Pipe Rupture Threatens Peru Oil Project
Canada’s Frontera Energy Corp could be forced to halt operations in Peru’s largest oil block if a key pipeline ruptured amid indigenous protests is not promptly repaired, state oil company Petroperu said.
The pipeline, in a remote corner of Peru’s Amazon, was attacked earlier this week in protests over municipal election results, causing it to spew thousands of gallons, Petroperu said.
The rupture has already forced Frontera to slash production by 12,000 barrels of crude daily, Manuel Ugaz, manager for Petroperu subsidiary Oleoducto Peru, told reporters.
“If the problem isn’t immediately solved, either with a provisional repair or a permanent one, Frontera will need to shut down production at all its wells,” Ugaz said.
Frontera operates Block 192, an oil-rich concession in the Amazon with reserves of 100 million barrels of petroleum. The company’s contract expires in 2019.
Vandals have repeatedly attacked the 1,106 km (687 mile) pipeline over the past several years, wreaking havoc on production and spooking investors. The pipe transports crude from jungle oil blocks tapped by Frontera to Petroperu’s refinery on the Pacific coast.
Ugaz said the Canadian oil company could lose $200,000 daily if it is forced to halt production.
Petroperu estimates that 8,000 barrels of oil spilled following the attack on the pipeline, although it says none of that oil has reached waterways. The state oil company has since stopped pumping crude through the pipe.
Beatriz Alva Hart, a Petroperu manager for relations with communities near the pipeline, said villagers from the Morona district confessed to the attack.
But law enforcement has been unable to stop the ongoing protest, contain the spill or fix the pipe, she said.
“To date, they are not allowing us to fix the pipe,” she said. “It’s an environmental attack that affects all Peruvians.”
Representatives from the indigenous community could not be immediately located for comment.
Keystone XL Pipeline Subject to Additional Review
The U.S. State Department will conduct another environmental review of TransCanada Corp’s long-pending Keystone XL oil pipeline, a U.S. official said, a move that could lead to additional delays of the project.
The so-called supplemental environmental impact statement was ordered by Judge Brian Morris of the U.S. District Court in Montana in his ruling on Nov. 8 that blocked construction of the pipeline planned to bring heavy crude from Canada’s oil sands to the United States.
Morris said in his ruling that previous environmental analysis of Keystone XL fell short of a “hard look” at the cumulative effects of greenhouse gas emissions and the impact on Native American land resources.
The $8 billion pipeline, which is supported by Canadian oil interests and U.S. refiners, but opposed by landowners and environmentalists, has been pending for a decade.
President Donald Trump announced a permit for the project soon after he took office. Former President Barack Obama nixed the pipeline, saying it would do little to help U.S. consumers and would add greenhouse gases.
TransCanada spokesman Terry Cunha said that the State Department’s announcement of an additional review was expected after the judge’s ruling.
TransCanada asked Morris, the District Court judge, to allow it to resume some U.S.-based pre-construction activities blocked by the initial ruling.
Morris’ decision gave the Calgary, Alberta-based company permission to resume some activity on the pipeline project, including project development work and stakeholder meetings.
It is not allowed to resume physical field work like moving pipe and equipment, preparing work camp sites or undertaking road upgrades at this time, Cunha said. Morris is set to rule on that work after Dec. 5.
“It is too soon to say what the injunction will mean to the timeline of the Keystone XL pipeline but we remain confident the project will be built,” Cunha said.
US Drillers Add Oil Rigs for Fifth Straight Month
U.S. energy firms added oil rigs for a third week in four and increased the rig count for the fifth month in a row, even though oil prices this week fell to their lowest since October 2017.
Drillers added two oil rigs in the week to Nov. 30, bringing the total count to 887, General Electric Co’s Baker Hughes energy services firm said in its closely followed report.
For the month, the rig count was up 12 in November, matching last month and its fifth monthly increase in a row.
The U.S. rig count, an early indicator of future output, is higher than a year ago when 749 rigs were active because energy companies have spent more this year to ramp up production to capture prices that are higher in 2018 than 2017.
Looking ahead, crude futures for calendar 2019 and 2020 were trading around $52 a barrel.
U.S. crude oil output hit a new all-time high of 11.5 million barrels per day in September, the fourth consecutive month of record highs, according to the government, as production in Texas and North Dakota climbed to fresh peaks.
U.S. financial services firm Cowen & Co this week said the exploration and production (E&P) companies it tracks have provided guidance indicating a 23 percent increase this year in planned capital spending.
Cowen said the E&Ps it tracks expect to spend a total of $89.1 billion in 2018. That compares with projected spending of $72.2 billion in 2017. Cowen said early 2019 capital spending budgets were mixed.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast the average combined oil and natural gas rig count would rise from 876 in 2017 to 1,031 in 2018, 1,092 in 2019 and 1,227 in 2020.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,028. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.