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
NatGas Collapse. U.S. NatGas falls 4% to 3-mth low on mild weather, global price collapse. Reuters. U.S. natural gas futures fell about 4% on Tuesday to a three-month low as oil and European gas prices dropped and forecasters called for milder U.S. weather over the next two weeks. U.S. gas prices have been declining for eight weeks as record domestic output and reduced liquefied natural gas (LNG) exports have allowed utilities to inject much more gas than usual into storage. Major LNG outages include Berkshire Hathaway Energy’s shutdown of its 0.8 billion-cubic-feet-per-day (bcfd) Cove Point LNG export plant in Maryland for about three weeks of planned maintenance on Oct. 1 and the continuing shutdown of Freeport LNG’s 2.0-bcfd plant in Texas for unplanned work after an explosion on June 8. Freeport expects the facility to return to at least partial service in early to mid-November.
U.S. NatGas languishes near 7-month low after big storage build. Reuters. U.S. natural gas futures fell to their lowest since March on Thursday, after a federal report showed a larger-than-expected storage build last week and as the market is expected to see increases in output. Front-month gas futures fell 1.9% to settle at $5.358 per million British thermal units, after sliding to $5.253 per mmBtu earlier in the session. The U.S. Energy Information Administration (EIA) said utilities added 111 billion cubic feet (bcf) of gas to storage during the week ended Oct. 14, more than the 105 bcf build analysts forecast in a Reuters poll and substantially more than the year-ago weekly build of 91 bcf and a five-year (2017-2021) average increase of 73 bcf. It was also the fifth week in a row that stockpiles increased by over 100 bcf.
Why the Appalachian Basin Is Missing out on the LNG Boom. Why the U.S.’ largest shale gas basin misses out on the LNG boom. Oil Price. Regulatory hurdles are stymieing growth in natural gas production in the Marcellus-Utica basin, the largest U.S. gas-producing region, which is set to miss out on the expected boom in American liquefied natural gas (LNG) exports in the coming years. Not only is Marcellus-Utica missing the opportunity to export and monetize natural gas in a world scrambling for LNG supply, but it is also unable to provide more natural gas to the regions close to it in New England, analysts and the pipeline industry say. In one of the most ironic twists in American energy these days, the U.S. Northeast is importing LNG from foreign producers to meet its gas demand. New England’s predicament is the result of the regulatory hurdles the U.S. states in the Northeast have posed to natural gas pipeline infrastructure, the Interstate Natural Gas Association of America says.
FERC Monitoring Big Oil. FERC meeting: Glick warning, ‘self-dealing’ and pipeline win. E&E News. Consumers are going to “suffer” this winter as energy costs continue to climb, the head of the Federal Energy Regulatory Commission said Thursday. Driving the spike in energy costs are high fuel prices worldwide and relatively low growth in natural gas production in the U.S., among other factors, according to FERC staff. One major natural gas price benchmark — the Henry Hub — is currently 30 percent higher than what it was last winter. In the coming months, FERC must be vigilant in ensuring that energy companies don’t take advantage of the situation by manipulating energy and power markets, Chair Richard Glick said.
FERC Forecasting NatGas Prices for this Winter. U.S. FERC says winter NatGas prices will be up from recent years. Reuters. Natural gas prices at major U.S. trading hubs for the upcoming winter are expected to remain higher than in recent years, the Federal Energy Regulatory Commission (FERC) said on Thursday. Even if domestic gas production grows faster than domestic demand, “forecasts anticipate that continued growth in net exports, including from liquefied natural gas (LNG) export facilities, will place additional pressure on natural gas prices this winter,” the agency said. Freeport LNG, the second-largest U.S. LNG export plant, idled for five months by a fire, must receive full approvals before a planned November restart can begin, regulators said this week.
NatGas Will Be Helped by Freeport LNG Terminal. Natural gas prices to rebound. The OA. Natural gas prices have been tanking since a June 7 fire and explosion put the Freeport Liquefied Natural Gas Export Terminal on Quintana Island on the Texas Gulf Coast out of action and forced billions of cubic feet into storage. But repairs are progressing, and the terminal will be online in November. Odessa oilman Kirk Edwards and spokesmen for the Texas Pipeline Association, Panhandle Producers & Royalty Owners and Texas Independent Producers & Royalty Owners say things are looking up just in time for a tough winter in Europe, one of the top LNG markets. The price was over $8 per million British Thermal Units before the blast and $5.364 Thursday.
Permian Record Coming in November. U.S. Permian oil production forecast to hit record in November -EIA. Hellenic Shipping News. Oil output in the Permian in Texas and New Mexico, the biggest U.S. shale oil basin, is forecast to rise by about 50,000 barrels per day (bpd) to a record 5.453 million bpd in November, the U.S. Energy Information Administration (EIA) said in its productivity report. U.S. crude oil output in major U.S. shale basins is due to rise by about 104,000 bpd to 9.105 million bpd in November, its highest since March 2020, the EIA projected. In the Bakken in North Dakota and Montana, the EIA forecast oil output will rise 22,000 bpd to 1.190 million bpd in November, the most since December 2020. In the Eagle Ford in South Texas, output will rise 18,000 bpd to 1.226 million bpd in November, its highest since April 2020.
$150 Barrell in 2023. Will 2023 bring $150-a-barrel oil? Washington Examiner. Opinion. With President Joe Biden’s release of another 15 million barrels, the Strategic Petroleum Reserve will be drawn down to its lowest levels since 1984. The United States is vulnerable to another oil crisis. The data suggest that another energy crunch is coming in late 2023. One challenge is that U.S. oil production, rather than increasing, as the Energy Information Administration had predicted, has plateaued. The weekly domestic oil production data from the EIA continue to show U.S. crude oil production at or around 12 million barrels a day.
LNG Prices Causing Conservation in Asia. Japan, China move to conserve natural gas as LNG price volatility rises. NGI. Asian countries that typically buy massive volumes of LNG are moving to build contingencies for procuring expensive cargoes and reserving excess volumes as risks of colder winter weather and continued competition with Europe sustain market volatility. Asian natural gas prices have been steadily descending for more than a week, following the Dutch Title Transfer Facility (TTF) benchmark for gas sold in Europe. Short-term forecasts of milder weather and higher-than-average levels of storage on the continent have been dropping European prices and hinting at a slight shift in market dominance to Asian offtakers once again.
New England Blackouts. New England risks winter blackouts as gas supplies tighten. Fox Business. New England power producers are preparing for potential strain on the grid this winter as a surge in natural-gas demand abroad threatens to reduce supplies they need to generate electricity. New England, which relies on natural-gas imports to bridge winter supply gaps, is now competing with European countries for shipments of liquefied natural gas, following Russia’s halt of most pipeline gas to the continent. Severe cold spells in the Northeast could reduce the amount of gas available to generate electricity as more of it is burned to heat homes. The region’s power-grid operator, ISO New England Inc., has warned that an extremely cold winter could strain the reliability of the grid and potentially result in the need for rolling blackouts to keep electricity supply and demand in balance.
“The Elephants in the Room.” Every year for the last 12 years, Michael Cembalest, the Chief Investment Officer at J.P. Morgan asset management, has published a report on the state of the global energy space. It is a comprehensive assessment of the state of play in the world of energy, chock full of charts and data related to every industry segment.
Cembalest titled this year’s edition of the report – which is a service to customers but is also publicly available – “The Elephants in the Room.” As readers here at Forbes Energy know, such elephants exist in great abundance across the globe as the world slouches ever more deeply into what promises to become the most severe energy crisis in history.
I reached out to Cembalest recently for an interview, and fortunately, he accepted the invitation. The full video of the interview can be found here.
Question: What, in your view is the current state of the Energy Transition? Do you think the world is keeping pace with all of these various “net zero by 2050” goals?
Cembalest: I don’t. That 2050 is such an abstract thing. And with any transition, sometimes the easiest stuff happens first. Think about this: The world is currently using the optimal places in terms of onshore wind speeds and solar irradiance. As you get deeper into the renewable transition, you’re going to be choosing the places people passed on first time around.
The world’s making good progress on one thing and one thing only, which is the gradual decarbonization of electricity, of electricity consumption used for HVAC. That’s basically it.
Separately, very little progress has been made on decarbonization of transportation.
And then, the biggest elephant in the room is there’s been almost zero progress on decarbonization of industrial energy consumption, which is how you make plastic, rubber, cement, steel, ammonia fertilizer or glass and plastics.
Question: That last element, the lack of decarbonization in industrial energy consumption, is one of the central issues in Europe, isn’t it?
Cembalest: We have a chart that looks at the pace of industrial output in gas-intensive energy sector in Germany. We have data going back 40 years and it’s at its lowest level on record.
They’ve got two problems hitting them at once: First, you can’t build wind and solar fast enough. In most countries, with the possible exception of China, which basically doesn’t have private property rules, developers can’t build wind or solar fast enough to displace gas on the grid.
Then the second thing hitting them is you can’t easily electrify the production of a lot of the things the German industry makes. That’s one of the biggest misnomers in all of the green energy plans. A lot of stuff that gets made does not conduct electricity. So it’s a lot harder to use electricity to make it. And that’s what a lot of natural gas and coal are used for, for process heat at very high temperatures for a lot of those industrial goods. Consider the US: the share of electricity in industrial energy use is unchanged since the 1980’s.
Question: Do you think we are having more of an ‘energy addition’ than an ‘energy transition’ right now? We’re adding more energy generation capacity to our grids with all the wind and solar that’s being built, but is that really lessening the need for what we have always called baseload capacity?
Cembalest: I would say that those in the community of energy people have always known that intermittent energy is not a substitute for baseload. But outside the energy community, there are these oversimplified things like ‘levelized cost of energy’ which can’t handle the concept of intermittent versus baseload.
So, you end up with a bunch of EIA reports and media articles saying that solar and wind are cheaper than gas. For the marginal kilowatt hour, maybe. But from a system perspective, you’ve got to load onto your estimate for your cost of wind and solar, things like how much backup thermal power am I going to need? How much utility scale energy storage am I going to need?
I don’t need that for gas, but I need that for wind and solar. And, how much extra transmission investment am I going to need?
Question: That was my next question – your report contains a great deal of focus on the challenges integral to the building-out of adequate transmission to bring electricity generated by wind and solar to market.
Cembalest: You know, thermal power tends to get built very close to load centers. You can build thermal power where you want to build it. But wind and solar tends to be built really far away from those load centers. And transmission is both costly and politically extremely difficult to build.
Question: Isn’t this an especially big challenge for wind, as opposed to solar? Solar is so much more versatile in where it can be sited – you can do so many different things with it, like wrapping these new flexible panels around light and power poles, covering the roofs of big box stores and home rooftops with them, etc. With wind, it seems limited to making the towers taller and the blades longer.
Cembalest: Certainly, if you look at the projections, solar is going to be overtaking wind in the near future. The capacity factors of wind cap out at about 40% or so, even in the best places in the country.
But then the costs and the transmission and maintenance challenges are equally difficult. So yeah, solar is going to get a lot more attention. And, a lot of solar is being built along with co-located storage.
But again, that begs the question of how much is this transition going to cost if every megawatt hour of solar is going to have to be accompanied by some pretty expensive utility scale lithium-ion storage?
Question: But promising alternatives to lithium-ion are being developed, correct?
Cembalest: There are some, yes. There’s a lot of research taking place with larger, cheaper stationary storage such as vanadium redox batteries. And I think eventually some progress will be made, but it’s not going to be free.
So, the cost issues here are going to take a while to really unbundle if storage becomes an inseparable component of solar power and you need all sorts of ramping and extra protections for the grid because of the concentration of solar irradiance in the middle of the day.
Question: Speaking of the cost of all of this, Congress just passed a bill that contains $369 billion in new subsidies for renewable energy and carbon capture and all these alternatives. Do you think people really understand the reality that all that amounts to is a down payment on what the ultimate cost of all this is really going to be?
Cembalest: Yeah. I don’t know what they’re going to get in terms of bang for the buck. One thing it’s certainly going to make complicated is you will no longer be able to look at household and commercial and industrial electricity prices to understand the cost of your energy eco-system. Because there are so many unrelated subsidies that won’t be showing up in your electricity price, but they’ll show up eventually in your tax bill.
I mean, the cost of an energy eco-system is the tax on the public debt used to build it, plus the direct payment to electricity prices. So a lot of people are going to under-quote the cost of this transition because they’re going to look at how much we’re paying in electricity rates for this new stuff. But they’ll be ignoring the cost to all taxpayers of an extra $370 billion of debt at the federal level.
Question: On a scale of 1 to 10, what would you say this bill rates in terms of providing the necessary economic incentives?
Cembalest: It’s a three in terms of creating the pathways for people to execute. Because, look, Manchin’s siting bill wasn’t a part of it and that has apparently been shelved, at least temporarily, if not permanently.
And here’s a perfect example: The bill calls for $7,500 subsidies for EVs and at least half of that $7,500 you only qualify for if you buy a North American assembled car whose battery gets its critical minerals or battery composition in the United States or from its close allies.
Question: Right, and no EVs currently made in the U.S. qualify for that, correct?
Cembalest: As far as we can tell, almost no EVs would qualify for that right now. Perhaps someday in the future, as there are a lot of battery assembly plants on the drawing board.
But, let’s see what happens when people start trying to apply for permits in Nevada or Utah for a lithium mining and refining and processing operation. I can anticipate that kind of thing would take 15 years.
One of the exercises that we did…we laid out all of the assumptions that were made by Manchin and Schumer when they talk about a 40% decline in GHG emissions by 2030. They didn’t run those numbers. Obviously, they got them from an energy consulting firm. So, I went to the consulting firm and got all their assumptions.
They’re assuming a seven-fold increase in the pace of solar power capacity additions compared to the last three years. That’s a moon landing war effort, a kind of pace of building that would be unprecedented in the history of the United States. And I think, practically speaking, highly improbable given all of the siting and transmission challenges that we know exist.
So, there’s certainly a lot of economic incentives for people to want to build that solar power. Their ability to execute and deliver is an entirely different question.
Question: Do you think policymakers in Washington understand the reality that if we’re actually going to make this transition work the way they think it’s going to work, that our country and Canada and Europe and really everybody in the world is going to have to get back into the strip-mining business in a very big way?
Cembalest: In principle, I think they’re aware that they’ve created a bill that is supposed to incentivize the repatriation and onshoring of certain mining activities. What I think they’re missing is those activities have gravitated to parts of the world that have minimal to no controls, or domestic judicial remedies for environmental pollution.
For its level of GDP, China is the most polluted country in the world, and we’re all aware of the air pollution. But the water pollution is worse than the air pollution, and the soil pollution is worse than both.
So, a lot of these activities have gravitated to China, sub-Saharan Africa and places like that. You know, it’s kind of like the CHIPs bill, the semiconductor bill that was just passed. We can certainly make those small chips in the United States, and we can mine and refine lithium and cobalt and manganese.
But, let’s see how much it will cost and how long it would take. If it’s done in a way that complies with Western standards. I think that the thing they’re missing is the time and the cost associated to re-shore and repatriate those activities.
PA Permit October 10, to October 14, 2022
County Township E&P Companies
1. Bradford Smithfield Chesapeake
2. Bradford Smithfield Chesapeake
3. Lycoming Lycoming Beech
4. Lycoming Lycoming Beech
5. Wyoming Washington BKV OPR
6. Wyoming Washington BKV OPR
7. Wyoming Washington BKV OPR
8. Wyoming Washington BKV OPR
OH Permits October 9, to October 15, 2022
County Township E&P Companies
1. Harrison Stock EAP OHIO
2. Harrison Stock EAP OHIO
3. Harrison Stock EAP OHIO
4. Harrison Stock EAP OHIO
WV Permits October 10, to October 14, 2022
1. Marshall Tug Hill
2. Marshall Tug Hill
3. Marshall Tug Hill
4. Marshall SWN
Joe Barone 610.764.1232
