Takeaway

When crude oil prices crashed in the second half of 2014 and 2015, producers survived by becoming leaner and more efficient. That transition included drastic reductions in the rates paid to services companies while wringing ever more oil and gas out of each well and, in the process, permanently altering the economics of drilling and completion. This year, producers are again facing a lower-price environment; since early October (2018), crude prices have dropped more than 30%. In the current, more conservative investment environment, can producers do it again? Can additional value be squeezed out with bigger well pads and longer laterals? Today, we continue a series exploring the benefits and risks of these highly concentrated and highly complicated operations. 

Dominator. Showboat. Brass Monkey. These are not player names in the re-established XFL; these are project names given to colossally proportioned drilling pads in the Permian and Appalachia. A single one of these well pads can be home to 20, 30, even 60 or more permitted well spots, each with miles-long laterals branching out in multiple directions. In today’s blog, we begin a series exploring the motivations that sparked this trend to larger pads and discuss the impact they’re having on the upstream and midstream sectors. 

On June 1, Energy Transfer Partners’ new Rover Pipeline began service on its market segment from northwestern Ohio into southern Michigan, effectively sending nearly 800 MMcf/d of Marcellus/Utica gas production to Vector Pipeline and its northern destinations in Michigan, and, by extension, to the Dawn Hub. This latest in-service has already shuffled flows in the region and pushed back on other supplies targeting the same markets, including Canadian gas imports. And that’s even before the project has achieved its full expected capacity of 3.25 Bcf/d. Today, we analyze the early effects of Rover’s first flows to the Michigan/Dawn markets via Vector.

Crude production from the Denver Julesburg (DJ) and Powder River Basin (PRB) plays in the Niobrara shale in Colorado and Wyoming is up 260 percent to 361 Mb/d since January 2012 and is expected to double again by the end of 2019. Takeaway capacity is expanding but is complicated by crude streams travelling through the region from Canada and North Dakota. Rising condensate production also presents a challenge to midstream companies. New pipeline proposals to expand takeaway from the DJ by as much as 500 Mb/d have recently surfaced – suggesting that local producers are looking to secure capacity. Today we look at recent and planned expansions to Niobrara takeaway capacity.