Natural Gas? The Energy Story This Winter? I Thought It Would Be New England. It Might Be British Columbia -- October 23, 2018

Updates

October 26, 2018: follow-up; prices spike.  

Original Post 

Wow, isn't this the height of irony?

Quick! Name the Canadian province that was instrumental in killing the TransMountain Pipeline expansion project (crude oil). Yeah, British Columbia.

Quick! Name the company that built, sold, and if built, will be the operator of the TransMountain Pipeine. Yup, TransCanada. 

So, now fast forward. From oilprice.com and also at the FortisBC webpage:

A natural gas pipeline explosion that occurred earlier this month near the city of Prince George will reduce supply to British Columbia by between 20 and 50 percent this winter, the gas distribution company said in a statement.

FortisBC said that although it had planned on having the ruptured pipe up and running by mid-November, it will not be able to fill it to capacity. At best, it would operate at 80 percent of capacity for the winter.

So, British Columbia is facing winter with a significant natural gas shortage.

FortisBC is turning to -- you got it -- to TransCanada for help.

To compensate, FortisBC said it was in talks with TransCanada to increase the flow along the Southern Crossing pipeline from Alberta. At the same time, the company said, it was working with industrial gas consumers to optimize their consumption. In its update, the company appealed to household consumers to also try and optimize their consumption of the fuel during peak demand season.

I could be wrong but I think TransCanada's Southern Crossing (Gas Transmission Northwest -- GTN) transports natural gas to the US west coast (Washington State, Oregon, and California) from western Canada. One wonders if there could be a domino effect on US west coast. Maybe a reader knows.

From the home page of FortisBC:

Due to transmission constraints, FortisBC is reaching out to customers to let them know that our regional natural gas supply, including the province, will be limited to 50 to 80 per cent of normal levels.

This means that the natural gas system will be challenged in times of high demand throughout the winter. As such, FortisBC is asking all of its customers to be conscious of their natural gas use and conserve energy wherever possible.

On Friday, October 19th, Enbridge released a statement announcing that, subject to regulatory approval, they expect their ruptured 36-inch natural gas transmission line to be repaired and in service by mid-November. However, both the 36 and 30-inch transmission lines will only be running at 80 per cent capacity and are not expected to return to maximum operating pressure throughout the winter.

We are actively working to make more gas available for our customers. For example, we’ve worked with TransCanada to maximize output of the Southern Crossing pipeline that feeds into the Interior from Alberta and are actively working with industrial customers to optimize their energy use – keeping them running while minimizing system impacts. We are also working on securing additional natural gas in the open marketplace to best support the province’s gas supply.

At the FortisBC home page:

Random Update Of Another Incredible MRO Well In Reunion Creek -- October 23, 2018

This well is one of a number of incredible MRO wells. It came off the confidential list in May, 2018, but was a DUC. I don't recall if I have posted the first ten days of production:

• 32971, 8,702, MRO, Whitebody USA 14-23H, Reunion Bay, t8/18; cum 40K after ten days: 

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2018	10	39659	38738	32589	48655	0	46071

• crude oil: 39,659 bbls over 10 days extrapolates to 118,977 bbls over 30 days
• mcf natural gas: 48,655 mcf (8,107 boe) over 10 days extrapolates to 24,323 boe over 30 days
• total: extrapolates to 143,300 boe over 30 days;

This page won't be updated. The other incredible MRO wells on this pad and in this area have been previously noted at a number of posts.

I'm waiting to see what a neighboring well, #19446, will do. It has just come back on line; it's a lousy well; curious if it's improved after neighboring wells have been fracked.

The Slawson Gabriel Wells In North Tobacco Garden

Overshadowed by all the news this week, this Slawson well (#24520) reported, and it's time to look at the other wells on the same 4-well pad:

• 24520, 1,458, Slawson, Gabriel 4-36-35H, North Tobacco Garden, 44 stages; 8.6 million lbs, t7/18; cum 28K 8/18; 
• 24519, 1,358, Slawson, Gabriel 5-36-25TFH, North Tobacco Garden, t7/18; cum 32K after one month;
• 23556, 920, Slawson, Gabriel 1-36-25H, North Tobacco Garden, t7/18; cum 39K after about two months;
• 24518, 2,449, Slawson, Gabriel 6-36-25TFH, North Tobacco Garden, t7/18; cum 27K after about two months;

Two wells running parallel and in same direction, lying east to the 4-well Gabriel pad:

• 21250, 2,568, Slawson, Gabriel 3-36-25H, North Tobacco Garden, t11/11; cum 276K 8/18;
• 24521, 1,628, Slawson, Gabriel 7-36-25TFH, North Tobacco Garden, t6/18; cum 45K after about 3 months;

Most incredibly, a Three Forks well running parallel BUT opposite direction, lying west of the pad, but also fracked recently:

• 32617, 1,157, Oasis, Oyloe 5199 14-26 12TX, North Tobacco Garden, t10/17; cum 236K 8/18;

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2018	31	21821	21867	39503	32855	5193	27352
BAKKEN	7-2018	27	16327	16259	41509	25718	14870	10578
BAKKEN	6-2018	0	0	0	0	830	830	0
BAKKEN	5-2018	6	2557	2557	2523	8170	4803	3307
BAKKEN	4-2018	30	21695	21695	16858	58157	12364	45493
BAKKEN	3-2018	23	21493	21564	14680	43645	18470	24945
BAKKEN	2-2018	28	27099	27115	14859	48864	24319	24265
BAKKEN	1-2018	31	25908	26023	16222	42170	24411	17449
BAKKEN	12-2017	31	30946	30744	19718	46087	25518	20259
BAKKEN	11-2017	30	28410	28410	19409	40645	21428	18917
BAKKEN	10-2017	29	34224	34224	24966	44481	7595	36596
BAKKEN	9-2017	8	5715	5715	5203	9647	4513	5064

Have We "Jumped The Shark" In The Permian -- October 23, 2018

Headline story over at Rigzone that made twitter, and I'm not making this up: "Nostra Terra acquires 8 potential Permian wells." Data points:

• Nostra Terra Oil and Gas Company (NTOG) is UK-based
• acquired Mesquite Prospect in the Permian Basin
• potential: eight -- yes, eight -- horizontal wells 
• the UK is excited about a second horizontal well in England -- yet to be drilled/completed -- so a report that any UK company that might report eight horizontal wells must be really exciting for the Brits
• NTOG acquired 1,384 acres. Wow.
• and it continues: this acquisition will represent a 308% increase in the company's total Permian Basin acreage position -- can't do the math -- are we talking an original position of 250 acres in the Permican for NTOG until this acquisition? Yes, there it is -- it "quadrupled" the company's footprint in the Permian -- 4 x 250 = 2,000 acres
• the CEO was even impressed that the wells to be drilled will not only be directional, but also horizontal
  
• potential: initial production of 9,000 bbls/month for each well
• anything less than 20,000 bbls/month initial production in the Bakken I consider a disappointment
• cost? 1/8 carried working interest in the first well and $150,000 cash
• $150,000 / 1,384 acres = $100 / acre

I must be missing something in this story. Or it was a a really, really slow news day.

API Reports Huge Crude Oil Build; WTI Plummets Almost 5% -- October 23, 2018

WTI plunges:

• down almost 5%
• lost over $3/bbl
• now trading barely above $66

API weekly crude oil inventories: huge, huge build.

I started tracking weekly crude oil inventories about two years ago to get "a feel" for this metric. In all that time, I never saw a swing (build or draw) of more than 6 million bbls in one week and that was incredibly rare. There may have been an occasional exception. I've long forgotten. But anyone who follows the weekly number will be / should be stunned. The API reports a huge build of almost 10 million bbls of crude oil. Who saw it coming? Regular readers might have. Remember this graphic? This is from last week. We will see this week's "gasoline demand" tomorrow afternoon. It will do one of two things: it will continue to slide, or it will show a very, very slight increase but it won't be enough to get anyone excited.

Active rig list:

$66.04↓↓↓↓	10/23/2018	10/23/2017	10/23/2016	10/23/2015	10/23/2014
Active Rigs	68	54	34	68	194

Four new permits:

• Operators: CLR (2); Liberty Resources (2)
• Fields: Haystack Butte (McKenzie); Gros Ventre (Burke)
• Comments: Liberty Resources has two new permits in section 23-159-93; and, CLR has two new Palmer Federal permits in Haystack Butte in section 25-149-98.

Six permits renewed:

• Hunt (3): two Trulson permits in Mountrail County and one Halliday permit in Dunn County
• Zavanna (2): two George permits in Williams County
• Bruin E&P: one Borrud permit in Williams County

Five producing wells (DUCs) reported as completed:

• 33737, 2,026, Hess, BB-Federal B-151-95-2122H-8, Blue Buttes, t9/18; cum --
• 34217, 1,052, Hess, RS-Howell-LW-156-91-1107H-4, Ross, t9/18; cum --
• 34219, 836, Hess, RS-Howell-LW-156-91-1107H-2, Ross, t9/18; cum --
• 34220, 1,256, Hess, RS-Howell-LW-156-91-1107H-1, Ross, t9/18; cum --
• 34218, 679, Hess, RS-Howell-LW-156-91-1107H-3, Ross, t9/18; cum -- 

Note: neighboring well to the new RS-Howell wells is off-line but it's a great well --

• 17720, 399, Hess, RS-Howell-156-91-1207H-1, Ross, t2/09; cum 462K 7/18; it will be interesting to see what this well does when it comes back on line;

Note: #33737 is on a 5-well pad; this one was the first to report; the others are SI/NC, but I believe they have all been fracked; will soon report; #18250 parallels the wells coming from this 5-well pad; still off line;