One proposed pipeline looks “in,” another looks “out,” and Pioneer hits big with a Martin County well.
Centurion Pipeline, subsidiary of Occidental Petroleum Co., announced an open season to solicit shipper commitments to a proposed Cline Shale pipeline system. Customers interested in transporting crude oil from Irion, Sterling, Coke, Tom Green, and Mitchell counties to Centurion’s existing Colorado City station in Mitchell County were invited to submit binding commitments.
The proposed Cline Shale pipeline system would originate near Barnhart in Irion County and transport about 75,000 barrels of crude oil per day to the Colorado City station with an additional new connection to the proposed BridgeTex Pipeline, which is expected to provide access to the Texas Gulf Coast by July 2014. The proposed system, with 100 miles of new pipeline, is expected to begin service in 2014 second quarter. Centurion currently has about 2,700 miles of pipelines from southeast New Mexico across the Permian Basin to Cushion, Okla., with 85 truck unloading facilities and 5.8 million barrels of active storage capacity.
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American Block Co. of Houston, manufacturer of drilling equipment, flowline products, and valves, opened an office on North Andrews Highway in Odessa because of its growing business in West Texas. “This expansion into West Texas is part of an overall plan to expand our distribution business,” Rajani Shah, president of American Block, said, “and this store opening will be used as a model for future expansion into other areas.”
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Kinder Morgan Energy Partners has postponed plans for a pipeline to carry crude oil from Midland to California because there wasn’t enough interest among refineries. The pipeline would have gone through southern New Mexico and Arizona and split in Barstow, Calif., with one branch extending to a terminal south of Bakersfield and another to refineries in the Los Angeles area.
At an estimated cost of $2 billion, the Freedom Pipeline would have been a mix of converted natural gas pipelines and new construction. The company said it could have carried up to 277,000 barrels of oil per day. But refiners such as Valero Energy Corp. and Tesoro Corp. preferred to continue getting crude delivered by railcar. Taking deliveries by rail gives refiners the flexibility to shop among crude oil supplies from different places.
Mark Kissel, president of west region gas pipelines for Kinder Morgan, said the pipeline idea could be revived if the market expresses more interest. Houston-based Kinder Morgan Energy Partners owns or operates 51,000 miles of pipeline.
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Atlas Pipeline opened a 200 MMcfd cryogenic gas processing facility in southeast Midland County. Called the Driver plant, it is the fourth plant in the Permian Basin for Atlas, and it brings the company’s total processing capacity in West Texas to 455 MMcfd. The others are the Benedum plant in Upton County and the Midkiff and Consolidated plants in Reagan County.
Denny Latham, vice president of Atlas Pipeline, told the Midland Reporter-Telegram that 160 companies sell into the Atlas system in West Texas. Pioneer Natural Resources owns 27 percent of Atlas, and all its natural gas runs through Atlas. Latham said a fifth plant is planned for late 2014.
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Pioneer Natural Resources Co. has gone on production with its first horizontal Wolfcamp shale well in Martin County in West Texas. The Mabee K #1H well had an initial 24-hour peak natural flow rate of 1,572 barrels of oil equivalent per day with 77 percent oil content. The well was completed in the Wolfcamp B interval using a 27-stage hybrid fracture stimulation over the well’s perforated lateral length of 6,671 feet.
Pioneer CEO Scott Sheffield told the Stanton-Martin County Messenger that the strong initial production rate from Mabee #1H demonstrates the potential of the company’s 900,000 acres in Wolfcamp and Spraberry, which he said holds an estimated net resource potential of more than 4.6 billion barrels of oil equivalent.
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As the natural gas boom continues across the United States, state legislatures have targeted hydraulic fracturing with dozens of new regulations, including bans, moratoriums, and increased disclosure requirements, according to a new study from Colorado State University.
The study said many of the approximately 50 bills address water requirements, air quality, and disclosure of chemicals used in the process as communities without a history of oil and gas deal with arrival of the industry. The bulk of the new rules come from states on the East Coast, but new legislation was also considered in Texas, where drillers have used fracturing for more than 50 years. Bills introduced but not passed into law during the recent 83rd session of the Texas legislature included measures to regulate water use and waste disposal.
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First Solar will build New Mexico’s largest solar power plant on state trust land in Luna County in southern New Mexico, according to the state’s land office. The 50-megawatt facility will provide power for almost 18,000 average homes. Commissioner Ray Powell said the project will create 300 construction jobs and a steady stream of revenue for public schools, universities and hospitals. Lease payments could generate as much as $40 million for state land trust beneficiaries over the 40 years of the lease.
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More than half of the identified shale oil resources outside the United States are concentrated in four countries—Russia, China, Argentina and Libya—and more than half of the non-U.S. shale gas resources are concentrated in five countries—China, Argentina, Algeria, Canada, and Mexico.
The United States would be ranked second after Russia for shale oil resources and fourth after Algeria for shale gas resources if compared with the 41 countries assessed in a new report from the U.S. Energy Information Administration titled “Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries Outside the United States.”
The EIA said currently only the United States and Canada are producing shale oil and shale gas in commercial quantities. The agency commissioned Advanced Resources International to conduct the world shale resource assessment because shale oil production has become a significant source of oil supply within the United States and because more and better geologic information has become available for shale formations outside the United States.
“As shale oil and shale gas production has grown in the United States to become 30 percent of oil and 40 percent of natural gas total production, interest in the oil and natural gas resource potential of shale formations outside the United States has grown,” EIA administrator Adam Sieminski said. “This report indicates a significant potential for international shale oil and shale gas, though the extent to which technically recoverable shale resources will prove to be economically recoverable is not yet clear.”
Shale oil and shale gas resource estimates are highly uncertain, the EIA said, and will remain so until the shale basins are extensively tested with production wells.
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FROM THE RAILROAD COMMISSION OF TEXAS
[issued 28 June 2013]
The Texas average rig count as of June 14, 2013, was 837, representing about 49 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 583 million barrels of oil and 7.4 trillion cubic feet of natural gas.
The commission’s estimated final production for April 2013 is 57,335,604 barrels of crude oil and 505,142,904 MCF (thousand cubic feet) of gas well gas.
The RRC derives final production numbers by multiplying the preliminary April 2013 production totals of 48,221,702 barrels of crude oil and 428,377,632 MCF of gas well gas by a production adjustment factor of 1.1890 for crude oil and 1.1792 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the commission for May 2013 was 356,879,249 Mcf compared to 395,143,999 Mcf in May 2012. The June 2013 gas storage estimate is 371,225,633 Mcf.
The RRC Oil and Gas Division set initial July 2013 natural gas production allowables for prorated fields in the state to meet market demand of 8,341,220 MCF (thousand cubic feet). In setting the initial July 2013 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 July 2013 is reported.
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FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
[issued 11 June 2013]
After increasing to $119 per barrel in early February 2013, the Brent crude oil spot price fell to a low of $97 per barrel in mid-April and then recovered to an average of $103 per barrel in May. EIA expects that the Brent crude oil spot price will average $102 per barrel over the second half of 2013 and $100 per barrel in 2014.
The EIA expects the price of regular gasoline will average $3.53 per gallon over the summer driving season (April through September). The annual average regular gasoline retail price is projected to decline from $3.63 per gallon in 2012 to $3.49 per gallon in 2013 and to $3.37 per gallon in 2014. Energy price forecasts are highly uncertain, and the current values of futures and options contracts suggest that prices could differ significantly from the projected levels.
In April 2013 estimated total liquid fuels consumption in non-OECD (Organization for Economic Cooperation and Development) countries reached 44.5 million barrels per day (bbl/d), which was higher than consumption in OECD countries (44.3 million bbl/d) for the first time in history. EIA expects that consumption in OECD countries will average 45.5 million bbl/d in 2013 compared with 44.6 million bbl/d for non-OECD countries. EIA forecasts annual average non-OECD total liquids consumption to surpass OECD levels in 2014.
The EIA forecasts the summer 2013 average U.S. residential electric bill will total $395 over the three-month period of June, July, and August, which is $10 (2.5 percent) lower than the average customer’s bill during summer 2012. Forecast milder temperatures than last summer contribute to a projected decline in average electricity usage per customer, which is partially offset by a projected two percent increase in average electricity prices.
Based on the outlook from the National Oceanic and Atmospheric Administration (NOAA) for above-normal tropical weather activity this year, EIA estimates median outcomes for total shut-in production in the federal Gulf of Mexico (GOM) during the current hurricane season (June through November) of about 19 million barrels of crude oil and 46 billion cubic feet (Bcf) of natural gas. Actual shut-ins are likely to differ significantly from this estimate depending on the number, track, and strength of hurricanes as the season progresses.
—compiled by Garner Roberts