Latest facts and a rumor from the Marcellus, Utica, and Permian, Eagle Ford Plays
NE PA LNG to Philadelphia Port. Federal officials will let LNG be shipped by rail to Greenwich Township port. Environmentalists on Monday decried the federal government’s approval of permits to move liquefied natural gas (LNG) by rail from northern Pennsylvania to a new port terminal in Gloucester County. The Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) on Friday approved a request by Energy Transport Solutions LLC to move LNG, produced from fracking Pennsylvania shale gas wells, to the Repauno Port and Rail Terminal in the Gibbstown section of Greenwich Township.
State Attorney Generals Support Atlantic Coast Pipeline. States urge Atlantic Coast Pipeline construction to continue. Attorneys general from 18 states are urging the U.S. Supreme Court to allow construction of the Atlantic Coast Pipeline to continue. West Virginia Attorney General Patrick Morrisey said his office will lead the coalition. A friend of the court brief scheduled to be filed Monday argues that the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, erred when it ruled last December that the U.S. Forest Service lacked authority to grant the pipeline rights of way across the Appalachian Trail and through the George Washington and Monongahela National Forests.
Base Decline Rate Has “Increased Dramatically” in the Permian. Oil and gas operators in the Permian Basin will have to drill substantially more wells just to maintain current production levels, owing to the high level of recent growth, according to an analysis by analytics/consulting firm IHS Markit.
Data from the IHS Markit shows the base decline rate of more than 150,000 producing oil and gas wells in the Permian has “increased dramatically” since 2010, Kallanish Energy reports.
The surge in shale drilling and output in recent years has been accelerating that inherent production decline because newer, younger wells decline much faster than older wells.
Base decline” is calculated by identifying the actual or forecasted production of all the wells onstream at the start of the year, then tracking their cumulative decline by the end of the year.
Understanding base declines critical
Understanding those base declines is critical for engineers/operators who must determine what level of drilling and production targets must be achieved for their company to grow production, and hopefully, maintain performance and provide returns to investors.
“Base decline is the volume that oil and gas producers need to add from new wells just to stay where they are — it is the speed of the treadmill,” said Raoul LeBlanc, vice president of Unconventional Oil and Gas at IHS Markit.
“Because of the large increases of recent years, the base decline production rate for the Permian Basin has increased dramatically, and we expect those declines to continue to accelerate. As a result, it is going to be challenging, especially for some companies with cash constraints, just to keep production flat.”
Total U.S. crude production to flatten by 2021
The new IHS Markit production outlook expects total U.S. oil production growth to flatten by 2021 due to a major slowdown in growth from U.S. shale. The new IHS Markit outlook for oil market fundamentals for 2019-2021 expects total U.S. production growth to be 440,000 barrels per day in 2020, before essentially flattening out in 2021.
Modest growth is expected to resume in 2022, but those volumes would still be in stark contrast to the boom levels of recent years, LeBlanc said.
Contrast traditional, shale wells
The Permian provides the comparison between traditional wells and shale wells. At the start of 2010, IHS Markit stated production for the Permian was roughly 880,000 Bpd, with virtually all production coming from conventional wells.
By the end of 2010, that group of wells produced 767,000 Bpd — a drop of 110,000 Bpd, or 13% of production.
Contrast that data to that in 2019, when most wells drilled in the Permian were hydraulically fractured shale wells, which decline much faster.
Permian base production to drop 40%
This year, Permian Basin production started the year at 3.8 million barrels per day (Mmbpd), 1 Mmbpd higher than the year before. IHS Markit expects that base production will decline by roughly 1.5 Mmbpd of oil by the end of 2019 – a staggering 40% base decline rate.
“Unless intentionally choked back, new, individual unconventional wells decline very rapidly, often 65% to 85% in the first year, so companies with many young wells in their inventory see significant declines in production compared to companies with a balance of younger and older wells,” LeBlanc said.
“However, these high initial decline rates of individual shale wells become shallower over time, with older wells showing annual declines of 20% or less. So, the key here is that older wells in an operator’s inventory help offset the rapid declines of newer wells.”
Base declines can drop
Because of these older wells, base declines can also decelerate if the weighted average age of the wells in the production base rises. Just as a production base with mostly young wells exhibits high decline rates, the older the production base, the more stable it is, IHS Markit said.
Companies with the highest growth in recent years have the steepest base decline rates, and vice versa. The challenge of base declines is, therefore, different for each operator, depending on multiple factors, but especially on the decisions the firm has made concerning production growth and capital allocation, IHS Markit said.
“Now that capital markets have closed for many companies and investors are requiring returns, a critical objective for these companies is to slow production growth, significantly moderating their base declines,” LeBlanc said.
Enterprise, Enbridge to Develop U.S. Gulf Coast Crude Export Terminal. Enterprise Products Partners LP and Enbridge Inc have agreed to jointly develop a U.S. Gulf Coast crude export terminal that would load supertankers off Freeport, Texas, Enbridge said on Monday. The pipeline operators plan to finalize a deal that would provide Enbridge an option to purchase ownership interest in Enterprise’s Sea Port Oil Terminal (SPOT), subject to SPOT receiving a deepwater port license, Enbridge said.
Antero to Sell $1 Billion in Assets. Antero Resources has announced it intends to reduce its midstream fees and expects to sell off nearly $1 billion in assets, Kallanish Energy reports.
The midstream fee reductions will save roughly $350 million between 2020 and 2023, the Colorado-based company said.
The fee agreements include a growth incentive fee program with Antero Midstream Corp. as the company reduces its gathering, processing and transportation costs. It has finalized agreements with other third-party midstream providers.
Antero said the asset sales will produce between $750 million and $1 billion and will be completed in 2020. The planned asset sales will help reduce debt.
The asset sales could include lease acreage, minerals, producing properties, hedge restructuring or the sale of Antero Midstream shares to Antero Midstream, it said.
The asset sales were initiated with a $100 million sale of AM shares to Antero Midstream, with the proceeds used to repurchase senior notes at a discount to par.
Antero has roughly 584,000 net acres in the Appalachian Basin.
“The midstream fee reductions further demonstrate our ongoing commitment to reducing Antero’s cost structure,” said chairman and CEO Paul Rady, in a statement.
With previously disclosed capital and operating cost reductions of $300 million in 2020, Antero is targeting a $375 million reduction in 2020, compared to what the company called “previous expectations,” Rady said.
That will result in moderate growth as the company moves to fill its firm transportation commitments by 2022, he said.
Antero said it expects to be cash flow neutral in 2020 and 2021 combined with sustained positive cash flow in 2022 and thereafter.
The U.S. Dominates New Oil and Gas Production. The American fracking for oil and natural gas boom will continue on through the 2020s. And why not? Since fracking took off in 2008, we have more than doubled our proven oil reserves to ~65 billion barrels. Natural gas reserves have surged over 80% to ~430 trillion cubic feet. Already the largest oil and gas producer, the U.S. is set to increase its share of ~17% of global oil production and ~23% of gas. In the 2020s, the U.S. is set to supply over 60% of new oil and gas. This is according to experts at Rystad Energy, “an independent energy consulting services and business intelligence data firm” based in Norway. Rystad says the U.S. shale industry will continue to mount production even if prices drop. The reality is that oil and gas companies already have.
Saudi’s Support U.S. Shale Producers. Saudi energy minister defends US shale producers: ‘They are creating jobs.’ Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman played down any rivalry between U.S. shale producers and more established oil producers in the Middle East. Speaking to CNBC’s Hadley Gamble following an OPEC decision in Vienna, Austria, on Friday, Abdulaziz said: “They (U.S. shale producers) didn’t do anything wrong, they produced more barrels, they put the U.S. on the map in terms of its energy requirements, they are growing the economy, they are creating jobs.” The U.S. is now the world’s largest oil producer hitting 12.3 million b/d in 2019, according to the U.S. Energy Information Administration, up from 11 million b/d in 2018.
Buckeye Xpress Ohio EPA Meeting December 18. The Ohio Environmental Protection Agency has scheduled a Dec. 18 public meeting for a natural gas pipeline project in southern Ohio, Kallanish Energy reports.
Columbia Gas Transmission LLC is seeking a water-quality certification to build its Buckeye Xpress project in Vinton, Gallia, Jackson and Lawrence counties.
An informational meeting will be held in Jackson and will be immediately followed by a public hearing on the water certification. The Ohio EPA will accept comment on the certification through Dec. 26.
The project calls for building 66 miles of new and larger natural gas pipeline and decommissioning about 61 miles of aging line and adding a new lateral pipeline.
The project extends south into one county in Kentucky. The project is expected to go into service in late 2020.
With looping and compression, it would boost natural gas capacity by 275 million cubic feet per day. The project has been approved by the Federal Energy Regulatory Commission.
The project would move Appalachian Basin natural gas to an in interconnect at Leach, Kentucky, en route to the Gulf Coast. It will modernize the company’s R-system pipeline that Columbia uses to move natural gas into Ohio storage fields and from those fields to Eastern markets.
Columbia is a subsidiary of TC Energy (formerly TransCanada).
Down in Flames: Judge Dismisses New York Climate Lawsuit against ExxonMobil. New York Supreme Court Justice Barry Ostrager today acquitted ExxonMobil of all charges brought against the company by New York Attorney General Letitia James. It was a beautiful result, nicely summarized by Spencer Walrath of Energy In Depth: After four years, three different legal theories, four million documents, hundreds of hours of depositions, 11 embarrassing days of trial for the New York Attorney General (NYAG) and a month long wait, the verdict is in: ExxonMobil did not deceive or mislead investors over climate change impacts.
Chevron Writing Assets. Chevron will write down assets by at least $10 billion. Chevron Corp. CVX 0.50% is writing down the value of its assets by more than $10 billion, a concession that in an age of abundant oil and gas some of its holdings won’t be profitable anytime soon. In the largest write-down by an energy producer in years, Chevron said Tuesday that it was cutting the value of a number of properties, notably its U.S. shale holdings in Appalachia, by a combined $10 billion to $11 billion. Chevron is also restructuring its operations to focus on fewer prospects in the face of persistently low natural gas prices, and will explore sales of some assets.
Fewer Wells in Texas. Texas on track to complete fewer oil and gas wells in 2019: regulator. Texas is on track to complete fewer oil and gas wells this year, the state regulator said in a statement on Tuesday, as companies tighten spending to adjust to lower oil prices and a push from investors to focus on returns. The state’s oil and gas regulator has processed 8,629 well completions so far this year, marking nearly a 16% decline versus the same period last year, the Railroad Commission of Texas said. Texas is the largest oil producing state in the country and helped propel U.S. output to a weekly record of nearly 13 million bpd last month, according to the U.S. Energy Information Administration (EIA).
Ironwood Expanding in the Eagle Ford. Ironwood Midstream closes deal to expand Eagle Ford pipeline network. San Antonio pipeline operator Ironwood Midstream has closed a deal to expand its crude oil gathering network in the Eagle Ford Shale of South Texas. In a statement released Tuesday, the company confirmed closing a deal to buy 150 miles of crude oil gathering pipelines in Dimmit and La Salle counties from Houston pipeline and frac sand company Twin Eagle.
PA Permits December 5, to December 12, 2019
County Township E&P Companies
- Allegheny Forward EQT
- Greene Springhill Rice
- Tioga Union Rockdale
- Wyoming Windham Chesapeake
OH Permits December 12, 2019
County Township E&P Companies
- Belmont Richland Ascent
- Belmont Wheeling Ascent
- Belmont Wheeling Ascent
- Belmont Wheeling Ascent
- Carroll Orange EAP OHIO
- Carroll Orange EAP OHIO