China Buys Crude Oil from the U.S.

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030629-N-4790M-003 Central Command Area of Responsibility (Jun. 29, 2003) -- Commercial oil tanker AbQaiq readies itself to receive oil at Mina-Al-Bkar Oil terminal (MABOT), an off shore Iraqi oil installation. AbQaiq is the first commercial vessel to receive a post-war shipment of crude oil for export at Mabot. AbQaiq is scheduled to take on an estimated 2 million barrels of crude oil. U.S. Navy and coalition forces are helping to provide security, enforcing an exclusionary perimeter around the terminal. U.S. Navy photo by Photographer's Mate 2nd Class Andrew M. Meyers. (RELEASED)

The Chinese refiner, Sinopec, bought 600,000 barrels of oil from a U.S. firm, and the shipment left a port in the Gulf Coast.  The number isn’t large, but Sinopec’s statement regarding the purchase is.  Sinopec said that it was buying from the U.S. in order to diversify its source of oil.  So in spite of the fact that Saudia Arabia is willing to pump and sell as much oil as anyone wants to buy, Sinopec wants to buy from other sources.  That indicates that there will be an available, if small, market for U.S. oil.  Hopefully that will be enough to keep some U.S. fracking companies above water.  In the meantime, we can only hope that decreased prices for oil will lead to increased utilization and decreased investment in high-cost drilling programs, which will eventually decrease the oversupply and drive prices back up to a slightly more healthy level.

6,300 Megawatts of Natural Gas Fired Electricity Proposed for Ohio

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Dynegy Inc. has proposed to build 6,300 megawatts worth of electricity power generating plants in Ohio.  The plants would be fired by natural gas.  That natural gas would come, naturally, from the Utica and Marcellus shales.

Other details are scant, as the article is more about the competing bids by other power generating companies and the associated drama.

West Virginia could use a few more natural gas powered electric plants.  We have several in progress in the northern panhandle and Harrison County.

Stonewall Gathering Line Increases Royalties

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This article over at Natural Gas Intelligence covers a few topics and is worth the read.  The most interesting point to us was that the Stonewall Gathering Pipeline, which went into service in December 2015, has already impacted revenues for Antero Resources, and has therefore impacted royalty checks.  A few more pipelines would make a big difference to all the royalty and mineral owners in West Virginia.

Pipeline Explosion in Robertson County, TX

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We are big proponents of the pipeline projects here in West Virginia.  We need them in order to utilize the massive volumes of gas that we have.  However, pipelines come with some amount of risk.  Everyone who has a gas pipeline near them needs to know what could happen.

In Robertson County, TX, a pipeline ruptured and then exploded last Saturday.  A man and his son were hunting within 100 yards of the rupture.  They are lucky to be alive.

If you live close to a pipeline, you should have a contingency plan for what to do if it ruptures.

Northeast Natural Energy Drilling in Monongalia County, WV

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Marcellus Drilling News (a great source for information about oil and gas development in  the Marcellus/Utica area) is reporting that Northeast Natural Energy has hired a new rig.  Right now, it seems that NNE is working exclusively in Monongalia County, WV, using leases that it bought from Chesapeake and leases that it is buying up itself.  NNE is going after Marcellus shale production there, which strikes me as odd because Chesapeake pulled up stakes in Monongalia County back in 2009 because it had drilled a few wells and the production was disappointing.  At least, that’s what the scuttlebutt was between the landmen that were working on the project.  With gas prices lower than they were then, it doesn’t make much sense for NNE to be drilling where CHK quit.  There must be some other factors in play that we aren’t aware of.  Nevertheless, best of luck to NNE.  We’re always glad to see that somebody is drilling and taking leases in West Virginia.

West Virginia’s Economy Ranked Lowest in the US

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West Virginia really needs to take better advantage of the energy resources located in the state.  Here’s an article by Business Insider that says we have the worst economy of all the 50 states and the District of Columbia.  We’re Number 51.

Considering the energy resources located here, the low cost of living and the inexpensive employee costs, we should be able to do better.

Oil is a $30 per Barrel Commodity, and That’s Good News for West Virginia

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We don’t often run across a good rule of thumb that we don’t know at this point.  Here’s one that’s new.  Outside of some occasional spikes, oil will always hover around $30 per barrel when adjusted for inflation.

There are a couple of other items of interest in this article by Anya Litvak of the Pittsburgh Post-Gazette.  The big takeaway for everybody, though, is that $30 figure for the inflation-adjusted price of oil.  When oil prices start to rise, we can know they will drop.  How it got to over $100 per barrel for a while there is beyond my ken.  It stayed there for quite a while, too.

Taking a look at the historical values for WTI crude oil prices, you can see some lengthy spikes.  Make sure to remove the options for “Log Scale” and “Show Recessions” just above the graph.  The interesting thing to note is that when prices climb above about $80 they usually stay up for about five years.  The major spikes were in 1980 and in 2008.  The major crashes were in 1985 and in 2009.  The crash just after 9/11 wasn’t as big as we would have expected.  Interestingly, the crash in 2009 was followed by a huge spike which lasted for about five years.

All of the major crashes look to me like they followed a stock market crash.  You’re welcome to correct me if I’m wrong.  The times when oil prices really did well were times when the economy was humming right along in the 1980s and when there was a lot of money being put into the economy by “easing”.  I don’t have the economic background to explain what was going on just before the 2009 crash, but I imagine someone reading this can explain that for us.

Regardless, the price of oil isn’t going to stay below $30 for long if it drops below that, and it’s not going to get back up to $100 any time soon.  I’ll be surprised if it gets above $50 per barrel any time soon, to be honest.  The frackers just have too many wells ready to produce when the price starts to rise.  I think this bodes well for the economy as a whole in the near future.  Cheap and less volatile energy prices are great for the United States economy, and probably for the world economy as well.

They heyday of ridiculously high bonus amounts for signing oil and gas leases is over.  Luckily in West Virginia the bonus amounts never got ridiculously high.  We’re still seeing bonus amounts surprisingly close to what we saw two years ago.  Royalty amounts are holding pretty steady, too.  It’s still a good time to own oil and gas mineral and royalty rights in West Virginia

More Horizontal Oil Drilling in West Virginia

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We’ve talked about drilling for oil in West Virginia before.  The same folks who brought drilling to the Big Injun formation are introducing us to drilling to the Weir Sand formation.

Cunningham Energy has announced that it’s drilling for oil in Kanawha County, WV.  It’s currently working on another site in Clay County, WV.

It doesn’t seem like a really good time to be drilling for oil.  The Saudis have said they will produce enough to keep up with demand, and American frackers will follow the dictates of the market, so it’s impossible to tell how low oil prices will go.

Cunningham seems to think that their oil will be marketable.  They may be right.  Getting leases in that part of West Virginia will be cheap, probably in the $100-$300 per acre range when they’re dealing with knowledgeable mineral owners.  They’ll be able to pick up leases for $5-$10 per acre from people who don’t take the time to educate themselves about oil and gas.  Drilling only 2000 feet down and 4000 feet out will not present any kind of technology challenge.  The real trick will be putting systems in place to be efficient.

New Pipeline Projects in West Virginia

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Gas Pipelines in Columbia

I was going to write up something about these new pipeline projects, but the folks over at Kallanish Energy already put together a good summary.

The Utica Access project is only five miles long and will come online at the end of 2016.  It will only move 205 million cubic feet per day and only down in Kanawha County, so it won’t impact production and royalty amounts much, if at all.

The WB Xpress will be an interesting project to watch, as it will move 1.3 billion cubic feet per day and will open in 2018.  There will be quite a few other project opening in 2018 as well.  2017 could be a very interesting year for West Virginia mineral and royalty owners whose rights aren’t leased.

West Virginia Forced Pooling: Woody Ireland’s Arguments in Favor

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Woody Ireleand has been interviewed again for an article in the Wheeling Intelligencer.  The Forced Pooling legislation that he is championing has improved over the years, but it’s never going to overcome the one argument that is foremost in my mind: forcing someone to sell or use their land is not right, even when it’s lawful.