Page 13 - NorthAmOil Week 25

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Ranch Energy collapse leaves

over 400 orphan wells

WESTERN THE collapse of an Alberta-based producer, 200 of the company’s newly orphaned wells are
CANADA Ranch Energy, has resulted in 401 wells and three located on farmland or private property. The BC
other facilities in British Columbia being desig- Oil and Gas Commission told CBC News that
nated as orphan sites. This more than doubles the cleaning up these sites could take up to 10 years,
total of such orphan sites in BC to 770, according but added that some may be restored “much
to the BC Oil and Gas Commission. sooner”.
Oil and gas wells and facilities are deemed to Cleaning up all 404 sites is estimated to cost
be orphaned when producers go bankrupt, or if around CAD40mn ($29mn).
they abandon the site without shutting down or An industry fund is supposed to cover
completing reclamation work and subsequently the clean-up costs of orphan wells and other
cannot be located by authorities. The number of facilities. However, the Office of the BC Audi-
orphan sites in BC has steadily grown from 45 tor General warned in 2019 that the fund was
in mid-2016, illustrating the toll that both the millions of dollars short of what it requires.
last industry downturn and the current one have This year, Western Canadian clean-up efforts
taken. received a boost on the announcement that the
Ranch went into receivership in 2018, but federal government would spend CAD1.7bn
the company’s court-approved bankruptcy pro- ($1.2bn) to help restore inactive and orphaned
ceedings were only finalised on June 12 this year. wells across Alberta, BC and Saskatchewan.
Under the transaction, 414 of Ranch’s oil and gas BC received CAD120mn ($88mn) of this, with
sites were sold to Erikson National Energy, while CAD15mn ($11mn) allocated to the province’s
the rest were designated as orphaned. Almost orphan well fund.™

LNG buyers reportedly set to cancel

40-45 August cargoes from US

US BUYERS of LNG are reportedly expected to cancellation fee of $3.00-3.50 [per mmBtu, or
cancel 40-45 cargoes scheduled for loading at $82.98-96.81 per 1,000 cubic metres],” a trader
US terminals in August. The number, which had was quoted by Reuters as saying.
yet to be confirmed earlier this week because the LNG producers do not typically disclose
deadline to provide notice to some of the termi- details of cancellations or other commercial
nals involved was June 22, would be roughly in arrangements with their customers, but at least
line with the amount of cargoes cancelled for July 20-30 US LNG cargoes scheduled for June load-
loading. ing are reported to have been cancelled, before
Cheniere Energy is Citing several market sources, Reuters cited the number of cancellations rose for the subse-
thought to be the the slow recovery in Asian gas demand and quent months.
worst-affected by the record-high European gas stocks as reasons for Cheniere Energy is thought to be the
cancellations. the large number of cancellations. The sources worst-affected by the cancellations because it
reportedly added that the premium of gas prices operates two liquefaction terminals and is the
in Europe over the US Henry Hub benchmark US’ largest exporter of LNG. Indeed, Reuters
remained too tight to deliver US cargoes to the cited one of its trade sources as saying that close
continent profitably. to 30 cargoes for August loading were likely to
The comments came as the August contract have been cancelled from Cheniere’s two Gulf
on the Title Transfer Facility (TTF) gas hub in Coast terminals.
the Netherlands was trading around $0.10 per Some of the news service’s sources have sug-
million British thermal units ($2.77 per 1,000 gested, however, that loading a cargo in August
cubic metres) above the Henry Hub price. might make more sense compared with June
“At those levels, European buyers are looking and July, as there was a price contango between
at a loss of over $5.00 [per mmBtu, or $138.30 per August and forward months, with shipping
1,000 cubic metres] compared with just paying a rates low.™

Week 25 25•June•2020 www. NEWSBASE .com P13