Alaska’s Balash in the Big Easy; Usibelli Turns 75

Usibelli Coal Mine celebrates 75 years in Healy
Alaska Public Media, Dan Bross, July 17, 2018

Usibelli Coal Mine is celebrating its 75th anniversary. The operation in Healy started by Emil Usibelli in 1943, run by his son and now by his grandson, is Alaska’s only operating coal mine. Joe Usibelli has run the company for the last three decades and shared the story of the family coal mine in a recent presentation to the Fairbanks Chamber of Commerce. Usibelli says his family came to the US over a century ago to seek a better life, just like today’s immigrants. ”My great-grandfather came over in 1907, my grandfather came over in 1909,” Usibelli said. “They came over from Italy, and there’s parallels in the world right now.”

AGDC will stick with Nikiski as prefered choice for LNG Project
Mat-Su Valley Frontiersman, Tim Bradner, July 17, 2018

Alaska LNG has cited all its reasons why Port MacKenzie won’t work as a site for a large liquefied natural gas plant. In a filing with the U.S. Energy Regulatory Commission, the state gas corporation, Alaska Gasline Development Corp., said issues with navigation, tides, beluga whales and other problems make the MatSu port on Knik Arm an unworkable choice for a marine loading terminal for the large LNG plant that is planned.

Our Take: How many times will AGDC be asked to defend its choice of Nikiski as the site for their LNG plant? AKHEADLAMP hopes this is the end of the discussion.

Alaska megaproject hits financial headwinds as elections loom
E&E News, Margaret Kriz Hobson, July 18, 2018

The blueprint to finance and build a $44 billion natural gas export project is coming under fire at a time when people here are gearing up for a governor’s race that could again throw the future of the Alaska liquefied natural gas project into question.

Our Take: We agree. This is shaping up to be a key issue in the gubernatorial race. Does the state allow market dynamics to guide the project or does the state force a project? As Senator Giessel noted, most legislators are supportive of the project, “but not at any cost.”

Texas to pass Iraq and Iran as world’s No. 3 oil powerhouse
CNN Money, Matt Egan, July 17, 2018

Plunging drilling costs have sparked an explosion of production out of the Permian Basin of West Texas. In fact, Texas is pumping so much oil that it will surpass OPEC members Iran and Iraq next year, HSBC predicted in a recent report.   If it were a country, Texas would be the world’s No. 3 oil producer, behind only Russia and Saudi Arabia, the investment bank said.

Our Take: Texas’ activity led to an additional $2 billion + for the Texas State Legislature.

America’s Oil And Gas Boom Is Spreading Through The Country
Forbes, David Blackmon, July 17, 2018

The Permian Basin, home to more than 40 percent of all active U.S. drilling rigs, continues to receive most of the credit for the rapid growth of U.S. oil production; meanwhile, the Marcellus Shale receives the lion’s share of credit for ongoing record-setting levels of domestic natural gas production. But a series of recent information releases demonstrate that the oil and gas boom is spreading into other plays across the nation.

Our Take: ConocoPhillips recent announcement about increased activity gives AKHEADLAMP hope that the oil and gas boom doesn’t bypass Alaska. Reduction in operating costs AND a stable fiscal climate contributed to their decisions. Elections matter – AKHEADLAMP hopes Alaskans will elect leaders who appreciate their largest business partners and will maintain a business climate that attracts more investment.

Parnell backs Dunleavy over Treadwell for governor
KTVA, Steve Quinn, July 17, 2018

Former Alaska governor Sean Parnell has endorsed Mike Dunleavy over Mead Treadwell, who served as Parnell’s lieutenant governor during his first full term. Dunleavy announced the surprise show of support on his campaign Facebook page Tuesday evening. Dunleavy spokesman Brett Huber declined to comment further on the endorsement beyond referring to the page, on which Dunleavy said, “I’m honored to have Sean Parnell’s support.”

 

From today’s Washington Examiner, Daily on Energy:

TRUMP APPOINTEES ADDRESS CONFERENCE OF CLIMATE SKEPTICS: The Trump administration is appearing in force at this year’s annual conference of the Heartland Institute, a group known for its questioning of climate science.

The group released the list of keynote speakers in an agenda Tuesday night for the Heartland Institute’s America First Energy Conference.

Interior Department: Joe Balash, the Interior Department assistant secretary for Land and Minerals Management, is set to deliver the closing keynote speech on August 7 at the Hilton New Orleans Riverside hotel.

Energy Department: Another keynote speech will be given by Douglas Matheney, special advisor to Energy Secretary Rick Perry. Matheney advises on fossil fuels policy.

The agenda: The conference will examine President Trump’s energy agenda, “which is focused on making the United States a global energy power,” according to the group’s agenda. “The conference will examine what has changed, how that has affected America’s economy, and what’s next.”

Our Take: Great to see Alaska’s own Joe Balash as the keynote at this conference!

Headlamp: Russian LNG lands in Boston. Alaska’s draft Climate Change Policy is light on detail.

June 4th was the deadline for comments on the draft Climate Change Policy developed by Governor Walker’s Climate Action Leadership Team (CALT). Response, research, mitigation and adaptation are the four categories covered in the policy.

Take a look at what some of Alaska’s business partners are already doing:

Advancing the energy transition
BP

Reducing, improving, creating. We’re reducing emissions in our own operations; we’re improving our products to help customers lower their emissions; and we’re creating low carbon businesses.

2017 Sustainability Report
ConocoPhillips

We are committed to providing the natural gas and oil necessary to support global economic development while addressing concerns related to greenhouse gas (GHG) emissions. Creating secure and affordable energy, while achieving the goals of the 2015 Paris Agreement will require collaboration between the natural gas and oil industry and governments, citizens and businesses.

In their comments to the team, the Alaska Oil and Gas Association (AOGA) pointed out:

  • The draft policy is an early work-in-progress and not ready for detailed public comments
  • The policy should be informed by robust scientific and economic analyses
  • A carbon-pricing mechanism in Alaska could result in negative unintended consequences to Alaska’s economy and environment

Our Take: The draft policy is lacking in specifics. Setting goals and targets with no detail on how they will be achieved doesn’t lead to good policy. There is much research and work to be done before a policy can be drafted and put out for public comment. Pro tip: look at what is already being done by our partners.

 

Russian Gas Addiction Problem No Problem for Those Willing to Address It
Natural Gas Now, Tom Shepstone, June 6, 2018

Russian gas addiction is a very real problem for Europe (and soon Boston?) but the solution is no mystery. It’s fracking here, LNG and development of UK gas. CNN Money has a fascinating story about Russian gas addiction in Europe. It’s a problem that’s come to our shores as well with Russian LNG entering Boston this past winter. What’s most interesting about the CNN Money article is that it ignores the obvious root of the addiction problem and the obvious solution. The problem is failure to develop natural gas resources in Europe (and pipelines to Boston). The solution is a combination of more natural gas development here and in the UK, for instance, and LNG.

Our Take: When political correctness is chosen over practical solutions… As the author notes, there is enormous potential in the UK’s Bowland Shale. “It is, in a word, humongous.” The best solution to breaking the Russian gas addiction is to develop your own resources – but political correctness demands that you choose to reduce your reliance on gas and move towards less reliable, more expensive renewable energy. Governor Walker’s climate action leadership team – take note.

 

Donlin Gold Advances In Permit Process
KYUK Public Media, Krysti Shallenberger, June 5, 2018

Last week, Donlin Gold received a state permit that regulates wastewater discharge. The mine is located in the Yukon-Kuskokwim region and is poised to be one of the biggest gold mines in the world. The company expects to obtain at least a dozen state and federal permits this year, says Donlin spokesperson Kurt Parkan. Those includes a combined record of decision from the Bureau of Land Management and the Army Corps of Engineers. The Army Corps spearheaded the Environmental Impact Statement, a study that calculates all the impacts to the environment from the mine. The Department of Transportation is set to issue a record of decision for the mine this year as well.

Our Take: For those who believe that our permitting system isn’t stringent – read on. According to Parkan “this is only a drop in the bucket compared to the potentially more than 100 permits that the Donlin Gold project needs to begin operating.” Parkan also notes “We’ve been saying about 100 general permits to operate, but in fact it’s a lot more than that because of the permits we need to operate the pipeline.”

Giving thanks to those who gave the ultimate sacrifice 74 years ago today.

 

 

 

 

 

 

Headlamp Extra Edition: Fairbanks Daily News Miner omits “The rest of the story”

Many media outlets omitted key facts about the BLM scoping meeting in Fairbanks last night for their notice of intent to prepare an EIS for opening ANWR.

The Fairbanks Daily News Miner (FDNM) headline “Locals speak out against ANWR drilling” is the most misleading description we found, so far. (The newspaper only covered the public portion, avoiding the presented and invited testimony that was balanced)

What the FDNM and other outlets failed to tell you?

  • Doors opened at 3:00pm for an open house and to hand out comment cards
  • Opponents to the lease sale arrived early by bus, took 50 comment cards, left, and returned at 6:30pm for the public comment period
  • Only one person who supported ANWR could testify (#51) since the first 50 comment cards had been taken by opponents and time ran out
  • The invited testimony was very balanced with the Mayor of Wainright and three different labor unions – Teamsters, Laborers, IBEW- testifying in support

So now you know the rest of the story. Here is a different perspective from someone who attended the entire meeting:

“As a life-long Alaskan raised in Fairbanks, I flew up to the “Golden Heart City” to present personal testimony supporting proposed lease sales on the coastal plain of ANWR. The hearing was painful and did not represent the view of many Alaskans. Hundreds attended the packed hearing at the Carlson Center and we were outnumbered 50-1 in testimony. I arrived 20 minutes after the doors opened at 3:00 p.m., more than three hours before public testimony was to begin. I signed up to testify, but learned I was number 52 on the list of those wishing to speak. Unfortunately, I did not get an opportunity to testify as time ran out.

It’s Anchorage’s turn tonight, expect more of the same: a coordinated effort by opponents to get there early while others are at work, take enough comment cards to prevent others from testifying and media coverage that focuses on the opposition while ignoring the supporters.

Headlamp – FERC WON’T CONSIDER CLIMATE CHANGE EFFECTS IN PIPELINE REVIEWS

US and China agree on trade as Alaska’s governor meets Chinese vice premier
KTUU, Leroy Polk, May 21, 2018

Trade tensions between U.S. and China eased considerably Monday as officials with both countries signaled “significant progress” towards an agreement on trade matters. Governor Walker and others met with Vice Premier Liu He in Beijing as part of the Alaska trade mission to China. Walker extended thanks to both Pres. Donald Trump and Chinese Pres. Xi Jinping, for “working together to improve trade relations between our countries.” According to Walker, the news from Washington proved to be a big boon for the Alaska mission, stating, “The timing of our trade mission could not be better” and claimed “Alaska LNG Project is key to reducing the trade imbalance between the U.S. and China.”

Thank Goodness For U.S. Natural Gas Exports
Forbes, Jude Clemente, May 20, 2018

A recent article caught my attention and hopefully yours, “Trump’s Iran Move May Kick Worst U.S. Gas Market While It’s Down.” There is indeed logic to the simplified idea: rising oil prices mean rising rig counts and rising oil production, which means rising associated natural gas production and thus falling natural gas prices.

Our Take: Driven by the Trump Administration’s decision to pull out of the Iran nuclear deal, rising oil prices mean two important things for our LNG, which is surely a larger baseload demand market for us than piped gas to Mexico. First, long-term LNG supply contracts linked to oil prices will get more expensive, upping the competitiveness of our non-oil indexed LNG. Second, U.S. gas production, especially in Texas, should grow as higher oil prices mean more drilling.

Murkowski Welcomes Final List of Critical Minerals
Federal Register, Interior Department, May 18,2018

“I thank Secretary Zinke for his efforts to develop this list of minerals, highlighting our most critical vulnerabilities,” Murkowski said. “These minerals are needed for energy, healthcare, manufacturing, defense, agriculture, and other technologies, and we must now take real steps to secure a reliable, long-term domestic supply.”

Our Take: The estimated value of rare-earth compounds and metals imported by the United States in 2017 was $150 million, a significant increase from $118 million imported in 2016. The growing demand is driven by the increased use of REEs in today’s high-tech devices. China currently dominates the supply side of the equation. What an opportunity for Alaska! We have large areas that either host known deposits of rare earth elements or are highly prospective for these increasingly important ingredients to modern devises.

April Was The 31st Consecutive Month Alaska Has Lost Jobs
KSRM, Jennifer Williams, May 18, 2018

The State Labor Department released the preliminary estimates showing April employment was down by 1,200, or 0.4 percent compared to April 2017. April was the 31st consecutive month Alaska has lost jobs, making this a longer downturn than in the 1980s, when a deep state recession led to 25 straight months of job loss. The construction sector held steady in April, with no further job losses. Oil and Gas lost another 500 jobs, while the retail sector loss 600 jobs with the closure of some major national chains.

Our Take: Alaska should focus on creating a bigger pie for everyone – not fretting over who gets the few good jobs we have. As highlighted in the Forbes LNG article and the Critical Minerals list – the opportunity for Alaska is great – if we make good decisions and create a stable investment climate for companies.


From Today’s Washington Examiner, Daily on Energy:

FERC WON’T CONSIDER CLIMATE CHANGE EFFECTS IN PIPELINE REVIEWS

A divided Federal Energy Regulatory Commission said Friday it won’t make broad evaluations about the impact of climate change when it decides whether to approve interstate pipelines. Limited by law: FERC Chairman Kevin McIntyre and fellow Republicans Robert Powelson and Neil Chatterjee wrote in the majority opinion that the National Environmental Policy Act does not require the commission to consider the upstream and downstream greenhouse gas emission impact in pipeline reviews.

Headlamp – China seeks to dominate the world through infrastructure investment.

House to Probe China Threat
The Washington Free Beacon, Bill Gertz, May 16, 2018

The House Permanent Select Committee on Intelligence will begin a major inquiry into the threat from China this week in a shift from its past attention on Russian subversion. The committee will hold a series of hearings, both open and in secret, examining threats posed by China in the military sphere, economic and industrial realm, technology arena, and Beijing’s significant influence operations against the United States, said committee aides.

Our Take: Our potential partners are being investigated for the “many challenges they pose to our national security through its aggressive territorial claims, unfair trade policies, espionage and cyber-attacks…”

IEA cuts outlook for global oil demand as crude nears $80 a barrel
Reuters, Reuters Staff, May 16, 2018

Global demand for oil is likely to moderate this year, as the price of crude nears $80 a barrel and many key importing nations no longer offer consumers generous fuel subsidies, the International Energy Agency said on Wednesday. The Paris-based IEA cut its forecast for global demand growth to 1.4 million barrels per day for 2018, from a previous estimate of 1.5 million bpd.

Legislative report misleads on ConocoPhillips profits
The Anchorage Daily News, Roger Marks, May 16, 2018

The Anchorage Daily News reported on May 6, about a report by Legislative Research Services comparing ConocoPhillips’ Alaska profits with profits elsewhere. Suppose you had a company that produced diamonds and gravel, and in some places, you produced more of one and less of another. Diamonds are, of course, much more valuable than gravel.

Our Take: We aren’t surprised it’s what they do – at the urging of Senator Wielechowski who has had this explained to him too many times to count -but continues to mislead the public.

LNG Edge Q1 2018 Trade Flow Report
ICIS, May 2018

China continued to surprise the market in the first quarter 2018, with a dramatic 65% year-on-year increase in imports as the country switched heating systems from coal to gas to improve air quality. The rate of increase accelerated from the previous quarter, but this is unlikely to be maintained during summer. The country has relatively low storage capacity so will have to rely more on importing at time-of-need rather than building up stocks in summer for the winter ahead.

Our Take: The LNG Edge: Q1 2018 Trade Flow Report draws on the latest voyage data from market-intelligence platform LNG Edge to analyze imports and exports in the global LNG market, bringing you market insights ahead of full data publication from customs authorities.

Headlamp – Higher oil prices don’t relieve the legislature of their duty; Stand for Salmon deception.

Why Oil Prices Are Likely To Go Higher
Oil Price.com, Nick Cunningham, May 7, 2018

WTI just hit $70 per barrel for the first time since late 2014. Prices continue to edge higher, pushed along by strong demand and falling inventories. But it is the geopolitical narrative that has really taken hold as of late, with the danger of supply outages looming in the next few weeks. This is the fateful week in which the Trump administration has to decide on what to do with the Iran nuclear deal. All signs point to him attempting to terminate the agreement. The return of sanctions could knock off as much as 400,000 to 500,000 bpd from Iranian supply, a huge volume that would put the oil market in danger of a shortage.

Our Take: A continued increase in the price of oil is obviously good for Alaska, however, the Alaska state legislature should still focus on a long-range fiscal plan that is less dependent on oil tax revenue.

 

GUEST COMMENTARY: The deception of Stand for Salmon
Alaska Journal of Commerce, Curtis Thayer, May 7, 2018

The Alaska Chamber has long been an outspoken voice for pro-business policies that grow our economy and create economic opportunities for Alaskans. For several years, especially during the recent economic slump, we’ve advocated for a state fiscal plan that limits government spending and supports private sector growth. Our annual public opinion survey found that 60 percent of Alaskans rate the state’s economy as poor. It’s a shocking number, and an indicator of how pessimistic Alaskans are about their ability to work and make a living here. Alaska already has the unwanted distinction of having the highest unemployment rate in the country. Getting our economy and our state back on track requires some hard decisions and a vision for the future, but, in the short term, we have some serious obstacles right before us.

Our Take: The threat to Alaska’s economy is real, but this misguided ballot initiative also threatens individual Alaskans and their private property rights.

 

Headlamp – Marathon becomes top U.S. refiner with Andeavor buyout. Trump keeping steel secrets.

Marathon becomes top U.S. refiner with Andeavor buyout. Marathon Petroleum Corp (MPC.N) agreed to buy rival Andeavor (ANDV.N) for more than $23 billion in the largest-ever tie-up between U.S. refiners, giving the combined company a nationwide presence and increased access to growing export markets. The deal gives Marathon more exposure to the booming U.S. shale oil sector, thanks to Andeavor’s existing logistics and terminal operations in Texas and North Dakota shale regions. Rising output from west Texas’s Permian has driven U.S. crude production to an all-time record above 10.5 million barrels per day (bpd). “The combination of the two companies allows us to go after and find ways to create a bigger presence in the Permian,” said Marathon Chief Executive Gary Heminger, who will lead the combined companies. The company would leapfrog Valero Energy Corp (VLO.N) to become the largest U.S. refiner, with the capacity to process 3.1 million bpd of crude oil into gasoline, diesel and other fuels. The deal also gives Marathon a line into fast-growing Mexican fuel markets. Andeavor is expanding its network of filling stations in the country. Mexico’s dilapidated refineries cannot meet the growing population’s demand for gasoline and other products. U.S. fuel exports to Mexico had risen to 1.4 million bpd as of January, up more than 85 percent from two years ago.

ASTAR is born – on the North Slope. Locals had the opportunity to hit a new set of trails this winter. Instead of snowmachines, they brought trucks. “It was definitely an adventure not to be taken lightly, but if you travel with the borough you get with the safe traveler program and you will be taken home,” said James Roy Ahmaogak, who has, so far, driven the snow roads twice this season. The roughly 300 miles of hard-packed snow roads were constructed under the Community Winter Access Trails (CWAT) project, headed by the North Slope Borough. The initial idea for the project was to find a way of connecting Utqiaġvik, Atqasuk, Wainwright, Nuiqsut and Anaktuvuk Pass with the haul road by way of Prudhoe Bay. It began, in part, to test the viability of a road system on the Slope concurrently with planning the Arctic Strategic Transportation and Resources (ASTAR) project. That project, if constructed, would bring hundreds of miles of year-round gravel roads to the Slope to ease industry access to drilling and processing sites and community access to goods and services.

Taking stock of success at ConocoPhillips. The recovery is now underway at ConocoPhillips (NYSE:COP). Management crowed about the recent successes in Alaska. More positive announcements on the way could keep the stock relatively high the rest of the year. Later this year some of the first production should begin from some of the recent Alaska activity. Major contributions from the state to production growth should happen a little more into the future. The stock has risen to respond to improved industry conditions and successes. It may in fact be getting a little bit ahead of a current valuation. But the stock repurchases and the latest dividend increase could keep the current stock price around until those major production increases arrive.

Trump keeps steel tariff plans a secret. President Donald Trump hasn’t decided whether to extend relief for allied nations from U.S. steel and aluminum tariffs, creating uncertainty in global metals markets with temporary exemptions set to expire in less than 24 hours. “The president has not made any decision yet,” Treasury Secretary Steven Mnuchin told Fox Business Network in an interview that aired Monday, when asked about extending exemptions to trading partners. “We’ve been having lots of discussions internally, we’ve been having lots of discussions with our counterparts,” he said, adding: “We’re addressing these issues real time.”

ExxonMobil (XOM.N) has agreed to acquire Indonesian motorcycle lubricant maker PT Federal Karyatama (FKT) in a $436 million transaction, FKT’s parent PT Mitra Pinasthika Mustika (MPMX.JK) said on Monday. ExxonMobil plans to buy 100 percent of FKT, including the Federal Oil brand, and expects to complete the deal in the third quarter of 2018, ExxonMobil said in a statement. bit.ly/2r9g7j8 ExxonMobil said the acquisition of FKT, one of Indonesia’s largest manufacturers and marketers of motorcycle lubricants, will accelerate its growth in the market. “This acquisition, combined with our existing premium Mobil lubricant brand, will help us continue to grow and better serve customers in Indonesia,” said Bryan Milton, president of ExxonMobil Fuels & Lubricants Company. Mitra Pinasthika said in a Jakarta stock exchange filing that the transaction was worth $436 million, but noted that it still needed shareholder approval.

 

First Reads:

Marathon to become top U.S. refiner with $23 billion Andeavor buy
Reuters, John Benny, April 29, 2018

On the North Slope, snow roads constructed with an eye toward a future Arctic road system
Anchorage Daily News, Shady Grove Oliver, April 29, 2018

ConocoPhillips: To Alaska And Beyond
Seeking Alpha, April 30, 2018

Trump Keeps Allies Guessing on Steel Tariffs Ahead of Deadline
Bloomberg Politics, Andrew Mayeda, April 30, 2018

ExxonMobil to buy Indonesian lubricant firm Federal in $436 million deal
Reuters, Reuters Staff, April 30, 2018

Headlamp – Enemy #1 for Alaska – Cantwell ignores record of responsible drilling in Arctic.

Enemy #1 for Alaska – Cantwell ignores record of responsible drilling in Arctic. Democrats in Congress are sounding the alarm about the Interior Department’s efforts to hold an offshore oil lease sale in the Beaufort Sea next year. Sens. Maria Cantwell of Washington and Jeff Merkley of Oregon, as well as Reps. Raul Grijalva of Arizona and Jared Huffman of California, wrote a letter to Interior Sec. Ryan Zinke Tuesday, urging the department to cease plans to schedule leases in the Beaufort in 2019. Their letter says drilling there would be risky and unpopular and that there’s no effective way to clean up if a spill occurs in Arctic waters. The Bureau of Ocean Energy Management last month issued a formal call for information on which parts of the Beaufort should be open to drilling and which areas are sensitive or important to subsistence activities. That comment period ends Monday. The government has received more than 1,200 comments so far, many of them opposed to Arctic offshore drilling in general. Drilling advocates say the outer continental shelf can be safely explored and that hundreds of wells have already been drilled in Arctic waters since the 1960s.

Strong performance for oilfield service sector predicted. Rystad Energy expects a strong performance from the oilfield service sector based on the first-quarter reports of the top three players in this field, which featured an average increase in income from oilfield services sales of 21 percent. Schlumberger, Halliburton and GE Baker Hughes also reported combined revenue growth of 15 percent, in tune with Rystad’s expectations for the period. The consultancy expects the rest of the year to be strong as well, with improvement in oilfield equipment sales slower but present. “With the great surge of activity in short cycle businesses – like U.S. shale and the slower-to-respond equipment market, typically in offshore – this will also be directionally in line with what we expect the trend to be in 2018 as a whole,” said Rystad’s vice president of oilfield service research, Audun Martinsen. Rystad’s researchers are particularly upbeat about oilfield service providers with a presence in the U.S. shale patch for obvious reasons, and despite some delays in frac sand deliveries over the first quarter of the year. In fact, Rystad’s VP said, frac jobs are growing in number, hitting a high of 44 per day in February.

“Even if you’re not in oil and gas, you’re in oil and gas.” A hundred-foot oil rig pushes up amid acres of irrigated cotton fields and long dirt roads on this oil patch between Midland and Odessa, the two main towns in the Permian Basin in West Texas. Both have about 150,000 people. Tommy Taylor, director of oil and gas development at Fasken Oil and Ranch, seems to know most of them. Taylor has worked at Fasken for 33 years. He jokes that the oil business isn’t just on his resume, it’s in his blood. “My dad was a petroleum engineer, my oldest brother is a petroleum engineer, my middle brother’s a mechanical engineer,” Taylor said as he scaled the oil rig his team. “My sister’s a schoolteacher, but she married a petroleum engineer. You know, it’s just kind of in the family.” Oil prices are hovering close to a three-year high, above $68 a barrel. Much of that oil comes from the United States, which will overtake Russia as the world’s top oil producer by year’s end, according to the International Energy Agency. That trend is thanks, in large part, to production in the Permian Basin, where output has tripled in the past three years. The basin towns of Midland and Odessa depend heavily on the oil and gas industry. For families here, the price of oil makes the difference between hard times and high times.   About six months ago, oil started creeping above $50 a barrel. Eighteen months earlier, it had been about half that. Taylor said Fasken went down to operating just one rig and stopped hiring. The drillers and roughnecks drifted away and found jobs elsewhere. But when oil prices fall, there are repercussions for those outside the oil industry, too. As they say in these parts, “even if you’re not in oil and gas, you’re in oil and gas.”

Shale-setting records in the Permian. The Permian shale play is all about setting records. Now, the region may even become the world’s largest oil patch over the next decade. Output in the basin is forecast to reach 3.18 million barrels a day in May, according to the Energy Information Administration. That’s the highest since the agency began compiling records in 2007. By 2023, the basin may produce 4 million barrels a day, according to the International Energy Agency. The Ghawar field in Saudi Arabia is currently the world’s biggest oil field, with capacity of 5.8 million barrels a day, according to a 2017 EIA report. This is all thanks to the size of the oil deposits, coupled with increased technology and efficiencies. “The technology is the biggest driver,” said Rob Thummel, managing director at Tortoise, which handles $16 billion in energy-related assets. “The basin in and of itself could end up being the largest oil field in the world, even bigger than Ghawar in Saudi Arabia.”

Equipment shortage for shale wells. The intensity of oilfield equipment used in hydraulic fracturing of shale wells is wearing out parts and machinery faster than ever today and should keep the pressure pumping market tight for the rest of 2018, Halliburton’s top executive said Monday. Even as companies move to bulk up the North American pressure pumping fleet used in well completions, a large chunk of the reported additions are believed to simply replace degraded equipment, rather than expanding the overall size of the fracking fleet capacity, Jeff Miller, CEO of the giant oilfield services and equipment provider, said during the company’s first-quarter 2018 earnings conference call. Roughly 50% of additional horsepower announced does not translate into new crews, said Miller, who projected a market shortage of about 1 million to 1.5 million horsepower. “Despite incremental horsepower coming into the market, I believe this undersupply will persist as wear and tear continues to degrade equipment,” he said. “We’ve analyzed the difference between horsepower additions announced and the related number of crews produced. It means about half the newbuild equipment is being used to replace or add to crews already in the field.”

EPA working on self-reporting policy. The Environmental Protection Agency’s (EPA) office of enforcement will announce a new policy aimed specifically at helping polluters in the oil and gas industry, The Hill has learned. The new policy, which has not been finalized, will focus on offering more flexibility to oil and gas companies that choose to self-audit their emissions and report any failures to meet EPA’s regulations, according to an EPA employee with knowledge of the plan. EPA’s head of the Office of Enforcement and Compliance Assurance (OECA), Susan Bodine, has plans to announce the policy Friday at the EarthX Law and Policy symposium in Dallas. The announcement is timed with Earth Day, which is Sunday. Bodine will be speaking on a panel focused on sustainable and ethical corporate decision-making.

 

First Reads:

Rystad Upbeat About Oilfield Service Providers
Oil Price.com, Irina Slav, April 24, 2018

Midland, Texas, is booming as oil prices rise
Marketplace, Andy Uhler, April 24, 2018

Permian Basin Is Growing Into the Largest Oil Patch in the World
Bloomberg Markets, Jessica Summers and Sheela Tobben, April 24, 2018

Offshore lease schedule for Beaufort draws flak
Alaska Public Media, Liz Ruskin, April 24, 2018

‘Frac’ intensity in shale wells wears out equipment faster: Halliburton
S&P Global Platts, Starr Spencer, April 23, 2018

EPA to unveil policy aimed at avoiding legal action over oil and gas polluters: source
The Hill, Miranda Green, April 20, 2018

Headlamp – Get the facts on the Pebble Project.

Army Corps of Engineers describes Pebble Project in this video:

 

 

Years of underinvestment in the oil industry has led to weak production. The oil and gas industry may need a significant amount of new investments to offset a looming supply shortage, the head of oil services firm Schlumberger said. Companies like Schlumberger that cater to the exploration and production, or upstream, side of the industry are still evolving after the historic slump in crude oil prices two years ago. That forced major energy companies to cut costs, improve efficiencies and join forces in order to survive. Schlumberger last year formed several ventures with its industry partners. Extending a six-year relationship, the company in July spent $1.7 billion to acquire a 51 percent stake in Eurasia Drilling Co. Ltd., which holds one of the largest fleets of onshore drilling units globally. In February, it formed a joint venture partnership with Subsea 7 that built on a 2015 arrangement to coordinate broad offshore development work under one umbrella.

U.S. still has 49% fewer rigs than in October 2014. West Texas’ Permian Basin single-handedly accounted for another jump in the number of rigs actively drilling for petroleum in the U.S. The overall rig count increased by five rigs this week, while the Permian alone grew by eight rigs. Small declines in Colorado, North Dakota and Oklahoma partially offset the gains in Texas, according to the weekly data collected by Houston-based Baker Hughes, a GE company. The total U.S. rig count is now up to 1,013. Oil drilling currently accounts for 820 rigs of the total. The rest are seeking natural gas. U.S. oil was selling at about $68 a barrel in early afternoon trading in New York. West Texas’ Permian Basin now accounts for 453 rigs, which is 55 percent of all the nation’s oil rigs. The next most active area is South Texas’ Eagle Ford shale with 76 rigs. Texas is home to 509 rigs overall, while Oklahoma is second with 127 rigs. New Mexico is next with 90 rigs. Despite this week’s jump, the oil rig count is down 49 percent from its peak of 1,609 in October 2014, before oil prices began plummeting.

From today’s Washington Examiner, Daily on Energy:

15 REPUBLICAN ATTORNEYS GENERAL OPPOSE CALIFORNIA CLIMATE SUIT: The climate change court fight between California cities and big energy companies such as Exxon Mobil is widening as Republican attorneys general from 15 states filed a court brief Friday opposing the cities’ climate lawsuits. The attorneys general argue that the cities and municipalities suing the companies in federal court are overreaching in using local “nuisance” ordinances as a way to find a court remedy to the complex issue of global warming. Fossil energy producer and consumer states: The 15 states filing the amicus brief opposing the lawsuit include Texas, Louisiana, Wyoming, Colorado, West Virginia, Indiana, Alabama, Arkansas, Georgia, Kansas, Nebraska, Oklahoma, South Carolina, Utah, and Wisconsin.

 

First View:

The Pebble Project: Project Description and Summary Information
U.S. Army Corps of Engineers

First Reads:

Schlumberger sees growing supply challenges
UPI, Daniel J. Graeber, April 20, 2018

Permian Basin dominates another rig count jump
Chron, Jordan Blum, April 20, 2018

Headlamp – FYI Legislators, the stability of fiscal terms important to companies looking to invest in Alaska.

“Clearly one of the most important things when a company looks at an area is stability of fiscal terms…” A Papua New Guinea oil company that’s new to Alaska is hiring workers to appraise and develop a large North Slope discovery — bucking a trend that’s seen the state’s industry workforce slashed and companies leaving. Oil Search last year acquired a $400 million stake in the Nanushuk field, a discovery announced by Armstrong Oil and Gas and Repsol in 2015. Geologists estimate the discovery is one of the largest in Alaska. Oil Search plans to find out just how big it is. The company operates oil and gas fields in Papua New Guinea. Its partners include ExxonMobil and Total. In late March, Oil Search officially took over as the Nanushuk operator. The company’s work could provide a big economic boost to the state, said Keiran Wulff, head of Oil Search in Alaska. The Anchorage Daily News spoke with Wulff last week at the downtown Anchorage building, Peterson Tower, where the company is retrofitting an entire floor to house a large staff. “We like the fact that in Alaska there was a lot of opportunity, despite the oil majors being up here a long time. There’s been some significant oil fields discovered, but also, relative to other parts of the world, the drilling density in Alaska is not significant.” “Once we commit to the development fully, hopefully in the second half of next year, that would provide significant impetus for employment opportunities for people in the state. Clearly one of the most important things when a company looks at an area is stability of fiscal terms because you spend a lot of money on projects and a lot of time and there are a lot of opportunities around the world.”

Unpredicted drop in crude inventories. Crude rose to its highest level since 2014 in New York as the drop in U.S. inventories reported by an industry group helped to sustain a rally spurred by geopolitical risks. Futures in New York rose as much as 2 percent, extending their gain beyond last week’s three-year high. U.S. crude and gasoline inventories fell last week, the American Petroleum Institute was said to report on Tuesday, in contrast to forecasts for a build in U.S. government data later. OPEC and Russia will probably look at ways to prolong their cooperation on cuts when they meet in Saudi Arabia this week. Oil had fallen earlier this week from the highest in more than three years as geopolitical risks surrounding Syria eased, with Russian President Vladimir Putin now seeking to reduce tensions with the U.S., according to people familiar. The U.S. has started talking to North Korea directly, President Donald Trump said on Tuesday, helping to buoy some equity markets. “The product draws were a bit surprising,” Tamas Varga, analyst at PVM Oil Associates, said, referring to the drop in gasoline and distillate inventories reported by the API. “As long as the geopolitical premium is here with us we should not sell off.”

The charity state of Alaska. The Alaska Legislature is already cutting into the amount of the yearly oil-wealth fund check given to residents to help pay for state government. Now, lawmakers are looking at other ways for residents to spend more of their check — to help pay for state government. One proposal would set up a raffle to benefit schools, with a minimum buy-in of $100 from a resident’s Alaska Permanent Fund dividend. Twenty-five percent of entry dollars would go toward the prize fund. Another bill, which passed the Senate, would let residents donate all or part of their Alaska Permanent Fund dividend to the state treasury to help pay Alaska’s bills. All this comes as lawmakers, deadlocked on taxes, look for alternatives to bolster state coffers in response to a persistent state budget deficit. It also comes amid a roiling political debate over the future of the dividend. Alaska has no state sales or personal income tax. The size of the yearly check paid to residents has been capped at $1,022 and $1,100 the past two years, and lawmakers propose limiting it again this year as they prepare to use earnings from the oil-wealth fund for the first time to help fill the deficit.

From today’s Washington Examiner, Daily on Energy:

ZINKE WON’T REDUCE AMOUNT COMPANIES PAY TO DRILL OFFSHORE: Interior Secretary Ryan Zinke on Tuesday declined to cut the amount that oil and gas companies pay for offshore drilling deep in federal waters. Zinke rejected the advice of the Interior Department’s Royalty Policy Committee, an advisory board that unanimously recommended that he lower the royalty rate companies pay on offshore drilling from 18.75 percent to 12.5 percent in federal waters deeper than 200 meters.

Low down: The proposed amount was the lowest rate the government can charge for offshore leases. Zinke said lowering the rate is not necessary to attract industry interest in drilling deep offshore.

 

First Reads:

Papua New Guinea oil company moves to develop big Alaska prospect
Anchorage Daily News, Alex DeMarban, April 17, 2018

Crude rises to highest since 2014
Chron, Alex Longley, April 18, 2018

Alaska looks at ways for residents to give to government
Daily News-Miner, Becky Bohrer, April 17, 2018