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Oil and Gas Roundup — Dec. 19

December 19, 2017
TOPICS: OIPA, In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

Federal tax bill boosts oil, gas drilling — and renewable energy

The Republicans’ tax package would boost traditional forms of energy such as oil and gas while also supporting renewable energy such as wind and solar power — and even extend a hand to buyers of electric cars.

An agreement by House and Senate negotiators would open Alaska’s Arctic National Wildlife Refuge to drilling, while preserving tax credits for wind power and other clean energy. The bill also would extend a tax credit of up to $7,500 for purchases of plug-in electric vehicles such as the Tesla Model 3 and Chevrolet Bolt.

Republicans rolled out the bill late Friday.

Opening the remote Arctic refuge to oil and gas drilling is a longtime Republican priority that most Democrats fiercely oppose. The 19.6-million-acre refuge in northeastern Alaska is one of the most pristine areas in the United States and is home to polar bears, caribou, migratory birds and other wildlife.

Alaska Sen. Lisa Murkowski and other Republicans say drilling can be done safely with new technology, while ensuring a steady energy supply for West Coast refineries.

Read more at AP.

Crude propelled higher on strengthening signs of dwindling glut

Crude bumped higher as traders awaited a U.S. government report that’s expected to show a fifth straight week of shrinking American inventories.

Futures rose as much as 0.8 percent in New York. Oil stored in U.S. tanks and terminals last week probably dropped to the lowest level in more than two years, according to a Bloomberg survey. If the decline is confirmed in an Energy Department tally scheduled to be released on Wednesday, it will aggravate tightening supply conditions stemming from the shutdown of a key North Sea crude pipeline.

Traders are contending with “a slightly tighter physical market at the moment,” Brad Hunnewell, senior equity analyst at Rockefeller & Co., said by telephone.

Oil has held above $55 a barrel in New York since mid-November as the Organization of Petroleum Exporting Countries and allied suppliers such as Russia curbed output to erode a glut. West Texas Intermediate futures, which as recently as June were down more than 20 percent for the year, now are on track to finish 2017 with a gain of almost 7 percent.

Read more at Bloomberg.

Canada oil producers exhaust options as pipelines, railroads fill

Canadian oil producers are running out of options to get crude to market as pipeline and rail capacity fills up, driving prices to four-year lows and increasing the risk of firms having to sell cheaply until at least late 2019.

This will drive down the profit margins for the oil sands industry, already struggling to compete with cheaper and abundant supplies from U.S. shale. A number of foreign oil majors have left Canada’s oil sands to invest in more profitable U.S. shale plays, selling over $23 billion in Canadian assets this year alone.

Canada’s oil sands output is still growing - but only as projects under construction are completed and smaller expansions come online. Oil firms are not commissioning large new projects because they cannot build them profitably with oil in the $50s a barrel.

The deeper discount on crude means next year could be just as tough for Canadian producers from a price perspective as 2017, even though international crude prices have strengthened.

Read more at Reuters.

Oil industry plans to spend $100 billion in U.S. fields next year

Oil companies expect to spend billions more next year on drilling wells and pumping oil across the United States, a financial boost for firms that sell tools and equipment, farm out crews for rigs and fracking fleets and employ thousands across Texas.

A survey released Wednesday of more than 300 oil companies indicates the industry plans to boost U.S. oil field spending — the lifeblood of local oil field services companies — by 15 percent in 2018 to more than $100 billion.

If oil prices stay high enough to support those investments next year, it would mark the second year in a row in which U.S. drillers led a global spending hike as crude prices recover from the market’s collapse in 2014. Companies lifted U.S. spending 49 percent in 2017, according to the survey by New York investment bank Evercore ISI.

“The pace of overall North American spending through the recovery will moderate in 2018 as companies look to live within cash flow,” James West, an analyst at Evercore, said during a conference call with investors. “But 2018 could be the first in several years that commodity prices surprise to the upside.”

All told, companies that produce oil and gas will spend $385.5 billion around the world, up $24.8 billion, or 7 percent, over 2017. More than half of that increase — $13.3 billion — will be spent in the U.S. Still, global spending will come in about 50 percent below the industry’s 2014 peak.


2017: The year shale went global

The magic number for U.S. shale is 54. The number has nothing to do with breakeven prices, fracture stages per well or other data points linked to shale energy production. Fifty-four is the distance—in feet—needed to make the Port of Corpus Christi truly the shale energy export hub of the world (not that it isn’t already).

As it currently exists, the Port’s main channel is 47 feet deep. At 54 feet, the channel could accommodate Very Large Crude Carriers, the massive vessels capable of moving more than 2 million barrels of liquid crude sourced from places like West Texas, Oklahoma and North Dakota to anywhere in the world.

A VLCC can save a shale oil exporter up to $1 million per voyage and represents the ideal vessel for exports to European import hubs in Italy or China where refineries are in need of light sweet crude.

While the PCC team has already found alternative export vessels and shore-to-ship loading strategies for the export of shale oil, the goal of the community and port authority leaders remains sharply focused on that magic number.

Investments and commitments by both the local and federal governments have already been made to gain the seven additional feet. It is only a matter of time—roughly two years—before VLCC’s can dock, load and ship out with no special processes and the PCC’s goal of sending North American shale energy to the rest of the world on a daily basis will be realized.

Until then, however, the PCC and Corpus team are not the only entities helping to reveal a new energy reality to the entire world: U.S. shale has gone global.

Read more at North American Shale.
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