it's starting to seem like the news from the oil patch each week is a repeat of the news from the week before, with just some minor changes in the numbers and the places...like last week and two weeks before, this past week saw another oil train derailment and explosion, and like every week over the past two months, oil production rose, oil inventories rose, and the count of active drilling rigs fell...about the only thing that changed substantially this week was the price of oil, which had stagnated between $50 and $55 a barrel for the past month and a half, but fell more than 9% this week, and ended the week below $45 a barrel for the first time since January...
our bomb train explosion of the week was again in a remote area of northern Ontario, near where another Canadian National Railways derailed & exploded 3 weeks ago, wherein a 94 car train carrying upgraded tar sands crude from Alberta derailed while passing over a bridge above the Makami River near the town of Gogama, Ontario...reports indicated that 38 rail cars left the tracks, at least 7 exploded and burst in to flames, and 5 five broke through the ice and sunk into the river, the town's source of drinking water....locals from the Mattagami First Nation tribe were warned not to drink their water and to stay indoors to avoid exposure to toxic fumes from the fire, which continued to burn days later...this was the third CN rail train wreck in 3 weeks, and the once again the tank cars involved were the new state of the art CPC-1232 model, ie Casualty Prevention Circular 1232, the same supposedly super safe railcars that failed in three previous derailments over the past month...
meanwhile, in the wake of last week's oil train bombing near Galena, Illinois, the U.S. Environmental Protection Agency issued an assessment that the spill of oil into the Galena River a quarter mile upstream from the Mississippi River contaminated the seasonal wetland there and threatened the adjacent Upper Mississippi National Wildlife and Fish Refuge, and further presented a imminent and substantial danger of discharging oil into the Mississippi River, obviously the source of drinking water for thousands downstream...also, a new analysis of oil shipments through Pennsylvania from PublicSource found that 1.5 million citizens of that state, including 327 K-12 schools, 37 hospitals and 61 nursing homes were close enough to rail lines to be at risk should a train derail and catch fire in that state...roughly one-fifth of all the explosive oil produced in North Dakota's Bakken is processed by Philadelphia's Energy Solutions 350,000 barrel-per-day refinery, meaning up to 80 unit trains of Bakken oil travel through Minnesota, Wisconsin, Chicago, northern Illionois, Indiana, and Ohio each week before they even threaten those 1.5 million Pennsylvanians...
some communities along these train routes aren't just sitting back and waiting for a bomb train to go off in their town, incinerating their businesses and residents; they're taking action to stop it...after seeing two bomb trains go off to the south of them, officials in Hennepin County, Minnesota moved to buy a large parcel of land in the Minneapolis suburb of Crystal, where Burlington Northern and Canadian Pacific planned to build a connector yard for their rail lines that are involved in hauling oil from North Dakota’s Bakken fields to points south and east...the county's goal in acquiring the land would be to prevent the railroads from using eminent domain to take the properties, which are now occupied by local businesses, feeling that their public safety purpose in acquiring the property would supersede the railroads’ rights...and also in Minnesota, Citizens Acting for Rail Safety, a group based in LaCrescent, sent a letter to the Corps’ of Engineers St. Paul District requesting they hold up any rail project permits until investigators determined the cause of the derailment on the Mississippi south of them and two others since early February...then in Wisconsin, in an area that saw an explosive derailment just south of their border with Illinois last week, petitioners are asking the La Crosse County Circuit Court to reverse a permit granted last month to fill a wetlands and build a bridge to facilitate more crude oil shipments through their state...
a much smaller oil bomb went off on I-94 in Dearborn, a stone's throw from Detroit on Wednesday, as a fuel tanker truck travelling the freeway swerved to miss a car, clipped a bridge abutment and burst into flames ...while this may seem like just an ordinary if spectacular traffic accident, what we find instructional here was in watching the 2 hour effort by the big city fire departments in the area to attempt to put the fire out....in the news video taken from a helicopter flying over the scene included below, we can watch two or three fire department booms continuously spray fire-retardant foam on the burning truck and the adjacent highway, only to have the oil spill out and catch the asphalt in all three lanes on fire about 30 minutes later...as a result, it took them nearly two hours to get the fire under control and a major Detroit artery will be closed for a week....if a fire contained to one truck on an accessible freeway posed this much difficulty for big city fire departments, how in the hell are small town volunteer fire departments expected to deal with a life-threatening derailment of several rail tanker cars 5 times the size each?
meanwhile, explosions and spills were once again the story in North Dakota, where an explosion followed by a fire said to be so massive that it could not be approached by firefighters completely obliterated an oil waste disposal site north of Alexander...the explosion was contained by an earthen berm which had been built around the facility, and the 5 workers on duty at the time managed to escape before it blew...on the same day, three oil storage tanks exploded at a Marathon oil well outside of Killdeer in a blast so severe that it rattled the town 5 miles away...no personnel were on site at the time, and N Dakota officials suspected it had been caused by a rapid temperature change, as N. Dakota was experiencing its first spring warm spell...later in the week, a spill of 1,680 gallons of oil well brine leaked into a creek about 7 miles northwest of Williston, downstream from the site of a a much larger spill of roughly 3 million gallons of fracking wastewater that had leaked over a period of more than 17 days at the end of January..since the area had already been covered with toxic metals and radioactive brine from the previous spill, the damage from this one was probably minimal by comparison...
another big oil related accident this week involved the collision of two large freighters in the Houston Ship Channel, the second oil related ship collision in the same area in 5 days...ship traffic in and out of several miles of the 53-mile channel was halted for 3 days aftera 600 foot chemical tanker carrying 216,000 barrels of the gasoline additive methyl tertiary-butyl ether, or MTBE, collided with a 623 foot bulk carrier hauling steel, rupturing the tanker....the MTBE, a flammable, water soluble and toxic central nervous system poison, leaked from 3 of the holds of the chemical tanker and resulted in an order to nearby residents to shelter in- place and not use their air conditioners... the collision was quite disruptive to Houston shipping; two days into the salvage operation, it was reported that 36 ships, carrying all kinds of cargo, were waiting to get in while 28 waited to get out, while three VLCCs (Very Large Crude Carriers) of Saudi and Kuwait crude anchored outside the harbor, raising fears of a drawdown of Gulf Coast oil supplies....by the time the MTBE was removed from the hold of the damaged tanker, there were 90 vessels waiting to load or unload, and although officials assured the media that cleanup was ongoing, none had offered an explanation of how they expected to clean a toxic water soluble chemical from a large body of water...
meanwhile, on the western side of the state, 3 oil field workers were killed when a drilling rig exploded in Upton County Texas, about 40 miles south of Midland, while one worker who was on the site at the time survived...Mason Well Services, the company that was working the Permian Basin well owned by Parsley Energy when the explosion occurred, had been previously cited by OSHA for allowing “flammable and combustible liquids” near “sources of ignition,” according to OSHA’s website...such accidents are apparently so common that officials from the Upton County sheriff's department were unable to the give the exact number of recent oil field fatalities in Upton County...finally, in another Permian oil basin death that crossed our news feeds, an oil field worker in southeastern New Mexico was killed by metal debrisfrom a blast that occurred when he was loading material into a pipe being installed into a drilling pipe; another worker was injured in the same explosion...
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US oil production rose to another record high of 9,366,000 barrels a day in the week ending March 6th, 0.45% higher than the output of 9,324,000 barrels a day we saw in the week ending February 27th and 14.5% higher than our output of 8,182,000 barrels per day in the first week in March of last year...similarly, our stockpiles of oil reached another record, as the weekly Petroleum Status Report (62 pp pdf) showed that US crude oil inventories rose by 4.5 million barrels to a record high 448.9 million barrels, 21.3% higher than the same period a year ago...while crude oil imports fell by 575,000 barrels per day from the previous week to 6.8 million barrels per day this week, possibly due to the ship traffic disruption at Houston, we continued to import over 7.1 million barrels a day over the past four weeks, only 1.2% less than the same four weeks in 2014...
this continuous weekly increase in production and inventories persists despite the ongoing drop in the number of rigs actively drilling for oil...for the week ending March 13, Baker Hughes reportedthat the count of rigs drilling for oil fell by 56 to 866, which is 595 less than their count of active oil rigs a year earlier, and down from the recent high of 1609 rigs that were drilling for oil early this fall...they also reported that there were 11 fewer rigs drilling for gas this week than last, dropping the US gas rig count to 257, which was 87 less than the 344 gas rigs that were active in the 2nd week of March last year...in addition, two active drilling rigs were classified as miscellaneous, unchanged from last week, leaving the total end of week rig count at 1125, down 67 from last week...of those rigs still running, 849 were drilling horizontally, 46 less than last week; another 166 were standard vertical drillers, which was 11 less than the week ending March 6th, and the remaining 110 rigs were directional, which was 10 less than the 120 directional rigs in operation last week...of the net of 67 rigs that were taken out of service this week, 64 had been land based, leaving the week end land based rig total at 1069, while 3 offshore drilling platforms were also idled, leaving 48 offshore rigs working in the US at the end of the week...meanwhile, Canadian drillers shut down 80 rigs this week, leaving them with just 220, of which 85 were drilling for oil, 65 less than last week, while 135 were drilling for gas..that leaves the Canadian count down 302 rigs from a year ago, with their idling of 242 oil rigs and 60 gas rigs over the past year..
so we've seen that even though US oil rig counts have been nearly halved in the face of lower oil prices, US oil production and inventories continue to grow...a visualization of this can be seen in the graph from Bloomberg below, where the recent historical oil rig count in dark blue is shown on the left scale, and our oil production in millions of barrels of oil output per day is shown in yellow on the right scale...we can see that our oil production has pretty much continued to rise uninterrupted almost irregardless of the count of oil drilling rigs operating at any point in time over the past 4 years...