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Expo/Industry events for the next few months

West Virginia Oil and Gas Expo
Oct. 5, 2016
Mylan Park's Expo Center
Morgantown, WV

Midstream PA 2016
October 13, 2016
Penn Stater Conference Center
State College, PA    

Latest facts and a rumor from the Marcellus and Utica Shale

  • U.S. #1 in Oil Reserves.  The US holds more oil reserves than Saudi Arabia and Russia, the first time it has surpassed those held by the world's biggest exporting nations, according to a new study.

    Rystad Energy estimates recoverable oil in the US from existing fields, discoveries and yet undiscovered areas amounts to 264bn barrels. The figure surpasses Saudi Arabia's 212bn and Russia's 256bn in reserves.

    The analysis of 60,000 fields worldwide, conducted over a three-year period by the Oslo-based group, shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year, Rystad Energy said on Monday.
  • Cabot Moving Gas in NE PA.  Independent producer Cabot Oil & Gas today said it’s signed a 10-year sales agreement to be the exclusive natural gas provider to Invenergy's Lackawanna Energy Center power plant.

    The proposed facility is a natural-gas fired 1,500-megawatt (MW), combined-cycle generating facility located in Lackawanna County, in northeast Pennsylvania.

    A combined-cycle power plant uses both a gas and a steam turbine together to produce up to 50% more electricity from the same fuel than a traditional simple-cycle plant. Waste heat from the gas turbine is routed to the nearby steam turbine to generate extra power.

    The facility, at maximum capacity, will burn up to 240 million cubic feet per day (MMcf/d) of natural gas, Kallanish Energy calculates. Contract value wasn't released by Cabot. Gas will be pulled from Cabot's numerous Marcellus Shale wells in the area.

    "We are very pleased to finalize this agreement with SJI and to provide locally produced natural gas to this state-of-the-art power generation facility," commented Dan O. Dinges, CEO of Houston, Texas-based CEO.

    "Together with our previously announced agreement with SJI to supply natural gas to the Caithness Moxie Freedom project, Cabot will be providing more than 400,000 dekatherms [400 MMcf/d] of natural gas for power generation directly in our backyard."

    The Caithness Moxie Freedom Project referred to by Dinges involves construction of a 1,029 MW combined-cycle, gas-fired power plant in Luzerne County, Pennsylvania, slated to start commercial operation in 2018.

    Likewise, commercial operation at the new Lackawanna facility is expected to begin in mid-2018 and to reach full power by year-end 2018.

    As part of the deal, holding company South Jersey Resources Group’s South Jersey Industries (SJI) unit will become counterparty to both companies via a supply fuel management service agreement.
  • O&G Industry Needs 100,000 Workers.  We have written about the challenge of finding oil and gas workers for the last couple of months.  Here’s an in-depth analysis by Goldman Sachs which further amplifies the challenge the E&P Companies will be facing.

    The U.S. oil industry will need to hire tens of thousands of workers in the next two and a half years as oil prices recover and drillers stand up rigs, Goldman Sachs projected in a note this week.

    The question is whether workers flushed out of the industry and into a resurgent U.S. labor market will head back to the oil patch. On Friday, government data showed the United States added a whopping 287,000 jobs in June, and the nation's unemployment rate held below 5 percent.

    Recruiters have long warned that layoffs could come back to haunt an industry still dealing with a shortage of mid-career workers following the 1980s oil bust. As the United States reaches full employment, oilfield services companies and drillers could face a shortage of workers and may have to pay dearly for them.

    Since the start of the oil price downturn in 2014, more than 291,500 energy jobs have been lost worldwide, estimates recruitment agency Airswift.

    "I don't see how the industry comes back to any level of activity that is busy without a breakneck amount of chasing bodies, and there just aren't going to be enough to go around." -Jeff Bush, CSI Recruiting president

    Airswift Chief Operating Officer Janette Marx said employers should anticipate a significant increase in the cost of attracting and retaining talent once demand for skilled staff returns.

    "Job seekers continue to turn to other, related industries that offer more stability. It's too soon to tell if this talent will exit the oil and gas industry permanently, but if it does, it could result in a long-term, more pronounced talent shortage when the oil price recovers," Janette Marx, chief operating officer at Airswift, told CNBC in an email.

    There are signs the layoffs have peaked. On Thursday, outplacement firm Challenger, Gray & Christmas reported U.S.-based energy sector employers cut 42 percent fewer jobs in the second quarter than in the first quarter.

    In Goldman's view, high pay in the oil and gas industry will make it possible for U.S. oilfield services companies to attract the 80,000 to 100,000 employees the bank believes energy firms will need. The industry's staffing needs would absorb about 8 to 11 percent of the unemployed population in energy-producing states, according to Goldman.

    Further, Goldman argues that many oilfield services companies have retained experienced staff throughout the wave of layoffs, and "in many cases" shuffled them into low-ranking positions with an eye toward "promoting" them once oil price recover and activity ramps up. Those staffs are ideally positioned to preserve the efficiency gains achieved during the downturn, Goldman notes.

    If all goes according to plan, those companies will mostly have to hire and provide training at the lowest skill levels.

    But Raymond James believes pay may not be enough to attract workers back to remote oil fields.

    "Although these non-oilfield jobs often pay less than those in the oil patch, the stability of employment and less harsh work conditions in non-oilfield industries might offset the lower compensation as the oilfield up-cycle progresses. This is particularly true today after the devastation industry participants have witnessed firsthand over the past 2 years," the firm said in a note earlier this year.

    Citing rig operators, Raymond James said the initial addition of 100 to 200 rigs will be manageable, because current staffing can handle the increase. But the firm believes bottlenecks will develop as the U.S. oil and gas rig count approaches 600. It now stands at 431.

    Gladney Darroh, president at Houston-based energy recruiting firm Piper-Morgan Associates, is also skeptical that staffing up will be an easy lift.

    Energy-producing states may have a theoretically sufficient pool of workers to meet the oil and gas industry's needs, but there's no telling how many of those workers are qualified and willing to work in the sector, he said.

    He also cast doubt on Goldman's assessment of staffing strategies: "This whole idea that we've got this whole group we have sort of demoted for the time being that are still in the organization that we can quickly promote back up, that's a fairy tale," he told CNBC.

    "These oil services companies don't even think that way. They slash and burn," he said.

    Asked by CNBC for clarification on how widespread a supposed retention-through-demotion strategy may be among energy firms, Goldman Sachs did not respond. Oilfield services firms Schlumberger, Baker Hughes, and Halliburton either did not respond before publication or declined to make an executive available for comment.

    It's far more common for service companies to cut to the bone, retain their best workers, and ask those star employees to shoulder a heavier workload until the firm can reverse layoffs, according to Darroh.

    But that strategy is fraught, as well, Darroh said. Employers run the risk of overworking their top-performers, who are likely to be pursued by headhunters as resurgent drilling yields labor shortages and bidding wars.

    Jeff Bush, president at Denver-based CSI Recruiting, said he already sees signs that this happening, particularly as private equity-backed management teams seek to build out their upstart drilling enterprises.

    "The directive we get is we don't want to see guys that are out of work," he told CNBC.

    Oil and gas firms will have a tough time meeting their personnel demands as they confront a "three-headed monster," Bush said.

    First, the industry hasn't done any net new hiring in two years. At the same time, enrollment in petroleum engineering degree programs across the United States is falling, department heads tell CNBC.

    Second, a number of experienced, high-income workers have retired or been bought out, leaving mid-level workers to fill a skills gap. That potentially exacerbates the long-anticipated staffing crisis known as the "Great Crew Change."

    And finally, some early career professionals without the experience to bide their time as consultants or attract private equity backing have embarked on other career paths.

    Ultimately, Bush expects the industry to fall back into its boom-and-bust cycle of hiring.

    "I don't see how the industry comes back to any level of activity that is busy without a breakneck amount of chasing bodies, and there just aren't going to be enough to go around," he said.

    Thank you, Tom DiChristopher, at CNBC.
  • Where Will the Workers Come from?  With a number of major construction projects proposed in the Northeast, highlighted by Royal Dutch Shell’s $4 billion-$6 billion ethane cracker in Beaver County, Pennsylvania, unionized tradesmen in the next half-decade will experience something relatively rare these days:

    More work than skilled tradesmen and women can handle.

    “With all the petrochemical and combined-cycle power plants proposed, demand in the next five to six years will be for 10,000 to 15,000 more craftsmen [and women] than are available,” according to Sam Lyon, global workforce services manager for engineering/construction contracting giant Bechtel.

    Lyon was part of a panel at last week’s Northeast U.S. & Canada Petrochemical Construction Conference in Pittsburgh, Pennsylvania, that discussed a skilled labor shortage in the Northeast.

    (Kallanish Energy was a presenter at the first-ever conference, presented by Petrochemical Update.)

    “These are the types of challenges that we live for,” Lyon said.

    Bechtel is the engineering, procurement and construction contractor for the Beaver County ethane cracker.

    When construction begins in about 18 months, Bechtel and mechanical contractor McCarl’s will oversee it under a joint venture formed last September called Great Arrow Builders.

    With the number of projects under construction sufficient to demand union halls call for reinforcements from across the country, so-called travelers, according to Lyon.

    The draw will be steady work and higher wages.

    “For skilled labor, wages are going to go up,” said Jeff Burd, founder of the construction industry analysis outfit Tall Timber Group.

    Opportunities for overtime will help attract travelers. Good project management will mean having the right safety culture, equipment and permits in hand to ensure as little downtime as possible.

    “Nobody likes standing around,” Lyon said.

    Lyon said of all the craft labor jobs, pipefitters will be at the top of the shortage list, followed by welders.
  • NatGas Power Plants in Northern PA.  Two upstate natural gas-fired power plants, each capable of meeting the electricity needs of one million homes, are close to being operational, the owner says.

    Panda Power Funds, headquartered in Dallas, Texas, says the Panda Liberty plant on 33-acre site in Asylum Twp., near Towanda in Bradford County, is very close to entering commercial operations.

    The company has taken control of the site, Panda spokesman Bill Pentak said Wednesday. One of the generating units is running and a subcontractor is installing pipe to the other, he said.

    Panda has projected Liberty will infuse $5.9 billion into that area's economy during construction and the first 10 years of operation.

    Its Patriot plant on an 85-acre site near Montgomery in Lycoming County is deemed "substantially complete" and Panda has assumed control of the site, Pentak said.

    Both generating units there have passed emission tests, he said.

    Each of 829-megawatt plants is expected to have 27-full-time employees, he said.

    Although both are adjacent to branches of the Susquehanna River, they are cooled with air, not water, he pointed out.

    Construction continues on a third Panda project, the conversion of the former Sunbury Generation 400 megawatt coal-fired generating plant on a 19-acre site in Shamokin Dam to a 1,124 megawatt facility fueled by natural gas.

    Major concrete pours are 40 percent complete and foundation work has started on the cooling tower, Pentak said.

    A super load of equipment for the plant is scheduled to move on sections of Routes 147 and 11/15 in the Sunbury-Shamokin Dam area late Thursday into Friday morning.

    Traffic could be affected between 10 p.m. Thursday and 2 a.m. Friday, according to the Pennsylvania Department of Transportation.

    The Hummel Station project, one of the largest natural gas power conversion projects in the United States, is scheduled for completion in early 2018.

    It, too, will generate enough power to serve one million homes, Panda says.

    Panda does not disclose the cost of its projects but refers to the Energy Information Administration's estimate of $1 million per megawatt.

    That would put the project Liberty and Patriot projects at $829 million each and the Hummel Station in the $1.2 billion range.

    Panda cites as the need for the three plants the expectation a number of coal-fired generating facilities in the Pennsylvania, New Jersey and Maryland market will be retired in coming years.

    The impetus for constructing the plants was the availability of natural gas from the Marcellus Shale, the company says.
  • Two Pipelines Working Together in OH.  Two pipeline projects will co-exist along a 13-mile corridor in southeast Ohio to alleviate concerns expressed by the Federal Energy Regulatory Commission.

    The companies behind the Rover Pipeline and the Leach Xpress Pipeline have, in separate filings with FERC, agreed to work closely together in Monroe County, where the routes overlap, Kallanish Energy has learned.

    The pipelines will share an easement and work space in that area, said the Texas-based Columbia Pipeline Group, the company behind the Leach Xpress, and Texas-headquartered Energy Transfer Partners, the company developing the Rover Pipeline, in the filings.

    The area is next to a Texas Eastern Gas Transmission right-of-way.

    The 700-mile Rover pipeline would run through parts of West Virginia, Pennsylvania, Ohio and Michigan. The $4.2 billion project is designed to deliver 3.25 billion cubic feet of natural gas per day (Bcf/d) from the Marcellus and Utica Shale plays to the Midwest and the Gulf Coast. It calls for two 42-inch pipelines, and is awaiting FERC approval.

    The $1.4 billion Leach Xpress Pipeline would run 160 miles with 30-inch and 36-inch lines from Marshall County, West Virginia, through southeast Ohio to Wayne County, West Virginia. It would transport up to 1.5 Bcf/d to the Mid-Atlantic States and the Gulf Coast.

    Last April, the U.S. Environmental Protection Agency, in a FERC filing, said the draft Environmental Impact Statement for the Leach Xpress was insufficient. It asked for more information including looking in more detail at alternatives in the final EIS report.   
  • Fracking Is Happening.  While the drilling has remained slow, we have heard that crews from Williams, Seneca and Anadarko are fracking.  (RUMOR)

Visit our Blog for daily updates on what’s happening in the oil & gas industry.

Rig Count

  • Baker Hughes Rig Count the week of July 8, 2016
  • PA     
    • Marcellus 13 unchanged
  • Ohio
    • Utica 12 unchanged
  • WV
    • Marcellus 11 unchanged
  • TX
    • Eagle Ford –33 down 1
  • TX & NM
    • Permian Basin – 158 up 4
  • ND
    • Williston – 28 up 2
  • CO
    • Niobrara – 15 up 1z
  • TOTAL U.S. Land Rig Count 417 up 9

PA Permits for June 30, to July 7 2016

      County       Township  E&P Companies

1.    Butler        Clinton        Range
2.    Butler        Clinton        Range
3.    Elk            Jones        Hunt Marcellus
4.    Tioga        Richmond    Shell
5.    Tioga        Richmond    Shell

OH Permits for weeks ending July 2, 2016

      County        Township    E&P Companies

1.    Belmont     Smith           XTO
2.    Noble         Wayne        Antero

Joe Barone 610.764.1232
Vera Anderson 570.337.7149


Utica Summit 2019