Editors: Diana Stares, Jack Myint
Persistent low prices didn't put a crimp in shale gas production in Pennsylvania during the second half of 2014, as drillers set a record and expect to continue the increases. Shale companies produced more than 2 trillion cubic feet of gas in the second half of the year, bringing the state's year-end total to more than 4 trillion cubic feet of gas, according to figures released Tuesday by the state Department of Environmental Protection. The 30 percent annual increase over 2013's record continues a trend of significant year-over-year increases. “It's rates that a few years ago nobody really thought possible,” said David Yoxtheimer, a researcher at Penn State University's Marcellus Center for Outreach and Research. “Basically, we're seeing a trillion cubic feet of growth per year. I think if you were to even ask the industry if they were to be expecting that…they would not have guessed those kinds of rates of increase.”
A Pennsylvania congressman wanted to know how his state and two neighboring states oversee the disposal of the waste generated by fracking oil-and-gas wells. Now, Matthew Cartwright has some answers, and he finds them late–and lacking. Cartwright, a Democrat from eastern Pennsylvania, launched the investigation in his state last October. A month later, he expanded his inquiry to Ohio and West Virginia. Responses from two states failed to provide substantive, detailed information to the congressman while one state has ignored the request. Among the issues Cartwright raised:
How each state inspects oil-and-gas waste facilities.
What information the states require to pinpoint what's in the waste.
An explanation of the process for handling complaints regarding fracking waste disposal.
Answers to those questions are important for both residents and the environment in regions that are disposing of huge quantities of fracking waste, Cartwright said in an email interview.
A new advisory board focusing on the conventional oil and gas producers often overlooked in the surge of shale gas drilling will examine how best to regulate the legacy wells in Pennsylvania. The state Department of Environmental Protection announced Tuesday that the Conventional Oil and Gas Advisory Committee will advise the department on conventional oil and gas extraction practices and regulations and will be structured like the existing Oil and Gas Technical Advisory Board. The older board will focus solely on practices and regulations of so-called unconventional drilling, which involves extraction from deeper shale foundations. Both groups will provide regulatory recommendations to the state, with the hope of creating more transparency, acting DEP Secretary John Quigley said. “Creating this advisory committee will increase dialogue between DEP and the regulated community as well as broaden the interests we hear from,” he said.
No land. No financing. No permit. The Pennsylvania Department of Environmental Protection has pulled the waste management permit for a firm that had planned a waste-to-energy plan in Allentown. Delta Thermo Energy Inc. had proposed a 48,000-square-foot waste-to-energy facility along Little Lehigh Creek. The city signed a 35-year lease with the Bucks County-based company, but terminated the deal last September, citing financing issues on the company's part. The DEP issued a waste management permit in May 2014. The state has pulled the permit because Delta Thermo does not have the land on which to build the plant or the necessary financing, according to an email from DEP spokeswoman Colleen Connolly.
When Gov. Tom Wolf issued an executive order prohibiting the state from signing new leases for gas drilling beneath state parks and forests in January, he left a third category open for business: public lands managed by the state’s conservation agency. The Department of Conservation and Natural Resources routinely leases publicly owned gas rights far beneath the beds of streams and rivers to companies drilling horizontally from well pads built on neighboring properties. The Wolf administration plans to let that continue. "When a stream is outside a state forest or state park and runs through private property, gas leasing remains an option as long as applicable laws are followed,” said Jeffrey Sheridan, Mr. Wolf’s press secretary. Since 2010, DCNR has signed 21 leases for natural gas drilling under 3,500 acres of publicly owned waterways, mostly in southwestern and north-central Pennsylvania. Twenty of those leases were signed in the last two years, including seven that were signed on Jan. 9.The state has raised $19 million in bonus payments and royalties from the contracts.
In many ways, the Keystone State is the epicenter of the energy transition underway in this country. Historically an important coal producer, Pennsylvania remains the fifth largest coal-producing state, accounting for 5 percent of the nation’s total coal production in 2013. And the state is on the front lines of the booming Marcellus shale gas production. But how far along is the state in transitioning to cleaner energy, and how much farther could it go in developing renewables? As an exporter of not only coal and natural gas, but also electricity, Pennsylvania is clearly an energy state. But one that is in a state of transition. Pennsylvania coal production has trended downward in recent years, falling from about 74 million short tons in 2001 to 51 million short tons in 2013, a decline of about 31 percent.
Brent crude futures fell by more $1 to $61.22 a barrel, while US crude was also down more than a $1 to $52.28. Among the oil majors, Chevron shares fell 1.4% while Exxon Mobil dropped 1.3%. After closing at a record high on Tuesday. the S&P 500 fell 3.43 points to 2,096.91 while the Dow Jones dropped 37.57 points to 18,010.01. The tech-heavy Nasdaq index was down 7.39 points at 4,891.87. The biggest faller on the Nasdaq was Fossil Group, which sank 15% after the watch and accessories company's fourth-quarter results fell short of expectations. Investors were also digesting a raft of US economic data. Figures from the Labor Department showed that falling energy costs meant that US producer prices dropped 0.8% in January, the biggest decline for more than five years. Meanwhile, the US Fed said factory production rose by 0.2% last month, an improvement from December's reading of no growth. In the property market, the number of housing starts fell 2% in January to an annual pace of 1.07 million units, the Commerce Department said. Despite the slight fall, the rate was still up 18.7% from a year earlier.
Oil prices hitting the lowest in five years has instilled fears in the minds of the students. It is both an inside joke and subject of serious literature among petroleum evaluation engineers to forecast the oil and gas prices with certainty. The oil barrel price plummet can make the students pay a huge price, even more so for petroleum engineering students who will graduate in 2015 looking for full-time opportunities. Not only are job options cut for students, but the oil field service companies are laying off employees in huge numbers, and it is taking a toll on families earning from the oil industry. According to the Houston Business Journal, Houston is currently experiencing a setback in the oil and gas sector. But the other industries, like automobiles, transport and construction, are expected to flourish, though the diverse economy might slow down. The catalyst for the world-wide oil price drop is complex. The oil and gas industry is more than 150 years old and is growing tremendously each day with new forms of technology. The shale boom in the United States has added to its energy independence, with its production increasing every year and growth seemingly ceaseless. As Bloomberg reported, it wasn’t until recently that the OPEC nations decided to suppress this burgeoning industry by not cutting back on production in an overly supplied market. This resulted in the plunging oil price, forcing U.S. shale oil producers to panic.
BP Energy (ticker: BP) released its latest edition of the 2035 Energy Outlook on February 17, 2015, complete with supporting materials, a press release and a webcast. The landing page of the report can be accessed by clicking here. BP stopped short of calling its projections a “crystal ball,” but says we can expect the following events to occur by 2035 based on trends in the evolving oil and gas industry: The need for oil imports in the U.S. is expected to evaporate in the 2030s, thanks to the continued development of tight oil. The projection, if achieved, is remarkable considering the global innovator of shale imported 60% of its oil demand in 2005. The number dropped to 52% in 2013 – the same year net energy imports to the U.S. reached its lowest point in 20 years. The Energy Information Administration reported last week that imports of light grade crude have already been virtually eliminated.
Historically, the prices of oil and natural gas (on an energy-equivalent basis) have moved together, with gas typically selling at a discount to oil. Folks in the industry say that’s because you can’t carry natural gas in a bucket. (They think that’s funny.) The prices diverged starting in about 2006. The global economy was booming, pulling up the price of oil. Natural gas production was about to increase rapidly in North America. Oil is a global market, and increased production here in the United States and Canada reduced our oil imports, which spread the price impact over the world. Natural gas, in contrast, moves mostly through pipelines and is thus a continental market. Increasing production impacted only North American natural gas prices. Because the price impact was not spread around the world, it was much more pronounced.
Republicans and Democrats appear increasingly convinced that the path to victory in the 2016 campaigns depends on the ability to articulate and advance policies that support the middle class and sustain the steady economic recovery witnessed during President Barack Obama’s second term. Obama has made it clear in recent weeks that he will push vigorously for a new “middle-class economics” during his last two years in office, all but ensuring that his agenda will shape the debate over who succeeds him. In the meantime, Jeb Bush’s new super PAC says the last decade has been a lost one for much of America except the top earners. It is reassuring to hear leaders of both parties professing concern over the stagnation of the middle class, a pillar of our nation’s economy. Yet once again, proposals have surfaced on Capitol Hill to impose burdensome, new taxes on a sector of the economy that quietly and helped set the stage for the current recovery: the energy sector.
The average price of a gallon of gasoline in the United States rose 13 cents in the past two weeks, following a nine-month price slide, due to a rise in the price of crude oil, according to the Lundberg survey released Sunday. Regular grade gasoline rose to an average price of $2.20 per gallon, according to the survey dated Feb. 6, up from the previous survey on Jan. 23. Gasoline is still down $1.10 a gallon from the same period a year ago, a decline driven by losses in the crude oil market from its June peak. But with crude oil prices rebounding in recent weeks, U.S. consumers can expect to pay more at the gas pumps, said survey publisher Trilby Lundberg. "Crude oil hit a bottom and has had a moderate rebound that has worked its way partially to the gas pumps," Lundberg said. "We can expect a few more pennies of that waiting in the wings."
Last month, Russia announced that it would shift all its flows of natural gas to Europe via Turkey, instead of Ukraine, in an effort to counter its decreasing influence over the European gas market.
"Our European partners have been informed of this and now their task is to create the necessary gas transport infrastructure from the Greek and Turkish border," Alexei Miller, head of the Russian state oil giant Gazprom, said in a statement. And now Hungary, a European Union (and NATO) member, has bolstered Moscow's push to redraw the European gas map. "It would be a good investment for Hungary if it makes sure that Turkish gas goes through Greece, Macedonia, and Serbia to Hungary," Hungarian Prime Minister Viktor Orbán said after negotiations with Russian President Vladimir Putin in Budapest on Tuesday.
Asia, specifically India and China, will ensure the long-term 20-year growth of the energy industry according to a new report published today by BP. According to the new edition of the BP Energy Outlook 2035, global demand for energy is expected to rise by 37 per cent from 2013 to 2035, or by an average of 1.4 per cent a year. Despite the dramatic recent weakening in global energy markets, ongoing economic expansion in Asia – particularly in China and India – will drive continued growth in the world’s demand for energy over the next 20 years. “After three years of high and deceptively steady oil prices, the fall of recent months is a stark reminder that the norm in energy markets is one of continuous change,” said Spencer Dale, BP’s chief economist. “It is important that we look through short term volatility to identify those longer term trends in supply and demand that are likely to shape the energy sector over the next 20 years and so help inform the strategic choices facing the industry and policy makers alike.”
As an island nation, Japan controls large swaths of ocean territory, about the sixth-greatest expanse of any country in the world, according to government data. That is stark contrast to its relatively meagre land area, which ranks near the middle of list, in 60th place. So it makes sense for Japan to look to the seas for renewable energy — something it hasn’t done so far. That is about to change, as the government is teaming up with two major industrial conglomerates, IHI Corp. and Toshiba Corp., to start field testing marine power generation in the near future. “Our goal is to enable large-scale marine energy farms,” said a Toshiba spokeswoman, noting that the nearest site for testing is the area off Japan’s southern Pacific coast, where the Kuroshio current flows northward. The initiative is an effort to develop new technologies to harness renewable energy and nurture future businesses opportunities as the need for renewable energy grows world-wide amid stricter regulations on coal in the U.S. and Western Europe. The Japanese government’s energy plan put forward in April 2014 called for an increase in use of renewable energy “to the greatest extent possible.”
Global reliance on hydroelectric energy production has only increased in the 21stcentury, even as our supply of hydropower has become increasingly uncertain due to climate change impacts, including glacial retreat. South Asia is a clear example: due to the high cost and political risks of importing fuels like oil or coal, countries in this region have increasingly turned to hydroelectric power for domestic energy production. But changes to the Himalayan hydro-ecosystem could severely disrupt future hydroelectric development in South Asia. Today, large regional electrical grids feed most global energy demand. To maintain constant supply and meet demand as efficiently as possible, different “tiers” of power plants tend to work together. “Base load” power plants, such as nuclear and coal generators, are most efficient when providing a constant supply of energy around the clock, as opposed to in short bursts to meet peak demand, and so form the backbone of most electric grids. “Load following” power plants are used to adapt to short-term changes in demand, typically shutting down at night or early morning.
The number of major contract awards across the global oil and gas industry has steadily declined during the last quarter of 2014, dropping to 117 contract awards, a 22 per cent decrease compared to 150 in Q3 2014, but on par with the 118 contracts awarded in Q4 2013, a report said. In the fourth quarter (Q4) of 2014, a total of 64 major contracts (EPC (Engineering, Procurement & Construction), Feed (Front End Engineering Design) and Subsea/SURF (Subsea, Umbilicals, Risers & Flowlines) were awarded across 53 upstream developments, rising 42 per cent from 45 awards in Q3 2014 and compared to 40 awards in Q4 2013, according to the EIC Monitor quarterly report from the Energy Industries Council (EIC), a leading trade association. A total of 33 EPC contracts, 6 Feed contracts and 25 Subsea/SURF contracts were awarded. The Mena region and Asia Pacific (including Australia) dominated activity this quarter, along with the US, with both regions accounting for 63 per cent of midstream EPC contracting activity in Q4 2014.
A HISTORIC change of roles is at the heart of the clamor and turmoil over the collapse of oil prices, which have plummeted by 50 percent since September. For decades, Saudi Arabia, backed by the Persian Gulf emirates, was described as the “swing producer.” With its immense production capacity, it could raise or lower its output to help the global market adjust to shortages or surpluses.But on Nov. 27, at the OPEC meeting in Vienna, Saudi Arabia effectively resigned from that role and OPEC handed over all responsibility for oil prices to the market, which the Saudi oil minister, Ali Al-Naimi, predicted would “stabilize itself eventually.” OPEC’s decision was hardly unanimous. Venezuela and Iran, their economies in deep trouble, lobbied hard for production cutbacks, to no avail. Afterward, Iran accused Saudi Arabia of waging an “oil war” and being part of a “plot” against it.By leaving oil prices to the market, Saudi Arabia and the emirates also passed the responsibility as de facto swing producer to a country that hardly expected it — the United States. This approach is expected to continue with the accession of the new Saudi king, Salman, following the death on Friday of King Abdullah. And it means that changes in American production will now, along with that of Persian Gulf producers, also have a major influence on global oil prices. America was once, by far, the world’s largest oil producer and exporter, and its swing producer. The Texas Railroad Commission determined “allowable” levels of production for Texas, the Saudi Arabia of the day. But by 1970, United States oil production had reached its high point of 9.6 million barrels per day and began to decline.
China Wants Its Own ExxonMobil. Here's How It Plans To Make That Happen.
China is considering merging its state-run oil and gas companies in the hopes that the resulting mega companies will be more efficient and able to compete with overseas rivals such as ExxonMobil and other supermajors, the Wall Street Journal reported Tuesday. “We want to create a big Chinese brand to better compete overseas,” one Chinese official told the paper. "We want our own Exxon Mobil." [Oilpro]
Eni To Engage In "Investment Optimization" Amid Price Downturn.
Eni said it would cut its 2015 Capex but did not indicate the size of the cut or where the reductions would be. "Oil prices are forecast to be significantly lower than the last year, due to an oversupplied global market. In the Exploration & Production segment, management will perform efficiency initiatives and investment optimization, while retaining a strong focus on project execution and time-to-market in order to cope with the negative impact of a lower oil price scenario," the company said its earnings statement. [Eni]
Oil Falls Toward $61 As Rally's Sustainability In Question.
Oil fell more than $1 toward $61 a barrel on Wednesday, failing to build on gains of over 1% in the previous session as analysts said a recent rally was overblown. Oil prices have risen more than 35% since hitting an almost six-year low of $45.19 in January, in an ascent fueled by lower industry spending and falling US rig counts. [CNBC]
Devon Energy: Production Beats Expectations, 2015 Capex Cut. Devon that operating revenue more than doubled and production surpassed its guidance. Devon joined the host of energy companies scaling back spending plans for this year amid the fall in oil prices, lowering its 2015 exploration and production budget by 20% from 2014. “We expect to sustain operational momentum in 2015 with the significant improvements we have seen in our completion designs and a capital program focused on development drilling,” management said. [Devon Energy]
Technip Sees Revenue Growth In 2015, Sustains Efficiency/Cost Reduction Plans.
"For 2015, based on our record 21 billion-euro ($24 billion) backlog, we are able to give clear guidance for revenue and profit growth,” Chief Executive Officer Thierry Pilenko said in a statement. The company said it has adapted to the lower price environment in the oil industry by cutting costs, reducing headcount and streamlining its vessel fleet. [Technip]
US E&P Brings COO Out Of Retirement As It Adjusts To Volatile Market.
Comstock Resources is bringing back its former Chief Operating Officer, Mack D. Good, from retirement, the E&P announced Tuesday afternoon. Good previously served as the company's COO from 2004 through March 2011. He also served in various other capacities from 1997 through 2004. Comstock also announced that Mark A. Williams, the Company's current COO, and Gerry L. Blackshear, Comstock's current VP of Exploration, are departing the company "to pursue other interests." [Oilpro]
Read Chesapeake's Lawsuit Against Former CEO Aubrey McClendon...And His Response.
Aubrey McClendon is being sued by the company he founded and of which he was once the helmsman. Oklahoma-based Chesapeake energy, the second largest natural gas player in the US, has filed a lawsuit against McClendon and his new venture for allegedly misappropriating sensitive trade secrets when he resigned from the company in April 2013. [Oilpro]
BP Sees Market Weakness Lasting Several Years.
On Tuesday, British major BP released its latest Energy Outlook 2035, which says that the current low oil price paradigm will likely "take several years" to overcome, even as global demand is projected to grow by more than a third in the next two decades. It is within this context that the British major explores the dominant trends and rearrangements of the global energy chessboard that it sees as likely over the next two decades. [Oilpro]
Aker Solutions Adjusts MMO Capacity In Norway On Market Slowdown.
The company will in 2015 adjust its workforce capacity within the maintenance, modifications and operations (MMO) market in Norway after a continued decline in activity levels. About 300 engineering and project management employees in the Norwegian MMO business may be affected, the company said. "Necessary adjustments will be made through normal employee turnover, reassignments to other parts of the company and dismissals." [Aker Solutions]
Berkshire Cuts Exxon Mobil Stake Amid Plunge In Oil Prices.
Warren Buffett’s Berkshire Hathaway Inc. exited a $3.7 billion investment in Exxon Mobil amid a slump in oil prices. Berkshire’s 41.1 million shares of Exxon cost on average $90.86 apiece in 2013, according to the latest annual report. A regulatory filing Tuesday showed Buffett sold the holding during the fourth quarter. The oil company traded for an average of $93.27 in those three months, so Berkshire could have sold the stake at a profit. [Bloomberg]