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Oil and Gas Roundup — April 11

April 11, 2018
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:


What will it take to keep up with the shale gas boom? $170 billion

Bottlenecks on the U.S. natural gas super highway are starting to stack up, raising concerns about whether infrastructure can be built fast enough to meet surging supplies.

Gas output will expand by 24 billion cubic feet, or 32 percent, through 2025 from last year, according to U.S. Energy Information Administration estimates. To support that growth, the country’s gas industry needs to spend $170 billion over the next seven years on pipelines, compressor stations, export terminals and other related infrastructure, said Meg Gentle, chief executive officer of gas exporter Tellurian Inc.

“One threat to the U.S. being able to export LNG and expand its export capability is the overall commitment to invest in infrastructure to move natural gas,” Gentle said in an interview at the Bloomberg New Energy Finance Future of Energy Summit in New York Tuesday.

It’s a warning that for parts of the country the pipeline woes aren’t over yet. Appalachian producers have been grappling for the better part of the shale boom of the past decade with limited pipeline access. Spot prices there slumped to record lows last year and have started to rebound as new capacity starts up.

Now the Permian Basin, know for its oil-rich layers of rock, is facing the threat of having to slow down the output of crude because drillers lack capacity to handle all the the gas that’s flowing as a mere byproduct.

For companies building multibillion-dollar plants to chill gas into liquid and ship it abroad, the abundance of cheap gas from the Permian in West Texas is an advantage. Developments there “will happen” because it’s an environment supportive to energy infrastructure, she said. That may not happen fast enough for Appalachia.

Producers are getting increasingly concerned about worsening pipeline constraints, Drillinginfo co-founder Allen Gilmer said during a panel at the BNEF summit. Its harder for the industry to get its hands around this because these limits aren’t being driven by operating or engineering issues but more by “social change and cultural conditions,” he said.

— Bloomberg News.


Will shale become the next victim of the China-U.S. trade war?

One can hardly call it a trade war just yet—posturing for a trade war may be a more apt label—but the U.S. Shale industry, which has enjoyed a mighty good run in the last year, may soon find itself the next target as China and the United States face off in the fight to flesh out new trade terms.

Not a day has gone by in the last couple of weeks without hearing the latest round of threats, promises—and analysis of said threats and promises—as the Trump administration clamors for better trading terms between the two nations. It’s a trade war. It’s not a trade war. China has too much to lose. The United States has more to lose than it thinks. It’s merely the start of negotiations. It’s the end of negotiations. The stock market plummets. It rallies. It plummets again. But in this continued tit for tat, the potential effects on the US shale industry should not be underestimated.

U.S. oil exports are at an all-time high, and with this prestige comes a unique vulnerability—a vulnerability that was nonexistent in the days of domestic-use only. Back in 2013, the United States was exporting between 43,000 and 58,000 barrels per day—with Canada being the only recipient, thanks to an export ban implemented by the United States in 1975. In late 2015, however, the United States removed the ban, opening up its oil exports to other nations. For week ending March 30, 2018, US crude oil exports reached an average of 2.175 million bpd—a meteoric rise for a nation that for years kept its oil close to home.

Read more at Oil Price.


Cyberattack ‘wake-up call’ puts pipeline sector in hot seat

A cyberattack that U.S. natural gas pipeline owners weren’t required to report has lawmakers taking a closer look at how the industry is handling such threats, raising the prospect of tighter regulation.

In website notices to customers this week, at least seven pipeline operators from Energy Transfer Partners LP to TransCanada Corp. said their third-party electronic communications systems were shut down, with five confirming the service disruptions were caused by hacking. But the companies didn’t have to alert the U.S. Transportation Security Administration, the agency that oversees the nation’s more than 2.6 million miles of oil and gas conduits in addition to providing security at airports.

Though the cyberattack didn’t disrupt the supply of gas to U.S. homes and businesses, it underscores that energy companies from power providers to pipeline operators and oil drillers are increasingly vulnerable to electronic sabotage. It also showed how even a minor attack can have ripple effects, forcing utilities to warn of billing delays and making it more difficult for analysts and traders to predict a key government report on gas stockpiles.

“These attacks are a wake-up call that addressing our aging energy infrastructure needs to be a priority,” Congressman Robert Latta, a Republican from Ohio who serves on the House Committee on Energy and Commerce, said in an emailed statement on April 5. “Bad actors are looking at any way to weaken the American energy sector.”

This isn’t the first time hackers have had oil and gas pipes in their sights: The Congressional Research Service reported intrusions targeting pipeline communication systems back in 2012. A web attack could “disrupt pipeline service and cause spills, explosions, or fires -- all from remote locations,” the service said in a report.

Read more at Bloomberg.


A U.S. shale bottleneck is threatening oil prices

The Permian basin is driving U.S. shale growth, with expectations that the basin will add enormous volumes this year, keeping the oil market well-supplied. But the Permian's pipeline network is already filling up, forcing steep discounts for oil, and threatening to derail the aggressive growth projections for the region.

The EIA predicts the Permian will hit 3.156 million barrels per day (mb/d) of output in April, an increase of 80,000 bpd from March, and up a shocking 850,000 bpd from a year ago. Shale E&Ps and the oil majors are pouring in billions of dollars into the region, and two out of every three rigs the industry is adding is going into the Permian.

But the shale basin is getting crowded, which not only means skyrocketing prices for land and a search for opportunities along the periphery, but also rapidly shrinking availability on the Permian's pipeline network. "As these fringe areas begin to get exploited, we are seeing more and more crude that needs to find a pipeline to Cushing or the Gulf Coast," John Zanner, energy analyst for RBN Energy, told Reuters.

Oil market analysts knew that new pipeline capacity would be necessary in order to move all of the oil out of the Permian. But few expected the region to run out of pipeline space so quickly.

Read more at Business Insider.


Bill to put on study, pilot program for natural gas demand response

U.S. Sen. Sheldon Whitehouse (D-R.I.) plans to introduce legislation on Wednesday that calls on the U.S. Department of Energy to study natural gas demand response, and directs federal regulators to develop a pilot program using the latest technology, Whitehouse's office told Utility Dive exclusively.

While demand response has long been recognized for its use in the electric sector, the idea has so far gained limited traction in the gas industry, despite a few utilities beginning to experiment. Gas demand response could help address constraints when demand spikes, helping stabilize prices and maintain reliability.

According to the U.S. Energy Information Administration, almost 10 million customers participate in electric demand response programs, helping shave nearly 6% off peak electric load in competitive power markets. And bill supporters say preliminary research shows similar results are possible in the gas sector.

“Incentives to use energy more wisely benefit everyone," Whitehouse said in a statement to Utility Dive. "Customers save on energy costs, we get more out of our infrastructure, and less pollution ends up in our atmosphere to drive climate change."

"Utilities are already succeeding with these programs," Whitehouse said. "My new legislation will help spread that success around the country.”

Read more.
 
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