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Expo/Industry events for the next few months

Marcellus-Utica Midstream
January 30 – February 1, 2018
David L. Lawrence Convention Center
Pittsburgh, PA
https://www.hartenergyconferences.com/marcellus-utica-midstream 

Emerging Opportunities Ohio River Valley Conference
February 22, 2018
Oglebay Resort
Wheeling, WV
http://emergingopportunitiesorv.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 

China Is Coming to WV.  Although relatively short on specifics during a Monday press conference, Gov. Jim Justice showed plenty of enthusiasm for what he termed a “deathly serious” $83.7 billion China Energy investment plan for shale natural gas and petrochemical projects in West Virginia.

“China wouldn’t be sending 28 people if they weren’t deathly serious about the whole thing,” Justice said. “They are traveling around the state and looking at sites and doing all kinds of different work.

“It’s more money than anybody can even imagine,” he added.

Almost one month has passed since West Virginia Secretary of Commerce Woody Thrasher went to Beijing to sign a memorandum of understanding with Chinese officials while in the presence of both President Donald Trump and China’s president, Xi Jinping. Details, however, remain somewhat scarce, although natural gas-fired power plants in Brooke and Harrison counties reportedly are among the initial investment plans.

Other opportunities could include ethane crackers and storage areas.

On Monday, Justice said he and other leaders met with some of the 28 Chinese team members in Morgantown for a general discussion. He also said West Virginia University President E. Gordon Gee and Thrasher took the delegation to a WVU basketball game.

When asked for more information about the deal, Justice said he could not reveal details because of a “confidentiality agreement.” He also declined to provide an estimate of when more information would be forthcoming.

If China officials reach the $83.7 billion investment figure, it will be more than double the $35 billion total which West Virginia University Energy Institute Director Brian Anderson estimates drillers, frackers, processors and pipeliners have spent in the Mountain State since the Marcellus and Utica shale boom began several years ago. It will also be more than the state’s annual gross domestic product — the total value of all goods and services produced in the state, which WVU Bureau of Business and Economic Research Director John Deskins said is about $75 billion.

Anderson recently discussed the results of a study to determine the best locations for underground storage caverns to create an Appalachian storage hub for natural gas liquids. This alone could lead to 100,000 permanent jobs in the Marcellus Shale region, according to the American Chemistry Council.

Several of the areas the study lists as “top-rated” for storing ethane, propane, butane or other natural gas liquids are in the Upper Ohio Valley. Presently, Mountaineer NGL Storage is working on such a project along the Ohio River in Clarington. Although this is in Ohio, the facility will connect to West Virginia by pipeline.

Justice said he believes West Virginia can be the hub of which Anderson speaks. If this occurs, the governor said the ultimate Chinese investment could be “substantially even higher” than the $83.7 billion outlined in the memorandum of understanding.

November Pipeline Takeaway. November was an important and much-anticipated month for Northeast pipeline projects, with seven projects being placed into service, five of which add a total 1.15 Bcf/d of incremental natural gas takeaway capacity out of the region. These were brownfield projects on AGT, CGT, TETCO, and TGP, as summarized in the table below. One notable project absent from this list is TCO Leach XPress, which had been scheduled for a November startup, but has been delayed until January 2018.

Pipeline flow data shows the new TETCO backhaul capacity is already being utilized, with flows jumping nearly 500 MMcf/d since November 1, as seen in the figure below. Conversely, on CGT, there have not been observable incremental flows out of the region with the startup of Rayne Xpress. With other upstream bottlenecks on the TCO system connecting into CGT, Rayne’s full impact will likely not be realized until Leach XPress comes online in January.

Even without the full impact of Rayne XPress, new pipeline capacity has ushered in record production in the region, with production receipts exceeding 26 Bcf/d at the end of November. This brings the November average to 25.5 Bcf/d, which was 1.8 Bcf/d greater than October, as weak pricing resulted in shut in production at times during shoulder season.

Much of the new pipeline takeaway capacity, over 1 Bcf/d, was focused in Western Appalachia. However, the month-over-month growth in production receipts was evenly split between Western and Eastern Appalachia, at about 900 MMcf/d each. Production in Eastern Appalachia has been correlated to natural gas pricing, and thus production receipts decreased by about 0.5 Bcf/d at the end of summer and into shoulder season, as TGP Zone 4 basis weakened, as seen in the figure below. Stronger pricing with the start of winter first brought production back to previous levels, and incremental capacity has allowed for increased production seen at the end of November. In Western Appalachia, on the other hand, production has steadily grown since summer, with Rover becoming partially operational in September.

The projects that started up in November really mark the start of the next wave of new pipeline capacity set to come online in the region.  The full completion of Rover and the startup of Leach XPress early next year are the main projects on the horizon. Next summer brings the anticipated startup of the greenfield portion of Atlantic Sunrise, which will provide 1.7 Bcf/d of incremental capacity out of Eastern Appalachia. Then another big slug of projects is slated to come online at the end of 2018, including Nexus, CGT Gulf Xpress and EQT’s Mountain Valley, which will add an additional 4.4 Bcf/d of takeaway capacity. Will production keep pace as these new projects come online and what are the basis implications as these projects startup? For answers to these questions and to keep up to date with the development of these infrastructure projects, check out the Northeast Gas Outlook.

EQT Receives Water Quality Certificates for Mountain Valley Pipeline. Virginia’s Water Control Board has issued a certification for a proposed natural gas pipeline that will run through six counties in the state. The board voted 5-2 Thursday to issue a water quality certification for the Mountain Valley Pipeline.

Chevron Bullish on U.S. Shale.  Chevron is stepping up investment in US shale production, even as the second-largest US oil and gas group prepares to cut its total capital spending for a fifth year in succession. The company on Wednesday afternoon announced a budget for capital and exploration spending for 2018 of $18.3bn, about 4 per cent lower than the expected out-turn for 2017. Within that, however, there will be a sharp acceleration in its planned investment in shale. The company intends to invest $2.5bn in shale this year, most of it in the Permian Basin of Texas and New Mexico. For next year, it plans to increase that by about 70 per cent to $4.3bn, with $3.3bn going to the Permian alone. Other large US oil producers, including ExxonMobil and ConocoPhillips, have also been stepping up investments in shale to drive production growth.

Valorem Closes Deal in the Williston.  Independent producer start-up Valorem Energy and certain subsidiaries said Thursday the companies had closed on the $285 million acquisition of LINN Energy’s Williston Basin assets.

The acquired assets consist of roughly 20,000 net acres in North Dakota, South Dakota and Montana with estimated third-quarter net production of 8,750 barrels of oil-equivalent per day (BOE/d), Kallanish Energy reports.

Chisholm Expands in the Delaware Basin.  Year-old oil and gas producer Chisholm Energy Holdings, backed by a $500 million equity credit line from private equity firm (PEF) Warburg Pincus, said Thursday it signed a deal to acquire undeveloped acreage from start-up Resource Rock Exploration, backed by PEF Kayne Anderson Energy Funds.

No purchase price was given, Kallanish Energy learns.

The acreage, which contains multiple horizontal reservoir targets in the Bone Spring and Wolfcamp formations, is located in Eddy County, N.M., within the Delaware Basin.

Greylock Buys into the Appalachian Basin. Greylock Energy has acquired substantially all of the Appalachian Basin gas production and midstream assets of West Virginia-based Energy Corporation of America for an undisclosed price, Kallanish Energy reports.

It also took on ECA’s staff, including its CEO.

Greylock, an affiliate of Boston-based private equity firm ArcLight Capital Partners, acquired 4,400 operated wells, 2,600 miles of gathering assets and 713,000 net deep acres.

Most of the wells involved are conventional wells in West Virginia and Pennsylvania, but the deal does include about 100 Marcellus Shale wells.

More NatGas Exporting.  In 2015, the price of liquefied natural gas (LNG) fell sharply and only a handful of US export projects secured final investment decision (FID) and began construction. The fate of other projects became clouded with several projects being canceled or delayed until LNG prices improved. Two years later, LNG market conditions are showing signs of improvement. However, due to the size and cost of LNG export facilities, there is a long development cycle where government approval and financial commitments today will not result in project completions for nearly 5 years. Thus, it may be time to pull the trigger on the next round of LNG projects.

Prices have showed some strengthening in the last two years, but the biggest change is that LNG prices are now clearing the all-in supply cost to market. The chart below shows a breakout of LNG costs to the Asian market and the LNG price in Japan. Although this analysis only focuses on one destination, the dynamics of exporting to Asia are a useful proxy for the overall LNG export market from the US. For much of last year the LNG price in Japan was below the all-in landed costs.  While a number of cargoes still moved due to a portion of the supply costs being sunk, the appetite for additional projects was tempered by the immediate oversupply. However, in the second half of 2017 supply and shipping costs declined slightly while the price of LNG rose above the total cost structure. A positive sign for companies looking to further grow US LNG exports through additional trains and new facilities.

There are currently six US LNG export terminals approved by the Federal Energy Regulatory Commission (FERC) and under construction. In total, this provides over 9 Bcf/d of LNG export capacity. Of these, only Cheniere’s Sabine Pass is currently operating although deliveries to the Cove Point LNG facility are expected to begin soon. Trains 1 through 4 at Sabine have been running strong with daily volumes averaging above 3 Bcf/d. As natural gas drilling from the Marcellus and Utica and associated gas production from the Permian continue to grow available supply, demand from LNG has become an increasingly important piece of the supply and demand balance in the US.

Beyond 2020, BTU Analytics sees the North American natural gas market returning to a demand constrained dynamic. As such, and assuming global demand for LNG continues to increase, US gas production growth may be partially limited to the total capacity and utilization of LNG export facilities. While it is not expected that all projects will get built, FERC currently lists over 25 Bcf/d of additional projects in the application phase in the US alone plus additional facilities in Canada and Mexico are under consideration.

However, the design size of LNG trains is showing a shift in strategy. Of the projects currently under construction, capacity per train will average nearly 0.6 Bcf/d. Sabine Pass, Cove Point, Cameron, Corpus Christi and Freeport will have train sizes between 0.59 Bcf/d and 0.71 Bcf/d. Only Elba Island has a smaller train size of 0.18 Bcf/d. In contrast, the next wave of LNG facilities are being designed with smaller train capacities. Magnolia and Driftwood for example have proposed train capacities of 0.29 Bcf/d and 0.20 Bcf/d respectively. This is perhaps a way to provide for smaller markets or contracts while keeping overall costs and project timelines in check.

The chart above shows the maximum monthly LNG volumes received by country in the last 12 months. Only Mexico and South Korea come close to the level of imports provided from a single train at Sabine Pass. The remaining countries take less than 0.35 Bcf/d, much more in line with announced train sizes from future projects. Going forward, this makes sense as the initial LNG projects are able to market to and secure many of the larger, creditworthy buyers. However, moving forward, a shift to smaller trains could allow for commitments from smaller backers, utilities, and more specialized markets while providing some flexibility into the US export market. For more information on BTU Analytics’ LNG research, request a sample of the Henry Hub Outlook Report.

Rover Moving to Completion.  The mighty Rover Pipeline project marches on toward 100% completion, even though the Ohio EPA is doing its best to stop it. Because of previous issues with underground horizontal directional drilling (HDD), the Federal Energy Regulatory Commission (FERC) first put the brakes on Rover, then later eased off the brakes, but still keeps Rover on a tight leash, preventing Rover from moving at the faster pace they’d like move at. Especially with respect to work in eastern Ohio. Rover is a $3.7 billion, 711-mile natural gas pipeline that (will eventually) run from PA, WV and eastern OH through OH into Michigan and on to Canada. 

A large portion of the pipeline, designated Phase 1A, began flowing natural gas on Sept. 1st. However, Phase 1B work in eastern OH and WV, which will feed more Marcellus/Utica gas to the main part of the pipeline, has been stymied by slow HDD work. At least some of 1B is now ready to begin. Yesterday Rover asked FERC for permission to begin service on three lateral pipelines totaling nearly 62 miles, and to start up three compressor stations and seven metering stations–in Ohio’s Noble, Monroe and Harrison counties. 

Firmer Oil Prices Forecast for 2018.  A stronger than anticipated OPEC-led commitment to extend production cuts will support prices through 2018, according to analysts at Goldman Sachs.

In a research note published late Monday, Goldman lifted its Brent price forecast for next year to $62 a barrel, and its West Texas Intermediate projection to $57.50/Bbl. The revisions were up from $58/Bbl and $55/Bbl, respectively, CNBC reported.

Brent closed Tuesday at $62.45, down $1.28, while WTI closed at $57.47, down $0.89/Bbl, Kallanish Energy reports.

While the OPEC-led deal "leaves room for an earlier exit than currently scheduled, we now reflect this resolve in our supply forecast, with full compliance for longer and a more modest exit rate," Goldman analysts said in the research note.

Industry Targets Methane Reduction.  Twenty six U.S. onshore oil and natural gas producers have announced a new voluntary, industry-backed initiative to curtail methane and volatile organic compound emissions from drilling, Kallanish Energy reports.

The landmark program, to officially kick off Jan. 1, is called The Environmental Partnership. The goal is to accelerate emissions reductions by boosting environmental performance.

The announcement came Tuesday in a teleconference organized by the American Petroleum Institute.

“This groundbreaking partnership further demonstrates the industry’s leadership and commitment to responsibly developing America’s energy resources while reducing emissions,” said Jack Gerard, president and CEO of API, in a statement.

Participating firms are Anadarko, Apache, BHP, BP, Chesapeake Energy, Cabot, Chevron, Cimarex Energy, ConocoPhillips, CrownQuest, Devon Energy, Encana, EOG Resources, Hess, Marathon Oil, Murphy Oil, Newfield, Noble Energy, Occidental Petroleum, Pioneer Natural Resources, Shell, Southwestern Energy, Statoil, Total, Western Gas Partners and XTO Energy.

“We are very happy to be participating,” said spokesman Mark Berg of Pioneer Natural Resources.

The program “is a good vehicle to deliver industry focus and action,” said Greg Guidry, Shell’s executive vice president Unconventionals Business.

Rover Seeking Approval for Compressor Stations and Laterals.  Rover Pipeline is seeking federal approval to begin service at three compressor stations and three laterals on its natural gas pipeline in eastern Ohio, Kallanish Energy reports.

The request was filed Friday with the Federal Energy Regulatory Commission. Texas-based Energy Transfer Partners asked the federal agency to approve its request by Dec. 14.

The three compressor stations are at Cadiz, Seneca and Clarington. In all, 10 compressor stations are planned.

The laterals are the 3.7-mile, 24-inch Berne Lateral in Noble County, the 25.6-mile, 42-inch Seneca Lateral in Noble and Monroe counties, and the 32.6-mile, 42-inch Clarington Lateral in Monroe and Harrison counties.

The company is also seeking approval to begin service at seven metering stations.

On Aug. 31, roughly 213 miles of the pipeline from Cadiz in eastern Ohio to Defiance in northwest Ohio and along two laterals were put into service.

Constructing the 125-mile pipeline from Defiance north into Michigan and east into Ontario is continuing. That project is expected to be in service by the end of first quarter 2018, ETP said.

The twin pipeline will carry natural gas from the Marcellus and Utica shales to the Midwest, Canada and the Gulf Coast. It will move up to 3.25 billion cubic feet per day from Ohio, West Virginia and Pennsylvania.

ETP and the Ohio Environmental Protection Agency remain ensnarled in a battle over the pipeline construction and leaks from horizontal directional drilling under streams and roads.

Ohio has filed a lawsuit against the company seeking $2.3 million in fines. The state has also asked that HDD be halted because of spills. 

Belmont County #1 in Ohio.  Belmont County is now the center of Utica Shale drilling activity in Ohio, Kallanish Energy reports.

Belmont has surpassed Carroll County in the number of drilling permits issued since 2011 by the Ohio Department of Natural Resources.

It is the first time in six years that Carroll County had failed to be No. 1 for drilling permits.

Belmont had 526 permits, as of Nov. 18, one more than Carroll County’s 525 permits, the Canton Repository newspaper reported.

Carroll County still leads in the number of producing horizontal Utica wells with 453, compared to 319 in Belmont and 309 in Harrison County, the paper said.

The new No. 1 Ohio drilling county had been expected for some time. Carroll County was the early focus of drillers who came to Ohio in 2010-2011.

More recently, Ohio drilling activity has been centered to the south, in Belmont and Monroe counties in the play's dry-gas window.

As of Dec. 2, Ohio has permitted 2,694 horizontal Utica wells, of which 2,184 wells have been drilled and 1,735 wells are producing, ODNR says. At present, 21 rigs are at work in Ohio.

The companies with the most state Utica permits, as of Dec. 4, are Chesapeake with 853, Gulfport with 387, Ascent with 281, Antero with 254, Eclipse with 150 and Rice Energy (now part of EQT) with 122.

ExxonMobil Merges Refining and Marketing.  ExxonMobil is combining its refining and marketing operations into a single company, ExxonMobil Fuels & Lubricants, in the first quarter of 2018.

Bryan Milton, currently president of ExxonMobil Fuels, Lubricants & Specialties Marketing, has been appointed president of the combined division by ExxonMobil’s board of directors, effective Jan. 1.

By combining activities of the two divisions, ExxonMobil Refining and Supply, and ExxonMobil Fuels, Lubricants & Specialties Marketing, the company will achieve further integration to improve decision making and enhance performance in the market, according to ExxonMobil.

ExxonMobil Fuels & Lubricants, along with ExxonMobil affiliates, will manage crude purchasing and logistics, refining, supply, trading, midstream, marketing and sales of refined products, Kallanish Energy reports.

Cove Point Getting Closer to Commercial Operations.  Dominion Energy Cove Point (DECP) on Tuesday announced it has introduced feed gas into the $4 billion natural gas liquefaction facility located in Maryland, Kallanish Energy reports.

All major equipment has been tested and is being commissioned as expected, following a comprehensive round of testing and quality assurance activities, the company said, in statement.

Shell NA LNG is providing the natural gas needed for liquefaction during the commissioning and will offtake the LNG that is produced, Dominion Energy said.

It has been reported the plant could begin commercial operations by Dec. 31.

When commissioning is complete, DECP will produce LNG for ST Cove Point, the joint venture of Sumitomo Corp. and Tokyo Gas and for GGULL, the U.S. affiliate of GAIL (India), under 20-year contracts.

Cove Point, at Lusby, Md., on the Chesapeake Bay, has LNG production capacity of 5.25 million tons per year.

The natural gas feedstock, roughly 750 million cubic feet per day, would come from the Marcellus and Utica shales in the Appalachian Basin.

Construction began in October 2014, following three years of review and permitting.

WV DEP Waives Authority.  The West Virginia Department of Environmental Protection on Wednesday waived the state’s authority under the federal Clean Water Act to determine if another major natural gas pipeline proposal would harm rivers and streams.

The DEP announced in a news release that the agency had waived its legal authority to decide if the Atlantic Coast Pipeline would violate West Virginia’s water quality standards. Agency officials also released copies of letters to the Federal Energy Regulatory Commission and the U.S. Army Corps of Engineers informing those agencies of the DEP’s waiver decision.

The announcement is the second time in a little more than a month that the Gov. Jim Justice administration has waived the state’s authority to certify — or refuse to certify or add conditions — that a natural gas pipeline proposal would comply with the state’s water quality standards. On Nov. 1, the DEP announced a similar waiver decision regarding the Mountain Valley Pipeline.

The Mountain Valley project would run from Wetzel County, West Virginia, to Pittsylvania County, Virginia.

The Atlantic Coast Pipeline would run from Harrison County to southeast North Carolina. The two projects are among a collection of pipelines that are proposed or under construction across the region that are meant to take advantage of the Marcellus Shale gas boom, but they are drawing opposition from residents and from national environmental groups.

Enterprise Converts NatGas Pipeline to Oil.  Enterprise Products Partners Wednesday announced plans to convert one of its pipelines that transports natural gas liquids from the Permian Basin to the Texas Gulf Coast to crude oil service.

This pipeline conversion would provide the partnership with total crude oil pipeline capacity of over 650,000 barrels per day (BPD) from the Permian Basin to Enterprise’s crude oil hub in the Houston area.

“We have had strong demand for crude oil transportation, storage and marine terminal services for crude oil production from the Permian Basin,” said A.J. “Jim” Teague, CEO of Enterprise’s general partner.

The conversion is expected to be completed in the first half of 2020, Kallanish Energy reports.

Midstreamer Enterprise has three existing NGL pipelines that flow from the Permian to the Texas Gulf Coast: Seminole Blue, Seminole Red and Chaparral.

The Shin Oak NGL pipeline, currently under construction, will be the partnership’s fourth NGL pipeline from the Permian to the Texas Gulf Coast. Shin Oak is expected to be in service in the second quarter of 2019.

The completion of the Shin Oak pipeline provides Enterprise the flexibility to divert NGL volumes from at least one of its existing NGL pipelines onto Shin Oak and repurpose the vacated NGL pipeline to crude oil service, according to the company. Enterprise is currently evaluating which NGL pipeline(s) to repurpose.

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PA Permits November30, 2017 to December 7, 2017

           County                                   Township                                          E&P Companies

  1. Greene                                         Richhill                                              Rice
  2. Greene                                         Richhill                                              Rice
  3. Greene                                         Richhill                                              Rice
  4. Greene                                         Richhill                                              Rice
  5. Greene                                         Richhill                                              Rice
  6. Greene                                         Richhill                                              Rice
  7. Greene                                         Richhill                                              Rice
  8. Susquehanna                            New Milford                                       SWN
  9. Susquehanna                            New Milford                                       SWN
  10. Tioga                                            Liberty                                                SWN
  11. Tioga                                            Liberty                                                SWN
  12. Tioga                                            Liberty                                                SWN
  13. Washington                                North Bethlehem                             Rice
  14. Washington                                North Bethlehem                             Rice
  15. Washington                                North Bethlehem                             Rice
  16. Washington                                North Bethlehem                             Rice
  17. Washington                                North Bethlehem                             Rice
  18. Washington                                North Bethlehem                             Rice
  19. Washington                                North Bethlehem                             Rice
  20. Wyoming                                     Forkston                                            WN

OH Permits for week November 11, 2017

          County                                      Township                                          E&P Companies

  1. Belmont                                       Washington                                      Gulfport
  2. Belmont                                       Washington                                      Gulfport
  3. Monroe                                        Greene                                               Eclipse
  4. Monroe                                        Adams                                                Eclipse
  5. Monroe                                        Switzerland                                       Consol
  6. Monroe                                        Switzerland                                       Consol
  7. Monroe                                        Switzerland                                       Consol

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

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