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Oil and Gas Roundup — April 15

April 15, 2014
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

State drilling rig tally dips by one

The number of drilling rigs actively exploring for oil or natural gas in Oklahoma fell by one this week to 192, Baker Hughes Inc. reported Friday. The tally is up seven from a year ago, when it was 185.

Nationwide, the net number of active drilling units rose by 13 this week to 1,831, said Houston-based Baker Hughes. The total is up 60 rigs from a year ago.

Of the rigs operating this week across the U.S., 1,517 were exploring for oil, 310 for gas and four were miscellaneous.
Friday on the New York Mercantile Exchange, benchmark U.S. crude oil for May delivery rose 34 cents, or 0.3 percent, to a five-week high of $103.74 a barrel. The price advanced 2.6 percent this week.

Natural gas for May delivery fell 3.5 cents to settle at $4.62 per million British thermal units.

Ohio cracks down on hydraulic fracturing over earthquake worries

Ohio is set to slap the oil and gas industry with more regulations, due to an alleged link between hydraulic fracturing near fault lines and increased earthquakes.

The Ohio Department of Natural Resources (ODNR) said on Friday it would require drilling companies to install seismic monitors if they want to hydraulically fracture within three miles of a known fault line, or where an earthquake has already occurred. If the monitors detect a seismic event above a 1.0 magnitude, drilling operations must be stopped.

But the drilling pause doesn’t stop there. If the state determines there is a “probable connection” between hydraulic fracturing and the quake, oil and gas companies will not be able to complete their well site.

“The seismic testing will be done in real-time,” said ODNR spokesman Mark Bruce. “If we see anything above one, the (policy) will require them to stop. We can then look at the data. If the seismic monitors show that it is down at the bedrock (below the fracturing), then it has nothing to do with the well and they can continue.”

Increasingly, regulators are looking for links between seismic events and hydraulic fracturing operations.

Across the country, environmentalists have been trying to link hydraulic fracturing with earthquakes. Last month, Ohio’s Poland Township was hit by a 3.0 earthquake that originated directly under hydraulic fractured wells. It was followed by four smaller quakes that prompted the state to halt oil and gas operations in the area.

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EIA says LNG attractive as railroad fuel

Continued growth in domestic natural gas production, along with substantially lower natural gas spot prices compared to crude oil, is reshaping the U.S. energy economy and attracting considerable interest in the potential for fueling freight locomotives with liquefied natural gas.

While there is significant appeal for major U.S. railroads to use LNG as a fuel for locomotives because of its potentially favorable economics compared with diesel fuel, there are also key uncertainties as to whether, and to what extent, the railroads can take advantage of this relatively cheap and abundant fuel.

Major U.S. railroads, known commonly as Class 1 railroads, are defined as line-haul freight railroads with certain minimum annual operating revenue. Currently, that classification is based on 2011 operating revenue of $433.2 million or more.

While there are 561 freight railroads operating in the United States, only seven are defined as Class 1 railroads.

The Class 1 railroads account for 94% of total freight rail revenue. They haul large amounts of tonnage over long distances, and in the process they consume significant quantities of diesel fuel.

In 2012, the seven Class 1 railroads consumed more than 3.6 billion gallons of diesel fuel, amounting to 10 million gal/day and representing 7% of all diesel fuel consumed in the United States.

The cost to Class 1 railroads of consuming such large quantities of diesel fuel was more than $11 billion in 2012, representing 23% of their total operating expense.

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Landrieu, Murkowski ask EIA for detailed look at crude export impacts

U.S. Senate Energy and Natural Resources Committee leaders asked the Energy Information Administration to conduct a more extensive analysis of possible consequences from lifting or easing the ban on exporting domestically produced crude oil.

The U.S. Department of Energy’s independent statistics, analysis, and forecasting service has limited resources and numerous reporting requirements to Congress already, Chair Mary L. Landrieu (D-La.) and Ranking Minority Member Lisa Murkowski (R-Alas.) conceded.

“We would like to convey the interest of our committee in crude oil exports, which are largely banned by statute,” they continued in an Apr. 10 letter to EIA Administrator Adam Sieminski. “As you know, the possibility of lifting the ban—partially or completely—has emerged as a subject of critical concern in Congress.”

Possible areas of interest, according to Landrieu and Murkowski, might include:

• Current and projected production of crude and condensate of varying grades.
• U.S. refining capacity and distribution, including the ability of U.S. refiners to process the various grades of domestically produced crude and condensate.
• U.S. refiners’ position and ability to compete in relation to global products markets.
• Economic implications of retaining or changing the current crude export policy on US producers, refiners, and consumers.
• Transportation logistics connected with US crude and condensate production, including rail capacity.

“This is a complex puzzle that is best solved with dynamic and ongoing analysis of the full picture, rather than a static study of a snapshot in time,” Landrieu and Murkowski said in their letter.

Eagle Ford’s Exports Spur Boom at Port of Corpus Christi

NuStar Energy LP (NS) officially opened its third petroleum dock at the Port of Corpus Christi, Texas, as Chairman Bill Greehey smashed a bottle of champagne against a loading arm that was filling a barge with crude.

NuStar and other companies are building docks, storage tanks and other facilities in Corpus Christi to take advantage of the oil boom in the Eagle Ford shale formation 100 miles away. The port shipped out 350,000 barrels of crude a day in November, up from under 10,000 at the start of 2012, according to port data.

“It’s a historic time right now for our port,” said Frank Brogan, managing director for the city’s port authority. “I’ve been here 27 years, and we’ve had more activity in the last two years than in the previous 25 combined.”

The new activity is putting pressure on the port’s infrastructure. When tankers used to leave the port empty, they could pass full incoming tankers without a problem. Now only one tanker is allowed to travel the ship channel at a time. Pilots are also restricted to daylight operations. Without the restrictions the port could move up to 30 percent more cargo, Brogan said.

The port authority is trying to gather funding to both widen the 45-foot-deep channel, which would allow tankers to pass again, and to deepen it to 52 feet to allow larger vessels as the Panama Canal expansion nears completion.

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