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Merich_OGJ_140324 1 3/17/14 3:25 PM

International Petroleum News and Technology | www.ogj.com

EDITORIAL

NEWSLETTER

STATISTICS

EDITOR’S PERSPECTIVE

GENERAL INTEREST

JOURNALLY SPEAKING

WATCHING GOVERNMENT

DIGITAL WEEKLY E D I T I O N

APR. 21, 2014 | USD 10

LKLY

D I T I O N

140421OGJ_1 1 4/17/14 12:04 PM

E A R T H W A T E R W A S T E R E S O U R C E S

O U R S O L U T I O N S H E L P E D T U R N 6 0 Y E A R S

O F L I A B I L I T Y I N T O H I S T O R Y.

There’s something to be said about leaving things better than the way you found them. That’s what we do. We are Tervita, an environmental solutions company and your sustainability partner. We offer the most comprehensive range of integrated earth, water, waste and resource solutions for all stages of your project – designed to help reduce your costs, manage your liability and protect your reputation. Minimizing impact, maximizing returns.TM It’s about helping to sustain your business. And everything around it. Visit tervita.com/earth to learn more.

Unique approach to secure wellbore, porous formations

and protect town’s water.

Abandonment completed safely

in accordance with compliance

regulations.

140421OGJ_2 2 4/17/14 12:07 PM

7 NEWSLETTER 16 LETTERS / CALENDAR 20 JOURNALLY SPEAKING 22 EDITORIAL

40 ADVERTISERS’ INDEX 41 STATISTICS 44 MARKET CONNECTION

Apr. 21, 2014 | Volume 112.4bInternational Petroleum News and Technology | www.ogj.com

GENERAL INTEREST

US $10

COVERNuevo Midstream LLC’s natural gas processing and

treating near Orla, Tex., in the Delaware basin are

part of the company’s Ramsey system with cur-

rent inlet cryogenic capacity of 300 MMcfd. By

third-quarter 2015, the company expects to have

online in the area 500 MMcfd of total capacity and

2,800 gpm of amine treating capacity. Photo by Jim

Belcha; from Nuevo Midstream and equity partner

EnCap Flatrock Midstream.

24 Speakers debate states’ oil, gas role at GMU conference

Nick Snow

States are better qualified than federal and local governments to regulate hydraulic fracturing and other unconventional oil and gas activities, two speakers agreed at an energy and environment conference at George Mason University’s School of Law.

25 Heitkamp leads Senate Democrats’ new push for Keystone XL approval

Nick Snow

25 FRA to propose requiring two-member crews on trains carrying crude

Nick Snow

26 WATCHING GOVERNMENT Marcellus shale impact surprises

28 GlobalData: US needs to ‘fast-track LNG exports to compete in global market

28 Proved reserves of US crude oil reach 36-year high in 2012

30 Environmental groups to challenge FWS’s lesser prairie chicken ruling

Nick Snow

30 Russia falls to last place in SAFE’s latest security index

Nick Snow

32 Sevan Louisiana towed to Curacao

34 Statoil’s oil sands production saw slight decline in 2013

34 IEA: Global oil supplies plunge in March on lower OPEC output

36 Texas Petro Index reaches record-high in February

36 GAO: Scant data exists about NEPA analyses’ costs, benefits

Nick Snow

38 DOE: ConocoPhillips can resume LNG sales to non-FTA countries

Nick Snow

38 EDITOR’S PERSPECTIVE Need for still more reform awaits winner of Indian elections

140421OGJ_3 3 4/17/14 12:08 PM

140421OGJ_4 4 4/17/14 12:08 PM

OGJ®

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Web site www.ogjonline.comEditor Bob Tippee, bobt@ogjonline.comChief Technology Editor Warren R. True,

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Editorial Advisory BoardPat Dennler Motiva Enterprises LLC, Port Arthur, Tex.Doug Elliot Bechtel Hydrocarbon Technology

Solutions/IPSI (Advisor), HoustonAndy Flower Independent Consultant,

Caterham, UKMichelle Michot Foss Bureau of Economic Geology’s

Center for Energy Economics, The University of Texas (Houston)

Michael Lynch Strategic Energy & Economic Research Inc., Amherst, Mass.

Tom Miesner Pipeline Knowledge & Development, Houston

Ralph Neumann Badger Midstream Energy LPKent F. Perry RPSEA, HoustonIgnacio Quintero Chevron Pipe Line Co., HoustonBill Schlesing KBC Advanced Technologies Inc.,

HoustonJohn A. Sheffeld John M. Campbell & Co.,

Lechlade, UKAndrew J. Slaughter IHS Energy, HoustonJohn Thorogood Drilling Global Consultant LLP,

Insch, ScotlandSteven Tobias Hess Corp., HoustonShree Vikas Conoco Phillips Co., HoustonColin Woodward Woodward International Ltd.,

Durham, UK

Houston AdministrationPublisher Jim Klingele, jimk@pennwell.comVice-President/Group Publishing Director

Paul Westervelt, pwestervelt@pennwell.comVice-President/Custom Publishing Roy Markum,

roym@pennwell.com

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P.C. Lauinger, 1900-1988Chairman Frank T. LauingerPresident/Chief Executive Offcer Robert F. Biolchini

Member Audit Bureau of Circulations & American Business Media

140421OGJ_5 5 4/17/14 12:35 PM

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NewsletterOGJ®

International News for oil and gas professionals

For up-to-the-minute news, visit www.ogjonline.com

Oil & Gas Journal 7

Apr. 21, 2014

GENERAL INTEREST QUICK TA K ES

Senate leaders ask EIA to probe oil export impactsUS Senate Energy and Natural Resources Committee leaders

asked the Energy Information Administration to conduct a

more extensive analysis of possible consequences from lifting

or easing the ban on exporting US-produced crude oil.

The US Department of Energy’s independent statistics,

analysis, and forecasting service has limited resources and

numerous reporting requirements to Congress already, Chair

Mary L. Landrieu (D-La.) and Ranking Minority Member Lisa

Murkowski (R-Alas.) conceded.

“We would like to convey the interest of our committee in

crude oil exports, which are largely banned by statute,” they

continued in an Apr. 10 letter to EIA Administrator Adam Si-

eminski. “As you know, the possibility of lifting the ban—par-

tially or completely—has emerged as a subject of critical con-

cern in Congress.”

Possible areas of interest, according to Landrieu and

Murkowski, might include:

•  Current and projected production of crude and conden-

sate of varying grades.

•  US refining capacity and distribution, including the abil-

ity of US refiners to process the various grades of domestically

produced crude and condensate.

•  US refiners’ position and ability to compete in relation to 

global products markets.

•  Economic implications of retaining or changing the cur-

rent crude export policy on US producers, refiners, and con-

sumers.

•  Transportation  logistics  connected  with  US  crude  and 

condensate production, including rail capacity.

“This is a complex puzzle that is best solved with dynamic

and ongoing analysis of the full picture, rather than a static

study of a snapshot in time,” the senators’ letter said.

ConocoPhillips ups Eagle Ford resources estimateConocoPhillips has increased its estimated resource base in the

Eagle Ford play to 2.5 billion bbl of oil in place from 1.8 billion

bbl, as well as its estimated production from current volumes to

more than 250,000 boe/d by 2017.

“ConocoPhillips’s wells in the Eagle Ford have the highest

oil rates per well and are leading the industry in value,” said

ConocoPhillips Chairman and CEO Ryan Lance.

During fourth-quarter 2013, the company reported pro-

duction of 218,000 boe/d from the Eagle Ford, Bakken, and

Permian, a 31% increase compared with fourth-quarter 2012.

The Eagle Ford and Bakken reached respective peak rates of

141,000 boe/d and 43,000 boe/d during that time (OGJ Online,

Jan. 31, 2014).

ConocoPhillips has outlined a plan to consistently deliver

3-5%/year compound growth in production and margins from

major development programs and projects already under way

in the US Lower 48, Canadian oil sands, the UK and Norwegian

North Sea, Malaysia, and Australia.

“Beginning this year, we will be growing production and

margins across our diverse asset base, and allocating 95% of

our annual capital expenditures to growth projects and pro-

grams with margins that are higher than our average margin

today,” said Lance.

Over the next several years, the company intends to execute

a $16 billion/year capital program and achieve the company’s

organic reserve replacement target of more than 100%.

ConocoPhillips since 2009 has added 6.7 billion boe of re-

sources, boosted in part by the Gulf of Mexico’s Tiber, Gila,

Shenandoah, and Coronado discoveries. Further activity tar-

gets offshore prospects in Australia, Angola, and Senegal; con-

ventional exploration in Norway and Indonesia; and unconven-

tional exploration in North America, Poland, and Colombia.

BP plans to divest Texas Panhandle assetsBP America Production Co. said it intends to divest assets in

the Hugoton and Panhandle West fields in Sherman and Moore

counties in the Texas Panhandle. The company will retain deep

rights below the base of the Brown Dolomite, it said.

BP owns more than 270,000 gross acres in the two counties,

encompassing 830 leases, 475 operated wells—a majority of

which BP owns 100% working interest—along with 37 nonop-

erated wells. Other operators include ConocoPhillips Co. and

Pantera Petroleum Inc.

The helium and liquids-rich sour gas play has total current

BP production of 4,600 boe/d, NGL production of 2,000 b/d,

residue gas production of 15 MMcfd, and helium production

of 96 Mcfd.

140421OGJ_7 7 4/17/14 12:08 PM

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Apr. 14 Apr. 15Apr. 11Apr. 10Apr. 9

Apr. 14 Apr. 15Apr. 11Apr. 10Apr. 9

Apr. 141 Apr. 151Apr. 111Apr. 101Apr. 91

Apr. 14 Apr. 15Apr. 11Apr. 10Apr. 9

Apr. 14 Apr. 15Apr. 11Apr. 10Apr. 9

Apr. 14 Apr. 151Apr. 11Apr. 10Apr. 9

WTI CUSHING / BRENT SPOT

$/bbl

109.00

108.00

107.00

106.00

105.00

104.00

103.00

102.00

$/bbl

109.00

108.00

107.00

106.00

105.00

104.00

103.00

102.00

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB

ICE GAS OIL / NYMEX HEATING OIL

NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3

ICE BRENT / NYMEX LIGHT SWEET CRUDE

PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU

¢/gal

302.00

299.00

296.00

293.00

290.00

287.00

284.00

281.00

¢/gal

128.00

127.00

126.00

125.00

112.00

111.00

110.00

109.00

¢/gal

303.00

301.00

299.00

297.00

295.00

293.00

291.00

289.00

4.675

4.650

4.625

4.600

4.575

4.550

4.525

4.500

1Not available 2Reformulated gasoline blendstock for oxygen blending3Nonoxygenated regular unleaded

$/MMbtu

Apr. 13 May. 13 Jun. 13 Dec. 13 Feb. 14Jan. 14 Mar. 14Mar. 13 Sept. 13 Nov. 13Oct. 13Jul. 13 Aug. 13

1,400

2,000

1,800

2,200

1,600

300

500

700

100

BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE

3,900

3,600

3,300

3,000

2,700

2,400

2,100

1,800

600

300

0

3,597

3,210

389

Note: End of week average countNote: End of week average count

BAKER HUGHES RIG COUNT: US / CANADA

Note: Monthly average count

212

1,831

2/21/142/21/143/8/133/8/13 3/22/133/22/13 4/5/134/5/131/25/131/25/13

2/15/132/15/13 3/1/133/1/13 4/12/134/12/132/1/132/1/13 2/14/143/15/13 3/29/13 2/28/14 3/14/14 3/28/14 4/11/141/31/14

2/22/132/8/13 3/7/14 3/21/14 4/4/141/24/14 2/7/14

156

1,771

9 Oil & Gas Journal | Apr. 21, 2014

US INDUSTRY SCOREBOARD — 4/21

Motor gasoline 8,806 8,431 4.4 8,502 8,434 0.8 Distillate 3,839 3,884 (1.2) 3,789 3,685 2.8 Jet fuel 1,412 1,346 4.9 1,399 1,348 3.8 Residual 246 355 (30.7) 257 306 (16.0)Other products 4,079 4,415 (7.6) 4,762 4,673 1.9 TOTAL PRODUCT SUPPLIED 18,382 18,431 (0.3) 18,709 18,446 1.4

Supply, 1,000 b/d

Crude production 8,207 7,158 14.7 8,133 7,088 14.7 NGL production2 2,621 2,401 9.2 2,674 2,463 8.6 Crude imports 7,267 7,782 (6.6) 7,340 7,752 (5.3)Product imports 1,795 1,773 1.2 1,748 1,923 (9.1)Other supply2 3 2,305 2,100 9.8 2,176 1,962 10.9 TOTAL SUPPLY 22,195 21,214 4.6 22,071 21,188 4.2 Net product imports (1,851) (1,077) — (1,915) (1,092) —

Refining, 1,000 b/d

Crude runs to stills 15,174 14,726 3.0 15,295 15,028 1.8 Input to crude stills 15,473 15,007 3.1 15,598 15,370 1.5 % utilization 86.7 84.3 — 87.5 88.0 —

4 wk. 4 wk. avg. Change, YTD YTD avg. Change,Latest week 4/4 average year ago1 % average1 year ago1 %

Product supplied, 1,000 b/d

Latest Previous Same week Change,Latest week 4/4 week week1 Change year ago1 Change %Stocks, 1,000 bbl

Crude oil 384,122 380,092 4,030 388,874 (4,752) (1.2)Motor gasoline 210,436 215,624 (5,188) 222,363 (11,927) (5.4)Distillate 113,194 112,955 239 112,817 377 0.3 Jet fuel–kerosine 36,641 35,620 1,021 39,730 (3,089) (7.8)Residual 37,037 36,486 551 37,125 (88) (0.2)

Stock cover (days)4 Change, % Change, %

Crude 25.3 25.2 0.4 26.1 (3.1)Motor gasoline 23.9 24.5 (2.4) 26.4 (9.5)Distillate 29.5 29.9 (1.3) 29.0 1.7 Propane 25.3 22.7 11.5 29.0 (12.8)

Futures prices5 34/11 Change Change %

Light sweet crude ($/bbl) 102.75 100.47 2.3 94.93 7.82 8.2 Natural gas, $/MMbtu 4.57 4.38 0.2 3.99 0.58 14.6

1Based on revised figures. 2OGJ estimates. 3Includes other liquids, refinery processing gain, and unaccounted for crude oil. 4Stocks divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices.Source: Energy Information Administration, Wall Street Journal

140421OGJ_9 9 4/17/14 12:08 PM

140421OGJ_10 10 4/17/14 12:08 PM

Oil & Gas Journal | Apr. 21, 2014 11

The Eagle Rock gathering system serves as the primary field

gathering system for Sherman and Moore counties, receiving

80% of BP’s production (OGJ Online, Aug. 13, 2012). The re-

maining gas is gathered by DCP Midstream Partners LP.

BP in 2012 sold its Kansas Hugoton assets to Linn Energy

LLC for $1.2 billion (OGJ Online, Feb. 28, 2012). In February,

Occidental Petroleum Corp. agreed to sell its Hugoton assets

spanning southwest Kansas, the Oklahoma panhandle, and

eastern Colorado to an undisclosed buyer for $1.4 billion (OGJ

Online, Feb. 13, 2014).

EXPLORATION & DEVELOPMENT QUICK TA K ES

Statoil makes oil, gas find north of Valemon fieldStatoil ASA, together with its Valemon unit partners, made an

oil and natural gas discovery in the Valemon North prospect

in the North Sea, just 10 km north of the companies’ planned

Valemon installation (OGJ Online, June 19, 2012).

The discovery wells, 34/10-54 S and 34/10-54 A, were

drilled by Transocean Inc.’s Transocean Leader semisubmers-

ible drilling rig.

The main wellbore, 34/10-54 S, proved a gross 164-m gas-

condensate and oil column in the Middle Jurassic Brent group.

The sidetrack, 34/10-54 A, proved a gross 100-m gas-conden-

sate column in the Brent Group and in sand of unspecified Ju-

rassic age, and an additional gross 140-m gas-condensate col-

umn in the Statfjord Group. Gas-condensate also was found in

the middle Jurassic Cook formation, Statoil reported.

Statoil estimates the total volumes in Valemon North to be

20-75 million bbl of recoverable oil equivalent.

“We are very satisfied with making a new discovery in the

close proximity of the Valemon gas and condensate field cur-

rently under development,” said Irene Rummelhoff, senior vice-

president, exploration, Norway.

Valemon field, discovered in 1985, is one of Statoil’s largest

ongoing development projects on the Norwegian Continental

Shelf. Recoverable reserves from the field are estimated at 206

million boe.

The development concept is a fixed platform, with rich gas

export to Heimdal and condensate export to Kvitebjorn. Pro-

duction start-up is expected in this year’s fourth quarter.

Santos tests gas at Mt Kitty-1 in central AustraliaThe Santos Ltd.-operated wildcat Mt Kitty-1 in the Amadeus

basin of central Australia has flowed gas on test from four zones

in the target Heavitree formation below 2,140 m subsurface.

The well was air-drilled to the target where it encountered a

formation thickness in the reservoir of 109 m on its way down

to the programmed total depth of 2,295 m.

Elevated gas readings were recorded on penetration of the

Heavitree prior to the test program.

A flow test at 2,144 m produced 500 Mcfd of gas before de-

clining to 70 Mcfd after 10 min. A second test at 2,156 m pro-

duced 530 Mcfd decreasing to 420 Mcfd after 18 min. Compa-

rable flows were then recorded at 2,185 m and 2,252 m.

The preliminary analysis indicated a high helium content

in the gas, making up about 5.8% of the flow. Historically the

region is known to be helium-rich.

The nearby Magee gas find recorded 6% helium, 45% inerts

(mostly nitrogen), and 49% hydrocarbons. Helium is about 30

times more valuable than methane for the venture.

Santos said, nevertheless, it is too early to speculate on the

commercial significance of the gas find. The JV is now conduct-

ing wireline operations and detailed gas sample analysis.

Mt Kitty-1 is in permit EP 125 in the southern Amadeus

about 200 km south southwest of Alice Springs. Santos has

70% and Central Petroleum Ltd. has 30%.

BOEM proposes Lease Sale 238 in western gulfThe US Bureau of Ocean Energy Management (BOEM) will of-

fer 3,992 blocks over 21.4 million acres offshore Texas for oil

and gas exploration and development in August’s western Gulf

of Mexico Lease Sale 238.

The blocks, which lie 9-25 miles offshore in 5-3,346 m of

water, could result in the production of 116-200 million bbl of

oil and 538-938 bcf of natural gas, BOEM projected.

BOEM specified it plans to offer blocks located, or partially

located, within the 3-statute mile US-Mexico Boundary Area

subject to the terms of the US-Mexico Transboundary Hydro-

carbon Agreement.

The sale will be the sixth offshore sale under the Obama

administration’s Outer Continental Shelf Oil and Gas Leasing

Program for 2012-17. The first five sales offered more than 60

million acres and netted nearly $2.3 billion.

Western gulf Lease Sale 233, held in August 2013, received

61 bids from 12 companies totaling $102,351,712 in apparent

high bids (OGJ Online, Aug. 28, 2013).

Last month’s central gulf Lease Sale 231 garnered 380 bids

from 50 companies resulting in a total of $850 million in appar-

ent high bids (OGJ Online, Mar. 19, 2014).

DRILLING & PRODUCTION QUICK TA K ES

Total lets $3.5 billion contract for KaomboTotal E&P Angola has let a contract to a consortium comprised

of Technip SA and Heerema Marine Contractors for the engi-

neering, procurement, construction, installation, and precom-

missioning of subsea umbilicals, risers, and flowlines for the

Kaombo project on Block 32 offshore Angola. The deal is worth

$3.5 billion, distributed 55% to Technip and 45% to Heerema.

The project’s scope of work consists of the engineering, pro-

curement, fabrication, transport, and installation of 18 rigid

risers, 300 km of rigid pipe-in-pipe production and single pipe

injection pipelines, and a large number of subsea structures,

piles, and steel jumpers.

The contract also covers the transport and installation of

115 km of client-supplied umbilicals, manifolds, well jumpers,

and flying leads.

140421OGJ_11 11 4/17/14 12:08 PM

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Oil & Gas Journal | Apr. 21, 2014 13

Technip said the engineering work will begin immediately

in the Paris, Leiden, and Luanda centers. Most of the offshore

installation activities are scheduled for 2016-17.

Heerema intends to mobilize Balder, its deepwater construc-

tion vessel, to install risers and the PIP production pipelines.

Technip’s vessel, the Deep Blue, will install the remaining pipe-

lines. Other vessels from Technip’s fleet will install the flexibles

and umbilicals and provide construction work support.

The project is scheduled for completion in first-half 2018.

Total recently made a final investment decision with its Ka-

ombo development partners, reducing its capital expenditures

from $20 billion to $16 billion (OGJ Online, Apr. 14, 2014).

Chevron, YPF to continue Vaca Muerta developmentChevron Corp. and YPF SA, Buenos Aires, will continue devel-

opment of Argentina’s Vaca Muerta shale formation. Chevron

says it will build off the progress of its 2013 drilling program

with YPF, investing in large-scale drilling and production in the

96,000-acre Loma Campana concession.

The initial development agreement was signed in July 2013

by Chevron subsidiaries after several months of negotiations

with the Argentinian government (OGJ Online, July 16, 2013).

It represented the first significant investment in the country

since YPF was renationalized in 2012 when President Cristrina

Fernandez de Kirchner expropriated 51% of the company from

Repsol YPF SA, Madrid.

Chevron says the continuing Vaca Buena development will

include exploration for shale oil and gas resources in a 49,000-

acre area of Chihuido de la Sierra Negra concession, one of the

main producing areas of the Neuquen basin in west-central Ar-

gentina.

In 2012, Repsol said a large investment in Vaca Buena could

double oil and gas production in Argentina in 10 years. At that

time, Ryder Scott Co. LP, Houston, estimated that the entire

7.4-million acre play had resource potential of 116 boe proved,

probable, and possible reserves, 1.525 billion boe of contingent

reserves, and 21.167 billion boe of prospective resources (OGJ

Online, Mar. 27, 2012).

Stanley gas-condensate field development approvedThe Papua New Guinea government has approved Horizon Oil

Ltd.’s proposed $300 million development of the Stanley gas-

condensate field in the country’s western province.

Papua New Guinea Petroleum and Energy Minister Nixon

Duban has been authorized by the National Executive Council

to sign a gas agreement with Horizon and its fellow partners.

This agreement prescribes the key rights and obligations of

the state and licensees for the Stanley project, including fiscal

terms and commitments to local content. There also is approval

for benefit sharing arrangements among the local landowners.

Stanley field will now be issued with a petroleum develop-

ment license (PDL10) and a pipeline license (PL10) following

the formal ceremony to sign the gas agreement this week.

Stanley will initially be developed as a condensate extrac-

tion project with reinjection of dry gas until a market develops,

both locally and potentially as part of a wider gas-gathering

system associated with the country’s LNG projects.

The plan is to produce at a rate of 140 MMcfd of gas from

two wells, which is expected to yield a condensate flow of 400

b/d, plus potential for 40 tonnes/day of LPG.

A condensate recovery plant will be built at Stanley field

along with a liquids pipeline to Kiunga on the Fly River. Stor-

age will be built at Kiunga while a river tanker being built in

Jiangsu in China will ferry the condensate to market outlets.

Stanley-1 flowed at 30 MMcfd of gas and 24 bbl/MMcf of

condensate after a workover in mid-2008. Horizon, which is

project operator with 30% interest, estimates the project will

produce about 8 million bbl of condensate over 10 years.

Osaka Gas has 20% interest, while Talisman Energy began

with 40% and Mitsubishi 10%. Talisman brokered a deal with

Mitsubishi in 2013 to sell down its interest in this and a num-

ber of other PNG projects such that Mitsubishi’s share would

rise to an average of 20% in each of the permits concerned.

PROCESSING QUICK TA K ES

Joint venture launches refinery in KurdistanBlack Diamond Oil Co. and Rezhwan Co. have agreed to form

a joint venture for a refinery in the Kurdistan region of Iraq

that is scheduled to begin operations as soon as next week, the

companies said in an Apr. 13 release.

The refinery, near the Kurdish capital of Erbil, will process

crude Black Diamond purchases directly from above-ground

reserves in Taq Taq field in central Iraq, about 50 miles east-

southeast of Erbil. Rezhwan will act as the refinery’s operator.

The gasoline-producing plant will have an initial crude oil

processing capacity of 11,000 b/d, which Black Diamond plans

to increase by 22,000 b/d starting in May, the company said.

With proved and probable reserves totaling 607 million bbl

of an estimated 1.7 billion bbl of oil in place, Taq Taq—Kurd-

istan region’s largest oil-producing field—produced 80,000-

100,000 b/d of crude, all of which currently is transported by

truck, according to field operator Genel Energy PLC (OGJ On-

line, Mar. 13, 2013).

Production from Taq Taq averaged 75,500 b/d in 2012 vs.

66,000 b/d in 2011.

With a projected total depth of 5,400 m, the TT-22 Taq Taq

deep exploratory well is due to spud shortly, Genel Energy said.

But with a gross unrisked resource of 250 million bbl of oil

equivalent still in Jurassic and Triassic reservoirs, Genel Energy

said it believes ultimate recovery from Taq Taq could reach 1

billion bbl.

Suriname refinery expansion advancesThe construction phase is progressing for a major expansion

and efficiency project to double crude capacity at the Tout Lui

Faut refining complex about 12 miles south of Suriname’s capi-

tal city of Paramaribo (OGJ Online, Sept. 9, 2009).

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Oil & Gas Journal | Apr. 21, 2014 15

Precommissioning preparations have now been completed

to start up some of the new systems related to the expansion,

according to Suriname state oil firm Staatsolie.

In a series of sessions during February and March, the con-

struction, commissioning, and startup and refining operations

divisions established plans to complete additional project mile-

stones, including the final powering of a substation as well as

the start-ups of cool water pumps and air compressors at the

site, Staatsolie said. The deadline for meeting these last project

milestones is May 15, according to the company.

Once completed, Staatsolie’s expansion project—which be-

gan in February 2012 and was designed to reduce the country’s

dependence on imported fuel products—will more than double

the refinery’s capacity to 15,000 b/d from a current 7,000 b/d to

produce high-quality diesel, gasoline, and fuel oil (OGJ Online,

July 28, 2011).

Most recently, Staatsolie let a contract to Honeywell for a

manufacturing execution system at the Tout Lui Faut plant,

at which time Staatsolie said the expanded refinery would be

commissioned in October (OGJ Online, Jan. 21, 2014).

New ethylene plant proposed for LouisianaShintech Inc., the US uni of Shin-Etsu Chemical Co. Ltd., To-

kyo, has applied to the Louisiana Department of Environment

Quality for a permit to build a grassroots ethylene plant.

The company intends to build the plant, which would have

a production capacity of 500,000 tonnes/year of ethylene, on

land for industrial use that it already owns, Shintech said.

Concurrently with carrying out the required processes to

secure a building permit, Shintech will continue its feasibility

study with regard to the amount to be invested for the pro-

posed plant construction, the profitability of the project, and

the amount of time that will take for construction to be com-

pleted, the company said.

Neither a timetable for the final investment decision on the

project nor a specific location for the proposed plant was dis-

closed.

Following its implementation of an in-house production sys-

tem for chlorine, Shintech said the proposed plant aligns with

its strategy of setting up in-house production of ethylene start-

ing from its own raw materials to ensure a stable supply and

further strengthen its integrated PVC production system.

TRANSPORTATION QUICK TA K ES

LNG Ltd. lets Magnolia LNG technical services agreementLiquefied Natural Gas Ltd.’s wholly owned subsidiary Magno-

lia LNG LCC (MLNG) let a technical services agreement to SK

E&C USA Inc. (SKEC), a wholly owned subsidiary of SK En-

gineering & Construction Co. Ltd., of South Korea covering

ongoing engineering, procurement, and construction activities

for MLNG’s planned 8-million tonne/year liquefaction plant in

Lake Charles, La.

Under the agreement, SKEC will:

•  Continue to review all pre-frontend engineering and de-

sign information and data included in the preliminary resource

reports submitted to the US Federal Energy Regulatory Com-

mission.

•  Assist MLNG in completing final resource reports as part 

of MLNG’s filing application to FERC, targeted for submission

the end of the month.

•  Complete the FEED for the Magnolia LNG project includ-

ing gas pretreatment facilities, four 2-million tpy LNG trains,

two 160,000-cu m full containment storage tanks, jetty, and

ship loader facilities, and all related infrastructure and services.

•  Prepare a detailed lump-sum turnkey EPC cost estimate 

on an open book basis Nov. 28.

•  Negotiate  and  agree  with  MLNG  a  detailed  lump-sum 

turnkey EPC contract term sheet; targeted for June 30.

•  Negotiate and agree a definitive and binding  lump-sum 

turnkey EPC contract based on the term sheet.

SKEC has been working on several of these activities under a

shorter term letter of engagement, which the technical services

agreement supersedes.

SKEC has already completed a satisfactory detailed review of

LNG Ltd.’s optimized single mixed refrigerant process technol-

ogy, to be used for MLNG, and provided the company with an

initial estimated EPC cost of $1.57 billion, consistent with the

LNG Ltd.’s budget estimate.

Antero books all of TGP pipeline expansion capacityAntero Resources Inc. was awarded all of the natural gas ca-

pacity offered by Kinder Morgan Energy Partners LP’s Tennes-

see Gas Pipeline Co. (TGP) in an open season for its proposed

Broad Run Flexibility and Broad Run Expansion projects.

The open season totaled 790 MMcfd of firm capacity for 15

years on the Broad Run Lateral in West Virginia and on TGP’s

100 and 500 mainlines.

The projects include horsepower and piping modifications

at existing stations, and one compressor station on the Broad

Run Lateral, all in West Virginia; two TGP mainline compres-

sor stations in Tennessee and Kentucky; and modifications to

five existing mainline compressor stations in Kentucky.

The Broad Run Flexibility Project provides 590 MMcfd of

firm transportation capacity from TGP’s Broad Run Lateral in

TGP Zone 3 to mutually agreeable delivery points in TGP Zone

1.

TGP expects the Broad Run Flexibility Project to enter ser-

vice Nov. 1, 2015. TGP expects the Broad Run Expansion Proj-

ect to provide an incremental 200 MMcfd firm transportation

capacity on the same path by Nov. 1, 2017.

KMEP expects the projects to cost $782 million.

Antero last month became the anchor ethane supplier for

Brazil-based Odebrecht SA subsidiary Odebrecht Oil & Gas

SA’s proposed Appalachian Shale Cracker Enterprise petro-

chemical complex in Wood County, W.Va. (OGJ Online, Mar.

28, 2014).

140421OGJ_15 15 4/17/14 12:08 PM

16 Oil & Gas Journal | Apr. 21, 2014

2014-2015 EVENT CALENDAR

Turkmenbashi, website:

http://www.turkmeni-

stangascongress.com/

conference-delegate-

booking-form 20-21.

Advanced Contract

Risk Management for

Oil & Gas Summit,

Houston, website:

http://www.contrac-

triskmanagement.us/

20-21.

DUG Permian Basin

Conference, Fort

Worth, Texas, website:

http://www.dugperm-

ian.com/?gclid=CN30i

PKenL0CFRQV7AodTm

4A4A 20-22.

International Confer-

ence on Petroleum

Data, Integration &

Data Management,

Houston, website:

http://www.pnecconfer-

ences.com/index.html

20-22.

AFPM Annual Meeting,

San Antonio, (202)

457-0480, (202)

457-0486 (fax), e-mail:

meetings@afpm.

org, website: www.

afpm.org/Conferences

20-23.

AFPM Reliability &

Maintenance Confer-

ence and Exhibition,

San Antonio, (202)

457-0480, (202)

457-0486 (fax), e-mail:

meetings@afpm.

org, website: www.

afpm.org/Conferences

20-23.

International LNG

in B.C. Conference,

Vancouver, website:

http://engage.gov.

bc.ca/lnginbc/lng-

conference/ 21-23.

SPE Latin American

and Caribbean Petro-

leum Engineering Con-

MEPIPES Oil and Gas

Pipelines in the Middle

East Conference, Abu

Dhabi, website: www.

theenergyexchange.

co.uk/event/oil-and-

gas-pipelines-middle-

east-2014. 18-21.

SPE High CO2 and H

2S

Gas Fields Develop-

ment Completions and

Productions Operations

Forum, Bali, website:

http://www.spe.org/

events/14fsap/ 18-23.

SPE Hydrocarbon Eco-

nomics and Evaluation

Conference, Hous-

ton, website: http://

www.spe.org/events/

hees/2014/ 19-20.

World XTL Summit,

London, website: http://

www.cwcxtl.com/

19-21.

SPE Hydrocarbon Eco-

nomics and Evaluation

Symposium, Houston,

website: www.spe.org/

events/calendar/ 19-21.

Flame–Europe’s Lead-

ing Natural Gas & LNG

Conference, Amster-

dam website: http://

www.icbi-flame.com/

FKN2382OGJW 19-22.

API Spring Refin-

ing and Equipment

Standards Meeting,

Orlando, website: www.

api.org/events-and-

training/calendar-of-

events/2014/spring-

refining 19-23.

API Spring Operating

Practices Symposium,

Orlando, website:

http://www.api.org/

events-and-training/cal-

endar-of-events/2014/

springops 20.

TGC Turkmenistan

Gas Congress, Avaza,

Uzbekistan Inter-

national Oil & Gas

Conference, Tash-

kent, website: http://

www.oguzbekistan.

com/2013/about-con-

ference.html 13-15.

SPE International

Conference and Exhibi-

tion on Oilfield Scale,

Aberdeen, website:

www: www.spe.org/

events 14-15.

AFPM National Oc-

cupational & Process

Safety Conference and

Exhibition, San Anto-

nio, (202) 457-0480,

(202) 457-0486 (fax),

e-mail: meetings@

afpm.org, website:

www.afpm.org/Confer-

ences 14-15.

Annual Asia Pacific

Small and Mid Scale

LNG Forum, Singapore,

website: www.apacing.

com 14-16.

GPA Europe Techni-

cal Meeting, Leiden,

website: https://www.

gpaeurope.com/event-

details.aspx?event=32

14-16.

IADC Drilling Onshore

Conference & Exhibi-

tion, Houston, website:

http://www.iadc.org/

event/drilling_on-

shore_2014/ 15.

IEF International En-

ergy Forum, Moscow,

website: http://www.ief.

org/events/ief14 15-16.

World Fuel Oil Summit

VII, Athens, website:

http://www.worldfueloil-

summit.com/ 15-17.

IOGCC Midyear Issues

Summit, Biloxi, Miss.,

website: www.iogcc.

state.ok.us/events

18-20.

PSIG Annual Meeting,

Baltimore, website:

http://www.psig.org/

6-9.

Morocco Oil & Gas

Summit, Marrakesh,

website: http://moroc-

cosummit.com 7-8.

Four Corners Oil & Gas

Conference, Farming-

ton, N.M., website:

http://www.fourcorner-

soilandgas.com/regis-

tration.html 7-8.

GPA MidContinent An-

nual Meeting, Midwest

City, Okla., website:

www.gpaglobal.org 8.

BBTC International

Bottom of the Barrel

Technology Confer-

ence, Lisbon, website:

http://www.europetro.

com/en/bbtc_2014

8-9.

SPE International Con-

ference and Exhibition

on Oilfield Corrosion,

Aberdeen, website:

www: www.spe.org/

events 12-13.

Deloitte Energy

Conference, National

Harbor, Md., website:

https://www.deloitte.

com/view/en_US/us/

Events-Deloitte/9de4

51a76d364410VgnV

CM3000003456f70a

RCRD.htm?oper=REG

13-14.

Eastern Oil & Gas Con-

ference & Trade Show,

Pittsburgh, website:

http://www.pioga.org/

event/2014-eastern-oil-

gas-conference-and-

trade-show/ 13-14.

International School of

Hydrocarbon Measure-

ments, Oklahoma City,

website: http://www.

ishm.info/ 13-15.

AIPN Spring Confer-

ence, New York City,

website: http://aipn.org/

Events/SC2014.aspx

27-29.

M2M for Oil and Gas

Conference, London,

website: www.smi-

online.co.uk/energy/

uk/conference/m2m-

security 28-29.

Small-Mid Scale LNG

Summit, Amsterdam,

website: http://www.

smallmidlng.com/

29-30.

Smart Grids Summit,

Malaga, website: http://

thesmartgridssummit.

com 29-30.

MAY 2014

Annual Oilfield

Housing Solutions

Conference, Hous-

ton, website: http://

www.petroleumcon-

nection.com/hous-

ing/ 1-2.

API International Oil

Spill Conference, Sa-

vannah, website: www.

api.org/events-and-

training/calendar-of-

events/2014/iosc2014

5-8.

OTC Offshore Technol-

ogy Conference, Hous-

ton, website: www.

otcnet.org 5-8.

Annual East Texas

Energy Symposium,

Kilgore, Texas, website:

www.easttexasoilmu-

seum.com 6.

International Down-

stream Technology &

Strategy Conference,

Lisbon, website:

http://www.europetro.

com/en/idtc_2014

6-7.

Denotes new listing or

a change in previously

published information.

APRIL 2014

SPE-SAS Annual

Technical Symposium

& Exhibition, Al Kobar,

website: http://spesas.

org/atse/ 21-24.

Russia & CIS Bottom of

the Barrel Technology

Conference & Exhibition,

Moscow, website: http://

www.europetro.com/en/

rusbbtc_2014 22-23.

Texas Alliance Expo

and Annual Meeting,

Wichita Falls, website:

http://texasalliance.org/

event/alliance-expo-an-

nual-meeting/ 22-23.

Annual Utica & Mar-

cellus Infrastructure

Development Summit,

Pittsburgh, website:

http://infocastinc.com/

events/utica/?gclid=CP

jrzPWnnL0CFUVp7Aod-

wGsAzA 22-24.

CIS Oil&Gas Summit,

Baku, www.theenergy-

exchange.co.uk/event/

cis-oil-gas-summit

22-24.

USEA Annual Mem-

bership Meeting &

Public Policy Forum,

Washing, DC, website:

http://www.usea.org/

event/2014-usea-

annual-membership-

meeting-public-policy-

forum 23.

OpEx Operational

Excellence in Oil &

Gas & Petrochemicals

Conference, Moscow,

website: http://www.

europetro.com/en/ruso-

pex2014 24-25.

140421OGJ_16 16 4/17/14 12:10 PM

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140421OGJ_17 17 4/17/14 12:10 PM

18 Oil & Gas Journal | Apr. 21, 2014

2014-2015 EVENT CALENDAR

ference, Maracaibo,

website: www.spe.org/

events 21-23.

GPA Permian Basin

Annual Meeting,

Odessa, website: www.

gpaglobal.org. 22.

The Mexican Oil

& Gas Opportunities

Update, Houston,

website: http://www.

petroleumconnec-

tion.com/MexicoUp-

date2014/ 27.

Annual California

Energy Summit, San

Francisco, website:

http://www.infocastinc.

com/events/ca-energy

?gclid=CMHC2K2R2b

0CFU4R7AodfiMA0A

28-30.

New Libya Oil & Gas

Summit, London, web-

site: http://libyaoilgas.

com 29-30.

JUNE 2014

SPE Exploitation of

Tight Carbonates

Forum, San Diego,

website: http://www.

spe.org/events/14fus2/

1-6.

Annual Mining Ameri-

cas Summit, Denver,

website: http://www.

miningamericas.com/

2-3.

Annual International

Operating Confer-

ence & Trade Show,

Houston, website:

http://www.ilta.org/

CalendarofEvents/

AOCTS/2014/2014info.

htm 2-4.

Annual Unconventional

Gas & Oil Conference,

London, website: http://

www.oilandgasuncon-

ventional.com/ 2-5.

International Caspian

Oil & Gas Exhibition

& Conference, Baku,

website: http://www.

caspianoil-gas.com/

3-6.

PIRA Canadian Energy

Conference, Calgary,

Alta, website: www.

pira.com 4.

Annual Ireland Oil &

Gas Summit, Dublin,

website: http://ireland-

summit.com 4-5.

GTL North America

Conference, Hous-

ton, website: www.

gtlnorthamerica.com

4-5.

Tulsa Oilfield Expo,

Tulsa, website: http://

www.tulsaoilfieldexpo.

com 4-5.

SPE London Annual

Conference, London,

website: http://www.

spe.org/events/

lond/2014/ 4-5.

Latin American Leader-

ship Forum, Cartagena,

website: http://www.

cg-la.com/forums 4-6.

IPAA OGIS Toronto

Meeting, Toronto,

Ont., website: http://

www.ipaa.org/

meetings-events/event-

details/?mid=308 5.

SPEE Annual Meet-

ing, Stowe, Vermont,

website: https://secure.

spee.org/ 7-10.

PIRA Scenario Plan-

ning Conference,

Houston, website:

www.pira.com 9.

Annual Global Procure-

ment and Supply

Chain Management

for the Oil and Gas

Industry Conference,

Houston, website: http://

www.ifmr-events.com/

marcusevans-confer-

ences-event-details.

asp?EventID=21085 9-11.

SPE Energy Resources

Conference, Port of

Spain, website: www.

spe.org/events/calen-

dar/ 9-11.

Enercom’s London Oil

& Gas Conference,

London, website: http://

www.enercominc.com/

the-london-oil-and-

gas-conference/ 10-11.

PIRA Understanding

Global Oil Markets

Conference, Houston,

website: www.pira.com.

10-11.

SPE African Health,

Safety, Security, and

Environment and Social

Responsibility Confer-

ence and Exhibition,

Nairobi, website: http://

www.spe.org/events/

hsea/2014/ 10-12.

SPE Heavy Oil

Conference-Canada in

Conjunction with GPS,

Calgary Alta., website:

www.spe.org/events/

calendar/ 10-12.

SPE Exploration and

Development in Un-

conventional Reservoir

Symposium, Neuquen,

website: www.spe.org/

events/calendar/ 10-12.

Global Petroleum Show,

Calgary, AB, website:

http://www.digitalrefining.

com/55,events,Global_

Petroleum_Show.html

10-12.

Tight & Shale Gas

Summit, Edinburgh,

website: http://www.

wplgroup.com/aci/

conferences/eu-eug3.

asp 11-12.

USEA Annual En-

ergy Efficiency Forum,

Washington, DC,

website: http://www.

eeforum.net 12.

World Petroleum

Congress, Moscow,

website: www.21wpc.

com 15-19.

Annual Lebanon Oil &

Gas Summit, Beirut,

website: http://irn-inter-

national.com 16-17.

Pipe Tech World Sum-

mit, Rome, website:

http://www.pipetech-

summit.com/ 16-18.

EAGE Conference &

Exhibition, Amsterdam,

website: http://www.

eage.org/events/index.

php?eventid=1000&Op

endivs=s3 16-19.

API Exploration and

Production Standards

Conference on Oilfield

Equipment and Materi-

als, Chicago, website:

www.api.org/events-

and-training/calendar-

of-events/2014/e-p-

standards 16-20.

EuALF SPE Aberdeen

European Artificial Lift

Forum, Aberdeen, web-

site: http://www.spe-

uk.org/default.aspx.

LocID-0a4008003.

Lang-EN.emID-965.

rss-cal.EventID-13676.

htm 17-18.

PIRA London Energy

Conference, London,

website: www.pira.com

17-18.

IADC World Drilling

Conference & Exhibi-

tion, Vienna, website:

http://www.iadc.org/

event/iadc-world-

drilling-2014-confer-

ence-exhibition-2/

18-19.

Africa Energy Forum,

Istanbul, website:

http://africa-energy-

forum.com/ 18-20.

IPAA Midyear Meeting,

Colorado Springs,

website: www.ipaa.

org/meetings-events/

upcoming-meetings/

18-20.

PIRA Scenario Plan-

ning Conference,

London, website: www.

pira.com 19-20.

PIRA Understanding

Global Oil Markets Con-

ference, London, www.

pira.com 19-20.

Myanmar Oil &

Gas Summit, Yangon,

website: http://www.

myanmaroilexhibition.

com/ 23-24.

Iran Oil & Gas Summit,

Abu Dubai, website:

www.iransummit.com

23-25.

Annual Energy Exposi-

tion & Symposium,

Billings, Mont., website:

http://energyexposition.

com/ 25-26.

API Tanker Conference,

Austin, website: http://

www.api.org/events-

and-training/calendar-

of-events/2014/tanker

25-26.

AAPL American’s

Landman Annual Meet-

ing, Montreal, Que.,

website: http://www.

landman.org/ 25-28.

JULY 2014

South Texas Oilfield Expo,

San Antonio, website:

http://www.southtexasoil-

fieldexpo.com/?gclid=CO

r78Mypi70CFY3m7Aode-

wEAvA 9-10.

E&P Information &

Data Management

Asia Pacific Confer-

ence, Singapore,

website: www.

smi-online.co.uk/en-

ergy/asia/conference/

ep-information-data-

and-knowledge-man-

agement-asia-pacific

9-10.

SPE Well Construc-

tion Efficiency: NPT,

Reliability and Process

Improvement Forum,

Santa Fe, website:

http://www.spe.org/

events/14fus4/ 13-18.

North American Cus-

tody Transfer Measure-

ment Conference,

Denver, website: http://

www.ceesi.com/Train-

ing/CustodyTransfer-

MeasurementConfer-

ence.aspx 15-17.

SPE Low Carbon

Intensity Process

for Low-Mobility Oil

Recovery Forum, New-

port Beach, website:

http://www.spe.org/

events/14fus3/ July

27-Aug. 1.

AUGUST 2014

SPE Nigeria Annual In-

ternational Conference

& Exhibition, Lagos,

website: www.spe.org/

events/calendar 5-7.

EnerCom’s Oil & Gas

Conference, Denver,

website: http://www.en-

ercominc.com/the-oil-

and-gas-conference/

17-21.

GeoBaikal Exploration

and Field Development

in East Siberia, Irkutsk

website: http://www.

eage.org/events/index.

php?eventid=1131&Op

endivs=s3 18-22.

140421OGJ_18 18 4/17/14 12:10 PM

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JOURNALLY SPEAKING

20 Oil & Gas Journal | Apr. 21, 2014

“The Doodlebugger” welcomes visitors to the Society of Exploration Geophysicists in Tulsa. Photo from American Oil & Gas Historical Society.

Oil and gas symbols

LEENA KOOTTUNGAL

Survey Editor/News Writer

Believed to be about 40,000 years old, the “Lion Man” from the Swabian Alps in Germany is widely accepted as the world’s oldest known statue. The discovery of the Lion Man dates to August 1939, when fragments of mammoth ivory were excavated at the back of the Stadel Cave in the Swabian Alps.

When the statue was eventually reassembled in 1970, it was regarded as a standing bear or big cat—but with human characteristics—according to The Art Newspaper. It was recently thought to be 32,000 years old but with the discovery of new pieces, the statue’s age has been refined using radio-carbon dating of other bones found in the strata and reveals a date of 40,000 years ago.

After reading a story about the Lion Man, this editor became curious about statues symbolic to the oil and gas industry.

Landmarks

“The Golden Driller” is a 43,500 lb, 76 ft statue of an oil worker. It is the largest free-standing statue in the world, and the fourth-tallest statue in the US. It was first erected by Mid-Continental Supply Co. at the 1953 International Petroleum Exposition. The Driller received such favorable reviews that it was temporarily brought back for the 1959 show.

The company donated the statue to the Tulsa County Fairgrounds Trust Authority. In 1979, the Driller was adopted as the state monument. A plaque at the base of the monument reads: “The Golden Driller, a symbol of the International Pe-troleum Exposition. Dedicated to the men of the petroleum industry who by their vision and dar-

ing have created from God’s abundance a better life for mankind.”

In Wyoming, “Man Made Energy,” also known as the “Welcome to Casper Eastside Gateway Mon-ument,” depicts four prominent local oil men—Dave True, John Wold, Mick McMurry, and Fred Goodstein—working on the floor of a drilling rig. Sculpted by Seth Vandable, this statue is symbolic of the dedication and hard work required to ex-tract oil and gas.

Methods and tools

While browsing the American Oil & Gas Histori-cal Society’s web site, this editor learned about the “Doodlebugger.” The name is a badge of honor among geophysical crews searching for petroleum. SEG’s journal, Geophysics, which first appeared in 1936, included articles about the petroleum indus-try’s three major prospecting methods then known: seismic, gravity, and magnetic. The lead article warned young geophysicists about employing black magic or doodle-bug methods based on unproven properties of oil, minerals, or geological formations.

The Doodlebugger was unveiled during a May 2, 2002, ceremony. The bronze statue, created by sculptor Jay O’Melia, stands almost 10 ft and weighs more than 600 lb.

O’Melia also created an “Oil Patch Warrior” statue of a roughneck dedicated in 1991 in Sher-wood Forest near Nottingham, England. The 7-ft bronze statue honors American oil men who drilled more than 100 wells there during World War II. A replica of the Oil Patch Warrior was ded-icated in 2001 in Memorial Square in Ardmore, Okla., where many of the US roughnecks volun-teered for the secret project.

“The Roughneck” at Texas A&M University in College Station is a bronze statue depicting an oil field worker using a chain to control a 20-ft drill pipe and tricone rotary drill bit, incorporating tools of the trade. This piece was commissioned to commemorate the dedication of the Joe C. Rich-ardson Petroleum Engineering Building.

These statues keep this editor interested in what will be sculpted next to represent the future of the industry.

140421OGJ_20 20 4/17/14 12:10 PM

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EDITORIAL

22 Oil & Gas Journal | Apr. 21, 2014

The third report of the Intergovernmental Panel on Climate Change Fifth Assessment performs a valu-able service. It establishes boundaries for compro-mise and thereby appeals for reasonable discussion about an important issue.

The report from Working Group 3 on mitiga-tion postulates action necessary to keep mean global temperature from rising more than 2° C. above preindustrial levels. Given the complexity of relationships among temperature, atmospheric concentrations of greenhouse gases (GHGs), and other influences, any such target and strategy for meeting it are theoretical. To meet this one, ac-cording to scientists in the working group, people must cut total GHG emissions 40-70% by midcen-tury and to nearly zero by 2100.

Won’t happenThis will not happen. Lowering GHG emissions by even the midcentury goal would require massive displacement of hydrocarbon fuels by energy forms many times more expensive. The economic burden would be politically intolerable. People would re-ject the effort long before the promised benefits of avoided warming came clearly into view. In many countries in Europe, with first-step energy-substi-tution efforts elevating electricity bills painfully, citizens now demand relief. Governments would be foolish to impose further hardship in pursuit of IPCC numbers uncertain to deliver on the promise.

Still, moderation of GHG emissions remains a prudent goal of policy, even if associated changes in measured temperature can’t be known in ad-vance. The effort just needs to acknowledge that people won’t make large, immediate sacrifices of well-being and comfort in service to indistinct benefits in the far-distant future.

This dilemma radiates the need for compro-mise, which requires reasoned discussion of alter-native approaches. So far, reasoned discussion has been absent from the political sphere, which treats views on climate change more as matters of faith and belief than of science and economics. Politics thus quashes any approach not grounded in eco-nomic hopelessness. That must change.

If reasoned discussion did somehow erupt around this issue, what might constructive com-promise look like? And what role should the oil and gas industry play in it?

At the outset, constructive compromise would acknowledge physical realities of energy. One such reality is that energy never has been created as an act of political will and never will be. With energy, people must make the best use of what na-ture gives them. The meaning of “best” under a new approach would incorporate cost and scale as well as environmental performance.

Constructive compromise also would accept that mandates to use expensive instead of afford-able energy doom themselves. Policy would be most effective if it instead fostered the discovery of ways to make physical laws work for rather than against the further decarbonization of energy and management of emissions. Policy therefore should refocus on research and retreat from the futile re-engineering of markets.

Efforts can proceed on other fronts while sci-entific exploration progresses. People can cut their energy use. Conservation works. But it works better when encouraged by education and judicious tax incentives than when it’s imposed. Performance standards for energy-consuming goods work, too, when standard-setters don’t get carried away. By a very important metric—energy use per incre-ment of economic growth—prosperity enhances conservation meaningfully. Policies that sacrifice economic health to rote consumption targets defeat themselves—if they don’t provoke riots first.

Companies’ roleOil and gas companies can complement govern-mental efforts by lowering emissions from their own work and by promoting conservation through education and support for policies geared to energy-use efficiency. They can conduct and fund research. They can encourage economic growth and support tax policies that encourage economically sensible conservation. In return, companies should expect relaxation of the obstructionist bias now turning energy policy against any project that would boost supply or consumption of coal, oil, or gas.

A compromise approach would keep emission reductions below 40%. But that still would rep-resent progress—almost certainly more than un-sustainable energy substitution can achieve. Who knows? Globally averaged temperature might sta-bilize within the 2° window, anyway. In nature, stranger things have happened.

Compromise on climate

140421OGJ_22 22 4/17/14 12:10 PM

140421OGJ_23 23 4/17/14 12:11 PM

24 Oil & Gas Journal | Apr. 21, 2014

GENERAL INTEREST

Nick Snow

Washington Editor

Speakers debate states’ oil,gas role at GMU conference

States are better qualified than federal and local govern-ments to regulate hydraulic fracturing and other unconven-tional oil and gas activities, two speakers agreed at an energy and environment conference at George Mason University’s School of Law. But a third speaker argued that some states’ performances as the primary US oil and gas regulator are unsatisfactory and need to be reevaluated.

Rapid growth of US oil and gas production from tight shale formations is bringing new scrutiny to regulation at all levels of government, all three speakers agreed during a panel discussion at a day-long conference, “Old Fuels, New Technologies, and Market Dynamics,” at the law school’s campus in Arlington, Va., on Apr. 7.

“There’s no convincing basis for the federal government coming in and trying to regulate fracing,” said Michael L. Krancer, a partner at the law firm Blank Rome LLP in Phila-delphia who formerly led Pennsylvania’s Department of En-vironmental Protection. “But it’s not a Republican or Demo-cratic issue. Folks of all political stripes are getting involved.”

US Environmental Protection Agency investigations in Dimock, Pa.; Pavilion, Wyo.; and Parker County, Tex., found no contamination of drinking-water supplies that could be traced to nearby gas wells that had been fraced, he said. “EPA spent millions of dollars, which could have been used to clean up environmental wastes on this troika of fumbles,” Krancer maintained.

Interstate impactsThomas W. Merrill, Charles Evans Hughes Professor at Co-lumbia University’s Law School, noted that while one legal theory suggests that infusions of outside capital from outside interests can influence states’ environmental rules, regula-tion at this level is most effective, except when it comes to potential interstate environmental impacts.

“If you have something with transboundary implications, it theoretically should be federally regulated,” Merrill said. Companies involved in fracing consider tort law’s poten-tial and act accordingly, he said, adding that establishing the cause of drinking or groundwater contamination can be difficult when unconventional oil and gas production is in-

volved, which has led some states to require groundwater tests before any fracing commences.

“Tort law is state law in this country,” Merrill said, add-ing, “I think most of these problems should be left to the states, with the exception of methane leaks and other poten-tial environmental impacts.”

Sharon Buccino, who directs the Land and Wildlife Pro-gram at the Natural Resources Defense Council, conced-ed states can be effective oil and gas regulators when they have strong programs. Colorado does a good job of notify-ing landowners of pending drilling applications, but other states don’t, she said. The federal government does because it’s required under the National Environmental Policy Act (NEPA), she said.

“States are on the front lines of ensuring enforcement people can count on,” Buccino said. “But many don’t have the necessary resources. There were 500 spills last year in Wyoming, and no fines. One solution is to incorpo-rate environmental monitoring costs into drilling permit charges.”

Krancer responded that state oil and gas regulation is far from failing, particularly with the State Review of Oil and Natural Gas Environmental Regulations (Stronger) where stakeholders from the industry, state environmental agen-cies, and environmental and public interest groups review state oil and gas waste management programs against guide-lines developed and agreed to by all of the participants.

EPACT exemptionsBuccino questioned exemptions for oil and gas producers from the federal Safe Drinking Water Act and stormwater runoff control requirements established under the Energy Policy Act of 2005. But Krancer said EPACT recodified that oil and gas regulation should be left to the states.

“The states can require advanced notice, set NEPA-like rules, and increase enforcement,” said Merrill. “The federal process is slow and cumbersome. States can respond more quickly.”

Buccino reiterated that states can do certain regulatory jobs well, but added, “When we’ve done enough, we won’t have the fear and outrage that’s out there. I’ve sat across the kitchen tables of people who have a drilling rig on the prop-erty of a neighbor who’s getting the royalties while they get all the noise and pollution.”

140421OGJ_24 24 4/17/14 12:11 PM

Oil & Gas Journal | Apr. 21, 2014 25

Heitkamp leads Senate Democrats’ new push for Keystone XL approvalNick Snow

Washington Editor

Ten other US Senate Democrats joined Heidi Heitkamp (ND) in urging US President Barack Obama to approve the pro-posed Keystone XL crude oil pipeline by May 31.

“Please use your executive authority to expedite this pro-cess to a swift conclusion and a final decision so we can all move forward on other energy infrastructure needs in this country,” they said in an Apr. 10 letter to the president.

Sens. Mary L. Landrieu (La.), who chairs the Energy and Natural Resources Committee; Mark Begich (Alas.); Joe Donnelly (Ind.); Kay Hagan (NC); Joe Manchin (W.Va.); Claire McCaskill (Mo.); Mark Pryor (Ark.); Jon Tester (Mont.); John Walsh (Mont.); and Mark Warner (Va.) also signed the letter.

“This process has been exhaustive in its time, breadth, and scope,” said Heitkamp. “It has already taken much lon-ger than anyone can reasonably justify.”

She said, “We cannot miss another construction season. Given the long, cold winter this year along the Keystone XL pipeline route and the time required for ground thaw, we could be looking at a very short season [in 2014]. We need a definitive timeline laid out for a project that should be ap-proved because it’s in our country’s best interest.”

The senators said they respected the need for a final pub-lic comment period on the proposed pipeline from Alberta’s oil sands to Gulf Coast refineries (which ended on Mar. 7), as well as the importance of relevant federal agencies and offi-cials conveying their views to US Sec. of State John F. Kerry.

Within 15 days“At the expiration of the current 90-day comment and con-sultation period for certain federal agencies, there should be a date no later than 15 days after that [time] for Sec. Kerry to provide you with his national interest determination rec-ommendation,” they told Obama. “Finally, we ask that you commit to making your final decision on the [cross-border] permit application by May 31.”

Responding to a reporter’s question about the Senate Democrats’ letter at the Apr. 10 daily briefing, White House Press Sec. Jay Carney said the administration’s position re-mains that the deliberation process at the US Department of State on Keystone XL should be allowed to run its appro-priate course without interference from the White House or Congress.

“It was because of actions taken by Republicans in Con-gress that one delay was caused in the process already,” Car-ney said, adding, “So that review continues at [DOS] where it’s housed in accordance with past practices of previous ad-ministrations of both parties. And when there’s a decision to be announced, it will be announced.”

But American Petroleum Institute Pres. Jack N. Gerard said Heitkamp and the 10 other Senate Democrats’ letter shows that many of the calls for the proposed project’s ap-proval are coming from within the president’s own political party.

“Delaying the decision on Keystone XL sends the wrong signal to the rest of the world,” Gerard said, adding, “A nation that continues to be indecisive on a simple a matter of our own energy security will have a hard time convincing the rest of the world we can be decisive when it comes to their interests. We need to send the signal we’re serious about our domestic energy policy and our global energy policy.”

FRA to propose requiring two-member crews on trains carrying crudeNick Snow

Washington Editor

The Federal Railroad Administration (FRA) plans to propose requiring trains transporting crude oil to have at least two crew members, the US Department of Transportation agency announced. It said it also intends to propose a train secure-ment rule and recommend a rulemaking on hazardous ma-terials movement.

The Apr. 9 announcement followed deliberations of three working groups created at DOT’s request following the July 6 derailment of an unmanned train carrying crude and sub-sequent explosion and fires that killed 47 people and exten-sively destroyed property at Lac Megantic, Que. (OGJ On-line, July 8, 2013).

Two of the working groups produced recommendations that were adopted by the full Railroad Safety Advisory Com-mittee (RSAC) for consideration in future rulemakings, it said. After the third working group didn’t reach a consen-sus on crew size, FRA said it acted to move forward with a rulemaking.

“Safety dictates that you never allow a single point of failure,” FRA Administrator Joseph C. Szabo said. “Ensur-ing that trains are adequately staffed for the type of ser-vice operated is critically important to ensure safety redun-dancy. We commend the RSAC’s efforts and will use the valuable input received to formulate a proposed rule that

140421OGJ_25 25 4/17/14 12:11 PM

26 Oil & Gas Journal | Apr. 21, 2014

WATCHING GOVERNMENT

NICK SNOWWashington Editor | Blog at www.ogj.com

Impacts of oil and gas development on

nearby communities are getting more

attention. Some are obvious, such

as demand for more services from a

suddenly bigger population before tax

revenue starts to flow into formerly rural

counties and towns. So are others,

including longer lines at grocery stores

and heavier traffic on two-lane roads.

But closer examinations of what’s

happened as hydraulic fracturing and

horizontal drilling has brought oil and

gas activity into new areas domestically

has revealed a few surprises, experts

said at an Apr. 10 seminar at Resourc-

es for the Future (RFF).

Local manufacturing has historically

tracked resource booms and busts,

according to Hunt Allcott, an assistant

economics professor at New York

University and a faculty research fellow

at the National Bureau of Economic

Research.

“It’s not just manufacturers of oil

and gas equipment, but also nonenergy

product manufacturers serving local

communities’ demands,” he said. “We

learned a lot from what happened in

the 1970s that we’re applying now.”

When Pennsylvania lawmakers

realized Marcellus shale gas’s signifi-

cant potential in 2012, they enacted an

impact fee to provide earlier revenue to

counties, townships, and communities,

said James M. McElfish Jr., a senior

attorney at the Environmental Law

Institute.

‘Heavily front-loaded’The fee is charged per well for 15

years, with the heaviest collections the

first year “so it’s pretty heavily front-

loaded,” he noted. “It’s also affected by

gas prices, so it’s similar to a severance

tax. As the first wells move beyond the

initial heavy expense, the total amount

could go down if more wells aren’t

added.”

Local governments decide how the

money is used, so several used much

of what they received on additional

rock salt during the recent hard winter,

McElfish said. “Almost none used any

of their shares for delivery of social

services,” he added.

Heavier traffic, meanwhile, came

from each fraced well requiring about

1,000 truck trips to deliver stimulation

fluids and remove flowback for disposal

elsewhere, said Lucija Muehlenbachs,

a University of Calgary assistant profes-

sor who’s also an RFF university fellow.

Pennsylvania’s oil and gas industry

quickly highlighted road congestion as

a major concern, she indicated. “There

also were changes in the general type

of drivers, with more young males

tending to drive bigger vehicles fast,”

Muehlenbachs said. “We’re finding im-

pacts on emergency medical services

and long-term rehabilitation.”

The state’s supreme court struck

down part of these impact fees in

December, and local governments

are having to adjust, McElfish said.

“Several also say Marcellus shale

development is having positive revenue

impacts, even though they can’t tax

oil and gas workers’ waves, because

they’re buying more goods and services

locally,” he indicated.

Marcellus shale impact surprises

protects the public and recognizes the nuance of railroad operations.”

The agency noted that while ex-isting FRA regulations do not man-date minimum crew staffing require-ments, current industry practice is to have two-person crews for over-the-road operations. It said the notice of proposed rulemaking will most likely require a minimum two-person crew for most mainline train operations in-cluding those carrying crude. It is also expected to include appropriate excep-tions, FRA said.

Additional proposalsFRA said it plans to propose an ad-ditional requirement prohibiting certain unattended freight trains or standing freight cars on main track or sidings, and requiring railroads to adopt and implement procedures to verify securement of trains and unat-tended equipment for emergency re-sponders.

Locomotive cabs also would have to be locked and reversers removed and secured, FRA said. Railroads also would be required to obtain advance approval from the agency for locations or circumstances where unattended cars or equipment may be left, it in-dicated.

The full RSAC also approved four recommendations by the Hazardous Materials Issues Working Group re-lating to identification, classification, operational control and handling of certain shipments. The recommenda-tions, directed to the US Pipeline and Hazardous Materials Safety Adminis-tration (PHMSA), include amending or revising the definitions of “residue” and “key train,” and clarifying its reg-ulatory jurisdiction over the loading, unloading, and storage of hazmat be-fore and during transportation.

PHMSA continues to advance a rulemaking that addresses the integ-rity of DOT Specification 111 tanker cars and the safe shipment by rail of flammable materials such as crude oil, FRA noted.

The American Petroleum Institute

140421OGJ_26 26 4/17/14 12:11 PM

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GENERAL INTEREST

28 Oil & Gas Journal | Apr. 21, 2014

China, Japan, Taiwan, and India, is critical to success since these are key markets in the growing LNG trade. Without this approval, commercial risks would be increased and projects would be deemed commercially unviable,” Rositano warned.

Proved reserves of US crude oil reach 36-year high in 2012US proved reserves of crude oil at yearend 2012 were es-timated at 33.4 billion bbl, up 15.4% from 2011 and the highest since 1976, according to a report released Apr. 10 by the US Energy Information Administration.

The report, US Crude Oil & Natural Gas Proved Re-serves (2012), outlined contributing factors to the higher reserves, including a rise in exploration for liquid hydro-carbons, improved technology for developing tight-oil plays, and sustained high historical oil prices, EIA said.

The report said, in 2012, proved oil reserves increased in three of the top five largest crude oil and lease conden-sate areas, including Texas, the Gulf of Mexico federal off-shore, and North Dakota. Texas recorded the largest volu-metric increase of 3 billion bbl among individual states, largely because of development in the Permian and western gulf basins, while North Dakota had the second-largest in-crease (1.1 billion bbl), driven by development of the Bak-ken and Three Forks formations in the Williston basin.

Tight oil plays contained 7.3 billion bbl of proved crude oil reserves and lease condensate in 2012, accounting for 22% of the US total. Proved crude oil reserves in the Eagle Ford tight oil play in southwest Texas surpassed those in the Bakken formation of North Dakota to become the larg-est tight oil play in the US.

US wet natural gas proved reserves were 322.7 tcf at the end of 2012, down 26 tcf from the previous year.

Low natural gas prices, reflected in a 34% decline in the 12-month, first-of-the-month, average spot price of natural gas at the Henry Hub between 2011 and 2012, led to large negative net revisions (–45.6 tcf) to the reserves of existing fields that offset almost all gains from extensions of exist-ing fields, EIA noted in its report.

However, the report anticipates that proved gas reserves for 2013 will be affected positively by the recovery in gas prices from 2012 to 2013.

Proved natural gas reserves in the Marcellus shale gas play in Pennsylvania and West Virginia surpassed those in the Barnett shale play of Texas to become the largest shale gas play in the US, EIA said.

applauded FRA’s announcement. “The multipronged ap-proach that must be taken to enhance rail safety and crude oil transportation incorporates prevention, mitigation, and emergency response,” noted Bob Greco, API downstream di-rector.

“Ensuring trains are adequately staffed and implement-ing technologies like positive train control could improve safety by preventing accidents before they happen,” Greco said, adding, “The oil and gas industry will continue to work closely with the railroad industry and regulators to address safety needs in a comprehensive way.”

GlobalData: US needs to ‘fast-track’ LNG exports to compete in global marketThe US’s lack of approved export terminals has prevented energy companies from competing in the growing global LNG market, despite the fact that the country is now the world’s largest natural gas producer, said an analyst with re-search and consulting firm GlobalData.

Global LNG capacity will rise an average of 10%/year during 2013-17, projected Carmine Rositano, GlobalData managing analyst, downstream oil and gas. Much of that change will be facilitated in Australia and Qatar, which will respectively hold 20% and 16% of global LNG capac-ity.

Australia will see the Gladstone, Gorgon, Wheatstone, and Queensland terminals come online, increasing the country’s LNG capacity by 10 bcfd over 2013 levels.

GlobalData forecasts that US liquefaction, meanwhile, will have just a 5% share of the global LNG capacity in 2017.

“Asia will remain the key market for LNG,” Rositano said, adding, “But other areas, such as Europe, will increase their LNG imports as they seek to reduce their dependence on gas supplies from Russia.”

Delays in the US caused by necessary local, state, envi-ronmental, and federal approvals, as well as the limitation that exports from US facilities can only be sold to countries with free-trade agreements (FTA), will hinder the country’s ability to compete globally, GlobalData said.

“To date, over 30 applications have been filed with the [US Department of Energy] to sell LNG. However, only sev-en terminals have been approved to export LNG to non-FTA countries and only one facility, the Sabine Pass LNG termi-nal (OGJ Online, Sept. 23, 2013), has received all necessary approvals,” Rositano stated.

“Being able to sell LNG to non-FTA countries, such as

140421OGJ_28 28 4/17/14 12:11 PM

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GENERAL INTEREST

30 Oil & Gas Journal | Apr. 21, 2014

“This decision is a recipe for further declines of a rare and beautiful bird already teetering on the brink of extinction,” said Jason Rylander, a Defenders of Wildlife senior attorney.

“[FWS] has adopted unprecedented and sweeping loop-holes that seriously undermine their ability to monitor the implementation and effectiveness of new and inadequate conservation programs, increasing the likelihood of further loss of prairie chickens and further habitat destruction,” he declared.

“Drought and habitat destruction are devastating the small remaining population of this magnificent grassland bird,” said Jay Lininger, a Center for Biological Diversity se-nior scientist. “The unenforceable state-level plan and volun-tary measures are too little, too late, and will not get traction fast enough to prevent extinction.”

Erik Molvar, a wildlife biologist with WildEarth Guard-ians, said, “In 1905, one market hunter shipped 20,000 less-er prairie-chickens out of a single county in Texas. In 2013, only 17,616 were found across the species’ entire five-state range, down from 34,440 just the year before, and counts appear to be even lower this spring.”

He said, “Clearly, the local efforts aren’t enough to recover the bird and protect its most sensitive habitats. Compelling a full-scale ‘endangered species’ listing would close the loop-holes and inject some much-needed backbone into conser-vation efforts.”

Nick Snow

Washington Editor

Three environmental organizations notified the US Fish and Wildlife Service that they plan to sue over the US Depart-ment of the Interior agency’s recent designation of the lesser prairie chicken as a threatened—but not endangered—spe-cies (OGJ Online, Mar. 28, 2013). While the Mar. 27 final rule fell short of the endangered status, it disappointed Midcontinent oil and gas producers and others involved in a five-state environmental impact mitigation effort to make any federal listing unnecessary.

FWS’s first-time use of Section 4(d) of the federal Endan-gered Species Act to create exemptions so participants to join state-organized or other voluntary conservation plans is unacceptable, the Center for Biological Diversity, Defenders of Wildlife, and WildEarth Guardians jointly said on Apr. 10.

They said FWS endorsed an agreement that would let oil and gas producers in five Midcontinent states kill just un-der half of the bird’s remaining population over 10 years. The groups also criticized the animal’s ESA designation as threatened instead of endangered, which would have trig-gered mandatory conservation measures.

Environmental groups to challenge FWS’s lesser prairie chicken ruling

Russia falls to last place in SAFE’s latest security indexNick Snow

Washington Editor

Russia, which ranked as high as No. 9 in 2005, fell to last place in the most recent quarterly update of the global Oil Security Index (OSI), released by Securing America’s Future Energy (SAFE), the nonpartisan organization dedicated to the reduction of US dependence on foreign oil.

The OSI measures the oil security of more than a dozen countries around the world based on key indicators, includ-ing their structural dependence on oil, their economic expo-sure to the global oil market, and their capacity to respond to oil supply disruptions, SAFE said.

It said Russia dropped to last place during fourth-quarter 2013, partly due to its extreme reliance on oil export rev-enues and the Russian economy’s relatively high oil inten-

sity, which is about 8 times higher than the most efficient countries. Russia depends on oil exports for 51% of its total export revenue, making it second only to Saudi Arabia in that respect, SAFE said.

“Oil security means different things for different coun-tries based on individual economic and structural factors,” noted SAFE Chief Executive Robbie Diamond. “That is one of the key lessons of the index. So while countries like Rus-sia and Saudi Arabia may be global leaders in oil production, they remain extremely vulnerable to changes in global oil prices.

“This is useful insight for US policymakers as they are increasingly forced to grapple with geopolitical events,” he said, adding, “We cannot ignore the importance of oil when dealing with allies and adversaries around the globe.”

140421OGJ_30 30 4/17/14 12:11 PM

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32 Oil & Gas Journal | Apr. 21, 2014

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US demand climbed

The US, meanwhile, fell one slot in the OSI’s rankings from fifth place during third-quarter 2013 to the No. 6 spot in the year’s final quarter. While increas-ing production has reduced US im-ports and improved the nation’s ener-gy security in recent years, SAFE said the US remains the world’s largest oil consumer, accounting for 20% of total global demand.

It said the country’s fuel consump-tion per capita metric is the second-highest in the OSI, and US oil intensity remains higher than many of its devel-oped country peers. Such high levels of economy-wide oil consumption, which increased by about 800,000 b/d year-to-year in first-quarter 2013,

leave the nation exposed to price vola-tility and supply disruptions, accord-ing to SAFE.

“Contrary to people’s expectations, we saw significant growth in US oil consumption in late 2013,” Diamond said. Domestic demand had its larg-est year-to-year increase since 2004, which helped drive a notable increase in spending on oil, he noted.

“This suggests that increasing pro-duction and declining import levels alone are not sufficient if the United States wants to achieve greater ener-gy security,” Diamond said. “We also need to be heavily focused on reduc-ing the role of oil consumption in our economy through greater efficiency and fuel diversity.”

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GENERAL INTEREST

34 Oil & Gas Journal | Apr. 21, 2014

Statoil’s oil sands production saw slight decline in 2013Statoil ASA reported a slight decrease in its oil sands pro-duction in 2013 because of a planned multiweek plant shut-down for facility maintenance and the integration of new scientific research and experimental development measures, according to the company’s 2013 Oil Sands Report.

Production decreased to 15,000 b/d of oil in 2013 from 16,000 b/d in 2012 as carbon dioxide intensity increased to 69.7 kg CO

2/bbl from 55.6 kg CO

2/bbl. The CO

2 intensity in

2011 was 72.7 kg CO2/bbl.

The report—which presents performance indicators for production, energy consumption, emissions intensity, and resource use at the Leismer Demonstration Project and in the Kai Kos Dehseh (KKD) leases in northern Alberta—stat-ed that CO

2 intensity rose because of facility maintenance

and the integration of pilot technologies to reduce long-term CO

2 intensity.

The technology pilot measures are intended to both in-crease production and decrease CO

2 intensity in the long

term. Statoil said its CO2 intensity reduction targets of 25%

by 2020 and 40% by 2025 remain firm.More steam was utilized in 2013 when a fourth steam gen-

erator was added to support new well pads and the company’s current production wells. Statoil also experienced an imbalance in the reservoir after a planned maintenance period. As a result, production levels were lower and steam use higher than usual, impacting the company’s overall CO

2 intensity rate.

“In 2013 we introduced new technologies to help further our ambitions. These include solvent co-injection, which has the potential to reduce the amount of steam and water used to produce a barrel of bitumen,” said Stale Tungesvik, Statoil Canada country manager and senior vice-president.

The company said CO2 intensity is expected to decrease

as operations normalize and additional technology is intro-duced. However, in the near term, the CO

2 intensity for Leis-

mer may be higher than the projected segment target.“Statoil’s technology plan remains on course. We have

identified a group of 14 technologies we aim to test and de-ploy over the next 5-10 years. A number of these technolo-gies support our strategy to reduce CO

2 emissions at their

source,” said Tungesvik.Results of the first full year of Statoil’s surface water mon-

itoring program showed no indication the development of the Kai Kos Dehseh leases is having an effect on the natural water cycle of lakes and rivers monitored on those leases, the company said.

Production at Leismer, via a steam-assisted gravity drainage facility, started in January 2011 (OGJ Online, Jan. 27, 2011).

Statoil and Thailand’s PTT Exploration & Production (PT-TEP), which in 2010 acquired 40% in the KKD project for $2.2 billion (OGJ Online, Nov. 23, 2010), signed an agreement in January of this year to divide their respective interests.

Following the transaction, Statoil will continue as opera-tor and 100% owner for the Leismer and Corner develop-ment projects, while PTTEP will own 100% of the Thorn-bury, Hangingstone, and South Leismer areas.

IEA: Global oil supplies plunge in March on lower OPEC outputGlobal crude oil supplies fell month-on-month in March by a steep 1.2 million b/d to 91.75 million b/d, with a decline in output from members of the Organization of the Petroleum Exporting Countries accounting for near 75% of the loss, according to the International Energy Agency’s most recent Oil Market Report.

Due to sharply lower supplies from Iraq, Saudi Arabia, and Libya, OPEC crude oil supplies in March fell 890,000 b/d to just 29.62 million b/d—the lowest level in 5 months.

“Libyan and Iraqi outputs were down on worsening civil unrest and operational issues, respectively, while Saudi Ara-bia curbed supplies last month in the wake of weaker de-mand from refiners during the peak spring refinery turn-around period,” IEA said.

OPEC’s “effective” spare capacity in March was estimated at 3.53 million b/d, up from 3.31 million b/d in February. Following an upward revision to demand and reduced fore-cast for non-OPEC supplies, the “call on OPEC crude and stock change” for the second quarter was raised by 100,000 b/d to 29.4 million b/d and for the second half by 350,000 b/d to an average 30.6 million b/d.

For all of 2014, the non-OPEC supply forecast has been revised lower by 250,000 b/d compared with last month’s report due to downward adjustments to the forecast for countries of the former Soviet Union, and to a lesser extent, smaller changes to Europe and Latin America output.

Output from both Russia and Kazakhstan is projected to fall this year because of accelerated declines at Russia’s leg-acy fields and ongoing (and extensive) repairs on Kashagan field’s leaky pipeline system.

The forecast of global demand growth has been margin-ally trimmed to 1.3 million b/d in 2014 vs. 1.4 million b/d in last month’s report, reflecting lower Russian demand projec-tion in the wake of its annexation of Crimea.

The adjustment is in line with underlying downward revi-sions to Russian gross domestic product by the World Bank and the International Monetary Fund, IEA said. The World

140421OGJ_34 34 4/17/14 12:11 PM

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140421OGJ_35 35 4/17/14 12:12 PM

GENERAL INTEREST

36 Oil & Gas Journal | Apr. 21, 2014

Bank cut by half its base-case projec-tion for Russian economic growth in 2014—to 1.1% from its December es-timate of 2.2%. The bank noted that, in a “high-risk” scenario for Russia, “An intensification of political tension could lead to heightened uncertain-ties around economic sanctions which would further depress confidence and investment activities.”

The forecast of US oil demand growth this year has been trimmed marginally by 20,000 b/d from last month’s report, to 19 million b/d, fol-lowing lower-than-expected delivery data for January and February.

IEA’s demand forecast for China, meanwhile, is maintained at 10.4 mil-lion b/d for 2014, 3.4% up on the year earlier, in the prospect of renewed gov-ernment support for the slowing down Chinese economy.

Texas Petro Index reaches record-high in February

The Texas Petro Index (TPI), a com-posite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Energy Producers (TAEP), reached yet another record high, tallying a score of 300.6 in February as a result of rapidly increasing production, higher wellhead prices, and revised statewide employment numbers (OGJ Online, Oct. 2, 2013).

Producers in Texas increased oil output by more than 22% in February compared with February 2013, noted Karr Ingham, economist and creator of the index. Ingham added that natural gas production was up about 1%.

“Combined with higher wellhead prices for both commodities, the value of oil and gas produced in Texas dur-ing February increased by more than $2.85 billion in the past year to about $10.63 billion,” Ingham said.

Texas producers recovered about 2.75 million b/d of crude oil in Feb-ruary—the most since 1980. Crude oil production in Texas totaled an es-timated 77.2 million bbl, about 14.1 million bbl more than in February 2013. The value of Texas-produced crude oil reached a total of $7.48 bil-lion, a 29.2% jump vs. February 2013.

The estimated Texas natural gas output was more than 625.2 bcf. With gas prices in February averaging 5.04/Mcf—an increase of about 55.6% com-pared with the average wellhead price of $3.24/Mcf in February 2013—the value of Texas-produced gas increased 57.3% to about $3.15 billion.

Ever-expanding workforceRevised statewide employment esti-mates by the Texas Workforce Commis-sion (TWC) indicated the oil and gas in-dustry continues to hire new workers at an impressive pace, faster than even the robust growth in prior years.

The number of Texans on oil and gas industry payrolls averaged a record

285,000, according to statistical meth-ods based on TWC estimates, about 4.9% more than in February 2013. Record-setting estimated oil and gas industry employment in February re-placed the record estimate of 282,700, set in August 2013.

“In 2012, workforce commissioners revised total upstream payroll employ-ment upward by about 3,200 jobs to more than 270,000 jobs, which reflected a growth rate of 10.2% at yearend com-pared to yearend 2011,” Ingham said, adding, “In 2013, another 10,000 jobs were added to upstream oil and gas com-pany payrolls, and that job growth has escalated during early part of this year.”

He said, “At yearend 2013, the year-over-year rate of industry employment growth was about 3.7%. In February, the year-over-year rate of industry em-ployment growth was nearly 5%, with about 13,400 jobs added over the last 12 months. Since the industry down-turn in 2009, about 103,000 jobs have been added to upstream oil and gas company payrolls.”

The most recent low ebb in industry employment, 179,200, occurred in Oc-tober 2009. During the previous growth cycle, industry employment peaked at 223,200 in November 2008.

GAO: Scant data exists about NEPA analyses’ costs, benefits

Nick Snow

Washington Editor

Little information exists about the costs and benefits of analyses required under the National Environmental Policy Act, the Government Accountability Office said. Federal agencies do not routinely track the costs, and there is no govern-ment-wide mechanism to do so, GAO investigators said they learned from offi-cials at the US Environmental Protection Agency, White House Council on Envi-ronmental Quality, and other agencies.

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Oil & Gas Journal | Apr. 21, 2014 37

GENERAL INTEREST

“Information on the benefits of completing NEPA anal-yses is largely qualitative,” the Apr. 15 report continued. “According to studies and agency officials, some of the qualitative benefits of NEPA include its role in encourag-ing public participation and in discovering and addressing project design problems that could be more costly in the long run.”

The fact that federal agencies’ activities under NEPA are hard to separate from other required environmental analyses under federal laws such as the Endangered Species Act and the Clean Water Act; executive orders; agency guidance; and state and local laws further complicates analysis of NEPA’s costs and benefits, GAO said.

“This report substantiates concerns that the federal gov-ernment has no system to track time or costs associated with NEPA, which is one of the most expansive regulatory laws in the country,” US Rep. Rob Bishop (R-Utah), who chairs the House Natural Resources Committee’s Public Lands and Environmental Subcommittee.

NEPA is important for many reasons, but delays and problems associated with its processes are significant, he maintained. “I am also very troubled by the constant use of NEPA as a litigious weapon to halt or delay projects that wealthy special interest groups don’t like,” said Bishop, who requested the investigation.

‘Costly, hidden, duplicative’Officials of two associations representing US oil and gas pro-ducers also responded to the report’s findings. “The NEPA pro-cess has been found to be costly, largely hidden from the public, and duplicative of other environmental legislation,” said Daniel T. Naatz, Independent Petroleum Association of America’s vice-president of federal resources and political affairs.

“This report echoes the problems America’s indepen-dent producers have encountered when dealing with a va-riety of agencies regarding environmental assessments, en-vironmental impact statements, and categorical exclusions,” Naatz said, adding, “Independent producers continue to struggle to operate on federal lands and NEPA continues to be an opaque barrier for entry.”

NEPA analysis was originally designed to enable trans-parent disclosure of environmental and economic impacts from federal projects so that impacts could be mitigated and better decisions made, according to the Denver-based West-ern Energy Alliance (WEA). The 1970 law was not designed to be a means for unaccountable environmental groups to raise money while stopping social progress, it added.

“GAO confirmed what western producers have been struggling with for years: long, drawn-out NEPA analy-sis that prevents economic growth and job creation,” said Kathleen Sgamma, WEA vice-president of government and public affairs. “NEPA delays to proposed western oil and gas projects on public lands are holding up nearly 79,000 jobs and $17.8 billion in annual economic activity.”

140421OGJ_37 37 4/17/14 12:11 PM

GENERAL INTEREST THE EDITOR’S PERSPECTIVE

38 Oil & Gas Journal | Apr. 21, 2014

sponsible oil and gas development can provide.”

He said he urged DOE to process the ConocoPhillips application to ship LNG to non-FTA countries outside the queue the department established for other LNG export applications. Only six applications in that group have been approved as being in the national interest, and at least 24 more remain, Begich said.

The company plans to operate the liquefaction plant seasonally, during summer when regional gas demand is low, the senator indicated.

ConocoPhillips separately said it is committed to meeting its local gas sup-ply contracts and to diverting gas from the LNG facility to address local sup-ply issues if needed. It previously said it would seek a new export authoriza-tion if local Cook Inlet area gas needs were met and there was sufficient gas available for export.

It said that during 2013, local utili-ties executed agreements securing their gas supplies through at least the first quarter of 2018. “The Cook Inlet area gas supply forecast has increased, which is a positive development for local utilities,” ConocoPhillips said. “LNG exports will provide a market opportunity for Cook Inlet gas pro-duction in excess of local market de-mand.”

DOE: ConocoPhillips can resume LNG sales to non-FTA countries

Nick Snow

Washington Editor

The US Department of Energy ap-proved a ConocoPhillips Co. subsid-iary’s request to resume exports of LNG to countries not having a free-trade agreement with the US from the company’s Kenai facility in Alaska in an Apr. 14 order. ConocoPhillips’s au-thorization for such LNG exports from the site expired on Mar. 31, it noted.

Exports of as much as 40 bcf of gas equivalent would be authorized for 2 years, DOE’s Fossil Energy Office said in the order. The overseas sales would provide additional demand for Cook Inlet gas, which is otherwise not need-ed in the state, ConocoPhillips Alaska Natural Gas Corp. said in its applica-tion. It included a Sept. 5 letter from Alaska’s Department of Natural Re-sources supporting this point.

A Feb. 19 DOE order authoriz-es LNG sales from ConocoPhillips Alaska’s Kenai Peninsula installation to countries that have an FTA agree-ment with the US, the company noted. Those sales would be part of the 40-bcf limit, it said.

Alaska’s two US senators applauded DOE’s action. “I’m glad ConocoPhil-lips will be able to add to Alaska’s 40-year history of supplying natural gas to Japan,” said Lisa Murkowski (R), the Energy and Natural Resources Com-mittee’s ranking minority member.

“DOE’s announcement also high-lights the growth that’s occurring in Cook Inlet, where there is now ample gas supply to both meet local needs and help out our friends overseas,” she observed.

“This is great news for the cradle of Alaska’s oil and gas industry on the Kenai Peninsula,” said Mark Begich (D). “With plenty of gas available to meet local needs through at least 2018, we’re seeing the kind of job growth re-

Need for still more reform awaits winner of Indian electionsby Bob Tippee, Editor

A question larger than who wins elections in the world’s fourth-ranked oil-consuming country is how much difference the out-come might make.

Elections in India opened Apr. 7 and will continue through May 12. An overarch-ing issue is reinvigoration of a once-boom-ing economy with a growth rate down by half since 2010.

A candidate leading in at least name recognition is Rahul Gandhi of the Con-gress Party, which founders in its second term atop the governing United Progres-sive Alliance after having been restored to power in 2004.

Economic drift has shaken popular confidence in Gandhi’s party and Prime Minister Manmohan Singh, a designer of the liberalization effort begun in 1991. Worse, scandals involving Congress Party members have stained Singh’s reputation for honesty and inflamed a citizenry weary of corruption.

An alternative candidate with strong support of business leaders is Narendra Modi of the Hindu-nationalist Bharatiya Janata Party. Modi was chief minister of Gujarat during the rapidly industrializing state’s economic boom. But he has been criticized for not doing enough to quell deadly riots against Muslims in 2002.

An interesting long shot is Arvind Kejri-wal, leader of the new Aam Aadmi Party, which routed Congress in Delhi Assembly elections last December. Kejriwal is run-ning a populist, anticorruption campaign. As chief minister of Delhi, he oversaw aggressive subsidization of public services. But when opposition parties blocked leg-islation to set up an anticorruption board, calling it unconstitutional, he resigned in principal after 49 days in office.

Indian voters have clearly defined choices. But national problems transcend ideological differences. India remains hobbled by market controls, bureaucracy, and dissipation of political potency among 28 states and 7 union territories inhabited by 1.2 billion people, nearly 70% of whom live on less than $2/day.

India certainly needs less corruption, more economic growth, and more-equita-ble distribution of opportunity. But it also needs institutional reforms that seem ever in progress but seldom closer to realization than they were in the last political cycle.

ONLINE APR. 11, 2014 | bobt@ogjonline.com

(From the Subscribers Only area of www.ogj.com)

Reprints of any OGJ article may be purchased from Rhonda Brown, Foster Printing Co., 4295 Ohio St., Michigan City, Ind. 46360.Phone: 1-866-879-9144 ext. 194.

E-mail:rhondab@fosterprinting.comWeb site: www.fosterprinting.com

140421OGJ_38 38 4/17/14 12:11 PM

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STATISTICS

Oil & Gas Journal | Apr. 21, 2014 41

Additional analysis of market trends is available through OGJ Online, Oil & Gas Journal’s electronic information source, at http://www.ogj.com.

OGJ CRACK SPREAD 4–11–14* 4–12–13* Change Change, ———–—$/bbl ——–—— %

SPOT PRICES Product value 120.90 115.75 5.16 4.5 Brent crude 106.39 103.72 2.67 2.6 Crack spread 14.51 12.02 2.49 20.7

FUTURES MARKET PRICESOne month Product value 124.51 121.49 3.02 2.5 Light sweet crude 102.75 93.40 9.35 10.0 Crack spread 21.76 28.09 (6.33) (22.5)Six month Product value 116.59 116.13 0.46 0.4 Light sweet crude 98.02 93.59 4.43 4.7 Crack spread 18.57 22.54 (3.97) (17.6)

*Average for week ending. Source: Oil & Gas JournalData available at PennEnergy Research Center.

IHS PURVIN & GERTZ LNG NETBACK MATRIX—APR. 11, 2014 –––––––––––––––––––––––––––– Liquefaction plant ––––––––––––––––––––––––––––––––Receiving Algeria Malaysia Nigeria Austr. NW Shelf Qatar Trinidadterminal –––––––––––––––––––––––––––––––– $/MMbtu ––––––––––––––––––––––––––––––––––––

Barcelona 11.69 9.18 10.69 9.09 9.96 10.59 Everett 2.92 0.55 2.47 0.63 1.20 3.26 Isle of Grain 6.98 4.42 6.17 4.31 5.14 6.21 Lake Charles 1.88 (0.33) 1.59 (0.10) 0.19 2.62 Sodegaura 10.98 13.81 11.09 13.41 12.40 9.96 Zeebrugge 10.03 7.37 9.15 7.24 8.13 9.24

Defnitions, see OGJ Apr. 9, 2007, p. 57.Source: IHS Purvin & GertzData available at PennEnergy Research Center.

CRUDE AND PRODUCT STOCKS —–– Motor gasoline —–– Blending Jet fuel, ————— Fuel oils ————— Propane- Crude oil Total comp. kerosine Distillate Residual propyleneDistrict ———————————————————————————— 1,000 bbl —————————————————————————

PADD 1 ..................................... 10,894 53,899 46,620 8,003 32,186 8,804 1,887PADD 2 ..................................... 97,511 47,249 37,815 6,681 26,879 1,708 8,126PADD 3 ..................................... 202,003 74,540 62,921 11,774 36,635 22,056 16,584

PADD 4 ..................................... 21,895 6,129 3,805 677 3,769 171 1988PADD 5 ..................................... 51,819 28,620 25,916 9,507 13,725 4,297 —

Apr. 4, 2014 ............................. 384,122 210,437 177,077 36,642 113,194 37,036 27,585Mar. 28, 2014 ........................... 380,091 215,625 181,452 35,620 112,954 36,487 26,568Apr. 5, 20132 ............................. 388,874 222,363 172,149 39,730 112,817 37,125 40,025

1Includes PADD 5. 2Revised. Source: US Energy Information AdministrationData available at PennEnergy Research Center.

REFINERY REPORT—APR. 4, 2014

REFINERY –––––––––––––––––––––––––––– REFINERY OUTPUT ––––––––––––––––––––––––––– –––––– OPERATIONS –––––– Total Gross Crude oil motor Jet fuel, ––––––– Fuel oils –––––––– Propane- inputs inputs gasoline kerosine Distillate Residual propyleneDistrict ––––––– 1,000 b/d –––––––– –––––––––––––––––––––––––––––––– 1,000 b/d –––––––––––––––––––––––––––––––

PADD 1 .............................................. 960 951 3,139 78 324 58 156PADD 2 .............................................. 3,196 3,194 2,495 210 1,035 65 239PADD 3 .............................................. 8,356 8,221 2,094 804 2,631 261 844PADD 4 .............................................. 520 503 367 21 160 14 1167PADD 5 .............................................. 2,662 2,469 1,745 410 648 113 —

Apr. 4, 2014 ........................................ 15,694 15,338 9,840 1,523 4,798 511 1,406Mar. 28, 2014 ..................................... 15,622 15,315 9,526 1,488 4,788 458 1,412Apr. 5, 2013 ........................................ 15,472 15,115 8,932 1,532 4,539 575 1,374

17,933 Operable capacity 87.5 utilization rate

1Includes PADD 5. 2Revised.Source: US Energy Information AdministrationData available at PennEnergy Research Center.

IMPORTS OF CRUDE AND PRODUCTS

— Districts 1-4 — — District 5 — ———— Total US ———— 4-4 3-28 4-4 3-28 4-4 3-28 4-5 * 2014 2014 2014 2014 2014 2014 2013 ––––––––––––––––––––––––— 1,000 b/d ––––––––––––––––––––––––—

Total motor gasoline ............. 478 523 23 10 501 533 875 Mo. gas. blending comp. ..... 442 454 20 8 462 462 808 Distillate ............................... 314 222 4 18 318 240 139 Residual .............................. 110 183 8 19 118 202 193 Jet fuel-kerosine .................. 129 106 0 1 129 107 0 Propane-propylene .............. 65 85 7 (27) 72 58 74 Other ................................... 178 2 29 65 207 67 22

Total products ...................... 1,716 1,575 91 94 1,807 1,669 2,111

Total crude ........................... 6,300 5,687 1,012 1,144 7,312 6,831 7,719

Total imports ........................ 8,016 7,262 1,103 1,238 9,119 8,500 9,830

*Revised. Source: US Energy Information AdministrationData available at PennEnergy Research Center.

140421OGJ_41 41 4/17/14 12:15 PM

STATISTICS

42 Oil & Gas Journal | Apr. 21, 2014

OGJ GASOLINE PRICES Price Pump Pump ex tax price* price 4-9-14 4-9-14 4-10-13 ————— ¢/gal —————

(Approx. prices for self-service unleaded gasoline)Atlanta .......................... 301.7 348.6 367.6Baltimore ...................... 307.7 353.1 357.6Boston ........................... 308.7 353.6 348.2Buffalo .......................... 287.6 355.6 376.5Miami ............................ 316.0 370.4 368.2Newark .......................... 311.2 344.1 328.2New York........................ 293.6 361.6 387.1Norfolk........................... 318.5 354.2 343.2Philadelphia .................. 302.4 362.6 382.0Pittsburgh ..................... 298.9 359.1 362.2Wash., DC ...................... 318.6 360.5 364.1 PAD I avg .................. 305.9 356.7 362.2

Chicago ......................... 343.3 400.8 413.0Cleveland ...................... 308.4 354.8 342.1Des Moines .................... 310.3 350.7 352.1Detroit ........................... 301.3 358.8 367.6Indianapolis .................. 308.6 365.7 360.9Kansas City ................... 315.0 350.7 328.7Louisville ....................... 316.9 366.1 358.8Memphis ....................... 330.2 370.0 345.6Milwaukee ..................... 314.0 365.3 361.5Minn.-St. Paul ............... 314.0 361.0 362.9Oklahoma City ............... 299.0 334.4 332.6Omaha .......................... 300.7 346.4 337.6St. Louis ........................ 305.7 341.4 331.6Tulsa ............................. 297.7 333.1 332.0Wichita .......................... 313.0 356.4 349.4 PAD II avg ................. 311.9 357.0 351.8

Albuquerque .................. 304.7 342.0 334.5Birmingham .................. 294.6 334.0 348.1Dallas-Fort Worth .......... 295.1 333.5 353.0Houston ......................... 298.7 337.1 344.8Little Rock ..................... 291.1 331.3 349.6New Orleans .................. 298.3 336.7 349.6San Antonio ................... 299.9 338.3 346.3 PAD III avg ................ 297.5 336.1 346.5

Cheyenne....................... 293.4 335.8 340.4Denver ........................... 318.3 358.7 360.2Salt Lake City ................ 299.9 342.8 350.1 PAD IV avg ................ 303.9 345.8 350.2

Los Angeles ................... 337.6 408.5 423.0Phoenix.......................... 335.2 372.6 358.7Portland ........................ 327.3 376.8 361.7San Diego ...................... 312.6 383.5 418.7San Francisco................ 338.1 409.0 420.0Seattle........................... 319.2 375.1 380.0 PAD V avg ................. 328.3 387.6 393.7

Week’s avg. .................. 309.7 357.0 359.5Mar. avg.. ...................... 302.1 349.4 370.7Feb. avg. ...................... 286.1 333.4 361.52014 to date ................. 292.1 339.2 —2013 to date ................. 306.5 352.7 —

*Includes state and federal motor fuel taxes and state sales tax. Local governments may impose additional taxes.Source: Oil & Gas Journal.Data available at PennEnergy Research Center.

US CRUDE PRICES4-11-14

$/bbl*

Alaska-North Slope 27° ......................................... 97.76 Light Louisiana Sweet ........................................... 99.11 California-Midway Sunset 13° .............................. 10.60 California Buena Vista Hills 26° ........................... 107.90 Wyoming Sweet ..................................................... 95.24 East Texas Sweet ................................................... 98.50 West Texas Sour 34° .............................................. 95.25 West Texas Intermediate ........................................ 100.25 Oklahoma Sweet.................................................... 100.25 Texas Upper Gulf Coast ......................................... 94.00 Michigan Sour ....................................................... 92.25 Kansas Common ................................................... 99.25 North Dakota Sweet ............................................... 90.44

*Current major refner’s posted prices except N. Slope lags 2 months. 40° gravity crude unless differing gravity is shown. Source: Oil & Gas Journal. Data available at PennEnergy Research Center.

REFINED PRODUCT PRICES 4-4-14 4-4-14 ¢/gal ¢/gal Spot market product prices

Motor gasoline (Conventional-regular) New York Harbor ......... 275.60 Gulf Coast .................. 276.40

Motor gasoline (RBOB-regular) New York Harbor ......... 309.40

No. 2 heating oil New York Harbor ......... 286.20

No. 2 DistillateLow sulfur diesel fuel New York Harbor ......... 291.70 Gulf Coast .................. 288.50 Los Angeles ................ 295.00

Kerosine jet fuel Gulf Coast .................. 284.70

Propane Mont Belvieu .............. 108.00

Source: EIA Weekly Petroleum Status Report.Data available at PennEnergy Research Center.

BAKER HUGHES RIG COUNT 4-11-14 4-12-13

Alabama............................................ 5 5Alaska ............................................... 10 10Arkansas ........................................... 11 15California .......................................... 41 39 Land................................................ 40 37 Offshore .......................................... 1 2Colorado ............................................ 62 59Florida ............................................... 1 1Illinois ............................................... 3 2Indiana.............................................. 0 2Kansas .............................................. 27 24Kentucky............................................ 3 2Louisiana .......................................... 108 107 N. Land ........................................... 24 22 S. Inland waters .............................. 18 25 S. Land............................................ 18 15 Offshore .......................................... 48 45Maryland ........................................... 0 0Michigan ........................................... 0 1Mississippi ........................................ 13 10Montana ............................................ 7 10Nebraska ........................................... 2 2New Mexico........................................ 91 80New York............................................ 0 1North Dakota ..................................... 178 178Ohio................................................... 34 32Oklahoma .......................................... 192 185Pennsylvania ..................................... 54 59South Dakota..................................... 0 1Texas ................................................. 884 848 Offshore .......................................... 3 2 Inland waters .................................. 1 0 Dist. 1 ............................................. 128 140 Dist. 2 ............................................. 81 79 Dist. 3 ............................................. 56 45 Dist. 4 ............................................. 34 36 Dist. 5 ............................................. 7 14 Dist. 6 ............................................. 33 26 Dist. 7B ........................................... 8 17 Dist. 7C ........................................... 93 82 Dist. 8 ............................................. 316 275 Dist. 8A ........................................... 37 39 Dist. 9 ............................................. 17 26 Dist. 10 ........................................... 70 67Utah .................................................. 27 28West Virginia ..................................... 26 24Wyoming............................................ 49 42Others—ID-1; NV-2 .......................... 3 4

Total US ........................................ 1,831 1,771 Total Canada ................................ 212 156

Grand total ................................... 2,043 1,927US oil rigs.......................................... 1,517 1,387US gas rigs........................................ 310 377Total US offshore ............................... 53 49Total US cum. avg. YTD ..................... 1,785 1,757

Rotary rigs from spudding in to total depth.Defnitions, see OGJ Sept. 18, 2006, p. 46.Source: Baker Hughes Inc.

Data available at PennEnergy Research Center.

US NATURAL GAS STORAGE1 4-4–14 3-28–14 4-4–13 Change, –——––—— bcf —––——– %

Producing region ................ 361 352 691 (47.8)Consuming region east ...... 305 310 648 (52.9)Consuming region west ...... 160 160 336 (52.4)

Total US ............................. 826 822 1,675 (50.7) Change, Jan.-14 Jan.-13 %

Total US2 ............................ 1,926 2,702 (28.7)

1Working gas. 2At end of period.Source: Energy Information Administration Data available at PennEnergy Research Center.

OGJ PRODUCTION REPORT 14-11-14 24-12-13

–—— 1,000 b/d —–—

(Crude oil and lease condensate)Alabama ................................. 26 28 Alaska .................................... 536 529 California ............................... 596 593 Colorado ................................. 187 163 Florida .................................... 6 5 Illinois .................................... 25 26 Kansas ................................... 132 132 Louisiana ............................... 1,210 1,229 Michigan ................................ 22 21 Mississippi ............................. 65 67 Montana ................................. 78 81 New Mexico ............................. 290 258 North Dakota .......................... 991 789 Oklahoma ............................... 344 303 Texas ...................................... 3,349 2,695 Utah ....................................... 106 91 Wyoming ................................. 182 172 All others ................................ 80 84

Total .................................. 8,225 7,2661OGJ estimate. 2Revised. Source: Oil & Gas Journal.Data available at PennEnergy Research Center.

WORLD CRUDE PRICES $/bbl OPEC reference basket Wkly. avg. 4-11-14 103.59 –– Mo. avg., $/bbl –– Feb.-14 Mar.-14

OPEC reference basket....................... 105.38 104.15Arab light-Saudi Arabia ....................... 106.30 104.80Basrah light-Iraq ................................. 103.38 102.10Bonny light 37o-Nigeria ........................ 110.77 109.50Es Sider-Libya ...................................... 108.47 107.15Girassol-Angola.................................... 109.54 108.67Iran heavy-Iran..................................... 104.96 104.01Kuwait export-Kuwait ........................... 104.17 103.05Marine-Qatar........................................ 104.91 104.07Merey-Venezuela .................................. 94.00 93.23Murban-UAE ......................................... 108.69 107.60Oriente-Ecuador ................................... 97.44 94.96Saharan blend 44o-Algeria ................... 110.52 108.95Other crudesMinas 34o-Indonesia ............................ 108.46 113.60Fateh 32o-Dubai ................................... 105.04 104.32Isthmus 33o-Mexico ............................. 100.47 98.87Tia Juana light 31o-Venezuela .............. 108.87 107.55Brent 38o-UK ........................................ 107.43 106.66Urals-Russia ........................................ 102.74 108.06DifferentialsWTI/Brent ............................................. (8.09) (7.02)Brent/Dubai.......................................... 3.83 3.23

Source: OPEC Monthly Oil Market Report.Data available at PennEnergy Research Center.

IHS PETRODATA RIG COUNT APR. 11, 2014

Total supply of rigs

Marketed supply of rigs

Marketed contracted

Marketed utilization rate (%)

US Gulf of Mexico. . . . . . 112 86 81 94.2South America 83 81 81 100.0Northwest

Europe. . . . . 93 92 92 100.0West Africa. . . . . . 80 76 69 90.8Middle East. . . . . . . 146 142 131 92.3Southeast Asia. . . . . . . 101 93 81 87.1Worldwide. . . . 836 782 741 94.8

Source: IHS PetrodataData available in PennEnergy Research Center

140421OGJ_42 42 4/17/14 12:15 PM

Oil & Gas Journal | Apr. 21, 2014 43

BAKER HUGHES INTERNATIONAL RIG COUNT –––––– Mar. 2014 –––––– Mar. 2013 Region Land Off. Total Total

WESTERN HEMISPHERE Argentina ................................ 101 — 101 76 Bolivia ..................................... 7 — 7 9 Brazil....................................... 24 23 47 74 Canada ................................... 449 1 449 464 Chile........................................ 3 — 3 2 Colombia ................................. 45 — 45 43 Ecuador ................................... 24 1 25 24 Mexico ..................................... 55 33 88 120 Peru......................................... 4 2 6 5 Trinidad ................................... 2 1 3 3 US ........................................... 1,750 54 1,803 1,756 Venezuela ................................ 72 9 81 81 Other ....................................... — — — — --------------- --------------- --------------- --------------- Subtotal .................................. 2,536 124 2,658 2,657 ASIA-PACIFIC Australia ................................. 13 7 20 16 Brunei ..................................... 1 1 2 2 China-offshore ........................ — 22 22 17 India........................................ 82 40 122 116 Indonesia ................................ 22 14 36 44 Japan ...................................... 1 — 1 1 Malaysia.................................. 1 15 16 10 Myanmar ................................. 1 1 2 2 New Zealand ........................... 3 2 5 9 Papua New Guinea .................. 5 — 5 3 Philippines .............................. 1 — 1 3 Taiwan..................................... — — — — Thailand .................................. 3 16 19 19 Vietnam................................... — 6 6 4 Other ....................................... 1 — 1 1 --------------- --------------- --------------- --------------- Subtotal .................................. 134 124 258 247 AFRICA Algeria..................................... 44 — 44 47 Angola ..................................... — 14 14 9 Congo ...................................... 1 3 4 5 Gabon...................................... 5 2 7 4 Kenya ...................................... 13 1 14 2 Libya ....................................... 11 1 12 15 Nigeria .................................... 10 5 15 15 South Africa ............................ — — — 1 Tunisia .................................... 1 — 1 2 Other ....................................... 12 9 21 15 --------------- --------------- --------------- --------------- Subtotal .................................. 97 35 132 115 MIDDLE EAST Abu Dhabi ............................... 19 10 29 28 Dubai ...................................... — 1 1 — Egypt ....................................... 43 10 53 51 Iran ......................................... — — — — Iraq ......................................... 90 — 90 65 Jordan ..................................... — — — — Kuwait ..................................... 34 — 34 31 Oman ...................................... 58 1 59 42 Pakistan .................................. 20 — 20 19 Qatar ....................................... 3 8 11 7 Saudi Arabia ........................... 75 21 96 84 Sudan...................................... — — — — Syria ........................................ — — — — Yemen ..................................... 4 — 4 3 Other ....................................... 4 — 4 6 --------------- --------------- --------------- --------------- Subtotal .................................. 350 51 401 336 EUROPE Croatia .................................... 1 1 2 1 Denmark.................................. — 3 3 2 France ..................................... 3 — 3 2 Germany .................................. 4 1 5 6 Hungary................................... 2 — 2 2 Italy ......................................... 5 2 7 3 Netherlands............................. 4 6 10 8 Norway .................................... — 21 21 20 Poland ..................................... 3 — 3 5 Romania.................................. 9 — 9 8 Turkey ...................................... 39 1 40 30 UK ........................................... 1 16 17 21 Other ....................................... 22 4 26 25 --------------- --------------- --------------- --------------- Subtotal .................................. 93 55 148 133 Total ........................................ 3,210 389 3,597 3,488

Defnitions, see OGJ Sept. 18, 2006, p. 42. Source: Baker Hughes Inc. Data available at PennEnergy Research Center.

BAKER HUGHES WELL COUNT Basin 1st qtr.* 4th qtr. Year ago Change, %

Ardmore Woodford 31 66 49 (36.7) Arkoma Woodford 24 25 13 84.6 Barnett 327 374 443 (26.2) Cana Woodford 94 77 82 14.6 DJ-Niobrara 267 258 266 0.4 Eagle Ford 1,110 1,171 1,044 6.3 Fayetteville 127 129 157 (19.1) Granite Wash 132 148 141 (6.4 Haynesville 97 94 109 (11.0) Marcellus 524 576 475 10.3 Mississippian 386 408 343 12.5 Permian 2,374 2,351 2,169 9.5 Utica 102 112 131 (22.1) Williston 707 737 582 21.5 Others 2,550 2,557 2,530 0.8

Total 8,852 9,083 8,534 3.7

*Current quarter well count data is preliminary and is subject to revisions. Source: Baker Hughes Inc. Data available in PennEnergy Research Center

WATERBORNE ENERGY INC. US LNG IMPORTS Change Jan. Dec. Jan. from a 2014 2013 2013 year ago, Country ————— MMcf ———— %

Egypt — — — — Nigeria — — — — Norway — — — — Peru — — — — Qatar — — — — Trinidad and Tobago 7,030 — 10,780 (34.8) Yemen 2,910 2,930 2,730 —

Total 9,940 2,930 13,510 (26.4)

Source: Waterborne Energy Inc. Data available at PennEnergy Research Center. No new data at press time.

PROPANE PRICES Jan. Feb. Jan. Feb. 2014 2014 2013 2013 ——–—––––––––– ¢/gal —––—–––––——–

Mont Belvieu 139.50 144.30 83.80 86.20

Source: EIA Weekly Petroleum Status Report Data available at PennEnergy Research Center.

MUSE, STANCIL & CO. REFINING MARGINS US US US US North- South- Gulf East Mid- West west east Coast Coast west Coast Europe Asia ––––––––––––––––––––––––––––––––––– $/bbl –––––––––––––––––––––––––––––––––––

Mar. 2014 Product revenues 117.92 118.75 122.68 123.85 117.73 114.11 Feedstock costs (104.17) (112.60) (95.47) (106.06) (112.14) (108.15)

Gross margin 13.75 6.15 27.21 17.79 5.59 5.96 Fixed costs (2.35) (3.26) (2.64) (3.08) (2.64) (2.05) Variable costs (1.21) (1.10) (1.00) (1.81) (1.83) (2.12)

Cash operating margin 10.19 1.79 23.57 12.90 1.12 1.79 Feb. 2014 9.52 5.48 23.67 13.70 2.10 2.06 YTD avg. 9.24 2.79 21.93 12.84 1.30 2.16 2013 avg. 7.42 2.22 24.96 15.85 3.14 1.97 2012 avg. 8.67 4.77 28.64 14.86 6.60 3.26 2011 avg. 5.62 0.20 20.04 10.99 4.25 2.93

Source: Muse, Stancil & Co. See OGJ, Jan. 15, 2001, p. 46Data available at PennEnergy Research Center.

MUSE, STANCIL & CO. GASOLINE MARKETING MARGINS Los Chicago* Houston Angeles New York Feb. 2014 ———–———— ¢/gal ————–———

Retail price 358.52 314.98 380.68 364.76 Taxes 60.80 38.40 65.43 54.25 Wholesale price 280.45 269.09 285.19 284.82 Spot price 271.23 267.28 287.45 277.63 Retail margin 17.27 7.49 30.06 25.69 Wholesale margin 9.22 1.81 (2.26) 7.19 Gross marketing margin 26.49 9.30 27.80 32.88 Jan. 2014 37.50 21.00 37.66 45.18 YTD avg. 32.00 15.15 32.73 39.03 2013 avg. 32.33 20.45 35.26 36.05 2012 avg. 33.55 22.46 37.32 36.82 2011 avg. 16.44 23.39 29.82 37.34

*The wholesale price shown for Chicago is the RFG price utilized for the wholesale margin. The Chicago retail margin includes a weighted average of RFG and conventional wholesale purchases. Source: Muse, Stancil & Co. See OGJ, Oct. 15, 2001, p. 46. Data available at PennEnergy Research Center. Note: Margins include ethanol blending in all markets.

MUSE, STANCIL & CO. ETHYLENE MARGINS Ethane Propane Naphtha ——–——– ¢/lb ethylene –—–———

Mar. 2014 Product revenues 58.23 101.64 127.09 Feedstock costs (12.37) (60.30) (133.04

Gross margin 45.86 41.34 (5.95) Fixed costs (6.64) (7.85) (8.88) Variable costs (4.05) (4.70) (6.18)

Cash operating margin 35.17 28.79 (21.01)

Feb. 2014 30.67 8.65 (22.00) YTD avg. 34.99 17.23 (19.84) 2013 avg. 42.10 32.09 (19.60) 2012 avg. 37.32 31.96 (20.62) 2011 avg. 21.63 10.43 (22.93)

Source: Muse, Stancil & Co. See OGJ, Sept. 16, 2002, p. 46. Data available at PennEnergy Research Center.

MUSE, STANCIL & CO. US GAS PROCESSING MARGINS Gulf Mid- Coast continent Mar. 2014 ———–– $/Mcf —–—–—

Gross revenue Gas 4.39 4.35 Liquids 1.19 3.94 Gas purchase cost 4.89 5.84 Operating costs 0.07 0.15 Cash operating margin 0.63 2.30

Feb. 2014 0.52 0.99 YTD avg. 0.53 1.10 2013 avg. 0.58 1.61 2012 avg. 0.81 1.80 2011 avg. 1.03 2.40 Breakeven producer payment, % of liquids 55% 98%

Source: Muse, Stancil & Co. See OGJ, May 21, 2001, p. 54. Data available at PennEnergy Research Center.

STATISTICS

140421OGJ_43 43 4/17/14 12:15 PM

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Oil & Gas Journal | Apr. 21, 2014 45

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The Oil & Gas Journal has a circulation of over 100,000 readers and has been the world’s most widely read petroleum publication for over 100 years

46 Oil & Gas Journal | Apr. 21, 2014

EMPLOYMENTTRAINING

Optimizing Careers for Oil and Gas Leaders

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June 4-6, Oct. 1-3

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June 25-27

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Register Today!

T h e N e W S R e S e R V e F O R N O R T h A M e R I C A N S h A L e P L A Y S VOLUME 1 NUMBER 1

Beyond US border, Mexico primes shale pot

Oil production from 14 of the most active counties in the South Texas eagle Ford shale reached 28 MMbbl in the last year. Gas production doubled from the previous year to 271 bcf, and for the

same period, condensate tripled to 21 MMbbl, according to a March report from the eagle Ford Task Force, which was established by the Texas Railroad Commission. By 2015, the eagle Ford shale will become the largest stand-alone energy project in the world as

measured by capital expenditures, the report indicates.

Meanwhile, across the border from South Texas, Mexico is gearing up to initiate its own shale boom.

“The eagle Ford doesn’t stop at the border,” said edgar Rangel-German, commissioner with Mexico’s National hydrocarbons Commission (CNh). The US energy Information Admin-istration (eIA) reported in 2011 that Mexico has the second-largest shale gas potential in Latin America and the fourth-largest in the world. The country contains 61 tcf of natural gas reserves but the eIA report places Mexico’s shale gas potential at 680 tcf.

Mexico state oil cbeen analyzing tthe eIA along witof resources, beithe world was a nbelieve the eIA’s nmated,” Rangel-G

Mexico’s CNhnew laws in the cThe commission isanctioning resertioning e&P projmation concerniand overseeing oThe country is in iunconventional

Tayvis Dunnahoe, Editor

EAGLE FORD

SHALE GAS BASINS OF EASTERN MEXICO

TexasEl BurroUplift

Sabinas Basin

Coahuila

Platform

Burgos

Percutor

Nomada

MontañezHabano

Emergente

Arbolero-1

Eagle Ford

Gas

Play

Eagle Fo rd O

il Pl

ay

Peyotes-Pic

achos A

rches

U S

The Journal of Energy

from Innovation

www.uogreport.com

The New:

BUSINESS OPPORTUNIT IES

Oat Mountain So. California

640-2000 acres available.

650,000,000 Barrel Potential

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well listing on:

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San Joaquin Basin Logs

All from Kern County, California

2,342 wells (mostly wildcats)

.LAS format, $15,000

Formation Tops

The Bureau of Indian Affairs, Pawnee

Agency, Pawnee, OK, is offering the sale

of Restricted Indian Land for Oil & Gas

Mining Leases, located in Noble, Pawnee,

Kay Counties & part of Payne Co., north

of the Cimarron River on Tuesday, May

20, 2014. Persons or frms interested in

bidding or those desiring additional infor-

mation should contact the Trust Manage-

ment Services Offce at 918-762-2585.

O I L & G AS M I N I N G L E AS E S

The Department of Interior, Bureau of Indian

Affairs, Concho Agency will be conducting an

at 9 a.m. on May 15, 2014

at Redlands Community College in El Reno,

Oklahoma. Indian lands in Blaine, Canadian,

Buster, Dewey, Kingfsher, Roger Mills and

Washlite counties in Oklahoma will be

available for lease.

To obtain the complete text of the sale

notice or further information,

please call (405)-262-7481.

Oil and Gas Lease Sale

BUSINESS OPPORTUNIT IES

In response to program growth and

campus strategic initiatives, the

Geological Sciences and Engineering

Department at Missouri S&T seeks

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with appointment at the assistant or

associate professor level. Candidates

must have an earned PhD in petroleum

engineering, petroleum geosciences,

or a closely related area appropriate

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tion. Industrial experience in analyz-

ing and evaluating the many indices

used to characterize unconventional

resources is strongly preferred.

For full position description includ-

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http://hraadi.mst.edu/hr/employ-

ment/faculty/ (reference number

R00059882). For additional informa-

tion (but not to submit applications)

contact Dr. Runar Nygaard, 153 McNutt

Hall, Rolla, MO 65409; nygaardr@mst.

edu; (573) 341-4759. Review of appli-

cations will begin

May 10, 2014, and

applications will

be accepted and

reviewed until the

position is flled.

Assistant/Associate Professor

of Petroleum Engineering

in Reservoir Characterization

Missouri University of Science and

Technology/Geological Sciences and

Engineering Department

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Contact Grace at gracej@pennwell.com

713-963-6291

MARKET CONNECTIONWHERE THE INDUSTRY GOES TO CLASSIFY

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140421OGJ_46 46 4/17/14 12:21 PM