Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, August 16, 2015

notes on 3 Ohio rulings, global rig counts, and global oil production

there were three fracking related decisions handed down in Ohio this week, netting two small victories and one big loss; first, the Ohio Oil and Gas Commission upheld the earlier decision by the ODNR to suspend operations at an American Water Management Services’ Weathersfield Township injection well in Trumbull county due to earthquakes of magnitude 1.7 and 2.1 that were induced by that injection in July and September of last year, a decision we had briefly discussed here...the company had argued that the ODNR intervention was “unlawful and/or unreasonable” and since they'd already spent over $5 million to drill and prepare those two wells, they should be allowed to use them...fortunately, the investor state dispute settlement provisions being pushed by the administration are not yet in effect, so the state will not be required to cover American Water Management for their lost potential profits...

the next decision came when Summit County Common Pleas Judge Mary Rowlands denied a temporary restraining order which would have allowed Spectra Energy to survey properties for their NEXUS pipeline without permission from landowners...as we mentioned last week, when discussing the Chesapeake Energy decision to put their Ohio natural gas production on hold until the Ohio Pipeline Energy Network is completed, the developers of the NEXUS pipeline had sued 91 property owners in Summit County who had refused company surveyors access to their property; Judge Rowland's decision to instead hold a trial in October to hear arguments about whether the Houston-based company should be granted access seems to at least put the NEXUS pipeline on hold till then....this NEXUS pipeline isn't your ordinary run of the mill gas transmission line, either...it's designed to deliver 1.5 billion cubic feet of natural gas per day across northern Ohio to Michigan, Chicago and Ontario, pumped along the way by 52,000 horsepower compression stations every 70 miles; that would be the equivalent of 1.7% of the total US natural gas production this year, and probably nearly 2% of the current US transmission trunkline capacity...a ten minute leak from such a pipeline would spew forth 10.4 million cubic feet of natural gas, certainly enough to wipe out any small town nearby...the industry argues that they have fail safe automatic shut offs on their pipelines, but just a month ago we saw a 5 million liter spill in Alberta when one such of those new fail safe pipelines failed to detect any leak...

finally, in a decision that culminates the weeks of news we've carried from Athens County, Ohio Secretary of State Jon Husted ruled that charter government proposals in Athens, Fulton and Medina counties cannot appear on the November ballot...moves by these three counties to transform themselves were initiated after the oil-industry funded Ohio Supreme court had ruled that local governments could not pass laws to regulate fracking because state laws give that authority solely to the ODNR...Athens, and presumably Fulton and Medina counties, had all gathered enough signatures to put the charter government proposals on the ballot, but in each county an oil company stooge filed a protest against the initiative, arguing that the charter amendment was county overreach and included unauthorized zoning regulations...those citizen protests then were forwarded to the Secretary of State, who had previously received $84,750 in oil industry contributions, and who did as expected and ruled those initiatives off the ballot in those counties, citing the Supreme Court decision that only the state has the authority to regulate oil and gas activity...this decision, then, seems to eliminate the possibility of any local legislation in the state in regards to fracking, at least until such time as Ohio laws are changed or oil industry funded public officials are defeated at the ballot box...

since we missed the rig count last week, we'll catch up on that next...over the past two weeks, Baker Hughes reported that a net of 10 additional drilling rigs were put into service in the US, with the entire increase in that count coming in the first week of August...oil rigs increased by 6 in that week and by 2 last week, to bring the current oil rig count up to 672, up from a low of 638 on July 17th, but down from the 1589 oil rigs in use a year ago, and down from the peak of 1609 oil rigs hit on October 10th of last year...gas rigs totaled 214 at the end of the week, after an increase of 4 in the first week of August and a decrease of two last week....despite the pickup in oil rigs over the last 4 weeks, the gas rig count has continued to slide, and is now down from 321 a year ago, and from 356 at the November 11 interim peak...there has also been an unusual fluctuation in the offshore rig count, as 4 were added in the first week of August only to have 3 withdrawn from operations last week....that leaves 35 rigs working offshore as of Friday, down from 62 a year ago, with 34 of those in the Gulf of Mexico and one off the shore of Alaska...

the drillers are again adding more horizontal rigs than other types, as 8 were added in the first week of August while 4 were added this week; that brings the horizontal rig count back up to 676, up from 650 four weeks ago, but down from 1329 a year ago...drillers also activated a net of 3 vertical rigs in the week ending August 7, but shut down 2 last week, leaving the vertical rig count at 129, down from 368 a year ago....meanwhile, the directional rig count was down 1 on August 7th and down another 2 last week, leaving it at 81, down from 216 a year earlier...

of the major horizontally fracked basins, the Permian basin of west Texas and New Mexico remains the most active, with 255 rigs, or nearly 30% of the 844 currently active rigs, working there this week, after 6 were added in the week of the 7th and another was added this week...however, that's still down from the 558 rigs that were drilling into that basin a year ago...activity in the Eagle Ford of southeast Texas has also increased, with 3 added this week after the net was unchanged the prior week...that brought the Eagle Ford count up to 101, which was still down from 199 a year earlier...the Williston basin, North Dakota home of the Bakken shale, ended the week with 70 rigs, down from 194 a year ago, after an addition of 1 rig last week and a removal of 2 rigs this week...meanwhile, 53 rigs remained in the natural gas yielding Marcellus of Pennsylvania and West Virginia, down from 77 a year ago, as 2 more rigs were withdrawn this week after a reduction of 1 last week...the rig count in Oklahoma's Cana Woodford remained unchanged at 37 after 2 weeks, while it's still the only basin to see an increase from the 34 rigs operating there a year ago...the Niobrara Chalk of the Rockies' front range ended the week with 32 rigs, down from 62 a year ago, after one rig was added this week, while the Haynesville shale of Louisiana netted no change from 30 rigs, down from 45 a year ago, after one was added last week and one was withdrawn this week...lastly, Ohio's Utica shale ended the week with 22 rigs, down from 44 a year ago, as one rig was pulled from the area in each of the last two weeks...

on a state basis, then, Texas ended this week with 390 rigs, after adding 8 rigs last week and 6 this week, which was still down from 908 a year ago...Oklahoma ended with 103, down from 209 a year ago, as they saw 4 rigs idled this week...Louisiana also saw 4 rigs pulled this week, but after 4 were added last week, leaving the state with 78 rigs, 33 of which were offshore, and which was down from their total of 116 in the 2nd week of August last year...North Dakota added a rig last week but pulled 2 this week, leaving them with 71, down from 182 a year ago; New Mexico, down 2 this week and unchanged last week, finished with 52, down from 94 a year ago, while Pennsylvania was down 3 last week and 1 this week to end at 38, down from 51 a year ago...Colorado also ended the week with 38 active rigs, down from 75 a year earlier, as 2 there were idled last week, only to see 2 restarted this week...Ohio finished with 19, down from 42 a year ago, as we saw a rig pulled out in each of the last two weeks...other notable changes saw West Virginia up two then down 1 to end at 18, down from 29 a year ago, and saw Kansas add 5 over the last two weeks to bring their total back to 12, still down from 26 a year ago...

Baker Hughes has also updated the international rig count with the averages for July, which showed the global rig count at 2,167, up from 2,136 in June but down from 3608 a year earlier, with most of those year over year reductions in North America...the average rig count in the Middle East fell from 401 in June to 391 in July, which was down from 432 a year earlier...notable changes in the region included Iraq, down 9 rigs to 44, Kuwait, down 6 rigs also to 44, Oman down 4 rigs to 67, and Pakistan, up 6 rigs to 23...the Saudis averaged 123 rigs in July, up from 121 in June and up from 105 in July a year ago....Latin America saw a net decline of 1 rig last month to 313 rigs, down from 407 a year ago, as the area added 7 land based rigs and shut down 8 offshore...within the region, Mexico saw a reduction of 6 rigs to 45 while Venezuela added 4 to reach 70...the Asia / Pacific region saw 212 rigs active in July, 3 fewer than in June and down from 253 last year, as India added 3 to bring their total to 116 and several countries cut one rig each...in Europe, the rig count fell 5 to 108, down from 153 last July, as Turkey and Italy each cut two rigs, while African nations averaged 94 rigs for the month, down 9 from from June and down 43 from a year ago, as Libya, Nigeria and Angola each reduced their active rig count by 2...

however, the Canadians added 54 rigs in July, for an average of 179, which was still down from 350 in July a year ago...also included in the release of the weekly count with US rigs, they added 15 in the week ending July 31st, reduced their count by 7 in the first week of August, and added 3 in the week just ended, to finish with 211 rigs as of August 14th...over the last two weeks, Canadians have shut down 12 oil rigs, leaving 100, while they've added 8 gas directed rigs, to bring the count of gas rigs to 111...the Canadian count is now down 190 rigs from last year's 401, with oil rigs down 124 and gas rigs down 66...

even with the ongoing reduction in rig counts, however, the global oversupply of oil continues to grow, putting further downward pressure on oil prices...this week Bloomberg reported that the output of OPEC reached a 3 year high in July, as they increased output by 105,000 barrels a days to average 31.5 million barrels a day over the month, which is up from their 2014 average of 30.075 million barrels a day...that was despite another 39,200 barrel a day drop in Libyan output, wherein they produced 373,000 barrels per day in July, well down from their 928,000 barrels per day average in 2013, as Iran, Iraq, Angola and Saudi Arabia all saw output increase by more than 30,000 barrels per day for the month, with Iraq increasing production by 46,700 barrels a day to 4.1 million...Russia, the world's largest oil producer outside of OPEC, saw its output slip from from 10.71 million barrels per day in June to 10.65 barrels per day in July, but that had been preceded by a string of monthly post Soviet era records since January...

in the US, our field production of crude oil fell during the most recent reporting week, from 9,465,000 barrels per day in the week ending July 31st to 9,395,000 barrels per day in the week ending August 7th...while that's down a bit more than 2% from the record oil production of the 1st week in June, it's still 11.1% higher than our output during the same week last year...meanwhile, our imports of crude oil jumped again, rising from 7,180,000 barrels per day in the week ending July 31st to 7,573,000 barrels per day in the current report...while that's up 10,000 barrels per day from the first week in August a year ago, we check the weekly Petroleum Status Report (62 pp pdf) to find the four week average of imports, which at 7.6 million barrels per day is 1.1% lower than the same 4 week period a year ago....with refineries still running at 96.1% of capacity, our crude oil inventories in storage fell once again, from 455,275,000 barrels last week to 453,593,000 barrels in the this week's report....that was still 24.1% more oil than the 365,618,000 barrels we had stored in the first week of August last year, and in fact much higher than had ever been stored in mid July in the 80 years of EIA record keeping, which had never seen a 400 million barrel inventory level before this year...


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