February 2018, Vol. 245, No. 2

In The News

In the News

Williams Partners Places Expansion Project into Service 

Williams Partners placed into service its Virginia Southside II expansion project, the fifth of Transco’s “Big 5” expansions to be placed into service.

The Williams Partners’ fully-contracted expansion projects – Gulf Trace, Hillabee Phase 1, Dalton, New York Bay and Virginia Southside II – combine to add more than 2.8 MMdth/d of firm transportation capacity to Transco pipeline system, increasing Transco’s design capacity by nearly 25%.

The Virginia Southside II project expands Transco’s capacity by 250,000 dth/d to supply Dominion Virginia Power’s new electric generation facility in Greensville County.

Alaskan Oil Lease Sale Brings Few Bids 

An oil-and-gas lease sale that raised concerns with environmentalists due to the vast amount of acres offered in Arctic Alaska drew few bids, government officials said.

The sale was the latest move by the administration of President Donald Trump, supporting his pledge to make the United States “energy dominant” by boosting output of oil, natural gas and coal.

Seven bids were received, covering about 80,000 acres – or less than 1% of the 10.3 million acres offered in the National Petroleum Reserve in Alaska (NPR-A) by the administration. It was, by far, more territory than ever offered in any of the previous 12 NPR-A lease sales held since 1999.

ConocoPhillips Alaska Inc., in partnership with Anadarko Petroleum Corp, submitted the seven bids, totaling $1.16 million, for tracts in the NPR-A. Results were revealed in a bid opening conducted in Anchorage by the U.S. Bureau of Land Management.

The ConocoPhillips-Anadarko bids were for tracts along the southern border of ConocoPhillips’ Greater Mooses Tooth unit, where oil production is expected to start next year.

Climate Activists Delay U.S. Gas Pipeline Approvals

National environmental groups waging legal battles against energy projects are delaying approval of U.S. natural gas pipelines, a top federal energy regulator said.

The groups have lawyers who “understand how to use all of the levers of federal and state law to frustrate pipeline development,” Neil Chatterjee, the chairman of the Federal Energy Regulatory Commission (FERC), told a meeting of natural gas industry officials.

Some recent approvals of natural gas pipelines, such as the Atlantic Coast Pipeline from West Virginia to North Carolina, have taken two years or more. Chatterjee said he hoped a timeline of two-plus years would not become the new industry norm.

The Sierra Club and 350.org both have campaigns to reject pipelines filled with gas from hydraulic fracturing projects. The groups are fighting development of fossil fuels including oil, coal and fracked natural gas, because they say the production slows the transition to cleaner sources, like wind and solar power, and the conservation and storage of energy.

U.S. Oil Industry Launches Voluntary Methane Cuts

The American Petroleum Institute has launched a voluntary program to cut emissions of the greenhouse gas methane from oil and gas operations, a move environmentalists said was not strong enough to adequately protect the climate.

Under the program, agreed to by 26 companies including Exxon Mobil subsidiary XTO Energy, Shell and Pioneer Natural Resources, drillers aim to reduce emissions of methane by plugging leaks, reducing venting at aging wells, and replacing or retrofitting equipment called pneumatic controllers. The program, on both existing and new facilities, does not set numerical goals to reduce the emissions.

The API said most companies will agree to take action on each of the three areas, but only have to agree to reducing emissions in one of the areas. Companies will implement the agreement in January and submit annual reports on their progress, available to the public.

Refinery Proposed Near Popular National Park

A proposed oil refinery close to the picturesque Theodore Roosevelt National Park has met federal and state air pollution rules but must undergo a period of public comment before a permit can be issued, North Dakota health officials said.

A state Health Department review that began last spring determined that Meridian Energy Group Inc. has met all of the requirements for an air quality permit for the planned Davis Refinery, which will cost more than $800 million.

The 700-acre refinery complex would process up to 49,500 barrels of Bakken crude per day into a variety of fuels. Meridian says it will be the “cleanest refinery on the planet” and a model for environmentally friendly technology.

The 30,000-acre park is named for the former U.S. president who ranched in the region in the 1880s and was revered for his advocacy of land and wildlife conservation. The park is the state’s top tourist attraction, drawing a record 760,000 visitors last year.

Denver Producers Join Forces in $649 Million Deal 

Bill Barrett Corp., one of Colorado’s largest publicly traded oil and gas producers, plans to combine with privately held Fifth Creek Energy in a deal valued at $649 million.

The two Denver-based companies will become subsidiaries of a new public holding company that will control 151,100 net acres and an inventory of 2,865 undeveloped drilling locations in the Hereford Field in rural northern Weld County.

Noble Forms JV to Buy Saddle Butte Pipeline 

Noble Energy’s pipeline business created a new joint venture to buy Colorado’s Saddle Butte Pipeline for $625 million.

The deal is a play by Houston’s Noble Midstream Partners to expand in Colorado’s DJ Basin and capitalize on the region’s growing oil production. Noble Midstream, which spun out last year from Noble Energy, is focusing on the DJ Basin and West Texas’ booming Permian Basin.

Noble said it is forming the Black Diamond Gathering joint venture with Greenfield Midstream, a Houston-based company backed by San Antonio private equity firm EnCap Flatrock Midstream. Noble and Greenfield will split the purchase price in half, but Noble will operate the joint venture and own 54.4% of the JV.

The privately owned Saddle Butte system includes 160 miles of pipelines in operation with 300,000 bpd of crude capacity. Saddle Butte also has about 210,000 barrels of oil storage capacity. Saddle Butte also brings ongoing oil gathering deals with Denver-based PDC Energy, and PDC is planning to expand in the DJ Basin.

Phillips 66, Enbridge Set Open Season for West Texas System

Phillips 66 and Enbridge Inc. announced an open season for the Gray Oak Pipeline. The Gray Oak Pipeline will provide producers and other shippers the opportunity to secure crude oil transportation from West Texas to the destination markets of Corpus Christi, Freeport, and Houston, with connectivity to over 3 MMbpd of refining capacity and multiple dock facilities capable of crude oil exports.

Shippers will have the option of  origination stations in Reeves, Loving, Winkler, and Crane counties.

The Gray Oak Pipeline is expected to have an initial throughput capacity of 385,000 bpd. Phillips 66 and Enbridge will evaluate expansion of the system beyond 385,000 bpd, depending on shipper interest in the open season. The pipeline system is anticipated to be placed in service in the second half of 2019.

Wolf Midstream Plans New Gathering, Terminal System

Wolf Midstream Partners, a full-service midstream provider, executed a crude oil gathering and transportation agreement with an independent producer for about 25,000 dedicated gross leasehold acres in the prolific Permian Basin of West Texas.

To support the agreement, and other area producers as needed, Wolf plans to construct 50 miles of new crude oil gathering pipelines with an expected capacity of 55,000 bpd. Additionally, Wolf has established a delivery point near Colorado City, Texas, and plans to construct terminal facilities, with interconnects into multiple downstream pipelines. Construction activities have begun, and Wolf expects the new system to start service in the second quarter of 2018.

EIA Raises Oil Output Forecast to Highest on Record, Passes 10 MMbpd

The U.S. Energy Information Administration said the 2018 average oil production rate will hit the highest level for any year on record in the United States.

In its monthly short-term energy outlook, the agency forecast that U.S. crude oil output will rise by 780,000 bpd to 10.02 MMbpd in 2018. Last month, it expected a 720,000 bpd year-over-year increase to 9.95 MMbpd.  Output will only top 10 MMbpd in the fourth quarter of 2018, however.

The forecast for stronger output comes as global oil prices topped $65 a barrel, the strongest since June 2015, driven by continued supply curbs from OPEC and an outage on a key North Sea pipeline. But analysts and traders say the increase in U.S. supply may put some downward pressure on prices next year, especially if demand fails to keep up.

More Oil Export Capacity in the Works

Enterprise Products Partners plans to convert a pipeline that carries natural gas from the Permian shale basin to a crude oil pipeline. With a new gas pipeline coming into service at the end of 2019, Shin Oak, the company said it has flexibility to repurpose another line for shale oil.

In its latest drilling productivity report, the U.S. Energy Information Administration put the Permian shale basin at the top in terms of U.S. shale oil producers, far exceeding output from the Bakken shale basin in North Dakota.

For gas, the Appalachian basin is by far the most productive shale reservoir in the United States, more than doubling the output from the Permian.

Enterprise said repurposing one of its gas lines to carry oil would lift its total carrying capacity to more than 650,000 bpd from the Permian shale to its crude oil hub in Houston.

TransCanada to Run Inspection Device in Keystone Pipeline

TransCanada says it will run an inspection device through its Keystone oil pipeline to make sure there aren’t segments of pipe with similar characteristics to a section that ruptured in South Dakota.

A company spokesman said that it would run the pipeline inspection gauge through its system within a 120-day period ordered by a federal pipeline safety agency.

The Pipeline and Hazardous Materials Safety Administration this week issued a corrective order on the estimated 210,000-gallon oil spill. The report says a weight installed on the pipeline nearly a decade ago may have damaged the pipeline and coating.

The order says TransCanada must also submit a proposal to analyze available data on other weight locations for similarities with the leak location.

TransCanada said it recently concluded the Keystone XL open season, securing about 500,000 bpd of firm, 20-year commitments, positioning the proposed project to proceed. Interest in the project remains strong, the company said, and it will look to continue to secure additional long-term contracted volumes. P&GJ