Friday Film on Saturday- Making Gasoline

Russia's Contaminated Crude Oil Problem

The latest issue of the Oil & Gas Journal offers up some analysis about the rise in oil prices, courtesy of Rystad Energy OIL PRICE RISKS RISE TO PRECARIOUS LEVELS:

Supply disruptions in the Middle East on top of an already tight crude market could send oil prices violently upward, according to Rystad Energy.

Two Saudi Arabian oil tankers were reportedly attacked off the coast of the United Arab Emirates (UAE) this weekend, sending crude futures sharply up Monday morning.

Commenting on the incident, Bjørnar Tonhaugen, Head of Oil Market Research at Rystad Energy, says:

“In the short term, the perceived risk of supply disruptions from the area will only add to the premium of short-dated oil contracts compared to deferred contracts on the futures curve, which are already trading at a high premium.”

The tightness in prompt supplies is caused by declines in production from Iran and Venezuela, along with ongoing OPEC cuts, outages in Russia owing to the Urals contamination, maintenance in Kazakhstan, plus planned maintenance in the North Sea during the summer months.

“The oil market is reacting today not because the physical market suddenly has lost more oil supplies, but because of risks that the market may lose more oil in the coming weeks and months given the heightened risk of supply disruptions from the critical Persian Gulf region. Raising tensions even higher, news flows suggest the latest incident might be related to the conflict between Iran and the US, which puts the Strait of Hormuz in play,” Tonhaugen said.

Wait, what? That part I highlighted says something about contaminated Russian crude oil? Perhaps you haven't heard that about The Giant Soviet Pipeline System That's Full of Tainted Crude

Europe’s oil refineries stopped accepting piped deliveries of Urals crude from Russia this week after flows were found to be contaminated with abnormally high levels of organic chlorides that, when refined, become hydrochloric acid that can damage the plants.
***
Russia’s government has blamed a private storage terminal in the center of the country for the problem. It will now take two weeks to ensure uncontaminated crude is flowing along the entire length of the pipeline.

The millions of barrels tainted crude will need to blended with larger quantities of unblemished oil to get the impurities down to safe levels, a task that might some weeks or months.

Organic chlorides are generally not present in crude oils, but are used to dissolve wax and during cleaning operations at production sites, pipelines or tanks.

Ah, well, Russia's Plan to Cleanse Tainted Oil Pipe Proves Slow-Going:

While there is nearly 1 million tons of contaminated oil in Belarus, the overall amount of substandard Urals crude in pipelines across the country, Russia, Ukraine and Poland may have been as much as 5 million tons as of the end of April.

Most of the tainted crude remains in the pipelines and is “eating away at them,” Belarus President Alexander Lukashenko said on Saturday. The nation and Russia are discussing what to do with the oil with no clear deadline for removing it.

Apparently, part of the Russian plan is to ship contaminated product to "Asia": Contaminated Urals cargoes stranded in Europe head for Asia:

With some contaminated cargoes of crude from the Urals headed to China and the Bahamas, the remaining oil cargoes are stranded in Europe while Asian buyers are sought

Oil traders sell dirty Russian crude to Asian buyers:

Trading companies Vitol and Unipec are sending around 700,000 tonnes (5.1 million barrels) of contaminated Russian oil to Asia in an attempt to place the barrels rejected by buyers in Europe, according to trading sources and ship tracking data.
***
Vitol has sold its cargo to Chinese independent refiner Bora Group while Unipec is moving the oil to refineries in China owned by its parent company China Petroleum and Chemical Corp (Sinopec), the sources said.

“We took the oil after evaluating that our refineries are able to process the crude,” one of the sources told Reuters, adding that the price was also attractive given that Middle East crude grades are trading at multi-year highs on tight supply.

A good time is being had by everyone except the Russians and the companies that bought the contaminated product and had it screw up their refineries, Total Declares Force Majeure On German Refinery After Russian Oil Contamination:

On Thursday, Total declared force majeure on shipments of refined oil products from the Leuna refinery after the suspension of the oil flow via the Druzhba pipeline.

Russian pipeline operator Transneft will compensate its customers for the losses they have sustained due to the contaminated crude oil, Russian Deputy Prime Minister Dmitry Kozak said on Thursday, noting that refiners must first prove their damage and loss in order to claim compensation.

And, it's all one more reason while oil prices go up.

OPEC Fights U.S. Shale Oil, U.S. Shale Oil Hangs in There

Cartels and monopolists tend to react to competition in very predictable ways - one of which is to lower their prices until the competition is driven out of business due to lack of profitability. OPEC nations want higher oil prices because their economies are built on maintaining a certain price level.

Bloomberg has a pretty good analysis of what price levels are needed for each OPEC state to make ends meet here. Saudi Arabia needs a price point of $106, Iran $87, Venezuela $125.

Current market price for a barrel of oil is below $50. Why so low? Part of the reason is the attempt to drive U.S. shale oil producers out of business and eliminate them as competition and allow OPEC to be back in the oil pricing and demand driver seat.

There's an interesting analysis from FGE's  Fereidun Fesharaki and David Isaak about why that may not be working so well from Oil & Gas Journal FGE: US unconventional industry shows resilence as OPEC reacts to shale production and prices

When the "War on Shale" began, it was common to hear that substantial drops in production would occur at $90/bbl, $80/bbl, or $70/bbl. And, it was true that to make the overall economics work, those sorts of prices were needed for many producers in certain plays. But the overall economics include the lease costs, which for some producers represents a very large fraction of the total cost. But lease costs are sunk costs, and once the investment has been made, they do not have much effect on production economics. So there are projects that might require $70/bbl to make money, but the operator can still keep producing at $40-60/bbl.
Some aspects of shale economics were improving at astonishing rates, even with the cushion of high prices. Total well depths typically more than doubled in the last 6 years, as did lateral runs lengths. Despite greater depths and lateral runs, typical drilling times per well were cut in half (to 17 days from 35), and some wells are now drilled in 9-12 days. In addition, multiple wells now are drilled from single production pads, meaning that the drilling equipment can be repositioned and restarted in a matter of hours rather than days.
As is widely known, productivity per well also has skyrocketed. This is the result of many factors, such as fracturing practices geared to specific local geology, improved use of proppants, and the longer total runs per well. But one of the reasons productivity is climbing is simply that the producers have begun to concentrate on the best plays.
In the early days of shale, most of the producing wells were also effectively exploration wells. In addition, many wells in the Great Rush were drilled simply because lease terms required a certain amount of drilling and output to avoid the lease reverting to the owner (leases held by production, or HBP drilling in industry jargon).

But as long as oil prices remained high, there were costs that tended to rise rather than come down. Labor was short, operating costs tended to rise, good drill rigs were at a premium, proppants and chemicals saw major price increases, and common items such as compressors were backordered. In addition, limited (and expensive) transport infrastructure cut netbacks to the wellhead.
***
Costs Have Fallen
Lower prices and increased productivity have to some extent reversed those trends. In the new low-price environment, costs have fallen-some producers report operating costs down by 20% or more. Rig counts are down, and this not only lowers the cost of rig hire, but it also means that only the best rigs are employed. Finally, although cheap transport infrastructure still falls short of demand, improvements in getting liquids to market have been steady.
That does not mean prevailing prices do not hurt. They have definitely put an end to the Great Rush. But the main effect has been to put the US shale business on a sounder footing. In the new environment, the less productive leases and plays are likely to be abandoned (which will look to the market like another major increase in well productivity). Improvements in drilling and production economics improved the bottom line before, but now additional improvements are required rather than optional.
What does this mean for production of tight oil and gas? With all the time-lags involved, it is becoming harder to assess. The large producers have slashed their E&P budgets for 2015 by about a third; and smaller producers have implemented even bigger cuts. Despite this, most of the producers report that their output of oil will be higher for 2015 than for 2014.
Monthly production declines are already occurring-although even the modest crude price revival of the last few months was enough to encourage a few producers to begin deployment of additional rigs for mid-summer. But a confounding factor is that many producers have elected to delay completions on wells that have already been drilled. Completion (casing and installation of production trees and piping) is expensive-and not needed unless the well is going into production. Some statistics suggest that as many as half of the wells drilled in the Bakken are deferring completion. Some companies (notably EOG Resources Inc. and Apache Corp., both of Houston) actually are deferring more wells in 2015 than their total new wells in 2014. This means that in the coming months and years, there may be small surges in production that are seemingly unrelated to drilling.
Crude prices need to be driven well below recent levels to put shale out of business. Conversely, mild increases in price can draw in new production comparatively rapidly. Deferred well completions add to the price responsiveness. Shale production is surprisingly resilient in the range of $50-60/bbl, and prices above $60/bbl may draw in significant new production.

So, OPEC, thanks for forcing the shale oil industry into streamlining and improving.

And good luck on that "control of the market" thing.

The U.S., according to the U.S. Energy Information Administration seems to be sitting pretty on shale:

Does the United States have abundant shale resources?
Yes, the United States has access to significant shale resources. In the Annual Energy Outlook 2014, EIA estimated that the United States has approximately 610 Tcf of technically recoverable shale natural gas resources and 59 billion barrels of technically recoverable tight oil resources. As a result, the United States is ranked second globally after Russia in shale oil resources and is ranked fourth globally after China, Argentina and Algeria in shale natural gas resources.

Gulf of Guinea Piracy/Thuggery Continues: Chevron Platform in Niger Delta Attacked

Chevron Platform in Niger Delta Attacked:

Chevron has confirmed that militants have attacked one of its platforms

Map source

off the Escravos Bar, in the Niger Delta region. Chevron Nigeria Limited, operator of a joint venture with the Nigerian National Petroleum Corporation (NNPC), said that the attack took place just after 11 PM on Wednesday. The “Okan offshore facility in the Western Niger Delta region was breached by unknown persons," said Chevron in a statement to Reuters. "The facility is currently shut-in and we are assessing the situation, and have deployed resources to respond to a resulting spill."
***
Local media reports – which could not immediately be confirmed – said that the facility had been attacked with explosives, but differed widely in assessments of the damage.

A spokesman for the Nigerian Navy, Commodore Chris Ezekobe, told PunchNG that the platform was “partially damaged,” and that it was an oil and gas collection point for the area. He said that the Navy had deployed additional vessel assets to protect nearby installations.

All the more reason to be developing U.S. resources.

Big Oil Losses: Okay, Where are the Congress Critters Standing in Front of the Cameras on this?

This Week in Petroleum:

Analysis of the annual reports of 40 publicly traded onshore-only U.S. oil producers reveals combined losses of $67 billion in 2015, driven by significant reductions in sales revenue and write-downs of assets following the decline in crude oil prices over the last 18 months. However, there are significant differences across these companies. Eighteen of these companies, referred to here as the high loss group (HLG), reported 2015 losses in excess of 100% of their equity. The HLG companies were more vulnerable to losses in an environment of falling oil prices than companies outside the group because they had more debt and proved reserves with a smaller economic margin between production cost and wellhead value. These same factors may limit the borrowing ability of the HLG companies, which could constrain their drilling and completion activities and thereby limit their production activities under current market conditions.

Those losses impact shareholders, including pension funds.

Lowest Oil Rig Count Ever?

Oil and Gas Journal reports US rig count hits all-time low in recorded data:

The overall weekly US rig count is now at its lowest point in Baker Hughes Inc. data that begins in the 1940s, and perhaps since the infancy of US oil and gas industry in the mid-19th century.
BHI reported that the count lost 9 units to 480 during the week ended Mar. 11, officially falling beneath the previous recorded low of 488 on Apr. 23, 1999, reached during the nadir of the 1998-99 industry downturn.
“While there is no consistent series for drilling activity before 1948, we think it likely that to find a lower level of activity would require going back to the 1860s, the early part of the Pennsylvania oil boom,” said Paul Hornsell, head of commodities research for Standard Chartered Bank, in a research note published last week (OGJ Online, Mar. 4, 2016).

Hmmm. Prices down, supply good, and oil reserves not being drained. And it looks like we'll just cycle up and down for the foreseeable future. Not such a good a thing for the rig workers, though.

Caspian Sea: Oil Issues and Iran, Russia, Azerbaijan, Turkmenistan, and Kazakhstan

Click on map to enlarge

So on yesterday's Midrats Episode 286: A Restless Russia and its Near Abroad with Dr. Dmitry Gorenburg, we had a little discussion about the status of naval forces in the Caspian Sea (beginning about 44:37).

Claude Berube tweeted this morning about an article which described Azerbaijan's new Caspian Sea Naval Base.

Now, from the Oil and Gas Journal comes Iran yields to Russia in talks over Caspian resources:

Iranian acquiescence to Russia, to which the Islamic Repubic increasingly turns in response to pressure from the West, has become a standard feature of long-unresolved deliberations over jurisdiction and resource ownership in the Caspian Sea. Iran has surrendered its Soviet-era claim to half of the world's largest inland lake and has aligned itself with Russian insistence that countries lacking Caspian shorelines-especially from the West-stay out.
***
The status of the Caspian Sea fell into question with the demise of the Soviet Union. The three littoral republics that emerged from that change demanded larger shares of the Caspian than allotted to them by treaties negotiated in 1921 and 1940, which granted the former Soviet Union half of the sea and Iran the remainder.

Much is at stake. The Caspian Sea, usually referred to as the boundary mark between Asia and Europe is not only rich in oil and gas; it also produces more than 80% of the world's sturgeon. After the collapse of the Soviet Union, the large South Caspian Basin became available to investment by western oil companies seeking exploration and production opportunities.

Caspian border countries all produce and export oil and natural gas, and all claim shares of Caspian resources. Azerbaijan is the hub for export of Caspian gas to western markets. Access to Caspian gas has been central to efforts by the European Union (EU) to diversify its members' gas purchases away from Russia.

International oil companies have been developing oil and gas in the deep basin of the Caspian Sea since the region became accessible to outside investment about 2 decades ago. The formation of Azerbaijan International Operating Co. opened a new era for development. The 1994 signing of the contract known as the "Contract of the Century," as US Sec. of Energy Samuel Bodman called it, allowed Azerbaijan oil to reach global markets for the first time a decade later via the Baku-Tbilisi-Ceyhan (BTC) pipeline.

Throughout this new era, Russia has tried to steer movement of Caspian oil and gas through its territory to keep control of the region's transport infrastructure. In 2005, more than two thirds of all crude oil exported from the Caspian moved through the Caspian Pipeline Consortium (CPC), operated by Russia. By 2010, Russia's share of Caspian oil transport had fallen below 40%.

The whole article requires a subscription, but what I've put up does give a sense of why there is a naval build up in the area.

More from that article Claude referenced:

In Azerbaijan's case it is particularly worried about Iran, with whom it has had a number of minor incidents. In the longer term it is worried about Russia, which strongly opposes the construction of a trans-Caspian gas pipeline from Turkmenistan, which Baku in principle supports. Russia also has tried to get all the littoral states to restrict the militaries of outside powers (meaning, the U.S.) from getting involved on the Caspian, which Baku has pushed back on. Nevertheless, Russia and Azerbaijan are slated to carry out their first-ever joint naval exercises in September.

For a change, the U.S. probably won't send a fleet to the area . . .

Oil Prices

UPDATED: An interesting audio discussion of declining oil prices from the folks at The Economist at this link (autorun video replaced by link).

Are the Saudis trying to hurt others in the market? Russia? Iran? Venezuela? U.S. shale producers? Can they do it in the long run? Short term benefit to consumers, but it pushes the smaller oil producers toward a decline as prices drop below production costs. More analysis here:

The growing oil glut has already had reverberations around the world, as oil producing nations attempt to balance their books based on the gloomy new forecasts.

Reminds me of the early 1980s, which were not much fun in the oil patch, but good for the rest of the economy.

Energy News: "No major environmental impact from Keystone XL, DOS says"

Well, if we really, really want to work to free ourselves from the many problems of the Persian/Arabian Gulf and a long sea line of communication carrying crude oil through often troubled waters, then this ought to be good news: "No major environmental impact from Keystone XL, DOS says", as set out in the Oil and Gas Journal,

“This final review puts to rest any credible concerns about the pipeline’s potential negative impact on the environment,” American Petroleum Institute Pres. Jack N. Gerard said. “This long-awaited project should now be swiftly approved. It’s time to put thousands of Americans to work.”

“The State Department has once again found nothing in its environmental analysis that would prevent the Keystone XL pipeline from moving forward,” US Chamber of Commerce Pres. Thomas J. Donohue declared. “It’s time for the administration to stop playing politics with a project that will create good-paying American jobs, improve our energy security, and strengthen relations with our closest ally, Canada.”

Obama vowed to approve Keystone XL if it was proven to be environmentally safe, according to American Fuel and Petrochemicals Manufacturers Pres. Charles T. Drevna. “Today’s release of the pipeline’s supplemental EIS provides the irrefutable evidence sought by the president, and he should waste no further time in delivering on his promise,” he said.

Of course, there are the nay-sayers:

Environmental organizations and other opponents immediately dismissed the supplemental EIS’s findings as corrupted by oil industry influence and seriously flawed.

“[DOS’s] environmental review of the Keystone XL pipeline is a farce,” declared Friends of the Earth Pres. Erich Pica. “Since the beginning of the assessment, the oil industry has had a direct pipeline into the agency. Perhaps most frustrating is the apparent collusion between [DOS], the oil industry, and the Canadian government.”

“Even though [DOS] continues to downplay clear evidence that the Keystone XL pipeline would lead to tar sands expansion and significantly worsen carbon pollution, it has, for the first time, acknowledged that the proposed project could accelerate climate change,” said Susan Casey-Lefkowitz, international program director at the Natural Resources Defense Council. “President Obama now has all the information he needs to reject the pipeline. This is absolutely not in our national interest.”

Sierra Club Executive Director Michael Brune, meanwhile, said, “The president has two choices before him: fighting climate disruption, or promoting an energy policy that includes the expansion of dirty fossil fuels like tar sands. The Keystone XL tar sands pipeline fails the basic climate test, and it’s not in the interest of the American people. The president should reject the tar sands pipeline once and for all.”

So, months of study and delays which, once again, find "no major environmental impact" are a "farce" because they don't coincide with the agendas of FOE and the Sierra Club.

Noteworthy, too, is that no adverse decision to their positions can be simply characterized as "in error" but always must be demonized. That's a very old debating trick.

And a tiresome one.

UPDATE: About those oil ocean shipping routes ("sea lines of communication"), here's a nice graphic:

Source: U.S. Government Accountability Office

Note: Circles represent millions of barrels per day transported through each chokepoint. Arrows represent common petroleum maritime routes.

A Little Known Tale from World War II: Sherwood Forest, American Oil Workers and the War Effort

An article in the Oil and Gas Journal put me on to this fascinating saga from the American Oil and Gas Historical Society,

"Roughnecks of Sherwood Forest"

Two bronze statues separated by the Atlantic Ocean commemorate the achievements of World War II American roughnecks. The first stands in Dukes Wood near the village of Eakring in Nottinghamshire, England. Its twin greets visitors at Memorial Square in Ardmore, Oklahoma.

The seven-foot bronze statues, separated by more than 2,400 miles, commemorate 44 Americans who – during a critical time during the war – produced oil. They drilled in Sherwood Forest.

Why?

England’s principal fuel supplies came by convoy from Trinidad and America and were subjected to relentless Nazi submarine attacks. Meanwhile, Field Marshall Erwin Rommel’s rampaging North African campaign threatened England’s access to Middle East oilfield sources.

So, the Brits sought some American help and got 44 oil field workers ("roughnecks" in U.S. oil field terms), whose efforts helped create an "unsinkable tanker" during Britain's hours of great need for oil and its products to fight and to survive the war which had been raging for 3 years . . .

Using innovative methods, the Americans drilled an average of one well per week in Duke’s Wood, while the British took at least five weeks per well.

Submarine warfare, an American oil roughneck buried in a military cemetery in England and all of it a secret . . .

Read it all, it's a great story that ought to be more widely known.

Oil and Gas Shortages? Not so Fast . . . "World hydrocarbon supply ‘relatively boundless'"

Okay . . . here's a bit of perhaps optimistic news from the Oil and Gas Journal: World hydrocarbon supply ‘relatively boundless,’ SEG told" :

Geophysical advances have contributed to the identification of a "relatively boundless supply" of oil and gas worldwide, Barry Smitherman, chairman, Texas Railroad Commission (RRC), told the Society of Exploration Geophysicists annual meeting Sept. 23.
***
So much oil and gas have been located in unconventional formations worldwide that the so-called “Peak Oil” web site has shut down, Smitherman noted.

In fact, the web site of the Association for the Study of Peak Oil and Gas, peakoil.net seems a bit - uh- musty. On the other hand, peakoil.com seems alive and well to me. Mostly wrongheaded, but alive.

I hope that Mr. Smitherman is right about that "relatively boundless" thing. Or right enough that we have time to perfect other energy sources.

UPDATE: Interesting financial (read "investment") thoughts from The Motley Fool America's Peak Oil Plan in Two Charts, increase (or hold steady) production, incentivize reductions in consumption and work on practical alternatives.

And, no, providing bicycles for every one in Houston will not work as a practical alternative.

"Better protection of US energy facilities needed" - former CIA head says

Oil and Gas Journal's Nick Snow reports "Ex-CIA chief calls for better protection of US energy facilities":

Valero Refinery

US energy firms and government officials should be more concerned with physically protecting domestic facilities from attacks than lining up supplies, former Central Intelligence Agency Director R. James Woolsey maintained.

Electric power generation and distribution systems look particularly vulnerable, Woolsey said in wide-ranging remarks July 7 at Johns Hopkins University’s School for Advanced International Studies.

But oil and gas facilities also could be targets, with refineries at greater risk than pipelines and production operations, said Woolsey, who was CIA director during the Clinton administration and now is a venture partner with Lux Capital management.

He said federal and local officials became concerned following an incident on Apr. 16—a day after the Boston Marathon bombings—where several individuals in San Jose, Calif., were observed shooting at power pole transformers in the middle of the night.

Authorities there later found that other people had lifted a manhole cover and reached telephone landlines beneath a street at about the same time, Woolsey said. “These apparently weren’t teenagers who had grabbed their fathers’ rifles for some late night fun,” he added. “They had something more serious in mind.”

Read it all.

Of course, the same government that delays a crude oil pipeline in favor of less safe rail tank cars is carefully monitoring this threat . . . .

Refineries are complex plants, however, and are not all that compact, so they are harder targets than you might think.

Nigeria Oil Pipeline Theft

WSJ headline, "Theft Threatens to Shut Nigeria Oil Pipeline":

Nigeria's oil industry is at a crisis point because the theft of oil from pipelines and the pollution it causes are reaching intolerable levels, costing the country and oil companies billions of dollars a year . . .

Oil theft is a long-standing issue in Nigeria, frequently leading to supply disruptions and environmental pollution when thieves drill into pipelines in order to siphon off the crude. The Nigerian government has repeatedly pledged to act aggressively to curb insecurity in the oil sector and has said that incidents of oil theft have decreased in the past year. However, Shell said the situation got worse last month.

Of course, even product at sea has not been safe, since pirates have been active in hijacking tankers and stealing their cargo as reported by the ONI here:

IVORY COAST: On 03 February the oil tanker GASCOGNE was hijacked in the vicinity of 04:07 N 003:54 W, approximately 70 nm south of Abidjan port. Twelve heavily armed pirates with guns boarded and hijacked the tanker underway. They sailed the tanker to Nigeria and stole the oil cargo and crew/ vessel valuables. On 05 February the tanker and her 17 crew members were released and proceeded to a safe port. Two crew members were injured during the incident. (IMB, IMO, TW)

UPDATE: I have just seen Martin N. Murphy's excellent article covering this topic in the latest issue of USNI Proceedings at "Africa's Leaking Wound":

Like blood from a leaking wound, the piracy that is spreading westward from Nigeria has now reached the Ivory Coast, 400 miles from its origins on the inland and coastal waters of the Niger Delta. There, and on the waters more than 100 miles off these countries’ coasts, acts of depredation against ships and fixed oil installations have resulted in far greater financial losses and had a far wider economic impact that any piracy seen so far anywhere else in the world.

Read it all.

Weekend Reading

Krugman needs one of these

When your model is proving to be wrong, insult the people who have a found a plan that works for them: Paul Krugman's Baltic Problem - By Anders Aslund | Foreign Policy

North American energy independence possible, House panel told:

It’s not unrealistic to expect abundant oil and gas resources to help make North America energy independent within a decade, witnesses told a US House Energy and Commerce Committee subcommittee on Sept. 13.

“The United States has become the world’s second-largest oil producer,” said Harold G. Hamm, chief executive of Continental Resources Inc. in Enid, Okla. “We just passed Russia and are behind only Saudi Arabia. I don’t think a lot of people realize this.”

Hydraulic fracturing and horizontal drilling have helped the US reduce its crude oil imports from 60% of its total consumption a few years ago to 45%, he told the committee’s Energy and Power Subcommittee. US natural gas reserves have grown from a 7-year supply to one that’s more than a century, Hamm added.

“The technology that allows us to drill 2 miles down, turn right, go another 2 miles, and hit a target the size of a lapel pin has unlocked the resources that make energy independence a reality,” he said.

Iran is complaining about "terrorists" in Syria receiving shipments of weapons from stocks in Libya. "Terrorists" being those who oppose the Iranian-supported Assad regime. Irony knows no bounds.

Especially since About Those Blacklisted Iranian Ships Calling at Libyan Ports...:

Over the past two months, at least three Iranian-linked container ships, all blacklisted by the U.S. Treasury, have called at the Libyan port of Benghazi.
***
The U.S. government has described Iran as the world’s “leading state sponsor of terrorism.” The U.S. State Department, in its most recent annual report on terrorism, released in July, noted that Iran had “increased its terrorist-related activity, likely in an effort to exploit the uncertain political conditions resulting from the Arab spring.” The same report noted that “Iran continued to provide financial, material and logistical support for terrorist and militant groups throughout the Middle East and Central Asia.” This includes “weapons, training and funding” for Palestinian terrorist groups, and “weapons and training” to help Syria’s Assad regime in a crackdown that has cost many thousands of lives.
***
In remarks Wednesday on the deaths of American personnel in Benghazi, Secretary of State Hillary Clinton reaffirmed that “A free and stable Libya is still in America’s interest and security, and we will not turn our back on that.” Surely, regardless of who was behind the Sept. 11 attack, the aspirations for a free and stable Libya are better served without the presence of blacklisted IRISL vessels dispatched from terror-linked ports in Iran.

Drug submarines continue to make news,
Use of sophisticated drug subs spikes in the Caribbean. There was a time when such drug running subs where operating only in the Pacific. Things change, but the threat is high:

American authorities have recently discovered at least three models of a new and sophisticated drug-trafficking submarine capable of travelling completely underwater from South America to the United States, and the use of these covert vessels has spiked in the Caribbean over the last year.

Older models pressed into service by drug barons were only semi-submersible, requiring a snorkel for air intake, but three newer captured vessels were fully submersible, capable of hauling 10 tons of cocaine and, by surfacing at night to charge their batteries, could sail beneath the surface from Ecuador to Los Angeles.
***
“These vessels are seaworthy enough that I have no doubt in my mind that if they had enough fuel, they could easily sail into a port in the United States,” according to Cmdr Mark J Fedor of the US Coast Guard, who commands the cutter Mohawk, a 200-foot vessel whose fast boat and helicopter interdicted a submersible in the Caribbean last September.

Last year, interdiction missions coordinated by the joint task force captured 129 tons of cocaine en route to the United States — more than five times the cocaine seized over the same period by operations in the United States, where agents and officers stopped about 24 tons of the drug.

Despite these advances, three-quarters of potential drug shipments identified by the task force are not interdicted, simply because there are not enough ships and aircraft available for the missions. “My staff watches multi-ton loads go by,” Admiral Michel said.

And, as noted here,

The drug trafficking quandary is bad enough, but officials worry that these subs could also be employed by terrorists. “If you can carry 10 tons of cocaine, you can carry 10 tons of anything,” said Rear Adm. Joseph Nimmich of the Joint Interagency Task Force South, which polices drug-interdiction efforts in the waters south of the United States.

Though I think it is safe to assume the drug kings would rather have a healthy U.S. economy to allow their profitable business to grow rather than a even more wounded U.S. . . .

Global Energy: Russian Offshore Exploration

Reported by Ocean News, announced planned offshore Russia oil and gas exploration, including in the Barents Sea and the Sea of Okhotsk here:

Statoil will fund 100% of costs in the exploration phase, which includes an obligatory work program of six wildcat wells to be drilled during the period 2016-2021.

A fiscal reform package providing incentives for the development of Russian offshore , including through geological survey, was outlined in a Russian government decree of April 2012. Enactment and implementation of these measures will facilitate the conduct of more capital intensive exploration work.

According to this,

The Shareholder and Operating Agreements are identical for the four license areas. Rosneft will have an equity share of 66.67% in each of the operating joint ventures and Statoil´s share will be 33.33%. Statoil will fund 100% of costs in the exploration phase, which includes an obligatory work program of six wildcat wells to be drilled during the period 2016-2021.

Statoil is a Norwegian company with world-wide operations. Rosneft is a Russian company, 75% state owned.

More:

The Perseevsky license block is located in the western part of the Barents Sea. Prospective recoverable resources stand at over 2 bln toe.

The Magadan 1, Lisyansky and Kashevarovsky license blocks are located in the northern part of the Sea of Okhotsk. Prospective recoverable resources at these fields stand at over 1.4 bln toe.

One more step in the Arctic.

Know Your Opposition

Some gems in this Oil and Gas Journal opinion video about the "stakeholders" in opposition to development of "non-conventional" petroleum production and transportation. The development of new means of production is an "inconvenient truth" for groups now fighting, as noted in the opinion, for that in which they've invested their time and talents. In some instances, it is almost like arguing against a religious belief.

Somalia: Oil Exploration Starts in Puntland

Oil and Gas Journal reports Somalia: Dharoor block exploratory wells started:

Horn Petroleum Corp. has spudded the Shabeel-1 wildcat on the Dharoor block in Puntland, northern Somalia, toward a planned total depth of 3,800 m, said Africa Oil Corp., Vancouver, BC, which owns a 51% equity interest in Horn Petroleum.

Operations have also started on the Shabeel North-1 well with the setting of the 30-in. surface casing and the drilling of a 50-m pilot hole. The Sakson 501 rig will be used to drill both wells, and drilling and evaluation time is put at 90 days each.

Horn Petroleum reports:

The Shabeel and Shabeel North prospects are located on a Jurassic aged rift system which is part of the same system that has proven to be highly productive in the Masila and Shabwa Basins in Yemen that contain an estimated 6 billion barrels of oil*. Both prospects are very large fault block prospects with internal most likely estimates of potential oil volumes of over 300 million barrels of recoverable oil. Source rocks are expected to be rich Jurassic Kimmeridgian shales in the deep portion of the rift immediately down dip from the Shabeel prospects. Reservoirs are expected to be sandstones and carbonates of the Lower Cretaceous and Jurassic systems analogous to Yemen.

Horn President and CEO David Grellman commented "The commencement of drilling in the Dharoor Valley block is a major milestone in the evaluation of the oil potential of Northern Somalia. We have had very strong support from the Puntland regional government and the local communities who are all keen to see development resume in the region after prolonged periods of internal strife. These wells are the first to be drilled into the deep areas of the rift basins and will be key to unlocking the hydrocarbon potential of this unexplored prospective trend".

Oh, look, an industry other than piracy.

Watch for stories about the corruption of the Puntland oil money flows, along the line of those set out in this Wikipedia article. And for stories of the exploitation of Africa's natural resources by the West.



Structure map from Africa Oil Corp.

U.S. Oil Shale Under Part of Wyoming Estimated at 1.45 Trilliom Barrels

Green River shale oil in place put at 1.45 trillion bbl

A trillion barrels is 1 million million  (1,000,000,000,000) barrels in U.S. terms. According to the EIA Saudi Arabia has 266.75 billion barrels of proven oil reserves, so this report would seem to give the U.S. even more oil than Saudi Arabia, though it is shale oil.

The EIA reports the U.S. crude oil and products imports 9,440,000 barrels/day. Assuming you can recover it, a trillion barrels would replace those imports for 288 years, by my rough calculations.

If these numbers are correct, why is this not a bigger news story?

You can find the supporting U.S.G.S. report in pdf format here.

UPDATE: Speaking of big energy finds, a report of a large gas find off Africa, which is a good thing, I would think for Mozambique:

An Eni group has drilled a giant gas discovery at the first well in Area 4 off northern Mozambique that the company said is the largest operated find in its history.
***
“The outstanding volume of natural gas discovered will lead to a large scale gas development with a combination of both export to regional and international markets through LNG and supply to the domestic market. This will support the industrial and economic growth of the country,” Eni said.

Crude Oil Prices

Interesting chart from Chart of the Day:

Today's chart illustrates that most oil price spikes coincided with Middle East crises and often preceded or coincided with a US recession. The logic behind this is that a Middle East crisis can potentially disrupt an already tight oil supply and thereby drive crude oil prices higher. Also, rising oil / energy prices can, among other things, increase costs within the global economy's supply / distribution chain and thereby contribute to inflation which can in turn encourage governments to halt or reduce any plans to stimulate the economy.

 So, you'd think that a government sitting on some of the world's largest reserves of energy (see here) would be pushing development of that energy to ease the "tight oil supply" so as to unleash its plans to "stimulate the economy," wouldn't you?

Wouldn't you?

Offshore Drilling: New Tools for Emergency Well Capping

Industry responds to the Macondo/Gulf of Mexico well blowout with new tools to cap such a blown out well, as reported at After Macondo: Emergency Well Capping:

In the wake of the spill, the industry and the wider world has switched on to the possibility of a similar disaster occurring again. Particularly given the increasing depths at which deepwater platforms are now operating, the logistics behind capping a leaking well are mind-boggling.

As a result, a number of emergency well capping devices are concurrently in development or under construction now. Some are intended and tailored for use in particular offshore regions, while others are being offered to oil companies as a kind of global insurance policy against any future disasters.

See the home page of the Marine Well Containment Company (source of the illustration above). It is reported the system MWCC has works down to 10,000 feet. There's a video at that site that shows how the system is supposed to work.

MWCC's start up was funded by ExxonMobil, Chevron, Shell and ConocoPhillips. Membership today has expanded:

The MWCC member companies are now Chevron, ConocoPhillips, ExxonMobil, Shell, BP, Apache, Anadarko, BHP Billiton, Statoil and Hess. These 10 companies operated approximately 70 percent of deepwater wells drilled in the U.S. Gulf of Mexico between 2007 through 2009.

As full disclosure, I am a former Chevron employee, looking forward to small retirement check from them in the future.