Marathon Oil Corp. has agreed to sell nearly all of its natural gas properties in the state for an undisclosed sum to Hilcorp Alaska LLC, a unit of privately held Hilcorp Energy Co. The sale includes an estimated 17 million boe net of proved reserves in 10 fields in which Marathon holds interests in the Cook Inlet. Gas operations include the McArthur River, Ninilchik, Cannery Loop and Kenai Gas units, as well as Beaver Creek, which is an oil and gas development within the Kenai National Wildlife Refuge. The sales package also includes natural gas storage and gas pipeline transmission systems. Last year Marathon’s Alaska net production averaged 93 MMcf/d of gas and 112 b/d of oil. The company also had about 12.5 Bcf in storage at the end of 2011. The transaction, with an effective date of Jan. 1, 2012, is set to be completed this fall. Not to be sold is Marathon’s onshore drilling rig, which is being marketed separately.
Chevron Corp.‘s 1Q2012 profits should exceed those from 4Q2011, in part because of lower costs and higher oil prices, but it still will be impacted because of lower natural gas prices, the San Ramon, CA-based major said in an interim report. The second-largest U.S. producer by market value after ExxonMobil Corp. said earnings from the exploration and production segment in January and February benefited from crude oil prices from U.S. fields, which averaged $105.65/bbl, and should be 13% more than in the same two months of 2011 and 0.3% from the full fourth quarter of 2011. However, realized domestic gas prices averaged $2.70/Mcf in January and February, which is one-third below prices a year ago and 25% off from realized prices in the final three months of last year. U.S. production in January and February totaled 644,000 boe/d, down 7.2% from January-March 2011 and off 2.6% from 4Q2011. U.S. output dropped 17,000 boe/d in the first two months, in part because Chevron completed the sale of its Cook Inlet assets in Alaska at the end of the year. The quarterly report is scheduled to be issued on April 27.
Legal action by the exploration and production unit of Mexico’s Petroleos Mexicanos (Pemex) against companies accused of trafficking in stolen natural gas condensate got bigger last week when the company filed another lawsuit in U.S. District Court for the Southern District of Texas in Houston that added defendants Pemex had unsuccessfully sought to add to an existing lawsuit. “The condensate at issue in this lawsuit is the sovereign property of the United Mexican States (Mexico),” said the filing by Pemex Exploracion Y Produccion (PEP). “It was stolen in Mexico and then transported into and ultimately sold to large end-users in the United States.” Named as defendants in the new lawsuit are ConocoPhillips Co., Marathon Petroleum Co. LP, Shell Chemical Co., Shell Trading U.S. Co., Murphy Energy Corp., High Sierra Crude Oil & Marketing LLC, Big Star Gathering Ltd. LLP, St. James Energy Operating Inc., F&M Transportation Inc., Plains Marketing LP, Superior Crude Gathering Inc., FR Midstream Transport LP and Sunoco Partners Marketing & Terminals LP (Pemex Exploracion Y Produccion versus Murphy Energy Corp. et al, 4:12-cv-01801, U.S. District Court for the Southern District of Texas).
McMoRan Exploration Co. CEO Jim Bob Moffatt said the Davy Jones prospect, considered one of the biggest natural gas discoveries in the Gulf of Mexico’s shallow waters, faces several weeks of delay before commercial production begins after a blockage prevented a measurable flow rate in the first well. The ultra-deep structure, which encompasses four lease blocks across 20,000 acres, may contain 2-6 Tcf. The No. 1 well, on South Marsh Island Block 230, was scheduled to begin commercial flow at the end of March (see NGI, Jan. 24). However, McMoRan encountered problems with the first well in March; production has been delayed by about a month. “The perforation of the Wilcox D sand resulted in positive pressure build-up in the wellbore, followed by a gas flare from the well,” Moffatt said. “Initial samples indicated that the natural gas from the Wilcox D sand is high quality and contains low levels of carbon dioxide [CO2] and no hydrogen sulfide [H2S].” Low/no H2S is good news for gas drillers because it reduces the cost of processing and reduces the risk of corrosives wear and tear on equipment. Low levels of CO2 mean it’s less expensive to move the gas to pipelines specifications, and less reservoir space is taken by gases that can’t be sold.
Anadarko Petroleum Corp. has obtained a favorable final environmental impact statement (EIS) from the Bureau of Land Management (BLM) for its long-pending 10-year natural gas development plan to develop natural gas in Utah’s Uintah Basin. The Woodlands, TX-based exploration and production company wants to drill 3,675 gas wells on 1,484 pads in an existing gas field on federal lands (see NGI, June 13, 2011). The final EIS resulted from an agreement between Anadarko, BLM, the Environmental Protection Agency, environmental groups and Native American tribes. Once a public comment period is concluded in early May, BLM expects to issue a final decision on the project later this year. Anadarko and the Southern Utah Wilderness Alliance also reached a tentative agreement that would protect the White River area and still allow Anadarko the access it needs to the region’s energy resources.
A major interstate natural gas pipeline group has called on the Federal Energy Regulatory Commission (FERC) to “reconsider and revise” its approach to reservation charge crediting, arguing that pipelines should not be required to provide full reservation charge credits to shippers for service interruptions that occur during systemic upgrades to comply with the new pipe safety and environmental laws. The Interstate Natural Gas Association of America urged FERC to retract a mid-February order, which requires Texas Eastern Transmission LP (Tetco) to revise its tariff to conform with the agency’s policy on reservation charge crediting or show cause why it should not be required to do so [RP12-318]. Under the existing policy, credit reservation charges are owed pipeline shippers when their service is interrupted by circumstances withint a pipeline’s control, including planned or scheduled maintenance to comply with safety and environmental requirements.
The Susquehanna River Basin Commission (SRBC) has released a report detailing existing or baseline water quality conditions in the Marcellus Shale from monitoring stations at 37 priority watersheds within the river basin, mostly smaller streams in northern Pennsylvania and the southern tier of New York. The monitoring stations are equipped with sensors measuring water temperature, pH, dissolved oxygen, conductance and turbidity. The commission said it would periodically collect water samples on-site for use in more than 20 additional tests in a laboratory. The SRBC said local anomalies — included elevated pH levels and conductance spikes — would require more in-depth analysis at six of the 37 initial test sites, all in Pennsylvania.
A coalition of organizations has called on the New York Department of Environmental Conservation Commission to undertake an environmental review of “any” applications for shale gas exploration in the state using liquefied petroleum gas (LPG) in hydraulic fracturing stimulation processes. In March Southern Tier Energy Partners LLC, a landowners’ group that controls about 135,000 net acres in Tioga County, signed a preliminary agreement to allow eCorp International LLC and GasFrac Energy Services Inc. to drill natural gas wells using GasFrac’s proprietary waterless LPG stimulation technology (see NGI, April 2). High-volume fracking using water has not been allowed in New York since a de facto moratorium went into effect. Beyond the oil and gas industry, “no one knows much about LPG fracking,” the coalition claimed. However, GasFrac’s technology has been used over the last three years by operators that include Royal Dutch Shell plc and Husky Energy Inc., with tests conducted in Canada and the United States.
Aside from those that have leased lands for development, Pennsylvania school districts do not seem to be benefiting much financially from Marcellus Shale activity, according to a report from Pennsylvania State University. While the state and local governments have collected more than $1 billion in taxes from shale development, “the current structure of school funding in Pennsylvania means that in most instances schools will likely not see significant economic benefits as a result of local activity associated with the Marcellus shale natural gas industry,” the report concluded. On the flip side, the report found that Marcellus activity does not appear to be increasing student enrollment or special education spending. In fact, both figures declined slightly as the number of wells in a district increased.
A bill is pending in a Louisiana Senate committee that aims to derail what oil and gas producers in the state believe is a gravy train for unreasonable landowners and greedy trial lawyers. Oil and natural gas interests are rallying support for SB 443, which last week was in the Senate Judiciary Committee A. Louisiana Oil & Gas Association (LOGA) Chairman Don Briggs is hoping the industry will step up to support it. “Please email or call the committee members…and ask them to vote ‘YES’ on SB 443. Also ask your employees to do the same,” Briggs wrote in a letter on the LOGA website last week. The legislation would allow a producer to accept liability for the cost of remediating past environmental damage while not accepting liability for private claims and additional remediation. Louisiana has become known for its “legacy lawsuits,” which have awarded some plaintiffs millions, unreasonably, according to the industry (see NGI, March 5).
Although the exact language of the bill is not yet available, a proposal by Pennsylvania State Rep. Rep. Duane Milne would real-time monitoring of all natural gas wells and pipelines in the state. The legislation would require the Pennsylvania Department of Environmental Protection, the Pennsylvania Emergency Management Agency and county emergency responders to set up a wireless mesh network to provide a data stream for all gas infrastructure in the state. The legislation is necessary because most wells and pipelines are unmanned once they go into operation and therefore do not provide a real-time stream of information about problems, Milne said. The WMN would provide information to operators and regulators simultaneously. Although the technology is cheaper than traditional networks, the proposal would still require adding equipment to more than 5,000 existing wells and thousands of miles of gas pipelines across the state.
A man who worked briefly for a company that built a natural gas pipeline in Lycoming County, PA, for Chief Oil and Gas LLC pleaded guilty to damaging the Emig Line pipeline after the construction company fired him, according to the U.S. Attorney’s Office for the Middle District of Pennsylvania. Henry Virgil Benton of Bradford, AR, pleaded guilty on April 4 to “knowingly engaging in an excavation activity resulting in damage to a natural gas pipeline exceeding $50,000. Benton, who had worked for Houston-based Holloman Corp. for about five weeks before being fired, “used a track hoe to excavate and then damaged, dent[ed] and open[ed] holes in the natural gas pipeline located in Cogan House Township” in northeastern Pennsylvania, prosecutors said. Under terms of a plea agreement, Benton is to serve a prison sentence of 12-18 months followed by three years of supervised release, and is to pay restitution of between $50,000 and $208,000.
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