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U.S. oil production gains can't support lower gasoline prices
by Daniel J. Graeber
Washington (UPI) Aug 14, 2014

Shell in feeding frenzy over Marcellus, Utica gas acreage
Houston (UPI) Aug 14, 2013 - Shell said Thursday it was offloading some of its U.S. assets to shift its focus to the Marcellus and emerging Utica shale natural gas reserves in the country.

"We continue to restructure and focus our North America shale oil and gas portfolio to deliver the most value in the longer term," Upstream Director Marvin Odum said in a statement. "With this announcement we are adding highly attractive exploration acreage, where we have impressive well results in the Utica [shale]."

Shell said it sold its entire stake in the Pinedale reserve area in Wyoming to Ultra Petroleum in exchange for $925 million and 155,000 net acres in the Marcellus and Utica basins in Pennsylvania.

Shell pulled 190 million cubic feet per day of natural gas from Pinedale in the second half of 2014. Ultra produced a net 109 million cubic feet per day from the eastern U.S. natural gas reserve areas.

In a separate deal, Shell sold its holdings in the Haynesville basin in Louisiana to Vine Oil & Gas and its partner Blackstone for $1.2 billion in cash. Shell produced a gross 700 million cubic feet of gas per day in Haynesville in the first half of the year.

The Marcellus shale is the most productive basin of its kind in the United States. While production is below Marcellus, drilling productivity in the Utica shale basin has outpaced others in the region, including Marcellus.

Colorado energy trajectory vetted by task force
Denver (UPI) Aug 15, 2013 - Colorado parties to a task force on energy issues are working to thread a needle on the interests of the environment and the energy sector, officials said.

Colorado Gov. John Hickenlooper last week created a special task force that would outline ways to develop energy resources safely. The state has an obligation to develop natural resources like oil and gas in a way that is safe for residents, supports jobs and the economy, he said.

Oil from Colorado accounts for one out of every 50 barrels produced in the United States and output is on the rise because of operations in the state's Niobrara shale basin. The state is home to nine of the largest 100 natural gas fields in the country.

Todd Hartman, a spokesman for the Colorado Department of Natural Resources, said the task force has its work cut out for it, but it's working in earnest to find the right solutions for the state.

"We certainly see the task force as a genuine effort on our part to get thoughtful people to the table who are willing to downplay personal preferences and think about the best approach for the state of Colorado," he said in Thursday interview with energy news website Rigzone.

The task force has the support of the energy industry, with Jack Gerard, president of the American Petroleum Institute, saying the policy framework could help protect the environment while promoting economic growth.

Rigzone reports the task force is working to make sure the state doesn't develop a myriad of niche regulations that would otherwise undermine state energy policies.

The rise in U.S. crude oil production hasn't translated to cheap gasoline because output isn't universal and energy markets are global, a market analyst said.

Motor club AAA reports a national average price for a gallon of regular unleaded gasoline Thursday at $3.47, down 14 cents from last month and 6 cents less than this date in 2013. Michael Green, a spokesman for AAA, said in an interview most people in the United States still think that's too high.

"According to our research, about half of Americans consider the cost of gas to be too high when the price reaches $3.30 per gallon," he said.

While on the presidential campaign trail in 2012, former House Speaker Newt Gingrich said gasoline prices could fall to as low as $2 per gallon if more emphasis were placed on domestic energy production.

The U.S. Energy Information Administration, part of the Energy Department, said around 6.7 billion barrels of oil per day were produced domestically in 2012. Full year 2014 output should be 8.5 million bpd and rise to 9.3 million bpd next year, which would be the highest annual average level of production since 1972.

EIA ranks the United States second only to Saudi Arabia in terms of oil production thanks in part to new drilling technology for shale reserves. In April, EIA said six shale basins -- Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara and Permian -- together accounted for almost 90 percent of the growth in U.S. oil production and nearly all of the gains in natural gas.

That trend in oil production hasn't been replicated elsewhere in the world, however. Global demand, meanwhile, has increased, most notably in the economies of the Asia-Pacific and China.

Analysis from the International Energy Agency, based in Paris, says global oil demand will be around 1 million bpd for 2013, lower than it previously estimated because of economic issues. With recovery emerging, IEA says global demand for oil should increase by 30 percent next year.

All that supply and demand translates into what are, relatively speaking, high oil prices. The U.S. benchmark for crude oil, West Texas Intermediate, is just under $98 per barrel, compared with $30.78 a decade ago.

"It is estimated that every $1 per barrel rise in the price of crude oil increases gas prices by 2-3 cents per gallon," Green said. "On this day ten years ago, a gallon of gasoline cost $1.86 per gallon and today it is $3.47 per gallon."

Meanwhile, while the United States is restricted in how much crude oil it can send to an energy-hungry global market, refiners can export as much gasoline as they want. When gas prices at home decline, those in the refinery sector can look for a better price overseas, where some countries pay the equivalent of $10 for a gallon of gasoline.

Green explains that puts a limit on how low gasoline prices in the U.S. market can go.

In today's dollars, the average price per gallon based on Gingrich's predictions would be $2.08 per gallon.

"Regrettably we may never see a return of $2 gasoline, but we do not expect a national average above $4 per gallon soon either," Green said.


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Spain's Canary Islands fume over oil exploration
Madrid (AFP) Aug 14, 2014
Spain's government sparked an outcry Thursday by giving oil group Repsol the all-clear to explore for oil and gas off the coast of the tourism-dependent Canary Islands. The industry ministry gave Repsol a three-year licence to drill in three sites some 50 kilometres (30 miles) off the coast of the Spanish archipelago, which lies off the northwest coast of Africa. The exploration, approve ... read more

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