One-Third of 45 Active Major Pipeline Projects Located in M-U
Even with the onslaught of leftist attacks on the fossil fuel industry–in particular against natural gas pipelines–there are still some 45 major natgas pipeline projects projected to come online over the next five years. Of those 45, we count 16 that are located in the Marcellus/Utica (i.e. Appalachian) region. There’s certainly no guarantee all 16 (or all 45) will end up getting built. But if the 16 pipe projects in the M-U do get built, that will add another 7.9 billion cubic feet (Bcf) of M-U molecules flowing to other markets. Cool.
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The NYMEX futures price for natural gas hit yet another 7-year high yesterday, closing up $0.20 to close at $5.46/MMBtu. The national spot price average (for physically traded/delivered gas) was up $0.18 to an average of $5.53/MMBtu. According to Bespoke Weather Services, the reason for ongoing run-up in prices is fear: “It is all fear in the market, owing to storage levels that are viewed as less than sufficient in the event of a cold winter, not just here in the U.S. but even more so over in Europe.”
Because of the soaring price of natural gas (see our companion post today), and because gas drillers have shown remarkable restraint and a real effort to scale back capital spending in an effort to generate free cash flow, investors have taken note and like what they’ve seen. The share price in most pure-play shale gas producers (mainly those in the M-U) posted double-digit gains in value over the past month.
The so-called budget reconciliation bill Democrats are trying to force through Congress against the will of the American public, a $3.5 trillion monstrosity, will do great harm to the oil and gas industry. On Monday we told you that 130 energy, manufacturing, business, and labor trade organizations, led by the American Petroleum Institute, are sounding the alarm about the methane tax that’s part of the bill (see 
LDC Forums held its Mid-Continent Forum (in person!) in Chicago earlier this week. One of the hot topics of discussion was ESG (environmental, social, governance) and RSG (responsibly sourced natural gas). We’re not big fans of either ESG or RSG, but hey, what do we know? At any rate, you can’t miss all the chatter about ESG/RSG over the past six months or so. Everyone (and we mean everyone) in the oil and gas industry seems to have gotten the ESG/RSG religion. So we found it interesting that members of a pro-ESG/RSG panel said, “it could be some time before a mature market develops for certified gas supply.”
We suppose we should have known. In querying the same Ohio Dept. of Natural Resources (ODNR) database we’ve been querying for years (maintained by ODNR), beginning about two months ago we noticed no new permits had been issued for new Utica Shale wells in the state. A week or two here and there is not all that unusual given the downward trend in drilling new wells. But the trend went on for two months. We were suspicious. A couple of sharp MDN readers emailed to say that ODNR is producing regular reports of new Utica well permits at a different location. Doh! We wish the ODNR had posted some sort of notice about the change in not continuing to update their other database. At any rate, we’ve gone back to early July to harvest and present all of the missing Ohio new weekly permit reports below…
MARCELLUS/UTICA REGION: Archaea Energy completes merger, poised to begin as publicly traded company; OTHER U.S. REGIONS: Los Angeles County votes to phase out oil and gas drilling; NATIONAL: Oil surged higher Wednesday; Chevron and Enterprise exploring carbon storage ops; Pipeline integrity programs a ‘growing business’ for CNG/LNG providers; How long can U.S. shale producers resist the oil price rally?; U.S. gas production set for big increase in 2022; INTERNATIONAL: Natural gas looks to remain key component as companies, nations lower emissions.
Spire STL is a 65-mile pipeline that connects to and flows Marcellus/Utica gas from the Rockies Express (REX) pipeline to residents and businesses in the St. Louis, MO area. The pipeline began flowing gas in late 2019 (see 
In May MDN told you about one of the oddest combinations in recent memory–the merger of Permian driller Cimarex Energy with Marcellus driller Cabot Oil & Gas (see 
Once again we’re talking about the price of natural gas–both the NYMEX futures price and the physical spot price. Yesterday the NYMEX hit a new post-pandemic high of $5.26/MMBtu. The NGI national average for spot prices (physical gas traded at hundreds of trading hubs across the country) rose to $5.35/MMBtu. The spot price in the Marcellus/Utica in both the northeastern and southwestern portions of the play also rose to new highs and is (gasp) coming close to the levels we saw during February and Winter Storm Uri. Again we ask the question: How long will prices stay this high (or even go higher)? We have some insight on that question below.
Ever hear of a “market enhancement” royalty clause? If you’re a Pennsylvania landowner, or perhaps a landowner in Ohio and West Virginia, you likely have. Even if you (as a landowner) have a lease that disallows post-production deductions from your royalty check, many leases have market enhancement clauses that allow the driller to deduct certain expenses if they can process the gas and sell it to a distant customer for more money than they can get locally. A higher price for the gas theoretically means you the landowner get a bigger royalty check, right? Not so fast…
Although Germany and Europe are far behind the U.S. in many ways, they are ahead of us in one way: LNG by rail. Three European LNG (liquefied natural gas) companies combined to successfully test an LNG delivery by railcar to a German power plant in Bavaria owned by utility company Uniper. The LNG was shipped some 500 miles (800 kilometers) without any problems. The specialized tank cars, if widely adopted in Europe, will no doubt make their way across the planet, including here in the U.S. LNG by rail is an important alternative to pipelines, especially in the U.S.