Natural Gas -- Western Haynesville Juggernaut -- May 20, 2024

Locator: 47144B.

Link here.

One Wonders If Qatar Is Watching -- Update On Costa Azul -- April 14, 2024

Locator: 47008NATURALGAS.

 
I track Coast Azul here. Update: project was delayed; now, June 6, 2026, production has begun. Links everywhere.

Link here but I'm sure there are many links elsewhere.

San Diego-based Sempra Energy is targeting summer of 2025 as the commercial operations date for its 3.25 mtpa (0.43 Bcf/d) nameplate capacity Energía Costa Azul (ECA) LNG Phase 1 project, located in Ensenada in Baja California, Mexico. The project will source U.S. gas.

This is a must-read, NY Times, February 13, 2024. Truly incredible.

As soon as next year, the United States’ fossil fuel industry will gain its first foothold on a valuable shortcut to sell natural gas to Asia. The shortcut goes straight through Mexico.

The new route could cut travel times to energy-hungry Asian nations roughly in half by piping the gas to a shipping terminal on Mexico’s Pacific Coast, bypassing the traffic- and drought-choked Panama Canal.

The terminal is symbolic of an enormous shift underway in the gas trade, one that will influence fossil-fuel use worldwide for decades and have consequences in the fight against climate change.

The American fracking boom has transformed the United States into the world’s largest gas producer and exporter. At the same time, the rest of the world has begun using ever more gas — in power plants, factories and homes — partly to move away from dirtier fuels like coal. Demand is particularly growing in China, India and fast-industrializing Southeast Asian countries.

And more, with a map, whoo-hoo! :

In Mexico, the action is centered for now on a gas terminal, Energía Costa Azul, that was originally designed to send gas in the other direction: For more than a decade it has unloaded gas from Asian tankers and piped it to California and Arizona to be burned to produce electricity.

Fracking changed everything.

Now Costa Azul, pinched between Baja California’s agave-covered mountains and the vast Pacific Ocean, is undergoing a $2 billion transformation into an export facility for American-produced gas. It’s the first in a network of gas exporting facilities planned down Mexico’s West coast.

Where We Stand With Regard To Renewable Energy -- August 26, 2023

Locator: 45477RENEWABLES.  

For the archives. Perhaps the best update so far this year.

Link here.

Data points:

• US power generation from gas-fired plants jumped by 10%, first eight months of 2023, compared to same period, 2022, one year earlier, still coming out of the pandemic
• this jump occurred despite overall electricity generation declined by 2.1% so far in 2023
• meanwhile, natural gas in electricity generation in the US has averaged:
• 40.4% this year to date; compared to
• 36% for same period last year.
• electricity generation:
• from coal: continued to drop
• "clean power" flat due to lower wind speeds and lower hydropower generation offset a surg ein solar power output
• By category:
• nuclear and hydropower: 40.5% of America's total power generation, 2023 to date;
• compared to 39.9% in the same period last year (2022)
• despite a surge in renewables installations, power output from wind and hydro was lower than usual -- lower wind speeds and drought in Pacific Northwest
• a lot more statistics at the linked article, but bottom line:
• renewable installation exceeding nuclear production
• but renewable power has been basically flat
• one can do the math
• making up the shortfall? Natural gas.

This, all against the backdrop, of increasing EV penetration. 

Solar and wind won't be able to keep up. Period. Dot.

Worse, much of the wind generation is not where the US population is centered: east of the Mississippi. 

Cumulatively, operating clean power capacity in the U.S. is now more than 237 GW, accounting for 15.1% of electricity generated. Texas leads with 26.353 GW, or 18% of total operating U.S. clean power, followed by California with an 11% share and New York with 6% of operating clean power. 

Bottom line:

• renewable installation exceeding nuclear production
• but renewable power has been basically flat
• one can do the math
• making up the shortfall? Natural gas.

Natural Gas Sell-Off -- Did The US EPA Have A Hand In It? September 6, 2022

There was a headline today that "natural gas sold off today." I don't know accurate that headline is/was. Oilprice.com suggests natural gas fell 1.65% to $8.011, about a buck lower than recent highs and as much as almost two dollars lower from just a few months ago, all this coming at a time that the energy crisis worsens in Europe.

From yesterday on the blog:

Natural gas: I've said from the beginning, I have a pretty good understanding of oil -- understanding maybe five percent of all there is to know, but I have no understanding of natural gas. After years of blogging, I have learned one thing about natural gas. Producers can produce a lot of it very quickly, if necessary. And today, we see it again. From Charles Kennedy:

And that's why I've never been a big fan in investing in pure-play natural gas producers. From the linked article:

U.S. natural gas futures shed around 5% on Tuesday, hitting a four-week low as soaring output coupled with lower demand forecasts drags prices down, despite the fact that inventories are 11% lower than their five-year norm. Output is still holding strong after the latest report from the Energy Information Administration (EIA) for the week ending August 26, which showed a natural gas inventory build of 61 billion cubic feet. While that brings inventory to 2,640 Bcf, it is still 228 Bcf below levels at the same time last year–heading into the winter season. 

Also prompting the decline is the outage at the key Freeport LNG export plant on the Gulf coast. 

That outage means traders are calculating some 2 billion cubic feet of gas per day that is not being consumed by Freeport for export and is remaining on the domestic market.

Freeport–which accounts for some 20% of U.S. LNG export capacity–looks set to remain offline until sometime in the first half of November, at which point we could see only a partial startup, ramping up to full capacity by the end of that month. Freeport, however, has already pushed back a restart date several times since declaring force majeure–and then revoking it–in June. 

I anticipated this on August 20, 2022. 

It now appears there may be more to the story and that the US EPA may have had a hand in it.

I'm too tired to post any more tonight. I assume if this is accurate -- that there is more to the story and the US EPA may have had a hand in it -- we'll hear more about it tomorrow. 

As for me, I'm headed off for some reading and for some old Perry Mason television.

Clearing Out The In-Box: Winter And Natural Gas -- October 24, 2021

Winter

Winter, 2021 - 2022: increasing number of reports suggest a warm October will be followed by a brutal winter.

• a big pattern change will probably be in the offing as the calendar flips to November;

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Natural Gas

UK: natural gas prices at the UK's NBP hub for delivery in the core winter months are at their steepest premium to nearby markets in 15 years, reflecting heightened supply security concerns. Or do they reflect the weather forecast by the Farmer's Almanac?

Google: US natural gas production as a percent of global production. Around 25% currently. Reuters sees huge growth in 2022. Link here. But look at this from the IEA, July 18, 2017.

Flashback: 2019, Forbes, BP's 2019 review, production and consumption of natural gas.

BP, 2020 in review: natural gas consumption decreased by 2.3%, similar to the fall seen in 2009 during the financial crisis. Despite the reduction in absolute levels of gas demand, the share of gas in primary energy continued to rise, reaching a record high of 24.7%.

Wildcard: Resident Biden could upset natural gas momentum. Forbes, September 9, 2021. 

A fool's errand: to predict fossil fuel prices. TotalEnergies: natural gas price spike unlikely to be sustained. The natural gas spike, apparently, is simply transitory. A great article for the archives.

TED: I have not watched this video; I probably won't. From the review, it suggests TED has really let us down this time.

Preaching to the choir (it is Sunday morning, after all): the Wreck of the Global Warming Narrative .. the global warming scare is more than three decades old, yet the disaster that's been forecast on a nearly daily basis since the late 1980s has yet to arrive. Meanwhile, Antarctica recorded coldest winter in recorded history.

The Magnitude Of Natural Gas Reserves In The US -- September 19, 2021

Disclaimer: I often make simple arithmetic errors and often misread things. If this is important to you, go to the source. 

Re-posting.

From a reader who follows the Appalachia, Marcellus, Utica, very, very closely -- 

The well: the Deremer 2HC, 3,617,694 boe  / 22 months on line -- the "Mighty Marcellus' best! 

Succinctly, I present you with data, with some context - current to July, 2021 - of the very best Marcellus well.

 

This in an effort to show the scale of what has been unfolding in the Appalachian Basin ...

Numbers:

• 20,982,624,000 (just shy of 21 billion) cubic feet production (3,627,694 boe using 5.8 conversion factor)
• 658 days online (~22 months)
• July output 18,291 million cubic feet per day, oil energy equivalent of 3,153 barrels per day 
• currently ranked #7 all time producer, on track to be #1 in a few months

Context:

     This one well can provide the annual residential gas needs for the cities of Cincinnati, Pittsburgh, and Buffalo COMBINED. (75,000 cubic feet per  household/year ... 3 persons/household)

The 5 wells on this Deremer pad all came online 22 months ago and have cumulatively produced 70 billion cubic feet ... enough to supply the annual residential gas needs of Philadelphia, Boston and Atlanta COMBINED

At a cost to drill and complete of approximately $50 million, this pad shows the incredible potential to any and all who continue to disparage embracing the  hydrocarbon bounty that lies beneath our feet.

Population / costs:

• the cities:
• Boston: 700,000
• Philadelphia: 1.6 million
• Atlanta: 500,000
• population total: 2.8 million
• one year to drill / complete the wells: $50 million
• $50 million / 2.8 million = $18 / resident / year -- assuming these wells produce for only one year, which, of course, is not the case. 

By the way, this is why the EU has worked so hard to convince Americans of global warming. The gap between the energy available in the US and the EU is absolutely incredible. The EU desperately needs to keep the US from gapping ahead of the EU. The EU will do anything to make US energy costs equal to that of the EU. 

The Natural Gas Conundrum In The Bakken -- May 23, 2021

About a week ago I posted a note on the problem with ethane in the Bakken.  

A reader replied with an excellent four-part note. But that note really "bugs" me in a positive way. It was such a great note that I hate to see it "lost" in the comment section only. 

So, here is the four-part note brought up as a stand-along post (hopefully I have them in the same order). No editing but if there are any typographical errors, attribute them to me, not the reader.

I'll come back later and highlight some of this.

First part of that four-part comment: 

It pains me when I see even oil execs not knowing something so basic as what NGLs are. And the popular press and peak oil nitwits are even worse. Talk about stuff and don't understand it. If you follow this sector for years, you need to learn/understand it.

1. First important characteristic of oil and gas is that it is a natural product. This is very different than chemistry where you think of a single molecule. Here we have a soup of different molecules. Thousands of different ones. And different deposits have different mixtures. And many of the fuels also are mixtures still (e.g. gasoline). VERY different than an element or a molecule, something you have pure and in a little Sigma Aldrich bottle to do reactions with. These are MIXTURES.

2. Creating this mixture tendency are two phenomenon: first the incredible complexity of organic compounds. Carbon has four bonds and forms stable molecules with many carbons. You can have different length chains, branches, rings, double/triple bonds, etc. And can have heteroatoms (non-C or non-H, e.g. S).

Secondly, organic molecules are (in general) very soluble in each other. You know oil and water? They don't mix. But different oils DO mix. And even natural gas (methane, one carbon) dissolves to a decent amount in even very heavy oils like tar sand.

Of course, the exact shape (branches and the like) matters. But for very simple assessment, you can think of the number of carbons as determining the properties of the molecules. C-1 (one carbon) is the simplest form and is "pure" natural gas. It has a very low boiling point (requires incredibly cold temps to liquefy into LNG, e.g.) Gasoline is around C-8. It's actually a mixture and branching is important, but for very gross oversimplification, think of it as octane. It has a relatively low boiling point (thus the vapors you can see). Diesel is less volatile (has a higher boiling point). Think of it as C-16. It's actually a mixture and straight(er) chains are important, but think of it as C-16. Heavy fuel oil is even more carbons and higher boiling.

[The different fuels are made by distilling to separate the mixtures in crude oil, thus "distillation towers". It's actually more complex than that with some cleanup, and molecule fiddling (cracking and the like). But for gross simplicity, think of basically taking the oil and distilling it into different "cuts" of hydrocarbon length.

Second part of that four-part comment. 

3. Oil and gas are produced together (in most cases) along with water. An oil well (or a wet gas well) is really an oil/gas/water well. At the well-head, there is a "three phase separator" that gives vapor (top), oil (middle) and water (bottom). This is basically just done by mechanical separation, like in your salad dressing bottle. Can Google for Youtube videos of the mechanism--they are cool looking with some mechanical tricks to allow the separation at decent flow rates. But for simplicity, can think of it as a wide spot in the pipe allowing settling separation.

A gas well typically has a little bit of associated oil. And visa versa. And can even be sort of same amounts of each. In a few cases ("dry gas"), you may have insignificant oil. And even rarer, you may have "dead oil" that has no appreciable gas. But usually you are getting BOTH together. (Along with some useless water.)

From, the 3-phase sep, you get three streams, the first twof which are commercial:

a. The vapor ("wet gas") is mostly C-1, but has appreciable amounts of C-2 to C4, and a little bit of C-5+.

b. The liquid oil is called "crude" or "lease condensate". There is no fundamental chemical difference (like with elements) between crude and lease condensate. The are the same junk, different flavors. In many states (ND, for instance), there is no tax or regulatory difference. And the Feds treat them the same also. A few states (OK, TX) differentiate crude (from mostly-oil wells) and lease condensate (from mostly-gas wells) for tax purposes. And the lease condensate tends to be lower density (higher API gravity). But it is purely a matter of degree. No fundamental difference. The peak oil morons get this messed up all the time.

c. The water is just salt water from the deep earth. Very high salinity and can contain some radioactivity or the like. Honest, it's not that awful. I think deep ocean disposal would hurt nothing because of the dilution. But you ain't allowed to put it in streams or the ocean any more. Have to clean it up or inject it back into the deep earth. Usually the latter.

Third part of that four-part comment:

4. The numbers you see reported for oil and gas production (on the EIA 914 or the NDIC) are C&C (crude and lease condensate) and well-head gas. I.e. they are the amounts produced FROM the 3 phase separators at well pads.

After the well-pad, the C&C goes to refineries where it is (basically) separated into different boiling fractions: light ends (even including a little more natural gas, along with ethane, propane), naphtha, gasoline, diesel, kerosene, heavy fuel oil, and even asphalt. You can think of this as a much more complex, expensive, "second separation" of the liquid petroleum stream from the three-phase sep. High temps are used to drive the separation.

The natural gas from the 3-phase separators also gets a "second squeeze" in centralized, expensive plants, away from the well head. In this case, cold temps are used to separate components. The C-1 (methane) is natural gas. All the other components of the "wet" gas stream are called NGLs (natural gas liquids). Paradoxically most of them are NOT liquid at room temp. But they are still liquid at higher temps than methane.

Ethane, C-2, is separated and used for petrochem (mostly). But in some cases, it is fed back into the natural gas stream when the heat limits allow, if price of petrochem is not good enough. C-3, propane, also has petrochem uses, but is mostly for space heating where natural gas is not available (think of it as transportable natural gas, can use much flimsier cylinders because of it's higher boiling point.

C-4, butane is right at the boundary of boiling. On a cold winter day, it is all liquid. But at room temp, it is a vapor. Can also be stored in flimsier tanks. Your plastic Bic lighter has butane in it...the slight pressure keeps it liquid, but as it comes out it evaporates). Because of the temperature, butane is seasonal. In the winter, it (mostly) gets mixed into gasoline. In the summer, it can't be mixed into gasoline. Also has some petrochem uses, but in many cases, people just store it in summer and sell it in winter.

There are two isomers of butane. The straight chain is used as above. The branched butane is actually sold to refineries as a starting material for making higher octane branched compounds. The branched isomer sells for more, so there is enough incentive to separate the two isomers and sell them separately.

The higher carbon molecules in the gas stream are called "pentanes plus". Since, well, they are C-5 mostly and a small amount of C-6, etc. These molecules ARE LIQUID at room temp. In the wet gas stream, they are a vapor. But the gas processing plant separates them out and collects them as a liquid phase.

C-5+ is sort of oil like. Is (confusingly) called "plant condensate" or "drip gas". But we are talking MUCH higher API gravity (say 90 or so) than wellhead lease condensates (that are in the high 40s-50s or so). However, plant condensates ARE real liquid hydrocarbons--the only NGLs that are room temp liquids.

There is no economic incentive to separate the (three) different isomers of C-5 or the C-6 (and its isomers). Basically pentanes plus is sold as a mixture. The primary application is to just get thrown into an oil refinery (mixed with heavier crude). But it can also be used for gasoline mixing, for diluting tar sands, petrochem, etc. 

Fourth part of that four-part note: 

In general, the gas stream components are more valuable as they get longer. But this depends on the exact supply/demand, transport availability and processing costs. But in general: C-1 is cheapest; C-2 is pricier; C-3 next pricier; normal butane even better; isobutane better than that; and pentanes plus best (close to WTI, maybe a ten buck haircut).

Again, it pains me that people (peak oilers, grrr) follow this stuff and opine on it for years. And don't even learn the first thing about what they are talking about. Not asking for detailed chem engineering and distillation curves. But just basic f... concepts. RBN has explained this several times. And there are many other sources a Google search away. But I still see people who don't know the basic lay of the land.

Natural Gas-Fired Generation Has Increased Across The US With Minor Exceptions -- EIA -- December 6, 2020

Link here. 

• minor exceptions:
• NYISO,
• ISO-NE,
• California,

Hunch: the decline in natural gas-fired electricity generation reflects downturns in the general economy in those regions and/or state-mandated changes in energy sources and/or new pipelines.

Most amazing: PJM -- Ohio and east to the Atlantic Ocean, north of the NC-VA state line, and south of New England;

Interesting: ERCOT (Texas); Florida; SERC (southeast excluding Florida, Louisiana).

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The Weather Page

Winter: first big snowstorm of the season hits parts of New England. Link to The WSJ.

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The Real Estate Page

Santa Barbara County:

• Montecito Estate
• seller: Dennis Miller and wife
• buyer: Ellen DeGeneres
• deal: $49 million
• my hunch: Ellen not worried about wealth gap
• my hunch: Ellen and wife following California governor's decree to "stay-at-home"; could use estate for filming show, movie productions;

The deal was among a string of major transactions in Montecito over the past few months. Rancho San Carlos, a roughly 240-acre estate, recently sold for $63.25 million, and the sale of actor Rob Lowe's home home in the area recently closed for $45.5 million.

Ms. DeGeneres and her wife Portia de Rossi are widely known to be investors in real estate and have long had a home in Montecito. They sold a Bali-inspired estate in the area for $33.3 million in November, according to a person familiar with the deal.

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The Travel Page

We were stationed in the Moselle region of Germany for seven years.

From The WSJ earlier this week: Germany's Moselle region is ripe with deals on vineyard estates.

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Tokyo 2020-One Olympics

Tokyo Olympics delay costs may reach $2.8 billion. 

Actually if you read the story at the Fox Business link (https://www.foxbusiness.com/sports/tokyo-olympics-delay-costs-may-reach-2-8-billion) it appears to be much worse. 

Tea leaves, Tokyo Olympics 2021 will:

1. limit / ban guests from overseas
2. limit number of athletes
3. limit number of trainers and staff per athlete
4. limit press

And, of course, there's always a chance we won't see the games at all this summer.

Data points from the linked article:

• cost of the postponement could reach $2.8 billion
• prior to the postponement, Japan estimated the total cost would be $12.6 billion
• but a Japanese government audit last year said it was likely twice that much, about $25 billion
• Tokyo said the Olympics would cost $7.3 billion overall when it won the bid in 2013 in Buenos Aires, Argentina
• the good news: Tokyo organizers said they could add about $260 million from a contingency fund to help cover added costs. LOL. No typographical errors on my part. I don't know whether the original source is accurate. 
• the IOC is not being particularly helpful: it is unlikely that the IOC will chip in $650 million that was suggested by the IOC some months ago -- tea leaves suggest IOC not particularly optimistic about 2020-One Olympics going off as planned;
  

Appalachian Storage Hub Has Been Added As A Link -- June 9, 2019

Appalachian Storage Hub (ASH) has been added as a link to the sidebar at the right.

A google search will reveal that the next ASH conference is scheduled for early June, 2019.

The Utica And The Marcellus Continue to Defy Skeptics -- October 6, 2016

Updates

October 7, 2016: from the comments below, brought up here so it can be googled --

In addition to the Marcellus (Pennsylvania) and the Utica (Ohio), there are the Upper Devonian formations that hardly anyone even knows about (three times as thick as the Marcellus Shale; does not overlie the entire Marcellus; situated in western New York [where fracking is banned]; western Pennsylvania [the rich get richer]; northeast Pennsylvania; western West Virginia, eastern Ohio; and, eastern Kentucky).

The report last year from Wrightstone Energy, claimed 100 trillion cubic feet recoverable from the UD based on 85 wells' production (total drilled up to that point).

Last several months, there have been dozens of wells turned online targeting the Genesee, Middlesex and Burket formations with output WAY higher than the earlier Wrightstone samples.

I will begin tracking the Upper Devonian at this site.

Original Post

 

This is an incredible article. A reader reminds me often that as big as the Marcellus is and as "famous" as the Marcellus is, the Utica is much bigger. In other words, "we haven't seen anything yet."

Think about that when you read this article from Forbes (a big thank you from a reader for sending me this link).

The "title" of the article: the Utica and Marcellus continue to defy skeptics.

In other words, this article is not about how big the Utica and the Marcellus are. This article is how the Utica and the Marcellus have defied skeptics, continue to defy skeptics, and will continue to defy skeptics.

The same could be said for the Bakken.

There are two threads in this article: a) how big the Utica and the Marcellus are; and, b) how fast things are changing, confounding skeptics.

The two threads may be tangled. But here goes:

• Utica: Ohio
• Marcellus: Pennsylvania
• together they have provided 85 - 90% of US shale production growth since the start of 2012: the ongoing drilling efficiency is a key driver (the operational words are "ongoing"; and "a" -- meaning that drilling efficiency is only part of the story -- remember Hillary wants to shut this success story down -- and we haven't exhausted that drilling efficiency)
• shale business continues to evolve: rig mobility, multi-pad drilling, deeper holes, DUCs, 
• no sign that these giant plays in the Northeast are slowing down (assuming Hillary doesn't shut them down)
• we could see pipeline additions of 18 billion cubic feet/day -- assuming the Native Americans don't have sacred burial grounds across the entire US
• interestingly, despite all that, there is still upward pressure on prices due to demand for power generation, industrial use, and, export

Now this from David Hughes, a fellow at the Post Carbon Institute, 2014:

There may be small, incremental further gains…but I think the biggest gains have already been had…I think the Marcellus is getting pretty close to the peak in [total] production…I wouldn’t be surprised to see a peak in the Marcellus this year, maybe next year (2015) at the latest."

So, how did David's prognostication turn out? Well, I certainly wouldn't hire him as my fossil fuel consultant. I wonder where David is these days? Working for Hillary? Working for Soros?

• Marcellus gas production has jumped 15% since 2014
• the Marcellus play will produce nearly 18 Bcf/day this month
• this is more gas than any other nations in the universe produces, except for Russia or the US as a whole

And there is more:

• Ohio now has about 10 Tcf of proven gas, a ten-fold increase since 2009
• Pennsylvania has over 70 Tcf, a doubling since 2012 alone
• "not even our very best experts at the USGS can keep up"

More:

• the Utica and the Marcellus: basis of some 800 Tcf that can be produced at a break-even price of $3/MMBtu or less
• these plays are why the EIA projects that total US natural gas production will boom nearly 25% by 2025 alone to 96 Bcf/day --" a colossal 85% surge since 2005 when Exxon CEO Lee Raymond infamously declared that our gas production has peaked."
• US gas production has increased every single year since 2006

Much more at the linked article. 

By the way, maybe regular readers remember this article from The New York Times back in 2011.

Link here. (Update, August 30, 2015: this is so interesting. The NY Times has removed this article.)

Natural gas companies have been placing enormous bets on the wells they are drilling, saying they will deliver big profits and provide a vast new source of energy for the United States. 

But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.

In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles.

“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company, wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”

Amazing, huh?

Light Ends / Light Ends Space-- A New Term (At Least For Me) -- June 5, 2016

Updates

June 12, 2016: this is pretty cool. As noted below, when I googled this term just a few days ago there were five hits. Today, googling "light-ends oil" there were 131,000 hits. Of the 131,000 hits, my post was #14, near the top of the second page. Whoopee. 

 

Original Post

 

There is an incredible amount of information in this paper. I've read the introduction and the conclusion; scanned the information in between. The information "in between" will remain a great reference. 

This link takes you to a "working paper" out of Rice University's Baker Institute for Public Policy, titled "Childhood's End: Developing Asian Giants and the Future of Global Oil Demand." It is dated 2016. A quick look at the paper suggests that Prince Salman is thinking along the same lines.

However, there is a new term -- that's probably been around for decades -- but I just stumbled across it and will come back to it later.

The term is "light ends" or "light ends space." A google search "'light ends space' oil 'natural gas'" led to only five hits, and one of them was a "linked in" hit.

By the way, this subject ("light ends space") and the "working paper" linked above seem, at first glance, to dovetail well with the very astute observation made by Don regarding "gasoline production" numbers, which is noted at length in the "update" at this post. 

Wow, if I miss one day of blogging, I fall behind.

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A New Term

The link above takes you to a linked "working document" authored by Al Troner. His thesis/article is featured in this month's issue of the Oil & Gas Journal, which requires a subscription. [Update: it looks like one can get to the entire article by googling "'light ends' oil". Here's the link: http://www.ogj.com/articles/print/volume-114/issue-6/general-interest/surge-in-ngl-and-tight-oil-supplies-creates-worldwide-light-ends-space.html.]

Putting "2" and "2" together, it appears that Al Troner, Asia Pacific Energy Consulting, Houston, has not necessarily coined a new term but will do much to put it the term in the everyday lexicon of those of us who follow the oil and gas industry.

I'm pretty jazzed, to say the least, to have come across this. It will be interesting to see where this leads.

The article begins:

While many analysts agree that oversupply, rather than weak demand, led to the current slump in the price of crude oil, few have looked closely at the nature of that supply overhang.

In a new study, Asia Pacific Energy Consulting (APEC) has examined in depth the role of NGLs, in particular condensate, in creating the current surplus, as well as the impact of tight oil and its light derivatives. The condensate, other NGLS (LPG and ethane), light products, and tight oil yeilding much of the new light-product supply all occupy the same light segment of the hydrocarbon spectrum.

The shale revolution has spurred a ballooning of NGL output, paralleled by dizzying growth in tight oil production. Almost all of this incremental liquids production has been light and sweet. The growing volume of this material, with incremental supply in the millions of barrels per day, has begun to shift pricing, trade, marketing, and supply-demand balances for crude -- light-heavy vs sweet-sour --- and in our products, with notable supply gains in LPG, gasoline, and naphtha in contrast to middle-barrel and heavy products.

A "light-ends space" is emerging, not only in the US and the Atlantic Bais but also globally, as markets attempt to adjust to this surge in light, low-sulfur hydrocarbon supply.

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A New Term: Light-Ends Space

NGLs: Definition

The article focused on the role of condensate as the spearhead creating the light-ends space.

Why? Because condensate is the only NGL that does not need specialized containment and that, when refined, yields a full range of products, from LPG to residual.

Where? Bakken, Eagle Ford, and the Permian.

Facts about condensate:

• once condensate becomes a liquid, it remains a liquid
• in a refinery or condensate splitter, it acts much like crude in the slate
• often confused with light, sweet crude oil but it has distinctive characteristics
• unlike crude oil, condensate always originates with gas, whether nonassociated or associated
• whole condensate almost always yields more than 50% naphtha; and is almost always quite clean, low not only in sulfur but also in metals and acid
• condensates are exceptionally clear, most containing 0.3% sulfur or less

More facts about condensate:

• most observers try to define condensate by setting an arbitrary API gravity breakpoint
• in the US commonly 45 degrees API
• international trade, usually 50 degrees API

But rules are made to be broken

• there are some crude condensates well above 50 degrees API; e.g., Saudi Arabia's Super Light and Australia's Laminaria
• there are some crude condensates below 50 degrees API; e.g., Kazakhstan's Karachaganak and Nigerian Oso
• in definition, what constitutes condensate, API gravity is only a general indicator, not an exact test of what is condensate and what is crude

Bottom line: what makes a condensate a condensate

• always originates in gas
• almost always yields 50%+ naphtha
• is exceptionally sweet
• contains little if any metals
• produces little residual oil
• a crude and condensate can have exactly the same API gravity but the condensate will always yield far more naphtha and far less fuel oil

The US and condensates?

• the US has emerged as a major NGL power due to the shale revolution
• despite recent events (2016), overall NGL output will continue to rise despite declining condensate volumes produced with tight oil (EIA)

Why?

• NGLs are caught in a twilight zone: NGLs come from both the crude and gas sides of total production
• while condensate has been the most prominent NGL derived from gas produced in association with tight oil, plays such as the Eagle Ford shale; Permian basins also have produced sizable volumes of LPG and even commercial volumes of ethane
• yet NGLs also come from primarily non-associated gas production as well, such as the Marcellus and Utica shales

*****************************

Notes From a Working Paper

Six chapters:

• Chapter 1: Introduction
• Chapter 2: Asia Pacific Demand Growth: Demand Growth by Sector
• Chapter 3: Recent Developments in Middle-Distillate Retail Price Subsidies
• Chapter 4: Asia Pacific: Comparing Light-Ends and Middle Distillate Growth
• Chapter 5: Product Quality Premiums
• Chapter 6: Conclusion

Chapter 1, Thesis: 

• Asia Pacific will remain the engine of world oil demand growth
• but future growth will be at a lower rate of expansion
• in addition, future demand will shift away from mid-barrel to light-ends products, such as LPG, gasoline, and naphtha
• bad news: US oil exporters will not get the growth they saw 1990 - 2000, or even 2000 - 2010
• Asia has begun to exhibit characteristics of more mature economies
• good news: Asia Pacific will likely continue to lead world oil demand growth for the remainder of this decade and the next (through 2030)
• the growth will be greatest in the light end of the barrel
• the working paper focuses on China, India, and Indonesia

Chapter 1.  Introduction

Sections A - H: 

• historical review

Section I: US exports -- a natural fit. 

• the growing Asian demand for light ends has coincided with the shale revolution in the UNITED States and a massive influx of sweet, light crude and NGLs onto the US market. With a crude export ban n place, the US had to focus on exporting light refined products and NGLs. 
• But, since late December 2015, the paradigm has shifted.
• Asia Pacific wants to end dependence on Mideast; long term trend: North America will compete with Mideast for demand growth in Asia Pacific
• US West Coast geographically closer to Asia Pacific
• but US Gulf Coast has a substantial edge in almost every other export factor: 
• relatively easy permitting process for building infrastructure; 
• a greater number of sophisticated refineries with more capacity
• proximity to two of the three largest tight oil basins: Eagle Ford and the Permian
• the Panama Canal serves as an enabler -- it puts the USGC close enough to compete with Mideast sales on the basis of different price formulae
• the author talks about the Panama Canal, saying the same thing RBN Energy has already talked about: the revamped canal will allow transit of all LNG tankers, except the two largest, the Q-Max and the Q-Flex; in other words, the Panama Canal can handle 90% of the world's LNG fleet
• the canal's expansion will be finished in 2017; already talking about further expansion

Section J: Export Opportunities  

• lower growth
• light-ends focus
• Panama Canal changes everything
• powered by the shale revolution -- and an easing of export regulations -- NGL producers responded quickly to marketing in Asia

Section K: Linked Lines of Query

• overall demand growth; changes in sector use
• deregulation and retain subsidies; impact of mid-distillate demand growth
• for Asia Pacific, it's all about naphtha; Asia is structurally depended on naphtha imports
• price deregulation has accelerated the use of light product over middle distillates; most fully achieved in Indonesia; to a lesser extent in Thailand, Malaysia, and Vietnam; we will know more about India by the end of the year; Asia Pacific is switching from diesel to gasoline; naphtha will dominate the petrochemical feedstock supply but naphtha is also required as the basestock for gasoline manufacturing
• future comparative growth rates
• impact of product quality in maturing Asian economies

Chapter 2. Asia Pacific Demand Gowth: Demand Growth by Sector

A. Asia Pacific

1. Basic Parameters of Demand 

2. Demand Trends by Product & Sector: this is a very, very interesting section; the author talks about a breakout point, "when expanding middle class incomes all for the possibility of acquiring private transport." This has recently been discussed on the blog. A reader personally noted this in India. 

B. Developing Asia

1. China: section on gasoline demand is very, very interesting

2. India: 

3. Indonesia:

C. NIC/Near-NIC Asia

1. Taiwan

2. Singapore

3. Hong Kong -- China, Special Administrative Region (SAR)

D. OECD Asia Pacific

1. Japan

2. South Korea

Chapter 3. Recent Developments in Middle-Distillate Retail Price Subsidies

A. China

1. EIA viewpoint

2. Managed float; indirect subsidies?

3. The 2013 reforms

4. Free market fears

5. Lagging prices; refinery investment

6. Guaranteed margins; pass-on

7. Consumption taxes/value added tax (VAT)

8. Last word

B. India

1. Gas oil / diesel vs gasoline subsidies

2. The burden

3. A look at LPG

4. Kerosene corundum (sic)

5. Taxes

C. Indonesia

1. Subsidy reform

2. The reform program

3. Pending reforms

D. Survey of other major gas oil / diesel market countries

1. Malaysia

2. Thailand

Chapter 4. Asia Pacific: Comparing Light-Ends and Middle Distillate Growth

A. Analysis Drivers -- Light-End Products

1. LPG

2. Gasoline

3. Naphtha

B. Analysis Drivers -- Mid-Barrel Products

1. Kerosene

2. Gas oil / ADO

C. Forecast/Outlook - By sector: Demand Giants vs West

1. Sector focus on transport and petrochemicals

2. Comparison of Growth Rates in OECD vs NIC/Near NIC vs Developing Asia Giants

3. What prospects should US exporters watch for?

Chapter 5. Product Quality Premiums

A. The Nature of tightening product specifications: One-directional, progressively cumulative, and irreversible 

B. Product premiums yet to justify high-cost, high-quality investment -- why?

1. Quality and refining

2. Quality and gas-to-liquids (GTL) plants

C. How long will it take for maturing developing Asia quality standards to catch up with OECD and NIC levels?

D. What marketing parameters should US exporters follow in selling products based on quality?

Chapter 6. Conclusions

Propane 101 -- July 12, 2015

A reader sent me this link for various reasons. It's a good read.

The best part of the article was the explanation by the president of this Canadian oil and gas company with regard to "shutting in" propane.

Unfortunately, the usual solution for low prices – shutting in production and reducing supply – isn’t so easy for propane. The decision is a bit more complex than that, and so some explanation is required.

Starting back in the reservoir, raw natural gas is typically at a temperature and pressure where propane molecules (C3H8) are in gaseous phase – as are the methane (C1H4), ethane (C2), butane (C4), and many of the heavier hydrocarbon chains (C5+).

As this raw gas is produced up the wellbore, the temperature and pressure drops and the heavier hydrocarbons condense into liquid form. What tends to arrive at the low pressure inlet of our gas plants, for example, is a mix of liquid condensates and pentanes, along with gaseous lighter hydrocarbons.

These gases still contain too much of the heavier hydrocarbons to safely consume in our homes, so Peyto has to process the gas (dry it and cool it) to remove the water vapour and condense even more of the heav ier hydrocarbons out of the gas.

Our sales products, at the out let of our facilities, ends up being stabilized condensates, a mixture of pressurized LPG (Liquid Petroleum Gases), and high pressure lean gas. The LPG is a mix of approximately 1/3 Pentane (C5+), 1/3 Butane (C 4) and 1/3 Propane (C3). This LPG mix is then transported to a refinery where it is “fractionated” or distilled into the pure components.

As you would expect, shutting in just the propane because its price is negative, isn’t possible. You’d have to shut in the entire gas stream. Alternatively, warming up your plant process to condense less propane into liquid form (thereby leaving it in the gas phase) also leaves some butane and pentane in gas phase and those products are still worth more as liquids than gases. Plus, at some point, the gas becomes too rich to make lean gas specifications. So the decision of what to do about negative propane prices, like we’ve had in April and May is a much more complex one.

Our solution at Peyto has been to extract all of the more valuable liquids (C4 & C5+) that we can and then try to “push” an optimal amount of the propane back into the gas stream so that we get paid in increased heat content in the gas rather than liquid barrels. This is often referred to as propane rejection.

In order to find that optimal amount, we have to consider all of the component prices and the liquid recoveries at various process conditions. We are looking for the most optimal combination of gas and liquid recoveries which yields the greatest possible revenues.

This optimal combination won’t necessarily yield the greatest combined production volume. But maximum production is not the point, maximum revenue is. As I’ve said before, this is one of the reasons why owning and operating your own processing facilities is so important.

US Domestic Natural Gas Wells -- Initial Production In The Marcellus / Utica

This is for me and for newbies who do not understand natural gas. I have a feeling for 24-hour IPs, 30-day initial production, and EURs for on-shore domestic (US) crude oil wells.

However, until recently, I had no clue when it came to initial production for on-shore domestic (US) natural gas wells, but I am starting to get a feeling based on various reports in the past 24 hours.

If I remember, I will post the links later that bring me to these observations:

• the average initial production of natural gas wells in the US east (Marcellus, Utica): 8 million cubic feet per day
• a recent natural gas well in the Utica reported by Mark Perry in a footnote to a recent post: 30 million cubic feet per day
• a natural gas well in the Marcellus reported in the last 48 hours: 40 million cubic feet per day

So, just out of curiosity, what have been the IPs for natural gas for some Bakken wells (file number, IP natural gas mcf -- I assume the "m" is 1,000)?

• 25000, 669 m (669,000 cubic feet)
• 24999, 535
• 24998, 1,565
• 24997, 1,820
• 24996, 1,541
• 24995, 93
• 24994, 1,393
• 24993, 2,952
• 24992, 2,736
• 24991, 2,834
• 24990, 1,117
• 24989, unreported, 
• 24988, 3,306
• 24987, 2,912
• 24986, 3,087
• 24985, 1,831
• 24984, 2,154
• 24983, 2,238
• 24982, 2,992
• 24981, 2,559
• 24980, 2,894 

Magnum Hunter Resources is reporting:

Magnum Hunter Resources announced today that the Company's 100% owned Stewart Winland 1300U well located in Tyler County, West Virginia was placed on production last weekend. The Company's first Utica Shale well drilled and completed in the State of West Virginia and the most southeastern well in the entire play tested at a peak rate of 46.5 MMCF of natural gas per day (~7,750 BOE per day) on an adjustable rate choke with 7,810 psi FCP and has been flowing to sales through the Company's Eureka Hunter Pipeline system. The Stewart Winland 1300U well was drilled and cased to a true vertical depth of 10,825 feet with a 5,289 foot horizontal lateral, and successfully fraced with 22 stages.

46,500,000 feet / 7,750 boe = 6,000.

Data points:

• West Virginia
• Utica shale
• most southeastern well in the entire Utica shale play
• horizontal fracking; short horizontal; 22 stages

That has been the conversion factor I was using, also: 6,000 to convert "mm cf natural gas" to bbls of oil."

From Mark Perry:

As another example of surging production and ongoing productivity gains for new wells, I learned from an energy industry insider last night (on/about September 22, 2014) in Houston that a prolific, new shale gas well in the Utica Shale region has delivered an initial production volume of 30 million cubic feet of natural gas per day, almost four times the 8 million cubic feet per day new-well average in the Marcellus.