NGI The Weekly Gas Market Report / NGI All News Access

Industry Briefs

The Federal Energy Regulatory Commission has approved for early environmental review Sempra Global's proposal to construct facilities to liquefy natural gas for export and expand a pipeline that serves the existing liquefied natural gas (LNG) terminal in Hackberry, LA. Sempra Global asked FERC to begin the review process on the Cameron LNG Liquefaction Project and Cameron Interstate Pipeline LLC's and Cameron LNG LLC's planned expansion project. "Cameron LNG plans to construct three liquefaction trains, capable of exporting a total of 12 million metric tons per year of LNG; a fourth 160,000 cubic-meter full containment storage tank; and additional facilities on land adjacent to the existing Cameron LNG terminal in Hackberry. The related pipeline project would add bi-directional flow capability to the existing Cameron Interstate Pipeline, allowing the pipeline to transport gas from various interstate pipeline interconnections to the LNG terminal for export, as well as sending out regasified LNG from the LNG terminal to the same pipeline interconnections," Sempra told FERC [PF12-13]. As part of the pipeline project, Cameron plans to build a 66,0000 hp compressor station and 21 miles of 42-inch diameter pipeline in Cameron, Calcasieu and Beauregard parishes. It plans to file applications in December.

The Energy Information Administration (EIA) has posted on its website a survey of proposed new inter- and intrastate natural gas pipeline and storage projects, which it plans to update quarterly. The spreadsheet on upcoming natural gas pipelines provides a status update, plus other data, including: capital cost estimates, ownership information, design capacity, pipeline diameters, regulatory jurisdiction, project type, market served, approximate in-service dates and other details. There are 107 prospective gas pipeline projects. The listing also includes 670 completed projects going back to 1997. The listing of upcoming natural gas storage facilities includes 36 new projects, all facilities that are expected to enter service from 2012 through 2014, including all major types of natural gas storage fields. There also are 12 proposed expansions of existing storage fields.

The California Public Utilities Commission's (CPUC) five-member state regulatory commission is showing some cracks in consensus after 10 years of being headed by former utility senior executive Michael Peevy, former president of Southern California Edison. A recent proposal by Pacific Gas and Electric Co. (PG&E) to invest utility ratepayer funds in a solar demonstration facility was rejected on a 3-2 vote; Peevey was on the losing side. He sponsored an alternative order that would have approved PG&E's plans to invest $9.9 million in a solar photovoltaic facility through the Silicon Valley Technology Corp., but it was rejected by a majority.

Asian investors Temasek Holdings Pte. Ltd. and RRJ Capital have agreed to put $468 million into Cheniere Energy Inc., which plans to use the proceeds to buy $500 million of the $2 billion of equity securities expected to be issued by Cheniere Energy Partners LP to finance Sabine Pass LNG (see NGI, April 23). Temasek, RRJ Capital and Cheniere also discussing a partnership to develop LNG sales, marketing and trading relationships and opportunities in Asian markets, Cheniere said. The partnership would market LNG from the proposed Sabine Pass facility as well as the company's proposed Corpus Christi, TX, LNG liquefaction facilities (see NGI, Dec. 19, 2011).

New taxes on companies drilling for natural gas and oil in Ohio have the support of a majority of the state's voters -- especially if the resulting revenue would be spent to cut income taxes for residents -- according to the results of a recent Quinnipiac University poll. The survey of 1,069 registered voters, which was conducted May 2-7, found that 55% of respondents support a new tax on companies drilling for gas and oil in the state, and 60% said they would support such a tax if the money raised was used to cut income taxes for Ohio residents. The poll also found that respondents support natural gas and oil drilling in the state 64-29%, and an overwhelming 82% think drilling will create jobs. And while a larger number of respondents (45%) think fracking will cause some environmental damage than those who believe fracking won't harm the environment (19%), more than a third (36%) answered that question "don't know." About the same number of respondents (35%) said they have not heard or read anything about fracking.

Eagle Ford operator Paloma Partners II LLC is being taken over by Marathon Oil Corp. for $750 million in cash. The partnership owns about 17,000 net acres, primarily in Karnes and Live Oak counties in South Texas. Net production as of April 1 was about 7,000 boe/d. Principal shareholders are privately held Paloma Resources LLC, Encap Energy Capital Fund VII LP and Macquarie Americas Corp. The sale is expected to be completed by the end of September.

MarkWest Energy Partners LP is building out its services for Appalachian producers with the $512 million acquisition of Pennsylvania-based Keystone Midstream Services LLC. The transaction, set to close before the end of June, gives MarkWest two cryogenic gas processing plants with 90 MMcf/d of capacity, a gas gathering system and associated field compression in Butler County, PA, as well as the opportunity to expand operations into neighboring states. Keystone is owned by Stonehenge Energy Resources LP and affiliates of Rex Energy Corp. and Japan's Sumitomo Corp. Under the sales agreement Rex and Sumitomo also agreed to dedicate an 895 square-mile area of their drilling venture to MarkWest. To support Rex's drilling program growth, MarkWest plans to lift capital expenditures by up to $500 million over the next five years to expand the Keystone system. Rex and MarkWest Utica EMG LLC also executed a letter to discuss similar gathering, processing and NGL fractionation for portions of Rex's Ohio Utica acreage, where it now is drilling its first well in Carroll County, OH.

The natural gas and oil industry added nearly 12,000 jobs in Oklahoma over the last two years and remains the state's "defining industry," according to a report from the Steven C. Agee Economic Research and Policy Institute at Oklahoma City University. Labor income, including wage and salary disbursements and self-employment income, in 2011 lgrew to levels very near their pre-recession peak, providing a statewide average compensation per job of more than $113,000, according to the report, which was commissioned by the Oklahoma Energy Resources Board. "Income growth was strongest in the field, reflecting increased drilling activity and increased complexity associated with today's drilling technique," and average income from drilling jobs has grown significantly since the recession."

Early indications point to natural gas development having a positive impact on state tax collections in counties in Pennsylvania's Marcellus Shale region, according to an analysis by Pennsylvania State University researchers. "Marcellus Shale and Local Collection of State Taxes: What the 2011 Pennsylvania Tax Data Say," was published by the university's Center for Economic and Community Development within the College of Agricultural Sciences. The report, which updates a similar analysis done last year using 2010 data, looked at county-level state tax collections from 2007 to 2011 and the data suggested that sales tax collections in counties with more Marcellus development continued to outperform collections in counties with less or no Marcellus activity. The increases were particularly dramatic in big producing counties: Bradford (50.8%), Greene (31.4%) and Susquehanna (27.4%), which are three of the top six counties in the number of Marcellus gas wells.

The Joint Landowners Coalition of New York Inc. has presented a 10-point landowners' "declaration of rights" to the New York State Assembly. In its declaration the group, which has about 70,000 members, asserted that the have the right to pursue economic opportunities, flexibility for negotiating leasing terms with developers, and for the timely development of private property, among other things. It also is opposed to local moratoriums on hydraulic fracturing, abitrary setbacks and "excessive regulations [that] serve no public interest."

Travis County, TX, District Court Judge John Dietz reversed his position and ruled April 30 that Southwest Royalties Inc. had not proven that oil and gas production equipment qualifies for the state's tax exemption on manufacturing equipment. Dietz had issued a bench ruling on April 12 in favor of Southwest, a subsidiary of Clayton Williams Energy Inc. (see NGI, April 23). An attorney representing Southwest said the company had not yet decided whether to appeal. The case is Southwest Royalties Inc. v. Combs et al. (Cause No. D-1-GN-09-004284).

Regulators with the Indiana Department of Environmental Management (IDEM) have submitted a proposed air quality permit for a $2.5 billion substitute natural gas (SNG) facility to the U.S. Environmental Protection Agency (EPA) for review. Under Title V of the Clean Air Act, the agency has until June 21 to review and offer comments to the permit IDEM has written for Indiana Gasification LLC's (IG) proposed facility near the Ohio River in southwestern Indiana. IG plans to annually use about 3.85 million tons of Illinois Basin coal, and possibly some petroleum coke, to generate 47 million MMBtu/year of pipeline-quality SNG. Under the terms of a 30-year purchase agreement, the Indiana Finance Authority would buy about 80% of the natural gas (38 million MMBtu/year) from the facility for eventual resale to residential and small business customers in the state. The facility would also annually produce about 5.5 million tons of liquefied carbon dioxide (CO2), which IG plans to sell to oil producers in the Gulf Coast region for enhanced oil recovery operations.

Houston-based Carrizo Oil & Gas Inc. posted records during the first quarter for natural gas, natural gas liquids (NGL) and oil production as well as chart-topping revenue, largely thanks to the Eagle Ford Shale of South Texas and the Barnett Shale in North Texas. Meanwhile, Marcellus Shale activities are ramping up. "Our oil production rate of 5,945 b/d for the quarter came in slightly above the high end of our range of guidance due to quicker-than-anticipated initiation of production from new wells in the Eagle Ford," said CEO Chip Johnson. "Our gas and NGL production of 116,687 Mcf/d came in above our forecast primarily due to lower-than-expected declines in Barnett production. Carrizo oil production increased 91% from the fourth quarter of 2011. Total production came to 13.9 Bcfe, or 152.4 MMcfe/d, an increase of 16% from the fourth quarter of 2011. The year-over-year increase was primarily due to increased production from new wells, partially offset by normal production decline and the sale of substantially all of the company's noncore area Barnett Shale properties to KKR Natural Resources in May 2011.

Texas natural gas producers are suing the City of Arlington, TX, to stop a recently enacted $2,400 per well annual fee on operators. The fee's anticipated $781,450 annual revenue would fund the city's "Natural Gas Well Preparedness and Response Plan," which was adopted in March. The Texas Independent Producers and Royalty Owners Association and the Texas Oil & Gas Association filed a lawsuit in U.S. District Court for the Northern District of Texas, claiming that Arlington city officials have not explained how the fee, which the producers call a tax, would increase public safety as it relates to oil and gas operations. Arlington, which is in Tarrant County, overlies the Barnett Shale and is part of the Dallas-Fort Worth metropolitan area. Plan costs include hiring a natural gas well program manager, a natural gas well site safety and security fire inspector and six fire fighters assigned and specially trained to handle natural gas well incidents, council said. The department also planned to assign another 42 firefighters at the city's Fire Stations No. 1 and 9 to the mission. To the natural gas industry, the plan is redundant and expensive.

During the first quarter Pioneer Natural Resources Co. grew production by 10,000 boe/d to 147,000 boe/d, a 7% increase from the year-ago period, thanks to growth in its three core liquids-rich assets in Texas: the Spraberry field, the Eagle Ford Shale and the Barnett Shale Combo play. "Importantly, oil production increases accounted for 74% of the quarter-to-quarter growth," said CEO Scott Sheffield. Pioneer expects production growth to range 23-27% this year compared with 2011. This year's capital program is $2.8 billion, with $2.4 billion designated for drilling and $400 million designated for vertical integration.

As of May 1, some of the fees paid by producers to the Railroad Commission of Texas (RRC) increased by 150% to fund the Oil and Gas Regulation and Cleanup Fund, which was created by Senate Bill 1, passed by state lawmakers in 2011. The RRC's final rule to implement the surcharge was published in the Texas Register on Feb. 24. For example, according to the RRC's notice, among the largest of the affected fees charged by the RRC is one for a voluntary cleanup application, $1,000. The 150% surcharge now brings that fee to $2,500. The majority of the affected fees, however, range from $100-300.

Energy Transfer Partners LP's (ETP) $5.3 billion purchase of Sunoco Inc. isn't expected to close until the second half of this year, but integration of the two companies "is well underway," according to ETP CFO Martin Salinas. "We are already meeting with Sunoco and Sunoco Logistics [Partners LP] management teams to work on commercial and operational synergies, and integration teams have been assembled to begin looking at ways to incorporate Sunoco's operations into ours," Salinas said during a conference call with analysts. The combined company would be one of the largest and most diversified energy partnerships in the country through the expandion of ETP's geographic footprint and strengthening its presence in the transportation, terminaling and logistics of crude oil, NGLs and refined products (see NGI, May 7). ETP has been getting calls from "a lot" of third parties interested in acquiring Sunoco's retail business, but "nothing that has any traction associated with it," Salinas said.

The first natural gas injections have been made into the Ryckman Creek Gas Storage Facility in Uinta County, WY, with Northwest Pipeline and Overthrust Pipeline supplying the first gas, Ryckman Creek Resources LLC said. Construction of the 35 Bcf high-deliverability, multi-cycle storage facility began in late September, according to the Peregrine Midstream Partners LLC subsidiary. In addition to Northwest and Overthrust, the Ryckman Creek facility is to interconnect in phases over the the coming months to Questar, Ruby Pipeline and Kern River. Reservoir commissioning and pad gas injections are planned for this summer, with commercial operations and first customer gas injections slated to begin Sept. 1. Initial working gas capacity for the first phase is 18 Bcf for the 2012-2013 gas storage season, which would increase to 25 Bcf by spring 2013 and 35 Bcf by spring 2014. A planned second expansion would increase total working gas capacity to 50 Bcf or more, depending on market demand. Maximum phase one injection capability is to be 350 MMcf/d with a maximum withdrawal capability of 480 MMcf/d.

Calpine Corp. has signed short-term resource adequacy power supply contracts with Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas and Electric Co. to ensure that the natural gas-fired Sutter Energy Center isn't shut down. Without the contracts, the California Independent System Operator and the utilities indicated that the plant could be idled and they would have to rely on older, less-efficient gas-fired plants in the state. Longer-term contracts still would have to be negotiated.

Rapid City, SD-based Black Hills Corp. had to overcome a 22% decrease in natural gas prices and a 13 cents/share negative impact on 1Q2012 earnings from milder-than-normal winter weather. The energy holding company offset those negatives with substantial first quarter increases in oil and gas sales (23% overall), including a 40% increase in crude oil sales and a 19% increase in gas volumes. In various shale plays, including the Mancos Shale in the San Juan and Piceance basins, Black Hills will not continue drilling at the current $2/MMBtu gas prices.

Federal environmental regulations have delayed almost two dozen major oil and natural gas drilling projects in Utah and Wyoming that could create thousands of jobs and create billions in economic benefits, according to a report prepared for the energy industry trade group Western Energy Alliance (WEA). The report examined proposed well projects across the West as of Jan. 1 that were under a required review by the National Environmental Policy Act (NEPA). The 30-page study was prepared by Las Vegas-based SWCA Environmental Consultants. However, the timing of the report followed by one day Interior Secretary Ken Salazar's decision to greenlight Anadarko Petroleum Corp.'s plans to drill 3,700 natural gas wells in the Greater Natural Buttes area of Utah's Uinta Basin over 10 years (see related story). In February regulators also approved the South Unit Oil and Gas Development Project in the Ashley National Forest in northeastern Utah, also was cited in the report.

Summer power supplies along the West Coast appear more than adequate with forecasts calling for increased amounts hydroelectric power and low-priced natural gas in the Pacific Northwest, and the reports that the three-month outage at the San Onofre Nuclear Generating Station (Songs) in Southern California possibly ending in June. For the first four months of the year, water levels turned out to be 107% of normal in the Columbia River Basin, according to the Northwest Power and Conservation Council.

©Copyright 2012 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus