Wednesday, March 9, 2016

So much for pipeline "Firm Contracts"!


I think this is very big news.

These pipelines all get built under the assumption of 15 year "firm contracts" between producers and consumers.

The problem with this scheme is that a single fracked well produces for about 3-5 years before it hits an knee in the curve and becomes a low-output "stripper well". So to fill a pipeline like the "Constitution" @ 650,000 dth/d, the suppliers must keep on drilling.

For Constitution, I calculated 110 new wells were needed the first year, 86 wells the second year, gradually increasing each year thereafter. 

(This is due to the fact they always drill the sweet spot first, and newer wells are always lower production on average than the wells the year before. All gas fields go into decline almost immediately after exploration begins)

And this is just the economics. This does not include the grave social consequences of sustained drilling, such as widespread and systemic water contamination.

These 15 year gas pipeline contracts, which FERC uses as a demonstration of need, requires that drilling continue at a rapid pace.

YET, sustained drilling is subject to all kinds of other factors.
-- Look what has happened! In their greed, the drillers have over- produced, and driven the price down, so there is a glut. Additional drilling in our part of the Marcellus has been curtailed way back.

Now to these news stories below:

FIRST: Read how the likely bankruptcy of fracked-gas E&P company Chesapeake is tied to many different midstream companies:

Williams Companies Inc. (NYSE:WMB), Energy Transfer Equity LP (NYSE:ETP), Kinder Morgan Inc. (NYSE:KMI), Spectra Energy Partners (NYSE:SEP), Columbia Pipeline Partners (NYSE:CPPL), and Marathon Petroleum's MPLX LP (NYSE:MPLX).

Now read this: Bankrupt oil producer Sabine can shed "firm" midstream contracts:
Not only could this be be a deathblow to certain troubled midstream companies which have been terrorizing our neighborhoods with pipelines and compressors (good!),

but because so much of our economy is tied to natural gas and these stocks, I fear there could be ripple effects (bad),. 

Will one of the actions of our next US President going to be to bail out the oil and gas industry?


---------- Forwarded message ----------
From: Ronald J Gulla <>
Date: Wed, Mar 9, 2016 at 1:17 PM
Subject: Fw: RPT-Sabine Oil wins pipeline ruling in a blow to pipeline ..
----- Original Message -----
Sent: Wednesday, March 09, 2016 12:18 PM
Subject: RPT-Sabine Oil wins pipeline ruling in a blow to pipeline ..

this will foster questioning of pipeline investment security - and did cause immediate decline in midstream value!!!


Bankrupt oil company Sabine can shed pipeline contracts ...

... Oil & Gas Corp won an important court ruling on Tuesday that will allow the bankrupt energy producer to shed certain pipeline contracts, potentially ...
MARCH 08, 2016 04:45PM EST

May you, and all beings
be happy and free from suffering :)
-- ancient Buddhist Prayer (Metta)

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