In this month’s assemblage of articles, the idea of “getting pointed in the right direction” could be thought of as a unifying thread. These are the full versions of the “Drilling Deeper” news items that appeared as abbreviated versions in the print edition of PBOG’s January 2019 issue.
NatGas Prices to Stay Low
Natural gas prices in the Permian basin likely to remain low during 2019 due to constrained pipeline capacity, according to a source at GlobalData, a leading data and analytics company.
Following a drastic drop in the Waha Hub natural gas price earlier this week, Adrian Lara, senior oil and gas analyst at GlobalData, offered his view on the impact on the upstream sector:
“A direct consequence of the excess of natural gas supply is the low prices at which Permian gas is traded at the Waha Hub in north Pecos County. During the last quarter of the current year, the average discount to Henry Hub price has average around US$1.45 per thousand cubic feet (mcf) and earlier this week the discount widened, widely reflecting the exhausted capacity of pipelines.
“Although additional pipelines have been sanctioned to transport gas to the U.S. Gulf Coast and Mexico, production will continue to surpass total pipeline capacity up to the year 2020. Also, the volume exported to Mexico might not be at its optimal level due to pipeline delays within Mexico that are to move the product further south.
“With an assumed increase in the export to Mexico and the potential for new LNG plants in the USGC, natural gas from Permian is expected to be matched by this additional demand. However pipeline projects in Mexico are facing delays and of a total seven planned projects that should have started by Q4 2018, five are delayed.
“Recently the TransCanada pipeline project, aimed at moving natural gas from Tuxpan on Mexico’s USGC to Tula nearby Mexico City, was stalled due to the difficulties in negotiating with local communities.
“In any case, none of these scenarios of increased demand for regional natural gas and its corresponding infrastructure in place will occur before 2020, which means Waha Hub prices will likely continue to be volatile and with a larger than normal discount to Henry Hub for at least one more year.”
End the EV Cap, Don’t Extend It
The American Energy Alliance recently delivered to lawmakers on Capitol Hill a study showing the economic effects of eliminating the manufacturers’ cap on the plug-in electric vehicle tax credit. The study, conducted by NERA Economic Modeling and commissioned by Flint Hills Resources, concluded that, on net, the high costs of raising the 200,000 manufacturers’ cap in the EV federal tax credit would more than outweigh consumers’ financial savings. Congress is continuing to negotiate a “tax extenders” package that could include a provision to lift the 200,000 vehicle cap and extend the program through at least 2022. The American Energy Alliance intends to score any “tax extenders” package that includes this special interest giveaway.
The study’s key takeaways:
* If the manufacturers’ cap were removed, the study foresees greater burdens on taxpayers and higher electricity rates to pay for EV infrastructure as utilities recover their costs plus a rate of return through a fixed charge on customer’s bills.
* Eliminating the manufacturers’ cap on the EV tax credit would result in the net present value reduction in personal income of all U.S. households of $95 billion or about $610 per household between 2020 and 2035.
* Extending the tax credit would have a negligible impact on gasoline demand (<1% decrease by 2035), and therefore, does not reduce carbon emissions in any significant way.
* A lifting of the cap would funnel wealth from the American public at large to a narrow segment of Americans: EV manufacturers and wealthy EV buyers.
American Energy Alliance President Thomas Pyle made the following statement:
“As Tesla’s Elon Musk and GM’s Mary Barra continue to lobby Congress to extend the electric vehicle tax credit and eliminate the manufacturers’ cap, this study confirms what we have been arguing for years: the special interest giveaway is a burden on American families and does not improve their lives in any tangible way. Americans want to make their own choices about what cars to drive and they shouldn’t have to pay for an electric vehicle tax credit which has been shown to mostly benefit wealthy individuals.
If policymakers in Washington were to lift the manufacturers’ cap provision of the tax credit, they would inflict further economic harm on American households to the tune of a $95 billion value reduction between 2020 and 2035. And to what end? The NERA study shows that the tax credit will have a negligible impact on gasoline demand and therefore, won’t improve the environment in any meaningful way. It’s time for this tax credit to be ended, not extended.”
How Shale Improved the Trade Deficit
Falling U.S. petroleum imports have lowered the U.S. merchandise trade deficit by $250 billion from what it would have been otherwise. A new IHS Markit report examines the impact of rising U.S. oil, natural gas, and chemicals production on the domestic trade merchandise balance and how the U.S. position in energy and chemicals may evolve in coming years.
The report finds that the U.S. production boom has exerted a moderating force on what is a large domestic merchandise trade deficit by helping reduce the country’s net petroleum imports. Furthermore, U.S. production growth is now on track to make the country a net-exporter of petroleum for the first time since at least 1949.
Among the key findings:
* The total U.S. merchandise trade deficit in 2017 was nearly $250 billion lower than it otherwise would have been if the petroleum (crude oil, refined products, and natural gas liquids-petroleum liquids separated out from natural gas and also known as NGLs) trade deficit had remained at its 2007 level.
* IHS Markit projects that the US petroleum trade balance will further improve by roughly $50 billion between 2017 and 2022.
* IHS Markit estimates that the US petroleum trade deficit in dollars fell from about $320 billion in 2007 to about $75 billion in 2017 as net imports declined. At the same time, the trade deficit for non-petroleum merchandise grew substantially.
* The continued growth of US crude oil and NGL production, along with relatively flat liquids demand, are expected to make the United States a net-petroleum (crude oil, refined products and natural gas liquids) exporter by early next decade. This would be the first time since at least 1949 that the United States was not a net petroleum importer.
* The resurgence of U.S. oil and gas production has already altered the domestic net trade position of a number of energy products over 2007-2017 period. IHS Markit expects exports of several of these products to continue to rise.
The United States is now on track to become a net exporter of petroleum for the first time since at least 1949 with additional trade deficit gains expected.
The boom in U.S. oil and gas production over the past decade has exerted a moderating force on what is a large domestic merchandise trade deficit by helping reduce the country’s net petroleum imports, a new report by business information provider IHS Markit says. Continued U.S. production growth is now on track to make the country a net-exporter of petroleum for the first time since at least 1949.
The total U.S. merchandise trade deficit in 2017 was nearly $250 billion lower than it otherwise would have been if the petroleum (crude oil, refined products and natural gas liquids – petroleum liquids separated out from natural gas and also known as NGLs) trade deficit had remained at its 2007 level, the report finds. IHS Markit projects that the U.S. petroleum trade balance will further improve by roughly $50 billion between 2017 and 2022.
The findings are part of a new report entitled “Trading Places: How the Shale Revolution Has Helped Keep the U.S. Trade Deficit in Check.” (See below for a link.) The report examines the impact of rising U.S. oil, natural gas and chemicals production on the domestic trade merchandise balance and how the U.S. position in energy and chemicals may evolve in coming years.
“The improved U.S. trade position in petroleum has been a counterbalancing force helping to keep the U.S. trade deficit in check over the past decade,” said Daniel Yergin, vice chairman, IHS Markit. “The resurgence of domestic oil and gas production has flipped the trade position of several products along the energy value chain on their heads, while that of other products, such as crude oil, have been significantly reduced.”
U.S. production of liquids (crude oil and natural gas liquids) nearly doubled from about 7 million barrels a day (mbd) in 2007 to 13 mbd in 2017 and 14.8 mbd in the first nine months of 2018. Crude oil alone rose from 5 mbd in 2007 to 9.4 mbd in 2017 and averaging 10.6 mbd in the first 9 months of 2018–and hitting 11.2 mbd in October 2018.
This rise, combined with a slight decline in domestic demand, contributed to a sharp fall in U.S. petroleum net imports as a share of total consumption – from a high of 60 percent in 2005 to 19 percent in 2017 and 14 percent in nine months of 2018.
For more on this and other subjects from IHS, go here: https://ihsmarkit.com/Info/1118/trading-places-shale-revolution.html
FreeMarket Coalition Says Halt
the Electric Vehicle Tax Credit
In light of recent conversations in Washington surrounding the electric vehicle tax credit, a coalition of 28 free market policy groups, led by the American Energy Alliance, recently sent a letter to House and Senate leaders objecting to any expansion of the federal electric vehicle tax credit.
The letter encourages Republican congressional leaders to reject attempts by the EV lobby and their allies in Congress to slip a tax credit cap increase into upcoming legislative and extender packages.
American Energy Alliance PresidentThomas Pyle made the following statement:
“The electric vehicle tax credit was signed into law under the condition that it would be temporary and that it would only apply to the first 200,000 vehicles sold per manufacturer. The authors’ intension behind the law was to reduce the country’s dependence on foreign oil. The tax credit is no longer needed as America now leads the world in energy production. The time has come for the tax credit to end. Under no circumstances should the cap be lifted in this lame-duck session of Congress. We shouldn’t be giving handouts to wealthy individuals to offset the costs of their luxury vehicles.”
The letter was signed by the following organizations who share AEA’s objection to taxpayers footing the bill for another massive government handout:
American Energy Alliance | American Commitment | American Conservative Union | American Consumer Institute | Americans for Limited Government | Americans for Prosperity | Americans for Tax Reform | Caesar Rodney Institute | Center for Freedom and Prosperity | Civitas Institute | Competitive Enterprise Institute | Consumers Action for a Strong Economy | Council for Citizens Against Government Waste | E&E Legal Institute | Freedom Foundation for Minnesota | FreedomWorks | Frontiers of Freedom | Georgia Public Policy Foundation | Heartland Institute | Heritage Action | Hispanic Leadership Fund | Independence Institute | Less Government | Mississippi Center for Public Policy | National Black Chamber of Commerce | National Tax-Limitation Committee | Rio Grande Foundation| Taxpayers Protection Alliance
Danos Reaches Safety Milestones
October 2018 marked two significant safety milestones for Danos. Danos’ production crew working for Shell Appalachia celebrated seven years without a recordable incident, as classified by the Occupational Safety and Health Administration (OSHA). At the same time, Danos’ team working with EP Energy celebrated four years with no OSHA recordable incidents.
“We are proud of the high performance and continued safety of our Shell and EP Energy teams,” said owner Mark Danos. “Since our company’s founding, our goal has always been for our employees to return home in the same condition that they came to us, and we are honored to share this value in working with our customers.”
The Danos team operating for Shell works in the Marcellus Shale areas of Tioga and Lycoming counties, Penn. The team provides onshore production operation support in addition to managing warehouse operations and materials. Danos began working in the Marcellus Shale play in 2011 and opened its current office in Martins Ferry, Ohio, in 2017.
Danos’ team working with EP Energy in the Eagle Ford Shale has worked over 160,000 man hours over the last four years with no recordable incidents. The team provides production operation support and is responsible for oil and gas production from wells at multiple work sites located south and west of San Antonio, Texas.
“Our employees are diligent about safe work practices, such as pre-work inspections and observations, and they take each task one at a time. Our team takes care of each other, and this is proof that all of the care they take is effective,” said Danos.
With over 2,100 employees, Danos has office locations in Houston and Midland, Texas, and Martin’s Ferry, Ohio, in addition to their Louisiana offices in Lafayette, Morgan City, Carencro, and Gray, where the company is headquartered.
AssurEOR Wins Recognition
When finalists for the 2018 World Oil Awards were announced, Locus Bio-Energy Solutions LLC’s AssurEOR product line was chosen for its advancements in the production chemicals category. The prestigious awards, developed by World Oil and Gulf Energy Information, honor leading innovations in upstream oil applications that are positively impacting the industry.
There has been an increasing need for new technology in the upstream oil sector, specifically in the development of production chemicals that offer environmental, safety and production benefits. Using a unique fermentation technique that allows for customization and quick deployment, Locus Bio-Energy developed the first non-toxic, non-bacterial biochemical treatment program that is rapidly tailored to each treated well, and has been proven to have extended production increases.
The AssurEOR line, named for its enhanced oil recovery benefits, consists of two product offerings—AssurEOR FLOW, a paraffin dispersal treatment, and AssurEOR STIM, an enhanced oil recovery treatment. Both products are as potent as chemicals without HSE issues, and are designed to overcome specific well conditions and challenges, ensuring maximum efficacy. In addition to consistent increases in production, the treatment program offers an array of additional benefits to E&P users, from decreasing safety concerns and increasing asset value to qualifying for tax credits in certain states—factors that led to its finalist position in the World Oil Awards.
“There was a large hole in product offerings for well maintenance and oil recovery that were not only consistently effective, but also sustainable and profitable. Locus Bio-Energy solved that,” said Dr. Kirk Raney, principal upstream oil applications consultant for Locus Bio-Energy and the nominator for the World Oil Awards. “The AssurEOR treatments create the first personalized program that increases production by up to 500 percent and significantly increases recoverable reserves. It’s a huge win for the industry, and we’re honored that it has been distinguished as a top technology by the judges.”
Almost 290 submissions were entered for the World Oil Awards, with a handful of finalists selected across 18 key categories. Entries were judged on the details of the technology developed, and their impact on the industry, including advancements in safety, cost savings, efficiency and more.
After successful treatments in the Appalachian basin, AssurEOR FLOW and AssurEOR STIM treatments are now also being offered in Permian and Powder River basins. Plans are in progress for expansion into additional regions. For more information on the technology, results, pricing, potential tax breaks or availability, visit LocusBioEnergy.com.
Locus Bio-Energy Opens Midland Facility
Developing non-toxic technologies for upstream applications continues to intensify, but there’s been little success to date until recent advancements from Locus Bio-Energy Solutions. The intellectual-property-based fermentation company, which is known throughout the industry for its local production of fresh, non-toxic, and customized treatments, recently announced the opening of a new facility in Midland, Texas, to expand its unique product offerings. Based at the center of one of the highest activity level basins in the world, the company’s new location will offer fresh, personalized treatment programs based on by-products of non-GMO, non-bacterial microorganisms for paraffin dispersal and enhanced oil recovery. The opening came in response to increased demand from Permian E&P companies for innovative, HSE-friendly products.
While microorganism-based products are not a new concept, the local production method has drastically improved availability, potency, efficacy and customization options. Locus Bio-Energy originally introduced the approach in the Appalachian basin—servicing hundreds of vertical and horizontal wells from its Ohio-based fermentation center. Refineries in the Appalachian basin have processed hundreds of thousands of barrels of crude treated with Locus Bio-Energy’s line of AssurEOR products, witnessing the efficacy first-hand. Interest continued to grow rapidly as owners and operators saw ongoing benefits from the AssurEOR FLOW paraffin dispersal and AssurEOR STIM enhanced oil recovery treatments. The AssurEOR FLOW paraffin dispersal product is especially unique in that it is the only maintenance product that also increases production by an average of 50 percent.
“No two wells are the same, and every basin has its own characteristics and challenges—making it very difficult to effectively use a standard product across all regions,” said Karthik Karathur, President of Locus Bio-Energy. “Producing treatments at local fermentation centers allows us to deliver more potent solutions directly to the well that are customized to the specific needs of that area. These non-toxic and innovative products are showing exceptional benefits—from increased production to decreased LOE—making them a key to successful regional and individual well operations.”
Located in Midland, the Locus Bio-Energy Texas facility will offer full fermentation and production capabilities in a 4,700-square-foot facility. Using proprietary techniques created by the company’s science team, including world-famous microbiologist Ken Alibek, the new location will have the capacity to service wells throughout the Permian Basin.
The company’s team of experts have been meeting with operators in the region for months to develop tailored solutions to liquify paraffin and increase production, and treatments are currently underway. Due to the number of operators that signed up for treatments before the facility even opened, Locus Bio-Energy has already started working on a second facility, with more in process.
“The intensity of interest speaks to the efficacy of our technology, and how industry standards are beginning to shift,” Karathur said. “Safe, green products based on food-grade ingredients are the future of the oil business.”
For more information on Locus Bio-Energy, the Midland facility, or the use of microbial-based products in upstream applications, visit LocusBioEnergy.com.