March Industry Affairs

Oklahoma Expands Plan To Curtail Earthquakes In State

March 7, 2016 (Reuters) By Heide Brandes

Oklahoma's oil and gas regulator released an expanded plan on Monday that will curtail wastewater injection volumes and well depth to deal with the state's increasingly frequent earthquakes.

The Oklahoma Corporation Commission's new plan about doubles the amount of land covered under a previous plan released in February to help deal with the increase of seismic activity in the state that officials say is caused by oil and natural gas disposal wells.

Quakes above magnitude 3.0 now strike the state at a rate of two per day or more, compared with two or so per year prior to 2009.

The new plan affects more than 5,000 square miles (12,950 sq km) and more than 400 disposal wells, bringing the combined effect of the two plans to more than 10,000 square miles (28,900 sq km) and more than 600 disposal wells.

The new plan that covers central Oklahoma calls for the reduction of wastewater volume by 40 percent below totals from 2014, which equals more than 300,000 barrels of wastewater a day, the commission said.

The volume reduction plans will be phased in over two months, with full compliance expected by May 28, the commission said. In 2015, Oklahoma geologists documented strong links between increased seismic activity in the state and the injection into the ground of wastewater from oil and gas production, stating that it is "very likely that the majority of the earthquakes" are triggered by wastewater injection activities tied to the oil and gas industry, according to the Oklahoma Geological Survey.

The spike in earthquake activity has put Oklahoma in the center of a national debate over whether wastewater disposal from oil and gas production triggers earthquakes. In response, the commission, and many oil and gas exploration companies, have reduced injection depth and volume in the wells nearest to the seismic activity.

Injection wells are used by the oil and gas industry to store wastewater extracted during hydraulic fracturing, or fracking. The water is extracted from the ground along with oil and gas, separated and re-injected into deep wells.

The February plan, which covers Oklahoma's northwest region, was after several earthquakes near Fairview in northwest Oklahoma. In the past month, several areas in central Oklahoma experienced earthquakes as well.

The expansion also includes 118 disposal wells in the Arbuckle area. Oil and gas operators there must prove the disposal well has not drilled into the basement rock and provide daily and weekly volume reporting.

 

Oil hits $40 as bets on rising prices hit record highs

CNBC By Jenny Cosgrave

March 7, 2016

Oil prices surged to three-month highs on Monday, as improving sentiment in financial markets helped support prices and data revealed investors have dramatically upped their bets on the price of oil rising.

Front-month Brent crude futures traded as high as $40.26, up close to 4 percent and trading at its highest level since early December on Monday in afternoon trade.

U.S. West Texas Intermediate (WTI) futures were up around 4 percent at $37.35 a barrel.

Genscape said Cushing stockpiles rose by 670,714 barrels to reach 68.8 million last week according to Reuters. In the previous week to Feb. 26, Genscape reported that inventories at the hub rose by more than 1 million barrels.

Meanwhile, data from the InterContinental Exchange (ICE) published on Monday showed that hedge fund and money managers have hiked their long positions, or bets, on the price of oil rising to record highs.

Investors have increased their net long positions in internationally traded Brent crude from 22,171 lots to 342,460 in the week to March 1, which is the highest level on record, since ICE began collecting data in 2011. Oil prices are now up over 40 percent on their lows for the year, as prices slumped to levels not seen since 2003 in January.

Global head of flow strategy and solutions at Societe Generale, Kokou Agbo-Bloua said he expects oil prices to stabilize, with a $50 target by the end of the year.

"There is clearly room for the stabilization of the oil price at these levels and some marginal upside towards the end of the year," he told CNBC. But most analysts remain distinctly cautious on the outlook from here, despite the recent rally.

Oil analyst at Morgan Stanley, Elizabeth Volynsky, said improved sentiment towards risk assets, rather than fundamentals, was the real reason for the support seen in oil prices and supply and demand concerns have not changed.

"We would argue that this latest rally is mostly a reversal of the same factors that drove oil prices into the 20s earlier this year. We have seen positive changes on U.S. supply and EM, but overall oil fundamentals remain challenging," she said.

"More important for short-term price action has been improved sentiment on the macro front and across risky assets globally. Thus, prices can continue to rally on headlines and a U.S. dollar pullback, but the upside should be limited by bloated global inventories and producer hedging. Moreover, we worry that this latest oil bounce shares many features of the oil rally in the second quarter of 2015, which ultimately resulted in disappointment," Volynsky added.

Analysts at Danske Bank also agreed that it is still "too soon to celebrate".

"The risks to the oil price persist as oil inventories are record high and production is still outpacing demand, leading to a further build-up of already high inventories. As hedges run out for many oil producers this year we could start to see a range of bankruptcies in this sector creating negative headlines," the group said in a research note to clients, published Monday.

 

Second-biggest U.S. shale output drop seen for April: EIA

March 7, 2016 (Reuters)  By Catherine Ngai and Scott DiSavino

U.S. shale oil production in April is expected to chalk up the second-largest monthly decline on record, and the sixth straight monthly decrease, a U.S. government forecast released on Monday showed.

Total output is expected to fall by 106,000 barrels per day to 4.87 million bpd, according to the U.S. Energy Information Administration's (EIA) drilling productivity report. That would be the second largest monthly drop after a record 121,000 bpd-decline in January 2015, based on data dating back to 2007.

Production from the Bakken Formation in North Dakota is expected to fall 28,000 bpd, the fifth consecutive monthly drop, while output from the Eagle Ford Formation is forecast to drop 58,000 bpd, the ninth consecutive monthly slide, the EIA said.

Production from the Permian Basin in West Texas is expected to fall 4,000 bpd, the first decline since June, it added.

Global oil prices have slumped more than 70 percent in the past 19 months, causing producers to hold back on capital spending and focus on drilling in more cost-effective areas.

Oil production per rig rose to new records across the shale plays, jumping 6 bpd in the Bakken, 10 bpd in the Eagle Ford and 6 bpd in the Permian.

Total natural gas output is expected to decline for a fifth consecutive month in April to 46.3 billion cubic feet per day (bcfd), the lowest since July 2015, the EIA said. That would be down almost 0.5 bcfd from March, making it the biggest monthly decline since March 2013, it noted.

The biggest regional decline was expected to be in Eagle Ford, down 0.2 bcfd from March to 6.3 bcfd in April, the lowest level of output in the basin since April 2014, the EIA said.

In the Marcellus Formation, the biggest U.S. shale gas field, in Pennsylvania and West Virginia, April output was expected to decline by 0.1 bcfd from March to 17.3 bcfd. That would be the second monthly decline in a row and the biggest decline since July 2013.