During recent days the members of The Norwood Resource (TNR) have responded to an article published in Border Watch, a regional newspaper, which services the South Eastern area of South Australia.
TNR has highlighted another example of activists using sensationalist, inaccurate 'facts' about the activities of the oil and gas industry, in the hope of creating fear and concern among the general public. Please take the time to read this article, and visit TNR's Facebook page to leave a comment of support.
Here is the intro and article:
Over the past couple of weeks, we have seen a heightened profile of the anti fracking and anti unconventional gas activists being reported in the Border Watch, a regional newspaper, which services the South Eastern area of South Australia.
Australia is heading for an election (2 July 2016) and while the major issues revolve around Border Security, Health, Education and Economic Management, in some regional centres around Australia, many local activists want their issues to be front and centre, particularly where they feel they have some support from swing voters.
The South East of South Australia is no different. Local activists seem to relish the opportunity to publicise their cause, regardless of the facts. The Border Watch, without checking out the facts relating to the claims, has even succumbed to the hysteria by advocating a moratorium on fracking and unconventional gas, even asserting the local activist group is a respected organisation.
If the publisher were to independently review the ‘facts’ it would be seen that this populist group does not have any foundation based on factual evidence to support it. Furthermore, publishing such information damages the reputation of the newspaper.
APPEA and SACOME responded to these half truths and nonsense assertions, providing facts and information in letters to the editor. However, as is often the case, the overwhelming and incessant emotive articles from the activists has caused unnecessary fear and misunderstanding among the readers of the newspaper.
In response, The Norwood Resource (which has taken many unfounded claims to task previously in The Border Watch) also submitted a letter in an attempt to bring some balance into this debate.
Unfortunately this letter is not yet published, although there were more sensationalist, scary stories about how fracking and unconventional gas will destroy forests, pristine(?) aquifers, and so forth.
We have therefore decided to publish our letter, which follows, through other media to ensure the evidence is available to public:
I write in regard to the many articles, letters and The Border Watch (TBW)’s editorial in regard to fracking and unconventional gas, which have been in TBW over recent weeks.
In many references, the opposition of fracking and unconventional gas development cite ‘potential’ impacts on water and aquifers, yet are unable to produce any evidence out of the 2.5 million fracks worldwide where a frack has propagated up from depth (4 km, where it is most likely any fracking in the South East would occur) to impact a near surface aquifer.
The use of the term ‘pristine’ to describe the aquifers is an emotive term and propaganda, since the aquifers have already been contaminated with pesticides, herbicides and fertilisers, and well as run off from other local activities, meat works, dairies, piggeries and the like. These cases of contamination have occurred in the past were essentially initiated at point sources, and have been diluted with the water in the aquifers.
Further, it is disingenuous to seek a zero risk guarantee (your editorial) when nobody lives in a zero risk environment now. Look at the number of car accidents there are! Everything we do has a risk element.
In regard to ‘clean green image’, over 100 wells have already been drilled in the SE, a gas processing plant operated, and there is a gas turbine still using gas to supply electricity requirements for the region, and the ‘clean green image’ has not been tarnished.
Some of your articles cite gas bubbling out of the ground due to oil and gas activities, however, this is a natural phenomenon, and was even cited in the book ‘A Town Like Alice’, where in the 1940’s part of the Saturday night fireworks was setting fire to gas from water bores to light up the night sky.
This is why oil & gas companies will look in areas where there are natural gas seeps, since there is evidence of gas being present in the area, which is no different to the SE, where methane has been recorded as being present in water bores, and even comprising up to 90% of the ‘air’ between the water level and the surface.
In regard to safety of unconventional gas and the use of fracking to enhance the production, even Professor Anthony Ingraffea (the darling of the anti frackers) stated when giving evidence to the SA Inquiry into Fracking and Unconventional Gas that fracking “.. in my opinion it is that part that brings with it the least risk.”
Further, the lame attempt to reclassify the meaning of the term ‘fracking’ (hydraulic fracture stimulation), to include the whole process of drilling, fracking, production and processing means conventional gas operations (without fracking – and even prior to when fracking was invented) would also be classed as ‘fracking’, which is a nonsense, since no fracking has occurred. However, if the activists prefer to use this definition of fracking, please bear in mind the above referenced quote from Professor Ingraffea, who assisted in editing and reviewing the document to which Ms Lorenz refers.
It is important that in any oil & gas exploration and production activities that risks are maintained as low as reasonably practical (ALARP), which is the guide that the Department of State Development employ when assessing any applications to do work in any area in the State.
Further, it is of primary importance that we have confidence in our Regulator to provide proper and diligent oversight to any oil & gas activities in the SE, and so it is heartening to know that SA has been independently assessed as one of the top three resource regulatory regimes in the world for shale and tight gas, situations where fracking is used.
The SA Regulator ‘has runs on the board’ having overseen 850 or so fracks in the north east of the State, where wells are drilled through the Great Artesian Basin and fracked, all without any significant impact on the environment or aquifers, and where organically certified cattle stations operate.
Perhaps a little less reporting of scaremongering, unsubstantiated assertions, and a closer examination of findings from credible investigations and formal inquiries might bring some balance back into this debate.
The Norwood Resource
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At first, it seemed like a done deal. Chevron made a US$33 billion offer to take over US-based upstream independent Anadarko Petroleum. It was a 39% premium to Anadarko’s last traded price at the time and would have been the largest industry deal since Shell’s US$61 billion takeover of the BG Group in 2015. The deal would have given Chevron significant and synergistic acreage in the Permian Basin along with new potential in US midstream, as well as Anadarko’s high potential projects in Africa. Then Occidental Petroleum swooped in at the eleventh hour, making the delicious new bid and pulling the carpet out from under Chevron.
We can thank Warren Buffet for this. Occidental Petroleum, or Oxy, had previously made several quiet approaches to purchase Anadarko. These were rebuffed in favour of Chevron’s. Then Oxy’s CEO Vicki Hollub took the company jet to meet with Buffet. Playing to his reported desire to buy into shale, Hollub returned with a US$10 billion cash infusion from Buffet’s Berkshire Hathaway – which was contingent on Oxy’s successful purchase of Anadarko. Hollub also secured a US$8.8 billion commitment from France’s Total to sell off Anadarko’s African assets. With these aces, she then re-approached Anadarko with a new deal – for US$38 billion.
This could have sparked off a price war. After all, the Chevron-Anadarko deal made a lot of sense – securing premium spots in the prolific Permian, creating a 120 sq.km corridor in the sweet spot of the shale basin, the Delaware. But the risk-adverse appetite of Chevron’s CEO Michael Wirth returned, and Chevron declined to increase its offer. By bowing out of the bid, Wirth said ‘Cost and capital discipline always matters…. winning in any environment doesn’t mean winning at any cost… for the sake for doing a deal.” Chevron walks away with a termination fee of US$1 billion and the scuppered dreams of matching ExxonMobil in size.
And so Oxy was victorious, capping off a two-year pursuit by Hollub for Anadarko – which only went public after the Chevron bid. This new ‘global energy leader’ has a combined 1.3 mmb/d boe production, but instead of leveraging Anadarko’s more international spread of operations, Oxy is looking for a future that is significantly more domestic.
The Oxy-Anadarko marriage will make Occidental the undisputed top producer in the Permian Basin, the hottest of all current oil and gas hotspots. Oxy was once a more international player, under former CEO Armand Hammer, who took Occidental to Libya, Peru, Venezuela, Bolivia, the Congo and other developing markets. A downturn in the 1990s led to a refocusing of operations on the US, with Oxy being one of the first companies to research extracting shale oil. And so, as the deal was done, Anadarko’s promising projects in Africa – Area 1 and the Mozambique LNG project, as well as interest in Ghana, Algeria and South Africa – go to Total, which has plenty of synergies to exploit. The retreat back to the US makes sense; Anadarko’s 600,000 acres in the Permian are reportedly the most ‘potentially profitable’ and it also has a major presence in Gulf of Mexico deepwater. Occidental has already identified 10,000 drilling locations in Anadarko areas that are near existing Oxy operations.
While Chevron licks its wounds, it can comfort itself with the fact that it is still the largest current supermajor presence in the Permian, with output there surging 70% in 2018 y-o-y. There could be other targets for acquisitions – Pioneer Natural Resources, Concho Resources or Diamondback Energy – but Chevron’s hunger for takeover seems to have diminished. And with it, the promises of an M&A bonanza in the Permian over 2019.
The Occidental-Anadarko deal:
Source: U.S. Energy Information Administration, Short-Term Energy Outlook
In April 2019, Venezuela's crude oil production averaged 830,000 barrels per day (b/d), down from 1.2 million b/d at the beginning of the year, according to EIA’s May 2019 Short-Term Energy Outlook. This average is the lowest level since January 2003, when a nationwide strike and civil unrest largely brought the operations of Venezuela's state oil company, Petróleos de Venezuela, S.A. (PdVSA), to a halt. Widespread power outages, mismanagement of the country's oil industry, and U.S. sanctions directed at Venezuela's energy sector and PdVSA have all contributed to the recent declines.
Source: U.S. Energy Information Administration, based on Baker Hughes
Venezuela’s oil production has decreased significantly over the last three years. Production declines accelerated in 2018, decreasing by an average of 33,000 b/d each month in 2018, and the rate of decline increased to an average of over 135,000 b/d per month in the first quarter of 2019. The number of active oil rigs—an indicator of future oil production—also fell from nearly 70 rigs in the first quarter of 2016 to 24 rigs in the first quarter of 2019. The declines in Venezuelan crude oil production will have limited effects on the United States, as U.S. imports of Venezuelan crude oil have decreased over the last several years. EIA estimates that U.S. crude oil imports from Venezuela in 2018 averaged 505,000 b/d and were the lowest since 1989.
EIA expects Venezuela's crude oil production to continue decreasing in 2019, and declines may accelerate as sanctions-related deadlines pass. These deadlines include provisions that third-party entities using the U.S. financial system stop transactions with PdVSA by April 28 and that U.S. companies, including oil service companies, involved in the oil sector must cease operations in Venezuela by July 27. Venezuela's chronic shortage of workers across the industry and the departure of U.S. oilfield service companies, among other factors, will contribute to a further decrease in production.
Additionally, U.S. sanctions, as outlined in the January 25, 2019 Executive Order 13857, immediately banned U.S. exports of petroleum products—including unfinished oils that are blended with Venezuela's heavy crude oil for processing—to Venezuela. The Executive Order also required payments for PdVSA-owned petroleum and petroleum products to be placed into an escrow account inaccessible by the company. Preliminary weekly estimates indicate a significant decline in U.S. crude oil imports from Venezuela in February and March, as without direct access to cash payments, PdVSA had little reason to export crude oil to the United States.
India, China, and some European countries continued to receive Venezuela's crude oil, according to data published by ClipperData Inc. Venezuela is likely keeping some crude oil cargoes intended for exports in floating storageuntil it finds buyers for the cargoes.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, and Clipper Data Inc.
A series of ongoing nationwide power outages in Venezuela that began on March 7 cut electricity to the country's oil-producing areas, likely damaging the reservoirs and associated infrastructure. In the Orinoco Oil Belt area, Venezuela produces extra-heavy crude oil that requires dilution with condensate or other light oils before the oil is sent by pipeline to domestic refineries or export terminals. Venezuela’s upgraders, complex processing units that upgrade the extra-heavy crude oil to help facilitate transport, were shut down in March during the power outages.
If Venezuelan crude or upgraded oil cannot flow as a result of a lack of power to the pumping infrastructure, heavier molecules sink and form a tar-like layer in the pipelines that can hinder the flow from resuming even after the power outages are resolved. However, according to tanker tracking data, Venezuela's main export terminal at Puerto José was apparently able to load crude oil onto vessels between power outages, possibly indicating that the loaded crude oil was taken from onshore storage. For this reason, EIA estimates that Venezuela's production fell at a faster rate than its exports.
EIA forecasts that Venezuela's crude oil production will continue to fall through at least the end of 2020, reflecting further declines in crude oil production capacity. Although EIA does not publish forecasts for individual OPEC countries, it does publish total OPEC crude oil and other liquids production. Further disruptions to Venezuela's production beyond what EIA currently assumes would change this forecast.
Headline crude prices for the week beginning 13 May 2019 – Brent: US$70/b; WTI: US$61/b
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