Conference Notes: LNG Infrastructure, Drill Time Reductions, and “Proppageddon”

Recently I had the opportunity to attend two conferences in Houston. The 2018 LNG USA Summit focused on challenges and developments in LNG infrastructure. The DUG Executive Conference, which focused on high-level discussion of production.

LNG USA Summit

The 2018 LNG USA Summit was designed to “discuss challenges posed by environmental and LNG regulations and share insights about the LNG market in USA and the world.”

Here were a few things that caught my attention:

  • 2018 exports from the US are expected to double vs 2017 exports.
  • LNG, LNG infrastructure, LNG SummitSteve Woodward, Co-Founder of Antero Resources, gave a helpful talk on LNG production. He was very bullish on LNG on a global scale, noting that “young millennials are demanding the world to have cleaner air, and this is evident in China with the new LNG infrastructure being put into place.” Steve specified that it requires -273F to liquify natural gas. Steve noted that 1/3 of all of the U.S. gas supply come from Marcellus/Utica. Looking forward, he compared Permian gas potential to the Marcellus/Utica before LNG infrastructure was put into place. The Permian is expected to be 8-15Bfc/day, and currently it can only go to the gulf (Corpus, Brownsville, and Mexico).
  • A representative from Texas LNG discussed predictions on when we would see the next wave of LNG production facilities materialize. He noted a global demand for 250-300M tons of gas, while we only have the capacity to export 7M/ton, currently suffering from massive supply coming into the market from the U.S.. The world continues to see demand requirements increasing, while LNG infrastructure is stagnant. He predicts that the next wave of available supply stations will not be completed for 12-18 months.
  • Meanwhile, a representative from Next Decade expressed disappointment with the aggressiveness the U.S. has had with constructing new export terminals. His perspective is that too many projects are being submitted for FID, and the analysis for each is hanging up the process to the point that it is disrupting potential supply. He has seen buyers kicking the tires on all slated projects. FOB debt partners can’t handle the burden of 80% of the project costs.

DUG Executive Conference

The 2018 DUG Executive Conference was designed to provide “a high-level forum for frank, peer-to-peer discussion about the challenges oil and gas producers face today.”

Here were a few things that caught my attention:

  • Rob Thurman of Goodrich Petroleum coined the term “Proppageddon” to describe his well in East Texas which is injecting  5k/lbs per foot of proppant. They noted that the rock quality increases closer to the Texas/Louisiana border, which provides opportunity to test 10k foot laterals with 4-5k/lbs proppant per foot. They are drilling 6 wells per section with -800′ spacing. Common initial rates on these wells are 25-40Mmcf/d.
  • For many companies drill time—formerly one of the most costly components of production—has been cut nearly in half. One company in the Oklahoma STACK noted a cut from 20 days in 2015 to 11 days in 2018, saving the company $50k/day. Fracking/completion costs now comprise 2/3 of the well costs.

Aaron Alaniz is the National Business Development Manger at Kimray, Inc, in Oklahoma City. Connect with him on LinkedIn or via email at aalaniz@kimray.com