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The Channel Island power station is the main provider of electricity to the Darwin-Katherine interconnected system.(Supplied: Territory Generation)

Production from the offshore field which supplies gas for the Top End’s electricity generation has decreased by nearly 50 per cent this year — raising concerns about the long-term security of the resource.

Power and Water Corporation (PWC) has an agreement with Italian company ENI to buy gas from its Blacktip field until 2031, using the gas to generate electricity for the Darwin to Katherine grid.

But over the past 12 months, gas output from the field has been steadily dropping.

Blacktip’s production has decreased so much that there is not enough gas to run the Tennant Creek to Mount Isa pipeline, where PWC normally sends its excess supply.

Wood Mackenzie energy research analyst Anne Forbes said it was common for gas fields to have production issues, but Blacktip’s problems seemed particularly bad.

“There’s been quite a significant [production] decline, much more severe than we would generally assume would happen for this type of gas field,” she said.

“It’s been quite unexpected.”

Aging electricity infrastructure in the Northern Territory — Most of the Northern Territory’s electricity is provided by gas-fired power stations.(ABC News)

The Blacktip field is made up of 12 separate stacked reservoirs across four different geological formations — meaning it is difficult to extract gas from.

“[A gas reservoir] will always not perform as you expect — it might be better or it might be worse,” Ms Forbes said.

“In this case it’s not been as good as [ENI] had hoped.”

…click on the above link to read the rest…

Hurricane Ida Shuts Down More Than 90% of Oil and Gas Production in the Gulf of Mexico

September 1, 2021

Hurricane Ida Shuts Down More Than 90% of Oil and Gas Production in the Gulf of Mexico

Experts say the oil refineries that have been shut down account for 9% of the country’s total.

A gas pump with gas selling for $1.04 a gallon is shown on May 07, 2020 in Baltimore, Maryland.

As if reversing the course of the Mississippi River, forcing hospitals to hunker down with patients that couldn’t be moved, and nearly shutting off the power and internet in New Orleans wasn’t enough, Hurricane Ida has also disrupted oil and gas production.

The Bureau of Safety and Environmental Enforcement on Sunday said that 95.6% of current oil production and 93.7% of the gas production in the Gulf of Mexico had been shut down in response to Hurricane Ida, which made landfall as a powerful Category 4 storm in Louisiana. Offshore Gulf operators had to evacuate personnel due to Ida and as of Sunday had moved workers off 288 production platforms, or 51.4% of manned platforms in the area, and 11 rigs, or 100% structures in the area.

In addition, the BSEE reported that 10 dynamically positioned rigs—which are not moored to the seafloor and can change locations in a relatively short period of time—had moved out of the storm’s projected path. They represent 66.7% of the total dynamically positioned rigs in the Gulf of Mexico.

A hurricane making landfall in this area is the one of the worst things that could happen to the oil industry, experts told CNN, and could impact the pipelines that ferry fuel to the East Coast. Andy Lipow, president of the Houston-based consulting firm Lipow Oil Associates, told the outlet that six refineries in New Orleans are currently shut down. These refineries—which include PBF, Phillips, Shell, Marathon, and two Valero refineries—produce 1.7 million barrels per day, or 9% of the country’s total.

…click on the above link to read the rest of the article…

US Crude Oil Production Plunged Most Ever, Natural Gas Followed: The Great American Oil & Gas Bust, Phase 2

August 6, 2020

US Crude Oil Production Plunged Most Ever, Natural Gas Followed: The Great American Oil & Gas Bust, Phase 2

Precisely what’s needed to end the price collapse. But last time, it wasn’t long before Wall Street liquidity surged back into shale, starting the cycle all over again.

US crude oil production in May plunged by 1.99 million barrels per day, from 12 million b/d in April to 10 million b/d, the largest monthly drop since at least 1980, and the sixth monthly drop in a row, according to the EIA.

This comes after the collapse in demand for transportation fuels – especially gasoline and jet fuel – that started in March and exacerbated the oil glut and a downward spiral of the already depressed prices for crude oil. Amid a torrent of bankruptcy filings by oil-and-gas companies, drillers cut drilling activity and production. This trend restarted last year, after having subsided somewhat following phase 1 of the Great American Oil Bust in 2015-2016, but took on record proportions during the Pandemic. From the peak in November 2019 of 12.86 million b/d, production has now plunged by 22.2%:

In the chart above, note how production doubled between mid-2012 and November 2019, despite the drop in production in 2015-2016.

The chart below shows the the price of benchmark crude oil grade West Texas Intermediate. Note how the price recovery from late 2016 ended in the fall of 2018 and then reversed, as production surged. The price decline bottomed out on April 20, when for a brief period the price of WTI plunged below zero, a bizarre moment in the history of crude oil:

Texas, the state with by far the largest production in the US and the epicenter of the oil-and-gas bankruptcy filings, was also the state with the largest production cuts, in terms of million b/d. Peak production occurred in March 2020 at 5.44 million b/d. By May production had plunged 19% to 4.39 million b/d.

…click on the above link to read the rest of the article…

Global Gas Production Set To Tumble In 2020

June 23, 2020

Global Gas Production Set To Tumble In 2020

Natural gas production, which was originally projected to grow in 2020, is now facing an estimated decline of 2.6 percent.
Associated gas from oil fields is going to be hit hardest, with an expected decline of 5.5 percent compared to 2019 levels
The biggest drop in associated gas production will be in North America, which makes up roughly half of the global output

The Covid-19 pandemic has landed a lasting blow to both oil and gas markets. Global oil production has absorbed the lion’s share of the impact, but natural gas output, which was previously set to grow, is also set to decline by 2.6 percent this year, Rystad Energy forecasts. Production of associated gas from oil fields will be hit most, losing some 5.5 percent compared to 2019 levels.

Before Covid-19 forced a new reality upon the energy world, Rystad Energy expected total natural gas production to rise to 4,233 billion cubic meters (Bcm) in 2020, from 4,069 Bcm last year. Now this estimate is revised down to 3,962 Bcm for this year, rising to 4,015 Bcm in 2021 and to 4,094 in 2022.

Production from natural gas fields, which was initially expected to rise to 3,687 Bcm this year from 3,521 Bcm in 2019, is expected to reach 3,445 Bcm instead, recovering to 3,485 Bcm in 2021 and further to 3,551 Bcm in 2022.

The most affected output in percentage terms is the one of associated gas, which was initially forecast to stay largely flat year-over-year from the 2019 level of 547 Bcm. It is now expected to fall to 517 Bcm instead in 2020, rising to 530 Bcm in 2021 and 542 Bcm in 2022. Associated gas will likely only again exceed 2019 levels from 2023 onwards.

…click on the above link to read the rest of the article…

The LNG Market Is “Imploding”

April 28, 2020

The LNG Market Is “Imploding”

LNG tanker

While everyone is understandably watching the meltdown in the crude oil market, the global market for natural gas is also cratering.

At least 20 cargoes of U.S. liquefied natural gas (LNG) have been cancelled by buyers in Asia and Europe, according to Reuters. The global pandemic and the unfolding economic crisis have slashed demand for gas worldwide. Cheniere Energy, one of the main exporters of U.S. LNG, has seen an estimated 10 cargoes cancelled by buyers halfway around the world, Reuters said.

The price for LNG in Asia was already crashing before the pandemic, owing to a substantial increase in supply last year. Prices for LNG in Asia for June delivery have recently traded at $2/MMBtu, only slightly higher than Henry Hub prices in the U.S.

As recently as October, LNG prices in Asia traded at just under $7/MMBtu.

The problem for American gas exporters is that after factoring in the cost of liquefaction and transportation, gas breakeven prices for delivering to Asia are around $5.56/MMBtu, according to Reuters. But prices are trading at less than half of those levels.

Gas exports tend to be conducted under rigid contracts, but cargoes are now facing cancellation.

“The financial prospects for [LNG] ? once one of the globe’s hottest energy commodities – seem to be imploding before our eyes,” Clark Williams-Derry wrote in a new report for the Institute for Energy Economics and Financial Analysis (IEEFA). He noted that LNG prices in the fall of 2018 were at around $12/MMBtu.

The oil majors have made large bets on LNG in recent years. Royal Dutch Shell spent more than $50 billion to buy BG Group in 2015. The move back then was made with an eye on surging demand for natural gas. “We will now be able to shape a simpler, leaner, more competitive company, focusing on our core expertise in deep water and LNG,” Shell’s CEO Ben van Beurden said after closing on the acquisition of BG Group more than four years ago.

The deal remade Shell into one of the largest traders of LNG on the planet. Several other oil majors – Total SA, ExxonMobil and Chevron, for instance – have also made massive bets on LNG.

The U.S. Remains The Natural Gas King

August 5, 2018

The U.S. Remains The Natural Gas King

Data from the 2018 BP Statistical Review of World Energy show that last year the U.S. maintained a healthy lead as the global natural gas powerhouse.

In 2017, the U.S. produced an average of 71.1 billion cubic feet per day (Bcf/d) of natural gas. That’s a 1.0 percent increase from 2016 production, but not quite good enough to beat the 2015 record of 71.6 Bcf/d.

That was still good enough for a 20.0 percent share of the world’s total natural gas production.

Shale Gas Puts U.S. Back on Top

To put the U.S. production numbers in perspective, natural gas production for the entire Middle East was 63.8 Bcf/d. Russia, in second place among countries, saw its natural gas production surge by 8.2 percent, but at 61.5 Bcf/d that was still well behind the U.S.

(Click to enlarge)

Natural gas production 1970-2017

The U.S. had dominated global natural gas production until the 1980s, at which time it ceded the lead to Russia. The Middle East has grown its natural gas production at a much faster rate over the past 50 years, though, and is on pace to take the lead during the next decade.

U.S. natural gas production had been in decline until the fracking boom that began in the middle of the previous decade. Production grew in the U.S. by an astounding 51 percent from 2005 to 2015, which pushed the U.S. back into the global lead.

U.S. consumption has also grown rapidly as power plants have turned increasingly to natural gas as both a replacement for coal-fired power, and a backup for new renewable capacity.

U.S. Gas Exports are Surging

Another important outlet for U.S. natural gas production has been exports, both via pipeline and as liquefied natural gas (LNG). LNG exports from the U.S. reached 1.7 Bcf/d in 2017, equivalent to about 2.4 percent of U.S. natural gas production. Mexico received nearly 22 percent of these exports, while the Asia Pacific region received 41 percent.

…click on the above link to read the rest of the article…

Norway and UK Production Update

November 8, 2017

Norway and UK Production Update

Short-term trends for UK oil and gas production and, to a lesser extent, Norway can be rendered a bit meaningless by seasonal impacts from summer maintenance turn-arounds and cyclic gas demand. Overall, though, both are at or approaching the tail end of the production curve, but with slight upticks in the nearer term. Barring several large and unlikely new discoveries over the coming years the industry will continue winding down in both countries, with the UK ahead of Norway, and exploration and development leading operations and finally decommissioning. However some Norwegian gas production still has a multi-decade plateau to come and there are a couple of large oil projects due on-line in each country which will run for twenty to thirty years.

norway drilling and discoveries

chart/

The usual patterns of exploration wells and discoveries following a bell curve that is matched by a later development curve (see below for the UK example and note that production is in cubic meters as it fits on a common axis better that way) is not seen so much in the Norwegian numbers. There are a number of reasons for this: 1) the wells and discoveries shown are for oil and gas and Norwegian gas development has been several years behind oil; 2) Norway really has three basins which have been explored somewhat sequentially – the North Sea, then the Norwegian Sea and then the Barents Sea; 3) the NPD includes as discoveries ‘hydrocarbon shows’ which will never be developed and skew the numbers, additionally in the chart the large number of ‘not evaluated’ finds in recent years will mostly become ‘unlikely to be developed’; 5) in the past Norwegian governments has made efforts to spread development of the resources through approval and leasing timing; 6) I think there are tax breaks in Norway that encourage exploration drilling even at low oil prices and low discovery rates; and 7) the chart shows numbers of discoveries rather than size, which would show a much clearer bell curve.

…click on the above link to read the rest of the article…

The North Sea Oil Recovery Is Dead In The Water

September 8, 2017

The North Sea Oil Recovery Is Dead In The Water

The oil majors issued a vote of confidence for the North Sea in recent days, citing precipitous declines in the cost of production, which they say will revive the region’s oil and gas production.

At an oil industry conference in the North Sea’s oil capital, Aberdeen, the chief executives of BP and Royal Dutch Shell both offered bullish assessments for the turnaround underway off the coast of Scotland. BP’s Bob Dudley said the North Sea is “back to growth,” according to the FT.

The North Sea has long been a costly place to produce oil. And as the aging oilfields in the North Sea suffer from declining output – a decline underway since the late 1990s – investing in a high-cost basin for the oil majors has slipped down on the priority list, especially when shale has emerged as an alternative in an uncertain market.

Even when oil prices were high, production was falling. When prices started to crash in 2014, the North Sea looked like a dead man walking.

But things are looking a little better than they were a few years ago. The oil majors say they have overhauled their cost structures in the region, making production profitable in today’s $50 market, even when the region struggled to be profitable with a $100 oil price a few years back. BP says costs of halved to just $15 per barrel.

Shell’s CEO Ben van Beurden told the FT on the sidelines of the conference that the industry managed to avoid the “death spiral” that they were facing in 2014. At the time, a growing number of key pieces of infrastructure looked like they might have to shut down.

…click on the above link to read the rest of the article…

Texas Update May 2016 and Eagle Ford Output Estimat

May 29, 2016

Texas Update May 2016 and Eagle Ford Output Estimate

Dean has provided me with his latest update for Texas Oil and Natural Gas production. Texas C+C output has increased slightly over the first 3 months of 2016.

blogchart/

Texas C+C output was 3549 kb/d in March 2016, about 39 kb/d higher than February.

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Texas crude output was 3079 kb/d in March 2016, about 29 kb/d higher than February.

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Condensate output was 470 kb/d in March 2016, 11 kb/d higher than February.

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Natural gas output in Texas was 24,690 MMCF/d, 309 MMCF/d higher than February.

Using RRC data, I determined the percentage of Texas C+C output produced in the Eagle Ford Shale from April 2012 to March 2016. This percentage was than multiplied by Dean’s estimate for Texas C+C output to get an estimate of Eagle Ford C+C output from April 2012 to March 2016. The Chart below compares the RRC data for the Eagle Ford with my estimate using Dean’s Texas C+C estimate.

blogchart/

Eagle Ford output was about 1390 kb/d in March 2016, about 20 kb/d higher than February. The annual decline rate from Feb 2015 to March 2016 was about 220 kb/d or roughly 15% per year. Since November 2015 Eagle Ford output has declined very little. The red data points are used for the trend line in the chart below.

…click on the above link to read the rest of the article…

Texas Oil and Gas Production March 2016

March 24, 2016

Texas Oil and Gas Production March 2016

Most of the charts that follow were produced by Dean Fantazzini and are in barrels of output per day for oil, condensate, and oil plus condensate except where noted. In my opinion Dean’s estimates for Texas output for the most recent 24 months are the best that I have seen. I appreciate him sharing his outstanding work with us.

TXchart/

In the chart above corrected output is 3477 kb/d for TX C+C in Jan 2016, an increase of 73 kb/d from Dec 2015. Note that from May 2015 to Dec 2015 the most recent month’s estimate has been about 28 kb/d too high on average, so actual Jan 2016 output might be about 3450 kb/d.

TXchart/

The chart above compares Dean’s corrected C+C estimate with both the EIA estimate and RRC data which is incomplete for the most recent 24 months. The “RRC error %” is Dean’s “corrected” divided by RRC data minus one times 100 and is read from the right axis.

TXchart/

Texas oil output was 3014 kb/d in Jan 2016 based on Dean’s corrected estimate, an increase of 73.5 kb/d from Dec 2015.

TXchart/

The corrected Texas condensate output was 463 kb/d in Jan 2016, a decrease of 1 kb/d from Dec 2015.

TXchart/

The chart above is in thousands of cubic feet per day. The Jan 2016 corrected estimate is 2381 million cubic feet per day, a decrease of 176 million cubic feet per day from Dec 2015.

TXchart/

The chart above shows how Dean’s estimates have changed over time from April 2015 to Jan 2016. Notice especially the big change in the estimates from April to June 2015, after that the estimates seem to converge nicely from June 2015 through Jan 2016. My guess is that the data processing in Texas has been improving dramatically over the past 7 months.

…click on the above link to read the rest of the article…

Carnage in US Natural Gas as Price Falls off the Chart

December 19, 2015

Carnage in US Natural Gas as Price Falls off the Chart

All eyes are on Chesapeake.

The price of natural gas in the US has gotten completely destroyed. The process started in July 2008, at over $13 per million Btu and continues through today, at $1.77 per million Btu.

In between, natural gas traded at prices that, for much of the time, didn’t allow drillers to recoup their investments, leading to permanently cash-flow negative operations, and now huge write-offs and losses, defaults, restructurings, and bankruptcies.

You’d think that this sort of financial misery would have caused investors to turn off the spigot, and for production to fall because drillers ran out of money before it got that far.

But no. Over the years, money kept flowing into the industry. In this Fed-designed world of zero interest rate policies, when risks no longer mattered, drillers were able to borrow new money from banks and bondholders and drill that money into the ground, and production soared, and more money poured into the industry based on Wall Street hoopla about this soaring production, and this money too has disappeared.

In the process, the US has become the largest natural gas producer in the world – and the place where the most money ever was destroyed drilling for natural gas.

But now the spigot is being turned off. And much of the industry is heading toward default and bankruptcy. Granted, the largest producer in the US, Exxon, has apparently bigger problems on its global worry list than the misery in US natural gas. Its stock is down only 25% since June 2014, and its credit rating is still AAA. But even if it gets downgraded a couple of notches, Exxon can still borrow new money to fund its operations, dividends, and stock buybacks, and service its existing debt.

But the rest of the industry – along with its investors and banks – is sinking deeper into fiasco.

…click on the above link to read the rest of the article…

Oil prices are down, gasoline prices are not. What gives?

July 24, 2015

Oil prices are down, gasoline prices are not. What gives?

It’s a good summer to be selling gasoline, not a great one to be buying it

In mid-February, the price of oil hovered around $50 US a barrel, and a litre of gasoline cost, on average, $1.01 Cdn.

This week, the price of oil is hovering around $50 a barrel and the average price of a litre of gasoline is $1.22. A few small things have changed over that five-month period: the Canadian dollar is lower by about three cents; Alberta has added a four cent tax to gasoline bought in that province.

But the big difference is that refineries are making a killing this summer.

Gas prices: Unravelling the mystery of what you pay at the pump

Refining margins are the difference between the cost of crude oil and the cost of wholesale gasoline.

‘We’re at that part of the summer where demand for gasoline is never going to be stronger.’ – Stephen Schork, Schork Report

Both Canadian and U.S. refining margins are running at seven- and eight -year highs. In Canada last month, the refining margin was 27.7 cents per litre according to data compiled by Michael Ervin of the Kent Group.

“We’re at that part of the summer where demand for gasoline is never going to be stronger,” said Stephen Schork, editor of the Schork Report, which is focused on commodities.

“We’re at the height of the northern-hemisphere peak-demand season.”

Demand for gasoline is high

Demand for gasoline is indeed very high this summer. According to the U.S. Energy Information Administration, gasoline demand is nearly seven per cent higher than it was a year ago. That’s a significant increase.

Refiners are going full steam right now, at over 90 per cent capacity, in order to keep up with demand.

Texas Oil and Gas Production for April

June 20, 2015

Texas Oil and Gas Production for April

The preliminary Texas RRC Production Data is out this morning. There appears to be a considerable drop in Texas crude oil production in April. All Texas RRC data in the charts below is through April 2015 and all EIA data is through March 2015.

For those new to this site, the Texas RRC data is incomplete. The drooping lines will eventually, after the final data comes in, closer resemble the EIA data. Though I believe the EIA data is quite a bit too high at this point.

It appears that, when the final data comes in that Texas will have took a huge hit in January, recovered somewhat in February and March, then took another hit this past April.

Dr. Dean Fantazzini, with his algorithm that calculates the final production numbers, also comes to the conclusion that Texas took a hit in April production. Dean has three results with the most probable in the middle.

…click on the above link to read the rest of the article…

Have Natural Gas Prices Bottomed?

April 28, 2015

Have Natural Gas Prices Bottomed?

Last Friday we finally got confirmation of where all the natural gas supply has been coming from as Cabot (COG) reported its earnings. Just like Chesapeake (CHK), they reduced natural gas output, but on a much grander scale. CHK has yet to report and will do so on May 6th providing even more color on the subject.

Last month they announced a 2% reduction in NGAS volumes to 1-3% for 2015 vs. 3-5%. But the ramp up of supply from Marcellus, and to a lesser extent Utica, and a corresponding flat to up rig count in natural gas rigs in those areas appears to be the reason why NGAS has crashed some 30% despite a relatively cold winter in the mid-west and East especially. The magnitude of the supply increase is simply stunning, begging the question: what was Cabot’s management thinking by increasing NGAS production in Marcellus by some 40% to 162 BCF in 1Q15 and up 12.5% sequentially from 4Q14? And, to boot, 4Q14 was up over 13% sequentially from 3Q14!

Source: Company Data

The Marcellus region began ramping up in 2010 which has resulted in a surge in production which has probably peaked 1Q15 in terms of rate of growth. It has by far contributed to the largest increases in output and has signal handily resulted in the crash in prices.

With spot prices hovering around $2.45/MMBTU and within 10% of the most bearish estimate targets this quarter, it seems the worst of the oversupply is behind the market especially with EPA rules forcing coal to NGAS switching in volume this summer. Coal still represents the majority of fuel used to generate electricity despite this trend.

…click on the above link to read the rest of the article…

Gulf of Mexico Crude Oil and Gas Production – Peak Oil BarrelPeak Oil Barrel

November 21, 2014

Gulf of Mexico Crude Oil and Gas Production – Peak Oil BarrelPeak Oil Barrel.

BOEM and BSEE have published in 2014 the GOM oil & gas reserves at end 2010 few months ago and at end 2011 lately.

The big change is that they now report proved and probable reserves = 2P (in contrary to SEC rules for operators reporting at the US Stock Exchange, forbidding to report probable reserves), when before they reported only proved reserves = 1P

They argue:

In order to more closely align BOEM GOM reserves definitions with the Petroleum Resources Management System definitions (SPE/AAPG/WPC/SPEE 2007), this report clarifies that Proved Reserves in this and previous reports are Proved plus Probable (2P) estimates.

The difference between original reserves estimates from previous year found little difference for discoveries before 1995

The difference between 2P 2011 and 2P 2010 is a very large decrease for Thunder Horse (-488 Mb or 573 Mboe) and the largest increase is Great White +73 Mb

…click on the above link to read the rest of the article…

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Experts say the oil refineries that have been shut down account for 9% of the country’s total.

Demand for gasoline is high

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