argentina, but still boasts some 245 trillion cubic feet of wet shale gas and 5.3 billion barrels of oil, while Mexico is comparable to the U.S. and Canada if only national producer Pemex could access the funds and technical expertise to open up its reserves.
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It was assumed that Europe and China would be the next to benefit from tight oil fracking technology after the U.S., but lack of expertise and complex geology in China, and lack of will and complex politics in Europe, have deprived both energy-hungry markets from exploiting their tight oil resources. It would seem American expertise and American money are going to be the driving force behind exploitation of tight oil and gas resources for years to come and the Americas, north and south, are where the action is going to be. So long, OPEC.

Federal Judge Invalidates Obama Administration’s Fracking Rules

Federal Judge Invalidates Obama Administration’s Fracking Rules

A federal judge has ruled the federal government cannot set rules for hydraulic fracturing or “fracking” on public lands and, no matter what the U.K. decides in its EU Brexit vote, gold’s bull run is likely over.

Judge Tells Interior Dept. it Can’t Set Fracking Rules

A federal judge in Wyoming made permanent a temporary block of an Interior Department rule setting stricter standards for hydraulic fracturing on public lands, a blow to President Barack Obama’s environmental agenda in the sunset of his administration.

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U.S. District Judge Scott Skavdahl issued a ruling late Tuesday invalidating the regulation, saying the Interior Department lacked the authority to issue it. The same judge last year issued a preliminary injunction blocking the rule until he made a final decision.

The rule, issued by department’s Bureau of Land Management in March 2015, applies to oil and gas drilling on federal lands, which produce 11% of the natural gas consumed in the U.S. and 5% of the oil, according to government data. The government can appeal the ruling.

Brexit Vote Likely to End Gold’s Run

No matter if the U.K. votes to stay in the European Union or leave, Gold’s sharp gains on uncertainty over its membership are likely to come to an end after Thursday’s referendum.

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Prices hit their highest since August 2014 last week as the $5-trillion a year gold market rose with other “safe” assets, such as German bunds, the Swiss franc and Japan’s yen.

BP’s Rosy Long-Term View of US Fracking and Tight Gas/Oil

BP’s Rosy Long-Term View of US Fracking and Tight Gas/Oil

Following on from our post Monday reporting on BP’s forward-looking Global Energy Outlook report we thought, with the current turmoil in the fracking industry bought on by OPEC induced low prices, it would be interesting to look at what the oil major has to say about the prospects for that business model.

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It may be that BP, still largely an oil and gas major, is looking at energy use through their own rose-tinted lens subscription. Many are heralding recent efficiency improvements in solar cells and the drop in prices as the start of a new golden age in solar power generation that, in a world so focused on rising carbon emissions, will sweep away older, more-polluting forms of power generation. BP doesn’t see it like that, and that does not mean to say they are wrong, but it does challenge us to ask if the current enthusiasm for a carbon-free world is misplaced.

About That Shift to Renewables…

History and the current sources of energy suggest that even by 2035 80% of our energy will continue to come from fossil fuels, that may be not what we want to see but it is what the data is telling us BP’s chief economist said in the presentation.

He went on to say disruptive as renewables will eventually become over the next twenty years, it is highly unlikely the integrated technologies will develop far enough or the costs come down sufficiently for a dramatically greater penetration of power generation than BP is already predicting. In its best case scenario tight oil and shale gas each contribute as much of a rise in energy supply as renewables such as wind and solar combined.

Just as surprising is the extent to which the oil major sees the transformational change that fracking will continue to be to the energy markets. Rather than consign tight oil and shale gas to the past, as Saudi Arabia had hoped would be the result of its purposeful depressing of the oil price, BP sees any demise as a temporary phenomena followed by continued growth in a couple of years.

How Low Prices Spurred Innovation

In fact the low price has further spurred innovation forcing energy firms to operate at lower and lower break-even points. Globally, technically recoverable resources are estimated to be around 340 billion barrels for tight oil and 7,500 trillion cubic feet for shale gas, the report says. Although Asia has the largest resources, North America will remain the largest producer by far, even out to 2035.

[caption id="attachment_76875" align="alignnone" width="545"]Source: BP Source: OECD/IEA

Although unconventional resources are spread across the globe, production is likely to remain concentrated in North America. Cumulative North American production of tight oil and shale gas between 2013-35 is roughly equivalent to 50% of tight oil and 30% of shale gas, technically recoverable resources. The comparable numbers for the rest of the world are expected to be just 3% and 1% respectively.

Other Markets Can’t Catch North America

While production increases outside North America, hopefuls in Europe and even Asia may be disappointed to hear BP thinks the factors that have enabled the dramatic growth of North American production are unlikely to be quickly replicated elsewhere.

US oil production growth in 2014 (roughly 1.5 million barrels per day) was the largest in US history, driven by tight oil and NGLs (natural gas liquids). The increases in US production in recent years have been among the largest ever seen, with only Saudi Arabia recording larger annual production growth.

Growth of US tight oil and shale gas has been supported by massive investment and rapid technological innovation. Productivity, as measured by new-well production per rig, increased by 34% per year for oil and 10% a year for gas between 2007 and 2014, BP states, contributing to the ability of the industry to continue to operate profitably. This trend has further to go but already it has helped production remain much higher than most had expected and increased estimates of economically recoverable reserves.

Growth in US tight oil is expected to flatten out in coming years, reflecting high well-decline rates and less extensive resources than gas, but in contrast, US shale gas production is expected to grow rapidly over the outlook of BP’s analysis.

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Although growth rates moderate gradually, 4.5% is still above that for any other energy source except renewables, and speaks well for the investment steel mills have put into drill pipe and oil country tubular goods products over recent years. In BP’s view, at least this industry will run and run, particularly for shale gas, for the next 20 years or more.

Miners Join Frackers in Cutting Jobs and Slashing Investment

Miners Join Frackers in Cutting Jobs and Slashing Investment

Low commodity prices may be great for industry and for consumers, but for those engaged in the heavy industry, it is brutal.

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There have been mass layoffs in the oil sector from the US shale industry to the offshore oil and gas markets around the world as energy companies slash investment. This week it is the turn of miners to hit the headline, in the Financial Times Anglo American is reported to be slashing 85,000 jobs from a total of 135,000 worldwide.

Over the next two years, the multinational will suspend dividends and demand its assets either move down the cost curve or be sold. CEO Mark Cutifanis is quoted as saying once the restructuring is complete, Anglo is likely to own “between 20 and 25” assets compared with the 55 mines and smelters it owns today as it focuses on copper, diamonds and platinum, moving out of iron ore, coal and base metals generally.

Path to Profitability?

Even so, dramatic as the moves sound some feel they are not radical enough. Deutsche Bank is reported as saying “The chief executive and Anglo American appear in denial,” to the seriousness of their situation. Nor is the firm alone, even Rio Tinto Group, one of the architects of the collapse in iron ore prices, is slashing $1.5 billion of capital expenditure over the next two years to cope with prices that have sunk below $40 per metric ton, a ten-year low, in spite of continued strong Chinese imports.

Rio is still investing in new capacity aiming for 360 million mt of production by 2017 as low prices have finally taken their toll on high-cost domestic Chinese mines and forced steel mills to increase imports.

Banks, too, are feeling the pain. Morgan Stanley is the latest to announce layoffs saying this week it would close its base metals trading desks globally as part of up to a 25% cut in jobs in its commodities and fixed income division.

Enough Pain to Go Around

Nor is the rout limited to the metals markets. Following the collapse of any form of agreement at the Organization of Petroleum Exporting Countries (OPEC) Vienna meeting, the Brent oil price fell below $40 per barrel this week for the first time in almost seven years. At this level, not only will American fracking firms begin collapsing next year but so will oil majors be slashing investment around the world.

Many are asking, surely, the darkest hour is just before the dawn, right? The world is not in recession, are commodity prices not positioning for a major rebound next year? With capacity being cut here, there and everywhere, with oil-producing countries budgets nearly universally in deficit, surely the stage is set for a strong rebound? Prices across the board are back to where they were before the super-cycle took off, such input costs should spur global growth and drive demand in a more constricted-supply landscape pushing up prices, no?

Surely, a Turnaround Must Come Soon, Right?

No. Eventually mine and oil/gas well closures and lack of new investment will translate into a more constrained supply market, but we are talking years. For oil, we have Iran about to enter the supply market and Saudi Arabia shows little sign of wanting to give way market share to their old adversary.

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Coal will continue to struggle against the headwinds of climate change legislation while metals great demand driver, China, is moving away from industrial and infrastructure-led investment growth towards internal consumption sharply reducing the prospect for a dramatic turnaround in Chinese imports, even if GDP generally continues to grow at a healthy 5-6%.

We have a bear market and, while some metals may be reaching their cost of production, the industry globally isn’t in enough pain yet to do more than trim output. Lower for longer remains the order of the day for 2016.

Emerging Markets, Fracking Already Feeling the Consequences of Low-Priced Oil

Emerging Markets, Fracking Already Feeling the Consequences of Low-Priced Oil

While I wouldn’t want to put a downer on the party, a sudden collapse in oil prices as we are seeing is not all good news. There are consequences, and the faster and further it falls, the greater those consequences could be.
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Russia, Venezuela, Argentina and even US hydraulic fracturing companies are already feeling the pinch caused by lower oil prices.

Surface Transportation Board Requires Railroads to Provide Backlog Information

Surface Transportation Board Requires Railroads to Provide Backlog Information

On October 8th, the US Surface Transportation Board required Class 1 railroads to provide more information about operations and backlogs of rail cars.

The STB ordered more strict compliance, particularly of railroads serving the Bakken Shale states of North Dakoka and Montana, after complaints by producers of everything from grain to steel that they could not get a cars fast enough in the effected area, the Upper Midwest.

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What Says Breast Cancer Awareness Better Than a Pink Drill Bit?

What Says Breast Cancer Awareness Better Than a Pink Drill Bit?

As NFL players don pink cleats, towels and gloves for breast cancer awareness this month, more and more companies are getting in on the act. Houston-based oil-field services company Baker-Hughes is one such company. According to FuelFix, Baker-Hughes’ unique contribution to awareness, in addition to the company’s second $100,000 donation of the Susan G. Komen For The Cure movement, was 1,000 drill bits that had been painted pink instead of the usual gold paint Baker-Hughes uses. Drill bits.

Australia’s LNG Export Ambitions Face Growing Headwinds

Fracking, in all its variations and personifications, has had a revolutionary impact on the global energy market. For the US it has meant fundamentally lower feedstock for petrochemicals and lower energy prices for a host of industries such as steel and cement, in addition to prompting a switch in electricity generation towards natural gas.

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But the very success of America’s hydraulic fracturing industry has rippled across the world in a not always positive way. In Australia, the very success of America’s natural gas industry is making investors wary of investing in its own. The country is set to become the world’s biggest exporter of LNG with 84 million tons of capacity coming into production in 2018.

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