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Expo/Industry events for the next few months

DUG East
June 20-22
David L. Lawrence Convention Center
Pittsburgh, PA
http://www.dugeast.com/  

For other events visit http://www.shaledirectories.com/site/oil-and-gas-expo-information.html

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

The Appalachian Storage Hub Conference.  Our Appalachian Storage Hub Conference provided a realistic look at the current state of the underground storage in the Appalachian Basin.  It was discussed from three very interesting perspectives – midstream and chemical companies and state governments.  We were fortunate to have Congressman David McKinley kickoff the meeting informing the audience of the support coming from Washington to make this development happen as soon as possible.   Tom Gellrich, Topline Analytics, and Brian Anderson, professor, West Virginia University, set the tone for the day.  In short, it’s going to be very big.  You have to follow this development.  

Shell Has Still Not Crossed the Line.  One of the more interesting discussions I had at the conference focused on the other petrochemical companies committing to the Appalachian Basin.  I was told that they are waiting for Shell to “cross the line” which means that Shell could still back out of the deal.  When I asked, “Where is the line?” this person told me he did not know, but these other petrochemical companies know.

In follow up discussion with someone working at the Shell construction, he somewhat confirmed what I had been told.  Shell could still back out, but the construction project is approaching “the line.”  

This is probably one of the more interesting rumors that we’ve heard. We’ll certainly be watching this closely.  (RUMOR)

Is there life in the Rogersville Shale in KY?  We heard that Cabot and Chesapeake could be drilling in the Rogersville.  I’m not surprised.  We had reported a few years ago about these companies being interested in the Rogersville.  

In discussions about the Appalachian Basin’s Storage Hub, Kentucky has been mentioned more and more.  It appears that Kentucky could now be included in the Appalachian Basin.  (RUMOR) 

New Easement for Shell for the Cracker.  Bit by bit, piece by piece, Shell is getting landowners in Beaver County, PA to sign easements for its 94-mile Falcon Ethane Pipeline–a pipeline with two “legs” that will feed Shell’s mighty ethane cracker plant. MDN exclusive broke the news in February 2016 that Shell had begun to sign leases with landowners for the pipeline. As we later learned, it’s “one” pipeline with “two” legs or branches. There were more easements signed in January, and again in May. Test news is that Shell has acquired another 3,183 feet. What’s different this time, however, is that we know how much Shell paid to lease those 3,138 feet. We’ve not seen any mention of payments in the past. We won’t keep you in suspense; the price paid works out to be $75 per foot…

The Coming Marcellus vs. Permian NatGas Battle. The two biggest shale gas deposits in the US are producing a record amount of the power-plant fuel, signaling that a fight for market share will intensify as supply outstrips demand.

As natural gas prices rebound from last year’s historic lows, output from the Marcellus shale basin in the US East and the Permian reservoir in Texas is driving a rebound in America’s production of the fuel.

Low-cost supply from the Marcellus is surging as new pipelines are built to shuttle gas to markets across the US and Canada. Meanwhile, Permian output is rising as a recovery in oil prices boosts the production of gas that’s extracted alongside crude.

A deluge of new gas production from Texas and Pennsylvania threatens to keep the US awash in excess supply and lower prices nationwide, even as rising exports trim a glut of the fuel in storage.

Though the reservoirs are thousands of miles apart, gas competition between the Marcellus and Permian is set to heat up as producers there go after the same customers in major markets like the Midwest.

“Everyone can’t grow and everyone can’t win,” Justin Carlson, managing director of research at East Daley Capital Advisors Inc, an energy consulting company he co-founded in Centennial, Colorado. “Marcellus producers did not count on the Permian.”

Marcellus gas output will rise 0.5 per cent to 19.4 billion cubic feet a day in July from June, while Permian production will climb 1.9 percent to 8.5 billion, the US Energy Information Administration’s monthly Drilling Productivity Report showed yesterday. That’s an all-time high for both shale deposits.

The Marcellus may end up ceding??? some ground to the Permian, Carlson said. Output from the Marcellus will probably climb by 11 billion cubic feet by the end of 2019 from last year, well below the guidance given by producers in the region showing a gain of 14.5 billion during the same period, he said.

That means the new pipelines crisscrossing the region could take longer to fill. — Bloomberg

Permits Up in TX.  In May, the Texas Railroad Commission issued 1,021 original drilling permits, up sharply from the 606 permits last in May 2016, Kallanish Energy reports.

The May total included 841 permits to drill new oil or natural gas wells, 25 to re-enter plugged well bores and 155 for re-completions of existing well bores, said the agency that oversees drilling in Texas.

The May total included 274 oil, 43 gas, 619 oil or gas, 64 injection, one service and 20 other permits, the commission reported.

In May, the commission processed 593 oil, 115 gas, 60 injection and zero "other" completions. That compares to 760 oil, 199 gas, 60 injection and 11 other completions in May 2016.

Total well completions processed year-to-date are 3,223, down from 5,529 recorded in the same period in 2016.

The top area for permits to drill oil/gas wells was the Refugio area, with 97 permits. No. 2 was the San Angelo area with 96 permits while the San Antonio area had 93 permits.

The top area for oil completions is the Midland Basin, with 266 in the Permian Basin of West Texas. No. 2 was the Lubbock area with 83 and third was the Refugio area with 64.

For gas completions, the San Antonio area is No. 1 with 29, followed by the Midland area with 26 and East Texas with 14.

Texas is the No. 1 drilling state in the U.S.

As of June 9, its rig count was 460, representing 50% of all active rigs in the country, according to Baker Hughes.

Rex Updates 4-well Baird Pad.  Rex Energy said it's pleased with initial production from the four-well Baird Pad in western Pennsylvania, Kallanish Energy learns.

The four wells averaged a 24-hour sales rate of 10.1 million cubic feet-equivalent per day, with 4.4 million cubic feet per day (MMcf/d) of natural gas, 823 barrels (Bbl) of natural gas liquids and 124 Bbl of condensate.

There are two Marcellus Shale wells on the pad, plus two Upper Devonian wells, said the company, which is based in State College, Pa. The average lateral length is 7,140 feet.

The two Marcellus wells averaged a 24-hour sales rate of 12.1 MMcfe/d, with 57% liquids. The Baird 4H well in the Marcellus Shale produced 213 Bbl of condensate, the highest rate to date among Rex wells in the Moraine East area near Butler, Pa.

The company said it is “extremely pleased” with the results, said president and CEO Tom Stabley in a statement. He said the pad is in the northern part of the Moraine drilling area and that bodes well for future drilling in that area.

Stabley added Rex remains on scheduled to complete14 wells on three pads in the second half of 2017.

Mountaineer Waiting to Close the Deal in OH.  In May MDN conveyed the news that it appears Mountaineer NGL Storage, which wants to build a new underground NGL storage facility in Monroe County, Ohio, near Clarington, along the Ohio River had, according to the story we read, begun construction.   Based on a new article, we believe that older story was in error. In October 2016, Mountaineer drilled and completed a test well in the salt formation. But in April of this year, Mountaineer said construction had not yet begun due to problems with red tape. A new interview with a company official who says nobody has (yet) signed on the dotted line to use the facility, and that is the holdup now…

Antero’s Water Facility Projected for Fall Opening.  Antero Resources’ Clearwater Facility, located off Sunnyside Road in Doddridge County, WV, will be the first of its kind in the United States and possibly the world.

The $275 million facility, which will clean fracking water so it can be reused, is set for completion sometime this fall, said Al Schopp, Antero’s chief administrative officer and regional senior vice president.

“The primary reason for this (project) is the long-term environmental impact of recycling the water,” Schopp said. “We’ll be able to reduce more truck miles and eliminate the use of saltwater disposal wells throughout the state.”

The facility’s location, central to all of Antero’s operations throughout the region, means the company will be able to reduce the road mileage traveled by its tanker trucks by about 10 million miles annually, Schopp said.

The facility will be a great step toward reducing the environmental impact of fracking, Conrad Baston, an engineer for Antero Resources, said.

“We frack or complete the well, and some of the water flows back from that effort, and it’s something typically taken to a wastewater well or injection well,” Baston said. “We just don’t see those as being viable long term, and that’s why we’ve arrived at Clearwater as an alternate solution to injection wells.”

Baston said the Doddridge facility has been custom-designed to treat Marcellus Shale and Utica Shale flowback water.

The facility will completely remove from the water any metals or naturally occurring radioactive materials.

“It takes the produced water that has no surface use at this point and separates it essentially in two,” Baston said. “It takes the 100 percent volume to produce 98 percent clean, surface-discharge-quality water and salt, and then takes those metals or things in the water and makes 2 percent residual solid.”

The residual solid will be taken to a third-party landfill for disposal, while the clean water and salt can be reused, Baston said.

The clean water will be put back into Antero’s freshwater pipeline that runs to the different sites in the region.

By doing that, Antero will reduce their withdraw of fresh water from streams by about 30 to 40 percent. Baston said this means that is 1.7 million gallons of water they don’t have to remove from the streams in the first place.

The second part of that 98 percent is the salt and they are creating an on-site salt landfill. The landfill will receive roughly about 2,100 tons at peak capacity.

“The landfill will only receive salt from Clearwater. It’s immediately adjacent to the facility and it’s all on Antero owned property,” Baston said. “So there aren’t any concerns about the truck traffic, taking the salt from the plant doesn’t have to go on the road to another landfill.”

With the close proximity to the Clearwater facility, Baston mentioned this will reduce trips on local roads by 3.2 million miles a year. The salt trucks never have to leave the property which is about 37,000 trips per year.

Kevin Ellis, vice president of government relations with Antero, said this is one of the more prominent and important environmental projects in the United States in a long time in reference to the oil and gas industry.

“That’s why we’re so proud of this project, it’s the best project like this in the world bar none, period,” he said. “West Virginia now has Clearwater and the largest gas processing plant in North America just a few miles away from that. West Virginia is taking its place on the national and world stage in energy production.”

Although having the salt landfill isn’t ideal, Ellis said it is required but they are continuing to look at ways to reduce the amount of salt put into the landfill.

“If I could not put any salt in the landfill and use it or market it for other purposes, I would,” he said. “We want to take that number of 2,100 tons a day and gradually cut it, utilize it, and studying how we can do better and reduce that salt input.”

Baston said there is a process in which they are able to take off a pure brine needed for drilling and completion operations.

“This is something that’s a very specific product with very specific temperature points we need for our projects,” he said. “We did execute a change order with Veolia to install the equipment to facilitate that.”

This process will allow Antero to pull a certain amount of brine to use in their operations, Baston said. There won’t be any increase in truck traffic because the trucks coming into the plant will just haul it out.

“Just by that, we can reduce our salt going to the landfill by about 485 tons a day. That’s reducing the salt in the 20 to 25 percent range,” he said. “That’s just one recent example of knowing we had the salt landfill and how we can reduce that.”

GE – Baker Hughes Deal Approved with One Proviso.  The U.S. Justice Department on Monday announced it has approved the $32 billion merger of General Electric and Baker Hughes with one condition, Kallanish Energy reports.

GE’s Water & Process Technologies business must be divested, the federal agency said. Justice said minus the divestiture, the proposed merger would substantially lessen competition for refinery chemicals and services in the U.S., leading to higher prices and a reduction in service quality.

Last March, GE had announced it would sell the Water & Technologies business to Suez for $3.4 billion.

The approval clears the way for Baker Hughes shareholders to vote on the merger on June 30. The companies hope to close the deal in July. It would create the world’s second biggest well services company.

The Justice Department’s Antitrust Division filed a civil lawsuit to block the proposed transaction in the U.S. District Court for the District of Columbia. It also filed a proposed settlement that, if approved by the court, would resolve the department’s competitive concerns. No other requirements were included in the settlement.

The action by the federal agency “will ensure that oil and gas refiners continue to receive competitive prices for chemicals and services needed to produce oil, gasoline and other refined petroleum and natural gas products,” said acting assistant Attorney General Andrew Finch, in a statement.

The proposed merger would unite two of the four companies that provide sophisticated chemicals and services to refine crude oil and natural gas and reduce competition.

The Justice Department said it worked with a number of jurisdictions, including the European Commission, Canada and Australia, to investigate the proposed merger.

The findings will be published in the Federal Register and that will kick off a 60-day public comment period on the proposed settlement.

DUC’s Are Up.  The number of drilled, but uncompleted wells (DUCs) in the Lower 48 States’ seven premiere shale plays rose from April to May by 176, the Energy Information Administration’s June Drilling Productivity Report (DPR) shows.

At the end of May, 5,946 DUCs were in place in the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica plays. The May total was up 176, from 5,770 DUCs in place in April, Kallanish Energy learns.

The biggest month-to-month increase occurred in the Permian Basin, up 125 DUCs, to 2,163, from 2,038, the DPR reveals.

Two plays, the Marcellus (one less DUC) and the Utica (nine fewer DUCs) reported a April-to-May drop in DUCs, to 667 and 73, respectively.

PA O&G Fees Down in 2016.  

The decrease in fees would not happen if it did not take the drillers so long to get permits approved.  The PA state government can use any type of revenue.  One would think it would create a better environment for the E&P’s companies to get permits and drill.  Revenue would flow if it could do this.

Pennsylvania’s counties and municipal governments will see another drop in the annual fee revenue they get from Marcellus Shale gas wells.

The Pennsylvania Public Utility Commission said Thursday that impact fee revenue from Marcellus Shale wells dropped by almost $15 million to about $173 million.

That’s the lowest annual payment in the six-year history of the impact fee, and the third year of decline.

The utility commission says the fee revenue is declining because of a persistent slump in natural gas prices and the increasing age of many of Pennsylvania’s Marcellus Shale wells.

Most of the money, about $93 million, goes to county and municipal governments, while smaller amounts are earmarked for environmental improvement programs, roadway repairs and water and sewer infrastructure upgrades.

Ineos Expanding in Europe due to U.S. Shale.  Anglo-Swiss petrochemical giant Ineos announced Monday expansion plans that include construction of a world-scale propane dehydrogenation (PDH) plant with the capacity to produce 750,000 metric tons per year of propylene, Kallanish Energy reports.

The company is currently evaluating a number of locations for the plant, including its existing sites at Antwerp, in Belgium. The €2 billion ($2.24 billion) program represents “the first substantial investments in the European chemicals industry for many years,” said Chairman Jim Ratcliffe.

Additionally, Ineos intends to increase the ethylene production capacity of its crackers in Scotland and Norway to over 1 million tons each. While it produces nearly 4.5 million tons of ethylene and propylene across Europe, it remains the largest buyer of both chemicals in the region.

Ratcliffe explained these projects are only possible thanks to Ineos’ “massive $2 billion investment in our Dragon Ships program which allows us to import ethane and LPG from the U.S. in huge quantities.”

Gerd Franken, CEO INEOS Olefins & Polymers North, said these are exciting times for Ineos. “These expansions and new builds will increase our self-sufficiency in all key olefin products and give further support to our derivative businesses and polymer plants in Europe.”

He also stressed all company assets will benefit from its capability to import competitive raw materials from the U.S. and the rest of the world.

The expansions on crackers at Grangemouth and Rafnes will add up to 900,000 tons of ethylene to its overall production capacity.

U.S. LNG to the Netherlands.  The Netherlands last week received its first-ever cargo of liquefied natural gas (LGN) from U.S. producer Cheniere Energy, Kallanish Energy learns from the U.S. Department of Energy.

The 140,000-billion-cubic-meter (Bcm) cargo arrived in the Gate Terminal, at Rotterdam port, on June 9 aboard the Artic Discoverer vessel. On the same day, another LNG cargo from Cheniere’s Sabine Pass LNG export terminal was delivered in Poland.

Rick Perry, U.S. Secretary of Energy, said in a statement, these volumes follow others delivered to southern Europe, including to Italy, Malta, Spain, Portugal and Turkey. These countries have been receiving Sabine Pass cargoes since February 2016, when the terminal began exporting.

“Spain and Portugal have received multiple cargoes,” he noted.

“U.S. LNG has begun arriving in Europe with some frequency, providing a diverse source of supply and ensuring energy security for Europe,” said Perry. “We will become a dominant energy force, using our research, development, and delivery capabilities. We will reassure the energy security of our allies and partners around the world, acting as a force for good in an environment of uncertainty.”

A growing number of U.S. LNG shipments are expected to be sold to Europe as more liquefaction projects located along the U.S. Gulf Coast come online and begin production and shipment.

The secretary said to date, some 5 billion cubic feet per day (Bcf/d) of LNG has been contracted to European companies such as Engie, BG, BP, Endesa, Iberdrola, Gas Natural Fenosa, EDF, EDP, Total and Centrica.

Spot U.S. LNG supplies to Poland help the country reduce its reliance on Russia, alongside contracted supplies from Qatar.

OH NatGas Production Up, but Oil Is Down.  Ohio’s natural gas production from horizontal wells in the Utica Shale increased by 12.86% in first quarter of 2017, according to the Ohio Department of Natural Resources (ODNR).

Oil production in that time decreased by 28.82%, the state agency said Friday in releasing Q1 production data.

Ohio’s horizontal wells produced 371 billion cubic feet (Bcf) of natural gas in the quarter. That is up from 329 Bcf produced in Q1 2016, the state said.

It is also up from the 345 Bcf, 7.5%, of natural gas produced in Q4 2016.

The top Ohio natural gas well in the quarter was Eclipse Resources’ Pittman 3H well in Monroe County’s Salem Township, producing 2.21 Bcf of natural gas.

Ohio had 87 Utica wells produce in excess of 1 Bcf in the quarter, Kallanish Energy has learned.

Oil production from shale drilling in Q1 was 3.90 million barrels (MMBbl), down sharply from 5.49 MMBbl in the year-ago quarter, and up 8.5% from 2016's fourth quarter oil production total of 3.6 MMBbl.

The top Ohio well for oil in the quarter was Eclipse Resources’ Purple Hayes well in Guernsey County, producing 68,171 Bbl.

ODNR said 1,560 horizontal shale wells reported oil or natural gas production in the first quarter. The average amount of oil produced was 2,503 Bbl; the average amount of natural gas produced was 238.41 million cubic feet (MMcf). The typical well was in production 86 days in Q1 2017.

Oil and gas totals include natural gas liquids and condensate. Ohio does not require separate listings.

As of June 3, Ohio had 2,518 Utica permits issued, 2,014 Utica wells drilled and 1,570 Utica wells producing, ODNR reported.

Pipeline Opposition Could Cost 78,000 Jobs.  A report released in April 2017 by the U.S. Chamber of Commerce’s Institute for 21st Century Industry, the fifth in its Energy Accountability Series, takes a look at the costs political opposition to new pipeline infrastructure projects is having on the residents of New England, New Jersey, New York, and Pennsylvania, finding this opposition could lead to the loss of greater than 78,000 jobs, $7.6 billion in GDP, and $4.4 billion in labor income in the region by 2020 if no new lines are constructed.  

The hydraulic-fracturing, commonly called “fracking,” revolution has transformed the energy outlook of the United States over the past decade. Because of the fracking revolution, natural-gas production has skyrocketed. As of 2015, 66 percent of the natural gas produced in the United States has been recovered via fracking techniques. The increased produced has caused prices to drop precipitously.

However, “despite the historic increase in natural gas production, as well as the economic and environmental advantages that have come with it,” the study notes, “infrastructure development has not proceeded at a similar and corresponding pace, particularly in the high-density Northeastern United States.”

Specifically, there are not enough pipelines in the Northeast, which limits the region’s supply of natural gas. “While much of the country has benefited from the massive influx of new natural gas supplies entering the marketplace over the past decade,” the report continues, “the Northeast has not been able to reap quite as much of the benefit of that trend notwithstanding its proximity to major producing formations like the Marcellus and Utica [shale basins.]”

There are 18 pipeline projects in the Northeast currently in the planning stages: three interstate that will travel into the Northeast, six interstate within the Northeast, and seven intrastate. Unfortunately, the study’s authors fear that “if past is prologue, we should expect that many of these projects will never be able to acquire the approvals they need to get off the ground.” They then site the Constitution Pipeline as a cautionary tale. The pipeline, which had been approved by federal regulators, was denied a water-quality permit by regulators in New York in April 2016, blocking the transportation of 600 million cubic feet of natural gas per day between the Marcellus shale and New England.

Because supplies of natural gas are limited, prices are necessarily driven up. Families in the Northeast pay residential electricity prices that are 44 percent higher than the U.S. average. Residential natural gas and industrial electricity prices are also 29 percent and 62 percent higher in the Northeast, respectively. Except for Pennsylvania, which is slightly below average, and Maine, which slides in at 11th place, all the states featured in the report are in the top 10 in the United States for having the highest average retail electricity prices. All six New England states also rank in the top 10 of a WalletHub study for total energy costs.

Bakken Production Up.  North Dakota crude oil production in April exceeded expectations, while natural gas production set a record, more examples of the industry rebound, Kallanish Energy reports.

Crude production increased to an average of 1.05 million barrels per day (MMBPD), the North Dakota Department of Mineral Resources reported Tuesday.

“I think that was more than many of us expected,” Director Lynn Helms told local media.

Natural gas production jumped 6%, to more than 1.8 billion cubic feet per day (Bcf/d) for April (latest data available), setting a new record based on preliminary figures.

Helms attributed the large increase in natural gas production to oil companies focusing efforts on the most prolific areas of the Bakken play — primarily in McKenzie and Dunn counties — where wells produce more associated gas.

North Dakota had 56 drilling rigs operating Tuesday, up six rigs from May.

The recent high for working rigs in North Dakota was 218, set in May 2012. The rig count has been slowly climbing since hitting a low of 27 in May 2016, but Helms said he believes a rig count around 55 is likely the peak for 2017.

“Oil prices just don’t support adding drilling rigs,” Helms said, the Bismarck Tribune newspaper reported.

The Dakota Access Pipeline, which began commercial service on June 1, is projected to increase the price for North Dakota crude by reducing transportation costs.

Justin Kringstad, director of the North Dakota Pipeline Authority, said he expects it may take six to 12 months before the market adjusts to Dakota Access, the Tribune reported.

North Dakota continues to see a shortage of workers in the Bakken, particularly for hydraulic fracturing crews, Helms said.

The number of wells that have been drilled but are waiting on fracking crews increased by 141 in April, to 830, in part due to the lack of workers.

“They’re really struggling to hire qualified people,” said Helms, adding most qualified workers took jobs in Oklahoma or Texas when activity ramped up those regions.

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Rig Count 

  • Baker Hughes Rig Count the week of June 16, 2017
     
  • PA     
    • Marcellus 34 unchanged
  • Ohio 
    • Utica 27 unchanged
  • WV 
    • Marcellus 13 unchanged
  • TX
    • Eagle Ford 84 unchanged
  • TX
    • Permian Basin – 368 unchanged
  • ND
    • Williston – 49 up 3
  • CO
    • Niobrara – 27 unchanged
       
  • TOTAL U.S. Land Rig Count 903 up 13

PA Permits June 8, to June 15 2017

      County              Township          E&P Companies

1.    Allegheny           Findlay              Range
2.    Beaver               Independence    Range
3.    Susquehanna     Brooklyn            Cabot

OH Permits for week June 10, 2017

       County      Township     E&P Companies

1.    Belmont      Mead            Gulfport
2.    Carroll        Washington    Rex
3.    Carroll        Washington    Rex
4.    Carroll        Washington    Rex
5.    Harrison     North             Chesapeake
6.    Harrison     North             Chesapeake
7.    Harrison     North             Chesapeake

Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149

Utica Summit