Oil, Gas, And Fracking News Reads: 15November 2020 – Part 2

Written by rjs, MarketWatch 666

Here are some more selected news articles for the week ending 14 November 2020. Go here for Part 1.

This is a feature at Global Economic Intersection every Monday evening or Tueday morning.

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How One Firm Drove Influence Campaigns Nationwide for Big Oil – New York Times – FTI, a global consulting firm, helped design, staff and run organizations and websites funded by energy companies that can appear to represent grass-roots support for fossil-fuel initiatives. In early 2017, the Texans for Natural Gas website went live to urge voters to “thank a roughneck” and support fracking. Around the same time, the Arctic Energy Center ramped up its advocacy for drilling in Alaskan waters and in a vast Arctic wildlife refuge. The next year, the Main Street Investors Coalition warned that climate activism doesn’t help mom-and-pop investors in the stock market. All three appeared to be separate efforts to amplify local voices or speak up for regular people. On closer look, however, the groups had something in common: They were part of a network of corporate influence campaigns designed, staffed and at times run by FTI Consulting, which had been hired by some of the largest oil and gas companies in the world to help them promote fossil fuels. An examination of FTI’s work provides an anatomy of the oil industry’s efforts to influence public opinion in the face of increasing political pressure over climate change, an issue likely to grow in prominence, given President-elect Joseph R. Biden Jr.’s pledge to pursue bolder climate regulations. The campaigns often obscure the industry’s role, portraying pro-petroleum groups as grass-roots movements. As part of its services to the industry, FTI monitored environmental activists online, and in one instance an employee created a fake Facebook persona – an imaginary, middle-aged Texas woman with a dog – to help keep tabs on protesters. Former FTI employees say they studied other online influence campaigns and compiled strategies for affecting public discourse. They helped run a campaign that sought a securities rule change, described as protecting the interests of mom-and-pop investors, that aimed to protect oil and gas companies from shareholder pressure to address climate and other concerns. FTI employees also staffed two news and information sites, Energy In Depth and Western Wire, writing pro-industry articles on fracking, climate lawsuits and other hot-button issues. Former employees familiar with Energy In Depth said the site’s content had direction from Exxon Mobil, one of the major clients of the FTI division that worked on these oil and gas campaigns. The Energy In Depth website notes its affiliation with an energy trade group that Exxon is a member of, though not Exxon’s role in directing content that the site published. This article is based on interviews with a dozen former FTI employees, including former managing directors, a review of hundreds of internal FTI documents and an examination of the digital trail of domain-name registrations and other details left by the creation of the websites. In all, FTI has been involved in the operations of at least 15 current and past influence campaigns promoting fossil-fuel interests in addition to its direct work for oil and gas clients. Matthew Bashalany, an FTI spokesman, disputed the idea that FTI worked behind the scenes for these groups. “We hide behind no one,” he said. “We summarily reject as false, misleading and defamatory the general narrative and specific claims,” he said. “We hold ourselves to the highest professional and ethical standards of conduct; when and where shortfalls are identified in this regard, they are addressed appropriately.” An Exxon spokesman, Casey Norton, said he would not comment on the findings because he considered the reporter to be biased against the fossil fuel industry. Kathleen Sgamma, a spokeswoman for the Western Energy Alliance, which funds Western Wire, said her group had been open about its partnership with FTI and about its approach to fracking. The business of corporate consulting and public relations is vast, and countless companies routinely provide media outreach, public messaging, crisis management and other services. FTI is among them, and it has taken up an important role in helping promote the messages of the fossil fuel industry.

Krotz Springs refinery lays off workers; looks to break even after millions in maintenance work — An oil refinery in St. Landry Parish laid off an undisclosed number of workers last week as it looks for ways to turn a profit and still plans to invest millions in maintenance work at the plant. The Krotz Springs oil refinery, owned by Tennessee-based Delek U.S. and built in 1976, had about 210 workers before the coronavirus pandemic caused lockdowns eight months ago that sapped demand for fuel for travel and work commutes. It was also not clear Monday how many workers the company still has in Louisiana. Delek officials told investors last week the company planned to lay off 8% of its workforce to save money. That would mean trimming roughly 300 workers of its 3,800 employees company-wide. About 1,300 worked in refining as of December 2019. Delek has refineries of similar size to Krotz Springs in Tyler, Texas; Big Spring, Texas; and El Dorado, Arkansas. The Krotz Springs refinery, acquired by Delek U.S. in 2017 from Alon Refining, has the capacity to process 80,000 barrels of crude oil each day. It was not clear how much production has been cut since the economic recession began. If the 8% staff reduction is evenly distributed, it would mean 16 employees lost their jobs in Krotz Springs. However, the company told investors it plans to idle unprofitable units at Krotz Springs that account for the majority of its products processed there. The profit margin for gasoline has diminished since the coronavirus pandemic and prompted other refineries across the country to idle some operations or even shutter. The Krotz Springs refinery also produces jet fuel, high-sulfur diesel, liquefied petroleum gas, isobutane, polygas, a blending fuel used in liquid fertilizers, naptha and propylene. Some of these petrochemical products are more profitable than others, but the volume is significantly lower than gasoline and jet fuel. The Krotz Springs refinery generated $70.5 million in annual sales as of December 2019, largely split between gasoline and jet fuel, with 35,000 barrels and 28,000 barrels, respectively, according to U.S. Securities and Exchange Commission records. Petrochemicals accounted for less than 5,000 barrels of daily capacity in 2019, records show. Delek U.S. told investors last week it plans to reorganize the business, but still invest $10 million in the Krotz Springs operation during fourth quarter for completion by first-quarter 2021, which is pushing the maintenance and turnaround work back by a few months.

NextDecade, Bechtel Extend Rio Grande LNG Contract to End of 2021 – Engineering firm Bechtel Corp. last month agreed to give NextDecade Corp. more time to fund its proposed Rio Grande liquefied natural gas (LNG) export project in Texas, amid a major setback that the project recently sustained. Houston-based NextDecade now has until December 21, 2021, to make positive final investment decisions (FIDs) to build up to three liquefaction trains at Rio Grande LNG for construction prices established last year to still be valid. The previous FID deadlines were July 31, 2021, according to a third quarter report NextDecade filed Wednesday with the U.S. Securities and Exchange Commission (SEC). Under one contract signed on May 24, 2019, Bechtel would build two liquefaction trains with combined capacity of 11.74 million metric tons/year (mmty), two 180,000-cubic-meter full containment LNG storage tanks, one marine loading berth and related facilities for $7.042 billion, according to a another document NextDecade filed with the SEC. Under a second contract signed the same day, Bechtel would build a third train with capacity of 5.87 mmty and related facilities for $2.323 billion. The project at full build-out would have a combined capacity of 27 mmty, equivalent to about 3.6 Bcf/d of gas, from five liquefaction trains. The contracts allow for relatively small price increases with deadline extensions and other changes, and the deadline presumably could be extended again. The French government recently delivered a blow to the project by scuttling a proposed $7-billion, 20-year deal for French energy firm Engie to buy LNG from Rio Grande because of environmental concerns over hydraulic fracturing. Rio Grande would get much of its feed gas from the Permian Basin in West Texas and Eastern New Mexico, where significant associated gas volumes are flared due to pipeline constraints. The government has a 23.63% stake in Engie. NextDecade management has said it is continuing negotiations with multiple customers to sign enough long-term deals to reach an FID in 2021 on at least two trains. Shell has signed a long-term deal to buy 2 mmty from Rio Grande but an LNG export project typically needs to sell at least 60-70% of its capacity under long-term deals to get bank financing.

COVID-19 oil bust turns once-pricey West Texas land into a bargain – Eric Huffman remembers a time not long ago when prospectors paid a hefty premium for land in the nation’s hottest oil fields.But since the coronavirus pandemic deflated crude demand, the value of oil land in West Texas and around the country has plummeted. Huffman, a land broker and attorney at Houston-based Lone Star Production Co., said he’s seen land prices fall below $1,000 an acre for property that was once valued at more than $10,000 an acre.“When (oil) prices are too low, no one is buying land,” Even if drillers were bullish on the quick rebound of crude demand, investors and banks have little interest in financing efforts to buy properties and drill new projects after years of disappointing returns in the energy sector. “People aren’t competing to acquire assets because there’s not the capital readily flowing into the space,” Huffman said. “The appetite is just not there.”As a result, the average price of U.S. shale acreage has fallen by more than 70 percent in two years, to $5,000 per acre in 2020 from $17,000 per acre in 2018, according to Rystad, a Norwegian energy research firm.Amid the wider decline, the value of some shale plays has held up. The Permian-Delaware basin is still valued at $30,000 per acre and the Midland basin is valued at $17,000 an acre, Rystad said. But prices for devalued oil and gas lands will be slow to recover as long as COVID-19 cases surge, and related lockdowns keep pressure on demand for petroleum.“We do not foresee demand for (oil) assets rising in the coming quarters,” Alisa Lukash, a senior analyst at Rystad, said in Thursday’s report. The real estate downturn is squeezing oil and gas companies that are relying on asset sales to balance budgets and pay debt. Houston-based Occidental Petroleum, which is trying to sell billions of dollars of assets to erase debt incurred in its $38 billion acquisition of Anadarko Petroleum in 2019, said this week that it lost $700 million on asset sales in Colombia and Wyoming because of low crude prices.Land brokers, called landmen in the oil and gas industry, also are feeling the squeeze, as work has dried up, said Huffman, a former president of the Houston Association of Professional Landmen, which has some 1,300 members. These brokers work with oil and gas producers to find and lease properties to drill. But with few companies drilling new wells, there aren’t many buyers seeking broker services.“It’s been pretty tough for landmen,” Huffman said. “What was once a land rush is now being scrutinized by very sophisticated oil and gas people that are trying to find a couple of shiny diamonds in a pile of gravel.”

Texas bill would tax wind, solar generation but not natural gas – Power bills likely would rise next year for Texas consumers who get their electricity from wind, solar, coal and nuclear generation if the Legislature approves a bill filed this week.The bill from state Rep. Ken King would add 1 cent to every kilowatt hour of energy generated. The tax likely would be passed on to consumers, adding about $12 a month to bills for households that use 1,200 kilowatt hours of renewable power sources each month. Power generated from natural gas would be exempt from the tax.Wind produced about 20 percent of electricity last year in Texas, which is the nation’s leader in wind power generation, and 47 percent came from natural gas, according to the state’s grid manager, the Electric Reliability Council of Texas.RELATED: Solar expected to disrupt Texas fossil-fuel apple cartLuke Metzger, executive director of the Austin-based clean energy advocacy group Environment Texas, said the bill makes no sense.“It flies against the rhetoric of Texas’ market-based system of electricity, putting the thumb on the scale for natural gas and raising taxes on Texans by $2.3 billion every year,” he said in a prepared statement. “It would also discourage wind and solar power, which are reducing pollution, helping us tread more lightly on the planet, and boosting rural economies.”King, a Republican from Canadian, Texas, represents a swath of the Texas Panhandle stretching from Oklahoma to New Mexico. The region is one of the biggest generators of wind in Texas and where millions of dollars were spent to build transmission lines to transport the wind to the state’s population centers.

BP reports uptick of spills in La Plata County – BP America Production Co. has reported four spills of produced water at oil and gas facilities in La Plata County since Oct. 28, according to state records, bringing the total to nearly 20 spills for the year. The first spill in the recent string of incidents was discovered Oct. 28, north of Colorado Highway 172, about 6 miles southeast of Durango. According to an incident report, a property owner reported a pipeline leak, and upon inspection, it was determined produced water was flowing into a nearby irrigation ditch and pond, which was reportedly dry. Produced water is a term that refers to the wastewater byproduct of oil and gas production, which can contain high concentrations of hydrocarbons and carry negative environmental impacts. Livestock on the property was removed, and BP worked to contain the spill. The company reported an “unknown volume of produced water” was released in the spill, none of which could be recovered. Inspectors with the Colorado Oil and Gas Conservation Commission inspected the site. According to state records, water and soil samples were taken. The next spill was discovered Nov. 4, also off Colorado Highway 172, about 3 miles south of Ignacio. An incident report says a pipeline released produced water, which ultimately flowed into a nearby arroyo that runs into the Los Pinos River. BP says the pipeline was isolated, but doesn’t know how much produced water was spilled. Water and soil sampling will be required in that instance, too. Then, two separate spills were found Nov. 6, according to state records. One spill happened near County Road 319, about 3 miles southwest of Ignacio, where an estimated 245 barrels, or about 10,290 gallons, of produced water was released, which required BP to create a small berm to stop it. The other incident occurred near County Road 523, about 6 miles southeast of Bayfield after a pipeline was reportedly found leaking. BP said a little more than a barrel of produced water was released. BP this year sold its assets in the San Juan Basin natural gas field, which spans Southwest Colorado and northern New Mexico, to a European renewable energy company called IKAV Energy Inc. But according to COGCC records, BP is still the company filing incident reports.

Texas Clampdown on Gas Flaring Falls Short of Total Prohibition – Texas’s oil regulator took action to reduce routine natural gas flaring but its efforts fall short of more aggressive measures requested by some investors and major producers. Read more at: https://www.bloombergquint.com/markets/texas-clampdown-on-gas-flaring-falls-short-of-total-prohibition Copyright © BloombergQuint

Shell Wants Biden to Reverse Methane Emissions Rollback – Royal Dutch Shell Plc will push for the reversal of President Donald Trump’s rollback of methane emissions rules and the introduction of carbon pricing when Joe Biden moves into the White House next year. “Some of the regulatory rollbacks that we’ve seen under the current administration haven’t actually benefited our industry,” Shell U.S. President Gretchen Watkins said Tuesday on a webcast hosted by the Greater Houston Partnership. The easing of direct regulation of methane emissions put the energy industry in a “backwards-facing position,” while the absence of carbon pricing makes it harder to incentivize new technologies like carbon capture, Watkins said. “Whoever is in the White House, we will work constructively with them and are actually very much looking forward to building that relationship with the new administration that’s coming in in January,” she added. The oil and gas industry, which has long been the target of environmental groups, faces increasing pressure from shareholders managing trillions of dollars to address greenhouse-gas emissions such as methane. Shell joined BP Plc in September in calling for Texas regulators to end the routine flaring of natural gas, a by-product of the oil boom in the shale patch.

Biden’s oil plan: The good, the bad and the illegal — Thursday, November 12, 2020 — An overhaul of the federal oil and gas program didn’t make it into President-elect Joe Biden’s transition priorities listed on his website Sunday after he was declared the winner of the presidential race. But observers are still expecting Biden and Vice President-elect Kamala Harris to curtail oil and gas development on federal lands and waters, an area where the president can exert significant direct control, experts say. The campaign’s proposal includes a first-day promise to ban new permitting, which approves specific drilling plans, and bar new leasing, which gives prospectors a 10-year property right to develop federal minerals. The president-elect’s platform has also pledged an end to hydraulic fracturing on public lands, a contentious development technique that is ubiquitous in the U.S. oil patch and has long stoked criticism from environmentalists. “A real transition to a clean energy future can and must begin with a halt to new fracking – first on federal lands, and everywhere else soon after,” Food & Water Action Executive Director Wenonah Hauter said in a statement soon after the election was called for Biden. If Biden follows through on his campaign pledges, the beginning of 2021 could see a significant shift for the oil and gas industry in states like Wyoming and New Mexico – where federal oil and gas development is prominent. It also could potentially refashion oil drilling on federal land and water for many years to come. But experts say there are several big “ifs” in Biden’s plan, not least of which is the potential backlash from curtailing industry. Federal oil development represents one-quarter of national production, according to the U.S. Geological Survey, and both oil and natural gas pour into both federal and state budgets. Proposed policies to choke new leasing and permitting, and even throttle fracking on federal land, are likely doable, but they’ll spark political and judicial fights.

Oil and gas experts discuss how Biden administration could affect the industry – The oil and gas industry in Texas and right here in the Coastal Bend is preparing for a change in leadership, but with a new administration in the White House, some question what that will mean for local oil and gas jobs. There has been some concern ever since president elect Joe Biden mentioned that he wants to transition over time to energy sources that don’t pollute as much as oil does. When you look at the state’s economy, you could say Texas is oil country. According to the Texas Oil and Gas Association, in 2019 the industry supported more than 400-thousand direct jobs. Now, with a change in power on the horizon, Joe Biden’s stance has certainly raised eyes and sparked some fear in an industry already hit hard by the COVID-19 pandemic. Economics professor Dr. Jim Lee at Texas A&M Corpus Christi said what the industry will likely see are more regulations and added costs of oil production. He doesn’t see a major loss in jobs because of the industry’s ability to adapt. “In the long run, I wouldn’t say we are going to lose jobs immediately because of that, but we will feel it in our pocketbooks because in the end they are going to pass on the higher cost of extracting oil and producing oil because producing clean energy doesn’t come free,” said Dr. Lee. The Port of Corpus Christi also takes on a vital role in the energy sector. It has become the 3rd largest port in the U.S. based on tonnage and the second largest exporter of crude oil. Port chairman Charlie Zahn said he doesn’t believe the presidential transition will have much if any affect at all. He said the country is too dependent on oil and gas. “Oil and gas are not just used for transportation purposes, they’re used in a lot of products that each one of us on a day-to-day basis was still going to have a need for energy,” said Zahn. “We certainly believe the Biden administration is going to have a significant focus on reducing atmospheric carbon concentrations, but when it comes to energy exports and Texas exports, we believe the Biden administration will continue with that policy,” said Port of Corpus Christi CEO Sean Strawbridge.

Big Oil execs say they’re not worried about Biden’s energy plan; hope to ‘get his staff on board’ – The prospect of a Joe Biden presidency and the most progressive climate strategy the U.S. has ever attempted is not something that should concern the energy industry, oil and gas executives have told CNBC. Instead, they hope President-elect Biden will engage directly with them as he rolls out his energy plan. Biden, who has won the U.S. election according to NBC projections, has previously said that one of his first acts as president would be to reverse President Donald Trump’s decision to pull out of the Paris climate agreement, an international pact designed to avert the dangerous warming of the planet. Thereafter, cutting carbon emissions will likely take center stage when it comes to the former vice president’s energy credibility. Democrats such as Congresswoman Alexandria Ocasio Cortez are pushing for Biden to consider backing the Green New Deal, which would eliminate carbon emissions from most sources over a decade. At present, however, Biden’s energy plan is more moderate. “Talking about climate is often like talking about religion with some politicians. They don’t actually understand the complexities of the energy system very much and that’s never very satisfying,” said Bob Dudley, former CEO of BP and chair of the Oil and Gas Climate Initiative (OGCI), an umbrella group of some of the world’s leading oil and gas producers. “So, what we need are policymakers and governments around the world that actually understand the mix of technologies, how they will come along, and the cost of these technologies, rather than rushing to get elected with what sounds too good to be true.” When asked specifically about whether he felt Biden understood those energy complexities, Dudley told CNBC’s Steve Sedgwick: “If you look at the campaign rhetoric around it, I think you have a spectrum in his party. I think he understands it, it can’t be as fast.” Dudley added: “There are some who want to go much faster and as a politician, he is going to have to balance what some people describe as the ‘far left’ with the more centrist parts of his party. How he’ll do that? I don’t know.”

Big Oil Has Long Way to Go on Emissions Targets: Green Insight – Just five of the 39 largest oil and gas companies have announced carbon-reduction targets that match levels needed to avoid a 2-degree Celsius temperature increase. And only 20 have taken initial steps to disclose how they plan to lower emissions produced by both their operations and electricity use, known respectively as Scope 1 and Scope 2. Put those facts together and it may seem like most of the world’s biggest polluters aren’t serious about climate change. The list of passive offenders includes four of the top-five ranked energy companies by stock market value: Chevron Corp., Exxon Mobil Corp., PetroChina Co. and Saudi Aramco. Eni SpA, Total SA, Reliance Industries Ltd., Galp Energia SGPS SA and Woodside Petroleum Ltd. are the only companies that have targets in-line with the International Energy Agency’s Sustainable Development Scenario (SDS) for 2030, said Eric Kane, senior ESG analyst at Bloomberg Intelligence, which has introduced a “carbon transition score” to evaluate, compare and rank how companies are cutting their carbon intensity. On Tuesday, Occidental Petroleum Corp. became the first major U.S. oil producer to aim for net zero emissions from everything it extracts and sells.The score allows investors to measure oil and gas companies’ progress in reducing their operational emissions intensity, Kane said. It also shows how they are positioned relative to each other and the IEA benchmark, assuming they are successful in achieving their publicly stated greenhouse gas reduction targets, he said.“Despite the risks, many companies have yet to develop reduction strategies,” Kane said.Of the 39 energy firms, just eight have established plans to lower Scope 3 emissions, which are generated when their customers burn fossil fuels, a figure that comprises about 80% of total greenhouse gases at large oil companies. That suggests most companies in the industry are likely to face significant challenges as the economy shifts away from carbon-intensive energy, Kane said.

Oil, Gas Permits for Lower 48 Federal Land Climb Ahead of Biden’s Election – U.S. explorers during October increased their oil and gas permit requests for the third month in a row, with an uptick in developing leaseholds on federal lands, according to Evercore ISI. The analyst firm each month provides data using state and federal sources regarding permits for oil and gas wells, plugging and abandoned (P&A) wells approved and detailed variances of onshore and offshore permitting. The gains in federal land requests preceded the election of Democrat Joseph R. Biden Jr., who has said he would seek to ban drilling on federal lands. U.S. applications by exploration and production (E&P) companies accelerated 25% month/month (m/m) in October, “which is the largest monthly increase so far in 2020,” Evercore analysts said.The increase mainly was driven by the Permian Basin, with permits up 76 over September. Requests to drill on federal lands in the Permian jumped by 19% m/m, according to Evercore. Marcellus Shale permit requests rose by 83 from September, with Bakken Shale requests increasing by 20, the data indicated. Operators filed 1,301 permits in oil formations, up by 199 from September, with 46% approved for the Permian and the Eagle Ford Shale. Leading up to the U.S. election, Evercore noted that Devon Energy Corp. boosted its permit activity in the Permian by 15 m/m in October, “as it pressed ahead with plans to receive regulatory approval of 650 federal permits by year-end.” Concho Resources Inc. and Occidental Petroleum Corp. (Oxy) “ramped their permits to a new 2020 peak in October,” analysts said. Oxy “scaled up applications to 63 (plus 40 m/m) with the bulk of permits focused mainly in New Mexico.” The Bakken permit count rose to 73 during October, up by 20 from September, “which is only 3% lower from January,” said analysts. “Incremental activity was primarily driven by ConocoPhillips,” up by 28 m/m, and the October count “reached the highest level so far this year.” Overall, permitted wells in oil formations had declined through October by 67% year/year (y/y) to 14,656, primarily from a “collapse in the Powder River Basin,” which had plunged by 67%, Evercore noted. Permian activity through October stood at 5,353, off by 37% y/y. The pullback was driven by “sharp reductions” at ExxonMobil, off by 52%, Marathon Oil Co., down 75%, and ConocoPhillips, whose permitting activity was 61% lower. Meanwhile, public E&Ps working in Appalachia’s Marcellus Shale increased their permitting activity by 1,038% from September, according to the data. Natural gas prices are forecast to strengthen, along with activity in the gassy formations of the Marcellus and Utica shales, and the Haynesville Shale.Overall, state regulators during October granted 220 permits in Lower 48 gas formations, up by 98% from September, with “a strong recovery in the Marcellus and the Utica, where applications are returning to 1Q2020 levels,” said Evercore analysts. “Wells permitted in the Marcellus ramped to 91 (up 83 m/m),” driven Antero Resources Corp., up 28, Southwestern Energy Corp., up 15, and Chesapeake Energy Corp., up by 11. Public operators submitted 75% of the October permits in the Appalachian plays, Evercore noted. Meanwhile, Utica permit activity was higher at 27, an increase of 13 over September, “trending upward for the second consecutive month.”

US Rig Count Rises Double Digits as Recovery Gains Steam – Already on the ascent, the U.S. rig count’s trajectory bent further upward for the week ended Friday (Nov. 13), as strength in oil-directed drilling lifted the overall domestic tally 12 units to 312, according to the latest data from Baker Hughes Co. (BKR). Gains for the week included 10 oil rigs and two natural gas-directed units. The U.S. count ended the week nearly 500 units shy of its year-ago total of 806. The domestic count has risen steadily over the past two months, clawing its way back from a recent low of 254 rigs for the week ending Sept. 11, according to the BKR numbers, which are based on data provided in part by Enverus Drillinginfo. Land drilling rose by 11 units during the period, while one rig was added in the Gulf of Mexico. Eight horizontal units and four directional units returned to action, while the total number of vertical units remained unchanged at 22. The Canadian rig count increased three units to 89, including two oil rigs and one natural gas rig. The Canadian count finished 45 units below the 134 rigs running there at this time last year. The combined North American rig count finished at 401, down from 940 a year ago. Among major plays, the Permian Basin added seven rigs to grow its tally to 154, versus 408 in the year-ago period. The Marcellus Shale added two rigs, while the Cana Woodford and Eagle Ford Shale each added one rig. The Utica Shale saw a net decrease of one rig during the period. Broken down by state, BKR tallied a six-rig increase in Texas, with three rigs returning to action in New Mexico. Pennsylvania added two rigs week/week, while Louisiana and Oklahoma each added one. Ohio dropped one rig from its total. U.S. explorers during October increased their oil and gas permit requests for the third month in a row, with an uptick in developing leaseholds on federal lands, according to a recent analysis conducted by Evercore ISI. U.S. applications by exploration and production companies accelerated 25% month/month in October, “which is the largest monthly increase so far in 2020,” Evercore analysts said. The increase mainly was driven by the Permian, with permits up 76 over September. Requests to drill on federal lands in the Permian jumped by 19% month/month, according to Evercore.

Oil operators get DUCs in a row, adding fracking crews to boost output – US frackers are bringing back equipment even as oil prices languish around $40 a barrel in a bid to boost production and tap into a backlog of drilled wells left uncompleted (DUCs) when oil prices crashed earlier this year.The number of active hydraulic fracturing fleets has climbed by nearly 50% since mid-September to 127, according to data from consultancy Primary Vision, outpacing a roughly 17% jump in the number of active drilling rigs over that same period of time. That count stands at 296.US oil prices were trading around $38.53 a barrel on Thursday, below profitable levels in some US producing basins. Still, hydraulic fracturing equipment is headed back to the field, as oil companies are trying to deal with the swift rate at which shale well production falls. US shale production is expected to fall to 7.7 million barrels per day in November, down from 9.2 million bpd in February, before prices crashed, according to the USEnergy Information Administration.Fracking was the first thing to get shut down when oil prices collapsed because it’s the most expensive part of drilling and completing a well, said Andy Hendricks, chief executive officer of driller Patterson-UTI Energy. When prices rose, operators brought back frack crews to complete wells that were drilled but not yet completed, accounting for a big bump in frack activity.The companies that specialize in well completions, like ProPetro Holding Corp and Liberty Oilfield Services , have said they are adding back workers.”Oil focused operators and basins are trying to manage decline curves,” said Matt Johnson, chief executive of Primary Vision.The US added as many as 1,200 DUCs in May, according to analysis from consultancy Enverus, but began completing wells at a faster rate than rigs could drill them starting around July. In October, operators were burning through DUCs at a rate of roughly 200 a month, Enverus said. That pace could slow, Hendricks warned. “I don’t expect big increases in frack activity from where we are. We just don’t have the inventory,” he said referencing drilled-but-uncompleted wells.

State regulators approve Line 3 permits; move pipeline closer to construction – State environmental regulators issued several key permits Thursday that move Enbridge Energy closer to building its controversial Line 3 oil pipeline replacement project. The Minnesota Department of Natural Resources and Minnesota Pollution Control Agency both approved permits for the Line 3 project. Now, Enbridge just needs a permit from the U.S. Army Corps of Engineers and an additional permit that’s expected from the MPCA in the next month. The MPCA’s decision this week will trigger a decision from the U.S. Army Corps of Engineers on its permit. At that point, Enbridge could begin work on the project – which would replace an existing, aging pipeline that at nearly 60 years in operation, is deteriorating and can only transport about half the oil it was designed for, with a new, larger line along a different route across northern Minnesota. An Enbridge spokesperson said only that the company would begin construction once it has all approvals in hand. Kevin Pranis, a spokesperson for the LIUNA union, whose members plan to work on the project, said they expect construction to begin in the next month. Once it does, Enbridge says construction will take six to nine months. The Minnesota Public Utilities Commission, which regulates state utilities and pipelines, gave the Line 3 project its stamp of approval for the second time earlier this year. The PUC originally granted a required certificate of need and route permit for the project in 2018, but had to vote again on the proposal after a court ordered that the project’s environmental review needed to be revised. In the meantime, the project has been held up by legal challenges, including one that the state Commerce Department renewed in August. An array of environmental and tribal groups oppose the project, arguing that it will contribute to climate change and risk oil spills in northern Minnesota waterways. Supporters argue that the new pipeline will be safer than the current line, and that it will create thousands of construction jobs.

Indigenous and Climate Leaders Outraged Over Minnesota Permits for Line 3 Pipeline – Environmental and Indigenous leaders on Thursday responded with alarm after Minnesota regulators approved key permits for Enbridge Energy’s planned Line 3 Pipeline replacement, and called on Democratic Gov. Tim Walz to block any construction for the Canadian company’s long-delayed multibillion-dollar project.”Gov. Walz has apparently decided that if Washington won’t lead on climate, Minnesota won’t either,” said Andy Pearson, MN350’s Midwest tar sands coordinator, in a statement about the permits. “Make no mistake. “This decision is a sharp escalation against water protectors and climate science.”The Associated Press reported that “the approvals from the Minnesota Pollution Control Agency and Department of Natural Resources clear the way for the U.S. Army Corps of Engineers to issue the remaining federal permits, which is expected to happen fairly quickly. The MPCA could then approve a final construction storm water permit that’s meant to protect surface waters from pollutant runoff.”As Leo Golden, vice president of Line 3 execution, called it “a big day for Line 3 in Minnesota” and said that “these authorizations and approvals are an important step towards construction,” Pearson and other critics of the crude oil project reiterated their opposition, citing both treaty rights and climate science.”Line 3 is facing multiple court challenges by Native nations, grassroots groups, and the Minnesota Department of Commerce,” Pearson noted. “This decision means that Enbridge may launch construction while the overall need and legality of the pipeline are being fought in court, including by a state agency.” “There is a good chance that courts will find the pipeline was approved illegally,” he said. “It’s just common sense, then, to demand that the state immediately halt Enbridge’s progress toward construction while those important legal challenges play out.”

State launches economic stimulus program to bring oil and gas workforce back – Gov. Mark Gordon launched an economic stimulus program on Wednesday to help the state’s ailing oil and gas industry recover from the economic collapse of energy markets fueled by the COVID-19 pandemic.The $15 million available to operators will come from federal CARES Act dollars. The program aims to pump resources into well cleanup and finishing uncompleted oil and gas wells.Uncompleted wells have a well bore drilled, but oil and gas have yet to be extracted. To complete the well, operators engage in hydraulic fracturing, or fracking.Wyoming operators will be eligible for up to $500,000 in aid.“These funds will have a direct impact on Wyoming’s employment rate and put people back to work in our oil and gas sector which was impacted by COVID-19,” Gordon said. “It will provide opportunities for employees who lost jobs when drilling ceased. The oil and gas industry is a huge contributor to Wyoming revenues, employment, and its overall economy. These dollars will assist in our state’s economic rebound.”In March, a global oil price war broke out between Russia and Saudi Arabia, sending prices tumbling. Simultaneously, the COVID-19 pandemic brought the economy to a near standstill, chilling demand for fuel. By April, the glut in supply and drought in demand caused oil prices to go negative. West Texas Intermediate contracts for May sold at negative $40 per barrel, plummeting roughly 300% a day before the deadline to purchase them. In June, Wyoming’s oil and gas rig count sank to zero for the first time in over 136 years. The series of events this year have devastated the U.S. oil and gas business.Measures taken to stem the tide of COVID-19 infections slashed petroleum consumption to the lowest levels the U.S. Energy Information Administration has recorded since it began collecting this data in the early 1990s.“The Energy Rebound Program is an excellent use of the CARES Act funding,” Rep. Steve Harshman, R-Casper, said in a statement. “CARES funding was designed to address many of the disastrous economic effects stemming from the COVID and the collapse of much of Wyoming’s economy. The program will provide immediate jobs and long-term revenue for Wyoming.” The Petroleum Association of Wyoming also praised the economic stimulus program.

Oil field operations likely triggered earthquakes in California a few miles from the San Andreas Fault – The way companies drill for oil and gas and dispose of wastewater can trigger earthquakes, at times in unexpected places.In West Texas, earthquake rates are now 30 times higher than they were in 2013. Studies have also linked earthquakes to oil field operations in Oklahoma, Kansas, Colorado and Ohio.California was thought to be an exception, a place where oil field operations and tectonic faults apparently coexisted without much problem. Now, new research shows that the state’s natural earthquake activity may be hiding industry-induced quakes.As a seismologist, I have been investigating induced earthquakes in the U.S., Europe and Australia. Our latest study, released on Nov. 11, shows how California oil field operations are putting stress on tectonic faults in an area just a few miles from the San Andreas Fault.Industry-induced earthquakes have been an increasing concern in the central and eastern United States for more than a decade.Most of these earthquakes are too small to be felt, but not all of them. In 2016, a magnitude 5.8 earthquake damaged buildings in Pawnee, Oklahoma, and led state and federal regulators to shut down 32 wastewater disposal wells near a newly discovered fault. Large earthquakes are rare far from tectonic plate boundaries, and Oklahoma experiencing three magnitude 5 or greater earthquakes in one year, as happened in 2016, was unheard of.Oklahoma’s earthquake frequency fell with lower oil prices and regulators’ decision to require companies to decrease their well injection volume, but there are still more earthquakes there today than in 2010.A familiar pattern has been emerging in West Texas in the past few years: drastically increasing earthquake rates well beyond the natural rate. A magnitude 5 earthquake shook West Texas in March. At the root of the induced earthquake problem are two different types of fluid injection operations: hydraulic fracturing and wastewater disposal. Hydraulic fracturing involves injecting water, sand and chemicals at very high pressures to create flow pathways for hydrocarbons trapped in tight rock formations. Wastewater disposal involves injecting fluids into deep geological formations. Although wastewater is pumped at low pressures, this type of operation can disturb natural pressures and stresses over large areas, several miles from injection wells.Tectonic faults underneath geothermal and oil reservoirs are often precariously balanced. Even a small perturbation to the natural tectonic system – due to deep fluid injection, for example – can cause faults to slip and trigger earthquakes.

Trump to Rush Drilling Leases in Arctic Before Biden Takes Over The Trump administration is advancing plans to auction drilling rights in the U.S. Arctic National Wildlife Refuge before the inauguration of President-elect Joe Biden, who has vowed to block oil exploration in the rugged Alaska wilderness. The Interior Department is set to issue a formal “call for nominations” as soon as Monday, kick-starting a final effort to get input on what tracts to auction inside the refuge’s 1.56-million-acre coastal plain. The plans were described by two people familiar with the matter who asked not to be named detailing administration strategy. Biden has pledged to permanently protect the refuge, saying drilling there would be a “big disaster.” But those efforts could be complicated if the Trump administration sells drilling rights first. Formally issued oil and gas leases on federal land are government contracts that can’t be easily yanked. The U.S. Geological Survey has estimated the refuge’s coastal plain might hold between 4.3 billion and 11.8 billion barrels of technically recoverable crude. Yet it’s unclear how many oil companies would have the appetite to mount costly operations in the remote Arctic wilderness amid low crude prices, steep public opposition, and regulatory uncertainty. Major U.S. banks have sworn off financing Arctic drilling projects, and conservationists are also pressuring oil executives to rule out work in the region. Environmentalists argue Arctic oil development imperils one of the country’s last truly wild places — a swath of northeast Alaska populated by polar bears, caribou, and more than 200 species of birds. The Trump administration is also fast-tracking a proposal to conduct 3-D seismic surveys inside the refuge before Jan. 20. The surveys can help pinpoint possible underground oil reserves, but environmentalists warn they are large industrial operations that threaten polar bears hidden in snow-covered dens. Oil companies that buy leases in the refuge might never get the opportunity to use them while Biden is in the White House. Even if leases are sold and issued before Jan. 20, companies will need permits governing air pollution, animal harm, water usage and rights of way that the new administration could stall or deny. Congress mandated the Interior Department hold two auctions of coastal plain oil leases before Dec. 22, 2024. But environmentalists, states and indigenous groups have already mounted legal challenges against the leasing plan. Any victory by the conservationists or settlement with the Biden administration requiring more environmental review could jeopardize leases.

Oil spill at Churchill Falls in October released roughly 45,000 litres of oil: Nalcor – An oil spill at the Nalcor Energy Churchill Falls switchyard in late October released roughly 45,000 litres of oil, the company said in a media release on Thursday, as it continues to work on clean up. The spill was caused by a transformer failure and fire, the company maintains, but while Nalcor at the time said the transformers hold 53,000 litres of oil, they actually hold 111,400 litres, according to Thursday’s release. Nalcor said 65,000 litres of oil were recovered in tankers in the switchyard, and an unknown amount of the oil spilled was consumed by the fire. “Priority continues to be employee safety and the safe containment, control, and recovery of oil. Absorbent materials, booms, and vacuum trucks are being utilized for containment and collection,” reads the company’s statement. “We continue to see no visible evidence of oil in the Churchill River.” In October, Nalcor said the oil used in the failed transformer was voltesso – an oil that is inherently biodegradable as opposed to readily biodegradable, meaning it will break down over time but the timeline is indefinite. However, Nalcor says now the oil spilled was actually luminol, which is readily biodegradable. “Luminol is more environmentally friendly and has a higher rate of biodegradability than voltesso,” says Nalcor’s statement. “Significant efforts continue to be made by the Churchill Falls team who has been safely working together in these recovery and collection efforts with dedication and commitment since the onset.”

The multi-billion-dollar merger of Canadian giants Cenovus and Husky – On October 25, a major consolidation of two Canadian oil and gas companies was announced with the planned merger of Cenovus Energy and Husky Energy. The prospective consolidation will offer the opportunity for corporate-level synergies and, over the longer term, for the physical integration of some of the companies’ operations, especially in Alberta’s oil sands. In today’s blog, we discuss some of the more nuanced elements of the consolidation, including potential improvement in crude oil market access and the larger presence of the combined company in PADD 2 refining, a sector that has taken a major hit during the pandemic. This blog also introduces a new weekly report from RBN and Baker & O’Brien: U.S. Refinery Billboard. Cenovus Energy is an integrated oil and natural gas company headquartered in Calgary, AB. It was formed when Encana Corp. (now known as Ovintiv) spun-off its oil-based assets into a separate corporation in 2009, allowing Encana to – at the time – focus on its natural gas assets. Cenovus produces oil in Canada and has refining interests in the U.S. The production assets include oil sands facilities at Christina Lake and Foster Creek (blue dots in Figure 1) and conventional operations at Marten Hills and Deep Basin (blue triangles). Notably, Cenovus announced this week that they have entered into an agreement to sell their Marten Hills oil assets to Headwater Exploration. In the U.S., Cenovus has a 50-50 partnership with Phillips 66 in WRB Refining, which has refineries in Borger, TX, and Wood River, IL (blue refinery icons). Husky Energy is also an integrated oil and natural gas company based in Calgary. The company was founded in 1938 in Cody, WY, but relocated to Canada in 1946. Since then, the company has grown organically and through acquisitions of companies such as Mohawk Oil, Renaissance Energy, and the Canadian unit of Marathon Oil, as well as the purchases of Valero Energy’s Lima, OH, refinery and Calumet’s refinery in Superior, WI. Today, the company is majority-owned by Hong Kong billionaire Li Ka-Shing, the 30th-richest person in the world. Husky’s oil production assets include oil sands operations at Sunrise, Tucker, and Lloyd Thermal (green dots in Figure 1); conventional assets at Rainbow and Deep Basin (green triangles); and offshore production in the South China Sea (the Liwan project) and the Madura Strait in Indonesia (the Madura project; green offshore platform icons in inset map), and off the coast of Newfoundland & Labrador in eastern Canada (the White Rose project; green offshore platform icon on main map). Husky’s refining assets include the Lloydminster Upgrader in Saskatchewan and asphalt refinery in Alberta; the Superior, WI, refinery (which is currently shut down and under repair after a major explosion/fire in 2018), and two refineries in Ohio (Lima and the BP-Husky JV refinery in Toledo; green refinery icons).

BP refinery closure threatens hundreds of jobs in Western Australia – In late October, British oil and gas company BP announced that over the next six months it will progressively close its refinery in the city of Kwinana near Perth, Western Australia (WA). The shutdown will cost at least 590 jobs. The refinery, the largest in Australia and the only one in WA, has been in operation for over 65 years. It currently employs 400 permanent staff and 250 contractors. It is to be converted into an import terminal that will employ only 60 people when it is completed in the middle of next year. Even before the pandemic had fully taken effect, official unemployment in Kwinana had hit 11.8 percent in the March quarter this year. This is far higher than the general rate for WA, which has just fallen to 7 percent, down from 8.7 percent in June as COVID-19 restrictions are eased. BP Australia head Frédéric Baudry told the media that the company’s decision “was not in any way a result of local policy settings,” but was in “response to the long-term structural changes to the regional fuels market.” The closure is part of a vicious global restructuring of the sector by the major oil companies, to cut costs and offset the impact of a slump in oil prices. Production is being slashed, jobs destroyed and older plants closed to facilitate the relocation of operations to newer large-scale export refineries in Asia and the Middle East. A September article by Reuters stated that global oil refiners, “reeling from months of lackluster demand and an abundance of inventories,” are cutting fuel production “because the recovery in demand from the impact of coronavirus has stalled.” Reuters reported that the Paris-based International Energy Agency (IEA) had reduced its forecast for global oil demand for 2020 for the second time in two months “due to the faltering recovery.” The IEA also forecast that “global consumption of petroleum and liquid fuels will average just 91.7 million barrels per day (bpd) for all of 2020, a reduction in its previous forecast of 200,000 bpd and down 8.4 million bpd from 2019’s 100.1 million bpd level.” According to natural resources research and consulting firm Wood Mackenzie, nearly 10 percent of high-cost refineries in Europe, or 1.4 million bpd of capacity, are in serious threat of closure over the next three years. Research and marketing agency Argus reported in August that US and Canadian refiners had already slashed 800,000 bpd of crude capacity this year and “at least 575,000 bpd of that will stay closed.” In Australia, other closures are likely to follow Kwinana with owners of the country’s three other remaining refineries already placing their operations under critical review. Ampol is considering shutting its Lytton refinery in Queensland, threatening 500 jobs, Viva Energy will possibly close its refinery in Geelong, Victoria, a facility that employs 700 people, while ExxonMobil has put a question mark over its Altona refinery in the same state, which is manned by 350 workers.

Oil spill- AIbom group demands N16.4bn compensation from NNPC –THE Akwa Ibom Oil Producing Community Development Network has asked the Nigerian National Petroleum Corporation to pay the sum of N16.4bn being compensation for oil spills in some communities in the state The demand was contained in a letter addressed to NNPC Managing Director and signed by the organisation’s lawyer, Mr N. A. Williams. The letter was copied Managing Director, Nigerian Petroleum Development Company Limited; the Managing Director, Sterling Oil Exploration & Energy Production Company Ltd; the Executive Secretary, National Human Rights Commission; the Manager, Cooperate Lands Management, and the Village Head, Ikot Ada Udo Community, Ikot Abasi. According to the letter, the organisation for many years has been demanding compensation from Shell Petroleum Development Company and other oil companies due to the negative effects of hydrocarbon pollution (oil spills, gas flaring and toxic waste dumping by Exxon Mobil and gas leakages/emissions from corked and uncorked wells, especially those belonging to SPDC Ibibio I oil spill at Ikot Ada Udo and elsewhere in the state. The letter recalled that “in the case of Ikot Ada Udo, SPDC Ibibio 1 oil spill incident first occurred in the year 1997. It re-occurred in 1999, 2004 and lasted till 2007 due to Ibibio 1 oil well head facility failure. “The spills resulted in the discharge of remarkable quantity of crude oil into the majorly rural farmlands and water bodies in Ikot Ada Udo and adjoining villages in Ikpa Nung Asang Clan in Ikot Abasi L.G.A, Ibiaku/Ukpum Minya Clans in Mkpat Enin L.G.A and Abak Midim in Oruk Anam L.G.A. “The spills drastically affected the ecosystem, wellbeing of the inhabitants and the environment. “Sequel to this unfavorable development, the community Attorney consulted an Accredited Estate Surveyors and Valuers who carried out valuation of the damages caused by the said spill/gas emissions which is in the sum of N4,136,484,000.00 only for Ikot Ada Udo. “The valuation for villages in Ikpa Nung Asang in Ikot Abasi L.G.A, Ukpum Minya/Ibiaku Clan in Mkpat Enin L.G.A and other SPDC’s host communities in Akwa Ibom State is N12,266,950,000.00 (Twelve Billion, Two Hundred and Sixty-Six Million, Nine Hundred and Fifty Thousand Naira) only, totaling N16,403,434,000.00.”

OPEC cuts 2020 oil demand forecast again on rising Covid cases – sees slower recovery next year – OPEC on Wednesday trimmed its global oil demand forecasts for the remainder of this year and 2021, citing a weaker-than-expected economic outlook and a surge in coronavirus cases. In a closely watched report, the group of oil-producing nations said it now expects world oil demand to contract by around 9.8 million barrels per day year over year in 2020. That reflects a downward revision of 0.3 million barrels from last month’s assessment. For next year, OPEC said oil demand growth will rise by 6.2 million on an annual basis, representing a downward revision of another 0.3 million barrels from its October report. The group has steadily lowered its oil demand outlook for 2021 from an initial expectation of 7 million in July. “These downward revisions mainly take into account downward adjustments to the economic outlook in OECD economies due to COVID-19 containment measures, with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021,” OPEC said in the report. The report comes ahead of the group’s Nov. 30 and Dec. 1 meeting with non-OPEC allies to discuss the next phase of oil production policy. The energy alliance, a grouping known collectively as OPEC+, had agreed to a record supply cut of 9.7 million bpd starting on May 1. The cut was subsequently scaled back to 7.7 million in August and OPEC+ has said it plans further tapering next year. A coronavirus-led demand shock has seen oil prices collapse in 2020, with strict public health measures coinciding with curtailed travel and economic activity. An easing of lockdown measures in the third quarter helped global oil demand to improve, but OPEC now fears a surge in the number of reported Covid-19 cases could derail an expected recovery. “As new COVID-19 infection cases continued to rise during October in the US and Europe, forcing governments to re-introduce a number of restrictive measures, various fuels including transportation fuel are thought to bear the brunt going forward,” OPEC said.

Successful vaccine would boost oil consumption, but not for 6-12 months: Kemp (Reuters) – Coronavirus vaccines are expected to boost international passenger transportation and oil consumption, but the first significant impact will not be felt until well into the second half of 2021, based on futures price movements on Monday. Brent calendar spreads surged that day as traders priced in an announcement from Pfizer about successful immunisation trials, fuelling optimism an effective vaccine will become available within the next few months. Before Pfizer’s announcement, flat prices and spreads had been under pressure since mid-October, prompting a statement from Saudi Arabia that OPEC and its partners are prepared to “tweak” their production agreement. The combined effect of Pfizer’s announcement (potentially boosting oil consumption) and Saudi Arabia’s talk about tweaking (potentially reducing production relative to the planned baseline) sent oil futures soaring. Front-month Brent futures prices closed more than 7% higher, an increase of more than three standard deviations, and the largest one-day percentage gain since the start of June. In the last two weeks, hedge funds and other money managers had sold the equivalent of almost 120 million barrels of Brent and WTI, including the creation of 62 million barrels of fresh short positions. The existence of so many shorts accelerated the price rise, as fund managers raced to buy back some contracts they had earlier sold, a classic high-volatility short-covering rally. Pfizer’s successful trial is reason for optimism that vaccines could be effective in controlling the coronavirus, as an alternative to lockdowns and travel restrictions. But any vaccination programme will not have a major effect until the second half of 2021, and in the meantime oil consumption is set to remain depressed, leaving OPEC and its partners with more to do to rebalance the market. Despite Pfizer’s optimism, any vaccine will take time to be approved by regulators, manufactured in large volumes, deployed through the logistics system, and administered to hundreds of millions of individuals. Likely delays at each stage of the timeline will ensure most restrictions on travel, especially those on international aviation, remain in place for at least six months, and possibly much longer. In the interim, news of successful trials may make governments more determined to maintain social-distancing and travel controls to suppress the virus as much as possible until the vaccine can be widely administered. Once vaccination is underway, however, many governments will come under pressure to permit some resumption of travel for passengers who can prove they pose a low transmission risk. And businesses will be allowed to re-open and domestic travel restrictions will be lifted as part of a plan to restart economic activity. But any relaxation of coronavirus controls, including limits on aviation and congregating in crowded spaces, is likely to be carefully phased and gradual. Only in the longer run, with widespread vaccination possibly tending towards herd immunity, coupled with a cyclical upswing in the global economy, will passenger flying recover to pre-pandemic levels.

Oil jumps on vaccine hopes, OPEC+ signal to tweak deal – Oil jumped on Monday by almost 10%, the highest daily rise in almost 6 month, after Pfizer said its COVID-19 vaccine was very effective, and Saudi Arabia said an OPEC+ deal on output cuts could be adjusted to offset rising supply and weak demand. Brent crude rose $3.33 cents, or 8.4%, to $42.78 a barrel, and U.S. West Texas Intermediate crude was at $40.53, up $3.39 cents, or 9.1%. Pfizer said the experimental vaccine was more than 90% effective in preventing COVID-19, based on initial data from a large study. Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the OPEC+ deal on oil output cuts could be adjusted as it has been in the past if there is consensus among members of the group. The Saudi minister was commenting after being asked whether OPEC+ – which groups OPEC states, Russia and other producers – would stick to existing cuts of 7.7 million barrels per day (bpd), rather than easing them from January to 5.7 million bpd. Key members of the Organization of the Petroleum Exporting Countries are wary of Biden relaxing measures on Iran and Venezuela, which could mean an increase in oil production that would make it harder to balance supply with demand. “While a Biden presidency increases the likelihood of Iranian oil supply returning to the market, this is not something that will happen overnight, and we still believe it’s more likely an end of 2021/2022 event,” ING said in a note. The oil prices also found some support from a weaker U.S. dollar driven by Joe Biden becoming president-elect, said Giovanni Staunovo, oil analyst for UBS. The dollar weakened on Monday, hitting a 10-week low and boosting commodities priced in the greenback as they became more affordable for investors holding other currencies. China, the world’s top crude importer, reported a 12% decline in October imports compared with September.

Oil soars 8% on promising COVID-19 vaccine results (Reuters) – Oil surged about 8% on Monday, its biggest daily gain in more five months, after Pfizer announced promising results for its COVID-19 vaccine. Brent crude LCOc1 settled at $42.40 a barrel, up $2.95, or 7.48%, while U.S. West Texas Intermediate crude CLc1 settled at $40.29 a barrel, rising $3.15, or 8.48%. Oil markets also rose after Saudi Arabia suggested it and other oil producers could adjust its current supply-cut pact, perhaps taking more barrels off the market if demand slumps in the winter as infections rise and before the vaccine is widely available. Fuel demand is down worldwide as a result of the pandemic, and with infections now surpassing 50 million globally, numerous nations, especially in Europe, are reimposing lockdowns to slow the virus’s spread. The vaccine news gave traders hope that the pandemic could be tamped down next year, which would help people resume normal life, boosting demand. “Oil particularly reacted to the news because of what it means,” said John Kilduff, partner at Again Capital in New York. “The pandemic is hitting transportation terrifically and 80% of crude oil barrels go to transportation fuel, so I think this is a logical response.” Both contracts rose more than $4 earlier in the session as traders sought to unwind bearish bets. Brent and WTI traded 148% and 139% of last session’s volumes, respectively. Pfizer said its experimental vaccine was more than 90% effective in preventing COVID-19, based on initial data, a victory in the battle against a pandemic that has forced lockdowns around the world.

Oil gains as vaccine hopes outweigh lockdown impact – Oil prices rose on Tuesday as hopes that a COVID-19 vaccine could be on the horizon outweighed the expected negative impact on fuel demand of new lockdowns to curb the virus. Brent crude futures rose 45 cents, or 1.1%, to $42.85, while U.S. West Texas Intermediate (WTI) crude futures gained 34 cents, or 0.8%, to $40.63. Both contracts jumped 8% on Monday, in their biggest daily gains in more than five months, after drugmakers Pfizer and BioNTech said an experimental COVID-19 treatment was more than 90% effective based on initial trial results. Mass rollouts, however, are likely to be months away and subject to regulatory approvals. “A viable vaccine is unequivocally game-changing for oil – a market where half of demand comes from moving people and things around,” JP Morgan said in a note. “But as we have written previously, oil is a spot asset that must first clear current supply and demand imbalances before one-to-two-year out prices can rise.” Prices were also boosted by comments from Saudi Arabia’s energy minister, who said on Monday the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, could tweak their supply cut pact if demand slumps before the vaccine is available. OPEC+ agreed to cut supply by 7.7 million barrels per day from August through December and then ease the cuts by around 2 million bpd in January. But the negative impact that renewed lockdowns in Europe are having on fuel demand, as well as rising Libyan production, kept prices in check. Traffic in London, Paris and Madrid fell sharply in November after a peak in October, according to data provided to Reuters by location technology company TomTom, that covered mobility until Sunday evening. France, the United Kingdom, Spain and Poland were under the strictest lockdowns in Europe, according to the Oxford stringency index that assesses indicators such as school and workplace closures, and travel bans. Meanwhile Libyan production has risen above 1 million bpd in recent days from 100,000 bpd in early September.

Oil prices tally back-to-back gains on optimism over vaccine – Oil futures finished higher Tuesday, building on the biggest one-day gain in more than five months on optimism over prospects for a COVID-19 vaccine, even as the continued spread of the disease undercuts fuel demand. “Oil funds got caught short as the demand outlook improves with hopes that we will get a coronavirus vaccine,” said Phil Flynn, senior market analyst at The Price Futures Group. “The market was betting big on more extensions of lockdown and more demand destruction,” he said in a Tuesday report. “While the vaccine is still months away, the trade must adjust for a demanding comeback that should come back faster than production.” West Texas Intermediate crude for December delivery rose $1.07, or 2.7%, to settle at $41.36 a barrel on the New York Mercantile Exchange. January Brent crude , the global benchmark, added $1.21, or nearly 2.9%, at $43.61 a barrel on ICE Futures Europe. WTI jumped 8.5%, while Brent soared 7.5% on Monday after Pfizer Inc. (PFE) and Germany-based BioNTech SE (BNTX)announced their vaccine candidate was more than 90% effective in protecting people from COVID-19 in a trial. The news sparked a massive rally in stocks and other assets perceived as risky. Some analysts, however, questioned how much further upside for oil prices might be available in the near term as rising COVID-19 cases in Europe and the U.S. begin to weigh on consumer and business activity. “While a successful vaccination should ultimately support the return of oil demand to normal levels, a number of hurdles, from final approval, to the ramp-up of production, to logistics remain, but hope is that a timely development could stave off the necessity for further lockdowns in the future,” wrote analysts at JBC Energy, a Vienna-based consulting firm, in a Tuesday note. The consultants said their road mobility indicator for Europe, meanwhile, had dropped to its lowest level since June, with data through Nov. 6 beginning to reflect the early stages of new lockdowns in France and Germany. Analysts at Commerzbank noted that Chinese crude oil imports fell in October to their lowest level since April, while Saudi Arabia granted further discounts to Asian customers for December shipments, “presumably because of the muted demand,” they said. “At a discount of [50 cents] per barrel vs. the Oman/Dubai benchmark, customers are enjoying the highest discounts since June.”

Oil rises slightly on hopes for COVID-19 vaccine, declining U.S. crude stocks – Oil prices rose slightly on Wednesday as hopes of an effective COVID-19 vaccine continued to bolster sentiment and an industry report showed U.S. crude inventories fell more than expected. Brent crude rose 0.16% to $44.53 a barrel, while U.S. West Texas Intermediate (WTI) crude settled up 9 cents, or 0.2%, to $41.45 a barrel. Both benchmarks gained nearly 3% on Tuesday. “This week’s news about a coronavirus vaccine was encouraging and, alongside short-covering activity, strongly supported oil prices on Monday and Tuesday,” said Giovanni Staunovo, oil analyst for UBS. The bank cautioned that European lockdowns and restored Libyan oil output could weigh on prices in the short term, but forecast oil at $60 a barrel by the end of 2021 based on the likelihood that producers would continue to rein in supply. U.S. crude stockpiles fell by 5.1 million barrels last week to about 482 million barrels, industry group data showed on Tuesday, compared with analysts’ expectations in a Reuters poll for a reduction of 913,000 barrels. Both Brent and U.S. oil prices are up more than 13% this week since initial trials data showed the experimental COVID-19 vaccine being developed by Pfizer Inc and Germany’s BioNTech was 90% effective. Although oil prices are supported by the positive news on the vaccine, the overall fuel demand outlook remains clouded as coronavirus restrictions are reimposed in Europe and United States. “Hopes of a return to pre-COVID normalcy next year have been given a huge boost this week. Before then, however, a difficult winter is on the cards. Infection rates are still accelerating in several parts of the world including the U.S.,” said Stephen Brennock of broker PVM. Renewed restrictions in Europe and the United States to combat the coronavirus have slowed the pace of the fuel demand recovery, offsetting a rebound in Asian economies where consumption has almost returned to pre-COVID levels.

Oil CEOs believe a demand recovery is coming, but volatility is here to stay – Top energy chief executives say oil demand will recover next year, but they expect volatility to remain elevated, as the industry emerges from the reckoning of the coronavirus pandemic. “We face a lot of uncertainty,” Total CEO Patrick Pouyanne told an invitation-only gathering of more than 30 senior oil and gas executives, who met virtually on Wednesday for the Abu Dhabi CEO Roundtable. “We all hope that demand will recover as quickly as possible,” Pouyanne said. “Nobody knows exactly how long it will take to get out of the pandemic, when we’ll have this vaccine, and how long it will take to reopen the global economy,” he added. A source familiar with the discussions said the mood among the executives was more upbeat than the last meeting held in June, with news of a potential vaccine giving executives a boost of confidence. Leaders expressed a cautious optimism about the global economic recovery and discussed the need to focus on cost reductions and technology gains. “We should have optimism, and we should have a sense of reality,” BP CEO Bernard Looney told the gathered executives. “We don’t control the price of our product, but we do control our cost structure, our investment levels, and the efficiency of that,” Looney added. “The fundamentals that we all learned as we were growing up in this industry will serve us well in the long run.” The International Energy Agency (IEA) has previously said that this year’s global energy demand decline will be seven times larger than the fall following the 2008/2009 financial crisis. Most analysts expect global oil demand will take several years to recover to pre-crisis levels of 100 million barrels per day. The roundtable, convened by Sultan Al Jaber, the UAE minister of industry and advanced technology and the ADNOC Group’s CEO, is the highest-level forum for dialogue on key topics confronting the global energy landscape. It gives executives the opportunity to privately discuss the strength and speed of energy demand and the economic recovery. “The oil and gas industry has demonstrated remarkable resilience over the past few months, and we know the long-term fundamentals of the industry remain intact as the world will still need hydrocarbons for many decades to come,” Al Jaber said.

IEA says Covid vaccine ‘unlikely to ride to the rescue’ of world oil market for some time – The International Energy Agency (IEA) on Thursday cut its 2020 global oil demand forecast and said it does not expect the prospect of a coronavirus vaccine to significantly boost demand “until well into next year.” In its latest closely-watched monthly report, the IEA said it now expects world oil demand to contract by 8.8 million barrels per day this year. That reflects a downward revision of 0.4 million barrels from last month’s assessment. The Paris-based energy agency trimmed its near-term outlook on weak historical data and a resurgence of Covid-19 cases in Europe and the U.S. For 2021, the IEA said world oil demand growth will rise by 5.8 million barrels per day, representing an upward revision of 0.3 million barrels from last month. Oil prices have notched three consecutive trading sessions of gains since Pfizer and BioNTech said Monday that early results showed their vaccine candidate was more than 90% effective in preventing Covid infections. It is hoped a safe and effective vaccine could help bring an end to the coronavirus pandemic that has claimed over 1.28 million lives worldwide. Huge challenges remain before a Covid-19 vaccine can be rolled out, but oil markets cheered the news, hoping it could lead to increased energy demand in the coming months. “However, it is far too early to know how and when vaccines will allow normal life to resume. For now, our forecasts do not anticipate a significant impact in the first half of 2021,” the IEA said. International benchmark Brent crude futures traded at $43.66 a barrel on Thursday morning, down around 0.3%, while U.S. West Texas Intermediate crude stood at $41.33, roughly 0.35% lower. The IEA’s latest report comes shortly before an energy alliance of some of the world’s most powerful crude producers will meet to discuss the next phase of oil production policy. OPEC and non-OPEC allies, known collectively as OPEC+, are scheduled to hold talks on Dec. 1. In the face of ongoing lackluster global demand for oil, the group had agreed to a record supply cut of 9.7 million barrels per day starting on May 1. The cut was subsequently scaled back to 7.7 million in August and OPEC+ has said it plans further tapering next year. “With a Covid-19 vaccine unlikely to ride to the rescue of the global oil market for some time, the combination of weaker demand and rising oil supply provides a difficult backdrop to the meeting of OPEC+ countries,” the IEA said. “Unless the fundamentals change, the task of re-balancing the market will make slow progress.”

Oil falls on coronavirus surge, unexpected U.S. crude stockpile rise (Reuters) – Oil prices fell on Thursday, weighed down by the surge in coronavirus cases that is hampering the global economy, along with an unexpected rise in U.S. crude stockpiles. Oil futures tracked with U.S. equities, which also fell on pandemic concerns. Europe is grappling with a sharp increase in infections and new social restrictions. In the United States, new cases have surpassed 100,000 per day for several days, and more than a dozen states have doubled their caseloads in the last two weeks. Brent crude fell 27 cents to settle at $43.53 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 33 cents to settle at $41.12 a barrel. “When stocks gave up gains, oil followed,” . “It’s a very nervous market.” U.S. government data added to the bearishness, as crude inventories rose by 4.3 million barrels last week, compared with an expected fall of 913,000 barrels. Both contracts rallied this week after data showed an experimental coronavirus vaccine being developed by Pfizer and BioNTech was 90% effective, raising hopes that the pandemic will be brought under control. Even with that development, though, oil demand remains shaky. The International Energy Agency (IEA) said global oil demand was unlikely to rise significantly until well into 2021, if the vaccine is successful.

Oil Prices Falter on Surprise Build and Fed Warning — Oil dropped after an unexpected increase in U.S. stockpiles and a Federal Reserve warning that a vaccine may not be enough to get the economy back on track. Futures in New York fell 0.8% after Federal Reserve Chair Jerome Powell’s remarks, erasing gains of as much as 1.8% in a volatile session. American’s crude inventories increased by 4.28 million barrels last week, the government said Thursday, while most analysts surveyed by Bloomberg expected a decline. Slowing refining activity also didn’t bode well for oil demand. “We won’t be getting stimulus until at least January, so that’s hit all the markets,” said John Kilduff, a partner at Again Capital LLC. “Oil needs the economy to be revived and supported to get people spending and traveling at least to a degree.” The International Energy Agency cut its forecast for global oil demand earlier, saying the coronavirus vaccine breakthrough won’t quickly revive markets. The constantly evolving state of demand recovery taking place at varying speeds around the world adds to the challenges facing OPEC+ when it meets at the end of the month to decide on its output strategy. While renewed lockdowns in Europe have coincided with weakening road travel, particularly in France and the U.K., it’s a mixed demand picture globally. India — whose consumption dwarfs both countries — posted its first annual increase since February and a return in Chinese buying interest is helping spur an oil buying frenzy. Earlier in the trading session, crude rose after OPEC+ signaled it might not phase out its output curbs so fast next year. “Vaccine or not, OPEC’s not really counting on oil demand to recover here in the next six months.” West Texas Intermediate for December delivery fell 33 cents to settle at $41.12 a barrel. Brent for January settlement lost 27 cents to $43.53 a barrel. Despite the surprise build in U.S. crude stockpiles, the EIA report also showed declines in both gasoline and distillate inventories. Distillate stockpiles dropped for eight straight weeks, pushing supplies down from a decade seasonal high.

Oil falls on rising Libya output, coronavirus surge (Reuters) – Oil prices fell about 2% on Friday, pressured by swelling output from Libya and fears that rising coronavirus infections may slow the recovery in the global economy and fuel demand. Hopes for a vaccine kept crude futures on track for a second straight weekly gain. Brent crude LCOc1 fell 75 cents, or 1.7%, to settle at $42.78 a barrel. U.S. West Texas Intermediate (WTI) crude futures CLc1 fell 99 cents, or 2.4%, to end the session at $40.13 a barrel. For the week, both notched gains of more than 8%. Libyan oil production has risen to 1.2 million barrels per day (bpd), a Libyan oil source told Reuters, up from the 1.0 million bpd reported on Nov. 7 by the country’s National Oil Corp. Signs of rising production in the U.S. added to bearish sentiment. U.S. oil rigs rose 10 to 236 this week, according to Baker Hughes data, their highest since May. Also pressuring prices, U.S. government data showed crude inventories rose by 4.3 million barrels last week. Analysts had expected a draw of 913,000 barrels. “In essence, some of the feel-good factor from the Pfizer vaccine has worn off and disappointing EIA figures have created a bit of a downward correction,” Harry Tchilinguirian, head of commodity research at BNP Paribas, said. “However, OPEC+ is prepared to tweak its production and we’re still waiting for the trial results of other vaccines that may be easier to distribute since they won’t need such cold storage.” New coronavirus infections in the United States and elsewhere are at record levels and tightening restrictions should lead to fuel demand recovering more slowly than many had hoped.

Oil Prices End the Week Higher Despite Hiccups — Oil declined for a second session as rising Covid-19 cases threatened to derail demand with tougher restrictions in major U.S. cities on the horizon. Futures fell 2.4% in New York on Friday, but still posted the largest weekly gain in a month as optimism from news of a potential Covid-19 vaccine breakthrough jolted markets earlier in the week. Despite the measure of hope for the long-term, U.S. cities from the West to East coasts have imposed stricter measures to slow surging case counts, raising concerns that the virus will further crimp demand for fuel. Gasoline futures also slumped. “In the U.S., the virus spread is exponential and right now many states are probably going to be forced to deliver stricter measures and return to lockdowns,” . “That’s going to cripple economic activity and put further pressure in the short-term as far as the crude demand outlook goes.” Before concerns over lockdowns set in, futures also got support from signs the OPEC+ alliance is inching closer to delaying a planned output increase in January. But downbeat demand forecasts from the International Energy Agency and OPEC have clouded hopes of a recovery. At the same time, governors of states along the U.S. West Coast issued travel advisories, following measures recently imposed in New York and Chicago. Meanwhile, crude supply in Libya is rising. The country’s production rose to 1.145 million barrels a day on Friday, according to a spokesman for its state-run National Oil Corp. Prices West Texas Intermediate for December delivery lost 99 cents to settle at $40.13 a barrel. The contract rose 8.1% this week. Brent for January settlement slid 75 cents to $42.78 a barrel Gasoline for December delivery declined 2.7% to $1.1254 a gallon In Europe, where motorway traffic is down by almost 50% in some countries, demand is stuttering anew. That’s impacting crude, with six supertankers of unwanted North Sea oil continuing to float in the region. Meanwhile, vehicle miles traveled on U.S. highways fell last week in another sign Americans are keeping off the roads amid the pandemic. Refining margins were left behind in the oil market rally that lifted not only headline prices this week, but also led to strong moves along the forward curve. The combined refining margin for gasoline and diesel, which is a rough gauge for the profitability of processing a barrel of oil, slid on Friday for a third straight session to near $8 a barrel. Refineries typically need the so-called crack to be above $10 a barrel to turn a profit from processing crude.

Coronavirus pandemic intensifies humanitarian disaster in Yemen – In war-torn Yemen – devastated by five years of a US- and EU-backed war led by Saudi Arabia – the coronavirus pandemic is exhibiting its murderous potential. Doctors there report a death rate of 20 to 30 percent among those infected. Intensive care physician Tankred Stöbe from the aid organization Doctors Without Borders told the German newspaper Tagesspiegel of the dramatic consequences of the pandemic . The pandemic, he noted, has swept through the bitterly poor and war-ravaged country “like a deadly desert storm.” Stöbe estimates a 30 percent mortality rate among COVID-19 patients, the highest in the world. A significant lack of testing renders the official figures – just over 2,000 confirmed cases and 600 deaths – meaningless. “The vast majority of patients have suffocated in their homes without being counted, diagnosed or treated.” Many Yemenis live far from a clinic and are left to fend for themselves if infected with the coronavirus. The virus spreads virtually unchecked. “There is hardly a family that has not been affected by the pandemic,” Stöbe reports. Doctors Without Borders erected a specialized COVID-19 clinic whose 40 beds were immediately filled. “The mortality was very high because patients came too late,” Stöbe explained. “The average length of stay was five days – but not because people recovered, but because they died.” The clinic contends with a chronic shortage of personnel and materials. Moreover, the staff must transport oxygen bottles across residential districts devastated by war. The high mortality rate is primarily due to the preexisting, unimaginable humanitarian catastrophe in the country from a years-long civil war and an imperialist-backed bombing campaign. Saudi Arabia has waged an unrelenting air war in Yemen since March 2015 aimed at toppling the Huthi rebel government and reimposing the puppet regime of imperialist stooge Abd Rabbuh Mansur Hadi. The United States, France, Great Britain and Germany have all supported this murderous war, directly or indirectly. As such, the German government has exported over €1 billion in weaponry to countries participating in the war. Stöbe described the situation now unfolding in Yemen as an “unbelievable tragedy.” Bombing and live fire continue on a daily basis: “Tens of thousands have already died. Millions have been displaced.” Were the criteria and legal principles of the Nuremberg Trials to be applied to Yemen, the politicians responsible for these crimes against humanity would be tried in court and locked behind bars. Sentences handed down in Nuremberg after the Second World War sent the surviving leaders of the Third Reich to the gallows or a lifetime in prison.

Russia, Turkey negotiate cease-fire in Armenian-Azeri war over Karabakh – On November 10, a cease-fire backed by Moscow and Ankara went into effect in the six-week war between Armenia and Azerbaijan over the disputed Nagorno-Karabakh region. Unlike previous truces negotiated by Russian, French and US officials which collapsed immediately, this cease-fire has so far held. This appears to be largely because, unlike previous ceasefires, it has support from the Azeri government and its main international backer, Turkey. The two former Soviet republics have repeatedly waged fratricidal wars over the Karabakh, which first broke out in 1988 in the run-up to the Stalinist regime’s 1991 dissolution of the Soviet Union. Whereas Armenia took over the Nagorno-Karabakh in the 1988-1994 war, however, the current cease-fire agreed by Russian, Armenian and Azeri officials makes substantial concessions to Azeri territorial demands, handing much of the Karabakh to Azerbaijan. Recent weeks saw major Azeri advances, relying on devastating strikes from Turkish and Israeli high-altitude drones. Evading Armenia’s older air defense systems with tactics worked out against Syrian and Russian forces in the decade-long NATO proxy war in Syria, they destroyed Armenian missile batteries, artillery and armored vehicles. After Azeri forces reported this weekend that they had captured Shusha, Nagorno-Karabakh’s second-largest city, Armenia agreed to a ceasefire. According to the truce, Armenian and Azeri troops are to initially remain on their current positions. As 1,960 Russian peacekeepers with armored vehicles and equipment deploy along the contact line, however, Armenian troops will withdraw. Armenia will retain those parts of the Karabakh it currently holds, including the capital, Stepanakert. It must also return to Azerbaijan the districts of Agdam and Kalbajar, which it took over during the 1988-1994 war, by November 20. The deal also calls to secure complex land routes through the mountainous region. Azerbaijan is to guarantee the security of the Lachin Corridor linking Stepanakert to Shusha and then to Armenia. The corridor will be patrolled by Russian peacekeepers. Armenia will guarantee the security of land routes from Azerbaijan via Armenia to the Nakhchivan Autonomous Republic, a landlocked Azeri-administered enclave separated from Azerbaijan by Armenian territory.

Turkish and Israeli Drones Enable Azerbaijan’s Decisive Victory Over Armenia — Defense analysts believe that Turkish and Israeli drones have helped Azerbaijan achieve decisive victory against Armenia. “Azerbaijan’s drones owned the battlefield in Nagorno-Karabakh – and showed future of warfare” says the Washington Post headline as tweeted by drone warfare expert Franz-Stefan Gady. Low-cost Azeri drones killed thousands of Armenian soldiers in Nagorno-Karabakh and destroyed hundreds of Armenian tanks and artillery pieces, giving a huge advantage to Azerbaijan and forcing the Armenian surrender. Armenian Prime Minister accused Pakistan of sending troops to help Azerbaijan in the conflict. Pakistan rejected Armenian allegations and congratulated Azerbaijan on its victory. Azeris deployed a variety of drones in their war against Armenia to wrest control of Nagorno-Karabakh, a region that is legally part of Azerbaijan but controlled by Armenians. Azeris used Turkish Bayraktar drones which are large and reusable drones. They also Kamikaze drones made by Israel which are small and designed for one-time use in destroying targets. The small Israeli-made suicide drones are sometimes also referred to as “loitering munitions”. Michael Kofman, military analyst and director of Russia studies at CNA, a defense think tank in Arlington, Va. is quoted by the Washington Post as saying, “Drones offer small countries very cheap access to tactical aviation and precision guided weapons, enabling them to destroy an opponent’s much-costlier equipment such as tanks and air defense systems.” “An air force is a very expensive thing,” he added. “And they permit the utility of air power to smaller, much poorer nations.”In 2019, dozens of cheap drones were deployed against Abqaiq and Khurais oil fields to cut Saudi Aramco’s production by half, according to multiple media reports. Saudi and US officials have blamed Iran for the destructive hit. This was the first time that cheap drone swarms loaded with explosives dodged sophisticated air defense systems to hit critical infrastructure targets in the history of warfare.

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