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Oil and Gas Roundup ó June 27

June 27, 2016
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

State rig count falls by four

The number of rigs exploring for oil or natural gas in Oklahoma fell by four at the end of the past week to 54. The national rig count fell by three to 421.

Among the other oil- and gas-producing states, Texas gained three rigs to 194, Louisiana lost five to 41, North Dakota added two to 26, New Mexico was unchanged at 20 and Colorado added one to 17.

Seventy-six rigs were operating in Canada, and 20 in the gulf of Mexico.

This time in 2015, there were 105 rigs operating in Oklahoma and 994 nationwide.

Oil prices settled 5 percent lower on Friday after Britain's vote to leave the European Union spurred massive risk aversion and a rally in safe havens like the U.S. dollar that threatened to cut short a three-month-long recovery in global oil markets.

Brent crude settled down 4.9 percent, or $2.50, at $48.41 a barrel. It had fallen 6 percent earlier to $47.54. West Texas Intermediate crude fell 5 percent, or $2.47, to settle at $47.64, its largest one-day decline since February.

Brent was down 1.5 percent and West Texas Intermediate 0.7 percent for the week.

Despite the fall, oil prices held above last week's one-month lows when Brent hit a bottom of $46.94 while WTI tumbled to $45.83.

TransCanada seeks $15B in damages following Keystone XL rejection

TransCanada Corp is formally requesting arbitration over U.S. President Barack Obama's rejection of the Keystone XL pipeline, seeking $15 billion in damages, the company said in legal papers dated Friday.

TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to "reach an amicable settlement," the company said in files posted on the pipeline's website. "Unfortunately, the parties were unable to settle the dispute."

TransCanada said it then filed its formal arbitration request under North American Free Trade Agreement (NAFTA) provisions, seeking to recover what it says are costs and damages.

The Keystone XL was designed to link existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast.

Obama rejected the cross-border crude oil pipeline last November, seven years after it was first proposed, saying it would not make a meaningful long-term contribution to the U.S. economy.

TransCanada is suing the United States in federal court in a separate legal action, seeking to reverse the pipeline's rejection.

Read more at Reuters.

California spill much smaller than first reported

An estimated 29,400 gallons of crude oil spilled Thursday from a pipeline and flowed down an arroyo in Ventura County, California, officials said.

The oil moved a half-mile from the spill but did not reach a beach, Ventura Fire Department spokeswoman Kelly Flanders said.

The spill was reported in the Hall Canyon area above the city of Ventura and flowed into the Prince Barranca, a ravine that ends at San Buenaventura State Beach near the Ventura Pier.

Fire departments responded and a pumphouse operating the line was shut down.

Initial projections that up to 210,000 gallons may have spilled were later reduced.

There was no immediate information on the possible cause.

Read more at Penn Energy.

U.S. adds most oil storage capacity since 2011

The U.S. added 34 million barrels of crude oil storage capacity from September 2015 to March 2016, the largest expansion since the Energy Information Administration (EIA) began tracking the data in 2011, it said on June 22.

Capacity has grown as oil inventories in the U.S. swelled over the last two years as a result of a massive glut, which also led to prices crashing to 12-year lows early in 2016.

Inventories are up more than 15% since the end of September. This has pushed crude oil storage capacity utilization to a near record high of 73% for the week ending June 10, the EIA said.

However, crude stocks have begun to drop in the last two months largely due to reduced output by U.S. producers, rising demand and reduced supply, especially in crude from Canada following the May wildfires.

Overall, crude inventories have fallen by about 12.8 million barrels since the last week of April. For the week ended June 17, inventories fell by 917,000 barrels, compared with expectations for an decrease of 1.7 million barrels. It was the fifth consecutive week of drawdowns.

Read more at Oil & Gas Investor.

Study: New England needs more natural gas pipelines

Despite not producing any itself, New England (6 states here) has rapidly surged its reliance on natural gas. ISO New England now gets about 50% of its power from gas, versus 10-15% a decade ago. From 2014-2015 alone, gas increased its share of New Englandís power generation from 43% to 49%. Nearly 30 gas plants have been built in the region since 2000.

And largely based on the goal to reduce GHG emissions, plans for more energy efficiency, low levels of wind and solar generation, the shutdown/retirement of coal, oil, and nuclear plants, New Englandís gas demand therefore will obviously continue to grow. ISO New England has ďassessed the fleet of power plants in the six states and found that nearly a third of the gridís generating capacity will have closed or be at risk of closure by 2020.Ē 

New England is the countryís most oil-reliant region, used for power generation and heating. Home heating takes priority in winter, and new and highly efficient electric plants donít get reliable access to gas.  Thatís why over 80% of the coal and oil used for power last year in New England occurred during the first quarter.

Currently, gas demand in New England averages 2.5-3.0 Bcf/day, and demand peaks in the winter, however, reaching around 4 Bcf/day. Gas pipeline capacity into the region is around 3.5 bcfd, with the rest available from Everett LNG imports. Rising gas demand though hasnít meant rising pipeline capacity.

Read more at Forbes.

Independentsí day dawns for Mexican oil industry

A couple of weeks ago, Mexico continued the historic opening of its energy markets to the world with the signing of its 24th contract for exploration and production with companies other than government-owned Petrůleos Mexicanos.

Besides Pemex, 28 companies from seven countries now have a direct stake in Mexicoís oil and gas industry. This is a positive development for the Mexican energy industry and a great step forward for Mexico as a whole.

As the Mexican government expressly intended, the size, scope and background of the participants in the process have varied significantly, from Italian and Norwegian national oil companies to small Mexican upstarts. Their capital structures vary widely, from publicly traded companies to family-owned ventures ó or in the case of Sierra, a unique structure that combines international private-equity investment with a Mexican capital development certificate, a specific type of Mexican trust security that grants ownership to, among other institutional investors, Mexican pension holders.

Despite the diversity of the participants, however, 96 percent of the contracts awarded so far have been competitively won by independents like Sierra.

Read more at FuelFix.
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