Midstream Monitor

The size of the Marcellus and Utica shales is impressive enough, according to the U.S. Energy Information Administration—the Marcellus has an estimated 354 trillion cubic feet (Tcf) of recoverable natural gas, while the Utica has about 45 Tcfe. As the region’s oil and gas industry has grown, so has its reach.
PITTSBURGH--Donald Raikes, senior vice president for customer service and business development at Virginia-based Dominion Energy, has some simple advice for anyone pondering the state of today’s oil and gas market as it treads what is increasingly being recognized as an unprecedented downturn. “If you think you’ve figured it out, you haven’t,” he told the more than 1,200 attendees at the Marcellus-Utica Midstream Conference & Exhibition, which kicked off Jan. 27.
The oil and gas downturn continues to sap value from midstream companies, including pipeline leviathan infrastructure company Kinder Morgan Inc. Kinder Morgan said Jan. 20 it will write down $1.15 billion in value due to a decline in the market value of KMI and similar midstream companies. Meanwhile, Global M&A in 2016 will likely surpass the hyperactive deal making that totaled $4.7 trillion in 2015, but whether the energy industry will see a surge in activity is yet unclear, according to two recent reports.
New Marcellus Shale regional pipelines are beginning to pressure Henry Hub prices, sapping differentials in gas value as more of the area’s production escapes regional lockdown.  With more pipelines coming online in the next couple of years—two with a combined 4.75 billion cubic feet per day (Bcf/d) takeaway capacity—the Marcellus’ formidable production may no longer be so tightly confined.
For the first time since the lifting of a 40 year export ban, Eagle Ford Shale oil set sail for international waters on Dec. 31 from the Port of Corpus Christi.  NuStar Energy and ConocoPhillips  said they loaded what they believed to be the nation's first export cargo of U.S.-produced light crude oil since the ban was lifted by Congress on Dec. 18.  
For well more than a year, the U.S. has been in a battle of attrition with OPEC, which has pumped nearly all the oil it could to win “market share.” The result has been a flat lining of crude oil prices.  For much of the shale boom, the Eagle Ford and Bakken oil—often of a much higher quality than West Texas Intermediate (WTI) and Brent—has been trapped in domestic markets. Now, with the lifting of the crude oil export ban on Dec. 18, that oil can now find a more fitting and lucrative place for its lighter, sweeter crude. 
By a 65-33 vote on Dec. 18, the U.S. Senate passed a combined $1.1-trillion spending bill and a $680-billion tax extenders package that funds the government through September 2016 and lifts the 40-year-old ban on U.S. crude oil exports. The combined bill—which also extends or makes permanent scores of tax incentives for corporations and individuals—now goes to President Barack Obama’s desk for signature.  On Dec. 17, the House of Representatives voted separately to approve the tax extenders package, and voted earlier Dec. 18 on the spending bill. Enactment of the spending and tax extender bills effectively brings to an end legislative business for the year.
Pipeline giant Kinder Morgan Inc. said Dec. 8 it would slash dividends by 75% to 50 cents in a move that frees up $3.9 billion a year of cash flow and likely keeps the company away from the equity markets in 2016-17.  Kinder Morgan’s decision to shrink dividends may open the door for “the entire sector to do the same,” according to Tudor, Pickering, Holt & Co. in a Dec. 9 report.
After weeks of stirring the pot, opponents of the MarkWest Energy Partners LP (MWE) merger with MPLX LP (MPLX) lost the war but won $605 million in cash concessions from MPLX parent Marathon Petroleum Corp. (MPC).  At a special meeting Dec. 1, MarkWest unitholders approved a strategic combination with MPLX. MarkWest and MPLX said 80% of units voted at the special meeting were in favor of the merger. The transaction, expected to close Dec. 4, means MarkWest, the second-largest processor of natural gas in the U.S. and largest processor and fractionator in the Marcellus and Utica shale plays, will become a wholly owned subsidiary of MPLX.
The emergence of the U.S. as a major producer and exporter of low-cost natural gas will force the global market to adjust its traditional business model, Charif Souki, Cheniere Energy Inc.’s chairman, CEO and president, told the Houston Producers’ Forum on Nov. 17. 

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