Category Archives: Oil and Gas Exploration

Russia’s Federal Budget Depends On High Price Crude Sales


A summary of the Russian Federal budget was posted by Reuters in July of this year.  It said that Russian crude oil had to be sold at or above $116 per barrel or the budget would show a deficit for the year.  A cursory look at the Ural blend (Russian Trading System, comparable to the WTI or Brent) crude pricing for the year suggests that it probably fell short of the goal.  To get some feel for whether or not they accomplished the price requirement, understand that the Ural and Brent crude price indices have been essentially the same for 2012.  The posting tables the Draft Three Year Budget:

DRAFT THREE-YEAR BUDGET 2013-2015 (in trillion roubles unless

stated)

Year                                         2012    2013     2014      2015

Break-even oil price ($)  116.2    113.9     106.0    105.4

Average oil price ($)              115      97        101      104

Nominal GDP                         60.6     65.8      73.4     81.5

Revenues                                  12.7     12.4      13.6     15.2

Expenditures                          12.7     13.4      14.1     15.3

Deficit (% GDP)                      – 0.1      1.5       0.6      0.11

Non-oil deficit (% GDP)     10.6     10.1      8.9      8.6

$1  =  31 rubles

By 2015, the draft budget forecasts break even price at $105.4.

Both Poland and Romania have shale oil and natural gas potential and are known to be evaluating whether it can be profitably exploited.  This is a real threat to Russia.  Any development of Western European shale is a major problem for Russia.  Like crude oil sales, natural gas sales are a major source of income for Russia.  Russia currently provides most of the natural gas and much of the oil to Western Europe.  Russia has not been reluctant to shut off supplies.  In 2009 a dispute between the Ukraine and Russia over unpaid bills resulted in shutting off natural gas to the Ukraine.  Other countries felt the effect with low  pressure or no  pressure in their pipelines.  While the official story was about unpaid bills there was a belief that Russia’s real reason was to warn neighboring countries not to join NATO. They probably are prepared to put pressure on these nations to persuade them to not develop shale gas or oil.

Below is a 2009 map of the Russian natural gas pipelines supplying European nations.

Russiannaturalgassupplylines573px-Major_russian_gas_pipelines_to_europe

Stefano Casertano,  managing director of the Berlin based “The Energy Affairs Company” posted “From Fracks to Riches” on the Stratfor website.  A number of countries are dependent on sale of oil and natural gas to provide the revenue to balance their budgets. In addition to the numbers above for Russia,  Casertano lists what he says are the crude oil prices (in dollars per barrel) to achieve the needed revenue for several other countries as follows:

Iran——-$117

Libya —-$117

Algeria–$105

Iraq—–$112

The US economy can get an enormous boost from an ample supply of low priced fossil fuels. The fear is that the President does not really see this boost as aligning with his political objectives.  He can use his rigged fracking safety study group to impose many “safety” restrictions as a means to cut short this very beneficial exploitation of our shale.  The consequence of slowing or even stopping the US shale boom will be appreciated by Russia and OPEC.

cbdakota

Why Is US Crude Oil Priced Lower Than European Crude?


 
 
The price standard for US crude oil is West Texas Intermediate (WTI). WTI is called light and sweet referring to its density and relatively low sulfur content.  It is often considered the premium crude and historically has been the benchmark for global oil pricing.  Brent Crude from the North Sea and an OPEC Reference Basket are other standards by which crude is valued.  WTI should carry a wellhead price premium over other crude sources.  But about two years ago,  Brent and WTI prices began separating and the price today, 26 December 2012,(at 4 pmEST) for Brent per barrel is $108.80 and WTI is $88.75.  The  Wikipedia chart below shows the historic trend since the beginning of 2001 through the later part of 2012.   (Click on Charts for clarity.)

“US Energy Independent By 2035”-International Energy Agency


The International Energy Agency (IEA) released their 2012 edition of the World Energy Outlook (WEO) on Monday, 12 November 2012. The take-away from the report is:
The WEO finds that the extraordinary growth in oil and natural gas output in the United States will mean a sea-change in global energy flows. In the New Policies Scenario, the WEO’s central scenario, the United States becomes a net exporter of natural gas by 2020 and is almost self-sufficient in energy, in net terms, by 2035. North America emerges as a net oil exporter, accelerating the switch in direction of international oil trade, with almost 90% of Middle Eastern oil exports being drawn to Asia by 2035.  
 
The new oil and natural gas production in the US will not only result in lower domestic prices for gasoline, electricity and heating oil, it could result in delivering our nation from the endless traumata that are the turbulent Middle-Eastern nations.  Will we feel it necessary to defend shipping routes any more?  Will we need to provide F-16 fighter planes to Saudia Arabia? I wonder if the European or perhaps the Saudis, are becoming nervous thinking that they might have to do for themselves what we have been doing for them.  Maybe the Chinese will take up the slack.  I’m not sure that is a comforting thought.  

Best Fracking Video–Shows How It Is Done


The best video describing the fracking process that I have seen.   Made by MIT, it is well done.

Click here to see the video.

cbdakota

New Technologies To Increase Oil Recovery From Shale Studied.


Currently fracking wells recover less than 10% of the oil in the North Dakota’s Bakken fields.  Bismarck, North Dakota TV station KFYR aired a program discussing new technologies that might result in a major boost in the amount of oil recovered per well site.  KFYR said that two technologies are under study.

Walking rigs – Used on Eco-pads that have several well bores at one location and can be moved from one well head to the next in a matter of hours instead of days.

CO2-enhanced recovery – The process has been used at other oil plays but would be new to the Bakken and could extend the life of wells there by 20 to 30 years.

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That 97% Solution, Again–Reboot


There are many—mostly non-scientists—that like to tell the public that 97% of the world’s climate scientists believe in the catastrophic man-made global warming theory.  If you disagree with their theory,  you are said to be one of the 3% who are “deniers”.  They also tell you that the “deniers” are heavily funded by the fossil fuel industry which makes them not only wrong on science but morally wrong for carrying the water for those evil oil and gas companies. In fact Oil and Gas provide more funds for alternative energy studies than funds provided to the skeptics. Most  skeptics are not funded at all. The winners of the funding wars are the believers of the man-made global warming theory. They get the large cash awards from Governments and Environmental organizations worldwide as long as they produce work that supports the man-made global warming theory. 
 
I set out to post the facts to demonstrate that the 97% claim is bogus.  I ran across the following National Post posting “That 97% Solution, Again”  by Larry Solomon and concluded I could not come up with anything that would surpass Solomon’s arguments on this topic.  So here is what he wrote:
 
That 97% Solution,Again.
Source:  National Post (Canada)
by Larry Solomon
 
How do we know there’s a scientific consensus on climate change? Pundits and the press tell us so. And how do the pundits and the press know? Until recently, they typically pointed to the number 2500 – that’s the number of scientists associated with the United Nations Intergovernmental Panel on Climate Change. Those 2500, the pundits and the press believed, had endorsed the IPCC position.
To their embarrassment, most of the pundits and press discovered that they were mistaken – those 2500 scientists hadn’t endorsed the IPCC’s conclusions, they had merely reviewed some part or other of the IPCC’s mammoth studies. To add to their embarrassment, many of those reviewers from within the IPCC establishment actually disagreed with the IPCC’s conclusions, sometimes vehemently.
The upshot? The punditry looked for and recently found an alternate number to tout — “97% of the world’s climate scientists” accept the consensus, articles in the Washington Post and elsewhere have begun to claim.
This number will prove a new embarrassment to the pundits and press who use it. The number stems from a 2009 online survey of 10,257 earth scientists, conducted by two researchers at the University of Illinois. The survey results must have deeply disappointed the researchers – in the end, they chose to highlight the views of a subgroup of just 77 scientists, 75 of whom thought humans contributed to climate change.  The ratio 75/77 produces the 97% figure that pundits now tout.
The two researchers started by altogether excluding from their survey the thousands of scientists most likely to think that the Sun, or planetary movements, might have something to do with climate on Earth – out were the solar scientists, space scientists, cosmologists, physicists, meteorologists and astronomers. That left the 10,257 scientists in disciplines like geology, oceanography, paleontology, and geochemistry that were somehow deemed more worthy of being included in the consensus. The two researchers also decided that scientific accomplishment should not be a factor in who could answer – those surveyed were determined by their place of employment (an academic or a governmental institution). Neither was academic qualification a factor – about 1,000 of those surveyed did not have a PhD, some didn’t even have a master’s diploma.
To encourage a high participation among these remaining disciplines, the two researchers decided on a quickie survey that would take less than two minutes to complete, and would be done online, saving the respondents the hassle of mailing a reply. Nevertheless, most didn’t consider the quickie survey worthy of response –just 3146, or 30.7%, answered the two questions on the survey:
1. When compared with pre-1800s levels, do you think that mean global temperatures have generally risen, fallen, or remained relatively constant?
2. Do you think human activity is a significant contributing factor in changing mean global temperatures?
The questions were actually non-questions. From my discussions with literally hundreds of skeptical scientists over the past few years, I know of none who claims that the planet hasn’t warmed since the 1700s, and almost none who think that humans haven’t contributed in some way to the recent warming – quite apart from carbon dioxide emissions, few would doubt that the creation of cities and the clearing of forests for agricultural lands have affected the climate. When pressed for a figure, global warming skeptics might say that human are responsible for 10% or 15% of the warming; some skeptics place the upper bound of man’s contribution at 35%. The skeptics only deny that humans played a dominant role in Earth’s warming.
Surprisingly, just 90% of those who responded to the first question believed that temperatures had risen – I would have expected a figure closer to 100%, since Earth was in the Little Ice Age in the centuries immediately preceding 1800. But perhaps some of the responders interpreted the question to include the past 1000 years, when Earth was in the Medieval Warm Period, generally thought to be warmer than today.
As for the second question, 82% of the earth scientists replied that that human activity had significantly contributed to the warming. Here the vagueness of the question comes into play. Since skeptics believe that human activity been a contributing factor, their answer would have turned on whether they consider a 10% or 15% or 35% increase to be a significant contributing factor. Some would, some wouldn’t.
In any case, the two researchers must have feared that an 82% figure would fall short of a convincing consensus – almost one in five wasn’t blaming humans for global warming — so they looked for subsets that would yield a higher percentage.  They found it – almost — in those whose recent published peer-reviewed research fell primarily in the climate change field. But the percentage still fell short of the researchers’ ideal. So they made another cut, allowing only the research conducted by those earth scientists who identified themselves as climate scientists.
Once all these cuts were made, 75 out of 77 scientists of unknown qualifications were left endorsing the global warming orthodoxy. The two researchers were then satisfied with their findings. Are you?
LawrenceSolomon@nextcity.com
cbdakota

Matt Damon’s Anti-US Oil Companies Film Financed by Abu Dhabi


The documentary film “Gasland” had set the tone. The town of Dimock, Pa had been featured in a scene where fire was blasting out of the sink faucets –all because the natural gas companies were using hydraulic fracturing (fracking) of the subsurface shale to release the trapped natural gas. The presumption was that somehow this fracturing was resulting in leakage of natural gas into the subsurface water from which the locals drew their drinking water.

It seemed like a good idea for a movie script, especially when it would bash those thieving rascals that run those evil oil and natural gas companies.  So, Matt Damon andJohn Krasinski said they would make the movie and it would be about “American identity . . . and what defines us as a country.” Whatever that means.  They planned to title the movie, “Promised Land”.  According to the NY Post, the story line was to have Damon, the big oil and natural gas company representative, exposed by an environmentalist.  The environmentalist would reveal the Damon’s (oil company’s) plan to “exploit, pollute and leave” the small community. 

The wheels began to come off the movie story-line when tests by the State of Pennsylvania and the EPA found that the Dimock water was not contaminated. In addition several other stories were reported further ruining the narrative that Damon, et al had chosen. Again, from the Post:

“There was Wolf Eagle Environmental Engineers in Texas, a group that produced a frightening video of a flaming house water pipe and claimed a gas company had polluted the water. But a judge just found that the tape was an outright fraud — Wolf Eagle connected the house gas pipe to a hose and lit the water.   Other “pollution” cases collapsed in Wyoming and Colorado. Even Josh Fox, who with his Oscar-nominated documentary “Gasland” first raised concerns about flammable water, has had to admit he withheld evidence that fracking was not responsible.”

Surely, the Hollywood crowd will come up with something and you want to know why?  Because Abu Dhabi, one of the oil rich United Arab Emirates, is providing part the financing for this movie.   

Do you suppose that Abu Dhabi has an interest in slowing or stopping fracking altogether? Fracking is propelling the United States to a condition of oil and natural gas self-sufficiency.   The consequence will probably be to cause crude oil prices to drop. Because the Emirates’ economic life is predicated on sales of crude oil, this is a logical conclusion. 

But Damon is smart enough to make that connection.  Yet he is smearing US OIL AND GAS COMPANIES in order to stop fracking.  Liberals, seesh.

Click on the link below to read the entire NY Post story:

www.nypost.com/f/print/news/opinion/opedcolumnists/for_his_next_escape_x46uFSONrAaCey67ZzZV0I

To read more of the Foundry Posting on Abu Dhabi financing the Damon picture  click here: http://blog.heritage.org/2012/09/28/matt-damons-anti-fracking-movie-financed-by-oil-rich-arab-nation/

 

cbdakota

Electric Cars and Battery Systems are a Bust


Despite President Obama’s boast that HE was going to bring about the era of the electric car, it isn’t happening.  Yes, he did what he could.  He hoped that by not allowing the use of the most of our Federal lands, he could short the supply of crude oil and thus drive the price of gasoline up to a point where people would have to buy electric cars. It did not work because he could not stop the States and Private owners from developing their lands.  It is now routine to see new supplies of natural gas and crude oil being brought on-line.  He tried to do it by massive infusion of tax payer’s money into electric vehicle and battery production.  But the cars being produced just aren‘t cutting it with the buying public.  The prices are too high. Limited vehicle range coupled with long recharge times are not helping win them over either.  A lot of the EV problems can be attributed to their batteries which are too big and heavy, cost too much and have questionable reliability.

Toyota sees the writing on the wall and has announced that it is getting out of the EV business for now.  They will continue to produce and sell their popular Pris hybrid.

EV sales versus Obama’s goal   

The President’s said that he wanted 1 million EVs and hybrids on the road by 2015.  The Department of Energy released their analysis in 2011 that said 1 million was achievable.  However, sales of the hybrid Volt are a little over 20,000 since introduction in late 2010.  Sales of the EV Nissan Leaf are even smaller. See here ( https://cbdakota.wordpress.com/2012/09/11/president-obamas-pants-on-fire-acceptance-speech/)for additional discussion of 1 million cars goal from President Obama’s acceptance speech at the Democrat Convention.  Analysts from all over are saying it is time to back off this goal.

Hysteria from the Environmentalists

The documentary “Who killed the Electric Car?” was winning awards for its”brilliant detective work” demonstrating how the”evil” corporations did the 1990ty’s EVs in.  The awards were meted out by the same folks that still think the widely discredited “An Inconvenient Truth” is gospel.  It is going to be much tougher to invent a story for this round of EVs and hybrids, when the truth is that the consumers really don’t want these vehicles.  Sure, a small group wants them and they are the ones that go to the Sundance Film Festival.  They can buy a $110,000 Tesla and can afford to not make practical choices for their transportation.

Let’s see now, GM has put up $1.2 billion developing the Volt.  The Feds give a tax rebate of $7,500 to the buyer of a Volt—and they are talking about upping that figure. The dealers have been discounting the Volt to get them off their lots.  This year the factory producing the Volt has twice stopped production when the unsold inventory reached 85 days. And depending on how one does the calculation, GM loses about $50,000 on each Volt sold according to Reuters.

A new factory is being built in Tennessee to manufacture Nissan Leafs.  Nissan got a $1.5 billion low interest rate loan from the Feds for the construction. Nissan says the factory can produce 150,000 Leafs each year.  Sales of the Leaf through August this year are 4,228.  One has to wonder if Nissan Management isn’t concerned that they overbuilt this factory or perhaps even built it at all. 

And the battery maker story is even worse, in my opinion.  A123 got loans of $250 million from the Feds.  A123 was facing bankruptcy when the Wanxiang Group, one of China’s biggest auto suppliers purchased 80% ownership in the company.   Ener1 got $118 million in pledges from the Feds and another $80 million in State and local pledges.  It was declaring bankruptcy when Boris Zingarevich, a Russian businessman with ties to former Russian President Dmitry Medvedev, bought them out. A123 and Ener1 are suppliers to our military as well as to the EV and hybrid manufacturers. The battery technology developed (paid for by us taxpayers) is now in the hands of the Russians and the Chinese. 

So, large amounts of money have been spent developing EVs and hybrids.  GM and probably Nissan are losing substantial amounts of money every day as they continue to produce the Volt and the Leaf.  The gasoline price is much higher than it was in the 90tys when that generation of EVs failed.  It will be very hard to generate a believable story line for a new documentary on what” killed the electric car” this time  unless they say  the customers did not want them.  Obviously that was the reason back in the 90tys, too.

Will there ever be a time for EVs?  Probably.   But it is not now.

cbdakota

Contrasting The Keystone Pipeline And Solyndra


Rep. Fred Upton(R- Michigan) illustrates the huge divide between the Obama view and that of Congressional Republicans when he contrasts the difference between the Solyndra and the Keystone Pipeline energy projects. Upton says:

 These two energy projects tell a dramatic yet revealing story, one that explains our slow economic recovery, our burgeoning federal debt, and our over reliance on Middle Eastern oil.   Solyndra – a bankrupt, federally subsidized solar project – and the proposed  Keystone pipeline carrying oil from Canada – are really symbols of a larger narrative, serving as examples of two distinct economic and governing philosophies. The Keystone approach supports free markets, encourages private investment and relies on technology instead of regulatory mandates to produce energy. The Solyndra model advocates prescriptive and detailed Washington planning, massive federal spending, and recasts energy bureaucrats as venture capitalists.”

 President Obama stymied attempts to authorize the Keystone pipeline saying that it was environmentally problematic because it would be built, in part, over a  major mid-American aquifer.  The pipeline’s proposed path was rerouted but still Obama would not give it the go-ahead.  It is widely understood that his in-action was taken to appease extreme environmentalist groups that are major campaign contributors.  Keystone would have the near term effect of employing thousands of people to build the line. It would have added to the Nation’s crude oil reserve and be supplied from a friendly country- Canada.  However, his inaction has resulted in the Canadians signing an oil sales agreement with China to be supplied from this same resource.  And get this— build a pipeline to the Pacific coast where the crude can be shipped by tanker to China.

Instead, Obama has been picking “renewable energy projects” to fund.  Solyndra is just one example of the many companies that his Administration has picked that have gone bankrupt.  Solyndra was given over $500 billion of taxpayer monies and those are all lost.  In Obama’s Presidential Nomination acceptance speech at the Democrat Convention, he promised to do more of this.  UGH!!

Upton sums up his case here:

“It’s time to start looking forward on energy policy and embrace the possibility of North American energy independence. Given the slow pace of Washington’s bureaucracy, policymakers are often busy solving yesterday’s problems. This rearview mirror approach afflicts Mr. Obama and his Democratic allies in Congress. They lack the vision to realize the energy world has changed dramatically even since the president took office. We now have the opportunity to significantly expand our North American energy supply – not through new regulations or federal subsidies, but by simply making commonsense policy decisions. We need to seize these new opportunities and adapt, not continue to support old policies conceived in a world when energy scarcity was in vogue.”

To read the full posting by Representative Upton click here.

cbdakota

President Obama’s Pants-On-Fire Acceptance Speech


The President’s acceptance speech at the Democrat Convention last Thursday was a pants-on-fire moment when it came to his energy program. (There were other topics besides the energy program in that speech that also rated high on the pants-on-fire meter—but this is an energy blog.)

The President claims responsibility for the decline in the use of imported crude oil.  “In the last year alone, we cut oil imports by 1 million barrels a day, more than any administration in recent history”. There are two primary reasons for this decline. First is because the manufacturing sector is still suffering from this less than robust economy—here his claim rings true as he is responsible for this economy.  The second is that the States and Private property owners have managed to overcome his and his administration’s efforts to stymie the development of oil and natural gas fields. Yes, oil and gas production are up but not on Federal lands where the President has the “say so”.  Oil production declined 11% and natural gas declined 6% on Federal lands from fiscal year (FY) 2010 to FY 2011.  At the same time on State and Private Lands’ oil production increased by 14% and natural gas by 12% over that same period.

 He said: “…. where we develop a hundred-year supply of natural gas that’s right beneath our feet. If you choose this path, we can cut our oil imports in half by 2020 and support more than 600,000 new jobs in natural gas alone”. While he is claiming credit for the natural gas, it really is No Thanks to Obama who has sent the EPA out to find reasons to rein in (i.e., reasons to stop fracking of shale) this State and Private land activity.  

Oil and natural gas production from State and Private Lands will continue to increase and will be the driver of the US economic recovery.  Not the “green” jobs that he has been promoting.  We have doubled our use of renewable energy, and thousands of Americans have jobs today building wind turbines and long-lasting batteries”. While Obama wants you think that wind and solar are soon to replace fossil fuels (oil, natural gas and coal) that is not happening. Fossil fuels supplied 78% and nukes another 11% of the US energy needs in 2010.  Wind supplied about 2% and solar was barely above 0 %. That they are that much is a testimonial to the crony capitalism being practiced by the Federal government by subsidizing the capital cost of renewables installation. This practice leaves the rate payers holding the bag for the high cost of the electricity that renewables create.   It looks like the US will be joining most of the rest of the world that have become disillusioned with wind and solar when Congress doesn’t renew the subsidies next year.  Adding to their dismal performance is the fact that for every new Kw of wind and solar power, a corresponding amount of fossil fuel supplied energy must be built because wind and solar are too unreliable (the wind blows sometimes and not at others and we know the sun is not always shining) for the nation’s power grid to rely upon.  So not only are these unreliable renewables not competitively priced, the global warmers don’t get a reduction in CO2 emissions.

After 30 years of inaction, we raised fuel standards so that by the middle of the next decade, cars and trucks will go twice as far on a gallon of gas”. Despite the implication that he has accomplished something, this new standard is in effective 2025 and there are many reasons to question if it can be met. This will only be realized if significant numbers of electric vehicles replace gasoline based vehicles.  And how is that program going? The hybrid Chevy Volt, the leading US manufactured vehicle, has sold through August about 13,170 making it unlikely they will meet the 2012 forecast of 45,000. The Volt is brought to you by Government General Motors (GM).  Through August, the best-selling all-electric car, the Nissan Leaf, had sold 4,228 vehicles versus the 2012 forecast of 20,000.  The electric vehicles are neither affordable nor efficient for the overwhelming majority of consumers who commute for work.  The Volt’s selling price is about $45,000 before the Government tax incentive of $7,500.  Even at that price, a recent report says: “Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts.”  A little perspective, the projected US  2012 sales of vehicles is about 14 million.  There are something like 250 million registered vehicles in the US.  Even if the Volt were to sell 45,ooo it is drop-in-the-bucket. 

He says that man-made global warming is “not a hoax“.  He is wrong.  His EPA is writing regulations that will imposed a “cap and trade” program on the use of fossil fuels.  Cap and Trade failed attempts at passage in Congress.  Here he is usurping the legislative role of Congress.

The President’s energy program is a threat to all of us, and especially our children who are going to have to pay higher energy cost while having to cope with the massive debt this Administration has racked up.  

cbdakota