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Permalink Reply by Skip Peel - Mineral Consultant on October 21, 2014 at 5:04

Marcellus Shale production may surpass 16B cubic feet daily in November

Oct 15, 2014, 10:19am EDT Updated: Oct 15, 2014, 11:49am EDT

 

Joe Wojcik   Staff Reporter- Pittsburgh Business Times

The U.S. government estimates Marcellus Shale production will exceed 16B cubic feet a day in November.

The U.S. Energy Information Administration projects that Marcellus Shale gas production will exceed 16 billion cubic per day in November, revising a previous estimate that production might surpass the mark this month.

In September, the administration forecasted production would reach 16.06 billion cubic feet per day this month. But in the more recent estimate, issued on Tuesday, it said production might actually be around 15.8 billion cubic feet per day.

It projected that production would reach 16.04 billion cubic feet per day next month.

The estimates are based on rig counts and production.

“The underlying data are often quite volatile, reflecting large variability in the performance of individual wells,” the EIA said. “The final point of actual production data as reported by the states varies, as each state has different reporting requirements and schedules.”

 

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Permalink Reply by jim weyland on October 21, 2014 at 7:00

'negative basis' is not a radical new concept. rather, it reflects the 'cost' to get the commodity to the contract location, in the instant case of ng, the henry hub header.  

what accounts for the price difference in an apple hanging from the orchard tree to an apple in the store? all other factors discounted, it is the cost to transport the apple from tree to market

the deep discount of the generic marcellus into the pipeline price to henry reflects the pipelines' present inability to take away all of the available supply. to continue the apple analogy, if you had an orchard of apples but only had one wagon to get them to market before spoilage, obliviously, the field price would be much, much less than the market price.

five years ago there was such a massive glut of gas at the opal, wy trading point that gas there regularly traded at a multidollar discount to henry. today, opal trades at a discount of a few cents to henry.

why? what changed? the system arbed the discount out by building enough new pl capacity to get all available opal gas to market on any and all given days.

is this what will happen with respect to marcellus? imo, yes.

some of the long line pls that were built to deliver gulf coast gas to points northeast have already announced plans to 'replumb' their systems by, at relatively low cost (in pl terms), reverse their flow to allow them to deliver marcellus to the gulf coast. others are scrambling to build new pls to move marcellus gas to market.

most lng export facilities will be built in the gc region. and, most of the announced new build petrochem facililities will be sited down there. aside from rational reasons, the 'nimby' effect is in play with respect to all.

when the nymex first came to producers to solicit their support for a proposed natural gas contract, they, the nymex, proposed the contract point to be at a nexus of then existing pls in the katy, tx area. for various reasons, it was determined that henry made more sense. i'm sure that not the least of which was that the texas producers weren't, shall we say, overly enthusiastic, about the proposed gas contract. louisiana then also had more gas storage capacity in vicinity to henry than was then available at katy. proximity to storage is a pretty much important consideration with gas. note: imo, one factor/reason that we've not ever seen an exchange traded standard electricity contract is the present impossibility to 'store' and redeliver electrons at a reasonable cost.

i always thought that the chicago city gate should have been the contract location. maybe, today, i don't feel that so much.  but, i respectfully feel that changing the contract's location to marcellus, won't ever be seriously considered until enough pl capacity is available to get all marcellus gas out of the field, 365.

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Permalink Reply by Dion Warr, CPL on October 22, 2014 at 3:26

To build upon what Jim has said, the contract point almost necessarily has to be a point of sufficient connectivity both to production and to the larger market with sufficient storage (inventory capacity) to moderate short-term disruption. At the current time, those conditions do not exist near the Eastern Seaboard. As long as their is sufficient resistance to E&P and pipeline development closer to New York, it will be difficult for those conditions to exist. A market point nearer the spokes of the wheels will always be relegated to a factor of regional importance at best, vulnerable to extreme peaks and valleys. While the Transco gate at New York means something to New Yorkers, it means very little to the rest of us.

Being a production center alone has never been enough. Without takeaway, Marcellus gas might as well be in Siberia as much as it is in Western PA. Additionally, much of the news of added capacity consists of flowing gas back to... TX and LA. And back towards Henry. Our first export terminals to come online will be priced upon a premium based upon HH settlement price. Dominion's facility on the East Coast will require additional pipeline infrastructure to be built to adequately supply Marcellus gas to fill capacity. These requirements are already met along the TX/LA Gulf Coast.

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Permalink Reply by Skip Peel - Mineral Consultant on October 22, 2014 at 3:43

I think the NE nat gas market will work out connection problems in the coming years.  NIMBYs do not for long trump the cost of energy for most consumers.  The market will prevail.

Crestwood says strong demand for New England pipeline

Posted on October 21, 2014 at 1:12 pm by Robert Grattan in Natural gas, Pipelines

Excerpt.

HOUSTON — Crestwood Midstream Partners LP said it had seen strong early interest in a pipeline connecting its New England system to planned infrastructure in the region.

The Houston-based company said it had received natural gas commitments of 700 million cubic feet per day to be transported on a 30-mile pipeline linking to a system owned by its subsidiary, Central New York Oil & Gas Co.

The proposed line, called the MARC II,  would link the company’s existing infrastructure to the proposed PennEast Pipeline, a new interconnect on Transco’s Leidy Line, and Transco’s proposed Atlantic Sunrise Expansion Project, according to a Monday announcement.

New England has been a big destination for midstream investment thanks to a growing electricity and home heating market. Last winter, a shortage of natural gas sent prices soaring and threatened to interrupt the region’s electricity generation.

Link to full article:  http://fuelfix.com/blog/2014/10/21/crestwood-says-strong-demand-for...

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Permalink Reply by jim weyland on October 22, 2014 at 5:46

i don't know if intrastate pls and/or gatherers in the marcellus states have eminent domain authority, but interstates sure do. ferc will aggressively intervene if necessary to enforce those rights.

so, the takeaway will be built. but, pipe-lining up there is difficult. mr. peel can speak to that via personal experience.

eventually, gas like water seeks its own level.

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Permalink Reply by Dion Warr, CPL on October 22, 2014 at 8:58

Skip:

FYI - For a graphical representation of pipeline capacity ca. 2008 (pre-Ruby and other midstream improvements).  It is predicted that Marcellus gas would first displace Canadian sources in NE, then begin reducing the transport of traditional domestic trunkline routes (a thought that makes many Canadians shudder).  To effect major east to west transport from the Marcellus that did not first go south would take substantial infrastructure improvements and capital expenditure.  It would be easier to reverse a portion of the trunkline system existing in place.  Most of those lines run back to the Gulf Coast.

Given enough time and money, anything can be done.  But what levels first - delivery at the lowest net transportation cost or equal delivery to all points?

As to NIMBY, it depends who your friends are.  As upstate NY has discovered, if your governor is a NIMBY, he can hold things up for a loooong time.

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Permalink Reply by Skip Peel - Mineral Consultant on October 22, 2014 at 9:07

West will certainly be more expensive and further in the future.  N, S & E:  Here Come Da Gas.  Thanks for the graphic.  Got any data on the cost to produce an mcf in the Marcellus vs. the Haynesville?  Give my regards to Kirk and have a successful event.

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Permalink Reply by jim weyland on October 22, 2014 at 9:21

imo, good map, good analysis.

as to nimby, ask the guys that built the iroquois pl through upstate ny. the line was to pass near dr. joyce brothers' property line. although it was/is an interstate project, she really 'pitched a shoe' and the resulting uproar led to to an extreme, unwarranted delay in its construction. it's been in service now for about twenty years and against all odds, the sun still rises every day and the pl hasn't yet led to the spread of world communism, epidemic smallpox, a pestilence of three-headed frogs or other supposed catastrophes.

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Permalink Reply by Skip Peel - Mineral Consultant on October 28, 2014 at 3:24

Billion-Dollar Projects To ‘Become the Norm’

Local Gas Will Be Transported By Four Interstate Pipelines

October 26, 2014 By CASEY JUNKINS Staff Writer , The Intelligencer / Wheeling News-Register  

MOUNDSVILLE - As natural gas production in the Marcellus Shale region increases, the next issue is getting the gas to market. That's where the pipelines come in.

In the past few months, along with a number of smaller projects to complete the interconnection of pipelines in our local region, four major pipeline projects have been announced. Combined, these massive interstate projects will cost up to $15 billion to build and provide thousands of construction jobs.

The pipelines - the Atlantic Coast Pipeline, Rover Pipeline, Mountain Valley Pipeline and Leach XPress - will take gas from our area and other nearby regions and send it to various markets across the country. It also will open up more drilling opportunities.

Pipeliners are building billions of dollars worth of infrastructure to ship Marcellus and Utica shale natural gas.

West Virginia oil and natural gas industry insiders Corky Demarco and Tim Greene believe the pipelines showcase the high value of the Marcellus and Utica shale formations.

"When the history is written, this will be the most productive natural gas region," Demarco, executive director of the West Virginia Oil and Natural Gas Association, said of the Marcellus and Utica found in West Virginia, Ohio and Pennsylvania. "Projects like this are going to become the norm as we move forward. We've got so much gas in this Appalachian Basin."

"They need to have somewhere to take all of this gas," said Greene, owner of Land and Mineral Management of Appalachia and a former West Virginia Department of Environmental Protection oil and gas inspector. "They are going north, south, east and west. And more pipelines will lead to more drilling all across the state."

The Projects

In just the last few months alone, developers have confirmed four interstate pipeline projects that will fall under the auspices of both the Federal Energy Regulatory Commission and the U.S. Pipeline and Hazardous Materials Safety Administration. All are at different points in the permitting and construction phases.

-- Atlantic Coast Pipeline

The $5 billion Atlantic Coast Pipeline, developed by Dominion Resources, Duke Energy, Piedmont Natural Gas and AGL Resources, is planned to be 550 miles long with the 42-inch pipeline diameter.

The pipeline's proposed route runs southeast through Harrison, Lewis, Upshur, Randolph and Pocahontas counties in West Virginia; southeast across central Virginia to the border of North Carolina; and south through North Carolina to Robeson County, just north of the South Carolina border. Pipelines from Tyler County will connect to this project.

-- Rover Pipeline

The $4.3 billion Rover Pipeline, developed by ET Rover Co., will be able to transport up to 3.5 billion cubic feet of natural gas per day.

Its proposed route includes a 36-inch pipeline running from Doddridge County, W.Va., north through Tyler County, under the Ohio River to Monroe County, and north to connect with a 42-inch pipeline running from Noble County, Ohio through northern Monroe County.

This 42-inch line will run from the Clarington area, north through Belmont County.

At this point, a 24-inch pipeline that travels west and under the Ohio River from Marshall County will connect with the 42-inch line in the Jacobsburg area of Belmont County. From there, the 42-inch line heads northwest through the St. Clairsville area and into Harrison County.

The 42-inch line continues north into Carroll County.

At that point, the 42-inch line will collect gas from a 36-inch line running west from northern Washington County, Pa., through Hancock County, under the Ohio River, and across Jefferson and Harrison counties. From that point, the map shows the Rover Pipeline will cut northwest across the Ohio countryside until it reaches the company's Midwest hub in Defiance, Ohio. From there, the line continues north into Michigan.

-- Leach XPress

A map shows the 36-inch diameter Leach XPress, at a cost of $1.75 billion to developer NiSource Inc., will ship dry methane natural gas southwest from a Majorsville compressor station in Marshall County to the Ohio River, west under the Ohio River to an area near Clarington in Monroe County, west across areas of Monroe, Noble, Muskingum, Morgan, Perry and Hocking counties in southeast Ohio to an area near Lancaster, Ohio, due south from the area near Lancaster to another crossing of the Ohio River and finally to a compressor station in Ceredo, W.Va., near Huntington.

"Historically, we have always drawn gas from the south. Now, we can send oil and gas produced in this area to the south," Zane Daniels, spokesman for NiSource subsidiary Columbia Pipeline Group, said. "This is the missing link in the chain."

-- Mountain Valley Pipeline

The $3-plus billion Mountain Valley Pipeline, developed by EQT Corp., would run 330 miles south from the MarkWest Energy Mobley complex in Wetzel County to the Transcontinental Gas Pipeline Co. Zone 5 compressor station 165 in Virginia.

The project map shows the Mountain Valley would run south through Wetzel, Harrison, Lewis, Braxton, Webster, Nicholas, Greenbrier, Summers and Monroe counties in West Virginia as it reaches the Virginia border.

Why Are They Needed?

Demarco said it would be great to see all of the gas produced in West Virginia consumed in the Mountain State, but said that is just not realistic.

"There is no way we could use all that gas here. Only 5 percent of the potential Marcellus wells have even been permitted," he said. "We ought to be thankful there is a market for West Virginia gas."

Demarco said the Dominion Cove Point liquefied natural gas exporting facility in Maryland will help create even more demand when it comes online in 2017.

"People are going to start to see that we, in the state of West Virginia, are for real. They will see us as a place that has the gas," Demarco said. "If you are a manufacturer, why wouldn't you want to be as close to that gas as possible?"

What Landowners Should Know

Accompanying any interstate pipeline will be compressor stations, which can produce air pollutants such as nitrogen oxides and formaldehyde. Companies typically place compressor stations every 40 to 100 miles along the line to propel the gas toward its destination.

Greene also said surface owners who are asked to sign right-of-way agreements to allow the pipelines on their property should know their rights.

"Don't just take their word for it. Do the research," Greene said. "Make sure you are getting a fair deal. Be careful what you sign."

© Copyright 2014 The Intelligencer / Wheeling News-Register. All ri...

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Permalink Reply by jim weyland on October 28, 2014 at 5:51

skip,

imo, excellent article.

of the projects, only one, atlantic coast, is to create new (virgin) market opportunities. the four others will be essentially moving gas east and or west to get it out of the field by tying into existing pls w/capacity.

clarington, oh was the original terminus of the 42" rockies express pl, aka rex. given that two of the projects propose to terminate at clarington, it looks to me that it might becoming a major hub.

it'll be interesting to see which, if not all, of the projects are able to find enough mullets, oops, i mean forward thinking parties shipper willing to pony up for a decade or more of firm (where you pay 'demand' charges whether or not you actually ship) service.

note: this type of rate design in tech/jargon speak is 'modified fixed variable'. the pls really, really love it. usually, in my experience, producers shipper must have really, really reached their point(s) of maximum pain before putting ink to paper.

jim

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Permalink Reply by Dion Warr, CPL on October 28, 2014 at 11:29

Skip:

I would note the points of the above article re: addressing the needs to funnel Marcellus gas into the greater market and the implications as to arbitrage on ng ca. 2017-18 and beyond.  What I would also point out per the articles and the regional transportation climate and pl flows are as follows:

At 16 bcfd, Marcellus gas cannot entirely displace the Producing Area's contribution to the NE gas market at peak demand, even assuming no bottlenecks at distribution points anywhere in the region.  (NE requires at least 27 bcfd capacity to manage peak regional requirements).

Much of NE ng import comes from the producing area (SW), which exports 40 bcfd more than it consumes and/or imports from other regions.  This amounts to approximately 80-85% as recent as two years ago.  The only savoir to Canada gas exports to NE is that much of upper NE (MA, ME, NH, VT) is an isolated market that does not have direct access to domestic gas transportation (yet).

As Jim noted, significant new supply comes from the ACP, however, a significant amount of that capacity could be rapidly redeployed down the Dominion Cove lateral to the recently permitted LNG terminal.  Even if taken in aggregate, the lines here add up to 8 bcfd of combined transfer capacity. ETCo - Rover already has a followup project in line to shuttle Rover gas to service Heartland supplies (OH, MI, Ontario) which would have more of an impact on the Panhandle East system than E TX, NW LA, or the Gulf Coast production trunklines.  (To partially rebut my own statements, yes, capacity will eventually backfill to impact PL demand from those areas as well.)  Given current capacity, this would place 10% of SW peak capacity at parity with Marcellus sources.  Leach is already paired with the Rayne X-press as a followup project which would bring gas south and west to within 30 miles of HH (Rayne, LA)

The other issue (which is arguable) is as to timeline re: increased storage capacity nearer the Marcellus.  Much of the excess storage is also located S (SW - Producing Area) and W (MW) of the Marcellus.  At present, contraflowing gas (or even net contraflow - taking preferred delivery on Marcellus gas and storing other producing area ng) still does not alleviate short-term supply peaks and shortages.

Interesting discussion though.

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Permalink Reply by tc on October 29, 2014 at 1:42

This website has some interesting data. 

First there is a review of NG production in the blog The Big Kahuna Helps Keep a Lid on NatGas Prices  The Marcellus/Utica now produces 39.4% of all shale NG produced in the US.

Second he has posted a rig map of current rigs and it has an overlay of the rig locations on 7-30-2010 the Haynesville peak.

http://www.haynesvilleplay.com/

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