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, May 15, 2016

more on the Utica shale, oil supplies drop as EIA fudge factor swings by 664,000 bpd, drilling drops again, etc

you'll recall that after looking at the new maps of the Utica/Pt Pleasant "plays" from the EIA last week, wherein we discovered that our part of the state was sitting on top of the thickest areas of the Utica, that i could not understand why our area had not yet been targeted for extensive horizontal drilling, given that the Utica was even closer to the surface in this part of the state than in those areas currently being fracked...among the reasons i suspected was that it was "possible that the shale in those areas [that are being drilled] have a higher hydrocarbon content than the shale in our area"...it turns out that's exactly the case...searching for sites that would provide that information, i came across a 2012 USGS paper titled "Assessment of Undiscovered Oil and Gas Resources of the Ordovician Utica Shale of the Appalachian Basin Province" (pdf) which included among other graphics a map showing the percentage of organic carbon content for the Utica and Point Pleasant formations that we're including below...

May 14 2016 Utica organic carbon percent

this map shows the extent of the exploitable areas of the Utica shale reservoir in blue and the extent of the Point Pleasant in violet and as the descriptive footnote indicates, the percentage of total organic carbon by weight in those shale layers, which is indicated by isolines marked 1, 2, and 3 across the face of the map...thus, the area in southeast Ohio between the 2 and 3 isolines indicates that the underlying Utica shale has a total organic carbon content of between 2% and 3%....similarly, the area in northwest PA adjacent to the Ohio border also has a total organic carbon content of between 2% and 3%...below our part of the state, in fact below almost all of northern Ohio east of a Toledo-Findlay line, the total organic carbon content of the Utica shale is between 1% and 2%...now, this is certainly a very generalized map and it's likely there's far more variation than these few lines indicate, but for our purposes it's probably all we really need to know...generally speaking, fracking the shale in the south eastern part of the state would yield almost twice as much hydrocarbon per ton of rock as in the northeast counties...so despite that fact that the Utica is both thicker and somewhat shallower in our part the state, the economics dictate that the drilling is concentrated in the "sweet spots" where the hydrocarbon content is twice what we have below us...

now, there's another map of the Utica shale that i stumbled on to this week that we should also take a look at, because it shows that different areas of the Utica will yield larger amounts of crude oil than natural gas and vise-versa......

May 14 2016 Utica source rock maturation status

the above map comes from a page of maps on "the Utica shale blog", produced by a Pennsylvania geologist...the maps show which parts of the Utica are likely to produce oil and which are likely to produce gas, apparently based on a regression analysis of core samples of the shale taken from a number of locations...as i gather from wikipedia and other reading, maturity of a rock formation is an indication how long and at what temperature and pressure the organic matter in a formation has been subjected to, which in turn determines the state of those hydrocarbons in the rock...thus those areas of the Utica in western Ohio and Kentucky marked immature include kerogens and incompletely formed oil, probably because they remained shallow, whereas those areas of the Utica in eastern Pennsylvania and southern New York marked overmature have been subjected to so much heat & pressure as to drive [some of?] the gas out...in between, the hydrocarbons exist as oil in northern and central Ohio as shown in green, and they exist as dry gas (mostly methane) in western Pennsylvania and central New York, while in a narrow band of the Utica from western New York through northwest Pennsylvania and eastern Ohio, hydrocarbons exist as wet gas, which is defined differently by different sources. but “gases having more than about 20 bbls/MMscf of condensate” seems as good as any...the same USGS paper on the Utica that we sourced our first graph from says “the gas / oil boundary is typically based on 20,000 cubic feet of natural gas per barrel of oil’...

an EIA map we looked at last week showed that most of the Utica shale wells were in counties around Columbiana, Carroll, Harrison, and points south, and thus a large majority of the wells drilled in the Ohio Utica so far appear to be in that pink band, indicating they've been drilling for the wet gas...this exists as a gas under pressure underground but includes condensates at atmospheric pressure at the surface...that's because it not only includes the natural gas methane that we're familiar with as used for domestic heating purposes, but increasing quantities of ethane, propane, butane, pentane, and possibly even more complex hydrocarbons which fall under the ‘natural gas liquids’ category...those are generally more valuable petrochemical feedstocks, and dry gas contains little or none of those...the other reason we've included this map is to point out that the hydrocarbons in Utica shale that's under this part of the state appear to exist as oil, not as natural gas or as gas liquids...that oil shale area would include Cuyahoga Lake, Ashtabula and most of Portage and Geauga counties (except for Parkman), while Trumbull is split and Mahoning is largely wet gas...so my previous assumptions that we'd be subject to immediate exploitation dui to natural gas exports and the rising prices they'd bring seems to be unfounded...

The Latest US Oil Stats and Fudge Factor from the EIA

Wednesday's Petroleum Status reports for the week ending May 6th from the Energy Information Administration indicated that our crude oil production fell a bit again and that our imports of oil were virtually unchanged, while US refineries saw another modest increase in the amount of oil that they used...production of crude oil from US wells fell for the 15th time in the past 16 weeks, dropping by 23,000 barrels per day, from an average of 8,825,000 barrels per day during the week ending April 29th to an average of 8,802,000 barrels per day during the week ending May 6th....that's now 6.1% below the 9,373,000 barrels per day we were producing during the first week of May last year, and 8.4% below the 9,610,000 barrel per day peak of our oil production that was hit during the week ending June 10th of last year...

meanwhile, our imports of crude oil rose by just 5,000 barrels per day, from an average of 7,660,000 barrels per day during the week ending April 29th to an average of 7,665,000 barrels per day during the week ending May 6th...that was 11.2% more than the 6,881,000 barrels of oil per day we imported during the week ending May 8th a year ago, and the EIA's weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports was still at the 7.8 million barrel per day level, which was still 8.4% more than our oil import rate of the same four-week period last year...  

at the same time, inputs of crude oil to US refineries averaged 16,179,000 barrels per day during the week ending May 6th, which was 193,000 barrels per day more than 15,986,000 barrels per day they used during the prior week....while that happens to be 1.3% more than the 15,968,000 barrels per day that US refineries were using the same week last year, our refining over the past couple of months is still about one percent below last year's pace for this time of year....in fact, the US refinery utilization rate actually fell to 89.1% of operable capacity last week, from the 89.7% capacity utilization rate of the week ending April 29th, and it remains well below the capacity utilization rate of 91.2% that we saw during the week ending May 8th of 2015...that's in contrast to the average over 95% of capacity that US refineries ran during a 10 week stretch in the middle of last summer... 

however, in the face of just that modest increase in refining, the 2.8 million barrel surplus of crude oil that we saw build up last week was completely reversed, and the EIA reported that 3.4 million barrels of oil was withdrawn from storage to meet our needs this week...now, anyone with basic math skills knows that doesn't add up, but we never see any oil or energy news and analysis site mention it, much less see it questioned by the regular media...you see, data for each of these oil metrics reported every week is gathered independently of the others; ie, some EIA analysts are responsible for the data on imports, some for the data on field production, some for consumption, some for the amount of oil and petroleum products in storage, and some for the inputs and outputs of our refineries...then on each Wednesday all these reports are published together, led by the weekly U.S. Petroleum Balance Sheet....with independent sources of the data that is included on the balance sheet, it's almost always the case that reports of oil arriving from several sources do not match the reports of oil used by several others....the EIA resolves those differences with an "adjustment" entry on line 13 of the balance sheet (pdf), which is really no more than a fudge factor used to bring the oil inputs and oil outputs into balance (the footnote says the adjustment was "formerly known as Unaccounted-for Crude Oil, a balancing item")....this week's adjustment was minus 375,000 barrels of oil per day, meaning 375,000 barrels of oil that we appear to have produced or imported this week did not show up in the final figures...last week the adjustment was a positive 288,000 barrels per day, which means that the apparent oil that ended up in products or in storage at the end of the week was 288,000 barrels per day more than we should have had...thus the swing in this fudge factor from last week to this week was 664,000 barrels per day, certainly enough to throw off any realistic analysis of what's happening with our crude oil supply nationally, and even worse, quite a bit more than would be needed to significantly move the global price of oil...since that weekly adjustment has become such a significant factor that no one else seems to be reporting, we're just going to have to include a report of that factor in our own coverage every week henceforth...

nonetheless, with more oil apparently being refined, our refinery production of gasoline rose by 240,000 barrels per day, averaging 10,051,000 barrels per day during the week ending May 6th, up from the average 9,811,000 barrels of gasoline per day produced during the week ending April 29th...turns out, that was the first time our gasoline output topped 10 million barrels per day in a week in any May, and the most gasoline we've produced in any week since the week ending August 14th of last year...at the same time, our refinery output of distillate fuels (diesel fuel and heat oil) also increased, rising by 21,000 barrels per day to 4,610,000 barrels per day during week ending the 6th, which was still 250,000 barrels per day, or 5.1% lower than our distillates production during the same week of 2015...    

however, even with that record output of gasoline, our gasoline inventories fell for the first time in 3 weeks, decreasing from 241,795,000 barrels on April 29th to 240,564,000 barrels on May 6th....that was as our imports of gasoline fell by 167,000 barrels per day to 779,000 barrels per day during the week, and as the gasoline supplied to US markets rose by 156,000 barrels per day to 9,658,000 barrels per day, the most we've consumed in any week this year, and the highest weekly consumption level in early May since prior to the great recession... nonetheless, this week's gasoline supplies were still 6.1% higher than the 226,710,000 barrels of gasoline that we had stored on May 8th last year, which were at the time the highest for the first full week of May in the EIA records...thus our gasoline stores are still categorized as "well above the upper limit of the average range" for this time of year..

meanwhile, our distillate fuel inventories fell by 1,647,000 barrels on continued elevated demand from the Midwest states, to end the week at 155,332,000 barrels...this is a normal spring planting season drawdown on distillates, and since distillate inventories were already bloated after the warmer than normal winter reduced heat oil consumption, distillate inventories are still 21.1% higher than the 128,270,000 barrels of distillates we had stored at the same time last year...thus, like gasoline, stores of distillates are also characterized as "well above the upper limit of the average range" for this time of year... 

lastly, after that 375,000 barrels of oil per day disappeared someplace this week, we found it necessary to withdraw 3,410,000 barrels of oil from our stockpiles of crude oil in storage to meet our needs, and hence our inventories of oil as of May 6th fell to 539,984,000 barrels, the first drop in 5 weeks and only the 2nd weekly decrease this year...so although we didn't set a new record for oil stores this week, we've still increased our inventories of crude oil by nearly 57.7 million barrels since the beginning of this year..thus our oil supplies are still 11.4% higher than the 484,839,000 barrels of oil we had stored as of May 8th, 2015, and 35.5% higher than the 398,523,000 barrels of oil we had stored on May 9th of 2014....

This Week's Rig Counts

at any rate, at least we set another record low for drilling activity this week, as the US rig count has now set new all time lows for 10 consecutive weeks....Baker Hughes reported that the total count of active rotary rigs running in the US was down by 9 more rigs to 406 rigs as of May 13th, which was also down from the 888 rigs that were working as of the May 15th report last year, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014... the count of rigs drilling for oil fell by 10 rigs to 318, which was down from 660 oil directed rigs a year earlier, and down from the recent high of 1609 working oil rigs that was reported on October 10, 2014, while the count of drilling rigs targeting natural gas formations rose by 1 to 87, which was still down from the 223 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 rigs that was set on August 29th, 2008... 

two of the rigs that were shut down this week had been drilling in the Gulf of Mexico, so the Gulf rig count is now down to 21, while the total offshore count fell to 22, as we still have an offshore platform working off the Cook Inlet in Alaska...this week's count was down from 33 rigs in the Gulf of Mexico and 34 total offshore that were in use on May 15th of 2015...there was also a rig removed that had been drilling on an inland lake in southern Louisiana this week, which left the inland waters rig count at 2, down from the 4 rigs deployed drilling on inland waters at the end of the same week last year...

the count active horizontal drilling rigs was down by 3 to 315 rigs this week, which was down from the 685 horizontal rigs that were in use on May 15th of last year, and down from the recent record of 1372 horizontal rigs that were deployed on November 21st of 2014...at the same time, 6 more directional rigs were also stacked, leaving just 38 directional rigs still working, which was down from the 89 directional rigs that were in use at the end of the same week a year earlier...meanwhile. the vertical rig count was unchanged at 53, which was still down from the 114 vertical rigs that were up and running in the US during the same week last year...   

for the details on which states and which shale basins saw changes in drilling activity this past week, we're again going to include a screenshot of that part of the rig count summary from Baker Hughes, which shows those changes...  the first table below shows weekly and annual rig count changes by state, and the second table shows weekly and annual rig count changes for the major geological oil and gas basins...in both tables, the first column shows the active rig count as of May 13th, second column shows the change in the number of working rigs from the prior week, the third column shows last weeks rig count, the fourth column shows the change in the number of rigs running from the same week a year ago, and the 5th column shows the number of rigs that were drilling at the end of that week a year ago, which in this case was May 15th of 2015:

May 13 2016 rig counts

so for example, we can see from the above that the active rig count in the Permian basin of western Texas was down by 5 rigs to 134, which was down from the 233 rigs that were working that basin a year ago, which contributed to the loss of 7 rigs in Texas, as shown in the upper table, where they now have 181 rigs still working in the state, down from 373 a year earlier...we can also see that the Haynesville shale of Louisiana, a natural gas basin, had a rig added, which likely accounts for the increase of 1 gas drilling rig, as the Marcellus and Utica counts were unchanged...that addition did not allay the 3 rig drop in Louisiana drilling, however, as the inland water rigs and both of the Gulf of Mexico rigs that were shut down this week had previously been counted for that state...notice that the state table above does not include Indiana, which saw a rig set up and start drilling this week, the first drilling activity in that state in more than a year...



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