Marcellus/Utica NGL Production & Exports – Shortage Coming?

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The Marcellus/Utica region is a tale of two shales. One is dry gas, or methane only, and the other is methane plus NGLs–other hydrocarbons that come out of the hole along with methane, including ethane, propane, butane, and few others. NGL production can turn a breakeven or possibly money-losing venture into a profitable venture. The wet gas area is located in portions of southwestern PA, eastern OH, and the northern panhandle of WV (see the map). Given the pandemic, fluctuating natgas prices, curtailments, and the general craziness in the markets, what do the next 12 months look like for NGL production in the M-U?
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Philly Petchem Workers Isolate 28 Days to Make Virus Equipment

Marcellus/Utica propane flows from eastern Ohio and southwestern Pennsylvania all the way to southeastern PA via the Mariner East pipelines (ME1 and ME2). A petrochemical facility operated by Braskem America in Marcus Hook (near Philadelphia) processes some of that propane, turning it into polypropylene–the raw plastic used to make N95 masks, hospital gowns, and sanitary wipes–items in critical demand right now to protect health care workers against the COVID-19 coronavirus. This will bring tears to your eyes as it did ours: Some 40 workers at the Braskem plant voluntarily decided to stay at the plant for 28 days straight–working 12-hour shifts–not leaving once during that time so they could be sure of no COVID contamination while they worked to make polypropylene that in turn would be used to make personal protective equipment for healthcare workers. We salute them one and all!
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With Condensate Near $0, Utica Drillers Shift Permits to Dry Gas

Last week MDN highlighted an article from the Pittsburgh Post-Gazette about the low low prices Marcellus/Utica condensate has fetched since the beginning of the year (see M-U Condensate Prices Briefly Go Negative, Down 91% from Jan 1). S&P Global is currently reporting prices for Utica condensate have not yet recovered, sometimes still dipping into negative territory. As a result, drillers are reducing their new permits and drilling in “wet gas” areas of the Utica and instead shifting gears to “dry gas” regions.
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PA Petrochemical Growth May Happen Due to…Coronavirus?

Quick: What’s the raw material used to make respirator masks, gloves, face shields and other high-demand products used by the medical community to combat the coronavirus pandemic? Correct, it’s plastics. And what is the primary feedstock used to make the plastic that in turn makes all of those live-saving products? Correct again: natural gas and natural gas liquids. Or another word for it, petrochemicals. The “Think About Energy” seminar series, usually held in-person, hosted its first virtual event yesterday. Four fantastic speakers spoke about how the coronavirus pandemic, among other things, may drive the expansion of petrochemicals in PA. Expanding the petchem industry in the Keystone State may literally be a life or death issue.
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Enverus Finds Bright Spot in the “Dark Side of the Boom”

Enverus, a leading oil and gas SaaS and data analytics company, has just released its latest FundamentalEdge report called, “The Dark Side of the Boom.” The report focuses on the new global supply and demand outlook since the failure of OPEC+ to reach an agreement on temporary production cuts resulting in an all-out price war. It also takes into account the effects on world energy demand as a result of the coronavirus. The report covers not only the crude oil situation but also natural gas, NGLs, rig count changes and more. What “overlooked bright spots” does Enervus find in a sea of bad news?
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M-U Condensate Prices Briefly Go Negative, Down 91% from Jan 1

The Pittsburgh Post-Gazette is reporting Marcellus/Utica condensate, produced in places like southwestern Pennsylvania and eastern Ohio, briefly touched and went below $0/barrel last week, before recovering slightly. The article says the price M-U drillers are getting for condensate is down 91% from January of this year. What’s lacking in the Post-Gazette story is context for how important (or not) condensate is as a revenue stream for M-U drillers.
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How Oil Crash/Virus has Altered Future of NatGas, NGLs, Midstream

Everyone, and we mean everyone, is still reeling from the double shock of the COVID-19 coronavirus and its effect on the world economy, and the Saudis and Russians pumping more oil, driving oil prices into the ground. Frankly, the COVID-19 virus is the bigger deal. It will have long-lasting effects for years to come on the U.S. economy, including a big effect on the oil and gas industry. The question is, what kind of effect? Is there any way to predict what may happen in the coming couple of years and longer? No one can really predict, but if anyone could, it would be the bright minds at RBN Energy. They’ve attempted the near-impossible: Try to predict how things will change following the COVID-19 lockdown (around March 6). Try to divine how the oil and gas (and NGL and midstream) worlds will change in the coming months and years. Their assessment is sobering.
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Ohio NGL Storage Permit Expires, Builder Says Project Still Alive

Mountaineer NGL Storage is planning to build an NGL (primarily ethane) storage operation in Monroe County, OH, located just across the river (and border) from West Virginia. Last summer David Hooker, president of Mountaineer and president of the parent company Energy Storage Ventures (located in Denver, Colo.) announced the project had received all necessary permits to begin construction, and that construction “could” begin by the end of March this year (see Mountaineer NGL Storage Says Construction Begins in OH 1Q20). One teeny tiny problem. One of the necessary permits needed for the project expired last week. What’s going on?
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WV Advances Bills to Attract NGL Hub, Cracker Plant, Downstream

The West Virginia House of Delegates Finance Committee approved two bills yesterday that would create two new tax credits. The aim is to boost more development in the natural gas industry in the Mountain State. One bill, House Bill (HB) 4421, is meant to attract a natural gas storage hub and an ethane cracker plant to the state. The other, HB 4019, is meant to attract “downstream” natural gas manufacturing facilities. Both bills now go to the full House for a vote.
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WV Legislature Advances Bill Granting Tax Credit for NGL Storage

Two weeks ago MDN told you about two bills important to the oil and gas industry in West Virginia that are quickly advancing through the state’s current 60-day legislative session (see WV House Advances 2 O&G Bills: Orphan Wells & Faster Permits). You may now add a third bill to the list–one previously not on our radar. House Bill (HB) 4421, called the “Natural Gas Liquids Economic Development Act,” is aimed at providing a tax credit to those who would store or transport natural gas liquids (NGLs).
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Mariner East Pipe Flips PA from Propane Shortage to Surplus

Credit: Energy Transfer

The 2014 Polar Vortex event, when most of the U.S. was plunged into record low temps for an extended period, created a propane shortage for many. One of the states most affected by lack of propane during that event was…Pennsylvania! Should such an event hit again, PA is now in the clear, thanks to the Mariner East pipelines.
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Did Federal Budget Passed This Wk Torpedo M-U NGL Storage Hub?

Appalachia Development Group is leading an effort to build a ~$10 billion (or $2.5B, or $3.4B, depending on your source) NGL storage hub in Appalachia–most likely in West Virginia (see WV’s US Senators Lead the Charge to Build $10B NGL Storage Hub). The project, called the Appalachia Storage and Trading Hub, needs a federal loan guarantee of $1.9 billion, which has been in the works for the past several years (see Appalachian NGL Storage Hub Gets Serious with DOE Loan Guarantee). The loan guarantee is now in doubt following a budget bill passed by Congress earlier this week.
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M-U Drillers Face Ongoing Challenge re More NGL Production

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Although the Marcellus (and Utica) is known worldwide as a “gas play”–meaning methane (CH4) production–a number of producers in southwestern PA, eastern OH and northern WV value the two plays for other hydrocarbons, NGLs (natural gas liquids). While methane or “natural gas” prices have gone low and stayed low, NGLs, which also come out of the ground along with methane, fetch much higher prices, and can make the difference between profitability and unprofitablity. But for M-U drillers there’s a problem with NGL production.
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Slowdown in Texas Permian Will Benefit Marcellus/Utica

U.S. shale regions (click for larger version)

Yesterday was the final day of the Hart Energy Marcellus-Utica Midstream Conference being held in Pittsburgh. While the first day’s sessions had “a somewhat downbeat tone” (see M-U Drillers Tell Pipeline Companies to Lower Fees, or Else), the second day’s sessions were more optimistic–especially with respect to our region’s prospects to ship natural gas and NGLs to other regions.
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Making the Case for Crackers, Other Petchem Plants in SWPA

Speaking of cracker plants and the exciting news that ExxonMobil is very actively searching for a location in the Marcellus/Utica region to build one (see today’s lead story), the fact that Exxon is looking is driving leftist environmental kooks bonkers. They hate the Shell cracker going up in Beaver County, and they want to ensure there are no other such plants built anywhere in the region–or at least in Pennsylvania. The eco-leftists have bullied Pittsburgh’s Mayor Bill Peduto to join their cause, who recently stated in a speech, “I oppose any additional petrochemical companies coming to western Pennsylvania.” The president of the Pennsylvania Chemical Industry Council has responded to Peduto’s inane comments, exposing him for the dunce he is.
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