Crude Observations

54 is a magic number

Where does the time go? Why it seems like just last week everyone was all in a lather about US production being up another 100,000 barrels and storage in Cushing being up 2 million barrels or some such number with the net result being that the world was awash in oil and we were in an age of peaceful plenty. Then some guy in Iran goes and drops a US drone into the strait of Hormuz and reality hits home. Yeah, I guess that there oil supply chain can get pretty dicey at times what with 20% of global production shipping through one of the more volatile regions on the planet.


Speaking of reality, did any of you catch some of the exciting news in the Canadian oil patch this past week? On Tuesday, the Federal government saw fit to approve the TransMountain Expansion project, again. This after declaring a climate emergency on Monday. Then on Thursday the Senate approved both Bills C48 and C69. So in the space of just four days, the Federal Government managed to piss off everyone on either side of the energy and environment debate. Well done fellas!


At any rate, I could go on at great length about these bills and how they will impact the broader energy and resource economy, but for now I am going to leave them where they sit as convenient electoral cudgels for the Conservative party to clobber the Liberals with for the next four months until the October election.


And as it regards TransMountain, there really isn’t that much to say. I am extremely happy it has been greenlighted but would be naïve to think the battle is over. I would say to all those politicians and pundits who are carping about “shovels in the ground” and “the only people who will be working are lawyers” that maybe we can all just calm down on these sweeping statements and demands. I am sure that Ian Anderson and his crew at TransMountain know what they are doing and have a project plan and schedule in motion. It’s not like they are starting from scratch.


But today, I have a different plan. As many of you know, one of the 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 sheer laziness, the ubiquitous birthday list!


That’s right, each year I throw together a lazy list of energy thoughts. This year there are 54 of them because I am turning 54 tomorrow. Holy free-holy Batman! That’s a lot of years. One year away from Freedom 55! I can retire! Well, no, I actually can’t but we can dream can’t we?


Anyway, before I “retire” for the day and let ye olde bidness pardner buy me a beer… Here are my 54 pithy, insightful and random observations about the oil and gas sector.


  1. Just like last year, we are waiting on OPEC+ to help us out with the price of oil. Where last year we were at $65 and worried about the impact of prices on global growth, we now find ourselves at $57 and worried about tariff wars and global growth.
  2. The natural gas industry in Canada continues to take it on the chin. Why do we ignore it so much?
  3. Notwithstanding Trump tweets and shale over production, if you think the Saudis are going to sit by and let their economy get sewered 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 drilling in multiple directions from a multiwell pad and held open by 3 and a 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 3rd largest reserves of oil in the world and the 10th 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 collapse 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… I repeat, never.
  23. But according to the environmental lobby, 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 $30 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. Suncor employs more First Nations people than the Federal Government
  31. In 1965, global consumption of oil was just over 30 million barrels of oil a day. In 2019 it is expected to be about 102 million barrels a day.
  32. In 1965, North America produced about 10.9 million bpd (32% of global production of 34.5mm bpd) and in 2019 that number is expected to be about 23 million (23%)
  33. 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
  34. 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.
  35. 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.
  36. In the early 2000’s, total fossil fuels’ share of the energy market was about 85%. Since then, hundreds of billions of dollars have been invested in renewables such that fossil fuels current share of the energy mix is… Yup, you guessed it, 85%.
  37. No one is on track to meet their Paris Accord emissions targets, except France.
  38. The United States, which has withdrawn from the accord, is one of the few countries to actually see emissions decline
  39. 40% of the world’s ocean cargo is oil
  40. It took more than 100 years to build out our current fossil fuel based infrastructure
  41. In 2017, there were more than 1.75 million active oil and gas wells in the United States.
  42. In 2017, there were around 220,000 active oil and gas wells in Canada
  43. In the United States it is estimated that the oil and gas industry supports around 10 million jobs or 5% of the labour force
  44. In Canada, the similar number is 250,000 direct jobs and probably another 300,000 indirect jobs
  45. In 2019, the US is expected to drill and complete some 35,000 wells and exit with liquids production of about 12.5 mm bpd
  46. In 2019, Russia is expected drill and complete about 8,000 wells and exit with production of about 11 mm bpd
  47. In 2019, 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
  48. In 2014 before the crash there were 547 rigs drilling in the Permian and production was 1.5 mm boepd. Today there are 439 and production is about 4.2 million boepd
  49. 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 56 and production is 1.39 million boepd
  50. Saudi Arabia still wants to launch the largest energy IPO in history
  51. 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
  52. 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
  53. 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
  54. In 2019/2020 the private and public sector in Canada will likely be involved in the construction of some $75 billion in energy infrastructure including thousands of kilometres of oil and 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 really wanted to!


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 21 (June 14), 2019

  • The price of oil were flat early this week before middle east tensions tookover
    • Storage posted a decrease week over week
    • Production was down marginally and remains higher than last year this at this time
    • The rig count in the US was down, slightly, while the rig count in Alberta and Saskatchewan improved
    • Natural gas storage was up. The market didn’t care
  • WTI Crude: $57.61 ($52.48)
  • Western Canada Select: $43.85 ($39.43)
  • AECO Spot : $0.86 ($0.86)
  • NYMEX Gas: $2.19 ($2.39)
  • US/Canadian Dollar: $0.7544 ($0.7505)


  • As at June 14, 2019, US crude oil supplies were at 482.4 million barrels, a decrease of 3.1 million barrels from the previous week and 55.8 million barrels above last year.
    • The number of days oil supply in storage is 28.4 compared to 25.5 last year at this time.
    • Production was down for the week at 12.200 million barrels per day. Production last year at the same time was 10.900 million barrels per day.
    • Imports fell to 7.467 million barrels from 7.611 million barrels per day compared to 8.242 million barrels per day last year.
    • Exports from the US rose to 3.422 million barrels per day from 3.122 million barrels per day last week compared to 2.374 million barrels per day a year ago
    • Canadian exports to the US were 3.688 million barrels a day, down from 3.683
    • Refinery inputs rose during the during the week to 17.264 million barrels per day
  • As at June 14, 2019, US natural gas in storage was 2.203 billion cubic feet (Bcf), which is about 8% lower than the 5-year average and about 10% higher than last year’s level, following an implied net injection of 115 Bcf during the report week
    • Overall U.S. natural gas consumption was down 1% during the report week
    • Production for the week was flat week over week. Imports from Canada decreased 9% from the week before. Exports to Mexico were up 2%
    • LNG exports totaled 39.1 Bcf
  • As of June 21, 2019, the Canadian rig count was up 15 at 119 (AB – 63; BC – 10; SK – 40; MB – 3; Other – 3). Rig count for the same period last year was 160.
  • US Onshore Oil rig count at June 21, 2019 is at 789, up 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 4 at 177.
    • 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 up 1 to 24.
    • Offshore peak rig count at January 1, 2015 was 55

US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 57%/43%

Trump Watch: Curse you Iran! Weird Trudeau visit video. See ya later Sarah Huckabee, we barely knew you.

Kenney Watch (new!): Bill 9! Got a pipeline. Protesting a carbon tax. Found some ear plugs.

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