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APPALACHIAN BASINEQT Again Curtailing Appalachian Natural Gas; Equitrans Contract Issues Surface

EQT Corp. has once again curtailed Appalachia natu-ral gas production, taking around 425 MMcf/d net output offline Sept. 1, the company said last week.

The move to cut production, announced at the Bar-clays CEO Energy-Power Conference, came less than two months after the largest natural gas producer in the United

States brought back online 1.4 Bcfe/d curtailed in May in response to the oil market downturn and Covid-19 pan-demic. However, management indicated that additional curtailments were possible if prices didn’t improve.

EQT management reiterated that its “robust ba-sis hedge position” provides the company

OUTLOOKPermian Natural Gas, Oil to Rebound in October, but Other U.S. Basins Still on Decline, Says EIA

The Permian Basin is the only one of the seven ma-jor producing areas of the United States forecast to see an increase in natural gas and oil output in October over September, the Energy Information Administration said Monday.

In the monthly Drilling Productivity Report, EIA researchers estimated total oil production from the seven most prolific basins in the United States would decline by 68,000 b/d month/month to total 7.64 million b/d.

Natural gas production overall is set to decline by 428 MMcf/d to average almost 80.60 Bcf/d,

REGULATORYPennsylvania Orders Mariner East Reroute, Cites ‘Careless’ Actions by Sunoco

Citing adverse impacts at a horizontal directional drill (HDD) site in southeastern Pennsylvania, the state’s Department of Environmental Protection (DEP) has or-dered Sunoco Pipeline LP to reroute part of its Mariner East (ME) system.

Sunoco will need to “take all steps necessary, includ-ing the submission of appropriate applications and sup-porting materials for permit amendments,” to implement a 1.1-mile reroute of its ME system around the “HDD-290” site in Upper Uwchlan Township, Chester County, PA, according to an administrative order issued Friday by the DEP.

Last month, Sunoco spilled 8,000 gallons

…cont' pg. 3

…cont' pg. 5

…cont' pg. 6

Tuesday, September 15, 2020 - Vol. 10, No. 238

Argentina Natural Gas Production Down 12% in July . . . . . . . . . . . . . . 2

Trade Date: Sep 14; Flow Date(s): Sep 15Basin/Region Range Avg Chg Vol Deals

Gulf CoastBarnett 1.995-2.140 2.085 0.070 85 18Eagle Ford 2.170-2.200 2.185 0.250 218 41Haynesville - E. TX 1.800-2.010 1.960 0.155 735 127Haynesville - N. LA 1.930-1.950 1.940 0.175 75 16Permian1 1.390-1.930 1.620 0.260 1,007 202Tuscaloosa Marine Shale 2.080-2.150 2.115 0.235 867 120

MidcontinentArkoma - Woodford 1.950-2.000 1.975 0.175 99 18Cana - Woodford 1.865-1.965 1.915 0.070 88 22Fayetteville 1.900-1.950 1.930 0.250 33 10Granite Wash* 1.760-1.830 1.800 0.155 579 120

NortheastMarcellus - NE PA2 1.000-1.170 1.075 -0.025 175 52Marcellus - NE PA: Other3 1.050-1.170 1.145 0.005 81 25Marcellus - NE PA: Tenn4 1.000-1.070 1.015 0.075 94 27Marcellus - SW PA/WV 0.970-1.750 1.335 0.160 1,171 259Utica5 1.155-1.900 1.540 0.195 404 94

Rocky Mountains / WestBakken -- -- -- -- --Green River Basin* 2.000-2.300 2.155 0.440 805 151Niobrara-DJ6 1.820-1.855 1.840 0.205 644 114Piceance Basin* 1.820-1.860 1.845 0.185 241 46Uinta Basin* 1.840-1.890 1.860 0.235 116 22San Juan Basin* 1.850-1.950 1.895 0.265 433 91

Notes: Table represents fixed-price delivered-to pipeline transactions in USD/MMBtu. These data are comprised of deals that NGI believe represent trading activity in the respective resource plays and may contain gas that was produced from conventional formations. * Denotes a tight sands formation. Volumes may not total due to rounding. For more information, please see NGI’s Shale Price Methodology.

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INTERNATIONALArgentina Natural Gas Production Down 12% in July

Natural gas production in Argentina fell by 12.2% year/year in July to 126.8 million cubic meters/day (MMm3/d), or 4.47 Bcf/d, according to the latest report by the IAE Argentine Energy Institute.

Production was essentially flat compared to June.

Analysts attributed the drop to restrictions in place because of the coronavirus pandemic. Argentina has had one of the strictest lockdowns in place globally since the pandemic began to spread in March.

In April, Argentina had zero rigs running, but upstream activity has picked up slowly since then.

Power demand on Argentina’s national grid held up and rose slightly year/year to 392.9 GWh/d in July compared to 387.2 GWh/d in July 2019, driven by a 13.7% rise in residential demand.

Thermal power, principally natural gas-fired, has accounted for 61% of total power de-mand on the national grid this year through July.

Gas production was down in all basins in Argentina in July including in Neuquén, home to most of the prolific Vaca Muerta formation. Neuquén, the largest gas producing province in Argentina, saw production fall to 2.79 Bcf/d in July from 3.22 Bcf/d in the same month last year.

Production from Vaca Muerta in July fell year/year to 1.14 Bcf/d from 1.23 Bcf/d. Vaca Muerta has been billed as the most promising unconventional play outside of the United States, and most major energy firms hold acreage in the formation.

The largest producers in July in Vaca Muerta were Argentina’s Tecpetrol SA (484 MMcf/d), followed by state oil firm YPF SA (261 MMcf/d), and the local subsidiary of France’s Total SE (165 MMcf/d).

In late August, Darío Martínez took over from Sergio Lanziani as the Energy secretary, the top position in the energy sector. Martínez was head of the energy committee in the lower house. He previously worked for YPF, and hails from Neuquén Province.

His first order of business is finalizing a gas tender program aimed at kickstarting production.

The proposed tender system would consist of a four-year block auction mechanism starting in October, which would differentiate offers for the peak winter season and the rest of the year, according to IAE.

Prices for offers from gas companies would be set at around $3.40/MMBtu.

These policies, while propping up upstream activity, would mean rising government subsidies in the sector, according to IAE analysts. Accumulated energy subsidies were $3.3 billion in the first seven months of 2020, double during the same period last year, analysts said.

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according to the DPR. However, in the Permian, which saw the fastest rig

slide in the country as Covid-19 scrambled prices, is forecast to see an uptick next month.

Permian oil production is projected to increase by 23,000 b/d to total 4.17 million b/d. Natural gas output is forecast to climb month/month by 110 MMcf/d to aver-age 16.01 Bcf/d.

In addition to the Permian, the DPR estimates monthly production from the Anadarko and Appalachian basins, the Bakken, Eagle Ford, Haynesville shales, and the Niobrara formation. Last month production declined

across the board in all seven basins. Drilling data through August was used for the latest

DPR, with projected production through October. The forecasts are based on the total number of drilling rigs in operation, along with estimates of drilling productivity and estimated changes in production from existing oil and gas wells.

In the Anadarko, oil production in October is forecast to decline by 20,000 b/d from August to 394,000 b/d. Gas output is forecast to fall by 110 MMcf/d month/month to 6.27 Bcf/d.

In the No. 1 gas play, the Appalachian …cont' pg. 4

Permian Natural Gas, Oil to Rebound in October, but Other U.S. Basins Still on Decline, Says EIAContinued from Page 1

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Source: Tallgrass Energy LP, NGI calculations. For more info and daily 10am ET updates of this chart, go to natgasintel.com/rextracker.

Basin, the minimal oil output in October is forecast to decline by 1,000 b/d from September to 134,000 b/d. Natural gas also is set to decline, down 162 MMcf/d from September to 32.84 Bcf/d.

Bakken oil output should decline by 19,000 b/d in October month/month to 1.17 million b/d, according to the DPR. Gas output also is forecast to fall by 55 MMcf/d to 2.62 MMcf/d.

In the Eagle Ford, researchers estimated oil pro-duction in October would be 28,000 b/d lower than in September at about 1.13 million b/d. Gas production was seen declining by 79 MMcf/d to 6.12 Bcf/d. In the gassy Haynesville Shale, EIA expects flat oil production into October at 36,000 b/d. Gas output, meanwhile, is forecast to decline by 58 MMcf/d month/month to 11.62 Bcf/d.

The Niobrara also is forecast to see oil production fall, down by 23,000 b/d in October from September to

total 605,000 b/d. Gas output should decline by 74 MMcf/d to total 5.13 Bcf/d.

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of drilling fluid and caused a 15-foot-wide, 8-foot-deep subsidence at the site, adversely impacting wetlands, two tributaries to the Marsh Creek Lake and the lake itself, the DEP said. Marsh Creek Lake is in Marsh Creek State Park, “one of the most visited state parks in Pennsylvania,” according to the order.

“These incidents are yet another instance where Su-noco has blatantly disregarded the citizens and resources of Chester County with careless actions while installing” the ME pipeline system, DEP Secretary Patrick McDon-nell said. “We will not stand for more of the same. An al-ternate route must be used. The department is holding Sunoco responsible for its unlawful ac-tions and demanding a proper cleanup.”

In addition to ordering a reroute, the DEP has ordered Sunoco to “further assess, in-vestigate and restore resources impacted” by ME construction in Upper Uwchlan Township.

The reroute the DEP is or-dering was previously evaluated by Sunoco and deemed “techni-cally feasible,” according to the agency. The DEP said it prefers the new route over the current path, “which has resulted in multiple drilling fluid spills and subsidence in a wetland area.”

The reroute outlined in the administrative order would in-volve creating a greenfield util-ity corridor. Sunoco reported to the DEP that the reroute would likely require the company “to use condemnation against previ-ously unaffected landowners.”

The Pennsylvania Energy Infrastructure Alliance, whose membership includes economic development groups, labor unions, trade associations and chambers of commerce in the state, slammed the DEP’s order.

Rerouting “this portion of the project is no small mat-ter, especially when you consider the pipe in this area is meant to connect two existing pipes that are already in the ground,” said Kurt Knaus, spokesperson for the alliance. “Communities that thought this project was coming to an end now face potentially many more months of disrup-tion, because this action has the potential of dramatically extending the construction life of a pipeline project that was nearly finished.

“The economic impacts are just as real. Hundreds of local jobs are at stake downstream at Marcus …cont' pg. 6

Pennsylvania Orders Mariner East Reroute, Cites ‘Careless’ Actions by SunocoContinued from Page 1

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protection from in-basin weakness.Dominion South October basis stood Friday at minus

$1.086, according to NGI’s Forward Look. Winter pricing was much stronger, however, with November 2020-March 2021 basis averaging minus 48.9 cents.

[Plan for natural gas pricing 10 years out with NGI’s Forward Price Curve Data.]

Meanwhile, EQT appears to be butting heads with Equitrans Midstream Corp. over the terms of a contract on the 1.6 Bcf/d Hammerhead natural gas pipeline.

Equitrans, which was spun off from EQT’s upstream business in 2018, said “it has recently come to our atten-tion that EQT has a mistaken belief that the Hammerhead pipeline is not in-service under the terms of its agreement; and, on that basis, that EQT believes it may terminate the gathering agreement and take title to the Hammerhead pipeline in exchange for a reimbursement payment.”

Equitrans demanded that EQT stop the “unlawful” marketing of the pipeline, which it said it is attempting

to do through its financial adviser. The action “constitutes unlawful conduct,” according to Equitrans.

The 57-mile gathering header pipeline began opera-tions in the second quarter and can provide interruptible service until Equitrans’ joint venture Mountain Valley Pipeline (MVP) project is placed in service, according to an investor presentation. When MVP is in service, the first capacity commitment on Hammerhead is to begin. Hammerhead provides access to the Texas Eastern Trans-mission and Dominion Transmission pipelines, as well as an interconnect to MVP.

“We firmly believe, and have communicated to EQT, that EQT lacks any valid basis for its actions and that any attempt by EQT to terminate the Hammerhead gathering agreement and to acquire (or potentially sell) the Ham-merhead pipeline is contrary to law,” said Equitrans. The company said it plans to continue enforcing its rights under the Hammerhead gathering agreement.

Equitrans noted that given the scope of …cont' pg. 7

Hook and along the line itself because of potential construction delays. This is Pennsylvania’s largest infrastructure project and it remains vital to the entire commonwealth, which is why it needs to move forward, not backward.”

Friday’s administrative order is the latest escalation in a back-and-forth between the DEP and Sunoco over con-struction of the ME system.

Late last month, Sunoco success-fully challenged a DEP order calling on the developer to suspend HDD activities at a site in West Whiteland Township.

While inadvertent returns are a common occurrence during HDD work, Sunoco has had repeated issues through-out Pennsylvania during construction of Mariner East. Drilling fluid spills, impacts to local water supplies and other violations during construction of the system have resulted in more than $13 million in fines.

Mariner East, which consists of three pipelines in various stages of development and service, has faced constant regulatory and legal challenges that have led to

delays and operational problems. It moves natural gas liquids from processing facilities in Ohio, Pennsylvania and West Virginia to the Marcus Hook Industrial Complex near Philadelphia.

EQT Again Curtailing Appalachian Natural Gas; Equitrans Contract Issues SurfaceContinued from Page 1

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NGI's Shale Daily™

Tuesday, September 15, 2020

Vol. 10, No. 238

ISSN 2158-8023 (print)

their business relationship, it has “periodically” had dis-putes and disagreements with EQT and “most often” has amicably resolved them. While it disagrees with EQT’s actions, the midstreamer “remains committed to pursuing a resolution to this dispute.”

However, Equitrans said its duty, first and foremost, is to its shareholders, and it would “firmly pursue all available legal avenues or remedies to protect its invest-ment in the Hammerhead pipeline.”

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