What Will Convince Investors to Spend $10B on M-U NGL Storage Hub?

One more item to share with you from last week’s second annual Appalachian Storage Hub Conference convened at the Hilton Garden Inn Pittsburgh/Southpointe. As we previously highlighted, most of the event revolved around the proposed plan to build a $10 billion ethane storage hub (see Southpointe Event Focuses on M-U NGL Storage Hub). One of the panel discussions addressed the issue of how to attract that kind of money. $10 billion is just a number on paper. How much is that, really? West Virginia is the state most frequently mentioned as the host state for the $10B project. WV’s budget for this fiscal year is $4.3 billion. So the investment needed to build the proposed storage hub project would run the entire state of WV for more than two years! Where do you get that kind of money? And what do investors look for when deciding to spend that kind of money? That’s what the panel discussed…
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Industry Expert Says 3 More Crackers Coming to M-U

Last week the second annual Appalachian Storage Hub Conference convened at the Hilton Garden Inn Pittsburgh/Southpointe. As we pointed out in a post last week, the main topic of discussion was the $10 billion NGL/ethane storage hub (see Southpointe Event Focuses on M-U NGL Storage Hub). As big as the storage hub project is (and the news surrounding it), there was even bigger news coming from the event: 3 more ethane cracker projects for the Marcellus/Utica are likely to announce in the coming year! Tom Gellrich, principal of Top Line Analytics, talks to a lot of people. He’s an insider. At last week’s event, Tom shared some of his insights. He said PTT Global will commit to its previously announced cracker in Belmont County, OH, sometime this year. No real revelation there–we’ve been expecting such an announcement for the past two years. That’s one of three. Then Tom said the on again, off again Braskem/Odebrecht plan to build a cracker near Parkersburg, WV is on again and he expects an announcement to that effect in the next year. Wow! That’s two of three. And then Tom teased the crowd by saying there’s a THIRD project bubbling in the background. No details on who is behind it or where it will be located. Tom says to look for an announcement on this third cracker project by this time next year. Bonus: Tom believes Shell will take a hard look at building a new/second cracker right next to the first, after the first is completed (a fourth new cracker?). We have embarrassing riches of ethane crackers! Each one costing multiple billions of dollars to build…
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New Yorkers Pay 44% More for Electric than Neighboring States

On average, New York residents pay 44% more for electricity than neighboring states, like Pennsylvania. In January of this year, New Yorkers (and NY utility companies) were briefly forced to pay a record high of $140.25 per thousand cubic feet (Mcf) for natural gas, as opposed to what everyone else was paying (an average of $3.08/Mcf)–which is 46 times as much! Both stats are rooted in the same issue: NY pays WAY MORE for energy than it has to, because Andrew Cuomo is blocking natural gas pipelines into the state from PA. So says a new report titled “Pipelines and their Benefits to New York” (full copy below). The report, published by the Consumer Energy Alliance, examines the benefits of pipelines to New York, highlighting the need for affordable energy supplies to keep the daily lives of families and businesses across New York moving. Without those pipelines, we’re toast. You can’t build windmills and solar farms fast enough to meet the growing demand for electricity–and natgas. Cuomo’s dysfunctional energy policies are blocking all New Yorkers, upstate and downstate, from living even moderately prosperous lives…
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NJ & PA Could Have Saved $1.3 Billion if PennEast Were Live

Click image for larger version

Too bad it takes so long to approve a new natural gas pipeline like PennEast–a $1 billion, 120-mile, 36-inch pipeline from Dallas (Luzerne County), PA to Pennington (Mercer County), NJ. Why does it take so long–years, in fact? Well there’s the federal regulatory process. But then there are the multiple, ongoing challenges from Big Green groups, people who irrationally hate all fossil fuels. Big Green launches lawsuit after lawsuit in an attempt to bury projects like PennEast in legal horse manure. One of the chief purveyors of said horse manure is THE Delaware Riverkeeper (Maya van Rossum). What if PennEast had been built two years ago, right after filing their well-laid-out, safe plan? If it had been built, consumers in PA and NJ over the past two winters would have saved $1.3 billion, according to a new study by Concentric (full copy below). Can you imagine the good things that could be done with an extra $1.3 billion in the hands of private citizens? All of the economic benefits that would ripple through the economies of PA and NJ? Instead, all of that benefit is being blocked by a few radical greens…
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LNG Exports to Add $1-$2 Trillion to U.S. Economy by 2050

Here are some numbers that are, frankly, hard for us to wrap our heads around. LNG Allies, a nonprofit trade group, recently issued a study they conducted showing that LNG exporters will add between $716 billion and $1.267 trillion in cumulative “direct, indirect, or induced value added” to the U.S. economy by 2050. Yes, trillion, with a “t”. During the same period of time, the study says value added to the economy from supplying the natural gas to those LNG plants (that is, all of the drilling and fracking), will be worth $948 billion to nearly (gasp) $2 trillion! No wonder President Trump is pushing hard to get more LNG export plants online. Here’s a quick overview, followed by a copy of the study/slide deck…
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WV’s Thrasher Says Tariffs “Shouldn’t” Derail China Shale Investment

West Virginia Secretary of Commerce, Woody Thrasher, once again addressed the issue of an ongoing trade war with China at yesterday’s West Virginia Oil and Natural Gas Association (WVONGA) conference at Oglebay Park. Last November Thrasher signed a memorandum of understanding with the Chinese government, an agreement in which the Chinese pledged to spend $83.7 billion over the next 20 years in WV’s shale and petrochemical sectors (see China Agrees to Invest Amazing $83.7 BILLION in WV Shale, Petchem). So far, six months later, not one red yuan has been invested. And since that time, a trade war has erupted. President Trump told a number of countries, including China, that the U.S. has had enough of being screwed over in trade deals. It’s time to emphasize “fair” instead of “free” when it comes to trade. China (and other countries) have a history of “dumping” steel in our country–selling it at far below the cost of producing it. Such practices result in our steel companies closing their doors, sometimes permanently. Later on, when a country has the market cornered, the price goes up. Trump recently slapped China with a 25% steel tariff and 10% aluminum tariff. China isn’t happy. The question becomes: Will China use their promised $83.7 billion investment in WV as a bargaining chip in the trade war? Will China slow, or even cancel, their investments in WV’s shale industry? Back in April Thrasher, at another industry event, said he doesn’t think so (see WV’s Thrasher “Hopeful” First Chinese Project Announcement Soon). At yesterday’s WVONGA event, Thrasher reiterated that he believes there will be a flurry of announcements “soon” about the first projects China will invest in, and that China will not cancel their promised WV investments…
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Penn State to Help Create New Biz Opportunities from Shell Cracker

The Penn State campus in Erie County (called Penn State Behrend) has been tapped by the PA Dept. of Community and Economic Development (DCED) to be the “lead partner” for developing business and market opportunities for the state related to the mighty $6 billion Shell ethane cracker–currently under construction in Beaver County. Erie County where Behrend is located is certainly not next door to the cracker, not nearly as close as some other Penn State campuses. So why was Behrend selected? In a word, plastics. “The strength of Erie’s plastics industry and the success of Penn State Behrend’s School of Engineering, which offers one of only six accredited U.S. plastics undergraduate programs, makes Erie of particular interest to DCED.” According to DCED’s Denise Brinley, senior energy adviser, “Penn State Behrend can provide critical connections to research support, materials testing and a talent pipeline that will add value to this large-scale petrochemical investment and associated growth in the plastics sector.” Penn State is kicking in a $250,000 grant to their Energy University Partnership for oil and gas strategies, to help prime the pump…
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WV’s Thrasher “Hopeful” First Chinese Project Announcement Soon

Yesterday the seventh Marcellus and Manufacturing Development Conference was held in Morgantown, WV. The event keynote speaker was Steve Winberg, the U.S. Dept. of Energy’s Assistant Secretary for Fossil Energy. He talked about the relationship between manufacturing and shale production. Fortunately for us, Winberg (part of the Trump Administration) said the DOE’s attitude is to not interfere with the shale miracle. Other speakers included Brian Anderson, director of the WVU Energy Institute. However, it was a brief comment made by WV Secretary of Commerce, Woody Thrasher, that really caught our attention. Last November Thrasher signed a memorandum of understanding with the Chinese government, an agreement in which the Chinese pledged to spend $83.7 billion over the next 20 years in WV’s shale and petrochemical sectors (see China Agrees to Invest Amazing $83.7 BILLION in WV Shale, Petchem). So far, five months later, not one red yuan has been invested. What’s the holdup? For one thing, there’s a developing trade war (see Will Trade War with China Affect $83.7B Investment in WV Shale?). Thrasher said yesterday he doesn’t think the trade war will interfere with China’s WV investment (if wishes were horses…). Thrasher also said he’s “very hopeful in the near future that we’ll be able to announce the first project” using Chinese money. Now that is definitely good news–perhaps the biggest news coming from yesterday’s event…
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China Threatens U.S. Shale Oil & Gas with Prospect of Tariffs

We don’t know how many times we have to say it (have said it for years, continue to say it): The Chinese are not America’s friends. They are our enemies. We tend to forget it because we love our iPhones and other electronics built by Chinese children. We’ve become far too cozy, too comfortable, in trusting that China will not do anything to harm America for fear of ending their gravy train. When President Trump wisely slapped tariffs on China in retaliation for their THEFT of our companies’ intellectual property and knock-off goods, China felt the need to respond. Part of that response is proposed tariffs on liquefied petroleum gas (i.e propane), and petrochemical products. The not-so-subtle threat is that they may add oil and LNG to the list. Since China imports more U.S. LNG than any other country, a tariff would definitely hurt. Ditto for oil. We currently export 435,000 barrels a day of oil to China. If that oil flow were suddenly shut down, it would have a dramatic impact on the price of oil here at home (sending West Texas Intermediate into the basement again). Meanwhile, West Virginia’s Secretary of Commerce, Woody Thrasher, says he “hopes” all this trade war stuff won’t affect China’s announced $83.7 billion investment in WV, an investment in shale and petrochemicals. The trade situation with China is high stakes stuff. We’re just glad the guy who wrote The Art of the Deal is the one playing a necessary game of chicken with China…
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Will Trade War with China Affect $83.7B Investment in WV Shale?

Chinese moo goo gai pan

Last November President Trump and assorted state officials, including West Virginia State Commerce Secretary Woody Thrasher, visited China as part of a trade delegation. On that trip, China agreed to invest a total of $250 billion in American (mostly energy) projects, $83.7B of which (a full third!) will go to investments in West Virginia (see China Agrees to Invest Amazing $83.7 BILLION in WV Shale, Petchem). It was all sunshine and flowers and butterflies. But now there’s a big, black cloud on the horizon (perhaps we always knew it was too good to be true). Following a seven month investigation into Chinese theft of American intellectual property, last week President Trump told the U.S. trade representative to levy tariffs on $50 billion worth of Chinese imports. China is threatening to impose tariffs on U.S. products in return. A good, old-fashioned trade war. The question has been raised, What about that promised $250 billion of Chinese investment in Uncle Sam? Will China move forward with those investments, or perhaps withhold them? According to one global energy expert, “The Chinese are going to see these things [the promised investments] as bargaining chips.” Which points out the problem with relying on an enemy’s investments…
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M-U Could Support 8 Crackers – Why Don’t Companies Build More?

Tom Gellrich, founder of Top Line Analytics–a consultancy focusing on downstream shale gas development like ethane crackers–spoke Wednesday at Kallanish Energy’s “Crackers, Storage & Pipelines 2018” event at Southpointe. He had some interesting things to say. Among them: The Marcellus/Utica region has enough ethane to easily support up to eight ethane cracker plants–plants the size of the massive Shell cracker being built now in Monaca (Beaver County), PA. So far only Shell has pulled the trigger and begun to build such a plant. PTT Global Chemical, based in Thailand, is actively considering (and likely) to build a second regional cracker plant in Belmont County. So the multi-billion question is this: Why aren’t more companies building crackers in our region, given the abundance of cheap ethane? Gellrich had some thoughts on that…
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New Study Says Petchem Investment in M-U Better than Gulf Coast

This week representatives from Shale Crescent USA are in Houston, TX attending the 33rd Annual World Petrochemical Conference–and they have in hand a dynamite study that shows it’s more cost effective to build a petrochemical plant in the Marcellus/Utica region than it is along the Gulf Coast. Which is heresy if you live along the Gulf Coast. “Benefits, Risks, and Estimated Project Cash Flows: Ethylene Project Located in the Shale Crescent USA versus the US Gulf Coast” is an independent report by IHS Markit commissioned by Shale Crescent USA to evaluate and compare the financial returns and risks of a major petrochemical and plastics investment in the region with an identical investment in the US Gulf Coast. The numbers don’t lie. Here’s one juicy statistic from the newly released study: ethane (the feedstock used to make raw plastics) in our region costs 32% less than it does in the Gulf Coast region. One more factoid from the report: If the Marcellus/Utica were its own country, it would be the #3 natural gas producing country, IN THE WORLD! Our region produces more natural gas than the countries of Saudi Arabia, Iran and Qatar. Last year the Shale Crescent folks were the new kids at the World Petrochemical Conference. They were just about laughed out of the event. We have a feeling this year is going to be a lot different…
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Is Lycoming County, PA in Midst of “Natural Gas Resurgence”?

Lycoming County, PA

In a recent interview, the CEO of the Williamsport/Lycoming Chamber of Commerce said that in Lycoming County the “natural gas industry is enjoying a resurgence.” Which struck us as odd, given our own recent research into the number of wells being drilled (or lack thereof), and the decrease in natural gas production in Lycoming County. We suppose it all depends on what you mean by resurgence. A resurgence in drilling and production? We’d have to answer that with a “no.” However, if you’re talking about a resurgence in jobs related to the natgas industry because of new pipeline projects? Apparently that answer would be a big “yes”…
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“Free” NatGas in Texas Permian Changes Shale Gas Economics in M-U

We spotted an article appearing on the Forbes magazine website that has a chart that stopped us cold in our tracks. The article was written by Jude Clemente, one of our favorite contributors to the Forbes website. He includes three charts in the article to update folks who have an interest in the natural gas space (the article is titled 3 Natural Gas Charts To End Winter 2018). The first chart in the list is “U.S. Natural Gas Wellhead Breakevens by Basin” and shows how much money a driller must make in order to break even–still make a profit. How much money, on average, does a driller have to make per thousand cubic feet (Mcf) in, for example, the Marcellus Shale basin in order to stay profitable? That number would be $2.15/Mcf. Anything above $2.15 and the driller makes money. (Bear in mind these are averages. Some drillers, like Cabot Oil & Gas, have lower expenses and can make money at much lower prices per Mcf than others.) What about the Utica? Drillers need to make an average of $2.41/Mcf in the Utica to break even. But at the top of the chart is a rather wild number. Drillers in the Permian Basin (in Texas) can LOSE or spend up to $2.36/Mcf and still “break even.” What? How can that be?…
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Japan Wants a Piece of WV Petchem Industry – Just Like China?

The Japanese recently found out more about the Marcellus/Utica and the region in the Mid-Ohio Valley called the “Shale Crescent.” In June 2016, MDN told you about an economic development group of business and government leaders from Ohio and West Virginia (the Mid-Ohio Valley) called Shale Crescent (see Group Promotes Mid-Ohio Valley for Petrochem: Shale Crescent USA). The group was two years in the making and officially launched in June at a public event in Washington County, OH. The aim of the group is to attract manufacturers–petrochemical manufacturers–to set up shop in the region. Now, nearly two years later, the Japanese are interested–particularly in West Virginia. Why?…
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PA’s Uneven Tax Treatment of Marcellus Industry vs. Amazon HQ2

What if a private company wanted to locate in a state, bringing with it 243,000 direct and spin-off jobs with an average salary of $93,000? And what if that company invested billions of dollars in the state economy? No doubt the state (and local municipalities) would offer up plenty of incentives to ensure they get the business. Pittsburgh and Philadelphia (and the State of Pennsylvania) are doing just that–offering up all sorts of incentives to attract Amazon to build its HQ2 project in the Keystone State–a project that promises a huge investment and thousands of employees. However, Amazon’s HQ2 will not employ 243,000 people and inject billions–not anywhere close. But there is an industry that is ALREADY doing exactly what we’ve outlined in the opening sentence. The Marcellus Shale industry has created 243,000 direct and indirect jobs (with an average salary of $93K per year) and has already pumped billions of dollars into the economy. And yet the State of PA and places like Pittsburgh and Philly are, in many ways, fighting against the industry! They don’t offer tax breaks, instead they offer new tax increases! What’s going on here? Why does PA treat Jeff Bezos and Amazon one way, and the Marcellus industry another? Why does PA pick “winners” and “losers” economically? That’s the important topic of a column we recently spotted by Lowman Henry, chairman and CEO of the Lincoln Institute…
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