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Oil Markets to Stabilize

 

Oil markets are expected to stabilize in the coming months as decreases in investments by oil companies will produce a drop in supply, according to the chief executive of energy giant Chevron.

Chevron CEO John Watson said that oil prices are always the results of supply and demand. A global over-supply of oil pushed prices to collapse in mid-2014 from above $100 a barrel. On Tuesday, Brent crude futures traded around $43 a barrel.

As a result of cheap oil prices, investments were reduced from the industry, according to Watson. "We are in a resource sector that diminishes over time without capital. And new projects have been slowed down but also a lot of short-cycle investments. The shale oil developments in the United States, what we call infill drilling in the business, has slowed down dramatically. We're starting to see a supply reaction that will bring markets into better balance." Watson described this weekend's meeting in Doha between several OPEC and non-OPEC oil producing nations, where the idea of an output freeze is to be discussed, as an intangible that may affect oil prices in the near-term. "What will OPEC do and what will the other nations do and will there be some cooperation by those nations to reign in increases in supply or reduce supply that can affect prices," he said. And "Ultimately, it's going to come down to supply and demand and I think markets will come into better balance."

Watson also discussed the prospects for liquified natural gas (LNG). Chevron has an LNG plant in Australia to develop the Gorgon gas field. "The LNG business has been around a long time and it's entering a new level. It's maturing and we're in a place now where many projects are coming online," he said. "The planet is going to need energy going forward. LNG production is expected to double over the next 10 years."

Prices for natural gas have dropped in recent years. Year to date, the commodity's price has dropped 20%. Also, extracting LNG is an expensive undertaking. "LNG developments are multi-billion dollar developments and I don't think that will change but we can make them more productive than they have been," Watson said. "We can manage those expenses very well but there are going to be large capital costs that are going to be necessary because it takes money to liquefy natural gas, transport and re-gasify it in those developing areas."

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By Robert Holden | | fracking, Gas Prices, Natural Gas, Petroleum | 0 comments | Read more

Crude oil futures prices continue to drop due to storage

April futures delivery on the New York market continued its downward trend. Some analysts say its due to an ongoing lack of storage for oil supplies. Although fears of running out of oil storage are unfounded, oil prices likely will remain "sloppy" over the coming months.

Regardless of the facts surrounding the United States and world oil storage situation, there is still potential risk for oil prices (and energy investors) over the next couple of months. There are still several risky and negative catalysts for short-term oil prices including: 1) the psychological fear of running out of global oil storage capacity while already sitting at all-time highs in US oil inventories; 2) the risk of a sanction removal agreement with Iran that eventually brings an additional 500,000 b/d or more of oil into the market; and 3) the risk of a rising US dollar driving oil prices lower.

Analysts said that the most noticeable example of any threat to storage is being played out at the Cushing, Okla., storage hub, where crude inventories have more than doubled over the past six months (from 20 million bbl to over 50 million bbl) and now sit near all-time highs.

The market fear is that if this oil inventory build rate continued at the same pace (2 million+ bbl/week [year-to-date]), then Cushing storage capacity of about 70 million bbl will fill in the next 2 months.

Cushing is not an isolated market, for the right price, there are many storage outlets for the roughly 250 million bbl of expected global oil inventory builds that must find a home in this yearís first half.

While global inventory data is delayed and often inaccurate, we see more than enough capacity through the combination of the entire [Organization for Economic Cooperation and Development] storage picture (crude plus refined products) and floating storage. While the OECD storage facts suggest the world has plenty of storage capacity this year, we still question whether the perception or fear of record-high US inventories will be enough to send oil prices lower in the coming months.

The New York Mercantile Exchange April crude oil contract fell $2.21 on Mar. 13 to $44.84/bbl Mar. 12. The May contract fell $2.07 to settle at $47.06/bbl.
The natural gas contract for April was virtually unchanged at a rounded $2.73/MMbtu. The Henry Hub, La., gas price was $2.69/MMbtu, down 13¢.
Heating oil for April dropped 6.6¢ to a rounded $1.71/gal. Reformulated gasoline stock for oxygenate blending for April delivery was down 4.7¢ to a rounded $1.76/gal.
The April ICE contract for Brent crude oil lost $2.41, settling at $54.67/bbl, while the May contract lost $2.27 to $55.01/bbl. The ICE gas oil contract for April dropped $16 to $523.75/tonne.
The average price for the Organization of Petroleum Exporting Countriesí basket of 12 benchmark crudes on Mar. 13 was $51.66/bbl, falling $1.50.

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By Bryan Gray | | fracking, Gas Prices, Natural Gas, Petroleum | 0 comments | Read more

Could inexpensive gas have a down side for the United States?

Suppose the decrease in gas prices, which is making virtually everyone happy at the pump has a potential down side?

Who in America is not excited about cheap oil? However, just as the U.S. was set to obtain huge profits from its shale boom the Saudi Arabian led OPEC decided to flood the market with massive supply.

So who benefits from the price drop? As of now, it seems the only benefit is for the consumer. So why bother flooding the market? Saudi Arabia is taking an income cut on its primary source of revenue at a time when it's projecting a $39 billion deficit for 2015.

One theory is that Saudi Arabia and also the U.S. are conspiring to weaken the economies of both Russia and Iran. The motives make sense. With respect to Iran, Saudi Sunni and Iranian Shi'ite regimes have long hated each other, while America is perpetually concerned about Iranian nuclear unpredictability. On the Russian front, Saudis and Russians have been at each others throats over Saudi funding of Islamic terrorism in Russia's North Caucasus region and over Russia's defense of Assad in the interests of maintaining Russian oil interests and of curtailing Islamic terrorism. Meanwhile, the U.S. currently seems intent on squeezing Russia economically.

But as much sense as a U.S.-Saudi Arabia conspiracy theory might make, there are some significant problems with it. The U.S. chose Russia as a partner over Saudi Arabia and Qatar when faced with that choice in Syria last year. There are no shared ideological interests between the U.S. and Saudi Arabia ó aside from mutual cooperation in combating the Islamic State, which both countries had a role in creating. The Saudis couldn't possibly manage to weaken the Russian economy to the point that Putin would abandon Assad and bail on Russia's associated economic interests in the region nor would America want that at a time when Assad's forces are now fighting against a common Islamic State enemy. Moreover, Russian and Saudi ministers met in Moscow in November to discuss cooperating on oil to better manage their respective economic interests. That last fact alone flies in the face of any Saudi-U.S oil price conspiracy theory.

An arguably more plausible theory is that if any nation is colluding with Saudi Arabia, it's China, the top global net importer of petroleum products and the country that's most benefiting from the bargain prices at the pump these days. China is also the only player that couldn't care less about oil revenues. Sitting in 49th place in the world for crude exports, China relies on manufacturing for its revenues. Unlike everyone else in this game, when China lays an oil pipeline in a foreign country, it's not for profit it's just a massive straw delivering the milkshake to the insatiable masses back home.

During the China-Arab Cooperation Forum in Beijing over the summer, Chinese Foreign Minister Wang Yi wrote that, "China and Arab states are working together to build the economic belt and the maritime silk road to revive the modern-day silk road. This will open a door to new opportunities for China-Arab relations."

Saudi Arabia is already China's top oil supplier, and China doesn't care about its partners' ideological preferences. It's a match made in heaven.

If the Saudis and Chinese are wheeling and dealing on oil prices for rewards to be specified later, then Russia, North America and Europe will eventually all end up sobbing into their alcoholic beverages of preference as their liquid gold drops in value.

And while the customers may enjoy the price break now, government and industry oil-revenue loss will come back to bite us in the form of job losses and fiscal cutbacks requiring even more U.S. debt to be bought up by its primary holder: China.

For now we all get to enjoy the cheap gas.

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By Bryan Gray | | fracking, Gas Prices, Natural Gas, Petroleum | 0 comments | Read more

Philadelphia experiencing a transformation fueled by the United States' oil and gas renaissance, rivaling Saudi Arabia in production

Philly the new Houston?

 

The city best known for Rocky, cheddar steaks and sharp-elbowed games fans is creating another notoriety as an issue of oil and gas transportation, which looks good for its economy. 

 

Philadelphia, Pennsylvania is experiencing a transformation fueled by the United States' oil and gas renaissance, which itself is rivaling Saudi Arabia in production. Restored ventures and movement in the area's sprawling railroad track system and maturing base is transforming the City of Brotherly Love into a potential vitality center that some expect to equal Houston, Texas. 

 

Economic experts refer to two main considerations working to support Philly: its location to the blasting Marcellus Shale, where 5,400 shale wells produced about 2 trillion cubic feet of regular gas amid the initial six months of the year; and the city's clamoring business railroad framework, which has made it a travel point for oil being transported from North Dakota's Bakken shaping. 

 

Along the Northeast hallway, "there are possibly six circulation pipeline recommendations for common gas," said V. Devito, a local regulator exper. "A great deal is proposed for fares and the speediest and most effortless path is through Philadelphia's base." 

 

Devito, a previous Department of Energy official, said the city is now a draw for gas and economic vitality "that like to be near the pipeline for simple access," he said. "Philly is in a blessed spot on the ground that they are a piece of the Northeast hallway, there's a ton of business and astounding open doors for business and monetary improvement." 

 

As of late, Philadelphia's profile in the economic segment got extensive support from Sunoco Logistics Partners, a pipeline speculation vehicle that published it would develop a $2.5 billion pipeline from the Marcellus into Philly. The new pipeline will supplement a current gas conduit that may trek the area's regular gas transport by fourfold. 

 

With the U.S. on the verge of fossil fuel wealth, Sunoco and different organizations are directing billions into pipeline speculation the nation over. As nearby rail organizations like Monroe Energy arrange for expanded access to Bakken through Philadelphia is one of a few areas that stands to profit from the onrushing of oil and gas. 

 

"Philly has the physical framework, land and access to fare markets, or you can transport [natural gas] to different markets in the U.S." said A. Karpf, a portfolio director, which has $24 billion in resources under administration. 

 

The new Houston? 

 

Once its up and running, Sunoco Limited's pipeline will pipe about 300,000 barrels for every day of common gas fluids (NGL) to Philadelphia's Marcus Hook Industrial Complex. 

 

The city is not what most would ordinarily consider an economic vitality center point. Generally, oil and gas generation has occurred in areas further south, in the same way as Houston and New Orleans, Louisiana. 

 

In any case, America's economy has overturned a number of those presumptions, changing improbable urban areas into center points of fossil fuel generation. Consolidated with a set of refineries that are generally retrofitted for natural gas purposes, Philadelphia could in the end rival vitality powerhouses in Texas and Louisiana, some watchers say. 

 

"Houston is not as near the interest as Philadelphia may be at the moment. The East Coast has a stunning engine of interest," said M. Krancer.

 

The city's 8.4 percent unemployment rate is well over the nation's normal, and even above Pennsylvania's. Large portions of the urban areas that are ground zero for shale generation have seen jobless rates dive. Thus, business watchers are sensibly hopeful that Philly can see a portion of the same improvements other oil and gas delivering districts have encountered through the shale boom. 

 

Advancement in the district can help stem a channel of experts out of the territory, Krancer included. 

 

"The potential is considerably more noteworthy than Houston," he said. "The parts of the area that are profiting the most from this are the parts of the region that have been financially tested for an era or two."

 

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By Bryan Gray | | fracking, Natural Gas, Petroleum | 0 comments | Read more

Excellent video explaining fracking

Let’s take a look at the horizontal drilling and stimulation processes that have made shale exploration so successful.

Below is the transcript from the video...

A drill bit is mounted on the end of the drill pipe. As the bit grinds away a mixture a mixture of water and additives called mud is pumped into the hole to cool the bit and flush the cuttings to the surface.

The mud also cakes on the walls of the wellbore keeping it tacked. Similar to a vertical well, the hole is drilled to just under the deepest fresh water near the surface. The drill pipe and bit are then removed.

Surface casing is inserted into the drilled hole to the fresh water zone and also serves as a foundation for the blowout preventer: a safety device that connects the rig to the wellbore. Then cement is pumped down the casing and out through the opening of the shoe at the bottom of the casing. It is then forced up between the casing and the hole. Sealing off the well bore from the fresh water. The cementing process prevents any contamination of the fresh water aquifers.

The pipe and bit are lowered back down the hole to drill through the plug and cement and continue the vertical section of the well to approximately five hundred feet above the planned horizontal leg. This depth is called the kick off point, where the curve will begin so the horizontal section can be drilled. Up to this point the process is the same as the drilling a vertical well. Again the pipe and bit are pulled out of the hole and a down hole drilling motor with measurement while drilling instruments is lowered back into the hole to begin the angled building process. The distance to make the curve from the kickoff point to where the wellbore becomes horizontal is just under a quarter of a mile.

Once the curve is completed drilling begins on the wells horizontal section called the lateral. The pipe used to drill the well measures 30 feet in length and weighs approximately 495 pounds each. It takes over 350 pieces of pipe weighing nearly 87 tons to drill a 10,500 foot well.

At various stages of drilling the pipe it taken out of the hole for tool and bit changes and put back in. This process is called tripping pipe. When the targeted distance is reached the drill pipe and bit are removed from the wellbore one last time. Production casing is now inserted into the full length of the well bore. Cement is again pumped down the casing and out through the hole in the casing shoe. Forcing the cement up between the casing and the wall of the hole filling the open space known as the annulus. Casing the well is a very important process because it permanently secures the well bore and it prevents hydrocarbons and other fluids from seeping out into the
formation as they are brought to the surface.

As this point the drilling rig is no longer needed. A temporary well head is installed and the location is prepared for the service crew who will perf, frack, and prepare the well for production.

The first of these steps is to perf, or perforate the casing. A perforating gun is lowered by wireline into the casing to the targeting section of the horizontal leg. An electrical current is sent down the wireline to the perf gun and sets off a charge that shoots small holes through the casing and cement. And out a short distance into the shale formation. The perf gun is then pulled out of
the hole.

Next because the shale is tight and compressed the well will have to be fracked. Known as hydrolic fracturing this is a process where water, sand and additives are pumped into the well bore and down the casing under extremely high pressure. As this mixture is forced out through the perforations and into the surrounding rock, the pressure causes the shale to fracture. This creates a fairway connecting the reservoir to the well and allows the released oil to flow to the well bore.

Next a temporary plugged is placed at the heal or left side of the first stage frack. The plug closes off or isolates the perforated frack section of the wellbore so that the second stage section of the horizontal leg can be perforated and fracked.

Tight reservoirs do not contain natural fractures and therefore cannot be produced economically without hydrolic fracturing. The permeability is increased by providing pathways through which the oil can flow more easily. With advancements in technology multi-stage fracking has becoming effective for recovering oil from shale reservoirs.

This process of perfing and fracking can be repeated several times to cover the entire horizontal distance of the wellbore. Once fracking is completed the plugs are drilled out. Allowing the oil to flow up the well bore.

The next step is to install a permanent well head and other necessary surface equipment. Sometimes a pump jack is used to help bring the oil to the surface. A pipeline is then built to transport the oil to the pipeline network. As field development expands additional infrastructure is built. Thanks to the vision and persistence of those who have perfected these new technologies shale plays across the U.S. Have become an innovative and highly productive source of new energy for our country.

 

 

 

At www.oilandgasequipmentsales.com we have all your new and used oil and gas exploration equipment.

By Bryan Gray | | fracking | 0 comments | Read more

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