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

Shale Earning Set Surge.  Shale earnings may show whether U.S. oil output is set to rev up. Bloomberg. U.S. shale companies are set to post yet another strong set of earnings, off the back of robust oil and gas prices in the fourth quarter. But the biggest question for analysts and investors remains whether the industry’s bumper cash flow will tempt them to drill more. The focus of attention will be on explorers’ production targets, with the global supply-demand balance still tight and with China’s recent lifting of coronavirus restrictions expected to boost consumption. Shale drillers have said supply-chain issues, labor shortages, rising costs and unhelpful federal policies are preventing them from revving up production.

Oil Inventories Jump. Oil dives $3 after U.S. EIA reports big builds in U.S. crude, fuel stocks. Reuters. Oil prices settled lower on Wednesday after sliding more than $3 a barrel in the session after U.S. government data showed big builds in crude oil, gasoline and distillate inventories and OPEC and its allies stuck to their output policy. Brent crude futures settled down $2.62, or 3.1%, at $82.84 a barrel while West Texas Intermediate (WTI) U.S. crude futures fell $2.46, or 3.1% to settle at $76.41. “The market is reacting to the report that indicates there isn’t demand for crude oil or fuels,” said John Kilduff, partner at Again Capital LLC in New York. The Federal Reserve raised its target interest rate by a quarter of a percentage point on Wednesday, yet continued to promise “ongoing increases” in borrowing costs as part of its still unresolved battle against inflation.

LNG Becoming Dominant Energy Mix.  Global natural gas price volatility accelerating LNG’s dominance, says GECF. NGI. Natural gas is still expected to dominate the global energy mix and support decarbonization into the middle of the century despite recent market volatility, but the world’s current energy crunch could be accelerating LNG’s position as the trade of choice, according to researchers from the Gas Exporting Countries Forum (GECF). In a recently published Global Gas Outlook report, researchers again estimated that natural gas will hold the largest portion of the global energy mix in 2050, growing from 23% last year to 26%. However, how that gas may reach end-users in the future could be changing more quickly due to recent geopolitical events. GECF researchers previously estimated liquefied natural gas could account for less than half of all global gas transactions in 2030 before pushing to 56% by 2050. In the latest report, researchers now expect LNG trade to surpass pipeline volumes as soon as 2026. LNG trade is expected to more than double traded pipeline volumes by 2050, reaching an estimated 1,170 billion cubic meters/year (Bcm/y).

New FERC Chair Moving Appalachian Projects The Federal Energy Regulatory Commission (FERC) under the chairmanship of Richard “Dick” Glick moved like molasses when it came to approving new pipeline projects. Glick’s favorite move was to require a full environmental impact statement (EIS) for even small projects that do nothing more than add more compressors or looping pipe (laid next to existing pipe). Glick is now gone, thanks to Sen. Joe Manchin. Willie Phillips is the Acting Chairman. In a surprise move, Phillips has converted what would have been full EISs for three small but important pipeline projects (all of them affecting the Marcellus/Utica) into much faster and less onerous environmental assessments (EAs), shaving a full nine months off the time it takes to approve these projects.

Repsol Purchases Japan’s Inpex Oil Project in the Eagle Ford.  Japan’s Inpex sells US Eagle Ford shale oil project to Repsol. Offshore Technology. Japanese exploration and production company Inpex has divested its tight oil assets in the Eagle Ford play in Texas to Spanish energy company Repsol. The financial terms of the deal were undisclosed. Since 2019, Inpex held several tight oil development and production assets in the Eagle Ford play through its subsidiary, Inpex Americas. The majority of these assets are in Karnes County, Texas, and are considered to be highly prospective for crude oil within the Eagle Ford shale play. As the operator of most of the project, Inpex Americas was responsible for the development, production, and marketing of tight oil. The Japanese firm has decided to offload these assets ‘to optimize the Inpex Group’s global asset portfolio’.

TX NatGas Production Hitting Records.  Texas natural gas production hitting records as Mexico ups supply needs. NGI. Mexico’s demand for Texan natural gas is set to rise as new infrastructure projects come to fruition. Along with plans in Mexico to build up to 5 Bcf/d of liquefied natural gas export capacity, state utility Comisión Federal de Electricidad (CFE) also is developing over 7 GW of natural gas-fired power generation by 2025. These power plants would require an additional 1.1 Bcf/d of natural gas, the CEO of CFE’s natural gas marketing affiliates CFE International LLC and CFEnergía, Miguel Reyes, said during the Mexico Infrastructure Projects Forum in Monterrey, Mexico, last week. Recently, CFE head Manuel Bartlett called Texan gas “the cheapest gas in the world” and said his company was doing all it could to maximize its usage.

Permian Oil Production and Profits Surge.  U.S. Permian Basin oil production — and profits — have surged. Axios. Production in the oil-and-gas-rich Permian Basin of West Texas and New Mexico hit records recently, juicing oil company profits and easing energy supply worries. Why it matters: It shows U.S. oil companies are responding to higher prices, with increased drilling and pumping after what seemed like months of foot-dragging. Context: Russia’s invasion of Ukraine generated a global oil shock in 2022. U.S. crude climbed over $120 a barrel back in March, and average gasoline prices jumped to more than $5 per gallon in June. Still, U.S. production in the Permian Basin — one of the most productive and cost-effective oil fields in the world — remained below 2019 levels for most of the year. The lack of production growth from the industry became a focus for the Biden administration, with the President comparing oil companies to war profiteers and hinting that it could push for a tax on windfall profits.

Mexico Needs U.S. NatGas.  Lack of natural gas, hydrocarbons storage said hampering Mexico energy industry. NGI. The lack of available storage options for natural gas and fuels continues to challenge the Mexican energy industry, leaving the country vulnerable in the event of supply interruptions, such as aberrational weather or unforeseen outages, executives said this week. Speaking at the 8th Mexico Infrastructure Projects Forum in Monterrey, stakeholders in Mexico’s government and private sector voiced the need to further develop natural gas and hydrocarbon storage infrastructure. Storage capacity is seen as a safeguard to assure the country doesn’t suffer from shortages that could stall industrial production and leave citizens without electricity or gasoline and diesel. Despite existing investor appetite to develop infrastructure in various regions of the country, the Mexican government has continued to prioritize other projects. Priorities have included oil exploration and production, as well as constructing the Dos Bocas oil refinery, over investing in needed storage projects, according to experts at the two-day forum.

WV Looking for NatGas Power Sites.  West Virginia advances natural gas power sites bill. Governing. A West Virginia Senate committee has advanced a bill that says the phrase ‘natural gas’ 34 times. Word counts became an issue Wednesday afternoon as the Senate Economic Development Committee considered the bill, which would direct the Department of Economic Development secretary to identify and designate sites deemed suitable for natural gas electric generation projects. The committee’s approval of Senate Bill 188 followed an argument from West Virginia Coal Association president Chris Hamilton that SB 188’s legislative findings would be used to establish that natural gas is the state’s preferred fuel for generating electricity.

PA NatGas Replaces Coal.  In the past 20 years, natural gas has displaced most coal-fired generation in Pennsylvania. EIA. Natural gas-fired power plants generated 2% of the electricity produced in Pennsylvania in 2001. Over the next 20 years, natural gas-fired generation in the state increased rapidly, reaching 52% in 2021. Natural gas displaced most coal-fired generation, which fell from 57% of the electricity generated in Pennsylvania in 2001 to 12% in 2021. Natural gas production has grown significantly in Pennsylvania over the past two decades, rising from 0.1 trillion cubic feet (Tcf) in 2001 to 7.6 Tcf in 2021, making the amount of natural gas produced in Pennsylvania second only to Texas. Pennsylvania sits on top of the Marcellus shale, and the portions of the Marcellus under Pennsylvania and West Virginia constitute the largest natural gas field in the United States. Although natural gas has been produced in the Marcellus for a long time, production from the Marcellus became much more economical after fracking and horizontal drilling were developed. The first Marcellus shale natural gas well using these techniques was drilled in Pennsylvania in 2004. At the same time that natural gas production in Pennsylvania was increasing, coal production was declining, falling 40% from 74.1 million tons in 2001 to 42.5 million tons in 2021.

Permian Methane Emissions Fell 76%.   Methane emissions intensity fell in Permian Basin by over 76%. Center Square. Methane emissions in the Permian Basin – one of the largest oil and natural gas fields in the world – fell by significant margins as production increased in the most recent decade analyzed. From 2011 to 2021, methane emissions intensity in the Permian Basin fell by more than 76% as production increased by over 345%; it also fell by 20% from 2020-2021, according to a new report published by Texans for Natural Gas. “Texas’ role as a global energy leader extends well beyond just volumes,” Ed Longanecker, TIPRO president and TNG spokesperson, said. “Our state, and the Permian specifically, produces some of the world’s cleanest natural gas. That matters more than ever today, as global unrest is creating energy challenges everywhere. We have what it takes to power the homes, businesses and industries of Americans and our allies. Leaders at home and abroad should take note of the progress Texas producers have made in methane and flaring intensity as they develop policies impacting our industry.”

Manchin Joins Republicans to Fight ESG Rule.  Manchin joins Republicans in bid to undo Biden ESG rule. E&E News. West Virginia Democratic Sen. Joe Manchin will vote for a GOP-led effort to overturn a Biden administration rule on climate-minded investing decisions, his office confirmed Monday. It will be the GOP’s first high-profile challenge of the new Congress to so-called ESG investing, which screens investments for environment, social and governance risks. Republicans deride it as “woke capitalism.” Manchin’s spokesperson, Sam Runyon, said in a text to E&E News that the Energy and Natural Resources chair would join with Republicans to overturn the rule. The effort could prove successful: With Manchin’s endorsement, and assuming all 49 Republicans vote “yes,” Republicans need just one more Democrat to defect for the resolution to be adopted under the Congressional Review Act. The CRA allows Congress to overturn recently finalized rules via simple majority in both chambers.

NY NatGas $164.80 MBTU.  New York natural gas hits 20-year high on extreme cold threat. Bloomberg. Natural gas prices skyrocketed in New York and Boston as bitter cold descends that will boost demand for the heating fuel. Next-day gas deliveries into a section of the Iroquois Gas pipeline that hauls Canadian gas into New York traded at an average of $164.80 per million British thermal units, a 14-fold increase from Wednesday, according to Bloomberg data. That’s the highest since at least 2003.

NY Gasoline Shortage Possible This Summer.  New York gasoline shortage brews on EU’s Russia ban fallout. Bloomberg. New York and much of the East Coast are at risk of a gasoline shortage this summer as the European Union’s ban of Russian fuel threatens to choke off the backup supplies the US relies on during peak driving season. Seasonal gasoline stockpiles already are at the lowest in about a decade, and heavy winter maintenance at refineries may further trim inventories. The EU ban on Russian oil-product imports starting Feb. 5 will strain the region’s feedstock supplies, limiting how much gasoline the bloc can make for itself or the US East Coast, which increasingly relies on transatlantic imports in the summer.

Despite Big Profits Oil Giants May Limit CAPEX.  Oil giants, after surge in profits, are wary about spending. New York Times. Economic and military uncertainty clouds the outlook for Exxon, Chevron and other energy companies, whose bonanza from high prices is already fading. Exxon Mobil made $56 billion in profit last year, its largest annual haul ever. Chevron earned $36 billion, also a company record. But after a bountiful 2022, the outlook for those companies and other big oil and gas producers is cloudy. They benefited for much of last year from higher prices for nearly all fuels as the continued recovery from the pandemic slowdown increased demand and the Russian invasion of Ukraine strained supplies. The landscape already looks different. “We don’t know what’s ahead in 2023,” Mike Wirth, Chevron’s chief executive, told analysts last week, adding that the uncertainty called for “operational discipline.”

MPLX Bullish on NatGas Growth as Permian, Marcellus Bottlenecks Targeted

NGI.  MPLX LP is bumping up its capital spending by $50 million in 2023 to work toward debottlenecking pipeline constraints and expanding gathering and processing (G&P) capacity in the Permian Basin, as well as the Bakken and Marcellus shales.

MPLX has set aside $800 million of growth capital for the year, with another $150 million earmarked for maintenance.

In the Logistics and Storage business unit, the midstream company is working with its partners to expand Permian takeaway with the addition of three compressor stations along the Whistler Pipeline. The additions would boost pipeline capacity to 2.5 Bcf/d from 2.0 Bcf/d, with in-service targeted for the third quarter.

Work also continues on the associated ADCC Pipeline lateral, a 43-mile, 42-inch diameter natural gas extension from the Agua Dulce Hub in South Texas to Corpus Christi LNG. Cheniere Energy Inc., which has a 30% stake in the pipeline, sanctioned the third stage of the Corpus liquefied natural gas export project last summer.

MPLX’s Shawn Lyon, vice president of operations, told investors on the quarterly earnings call Tuesday that volumes and commitments to the Whistler system have remained strong in spite of the recent decline in natural gas prices.

“We anticipate those all to continue on into ‘23,” he said. “You’re going to see volatility up and down on natural gas, but again, there’s strong volume demand for the gas takeaway out of the Permian.”

MPLX recorded an average 6.2 Bcf/d in gathered volumes during the fourth quarter of 2022, an increase of 14% year/year. Processed volumes rose 1% to an average 8.6 Bcf/d. Fractionated volumes averaged 583,000 b/d, up 6% year/year.

MPLX also is a partner in the greenfield Matterhorn Express project in the Permian. The 42-inch diameter pipeline would traverse 490 miles, with direct connections to processing facilities in the Permian Midland sub-basin. It also would have a direct connection to the 3.2 Bcf/d Agua Blanca Pipeline, a joint venture between WhiteWater Midstream LLC and MPLX.

COO Gregory Floerke said crude oil, natural gas and natural gas liquids (NGL) prices in 2022 were “very supportive of increased drilling activity” by exploration and production companies across all basins. The increased drilling, along with completions heading into 2023, are what’s driving management’s higher volume outlook for the year, according to the executive. Therefore, short-term price swings are not currently expected to impact volumes as much.

“Certainly, there has been price volatility. We’ve seen prices over $10/MMBtu in the summer… and now we’re kind of back to more of a normal level,” Floerke said. But in the Permian and Bakken, “the drilling is really tied to the crude price, and we see the benefits of associated gas and NGLs that come off of that.”

The COO said the MPLX management team is communicating with producer customers and while forecasts can change, “at this point, we still feel bullish about volume this year.”

As such, the midstreamer continues to work toward bringing online its sixth 200 MMcf/d processing plant in the Permian, Preakness ll, in the first half of 2024. MPLX brought online its 200 MMcf/d Torñado ll processing plant in 4Q2022.

In the Marcellus, MPLX is progressing Harmon Creek ll, a 200 MMcf/d processing plant that also is expected online by June 2024.

Gathered volumes in the Marcellus averaged 1.4 Bcf/d in 4Q2022, down 1% from a year ago. Processed volumes averaged 5.5 Bcf/d for the quarter, off 2%, while fractionated volumes averaged 518,000 b/d, up 7%.

“Even outside of the Marcellus, I think everybody realizes now there’s a structural change in gas from a lot of perspectives,” CEO Michael Hennigan said. “You’re starting to see rigs in other basins outside of the Marcellus that haven’t had a lot of activity. Overall, people are recognizing a structural change in gas now.”

MPLX reported net income of $816 million (78 cents/share) for 4Q2022, compared with $830 million (78 cents) in the year-earlier period. Full year 2022 net income was $3.94 billion ($3.75/share), up from $3.08 billion ($2.86) in 2021.

RNG News from Coalition for RNG

DOE to award $118M to 17 projects to accelerate domestic biofuel production

The US Department of Energy (DOE) will award some $118 million in funding for 17 projects to accelerate the production of sustainable biofuels. Made from widely available domestic feedstocks and advanced refining technologies, energy-dense biofuels provide a pathway for low-carbon fuels that can lower greenhouse gas emissions throughout the transportation sector and accelerate the bioeconomy.

Kinder Morgan sees tax credits speeding up clean energy investments

U.S. funding for clean energy projects will help energy pipeline operator Kinder Morgan accelerate its investments in renewable natural gas and carbon sequestration, executives said on Wednesday.

The $430 billion Inflation Reduction Act (IRA) signed into law last September expanded tax credits for industrial projects that capture, reuse or permanently store carbon dioxide, a gas that contributes to climate change.

The funding “accelerates growth opportunities” in renewable natural gas (RNG), renewable diesel, hydrogen as well as carbon capture and storage (CCS), according to a presentation by Kinder Morgan, the largest operator of carbon dioxide pipelines in North America.

Opportunities to speed up development targets for CCS projects are tied to the increase in credits – to $85 per ton from $50 per ton – for carbon sequestration.

The law also provides $60 per ton for carbon used for enhanced oil recovery, used in Kinder Morgan’s oil business.

Earnings before depreciation and amortization in its carbon dioxide business are set to grow 9% to $879 million this year, it said.

The company, which has a network of pipelines that transport natural gas and refined products, recently expanded its energy transition business with three acquisitions and as well as a carbon dioxide transportation and sequestration deal.

Last week, Kinder Morgan said it would move forward with an agreement with Red Cedar Gathering Company to transport and sequester carbon. It also decided to go ahead with a plan to convert its Autumn Hills landfill to an RNG facility, with construction scheduled to begin this month.

The Houston company also is evaluating whether to keep sites dedicated to producing electricity to take advantage of the EPA’s proposed regulations allowing for the creation of e-RINs, a new type of credit that would be sold by electric vehicle makers if they can prove their cars and trucks are being powered by electricity from plants that burn biofuels.

Clean Energy to Provide 86 Million Gallons of RNG to One of Nation’s Largest Transit Systems, San Diego MTS

Clean Energy Fuels Corp. (NASDAQ: CLNE), the largest provider of the cleanest fuel for the transportation market, has been awarded a contract by San Diego Metropolitan Transit System (MTS), to provide an expected 86 million gallons of renewable natural gas (RNG) to operate its bus fleet.

“San Diego MTS was an early adopter of natural gas in the 1990s and has continued to seek cleaner and more economical fueling options,” said Clean Energy Senior Vice President Chad Lindholm. “As a result of the use of RNG the people who live in the San Diego area will have less exposure to greenhouse gas emissions and cleaner air.”

“RNG is a great example of how we can use innovation and technology to create a cleaner and more sustainable environment,” said MTS Chief Executive Officer Sharon Cooney. “The use of RNG is an important strategy for MTS while we work toward achieving our goal of zero emissions. This contract with Clean Energy will play key role as MTS continues transitioning to a more eco-friendly transit system.”

MTS serves the San Diego metropolitan area with a fleet of 764 buses, of which 595 run on RNG, that fuel at four private transit stations. The contract was awarded through competitive solicitation. By operating on RNG instead of diesel, it is anticipated that the fleet will reduce 73,972 metric tons of carbon dioxide—the equivalent of planting 1.2 million trees, taking 15, 939 gasoline cars off the road, or recycling 25,596 tons of landfill waste per year.

PA Permits January 23, to February 3, 2023

County                                   Township                                           E&P Companies

1.    Bradford                                       Armenia                                             Repsol

2.    Bradford                                      Armenia                                             Repsol

3.    Bradford                                       Armenia                                             Repsol

4.    Bradford                                       Armenia                                             Repsol

5.    Bradford                                       Franklin                                              Chesapeake

6.    Bradford                                       Franklin                                              Chesapeake

7.    Bradford                                       Franklin                                              Chesapeake

8.    Bradford                                       Franklin                                              Chesapeake

9.    Bradford                                       Smithfield                                          Blackhill Energy

10. Bradford                                       Smithfield                                          Blackhill Energy

11. Bradford                                       Smithfield                                          Blackhill Energy

12. Bradford                                       Smithfield                                          Blackhill Energy

13. Bradford                                       Springfield                                         Blackhill Energy

14. Bradford                                       Terry                                                   Chesapeake

15. Bradford                                       Terry                                                   Chesapeake

16. Bradford                                       Terry                                                   Chesapeake

17. Bradford                                       Terry                                                   Chesapeake

18. Bradford                                       Wilmot                                                Chesapeake

19. Bradford                                       Wilmot                                                Chesapeake

20. Bradford                                       Wilmot                                                Chesapeake

21. Bradford                                       Wilmot                                                Chesapeake

22. Bradford                                       Wilmot                                                Chesapeake

23. Susquehanna                             Dimock                                               Coterra

24. Susquehanna                             Springfield                                         Coterra

25. Washington                                 N. Franklin                                         Range

26. Washington                                 N. Franklin                                         Range

27. Washington                                 N. Franklin                                         Range

28. Washington                                 N. Franklin                                         Range

29. Washington                                 N. Franklin                                         Range

30. Westmoreland                            Bell                                                     CNX

31. Westmoreland                            Bell                                                     CNX

32. Westmoreland                            Penn                                                   Olympus

33. Westmoreland                            Penn                                                   Olympus

34. Westmoreland                            Penn                                                   Olympus

OH Permits January 22, to January 28, 2023

County                                   Township                                           E&P Companies

1.    Belmont                                       Pultney                                               Ascent

2.    Belmont                                       Pultney                                               Ascent

3.    Belmont                                       Pultney                                               Ascent

4.    Belmont                                       Richland                                            Ascent

5.    Carroll                                          Brown                                                 EAP OHIO

6.    Carroll                                          Brown                                                 EAP OHIO

7.    Carroll                                          Brown                                                 EAP OHIO

8.    Carroll                                          Brown                                                 EAP OHIO

9.    Carroll                                          Washington                                       INR OHIO LLC

10. Jefferson                                     Cross Creek                                      Ascent

11. Jefferson                                     Cross Creek                                      Ascent

12. Monroe                                        Benton                                               Diversified

13. Monroe                                        Benton                                               Diversified

14. Monroe                                        Benton                                               Diversified

15. Noble                                           Brookfield                                          EOG Resources

16. Noble                                           Brookfield                                          EOG Resources

17. Noble                                           Brookfield                                          EOG Resources

18. Noble                                           Brookfield                                          EOG Resources

19. Noble                                           Brookfield                                          EOG Resources

20. Noble                                           Brookfield                                          EOG Resources

21. Noble                                           Brookfield                                          EOG Resources

22. Noble                                           Brookfield                                          EOG Resources

WV Permits January 23, to January 27, 2023

1.    Marshall                                                                                                  EQT

2.    Marshall                                                                                                  EQT

3.    Marshall                                                                                                  EQT

4.    Marshall                                                                                                  EQT

5.    Marshall                                                                                                  EQT

6.    Marshall                                                                                                  EQT

7.    Marshall                                                                                                  EQT

8.    Wetzel                                                                                                      Tug Hill