Latest facts and a rumor from the Marcellus, Utica, and Permian, Eagle Ford Plays
Judges Did Not Get the Word!! Mountain Valley Pipeline halted as legal wrangling heats up. NYT. A federal court in Richmond has halted construction of the Mountain Valley Pipeline, setting off a battle with Congress that could end up at the Supreme Court. The U.S. Court of Appeals for the Fourth Circuit, in Richmond, released a pair of rulings on Monday and Tuesday to stop work on the project, which is intended to carry natural gas about 300 miles from the Marcellus shale fields in West Virginia across nearly 1,000 streams and wetlands before ending in Virginia. That was notable because Congress had moved jurisdiction over the pipeline last month from the court in Richmond, where environmentalists have found some success in their decade-long fight, to the U.S. Court of Appeals for the District of Columbia Circuit. The Justice Department backed the pipeline, submitting briefs this week to the Fourth Circuit appeals court supporting a motion to dismiss the appeals challenging Mountain Valley Pipeline’s right of way through Jefferson National Forest in West Virginia.
NatGas Production in the Appalachian Basin; Four PA Counties See Declines. Natural gas production in the Appalachian Basin remained flat in 2022 as production from a group of four key Pennsylvania counties declined.
The Susquehanna, Washington, Bradford, and Greene counties in Pennsylvania produced 40%—13.9 billion cubic feet per day (Bcf/d)—of the 34.7 Bcf/d of natural gas produced in the Appalachian Basin in 2022. The 13.9 Bcf/d produced in the four counties last year represents a 3% decline compared with output in 2021. Natural gas production from the Appalachian Basin, home to the Marcellus shale formation, was relatively flat in 2022 compared with 2021 after increasing every year since 2010.
A combined 207 counties across 8 states produced the remaining 60% of natural gas. The Appalachian Basin is the largest natural gas-producing region in the United States, comprising nearly one-third (29%) of total U.S. production in 2022.
Productivity declines and limits on natural gas takeaway capacity resulted in a 0.4 Bcf/d decrease in Pennsylvania’s total natural gas production in 2022. Until last year, output had increased every year since 2013 on the back of drilling efficiency gains. One measure of drilling efficiency is the average volume of natural gas produced in wells during the first six months of drilling. Drilling efficiency at Pennsylvania’s natural gas wells increased every year since 2013 before declining for the first time in 2022.
Of the four top producing counties, only Greene County increased its average annual production in 2022 compared with 2021. Overall, Susquehanna County has produced the most natural gas since 2014, averaging more than 4.0 Bcf/d since 2018. Washington, Bradford, and Greene counties have each produced more than 3.0 Bcf/d in 2021 and 2022.
Production in the Appalachian Basin is primarily concentrated in three states—Pennsylvania, Ohio, and West Virginia—but also includes production in parts of New York, Kentucky, Tennessee, Virginia, and Alabama. Production in the Appalachian Basin grew from 3.3 Bcf/d in 2010 to 34.7 Bcf/d in 2021 because of improved hydraulic fracturing techniques and more horizontal drilling.
OH Could Set Shale Oil Production Record. Ohio could eclipse its historical high for shale oil production in April–June after another solid quarter to open 2023. “Fracking” wells will tip a record 7,200,000/billion barrels (bbl) by the end of this month if they can match rising oil numbers in January–March.
Horizontal drilling produced 6,549,638 bbl of oil in Q1 of this year, a double-digit increase over September–December of 2022 and a growth of 71 percent year-over-year compared to the previous first quarter. If numbers continue to rise like the start of 2023, Ohio will set a new record for shale oil output by the end of the current second quarter.
Meanwhile, natural gas production from Utica and Marcellus shale formations posted a much smaller increase to begin the year, slightly beating the previous fourth quarter but rising more than 20 percent year-over-year compared to Q1 of 2022 for a total output of 551,830,848 cubic feet (cf).
Jefferson and Belmont counties continue to jockey for the lead in natural gas “fracking,” with the former maintaining first place with 155,975,710 cf in the first three months of 2023 compared to 143,270,218 cf for Belmont. Monroe and Harrison counties followed at a distance with 84,979,879 cf and 80,229,239 cf, respectively.
Carroll (2,559,404 bbl), Guernsey (2,263,877 bbl) and Harrison (1,219,686 bbl) counties each held onto first, second and third place for oil production in January–March of this year.
And once again, waste from fluids used to fracture and drill petrochemical-rich shale formations in Q1 surpassed oil production with 8,842,565 bbl of brine.
Exxon Buying Denbury. Exxon to buy Denbury in $4.9 billion deal. Reuters. Exxon Mobil Corp said on Thursday it would buy Denbury Inc in an all-stock transaction valued at $4.9 billion, giving the oil major access to the largest carbon dioxide pipeline network in the United States. Plano, Texas-based Denbury specializes in using carbon dioxide to extract oil from old wells and thus is seen as an attractive asset for oil majors and other large-cap energy companies that are starting to make bigger bets on the environmental, social and corporate governance strategy. Exxon, the largest U.S. oil producer, aims to cut its operational emissions by 2050 and plans to develop technologies that are currently not commercial such as carbon capture and storage, hydrogen power and biofuels from algae. Exxon’s acquisition also includes Denbury’s Gulf Coast and Rocky Mountain oil and natural gas operations. “Acquiring Denbury reflects our determination to profitably grow our low carbon solutions business by serving a range of hard-to-decarbonize industries with a comprehensive carbon capture and sequestration offering,” Exxon’s CEO Darren Woods said in a statement.
U.S. Challenges OPEC. U.S. shale challenges OPEC with record production in 2023. Oil Price. The EIA has forecast total U.S. output will hit 12.61M bbl/day in the current year, eclipsing the previous record of 12.32M bbl/day. Energy experts have generally been bearish about U.S. crude supply with many arguing it has already peaked. Rising costs as well as limited supplies of labor and equipment were some of the problems that were hamstringing efforts by U.S. shale to increase output.
Robust Storage Hurting NatGas Prices. Natural gas futures decline a second day as robust storage supplies galvanize bears. NGI. Natural gas futures faltered after the government’s latest inventory report showed continued plump supplies in underground storage. The print overshadowed forecasts for intense heat through the rest of July and pushed the prompt month lower for a second straight day. After shedding 9.9 cents the prior session, the August Nymex gas futures contract on Thursday fell 8.7 cents day/day and settled at $2.545/MMBtu. September dipped 6.3 cents to $2.534.
Record NatGas Deliveries to LNG Export Facilities. EIA reports increase in natural gas deliveries to U.S. LNG export facilities. Hydrocarbon Engineering. The US Energy Information Administration (EIA), has reported that natural gas deliveries by pipeline to US LNG export facilities averaged 12.8 billion ft3/d in the first six months of 2023, according to data by S&P Global Commodity Insights. This average was 1 billion ft3/d (8%) more than the 2022 annual average and 0.5 billion ft3/d (4%) more than the first six months of 2022. LNG feed gas set a monthly record in April 2023 at 14 billion ft3/d, supported by high international demand for US LNG exports, particularly in Europe. However, LNG feed gas declined in May 2023 (13 billion ft3/d) and June 2023 (11.5 billion ft3/d), mostly due to maintenance at several US LNG export facilities, including Sabine Pass and Cameron.
LNG Project Gets Approval. Developer green-lights $18.4B Texas LNG project. E&E News. A project in South Texas is the third U.S. liquefied natural gas export facility this year to get approval from private developers to start construction. NextDecade Corp. announced Wednesday that it has made a positive final investment decision to build the first three liquefaction units, or trains, for the Rio Grande LNG site in Brownsville, Texas. The Houston-based company said it has secured $18.4 billion in financing for the project’s first phase, which has a liquefaction capacity of more than 17 million metric tons of LNG per year, according to a news release. NextDecade said it gave Bechtel Energy Inc. a notice to proceed with construction on the initial phase. Federal energy regulators authorized the LNG export project in 2019.
TX Producers Bullish Outlook. Texas oil producers continue record pace amid economic uncertainty. KTRH. Texas oil producers remain “bullish” with inflation rising slower than expected and OPEC+ announcing extended cuts. An unstable global economy and expected rate hikes by the Fed are still weighing heavily on Texas oil producers with the Petro Index down for a fourth straight month in May. “Declining rig counts and permits, and relatively weak pricing to year ago levels are not a recipe for strong industry job growth going forward,” says economist Karr Ingham at the Texas Alliance of Energy Producers. “If this doesn’t turn around. If we don’t get stronger pricing and kind of stabilize the rig count and these other measures of activity, I think unfortunately we can begin to expect some job loss.” Ingham would like to see crude prices rise a little higher than the current $75 per barrel.
Gas Liquefaction Plant Coming to Brownsville. Company confirms it has found new funding to build a massive gas terminal at the Port of Brownsville. Texas Tribune. After years of delays, an industrial developer said this week that it has secured funding to proceed with construction of a massive new gas liquefaction plant and export terminal in the wild greenfields and wetlands of the Rio Grande delta. Houston-based NextDecade says it has secured $5.9 billion in financing from international partners to begin work on the terminal’s first three compressors to liquify natural gas from Texas’ shale fields for export on global markets.
TX Producers Expect Higher Prices. Texas producers expect higher oil prices. Oil Price. Oil prices are headed higher later this year amid increasingly bullish fundamentals, even though the market is still very much focused on macroeconomic concerns. Supplies are tightening, thanks to the cuts from OPEC+ and Saudi Arabia, while demand remains resilient despite underwhelming economic data out of China in the past few weeks. While market participants are following the bearish macroeconomic sentiment, physical crude supply is tightening, especially of sour grades, the type of oil most of the Middle East pumps and exports.
Dominion Sell to Warren Buffet. Dominion sells Maryland gas plant stake to Berkshire Hathaway unit for $3.3 billion cash. Reuters. Dominion Energy agreed to sell its 50% stake in the Cove Point liquefied natural gas facility in Maryland’s Chesapeake Bay to a unit of Warren Buffett’s Berkshire Hathaway for $3.3 billion in cash, the companies said on Monday. Berkshire Hathaway Energy already operates the facility, and would upon closing have a 75% ownership stake. A unit of Brookfield Infrastructure Partners (BIP.N) owns the remaining 25%. Berkshire Hathaway Energy said the facility has a storage capacity of 14.6 billion cubic feet, and provides liquefied natural gas to supplant coal-burning power plants and support energy needs in 28 countries. Bloomberg also reports.
Shale Production Costs Falling. U.S. shale production costs are finally falling. Oil Price. After years of rising production costs amid post-pandemic inflation, the U.S. Shale Patch can finally breathe a sigh of relief after the cost trajectory hit a turning point. Production costs fell 1% year-on-year in the second quarter, marking the first time they have shrunk in three years. Drill pipe prices have halved this year, daily rig rates are down by more than 10% and the costs of steel and diesel are also trending lower. According to Goldman Sachs via Bloomberg, Drill pipe prices have fallen by 50% this year; daily rig rates are down by more than 10%, while the costs of diesel and steel have been gradually declining. Only labor has been defying this trend as wages continue rising.
NatGas Glut Coming?? Will rising NatGas prices push US back into glut? Energy Intelligence. Months of sub-$3 US natural gas have many industry observers confident that supply and demand are finding some equilibrium. But does the emergence of bullish demand-side fundamentals threaten to undermine producer discipline? For now, US gas producers are expressing relief that a needed drilling pullback in the Haynesville Shale, one of the country’s most prolific gas plays, finally manifested, and that concerns about storage inventories breaching record levels this summer have abated. “We feel the market is within a good margin of error for balance,” East Daley Analytics co-founder Justin Carlson told clients Wednesday. “It’s hot. That’s great for gas markets. … We still see a lot of production potential, meaning if we start to move up with prices, then all of the sudden rigs show up, production shows up and the market gets out of balance.”
Could PA Legislators Drive Producers out of PA? PA House votes 102-101 to study Marcellus-busting severance tax. Marcellus Drilling News. Pennsylvania’s Democrat Party is hellbent on driving the Marcellus Shale industry out of the state. They have been for years. That’s just a truthful observation and beyond dispute. The latest evidence is the party’s insistence on adding a severance tax on top of the existing impact fee, PA’s version of a severance tax. The Dems in the PA House passed a resolution on Friday by a single vote that directs the Legislative Budget and Finance Committee to “study” Pennsylvania’s revenue from the oil and gas industry, comparing it with the top five states in natural gas production in the U.S.
PA Permits June 26, to July 13, 2023
County Township E&P Companies
1. Butler Allegheny Lola
2. Butler Oakland Lola
3. Clearfield Bigler Campbell Gas
4. Fayette Greene EQT
5. Greene Morris CNX
6. Greene Morris CNX
7. Greene Morris CNX
8. Greene Morris CNX
9. Potter Hector Greylock
10. Susquehanna Dimock Coterra
11. Susquehanna Dimock Coterra
12. Susquehanna Dimock Coterra
13. Susquehanna Dimock Coterra
14. Susquehanna Dimock Coterra
15. Susquehanna Dimock Coterra
16. Susquehanna Dimock Coterra
17. Susquehanna Dimock Coterra
18. Susquehanna Jessup Coterra
19. Susquehanna Jessup Coterra
20. Susquehanna Jessup Coterra
21. Susquehanna Jessup Coterra
22. Washington Smith Range
23. Washington Smith Range
24. Washington Smith Range
25. Washington Smith Range
26. Washington Smith Range
27. Washington Smith Range
28. Washington Smith Range
29. Westmoreland Bell CNX
30. Westmoreland Salem Apex
31. Westmoreland Salem Apex
32. Westmoreland Salem Apex
OH Permits June 25, to July 8, 2023
County Township E&P Companies
1. Carroll Washington INR Ohio
2. Carroll Washington INR Ohio
3. Carroll Washington INR Ohio
4. Carroll Washington INR Ohio
5. Carroll Washington INR Ohio
6. Guernsey Oxford SWN
7. Jefferson Mount Pleasant Ascent
8. Jefferson Mount Pleasant Ascent
WV Permits June 24, to July 7, 2023
1. Doddridge Tribune Resources
2. Monongalia Northeast Res.
3. Monongalia Northeast Res.
4. Monongalia Northeast Res.
5. Monongalia Northeast Res.
6. Monongalia Northeast Res.
7. Wetzel SWN