2012 August 17

The Master Resource Report  2012-08-17

Saudi Aramco succumbs to computer attack

“Hackers have claimed responsibility for the spread of a computer virus that forced the world’s largest oil company, Saudi Aramco, to isolate its production systems from infected PC workstations inside the company.”

Based on the recent reports this year about the imminent U.S. “independence” from Opec oil this isn’t a problem or is it?

“The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow.”

The global petroleum industry is a fragile network with many potential breaking points. Everyone should be asking themselves what their plan is if, for whatever reason that network failed. As a model consider the banking system in 2008, very few understood how entangled that system was either.

Rig count

The Baker Hughes rig count data released today reported the number of U.S. rigs drilling for natural gas fell 11 while the number drilling for oil slipped 7. Year-over-year the number of rigs drilling for natural gas has dropped from 900 to 484 down 416 or 46%.

An even more amazing decline is seen when looking back to the peak natural gas drilling level seen in the summer of 2008 when the number of rigs peaked at 1,606. That means since the start high point the number of rigs has fallen 1,122 or 70%.

The comparison to oil is equally amazing. The high for rig count drilling for oil in the summer of 2008 (remember oil had recently hit nearly $150/barrel) was 442. Today according to the Baker Hughes report there are 1,425 rigs searching for oil in the U.S. That is an increase of over 300%. This brings into question the argument that drilling for oil is being restricted in the U.S.

North Dakota prices finally near WTI

According to Bloomberg Bakken crude for delivery to Clearbrook, Minnesota is now trading at $94/b which is near parity with WTI. The move in that delivery price since the June bottom is startling. In June the spot price according to Bloomberg bottomed at $63.69 and has climbed $29/b or nearly 50% since then during its run to WTI parity.

That should bring smiles to the Bakken producers and frowns to the mid-continent refiners.