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Iraq second-leading contributor to global oil supply growth in 2014

"Despite some supply disruptions and security threats, Iraq was the second-leading contributor to global oil supply growth in 2014, behind only the United States. Iraq accounted for almost 60% of production growth among the Organization of the Petroleum Exporting Countries (OPEC), although this growth was more than offset by production declines in other OPEC countries. Iraq's crude oil production, which averaged almost 3.4 million barrels per day (bbl/d) in 2014, was 330,000 bbl/d above 2013 levels, despite the heightened security threat from the Islamic State of Iraq and the Levant (ISIL) and disrupted production in northern Iraq."-EIA

Historic gains in US oil production May come to a halt in 2015 - IHS

Stunning growth in US oil production may come to a halt by mid-2015 as low oil prices begin to constrain US tight oil production, which has been the dominant engine of world oil supply gains in recent years, according to a new report by information and analytics provider HIS. Growth is still expected in the early months of 2015 but that momentum will level off in the latter half of the year amidst prices at lows not seen since the 2008-09 Great Recession.

The new report, based on an IHS study of 39,000 wells, points to the possibility of month-to-month US oil production growth coming to a halt in the latter half of 2015, assuming that West Texas Intermediate (WTI) prices remain below $60.

The study identified a wide spectrum of break-even prices for US crude oil production. About a quarter of new wells in 2014 had a breakeven WTI price of $40 or less. Just less than half of new wells in 2014 had a breakeven price of $60 or less. At the opposite end of the spectrum, nearly 30% of new wells had breakeven prices of $81 or higher. The break-even level is the WTI price needed to cover capital and operating costs and generate a 10% return.

Hedging programs, finishing work on uncompleted wells, contractual obligations and further drilling of the most economic tight oil plays mean that many new wells will still be drilled in 2015. But adverse economics and lower spending will lead to fewer wells drilled than in 2014, the report says.

Monthly average US production at the close of 2015 is projected to be about half a million barrels per day above the January 2015 average, but nearly all of that growth will come in the first half of the year. By December 2015, US oil production growth will have been flat for several months, the report says.

"US oil production has been the main engine of global supply growth in recent years," said Jim Burkhard, vice president, IHS Energy. "And momentum from strong growth in the second half of 2014 means the impact of lower prices will not immediately drive production lower. But the reality of lower oil prices and less spending on new wells will affect production as 2015 progresses."

The fate of US oil production growth past 2015 and into 2016 will be shaped by global economic conditions, geopolitics and changes in industry costs, all of which are in a state of flux, according to Raoul LeBlanc, IHS energy senior director, financial markets and report co-author.

"So much can happen over the course of a year," LeBlanc said. "If oil prices remain weak and confidence in future prices remains shaken, US production in 2016 could possibly flatten or even decline. But there is plenty that could happen-a recovery in oil prices, lower upstream costs and improved well productivity-that would quickly change the calculus of drilling new wells and reinvigorate US production growth."

Williams and DPM achieve first gas from ultra-deepwater GoM

Williams, through its general partner ownership of Williams Partners, with DCP Midstream Partners LP, has achieved first gas from an ultra-deepwater area of the Gulf of Mexico, as the new extended Discovery natural gas gathering pipeline system is now flowing natural gas. The Keathley Canyon Connector deepwater gas gathering pipeline system and the South Timbalier Block 283 junction platform are serving producers in the central ultra-deepwater Gulf of Mexico.

The 20-inch, 209-mile Keathley Canyon Connector, which is capable of gathering more than 400 million cubic feet per day (MMcf/d) of natural gas, originates in the southeast portion of the Keathley Canyon protraction area and terminates into Discovery's 30-inch-diameter mainline at Discovery's new junction platform. The pipeline was constructed in depths of up to 7,200 feet of water. Williams owns the controlling interest in, and is the general partner of, Williams Partners LP, which owns 60% of the Discovery system and operates it. DCP Midstream Partners LP owns the remaining 40% of the Discovery system.

The Keathley Canyon Connector extension is supported by long-term agreements with the Lucius and Hadrian South owners, as well as the Heidelberg and Hadrian North owners, for natural gas gathering, transportation and processing services for production from those fields. In addition to the offshore gathering system, the Discovery system includes the 600 MMcf/d Larose natural gas processing plant providing market outlets to six interstate/intrastate gas pipelines and the 35,000 b/d Paradis fractionation facility.

Marathon further reduces drilling budget

After reporting an operating loss in the final quarter of 2014, Marathon Oil Corp. plans to further reduce its drilling budget. The company now plans to spend $3.5 billion on oil and gas drilling in 2015, down from a budget of about $5.9 billion in total capital, investment, and exploration spending in 2014. The number is down 20% from the guidance in December of $4.3-4.5 billion. More than $1.4 billion in earmarked for the Eagle Ford, where rig count is expected to drop from 18 in late 2014 to 10 by the end of the second quarter. Included in Eagle Ford spending is approximately $1.0 billion for drilling and completions.

The company plans to spend $760 million in the Bakken in North Dakota. Drilling activity will be reduced to two rigs by the end of the first quarter, down from seven rigs at the end of 2014. Bakken spending includes approximately $550 million for drilling, completions and recompletions.

GCA: Oil price crash could have 2MMbpd impact in US

By the end of 2016 US production could be some two million barrels per day lower than where it would have been without the oil price crash, according to analysis by Gaffney, Cline & Associates.

"Based on GCA's review of EIA and public data from the Bakken, if the oil price crash had not happened and rig count had stayed steady, then that play would probably have added a further 500,000 to 600,000 b/d by the end of 2016. Cutting the rig count significantly takes away this growth but doesn't cause production to fall like a stone," said GCA executive director and senior strategic advisor Bob George.

"In its January 2015 forecast, the EIA has US oil production continuing to rise steadily to one million barrels per day above its 2014 year end level, by the end 2016. The results of our work suggest that despite the expected sharp drop in capital expenditures and rig count, under most scenarios production over the next two years is not expected to drop from current levels, and may even continue to increase," added GCA petroleum economist Cecilia Jing Cui.

"However, this does reflect a sharp fall from where it might otherwise have been. Extrapolating the Bakken production analysis to all US unconventional production would result in a difference of some 1.5 million to two million barrels of oil per day from what might have been."

GCA senior geologist Neil Abdalla also pointed to another factor that could impact forecasts, based upon some recent operator comments: "There is also a 'storage scenario' which involves drilling but not completing wells straight away. This seeks to defer flush production in the hope of capturing a price recovery or spike. It is somewhat analogous to players who are renting tankers to buy crude today, store it and then release it back into the market when prices are higher. The scenario may also explain in whole or part, the sharp rise in oil price as players speculating in the market also seek to drive up the futures market and lock in early profits."

Mexico's Pemex will halt some deepwater exploration projects

The head of Mexico's state-run oil company Pemex said Feb. 18 that the company will delay starting some much-anticipated deepwater exploration projects due to the decline in worldwide crude oil prices.

Pemex managing director Emilio Lozoya said the company plans personnel cutbacks in the coming weeks, although no specific numbers were provided.

Recently, the company noted it would reduce 2015 expenditures by about $4.2 billion. The Mexican government has opened up bidding on Round 1 of projects open to outside investment, and Lozoya said it will go ahead this year as planned.

According to Mexican officials, approximately 24 outside companies, including US majors ExxonMobil and Chevron, have expressed interest in 14 shallow-water blocks available in Round 1.

First Oil Flows at UAE's Offshore Nasr Field

Through its wholly-owned subsidiary Japan Oil Development Co. Ltd. (JODCO), Japan's Inpex Corp. has commenced oil production from the Nasr Oil Field offshore Abu Dhabi, the United Arab Emirates in late January.

The Nasr Oil Field is located approximately 81 miles northwest of Abu Dhabi City. Inpex has jointly developed the Nasr Oil Field with Abu Dhabi National Oil Company (ADNOC), BP, and Total.

In the first development phase, Inpex has commenced oil production from the Nasr Oil Field by utilizing existing facilities of the Abu Al Bukoosh (ABK) and Umm Shaif Oil Fields, located adjacent to the Nasr Oil Field. Full field development of the Nasr Oil Field is currently in progress, and after completion, the field is expected to produce oil at a peak rate of 65,000 b/d.

Statoil, partners submit development plan for Johan Sverdrup

Statoil and its partners have submitted the plan for development and operation for Johan Sverdrup, Phase 1, to the Norwegian Ministry of Petroleum and Energy. Capital expenditures for Phase 1 are estimated at NOK 117 billion (2015 value) and the expected recoverable resources are projected at between 1.4-2.4 boe. The development in Phase 1 has a production capacity in the range of 315,000-380,000 b/d and first oil is planned for late 2019.