Research

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    Deloitte’s View: 2014 Spending Shifts from Upstream to Midstream

    From time to time it’s helpful to zoom out to the “40,000-foot view” of the oil and gas industry, because understanding the bigger picture helps us understand the smaller picture that MDN concentrates on–the Marcellus and Utica Shale. One of the better analysts of the bigger picture (in our humble opinion) is consulting powerhouse Deloitte. John England, Deloitte’s U.S. Oil & Gas leader, recently posted a 40,000-foot view of what’s happening in the oil and gas sector in the U.S.–and where he believes it’s headed in 2014.

    England, quoting the Oil & Gas Journal, says E&P (exploration and production) spending in the U.S. was $354.8 billion in 2013. However, spending on the midstream–the pipelines and processing plants that get all of that production to market–was only $46.4 billion in 2013 (although that’s up 360% from the $12.8 billion spent on midstream in 2012). England says as we head into 2014, look for investments to continue shifting from the upstream sector (E&P) to the midstream sector–to infrastructure like pipelines and processing plants, refinery operations, and petrochemical facilities. MDN concurs. Just reference our massive list of 111 midstream/infrastructure projects underway or planned in the Marcellus/Utica (see MDN’s 2013 Databook Vol 2 Finds Staggering $40B in NE Midstream Projects). Here’s England’s take on where we’ve been, and where we’re headed in 2014…
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    IHS Research Predicts Gas Price will Stay at $4-$5/Mcf Until 2035

    An interesting new report is out from IHS. Researchers with IHS predict that the price of natural gas, because of the flood of new shale gas coming into the market, will stay somewhere between $4-$5 per thousand cubic feet (Mcf) at the benchmark Henry Hub for the long-term–like until 2035, at least.

    The report, titled “Fueling the Future with Natural Gas: Bringing It Home” (25-page executive summary embedded below) says shale gas can be profitably produced at $4/Mcf or less. One of many conclusions from their research: “…the North American natural gas resource base can accommodate significant increases in demand without requiring a significantly higher price to elicit new supply.” Translation: A LOT more shale drilling just ahead, even with relatively “low” prices. Here’s another fascinating conclusion from the study…
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    BP’s Annual Energy Outlook Through 2035 – Fool’s Errand?

    Yesterday BP, a huge driller with a sizable acreage position in the Utica Shale (84,000 leased acres), issued its annual BP Energy Outlook 2035 (full copy embedded below). The 96-page report sets out BP’s view of the most likely developments in global energy markets to 2035, based on up-to-date analyses. BP experts expect global energy demand to rise 41% from now until 2035 with 95% of that growth coming from “emerging economies.” According to BP, gas as a source of energy is growing fastest among the fossil fuels and by 2035 gas is expected to be at parity with coal–each providing about 27% of power needs in 2035. BP says shale gas will make up 68% of U.S. gas production by 2035.

    Of course, all of this speculation is fun to read, but frankly is just so much folly. MDN editor Jim Willis heard Charif Souki, CEO of Cheniere Energy address the predictions game at the Platts Global Energy Forum in New York City last December (see Energy Industry Leaders Gather at Platts Forum in NYC). At that forum, Souki said any kind of prediction beyond 2-3 years in the rapidly changing energy industry is meaningless. He said if you go back 20 years and look at those predictions about today, none of them predicted shale and how the industry would change so dramatically. We concur with Souki–making these kinds of predictions is a fool’s errand. Still, it’s fun to read and muse about what might be…
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    Quarterly OH Utica Shale Report from CSU: Huge Economic Impact

    Each quarter, researchers at Cleveland State University publish the Ohio Utica Shale Gas Monitor, a report that looks at the economic impacts of Utica and Marcellus Shale drilling in Ohio. The latest report was issued a few weeks ago and MDN has just now been able to locate a copy to share with you (full copy of the 39-page report embedded below). What does the report tell us? The number of counties with “strong” shale activity has gone to eight from 15, and the number of counties with “moderate” shale drilling activity has gone to five from 30. That’s a head-turner! The “strong” counties, in addition to producing methane (or dry gas), are also producing “commercial amounts” of natural gas liquids (wet gas).

    Here’s a good overview of the report as provided by NortheastPA.com:
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    Duke Study: Acid Mine Water in Fracking Reduces Radioactivity

    MDN has for years covered the story that some drillers would be happy to use acid mine drainage water for fracking–except enviro-nazis will sue them into the next lifetime for environmental contamination when they eventually dispose of what’s leftover after fracking (see PA Enviro Groups Oppose Using Acid Mine Water for Fracking as just one example). We now have an intriguing study from the mostly-anti-drilling Duke University that says if you use acid mine drainage water for fracking, it will reduce the amount of radioactivity in frack wastewater. Hmmm.

    There’s enough acid mine drainage water in this country to just about meet all fracking needs–if all of it were used (not practical of course). But using acid mine water could greatly reduce the amount of fresh water needed–especially in places where fresh water is in short supply. Under such a scenario, everybody wins–except enviro-nazis who demand nothing less than the obliteration of all fossil fuels as a source of energy. Here’s more details about this interesting Duke study that says using acid mine drainage for fracking can cut down on radioactivity in wastewater…
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    Must-Read IHS Report: Midstream/Downstream Spending Hits $90B/Yr

    a must readInformation Handling Services, or IHS, is the publisher of choice for the American Petroleum Institute (API). A new API/IHS study was published in December, but apparently just released to the public yesterday by the API. The study is titled “Oil & Natural Gas Transportation & Storage Infrastructure: Status, Trends, & Economic Benefits” (full copy embedded below).

    We previously told you the API/IHS estimates each year drillers in the U.S. spend on the order of $150 billion to drill new oil and gas wells (see US Spending $150B+ to Drill New Oil & Gas Wells Each Year). MDN editor Jim Willis heard at the recent Platts Global Energy Outlook Forum that midstream-specific spending is only $15 billion per year (see Energy Industry Leaders Gather at Platts Forum in NYC). This new IHS report provides further clarification on spending in the midstream and downstream. If you lump new yearly spending together for all midstream (pipelines & processing plants) and downstream (refineries and distribution), IHS says the number was actually $53 billion in 2010, and had rocketed to nearly $90 billion in 2013. IHS researchers believe spending will remain around $90 billion in 2014 and something close that, per year, until 2020. Truly astonishing numbers. And that’s not the only revelation contained in this “must read” report. Like, there are 1 million new jobs on the way because of all this spending…
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    Researchers Backpedal on Bloomberg Story about Fracking & Babies

    That was fast. It seems that Bloomberg’s article that implies fracking kills babies (see Another Flawed Fracking/Health Study Emerges…from Economics Conf) was a tad premature. According to Andy Revkin, environmental writer for the New York Times, the authors of the rumored research that reportedly shows a link between babies born close to fracking sites and low birth weight–didn’t want their research announced yet. They say they haven’t finished analyzing the data, it’s not peer-reviewed, and it’s not ready. The authors say Bloomberg jumped the gun and should not have printed their article.

    To which we say, why did the authors mention their research and their preliminary conclusions/findings a public conference, if they didn’t want it known? Doh! Apparently the blow-back has been so swift and so strong that the researchers are now backpedaling as fast as they can…
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    Drill Capital Launches Drill Research; Nifty Antero/Utica Report

    MDN does not usually run self-serving press releases that are the sum total of “look at us.” But sometimes we do–when the release piques our interest. Such a release was issued yesterday by investment firm Drill Capital–a firm focused on investing in the North American energy sector. According to yesterday’s press release, Drill Capital has formed a separate, dedicated research arm called Drill Research that will evaluate energy sector investment opportunities. Of course this is a marketing technique to attract customers (i.e. investors) to join Drill Capital. Certainly nothing wrong with that! What piqued our interest is their publication of a sample model portfolio highlighting Drill Research’s top pick. Which is? One of the top drillers in the Marcellus and Utica Shale: Antero Resources.

    By visiting the Drill Research webpage highlighted in the release, you can read their research and view the model portfolio. If you do, you’ll find interesting details about Antero, the Utica Shale, the Marcellus Shale and several other major U.S. shale plays. It’s definitely worthwhile info, which is why we share it with you…
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    WVU Prof Stokes Radioactive Fears, Says DEP Study Missing Research

    Say What?Here’s a story that we confess, we’re having a tough time wrapping our brains around. Allegations are swirling in West Virginia that one of three officially conducted studies for the state’s Dept. of Environmental Protection (DEP) released last year overlooked important data collection. The study in question was completed in December 2011 and released in February 2012. Titled “Pits and Impoundments Final Report,” the report looks at frack wastewater impoundments and water pits used in horizontal Marcellus Shale drilling (see WVU Study Finds Potential Problems with Frack Wastewater Pits for a copy of the full study). From what we can determine, solid waste, like drilling mud and “cuttings” (leftover rock and soil from drilling) were not part of that study–at all.

    But now, the Charleston Gazette identifies and quotes a WVU professor who supposedly worked on that study (although his name doesn’t appear in the study) who says researchers tried to test drill cuttings for radioactivity and were either denied access or put off/delayed until they finally ran out of time and had to file the report without doing the analysis. It’s now a big deal because anti-drillers are raising the specter that everyone is about to glow in the dark from radioactive drill cuttings going to landfills across the state. The WVU prof seems to be intentionally stoking those fears…
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    Another Flawed Fracking/Health Study Emerges…from Economics Conf

    Do they never tire of this crap? Apparently no. We have yet another “study” on how fracking kills people. The latest one comes from an economics conference (yeah, figure that one out). The so-called “research” (not yet peer-reviewed and not yet posted anywhere so it can be evaluated) was shared, or rumored to have been shared, at the annual meeting of the American Economic Association in Philadelphia. The rumored-not-yet-published study claims babies born close to shale drilling sites have an increased chance of being born with low birth weight–a 3.4% increased chance.

    Blow the horns! Wail and gnash teeth! Fracking kills! Well, it doesn’t kill, but a few “researchers” claim it maybe/might/could cause a few babies to have to put on some extra weight. But that’s not the narrative that will emerge. The narrative is that fracking kills, so let’s say it over and over as a mantra. Everyone ready? Let’s begin…
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    PA Marcellus Health Study by Geisinger Turns into Data Warehouse

    In August 2012 two major health system networks announced, to much fanfare, that they would partner to launch a multi-year study of the health impacts on residents living near Marcellus Shale drilling sites (see Health Care Systems Partner to Study Marcellus Impacts). To which we said, great! It’s about time some real science is done instead of pseudo-scientific fantasies spun by people like professors Howarth and Ingraffea at Cornell University. But we quickly learned that Geisinger Health Systems and the other participants in this new study were not willing to fund it themselves–they have their hands out and want someone else to foot the bill. So we’ve had some enjoyment over the past year and a half, poking fun at the non-study study (see PA Marcellus Health Study Still No Pulse – Needs Extra $24M).

    Time for an update from the AP on the non-study study. The short version: The comprehensive “study” of health impacts has now morphed into a “data warehouse” for researchers as Geisinger and the other partners continue to putter. Oh, and they still have their hands out…
    Read More “PA Marcellus Health Study by Geisinger Turns into Data Warehouse”

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    Peer-Reviewed Fracking Survey Peers into U.S. Minds, and Finds…

    A new survey of Americans on the topic of fracking appears in the upcoming February issue of the peer-reviewed journal Energy Policy. The survey, titled “Fracking” controversy and communication: Using national survey data to understand public perceptions of hydraulic fracturing (full draft copy embedded below) was actually conducted in September 2012–so the data is already quite old. Apparently 15 months is how long it takes to get your articles reviewed by journals like Energy Policy. A lot has happened in the last 15 months: FrackNation and Gasland II were both released, Dimock faded away as an issue, Pennsylvania’s natural gas production more than doubled, the U.S. became the world’s #1 producer of both natural gas and oil–the list goes on. Still, the survey is interesting and yields confirmation of what we already know along with the odd insight into what can be used as a predictor of whether or not someone will support fracking and shale drilling.

    For example, if you’re conservative, educated and like to let the free market determine which energy sources should win, you support fracking. Conversely, if you’re liberal, less educated and like the idea of government picking the winners (that is, you have a touch of fascism in your philosophy), you don’t support fracking. If you’ve been reading MDN for any length of time, you already know all of this. The benefit of this particular survey is the scientific “rigor” used in testing which characteristics are good predictors of support or lack of support–and which characteristics are not good predictors. That’s what is interesting to MDN about this particular study.
    Read More “Peer-Reviewed Fracking Survey Peers into U.S. Minds, and Finds…”

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    Carroll County Anti-Drillers Eager to Help with Air Quality Study

    The anti-drilling group Carroll Concerned Citizens (Carroll County, OH) is only too eager to help out with a new air quality study that will be conducted by the University of Cincinnati (UC) and Oregon State University’s (OSU) College of Medicine in Carroll County. Perhaps a little too eager. Using a grant from the National Institutes of Health, the two universities are teaming up to place passive air quality sampling equipment on properties close to active or recently-completed shale drilling operations. Carroll Concerned Citizens (CCC) is one of the local “partners” that’s “assisting” in the study. Err, yeah. Please tell the CCC volunteers this is a scientific study, K? And tell them to keep their cigarettes at home when they’re out and around checking the air sampling equipment, K?

    The eager-beaver announcement from CCC about the new study:
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    USGS Study Finds 15% of NY Water Wells Already Have High Methane

    Well, imagine that. Even more scientific evidence has just arrived, courtesy the US Geological Survey (USGS), that there’s a whole lotta methane in the ground in the Southern Tier of New York State. So much methane that 15% of the water wells tested across nearly 2,000 square miles for more than a year by the USGS show methane levels so high that the methane needs to be monitored and/or mitigated. That is, miles away from any fracking or existing gas wells, water wells are saturated with naturally occurring methane. In case you miss the point: Fracking is NOT the cause of methane migrating to water wells in northeast PA and in New York. There is no shale fracking in NY! And yet, there’s methane–so much you can, oh, light your tap on fire?

    What say you now anti-frackers? Yeah, we thought so. There’s NOTHING you can say. Your lies are exposed. Here’s the press release and a full copy of the study released yesterday by the USGS with data from their tests of water wells in NY state:
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    EIA Early Release of 2014 Report Shows Plenty of Gas for Exports

    Yesterday the U.S. Energy Information Administration (EIA)–the one government agency MDN actually likes and believes to be effective–released preliminary data and an abridged version of their Annual Energy Outlook (AEO) for 2014 (full copy of the “early release” version embedded below). The full version will be along in Spring 2014.

    So what does the early release version show? U.S. production of crude oil and natural gas will continue to go through the roof–thanks to natural gas. Crude oil production will continue to grow until 2020 or there about, before leveling off. Natural gas? Production increases until at least 2040. In addition, EIA says the increased production in natgas means exports–by both pipeline and LNG carriers–won’t negatively affect domestic prices. That is, EIA report provides justification for further approvals to export American natural gas…
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    Very Cool Map from ODNR Showing OH Utica Wells Permitted/Drilled

    Last week the Ohio Dept. of Natural Resources (ODNR) released a very handy map that shows where Utica Shale drilling is happening in the state. It has different colored dots to denote where permits have been issued, where wells have been drilled, and where wells have been drilled and are now producing. Running along the right bottom corner is a tally (as of 12/6/13) for how many permits have been issued by driller, which now totals over 1,000 permits.

    We really like this map, and you think you will to! Here it is:
    Read More “Very Cool Map from ODNR Showing OH Utica Wells Permitted/Drilled”