Daily Energy Blog

More than four years after the Utica and the “wet” part of the Marcellus became a hot spot for drillers, the field condensate and natural gasoline produced there are still moved to market by barge, rail and truck. A three-part, $500 million plan by MPLX LP and the midstream master limited partnership’s (MLP’s) subsidiaries, now well under way, will enable more efficient pipeline transport of these important hydrocarbons to Midwest refineries, Western Canadian diluent pipelines and other end-users. To hold down costs, the effort involves a creative mix of new and existing pipelines. Today we continue our review of MPLX’s plan with a look at its “Utica Build-Out Projects.”

Let’s face it — for producers, the last couple of years have stung, with low-slung energy prices allowing little-to-no returns on drilling investments in most parts of the major shale basins. A side effect of the low price environment in the past two years has been the shrinking geographic footprint of the Shale Revolution. About 50% of all onshore rigs in the Lower 48 currently are clustered in the top 20 counties for drilling activity. In effect, this also means a lot of the new production growth will come primarily from these same 20 counties, with the potential for all sorts of implications for infrastructure and regional price relationships. In today’s blog, we take a closer look at rig counts by county to see how much the geographic focus of the Shale Revolution has narrowed.

The Shale Revolution sparked a multibillion-dollar re-plumbing of the U.S. crude oil pipeline network that continues to this day, two years after oil prices started falling and one year after oil production volumes followed suit. While the pace of development has at times seemed hectic, the individual decisions to build new pipelines involve a lot of studying, vetting and number crunching. After all, pipelines don’t come cheap, and their success depends to a considerable degree on their long-term usefulness to the market. One of the most important factors in determining whether a crude oil pipeline project makes sense is its capital cost and, with that, the cost of moving oil through it. Today, we continue our look at crude pipeline economics with a discussion of the basics of estimating pipe size and cost, and figuring the optimal capacity of a given pipeline project.

Way back when—before 2012—few outside a small cadre of oil producers and marketers paid any attention to condensates, or even knew they existed.  Then two events shook the condensate world.  First came rapid growth in the Eagle Ford, where crude oil production turned out to be almost half condensates.  Then the Department of Commerce started allowing condensate exports while maintaining the ban on international sales of mainstream crude oil.  Suddenly condensates were the star of the show.   But like the careers of one-hit rock & roll wonders, the stardom didn’t last long.  The crude oil price crash hit Eagle Ford hard, resulting in a disproportionate decline in condensate production.  Congress then sent condensates further back into obscurity by removing the export ban for all crude oil in December 2015, eliminating any special status for the product.   That was the end of the road for the condensate story, right?  Wrong.  Because during condensate’s day in the sun, billions were spent on pipelines, stabilizers, splitters, export facilities and refinery modifications, all focused on providing new markets for condensates.  Oops.  Today we consider how the next chapter of the condensate saga will play out.

Eight years into the Shale Revolution –– and two years into a crude oil price slump that put the brakes on production growth –– midstream companies continue to develop new pipelines to move crude to market. As always, the aims of these investments in new takeaway capacity may include reducing or eliminating delivery constraints, shrinking the price differentials that hurt producers in takeaway-constrained areas, or giving producers access to new markets or refineries access to new sources of supply. Whatever the economic rationale for developing new pipeline capacity, midstreamers and potential crude oil shippers need to examine–– early on –– the likely capital cost of possible projects, if only to help them determine which projects are worth pursuing, and which aren’t. Today, we begin a series on how midstream companies and potential shippers evaluate (and continually reassess) the rationale for new crude pipeline capacity in today’s topsy-turvy markets.

New pipelines to increase crude oil takeaway capacity from major producing areas like the Permian and the Bakken to oil storage and distribution hubs like Houston, TX and Cushing, OK seem to garner most of the media’s attention. Just outside the spotlight’s glare, though –– and even during the ongoing slump in oil prices –– midstream companies are building several “demand-pull” pipelines to move crude to refineries more efficiently, and to give refineries easier, cheaper access to new, desirable supplies. Today, we begin a look at these new pipeline connections, their rationales, and their effects on other pipelines, barge deliveries and crude-by-rail.

In the past century and a half, Sarnia, ON has evolved into one of Canada’s leading refinery and petrochemical centers, and a major consumer of Alberta and Bakken crude and Alberta and –– more recently –– Marcellus/Utica natural gas liquids. Getting that oil and those NGLs to southwestern Ontario is the task of a small group of pipelines and a few rail facilities; other pipelines out of Sarnia help to move refined petroleum products to nearby demand centers. Today, we continue our comprehensive review of refinery and petchem-related infrastructure in and around Ontario’s Chemical Valley.