Everything I Know About The Oil And Gas Industry I Learned From The Bakken -- July 7, 2015

Rigzone is reporting:

As part of its goal to become a dominant player in Alaska’s energy industry, Hilcorp Energy is reportedly buying the Cook Inlet assets owned by XTO Energy, an Exxon Mobil Corp. subsidiary.

Suann Guthrie, a media advisory for XTO Energy in Fort Worth, confirmed to Rigzone that XTO has agreed to sell its interest in the Cook Inlet, which include 29 producing wells from two platforms and an onshore facility to Hilcorp Alaska. Altogether, the assets produced about 2,000 barrels of oil per day in 2014.

Really? Am I misreading something? 29 producing well from two platforms and these assets produced about 2,000 bbls of oil per day in 2014?

2,000 / 29 = 70 bbls/day? These are practically off-shore stripper wells.

Had I not followed the Bakken I would not know how to put this information into perspective.

Everything I know about global gas and oil, I learned from the Bakken.

[Note: I often misread things, and it's very possible I'm misreading something in this article, but it seems fairly clear: 29 wells and "altogether, the assets produced about 2,000 bopd."

Update On EPD Announcement To Buy WMB; And Some Other Stuff -- July 7, 2015

Enterprise Partners may have to make it a "hostile" takeover. The Wall Street Journal is reporting:

Energy Transfer Equity LP said it would pursue a multibillion-dollar deal to acquire rival pipeline operator Williams Cos. with or without the company’s cooperation.

Energy Transfer had been quietly pursuing Williams for six months when the pipeline company rejected an all-equity offer valued at $48 billion last month. Now Energy Transfer, run by Dallas billionaire Kelcy Warren, is signaling that it may be willing to go in a hostile direction with its takeover bid.

In a statement issued late Tuesday, Energy Transfer was critical of how Williams has responded to its proposal and reiterated its offer—an offer Williams has already deemed too low.

This isn't the first contentious deal that has pitted Energy Transfer and Williams against each other. In 2011, Energy Transfer agreed to buy pipeline operator Southern Union Co. for $4.2 billion when Williams tried to scuttle the deal with a higher offer. Energy Transfer ultimately had to pay $5.7 billion to win.

Though little-known outside of the energy patch, Energy Transfer has become one of top oil and gas transportation companies in the U.S. The company controls an intricate network of 70,000 miles of oil, gas and fuel lines.

Geographically, a deal with Williams would give Energy Transfer an expanded footprint. And Williams has significant fuel-moving capabilities in the northeastern U.S., where it is tough to build new pipelines because projects tend to be fraught with political tension and delays. Most of Energy Transfer’s oil and gas lines are located across the South and Midwest. Since there is little overlap between the two companies’ networks, analysts have predicted that federal regulators would probably approve a combination of the companies.

With this administration I wouldn't hold my breath on regulators approving this deal.

Let's do the math:

• (5.7 - 4.2) / 4.2 = 0.357
• 1.357 x 64 = 87

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Shell Places Huge Bet On The Arctic
The Wall Street Journal is reporting:

Royal Dutch Shell PLC is days away from drilling in the Arctic Ocean—betting it can find enough oil to justify the huge risks that keep almost every other competitor out of those icy waters.

The company is hauling two massive rigs—the Polar Pioneer and the Noble Discoverer—more than 2,000 miles up and around the Alaska coast to the Chukchi Sea, where it plans to begin work the third week of July. Accompanying the rigs are 30 support vessels and seven aircraft, a large entourage even by big oil-company standards.

The voyage represents Shell’s effort to mount a comeback in the Arctic three years after a different rig ran aground following an unsuccessful drilling season. This time, Shell executives say they have both costs and safety under control, but the project has already hit a snag.

A federal agency said last week that Shell can’t drill wells simultaneously within a 15-mile radius to minimize impacts on walruses, which means the company may only be able to drill one well this year instead of the two it had planned. And on Tuesday, Shell said that it discovered a small breach in the hull of a vessel carrying equipment for spill response and is examining what repairs are necessary.

If I were a betting man, and I'm not, I would not want to bet the farm on the Arctic adventure.

I'm sure we are all 99% sure that Shell's interest in the Arctic is simply what they say it is, but the intensity with which they pursue this object suggests one at least think of other possibilities, not necessarily to develop at this time, but to explore.

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A Chinese Birthday Present

A reader writes me regularly about this issue. The Wall Street Journal is reporting:

China’s state-sponsored stock-market rally is unraveling, with potentially dangerous consequences. The first major sign that all wasn’t going according to script came on June 15.

Chinese had awakened expecting big gains because it was President Xi Jinping’s birthday, but the Shanghai market fell more than 2%.

One deeply indebted day trader committed suicide by jumping out a window, his net worth wiped out by the collapse of a single stock that he had borrowed heavily to purchase. The market has since fallen by another 25%—and some fear that prices could go much lower.

In most countries, no one thinks there is a link between a leader’s birthday and the market. That such a theory prevails in China reflects the widespread belief that Beijing’s authoritarian government can produce any economic outcome it wants. Now trust in China’s ability to command and control the economy is faltering. If trust collapses, the global repercussions could be more severe than those from the Greek debt crisis.

I knew about the plunge in the Chinese stock market; I did not know it was related to a birthday.

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A Dry State

Everyone knows the huge amount of water that marijuana crops require. Now we're beginning to see just how much. The Wall Street Journal is reporting:

California’s marijuana industry is taking a toll on the state’s scarce water resources and the environment, with growers sometimes illegally siphoning off entire streams to produce the nation’s largest supply of pot.

In the Cascade Mountains here in the northern part of the state, thousands of mostly illegal pot farms dot the lush evergreen forests—many using pipes and other equipment to siphon water for their crops even though few have rights to do so.

Just last month sheriff’s deputies discovered an unattended, 10-horsepower generator along a creek that was pumping water to four pot farms. “You can stop them one day, and they’ll put in another the next day,” he said. “They don’t care. It’s all money, money, money.”

The problem, while not seen as a major issue in the state’s broader drought emergency, is a byproduct of a boom in marijuana production in California amid a nationwide movement toward legalization.

California legalized marijuana for medical use in 1996, while pot for recreational use has been legalized in Alaska, Colorado and Washington and Oregon over the past three years. A petition for a 2016 ballot initiative on legalizing recreational use is circulating in the Golden State.

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Why I Love The Wall Street Journal

The WSJ has a piece on Janis Joplin's Mercedes Benz.

Pardon The Interruption, North Dakota #1 In Per Capita Beer Consumption -- July 7, 2015

A link sent to me by a reader. I had not seen this most recent story but similar stories in the past have shown North Dakota #1 or near the top in this category before. Glad to see we're holding our own. USA Today is reporting:

Despite declining across the United States, beer consumption remains quite high in some states. According to a recent study from Beer Marketer's Insights, a brewing industry trade publisher, North Dakota residents consumed 43.6 gallons of beer per drinking-age adult in 2013, more than any other state.

This was also more than double the 19.6 gallons per adult consumed in Utah, where residents drank the least beer. Based on figures from Beer Marketer's Insights, these are the states where residents drink the most beer.

Here are the states:

1. North Dakota
2. New Hampshire
3. Montana
4. South Dakota
5. Vermont
6. Wisconsin
7. Nevada
8. Maine
9. Nebraska
10. Mississippi
11. Texas

What do these states have in common? With three exceptions, these states did not establish an ObamaCare state exchange. With regard to Utah, it remains undecided (this was based on a map last updated 11/16/12).

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A Repeat From The EIA

I think the EIA posted this some weeks ago, and now they are posting it again. I don't know for sure, but it was released (again?) by the EIA earlier today:

Crude Oil:

“While U.S. crude oil production is expected to decline over the months ahead, total output in 2015 is on track to be the highest in 45 years.”

“The forecast decline in U.S. monthly oil production through early 2016 is the result of low oil prices, which pushed oil companies to reduce their investment in drilling that resulted in the lowest number of rigs drilling for oil in nearly five years.”

Gasoline:

“U.S. gasoline demand will likely top 9 million barrels per day this year for the first time since 2007, which reflects record highway travel.”

“Low gasoline prices and higher employment  will contribute to more driving this year,  boosting U.S. gasoline consumption an estimated 170,000 barrels per day higher than in 2014.”

Natural Gas:

“U.S. natural gas marketed production growth is forecast to slow in 2016, but output is still expected to flow past 80 billion cubic feet per day for the first time.”

“Natural gas production is increasing largely because of more efficient drilling techniques and strong demand for gas in the industrial and electric power sectors.”

“EIA will be able to keep better track of natural gas production as more states were added to its monthly output survey that now covers about 95% of total U.S. gas production.”

Electricity:

“Sustained low natural gas prices have driven the U.S. electricity sector to increasingly shift to that fuel for power generation. “

“Natural gas-fired generation surpassed coal-fired generation for the first time in history this April. A slight shift back to coal generation is expected over the next year in response to projected higher natural gas fuel costs.”

“Higher electricity prices and strong electric cooling demand is expected to increase the typical residential customer’s summer electricity bill by 5.9%.”

Renewables:

“The amount of U.S. electricity generated by wind is expected to increase almost 4% this year and then jump nearly 14% next year, while solar power is forecast to increase 42% and 22%, respectively.”

Coal:

“Coal use in the electric power sector is expected to decline this year, as low natural gas prices make it more economical to run generating units on natural gas even in regions of the country that typically rely on coal-fired power plants.”

With regard to solar power, 42% of 0 is still zero. The amount of electricity generated by solar power in the US as of 2014 rounds to 0% -- when rounding to nearest whole number.

And wind, increasing by 4%! Wow. Gasoline demand in the US increased 3.8% from January, 2015, to March, 2015 earlier this year.

Going back to this data point from above:

“U.S. gasoline demand will likely top 9 million barrels per day this year for the first time since 2007, which reflects record highway travel.”

I'm not sure what was meant by that; it certainly can't be 9 million bbls per day (on average) for the entire year (or can it)? We've already topped 9 million bbls/day earlier this year: back in March, 2015, the US averaged 9.055 million bbls/day. [Note, I often make errors when challenging official sources. If this information is important to you, go to the source.] [Update, July 9, 2015: several months of 9 million + barrels of gasoline/day demand in the US.]

I'm still opining that the US will hit 10 million bbls/day in August, 2015.

Off The Net For Awhile -- July 7, 2015

I'm going to call it a day -- at least until later this evening. I got started a bit later this morning, about 7:00 a.m. instead of 6:30, posted some great links sent in by readers, updated the initial production numbers, and lived long enough to see the market fall 200 points and for oil to close in on $50. All great news: the correction we've been waiting for may finally be here, providing incredible buying opportunities for long-term investors.

Note: for those new to the site or who may have accidentally arrived here looking for Willie Nelson songs, be advised that there are a lot of factual and typographical errors on this blog. There is also a lot of opinion disguised as fact. Sort of like what we get from the Los Angeles Times. There is also a lot of irrational exuberance with regard to the oil and gas industry. For example, I still opine that US gasoline demand will hit an all-time record this August.

Whatever this site is, it is not an investment site. Do not make any investment or financial decisions based on what you read here or what you think you may have read here.

Also, this is not a travel site. Just because I said parking was $5/day at the Blue Hole in Santa Rosa, California, does not mean it is $5/day every day. That was just the price for parking the day we visited.

This is also not a food and drink site, though, except for the Bakken, the posts on food and drink on this site -- sent in by readers -- are probably as good as any.

I am not paid by Starbucks or McDonald's to push their products. In fact, I may minimize my Starbucks visits if indeed prices have gone up on my "tall" coffee. Two bucks for a cup of coffee is what one can pay for a relatively good bottle of wine at Trader Joe's.

I'm in a great mood.

The Greek tragedy is coming to a head. I've never seen a modern (using that term loosely) country whose banks have completely failed. The big question is why creditors waited so long to finally say "enough is enough." I don't wish bad things to happen to anyone (okay, I do wish bad things for ISIS), but I think a lot of folks have wondered what it will look like when a country runs out of other people's money.

As of May 25, 2015, the scorecard -- amount of money Greece needs to pay the IMF in June, rounded:

• June 5: 300 million
• June 12: 300 million
• June 16: 550 million
• June 19: 300 million
• June 19: 100 million 

Or in graphic form:

Creditors allowed Greece to move all the deadlines to June 30, 2015, which they did. Greece telegraphed on/about June 25, 2015, they had no intention of paying back the IMF and they did not pay back the IMF, the first loan that was due.

In case folks forget, Greece is still part of the EU. Free, unfettered travel is allowed between and among all EU countries. We won't see streams of Greeks storming the barriers trying to flee to Germany, they will simply drive up the road. It is all agreed that regardless of how this plays out, Greece will not exit the EU in less than two years; it will take that long for the process to play out. A lot can happen in two years.

There is no question the politicians in Greece must have been incredibly corrupt, squirreling away all the money they must have squirreled away. But why wasn't there more oversight? Why do we send money? Why not send energy? Food? It appears more and more Greece will play the Putin card. "Restructure the debt or we become the new Cuba."

With regard to oil, for newbies, important dates and prognostications;

With the slump in oil prices, my hunch is that some crafty CEOs are waiting to pounce -- will buy some highly undervalued property. My timeline:

• October, 2014: slump in oil price takes many outside the oil industry by surprise
• November, 2014 -- June, 2015: survival mode; CFOs working overtime to make "it" work
• July, 2015 -- December, 2015: CEOs watching tea leaves closely to see if Saudi's strategy works; worse might be over;
• January, 2016 -- June, 2016: companies that survive, see light at the end of the tunnel; financial statements and balance sheets much improved over a year ago
• July, 2016 -- December, 2016: signs of consolidation as CEOs take advantage of opportunities
• January, 2017 -- June, 2017: pundits start talking about all those off-shore projects canceled, delayed; will see if Saudi's strategy worked

As bad as things are right now, or might seem to be bad, here in the US, the fact remains that this is a most remarkable country. We are dealing with nothing even remotely close to what the Mideast is dealing with, and nothing even close to what the Europeans are dealing with.

In the Mideast, it's barely one step forward and then several steps backward whenever what was built is blown up.

In the United States, the entrepreneurial spirit thrives. Look at this story in the Seattle Business Journal:

Up to 1 million barrels of crude oil could move through the Northwest daily if all 15 proposed oil terminal projects are completed in Washington, Oregon and British Columbia.

That’s the conclusion of a just-completed update to a report by Seattle-based Sightline Institute, which has been monitoring the growth of oil train movements for some years.

Rail oil terminals at BP and Phillips 66 refineries in Ferndale near Bellingham, the Tesoro Refinery in Anacortes, and the Chevron Canada Refinery in British Columbia are all already operating.

Trains supplying those refineries already travel north under Seattle, through the Great Northern tunnel under the heart of downtown. If the rest of the projects are completed, as many as 14 oil trains per day could traverse the region.

I'm not holding my breath; these projects are unlikely to happen. Any doubt? The next story in the sentence:

Such trains have suffered repeated explosions around the United States, even after the U.S. Dept. of Transportation required improved designs.

It's important to note more people died in Ted Kennedy's car than have ever been killed in a crude oil derailment in the US. (The deaths associated with a crude oil derailment were in Canada, and that mishap was due to incredibly poor human judgment.)

But this is the good news. America doesn't need those northwest terminals. (California might need them, but not the US.) Here's why, from Reuters:

As it enters the final stretch of a massive expansion, the Panama Canal Authority is setting its sights on an even more ambitious project worth up to $17 billion that would allow it to handle the world's biggest ships.

Workers are now installing giant, 22-story lock gates to accommodate larger "Post-Panamax" ships through the Canal, one of the world's busiest maritime routes.
The project involves building a third set of locks on the Canal. It is being headed by Italy's Salini Impregilo and Spain's Sacyr, and should open on April 1, 2016.

But Jorge Quijano, who leads the Panama Canal Authority, is already looking beyond this project to a fourth set of locks which would serve a new generation of even bigger ships that can carry 20,000 containers.

"Looking at our geology and the experience we gained with this current expansion, we estimate it's a project that could cost between $16 billion and $17 billion," he told Reuters, adding it would allow Panama to compete head-to-head with Egypt's Suez Canal.

Once the current widening project is completed (scheduled for 2016, next year), huge tankers and  cargo ships can bypass the west coast and go to South Carolina if the west coast has problems with activists in the Northwest and work stoppages in Los Angeles port.

The Panama story is a huge story that may be one of the first game-changers in oceanic shipping in a long, long time. Remember, ships are already slowed down due to an effort to lower CO2 emissions; the extra time through the Panama Canal to the East Coast will be trivial. Remember: the recent work stoppage in the Ports of Los Angeles and Long Beach last several months, and repercussions are still being felt months later.

July 7, 2015 -- Part II; Glut Of Coffee Beans But Starbucks To Raise Prices

This is not good: the minimum wage effects are starting to be felt in California and the ObamaCare mandate kicks in this fall for the rest of America's businesses.

Forbes is reporting:

As we keep trying to point out to people there really isn’t anything even remotely resembling a free lunch when it comes to the discussion of wages and labor. Meaning that just because well meaning liberals wave their magic wand and decree that wages will rise there will indeed be countervailing effects. And in San Francisco, where the minimum wage was recently raised we did indeed see that comic book shop insisting that it just couldn’t survive.

And now we’ve another tale, this time from Chipotle. Beef prices have been rising around the country so they’ve raised the prices, around the country, of their beef products. Wages in San Francisco have been rising strongly so they’ve raised the prices of all their products in San Francisco strongly. There really is no free lunch. A rise in wages will come out of either less labor being employed, lower profit margins (and fast food doesn’t have those wide enough to take the strain) or price increases to consumers.

By the way, on the news last night, Starbucks will be raising their prices 5% to 20% on their drinks starting today. No reason was given, but this isn't rocket science. Let's see how long it's take to find the story.

Yup, here it is, in USA Today:

Starbucks is raising prices again starting Tuesday, with the increases ranging from 5 to 20 cents for most affected drinks.

The Seattle-based company also raised prices nationally about a year ago.

A small and large brewed coffee will each go up by 10 cents in most areas of the country, Starbucks says. That would bring the price of a large coffee to $2.45 in most U.S. stores.
Some other coffee sellers are cutting prices.

Last week, The J.M. Smucker Co. said it would cut prices for most of its coffee products because of declines in future prices for unroasted coffee beans. In an emailed statement Monday, Starbucks Corp. said coffee costs are only part of its expenses, which also include rent, labor, marketing and equipment.

I misheard the television news story, only 5 cents to 20 cents for drinks.

By the way, food prices will stay the same.

I don't think Starbucks can cut staff; they already seem to have minimum number of employees at any given shift. However, I can see other fast food restaurants cutting staff as self-ordering kiosks become widespread and more 3-D printers start making sandwiches.

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McDonald's

With the price of Starbucks coffee going up, I may have to make McDonald's my regular, and Starbucks my second choice.

Last night I started this post, then abandoned it, but I will re-post as much as I wrote here:

I don't know if there will be much about the Bakken in this post. I would recommend that folks who are here expecting to read something about the Bakken to scroll down or check out the links at the sidebar at the right.

I'm taking a break, literally and figuratively, I guess. May and I drove out to San Pedro (south Los Angeles) with our two older granddaughters, leaving Grapevine (northeast of Ft Worth, TX) about 10 days ago. It's been a relaxing vacation. The girls have no desire to go to Disneyland.

About 4:00 p.m. this afternoon, it appeared the girls were in their own world, and May was doing her own thing, so I asked if I had the rest of the day free. May said I did.

Yesterday, I bicycled a hard 40-mile round trip from San Pedro up to Redondo Beach and then farther up the coast (near LAX).

Tonight I decided I would just go to Redondo Beach and back, 20 miles. I'm in Redondo Beach now, at a McDonald's writing this note.

It's hard to believe. There were six new items I posted between that draft written last night and posted just now. 

I forgot to look what my tall Starbucks cost me this morning. For newbies, "tall" is the smallest size coffee drink routinely served. I say "routinely," because if I recall correctly, one can ask for a "small" coffee at Starbucks and they will find a smaller cup from behind the counter. That was true some years ago; I don't know if it is still true.

Yesterday, my Starbucks cost $1.75 (with tax); in Texas, it is $1.89 with tax. I didn't get a receipt and they don't post the cost of their simple coffee drinks in this particular Starbucks, so let's just assume it stayed at a $1.75. At McDonalds, I can get three food items -- sandwich, fries, and a drink -- each for a dollar off the dollar menu. Along expensive Redondo Beach last night, the three food items off the "dollar menu" cost me $4.12. So, not quite a "dollar menu" but close.

When traveling, if I stop for breakfast at McDonald's it is only coffee ($1.00) and hash browns (or what passes for hash browns) at about a dollar also. That usually lasts me to well past noon, and sometimes all day when traveling. One doesn't burn many calories driving.

Reminds me of Kim.

The OctoFrac -- The Bakken -- July 7, 2015

Mainstream media is catching up with the Bakken and with the bloggers; I wonder if Jane Nielson still stands by her original assessment of the Bakken:

Don’t believe it. There’s some oil to be gotten out of Bakken, and it’s going to be exploited. But the “bonanza” is nothing but hype.

By the way, several years later, finally, she did acknowledge there was some oil in the Bakken, but it wasn't going to last long. I'm not going to link that post. I have too much fun with her original assessment.

But I digress.

Remember the story of the frack-sand-by-train story posted yesterday?

This is why: refracking is the new fracking. BloombergBusiness is reporting:

The technique itself is nothing new. Oil crews across the world have been schooled on its simple principles for generations: Identify aging, low-output wells and hit them with a blast of sand and water to bolster the flow of crude. The idea originated somewhere in the plains of the American Midwest, back in the 1950s.

But as today’s engineers start applying the procedure to the horizontal wells that went up during the fracking boom that swept across U.S. shale fields over the past decade, something more powerful, more financially rewarding is happening.

The short life span of these wells, long thought to be perhaps the single biggest weakness of the shale industry, is being stretched out. Early evidence of the effects of restimulation suggests that the fields could actually contain enough reserves to last about 50 years, according to a calculation based on Wood Mackenzie Ltd and ITG Investment Research data.

The blog has a tag, refracking, and we've talked about re-fracking for quite some time now; it began with MRO some years ago.

Then just a couple of days ago a reader suggested looking at this old well, recently re-fracked.

More from the article:

If the word fracking has carved out a spot in the lexicon of Americans as the nation advances toward energy independence, then refracking, as roughnecks have begun calling it, could be next. And for an industry that has been hammered by the 50 percent drop in crude prices over the past year, the finding on the technique’s potential -- at a fraction of the cost of the initial well -- provides a much-needed sense of hope.
The risks abound -- from inadvertently siphoning oil from an adjacent well to ruining a whole reservoir -- and the sample size so far isn’t big enough to be conclusive, but oil giants like Marathon Oil Corp. and ConocoPhillips aren’t waiting to incorporate refracking into their shale operations.

Note: Bloomberg specifically mentions MRO and COP. MRO was mentioned years ago with regard to refracking (I even provided a list of wells that MRO was likely looking at to be the first wells to be re-fracked); the BR example linked is one example of the BR experience.

The Octofrac

Years of working on traditional wells have shown that they can be restimulated multiple times, Vincent said. In the industry’s lingo, a well that has been blasted five times is a “Cinco de Fraco.” Eight times gets you an “Octofrac.” When done right, the procedure not only boosts the flow of crude, but can also increase the estimate of reserves held in the well. Vincent said it’s common to see oil recovery climb 60 percent or more.

“I’ve seen a well get 10 fracs through the same perfs, and it appears that we’re adding reserves every time,” he said.

And a long, long time ago, I even suggested 100,000 wells in the Bakken. And here it is:

A study by Bloomberg Intelligence of about 80 wells that were originally tapped in North Dakota’s Bakken formation in 2008 or 2009 and then refracked again years later shows a clear pickup in output. The wells on average produced more than 30 percent more oil in the month after the refrack than they did after the original completion, according to analysts William Foiles and Peter Pulikkan.

I don't know when I first mentioned 100,000 wells in the Bakken, but it goes back to at least July 18, 2013.

A big thank you to Don for sending me the link to BloombergBusiness.

EOG is on record that it is more cost-effective to simply drill a new well instead of re-fracking. It will be interesting to see if they eat those words.

Other posts of interest:

• Filloon on Whiting's re-fracks.
• Starting to think about re-fracking with the price slump.
• MRO case studies. Background to that post:
• August 17, 2012:  MRO and re-fracks/re-fracking
• December 18, 2011: re-fracking wells in the Bakken
• July 31, 2011: list of 25 MRO wells that might be candidates for re-fracking

Tuesday, July 7, 2015

Active rigs:

	7/7/2015	07/07/2014	07/07/2013	07/07/2012	07/07/2011
Active Rigs	77	189	188	213	166

RBN Energy: Delivering Utica Condensate to The Gulf Coast. (archived)

The recently (re)announced Kinder Morgan Utica Marcellus Texas Pipeline (UMTP) is that company’s second iteration of a natural gas liquids (NGL) pipeline from Ohio to the Texas Gulf Coast. If built – the project would facilitate delivery of mixed NGLs (y-grade) and purity NGL products from the Utica to the Gulf Coast - where the liquids could be further processed and/or exported. Those purity products could include both plant and lease condensates. But as we discuss today - the project might currently be more attractive to NGL shippers anxious to get better prices for stranded northeast production than it is to condensate producers.

This blog continues analysis we initiated back in May looking at growing production of lease and plant condensate in the liquids window of the Utica in Ohio (see Give A Little Bit). Utica lease condensate production is currently projected by the Energy Information Administration (EIA) Drilling Productivity Report to reach 66 Mb/d by July 2015. Production of plant condensate (aka, natural gasoline or pentane-plus) from natural gas processing plants in the northeast (from both the liquids rich Pennsylvania/West Virginia Marcellus and Ohio Utica) is expected to be close to 60 Mb/d by the end of 2015 (we recently upped our earlier 50 Mb/d estimate based on EIA plant production data). Midstream companies are investing in new infrastructure to transport these condensate range materials to market. Our analysis started with a look at regional markets for lease condensate (an ultra-light crude that condenses out of the gas stream at the wellhead). We covered plans by the area’s largest refiner, Marathon Petroleum Company, to increase their processing of lease condensate and light crude at their Canton, OH and Robinson, IL refineries by adding a condensate splitter and new light crude handling capacity respectively. To feed these and other Midwest refineries, Marathon’s logistics subsidiary, MPLX is building the 180 Mb/d Cornerstone pipeline – due online by the end of 2016. MPLX is also shipping lease condensate down the Ohio River to their Catlettsburg, KY refinery that brought a splitter online in June 2015. Refineries in the Louisiana Gulf Coast region are also receiving Utica lease condensate by barge via the Ohio and Mississippi Rivers.

At least 4 barge terminals in Ohio and West Virginia are delivering these supplies. Episode 2 in the series - covered developing plans to move plant condensate or natural gasoline to Western Canada as diluent for blending with heavy oil sands crude - to enable the latter to flow easily in pipelines. Plant condensate is an NGL extracted from wet gas at processing plants – a similar material to lease condensate but with a defined specification that makes it more attractive for diluent blending.

The Utica is geographically close to the origins of two major diluent pipelines from the Chicago area to Western Canada. As a result a number of infrastructure projects have been proposed in the past two years linking plant condensate production in Ohio to these pipelines. We detailed the Kinder Morgan Utopia West project that would deliver up to 95 Mb/d of plant condensate to the Cochin and Southern Lights diluent pipelines in the Chicago area beginning in 2018. An interim Kinder Morgan project would deliver plant condensate to the Cochin pipeline via a rail terminal at Milford, IN - due online by the end of 2015. Subsequent to that post, MPLX pointed out that their Utica build out project plans ultimately include providing shippers on the Cornerstone pipeline with connectivity to the Cochin and Southern Lights diluent pipelines. This time we take a look at another Kinder Morgan pipeline project that could deliver both plant and lease condensate (as well as other NGLs) from the Utica to the Gulf Coast.

Three Words I Love To See In Same Headline: Soaring - Demand - LNG -- July 6, 2015

Rigzone is reporting:

Development of regasification infrastructure is picking up in Southeast Asia, as countries in the region seek to augment declining gas production from their mature hydrocarbon basins by importing liquefied natural gas (LNG) in order to meet both export volumes and increasing domestic requirements.

Southeast Asia is an emerging LNG hotspot, with annual demand growing at 45 million tons, outstripping India’s 20 million tons, according to a Wood Mackenzie’s report released in February 2013.

Malaysia stands as the exception – maintaining its rank among the world’s top LNG net exporters in the foreseeable future. Elsewhere in the region – Indonesia, Thailand and the Philippines – LNG is being sought after to feed domestic demand, and this has, in turn, fueled a drive towards expanding regasification capacity.

Thailand:

Thailand is in a unique position in that the country derives 90 percent of its domestic sales gas from Myanmar, according to data from PTT. The remaining 10 percent of Thailand’s gas imports – which meet 22 percent of the country’s gas demand – comes from LNG.

Philippines:

Like Thailand, the Philippines is also facing a looming gas crisis as reserves at the Royal Dutch Shell plc-operated Malampaya project – the sole producing gas field supplying domestic users – expected to be fully depleted by 2024. With no visibility on any replacement reserves from a new discovery rivaling that of Malampaya, Philippines National Oil Company’s Vice President for Upstream Raymundo Savella viewed importing LNG as the inevitable outcome to secure supplies of the “greenest” fossil fuel.

The Philippines Department of Energy plans to replace over 15,000 megawatts (MW) of coal-fired electricity supplies with those from gas-fired plants, translating to rising demand for gas over and above the current requirement.

Indonesia:

Southeast Asia’s other giant archipelago nation, Indonesia, looks set to take the lead in small to mid-scale LNG and regas developments in the region as its president, Joko “Jokowi” Widodo embarked on his pledged 35,000 MW electrification plan during his first five-year term.

For Jokowi to deliver on his pledged electrification plan, Indonesia would require more LNG imports to fill a widening shortfall of domestic gas supplies exacerbated by delays in upstream gas field developments. Large-scale field developments including Chevron-operated Gendalo-Gehem gas and condensate development and Inpex Corp.’s Abadi floating LNG project had been held back by among others, a lack of clarity in the extensions of the existing production sharing contracts.