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    Expo/Industry events for the next few months

Utica Midstream
April 4, 2018
Walsh University
North Canton, OH
www.uticasummit.com

Ohio Valley Regional Oil & Gas Expo
April 24-25, 2018
Belmont County Carnes Center
St. Clairsville, OH\
http://ohiovalleyoilgasexpo.com/

The New Upstream PA 2018
May 17, 2018
Penn Stater Conference Center
State College, PA
www.upstreampa.com

Appalachian Storage Hub Conference
June 7, 2018
Hilton Garden Inn, Southpointe
Canonsburg, PA
https://www.appastorage.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

Interesting Rumors and Comments.  I want to thank Kallanish Reports for allowing me to moderator a panel at its “Crackers, Storage, and Pipelines 2018” conference.  Here’s what I heard:

  • Shell is already working on expansion of the cracker.  (RUMOR)
  • Shell is definitely going to need underground storage for the cracker plant.  Currently, there is only 1-day of underground storage.  When the cracker plant’s operations director arrives, he’s going to want more storage.  It could come from Mountaineer Storage. (RUMOR)
  • Where is China Energy?  Everyone is looking for China’s first move in the Appalachian Basin.  Many believe China Energy could become a player in the Appalachian Storage Hub.

Wolfe’s Tri-State Joke.  Pennsylvania Gov. Tom Wolf announced Wednesday his state, West Virginia and Ohio are extending their agreement to work together on natural gas resources through 2021.

Tri-State Shale Coalition was formed in 2015 for the mutual benefit of all three states, as they delve into the natural gas industry in the Marcellus and Utica shale formations. The agreement is among Wolf and fellow governors John Kasich of Ohio and Jim Justice of West Virginia.

The extension also is a message to domestic and international markets the three states intend to increase their own manufacturing opportunities to  ?? exporting resources to other areas.

Wolf said in a prepared statement: “The shale gas resources in the Appalachian Basin represent enormous economic opportunity not just for Pennsylvania, but for the region as a whole. We have a unique proposition: abundant and low-cost feedstock for petrochemical and plastics manufacturing, all within the same geographic footprint.

“I’m proud to continue our successful collaboration with Ohio and West Virginia to ensure that we are doing everything we can to support additional development – and the jobs and economic growth that go with it – in a region with an unprecedented natural resource.”

The states are working together at a time Shell is building its ethane cracker plant in Potter Township, Beaver County, and amid speculation the region could accommodate up to four other cracker plants.

Wolfe’s administration does everything possible to kill the oil and gas industry in PA.  This is just an election year ploy. 

If he supports the industry, why does he:

  • Continue to implement a severance tax
  • Support the Delaware River Basin Commission’s move to ban fracking in the Delaware River Basin
  • Encourage his DEP Department to stop or delay all pipelines in the state

Gulf Coast vs. Ohio River Valley.  A new study says the Shale Crescent — Ohio, West Virginia and Pennsylvania — has the potential to supplant the Gulf Coast as the nation’s petrochemical hub.

IHS Markit’s study, commissioned by Shale Crescent USA, looked at the risk-reward of developing cracker plants and downstream opportunities in the crescent vs the Gulf Coast.

Applied Economics Vice President Ron Whitfield said the study, which he oversaw, looked at the potential return on investment over a 20-year time frame, how pricing levels would impact those returns and other risk factors, including differences in capital costs, operating rates, customer proximity and access to international markets.

The study predicts substantial cost savings for companies investing in the shale crescent — 32 percent on ethane prices, and cash cost savings of 23 percent on ethylene and 16 percent on polyethylene, with a 23 percent savings on polyethylene delivered costs — primarily because it’s located virtually on top of the gas fields, is within a day’s drive of customers throughout the Midwest and Northeast and has an abundant supply of fresh water.

Their conclusion: Investing $3 billion in an ethylene facility would bring $3.6 billion in pre-tax profit advantage over 20 years.

“The Shale Crescent is more profitable than the Gulf Coast under all three scenarios, primarily driven by feedstock advantages and transportation costs associated with having a plant right on top of the gas fields and close to customers,” Whitfield said.

Jerry James, a volunteer director for Shale Crescent USA, said feedstock prices are a key driver. “In the petroleum business, that’s the supply of natural gas and natural gas liquids, particularly ethane.”

“We think that this will be a very good opportunity for investors to look at Shale Crescent USA for locating ethane and polyethylene cracker and downstream units,” he said.

IHS predicts the tri-state region will supply 37 percent of the nation’s natural gas production by 2040 and notes the U.S. has become the No. 1 natural gas producer.

“The natural gas produced in the Marcellus and Utica shales is rich in natural gas liquids (NGL), including ethane,” the firm noted in its report. “IHS Markit forecasts NGL production from these two plays will increase from 0.53 million barrels per day in 2017 to 1.37 million barrels per day in 2040, an increase of over 150 percent.”

Other studies concluded the three-state region can support up to five ethane crackers, including the $6 billion-plus Shell ethane cracker already under construction in western Pennsylvania, and another looking increasingly likely in Dilles Bottom, Ohio.

Shale Crescent leaders expect to see foreign investment in the three-state region, pointing out “the most likely people to invest are those who don’t necessarily already have assets in the Gulf.”

Whitfield said the market is already there.

“In our study, we identified about 900 plants currently existing in Ohio, some of them very, very large, that are currently buying pellets from the Gulf because there are no plants in the Shale Crescent to supply them,” Whitfield said. “There are another 30 currently in West Virginia, and another 100 or so in western Pennsylvania. That’s over a thousand customers on Day 1 who are currently buying pellets from suppliers (on the Gulf Coast).”

The bill, which Manchin introduced in June, would make sure that a regional storage hub qualifies for the Department of Energy’s successful Title XVII innovative technologies loan guarantee program.

A regional storage hub could help ensure optimization of domestic energy resources while attracting manufacturing investment and creating jobs, Manchin said.

“The Appalachian Storage Hub will allow West Virginia and its neighbors to realize the unique opportunities associated with Appalachia’s abundant natural gas liquids like ethane, naturally occurring geologic storage and expanding energy infrastructure,” Manchin said.

“In fact, a storage hub will attract manufacturing investment, create jobs and significantly reduce the rejection rate of natural gas liquids like ethane, butane and propane by capturing and utilizing these products — thereby reducing emissions,” Manchin said.

“By having access to natural gas liquids locally, our existing manufacturers will benefit and we will be in a position to attract additional companies, create thousands of downstream jobs and boost the state’s economy,” she said  “We are excited to hear of this advancement spearheaded by Senator Manchin.”

The proposed Appalachian Storage and Training Hub most recently cleared a major hurdle in January.

Its developers, Appalachia Development Group, were given permission to proceed with Part II of the application process to secure a $1.9 billion federal loan to support the project.

The application was “the first of several steps in the process to secure a conditional commitment and final loan agreement, said Steve Hedrick, CEO of Appalachia Development Group and president and CEO of Mid-Atlantic Technology, Research & Innovation Center.

“I would consider this to be a milestone and a pathway,” he said. “A select few efforts make it through Part I of the loan guarantee program and get an invitation to Part II.”

Hedrick said the initial cost of the project would be “north of $3 billion” for the first phase.

“(You’re talking) multiple storage locations with significant infrastructure and piping, storing and delivering natural gas liquids from intermediates to manufacturing locations — it’s not a small list,” he said.

John Deskins of the Bureau of Business and Economic Research at the WVU College of Business and Economics said the storage hub would help add value to gas products extracted from West Virginia before they are shipped elsewhere.

“It’s absolutely crucial to see value added,” he said. “That could really turn around a lot of vicious cycles we’ve seen, such as unemployment and loss of population in this state.”

Top Producers in the Marcellus.  Cabot Oil & Gas, EQT Corp. and Consol Energy are at the top of a list of the most productive operators in the Marcellus Shale play, according to a new analysis by private equity firm Baird Equity Research. The analysis ranks oil and gas companies on the consistency and magnitude of their productivity.

Judges Are not Buying Environmentalists Claims.  Federal judges seemed doubtful yesterday of environmentalists' claims that the Federal Energy Regulatory Commission is fundamentally biased in favor of pipelines. In oral arguments before the U.S. Court of Appeals for the District of Columbia Circuit, a panel of judges expressed skepticism toward the Delaware Riverkeeper Network's argument that FERC's funding structure encourages the agency to approve projects. "First of all, it seems utterly unrealistic," said Senior Judge Harry Edwards, zeroing in on FERC officials' motivation. At issue is whether the commission's funding creates a "structural bias" favoring natural gas pipelines. Under the Omnibus Budget Reconciliation Act of 1986, the agency relies on fees and annual charges from natural gas companies to reimburse the U.S. Treasury for the natural gas program's budget.

EnerVest Sells Eagle Ford Assets.  TPG Pace Energy Holdings announced it's acquiring 360,000 net acres in the Eagle Ford Shale from EnerVest for $2.66 billion, Kallanish Energy reports.

TPG Pace Energy Holdings was formed by Steve Chazen, former CEO at Occidental Petroleum, who stepped down in 2016, and private equity firm TPGF.

It plans to change its name to Magnolia Oil and Gas Corp. upon the deal closing by June 30, when it becomes a publicly-traded company.

Chazen will be the president, chairman and CEO of Magnolia and EnerVest will operate the assets and own roughly 51% of the company. TPG Pace investors will own 43% and TPG will own the remainder.

The new company's chief financial officer will be Christopher Stavros, another Occidental Petroleum veteran.

The company is expected to be large-scale, oil-weighted, pure-play Eagle Ford independent oil and gas producer, the companies said.

Those South Texas assets currently produce more than 40,000 barrels of oil-equivalent per day (BOE/d). Production is 62% oil and 78% liquids.

The assets include Eagle Ford and Austin Chalk assets in Karnes County, and an extensive position in the Giddings Field, an emerging high-growth Austin Chalk play. That includes 14,000 net acres in Karnes County and 345,000 net acres in the Giddings Field.

Cabot Sells Eagle Ford Assets.  Privately-held Venado Oil and Gas and international investment giant KKR said Tuesday they’ve closed on the $765 million acquisition of Cabot Oil & Gas’ operated and non-operated Eagle Ford assets.

Venado and KKR acquired interests which include roughly 303 gross/203 net wells and 74,400 net acres situated primarily in the Eagle Ford oil window of South Texas (Atascosa, Frio, and LaSalle counties).

During 2017’s fourth quarter, the assets produced 15,656 net barrels of oil-equivalent per day (85% oil, 5% natural gas and 10% natural gas liquids).

“The Cabot acquisition is a high-quality asset positioned in the oil fairway of the Eagle Ford,” said Venado CEO Scott Garrick. “The combination of a strong production base and an attractive inventory of future drilling locations fit well with our disciplined business model of operating with free cash flow while supporting long term growth.”

When the deal was announced last Dec. 20, Cabot also announced a separate deal for the sale of its remaining East Texas assets to an undisclosed buyer, expected to close by July 1, Kallanish Energy reports.

"Beginning over a decade ago, Cabot began the process of transforming the company into one of the lowest cost operators in the industry," said Dan O. Dinges, Cabot’s chairman, president and CEO, speaking when the deal was announced.

"These transactions (the Eagle Ford sales) represent a further step in our transformation process and accelerate the value of these assets while improving Cabot's cost structure and corporate returns.”

The Eagle Ford assets accounted for only roughly 5% of Cabot’s total equivalent production and 4% of its proved reserves in 2017.

NatGas Growing in the Permian.  Natural gas from the Permian Basin in West Texas and New Mexico is often overshadowed by oil -- but natural gas production is growing and significant.

 The bottlenecks in getting natural gas from the Marcellus and Utica shales in the Appalachian Basin to markets are expected to largely disappear in the third quarter of 2018.

The U.S. has become the No. 1 producer of crude oil and natural gas and that fact is disrupting both global markets.

Those were among the observations from Maria Sanchez, manager of energy analysis at DrillingInfo.com, who was among the speakers Wednesday at Kallanish Energy’s Crackers, Storage & Pipelines 2018 Conference, in Cecil Township, south of Pittsburgh.

The abundance of crude oil and natural gas from U.S. shale has created “a whole new game,” Sanchez told roughly 45 attendees at the half-day conference.

The U.S. must be prepared to export crude and natural gas in order to provide the best economic options, she said. Such exports will be “crucial.”

If the U.S. fails to develop the needed infrastructure, there will be a wide differential between global and U.S. domestic prices, she warned.

Her company is projecting U.S. crude oil production will surpass U.S. refinery capacity by late 2019, triggering additional crude oil exports.

Prices will likely increase in the next few years for E&P companies, although that will be partially offset by improved technology, according to Sanchez.

Drillers will likely find new sources of natural gas, including the Mancos Shale in Colorado and New Mexico and Alpine High and Austin Chalk formations, both in Texas, Sanchez said.

Such future discoveries will “disrupt existing gas flows and place significant stress on existing infrastructure,” she said.

The U.S., she said, will not abandon its position as the low-cost marginal supplier of crude oil and natural gas.

According to Sanchez, the Permian Basin is considered an oil play with crude oil accounting for 77% of production.

But the Permian Basin is now producing 7 billion cubic feet of natural gas per day (Bcf/d) and is projected to increase to 15 Bcf/d by 2035, she said.

The Bakken Shale in North Dakota and Montana is also a big oil play with oil accounting for 89% of production, she said. That contrasts with the Haynesville Shale on Louisiana, Texas and Arkansas that is 89% natural gas, and the Marcellus and Utica shales in the Appalachian Basin that are 70% natural gas.

What can be done with Permian crude oil and natural gas is somewhat limited by geography, Sanchez said.

Most of it flows east to Houston and Louisiana, and some is headed to the southeast to Corpus Christi, Texas, for export.

Mexico may get additional shipments from the Permian but that has been slow to develop, to date, she said. There are few shipments to the west, to Arizona or California, she said.

Shipments to the north to the Midwest have largely been curtailed by increased production in Oklahoma and from the Marcellus-Utica. Those areas are pushing back against the growing Permian production, and less Texas natural gas is being shipped to the Midwest.

Seven new pipelines to move natural gas from the Appalachian Basin to markets will help eliminate the bottleneck that's produced lower prices for Appalachia producers. That will have “a huge impact” on prices paid for natural gas produced in the basin.

U.S. natural gas exports are projected to grow to 11 Bcf per day by 2025, and to 14 Bcf per day by 2033, Sanchez told her audience. Much of the gas will be shipped as liquefied natural gas (LNG) from Gulf Coast ports, she added.

New Permian Pipeline.  Permian Global Access Pipeline, a subsidiary of Tellurian, the Houston-based LNG firm, is seeking shippers to support a natural gas pipeline from the Permian Basin to southwest Louisiana, Kallanish Energy reports.

The $3.7 billion pipeline would be able to transport 2 billion cubic feet of natural gas per day (Bcf/d). Construction could begin as early as 2021, and the line could be in operation by 2022.

The 42-inch pipeline would run 625 miles, from the Waha Hub in Pecos County, Texas, to Gillis, La., in Jefferson Davis Parish.

There will be multiple generation and delivery locations along the line, the company said.

The non-binding open season for the pipeline began March 21, and runs through May 25.

It will be part of Tellurian’s planned $7 billion pipeline network of projects in Texas and Louisiana to support its Driftwood LNG, a proposed $15.2 billion natural gas export facility near Lake Charles, La.

Natural gas production in the Permian Basin is expected to reach 12 Bcf/d by 2023, and continue to grow and new pipeline capacity is needed, said Tellurian president and CEO Meg Gentle, in a statement.

ExxonMobil Thinking about New Polyethylene Plant in the Gulf.  ExxonMobil announced this week it has started detailed engineering work on a potential U.S. Gulf Coast project to expand its polyethylene manufacturing capacity by up to 450,000 tons a year, Kallanish Energy reports.

A final investment decision is expected later this year. The facility, expected to cost several hundred million dollars, could come online as early as 2021.

No specific location for the project was mentioned in the company’s statement, although media reports said the facility might be built at the company’s existing polyolefins plant in Baton Rouge, La.

The new facility would help ExxonMobil meet growing worldwide demand for high-performance, lightweight durable plastics derived from ethane produced by U.S. shale drilling.

It would be capable of producing advanced polypropylene products which can be used in high performance automotive, appliance and packaging applications.

“ExxonMobil is well positioned to take advantage of the growing global demand for higher-value products in both North America and the high-growth Asia Pacific region,” said John Verity, president of ExxonMobil Chemical, in a statement.

“Abundant supplies of domestically produced oil and natural gas have reduced energy costs and create new sources of feedstock for U.S. chemical manufacturing. Most of our planned investment in the Gulf Coast region is focused on supplying emerging markets like Asia with high-demand products, which ultimately will spur new economic growth locally,” he said.

The project is one of 13 new facilities planned to grow ExxonMobil’s chemical manufacturing capacity in North America and Asia Pacific by roughly 40%. The investments include two steam crackers planned in the U.S.

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PA Permits March 15, to March 22, 2018

            County                                     Township                                          E&P Companies

  1. Butler                                           Parker                                                EM Energy
  2. Butler                                           Parker                                                EM Energy
  3. Butler                                           Parker                                                EM Energy
  4. Butler                                           Parker                                                EM Energy
  5. Butler                                           Parker                                                EM Energy
  6. Butler                                           Parker                                                EM Energy
  7. Butler                                           Parker                                                EM Energy
  8. Greene                                         Morris                                                 EQT
  9. Greene                                         Morris                                                 EQT
  10. Greene                                         Morris                                                 EQT
  11. Greene                                         Morris                                                 EQT
  12. Greene                                         Richhill                                              CNX
  13. Greene                                         Whiteley                                            Greylock
  14. Greene                                         Whiteley                                            Greylock
  15. Indiana                                        North Mahoning                               XTO Energy

OH Permits for week ending March 17, 2018

            County                                   Township                                          E&P Companies

  1. Monroe                                        Ohio                                                   Statoil
  2. Monroe                                        Ohio                                                   Statoil
  3. Monroe                                        Ohio                                                   Statoil
  4. Monroe                                        Ohio                                                   Statoil
  5. Monroe                                        Green                                                 Eclipse Resources
  6. Monroe                                        Green                                                 Eclipse Resources
  7. Monroe                                        Benton                                               Triad Hunter

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

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