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Oil and Gas Roundup — Nov. 19

November 18, 2014
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Gov't tells U.S. drivers to get used to cheap gas

NEW YORK — Those low gas prices on station signs aren't going away soon, the government says.

In a dramatic shift from previous forecasts, the Energy Department predicted Wednesday that the average price of gasoline in the U.S. will be $2.94 a gallon in 2015. That is a 44-cent drop from an outlook issued just a month ago.

If the sharply lower estimate holds true, U.S. consumers will save $61 billion on gas compared with this year.

Rising oil production, particularly in the U.S., and weak spots in the global economy have led to a sharp reduction in oil prices over the past four months. Not seeing much of a change ahead, the government cut its forecast for global oil prices next year by $18 a barrel to $83.

As a result, U.S. drivers will pay on average 45 cents less for a gallon of gas next year compared to this year. Based on expected gasoline consumption, that's a savings of $60.9 billion.

That may not seem like a lot in the context of a $17.5 trillion U.S. economy, but economists say it matters because it immediately gives consumers more money to spend on other things. Consumer spending accounts for 70 percent of the U.S. economy.

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Big oil deals return after price plunges, as Halliburton moves first

Halliburton Co.’s deal for Baker Hughes Inc. may be just the start of big energy takeovers as oil prices slump.

Crude has plunged to a more than four-year low amid a U.S. supply glut. That’s making top energy companies, from equipment makers to oil explorers, cheaper for buyers that have the capital to survive and the confidence to strike. Halliburton, a $47 billion provider of oilfield services and equipment, approached Baker Hughes about a combination several weeks ago, a time when the target was trading near its cheapest price in more than a year. The forces that drove them together will likely spur on other dealmaking as well.

General Electric Co. could go after National Oilwell Varco Inc., a $31 billion energy equipment company, to show it’s serious about being big in the industry after last year’s purchase of pumpmaker Lufkin Industries Inc., said Royal Bank of Canada. The drop in crude prices could even make $123 billion BP Plc an acquisition candidate, said Oppenheimer Holdings Inc.

“Low oil prices always triggered industry consolidation,” said Fadel Gheit, an analyst at Oppenheimer. It’s “survival of the fittest. Larger companies view this correction as a window of opportunity to make acquisitions that would improve their own operation and generate synergy benefits.”

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Shale drillers keep output high despite oil price decline

Shale drillers are planning on production growth with fewer rigs despite a worldwide glut that has sent crude prices to a four-year low.

Companies including Devon Energy Corp., Continental Resources Inc. and EOG Resources Inc. said they expect to pump more from their prime properties while cutting back in their least productive prospects. That puts the onus on OPEC nations, led by Saudi Arabia, to cut output if they want to stem the slide in global oil prices.

“There’s a lot more production coming online this year and in the first half of 2015,” said Jason Wangler, an analyst at Wunderlich Securities Inc. in Houston. “This isn’t a machine that you can turn on and off with a switch. It’s going to take months, if not quarters, to turn it around.”

Domestic output topped 9 million barrels a day for the first time since at least 1983, the U.S. Energy Information Administration said Nov. 13. West Texas Intermediate crude, the U.S. benchmark oil contract, rose 21 cents today to $75.85 a barrel at 11:51 a.m. in London. Prices fell to $74.21 on Nov. 13, the lowest close since 2010.

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Independent producers remain at the heart of the U.S. shale story

The Small Business & Entrepreneurship Council (SBEC) recently released a report, which highlights the benefits of natural gas production for small businesses. The SBEC’s findings show that, thanks to booming oil and gas production, small businesses have been able to thrive in difficult times, even while other sectors fell behind.  From the report:

“The increased [natural gas] production has been good news for the energy sector, including for employment and business growth (especially small and midsize businesses), especially in those states where natural gas production has expanded. The excellent performance of the oil and natural gas sectors of our economy stands in sharp contrast to the gross underperformance of the overall economy since 2007."

The SBEC took a look at the five main sectors of the oil and gas industry: oil and gas extraction, drilling, support for oil and gas operations, oil and gas pipeline and related structures construction, and field machinery and equipment manufacturing.

Read more from Energy In Depth:

California regulator: Facts don’t matter on HF, methane

It is generally acknowledged that one of the great success stories of the shale revolution has been a dramatic reduction of carbon dioxide (CO2) emissions in the United States.

Another great industry achievement is rarely noticed but no less remarkable: the sharp reduction in methane emission from oil and gas development, even as production has increased significantly (this graph tells the story).

You wouldn’t know of this, however, from listening to regulators at a recent event held by the Center for American Progress, an organization that has repeatedly promoted the anti-fracking Gasland movies.

But the most bizarre aspect of this event was when a California regulator claimed that the facts about methane emissions don’t matter when it comes to increasing regulations on the oil and gas industry.

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