Four wastewater wells tied to Oklahoma quake surge, study says

Four wastewater wells used in oil and natural gas drilling may be responsible for triggering 20% of all earthquakes in the central and eastern U.S. from 2008 to 2013, according to a study published in the journal Science.

The wells are used to dispose of high volumes of wastewater released from underground rocks when they are fractured using modern oil-drilling techniques. The four wells are likely responsible for a dramatic rise in earthquakes near Oklahoma City since 2009, according to the research.

Oklahoma has had more earthquakes than California so far this year, making it the most seismically active state in the continental U.S. and raising suspicions that drilling activity is influencing a surge in temblors there. The state had 238 earthquakes with a magnitude 3.0 or greater through June, more than double the number in California, which has historically ranked second in earthquakes behind Alaska.

Scientists studied wastewater-injection volumes, geologic information and data from earthquake sensors to show that fluids pumped into the wells increased underground pressures and spread them. The area of elevated underground pressure grew in a way that overlapped with a “migrating front” of earthquakes centered near Oklahoma City.

The data showed that water pumped into wastewater wells can increase and affect underground pressures as far away as 35 km (22 miles), potentially triggering earthquakes at faults that would have previously been considered too distant.

Researchers from Cornell University, University of Colorado, Columbia University, and the U.S. Geological Survey collaborated on the study.

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DNO falls for second day on fears Iraq tensions could spread north

DNO ASA, the Norwegian oil producer focused on northern Iraq, fell for a second day after Islamist insurgents seized several cities south of the Kurdistan region where it operates.

While no violence has been reported in the semi-autonomous region, the Oslo-based company fell as much as 5.7% and traded 0.5% lower at 22.19 kroner a share as of 2:01 p.m., extending losses to 6.4% over the last two days.

“When the unrest is at this level and terror groups are involved, the stock will never thrive,” analyst Teodor Sveen Nilsen of Swedbank First Securities said in a phone interview. “The unrest is 150 kilometers from DNO’s Tawke field and might as such not have a big impact, but investors have a lot of others stocks to choose from and will react negatively when faced with uncertainty.”

Militants

DNO, the first foreign oil company to drill in Iraq after the U.S.-led invasion in 2003, got almost 80% of its production from the Kurdish region of the country’s north in the first quarter. The area is situated north of Mosul, Iraq’s second-biggest city, which was seized by militants of the Islamic State in Iraq and the Levant this week.

The violence has raised the prospect of a resurgence of sectarian conflict in Iraq, the second-biggest producer of the Organization of Petroleum Exporting Countries, as Prime Minister Nouri al-Maliki’s Shiite-led government struggles to control Sunni-majority regions.

DNO spokesman Henrik Schwabe couldn’t immediately comment, he said in an email.

Swedbank downgraded DNO to neutral from buy on “increased political risk,” it said in a note yesterday, June 11. “It’s escalated more than I had thought,” Sveen Nilsen said today.

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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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Tethys awarded 15-year extension to Kazakhstan gas contract

Tethys Petroleum, following the recently reported Kazakh State Reserves Committee (GKZ) approval, confirmed that it has received approval from the Ministry of Oil & Gas of the Republic of Kazakhstan (MOG) for the extension its Kyzyloi Production Contract for a further 15 years, to June 2029.

The contract area currently covers some 287 sq km, and the company is currently producing gas from the shallow Kyzyloi sandstone in this area. This contract extension will give Tethys significantly more time to produce natural gas from the area.

The reserves attributed to the Kyzyloi contract area, determined in accordance with National Instrument 51-101 of the Canadian Securities Administrators, are included in the company' s reserves evaluation for its oil and gas interests in Kazakhstan.

Tethys is focused on oil and gas exploration and production activities in Central Asia and the Caspian region, with activities currently in the Republics of Kazakhstan, Tajikistan and Georgia.

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Iraq’s Kurds vow to keep Kirkuk oil fields until referendum

Iraq’s semi-autonomous Kurds plan a referendum for independence and will keep troops in the nearby oil hub of Kirkuk until people there can vote on whether to join the Kurdish enclave, a regional government spokesman said.

“As a people, we have the right to be independent, but the issue is up to the Kurdish people, to be decided upon via a referendum,” Safeen Dizayee, spokesman of the Kurdistan Regional Government, said in an interview in the city of Erbil yesterday, June 30. “We now have arrived at a new reality. If the Kurdish people, through referendum, were to opt for complete independence, we want it to be done through negotiations with Baghdad, like what happened in Czechoslovakia.”

Iraq’s minority Kurds, who historically have resisted control by Arab-dominated central governments, are charting a course to independently develop oil reserves that the KRG calculates at 45 billion bbl - larger than BP Plc’s estimate for deposits in the U.S. or Nigeria, Africa’s biggest producer. Kurdish armed forces moved last month outside their region in northern Iraq and occupied the long-disputed Kirkuk oil fields after the Iraqi army fled from Islamist militants.

Iraq’s central government in Baghdad said any referendum the Kurds may hold, whether to determine the future of the city of Kirkuk and its nearby oil fields or to declare independence for the Kurdish region itself, would be unlawful. “The government doesn’t accept anything outside the constitutional way, which was voted on by the Kurds,” Ali al-Moussawi, media adviser to Iraqi Prime Minister Nouri al-Maliki, said by phone in response to Dizayee’s comments. “If they do this, it would be unilateral and unconstitutional.”

Peshmerga Deployed

The KRG and its Peshmerga armed forces will maintain control of Kirkuk and other disputed areas they hold outside their region until people there can vote on joining the Kurdish enclave, Dizayee said, without providing a date for such a referendum. Kirkuk, including Iraq’s fourth-biggest oil deposit, is an ethnically mixed area claimed also by the central government.

“The KRG can export Kirkuk oil, the same way as it exports the region’s crude” from current KRG-administered fields, Dizayee said.

By securing the oil facilities in and around Kirkuk, the Kurds would add almost 9 billion barrels to their own crude reserves. Iraq, excluding such an enlarged Kurdish-controlled region, would be left with reserves of 141 billion barrels, still the world’s fifth-largest.

Market Prices

The KRG has sold one cargo of crude that it sent by pipeline to the Turkish port of Ceyhan on the Mediterranean Sea, Dizayee said. “Oil was sold according to the market prices on the day of loading and was definitely not sold at half price,” he said. The Kurds deposited revenue from the sale at Turkey’s Halkbank, where they also plan to send money from any future sales.

Brent crude for August settlement, a global price benchmark, rose 0.1% to $112.44 a barrel at 7:44 a.m. local time on the London-based ICE Futures Europe exchange today, July 1.

KRG authorities plan to boost daily crude-export capacity from about 120,000 bbl currently to 400,000 bbl by the end of the year, with a possibility of “additional quantities from Kirkuk,” Dizayee said.

Output from the Kirkuk area has dwindled to 30,000 bpd from 650,000 since Iraq’s government shut the country’s export pipeline to Turkey in March because of sabotage, state-run North Oil Co. said in a June 19 statement.

The KRG will pay money owed to oil companies working in the Kurdish region after meeting its own financial requirements, and it plans to seek loans from international banks to help cover public expenses, he said.

Iraq’s central government only allocated enough money to the KRG this year for the Kurdish authorities to pay civil servants’ salaries for the first two months, Dizayee said. “We need approximately $1.2 billion a month for salaries and other operational and investment projects,” he said.

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Shell announces IPO for a U.S. pipeline unit

Royal Dutch Shell said it will sell shares in a U.S. pipeline business in the second half of this year.

Shell Midstream Partners LP’s assets are expected to consist of ownership interests in four onshore and offshore pipelines located primarily in Texas and Louisiana, according to a statement today. The Houston-based company will trade on the New York Stock Exchange.

Pipeline companies structured as tax-exempt master limited partnerships, or MLPs, have attracted investors by returning almost all their income to shareholders. Pipeline operators are also benefiting from the boom in North America’s oil and gas production from shale fields.

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Weatherford introduces Katy, Texas rod pump facility

In response to growing demand for artificial lift solutions in the North American shale plays, Weatherford has built a 354,000 sq-ft manufacturing facility and world-class training center on a 174-acre site in the suburban area west of Houston.

The new plant is currently producing 120 rod pump units per month, with the capacity to manufacture as many as 800 units per month. The plant employs 135 employees, but the company projects to fill 335 positions by year end.

“We use lean manufacturing techniques and cutting-edge robotics technology to increase operational efficiency, which includes machining, fabrication, painting, and assembly,” explained Karl Sakocius, Sr. Marketing Manager, during a media tour. “Our Katy facility delivers American-made rod pumping units to the market. We are the only original equipment manufacturer to engineer, service, repair, and refurbish pumping units.”

The Weatherford manufacturing facility features banks of advanced numerically controlled machine tools and includes a robotic welding unit. A systematic, single-piece flow process?as opposed to the traditional process of batching and sub-optimizing by department?reduces the amount of inventory in the plant, which reduces the potential for accidents. Emissions within the plant are minimized through the use of trolleys and conveyor systems instead of forklifts.

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Keystone win easier with Canada carbon limits, Trudeau says

Justin Trudeau says he would bolster Canada’s case for approval of the Keystone XL pipeline by introducing financial incentives to curb greenhouse-gas emissions in the oil and gas industry.

Canada should establish a price for carbon emissions to show it’s addressing climate change and to give President Barack Obama political “cover” to approve TransCanada Corp.’s $5.4 billion project, Trudeau, leader of Canada’s Liberal Party said yesterday, June 25, in an interview in Fort McMurray, Alberta. He said he was “agnostic” about how the price should be set.

“The way to promote Keystone XL is not to be shouting, ‘You need to approve this.’ It’s to actually get our own house in order and demonstrate we’re serious about the responsibilities that come with carbon emissions,” said Trudeau. “That’s why it’s become politically untenable to approve something that should have been approved years ago.”

Trudeau’s call to action contrasts with Prime Minister Stephen Harper’s position that he won’t regulate oil and gas emissions without similar U.S. measures because it would put Canadian producers at a competitive disadvantage. Harper and his ministers have continued to press for Keystone in speeches and meetings with U.S. officials.

The State Department said in April it would again delay a decision on Calgary-based TransCanada’s conduit in order to give parties more time to comment. That further stalled a project first proposed in 2008 and originally intended to come online in 2012. Obama has said he won’t approve the pipeline if it significantly adds to carbon emissions linked to global warming.

Crude Discount

Canada has the world’s third-largest crude reserves, much of it in the oil sands near Fort McMurray. The area’s heavy crude has traded at an average of $18.70 per barrel below the U.S. benchmark over the last five years due in part to transportation bottlenecks. The discount costs Canada’s economy as much as C$50 million a day, according to the Canadian Chamber of Commerce. Keystone XL would carry 830,000 bopd from the oil sands to Gulf Coast refineries.

Natural Resources Minister Greg Rickford said he’ll continue working with U.S. Energy Secretary Ernest Moniz to “enhance cooperation on energy and the economy.” Canada won’t “take actions unilaterally that would put Canadian jobs and the economy at a disadvantage,” Rickford said in an emailed statement today, June 26, in response to Trudeau’s comments.

Rickford, Finance Minister Joe Oliver and Foreign Affairs Minister John Baird all traveled to New York this month, arguing in media interviews and at an energy conference that Obama has unfairly entangled the $5.4 billion pipeline with U.S. politics.

‘Worse Relationship’

“It’s not moving forward,” Trudeau said of the pipeline. “We’ve never had a worse relationship with the United States, because perhaps our entire continental relationship has been reduced to not just one industry or one company but one single project.”

Trudeau, son of former Prime Minister Pierre Trudeau, cited moves by Obama this month to cut emissions from U.S. power plants, that country’s largest source of greenhouse gases.

Harper said June 9 that the U.S. moves don’t go as far as Canada’s regulations in the power-generation sector. He said Canada would deal with climate change in a way that protects Canadian jobs, not destroys them.

Trudeau, 42, said his Liberals would spell out in an election platform how they would go about putting a price on carbon. Former Liberal leader Stephane Dion lost the 2008 election after proposing a carbon tax that was vilified by the Conservatives.

Leading Polls

The Liberals have held a consistent lead in public opinion polls since Trudeau became leader in April last year. While the next general election is scheduled for October, 2015, there are partial elections scheduled June 30 to fill four vacancies, including the district containing Fort McMurray.

“The Liberal Party is somewhat agnostic,” Trudeau said. “We recognize the fact that the discussion around carbon pricing has been incredibly polarized politically.”

Harper’s Conservative-Party government has been regulating greenhouse-gas emissions on an industry-by-industry basis. The main opposition New Democratic Party has proposed a cap-and-trade system, which Conservative lawmakers have labeled a “tax on everything.”

At the provincial level, Alberta requires companies that emit more than 100,000 metric tons of greenhouse gases a year to cut emissions per barrel by 12% percent or pay a penalty of C$15 per ton. The proceeds of the levy are paid into a fund that invests in technologies that cut carbon output.

Carbon Tax

British Columbia established a carbon tax in 2008, which is imposed on fossil-fuel consumers and designed to encourage use of alternative fuels.

Whatever form the carbon price takes, businesses need clarity, Trudeau said. Companies “want to know where the benchmarks will be, what the expectations will be, for the next 10 years, for the next 25 years.”

“That kind of clarity will allow industry to make a business model, invest in capital upgrades they need to justify to their shareholders,” he said. “That kind of clarity is exactly what this government hasn’t given.”

While Trudeau has joined Harper in supporting Keystone XL, he reiterated his intention to kill another proposed pipeline: Enbridge Inc.’s Northern Gateway, which was approved by Harper’s cabinet earlier this month.

Trudeau said the project, which would cross the mountains of British Columbia and bring oil sands crude to the Pacific Coast for export by tanker, never had local support and was “doomed” from the beginning.

“There are a lot of tools at a prime minister’s and a government’s disposal,” Trudeau said when asked how he’d stop Northern Gateway. “We’ll use the most appropriate one that has the lowest impact and cost for Canadians.”

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