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Expo/Industry events for the next few months

Utica Upstream
April 6, 2016
Pro Football Hall of Fame
Canton, OH

Upstream PA 2016
April 19, 2016
Penn Stater Inn
State College, PA

Ohio Valley Regional Oil & Gas Expo
April 26-27, 2016
Belmont County Carnes Center
St. Clairsville, OH

PIOGA’s 2016 Spring Meeting
April 7, 2016
Rivers Casino

Latest facts and a rumor from the Marcellus and Utica Shale

  • Shell Makes Another Move Toward Cracker.  A company spokesman confirmed Monday that Shell bought the property and said it could be used as a parking lot if Shell decides to build an ethane cracker plant in the area.

    A deed recorded with the county showed a sale price of $2.5 million to Three Center Independent Oil Real Estate, which owned the property at 427 Frankfort Road. That company bought the property in 2011 from Josephine Lang for $200,000.

    Shell spokesman Michael Marr confirmed the purchase and said the company “is taking the necessary steps to prepare for potential construction in the event a decision to build the project is made.”

    The Kobuta property is near the former Horsehead Corp. site that is being remediated by Shell for potential use as an ethane cracker plant.

    Shell has not made a final investment decision on whether it will build a multibillion-dollar plant, but work continues at a rapid pace at the site to prepare it for potential construction.
  • Shell Looking for Workers.  We have heard that Shell is looking professionals for positions at the Beaver County, PA cracker plant.  (RUMOR)
  • More Ethane Now to England.  INEOS has carried out operational trials on the second train of its KG cracker at its Grangemouth, UK, complex, ahead of the delivery of US shale ethane stocks for the long-idled unit, the Switzerland-headquartered chemicals producer said on Tuesday.

    The train, one of two making up the 700,000 tonne/year KG gas cracker, has been mothballed since 2008. Recommissioning trials have been completed, and the first US shale ethane deliveries are expected to dock in Grangemouth in the autumn.

    INEOS has been unable to source sufficient feedstocks to run the cracker at full capacity due to dwindling supplies from the North Sea, according to the company. US shale ethane, sourced from the Marcellus Shale play in western Pennsylvania, will supplement locally-sourced supplies.
  • Could This Be Pipeline “B”.  As the result of a rumor in last Facts & Rumors Newsletter dated March 19, 2016, I’ve received the following information from Garland Thompson.

    It's very possible that Energy Transfer Partners' (ETP) planned re-use of an existing right-of-way heading south from Susquehanna County, Pennsylvania could be "Pipeline B." Here's why I think so:

    I ran into an ETP executive at the Greater Philadelphia Chamber of Commerce who showed a chart tracing an existing right-of-way from Susquehanna County to Marcus Hook, the former Sunoco refinery now being re-purposed as the Marcus Hook Industrial Complex. That pipeline, now apparently defunct, is still in the ground and Energy Transfer owns the right-of-way.

    As it happens, Philadelphia Energy Solutions, operator of the former Sunoco refinery in South Philadelphia, is seeking a new supply of Marcellus Shale gas for three planned expansion projects:

    * A 100-megawatt, gas-fired co-generator;

    * A gas-to-liquids plant;

    * A fertilizer plant, to produce ammonia, ammonium nitrate and urea.

    Phil Rinaldi, Philadelphia Energy's chief executive, has been for some time working with the Chamber and a consortium of Delaware Valley companies -- including Braskem America just downriver in Trainer -- promoting support for a 42-inch gas line, to supply his refinery expansion plans, but also to supply all the industries along the Delaware. As Rinaldi explained  at a Chamber breakfast, the local distribution system is incapable of supplying the amounts of gas needed for his projects, and a new supply would not only support his refinery's growth, it would open up new opportunities for other riverside industries. U.S. Rep. Meehan, R-Delaware County, has joined with Rinaldi to lead the regional business push.

    Looking at the business relationship -- Energy Transfer Partners has part-ownership of the Joint Venture that is Philadelphia Energy Solutions -- it makes sense that ETP, a major builder and operator of transmission lines, would have a keen interest in supporting Rinaldi's pipeline push with a line it can wholly own. And that existing right-of-way, re-purposed to bring natural gas directly to Philadelphia, easily can fit the bill.

    I reached out to the ETP executive, seeking more information, but his reply indicated that "producers" in upstate Pennsylvania were not willing to commit to help fund the pipeline. But it was not lost on me that Cabot Energy had a representative at those Chamber of Commerce breakfast meetings promoting an "Energy Hub" at Philadelphia, or that Cabot, the major producer in Susquehanna County, has drilled wells that are shut in for lack of takeaway capacity. So from this vantage, it's very likely that the ETP line, whether it's "Pipeline B," will get built in the near future.

    Garland L. Thompson, Contributing Editor, US Black Engineer & Information Technology
  • Range Sells in Bradford County, PA.  Independent producer Range Resources said Monday it completed the sale of its Bradford County, Pennsylvania, non-operated assets for roughly $110 million, Kallanish Energy reports.

    In early February, the Fort Worth, Texas-based company signed a purchase and sale agreement covering its non-operating Marcellus Shale interest in Bradford County for approximately $112 million.

    Range sold an average working interest of 23% covering roughly 10,900 acres with net production of approximately 22 million cubic feet of natural gas per day.

    The net proceeds were used to reduce debt and for other corporate purposes.
  • Bakken Pipeline to Philadelphia.  Another piece provided by Garland Thompson.

    Whiting Petroleum's CEO, appearing at one of Hart Energy's DUG Bakken/Niobrara conference, said in an open meeting that his biggest problem was getting pipeline access to the Philadelphia refinery complex. That sparked a flurry of questions from reporters: Was Whiting involved in a pipeline project? ‘ No’, he said, but indicated someone else might be. Did he know of a company planning to build a cross-country pipeline? Well, he didn't want to divulge another company's plans. What company? He couldn't say. Then Oasis Petroleum's CEO indicated he knew about a pipeline project. His company wasn't involved, but it would sure like to ship its crude over the pipeline, once it got built. Like Whiting's CEO, however, he couldn't say what builder was out there.

    But it turned out that there were two companies working to build that pipeline.

    A little research turned up Dakota Access, a project to re-purpose an existing gas line and build on it to move crude oil from western North Dakota 1,100 miles east to Patoka, Illinois. Looking at a map and aerial photographs of the Patoka, Illinois, terminal, it appears that nearby pipelines could take that crude oil to the Gulf Coast and to northern refineries. The hiccup here is that Gulf Coast refinery operators have said they have on hand more "light," "sweet," low-sulfur crude than they can economically handle. Both the Eagle Ford shale and the stacked plays of the Permian Basin have been producing record amounts of light crude, prompting Gulf Coast businessmen to pay for tankers built in Philadelphia's Aker Shipyard to ship it to West Coast refineries. Those, like the refineries on the East Coast, are optimized for light crude, while Gulf Coast refineries are set up for the heavier, high-sulfur crudes coming out of the ground in Canada and Venezuela.

    In a nutshell, that is why Philadelphia Energy Solutions is the biggest buyer of North Dakota crude, why a reported two-thirds of all of the Bakken's crude comes East.

    At DUG Marcellus/Utica, I asked a MarkWest Energy VP whether there were any plans to ship Utica crude over the Mariner East system. I had learned that shippers were paying to move condensate from the Utica Shale over the rails to Perth Amboy, N.J., and it appeared that the Mariner East system, with one pipeline already in operation and another due to start construction would make a better fit.

    I got two answers. The MarkWest exec smiled and said he thought it would be a good question for Sunoco, which incidentally is MarkWest's Joint Venture partner. But another conference attendee came by to say he'd seen Sunoco documents saying Sunoco plans to batch-ship Utica crude over Mariner 1.

    Made sense to me, especially after I looked over the Shale Directories report that MPLX, the outfit that bought MarkWest, is planning to build its Cornerstone East pipeline to connect MarkWest's Cadiz, Ohio, processing center to MPLX' terminal at Sparta, Ohio. That terminal is very near an existing liquids line that goes all the way west to Southern Illinois, not so many miles from Patoka. What MPLX plans, according to the Shale Directories report, is to "reverse" that pipeline's transport to ship liquids west, and is looking for partners. Then again, there's Energy Transfer's project, building out to Patoka, preparing to transport crude oil that could be more economically used in East Coast refineries than on the Gulf Coast.

    Perhaps I've missed some key factors here, but it does look like the Mariner East system, once Cornerstone East and Mariner East 2 are completed, is well-placed to do the takeaway from Patoka. Somebody out there, correct me if I'm wrong.

    Garland L. Thompson, Contributing Editor, US Black Engineer & Information Technology
  • FERC Sees No Threat in PA Pipeline.  The Federal Energy Regulatory Commission (FERC) last week issued its environmental assessment of a Tennessee Gas Pipeline-proposed 8.1-mile pipeline in Pennsylvania would not significantly impact the surrounding area.

    The $156 million Susquehanna West project would provide 145 million cubic feet per day (MMcf/d) of additional capacity for one, unnamed customer, Kallanish Energy understands.

    Located in Tioga County in northeast Pennsylvania, the 36-inch pipeline would loop (lay parallel) to the existing Tennessee Gas 300 Line?
  • Former McClendon Companies Transition to Stand Alone.  As part of the transition, American Energy Permian Holdings and its American Energy-Permian Basin unit have been renamed Permian Resources Holdings and Permian Resources, respectively.

    “After a detailed and thorough planning process spanning six months, we are pleased to announce the anticipated transition of Permian Resources to a separate, stand-alone company,” Jeffrey L. Mobley, chief financial officer and interim CEO, said.

    “This separation has been a key objective of our business since the company was founded in 2014, and we look forward to finalizing this initiative in the coming months as Permian Resources has matured into a stand-alone company.”

    American Energy Partners announced the spin-off plan in February. The company last summer spun-off Ascent Resources and Traverse Midstream Partners and has said several more spin-offs are planned.

    “This transition was the stated vision of our founder, Aubrey K. McClendon, and we appreciate the assistance the American Energy Partners platform has provided since our initial formation two years ago,” Mobley said.
  • FERC Says “No” to Cuomo.  The Federal Energy Regulatory Commission (FERC) last Friday denied New York State’s requests to reconsider its approval of the Algonquin natural gas pipeline project, Kallanish Energy learns.

    The decision came despite local residents and elected officials earlier this month pleading with federal regulators to shut down construction of the project.

    Governor Andrew Cuomo in late February also urged the federal government to halt the project, citing the potential dangers of its proximity to the Indian Point nuclear power plant in Buchanan, New York.

    Spectra Energy’s Algonquin Incremental Market (AIM) project was approved by FERC one year ago, and is under construction in four states.

    The pipeline would carry 342 million cubic feet per day (MMcf/d) of natural gas northeast from Pennsylvania’s Marcellus Shale play by replacing parts of the existing pipeline and running new pipe through Stony Point, east under the Hudson River and into the towns of Verplanck and Buchanan, New York.

    The New York Department of Environmental Conservation this month requested that FERC reconsider and stay its approval of the project, citing the state agencies’ ongoing independent safety risk analysis of the line.

    The state also argued a stay should be granted because of the project’s potential impact on the nearby nuclear facility, Indian Point.

    In denying that request, FERC again cited a safety analysis by the plant’s owner Entergy and the Nuclear Regulatory Commission that concluded that the pipeline would not adversely affect Indian Point.
  • FERC Wants Comments on ET Rover Pipeline.  FERC, the Federal Energy Regulatory Commission, is accepting public comments through April 11, concerning its draft environmental statement (EIS) concerning Energy Transfer Equity’s proposed Rover natural gas pipeline.  

    Michigan residents in particular have spoken out about their fears of gas explosions, their concerns over impacts on their property rights and values, and the potential environmental hazards, among other issues. A local grassroots group has taken the catchy name “ET Rover Go Home.”

    Proponents of the proposed pipeline have said it is a needed piece of infrastructure that would create construction jobs, generate tax revenue and be safer than people expect, Kallanish Energy learns.

    The federal agency is still considering the proposed pipeline. Rover is designed to transport 3.25 billion cubic feet per day (Bcf/d) of natural gas through roughly 710 miles of 24-inch, 30-inch, 36-inch and 42-inch pipeline.

    Additionally, the Rover project will build a pipeline segment from the Midwest Hub in Defiance County, Ohio, area through Michigan to an interconnection with the Vector Pipeline, allowing delivery of gas to additional points in Michigan and to the Union Gas Dawn Hub in Ontario, Canada.

    A 60-40 joint venture between Canada’s Enbridge and Detroit, Michigan-based DTE Energy, respectively, Vector is a 348-mile, 42-inch pipeline that transports roughly 1.3 Bcf/d of natural gas from Joliet, Illinois, to parts of Indiana and Michigan and into Ontario, Canada.
  • Halliburton – Baker Hughes Deal Facing More Delays.  Could There Be a Termination of the Deal?  The European Union antitrust regulator, European Commission (EC), has once again stopped the clock on the $35 billion acquisition by U.S. oilfield services company Halliburton of its smaller rival Baker Hughes, Kallanish Energy learns.

    Halliburton agreed to buy Baker Hughes in November 2014, in a cash-and-stock deal. The transaction, however, has faced delays due to antitrust concerns in the U.S. and Europe.

    European Commission spokesman Ricardo Cardoso said Monday the investigation was halted because the companies have yet to provide relevant information. “Once the missing information is supplied by the parties, the clock is re-started and the deadline for the Commission’s decision is then adjusted accordingly.”

    Cardoso added “to comply with merger deadlines, parties must supply the necessary information for the investigation in a timely fashion. Failure to do so will lead the commission to stop the clock.”

    Halliburton’s spokeswoman Emily Mir told Kallanish Energy it’s standard procedure for the EC to suspend the formal review period pending receipt of the requested information. “Halliburton is working to provide the additional information as expeditiously as possible,” she said without disclosing details of such information.

    With the deal expected to be completed last year, the companies previously set a deadline of April 30, to close the deal. Halliburton would be required by the deal to pay Baker Hughes a breakup fee of $3.5 billion if the transaction is dropped.

    “If the review extends beyond April 30, 2016, the merger agreement does not terminate automatically,” Mir said. “The parties may continue to seek the Commission’s approval or one of the parties may terminate the merger agreement after April 30, 2016.”

    The deal received clearance from antitrust regulators in Canada, Colombia, Ecuador, Kazakhstan, South Africa and Turkey. However, the EU raised concerns that combining the second- and third-largest oilfield services companies may impede competition and increase prices. The Commission opened an in-depth probe in January of this year.
  • Another New Player in the Marcellus & Utica.  A Canonsburg company started by a former Rice Energy executive and with up to $800 million in private equity backing from Apollo Global Management LLC is jumping into the oil and natural gas business in the Marcellus and Utica shales.

    American Petroleum Partners LLC, which was founded in 2014, forged what it called a strategic partnership with Apollo in September 2015. The company is run by CEO Varun Mishra, who worked at EOG Resources and in the Barnett Shale before overseeing the technical team at Rice Energy. It said in a news release Wednesday that Apollo's funds could invest up to $800 million in acquisitions and development in Appalachia.

    “We look forward to working with Apollo to build a low-cost, Appalachia-focused independent E&P business, taking advantage of the current market stress and low commodity price environment," said Mishra in a prepared statement. "The current APP team has the expertise and track-record to find and efficiently develop shale resources to create value for our partners including land owners. As a low-cost basin, we believe Appalachia will continue to grow as a source of domestic natural gas supply and provide an attractive environment for well-capitalized new entrants with strong operational expertise."

    The announcement of the Apollo investment was first reported in Marcellus News. Spokesmen for both American Petroleum Partners and Apollo both declined further comment about the company Wednesday, and directed the Pittsburgh Business Times to the news release.

    While many oil and natural gas exploration companies have been knocked around in the past year and a half due to low prices and oversupply, private equity firms and startups like American Petroleum Partners are taking a closer look and investing big into energy while the prices are low. Another Pittsburgh-region startup, Lola Energy in Wexford, announced late last year a $250 million funding commitment from Denham Capital. Lola is working toward leasing acreage and lining up production of natural gas in Greene County, Pa., south of Pittsburgh.
  • Marcellus NatGas Arrives in Europe.  First US shale gas arrives in Europe, marking the first commercial phase of a $2 billion investment by operators INOES.

    The shipment arrived in the Norwegian Port of Rafnes Wednesday, onboard the company’s own purpose built carrier INEOS Intrepid, signaling delivery of the first exports from the US.
  • Schlumberger – Cameron finalized.  U.S. oilfield services giant Schlumberger and flow equipment provider Cameron International announced the final regulatory hurdle has been removed for their proposed $12.7 billion merger, Kallanish Energy learns.

    The Chinese Ministry of Commerce (MOFCOM) cleared the Schlumberger-Cameron merger without any conditions. “MOFCOM approval represents the last major closing condition to the proposed merger.

    The deal, set to be the second-largest merger among energy services providers, remains subject to the satisfaction or waiver of the remaining closing conditions in the merger agreement. Until then, the companies will continue to operate separately and independently.
  • Methanol Plant Coming to the Marcellus.  Primus Green Energy Inc., announced yesterday plans to develop and deliver its 160MT/day methanol plant to a manufacturing site in the Marcellus shale region. The plant, which is slated to begin regional production in 2017, will be the first methanol plant and first gas-to-liquids plant in the Marcellus — two significant firsts for a region that is arguably the largest gas play in the United States. The plant is expected to ultimately increase its capacity to 640MT/day after three additional trains are put into operation in the next several years.

    Primus’ standardized modular GTL systems will convert low-cost Marcellus feedstock into methanol locally, thus saving its clients in the region both production and transportation costs. As a result, the systems are cost-competitive with the world-class methanol plants located on the Gulf Coast of the United States and in international markets. The company plans to deliver up to four additional methanol plants in other North American regional markets with capacities ranging from 160 MT per day to 640 MT per day, which will follow its low-cost standardized design and facilitate local production.

    “The launch of our North American methanol plant in the Marcellus and additional commercial builds to follow for our clients globally demonstrate how Primus’ standardized, modularized STG+ solutions can provide world-class economics in smaller distributed plants,” said Sam Golan, chief executive officer of Primus Green Energy. “In North America specifically, our technology offers clients a politically-stable, cost-effective avenue for local methanol and gasoline production, and we look forward to continuing to provide the industry with this domestic solution.”

    Primus’ STG+™ technology can use a range of natural gas feedstocks, including wellhead and pipeline gas, dry or wet associated gas, “stranded” ethane, excess syngas from underutilized reformers or mixed natural gas liquids. The systems’ stranded and associated gas applications offer an ideal solution to the lack of traditional natural gas pipeline infrastructure in remote locations, enabling the monetization of gas that would otherwise be stranded or flared. The low-cost, modular systems can be trucked in and assembled onsite for easy deployment.

    The Primus STG+™methanol and gasoline solutions are being developed in multiple projects across North America, Asia and the Middle East. By comparison with other GTL technologies, the process holds many key advantages, including record low capital and operating costs, high liquid product quality, zero wastewater, unmatched process simplicity and one of the best conversion yields on the market. These advantages result in STG+™ technology being uniquely economical at all scales, starting at as small as 100,000 Nm3 (5 million scf) per day of feed gas.
  • Williams Atlantic Sunrise Decision Delayed until 2017.  A decision on the Atlantic Sunrise natural gas pipeline project through Lancaster County has been delayed and may not happen until January.

    The Federal Energy Regulatory Commission's decision — on whether to allow the project or not — isn't expected until between Oct. 21 and Jan. 19, the agency says.

    That’s later than the project’s builder, Williams Partners, had hoped for the $3 billion, 198-mile project. The pipeline will transport gas fracked in the Marcellus Shale region of Pennsylvania to markets along the Atlantic Coast and abroad.

    In Lancaster County, where the project has faced bitter opposition in some areas, the pipeline would cross 36.5 miles in a 50-foot-wide swath. It passes through mostly farms and forest land.

    County residents and groups have submitted more than 1,000 letters to the commission. So far, some 60 changes have been made to the pipeline's route since it was announced in 2014.

    Despite the delay, Williams officials on Tuesday reasserted their intent to pursue the project. They also are not deterred by the recent downturn in Marcellus Shale gas production. The company's shares listed on the New York Stock Exchange was down about 67 percent Tuesday, from its one-year high of $59.44 last May.

    “We are very much committed to the project,” said Chris Stockton, spokesman for Tulsa, Oklahoma-based Williams, which owns and operates the largest pipeline networks in the country.

    “Projects like the Atlantic Sunrise are not developed based on short-term commodity prices, but instead take the long-term, bigger-picture view of the changing supply dynamic in the U.S.”

    Stockton said the delay in a decision “reflects that FERC is conducting a very thorough analysis of the project.”

    He said binding agreements with nine companies that had committed to using the proposed pipeline are still intact.

    As for the considerable decrease in rigs working the Marcellus Shale in Pennsylvania because of cheap prices for gas, Stockton said efficiencies in the industry mean the Marcellus play is still the largest in the country, even with fewer rigs.

    “The biggest problem is the region doesn’t have the necessary infrastructure to connect Pennsylvania gas production with other consuming markets,” Stockton observed. That’s what the Atlantic Sunrise project is meant to correct, he said.

    The Federal Energy Regulatory Commission said it would release its Environmental Impact Statement on the Atlantic Sunrise project on Oct. 21.

    The commission said major issues posed by the pipeline that surfaced and will be addressed in the document include potential impacts on forested areas, groundwater and threatened species; socio-economic impacts; land use and recreational impacts; air quality; safety; potential cumulative impacts; and potential alternative routes.

    The commission has said it would hold public meetings in certain communities after the release of the Environmental Impact Statement and before it issues a ruling.

    “This is a strategically important day for INEOS and Europe. We know that shale gas economics revitalized US manufacturing and for the first time ever Europe can access this essential energy and raw material source too”, said INEOS CEO, Jim Ratcliffe.

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Rig Count

  • Baker Hughes Rig Count the week of March 24, 2016
  • PA
  • Ohio
    • Utica 10 unchanged
  • WV
    • Marcellus 12 unchanged
  • TX
    • Eagle Ford – 41 down 4
  • TX & NM
    • Permian Basin – 147 down 5
  • ND
    • Williston – 31 unchanged
  • CO
    • Niobrara – 17 unchanged
  • TOTAL U.S. Land Rig Count 432 down 14

PA Permits for February March 17, to March 31 2016

       County            Township        E&P Companies

1.    Greene             Morris              EQT
2.    Greene             Morris              EQT
3.    McKean            Corydon           Shell
4.    McKean            Wetmore          Shell
5.    Susquehanna    Jackson            SWN
6.    Susquehanna    Jackson            SWN
7.    Susquehanna    Jackson            SWN
8.    Susquehanna    Jackson            SWN
9.    Washington       Buffalo              Range
10.    Washington     Independence    SWN    

OH Permits for weeks ending March 19, and 26 2016

       County      Township    E&P Companies

1.    Carroll        Harrison      Rex
2.    Monroe      Ohio           Triad Hunter
3.    Monroe      Ohio           Triad Hunter
4.    Monroe      Perry          E M Energy OH

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Utica Summit 2019