One of the many benefits of doing a blog for so long is that you develop annual traditions such as my Sweet 16 challenge, the annual fearless forecast and quarterly review as well as this week’s ode to laziness, the ubiquitous birthday list! That’s right, each year I throw together a lazy list of energy reflections. This year there are 53 of them because I am turning 53. Holy free-holy Batman! That’s a lot of years. Last year I celebrated that I had been able to get my weight down to less than 4 times my age and can safely say I have maintained that oddly satisfying ratio.

Also this week, there is an OPEC meeting. In fact it was going on as I wrote. Talk about birthday gifts! They were meeting to discuss whether they should finally raise output given that the surplus appears to be gone, no one wants shale oil and Donald Trump sent a tweet. What a bizarre world we live in. Just to close the loop on this, they raised production so now they are in compliance with the target they previously set.

Anyway, speaking of birthday gifts, the one I am giving myself is the right to be lazy, and lazy people mail it in. And as all faithful readers know, mailing it in means a list.

So, before I check out for the day and let ye olde bizness pardner buy me a beer… Here are 53 (fifty-three!) pithy, insightful and random observations about the oil and gas sector.

1. Just like last year, OPEC+ is fiddling around with the price of oil. Where last year we were at $42 and desperate for an uptick, we now find ourselves at $65 and worried about affordability.
2. The natural gas industry in Canada continues to take it on the chin. Why do we ignore it so much? Why even bother.
3. Notwithstanding Trump tweets and shale over production, if you think the Saudis are going to sit by and let their IPO get hijacked by low oil prices, I have a herd of camels to sell you.
4. North America has more than 3 million miles of oil and gas pipelines, split roughly 80/20 between the United States and Canada
5. Since I was born in 1965, there have been 3 major oil price shocks. Each time the market recovered. Go figure.
6. I am older than OPEC
7. In 1965, the American’s closest ally in the Middle East was Iran
8. The first real frac job ever recorded was in 1865 (100 years before I was born!) in Titusville Pennsylvania when Civil War veteran Col. Edward A.L. Roberts lowered a torpedo into an oil well, covered it with water and detonated it, vastly improving the well’s yield.
9. The first commercial hydraulic frac was in 1950.
10. Since that time, frac’ing has significantly improved, but the process is still the same – jam something under pressure into the well until the rock fractures and the molecules flow to the surface. Biggest difference between now and then? Efficiency. And safety. I guess we can’t forget that. Boom.
11. The longest horizontal frac on record is about 18,500 ft, drilled in the Utica Shale, which is a natural gas play. Total depth was about 27,000 ft. So 1.5 miles down and 3.5 miles horizontally. 124 frac stages.
12. The largest frac job ever utilized close to 50 million pounds of sand or proppant in a Haynesville shale well in Louisiana. The lateral length of the well was about 10,000 ft. As a point of reference, the Eiffel Tower weighs 14 million pounds.
13. “Frac hits” a phenomenon where laterally drilled wells start to run into vertical and horizontal wells belonging to other operators continue to plague large scale drilling operations in the United States. This is leading to much legal work. Seriously folks – 5 miles of drilled in multiple directions underground from a multiwell pad and held open by 3 and half Eiffel Towers worth of drill pipe – is anyone really surprised companies are running into each other?
14. The use of sand in North America has more than doubled since 2014 with the advent of the mega/monster-frac
15. Canada has the 3^rd largest reserves of oil in the world and the 10^th largest reserves of natural gas
16. Canada is the only country in the world that has only one customer for its largest export
17. The energy sector, broadly speaking, represents 15% of Canadian GDP.
18. Put another way, 15% of our national wealth depends on the exploitation of these reserves, our 500,000 miles of pipeline and the goodwill of one country
19. Canada is recognized as having the most stringently regulated oil and gas industry in the world
20. It is estimated that in Russia the equivalent of 50,000 bpd of oil is spilled annually (5% of production). That would be like half of the production of the massive Surmont SAGD facility in Fort Mac being dumped into the Athabasca River every day!
21. Venezuela is an environmental and societal basket case, has the largest reserves in the world and has seen production implode from 3.5 mm boepd to less than 1 mm.
22. The environmental degradation of Venezuelan oilfields and facilities from lack of investment and little to no regulation is likely to never be cleaned up… ever…
23. But in environmental circles, Canada is the bad guy
24. Global spend in the oil and gas sector is about $2 trillion a year, about $200 billion more than Canada’s annual GDP
25. Of that, about a quarter is spent on exploration and new production, down 40% from pre-crash levels.
26. In Canada, capital spending in the oil and gas sector is expected to be $33 billion this year
27. Of the $11 billion spent on environmental protection in 2012 (last year data available, gotta love government), 43% was spent by the oil and gas industry. The next closest industry spent 12%
28. Total spending on tangible environmental protection by Canada’s environmental lobby groups since I was born in 1965 has been about $0
29. The oil and gas sector is one of the largest employers of First Nations people in Canada
30. In 1965, global consumption of oil was just over 30 million barrels of oil a day. In 2018 it is expected to be between 99 and 100 million barrels a day.
31. In 1965, North America produced about 10.9 million bpd (32% of global production of 34.5mm bpd) and in 2018 that number is expected to be about 21.3 million (23%)
32. In 1965, the Middle East produced about 9.4 million bpd (27%) and in 2018 that number is 25.6 (27%). Total all-in OPEC production is currently about 34% of total global production
33. There are currently 300 million vehicles in the United States. At current rates of production, it will take about 100 years to replace all of them with electric vehicles.
34. Alternatively, annual vehicle sales in the US are about 17 million. If all vehicles sold from this day forward were EV’s, it would take about 60 years to replace the fleet. And you’d still likely have about 150 million gas powered vehicles on the road. People like to have 2 vehicles.
35. Tesla isn’t going to be the solution. They are currently running as production surge inside a Sprung Structures tent (Cancon!) to meet quarterly commitments. It won’t happen.
36. There are about 120,000 service stations in the US.
37. The cost to install a DC Fast charging station is estimated to be about $75,000
38. That’s $9 billion to roll out a full install.
39. It took more than 100 years to build out our current fossil fuel based infrastructure
40. In 2017, there were more than 1.75 million active oil and gas wells in the United States.
41. In 2017, there were around 220,000 active oil and gas wells in Canada
42. In the United States it is estimated that the oil and gas industry supports around 10 million jobs or 5% of the labour force
43. In Canada, the similar number is 250,000 direct jobs and probably another 300,000 indirect jobs
44. In 2018, the US is expected to drill and complete some 35,000 wells and exit with liquids production of about 11.5 mm bpd
45. In 2018, Russia is expected drill and complete about 8,000 wells and exist with production of about 11 mm bpd
46. In 2018, Saudi Arabia is expected to drill and complete 600 wells and exit with production of about 10 mm bpd and spare capacity of 2 mm bpd
47. In 2014 before the crash there were 547 rigs drilling in the Permian and production was 1.5 mm boepd. Today there are 475 and production is about 3.25 million boepd
48. In 2014 before the crash there were 175 rigs drilling in the Williston Basin and production was about 1.2 mm boepd. Today there are 57 and production is the same.
49. Also in 2018, unless Trump screws everything up, Saudi Arabia is expected to launch the largest energy IPO in history
50. Only half of a barrel of oil is used for gasoline, the rest is used in more than 6,000 common products including hand lotion, football helmets, insecticides, fertilizer and fidget spinners
51. The countries with the highest use of energy per capita also have the highest life expectancy, demonstrating that access to cheap and plentiful energy is critical to increasing life expectancy and pulling people out of poverty
52. The energy industry is one of the most important industries in the world today and touches virtually all aspects of our lives, every day so maligning the energy industry and blocking projects is hypocritical and denies the reality on the ground that our privileged lifestyle depends on a healthy energy economy
53. In 2018/2019 the private and public sector in Canada will likely be involved in the construction of some $75 billion in energy infrastructure including more than 5000 km of oil pipeline, 3000 km of natural gas pipeline and massive investments in LNG and petchem processing facilities. Not bad for a country mired in regulatory gridlock. Imagine what we could do if we got it right!
54. Bonus extra muse – As part of my never ending love affair with natural gas, I feel I must mention it. Natural gas. There. I’m done.

Prices as at June 22, 2018 (Jun 15, 2018)

• The price of oil gained ground during the week as OPEC uncertainty was resolved
  • Storage posted an decrease
  • Production was flat
  • The rig count in the US was mixed
• After a larger than expected injection, natural gas gave up some ground then rallied thru the end of the week…

• WTI Crude: $65.58 ($65.06)
• Nymex Gas: $2.954 ($3.022)
• US/Canadian Dollar: $0.7542 ($ 0.75870

Highlights

• As at June 15, 2018, US crude oil supplies were at 426.5 million barrels, a decrease of 5.9 million barrels from the previous week and 82.6 million barrels below last year.
  • The number of days oil supply in storage was 24.5 behind last year’s 29.5.
  • Production stayed the same for the week at 10.900 million barrels per day. Production last year at the same time was 9.350 million barrels per day. The constant production this week came from constant production in Alaska and Lower 48.
  • Imports rose from 8.1 million barrels a day to 8.242 compared to 7.876 million barrels per day last year.
  • Exports from the US rose to 2.374 million barrels a day from 2.030 last week and 0.517 a year ago
  • Canadian exports to the US were 3.571 million barrels a day, up from 3.711
  • Refinery inputs were up during the week at 17.701 million barrels a day
• As at June 15, 2018, US natural gas in storage was 2.004 billion cubic feet (Bcf), which is 20% lower than the 5-year average and about 27% less than last year’s level, following an implied net injection of 91 Bcf during the report week
  • Overall U.S. natural gas consumption was up 4% during the report week
  • Production for the week was up 0.4%. Imports from Canada were up 6% compared to the week before. Exports to Mexico were down 2% compared to the week before.
  • LNG exports totalled 21.8 Bcf.
• Slowly but surely… As of June 22 the Canadian rig count was 160 . Rig count for the same period last year was actually higher.
• US Onshore Oil rig count at June 22, 2018 was at 862, down 1 from the week prior.
  • Peak rig count was October 10, 2014 at 1,609
• Natural gas rigs drilling in the United States was down 6 at 188.
  • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
• Offshore rig count was down 2 at 18
  • Offshore rig count at January 1, 2015 was 55
• US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 62%/38%

Drillbits

• Tariffs – still
• Baytex Energy Corp. and Raging River Exploration Inc. announced that they have agreed to a strategic combination of the two companies
• Nexen Energy announced it will spend about $400 million to build a 26,000-barrel-per-day expansion of its Long Lake oilsands project in northern Alberta.
• Trump Watch: Tariffs. Children in cages.