HB 331 passed the Alaska house yesterday and is headed to the senate. Opponents of the bill say it is kicking the can down the road and placing a burden on future Alaskans. Supporters say it is a good, not necessarily the best, solution to a problem that is having a significant, negative impact on our economy.
Ed King, of King Economics Group in Juneau, makes a compelling argument that the bill is a good deal for the state from a cash flow basis.
The Alaska State Legislature is currently considering a bill that would allow the Department of Revenue (DOR) to borrow money to make oil tax credit purchases. The bill is called HB 331 in the House and SB 176 in the Senate. Both bills sit in their respective finance committees but are said to be a part of the final compromise to get done with the session. The entire issue is very touchy and ripe for political rhetoric. I’m not going to get into all that. This quick analysis doesn’t speak to the politics of the issue, or the legal merits that have been raised. The only thing this analysis contemplates is the money. I’ll give you the conclusion up front. If you are committed to purchasing these credits, this bill is a good deal for the State (from a pure cash flow basis). I feel like I need to explain that caveat, so I’ll come back to it at the end.
As the U.S. moves to open ANWR to drilling, Canada says ‘not so fast’
Alaska Public Media, Elizabeth Harball, May 3, 2018
Congress has voted to allow oil development in the Arctic National Wildlife Refuge but drilling opponents haven’t given up. As part of their strategy going forward, they’re looking beyond Washington, D.C. and across the U.S.-Canada border for support. Canada has a long history of opposing oil development in ANWR. That opposition comes down to the caribou.
Our Take: Canada should consider the facts before opposing responsible resource development. The herd and responsible development already co-exist. The Porcupine caribou herd reached a record high number of animals last summer. That’s according to a photo census conducted by the Alaska Department of Fish and Game. The herd has been growing at a rate of about 3 to 4 percent annually since 2010. As of this year, the herd reached an estimated 218,000 animals. That’s nearly 40,000 more caribou than were present during the herd’s last population peak in 1989.
Marathon CEO Doesn’t Expect Regulatory Issues With Andeavor Deal
Bloomberg, May 3, 2018
The CEO of Marathon Petroleum, Gary Heminger, sees his company’s plans to become the largest refining and transportation company in the nation as good for consumers and global demand for U.S.-made diesel and gasoline.
Our Take: Good for consumers: The merger would reduce costs by at least $1 billion, which is good for both the shareholders and consumers. Alaskans are a part of this deal!
Walker’s oil tax credit bond bill clears the House
KTVA, Steve Quinn, May 3, 2018
The credit program was originally designed to attract companies to Alaska to explore for oil and gas deposits. It worked both for the Cook Inlet and North Slope basins, but when oil prices dropped, the state slowed down repayments running up a sizable tab. The state could no longer afford the program and shut it down last year, but credits remained on the books. The legislature and the administration want to clear the books of the remaining credits.
Our Take: We agree with @RepJasonGrenn who said “Uncertainty around these tax credit payments has led to projects being stalled and credit being frozen.” HB 331 says let’s find a way to solve this problem and put Alaskans to work!
Kremlin prioritizes commercial considerations in Arctic safety dispute
High North News, Av Malte Humpert, May 4, 2018
The serious violation of Arctic shipping safety rules by Yamal LNG carrier Boris Vilkitsky last month has escalated a growing conflict about the regulation of and control over the Northern Sea Route (NSR). The widening rift involves Rosatomflot, operator of Russia’s icebreaker fleet, on one side and the Ministry of Transportation via its Northern Sea Route Administration (NSRA), on the other side. While the former aims to prioritize commercial considerations, the latter wishes to uphold existing safety standards along the route.
Our Take: Safety regulations and rapid economic development can co-exist and should.
Is there such a thing as an ethical electric car?
CNN Tech, May 2, 2018
The Democratic Republic of Congo is at the epicenter of a modern-day “gold rush” for cobalt, about a fifth of which is dug out of makeshift artisanal mines by hand. The mineral is an essential component in the rechargeable batteries powering electric vehicles and cellphones – but at what cost? CNN’s findings show that the companies profiting from the clean energy revolution have a problem: They can’t prove that children aren’t involved in their supply chains.
Our Take: We refer you to @Jason Brune’s tweet today: “Companies profiting from the clean energy revolution have a problem: they can’t prove that children aren’t’ involved in their supply chain.” Let’s develop these minerals responsibly here in the US and protect lives, children and the environment.
Buzios hopefuls team up with Chinese yards
Upstream, May 2, 2018
Industry officials said that at least five international engineering, procurement and construction contractors that have received price quotes from Chinese sub-contracting partners are ready to submit commercial bids for the Buzios-5 FPSO towards the end of this month, if not further delayed.
Our Take: The Alaska Gasline Development Corporation (AGDC) is pursuing a similar strategy to use an engineering, procurement and construction contractor to build segments of the Alaska LNG project – with the Chinese. It’s important for Alaskans to understand how this can work and the pros and cons of such an approach.
Energy Secretary gets taste of Alaska travel woes on Day 2 of Alaska tour
KTUU, Kortnie Horazdovsky, May 2, 2018
Sen. Murkowski told Channel 2 Wednesday afternoon from Fairbanks that Perry’s visit as Energy Secretary – one promised to her during the confirmation process – was a good eye-opener to how things in Alaska really work. “It’s been an important visit for him. Certainly, he is appreciating the size and scope of Alaska. Going from Kodiak to Prudhoe gives you an appreciation of what we’re dealing with here,” she said.
More than 50 Members, Stakeholders Call on Admin to Scrap Obama Mineral Withdrawals
Congressional Western Caucus, Tanner Hanson, May 2, 2018
“Today, we implore this Administration to take a closer look at several improper mineral withdrawals that were planned behind closed doors and executed in unprecedented haste by the last Administration. These massive mineral estate removals proved devastating to local communities, imperiling good-paying jobs and shattering investor and mining company confidence. The Trump Administration has done an incredible job signaling that it supports responsible job creation and opposes arbitrary or political violations of the rule of law.”
Our Take: Read the story above about child labor in the Congo. The case for developing Alaska’s, and the US’s rare earth minerals is strong!
Oil-Pricing Skirmish Heats Up as Chinese Trader Seeks Saudi Cuts
Bloomberg, Serene Cheong, May 2, 2018
Unipec, which buys crude for giant Chinese processor Sinopec, is seeking a 40 percent cut to Saudi oil volumes versus supplies available under long-term contracts for June loading, according to a senior official at the trading company. That’s because the world’s biggest crude exporter has set prices too high for grades such as Arab Light and Arab Medium, he said, asking not to be identified because of internal policy.
Our Take: Sinopec is involved with AGDC and recently sent representatives to Alaska to learn more about the Alaska LNG project.
Pump the Permian! Exxon boosting spending to $30 billion. Texas dirt is emerging as Exxon Mobil Corp.’s best bet to arrest production declines that are threatening its position as the world’s most valuable listed oil company. Exxon could become the most active driller in the Texas and New Mexico basin by year’s end, with a plan for at least 30 operating rigs. Now, Concho Resources Inc. is the most active driller with 26 rigs, if its planned $8 billion acquisition of RSP Permian Inc. is included, according to RS Energy Group. Chief Executive Officer Darren Woods has Exxon boosting spending to more than $30 billion a year by the mid-2020s, with major projects planned worldwide. But its production lag in the meantime has been difficult. Exxon’s first-quarter output was the worst since 1999, spurring a 3.8 percent share drop on Friday. The company’s shale business has been a small slice of the pie for the eight years but is now its fastest-turnaround major project.
Comments on Ambler Road released. The Bureau of Land Management received thousands of public comments on the controversial proposed Ambler Road during the scoping period for the project, which ended in January. The BLM released a summary of those comments this week. The road, which is proposed by the state, would begin at the Dalton Highway and run more than 200 miles west, along the southern edge of the Brooks Range. Proponents say it’s needed to develop the Ambler mining district. Tim La Marr with BLM said the agency received input from people on all sides of the issue. Click here to read comments.
From today’s Washington Examiner, Daily on Energy:
DOES ZINKE CARE ABOUT CLOSING THE LARGEST COAL PLANT IN THE WEST? Groups who sued Tuesday to keep the giant Navajo Generating Station coal plant in Arizona from closing say Interior Secretary Ryan Zinke has grown timid since his early support.
Part of the reason for the lawsuit is to coax the Interior Department, which owns a 25 percent stake in the plant, to come to its defense and keep it open.
No place for coal: The Hopi, the United Mineworkers, and coal firm Peabody sued the Central Arizona Water Conservation District for its plans to no longer buy power from the coal plant in favor of natural gas and renewable energy.
Zinke has authority: Plaintiffs believe Zinke has become lax in defending the plant when he has clear legal authority to do so.
John Shadegg, former congressman and a lawyer for the mineworkers, wants Zinke to understand that the government has huge authority on who uses the power, so the coal plant’s customer base is not completely eroded.
Coaxing Zinke: The plaintiffs hope Zinke will read the lawsuit, see the role he plays, and act to save the plant, advisers say.
Closer look at the law: “I believe the secretary of Interior needs to look very close at this issue, and I believe he has much greater legal authority to protect the Hopi and Navajo people, whose economy is linked to the plant, than he realizes,” Shadegg told John.
Early support: Zinke had facilitated the plant’s owners to negotiate a way to keep the plant open last year. Most of its owners had wanted to close the plant by the end of next year. Zinke managed to keep that ball from dropping, but he has been quiet about the campaign by the plant’s customers to shutter it.
The Interior Department had not replied to a request for comment.
Keeping Trump’s promise to coal: The coal plant, which was created by an act of Congress to pump water into Arizona, had been considered a symbol of President Trump’s pledge to keep coal workers employed. Zinke’s early involvement was a testament to that. But now the administration’s commitment to NGS may be failing, according to the plaintiffs in the case.
Tweet of the Day –@ Secretary Perry:
“Started the day in Kodiak, Alaska with Kodiak Electric Association which generates 98% of the island’s electricity from renewable energy.” #NewEnergyRealism
Pump the Permian: Exxon’s Effort to Boost Output
Bloomberg, Kevin Crowley, April 27, 2018
BLM releases summary of public comments on Ambler Road
Fairbanks Daily News-Miner, Ravenna Koenig, May 2, 2018
Oregon invades Alaska to sue the state. An Anchorage judge heard arguments Monday on whether a lawsuit brought by sixteen young Alaskans suing the state over climate change should advance. The plaintiffs in the case, Sinnok v. State of Alaska, argue the state is violating their constitutional rights by failing to limit greenhouse gas emissions – and they’re asking the courts to intervene. But the state says climate change policies must be decided by the legislature and the executive branch, not the courts. About a dozen of the young plaintiffs, ranging in age from elementary school to their early 20s, sat in the front row of the small courtroom during the hour-long arguments. They watched as Assistant Attorney General Seth Beausang, arguing for the state, asked the court to dismiss the case entirely. Beausang said past court rulings have established that only the elected branches of government can balance the impacts of climate change against other interests, like economic development. “The court said that weighing all those interests was a policy decision entrusted to the political branches, and not to the courts,” Beausang said. That ruling came in a similar climate change case, Kanuk v State of Alaska, dismissed by the Alaska Supreme Court in 2014. That case and this new one were both brought with the help of an Oregon-based nonprofit, Our Children’s Trust, which has filed legal actions on behalf of young people across the country demanding action on climate change.
From the Iditarod to the Legislature? Iditarod mushing icon DeeDee Jonrowe may not have run her last great race after all. Jonrowe, who competed this year in what she says is her last Iditarod, is now contemplating a run for elected office, she said Monday. “It’s fair to say that there are a lot of people that seem to think that I have something to offer,” Jonrowe, a Republican, said in a phone interview from her home in Willow. She added: “It is a dilemma.” Jonrowe, 64, has started 36 Iditarods and twice finished as runner-up. She dropped out 150 miles into this year’s race after suffering flu-like symptoms. Jonrowe, a cancer and car crash survivor beloved by fans and fellow mushers, would bring a compelling biography to political office. She was in Juneau last week to receive a citation from the Legislature — an experience that she said helped boost her interest in politics. But Jonrowe said she has to balance her enthusiasm with what she described as loose ends in her personal life. Her parents both died in the past five years, and her home burned down in a 2015 wildfire
Low investment in cyber security a hacker’s dream. How much is cyber security worth to the U.S. energy industry? Not a whole lot apparently. Two prominent security consultant firms estimate that energy companies, ranging from drillers to pipeline operators to utilities, invest less than 0.2 percent of their revenue in cyber security. For context, that’s at least a third less than the corresponding figure for banks and other financial institutions, according to the consultants, Precision Analytics LLC and the CAP Group. What makes the lack of investment even more worrisome is that the number of hacker groups targeting the energy sector is soaring. Symantec Corp. says it’s tracking at least 140 groups, up from 87 in 2015, some with links to foreign countries. And it’s just one of many security firms working with the industry. “It’s scary,” said Brian Walker, a former head of Marathon Oil Corp.’s global IT and now an independent consultant. Executives making funding decisions “aren’t necessarily millennials who intuitively understand” how cyberthreats reach seemingly disconnected units, he said. “It’s guys my age that are the problem,” according to Walker, who said he’s in his early 50s. “We’ve been 30-years trained in a world that doesn’t work this way anymore.”
Offshore drilling and military training can co-exist. When Interior Secretary Ryan Zinke announced plans to consider unlocking the energy America has offshore, he probably expected howls of outrage from the multimillionaires who live along the coast and politicians who represent them. What he probably didn’t expect, though, was the criticism from some supporters of the military. They worry that more drilling could disrupt offshore training exercises and impact military preparedness. Offshore drilling has long coexisted with military training. For years, oil exploration has occurred near military bases and seaports in the Gulf of Mexico without hampering operations or readiness. That’s because the federal agencies involved, the Departments of Defense and Interior, carefully synchronize operations and set strict standards for safety. In fact, studies conducted by the Department of Defense show that offshore drilling, with some restrictions on permanent structures, is compatible with military requirements for 89 percent of the surface area of the eastern Gulf of Mexico and 95 percent of the Atlantic seaboard.
From today’s Washington Examiner, Daily on Energy:
AMERICAN PETROLEUM INSTITUTE EXPECTED TO TAP FORMER BOEHNER AIDE AS CEO: The American Petroleum Institute is expected to name Mike Sommers, who was a top aide to former House Speaker John Boehner, as its next CEO, according to reports Monday.
Resume, please: Sommers has been president and CEO of the American Investment Council, which represents private equity investors since February 2016. Before that, he was chief of staff to Boehner, R-Ohio. He was also special assistant to former President George W. Bush at the National Economic Council in 2005. There, he advised the president on agriculture, trade, and food policy.
Replacing a titan: Sommers, if approved by the API board this week, would replace Jack Gerard, who is retiring as the oil industry’s top lobbyist in Washington. API is the main trade group representing the oil and natural gas industry.
The group would not confirm plans to hire Sommers.
“The successor to Jack Gerard will be announced at the appropriate time once the committee has completed its work,” a API spokesman said.
Can courts force action on climate change? Sixteen young Alaskans hope so.
Alaska Public Media, Rachel Waldholz, April 30, 2018
Iditarod icon DeeDee Jonrowe considers a political race
Anchorage Daily News, Nathaniel Herz, April 30, 2018
Energy Companies Aren’t Doing Much to Defend Against Soaring Cyber Attacks
Bloomberg Technologies, Naureen S. Malik, April 27, 2018
Offshore energy and a strong military go hand-in-hand
Houston Chronicle, Michael James Barton, May 1, 2018
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.
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
Hamilton to Josephson – please update your information. “I respectfully disagree with Rep. Josephson’s recent opinion piece about the Pebble mining prospect that is full of misleading and inaccurate claims. Because he is in session, he may not have had the benefit of the most up-to-date information about the project. He goes to great length to suggest that the state of Alaska needs to participate in Pebble permitting and quotes from a February hearing to make this point. It is nothing more than political sophistry designed to obscure the normal process. Since that hearing and not because of it, the Army Corps of Engineers, following normal procedure, has reached out to the multitude of regulatory agencies responsible for reviewing Pebble about their interest in reviewing Pebble’s plan. The state of Alaska is a cooperating agency, along with several federal agencies, the local borough and tribal governments. Rep. Josephson makes the claim that scientific evidence shows the project is risky. This refers to the Environmental Protection Agency’s Bristol Bay Watershed Assessment, a hastily crafted desktop survey of the region developed for the sole purpose of allowing the EPA to take an unprecedented pre-emptive action to stop Pebble before it could enter permitting. The U.S. House Science Committee put it best in 2017, noting that EPA’s actions were rife with misconduct and “determined that the preemptive action taken for the Pebble Mine Project was unprecedented under the Clean Water Act and was justified by a questionable scientific assessment that relied on predetermined conclusions developed by EPA officials.” Mark Hamilton is executive vice president of external affairs for the Pebble Limited Partnership.
Anadarko has LNG Buyers. Anadarko Petroleum Corp. said that “in principle” it has enough customers to proceed with its liquefied natural gas project in Mozambique, eight years after making a major deepwater discovery there. The development of Mozambique’s LNG potential by Anadarko, Eni SpA and Exxon Mobil Corp. is key to stimulating growth in one of the world’s poorest countries. Anadarko signed a 15-year supply deal with Electricite de France SA in February and now needs to finalize contracts with other potential clients, said Steven Wilson, vice president and country manager in Mozambique for the Woodlands, Texas-based explorer. “We effectively have agreement in principle for the volumes we need,” Wilson said in an interview in Mozambique’s capital, Maputo. “Now the intention is to follow the EDF transaction to be able to convert all those” into binding sales and purchase agreements.
From today’s Washington Examiner, Daily on Energy:
PRUITT TELLS CONGRESS HE ‘HAS NOTHING TO HIDE, AIMS TO ‘TAKE RESPONSIBILITY’: Environmental Protection Agency Administrator Scott Pruitt sought Thursday morning to “take responsibility” for various ethics and spending accusations that have imperiled his job, assuring Congress he will “make changes,” but blaming the media for reporting “half truths” and saying critics want to derail his deregulatory agenda.
“As administrator, I have to take responsibility to make changes to ensure in each of these areas we get results and show the American people we are good stewards of taxpayer resources, stay true to the EPA’s mission and I am committed to doing that,” Pruitt said in much-anticipated testimony before a House Energy and Commerce subcommittee.
“I want to address each of these issues and provide information and will work with Congress to provide any and all information that helps answer those questions.”
Agenda derailed: But Pruitt said the allegations and multiple ongoing federal investigations of his behavior “have been a distraction to our agenda, and that is troublesome.”
“I did not expect this work to be easy,” he said. “There have been very troubling reports. I have nothing to hide. The responsibility for identifying and making changes rests with me and no one else. But facts are facts. A lie doesn’t become true just because it’s on the front page.”
‘Record straight’: The embattled EPA chief said he wants to set “the record straight” on issues including his $50-per-night condo rental deal with the wife of an energy lobbyist who had business before the EPA, spending more than $3 million on security, frequent first-class travel, and charges that he retaliated against employees who questioned his judgment.
“Those who attack EPA and me want to derail the president’s agenda and priorities,” Pruitt said. “I will not let that happen.”
Pebble: Rep. Josephson needs to visit site before replaying misleading rhetoric
Anchorage Daily News, Mark Hamilton, April 25, 2018
Anadarko Lines Up Enough LNG Buyers for Mozambique Project
Bloomberg Markets, Paul Burkhardt, April 26, 2018
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.
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
Name it, claim it – North American Drilling Record! Conoco Phillips Alaska has announced a North American drilling landmark as North Slope producers push efforts to tap oil as efficiently as possible after years of low oil prices. The company set the continent’s land-based record with a four-mile “horizontal lateral,” an extension branching off a vertical well, the ConocoPhillips said in a statement. The record, at 21,478 feet, beat a 19,500-foot horizontal lateral in Ohio announced in 2017 by Eclipse Resources, said Amy Burnett, a spokeswoman with the company. The record came at a well at the company’s CD5 field, the first commercially producing field within the National Petroleum Reserve-Alaska. Oil companies today are able to drill “extraordinary kickout lengths,” opening huge areas of a reservoir with a small footprint, said Mark Wiggin, deputy commissioner for the Alaska Department of Natural Resources. That saves money on the tons of gravel needed for well-pad foundations and roads, and reduces environmental impact, said Wiggin, a former engineer with Arco Alaska, a ConocoPhillips Alaska predecessor. Advances in drilling systems helped boost the distances, said Chip Alvord, Alaska drilling manager for ConocoPhillips.
If you pass it, will they come? A bill that would use bonds to pay off the state’s debt to oil and gas companies for tax credits has raised a question from lawmakers: are the companies interested? Revenue Commissioner Sheldon Fisher provided the House Finance Committee an answer Monday, saying most of the companies are on board with the idea. “So far, no one has informed us that they do not intend to participate,” Fisher said. “They’ve either informed us that they want to participate – which is far and away the majority – (or) there’s a handful of companies that have said they’re still thinking about it and want to get back to us.” The state owes the companies more than $800 million in tax credits. House Bill 331 would allow it to pay them off quickly. The state would receive a discount of roughly 10 cents on the dollar, to cover the cost of issuing the bonds. State payments for the credits slowed as oil prices fell. But companies have said the delayed payments have hurt development. One company that is especially interested is Caelus Energy. It has $180 million in tax credits owed it. Caelus Vice President Pat Foley said it would be a win for the state and investors if the bill passes. House Finance will be taking testimony on the bill at 1:30pm today. Watch it live at www.akleg.gov.
A big, gold milestone. The Army Corps of Engineers will publish environmental recommendations this week for a proposed massive open-pit gold mine in western Alaska. The Corps’ final environmental impact statement for the Donlin Gold Mine is expected to be released Friday after five years of work, the Alaska Journal of Commerce reported. Owners envision a conventional open-pit mine 1.5 miles (2.4 kilometers) across and up to 1,200 feet (366 meters) deep. The mine at its peak is projected to produce more than 1 million ounces (28.35 million grams) of gold per year. Donlin spokesman Kurt Parkan said initial exploration began 22 years ago. “It’s a good day. We’re happy that we’ve reached (the final environmental impact statement). That’s a big milestone,” Parkan said. A final environmental impact statement includes the oversight agency’s recommendations on how a project can be adjusted to minimize its environmental impacts. The Corps also could recommend not approving the project Donlin Gold estimates the mine and associated infrastructure, including a 315-mile (507-kilometer), 14-inch (35.5-centimeter) natural gas pipeline from west Cook Inlet and fuel storage in Dutch Harbor, will cost $6.7 billion.
U.S. oil hurts OPEC and Russia. As OPEC’s efforts to balance the oil market bear fruit, U.S. producers are reaping the benefits – and flooding Europe with a record amount of crude. Russia paired with the Organization of the Petroleum Exporting Countries last year in cutting oil output jointly by 1.8 million barrels per day (bpd), a deal they say has largely rebalanced the market and one that has helped elevate benchmark Brent prices LCOc1 close to four-year highs. Now, the relatively high prices brought about by that pact, coupled with surging U.S. output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, traders said. “U.S. oil is on offer everywhere,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude and has recently started purchasing U.S. oil. “It puts local grades under a lot of pressure.” U.S. oil output is expected to hit 10.7 million bpd this year, rivaling that of top producers Russia and Saudi Arabia. In April, U.S. supplies to Europe are set to reach an all-time high of roughly 550,000 bpd (around 2.2 million tonnes), according to the Thomson Reuters Eikon trade flows monitor.
The 8th wonder of the world. The Panama Canal may carry five times as much liquefied natural gas (LNG) in 2020 as it did last year as production of the fuel expands in the United States and Asian import demand rises, the head of the canal’s governing agency told Reuters. LNG volumes traversing the Canal could hit 30 million tonnes a year before the end of 2020, said Jorge Quijano, who leads the Panama Canal Authority, up from 6 million tonnes last year. Demand for LNG has risen significantly in the last three years as the increase of supply, especially from onshore shale fields in the United States and offshore reserves in Australia, has made it more competitive. Many countries including China have also been switching to gas more rapidly than expected, away from dirtier coal, for environmental reasons. For graphic on U.S. LNG tankers passing Panama Canal click here.
No oil companies oppose bonds for tax credits, commissioner says
Alaska Public Media, Andrew Kitchenman, April 23, 2018
ConocoPhillips claims North American record for horizontal drilling
Anchorage Daily News, Alex DeMarban, April 23, 2018
Arm Corps prepares to release Donlin environmental review
AP News, April 23, 2018
Trump’s revenge: U.S. oil floods Europe, hurting OPEC and Russia
Reuters, Olga Yagova and Libby George, April 23, 2018
Panama Canal to carry 30 million tonnes of LNG by 2020 as global demand grows
Reuters, Osamu Tsukimori, April 19, 2018
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.
The Pebble Project: Project Description and Summary Information
U.S. Army Corps of Engineers
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