[P2P-F] Fw: Shale Explosion Imminent

Wed Jul 24 12:11:53 CEST 2013

The Shale Exploision from the POV of investors!!

RS.

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To: dharao4 at yahoo.co.uk 
Sent: Tuesday, 23 July 2013, 17:07
Subject: Shale Explosion Imminent

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Shale Explosion Imminent
By Keith Kohl | Tuesday, July 23rd,
2013

I'll confess that whenever I bring up oil production on the West Coast, it's usually to show how bad things can
get.
The  steady decline of California's oil production has been painful to watch.  In fact, the Golden State's oil
industry has only managed to increase  its annual
production three times over the last 28 years.
Believe me, nobody else in this country could use some good news more than California's oil industry.
Well, they just might get their wish...
That's right. For the first time ever, the state may be on the verge of turning things around.
State of Denial
Despite being a beacon for renewable energy in the United States, every last bit of green energy on the West Coast still hasn't managed to make much of a dent in the state's oil consumption.
In fact, petroleum shipments to the West Coast area, also known as PADD 5, have been fairly consistent (click
chart to enlarge):
West Coast refineries have been receiving about three million barrels per day for the better part of three
decades!
Unfortunately, there's an even bigger issue here. Shipping that much crude out West is overshadowed by the declining
quality of oil that makes up California's oil supply.
That's mostly due to the fact that up until now, California has relied heavily on just one area, Kern County.
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 Just to give you an idea of how important this county is to the state's  oil output, consider the fact that Kern County accounted for  approximately
73% of California's total production in 2011. 
In  other words, if Kern County were its own state, it would be the fourth  largest oil-producing state in the U.S.
(and that would mean knocking  the Golden State way down the list to tie with Wyoming at the No. 8  spot).
Barring some unforeseen secession by Kern County residents, let's see how this area stacks against other California
counties (click table to enlarge):
Source: State of California Department of
Conservation
Now, as I mentioned earlier, there is a catch — and that's the quality of the oil coming out of
Kern County.
You see, we're taking about heavy crude here.
The  way we know this is through its API gravity.
Simply put, the API gravity  is used to show how heavy petroleum is compared to water: A rating of  10o or
higher means it's lighter — and floats — on water, while anything less than 10o will sink.
West Texas Intermediate, for example, carries an API gravity of about 39.6o.
The light, sweet crude that flows out of North Dakota's Bakken wells is usually between 40-42o.
Oil produced from the Kern River oil field, on the other hand, typically weighs in between 10-16o.
Naturally, the heavier the oil, the costlier it is to refine.
Venezuela's extra-heavy crude produced from the Orinoco Belt, for example, can have an API gravity as low as
4o. Not exactly ideal...
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________________________________
 Crude Feuds  
While  California oil companies are struggling to reverse the state's  production decline, you'd expect to see others
take advantage of it.
As my readers are well aware, some states are having a much easier time boosting oil production...
Last Friday, I explained how
the renewed activity in the Permian Basin has helped spark a good,  old-fashioned oil boom in Texas. Now those Texas producers are looking  to tap
into a California oil market beset with production problems.
Kinder  Morgan Energy Partners was recently looking to ship the light West  Texas crude by building a pipeline that
runs westward out of the Permian  Basin. Once completed, the pipeline would handle 277,000 per day.
However,  Kinder Morgan's plans were scrapped in late May after a lack of  interest from California refiners, who
instead chose to receive that oil  by trucks and railways. Essentially, putting the kibosh on the pipeline  project would give them more flexibility
to receive more California oil  in the future.
Could things finally be on the up and up for California's oil production?
The truth is the key to its future success will be from more than just Kern County...
The state may be on the verge of experiencing its very own shale boom in a relatively short period of time.
This is a bet a few California oil companies are ready to make — with more than 15 billion barrels of
recoverable crude at stake.
It's what drove me to rush nearly 3,000 miles across the country recently. 
You  see, I'm putting the finishing touches on my latest investment report  that's targeting the brighter side of the
California oil industry...
Look  for it to hit your email inbox on Thursday.
Until next time,
Keith Kohl
@KeithKohl1 on Twitter
A true  insider in the energy markets, Keith is one of few financial  reporters to
have visited the Alberta oil sands. His research has helped  thousands of investors capitalize from the rapidly changing face of  energy. Keith
connects with hundreds of thousands of readers as the  Managing Editor of Energy & Capital as well as Investment Director of Angel
Publishing's Energy Investor. For years, Keith has been
providing in-depth coverage of the Bakken, the  Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media.
For more on  Keith, go to his editor's page.
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