Thursday, February 6, 2020

Why There Is So Much Work Yet To Be Done In The Bakken -- February 6, 2020

For newbies: this is why I often say that there is so much work yet to be done in the Bakken. All the early wells need to be re-fracked or re-drilled/re-fracked using "modern" completion (fracking) strategies.

Here's a great example.

These two wells were permitted about the same time, back in 2014.

The first one, #28648, was drilled/completed in early 2015, using "old" completion (fracking) strategies. The second one, #28194, was only recently drilled/fracked, using new completion strategies. Note the huge difference in the first five months of production. 

The wells:
  • 28648, 1,234, Oasis, Chalmers 53-- 21-19 9B, 36 stages; 3.8 million lbs; Baker, t5/15; cum 173K 12/19; first five months of production:
  • 28194, conf, Oasis, Lewis Federal 5300 21-31 5B; this permit was issued about the same time as the permit for #28648 above. That well above was drilled/completed in early 2015; this well (#28194) was only recently drilled and completed (late 2019, four and a half years later):

DateOil RunsMCF Sold

Yes, we don't the number of days the second well was producing (mostly likely full months starting in September), but mineral owners don't really care about details like that. Most mineral owners are only interested in the size of the check.

All Politics -- Nothing About The Bakken -- February 6, 2020

This is over at The Atlantic, how Joe Biden blew it. It's behind a paywall, but most folks get three or four free articles each month before the paywall kicks in.

If you enjoy this sort of stuff, it's worth a read.

I normally wouldn't post it / link it but it gives me an opportunity to expand on a couple of items that I've wanted to talk about for quite some time.

First: money. From the article:
Running short on money is a big part of why [Biden] ended up here [in last place among the real contenders] ...
After a disastrous summer of fundraising, plans from the team in Iowa and other states would linger with national headquarters for weeks, then come back without approval for the spending being requested. Other candidates were quickly hiring staff—particularly Buttigieg, who in June had all of four staffers in the state but went into the caucuses with 170—while Biden’s team was under an almost complete hiring freeze.
The campaign yanked its TV ads, leaving Biden dark for weeks and exponentially outspent in online advertising by Warren and Buttigieg, who soon had the rising poll numbers to show for it. At one point, aides realized, Biden was on track to spend less on TV in Iowa in this race than in his 2008 run, when he finished as an asterisk, with 1 percent of the vote.
Comment: It is being reported elsewhere that campaign costs rose "exponentially" when Mike Bloomberg entered the race. Money was no problem for him, and networks raised their prices for advertising -- for all campaigns. Apparently other campaigns have noted that it's costing a  lot more to campaign now that Mike Bloomberg is in the race. Bloomberg is ruining it for all of them. LOL.

Second: impeachment. From the article:
Biden aides who were being honest with themselves knew for months that they were in trouble. Some didn’t want to believe it; some couldn’t. Others felt like they’d gotten into a taxi with a driver who was swerving all over the road, and they were just holding on and hoping they made it to the end.
They hoped that Democrats’ obsession with beating Donald Trump and voters’ sense of personal connection to Biden would pull them over the edge. Trump had blundered into his own impeachment out of fear that Biden was strong.
Now they were hoping the impeachment trial would help make up for his weakness. “We might win this,” one person who worked on the campaign told me the week before the caucuses, “and it might come down to nothing we’ve done.”
Comment: Donald Trump did not "blunder" into anything. The US House was going to impeach Trump at some point. 

I used to say to myself that I wish Trump had never made that Ukrainian phone call. That's absolutely wrong and no one has yet figured that out. The Ukrainian phone call was a McGuffin. That's what Alfred Hitchcock would have called it.

If there had been no Ukrainian phone call at all, there would have been something else. Assassinating a legitimate general Army office might be impeachable; it puts every one of our own general officers at increased risk. The emoluments issue is still out there. The "obstruction" on tax returns is still out there. Unilaterally withdrawing from the climate "deal" is still out there. There are/and were a million reasons that Nadler/Schiff could have come up with to impeach Trump. [The interesting thing is that they were unable to come up with anything substantial -- reminding us how weak their case really was. I'll get back to this later.] 

So the Ukrainian phone call was a McGuffin. 

The interesting thing is that of all the McGuffins that Nancy Pelosi could have selected, this was perhaps the worse: it would fatally wound Biden, and she knew it. Unless she's not quite as bright as the rest of the establishment sees her.

So, we have a twofer. At least a twofer. First, Trump did not blunder into impeachment. Three years ago it was decided that "they" would impeach him; they were hoping Mueller would give "them" the ammunition. Mueller did not. Second, Nancy Pelosi, et al picked exactly the wrong McGuffin. LOL.

Third: the candidate. The writer not once touches on why Iowans did not warm up to Biden. Of all the candidates, he and Sanders are the "old hats." Folks want to see fresh faces, hear new ideas, touch new hands. Biden might possibly transcend all that (Bernie has) but Biden has no new ideas. It's Obama (at best) all over again. Or at worst, stale Democrat Party platitudes His soundbite the other night in Iowa: his standing in the polls / the Democrat Party was all about unions. He said that he would win Iowa because the unions would make it happen. Wow. That's a throwback to the 1950s.

Now, back to McGuffin -- I said I would return to the weak impeachment case. "They" only had to find him guilty on one article of impeachment. Why did Nancy Pelosi not send up 35 articles of impeachment, or 24, or 55 or 31? Why just two? Mitch McConnell and company were able to dispense of two articles of impeachment in less then thirty minutes once the voting actually started.

In hindsight, the two articles of impeachment were so incredibly weak, nebulous, vacuous, Nadler, et al, should have been able to come up with dozens of similar Articles of Impeachment. Even if found innocent on all accounts, can one imagine the headline: 35 articles of impeachment! The New York Times would have needed to print a special Sunday edition just to showcase 35 articles.

If Biden is out of the race by Super Tuesday / or right after Super Tuesday, there will be a lot of articles, "how Biden blew it" and they will all be similar to The Atlantic article. But they will all miss the point.

The voters know Joe Biden. Twelve disciples with an unlimited bank account could not manage a winning strategy for this has-been plagiarist with a crazy affinity for the smell of hair spray. 

Fracking And Water: Flowback, Produced -- February 6, 2020

A reader -- much more knowledgeable than I am regarding all of this -- corrected one of my earlier notes regarding "water." The reader notes that there is a difference between flowback (water) and produced water, but the reader explains much more.

This explains so much -- an incredible note and much appreciated. 

The reader wrote:
There is a major distinction regarding the flowback/produced water situation
Prior to the introduction of HVFRs (high viscosity friction reducers) about three (3) years ago, operators "opened the chokes" in the early week or two after fracturing to remove the bulk of the frac fluid.

One big reason for doing so was to minimize the 'skin', aka the 'gumming up' of the fractures due to the guar - or other thickening agents - which was needed to transport the proppant. 
When these polymers - HVFRs - were introduced, proppant transport was enhanced with several other follow on consequences (re-using frac fluid being one).

One big effect  was no 'skin/gumming' occurred and higher formation pressure (via injection of millions of gallons of water) could be sustained indefinitely
This is one reason early hydrocarbon production is so high and stays - relatively - high ... along with the now labelled produced water.

Historically, produced water increases each month. The observed decrease in recent wells produced water is further indication that this is almost all frac fluid.
This pertains to the "water" mentioned at this post

Idle Chatter Regarding an Oasis Well In Baker Oil Field -- February 6, 2020

This is a very, very typical well in Tier 1 Bakken wells.

The IP is nothing particularly noteworthy (see record IPs here) and the monthly production is not all that remarkable compared to many Bakken wells in Tier 1 locations.

But look at that cumulative production. There are many wells drilled back in the early days of the boom (2008 - 2012) that still haven't hit 100,000 bbls. This one has produced more than 100,000 bbls of crude oil in less than four months of production.

And, again, this is a well that doesn't get my attention. I see these results day in and day out looking at wells now being reported (yes, there is a lot of water (see this note); and much natural gas is being flared). Also note how "small" the frack was -- only 6 million lbs:
  • 30188, 1,569, Oasis, Lewis Federal 5300 11-31 2B, 40 stages; 6 million lbs; Baker, t8/19; cum 109K 12/19; 
Full production data:

PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

The Baker oil field is tracked here, though it has not been updated in quite some time. If I have time, I will update it later tonight.

Baker oil field, immediately south of Williston, across the river:

One New Permit -- February 6, 2020

NGL fill rate -- moving closer to a new five-year max:

Market: all three major US equity markets hit all-time highs:
  • Dow: about 29,380
  • NASDAQ: about 9,570
  • S & P 500: about 3,345
Back to the Bakken

Active rigs:

Active Rigs5462584042

One new permit, #37365:
  • Operator: Whiting
  • Field: Bully (McKenzie)
  • Comment:
    • Whiting has a permit for a Sorenson well in Bully oil field, section 6-148-99;
Two producing wells (DUCs) reported as completed:
  • 30179, n/d, Slawson, Challenger Federal 7-29-32TFH,
  • 30178, n/d, Slawson, Diamondback 1 SLH, 

MRO Reports A Dry Well -- February 6, 2020

The well:
  • 32974, dry, MRO, Jorgenson USA 12-23H, Reunion Bay, failed cement issue;
From the file report:
  • MRO drilled this well to TD of 23,612 measured depth. 7" casing set at 11,033' MD. Then ran 4.5" liner to 23,607' MD, and rigged up to cement in liner. With liner hanger at 10,411.9' MD.
  • MRO pumped liner cement job and when stringing out to circulate out excess cement, the cement flash set, and caused liner running tools and drill string to be cemented in hole
  • temperature survey and CBL indicates that drill pipe is cemented in hole at 7,940'.
  • 4" HWD drill pipe was cut off at 7,904' MD, while MRO evaluated options, to cut off 7" redrill, wash over and attempt to pull drill pipe or completely PA and drill replacement well. Have 4" HWDP from 7,904' to 10,411.9' MD -- cemented inside 7" above liner packer at 10,411.9' MD.

Almost 500K Bbls Crude Oil In Slightly More Than One Year Of Production -- February 6, 2020


I posted this earlier, when it came off the confidential list, but it was part of a longer post. I want to post this as a stand-alone post so it can be highlighted at the sidebar at the right. We didn't have the frack data at the original post. Here's the pertinent frack data: 56 stages; 11.4 million lbs; Three Forks, first bench;

The MRO Well

The previous monthly record?
  • 32975, 9,166, MRO, Jerome USA 12-23TFH, Reunion Bay, t9/18; cum 474K 3/21; TD: 23,722 feet; permit: Three Forks B2; stimulation: Three Forks B1; 56 stages; 11.4 million pounds proppant; sundry form dated September 4, 2017, name change and target changed from second bench to first bench;
Monthly Production Data:
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Note: looking at the NDIC map, a Slawson well, under the lake, looks like the horizontal was a full three-section lateral, or a "3-mile well." The MRO wells looks like the horizontal, also under the lake, was 2.5 sections or a "2.5-mile well."

In the same area:
  • 32973, 9,061, MRO, Joshua USA 13-23TFH-2B, Three Forks B2, 56 stages; 11.4 million lbs, Reunion Bay, t9/18; cum 393 12/19; 11.6 million gallons of water; 89% by weight; see this post with production profile;

What Is Kraken Doing With Some Old Kaiser-Francis Wells In The Sanish? -- February 6, 2020

A few wells in the Sanish previously operated by Kaiser-Francis, now operated by Kraken, are updated. These are incredibly awful wells, especially considering that they are in the Sanish oil field. Most, if not almost all, of the wells have been taken off-line.

I don't see any active drilling or active fracking in the area. One wonders if Kraken has taken these wells off line while they figure out what to do next.

Flashback: Solyndra

Solyndra slush fund list.

See this link.

Now this:
February 6, 2020: Crescent Dunes, $737-million-backed by the federal government; solar company in Nevada declares bankruptcy. Link here. Solyndra: $535 million. Crescent Dunes lost its only customer; suffered a catastrophic technology failure -- can't even produce any electricity. 

Best Graphic Of The Week -- The Permian -- February 6, 2020

Wow, huge thanks to the reader who sent this to me via comment at another post.

The link takes you to twitter.

I'm assuming that's a 640-acre section, but I don't know. If it is, and if it's accurate, that's pretty clever. The operator is drilling a horizontal no longer than the standard length of a horizontal in the Bakken. At the same time, the operator is getting two horizontal wells for the price of one.

All Politics: Nothing About The Bakken -- Did I Hear This Correctly? -- Notes From All Over, Part 3 -- February 6, 2020

Even Chuck Todd is confused. He said, at 12:42 p.m. CT on MSNBC (I watched the Trump address on MSNBC) that the Iowa Democrat party chair has said the party is re-counting / or re-canvasing the entire Monday night "votes." The party chair either said directly or implied (I didn't quite catch what Chuck Todd was saying) that "we" should all simply ignore the Iowa numbers. The party is "re-counting" them.

I guess I got some of that wrong. But I'm not sure Chuck Todd had it all correct either. Whatever.

Here it is:
The chairman of the National Democratic Party is now calling for an immediate recanvass by the Iowa Democratic Party "In light of the problems that have emerged in the implementation of the delegate selection plan and in order to assure public confidence in the results," he tweeted Thursday afternoon.
Ah, it's the NATIONAL Democrat party chair calling for a do-over in Iowa.

Whenever I see "Democrat" and "do-over" in the same sentence, I immediately think of Hillary Clinton.

MSNBC Hypocrisy (But I Repeat Myself)

I've never had so much fun watching MSNBC. After Trump's victory speech, the reporters were most upset that he used the word "bullshit" in the East Room of the White House. LOL. I noticed "they" immediately quit mentioning that when it brought back memories of the stain on the "blue dress" worn in the Oval Office. LOL.

This is quite incredible on so many levels. 

Enerplus' Pride Well Has Been Updated -- February 6, 2020

The Honor, Grace, Courage, And Pride wells are tracked here. This page will not be updated. All four wells have each gone over 500K bbls crude oil, and they are not that old.

Subtle jump in production. More importantly, the increased production lasted much longer than one might expect.

The well:
  • 26609, 1,703, Enerplus Resources, Pride 150-94-06A-18H TF, t10/14; cum 541K 12/19;
Note this period of production:

A BR Merton Three Forks Well Reports Almost 270K Bbls Crude Oil In Eight Months -- February 6, 2020

This page won't be updated.

The BR Merton wells are tracked here. Spend some time looking at those wells. At least one has gone over 500K bbls crude oil cumulative, and many will be getting there shortly.

Another BR Merton well recently came off the confidential list, is now reporting:
  • 30487, 77 (no typo), BR, Merton 14-10TFH ULW, 33-053-06657, Three Forks well; North Fork, this well was fracked 3/12/2019 - 3/24/2019; 7.6 million gallons of water (FracFocus), a moderate size frack; 33 stages; 10.7 million lbs; t3/19; cum 267K 12/19; 
Full production
PoolDateDaysBBLS OilRunsBBLS WaterMCF ProdMCF SoldVent/Flare

Notes From All Over, Part 2 -- February 6, 2020

The gloves come off: Oval Office, 12:00 noon ET, today. Same time Rush Limbaugh usually starts his 3-hour show. He was last on his show, Monday, earlier this week; said he would be back today. Was honored with Presidential Medal of Freedom, Tuesday night in Nancy Pelosi's chamber. [Later: I'm listening to the speech: wow, the gloves are off. Amazing.]

GDP, by country, these are 2018 numbers, two years ago;
  • global: $84 trillion
    • US: a "staggering" $21 trillion
    • China, #2: $14 trillion, two years ago
    • then it trails off remarkably:
      • Japan, #3: $5 trillion -- a distant third
      • Germany, #4: $4 trillion -- if Japan was a distant third, how does one talk about Germany's GDP?
      • UK #5: $3 trillion
  • five biggest economies account for about half of the total global GDP
  • US growth rate in 2019: 2.3 percent
  • US: consumer spending accounts for more than 2/3rds of the country's GDP (which means the more gasoline costs, the higher the GDP -- what's wrong with that metric? LOL) 
Market: all three major indices hit new all-time highs. 
Iowa Caucuses

Are you kidding me.

It's February 6, 2020, Thursday. The Iowa caucuses "closed" early evening, Monday, February 3, 2020, and we still don't the final results. We're close but not there yet. At 97%.
  • Buttigieg: 26.2%
  • Sanders: 26.0%
Federal Judgeships

If the US House isn't getting anything done, they can't send anything to the US Senate. That gives the US Senate a lot of free time.

To confirm new federal judges. 

Notes From All Over, Part 2 -- February 6, 2020

At 90%, the highest this metric has been -- ever -- tracked since 1979, at 90% -- highest polling ever:

Connecting the dots?

  • major indices hitting new records (I believe Dow is still below its all-time high)
  • individual stocks:
    • IMUX: up 2.4%; trading at $9.15;
    • PFE: up a bit;
    • ENB: up a bit; trading at $42.06;
    • OKE: down a dime, trading just under $76;
    • SRE: up a bit; has had a nice run;
    • D: up a tad;
    • BKH: up almost a percent;
    • MDU: up almost two percent; trading at $31.81;
    • T: up over 1%;
    • AAPL: taking a pause to re-fresh; down 0.16%; later, goes green (FOMO);
    • BRK-B: up 0.16%; 
    • F: flat
    • TSLA: up 3%; back to its usual volatility;
    • Twitter stock pops 8% on 4Q19 user, sales boost;
Taxes: Amazon paid 1.2% tax rate in 2019. So, what did the US House (Dem majority; Pelosi; do about this?) If there's a problem here, and I don't think there is, the problem lies with US tax policy, which begins with the US House.

U-Think? “Florida greeted the largest number of U-Haul® moving trucks entering its borders versus exiting them, establishing a new No. 1 growth state for the first time in four years…."
  • California ranked 49th. -- U-Haul annual growth survey.
  • one can assume that few folks crossing into California from Mexico are coming in with U-Hauls; in fact, you can "take that to the bank," as they say
Politics -- The Impeachment

At the end of the day, I think President Trump really enjoys this. He loves a good fight, and he loves it when he wins. The impeachment win is huge for him. In his mind, and that's all that counts, exonerated.

In hindsight, one wonders if no impeachment had been held if that would have been worse. Sort of like wandering in purgatory. Endless accusations. Sort of like internal medicine physicians arguing about best course of action; surgeon comes in, cuts it out, and patient survives. Better than ever. Heart attack? Internal medicine: this medication or this medication or no medication. Cross our fingers. Surgeon: puts in a stent and the patient goes home.

Had there never been any impeachment trial would "we" have ever known? Did President Trump over-step the boundaries rising to the level of high crimes and misdemeanors? Apparently not.

And so we move on, to the next fight.

By the way, has anyone looked at the map that the US administration is proposing for a two-state solution (Palestine/Israel)? And Palestine said, "no." Wow, poor negotiators. That was incredible what Palestine was getting in the deal. But we move on. And Palestine, apparently, won't.

Notes From All Over, Part 1 -- February 6, 2020

China in deep doo-doo: will cut tariffs on $75 billion in US goods. 

Jobless claims. Link here:
  • prior: 216K
  • revised: 217K
  • consensus: 215K
  • actual: 202K
Jobless claims. Link here:

  • at 96% precincts reporting:
    Buttigieg: 26.2%
  • Sanders: 26.1%
  • but I thought I saw on television this a.m. that at 97% precincts reporting, Sanders took a definite lead; we'll see.
A quick scroll through my twitter feed:
  • "fake news": this was the headline from EIA -- "despite the US becoming a net petroleum exporter, most regions were still net importers" -- so much wrong with that headline, LOL graphic below
  • four mega-cities in China (Beijing, Tianjin, Quongqing, and Shanghai) -- all governed by Beijing -- now one of them -- Tianjin in the north, near Beijing -- restricts entry and exit from residential compounds, villages
  • Russia blocks OPEC's offers to cut production
  • China's CNOOC declares force majeure on LNG contracts; inventories overfilling storage sites
  • Sinopec: may cut Saudi oil purchases
  • UK to move to golf carts only by 2035; ICE vehicles will be banned
  • Buttigieg: change course!!
  • Sanders: resist!!
  • Pocahontas: happy hour, anyone?
  • Biden: WTF just happened?
  • Romney nixes "presumed innocent until proven guilty"; admits that the president not proven guilty, but his religious beliefs forced him to vote the way he did; paraphrasing; noted by others;
Most ridiculous "conclusion" so far today:
"fake news": this was the headline from EIA -- "despite the US becoming a net petroleum exporter, most regions were still net importers" -- so much wrong with that headline, LOL. Graphic:

Later, see comment below regarding the graphic above:
Look past the headline. It's a decent article and has some important points to think about. (Plus I like the author, Mason Hamilton--check his Twitter.)

Landlubbers ignore the bicoastal nature of the US. But the Navy knows this well. Is in our DNA for PAC and LANT to be very different animals.

The distances for ships to respond in the 1898 war were behind the creation of the Panama Canal (damned Jimmy giveaway). But it's still very hard to move back and forth. And obviously carriers and crude tankers still go all the way around SA.

For oil, you have the West Coast being "an island" because of the lack of pipes connecting it to the middle of the country. HI literally is. And can't get crude from the Gulf, even with ships because of the Jones Act. Within that PADD, you used to have a lot of internal production (AK and CA), but both are way declined now. So imports make sense.

Then for the East, it's a little like the West. No crude pipes going over the Appalachians (one important products pipe, though). Shipping from the Gulf Coast would make huge sense but is not economic because of the Jones Act. So they import, while VLCCs head out from Houston but going much further away (export). The author also describes gasoline importing, which is sort of a classic story--basically US likes gasoline engines and Germany likes diesel. Refineries make both. But then Euros export gasoline and import diesel. And we do the opposite. That's the benefit of free trade! Get rid of stuff you don't need as much in exchanges with countries who have the reverse problem. (Donald, take note. Rand can explain it.)

The Rockies are a relatively small market and supply most of their own needs. Decent connections to middle of the country, but still not a huge deal. No point in importing.

Midwest gets a lot of Canadian crude, very price advantaged also. So makes sense to be an importer. Used to get PADD to PADD transfers from the Gulf up (imported). But those lines are now stopped and actually reversing. Capline reversal is a big deal.

Gulf PADD is exporting huge amounts of light sweet now, that are worth more overseas than here. Still has decent imports of sour medium/heavy. But even has backed out all light imports. And even the heavier imports are going down as they blend with less and less (but heavier) in order to mop up the US LTO as much as possible. And then, no need to import for transfer up toe Chicago any more either (as that is well supplied by Canadian crude and Bakken LTO).

Six Wells To Be Reported Today -- February 6, 2020

AAPL: Apple shipped an estimated 31 million Apple Watches in 2019, beating the entire Swiss watch industry

Deepwater: taking off.

Permian deal: Noble Midstream, Greenfield Midstream gain Saddlehorn interest.
  • the two will acquire a 20 percent interest in the Saddlehorn Pipeline 
  • to be called their Black Diamond Gathering LLC; a joint venture
  • Saddlehorn Pipeline
  • will expand by 100,000 bpd to 290,000 bopd; by late 2020
  • owned by Magellan Midstream Partners, Plains All American Pipeline, and Western Midstream Partners
  • 190,000 bopd crude oil and condensate from the DJ and Powder River basins to Cushing, OK
  • Magellan is the pipeline operator
EVs to replace ICE: Uh, no. Link here.

Back to the Bakken

Active rigs:

Active Rigs5462584042

Six wells coming off confidential list today --  
Thursday, February 6, 2020: 18 for the month; 125 for the quarter, 125 for the year:
  • 36424, drl, XTO, Linda 41X-22C, Capa, 
  • 35620, 690, Whiting, Fladeland 44-9-2H, Sanish, t8/19; cum 81K 12/19; a 24K month;
  • 35529, 395, Lime Rock, Ward Hill 2-29-20H_160-90, Dimond, t8/19; cum 63K 12/19;
  • 35049, drl, XTO, Johnson Trust Federal 21X-6B, SIverston,
Wednesday, February 5, 2020: 14 for the month; 121 for the quarter, 121 for the year:
  • 35046, drl, XTO, Johnson Trust Federal 21X-6E,
  • 33976, SI/NC, Petro-Hunt, USA 153-95-8A-31-4H, 
RBN Energy: why Iroquois Pipeline gas flows are an outlier in the US northeast.
The development of Appalachia’s Marcellus and Utica shales has flipped regional natural gas prices in the U.S. Northeast from their long-time premiums to Henry Hub, to trading at a significant discount and, in the process, reversed inbound gas flows, including from Eastern Canada. But there is an exception: from an entry point at the northern edge of New York, the Iroquois Gas Transmission pipeline is still importing Canadian gas supply nearly year-round to help meet local demand, despite its proximity to Marcellus/Utica production via other Northeast pipelines. This has kept prices along the Iroquois pipeline system at a premium to the other points in the region. And with the new, 1,100-MW Cricket Valley Energy Center power plant due online this spring, Iroquois prices are likely to strengthen. Today, we examine the dynamics driving Iroquois prices and gas flows.
Natural gas pricing is not uniform across the Northeast; the magnitude of the discount varies with how constrained the local pipe is and the location of the pricing point relative to the constraints. But in general, from eastern Ohio and Pennsylvania up through New England, prices tied to robust Marcellus/Utica shale production have traded at a significant discount to Henry Hub ever since Appalachian gas production surpassed Northeast demand and the region became a net supplier to the Midwest and Gulf Coast regions in the mid-2010s. Of course, during extreme wintry weather, prices in the East Coast market area, particularly New York and New England, are prone to spikes, where they jump not only above Henry Hub, but above all global gas prices or even above an oil parity price. These markets have maintained discounts to Henry on most days, however — that is, except for points along the Iroquois pipeline, which, because of the system’s reliance on gas imports from Canada, have escaped the worst of the discounted pricing and trade above the rest of the region year-round.