Shale Directories Conferences
Appalachian Storage Hub Conference
June 6, 2019
Hilton Garden Inn Southpointe
Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, and Bakken Shale Plays
New York deals critical blow to $1 billion shale gas pipeline. New York denied a key permit for a $1 billion Williams Cos. shale gas pipeline, dealing a critical blow to a project that would shuttle fuel to customers in New York City and Long Island. The New York State Department of Environmental Conservation said Wednesday that the pipeline would result in water quality violations, including those caused by kicking up hazardous metals and disturbing seabed habitats. The denial was “without prejudice,” meaning the company can reapply. Williams said in a separate statement that the DEC had raised “a minor technical issue” with the application, which it will resubmit quickly. The decision comes as states tussle with the Trump administration over pipelines designed to carry abundant natural gas to the Northeast from shale basins in Pennsylvania, Ohio and West Virginia. President Trump has taken action to speed up approval of interstate gas conduits, last month signing an executive order that aims to short-circuit state regulators who have held up projects by denying necessary permits amid environmental concerns.
NatGas Production Keeps Growing. Natural gas production from the Lower 48 U.S. states’ seven most productive unconventional plays and basins will jump by nearly 1 billion cubic feet per day (Bcf/d) from May to June, the Energy Information Administration reports.
In its just-released Drilling Productivity Report (Dpr) for May, EIA expects natural gas production to grow by 943 million cubic feet per day (Mmcf/d), bringing total production from the seven plays/basins to 80.66 Bcf/d, up from 79.72 Bcf/d in May. (All numbers are rounded.)
The biggest May-to-June natural gas production increase is expected in Appalachia, the combination of the Marcellus and Utica shale plays. In this region, gas production will jump 366 Mmcf/d, to 32.11 Bcf/d, from 31.74 Bcf/d in May, the Dpr projects. Five of the seven basins/plays are expected to report a month-to-month natural gas production increase, with three of those regions projected to see triple-digit increases, Kallanish Energy reports.
The Haynesville Shale will see its production rise to 11.36 Bcf/d, from 11.07 Bcf/d, a 287 Mmcf/d May-to-June increase. And the Permian’s associated gas production is expected to jump 241 Mmcf/d from May to June, bringing the basin’s gas production to 14.41 Bcf/d in June, from 14.17 Mmcf/d in May, EIA reports.
The Anadarko Basin is expected to see its natural gas production fall 31 Mmcf/d from May to June, with total basin production dropping to 7.52 Bcf/d, from 7.55 Bcf/d in May.
Shell Becoming a Larger Presence in Midstream Business in the U.S. Shell Midstream Partners up stakes in two pipelines in $800 million deal. Houston pipeline operator Shell Midstream Partners LP entered into an $800 million deal to buy greater stakes in a pair of pipelines that move gasoline, diesel and jet fuel to the Midwest and East Coast. Shell Midstream Partners announced the dropdown transactions in a Monday morning statement. The master limited partnership, formed by Netherlands-based Shell to own, operate, develop and acquire pipelines and other midstream assets, acquired Shell’s 26 percent stake in the Explorer Pipeline Company. The 1,830-mile pipeline moves refined products from Pasadena and Port Arthur to Chicago and other destinations in the Midwest. In the second part of the deal, Shell Midstream bought Shell’s 10.13 percent stake in the Colonial Pipeline Co. Touted as the largest refined products pipeline in the United States, the 5,500-mile system moves gasoline, diesel and jet fuel from the Houston area to destinations in the South along the East Coast and New York Harbor.
Pin Oak Does Another Deal in the Appalachian Basin. Pin Oak Energy (Pin Oak) has acquired from Protege Energy III LLC the Caywood A 1H Utica well located in Washington County Ohio along with nearly 10,000 net acres in Washington and Noble Counties Ohio and Wood County, West Virginia. In addition to the producing Utica well, Pin Oak acquired the Big Red pad location, 60 square miles of proprietary 3D Seismic, largely undedicated acreage position and a 4-mile gathering line connecting into Blue Racer Midstream’s Washington County Connector line.
EdgeMarc Files for Bankruptcy. EdgeMarc Energy, headquartered in Canonsburg, PA (with 45,000 acres of Marcellus/Utica leases), is filing for Chapter 11 bankruptcy, looking to sell all of the company’s assets. The reason? They can’t move their production to market because their main pipeline partner, Energy Transfer’s Revolution Pipeline, exploded last September and ET has not been able to get the PA Dept. of Environmental Protection to allow them to restart it.
Advanced Power Breaks Ground on $1.3bn Project. Advanced Power has broken ground on the South Field Energy project, a 1.182GW combined-cycle natural gas-fired power plant, which is being developed with an investment of $1.3bn, in Ohio.
The South Field Energy project, which will come up in Columbiana County, will involve up to 1,000 people during its construction stage. The power plant is slated to be brought into operations in mid-2021 and will employ nearly 25 full-time employees in engineering, technical, operation, management and administrative roles.
Bechtel under a contract given in September 2018 is responsible for the engineering, procurement, and construction of the project. The South Field Energy project will be equipped with General Electric power generation equipment, which includes two 7HA natural gas turbines with each of them paired with a heat recovery steam generator and steam turbine generator.
Once commissioned, the facility will generate enough electricity to meet the power consumption needs of more than a million households. In addition to natural gas, the power plant is designed to run on ultra-low-sulfur diesel (ULSD) in the absence of the former.
Advanced Power development chief operating officer Jonathan Winslow said: “With facilities like this, we can close the growing gap Ohioans face in energy production.
“We will accomplish this using advanced technology to produce substantial, reliable, low-carbon electricity generation, while minimizing our environmental footprint.”
Earlier this week, Advanced Power announced the sale of a 15% stake in the South Field Energy project to ENEOS Power USA, an affiliate of Japanese energy firm JXTG Nippon Oil and Energy, for an undisclosed price.
The power plant will sell its energy, capacity and ancillary services into the PJM market. It will be fed with natural gas delivered from the TL-400 (Dominion South Point Gas) interstate gas pipeline.
New study suggests oil and gas methane emissions have been overestimated. The production of oil and gas is raising methane emissions, but at levels far less than previously understood, according to a recent study from The National Oceanic Atmospheric Administration. The NOAA released findings from a study that suggested the long-term measurements of methane emissions did not result in large increases, and that the oil and gas industry’s role in these emissions was lower than previous studies suggested. Long-term measurements show no large increases in U.S. methane emissions in the past decade, according to the study. “We analyzed a decade’s worth of data and while we do find some increase in methane downwind of oil and gas activity, we do not find a statistically significant trend in the U.S. for total methane emissions,” said Xin Lan, the lead author and a scientist working at NOAA.
PA Supreme Court Rules in favor of O&G. The Pennsylvania Supreme Court has just upheld a lower court opinion that allows shale drilling to happen *anywhere* in a township, so long as such drilling satisfies standards to protect public health, safety and welfare. This is the end of the road for a lawsuit funded by Big Green that began in 2015 in Westmoreland County, PA.
North Dakota oil output totals 1.39 million b/d in March, up 4% on month. North Dakota oil production in March totaled 1.39 million b/d, up 4% from February, but still below the all-time high earlier in the year, the state’s Department of Mineral Resources said Wednesday. Natural gas production, though, hit an all-time high of 2.8 Bcf/d, up 6% from February, Lynn Helms, the state’s oil and gas director, said during a monthly production webinar. “That was a pretty good recovery [on the oil side], up almost 55,000 b/d from February,” Helms said. “But we’re still about 13,000 b/d shy of the record set in January.” That all-time high monthly average production for oil was 1.403 million b/d. The state is one of the largest oil producers in the US, and home to the bulk of production from the Bakken Shale, an unconventional crude formation. Helms noted that weather in North Dakota for February and the first half of March was “brutal,” with temperatures well below zero. Even around March 9, wind chills were 50 degrees below zero.
Like It or Not. Natural Gas Is Here to Stay. (Thanks, Rick Stouffer, Kallanish Reports) There is hardly a week that goes by a liquefied natural gas export project is not making news in the U.S. LNG export facilities have moved into the second wave of projects, with four first-wave projects in operation or growing closer to completion.
“Without question, natural gas is enjoying its star turn in America,” consulting giant Black & Veatch states in its recently published “2019 Strategic Directions: Natural Gas Report.”
Two years ago, the U.S. became an annual net natural gas exporter for the first time in nearly six decades. The country added to that in 2018, and the direction for production in 2019 points one way: up, Kallanish Energy reports.
The Energy Information Administration projects gas production will spike by 22 billion cubic feet per day (Bcf/d), to 103 Bcf/d by 2029.
Growth with pressure
But growth does not come without pressure. It’s unclear if natural gas ever was the “media darling” of fuels (perhaps if compared to the black evil known as coal, or the radioactive monster of nuclear power.)
There’s no question renewables rule the proverbial roost when it comes to the energy form everyone seems to love.
There’s also a preference for shorter-term natural gas contracts, giving natural gas buyers the upper hand in bargaining amid the disparity in the supply and demand
U.S. relations with Russia, China impact gas
“In 2018, U.S. relations with at least two of the world’s biggest players in natural gas were uneasy,” Black & Veatch stated.
Russia, with its ever-expanding reach of pipelines, is entrenched as the European Union’s biggest supplier of natural gas while that region slowly weans itself off of coal, crimping U.S. efforts to move into that market.
And, as of October 2018, the U.S. was in a trade dispute with China, which within the last few days has become more intense, with LNG exports to China to carry a 25% tariff, effective June 1.
Natural gas at a ‘crossroads’
“All of these matters are part of the mosaic that puts natural gas at a crossroads, given competing and rapidly evolving forces involving the growing supply of natural gas from new producers and the falling costs of renewables,” Black & Veatch stated.
In February 2017, the U.S. first started shipping LNG from the Lower 48 U.S. states, from Cheniere Energy’s Sabine Pass export complex in western Louisiana. Roughly 40 countries now import natural gas, up 11 in just the past five years.
Geopolitical forces at work
While U.S. exports rise and the number of countries interested in importing American LNG grows, geopolitical forces are pulling at the market, largely in the form of public policy goals calling for wider adoption of renewables, according to Black & Veatch.
California intends to get all of its energy from renewables by 2045, while Europe and Africa have set their renewables mileposts at more than 20%. China is diversifying its clean energy portfolio, shipping in more natural gas and adopting energy-efficiency policies amid its pullback on coal-fired power generation that has some of its regions enveloped in an ambient haze.
Renewables are the darling of global energy talk
The rise of renewables holds a special footing in this conversation. Renewable energy sources are the darling of the global discussion around sustainable power generation. As their prices drop and capabilities mature, solar, wind and other distributed energy technologies are taking an increasingly prominent position in the energy mix and creating new dynamics for stakeholders to consider.
Black & Veatch poses three questions centered on the direction natural gas is heading:
Is natural gas the bridge to the energy future — a cleaner-energy connection that helps move from fossil-based generation sources to a future of global energy primarily sourced from renewables?
Is natural gas the destination — an acknowledgement that natural gas is here to stay, given its extended low-price cycle, abundancy, mature supply chains and ability to complement a renewables strategy?
Is natural gas a has-been — a solution whose need has been surpassed by the increasingly robust tool sets of renewable energy resources?
“We can say with some certainty that the ‘has-been’ label is too strong and vastly understates natural gas’ current global importance,” according to B&V. “Natural gas is attractive to developing economies and emerging markets in ways that renewables cannot currently match, particularly in price and potential access to supply.”
Natural gas is attractive, but what of renewables, and the attendant storage. Global solar capacity is expected to reach 740,000 megawatts by 2022, with nearly half of installed capacity and one-third of electric generation coming from wind and solar sources by 2040.
Storage is key to renewables
“Energy storage, the key to fully harnessing intermittent power generation (like wind and solar), will continue to gain momentum and catalyze the growth of renewables,” B&V believes.
Natural gas, however, is anything but diminished on the global stage. Key factors will both keep natural gas as a global energy centerpiece for the foreseeable future but also shift the market and stoke lingering questions about long-term investment (Figure
Building a bridge
It’s believed a significant component of the world’s energy demand will, over the long term, depend on natural gas in roles ranging from primary to complementary.
The link between gas and renewables can be stronger than just parts of a diverse power portfolio. New scenarios are emerging that pair storage with conventional gas turbine generation to deliver more rapid response, milder ramp rates, and fewer starts and stops, and emissions reductions.
Battery storage-augmented gas turbines are being explored by some American utilities. With reliability and responsiveness driving investment, cost-effective natural gas assets will continue to have a place in meeting global energy needs — especially in emerging markets where energy needs are huge and “all options are on the table,” B&V said.
Gas backup practically mandated by renewables
In regions where renewables are maturing, their increasing penetration still requires an increase in the amount of natural gas-fired backup to accommodate the faster up and down ramping requirements of electric generation caused by distributed energy resources.
Additionally, although much of the current discussion is on the use of natural gas for power generation and its interplay with renewables growth, natural gas demand for industrial uses and transportation is also expected to grow significantly.
“Global market forces demonstrate that natural gas is neither an absolute solution nor a ‘has-been.’ It’s a major, clean-burning catalyst for reliable energy across the globe, and its expanding role in key markets, both on the import and export sides, confirms that,” B&V states.
Atlantic Coast Pipeline Decision Not until August. A representative of Dominion Energy’s Atlantic Coast Pipeline says the company doesn’t expect a federal court ruling that could greatly impact the project’s future until at least August. The U.S. Court of Appeals for the 4th Circuit held a hearing Thursday regarding its December ruling that stayed authorization of a key permit previously issued by the U.S. Fish and Wildlife Service, said ACP spokesman Karl Neddenien. In Dominion’s fourth-quarter and full-year 2018 earnings report, the company announced the ACP would not be in service until early 2021, rather than the prior estimate of mid-2020. “Based on that schedule, the company now expects the project cost to be between $7 (billion) and $7.5 billion, excluding financing costs. Similarly, the company currently expects the Supply Header project to enter commercial service in late 2020 at a project cost of $650 to $700 million,” the report stated. Charlie Burd, executive director of the West Virginia Independent Oil and Gas Association, said the project’s continued delays have negatively impacted West Virginia’s workers and its economy.
DUC’s Drop. The number of drilled, but uncompleted wells located in the Lower 48 U.S. states’ seven most productive, unconventional basins and plays fell by a half-percent between March and April, Kallanish Energy reports.
The Energy Information Administration’s May issue of its Drilling Productivity Report (Dpr) reported the number of so-called Ducs dropped by 43, to 8,390 in April, from 8,433 in March.
Five of the seven basins and plays surveyed for the monthly Dpr reported a drop in Ducs, with the other two increasing their Duc total.
The biggest drop in Ducs from March to April was in the Anadarko Basin, with the number of drilled, but uncompleted wells falling by 26, to 998 in April, from 1,024 in March. The Eagle Ford Shale play saw its Duc total fall by 22, to 1,488, from 1,510.
The Permian Basin reported its Duc total rose by 47, finishing April with 3,964, from 3,917 in March, the Dpr reported.
2018 Most Profitable Year Since 2013. Profit at 43 U.S. oil producers totaled $28 billion in 2018, a five-year high – despite crude oil prices lower last year than in 2013 on an annual average basis — the Energy Information Administration reports.
Lower production costs per barrel of oil-equivalent (Boe) and increased production levels contributed to a higher return on equity for these companies for the fourth quarter of 2018 than in any quarter from 2013 through 2018, Kallanish Energy learns.
One-third of oil, NGL production
EIA calculates these companies accounted for roughly 33% of total U.S. crude oil and natural gas liquids production in the fourth quarter of 2018. EIA said it selected these 43 oil producers because their results are publicly available.
Most of these companies operate in Lower 48 U.S. onshore basins, with some in the Federal Offshore Gulf of Mexico and Alaska, and some in several other regions worldwide.
Because of mergers and acquisitions in 2018, the number of U.S. producers EIA examined in this analysis fell from 46 companies in 2017, to 43 last year.
“The aggregated income statements for these 43 companies reveal a trend of relatively low increases in expenses directly related to upstream production in 2018,” EIA said. “Although these upstream production expenses per barrel typically correlate with crude oil prices, the magnitude of these increases in 2018 was small compared with the increase in prices.”
WTI price, expenses up
The annual average West Texas Intermediate (WTI) crude oil price increased 28% from 2017, to average $65 per barrel in 2018, but expenses directly related to upstream production activities increased 16% between 2017 and 2018, to $24/Boe.
When including depreciation, impairments and other costs not directly related to upstream production, expenses for these 43 companies averaged $48/Boe in 2018 — the lowest amount from 2013 to 2018.
In contrast to production expenses, between 2017 and 2018, upstream revenue for these 43 companies increased 31%, to average $48/Boe last year, primarily due to increases in average energy prices and production.
As crude oil prices fell in late 2018, their upstream revenue declined 11% between the third and fourth quarters.
Hedging like insurance policy
However, this group of companies reported they hedged nearly one-third of their fourth-quarter 2018 production at prices in the mid-$50/Bbl range, offsetting revenue declines when WTI prices fell lower than $50/Bbl by the end of the year.
Consequently, even with their decline in upstream revenue in the last quarter of 2018, total revenue increased for these companies because of the gains from financial derivatives.
Contributions to revenue from derivative hedges — which increase in value when prices decline — for these companies reached the largest total for any quarter since the fourth quarter of 2014.
“Financial hedging can act like an insurance policy, reducing risk by stabilizing revenue for producers,” according to EIA. “When oil prices fall lower than the prices at which producers established a hedge, the producer effectively receives higher revenues than selling at market prices. When oil prices rise higher than the hedged price, hedging results in a loss that is treated as an operating expense.”
Texas drilling permits dropped 25.6% in April. The Railroad Commission of Texas last month issued a total of 909 original drilling permits, down 25.6% from the 1,221 permits issued in April 2018, Kallanish Energy reports. The April 2019 total included 802 permits to drill new oil or gas wells, 14 to re-enter plugged well bores and 93 for re-completions of existing well bores, the commission said. Those permits are for 212 oil, 62 gas, 574 oil or gas, 45 injection, two service and 14 “other” permits. In April, the commission also processed 593 oil, 143 gas, 36 injection and three other completions. Those totals compare to 616 oil, 134 gas, 48 injection and four other completions in April 2018. Total well completion processed for 2019 year-to-date are 3,244, down 7.7% from 3,514 recorded in the same time period in 2018. The top regions for permits to drill oil/gas wells were the Midland area of West Texas, with 404 permits, followed by the San Antonio area and the San Angelo area.
Why China’s Tariffs On U.S. Liquefied Natural Gas Aren’t Likely To Have A Huge Impact. China is raising tariffs on U.S. liquefied natural gas — a rapidly growing industry. But in the short term, this isn’t likely to have much effect on U.S. producers because of previous tariffs. President Trump is in Louisiana today visiting the Cameron Parish liquefied natural gas export facility. He’s promoting the American jobs created by the newly booming natural gas industry. The timing was not the best for the president. The visit comes shortly after news that China would be raising tariffs on liquefied natural gas from the U.S. This is the latest in the ongoing trade war with China. NPR’s Camila Domonoske is in the studio.
PA Permits May 4, to May 11, 2019
County Township E&P Companies
Greene Richhill CNX
OH Permits for week of May 11, 2019
County Township E&P Companies
Belmont Pease CNX
Jefferson Island Creek CNX
Jefferson Island Creek CNX
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