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Oil and Gas Roundup — August 11

August 11, 2016
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, country and world:

Analysts: Shale will reduce oil imports to 11% of US supply by 2020

America's oil boom has put a serious dent in the country's reliance on foreign oil.
Not long ago, the idea of the U.S. achieving energy independence seemed far-fetched.

America's vast energy needs have long been met by oil imported from foreign powers, some of whom clash with American interests and ideals. It was apparent during the crippling Arab oil embargo on the U.S. during the 1970s, an era symbolized by motorists lining up at the pump and a dramatic increase in gasoline prices.

But the shale oil and gas revolution of the last couple of decades has made the improbable goal of American energy independence close to reality. Analysts at Raymond James recently predicted the U.S. will be "tantalizingly close" by 2020, as long as oil prices and domestic production rebound.

"The U.S. will be a much smaller importer of oil in the future than anybody thought was possible a decade ago," said Jason Bordoff, a Columbia University professor and former energy policy adviser to President Obama.

As recently as 2005, the U.S. relied on imports to meet 65% of daily oil demand, according to the U.S. Energy Information Administration. That figure shrank to 55% in 2010, and as low as 28% last year, as surging domestic oil production hit a 43-year high.

Read more at CNN Money.

NAPE opens with enthusiastic speakers, light crowds

The North American Prospect Expo, the nation's premier conference for buying and selling oil and gas land, opened Wednesday in Houston to sparse crowds and sweeping discussions of the changing industry.

Hydraulic fracturing, which now dominates Texas production, fundamentally changed oil and gas production in the state and beyond, said Richard Stoneburner, a managing director at New York-based private equity firm Pine Book Partners.

Stoneburner, the conference's first speaker, said the technology to fracture shale rock by pumping fluids down wells at high pressures was a "truly historical event" around 2006.

He outlined the evolution of at least a dozen shale plays, and remained bullish on the future of oil and gas. There is risk in every play, Stoneburner said, but much of it is "attractively priced."

"No one says it's easy, and you're never going to get it perfect," Stoneburner said. "But if it was easy, it wouldn't be any fun."

— Houston Chronicle

Newly discovered 'blue whirl' fire tornado burns cleaner for reduced emissions

Fire tornados, or ‘fire whirls,’ pose a powerful and essentially uncontrollable threat to life, property, and the surrounding environment in large urban and wildland fires. But now, a team of researchers in the University of Maryland’s A. James Clark School of Engineering say their discovery of a type of fire tornado they call a ‘blue whirl’ could lead to beneficial new approaches for reducing carbon emissions and improving oil spill cleanup.

A new paper published online August 4, 2016, in the peer-reviewed journal Proceedings of the National Academy of Sciences (PNAS) describes this previously unobserved flame phenomenon, which burns nearly soot-free.

“Blue whirls evolve from traditional yellow fire whirls. The yellow color is due to radiating soot particles, which form when there is not enough oxygen to burn the fuel completely,” said Elaine Oran, Glenn L. Martin Institute Professor of Engineering and co-author of the paper. “Blue in the whirl indicates there is enough oxygen for complete combustion, which means less or no soot, and is therefore a cleaner burn.”

The Clark School team initially set out to investigate the combustion and burning dynamics of fire whirls on water. What they discovered was a novel, swirling blue flame that they say could help meet the growing worldwide demand for high-efficiency, low-emission combustion.

Read more:

90 North American oil companies went bust in just 20 months

Ninety North America oil and natural gas companies have gone under since January, 2015.

The law firm Haynes and Boone reported earlier this month bankruptcies were driven by historically oil and natural gas prices. The average price of a barrel of oil in July of 2016 was $41.60, less than half the price oil barrels were selling for in the summer of 2014.

Oil companies have discharged approximately $66.5 billion in aggregate debt in dozens of bankruptcy cases. Forty-four of the now bankrupt oil and gas producers were located in Texas. The Lone Star state has seen oil production skyrocket thanks to drilling in the Eagle Ford and Barnett Shale formations.

Oil and natural gas prices are so low due to the development of hydraulic fracturing and horizontal drilling, which have made producing energy much cheaper, leading to more production. The swell in production occurred mainly in the U.S. and Canada, causing energy prices to drop 41 percent over the course of 2015. Other commodities fell in price as well, but not nearly as much as energy, according to the Energy Information Administration (EIA).

Hydraulic fracturing and horizontal drilling helped America surpass Russia early in 2015 as the world’s largest and fastest-growing producer of oil and natural gas, and gets the credit for American oil and natural gas reserves being at their highest levels since 1972.

Read more at Daily Caller.

Pemex has imported exactly zero barrels of U.S. crude

Ten months after Mexico won special dispensation to import U.S. crude oil, it has yet to take in a single barrel.

Petroleos Mexicanos successfully petitioned the Commerce Department in October for permission to swap its own heavy oil for the lighter crude produced in shale formations. The effort was part of the state-owned oil company’s plan to increase fuel quality at its refineries, and came months before the government removed all prohibitions on U.S. oil exports.

But the oil hasn’t come, according to the latest reports from the Census Bureau and Mexico’s Energy Ministry. Pemex says it doesn’t make economic sense to bring in U.S. crude at current prices. Even if the potential for profits improves, though, the question remains whether Mexico’s infrastructure would be able to handle the imports and if its ailing refineries would be able to take it. Roberto Montes, Pemex’s operational manager for refining, said in an interview last year that the necessary infrastructure wasn’t in place to import U.S. crude by large tankers.

The aim to produce better-quality gasoline and diesel by blending Mexican heavy crude with U.S. light oil has run into a snag at a time when Pemex’s refineries are struggling with continued operating losses, reduced investment and frequent outages. Mexico, which for years requested supplies from the U.S., has had to cut $8.7 billion from Pemex’s budget in the past two years to weather an oil market rout, compromising the efficiency of units that would process the imported crude.

“It wouldn’t surprise me if the refineries were not in a condition to receive the shipments,” John Padilla, Managing Director of IPD Latin America, said in a phone interview. “The company is in a full-blown liquidity crisis, which means less and less money can be dedicated to refining and crude processing.”

Read more at FuelFix.

Saudi Arabia hits output record despite glut

Saudi Arabia produced a record amount of oil in July.

The kingdom produced 10.67 million barrels daily — 30,100 barrels of oil per day more than it did last year this time, despite the fact that demand for oil fell by 8 percent in the same period. Increased output is contributing to a glut in the market that is lowering oil prices.

Despite the slump, Saudi Arabia has been refusing to lower production for the last two years. It is competing with oil producers in the United States, Russia and — after the lifting of Western sanctions — Iran. It's possible, however, that members of the Organization of the Petroleum Exporting Countries could agree to jointly reduce production and push up prices, given the impact the slump is having on their economies.

Jim Krane from Rice University's Baker Institute said, "It almost seems like the stars are aligning for some sort of Iranian-Saudi cooperation. Their interests are converging."

— Wall Street Journal
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