Enviro-Activists Have Created A War Against Civilization–Throughout North America!  -dh

We comment on today's blog by our Aussie O&G Analyst friend:

Remember Governor Walker's recent trip to Japan (Very productive and groundbreaking…NOT; the Japanese will happily consider buying Alaska's gas 1) at the right price, and 2) if Alaska gas can be transported to Japan.  But should Alaska market its royalty gas or let the experienced producers do it?  Will Japan need gas when Alaska's project is complete?  How can Alaska's gas project be sanctioned if the Governor refuses to support fiscal terms of certainty re: Alaska gas AND oil taxes.)

We are sure Alaska's governor tasted no fewer flavors of Japanese hospitality than the Australian resource minister will.  We are also confident that the result of the Australian trip will be little more or less productive than Governor Walker's trip — except that the Australian private sector has two new and large LNG projects ACTUALLY coming on-stream in 2016-17 from tidewater sources at what will be competitive world prices.  

Alaskan producers are still diligently trying to create a feasible project to transport 35 Tcf of Alaska North Slope gas to tidewater, 800 miles from the North Slope, where it can be converted to LNG and compete for Japanese business.

As a demonstration more of intelligence than courage, Alaska's governor is criticizing Alaska's producers as they endeavor to accomplish their mission; he is threatening them at the same time with a reserves tax on top of the already high Alaskan industry tax burdens.  

When will some people learn that too many government cooks inevitably spoil the economic stew?

…especially when those cooks are not very good at what they do?     -dh

Our Aussie friend says: 

LNG

The Australian Financial Review (AFR) published a story today about a trip to Japan by Australia's new Resources Minister, Josh Frydenberg.  The primary aim of the trip was said to be to encourage further Japanese support for Australia's LNG ministry, through meetings with the likes of the Japanese Minister who oversees METI.

The Australian Government owns no gas reserves / resources, has no marketing expertise therein, will have little knowledge of the intricacies of gas markets and has only tangential influence over the Super-Majors and NOCs who dominate ownership of Australia's gas reserves.  (Note: we have said the same about Alaska's governor.  -dh)  On the Japanese side, although there is a far greater integration of Government and gas buyers (through "Japan Inc"), the Government does not directly buy any gas.

Those hardened cynics who adopt a less starry-eyed view of the world than this blog will not expect the Minister to achieve much from this trip other than taste the pleasures of Japanese hospitality.

This is of course what Governments around the world do, so Mr Frydneberg is no orphan – but he is a Minister of a Government that supposedly understands and supports free enterprise.

COMMENTARY.  We only wish we could name our confidential O&G analyst friends, but each has reasons for wanting to offer solid analysis without being named — yet.  

Today we bring you a very current, eye-opening analysis of the reality of oil supply and demand from our mid-Atlantic O&G analyst friend.  

Our Alaskan and Canadian friends should be taking from this that worldwide competition is becoming more not less stressful; and, that the O&G industries supporting our way of life need popular and political support — not hostility, opposition, higher taxes and more destructive regulations!  -dh

From Our Mid-Atlantic O & G Analyst Friend:

There are telling signs that the effort to rein in crude oil and natural gas production is getting into full gear. Some of these are directly related to field operations, but some ancillary signs are just relevant in our opinion.

 

·        We have had several reports that the oil & gas conference business is dwindling rapidly. A number of “annual” conferences have been cancelled this year, and attendance at the rest are lagging badly.

·        We got a report today that the SEC is finalizing rules to allow crowdfunding to add such businesses as oil & gas drillingeligible to attract investment funds through this vehicle.

·        Assets being put up for sale in the Oil Patch are climbing rapidly:

 

 

 

·        Banks are trying to secure themselves without appearing worried. The recent securing of Chesapeake’s bank line is Exhibit A: See FuelFix

 

 

 

·        There are stories of layoffs everywhere, and some companies are cutting for the second or third time in the past year. Salaries are frozen, and bonuses are gone.

See Market Watch

And now comes production reports from the various fields. We watch the Bakken fairly closely, as being a good barometer of overall health.  Wells drilled and volumes were starting to show a significant drop in August.

See the chart below: 

The drop of 19,502 bpd may seem small, but underlying it is the implicit decline rate that will show up further as the number of new wells added in the next couple of months stays very low. The decline comes despite the fact that producers are only drilling their best prospects in this environment. The Daily Production Per Well (112, which is the lowest monthly number since 2008) would be even lower if not for that effort.

The downside is that the Bakken now has 993 uncompleted wells, the highest level yet. This will help keep the volume of production from dropping in a big way for at least 18 months.

Bakken Oil Production (September to August for each year)

          

Lagged

Lagged
       

Daily

Daily

Net

    

Oil

Wells

Daily

Year

Wells

New

Daily Oil

Added

Production

Added

Wells Per

Uncompl.

Rig

Added

Barrels

(To August)

(August)

Wells

Production

Production

Per Well

Per Well

Month

Wells

Count

Per Rig

Per Rig
     

 

          

 

    

2015 Detail

    

 

          

 

    
                       

Oct-14

8621

121

1,118,011

-1,597

130

-13.2

  

650

194

0.62

-8

Nov-14

8735

114

1,124,272

6,261

129

54.9

  

775

192

0.59

32

Dec-14

8944

209

1,163,252

38,980

130

186.5

  

750

187

1.09

203

Jan-15

9052

108

1,128,707

-34,545

125

-319.9

  

825

171

0.58

-185

Feb-15

9166

114

1,116,325

-12,382

122

-108.6

  

900

127

0.67

-72

Mar-15

9419

253

1,129,174

12,849

120

50.8

  

880

108

1.99

101

Apr-15

9525

106

1,108,572

-20,602

116

-194.4

  

925

91

0.98

-191

May-15

9704

179

1,141,548

32,976

118

184.2

  

925

83

1.97

362

Jun-15

9912

208

1,152,435

10,887

116

52.3

  

848

78

2.51

131

Jul-15

10074

131

1,149,774

-2,661

114

-20.3

  

914

74

1.68

-34

Aug-15

10112

69

1,130,272

-19,502

112

-282.6

  

993

71

0.93

-264

…what the market does not do to cut production may come from an onslaught of regulation. The October Director’s Cut (monthly status report) goes on for over four pages summarizing proposed regulations:

Also, a report on Fuelfix today noted the regulatory environment in the Bakken.

BISMARCK, N.D. (AP) — A North Dakota oil industry official says proposed federal regulations threaten the state’s oil production more than depressed crude prices.

North Dakota Petroleum Council Vice President Kari Cutting told an interim legislative committee onWednesday that the new rules range from changes in air quality standards to additional animals being listed as endangered species.

Cutting says the industry is most concerned about the possibility of the federal government regulating the burning of natural gas as a byproduct of oil production.

Cutting says the industry has been able to adapt so far to slumping oil prices. But she says it will have a tougher time adapting to what she calls increased federal overreach.

Cutting’s group represents more than 550 companies and 65,000 workers in North Dakota’s oil and gas industry.

 

Bottom Line: There is much evidence that the cycle should be getting close the bottom. The biggest question is the length of time any recovery will take. We see evidence of two major catalysts: 1) The cost of capital is being raised for the energy industry, away from what the nominal cost of funds is elsewhere, and 2) The regulatory environment is going restrict the volume of activity.

Calgary Herald/Bloomberg.  The battle to build natural gas pipelines in the post-Keystone XL world has moved from the hearing room into the streets.

Developers are squaring off against activists like Nick Katkevich, who’s prepared to risk jail time to block new pipelines. Their actions have forced companies like Spectra Energy Corp. to take countermeasures that include training staff and contractors to cope with acts of civil disobedience, arranging undercover security and monitoring opponents’ websites and social media postings for signs of protests.

Katkevich, a 30-year-old self-described professional activist from Providence, R.I., says he’s been arrested 11 times for non-violent protests, most recently in September when he chained himself to construction equipment at a Spectra pipeline project. Driven by a desire to hasten the end of the fossil-fuel era, Katkevich said he draws inspiration from the dozens arrested in Texas, Oklahoma and Washington protesting the Keystone pipeline.

“We’re going to keep resisting and costing them money,” Katkevich said in an interview. “We don’t need to be investing billions of dollars in another fossil fuel like fracked gas.”  (More….)

Our Aussie friend (link right column) also provides his quote for the day to which we add a comment.

He observes:

Aussie Quote Of The Day

In light of last week's news about a potential material oil discovery in the Golan Heights, Israel will be hoping that the views of its early 1970s Prime Minister, its own "Iron Lady" Golda Meir, will finally prove to be incorrect:

“Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil.”

Dave's comment: The story of Moses recounts over a dozen times when the Israelites revolted against God's will after he had led them out of Egyptian slavery.  Each time, Moses caused them to return to God…but their disobedience caused them to wander the deserts for 40 years before finally reaching the promised land.  Golda's statement (Circa. 40 years ago), while possibly said in jest, could be interpreted as a criticism of God's plan.  The recent discoveries of Mediterrean gas and Golan Heights oil shale have given further witness to the power of the caring and powerful Creator who knows exactly what He is doing.  It is perhaps a modern demonstration of His hand at work, an example about why it is so necessary for His followers everywhere to be patient and faithful.  -dh