Replies to This Discussion

Permalink Reply by Bluflame on August 28, 2012 at 2:33pm

Thanks Dan,

  Doesn't look promising for any domestic LNG export facilities anytime soon. I don't have any inside information, but I'd wager serious money that the Sierra Club will dig in their heals on Cove Point. Unfortunately, it's the nearest terminal to the Utica & Marcellus.

  I've read the retrofits are expensive and time-consuming; and, nothing happens until approval!

BluFlame

  

Permalink Reply by Dan on August 27, 2012 at 2:34pm

Thanks Jack,

Interesting read.  American construction workers, some of the hardest hit by recent econmic woes, know the projects aren't in the USA.  Canada just passed us by this summer with household  wealth.  Australia next?  The good news is the worlds' "new found energy?" is adding decades to the Mayan calander each day and chicken little has to look back to space again to see the possibly falling sky.

Permalink Reply by Jack Straw on August 27, 2012 at 3:27pm

 

For those interested in the Utica, please consult pages 11=16.

 

http://files.shareholder.com/downloads/EVEP/1512291341x0x592856/d95...

 

Well worth a look.

 

JS

 

Permalink Reply by JR on August 27, 2012 at 3:56pm

What does "volatile" mean in the light crude window?

Permalink Reply by Jack Straw on August 27, 2012 at 5:31pm

"Volatile" and "Light" Oil are essentially interchangeable terms.

Volatile oils are called "light", whereas thick/viscous ones are are called "heavy".

The Volatile/Light Oils are shorter chain hydrocarbons; easier to "crack" in the refining process.

 

Light oils have an API gravity of 30 to 40 degrees; these oils  have a density less than 1.0 g/cc.

Light/Volatile oils have a density less than that of water and thus will float on water.

 

Light sweet oil (sweet means low in sulphur) produces the greatest proportion of the most valuable products, when refined.

Light sweet oil commands the highest market price.

 

JS

 

Permalink Reply by Jack Straw on August 27, 2012 at 5:54pm

Added comment:

If a lot of the terminology seems primitive/unscientifc (as in not Latin derived), it is because it evolved from the early 19th century origins of the industry.

Non-scientific baggage from an earlier time.

 

JS

Permalink Reply by Jack Straw on August 29, 2012 at 4:54am

Source:  http://www.businessinsider.com/edwin-drake-first-modern-oil-well-15...

153 Years Ago Today, An Unemployed Sick Man Drilled The First Modern Oil Well

Rob Wile|Aug. 27, 2012, 9:49 AM

Pennsylvania remains in the midst of an incredible natural gas boom, with dozens of companies flocking to its Marcellus Shale basin and giving the state — and the country — an economic jolt.

But a hydrocarbon frenzy in Pennsylvania is not without precedent.

153 years ago today, a hard-up wildcatter named Edwin Drake drilled the country's first oil well.

But while the event itself was momentous, Drake's life remained tragic throughout.

For the first decade of his adult life, he held odd jobs, according to Penn State's Urja Davé. His first wife died in child birth. Eventually he landed a gig with the New York and New Haven railroad but was eventually forced to retire when he became ill with muscular neuralgia.

Up until 1859, oil had been gathered by collecting whatever had seeped through to the surface — known drilling methods were deemed too dangerous.

Still, everyone knew that Pennsylvania had enormous potential.

Eventually, a group of chemists, lawyers, and others formed the first oil company in the United States, the Pennsylvania Rock Oil Company of New York, Davé writes. The company hired Drake "due to the sheer coincidence that he was out of work and staying at the same hotel as the founders of the company."

Apparently frustrated with the methods at hand, Drake realized that if he could grind down the rocks before simply drilling through them, he could better access whatever flowed up from the ground.

On Saturday, August 27, 1859, Smith's drill bit smashed through a rock ledge 75-feet deep. It then slipped another eight inches into a dirt crevice.

According to Kendall F. Haven, at this point the sun was setting and work halted.

The next morning, Drake discovered an enormous pool of oil covering the ground around the well, "as if the derrick was rising from the middle of a quiet, black lake," Haven writes. "By noon on Monday, every container he could find was filled with oil — tubs, empty whiskey barrels, troughs and jugs."

"Western Pennsylvania produced half of the world's oil until the East Texas oil boom in 1901."

Tragically, Drake failed to patent his method, and Seneca Oil had already laid him off.

Drake dug just two more wells, and by the 1870s, they'd stopped producing.

For a brief time, Drake became a Justice of the Peace in 1860 but poor health again scuttled his work. Eventually, Davé says, "The caring residents of Titusville started a collection for him in 1870 and convinced the General Assembly in 1873 to provide Drake's family with an annual pension of $1,500."

Drake died in Bethlehem, PA in 1880, and was later moved to Titusville, where he remains today. In 1902, a Standard Oil Executive built a statue of Drake at his burial site.

The original tools that Drake used for Oil Creek Well can be found at the Drake Well Museum in Titusville.

Read more: http://www.businessinsider.com/edwin-drake-first-modern-oil-well-15...

Permalink Reply by Bluflame on August 29, 2012 at 6:21am

Jack,

  A really tragic story. Coincidentally, Spindletop, the historic Texas "gusher" that initiated the Texas oil boom in the early 1900's, was financed by the Mellon Brothers of Pittsburgh. This event, in turn, led to the Mellons founding Gulf Oil, and the rest is history.

BluFlame

Permalink Reply by 015334grltd9m on August 29, 2012 at 4:20pm

Flame,

Andrew Mellon although often approached to enter the oil business locally- it seemed he did not wish to step on Rockerfeller's toes, Gulf allowed the Mellons a way into energy by way of Texas.

Permalink Reply by Jack Straw on August 30, 2012 at 11:40am

Source: http://www.platts.com/newsfeature/2012/naturalgas/uspipelines/index

 

New Northeast gas pipeline projects may not breach traditional bottlenecks

By Samantha Santa Maria in Houston

August 29, 2012 - Even with more than a dozen gas pipeline projects going into service in the Northeast by year's end, volatility could still abound this winter, as these projects spread out the supply glut caused by rampant Marcellus Shale production without fully breaching the gas-hungry city-gates markets, traders and analyst sources said. 

Some 3.5 Bcf/d of new incremental capacity is expected to come online by the end of the year, Platts analysis shows, all aimed at enhancing takeaway from Marcellus production fields. None of these, however, directly address any of the traditional bottlenecks or penetrate the city-gates.

In contrast, there has been a nearly 3.3 Bcf/d increase in Northeast production to 7.83 Bcf/d as of August 1, compared with the same time a year ago, according to data from Platts unit Bentek Energy.

These supply gains are led by a rampant increase in production out of northeast Pennsylvania — the dry, sweet spot of the Marcellus — which came in at 4.15 Bcf/d  in early August, compared with its year-ago level of 1.83 Bcf/d, Bentek data shows.

Analysts estimate total Northeast production could come in between 8 Bcf/d and 10 Bcf/d by year's end.

"This is like putting a band-aid on a fatal wound," an analyst at a producer's shop said. "Takeaway is playing catch-up to production again this year and all this means is volatility."

Alan Lammey, energy analyst with WeatherBell Analytics, added there is still far too much demand and still too little capacity for the market area. "You probably need 10 times more [expansions] than that to take a significant chunk out of the price spikes we see during those times of concentrated cold," Lammey said.

BNP Paribas Director Teri Viswanath agreed the Northeast could benefit from more demand-led infrastructure. "We're seeing a number of large pipes, but there is still a tremendous need for connecting to pockets of demand," Viswanath said. "Commercial consumers see and would like to take advantage of low-cost supplies."

One of the more distinct effects of this overwhelming number of new infrastructure projects, primarily being anchored by Marcellus producers, is increased and more frequent price bifurcation at Northeast pricing hubs, sources said. Effectively, intraday priced differentials between the lowest and the highest trade of the day could blow out as pipeline constraints kick, in preventing supplies from reaching the most downstream portions of some markets.

Bifurcation has traditionally marked constrained Northeast markets in cold winters, but as Marcellus supplies pile on with little improvements being made to traditional pipe constraints, price bifurcation is now evident during high-demand days in general, be it in summer or in the midst of a mild winter.

As recently as June 20, the lowest trade reported to Platts at Tennessee Gas Pipeline zone 6 was $1.50/MMBtu, while the highest was $9.60/MMBtu, an intraday differential of $8.10/MMBtu.

Greg Hopper, managing director at consulting firm Black & Veatch pointed to two upcoming projects as leading to increased bifurcation going forward.

Dominion's Appalachian Gateway, which would deliver more gas into Texas Eastern Transmission at Oakford, Pennsylvania, could "open up the spread at Tetco M-3," Hopper said.

"I think it would bifurcate during a low-demand period," Hopper added. "During periods of low demand, there's too much seeking too little."

Meanwhile, Millennium Pipeline's Minisink compressor project — which was supposed to have gone into service in November, but has since been delayed until March or April 2013 — would allow for more supplies to reach Algonquin Gas Transmission at Ramapo, New York, which is already a bifurcated market.

As recently as July 16, Algonquin, receipts, reported a low and high trade to Platts of $31.8/MMBtu and $6.75/MMBtu, respectively, for an intraday differential of $3.57/MMBtu.

Minisink would further split the Algonquin, receipts, market, Hopper said. "Where else is it going to go? There is some on-system market, which is not huge, but it's there."

Some of the projects, however, are targeting clear end-use markets. For instance, Transcontinental Gas Pipe Line's Bayonne Delivery Lateral, which went into service earlier this year, is supplying up to 250,000 Mcf/d to the Bayonne Energy Center, a power plant in New Jersey. Spectra Energy's Philadelphia Lateral, expected to come online late this year, would sent 27,000 Mcf/d to a power plant in that city.

By year's end, three expansion projects would enhance deliveries from the US, primarily from the Marcellus, into Ontario, presumably to fill the power generation gap as the province shutters its coal fleet.

Finally, addressing power growth in the mid-Atlantic market is the aim of the Mid-Atlantic Connector, which would add new pipe on the Transco system in the Washington, DC, metropolitan area.

Bentek noted in a report that total demand off Transco's pipe in the Virginia market has increased some 100,000 Mcf/d between January and May this year, compared with the same timeframe in 2011. Most of this growth, the analysts said, has come from the power sector.

But all these only account for less than half of the capacity coming online by year's end, a Platts analysis showed.

"If none of that stuff is penetrating [Transco zone 6-New York] or [Texas Eastern zone] M-3, then it is just enlarging the supply bubble," an analyst said.

Already, financial players are betting this bubble will exacerbate city-gates' premiums as rampant production weighs down Appalachian hubs.

Platts assessments Tuesday show the forward full-value premium for prompt winter held by Transco zone 6-New York over Dominion, South stood at $2.69/MMBtu. In contrast, the premium for last winter's packages went no higher than $2.46/MMBtu.

Financial traders primarily attributed the lofty premium this year to Marcellus supplies, which could weigh down the Dominion South Point.

Putting winter weather into the mix in the Northeast could provide even more bumps in the road, sources said. Meteorologists are expecting the upcoming winter to be slightly colder than normal in the Northeast, a far cry from the incredibly mild winter of 2011-2012.

Matt Rogers, president of Commodity Weather Group, said for now, the upcoming winter appears as through it will have a warm start and finish, similar to the winter of 2006-2007. "January's a big wild card right now," Rogers said. "Maybe you could call it a bipolar winter."

Viswanath warned the market could be setting itself up for a price shock. "The market has been lulled into false sense of security with the mild winter we had last year," Viswanath said. "If October and November are colder than last season, it could catch some of the market by surprise. That could cause some volatility."

Starting from next year, however, Viswanath said the nearly 5 Bcf/d of regional pipeline projects either under construction or in advanced planning should lead the Northeast delivery points to trade in closer parity to the production hubs, including the Henry Hub.

Next year, Spectra hopes to put in place its New Jersey-New York Expansion, which would alleviate the traditional chokepoint at Lambertville, Pennsylvania — the main culprit in the price bifurcation at the Texas Eastern zone M-3 market — and deliver supplies into downtown Manhattan.

Around 2015, said Wood Mackenzie's North American gas and power vice president Edward Kelly, expansions are planned to relieve the constraints in New England, where the highest prices in North America have been recorded for the year to date.

"There are likely to be constraints between Marcellus supplies and New England markets for several more years, at least, especially in the winter and summer peaks," Kelly said.

"Over the long run, we anticipate further contraction in regional basis differentials with reduced volatility given these physical expansions," Viswanath said.

Ken Beckman, president of IGC Consulting, agreed and said that with growing concerns from the electric sector regarding reliability, the rash of Northeast expansions are "simply going to improve the situation. To me, this is the ultimate answer for electric reliability."

But Northeast physical traders remain skeptical. A Marcellus trader said the expansions could boost prices for Marcellus gas, but that could lead to a "vicious cycle."

"I think prices will definitely rebound and come more in line with every other point we're seeing, and that will probably inspire some producers to increase production again and fill it up again," the trader said. "Every time there's an expansion project, it might alleviate the bottleneck for a few months, but then that bottleneck is going to come right back."

 

 

Permalink Reply by Jack Straw on August 31, 2012 at 9:00am

Source:  http://www.reuters.com/article/2012/08/31/us-oil-conference-schlumb...

Schlumberger's clever frack takes aim at gas costs

By Andrew Callus

STAVANGER, Norway | Fri Aug 31, 2012 7:30am EDT

(Reuters) - Production costs of natural gas from unconventional fields could tumble in the United States if a new technique developed by Schlumberger lives up to its billing.

The world's largest oilfield services company by market value and others working in the industry have suffered this year because the runaway success of hydraulic fracturing (fracking) and horizontal drilling techniques to extract so-called unconventional gas has created a glut and caused a price slide.

But using a proprietary system called Hiway that only became commercially viable last year, Schlumberger's fracker in chief believes he has knocked a lump out of the infant industry's three major cost components; water, sand, and trucks.

Schlumberger is already using the system on nearly a third of all fracking jobs, and expects that to rise rapidly to 50-70 percent, according to Kyel Hodenfield, the company's vice president for unconventional resources.

"It can vary, but using Hiway we generally say you need 40 percent less proppant," (graded sand mixed with guar gum or lubricating chemicals), he told Reuters in an interview.

"Water is more variable, but it's somewhere between 20 and 50 percent less."

Less sand, less water and less pumping adds up to fewer trucks, Hodenfield explained on the sidelines of the Offshore Northern Seas (ONS) conference in Stavanger, Norway.

"Those are the big costs. Anything you can do to reduce the amount of sand, the amount of water, and the amount of horsepower is going to fall to the bottom line."

Fracking, often combined with modern horizontal drilling techniques, recovers previously unreachable gas by fracturing the rock that contains it and then pumping in fluid and mined or manufactured sand to hold open the cracks and force out the gas.

The process, pioneered in the United States, requires many more wells to be drilled than traditional oil and gas extraction. The fracking generally takes just a few days, even though some fracked fields will produce for years, so the infrastructure, materials and equipment need to be mobile.

At some sites, water is piped in, but usually, both sand and water are trucked to the site. More trucks are needed to provide the horsepower to pump the mixture into the cracks, and road regulations restrict their size, so the number of heavy vehicles per site can be considerable.

Schlumberger is the number-two in fracking services, as measured by the horsepower of its fleet, with a 12 percent share of the market in 2011, according to analysts at Global Hunter Securities.

It lies behind Halliburton and ahead of Baker Hughes in the ranking, although its exposure to the industry is relatively small in the context of its traditional oil and gas services business worldwide. Hodenfield would not reveal how much of Schlumberger's business is now in U.S. unconventionals, "but I can say it's grown, a lot", he said.

FIBRE INJECTION

So how does Hiway work?

Hodenfield, who grew up in North Dakota where the Bakken field is at the centre of the U.S. shale gas boom, brightens at the opportunity to explain a process that adds a proprietary fiber to the traditional sand and fluid mix, and uses a "pulsing" system to send globs of the fiber in between each injection.

The dissolvable fiber globs create more effective channels for the gas to flow, and the pulsing rhythm can be made to match the geological structure of the rock, also pushing the sand deeper into the cracks and resulting in more effective openings that conduct gas better for every liter pumped in.

Hiway is not the only new technique on the scene as oil companies look to use fracking to reach more lucrative oil as well as gas.

Schlumberger and other innovators are also using sophisticated seismic techniques, combined with data from pilot wells, to reduce the number of fracks along a drill pipe and target only the "sweet spots" in the field.

Together, these new techniques and smart rugged sensor kit from National Instruments can also reduce the production pace variability that plagues the unconventional industry.

And according to one senior executive at one of the world's major oil companies, these cost-saving innovations may only be the beginning.

"It's mostly brute force up to now," he said. "When the oil majors get serious about investment in fracking the cost could fall by half."

U.S. fracking expenditure is not pocket change. Hodenfield cites data from analysts Spears & Associates saying the total onshore oil and gas industry drilling and completions spend, boosted mainly by unconventional work, has soared to $150 billion a year from $20 billion in 2002.

This eclipses the offshore spend, which was at a similar $20 billion level 10 years ago and has only recently recovered to that level after the Macondo oil spill disaster of 2010.

Hodenfield says smarter technology is also the key to reducing the environmental impact of fracking in shale rock, tight gas, coal bed methane and other unconventional gas fields.

"We have a choice," he said. "We can take the brute force approach and drill a lot of wells and frack a lot of wells and live with the production variation and compensate that by drilling even more wells (with the consequent environmental footprint), or you drill only the best wells by defining the sweet spot and optimize the completion by technology."

(Additional reporting by Braden Reddall; Editing by Alison Birrane)

Permalink Reply by Jack Straw on August 31, 2012 at 1:32pm

Although this article contains “Texas”  in the headline, it should be of interest to those of us in the Marcellus/Utica.

Source: http://www.businesswire.com/news/home/20120419005410/en/Dow-Build-E...

April 19, 2012 08:00 AM Eastern Daylight Time

Dow to Build New Ethylene Production Plant at Dow Texas Operations

Latest Action in Comprehensive Plan to Enhance USGC Advantage, Positioning Performance Plastics, Performance Materials and Advanced Materials Businesses for Competitive Advantage and Growth

MIDLAND, Mich.--(BUSINESS WIRE)--The Dow Chemical Company (NYSE: DOW) today announced that the Company will construct a new world-scale ethylene production plant at Dow Texas Operations in Freeport, TX, as part of Dow’s previously announced comprehensive plan to further connect its U.S. operations with cost-advantaged feedstocks available from increasing supplies of U.S. shale gas.

“The outlook for advantaged U.S. natural gas was a significant factor in Dow’s decision to invest $4 billion to grow our overall ethylene and propylene production capabilities in the U.S. Gulf Coast region”

The new ethylene production facility at Dow Texas Operations will employ up to 2,000 workers at its construction peak. Over the next five to seven years, Dow estimates that this project, together with all other planned projects announced as part of the Company’s comprehensive U.S. investment plan, will employ up to 4,800 workers during peak construction and support over 35,000 jobs in the broader U.S. economy.

“For the first time in over a decade, U.S. natural gas prices are affordable and relatively stable, attracting new industry investments and growth and putting us on the threshold of an American manufacturing resurgence,” said Andrew N. Liveris, Dow Chairman and Chief Executive Officer. “Dow is proud to have been among the first manufacturing companies to declare a comprehensive plan to take advantage of these favorable market dynamics, further enhancing our footprint in the Americas and the profitability of our global businesses while supporting economic revitalization in the communities in which we operate. Constructing this new ethylene cracker at Dow Texas Operations will create a long-term advantage for our downstream businesses and for our Company as a whole, and the benefits will accrue not only to Dow but to the state and national economy.”

This decision marks another significant milestone in the Company’s strategy to further develop the competitive advantage for Dow’s Performance Plastics, Performance Materials and Advanced Materials businesses by expanding access to low-cost natural gas-based feedstocks, which are used in the production of Dow products that are essential to over a dozen consumer markets.

“The outlook for advantaged U.S. natural gas was a significant factor in Dow’s decision to invest $4 billion to grow our overall ethylene and propylene production capabilities in the U.S. Gulf Coast region,” said Jim Fitterling, Dow Executive Vice President and President of Feedstocks & Energy and Corporate Development. “Today, 70 percent of the Company’s global ethylene assets are in regions with cost advantaged feedstocks – and we’ve seen the benefits this advantage provides given oil-based naphtha margin pressure in Europe and Asia. This plan represents a game-changing move to strengthen the competitiveness of our high-margin, high-growth derivatives businesses as we continue to capture growth in the Americas.”

Dow Texas Operations in Freeport is Dow’s largest integrated manufacturing site worldwide and the largest single-company chemical complex in North America. With 4,200 employees and 3,000 contractors on site daily, Dow Texas Operations currently manufactures 44 percent of Dow products sold in the United States and more than 20 percent of Dow products sold globally.

Dow Progresses Comprehensive Plan

Projects announced as part of the Company’s U.S. Gulf Coast investment plan are moving forward according to schedule.

The new ethylene production unit project is currently on track for start-up in 2017, and Dow continues to develop feedstock supply arrangements for this new asset.

On March 7 Dow announced that the Company’s Board of Directors had authorized capital to finalize detailed engineering and purchase long lead-time equipment for a new, world-scale propylene production facility to be constructed at Dow Texas Operations. Basic engineering work for the new on-purpose propylene production facility at Dow Texas Operations has commenced, and the project is on track for production start-up in 2015.

In December 2011, Dow and UOP LLC, a Honeywell company, signed a technology licensing agreement, enabling on-purpose propylene production at the facility. Under the terms of this agreement, Dow will license UOP's proprietary UOP C3 Oleflex TM process technology for manufacturing on-purpose propylene from propane. Dow also signed catalyst supply and performance guarantee agreements with UOP.

Recomissioning work on an ethylene production unit at Dow’s manufacturing site near Hahnville, Louisiana is progressing as planned, and the unit is on track to restart at the end of this year.

About Dow

Dow (NYSE: DOW) combines the power of science and technology to passionately innovate what is essential to human progress. The Company connects chemistry and innovation with the principles of sustainability to help address many of the world's most challenging problems such as the need for clean water, renewable energy generation and conservation, and increasing agricultural productivity. Dow's diversified industry-leading portfolio of specialty chemical, advanced materials, agrosciences and plastics businesses delivers a broad range of technology-based products and solutions to customers in approximately 160 countries and in high growth sectors such as electronics, water, energy, coatings and agriculture. In 2011, Dow had annual sales of $60 billion and employed approximately 52,000 people worldwide. The Company's more than 5,000 products are manufactured at 197 sites in 36 countries across the globe. References to "Dow" or the "Company" mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted. More information about Dow can be found at www.dow.com.

Note: The forward-looking statements contained in this document involve risks and uncertainties that may affect the Company’s operations, markets, products, services, prices and other factors as discussed in filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

Contacts

For editorial information:
Gina Gibbs Foster
The Dow Chemical Company
+1 (989) 633-1147
ggibbs-foster@dow.com
or
Greg Baldwin
The Dow Chemical Company
+1 (989) 638-0745
gbaldwin@dow.com

 

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