April 2011 Archives

Hey, that's me! I'm on DVD, playing "gringa reporter in red shirt" in the scene of a 2006 press conference in Quito, Ecuador, about the landmark pollution lawsuit in that country against Chevron. I was finally, finally watching Joe Berlinger's documentary of the case, Crude, that came out in 2009, and saw my surprise two-second appearance. (The film won Berlinger a slew of doumentary awards and a successful subpoena from Chevron seeking raw footage.)

I delayed watching the documentary for a long time. First, I'd usually rather play with my preschooler after work. Second, covering the case for five years as a freelance journalist in Ecuador had left me with an oily aftertaste.

No one in Pennsylvania, so far, has demanded Chesapeake Energy be banished forever from the state because of the accidental discharge April 19 of a lot of frac water at a Marcellus Shale gas well in Bradford County. One blogger called it the "Macondo moment" for natural gas, but no one else has picked up that thread.

I've been interviewed recently by two separate television networks, and either the producer or on-camera "talent" felt it necessary to say the same thing: "I'm sick of this gasoline story." How many times can you stick a microphone in somebody's face, asking them to comment on their feelings as $4 gasoline flows into their SUV and the cost of the fillup nears a C-note?

But bear with us as we make a few side observations:

Crude was up -- way up -- in this week's Energy Information Administration inventory numbers on the US. But product inventories drew by a significant amount, and they're down to levels not seen in about 2.5 years. You can see Linda Rafield's analysis of the report here.

Declining total gasoline stocks in the critical central US Atlantic Coast region may be putting some in the US Atlantic Coast gasoline market on edge as the country moves toward the high-demand summer gasoline season.

In the aftermath of the earthquake in Japan, there's been a sort of polarization in the tanker market that has pitted some charterers against certain owners.

It's been more than a month since the devastating earthquake and tsunami had struck the northeastern coast of Japan, but still a few tanker owners are avoiding Japanese ports on fears of nuclear radiation from the Fukushima I nuclear plant.

Consumers are feeling the pinch at the pump as gasoline prices head north even before peak summer driving demand hits.

In one state, where gasoline prices are the third cheapest in the nation, one politician is calling for the release of 50 million gallons of oil from the US' Strategic Petroleum Reserve to help lower prices and ease the pain consumers are feeling at the pump. And the leader of his state's retailers is opposed.

Like a psychology researcher laying out his findings about an utterly dysfunctional family, George Baker let Pemex have it Monday night.

At a presentation before New York's Energy Forum, Baker delivered a verdict of everything that's wrong with the state-owned oil company and the government that dictates its moves, conclusions he drew from years as a US-based analyst of the country, and consultant to companies trying to figure out just how things get done. If he spoke of anything right with the industry, it flew by too quickly to be remembered.

The oil rig count -- that is, the number of rigs that are expressly drilling for oil rather than natural gas -- finally did two important, if expected, things late last week.

Not only did it surpass the natural gas rig count for the first time since 1993, but the number of rigs drilling for oil exceeded 900 for the first time ever since the Baker Hughes rig count began keeping such statistics in mid-1987.

In this week's Platts Oilgram News column "At The Wellhead," London editor Stuart Elliott takes a look at Afghanistan. Is there anything of value under those blood-stained lands? Maybe...maybe.

The Oil Council, as it did last October, brought together a panel of executives in New York April 21 to meet with the media and talk about pretty much everything. There wasn't one overriding theme, but when industry executives get together in the US these days, shale gas and its impact on so many parts of the business is never far from their minds. 

Here are some of the main points that the panelists discussed. These are a summation of their main thoughts, with direct quotes marked as such:

Comparing indications of petroleum demand on a month-to-month basis is always fraught with potential pitfalls. Bad weather could have been a feature of one of the months; there could be a holiday in there; the list is endless. So year-on-year comparisons are considered more significant.

Except this month, when looking at Chinese demand, it can't help but be noticed that Chinese demand in March was a little less than February. An end to the relentless increases in demand has been predicted by many; the data is never there to back it up. So those bearish soothsayers looking for a little redemption may find this month's Platts estimate to be interesting. You can see it here.

With limited options for wheels pidiendo la botella, or hitch-hiking in Cuban parlance, is the mode for many Cubans as they try to get from Point A to Point B on the island.

Hitch-hiking is not just a survival tactic for the rural or stranded. Even in the nation's capital, plucky Habaneros stand in the middle of a busy boulevard beside the city's malecon, or waterfront esplanade, where they will negotiate for a ride as idling cars wait for the traffic light to change from red to green. Further up the road one morning earlier this month, I saw a well-dressed professional standing on a grassy median in the Miramar suburb waiting for a ride. She eventually arrived at Cuba's Geology Society biennial conference, looking none the worse for wear.

New technologies are having a dramatic impact on a couple of key measures for US E&P efficiency according to a recent report by Oppenheimer's Fadel Gheit, who finds reserve replacement rates rising as finding costs are falling.

His study analyzes the reserve profiles for a group of 14 key E&Ps through 2010, noting that their combined reserve replacement rate averaged 413% last year, up from 311% in 2009, while their finding and development costs fell 4% to a natural gas-equivalent average of $2.01/Mcf from a level of $2.10 in 2009.

No one in India seems to want to be the one to make a decision on the $9 billion Cairn-Vedanta deal.

Eight months after Cairn Energy announced its intention to sell its stake in Cairn India to Vedanta Resources, the fate of the deal still hangs in balance.

A fairly limited number of companies exercise a lot of power in Europe's very slowly liberalizing gas markets. France and Germany have two apiece, and they comprise two-thirds of the big players in the UK; Italy, Spain, Austria and the Netherlands have one each.

So given the size of the field, one might have expected them to keep a closer watch on each other and to avoid repeating their mistakes.

And yet clearly they do not all do so, or they would not have ended up in the mess that some are in: they are massively over-contracted to buy expensive gas, as the strategy to keep out competition in the first years of this decade has gone horribly wrong.

A glance across the Channel at Britain, where British Gas ended up in the same position in the closing years of the last century would have served as warning, but if they saw it, they ignored it.

With the excitement surrounding shale gas having spurred a bit of a problem -- too much of it -- every company in the world says it is turning its focus to the liquids coming out of the ground.

In this week's Platts Oilgram News column, "PetroDollars," Gary Taylor explains how one company that's been out in the gas fields for a long, long time, has been handling the shift, and what analysts think about it.

The US' Bakken Shale oil field, which spans Montana and North Dakota, has become so prolific that at least one big independent operator there estimates industry's output potential there at a whopping 1.2 million b/d by year-end 2016.

That's a heck of a lot of oil for a play that was barely breathing six or seven years ago. And that figure is even higher than the 700,000 b/d or so North Dakota officials were citing as a  peak awhile back. 

US natural gas has been a puzzle -- as well as a jaw-dropper -- for the last several years. It has seemingly defied typical supply and demand expectations where cutting back on production of something eventually leads to scarcity and thus more production to bring the market in balance.

The kink in the case of gas is new technology that has caused efficiencies that allowed production volumes from new shale and unconventional plays to exceed most expectations even with less drilling. Optimal well completion techniques and more efficient new rigs, have resulted in soaring per-well yields. And even as E&P companies have switched their focus to oil as oil prices have climbed in the past year, that hasn't necessarily prevented associated gas from cropping up with each well drilled. All that gas eventually adds up to hefty volumes that have tamped down gas prices.

In terms of revelations, it wasn't exactly on the level of a former FBI official's deathbed confession that he was the Watergate conspiracy's Deep Throat or even Pete Rose admitting he bet on baseball.

But Commodity Futures Trading Commission Chairman Gary Gensler's admission this week that he is concerned that position limits and other financial reform rules could compel US market participants to flee for overseas markets was kind of a big deal for an agency head who has long painted regulatory arbitrage fears as nothing more than industry paranoia.

The EU and the US -- on different continents, or different planets?

The European Commission's proposal to tax CO2 from heating and motor fuels may or may not go anywhere, as it requires unanimous approval from all 27 member nations. But the fact that the EC was comfortable putting it out there just points up the vast gulf the Atlantic Ocean represents between Europe and the US.

Here's an interesting thought: The International Energy Agency says in its latest monthly oil market report that if the global oil supply chugs along at March levels for the rest of 2011, OECD inventories could slip close to five-year lows by December.

That's not necessarily a worrying thing in itself, as the IEA is quick to point out, because it implies 57 days of forward cover, "not excruciatingly tight by historical standards" and more than the 52-53 days preferred by oil producer group OPEC.

With the oil market still digesting the impact of unrest in North Africa and the Middle East, as well as last month's devastating earthquake and tsunami in Japan, the International Energy Agency gave evidence on April 12 of a continued tightening of fundamentals.

In this week's Oilgram News New Frontiers column, Starr Spencer takes a look at the Haynesville Shale.

It was just a few years ago that it was just about the hottest thing around. Heck, they even made a documentary about it. Now, it seems to have lost some of its luster. But only for now, because there are still plenty of people who think it has a vital role in the energy future of the US.

Some bunker sellers in Houston who recently have been frantically removing traces of biofuels which somehow snuck into their supply -- because they're known to damage ship engines -- by 2020 may be trying to put those biofuels back in there. Or so says DNV, a Norwegian risk management company that just released in the US its technological outlook on energy and shipping through 2020.

Among its host of broad-ranging predictions are that shipping companies -- including those that carry oil, LNG, coal and the like -- will move ahead in using alternative fuels, or even developing a hybrid electric "Prius of the Seas." (Sorry, Jessica Simpson, we know that's confusing.)  

Gasoline demand is showing sign of waning, according to the latest inventory numbers released by the Energy Information Administration.

With inventory draws less than expected, implied demand is down from the prior week. But more significantly, it's down more than 100,000 b/d on a four-week rolling average basis compared to 2010. That figure is generally considered more significant, because a straight one-week comparison can be affected by any number of factors, like crazy weather. Over four weeks, the anomalies tend to even out.

Please see Linda Rafield's analysis here.

We will begin running here at The Barrel the weekly column that appears in Platts Oilgram News under different headings. This column has long been a staple of PON, and is one of its most popular features, covering a wide variety of subjects with depth and analysis.

This week's column, under the Regulation & Environment heading, is about the Philippines' stop-and-start efforts to launch a strong biofuels industry. Platts' Singapore editors Mriganka Jaipuriyar and Michelle Ho combined to produce this week's column.