industryterm:energy boom

Some States See Budgets at Risk as Oil Price Falls - NYTimes.com
▻http://www.nytimes.com/2014/12/27/us/falling-oil-prices-have-ripple-effect-in-texas-louisiana-oklahoma.html?emc=

HOUSTON — States dependent on oil and gas revenue are bracing for layoffs, slashing agency budgets and growing increasingly anxious about the ripple effect that falling oil prices may have on their local economies.

The concerns are cutting across traditional oil states like Texas, Louisiana, Oklahoma and Alaska as well as those like North Dakota that are benefiting from the nation’s latest energy boom.

“The crunch is coming,” said Gunnar Knapp, a professor of economics and the director of the Institute of Social and Economic Research at the University of Alaska Anchorage.

Experts and elected officials say an extended downturn in oil prices seems unlikely to create the economic disasters that accompanied the 1980s oil bust, because energy-producing states that were left reeling for years have diversified their economies. The effects on the states are nothing like the crises facing big oil-exporting nations like Russia, Iran and Venezuela.

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But here in Houston, which proudly bills itself as the energy capital of the world, Hercules Offshore announced it would lay off about 300 employees who work on the company’s rigs in the Gulf of Mexico at the end of the month. Texas already lost 2,300 oil and gas jobs in October and November, according to preliminary data released last week by the federal Bureau of Labor Statistics.

On the same day, Fitch Ratings warned that home prices in Texas “may be unsustainable” as the price of oil continues to plummet. The American benchmark for crude oil, known as West Texas Intermediate, was $54.73 per barrel on Friday, having fallen from more than $100 a barrel in June.

In Louisiana, the drop in oil prices had a hand in increasing the state’s projected 2015-16 budget shortfall to $1.4 billion and prompting cuts that eliminated 162 vacant positions in state government, reduced contracts across the state and froze expenses for items like travel and supplies at all state agencies. Another round of reductions is expected as soon as January.

And in Alaska — where about 90 percent of state government is funded by oil, allowing residents to pay no state sales or income taxes — the drop in oil prices has worsened the budget deficit and could force a 50 percent cut in capital spending for bridges and roads. Moody’s, the credit rating service, recently lowered Alaska’s credit outlook from stable to negative.

States that have become accustomed to the benefits of energy production — budgets fattened by oil and gas taxes, ample jobs and healthy rainy-day funds — are now nervously eyeing the changed landscape and wondering how much they will lose from falling prices that have been an unexpected present to drivers across the country this holiday season. The price of natural gas is falling, too.

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“Our approach to the 2016 budget includes a full review of every activity in every agency’s budget and the cost associated with them,” said Kristy Nichols, the chief budget adviser to Gov. Bobby Jindal of Louisiana. “Nothing is off the table at this point.”

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A study published in 2013 by the Council on Foreign Relations suggested that job losses from a sharp decline in oil prices would be largest in Wyoming, Oklahoma and North Dakota.

But Louisiana, which has a smaller and less diversified economy than Texas, is already feeling the sting of the price downturn because it relies on more oil and gas money for its operating budget. Louisiana loses $12 million for every $1 in decline in the annual average price of a barrel of oil, according to Greg Albrecht, the state’s chief economist.

“From a strictly budgetary perspective, Louisiana is more sensitive to all of this,” said James A. Richardson, a Louisiana State University economist who serves on the state’s Revenue Estimating Conference, which estimates how much money will be available for the budget. “It shows up in our house much sooner.”

How Crude Oil’s Global Collapse Unfolded
▻http://www.wsj.com/articles/tracing-oil-price-plunge-back-to-texas-1418404579

Since the 1970s, Nigeria has sent a steady stream of high-quality crude oil to North American refineries. As recently as 2010, tankers delivered a million barrels a day.

Then came the U.S. energy boom. By July of this year, oil imports from Nigeria had fallen to zero.

Displaced by surging U.S. oil production, millions of barrels of Nigerian crude now head to India, Indonesia and China. But Middle Eastern nations are trying to entice the same buyers. This has set up a battle for market share that could reshape the Organization of the Petroleum Exporting Countries and fundamentally change the global market for oil.

The sudden plunge in global crude oil prices from over $100 a barrel to under $65 has been portrayed as a showdown between Saudi Arabia and the U.S., two of the world’s biggest oil producers. But the reality is more complex, involving Libyan rebels and Indonesian cabdrivers as well as Texas roughnecks and Middle Eastern oil ministers. It reflects both the surging supply of crude and the crumbling demand for oil.

And the oil-price free fall may not end soon. Bank of America Merrill Lynch says U.S. oil prices, which closed below $60 a barrel Thursday for the first time in years, could drop to $50 in 2015

(...)

For a long time, it seemed like the world’s growing appetite for oil would soak up all the displaced crude. By 2011 prices began to hover between $90 and $100 a barrel and mostly stayed in that range.

But earlier this year, another trend began to come into focus, catching Wall Street energy analysts and other market watchers by surprise. In March, many analysts predicted global demand for crude oil would grow by 1.4 million barrels a day in 2014, to 92.7 million barrels a day.

That prediction proved wildly optimistic.

(...)

Rising supply and falling demand both put downward pressure on prices. Throughout the summer, however, fears of violence in Iraq kept oil prices high. Traders worried Islamic State fighters could cut Iraq’s oil output.

Then two events tipped the market. In late June, The Wall Street Journal reported the U.S. government had given permission for the first exports of U.S. oil in a generation. While the ruling was limited in scope, the market saw it as the first crack in a long-standing ban on crude exports. Not only was the U.S. importing fewer barrels of oil, it could soon begin exporting some also. This news jolted oil markets; prices began to edge down from their summer peaks.

On July 1, Libyan rebels agreed to open Es Sider and Ras Lanuf, two key oil export terminals that had been closed for a year. Libyan oil cargoes sailed across the Mediterranean Sea into Europe. Already displaced from the U.S. Gulf Coast and eastern Canada, Nigerian oil was soon replaced in Europe, too.

Increasingly, shipments of Nigerian crude headed toward China.

(...)

Saudi Arabia didn’t want Nigeria to develop long-term relationships with refinery buyers in Asia. In late September, the kingdom decided to shore up its hold on them by, effectively, holding a sale. The Saudis cut their official crude price in Asia by $1 a barrel; within a week, Iran and Kuwait did the same.

Two weeks later, the IEA again lowered its full-year projection of demand growth by 200,000 barrels a day to a meager annual increase of 700,000 barrels, nearly half of what it expected at the beginning of the year. Oil prices fell nearly $4 a barrel on the news.

At this point, the oil market appeared to be in free fall. Of the 23 trading days in October, the price of crude fell by more than $1 on eight days. It rose by $1 on one day.

Traders’ attention turned to OPEC, which has traditionally played the role of market stabilizer by cutting production when prices fall and raising production was prices rise. Many OPEC members, reliant on the cash oil brings in to pay for generous social programs, didn’t want to cut.

Saudi Arabia’s powerful oil minister, Ali al-Naimi, was silent for weeks. The country had been burned in the past when it cut its oil output, only to see other countries continue to pump—and steal its customers.

And it was already feeling competition, says Abudi Zein, chief operating officer of ClipperData, a New York firm that tracks global crude movement. Colombia, which historically has sent most of its oil to the U.S., is finding its biggest buyer this year is China, a critical market for OPEC, he said.

“For the Saudis, Asia is their growth market,” Mr. Zein says. “The Nigerians and Colombians are being kicked out of their natural markets in North America. Saudi had to do something.”

At its regular meeting in Vienna in late November, the cartel kept production unchanged. U.S. and European oil prices fell another $7 per barrel.

On Wednesday, Mr. al-Naimi, the Saudi Arabian oil minister, was asked whether OPEC would soon act to cut exports. “Why should we cut production?” he asked. “Why?”

SOME STATES CONFIRM WATER POLLUTION FROM DRILLING
▻http://bigstory.ap.org/article/some-states-confirm-water-pollution-drilling

PITTSBURGH (AP) — In at least four states that have nurtured the nation’s energy boom, hundreds of complaints have been made about well-water contamination from oil or gas drilling, and pollution was confirmed in a number of them, according to a review that casts doubt on industry suggestions that such problems rarely happen.

#pollution #eau #fracturation_hydraulique