2014 June 20

The Master Resource Report 2014-06-20

EIA reports natural gas supply & demand

The EIA reported this week that natural gas consumption was down for the seventh week in a row as cooler temperatures prevailed. But in a good example of just how much weather impacts power burn consumption in that sector climbed from the low in the week of 20.2 Bcf/d to 28.2 Bcf/d when the weather warmed.

The graphs below from the EIA the weekly natural gas report give further information on supply and demand.

EIA weekly nat gas graphs 2014-06-20

Click image to open larger view.



2014 June 13

The Master Resource Report 2014-06-13

The Bakken’s radioactive problem

When you talk to folks who have visited or worked in the booming oil fields of North Dakota they report it being like the Wild, Wild West. And like any gold rush period government and environmental regulation enforcement runs way behind the curve.

Associated Press: People have been caught nearly 150 times in the past year attempting to illegally dump loads of oil field waste — much of it radioactive — at two of the biggest landfills in western North Dakota, records obtained Wednesday by The Associated Press show. None of the incidents resulted in fines or other sanctions from the state, and the most regulators required was that offenders promise to properly dispose of the waste, officials said.

The biggest problem is the growing volume of illegal disposal of filter socks. These are tubular mesh nets that filter the liquids produced from the oil wells.  In the process of straining out solid material the filter socks also become contaminated with radioactive waste that is extracted with the petroleum liquids.

Since there are no licensed disposal sites in North Dakota they need to hauled to the nearest approved disposal sites in other states such as Montana which allow radioactive waste in their landfills. But for some apparently the cost and the drive are just too far so they dump them illegally along the road or in dumps not designed to accept the waste.

For now North Dakota is remaining firm on its restrictions on radioactive waste disposal but this issue will not go away and must be resolved in the near future as the number of wells move beyond the current 10,000 plus.

While most operators are conforming to regulations concerning waste disposal there will always be those that will go out of their way to avoid compliance. If the industry doesn’t help bring these operators into compliance they will all suffer and the cost they face will be escalated further.


2014 June 6

The Master Resource Report 2014-06-06

Libyan exports

According to a report on Upstreamonline Libyan exports of crude oil could fall to zero.

Libya’s crude exports could fall to zero in days as the state oil company could be forced to divert the only remaining exports to the Zawiya refinery, which provides crucial gasoline to the country’s capital…..

The total loss of this high quality crude on the global export market needs to make up by other exporting countries, in particular other Opec members. However, since US demand for light crude has continued to fall this has allowed former US imports to flow to markets now unable to obtain the Libyan crude.

US coal production up

The EIA’s weekly estimate of US coal production shows an increase of 2.7% over last week and 2.3% over year-ago levels. The estimate for U.S. year-to-date coal production totaled 407.8 mmst, a slightly lower than the     comparable year-to-date coal production last year.


2014 May 30

The Master Resource Report 2014-05-30

Total pulls the plug on tar sands project

Due to the continued escalation of industry costs Total has stopped its Joslyn tar sands operation in Alberta, Canada. The $11 billion price tag cannot be supported by today’s oil prices around $100 per barrel.

“We are still in the cycle within this industry where cost inflation in general is going much faster than price adjustments. We know that there is a rebalancing that needs to be done.”

The Globe and Mail article however made it clear that some project expansions will continue either because they are beyond the point of no return or they are less expensive additions to existing operations.

US natural gas exports to Mexico

US natural gas exports to Mexico have doubled since 2009 and are expected to continue growing at least thru the end of the decade. This graph is from Thursday’s Today In Energy posted by the EIA. It shows what the Mexican energy ministry thinks their country’s imports will look like over the 15 years from 2012. Note that the LNG imports will flat line since the price of Pacific Basin LNG is expected to remain at a multiple of US sourced natural gas. This means other than domestic Mexican production there is little to hold back the demand for US natural gas.

Forecast Mexican nat gas imports from US

Click image for larger view


Note: Currently clients and advisors at Ravenna Capital Management hold positions in Total.



2014 May 16

The Master Resource Report 2014-05-16

Toyota ends battery and drivetrain supply deal with Tesla

Toyota announced this week that it will not be renewing its agreement with Tesla to supply batteries and the drivetrain for its RAV4 electric crossover vehicle. The RAV4 electric has sold poorly since its introduction.

According to a New York Times article “Toyota has increasingly signaled that it sees fuel cells as the most viable zero-emissions technology.” Toyota has previously indicated it plans to market a fuel cell sedan in California next year. The company believes that short comings of batteries can be overcome with fuel cells and the market for zero emission vehicles is still in its infancy.

IEA raises concern about supply in late 2014

In its latest Oil Market Report, the International Energy Agency (IEA) raises concerns about recent production growth not being adequate to match rising market demands. “Crude prices remain elevated and forecast balances call for a significant rise in OPEC production from current levels for the second half of the year,” the IEA said.

Global supplies rose 700 kb/d month-on-month to 92.1 mb/d in April, with roughly half of the increase stemming from OPEC producers. Global supplies were 820 kb/d higher than a year earlier, with non-OPEC annual output growth of 1.8 mb/d more than offsetting an OPEC crude oil decline of 960 kb/d.

Note that the IEA is reporting all liquids which includes biofuels and NGLs. For example the IEA estimate for global crude oil refinery throughput for the second quarter of 2014 is 76.2 million barrels per day. It is important to know what is being included or excluded when agencies like the IEA or EIA report production and consumption data.

IEA forecast from 1982

Here is what the IEA was forecasting 30 years ago.

New York Times: The I.E.A. study predicts that production by the Organization of Petroleum Exporting Countries will stay in the range of 23 million to 29 million barrels a day during the rest of this decade. But output in North America and the North Sea is likely to decline after 1985, it said, and the Soviet bloc will no longer be a net oil exporter, but will become a net importer of 2 million barrels a day by 1990. Oil demand in the developing world and in OPEC itself will grow, the report predicted.

Today Russia is the largest oil producer in the world surpassing Saudi Arabia. OPEC’s current production stands at 29.9 million barrels per day.

The United States will remain the West’s largest coal producer for the rest of the century, producing 65 percent of Western coal in the year 2000 and accounting for 70 percent of the expected growth of coal demand.

They clearly missed the rise of China and the issue of climate change was still on the horizon. What will today’s forecasts look like 30 years from now?


Note: Currently clients and advisors at Ravenna Capital Management do not hold positions in Tesla or Toyota.