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Facts & Rumors # 306 September 29, 2018

Expo/Industry events for the next few months

 WV Energy Expo 2018 October 3, 2018 Hazel and J.W. Ruby Community Center Morgantown, West Virginia http://wvenergyexpo.com/  Utica Summit October 10, 2018 Walsh University North Canton, OH http://www.uticasummit.com/ Shale Insight October 23-25, 2018 David Lawrence Conference Center Pittsburgh, PA http://shaleinsight.com/ For other events visit http://www.shaledirectories.com/site/oil-and-gas-expo-information.html

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

Williams Seeks Final Approval for Atlantic Sunrise.  Williams Companies, Inc. recently reported the completion of construction of its major Atlantic Sunrise project. The production and pipeline operator has requested for the final approval of the project by Federal Energy Regulatory Commission (FERC). Importantly, the Atlantic Sunrise natural gas pipeline, worth $3 billion, is an expansion of the company's Transco pipeline, which is the largest-volume natural gas transmission system in the United States. Atlantic Sunrise will have a transportation capacity of around 1.7 billion cubic feet of gas per day (Bcf/d). It will transport Marcellus shale gas from Pennsylvania to the rest of the country. The project design includes 200 miles of new greenfield pipe, two compressor facilities in Pennsylvania along with other compressor station modifications in five states. Shell Cracker On Schedule, On Budget.  Royal Dutch Shell’s CEO Ben van Beurden said Tuesday development of the company’s Pennsylvania petrochemicals complex is “ahead of schedule and within budget." The ethane cracker under construction in Beaver County, 30 miles northwest of Pittsburgh, will produce 1.6 million tons per annum of polyethylene. The plant will process low-cost ethane from shale gas producers in the Marcellus and Utica basins. While development is progressing as planned, van Beurden said during an industry event in New York that U.S. President Donald Trump’s steel trade policies could have major consequences on the project. “It’s not fatal but it is something that can really disrupt the flow of construction and the continuity of employment and it can bring significant costs in the project itself if it is not managed properly,” he said. Shell was amongst the first oil and gas industry players to have received waivers from Trump’s 25% tariff on steel imports, after the administration agreed the specialty steel it was importing isn’t manufactured in the U.S., Kallanish Energy notes. Yes, No FID from PPTGC.  Our rumor about PTTGC making its FID in September is obviously wrong.  We are hearing another rumor that Daelim and PTTGC are finalizing their contracts which is another critical step forward to the FID.  (RUMOR) LyondellBasell Purchase of Braskem.  We have reported that LyondellBasell was in process of purchasing Braskem.  It appears the purchase is eminent.  We are hearing that purchase could happen in October.  (RUMOR) Antero Could Be Getting Busy.  Antero could be getting busier.  It now has 4 rigs in the Appalachian Basin and we are hearing that 2 more rigs could go into use. (RUMOR) Mountain Valley Costs Way Up.  The projected cost of building the Mountain Valley Pipeline has increased by nearly $1 billion. In a revised estimate announced this week, the developers of the natural gas pipeline said they now expect to spend $4.6 billion on the project, a jump of about 25 percent over their previous calculation of $3.7 billion. About half of the cost increase was attributed to a lull in construction for most of August, when the Federal Energy Regulatory Commission ordered that work be stopped after two key permits were invalidated by a federal appeals court. The order led to “significant schedule changes that forced activities to be conducted out-of-sequence — these changes, in turn, required both crews and inspectors to make adjustments in order to return to areas that had to be bypassed,” Mountain Valley spokeswoman Natalie Cox wrote in an email. FERC has since allowed work to resume on most of the pipeline’s 303-mile route through West Virginia and Southwest Virginia. Mountain Valley’s statement attributed the rest of the additional expenses to “extraordinary rainfall events that continued through the summer, recent hurricane preparedness actions that interrupted full construction activities, and certain unanticipated construction costs overruns.” It’s Road not Pipelines Threating the Permian.  For an oilman who’s worked on the Gulf Coast, near the Russian Arctic and in Royal Dutch Shell’s headquarters in The Hague, being stuck in traffic on a dusty West Texas highway is not the stuff of dreams. The GMC Yukon rented by Amir Gerges, general manager of Shell’s operations in the Permian Basin, has crawled just four miles in the past hour. The delay helps Gerges prove a point: Roads, he said, not pipelines, geology or labor shortages, are the biggest long-term threat to sustainable growth in the Permian, the world’s busiest shale oil field. “Almost everything you need at the wellhead is transported by road,” Gerges said. “That’s the one biggest challenge, not just Shell, everyone faces.” DOE Funding Research in WV to Improve Well Productivity.  The Marcellus Shale Engineering and Environmental Laboratory (Mseel ) is expanding its research to a second shale well in northern West Virginia, Kallanish Energy reports. The new work will take place at a Marcellus well near Blacksville in western Monongalia County, West Virginia. Mseel has conducted research over the last three years at a well site near Morgantown, West Virginia. The research has been funded by the U.S. Department of Energy’s National Energy Technology Laboratory that involves West Virginia University (WVU)and Northeast Natural Energy (NNE), a West Virginia-based E&P company. The new work will be geared to improving natural gas recovery from horizontal drilling and hydraulic fracturing (or fracking) at regional sites. Netl’s Robert Vagnetti said the work advances hydraulic fracture stimulation techniques that were pioneered by Netl researchers. A key objective of the upcoming field test is to develop advanced completion capabilities that can be applied to other areas of the Marcellus Shale play to improve resource recovery efficiency. WVU and NNE were able to design stimulation zones or stages that optimized performance around natural fractures in the shale at the Morgantown well. Monitoring using seismic and fiber optic distributed temperatures and acoustic sensing (Das/Dts) during stimulation and subsequent production logging confirm these engineered stages outperformed conventional geometrically designed stages, Vagnetti said. He said that Das/Dts is too costly to be used on all wells and that the research team will “compare the use and results of new completion/stimulation techniques at the Blacksville site to the large array of relatively cost-prohibitive techniques used in the Morgantown Industrial Park wells.” NatGas & Oil Pumping up WV Economy.  Oil and gas production is one of West Virginia’s fastest-growing and most successful industries, easily outpacing other sectors of the economy. “Oil and natural gas production in the Mountain State has increased exponentially over the past decade, and we are just scratching the surface,” said Anne Blankenship, West Virginia Oil and Natural Gas Association executive director. “What an exciting time to be involved in this thriving industry, with so much more to come,” she said. “With the advancements in technology that have allowed us to access the enormous oil and natural gas reserves in the Marcellus and Utica shales, production is going up and new ideas for end uses of natural gas are emerging. Dominion Evaluating Blue Racer Sale.  Dominion Energy also said it is evaluating its 50% interest in Blue Racer Midstream, an Appalachian Basin-based midstream company with operations in Ohio, West Virginia and western Pennsylvania. The other 50% of Blue Racer is owned by Caiman Energy II. Dominion Energy said it has gotten strong interest in Blue Racer Midstream from other unnamed parties. PA State Senators Support Case Against DRBC.  State Sen. Lisa Baker and two fellow legislators are seeking to join a federal lawsuit that challenges the Delaware River Basin Commission’s authority to regulate hydraulic fracturing within the watershed. In a motion to intervene, the senators contend the DRBC exceeded its authority when it issued a 2010 moratorium that banned natural gas drilling in the basin. They want to join a 2016 lawsuit filed by Wayne Land and Mineral Group, a natural gas driller that challenges the DRBC’s position. Hydraulic fracturing, or fracking, is a process that uses high pressure to inject a large volume of water, chemicals and sand into Marcellus Shale, causing it to crack and release natural gas. It’s a controversial issue opposed by environmental groups and others concerned about the potential risks it poses to the environment and water supplies. The resolution of Wayne Land’s case will have significant ramifications for Pennsylvania. The basin covers roughly 13,539 square miles, of which 6,422 square miles is located in Pennsylvania, according to the motion to intervene. It’s estimated the land in Pennsylvania holds more than $40 billion in natural gas reserves, the motion says. Coal Consumption Lowest Since 1983.  Coal consumption at US power producers drops to lowest since 1983.   U.S. electricity producers consumed the lowest amount of coal in the first half of 2018 since 1983, as natural gas is increasingly replacing coal-fired generation, according to calculations by Reuter’s market analyst John Kemp based on EIA data. TX Production Up in August.  Production in Texas for July 2018 is 90,026,586 barrels of crude oil and 612,512,811 thousand cubic feet of natural gas from oil and natural gas wells, according to the Railroad Commission of Texas. Those are preliminary figures based on production volumes reported by operators and will be updated as late and corrected production reports are filed. Production reported to the state agency in July 2017 was 75.31 million barrels (Mmbbl) of crude oil, updated to the current figure of 93.23 Bbls; and 534.78 million ,777.62 Bcf of total gas, updated to the current figure of 692.43 Bcf, Kallanish Energy reports. Total Texas production from August 2017 to July 2018 was 1,16 billion barrels of crude oil and 08.1 trillion cubic feet of total gas. July 2018 production averaged 2.90 Mmbpd, compared to 2.43 Mmbbl in July 2017. Natural gas production in July 2018 averaged 19.76 Bcf a pay, compared to the 17.25 Bcf daily average in July 2017. That 2018 production came from 180,434 oil wells and 91,025 natural gas wells. The top five counties for oil production were Midland, Karnes, Reeves, Martin and Loving. The top five counties for natural gas were Webb, Reeves, Tarrant, Karnes and Midland. The top counties for condensate were Reeves, Culberson, Karnes, DeWitt and Loving. Bakken Making Come Back.  After months of being the red-headed stepchild to the Permian, the Bakken shale play is getting a resurgence. Crude oil production in North Dakota reached an all-new high for the second time this year in July, averaging 1.27 million barrels per day, according to the most recent figures available. Monthly oil production in July was 39.35 million barrels. Wood Mackenzie broke down some key factors that are attracting investments to the Bakken and nearby Three Forks formation (located just below the Bakken). “Operators are planning to spend $5 billion in planned CAPEX this year in these areas,” Pablo Prudencio, research analyst for WoodMac’s Lower 48 region, told Rigzone. “Operators are expected to spend more than $40 billion in the play over the next five years.” In August, shale producer Continental Resources said it was allocating $200 million this year to increased drilling and completion activity, with a third of that focused on the Bakken, Reuters reported. Prudencio said the investments will be significantly less than the Permian due in part to activity levels and rig count. WoodMac’s analysis further included the following:

Rise in Gas Production: Operators are focusing on the core of the play, which tends to be gassier. Gas production is also continuing to rise, and gas processing plants are being built to meet North Dakota’s flaring limits.

Oil Production: Bakken and Three Forks production contributes an average of 13 percent to the U.S. Lower 48 production outlook.

Crude Takeaway: Long-term oil production growth is slowed by pipeline takeaway capacity. Oil production is expected to peak at about 1.5 million barrels per day and plateau after.

Sluggish M&A: Recent years have shown lackluster M&A activity relative to the size of the play. Key themes include Private equity-backed operators entering the play and public E&Ps selling Bakken assets to focus on other plays such as the Permian.

Prudencio added that WoodMac has been following the production comeback for a while now and technology has definitely played a part. “Three main factors have contributed to this,” he said. “They are higher oil prices, improved transportation due to new pipelines and more productive wells. The productivity of the wells is mainly due to technology and improved completions. Drilling rates have improved because the wells are being drilled faster.” Plastics Company Moves in Stark County, OH.  A plastic container maker is setting up temporary shop in Ohio to be closer to a customer as it plans for a permanent facility in the area. Officials in Stark County, Ohio, said IML Containers is leasing about 35,000 square feet to make containers for Land O'Lakes Inc.'s nearby facility in Cleveland. IML currently has sites in Saint-Placide, Quebec; Le Mars, Iowa; Lyons, Ill.; and Flagstaff, Ariz., according to the company's website. "What they did was they were looking for a location that was near. We're getting a lot of inquiries from the plastics industry, which is one of our targets for the community," said Ray Hexamer, president of the Stark County Economic Development Board. Stark County, which counts Canton, Ohio, as its county seat, is in eastern Ohio, not far from where Royal Dutch Shell is building an ethane cracker plant in Beaver County, Pa. Shell is taking advantage of the region's resurgent natural gas production brought on by fracking in both the Utica and Marcellus shale regions, located at different depths below the earth's surface. And Hexamer said his county's proximity to the increased production will help drive economic development. The area also is a hub for food production, so creating an expanded plastics economic locally makes sense to better serve those markets. "The industry is very important for our future. IML is our great first tenant for us and a great company. They were extremely easy to work with," Hexamer said. "We were able to find a facility that they will lease for two years, and they will be building a new manufacturing facility in the area for future growth." IML, which is short for in-mold labeling, is in the process of setting up equipment in its 35,000-square-foot temporary home and expects production to begin soon. Hexamer admitted he sounded like an economic development salesman when he touted Stark County's advantages. "When we look at the plastics industry, we are within a six-hour drive of a majority of the business that's done in that industry," he said. "We're centrally located. We have rail. We have air. We have great interstates," Hexamer said, describing the situation as "stars lining up for our community." Hiring already has begun at IML in Ohio, which eventually expects to employ about 85 workers, the economic development official said.

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