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Oil and Gas Roundup — Jan. 6

January 06, 2014
TOPICS: In the news
U.S. rig count falls by 6 to 1,751

HOUSTON (AP) — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. fell by six last week to 1,751.

The Houston company said in its weekly report Friday that 1,378 rigs were exploring for oil and 372 for gas. One was listed as miscellaneous. A year ago there were 1,762 active rigs.

Of the major oil- and gas-producing states, Alaska gained two rigs while Colorado, New Mexico and North Dakota each gained one.

Oklahoma and Texas each lost three rigs, Kansas lost two and California lost one. Arkansas, Louisiana, Ohio, Pennsylvania, Utah, West Virginia and Wyoming were unchanged.

The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

China’s largest coal company to learn shale in U.S. deal

HOUSTON — China’s state-owned coal behemoth is heading to Pennsylvania to learn how to tap into natural gas embedded in shale.

China Shenhua Energy Co., the world’s second largest coal company, is planning to create a joint venture between a U.S. subsidiary and a private Pennsylvania natural gas producer to drill 25 natural gas wells in the Marcellus Shale.

The $146 million project — which is slated to produce 3.8 billion cubic meters of gas in three decades — is China Shenhua’s first foreign venture into shale gas, according to China Daily.

China Shenhua said it aims to learn the trade and bring it back to China, where Chinese officials have set a goal to produce 80 billion cubic meters of gas by 2020. However, analysts peg China’s potential gas production at 18 billion cubic meters by that time.

U.S. liquefied natural gas companies are counting on the country to be a big importer in coming years, as China tries to increase the amount of power it generates from natural gas.

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Oil glut stirs debate over U.S. crude exports

WASHINGTON — As a new year dawns in the nation’s capital, the Obama administration and Congress find themselves grappling with a scenario that was unthinkable just a few years ago: What to do with the domestic oil flowing out of West Texas, North Dakota and other states?

The climb in domestic crude production has created a dilemma for both lawmakers and the White House, who are facing new pressure from oil companies to relax the nation’s 38-year-old ban on exports of the unprocessed product.

The current restrictions — born in the aftermath of the oil embargo of the 1970s — benefit some domestic refiners, who are selling record amounts of gasoline and other refined products to foreign customers. But their gains are coming at the expense of oil producers who face the prospect of dropping domestic prices for the commodity, as the U.S. produces more light sweet crude than it can handle.

“If we wouldn’t have had this massive, huge increase in the development of oil and natural gas, we wouldn’t be having this discussion; we’d still be living in the shadows of the 1970s,” said Charles Drevna, head of the American Fuel and Petrochemical Manufacturers. “This is a good problem to have.”

Consider that the U.S. exported some 2.6 million barrels of finished petroleum products each day in 2012, according to the government’s Energy Information Administration, more than double the 1.2 million barrels logged daily in 2007.

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Column: EPA's watchdog covered up the agency's missteps

In December of 2010, the U.S. Environmental Protection Agency issued a rare endangerment order against Range Resources for allegedly contaminating private water wells. The EPA had sampled groundwater in Parker County, Tex., and claimed that the gas had a similar composition to what Range was producing in its nearby Barnett Shale wells.

A month later, state regulators held a hearing at which evidence was presented showing that Range’s operations were not responsible, and that the gas found in the water wells was naturally occurring. EPA, however, refused to relent.

After the order was issued, news came to light that made EPA’s actions even less defensible. The regional administrator in charge, Al Armendariz, had been communicating with anti-drilling activists in the region in the run-up to the order, even thanking them for educating him on drilling issues.

An EPA scientist had written to his colleagues that the basis for such an order was “not conclusive evidence,” and that to issue the order the EPA would have to “make assumptions to fill in data gaps.”

Months before issuing the order, in a video not uncovered until 2012, Armendariz told a north Texas crowd that his method of regulating the industry was similar to how the Romans would “crucify” villagers in towns they had conquered. Armendariz later resigned to go work for the anti-drilling Sierra Club, and the EPA withdrew the order in the spring of 2012.

Yet on December 24, 2013, the EPA’s Office of Inspector General released a report that concluded the EPA’s actions “conformed to agency guidelines, regulations and policy.” The IG also said the EPA’s interactions with local activists “were appropriate” and within the guidelines established by the Safe Drinking Water Act.

How did the IG come to such a conclusion? Simple: by ignoring the evidence that would suggest any wrongdoing on the part of EPA.

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The Weekly Oil & Gas Follies

Each week, Forbes and Energy In Depth columnist David Blackmon will “briefly chronicle the week’s silliness, foibles, fake news and real news related to the oil and natural gas industry.”

Check out this week’s here:

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