MARCELLUS/UTICA REGION: Trump executive order energizes Capito,?Manchin; Equitrans completes strategic acquisition of Eureka Midstream and Hornet Midstream; NATIONAL: U.S. natural gas stocks end heating season at the lowest level since 2014; Petchem demand, exports add complexity to propane market; Natural gas consumption projected to jump in 2019; AOC compares climate doom skeptics to grandparents who protested civil rights movement; Shale companies, adding ever more wells, threaten future of U.S. oil boom; INTERNATIONAL: LNG as marine fuel could reduce greenhouse gas up to 21%; Nord Stream 2 gas pipeline hits 1,000-kilometer mark; U.S. natural gas market is taking cues from China; Iraq is finally pumping enough oil to flex its muscles in OPEC.
MARCELLUS/UTICA REGION
Trump executive order energizes Capito,?Manchin
Parkersburg (WV) News and Sentinel
President Trump’s executive orders supporting energy development are being hailed by the U.S. senators from West Virginia. Trump signed the directives on Wednesday to expedite permitting processes and encourage investment in infrastructure to develop energy markets, such as pipelines and the Appalachian Storage Hub in West Virginia. “I’m also pleased to see the president’s executive order directs a study on the growth of the Appalachian energy sector and particularly the potential to grow our petrochemical industry downstream of an ethane hub,” Sen. Shelley Moore Capito, R-W.Va., said. “I’ve said time and time again that a regional ethane storage hub would do a lot to benefit West Virginia. This logical follow-up to the study I authorized, and which the Department of Energy has completed, on the viability of the hub is another affirmation that it’s an idea worth pursuing.” Political games prevent West Virginia energy from being sent to where it’s needed, Capito said. Policies should facilitate coal and liquid natural gas exports to promote West Virginia jobs, she said. “Earlier this year, I sent (EPA Administrator Andrew Wheeler) a letter voicing my concern with certain states blocking natural gas pipelines for political reasons, and I have worked hard to end the previous administration’s war on coal,” Capito said. The proposed Appalachian Storage Hub is a facility using available natural underground storage capabilities to store raw materials, including ethane or butane from gas produced in the Marcellus Shale. An area in Tyler County near Bens Run is among three sites under consideration in West Virginia. “After talking with Secretary Perry this week and after (Wednesday’s) executive order, I am more confident than ever that the administration is serious about being a partner in helping us develop the Appalachian Storage Hub,” Sen. Joe Manchin, D-W.Va., said. Manchin said he has been working with the Trump administration and Perry so they understand the economic development and potential for energy security from a storage hub. It will create jobs in West Virginia and encourage development in the state and neighboring states, he said. “It will also be vital in helping to secure our energy future by providing a reliable, affordable supply of natural gas liquids,” Manchin said. [MDN: An interesting take. Both WV U.S. Senators are jazzed by Trump’s EOs because they believe it will help their state–specifically the proposed ethane storage hub in their state. We suppose making pipelines easier to build will assist the storage hub, but we kind of scratch our heads to figure out why Capito and Manchin think the EO directly benefits WV.]
Equitrans completes strategic acquisition of Eureka Midstream and Hornet Midstream
Equitrans Midstream
Equitrans Midstream Corporation (NYSE: ETRN) and EQM Midstream Partners, LP (NYSE: EQM) today announced that EQM has completed the acquisition of a 60% interest in Eureka Midstream Holdings, LLC (Eureka Midstream) and a 100% interest in Hornet Midstream Holdings, LLC (Hornet Midstream) for total consideration of $1,030 million, comprised of approximately $860 million in cash and approximately $170 million of assumed pro-rata debt. Concurrently, EQM closed the private placement of $1.2 billion of newly issued Series A Perpetual Convertible Preferred Units (Convertible Preferred Units). A portion of the net proceeds from the private placement was allocated to the cash purchase price of the acquisition, with the remaining net proceeds to be used for general purposes. “We are pleased to have completed this important acquisition and our team is excited to begin integrating the Eureka and Hornet systems and leveraging our existing assets and core operating capabilities,” said Diana M. Charletta, chief operating officer of EQM. “We are relentless in our pursuit of becoming the low-cost provider and partner of choice across all aspects of our business. These value-enhancing assets will diversify our producer customer mix and increase exposure to wet Marcellus acreage; expand our supply hub and create additional commercial opportunities; reduce unit operating costs through increased scale; and accelerate opportunities for our water services business.” [MDN: We previously brought you the news of this deal a month ago (see Equitrans Buys 2 Pipeline Systems in Marcellus/Utica for $1B). This is the first major purchase made by EQT’s spun-off midstream division since the split with EQT last year.]
NATIONAL
U.S. natural gas stocks end heating season at the lowest level since 2014
U.S. Energy Information Administration – Natural Gas Storage Dashboard
Working natural gas in storage in the Lower 48 states as of March 31, the traditional end of the heating season (November 1–March 31), totaled 1,137 billion cubic feet (Bcf), according to EIA’s Weekly Natural Gas Storage Report released on April 11. As of March 31, estimated working gas stocks were 491 Bcf (30%) lower than the current five-year (2014–18) average for the end of the heating season. The 2018–19 heating season had the lowest level of working gas stocks in the United States for this time of year since 2014, when working gas stocks ended the 2013–14 heating season at 837 Bcf because of multiple, intense cold snaps. In 2018, working gas stocks ended the winter at 1,360 Bcf. Working gas stocks totaled 3,198 Bcf at the beginning of the winter heating season in November 2018—the lowest level since 2002, and followed a fairly typical path during the winter. The 2018–19 U.S. heating season was characterized by periods of significantly colder-than-normal temperatures that resulted in relatively substantial natural gas storage withdrawals, as well as periods of lower-than-average withdrawals from storage. [MDN: The point in bringing you this blurb is point out that even though storage numbers are down, at the lowest level in the past five years, the price of natgas remains low too. Because of prolific production. Lower for longer. Learn it, love it, live it.]
Petchem demand, exports add complexity to propane market
RBN Energy
Until just a few years ago, the rise and fall of U.S. propane inventories each year was driven in large part by winter weather: the colder the temperatures in the major propane-consuming areas, the bigger the draw on stocks. Things have gotten much more complicated lately, though, thanks to a combination of rapid NGL production growth, a generally booming propane export market, and the vagaries of petchem margins. Now, to get a handle on propane stocks, you not only need to be able to forecast the weather, you also need to monitor international propane arbs and steam cracker economics — oh, and crude prices too, because they have a significant effect on NGL output and propane supply. Today, we discuss the many factors that impact propane inventories and prices in this sometimes chaotic market. [MDN: Believe it or not the Marcellus/Utica produces quite a bit of propane, which comes from the “wet gas” areas of southwest PA and eastern OH. Interesting article on the complexities of the propane market here in the U.S.]
Natural gas consumption projected to jump in 2019
Kallanish Energy
The Energy Information Administration expects U.S. natural gas consumption to increase by 2.5 billion cubic feet per day (Bcf/d) (3.0%) in 2019, according to EIA’s just-released Short-Term Energy Outlook (Steo), Kallanish Energy reports. The latest data is up from expected growth of 1.5 Bcf/d (1.8%) projected in the March Steo. The forecast largely reflects higher consumption in the first quarter of 2019, as a result of estimated heating degree days for March higher than previously forecast. Colder-than-expected temperatures in March raised consumption of natural gas for space heating use in the residential and commercial sectors. In addition, EIA slightly raised its forecast growth of natural gas consumption in the industrial and electric power sectors for 2019. EIA/Steo expects strong growth in U.S. natural gas production to put downward pressure on prices in 2019 and in 2020. EIA expects Henry Hub natural gas spot prices will average $2.82/Mmbtu in 2019, down $0.33/Mmbtu from 2018. The forecasted 2020 Henry Hub spot price is $2.77/Mmbtu. [MDN: These predictions are always a crap shoot, but EIA does a better job than most. The good news here is that demand for natgas will likely rise this year, meaning more markets for M-U gas.]
AOC compares climate doom skeptics to grandparents who protested civil rights movement
Washington (DC) Examiner
Rep. Alexandria Ocasio-Cortez D-N.Y., called out people who are resistant to extreme action to address climate change Wednesday, comparing them to their grandparents who protested the Civil Rights Movement. “How many years until the world ends again? We have 12 years left to cut emissions by at least 50% if not more,” said Ocasio-Cortez as she crouched on the ground, looking at the camera and eating a snack while on Instagram Live. “For everyone who wants to make a joke about that, you may laugh but your grandkids will not.” Ocasio-Cortez said a lot of Americans are hiding their families’ past history opposing the civil rights movement. “You look back and you open history books on the civil rights movement and you see those folks who are protesting against the ability for African Americans and black Americans to have the right to vote and they would hold up these bigoted signs,” she said. “Just know that in the present day, there are a lot of people who hide the fact that their families and that their grandparents fought against principles of equal rights in the United States.” [MDN: This woman is a mental midget. She doesn’t even make sense (she’s irrational). Why anyone even listens to her is beyond us. We bring you the occasional story about Alexandria Occasional-Cortex (i.e. “half-brain”) purely for entertainment purposes.]
Shale companies, adding ever more wells, threaten future of U.S. oil boom
Wall Street Journal
Shale companies’ strategy to supercharge oil and gas production by drilling thousands of new wells more closely together is turning out to be a bust. What’s more, the approach is hurting the performance of older existing wells, threatening the U.S. oil boom and forcing the maturing industry to rethink its future. To maintain America’s status as an energy powerhouse, shale companies in recent years have touted bunching wells in close proximity, greatly increasing the number of wells drawing on a promising reservoir. The added wells would produce as much as older ones, many drillers believed, allowing them to extract more oil overall while maintaining strong returns from each well. Those rosy forecasts helped fuel investor interest in shale companies, which raised nearly $57 billion from equity and debt financing in 2016, according to Dealogic, even as oil prices dipped below $30 a barrel. That was up from nearly $34 billion five years earlier, when oil topped $110 a barrel. Now the results are coming in, and they are disappointing. Newer shale wells drilled close to older wells are generally pumping less oil and gas than the older wells, according to early corporate results. Engineers warn the new wells could produce as much as 50% less in some circumstances. The newer shale wells often interfere with the output of older wells, because blasting too many holes in dense rock formations can damage nearby wells and lower the overall pressure, making it harder for oil to seep out. The moves could potentially cause permanent damage and lower the overall amount recovered from a reservoir. [MDN: An interesting article that posits we’re drilling wells to close together and as a result, they’re not as productive. The article is aimed at shale oil, not shale gas–although we assume the same thing can be said about gas wells.]
INTERNATIONAL
LNG as marine fuel could reduce greenhouse gas up to 21%
LNG World News
An independent study has revealed that the use of LNG as marine fuel could achieve the reduction of greenhouse gas (GHG) of up to 21% when compared with current oil-based marine fuels. SEA\LNG, a UK-registered not for profit collaborative industry foundation, said on Thursday that the study also confirms that emissions of other local pollutants, such as SOx, NOx, and particulate matter, were close to zero when using LNG compared with current conventional oil-based marine fuels. The study, commissioned by SEA\LNG and non-government agency Society for Gas as a Marine Fuel (SGMF), was conducted by data and consultancy provider Thinkstep according to ISO standards. SEA\LNG chairman Peter Keller said: “The Life Cycle GHG Emission Study is a long-awaited piece of the ‘LNG as a marine fuel’ puzzle. It not only confirms what we already knew in terms of LNG’s immediate impact on air quality, human health, and its cleanliness but clearly highlights the genuine, substantiated GHG benefits of using today’s marine engines capable of burning natural gas. “[…] it is clear that LNG is the most environmentally-friendly marine fuel that is readily available and safe, both today and in the foreseeable future.” On an engine technology basis, the absolute Well-to-Wake (WtW) emissions reduction benefits for LNG-fuelled engines compared with HFO fuelled ships today are between 14% to 21% for 2-stroke slow speed engines and between 7% to 15% for 4-stroke medium speed engines. Also, 72% of the marine fuel consumed today is by 2-stroke engines with a further 18% used by 4-stroke medium speed engines. Study partner Chad Verret, SGMF board chairman, added: “LNG is safe to use, fully compliant and readily available as a marine transport fuel. Standards, guidelines, and operational protocols are all in place to ensure that the safe way is the only way when using gas as a marine fuel. “LNG meets and exceeds all current and 2020 marine fuel compliance requirements for content and emissions, local and GHG. With the world LNG Bunker Vessel fleet doubling in the next 18 months and those vessels being deployed at major bunkering hubs, LNG as a ship fuel is rapidly becoming readily available.” Additionally, bioLNG and Synthetic LNG – both fully interchangeable with LNG derived from fossil feedstock – offer the potential for significant additional GHG emissions reductions. According to the study, a blend of 20% bioLNG as a drop-in fuel can reduce GHG emissions by a further 13% when compared to 100% fossil fuel LNG. It is worth noting that the report looked at all major marine engines with help from quality data provided by equipment manufacturers including Caterpillar MaK, Caterpillar, GE, MAN, Rolls Royce, Wärtsilä, and Winterthur Gas & Diesel as well as from ExxonMobil, Shell, and Total from the supply side. [MDN: You don’t often think of ships as being a huge potential market for natural gas, but they are, via LNG. Most ships are powered by diesel and other heavy oil-based fuels. New worldwide standards are about to go into effect limiting emissions from ships, and LNG is increasingly being looked at as the fuel of the future. Solar panels and windmills just won’t power a ship (or airplane)…sorry Big Green, we live in the real world, not your fantasy world. We like to keep an eye on the “marine” space as a potential new market for Marcellus/Utica gas.]
Nord Stream 2 gas pipeline hits 1,000-kilometer mark
LNG World News
A total of 1,000 kilometers of the contentious Nord Stream 2 gas pipeline has now been laid in Finnish, Swedish, and German waters. Nord Stream 2 AG, a subsidiary of Russian giant Gazprom, said on Thursday that two Allseas-owned pipelay vessels, the Solitaire and the Pioneering Spirit, were currently installing the pipeline in the Swedish Exclusive Economic Zone. The pipeline operator added that some twenty vessels were being engaged in the project in the Baltic Sea, with nearly 1,300 people working on board the pipelay, pipe supply, and survey vessels. The company reached another project milestone last week when the project’s coating and logistics contractor Wasco completed concrete weight coating of its share of the steel pipes in its plant in Kotka, Finland, where approximately 101,000 steel pipes had been coated. This corresponds to half of the pipes needed for the twin pipelines. The pipeline system consists of two approximately 1,230-kilometers-long pipelines, each made up of some 100,000 pipe joints. Nord Stream 2 was designed as two parallel 48-inch lines, roughly 1,200 kilometers long, each starting from south-west of St. Petersburg and ending at German coast, Greifswald. Nord Stream 2’s natural gas pipelines will have the capacity to transport 55 billion cubic meters (bcm) of Russian gas a year to the EU, for at least 50 years. In related news to the project, U.S. Ambassador to the EU Gordon Sondland criticized the European Commission for not putting more effort into killing the Nord Stream 2 pipeline in the Politico journal while Reuters reported that Nord Stream 2’s gas link to Germany will miss its end-2019 start-up target and may not be fully operational for several years. According to EC’s deputy director-general for energy Klaus-Dieter Borchardt, such a delay means that Gazprom will need to transit gas via Ukraine to meet its supply obligations to EU customers after 2019 and negotiate terms for gas transfer before the end of the year. [MDN: This pipeline is getting built over the objections of the U.S. We know it will be considered extreme, but we think all foreign aid (OUR taxpayer money) to Germany should be cut off. Period. Forthwith. Germany needs to know America’s patience has limits, and their stupidity of jumping into bed with Russia has consequences. They’ve made their bed, let’s let them lie in it.]
U.S. natural gas market is taking cues from China
Wall Street Journal
The rise of the U.S. as a major exporter of liquefied natural gas has helped balance the domestic market amid surging production. It has also connected the price of gas in Louisiana to the weather in China—a development that is adding pressure on already low U.S. prices. The U.S. gas market, long isolated from global trade, had relied on domestic supply and demand for the heating and power-generation fuel to set prices. Now, though, enough liquefied natural gas, or LNG, is being shipped overseas that forecasting prices is becoming as complex as calculus. There are smog-battling policy makers in Beijing to consider, as well as nuclear-power plant maintenance schedules in Japan, Chilean weather forecasts and gas inventories in the Netherlands to monitor. “Our supply and demand balances are increasingly linked to what’s going on in other places in the world,” said Barclays analyst Samuel Phillips. “That quite simply was not the case five years ago, or even really a couple years ago.” Lately a sharp decline in Asian and European LNG prices is reverberating back to the U.S. market. The Japan Korea Marker, a widely used Asian benchmark, has fallen below $5 per million British thermal units in recent weeks, down from more than $10 before winter. Asian prices have plunged in response to a warmer-than-expected winter in China and neighboring importers, which resulted in gas that was stockpiled in autumn being available for spring. At less than $5, the Asia price is right around the cost of U.S. gas plus processing and shipping expenses. U.S. natural-gas futures for May delivery settled at $2.664 per million BTUs on Thursday. Though processing and shipping costs can vary by exporter and destination, $2 per million BTUs is typical, analysts say. In Asia, U.S. exports are “basically out of the money,” said Jordan McNiven, an analyst with energy-focused investment bank Tudor, Pickering, Holt & Co. “They’re saying, don’t send us any more LNG, we’re good.” [MDN: Like it or not, the price of gas here at home is increasingly driven by what people on the other side of the planet are willing to pay for it, as this article points out. Something to keep in mind. We have to lift our heads up and scan the world energy scene. It’s not only gas, it’s nuclear, wind, solor–all forms of energy. One form impacts all the others–and price is the key.]
Iraq is finally pumping enough oil to flex its muscles in OPEC
Bloomberg
Yamani, al-Naimi, al-Falih. These three men, all Saudi Arabian energy ministers, moved global oil markets for the past 50?years, sometimes with just an utterance. But the kingdom may be about to lose some of its power. Lurking in the shadows are oil sages in Iraq, which has quietly emerged as the world’s fourth-biggest oil producer. They want a bigger say in OPEC and the global energy game. Hardly filled with household names, the ever-changing cast of Iraqi oil ministers has basically been relegated to observers in OPEC, the cartel founded in Baghdad in 1960. Iraq was exempted from OPEC production quotas for almost two decades, a concession granted because the country had been mired in conflict since 1980. Its delegations to cartel meetings in Vienna had nothing to offer, unable to tweak output to help prop up prices or fill shortages. Iraq’s doubling of crude output in the past decade has finally given the country a voice in oil debates and prompted its inclusion in the most recent round of cuts. It recently joined the committee that monitors compliance, though third-party data suggest that the country flouts the production curbs. (Iraqi officials say the country is complying with the cuts.) Size is power in the oil markets. No one is as mighty as Saudi Arabia, the world’s biggest exporter, which has the capacity to pump about 12.5?million barrels a day. But Iraq’s ascent is posing an increasing threat to the kingdom’s dominance. Former Iraqi oil minister Hussain al-Shahristani laid the groundwork early this decade by boosting the country’s crude reserves assessments and cementing partnerships with ExxonMobil, Russia’s Lukoil, BP, and other companies to develop long-neglected fields. Those efforts have paid off. Capacity is now about 5?million barrels a day, and Iraq plans to pump even more, targeting 7.5?million barrels per day in 2025. It’s likely to fall short, reaching 6?million barrels by then, according to consultant Wood Mackenzie Ltd. But even if it fails to meet its target, that growing production capacity sends a clear message to OPEC: Iraq can swing global markets. [MDN: Keep an eye on Iraq.]
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