Keystone foes urge top Nebraska court to void pipeline path

Nebraska landowners opposed to the proposed $5.4 billion Keystone XL pipeline urged the state’s highest court to uphold a judge’s ruling invalidating the route mapped by Governor Dave Heineman and TransCanada Corp.

The property owners urged the state Supreme Court to uphold a February ruling effectively blocking the pipeline. Judge Stephanie Stacy in Lincoln declared TransCanada a common carrier like a railroad. As such, a 2012 law giving the governor control over the path violated a part of the state constitution vesting power in the Public Service Commission.

TransCanada “offers pipeline structures for transportation services, like taxis offer rides to passengers for a fee, and truckers offer cartage for dollars per mile,” the landowners said in a June 20 legal brief. “The currently-proposed pipeline is a structure that will transport crude oil for hire.”

TransCanada, based in Calgary, seeks to build a 1,179-mile (1,897-km) conduit capable of carrying 830,000 bopd from Hardisty, Alberta, to Steele City, Nebraska, where it would connect to an existing network.

Supporters say Keystone will create jobs and promote energy independence. Opponents say petroleum derived from Alberta’s oil sands will contribute to global warming.

The decision on whether to approve Keystone will fall to President Barack Obama, who may wait until the Nebraska court rules. The judges have yet to schedule arguments, and a decision may not come until after Congress’s midterm elections.

Energy East

TransCanada has said it will seek Canadian government permission to construct a different, longer, pipeline giving it a conduit to the Atlantic Ocean. That proposed 2,700-mile pipeline, called Energy East, would carry 1.1 MMbopd across six provinces to a refinery and export terminal at Saint John, New Brunswick.

Heineman, a Republican who’s leaving office on Dec. 31, and state Attorney General Jon Bruning, who sought to succeed him, argued in April that the three landowners who sued haven’t shown they’ve been injured by the plan and lack standing to sue.

Bruning last month lost the Republican Party’s gubernatorial primary to former Ameritrade Holding Corp. Vice Chairman Pete Ricketts.

David Domina, the landowners’ lawyer and a Democrat seeking a U.S. Senate seat, said his clients have been harmed.

“There is no competitor, different regulator or differently affected landowner to bring this suit,” he said in a phone interview. “The state belongs to the citizens, and they are its saving watchfulness.”

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Carrizo Oil & Gas provides operational updates on Niobrara, Utica activities

Carrizo Oil & Gas reported an operational update, which includes initial test results from its Niobrara A bench wells. Testing flowed at an average peak 24-hr rate of 1,127 boed, including one well which tested at 1,633 boed.

Carrizo recently began production from its first multiple geological bench downspacing pilot in the Niobrara formation. The pilot consisted of eight wells in the company' s Bringelson Ranch area in Weld County. The pilot tested both B-A-B and B-B-B lateral orientations, spaced 300 ft apart, equating to 40 acre spacing. The wells were drilled with an average effective lateral of approximately 4,000 ft and completed with an average of 14 frac stages.

The average peak rate from the eight wells was 1,021 boed, 89% oil. This compares to the company’s current Area 1 type curve, which assumes an average IP rate of approximately 800 boed, 80% oil. The five B bench wells had a peak rate of 957 boed, 89% oil, while the three A bench wells had a peak rate of 1,127 boed, 88% oil. One of the A bench wells, the Bringelson Ranch 6-20, had a peak 24-hr flowrate of 1,633 boed, 87% oil, the strongest peak rate to date from the company' s Niobrara program. Carrizo operates the Bringelson Ranch wells with an approximate 29% working interest.

The company is currently drilling its second 40-acre B-A-B downspacing pilot in its Hemberger area in Weld County. Current plans call for the pilot to include three wells in the B bench and two wells in the A bench, with the laterals spaced approximately 300 ft apart. Carrizo operates the Hemberger wells with an approximate 26% working interest.

The spudder rig has arrived on the location of Carrizo' s second Utica shale well, the Brown 1H in Guernsey County, Ohio, and drilling is expected to begin shortly. The company currently plans to drill the top hole with the spudder rig and bring in a larger rig to drill the horizontal section in July. The company plans to drill the well with an effective lateral of 6,280 ft and complete it with 26 frac stages. Carrizo operates the Brown 1H well with a 50% working interest. Carrizo currently plans to keep both the spudder and larger rig active for the remainder of the year.

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Scotland may hold billions of barrels of shale oil, report says

Scotland may have billions of barrels of shale oil buried under the country’s most densely populated areas, geologists said June 30.

Scotland’s central belt, running between Glasgow and Edinburgh, may have 6 billion barrels of oil in place, according to a report by the British Geological Survey. While only a fraction of the resource will end up being viable, the deposits could supplement the UK’s 3 billion barrels of proven oil reserves, held mostly in North Sea fields off Scotland’s coast.

The oil and gas industry is central to the debate on Scotland’s independence before a referendum in September. The Scottish government says existing fields in the North Sea will underpin the economy of an independent nation, while opponents say declining production from offshore reserves leaves the country vulnerable.

“This report will give reassurance to investors who wish to explore for oil and gas onshore in Scotland,” said Ken Cronin, CEO of the UK Onshore Operators Group, an industry lobby. The resources “can help replace the UK’s growing dependency on imports and balance the decline of the North Sea.”

Bowland shale

Scotland’s shale gas potential is a fraction of northwest England, the report showed. Scotland’s central belt has shale gas in place of 80.3 Tcf, according to the middle estimate in the report. That compares with 1,300 Tcf in the Bowland shale in northwest England, according to research published by the British Geological Survey last year.

Exploiting the UK’s shale resources has been opposed by environmental campaigners and property owners concerned drilling techniques, including hydraulic fracturing, risk polluting water supplies. Britain’s greater population density will likely make production more difficult than in the U.S, where a shale boom has reversed declining oil and gas output.

The UK government is offering tax breaks to shale drillers to spur development of the resource as North Sea reserves dwindle. The Bowland basin in northern England may supply local natural gas demand for half a century at extraction rates of 10% similar to U.S. fields, according to a report last year.

“Only the broad shoulders of the UK can attract investment in new energy sources and maintain the UK’s position as one of the world’s great energy hubs,” said UK Energy Minister Michael Fallon.

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Oil supply expected to grow faster than demand, says consultancy

The IEA, on June 17, released its Medium-Term Oil Market Report. Rystad Energy, an independent oil and gas consulting group, has compared the revised IEA demand outlook with its own supply estimates derived from its global upstream database, UCube. The estimates are based on Rystad’s bottom-up analysis of 30,000 fields and 2,500 oil companies in 150 countries.

Analysis shows that oil markets have gradually been tightening over the last two years, while the outlook indicates a possible inflection point in early 2015 and an increasing downward pressure on oil prices for the coming two to three years.

The recent geopolitical outages of oil production from the Middle East and North Africa have, until now, been perfectly balanced by the increased supply of unconventional tight oil from the U.S. This predicted easing of the oil markets is partly driven by an assumption of gradual return over the next two years of oil from Libya, Iran, Iraq and Sudan, while U.S. drillers are continuing their activities with unchanged intensity and increased efficiency.

Rystad Energy now forecasts North American tight liquids production to pass 10 million bbl before 2020, making the region a net exporter of seaborne crude and petroleum products within three years.

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U.S. crude exports in April rise to highest level in 15 years, says EIA

The U.S. exported 268,000 bpd of crude oil in April (the latest data available from the U.S. Census Bureau), the highest level of exports in 15 years, reported the U.S. Energy Information Administration. Exports have increased sharply since the start of 2013, and have exceeded 200,000 bpd in five of the past six months. The increase in crude exports is largely the result of rising U.S. crude production, which was 8.2 million bpd in March.

To export crude oil from the U.S., a company must obtain a license from the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce. Under export licensing requirements, the following kinds of transactions will generally be approved:

Exports from Alaska' s Cook Inlet
Exports to Canada for consumption or use therein
Exports in connection with the refining or exchange of strategic petroleum reserve oil
Exports that are consistent with international energy supply agreements
Exports of foreign-origin crude
Exports of California heavy crude up to an average of 25,000 bpd
Temporary exports or exchanges

Licenses for other exports of U.S.-origin crude are considered on a case-by-case basis. For such other exports, the regulations describe the characteristics of transactions that will generally be approved as in the national interest.

Almost all of the crude oil exported from the U.S. has been delivered to Canada, and most of the recent increase in crude oil exports has been from the U.S. Gulf Coast (PADD 3). Gulf Coast crude exports averaged 134,000 bpd in first-quarter 2014, a 283% increase over 2013' s record high of 35,000 bpd. In first-quarter 2014, nearly 75% of Gulf Coast exports have left the region from the Houston-Galveston district, in Texas. The remaining barrels were loaded in Port Arthur, Texas, and New Orleans, La.

Exports from the East Coast (PADD 1) averaged 30,000 bpd in first-quarter 2014, down slightly from 2013 levels, but up from 9,000 bpd in 2012. First-quarter exports from PADD 1 were evenly distributed between the Port of New York and Portland, Maine, which is the starting point of a pipeline that delivers crude to refineries in the Montreal area. Exports of crude from the Midwest (PADD 2) have long been a source of crude for refineries in Sarnia, Ontario.

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