API welcomes Senate letter from Democrats on Keystone

American Petroleum Institute President and CEO Jack Gerard has welcomed a Senate letter sent from nearly a dozen Democrats to President Obama urging him to swiftly approve the Keystone XL pipeline and put thousands of Americans to work while enhancing U.S. energy security.

“The voices of bipartisan support for KXL continue to grow louder with many of those voices coming from the president’s own party,” said Gerard. “President Obama should listen to these voices and that of the majority of Americans who are beyond tired of waiting for this project’s approval.

“Delaying the decision on the Keystone XL sends the wrong signal to the rest of the world. A nation that continues to be indecisive on a simple a matter of our own energy security will have a hard time convincing the rest of the world we can be decisive when it comes to their interests. We’ve got to get focused on Keystone approval. The world is watching. We need to send the signal: We’re serious about our domestic energy policy and our global energy policy. It’s time to approve the Keystone XL pipeline.”

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Texas upstream petroleum economy sustains record run

The upstream oil and gas economy in Texas ventured further into uncharted territory in February, as rapidly increasing production, higher wellhead prices, and revised statewide employment numbers boosted the Texas Petro Index (TPI) to a record 300.6.

“Texas producers increased oil output by more than 22% in February compared to February 2013, and natural gas production was up about 1.0%,” said Karr Ingham, the economist who created the TPI and updates it monthly.

“Combined with higher wellhead prices for both commodities, the value of oil and gas produced in Texas during February increased by more than $2.85 bn in the past year to about $10.63 bn.”

Ingham noted that Texas producers recovered about 2.75 MMbpd of crude oil during February, “the most since 1980.”

Ingham said revised statewide employment estimates by the Texas Workforce Commission indicated the oil and gas industry continues to hire new workers at an impressive pace, faster than even the stout growth in prior years.

“In 2012, workforce commissioners revised total upstream payroll employment upward by about 3,200 jobs to more than 270,000 jobs, which reflected a growth rate of 10.2% at yearend compared to yearend 2011,” Ingham said. “In 2013, another 10,000 jobs were added to upstream oil and gas company payrolls, and that job growth has escalated in early 2014.

“At yearend 2013, the year-over-year rate of industry employment growth was about 3.7%; in February, the year-over-year rate of industry employment growth was nearly 5%, with about 13,400 jobs added over the last 12 months,” he said. “Since the industry downturn in 2009, about 103,000 jobs have been added to upstream oil and gas company payrolls.”

A composite index based upon a comprehensive group of upstream economic indicators, the Texas Petro Index in February moved above 300.0 for the first time to a record 300.6, up 7.6% compared to February 2013.  Before the current economic expansion, the TPI’s previous all-time high of 287.6 occurred in September and October 2008, after which the TPI declined to 188.5 in December 2009 before embarking upon the current growth cycle.

The Texas Petro Index is a service of the Texas Alliance of Energy Producers, the nation’s largest state association of independent oil and gas producers.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

ConocoPhillips raises Eagle Ford resource estimate

ConocoPhillips has reaffirmed its objective to deliver double-digit returns annually to shareholders at its Analyst Meeting held at the New York Stock Exchange. Members of the company’s executive leadership team outlined ConocoPhillips’ goal to consistently deliver 3 to 5% compound annual growth in production and margins.
 
ConocoPhillips also highlighted its substantial U.S. unconventional position and announced an increase of its estimated resource base in the prolific Eagle Ford play. Based on its prime acreage position and technical knowledge, the company has increased its estimates from 1.8 billion to 2.5 billion bbl of oil in place. Production is also expected to increase from current volumes to more than 250,000 boed by 2017.
 
“ConocoPhillips’ wells in the Eagle Ford have the highest oil rates per well and are leading the industry in value. This is attributable not only to the fact that we are in the best part of the play, but also to our relentless focus on  technical innovation and drilling and completion cost efficiencies,” said Chairman and CEO Ryan Lance. “We are applying these benefits and efficiencies across our unconventional portfolio in the Bakken, Permian, Niobrara, Canada, and outside of North America. We believe our unconventional resource base is unmatched, particularly for a company our size."
 
“Beginning this year, we will be growing production and margins across our diverse asset base, and allocating 95% of our annual capital expenditures to growth projects and programs with margins that are higher than our average margin today. We believe we have the asset base, technical capability, world-class workforce and financial strength to deliver on our unique value proposition,” Lance added.
 
Since 2009, ConocoPhillips has added 6.7 billion boe of resources through a diverse and balanced exploration and appraisal portfolio of high-value opportunities. Among the high-quality prospects are four large U.S. Gulf of Mexico discoveries – Tiber, Gila, Shenandoah and Coronado. Further activity is targeting offshore prospects in Australia, Angola and Senegal; conventional exploration in Norway and Indonesia; and unconventional exploration in North America, Poland and Colombia.
 
In its first two years as an E&P company, ConocoPhillips generated proceeds of $12.4 billion from non-core asset sales, advanced new growth projects, achieved visible margin growth, accessed new organic growth opportunities, participated in successful deepwater Gulf of Mexico discoveries and maintained a strong dividend.
 
Over the next several years, ConocoPhillips plans to execute a disciplined capital program of approximately $16 billion per year and achieve the company’s organic reserve replacement target of more than 100%. The company expects to generate 3 to 5% compound annual production growth and margin growth from major development programs and projects already under way in the U.S. Lower 48, Canadian oil sands, UK and Norwegian North Sea, Malaysia and Australia.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Kuwait sees rising crude production amid improved extraction

Kuwait plans to increase oil output 23% by 2020 as improvements in how crude can be extracted allow the third-largest producer in OPEC to pump more.

The country will boost supply to 4 MMbpd from about 3.25 MMbpd by using enhanced extraction methods, Kuwait Oil Co. CEO Hashem Hashem said at a conference in Kuwait City. The supplies include 300,000 bpd from northern oil fields and a similar amount of crude and condensates from the Jurassic natural gas project, he said.

“We have the reserves and we have a proven capability to advance projects in a timely manner; but there is always a risk that the skill mix in our organization may not be keeping up with the increased complexity of the reservoirs,” Hashem said. “It is time to be proactive and invite new approach from experience around the world to upgrade our capability.”

Oil Minister Ali Al-Omair yesterday said he saw no risk of oversupply in global oil markets because demand growth will match output increases. Brent, the benchmark for half the world’s crude, fell 2% this year on concern that increased supply from Iraq, Iran and Libya would outstrip demand and amid signs of slower economic growth in China.

Kuwait plans to spend $100 bn on oil and gas projects, according to the U.S. Energy Information Administration. It is the third-largest producer of the Organization of Petroleum Exporting Countries, after Saudi Arabia and Iraq.

As well as the additional crude supply, Kuwait plans to upgrade two of its three refineries to increase so-called clean fuels output, and build a fourth.

The nation is also building a refinery in Vietnam, planning one in China and another in India to secure markets for the crude it produces.

Enhanced oil recovery should lift production in northern fields including Sabriyah, Raudathain, Bahra and Abdali to 1 MMbpd, from about 700,000 bpd now, said Hashem. Another increase of 300,000 bpd to 350,000 bpd will come from condensates and crude produced by the Jurassic Gas project, he said. Kuwait Oil signed a deal four years ago to develop the deposit with Royal Dutch Shell Plc.

Development of heavy oil in fields across the country, including Ratqa, which require steam injection in reservoirs, will add 60,000 bpd by 2018, 120,000 bpd by 2020 and possibly 270,000 bpd by 2030, he said. A 1.2 billion-dinar ($4.3 billion) construction contract for the first phase will be awarded this year, he said.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

South Sudan's Unity State oil production to restart by July

South Sudan plans to resume crude output in Unity state by July after conflict in the world’s newest nation caused the northern region to freeze production.

Oil fields in Unity will gradually raise output toward the 50,000 bpd they produced before the December shutdown, Petroleum Ministry spokesman Nicodemus Ajak Bior said in an interview in the capital, Juba. A new refinery built by Russian and South Sudanese companies near the state capital, Bentiu, will begin producing 3,000 bpd of diesel in July, he said.

“In the beginning there will be a challenge to bring back production to the pre-shutdown levels,” Bior said. “People are working day and night to see to it that production has restarted.”

South Sudan’s oil output has fallen by about a third since fighting erupted on Dec. 15 between factions loyal to President Salva Kiir and his former deputy Riek Machar. Violence has left thousands of people dead and forced more than a million to flee their homes, according to the United Nations.

The country is currently producing about 160,000 bpd from Upper Nile, the only state still pumping crude, Bior said. Machar has vowed to seize key oil installations in a bid to starve the military of revenue.

Government forces retook Bentiu from rebels on Jan. 26 and the Juba-based Sudd Petroleum Operating Co. has assessed damage to the facilities, Bior said. China National Petroleum Corp., India’s Oil & Natural Gas Corp. and Petroliam Nasional Bhd., the main producers of South Sudan’s oil, evacuated employees from the country due to the fighting.

Construction is finished on Bentiu’s refinery, a JV by Russia’s Safinat and the state-owned Nile Petroleum Corp., Bior said. A later expansion will raise output to 5,000 bpd, he said, without specifying a timescale.

“The refinery is ready, however commissioning will commence once the oil field in Unity state resumes production,” Bior said.

Construction of a 10,000 bpd refinery in Melut county, Upper Nile state, has halted due to the conflict, Bior said. Texas-based Ventech Engineers International LLC was building the facility which is set to produce diesel, kerosene and fuel oil, he said.

South Sudan, which gained independence from Sudan in July 2011, has sub-Saharan Africa’s third-biggest oil reserves, according to BP Plc data.

The country’s low-sulfur crude is prized by Japanese buyers as a cleaner-burning fuel for power generation. The country has the capacity to produce as much as 350,000 to 400,000 bpd, Foreign Minister Barnaba Marial Benjamin said on Feb. 11.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Age of gas seen as sideshow as producers look to oil

The “golden age of gas” that the International Energy Agency foresees as a result of the U.S. energy boom is hardly the future being embraced by industry executives.

At least based on comments from company officials presenting at the Independent Petroleum Association of America’s conference in New York yesterday. For them, oil is still the prize. Gas is almost an afterthought.

Abraxas Petroleum Corp. CEO Bob Watson boasted about how much of his company’s proved reserves are oil and liquids rather than gas (74%). PDC Energy Inc. said it’s sitting on huge leases in gas fields that aren’t worth drilling. Whiting Petroleum Corp. Chairman and CEO James Volker explained why: oil sells for three times as much as the equivalent amount of natural gas.

That’s no knock against the producers for chasing oil - the commodity that makes the best return for their shareholders. Still, at a time when President Barack Obama is saying natural gas will be a bridge for the U.S. economy from fossil fuels to clean energy, the industry’s views put some realism into the discussion about what energy resources get unlocked by fracing shale rocks.

U.S. natural gas futures have plunged 72% from their 2005 peak to $4.476 as supply expanded to a record. Even after the coldest winter in decades drained stockpiles, the fuel costs about half as much as in Europe. Crude oil, by contrast, is stuck at around $100 a barrel. Even as the growth of U.S. oil supplies has brought the domestic price below the international benchmark, it’s still 7.6% higher than a year ago.

The U.S. is still very much addicted to oil. Consumption will inch up to 19 MMbbl a day this year, more than Europe and China combined, the IEA estimates. Even as expanding domestic supplies reduce imports, they haven’t curbed reliance on oil outright.

If natural gas is to be a bridge fuel, the transition can’t depend on supply alone.

Now that natural gas is so abundant, it needs more uses. While power plants are switching to gas, the U.S. still gets more electricity from coal.

Billionaire T. Boone Pickens wants trucks and buses to run on natural gas. The chemical industry is investing more than $100 bn in expansion projects spurred by cheap shale gas, according to the American Chemistry Council in Washington. And the Energy Department has approved seven projects to export about 9.3 Bcf a day of natural gas in liquid form.

In the time it takes for those new demand sources to develop, making natural gas more valuable in its own right, its role as a byproduct of oil drilling is contributing to more pollution. In North Dakota, drillers pumping oil in the Bakken shale formation are burning off about $1.4 million worth of natural gas every day.

While politicians and industry may pay lip service to natural gas as the clean fuel of the future, the companies out exploiting America’s oil fields leave no doubt that they’re interested in the same fuel as 100 years ago.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.