Monday, October 22, 2012

Another Natural Gas Pipeline -- Southwest US --

Yahoo!Finance -- In-Play (see also this press release):

Sempra International unit to construct natural gas pipeline network in Northwestern Mexico : Co announced that its Mexican business unit Sempra Mexico has been awarded two contracts by Comision Federal de Electricidad (CFE), Mexico's state-owned electric utility, to construct, own and operate an ~500-mile (820-kilometers), $1 bln pipeline network connecting the Northwestern states of Sonora and Sinaloa. After a competitive and transparent international public bidding process, Sempra Mexico's offers were selected to develop the new pipeline network. The network will be comprised of two segments that will interconnect to the U.S. interstate pipeline system in Arizona and will provide natural gas to new and existing CFE power plants that currently use fuel oil. The capacity for each segment is fully contracted by CFE under two 25-year firm capacity contracts denominated in U.S. dollars.
Back on July 20, 2011, the following story was posted:
U.S. natural gas is flowing to Mexico at a record pace as demand for the fuel south of the border provides an outlet for surging supplies that have battered prices. Exports by pipeline to Mexico, which can't pump enough gas to meet local needs, reached 42.9 billion cubic feet in April as yields from shale formations drove U.S. output to an all-time high. Producers are shipping the fuel as prices at the Waha hub in west Texas, about 100 miles from Mexico, have dropped 65 percent from pre-recession levels in 2008.
And June 27, 2011, a similar story:
Exports of U.S. natural gas into Mexico are expected to average 1.3 Bcf/d, a 450 MMcf/d increase from 2010, and the tightening of Mexican supply/demand balances should lead to further U.S. export growth in 2012, Barclays Capital reported last week.

Exports to Mexico grew sharply in the beginning of the past decade before stabilizing in the 850 MMcf/d range from 5001-2010; however, first quarter 2011 exports averaged the highest in the past 10 years. 

Four Wells Report IPs; Two Others on DRL Status -- Wells Coming Off Confidential List Tuesday

RBN Energy: continuation of series on condensates

Wells that came off the confidential list on Tuesday:
  • 19155, 769, Slawson, Periscope Federal1-10-11-12H, Van Hook, t7/12; cum 40K 9/12;
  • 21773, 733, Whiting, Ogden 13-13TFX, Sanish, t4/12; cum 20K 9/12;
  • 22390, 1,252, Denbury Onshore, Lund 26-18SH, Siverston, t7/12; cum 19K 9/12;
  • 22587, drl, BEXP, Lonnie 15-22 3H, Ragged Butte,
  • 22600, 668, CLR, Bjarne 1-29H, Patent Gate, t7/12; cum 23K 9/12;
  • 22697, drl, BEXP, Hospital 31-36 2TFH, Alger

San Antonio-Based Valero Wants Out of California -- The Moat Gets Wider

Link here to LA Times.
Meanwhile, another big player in the California refinery industry may be looking for buyers and hoping to leave the state.
The Wall Street Journal reported on Friday that San Antonio-based Valero Energy Corp. was looking for buyers for at least two of the refineries it operates in California.
Valero has a 132,000 barrel a day refinery in Benicia, Calif. that it acquired in 2000. It also owns a 78,000 barrel a day refinery in Wlimington (sic). Both of those facilities produce gasoline and diesel for the California market.
Fadel Gheit, senior energy analyst for Oppenheimer and Co., said that Valero is looking for buyers because of a looming regulatory requirement in California that will require refinery emissions to match 1990 levels by 2020.
"California has been and will continue to be a difficult state to do business in" because of such regulatory hurdles, said Gheit, but he added that Valero will probably be able to find a buyer.
The moat surrounding California is getting wider. The lack of adequate refining in California is part of the reason Californians are paying record -- yes, record -- prices of gasoline on October 22, 2012, when most of the rest of the nation is seeing prices falling (at least those were some of the recent headlines if I recall correctly).

Wlimington is an alternate spelling for Wilmington, I assume.

Back To That Marcellus Story

The other day I posted a link regarding new estimates of the Marcellus, and said I would get back to it.
One of the reports adds that the Marcellus reserves that lie below parts of Pennsylvania, West Virginia, Ohio and New York are far larger than recent government estimates, while another said the powerful combination of resource, cost and location is altering natural gas prices and market trends across the nation.

The Marcellus could contain “almost half of the current proven natural gas reserves in the U.S,” a report from Standard & Poor’s issued this week said.
And more:
The Marcellus is a gas-rich formation thousands of feet below much of the four states, but current production is centered in Pennsylvania and West Virginia.
Earlier this year, the federal Energy Information Administration sharply lowered its estimates of Marcellus reserves, from 410 trillion cubic feet down to 141 trillion cubic feet. That adjustment was widely reported, including by The Associated Press. [Hmmmm.]
But that lowered estimate doesn’t correspond with actual well production, said Nikhanj. He said their analysis shows that the Marcellus contains about 330 trillion cubic feet of gas, more than double the size of the next largest field in the nation, the Eagle Ford in south Texas.
Some financial firms and critics of gas drilling had suggested that the EIA estimates supported theories that Marcellus production might decline more rapidly than expected, and thus be far less profitable for energy companies. But Nikhanj said a review of actual Marcellus well data shows that on average they’re producing more gas than expected, not less.
This goes back to that "bogus" NY Times article posted back on June 25, 2011, in which was written:
But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.
In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles. [Wow.]
“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company,  wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”
It turns out natural gas companies may be challenged but not for the reasons the NY Times suggested. (The Times did subsequently try to "walk back" that story.)

Anyway, enough of this.

Bottom line: the Marcellus is changing the dynamics of the natural gas industry far more than anyone realized. It's an incredible story. RBN Energy has been ahead of the curve reporting this and links have been provided at MDW on a regular basis.

Even the environmentalists are noting the obvious:
Even critics of gas drilling should accept that it isn’t going away, said the head of one leading Pennsylvania environmental group.
“We should realize by now this is not going to be a short play. It’s going to be here, probably for generations, because it’s so productive,” said George Jugovic Jr., president of PennFuture.
That’s a mixed blessing for environmental groups, Jugovic said.
“It lengthens the horizon. It means that we have time to get it right because they’re not going to be in here and out,” Jugovic said of drilling companies, yet “at same time that it raises the imperative of getting our regulations in order.”
Ironically, the vast production coming out of Marcellus wells in Pennsylvania and West Virginia may have given some breathing room to New York, where residents, government officials and gas drillers are engaged in an extended debate over whether to allow the new gas production method known as hydraulic fracturing, or fracking. 
Fracking is under moratorium in New York until the debate is resolved.
The governor of New York is considering letting local municipalities make their own decisions to allow fracking or not. Wow. Hmmm. Local governance. What a concept. 

The Value of Filling Out Federal Forms -- $370 Million in Loans -- The Bakken

Link here to Bismarck Tribune.
Several North Dakota electric cooperatives have received U.S. Department of Agriculture loans to modernize electric generation and transmission systems.
Rural Utilities Service loans (some numbers rounded) were awarded to:
  • Mountrail-Williams Electric Cooperative: $54 million; improve 520 miles of powerlines
  • Minnkota Power Cooperative: $309 million; 260 miles of high voltage transmission line
  • McLean Electric Cooperative: $10 million; 100 miles of powerlines
This is a rapidly growing co-op mostly caused by development brought on by the Bakken oil field,” said Dennis Hill, general manager of the North Dakota Association of Rural Electric Cooperatives.
I think the loans total about $370 million but there were a lot of zeroes to keep track of. 

Unlike loans to Solyndra and 35 other faltering/bankrupt green energy companies receiving federal loans, I assume these loans will be paid back. In full. On time. With a smile.

Thirteen (13) New Permits -- The Williston Basin, North Dakota, USA

Bakken Operations

Active rigs: 186 (steady)

Thirteen (13) new permits --
  • Operators: XTO (3), Oasis (2), BR (2), G3 Operating (2), ERF (2), Whiting (2)
  • Fields: Willow Creek (Williams), Lost Bridge (Dunn), Blue Buttes (McKenzie), Climax (Williams), Truax (Williams), Mandaree (Dunn), Park (Billings)
Comments: another day with no Newfield or OXY USA permit

Wells coming off confidential list were reported earlier; see sidebar at the right.

Four (4) producing wells were completed:
  • 20927, 532, Whiting, Burl TTT 13-3TFH,
  • 15121, --, True Oil, Evanson 21-24, a Madison well --> salt water disposal
  • 22648, 1,245, Whiting, Lacey 14-3TFX,
  • 22166, 48, Samson, Outback 25-36-162-97H,

Another Canadian Energy Deal: Enbridge Buying Some Midstream Assets From Encana

Link here to Reuters.

Data points:
  • Enbridge to buy "certain" gas facilities from Encana Corp
  • Peace River Arch region in northwestern Alberta
  • will strengthen the gathering and compression business of Canada's second-largest pipeline company
  • total cost about $265 million (Canadian)
  • Encana trying to shift to oil and liquids-rich gas production in lieu of natural gas (which got hammered again today)
Also, an Oil & Gas Journal link here
Enbridge Inc. has entered a midstream services agreement with Encana Corp. to develop gas gathering and compression in the Peace River Arch (PRA) region of northwestern Alberta. The agreement includes Enbridge’s acquisition from Encana of certain gathering and compression facilities in the PRA region currently in service and under construction, with an expected closing date in December.
The financial terms of the gathering and compression midstream services agreement will parallel previously established terms between the two companies reached in 2011.
Enbridge also agreed with the other owners of the Cabin Gas Plant development to defer the commissioning of Cabin Phase 1 and construction of Cabin Phase 2.......
Completion of construction in 2013 will bring Enbridge's total investment in the PRA region to roughly $264 million. Enbridge expects its investment in the Cabin and PRA region will exceed the previous level of capital committed to Cabin Phases 1 and 2.
A Note to the Granddaughters

This is so cool.

My wife sent me the link to this video: the oldest restaurant in Los Angeles with the best sandwich.

This really is a cool story for us. We have spent a fair amount of time in Los Angeles, but it was only by happenstance that a friend mentioned this restaurant to us. We seldom get to the restaurant, but I  have to admit, it is one of may favorites: Philippe the Original. 

Notice that unless Yahoo changes the caption, Yahoo has misspelled "Philippe" -- with two "els." It is within walking distance -- about two city blocks -- from Los Angeles Union Station, Amtrak. Crossing the broad boulevard is about the longest stretch of that two-city-block walk.

I might have to list our top ten restaurants in the LA area someday. I have three so far: Philippe the Original (Union Station); Eatalian Cafe (Gardena); and In 'N Out (everywhere).

A YouTube video of the same:
Philippe the Original

Update: Keystone Pipeline To Be Restarted Today

Apparently we will be told when the pipeline is restarted -- 500,000 bopd.

I believe it was supposed to be started this past weekend (maybe Saturday).

NDIC Site Seems to Be Fully Operational

Pipeline Updates of Interest, Selected

Link to Oil & Gas Journal here, re: ONEOK, update:

Data points:
  • ONEOK announces "open season" for previously announced Bakken Crude Express Pipeline
  • 1,300 mile crud oil pipeline
  • from Williston Basin to Cushing hub
  • 200,000 bopd
  • construction to begin in early 2014; completion by mid-2015
Link to Oil & Gas Journal, re: Alliance natural gas pipeline, North Dakota:

Data points (some numbers rounded)
  • Alliance Pipeline gets FERC approval
  • 80-mile pipeline from Tioga, ND; ties in with Alliance mainline in ND --> Chicago
  • natural gas; certified for 100 million cfd; underpinned with Hess contract for 60 million cfd
  • pipeline is expandable; should be complete by summer, 2013
  • Alliance Pipeline system in operation since 2000; 2,300 mile integrated Canadian and US high-pressure gas transmission pipeline system
  • from Western Canadian Sedimentary Basin and Williston Basin to Chicago
  • delivers an average of 1.6 billion cfd
Link to Oil & Gas Journal re: Marcellus ethane to Europe, a first, much more to the story than the few data points below:

Data points:
  • Ineos Europe AG, Switzerland, will ship ethane from Marcellus to Europe
  • through Sunoco-operated Mariner East pipeline
  • still requires FERC approval of the Mariner East pipeline

The Irony -- Nothing About the Bakken -- A Political Note, As It Were


December 31, 2012: Yes, it was the State Department, i.e., Ms Hillary Rodham Clinton, who slept through the 3:00 a.m. phone call. 
The Senate report noted the "large amount of evidence" in the months preceding the attack that Benghazi was "increasingly dangerous and unstable," with an attack on Americans becoming "much more likely."
"While this intelligence was effectively shared within the Intelligence Community (IC) and with key officials at the Department of State, it did not lead to a commensurate increase in security at Benghazi nor to a decision to close the American mission there, either of which would have been more than justified by the intelligence presented," the report said.
Apparently a lot of phone calls. Some even probably came in during the day.

Original Post

Although I don't think this is political in nature. It's simply a random observation. But the story happens to involve politicians.

This pertains to the killing of the first US ambassador in 33 years -- the US ambassador to Libya.

As the dust begins to settle, it appears the intelligence was all there. Someone just didn't answer the phone in Washington.

Ms Clinton has taken full blame for the lapse in Libya.

It appears it was she, not Mr Obama, that slept through the 3:00 a.m. phone call.

Just an observation.

[Joe Klein's column.]

More To Follow-- Just In From a Reader -- Halcon To Buy Some Petro-Hunt, LLC, Assets In North Dakota

From the Bismarck Tribune (the link is already broken; 9/18/12; see data points below). Here's another link to the story.

A huge "thank you" to a reader for sending me the story.

Here are Petro-Hunt's ten (10) operated rigs on the day of the announcement:
  • 22101, Ensign 46, Thorson 159-94-7A-18-3H, 
  • 20879, Nomac 322, Fort Berthold 147-94-1A-12-2H,
  • 22561, Ensign 77, Fort Berthold 148-94-21A-20-2H,
  • 20355, Nomac 308, USA 153-95-1A-7-2H,
  • 21716, Unit 108, Van Hise Trust 153-95-28C-21-2H,
  • 21802, Unit 233, Fort Berthold 152-93-9C-10-3H,
  • 22090, Unit 329, Fort Berthold 152-93-17C-08-4H,
  • 23025, Unit 234, Pesek Trust 151-102-35D-26-2H,
  • 23136, Ensign 24, Blikre 158-94-13B-24-1H,
  • 22456, Ensign 93, Hoff 157-100-1A-12-1H,
Data points:
  • Halcon Resources to buy 81,000 net acres in North Dakota from Petro-Hunt, LLC
  • $1.45 billion; cash-and-stock deal; $700 million cash; $750 million in stock
  • HK up almost 3% in trading today
  • average net production of acquired assets: 10,500 boepd
  • total proved reserves: 40 million boe (number rounded)
  • five operated drilling rigs on the properties
Regular readers have noticed significant permitting activity by Petro-Hunt in the past few weeks.

On Friday, the Z-Man over at had a nice story on HK. I can't remember if I linked it last Friday.
Bandera, Willie Nelson
Bach Minuet in G, Willie Nelson

If the acres that Petro-Hunt sold were acres inside the reservation, I find that interesting.

I've noted on the blog that KOG acquired acres outside the reservation (some time ago). Prior to that acquisition, I considered KOG pretty closely tied with the reservation.

My hunch is that what I am about to say next has nothing to do with any of this, but the paranoid among us at least have to think about it: The federal government/BLM is yet to announce its rules on fracking. I assume the rules will be announced if Mr Obama is re-elected. Again, don't take this as political commentary -- for me, it's just reality.

Again, I am probably in the minority on this, but a few might agree: that KOG expanding outside the reservation and Petro-Hunt selling land on the reservation (if accurate) is just hedging their bet on the Bakken. I don't mean to offend anyone by posting this, but for me it's reality, knowing that the BLM is still waiting to post its rules; the public comment period ended some time ago.

The Potash Story: Quiet But Not Quite Dead -- Is Wall Street Looking for Love in All The Wrong Places?

In the print edition of the WSJ, October 22, 2012, page B3, a little story, easily missed: US firm, China sign potash deal

Data points
  • source for potash in this story: Arizona, near Holbrook AZ;
  • seller: Prospect Global Resources, Inc (US)
  • buyer: Sichuan Chemical Industry Holding Co (China)
  • to buy: 500,000 metric tons annually over 10 years staring in 2015; agreement
  • to date, Prospect has spent $75 million of the roughly $1 billion it will need to develop its property
  • bigger challenges: company yet to secure government permits; needs to raise millions of dollars
  • US exported 215,000 metric tons of potash in 2011
  • Arizona may hold as much as 2.5 billion tons of potash
I'm hearing stories that Wall Street investors are starting to take note of the Bakken, but a) they can't find big enough projects to spur interest; and, b) the risks of federal regulation of fracking are scaring them off (it's reported elsewhere enough times I'm not going back to look up the links, again). Potash mining does not require fracking.

Folks might recall:
  • The drive for potash, as a fertilizer, is being driven by the Chinese
  • A small portion of North Dakota sits on 33% of all the known potash reserves in the world
  • It is the same basin that allows Saskatchewan to produce 90% of all potash produced in North America
  • Officials estimate there are 7 billion tons of potash in northwestern North Dakota and northeastern Montana; others suggest as much as 60 billion tons
  • Dakota Salts LLC, a subsidiary of Sirius Minerals, London, England, got the first permit in decades to drill for potash in North Dakota
Sirius Minerals has backed out of North Dakota: The company says it is focused on its flagship operation in England and has written down the value of the remainder of its portfolio (page 12 of the annual report); and, this on page 26: "...and no further work is planned in the near future in North Dakota."

From Geo News, January, 2011:

While Anderson and Swinehart (1979) placed the resource at 60 billion tons (50 billion in North Dakota and 10 billion tons in Montana) the U.S. Geological Survey estimates the total U.S. potash resource at roughly 7 billion metric tons, with the majority of that occuring in northwestern North Dakota and northeastern Montana (Jasinski, 2010a).