Encana Corp. and liquefied natural gas (LNG) fueling solutions provider Ferus LNG Inc. plan to build a 190,000 liter per day LNG production facility near Grande Prairie, Alberta (AB). The facility is to be near high levels of energy industry activity in northwestern Alberta and northeastern British Columbia and is expected to be operational by the end of 2013. It would be among the first in Canada designed to produce high-quality LNG fuel specifically for high-horsepower (HHP) engines used in drilling rigs, pressure pumping services and heavy-duty highway and off-road trucks, the partners said. Other HHP applications for the LNG supply include rail, mining, and remote power generation. To support the entire LNG supply chain, Encana and Ferus LNG have also designed and are in the process of building specialized mobile storage and dispensing equipment. Ferus and Encana said they have committed to using LNG for their own fueling needs. In 2011 alone, Encana saved $12 million in fuel costs by using natural gas instead of diesel in drilling rigs and company trucks and is on track to exceed this figure in 2012, the company said (see NGI, March 26). Earlier this year Ferus said it was putting into service the first LNG-powered heavy duty truck in Alberta (see NGI, April 30).
The number of original drilling permits issued in Texas during November declined from one year ago, as did the amount of natural gas produced from wells during October compared to a year ago, according to the Railroad Commission of Texas (RRC). The commission issued 1,586 original drilling permits in November compared with 1,878 in November 2011. The November total included 1,416 permits to drill new oil and gas wells, 33 to re-enter existing well bores, and 137 for recompletions. Permits issued last month included 446 oil, 127 gas, 941 oil and gas, 57 injection, two service and 13 other. In November, operators reported 1,486 oil, 279 gas, 41 injection and three other completions compared to 674 oil, 305 gas, 45 injection and one other completion in November 2011. Total well completions for 2012 year to date are 13,997, up from 7,924 during the same period in 2011. Texas oil and gas wells produced 528,495,674 Mcf of gas based upon preliminary production figures for October, down from the October 2011 preliminary gas production total of 530,931,972 Mcf. Texas preliminary October total gas production averaged 17,048,247 Mcf/d. Production in October came from 132,073 oil wells and 84,302 gas wells.
Magnum Hunter Resources Corp. and privately held Eclipse Resources I LP have struck a joint operating agreement covering a leasehold owned by both companies in the Marcellus and Utica shales in Monroe County, OH. Terms call for Magnum Hunter unit Triad Hunter LLC and State College, PA-based Eclipse to collaborate within the contract area on an equal basis on 1,950 net mineral acres with the objective of drilling 12 horizontal wells in the Marcellus and 12 horizontal wells in the Utica over the next three years, the partners said. It is estimated that the combined capital costs for the development will exceed $200 million. Triad Hunter has been designated operator and each company will own an approximate 47% working interest. The balance is owned by third parties. Eclipse has also agreed to commit its share of production to a new pipeline system currently under construction by Magnum Hunter’s Eureka Hunter Pipeline LLC.
The Bureau of Land Management (BLM) Richfield, UT, Field Office has begun seeking public comments on an environmental assessment (EA) of a proposal to offer 12 parcels in May for more than 14,000 acres of oil and natural gas leases. There is no ongoing exploration and production activity in the area. The review and public comment on the EA is open until Jan. 25. BLM officials said the parcels are about 80 miles north of Richfield.
The United States has at least 2,400 billion metric tons of possible carbon dioxide (CO2) storage space in saline formations, oil and gas reservoirs and unmineable coal seams — enough to potentially store “hundreds of years’ worth of industrial greenhouse emissions” — according to a report from the Department of Energy (DOE). “Of particular importance is that over 280 billion metric tons of storage capacity has been identified in depleted oil and gas fields (including unconventional gas sources) which could accommodate storage of several decades of emission from stationary sources while simultaneously improving the energy security of the United States by enhancing oil and gas recovery,” according to the 130-page 2012 Carbon Utilization and Storage Atlas, which was compiled by DOE’s National Energy Technology Laboratory (NETL). Data in the NETL report is scheduled to be updated every two years. The report was created using input from DOE’s seven Regional Carbon Sequestration Partnerships and ten Site Characterization projects.
Lone Star Fractionator I in Mont Belvieu, TX, a 100,000 b/d natural gas liquids (NGL) facility designed to handle prolific NGL production in the Permian and Eagle Ford regions, is in service, according to Energy Transfer Partners (ETP) and Regency Energy Partners. The facility, which is owned by Lone Star NGL LLC, a joint venture between the two partnerships, will handle NGL barrels delivered from several sources, including Lone Star’s West Texas Gateway NGL pipeline, via ETP’s Justice NGL Pipeline. The 570-mile, 16-inch diameter West Texas Gateway pipeline entered service in early December, transporting NGLs from the Permian and Delaware basins in West Texas to Mont Belvieu (see NGI, Dec. 10). Fractionator I is the first of two 100,000 b/d fractionators that Lone Star is placing in service to meet the critical NGL fractionation needs due to prolific NGL production in the Permian and Eagle Ford regions. Fractionator II is scheduled to be completed in 4Q2013.
The U.S. Senate passed legislation that would allow a natural gas pipeline to be built through the Denali National Park in Alaska. However, the House of Representatives failed to act on the measure before the 112th Congress adjourned. The bill, which is sponsored by Alaska Sens. Lisa Murkowski and Mark Begich, is expected to be reintroduced in the new Congress. The Denali National Park and Preserve Natural Gas Pipeline Act (S. 302) would allow the National Park Service, subject to a National Environmental Policy Act review, to authorize a right-of-way for construction of an in-state gas pipeline for roughly seven miles along the George Parks Highway. “This bill clears a key hurdle to constructing a pipeline along the [George] Parks Highway and allows decisions on the best route to be based on economic and commercial grounds, rather than out of fear of lengthy permitting delays to win access rights across federal lands,” Murkowski said. Southcentral Alaska “faces a serious gas shortage as early as 2014.”
The natural gas vehicle (NGV) sector was one part of the economy that benefited from Congress’ fiscal cliff action last Tuesday, gaining new life from the extension of clean vehicle tax incentives. While it is a plus for NGV expansion, it was also welcomed by competing clean fuels, such as biodiesel and propane. Nevertheless, for the gas transportation fuel sector it was truly a “Happy New Year,” as NGVAmerica President Richard Kolodziej declared in a special bulletin to his members last Tuesday. “A really great start to 2013,” said Kolodziej, who outlined benefits for both the use of liquefied natural gas (LNG) and compressed natural gas (CNG) in vehicles. The NGV sector retained a 50-cent/gallon or gallon equivalent tax credit and a $30,000 infrastructure tax credit, both of which were made retroactive to last year. Kolodziej contends for LNG the tax credit helps “compensate” for a “federal LNG tax penalty.” He reiterated that eliminating the penalty for LNG, which relates to its lower per-gallon energy content relative to diesel, is “high on our congressional agenda” this year. “For CNG, the fuel tax credit will increase NGVs’ economic advantage and help accelerate the industry’s ability to displace foreign oil,” Kolodziej said.
GreenHunter Water LLC has acquired two oilfield water service and construction companies operating in the Eagle Ford Shale of South Texas. White Top Oilfield Construction LLC and Black Water Services LLC have common management and have been serving Eagle Ford operators since 2008. Assets acquired include 26 vacuum water hauling trucks, 10 dump trucks, six drilling rig wash trailers and seven pieces of heavy equipment. Located in the town of Louise in Wharton County, TX, with 66 employees, White Top and Black Water service operations are predominantly concentrated in the Texas counties of Gonzales, Karnes and DeWitt. With this closing, the total number of water hauling trucks owned and operated by GreenHunter Water in the Eagle Ford Shale region has grown to 30 units. The combined purchase price was $3.25 million in cash and securities.
Yacimientos Petroliferos Fiscales (YPF) SA, Argentina’s newly state-owned energy company, announced that it had signed a two-year, $1.5 billion agreement with Bridas Corp. to explore and drill for oil in two of the country’s shale plays. According to reports, the agreement calls for YPF to transfer a 50% stake in the Bajada del Anelo and Bandurria fields to Bridas. Both fields are located in the Vaca Muerta formation, which is located in Neuquen province. YPF will reportedly cede 663 square kilometers (256 square miles) total — 201 square kilometers (77.6 square miles) in the Bajada del Anelo field, and 462 square kilometers (178.4 square miles) in the Bandurria field — to Bridas, an independent oil and gas company also based in Argentina. Argentina’s shale reserves are estimated to be the world’s third-largest by the U.S. Energy Information Agency (see NGI, April 11, 2011). The Argentine government nationalized YPF last April (see NGI, April 30, 2012).
Encore Energy Inc., acting in its capacity as lease advisor to mineral rights owners in eastern Ohio’s portion of the Utica Shale, is currently shopping multiple tracts of “add-on” acreage to operators in the play. Steve Stengell, CEO for the Bowling Green, KY-based company, told NGI that six or seven tracts totaling about 1,000 net acres in Guernsey and Noble counties were up for sale. A company statement added that the acreage in question was in areas where several active operators had already posted “reports of phenomenal success from a combination of crude oil, condensate, natural gas liquids and dry gas production.” Encore controls nearly 250,000 acres across 13 counties in the Utica Shale.
The New York Department of Environmental Conservation (DEC) says it has received more than 800 responses so far on proposed rules governing high-volume hydraulic fracturing. DEC spokeswoman Lisa King told NGI that the agency had received 837 comments by Dec. 31, 2012. Of those, 447 were submitted by mail and 390 were received online. Meanwhile, 37 elected officials added their signatures to a letter written by Elected Officials to Protect New York, an anti-fracking group, to Gov. Andrew Cuomo, urging him to unilaterally extend the public comment period at least another 60 days, for a total of at least 90 days. The current 30-day public comment period began Dec. 12, 2012 and is scheduled to conclude at 5 p.m. EST on Jan. 11 (see NGI, Dec. 3, 2012).
Forest Oil Corp. has agreed to sell all of its South Texas properties — excluding those in the Eagle Ford Shale — for proceeds of $325 million after tax as part of its ongoing deleveraging plan, the company said. The properties produced 66 MMcfe/d (86% natural gas) during the third quarter of 2012, had estimated proved reserves of 272 Bcfe (85% natural gas) as of Dec. 31, 2011, and generated about $60 million of lease-level income during 2012, Forest said. The company intends to use the proceeds to pay down debt. Forest is retaining all of its natural gas hedges. “We have now made significant progress in executing our stated goal of improving and restoring flexibility to our balance sheet,” said Forest CEO Patrick R. McDonald. “The allocation of capital and resources towards our core oil and liquids assets in the Texas Panhandle and Eagle Ford, alongside the evident improvement in our financial position, is a material positive for us.”
Texas shale plays, notably the Eagle Ford and Barnett shales, have been at the forefront of the shale gas and oil revolution, making Texas “a highly cost-effective place to invest in new petrochemical plants, even if the market for that new production is in emerging economies,” said Jesse Thompson, an economist with the Houston Branch of the Federal Reserve Bank of Dallas in a recent note. “Ethylene capacity is poised to increase almost 33% by 2017, pending completion of all new plants, expansions, enhancements and restarts of shutdown facilities that have been announced in the U.S.” The competitiveness of U.S. ethylene is thanks to the divergence of natural gas and oil prices. The price of naphtha, an alternative ethylene feedstock that is relied upon heavily outside of the United States, has followed oil prices higher. “…[I]t cost 60 cents to produce a pound of ethylene with nearly 12 cents worth of ethane in September 2012; alternatively, one pound of ethylene required $1.37 of naphtha,” Thompson wrote. “Overall, greater domestic ethylene production capacity will significantly outstrip projected domestic demand growth over the next several years. As a result, U.S. petrochemical exports, particularly from Texas, will expand significantly.”
Based on the most recent state data for this year, New Mexico is on track to bust the 80 million bbl oil production level for the first time since the late 1970s, and natural gas is expected to stay level at about 1.2 Tcf, according New Mexico Oil and Gas Association (NMOGA) officials. Even with the cutback in dry gas drilling due to low prices, there is more associated gas production with the continued ramp up of oil production, said Wally Drangmeister, NMOGA communications director, who has based his bullish projections on the year-to-date statistics (as of mid-October) compiled by the New Mexico Oil Conservation Division. “You have to go all the way back to 1978 and 1979 to see production levels in the range we’re now in,” Drangmeister said. “The increased production shows up in reports on both the federal government’s Energy Information Administration and the state conservation agency.” NMOGA has concluded that the robust oil/gas production is “one of the main reasons” that state economists are forecasting that $283 million in additional revenues will flow to the state next year from the oil/gas industry.
A recent poll shows a majority of Ohio voters support new severance taxes on hydraulic fracturing (fracking) and natural gas liquids (NGL), especially if the revenue raised is used to cut state income taxes, which is an idea proposed by Gov. John Kasich. According to a Quinnipiac University poll, 62% of respondents said they would support the proposed taxes if the revenue went to cut state income taxes, while 31% were opposed. That represents a 2% increase in support from another Quinnipiac poll on May 9, when voters backed it 60-32% (see NGI, May 14). The proposed taxes garnered more support among independents (66-27%) and Democrats (65-28%) than Republicans (52-40%). Support for the idea was also strong among blacks (68-27%) and whites (62-31%), as well as women (63-30%) and men (62-32%). The poll also found that support for the proposed taxes falls dramatically — to 52-38% in favor, a 10% decrease — without the stipulation that generated revenue be applied to reducing state income taxes for residents. In the May 9 poll, 55% of respondents favored the proposed taxes without the stipulation while 35% were opposed.
Ohio legislators and regulators, as well as industry groups, are discussing a bill that, if enacted, would require oil and natural gas land agents to register with the state and provide homeowners with several disclosure forms. HB 493 would require the agents, or landmen, to register annually with the Ohio Department of Natural Resources‘ (ODNR) Division of Oil and Gas Resources Management. The landmen would also be required to provide homeowners with disclosures detailing oil and gas leases, and mineral rights purchases. The bill would also empower the division chief to create a registration form, set a fee structure and establish minimum qualifications for working as a landman in Ohio. HB 493 was introduced in the state House of Representatives by Reps. Okey (D-Carrollton) and Teresa Fedor (D-Toledo) in March. It is currently being by the House Committee for Agriculture and Natural Resources. Fifteen additional representatives, all Democrats, have signed on as cosponsors.The legislature reconvenes on Monday (Jan. 7).
Dominion said it will proceed with engineering, marketing and regulatory review processes for proposed natural gas liquefaction facilities at its Dominion Cove Point liquefied natural gas (LNG) terminal on the Chesapeake Bay in Lusby, MD, following a favorable court ruling on the project. Circuit Court Judge James P. Salmon of Maryland ruled that Dominion Cove Point’s agreement with environmental agencies allows it to build liquefaction facilities inside the plant’s fenced area and export LNG. The Sierra Club had maintained Dominion needed its permission to build the facilities. The Sierra Club had maintained that a legacy agreement between it and a previous owner of the Cove Point LNG terminal site prevented current owner Dominion from adding liquefaction and export facilities (see NGI, Nov. 26, 2012; May 21, 2012).
The California Public Utilities Commission (CPUC) authorized a five-year, $150 million joint research effort between a federal research laboratory and three of the state’s major investor-owned utilities. The CPUC approved a plan in which Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas and Electric Co. would provide individual research projects to pursue with the Lawrence Livermore National Laboratories (LLNL) in Livermore, CA. Each utility will share proportionally in the $30 million annual cost, and the CPUC has calculated that by 2020 the collective benefits from the research could produce more than $552 million in savings from improvements in gas operations, safety and reliability, advancements in electric grid and smart meters, and cyber security.
Hedge fund TPG-Axon Capital, one of SandRidge Energy‘s largest investors, continues to push for changes at the Oklahoma City-based exploration and production company, calling for the replacement of SandRidge’s entire board of directors. TPG-Axon also said it has filed a lawsuit in Delaware Chancery Court challenging the amount of time SandRidge gave shareholders to vote on proposed changes to the company’s bylaws that were proposed by the hedge fund. “Obviously, the company is fearful of allowing the voice of shareholders to be heard,” TPG-Axon said in a Dec. 24 letter to the SandRidge board of directors. Last month TPG-Axon called for SandRidge to replace CEO Tom Ward, realign its board of directors and consider the possible sale of the company (see NGI, Nov. 12).
With an eleventh-hour donation, a regional unit of the national Trust for Public Land (TPL) completed an $8.75 million transaction with Plains Exploration and Production Co. (PXP) to acquire and retire oil and natural gas leases in the Wyoming Range. TPL said the transaction was completed at the year-end 2012 deadline through a “broad coalition” of environmental organizations, concerned citizens and more than 1,000 donors. The deal covers 58,000 acres in the Hoback Basin. “The acquisition means that affected land inside the Bridger-Teton National Forest near Grand Teton National Park will be forever saved from oil/gas drilling and preserved for hunting, fishing and recreation,” a TPL spokesperson said. PXP, which is an exploration and production (E&P) company in California’s Monterey Shale and other areas of that state, last year abandoned plans to drill in western Wyoming, agreeing instead to sell oil and natural gas leases on 58,000 acres in the Hoback Basin of the Wyoming Range to the conservation group (see NGI, Oct. 12, 2012).
The Idaho Public Utilities Commission (PUC) has accepted Spokane, WA-based Avista Utilities’ long-term integrated resource plan in which shale gas-driven low prices and abundant supplies dominant the next 20 years. Customer demand is projected to grow at slightly more than 1% during the period. “Avista does not anticipate any resource shortages during the next 20 years due to increased production from shale and lower customer demand,” said a PUC spokesperson, emphasizing that the plan covers both retail residential and business natural gas customers in the northern panhandle of the state. Avista’s long-term plan estimates that gas demand will grow “only slightly more than 1%” during the next 20 years. Natural gas prices will remain low during the next several years due primarily to the continued development of shale gas, the combination utility told the PUC. Last September, Avista said its long-term gas demand forecasts have declined and shorter-term price declines have been even greater. Avista called demand “a key risk” that will have to be monitored.
Audi AG held a topping-out ceremony recently for a new plant in Germany that is to be the world’s first manufacturing facility for producing synthetic methane, or “e-gas,” along with renewable electricity. The facility is scheduled to begin operations early in 2013 and begin feeding e-gas into the local natural gas distribution network by summer. Audi is billing the new facility in Werlte, Germany as a source of synthetic methane that can be pumped into the natural gas pipeline infrastructure. The fuel produced would be used in Audi’s compressed natural gas (CNG) vehicles. The e-gas is the byproduct of a chemical reaction with hydrogen that is derived from electrolysis and carbon dioxide (CO2). “Chemically speaking, this e-gas is nearly identical to fossil-based natural gas,” Audi said. “As such, it can be distributed to CNG fueling stations via the local natural gas pipeline network to power vehicles starting in 2013.”
Advocates for diesel and biodiesel alternatives are joining forces to promote their fuel’s viability among Washington, DC, policymakers. The National Biodiesel Board, including 260 producers, users and marketers, joined the Diesel Technology Forum in December, saying it should help the “fight for clean diesel technology” in the face of growing competition from natural gas as a transportation fuel. The forum (www.dieselforum.org) is a nonprofit educational organization dedicated to raising awareness of the economic importance and essential uses of diesel engines. BP and several engine manufacturers, including General Motors, Chrysler, Ford, Mazda, Volvo and Volkswagen are backing the forum and its programs. Diesel officials have acknowledged that their fuel has come under attack from natural gas producers amid recent production booms that brought natural gas prices in 2012 to their lowest levels in 10 years. Diesel prices are tied to crude oil prices, meaning they have been high of late, a fact that the gas producers have emphasized in marketing efforts for more use of natural gas in vehicles.
The California Public Utilities Commission (CPUC) has given the OK to a natural gas-fired combined-cycle generating plant in Northern California that has been in development for more than a decade. The CPUC unanimously approved an amended purchase and sale agreement between Pacific Gas and Electric Co. (PG&E) and Contra Costa Generating Station LLC‘s Oakley Generating Station. The CPUC approved a utility agreement two years ago for a 586 MW generation plant but it refused to authorize the plant for inclusion in rates until 2016, two years after its targeted start-up. The project currently has a proposed online date of June 2016.
Regulators with the Alaska Oil and Gas Conservation Commission (AOGCC) are proposing a comprehensive set of rules to govern hydraulic fracturing (fracking) in the state, and will accept public comments on its proposals until 4:30 p.m. on Feb. 4. Under the proposed rules, drillers would be required to notify landowners, surface owners and other operators within a quarter-mile radius that fracking will take place; conduct sampling and analysis at drinking water wells both before and after fracking; require drillers to disclose the chemicals used in fracking operations; meet wellbore integrity requirements, and contain fracking fluids. The AOGCC has scheduled a public hearing for the proposed rules at 9 a.m. on Feb. 5, at its offices in Anchorage. The rules would amend Title 20, Chapter 25 of the Alaska Administrative Code. Meanwhile the Alaska State Legislature is scheduled to convene its first session for 2013 on Jan. 15.
The New York Department of Health (DOH) conducted a draft assessment of high-volume hydraulic fracturing (HVHF) in early 2012 and concluded that, with appropriate regulation, the practice could be performed safely in the state, according to reports. The document reportedly outlines steps regulators with the state Department of Environmental Conservation (DEC) would have to take in order to prevent harm to public health from HVHF. Potential risks reportedly included air emissions, water contamination and radioactive materials. DEC spokeswoman Emily DeSantis told NGI the document “is nearly a year old and does not reflect final DEC policy.” In late November, the DEC released 90 pages of documents detailing proposed regulations governing HVHF and set a 30-day public comment period to discuss them (see NGI, Dec. 3, 2012). The public comment period expires at 5 p.m. EST on Jan. 11.
Presidents don’t get their own libraries until after they leave office; however, Alaska’s multiple proposed projects for North Slope natural gas pipelines now have a digital library, even though not one of them has been built yet. The Office of the Federal Coordinator for an Alaska North Slope gas pipeline has posted a digital library that consolidates for the public many of the reports, maps, analyses and other work on proposed North Slope gas pipeline projects going back to the 1970s. “The Pipe Files — Alaska Gas Line” is available through the coordinator’s website (www.arcticgas.gov). “We have started with about 500 documents and plan to add hundreds more as we build the collection,” said Federal Coordinator Larry Persily. “We have invited federal and state agencies to help us add to ‘The Pipe Files’ and expect it will grow much larger.
A Royal Dutch Shell plc subsidiary has been given another six months to decide whether to purchase property in western Pennsylvania for a proposed “world scale” ethane cracker in the heart of the Marcellus Shale. Shell Chemical LP in March signed an option to purchase a 300-acre site near Monaca from zinc producer Horsehead Holding Corp., presumably for a major petrochemical complex that would include a cracker capable of processing 60,000-80,000 b/d of ethane (see NGI, March 19). The original terms called for the transaction to be completed by the end of 2012. “We are still in the assessment phase of the project to determine the site’s suitability. Among the many factors we continue to assess are the ethane feedstock supply, engineering and design work, customer support confirmation for our products, permit approvals, and confirmation that the project is economically robust and competitive,” said Shell spokeswoman Kayla Macke.
Noble Energy Inc. is considering a move to larger offices in Pennsylvania to accommodate its growing presence in the Marcellus Shale. The company is focusing on possibly finding larger offices in Washington County, PA, where it is now located. “The Marcellus has become a core area of operation for Noble Energy,” Stacey Brodak, a spokeswoman for the Houston-based producer, told NGI. “As a result, we have quickly ramped up to nearly 100 employees in our current office in Southpointe during 2012. Approximately 85% of those positions have been hired from the local area as new positions…..we currently anticipate increasing our staff significantly over the next few years.” Earlier this month, Noble officials said they planned to spend $750 million to support drilling around 140 wells with its Pittsburgh-based Consol Energy Inc., joint venture partner in the Marcellus (see NGI, Dec. 17). That investment is to target 85 operated wells in liquids-rich areas of the play.
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