Page 9 - NorthAmOil Week 45

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Alberta’s Houston Oil & Gas ceases operations
ALBERTA
CALGARY-BASED Houston Oil & Gas has gone into receivership, becoming the latest Canadian oil company to fall victim to unfavourable oper- ating conditions caused by low oil and gas prices.
The company, which is primarily focused on natural gas production in south-east Alberta, told the Alberta Energy Regulator (AER) last month that it was ceasing operations and no longer had any employees.
According to court documents cited by CBC News, Houston has 1,264 wells, 41 facilities and 251 pipelines. The court documents show that some of Houston’s wells have already been trans- ferred to the Orphan Well Association (OWA) – an industry-funded body – to be decommis- sioned. The OWA cleans up old oil and gas infra- structure when companies go bankrupt and cannot decommission assets themselves, nor can they sell them.
“If all of Houston’s wells are ultimately desig- nated as orphans, the orphan inventory of wells requiring [decommissioning] will increase by nearly 30%,” the OWA said in a court submission. If this happens, the AER estimates that clean-up will cost around CAD81.5mn ($61.5mn).
Hardie and Kelly has also been appointed to
ensure that Houston’s wells are properly main- tained and to look into the possibility of selling some of the assets.
Houston reportedly only began production in 2015, according to its website.
The company joins a growing list of com- panies that have failed in the current operating environment. This includes Bellatrix Explo- ration, which entered creditor protection last month and continues to look for a buyer. Another recently failed company is Trident Exploration, which shut down in May, leaving about 3,650 wells without an owner.
According to an AltaCorp Capital analyst, Patrick O’Rourke, those companies that produce oil or gas rich in natural gas liquids (NGLs) are generally faring better than dry gas producers in Alberta.
“Gas prices have been extremely challenging, specifically in Alberta,” O’Rourke was quoted by CBC as saying. “We’ve seen some strengthen- ing in October with low storage levels and the weather out the window here being pretty cold, but generally, the producers who have pursued that liquids strategy have fared better than some junior gas producers.”™
Permian flaring reaches new high
PERMIAN BASIN
THE flaring and venting of natural gas has reached a new all-time high in the Permian Basin, where it is a by-product of drilling for oil.
Consultancy Rystad Energy has found in a preliminary analysis that Permian flaring and venting averaged more than 750mn cubic feet (21mn cubic metres) per day during the third quarter of 2019. By comparison, levels of flaring and venting during the prior three quarters had only averaged 600-650 mmcf (17-18 mcm) per day, according to Rystad.
The consultancy attributed the increase to a combination of higher activity levels in the Per- mian, more output from areas with less devel- oped gas-gathering infrastructure, and takeaway capacity bottlenecks across the whole basin.
The start-up of the Gulf Coast Express pipe- line in September helped to provide some relief from pipeline bottlenecks, adding 2bn cubic feet (57 mcm) per day of takeaway capacity to the Permian. But this is not enough to accom- modate future associated gas growth, nor does it address the issue of gas being flared at the wellhead before a new well is tested, as is fairly standard practice.
More gathering and takeaway capacity is being built. However, it will only be in 2021 and beyond that major new gas pipeline capacity additions come online, and the Permian will continue to be bottlenecked in the meantime.
New projects are going ahead that will have an impact in the medium term, however. Last week, WhiteWater Midstream announced that it was moving forward with a plan to more than double the capacity of the Agua Blanca gas pipe- line across six counties in the Permian’s Delaware sub-basin in West Texas.
WhiteWater is developing the Delaware Basin Agua Blanca system expansion with its joint venture partner MPLX and Agua Blanca lead investor First Infrastructure Capital.
The Agua Blanca system, which serves the Waha gas hub, currently has a capacity of 1.4 bcf (40 mcm) per day. The expansion will bring total capacity on the pipeline to more than 3 bcf (85 mcm) per day. WhiteWater said the expansion was supported by multiple 10-year, take-or-pay transportation agreements.
No start-up date for the expansion has been given.™
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