Shale Directories Conferences
FALL 2022 Hydrogen & Carbon Capture Conference IV
November 10, 2022
Hilton Garden Inn, Southpointe
Canonsburg, PA (near Pittsburgh)
Latest facts and rumors from the Marcellus, Utica, and Permian, Eagle Ford Plays
API Opposition to Inflation Reduction Act. The American Petroleum Institute (API) today joined with nearly 60 other trade groups representing America’s natural gas and oil industry in opposing the Inflation Reduction Act (IRA) as passed by the Senate. In a letter to House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy, the organizations outlined problematic provisions, including punitive new taxes and regulatory red tape that undermine the industry’s ability to promote energy security for the American consumer.
“We share the goal of addressing climate change, as evidenced in the policies we support and in the actions that we take every day,” the letter states. “However, the considerable tax increases and new government spending in the IRA amount to the wrong policies at the wrong time.”
The letter further cited the absence of comprehensive of permitting reform legislation, which is required to advance America’s infrastructure needs and meet growing demand for affordable and reliable energy.
“Finally, the IRA fails to address permitting reform, which is desperately needed and is essential to effectively deliver affordable, reliable energy to consumers in a growing economy,” the signatories wrote. “To date, neither the House nor the Senate have introduced comprehensive permitting reform legislation. We urge Congress to quickly consider and pass permitting reform without delay.”
Manchin Gets a Win in Climate Bill. Conceding to Manchin, U.S. climate bill exempts most oil industry from methane fees. Reuters. The U.S. Senate climate bill’s fee on oil and gas industry methane emissions will cover less than half the sector’s releases of the powerful greenhouse gas, thanks to concessions made to win over party holdout Joe Manchin, according to a review of the legislation and interviews with lawmakers that negotiated it. The reduced scope of the fee is among numerous changes made by Senate Democratic leadership to secure a deal on the hard-won Inflation Reduction Act, which is being hailed as the biggest climate package in U.S. history, but which pales in comparison to President Joe Biden’s initial vision for legislative action on global warming.
2023 Oil Output to Set a Record. Oil output in US set for record 2023 despite slowing growth. Bloomberg. US oil production remains on track for a record 2023 even as output grows more slowly than anticipated amid surging costs and labor shortages in America’s shale fields. Output is expected to expand at an average rate of 840,000 barrels a day next year, down from a prior forecast of 860,000, according to the Energy Information Administration. While production is still seen reaching an all-time high in 2023, the government revised its forecast slightly lower to 12.7 million barrels a day. The current annual record is 12.3 million set in 2019.
Strong Demand for the Rest of 2022. U.S. oil refiners, pipeline companies expect strong demand for rest of 2022. Reuters. U.S. oil refiners and pipeline operators expect energy consumption to be strong for the second half of 2022, even though analysts and industry watchers have worried that demand could falter if the global economy enters a recession or high fuel prices deter travelers. The company outlooks suggest a stronger view than recent data showing weakness in U.S. fuel demand, particularly in gasoline, where consumption recently hit its lowest level since February even though this is the middle of the peak summer driving season. U.S. gasoline product supplied over the past four weeks recently fell below 2020’s level for the same time of year, when the United States was in the depths of the pandemic.
Ascent Ramping Up in the Utica. Why Ascent Resources moved up some of next year’s fracking to this year. Pittsburgh Biz Journal. Inflationary pressures and higher gas prices are leading a Utica Shale driller to move up some of the hydraulic fracturing and well completions that it was planning for next year. Ascent Resources Utica Holdings LLC, one of the biggest privately held natural gas producers in the United States, said it was adding a frack crew late in this quarter to finish pads and turn on the gas spigot instead of in 2023 like previously scheduled. Ascent has production of about 2 billion cubic feet per day and 708 wells in the Utica in Ohio.
Drilling Permits Up Big Time in TX Analysts say oil and gas drilling permits in the Permian hit three-year high. Houston Chronicle. The number of drilling permits approved in the Permian Basin, the nation’s most productive oil field, continues to rebound from the pandemic downturn, analysts say, hitting a three-year high in July. The number rose in July by 273 permits to 1,526, almost 22 percent, according to investment banking advisory firm Evercore and data firm Enverus. The figure represents permits across the Permian in Texas and New Mexico. In Texas oil fields alone, there were 901 approved drilling permits in July, a 16 percent increase from the 779 issued during the same month last year. State regulators approved 1,146 permits in June, and 963 in May.
TX Should Love the Inflation Reduction Act. Energy-rich Texas should love the climate bill. The Washington Post. Texas is known as an oil state but is more accurately an energy state. Yes, it is the biggest producer of oil (and gas) in the country, as well as the top refiner. It is also in the top 10 states for coal mining. And Texas produces more electricity from coal than any other state — indeed, more electricity, period. Yet Texas is also the biggest state for wind power generation — for 16 years running — and ports such as Corpus Christi are critical entry points for turbine imports. In utility-scale solar power, Texas ranks number two and is catching up to California fast.
Devon Buying Validus Energy. Devon Energy to acquire Validus Energy in $1.8bn deal. Offshore Technology. US-based shale gas producer Devon Energy has signed an all-cash deal to acquire Validus Energy, an operator in the Eagle Ford Shale in the US, for $1.8bn Validus Energy, a Denver-based exploration and production company is backed by Pontem Energy Capital (PEC), private investors and other institutions. Devon expects the acquisition to provide 42,000 net acres near its existing leasehold in the Eagle Ford Formation. Current production capacity of Validus Energy in the Eagle Ford basin stands at around 35,000 barrels of oil equivalent per day (boepd), of which 70% is oil. The production volumes are anticipated to increase to an average of 40,000 nboepd over the next year, said Devon Energy. Furthermore, the acquisition provides 350 repeatable drilling locations for Devon Energy in the core of the Karnes Trough oil window in addition to 150 ‘high-quality’ refrac candidates.
Global Oil Demand Rising. Oil rises as IEA hikes 2022 demand growth forecast. Reuters. Oil prices rose by over 1% on Thursday after the International Energy Agency raised its oil demand growth forecast for this year as soaring gas prices drive some consumers to switch to oil. Brent crude futures gained $1.04, or 1.1%, to $98.44 a barrel by 0949 GMT, while U.S. West Texas Intermediate crude futures rose $1.03, or 1.1%, to $92.96. “Natural gas and electricity prices have soared to new records, incentivizing gas-to-oil switching in some countries,” the Paris-based agency said in its monthly oil report, in which it raised its outlook for 2022 demand by 380,000 barrels per day (bpd).
Inflation Reduction Act Will Drive Small Drillers Out of Business. Big oil sees upside of climate bill as small drillers brace for new fees, taxes. Bloomberg. Oil and gas executives from Exxon Mobil Corp. to Occidental Petroleum Corp. have been quick to applaud parts of the $437 billion climate, tax and health-care legislation that Congress is poised to pass this week. The enthusiasm from Big Oil isn’t shared by some smaller and independent producers, which pump the vast majority of the crude and gas produced in the US. They’re bracing for a raft of new fees and taxes, including penalties on leaking methane and much higher payments for drilling on federal land. While Occidental’s Chief Executive Officer Vicki Hollub hailed the Democrats’ sprawling bill as “very positive,” and Exxon’s Darren Woods dubbed it “a step in the right direction,” for many smaller oil producers there’s little in the legislation to like, said Dan Naatz, executive vice president at the Independent Petroleum Association of America.
TX Joins Opposition to Blackrock. Texas joins 18 states to oppose Blackrock’s woke agenda. Epoch Times. Texas joined a group of Republican-led states accusing BlackRock Inc. of putting woke investment criteria above shareholder profits in state pension funds. In a letter to BlackRock CEO Larry Fink, 19 attorneys general, mainly from conservative states, challenged his company’s reliance on environmental, social, and governance criteria at the expense of investor returns. Texas Attorney General Ken Paxton said in an Aug. 8 news release that ESG climate goals harm Texas’s oil and gas economy and state pension fund performance. The release said that BlackRock’s actions might also violate state and federal law.
Eagle Ford Has a Bright Future. Maturing Eagle Ford shale still has ‘long runway’. Energy Intelligence. The Eagle Ford Shale may be maturing, but operators believe there is still plenty of life in the South Texas play. That became apparent earlier this week, when Devon Energy announced it would acquire privately held Validus Energy for $1.8 billion, the biggest Eagle Ford deal since 2018. The transaction nearly doubles Devon’s current output of 38,000 barrels of oil equivalent per day. While Validus’ already producing assets were the main attraction, as it allows Devon to seamlessly grow output to capitalize on high oil prices, the properties also hold 350 “repeatable drilling locations” in the core of the Karnes Trough oil window, along with 150 “high-quality” older wells that could be recompleted in the future, the buyer said.
Shell Cracker Plant Completed. Shell has fully completed as of early Aug. 2022 construction of an ethane cracker and polyethylene plant complex near Pittsburgh, Pennsylvania that is different from other U.S. downstream investment in plastic resin capacity in that it will tap ethane from the Marcellus Shale.
“So Pennsylvania, we’re done building it,” said Shell´s Chief Executive Officer Ben van Beurden, referring to the complex with capacity to produce 1.6 million tonnes per year of polyethylene, according to a transcript of the call by Motley Fool.
Running rates closer to full capacity will be reached in the fourth quarter, he said
The company reported a “strong performance” in its LNG business in the second quarter whereas its chemical business performance for the same period wasn´t as good.
Plant startup
“Now, there’s always a phase when you are completing construction and go into start-up mode,” van Beurden said while talking about the startup as part of the company´s earnings discussion.
While Shell hasn´t disclosed an actual budget, the spending had been estimated in a range of between $6 billion to $10 billion, when including related pipeline works, before Covid.
“We have, in a way, been starting up support systems and utilities already for many quarters. But over the summer, we will indeed start bringing production on gradually,” van Beurden said.
Near full capacity by year´s end
“It’s very important we do that safely and reliably, and therefore we do not put pressures on our teams and say you have to have product done by x date. Everybody understands that today’s environment is a good environment to start producing in,” van Beurden said.
“Somewhere in the fourth quarter, this will be running more or less at design capacity,” he said. By 2023 earnings from plastic sales should start to show in Shell´s overall results, he said.
“This is a very advantaged project because of its feedstock cost, but also because of the location, where it is, in the middle of the large plastics demand in northeast North America,” he added.
Market sources have in the past estimated the new plant output will change market dynamics around polyethylene by displacing other U.S.-made product consumed domestically that will now go for export.
As much as half of the U.S. polyethylene production has been exported in recent years. This is possible as the U.S. enjoys a price advantage thanks to plentiful ethane supplies from shale developments.
The plant is within a 700-mile distance of the biggest markets for plastic resins in the U.S. in regions that include the Northeast and Midwest.
Those regions currently get plastic resin needed for many products and for nearly all packaging shipped by railcar from plants in the U.S. Gulf Coast, by far the country´s biggest chemical hub.
Inflationary pressures
Shell´s chief financial officer, Sinead Gorman, said that capital spending for 2022 is within the $23 billion to $27 billion range that was previously announced.
As the company readies its 2023 capital spending plan, it is “seeing inflationary pressures coming through.”
“We’re seeing things like steel being very much pressurized at the moment in terms of sort of 18% or so of inflation,” she said, according to the Motley Fool transcript.
Steel costs are a very important component of the price of petrochemical projects. Labor costs have also been on the rise in 2022.
LNG business “strong”
Shell had a very strong performance in the second quarter “in terms of the strength of our equity volumes, our own production volumes across the LNG plants,” Gorman said.
“We saw Peru and Trinidad and Tobago OK back again, all being able to produce where they should be. And of course, Colibri (project in Trinidad) has been added to that as well. What we do see, of course, is Nigeria and LNG still being impacted by some of the security issues,” Gorman added.
“We have taken out the Sakhalin (Russia) equity volumes from our predictions for Q3 and that’s what you’ll see in terms of the noise going forward there,” she said.
Shell, a world leading LNG supplier and trader, faced back in 2021 some production issues.
Chemicals not strong
“The chemicals results are not strong this quarter. That is because the chemical sector that we are exposed to is actually at still at a lower end, if not the bottom of the cycle,” van Beurden said.
“We will fix that, of course, once we have Pennsylvania on stream,” he added.
The new ethane cracker and polyethylene plant as well as other U.S. polyethylene capacity coming online this year is likely to find good demand, an industry executive said earlier in 2022.
There are about four million tonnes of new polyethylene capacity coming online in North America in 2022, including the Shell plant.
PA Permit August 1, to August 11, 2022
County Township E&P Companies
1. Armstrong Sugarcreek Apex Energy
2. Susquehanna Great Bend SWN
3. Susquehanna Great Bend SWN
4. Susquehanna Great Bend SWN
5. Washington Buffalo Range
6. Washington Buffalo Range
7. Washington Buffalo Range
OH Permits July 31 to August 6, 2022
County Township E&P Companies
1. Monroe Adams SWN
WV Permits August 1, to August 5 2022
1. Marshall SWN
2. Marshall SWN
3. Marshall SWN
4. Marshall SWN
5. Wetzel EQT
6. Wetzel EQT
7. Wetzel EQT
8. Wetzel EQT
Joe Barone 610.764.1232
