Another oil disaster in the Gulf casts shadow over August auction; good news for fracking, or good news for your drinking water; OPEC cut rumors; a sneak peak at our Egypt executive report and the future of “oil drones”…
As of the time of writing, natural gas from the well damaged off the coast of Louisiana has stopped flowing, and the fire aboard a rig is almost out, with only residual gas fueling a small flame. No oil was spilled in the incident, and the natural gas leaked is said to be much less damaging environmentally because it is easier to disperse. No one was injured in the incident, and 44 rig workers were safely evacuated, but the 2010 Deepwater Horizon oil spill that killed 11 people and is still causing damage is fresh in everyone’s minds, so spills that are small by comparison cause major Gulf of Mexico jitters.
However small, the incident casts a gray shadow over the planned auction in late August of more Gulf of Mexico acreage by the US government. On 28 August, more than 21 million acres (in 3,953 blocks) will be up for grabs in the western Gulf of Mexico. The last auction, on 20 March, saw oil companies pay more than $1 billion for 1.6 million acres in total. Federal authorities have been expecting a greater show of interest for the August round.
In the meantime, the federal government has handed hydraulic fracking a small victory with a study declaring there is no evidence that fracking chemicals have contaminated Pennsylvania drinking water. The preliminary assessment (based on a year-long investigation) is that the chemicals used in fracking remain thousands of feet below the shallower areas that supply drinking water. It doesn’t necessarily signal that fracking doesn’t pollute with its chemicals, though, because of variances in geology from site to site and state to state, but the industry is definitely reveling in the news, while the Environmental Protection Agency (EPA) is not. It’s still attempting to prove that fracking has contaminated drinking water in Wyoming, though it’s had to drop its own investigation and hand it over to the state’s environmental department.
There are also burgeoning rumors that OPEC could cut back oil production for the first time in five years—the last time being the global recession. Many analysts attribute this to North America’s soaring production—up more than 40% over the past five years. OPEC projects that demand for its crude will drop by about 300,000 barrels per day. Experts say Saudi Arabia will shoulder the biggest burden with a cut, followed by Kuwait and the United Arab Emirates (UAE). “The first cut would merely go some way to reverse Saudi Arabia’s increase in market share at the expense of other OPEC members in recent years”—particularly the cut in Iranian oil shipments thanks to sanctions, writes John Kemp for Gulf Business. Any cuts after this, he argues, will be difficult because other OPEC members won’t be as willing, or able, to share the burden.
We’re also looking this week at the rebound in Canadian heavy oil prices as transport bottlenecks ease to boost shipping capacity. Analysts are keen on this market right now, and urging investors to get in on it before a decision is made on Keystone XL. Back in January, Canadian heavy oil was trading at only 50% of the World Brent crude price, but last month was good and this month has seen it reach about 83% of the World Brent crude price. In December, heavy oil in Alberta was trading at $48 per barrel. This month, we’re looking at over $91 per barrel, and analysts think the trend will continue strong.
In this weeks special report for readers we give you four pieces of analysis from our Intelligence section of Oilprice.com Premium. The reports are all below the introduction and look at the following:
- UK Releases Impressive Shale Estimates, Relaxes Tax Regime
- Armenia Faces Opposition over Gazprom Deal
- Romania to Build Gas Pipeline to Moldova with Major Political Implications
- Uganda Eyes 2016 for Commercial Output
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Inside Investor: How to Put an End to Gas Price Spikes
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Inside Opportunities: Drone Technology Gets Energized
Takes a detailed look at drones and why we believe this is a very important sector for forward looking investors to be aware of. We believe the drone industry will have a huge impact on the oil and gas sector and early investors could make huge returns.
• A look at the companies on the leading edge of drone technology
• What exactly drones are
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Executive Report: Waiting on Egypt for Oil & Gas Investment
Takes a very detailed look at the ongoing situation in Egypt and where we see opportunities for investors and companies in the coming months and years ahead.
• Egypt’s reserves and geology
• The current political situation in Egypt
• Companies that are currently operating in the country and the size and location of their holdings
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• What we believe will happen next
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That’s it from us this week – I hope you find the four intelligence reports below of interest and have a great weekend.
James Stafford
Editor, Oilprice.com
