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Canada’s oil sands to see modest growth from 2020-2027

Canada’s oil sands will experience large production growth through 2019 followed by more modest, steady growth through 2027, according to a new, 10-year production forecast by business information provider IHS Markit.

The forecast calls for production to rise more than 500,000 barrels per day in 2019, and up to 1 million barrels per day (MMBPD) by 2027 compared to 2018, Kallanish Energy reports.

Canadian oil sands have gained importance to the heavy oil market as the only source of material supply growth in the world for that type of crude.

Output from other large producers of heavy oil — most notably Venezuela, where production has fallen by more than one MMBPD in recent years and is expected to fall further — has declined.

Despite this increased prominence in heavy oil markets and higher oil prices in recent months, the new outlook still expects production growth to moderate after 2019, similar to previous IHS Markit projections for oil sands production.

The strong growth in the near term is expected to come from the completion of projects sanctioned prior to the oil price collapse, the revival of some deferred projects as well as some new investments in capital efficiency projects.

Following 2019, uncertainties related to much-needed infrastructure—particularly pipeline takeaway capacity—point to a deceleration of growth, IHS Markit says.

“Pipeline constraints have exacerbated price discounts for Western Canadian heavy oil relative to global benchmarks. Over the past 12 months alone, the difference in price compared to a barrel of West Texas Intermediate (WTI) has fluctuated just under $10 per barrel to more than $30,” said Kevin Birn, executive director, IHS Markit.

“This sort of price volatility is weighing on investment decisions in western Canada and will likely continue to do so until greater certainty can be achieved.”

The IHS Markit outlook does continue to project growth in part due to the unique nature of oil sands projects, which do not experience production declines, meaning any incremental investment can add to existing production and contribute to growth.

“This represents a strategic advantage for oil sands asset owners coming out of a low-price period in that there is no production deficit to overcome,” according to IHS Markit. “IHS Markit also expects greater crude-by-rail movements to help pick up the slack in the interim and for new pipelines to be built eventually.

“Over the long term, the timing of the new pipelines will be key,” Birn said. “Even when greater certainty on infrastructure is achieved, it will take time for the impact of subsequent investment decisions to play out on production growth because of the lead time involved in oil sands development. The current growth trajectory was a long time in the making, it has taken a time to slow, and it will take time to recover.”

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Medallion launches binding open season for oil line expansion

Medallion Pipeline, of Irving, Texas, on Monday announced a binding open season for a major expansion of its crude oil pipeline system in the Midland Basin.

The company plans to construct a 16-inch operational loop of its existing Midkiff Lateral and plans to expand the capacity of the Crane Extension, Reagan Gathering Extension, Santa Rita Lateral, Martin Lateral and Midland Lateral, Kallanish Energy reports.

The open season provides an opportunity for interested shippers to acquire long-term firm capacity under binding Transportation Services Agreements (TSAs), as a committed firm shipper on one or more of the expansion segments.

Additionally, existing firm shippers will be provided the option to amend their existing Transportation Services Agreements, as set forth in the open season notice, to 1) adjust committed volumes or 2) obtain the lower expansion rates offered on the applicable Expansion Segments in return for an extension of the primary term of the Transportation Services Agreement. The expansion project is expected to commence commercial operations in phases, with full commercial operations expected during the fourth quarter of 2019.

Initially placed in service in October 2014, Medallion’s crude oil pipeline has undertaken a series of expansions to meet the increasing needs of producers and marketers in the Midland Basin. The existing system is a network of roughly 700 miles of six-inch and larger crude oil pipeline facilities that aggregate and transport crude oil production to the Colorado City Hub, the Crane Hub and the Midland Hub, providing access to multiple long-haul, large-volume pipelines for transportation to downstream markets.

The open season began July 16, and ends on Aug. 15.

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Trump reportedly considering tapping SPR

President Trump is reportedly considering tapping the nation’s stockpile of emergency oil supplies as prices at the pump remain stubbornly elevated.

The administration is considering selling 5 million to 30 million barrels from the Strategic Petroleum Reserve into the market, two sources with knowledge of the situation told Bloomberg News.

The administration is also mulling a larger release that would be coordinated with other nations, the sources said.

Fatih Birol, director of the International Energy Agency, recently told attendees at a private dinner that his organization was considering a strategic release, the Wall Street Journal reported, citing people who attended the event.

Trump has lately expressed frustration at oil and gas prices, blaming OPEC on Twitter and demanding that the 15-member producer group hike output to stop crude costs from bubbling up, Kallanish Energy reports.

The national average price for a gallon of regular gasoline is currently $2.88, up about 60 cents from a year ago, according to AAA.

OPEC has propped up prices since January 2017 by limiting its supply, but the slow-and-steady rally accelerated earlier this year when Trump restored sanctions on Iran, the world’s fifth largest oil producer.

Prices have also risen on production declines in major producing nations like Venezuela and Angola and supply disruptions in Libya and Canada.

Many analysts are skeptical top OPEC producer Saudi Arabia can offset the looming drop in Iran’s exports and disruptions elsewhere. Trump’s aggressive bid to remove Iranian barrels from the market could boost gasoline prices into the fall, depriving Americans of the fuel price relief they usually get, just as they head to the polls, analysts recently told CNBC.

Rumors and speculation that Trump could release oil from the Strategic Petroleum Reserve have been creeping into the market in recent weeks.

Gary Ross, head of global oil analytics at S&P Global Platts, told CNBC’s “Squawk Box” last week people are worried Trump could draw down the Strategic Petroleum Reserve (SPR) because he is worried about gasoline prices heading into the midterm elections.

The U.S. currently holds 660 million barrels of oil in reserve. The reserve was established after the 1970s oil crisis to ensure the U.S. economy would not suffer shocks in times of tight supply. It has only been used three times to counter import cutoffs or for foreign policy purposes.

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Maya Strikes Out in Court Again; On Environmental Rights Amendment

Tom Shepstone Shepstone Management Company, Inc. … … The Delaware Povertykeeper a/k/a Riverkeeper has gotten mowed over in court again; this time is a defeat for Maya’s cherished Environmental Rights Amendment. Ever since the Delaware Riverkeeper conned a soon to … Continue reading

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North Dakota Oil, Gas Producers Set New Records In May

North Dakota has reached new records in both oil and gas production, according to preliminary data released by the state’s Department of Mineral Resources (DMR) on July 13.  The state, where the core of the Bakken/Three Forks play is located, produced roughly 1.2 million barrels per day of oil in May—an increase of about 17,000 barrels from the last record set in December 2014. “This is a very encouraging time for North Dakota as oil and gas operators and service companies have developed drilling rigs that are twice as efficient as they were in 2014 to drill and complete permitted wells,” Lynn Helms, director of the North Dakota DMR, said in a statement. “Closing the gap between current wells producing and the wells capable of producing will add to 2018 production numbers so we should continue to reach new highs.”
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US Drillers Leave Oil Rig Count Unchanged

U.S. energy companies left the oil rig count unchanged this week as the rate of growth has slowed over the past month or so with a decline in crude prices from late May through late June. U.S. crude prices were on track to fall almost 4% this week as escalating U.S.-China trade tensions threatened to hurt oil demand after last week rising to their highest level since November 2014. The number of active oil rigs held steady at 863 in the week to July 13, Baker Hughes, a GE company, said in its weekly report. More than half the total oil rigs are in Permian Basin in west Texas and eastern New Mexico, the nation’s biggest shale oil field. Active units there increased by one this week to 475, the most in a month.
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Natural Gas-Fired Electricity Generation Up; CO2 Emissions Down

Tom Shepstone Shepstone Management Company, Inc.   The Energy Information Administration reports natural gas-fired electricity generation continues to increase as CO2 emissions continue to drop as a result. The Energy Information Administration (EIA) reported yesterday that natural gas-fired electricity generation … Continue reading

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