Wednesday, February 21, 2018

Primer On Natural Gas Liquids -- US Dept Of Energy -- December, 2017


February 22, 2018: be sure to watch comments. I can't bring them all to the main post (it would get too cluttered) but this one is too important to lose. From a reader:
The line to Alberta might well ship both ethane and propane either in batches or separated by pigs.
The huge cracker in India built by Reliance Industries is being fed by a virtual pipeline of brand new, built -for-purpose ethane carrying ships out of Morgan's Point.
Reliance said that even with transportation costs (halfway around the world), they are still profiting $300 million/year more rather than using naptha.

This shipping or liquefied ethane is a new industry entirely with Marcus Hook and Morgan's Point being the ports of origin. 
Original Post
For an understanding of natural gas liquids, a reader recommends this monograph: "Natural Gas Liquids Primer: With a Focus on the Appalachian Region" produced by the US Department of Energy, December, 2017.

Clicking on this link will result in a pdf that will load on your desktop, or you can click on this link which will lead you to the pdf link.

This link will also be found at the "Data Links" page tabbed at the top of the blog.


And this blows me away.

The first thing I wanted to check: the volume of natural gas liquids produced in the Appalachian region, now that we know that number of North Dakota (posted earlier today or yesterday -- see below).

Hold your breath.

From the monograph linked above:

If I'm reading the graph correctly, and it's not a particularly difficult graph to read:
  • in 2013, the Appalachian region was producing less than 250,000 bbls of NGL daily
  • in 2016, production had jumped to 1.2 million bbls / day
  • through 2049, production tends to level off at 1.2 million bbls daily
So? So what? What's the point?

The Appalachia (Marcellus/Utica) is a natural gas play. It's producing about 1 million bbls NGLs on a daily basis and is projected to level out at that level.

But yesterday, from this post:
  • North Dakota produces more than 400,000 bbls of NGLs daily
  • this NGL production will more than double by the 2030s -- ranging from from 800,000 to 1 million bbls daily
Okay, you can breathe now. I may be missing something or misreading something, but it seems fairly straightforward.

But there's more.

This is not as interesting, perhaps, but it certainly helps put things into perspective. This graph is from the same monograph:

This is annual production of natural gas in the Appalachian region, measured in trillions of cubic feet. Currently it looks like the region is producing around 8 trillion cubic feet annually but just a few years ago, half that much, about 4 trillion cubic feet. But just for the fun of it, let's call it 3.65 trillion cubic feet, divide by 365 and come up with 10 billion cubic feet / day.

North Dakota is producing 2 billion cubic feet / day. Yes, ten billion is 5x two billion -- a huge difference but it's not exponentially different.

I am simply blown away. The natural gas comparison might not be that remarkable, but the natural gas liquid comparison certainly caught my attention. It certainly helps explain why the NDIC and industry leaders in North Dakota have a sense of urgency about this issue. Even if there were no caps on flaring, what will the industry do with all this "by-product."

Disclaimer: especially for newcomers -- I often make simple arithmetic errors. I am inappropriately exuberant about the Bakken. I see things that may not exist. On many of the things I post I feel I am in a distinct minority. C'est la vie.

A Summer Song

A Summer Song, Chad and Jeremy

Oasis Presentation -- January, 2017, Presentation

Wow, this is timely -- after all the recent posts about Oasis, natural gas processing, and pipelines, a reader just forwarded this Oasis January, 2017, presentation.

I posted much of this data when the presentation first came out but it's interesting to look at it again.

Data points, with emphasis on the Bakken; go to the linked presentation for more on the Delaware (Permian). Much of this was previously posted from a previous presentation, so much of it will not be repeated, (some personal comments):
  • top tier assets: Permian and Bakken
  • Williston:
    • 518K net acres
    • >90% held by production
  • inventory substantially all operated; Williston, 100%; Permian, 90%
  • 1,614 locations economic @$45 WTI and lower in the Williston Basin
  • (1,614 locations at current max rate of drilling/completing: 14 years of inventory; but remember, these 1,614 locations are those that are economic at $45)
  • core Bakken production continues to improve; >70 mboepd in October; 72 mboepd in November, already surpassing planned 2017 exit rate
  • exit rate for 2018:
    • Williston: 83+ mboepd
    • Delaware (Permian): 5 mboepd
  • 2018 development plan:
    • Williston
      • expect to drill and complete 100 - 120 operated wells 
      • 5 rigs throughout the year
      • wells costs about $7 million (less for 4mmlb; more for 10mmlb) 
      • 120 wells x $7 million = $840 million
    • Permian
      • expect to drill 16 to 20 wells; complete 6 to 8 wells
      • 1 rigs initially with potential to add a second in 2H18
By the way compare the Oasis drilling plan with that of Hess:
  • Hess Corporation will spend $900 million to drill 120 wells with six drilling rigs and completing 85 wells in 2018 in the Bakken
Faces In The Crowd

Five New Permits; One Producing Well Completed -- February 21, 2018

Active rigs:

Active Rigs554238127182

Five new permits:
  • Operators: Newfield (3), Petro-Hunt (2)
  • Fields: South Tobacco Garden (McKenzie); Charlson (McKenzie)
  • Comments:
One permit renewed: an Oasis permit for a McCauley well in Williams County

Two permits canceled:
  • Whiting: two P Earl Rennerfeldt permits in Williams County
One producing well completed:
  • 32279, 2 (no typo), XTO, FBIR Blackmedicine 24X-21G, Heart Butte; API - 33-025-03068; t10/17; cum -- ; my hunch: more data to follow; from the geologist's report: Three Forks well; expands the existing Heart Butte field; background gas not remarkable, fluctuating between 50 and 700 units; however, the highest gas value recorded was 2,520 units at 15,781 feet; the ideal target zone was defined as an 18-foot interval, initially set at 10,088 feet TVD, 20 feet below the base of the Pronghorn formation. FracFocus shows the well was fracked 2/2417 - 3/21/17: total water, 8.8 million gallons; water, 86.8590% by mass; proppant, 11.24325% by mass;
  • 8.35 lbs x 8.8 million gallons = 73.48 million lbs
  • 0.868590 of x = 73.48 million lbs; therefore, total mass: 84.5969 million lbs
  • 11.24325% of 84.5969 million lbs = 9.5 million lbs of sand
  • there are twelve wells on this pad; the oldest one is #20600 (see below)
  • the other eleven wells have permits with the numbers #32XXX
  • 20600, 1,831, XTO, FBIR Blackmedicine 24X-21B, Heart Butte, 30 stages; 3.1 million lbs, t6/12; cum 279K 12/17; recent production:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

The well has been off-line since 1/16 (until 8/17). The months leading up to 1/16:

Initial production and first nine months:

Wow, It Never Quits, Does It? -- February 21, 2018

After all the "noise" the past couple of days regarding NGL infrastructure and natural gas/flaring, there seems to have been quite a response.

Now, this, sent to me by a reader (another "huge thank you") -- from a press release: ONEOK will invest $2.3 billion by 2020 to construct:
  • a new 400,000-barrel per day (bpd) natural gas liquids (NGL) pipeline – the Arbuckle II Pipeline – that will create additional NGL transportation capacity between ONEOK's extensive Mid-Continent infrastructure in Oklahoma and the company's existing NGL facilities in Mont Belvieu, Texas;
  • a new 125,000 bpd NGL fractionator – MB-4 – in Mont Belvieu, Texas, and related infrastructure; and, 
  • a new 200-million cubic feet per day (MMcf/d) natural gas processing facility – the Demicks Lake plant and related infrastructure – in the Williston Basin
This is on top of more than $4 billion in announced capital-growth projects since 2017.

Note: Oasis is building the largest NG processing facility in North Dakota:
The Bismarck Tribune ( ) reports that Oasis Midstream wants to expand the Wild Basin Gas Plant in McKenzie County to make it the largest natural gas processing complex in the state.

The plant currently processes about 80 million cubic feet of natural gas per day. The expansion would add a new complex next to the existing plant, which would allow the plant to process an additional 265 million cubic feet per day.
So, if I read that correctly, a 345-million-cubic-feet natural gas processing plant. This is the plant that Andeavor will source with a new 44-mile pipeline to supply its Belfield logistics hub. 

Reason #3 Why I Love To Blog -- February 21, 2018

On December 22, 2017, I stumbled across a spectacular MRO well. There was a method to my madness but at the end of the day it was still a surprise when I found it. Here's part of that post:
Why I love to blog and never get tired of the Bakken. I'm always surprised: I thought this was going to simply be a "same-old, same-old" post. And then, surprise, surprise. In addition to a "record" (or "near-record) IP being reported, look at this (down below): an existing well was re-fracked at the same time the DUC was completed. And it was a Marathon well. Marathon took the lead in a re-frack program and it looks they are trying something different. Wow, I simply love it. It seems every operator is "bringing something different to the Bakken table."


Reported today, this DUC:
  • 32888, 6,278, MRO, Forsman USA 44-22H, Antelope, Sanish, 45 stages; 15 million lbs, t12/17; cum --
That's a huge IP for oil; 6,278. It may be a record IP for crude oil alone (see below). For BOE, is it a record?
  • IP oil: 6,278 (oil only; this may be a Bakken record)
  • IP mcf: 6,989 = 1,164 boe
  • IP total boe: 7,442 boepd
So, nope it's not a record but it's certainly very close. Note: I have not captured every IP of every well in the Bakken so I may have missed the record well, but does it really matter? Whether this well set a record or not, it's a huge well. See graphic below for the location of this well.

In fact, according to the company, it did set a record for the Bakken: it set the 30-day IP record for a Bakken well according to its operator, MRO, in its 4Q17 earnings call, slide 15 of 32.

The production data:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare
  • 30 days oil: 78,259 bbls = 2,608/day for 30 days
  • 30 days mcf: 99,560 mcf = 16,593 boe
  • 30-day IP total boe: 94,852 boe
According to the slide, the company reported a 30-day crude oil IP of 3,005 bopd (not boepd). So perhaps there is more data yet to come.

Disclaimer: I often make simple arithmetic errors. In addition, I did this quickly; have not rechecked the numbers. If this is important to you, go to the source.

Wednesday, February 21, 2018 -- API Reports A Million-Bbl Draw In Weekly US Crude Oil Inventories

Re-posting the data. My earlier post was in error regarding the API forecast. It's been corrected. 

Because of the holiday on Monday, the API data was released today. API forecast a 1.300-million-bbl build. The actual number: interesting -- not a build at all, but a decrease - API has the weekly crude oil inventory number dropping 0.907 million; in other words, down about a million bbls.

WTI: $61.10 just as the API number hit the internet, 4:30 ET. Five minutes later, $61.12 -- in other words, no impact.

The EIA weekly petroleum report that usually comes out Wednesday will be delayed a day, to be released Thursday.

I use the EIA data, not API data, for calculating "re-balancing" time frame.


From "Surprise crude draw lifts hope for oil market."
The American Petroleum Institute (API) reported a small draw of 907,000 barrels of United States crude oil inventories for the week ending February 16, according to the API data. Analysts had expected a small build of 1.333 million barrels in crude oil inventories, instead.

Last week, the American Petroleum Institute (API) reported a build of 3.947 million barrels of crude oil, along with a build in gasoline inventories of 4.634 million barrels.
This week’s data is more optimistic, with the API reporting not only a surprise draw for crude oil, but a modest gasoline build of 1.468 million barrels, which was largely in line with analyst forecasts that had the build pegged at a 1.229-million-barrel build.
More at the link.

The headline said that the surprise draw would give hope for the market. Did it? Not really. Oil settled down for the day, at $61.

Artists At Work In The Studio

Anticipating The Weekend -- European Forecast: Really, Really Cold -- February 21, 2018

This should be interesting to watch. Weather forecasters suggest this weekend could be the beginning of a particularly harsh cold wave stretching well into Europe, and south into Italy.

Link here.


Folks may remember this story:
  • 2012: Philadelphia dying; refinery dying
  • 2013: Philadelphia could become next "Cushing"; refiner will become single largest consumer of Bakken crude oil; CBR
  • 2017: refinery bankrupt
I've blogged about this refinery on at least three occasions. This was a big, big deal at one time. Now, it's a big deal, but, sadly, for a different reason.

Previous posts:
Today a Reuters story on a Ted Cruz rally at the refinery.
Republican Senator Ted Cruz of Texas on Wednesday urged President Donald Trump's administration to push for an overhaul of the nation's biofuels policy to save refinery jobs, during a rally at bankrupt oil refiner Philadelphia Energy Solutions in Pennsylvania.
The rally comes as the oil industry and the corn lobby clash over the causes of the Philadelphia-area refiner's insolvency, which has become a touchstone in the debate over whether the U.S. Renewable Fuel Standard needs to be rewritten.
The decade-old regulation requires U.S. refiners to blend biofuels like corn-based ethanol into their fuel, or buy credits from those who do. While it has created a lucrative market for corn states like Iowa and Nebraska, refiners like Philadelphia Energy Solutions (PES) that have no blending facilities say it is unfair and costly.
PES, which employs more than a thousand people, declared bankruptcy in January and placed the blame squarely at the feet of the Renewable Fuel Standard.
The corn industry has pushed back, pointing out that other refining companies are raking in their biggest profits in years, and suggesting PES' problems may have had more to do with regional refining economics and management choices.
Reuters reported that PES' investor backers - led by the Carlyle Group - withdrew at least $594 million in a series of dividend-style distributions from PES since 2012, most of them backed by loans the company ultimately could not repay. The distributions, combined with a shift in U.S. energy economics, made complying with the Renewable Fuel Standard (RFS) challenging for PES.

New Poll: Should Production Have Precedence Over Flaring? -- February 21, 2018

A reader responded to the news yesterday that "the emergency task force" has been activated to address the issue of flaring (again). See this post.

The reader took strong issue with the need for this action, and took particular issue with the Director of the NDIC and the self-imposed flaring caps, suggesting that there seems to be a tug-of-war between someone who wants to slow production (for whatever reason) and the governor who wants North Dakota crude oil production to double (which I have said many times, if "unfettered, the Bakken can produce two million bopd").

My response to the reader:
Thank you. Agree 100% with the sentiment, but some thoughts.

I've flip-flopped on the issue many times. Early on in the boom, I thought the concern of flaring was overdone, but I was wrong -- oil companies, investors, and mineral owners have benefited -- at least as far as I can tell -- with the amount of NG activity we now have in the state.

But, whether it's 87% or 88% it seems like we've turned the corner -- and that's why I agree with your note. There seems to be a lot of hysteria over meeting the 88% goal, when outside of the reservation we seem to easily be there.

The "thing" that has me wondering now: I always thought it was the remote wells (not economical to hook up to a pipeline) and the reservation. If so, I completely agree: ridiculous to hew to self-imposed caps when much of it is due to self-imposed red tape.

But when I look at the graph and the amount of NG production predicted, I think folks are looking out over the next five to ten years. I wonder if Lynn Helms isn't telling Burgum that if we're going to get to 2 million bopd we need to prepare for all that natural gas that will be produced.

My hunch is that the "emergency" task force will come up with some great ideas: maybe it will force some changes in the bureaucracies causing all the red tape; perhaps we will see some incentives for more infrastructure investment; and, if necessary, delay the self-imposed "goals."
So, time for a poll, in which we ask whether production should have precedence over flaring:
  • yes, production should take precedence over flaring caps
  • middle of the road: ease the caps now but long term keep the caps as goals
  • no, hold the industry accountable; enforce the caps 
Note: a "yes" vote does NOT mean one wants to completely scrap policies to minimize flaring. It simply means that production takes precedence and that this "sense of urgency" that something needs to be done "now" is overblown. If that makes sense.

Update On The Mideast: Focus On Afrin -- The City, Not The Nose Spray

From "Mideast On The Brink" (linked at the sidebar at the right) was this linked post:
March 10, 2016: end times for the Caliphate (ISIS); excellent update of the current situation in the war against ISIS.
Now that ISIS has pretty much come to the end in the Mideast, there is a new focus and a need to update the players and objectives. The WSJ has a nice update today: why Turkey says it is ready to go to war with Syria over Afrin. If Turkey thinks the Kurds are an existential threat, it shows just how weak militarily, spiritually, morally, and culturally, Turkey really is.

Finally, a Mideast name we can spell, pronounce, and remember: Afrin.

API Reports A Million-Barrel Draw In Crude Oil Inventories; More Growth In The Bakken -- February 21, 2018

Because of the holiday on Monday, the API data will be released today, instead of Tuesday. That data will come out later this afternoon. API forecasts a 1.300-million-bbl build. Later: here is the actual number: interesting -- not a build at all, but a decrease - API has the weekly crude oil inventory number dropping 0.907 million; in other words, down about a million bbls.

Later: WTI: $61.10 just as the API number hit the internet, 4:30 ET. Five minutes later, $61.12 -- in other words, no impact.

Likewise, the EIA weekly petroleum report that usually comes out Wednesday will be delayed a day, to be released Thursday.

I use the EIA data for calculating "re-balancing" time frame.

Update On Andeavor's Belfield Logistics Hub

I'm not sure if this has been previously reported or if this is new but related to the previously reported story regarding the proposed Andeavor natural gas logistics hub near Belfield, North Dakota. I guess parts of this have been previously reported, but this fills in a lot of the details.

From The Bismarck Tribune today, a couple of stories in one article.

First, Andeavor, a new pipeline:
  • 44 miles long -- McKenzie, Billings, and Stark counties (the original article regarding the Belfield hub did say the company would connect its new Belfield hub with a location in McKenzie County
  • at Belfield, the mixed natural gas liquids would be separated into products such as ethane, propane, butane, and natural gasoline
  • from Belfield, the products would be transported by pipeline to the Andeavor Fryburg Rail Terminal and loaded unto rail cars
  • North Dakota produces more than 400,000 bbls of NGLs daily
  • this NGL production will more than double by the 2030s -- ranging from from 800,000 to 1 million bbls daily
  • memo to self: memo to Art Berman
  • the entire project:
    • three pipeline segments that total 44 miles
    • conversion of 42 miles of Andeavor BakkenLink crude oil pipeline into NGL service
    • would carry NGLs from the Oasis Wild Basin natural gas processing plant that's being expanded near Watford City (I believe when the Oasis Wild Basin NG processing plant comes on line it will be the biggest such plant in North Dakota -- although it may not hold that title for long)
    • pipeline would initially carry 15,000 bbls/day; could be expanded to 34,000 bbls/day
    • total project cost estimate: $150 million
The second story: ONEOK (previously posted on the blog) --
  • has proposed to have the 900-mile Elk Creek Pipeline transport NGLs from Bakken to Kansas
  • that project originates in Sidney, MT, but will connect to existing pipelines in northwest North Dakota
  • ONEOK would convert an existing 45-mile NG gathering pipeline into a NGL pipeline in McKenzie and Williams counties
Meanwhile, the status of the Keystone XL remains muddled.


Because of the wind, rain, and winter advisory here in north Texas, I had to move the tulips indoors.

Update On East Coast Natural Gas -- RBN Energy -- February 21, 2018

Global warming? What global warming: from Rigzone:
Oil and gas will account for over half of the world’s energy by 2040, according to BP plc’s latest Energy Outlook.
The outlook’s ‘evolving transition’ scenario highlights that demand for oil will grow over much of the period to 2040 before plateauing in later years. All the demand growth is said to come from emerging economies, with the growth in supply driven by US tight oil in the early part of the outlook. OPEC is said to take over from the late 2020s as Middle East producers adopt a strategy of growing market share.
The transport sector will continue to dominate global oil demand, according to BP, accounting for more than half of the overall growth. Most of the growth in energy demand from transport, which flattens off towards the end of the outlook, comes from non-road (largely air, marine, and rail) and trucks, with small increases from cars and motorbikes.
After 2030, the main source of growth in the demand for oil is from non-combusted uses, particularly as a feedstock for petrochemicals.
Natural gas demand is anticipated to grow strongly over the period, according to the scenario, overtaking coal as the second largest source of energy. By 2040, the US is said to account for almost one quarter of global gas production, with global LNG supplies more than doubling.
Impact of oil on US economy: the headline story in today's WSJ -- America's emerging petro economy flips the impact of oil. 

SPR update, via Twitter:

Noble Energy: shares surge 8%? I heard that on the radio this morning. Don't know any more than that. Other sources suggest it's up almost 11%. Most likely due to the Delek-Noble Israel-Egypt natural gas story. Noble Energy, Israel’s Delek to supply gas to Egypt in $15 billion deal.

Disclaimer: this is not an investment site. Do not make any investment or financial decisions based on what your read here or think you may have read here.

Frack sand shortage? Mike Filloon started talking about this years ago, and this particular story posted previously on the blog. Now, over at
Halliburton said last week that its earnings could be negatively impacted because of bottlenecks related to the supply of frac sand used in shale drilling. The Wall Street Journal reported that Halliburton’s shares were briefly halted on February 15 after Halliburton’s CFO Chris Weber told an audience at the Credit Suisse Energy Summit that the company’s first quarter earnings could take a hit by a whopping 10 cents per share.
The reason, he said, was because of delays by Canadian rail companies that would slow the delivery of frac sand. Halliburton saw its shares drop by more than 2 percent on a day that saw broader gains to the S&P 500.
Back to the Bakken

Active rigs:

Active Rigs564238127182

RBN Energy: East Coast natural gas prices hit all-time highs during "bomb cyclone."
After a three-year hiatus, winter returned to the U.S. natural gas market this year in the form of a “Bomb Cyclone” and more than a week of frigid temperatures.
The cold weather pushed Henry Hub prices above $6/MMBtu and East Coast prices higher than $100/MMBtu on some days.
This winter, the pain wasn’t just confined to New England.
Prices at Williams’ Transcontinental Gas Pipeline (Transco) Zone 5, which includes the Carolinas, Virginia and Maryland, hit all-time highs on January 5. Exports from Dominion’s Cove Point terminal in Maryland are only just getting started so it’s not liquefied natural gas (LNG) exports from the East Coast that are driving prices higher. Instead, it’s gas’s increasing role in winter power generation that has been putting pressure on East Coast gas pipeline deliverability.
Today, we begin a series explaining why prices have been so high on very cold days this winter and why more price spikes may be ahead. This winter, eastern gas prices have set records at some hubs and spiked near record highs at many others. Prices at Algonquin Citygate and Transco Zone 5 ran up to more than $100/MMBtu on January 5, and to $24/MMBtu during the week prior.
These price spikes have been driven by an increasing call on gas for power generation across the eastern U.S. On the coldest days, such as we saw when the Bomb Cyclone hit, the demand for gas as a generation and heating fuel exceeds pipeline capacity to deliver it, which begins a cascade of dominoes that results in skyrocketing prices.
How could such a calamity happen when Marcellus and Utica, two of the greatest gas producing fields in the world, sit right at the doorstep of this market? Although U.S. gas supply overall is more than plentiful, gas pipeline capacity into parts of the East Coast is not. Couple this with rising gas demand for baseload power generation and you have a recipe for price spikes, especially on the Transco system.
Either directly or indirectly, Transco serves almost all of the demand in the Carolinas and much of it from Virginia to New York City in its zones 5 and 6. We call the states in these two zones the Eastern Transco Corridor.