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Oil and Gas Roundup — Oct. 9

October 09, 2015
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

State rig count down 6 as U.S. count falls 16

The number of rigs exploring for oil and natural gas on land in the U.S. fell by 16 to 760 this week. Oklahoma had the greatest drop in rigs, by six to 91.

A year ago there were 1,859 land rigs nationwide and 211 in the state.

Among the other major oil- and gas-producing states, Texas lost four to 353, and Louisiana, North Dakota, Pennsylvania and Ohio each lost one.

New Mexico and Wyoming were unchanged. Colorado gained a rig.

On Thursday, West Texas Intermediate crude oil rose above $50 per barrel for the first time since July.

Following the rig count data release, WTI futures in New York were up by less than 1%, near $49.80 per barrel.


Sixth Circuit puts hold on Waters of the U.S.

A federal court ruled Friday that President Obama’s regulation to protect small waterways from pollution cannot be enforced nationwide.

In a 2-1 ruling, the Cincinnati-based Court of Appeals for the Sixth Circuit delivered a stinging defeat to Obama’s most ambitious effort to keep streams and wetlands clean, saying it looks likely that the rule, dubbed Waters of the United States, is illegal.


“We conclude that petitioners have demonstrated a substantial possibility of success on the merits of their claims,” the judges wrote in their decision, explaining that the Environmental Protection Agency’s (EPA) new guidelines for determining whether water is subject to federal control — based mostly on the water’s distance and connection to larger water bodies — is “at odds” with a key Supreme Court ruling.

The judges said they have yet to decide whether they have jurisdiction to review the regulation, but a stay would make it easier to determine that.

“A stay allows for a more deliberate determination whether this exercise of executive power, enabled by Congress and explicated by the Supreme Court, is proper under the dictates of federal law,” the court said.

“A stay temporarily silences the whirlwind of confusion that springs from uncertainty about the requirements of the new Rule and whether they will survive legal testing. A stay honors the policy of cooperative federalism that informs the Clean Water Act and must attend the shared responsibility for safeguarding the nation’s waters.”

Read more at The Hill.


Gas power passes coal for the second time ever

The amount of electricity generated from natural gas in the United States surpassed the share of coal-fired production in July for the second time.

The U.S. Energy Information Administration reported Wednesday that the share of electricity coming from natural gas-fired power plants hit 35 percent in July. It was 34.9 percent from coal plants.

Natural gas first edged coal out as a power generation fuel in April, according to the Energy Department agency.

The shift comes as the ongoing domestic shale boom produces lots of natural gas at relatively cheap prices. At the same time, few new coal plants are being built nationally because of increasing federal regulations on carbon emissions.

Compared to July of last year, coal generation fell from 150 billion kilowatt-hours down to 139 billion kwh this year. Likewise, natural gas power jumped from 114 billion kwh to 140 kwh.

In the Texas grid managed by the Electric Reliability Council of Texas, coal fell by 1.9 kwh in July, while natural gas power jumped up 3.1 kwh. Gas-fired power was already ahead of coal last year in Texas, according to the report, and gas is just building on its lead.

When the switch first occurred in April, it was during the month of the lowest demand for electricity. In times of low demand, many generators schedule routine maintenance and plants are taken partially offline. The output is highest in the summer and winter.

Read more at FuelFix.


Shell CEO sees first signs of oil price recovery

Oil markets are beginning to recover but the scale of global oversupply means prices may rise only slowly, the chief executive of Royal Dutch Shell Plc (RDSa.L) said on Tuesday.

"I see the first mixed signs for recovery of oil prices," Ben van Beurden told an oil industry conference in London.

"But with U.S. shale oil being more resilient than we originally thought and a lot of oil still in stock, it will take some more time to rebalance demand and supply," he added.

Oil prices have collapsed over the last year in the face of heavy oversupply, with benchmark Brent crude LCOc1 falling to below $50 a barrel from a high above $115 in June 2014.

The Organization of the Petroleum Exporting Countries led by Saudi Arabia has increased production in an attempt to build market share, leaving some other producers, including shale companies in North America, operating below break-even costs.

Van Beurden said many U.S. oil producers would struggle to refinance while prices remained so low, leading to lower output in the future: "Producers are now looking for new cash to survive and they will probably struggle to get it."

Longer-term, there was a risk that low levels of global production could bring a spike in oil prices, he said.

Read more at Reuters.


FERC commissioner presses for more gas pipelines while praising 'helpful' dissent

FERC Commissioner Tony Clark on Oct. 6 called for more natural gas pipeline infrastructure, citing the shale boom's transformative effect on the U.S., but he also welcomed as "helpful" the views of local landowners who oppose development projects.

In his keynote speech at the North American Gas Forum, Clark stressed that shale gas and the midstream sector have significantly contributed to lower gas prices and will play a major role in supporting the future of renewable energy.

"If we didn't have the shale gas that we have and if we didn't have adequate infrastructure, as they've seen in New England, gas prices would skyrocket," Clark said at the Washington, D.C., event. He added that natural gas has had a massive impact on costs in the U.S. industrial sector and in areas such as North Dakota, Clark's home state, where it is the primary heating fuel for residential and commercial customers.

These cost drivers are also making a big impact on the power industry, Clark noted, with an ever-growing amount of generation switching from coal to natural gas. He said electricity's reliability and cost stability and the power industry's ability to meet present and future EPA carbon regulations are heavily improved by the aid of natural gas.

Even in a hypothetical scenario where there is heavy reliance on energy resources like sun and wind, efficient natural gas plants remain a major energy source to support the inherently intermittent renewables.

Read more at SNL Financial.


Valero opposes lifting oil export ban while sending crude to Canada

As the House approaches a pivotal vote on crude exports Friday, lobbyists for Valero Energy Corp. and other refiners have been walking the halls of Congress, pushing lawmakers to oppose legislation that would liberalize oil trade.

San Antonio-based Valero supports the longstanding crude export ban, which helps sustain a discount on the domestic oil it transforms into gasoline, diesel and jet fuel in 13 refineries around the country.

But the company’s high-profile opposition to crude exports comes even as it actively exploits an existing exception to the ban by shipping U.S. oil to its refinery in Quebec. And last month, Valero told investors and analysts that given current market conditions, it prefers importing medium-grade crudes from foreign suppliers instead of buying lighter, sweeter U.S. oil.  

Energy companies eager to sell raw, unprocessed U.S. crude around the world point to Valero’s posture as evidence that the current trade restrictions are fundamentally unfair, giving refiners access to world markets to buy the oil they use and sell the gasoline they make, even though domestic producers don’t have the same latitude.

That fairness argument is at the heart of the congressional debate over oil exports and will be the backdrop for House votes Friday on the issue.

Read more at FuelFix.

 
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