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Oil and Gas Roundup — Feb. 15

February 15, 2016
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

U.S. rig count loses 30; state off 4

The U.S. drilling rig count plunged 30 units to 541 during the week ended Feb. 12, continuing another interval of steep declines amid a drilling slump that stretches back to late 2014. All but two units to go offline this week were oil-directed.

Oklahoma lost four rigs to 76, 95 less than a year ago.

The national count last week dived 48 units, the largest in nearly 11 months.
The latest data from Baker Hughes Inc. show the count is down 817 year-over-year and at its lowest point since May 28, 1999. The nadir of the 1998-99 downturn was 488 units on Apr. 23, 1999.

With the lingering presence of $30/bbl-and-less oil, the industry has started the year further cutting average 2016 Brent and West Texas Intermediate prices, capital expenditures, and thus exploration and production activity (OGJ Online, Feb. 8, 2016).

In light of the recent declines, financial services firm Raymond James & Associates Inc. further reduced its forecast US rig counts for 2016-18 in its most recent industry brief.

RJA now projects an average 2016 count of 500, down from the 620 the firm projected just last month and down nearly half compared with the 2015 average (OGJ Online, Jan. 8, 2016). The new bottom is expected occur in April at 400 units, compared with RJA’s previous projection of 550 in June.

A drilling rebound isn’t seen until late 2016, the firm says, as many E&P firms are likely to first focus on drawing down their uncompleted well inventories and improving their balance sheets, while waiting for consistently higher crude oil prices and a labor force recovery.

Of the other major oil- and gas-producing states, Texas lost 14 to 248, North Dakota was off three to 39, New Mexico fell four to 22 and Colorado and Pennsylvania each fell by two to 20 and 17, respectively.

Louisiana gained one rig to 47. Ohio was unchanged at 13.

BP: China shale production could outpace US by 2035

HOUSTON — The U.S. shale gas revolution will go global over the next two decades, with production expanding rapidly in China, Argentina and Canada as natural gas eats into oil’s share of global energy demand to become the fastest-growing fossil fuel, BP says.

In its annual Energy Outlook released Wednesday, BP projected shale gas production around the world will grow 5.6 percent a year, and by 2035, half the growth in shale energy will come from outside the United States. BP expects China to overtake the United States as the biggest factor behind shale gas production growth by 2035, after U.S. shale resources reach their peak.

“China really matters for energy,” BP Chief Economist Spencer Dale told analysts and investors in a webcast Wednesday.

Late last year, BP struck two multibillion-dollar deals with China to help cultivate its vast shale natural gas resources as part of China’s efforts to reduce air pollution from the massive amount of coal it burns for power. More broadly, the British oil giant expects to pump more natural gas than oil in just a few years.

“Our portfolio is already around half natural gas and is heading toward more gas with some very big projects on course, on budget,” BP CEO Bob Dudley said during the webcast. “We could be 60 percent gas by the end of this decade.”

BP expects to extract natural gas from its project in the Nile Delta in Egypt, in the Khazzan field in Oman and its giant Shah Deniz 2 project in Azerbaijan, and it is building major gas pipelines in Europe.

In the United States, shale drillers have learned how to pump more and more oil and gas and have “unlocked vast resources,” Dale said.

“We’ve been repeatedly surprised by the strength of U.S. shale,” he said.

Read more at FuelFix.

New EIA data revise Oklahoma's oil production up by 100,000 barrels per day

EIA's Petroleum Supply Monthly, published on January 30, includes crude oil production estimates for Oklahoma based on EIA monthly survey data. The new estimates are roughly 100,000 barrels per day more than those generated by the previous EIA methodology, which was informed by state-reported data.

The recently expanded EIA-914 survey collects oil production data from the largest oil producers in 15 states (including Oklahoma), the federal Gulf of Mexico, and the remaining states as a group. Estimates based on the expanded EIA-914 survey, which had previously been implemented for other states, replaces an earlier methodology that relied on data collected by states. In states with predictable lag times and revision patterns, estimates based on the 914 data and the earlier methodology were quite similar. For these states, EIA shifted to the directly sampled 914 data earlier in 2015.

For Oklahoma, the significant discrepancy between production estimates using earlier methodologies and those based on the new 914 survey, which directly samples about 75% of the state's crude oil production volumes, led EIA to undertake an in-depth evaluation.

EIA conferred with a number of large operators with significant production growth to confirm their reported production for 2014 and 2015. After review of these data and discussions with other operators, purchasers, Oklahoma state officials, and commercial data vendors, EIA determined that its expanded EIA-914 survey provided a better estimate of monthly Oklahoma production than the prior approach.

EIA's estimates of Oklahoma's oil production have been revised beginning with January 2015 and affect regional and national total production series. More information about EIA's methodology is discussed in a presentation given by EIA staff to state officials and industry representatives in Oklahoma at the end of January 2016. Additional domestic oil production data are available in EIA's Petroleum Supply Monthly and Monthly Crude Oil and Natural Gas Production reports.

Note: The Oklahoman also reports.

North American energy leaders meet in Canada to map out 'continental approach'

Federal energy leaders from the U.S., Canada and Mexico met in Winnipeg, Manitoba, and agreed to collaborate on a range of issues, from low-carbon electricity to reducing emissions from the oil and natural gas sector.

U.S. Energy Secretary Ernest Moniz, Mexico Energy Secretary Pedro Joaquín Coldwell and Canadian Minister of Natural Resources Jim Carr were in the Canadian city on Feb. 12 to sign a memorandum of understanding designed to advance a "continental approach" to energy policy. The countries have worked closely in the past year on mapping North American energy trade and infrastructure, sharing energy data, promoting reforms and new business opportunities, according to a Government of Canada news release.

"Secretary Moniz, Secretary Joaquín Coldwell and I want to build on North America's strength as one of the world's most dynamic and influential regions for secure and sustainable energy," Carr said in the statement. "The Memorandum of Understanding we signed today reflects our governments' shared vision for a future where an expanding clean energy sector, a sustainable environment and a strong economy go hand in hand."

The nations agreed to collaborate and share information on low-carbon electricity; clean energy technologies; energy efficiency; carbon capture, use and storage; climate change adaptation; and reducing emissions from the oil and gas sector, including from methane. They launched a Web platform that depicts North American energy resources, production and infrastructure.

Mexico's government has been upgrading its electricity infrastructure to include natural-gas fired generators and pipelines. Calgary, Alberta-based TransCanada Corp. is working on natural gas infrastructure projects in Mexico. The U.S. has boosted natural gas exports to the country and foreign companies are being allowed to bid on oil developments.

— SNL Financial

Iran exports first oil shipment to Europe since nuclear deal

TEHRAN, Iran — Iran says it has exported its first crude oil shipment to Europe since it reached a landmark nuclear deal with world powers, the official IRNA news agency reported Sunday.
IRNA quoted Deputy Oil Minister Rokneddin Javadi as saying the shipment was the first in five years and marked “a new chapter” in Iran’s oil industry.

He did not elaborate but IRNA said several western tankers have loaded Iran’s oil in recent days.
Iran plans to add one million barrels to its oil production following implementation of the nuclear deal, which lifted international sanctions in exchange for Iran restricting its nuclear activities.

Iran expects an economic bonanza after the lifting of sanctions, which will allow it to access overseas assets and sell crude oil more freely.

Javadi said Iran has already reached agreement to export oil to France, Russia and Spain.
The country used to export 2.3 million barrels per day but its crude exports fell to 1 million in 2012. Iran’s total production currently stands at 3.1 million barrels per day.

In order to retake its market share, Iran said in January that it will add to its production despite the drop in prices and should not be blamed for the further price drops. Iran’s regional rival Saudi Arabia is OPEC’s largest producer.

In November, Tehran unveiled a new model of oil contracts aimed at attracting foreign investment in anticipation of the lifting of sanctions. Iran has sweetened the terms of the new model, hoping to bring in $30 billion in new investment. The new contracts last 15 to 20 years and allow for the full recovery of costs. The older model contracts were shorter term and investors complained of heavy risks and losses.

— FuelFix
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