Plains All-America Pipeline has completed or is completing several new pipeline projects in the Permian Basin designed to help producers in midstream operations. The pipelines serve the Bone Spring, Spraberry, and Wolfberry areas in nine counties at a cost to build of $135 million. “These projects provide additional pipeline gathering capacity in areas with significant production growth,” Harry Pefanis, president and COO of Plains, said.
The Barstow pipeline is a completed 15-mile project that initially provides 50,000 barrels a day of takeaway capacity in Ward, Reeves, and Pecos counties. Plains said that projects under construction include the 50-mile North Spraberry pipeline, the 50-mile South Spraberry trunk line, and a 15-mile pipeline extending from Garden City to the South Spraberry trunk line.
The Associated Press reported that Chesapeake Energy is selling much of its land and infrastructure in West Texas for $6.9 billion as the company tries “to strengthen its finances.”
The assets in the Permian Basin are being sold in a series of deals to Royal Dutch Shell and Chevron in addition to a previously announced sale to affiliates of EnerVest.
The AP said, “Chesapeake accumulated enormous debt in recent years as it rushed to acquire land and other assets. New technology allowed drillers to access enormous reserves of natural gas held in shale and other formations under several U.S. states. Chesapeake and other drillers found and developed so much new natural gas that the price collapsed, decimating profits and the ability to pay down debt.”
The Oklahoma City-based company is trying to wipe from its books $14 billion in debt this year. The Oil and Gas Journal said Chesapeake is selling assets in the southern Delaware to a unit of Royal Dutch Shell, and Chevron is buying assets in the northern Delaware. Chesapeake is keeping 470,000 net acres of undeveloped leases in the Midland basin for future sale or development.
The chief economist for American Petroleum Institute said in Washington, D.C., that policymakers across all levels of U.S. government must guard against unnecessary or duplicate regulations that could impede investments in unconventional oil and gas plays.
John Felmy told reporters that API believes strong state regulations and safety practices already are in place for shale development and hydraulic fracturing. “The application of horizontal drilling has allowed hydraulic fracturing to access enormous, previously unreachable supplies of oil and natural gas—and to do so safely and responsibly,” he said.
Technological advances led to what Felmy called “the North Dakota miracle”—transforming that state to the nation’s No. 2 oil producer—and tapping unconventional reserves, creating jobs, and boosting revenue in Texas, Pennsylvania, Arkansas, Louisiana, and Ohio.
U.S. Senator John Hoeven (R-ND) said he plans to introduce a federal bill called the Empower States Act to ensure that states remain primary regulators of hydraulic fracturing and similar oil and gas activities. “The legislation recognizes that states have a long record of effectively regulating oil and gas development with good environmental stewardship,” he said.
Hoeven said that, if adopted, the bill would prevent arbitrary decisions by the U.S. Environmental Protection Agency and allow each state to develop regulations to meet its unique geological circumstances.
A bill co-sponsor, Senator Lisa Murkowski (R-Alaska), added, “Given the differences in geology and drilling techniques around the country, it makes sense to let the states take the lead on regulating oil and gas development.”
An international energy research and consulting firm anticipates a strong medium- to long-term resurgence of exploration and production in the deepwater Gulf of Mexico following the 2010 well blowout and resulting massive oil spill offshore Louisiana that stalled gulf activity for months.
At a briefing in its Houston office as reported by the Oil and Gas Journal, Wood MacKenzie said gulf production is expected to reach two million boe/d in 2018-19. The 2010 accident and resulting more-stringent U.S. drilling regulations delayed some exploration and production plans. But Wood MacKenzie pointed to high investments, a wide range of opportunities, and a large number (46) of operators at work in the deepwater gulf.
“The moratorium and exodus of several mobile offshore drilling units from deepwater gulf in 2010 sharply hindered drilling activity through 2011, but it has rebounded very well in 2012,” Lauren Payne of Wood MacKenzie said. The firm expects $20 billion will be spent in drilling development wells through 2015.
Also, the U.S. Bureau of Ocean Energy Management announced plans for another in a series of lease sales—this one scheduled March 20, 2013—to offer 38 million acres in the Gulf of Mexico offshore Louisiana, Mississippi, and Alabama. The sale will offer all unleased areas in the central gulf.
John Freeman from the energy research group at Raymond James and Associates told a subcommittee of the Energy and Commerce Committee of the U.S. House of Representatives that his firm believes the U.S. “will become the largest oil producer in the world before the end of the decade.”
Freeman was one of several officials to testify Sept. 13 in Washington, D.C., that they expect abundant oil and gas resources will help make North America energy independent within a decade. “The United States has become the world’s second largest oil producer,” Harold Hamm of Continental Resources of Enid, Okla., said. “We just passed Russia and are behind only Saudi Arabia.”
According to a report in Oil and Gas Journal, he added, “The technology that allows us to drill two miles down, turn right, go another two miles, and hit a target the size of a lapel pin has unlocked the resources that make energy independence a reality.”
Daniel Ahn of Citigroup-New York said global oil prices could fall 15 to 20 percent, and domestic refining, petrochemical, fertilizer, steel, aluminum smelting, and other energy-dependent manufacturing could strategically benefit.
Daniel Weiss of the Center for American Progress Action Fund in Washington, D.C., said an energy independence plan must reduce carbon pollution. “Promoting an energy independence plan that increases carbon pollution is like setting your house on fire to stay warm,” he said. “It may work at first, but the long-term consequences are horrendous.”
Oil and natural gas issues quickly surfaced in the first of three presidential debates Oct. 3 in Denver between President Barack Obama and the Republican candidate, former Massachusetts governor Mitt Romney.
In his opening statement, Romney said North American energy independence by 2050 is one of his five major goals. “Energy is critical,” he said. “It’s true that production is up, but not due to [Obama’s] policies. All the oil and gas growth has been on private and state land. Production is actually down on federal land.” He also called for increased crude oil production in Alaska and approval of the Keystone XL pipeline project’s cross-border permit.
Obama said a good first step to address the nation’s looming fiscal crisis would be to eliminate tax code provisions that favor the nation’s largest oil companies. He also said developing new forms of energy is important.
FROM THE RAILROAD COMMISSION OF TEXAS
The Texas average rig count as of Sept. 21, 2012, was 877, representing about 49 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 474 million barrels of oil and 7.2 trillion cubic feet of natural gas.
The commission’s estimated final production for July 2012 is 49,002,732 barrels of crude oil and 524,613,151 Mcf (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary July 2012 production totals of 40,321,511 barrels of crude oil and 441,853,913 Mcf of gas well gas by a production adjustment factor of 1.2153 for crude oil and 1.1873 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the commission for August 2012 was 391,994,296 Mcf compared to 353,961,061 Mcf in August 2011. The September 2012 gas storage estimate is 404,036,307 Mcf.
The RRC Oil and Gas Division set initial October 2012 natural gas production allowables for prorated fields in the state to meet market demand of 9,784,268 Mcf (thousand cubic feet). In setting the initial October 2012 allowables, the commission used historical production figures from previous months and producers’ demand forecasts for the coming month, then adjusted the figures based on well capability. These initial allowables will be adjusted after actual production for October 2012 is reported.
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
EIA projects average household expenditures for heating oil (by 19 percent) and natural gas (by 15 percent) will increase this winter (Oct. 1 through March 31) compared with last winter. Projected household expenditures are five percent higher for electricity and 13 percent higher for propane this winter. Average expenditures for households that heat with heating oil are forecast to be higher than any previous winter on record.
The forecast for higher household expenditures primarily reflects a return to roughly normal winter temperatures east of the Rocky Mountains compared with last winter’s unusual warmth. According to the National Oceanic and Atmospheric Administration’s most recent projection of heating degree days, the Northeast, Midwest, and South will be about two percent warmer than the 30-year average (1971 to 2000), but still 20 percent to 27 percent colder than last winter. The West is projected to be only about one percent colder than last winter.
Projected residential heating oil prices average two percent higher and natural gas prices one percent higher this winter. Winter average electricity (by two percent) and propane prices (by four percent) average lower than last winter.
EIA expects U.S. total crude oil production to average 6.3 million barrels per day (bbl/d) in 2012, an increase of 0.7 million bbl/d from last year. Projected U.S. domestic crude oil production increases to 6.9 million bbl/d in 2013, the highest level of production since 1993.
Forecast U.S. real gross domestic product (GDP) grows by 2.2 percent this year and by 1.7 percent next year. Projected world oil-consumption-weighted real GDP grows by 2.7 percent in 2012 and 2.5 percent in 2013. EIA expects Brent crude oil prices to fall from recent highs over the rest of 2012, averaging $111 per barrel over the fourth quarter of 2012 and $103 per barrel in 2013. EIA expects WTI spot prices to average $93 per barrel in 2013, with the WTI discount to Brent narrowing to $9 per barrel by the end of 2013.
Natural gas working inventories ended September 2012 at an estimated 3.7 trillion cubic feet (Tcf), about eight percent above the same time last year. EIA expects the Henry Hub natural gas spot price, which averaged $4.00 per million British thermal units (MMBtu) in 2011, to average $2.71 per MMBtu in 2012 and $3.35 per MMBtu in 2013.
—compiled by Garner Roberts