It appears that what's been happening in Ohio's shale was the major fracking news this week, as the U.S. Energy Information Administration decided it was important enough to include the Utica in their monthly productivity report, along with the better known fracked up areas such as the Bakken, the Marcellus, and the Eagle Ford; this in turn generated a lot of national coverage on eastern Ohio, especially on industry sites, calling the Utica the fastest growing gas producing area in the US, noting a ten-fold increase in production over 2 years as the ODNR reports that we've just fracked our thousandth well the past week, and the American Petroleum Institute claims that those 1,000 wells are just the beginning of what we'll see in the future...
In other news, despite the economic sanctions imposed by the US and its NATO allies against Russia and the Russian embargo of everything, including food, from the US due to the ongoing civil war in the Ukraine, which has the US moving troops & military hardware all over eastern Europe, Exxon began drilling a $700 million well in the Russian Arctic in partnership with Rosneft, Russia’s state-owned oil company on Saturday in clear defiance of the government's economic sanctions, and a report issued by the Environmental Integrity Project found that at least 33 fracking companies in 12 states were illegally using diesel fuel as a component of their fracking fluids, a violation of the Safe Drinking Water Act..
We'll start with a few local stories...first, Gates Mills' profracking Council and mayor are trying to keep a fracking ban off the ballot, and then there's a Youngstown Vindicator editorial calling just such a ballot issue in their area "litter":
Gates Mills residents argue with law director, council over anti-fracking bill of rights — Gates Mills Village Council refused on Tuesday to consider residents' petition for a bill of rights to ban additional fracking in the village. Residents formed the Citizens for the Preservation of Gates Mills when Mayor Shawn Riley announced his plans for villagers to pool their land to prepare for gas wells in the village. The group has gathered more than 130 signatures to have a bill of rights placed on the November ballot that would outlaw all new wells in the village. Council was supposed to vote on Tuesday whether to submit the issue to the Cuyahoga County Board of Elections. Council has until Sept. 6 to do it, but members "need more time to review the issue," Councilman Will Barnes said, refusing to comment further. On Friday, Law Director Margaret Cannon told petitioners they do not have enough valid signatures. She said 10 percent of the total 1,976 registered voters have to sign the petition and that adding more signatures isn't an option since the group has already filed the petition with the board of elections.The group's lawyer, though, argues that they needed 10 percent of the total voters in the last general election.
Anti-fracking charter issue will litter city ballot — again - Youngstown Vindicator -- Given that Utica shale exploration is virtually nonexistent in Mahoning County, what purpose does the pretentious Community Bill of Rights proposed amendment to the Youngstown charter serve? The proposed charter amendment to ban hydraulic fracturing was unenforceable when it was written, it would have been unenforceable had the voters approved it over the past 15 months, and it will be unenforceable if, by some outside chance, it passes in November. As we’ve argued ad nauseam, the amendment will not give Youngstown city government any of the rights detailed in the 1,300-word tome. On the key issue of hydraulic fracturing — fracking in common parlance — the Ohio General Assembly years ago gave the state Department of Natural Resources sole authority to oversee the process used to extract oil and gas from shale formations deep beneath the earth’s surface. The Ohio Constitution, which supersedes the Youngstown Home Rule Charter, gives the Legislature the authority to act on issues of statewide importance. That authority has been upheld by the Ohio Supreme Court. The Community Bill of Rights would place the city of Youngstown outside the reach of both the Ohio Constitution and the U.S. Constitution.It should also be pointed out that every time the charter amendment issue is on the ballot, it costs money (public dollars). And yet, individuals who claim to be so concerned about the welfare of Youngstown residents have no qualms about taking money out of the public treasury in pursuit of an issue they concede will end up in the courts. If the amendment is adopted in November, city government will be required to enforce it. And the first time it attempts to do that, there will be a lawsuit challenging the constitutionality of the Community Bill of Rights. And that means a further drain of the public treasury. As we’ve said before, “Enough’s enough.”
Ohio's Utica Region now included in EIA's monthly Drilling Productivity Report - Today in Energy - U.S. Energy Information Administration (EIA) -- The Utica Region in eastern Ohio, one of the fastest growing natural gas production areas in the United States, has been added to the Drilling Productivity Report (DPR). Total natural gas production in the Utica Region, which includes production from the Utica and Point Pleasant formations as well as legacy production from conventional reservoirs, has increased from 155 million cubic feet per day (MMcf/d) in January 2012 to an estimated 1.3 billion cubic feet per day (Bcf/d) in September 2014. Utica formation drilling activity has been primarily focused in eastern Ohio since mid-2012, although the geologic formation extends into Maryland, New York, Pennsylvania, and West Virginia. Some producers are successfully targeting the Utica formation in northern West Virginia, but these wells fall within the existing DPR Marcellus Region. The DPR analyzes all drilling and production within geographic areas in order to capture total production volumes supplied to the market and is not limited to the formation name used for the region.
ODNR data: Ohio’s Utica shale play home to 1,004 drilled horizontal wells - Looks Like We Made It could be the song du jour Tuesday, when Ohio recorded its 1,000th horizontal well drilled into the ground. To be precise, it was well No. 1,004, according to data from the Ohio Department of Natural Resources. The Utica play is approaching another milestone, too, with 1,431 drilling permits, just 69 shy of 1,500. Well No. 1,000 is a nice round number, but it’s notable nonetheless for an area that the federal Energy Information Administration recently called “one of the fastest-growing natural gas production areas in the United States.” The state recorded seven new drilled wells since last week, when the Utica field in Ohio was three short of No. 1,000.
Ohio Shale Production Up Ten Fold Since 2012 » WOSU News: A new federal report says that natural gas production in Ohio’s Utica Shale region is growing rapidly. The report issued Monday found that production from the Utica region in eastern Ohio increased by more than 10 times over the last two years, from 115 million cubic feet per day in 2012 to an estimated 1.3 billion cubic feet per day by September 2014. The U.S. Energy Information Administration says the Utica is one of the fastest growing natural gas production areas in the United States. Utica oil production has also increased to about 40,000 barrels per day. But the Utica production numbers are still far smaller than leading regions such as the Marcellus in Pennsylvania, the Bakken in North Dakota, or the Eagle Ford in Texas.
Second natural gas pipeline planned to cross Stark - The CantonRep - A second interstate pipeline is being planned to ship natural gas from the Utica and Marcellus shale regions across Stark County. Energy Transfer’s planned Rover Pipeline would carry up to 3.25 billion cubic feet of natural gas per day from West Virginia, Pennsylvania and Ohio, according to the project website. The main pipeline would leave the gas-processing plant in Leesville, cut across the northeastern edge of Tuscarawas County, then head west across southern Stark and Wayne counties on its way to the Midwest Hub in Defiance, according to a project map. From there, more pipeline would be built to take natural gas to Michigan and Canada. In total, the Rover mainline will include 380 miles of 36-inch and 42-inch diameter pipe and five compressor stations, plus 197 miles of supply laterals ranging in diameter from 24 to 42 inches, according to the project website. If approved by the Federal Energy Regulatory Commission, the mainline from Leesville to Defiance is expected to open by December 2016. The section between Defiance and the Union Gas Hub in Canada would begin serving the Michigan and Ontario markets in June 2017.
API analyst says Ohio just getting started with Utica, - Ohio only has seen the tip of the iceberg when it comes to developing the Utica Shale, said Rayola Dougher, senior economic adviser for the American Petroleum Institute. Across the county, shale oil development is reducing the nation’s dependence on foreign oil and fueling the economy, said Dougher, who is one of several speakers slated for the Utica Summit II program Oct. 14 at University Center on the Kent State University Stark Campus. Utica Shale drilling — currently focused in a half dozen southeastern Ohio counties — should complement Ohio’s existing manufacturing base, especially the steel and chemical industries, Dougher said. “It’s just only the beginning of the journey,” she said. Utica Summit II has been organized by the Canton Regional Chamber of Commerce, Shale Directories and The Repository. Dougher and other speakers will lead discussions on what Utica Shale development can mean for manufacturing, transportation, job creation and more. Shale drilling has been evolving for several years as companies improve techniques for horizontal drilling and hydraulic fracturing, also called fracking. Horizontal drilling lets companies cut through a shale rock vein. Fracking, is a process where a slurry of water, sand and chemicals are forced into the well to break the rock and release trapped oil and gas. Companies began drilling the Utica Shale in southeastern Ohio late in 2010. Now more than 1,000 horizontal wells have been drilled in shale formations, with more than 500 wells listed as producing. The Utica Shale is one of the newest areas being drilled. Shale formations in Texas, Oklahoma, Arkansas, North Dakota and Pennsylvania are where horizontal drilling and fracking techniques have been refined.
Project helping Ohio communities avert bust after shale boom - Boom, then bust. It’s a scenario often played out in local economies heavily reliant on one type of industry, especially in the energy sector. And it’s an underlying concern for Ohio communities experiencing a boom in shale oil and gas development. But the cycle isn’t inescapable, say community development specialists with Ohio State University Extension. They have received funding to help eastern Ohio communities examine how shale development, also known as fracking, is affecting their economies, environmental conditions and social structures and to create plans for long-term viability. With $200,000 in funding for a three-year project from the U.S. Department of Commerce’s Economic Development Administration, OSU Extension has joined forces with four regional economic development districts representing 25 eastern Ohio counties. “We are trying to help the communities in the region position themselves for sustainable economic development that leverages the shale play and prevents the bust that inevitably would happen,” said Nancy Bowen-Ellzey, an OSU Extension field specialist in community economics and one of the project’s principal investigators.
Ohio Supreme Court to hear mineral rights cases that affect landowners, drillers - The Ohio Supreme Courtwill hear two cases next week on a law that has caused mass confusion among Ohio oil and gas landowners and drillers. Ohio’s Dormant Mineral Act has been the focus of many lawsuits since production began a few years ago in the state’s Utica shale play as land and mineral-rights owners dispute ownership of valuable underground minerals. Earlier this month, I wrote about the court approving another mineral-act related case, separate from the two being heard next week. That case and next Wednesday’s could wind up redirecting tens of millions of exploration dollars to landowners from drillers. It’s been common since the 19th century for mineral rights underneath the ground to be split from surface rights. But mineral rights can be fragmented on big parcels and mineral rights owners could be heirs who are oblivious to a long-deceased relative’s ownership. It can make determining ownership difficult. Ohio’s law, adopted in 1989, can be simply described as “use-it-or-lose-it.” If a certain action isn’t made on the minerals in a 20-year period, those rights float to the surface owner. In 2006, the state legislature amended the law demanding a surface owner tell a mineral owner of his intention to declare the mineral interest abandoned. The amendment also clarified the 20-year rule. Now, a surface owner’s claim for mineral surrender starts 20 years before they declare the minerals abandoned. So, if a surface owner today tried to declare mineral rights abandoned, there couldn’t have been mineral activity on the land since 1994. But Utica exploration began in 2010, so that claim likely would lose. Drillers have signed contracts worth millions, so the decisions the court makes can wind up shifting loads of money.
Editorial: EPA, Ohio lawmakers must reconsider self-reporting rules for private companies - The Canton Repository - The Ohio Environmental Protection Agency and the federal EPA must think twice about allowing private companies to self-report spills and chemical leaks that threaten not only the environment but public health. While the state and federal arms of the agency claim “there are tremendous penalties for incorrect reporting,” we seriously doubt fines of several thousand dollars provide a serious-enough deterrent to multibillion dollar companies and are likely written off as the cost of doing business. When companies, such as Dover Chemical Co., are dealing with probable carcinogens and are located within an arm’s length of Tuscarawas County’s drinking supply, it’s imperative that adequate checks and balances are in place. Meanwhile, residents in both Stark and Tuscarawas counties must worry about waste products from horizontal shale drilling — also known as fracking. And while both communities have benefited from gas and oil exploration and all the ancillary businesses that support this industry, it’s important that laws are in place to provide for timely reporting. After all, these companies are part of our communities, they are our neighbors and like good neighbors we have an expectation they will balance their business interests with the best interests of their communities. Our children attend the same schools, we shop in the same stores and drink the same water — the quality of which could be at risk. In July, The Columbus Dispatch reported a fracking company — Halliburton — waited five days before it released to federal and state EPA officials a list of toxic chemicals that spilled from a drilling site into a tributary of the Ohio River. The spill, which occurred after a fire on a well pad in Monroe County, killed more than 70,000 fish and wildlife, state officials said. Did it affect drinking water? Environmental advocacy groups say the state can’t be sure
Report: Too few safeguards for drinking water near fracking wells - Federal and state governments do not do enough to safeguard drinking water around the nearly 200,000 wells where fracking wastewater is injected deep underground, according to a federal report. The U.S. Government Accountability Office investigation found that existing regulations do not adequately protect against contamination that could occur after earthquakes, which is increasingly a concern at injection wells and fracking sites in Ohio and out west. In some states, the U.S. Environmental Protection Agency oversees injection wells. On others, state agencies, such as the Ohio Department of Natural Resources, regulates oil and gas drilling. Julia Ortiz, a spokeswoman for the U.S. EPA, said the agency is reviewing the report, but generally agrees with the findings. Bob Worstall, an oil and gas resources management deputy chief with the Ohio Department of Natural Resources, said that after earthquakes connected with an injection well rolled through Mahoning County in 2011, ODNR started requiring seismic monitoring near injection wells. Additional earthquakes occurred this year in Northeast Ohio near fracking sites. “Our experience has been — and I think the results will bear it out — that if the well is constructed properly, the likelihood of any issues down the road are greatly diminished,” he said.
Fracking's threat to drinking water is getting little EPA scrutiny, studies find - Two new reports on fracking's potential threat to American aquifers suggest that drinking-water contamination is significantly more likely than energy producers, and regulators, have been willing to acknowledge. Neither has gained much attention in the national press — and none locally that I can detect. A two-year audit by the Government Accountability Office, made public two weeks ago, concluded that the U.S. Environmental Protection Agency is doing a poor job of protecting drinking-water supplies from the many fracking-related activities that fall outside the so-called "Halliburton loophole." Since 2006, most injection of hydraulic fracturing fluids done to directly produce oil and natural gas has been exempt from EPA oversight. But other phases of the fracking operations — injection of wastes or returned water for long-term storage — are supposed to be regulated by EPA or state agencies to which it delegates the responsibility.There are now some 172,000 such wells across the U.S., and though at least some of these are known to have contaminated drinking water sources, the GAO found that no long-term monitoring is being done, and short-term oversight is deficient in many respects as well. The second report was delivered earlier this week to the national conference of the American Chemical Society by Stanford scientist Rob Jackson, of whom I have written before.
EPA must step in after WV's repeated failure to protect drinking water from oil and gas waste -- Today NRDC sent a letter to U.S. EPA calling on them to crack down on the state of West Virginia’s lax oversight of oil and gas and fracking wastewater disposal wells—that is putting drinking water at risk of contamination, and could trigger man-made earthquakes. The West Virginia Surface Owners’ Rights Organization, which works to protect landowners from abuses by the oil and gas industry, joined us in sending the letter. The oil and gas industry creates an enormous amount of wastewater – more than 2 billion gallons per day. This wastewater includes the “flowback” that comes up the wellbore after fracking is completed, as well as “produced water” that was trapped in oil and gas formations. The wastewater is often toxic and can contain chemicals used in fracking and naturally occurring substances, including heavy metals like arsenic and lead, and radioactive materials. Over 90% of this wastewater generated by the industry is disposed of by pumping it underground via “injection wells.” But there is mounting evidence that the underground injection of this waste is risking the safety of drinking water. A recent report by the U.S. Government Accountability Office (GAO), a federal watchdog agency, found that EPA was not doing enough to ensure state oil and gas waste injection programs are not contaminating underground drinking water supplies, risking earthquakes, or causing “over pressurization,” in which pressures build up to unsafe levels and waste can spill onto the surface.
New Jersey Governor Vetoes Fracking Waste Ban Despite Bipartisan Support - If New Jersey Governor Chris Christie, whose presidential potential is still being touted by some supporters despite a series of scandals surrounding him, is trying to demonstrate that he’s on the far right fringe of his own party when it comes to the environment, he’s doing a good job of it. Last week, he vetoed a bill dubbed the Frack Waste Ban Bill which would have barred the disposal, treatment, storage and discharge of fracking waste in the state. It’s the second time he’s done so; he vetoed a similar bill in 2012. And he’s done so despite overwhelming support of the measure in the New Jersey legislature from both parties. The bill had four dozen sponsors, both Republicans and Democrats. The vote in the N.J. Senate was 33-4. In the state Assembly it was 62-16-1. Currently, no fracking is going on in New Jersey, but there’s plenty in neighboring Pennsylvania, which is already bringing some of its waste to New Jersey for disposal. When he previously vetoed the bill, Christie claimed it violated the interstate commerce clause of the U.S. Constitution. However, New Jersey’s nonpartisan legislative Office of Legislative Services, says it doesn’t because it would treat in-state and out-of-state waste equally.
Pennsylvania Town Votes To Allow 6 Fracking Wells Within 3,000 Feet Of School Buildings - The Geyer farm, where as many as six unconventional gas wells are waiting to be placed by Rex Energy, sits just half a mile from the Mars School District, a campus of 3,200 children. If Rex Energy’s permits for the wells are approved by the Pennsylvania Department of Environmental Protection, residents say the school buildings could be within the radius of a possible explosion.At a township public meeting Wednesday night, Rex Energy came one step closer to having those permits approved. Middlesex supervisors Michael Spreng, Donald P. Marshall, and James Evans voted unanimously to approve changes to the town’s zoning laws that would legally open up residential and agricultural lands for drilling, despite the protests of concerned parents and residents. In essence, the ordinance opens up most of the township to drilling. That zoning law change has wider implications for the town in the long run, but at the moment, it has everything to do with the schools. “In essence, the ordinance opens up most of the township to drilling,” said John Neuhror, communications director at Keystone Progress, who also lives in a development adjacent to the well site. “But it’s pretty clear to an objective observer that the ordinance was written to make it very clear that the Geyer farm’s wells are allowed in the township.”
DEP gets 2nd dour report on gas well oversight - The issuance last week of a second report detailing myriad shortcomings in the state Department of Environmental Protection’s oversight and enforcement of Marcellus Shale gas development might have the agency feeling like a pinata after a party. The latest report, which Earthworks, a Washington, D.C.-based environmental organization, released Thursday, reviewed and analyzed DEP Marcellus Shale gas well drilling files and conducted its own air and water testing to detail how the DEP’s enforcement of shale gas regulations has been less than transparent or effective in controlling the exposure of Pennsylvania residents to unhealthy air and water. Three weeks ago, state Auditor General Eugene DePasquale issued a highly critical performance audit of the DEP’s shale gas industry oversight, including its failure to consistently pursue citizen complaints about drinking water degradation or issue enforcement orders for regulatory violations as the state oil and gas law requires. Among its 25 findings, the 70-page Earthworks report alleges that the DEP’s oil and gas office:
- ■ has failed to consider the cumulative health impacts from shale gas development;
- ■ keeps incomplete permitting and enforcement records that make it impossible for residents to assess their exposure to air and water emissions;
- ■ has increased inspections, but they still don’t meet even the voluntary goals the department set;
- ■ poorly tracks, records and responds to citizen complaints;
- ■ puts a higher premium on speedy permitting than enforcement.
Drillers did not report half of spills that led to fines - Half the spills at Marcellus Shale well sites that resulted in fines weren’t spotted by gas companies, which are required by state law to look for and report spills of drilling-related fluids. That is one of the main conclusions of a Pittsburgh Post-Gazette review of hundreds of thousands of state and company documents for every incident at a Marcellus well site that led to a fine against a driller through the end of 2012. The documentation showing that companies often failed to detect spills on their own sites offers a look at self-regulation in the shale gas industry. State regulation of the industry was the subject of a withering state auditor general review of the Department of Environmental Protection’s oversight issued July 22. The audit detailed the agency’s shortcomings, including failing to consistently issue enforcement orders to drilling companies after regulators determined that gas operations had damaged water supplies, even though the state’s oil and gas law requires it. The Post-Gazette investigation using well permit file documents and other DEP data focused on 425 incidents involving 48 companies that resulted in nearly $4.4 million in fines. Of those 425 fines, 137 were due to spills at or near a well site. They ranged from relatively small incidents involving a couple of gallons of diesel fuel on a well pad to larger accidents involving thousands of gallons of hydraulic fracturing flowback fluid that killed vegetation or fish.
Study raises red flags on fracking fluids - - A new study on the contents of the fluids utilized in the gas and oil drilling process known as hydraulic fracturing, or fracking, raises concerns about several ingredients. Scientists presenting the work Wednesday at the 248th National Meeting & Exposition of the American Chemical Society (ACS) say that out of nearly 200 commonly used compounds, there's very little known about the potential health risks of about one-third, and eight are toxic to mammals. William Stringfellow, Ph.D., says he conducted the review of fracking contents to help resolve the public debate over the controversial drilling practice.“The industrial side was saying, ‘We're just using food additives, basically making ice cream here,'” Stringfellow says. “On the other side, there's talk about the injection of thousands of toxic chemicals. As scientists, we looked at the debate and asked, ‘What's the real story?'” To find out, Stringfellow's team at Lawrence Berkeley National Laboratory scoured databases and reports to compile a list of substances commonly used in fracking. What their analysis revealed was a little truth to both sides' stories — with big caveats. Fracking fluids do contain many nontoxic and food-grade materials, as the industry asserts. But if something is edible or biodegradable, it doesn't automatically mean it can be easily disposed of, Stringfellow notes. “You can't take a truckload of ice cream and dump it down the storm drain,” he says, building on the industry's analogy.
The Science Against Fracking -- Three or four years ago, the chief environmental concern about fracking involved the contamination of drinking water through the fracking process—blasting water, sand, and chemicals underground in vast quantities and at extreme pressures to force open shale layers deep beneath the Earth, and release natural gas. But the science was still pretty ambiguous, and a great deal turned on how “fracking” was defined. The entire mega-process of “unconventional” gas drilling had clearly caused instances of groundwater contamination, due to spills and leaks from improperly cased wells. But technically, “fracking” only refers to the water and chemical blast, not the drilling, the disposal of waste, or the huge industrial operations that accompany it all. Nowadays, explains Cornell University engineering professor Anthony Ingraffea on the latest installment of the Inquiring Minds podcast (stream above), the scientific argument against fracking and unconventional gas drilling is more extensive. It involves not simply groundwater contamination, but also at least two other major problems: earthquake generation and the accidental emissions of methane, a potent greenhouse gas.
EIP investigation finds continued use of diesel in fracking -- The illegal injection of diesel fuel during hydraulic fracturing has continued over the last four years, despite repeated denials by the drilling industry, according to a report by the Environmental Integrity Project (EIP). In its investigation, EIP also found troubling evidence that drilling companies have been changing and eliminating their disclosures of past diesel use from the industry self-disclosure database of chemicals used in hydraulic fracturing, called FracFocus. Injecting diesel fuel into the ground to fracture shale and extract gas or oil is a potential threat to drinking water supplies and public health because diesel contains toxic chemicals, such as benzene, that cause cancer or other serious health problems, even at low doses. EIP’s report, “Fracking Beyond The Law,” uses self-reported data from drilling companies and federal records to document at least 33 companies fracking at least 351 wells across 12 states with fluids containing diesel from 2010 through early August 2014. Diesel fuels were used to frack wells in Texas, Colorado, North Dakota, Arkansas, Oklahoma, Wyoming, New Mexico, Utah, Kansas, Pennsylvania, West Virginia, and Montana without required Safe Drinking Water Act permits. “We urge EPA and the states to exercise their legal authority by immediately investigating the compliance status of these 351 wells and taking all necessary steps to make sure they are properly permitted. Companies that inject diesel without permits should be fined for ignoring the law.” EIP’s investigation also revealed that some oil and gas companies have been changing their disclosures submitted to FracFocus, the privately-run fracking chemical disclosure registry, in a manner that removes any and all indication of past injection of diesel. FracFocus, which was created by industry as an alternative to mandatory disclosure to federal or state governments, allows operators to change or replace previous disclosures, at any time, without leaving any record of or justification for the change.
Diesel Used To Frack Oil And Gas Wells Without Permit, Report Finds - A new report has found that since 2010 fossil fuel companies have used more than 30,000 gallons of diesel fuel across the country to frack for oil and gas without obtaining the required federal permits. The report, called, “Fracking Beyond The Law,” by the Environmental Integrity Project, a D.C. nonprofit established by environmental attorneys, found that at least 33 companies fracked at least 351 wells across 12 states with fluids containing diesel. The passing of the 2005 Energy Policy Act by Congress established what is commonly known as the “Halliburton Loophole” in which the EPA was stripped of its authority to regulate a number of fracking fluids that could reveal the companies’ trade secrets. However diesel fuels, which contain high levels of benzene, ethylbenzene, toluene, or xylene — known carcinogens and neurotoxins — remain under the jurisdiction of the EPA as part of the Safe Drinking Water Act. The industry has repeatedly asserted the the use of diesel fuel in fracking no longer occurs and those denials along with the release of this report. The industry groups say that companies are phasing out diesel, which as of earlier this year was used in around two percent of wells, and that companies were using kerosene, which wasn’t listed as a diesel fuel until February. The industry group Energy in Depth also pointed out that the 351 wells the project cited as using diesel make up less than 0.5 percent of the 77,000 wells registered on FracFocus. The EIP investigation asserts that the 351 wells they found using diesel is likely an underestimate as some oil and gas companies have been changing their FracFocus disclosures to remove indication of past diesel injections.
North Carolina Frack Study: Don’t Ask Don’t Tell - North Carolina’s governor has decided he wants the state to get fracked. Whether it’s safe or not. One thing we know for sure, the shale there is really shallow, so if they hit gas anywhere during the drilling or fracking – up she comes. Turning Tar Heels into Tar Balls.
Duke Scientists’ Fracking Warnings Fall on Deaf Ears: Robert Jackson and Avner Vengosh of Duke University’s esteemed Nicholas School are viewed by some in the oil and gas industry as enemies. At Duke, they’ve done studies with compelling evidence that shale gas extraction, fracking, causes drinking water problems in other states. The industry, which got North Carolina to lift its moratorium on fracking with drilling next year, has long made the case that drilling is absolutely safe. Jackson and Vengosh have serious doubts about that, and given that the Nicholas School in the field of environmental science is considered among the elite in the county, it would be logical to assume that state officials developing rules to govern shale gas exploration would want to hear from them. But the N.C. Mining and Energy Commission did not invite either Jackson or Vengosh to offer any views while commission members were in the process of determining the rules.“With all due respect to Avner Vengosh,” said recently resigned commission Chairman James Womack, “he’s not interested in drilling. His studies are all aimed at the downside of oil and gas development.” (Which is normally how you make regulations . . . )Vengosh says instead that he’s all about science. And Vengosh and Jackson, who’s taking a job at Stanford University, have some pretty strong science behind their belief that fracking causes contamination of drinking water, among other problems.
Busting the Bureau of Land Management’s Frackopoly -- BLM-managed land like near Moab Valley, Arches National Park, Canyonlands National Park and so many others in the U.S., may be at risk from nearby fracking. President Obama’s BLM controls access to more than 700 million acres of federally owned mineral rights, some of which sit adjacent to public parks. Some 38 million acres of that land is currently leased, and over the past three years, the oil and gas industry has drilled over three thousand new wells, 90 percent of which have been (or will be) fracked. In fact, existing and proposed drilling and fracking operations overseen by the BLM threaten public lands, nearby watersheds, air quality and the health and safety of surrounding communities in 27 states. The mission of the BLM, according to its own website, is “to sustain the health, diversity and productivity of America’s lands for the use and enjoyment of present and future generations.” But how can future generations be expected to enjoy lands that sit adjacent to hardcore industrial activity?
Poll Shows Californians Oppose Dumping Fracking Chemicals Into Ocean -- A poll commissioned by the Center for Biological Diversity and conducted by Public Policy Polling (PPP), surveying 500 California voters, found that a majority of Californians opposed fracking in their state and an even larger number support a ban on dumping fracking chemicals in the ocean. In response to the question “Do you favor or oppose increased use of hydraulic fracturing in California, which is also known as fracking, a drilling method that extracts oil and natural gas from underground using a high-pressure mixture of water, sand and assorted chemicals?,” 36 percent said they favored increased fracking, while 56 percent opposed it and 8 percent were not sure. In response to “The federal government currently allows oil companies to dispose of fracking fluid with wastewater into the ocean. Do you support or oppose a ban on dumping fracking chemicals into the water off California’s coast?,” 65 percent supported such a ban, 25 percent opposed it and 9 percent were not sure. When presented with the choice of two viewpoints—one offering fracking as a danger to the environment which should be banned and the other saying it will create jobs and reduce energy prices and should therefore remain legal,” 55 percent agreed it was a threat to the environment, 35 percent agreed it was a job-creator and 10 percent were not sure.
Fracking Waste Disposal Fuels Opposition in U.S. and Abroad - A poll taken by Public Policy Polling revealed this week that 65 percent of California residents oppose dumping fracking waste in the ocean. The actions of fracking companies in both the U.S. and England, the eagerness of many government bodies and officials to cater to them, and the obfuscation around the disposal of the waste show they have reason to be concerned. Ban Michigan Fracking reports that 12 tons of radioactive fracking waste is heading for a hazardous waste facility in the Detroit area from Pennsylvania. The facility, Wayne Disposal Inc., is one of only two in the country that accepts this waste (the other is in Idaho), which was already rejected by a West Virginia facility for its high level of radioactivity. The lack of places to dump fracking waste is emerging as one of the industry’s biggest problems. Recently, for the second time, the New Jersey legislature voted by an overwhelming bipartisan majority to prohibit the treatment, storing and disposal of fracking waste water in that state And last week it was vetoed for the second time by Governor Chris Christie, angering environmentalists, as well as legislators.
Oil and gas company debt soars to danger levels to cover shortfall in cash - The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry. The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets. This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions. For it to occur five years into an economic expansion points to a deep structural malaise. The EIA said revenues from oil and gas sales have reached a plateau since 2011, stagnating at $568bn over the last year as oil hovers near $100 a barrel. Yet costs have continued to rise relentlessly. Companies have exhausted the low-hanging fruit and are being forced to explore fields in ever more difficult regions. The EIA said the shortfall between cash earnings from operations and expenditure -- mostly CAPEX and dividends -- has widened from $18bn in 2010 to $110bn during the past three years. Companies appear to have been borrowing heavily both to keep dividends steady and to buy back their own shares, spending an average of $39bn on repurchases since 2011.
EIA Corroborates the Work of Energy Policy Forum -- Over a year ago, on 19 June, 2013, Energy Policy Forum (EPF) wrote a post exposing the explosion of capital expenditure by shale operators to drill and complete wells and the concomitant lack of free cash flow. Unless operations can produce sufficient cash, the exercise is obviously unsustainable. At some point a company simply hits the proverbial financial wall. http://energypolicyforum.org/
Wall Street's Shale 'Fraud' Exposed - U.S. energy independence, we're told, is at our fingertips thanks to the so-called “shale revolution”. Offsetting declines in conventional oil and gas production, shale gas and tight oil (shale oil) are being heralded as the means by which the U.S. will become energy independent – a net exporter of natural gas and once again the world’s largest oil producing nation. But two new reports by Post Carbon Institute and Energy Policy Forum show that the hype simply doesn’t stand up to scrutiny.
KEY FINDINGS, SHALE GAS
- High productivity shale gas plays are not ubiquitous: Just six plays account for 88% of total production.
- Individual well decline rates range from 80-95% after 36 months in the top five U.S. plays.
- Overall field declines require from 30-50% of production to be replaced annually with more drilling – roughly 7,200 new wells a year simply to maintain production.
- Dry shale gas plays require $42 billion/year in capital investment to offset declines. This investment is not covered by sales: in 2012, U.S. shale gas generated just $33 billion, although some of the wells also produced liquids, which improved economics.
KEY FINDINGS, TIGHT OIL (SHALE OIL)
- More than 80 percent of tight oil production is from two unique plays: the Bakken and the Eagle Ford.
- Well decline rates are steep – between 81 and 90 percent in the first 24 months.
- Overall field decline rates are such that 40 percent of production must be replaced annually to maintain production.
- Together the Bakken and Eagle Ford plays may yield a little over 5 billion barrels – less than 10 months of U.S. consumption.
Rail CEOs to Investors: “Bomb Trains” Safe At Almost Any Speed -- Burlington Northern Santa Fe (BNSF)recently said it would proceed with plans to increase speeds for oil-by-rail unit trains in Devil’s Lake, N.D. to 60 MPH from 30 MPH, despite opposition from local officials. BNSF’s announcement came merely a week after the Obama Administration announced its proposed regulations for trains carrying oil obtained viahydraulic fracturing (“fracking”) from North Dakota's Bakken Shale basin. The rail industry’s position on speed limits for “bomb trains” is simple: they continuously claim velocity has nothing to do with oil-by-rail accidents or safety.For example, Big Rail — as revealed by DeSmogBlog — lobbied against all proposed oil train speed reductions in its dozen or so private meetings at the Obama White House before the unveiling of the proposed oil-by-rail regulations. Recent statements by rail industry CEOs during investor calls put the heads of many companies on record opposing oil-by-rail speed limits for the first time.
New Study Says U.S. Underestimated Keystone XL Emissions - Yves Smith - Yves here. Some advocates greenhouse gas reduction policies argue that the fight against the Keystone XL pipeline is misguided, since it represented a lot of political capital spent against a not-terribly-significant target. However, this post does reveal an important coda: that of the Administration’s characteristic dishonesty, in this case around climate change issues. Other examples, chronicled at length here and here, is Obama’s pro-fracking climate change headfake, which conveniently fails to include methane emissions in his new carbon containment policies. Originally published at Oil Price. A new report says the U.S. government dramatically underestimated the level of greenhouse gas emissions that would result if the controversial proposed Keystone XL pipeline becomes a reality. The study, by the Stockholm Environmental Institute, found that building the pipeline, which would connect Canada’s oil-rich tar sands to refineries in the Gulf of Mexico, would produce greenhouse gas emissions at least four times higher than the U.S. State Department’s official estimate. The study’s authors said that the U.S. officials did not take into account the fact that, by providing an outlet for Canada’s tar sands to reach international buyers, global oil supplies would increase, resulting in a moderate price decline of about $3 per barrel, according to the study. Basic economic theory dictates that lower prices would lead to greater consumption. More specifically, the study estimates that global oil consumption increases by 0.6 barrels for every barrel of oil added to global supply. The study finds that global greenhouse gas emissions would increase by 121 million tons of carbon dioxide a year. The study was published in the journal Nature Climate Change.
Oil Sands are Biggest Losers From Low Crude Prices: Study - ConocoPhillips and Royal Dutch Shell are among global oil companies needing crude prices as high as $150 a barrel to turn a profit from Canada’s oil sands, the costliest petroleum projects in the world, according to a study. The next most-expensive crude projects are in the deep waters off the coasts of Africa and Brazil, with each venture needing prices between $115 and $127 a barrel, said Carbon Tracker Initiative, a London-based think tank and environmental advocacy group, in a report today. As the U.S. shale drilling boom floods the world’s biggest crude market with supply, explorers are at greater risk of a price collapse that would turn some investments into money losers. Energy explorers are willing to invest in high-cost oil-sands developments because once they are up and running, they produce crude for decades longer than other ventures such as deepwater wells, said David McColl, an analyst at Morningstar Inc. in Chicago. “Where else can you get 10 to 30 years of predictable cash flow?” said McColl, who estimated new oil sands projects require $60 to $100 crude to make sense. “The returns may not be stellar compared to some other projects but they are steady.” In May, Carbon Tracker released a report that said the oil industry was at risk of wasting $1.1 trillion of investors’ cash on expensive developments in the Arctic, oil sands and deep oceans. That figure represents the amount explorers may spend on oilfields that need crude prices of $95 a barrel or more, the group said three months ago. Oil companies face growing pressure from shareholders to rein in costs after two decades of bigger spending have failed to boost production or profitability
Oilprice Intelligence Report: Yes to Mexico, No to Ukraine, Maybe to Offshore Fracking - As Ukraine ushers through tax legislation designed to prop up political-business elite and alienate outside investors, Mexico finally passes secondary legislation to implement sweeping oil sector reforms and open up the sector to foreign investors. On 6 August, the Mexican Senate voted 90-27 to pass the delayed secondary rules that will make energy sector reform a reality and end the 76-year state monopoly on oil and gas held by Pemex.Now Mexico is looking at a possible $1 trillion in outside investment, which at the end of the day could significantly reshape the oil and gas picture in North America. At the same time, Ukraine moved on 1 August to ensure that new foreign investment is crippled by a tax code that doubles tax rates for private gas producers and benefits certain local political-business elite at the expense of the state and the need to develop more resources, as Oilprice.com reported yesterday.Meanwhile, Reuters reports that wars, unrest, sabotage and sanctions are keeping some 3.3 million barrels of oil per day out of the market. This represents 4% of global supply, with the intensifying conflict in Iraq and the enduring chaos in Libya promising more “offline” oil.Amid the conflict and chaos, however, exports of crude oil from the US in June reached their highest level since the 1950s, putting the US ahead of Ecuador, the smallest member of OPEC. Exports spiked 35% from May to 389,000 barrels per day in June—most of it heading to the Canadian market, media cited the US Census Bureau as saying on 6 August. The figures reflect allowable shipments of US crude oil to Canada and re-exports of foreign oil; however, we could soon seem more light-processed crude, or condensate, added to the export mix as companies find loopholes to get around the ban on crude oil exports. With the good news in Mexico and stellar US production figures, attention is now turning—or returning—to the Gulf of Mexico, where advances in drilling technology are being put to use offshore, in the shallow waters. There has been a lot of news this week about squeezing more out of the older fields of the Gulf of Mexico, piggy-backing on advances in onshore drilling technology that have resulted in the shale boom.
Mexico Opens Oil Fields, Expects Rush Of International Companies Across The Border -- On Wednesday, Mexico outlined long-anticipated updates to its fossil fuel sector that are designed to usher in an energy boom led by the arrival of international companies with extraction expertise and financial savvy. The government made final the announcement that for the first time since 1938 private companies will be allowed to bid on prospective oil and gas resources, thus ending state-run Pemex’s monopoly. Mexico’s oil production has been declining for the last decade, and has dropped about one million barrels a day to 2.5 million bpd — and even this number might be exaggerated due to water being included in its oil output. Under the new laws, Pemex will maintain 83 percent of Mexico’s proven and probable reserves, around 20 billion barrels of crude oil equivalent, while it will only keep a fifth of prospective resources, including yet-to-be-discovered resources. The rest will be made available to international companies, which are especially keen to start developing offshore resources in the Gulf of Mexico, an area that has yielded serious output from the U.S. side but is yet to be tapped in Mexico. Pemex has become associated with bloated bureaucracy and corrupt practices and the arrival of international companies is meant to bring efficiency, expertise, reduced costs, and deep pockets to the country’s oil sector. The government has identified 109 blocks for the first round of bids and expects investments of around $50 billion over the next four years, including partnerships with Pemex. Officials hope to raise national production to three million barrels a day by 2018.
How much oil do we have left? - - The year 1981 just called and said that we are out of oil. Well, according to estimates from the time, we should be. Back then the world consumed just under 60 million barrels per day, and global proved reserves for oil stood at almost 700 billion barrels. At that rate, the world should have exhausted all its proved reserves sometime in December 2013. But instead of the last drop of oil being squeezed out of the Earth, global production has increased by 46%, and global reserves now stand 1 trillion barrels higher than they did 33 years ago. Did some geological miracle more than double the amount of oil we have produced in the past three-plus decades? No. It's more of a disconnect between how much oil is physically left in the world and how data related to oil reserves is reported. Let's look at why these numbers have been misleading for so long and why today's current projection of 53 years of oil remaining -- based on recent numbers from BP -- is likely wrong as well. There are a multitude of ways to describe the amount of oil remaining, but the most common is known as proved reserves. When you divide proved reserves by total production, you get the reserves-to-production ratio. This is where the 53-year estimate comes from and where that 32-year estimate originated in 1981. While the number is easy to understand, it's a red herring because it assumes production will remain constant forever and that the current proved reserves estimates represent all the oil left. As we all know, this simply isn't the case. The problem with the term "proved reserves" is that many assume it describes a physical limitation on oil, but it is actually a calculated economic limitation. Every country has a slightly different way of calculating the amount, but the basic gist is that proved reserve estimates are what companies assume they can pull from the ground using existing technology while still generating a profit, which is based on the price of oil or gas over the past year.
US oil production keeps surging, so why haven’t oil and gasoline prices fallen? - One question that I hear all the time on this topic is this: With the huge increases in US crude oil output from the shale revolution, why is oil still around $100 per barrel and why is gasoline so expensive? The answer is pretty straightforward: Oil is a global commodity whose market price is largely determined by two important market-based factors: a) global oil supply and b) global oil demand. The chart below helps to explain. Between 2004 and 2013, the world oil supply has increased only 4.6% from 72.58 million barrels per day to 75.94 million barrels per day last year (EIA data here), while world real GDP has increased by 24.2% from $44.52 trillion to $55.3 trillion (in 2005 dollars, USDA data here) and world nominal GDP increased by almost 64% from $43.1 trillion to $70.6 trillion. Bottom Line: The significant increases in US crude oil output over the last ten years haven’t increased the world supply of oil nearly enough to impact world oil production enough to offset the significant 24.2% increase in global economic activity. World demand for oil and energy is up significantly, while the supply of oil has barely increased. Therefore, oil prices and US gas prices haven’t come down much.
New Tax Threatens to Destroy Gas Production in Ukraine: Independent gas producers in Ukraine are joining forces to pressure the government in Kiev to re-think its new gas tax before everyone makes a run for the border in search of new assets in a more stable environment. Private producers have compiled a draft letter to Ukrainian Prime Minister Arseniy Yatsenyuk, criticizing the government’s doubling of taxes for gas producers, which was justified through the use of “wrong and misleading” data about private companies. They also warn that their time in Ukraine will be over if the tax is extended beyond the end of this year—and there will be no further foreign investment in the country’s beleaguered gas sector. In an open letter to Yatsenyuk--an advance copy of which was obtained by Oilprice.com on August 10--independent gas producers in Ukraine pointed out that the cost of gas production by private companies in Ukraine exceeds the capital costs of public companies, which enjoy the advantage of development well researched and more easily profitable areas. “Therefore, any estimates by the Ministry of Finance as to the cost of gas on the basis of the financial performance of public companies cannot be used to determine the profitability of private company projects, which may be 10 times higher,” the letter said.
Before the fear of war, fear of fracking in Ukraine -- Locals seemed to have consensus on who’s at war: the U.S. and Russia over control of Ukraine, they all agreed. The people of the Donbass, the country’s gritty industrial region in the east, were not naive. They realized that gas pipelines crossing the border with Russia and the shale gas fields near Slovyansk — with a potential reserve of about 3 trillion cubic meters of gas — were the cause of constant tension between Russia and Ukraine. But with pipes in their backyards or running right next to their homes, with their feet firmly on ground that stands over a vast shale deposit, they knew the struggle was not really over Ukraine itself. They were in the middle of a war about energy. Depending on the political winds blowing between Kiev and Moscow, the Russian gas giant Gazprom cut off natural gas to Ukraine or turned it on again. The shale gas is an important potential source for Ukraine and possibly southeastern Europe. If it proves possible to tap, Ukraine hopes this supply would undercut Gazprom’s monopoly, a move that could change Europe’s energy map and its political contours as well. “If you asked me last month, I would tell you right away that gas was the real reason for our hate for Kiev and for this war,’’ said Ivan Vailyevich, a pensioner from the building on Bulvarnaya Avenue when recalled how he participated in mass street protests in February and March. “We’d kill and die but never allow production of shale gas here,” he said. “That would poison our land.” Now he doesn’t know what to say. “After our house was bombed this month, we realized that shale gas was not as scary as shells.”
3rd 'Gas War' Looming Between Russia, Ukraine, EU - Weather forecasters promise 32 degrees Celsius in Kiev on Thursday — which makes the near-citywide absence of hot water due to a shortage of Russian gas more bearable. But things could get much uglier in winter, when a "humanitarian catastrophe" looms, if the confrontation between Moscow and Kiev over Ukraine's rebellious eastern regions remains unresolved and Russia turns off the gas tap, analysts said. While political pundits say the ongoing pro-Russian insurgency in Ukraine is Moscow's last remaining leverage against Kiev, the Kremlin still has a "gas truncheon" at its disposal. Ukraine is entirely dependent on Russian gas supplies, and half of Russia's gas exports to Europe flow through its pipelines. The gas weapon is ineffective in the summer, but a new "gas war" between Russia and Ukraine — which would be the third so far — is waiting to happen this fall, when the energy- and cash-strapped Ukraine will have to provide for its citizens and factories, experts said. The worst case scenario is a season-long halt to Russian gas supplies to Ukraine and the European Union, which, while not leaving populations to freeze, would ground Ukraine's industrial output and cause supply disruptions in the European countries beyond.
Wind farm 'needs 700 times more land than fracking site' - A wind farm requires 700 times more land to produce the same amount of energy as a fracking site, according to analysis by the energy department’s recently-departed chief scientific advisor. Prof David MacKay, who stood down from the Government role at the end of July, published analysis putting shale gas extraction “in perspective”, showing it was far less intrusive on the landscape than wind or solar energy. His intervention was welcomed by fracking groups, who are battling to win public support amid claims from green groups and other critics that shale gas extraction will require the “industrialisation” of the countryside. Hundreds of anti-fracking protesters on Thursday occupied a field near Blackpool neighbouring a proposed fracking site for energy firm Cuadrilla. Prof MacKay said that a shale gas site uses less land and “creates the least visual intrusion”, compared with a wind farm or solar farm capable of producing the equivalent amount of energy over 25 years.
Exxon Starts ‘Most Controversial Oil Rig in the World” - After years of preparation, on Saturday ExxonMobil began drilling a $700 million well in the Kara Sea in Russia’s Arctic. It is Russia’s most northerly well. In doing so, the oil giant has ignored growing concerns over Russia’s role in the Ukrainian conflict, and the sanctions imposed on its business partner, Rosneft, which is run by a close associate of Putin, Igor Sechin, who is also personally blacklisted. Indeed, the go ahead shows just how ineffectual the sanctions against Russia really are. Exxon’s excuse is that the contract to hire the rig was signed before sanctions were announced, but the oil giant is still working with Putin’s blacklisted inner circle. Exxon has also ignored huge questions over whether an oil spill in the region could be contained. And of course it has totally disregarded the issue of climate change and the need to disinvest from fossil fuels in the most ecologically sensitive areas, such as the Arctic.
Exxon, Rosneft in joint Arctic oil project despite sanctions on Russia | South China Morning Post -- US oil giant Exxon Mobil began drilling for oil in the Russian Arctic yesterday with local partner Rosneft, despite sanctions imposed on the Russian company by Washington over the crisis in Ukraine. Russian President Vladimir Putin praised the US$700 million joint project as an example of cooperation. Although US sanctions are not designed to halt such joint projects, they nevertheless aim to starve Rosneft of dollar financing and stop it accessing modern technology. "Today, commercial success is driven by efficient international cooperation," Putin, speaking from his Black Sea residence, told Rosneft CEO Igor Sechin, who is subject to US sanctions, and Glenn Waller, Exxon Mobil's lead manager in Russia. The European Union imposed a third round of sanctions last month, restricting the export of equipment used for offshore oil production to Russia after its relations with Europe and the US deteriorated to the lowest point since the cold war over the Ukraine conflict. That has not stopped Exxon because the contract to hire the rig was signed before sanctions were announced. "In the area of oil, the sanctions are more symbolic perhaps at this stage, but if they remain in place for a long period then they will have some significant consequences,"
ExxonMobil And Russia Began Drilling For Oil In The Arctic On Saturday - ExxonMobil began drilling in the Russian Arctic on Saturday, defying both the spirit of recent U.S. sanctions and environmental opposition to oil exploration in the region.According to Fuel Fix, the well is a joint $700 million project between ExxonMobil and Rosneft, Russia’s state-owned oil producer. Drilling is anticipated to take about 70 days, and will target the Universitetskaya — a geologic formation under the ocean floor that’s roughly the size of the city of Moscow. Rosneft estimates the formation could contain up to 9 billion barrels of oil, making it a major target for Russian oil exploration. Energy provides half the Russian state’s revenue, and the country has so far maintained its oil production at a post-Soviet high of over 10 million barrels per day.ExxonMobil’s output fell to a five-year low in the second quarter, so discovering new reserves in the Universitetskaya would also be a major boost. . It’s apparently the first of as many as 40 wells Rosneft plans to drill by 2018 to explore the potential of the Arctic Ocean for oil production. Gazprom, another Russian state-owned fossil fuel company,already has active wells in the Arctic Circle off Russia’s northern coast.
Oil and the prospect of a Chinese shale boom - Russia geopolitical risk? Check. Middle East geopolitical risk? Check. But commodity prices, and in particular oil prices, are doing nothing: From the charts it increasingly looks like somebody somewhere is enforcing an unofficial trading band, capped on the top-end by SPR releases or Opec production hikes, and propped up on the bottom-end by monetary policy and strategic supply cuts. But the weirdest thing of all is that the prospect of supply disruption isn’t doing much to prices at all. More than that, our old friend contango is threatening to make a significant come back in the Brent market.The culprit? Plentiful supply amid a surplus of barrels from West Africa and the Atlantic Basin despite all the escalating conflicts in Iraq, Libya and Ukraine.Though, as the analysts at JBC Energy observe, it’s probably significant that China — the key driver for oil markets over the last decade — has begun to implement an energy strategy which foresees greater use of natural gas. While Beijing expects the new regime to bring positive results in terms of supply, the country’s shale gas ambitions have suffered a major blow. China has just slashed its national target for shale gas output to 30 bcm by 2020 from the previously estimated 60-100 bcm after early exploration efforts for unconventional fuel proved to be challenging. China is believed to hold the world’s largest technically recoverable shale resources, but complex geology, lack of expertise and infrastructure as well as high costs of production are making it difficult to replicate the success story of the US.
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