A milestone: Texas’ oil production hits 2 million barrels a day.
Production reports to the Texas Railroad Commission from oil operators across the state reached two million barrels a day in February. The production total, a level not seen in Texas since 1986, includes more than one million b/d from the Permian Basin. Preliminary numbers for February 2014 announced April 24 indicate that statewide production was 2,002,070 b/d.
“This is a milestone production level for Texas not seen in 28 years,” commissioner Christi Craddick of Midland said. “Our state is blessed with vast mineral resources, and I am confident that the future will only continue to grow brighter… Texas must have the ability to continue to drive the nation toward energy independence. We must stand strong against interfering policies.” Texas is the largest oil-producing state in the U.S.—delivering 36 percent of the nation’s crude oil, three times more than any other state, according to the U.S. Energy Information Administration.
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Western Refining said it plans to lay 40 miles of 12-inch diameter pipeline for light crude oil and condensate produced in the Delaware basin. The pipeline will connect Western Refining Logistics’ Mason station crude-oil gathering facility in Reeves County with a new crude-gathering facility at Wink station in Winkler County, according to Oil & Gas Journal. The pipeline, which will be in service by mid-2015, will allow delivery of as much as 125,000 b/d of oil greater than 45-degree gravity to common-carrier pipelines at Wink.
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Houston-based Crestwood Midstream Partners will expand its Willow Lake project in the Delaware Basin. Crestwood said Phase II will include the conversion of a portion of its Las Animas natural gas gathering system into rich gas service and the construction of a cryogenic natural gas processing plant. Phase I of the project in Eddy County, N.M., started in 2013 with the conversion of an existing Crestwood gathering pipeline and installation of NGL field separation equipment to support drilling by Legend Natural Gas. Phase II, expected by Crestwood to cost $25 million to $30 million, will include construction of a cryogenic natural gas processing facility with a capacity of 20 MMcfd and additional gathering pipelines across the dedication area to support Legend drilling in 2014 and 2015.
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The U.S. Energy Information Administration said crude oil inventories on the U.S. Gulf Coast reached a record high of 207.2 million bbl April 11 as a result of the continuing strong crude oil production growth, the opening of TransCanada’s Marketlink pipeline, and a drop in crude oil inputs at Gulf Coast refineries due to seasonal maintenance. “While Gulf Coast crude oil inventories typically build during the beginning of the year, this year’s increase has been particularly notable,” the EIA said.
Gulf Coast inventories increased 46.2 million bbl from 161 million bbl Jan. 10 to the current level, which is 24.2 million bbl above the previous year-average and 22.2 million bbl above year-ago levels. Typically over this period, Gulf Coast crude oil inventories build only 23.4 million bbl. The start-up of TransCanada’s 700,000-b/d Marketlink pipeline from Cushing, Okla., to Houston has been the main driver of the elevated Gulf Coast inventory levels. Rising in-region production on the Gulf Coast have kept inventories levels generally high in recent years.
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ConocoPhillips increased its estimated resource base in the Eagle Ford play to 2.5 billion bbl of oil in place from 1.8 billion bbl and its estimated production from current volumes to more than 250,000 boe/d by 2017.
“ConocoPhillips’s wells in the Eagle Ford have the highest oil rates per well and are leading the industry in value,” chairman and CEO Ryan Lance said. “This is attributable not only to the fact that we are in the best part of the play, but also to our relentless focus on technical innovation and drilling and completion cost efficiencies.” The Oil & Gas Journal said during fourth quarter 2013 ConocoPhillips reported production of 218,000 boe/d from the Permian, Eagle Ford, and Bakken—an increase of 31 percent compared with fourth quarter 2012.
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Houston-based Enterprise Products Partners plans to build a fully refrigerated ethane export facility on the Texas Gulf Coast. Enterprise executed long-term contracts to support development of the facility designed to have an aggregate loading rate of approximately 10,000 barrels per hour or up to 240,000 b/d. The export facility is expected to begin operations in 2016 third quarter. CEO Michael Creel said the facility “will be the largest in the world… We continue to receive strong interest from the international community, and we are having ongoing discussions with other potential customers that could result in our contracting the remaining capacity of the facility.”
EPP estimates U.S. ethane production capacity currently exceeds U.S. demand by 300 mbpd and could exceed demand by up to 700 mbpd by 2020 considering the estimated incremental demand from new ethylene facilities previously announced.
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Denver-based DCP Midstream will construct a 200 MMcfd sour natural gas processing plant in Lea County, N.M., with associated gathering system extensions to service producers in Southeast New Mexico and West Texas. In addition to the new Zia II plant, the project includes front-end treating for sour gas, two acid gas injection wells, a 50-mile high pressure trunk line that will intersect DCP Midstream’s existing NM gathering system, and new high-pressure pipelines and compression in west Texas. The project is expected to begin operation by 2015 second quarter. Greg Smith, president of the company’s Permian and North business units, said the company’s total investment the last three years in the Permian Basin is $1.7 billion.
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Houston-based Kinder Morgan Energy Partners will build and operate a new 213-mile pipeline to transport carbon dioxide from the company’s St. Johns source field in Apache County, Arizona, to the KMEP-operated Cortez pipeline in Torrance County, N.M. The new 16-inch OD pipeline will have an initial capacity of 300 MMcfd and will support current and future EOR projects owned by Kinder Morgan and other operators in the Permian Basin. KMEP said it plans to invest $300 million on the pipeline and another $700 million to drill wells and build field gathering, treatment, and compression facilities at the St. Johns field. The project is expected to be in service by 2016 third quarter.
James Wuerth, president of KMEP’s CO2 group, said, “This project will help address the market’s growing demand for CO2 and enable Permian Basin producers to increase oil production by using the product in EOR projects.”
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FROM THE RAILROAD COMMISSION OF TEXAS
[issued 17 April 2014]
The Texas average rig count as of April 17, 2014, was 882, representing about 50 percent of all active land rigs in the United States. In the last 12 months, total Texas reported production was 744 million barrels of oil and 7.8 trillion cubic feet of natural gas.
The commission’s estimated final production for February 2014 is 65,593,424 barrels of crude oil and 490,248,893 Mcf (thousand cubic feet) of gas well gas.
The RRC derives final production numbers by multiplying the preliminary February 2014 production totals of 56,057,964 barrels of crude oil and 415,923,384 Mcf of gas well gas by a production adjustment factor of 1.1701 for crude oil and 1.1787 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the commission for March 2014 was 133,638,911 Mcf compared to 284, 985, 813 Mcf in March 2013. The April 2014 gas storage estimate is 142,369,123 Mcf.
The RRC Oil and Gas Division set initial May 2014 natural gas production allowables for prorated fields in the state to meet market demand of 8,712,007 Mcf (thousand cubic feet). In setting the initial May 2014 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 May 2014 is reported.
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FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
[issued 08 April 2014]
During the April-through-September summer driving season, regular gasoline retail prices are forecast to average $3.57/gallon. The projected monthly national average regular retail gasoline price falls from $3.66/gal in May to $3.46/gal in September. EIA expects regular gasoline retail prices to average $3.45/gal in 2014 and $3.37/gal in 2015 compared with $3.51/gal in 2013.
The July 2014 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $2.85/gal for the five trading days ending April 3. Based on the market value of futures and options contracts for this key petroleum component of gasoline, there is a 3 percent probability that its price at expiration will exceed $3.35/gal, consistent with a monthly average regular-grade gasoline retail price exceeding $4.00/gal in July 2014.
The North Sea Brent crude oil spot price in March averaged near $110 per barrel (bbl) for the ninth consecutive month; West Texas Intermediate (WTI) crude oil prices remained flat near $101/bbl. New pipeline capacity from the Midwest into the Gulf Coast helped reduce inventories at the Cushing, Okla., storage hub to 27 million barrels by the end of March 2014, the lowest level since November 2009.
The discount of WTI crude oil to Brent crude oil, which averaged more than $13/bbl from November through January, fell to $7/bbl in March. EIA expects the WTI discount to average $9/bbl in 2014 and $11/bbl in 2015.
Natural gas working inventories March 28 were 0.82 trillion cubic feet (Tcf), 0.88 Tcf (52 percent) below the level at the same time a year ago and 0.99 Tcf (55 percent) below the five-year average (2009-13). Henry Hub natural gas spot prices were volatile over the past few months, increasing from $3.95 per million British thermal units (MMBtu) Jan. 10 to a high of $8.15/MMBtu Feb. 10, before falling back to $4.61/MMBtu Feb. 27, and then bouncing back up to $7.98/MMBtu March 4.
EIA expects that the Henry Hub natural gas spot price, which averaged $3.73/MMBtu in 2013, will average $4.44/MMBtu in 2014 and $4.11/MMBtu in 2015
—compiled by Garner Roberts