Will Marcellus/Utica Grow Fast Enough to Offset Declines Elsewhere?

spg_plts_rgb_pos_210x92What if a couple of really smart analysts who work next to each other, guys who challenge each other every day, analysts who study and focus on natural gas production, were to pull the curtain back and reveal to the world what kinds of discussion and repartee they engage in? In particular, disclose their discussions and debate about the Marcellus/Utica? For those of us who eat/sleep/breath shale energy in the northeast, that would be wicked cool. And that’s just what MDN editor Jim Willis was treated to at S&P Global Platts’ Benposium East event in New York this past Wednesday. Luke Jackson, senior energy analyst with Platts Analytics, and Jeff Moore, also a senior energy analyst with Platts Analytics (the Bentek Products division) both live and work in Denver, CO. Their session at Benposium was titled, “Opposing Views–Northeast Production: Boom or Bust?” The two decided it would spice up what is normally a pretty dry conference presentation by standing on the stage and conducting a classic Oxford-style debate, where a motion is offered and one person argues “for” the motion, the other “against.” The motion they put forward was this: “Will Northeast production remain the sole engine of US natural gas production growth in the next 1-3 years, offsetting declines from the rest of the US and allowing overall US production to push higher?” In other words, can the Marcellus/Utica keep expanding production fast enough that it offsets declining production in other plays, or will those other plays need to increase their output too–to meet growing US demand? Luke argued for the motion and Jeff against. What was the conclusion? Keep reading! The boys used a dynamite PowerPoint slide deck. We asked for and got a copy of it and share it with you below. You need to take time to review the slides–they are awesome! Loaded with details. Below we also have some of our notes–quips and tidbits of information that caught our attention as the boys debated…
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Utica Condensate Begins Flowing Through Cornerstone Pipeline

Cornerstone Pipeline Route Map
Cornerstone Pipeline Route Map – click for larger version

In December 2013 MDN first reported a new $250 million pipeline on the way in the Utica Shale from Marathon Petroleum Corporation, the largest refiner in the Utica Shale region (see Marathon Petroleum’s Newly Announced “Cornerstone” Utica Pipeline). The Cornerstone pipeline will stretch nearly 50 miles from the MarkWest cryogenic processing plant in Cadiz, OH northwest connecting to M3’s fractionator plant in Scio and M3’s cryogenic processing plant in Leesville along the way as it terminates and connects to Marathon’s refinery in Canton, OH. The pipeline will carry, at various times, crude oil, condensate and natural gasoline. From Canton, Marathon plans to move condensate and NGLs to Midwest refining centers and into Canada. In July the company said Cornerstone would be online by the end of this year (see MPLX Cornerstone NGL Pipe Done by End 2016, New Projects Coming). Yesterday the pipeline went online–at least part of it did–when Cornerstone flowed condensate from Cadiz to East Sparta…
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Peters Twp Gives the Middle Finger to Drillers One Final Time

peters-twp-washington-county-paPeters Township, the most populous township in Washington County, PA, is one of the seven selfish towns that sued the state over the zoning provisions in the Act 13 law, eventually winning at the PA Supreme Court level (see PA Supreme Court Rules Against State/Drillers in Act 13 Case). The Act 13 victory gives townships the right to pass local zoning ordinances that restrict–but don’t ban–Marcellus/Utica drilling. Peters has been adept at using the victory to keep drilling banned by “studying” the issue to death (see Peters Twp, PA Pretends to Debate Ordinance to Allow Drilling). That pattern of behavior continued into last year (see Peters Twp, PA Continues to Delay Drilling by “Studying” It). Sooner or later you have to come down on one side or the other, and Monday night Peters decided–to screw Marcellus drillers. Town council passed a new drilling ordinance (4-2) that says drilling is ONLY allowed in areas zoned for industrial uses, which rules out areas zoned for agricultural uses (where most drilling happens). Even the drilling in industrial areas, a grand total of 138 acres in the township, will have to be a “conditional use” with loads of permits and reviews. In other words, Peters just flipped off the drilling industry, telling them “don’t ever bother drilling here”…
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Status Update on Major Pipelines in the Marcellus/Utica

update.jpgAt last week’s Shale Insight conference in Pittsburgh, this this past Wednesday at Platts’ Benposium East conference in New York, there was one topic of conversation that pretty much dominated the discussion: pipelines. Without new “takeaway” capacity in the northeast, we’re in trouble. Many types of people watch the pipeline space for varying reasons. Investors keep an eye on it because they want to invest, or they’ve invested in producers who need to get their gas (and oil) to market. Upstream (drillers) are vitally interested. Midstream (pipeline) companies are interested, needless to say. But so too are the construction companies, much of whose livelihood depends on building the pipelines. So it makes perfect sense that an industry magazine like Construction Equipment Guide would run an article updating their readers on the status of various pipeline projects. Most of the projects in the list are in the northeast, or somehow connected to production coming from the northeast. Below is their helpful roundup listing important, major projects–with a description and the current status of the project…
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PA’s Supreme Court Orders Up the Impossible re Act 13

cluelessYesterday MDN reported that the Pennsylvania Supreme Court has essentially gutted the rest of the Act 13 drilling law passed in 2012 (see PA Supreme Court Rules Against Act 13 Drilling Law, Yet Again). One of the four provisions in the law eviscerated in the most recently ruling deals with notifications following a spill of chemicals or frack wastewater. The Act 13 law provided for a mechanism (requirement) that local public water drinking systems be notified following a spill. Immediately. But the law did not provide for the same notification to owners of private water wells. Why was that? Was it a sweetheart deal with evil, nasty frackers who don’t care if they poison the water wells of nearby residents–interested only in money? Uh, no. The fact is Pennsylvania is one of the few states that does not regulate private water wells, so there is no registry, no way to know WHO to inform in case of a spill. How can you require a company to do something when there is no way to do it? Which raises this question: Do the Democrats on the Supreme Court who made this decision even understand the issue at all? Are they totally clueless?…
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PA Supreme Court’s Final Evisceration of Act 13 – Big Deal or Not?

eviscerationFollowing up on yesterday’s Pennsylvania Supreme Court decision to eviscerate the rest of the 2012 Act 13 drilling law (see PA Supreme Court Rules Against Act 13 Drilling Law, Yet Again), there have been a number of articles and reactions to the decision. Most point out that the items struck down by the Supremes in their great wisdom were not really being followed or implemented after earlier court cases questioned Act 13. But some maintain there are aspects of this week’s decision that portend future trouble for the drilling industry, while others say it’s no big deal. Here’s one on each side of the issue…
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FERC Tells Ohio Valley Connector Project to Open the Valves

ovc-overall-05282015
OVC Project – click for larger version

10/4/16 UPDATE: EQT Confirms the gas began flowing on Oct 1, the day after this post. See EQT’s statement below.

The Ohio Valley Connector (OVC) project is a proposed natural gas pipeline system approximately 37 miles long running from northwestern West Virginia into southeastern Ohio. Equitrans, a subsidiary of EQT Midstream which is itself a subsidiary of EQT the driller, is building the pipeline. We reported in July 2014 that the project was green lighted. At that time, EQT CEO David Porges said the pipeline will interconnect with both the Rockies Express Pipeline and the Texas Eastern Pipeline and will provide about 1 billion cubic feet (Bcf) per day of capacity (see EQT Midstream: 2 Major Pipeline Projects Advance, 1 Doesn’t). In July 2015 we ran a story disclosing that the main customer for the new pipeline is one of EQT’s biggest competitors, Range Resources (see EQT Midstream Building $250 Million Pipeline – for Range Resources!). Fast forward to today. The pipeline’s project cost has gone up, to $415 million. But the really good news is that the pipeline is now built, and the Federal Energy Regulatory Commission (FERC) has just given EQT permission to turn it on…
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Everybody Just Subpoenaed Chesapeake Energy for Everything

subpoenaSince before Aubrey McClendon left the helm at Chesapeake Energy, the company has been controversial and to one degree or another, in hot water. Legally. You’ve read plenty on MDN about who’s sued Chessy, over royalties, over collusion on land deals, over nonpayments to suppliers. You’ve also read about various investigations by various government entities into Chesapeake and their practices. It appears like it’s all reaching a fevered pitch. Yesterday Chesapeake filed disclosure forms with the Securities and Exchange Commission which says the U.S. Dept. of Justice, a number of states, and even the U.S. Postal Service have served the company with subpoenas for information. In essence, everyone has subpoenaed Chesapeake for everything…
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Marcellus & Utica Shale Story Links: Fri, Sep 30, 2016

best of the restThe “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: 5 takeaways from Shale Insight; PA cracker construction moves ahead at fast pace; natgas pipeline network to reach capacity in 6 mos; gas drillers could see $4/Mcf in 2017, for a short time; OPEC’s “truce on oil prices” may not last long; Chesapeake looks to sell the Haynesville for $1B; western Canadian gas may go east for export as LNG; and more!
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