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, September 3, 2017

Harvey shuts down a quarter of US refining just a week after refining records were set; gasoline shortages result...

we're going to start with Hurricane Harvey, and what it has done to US energy infrastructure...although there was considerable damage to structures in the Corpus Christi area when it came on shore as a Category 4 storm with 130 mph winds near Rockport, Texas, about 20 miles up the coast, by far the greatest damage was from the rainfall, which surpassed 30 inches in a broad swath of the state from 50 miles west of Houston all the way to the Louisiana border...so we'll start with a map that shows where that rainfall fell..

Harvey rain totals

the above map comes from the National Weather Service out of Brownsville Texas and as the legend indicates, it shows the extent of the area that received rainfall totals exceeding 20 inches in green, exceeding 30 inches in blue, and exceeding 40 inches in purple...for those of you not familiar with Texas geography, note the 50 mile scale near the lower left hand corner to get an idea about the breadth of the areas receiving such quantities of rain...Harvey was by far the worst rainfall disaster in US history, seeing the greatest amount of rain ever recorded in the Lower 48 states from a single storm, while the 51.88 inches of rainfall measured in Cedar Bayou east of Houston was the most rainfall that ever fell on one place in one event in the continental US....an estimated 24.5 trillion gallons of water fell on Southeast Texas and southern Louisiana during the storm; that's enough water to cover the entirety of Washington DC 1,727 feet deep, more than 3 times the height of the Washington Monument...estimates are that roughly 460,000 Texans were flooded out, and as many as a million cars were damaged or destroyed...the disaster was exacerbated by urban sprawl into what were once wetlands, where wetlands that could have mitigated the flooding were paved over, and hence could not absorb any of the rain...the Texas coast terrain is relatively flat and drainage infrastructure is inadequate, so with the storm surge forcing high water into the mouths of the bayous, the rain that fell just accumulated on the already saturated surface...

next, we'll include a map that shows the track of Harvey through the Gulf Coast oil and gas infrastructure:

August 29 2017 Platts map of Harvey

this map came from Platts on Tuesday, and the original version of it just showed the forecast track of Harvey, then a tropical storm, from that day forward...i've added the approximate path that Harvey took over the prior Friday through Tuesday period so you can see how the storm moved over land...notable features on this map include the Eagle Ford shale basin in yellow, inland from Corpus Christi and Houston; oil import and export ports, shown as blue diamonds; oil and gas pipelines, shown in blue and orange; LNG terminals, shown as pink triangles, and refineries, shown as variously sized and colored circles, to indicate the amount of oil each normally processes and their status at the time this map was made...the initial impact of the hurricane was to shut down offshore oil and gas production in the western Gulf, as crews were removed from the offshore platforms when the track of the storm was still uncertain...at the same time, at least 25 oil tankers carrying almost 17 million barrels of imported crude were stuck offshore, unable to unload as the Texas ports closed in anticipation of the storm....then, when the storm hit Corpus Christi, its refineries were shut down and loading of crude oil exports from both the Permian and Eagle Ford was halted...although Harvey was downgraded to a tropical storm by the time it made it into the Eagle Ford, most oil production from that field had ahlready been shut in...

now remember, circulation around a hurricane is counter-clockwise, so over this entire time it was drawing moisture in from the warmer than normal Gulf on the eastern side of the storm and pushing the heaviest rain northward into the Houston area...at that point, the storm stalled, moving no more than 2 miles an hour, till it slowly turned around and moved back out into the Gulf, with heavy rain bands now extending as far east as New Orleans (not shown above); the above map thus shows the refinery closures at that time, but as we shall see in the next table, large refineries in Beaumont and Port Arthur marked as operational above were eventually shut down too, as Harvey's late week rainfall later flooded those areas...

the table below comes from an article at Platts titled Oil Factbox: Gasoline prices soar on Harvey-related outages and it shows the major refinery outages caused by Harvey as of early Friday...roughly 47% of US refining capacity is on the Gulf Coast, and more than half of that was impacted by Harvey...most of these refineries were flooded, so they may be down for a while...for instance, the Saudi owned Motiva refinery in Port Arthur, the largest refinery in the US, will be shut for at least two weeks...Exxon's Baytown, the 2nd largest US refinery, was hit by the Houston area flooding, and may be back online sooner...however, Exxon's Beaumont refinery reports flooding still ongoing, with water well over the 10 foot levee protecting the plant, and oil spilling into that water...and that Corpus Christi refineries remain shut down a week after the hurricane passed them may mean they've sustained some storm damage, since flooding was not a major problem that far south down the Texas coast...

August 31 2017 refineries shutdown via Platts

notice that as of Friday, this table indicates that 22% of US refining capacity was still offline, meaning 4 million barrels per day of oil were not being refined; others put that figure at 4.4 million barrels, which would mean that one quarter of US refining has been shut down...the result of this has been to push oil prices down, while prices for gasoline, distillates and jet fuel have all been rising...there are already shortages of gasoline in some areas of Texas, and panicked gas lines have formed where gasoline is available...on Wednesday, the Colonial Pipeline, normally carrying gasoline, diesel and jet fuel from several refineries in Houston, Port Arthur through the south Atlantic states to New York, was shut down for lack of supply; that pipeline normally carries “roughly one in every eight barrels of fuel consumed in the country"...a day earlier, the Explorer Pipeline from Houston to Chicago was shut down, cutting off the normal supplies for the Chicago area...even though there are nearly a quarter of a billion barrels of gasoline stockpiled in the US, it's not in the right places to address these Midwest and East Coast shortages; pipeline terminals typically only have a five-day supply in storage to meet immediate needs...bottom line, that means higher prices and gasoline shortages might hamper travel over the Labor Day holiday weekend...

The Latest US Oil Data from the EIA

this week's US oil data from the US Energy Information Administration, covering details for the week ending August 25th, ie, the week before Harvey hit land, showed a big drop in our imports of crude oil, a new record for the amount of crude oil being used by US refineries, and hence another withdrawal of from our stored supplies of crude oil....our imports of crude oil fell by an average of 885,000 barrels per day to an average of 7,905,000 barrels per day during the week, while at the same time our exports of crude oil fell by 34,000 barrels per day to an average of 902,000 barrels per day, which meant that our effective imports netted out to an average of 7,003,000 barrels per day during the week, 851,000 barrels per day less than during the prior week...at the same time, our field production of crude oil inched higher by 2,000 barrels per day to an average of 9,530,000 barrels per day, which means that our daily supply of oil coming from net imports and from wells totaled an average of 16,533,000 barrels per day during the cited week...

during the same period, refineries were using 17,725,000 barrels of crude per day, 264,000 barrels per day more than they used during the prior week, while at the same time 771,000 barrels of oil per day were being pulled out of oil storage facilities in the US...hence, this week's crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 421,000 less barrels per day than what refineries reported they used during the week...to account for that discrepancy, the EIA needed to insert a (+421) barrel per day figure onto line 13 of the weekly U.S. Petroleum  Balance Sheet to make the data for the supply of oil and the consumption of it balance out, which they label in their footnotes as "unaccounted for crude oil"...note that last week's unaccounted for crude was -396,000, a swing of 818,000 barrels per day, and hence the week over week data is accordingly suspect..

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports fell to an average of 8,146,000 barrels per day, which was 4.6% below the imports of the same four-week period last year....this week's 2,000 barrel per day increase in our crude oil production was the result of a 14,000 barrel per day increase in oil output from Alaska, which was offset by a 12,000 barrels per day decrease in oil output from wells in the lower 48 states...the 9,530,000 barrels of crude per day that were produced by US wells during the week ending August 25th was the most oil US wells have produced since July 17, 2015, 8.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 12.3% more than the 8,488,000 barrels per day of oil we produced during the during the week ending August 26th a year ago, while our oil output was still 0.9% below the record US oil production of 9,610,000 barrels per day set during the week ending June 5th 2015...

US oil refineries were operating at 96.6% of their capacity in using those 17,725,000 barrels of crude per day, which was up from 95.4% of capacity the prior week, and the highest refinery utilization rate since August 26, 2005....the 17,725,000 barrels of oil refined this week was the most ever refined in US history, 149,000 barrels per day more than the previous record, 6.7% more than the 16,615,000 barrels of crude per day.that were being processed during week ending August 26th, 2016, when refineries were operating at 92.8% of capacity, and roughly 12.9% above the 10 year average of 15.7 million barrels of crude refined per day at this time of year...

with this week's record level of oil refining, gasoline production from our refineries increased by 36,000 barrels per day to a new record high of 10,602,000 barrels per day during the week ending August 25th, topping the record just set last week...that put this week's gasoline output at a level 5.8% higher than the 10,021,000 barrels of gasoline that were being produced daily during the comparable week a year ago....however, our refineries' production of distillate fuels (diesel fuel and heat oil) fell by 36,000 barrels per day to 5,055,000 barrels per day at the same time, which was still 1.6% more than the 4,973,000 barrels per day of distillates that were being produced during the week ending August 26th last year....

with this week's record gasoline production, our end of the week gasoline inventories increased by 35,000 barrels to 229,937,000 barrels by August 25th, only the 3rd small increase in gasoline inventories in 11 weeks...that was as our domestic consumption of gasoline rose by 217,000 barrels per day to a record 9,846,000 barrels per day, and as our imports of gasoline rose by 284,000 barrels per day to 839,000 barrels per day, and as our exports of gasoline rose by 44,000 barrels per day to 637,000 barrels per day...however, with significant gasoline supply withdrawals in 8 out of the last 11 weeks, our gasoline inventories are still 0.9% below last August 26th's level of 232,004,000 barrels, while they are still 7.4% higher than the 214,163,000 barrels of gasoline we had stored on August 28th of 2015, and roughly 9% above the 10 year average for gasoline supplies for this time of the year...

meanwhile, even with the decrease in our distillates production, our supplies of distillate fuels managed to increase by 748,000 barrels to 149,163,000 barrels over the week ending August 25th, the third modest distillates inventory increase in a row…that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 167,000 barrels per day to 3,910,000 barrels per day, while our imports of distillates fell by 48,000 barrels per day to 84,000 barrels per day, and as our exports of distillates fell by 20,000 barrels per day to 1,122,000 barrels per day....however, even after this week’s increase, our distillate inventories were still 3.6% lower than the 154,753,000 barrels that we had stored on August 26th, 2016, and fractionally lower than the distillate inventories of 149,951,000 barrels of distillates that we had stored on August 28th of 2015, even as they remain more than 5% above the 10 year average for distillates stocks for this time of the year…

finally, with the week's big drop in our oil imports while our refineries were using oil at a record pace, our commercial crude oil inventories fell for the 19th time in the past 21 weeks, decreasing by another 5,392,000 barrels to 457,773,000 barrels as of August 25th, leaving us with the least oil we've had in storage since January 15th, 2016...however, while our oil inventories as of August 25th ended 7.6% below the 495,238,000 barrels of oil we had stored on August 26th of 2016, they were still up considerably from the normal level for our oil supplies in the years before the oil glut started building up, ie., 8.1% higher than the 423,657,000 barrels in of oil that were in storage on August 28th of 2015, and 39.5% higher than the 328,119,000 barrels of oil we had in storage on August 29th of 2014...

This Week's Rig Count

US drilling activity increased for the 3rd time in the past 10 weeks during the week ending September 1st, after a string of 23 consecutive weekly increases earlier this year, as  apparently there was no Harvey impact....Baker Hughes reported that the total count of active rotary rigs running in the US rose by 3 rigs to 943 rigs in the week ending Friday, which was 446 more rigs than the 497 rigs that were deployed as of the September 2nd report in 2016, while it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014....

the number of rigs drilling for oil was unchanged at 759 rigs this week, which still left oil rigs up by 352 oil rigs over the past year, while their count remained far from the recent high of 1609 rigs that were drilling for oil on October 10, 2014...at the same time, the count of drilling rigs targeting natural gas formations increased by 3 rigs to 183 rigs this week, which was 95 more rigs than the 88 natural gas rigs that were drilling a year ago, but still way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008...in addition, one rig that was classified as miscellaneous was still drilling this week, compared to the 2 miscellaneous rigs that were working a year ago..

the Gulf of Mexico rig count fell by one rig to 16 Gulf rigs this week, as a rig offshore from Louisiana was shut down...nonetheless, the Gulf of Mexico count was still up from the 10 Gulf rigs that were running during the same week a year ago...the total US offshore rig count was the same as the Gulf count, since there was no other US offshore drilling activity except in the Gulf...

working horizontal drilling rigs fell by 2 rigs to 794 rigs this week, which left the horizontal rig count still up by 399 rigs from the 395 horizontal rigs that were in use in the US on September 2nd of last year, while their count was also still down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014....on the other hand, the vertical rig count was up by 4 rigs to 68 vertical rigs this week, which was also up from the 60 vertical rigs that were deployed during the same week last year...at the same time, the directional rig count was up by 1 rig to 81 rigs this week, which was also up from the 42 directional rigs that were deployed on September 2nd of 2016....

the details on this week's changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes...the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows weekly and year over year rig count changes for the major US geological oil and gas basins...in both tables, the first column shows the active rig count as of September 1st, the second column shows the change in the number of working rigs between last week's count (August 25th) and this week's (September 1st) count, the third column shows last week's August 25th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was for the 2nd of September, 2016...     

September 1 2017 rig count summary

 

note: there's more here...

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