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Tuesday, 16 June 20
SHALE SHOCKED - WOOD MACKENZIE
 Capturing shut-ins in real time
Oil markets are searching for balance as the world reflects on the impact of the COVID-19 pandemic. The market has never experienced such a demand shock and it is difficult to predict what will happen next. What we do know, is that US producers have made drastic changes to overcome the excess supply in the market. From its peak in March to the end of May, our US Daily Oil Pipe Production data, shows that total US production has dropped 1.6 million bpd. That’s approximately 13% of daily barrels-out-of-the-ground removed from the market due to price-driven shut-ins. It’s hard to swallow just how impactful this dip in production is – and there are many factors at play in the market today. In this post, we will discuss how we’ve been tracking and corroborating shut-ins, impacted regions, and our thoughts on recovery.
Regional assessments of production
In April, our US daily oil production model began showing a meaningful downward response to market pressures. Because our data is broken out into eight different regions, we saw that this decline was driven by the Permian, which fell off by nearly a million bpd from March to May. Despite the Texas Railroad Commission’s decision not to curtail production, operators voluntarily shut their wells in through a market-driven exodus. During this time, our data was corroborated by myriad shut-in announcements from various producers. We are now expecting production to begin rebounding in the basin. We’ve already seen some recovery just south of the world’s most productive basin. Though it did not show as an intense nor rapid response, production in the Eagle Ford fell off by about 130,000 bpd since March. As of June 5, most of that production has recovered. While the shut-ins started in Texas, more followed in the Bakken and Gulf of Mexico.
Bakken production data recently published by the North Dakota Industrial Commission (NDIC) shows that March production came in at 1.428 million bpd, just above our modeled 1.422 million bpd. Between March 13 and May 15, our North Dakota model showed a 410,000 bpd decline, dipping below 1 million barrels at its lowest point. The NDIC also cited on May 15 that production has dipped below 1 million bpd, and that “it is going to be a rather slow process to get production back online.” However, our modeled production data recovered by about 90,000 bpd between May 15 and May 22 which rose with local hub pricing through the end of May. This recovery has since dipped, but recent signals have shown that production is rebounding again in response to the latest price rallies. More on recovery later.
The Gulf of Mexico has been hit just as hard as some onshore fields, despite expectations of resiliency due to larger projects with higher overhead. Since March, we’ve observed production fall off by over 200,000 bpd. At first, this decline was spread evenly across fields (we model production at 12 separate offshore platforms) and corroborated by April 22 shut-in announcements from Cantium and Fieldwood Energy. On May 2, the Delta House platform shut-in and production dropped to zero. During their May 11 earnings call, Kosmos Energy revealed that the platform’s operator had decided to shut the field for the entire month of May and move up their maintenance schedule. Our model captured this shut-in ten days in advance and our subscribers witnessed production ramp back up the day that this field restarted. Previously, our data has accurately predicted production recovery following hurricanes, and our model will also capture the next price-driven uptick in offshore production.
One recent example is Tropical Storm Cristobal, which made landfall over Louisiana on June 5 bringing heavy rain and winds of upwards of 50 mph. Tropical storm warnings were posted for much of the Louisiana coastline, Mississippi, Alabama and portions of the Florida Panhandle. Gulf of Mexico producers began shutting in production on Thursday in preparation for the storm and as of today, nearly 674 Mb/d has been shut-in. Atlantis, Thunder Horse, Na Kika, Jack/St. Malo, Baldpate/Magnolia, Lucius/Hadrian and Tubular Bells are shut-in or running at reduced rates. The BSEE reported that personale had been evacuated from a total of 185 production platforms, which is 29% of total production platform in the Gulf of Mexico. Seven dynamically positioned rigs had been moved off of location in the storm path as safety precaution, while three rigs had been evacuated. Our daily model predicted shut in volumes of 574 Mb/d, which is a decline of 33% of total production from the prior week. Our daily production estimates are able to track the outages in real-time, before the public BSEE reports.
Keep in mind that shut-ins are not uniform. Certain operators, like Exxon Mobil, shut in their most productive wells (according to their May 1 earnings call), while others shut in least economic wells. Some ran wells until failure, and others chartered crude tankers for extra storage space. Still, we’ve now seen sweeping declines across the regions that we model for – which drive our total estimate of crude production in the United States.
Our US Daily Oil Production model covers eight main regions, twelve Gulf of Mexico sub-regions, and a total US production estimate. The model utilizes Genscape’s Oil and Natural Gas Intelligence platforms for real-time inputs. These inputs include oil pipeline flow volumes, crude-by-rail cargo counting, and natural gas nominations. Using these proprietary inputs, Genscape captures a daily production estimate in the following regions with high accuracy: Permian, Gulf of Mexico, Eagle Ford, Bakken, DJ Basin, Alaska, Wyoming, and California. All other US production regions are captured in our total US production number. Regions included in our high-frequency estimate have a monthly correlation to state data greater than 95% R2. This accuracy creates user confidence and helps answer the next question, when will US production reach the bottom and begin recovery?
Calling the bottom and capturing recovery
As a result of these declines in our daily estimates, we have lowered our short-term total US production forecast significantly in Q2-2020 to take into account the shut-ins and completion deferrals. We expect that production will drop nearly 1.9 million bpd, from 12.8 million bpd in March to 10.9 million bpd in June. Of this reduction, we assume nearly 1.1 million bpd come from shut-ins, while 800,000 bpd is related to completion deferrals and rig activity reductions. We could see a jump in production by mid-June as curtailments come back online, however there is risk to this depending on how quickly demand recovers and where storage levels sit. The timing and volume could be dependent on if wells need workover activity or if they actually come back at higher levels due to pressure build up and flush production.
In fact, we’ve seen some incremental growth driven by North Dakota, Denver-Julesburg, and the Eagle Ford, signaling that production could be recovering. Local hubs like Clearbrook and Midland both traded above WTI throughout late April/early May, improving the margin on barrels produced in these regions. Still, since we have never seen widespread production shut-in like this in the past, many questions remain about how much volume will return and if smaller producing higher cost wells may be shut-in for good.
Keep in mind that our forecast will change according to prices and the now bottomed-out rig count, and that we provide our clients with a weekly update of our forward-looking expectations based on these inputs. Regardless of when production comes back, our users will be able to capture and quantify the recovery as it happens. Just as our data was a leading indicator of the first shut-ins, it will catch production on the way up. This will allow our clients to be able to update their balances in near real-time and respond to production movements appropriately.
Watch what happens next
For years, US crude production has been marked by steady, seemingly unstoppable growth. The drastic imbalance of oversupply in a market suppressed by a demand-choking pandemic has driven prices to historic lows. The resulting production dive is nearly indescribable, but nothing short of unprecedented. Data describes the situation much better than words, which is why we strive to provide the most accurate and high-frequency assessment of crude production in a cloudy market. The combined analytical expertise and powerful daily modeling of our US Crude Production suite will help you capitalize on upstream uncertainty. Join us in following shut-ins and capture crude recovery.
Source: Wood Mackenzie
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Friday, 28 June 24
INDIAN POWER STATIONS STOCKED WITH BUMPER COAL SUPPLY AS TRANSPORT WOES EASE - BUSINESS STANDARD
Even as power demand has touched a historic high of 250 gigawatts (Gw) amid sweltering heat this June, India’s power stations are stocked wit ...
Friday, 28 June 24
INDIA'S CY23 COAL USE LARGER THAN NORTH AMERICA, EUROPE COMBINED - THE HINDU
For the first time, India’s coal consumption surpassed that of North America and Europe combined in the calendar year 2023, said Energy Insti ...
Monday, 24 June 24
PLN'S FINANCIAL SUSTAINABILITY RESTS ON ACCELERATED COAL RETIREMENT AND RENEWABLES DEPLOYMENT - MUTYA YUSTIKA
On 28 May 2024, Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), released its financial report for 2023. Althoug ...
Monday, 24 June 24
INDIA'S COAL-BASED POWER DEMAND AT ALL-TIME HIGH, GOVERNMENT SAYS - REUTERS
India’s demand for coal-based power has risen by 7.3% this fiscal year to an all-time high, the government said in a statement on Wednesday.
...
Monday, 24 June 24
CHINA'S COAL INDUSTRY TURNS GREENER THROUGH INNOVATIVE APPROACHES - PEOPLE'S DAILY
At an opencast mine operated by Inner Mongolia Pingzhuang Coal Group Co. Ltd., a subsidiary of CHN Energy Investment Group (CHN Energy), a 14-meter ...
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- Kepco SPC Power Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
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- Bukit Asam (Persero) Tbk - Indonesia
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- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
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- Coal and Oil Company - UAE
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- The University of Queensland
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- Ministry of Mines - Canada
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- IHS Mccloskey Coal Group - USA
- Petron Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
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- SMC Global Power, Philippines
- Renaissance Capital - South Africa
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
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- Intertek Mineral Services - Indonesia
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- McConnell Dowell - Australia
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- Electricity Generating Authority of Thailand
- Price Waterhouse Coopers - Russia
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- Lanco Infratech Ltd - India
- Kumho Petrochemical, South Korea
- Economic Council, Georgia
- Salva Resources Pvt Ltd - India
- Cement Manufacturers Association - India
- Orica Australia Pty. Ltd.
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- White Energy Company Limited
- Romanian Commodities Exchange
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- Sinarmas Energy and Mining - Indonesia
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- Global Coal Blending Company Limited - Australia
- Wood Mackenzie - Singapore
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- Global Green Power PLC Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Posco Energy - South Korea
- Wilmar Investment Holdings
- Metalloyd Limited - United Kingdom
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- Star Paper Mills Limited - India
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Parry Sugars Refinery, India
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Edison Trading Spa - Italy
- MS Steel International - UAE
- Asmin Koalindo Tuhup - Indonesia
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- Commonwealth Bank - Australia
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- Holcim Trading Pte Ltd - Singapore
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Oil Corporation Limited
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- Dalmia Cement Bharat India
- AsiaOL BioFuels Corp., Philippines
- Pipit Mutiara Jaya. PT, Indonesia
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- Vedanta Resources Plc - India
- Timah Investasi Mineral - Indoneisa
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Planning Commission, India
- Medco Energi Mining Internasional
- Merrill Lynch Commodities Europe
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- Krishnapatnam Port Company Ltd. - India
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- PowerSource Philippines DevCo
- Deloitte Consulting - India
- TNB Fuel Sdn Bhd - Malaysia
- Energy Link Ltd, New Zealand
- Neyveli Lignite Corporation Ltd, - India
- Aditya Birla Group - India
- Gujarat Mineral Development Corp Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tata Chemicals Ltd - India
- Mjunction Services Limited - India
- Minerals Council of Australia
- Antam Resourcindo - Indonesia
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Anglo American - United Kingdom
- Maharashtra Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Coalindo Energy - Indonesia
- TeaM Sual Corporation - Philippines
- Agrawal Coal Company - India
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Madhucon Powers Ltd - India
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Independent Power Producers Association of India
- Meralco Power Generation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercator Lines Limited - India
- Aboitiz Power Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Samtan Co., Ltd - South Korea
- Billiton Holdings Pty Ltd - Australia
- Kapuas Tunggal Persada - Indonesia
- Thiess Contractors Indonesia
- Goldman Sachs - Singapore
- The State Trading Corporation of India Ltd
- Indo Tambangraya Megah - Indonesia
- Ministry of Finance - Indonesia
- LBH Netherlands Bv - Netherlands
- Bhatia International Limited - India
- Toyota Tsusho Corporation, Japan
- Bukit Baiduri Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Indian Energy Exchange, India
- Attock Cement Pakistan Limited
- Xindia Steels Limited - India
- Latin American Coal - Colombia
- Kohat Cement Company Ltd. - Pakistan
- Australian Commodity Traders Exchange
- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- Vizag Seaport Private Limited - India
- Bayan Resources Tbk. - Indonesia
- Trasteel International SA, Italy
- Orica Mining Services - Indonesia
- IEA Clean Coal Centre - UK
- Bangladesh Power Developement Board
- Leighton Contractors Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Therma Luzon, Inc, Philippines
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Standard Chartered Bank - UAE
- Directorate Of Revenue Intelligence - India
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- International Coal Ventures Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
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