The US in 2018 is expected to become a net exporter of natural gas for the first time in six decades and earn the title of the third-largest liquefied natural gas exporter in the world, all thanks to the shale revolution. LNG export capacity in the contiguous 48 states is seen topping 6 billion cubic feet per day by the end of 2018, representing 8% of domestic consumption.
US crude inventories surged by 1.9 million barrels in the week ended Friday, versus forecasts for a 300,000-barrel build, the American Petroleum Institute reported. Gasoline supplies were down 1.1 million barrels, while distillate stockpiles dropped by 2 million barrels.
Texas will become home to new oil refineries built by Raven Petroleum and MMEX Resources that aim to take advantage of growing demand for gasoline in Mexico as its market is getting deregulated. The refineries will be designed to process shale oil from the Eagle Ford and Permian Basin into fuels such as gasoline and diesel, which will then be shipped to Mexico by rail.
Offshore production in the US Gulf of Mexico is more to blame than shale for the surge in US oil output, with offshore projects adding 220,000 barrels of extra oil per day between September and December 2016, according to Bank of America Merrill Lynch. By comparison, the Energy Information Administration expects shale output to increase by 110,000 barrels per day in April, with the Permian Basin accounting for most of the gains as production in other shale regions declines.
West Virginia Republican lawmakers are advocating for a bill that would allow oil and natural gas companies to drill without needing approval from all mineral-rights owners. The new legislation would require drillers to get the approval of at least 75% of mineral-rights owners, whereas current law states that a single owner has the right to block drilling on a property.
Oilfield service costs will increase significantly in the coming year, hurting the margins of US onshore producers, Schlumberger Chairman and CEO Paal Kibsgaard said at the Scotia Howard Weil Energy Conference in New Orleans. "While the E&P operators rightfully state that break-even costs have come down significantly over the past couple of years, there is an impending cost inflation avalanche coming from the service industry, which continues to operate at unsustainable pricing levels," Kibsgaard warned.
Overseas shipments of US crude oil are poised to surge as US futures trade at a discount of $3.02 per barrel to Brent futures, the widest spread since late 2015, analysts and traders say. This means it's now more profitable for US exporters to ship oil overseas, where it sells for higher prices, especially with declining freight rates.
Hedging activity surged by 33%, or 648,000 barrels a day of new oil hedges, in the fourth quarter of 2016 from the third quarter as US oil producers sought to protect themselves against any losses caused by prices below $50 a barrel by locking in higher prices between $50 and $60 a barrel for their oil, according to a Wood Mackenzie analysis of 33 producers. However, the consultancy warned that the surge in hedging will likely worsen the oil supply glut as drillers continue to ramp up production.
Hess is seeking to raise $250 million in an initial public offering of 12.5 million shares priced at about $20 each in Houston-based pipeline and storage business Hess Midstream Partners. The units offered to the public make up about 25% of the company, while the rest will be controlled by Hess Infrastructure Partners, Hess' joint venture with Global Infrastructure Partners.
Transcontinental Gas Pipe Line, a Williams Partners subsidiary, has filed an application with the Federal Energy Regulatory Commission seeking permission to begin construction on its $926.5 million Northeast Supply Enhancement project. As part of the expansion project, Transco would boost capacity to markets in the New York City area by 386 million cubic feet of natural gas per day, create 36 miles of pipeline looping facilities, add 21,902 horsepower to an existing compressor station and build a new compressor station with 32,000 horsepower.
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