API Study Highlights Economic Benefits of LNG Exports

In order to inform the current policy debate surrounding the granting of licenses for U.S. exports of liquefied natural gas (LNG), the American Petroleum Institute (API) commissioned ICF International to undertake a study of the energy market and economic impacts of LNG exports. The following table shows the key findings in terms of the average change in employment, GDP, and natural gas prices attributed to LNG exports between 2016 and 2035. Employment and GDP impacts are incremental changes relative to the Zero Exports Case.

• The net effects on U.S. employment from LNG exports are projected to be positive with average net job growth of 73,100 to 452,300 between 2016 and 2035, including all economic multiplier effects. This wide estimated range reflects the fact that the net job impacts will depend, in part, on how much “slack” there is in the economy and how much the demand for LNG-export-related labor will “crowd out” other labor demands. Manufacturing job gains average between 7,800 and 76,800 net jobs between 2016 and 2035, including 1,700-11,400 net job gains in the specific manufacturing sectors that include refining, petrochemicals, and chemicals.
• The net effect on annual U.S. GDP of LNG exports is expected to be positive at about $15.6 to $73.6 billion annually between 2016 and 2035, depending on LNG export case and GDP multiplier effect. This includes the impacts of additional hydrocarbon liquids that would be produced along with the natural gas, greater petrochemical (olefins) production using more abundant natural gas liquids feedstock, and all economic multiplier effects.

Pulp and Paper Industry Forced to Adopt Water and Wastewater Efficient Solutions

The pulp and paper industry characterizes with high water footprint, and rising water prices have forced manufacturers to adopt water-efficient and high-end equipment to treat wastewater and reduce water consumption. The focus on water recycling, biogas generation and sludge management is sustaining strong investments in the water and wastewater treatment market for this industry. While developing countries offer the highest potential for market expansion owing to greater greenfield project development, opportunities in mature regions such as North America and Europe will arise from the need to modernize existing facilities.

New analysis from Frost & Sullivan, CEO 360 Degree Perspective on the Global Pulp and Paper Water and Wastewater Treatment Market, finds that the market earned revenues of more than $983.9 million in 2012 and estimates this to reach $1.57 billion in 2020.

"Pulp and paper manufacturers are looking for advanced water and wastewater treatment technologies with an efficient energy rating and easy operation and maintenance," said Frost & Sullivan Energy and Environmental Research Analyst Paulina Szyplinska . "Increasing dependence on water specialists to comply with tightening environmental standards and enhance operational efficiency has accelerated market growth."

Significant advances in closed-loop and minimal impact production facilities have added to market revenues. Closed-loop systems are especially popular, as they enable the recycling and reuse of water within the pulp and paper industry, as well as recover excess pulp fibers in the wastewater.

In fact, pulp and paper manufacturers are switching from conventional treatment systems to more sophisticated solutions such as membranes to increase treatment levels and reduce the loss of raw materials, therefore the large-scale implementation of this zero-emission process is crucial to minimize the overall footprint of pulp and paper production.

"Continuous technological advancements and infrastructure improvements are vital to boost recycling rates," noted Szyplinska. "Water and wastewater treatment equipment suppliers must provide a broad range of customized treatment technologies to appeal to various industrial end-users."

Research and development to design treatment technology that can address unique requirements and incorporate renewable energy initiatives will sustain the market in the long run.  

Energy Department Authorizes Freeport Facility to Export LNG

The Energy Department announced Friday that it has conditionally authorized Freeport LNG Expansion, L.P. and FLNG Liquefaction, LLC (Freeport) to export domestically produced liquefied natural gas (LNG) to countries that do not have a Free Trade Agreement (FTA) with the United States from the Freeport LNG Terminal on Quintana Island, TX. Freeport previously received approval to export LNG from this facility to FTA countries on February 10, 2011. Subject to environmental review and final regulatory approval, the facility is conditionally authorized to export at a rate of up to 1.4 billion cubic feet of natural gas a day (Bcf/d) for a period of 20 years. The Department granted the first authorization to export LNG to non-FTA countries in May 2011 for the Sabine Pass LNG Terminal in Cameron Parish, LA at a rate of up to 2.2 Bcf/d.

Federal law generally requires approval of natural gas exports to countries that have an FTA with the United States. For countries that do not have an FTA with the United States, the Natural Gas Act directs the Department of Energy to grant export authorizations unless the Department finds that the proposed exports “will not be consistent with the public interest.”

USGS Doubles Estimate of Recoverable Oil in Bakken Shale Formation

The United States Geological Survey (USGS) released an updated oil and gas resource assessment for the Bakken Formation and a new assessment for the Three Forks Formation in North Dakota, South Dakota and Montana. The assessments found that the formations contain an estimated mean of 7.4 billion barrels (BBO) of undiscovered, technically recoverable oil. The updated assessment for the Bakken and Three Forks represents a twofold increase over what has previously been thought.

The USGS assessment found that the Bakken Formation has an estimated mean oil resource of 3.65 BBO and the Three Forks Formation has an estimated mean resource of 3.73 BBO, for a total of 7.38 BBO, with a range of 4.42 (95 percent chance) to 11.43 BBO (5 percent chance). This assessment of both formations represents a significant increase over the estimated mean resource of 3.65 billion barrels of undiscovered oil in the Bakken Formation that was estimated in the 2008 assessment.

Nuclear Energy Industry Confident of Expansion as Economy Rebounds

Expressing confidence that the U.S. nuclear energy industry is well-poised to help meet America’s future electricity needs, the Nuclear Energy Institute’s chief executive told industry leaders today that they are making “solid progress” in addressing challenges confronting the electric sector.

In the keynote address to 550 industry leaders at NEI’s annual conference, NEI president and CEO Marvin Fertel hailed the milestones achieved this year at facilities in Georgia and South Carolina—the pouring of concrete basemats for new reactors that now are about 40% complete—as evidence of the industry’s progress.

“These are the largest construction projects in their states, and they are driving direct employment for nearly 4,000 workers, twice that during peak construction,” Fertel said. “The projects also are creating ancillary jobs across America in component manufacturing, modular construction and other services. The projects in Georgia and South Carolina will support about 35,000 U.S. jobs, according to an analysis by Westinghouse and the Shaw Group.”

As the U.S. economy rebounds and electricity demand increases, additional nuclear energy facility construction can be anticipated beyond the five reactors being built in Georgia, South Carolina and Tennessee, Fertel said.

Fertilizer Plants Likely to be Delayed

April’s explosion at a Texas fertilizer plant may result in delays of $22 billion worth of North American fertilizer production projects. Analysts believe that increased regulatory scrutiny and concerns from the communities affected by the plants could not only slow new projects, but force others in populated areas to relocate.

Federal Government Releases National Strategy for the Arctic Region

The National Strategy for the Arctic Region sets forth the United States Government’s strategic priorities for the Arctic region. This strategy is intended to position the United States to respond effectively to challenges and emerging opportunities arising from significant increases in Arctic activity due to the diminishment of sea ice and the emergence of a new Arctic environment. It defines U.S. national security interests in the Arctic region and identifies prioritized lines of effort, building upon existing initiatives by Federal, state, local, and tribal authorities, the private sector, and international partners, and aims to focus efforts where opportunities exist and action is needed. It is designed to meet the reality of a changing Arctic environment, while simultaneously pursuing the global objective of combating the climatic changes that are driving these environmental conditions. The strategy is built on three lines of effort:

1. Advance United States Security Interests
2. Pursue Responsible Arctic Region Stewardship
3. Strengthen International Cooperation

This approach will be informed by the following guiding principles:

• Safeguard Peace and Stability – Seek to maintain and preserve the Arctic region as an area free of conflict, acting in concert with allies, partners, and other interested parties. Support and preserve: international legal principles of freedom of navigation and overflight and other uses of the sea and airspace related to these freedoms, unimpeded lawful commerce, and the peaceful resolution of disputes for all nations.
• Make Decisions Using the Best Available Information – Across all lines of effort, decisions need to be based on the most current science and traditional knowledge.
• Pursue Innovative Arrangements – Foster partnerships with the State of Alaska, Arctic states, other international partners, and the private sector to more efficiently develop, resource, and manage capabilities, where appropriate and feasible, to better advance strategic priorities in this austere fiscal environment.
• Consult and Coordinate with Alaska Natives – Engage in a consultation process with Alaska Natives, recognizing tribal governments’ unique legal relationship with the United States and providing for meaningful and timely opportunity to inform Federal policy affecting Alaskan Native communities.

API: Investment in U.S. Shale Well Drilling Surged in 2011

An estimated $65.5 billion was invested drilling an estimated 10,173 U.S. shale oil and natural gas wells in 2011, according to API’s 2011 Joint Association Survey on Drilling Costs. The investment number represents an 87.6% increase in shale drilling expenditures from 2010 levels and more than half of an estimated $124.8 billion spent on all new wells drilled in 2011. The number of estimated shale wells drilled in 2011 is 43.8% more than in 2010.

“The rising numbers illustrate the growing importance of shale drilling in U.S. oil and natural gas development,” said API Statistics Director Hazem Arafa. “Shale drilling drove most of the overall increase in drilling and now accounts for an estimated 23% of all wells drilled in the United States.”

The report shows that while expenditures on shale drilling were barely more than one-fourth of expenditures for drilling all wells in 2009, they accounted for more than half of total well drilling expenditures in 2011.

Estimated expenditures for offshore drilling dipped precipitously from 2009 to 2010, from an estimated $24.9 billion to $4.0 billion, a reflection at least in part of the drilling moratorium put in place by the administration following the Deepwater Horizon accident. Expenditures increased to an estimated $8.1 billion in 2011.

The number of estimated shale wells has risen rapidly, from 5,531 in 2009 to 7,077 in 2010 to 10,173 in 2011. Almost twice as many shale gas as shale oil wells were drilled in 2011, the report estimates, 6,759 versus 3,414.

Wells drilled of all kinds totaled 44,160 in 2011 with a total expenditure of $124,794,493,000 the report estimates.  

Americans Want More Emphasis on Solar, Wind, Natural Gas

No fewer than two in three Americans want the U.S. to put more emphasis on producing domestic energy using solar power (76%), wind (71%), and natural gas (65%) according to a Gallup poll. Far fewer want to emphasize the production of oil (46%) and the use of nuclear power (37%). Least favored is coal, with about one in three Americans wanting to prioritize its domestic production.

For Americans in every region, solar power is the top choice, or is tied for the top spot, among the energy sources tested.

Americans overall and across political and socioeconomic groups generally are most likely to call for more emphasis on solar and wind power -- but these potential future sources of energy have a long way to go in terms of technology and affordability before they can significantly affect overall U.S. domestic energy production. On the other hand, Americans are sharply divided politically over achieving greater domestic energy production using more traditional energy sources such as oil, coal, and nuclear power.

Bloomberg: Construction Pay Seen Rising as Much as 30% from Keystone

“Building the Keystone XL pipeline would temporarily increase construction wages for some workers in three U.S. states by as much as 30 percent,” according to a new study by Bloomberg Government.

“Average construction wages in South Dakota where portions of a separate pipeline were built starting in 2008 rose 10 percent to 30 percent to more than $600 a week" the study says. "The same premium may apply for workers in certain Montana, South Dakota and Nebraska counties along the route of the planned XL pipeline connecting Hardisty, Alberta, and Steele City, Nebraska.”

After completion of the project, the study notes, this boost in wages is expected to return to normal.

North American Chemical Companies Take Control with Investments in Process Control Replacements, Upgrades

Industrial Info has identified 62 projects in the U.S. and Canadian Chemical Processing Industry that focus on control systems, totaling an estimated $325 million.

West Virginia Judge Recognizes Trespass by Hydraulic Fracturing

The notion that an oil and gas producer can commit a trespass by engaging in hydraulic fracturing gained traction on April 9, 2013, when U.S. District Judge John Preston Bailey of the Northern District of West Virginia denied a motion for summary judgment filed by oil and gas producer defendants Chesapeake Appalachia, LLC, Statoil USA Onshore Properties, Inc. and Jamestown Resources, Inc. in Stone v. Chesapeake Appalachia, LLC. In this case, Chesapeake Appalachia drilled a horizontal Marcellus Shale well with a vertical well bore within 200 feet of the plaintiffs’ property and a horizontal well bore within “tens of feet” of the plaintiffs’ property. Although Chesapeake Appalachia maintains a lease for the oil and gas underlying the plaintiffs’ property, plaintiffs’ lease does not authorize pooling or unitization of the Marcellus formation.

According to analysis by McGuireWoods Consulting, this decision may pose a potential problem for oil and gas producers in West Virginia if trespass by hydraulic fracturing is a viable cause of action. Ultimately, the West Virginia Supreme Court may have the last word.

Canada's Enbridge Plans to Increase U.S. Pipeline Capacity

President and CEO Al Monaco told shareholders in Calgary last week that Enbridge is poised to connect growing energy supply with key North American markets by expanding its network of liquids pipelines infrastructure in the near future.

Existing pipeline bottlenecks, and the resulting Canadian crude oil discounts, "can be solved by a reconfiguration of the North American pipeline grid, where crude moves from inland markets to coastal markets - and Enbridge is right in the middle of this transformation," said Mr. Monaco.

Between now and 2016, Enbridge expects to roll out a series of major projects that will expand Enbridge's Eastern Access program to the U.S. Midwest and eastern Canada; the U.S. Gulf Coast Access program with 585,000 bpd of incremental capacity from the Chicago area; additional capacity to the U.S. Midwest and eastern Canada as part of the Light Oil Access initiative; and development of the Eastern Gulf project from the U.S. Midwest to the eastern Gulf Coast. Additionally, Enbridge is proposing to build the Northern Gateway project, in order to connect Canadian supply with robust Asian demand. All told, said Mr. Monaco, Enbridge has committed billions to add roughly 1.7 million bpd of new market access to address the Canadian crude oil pricing issue.

Shell and Williams Partners Form Marcellus Shale Gas Processing Alliance

Williams Partners L.P. has agreed to launch a new midstream joint venture with Shell to provide gas gathering and gas processing services for production located in Northwest Pennsylvania. The venture will invest in both wet-gas handling infrastructure and dry gas infrastructure serving Marcellus and Utica Shale wells in the area.

The new venture, Three Rivers Midstream, has signed a long-term fee-based dedicated gathering and processing agreement for Shell's production in the area, including approximately 275,000 dedicated acres. The joint venture also plans to pursue gathering and processing agreements with other producers in the liquids-rich areas of Northeast Ohio in addition to Northwest Pennsylvania.

Three Rivers plans to construct a 200 million cubic feet per day (MMcf/d) cryogenic gas processing plant and related facilities. The location will be determined at a later date. The planned large-scale gas processing complex would be expandable as Three Rivers' business grows. The initial plant is expected to be placed into service by second quarter 2015.

Phillips 66 CEO Calls EPA Ethanol Mandate "Unworkable"

Phillips 66 CEO Greg Garland called the EPA proposal to include more ethanol in gasoline an “unworkable mandate” during remarks to reporters yesterday. He says the new mandate combined with stagnant or worse demand will cause the refining industry to hit the so-called “blend wall” sometime next year, the point at which ethanol can no longer be added to fuel.

"There's broad agreement there's an issue but not how to solve it," said Garland just before his company’s first shareholder meeting since splitting from ConocoPhillips.  

Government Blames Chevron for 2012 Richmond Refinery Fire

Missed opportunities to apply inherently safer design, failure to identify and evaluate damage mechanism hazards, and the lack of effective safeguards culminated in the vapor cloud release and massive fire that occurred at the Chevron refinery on August 6, 2012, a draft report by the U.S. Chemical Safety Board (CSB) has found. The investigation team concluded that enhanced regulatory oversight with greater worker involvement and public participation are needed to improve oil refinery safety.

The report, subject to a Board vote at a CSB public meeting in Richmond on Friday, April 19, notes that Chevron repeatedly over a ten-year period failed to effectively apply inherently safer design principles and upgrade piping in its crude oil processing unit that was extremely corroded and ultimately ruptured on August 6, 2012. The ensuing release of hydrocarbons endangered 19 workers who narrowly escaped from a vapor cloud before it ignited, causing a fire that sent a plume across the area. 15,000 people sought medical treatment in the weeks following the accident.

Human Error to Blame for Near Nuclear Disaster in Canada

After the Chalk River nuclear reactor in Canada narrowly averted a potentially catastrophic incident in February, the Canadian Nuclear Safety Commission (CNSC) has concluded that the “root cause has not been determined, but human error was a major contributor to this event.”

On Feb. 27 someone erroneously shut down a pumping system which nearly caused a “near-miss safety significant event” the just-released CNSC report says. Fortunately someone spotted the mistake before the NRU reactor started to overheat.

The report points out other irregularities as well, noting that “instead of closing the process water valves, the rods supervisor started to close main heavy water pump outlet isolation valves. The senior reactor shift engineer did not immediately identify this error, but it was noticed by the facility manager, who was present in the control room. The facility manager immediately proceeded to stop the closure of the main heavy water pump outlet isolation valves and reopen them.”

The CNSC also worries that Atomic Energy of Canada Ltd., who owns and operates the Chalk River reactor, in general “may be underestimating the possibility of operator errors.”  

North Dakota Breaks Ground on First New U.S. Refinery Since 1976

Construction of the Dakota Prairie Refinery began with a groundbreaking ceremony held by the developers, MDU Resources Group, Inc. and Calumet Specialty Products Partners, L.P.

Construction of the diesel refinery, on a 318-acre site located west of Dickinson in Stark County, ND is expected to take approximately 20 months. The refinery will process 20,000 barrels per day of Bakken crude oil.

The facility’s engineering and plant design are in the final stages. Westcon has been selected as the general contractor and Ventech Engineering will be the primary equipment and technology provider. MDU Resources’ construction businesses, Knife River Corporation and MDU Construction Services Group, are among potential subcontractors. Other MDU Resources’ companies involved in the project include Fidelity Exploration and Production Company, which will supply some of the facility’s crude oil; WBI Energy, which will supply natural gas service to operate the facility; and Montana-Dakota Utilities, which will supply the facility’s electricity needs.

More Than $209.7 Billion of Active Industrial Projects Present in U.S. Gulf Coast

Industrial Info Resources is tracking more than $209.7 billion in industrial projects that are under way or planned to kick off in 2013 and beyond in the U.S. Gulf Coast region. A substantial portion of this spending stems from the large amount of inexpensive natural gas entering the U.S. market from shale play production.

Plains All American Building Cactus Crude Oil Pipeline in West Texas

Plains All American Pipeline, L.P. Monday announced it is constructing the Cactus Pipeline, a new 310-mile, 20-inch crude oil pipeline from McCamey to Gardendale, Texas. The Cactus Pipeline is expected to be placed into service in the first quarter of 2015. The Partnership has entered into a letter of intent with a third party regarding a long-term commitment for a majority of the pipeline's capacity and is in discussions with several potential shippers for the remaining capacity. The total project investment is expected to range from $350 million to $375 million.

The pipeline is expected to transport both sweet and sour crude oil from the Permian Basin to the PAA/Enterprise Products Partners Eagle Ford Joint Venture (Eagle Ford JV) Pipeline. The Eagle Ford JV Pipeline directly serves the Three Rivers and Corpus Christi markets and can supply the Houston-area market through a connection to the Enterprise South Texas Crude Oil Pipeline. Crude oil delivered on Cactus will have access to rail loading capacity at PAA's Gardendale station and access to the Eagle Ford JV barge dock facility in the Corpus Christi area. The Cactus Pipeline will initially be designed to provide approximately 200,000 barrels-per-day of capacity and can be increased as demand warrants.