February 2017, Vol. 244, No. 2

In The News

In the News

DCP Midstream Partners to buy assets of Philips-Spectra joint venture

DCP Midstream Partners LP has acquired the assets of a joint venture between Phillips 66 and Spectra Energy Corp to create the largest natural gas liquids (NGL) producer and gas processor in the United States. The combined company, which has an enterprise value of $11 billion, will be renamed DCP Midstream LP and will trade with the ticker symbol “DCP” on the New York Stock Exchange.(See Projects).

The deal simplifies the company’s corporate structure, said Wouter van Kempen, CEO of DCP Midstream and DPM. DPM is managed by its general partner, DCP Midstream GP LP, which in turn is managed by an entity owned by DCP Midstream LLC. As part of the deal, the joint venture, DCP Midstream LLC, will pay DCP Midstream Partners (DPM) $424 million in cash and get 31.1 million DPM units. DPM will also assume $3.15 billion of DCP Midstream LLC’s debt.

DPM said it would build a 200 MMmcf/d processing plant to increase its capacity in Colorado’s Denver-Julesburg basin by 50%. The plant is expected to come online in late 2018.The company would also expand its natural gas liquids capacity on Sand Hills pipeline by 30% to 365,000 bpd. The pipeline moves natural gas liquids from the Permian basin and Eagle Ford to Mont Belvieu, TX.

Wisconsin Tribe Wants Pipeline Removed After Decades of Operations

AP reports that a Chippewa tribe in Wisconsin is calling for 12 miles of pipeline to be removed from its reservation after 64 years of operation, claiming they want to protect their land and water from oil spills. The Bad River Band of the Lake Superior Chippewa’s tribal council approved a resolution Jan. 4 refusing to renew easements for 11 parcels of land along a section of Enbridge’s Line 5 pipeline, which carries oil and natural gas liquids almost 650 miles from Canada to eastern Michigan.

The resolution also calls for decommissioning the pipeline and removing it from the tribe’s reservation along the shores of Lake Superior in far northern Wisconsin. “We depend upon everything that the creator put here before us to live a good and healthy life,” Bad River Chairman Robert Blanchard said.

It isn’t clear if the tribe can force removal of the pipeline. Brad Shamla, Enbridge’s vice president of U.S. operations, said it was too early to speculate on what authority the tribe may have. He said there’s never been a spill on the reservation since he joined the company in 1991. The resolution was a surprise, Shamla said, because Enbridge and the tribe have been negotiating renewal of easements on the 11 parcels – which expired in 2013 – for the past three years. The easements for the majority of other parcels on tribal land extend until 2043 or last in perpetuity.

Tulsa Pipeliners Announces 2016-2017 Honors 

The Tulsa Pipeliners Association recently announced the 2016-2017 President’s Award and Pipe Liner of the Year Award Recepients. The President’s Award is given to Select Engineering and Pipeliner of the Year is Terry Flynn.

Anadarko Sells Marcellus Shale Natural Gas Assets

Anadarko Petroleum will sell its operated and non-operated upstream assets and operated midstream assets in the Marcellus Shale of north-central Pennsylvania to Alta Marcellus Development, a wholly owned subsidiary of Alta Resources Development, for $1.24 billion. The midstream assets in the Marcellus owned by Western Gas Partners, Anadarko’s sponsored MLP, are not in the agreement.

The Marcellus Shale divestiture includes about 195,000 net acres and, at the end of the third quarter, sales volumes from these properties totaled about 470 MMcfd. The transaction is expected to close shortly.

DOE Offers Conditional OK for Methanol Carbon Capture Loans

The U.S. Department of Energy offered a conditional commitment to guarantee loans of up to $2 billion to Lake Charles Methanol to construct the world’s first methanol production facility to employ carbon-capture technology in Lake Charles, LA.

The captured carbon would be used for enhanced oil recovery (EOR) in Texas. The project represents the first loan guarantee under the Advanced Fossil Energy Project solicitation issued by the department’s Loan Programs Office.

If constructed, the project would also be the first petroleum coke-(petcoke) to-methanol facility in the U.S. Petcoke is a byproduct from oil refining. By using petcoke as the feedstock and employing carbon capture at the project, the proposed project would reduce emissions of carbon dioxide that would otherwise be released.

Shell Midstream Acquires Interests in Gulf of Mexico Pipelines

Shell Midstream Partners acquired 10% interest in Proteus Oil Pipeline Company, 10% interest in Endymion Oil Pipeline Company and 1% interest in Cleopatra Gas Gathering from BP.

Proteus is a 71-mile pipeline with 425,000-bpd capacity which provides access to the Mississippi Canyon area of the Gulf of Mexico from the Thunder Horse and Thunder Hawk platform to the Proteus SP 89E Platform. Noble Energy’s Big Bend and Dantzler fields are tied back to the Thunder Hawk platform.

Endymion is an 89-mile pipeline with a 425,000-bpd capacity which provides access to the Mississippi Canyon area of the Gulf of Mexico. It is connected to LOOP Clovelly storage with access to multiple markets.

Cleopatra is a 115-mile gas-gathering pipeline in Southern Green Canyon, with access to Atwater Valley, Walker Ridge, and Lund areas in the Gulf of Mexico. Cleopatra is connected to the Holstein, Atlantis, Neptune, Shenzi and Mad Dog platforms. The system will transport new volumes from the Mad Dog 2 field once it comes online.

Pipelines Selected as Canadian Business Story of the Year

The increasingly divisive debate over pipelines, with the economic benefits and environmental concerns they carry, was named The Canadian Press business story of the year. In a survey of newsrooms across the country, pipeline development edged out another politically charged issue – real estate – by a single vote, a reflection of how the two stories competed for attention throughout 2016.

The year saw Prime Minister Justin Trudeau attempt to strike a grand bargain of sorts: approving Kinder Morgan’s expansion of Trans Mountain and the replacement of Enbridge’s Line 3 while also pushing ahead with a national carbon price and rejecting Enbridge’s Northern Gateway. The decision to green-light the Kinder Morgan proposal, which would see an existing pipeline that runs from Edmonton to Burnaby, BC, nearly triple its capacity, was Trudeau’s most controversial.

PECO Completes Nearly 1,200 System Upgrade Projects

Philadelphia-based PECO finished up nearly 1,200 projects to enhance natural gas and electric service for customers during the third quarter of 2016. PECO’s System 2020 plan has the company investing an additional $275 million in the next five years to install advanced equipment and reinforce the local electric system, making it more weather-resistant.

“Ensuring safe and reliable natural gas and electric service for our customers is our top priority,” said Mike Innocenzo, senior vice president and COO. “The work we do day-in and day-out is essential to meeting the energy needs of our customers, and this ongoing, proactive work is essential to improving service for our customers.”

From July through September, PECO inspected 913 miles of natural gas main, completed over 3,400 valve inspections and replaced over 42,000 feet of natural gas main with new pipe, which enhances safety, is more durable and improves service.

$3.5 Trillion Fracking Economy About to Get Bigger

Hydraulic fracturing generated $3.5 trillion in new wealth between 2012 and 2014 despite falling oil prices, according to a new study, but today’s rising prices could be even better for the U.S. economy.

From 2012-14, the shale oil industry generated 4.6 million new direct and indirect jobs due to an energy boom and the resulting low gas prices, according to a study published by the National Bureau of Economic Research (NBER). Expensive energy could be a huge net positive for the U.S. fracking economy as rising oil prices mean more drilling.

Oil prices fell to a record low of $30 a barrel during the previous year, sharply reducing the industry’s profit margins, which are now rising again. Researchers estimate that of the new jobs created by economic activity from fracking technology, about 1.6 million were directly linked to the oil industry.

Pennsylvania Tries New Rules to Limit Quakes from Disposal Wells

State environmental regulators are on the verge of approving two planned disposal wells for oil and gas waste fluids, on the condition that operators take new steps to limit the chances the wells will cause the kinds of earthquakes that have shaken other oil- and gas-producing states.

Department of Environmental Protection officials said they will soon issue long-delayed permits to Pennsylvania General Energy and Seneca Resources for disposal wells in two counties. The applications for the wastewater wells have inspired an extraordinary degree of local opposition, especially for regions of the state that have a history of oil and gas development.

The state permits will carry common conditions, as well as individualized requirements. They will require operators to perform seismic monitoring around the wells and to make the data publicly available. They will force the operators to shut down wells that cause earthquakes of magnitude 2.0 or greater.

North Dakota Gains More Oversight of Pipeline Repairs

New North Dakota pipeline rules will give state regulators greater oversight of repairs to the Belle Fourche Pipeline that spilled over 176,000 gallons of oil recently.

Regulations that took effect Jan. 1 now require companies to notify the state Oil and Gas Division if they plan to repair or replace crude oil-gathering pipelines, allowing state inspectors to observe the construction process. The rules also enable state inspectors to witness tests performed on the pipeline to check the integrity of the line before it is returned to service.

Pipeline owners are required to report to state officials the root cause of a spill, allowing regulators to look for trends and work to prevent future incidents.

“We want to be able to collect the data on the true root cause of why these pipelines are failing and look to that in future rulemaking or future regulations,” said Kevin Connors, pipelines program supervisor for the Oil and Gas Division.

A landowner discovered the leaking Belle Fourche Pipeline on Dec. 5 about 16 miles northwest of Belfield. The company estimates that 4,200 barrels, or 176,400 gallons, of oil spilled, contaminating a hillside and nearly 5½ miles of Ash Coulee Creek, a tributary of the Little Missouri River.

Lucid Expands Gathering, Processing in Delaware Basin

Midstream provider Lucid Energy Group significantly expanded its gathering and processing capacity in the Delaware Basin of southeastern New Mexico, following the company’s acquisition of Agave Energy Co. on Aug. 30 and the implementation of an aggressive plan to expand the Agave assets.

Phase I of the growth plan has focused on the South Carlsbad Gathering and Processing System in Lea and Eddy counties, NM. In 90 days, Lucid expanded processing capacity at the Red Hills Natural Gas Processing complex by 83.3%, increasing capacity from 60 MMcf/d to 110 MMcf/d.

Lucid began construction of a cryogenic-processing train and amine-treating facilities at the Red Hills Plant with an expected commission date of mid-2017, bringing processing capacity to 310 MMcf/d.

Oil Company Withdraws Application for New Mexico Pipeline

The federal Bureau of Land Management said an oil company with plans to build a pipeline in New Mexico capable of moving 50,000 bpd of crude oil has withdrawn its application for the project.

Saddle Butte San Juan, wrote the agency that market conditions led to the decision to withdraw the right-of-way application for the Pinon pipeline system. The project would have been comprised of smaller pipelines that would gather oil at well pads and other points. A larger pipeline would have moved the oil south to a distribution center near Interstate 40 in western New Mexico.

NGL Energy Partners Buying Assets from Murphy Energy

NGL Energy Partners LP was approved by a federal Bankruptcy Court as the high bidder for certain assets of Murphy Energy, including the Port Hudson, LA Terminal, which is a natural gas liquids terminal that supports refined products blending, and the Kingfisher, OK facility, which is an NGL and condensate facility.

The combined purchase price of the assets is $51 million. NGL said the assets fit strategically within its existing liquids and crude oil segments and include long-term, fee-based contracts.

The Port Hudson Terminal is near Baton Rouge, LA in proximity to other refined products infrastructure along Colonial Pipeline. The truck unloading and storage facility allows for the aggregation and supply of butane and naphtha for motor fuel blending. The terminal has four truck-unloading bays and eight pressurized storage tanks with total capacity of 720,000 gallons.

The Kingfisher Facility is an NGL and condensate facility connects to the Chisholm NGL Pipeline and the Conway Fractionation complex. The facility has multiple truck-unloading stations, 450,000 gallons of storage capacity, a methanol extraction tower and a 5,000-bpd condensate splitter.

Correction:

The last line of page 73 in the November issue should read: NW Natural Gas — North Mist Expansion/Portland, OR 13 2018.