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Expo/Industry events for the next few months

OOGA Technical Conference and Oil Expo
November 2
Pritchard Laughlin Civic Center
7033 Glenn Hwy
Cambridge, Ohio  43725

Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, Bakken and Niobrara Shale Plays 

Shell Pipeline for Shell Cracker.  Royal Dutch Shell’s Shell Pipeline announced it launched a binding open season for a new 94-mile ethane supply pipeline which will feed the operator’s sister company’s soon-to-be-constructed ethane cracker in Southwest Pennsylvania.

“The new pipeline will enhance ethane supply, while building new and reliable infrastructure in a strategic growth market,” said John Hollowell, executive vice president of Shell Pipeline.

Shell Pipeline anticipates the proposed Falcon Ethane Pipeline System will connect three major ethane source points within Pennsylvania and Ohio, in the rich-gas portions of the Marcellus and Utica Shale plays, to the Shell Chemical cracker near Monaca, Beaver County. Construction of the pipeline is scheduled to begin in late 2018, Kallanish Energy reports.

Falcon’s initial pipeline capacity is expected to be approximately 107,000 barrels per day (BPD) of ethane. If shipper demand exceeds the initial offered capacity, the capacity will be expanded sufficiently to accommodate committed volumes, plus at least 10% for spot shipments.

The binding bidding open continues until end-of-business on Nov. 18.

Gulfport 3rd Qtr. Production Up.  Gulfport Energy reports its third-quarter production grew 10% from the previous quarter, and 13% from a year ago, Kallanish Energy reports.

The Oklahoma-based company said third-quarter production averaged 734.1 million cubic feet-equivalent per day (MMcfe/d). That production was 86% natural gas, 9% natural gas liquids and 5% oil, said the company, a key player in Ohio’s Utica Shale.

That production exceeded the company’s quarterly guidance of 685 MMcfe/d to 705 MMcfe/d.

Gulfport’s realized prices for the third quarter were $2.67/thousand cubic feet (Mcf) of gas, $45.09 per barrel of oil and 34 cents per gallon of natural gas liquids (NGLs), resulting in a combined price of $2.87/thousand cubic feet-equivalent.

The company will release its third-quarter financial report on Nov. 2.

Yes, Drilling Is Picking Up in OH.  Ohio-based Fairmount Santrol reported its sand volumes grew by 20% from the second to third quarter, due to higher demand for both raw sand and coated proppants for hydraulic fracturing (fracking) in shale drilling, Kallanish Energy learns.

Fairmount Santrol, a provider of high-performance sand and sand-based products, said its total sand volume in the third quarter was 2.4 million tons.

That total compared to 2 million tons produced during the second quarter, and 2 million tons produced a year ago.

Third-quarter revenue is expected to be between $133 million and $135 million, compared to $114.2 million in the second quarter, and $171 million for the year-ago quarter, the company said.

The company expects a third-quarter 2016 net loss of between $21 million and $23 million.

The company said it has reopened its facility in Menomonie, Wisconsin, and that will add 750,000 tons of sand per year. It also renegotiated certain railcar lease and purchase agreements.

Fairmount Santrol also priced a public offering of 30.25 million shares of common stock for total gross proceeds of roughly $286 million. The underwriter will be granted an option on an additional 4.54 million shares. That offering closes on Oct. 25.

The company will use the proceeds for paying down debt and general corporate operations.

SM Energy Expands in the Permian.  SM Energy Co said that it would buy 35,700 net acres in West Texas's Howard and Martin counties for about $1.6 billion and sell its Williston Basin assets in North Dakota for $785 million to Oasis Petroleum Inc.

SM Energy has been trying to boost its presence in the Permian basin, while divesting assets elsewhere. The company had bought 24,783 net acres in Howard County for about $980 million in August.

The latest deal, which is expected to close in December, will expand SM Energy's footprint in the Permian Basin to about 82,450 net acres.

The company said it would pay $1.1 billion in cash and about 13.4 million in shares for the Permian property to QStar LLC, a portfolio company of EnCap Investments LP and a related entity.

Fracking on Public Land near Marietta, OH.  The federal government has given notice that it plans to auction oil and gas lease rights for 1,600 acres of Wayne National Forest near Marietta, a step that could lead to fracking on public land.

Energy industry officials are applauding the decision, which affects parts of Monroe and Washington counties, while environmentalists are criticizing it.

With the notice, a 30-day clock starts in which opponents can file a formal protest. The government will review the objections before moving ahead with an online auction scheduled for Dec. 13.

The affected land is part of Ohio's only national forest, which covers more than 240,000 acres in the southeastern part of the state.

The proposed leases are "a step in the right direction," said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, a trade group. "It opens up lands that are required to be leased by several federal statutes."

Many environmental groups oppose the leases, saying this would be a step toward allowing widespread hydraulic fracturing, or fracking, on public lands.

"This decision is bad for wildlife, bad for recreation, and bad for the overall health of the Wayne," said Nathan Johnson, an attorney for the Ohio Environmental Council, in an e-mail.

He said his group will appeal the decision on the grounds that the government has not done enough to consider environmental concerns.

The land to be leased is in the far eastern part of the forest, where there are substantial oil and gas reserves and less public opposition to drilling for energy.

The Bureau of Land Management, one of the federal agencies handling the process, is not leasing land in the part of the forest in and around Athens County, where public opposition has been strong, and where energy companies are showing less interest.

The notice, dated on Friday, followed a report that day from the bureau saying that energy drilling would have no significant impact on the environment.

"The project does not violate any known federal, state, local or tribal law or requirement imposed for the protection of the environment," said the report, signed by Dean Gettinger, a district manager for the bureau.

Oil and gas extraction has long taken place in the forest, although on a smaller scale than what may be coming with new leases. The U.S. Forest Service says that there are more than 1,200 conventional oil and gas wells in the forest. These are mostly small wells and many are no longer active.

The process has drawn attention because it would open the door to fracking of public land in the forest. Critics of fracking have long argued that the method is harmful to the air and water, while the industry has said that fracking can be done safely.

We hope the Federal Gov’t will approve the oil and gas lease in OH and this is not a ploy during the last days of very heated political campaign.  

More Foreign Oil Coming to U.S.  The U.S. Energy Department said it expected more crude oil will enter the country from foreign countries in part because U.S. oil was less cost effective.

During the first half of the year, the U.S. Energy Information Administration, part of the Energy Department, said total crude oil imports increased 7 percent year-on-year. The increase marks a first since 2010, when imports started to decline in response to rising domestic output.

Duke University Finds Waste Water Much Safer Than Thought.  Naturally occurring brines — not man-made fracking fluids — account for most of the wastewater coming from hydraulically fractured unconventional oil and gas wells, a new Duke University study finds.

“Much of the public fear about fracking has centered on the chemical-laden fracking fluids — which are injected into wells at the start of production — and the potential harm they could cause if they spill or are disposed of improperly into the environment,” said Avner Vengosh, professor of geochemistry and water quality at Duke’s Nicholas School of the Environment.

“Our new analysis, however, shows that these fluids only account for between 4% and 8% of wastewater being generated over the productive lifetime of fracked wells in the major U.S. unconventional oil and gas basins,” Vengosh said. “Most of the fracking fluids injected into these wells do not return to the surface; they are retained in the shale deep underground.”

Vengosh added this means the probability of having environmental impacts from the man-made chemicals in fracking fluids is low, unless a direct spill of the chemicals occurs before the actual fracking.

More than 92% of the flowback and produced water — or wastewater — coming from the wells is derived from naturally occurring brines that are extracted along with the gas and oil, Kallanish Energy learns.

These brines carry their own risks, Vengosh stressed. They contain varying levels of salts, heavy metals and naturally occurring radioactive elements, and their sheer volume makes disposing of them a challenge.

“But with proper treatment, they potentially could have beneficial reuses,” he said, “especially out West, where our study shows most brines being produced by fracked wells are much less saline than those in the East. These Western brines, which are similar in salinity to sea water, could possibly be treated and re-used for agricultural irrigation or other useful purposes, especially in areas where freshwater is scarce and drought is persistent.”

The Duke team published its findings Oct. 14 in the peer-reviewed journal Science of the Total Environment, Kallanish Energy reports.

The researchers used three statistical techniques to quantify the volume of wastewater generated from unconventional oil and gas wells in six basins nationwide: the Bakken formation in North Dakota; the Marcellus Shale play in Pennsylvania; the Barnett and Eagle Ford plays in Texas; the Haynesville Shale in Arkansas, Louisiana and East Texas; and the Niobrara in Colorado and Wyoming.

Using multiple statistical techniques “helped us more accurately account for changes in each well’s wastewater volume and salinity over time, and provide a more complete overview of the differences from region to region,” said Andrew J. Kondash, a doctoral student in Vengosh’s lab at Duke’s Nicholas School, who led the study.

“This makes our findings much more useful, not just for scientists but for industry and regulatory agencies as well,” he said.

Funding from the study came from the National Science Foundation and the Duke University Energy Initiative.

Arson on the Dakota Access Pipeline.  Federal and state agencies are investigating a $2 million fire suspected of being arson along the Dakota Access Pipeline in central Iowa, Kallanish Energy reports.

The fire occurred last weekend near Reasnor in Jasper County. An excavator and three bulldozers owned by a contractor were destroyed.

No arrests have been made. The fire is being investigated by the Iowa Fire Marshal Division and the FBI.

A similar arson fire took place on Aug. 1 at the same site, about 30 miles east of Des Moines.

Construction has resumed on the 1,172-mile pipeline with its $3.8 billion price tag. It will move Bakken Shale oil from North Dakota to Illinois. It is being developed by Dallas-based Energy Transfer Partners.

The Standing Rock Sioux and supporters have been protesting the pipeline’s construction in North Dakota.

PennEast Pipeline Confronts NJ Agency.  A new report defending the proposed $1.2 billion PennEast Pipeline was released this week, as the battle continued between New Jersey and the pipeline company, Kallanish Energy is reporting.

Concentric Energy Advisors, in the new report done for PennEast, took issue with the New Jersey Division of Rate Counsel that had opposed the hotly contested natural gas pipeline.

The state agency had filed comments last month with the Federal Energy Regulatory Commission that questioned the need for the 119-mile pipeline from northeast Pennsylvania into New Jersey. It would move up to 1 billion cubic feet of natural gas per day (Bcf/d).

Concentric said the state agency’s “comments demonstrate a lack of understanding of how local distribution companies contract for pipeline capacity and make a number of incorrect assumptions.”

The study also contends the agency relied on “improper analysis” and in some cases, “completely contradicts (its own) conclusion.” It said there is “critical flaws” in the state’s position.

The state agency told New Jersey media it was reviewing the report and would have no comment.

FERC has approved a draft environmental impact statement for the pipeline. Final approval could come next spring.

The pipeline would transport Marcellus Shale natural gas to utilities in Pennsylvania, New Jersey and New York City. It would run from Luzerne County, PA, to Mercer County, N.J.

More than 9,000 people along the route have petitioned FERC to reject the pipeline.

Niobrara Oil Production Falls.  The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on October 17, 2016. The report estimated that the Niobrara Shale had produced ~0.38 MMbpd (million barrels per day) of crude oil in September 2016, 1.9% less than its production in August 2016 and 20% less than its production in September 2015.

Month-over-month, the Niobrara Shale’s September 2016 crude oil production number represented its 11th consecutive fall.

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

Rig Count 

  • Baker Hughes Rig Count the week of October 21, 2016
  • PA     
    • Marcellus 25 unchanged
  • Ohio 
    • Utica 14 unchanged
  • WV 
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 33 up 2
  • TX & NM
    • Permian Basin – 212 up 11
  • ND
    • Williston – 30 unchanged
  • CO
    • Niobrara – 17 down 1
  • TOTAL U.S. Land Rig Count 528 up 15

PA Permits October 13, to October 20, 2016

       County            Township              E&P Companies

1.    Beaver             New Sewickley       PennEnergy
2.    Washington      Robinson                Range
3.    Washington      Robinson                Range

OH Permits for week ending October 15, 2016

       County            Township           E&P Companies

1.    Belmont            Smith                 Rice
2.    Belmont            Colerain              Ascent

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement