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Oil and Gas Roundup — Jan. 16

January 16, 2017
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

State, national rig counts fall

The number of rigs exploring for oil and natural gas in Oklahoma fell by two to 84 for the week ending Jan. 13, as the U.S. count fell by six to 659.

Nationwide, 522 rigs were exploring for oil, 136 for natural gas and one was listed as miscellaneous.

Of the other major oil- and gas-producing states, Texas fell two to 325, Louisiana gained one to 51, New Mexico was flat at 37, North Dakota and Pennsylvania each lost one rig to 32, Colorado was off one to 28, Ohio fell one to 19 and Wyoming gained two to 19.

The Canadian rig count jumped 110 to 315 as crews pushed to drill before the spring thaw. The Canadian rig count was last above 300 in March of 2015.

Regional Fed survey finds optimism among energy companies

Energy activity in the region accelerated in the fourth quarter as profits, drilling and jobs were up and companies were hopeful of a continued rebound after two years of troubles, the Federal Reserve Bank of Kansas City said Friday.

The bank's fourth-quarter energy survey included responses from 31 companies in the region including Oklahoma.

"Regional oil and gas firms said they returned to profitability in the fourth quarter for the first time in over two years," said Chad Wilkerson, Oklahoma City branch executive and economist. "Companies began hiring again and increased their drilling programs further."

Companies in the survey need oil prices to be about $60 per barrel and natural gas close to $4 per thousand cubic feet in order to increase drilling substantially. Domestic crude was trading in the $52 range Friday, with natural gas about $3.40 per thousand cubic feet.

Looking forward, companies expected domestic oil prices to be about $58 per barrel by the end of 2017, rising to about $63 per barrel by the end of 2018. The survey found companies predicted natural gas to range from $3.64 per thousand cubic feet by the end of this year, and improve slightly to $3.73 per thousand cubic feet by the end of 2018.

Most companies said they didn't expect OPEC to comply with its recent agreement among members to cut oil production to 32.5 million barrels per day. On average, companies expected OPEC production to be closer to 33.7 million barrels per day.

"Those who did believe OPEC would cut its production mentioned OPEC countries needing higher prices as the main reason," the survey said.

Read Paul Monies’ story at NewsOK.

Report: Shale gas spurring plastics manufacturing growth

Energy In Depth has highlighted several times in recent months how the shale gas revolution has spearheaded a manufacturing renaissance in the United States. The latest evidence of this trend was released this week in the Plastics Industry Association’s 2016 Size & Impact Report.

According to the plastics industry website, the report shows plastics industry employment was up nearly 10 percent in 2015 from its 2008 lows. It also notes that the American Chemistry Council (ACC) is currently tracking 560 plastic manufacturing investments in expansion or new construction nationwide. reports that “the development of shale gas feedstocks in the United States” is one of the three reasons the plastics industry is seeing this success, adding,

“… employment is growing after some steep declines, and that shale gas-related investments should help plastics fare better than other manufacturing sectors.”

That is because energy intensive industries such as plastics manufacturing have been able to bounce back from the depths of the Great Recession due to abundant and affordable natural gas. According to Steve Russell, vice president of the ACC’s plastic division:

“The ready availability of large amounts of natural gas is giving the U.S. plastics industry really a renaissance, turning it from among the highest-cost producers to one of the lowest in the world, increasing manufacturing in the United States, increasing exports to markets that we were not exporting to before, and along with all that comes jobs.”

Read more at Energy In Depth.

U.S. shale's great reawakening

OPEC and its friends have just received some uncomfortable reading. The latest forecasts from the U.S. Energy Information Administration suggest that their agreements to boost prices and hasten the rebalancing of oil supply and demand by cutting output may bring the U.S. shale industry out of hibernation faster than they might like.

The EIA's monthly report published on Tuesday raised its forecast of global oil demand growth for 2017 to 1.63 million barrels a day from last month's 1.56 million, its third successive increase -- that should be good news for producers. At the same time, though, the EIA boosted its outlook for U.S. oil production.

This is where the news gets bad for OPEC. Separate weekly EIA data published on Wednesday showed a 176,000 barrel-a-day jump in U.S. production from the previous week, the biggest increase since May 2015. A large part of that increase came from a revision of fourth-quarter output figures, with U.S. production raised by 100,000 barrels a day from the previous estimate -- this isn't an example of shale responding quickly to higher prices.

Why is this important? Because it means that U.S. oil production was already growing more strongly (due to increased drilling rates) than thought at a time when the consensus view was that OPEC would fail to agree to cuts and that oil prices would struggle to rise above $50 per barrel this year.

Read more at Bloomberg.

With a major oil discovery, Guyana is poised to become a top producer

Guyana, the tiny English-speaking South American country, is poised to become the next big oil producer in the Western Hemisphere, attracting the attention and investment dollars of some of the biggest oil companies in the world.

This week, Exxon Mobil and Hess announced the successful drilling of a deepwater exploration well that may soon confirm that the seafloor beneath Guyana’s coastal waters contains one of the richest oil and natural gas discoveries in decades. Experts now estimate that one of its offshore fields alone, known as Liza, could contain 1.4 billion barrels of oil mixed with natural gas, comparable to some of the larger fields drilled in South America.

With a population of fewer than one million people, Guyana — Venezuela’s eastern neighbor on the continent’s north coast — would be able to export nearly all of the oil that it will begin producing, probably starting around 2020.

The company announcements came only days after the Guyanese government announced its intention to build a $500 million petroleum processing and service center on Crab Island, an enormous investment for one of the poorest countries in the region.

Early rough estimates by experts of how much recoverable oil Guyana could have range to more than four billion barrels, which at today’s prices would be worth more than $200 billion. But the country, which currently produces precious little energy, sorely needs pipelines and other support infrastructure to begin a major production and export effort.

Read more at the New York Times.
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