What We're Seeing Happening in the Energy Industry
*Note: This article is prepared by a member of KE Andrews, an ad valorem tax and valuation company specializing in the energy industry, representing over 35% of all gas plants in the U.S. and over $40 billion in pipeline*
CERAWeek is coming to Houston this week, with people like Darren Woods of Exxon, the new EPA chief Scott Pruitt, and Ben van Beurden of Royal Dutch Shell set to keynote. With Trump clearing the way for the Keystone XL and the rise of renewable energy, it's an exciting time for the energy industry. Let's look at what's happening from our clients and get the KE Andrews perspective on it.
Gas Exploration in the Marcellus and Utica Rising
It's a widely known fact that the U.S. is putting serious capital into E&P in the region surrounding Pennsylvania because of the abundance of gas. Because of this, as a country we're down from the high of almost $120 B/year in imports from Canada from 2014. We're becoming less reliant on Canada as you'll see in the graph below because of the multitude of projects underway in the midwest region of the Marcellus.
Two companies dominating the region are Range Resources and EQT. The former has accrued almost 1 million net acres, and are pumping at a rate of 1,419 Bcfe per day. EQT has amassed close to 660,000 acres and has stated that there are a staggering 7.8 Tcfe of proved reserves in the ground.
Midstream Arms Race
With the proposed 550 mile Atlantic Coast Pipeline clearing hurdles day by day, or the "Epic Pipeline" (my favorite name of a pipeline anywhere) spanning from the Permian to Corpus Christi, it seems another huge pipeline is announced by the day. Dominion Resources looks to be spearheading the ACP, while the "Epic" is being built by San Antonio-based TexStar Midstream Logistics, Connecticut-based Castleton Commodities International and Texas-based Ironwood Midstream Energy Partners.
Trump Moving the Keystone Along
We're seeing the Keystone get the green light from Washington, and Trump is the main reason behind the movement. Seemingly by the day a new EO is signed, but he has massively serviced the midstream industry. This latest mandate, removing the need for the U.S. to use "all American steel" should put things in motion. TransCanada stands to benefit from this latest news as they're the sole owner of the pipeline.
Renewables Making a Push
Wind the recent completion of the Block City Wind Farm, the U.S. has officially joined the offshore turbine sector. Europe has long established a presence in EU waters, with the largest farm (London Array) producing upwards of 630 MW... or enough to power half a million homes in the UK. Another sector that is growing is the electric sector. With the purchase of Saft by Total SA last year for $1 billion and the rise of Tesla's Powerpacks, the need for grid regulation for these alternative energies is paramount. Pacific Gas and Electric has gone live with 22 of Tesla's feature product, with the ability to store up to "2000KW hours (KWh) of power, enough to power up to 380 typical homes". This is a step in the right direction for harnessing the power of these alternatives. As you can see below, the grid operator plans the operation of the power grid over primarily 3 different times. They schedule it a day ahead, then adjust accordingly on smaller scales.
Things are moving in the industry, and it's one that keeps evolving. Be on the lookout for these trends this year.