O&G news from beyond the Permian’s borders—news that, in some way, touches the Basin.
Reports from EIA, GlobalData, and Platts
EIA
Nov. 16
A recently released report by the U.S. Energy Information Administration finds that planned refinery maintenance is not expected to adversely affect the supply of gasoline, jet fuel, and distillate fuel in the United States through the end of 2016… Barring unusually high unplanned outages, planned outages that extend beyond schedule, or higher-than-expected demand, the supply of gasoline, jet fuel, and distillate fuel is expected to be adequate in all regions through December 2016.
Nov. 8
Short Term Energy Outlook (STEO)
Gasoline/Refined Products:Falling crude oil prices and the regular seasonal decline in gasoline demand are expected to push the national average pump price for gasoline below $2 a gallon in January.
Crude Oil: Although average annual U.S. crude oil production is expected to be slightly below this year’s level in 2017, increased drilling activity in West Texas and southeastern New Mexico, along with rising oil output in the Gulf of Mexico, are expected to partially offset lower production in other areas of the country and make the decline smaller than previously forecast.
Natural Gas:U.S. annual natural gas production is expected to decline in 2016 for the first time in 11 years, but then increase in 2017 as drilling activity picks up and new pipelines connect supplies to demand centers.
Electricity:Natural gas will continue to account for a bigger share of U.S. electricity generation than coal in 2017, but generation from coal is expected to rise modestly next year.
Coal:U.S. coal production is expected to decline this year to its lowest level in nearly four decades, and then rise slightly next year.
Renewables:Wind and solar power generation capacity remain on track to see double-digit growth this year, and continue to increase in 2017.
Nov. 7
U.S. field production of crude oil increased in 2015 for the seventh consecutive year, reaching 9.42 million barrels per day (b/d). This was the highest crude oil production level since 1972, based on final production numbers in EIA’s Petroleum Supply Annual. In 2015, production gains were highest in Texas, the Gulf of Mexico, and North Dakota, as these three regions accounted for 77 percent of the U.S. total increase. Although annual production for 2015 grew, monthly U.S. crude oil production has declined since April 2015. Lower oil prices led to slower development activity, and production fell to 8.74 million b/d in August 2016, the latest month for which survey data is available.
Nov. 4
In 2015 nearly 77 percent of the most prolific U.S. oil wells, or those producing more than 400 barrels of oil equivalent (BOE) per day, were horizontally drilled wells. For about 85,000 moderate rate wells producing in 2015, defined here as more than 15 BOE per day and up to 400 BOE per day, 42 percent were drilled horizontally. Of the approximately 370,000 lowest-rate, marginal oil wells in 2015, also known as stripper wells, only about 2 percent were horizontal wells.
Nov. 2
The consumption of U.S. finished motor gasoline reached a new high of 9.7 million barrels per day (b/d) in June 2016, surpassing the previous one-month high of 9.6 million b/d set in July 2007. U.S. gasoline consumption during summer 2016 (June through August) increased by 169,000 b/d, or 1.8 percent, relative to the same period in 2015. The increase in gasoline consumption was slightly lower than the increase in driving, suggesting that fuel economy improvements slightly mitigated the increase.
Oct. 27
Recent expansion of the global crude oil and petroleum product tanker fleet has resulted in falling or lower tanker rates for much of 2016 that have widened the geographic scope for economically attractive trade at a time when inventories of both crude oil and petroleum products are at high levels… For exporters, lower tanker rates increase the price competiveness of their supplies in more distant markets. This can help to explain some of the motor gasoline imports to the U.S. East Coast in 2016 from relatively distant countries such as South Korea, Malaysia, Taiwan, and Japan. Low tanker rates also aid the competitiveness of U.S. crude oil exports.
GlobalData
Nov. 14
UK to greatly expand North Sea operations
A total of 32 crude and natural gas projects are expected to commence operations in the North Sea region by 2025, with the UK claiming the highest number at 22, followed by Norway and Denmark, with nine and one respectively, according to research and consulting firm GlobalData.
This estimate is down slightly from GlobalData’s previous estimate of 36 new projects. The change in planned project count is mainly a result of the start of production at several projects.
The company’s report states that Statoil ASA will lead the North Sea in terms of operatorship of planned projects, owning the highest number of planned assets in the region with four crude projects. Maersk OIie og Gas A/S and EnQuest PLC jointly occupy second place, with three planned projects each.
In terms of gas production volumes, key planned projects in the North Sea are expected to contribute 869 thousand barrels of oil per day (mbd) to global crude production and 996.8 million cubic feet per day (mmcfd) to global gas production by 2025. Among companies, Statoil ASA is expected to lead planned oil production.
In the North Sea region, key planned projects are expected to come online with a total capital expenditure (capex) of $78.2 billion (USD), $43.1 billion of which is expected to be spent between 2016 and 2025. Norway will lead the North Sea with expected capex of $23.8 billion during the forecast period, of which close to $13.2 billion will be spent on the Johan Sverdrup project. Statoil ASA will have the highest capex spending among all the companies in the North Sea region and is expected to spend a total of $11.3 billion on the key planned projects over the next 10 years.
Major undeveloped discoveries in the North Sea region include Bagpuss in the Central North Sea basin, Hejre in the Central Graben, and Clark in the Southern North Sea basin.
Nov. 10
GlobalData: Trump Win May Bring
Significant Policy Effects
Will Scargill, GlobalData’s senior oil and gas analyst covering upstream fiscal and regulatory regimes says:
Donald Trump’s election as the 45th President of the United States may have significant effects for the global oil and gas industry. The policy platform laid out during the campaign on both domestic issues and foreign affairs includes a number of elements with notable impacts on regulation, tax and investment opportunities in the sector. The Republican Party’s retention of its majority in both the House of Representatives and the Senate, should facilitate legislation to progress the new administration’s initiatives. The lack of detail of Trump’s platform and absence of a track record in public office cast uncertainty over the policies that will be enacted and the effects they will have, but the tone of the campaign suggests a priority on domestic energy policy over international.
Domestic energy policy statements during the election campaign suggest a positive outlook for the oil and gas sector. This is supported by reports that his adviser Harold Hamm, CEO of Continental Resources, is in the running for Energy Secretary. Trump’s energy plan sets out support for the shale industry and open leasing of federal lands and offshore areas for upstream operations. During the campaign he also noted opposition to environmental regulation including the Paris climate agreement adopted at the COP21 summit, suggesting that the industry will face a reduced regulatory burden under his presidency.
The expansion of offshore lease sales would likely be supported by the Republican-controlled Congress, particularly for Alaska’s Outer Continental Shelf (OCS) and perhaps also for the frontier Atlantic OCS. The Obama administration had initially proposed a lease sale in the Atlantic OCS in the 2017-2022 program but later removed it due to environmental concerns. However, Trump’s support for the shale industry may be more difficult to realize from the Oval Office. He will have control over some regulations such as wastewater and emissions standards through the Environmental Protection Agency, but the majority of regulatory barriers have been imposed at local or state level, which are currently decoupled from Federal involvement.
On wider energy markets, Trump has indicated that he would give the go-ahead to the Keystone XL pipeline, which was vetoed in 2015 by President Obama, if the operator reapplies for approval. This could improve supply side economics on heavy crude for U.S. refiners by increasing supply capacity from Alberta, where production is expected to increase by approximately 500,000 barrels per day by 2020. This also suggests strong prospects for the North Dakota Access pipeline, which provides additional lower-cost takeaway capacity from the Bakken, for which federal agencies have requested a construction pause.
Financial disclosures have shown that Trump has invested in the operator, Energy Transfer Partners, and that its CEO contributed to his campaign, though it is customary for sitting presidents’ assets to be held in a blind trust. Although the prospect of infrastructure projects moving forward is positive for the oil and gas sector, the inherent contradictions between his support for business and his protectionist trade position may untangle as policy is realized. A focus on U.S. energy independence and opposition to broader trade deals could create direct or indirect hurdles for the industry in the U.S. and abroad.
For a full version of this analysis, please visit the GlobalData Energy website.
Platts
OPEC October Output Surged to New Record
Oil production from the Organization of the Petroleum Exporting Countries rose to another record, at 33.54 million barrels per day (b/d) in October, according to survey of OPEC and oil industry officials by S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets. Recoveries in strife-torn Libya and Nigeria significantly boosted the organization’s output and more than offset field maintenance in Angola.
- Iran, Iraq output climbs higher
- Libya, Nigeria add 190,000 b/d each in October
- Dalia maintenance dents Angolan output
The gains, which total 300,000 b/d from September and mark the fifth consecutive month of increased production, further complicate the path for OPEC to freeze production between 32.5 million to 33 million b/d in order to support prices and accelerate the drawdown of inventories.
“OPEC’s freeze math has gotten more complicated, as its countries keep pumping more,” said Herman Wang, senior writer for S&P Global Platts.
“The pressure will be on to deliver a deal that the market views as credible [prior to OPEC’s self-imposed Nov. 30 deadline]. Progress towards that goal has been slow, and a fifth straight month of record-high production won’t help.”
Libya and Nigeria are exempt from the freeze, according to the plan announced in Algiers five weeks ago, but increases in Iraq and the expected return of Angolan production once the Dalia field maintenance is complete will make it harder.
OPEC kingpin Saudi Arabia, which is expected to bear the brunt of any cuts that the producer group implements, saw its output decline to 10.53 million b/d for October, with reduced crude consumption for power generation, as the peak summer air conditioning season ended.
IRAQ, IRAN INCH HIGHER
Iraq, the organization’s second largest producer, had output of 4.56 million b/d in the month, on increased exports.
Iraqi oil exports in October were boosted by higher loadings from the southern terminals along with a rise in pipeline exports from the Turkish port of Ceyhan.
The country, which has disputed secondary source estimates—including from Platts—used by OPEC to determine each country’s monthly output, invited several media organizations to Baghdad last month to detail its field-by-field production.
During a press briefing, Iraqi oil officials were adamant that Iraq will “not back down” and will continue to produce at current levels regardless of whatever freeze agreement is reached. Its official production figure of 4.774 million b/d for September is higher than independent estimates, as it appears to be double-counting some production in the semi-autonomous Kurdistan Regional Government. Iraqi officials have complained that the lower estimates could put the country at a disadvantage when OPEC decides the quotas under the freeze.
Iran’s production ticked up slightly in October to 3.67 million b/d, according to the Platts survey, as exports reached a post-sanctions high on increased interest from Europe on top of strong demand in Asia.
The country, which has also complained about secondary source estimates of its output being too low, has said it intends to regain its pre-sanctions production level of about 4 million b/d before it agrees to rein in under any freeze plan. But analysts have said Iran is unlikely to be able to raise its production much further without significant investment.
NIGERIA, LIBYA RECOVERING
Nigeria, which resumed loadings of key export grades Qua Iboe and Forcados in late September, saw its production recover to 1.68 million b/d in October, as exports of all of its key exports grades have resumed.
But the oil-rich Niger Delta remains unstable and sensitive, with chances of more militant attacks high, which means production is still at risk.
Forcados production, which only resumed a month ago, is expected to be affected this month after militants bombed the Trans-Forcados pipeline on Wednesday.
Libya’s production rose to an average of 530,000 b/d in October, as it continues to ramp up after exports from some if its eastern ports have resumed.
Libya’s output has more than doubled since August, as production recovered sharply following news in September that Libya’s state-owned National Oil Corporation (NOC) had lifted force majeure at the 360,000 b/d Es Sider terminal and also the 220,000 b/d Ras Lanuf and 70,000 b/d Zueitina terminals.
NOC chairman Mustafa Sanalla told S&P Global Platts on Tuesday that Libyan oil production was now 585,000 b/d, and also that the Es Sider terminal, which has been down since December 2014, was ready to begin loadings “within days.”
Production in fields operated by the Waha Oil Company, Harouge Oil Operations and Arabian Gulf Oil Company have also increased in the past few months.
Angola production declined to 1.47 million b/d, as the key Dalia field which produces around 200,000-250,000 b/d was down for maintenance the entire month. Output is expected to come back online this month.
Final details of OPEC’s freeze—including individual country allocations and which production estimates are used to verify compliance—were set to be decided by the next organizational meeting Nov. 30, in Vienna.
The S&P Global Platts estimates are obtained by surveying OPEC and oil industry officials, traders and analysts, as well as reviewing proprietary shipping data.
OPEC ministers, on Sept. 28, agreed to a preliminary deal to freeze production between 32.5 million and 33 million b/d.
The organization had been operating without any official output ceiling since Dec. 4, 2015 when it scrapped the 30 million b/d ceiling that it had in place since January 2012.
Gabon officially rejoined OPEC on July 1 while Indonesia reactivated its membership of OPEC at the December 2015 meeting. The estimate for Iraq includes volumes from semi-autonomous Iraqi Kurdistan.
Additional information on oil, energy, and related information may be found on the S&P Global Platts website.