Archive for the ‘U.S. oil’ category

Texas to become world’s number 3 oil producer, passing Iran

July 19, 2018

John Sexton Posted at 1:01 pm on July 19, 2018 Hot Air

Source Link: Texas to become world’s number 3 oil producer, passing Iran

{God Bless Texas. – LS}

America is a powerhouse and I mean that literally as well as figuratively. CNN Money reported Wednesday that Texas is set to become the world’s number three oil producer thanks to a boom in production:

Plunging drilling costs have sparked an explosion of production out of the Permian Basin of West Texas. In fact, Texas is pumping so much oil that it will surpass OPEC members Iran and Iraq next year, HSBC predicted in a recent report.

If it were a country, Texas would be the world’s No. 3 oil producer, behind only Russia and Saudi Arabia, the investment bank said.

“It’s remarkable. The Permian is nothing less than a blessing for the global economy,” said Bob McNally, president of Rapidan Energy Group, a consulting firm…

“The industry cracked the code on fracking,” said McNally.

Texas is producing so much oil that it will soon be bumping up against pipeline capacity. Some producers are already selling at a discount because of the limitations. Another problem is a shortage of labor, though that will likely be good news for the state and for people moving to Texas to find work.

The boom in Texas is one reason the U.S. is set to become the world’s number one oil producer. Last week, U.S. production reached an all-time high of 11 million barrels per day:

Reuters reports that if these preliminary numbers are confirmed, the U.S. is currently the second largest producer in the world, just behind Russia:

U.S. crude oil production last week hit 11 million barrels per day (bpd) for the first time in the nation’s history, the Energy Department said on Wednesday, as the ongoing boom in shale production continues to drive output.

The gains represent a rapid increase in output, as the data, if confirmed by monthly figures, puts the United States as the second largest producer of crude oil, just behind Russia, which was producing 11.2 million bpd in early July, according to sources.

“Eleven million would have made us the biggest producer in the world; but actually Russian production in June was above 11 million. So, this is kind of like the space race,” said Sandy Fielden, director of research in commodities and energy at Morningstar.

But we won’t be behind Russia for much longer. The U.S. Energy Information Administration predicted last week that production would near 12 million barrels a day by next year:

EIA forecasts total U.S. crude oil production to average 10.8 million b/d in 2018, up 1.4 million b/d from 2017. In 2019, crude oil production is forecast to average 11.8 million b/d. If realized, the forecast for both years would surpass the previous record of 9.6 million b/d set in 1970. Crude oil production at these forecast levels would probably make the United States the world’s leading crude oil producer in both years.

Of course, gasoline prices are still up a bit thanks to problems in Venezuela and sanctions on Iran. But fracking has made the U.S. the world’s energy powerhouse and that should continue well into the 2020s. This is data the Trump administration should continue to cite as a sign America is resurgent.

Report: US Oil Output Jumps To Record High In March

June 1, 2018


In the first great Texas gusher, oil is discovered at Spindletop in Beaumont, Texas

Reuters Thursday, May 31, 2018

Source Link:
Report: US Oil Output Jumps To Record High In March

{Strategically, this is good news if you consider Saudi output was just below this figure for the same period. – LS}

U.S. crude oil production jumped 215,000 barrels per day (bbl/d) to 10.47 million bbl/d in March, the highest on record, the Energy Information Administration (EIA) said in a monthly report on May 31.

Production in Texas rose by 4% to almost 4.2 million bbl/d, a record high based on the data going back to 2005. The Permian Basin, which stretches across West Texas and eastern New Mexico, is the largest U.S. oil field.

Output from North Dakota held around 1.2 million bbl/d, while output in the federal Gulf of Mexico declined 1.1% to 1.7 million bbl/d.

The agency also revised February oil production down by 5,000 bbl/d to 10.26 million bbl/d.

U.S. natural gas production in the Lower 48 states rose to an all-time high of 88.8 billion cubic feet per day (Bcf/d) in March, up from the prior record of 87.7 Bcf/d in February, according to EIA’s 914 production report.

Output in Texas, the nation’s largest gas producer, increased 1.3% in March to 22.7 Bcf/d, the most since April 2016.

In Pennsylvania, the second biggest gas producing state, production dipped to 16.4 Bcf/d in March, down 0.6% from February’s record high of 16.5 Bcf/d. That compares with output of 14.8 Bcf/d in March 2017.

U.S. Oil Production Will Soon Overtake Saudi Arabia’s

January 22, 2018

Written by Bob Adelmann Monday, 22 January 2018 The New American

Source: U.S. Oil Production Will Soon Overtake Saudi Arabia’s

{A little ingenuity can go a long way. – LS}

Fatih Birol, head of the Paris-based International Energy Agency (IEA), told a congressional committee last week, “What we see is a result of the shale revolution [fracking]. The U.S. is becoming the undisputed leader of oil and gas production worldwide. [U.S.] oil production is growing very strongly and will continue to grow. We think that this growth is unprecedented [both in the] size of the growth and the pace of the growth.”

In 1973, Saudi Arabia punished U.S. citizens with an oil embargo in retaliation for the U.S. government’s support for Israel during the Yom Kippur War. It could do so because it held the biggest hammer: Saudi Arabia controlled the world’s largest reserves of crude oil and the kingdom. Within months, the price of oil quadrupled in the United States, resulting in shortages and rationing. Gas stations were closed, and when they reopened they were forced to restrict gasoline purchases to “odd” and “even” days depending upon their customers’ license plate numbers. The federal government imposed “double-nickel” (55 mph) speed limits on highways, and experimented with “daylight saving” time in order to reduce the impact of the embargo.

Those days are long gone and not likely ever to return. Saudi Arabia and its OPEC cartel are slowly being reduced to bit players in the global energy market. Saudi Crown Prince Mohammed bin Salman saw that coming more than two years ago when he announced the kingdom’s “Saudi Vision 2030,” a plan to diversify his country’s economy away from its dependence on oil and gas revenues. He created a “sovereign wealth fund” to invest in various schemes and projects to expand public service sectors such as healthcare, education, infrastructure, recreation, and tourism. Part of the plan was to take advantag of the country’s unique geographical location as a central hub connecting Asia, Africa, and Europe.

To do all of that, the crown prince needed money — lots of money — to transform his country and move it away from its dependence on oil and gas revenues. In April 2016, he announced that he would be offering for sale up to five percent of his oil company, Saudi Aramco, hoping to raise an initial $500 billion, as the company was estimated to be worth $10 trillion. But with the decline in oil prices, his country’s stagnant oil and gas production, and the coming of age of the fracking revolution in the United States, estimates of the real marketable value of Aramco have continued to drop. The latest estimate is that the company is worth about $2 trillion, with the sale of that five percent (if it happens at all) generating a paltry $100 billion.

It’s been two years since that announcement, and the offering continues to be delayed. The latest delay is pushing the public offering of shares into the second half of 2018.

All of which raises a question: What happened to rebalance the equation against Saudi Arabia in favor of the United States? What happened was George P. Mitchell. A son of poor Greek immigrants (who entered the U.S. legally in 1901), Mitchell served in the U.S. Army Corps of Engineers during World War II. After the war he joined his brother Johnny in starting an oil exploration business in Houston.

Fast-forward to the late 1970s. Mitchell was using company resources to explore ways of getting more natural gas out of shale formations at such a rate that his board of directors and investors were getting nervous. It took almost 20 years and the threat of near-bankruptcy before Mitchell and his company’s engineers finally developed the magic formula of techniques and materials to extract gas, and then oil, from shale.

In 2002 Mitchell sold his company, Mitchell Energy & Development Corporation, to Devon Energy Corporation for $3.1 billion.

Why couldn’t Saudi Arabia have done the same thing? Why did it wait until the issue became an existential threat with the development of fracking in the United States?

Part of the answer has to be the culture. In Saudi Arabia, the country’s vast reserves — some 360 billion barrels of recoverable oil, at last count — belong to Aramco, i.e., the government. What is the incentive then for an entrepreneur to risk his capital, his time, his reputation, and his energy to try to find a way to squeeze more production out of those reserves?

In the United States, the culture is vastly different. The oil in the vast Permian Basin (which lies under west Texas and eastern New Mexico), for example, belongs to the people who successfully negotiate the land leases and then develop it. They take risks with their own money (and that of other people — investors) and spend themselves into exhaustion both physically and financially in the hopes of striking it rich. If they succeed, they get to keep what they have reaped. If they don’t, they eat their losses and perhaps return for another go at it in the future. It is the peculiar, some say unique, mixture of limited government intervention, the enforcement of contracts at law, and the exhilaration that comes from success, that drives people such as George Mitchell to change the world.

It was thus inevitable that the United States, given that peculiar culture, would eventually become the “undisputed leader” of the world in energy development. It has an unfair advantage over every statist economy on the planet. All it took was time, and George Mitchell, to soon relegate Saudi Arabia to second place.

Russia and Iran Moving to Corner the Mideast Oil Supply

October 15, 2015

Russia and Iran Moving to Corner the Mideast Oil Supply, American ThinkerSteve Chambers, October 15, 2015

It looks like Vladimir Putin and the ayatollahs are preparing to corner the world’s oil supply – literally.

Last May I wrote on this site that Iran was in the process of surrounding the Saudi/Wahhabi oil reserves, along with those of the other Sunni Gulf petro-states.  I added that, “Iran’s strategy to strangle Saudi/Wahhabi oil production also dovetails with Putin’s interests.  As the ruler of the second largest exporter of oil, he would be delighted to see the Kingdom’s production eliminated or severely curtailed and global prices soar to unseen levels.  No wonder he is so overtly supporting Iran.”

We’ve now seen Putin take a major, menacing step in support of the Iranians by introducing combat forces into Syria.  Many analysts argue that he’s doing this both to protect his own naval base at Tartus and as some sort of favor to the Iranians.  Are those really sufficient inducement for him to spend scarce resources and risk Russian lives, or does he have bigger ambitions in mind?  Given the parlous state of Russia’s economy, thanks in very large part to the recent halving of oil prices, he must relish the opportunity now presented to him, in an axis with Iran, to drive those prices back to prior levels.

The Iranians, for their part, must welcome this opportunity as well, for two huge reasons: first, when sanctions are finally lifted, thanks to their friend in the White House, Iran’s oil production will only aggravate the current global excess oil supply, reducing their cash flow (although they will still repatriate the $150 billion released by the nuclear deal).  They and the Russians must both be desperate to find a way to prevent further oil price declines.  And second, Iran’s mortal sectarian enemies and rivals for leadership of all of Islam are the Saudi/Wahhabi clan, so the prospect of simultaneously hurting them while strengthening themselves must seem tremendously tantalizing.

To achieve this, the Russian-Iranian axis can pursue the encirclement strategy of the Arabian Peninsula that Iran has already been overtly conducting, as I described in May, and is evident by referring to the map below.

195414_5_

Iran and its allies already control the border across the Saudi/Wahhabi Kingdom’s northern frontier, although the Iranian grip on the Syrian portion is tenuous – hence the Russian intervention.  Now Iran is also fighting a bitter proxy war with the Kingdom in Yemen, where Iran is backing coreligionist Shi’ites.  From Yemen, Iran can also threaten the Bab-al-Mandeb that provides access to the Red Sea, multiplying the pressure it already exerts on the Kingdom by threatening the Strait of Hormuz at the entrance to the Persian Gulf from its own territory.

Moreover, Iran is widely believed to be supporting the Shi’a who live on top of the Saudi/Wahhabi oil reserves in the Eastern Province.  The natural affinity between the Shi’a of Arabia and Iran has long worried the royal family and led them to discriminate against their Shi’ite subjects, fostering resentment among them.  Attacks on the Shi’a community early this year have increased tensions.  On top of all that, Iran is reportedly behind the recent Shi’a unrest in Bahrain, which Iran considers it lost “14th province” – much as Saddam viewed Kuwait in the late 1980s.

With this being the current state of the Mideast chessboard, consider how the game can unfold.  With Russian assistance, Iran can save its Syrian puppet and reinforce its defensive enclave in the Allawite homeland in the northwest of its putative boundaries.  Then the combined forces of the axis can turn on ISIS, all the while boasting of doing the world a favor, and reduce its territorial control if not extirpate it entirely.  Of course, the Saudi/Wahhabis will probably do whatever they can to assist their vicious ideological offspring, but it would be hard to bet against the axis.

As the axis pacifies Syria, it can then begin pressure the Saudi/Wahhabis and other Sunni petro-states to curtail their oil production enough both to accommodate the increased Iranian flow and to lift prices back to acceptable levels.  $100 a barrel must sound like a nice target.

The axis’s initial pressure will probably be diplomatic, applied by both principal powers.  However, with Iran’s foothold-by-proxy in Yemen and their influence in the Eastern Province and Bahrain, it could easily foment more general violence against the Saudi/Wahhabis, even within the Kingdom itself.  Iran could likewise twist Bahrain’s arm and thereby rattle the cages of the lesser Sunni petro-states.  Then, by trading a reduction in oil for a reduction in violence, the axis could achieve its objective.

If not, the Iranians could escalate the violence further.  Perhaps ideally from the Iranian perspective, the Saudi/Wahhabis would overreact and provide Iran with an excuse to strike directly at the geographically highly concentrated Arabian oil fields and support facilities.  Iran might not be willing to risk royal retaliation by attacking on its own, but it could be emboldened with Russian backing by air and sea, and perhaps even a nuclear umbrella.  In that scenario, the proud Arabs would be forced to bow to the will of their ancient Persian foes – particularly since it is obvious that the US under its current president could not be relied upon for support.

An attack on the Kingdom’s fields would cause a severe and lengthy disruption of Mideast oil supply, which would dreadful for the rest of the world – but certainly not the worst-case scenario.  Such a disruption would precipitate another nasty global recession and could severely weaken the US, Europe, and China, all of whose economies are fragile and probably brittle.  Thus the damage inflicted could far outlast the disruption itself.  This could be yet another highly attractive incentive for Putin and his ayatollah allies.

So, Putin and the ayatollahs have powerful motives to corner the world’s oil market and therefore the US and the rest of the world are facing an enormous risk.  The horrible pity of this is that the US could easily demonstrate the futility of the Russian-Iranian axis trying to take the world hostage with Mideast oil, simply by opening up our surface deposits of oil shales in the Rockies.  As I showed in this analysis last March, these resources could make Mideast oil irrelevant.

The US’ surface oil shales are completely different from the deep shales that are accessed through directional drilling and fracking and that grab all the headlines; the deep shales are a mere side show in terms of reserves.  The surface shales hold up to 3 trillion barrels of oil versus about 50 billion barrels of tight oil accessed by fracking.  The total global proven reserves of oil are 1.6 trillion barrels, and the Canadian tar sands have 1.6 to 2.5 trillion barrels (although they’re officially listed at 175 billion barrels, which are incorporated in the global total).  So, the US and Canada together essentially can triple the global supply of oil, and at prices in the $60-75/barrel range.  Meanwhile, Mideast reserves are about 800 billion barrels – half of Canada’s oil sands, perhaps less than a third of the US surface shales.  The world no longer needs the Muslim oil.

Unfortunately, the vast majority of the Rockies surface shales sit on Federal land, and while George W. Bush opened up those lands for development, Obama rescinded that policy.  These reserves now sit almost entirely idle.

As with any petroleum deposit, these surface shale reserves can’t be turned on with the wave of a wand.  But they can be opened for development with just a pen, and not even a phone.  For the protection of this country, and the good of the world, our current president should immediately open these reserves for development, with great fanfare.  If he will not use our military to protect our interests, he should at least use our economic weapons.

There is no time to lose.  Russia is on the march, in unison with the emboldened and enriched Iranians, thanks again to our president.  Putin and the ayatollahs know they will enjoy only another 464 days with this president and that none of his likely replacements will be so complacent and flexible, to use his own term.  We should therefore expect that they will want to make as much hay as they can while the sun reflects off of Obama’s insouciant grin.