A third cargo of US LNG has arrived on European shores, the Sestao Knutsen earlier this week unloading at the Turkish LNG import terminal at Aliaga.

The tanker was one of the last to load at Cheniere Energy's Sabine Pass export facility in the Gulf of Mexico before the two-train plant was shut down for planned maintenance in mid-September.

The arrival of US LNG into Turkey marks a step change in flows into Europe.

The previous two cargoes were both delivered to the Iberian Peninsula -- the first in April to Portugal and the second this summer to Spain.

Neither country is supplied with pipeline gas by Gazprom.

But the start of US LNG exports to Turkey is arguably of more importance given that Russia supplies significant volumes of gas to the Turkish market.

In the first half of 2016, Gazprom piped 12 Bcm of gas to Turkey, making it the Russian company's third biggest customer after Germany and Italy.

Turkish relations with Russia deteriorated sharply at the end of last year with the downing by Ankara of a Russian fighter jet near the Syrian border.

But following an apology for the incident by Turkish President Recep Tayyip Erdogan, ties were mended and the two sides began to work quickly on realizing the planned TurkStream gas pipeline from Russia to Turkey.

US LNG exports to Europe remain a rarity -- of the now 31 cargoes loaded since exports began in February, it is only the third.

But one other LNG tanker from Sabine Pass is currently in European waters -- outside the bunkering port of Kalamata in Greece.

The Maran Gas Delphi arrived at Kalamata on Monday, but its next destination is as yet unclear.

The majority of US LNG cargoes have gone to South America. But cargoes have also been shipped to China, India, the Middle East and recently to Mexico and the Dominican Republic.

Delegates speaking at the S&P Global Platts European Gas Summit in Dusseldorf this week were not optimistic about the chances of US LNG making waves on the European market given the low cost Russian gas alternative.

"It will not be a tsunami of US LNG [in Europe]", Vattenfall's Head of Continental Power Trading Frank van Doorn said.

BP's Head of Russia & CIS Economics Vladimir Drebentsov added: "Russian gas production costs are very low, among the cheapest in the world. My thinking is that Gazprom will undercut US LNG -- letting the [US)] LNG set the price."

http://www.platts.com/latest-news/shipping/london/us-lng-cargo-lands-in-turkey-first-market-with-26557391

---

Attached Files

Dallas Fed Reserve Provides Optimistic Local Energy Outlook

The energy woes for one of the main oil producing areas of the United States may be a thing of the past, according to the latest quarterly report from the Dallas Federal Reserve.

The survey encompasses upstream energy firms located or headquartered in the Eleventh Federal Reserve District, which includes Texas, southern New Mexico, and a portion of Louisiana. It includes the Barnett Shale, Eagle Ford, Haynesville Shale, and the Permian Basin.

“Results suggest conditions were improving again in the third quarter,” Michael Plante, senior research economist and project manager for the latest Dallas Fed Energy Survey said in an interview the Midland Reporter-Telegram.

Nearly 62 percent of the 149 respondents to the survey believe that the price of oil, which has plummeted since 2014, will increase a year from now. At least 90 percent feel the West Texas Intermediate price must surpass the US$55 per barrel mark.

Most of those surveyed anticipate a notable increase in drilling activity, particularly in the second quarter of 2017.

A plurality of 48 percent of respondents from the report published on September 26th is also optimist over the price of natural gas.

Energy firms also reported a 25 percent spike in equipment utilization as well as a continued fall in the prices of services.

Despite the bright indicators, other factors were not so positive.

Production for oil and natural gas dropped for the third straight quarter, albeit a slower rate than previous periods. Jobs in the sector continued to be shed, while the employee indices for hours and wages plus benefits continued in the red.

“Based on the survey itself, (respondents) are saying the worst is over. But one thing I would point out, the comments told us there is uncertainty about recent price weakness and continued oversupply,” Plante said.

“The comments suggest people are still uncertain, but even if they’re uncertain, they think things will be better next year,” he added.

http://oilprice.com/Latest-Energy-News/World-News/Dallas-Fed-Reserve-Provides-Optimistic-Local-Energy-Outlook.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+oilpricecom+%28Oil+Price.com+Daily+News+Update%29

---

Attached Files

China, the world’s largest energy consumer, may have stored more oil than official estimates, according to an analysis of satellite images by Orbital Insight Inc.

Oil in storage was about 600 million barrels as of May, according to the geospatial analytics startup based in Palo Alto, California. There were about 2,100 strategic and commercial petroleum reserve tanks capable of storing 900 million barrels as of the end of 2014, according to calculations derived from photos tracking the depth of shadows visible on top of the floating lids of the giant tanks. They don’t include underground caverns.

The estimates exceed projections from forecasters including Energy Aspects Ltd., and help shed light on oil reserves that puzzle commodities traders worldwide. China’s record purchases this year have helped oil prices recover from the worst crash in a generation. The findings are also the latest example of how private technology firms are using big data and machine learning to better measure the second-largest economy, where some official data are incomplete and private gauges have vanished without explanation.

"I’m not surprised," Michal Meidan, an analyst with London-based consultancy Energy Aspects, said of Orbital’s estimate, adding that her number is over 400 million including both strategic and commercial stocks. "There is more storage available in China than the market is willing to acknowledge. Any information around this is valuable. There seems to be quite a bit of flexibility between commercial strategic storage tanks, even though official statistics do not account for all of it.”

Oil Storage

China held 301 million barrels in seven national oil storage cities as of end-2015, with a combined capacity of 442 million barrels, according to Jason Lohn, Orbital’s head of core engineering. The company mapped tank locations that may differ from those the government has acknowledged in Dalian, Dushanzi, Huangdao, Lanzhou, Tianjin, Zhenhai and Zhoushan.

Orbital’s figure is larger than China’s official estimates for strategic petroleum reserves and for commercial stocks, which are published each month by the official Xinhua News Agency’s China Oil, Gas & Petrochemicals newsletter, said Orbital Chief Executive Officer James Crawford. Nobody replied to a fax to China’s National Energy Administration Thursday seeking comment on Orbital’s estimates.

In a rare release this month, China reported adding about 43 million barrels of crude to its strategic reserves between mid-2015 and early this year. Reserves totaled 31.97 million tons in early 2016, equivalent to about 234 million barrels, the National Bureau of Statistics said in a statement that was the first government update on reserves since December.

Emergency Stockpiles

Emergency stockpiles of the second-biggest oil user have been a source of speculation among analysts and traders, who rely on customs figures and infrequent construction updates to estimate how much of the country’s imports go into strategic inventories, and for how long they will continue to fill.

China’s overall storage is about 60 percent full, “and it’s probably actually less than that because there’s probably a fair amount of new capacity since the end of 2014 that’s not yet included,” said Crawford, a former NASA scientist and Google engineer who founded the company. “It’s definitely higher than Chinese official estimates. There are some slightly higher numbers for SPR, and there are some folks who feel the Xinhua numbers may slightly understate the commercial.”

Orbital has received funding from Google Ventures, Sequoia Capital, and Bloomberg Beta, the venture-capital unit of Bloomberg LP.

http://www.bloomberg.com/news/articles/2016-09-29/satellite-data-show-china-oil-reserves-may-top-official-estimate

---

Attached Files

Libya's Arabian Gulf Oil Company (AGOCO) has increased production to 290,000 barrels per day, its chairman said on Thursday, and hopes to reach 350,000 bpd by the end of the year.

AGOCO, a subsidiary of the National Oil Corporation (NOC) that operates mainly in eastern Libya, has boosted its output from about 150,000 bpd since military commander Khalifa Haftar took control of some of the country's main oil terminals from a rival force on Sept. 11-12.

Following the takeover, the NOC opened three previously blockaded ports. On Thursday an official at one of the ports, Zueitina, said a tanker had entered to load 570,000 barrels of crude to take to Zawiya refinery in western Libya.

Clashes, protests and political disputes slashed Libya's oil output to a fraction of former levels. The OPEC member was producing about 1.6 million bpd before the 2011 uprising that toppled long-time leader Muammar Gaddafi.

NOC Chairman Mustafa Sanalla has said he hopes the opening of the ports can be a turning point. But major pipelines in western Libya are still blockaded and Libya remains politically and militarily divided.

Ibrahim Alawami, head of the NOC's measurement department, said on Thursday national production was between 450,000 and 490,000 bpd and would rise to about 500,000 bpd by the end of the month.

AGOCO Chairman Mohamed Shatwan told Reuters the company's production should reach 300,000 bpd in the coming days, barring any technical problems, adding a further 50,000 bpd by the end of 2016.

"We have an ambitious plan under which it is possible after a period to reach 400,000 bpd," he added, saying it might take up to two years to achieve that goal.

Damage to AGOCO's fields from militant attacks over the past two years was limited, he said.

Of AGOCO's five major fields Bayda remains shut because of a technical problem at Ras Lanuf, and production at Nafoura is limited to 22,000 bpd, about half of its capacity, because maintenance work and parts are needed, said Shatwan. A storage tank in Messla field that was damaged in 2011 has remained unrepaired because of the evacuation of foreign workers.

"We ask on this occasion that foreign companies return to work and carry out operations to check security, and if they do not return we will have to find another solution," he said.

Of the ports seized by Hangar's forces, Zueitina had been closed since late last year, while Ras Lanuf and Es Sider ports had been shut since 2014. The first tankers docked at Ras Lanuf last week, but Es Sider, badly damaged in fighting, needs repairs before exports can resume.

Exports have continued at a reduced level at Brega, the fourth port now under Haftar's control.

Hariga terminal in the far east of Libya, which is operated by AGOCO, has kept working relatively smoothly. Shatwan said 56 or 57 tankers had loaded there so far this year, compared to 90 tankers during the whole of 2015.

http://www.reuters.com/article/libya-security-oil-idUSL8N1C54J2

Lukoil, Russia's second biggest oil producer, is not ready to reduce its oil output but will join oil market stabilisation measures if Russia joins them, RIA news agency quoted Lukoil Chief Executive Vagit Alekperov as saying.

TASS news agency also cited Alekperov as saying that all Russian oil producers could sign a protocol on stabilising oil production. It later clarified in Alekperov's quote that he was talking about the need to sign such a protocol in case Russia decides to join the process of output stabilisation.

Oil producers' cartel OPEC agreed on Wednesday to limit its output to 32.5-33.0 million barrels per day (bpd) to prop up weak crude prices.

http://www.reuters.com/article/opec-meeting-russia-lukoil-idUSR4N1BY02O

Now that the federal government has approved Pacific NorthWest LNG, the controversial gas liquefaction facility on Lelu Island, the devil is in the details.

On Sept. 27. the federal government imposed 190 conditions on the $11.4 billion plant, which would refine gas from Northeast B.C. for shipment to Asia.

The conditions include rules for construction and operations around Flora Bank, a sensitive salmon habitat, as well as a cap on total emissions from the project.

Federal conditions also create environmental monitoring committees “comprised of Indigenous peoples and federal and provincial representatives, for the first time ever,” Environment Minister Catherine McKenna said at a news conference in Richmond.  

Some, including Northeast B.C. MP Bob Zimmer, said the conditions could be designed to make the project unfeasible—potentially avoiding a political headache for Justin Trudeau's Liberals.    

While Pacific NorthWest can now move forward, Malaysian energy giant Petronas and its partners still need to review the project to see if it makes economic sense under the conditions.

“Approving this project is one thing, building it is completely another,” Zimmer said in the House of Commons Sept. 28. “Why did the Liberals put potential poison pills in the approval with unnecessary conditions?”

Many of the conditions aim to prevent impacts on fisheries. Among the concerns are that the project’s around-the-clock construction schedule could create 24-hour daylight conditions for nearby salmon populations.

The 190 conditions include:

-limiting underwater pile driving noise to 207 decibels to avoid impacts on fish
-restrictions on lighting during construction, including a requirement to “place -reflective material on the underside of over-water infrastructure to reduce the light/dark contrast on marine waters.”  
-fisheries assessments for Northern Abalone and other species, as well as followup monitoring  
-specific emissions intensity guidelines on each LNG “train” to minimize impacts on air quality

B.C. has also agreed to support the upcoming federal climate change plan, and has committed to raising its $30 a tonne tax on carbon concurrently with other provincial governments.

Warren Brazier, an energy lawyer with Watson Goepel, said emissions will likely be the biggest hurdle for the project going forward.

- See more at: http://www.dawsoncreekmirror.ca/regional-news/lng/what-s-in-the-pacific-northwest-lng-conditions-1.2355063#sthash.Ky6rQr1B.dpuf

Canada’s Tundra Energy Marketing has struck a nearly C$1.1 billion (US$816.8 million) deal to buy a regional pipeline system from an affiliate of Enbridge Income Fund.

http://www.upstreamonline.com/live/1445620/tundra-buys-saskatchewan-system?utm_source=twitterfeed&utm_medium=twitter

US independent Chesapeake Energy has said it has entered "discussions" with the US Department of Justice after receiving a subpoena seeking information on the company's accounting practises.

http://www.upstreamonline.com/live/1445605/chesapeake-hit-with-doj-subpoena?utm_source=twitterfeed&utm_medium=twitter

Earlier this week MDN brought you the dynamite news that Rice Energy is buying out Vantage Energy for $2.7 billion.

The reason Rice bought Vantage was largely because of 85,000 acres of Marcellus leases in Greene County, PA. What we had overlooked was the fact that 27,000 of the 85,000 acres in Vantage’s Greene County portfolio was acreage they just bought from bankrupt Alpha Natural Resources.

Rice had bid $200 million for that acreage, but Vantage came along and got it for $339.5 million.

Now that Rice has locked up the Vantage acreage in addition to its own considerable holdings in Greene County, what’s left to do?

Lease more unleased acreage in Greene. Rice says there is between 20,000-40,000 unleases acres in Greene and the company is full speed ahead trying to get that acreage signed up for themselves. Note to Greene landowners: expect a landman on your doorstep soon…

http://marcellusdrilling.com/2016/09/rice-energy-ramps-up-leasing-activity-in-greene-county-pa/

Attacks on Nigeria's energy facilities by groups calling for the Delta region to receive a greater share of the OPEC member's oil wealth have cut crude production, which stood at 2.1 million barrels per day at the start of the year, by a third.

The Niger Delta Greenland Justice Mandate said it bombed the Unenurhie-Evwreni delivery line in Ughelli, Delta state, at around 01:00 a.m. (0000 GMT) on Thursday. The line is operated by NPDC, a subsidiary of NNPC.

A military source said dynamite was used to blow up the pipeline. An NNPC spokesman could not immediately be reached for comment.

It comes days after Niger Delta Avengers, which has claimed responsibility for most of the attacks on energy facilities in the region since the start of the year, said it carried out its first attack since declaring a break in hostilities in August to pursue talks with the government.

The Avengers said on Saturday there had been no progress in meeting their demands.

The Greenland Justice Mandate, which has never agreed to cease hostilities, said in a statement it had blown up the pipeline "to prove to the wicked and ungrateful multinational oil companies and their Nigerian military allies... that we own our lands".

http://www.reuters.com/article/us-nigeria-oil-idUSKCN11Z0XE

Extraction Oil & Gas LLC said it expected to raise as much as $600 million in an initial public offering, valuing the Denver-based oil explorer and producer at about $2.6 billion.

The company, based in Colorado's Denver-Julesburg basin and backed by private equity firm Yorktown Partners LLC, said it expected to price the offering of 33.3 million shares at between $15 and $18 each. (bit.ly/2dGcgVT)

Private equity backers are looking to sell some or all of their investments in energy companies after oil prices rebounded slightly from 12-year lows hit early this year.

Extraction Oil & Gas said it would list itself on the Nasdaq under the symbol "XOG" and would be called Extraction Oil & Gas Inc after it goes public.

The company intends to use proceeds from the offering to pay back debt and for general corporate purposes.

Credit Suisse Securities (USA) LLC, Barclays Capital Inc and Goldman Sachs & Co are among the underwriters to the offering.

http://www.reuters.com/article/extractionoilgas-ipo-idUSL3N1C53IX

For years, debates in the OPEC conference room were dominated by clashes between top producer Saudi Arabia and arch-rival Iran.

But as the two managed to find a rare compromise on Wednesday - with Riyadh softening its stance towards Tehran - a third OPEC superpower emerged.

Iraq overtook Iran as the group's second-largest producer several years ago but kept its OPEC agenda fairly low-profile. On Wednesday, Baghdad finally made its presence felt.

What it did, however, pleased neither Saudi Arabia nor Iran.

Iraq's new oil minister Jabar Ali al-Luaibi told his Saudi and Iranian counterparts, Khalid al-Falih and Bijan Zanganeh, in a closed-door gathering in Algiers that "it was an OPEC meeting for all ministers", a source briefed on the talks said.

Luaibi also said he didn't like the idea of re-establishing OPEC's output ceiling at 32.5 million barrels per day (bpd), according to sources in the Organization of the Petroleum Exporting Countries.

Reviving a ceiling, abandoned a year ago because of a Saudi-Iranian clash, was seen by some members as crucial in helping OPEC manage a vastly oversupplied market and prop up prices that stand well below the budget needs of most producers.

But Luaibi told the meeting the new ceiling was no good for Baghdad as OPEC had underestimated Iraq's production, which has soared in recent years.

Confusion followed, according to sources, and after a debate OPEC chose to impose a ceiling in the range of 32.5-33.0 million bpd - a decision dismissed by many analysts as weak and non-binding. OPEC's current output stands at 33.24 million bpd.

As ministers including Falih and Zanganeh emerged smiling from the room and praised OPEC's first output-limiting deal since 2008, Luaibi called a separate briefing to complain about OPEC's estimates of Iraqi output.

"These figures do not represent our actual production," he told reporters. If by November estimates do not change, "then we say we cannot accept this, and we will ask for alternatives".

Luaibi went even further and asked a reporter from Argus Media - whose data OPEC uses among other sources to compile estimates of countries' production - to disclose from where Argus' estimates were coming.

"Your sources are not acceptable. And if there is deviation from the government, then Argus will not work in Iraq," Luaibi told the Argus reporter.

DIFFICULT NEGOTIATIONS AHEAD

Luaibi's revolt shows the fragility of the OPEC deal.

Between now and November, when OPEC meets formally in Vienna, the group will have to overcome huge obstacles to agree a binding deal.

Key among them will be to establish at least some semblance of country quotas to make sure members limit global oversupply, which has helped halve prices since 2014 to below $50 a barrel.

Iran insists it wants to raise output to around 4 million bpd as it emerges from European sanctions. The Saudis have proposed that Iran freeze production at 3.7 million bpd.

Riyadh is offering to cut its own production to 10.2 million bpd from 10.7 million but most analysts argue it will fall to such a level anyway as the summer heat eases, reducing the need for cooling.

Iraq has seen spectacular gains in output in recent years and is asking oil majors to expand production further to above 5 million bpd from the current 4.7 million.

"The deal is a bit of a farce," one OPEC source said.

A source familiar with Iranian thinking said it was still positive that an agreement had been reached: "No one will offer anyone a free ride. Technical committees will work out details."

For Michael Wittner, head of oil research at Societe Generale, the decision shows Saudi Arabia is turning its back on letting the market manage supply.

"It remains to be seen how many real barrels will be removed from the market. To me, the significance is way beyond that: they all sat down in a room and made a decision."

http://www.reuters.com/article/us-opec-meeting-iraq-idUSKCN11Z1JH

KKR and Venado Oil and Gas, LLC today announced a partnership to consolidate proven assets in the Eagle Ford Shale of South Texas. The partnership is principally funded by KKR’s Energy Income and Growth Fund I (“EIGF”).

Venado is led by CEO Scott Garrick and a core team of individuals who have operated in the Eagle Ford since the play’s inception. Venado intends to apply its expertise to acquire and enhance Eagle Ford assets through a focus on operational efficiency, technical innovation and strong community relations.

David Rockecharlie, Member and Head of Energy Real Assets (“ERA”) for KKR, stated, "We have known Scott for many years and believe he and his team have the experience and differentiated business approach necessary to acquire attractive Eagle Ford assets and enhance long-term value through superior technical and operational execution. KKR has a long history investing in the Eagle Ford, and we look forward to expanding our existing Eagle Ford asset position in partnership with Venado.”

Scott Garrick, CEO of Venado, added, "We are excited to partner with KKR in the Eagle Ford, where we both see the opportunity to build a large scale, long-term business. Both Venado’s management and KKR have been active in the Eagle Ford since the early phase of development, and we share the same vision of the next phase of its evolution. This provides an ideal foundation for a strong partnership.”

Venado’s business plan is a natural fit within KKR ERA’s asset-based investment strategy that provides flexible capital solutions to upstream operators. KKR has made more than ten investments in the Eagle Ford to date. KKR ERA manages a portfolio of oil and gas assets in numerous unconventional and conventional resource areas across the United States, including developments in the Eagle Ford, Bakken, Barnett, DJ, Haynesville, Marcellus, Permian and Utica.

http://www.businesswire.com/news/home/20160929005397/en/KKR-Venado-Form-Partnership-Pursue-Oil-Gas

The $10 billion Angola LNG project, led by U.S. energy giant Chevron, has resumed production following a planned two-month shutdown.

“I can confirm that Angola LNG has resumed production and sales of LNG from its plant in Soyo,”  an Angola LNG spokeswoman told LNG World News on Thursday.

The 5.2 million tons per year liquefaction plant was shut down in July as part of the restart and commissioning programme.

To remind, the facility was closed for more than two years due to a major rupture on a flare line that occurred in April 2014.

It restarted operations again in May with four cargoes shipped from the facility until the maintenance began in July.

Angola LNG is a joint venture between Sonangol (22.8%), Chevron (36.4%), BP (13.6%), Eni (13.6%), and Total (13.6%).

http://www.lngworldnews.com/angola-lng-resumes-production/

Preliminary results from Origin Energy’s Amungee NW-1H horizontal exploration well in Australia’s Northern Territory have been “encouraging” according to one of its joint venture partners.

http://www.upstreamonline.com/live/1445433/promising-signs-in-beetaloo-test?utm_source=twitterfeed&utm_medium=twitter

Falcon Oil & Gas Ltd.: Update on Hydraulic Stimulation of Amungee NW-1H

Falcon Oil & Gas Ltd.  is pleased to provide the following technical update regarding the hydraulic stimulation of the horizontal Amungee NW-1H well in the Beetaloo Basin, Australia.

Highlights of preliminary results from the Amungee NW-1H horizontal exploration well:

-Completion of 11 hydraulic stimulation stages along the 1,000 meter horizontal section in the Middle Velkerri B shale zone
-Stimulation treatments were successfully executed, with 95% of programmed proppant placed
-Flow back of hydraulic fracture stimulation fluid to surface continues
-Early stage gas flow rates through the 4.5" casing are encouraging
-The rates regularly exceed 1 million standard cubic feet per day ("MMscf/d"), and consistently range between 0.4 - 0.6 MMscf/d
-A workover rig is being mobilised to run production tubing and to commence an extended production test

Philip O'Quigley CEO of Falcon commented on the results:

"Preliminary results of the first horizontal exploration well in the Beetaloo are very encouraging. The planned testing programme utilising a production tubing string aims to evaluate the potential gas flow rate of the well.

We look forward to updating the market when further results become available."

This announcement has been reviewed by Dr. Gábor Bada, Falcon Oil & Gas Ltd's Head of Technical Operations. Dr. Bada obtained his geology degree at the Eötvös L. University in Budapest, Hungary and his PhD at the Vrije Aniversiteit Amsterdam, the Netherlands. He is a member of AAPG and EAGE.

http://www.marketwired.com/press-release/falcon-oil-gas-ltd-update-on-hydraulic-stimulation-of-amungee-nw-1h-tsx-venture-fo-2162410.htm

Russia's Gazprom plans to launch third LNG train at Sakhalin-2 in 2021

Gazprom said on Thursday it plans to launch a third liquefied natural gas (LNG) production train at the Sakhalin-2 LNG plant in 2021, possibly fed by a newly drilled field, as Russian companies seek to boost their share of the global LNG market.

Russia accounts for less than 5 percent of the global LNG market but new plants are being built or considered by Novatek, Gazprom and Rosneft.

Located at Prigorodnoye on Sakhalin island, Sakhalin-2, Russia's sole LNG plant, operates two production lines with a combined capacity of 10 million tonnes of LNG per year. The third train should add another 5 million tonnes.

An obstacle to expanding the plant, operated by Gazprom, Royal Dutch Shell, Japan's Mitsui and Mitsubishi, is the resource base.

Shareholders are considering two options: buying gas from the Sakhalin-1 project led by ExxonMobil, developing new resources or a combination. Yet, Sakhalin-1, where the state oil firm Rosneft is also a shareholder, is aiming for its own LNG plant.

Vsevolod Cherepanov, a Gazprom board member, said that the first exploitation well at the Yuzhno-Kirinskoye field, viewed as a source of fuel for Sakhalin-2 expansion, aimed to be drilled in 2017, with production to start in test mode in 2021 and in full operation in 2022.

"The plateau of 21 billion cubic meters (bcm) a year is expected to be reached in ten years. We will start from 3 bcm," Cherepanov said. For the third train to operate, a total of 7-8 bcm of gas per year is needed, he added.

"We also have Kirinskoye field with (expected) 5.5 bcm (a year)... (But) 50 percent of volumes is enough to launch the third train. We will increase volumes a year after that."

Cherepanov said talks were ongoing with a Chinese company over a drilling platform for Yuzhno-Kirinskoye, but Gazprom may also drill on its own.

In 2015, the United States restricted exports, re-exports and transfers of technology and equipment to the Yuzhno-Kirinskoye field, making it harder to develop.

Gazprom executives have said they will find a way to bring the field on stream. The company said this month it had discovered a new gas deposit in the Sea of Okhotsk near Sakhalin island.

Cherepanov said that based on preliminary information from one well, the field could contain over 40 bcm of gas, yet to be proved, but could not replace Yuzhno-Kirinskoye as a source for Sakhalin-2 expansion.

PERSPECTIVES

On Thursday, a LNG tanker could be seen on its way from the facility in Prigorodnoye to Asia-Pacific markets. It takes 2-3 days to reach Japan or South Korea, major LNG consumers.

Olivier Lazare, head of Royal Dutch Shell in Russia, said on Wednesday that shareholders at Sakhalin-2 had agreed on the strategy of marketing LNG from the planned third train. He declined to provide details.

Two sources close to the project said that there were no commercial talks with buyers yet, though one source said shareholders has agreed on general principles for marketing.

The proximity of Asian markets is behind the idea of Sakhalin-1 shareholders to build their own LNG facility, with initial capacity of 5 million tonnes a year and start after 2023.

"In the current pricing environment, it (the LNG project) remains competitive but challenging," a source close to the planned plant, known as Far East LNG, said.

Asian LNG spot prices are under $6 per mmBtu, down from more than $20 between 2010 and 2014, due to soaring output from Australia and the United States.

Given low prices were putting on hold plans for LNG facilities, there could be a deficit on the market from 2023, according to Mark Gyetvay, chief financial officer with Novatek.

"If we look at Russia increasing its supplies of LNG it is reasonable to assume that Sakhalin LNG can expand their project," Gyetvay told Reuters this month.

Novatek plans to ship its first LNG cargoes from a new facility in Russia's Yamal peninsula next year and is considering building its second LNG facility, Arctic LNG-2.

"It's ironic that nobody raises these types of questions for Australian LNG projects," Gyetvay said, when asked if the was room for new Russian projects on world markets.

http://www.reuters.com/article/us-russia-oil-forum-lng-idUSKCN11Z0J6

---

Attached Files

The Pennsylvania Supreme Court has decided that Act 13, the state Legislature's 2012 attempt to accommodate the shale gas industry, is an unconstitutional "special law" that benefits specific groups or industries.

The court, in a decision Wednesday, said Act 13's provisions limiting notification of spills and leaks to public water suppliers but not to private well owners, and its "physician gag order" restricting health-care professionals from getting information about drilling chemicals that could harm their patients, violate the state constitution's prohibition against special laws.

The court also struck down the provision that allows companies involved in transporting, selling, or storing natural gas to seize privately owned subsurface property through eminent domain.

And the decision prohibits the Public Utility Commission from reviewing local ordinances and withholding impact-fee payments from municipalities that limit shale gas drilling.

"The decision is another historic vindication for the people's constitutional rights," said Jordan Yeager, lead counsel representing the Delaware Riverkeeper Network and Bucks County municipalities in the case. "The court has made a clear declaration that the Pennsylvania legislature cannot enact special laws that benefit the fossil fuel industry and injure the rest of us."

Marcellus Shale Coalition president David Spigelmyer praised Act 13 as a "commonsense bipartisan law that modernized our oil and natural gas regulatory framework," and said he was disappointed with the court's ruling, "which will make investing and growing jobs in the commonwealth more - not less - difficult without realizing any environmental or public safety benefits."

Neil Shader, a state Department of Environmental Protection spokesman, said the department's lawyers were reviewing the ruling to determine its impact. He said the eventual need to notify private well owners of drilling spills and leaks affecting their water supplies could have the biggest impact on department operations.

http://www.philly.com/philly/business/energy/20160929_Law_unfairly_gave_shale_drillers__special__treatment__Pa__Supreme_Court_rules.html

Libya, struggling to revive its energy industry after five years of armed conflict, restarted production at an eastern oil field and was poised to export crude from the port of Zueitina for the first time since November.

Germany’s Wintershall AG began pumping at Concession 96 in the As Sarah field on Sept. 16 and is producing 35,000 barrels a day, a company official said Wednesday in an e-mailed response to questions. Wintershall restarted production at the request of Libya’s National Oil Corp. and will send oil from the field to Zueitina for export, the official said.

The tanker Ionic Anassa is due to arrive at Zueitina on Oct. 3, according to a signal from the ship. It would be the first vessel to load crude there since force majeure restrictions were lifted earlier this month.

“Libya’s output is showing the first signs of a credible increase,” said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland.

Libya, with Africa’s largest crude reserves, produced 260,000 barrels a day last month, data compiled by Bloomberg show. It has gradually boosted output and is now pumping 485,000 barrels a day, National Oil Corp. Chairman Mustafa Sanalla said in an interview in Algiers on Wednesday as OPEC members prepared to meet in the Algerian capital. The country produced about 1.6 million barrels a day of oil before the 2011 uprising that ousted longtime leader Moammar Al Qaddafi, but output has withered as rival militias vied to control energy facilities.

Three Ports

The NOC removed force majeure at Zueitina and the export terminals of Es Sider and Ras Lanuf on Sept. 14, after reaching a deal with Khalifa Haftar, commander of the armed forces controlling the terminals. Force majeure, a legal status protecting a party from liability if it can’t fulfill a contract for reasons beyond its control, was declared after the ports came under attack. Ras Lanuf, Libya’s third-biggest oil port, resumed exports this month. Zueitina will ship two oil cargoes by the end of the month, and operations at the port are normal, the NOC’s Sanalla said.

Renewed crude shipments from Zueitina would give an additional boost to Libya’s economy as rival administrations toil to form a unified national government. Islamic State militants exploited a power vacuum in Libya after the country split between two rival administrations in 2014.

Wintershall is part of the world’s biggest chemicals company, BASF SE, which also operates in plastics, agriculture and natural gas.

http://www.bloomberg.com/news/articles/2016-09-28/libya-s-oil-output-nudges-higher-as-wintershall-resumes-output

---

Attached Files

Russia, the world’s largest energy exporter, is on course to pump a post-Soviet record amount of oil in September, adding as much as 400,000 barrels a day to the country’s production. The output surge comes as OPEC nations meet in Algeria, with discussions to curb a global surplus at the top of their agenda.

Russian crude and condensate production is set to average 11.1 million barrels a day this month, compared with 10.7 million barrels a day in August, according to preliminary Energy Ministry data compiled by Bloomberg. That would surpass the 10.9 million barrels a day January production level, which officials consideredas a potential cap during failed talks among producer nations in April.

Now they’re reviving those efforts. Russia and members of the Organization of Petroleum Exporting Countries are meeting this week in Algeria to discuss scenarios for potentially curbing production to help stabilize an over-supplied oil market. The talks may not produce a decision, in part due to the different views of regional rivals Saudi Arabia and Iran. The April discussions in Doha fell apart after Saudi Arabia insisted Iran join the effort to limit production instead of being allowed to return output to a level prior to the imposition of international sanctions, which were lifted in January.

Russia would consider a range of freeze options, though it would prefer capping its output at the most recent levels, according to Energy Minister Alexander Novak.

"We will look at different options and discuss them with OPEC", Novak told reporters late yesterday after bilateral meetings with Saudi Arabia, Iran and Venezuela. "Undoubtedly, September would be the month that objectively would suit us best.”

Siberian Fields

The increase in Russian crude output is being driven by the start of new fields in the country’s far north and the Caspian Sea region. Rosneft PJSC, along with Gazprom Neft, the oil unit of Gazprom PJSC, began commercial production from the East Messoyakha venture earlier this month. Rosneft plans to start the Suzun field, a separate project in Siberia, next month, according to Chief Executive Officer Igor Sechin. Lukoil PJSC’s Caspian Filanovsky deposit has started a second well, which is now in test production, and is on track to grow to a peak of 120,000 barrels a day next year, according to the company press service.

Russia produced record annual average 11.4 million barrels a day in 1987, before the break-up of the Soviet Union, according to BP statistics. Bloomberg’s monthly estimate for September production is based on daily data from the Energy Ministry’s CDU-TEK for the first 27 days of the month, and then the average of the rate over the last week for the final three days.

Russian production has every opportunity to continue growing, potentially adding another 2-3 percent over the next 12 months if the government doesn’t raise taxes on the industry, according to Artem Konchin, an oil analyst at Otkritie Capital in Moscow. Rosneft and Lukoil, the nation’s two largest producers, have shifted their guidance on output to positive territory as they start new fields and increase spending on core production in Siberia, he said in an e-mail.

“If the freeze happens at current levels, then the bar is obviously higher,” Konchin said. “Technically, I’m not sure how that whole thing will be implemented -- no one is sure.”

http://www.bloomberg.com/news/articles/2016-09-28/russia-smashes-post-soviet-oil-supply-record-as-opec-weighs-curb

---

Attached Files

U.S. crude oil refinery inputs averaged over 16.3 million barrels per day during the week ending September 23, 2016, 253,000 barrels per day less than the previous week’s average. Refineries operated at 90.1% of their operable capacity last week. Gasoline production decreased last week, averaging about 9.6 million barrels per day. Distillate fuel production decreased last week, averaging 4.7 million barrels per day.

U.S. crude oil imports averaged over 7.8 million barrels per day last week, down by 474,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.8 million barrels per day, 6.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 778,000 barrels per day. Distillate fuel imports averaged 144,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week. At 502.7 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 2.0 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 1.9 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.5 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories remained unchanged from last week.

Total products supplied over the last four-week period averaged over 20.0 million barrels per day, up by 2.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 3.6% from the same period last year. Distillate fuel product supplied averaged over 3.5 million barrels per day over the last four weeks, down by 6.4% from the same period last year. Jet fuel product supplied is up 0.9% compared to the same four-week period last year.

Cushing down 631,000

http://ir.eia.gov/wpsr/wpsrsummary.pdf

---

Attached Files

                                                                        Last week     Week before       Last year

Domestic Production '000.................. 8,497               8,512                 9,096
Alaska ............................................     454                  464                     469
Lower 48 ........................................ 8,043               8,048                  8,627
Exports ...........................................     507                  588                     526

http://ir.eia.gov/wpsr/overview.pdf

SandRidge Energy, Inc. provided an update of its Mid-Continent and Colorado operations as well as full year 2016 capital expenditure/operational guidance and hedging. The Company will release third quarter 2016 earnings results on November 8th, with a related conference call on November 9th (details included below).

Operations Update

2016 High-graded Harvest of Mid-Continent Plus Initial Development in North Park Niobrara

Running one drilling rig for most of 2016 in the Mid-Continent and one rig through August in the North ParkNiobrara, SandRidge is allocating capital across both of its active areas, generating cash flow stability while advancing drilling and completion innovations.

SandRidge plans to invest $225 to $255 million of capital expenditures in 2016, with $56 million spent during the second quarter and $110 million during the first half of 2016, excluding acquisitions and abandonment liabilities. Full year total production is estimated to be between 18.9 -19.3 MMBoe, with 5.0 MMBoe produced during the second quarter and 10.5 MMBoe during the first half of 2016. Thirty seven horizontal laterals are planned to be spud during the year, with 26 in the Mid-Continent and 11 in North Park. These lateral counts include four extended laterals, one dual extended lateral, and two full section development projects in the Mid-Continent, and one extended lateral in North Park.

In the Mid-Continent, encouraging development and testing of additional zones, notably the Chester overlying the Mississippian, has grown the existing multiyear drilling inventory, taking full advantage of existing leasehold and infrastructure. The Mid-Continent continues to benefit from improved reservoir characterization and primarily multilateral and extended lateral drilling is planned.

Extended laterals and multilaterals are also envisioned as part of the North Park Niobrara development. The Company recently drilled and is currently completing a Niobrara extended lateral which is expected to be online in the fourth quarter of 2016. Optimized well spacing, multiple initiatives to further lower costs per lateral, and incremental productive zones are all targeted upsides.

Mid-Continent Assets in Oklahoma and Kansas

Drilled 18 laterals in 1H’16, bringing 26 laterals online
Successful first dual extended lateral, the Dettle 1-29 20H, produced a 30-Day IP of 1,099 Boepd1 (60% oil) and was drilled and completed for approximately $1.7MM per lateral2 or $368/ completed ft
1H’16 2016 Mississippian completed well costs averaged $1.9MM per lateral or $418/ completed ft, ~19% reduction from all of 2015
Successful Chester drilling with most recent 7 laterals averaging a 30-Day IP of 487 Boepd (60% oil), expanding drilling inventory on existing leasehold footprint

SandRidge has been actively developing the Mississippian and adjacent oil and gas reservoirs since 2010, drilling over 1,600 horizontal producing wells in Oklahoma and Kansas. While the Company has a combined 1.1 million acres in all of Oklahoma and Kansas, its current drilling activity is concentrated within its 462,000 acres of focus area leasehold in Oklahoma, 64% of which is held by production. The Company’s Mid-Continent assets averaged approximately 52,000 barrels of oil equivalent per day (25% oil, 24% NGLs, and 51% natural gas) during the second quarter of 2016.

1) Calculated as the highest consecutive 30-Day average production rate during the early life of a well

2) A “lateral” is defined as a single one-mile section lateral

SandRidge pioneered the use of multilaterals in the Mississippian, where typically two to four laterals are drilled from a single vertical wellbore. This approach reduces the average drilling and completion cost per lateral, while further reducing expenses by utilizing shared surface facilities and artificial lift systems.

During the first six months of 2016, the Company continued to develop its Mid-Continent asset by drilling 18 laterals and bringing 26 laterals online. The Company successfully completed its first ever dual extended lateral in the Mississippian formation, currently producing from 18,426 feet of completed lateral. The Dettle 2408 1-29 20H was drilled and completed for just under $1.7 million per lateral and produced a 30-Day IP of 1,099 Boepd (60% oil). Separately in the Chester, an extended lateral development project, the Earl 2414 1-11H 14H, yielded a 30-Day IP of 560 Boepd (62% oil) with a drilling and completing cost of $2.16 million per lateral.

Niobrara Asset in North Park Basin, Jackson County, Colorado

Drilled eight laterals in 1H’16, bringing five laterals online
First SandRidge well, the Gregory 1-9H, produced an initial 30-Day IP of 550 Boepd (89% oil); online for over six months, the Gregory has produced a total of ~73 MBoe and averaged 346 Boepd the last 30 days
Four additional 1H’16 wells produced an average 30-Day IP of 460 Boepd (91% oil)
Successfully drilled and currently completing first extended lateral well (a two mile lateral), expected to be brought online in Q4’16
Three additional wells brought online in 2H’16 are in various stages of evaluation, having been designed to test spacing, artificial lift methods, and stimulation concepts, including the use of slickwater frac fluids

SandRidge acquired its oil rich Niobrara properties in December 2015 and began development in January 2016. The Niobrara is located at vertical depths between 5,500 and 9,000 feet with gross pay thickness of 450 feet to 480 feet. The Company holds 129,000 net acres in the Niobrara play, 55% of which is held by production or held by federal unit. This land position comprises a dominant footprint in the North Park Basin where the Niobrara shale is geologically similar to but thicker and oilier than that of the actively developedDenver–Julesburg or “DJ” Basin. The Company is preparing applications for two additional federal units and plans to shoot additional 3D seismic surveys in early 2017 to extend and complement the existing 54 square mile 3D survey.

Initial development plans include 1,300 Niobrara drilling locations. The properties averaged approximately 1,200 barrels of oil per day during the second quarter of 2016, impacted by pad drilling and some planned shut-ins of existing producers while new wells were being drilled and completed on the same pad.

At year end 2015, 16 Niobrara wells already delineated a large contiguous producing area, supporting 108 PUD locations at SEC prices. At the end of 2015, 28 million barrels of oil equivalent were booked as proven reserves (81% oil).

During the first six months of 2016, the Company drilled eight horizontal laterals, bringing online five laterals. While horizontal drilling with single laterals has been the standard to date, a two mile extended lateral was successfully drilled in July 2016 and is currently being completed. In addition, other Niobrara benches will be appraised and optimal well spacing tests will be conducted in 2016 and 2017. Also in 2017, the Company will expand application of extended laterals.

Multiple cost reduction and efficiency efforts have steadily reduced well costs in the early development of our Niobrara asset. Drilling optimization efforts include improving drilling mud and bit systems, presetting surface casing and drilling extended laterals. Numerous fracture stimulation enhancements are also underway. Efforts to optimize completions have included the refinement of water and sand volumes, number of frac stages, stage length, and cluster spacing. The Company now has line of sight to achieving drilling and completion costs below $4 million per lateral.

2016 Operational Guidance

The Company is providing an update to its previously disclosed 2016 capital budgeting guidance of $285 million, estimating that it will now spend $225 to $255 million for the full year. Additionally, the Company is initiating total 2016 production guidance of 18.9-19.3 MMBoe.

http://boereport.com/2016/09/28/sandridge-energy-inc-provides-operations-update-and-full-year-2016-guidance/

The Chinese company Wison Offshore & Marine, the upstream arm of the Wison Group that focuses on services and capital investment in the oil and gas industry, today announced its natural gas floating liquefaction unit (FLNG) has successfully completed its performance test at the Wison yard in Nantong, China. This marks for the first time LNG has ever been produced onboard a floating facility.

The company’s services cover the full life cycle of project delivery, from facility design and engineering, to project management, construction, commissioning and operations.

"The performance test was carried out in the presence of classification societies, the client Exmar [for which Wison provided turnkey services] and all the relevant parties. During the 72-hour performance test, the excellent performance of the FLNG ensured all key design requirements and production capacities (guaranteed performance) were achieved for the unit’s operational effectiveness," Wison said.

The FLNG project is being delivered by Wison under an engineering, procurement, construction, installation and commissioning (EPCIC) contract with Exmar. All systems on the FLNG have been commissioned and tested without leaving the shipyard by using LNG to supply gas without connection to a pipeline, Wison said. Conducting gas trials and performance testing in the shipyard shortened the time required for project completion.

"Floating LNG production, storage and transportation facilities are emerging markets with large potential," said An Wenxin, the senior vice president of Wison Offshore & Marine. "The small-scale FLNG being delivered by Wison has design advantages with low-cost and compact features, providing the market with more economical and efficient solutions."

http://www.thenational.ae/business/energy/a-world-first-for-chinese-lng-marine-platform-builder

The chief executive of Vitol, the world's largest oil trader, said on Wednesday he did not see the global oil market tightening before 2018.

He also expressed scepticism over the significance of a potential OPEC deal on freezing production.

"If you freeze production at a level that is clearly above demand ... is that bullish?" Ian Taylor asked a Bloomberg conference in London.

Investors were closely watching an OPEC meeting in Algiers this week anticipating that the cartel would finally agree a plan to tackle a global crude surplus that sent oil prices tumbling in 2014. But so far, the talks have remained just that.

Taylor said it would be difficult for the market to rebalance with underwhelming global economic growth meeting slightly better-than-expected production.

He expects oil demand growth this year at 1.2 million-1.3 million barrels per day and that the liquefied natural gas market would remain long until 2022.

http://www.reuters.com/article/vitol-oil-idUSL8N1C430I

Asian crude oil buyers remained cautious, eyeing details of an OPEC deal after the oil-producers group agreed for the first time since 2008 to reduce output in an oversupplied market.

Global oil prices held onto gains on Thursday after soaring 6 percent in the previous session as the Organization of the Petroleum Exporting Countries agreed on Wednesday to reduce output to a range of 32.5-33.0 million barrels per day.

However, how much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.

"We have to wait and see whether they will take real action and how long it would last," said Kim Woo-kyung, spokeswoman at SK Innovation, owner of South Korea's largest refiner.

The size of the proposed cut is not significantly huge, she said, but added that the deal could support prices, increase the value of refiners' crude inventories and margins by pushing up oil product prices.

OPEC's new target represents an implied cut of 0.5-1.0 million bpd, although the actual cut could easily be much smaller at 0-0.5 million bpd depending on whether Libya and Nigeria can recover from supply disruptions, Societe Generale's oil analyst Michael Wittner said.

The OPEC deal is unlikely to affect Middle East crude supplies to term customers in Asia for next year, but may crimp additional volumes that producers have been offering throughout 2016, traders said.

"They've been giving incremental volumes so maybe less for next year," said a trader with a North Asian refiner who declined to be named as he was not authorised to speak to media.

Still, robust oil demand in Asia has absorbed much of the increase in OPEC production and may provide little impetus for OPEC producers to cut output unless demand drops.

"It has historically taken a fall in oil demand to ensure quota compliance, as in that case, production is forced lower by a decline in refinery intake around the world. This is not the case today with resilient demand growth," Goldman Sachs analysts said.

Asian refiners' crude demand has been good this year and are expected to hold steady unless there are major changes in refining margins or crude prices set by producers, the trader said.

Higher oil prices could also encourage U.S. shale producers to increase output and fill in supply gaps left by OPEC, traders said.

"An amply supplied market will continue to allow these importers to pick and choose from a broader array of suppliers, though given current refinery configurations the dependence on Middle Eastern crudes will continue," BMI Resarch analyst Peter Lee said.

http://www.reuters.com/article/asia-oil-opec-idUSL3N1C51VW

Last spring, Statoil ASA announced it had used the same oil well design and components to drill three reservoirs for the price of one.

While the specs for Norwegian Sea drilling might provoke reactions akin to the oil field’s name—the Snorre—such standardized pipes and casings could hold the key to a pervasive mystery about today’s energy market: Why is everyone still drilling when prices are in the basement?

Even as oil producers have planned $1 trillion worth of spending reductions between 2015-to-2020—cutting staff, delaying projects, and squeezing contractors—they’ve continued to green-light new wells from the Norwegian Sea to Brazil, and from Uganda to the Gulf of Mexico. Those initiatives mean oil production will continue to grow, adding to the supply glut and putting downward pressure on prices.

It’s a development that has both baffled and frustrated the world’s biggest producers of crude, who have been waiting for lower prices to force a rollback of global production. They have largely blamed the resilience of the world’s oil drilling on U.S. shale producers, as well as efforts to maintain market share, but the Snorre and other projects like it suggest there may be another–much more boring–culprit at fault.

That's because oil majors' urgent mission to slash costs includes standardizing the components used in drilling for oil–a development that has helped turn unprofitable wells into moneymakers, protected bottom lines, and allowed companies to keep pumping even in the face of crude prices that have more than halved over the past three years.

“One might wonder how it is possible that with expenditures being cut dramatically in the upstream industry, output is still growing in many parts of the non-OPEC world while the costs of future projects are declining,” analysts at JBC Energy GmbH wrote earlier this year. “One of the key topics in this respect is industry standardization.”

While oil traders have been pondering the prospect of a production freeze from OPEC, which has so far ramped up production to seize market share and force upstart shale players out of business, they’ve paid scant attention to cooperation already taking place across the industry.

Earlier this year the heads of some of the world’s biggest oil majors, including Saudi Aramco, BP Plc, Repsol SpA, and Statoil, met behind closed doors to discuss a push to cut costs by standardizing the equipment used in exploration and production. Other joint projects are already under way, meaning everything from the ‘Christmas Tree’ collections of valves and spools used in oil wells, to light bulbs, and engineering contracts are now up for standardized treatment.

It’s a sharp turnaround from the heady days of the mid-2000s when oil reached more than $145 per barrel. Back then, nascent standardization efforts were primarily aimed at speeding up lead times—the interval between the discovery of oil and when drilling commences—in order to make up for a shortage of engineers and other energy industry professionals.

“People were rushing to get hydrocarbons into the market. If something wouldn’t work, you could just throw more money at it,” said Rod Christie, president and chief executive of Turbomachinery at GE Oil & Gas. “Today that’s not an option. Everything has to be more efficient.”

Now, lead times and costs are again at the fore—but for very different reasons. With the price of oil dipping to $26.21 in February and currently hovering around $45 a barrel, attaining maximum production using the least amount of time and resources is crucial.

“Time is money in this business,” said Kristin Nergaard Berg, DNVL Gas AS project manager for a joint industry effort to standardize sub-sea processing. “The earlier you start production, the better the net present value of your project is.”

It’s a far cry from the way things used to be done, when drillers would often order costly custom fittings tailor-made for individual wells. Ordering standardized parts can allow the companies to pre-stock components and rapidly sign contracts, letting them ramp up production at a faster rate and cheaper cost—similar to the creation of the standardized railway gauges that helped spur a boom in train traffic.

Nergaard Berg estimates that standardization of sub-sea forgings alone—the massive steel spools used in deepwater drilling—has resulted in a 30 percent reduction in project lead times. Christie, of GE Oil & Gas, also reckons that standardization can lower drilling expenses by an average of 30 percent.

At Statoil, the three wells drilled at its Snorre B platform cost an average 170 million kroner ($21 million) compared with about 490 million kroner for previous projects, according to the Stavanger, Norway-based company. That means oil obtained by the platform, which began pumping some 80,000 barrels a day, costs an average of $10 a barrel.

About 100 miles south of New Orleans, BP has more than halved the costs stemming from a massive floating oil platform known as Mad Dog. While the company is benefiting from a steep reduction in the cost of drilling services and commodities such as steel, a “large chunk of savings has been driven by simplification and standardization,” Goldman Sachs Group Inc. analysts said in research published this month.

“Once FX variations have been factored in, we expect the majority of the projects to be more cost competitive vs. U.S. shale,” the analysts led by Henry Tarr said. “Factoring in the new cost deflation drives breakevens for deepwater the most.”

Such standardization efforts are likely unleashing a wave of downward pressure on oil production costs, according to Goldman’s analysis. That’s helped keep expenses low and production high, forcing oil prices lower thanks to the stubborn glut in supply.

“We expect the majority of the projects to be more cost competitive vs. U.S. shale,” the Goldman analysts said, with deepwater drilling to benefit the most from standardization.

Overall, oil majors have taken a chainsaw to expenses, reducing spending for the 2015-to-2020 period by $1 trillion, according to estimates from consulting firm Wood Mackenzie Ltd.

“The oil industry has often been criticized as being behind other industries in terms of the implementation of available technology,” said the analysts at JBC. “This is beginning to change.”

http://www.bloomberg.com/news/articles/2016-09-28/how-actual-nuts-and-bolts-are-bringing-down-oil-prices

---

Attached Files

Hundreds of workers have been laid off in Norway amid strike action by Industri Energi.

The staff made redundant are from Baker Hughes, Schlumberger and Halliburton.

According to reports, the majority of the employees who have lost their jobs are from Baker Hughes.

Strike action has been ongoing in Norway since last week.

The companies involved are alleged to have claimed there is simply not enough work for staff as drilling operations have been halted because of the strike.

Industri Energi said pressure was being put on the workers through job cuts to give up on strike action.

Since the industrial action began there have been no discussions between the companies or unions.

https://www.energyvoice.com/oilandgas/north-sea/120439/hundreds-workers-laid-off-amid-norway-strike-action/

Italian oil firm Eni has approached banks for billions of dollars to finance a huge offshore gas development in Mozambique, a significant step in getting a long-delayed project off the ground, the company and sources said.

Eni confirmed it met bankers in London last week about project financing to develop the Coral field, part of the huge reserves discovered six years ago in the Area 4 concession off the Mozambican coast.

"It's running into billions of dollars," one source familiar with the financing told Reuters, adding banks were also looking for credit guarantees from foreign governments, including Britain and China.

Banks are likely to respond within three to four weeks with terms of loans they are willing to provide, one of the last stages before Eni can make a final investment decision (FID) on the project, two sources close to the deal said.

Eni said it hoped to announce a FID by the end of this year.

Some lenders may be concerned about involvement in a project in Mozambique, given recent clashes between opposition guerrillas and government forces and financial scandals.

The International Monetary Fund (IMF) is in Mozambique this week to try to restore trust between President Filipe Nyusi's government and international lenders after more than $2 billion in secret loans came to light this year.

The IMF has suspended its own lending to the southeast African country, insisting on external scrutiny as a precursor to resuming financial aid.

"The biggest challenge is Mozambique country risk," one of the sources said.

Reserves discovered in Mozambique's Rovuma Basin in recent years amount to some 85 trillion cubic feet, one of the largest finds in a decade and enough to supply Germany, Britain, France and Italy for nearly two decades.

The gas offers Mozambique an opportunity to transform itself from one of the world's poorest countries into a middle-income state and a major global liquefied natural gas (LNG) exporter.

Negotiations with operators Eni and U.S. firm Anadarko have dragged on for years due to disputes over terms and concerns about falling energy prices.

However, there have been several signs of significant progress in recent months.

Eni has struck a deal with Samsung Heavy to provide a floating LNG platform to process the gas from the Coral field, which will be sold to BP.

Eni has also wrapped up long-running talks to sell a multi-billion dollar stake in other fields in Area 4 to Exxon Mobil, sources told Reuters last month.

In 2013, Eni sold 20 percent of its Area 4 licence to China's CNPC for $4.2 billion but since then oil and gas prices have come down by more than half.

Anadarko's $24 billion onshore LNG project is expected to lag Eni's and its FID is unlikely this year.

http://finance.yahoo.com/news/eni-asks-banks-billions-finance-130618435.html?soc_src=social-sh&soc_trk=tw

Freeport-McMoRan’s bondholders are creating a potential obstacle for a $2-billion asset sale designed to inject cash into the debt-laden commodities producer, according to people with knowledge of the matter.

Some of the creditors want more money and greater protection for  allowing the sale of oil and gas assets to Anadarko Petroleum – a proposal that requires changes to Freeport’s existing agreement with the lenders. Freeport, which wants to keep the debt on its own balance sheet even as the assets shift to the buyer, is seeking majority approval from five sets of bondholders who together own $2.3-billion of notes to complete the asset sale.

Freeport has been struggling to lift earnings amid a two-year long commodities rout and had its credit ratings cut to  junk earlier this year as it grapples with more than $18-billion of debt. The company announced the sale of its Gulf of Mexicoassets to Anadarko this month in a move that would allow it to cut debt and clean up its balance sheet.

The bondholders are demanding a bigger consent fee, a higher interest rate on the debt and additional protective covenants to approve the sale, according to a creditor letter to the company obtained by Bloomberg. Without that, they want the debt to move with the assets to Anadarko, which has a stronger credit profile than Freeport. The dissenting creditors together own $1.1-billion of the notes, according to the September 22 letter.

PUSHING AHEAD

Freeport CFO Kathleen Quirk said the company plans to push ahead with the sale of its assets to Anadarko even without the consent of the bondholders. If it can’t secure bondholder consent for the proposed deal, Freeport will instead strike a merger with its subsidiary Freeport-McMoRan Oil & Gas, the entity that issued the bonds. That deal would allow for the transaction with Anadarko to take place while keeping the debt on the Freeport balance sheet, she said.

“There is no reason” for the company to offer better terms to bondholders, Quirk said. Freeport is offering the creditors holding about $2.3-billion of bonds 25 basis points, or about $2.50 for every $1 000 to obtain the covenant amendment approval.

But law firm Paul, Weiss, which is representing a majority of bondholders in at least two of the series of notes, argues thatFreeport’s alternate plan isn’t allowed under the company’s current credit pact because it’s a “related transaction," according to the people with knowledge of the discussions.Paul, Weiss has said Freeport’s credit pact doesn’t allow it to directly or indirectly sell the assets unless the debt is assumed by the buyer, the people said, asking not to be identified because the matter is private.

The bondholders also complained that the company neglected to inform them of all the facts they needed to make an informed decision on whether to approve the sale, the letter showed.

Freeport has already had to extend a consent deadline and the next one is set to expire on Wednesday, according to company statements.

Oil halted losses below $45 a barrel after Saudi Arabia signaled it may compromise with regional rival Iran on a future output agreement as both countries expect no deal when OPEC members meet Wednesday in Algiers.

Futures rose 0.5 percent in New York after falling 2.7 percent Tuesday. A deal in November is possible, Saudi Arabian Oil Minister Khalid Al-Falih said at a briefing in the Algerian capital, adding that Iran, as well as Libya and Nigeria, should be allowed to “produce at the maximum levels that makes sense.” Global output will exceed demanduntil late 2017, according to Fatih Birol, executive director of the International Energy Agency.

Oil has swung near $45 since last week amid speculation over whether the Organization of Petroleum Exporting Countries will agree on ways to stabilize the market. While Saudi Arabia has offered to pump less crude if Iran caps output, neither country expects an agreement this week. Freezing output was first proposed in February, but a meeting in April ended with no final accord. OPEC’s next formal meeting is in November in Vienna.

“OPEC members are peddling their self interests, and while that’s the case, there can’t be a cooperative effort,” said Michael McCarthy, chief market strategist in Sydney at CMC Markets. “Oil is trapped between $40 and $50 a barrel, and at this stage, there doesn’t appear to be anything on the horizon to break prices out of that range.”

West Texas Intermediate for November delivery was at $44.87 a barrel on the New York Mercantile Exchange, up 20 cents, at 8:01 a.m. in London. The contract lost $1.26 to $44.67 on Tuesday. Total volume traded was about 26 percent below the 100-day average. Prices have averaged about $44.80 this quarter.

OPEC Meeting

Brent for November settlement added 25 cents to $46.22 a barrel on the London-based ICE Futures Europe exchange. The contract dropped $1.38, or 2.9 percent, to $45.97 on Tuesday. The global benchmark crude traded at a premium of $1.36 to WTI.

“It’s not our agenda to reach agreement in these two days,” Iran Oil Minister Bijan Namdar Zanganeh said on Tuesday. Al-Falih echoed the sentiment, saying the meeting on Wednesday will be used for consultation and that he doesn’t expect that an agreement will come out of it. Consensus may be reached at the informal meeting, but there will be no formal deal, Russian Energy Minister Alexander Novak said.

Iraq is seeking to reduce the gap of the viewpoints between Iran and Saudi Arabia to reach a compromise formula in a way that serves the interests of oil producers and backs the stability of the market, Iraq’s Oil Minister Jabbar Al-Luaibi said in a text message.

http://www.bloomberg.com/news/articles/2016-09-28/oil-halts-loss-before-opec-meets-as-saudis-signal-future-deal

Russia's Pacific island of Sakhalin is expected to increase oil production by 8 percent in 2016 from a year ago, a regional official said, which would add to the global glut the industry currently faces.

Russia and the Organization of the Petroleum Exporting Countries are gathering in Algeria this week in a second attempt this year to cooperate on global oil markets to stabilise prices. Yet, the task looks hard as hopes are fading that Saudi Arabia and Iran would find a compromise, while production is growing in Russia.

Vera Sherbina, head of Russia's regional government of Sakhalin, told a conference on Wednesday that oil and gas condensate production at the island, which comes mostly from offshore, will climb to 18.1 million tonnes, or about 362,000 barrels per day (bpd), this year, up from 16.7 million tonnes in 2015.

The annual oil and gas conference at Sakhalin has gathered mid-tier officials from Russian and western oil and oilfield services companies to discuss the prospects of the region that accounts for around 3 percent of Russia's total output.

Production of oil and gas at Sakhalin, which is also famous for being the home of one of Russia's largest oysters, comes mostly from two offshore projects - Sakhalin-1 led by ExxonMobil and Sakhalin-2 led by Russia's Gazprom.

Sakhalin-1 shareholders also include Russia's Rosneft , Japan's Sodeco and India's ONGC. Apart from Gazprom, Sakhalin-2 shareholders include Royal Dutch Shell, Mitsui and Mitsubishi.

"Our key task is to maintain production levels we have now," Sherbina told reporters. She did not provide an outlook for oil production for the island for the years to come.

Sakhalin-2 also operates Russia's sole LNG plant, with Sakhalin-1 also looking at building its own LNG facility that could start production after 2023.

DRILLING AROUND

Russian oil production is growing despite western sanctions and low oil prices, as previous investments come online. Output is expected to be as high as 547 million tonnes in 2016, or almost 11 million bpd, which would be a new record.

Rosneft, Russia's biggest oil producer, is under sanctions over Moscow's role in the Ukraine crisis, with restrictions both on supporting the firm financially as well as getting access to exploration technology.

In June, Rosneft said it started exploration drilling in the Sea of Okhotsk in Russia's Far East, northeast of Sakhalin, along with Norway's Statoil.

Alexander Zharov, a department head at Rosneft, said that the sea depth at the drilling area was less than 150 metres, which is not covered by the sanctions. He said it was too preliminary to comment on the results.

"Sakhalin remains one of a few places in the world where operations remain profitable even at oil prices of $50 per barrel," said a manager with western oilfield services company, who came to Sakhalin looking for new contracts but declined to give his name.

http://www.reuters.com/article/russia-oil-forum-sakhalin-idUSL8N1C408P

Oil prices are hovering in the mid-$40s per barrel, and the hopes of a rebound have once again been delayed. The IEA’s September Oil Market Report predicts that the supply/demand equation might not come into balance until next year, suggesting another year of low oil prices. But what if oil prices never rebound?

The question seems ridiculous, not only because the oil markets always go through booms and busts, but also because demand continues to rise. Supplies are also falling from high cost areas, ensuring that the supply overhang will eventually be erased. Moreover, the oil industry has made unprecedented cuts in spending on exploration and development. The IEA says the industry cut spending by more than $300 billion over the past two years and a separate estimate from Wood Mackenzie expects oil and gas producers to slash about $1 trillion from spending between 2015 and 2020. Such draconian measures are surely sowing the seeds of another supply crunch, guaranteeing a price spike in the years ahead.

But the world is still oversupplied with oil, and the recent ramp up in production from OPEC could lead to low oil prices for a few years. Libya is set to bring back around 600,000 barrels per day (although those claims are questionable), and Nigeria has already returned somewhere between 200,000 and 300,000 barrels per day of interrupted supply. Production in the U.S. has also recently leveled off over the past month at 8.5 million barrels per day, after nearly 18 months of declines

The IEA expects global supplies to exceed demand through next year, and inventories to continue to build through 2017. Crude oil and refined product inventories are only slightly down from record levels, and will take a few more years to get worked through.

All of that is to say there is a good chance that ample supplies could ensure relatively low oil prices for several years, perhaps as long as towards the end of this decade.

In the meantime, alternatives will continue to make inroads into the transportation sector. Batteries for electric vehicles (EVs) continue to achieve cost declines, having fallen by 35 percent in 2015 alone. Bloomberg New Energy Finance sees EVs becoming as affordable as gasoline-powered cars – on an unsubsidized basis – as soon as the early 2020s. That could erase about 2 million barrels per day of oil demand by 2023. Given that the global surplus in crude oil over the past two years was only a little more than 2 million barrels per day at its worst point, which was enough to cause a meltdown in oil prices, the displacement of 2 mb/d from EVs in six years is a big, big deal.

By 2040, EVs could cost as little as $22,000 (in 2016 dollars), BNEF says. Electric vehicles could displace 13 million barrels per day of oil demand by then, enough to keep oil prices permanently low. It wouldn’t stop there, if EVs made that kind of progress, the takeover of the transportation sector would accelerate and oil would continue to lose market share.

These, of course, are aggressive scenarios, BNEF concedes. But maybe not. If governments around the world crack down on oil drilling through new taxes and regulation, and also subsidize R&D and the adoption of EVs, all with an eye on climate change, the scenarios could prove to be more of a middle-of-the-road prediction. Major oil spills, or sudden natural disasters could spark a public backlash, demanding deeper reductions in carbon emissions. In other words, the uncertainty around the advancement of clean energy could be on the upside – unforeseen future public policy could very conceivably accelerate EV adoption faster than we can envision sitting here in 2016.

Abundant oil supplies plus huge volumes of oil and refined products sitting in storage – a supply-side problem – could ensure oil price stay low in the near- to medium-term. But steady efficiency and the technological advancements in EVs – a demand-side problem – might mean oil demand ends up being much lower over the medium- to long-term than we currently expect. These scenarios are certainly not inevitable, but if they are even remotely accurate, oil prices could stay low more or less permanently.

http://uk.businessinsider.com/theres-a-strong-chance-that-oil-prices-may-never-rebound-2016-9?r=US&IR=T

The President and Chief Executive of Malaysia's state-owned oil firm Petronas said on Wednesday that the company will review a liquefied natural gas plant project in northern British Columbia that was approved by the Canadian government.

"The announcement was just made this morning. We need time to look at the conditions and then we will have a review of the project," Wan Zulkiflee Wan Ariffin told reporters at the sidelines of an event.

The Canadian government on Tuesday approved the project, ending a three-year wait for a decision and drawing condemnation from environmentalists.

Approval comes with 190 conditions including capping direct emissions

http://ca.reuters.com/article/businessNews/idCAKCN11Y09D

DTE Energy Co. plans to spend $1.3 billion for natural gas assets in Pennsylvania and West Virginia.

The Detroit-based company announced Monday that an agreement calls for DTE to purchase all of Appalachia Gathering System in Pennsylvania and West Virginia and 40 percent of Stonewall Gas Gathering in West Virginia from energy company M3 Midstream.

In addition, DTE plans to purchase 15 percent of Stonewall Gas Gathering from Vega Energy Partners.

The assets will become part of DTE’s non-utility Gas Storage and Pipeline business, which owns and manages a network of natural gas gathering, transmission and storage facilities serving the Midwest, Northeast and Ontario markets. The deals are expected to be completed this year.

http://www.seattletimes.com/business/dte-energy-spending-1-3b-for-natural-gas-assets-in-2-states/

Several news sources are reporting that EmberClear has committed to fund and build a new $900 million, 1,000-megawatt electric generating plant in Harrison County, OH.

The new plant will be fed by Utica Shale gas. Officials in the county have been working on a deal to lure the plant to the county since December of last year and stress it is a “long-term project” and “not a slam-dunk” because of extensive regulatory hurdles.

If the project happens, it will generate 500 temporary construction jobs and 30 permanent jobs and use a huge amount of natural gas to power it (good for drillers!).

MDN did some checking and found one potential cloud over the deal. EmberClear was, until July, a Canadian-based company. But it went bankrupt and after emerging from bankruptcy it changed its name to Ember Partners, now based in Houston, TX. Apparently the bankruptcy hasn’t slowed them down–but it does raise a question about the financial stability of the company and its ability to fund a big-money project like the Harrison Power Project.

However, these projects are typically funded by one or several investors and not by the company that builds and operates the facility…

http://marcellusdrilling.com/2016/09/900m-utica-gas-fired-electric-plant-coming-to-harrison-county-oh/

The following is a memo sent to all Cabot employees by Dan Dinges, Chairman, President and Chief Executive Officer, which highlights the last 18 months of milestones in Cabot’s Marcellus operations.

TO: All Employees
FROM: Dan O. Dinges
DATE: September 26, 2016
RE: Marcellus – Game Changer for COG Shareholders, Employees and Communities

Today marks a major milestone in the history of this company: 10 years ago today, we began drilling our first well in the Marcellus, the Teel 1.

In the last 18 months we have achieved three additionally impressive milestones in the Marcellus. In April 2015 the 500th well was drilled and just last month the 10,000th frac stage was completed. At the end of last month our cumulative Marcellus production hit 2.5 trillion cubic feet of natural gas – a stunning amount of production by just one company over the past decade.
Make no mistake; these operational records would have been unachievable if not for the dedication, innovation, and knowledge of the Cabot team across the country. I have said time and again that Cabot has access to a world class asset in the Marcellus – but the reality is, without the right employees with the right skill sets employed in each and every one of our departments, we would not achieve this level of success.

The last 24 months have been challenging. We have all seen firsthand the effects of a down market on our industry and the communities where we live and work. But we have all found ways to increase our efficiencies to not just maintain Cabot, but to keep the company positioned to take advantage of the eventual return to better pricing.

Ten years ago we began operations in what is now one of the largest shale gas fields using the knowledge of our employees gained from their experiences around the country and around the world. That experience and work has led us to: 2.5 TCF, 500 wells, and 10,000 frac stages. As many of you are aware, we have new infrastructure scheduled for completion during the next couple of years. Upon commissioning this infrastructure we will be working to more than double our current production levels towards 4 BCF per day in the Marcellus.

Knowing all we have learned and pioneered during the last decade, the prospect of what we will accomplish and the value we will create for shareholders in the years to come is exciting.
I offer my sincere congratulations on these accomplishments to each and every one of you. As we transition to move rigs back into our areas of operation, keep in mind every creative idea you have as an employee of Cabot moves us closer to the next big milestone.

Dan O. Dinges

http://wellsaidcabot.com/cabot-hits-major-milestones-marcellus/

Global oil output will exceed demand until late 2017, the head of the International Energy Agency said before major producing nations gather for talks.

"We don’t see the oil market re-balancing until late 2017" provided there’s no “major intervention,” IEA Executive Director Fatih Birol said Tuesday in an interview with Bloomberg Television in Algiers.

The Paris-based agency is extending its bearish view after saying Sept. 13 that oil supply will outpace demand “at least through the first half of next year.” OPEC members will hold informal discussions in the Algerian capital on Wednesday as they seek to buoy prices following two years of decline amid brimming global stockpiles.

Start your day with what’s moving markets.
Get our markets daily newsletter.
Sign Up
Oil-demand growth has been weaker than expected, Birol said. The IEA this month cut its forecast for consumption growth in 2016 and 2017, citing a "marked slowdown" in India and China. The agency, which advises industrialized countries on energy policy, projected demand growth of 1.3 million barrels a day in 2016, down from 1.6 million a day in 2015. Its prediction slips to 1.2 million a day next year.

http://www.bloomberg.com/news/articles/2016-09-27/iea-s-birol-warns-oil-supply-will-exceed-demand-until-late-2017

When oil prices began to plunge two years ago due to a global glut of crude, experts predicted U.S. shale producers would be the losers of the resulting shakeout.

But the American companies that revolutionized the oil and gas business with hydraulic fracturing and horizontal drilling are surviving the carnage largely unbowed.

Though the collapse in prices caused a wave of bankruptcies, total U.S. oil production has only fallen by about 535,000 barrels a day so far this year compared with 2015, when it averaged 9.4 million barrels, according to the latest federal data.

As the oil markets ponder where production will resume when prices pick back up, one clear answer has emerged: America. Goldman Sachs forecasts the U.S. will be pumping an additional 600,000 to 700,000 barrels of oil a day by the end of next year—making up for every drop lost in the bust.

Few predicted that in the fall of 2014, when Saudi Arabia signaled that it wouldn’t curb its output to put a floor under crude prices. Oil pundits concluded that a brutal culling would force higher-cost players known as marginal producers—a group that includes shale drillers—out of the market.

But the greatest consequence of the Saudi decision and subsequent price drop is that it has delayed costly oil megaprojects, from deep-water platforms off Angola to oil-sands mines in Canada.

“The U.S. isn’t the marginal barrel but the most flexible,” said R.T. Dukes, an analyst at Wood Mackenzie. “We’ll be the fastest to snap back.”

More than 100 North American energy producers have declared bankruptcy during this downturn, but even companies working through chapter 11 keep pumping oil and gas. Many exit bankruptcy stronger thanks to a balance sheet that has been wiped clean.SandRidge Energy Inc., which filed in May, will exit next month after erasing nearly $3.7 billion in debt.

Many shale operators are still struggling at current prices, drilling at a loss and tapping Wall Street for new infusions of cash. But the strongest producers, including EOG Resources Inc. and Continental Resources Inc., soon will be able to generate enough money to pay for new investments and dividends—as well as boost production—even at low prices, analysts say.

U.S. production began inching up in July, shortly after oil prices rebounded to $50-a-barrel territory. Producers quickly put 100 rigs back to work this summer.

The ramp-up spooked the market, sending oil prices plunging 20% back toward $40. They have recently rebounded back to about $46.

The gyrations will continue for months as shale producers go back to work, said Eric Lee, an analyst at Citibank, who predicts crude will stabilize around $60 a barrel in late 2017.

Though oil storage tanks around the world are brimming, new sources will be needed soon because older oil fields decline by 5% a year and global demand continues to rise 1.2% a year. Demand will break through the 100 million barrel-a-day mark by 2020, according to the International Energy Agency.

The looming gap between supply and demand is one reason the easy money that fueled the American drilling boom hasn’t dried up, saidLewis Hart, senior vice president of corporate advisory and banking for Brown Brothers Harriman in New York.

Even as banks and other traditional lenders tighten their purse strings, alternative sources of money are cropping up, from private-equity funds to distressed-debt specialists.

“The very existence of that capital means prices are likely to be lower for longer, because it compounds the supply problem,” Mr. Hart said.

Jesse Thompson, an economist with the Federal Reserve Bank of Dallas, said this oil bust is different from the downturn that crippled American producers in the 1980s.

Back then, Saudi Arabia initially shut down production as it tried to put a floor under prices, then changed course and began selling crude into an already glutted market. By 1986, the world’s oil supply capacity was 20% higher than demand, Mr. Thompson said. He estimates that today, the world is oversupplied by about 1%.

A big reason U.S. oil production has been so resilient is that U.S. producers found ways to cut costs and enhance efficiencies during the lean years. Those innovations are now poised to propel the industry’s resurrection.

In May,  Halliburton Co. helped tap the longest shale well on record—26,641 feet deep and another 18,544 feet long—for Eclipse ResourcesCorp. in Ohio, 130 miles south of Cleveland.

That well was fracked—the process of injecting water, chemicals and sand to coax out oil and gas—an extraordinary 124 times. Typical shale wells are fracked between 30 and 40 times, up from just nine fracks in 2011 at the start of the oil boom, according to Drillinginfo, a data provider for the energy industry.

To put that engineering feat in Manhattan perspective, that is equivalent to burrowing down to the depth of 15 World Trade Centers at One World Trade Center, turning 90 degrees and drilling underground 3.5 miles to Grand Central station. Eclipse saved 30% by supersizing the well, said Chief Operating Officer  Tom Liberatore.

The industry’s cost-cutting has been painful for many. Nearly 160,000 energy employees have been laid off around the country, according to the latest tally by Graves & Co.

Even so, plenty of companies that didn’t accumulate debt or spend beyond their means during the boom years have the resources to take advantage of financial fallout from the downturn.

Albert Huddleston, founder and managing partner of Aethon Energy, said the Dallas-based producer spent more than $600 million on distressed oil-and-gas properties from Wyoming to Louisiana since prices started to fall in 2014.

“Can you kill off shale? The answer is no,” he said.

http://www.wsj.com/articles/two-years-into-oil-slump-u-s-shale-firms-are-ready-to-pump-more-1474968601

---

Attached Files

Greka Drilling Limited, the largest independent and specialised unconventional gas driller in China, is pleased to announce its results for the six months ended 30 June 2016.

FINANCIAL HIGHLIGHTS

Revenue of US$2.6 million (H1 2015: US$11.9 million)
US$8.1 million of cash as at 30 June 2016 including restricted cash (US$2.4 million as at 31 December 2015)
US$3.8 million bank loans as at 30 June 2016 (US$5.9 million as at 31 December 2015)
Loss of US$5.5 million (H1 2015: loss of US$4.8 million)
Secured US$5 million in loan financing from Guaranty Finance Investors LLC

OPERATIONAL HIGHLIGHTS

In line with our guidance in February this year, activity levels have been very limited in the first half of 2016. GDL has drilled 10 wells (3 in China and 7 wells in India) in the first 6 months compared to 28 wells in the same period last year
Of the wells drilled there was:

1 Vertical well in China with a total depth ('TD') of 789 metres and completed in 13 days (spud to completion)
7 Directional wells in India which averaged 12 days, a 42% improvement on the average of 20 days in the same period in 2015. The fastest Directional well was drilled to TD 1,036 metres in 9.3 days
2 Horizontal wells in China with the fastest being drilled to TD of 1,658 metres in 28 days (spud to completion)

In total there were 12,458.31 metres drilled (4,128.31 metres in China and 8,330 metres in India) compared to 26,367 metres in H1 2015
The 8,330 metres drilled in India compares with a total of 9,920 metres in India for the FY 2015

H2 2016 OPERATIONS OUTLOOK

India:

Essar Oil Limited:

Expected to drill 30 wells with 2 rigs deployed under the current contract
Potential for deployment of a third rig under the current contract

In advanced talks with new potential clients for deployment of three rigs in 2017

China:

Green Dragon Gas has begun mobilising for a programme of up to 8 wells
Bids to conclude multi-well programme prior to year-end

Randeep S. Grewal, Chairman and Chief Executive of Greka Drilling, commented:

'We have previously advised that we expected this year to be very challenging while the oil and gas operators realign their portfolios to the new oil price environment. Unconventional drilling, the Company's niche, has been largely suspended by most of the operators. During this period, we continued to take steps to reduce costs, improve our drilling efficiency and diversify our services and customer base. Indeed, this year we expect to have an equal client base between China and India.

http://www.oilvoice.com/n/Greka-Drilling-announces-2016-halfyear-report/b512722feefb.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29

---

Attached Files

Slower growth in oil supply is helping the crude market to re-balance, and prices are set to increase over time, according to the head of the world’s biggest producer.  

As investments in new oil and natural gas capacity have been being canceled or deferred worldwide, supply is rising more slowly, especially production of U.S. shale oil, Saudi Arabian Oil Co. Chief Executive Officer Amin Nasser said Monday. Global demand is “on a steady, if moderate course,” he said in a speech at a conference in Dubai.

“Despite volatility, the market is heading toward re-balance, and prices are likely to strengthen with time,” Nasser said. “However, market volatility could remain with us for the near future.”

Oil-producing nations have been considering limiting output to counter a global glut that has cut crude prices by more than half from their 2014 peak. Saudi Arabia and other OPEC members are meeting in Algeria this week and may consider freezing production in an effort to shore up prices. Brent crude, the global benchmark, has averaged about $43 a barrel so far this year and was 73 cents higher at $46.62 at 1:27 p.m. in London.

Unfettered Output

Crude gained about 11 percent in August on speculation that the Organization of Petroleum Exporting Countries will reach an output deal in Algiers. The group’s discussions are a sign OPEC may be reconsidering a Saudi-led policy adopted in 2014 allowing members to raise output to protect market share from higher-cost producers, including U.S. shale drillers.

OPEC’s production rose to a record 33.69 million barrels a day in August, just under a third of global demand, data compiled by Bloomberg show. Saudi Arabia, the group’s biggest producer, pumped a record 10.69 million barrels a day last month, the data show.

“While the oil market has recovered from its most severe period, it’s still weak,” Nasser said.

Mature Fields

Improvements in energy efficiency have tempered consumption growth, but an expanding world population and rising living standards in developing countries will support long-term demand, he said. Oil’s central role as a source of fuel for heavy transportation and feedstock for petrochemicals will remain solid, Nasser said.

“The oil and gas resources we have available, as well as new discoveries, are more challenging and more expensive to develop. At the same time, the present oil and gas fields are becoming increasingly mature and complex to operate.”

Saudi Arabian Oil Co., known as Saudi Aramco is exploring more intensively to augment its “resources” to 900 billion barrels from 800 billion barrels over the next decade, Nasser told reporters. Its budget over the next five years will be “much more” than $100 billion, and the company seeks to increase oil-recovery rates at its fields to 70 percent from 50 percent, he said, without specifying timing.

Rig Count

Aramco is also adding drilling rigs to explore onshore and offshore for oil and gas, Nasser said. Saudi Arabia had 124 rigs operating in August compared with 101 in May 2014, according to Baker Hughes Inc.

The oil industry needs new investment in exploration and production to meet future demand, according to Schlumberger Ltd. and  Total SA.

“We are setting ourselves up for a supply crunch one or two years down the road” as non-OPEC supply declines along with cuts in investment, Schlumberger CEO Paal Kibsgaard said at the conference. Total foresees a supply shortfall of 5 million to 10 million barrels a day by 2020, Arnaud Breuillac, the Paris-based company’s president of exploration and production, told reporters in Dubai.

http://www.rigzone.com/news/oil_gas/a/146777/Saudi_Aramco_Sees_Oil_Demand_Steady_as_Supply_Growth_Slows

---

Attached Files

Colombia is moving forward with plans to build a second 400 MMcf/d LNG regasification plant to be located near its Pacific coast to assure adequate gas supplies, mining and energy minister German Arce has said.

Speaking Friday to business leaders in the southwestern city of Cali, Arce said such a plant was necessary to assure "reliability of supply" in western Colombia. The country is self-sufficient in gas, but with reserves in decline it may have to begin imports as soon as next year.

Colombia's first LNG regasification plant is under construction near Cartagena on the Caribbean Coast and will be operational by year-end. The $800 million facility will process up to 348 MMcf/d of gas, destined mainly to fuel thermo-electric power plants serving northern and central Colombia.

Colombia consumes about 1 Bcf/d of gas, all supplied from its rapidly depleting fields. Promising offshore fields being developed by state-controlled Ecopetrol and partners Anadarko and Repsol are not expected to enter production until 2022 at the earliest, assuming they prove commercially viable.

Arce did not give a target date for a construction of such a plant. But the ministry's planning agency, known by its Spanish initials UPME, has said that such a facility should be operational no later than 2024. However, thermo-electric power plant owners in the region want such a plant to be on line by 2020 at the latest, regulators have told S&P Global Platts.

Regulators have told Platts the second regas plant is likely to be built in or near Buenaventura, Colombia's largest Pacific Coast port city.

The regas plant near Cartagena is expected to import LNG from Trinidad and Tobago and the US. The Pacific plant may seek LNG from Peru or Asian LNG producers, sources have said.

How fast demand for imported LNG grows will depend in part on climate and rainfall levels. Normally, Colombia generates 70% of its electricity at hydro power facilities, but droughts caused by the El Nino weather phenomenon over the last year forced the country's electricity grid at times to use as much thermo-electric power as hydro.

Also boosting gas demand is the growing popularity of so-called hybrid cars and buses that use a mixture of gas and gasoline for fuel. The government is promoting such power sources as environmentally friendly.

http://www.platts.com/latest-news/natural-gas/bogota/plans-proceeding-for-colombias-second-lng-regasification-21611971

Suddenly the tables have been turned on Saudi Arabia.

The biggest oil exporter has swapped its traditional role as price dove with regional foe Iran, for years OPEC price hawk. The government in Riyadh is now offering a deal -- including its first output cut in eight years -- to boost prices; Tehran is dragging its feet. At the center of the reversal is their contrasting thresholds for enduring economic pain.

"Both countries are coming from different positions," said Jason Tuvey, Middle East economist at consulting firm Capital Economics. "Iran has been under sanctions until recently, so it’s getting an economic boost as investment returns and oil output rises. Meanwhile, Saudi Arabia is facing steep fiscal cuts."

The contrast between the two countries is stark. Iran, never as dependent on oil revenue as its neighbor, has seen prospects boosted by rapprochement with the west. In Saudi Arabia, tentative moves toward economic reform haven’t prevented two years of weak prices causing financial havoc: it’s burning through foreign exchange reserves, government contractors have gone unpaid and civil servants will get no bonus this year.

Diverging Economies

Saudi Arabia will suffer a fiscal deficit equal to 13.5 percent of gross domestic product this year, compared with one of less than 2.5 percent of GDP for Iran, the International Monetary Fund estimates. The IMF says the Saudis need oil close to $67 a barrel to square the books. For Iran, it’s lower, at $61.50. Brent crude, the global benchmark, was down 0.4 percent at $47.18 a barrel as of 1:18 p.m. in Hong Kong.

When it comes to economic growth, Saudi Arabia is slowing sharply to 1 percent while Iran is accelerating toward 4 percent. The current account -- a broad measure of a country’s economic relationship with the world -- tells the same story. Saudi Arabia faces a double-digit deficit this year; Iran’s is nearly balanced following economic reforms in 2012 and 2013 to weather the impact of international sanctions over its nuclear program.

While Iranian President Hassan Rouhani faces elections next May and is under pressure over the country’s economic performance since sanctions were lifted, it’s already been through the austerity that’s only starting in Saudi Arabia, according to Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. "Iran has already been through so much pain, incrementally they aren’t really worse off," she said.

U-Turn

Saudi Arabia led OPEC in November 2014 to defend market share, notably against U.S. shale oil producers, at the expense of high oil prices. A month after the policy shift, Ali Al-Naimi, then Saudi oil minister, told the trade journal Middle East Economic Survey that "sooner or later" rivals would run into financial difficulties. The kingdom had "the ability to hold out" for a long time, he said.

Nearly two years later -- and under different oil minister -- Riyadh is now signaling it may be ready for a U-turn.

Saudi Arabia has told other OPEC members it’s willing to reduce production to January levels, according to Algerian Energy Minister Noureddine Boutarfa. That effectively would mean a cut of 500,000 barrels a day. Iran, meanwhile, is refusing to freeze its production at the current level of 3.6 million barrels a day, aiming instead to lift output to about 4 million barrels a day, the level before sanctions halved exports.

When the oil slump started, few would have anticipated that Saudi Arabia would be seeking a deal to boost prices and Iran would resist it. Beyond the economy, other factors are at play, including regional politics. Both countries are on opposite sides of the Syrian and Yemeni civil wars. Then there’s pride -- Iran wants to return to pre-sanctions production.

Spending Petrodollars

For the last two years, as oil prices plunged from more than $100 a barrel to a 12-year low of less than $30 a barrel in January, the Saudis have drawn on their huge currency reserves to cushion the impact. It spent $115 billion last year and between January and July this year it used up another $52 billion.

For analysis on the sale of Saudi Aramco, click here

Worried about a looming insolvency if the kingdom continued to spend way above its oil income, Riyadh sought to staunch the financial bleeding.

Subsidies, long a political taboo, are being cut, as are the salaries of government ministers by 20 percent. Infrastructure projects have been delayed, and a value-added tax is mooted for 2018. If Saudis have continued spending as they did last year, Mohammed Al-Sheikh, a financial adviser to the crown, told Bloomberg in April the country would have gone “completely broke” by early 2017.

On the other side of the Persian Gulf, there isn’t the same sense of crisis.

"Tehran would love to have higher oil prices, but Iran is the OPEC country that had to do fewer budget sacrifices due to cheap oil," said Olivier Jakob, an analyst at Petromatrix GmbH in Zug, Switzerland. "They feel they have a strong hand.”

http://www.bloomberg.com/news/articles/2016-09-26/in-fight-over-oil-prices-with-saudi-arabia-it-s-advantage-iran

Iran Says It Won't Freeze Output at Current Level

Oil extended declines as Iran said it’s unwilling to freeze output at current levels and wants to raise production to 4 million barrels a day, damping expectations for OPEC to reach a deal to stabilize markets when the group meets Wednesday in Algiers.

It’s “not on our agenda” to reach agreement at the OPEC talks in Algiers, Iranian Oil Minister Bijan Namdar Zanganeh told reporters in the Algerian capital. Iran, which produced about 3.6 million barrels a day last month, is seeking a 12-13 percent share of OPEC’s market, he added.

The U.A.E. supports a deal to freeze output if other nations agree, but production cuts are not up for discussion, Oil Minister Suhail Al Mazrouei said.

http://www.bloomberg.com/news/articles/2016-09-27/oil-halts-advance-near-46-as-more-opec-members-back-output-deal

---

Attached Files

Oil and gas producer Rice Energy Inc said on Monday it will buy Vantage Energy for about $2.7 billion, in what has become the most active month for acquisitions in the energy sector since oil prices sank two years ago.

Rice Energy shares slid 4.2 percent to $26 in after market trading after it said it would pay about $1.02 billion in cash, issue about 39.1 mln shares worth about $980 million and assume about $700 million in debt.

The deal follows others this month by EOG Resources Inc , which is buying privately-held Yates Petroleum Corp for $2.5 billion, and Enbridge of Canada's plans to buy pipeline company Spectra Energy Corp of Houston in an all-stock deal valued at about $28 billion.

Rice would buy assets including about 85,000 net core Marcellus acres in Pennsylvania, with rights to deeper Utica Shale on about 52,000 net acres and 37,000 net acres in the Barnett Shale. Net production from these assets was 399 million cubic feet equivalent per day in the second quarter.

Rice Energy said it would sell some of the acquired core midstream assets, including 30 miles of dry gas gathering and compression assets, to Rice Midstream Partners LP for $600 million.

Rice Energy also raised its 2016 capital budget forecast to $735 million from $660 million due to the acquisition, which is expected to close in the fourth quarter.

Evercore advised Rice Energy while Latham & Watkins LLP served as its legal counsel.

http://www.reuters.com/article/vantageenergy-ma-rice-enrgy-idUSL3N1C24LX

Genscape Cushing draw of -276,114bbl for week ending 9/23

@zerohedge

South Africa’s Strategic Fuel Fund failed to notify the National Treasury of a sale of crude oil reserves and to properly safeguard the assets, the nation’s Auditor-General said in a report to lawmakers.

“The accounting authority did not exercise reasonable care to ensure the safeguarding of assets of the public entity,” the Auditor-General wrote in the report tabled on Sept. 23, referring to the management of the fund. The SFF also “did not inform the National Treasury of the sale of its 10 million barrels of strategic crude oil reserves, as required by the Public Finance Management Act,” it said.

The SFF, a unit of the Central Energy Fund whose primary shareholder is the Department of Energy, sold 10 million barrels of oil in December, when Brent crude oil prices were at an eight-year low, for $280 million as part of a rotation of stocks. The department said in July it will review all contracts related to strategic reserve rotation and storage.

The fund’s former acting chief executive officer, Sibusiso Gamede, resigned in July before the Department of Energy announced the contract review. This was after the department objected to an offer by the SFF for the assets of Chevron Corp. in the country. The department also launched a probe into that purchase attempt.

The sale of the oil assets generated 3.9 billion rand ($285 million), according to the Auditor-General’s report. It was originally claimed that the revenue from the transaction was 5 billion rand, Johannesburg-based Business Day reported on Monday.

The media desks of the Auditor-General and the SFF wouldn’t immediately respond to e-mailed questions.

http://www.bloomberg.com/news/articles/2016-09-26/sale-of-south-african-oil-reserves-careless-regulator-says

Bulgaria would hope to attract natural gas from Cyprus if its planned gas hub at the Black Sea, to transport gas from Russia and the Caspian Sea to southern and central Europe, goes ahead, it said on Monday.

Bulgaria will launch a feasibility study next year on building a 1.5 billion euro ($1.7 bln) hub at the Black Sea port of Varna that would use gas pipeline links it is already building with neighbouring Greece, Serbia, Romania and Turkey, and eventually also an undersea pipeline from Russia.

Cypriot gas supplies can flow through the pipeline that Bulgaria is building with Greece and Bulgarian Energy Minister Temenuzhka Petkova said Sofia is ready to boost its capacity if needed, after meeting her Cypriot counterpart Yiorgios Lakkotrypis in Nicosia.

"Natural gas from Cyprus is one of the options to feed the natural gas hub," the energy ministry quoted Petkova as saying.

Sofia has yet to attract Russia to the idea of its gas hub, which has the support of the European Commission. The European Bank for Reconstruction and Development is also ready to support the plan.

Cyprus, where U.S. energy firm Noble discovered an estimated 4.5 trillion cubic feet of natural gas in one prospect in late 2011, is considering Bulgaria as a country en route to shipping Mediterranean gas to Europe, the energy ministry quoted Lakkotrypis as saying.

"We intend to deliver natural gas to Bulgaria through the gas interconnector with Greece or the LNG terminal near (the northern Greek city of) Alexandroupolis," Lakkotrypis said.

He said he would like to examine in detail the Bulgarian government's plan to build a gas hub.

Bulgaria plans to have the gas pipeline with Greece operational at the end of 2018. Sofia also plans to take a stake in the planned LNG terminal at Alexandroupolis in Greece, which will be linked to the pipeline.

http://www.reuters.com/article/bulgaria-gas-cyprus-idUSL8N1C21WF

Backers of Israel's massive Leviathan natural gas field signed a $10 billion deal on Monday to supply 1.6 trillion feet (tcf) of gas to Jordan's National Electric Power Company.

"Subject to regulatory approvals from Israel and Jordan, sales ...are anticipated to commence at field startup," said Texas-based Noble Energy, the project's operator.

Talks on the contract began more than two years ago.

The 15-year deal for Leviathan, which holds an estimated 22 tcf of gas, should help the U.S.-Israeli group secure funds to bring it online.

Production is expected to begin around 2019 or 2020.

The Leviathan group has also been in talks to export much larger quantities of gas to companies in Egypt.

Shares in the Israeli partners - which include Ratio Oil , Delek Group and its subsidiaries Avner Oil and Delek Drilling - were halted by the Tel Aviv Stock Exchange for more than a half hour.

Leviathan, discovered in the eastern Mediterranean in 2010, is one of the world's largest offshore gas discoveries of the past decade.

Last year, Israel approved plans for a 15.5 kilometre (9.6 mile) pipeline near the Dead Sea to export gas to Jordan.

http://www.reuters.com/article/israel-gas-jordan-idUSL8N1C22N1

TransCanada Corp said on Monday its unit, Columbia Pipeline Group, offered to buy Columbia Pipeline Partners LP for about $848 million in cash.

The $15.75 per common unit offer represents a premium of 11.3 percent to Columbia Pipeline Partners' 30-day average closing price as of Sept. 23, TransCanada said.

A committee of independent directors of Columbia Pipeline Partners' board will be formed to consider the offer as the general partner of Columbia Pipeline Partners is an indirect unit of Columbia Pipeline Group, TransCanada said.

TransCanada, which completed its $10.3 billion takeover of Columbia Pipeline Group in July, had said it was reviewing strategic alternatives for master limited partnership (MLP) holdings, including Columbia Pipeline Partners LP.

Columbia Pipeline Partners LP is a Delaware MLP with interests in three regulated U.S. natural gas pipelines, as well as storage and related midstream assets.

TransCanada, Canada's second-largest pipeline company, has retained Morgan Stanley as its financial adviser and Vinson & Elkins as legal adviser.

http://www.reuters.com/article/cppl-ma-transcanada-idUSL3N1C23H3

Project Forward in talks with Shell

Project Forward has announced that it has combined with Shell to discuss and investigate the options of supplying LNG-powered vessels. They will also assess the bunker requirements for globally-trading bulk carriers, tankers and container vessels.

Led by Arista Shipping and including the resources of ABS, Deltamarin, Gaztransport & Technigaz (GTT) and Wärtsilä, Project Forward has developed a technically feasible and commercially viable design for ocean going, deep sea vessels powered by LNG fuel. The design is equally suitable for bulk carriers and tankers.

Arista Shipping Principal, Alexander P Panagopulos, said: “Merchant shipping is under increased pressure of tight regulations on emissions from a range of sources and this will continue in future […] LNG is a cleaner burning marine fuel for shipping which can help ship owners and operators to reduce emissions of CO2, sulfur, particulates and nitrogen oxides.”

The design of Project Forward ensures a long sailing range on LNG, which can be adjusted to fit specific needs of each owner or trade pattern. As a result, it could be sufficient for LNG-fuelled vessels to bunker LNG at major ports only. Arista Shipping feels the establishment of bunkering locations needs to be concentrated in these major ports and the development accelerated in order to meet this emerging and rapidly expanding demand.

Together, the Project Forward partners are working towards one common goal; making the launch of a first bulk carrier vessel with the innovative Project Forward design feasible within the next few years.

http://www.lngindustry.com/small-scale-lng/26092016/Project-Forward-in-talks-with-Shell-3094/

There are more than just earthquakes buzzing in Oklahoma. The South Central Oklahoma Oil Province and Sooner Trend Anadarko Basin Canadian and Kingfisher counties (SCOOP and STACK) are becoming some of the most highly sought after shale assets in North America. Along with the Permian, the newly developed acreage in Oklahoma seems to provide some of the best economics of the North American oil plays.

Extensions of the Cana Woodford, the SCOOP and STACK have turned interest in Oklahoma away from pure natural gas towards liquids potential. Operators including Devon, Newfield and Marathon have focused efforts on drilling the liquids rich plays since the downturn in natural gas prices in 2008. According to Devon, certain STACK assets reward operators with 20-30%+ IRR, second highest behind prolific core Permian plays. Operators have also noted that the STACK has little to no produced water. This along with high yields from horizontal redevelopment and modern stimulations have created a buzz around the basin's future potential.

During 2015, the STACK became one of the few unconventional formations in North America to see a year over year increase in rig count. However, increased operator interest in Oklahoma has coincided with renewed speculation that fracking may be connected to the 5.6 magnitude earthquake that recently shook the state. While the precise connection between fracking and earthquakes remains unproven, specialists believe that the injection of wastewater from disposal wells could increase the likelihood of earthquakes in the area. The environmental concern surrounding the SCOOP and STACK could yet play an important role in the basins success.

With one of the lowest breakevens of the North American shale plays - some areas reportedly economical under $40/ bbl. WTI - the question surrounding potential environmental legislation remains. Whether or not operators are able to overcome these concerns will play an important role in US production over the next decade.

http://www.oilvoice.com/n/Whats-the-SCOOP-on-the-STACK/6d813a239c49.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29

A future Labour government would ban fracking, shadow energy secretary Barry Gardiner is to say.

Mr Gardiner will tell the Labour Party conference there would be an "outright ban" on the process, which involves gas being extracted from shale rock.

Labour would back "clean technologies for the future", he will say.

The government says fracking could provide the UK with greater energy security and create jobs, but opponents argue it is bad for the environment.

Environmentalists say shale gas projects will make the UK's climate change targets impossible to achieve.

Gary Smith, the GMB union's Scotland secretary, said ruling out fracking was "madness", saying the UK would be dependent on gas for decades.

"We will have to confront the fact that we will be buying gas from hangmen, henchmen and head-choppers. We don't think that's ethical. We have world-class regulators and world-leading standards in terms of monitoring. Ruling it out now is madness," he told the Press Association.

http://www.bbc.co.uk/news/uk-politics-37470549

Russian state-run gas major Gazprom plans to build a new liquefied natural gas platform at its Sakhalin-2 development project with an eye on boosting exports to Japan, Deputy Chairman Alexander Medvedev said in Moscow.

The platform, which may receive final approval next year with the goal of starting production in 2022, could boost Japanese and Russian efforts to strengthen economic ties under an eight-point plan presented by Tokyo.

Gazprom works with Royal Dutch Shell and Japanese trading houses Mitsui & Co. and Mitsubishi Corp. on the Sakhalin-2 oil and gas project, with LNG production beginning in 2009 mainly for export to Japan.

Sakhalin-2's LNG business "has been one of our most successful projects in the last 10 to 15 years," Medvedev said. "If there's enough demand in Japan, we will make the expansion of this business a top priority, creating a pillar for future cooperation between Russia and Japan."

The project's two existing LNG platforms, which combined produce about 10 million tons a year, are both operating at nearly full capacity. Gazprom plans to obtain the natural gas needed to boost LNG output from fields off the coastal island of Sakhalin, including the Sakhalin-3 project. But Gazprom also is negotiating the possible purchase of natural gas from Sakhalin-1, which the Russian company considers to be the best option.

The Sakhalin-1 project's stakeholders include U.S. giant Exxon Mobil, Russian state-run Rosneft and Japanese public-private consortium Sakhalin Oil and Gas Development, or Sodeco. Sakhalin-1, which Gazprom is not involved in, has yet to deliver on planned exports to China and the construction of its own LNG plant.

Medvedev also said Gazprom will revisit the possibility of building a gas pipeline from Sakhalin to Japan in cooperation with the country. Previous plans for the pipeline were scrapped over economic calculations and environmental concerns, such as the potential impact on the fishing industry.

"We've received strong, repeated requests" from Japanese business and political leaders to reconsider the pipeline, Medvedev said.

Gazprom also had planned to build a new LNG plant in Vladivostok to serve as the export hub to Japan.

"We have shelved the idea for a while as we observe the development of gas fields and domestic demand," Medvedev said. "We haven't scrapped the plan, but we will prioritize expanding Sakhalin-2 in order to utilize the gas reserves there more efficiently."

http://asia.nikkei.com/Politics-Economy/International-Relations/Gazprom-looks-to-expand-LNG-output-in-Russian-Far-East

Oil pipelines planned in Kenya and Uganda to ferry crude from fields to port present opportunities for private financiers keen to gain a foothold in East Africa’s energy industry, the African Development Bank says.

“Nobody has ever, ever lost money financing pipelines,” Gabriel Negatu, the Abidjan-based lender’s regional director for East Africa, said in an interview in Kenya’s capital, Nairobi, on Sept. 23. If there is oil flowing, “it’s generally viable,” he said.

East African countries are in a race to start exploiting crude oil reserves estimated at 1.7 billion recoverable barrels in Uganda and 750 million barrels in neighboring Kenya. Both nations are planning to start construction on pipelines by 2018, even as oil prices are stuck at less than half the level of three years ago, straining finances of producers across the continent.

While global oil prices are “depressed a little bit,” that shouldn’t hold sway over potential investors seeking to finance pipelines in the two countries, Negatu said. Current global price levels are “not a permanent situation,” he said.

“Prices should stabilize around at $60 per barrel next year, barring the unforeseen,” Negatu said. “At that point I think the industry will adjust to that reality and figure out how to become viable and profitable.”

Kenya expects production by Tullow Oil Plc to start in mid-2017, with the government initially hauling crude by road and rail to a refinery at the port city of Mombasa. East Africa’s largest economy plans to start building an 865-kilometer (538-mile) pipeline linking fields in its northern region to a port at Lamu on the Indian Ocean coast by 2018, the government has said.

Ongoing Exploration

The AfDB is confident that results from exploration in northern Kenya and the possibility of South Sudan routing crude exports via Kenyan ports “will support the pipeline and even other downstream facilities,” Negatu said.

Work on Uganda’s pipeline, which will run from the western region of Hoima to the Tanzanian port of Tanga, is expected to begin in 2018. France’s Total SA, China National Offshore Oil Corp. and London-based Tullow are developing oil fields in Uganda’s Lake Albert basin. The three companies have been awarded production licenses by the Ugandan government that will run for 25 years.

The AfDB will support the pipelines “with whatever means available,” Negatu said. “If there are two different pipelines, we will talk to both sides and find ways to make resources available.”

http://www.bloomberg.com/news/articles/2016-09-26/east-africa-oil-pipelines-a-boon-to-private-investors-afdb-says

---

Attached Files

Oil prices rebound after Algeria says all options open at OPEC meeting

Crude prices rebounded on Monday after Algeria's energy minister said the day before that all options were possible for an oil output cut or freeze at this week's informal meeting of OPEC producers.

That came after prices tumbled 4 percent on Friday amid signs Saudi Arabia and Iran were making little progress in achieving preliminary agreement to freeze production.

Members of the Organization of the Petroleum Exporting Countries will meet on the sidelines of the International Energy Forum in Algeria from Sept. 26-28, where they will discuss a possible output-limiting deal.

"We will not come out of the meeting empty-handed," Algerian energy minister Noureddine Bouterfa said in Algiers on Sunday.

A weaker U.S. dollar also supported oil prices.

"The fact countries like Algeria are still talking about a deal means it's still on the table regardless of others' views about what might be happening," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.

"I expect Algeria and Venezuela to keep pushing for a deal - it's imperative for them to keep the price up," Barratt said.

Signals have been mixed so far on whether a deal on cutting or freezing production is possible.

Sources told Reuters on Friday that Saudi Arabia did not expect a decision to be made in Algeria, while Saudi Arabia had also offered to reduce production if Iran caps its own output this year, an offer to which Tehran had yet to respond.

"Our base case is that OPEC will meet on Sept. 28 without a formal statement. A nonbinding commitment to stabilize oil markets is possible, but it would likely lack teeth," Morgan Stanley said in a note on Monday.

"Rather, we expect OPEC to note how this meeting lays the foundation for a more constructive and formal discussion at the official November OPEC meeting," the bank added.

http://www.reuters.com/article/us-global-oil-idUSKCN11W02F

Nigerian militant group the Niger Delta Avengers said on Saturday it had carried out its first attack in the country's southern energy hub since it declared in August it was halting hostilities to pursue talks with the government.

The militants, who said they attacked the Bonny crude export line on Friday night, have in previous months launched assaults which have cut crude production, which was 2.1 million barrels per day at the start of the year, by around a third.

In a statement on its website the group said it "brought down oil production activities at the Bonny 48 inches crude oil export line" through its "strike team". Reuters was unable to immediately independently verify the details.

The Avengers, who want a greater share of the OPEC member's wealth to go to the Niger Delta where most crude is produced, said the attack was a "wake up call" for the government, which it accused of intimidating youths in the region since the ceasefire began.

"While we were promised that the concerns of the Niger Delta will be addressed once a truce is declared, the activities of the government and her agents are not assuring enough, there has been no progress," the group said.

However, the statement added that the organization was "still in favor of dialogue and negotiations". Earlier this month the Avengers told Reuters there had been no contact with the government since the group agreed to cease hostilities.

http://www.reuters.com/article/us-nigeria-delta-idUSKCN11U0B6

The Federal Reserve on Friday outlined a plan to limit Wall Street bets on the energy sector by forcing companies like Goldman Sachs and Morgan Stanley to hold more capital against such investments.

Under current law, Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) may invest in energy storage and transportation in ways that other banks cannot, but the U.S. central bank's new plan would make such bets more costly.

Banks would have to hold more capital against energy and commodity investments under the plan. The Fed also contemplated other limits like banning Wall Street control of power plants and prohibiting bank holding companies from owning copper.

At this stage the plan is only a proposal that is subject to comment and change. The Fed has opened a three-month window for comment.

The Fed, which regulates the banking and financial services sector, said the new measures would help shield banks and the broader financial system from a costly mishap like the 2010 Deepwater Horizon oil spill in the Gulf of Mexico.

Under the plan, Fed officials said, banks would have to hold roughly $1 in capital for every $1 of energy infrastructure they owned.

In the Fed’s calculus of bank safety, that amounts to a 1,250 percent capital charge - the regulator's highest tariff for the riskiest investments.

Wall Street would have to offer roughly $4 billion in fresh capital to satisfy the proposal.

SCALING BACK

Firms on Wall Street have already been scaling back their ownership of refinery, shipping and storage facilities in the face of scrutiny from regulators who have asked what benefit comes from banks in the raw material market.

Morgan Stanley has decreased the value of physical commodity assets on its balance sheet to $321 million in 2015 from $9.7 billion in 2011.

Goldman Sachs has shed much of its energy infrastructure, too, but the bank is still a major trader of fossil fuels.

J. Aron, Goldman's commodities arm, traded more natural gas than both Chevron  and ExxonMobil in the second quarter of this year, according to Natural Gas Intelligence, a trade publication.

The energy trader moved 5.42 billion cubic feet of physical gas in the United States during the period, more than 73 percent of the volume it did during the same time in 2011, according to data.

Morgan Stanley and Goldman declined to comment on the Fed's proposal.

Between 2007 and 2009, commodities trading for banks like Morgan Stanley and Goldman accounted for as much as a fifth of their overall annual revenues.

Although Goldman has scaled back its ownership of physical commodities, it has remained committed to trading.

The bank during the second quarter of 2016 earned more from that business than any of its Wall Street peers, according to data provider Coalition.

Tougher regulations conceived since the 2008 financial crisis, though, have push much of that trading business to specialists like Glencore Plc, Vitol Group and Mercuria Energy Group.

http://www.reuters.com/article/us-usa-fed-commodities-idUSKCN11T1ZB

---

Attached Files

Sept 23 U.S. drillers this week added oil rigs for a 12th week in the past 13 and were on track to add the most
rigs in a quarter since crude prices plummeted two years ago,although the momentum has slowed as prices hold below $50 a
barrel.

Drillers added two oil rigs in the week to Sept. 23,bringing the total rig count up to 418, the most since February
but still below the 641 rigs seen a year ago, energy services firm Baker Hughes Inc said on Friday. 

The oil rig count plunged from a record high of 1,609 inOctober 2014 to a low of 316 in May after crude prices collapsed
in the biggest price rout in a generation due to a global oil glut. That decline continued through the first half of this yearwhen drillers cut 206 rigs.

So far this quarter, however, drillers have added or at least not removed any oil rigs for 13 weeks in a row, the
longest streak of not cutting rigs since 2011.

With just one week to go in the quarter, oil rig additions over the past three months were on track to be the most since
the first quarter of 2014 when drillers added 105 rigs. To date,the count has increased by 88 rigs so far this quarter.

Continued growth in the rig count in the short-term,however, could be at risk if the small, independent drillers,
which accounted for about two-thirds of rig additions since May,pull back if prices remain low.

As their cash flows ramped with oil moving from itsFebruary bottom to over $50, they redeployed their cash flows in
the form of rigs," analysts at Evercore ISI, a U.S. investment banking advisory, said about the small, independent drillers.

"With WTI (West Texas Intermediate crude) now oscillating inthe mid-$40s, and cash flows declining again due to the lower
oil price, we wouldn't be surprised to see this group of operators let some rigs go," Evercore said.

U.S. WTI futures were below $45 per barrel on Fridaybut were on track for a 5-percent hike for the week ahead of
next week's meeting in Algeria where the world's biggest producers are expected to discuss a deal to curb the global oil
glut.

Looking forward, analysts said they still expect the rigcount to rise in 2017 and 2018 over 2016, but not by as much as
a few weeks ago as future oil price forecasts hold in the $50 to$60 a barrel range.

Futures for calendar 2017 were trading around $48 a barrel, while calendar 2018 was about $51.

"Based on a lower assumed price deck of about $50-60 for thenext two years, we are moderating our exploration and production
capital spending and activity growth assumptions," analysts at Simmons & Co, energy specialists at U.S. investment bank Piper
Jaffray, said in a note.

Simmons reduced its average total oil and natural gas rig count forecasts to 495 from 498 in 2016, to 647 from 704 in 2017
and to 857 from 981 in 2018.

The combined number of oil and gas rigs active so far thisyear has averaged 480 rigs, according to Baker Hughes data. That
compares with an average rig count of 978 in 2015.

http://www.reuters.com/article/usa-rigs-baker-hughes-idUSL2N1BV0JG

---

Attached Files

Exxon Mobil Corp. is considering a sale of some of the oil fields it operates in Norway'sNorth Sea in a deal that could fetch more than $1 billion, according to reports citing people familiar with the matter.

Exxon isn't running a formal process, though it has had discussions with potential buyers, the reports said.

The reports indicated Exxon was planning to sell Ringhorne, Balder and Sigyn, while Jotun is closing down soon.

Read more: http://www.nasdaq.com/article/exxon-mobil-reportedly-considers-sale-of-more-than-1-bln-in-norway-assets-20160923-00164#ixzz4L5vpF1aM

Platts spoke this week with Gazprom Export's Valery Nemov about Russian gas supplies to Europe and current European gas market conditions. Read the interview below and also hear more from Valery Nemov at Platts' European Gas Summit in Dusseldorf on September 27-28.

* Hub indexation 'broadly' used in Gazprom contracts: Nemov
* But oil indexation 'still alive'
* Take-or-pay levels also changing in revised agreements

The significant increase in Russian gas supplies to Europe so far in 2016 is a result of higher demand from buyers, and is not due to Gazprom "dumping" gas on the European market, a senior official from Gazprom Export said Friday.

In a wide-ranging interview with S&P Global Platts, Valery Nemov, Gazprom Export's deputy head of contract structuring and price formation, also said that oil indexation remained key to gas pricing.

Gazprom's gas exports to Europe -- including Turkey and the ex-Soviet Union states -- rose by 14% to 85 Bcm in the first half of 2016 compared with the same period last year.

Some industry spectators have questioned whether the sharp increase was demand-driven or whether Gazprom has been flooding the European market with cheap gas as part of a market defense strategy ahead of the startup of US LNG exports.

"We have observed a remarkable increase in our supplies to Europe in the first half," Nemov said.

"Gazprom has not been dumping these volumes. Our contracts are mostly designed in a way that the nomination right comes from the buyer. So the increase in supplies means that demand has increased, as it reflects buyers' willingness to take Russian gas," he said.

Nemov also said Russian gas supplies to Europe were "cost-effective" compared with the cost of shipping US LNG to Europe at current prices.

"In the 'sunk-cost' concept US LNG deliveries are possible, but the scheme in the current price environment turns out to be a loss-making one for some party -- a tolling contract holder or a liquefaction capacity investor," he said. "So which deliveries are more viable in longer term? The answer is quite obvious."

And in the short term, the level of gas price in Europe has fallen to a point that it is almost prohibitive for new LNG suppliers.

"Prices in Europe are currently so low that they hardly cover semi-variable costs of LNG supplies from new projects," he said.

HUB, OIL INDEXATION

Nemov also said that Gazprom increasingly used hub pricing in its long-term contracts with customers in Europe.

"In recent years we have revised many of our long-term contracts. Hub indexation is currently broadly used in our contract portfolio, predominantly in Western Europe," he said.

He added that with this came more flexibility around take-or-pay obligations for buyers.

"Generally, the transition to broader use of hub indexation comes together with changing take-or-pay levels," he said.

Gazprom has said in the past year or so that it is open to providing more flexibility around gas supplies to Europe, but Nemov said that a supplier also needs an incentive to provide more flexible terms.

"To have more flexibility within existing contracts and more hub indexation at the same time is a fantastic desire. But you can't have your cake and eat it too," Nemov said. "Flexibility stemming from long-term contracts should have its own fair price as it is the supplier that is responsible for providing flexible volumes." Nemov also said that oil indexation was here to stay.

"Oil indexation is still alive and oil prices serve as a benchmark for gas forward prices," he said, adding that in long-term investment planning it was usual to look at the correlation between oil and gas prices when forecasting.

Nemov also said that the only participants in the liberalized European gas market that are truly interested in outright prices are the producers as they are unbundled from the supply to end-users.

The midstream -- the importers of gas -- are more concerned with the margin they get from buying and selling gas.

"Their revenues do not correlate with the absolute level of price anymore," he said.

http://www.platts.com/latest-news/natural-gas/london/interview-gazproms-2016-natural-gas-export-hike-26552913?hootpostid=ba32157d9f9c176d36157ecc79ac9613

---

Attached Files

Brazil's state-run oil company Petroleo Brasileiro SA agreed to sell 90 percent of its natural gas pipeline unit for $5.2 billion to a group of investors led by Canada's Brookfield Asset Management Inc , the companies said on Friday.

The Brookfield-led group agreed to pay $4.34 billion upon closing the deal and the remaining $850 million in five years, they said. The consortium includes sovereign wealth funds CIC Capital Corp of China and GIC Private Ltd. of Singapore.

Reuters had reported on Sept. 6 details of the accord that the investor group struck with Petrobras, as the oil company is known.

The deal, which is still subject to approval by shareholders and Brazilian regulators, is the largest yet in a plan by the oil company to sell $15.1 billion of assets in 2015 and 2016 and raise another $19.5 billion through divestments and partnerships between 2017 and 2018.

Under the accord, Brookfield Infrastructure Partners Ltd will invest at least 20 percent of value of the deal, while Brookfield Asset Management has an initial investment of about 30 percent.

The Petrobras pipeline unit, Nova Transportadora do Sudeste SA, transports natural gas in south-central Brazil, providing Rio de Janeiro, São Paulo and Minas Gerais with natural gas coming from Bolivia and Brazil's offshore oil and gas fields.

http://www.reuters.com/article/petrobras-divestiture-brookfield-idUSL3N1BZ3EG

Russian finance minister Anton Siluanov said on Friday he wanted to increase taxes on the oil and gas industry by around 50 billion roubles ($787 million) a year.

Russia is the world's biggest oil producer and its output has been rising to record highs despite low crude prices. The trend, supported by a weaker rouble, has caught the attention of the treasury, which needs revenues to cover a budget deficit.

The current oil tax regime envisages a gradual increase in mineral extraction tax (MET) and export duties on heavy oil refining products, offset by a reduction in duties on exports of oil and high-grade refined products.

This year, however, the MET was increased as planned, but there was no corresponding reduction in oil export duty, angering the industry. Russia's oil taxes are already among the highest in the world.

Speaking on the sidelines of the Moscow Finance Forum, Siluanov told reporters the finance ministry would propose increasing taxes on the oil and gas industry by about 50 billion roubles a year via tools such as MET.

"We are working with the energy ministry on how this should be spread out, which sectors (oil or gas) we will take this money from," he said, without giving further details.

Siluanov also said the ministry planned to reach the same level of taxation for the gas sector as for the oil industry, in a step-by-step process.

"First of all, we are talking about Gazprom," he said.

http://www.reuters.com/article/russia-economy-oil-idUSL8N1BZ2CF

After oil spiked earlier on an anonymously-sourced Reuters "report" that Saudi Arabia has offered to cut production in exchange for an Iran production freeze, a proposal which was promptly shut down by third party observes, moments ago WSJ reporter Summari Said effectively killed this particular attempt to spike the price of oil when she reported - also citing sources - that Saudis and Iranians have clshed over output freeze levels, and that Iran has refused to cap output.

This is what she tweeted in its entirety:

Saudis, Iranians Clash Over Output Freeze Level--Sources
Saudis Want to Use Secondary Sources for Output Freeze Levels--Sources
Iran Wants to Use Govt Projections for Freeze Levels--Sources
Disagreements in Vienna Go Unresolved Ahead of Algiers Meeting-- Sources
Iraq Won't Cap Output Until It Reaches 4.75M B/D to 5M B/D--Statement
Iraq Output Cap Implies Boost of 150,000B/D to 400,000 B/D Vs August

Oil has recouped some of its gain, but is still well above the intraday lows. We expect many more such headline headfakes in the coming days and especially early next week during the Algiers OPEC meeting.

http://www.zerohedge.com/news/2016-09-23/so-much-saudi-proposal-iran-refuses-cap-output-clashes-saudis-over-freeze

Schlumberger said it has signed an agreement to license a significant part of the WesternGeco Campeche seismic survey in the southern Gulf of Mexico with Petronas.

The Western Geco Campeche deepwater survey is located in the southern Gulf of Mexico.

More than 800,000km of newly imaged subsurface data has been acquired in the last 12 months.

The project follows the Mexican government’s opening of licensing rounds to non-government companies for the first time.

Maurice Nessim, president of WesternGeco, Schlumberger, said: “We are pleased to have the opportunity to expand our collaboration with PETRONAS in Mexican waters of the Gulf of Mexico,’ ‘The great potential of the area and complexity of the geology in the Campeche basin requires high-quality wide-azimuth acquisition to image the subsalt effectively.

“We will leverage our extensive US Gulf of Mexico experience to deliver enhanced subsalt imaging and additional exploration solutions to our clients.”

https://www.energyvoice.com/oilandgas/120096/schlumberger-strike-agreement-seismic-petronas/

Iran would be unlikely to agree to freeze its crude output at current levels as part of any deal among OPEC and other major oil producers, an Iranian official told S&P Global Platts on Friday.

Reuters reported earlier that Saudi Arabia has told Iran it would be willing to reduce its output if Iran agreed to freeze its production at current levels of around 3.6 million b/d, citing unnamed sources.

The Iranian official, who spoke on condition of anonymity, as oil minister Bijan Zanganeh has final say over policy decisions, declined to confirm whether Iran had received any such proposal from Saudi Arabia.

But he said Iran continues to insist on regaining its pre-sanctions output levels before agreeing to any restrictions on its output.

"I think it's unlikely that Iran will even consider 3.6 million b/d," the official said. "It is very, very unlikely that Iran agrees to this figure or negotiates it." He added: "As far as the oil ministry's principal policy is concerned, we have always stressed that we want our pre-sanctions level of 4.2 million b/d back."

Representatives from the two countries have been meeting in Vienna the past few days ahead of next week's International Energy Forum in Algiers, where OPEC is scheduled to informally meet and possibly discuss an output freeze, according to media reports.

Saudi Arabia pumped a record 10.66 million b/d in August, according to the latest Platts OPEC production survey. Many observers expect the kingdom's output to decline in the coming months anyway, as the peak summer air conditioning season ends, reducing its domestic crude burn.

Iran produced 3.63 million b/d in August for the third straight month, according to the Platts survey, as recovery from sanctions imposed on its oil sector by western powers over its nuclear program appears to be plateauing.

A previous agreement in April among major OPEC and non-OPEC producers at a summit in Doha to freeze output at January levels fell apart over Saudi Arabia's insistence that Iran be a party to the deal.

Iran did not participate in the Doha talks but is scheduled to attend the Algiers meeting.

The meeting comes as the market continues to languish from a global supply overhang that has persisted far longer than many producer nations had anticipated.

Saudi Arabia, which in recent years has declined to act as the world's swing producer to balance the market, has said that it would only participate in coordinated output action if there were unanimous agreement among all key producers.

http://www.platts.com/latest-news/oil/tehran/iran-unlikely-to-agree-to-oil-freeze-pre-sanctions-26552887

---

Attached Files