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Oil and Gas Roundup — Nov. 17

November 17, 2015
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Oklahoma rig count increases by two

The number of rigs exploring for oil and natural gas in Oklahoma increased by two last week to 85, while the national rig count dropped six to 767, off 60 percent from this time last year and the lowest level since April of 2002, according to Baker-Hughes.

Of the other major oil- and natural gas-producing states, Texas lost two to 338, Louisiana was off one to 69, North Dakota lost one to 62, New Mexico gained one rig to 38 and Colorado fell by one to 32. Unchanged were Pennsylvania at 28, Wyoming at 24 and Ohio at 20.

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

Report: Earthquakes linked to less than 1 percent of all U.S. injection wells

Less than one percent of wastewater injection wells across the United States have been potentially linked to induced seismicity, according to a new report by Energy In Depth. The report, entitled “Injection Wells and Earthquakes: Quantifying the Risk,” consults data from the U.S. Geological Survey (USGS) and several peer-reviewed studies to examine the number of injection wells that have been suspected as causing earthquakes, compared against the total number of operating injection wells.

The report includes breakout statistics for several states as well, including Oklahoma, Texas, Colorado, New Mexico, Ohio, Kansas, and Arkansas.

Below are the key findings, by the numbers:
  •    Total number of U.S. disposal wells – 40,000 (approx.)
    •    Number of U.S. disposal wells potentially linked to seismicity – 218
    •    Percentage of U.S. disposal wells potentially linked to seismicity – 0.55%
    •    Percentage of disposal wells operating without seismicity – 99.45%
    •    Total number of Class II injection wells in the United States – 150,000 (approx.)
    •    Percentage of Class II injection wells potentially linked to seismicity – 0.15%
    •    Percentage of Class II injection wells operating without seismicity – 99.85%

The report helps to quantify the risk of induced seismicity from underground wastewater disposal, demonstrating that despite prevalent media coverage of each seismic event, the number of wells even potentially linked to earthquakes is comparatively small across the United States.

Even in the individual states where most of the attention on induced seismicity has been focused, the vast majority of injection wells are operating aseismically.

Read more at Energy In Depth.

Opinion: Obama administration’s anti-fossil fuel bias poses threat

A bias against fossil fuels because of their potential climate impacts permeates US President Barack Obama’s administration and could shorten the nation’s recent oil and gas prosperity, warned Charles K. Ebinger, who has been a prominent member of Washington’s energy community for more than 40 years.

It increasingly looks as if Obama would veto any bill ending a ban on exporting US crude oil, which has been in place for the same amount of time because he and others in the administration believe any increased fossil fuel use should be stopped, Ebinger said in Nov. 10 remarks at the US Energy Association.

“I believe this was at the core of his Clean Power Plan and decision to reject the Keystone XL pipeline’s permit application (OGJ Online, Nov. 6, 2015), and it will be there if a bill allowing crude oil exports reaches his desk,” said Ebinger, who now is a senior fellow specializing in foreign policy at the Brookings Institution’s Energy Security and Climate Initiative.

“Unless you believe demand will miraculously disappear, the world will need more oil,” he said. “BP’s latest annual statistical review says we’ll need another 15-19 million b/d by 2035. But if it doesn’t come from tight shales or Alberta’s oil sands, where will the world get it? It certainly won’t come from the Arctic, where it has become so uneconomic that Shell has withdrawn and others are reconsidering their strategies.”

Ebinger said more crude would have to come from politically unstable Middle East producers like Iran and Iraq, scandal-ridden countries like Brazil, or anti-US nations like Venezuela, which continues to export crude despite the unsettled political conditions there. “There’s a disconnect between what US energy policy promotes now and the world actually needs,” he observed.

Read more at Oil & Gas Journal.

Drop in shale production seen accelerating in December

The slowdown in shale production of natural gas and crude oil is expected to continue in December, as five of the seven shale plays tracked by the U.S. Energy Information Administration are projected to post declines.
Total output of natural gas across the plays in December is projected to fall 394.13 MMcf/d, or 0.9%, to 44.29 Bcf/d from November, according to the "Drilling Productivity Report" published by the EIA on Nov. 9. Output in November was downwardly revised by 198.37 MMcf/d to 44.68 Bcf/d.

On a year-over-year basis, output is projected to rise 1.01 Bcf/d, or 2.3%, in what is projected to be the slowest percentage rate of annual growth on record in data going back to 2007.

The sequential changes have been negative for six consecutive months and have been falling at an increasing rate in each of those months. The record peak in production was made in June at 45.62 Bcf/d, which was downwardly revised from the October report, which posted a peak of 45.87 Bcf/d. The December production levels are projected to fall 1.33 Bcf/d below the record peak.

Production has fallen as prices of natural gas futures dropped from a peak near $6.50/MMBtu in February 2014 to a settlement of $2.32/MMBtu on Nov. 10.

The shale production figures in the DPR differ from the dry gas production data published in the agency's "Short-Term Energy Outlook" published on Nov. 10. In that report, the EIA revised up its 2015 production growth expectation to 4.47 Bcf/d from 3.93 Bcf/d forecast in the October report.

Read more at SNL Financial.

Study of premature births fails to show connection to hydraulic fracturing

Serious methodological errors render unreliable the findings of a recent study titled “Unconventional Natural Gas Development and Birth Outcome in Pennsylvania, USA,” which suggested pregnant mothers living near hydraulic fracturing sites could be at a higher risk of giving birth to premature babies.

The study, which was published in the journal Epidemiology, was conducted by researchers at the Johns Hopkins-Bloomberg School of Public Health. It relies exclusively on retrospective data analysis of pregnancy and birth statistics of just under 11,000 pregnant women in hydraulic fracturing-rich areas of Pennsylvania between 2009 and 2013. The data were used to find statistical associations between the distance a pregnant mother lived from a fracking site and whether or not she gave birth prematurely.

Dr. Gilbert Ross, senior director of medicine and public health at the American Council on Science and Health, says although these methods sound sophisticated, they tell us very little about whether fracking had any impact on the pregnancies.


A Saudi hydraulic fracturing boom could be a tectonic shift

Great attention has focused on the North American energy boom, driven by fracking and horizontal drilling, and for good reason: It has yielded far more energy than most people expected and has altered energy security by adding more than four million barrels of oil a day to global markets since 2008.

But what about Saudi Arabia? We rarely think of the Saudis as in need of new energy technologies, or as pursuing unconventional shale energy. After all, their country holds enormous conventional energy sources. But the House of Saud has launched its own fracking boom, and it could well be the next big thing in global energy.

Saudi efforts are more advanced in shale gas than in oil, but both are in motion. In 2011, several years after the U.S. boom was in full swing, Saudi Aramco launched its own unconventional gas program in the northern region (or Empty Quarter, as it is also known). Two years later, Saudi Aramco was ready to commit new shale gas production to a 1,000-megawatt power plant. Ali al-Naimi, Saudi Minister of Petroleum and Mineral Resources, estimated that the kingdom possesses about 600 trillion cubic feet of shale gas reserves, which would place Saudi Arabia fifth in the world in total unconventional reserves. That would be amazing.

Saudi Aramco, in its 2014 annual report, spoke of its unconventional gas program as “continuing to gain momentum,” and Mr. al-Naimi added that “the kingdom has made promising shale gas discoveries and acquired the technologies to produce it at a reasonable price.” Notably, in early 2015, Saudi Aramco raised the amount earmarked for its own boom from an original $3-billion (U.S.) to $10-billion.

Read more at The Globe & Mail.

What the Paris attacks mean for the oil price

The price of oil bounced Monday morning off two-and-a-half-month lows following the Paris attacks on Friday but analysts told CNBC they weren't expecting any significant movement higher despite rising geopolitical tensions.

Oil prices traditionally spike on fears of supply disruptions caused by military conflict and saw a boost on Monday morning. Front-month U.S. crude futures were trading at $41.63 a barrel at 12:30 p.m. London time, up 88 cents for the session. Brent was trading at $45.03 a barrel, up 57 cents.

Traders and analysts highlighted risks of "uncertainty and geopolitical risks" for the bounce, with the U.S. and France expected to ramp up efforts against the Islamic State in Iraq and al-Sham (ISIS). France launched airstrikes against ISIS Sunday and enters a third day of mourning after deadly attacks in Paris killed 129 people on Friday.

Both crude benchmarks saw high levels of activity in early trading, according to Reuters data. However, Michael Scialla, a research analyst at investment banking firm Stifel, said it was hard to determine how those events can really impact oil prices in the long term.

"I don't see this as a significant supply threat," he told CNBC Monday. He added that, conversely, it could hurt demand for oil as airlines - who use the commodity - could be hit due to less tourism and travel within Europe.

Read more at CNBC.

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