Analysis by the father of American Geopolitics Dr. Daniel Fine, MIT.

Posts tagged ‘upstream’

Dr. Daniel Fine: Trump’s approach to oil and gas: a new course in the San Juan Basin


 

The full article is here-> http://www.daily-times.com/story/money/industries/oil-gas/2017/10/30/fine-trump-new-approach-oil-and-gas-in-san-juan-basin/777153001/

It has been 70 years since a President of the United States has considered domestic oil and gas as a “power” in world affairs. With Secretary of the Interior Ryan Zinke charting a new course, the Trump Administration is considering a transfer of Federal Land management with natural resources to the Western States.
Coupled with Zinke’s proclamation of American energy world domination, a revolution on how to think about oil and gas in the San Juan Basin is taking place.
The Four Corners BLM management could move across Farmington to the New Mexico state office.  The Bureau of Land Management’s Washington control might move to Denver.
It is more than speeding up Applications for Petroleum Drilling (APD): it is who decides and implements Trump-Zinke. How is San Juan natural gas to advance American oil and gas first in a redesign of domestic resources on a world stage?
Farmington and Carlsbad would control, as New Mexico State offices of oil and gas, new rules with national and global meaning. The San Juan Basin future would have natural gas reserves managed for strategic and economic purposes in the Baltic and Black Seas.  Management would be drawn from New Mexico.
What is the cost for this historic transfer of power from Washington or a non-oil and gas Potomac?
The State of New Mexico must legislate expansion budgets to overcome the limitations of Santa Fe staff in numbers and expertise. Under State Oil and Gas Law, inspectors are needed to inspect wells (62,000).
Inspection of Federal oil and gas wells (transfer from Washington BLM) requires a budgetary alignment with the strategy and vision of Secretary Zinke.
There is a return to the economic development history of America. San Juan Basin natural gas does not depend on localized manufacturing alternatives into natural gas in the Four Corners.  Pipelines take care of markets.  The expansion to ultimate economic recovery is in the new policy of this Administration.
I was the lunch keynote speaker at the Jicarilla Apache Energy Conference in Dulce.  Indian nation natural gas must not be outside American oil and gas first. Investment and production is now a different opportunity. Deals with conventional oil and gas companies were part of the excitement.
Readers of this column in the Energy Magazine have followed a forecast made 11 months ago, in which I have seen warning signs of oversupply of world oil in 2019.
The Initial Public Offering (IPO) shares in Saudi Aramco is doubtful.  China or BP could buy non-controlling blocks of shares as an alternative. If this IPO fails, Saudi Aramco will have little reason to throttle OPEC production downward.
This would open the way for a trend-line similar to 2014. Saudi Arabia is in the first phase of instability.  What happens to Mohammed bin Salmon, the Crown Prince, lies in Qatar, and with the Kurds.
It is important to recognize that the IPO process called for the right of women to obtain driving permits. Underwriters were on notice that such discrimination would distract buyers of Saudi Aramco shares.
Hilcorp’s female staff at Dulce added that they (women in Saudi Arabia) must be 30 years of age and will not be able to drive at night.

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Daniel Fine is the associate director of New Mexico

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This is what an oil bust looks like by Jonathan Thompson


Low prices have energy companies and communities reeling as rig counts plummet and unemployment climbs.

The full article is here-> http://www.hcn.org/articles/this-is-what-an-oil-bust-looks-like

“In early March, Daniel Fine, associate director of the New Mexico Center for Energy Policy, told a gathering of tribal energy officials that the oil bust is officially on. Those gathered, however, sure as heck didn’t need an expert to tell them that. In the oil and gas patches it has become clear that the economic gains of the so-called shale revolution are being wiped away by one of the worst fossil fuel downturns in U.S. history.

Now, the oil companies are crying for help. First, they got the crude oil export ban lifted. Next they want proposed federal rules on methane emissions weakened or scrapped. As if any of that will help.

Back in 2010, the price of a barrel of Brent crude (the international oil price benchmark) topped $80. That made it profitable to extract oil from tight shale formations, which is especially costly. A drilling frenzy ensued, domestic oil production skyrocketed, oil companies raked in profits and oil patch communities prospered.

But all that new oil on the market, plus China’s slowing economic growth, began to dampen oil prices in the summer of 2014. Instead of curtailing production to keep prices afloat, OPEC’s leaders launched a thinly veiled price war, clearly aimed at putting U.S. producers out of business. Here are some indicators that OPEC won the war:

The U.S. rig count has collapsed to levels not seen since, well, ever. With both oil and natural gas prices at near-record lows, it simply doesn’t make economic sense to spend up to $10 million to drill a well. So the rigs are shutting down. In September 2014, 1,931 oil and gas rigs were operating in the U.S.; today there are just 476. That’s a 75 percent decrease, and it’s still some 50 percent lower than the 1987 count, which followed what was considered the biggest, baddest bust ever, until now. Tom Dugan, who runs an oil and gas production company in northwest New Mexico, told the Farmington Daily Times, “It’s the hardest bust I’ve been through and I have been in this business for 57 years.”

Energy policy expert says oil slump a bust


by James Fenton, jfenton@daily-times.com5:02 p.m. MST March 5, 2016

The complete article is here-> http://www.daily-times.com/story/money/industries/oil-gas/2016/03/05/energy-policy-expert-says-oil-slump-bust/81289608/

FARMINGTON — “It’s officially a “bust.”

That’s the verdict from Daniel Fine, one of Gov. Susana Martinez’s senior advisers on energy policy. The U.S. oil and gas industry — and the San Juan Basin — is in a “bust” period, Fine said Tuesday at an inter-tribal energy conference at San Juan College’s School of Energy.

“This is what a bust is. You lose the workforce,” said Fine, who is associate director at New Mexico Center for Energy Policy at New Mexico Tech. “Loss to the country and to the Southwest will be the workforce. It will be decimated at levels of less than $30 a barrel (of crude oil).”

And 2015 was a year of layoffs and cutbacks.

Since the collapse of oil prices on the commodities market in fall of 2014, the number of  workers laid off from local oil and gas companies — from the large corporations to the smaller independents — has been in the thousands.

“We’re in a ‘bust.’  So be ahead of the curve, and think ahead in this business by at least six months,” Fine told the Native American and non-tribal energy leaders and business people in the Merrion conference room at the new $15.8 million school.

He said looming federal regulations such as the the U.S. Bureau of Land Management’s proposed Onshore Oil and Gas Orders Nos. 3, 4 and 5 along with proposed updates to its rule aimed at reducing “fugitive” atmospheric methane from oil and gas operations were doubling the pain already caused by low crude oil prices. He said that a third of all U.S. oil and gas producers — especially those burdened with debt — will inevitably go bankrupt.

But Fine’s sobering analysis wasn’t without one ray of hope for the industry.”

Fine: Washington, D.C., on oil and gas


by Dr. Daniel Fine, New Mexico Center for Energy Policy

The complete article is here-> http://www.daily-times.com/story/opinion/columnists/2015/12/28/fine-washington-dc-oil-and-gas/77979916/

The “deal” between the parties over the energy future of the United States and the San Juan Basin at the end of 2015 was the most misguided example of politics at the fuel pump since the 1970s. Then it was retail price control and now it’s a free-for-all in the price of oil in the world market with West Texas Crude approaching 10-year lows.

Lifting the restriction on exporting crude oil adds American oil to a world market which is over-supplied. Expect no cash flow increase for American producers and still lower world prices than with the restriction or ban in place.

This is not the place to assess the other side of the “deal.” However, tax credit extensions for wind and solar as alternative fuels to replace coal and later natural gas are no longer of concern to the Republican Party in Congress.

With petroleum economics based on market prices, there is virtually no way that the “deal” will bring about tens of thousands of new jobs in the oil and gas fields. How does exporting crude oil lead to increased drilling and rig deployment if this increases supply in an oversupplied world market? On the contrary, it leads to lower prices and negative cash flows for producers who must cut their workforces.

If oil and gas prices rebound in the next three years, the alternative fuels are beneficiaries as tax credits shape new non-fossil fuel investment, offsetting the risk of lower oil and gas prices, This was no doubt the objective of the climate change politics of Paris and the Democratic Party in Congress as well as the White House.

Although U.S. oil refiners will have a transportation cost tax adjustment from the “deal,” what prevents them from buying foreign oil at lower prices than American oil (North Sea Brent at declining prices)?

Daniel Fine is associate director, New Mexico Center for Energy Policy at New Mexico Tech, and project leader of the Energy Policy, state of New Mexico, Department of Energy Minerals and Natural Resources. The opinions he expresses in this column are his own.

Column: Mexico and Shale Oil — North America Strategy By Dr. Daniel Fine (Daily Times)


Editor’s note: This is an abridged version of Daniel Fine’s column. Read the full version in The Daily Times’ Energy magazine, which will be available in the April 27 edition of our newspaper and online.

For the complete abridged article use this link–> http://www.daily-times.com/farmington-opinion/ci_27941975/column-mexico-and-shale-oil-north-america-strategy

Since the Organization of Petroleum Exporting Countries has imposed a price war upon Southwest shale oil producers, there have been efforts to come up with a counter-strategy. Since San Juan Basin oil is light and tight, is there a market in North America for it?

Projects are underway for the export of natural gas to Mexico for Liquid Natural Gas conversion for overseas markets primarily in Asia, but, until now, no parallel strategy surfaced concerning oil. Mexico is prepared to take the ultra-light crude oil for blending purposes into its Mayan heavy and sour.

So far, the discussion is over Mexican ocean-based refineries taking 100,000 barrels of our light oil in a swap for 100,000 barrels of their heavy for U.S. East Coast refineries.

The swap can be a physical exchange with tankers delivering to Mexico and picking up cargoes of Mexican heavy.

Any heavy Mexican oil purchased by U.S. refiners displaces foreign overseas imports from Saudi Arabia and Venezuela. This emerges as a North American counter to the OPEC oil price war. Now Mexico and the United States have a common market interest in a swap of oil between them. There are historic and strategic origins that surround the swap transactions. First, the change in Mexico towards oil and gas ownership and investment is itself a significant, if not radical, shift from exclusive, anti-foreign government control towards an opening to private foreign exploration and production companies. American companies are prominent among applicants to the first auction. PEMEX, Mexico’s state monopoly company is prepared to take partners who deliver capital and technology to increase production.

New Mexico Tech Hosts first of its kind forum on Induced Seismicity


New Mexico Tech is hosting a first-of-its-kind workshop that will address the relationship between petroleum drilling and earthquakes, or “induced seismicity.”

The event will feature a series of guest speakers and will be August 21, 2014 in Fidel Center Ballroom on campus in Socorro. The event starts at 9 a.m., with three speakers in the morning and four speakers after lunch.

Over the past few decades, scientists have been examining the relationship between oil exploration – specifically hydraulic fracturing (or fracking) and horizontal drilling – and the increasing number of small earthquakes in the same areas. Several studies have examined the timing and location of seismic activity in Arkansas, Ohio, New Mexico and other states.

“A growing number of Earth scientists are looking at the relationship between oil exploration and seismic activity,” said Dr. Van Romero, Vice President of Research at New Mexico Tech. “With this workshop, we hope to place New Mexico Tech researchers at the forefront of the discussions about the topic.”

Romero will open the day-long event with a welcome to all participants. Hydrology professor Dr. Mark Person of New Mexico Tech is coordinating the event.

He said, “This is becoming a more important topic in recent years due to the large volumes of produced saline water that must be re-injected into deep subsurface reservoirs. If we can get a firm handle on the mechanisms controlling seismicity associated with saline water disposal practices, hopefully we can come up with some practical suggestions for best management practices.”

Guest speakers include the following:

Dr. Mark Person, New Mexico Tech – “Induced Seismicity events in the Midcontinent U.S.A.”
Dr. David Dempsey and Dr. Sharad Kelkar, Los Alamos National Lab, “Couple Geomechanical Hydrologic Models”
Dr. Andrew Delorey, Los Alamos National Lab, “Probing the Critical Stress State In Reservoirs”
Dr. Sue Bilek, New Mexico Tech, “Seismic Monitoring of Induced Seismic Events”
Dr. Sutin Holland and Dr. Randy Keller, Oklahoma Geological Survey, “Oklahoma Seismicity and Potential Cases of Induced Seismicity”
Dr. Reid Grigg and Dr. Bob Balch, New Mexico Tech, “Induced Seismicity in Paradise Valley, Utah”
Dr. Peter Mozley, New Mexico Tech, “Field Observations of Sedimentary and Crystalline Basement Fault Permeability”
The workshop is free and open to the public. To register, please email Gina Chavez at gchavez@admin.nmt.edu.

– NMT –

By Thomas Guengerich/New Mexico Tech

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