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Friday, January 19, 2018

Supersized Well Pads Becoming All the Rage in Utica and Marcellus Shale

From the Pittsburgh Post-Gazette:
Dave Elkin remembers in the earlier days of the Marcellus when EQT drilled three wells from a single well pad and it was considered a technological marvel. 
“The greatest thing since sliced bread,” Mr. Elkin, a senior vice president of asset optimization at EQT Corp., thought at the time. 
It was a quaint memory that contrasts sharply with the company’s and industry’s new normal: superpads — concrete platforms that can house 30 wells, maybe even 40, with long horizontal tentacles stretching underground for up to 4 miles in each direction. 
A superpad means a quarter of a billion dollars pumped into a single hillside in a place like rural Washington County. It means fewer well pads in total but much more activity on those that exist. It means that from a 10-acre spot, a company like EQT can theoretically slurp natural gas from underneath an area nearly the size of the City of Pittsburgh. 
“I call them mini-industrial complexes,” said David Schlosser, president of exploration and production at EQT.
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More Increases in Takeaway Capacity Coming for Utica and Marcellus Shale

From Argus:
The US northeast should realize an increase of more than 3 Bcf/d (85mn m³/d) of natural gas pipeline capacity by the end of this quarter, compared with an increase of 2.3 Bcf/d in volumes in the fourth quarter of 2017. 
Columbia Gas Transmission's 1.5 Bcf/d Leach XPress pipeline project began flows last week, shuttling gas from West Virginia and Pennsylvania into Ohio and to an interconnection with Columbia Gulf pipeline near Leach, Kentucky. 
Energy Transfer Partners has been bringing its 3.25 Bcf/d Rover pipeline project on line in phases, with the final tranche of 1.55 Bcf/d expected to begin flowing by the end of March. The 713-mile (1,147km) pipeline will transport Appalachian shale gas to pipeline interconnects in West Virginia, markets in Ohio and Michigan, and to the Dawn storage hub in Ontario, Canada. 
Finally, Spectra's 128mn cf/d Atlantic Bridge project began partial flows of 40mn cf/d in November, with the rest of that line expected to start up soon. But that project is not expected to have as significant an impact on prices or production levels as Leach XPress and Rover, analyst Jake Fells of BTU Analytics said.
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PA Court Ruling Smacks Down Home Rule Fracking Bans; What Could it Mean in Ohio?

From the Athens News:
Dick McGinn, who has led efforts in Athens city and county to pass community bill of rights ordinances or amendments, also criticized the Pennsylvania federal judge’s decision.

“Obviously the judge has little interest in civil rights,” he wrote in an email. “Her chosen legal path is to favor the ‘rights’ of corporations to trample on civil rights. The fight will continue. The people will win in the end.”

McGinn, in his capacity as a leader of the Athens County Bill of Rights Committee, issued a news release Tuesday celebrating the fact that Athens City Council had codified language in the Community Bill of Rights passed by voters in 2014, “exactly as voted on by the people; and includes the ballot language, too.” This is the same CELDF-originated legal reasoning that the federal judge in Pennsylvania rejected in the Grant Township case.

Athens Law Director Lisa Eliason was asked Tuesday if she felt concerned about the Athens law considering the sanctioning and referral to the Supreme Court of the CELDF attorneys in the Pennsylvania case. “I do not believe the act of codifying the Bill of Rights Initiative Petition exposes the city of Athens to the type of liability set forth in the Pennsylvania case,” she responded. “The city of Athens Bill of Rights Initiative Petition passed by an overwhelming majority and represents the ‘home rule’ will of the people.”

JACKIE STEWART, WHO DIRECTS the oil and gas industry-funded outreach group, Energy in Depth (EID) Ohio, issued a statement on Monday, praising the federal judge’s decision.

“The Community Environmental Legal Defense Fund has been targeting communities all over the country for years with misinformation campaigns and has proven to be nothing more than a litigation factory, as this recent federal judge has confirmed,” Stewart wrote. “EID has been cataloging the extensive costs incurred in towns where CELDF operates, and we are pleased that a federal judge has now recognized that ‘such litigation creates enormous expense to parties and taxes limited judicial resources.’

“CELDF has made it clear that its goal is to ‘bankrupt’ towns it operates in, and now a federal judge has finally exposed how incredibly deceptive this group is. A prime example is Youngstown, where CELDF has cost taxpayers over $187,000 and voters have rejected the group's Community Bill of Rights six consecutive times."
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Opponents of NEXUS Pipeline Dealt a Blow by FERC

From NGI:
FERC has denied several motions to stay its August certificate order approving the Nexus Gas Transmission pipeline project that were filed by environmental and citizens’ advocacy groups. 
The groups filed their motions for a stay in September and October, with their sights set on preventing the project from advancing while a request for rehearing was pending. The Federal Energy Regulatory Commission denied motions filed by the Sierra Club; Oberlin, OH; Sustainable Medina County; Neighbors Against Nexus; Freshwater Accountability Project; Communities for Safe and Sustainable Energy, and the Coalition to Reroute Nexus. 
It was the latest setback for opponents who have waged a hardline campaign to stop the 1.5 Bcf/d project to carry Appalachian gas to markets in the Midwest and Canada. The bulk of the 257-mile pipeline would be constructed in Ohio. The Sierra Club filed late last year in the U.S. Court of Appeals for the District of Columbia to stop all Nexus construction but the challenge was later dropped.
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Wednesday, January 17, 2018

Utica Shale Permitting Picks Up Slightly; Rig Count Up Too

New permits issued last week: 6  (Previous week: 2+4
Total horizontal permits issued: 2740  (Previous week: 2736+4
Total horizontal wells drilled: 2240  (Previous week: 2239+1
Total horizontal wells producing: 1798 (Previous week: 1787+11
Utica rig count: 23 (Previous week: 21)  +2

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Friday, January 12, 2018

Carroll County Energy Begins Commercial Operations

CARROLLTON, Ohio, Jan. 10, 2018 /PRNewswire/ -- Advanced Power today announced commercial operation has begun at its 700-megawatt Carroll County Energy natural gas electric generation facility.

Carroll County Energy is a combined-cycle natural gas electric generating facility built to sell into the PJM market. It is located in an area with low priced natural gas production, as well as AEP's 345 kV transmission lines and Kinder Morgan's Tennessee Gas Pipeline system.

Commercial operations began in mid-December, said Chuck Davis, President, Advanced Power Asset Management. He said that commencement of operations was a credit to community partnerships, solid financial support, and the professionalism of Bechtel, the general contractor as well as the subcontractors and scores of workers employed to build the facility.

"In the four-plus years since we first announced plans to build this state-of-the-art generation facility, Carroll County Energy has received outstanding support from the leadership and citizens of the Village of Carrollton, Washington Township and Carroll County," Davis said. "We are particularly proud to have been able to help the local schools to benefit the people who live and work around our facility."

Plans to build Carroll County Energy were announced in July 2013. In April 2015, Advanced Power closed the $899 million project financing. Equity investors are TIAA Investments, JERA, Ullico and Prudential Capital Group and Advanced Power. Providing senior secured credit facilities for construction were BNP Paribas, Credit Agricole and eight other commercial banks.

The facility, which features two GE gas turbines and a steam turbine, has the capacity to generate electricity for approximately 750,000 homes. Bechtel built the project under a turnkey construction contract. Ethos Energy is operating the facility, which employs 22 people. Advanced Power continues to manage the business.

Advanced Power is a privately owned company whose mandate is to develop, acquire, own and manage power generation and related infrastructure projects throughout Europe and North America. Advanced Power's leadership has a proven track record of identifying, developing and managing power generation and related infrastructure projects. Management has led the development of over 15,000 MW of power generation projects and $7 billion of limited recourse project financing.
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Wednesday, January 10, 2018

EIA Projects that U.S. Oil Production in 2019 May Surpass Saudi Arabia, Rival Russia

From CNBC:
American drillers will pump enough oil in 2019 to potentially surpass Saudi Arabia's output and rival the world's current top producer, Russia, according to a forecast from the U.S. Department of Energy. 
The department's Energy Information Administration forecast Tuesday that U.S. oil production will average 10.8 million barrels a day in 2019, a level that would put it on par with Saudi Arabia and Russia. EIA expects American output to top 11 million barrels a day for the first time ever in November 2019. 
This year, EIA sees U.S. output rising to 10.3 million barrels a day, the highest ever annual average production.

"Led by U.S. production, particularly in the Permian Basin, and new oil sands projects in Canada, non-OPEC production is forecast to continue growing through the end of 2019," EIA acting Administrator John Conti said in a statement. 
"We expect to see growth near 2.0 million barrels per day in 2018 and 1.3 million barrels per day in 2019."
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Oil Could Be Headed for a Price Spike...Or Maybe a Price Collapse

Two articles by Forbes contributor Michael Lynch looked at the potential for oil prices to spike or the potential for them to crash.

From the first article:
There is significant optimism about oil prices for next year given the return of inventories to something approaching “normal” levels, and a high degree of compliance among oil producers who have agreed to cut production. Strong economic growth should produce robust demand next year, and there is a relatively strong consensus that the market will be bullish for oil prices, with some talking about a $70 or $80 target for Brent. Compared to the swings of the last decade, a $10 or even $20 increase seems like a pittance, but would actually put $100 billion to $200 billion into the pockets of OPEC countries, and add tens of billions to the oil industry’s revenues. 
And numerous events could cause prices to move upward, including civil unrest in Venezuela or Libya, increased attacks on Nigerian producing facilities, disputes between the governments in Baghdad and Kurdistan, the re-imposition of sanctions on Iran, and technical problems at any number of large facilities around the world. 
But market tightness seems unlikely to cause a sharp increase in prices, since a number of producers would presumably take that opportunity to raise production. But one assumes that the Southwestern U.S. has seen new sightings of that 1980s bumper sticker, “God grant me one more boom and I promise not to screw it up,” a sticker that’s gotten more use than “Clinton for President.” Because it’s boom and bust, not boom and boom or boom and plateau, a basic fact that the industry and investors seem to forget.

How could it happen again? The four major modern price collapses —1986, 1998, 2008, and 2014— have each had a different cause, and provide some idea of what might cause another collapse next year. The first was the result of a market collapse — OPEC production fell by half from 1980 to 1985 — due to excessively high prices. In 1998, the market was not under such strong pressure, but most OPEC nations were exceeding their quotas, led by Venezuela, which proclaimed its defiance to the organization. A combination of short-term economic weakness leading to higher inventories and a determination by Saudi Arabia to rein in the errant producers led to the lowest prices in many years.
And from the second:
A recent post talked about how the oil price might collapse this year, and what factors would cause that. In this post, the potential for a price spike and what might be behind it will be enumerated. Because, as those involved in following oil markets have long known, almost any trend and price is possible—in the short run. 
Several decades ago, a reporter from a Swedish business magazine asked me to participate in a contest to predict the oil price at year’s end. (Okay, he didn’t really call me, he called the group I worked for and nobody else was around.) I wound up winning the contest, received a nice sweatshirt and an interview in the magazine to explain my success. However, when I told the reporter that I had basically guessed, since the short-term market is quite volatile and predicting political elements that affect the price impossible. The magazine never called me again. 
So, the market fundamentals suggest that prices will be tight this year, but a spike, that is, a sharp significant increase, rather than a gradual rise. Higher prices usually come from one of two sources: rapid demand growth in a tight market, or a significant disruption in supply.

Rapid demand growth could, theoretically, occur just as the result of a robust global economy, as in the rebound in 2010 (see figure) and the strong 2015 growth. Alternatively, there are a few short-term events that can cause demand to spike, as in 2004, when constraints on Chinese coal deliveries saw power companies rely on oil, sending that country’s demand up 1 mb/d for the year and reversing the bearish expectations for the year (double the previous trend). Few economies are large enough that an unusual event like that could affect the global market—unless it was very stressed already.
Lynch's conclusion? 
So, my expectations are for slight market tightening in the first part of 2018, but a likely decline due to slower economic growth, some quota cheating and strong shale oil production. But as the market moves into balance towards the 3rd quarter, the potential for supply disruptions to have a bigger impact will grow. Serious economic weakness could bring a collapse, but the political instability in Libya and/or Venezuela, with a tighter market balance, could see prices up above $70, maybe even $80. Ignoring (relatively) small probability events, prices will probably be slightly lower next year, but will the short-term trajectory is not random, it remains highly uncertain.

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