Tuesday, April 10, 2012

North Dakota Now Produces More Oil Than Crude Imports from Nigeria and Colombia for First Time

The EIA reported today that:

"The trend of declining crude oil imports into the United States continued in the first month of 2012. There has been a particularly sharp decline in imports from Nigeria due to the idling in late 2011 of two refineries on the East Coast, which were significant buyers of Nigerian crude, and reduced imports by refiners on the Gulf Coast. Prior to the idling of the refineries, Nigeria typically accounted for about 10% of the crude oil imported into the United States; in January, that share dropped to about 5%.

In January 2012, imports from Nigeria totaled just 449 thousand barrels per day (bbl/d), a 54% decrease from January 2011, marking the lowest monthly import total from the country since 2002. One third of this decline was the result of two idled Philadelphia-area refineries. ConocoPhillips' Trainer refinery (idled in September 2011) and Sunoco's Marcus Hook refinery (idled in December 2011) imported a combined 173 thousand bbl/d of Nigerian crude in January 2011. Most of the remaining decrease in Nigerian imports was the result of several Gulf Coast refiners reducing Nigerian imports in favor of domestically-produced crude."

MP: The chart above shows that domestic production in just the one state of North Dakota (546,000 barrels per day in January, with production for February and March estimated) now exceeds imports from Nigeria for the first time.  Further, EIA crude oil import data show that North Dakota has been consistently producing more oil than imports from Colombia in every month since last June (468,000 bbl/d average in 2012).   

8 Comments:

At 4/10/2012 3:40 PM, Blogger Jon Murphy said...

Something else I am reading from this report is that East Coast refineries import oil more than midwest. Seems like we should improve/expand/create pipelines to bring oil East (and West)

 
At 4/10/2012 5:10 PM, Blogger Paul said...

And even more good news is Colombia's oil production is starting to take off like a rocket.

"Proved net reserves have grown 63% in the last three years due to extending its areas of production, revising prior estimates in some fields and acquisitions."

 
At 4/10/2012 9:01 PM, Blogger Breaker Morant said...

http://milliondollarway.blogspot.com/2012/04/bakken-oil-being-shipped-to-california.html

Link to a blog post about Bakken Oil going to California. He has detected glimmerings of Bakken oil going east as well.

Interesting blog for Bakken related news is "Million Dollar Way."

 
At 4/11/2012 6:52 AM, Blogger Methinks said...

My husband just informed me that at least certain parts of North Dakota are looking to eliminate property taxes. I think he got this information via Thomas Woods whose show got an insta-fan in mon mari.

It appears they're not afraid of a bust because the lack of taxes will encourage more and more diverse economic activity - hedging them against a bust. My bet is they're also not planning on funding Lifestyles of the Rich Public Employee either.

 
At 4/11/2012 9:09 PM, Blogger VangelV said...

MP: The chart above shows that domestic production in just the one state of North Dakota (546,000 barrels per day in January, with production for February and March estimated) now exceeds imports from Nigeria for the first time. Further, EIA crude oil import data show that North Dakota has been consistently producing more oil than imports from Colombia in every month since last June (468,000 bbl/d average in 2012).

With real economic activity in decline the US is using less crude. That is not exactly great news.

As for ND, the average well production rate of less than 100 bpd is not anything to get excited about. To keep production growing ND has to keep drilling more and more wells because of the massive decline rates. From where I stand shale oil is looking very similar to shale gas. It was hyped up and attracted a great deal of capital but production could not yield a positive return on investment. That is not a great way to increase wealth in a country.

 
At 4/15/2012 1:38 AM, Blogger Unknown said...

Methinks: This might answer your question.
http://ballotpedia.org/wiki/index.php/North_Dakota_Property_Tax_Amendment,_Measure_2_(June_2012)

 
At 4/15/2012 2:13 AM, Blogger mozamcrew said...

VangeIV: I have to disagree about the situation in the Bakken. I live in the upper midwest and I think the regional media has done a better job covering this. I also have friends whose families own land in western ND, so I have at least some idea what I'm speaking about. But I'm not a petroleum geologist or anything, so Caveat emptor.

I don't think the production numbers in the Bakken are evidence of massive decline rates, I think they are evidence that pipeline capacity in the region hasn't increased fast enough to get all this new production to market. Even with rail trying to pick up the slack, there simply isn't enough capacity without large increases in the pipeline system. As a result, Bakken oil (which is light sweet crude, unlike the canadian tar sands) has been trading at a discount simply because of the transporation bottleneck. This is even compared to crude at Cushing OK, which has had it's own bottleneck issues lately and has been at a discount to Brent crude for that very reason.

So why are oil companies still drilling, even with the lack of transportation and the shortage of housing in the region? Because once they lease land, they only have a few years to get a well drilled or they lose their rights to the lease. The result is lots of wells running well below their real capacity, at least until the pipeline situation improves.

 
At 4/15/2012 11:50 AM, Blogger VangelV said...

I don't think the production numbers in the Bakken are evidence of massive decline rates, I think they are evidence that pipeline capacity in the region hasn't increased fast enough to get all this new production to market.

Sorry but the output is what it is. Mark has been referencing data that shows that oil production per well is less than 100 bpd even though thousands of new horizontal wells costing more than $5 million each were drilled over the past few years and hundreds of older wells were taken off line. The production curves show a high IP (700-1,200 bpd is typical) that falls off a cliff immediately as pressure drops. While the production levels off after a few weeks it does so at a very low level that makes it difficult to earn a reasonable return on the investment made. While increased pipeline capacity will help with the prices the move out of the core areas will cause production to be even lower than it is now. That makes shale oil a tough investment.

Even with rail trying to pick up the slack, there simply isn't enough capacity without large increases in the pipeline system. As a result, Bakken oil (which is light sweet crude, unlike the canadian tar sands) has been trading at a discount simply because of the transporation bottleneck. This is even compared to crude at Cushing OK, which has had it's own bottleneck issues lately and has been at a discount to Brent crude for that very reason.

A lot of the Bakken oil is selling for above $85 according to the reference provided on this site so transportation issues are not the big problem. The problem comes from the cost of drilling and and the depletion rates. If the UR is as low as it appears you are looking at either tiny returns or losses for the average producer.

So why are oil companies still drilling, even with the lack of transportation and the shortage of housing in the region? Because once they lease land, they only have a few years to get a well drilled or they lose their rights to the lease. The result is lots of wells running well below their real capacity, at least until the pipeline situation improves.

That is easy. If the producers don't drill they lose the leases and have to write down the asset side of the balance sheets. Given the tiny bit of actual equity that would push them into bankruptcy. If you are running one of these companies it is far better to keep the music playing and collect your generous compensation package for as long as possible.

 

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