UPSTREAM NEWS
US oil rig count hits Nov 2009 low
At the time this issue went to press, the collective group of US oil and gas companies had cut oil rigs for the fourth straight week, resulting in the lowest number of oil rigs running since November 2009, according to Baker Hughes. By the week of April 15, the total rig count was down to 351. A year prior, the number of US oil rigs operating was 734.
Rystad: Iraqi crude output grows, but at slower pace from 2017
Rystad Energy analysis shows that Iraqi crude oil production for 2015 was approximately 3.9 million per barrel, up by 12% from 2014. The 2016 production level is expected to exhibit similar growth as in 2015. From 2017, the growth rate will slow down to an average year-on-year increase of 4%, predominantly as the first phase of the redevelopment of mature oil fields has now been completed.
ExxonMobil starts production at Julia oil field in Gulf of Mexico
Oil production has started under budget and ahead of schedule at the Julia oil field in the Gulf of Mexico, Exxon Mobil Corp. said April 19. The first production well is now online and a second well is expected to start production in the coming weeks.
The Julia development is located approximately 265 miles southwest of New Orleans in water depths of more than 7,000 feet. The initial development phase uses subsea tie-backs to the Chevron-operated Jack/St. Malo production facility.
The Maersk Viking drillship is currently drilling a third well, which is expected to come online in early 2017. Production results will assist in the evaluation of additional wells included in the initial development phase, which has a design capacity of 34,000 barrels per day of oil.
Discovered in 2007, the Julia field comprises five leases in the ultra-deepwater Walker Ridge area of the Gulf of Mexico. ExxonMobil, the operator, and Statoil Gulf of Mexico LLC each hold a 50% interest in the Julia unit.
ExxonMobil plans to start up 10 new upstream projects in 2016 and 2017, adding 450,000 oil-equivalent barrels per day of working-interest production capacity.
Norwegian production figures down February to March
The Norwegian Petroleum Directorate released preliminary production figures showing average daily production near 2.01 million barrels of oil, natural gas liquids, and condensate for the month of March. The production is 51,000 barrels per day less than the figures reported for February.
TPI: Texas oil, gas economy looks rough; 84,000 jobs lost
Crude oil prices increased 28% recently, the crunch in the job market and virtually every other economic indicator points to more tough times in the oil and gas industry.
On April 19, Karr Ingham, petroleum economist who authors the Texas Petro Index (TPI), noted that 84,000 oil and gas jobs have been lost in Texas during the 16 consecutive months of decline in the TPI.
In addition to the decline in jobs, the drilling rig count, well completions, and drilling permits are all down, too, Ingham said, and he advised against reading too much into the oil price hike.
"First, it may or may not be the real deal; prices increased in part on the hope that some agreement might be reached between producing countries elsewhere in the world on production limitations and that's a prickly proposition," said Ingham. "And second, price increase now produces a change in other oilfield indicators later, and indeed most other components of the index continued to decline in March."
Ingham said the TPI indicates "more than 84,000 direct industry jobs have been lost through March from peak upstream employment in December. Upstream industry employment in Texas will almost certainly continue to decline for most of the rest of the year; history suggests that employment will trough and begin to increase a good six months after prices reverse course."
West Texas Intermediate (WTI) crude oil averaged $34.58 per barrel ($/bbl) in March, nearly 28% more than the monthly average of $27.08/bbl in February.
Since peaking at 313.3 in October and November 2014, the TPI has declined more than 45%. In November 2014, the combined value of Texas-produced oil and gas was about $9.4 billion.
The value destroyed during the current economic contraction is reflected in the TPI's leading indicators:
- The statewide rig count averaged 221 in March, down from a monthly average of 904 in November 2014. (On Friday, April 8, the statewide weekly rig count reached another dubious milestone, falling below 200 to 197, the lowest weekly rig count since June 1999.)
- The Railroad Commission issued 1,594 drilling permits in first quarter 2016, the lowest first quarter total in the history of the TPI, which is based in January 1995. The RRC issued 5,367 permits in first quarter 2014 and 5,775 permits in first quarter 2013 and 2,949 in the first quarter of 2015 as permits were falling in response to lower crude oil prices.
Texas Petro Index for March
A composite index based upon a comprehensive group of upstream economic indicators, the Texas Petro Index in March was 170.7, 40 percent less than in March 2015. Before the current economic downturn, the TPI peaked at a record 313.3 in October and November 2014, which marked the zenith of an economic expansion that began in December 2009, when the TPI stood at 187.4.
TPI Highlights in March:
- Crude oil production in Texas totaled an estimated 108.4 million barrels, 4.1% less than in March 2015. With oil prices in March averaging $34.58/bbl, the value of Texas-produced crude oil totaled about $3.75 billion, 25% less than in March 2015.
- Estimated Texas natural gas output was about 721.5 bcf, a year-over-year monthly decline of about 3.3%. With natural gas prices in March averaging $1.63/Mcf, the value of Texas-produced gas declined 41.5% to nearly $1.18 billion.
- The Baker Hughes count of active drilling rigs in Texas averaged 221, compared to 492 in March 2015. Drilling activity in Texas peaked in September 2008 at a monthly average of 946 rigs before falling to a trough of 329 in June 2009. In the most recent economic expansion, which began in December 2009, the statewide average monthly rig count peaked at 932 in May and June 2012.
- An estimated 222,000 Texans remained on upstream oil & gas industry payrolls, down 27.5% from a high of about 306,020 in December 2014. According to TPI estimates, the trough in upstream oil and gas industry employment in Texas before the expansion ending December 2014 was 184,640 in October 2009. During the previous growth cycle, industry employment peaked at 225,965 in October 2008.
The Texas Petro Index is a service of the Texas Alliance of Energy Producers, the nation's largest state association of independent oil and gas producers.
March US natural gas production down nearly 2% from February
Natural gas production in the lower 48 US averaged 72.2 bcf/d in March-down just over 1 bcf/d compared to the February average, according to Platts Analytics. On a month-over-month basis, March natural gas production was down nearly 2% from February. The US Energy Information Administration is set to publish its domestic production estimates for February as this issue goes to press.
"Following a US gas production record-setting month of February, production volumes in March dwindled," said Platts analyst Sami Yahya. "Most major basins contributed to the production decline in some way. However, the two main culprits were the Northeast and Texas, where production drops in each were roughly 0.5 bcf/d month on month."
Flooding in Texas hindered natural gas production in March, mainly from the Haynesville, East Texas, and Texas Gulf Coast onshore.
"When wells are shut in due to a flooding, the process of turning them back on is not an easy one because of all the physical inspections that are required. But even before the inspections occur, company crews must battle the inaccessible and blocked roads to regain access to the wells, all of which tend to elongate the shut in time." The decline within the Northeast was the product of multiple factors, including maintenance, lower prices, and relatively warm temperatures, noted Yahya. There, production averaged 22.2 bcf/d in March, down about 530 MMcf/d from February.
"Additionally, the recent downtrend in Henry and Dom South prices added to the growing pains of Northeast production. Dominion South prices averaged below $1.00/MMbtu for March, with a low of $0.83/MMbtu on March 9," Yahya said. Platts analysis suggests 2016 US natural gas production will average approximately 70.9 bcf/d, with some growth geared toward the end of the year. This will mark a year-over-year decline of just more than 1%.