EIA Jan DPR: Marcellus Production Way Down Again, Utica Up

EIAYesterday our favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite report, the Drilling Productivity Report (DPR). The January 2016 report shows what the EIA predicts oil and natural gas production will be in February from the seven largest commercial shale plays in the U.S. What does the report (full copy below) show? The biggest drop in production will once again be the biggest natgas producer in the country–the Mighty Marcellus. The EIA predicts the Marcellus will produce 15.222 billion cubic feet per day (Bcf/d) in February, vs. 15.447 Bcf/d in January, a decrease of 225 million cubic feet per day (MMcf/d). Meanwhile the Utica Shale will continue to show an INCREASE in production month over month–from 3.206 Bcf/d in January to 3.249 Bcf/d in February, a 43 MMcf/d increase month over month. The Utica, for a second month in a row, shows the largest increase in natgas production of all seven plays covered in the DPR. Overall the DPR shows that oil production month over month will decrease in February, the seventh month in a row, and natural gas will decrease for the eighth month in a row…
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Natural Gas and Electricity in U.S. Joined at the Hip

Increasingly natural gas and electricity production in the U.S. are “joined at the hip.” What do we mean by that? In 2015 more electricity was generated from natural gas-fired generators than from coal-fired generators in the months of April, July, August, September, and October (data for November and December not yet available). Wholesale electricity prices at major trading hubs, on a monthly average basis for on-peak hours, were down 27%-37% across the nation in 2015 compared with 2014–driven largely by lower natural gas prices. It’s not a stretch to declare that natural gas has replaced coal as the #1 energy source for creating electricity. That’s what we mean by nagas and electricity being joined at the hip. Our favorite government agency, the U.S. Energy Information Administration (EIA), provides some context…
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Which Marcellus/Utica Drillers are Part of the “Thousand Club”?

It’s difficult to compare apples with apples when it comes to evaluating how productive, or profitable, a hydrocarbon-producing well is. We typically think of wells as “oil wells” or “natural gas wells” or perhaps “wet gas (NGL) wells.” While there are some wells that produce almost all natgas or almost all oil, etc., most wells produce multiple hydrocarbons. Oil wells in the Permian Basin or Eagle Ford Shale (in TX) produce natural gas along with the oil coming out of the well. Many Marcellus and Utica wells in southwestern PA and eastern OH produce very profitable quantities of natural gas liquids, a mish mash of ethane, propane, butane, isobutane, and pentane. And don’t forget condensate (natural gasoline). So how do you compare the relative output/profitability/production for different “types” of wells? One way is to convert all of those hydrocarbons into one hydrocarbon–oil. Specifically, barrels of oil. Once you convert all hydrocarbons into barrels of oil, you have a way to compare apples to apples–comparing wells located in the same shale play or comparing wells from one play with wells from another. Recently the sharp analysts at investment firm Sanford C. Bernstein & Co. ran the numbers to convert and compare wells across different plays. They issued a report showing wells that belong to the “Thousand Club”–wells producing at least 1,000 barrels of oil equivalent per day. Where are the most such wells located? The Eagle Ford Shale, the Bakken Shale, and yes, the Marcellus and Utica Shale. Which drillers are in the club?…
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A Closer Look at GTL Technologies, Benefits for Marcellus

MDN has written, many times, about companies planning or building gas-to-liquids (GTL) plants. Such plants convert natural gas into other hydrocarbon-based products–like gasoline and diesel fuel. As you can imagine there’s some sophisticated chemistry used in order to make it happen. The process was originally pioneered in Germany in the 1920s and (yes) was used by the Nazis to convert coal to diesel. That method is the most well-known and is called Fischer-Tropsch (FT). There are, however, other methods that have been pioneered since that time. A recent entrant in GTL technology is a process called STG+, created by the company Primus Green Energy, based in New Jersey. Primus CEO Sam Golan, writing for the Marcellus.com website, makes a product pitch for his tech that many in the Marcellus/Utica region could benefit from STG+. One of the primary selling points is that STG+ can be used, profitably, in areas where there are low volumes of stranded natural gas. We’re not interested in giving Primus a free product pitch, but we did find Golan’s description of the various technologies used in GTL, including their own STG+, to be interesting and helpful for our own understanding of how GTL works. We thought you might find it interesting too…
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Historic Average Price of Oil is $30/Barrel – Who Knew?

Here’s a bombshell: Did you know that throughout its existence as an energy source that oil has sold at an average of $30 per barrel, adjusted for inflation? There have been a few periods of price spikes, but overall, on average, oil has always sold for around $30/barrel. No, we didn’t know that either. But that’s the assertion of Michael Lynch, president of Strategic Energy & Economic Research Inc. He’s been an economist/researcher in the oil industry for nearly 40 years, so he should know. We often highlight articles by Lynch in our daily “best of the rest” listing of stories you may be interested in reading. Our favorite Pittsburgh Post-Gazette reporter, Anya Litvak, recently spoke to Lynch. Here’s a portion of that enlightening interview…
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Pipelines – The Safest Form of Transportation in Existence

Lately we’ve repeatedly seen references in articles about pipelines, especially those planned for New England, that make an implied threat that a pipeline located near a home or business is a threat. In some cases antis throw around reckless language like pipelines are the equivalent of unexploded bombs–just waiting to explode. It is one of the scare tactics used to smear what is, hands down, the safest form of transportation in existence. In fact, a recent announcement from the American Petroleum Institute, in commenting on proposed new rules and regulations for pipelines coming from the Pipeline and Hazardous Materials Safety Administration’s (PHMSA), points out that, “more than 199,000 miles of liquid pipelines [in the U.S.] transport about 16 billion barrels of crude oil and petroleum products per year at a safety rate of 99.999 percent.” That’s for liquids in pipelines. For gas pipelines it’s the same. Can you imagine any form of transportation with a safety rate of 99.999%? That’s like one or two accidents per year–statistically zero. And yet antis continue to create a bogyman of pipeline problems where none exist…
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Brutal Honesty from OOGA: ‘No Way to Sugar Coat’ the Bad News

In December we highlighted comments by Shawn Bennett, executive vice president of the Ohio Oil and Gas Association (OOGA), in which he predicts 2016 for Ohio’s oil and gas drillers won’t be pretty (see OOGA Tells Ohio to “Sit Tight” – 2016 Won’t be Pretty). Must be Bennett is on a truth-telling tour. Last week he addressed the first Guernsey Energy Coalition meeting of the year last week in Cambridge, OH. He told the audience he wasn’t going to sugar coat the bad news, and he didn’t…
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Is Eclipse’s Move to Curtail Prod. a Preview of Things to Come?

Last week Eclipse Resources, a smaller but important Marcellus/Utica driller with its headquarters in State College, PA, announced it would drill a single well in 2016 and was embarking on a program of choking back production–until prices go back up (see Eclipse Resources Drilling 1 Well in 2016, Restricting Production). That move caught the attention of analysts at investment firm Tudor Pickering Holt & Co. They issued a note saying Eclipse’s move may well be a preview of things to come in the Marcellus/Utica…
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Cali Crisis Being Used to Promote Ban on NatGas Storage

MDN hasn’t, until now, covered the ongoing disaster near Los Angeles where a well used to store natural gas is leaking and out of control. The well is one of 115 such wells in the Santa Susana Mountains where Southern California Gas Co. (SoCalGas), a division of Sempra Energy, stores natural gas in a vacant oil field about a mile and a half underground. It is the largest such underground gas storage field in the Western U.S. One of the wells began to leak back in October, and SoCalGas says it may take them until March to fix the leak. A University of California at Davis researcher claims his calculations, taken from a specially fitted airplane, show the well is leaking around 1,000 tons of methane per day–or 80,000 tons so far. Some 4,500 residents in the nearby community of Porter Ranch have temporarily moved. Two local schools have moved their combined 1,900 students to different locations. It is a disaster by anyone’s definition. What’s newsworthy and interesting to MDN about this disaster–and how it may affect us in the Marcellus/Utica region–is how the disaster is being used/manipulated/abused in an attempt by anti-drillers to try and ban underground storage of natural gas…everywhere. Let’s keep this in perspective. There are hundreds (thousands?) of such underground storage facilities. A problem at one facility is being used as an argument that every other such facility across the country should be banned. It’s more than silly–it’s insane…
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Full Speed Ahead for PA O&G Construction Company McCarl’s

McCarl’s Inc. is ranked among the top fifty industrial contractors in the country. The company specializes in construction for companies in petroleum, chemical, power, steel, water treatment, cryogenic processing and the oil and gas industries. McCarl’s is also a “home grown” business–with its headquarters in Beaver Falls, PA. We love a good story about a local business. Last week McCarl’s announced they’ve hired Jeffrey Hines as executive vice president charged with leading a new phase of growth for the $150 million company. McCarl’s isn’t letting the price collapse of oil and gas hold them back. It’s full speed ahead…
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Marcellus & Utica Shale Story Links: Tue, Jan 12, 2016

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Purple squirrel syndrome; PA PUC exploring different rate structures; UGI wins court case in Lycoming County; IHS buys OPIS; Hawaii’s $300M LNG project; stay away from Chessy; oil and gas prices worsen; is natgas killing coal mining?; world’s largest oil company may go public; and more!
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