Facts and Rumors Newsletter #348 August 31, 2019

Shale Directories Conferences

7^th Annual Utica Summit
October 10, 2019
Walsh University
North Canton, OH

www.uticasummit.com

Shale Insight Conference
October 22-24, 2019
David Lawrence Convention Center
Pittsburgh, PA

7^th Annual Midstream PA 2019
November 12, 2019
Penn Stater Conference Center
State College, PA

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

A Perfect Storm Is Brewing for US LNG. That the U.S. energy industry would be among those hardest hit by a full-blown trade war between Washington and Beijing was a no-brainer. Yet the extent of the fallout as the war continues is only becoming evident now, as some companies find it hard to secure the funding for their ambitious LNG projects. According to the Bank of America Merrill Lynch, a number of companies may delay their final investment decisions on new LNG capacity to next year because of U.S.-Chinese trade tensions. Bloomberg reports these include Tellurian and NextDecade, as well as other companies focused exclusively on LNG.

Natural Gas Prices Poised for Dramatic Price Increase. The recent fall of natural gas prices to extraordinary lows attests to a misunderstanding of how precarious supply remains, and it has poised the market for potentially explosive price increases in the near term. Years of waning interest in natural gas simplified the public discussion of gas prices to a single factor: gas in storage compared to five-year average. This spring and summer as storage trended up toward, but still below the five-year average, prices swooned to levels only touched briefly since the early 2000s. The idea of gas storage as the keystone indicator worked in a previous incarnation of the gas market, but it fails to understand the market’s ongoing metamorphosis.

Aramco Selling West Texas Light. Aramco Trading Company (ATC) sold its first-ever cargo of U.S. West Texas Light (WTL) crude, with a South Korean refiner the buyer, as the Saudi Aramco unit expands its U.S. oil dealings to boost trade volumes, four people familiar with the matter said. ATC is key to Saudi Aramco’s strategy as it expands its refining and petrochemical operations to boost global sales. The trading unit has been buying U.S. crude from Texas refinery Motiva [MOTIV.UL] to re-sell in Asia, the people said.

NY Businesses and Household Facing Ruin. After New York denied a water-quality permit for the Northeast Supply Enhancement Project, or NESE, in May, National Grid stopped signing up new accounts, as it had vowed to do if construction could not proceed. Nearly 2,600 residential and business customers have since been denied natural-gas hookups across National Grid’s territory, which extends from Brooklyn and Queens to Staten Island and Long Island. Business leaders say environmentalists and their allies in government are stifling development in those areas, just as they have in Westchester, where Con Edison has imposed its own moratorium on natural-gas hookups. Advocates and some elected officials are accusing National Grid of manufacturing a crisis to get its way with regulators.

Enterprise Mulling 50,000 b/d Expansion for Appalachia-to-Texas Ethane Line. Natural Gas Intelligence. Enterprise Products Partners LP said Monday its testing support for up to 50,000 b/d of additional capacity on its Appalachia-to-Texas (ATEX) ethane pipeline. Subject to sufficient customer commitments, the Houston-based midstreamer said the new capacity could be in service by 2022, added through a combination of pipeline looping, hydraulic improvements and modifications to existing infrastructure.

Ineos Hunting for Shale Gas Investments in US. Sir Jim Ratcliffe, one of Britain’s richest men, has set his sights on the US shale gas industry as his fracking ambitions in the UK wane. The owner of petrochemicals giant Ineos is on the hunt for shale gas investments within the US fracking heartlands of the Permian Basin, according to sources. The billionaire industrialist is understood to have begun assessing a number of US shale projects over the summer as part of a multibillion-dollar debut in the US oil and gas industry.

FERC Delays Harm Permian Producers. Sendero says FERC delay on pipeline project harms Permian producers, adds to flaring. S&PG Global Platts. Sendero Midstream appealed to FERC to act on an idle application for a natural gas pipeline that would provide takeaway capacity for a recently completed processing plant in the Permian Basin. Every day of continued delay “increases the hardship” on Sendero and producers in the region, the company said in an August 23 letter to FERC (CP18-538). Delay also contributes to flaring natural gas produced in association with crude oil, “an economic waste with adverse environmental consequences,” it said.

Houston American Energy to Start Drilling in the Permian. Independent oil and gas producer Houston American Energy said Monday it’s signed an agreement to participate in a new drilling program in the San Andres formation, in the northern shelf of the Permian Basin, Kallanish Energy reports.

“This agreement is the culmination of more than a year of effort to identify a suitable growth platform,” said Jim Schoonover, CEO of Houston American Energy. “We expect an initial horizontal test well will commence on the block before the end of 2019. If successful, we believe the existing acreage will support drilling of up to 50 wells over the next four to five years with the acquisition of additional acreage under the Ami (area of mutual interest) supporting additional wells.”

Under the agreement, the company will acquire a 20% working interest in an existing 5,871-gross-acre block. The agreement provides that Houston American will pay 26.67% of the costs of an initial test well through the point at which the well is drilled, completed, equipped and ready for operation, production or disposal.

All additional operations will be conducted on a heads-up basis, meaning working interest participants are responsible for their own pro-rata share of costs to complete and produce the well.

The agreement also defines an Ami of roughly 20,367 acres in the area of, and including, the existing acreage covered by the deal.

The parties to the agreement will have the right to participate, at cost, in any interest acquired in the Ami over the following five years.

Drilling Down. The Big Dog Keeps Drilling. Exxon Mobil shows no sign of cooling off in Permian Basin. Houston Chronicle. The dog days of summer are the hottest and Exxon Mobil is showing no signs of cooling off any time soon. Exxon Mobil’s shale drilling arm XTO Energy is preparing for another round of drilling in the Permian Basin of West Texas. The company is seeking permission from the Railroad Commission of Texas to drill 20 horizontal wells split between Glasscock, Pecos and Midland counties. Exxon Mobil has become the top driller in the state. So far this year, Exxon Mobil has filed for 500 drilling permits this year, compared to the 332 drilling permits EOG Resources of Houston, the second most active driller. More than 430 of Exxon’s permits are for projects in the Permian Basin.

Enterprise Initiates Binding Open Season on Atex. Enterprise Products Partners on Monday initiated a binding open season to add as much as 26% in capacity to the partnership’s Appalachia-to-Texas (Atex) ethane pipeline, Kallanish Energy reports.

The 1,200-mile Atex line transports roughly 190,000 barrels per day of ethane from the Marcellus and Utica Shale plays in Pennsylvania, West Virginia and Ohio, to Enterprise’s natural gas liquids storage complex in Mont Belvieu, Texas, with access to petrochemical plants along the Gulf Coast. Atex went into service in early 2014.

Subject to customer commitments, Enterprise would add up to 50,000 Bpd through a combination of pipeline looping, hydraulic improvements and modifications to existing infrastructure. The expanded capabilities would be in service by 2022.

Nexus to Replace Half-Mile of Pipeline. Nexus Gas Transmission has announced plans to replace a half-mile section of the natural gas pipeline in Northeast Ohio with a thicker steel pipe, Kallanish Energy has learned.

The $8.5 million project will begin around Oct. 1, in the city of Green, between Akron and Canton. The suburban community had led the initial fight against the pipeline project.

The project involves three property owners and calls for installing pipe that is roughly three quarters of an inch thick. At present, the pipeline that went into service only last year is about a half-inch thick.

The change to a heavier wall pipe is required because the local population density is greater than the company had first thought and the thicker steel is needed if the pipeline is to safely transport maximum natural gas capacities, officials said.

Nexus spokesman Adam Parker told the Akron Beacon Journal newspaper an internal review by Nexus Pipeline officials determined that thicker steel was needed to handle maximum natural gas flows. The change is voluntary, he said.

There is no connection between the proposed project and a pipeline explosion on Aug. 1 near Danville, Kentucky, that killed one and inured six, he said. The Green project was already planned.

A spokeswoman for the Federal Energy Regulatory Commission told the Beacon-Journal it was unclear why the company installed Class 2 pipe instead of Class 3 pipe in that area of Green. News of the project has angered some Green officials and citizens.

The $2.6 billion pipeline began service last fall. It was designed to move 1.5 billion cubic feet per day of Utica and Marcellus Shale play natural gas across northern Ohio to the Midwest, the Gulf Coast and Ontario.

The 256-mile pipeline across northern Ohio to Michigan and Ontario transports natural gas from Ohio, West Virginia and western Pennsylvania. It was developed by Michigan-based DTE Energy and Enbridge.

Erie-Ohio Pipeline Project Nears Completion. Forty-foot sections of 12-inch steel pipe — a pipe so large you could roll a basketball down the inside — lay in sections along Route 20 last week. These pipes, which will be buried over the next few weeks, represent the final stages of the $86 million Risberg Pipeline. The pipeline’s owner, Erie-based RH Energytrans, an affiliate of EmKey Energy LLC, has been working to build a 28-mile extension to an existing pipeline, connecting Elk Creek Township in Erie County with North Kingsville. When the work is finished, probably by mid-fall, it will give Ashtabula County something that’s been missing there for years — enough natural gas to promote industrial growth.

TX Storage Operator to Produce Fuels. Exclusive: Texas storage operator jumps into race to produce low-sulfur marine fuels. Reuters. A U.S. Gulf Coast fuel storage operator is launching its own crude processing facility to make 50,000 barrels per day (bpd) of low-sulfur fuels to comply with new environmental rules beginning in 2020, executives told Reuters on Tuesday. Texas International Terminals plans to operate its own crude distillation unit (CDU) at a site in Galveston, Texas, producing bunker and gas oil for affiliate GCC Bunkers, which will supply crude and market the resulting fuels.

Methane Emissions a Worry? Absolutely, and that’s why the natural gas industry is responding. The issue of methane as a driver of climate change has recently come into focus. Methane is widely known as a significant greenhouse gas, eighty-four times more potent than carbon dioxide during its first two decades of release because of the way it absorbs heat. This means limiting methane emissions is just as important as — maybe even more important than — controlling carbon dioxide emissions if we hope to stem climate change. Despite allegations that U.S. natural gas companies are the only culprit when it comes to methane emissions, objective data and evidence show that’s not quite true. That’s because limiting methane emissions doesn’t just help combat climate change; it also makes business sense for gas companies since keeping product in the pipeline, not in the air, is best for the bottom line.

Plains Gives Up on Steel Surcharge. U.S. pipeline operator Plains All American has abandoned a plan to institute a surcharge to offset Section 232 steel tariffs for its new Cactus II Pipeline, following objections by ConocoPhillips and Encana, according to regulatory documents secured by Kallanish, sister publication of Kallanish Energy.

The proposed tariff would have been $0.05/barrel on its 670,000 barrels per day Cactus II crude oil line from the Permian Basin to refineries on the Gulf Coast.

At that rate, the company estimates it would have offset the extra $40 million it expects to pay for steel for the $1.1 billion, 550-mile line in roughly 3.5 years.

ConocoPhillips and Encana both argued to the Federal Energy Regulatory Commission the surcharge was unnecessary, as Plains does not yet know whether it will ultimately be subject to Section 232 tariffs for Cactus II.

NatGas Power Generation Plant Coming to Guernsey County, OH. Caithness Energy announced today that it has successfully closed a $1.6 billion financing for the construction of a fully-permitted 1,875 megawatt combined-cycle natural gas electric generating facility located in Guernsey County, Ohio known as Guernsey Power Station, clearing the way for the project to move forward to construction. Caithness partnered with Apex Power Group to develop the project in the heart of the Utica and Marcellus shale region.

“Caithness is proud to deliver this state-of-the-art electric generating solution for cleaner, more efficient power into the PJM Market,” said Ross Ain, Caithness Energy’s President. “Our energy design is cleaner, providing maximum power with minimal impact on the surrounding environment with a dry cooling system that reduces water use by 95% compared to traditional facilities.”

“We have worked closely with our partners, suppliers and contractors to complete financing and begin construction of this important project,” continued Ain. “The local community will benefit from up to 1,000 jobs at peak construction and approximately 30 permanent high-tech jobs, all while providing vital funds committed to the Rolling Hills School district that will enable a major school infrastructure construction project.”

The completed electric generating facility, which will be managed by Caithness Energy, will sell energy, capacity and ancillary services into the PJM market. The PJM is the regional transmission organization that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia, including all of Ohio.

“Guernsey Power Station will create jobs and bring significant economic benefits to southeast Ohio,” said Mike King, Apex Power Group Managing Partner. “Thank you to all of the community leaders who made this project a reality with their relentless support as we are looking forward to starting construction and providing clean energy from one of the most efficient generating plants in the nation.”

Gemma Power Systems, a wholly owned subsidiary of Argan, Inc. (NYSE: AGX), has responsibility for the engineering, procurement and construction of the energy center slated for completion early in the fourth quarter of 2022.“We are thrilled to have the opportunity to help deliver clean, reliable energy to Guernsey County and the greater Ohio community,” said William F. Griffin, Jr., Chief Executive Officer of Gemma Power Systems. Caithness Energy will be the construction and asset manager.

The facility will use three of General Electric’s most advanced gas turbines, each with a heat recovery steam generator and steam turbine generator, and will produce electricity equivalent to the power needs of approximately one million homes within the PJM region.

“We are honored to work with the team at Caithness again to bring another leading gas power plant project to life,” said Dave Ross, President of Sales, North America for GE Power. “GE’s industry leading gas turbine technology and services will ensure Guernsey Power Station delivers highly efficient electricity to homes and businesses across the PJM market.”

FERC Wants Biological Review of Mountain Valley Pipeline. The Federal Energy Regulatory Commission has asked the U.S. Fish and Wildlife Service to start over on a key permit for the 303-mile Mountain Valley Pipeline, Kallanish Energy reports.

That means all work would likely be stopped on the $4.6 billion pipeline in West Virginia and Virginia, designed to move Appalachian Basin natural gas to markets.

Officially, Ferc has sent a two-page letter to its fellow federal agency, seeking to “reinitiate consultation” on the pipeline and its Endangered Species Act permit.

The pipeline needs a valid biological opinion and an incidental take statement from Fish and Wildlife before it can proceed. The agency initially submitted its biological opinion for the project to Ferc on Nov. 21, 2017.

Since that time, the candy darter, a fish found in the region and could impact the project, has been listed as endangered, Ferc said in its Wednesday letter.

It also noted new information is available on possible impacts of the pipeline on three other endangered species: the Roanoke logperch, the Indiana bat and the Northern long-eared bat. That’s why a new biological review is needed and why Fish and Wildlife should reconsider its permit, Ferc said.

The news was hailed by environmental groups opposed to Mountain Valley Pipeline.

The stalled Atlantic Coast Pipeline’s biological opinion and incidental take statement are also under separate legal review.

Mountain Valley Pipeline LLC has said the new pipeline could be operational by Dec. 31; it’s 80% complete. Construction has been halted at times by the Ferc, a federal appeals court, state agencies and the U.S. Army Corps of Engineers.

At present, work cannot proceed on 160 miles of line in West Virginia after a federal permit for stream and wetland crossings was suspended last October after a legal challenge.

The pipeline is owned by joint-venture partners EQT Midstream Partners, NextEra U.S. Gas Assets, Con Edison Transmission, WGL Midstream and RGC Midstream.

It is 42-inch natural gas pipeline system that will run from northwestern West Virginia to southern Virginia, flowing 2 billion cubic feet per day from the Marcellus and Utica Shales plays.

There are plans to extend the pipeline south from Virginia into North Carolina.

PA Permits August 22, to August 29 2019

County Township E&P Companies