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Rail Permit for New Fortress to Ship LNG Expired, Putting Future Projects at Risk
12/14/2021
The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) granted Energy Transport Solutions a permit on Dec. 5, 2019, to transport refrigerated liquid methane in tank cars that meet specifications set by the Department of Transportation. Yet, the permit to ship liquefied natural gas (LNG) by rail expired on Nov. 30, prompting to wonder whether the company will proceed with related initiatives.
One of the projects in question is located in northeast Pennsylvania, Wyalusing: where New Fortress originally planned to transport NLG from its future liquefaction plant to Gibbstown, New Jersey. Afterward, customers in the Caribbean and elsewhere would have received LNG shipped from Gibbstown port.
However, The Pennsylvania liquefaction plant, which would liquefy natural gas from the Marcellus shale, still awaits a final decision about construction from New Fortress. It is unclear whether or not this development halted any plans.
According to PHMSA regulations, a special permit holder must apply for renewal at least 60 days before the expiration date in order to avoid expiration. Yet, Delaware Riverkeeper, a group opposing the LNG project, claims that there has not been a renewal request submitted for this permit.
Fortress Transportation, PHMSA, and New Fortress officials did not immediately return messages requesting comment.
Meanwhile, in the same period that the special permit is running out, President Joe Biden's administration is pausing regulations allowing LNG-by-rail so the PHMSA can study safety issues regarding this method of transportation. The action contrasts with that of former President Donald Trump, who in 2019 attempted to dramatically increase the export of LNG from the US, dubbing it as the molecules of freedom.
Despite concerns about the proposed Gibbstown LNG export terminal, Delaware Riverkeeper still believes that New Fortress may continue to pursue it. Even If LNG by rail cannot be accomplished, New Fortress could still transport LNG by truck to the port. After all, New Fortress already spent about $159 million developing the Pennsylvania facility through 2020, according to federal filings.
However, New Fortress appears to have abandoned or stalled its plans to build a liquefaction plant in Wyoming, introduce a new pipeline to deliver feed gas to Wyalusing from shale gas wells, and build a fleet of railcars for transporting LNG, according to Delaware Riverkeeper and other sources.
As a public company, New Fortress invests in, builds, and operates natural gas infrastructure and logistics in order to provide quick, turnkey energy solutions that promote economic growth, enhance environmental stewardship, and increase local prosperity.
For now, though, it remains to be seen, what changes if any, this development will bring to the Fortresses Pennsylvanians projects.
Look At The Future Of American And Appalachian Gas Production
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The crux of the matter is rather simple: productivity gains of local energy operators have been stable not only because they are drilling better acreage, but also because players finally realized capital efficiency gains. And even if some new obstacles impede Appalachia's growth at the same rate as the Permian or Haynesville, it does not detract from the value of the Marcellus and Utica basins. The Appalachians will still be the top producers at a very competitive pace as long as commercial inventory exists. After all, as long as there is commercial inventory, somebody will have to drill.
$7 Billion Merger of Colgate and Centennial, the 2 Largest Permian Operators
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Despite the circulating rumors concerning Colgate’s attempt to launch an IPO, on May 19 the company decided to combine with Centennial Resource Development Inc. This merger of equals is estimated at $7 billion and will found the biggest pure-play E&P company in the Delaware Basin of the Permian. The transformative combination essentially enlarges companies’ potential and hastens the growth across all financial and operating metrics. According to Centennial CEO Sean Smith, the combined company is anticipated to furnish shareholders with quickened capital return program due to a fixed dividend coupled with a share repurchase plan. Due to a recent report, the merger would increase production 7%, to 145,000 boe/d by the fourth quarter would further ratchet up next year. By third-quarter 2023, the company predicted 160,000 boe/d based on a drilling program of 140 wells per year. Colgate Energy was reported to be getting an IPO last December that sources said would value the company at approximately $4 billion. The combined company will have over 15-years of drilling inventory, assuming its current drilling pace, the companies will produce over $1 billion of free cash flow in 2023 at current strip prices.
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Shareholder’s payout target was increased by 50% after the largest U.S. independent oil producer surpassed Wall Street’s earnings estimates on growing energy prices, said Houston-based Conoco Phillips Co. on Aug. 4. Due to Western sanctions on major producer Russia throttling energy supply amid a rebound in demand from pandemic lows, oil and gas #prices have soared. Crude has been trading more than 25% higher since the start of the year and results also benefited from high natural gas prices. Meanwhile, shares were down a fraction, to $91.03, in early trading but are up about 26% year to date. Conoco Phillips stated, that the average price obtained for a barrel of oil and gas accelerated 77% from a year earlier to $88.57. The company acknowledges that it has not hedged any of its oil and gas sales to make the most of higher market prices. The capacity of 1.69 million boe/d was in line with Wall Street estimates, however, the company expected the current quarter’s output would be between 1.71 million and 1.76 million boe/d.
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California oil joint venture, Aera Energy, of Exxon Mobil Corp. and ShellPlc is being sold to German asset manager IKAV, according to the agreement of Sept. 1. Shell noted that the sale of its 51.8% membership interest in Aera Energy is for a total consideration of about $2 billion in cash with additional contingent payments based on future oil prices, subject to regulatory approval. However, the total transaction value was not disclosed. Being one of California’s largest oil and gas producers, Aera Energy accounts for nearly 25% of the state’s production. The sale by Exxon Mobil and Shell ends a 25-year-long partnership in California, meanwhile, it persists a streak of divestments of mature oil and gas properties by the two supermajors. Aera Energy LLC operates about 13,000 wells in the San Joaquin Valley in California, producing oil and associated gas. In 2021, Aera took out about 95,000 boe/d. Exxon Mobil’s interests in the Aera oil-production operation in California contained a 48.2% share of Aera Energy LLC and a 50% share of Aera Energy Services Co. held by Mobil California Exploration & Producing Co. Moreover, Exxon Mobil affiliates have signed a separate agreement for the sale of an associated loading facility and pipeline system. The sale effectively ends Shell’s upstream position in California. The company reported that the divestiture is valued to result in a post-tax impairment of $300 million to $400 million, subject to adjustments.
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The completion of the merger between Centennial Resource Development Inc. and Colgate Energy Partners II LLC happened on Sept. 1, sealing the debut of Permian Resources Corp., which is considered the largest pure-play E&P company in the Delaware Basin. Permian Resources’ idea was to combine two successful E&P companies, creating a better, stronger, and more strategically compelling company. Centennial and Colgate announced an agreement to merge in May, denying rumors that Colgate, a privately held independent Midland-based company, had been seeking an IPO. The merger estimated Colgate at about $3.9 billion and consists of 269.3 million shares of Centennial stock, $525 million of cash, and the assumption of approximately $1.4 billion of Colgate’s outstanding net debt. Permian Resources, being the combined company, has a deep inventory of “high-quality” drilling locations on around 180,000 net acres the companies anticipate will provide more than $1 billion of free cash flow in 2023 at current strip prices, in accordance with the company release on Sept. 1.