U.S. Energy Agency sees oil imports falling to zero by 2037

Net oil imports to the U.S. could fall to zero by 2037 because of robust production in areas including North Dakota’s Bakken field and Texas’s Eagle Ford formation, according to a government projection released.

The Energy Information Administration, the branch of the Energy Department that collects and analyzes energy data, said the once-chimerical goal of U.S. energy independence could be within reach in 23 years under a “high-production” estimate contained in an update of its periodic energy forecast.

“This is the first time that a case in the Annual Energy Outlook has projected that net imports’ share of liquid fuels consumption could reach zero,” said John Krohn, a spokesman for the EIA, in an email.

Estimating oil production is a tricky business, particularly for the length of time in EIA’s analysis. Forecasters must make a number of guesses, including the size of oil reserves lying thousands of ft underground, how quickly technology advances, and whether a rise in oil prices can make resources once too costly to produce suddenly economic.

“Forecasts going out 20 years make astrology look like respectable science,” said Stephen Schork, President of Schork Group, a consulting group in Villanova, Pennsylvania. “Ten years ago we were importing natural gas, and now we’re looking at exports. The changes have over the last few years have been dramatic and there’s really no way to predict things more than a couple years in advance.”

Some industry analysts are questioning whether the formula used to calculate oil reserves works for shale formations.The Arps method, named for Jan Arps, a petroleum engineer who invented it in 1945, has been the standard for decades.

John Lee, a University of Houston engineering professor, told Bloomberg News that estimates of billions of barrels of untapped shale oil rely on limited drilling history and may exaggerate future production, raising questions about whether U.S. energy independence is truly in reach. Some companies have lowered forecasts after production didn’t reach anticipated levels.

One thing is undeniable: the U.S. energy picture is changing rapidly. If anything, the EIA is overly pessimistic even in its high-production scenario, said Pavel Molchanov, an analyst at Raymond James Financial.

The St. Petersburg, Florida-based company projects the U.S. will essentially be energy independent by 2020, thanks to an increase in oil and biofuels production and a slight downturn in demand for liquid fuels.

“It’s absolutely night and day from where we were five years ago,” Molchanov said in a phone interview.

Under EIA’s high-resource assessment, it’s most optimistic, production increases to 13 MMbpd over the next two decades, based on more favorable assumptions relating to technological advancements and well productivity.

Production levels never exceed 10 MMbpd under a reference case, which assumes no dramatic changes to drilling activity.

Already net oil imports have fallen to about 5 MMbpd from a peak of almost 13 MMbbl in 2006, thanks in large measure to advances in techniques such as hydraulic fracturing and horizontal drilling in shale rock, which are also known as “tight oil” formations.

Production from tight oil formations has increased from less than 1 MMbpd in 2010 to 3 MMbpd in 2013, according to the EIA.

The EIA also included a low-resource estimate where production rises to 9.1 MMbpd in 2017 before falling to 6.6 MMbpd in 2040.

In the EIA reference case, the net import share of petroleum and other liquids consumed in the U.S. falls to 25% in 2016 and then rises to 32% in 2040.

“The high case is very high,” said Sarah Emerson, managing principal of ESAI Energy in Wakefield, Massachusetts.“Their reference case is reasonable and a lot more likely.”

Guy Caruso, who led the EIA from 2002 to 2008, said he thought production may end up coming in somewhere between the agency’s reference case and its high-end assessment.

More experience drilling in the U.S. shale reserves and new research and development spending will probably increase productivity, said Caruso, now a senior adviser at the Center for Strategic and International Studies, a research group in Washington.

“A lot of things have to go right” for the high-end case to come to fruition, Caruso said in a phone interview.“It’s so early in the game, but it’s not unreasonable to see something like this. We could be pretty low on the learning curve.”

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

Baker Hughes acquires software technology company Perfomix

Baker Hughes stated the acquisition of Perfomix, a Texas-based oilfield software technology company focused on solutions to enhance oil and gas operations' performance. Perfomix will operate as a wholly-owned subsidiary of Baker Hughes and will be integrated into the company' s remote operations services organization.

Perfomix offers a data and advisory services delivery platform to support drilling, pressure pumping, completions and production operations, and regulatory reporting requirements. The addition of Perfomix will expand the Baker Hughes portfolio of field devices integration, real-time data management, visualization, and analytics software, thus complementing existing capabilities with a modern, elastically scalable and standards-based technology platform.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

American Sands Energy acquires pilot plant for water-free extraction process

American Sands Energy Corp., an oil sands exploration and development company operating in Utah, has completed the purchase of its pilot plant, used to demonstrate its water-free extraction of bitumen, or heavy oil, from leased oil sands deposits the firm intends to mine. The agreement with Elemax, Inc., included a combination of cash and stock to purchase the trailer-mounted mobile oil recovery system.

The pilot plant, which the company has successfully used to process up to 1 ton of oil sand per hour over multiple days, will be used by American Sands to evaluate other opportunities for hydrocarbon recovery projects, while the company moves toward initial production at its Sunnyside location.

Will Gibbs, chairman and CEO, said that the pilot plant “uses no water, consumes 60% less energy than traditional oil sands mining operations, requires no tailing ponds and produces no toxic byproducts.”

Gibbs added that, going forward, "In addition to the pilot plant being the engineering model for our initial planned 5,000 bpd plant in Utah, we also plan to work with industry partners around the world that can utilize our scalable technology to extract oil from solid materials such as oil sands, oil shale and other substances."

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

Parex to focus on Colombia in bid to double production

Parex Resources Inc., the Canadian oil producer operating in Latin America, is focusing its growth efforts on Colombia as it aims to double production in the next five years.

CEO Wayne Foo is planning more land and asset acquisitions to boost the company’s output to as much as 50,000 bpd, he said in an interview at Parex’s headquarters in Calgary yesterday. Colombia’s stable government and well-understood oil resources make it a better investment than other countries in the region such as Argentina, Foo said.

“To be relevant in the market, you really have to be in the range of 25,000 to 50,000 barrels a day,” he said. Production will grow as much as 20% annually from 17,500 to 18,500 bpd this year, he said.

Parex began as an oil producer in Argentina in 2003. The Colombian business was spun off in 2009 and based in Calgary. One of about 10 Canadian energy producers operating in Colombia, Parex produces both light and medium crude in the Llanos basin.

Parex’s shares have more than doubled in the past 12 months, valuing the company at about C$1 billion ($911 million). The stock declined 2.1% yesterday, closing at C$9.50 in Toronto.

“They still have upside,” said John Stephenson, who helps oversee about C$3.1 billion at First Asset Investment Management Inc. in Toronto. “Historically they have been drilling targets that were small and they’re now going after bigger plays to add resource.”

The Canadian company has focused on purchasing land near its current holdings in the Llanos basin, boosting its position to about 2 million acres (809,371 hectares) from 250,000 acres in 2009.

Parex’s largest non-state-owned competitor is Pacific Rubiales Energy Co., a Bogota and Toronto-listed company with a market value of about C$6.7 billion. Colombia in February produced about 1 MMbpd of crude, according to the country’s Mines and Energy Ministry.

Oil transportation infrastructure has caught up with production, helping to relieve a bottleneck that existed for producers a couple of years ago, said Parex V.P. Mike Kruchten. Last year the Bicentenario line began operating, while the Ocensa pipeline has been expanded. Calgary-based Enbridge Inc. is also considering building a line to Colombia’s Pacific coast.

“At present there’s lots of excess capacity” in pipelines, said Foo.

Parex earns about 3% to 4% less on its Colombian oil than Brent crude, the global benchmark, said Kruchten. Brent crude for May settlement traded at about $106 a barrel on April 7.

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Kentz awarded $570 million contract for Ichthys LNG project

Kentz Corporation Limited has announced the award of a $570m (AUS$615m) contract to it' s Australian subsidiary for the electrical and instrumentation (E&I) construction packages for the Ichthys Project Onshore LNG Facilities in Darwin, Australia.

This contract was awarded by JKC Australia LNG, a JV between JGC, KBR and Chiyoda. JKC is responsible for the engineering, procurement and construction of the Ichthys LNG Project' s onshore facilities, including the gas processing plant at Blaydin Point.

The contract, for which site preparation work will commence in August 2014, has a duration of 30 months and will provide more than 1,200 jobs for construction personnel. The contract scope includes the provision of services for site wide E&I installation on a unit rate re-measurable basis for the two process trains and utilities, and additional pre-commissioning and commissioning expertise.

The Ichthys LNG Project is a JV between INPEX group companies (the operator), major partner Total and the Australian subsidiaries of Tokyo Gas, Osaka Gas, Chubu Electric Power and Toho Gas. It is expected to produce 8.4 million tonnes of LNG and 1.6 million tonnes of LPG per annum, along with approximately 100,000 barrels of condensate per day at peak.

Michael Murphy, Group President Construction and TSS of Kentz, commented: "It is extremely pleasing to secure a further major construction contract on the Ichthys Project Onshore LNG Facilities, in this instance for the E&I construction contract."

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.