[ 14 July 2014 20:35 ]
Baku-APA. Iran and Russia plan to enhance cooperation in the field of natural gas by establishing a joint committee, APA reports quoting Press TV.
The committee will oversee equipment provisions, technology transfer, participation in oil and gas projects in the form of finance, as well as plans for foreign investment, Managing Director of the NIGC Hamidreza Araqi said.
Iran's National Iranian Gas Company (NIGC) and Russia's Gazprom will also be a part of the joint committee.
"Iran and Russia share common interests as the world's gas giants and plan to increase their share of the international market, and as such, the two sides have agreed on the new cooperation plan," Araqi said.
Iran, one of the world's top gas reserve holders, sits on more than 33 trillion cubic meters of natural gas.
Iranian oil shipments still restricted
Sanctions acknowledgement coincides with Kerry visit.
By Daniel J. Graeber | July 14, 2014 at 10:24 AM |
Tankers still restricted by aspects of international sanctions, Iran says. (UPI Photo/William S. Stevens/U.S. Navy)
TEHRAN, July 14 (UPI) --Iranian crude oil tankers are still restricted by international sanctions because of problems with insurance coverage, an official said Monday.
Ali Akbar Safaei, director of the National Iranian Tanker Co., said that, although sanctions in the company were lifted, getting insurance coverage was still restricted by international sanctions.
Iran last year secured modest relief from sanctions targeting its energy sector in exchange for agreement to curb some of its nuclear research activity.
U.S. Secretary of State John Kerry traveled Monday to Vienna to meet with Iranian Foreign Minister Javad Zarif and European delegates leading multilateral nuclear negotiations. The U.S. State Department said Kerry is expected to weigh Iran's willingness to make the "critical choices" necessary for a comprehensive agreement on nuclear issues.
Safaei last week said his company should make a strong recovery following a recent ruling from the European courts last week that it made a "manifest error" when imposing sanctions on certain Iranian entities tied to the nuclear sector.
Safaei said the ruling means EU sanctions against NITC are annulled.
NITC transports Iranian crude oil to export markets and is responsible for the distribution of oil products to Iranian ports.
Are These New Rules A Lift For Uranium?
The place is the West African nation of Gabon. Where the government is reportedly aiming to having a new exploration regime in place by the end of the year.
Officials from Gabon's state mining company Société Équatoriale des Mines told Mining Weekly last week that the rule change is designed to attract new investors to the local sector. By making it easier to explore for new deposits, and develop them after they've been delineated.
During the initial stages of such work, the new mining code will reportedly simplify procedures for licensing of exploration ground. The government will also create an office to organize and make available maps of licenses and possibly other exploration data--at one central location.
Officials also promised an "investor-friendly" tax regime for all of this work.
The changes certainly sound encouraging. Leading to the question: what metals might incoming investors look for?
The nation's only substantial mineral production is currently in manganese. Deposits of iron ore and possibly rare earth elements are also known.
But there's one commodity where Gabon could prove to be one of the most prospective places on Earth: uranium.
Gabon has long been noted as one of the few places with potential for basin-hosted uranium. The same type of geologic setting that's created high-grade mineralization in leading production centers like Canada and Australia.
In fact, Gabon is the only place on Earth where self-sustaining natural fission reactions have been observed in local uranium-bearing rocks. Suggesting that enrichment of the metal here may be particularly strong.
Exploration since colonial times has been minimal. So there's likely still lots here to be discovered. And the new rules should help in bringing some of that potential to light.
Here's to opening up,
By Dave Forest
This Top Oil Producer Hits a 6-Year Export Low
On the one hand, we've seen supply gradually coming back online in places like Libya. On the other, significant output has been threatened by growing violence in Iraq.
But now we can add one more wrinkle to this mix: Russia.
Reports this week from Russian Energy Ministry division CDU-TEK show that this petro-power is seeing a drop in crude exports.
For the six months to June 30, Russia's oil shipments abroad fell 5.3%, to 4.95 million barrels. Interestingly, Bloomberg notes that this is the lowest level of exports seen since 2008, when tracking of the data began.
This is potentially a critical event for oil traders. Pointing to a supply decrease on the order of hundreds of thousands of barrels. Enough to cause a tightening in markets like Europe and Asia, where Russia is a key supplier.
What's less clear however, is whether Russia's export dip is here to stay.
The decrease in crude shipments appears to be due to rising domestic production of fuel oil. With output of this commodity rising 5.8% in the January to May 2014 period--hitting a five-year high.
That obviously means a lot more crude being refined in-country. But that's not necessarily something the Russian government wants.
That's because fuel oil is a low-value product. Mainly produced by small, aging refineries.
Russian regulators have in fact been trying to discourage fuel oil production across the country. By raising export taxes on the product--a move that's reportedly set to continue.
The end goal is that export of low-value fuel oil should become uneconomic. Forcing refiners to upgrade their plants in order to produce more-desireable products like diesel and jet fuel.
We'll see how quickly that change comes. And if internal crude consumption continues to rise in the meantime. If the shift takes time, this trend could become a dark horse in supporting global oil prices.
Here's to keeping the crude at home,
By Dave Forest
Europe Considers Fracking to Cut Russian Gas Imports
July 12, 2014 8:32 AM
The political crisis in Ukraine, including its dispute with Moscow over the flow of Russian natural gas, has forced many European nations to reconsider their reliance on Russia for energy. Some nations are looking at new options for extracting natural gas at home, including the controversial process of hydraulic fracking.
Although much of Europe is dependent on Russian energy imports, the continent is believed to be sitting on 13 trillion cubic meters of shale gas, a significant reserve.
France, Poland and Ukraine share the largest amounts of shale gas, but reserves have been found in Romania, Bulgaria and the United Kingdom.
The presence of large shale gas reserves and the current crisis in Ukraine have sharpened the focus on Europe’s shale gas potential, according to Lucia Seybert, at the Wilson Center in Washington.
“With energy security it’s not just a matter of supply, it’s also a question of reliability. And one thing this thing may do, what might happen is, it may expedite some of these explorations of shale gas within the European Union,” Seybert said.
Still, Europe is believed to be years away from commercially exploiting shale gas. Poland, the United Kingdom and Romania are the farthest along - and expect to start exploration by 2020.
But extracting shale gas - using a technique called hydraulic fracking, is controversial. Most drilling sites in Europe are near populated areas and environmental groups have raised concerns about water and air pollution.
There also are political issues. European taxes on the industry and strict regulations create a challenge for extraction companies.
“It is much more complex extracting the gas in places like Poland and Central Europe than it is in the U.S. So we really need to better understand how much is there and how easily we can actually get it out of the ground,” said Eric Stewart, president of the Romanian-American and Polish-American Business Councils.
Energy companies also must battle a strong environmental movement and public opposition.
The process can help meet Europe’s energy needs if it complements conventional and renewable sources of energy like solar and wind, said
Keith Smith, a former U.S. ambassador to Lithuania, now a fellow at the Center for European Policy Analysis and an expert on fracking technology.
“I think hydraulic fracturing is one element that can help bring energy security to Europe, but it will take a long time. I think it can happen but it’s only one factor. There are a lot of other things that need to be done," he said.
Much of Europe’s gas flows through a pipeline that runs from Russia across Ukraine. But Ukraine has had trouble paying its gas bill to Russia’s Gazprom energy company. And earlier this year, Ukrainian protesters ousted the country’s pro-Russia president. The new government has signed economic agreements with the European Union, over Moscow’s objections. Moscow has signaled it may cut off gas to Kyiv, and thus to much of Europe.
With winter approaching, the current dispute looks similar to the crisis in 2009, when Russia stopped the natural gas flow to Europe in January, leaving millions of homes and businesses in the cold.
"The European Union has got burned - or, frozen, I should say - with the 2009 crisis so they really worked hard to prevent something like that from reccurring, and there has been much talk about the interconnection of pipelines, alternative sources and reverse flow mechanism, so we will see,” Seybert said.
Shale gas exploration will not achieve complete energy independence from Russian imports, but will lessen that dependence long-term.
That would be beneficial for both Europe and Russia, a country that needs a more diversified economy and less dependence on energy exports, she said.
Romania Expects to be Energy Independent Despite Ukraine Crisis
July 14, 2014 5:49 AM
Romania is expected to achieve energy independence by the end of the decade, due to shale gas and alternative energy sources like wind and nuclear power. It is the third most energy independent country in the European Union after Denmark and Estonia.
A neighbor of Ukraine, Romania has found itself in recent months close to Europe’s latest energy and political crisis, a crisis that threatens to disrupt Europe’s gas supply and throw the European Union into economic turmoil. Despite the continent’s dependence on Russian natural gas and oil, Romania is the only southeastern European country believed to approach energy self-sufficiency, and is mostly unaffected by the crisis in Ukraine.
Razvan Niculescu, the Romanian Secretary of Energy, said recent exploration efforts show Romania has significant offshore resources of natural gas in the Black Sea, with recovery expected to start by the end of 2019. These resources and unconventional shale gas will help Romania meet all its energy needs and even become an exporter of natural gas.
Romania already meets 80 percent of those needs from its own oil, gas, hydro, coal and nuclear energy sources, and imports the remaining 20 percent of gas and oil from Russia - unlike Ukraine and Bulgaria, which depend almost entirely on Russian natural gas imports,
Besides a significant supply of offshore gas in the Black Sea, the U.S. Energy Information Administration estimates Romania to have 1.4 trillion cubic meters of shale gas, the third largest reserve in Europe after Poland and France.
The crisis over Russia's annexation of Ukraine's Crimean peninsula and a bill paying dispute between those two countries further encouraged Bucharest to pursue energy independence. In May, U.S. Vice President Joe Biden visited Romania to discuss alternatives to Europe’s dependence on Russian energy and the possibility of Romania becoming a key connection point for energy markets between East and West.
Iulian Buga, Romania's ambassador to the United States, said Ukraine's crisis emphasizes the need to speed up that process.
“This is not only related to the current crisis in the region but it’s about the future, because the need for energy has been there for quite some time and it will increase and increase. With or without that crisis, you still need to find new resources, and the energy subject has always been an important element in the security of every country,” said Buga.
Another consequence of the crisis in the Crimean Peninsula is the construction of an inter-connector system between Romania and the Republic of Moldova, a small former Soviet republic east of Romania that is 100 percent dependent on Russian energy imports. Romania and Moldova have strong historical and cultural ties.
Romania is also doing a feasibility study on building an inter-connector pipeline that will allow natural gas from Azerbaijan to be transported through Georgia to Romania and farther into Central and Western Europe. Romanian Energy Secretary Niculescu said the pipeline will help the region sustain any future energy disruptions.
Niculescu said Europe will continue to import natural gas and oil from Russia, but these imports will be at an acceptable percentage and will ensure energy will never again be used as a political weapon.
The booming energy sector is expected to be the main economic driver and job creator as Romania works to catch up to wealthier EU members. According to government data, the energy sector alone is expected to create 20,000 jobs in Romania over the next decade.
By Jim Snyder and Thomas Black Jul 15, 2014 4:02 AM GMT+0700
Oil companies and railroads that move crude have presented a joint plan to U.S. regulators that would phase out a type of older tank cars implicated in a spate of fiery accidents, according to two people familiar with the plan.
The plan also calls for slightly thicker walls for new cars to make them less vulnerable to puncture, according to the people, who asked not to be identified discussing private communication. The parties agreed to scrap the fleet of thousands of DOT-111s within three years if tank car manufacturers agree they can replace or retrofit the tank cars in that period.
Representatives of the American Petroleum Institute and the Association of American Railroads met with officials of the Transportation Department and Office of Management and Budget on July 11 to present their plan, one of the people said.
Those agencies, along with their counterparts in Canada, are weighing steps that can be taken to increase the safety of moving oil by rail in the wake of a number of accidents, including one a year ago in Quebec that killed 47.
If adopted by regulators, the industry plan would require a significant investment by oil and leasing companies that own rail cars.
Transport Canada in April mandated a three-year phase-out of tank cars ordered before October 2011, when the industry introduced a car design to include steel shields at the ends and protection for valves on the top. The agency also banned immediately tank cars that have weak underbelly support, those built before the mid-1990s, from carrying dangerous goods.
Thicker Steel
The deal between API and the railroad group also would require new cars to be built with a half-inch thick steel shell, or 1/16th of an inch thicker than newer car designs now being produced, known as the CPC-1232.
Officials from the Washington-based API and AAR didn’t immediately respond for comment. API’s members include Exxon Mobil Corp. (XOM) AAR represents companies such as Berkshire Hathaway Inc. (BRK/A)’s BNSF railway. A spokesman for the Transportation Department also did not immediately respond to a request for information about the plan.
Until recently, trains didn’t carry much oil. That changed with a big jump in domestic production that outpaced the capacity of pipelines to carry the fuel.
As many as 10 trains with 100 or more tank cars filled with crude leave North Dakota, home to a booming oil and natural gas industry, every day for refineries across the U.S. Carloads of oil jumped to 408,000 last year from 11,000 in 2009, according to the Association of American Railroads.
Quebec Crash
“We’re seeing exponential growth in the transport of crude oil by rail,” Transportation Secretary Anthony Foxx said in Washington on July 1 at a breakfast sponsored by the Christian Science Monitor. “It requires us to step up our level of safety as a nation.”
A year ago, an unattended train broke free from its brakes and rolled into Lac-Megantic, Quebec, creating a fireball that killed 47 people and incinerated much of the downtown area.
Subsequent derailments and explosions of trains in North Dakota and Virginia that didn’t cause causalities led to heightened concern about using trains to haul oil in the U.S.
The accidents have focused attention on the design of an older tank car, known as the DOT-111, that the National Transportation Safety Board said are vulnerable to rupture. Those cars are still in wide use today.
The U.S. Transportation Department has taken interim steps to respond to what it’s called an imminent hazard.
In February, it reached an agreement with railroads to slow oil trains to 40 miles per hour through urban areas from 50 mph and install sensors to detect faulty track.
In May railroads agreed to give local officials more information on crude shipments routed through their communities.
Tank car owners have balked at the cost, estimated as high as $60,000 each, to modify tank cars to the new specifications. The cost wasn’t clear for the design agreed to by API and AAR.
To contact the reporters on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net; Thomas Black in Dallas at tblack@bloomberg.net
To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Steve Geimann
By Jonathan Tirone, Sangwon Yoon and Kambiz Foroohar Jul 14, 2014 11:21 PM GMT+0700
Direct talks between U.S. Secretary of State John Kerry and his Iranian counterpart showed no sign of overcoming the same disagreements that foiled their diplomats for the last 13 days in Vienna.
Iranian Foreign Minister Mohammad Javad Zarif, who has been in the Austrian capital since negotiations over the Islamic Republic’s nuclear work convened July 2, met with Kerry for two hours today, according to a U.S. official who asked not to be named. Kerry arrived yesterday and met with envoys including President Hassan Rouhani’s younger brother, Hossein Fereydoun, who joined talks for the first time.
“We are in the middle of talks about nuclear proliferation and reining in Iran’s program,” Kerry said in Vienna, ahead of a second meeting with Zarif. “It is a really tough negotiation.”
Stakes are high as negotiators face a July 20 deadline to secure a long-term nuclear deal with Iran. Important gaps remain over the Persian Gulf nation’s uranium-enrichment capacity. Absent an accord, Iran has said it may resume some suspended nuclear activities while the U.S. Congress has threatened to impose harsher sanctions.
“This is perhaps the last chance in a long time to resolve the conflict over Iran’s nuclear program in a peaceful manner,” German Foreign Minister Frank-Walter Steinmeier told reporters on July 13 in Vienna after meeting with Kerry and his counterparts from France and the U.K. “There is little time remaining. The ball is in Iran’s court.”
Ears, Eyes
The presence of Fereydoun, who had previously served as a diplomat at Iran’s United Nations mission in New York, may signal a greater desire by Iran to reach a deal. In a photograph of the meeting, posted by European Union spokesman Michael Mann on Twitter, Fereydoun is sitting next to Zarif. He doesn’t share the same family name as Hassan Rouhani, who changed his appellation after he became a cleric.
“He’s the president’s eyes and ears,” Ali Vaez, an Istanbul-based analyst for the International Crisis Group, said in an e-mailed reply to questions about Fereydoun.
Iran and world powers are divided over the extent of the country’s enrichment program. The U.S. and its allies seek a cut in Iran’s current capacity and curbs on future production.
Comments last week by Iran’s Supreme Leader, Ayatollah Ali Khamenei, complicated this round of talks, according to another U.S. official who asked not to be named. Iran’s highest authority said the country would eventually need as many as 190,000 first-generation uranium enrichment centrifuges or 7,000 advanced machines. About 19,000 first-generation units are currently installed, with about 9,000 in operation.
Red Line
Iran’s conservative Kayhan newspaper today warned Zarif not to back down from the 190,000 level. It is “the official red line of the establishment at one of the most essential junctures of the negotiations,” said Hossein Shariatmadari, Kayhan’s editor in chief, who was appointed by Khamenei.
While diplomats in Vienna try to keep focus on the Iran nuclear talks, widening tension in the Middle East also crept into the agenda. U.K. Foreign Secretary William Hague and French Foreign Minister Laurent Fabius called for a cease-fire in fighting between Israel and Hamas militants in the Gaza Strip that has killed more than 100 civilians.
Kerry offered to help facilitate a cease-fire in a phone call with Israeli Prime Minister Benjamin Netanyahu, according to a U.S. official who asked not to be named following diplomatic rules.
“The circumstances have changed radically in the last few years in the Middle East,” William Miller, a former U.S. ambassador who also served five years in Tehran, said today in an interview in Vienna. “Iran is now the most stable country in the Middle East.”
To contact the reporters on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net; Sangwon Yoon in Vienna at syoon32@bloomberg.net; Kambiz Foroohar in New York at kforoohar@bloomberg.net
To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net; Alan Crawford at acrawford6@bloomberg.net Leon Mangasarian, Ben Holland
By Maher Chmaytelli Jul 14, 2014 11:45 AM GMT+0700
Rebels in Libya’s east committed to keeping open the country’s largest oil port, Es Sider, and dissociated themselves from a protest that shut a smaller crude export terminal. Brent traded near the lowest in three months.
“This incident, in the port of Brega, has no impact on the agreement with the government to open Es Sider and Ras Lanuf,” said Ali al-Hasy, a spokesman for the self-declared Executive Office for the Barqa region. “We stand by the agreement with the government. Es Sider and Ras Lanuf will stay open.”
Es Sider and Ras Lanuf, Libya’s third-largest oil port, have a combined daily loading capacity of 560,000 barrels. Brega, which was reported July 12 to have been shut by guards seeking better pay, can export 60,000 barrels a day, according to the Oil Ministry.
The Executive Office for Barqa seeks self-rule for the eastern region also known as Cyrenaica. It took control of four oil ports about a year ago, handing back two of them to the government in April and the remaining two this month.
Although located in eastern Libya, Brega was not among the four ports that fell under the rebel group’s control, and it continued to supply a refinery controlled by the government in the nation’s western region.
The July 3 agreement under which Barqa rebels agreed to surrender Es Sider and Ras Lanuf helped push Brent crude prices lower. The benchmark grade for more than half of the world’s oil closed at $106.66 a barrel on July 11, its lowest in three months. The August contract traded as low as $106.27 a barrel today in London.
Africa’s Largest
“The Executive Office for the Barqa region doesn’t command the guards in Brega, they acted on their own,” said al-Hasy. “We are nevertheless mediating with them to re-open the port. This may happen in the coming hours, God willing.”
The holder of Africa’s largest oil reserves, Libya’s output has dwindled in the past year to make it the smallest producer in the Organization of Petroleum Exporting Countries. The government is struggling to restore its authority over armed groups that took part in the 2011 rebellion that ended Muammar Qaddafi’s 42-year rule.
The country’s daily production rose to 470,000 barrels from 350,000 barrels on July 10, as Repsol SA (REP) boosted output from the Sharara field, Mohamed Elharari, a spokesman for state-run National Oil Corp., said by phone. The shutdown at Brega could reduce output by 40,000 barrels a day, he said.
Sharara, the largest field in western Libya, resumed production last week after a four-month halt as protesters allowed a pipeline carrying its crude to re-open.
The Executive Office for Barqa relinquished the ports in return for a government promise to pay the salaries of Petroleum Facilities Guard members who defected to join the rebels, and as a goodwill gesture after last month’s parliamentary elections. The group hopes that members of the new national legislature will support its demand for an oil-revenue-sharing agreement for the Barqa region to help compensate for the neglect the area experienced under Qaddafi.
To contact the reporter on this story: Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Pratish Narayanan, Mike Anderson
By Joe Carroll and Jim Polson Jul 15, 2014 3:18 AM GMT+0700
Whiting Petroleum Corp. (WLL) will increase oil production by the most in a decade when it creates the dominant crude producer in the richest U.S. shale region with its $3.8 billion takeover of Kodiak Oil & Gas Corp. (KOG)
The deal will boost Whiting’s output by 50 percent next year, Chairman and Chief Executive Officer James Volker said on a conference call today. That would be the largest annual increase since 2005, according to data compiled by Bloomberg. Shares in both companies closed at a record high today.
Without Whiting’s financial heft, the company couldn’t afford to accelerate drilling on some leases, Lynn Peterson, Kodiak’s co-founder, chairman and CEO, said during the call. A slower pace of drilling means a longer wait time until oil profits flow.
The agreement will vault Whiting ahead of Oklahoma billionaire Harold Hamm’s Continental Resources Inc. (CLR) as the premier oil supplier in the Bakken shale formation that stretches beneath parts of Montana, North Dakota and Saskatchewan. Including $2.2 billion in debt, the total transaction is valued at about $6 billion.
“This is an exciting transaction,” John Paulson, the billionaire founder of Paulson & Co. hedge fund, said today in an e-mail. “It creates the top producer in the fast-growing oil-producing Bakken region of North Dakota.”
Paulson & Co. owns more stock in both companies than anyone else.
Shares Surge
Investors boosted Kodiak and Whiting to their highest closing prices since the shares began trading in 1998 and 2003, respectively. Kodiak gained 4.8 percent to $14.91 and Whiting rose 7.7 percent to $84.58, leading the S&P Oil & Gas Exploration and Production index today.
Under the agreement, announced yesterday, Kodiak stockholders will receive 0.177 of a Whiting share for each Kodiak share they own. That’s the equivalent of $13.90 a share, based on the acquirer’s July 11 price, the Denver-based companies said in a statement. The per-share value represented about a 5.1 percent premium to Kodiak’s volume-weighted average over the prior 60 days, the companies said.
Whiting is buying a company that more than doubled production last year while its own output growth slowed as costs to bring new wells online surged.
In the coming years, Whiting will target average annual growth rates of 20 percent or more, Volker said.
“We can drill a lot more wells,” Mark Williams, Whiting senior vice president for exploration and development, said during the call. In addition to putting more rigs to work, Whiting plans to shave the cost of drilling a well on Kodiak land by $700,000 to $8.5 million, Volker said.
Fracking Breakthroughs
Competition for Bakken assets is fierce because the geologic formation beneath North Dakota and Montana is the most prolific U.S. shale region, on a barrels-per-well basis, according to data compiled by Bloomberg. Because most drilling rights on privately owned land in the area have already been snapped up by corporations, explorers can only expand through acquisitions.
The Bakken region of North Dakota and Montana has been a hotbed of U.S. oil exploration after innovations in sideways drilling and hydraulic fracturing, or fracking, enabled access to previously impenetrable rock layers.
Biggest Supplier
New wells drilled in the Bakken pump an average of 510 barrels of oil a day, compared to 479 barrels for wells in the Eagle Ford shale in south Texas and almost four times as much as Permian Basin wells in west Texas and New Mexico, according to data compiled by Bloomberg.
The relatively high crude output means explorers may recoup their drilling costs and begin booking profits from Bakken wells faster than those in other formations.
Kodiak’s decision to sell now is “curious,” Tim Rezvan, a New York-based analyst for Stern Agee & Leache Inc., wrote today in a note to clients. A second-quarter earnings miss might explain the move, he wrote. The company hasn’t announced a date to release second-quarter results.
The Kodiak purchase will give Whiting drilling rights across 855,000 net acres, surpassing Exxon Mobil Corp. (XOM) as the second-biggest leaseholder in the area, according to data compiled by Bloomberg.
In North Dakota, home to some of the richest sections of the Bakken, daily crude output exceeded 1 million barrels in April for the first time in history, making the state a bigger oil supplier than Ecuador or Qatar, both members of the Organization of Petroleum Exporting Countries, or OPEC. In the U.S., Texas is the only state that pumps more crude than North Dakota, according to the Energy Department.
Denver Neighbors
An enterprise value for Kodiak of $6 billion is about 8.8 times earnings before interest, taxes, depreciation and amortization last year. That compares with a median of 11.6 times Ebitda for U.S. oil and exploration deals since 2009 valued at more than $1 billion, according to data compiled by Bloomberg.
Whiting and Kodiak executives have known each other for years, but began to evaluate a deal in recent months, Peterson said in an interview yesterday. “We both reside here in Denver, our offices are across the street.”
To contact the reporters on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net; Jim Polson in New York at jpolson@bloomberg.net
To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net Jim Efstathiou Jr.
North Dakota Oil Output Rose Most in Nine Months in May
By Dan Murtaugh Jul 15, 2014 2:55 AM GMT+0700
North Dakota, the second-largest oil-producing state in the U.S., saw output rise the most in nine months in May.
Output increased to 1,039,635 barrels a day in May, the state’s Department of Mineral Resources reported. It increased by 36,379 barrels a day from April, the largest month-to-month jump since August. Texas, which extracts more than 3 million barrels a day, is the only state producing more crude.
Bakken oil from North Dakota, priced at Enbridge Inc. (ENB)’s pipeline hub at Clearbrook, Minnesota, weakened by 5 cents to $7.30 a barrel below U.S. benchmark West Texas Intermediate in Cushing, Oklahoma, at 1:35 p.m. New York time, according to data compiled by Bloomberg. It’s the largest discount since Dec. 31.
About 34 percent of North Dakota’s oil left the state by pipeline and 59 percent by rail in April, according to the state’s pipeline authority.
It costs $9 to $10 a barrel to transport oil by train to East Coast refineries, and $6 to $7 a barrel to ship crude by rail to Washington plants, Tesoro Corp. (TSO) said in a February presentation to investors.
The discount of Bakken crude priced at the wellhead to Brent crude, the benchmark for overseas crude shipped to the U.S., increased to $18.58 a barrel, according to data compiled by Bloomberg.
To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Charlotte Porter
By Naureen S. Malik Jul 15, 2014 3:38 AM GMT+0700
Natural gas production from the Marcellus shale deposit in the Northeast surged above 15 billion cubic feet a day for the first time, as hydraulic fracturing and horizontal drilling unlocked underground supplies.
Gross output from the region will average 15.235 billion cubic feet a day this month, up 28 percent from a year earlier, and 15.482 billion in August, the U.S. Energy Information Administration said today in a monthly report. Marcellus gas accounts for about 16 percent of gross U.S. production, up from 2 percent in 2008.
Marcellus supplies are contributing to record U.S. output, a change from six years ago, when federal regulators were evaluating plans for gas import terminals to make up for a domestic shortfall and cut prices. Exports from the Gulf Coast are now scheduled to start next year as prices that have dropped 70 percent since July 2008 make the fuel attractive to overseas consumers.
“This is the latest round of big numbers from the Marcellus,” said Martin King, an analyst with FirstEnergy Capital Corp. in Calgary. “There is more focus on supply and how that is weighing on prices.”
The supply glut near the biggest cities in the East is keeping spot prices at a discount to the benchmark Henry Hub in Louisiana during periods of lower demand, a switch from the normal configuration.
Spot Gas
Spot gas on the Transco Zone 6 pipeline for New York City dropped 4.1 percent to $2.24 per million British thermal units July 11 on the Intercontinental Exchange, $1.85 below the Henry Hub price and the lowest since April 25, 2012. The New York price has averaged 31 cents above Henry Hub over the past five years. Prices at Algonquin City Gates, which includes Boston, fell to $2.5885 per million Btu on July 11, the lowest since June 13, 2012.
“This supply growth, coupled with known transportation constraints, is responsible for increasing price weakness in the Appalachian region this summer,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a note to clients today. “We see the potential that rising Marcellus production is poised to permanently disrupt the traditional Gulf-based pricing paradigm.”
Gas production from the six largest U.S. shale fields climbed 1.1 percent to 40.145 billion cubic feet a day in August, today’s Drilling Productivity Report showed. Output gains have contributed to a surge in U.S. stockpiles, which dropped to an 11-year low in March.
Stockpile Gains
Supplies of the heating and power-plant fuel climbed 1.2 trillion cubic feet from the end of March to 2.022 trillion in the week ended July 4, an EIA report last week showed. It was the fastest pace of storage injections for the first 14 weeks of the stockpiling season since 2001.
A deficit to five-year average levels has narrowed to 28 percent from a record 55 percent in March as supply gains topped 100 billion cubic feet for eight straight weeks, the longest streak of triple-digit gains in government data going back 20 years.
Gas futures on the New York Mercantile Exchange have dropped 5.1 percent since March to $4.147 per million Btu as rising stockpiles eased concern that supplies wouldn’t be high enough before demand peaks next winter.
“There’s too much supply in the region and there’s not enough takeaway capacity,” King said. “That regional sentiment is probably weighing on Nymex prices to some degree.”
To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Bill Banker, Charlotte Porter
Natural Gas Supply Gains Keep Driving Bulls From Market
By Naureen S. Malik Jul 15, 2014 2:50 AM GMT+0700
Twelve weeks of above-average gains in U.S. natural gas supply are easing concern over winter fuel shortages and spurring speculators to cut their bets on rising prices.
Hedge funds reduced net-long positions by 8.1 percent in the week ended July 8, the U.S. Commodity Futures Trading Commission said. Bullish wagers have fallen 43 percent from February and gas dropped last week to a six-month low, wiping out an advance of as much as 53 percent after frigid weather pushed consumption to a record.
Stockpiles more than doubled from an 11-year low in March as mild weather curbed power-plant demand and output expanded for the ninth straight year. Storage rose more than 100 billion cubic feet for eight weeks in a row, the longest streak of triple-digit increases in government data going back 20 years.
“It looks like the market is going to be in balance heading into the winter,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone July 11. “The combination of modest summer weather and robust drilling has let people believe that inventory will grow to normal levels.”
Natural gas dropped 25.1 cents, or 5.6 percent, to $4.204 per million British thermal units on the New York Mercantile Exchange in the period covered by the CFTC report. Prices closed at $4.146 on July 11, capping a fourth weekly decline. The futures today advanced 0.1 cent to $4.147.
More Supply
Gas storage rose 93 billion cubic feet to 2.022 trillion in the week ended July 4, a gain bigger than the five-year average for the 12th straight week, according to Energy Information Administration data.
A cold front will push across the central and eastern states from July 16 through July 20, according to Commodity Weather Group LLC of Bethesda, Maryland. A drop in demand in the South will more than offset gains from a heat wave in the West, the forecaster said.
The high temperature in Dallas July 17 will be 78 degrees Fahrenheit (26 Celsius), 18 below normal, according to AccuWeather Inc. in State College, Pennsylvania. Washington’s reading will be 5 lower than average at 84.
“The updated weather forecasts not only show an impressive cold intrusion lingering over much of the country but the timing occurs when the potential for cooling demand is typically at a high point,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a July 11 note to clients.
More Production
Gas production will help raise inventories to 3.431 trillion cubic feet by the end of October, which would be the lowest level before the peak heating-demand season since 2008, according to an EIA July 8 report.
Output will rise 4.1 percent to 73.08 billion cubic feet a day from 2013 level as new wells come online at shale deposits such as the Marcellus in the Northeast, the EIA forecasts.
“Summer is going to be over soon and storage numbers have come in pretty strong for many weeks,” Donnie Sharp, natural gas supply coordinator for Huntsville Utilities in Huntsville, Alabama, said by phone on July 11. “There may be an opportunity for a bit lower prices.”
In other markets, easing supply concern from Iraq to Libya forced speculators to reduce bullish oil bets for a third week.
Money managers cut net-long positions in benchmark West Texas Intermediate futures by 7.8 percent to 304,366 futures and options combined in the week ended July 8, CFTC data show.
WTI Slide
WTI futures slid 1.8 percent to $103.40 a barrel on the New York Mercantile Exchange in the period covered by the report. The contract was little changed today after settling at $100.83 on July 11.
Net-long positions in gasoline fell by 2.7 percent to 65,190, the CFTC report showed. Futures fell 6.4 percent to $2.9729 a gallon on the Nymex in the week covered by the report and settled at $2.9085 on July 11.
Gasoline at U.S. pumps, averaged nationwide, slipped 0.8 cent to $3.631 a gallon on July 10, according to data from Heathrow, Florida-based AAA, the nation’s largest motoring group. Retail prices are down 1.8 percent from a 13-month high on April 26.
Money managers’ bets on ultra-low sulfur diesel dropped by 41 percent to 22,634, the CFTC report show. Futures slid 3.5 percent to $2.8736 a gallon in the week covered by the report and closed at $2.8609 on July 11.
Net-long positions on four U.S. natural gas contracts held by money managers declined by 20,642 futures equivalents to 234,190, the least since Dec. 3.
Gas Contracts
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
Long positions fell by 1.9 percent, while bearish bets gained 4 percent to 272,510, the most since Dec. 10.
“The temperate weather combined with increased production are weighing on prices,” Peter Buchanan, senior economist at CIBC World Markets Inc. in Toronto, said in a July 11 telephone interview. “The weather hasn’t been quite as hot so far this summer and that is helping to restrain demand.”
To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net
To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net; David Marino at dmarino4@bloomberg.net Charlotte Porter
Seasonal Temperatures to Return Next Week After Cooldown
By Brian K. Sullivan Jul 14, 2014 7:32 PM GMT+0700
Seasonal to above-normal temperatures will return to the central U.S. following cooler weather this week from Nebraska to Ohio, an area including St. Louis and Chicago.
Readings may be about 3 degrees (1.6 Celsius) above normal from the Rocky Mountains to the upper Midwest from July 19 to 23 while reaching seasonal levels elsewhere, said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland.
“After this week’s impressive cool push into the mid-continent, we track a same-to-slower moderation in temperatures for the Midwest, East, and South,” Rogers said. “Temperatures find their way back to above-normal levels for the Midwest by Tuesday to Wednesday next week, while reaching the East Coast toward the middle of next week.”
Higher-than-normal temperatures can increase energy demand as more people turn to air conditioning to cool homes and businesses.
The only part of the eastern U.S. that may miss the return of seasonal temperatures is a section from Arkansas to northwestern Georgia, which may be cooler, according to WSI Corp. in Andover, Massachusetts.
Forecasts diverge beyond that timeframe. Both WSI and Rogers call for seasonal readings across most of the central U.S. with a possibility of below-normal temperatures July 24 to 28.
Readings may reach 1 to 3 degrees above normal in the Northeast during the same period, according to MDA Weather Services in Gaithersburg, Maryland. MDA predicts cooler-than-normal weather will dominate the upper Great Plains.
For July 22, the normal average temperature in New York is 78 degrees, MDA said. It’s 74 in Chicago and Boston, 80 in St. Louis, 86 in Dallas, 67 in Seattle and 75 in Burbank, California.
To contact the reporter on this story: Brian K. Sullivan in Boston at bsullivan10@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Charlotte Porter, Stephen Cunningham
By Maher Chmaytelli Jul 14, 2014 11:45 AM GMT+0700
Rebels in Libya’s east committed to keeping open the country’s largest oil port, Es Sider, and dissociated themselves from a protest that shut a smaller crude export terminal. Brent traded near the lowest in three months.
“This incident, in the port of Brega, has no impact on the agreement with the government to open Es Sider and Ras Lanuf,” said Ali al-Hasy, a spokesman for the self-declared Executive Office for the Barqa region. “We stand by the agreement with the government. Es Sider and Ras Lanuf will stay open.”
Es Sider and Ras Lanuf, Libya’s third-largest oil port, have a combined daily loading capacity of 560,000 barrels. Brega, which was reported July 12 to have been shut by guards seeking better pay, can export 60,000 barrels a day, according to the Oil Ministry.
The Executive Office for Barqa seeks self-rule for the eastern region also known as Cyrenaica. It took control of four oil ports about a year ago, handing back two of them to the government in April and the remaining two this month.
Although located in eastern Libya, Brega was not among the four ports that fell under the rebel group’s control, and it continued to supply a refinery controlled by the government in the nation’s western region.
The July 3 agreement under which Barqa rebels agreed to surrender Es Sider and Ras Lanuf helped push Brent crude prices lower. The benchmark grade for more than half of the world’s oil closed at $106.66 a barrel on July 11, its lowest in three months. The August contract traded as low as $106.27 a barrel today in London.
Africa’s Largest
“The Executive Office for the Barqa region doesn’t command the guards in Brega, they acted on their own,” said al-Hasy. “We are nevertheless mediating with them to re-open the port. This may happen in the coming hours, God willing.”
The holder of Africa’s largest oil reserves, Libya’s output has dwindled in the past year to make it the smallest producer in the Organization of Petroleum Exporting Countries. The government is struggling to restore its authority over armed groups that took part in the 2011 rebellion that ended Muammar Qaddafi’s 42-year rule.
The country’s daily production rose to 470,000 barrels from 350,000 barrels on July 10, as Repsol SA (REP) boosted output from the Sharara field, Mohamed Elharari, a spokesman for state-run National Oil Corp., said by phone. The shutdown at Brega could reduce output by 40,000 barrels a day, he said.
Sharara, the largest field in western Libya, resumed production last week after a four-month halt as protesters allowed a pipeline carrying its crude to re-open.
The Executive Office for Barqa relinquished the ports in return for a government promise to pay the salaries of Petroleum Facilities Guard members who defected to join the rebels, and as a goodwill gesture after last month’s parliamentary elections. The group hopes that members of the new national legislature will support its demand for an oil-revenue-sharing agreement for the Barqa region to help compensate for the neglect the area experienced under Qaddafi.
To contact the reporter on this story: Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Pratish Narayanan, Mike Anderson
By Isis Almeida Jul 14, 2014 11:22 PM GMT+0700
The World Bank’s private lending arm will help finance a $300 million liquefied natural gas export project in Colombia as demand for the super-chilled fuel in Latin America is forecast to double over the next decade.
The International Finance Corp. is leading a $240 million debt financing for the world’s first floating liquefaction plant to start operating in Colombia by mid-next year, Lance Crist, the IFC’s global head of oil and gas, said by telephone on July 9. The IFC will invest $75 million in the plant and the balance will be provided by other lenders in transactions expected to close “in the next several weeks,” he said.
Transport and power generation are boosting energy demand in Central America, where spending on petroleum imports more than tripled in 2013 from 2000, according to the Institute of the Americas. The Colombian plant is part of a $2 billion investment in energy projects that the IFC will back for Central America and the Caribbean basin over the next year, Crist said.
“The beauty of this is that it will basically enable Colombia to take advantage of some of its stranded gas and supply it to regional markets,” he said. “In the near term, they will be selling gas to the international market, but now that this kind of supply is available, you will start to see regasification units being built in the Caribbean.”
$500 Million
The Colombian plant, which will produce 500,000 metric tons of LNG a year, is a venture between Pacific Rubiales Energy Corp. (PRE), the nation’s largest independent oil and gas exploration and production company, and Belgium’s Exmar NV (EXM), an LNG and LPG carrier owner in Antwerp. Peter Volk, a spokesman for Toronto-listed Pacific Rubiales, confirmed the company is in talks to receive investment from the IFC when reached by telephone today.
The IFC will probably supply at least $500 million in regional project funding over the next year, and the rest will come from other banks and partners, Crist said. The Colombian facility is under construction in China and will be brought to the Andean nation and commissioned next year, he said.
Pacific Rubiales said last year it was in talks to sell supplies from its plant to Gazprom Marketing & Trading Ltd., a U.K.-based subsidiary of Russia’s OAO Gazprom, for a period of five years, according to a statement on the company’s website. The two companies are still in negotiations, Volk said today.
Oil Imports
Latin America, the world’s fastest-growing LNG market, will consume 28.9 million tons of the fuel by 2025, more than double the 13.3 million projected for this year, according to a forecast by Sanford C.Bernstein. That compares with global demand of 230.7 million tons last year. The Dominican Republic and Puerto Rico are the only Central American and Caribbean nations with LNG import terminals and Trinidad and Tobago is the only producer, according to the International Group of LNG importers.
The region spent $13 billion on petroleum imports in 2013 from $3 billion in 2000, the Institute of the Americas said in an October report, citing figures from the United Nations’ Economic Commission for Latin America.
“Both of these regions have been plagued by the lack of energy entirely or very high-cost supply and incremental supply in recent years has been largely provided by fuel oil and diesel in power generation, which is quite expensive,” Crist said, referring to Central America and the Caribbean. “We see that as a severe constraint on growth in the region across all sectors, job creation, you name it.”
The IFC is also in talks with Petroleos Mexicanos, or Pemex, to help the state-run company broker a deal to develop a pipeline that would take gas from Mexico to Central American nations, Crist said. Guatemala and Mexico signed in May an $800 million accord to build a link between the two nations.
“We are trying to address all facets of the value chain by promoting greater supply through gas development, greater transportation through pipelines and liquefaction and the access to the regasification,” he said. “We are putting a a big emphasis on gas because we see it as helping address the dual needs of energy security and being a more climate-friendly alternative.”
To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Rob Verdonck, Dan Weeks
By Stephen Bierman and David Wethe Jul 15, 2014 3:37 AM GMT+0700
Weatherford International Plc (WFT) agreed to sell its land drilling operations in Russia and Venezuela to OAO Rosneft (ROSN) for $500 million as the world’s fourth-largest oilfield servicer continues to snip off some of its less-profitable work.
Russia’s largest oil producer will buy 61 land drilling crews and a fleet of workover rigs in Russia from Weatherford and six land-drilling rigs in Venezuela, according to Weatherford’s regulatory filing today. The operations generate half of Weatherford’s revenue in Russia and one third in Venezuela, according to a separate statement today. The deal sells off the least-profitable piece of Weatherford’s land-drilling business, Jeffries Group LLC analyst Brad Handler said in a phone interview from New York.
“This speaks to clear momentum that Weatherford has in purging non-core businesses,” said Handler, who rates the shares a hold and owns none. “The combined Russian and Venezuelan businesses were not very profitable. In light of that, the $500 million price tag feels very healthy to us.”
Weatherford in April pledged to sell or split off as much as $1 billion in assets this year as part of a corporate turnaround plan. Weatherford promised additional steps in the company’s divestment plan over the coming quarters, according to the statement.
Leaner Operations
“De-levering our balance sheet is a top priority,” Bernard Duroc-Danner, Weatherford’s CEO, said in the statement. “Although our Russian business will be half its present size, the operations will be much leaner, intensely focused on our core product lines, and therefore more profitable.”
Weatherford has said as recently as May that it planned to divest by the first quarter of 2015 its global land-rig business, which has 183 drilling rigs, 284 workover rigs and will account for as much as $1.8 billion in sales this year, according to a slide presentation for the UBS Global Oil and Gas Conference. Workover rigs are primarily used to re-enter an existing well and boost production.
The Russia and Venezuela assets account for about 75 percent of the global land-rig business, Ben Schuman, an analyst at Drexel Hamilton LLC in Austin, Texas, who rates the shares a hold and owns none, said in a phone interview.
“The sale of such a large portion of them did come as a surprise,” Schuman said. “The company right now is being held accountable for its execution of its turnaround plan more than anything else.”
TNK-BP Assets
Meanwhile, Rosneft has pushed to build its own drilling business to cut costs, buying rigs from VTB Group earlier this year, as other Russian oil producers including OAO Lukoil, OAO Gazprom Neft (GAZ) and TNK-BP have sold units.
“The deal fully complies with the adopted Rosneft strategy of the development of in-house service business,” Rosneft CEO Igor Sechin said in a statement today.
The deal also sees the development of long-term cooperation between Weatherford and Rosneft and is expected to close in the third quarter of 2014, Rosneft said.
Weatherford bought drilling and oilfield service assets in Russia from TNK-BP in 2009 for $489 million before Rosneft’s acquisition of TNK-BP last year. Weatherford may have accounted for about a third of Rosneft’s drilling business last year, Sberbank CIB wrote in a research note today.
The Weatherford Russian operation in the deal has about 7,800 employees, while the Venezuelan business has about 375 workers, according to the statement.
Most at Stake
Weatherford has the most at stake in Russia among peers with about 5 percent of its sales coming from the country, Scott Gruber, a New York-based analyst at Sanford Bernstein & Co., said March 3 in a note to clients. The company is expected to generate about $15.6 billion in revenue this year, according to 28 analysts’ estimates compiled by Bloomberg.
Weatherford, which has 14 buy ratings from analysts, 13 holds and two sells, rose 2.5 percent to close at $22.44 in New York. The company is the second-best performer in the Philadelphia Oil Services Index this year, climbing 45 percent. Nabors Industries Ltd. has risen 70 percent, the best in the index this year.
To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net; David Wethe in Houston at dwethe@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Susan Warren at susanwarren@bloomberg.net Robin Saponar, Tina Davis
Houston (Platts)--11Jul2014/444 pm EDT/2044 GMT
The US onshore well count rose 4% year on year during the second quarter of 2014 to 9,394 wells, up 383 wells, a volume that was also up 5%, or 428 wells, from three months earlier, Baker Hughes said in its quarterly well count on Friday.
Major areas of more drilling were the oily Permian Basin of West Texas and New Mexico, which boasted 2,670 wells drilled in Q2, up 18% year on year and 11% over Q1, and the Eagle Ford Shale in South Texas, where 1,186 wells were drilled in the period, up 9% year on year but up less than 1% from Q1.
Well counts were also up on a quarterly basis in the gassy Marcellus Shale in Pennsylvania and surrounding states, where 576 wells were drilled in Q2, identical to the well count a year before but up 16% from 498 wells drilled in Q1.
Posting lesser Q2 well count gains were the Granite Wash (up 14 wells, or 9%, year on year to 164 wells), Arkoma Woodford (up 20 wells, or 167%, year on year to 32 wells), DJ Niobrara of Colorado/Wyoming (up 19 wells, or 7%, year on year to 287 wells).
But the natural gas-prone Barnett Shale in North Texas posted the biggest year-on-year drop in Q2 to 261 wells, down 35% from 403 wells from a year ago and down 18% from 318 wells in Q1. Likewise, well counts for the gassy Fayetteville Shale in Arkansas also fell 24% in Q2 to 147 wells from 198 wells a year ago, although they were up 14% from Q1.
Curiously, well counts for the much-touted Utica Shale in Ohio were down 19% year on year to 95 wells from 118 a year ago, and down from 106 wells three months earlier. And even the booming Bakken Shale well count in North Dakota/Montana fell to 677 wells in Q2, down 2% from 693 in Q2 2013 and slightly down from 681 in Q1. Harsh winters likely contributed to the falling well counts in both regions.
Among the country's many unconventional oil plays, the Permian Basin is one of the US' most flourishing areas of production growth, with about 1.65 million b/d, according to Bentek Energy, a unit of Platts. The area's "stacked" or multi-layered pay zones, with as many as a dozen in some areas, have proved a boon to oil companies because they offer a compact opportunity set with potential savings on rig and oilfield material movements.
Other areas that are largely gassy have seen drilling dropoffs, such as the Barnett, which was the first shale play in the US to be exploited on a wide scale starting around 15 years ago. Activity waned there after the 2009 recession, as gas prices fell in response to growing production levels.
In addition, Baker Hughes said the total US land rig count averaged 1,796 rigs in Q2, up 5% year on year from 1,709 in the comparable 2013 period and up 4% from 1,724 rigs in Q1.
About 156 rigs were running in the Bakken last week, and 44 rigs in the Utica Shale, according to Global Hunter Securities' weekly Rig Count Reckoning. That compares with 163 rigs and 46 rigs, respectively, the week before, and 163 and 25, respectively, about a year ago.
--Starr Spencer, starr.spencer@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com
Dubai (Platts)--14Jul2014/853 am EDT/1253 GMT
Iraq's oil ministry condemned Sunday the seizure of crude oil production facilities at the Kirkuk and Bai Hassan oil fields in the north of the country by Kurdish Peshmerga armed forces.
Peshmerga forces, along with numerous civilians, entered the crude oil stations at the two fields, driving out the workers from state-owned North Oil Company early Friday, the oil ministry said in a statement.
Calling on the forces to retreat from the fields, the ministry warned the Kurdistan Regional Government of "the seriousness of this irresponsible action which is an encroachment on the constitution and the national fortune, as well as ignorance for the federal authority and a threat to the national unity."
"These forces were supposed to help the Iraqi security forces defeat terrorist gangs and protect the people and their fortune, but instead they took advantage of the exceptionally bad circumstances in Iraq and initiated raids over these important oil locations," the ministry said.
According to the KRG, the operation to seize the fields was launched in response to orders from the oil ministry to its staff to sabotage pipeline infrastructure linking the Avana dome with the Khurmala field.
It had already taken over the security of a large area that the Iraqi military had been unable to control, but up until last Friday had not taken over the administration of the oil fields.
The fields have a capacity of some 500,000 b/d, but production has been shut due to violence across northern Iraq. The KRG says it will use the production to fill the shortage of refined products in the domestic market since the closure of the 320,000 b/d Baiji refinery in mid-June.
--Adal Mirza, adal.mirza@platts.com
--Edited by Deepa Vijiyasingam, deepa.vijiyasingam@platts.com
London (Platts)--14Jul2014/858 am EDT/1258 GMT
Singapore-based InterOil has suspended its Wahoo-1 well in PPL474 in Papua New Guinea due to safety concerns, but plans to resume operations "as soon as practicable," the company said Monday.
In a statement, InterOil said the well intersected gas and higher-than-expected pressures that could compromise rig safety.
"After a review by drilling and engineering teams and expert advisers, InterOil has concluded that drilling ahead would pose an unacceptable safety risk to people and the rig," it said.
"InterOil intends to resume operations as soon as practicable following a detailed review of well engineering, equipment and options, when the company is satisfied it is safe to proceed, and after the regulator has approved the company's plans," it said.
The Wahoo-1 well was designed for high pressures based on data from other wells in the region but the pressures have exceeded by nearly 50% even those of InterOil's Antelope discovery, 170 km to the northwest, it said.
--Stuart Elliott, stuart.elliott@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@platts.com
Houston (Platts)--14Jul2014/310 pm EDT/1910 GMT
North Dakota's crude production in May reached another all-time high, continuing to climb above the 1 million b/d mark it reached in April, the state's Department of Mineral Resources said Monday.
May production rose 36,379 b/d from April to a record 1,039,635 b/d, the DMR said in a statement. The number of producing wells in the state also jumped to a record 10,892 in May, up 227 from April, it said.
Bakken and Three Forks production made up 94% of the May output, or 974,695 b/d, with 7,526 wells producing in those formations, according to DMR data.
--Josh Brown, joshua.brown1@platts.com
--Edited by Richard Rubin, richard.rubin@platts.com
Kiev (Platts)--14Jul2014/120 pm EDT/1720 GMT
Ukraine will need to import 7.23 billion cubic meters of natural gas August 2014 through March 2015 to ensure the economy's steady operation during the high demand season, the government said on Friday.
The government expects most of the imports to come from Europe via several gas pipeline routes, since supplies from Russia were cut to zero June 16 following a dispute over prices and a debt payment schedule.
The figures were outlined in a government resolution on gas-use and import targets for the period, given the halt to imports from Russia. The resolution was approved on Wednesday.
The government estimated that Ukraine would consume 30.23 Bcm of gas in the period, with available resources estimated at 23 Bcm. These resources include 13.5 Bcm in domestic gas output and 9.5 Bcm of gas in underground storage facilities. This leaves 7.23 Bcm of demand that must be met by imports, the government said.
Since Ukraine is able to import up to 43 million cubic meters/d of European gas, it has capacity to bring in as much as 10.5 Bcm of gas in the August-March period, the government said.
The country can import gas from Europe via Hungary and Poland, and aims to open a new supply route -- via Slovakia -- in September.
MEASURES TO CUT GAS USE AUG-MAR
"The capacity of these routes -- subject to economical use of energy during the heating season of 2014-2015 -- allows for meeting the needs of domestic consumers by importing enough gas without involving Russian supplies," the government said.
The government in the resolution outlined measures curbing gas consumption across various sectors of the economy.
The measures are aimed at cutting gas use by 30% in the manufacturing and municipal sectors, while consumers that rely on government funding, such as schools and hospitals, would have to cut gas consumption by 10% in the period.
The government expects Ukraine's manufacturing sector to consume 7.53 Bcm in August-March and the municipal sector to use 5.83 Bcm in the same period.
The consumers that rely on government funding are expected to use 630 million cu m of gas in the period, the government said.
The household sector is expected to consume 13.56 Bcm, while gas extracting and transporting companies will probably need 2.66 Bcm to run their equipment and for other technological needs, it said.
--Alexander Bor, newsdesk@platts.com --Edited by Lisa Miller, lisa.miller@platts.com
Barcelona (Platts)--14Jul2014/118 pm EDT/1718 GMT
Weekly LNG throughput from Spain's six LNG terminals into the national gas system was down 37.2% year on year and the country made no reloads for the first full week since February, data published Monday by gas grid operator Enagas showed.
Throughput from the six terminals fell from 2.18 TWh in the same week last year to 1.37 TWh in the week ended Sunday, the data showed.
During the week, Spain's six LNG terminals unloaded four tankers and concluded one unloading from the previous week for a combined 407,700 cubic meters of liquid, including rounding, while no tankers were reloaded for export for the first full week since the week ended February 23.
By terminal last week, Barcelona concluded one reload with 2,400 cu m and reloaded none, Cartagena and Huelva neither unloaded nor reloaded any, Bilbao unloaded one with 128,000 cu m and reloaded none, Sagunto reloaded one for 122,000 cu m and reloaded none, and Mugardos unloaded two for a combined 155,100 cu m and reloaded none.
Throughput was down, in annual comparison, at five of the six terminals. At Huelva, throughput dropped from 266.7 GWh in the year-ago week to zero, with no maintenance or other stoppage announced by Enagas. At Sagunto, throughput fell 40.9% year on year to 205.7 GWh. At Bilbao, it dropped 40.6% to 302.9 GWh. At Barcelona, it dropped 31.3% to 451.4 GWh, and at Cartagena throughput was down 6.8% year on year to 190.0 GWh.
The only terminal showing an increase was Mugardos, where throughput increased 12.2% year on year to 221.8 GWh in the week.
National demand in the week dropped 7.2% year on year to 4.77 TWh, with the volume of gas imported by pipeline up 12.9% from the year-ago period to 3.87 TWh.
At the end of the week, LNG stocks in storage were 7.17 TWh, or 21.4 days worth of operational demand, up from 6.40 TWh, or 19.3 days worth of operational demand, during the week ended July 6, the data showed.
--Gianluca Baratti, newsdesk@platts.com --Edited by Annie Siebert, ann.siebert@platts.com
London (Platts)--14Jul2014/135 pm EDT/1735 GMT
Four cargoes of Azerbaijan's Azeri Light crude oil have been scheduled to load out of the Black Sea port of Supsa in August, down from five in July, according to a copy of the program seen by Platts Monday.
The average daily loading rate for the port is set at 77,419 b/d, down from 96,774 b/d in July.
Inpex is scheduled to load one 600,000 barrel cargo, with the other three going to Socar.
At Ceyhan, where the bulk of Azeri Light is exported, overall volumes were set to fall 2.363 million barrels month on month to 20.937 million barrels in August.
The Georgian Black Sea port of Batumi typically loads one or two 600,000 barrel cargoes per month.
--Paula VanLaningham, paula.vanlaningham@platts.com --Edited by Dan Lalor. daniel.lalor@platts.com
Singapore (Platts)--14Jul2014/852 am EDT/1252 GMT
Japan's bonded bunker fuel sales fell 11.9% year on year to 1.85 million barrels (293,606 kl) in May, data released Monday by the Ministry of Economy, Trade and Industry showed.
The May total was down 10.1% from April.
Sales of bonded marine diesel oil in May totaled 28,575 barrels (4,543 kl), down 24.4% year on year and up 18.9% month on month, METI data showed.
Japan imported 80767 barrels (12,841 kl) of bonded bunker fuel oil in May, against no imports recorded in April 2014, the data showed.
Bonded bunker fuel is exempt from import tax and can be sold only to ships plying international routes.
--Ronald Shi, ronald.shi@platts.com --Edited by Wendy Wells, wendy.wells@platts.com
