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Oil and Gas Roundup — Jan. 31

January 31, 2017
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Intelligence: Putin is funding the anti-fracking campaign

Recent intelligence reports show that Russia is interested in influencing more than just America's elections. Russian President Vladimir Putin and his cronies have taken aim at undermining the U.S. energy industry, as well.

Buried within the U.S. intelligence community's report on Russian activities in the presidential election is clear evidence that the Kremlin is financing and choreographing anti-fracking propaganda in the United States. By targeting fracking, Putin hopes to increase oil and gas prices, destabilize the U.S. economy and threaten America's energy independence.

Thanks to new technologies which are making the process more efficient and environmentally friendly, fracking now supports 4.3 million jobs and generates about half a trillion dollars in economic benefit to the United States every year. Additionally, natural gas prices have dropped in half thanks to the corresponding boost in supply, saving American families an average of $200 a year.  

Fracking is the major reason why the United States is on pace to become completely energy independent by 2020. America relies on fracking to produce more than 1.5 billion barrels of oil a year — over half of the total U.S. oil output.

Russia sees all this as a threat.

Read more at Newsweek.

The days of cheap natural gas are over

Natural gas prices averaged a little more than $2.50 per mmBtu (million British Thermal Units) in 2016. Those days are over. Prices will average at least $3.50 to $4.00 in 2017.

Prices have more than doubled since March 2016 but gas is still under-valued. Supply is tight because demand and exports have grown and shale gas production has declined.

In April of last year, I wrote that natural gas prices should double and they did. Henry Hub spot prices increased 2 1/2 times from $1.49 to $3.70 per mmBtu and NYMEX futures prices doubled from $1.64 to $3.30 per (Figure 1).

Nevertheless, gas prices are still too low. Storage was at record high levels throughout 2016 reaching 4.1 Tcf (Trillion cubic feet) and 84% of working capacity in mid-December. Storage has fallen 1.1 Tcf in the last month to 61% of capacity. That is below the 5-year average (pink, dashed line in Figure 2).

Read more of Art Berman’s column at Forbes.

Border tax could further reduce Mexican oil’s U.S. ties

U.S. President Donald Trump’s proposed tariff on Mexican goods has the country’s oil industry considering just how much it needs the American market.
A 20 percent border tax to build a wall between Mexico and the U.S. means Canadian oil-sands competitors will enjoy a leg up and U.S. motorists will suffer higher prices at the pump due to the tariff on Mexican oil.

Pemex, Mexico’s principal producer, isn’t waiting for Trump’s plan to come to reality. The state-owned company has already been reducing its reliance on the U.S. In the first 11 months of 2016, Mexico exported 48 percent of its crude to the U.S., down from 69 percent in 2014, according to Mexico’s Energy Information Agency data. Asian buyers took 26 percent while Europe accounted for 23 percent.

“Mexico has a strong relationship with clients in Asia and Europe,” said Ixchel Castro, a senior analyst for Latin American oils and refining markets at Wood Mackenzie in Mexico City.

Trump will give attendees of the Energy Mexico 2017 conference, convening today in Mexico City, plenty to chew over. Mohammad Barkindo, OPEC’s Secretary General, is scheduled to open the event. The three-day conference, organized in large part by former Pemex Chief Executive Officer Jesus Reyes Heroles, features experts from BP Plc, ExxonMobil Corp., Citigroup Inc., and many of Mexico’s top names in the industry.

Panels will discuss North America’s energy outlook, the changing geopolitical climate, global oil outlook and deep-water production in the Gulf of Mexico.

Read more at Bloomberg.

House Republicans ready bill to overturn methane rule

Congressional Republicans are not wasting any time going after former president Barack Obama’s climate change legacy.

House Republicans are putting the final touches on legislation to overturn an Obama executive order limiting the amount of methane that can be vented and flared from oil and gas drilling sites on federal lands. The bill, along with another piece of legislation overturning an order protecting streams and wildlife around coal mines, is set to be introduced Monday,

“These are abusive, last minute regulations that are grossly inconsistent with congressional intent,” Rep. Rob Bishop, R-Utah, chairman of the House Natural Resources Committee, said in a conference call Friday. “They will impose a real an unnecessary cost on American people and communities.”

A day after a Republican retreat in Philadelphia headlined by President Donald Trump, party leaders are gearing up to roll back federal regulation at-large. At a meeting in the White House earlier this week, Trump told business leaders he wants to see federal rules reduced by three quarters.

Most immediately, Republicans plan to revive a little-used law signed by former president Bill Clinton in the 1990s that gave Congress the authority to overturn any regulation within 60 days of publication – a measure designed to keep presidential administration’s from tacking on regulations on their way out of the White House.

Known as the Congressional Review Act, it has only been used once in the past two decades. But now Republicans want to use it to tackle rules on everything from overtime pay to in this case greenhouse gas emissions.

Environmentalists are already stepping up campaigns to try and block the legislation in the Senate, where Republicans maintain a thin 52-48 majority.

Read more at FuelFix.
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