Quote of the Week

In Canada, Kinder Morgan Canada Ltd wants to almost triple the capacity of its Trans Mountain pipeline from Alberta to the Pacific province of British Columbia, which strongly opposes the idea on environmental grounds. Prime Minister Justin Trudeau said, “I have asked the finance minister to engage in discussions, financial discussions, with Kinder Morgan and that’s exactly what is going on. We will ensure that this pipeline gets built in a way that upholds and protects the interests of Canadians. “This pipeline will get built.” (4/20)

Graphic of the Week


1.  Oil and the Global Economy
2.  The Middle East & North Africa
3.  China
4.  Russia
5.  Nigeria
6.  Venezuela
7.  The Briefs

1.  Oil and the Global Economy

In the last two weeks, London oil futures have increased by $7 a barrel, closing last week at $74.06. New York futures closed circa $5.50 below London. This price differential is making US crude very popular on the world markets so that exports are setting records and drawing down US crude stocks.  Behind the price surge is the steady drop in world crude stocks; strong demand from Asia as China’s economy grows faster than forecast; the likelihood that OPEC will continue its production cut on into next year; and the possibility that the Trump administration will abandon the nuclear treaty and impose new sanctions on Iran. There also are the deteriorating situations in Venezuela where production seems likely to drop by hundreds of thousands of barrels per day this year, and in Libya where the incapacitation of the country’s military strongman could result in a drop in oil production as local militias reassert themselves.

While the EIA continues to forecast large increases in US shale oil production, particularly from the Permian Basin, an increasing number of observers, including the Wall Street Journal are warning that increasing costs and limitations on infrastructure will limit the pace at which US shale oil production can be increased.

The increase in gas prices due to higher crude oil prices means OPEC is canceling out the gains of US consumers from the recent US  tax bill. The AAA says the average retail price of gasoline in the US is now $2.76 a gallon, up by nearly 20 cents in the last month and 35 cents higher than at this time last year. In one California county, gasoline is retailing at $4.25. Americans are paying about $86 million per day more to fill up their tanks than they were a month ago.

President Trump took notice of the rapidly increasing US gasoline prices which are devastating his recent tax cut. He tweeted on Friday, “With record amounts of oil all over the place, including the fully loaded ships at sea, oil prices are artificially very high!”  “No good and will not be accepted!” Many observers noted that the President had the facts of the current oil situation wrong and that there were no longer record amounts of oil in storage or loaded on ships at sea. The tweet sent US futures down for a few minutes, but they quickly recovered.

The OPEC Production Cut:  A meeting of the OPEC and non-OPEC oil producers last Thursday found that oil inventories in developed economies had dropped to only 12 million barrels over the official target of the cuts—the five-year average. Twelve million barrels is a virtually non-existent surplus, compared to the 340-million-barrel surplus in January 2017. The next day Saudi Arabia’s Energy Minister al-Falih said that while oil inventories had declined from their peak, they had not yet fallen far enough. “We have to be patient, we don’t want to jump the gun, we don’t want to be complacent and listen to some of the noise that ‘mission accomplished’ and things of that sort.” These sentiments were echoed by several other oil ministers during the week.

Until recently the Saudis maintained that their goal was to maintain oil prices around $60 a barrel. Higher prices would quickly bring forth increased amounts of US shale oil and send prices lower again. A $60 a barrel price, however, would not be enough to return the kingdom to the glory days of five years ago when $100 oil made the kingdom wealthy, its annual budget was covered by oil revenues and its sovereign wealth fund was growing. Moscow has the same problem as the Saudis but is not so open about it.

With international oil prices fast approaching $80 a barrel, the major oil exporters seem content with the status quo. Even though they are not exporting as much oil as they were a couple of years ago, their oil revenues are rapidly recovering to the point they can get along with smaller exports. They all realize that a sudden relaxation of the production cap is likely to drive prices lower. Perhaps they have been reading the stories of bottlenecks developing in US shale oil production and have realized that they could have $100 oil again without quickly creating a glut of US shale oil.

The EIA continues to forecast that global oil demand will increase by 1.5 million b/d  for the next year or two. The only cloud on the horizon is the possibility that a trade war between the US and China would reduce the growth in global GDP.  A 1 percent decline in global GDP growth is believe to result in a reduction in demand growth by 690,000 b/d.

US Shale Oil Production: Last week saw a spate of stories talking about emerging bottlenecks that could slow or even stop increasing production from the Permian Basin. In a story about the Permian last week, the Wall Street Journal called the basin “one of the few growth engines for production worldwide.” Its output is projected to climb from three million b/d to more than four million within two years. The International Energy Agency forecasts that last year’s production will double by 2023.

There seem to be three major aspects that will determine how well the Permian will perform over the next five years and whether it will meet its optimistic forecasts. Most of the current attention is focused on the lack of adequate pipeline capacity to carry the oil and natural gas to markets. This seems to be the most immediate issue as new oil and natural gas pipelines are not due to be completed until 2019. Even then there may not be enough capacity if production can increase as fast as is currently being forecast. Lack of pipelines to carry away the natural gas that comes with the oil may lead some producers to slow or stop production to comply with environmental regulations against flaring too much of the gas.

Then we have the cost and value of the product issue. The rapid growth of production from the Permian, which is up by 800,000 b/d in the past year, is causing shortages of nearly all skills and resources used to produce shale oil. This has forced up costs so that the lower breakeven points brought about by production efficiencies may not obtain. Oil from the Permian has recently been selling at a $6 to $9 discount to elsewhere in the US suggesting that buyers have to use expensive trucks to haul oil out of the region. Another aspect to the economics of shale oil is the pledge that many producers have made to start making a profit, to pay dividends, and to stop increasing production with borrowed money. As we saw ten years ago, there will be a reduction in the global demand for oil if prices get too high.

The final issue is just how much oil is left in the Permian and other shale oil basins that can be produced at wherever oil prices go. Many recent articles discussing shale oil production focus on short-term logistics and financing issues and not the major question of how much oil is left to produce. The government and the oil producers rarely if ever discuss this issue so it is left to a handful of independent observers to point out that the rapid increases in shale oil production these days is coming from a limited number of “sweet spots” which yield much more oil quickly than can be found in other parts of the shale oil basins. How fast these sweet spots go dry is likely to be the key question of the next decade.

2.  The Middle East & North Africa

Iran:  Concerns are rising that Iran’s nuclear deal with Western powers will come to an end next month. The Trump administration has warned Iran that the US will pull out of a nuclear deal between Iran and six major powers by May 12 unless the US Congress and European allies help “fix” it with a follow-up agreement.  EU diplomats said there is growing support for imposing new sanctions on Iran as they seek to persuade President Trump to stick by the nuclear deal.   No formal decision was taken at the EU foreign ministers last week, and some countries aren’t convinced that adding sanctions will convince President Trump and his new foreign policy advisors to stick with the agreement.  People involved in the EU discussions said ministers were nearing a political agreement that action should be taken.

In addition to concerns over the nuclear agreement, concerns are rising about the possibility of a direct war between Israel and Iran. Since Iran’s Islamic Revolution in 1979, Iran and Israel have been fighting each other through proxies, assassination squads and cyber-virus attacks, but never directly. Some are worried that this is about to change with serious consequences for the entire Middle East and its oil exports.

In recent months, the situation has changed. Iran’s Revolutionary Guards now seem to be using the forces and bases that were brought into the country to keep the Assad government in power to establish a front in its confrontation with Israel. On April 9th, Israeli planes attacked an Iranian drone base in Syria that had sent a drone over the Golan Heights. The attack killed the seven Revolutionary Guards at the base. This incident was the first time Israeli forces had attacked Iranian military forces. The Israelis are determined that Iran will never build up a large inventory of missiles close to  Israeli territory as happened in Lebanon.

Israeli officials are saying that should Iran retaliate for the attack on the drone base, there will be massive Israeli air strikes on Iranian bases in Syria.  The Israelis are said to have distributed maps to Israeli news organizations showing the five Iranian-controlled bases in Syria as a warning to Tehran not to take the confrontation any further. Syria’s air defense system failed to defend against the U.S.-led strike on the country’s chemical weapons facilities two weeks ago. While Syria is equipped with a relatively sophisticated air defense system, a lack of training, command and control and other human factors are probably responsible for the failure of the system during the attack.

Russia and Iran have launched an oil-for-goods exchange program seeking to eliminate bilateral payments in US dollars. Russian Energy Minister Novak said the first Iranian cargo of crude oil had been received by Russia. Moscow will receive 100,000 b/d of Iranian crude in exchange for $45 billion worth of Russian goods.

Iraq:  Baghdad’s Common Seawater Supply Project is key to its plans to boost oil production capacity to as much as 6.5 million b/d by 2022.  Current production capacity is below 5 million barrels, and production rates are around 4.4 million b/d as per its OPEC quota. This project is critical to the future of Baghdad’s oil industry as it will supply well injection water to six fields in southern Iraq to boost yields and slow depletion. A boost in production cannot happen without a substantial increase in water supply, and since Iraq has scarce freshwater resources, processed seawater is the only option. The CSSP project was supposed to be awarded this year so that construction work can begin with a launch date set for 2022.

Exxon has been negotiating the terms for installing the system for the last two years but the two sides are still unable to reach agreement on the terms and costs associated with it. Some analysts believe that the project will be awarded to another company resulting in delays in completion.

Last fall Rosneft, the Russian state oil company sent a letter to Baghdad saying that since the Iraqi government was showing “lack of constructive position and interest” about Rosneft’s offer to develop southern Iraqi oilfields, the company would shift its investment to the semi-independent province of Kurdistan. Rosneft has taken over ownership of landlocked Kurdistan’s oil export pipelines to Turkey from the KRG in return for $1.8 billion.  As a sign of Moscow’s new influence, Kurdish officials have said they will not restart oil flows from northern Iraq through the pipelines unless transit fees are paid to Rosneft.

For Kurdistan, Russia’s growing influence is a geopolitical reversal. The region has been aligned to the US since the invasion of Iraq in 2003. Although Rosneft and other Russian state firms try to make profits, they also act as political entities furthering the interests of the Russian government when necessary. The Iraqi oil ministry declined to comment on any political aspects of the Rosneft deal, although Baghdad clearly is upset by Russian investment in Kurdistan which may have as much as a third of Iraq’s oil.

Saudi Arabia: The government would be happy to see crude rise to $80 or even $100 a barrel, according to industry sources, a sign Riyadh will support an extension into 2019 for the OPEC supply-cutting deal. This report contributed to last week’s increase in oil prices. Industry sources say this shift in Saudi Arabia’s stance is its desire to support the valuation of Aramco ahead of the kingdom’s planned sale of a minority stake in the company. Once the Aramco share sale is done, Riyadh would want higher prices to help fund initiatives such as Vision 2030. “Look at the economic reforms and projects they want to do, and the war in Yemen. How are they going to pay for all that? They need higher prices.”

As prices soared to unprecedented highs in 2014, US shale oil producers increased production. The Saudis retaliated, not by playing its historic role of swing producer and putting the brakes on oil output, instead deciding to pump as fast as possible. This flooded global oil inventories and sent prices as low as $30 a barrel which was a disaster for all concerned. Now the Saudis seem to believe that with oil inventories approaching average and a solid alliance with Moscow, they can let oil prices rise and micromanage the markets at any time.

The real issue for the Saudis is whether the US shale industry can respond to $80-$100 oil by increasing production enough to flood the market again. Recent news from the US shale oil industry suggests that a surge beyond what is currently projected is doubtful.

One of the best-kept secrets has been how much money Saudi  Aramco has been making from extracting what is likely the lowest-cost oil in the world. Last week Bloomberg News reported that insiders say the company earned a net $33.8 billion in the first half of 2017. This happened during a period when oil prices were not particularly high. If true, Aramco is the most profitable company in the world and earns more money than the combined net incomes of  Exxon, Shell, Chevron, Total, and BP.

According to Bloomberg’s calculations, Aramco’s production costs imply that it extracts oil at the cost of less than $4 a barrel, compared to Shell and Exxon’s per-barrel cost of $20. This “leak” raises the issue of whether Aramco is worth the $2 trillion that the Saudi’s are talking about. Considering that the Saudi government has unlimited freedom to manipulate the royalties and taxes that Aramco pays, many are skeptical that an IPO will bring as much as the Saudis hope. The Financial Times has calculated that the company would only be worth $2 trillion if the price of oil can be sustained above $120 a barrel. It seems unlikely that such a price can be sustained.

Libya:  Since the news broke two weeks ago that Gen. Khalifa Hifter had been airlifted to France for emergency treatment, Libya’s rumor mill has gone into overdrive amid news reports that the general, a 75-year-old strongman who controls most of eastern Libya, was seriously ill, incapacitated or even dead.  Several French news outlets reported that General Hifter had suffered a serious stroke and was incapacitated.

The general’s efforts were vital in maintaining much of Libya’s oil production in recent years. Haftar’s concentration of power in the east, aided by his military forces, opened up Libya’s central export terminals, marking the start of the most recent rise in Libyan output back to 1 million b/d from 300,000.

If Haftar dies or is incapacitated there likely would be a resurgence of rival factions, including extremists, seeking to regain influence. The Libyan National Army itself is far from a solid, coherent organization. There are internal rivalries as the army is made up of regular military personnel, tribal forces, and militias. The short version of what will happen in case of Haftar’s demise is chaos.

The troubles are starting already. Over the weekend a pipeline owned by the al-Waha oil company, feeding the port of Es Sider, was set on fire causing the loss of between 70,000 and 100,000 b/d.

3.  China

China’s economy grew at an annual rate of 6.8 percent in the first quarter compared to the same period last year, beating the official target of  “around 6.5 percent” for the period.  The increase was helped by strong consumer demand. However, concerns about China’s economy – including rising debt levels – remain. The government has been fighting to contain a ballooning debt and a housing bubble without hurting growth. There are signs that the positive momentum is weakening, likely due to the cooling housing market.

Chinese refineries processed a record of more than 12.1 million b/d in March, boosted by higher government import quotas and steady margins.  That beat the previous record of 12.03 million b/d set last November and 11.19 million b/d in March of last year. Crude runs are expected to be lower for the next two months as refiners enter the peak maintenance season.  At least three major state refineries, with a combined crude processing capacity of 860,000 b/d, have begun overhauls that will last 40-60 days during April and May.

The upcoming restart of a giant petrochemical complex in Fujian province could further intensify competition among regional end-users to secure ultra-light crude feedstocks. China’s Fuhaichuang petrochemical plant plans to restart operations at its 4 million ton/year condensate splitter in July following a three-year closure. The rapid decline in Iran’s condensate exports since late 2017 has raised concerns among many Northeast Asian end-users that require a stable supply of ultra-light crude feedstocks, and the return of the giant condensate consumer in China does not bode well for the buyers.

China will add almost 700 new shale gas wells by 2020 at three large fields, two of them operated by PetroChina and one by Sinopec, all in northwestern China. However, the increased production will not be enough to catch up with soaring gas demand. Beijing has a target of 30 billion cubic meters of shale gas for 2020, and it looks like even these investments won’t be enough to achieve it.  China will need to continue raising its LNG and pipeline gas imports after they hit a record last year amid the government’s efforts to curb pollution by cutting the use of coal for power generation.

Hengli Petrochemical, part of the Chinese chemical giant Hengli Group, has obtained government approval to import 400,000 b/d of crude oil—the largest quota ever handed to a private Chinese refiner, as it aims to start a new refinery this year.

4. Russia

According to the Russian website Finanz, citing the International Energy Agency, the Russian oil industry is about to see its production peak.  The IEA’s 2018 oil report says there is no way Russian oil companies are going to boost their oil production forever and in about 3 years, Moscow’s oil industry will reach an all-time high and start declining steadily. Last year, Russia produced 11.2 million b/d of crude oil, which was still the highest production level in 29 years. In 2021, the production level is going to peak at 11.74 million barrels.

Finanz says this projection has been confirmed by Russian statistics. Newly-opened oil fields are unable to make up for decreasing production in older fields. According to RusEnergy, the average size of the oil fields discovered in 2016-2017 is only 1.7 million tons. Some experts in Russia assume that after peaking at some time after 2020, production is going to start declining rather fast – up to 10 percent a year. This contradicts the Russian government’s promises to preserve the production above 525 million tons a year until 2035. If the forecast is correct, in 2035 Russia will be producing around 6 million b/d, barely enough to cover internal needs. There will be nothing to export.

5. Nigeria

Nigeria’s crude oil production stood at 2.022 million b/d in March, 277,000 b/d below the target of 2.3 million b/d for the 2018 budget, indicating the country is still struggling to step up production to meet the budget benchmark. The production figure for March includes condensate which OPEC does not usually recognize as part of its members’ output.

Although Nigeria is Africa’s largest oil producer, it is also one of the continent’s largest importer of refined petroleum products. Despite being a large net importer of refined petroleum products, including gasoline, no Nigerian government agency has data on the daily gasoline consumption in the country. The government’s Statistician General said all consumption data in the media and issued by some government agencies were either outdated or guesstimates. “At the moment we do not have any reliable data on fuel consumption, but we are working on a survey that would provide the information for the sector.”

6. Venezuela

Reuters reports that PDVSA is completely falling apart, with workers walking off the job at a frightening pace. The conditions for oil workers have deteriorated for years, with shortages of food, unsafe working conditions, and hyperinflation destroying the value of paychecks. Late last year, President Maduro fired the head of PDVSA and handed over control to the military. However, Major General Manuel Quevedo has only accelerated the decline of PDVSA, which once held a reputation as one of the better managed state-owned oil companies in the world.
Quevedo, a former housing minister who replaced two executives jailed for alleged graft,  has further poisoned the atmosphere. The general, who rose through the National Guard, fired many long-term employees upon arrival and urged remaining ones to denounce any of their colleagues who oppose Maduro. He tapped soldiers for top roles. “The military guys arrive calling the engineers thieves and saboteurs,” said a Venezuelan oil executive at a private company who frequently works with PDVSA.

According to Reuters, about 25,000 workers out of 146,000 have quit PDVSA between January 2017 and January 2018. Thousands are walking off of job sites, tired of going to work hungry, putting their lives at risk at poorly-maintained refineries, for a paycheck that fails to cover even the most basic expenses. The worker exodus has grown so bad that the company has in some cases refused to process resignations. Many of those leaving now are engineers, managers, or other high-level professionals that are almost impossible to replace amid Venezuela’s economic meltdown.

Venezuelan intelligence services have arrested two local employees of Chevron. The reason for the detention has not yet been established. However, according to two of Reuters’ sources, the arrests followed a disagreement between the Chevron employees and representatives from PDVSA about procurement processes. Foreign companies working with PDVSA has been the one bright spot for Venezuela’s oil industry as companies function normally and presumably see that their employees and their families are well fed. If the government starts arresting employees of foreign companies for no good reason, they are likely to start withdrawing from the country.

7.  The Briefs (date of the article in the Peak Oil News is in parentheses)

Royal Dutch Shell defended its ambition to cut carbon emissions, urging investors to oppose a shareholder resolution arguing that the oil and gas giant is not doing enough to meet international targets to tackle climate change.  The Anglo-Dutch company, like many of its peers, has faced growing investor pressure to address the need to reduce fossil fuel burning. (4/17)

Shell and stranded assets? The future of oil and gas across the world is coming under pressure following reports by Shell, which plans to empty reserves by over 80 percent in the next 12 years. The report, hinged on the implications of climate change, came at a time when energy experts were insisting that unless countries drastically cut greenhouse gas emissions by moving away from fossil fuels, climate change would remain inevitable. While oil majors are already cutting back on exploration activities in Nigeria, the decision by Shell indicated that keeping a large part of its oil and gas reserves in the ground would be risky. (4/20)

Using LNG for maritime fuel could help the maritime fleet lower its emissions, a Finnish company said Friday. Not surprisingly, the statement came from a company that makes engines for the marine and energy market. (4/21)

In Norway, technical problems were to blame for a drop in average daily oil production. The National Petroleum Directorate said March oil production averaged 1.5 million b/d, approximately 5 percent lower than the NPD’s forecast, and about 3.0 percent below the forecast this year. On the potential for future production, the Johan Sverdrup oil field in the Norwegian waters could be producing as much as 660,000 b/d once all operational phases are in service by 2022. (4/20)

Dry hole in Norway: A drilling facility in the Norwegian waters of the North Sea is moving on to the frontier territory after coming up empty-handed on a wildcat well, one not previously known to hold reserves. The exploration well was about 4 miles southwest of the producing Knarr field and 12 miles north of the Visund field. (4/18)

Germany’s government is increasing pressure on its car makers to invest heavily in electric cars as well as battery production in Europe to safeguard jobs in Germany during a rapid transformation of the sector. Germany’s car industry, which produced a record 16.5 million passenger vehicles last year and employs 825,000 people, is already planning to invest $50 billion into electric mobility by 2020. (4/17)

Offshore India, BP and India’s Reliance Industries sanctioned the development of a cluster of deepwater gas fields. With an estimated 3 trillion cubic feet of discovered reserves, the project’s total investment is projected at $6 billion. India consumes more than 5 billion cubic feet of natural gas per day and could double its consumption by 2022. Once production begins in 2020, the project could meet about 20 percent of India’s current demand. (4/20)

In Australia, the decision by Northern Territory government to end a two-year moratorium and allow the resumption of fracking for natural gas will do little to immediately solve the country’s energy woes, but will likely sharpen political battle lines. At least one company plans to start drilling the Beetaloo Basin, which could contain as much as 6 trillion cf of reserves, “as soon as practical.” (4/19)

Libya’s National Oil Corporation is considering using a chemical marking system to help trace oil products smuggled out of the country.  NOC’s chairman also called on a European Union naval mission to combat smugglers by seizing their ships in the Mediterranean, said the United Nations should consider sanctioning smugglers and urged Libya to reform massive subsidies that allow fuel to be sold for as little as 2-3 US cents per liter. (4/19)

In Algeria, Italian energy company Eni said Tuesday it signed a series of agreements with a state-run company that could lead to greater gas production. Algeria has the 10th-largest natural gas deposits in the world and is the third-largest supplier to Europe. Its exports have been in decline, however, because of lagging foreign investments. (4/18)

In Sudan, the inflation rate in March reached 55.6 percent. Public transport prices nearly doubled last week, and the prices of basic commodities reached record levels. The fuel and gas shortages that rapidly grew last year are exacerbating the financial crisis in the country. (4/17)

Offshore Mauritania and Senegal, BP will be moving ahead with development of a liquefied natural gas project. Design work on a floating production storage and offloading unit is commencing for the Tortue/Ahmeyim field, home to an LNG project on the maritime border between Mauritania and Senegal. BP secured the agreements necessary to make a final investment decision on the project in February. (4/17)

Ecuadorian farmers and indigenous people will seek to show an Ontario Court of Appeal this week that Chevron Canada is legally liable for a US$9.5-billion award that the Ecuadorians won against the US parent Chevron Corp in Ecuador over past environmental pollution. (4/17)

LNG vs. Panama Canal: Although LNG carriers passing through the expanded Panama Canal have increased significantly in numbers, they are still below what the canal can handle on a daily basis: 12 Neopanamaxes. Right now, the average daily transit of this size of vessel is five. What’s more, not all five carry LNG. In fact, the Panama Canal Authority has reportedly only allocated one slot daily for LNG carriers, which will inevitably lead to congestion as US export-bound production continues to boom. Not enough LNG tankers are using the freshly expanded channel that saves 11 days from the journey to Asia, which has become a key market for US LNG. (4/19)

The Panama Canal Authority will reduce the maximum draft for vessels transiting the Neopanamax locks by 1 foot down to 48 feet or 14.63 meters tropical fresh water starting April 27. At 48 feet draft, a Suezmax cannot transit the canal fully laden, as such tankers typically require 50 feet draft for a full million-barrel cargo of 43 API crude. (4/20)

Canada’s oil patch booked three consecutive years of hefty losses after the oil price crash in 2014. This year, the industry is set to post a very slim gross profit—the first profit in four years. Despite the expectation that the tide is finally turning for Canada’s oil producers, significant challenges remain, with constrained pipeline capacity and limited capability to expand export markets the biggest of them all. (4/18)

The US oil rig count increased by five units in the week to April 20, bringing oil rigs to 820, according to Baker Hughes. So far this year, the total number of oil and natural gas rigs active in the United States has averaged 974, up sharply from an average of 876 rigs in 2017 and 509 in 2016. (4/21)

Shift in benchmark crudes? Rapid increases in US oil output and exports over the past two years are forcing some traders and producers to try alternative ways of pricing crude. While the market benchmark remains West Texas Intermediate crude delivered in Cushing, Oklahoma, there has been a surge in trading of futures contracts tracking the price differences between WTI and oil sold in Gulf Coast ports like Houston and the Permian shale fields near Midland, Texas. (4/21)

Gasoline prices up: Americans are expected to spend an average of $400 per household more on fuel this year than in 2016, as the rebound in crude prices is reflected in the cost of petrol at the pump. By contrast, middle-income US households will on average gain $930 each from the tax cut bill passed at the end of last year. The average price of petrol in the US was about $2.75 a gallon last week, up $1 from its low point of about $1.75 in February 2016. (4/18)

Bypassing biofuels: US supermajors ExxonMobil and Chevron have asked the Environmental Protection Agency to waive obligations for biofuel blending for their smallest refineries—exemptions that are typically granted to small refiners (below 75,000 b/d) under financial distress. Those waivers have been traditionally given to refiners in hardship, but recently the US Administration seems to have leaned towards Big Oil in its battle with Big Corn. (4/16)

Hype loses: The Trump administration has had to rein in expectations for offshore oil drilling, with an aggressive sales pitch and boastful rhetoric mostly being met with tepid interest from the oil industry. In March, oil and gas companies only bought about 1 percent of the acreage on offer in the US’ largest offshore auction in history. The disappointing figures came after a lot of hype from the Trump administration, including discounted royalty rates. (4/17)

ANWR deal: The US tax reform passed late last year included language inserted by US Sen. Lisa Murkowski, R-Alaska, that opened the 1002 Area. Murkowski’s office said the ANWR section in question represents about 8 percent of total ANWR acreage. (4/21)

ANWR review process: The Trump administration this week will begin the environmental review process for oil and gas drilling on a section of the Arctic National Wildlife Refuge, a region in northern Alaska rich in crude but prized by conservationists. A notice from the US Department of the Interior says it will hold meetings in five Alaskan towns where the public can speak about drilling in the refuge. (4/20)

North Dakota is facing tariff headwinds.  Despite its vast crude oil resources, North Dakota may have to cut back most department budgets by 5% because of a shortage of general funds, Governor Doug Burgum said.  Oil production of nearly 1.2 million barrels per day was well ahead of its forecast of 925,000 barrels per day. For agriculture, US Sen. Heidi Heitkamp said she was concerned that federal trade policies that would target China could backfire. (4/20)

Royalty rate dust-up: US Interior Secretary Ryan Zinke said Tuesday the government won’t cut royalty rates on profits from offshore drilling. But an industry trade group said the US offshore oil and gas market can’t stay competitive without incentives like reduced royalty rates. (4/19)

Earthquake central: A small tremor was recorded early Friday in the shale heartland of Oklahoma, one day after state regulators limited work because of seismic activity. The US Geological Survey recorded a magnitude-2.8 tremor. That followed a magnitude-3.2 tremor in the same area Thursday morning and is part of a large cluster of seismic activity in the region over the last 30 days. (4/21)

Endless gas boom? US dry natural gas production will set a new record this year, averaging 81.1 Bcf/d, the EIA said in its April Short-Term Energy Outlook. In their Reference case, US natural gas production is expected to grow by 59 percent between 2017 and 2050. The shale-growth-driven natural gas output is expected to bring benefits to the petrochemical industry as manufacturers will continue to enjoy low-cost feedstock for plants in and close to areas where shale gas and natural gas plant liquids production is abundant. (4/19)(Editor’s note: dartboard alert)

More LNG exports: The first export of natural gas from the US East Coast has set sail. Dominion Energy Inc.’s Cove Point terminal in Maryland, after three years of construction, shipped its first commercial cargo of liquefied natural gas Monday, officially bringing the total number of US exporters of the super-chilled fuel to two. Three more export terminals may open on the Gulf Coast by 2019. While Cove Point’s East Coast location could give it an edge in the competition for exports to Europe, the first ship may be headed to Asia. (4/17)

LNG trains delayed: Freeport LNG has confirmed that its engineering, procurement and construction contractor has pushed back the expected commercial start date for the export terminal’s first train to September 1, 2019, a roughly nine-month delay from a previously released target of fourth-quarter 2018. The delay stems from flooding following Hurricane Harvey of lay-yards where equipment, including steel piping, was stored, and the resulting need to clean and test that equipment. (4/19)

Cheniere Energy said Friday it had engaged more than two dozen banks and financial institutions to help it finance a third liquefaction train at its Corpus Christi LNG export facility, and it expects to make a final investment decision on the unit by the end of June. (4/21)

Wind power generated a record 6.3-percent share of total US electricity last year, with four states—Iowa, Kansas, Oklahoma and South Dakota—generating more than 30 percent of their electricity from wind power, the American Wind Energy Association (AWEA) said in its newly released US Wind Industry Annual Market Report 2017. (4/19)

Wind + batteries: British Petroleum has joined forces with Tesla to build the oil company’s first battery storage project at one of its US wind farms. Wind farming is notoriously finicky when it comes to supply, and large-scale batteries like the one Tesla will be providing in the pilot project at BP’s South Dakota Titan 1 wind farm will help solve the volatility of the renewable power source. (4/18)

China’s wind overload: In most parts of the world there is probably not enough wind power capacity, but in northwestern China, there is too much. As a result, one city in the Shaanxi province has decided to choose which new wind projects will go ahead through a lottery, signaling the local grid cannot take in all the available and planned wind power supply. Reuters reports that last year, wind power capacity connected to the grid in China hit 163.7 GW, representing almost a tenth of the country’s total generating capacity and up by 10.1 percent from 2016. Grid expansion, however, has in the meantime lagged behind, which is now creating constraints for the new wind farms. (4/19)

Wireless EV bus charging: Momentum Dynamics has commissioned the US’ first 200 kW wireless charging system for a battery-electric transit bus fleet. The wireless charging system is now operational on a BYD K9S bus at Link Transit in Wenatchee, Washington. Within five minutes, the wireless charging system automatically adds enough energy to the vehicle’s battery to complete another route during its routine transfer station stop. (4/20)

California’s water supply levels were bolstered in March but still sit below normal, after several late winter storms increased snowpack and reservoir levels, according to the California Department of Water Resources. (4/20)