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Oil and Gas Roundup — Feb. 24

February 24, 2016
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Brockovich talks earthquakes, water during forum at University of Central Oklahoma

EDMOND — Environmental and consumer advocate Erin Brockovich brought a message of community empowerment to a packed forum Tuesday evening on the escalating number of earthquakes in Oklahoma.

An overflow crowd at University of Central Oklahoma's Constitution Hall also heard from the forum's organizer, Rep. Richard Morrissette, that he plans to run for the Democratic nomination to the Oklahoma Corporation Commission. That position is currently held by Republican Dana Murphy, who was elected to a six-year term in 2010.

Morrissette criticized the Corporation Commission for what he said was a slow response to the links between saltwater disposal wells and man-made earthquakes. He called the commission a "deep black box" with no transparency.

"I assure you, folks, when I get there, it's no longer going to be a deep black box," he said. "I'm going to shed transparency on that place."

The forum was the second hosted this year by Morrissette, who is term-limited at the Legislature. An earlier forum at the Capitol in mid-January also attracted a large crowd.

Brockovich's first foray into activism came from her work on a lawsuit over water quality in California against Pacific Gas & Electric Co. Julia Roberts played her in a 2000 biographical movie.

Read The Oklahoman story.

Despite low oil, Gulf of Mexico production expected to hit record high

Even with the price of oil hovering near $30 a barrel, crude production from the Gulf of Mexico is expected to hit record levels in 2017, the U.S. Energy Information Administration projects.

Because deep-water projects are costly and take years to come online, many expensive projects were authorized before the price of oil began to plummet. In general, Gulf production is less sensitive to short-term crude pricing movement than onshore shale production.

The EIA projects Gulf production will average 1.63 million barrels per day this year and 1.79 million barrels a day in 2017, including hitting 1.91 million barrels in December 2017.

The previous high of more than 1.7 million barrels came in 2009 in advance of the 2010 drilling moratorium after the Deepwater Horizon tragedy.

Gulf oil is expected to represent 18 percent and 21 percent of total U.S. crude production in 2016 and 2017, respectively.

The low price of oil is keeping most energy companies from approving new Gulf projects, but several are already in the works. The market instability changes add an element of uncertainty because projects in the early stages of development could be delayed, the EIA noted.

Read more at FuelFix.

Coast Guard drops plan to let barges carry fracking wastewater on U.S. rivers

LOUISVILLE, Ky. – The Coast Guard won’t adopt a policy clearing the way for barges to ship large amounts of fracking wastewater on the Ohio River and other waterways.

The agency, which regulates safety rules for vessels that carry hazardous materials, formally withdrew the proposal in the Tuesday edition of the Federal Register, the journal for notices issued by the U.S. government.

The Coast Guard said in the notice that barge owners can continue to seek approval to carry the wastewater under current regulations that evaluate permits on a case-by-case basis. The agency has yet to allow any such shipments, a spokeswoman said.     
More than 70,000 comments were submitted, with about 98 percent objecting to the policy creating standards for moving wastewater from shale gas drilling. A smaller number of comments – about two percent – suggested that a “rulemaking” would be a better approach.  

The Coast Guard proposed the policy change in fall 2013 as companies sought to move wastewater from drilling operations in eastern states to disposal sites in Ohio, Texas and Louisiana. The Ohio and Mississippi rivers are among the likely routes for those shipments.

But in its notice, the agency said it withdrew the proposal partly because it had not received “significant interest from industry.” It plans to consider a standard process for transporting wastewater after determining whether "current regulations are inadequate" and other environmental impacts.

The Ohio River provides drinking water for more than five million people, according to the Ohio River Valley Water Sanitation Commission, an eight-state agency that monitors the river's water quality. Wastewater from fracking operations “can pose an immediate threat to drinking water utilities if released directly from a loaded barge” or a storage facility, the agency wrote in a comment to the Coast Guard.

The Ohio is the nation’s most polluted river, absorbing more than 24 million pounds of chemicals in 2013, according to data from ORSANCO. Nitrate compounds, such an untreated sewage, account for roughly 92 percent of the releases.
Last summer, Kentucky and other states warned water skiers, boaters and others not to come into contact with river water after harmful algae blooms were spotted on the Ohio. The blooms form when the river and its tributaries are flooded with excess nutrients, such as agricultural fertilizer and eroded soil.

The amount of mercury in the river – 132 pounds – fell to its lowest level in six years in 2013. Still, Kentucky officials recently revised the guidelines for eating fish from all state waters, including the Ohio, because of mercury levels.

Statewide, officials now urge people to eat no more than one meal per month that includes smallmouth and largemouth bass and other predatory fish; and no more than one meal per week with bottom feeder fish, such as catfish, and bluegill, crappie and other panfish. Pregnant women and children should eat those fish sparingly.

U.S. shale oil poised for new renaissance, IEA says

Faced with declining prices and a global supply glut, US light tight oil production is expected to fall by 800,000 b/d through 2017, but US shale is poised for another renaissance later this decade, Fatih Birol, executive director of the International Energy Agency, said Monday at IHS CERAWeek in Houston.

"There was a rise, there will be a fall and soon there will be a rise again," Birol said during a news conference.

On Monday, IEA released its medium-term oil market report which estimated that after falling by 600,000 b/d in 2016 and 200,000 b/d in 2017, US light tight oil production will climb by about 250,000 b/d in 2018 as the global market begins to rebalance (See story, 1738 GMT). US shale will see year-on-year growth of about 550,000 b/d within five years as prices recover and technology improvements boost well production rates.

The drop in US oil production is merely a temporary function of oil prices hovering around $30/b, according to Neil Atkinson, head of IEA's oil industry and markets division.

While OPEC, led by Saudi Arabia, is in the midst of a strategy to hold production levels in order to bring pain to North American and other high-cost producers, Birol dismissed the notion that this strategy would fail if US supply growth continues. Rather than impacting market share, it has simply put a cap on prices, he said.

Read more at Platts.

In Russia, what oil bust?

In western Siberia, the heart of the Russian oil sector, there is little sign of the slowdown that has hit other fields around the world.

Not only is crude production holding relatively steady, but capital spending is up, making Russia unique among oil producing countries, Matt Sagers, a managing director the research firm IHS, said Tuesday at the IHS Energy CERAWeek conference in Houston.

How has the Russian oil sector avoided the crisis sweeping the rest of the world, at the same time it operates under U.S. and European sanctions? It is a combination of heavy borrowing from Russian banks, the health of the Russian economy going into the crisis and how companies so far have found ways around U.S. efforts to limit investment in the Russian energy sector, said Thane Gustafson, a senior director at IHS.

At the same time, the largely-government owned oil sector is used to operating cheaply under a system where the majority of profits go to the government.

“Russian oil companies have always existed in a $25 to $30 oil price environment,” said Tom Reed, CEO of the small oil firm JKX, which operates in Russia.

Read more at FuelFix.

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