Facts & Rumors Newsletter #497 January 21, 2023

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

U.S. Oil Production Up in FEB. U.S. oil output set to rise in Feb to record – EIA. Hellenic Shipping News. Oil output from top shale regions in the United States is due to rise by about 77,300 barrels per day (bpd) to a record 9.38 million bpd in February, the U.S. Energy Information Administration (EIA) said in its productivity report on Tuesday. U.S. crude oil output in the Permian in Texas and New Mexico, the biggest U.S. shale oil basin, is set to rise by about 30,400 bpd to 5.64 million bpd in February, its highest on record, the EIA projected. In the Bakken region of North Dakota and Montana, the EIA forecast oil output next month will rise 20,000 bpd to 1.23 million bpd, the largest total since November 2020. In the Eagle Ford shale in South Texas, output will rise about 4,200 bpd to 1.21 million bpd in February, its highest total volume since April 2020. Total natural gas output in the big shale basins will increase 0.5 billion cubic feet per day (bcfd) to a record 96.7 bcfd in February, the EIA forecast.

EPA Moves Away from Permian Methane Crackdown. Strange! Why? EPA moves away from Permian Basin air pollution crackdown. The Texas Tribune. Federal authorities have stepped back from a proposal to address high levels of air pollution from the oil fields of West Texas and New Mexico. Last summer, the U.S. Environmental Protection Agency announced it was considering designating the Permian Basin — the nation’s top-producing oil patch and one of the largest single sources of carbon emissions on Earth — in violation of ozone standards, which would have required substantial reforms in local oil and gas operations. But the proposal was moved to a back burner in the agency’s annual agenda issued last week, reclassified from “active” to “pending,” a move first reported by Bloomberg News. “While it is encouraging news that the Biden Administration has backed down on this disastrous plan, Texas remains ready to fight any job-killing attacks on our critical oil and gas industry,” Texas Gov. Greg Abbott said in a statement following the EPA move.

FERC Approves Transco Expansion in PA, NJ and MD. Marcellus Shale gas producers may soon see a new outlet for the region’s plentiful natural gas after the Federal Energy Regulatory Commission (FERC) granted Williams Companies permission to expand the capacity of its Transco pipeline in Pennsylvania and in neighboring New Jersey and Maryland.

The 4-0 ruling issued Jan 11 ran counter to an earlier position taken by New Jersey regulators who had deemed the project unnecessary due to potential environmental impacts and because the Garden State was already committed to using less fossil fuel such as gas in the coming years as part of its climate-change strategy.

The ruling will enable Williams and Transco to begin replacing eight current compressor stations with six new or upgraded compressor stations in Pennsylvania and New Jersey, which will increase shipping capacity by 829 million cubic feet per day while requiring less maintenance than the current stations.

“We are pleased that FERC has unanimously recognized the vital importance of a reliable energy supply to support growing energy demand at home and abroad,” said Robin Rorick, vice president of Midstream Policy at the American Petroleum Institute. “A modern U.S. infrastructure system with a transparent, timely and consistent permitting process is a bipartisan issue and is crucial to harnessing the power of American energy.”

The ruling specifically approved plans to add 22.3 miles of 30-inch diameter pipeline plus another 13.8 miles of 42-inch pipe in Pennsylvania along with one new compressor station in New Jersey and modifications to five existing stations in Pennsylvania, all of which will continue to run on gas power.

Williams said in a statement, “We look forward to continuing our work with regulators and other stakeholders on this critical project that will enhance existing energy infrastructure and increase much-needed access to clean and reliable for consumers in the Northeast, and particularly for our customers in New Jersey.”

The entire Northeast has been shaking off sticker shock in the form of stiff winter gas bills, which the energy industry says is primarily the result of pipeline constraints in the region. The obvious answer, producers say, is allowing the construction of additional capacity to tap into the Marcellus region’s ample gas supplies. The Transco expansion, known as the Regional Energy Access (REA) expansion project, consists primarily of upgrades to or total replacement of compressor stations along the existing pipeline in New Jersey as well as in Pennsylvania’s Luzerne, York, Chester and Monroe counties.

Among the various filings submitted in the FERC case were analyses by the New Jersey Board of Public Utilities (NJ BPU) and the state’s Division of Rate Counsel, both of which concluded that New Jersey’s gas supplies were presently adequate, and that expansion of Transco’s capacity would leave ratepayers holding the bag for the cost of a project that was in not needed in the long run. In addition, FERC made note in its ruling that while the REA project met environmental requirements, it would still result in an 11.8 percent increase in post-construction greenhouse gas emissions over 2019 plus a 1.2 percent increase in Pennsylvania.

“Clearly, there is no need for this project,” said Tom Gilbert, co-executive director of the New Jersey Conservation Foundation, told the NJ Spotlight. “This essentially is New Jersey footing the bill for a project that is not needed.”

The idea of dueling studies and other third-party filings affecting FERC’s deliberations in general was raised in the written ruling by individual commissioners who urged a level of uniformity in how much weight individual filings should be given in future cases, particularly when it comes to climate change and other environmental impacts that go beyond basic supply-and-demand questions.

FERC Commissioner Allison Clements wrote that the third-party material in the Transco case contained “certain shortcomings that further limit their usefulness for aiding our decision-making.”

“As more states adopt laws and policies like New Jersey’s, we should expect more frequent and active participation by states and their utility regulators in our certificate proceedings,” Clements said in her concurrence. “Rather than improvising case-by-case, we should determine as a matter of policy how to consider and weigh relevant state laws, programs, and administrative determinations in future certificate proceedings.”

FERC Commissioner James P. Danley said he did not find much in the NJ BPU filing that contradicted the conclusions by Williams and the gas shippers who were already committing to use the new capacity. “Even while admitted to the record, each of the third-party studies suffers certain shortcomings that further limit their usefulness for aiding our decision-making,” he said.

The REA project will no doubt provide a nice boost for Marcellus gas production and a break for Northeast utility consumers, but with many states regulatory agencies playing a larger role in climate-change strategies, increased standardization of how other pipeline projects are considered at FERC could provide an even greater long-term benefit for the energy industry.

Chesapeake Focusing on Marcellus. Chesapeake Energy offloads Texas oil acreage in pivot to natural gas. Financial Times. Chesapeake Energy, a prime mover in the US shale energy revolution, has struck a $1.4bn deal to offload the bulk of its Texas oil assets as it ditches crude production in favor of drilling for natural gas. The company said on Wednesday it had agreed to sell roughly 60 per cent of its land in the Eagle Ford basin of south Texas to Wildfire Energy. The sale marks Chesapeake’s first concrete deal in a strategic pivot out of oil. Future production will be concentrated in the gas-rich shale regions of the Haynesville basin in Louisiana and the Marcellus in Appalachia.

Chesapeake CEO Urges Scale Back. Chesapeake Energy Corp. Chief Executive Officer Nick Dell’Osso urged his peers in the US natural gas sector to scale back production growth in response to the “very clear signal” from low prices for the fuel.

“Growth in gas supply is not needed in the short term,” Dell’Osso said during an interview on Wednesday. “We do think the industry should acknowledge that and may reduce growth in the near term.”

Dell’Osso’s remarks came just hours after news broke of Chesapeake’s agreement to sell some South Texas shale assets for $1.43 billion to WildFire Energy. Shedding the package of drilling rights, wells and equipment is intended to hone Chesapeake’s focus on harvesting gas from the Haynesville and Marcellus shale regions.

Benchmark US gas prices are down 23% in the past year as rapidly increasing production ran headlong into slower-growing domestic demand and the shutdown of a key fuel-export complex on the Texas coast after a June explosion.

Just last month, top US gas producer EQT Corp. said the price plunge would slow supply growth. Dell’Osso on Wednesday noted that more output will be needed during the second half of this decade as demand surges due to increased overseas demand for American gas.

Toby Rice’s Comments on Plunging NatGas Prices. A plunge in natural gas prices will slow supply growth in the US this year, according to the country’s biggest producer of the fuel.

Gas futures have dropped in the US and Europe in recent weeks, largely because of abnormally warm winter weather. US production has also continued to increase.

Predictions among some in the industry that US output will rise this year by another 3 billion cubic feet a day, or roughly 3%, will probably turn out to be incorrect, according to Toby Rice, chief executive officer of EQT Corp.

“That’s a little ambitious with the current pullback in prices,” he said in an interview over the weekend. “You are going to see an operator response and slowdown in the activity levels.”

US prices have fallen 16% this year to $3.75 per metric million British thermal units. They were almost double that as recently as late November.

US Natural Gas Plunges

The disruption to global flows caused by Russia’s invasion of Ukraine and decision to cut supplies to Europe means gas will continue to whipsaw in the medium term, Rice said.

“It’s been a little bit over-sold,” he said in Abu Dhabi, capital of the United Arab Emirates, where he was attending an Atlantic Council conference. “But this is the world we’re going to be living in — a significant amount of volatility, especially when we are energy-short.”

Another problem for gas firms is that inflation in the industry is still high, making it expensive to hire drilling workers and equipment.

“Inflation has not reacted,” Rice said. “So, we’ve got a couple of big forces that are working against producers.”

Pittsburgh-based EQT fracks gas from shale rocks in Pennsylvania, Ohio and West Virginia. It’s pumping almost 6 billion cubic feet a day and expects that figure to remain flat this year, Rice said.

Broken Markets

He reiterated that a shortage of pipelines in the US exacerbates the company’s ability to raise production. Environmental activism has led to several pipelines being delayed or canceled in the past five years.

“The gas markets in the US are broken,” he said. “And what’s broken is lack of pipeline infrastructure that connects the low-cost supply that we have with the demand. We still see pockets in the US where natural-gas prices are higher than what they’re paying in Europe. It’s crazy.”

European prices are around $21 per mmbtu, even with their recent drop. That’s more than five times the cost of benchmark gas in the US.

Gas should be seen as a clean source of energy as not lumped together with oil and coal, said Rice. While gas is cleaner than those two, it still emits carbon when burned and methane leaks are common in the industry. Many climate activists are against its use and say governments should phase it out as a fuel for generating electricity and heating homes.

The US government’s climate envoy, John Kerry, said to Bloomberg on Sunday that gas can play a role in slowing the planet’s warming, but only if producers accelerate efforts to capture their carbon emissions.

Kerry Says Gas Can Help Climate, But Only With Carbon Capture

With more pipelines, the US has the potential to eventually increase gas exports six-fold to 60 billion cubic feet daily, Rice said.

“That is the energy equivalent of adding 10 million barrels a day of clean energy to the world stage,” he said. It would allow the US to be the “swing producer” for energy markets, he said.

EQT has no plans to tap the bond market again following a $1 billion deal in September, which helped fund the acquisition of competitor THQ Appalachia I LLC. The company will look to raise its shareholder payouts further, according to Rice.

“We are going to be a dividend grower over time,” he said.

What’s Dragging Down NatGas Prices? Mild winter, strong storage inventories drag down global natural gas price outlook. NGI. The sinking cost of natural gas and LNG prices across the world in recent weeks has influenced banks and energy analysts to lower their price forecasts for the year as global storage inventories and demand hold steady. Expectations have especially shifted for the Dutch Title Transfer Facility, which has dropped around 80% since reaching a record high in August. A continued influx of liquefied natural gas cargoes and mild weather have kept Europe’s natural gas storage at around 80% full, well above the five-year average. Since the beginning of the year, the TTF has slumped below $20/MMBtu, hitting its lowest point since 2021. The prompt price for March again closed just above $19 on Thursday. TTF has also been closely followed by Japan-Korea Marker futures, which have been hovering just above the $20/MMBtu mark as price-sensitive South Asian buyers tentatively venture back into the market. Spot JKM prices have dipped below $20.

Climate Savior – U.S. NatGas. U.S. natural gas pitched as climate savior if methane leaks cut. Bloomberg Law. US natural gas exports can help the world slow the pace of climate change — but only if the fossil fuel displaces coal power and its methane emissions are slashed dramatically — the Progressive Policy Institute argued Thursday. The center-left think tank is making a climate argument for expanding US exports of liquefied natural gas — a novel approach at a time when many activists are warning against any embrace of the fossil fuel. But the endorsement of greater LNG exports comes with a catch: Producers, shippers and users of the fuel need to clamp down on emissions of potent greenhouse gases.

CA NatGas Shortage Persists. U.S. natural-gas inventories swell, but California’s shortage persists. WSJ. Mild weather and strong production have pushed U.S. natural-gas inventories to above normal for this time of year, all but eliminating the risk of price spikes and shortages of the heating and power-generation fuel this winter. The volume of gas in storage ended last week 1.2% above the five-year average, up from more than 10% below normal this summer, when prices surged to shale-era highs, Energy Information Administration data show. Supplies have swelled despite a big deficit on the West Coast, where inventories are 31% below normal. Low supplies have been especially problematic in California, where on-the-spot gas has been more than six times as expensive as it is at Louisiana’s Henry Hub pipeline junction, where the national benchmark price is set.

NatGas Flowing to Freeport LNG. Yeah! Gas starts to flow to Freeport LNG export plant in Texas – data shows. Oil & Gas 360. Freeport LNG’s long-shut export plant in Texas started receiving natural gas from pipelines over the long U.S. Martin Luther King Jr holiday weekend, according to data from Refinitiv, a possible sign the plant is finally moving closer to exiting an outage. Gas started flowing to Freeport on Jan. 14 and was on track to reach 69 million cubic feet per day (mmcfd) on Tuesday, according to data from Refinitiv. The last time gas flowed to Freeport was in late December when the plant was using the fuel to maintain a flare system, according to a source familiar with the plant. Officials at Freeport, which shut in a fire on June 8, 2022, said on Tuesday the plant was still on track to restart in the second half of January, pending regulatory approvals.

Eagle Ford Production Picking Up. Oil production picking up in second-largest U.S. shale field. Oil & Gas 360. Oil production in South Texas, home of the second largest U.S. shale field, is expected to rise as much as 4% this year, as higher prices spur more drilling and as U.S. crude exports set new records. Output in the Eagle Ford shale field tanked in 2020, but has returned to growth with an average increase per month of about 17,000 barrels per bay (bpd) in the back half of 2022, according to U.S. government data. Its gains will help keep U.S. output rising as the Permian basin, the largest U.S. shale field, has slowed rapidly in the last year. Output in the Eagle Ford is expected to rise between 25,000 to 40,000 barrels per day, said Alexandre Ramos-Peon, head of shale well research at Rystad Energy. “Over the past few months, oil and gas production in South Texas have been showing new signs of life,” Housley Carr, an analyst at RBN Energy, said in a report.

New England’s Oil Reality. New England clean energy goals slam into oil reality. E&E News. New England power plants burned more oil for electricity on a single day during last month’s deep freeze than they have in four years, underscoring the gap between Northeastern states’ clean energy targets and the current resource mix in the region. Oil resources supplied 29 percent of a six-state region’s power on Dec. 24 as temperatures hovered in the teens, natural gas supplies tightened and some generators failed to perform as expected. The amount of electricity generated by oil that day was higher than it had been since a weekslong polar vortex hit New England in January 2018, according to an E&E News review of annual reports from the regional grid operator on fuel use. New England and New York are the only parts of the country that rely extensively on oil resources for backup power when other electricity supplies are expensive or in short supply. In both regions, oil is used sparingly throughout the year, having accounted for 0.2 percent of the total electric load in New England in 2021, according to ISO New England, the area’s nonprofit grid operator.

Why Capturing Methane Is So Hard. Why capturing methane is so difficult. Scientific American. Avoiding the worst impacts of climate change may require removing methane from industrial emissions streams and the atmosphere — but researchers are so far stymied on how to capture the potent planet-warming gas. Methane lasts in the atmosphere only a decade or two, compared with carbon dioxide’s centuries. But it traps 80 times as much heat, helping drive near-term warming and potentially kick-starting a feedback loop that would release even more gas from natural sources. A technology that removed methane from the air could significantly change the rate of global warming in the relatively near future, said Desirée Plata, a professor of civil and environmental engineering at the Massachusetts Institute of Technology.

RNG News from Coalition for RNG

Green Rock’s Growing Its Portfolio. The South Hills deal adds to Green Rock’s growing portfolio in the renewable energy space and is consistent with the firm’s primary investment focus on energy-producing waste-to-value assets.

The South Hills deal adds to Green Rock’s growing portfolio in the renewable energy space and is consistent with the firm’s primary investment focus on energy-producing waste-to-value assets.

Located in South Park Township, Pennsylvania, South Hills upgrades landfill biogas to produce RNG that will be sold in the vehicular transportation market as renewable compressed natural gas. Production at the facility is expected to exceed one million gallons of renewable fuel per year. Green Rock has partnered with United Green Energy, and others, to manage the renewable natural gas offtake.

Clean Energy Fuels Providing RNG in Centre County, PA. Clean Energy Fuels Corp. announced it is has begun providing renewable natural gas (RNG) for the Centre County Recycling and Refuse Authority (CCRRA) in Bellefonte, PA.

Clean Energy Fuels Corp. announced it is has begun providing renewable natural gas (RNG) for the Centre County Recycling and Refuse Authority (CCRRA) in Bellefonte, PA, supporting a transition to a cleaner, low-carbon fuel produced from organic waste.

“The recycling and refuse industry have long embraced natural gas to mitigate the impact of greenhouse gas emissions,” said Chad Lindholm, senior vice president, Clean Energy. “Our CCRRA station is one of the first on the East Coast to transition to RNG and will further our sustainability goal of providing RNG at all of our stations by 2025.”

PA January 9, to January 19, 2023

County Township E&P Companies

1. Armstrong Manor Snyder

2. Armstrong Rayburn Snyder

3. Bradford Springfield Blackhill Energy

4. Bradford Springfield Blackhill Energy

5. Bradford Springfield Blackhill Energy

6. Butler Connoquessing PennEnergy

7. Butler Connoquessing PennEnergy

8. Butler Connoquessing PennEnergy

9. Butler Connoquessing PennEnergy

10. Butler Connoquessing PennEnergy

11. Butler Connoquessing PennEnergy

12. Lycoming Gamble Seneca

13. Susquehanna Hush SWN

14. Tioga Delmar Seneca

15. Tioga Westfield SWN

16. Tioga Westfield SWN

17. Wyoming Windfield Chesapeake

18. Wyoming Windfield Chesapeake

OH Permits January 8, to January 14, 2023

County Township E&P Companies

1. Columbiana Knox EAP OHIO

2. Columbiana Knox EAP OHIO

3. Columbiana Knox EAP OHIO

4. Columbiana Knox EAP OHIO

WV Permits January 9, to January 9, 2023

1. Ohio SWN

2. Ritchie Antero

3. Marshall Chevron Appalachia

Tags: Facts and Rumors

Facts & Rumors Newsletter #497 January 21, 2023

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

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