After five consecutive quarters of falling U.S. rig counts, onshore activity will improve through the rest of the year, according to a forecast by Baker Hughes Inc. There were 1,748 U.S. rigs in operation at the end of the first quarter, CFO Peter Ragauss said. “We anticipate that the rig count will rise to an average of 1,800 rigs for the second quarter. This would be the first increase in U.S. rig count following sequential declines over five consecutive quarters. And the rig count is expected to rise over the second half of the year.” Overall, “the increase from the first quarter is expected to be about 100 rigs, to a 4Q2013 average rate of approximately 1,850 rigs.” The average annual rig count this year “is projected to be 1,810 rigs, composed of approximately 1,400 oil rigs and 410 gas rigs.” The U.S. offshore rig count is forecast to be 8% higher, averaging 52 rigs with four more deepwater rigs than in 2012. The Canadian rig count in 2Q2013 is projected to decline sequentially by 70% to 160 average rigs because of the spring break-up.
Natural gas drilling activity continued its downward slide in 1Q2013, while oil well completions rose, according to the American Petroleum Institute’s (API) quarterly report. Gas well completions fell 26% year/year to 2,175 wells, while oil well completions rose 20% to 8,705. The total number of wells completed in the first quarter was 6% higher to 12,381 from year-ago levels. “The oil and natural gas industry expanded oil drilling in the first quarter…thanks in large part to access on private and state lands,” said Hazem Arafa, director of API’s statistics department. “Additional access to our own vast energy resources and streamlined federal permitting would allow for more opportunities to produce U.S. energy.” Rep. Doc Hastings (R-WA), chairman of the House Natural Resources Committee said energy production on state and private lands is at the epicenter of the U.S. energy renaissance, and because the restrictions are not as onerous as the ones on public lands, the average time to get a drilling permit approved is only 12-15 days. However, producers seeking to drill on federal lands face a wait time of up to 307 days to get a drilling permit approved, Hastings claimed.
The Federal Energy Regulatory Commission (FERC) issued a favorable environmental assessment of Trunkline Gas Co.’s proposal to convert a multi-state natural gas pipeline to crude oil service for the Gulf Coast market. Trunkline is seeking approval to abandon nearly 770 miles of looped mainline and facilities that run through Illinois, Kentucky, Tennessee, Mississippi, Arkansas, Louisiana and Texas [CP12-491]. About 45 miles of 24-inch diameter gas pipeline would be abandoned from Buna, TX, in Jasper County to Longville, LA, in Beauregard Parish, and another 725 miles of 30-inch diameter pipe would be abandoned from Longville to Tuscola, IL. The pipeline, along with 15,850 hp of compression, would be sold to Energy Transfer Equity LP (see NGI, Sept. 3, 2012). Energy Transfer officials said they expect to obtain FERC approval to abandon the gas pipeline by the third quarter. The converted oil pipeline, expected to cost about $1.5 billion, could be in service by the middle of 2014. The Trunkline conversion would create the first pipeline transportation option to carry crude oil to the eastern Gulf Coast from the Midwest.
The Ohio Department of Natural Resources as of April 13 had cumulatively issued 605 permits for horizontal wells in the Utica Shale, and to date 196 wells have been drilled and 89 are in production. There also were 32 drilling rigs deployed. Carroll County has the most permits issued with 237, followed by Harrison County, 77, and Columbiana County with 67. Regulators issued 13 permits during the week of April 7-13 — nine to leading operator Chesapeake Exploration LLC, three to Gulfport Energy Corp. and one to CNX Gas Co. LLC.
Low natural gas prices and a “responsive regulatory environment” have prompted Australia’s Incitec Pivot Limited (IPL) to devote $850 million toward the construction of a world scale ammonia manufacturing plant on a brownfield site in Waggaman, LA. The plant, which is scheduled to begin production in the third quarter of 2016, would have the capacity to produced 800,000 metric tonnes per year, IPL said. Initial production of 300,000 tonnes is earmarked for IPL’s U.S. plants, and offtake agreements are in place with Transammonia Inc. and Cornerstone Chemicals Co. The plant would be located at the Cornerstone chemical complex in Waggaman. IPL has contracted KBR Inc. for engineering, procurement and construction of the facility. IPL has six other ammonia plants around the world.
Kinder Morgan Inc. subsidiary El Paso Natural Gas Co. (EPNG) unit is on track to put in service in 2014 a 60-mile, 36-inch diameter natural gas pipeline in Arizona, connecting the EPNG southern system near Tucson to the U.S./Mexican border as the Sierrita Lateral Project (formerly Sasabe). EPNG, through affiliate Sierrita Gas Pipeline LLC, is to begin construction in 1Q2014. The Sierrita project initially is to provide 200 MMcf/d and connect with a project that Sempra International is building for Mexico’s Comision Federal de Electricidad.
The United States has completed bilateral consultations with Japan for membership in the Trans-Pacific Partnership (TPP), which if approved may help in domestic plans to export gas to Asia-Pacific markets (see related story; NGI, March 25; March 4). The United States has been consulting with Japan about its “readiness to meet the TPP’s high standards for liberalizing trade and investment, and to address specific bilateral issues of concern in the automotive and insurance sectors, as well as other Japanese nontariff measures,” said Acting U.S. Trade Representative Demetrios Marantis. Through the TPP, the United States and 10 Asia-Pacific countries are seeking to negotiate a next-generation, regional trade agreement.
Two natural gas midstream operators in western Pennsylvania have agreed to improve their facilities after the U.S. Environmental Protection Agency (EPA) said they failed to comply with Clean Air Act (CAA) rules to prevent accidental releases of flammable substances. MarkWest Liberty Midstream & Resources agreed to install appropriately sized emergency vents on its condensate storage tanks and adopt an approved maintenance schedule at all 14 of its compressor stations in Washington and Butler counties. Owner Laurel Mountain Midstream Operating and operator Williams Field Services Co. agreed to conduct a safety analysis and make necessary improvements at the Robin Hill facility in Washington County. They also agreed to coordinate and conduct training with local emergency responders.
Two separate polls conducted by Quinnipiac University show voters in New York and Ohio have very different opinions of shale gas development. Ohio voters support drilling by a 63-30% margin, according to the latest poll, while New Yorkers by 46% are opposed to drilling because of its potential impact on the environment, and 54% said hydraulic fracturing (fracking) would damage the environment. The New York poll also found that 72% believe shale development will create jobs; 50% support a new tax on companies drilling in the Marcellus Shale; and 31% believe Gov. Andrew Cuomo is stalling on whether to allow fracking. Quinnipiac surveyed 1,138 registered voters in Ohio between April 10-15, with a margin of error of plus/minus 2.91%. In New York, the university polled 1,404 registered voters between April 9-14, with a margin of error of plus/minus 2.62%.
Pullman, WA-based Washington State University (WSU) researchers are planning a methane tracking project to help quantify emissions from unburned methane in the national gas distribution system. WSU research team leader Brian Lamb plans to obtain “direct, carefully measured data under real-world conditions” to determine the scope of national emissions, particularly as unconventional gas plays continue to expand. Organizations commissioning the research are the American Gas Association, Environmental Defense Fund, National Grid, Southern California Gas Co. and Pacific Gas and Electric Co.
Opponents of hydraulic fracturing (fracking) in Michigan are collecting signatures for a petition to ask voters in 2014 whether to allow the drilling stimulation practice to be used in the state. The Board of State Canvassers approved the petition by the Committee to Ban Fracking in Michigan, which needs to collect more than the 258,088 valid signatures for the question to appear on the ballot in November 2014. According to the state Department of Environmental Quality, operators have performed drilling using fracking techniques in Michigan since the late 1940s on about 12,000 wells.
Xcel Energy has submitted a plan to the Minnesota Public Utilities Commission (PUC) to add up to three natural gas-fired generators with 645 MW of capacity in Minnesota and North Dakota by 2019. Xcel determined that it needed to add at least 150 MW of resources in 2017 and up to another 350 MW by 2019. A 215 MW combustion turbine could be in service in 2017 at the Black Dog plant in Burnsville, MN, to replace coal-fired capacity. Two new gas-fired turbines, 215 MW each, would be built in Hankinson, ND, and in service in 2018 and 2019.
Dover, OH-based Dennison Disposal LLC has applied for a permit to drill a Class II wastewater injection well in Union Township in Tuscarawas County, OH, to support Utica Shale drilling. The well would be drilled to a depth of 7,900-9,000 feet, according to the permit application with the Ohio Department of Natural Resources. The well, classified as a saltwater injection well, would have an average disposal capacity of 5,000 barrels a day of wastewater, and a maximum disposal capacity of 8,000 barrels a day. A public comment period is to end Thursday (April 24).
SM Energy Co. said it is seeing encouraging results from a test well drilled in the Woodbine formation and has added about 10,000 net acres to its position on the northeastern edge of the Eagle Ford Shale in East Texas. CEO Tony Best said the test well achieved a 24-hour initial production rate of 740 boe/d, at 1,520 pounds per square inch gauge. The well produced 305 b/d of oil and 2.6 MMcf/d of natural gas. Net production in the Woodbine has increased 50%, from 30,100 boe/d in 4Q2011 to 45,200 boe/d in 4Q2012. Proved reserves in the play also increased 127% during that same time frame, from 63,500 boe to 143,900 boe. The company has targeted more oily locations — from 1,455 with 883 million boe of resources in 2011, to 1,513 with 967 million boe in 2012.
Energy & Exploration Partners Inc. has acquired 57,275 net acres and 11 producing wells in the East Texas Eaglebine formation from a subsidiary of Chesapeake Energy Corp. In connection with the transaction, the partnership issued senior unsecured notes to Highbridge Principal Strategies and Apollo Investment Corp. The company in 2012filed an initial public offering to buy the acreage for $125 million. The partnership plans a two-rig program on the new acreage; it now owns about 14,600 net acres in the play.
Halcon Resources Corp. said it has acquired more than 50,000 net acres in East Texas, which it has dubbed El Halcon, where it plans to invest $100 million this year. CEO Floyd Wilson said plans to expand to 100,000-150,000 operated acres. Halcon has seven producing wells in the play, with an average initial production (IP) rate of 859 boe/d, and a 30-day IP rate of 694 boe/d, both 94% weighted to oil. An additional well was in the process of being completed and three more were being drilled.
Clayton Williams Energy Inc. (CWEI) has struck a deal with a financial investor to monetize 95% of its Wolfberry reserves, leasehold interests and facilities in Andrews County, TX, for $214 million to reduce debt. At closing, which is expected Wednesday (April 24), the borrowing base under the producer’s credit facility would be reduced from $585 million to $470 million, leaving about $99 million available under the facility. In connection with the transaction, CWEI will contribute 5% of the assets to a newly formed limited partnership in exchange for a 5% general partner interest, and the partnership will purchase the remaining 95% of the assets from the company. The partnership will obtain the proceeds from the investor in exchange for a 95% limited partner interest.
Bills targeting the oil and gas industry failed to receive enough support from the West Virginia Legislature before adjourning on April 13. The failed bills included SB 167, which proposed creating a West Virginia Future Fund from oil and gas severance tax revenue. However, the West Virginia House of Delegates enacted five resolutions, calling for a study of the impacts of the disposal of drill cuttings into landfills; renewable fuel standards; alternative and renewable energy sources; development of the state’s resources, and shallow well pooling.
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