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Northern Gas Pipelines is your public service 1-stop-shop for Alaska and Canadian Arctic energy commentary, news, history, projects and people. It is informal and rich with new information, updated daily. Here is the most timely and complete Arctic gas pipeline and northern energy archive available anywhere—used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to suggest others existing before 2001.  -dh

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3-21-15

21 March 2015 4:16pm

Petroleum News.  In early February Ben van Beurden, CEO of Shell, confirmed that his company was moving ahead with plans to restart its exploration drilling in Alaska’s Chukchi Sea during the 2015 summer open water season. In apparent confirmation of that statement notices relating to requests from Shell for some go....

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3-20-15 Alaskan and Canadian Energy Investors Face a Competitive New World

20 March 2015 7:46am

See this week's Petroleum News, just released.

Compared to Russian and Canadian Arctic energy initiatives, U.S. efforts are pathetic.  Russia's Arctic power could well influence competitive factors discussed below in ways detrimental to the world's democracies.  Read more....    -dh 


Decision makers: look below, and ignore the competitive, new, worldwide oil & gas market at your own peril and at the risk of removing opportunities from your succeeding generation of young, hopeful, ambitious children that you and your friends enjoyed.  -dh

Today, an energy analyst friend privately opines on natural gas pricing, which should be of some interest to potential investors in a $40 - 60 billion Alaska natural gas pipeline--as well as Canadian project participants.  Read below.

We hasten to add that natural gas supply and pricing is still not as "world-wide fungible" as oil.  

Until now, the North American gas market has focused almost completely on North American supply/demand factors...unlike oil which has traded within a fairly narrow worldwide price range--offsetting U.S. prices somewhat because of the multi-decade crude oil export ban.  

U.S. Sen. Lisa Murkowski yesterday stressed the economic and national security benefits of ending the 1975 federal ban on exporting domestically produced crude oil at a hearing before the Senate Energy and Natural Resources Committee.  See the video, also featuring ConocoPhillips Chairman & CEO Ryan Lance (NGP Photo).  

However, because of extensive, competing world-wide LNG export projects, the continuing expansion of world-wide shale technology, and the increasing attraction of natural gas for power generation it is probably only a matter of time before we approach a worldwide pricing range and supply balance for natural gas.  

Investors must absorb and interpret these rapidly changing and multi-dimensional factors as they consider different lease sale bidding strategies and varied projects in different jurisdictions with wide-ranging rules and risks.  This reality makes it essential that Alaska's and Canada's energy decision makers (i.e. our readership base) retreat from unpredictable, greedy and provincial tax, royalty, regulatory policies and lavish spending practices--which affect tax policies.  

Everywhere, those blessed with oil and gas supply should keep one eye on the competition and one eye on reducing public spending to sustainable, essential levels.   See yesterday's examples, "Lessons For Alaska From Canada".    -dh


Our energy analyst friend writes, "Natural gas has seemingly had a lot going for it in the past year:

  • The US came out of last winter at record low inventories
  • Pipelines keep getting added and redirected to distribute natural gas to hungry markets (although slowly)
  • The weather has been brutal east of the Rockies, all the way into the South
  • More gas keeps displacing coalmoving to Mexico, and benefiting slightly from a modestly improving economy
  • The number of gas (and especially oil) rigs has dropped off big-time

"Despite it all, natural gas is in the doldrums  price-wise. The HH is $2.83, and some recent negative basis-priced gas has sold for 99 cents.  The worst of it all, however, is that it is hard to see the end of the “tunnel”. There is no futures monthly price that hits $4 until 2022."


For our Alaskan and Canadian decision maker friends: here is the face of worldwide oil & gas competition from Energypedia:

GoM: Statoil adds acreage in the Gulf of Mexico Central Lease Sale
http://www.energy-pedia.com/news/gulf-of-mexico/new-162961?editionid=101595

Brazil: Petrobras breaks record for well drilling depth in Sergipe-Alagoas Basin http://www.energy-pedia.com/news/brazil/new-162960?editionid=101595

Ophir Energy announces full year results - updates operations  http://www.energy-pedia.com/news/general/new-162959?editionid=101595

Tower Resources announces corporate update
http://www.energy-pedia.com/news/general/new-162958?editionid=101595

Trinidad: Range Resources announces Trinidad operational update 
http://www.energy-pedia.com/news/trinidad/new-162957?editionid=101595

Iran upstream could be open for business this year
http://www.energy-pedia.com/ajax.aspx?advertid=11045&referurl=http://www.af
razadvisers.com/toolkit.html&editionid=101595

Colombia: Anadarko awards CGG the largest proprietary 3D marine seismic survey in Colombia
http://www.energy-pedia.com/news/colombia/new-162956?editionid=101595
 
Bulgaria’s Mizia Oil and Gas awarded four exploration blocks in Bulgaria  <http://www.energy-pedia.com/news/bulgaria/new-162955?editionid=101595>

UK: Britain hands lifeline to North Sea oil industry with tax cuts  http://www.energy-pedia.com/news/united-kingdom/new-162954?editionid=101595

UK: Grangemouth operator INEOS begins fracking consultation  http://www.energy-pedia.com/news/united-kingdom/new-162953?editionid=101595

Australia: Gardline CGG to acquire Gippsland 2D infill seismic survey for Geoscience Australia  http://www.energy-pedia.com/news/australia/new-162952?editionid=101595

US shale oil firms brace for more pain as crude resumes slide  http://www.energy-pedia.com/news/usa/new-162951?editionid=101595  

UK Budget lays strong foundations for regeneration of the UK North Sea  http://www.energy-pedia.com/news/united-kingdom/new-162950?editionid=101595
Oil & Gas UK welcomes the Chancellor’s decisive move to restructure the North Sea tax regime ....

GoM: Gulf of Mexico Lease Sale 235 yields $539 million in high bids on nearly one million acres in Central Planning Area http://www.energy-pedia.com/news/gulf-of-mexico/new-162949?editionid=101595

Canada: Conoco to cut 7 percent of Canadian workforce
http://www.energy-pedia.com/news/canada/new-162948?editionid=101595  ConocoPhillips plans to cut about 7 percent ... as tumbling oil prices have made its operations in the country less profitable.

Israel's Tamar group to sell gas to Egypt via pipeline
http://www.energy-pedia.com/news/israel/new-162947?editionid=101595.  A group of private customers in Egypt has agreed to buy at least $1.2
billion of natural gas from Israel's ....

Iraq: Gulf Keystone ramping up Shaikan production
http://www.energy-pedia.com/news/iraq/new-162946?editionid=101595  

Morocco: Mubadala Petroleum signs geological study agreement with Morocco  http://www.energy-pedia.com/news/morocco/new-162945?editionid=101595

Indonesia: Statoil awarded new licence offshore Indonesia  http://www.energy-pedia.com/news/indonesia/new-162944?editionid=101595


While the U.S. administration characteristically fumbles with global warming and Arctic regulatory issues, Russia -- and to a similar but smaller degree, Canada -- moves out smartly to take the initiative while establishing and enforcing jurisdiction -- and sovereignty.  More below....  -dh

Barents Observer by Atle Staalesen.  As Russia is unfolding a major combat alert drill in its Northern Fleet, the country’s government approves the setup of a new federal Arctic Commission. Headed by hardline Deputy Prime Minister Dmitry Rogozin, the Commission will coordinate all government authorities involved in regional developments.

Included in the Commission mandate are issues of social, economic, political, as well as military, importance, newspaper Kommersant reports.

...

Rogozin will have five Commission deputies to his disposal: Minister of Natural Resources Sergey Donskoy, Minister of Energy Aleksandr Novak, Minister of Economic Development Aleksey Ulyukaev, Minister of Transport Maksim Sokolov and Deputy Secretary of the national Security Council Vladimir Nazarov. A total of 60 people will be included in the new structure, among them representatives of the oil and gas industry, the ministry of Defence, the FSB, the Presidential Administration and regional governors.

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3-19-15 Lessons For Alaska From Canada

19 March 2015 4:39am

 

Lessons For Alaska From Canada:

Investors Can Go Anywhere.  Get "your act together".  You're not the "only game in town!"      -dh

CBC News.  ConocoPhillips says it doesn't plan to do any more exploration work on its parcel in the N.W.T.'s Canol shale oil play for the foreseeable future.

...

"Although a significant discovery declaration and subsequent significant discovery licence is a positive indication for a play, it does not indicate commercial viability," said Kristen Ashcroft, a spokesperson for ConocoPhillips.

The company says it will return to the site next winter, but only to suspend a well — "a common industry practice to verify the secure condition of a well for the long term," said Ashcroft.

The company would not confirm whether its discovery is oil or natural gas or both.

CBC News.  The sixth annual Yukon First Nations Resource Conference brings together First Nations and mining companies ....

"I see some very, very encouraging signs and I also see some extreme negativity with the bureaucracy in place and some of the regulation and some of the bickering,” says Steve McAlister, director of Sepro Mineral Systems Corp, a company that provides equipment to the mining industry. 

...

"Mining companies can go anywhere in the world, and they're going to go where the risk is least and the projects are most lucrative,” he says.

...

He says companies need certainty when they’re considering investing, and says he, personally, is feeling “ambivalent” about spending his company’s money here.   

His advice for all governments?  "Make sure you have your act together because the Yukon isn't the only game in town."

McAlister adds companies do not like surprises … such as court cases.


Point of personal privilege: Nephew Dave Harbour of Lamar, Colorado makes the clan proud yet again!  Lamar Ledger by Chris Frost.  

Southeastern Developmental Services had a special morning Thursday, March 12, as the American Legion Post 71 stopped by to present the organization with a new American Flag.

...

Post Financial Officer and Adjutant Jesse Herrera said SDS was ready for a new flag.

"What a better day could you have for doing this," he said. "There are so many great people here and this is what we do."

...

Dave Harbour called the gesture a cool time.

"We sure do appreciate Jesse and the guys from the American legion coming down and bringing a new flag to us," he said. "It sure meant a lot to all the clients down here."

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3-18-15

18 March 2015 6:24am

Today's Energy In Depth Energy Links.  (More coming)

NATIONAL

New HF rules coming in ‘days’Houston Chronicle. The Obama administration is poised to impose new rules for hydraulic fracturing on public lands. The mandates are aimed at boosting the integrity of wells on public lands to ensure oil, gas and other fluids are contained within them. The rules will also require recovered water and other fluids to be safely stored at the sites. The Bureau of Land Management is set to release the final regulation “in the next few days,” Interior Secretary Sally Jewell told reporters, following a speech at the Center for Strategic and International Studies. NOTE: U.S. News & World Report also reports.
 
Production eases back in key U.S. oil regionsHouston Chronicle. The shale drilling juggernaut that has flooded the market with oil and forced prices to their lowest levels in years is starting to show signs of weakening in the nation's biggest oil patches. Oil output in three of the largest shale plays will shrink for the first time in six years, the government reported Tuesday, offering one of the first signs that widespread corporate cutbacks are making their mark in the remote fields that drove the dramatic and rapid surge in U.S. production.
 
Dems to reintroduce 'Frac Act,' other drilling billsE&E News (sub req’d). Democrats are reintroducing four bills that would increase federal regulation of oil and gas drilling, though passage remains unlikely. House Democrats are calling the bills the "Frack Pack." They would increase federal regulation of the effects of drilling and hydraulic fracturing on water and air. On the other side of the Capitol today, Sen. Bob Casey (D-Pa.) is to reintroduce one of the four bills, called the "Frac Act." It would repeal a provision environmentalists call the "Halliburton Loophole" and allow U.S. EPA to regulate hydraulic fracturing. Rep. Diana DeGette (D-Colo.) is introducing the bill in the House.
 
Natural Gas Output Has BofA Bracing for Sub-$2 PricesBloomberg. Relentless U.S. production gains that caught many natural gas traders by surprise have triggered a 30 percent plunge in prices since November. Bank of America Corp. says the selloff isn’t over and is telling clients to brace for the possibility of sub-$2 prices for the first time in three years. Gas output will climb to an all-time high of 78.39 billion cubic feet a day this year, an increase of 50 percent over 2005, led by shale reservoirs in Pennsylvania, Louisiana and Texas, government data show.
 
Report: Oil firms' rising debts add downward price pressureBloomberg. The oil and gas industry’s $2.5 trillion of debt may compound the drop in crude prices, as companies maximize output to meet their financial obligations, according to the Bank for International Settlements.
 
U.S. working to cut flaring of natural gasUPI. The U.S. government will roll out new standards in the coming months to cut the amount of shale natural gas wasted through flaring, the interior secretary said. Much of the natural gas associated with shale oil deposits is burned off, or flared, because of a lack of infrastructure needed to utilize the resource.
 
HF law opens North Carolina to drillingAssociated Press. Rules governing the hydraulic fracturing method for drilling natural gas are expected to take effect Tuesday, creating the potential for drilling to start later in the year. The set of 120 rules that govern issues including well construction, water testing and buffer zones was developed by the state Mining and Energy Commission over nearly two years and approved in December by a separate state panel.
 
Are the good times over for growth in US shale gas? Reuters. U.S. natural gas production could decline in 2016 for the first time in 10 years, driven by low oil prices after a decade of gangbusters growth from shale plays. While most analysts forecast gas production will continue growing year-over-year, albeit at a slower pace, a couple of outlier analysts believe low oil and gas prices will prompt drillers to cut spending enough to reduce gas production next year.
 
Cnooc's North American Unit Slashes 13% of WorkforceWall Street Journal. The North American headquarters of China National Offshore Oil Corp. said Tuesday it would cut about 13% of its workforce due to the slump in global oil prices, raising questions about terms of the Chinese state-owned company’s accord with the Canadian government.
 
Feds: Market forces pushing offshore rig counts downHouston Chronicle/Fuel Fix. The government’s top offshore energy overseers on Tuesday defended the Obama administration’s approach to oil and gas drilling along the nation’s coastlines, insisting that market forces — not federal regulations — were discouraging the activity. About 46 rigs were working in the Gulf of Mexico as of March 13, according to Baker Hughes — down from 55 on average last year.
 
Oil company Quicksilver Resources files for bankruptcy protectionReuters. Quicksilver Resources and its U.S. units filed for Chapter 11 bankruptcy protection on Tuesday, adding to a list of oil and gas producers who have folded amid low oil prices. The company listed assets of $1.21 billion and liabilities of $1.35 billion in its bankruptcy petition in a Delaware court.

INTERNATIONAL

Ineos seeks to convince Scots over shaleFinancial Times. A charm offensive has been launched to convince Scots of the benefits of shale gas “fracking”, with chemicals group Ineos promising to pump hundreds of millions of pounds into communities where the controversial technology is used. The campaign underscores the company’s determination to tap unconventional gas to secure the future of its Grangemouth refinery complex despite a fracking moratorium announced by the Scottish government in January.
 
Northern Territory shale gas potential more than hot airABC Online. The Northern Territory's shale oil and gas potential has geologists excited. The shale industry is in its infancy in the Territory, with only a handful of gas wells drilled so far, however a reserve known as the Beetaloo Sub-basin, within the McArthur Basin, has encouraged further exploration.
 
Korean, U.S. experts discuss shale gas technology cooperationKorea Herald. The Korea Gas Corp. and New Mexico-based research center Sandia National Laboratories jointly hosted the “2015 Korea-U.S. Shale Gas Technology Cooperation Symposium” as a follow-up measure after the two countries signed a pact on close collaboration in the energy sector in 2013. Sandia National Laboratories is a contractor to the U.S. Department of Energy’s National Nuclear Security Administration.
 
Shell, Petronas, Statoil among winners of 11 Indonesian oil, shale gas blocksPlatts. Indonesia has awarded 11 blocks -- eight conventional and three shale gas blocks -- with major oil and gas companies Shell, Statoil and Petronas among the winners, Naryanto Wagimin, upstream director at the Energy and Mines Ministry, said Wednesday.
 
SA must take the long view on shaleBusiness Day, Editorial. LEAD times are long in the oil and gas industry. It is therefore doubtful that government tardiness in creating a legislative and regulatory framework for shale gas exploration in the Karoo had anything to do with Shell’s decision to scale back its investment in hydraulic fracturing (fracking).
 
Oil glut: 116 firms cut $120bn from 2015 budgetNational Mirror. About 116 companies have cut their 2015 capital budgets by 24 per cent, amounting to $120bn, as a result of continued crash in the prices of crude oil in the international market. Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, who disclosed this at the ongoing Nigeria Oil and Gas conference in Abuja yesterday, said the cut may go up to 40 per cent as prices continue to slide.
 
CALIFORNIA

Temporary HF ban rejected by Monterey County supervisors. Monterey County Herald. Arguing there’s no evidence of an immediate threat to public health, a split Board of Supervisors declined on Tuesday to move ahead with a temporary ban on the controversial oil extraction technique known as fracking, at least until the state finalizes its own rules. NOTE: KCBX Radio also reports. 

COLORADO

Brighton adopts new oil and gas development codeDenver Post. After three years of negotiations, the Brighton City Council on Tuesday night unanimously adopted new rules and safety policies for oil and gas development sites in the city. Brighton's old land use and development code was a decade old and did not meet state requirements for hydraulic fracturing sites.

NORTHEAST

Shell certified as environmentally conscious drillerTribune-Review. A partnership between environmentalists and shale gas producers awarded its second certification to an energy company for meeting the group's voluntary standards for environmentally conscious drilling in Appalachia, signaling progress in an effort some critics complained was slow to develop. Royal Dutch Shell and the Center for Sustainable Shale Development planned to announce Wednesday that the company met the partnership's 15 standards for protecting air and water during gas drilling and production. In September, Chevron became the first company to gain certification.
 
Industry says Wolf's severance tax would force them to overpayAssociated Press. David Spigelmyer, president of the Marcellus Shale Coalition, an industry trade group, said the floor would make the effective tax rate 13 percent. Wolf's proposal "totally ignores what's going on in the marketplace in Pennsylvania," Spigelmyer said. "You're talking excessive tax rates that are well above any other shale producing region in the U.S." Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, likened it to an income tax that assumes every worker earns $100,000 per year. "It makes no sense whatsoever," he said.
 
Wyoming County resident appointed to DEP oil and gas boardScranton Times-Tribune. Emily Krafjack’s voice may not be the loudest on the subject of shale gas, but it has earned her a seat at the table where major decisions on drilling regulations are made. Last week, the Wyoming County native became one of the first nonvoting appointees to the state Department of Environmental Protection’s Oil and Gas Technical Advisory Board, where members tinker with fine details of proposed regulations.
 
Pennsylvania nears end of royalties investigationTribune-Review. Pennsylvania state investigators are close to wrapping up an investigation into complaints that landowners in northeastern Pennsylvania are being cheated out of royalties by natural gas companies exploring the Marcellus shale, Attorney General Kathleen Kane said Tuesday.

OHIO

Ohio State planning $2.5M CNG station in Kenny Road areaColumbus Business First. Ohio State University wants to build a compressed natural gas station and have it running by next year. The university issued a request for qualifications Tuesday to design and build a $2.5 million CNG station in the Kenny Road area.
 
Utica Shale: Weak vs. Strong is comingShale News Media. Chris Doyle, the executive vice president of operations for Chesapeake Energy Corp., believes that over the next few years it will be clear who the weak and strong are in the Utica shale. Doyle’s experience in the Utica Shale started back in 2011 while managing the Appalachian division of Anadarko Petroleum Corp. At the time, the company had acquired about 400,000 acres in the Utica Shale located in Ohio and drilled its first well. Doyle left Anadarko in mid-2013 for a similar job with Chesapeake. Doyle soon learned that the Utica wasn’t as oil rich as many had hoped, but the region’s natural gas and natural gas liquids were ample.
 
Number of drilling rigs in Ohio continues to dropAkron Beacon Journal. The number of drilling rigs in Ohio’s Utica Shale region continues to drop. There are 27 rigs drilling in Ohio, as of March 14, the Ohio Department of Natural Resources said. That’s down from 37 rigs Feb. 28 and from 49 rigs Jan. 3, according to state records.
 
Despite falling prices, Ohio oil production increasesColumbus Dispatch. Oil and natural-gas prices might be low, but production in Ohio’s Utica shale region next month is expected to continue rising. The forecast, issued by the Energy Information Administration, shows the Utica is one of two shale regions in which oil production is on track to grow, while the country’s other five regions are projected to have reductions or flat growth.
 
HF-tax ballot issue? Columbus Dispatch. Maybe Ohio’s Republican lawmakers and the oil-and-gas interests who command their loyalty don’t believe Gov. John Kasich when he hints at a possible statewide ballot issue to hike the state’s puny severance tax. They should, because a ballot issue is possible and would appeal to voters.
 
Lawmakers Scrap Plan To Allow Fracking In State ParksWOSU Public Media. Plans to allow fracking in Ohio state parks appear to be dead for now after lawmakers removed the provision from a bill making its way through the state legislature. Democratic State Representative David Leland says he is pleased that lawmakers have struck out part of a bill being considered by the Ohio House that would allow fracking in state parks – though backers said it would have been thousands of feet underground.

TEXAS

Denton fracturing ban tees up local control fightMidland Reporter-Telegram. As policy dilemmas go, the one triggered when Denton voters decided last fall to ban hydraulic fracturing in their city looked like a whopper: The oil and gas industry versus local control — two things Texas holds dear — in intractable opposition. There seemed little doubt lawmakers would weigh in upon their return to Austin. But four months after the North Texas city’s historic vote, top state lawmakers don’t appear to be scratching their heads. Petroleum is winning hands down, and local control appears headed for a beating.
 
Devon shows off new digsSan Angelo Standard Times. A green beacon flashed in Devon Energy’s San Angelo control room, indicating all systems were a go on a production well miles away in Sweetwater. Three desks held computers hooked up to a dozen monitors and four wall-mounted TVs, scanning about 600 wells peppered around San Angelo and Ozona, checking oil and water levels and incoming production figures.
 
Small Business Forum highlights opportunities in the Eagle Ford ShaleSan Antonio Business Journal. Crude oil may be at six-year low prices but small businesses in the Eagle Ford shale region just south of San Antonio are not sitting idle. The Texas Governor's Office held a Small Business Forum at the La Vernia High School auditorium on Tuesday morning.
 
Natural Gas Facility Closer to Breaking GroundKRGV. Texas LNG announced they are preparing to file their last application needed for federal approval before they can start building. The company plans to build a facility along the Brownsville ship channel that will convert natural gas into liquid form. The liquid natural gas will then be shipped by boat across the world.
 

3-17-15 Acknowledging the Day

17 March 2015 8:21am

Petroleum News by Kristen Nelson: The Regulatory Commission of Alaska and the House Energy Committee are struggling with overlapping issues related to the ability of independent power producers to sell electric power to existing utilities and to access transmission lines. The committee has held a number of hearings on House Bill 78....


Happy Saint Patrick's Day: What A Man!

WND News.  St. Patrick of Ireland is one of the world's most popular saints. An icon of the Irish and the reason we wear green on St. Patrick's day, this influential saint is shrouded by myth and legend. There are many stories about St. Patrick, but the real story is much different than what we would imagine. He was not a leprechaun or an elf, nor did he find a pot of gold at the end of a rainbow. What he did do brought something more valuable than gold into the lives of thousands. 



St. Patrick was born in Britain around 389. As a teenager, he was captured during a raiding party and taken to Ireland as a slave to herd and tend sheep. Ireland at this time was a land of druids and pagans. St. Patrick learned the language and practices of the people who held him. But he turned to God during his captivity and became a devout Christian. 



After a miraculous escape from Ireland around the age of 20, he was called back in a vision from God. He returned to the place of his captivity to preach the gospel. There he spent 40 years, converting all of Ireland to Christianity. 



He spent his life building churches, living in poverty and enduring much suffering and hardship for the sake of Christ. Legend has it that St. Patrick used the shamrock to explain the Trinity, and it has been associated with him and the Irish ever since. 



William Federer's biography lifts the shroud of legend from St. Patrick and covers in detail his true life story. Federer draws on the historically confirmed writings of St. Patrick such as "The Confession of Patrick" and the "Letter to Coroticus." The text of the book is sprinkled with pictures to illustrate the culture, landscape and people of Patrick's birthplace in Roman Britain and his mission field in Ireland. Federer includes chapters on his captivity, conversion, years in Europe, calling, trials, faith and legacy. 



By his death in A.D. 461, Patrick had founded 300 churches and baptized 120,000 believers – and his followers re-evangelized Europe! We have much to learn from the life of this humble, pious and passionate man. The story of his devotion to Christ and to preaching the gospel will be an inspiration to every reader.

3-16-15 The Future of Oil Prices According to An Astute Reader - Senators Sullivan's Reputation Spreads

16 March 2015 5:35am

Dan Sullivan, US Senator, Alaska, Maiden Speech, Master Resource, Dave Harbour PhotoOur friend, Rob Bradley, Master ResourceRob Bradley (File Photo-R) of the Master Resource Blog, saw U.S. Senator Dan Sullivan's (NGP Photo) Maiden Senate Speech on this website and has further promoted it to his large international audience (here).  (Our original coverage and speech text)  -dh


Halloran Opines On Proposed Ohio Severance Tax and Future of Oil Prices

James Halloran, Energy Analyst, Ohio, Severance Tax, Oil Prices, Northern Gas PipelinesRepublican Governor Proposes Ohio Severance Tax?  Our friend, Independent Energy Analyst James R. Halloran (File Photo) just returned from the Ohio Oil and Gas Association Winter Meeting where he reported that, "the big issue is Governor Kasich’s proposal for a (completely mis-named) “severance tax”. We will have a lot more on that topic after (maybe) cooling off slightly. Momma did not train this writer to suffer fools gladly, and that is what Ohio is faced with on the topic of taxation of the oil & gas business."

Steve Heimel of APRN retires, Personal, Photo by Dave Harbour(Point of personal privilege: our friend and longtime APRN senior reporter Steve Heimel (NGP Photo)  is retiring after decades covering countless Alaska issues.  -dh)

On oil prices, Halloran says, "The overwhelming question (outside of Ohio) is,  When will oil prices go back up (how high is a second implicit question)? That question was posed to us numerous times at the Winter Meeting. Our standard answer is that oil pricing is a process, not an event. Assume for the moment that Brent oil (we try to stay with the international price for analysis purposes) were to return to $70 by midyear (this is NOT a prediction; it is for discussion purposes): Can we tell them what will happen to the price in the next six months after that?

"The relevant questions that need answering first", he says, "are:

  • "Have there been fundamental changes in the market that will cause crude oil to trade at a different price range than $94-114 for an extended period of time? If so, what are they, and how will they affect the industry longer term?
  • "If the the major inputs to the current market are more likely of a transient nature, what will have to change for prices to recover? Will a price recovery cause some of these transient inputs to recur?"

He elaborates that, "there are some effects that are of a transient nature (maybe) that are significant contributors to the oil price drop, of which we have commented heavily in the last several months:"

  • "The strong dollar, which is following a trend to get even stronger, and which will likely provide a major head wind for any near-term recovery
  • "Massive amounts of capital and incredibly low interest rates, putting many PE, Major, and vulture players ready to jump into the Energy pit. This is related to the strong dollar, and will provide no relief from the fact that there are too many players.
  • "Too much production, which is having a hard time to find a home (see the chart of inventories below, courtesy of Mike Bodell), which graphically illustrates the situation.
  • "Much of the capital cutbacks are coming out of the hide of service companies, so that lower costs will not really bring lower production volumes soon."

"No one is cutting back to the point of ceding “market share” to others. This capitalism at its purest. Unfortunately, it is being done in an environment in which central banks are imposing zero effort to observe capital discipline: Nothing. Nada. Rien. Zip.

"The only “good news” (but less helpful than one might think) is that the rig count continues to drop.  It is too much to try to get trends from the rig count on a weekly basis, so we will be looking at it monthly. This should make it easier to spot trends. Our observations are as follows:

  • "The downturn in rigs is much more directed toward oil (no surprise). Oil rigs are down 45% from our base date last December, compared to 25% down for gas rigs. The Marcellus, Utica, and Eagle Ford, which have large dry gas plays, are not down in rigs as much as the other basins.
  • "Vertical rigs are down much more than horizontals. Also, Small Basins are harder hit than the major basins.  This consistent with the WSJ article, which indicates that major players are still drilling big wells (just not completing them).

"BOTTOM LINE:  The beatings will continue until capital discipline improves and/or the number of players is reduced.  There may be rallies, but they will likely be shallow."  (Note: While Halloran has sources to back his statistics, we removed them in the interest of space.  -dh)

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