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Oil and Gas Roundup — June 19

June 19, 2018
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

U.S. federal oil output hits record in 2017, in boost for Trump energy agenda

Oil production from U.S. federal lands and waters rose 7 percent last year to the highest in at least a decade, while natural gas output slipped, according to soon-to-be-published U.S. data - a partial win for the Trump administration as it tries to fire up energy production on public land.

Crude oil output from federal leases averaged about 2.22 million barrels per day during the 2017 fiscal year, the highest since at least 2007, and up from 2.07 million bpd during the 2016 fiscal year, according to the data from the Department of Interior’s Office of Natural Resources Revenue provided to Reuters.

That increase came as total U.S. oil production, including output from private lands, rose 5 percent in the 2017 calendar year to 9.3 million bpd, near the highest since the 1970s, according to the U.S. Energy Information Administration.

The ONRR data also showed federal coal production rose in fiscal 2017 to about 333.5 million tonnes, compared to 296 million the year before, while natural gas output dipped 5 percent to 4.36 billion mcf (thousand cubic feet).

President Donald Trump’s administration has sought to expand energy production on public lands, which stagnated during a multi-year surge in output on private lands, by rolling back federal environmental protections such as methane emissions curbs, expanding lease sales, and trimming royalty rates.

That approach, which has angered environmentalists and land conservationists, was meant in part to help boost energy revenues to federal coffers.

The Interior Department said late last year that 2017 fiscal year disbursements from energy and minerals production on federal and tribal acreage likely totaled $7.11 billion, up nearly $1 billion from fiscal year 2016.

At that time Interior’s ONRR had not yet finalized its production data.

U.S. oil sector limited by port infrastructure

Without improvements to port facilities, the U.S. crude oil market could find itself increasingly landlocked, a market analyst said.

The Organization of Petroleum Exporting Countries in their monthly market report, published last week, said non-OPEC supply in the second half of the year is expected to increase by 2 million barrels per day over last year. Of that, the United States is the main contributor to growth, with an estimated 1.4 million barrels per day.

The United States is now an oil exporter, though infrastructure necessary to move the oil to the market can't keep up with production trends. A report from consultant group IHS Markit found it was the lack of infrastructure, not the lack of spending on exploration and production, that presented a growth challenge for the U.S. energy sector.

Last week, officials at the Port of Corpus Christi said they secured nearly $23 million from the U.S. Army Corps of Engineers to help deepen and widen the waterway. More funding is expected for a project slated for completion by the early part of the next decade.

Sandy Fielden, the director for oil and products research at Morningstar, told UPI that new pipelines from inland shale basins will increase the flow of crude oil to the port by more than 1.5 million bpd by the second half of next year.

Read more at UPI.

U.S. oil pipeline companies, producers seek relief from steel tariffs

Major U.S. energy companies including Plains All American Pipeline (PAA.N), Hess Corp (HES.N) and Kinder Morgan Inc (KMI.N) are among many seeking exemptions from steel-import tariffs as the United States ratchets up trade tensions with exporters including China, Canada and Mexico.

There have been nearly 21,000 requests overall for exclusions submitted to the U.S. Commerce Department since the Trump administration imposed levies this year. Of those, more than 500 petitions involve pipes and related materials.

Initial decisions are expected this month, offering the first clues as to how the administration will balance an agenda favoring oil and gas exports while also supporting the U.S. steel and aluminum industries.

For the energy industry, the potential for relief has taken on added importance after China surprised markets last week by proposing 25 percent levies on about $1 billion a month in U.S. oil imports in retaliation for U.S. tariffs.

The pipeline industry could face higher costs from tariffs as about 77 percent of the steel used in U.S. pipelines is imported, according to a 2017 study for the pipeline industry. Benchmark hot-rolled U.S. steel coil prices are up more than 50 percent from a year ago, according to S&P Global Platts.

Read more at Reuters.

Another push for oil and gas measures on the Colorado ballot

The regulation of oil and gas operations, a consistently contentious issue in Colorado, once again may be fought over in dueling ballot initiatives this November.

Four proposed ballot measures falling on opposite sides of the question could be before voters this fall, providing their sponsors collect enough valid voter signatures by the state's Aug. 6 deadline for petitions.

"This is the most important issue in Colorado environmentally and socially," said Suzanne Spiegel, a campaign organizer for Colorado Rising, a coalition of environmental and community groups that is backing an initiative to require a 2,500-foot setback from homes for new wells. "The state has failed to act."

On the other side of the fence, John Brackney, the representative for a ballot measure to reinforce the state's primacy in regulating oil and gas operations, said, "There have been these ongoing battles for years."

The state government's prime role in setting rules and regulations for oil and gas development - superseding city and county authority - is based on court rulings. Brackney's proposed initiative, which is backed by the oil and gas industry, would embed it in the state's constitution.

"There are some politicians who constantly want to be battling," he said. "This is a step to enshrine current law into our constitution."

Read more.

Venezuela forced to shut down production as operations fall apart

Every week the crisis in Venezuela takes a turn for the worse.

There are now signs that its oil industry is entering a dangerous new phase. Argus Media reports that Venezuela has begun to “proactively shut in oil production to cope with nearly replete terminal storage, further accelerating an output decline and bringing the OPEC country closer to the psychological barrier of 1mn b/d.”

Venezuela’s oil production fell to an average of 1.392 million barrels per day in May, down another 42,000 bpd from a month earlier, according to OPEC’s secondary sources. However, with the crisis in Venezuela spiraling out of control at a horrific pace, the numbers from May might as well be a year ago.

The May numbers don’t reflect the full ramifications of having to deal with inadequate port capacity, after PDVSA diverted operations to Venezuela from its Caribbean island refineries and storage facilities following the attempt by ConocoPhillips to take control of them.

The problem of export capacity has become so acute that PDVSA is demanding customers send ships that can handle ship-to-ship loadings, since there is a backlog of ships trying to load up at the country’s decrepit ports. PDVSA is even considering declaring force majeure on contracts that it will be unable to fulfill. The upshot is that PDVSA might have only 694,000 bpd available for export in June, which is less than half of the 1.495 mb/d that it is contractually obligated to deliver this month.

Read more at Oilprice.
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