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Oil and Gas Roundup — Dec. 15

December 15, 2015
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

State drilling rig count increases by one to 85

The number of drilling rigs actively exploring for oil or natural gas in Oklahoma increased this week by one to 85, Baker Hughes Inc. reported Friday. The tally is down 126 rigs from a year ago, when it was 211.

Nationwide, the net number of active drilling units decreased by seven this week to 709, said Houston-based Baker Hughes. The total is down 1,184 rigs from a year ago, when it was 1,893.

Of the other major oil- and gas-producing states, Texas dropped nine to 324, North Dakota lost two to 58, New Mexico was off four to 36 and Colorado fell two to 25. Pennsylvania gained one to 30 and Louisiana was unchanged at 60.

Of the rigs operating this week across the U.S., 524 were exploring for oil, the lowest number in years, and 185 were deployed for natural gas.

Can produced water from Oklahoma's oil and gas production be re-used?

Cleaning and using saltwater produced along with oil could help alleviate the drought and reduce earthquakes, but technical and regulatory changes are needed to make the process feasible, researchers said Friday.

"There are big opportunities here, but with that comes fairly significant risks as well," Holly Pearen, senior attorney for the Environmental Defense Fund, said Friday during an American Geosciences Institute webinar on making produced water more productive. "Reusing oil and gas wastewater makes a lot of sense. But recycling is not easy. In some areas it doesn't make economic sense. And it's not risk free."

Oklahoma hydrologist Kyle Murray said the biggest challenges are cleaning the water and transporting it to areas where it can be used.

Gov. Mary Fallin last week created a fact-finding work group to help find ways to use produced water instead if pumping it underground through disposal wells that researchers and regulators say are causing the state's ongoing earthquake swarm.

Read The Oklahoman story.

Paris climate accords, shale and implications for OPEC

Since the 1980s, the Organization of Petroleum Exporting Countries (OPEC) has operated from the assumption that someday in the future (for years, viewed as by the 2010s), the industrialized world would use up its “easy” oil and become increasingly dependent on OPEC and in particular the vast reserves of the Middle East. In this world, OPEC’s petro-power would increase over time and therefore all the oil cartel really needed to do was wait it out for that day to come.

An econometrics study by New York University economist Dermot Gately in 2004 confirmed the view within OPEC that “the (revenue) payoffs to OPEC are relatively insensitive to faster output growth.” Through the 2000s and up until last year, OPEC took a revenues oriented strategy, believing that the “2010” world had arrived and its oil was more valuable under the ground than out in the market.

But the U.S. shale boom and this week’s Paris climate accords have changed the world in which OPEC operates. Now, with the prospects that major economies like the United States, China and Europe will actively try to shift away from oil and the costs for producing oil from shale and other source rock will decline through technological innovation and learning over time, producers are coming to realize that oil under the ground might someday soon be less valuable than oil produced and sold in today’s market.

In effect, perceptions have changed from believing a peak in supplies was possible to believing a peak in demand for oil is possible over the next several decades.

Read more at FuelFix.

EIA ups world total for recoverable shale oil

The Energy Department said on Monday that billions more barrels had been added in 2015 to its estimate of recoverable shale oil around the world.

The U.S. Energy Information Administration said that new estimate comes after reviews of shale oil and natural gas reserves in four more countries — the United Arab Emirates, Oman, Chad and Kazakhstan.

The new reserves in those countries pushed up the worldwide total of shale oil that can be recovered using existing technology to 419 billion barrels, a 13 percent rise over the EIA’s previous estimate, or about 48 billion barrels. The review also resulted in a smaller increase in shale gas reserves to 7.5 trillion cubic feet, a 4 percent increase.

The EIA report noted that most countries, including the most recent four added to the report, still can’t deploy the drilling technology capable of accessing shale oil reserves that has turned the United States into the world’s largest oil producer. Only the U.S., Canada, China and Argentina are current shale oil producers, and the U.S. owns more than 90 percent of that production.

— FuelFix

U.S. oil price gap vanishing for first time in shale era

The once-deep discount for benchmark U.S. crude oil prices versus global rates is about to disappear for the first time since the rise of the shale oil boom, a sudden reversal that highlights the market's ongoing flux.

On Monday, U.S. West Texas Intermediate for delivery in March settled just 6 cents below global Brent crude for the same month CL-LCO3=R, the narrowest gap since 2010. It was trading at more than $1 a barrel two days ago.

While U.S. crude has occasionally and briefly traded at a premium to Brent over the past five years, current spreads suggest it could be a longer-lived phenomenon this time. The April spread CL-LCO4=R contracted to 5 cents by the close of trade, while May Brent settled at a 22 cents a barrel premium to WTI, after trading at a low of 5 cents earlier.

Unusually, the prompt spread for January was wider than the later months at $1.44 a barrel premium to prompt WTI futures, down from a high of a $2.58 earlier in the day CL-LCO1=R, although this appeared more likely tied to an unusually strong Brent market just two days before the contract expires.

Read more at Reuters.
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