Marcellus & Utica Shale Story Links: Tue, Mar 7, 2017
The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Opposition to fracking in Maryland is anti-science; outrage over closing NY nuke plant; Exxon plans to invest $20B in U.S. Gulf region; GE & Baker Hughes get more info requests from DOJ on merger; Statoil says shale profitable at $50/barrel; #ExxonKnew activists target Shell next; Chesapeake “won’t hesitate” to dump more assets; hackers target energy sector; and more!
Opposition to fracking in Maryland is anti-science
Washington (DC) Post
For Maryland state Sen. Robert Zirkin (D-Baltimore County), the dangers of hydraulic fracturing (“fracking”) are so patently obvious that the question itself is pointless to discuss. “This is not one of those issues that lends itself to that debate,” said Zirkin at an anti-fracking rally in Annapolis on Tuesday. “This is a public health issue, pure and simple.” Zirkin and his supporters are backing a bill aimed at banning fracking in Maryland. They argue that fracking causes groundwater contamination, earthquakes and air pollution. Zirkin and his supporters are spouting nonsense. Their first concern — that fracking causes groundwater contamination — was long ago debunked. To be clear: Despite the enormous size of the 70-year-old fracking industry, there has never been a proven case in which fracking chemicals seeped into drinking water. The theory that fracking affects groundwater was first popularized by the anti-fracking documentary Gasland, in which a resident of a fracking community was depicted igniting his tap water. The drinking water’s increased flammability, said the resident, was caused by methane gas leaking into groundwater as a result of fracking. The scene — as well as most of the documentary — has since been has been discredited by the experts as “sensationalism and scare tactics.” As a rebuttal, anti-fracking activists usually cite the Environmental Protection Agency’s 2016 study of fracking’s potential impact on drinking water, which concluded that “hydraulic fracturing activities” can affect drinking water resources “under some circumstances.” But the report’s expansive definition of “hydraulic fracturing activities” and its willingness to venture into the absurd virtually guarantee such a conclusion. Per the report’s parameters, if a truck filled with fracking chemicals gets into a wreck, it is considered to be fracking-related. Chemical engineer Robert Rapier put it best: If chemicals used in firefighting were spilled, we would not say firefighting contaminates water.
Outrage swells over NY State’s handling of Indian Point Nuclear Plant closure
The surprise announcement in January that the Indian Point nuclear power plant would close over a decade earlier than planned came as a shock to local communities. The municipalities that will be most impacted heard the news from the New York Times on a Friday. The rumors were then confirmed the following Monday by the plant’s owner, Entergy, and later that day during Governor Cuomo’s State of the State Address. State officials then met with local government representatives at Cortlandt Town Hall on Friday February 17 for roughly two hours to answer and field questions. Despite assurance from these officials on behalf of the governor that they are “committed to working with the local taxing jurisdictions on trying to mitigate tax impacts…,” residents, business owners, local politicians and labor leaders remain concerned. The main challenges for local stakeholders and residents include the loss of $33 million in annual tax revenue for the Town of Cortlandt; Village of Buchanan; Hendrick Hudson School District; Westchester County; Hedrick Hudson Free Library; and the Verplanck Fire District, along with losing thousands of jobs; local business impacts; potentially higher electric bills and safety concerns associated with radioactive material storage at the site. “People are indeed incredibly concerned, if not scared, about the closure of Indian Point and the impact it will have on our neighbors and communities,” State Senator Terrence Murphy (R-Yorktown) wrote in a recent letter to the community.
ExxonMobil plans investments of $20 billion to expand manufacturing in U.S. Gulf region
Exxon Mobil Corporation (NYSE:XOM) is expanding its manufacturing capacity along the U.S. Gulf Coast through planned investments of $20 billion over a 10-year period to take advantage of the American energy revolution, Darren Woods, chairman and chief executive officer, said Monday. The projects, at 11 proposed and existing sites, are expected to generate thousands of new high-paying jobs and $20 billion in increased economic activity in Texas and Louisiana, Woods said, highlighting the company’s Growing the Gulf initiative in a keynote speech today at the CERAWeek 2017 conference. “The United States is a leading producer of oil and natural gas, which is incentivizing U.S. manufacturing to invest and grow,” said Woods. “We are using new, abundant domestic energy supplies to provide products to the world at a competitive advantage resulting from lower costs and abundant raw materials. In this way, an upstream technology breakthrough has led to a downstream manufacturing renaissance.” ExxonMobil is strategically investing in new refining and chemical-manufacturing projects in the U.S. Gulf Coast region to expand its manufacturing and export capacity. The company’s Growing the Gulf expansion program, consists of 11 major chemical, refining, lubricant and liquefied natural gas projects at proposed new and existing facilities along the Texas and Louisiana coasts. Investments began in 2013 and are expected to continue through at least 2022.
Exxon is steering its construction dollars back to U.S.
Exxon Mobil Corp. announced a $20 billion building spree in the heart of the U.S. chemical and refining industry, a program it said would create 45,000 jobs. President Donald Trump quickly tweeted his support, calling the oil producer a “special company.” The only problem? Monday’s announcement just gave a name to a series of investments the company began making as far back as 2013, before the collapse in oil prices. Chief Executive Officer Darren Woods dubbed the program “Growing the Gulf,” part of an effort to boost energy exports from abundant natural gas and oil supplies on the U.S. Gulf Coast. It’s the latest effort by a corporation to proactively present itself as a job creator to a president who has made the issue a centerpiece of his campaign and his less than two-month tenure in office. Trump described Exxon as a “true American success story” in a statement. The president followed up with a trademark tweet: “We are already winning again, America!” and a short video celebrating the announcement which he said was in part because of his administration’s policies. All the jobs will be located along the Gulf Coast, and many will pay an average of $100,000 a year, Woods said in a speech at CERAWeek, a huge annual industry conference in Houston.
GE and Baker Hughes receive requests for additional information from the DOJ
General Electric Company (NYSE: GE) and Baker Hughes Incorporated (NYSE: BHI) today announced that the companies have each received a request for additional information (“second request”) from the United States Department of Justice (“DOJ”) in connection with the pending combination of GE’s oil and gas business with Baker Hughes. The second requests were issued under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”). GE and Baker Hughes have been working cooperatively with the DOJ as it conducts its review of the transaction. The second requests were expected and are a normal part of the DOJ review process. The effect of the second requests is to extend the waiting period imposed by the HSR Act until 30 days after GE and Baker Hughes have substantially complied with the requests, unless that period is extended voluntarily by the parties or terminated sooner by the DOJ. The transaction remains subject to approval by Baker Hughes’ shareholders and other approvals, as well as customary closing conditions. GE and Baker Hughes expect the transaction to close in mid-2017.
Statoil sees U.S. shale profitable within two years at $50 oil
Norwegian oil producer Statoil ASA expects its U.S. shale operations to be profitable within two years at crude prices of $50 per barrel, an improvement helped by simplifying operations, technological improvements and cost cuts. Torgrim Reitan, Statoil’s head of United States operations, said in an interview that the company’s push for the lower break-even price is largely due to internal improvements that should stick regardless of any price hikes from service providers. “Our business clearly makes sense in a $50 (per barrel) environment,” Reitan said Monday on the sidelines of the CERAWeek conference, the world’s largest gathering of energy executives. “It is remarkable to see how the whole industry has responded positively to the new price reality.” Statoil, which produces shale oil and natural gas in North Dakota’s Bakken, the Eagle Ford of Texas and the Marcellus of Pennsylvania, moved its U.S. operational staff to Austin, Texas, last year, a step Reitan said has helped push down costs. The company’s U.S. shale oil break-even price stood at $66 per barrel at the end of 2016, a 35 percent improvement from the prior year. That should drop to $50 by 2018, he said.
After #ExxonKnew failure, activists try attacking Shell
Energy in Depth
What do wealthy activists do now that their #ExxonKnew campaign has failed? Choose another oil company to target, apparently. But the sequel is never as good as the original – and in this case, the original was never very good, either. Last week, The Guardian – the UK “newspaper” that teamed up with 350.org’s Bill McKibben on failed divestment campaigns and credits itself with having started the Keep it in the Ground movement – reported on a video posted by a Dutch blogger, Jelmer Mommers, which reportedly shows Shell “knew” about climate change more than two decades ago. But then – stop us if you’ve heard this before – the company lobbied against climate solutions. The documentary, produced in 1991, addresses potential consequences of global warming and discusses what the company is doing to reduce its emissions. Environmentalists, including those involved in the #ExxonKnew campaign, were quick to pounce on the “new” development. Bill McKibben accused Shell of “endless deceit” on climate change while Greenpeace accused the company of “empty rhetoric.” Of course, the documentary that Shell produced was clearly meant for public consumption. It shows that, like Exxon, Shell was working with government agencies to study and address climate change.
Chesapeake will not hesitate to sell more assets: Lawler
Chesapeake Energy has 11 billion barrels of net recovery reserves and an extremely strong asset portfolio – and will not hesitate to continue selling assets to maintain a strong balance sheet — company CEO Robert Lawler said on the sidelines of the IHS Markit’s CERAWeek energy conference. Lawler told a handful of reporters following his presentation as part of a CERAWeek panel discussion he/his company realizes debt is its primary challenge. “Our portfolio is strong and we see a good level of interest in our assets, from private equity firms,” and other potential buyers, Lawler said. Lawler in January said Chesapeake anticipates reducing debt by an additional $2 billion to $3 billion during the next two to three years, which will include asset sales. The company announced or finalized divestments of $2.5 billion in 2016, exceeding its previously stated goal by $500 million. As the oil and gas industry continues to come off the proverbial mat after 2-1/2 years of tears, Lawler said Chesapeake will continue to closely monitor oilfield service costs, which are on the way up – some substantially.
Little-used Congressional Review Act becoming an indispensable
As the United States Senate finally begins taking up joint resolutions designed to reverse a handful of regulations implemented during the waning days of the Obama Administration, it’s worth discussing the indispensable role the Congressional Review Act (CRA) has come to play in halting regulatory excess, and more importantly, upholding the rule of law. While the merits of some of the regulatory actions targeted for reversal are certainly arguable, others lie so far outside the governing statutes that their reversal, either by congress or the courts, was almost inevitable from the day of their initial proposal. Last week, House Majority Whip Steve Scalise (R-LA) introduced a resolution that would reverse a regulation sought by the Office of Natural Resources Revenue (ONRR) that would revise the federal regulations governing the valuation of the government’s royalties for oil and natural gas produced from federal lands and waters. Steve Daines (R-MT) followed suit with the introduction of a similar resolution for the Senate to consider. The premise of the ONRR valuation regulation is pretty straight-forward: it would essentially, with only minor differences, allow the federal government to collect its oil and gas royalties on the same bases for valuation that govern the collection of oil and gas royalties for Indian lessors. Now, the average person who doesn’t have any knowledge of any of the details involved might look at this proposal and think, gee, that seems fair, which of course is exactly the public reaction proponents of this regulatory effort hoped to engender. But things are not always what they seem, and what is in fact “fair” in this situation depends on the details in the governing statues and, more importantly, the governing lease agreements.
National Fuel announces executive management changes
National Fuel Gas Company
– National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE: NFG) announced the following executive management changes, effective Feb. 1, 2017. Ann M. Wegrzyn has been promoted to Chief Information Officer (CIO) of National Fuel Gas Company. She is now responsible for developing and implementing critical information technology objectives and strategies across all of the Company’s subsidiaries. Ramon P. Harris has been promoted to Vice President of National Fuel Gas Supply Corporation. He is now responsible for the Measurement, Regulator and Corrosion Control Department in addition to continuing his responsibilities for management of Gas Storage, Gas Supply, Gas Measurement-Supply, Dispatch, and Transportation and Exchange Functions. Elena G. Mendel has been promoted to Assistant Controller of National Fuel’s regulated companies, including National Fuel Gas Distribution Corporation, National Fuel Gas Supply Corporation and Empire Pipeline, Inc. Craig K. Swiech has been promoted to Assistant Vice President of National Fuel Gas Distribution Corporation. He is now responsible for the day-to-day management of field operations for the regulated subsidiaries in New York.
U.S. oil industry becomes refiner to world as exports boom
When PBF Energy Inc. scooped up a refinery from Exxon Mobil Corp. on the Mississippi River in 2015, it wasted no time sprucing up the plant with an eye toward quickly resuming lucrative fuel exports. Within three months, PBF was ready to load its first tanker for shipment abroad. By late last year, the New Jersey-based company was exporting 22,000 barrels a day of fuel, or 16 percent of that refinery’s output. Now, it wants to boost that to almost 25 percent. PBF isn’t alone in this push. From major producers such as Chevron Corp. to specialized refiners including Valero Energy Corp., the U.S. refining industry has shifted its game over the last five years, taking advantage of gaps left by struggling refiners in Latin America, Africa and Asia. Along the way, it’s transforming what had long been a largely domestic business into a new global venture. “U.S. refiners are now the refiners for the world,” said Ivan Sandrea, head of Sierra Oil & Gas, which is planning to build infrastructure to import U.S. fuels into Mexico. U.S. companies last year exported a record 3 million barrels a day of refined products, more than double the 1.3 million barrels a day shipped a decade ago, according to data from the Energy Information Administration. Gasoline led the surge, with exports hitting an all-time high of almost 1 million barrels a day in December, up ten-fold from a decade ago.
Hackers drawn to energy sector’s lack of sensors, controls
Washington (DC) Post
Oil and gas companies, including some of the most celebrated industry names in the Houston area, are facing increasingly sophisticated hackers seeking to steal trade secrets and disrupt operations, according to a newspaper investigation. A stretch of the Gulf Coast near Houston features one of the largest concentrations of refineries, pipelines and chemical plants in the country, and cybersecurity experts say it’s an alluring target for espionage and other cyberattacks. “There are actors that are scanning for these vulnerable systems and taking advantage of those weaknesses when they find them,” said Marty Edwards, director of U.S. Homeland Security’s Cyber Emergency Response Team for industrial systems. Homeland Security, which is responsible for protecting the nation from cybercrime, received reports of some 350 incidents at energy companies from 2011 to 2015, an investigation by the Houston Chronicle has found (http://bit.ly/2lOFJgz ). Over that period, the agency found nearly 900 security flaws within U.S. energy companies, more than any other industry. Steps are being taken to thwart attacks. For instance, the Coast Guard in a joint operation with Houston police patrolled the waters southeast of Houston last year conducting sweeps for unprotected wireless signals that hackers could use to gain access to facilities. The operation was one of the first of its kind in the U.S. concentrating on cyberattacks by sea.
Venezuela’s PDVSA: The world’s worst oil company
My Misery Index for 2016 placed Venezuela at the unenviable top spot: the world’s most miserable country. However, to gain a real appreciation of the depths of Venezuela’s socialist disaster, we must look under the hood of Petróleos de Venezuela (PDVSA), Venezuela’s state-owned oil giant. After all, PDVSA is, for all practical purposes economically, Venezuela. Indeed, PDVSA accounts for virtually all of Venezuela’s foreign exchange earnings (93% over the past 5 reported years). An understanding of the workings of PDVSA requires a good grasp of petroleum economics, a field I was introduced to many years ago, when I was on the faculty of the Colorado School of Mines, and where I taught both petroleum and mineral economics. It was then that I had the good fortune to be befriended and mentored by the world’s greatest petroleum economist, the late Prof. M. A. Adelman of the Massachusetts Institute of Technology. I mention this because it is only by learning Adelman’s lessons that we can make sense of the dodgy accounts of what is undoubtedly the world’s worst oil company: PDVSA. The extent of PDVSA’s mismanagement can be seen by taking a look at its production and reserve figures. Under the direction of Luis Giusti in the 1994-98 period, PDVSA’s production soared. But, that boom was cut short. In 1999, the socialist fire-brand Hugo Chavez became Venezuela’s president and introduced Chavismo. With that, PDVSA’s oil output started a downward slide (see the chart below). That slide became a plunge after the coup attempt of April 2002. It was then that Chavez purged PDVSA of its professionals en masse and replaced them with “reliable” hands – those who worshiped at Chavez’s altar.
Iran vs Russia: The next natural gas war
Not everybody attending the Iranian natural gas summit last week in Frankfurt was there for the same reason. While most were gauging the prospects for an opening of major natural gas reserves and liquefied natural gas (LNG) export prospects, others were there for quite different reasons. Take the three representatives from Russia’s gas giant Gazprom (OGZPY), for example. They weren’t there to scout new investment packages. On the contrary… They were there to see just how badly their company’s position was under siege. And it’s no wonder the Gazprom guys looked concerned. From what I saw at the summit, they have every reason to be. For energy investors, on the other hand, the news is very good. Gazprom may still be the largest natural gas company on the face of the Earth, exporting more gas than anybody else and providing revenues that account for the biggest single chunk of the Russian central budget. But it is facing down some difficult times. For one, extractions are declining at the primary mature fields the company has depended on for decades. To offset that growing problem, Gazprom needs to move into three very expensive new regions – above the Arctic Circle, onto the continental shelf, and into eastern Siberia. Moscow is hard pressed to provide the necessary funds for that.
Using natural gas to reduce energy poverty
Life without access to energy is simply miserable. The most mundane task, such as heating water to cook rice, can require an entire day’s labor to gather both water and firewood. That labor can be physically exhausting, in some cases immediately dangerous, and often with unfortunate health outcomes. With over one billion people around the world faced with such simple barriers to improving their lives, reducing energy poverty can serve as a shared goal that transcends political, cultural, and regional barriers. Accessing energy is the single most important factor in improving the lives of individuals and increasing the economic opportunities available in their communities. Access to lighting transforms education from outdoors during the day, to indoors and anytime! A simple refrigerator can transform a fruit stand to a grocery store. Reliable electricity allows businesses to stay open and ultimately provides the cornerstone that allows industries to form. Although not a carbon-free source, natural gas has a transformative role to play in the energizing of developing nations. Abundantly available around the world, and more transportable than ever, a world natural gas market is creating a more stable, affordable supply. As an electricity generation fuel, it is both a baseload alternative to coal and a backup for renewable generation. In this capacity, natural gas provides carbon and non-carbon air emissions benefits. When used as a transportation fuel, natural gas provides significant air quality benefit to traditional fuels and can be equally affordable. When deployed as a cooking fuel, liquefied petroleum gas (LPG), provides dramatic health benefits and could reduce the unnecessary 4 million annual deaths attributed to cooking over inefficient, biomass fuels. As an economic cornerstone, natural gas can empower industrial development as a chemical feedstock, fertilizer component, direct energy source, and electricity provider.