Category Archives: Natural Gas Prices

New Pipeline Projects in West Virginia

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Gas Pipelines in Columbia

I was going to write up something about these new pipeline projects, but the folks over at Kallanish Energy already put together a good summary.

The Utica Access project is only five miles long and will come online at the end of 2016.  It will only move 205 million cubic feet per day and only down in Kanawha County, so it won’t impact production and royalty amounts much, if at all.

The WB Xpress will be an interesting project to watch, as it will move 1.3 billion cubic feet per day and will open in 2018.  There will be quite a few other project opening in 2018 as well.  2017 could be a very interesting year for West Virginia mineral and royalty owners whose rights aren’t leased.

Stonewall Gathering Pipeline Finished!

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Great news for West Virginia royalty and mineral owners!  The Stonewall Gathering project is complete and pumping gas out of the Marcellus Shale area.  It takes gas from Doddridge, Harrison, and Lewis counties and transports it to Braxton County where it connects with an existing Columbia Gas pipeline.  That pipeline takes the gas out of state.

It’s a big pipeline, at 36 inches in diameter, and is currently moving about 700 MMcf/day.  It’s highest capacity is expected to be 1.4 billion cubic feet of gas per day.  If it’s like other pipelines, it could probably be pushed a bit higher with some additional compressors.

The most pressing need in the Marcellus shale and Utica shale area is for take away capacity.  There is so much gas in the region that there simply aren’t enough pipelines to transport it all to market.  Consequently, pipeline companies can name their price to transport the gas, and they take a huge chunk of the value of the gas.  When all is said and done, Marcellus shale gas has been netting West Virginia producers more than a dollar less than what gas sells for at Henry Hub.

With more pipelines, the “differential” between Henry Hub and the Marcellus/Utica region will decrease.  That means more money in royalty owners’ and lessors’ pockets.  The Stonewall Gathering pipeline itself will not make a large difference.  Combined with other projects that should be completed in the next few years, though, we will start to see better royalty payments.

The Challenges of Converting Power Plants from Coal to Gas

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Here is an interesting article in the Pittsburgh Post-Gazette.  FirstEnergy closed down a coal-fired power plant in 2013, and had no plans to re-open it.  In the last few months, however, they have changed their minds.  At least, they have changed their minds about looking at the possibility of re-opening it.

The article states that market conditions have changed.  The price of electricity hasn’t gone up much, but the price of oil and gas has gone way, way down.  Who wants to bet that that one factor alone has reduced costs?

One other interesting point that was made in the article is that building a brand new gas-fired plant would (just a couple years ago) have been cheaper than converting the coal-fired plant to gas.

Five Facts About Fracking

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You won’t hear this phrase on this blog very often: the information in this article blew my mind.  Andrew Follett wrote an article published at the Daily Caller that describes five facts about fracking that haven’t gotten much traction in the news.  Most of them are extremely interesting.  The point about Russia’s economy shrinking because we no longer rely on their oil could have both good and bad long-term effects.  Click on over and read.  It’ll make you think.

Oil Prices Will Not Recover Soon

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In this article in the Wall Street Journal, you can see that the price of oil is not going to jump up any time soon.  Any industry that relies on high oil prices to get by is going to have a bad couple of years.  Luckily there aren’t very many industries that rely on high oil prices.  There are quite a few more industries which do significantly better when oil prices are low.  Also, American consumers benefit greatly when oil prices are low.  It seems that America and maybe the world in general is going to have a pretty hot economy in the next couple of years, just because energy is going to be so affordable.  While this firm may suffer some in the short term, we expect to benefit from an improved economy.  Here’s to shale development and the Saudi war on shale!

Saudis Already Cutting Back on Spending

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Dollar SignKarma is coming back to bite the Saudis in the butt.  The Saudis are cutting back their budget in 2016.  Their budget deficit is being reduced, but at the expense of spending, not because their income is increasing.  The reduction in spending is going to make the lower classes unhappy, and give the political opposition to the Saudi royal family something to work with.  Things won’t come to a head in 2016, because there just won’t be enough unrest in Saudi Arabia, but if things keep going this way it will come to a head eventually.  It’s going to be an interesting show to watch.

A New Cracker Plant! …..In Louisiana.

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Axiall Corporation is building a cracker plant in Louisiana.  It’s expected to open for business in 2019, so sometime between three and four years from now.  That is, of course, if there are no construction delays or Hurricane Katrinas or any other such thing.  This is great news!  The cracker plant will process natural gas from the Marcellus/Utica plays

While we would prefer to see the cracker plant in Parkersburg, WV get built (and we now wonder why it’s not, seeing as how one can get funded and built over a thousand miles away from the Marcellus/Utica Play) we are excited that there will be a destination for ethane gas.

Of course, we badly need some pipelines heading out of this area.  Gas is trading a $0.59/MCF at Dominion South today.  That’s $1.30 less than the Henry Hub.

Shale Gas is Great for the Economy

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We’ve mentioned before that the abundance of shale gas is good for industry, as natural gas is a major source of energy for industry.  We went looking for an article that shows just how good shale gas is for industry, and found several that are right on point.

Sterling Burnett, writing for the Heartland, explains how chemical plant construction is coming back to the U.S. because of cheap natural gas.  Steve Goldstein over at MarketWatch says that the plastics industry alone will directly generate 127,500 new jobs in the next decade.  Matthew V. Veazey over at RigZone describes the kinds of jobs that will be available at LNG facilities when they are built, of which five are likely.  The jobs at the facilities are not the only benefits, as shipping LNG worldwide will increase royalties and jobs in the “oil patch”.

Giles Parkinson over at CleanTechnica says that electricity rates for consumers are not going down, but they’re also not going up as much as they otherwise would.  And of course, those who use natural gas to heat their homes will see direct benefits from the low cost.

Low Energy Prices are Good for Most Everyone

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christmas-bonus

The steep drop in energy prices is a really good thing for most everybody, but a bad thing for mineral owners and those few poor lawyers who make their living helping mineral owners.  We won’t cry over it, we’ll just work a little harder and a little smarter, just like all the drillers are.

Down in New Jersey, residential and small commercial customers are getting a rate reduction in their natural gas bill, and a credit back on their statements.  How cool is that?!  When’s the last time anybody was happy to see their gas bill?

The really awesome thing is, it’s mostly due to unprecedented output of natural gas in the Marcellus and Utica shale areas.  We’re proud to be a small part of that.  The other factor has been the increased production from Saudi Arabia as it tries to keep its share of the oil market and drive American oil developers into bankruptcy.  Everyone can see the direct effect on prices at the gas pump.

The great news is that low energy prices are going to heat our economy back up.  We think that one of the reasons the fed raised interest rates for the first time in years is because they see the economy taking off, in part to low energy prices.  Low energy prices make manufacturing and petrochemical industries in the United States more competitive.  It also makes it easier for transportation companies to make ends meet.  It also makes it easier to take that Great American Road Trip, and more interesting to buy big gas guzzlers.  It also puts a few more dollars into the wallets of every consumer.  All of the above will translate into jobs and greater energy demands.  It’s going to take a while, but low energy prices are going to help improve our economy, which will drive demand for energy back up, which will drive the price of energy back up.

The disappointing part of low energy prices is that it will drive down the demand for renewable energy sources.  I’m no tree hugging environmentalist, but I still think renewables are cool and would like to see that industry take off.

In the meantime, we hope that people will take a look at gas prices and decide to go visit both sets of grandmas this Christmas, and turn the heat up a bit.