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USGS Confirms Oklahoma Quakes Are Due To Fracking
USGS Confirms Oklahoma Quakes Are Due To Fracking
The debate about the cause of the exponential rise in the frequency of earthquakes in Oklahoma has really heated up in the last year, but as KFOR4 reports, The United States Geological Survey (USGS) appears to have put any doubt firmly to rest. In a strongly-worded press release, the USGS states, “…Large areas of the United States that used to experience few or no earthquakes have, in recent years, experienced a remarkable increase in earthquake activity.. This rise in seismic activity, especially in the central United States, is not the result of natural processes... Instead, the increased seismicity is due to fluid injection associated with new technologies that enable the extraction of oil and gas from previously unproductive reservoirs.” For some, that could end the debate; but Kim Hatfield, with the Oklahoma Independent Petroleum Association, is not so sure, “I don’t think it’s particularly helpful because basically, it says we’ve come to a conclusion, but we don’t have the science to back it up.”
Full USGS Statement: Coping with Earthquakes Induced by Fluid Injection
A paper published today in Science provides a case for increasing transparency and data collection to enable strategies for mitigating the effects of human-induced earthquakes caused by wastewater injection associated with oil and gas production in the United States. The paper is the result of a series of workshops led by scientists at the U.S. Geological Survey in collaboration with the University of Colorado, Oklahoma Geological Survey and Lawrence Berkeley National Laboratory, suggests that it is possible to reduce the hazard of induced seismicity through management of injection activities.
…click on the above link to read the rest of the article…
Shale sub-prime and the Ides of March
Shale sub-prime and the Ides of March
“Sub-prime” is the term by which became known the debt market segment that served low quality housing in the US. Essentially these were products supporting mortgages to low-middle class families, that in 2006/07, up against the simultaneous rise in interest rates and commodities prices, produced a wave of defaults that lead to the 2008 financial crisis.
The rise in petroleum prices was a key element to the 2008 crisis, but would eventually bring something positive to the US. Petroleum is usually extracted from large underground cavities known as reservoirs. However, it is formed at greater depth, within source rocks, where organic matter is slowly cooked by the internal heat of the planet until it degrades, first into petroleum and finally into gas. Prices persistently above 100 dollars per barrel meant that beyond traditional reservoirs it also became feasible to drill deeper for petroleum, down to source rocks and other rock formations of low permeability.
In 2010 the US Government and media thus embarked in a promotional campaign for source rock drilling, erroneously calling “shales” to these resources to ease the marketing. Vast amounts of money started flowing to the sector, the industry quivered with activity, plenty of new jobs were created and the country soon emerged from economic recession. The end result: in three years petroleum extraction in the US grew by 50%, returning to levels not seen since the 1980s.
…click on the above link to read the rest of the article…
This Week In Energy: ExxonMobil On The Hunt
This Week In Energy: ExxonMobil On The Hunt
Oil prices continued to pick up steam for the week ending on February 13. Brent crude traded above $60 per barrel for the first time in 2015, a psychological threshold that caught the markets by surprise and points to a potential price rebound quicker than many had previously thought.
The price surge is underpinned by a continued pull back by the industry. There were also several catalysts this week that pushed oil higher. Apache Corporation (NYSE: APA) reported its fourth quarter earnings this week, and announced a significant draw down in its drilling plans for the year. One of the biggest drillers in Texas, and in the Permian basin in particular, Apache plans on reducing its drilling fleet by 70%, and revised its estimated production growth down to essentially zero.
Also, Royal Dutch Shell’s (NYSE: RDS.A) CEO Ben van Beurden warned investorsabout the potential for prices to spike in the next two years or so. Echoing prior comments from OPEC officials, van Buerden said that severe cutbacks in investment and drilling could result in a supply shortage, not necessarily in 2015, but in the coming years.
Several other background indicators supported oil prices, including positive news coming out of Europe. German GDP figures beat estimates, reducing fears of a European-wide recession. The markets also raised hopes that a resolution to the Greek debt situation would be less intractable than previously thought. Greek officials are meeting with international creditors on February 13. Moreover, the U.S. dollar weakened a bit this week. Retail sales in the U.S. disappointed, falling 0.8% in January from a month earlier. That contributed to a 1% decline in the dollar index. Since oil is priced in U.S. dollars, the depreciation helped push up oil prices.
…click on the above link to read the rest of the article…
Never before has drilling for oil collapsed this far this fast.
Never before has drilling for oil collapsed this far this fast.
The word “boom” can never be thought of as a stand-alone concept that everyone loves, particularly governments because they get to rake in the big bucks. It’s always attached to its miserable twin that no one wants to see, the “bust.” They come invariably in cycles, one after the other. You can’t have one without the other. It’s just a question of time. And in the world of fracking, it’s no different.
The fracking-for-oil boom started in 2005, collapsed by 60% during the Financial Crisis when money ran out, but got going in earnest after the Fed had begun spreading its newly created money around the land. From the trough in May 2009 to its peak in October 2014, rigs drilling for oil soared from 180 to 1,609: multiplied by a factor of 9 in five years! And oil production soared, to reach 9.2 million barrels a day in January.
That’s what real booms look like. They’re fed by limitless low-cost money – exuberant investors that buy the riskiest IPOs, junk bonds, leveraged loans, and CLOs usually indirectly without knowing it via their bond funds, stock funds, leveraged-loan funds, by being part of a public pension system that invests in private equity firms that invest in the boom…. You get the idea.
That’s how much of the American shale-oil revolution was funded.
…click on the above link to read the rest of the article…
Junk Science? Report Finds Shale Industry Cited ‘Retracted and Discredited’ Studies
Junk Science? Report Finds Shale Industry Cited ‘Retracted and Discredited’ Studies
Since the beginning of the shale gas rush, the drilling industry has insisted that the process is relatively benign, arguing that its critics are simply fear-mongering and that a sober scientific review of the data fails to prove, for instance, that fracking has ever contaminated water supplies.
In the wake of New York Governor Andrew Cuomo’s decision to disallow fracking in that state, for example, one of the most active boosters of the shale drilling rush, the industry-funded Energy in Depth, issued a statement labeling the ban “’Junk Science’ and ‘Political Theater.”
In the wake of news reports, academic publications, or policy decisions that it opposes, Energy in Depth often circulates lists of sources that it describes as debunking “junk science.” But how reliable is the science that EID cites?
A report issued today by the Public Accountability Initiative (PAI) reviews a list of over 130 studies cited by Energy in Depth (EID), testing its sources for markers of credibility.
How often was the research cited peer-reviewed? Was it accurately labeled? Was the research funded by the oil and gas industry, and if so, was that funding properly disclosed or was it concealed? Were any of the papers cited revoked or rescinded?
…click on the above link to read the rest of the article…
Why We Won’t See An Oil Price Rebound Yet
Why We Won’t See An Oil Price Rebound Yet
The front page of The Wall Street Journal on Tuesday, February 10 proclaimed “Oil-Price Rebound Predicted” according to the IEA (International Energy Agency).
Not true.
The February 10 IEA Oil Market Report states that some “market participants are seeing light at the end of the tunnel” based on oil company spending cuts. It goes on to mention that over-supply could become as bad as in 1998 when oil prices plunged to almost $11 per barrel.
That’s some kind of light at the end of the tunnel!
I believe that oil prices will increase strongly before the end of 2015 but there has to be a reason. Budget cuts and falling rig counts may create a feeling that production will fall but markets don’t move far or for long based on feelings.
The first reason for a rebound in oil prices will be a production cut after the June OPEC meeting. That didn’t happen in November because Russia said no. I think Russia will be ready by June.
The second reason will be when North American oil production starts to fall, hopefully around the same time as an OPEC plus Russia production cut. Another reason may be a political event that introduces a fear premium into the price of oil like ISIS in Iraq, Ukraine or something not on the radar yet. That’s how the world is.
…click on the above link to read the rest of the article…
Goldman Warns “Don’t Count On Rig Declines To Balance The Oil Market Just Yet”
Goldman Warns “Don’t Count On Rig Declines To Balance The Oil Market Just Yet”
With WTI back under $50 once again (the mainstream media’s new Maginot Line for oil complex stability – just like $80, $70, and $60 was), it appears more investors are waking up to the reality of an over-supplied, under-demanded global energy market. The ‘squeeze bounce manipulation’ that we saw over the last week – very reminiscent of the bounce seen mid-collapse in 2008/9, was predicated on falling rig counts (and capex). However, Goldman pours freezing cold fracking water all over that thesis as they explain that the decline in the US rig count remains well short of the level required to achieve a sufficient slowdown in US oil production growth to balance the global market. Simply put, they conclude, lower oil prices will be required over the coming quarters to see the US production growth slowdown materialize with risk to their already low price forecast to the downside.
Via Goldman Sachs,
Further rig count declines required to balance market
The US oil rig count has dropped sharply, with the recent acceleration helping trigger a large rally in oil prices. To help quantify the impact, we decompose oil production from the three big shale plays at the county level, separating the contribution of well and rig performance. Our bottom-up analysis suggests that the decline in the US rig count likely remains well short of the level required to slow US shale oil production to levels consistent with a balanced global market, especially if productivity gains and high-grading materialize as expected. Nonetheless, we also find that the rebalancing of the US oil market is closer than would be implied by the US shale gas template of 2012-13.
The past weeks have featured (1) an improvement in oil prices, locked in to some extent by production hedges, (2) an easing in the funding constraint of E&Ps, and (3) an acceleration in both cost deflation and deleveraging through significant rig cuts.
…click on the above link to read the rest of the article…
Why a UK shale gas industry is incompatible with the 2°C framing of dangerous climate change
Why a UK shale gas industry is incompatible with the 2°C framing of dangerous climate change
This piece is a response to Professor Robert Mair’s Royal Society science policy blog, “Hydraulic fracturing for shale gas in the UK – an opportunity to shape a constructive way forward” (In Verba, 26th Jan):
Professor Mair’s Royal Society post suggests that the development of a UK shale gas industry is compatible with the UK’s climate change targets. I suggest this conclusion is premised on a partial and overly simplistic interpretation of the UK’s muddled climate change obligations.
Shale gas within domestic carbon budgets
The development of a UK shale gas industry may be compatible with the UK’s domestic carbon budgets – just.
These budgets are however premised on a high probability of exceeding the 2°C threshold between acceptable and dangerous climate change and on a highly inequitable allocation of the global carbon budget to the UK.
Even under such lax conditions (and hence a larger UK carbon budget) there is a significant risk that a new and large-scale UK shale gas infrastructure could become a stranded asset within a decade or so of major shale gas extraction.
…click on the above link to read the rest of the article…
Wall Street Has a Dream About the Price of Oil
Wall Street Has a Dream About the Price of Oil
The price of oil has bounced 20% since January 29 when the benchmark West Texas Intermediate had dipped below $44 a barrel, but according to Edward Morse, Citigroup’s global head of commodity research, that dizzying bounce is a “head-fake.”
Because the fundamentals are still terrible. Oil production in the US is still rising, despite drillers shutting down drilling activities at a record pace. Drilling fewer new wells is hurting oil field services companies, and the pain is fanning out across the oil patch and beyond. It hit private equity firms, it sank energy junk bonds, it triggered layoffs, but it isn’t curtailing oil production. Not yet.
So the US remains by far the largest contributor to “global oil supply growth,” the US Energy Information Administration just pointed out, with production in 2014 jumping by 1.59 million barrels a day. By comparison: in Iraq, the second largest contributor to global oil supply growth, production edged up by 0.33 million barrels a day.
And…
“Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia,” explained the Citi report, cited by Bloomberg. “The market is oversupplied, and storage tanks are topping out.”
…click on the above link to read the rest of the article…
Fracking set to be banned from 40% of England’s shale areas
Guardian analysis reveals new rules agreed by government will make huge swath of protected areas off limits for shale gas exploration
Fracking is set to be banned on two-fifths of the land in England being offered for shale gas exploration by the government, according to a Guardian analysis.
Such a wide-ranging ban would be a significant blow to the UK’s embryonic fracking industry, which David Cameron and George Osborne have enthusiastically backed.
There were setbacks last week after the Scottish government declared a moratorium and UK ministers were forced to accept a swath of new environmental protections proposed by Labour, leading some analysts to say the outlook for fracking was bleak
One of those new protections was to rule out fracking in national parks, areas of outstanding natural beauty (AONBs), sites of special scientific interest (SSSIs) andgroundwater source protection zones (SPZs).
Neither the government nor Labour have stated how much of the land available for future shale gas drilling – 60% of England – would be affected by the new bans. But a Guardian data analysis has revealed it is 39.7%, with large swaths of the south and south east off-limits, as well as the Yorkshire Dales and Peak district.
…click on the above link to read the rest of the article…
Arthur Berman: Why Today’s Shale Era Is The Retirement Party For Oil Production
Arthur Berman: Why Today’s Shale Era Is The Retirement Party For Oil Production
A leading geologist delivers the hard facts
As we’ve written about often here at PeakProsperity.com, much of what’s been ‘sold’ to us about the US shale oil revolution is massively over-hyped. The amount of commercially-recoverable shale oil is much less than touted, returns much less net energy than the petroleum our economy was built around, and is extremely unprofitable to extract for most drillers at today’s lower oil price.
To separate the hype from reality, our podcast guest is Arthur Berman, a geological consultant with 34 years of experience in petroleum exploration and production.
Berman sees the recent US oil production boost from shale drilling as and short-lived and somewhat desperate; a kind of last hurrah before the lights get turned out:
The EIA looks at the US tight oil plays and they see maybe five years before things start to fall off. I think it is less, but I am not going to split hairs. The point is that what we found is expensive and we have got a few years — not decades — of it.
So when we start hearing people pounding the table about how the United States should lift the ban on crude oil exports, well that is another topic if we are just talking about free trade and regulation, but what in the world is a country like ours doing still importing 5+ million barrels of crude oil a day and we have got maybe 2 years of supply from tight oil? What are we thinking about when we claim we’re going to export oil? That is just a dumb idea. It is like borrowing money from a bankrupt person.
…click on the above link to read the rest of the article and listen to the podcast…
Slump in Oil Prices Brings Pressure, and Investment Opportunity
Slump in Oil Prices Brings Pressure, and Investment Opportunity
Now, as the cracks appear in the latest energy boom, the forces of failure and opportunity are stirring again. Resolute Energy, a Colorado company that borrowed big in the boom, is among those in an endgame that is being played up and down Wall Street and in the vast oil fields that new drilling methods have opened in recent years.
It is a struggle that could take place at scores of other companies, leading to thousands of layoffs, as well as losses for banks and investors. At the same time, new fortunes stand to be made.
When Resolute set out three years ago to buy thousands of acres in the oil patch of West Texas, lenders showered the company with hundreds of millions of dollars. But the company had little expertise in the costly and complicated horizontal drilling that it employed on its new property.
Such easy money has abruptly come to an end, mostly because oil prices have plunged, potentially making life much harder for companies like Resolute. Banks slashed the size of the company’s credit line late last year and imposed new lending conditions. Its stock has plummeted, and now trades for mere pennies.
…click on the above link to read the rest of the article…
Oil Rig Count Plunges Most Ever, Oil Price Soars, Inventories Too: Catch Falling Knife, Get Fingers Sliced Off
Oil Rig Count Plunges Most Ever, Oil Price Soars, Inventories Too: Catch Falling Knife, Get Fingers Sliced Off
The oil industry is dead-serious when it talks about slashing operating cost and capital expenditures. They have to. Preserving cash is suddenly a priority, after years when money was growing on trees.
In the US, the cost cutting has reached frenetic levels. One place where it shows up on a weekly basis is the number of rigs actively drilling for oil. And that rig count dropped by 94 to 1,223 in the latest week, as Baker Hughes reported today. A phenomenal plunge, by far the worst ever. In January, the rig count crashed by 276, the most ever for a calendar month. That’s 18.4%! the rig count is now down 386 from its peak on October 10, by nearly a quarter!
And yet, it’s still just the beginning. The chart shows the breathless fracking-for-oil boom that started after the financial crisis. Not included are the rigs drilling for natural gas. That fracking boom had started years earlier and ended in a glut and total price destruction that continues to this day (chart). Note the two-month cliff-dive, the worst ever. During the financial crisis, the oil rig count fell 60% from peak to trough. If this oil bust plays out the same way, the rig count would drop to 642! The bloodletting in the industry would be enormous.
…click on the above link to read the rest of the article…
Leaked Document Could Shatter UK Shale Dreams
Leaked Document Could Shatter UK Shale Dreams
U.K. Prime Minister David Cameron’s hopes for a British-style shale gas revolution recently took a major hit.
Cameron has promised that his government will be “going all out” to develop Britain’s shale gas resources, which he argues will create new jobs and cut dependence on imported gas.
But a committee made up of members of parliament (MPs) from several political parties issued a damning new report on the state of “fracking” in the United Kingdom. The Environmental Audit Committee published a report that called for a 30-month moratorium on fracking, citing “huge uncertainties” regarding the environmental fallout from widespread drilling. On top of the usual controversies over water supplies, the report says that allowing fracking will upend British climate change goals.
“Ultimately fracking cannot be compatible with our long-term commitments to cut climate-changing emissions unless full-scale carbon capture and storage technology is rolled out rapidly, which currently looks unlikely,” MP and Committee Chair Joan Walley said. “There are also huge uncertainties around the impact that fracking could have on our water supplies, air quality and public health.”
Related: Emergency Tax May Not Be Enough To Save North Sea Oil
The committee report was a political bombshell in London, but the House of Commons overwhelmingly shot down an amendment – by a vote of 308 to 52 – on January 26 that would have banned fracking outright.
…click on the above link to read the rest of the article…
