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Shell Acquires BG Group in $70 Billion Oil & Gas Merger

Royal Dutch Shell has purchased fellow British oil and gas company BG Group for $70 billion “in the first major energy industry merger in more than a decade, closing the gap on market leader U.S. Exxon Mobil,” Reuters reports.

“Shell is already the world's leading LNG company and it would get BG's capacity in LNG logistics - complex infrastructure that includes terminals, pipelines, specialised tankers, rigs, super coolers, regasification facilities and storage points.” 

Oil Wastewater Sold to Farmers in California

 In drought-stricken California, “Chevron is selling about 500,000 barrels of water per day, or 21 million gallons, back to the Cawelo Water District—the local water district that delivers water to farmers within a seven-mile slice of Kern County—at an undisclosed amount, but essentially ‘at cost,’ according to Chevron spokesman Cameron Van Ast. In a time when freshwater in the Central Valley is selling at up to 10 times the typical cost, it’s a good deal for farmers,” Newsweek reports.

“The wastewater Chevron is selling flows, without municipal treatment (though the oil products are removed), to 90 local farmers who spread it on their citrus, nut and grape crops. The Cawelo Water District might first mix the wastewater with freshwater, or it might not, depending on what crop the wastewater will be used on—and on how much freshwater is available at the time.”

U.S. Refineries Running at Highest Seasonal Rate Since 06

“U.S. refineries ran at their highest seasonal rates since at least 2006 last week, according to Energy Department data. Midwest refineries, the biggest consumers of Canadian crude, ran at 94% of capacity,” Bloomberg is reporting.

Meanwhile, U.S. plants “are poised to make gasoline at a record pace this year as they benefit from higher margins than last year after adding more than 100,000 bpd of capacity since last summer.” 

Oil & Gas Industry Anticipates New Offshore Drilling Rules

“The Obama administration is expected to propose in the coming days an offshore oil and natural gas drilling regulation aimed at preventing the kind of explosion that erupted five years ago on BP's Deepwater Horizon rig, killing 11 people and causing the biggest offshore oil spill in U.S. history,” Dow Jones Business News reports.

“An Interior Department spokeswoman on Saturday wouldn't say when the administration would issue the rule. But oil- industry officials say it could come imminently.”

Deferred Completions Disrupting Oil Supply to U.S.

The crude oil contango market in the U.S. has created a massive incentive to store oil and, while traditional storage hubs reach record high levels, Genscape analysts have identified a trend for operators look to their own wells as an avenue to store until commodity market conditions improve. Already over 800 wells are being deferred by Cabot, Chesapeake, EOG, SM Energy, Apache, and Anadarko alone, accounting for about 373 Mb/d of oil and 528 MMcfd of gas, according to Genscape analysis.

Genscape economic models indicate the oil price decline to $45 WTI has priced out the majority of the Eagle Ford and Bakken oil plays, except for the very cores of the plays. Besides completion deferrals, rig counts are expected to decline further based on the forward curve, and this expectation is supported by Genscape’s economic findings reported in Oil and Gas Production Forecasts.  

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