Shale Oil Fiasco

[James Gautreau + 86]

15 minutes ago, wrs said:

I think this might be the apocalyptic scenario but I do think that there won't be much if any growth in shale production out of the Permian next year unless oil prices get over $70.  I am not confident we will see $100 but personally it would be good for me.  I have a lot of new production that recently came on line so selling into a rising price is a good thing for me and the operators.

I think that expensive oil won't hurt the US as much as Europe and China but it will help the mideast and Russia which isn't something Trump wants but he has to weigh that against the benefit to China of cheap oil.  It's a complicated set of options to choose from.  I think up until this year Trump was cheering cheap oil but as you say, he has been eerily silent lately on oil which I hope continues.

BTW, thanks for the youtube link, that's a good presentation.

Well peak oil is apocalyptic. Shale oil postponed it. Now that we've squandered the 10 year delay with business as usual, people are going to want to know how we got it so wrong. This right/left thing has polluted the public discourse so profoundly, we can no longer agree on a set of common facts. This is dangerous to our country; existential even. When shale peaks, we start fighting over what's left. That's the bottom line. We'll fight with currency, fight with trade, fight with bullets. Ever been to a gas station after a hurricane. People are ready to kill each other for that gasoline. In America. 

[Coffeeguyzz + 454]

Mr. Gautreau

Your reference to the now-closed PES refinery in Philadelphia offers an instructive example of how so many competing factions can help/hurt an area's residents in these matters.

For a hydrocarbon booster - interested in the greater, overall economic situation for the people in Philadelphia - it is an absolute no brainer to encourage the building of a new, state of the art refinery optimally designed to process light sweet LTO.

Not only would the property and sales taxes from this proposed facility greatly benefit the city's schools, services, etc., the income taxes paid by high salary employees would be another source of 'rising tide' economics.

Crude could be brought in via CBR (a new terminal was built there a few years back,  receiving up to 3 unit trains a day) or - if needed - have the right-next-door shipyard build a few Jones Act compliant tankers to bring the crude up from Da Guf. 

Area drivers could pay Texas-like gasoline prices or - in efforts to sway public opinion - a dedicated tax of ten/fifteen cents per gallon could go to school funding.

The land holds ENORMOUS potential, but the political tensions present  a daunting hurdle to surmount.

Edited December 27, 2019 by Coffeeguyzz

[Old-Ruffneck + 1,246]

23 minutes ago, James Gautreau said:

Well peak oil is apocalyptic. Shale oil postponed it. Now that we've squandered the 10 year delay with business as usual, people are going to want to know how we got it so wrong. This right/left thing has polluted the public discourse so profoundly, we can no longer agree on a set of common facts. This is dangerous to our country; existential even. When shale peaks, we start fighting over what's left. That's the bottom line. We'll fight with currency, fight with trade, fight with bullets. Ever been to a gas station after a hurricane. People are ready to kill each other for that gasoline. In America. 

I disagree, peak is a term not for when we run to the apex and start dropping in amount pumped. Peak is determined by amount used and starts dropping say from "green" energies or nuke. There is plenty recoverable conventional oil world-wide to last 100+ years. Tech and AI will solve these complex issues long after we are gone.

[Gerry Maddoux + 3,627]

18 minutes ago, Old-Ruffneck said:

There is plenty recoverable conventional oil world-wide to last 100+ years. Tech and AI will solve these complex issues long after we are gone.

Agree. The biggest problem we Americans have is that we do not own most of the conventional oil in the world. That would be Venezuela, which has the biggest reserves, and it's mostly owned by Putin and Xi via debt obligations. That a big enough thorn in the foot, but then there's KSA, Iran, Iraq, Brazil, Africa. This shale skirmish may seem big to us, because it's totally American, but in the composite of the world's oil reserves, it is but a pittance. 

[James Gautreau + 86]

Part of the reason Venezuela collapsed is that they are out of the easy and cheap conventional oil. All that's left is the heavy stuff that has to have steam injected into the reservoir and then mixed with napatha when it is brought up so that it will flow at room temperature. Doing all of this requires a lot of technology that Venezuela does not have. If you want to look at what peak oil means in the real world look at Venezuela. Venezuela is now more like the Canadian Tar Sands, in other words as unconventional as it gets. Expensive, dirty, hard to process. Venezuela is yet another country that failed once it reached peak, cheap, easy oil. The gravy train ends and you're left with a train wreck. Venezuela peaked a couple of year before Chavez came to power. He tried to stem the tide, but as most of us here know, it can hardly ever be stemmed. Venezuela was no different. 

[Old-Ruffneck + 1,246]

9 minutes ago, James Gautreau said:

Part of the reason Venezuela collapsed is that they are out of the easy and cheap conventional oil. All that's left is the heavy stuff that has to have steam injected into the reservoir and then mixed with napatha when it is brought up so that it will flow at room temperature. Doing all of this requires a lot of technology that Venezuela does not have. If you want to look at what peak oil means in the real world look at Venezuela. Venezuela is now more like the Canadian Tar Sands, in other words as unconventional as it gets. Expensive, dirty, hard to process. Venezuela is yet another country that failed once it reached peak, cheap, easy oil. The gravy train ends and you're left with a train wreck. Venezuela peaked a couple of year before Chavez came to power. He tried to stem the tide, but as most of us here know, it can hardly ever be stemmed. Venezuela was no different. 

You're partly correct. Hugo and his generals took over Venezuela and like kids in Toyland raped and pillaged the oil-fields kicking out all USA companies with no compensation. Shot himself in the foot. We put in place a 100% hands off and locked the country from getting repair equipment. It was just recently the Russians and Chinese came in to help Maduro try repairing a 20yr plus mess. Comes at a cost when you go Socialist. Workers weren't paid, and were intentionally tearing up equipment. So there really is more to the story. American engineering in the oil sector is by far NO.1 and heavy oil now getting blended with LTO and other liquids is having favorable outlook. 

[James Gautreau + 86]

23 minutes ago, Old-Ruffneck said:

You're partly correct. Hugo and his generals took over Venezuela and like kids in Toyland raped and pillaged the oil-fields kicking out all USA companies with no compensation. Shot himself in the foot. We put in place a 100% hands off and locked the country from getting repair equipment. It was just recently the Russians and Chinese came in to help Maduro try repairing a 20yr plus mess. Comes at a cost when you go Socialist. Workers weren't paid, and were intentionally tearing up equipment. So there really is more to the story. American engineering in the oil sector is by far NO.1 and heavy oil now getting blended with LTO and other liquids is having favorable outlook. 

They nationalized their oil industry. The companies were compensated. The cocktail of LTO and Venezuelan heavy oil would be perfect for American refineries. As soon as LTO started here, we should have made peace with Venezuela, helped them get on their feet, and we would have been in the money the last decade.

[Anthony Okrongly + 114]

This was a really interesting thread until it turned to politics. I learned a lot about the details of the fracking industry from seeing all of this. You guys are really "in the weeds" when it comes to breaking this down. I, personally, think that it's all about money and the investors are starting to ask... "If he's a good hitter then why doesn't he hit good?"  The shale industry has done a great job of doing everything but making profits.  They make jobs!  They make oil!  They make GDP! They make Royalties!  They make Technology! They even make Sense! ... They make Debt.  They make Bankruptcies. They make Predictions.  They make Investor Presentations. 

In the end production is directly connected to new infusions of capital. If capital slows down, production will slow down. If companies can't pay their debt then production really slows down.  I live in East Texas and I know one thing... my neighbor's son spent the past 6 years working in the frack fields.... now he's sitting on the sofa watching TV.  Something changed. The industry is losing jobs fast. 

I bought Occidental stock because I think we're getting to capitulation on both oil stock (which will go up) and oil company debt (which will dry up). It seems counter intuitive, but production - I think - will start dropping based on capital while oil prices rise. This will raise company values who hold lots of reserves, but interestingly enough it will not pull new capital into the field because the industry has Pinoccioed itself to death.

It doesn't matter to me if I'm right or wrong.  It's just a good hedge. If oil stay low and oil stocks stay low then it's a wash.  If oil goes up and my stocks go up then I can afford more expensive gasoline. I hope fracking holds out for a couple more years so I can dollar cost average myself into a good position before it really hits the skids in 2022.

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

Edited December 27, 2019 by Anthony Okrongly
typo

[Anthony Okrongly + 114]

11 hours ago, Coffeeguyzz said:

Mr. Gautreau

Your reference to the now-closed PES refinery in Philadelphia offers an instructive example of how so many competing factions can help/hurt an area's residents in these matters.

For a hydrocarbon booster - interested in the greater, overall economic situation for the people in Philadelphia - it is an absolute no brainer to encourage the building of a new, state of the art refinery optimally designed to process light sweet LTO.

Not only would the property and sales taxes from this proposed facility greatly benefit the city's schools, services, etc., the income taxes paid by high salary employees would be another source of 'rising tide' economics.

Crude could be brought in via CBR (a new terminal was built there a few years back,  receiving up to 3 unit trains a day) or - if needed - have the right-next-door shipyard build a few Jones Act compliant tankers to bring the crude up from Da Guf. 

Area drivers could pay Texas-like gasoline prices or - in efforts to sway public opinion - a dedicated tax of ten/fifteen cents per gallon could go to school funding.

The land holds ENORMOUS potential, but the political tensions present  a daunting hurdle to surmount.

You guys in the Northeast are going to get killed with regulation. I just read that natural gas prices in the Northeast are around $15 per MMBTU because of lack of pipeline capacity to bring natural gas up from Texas. It seems like that sort of thing will only increase. "Not in my backyard" issues are going to make serious energy have's and have-not's in the U.S. California is the same way. Texas may be last in social medical services but I pay $2.12 for a gallon of gas, 4.5 cents for a kilowatt of electricity, and no state income tax.

Come on down to Texas, but stay out of Port Arthur / Houston area... you'll get cancer in a week from those toxic refinery waste dumps. NIMBY.

Edited December 27, 2019 by Anthony Okrongly
typo

[Gerry Maddoux + 3,627]

The above are most informative posts I've seen on this site. Thank you all. 

America has always craved energy hegemony. At long last, she has it. But it's not in oil; it's in an unwanted by-product from all the shale drilling: NG. 

LNG--which has all acid oxide producing molecules removed by cooling and extraction--is very close to being the cleanest energy source in the world . . . if you consider the enormous feedstock of petchem for production of lithium battery vehicles, as well as blood cobalt, the huge SOX pollution from nickel mining, etc. 

The "Green New Deal" states think they can implement their plans quickly enough to prevent collapse of their energy structure. California probably can, due to their vast spaces of desert for solar farms that stretch further than the eye can see, as well as the capacity for offshore windmill farms (which the Monterey Institute that Mr. Packard established is surveying). The Northeast can't do this: they're too dense.. 

The above gentleman was correct--they're going to pay higher and higher energy prices until they either capitulate or freeze. And if they persist in buying Russian LNG that has been coyly sent to the UK, they're going to pay a price in something else . . . a black eye that won't go away. 

[James Gautreau + 86]

45 minutes ago, Anthony Okrongly said:

This was a really interesting thread until it turned to politics. I learned a lot about the details of the fracking industry from seeing all of this. You guys are really "in the weeds" when it comes to breaking this down. I, personally, think that it's all about money and the investors are starting to ask... "If he's a good hitter then why doesn't he hit good?"  The shale industry has done a great job of doing everything but making profits.  They make jobs!  They make oil!  They make GDP! They make Royalties!  They make Technology! They even make Sense! ... They make Debt.  They make Bankruptcies. They make Predictions.  They make Investor Presentations. 

In the end production is directly connected to new infusions of capital. If capital slows down, production will slow down. If companies make pay their debt then production really slows down.  I live in East Texas and I know one thing... my neighbor's son spent the past 6 years working in the frack fields.... now he's sitting on the sofa watching TV.  Something changed. The industry is losing jobs fast. 

I bought Occidental stock because I think we're getting to capitulation on both oil stock (which will go up) and oil company debt (which will dry up). It seems counter intuitive, but production - I think - will start dropping based on capital while oil prices rise. This will raise company values who hold lots of reserves, but interestingly enough it will not pull new capital into the field because the industry has Pinoccioed itself to death.

It doesn't matter to me if I'm right or wrong.  It's just a good hedge. If oil stay low and oil stocks stay low then it's a wash.  If oil goes up and my stocks go up then I can afford more expensive gasoline.

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

I have heard that several times now. Anecdotes about how all my friends are home now looking for work and there is none. The truck drivers-gone due to pipelines. The frack crews-gone because sweet spots exhausted. Drillers-gone because sweet spots exhausted. The capitol infusions will return, but only at a much higher price. 

[jjj + 26]

16 hours ago, James Gautreau said:

Does the nat gas fired engine have the torque of a diesel?

Most of our rigs ran NG dual fuel diesels. They burned a very small amount of Diesel to ignite the NG. On NG they produced like 75% of what they did on Diesel. But when we needed 100% power, not very often, they would automatically go 100% Diesel and give us that power. The computer did this so well it was transparent unless you were watching the computer. 

Jay

[James Gautreau + 86]

5.5 million barrel draw. Not as big as predicted-7.9 million-still is fairly large. Moving forward, will we ever get another build? I don't see how, not unless the rigs and crews comeback, and in a big, big, big, way. We shall see in the weeks to come. 

[James Gautreau + 86]

27 minutes ago, jjj said:

Most of our rigs ran NG dual fuel diesels. They burned a very small amount of Diesel to ignite the NG. On NG they produced like 75% of what they did on Diesel. But when we needed 100% power, not very often, they would automatically go 100% Diesel and give us that power. The computer did this so well it was transparent unless you were watching the computer. 

Jay

Thanks for the info, I did not know that.

[AcK + 50]

On 12/6/2019 at 12:18 AM, ceo_energemsier said:

The second, OPEC cuts more, and prices go up, you will see rigs flowing back into the shale patches.

This was epic prophetic!

[D Coyne + 305]

23 hours ago, Gerry Maddoux said:

These are all reasonable comments. I don't want to disagree just for the purpose of disagreement, as if that makes me a good debater: I'm not, and I am a conciliator by nature. Everyone assumes that these "less expensive alternatives" are going to come without an unexpected or unintended consequence, just because they're green renewables. I don't assume that. I can imagine a landscape filled with solar panels and windmills, producing enough energy to power the world, storing energy in giant batteries for a rainy and windless day. 

However, I don't think for a minute that such a landscape is going to be without side-effects. Those will emerge when we're a quarter the way into the project, or maybe halfway, but they're going to emerge. Maybe they'll be nothing-burgers, but I doubt it. Energy has always been expensive and at at environmental cost. We're currently in the early stages of replacing tried and proven energy with a brave new world. That's the thrust of my posts: oil and gas are inexpensive in the grand scheme of things. To get to the next level without some pain is to ignore the lessons of civilization. 

Gerry,

Oil and natural gas are limited, they will need to be replaced at some point.  Note that total energy needed gets reduced as 2/3 of primary energy provided by fossil fuels ends up as waste heat in many applications.  As energy becomes more expensive it will be used more efficiently, there is a large amount of waste in the current system because energy is so cheap.

I agree there are always unintended consequences and a transition to alternatives to fossil fuel will not be easy.

[Gerry Maddoux + 3,627]

Venezuelan oil has been lost to China and Russia. Brazilian oil is going the same way. The US has forever made her bed with the Saudis. 
They have, in return, been fairly good bedfellows, in the long arm of history, provided you overlook their pouts and attempts to drill us into oblivion (and also 9/11). 

This will all work out. Chevron and Exxon have made massive investments in something that won't always make them a profit at the wellhead, but it will provide them with great feedstock for their petrochemical plants (which are proliferating like rabbits) and refineries. As has been pointed out, their refineries, like most, require a certain blend that comes from adding heavy crude to LTO. That's of course where the Saudi oil comes in--after they desulfurize it. Sure, it would have been nice to have Venezuela for a backup, but we have Mexico, a reliable source for some backup. Chevron and Exxon are going to make a ton of money from moderately priced oil because of their end-product facilities. If oil rises in price, then they make it at the wellhead. In the interim, they're quietly transitioning more into offshore, which in my mind is going to be exceptionally prolific--enough to provide the US with plenty of high-grade oil. 

I think we all figured that strong hands would eventually win the day in the shale basin. Small companies that have great property in the Delaware may have already missed the opportunity to sell. It's going to be hard for most of them to survive, unless crude prices rise dramatically ($80-100). I personally feel that the EIA is just now waking up to the fact that the world has changed, that the glut will quickly be worked through, but I also don't think we're headed for astronomical oil prices: Exxon and Chevron now possess the swing vote and they want middle of the road prices. 

[D Coyne + 305]

13 hours ago, Old-Ruffneck said:

I disagree, peak is a term not for when we run to the apex and start dropping in amount pumped. Peak is determined by amount used and starts dropping say from "green" energies or nuke. There is plenty recoverable conventional oil world-wide to last 100+ years. Tech and AI will solve these complex issues long after we are gone.

Old Ruffneck,

Pretty sure you are wrong.  Let's say current output is the peak, roughly 26 Gb of  conventional C+C per year.  Let's also assume oil output never peaks because demand for oil remains strong.  So 100 years times 26 Gb is 2600 Gb of conventional C+C produced over the next 100 years.  About 1300 Gb of conventional C+C had been produced by the end of 2018, so you are proposing at least a 3900 Gb URR for conventional C+C if we assume output drops suddenly to zero after 100 years.

Conventional C+C URR is likely no more than 3100 Gb, my best guess is 2800 Gb.

Not sure where you think all this oil is, but not a lot has been discovered lately, 2P reserves are about 1200 Gb, enough for 46 years of output at the 2018 rate of production.  If output goes up, the time is shorter.

[D Coyne + 305]

1 hour ago, James Gautreau said:

5.5 million barrel draw. Not as big as predicted-7.9 million-still is fairly large. Moving forward, will we ever get another build? I don't see how, not unless the rigs and crews comeback, and in a big, big, big, way. We shall see in the weeks to come. 

As stocks continue to draw, oil prices will rise.  Eventually completion rate ramps up in response.

[Gerry Maddoux + 3,627]

9 minutes ago, D Coyne said:

Oil and natural gas are limited, they will need to be replaced at some point. 

Dennis, oil is limited. NG? I'm not so sure. When you look at these big offshore finds, they always seem to have an abundance of NG. The Vaca Meurto shale field possesses much thicker shale benches than anything we've ever seen before. It is a huge field and absolutely full of natural gas. I know you're not as keen on LNG as I am, but in my mind this is the fuel of the future . . . worldwide. 

And the elimination of sulfur oxides from maritime shipping is going to be--in my estimation--much, much bigger than anyone in the media has yet reported. With 90,000 oceangoing vessels heretofore burning 3.5% sulfur fuel, suddenly switching to 0.5%, this being checked by drone-sniffers in worldwide ports (where emissions can't be more than 0.1%), I think this epochal transition may be enough to . . . change the climate. I know, I know, that sounds silly and outlandish, but think of it, 90,000 cargo ships and tankers making such a tremendous change at one time. Some of those old ships will be trashed. Some will go to NG (LNG, usually). Compared to their previous pollution, we probably could have converted all vehicles on earth to electric and not have made 1/100th the change . . . this is almost too big a change to even calculate (if fact, they have admitted that it's massive, too large and complicated to calculate). 

I sincerely believe that we are on the wrong scent: oil is becoming a petrochemical feedstock while NG is becoming an LNG feedstock. LNG will rule the day. Just like maritime, the elimination of sulfur oxide from NG--especially when used in massive quantities--and the near-total elimination of coal (why burn high sulfur coal when LNG is just as cheap) will make a huge change in airstream pollutants.

[D Coyne + 305]

20 hours ago, Mike Shellman said:

Well economics should not be based on BOE, Dennis; break the revenue stream down to three components. If you have to use BOE use 40:1, at least. +25% on NGL's is too much. If you want to assume that more takeaway will result in less flaring and more revenue for Permian WI, knock yourself out. Just because you put it in a pipe doesn't mean there will be a buyer for it on the other end. If Permian associated gas  can compete in the LNG market against the likes of Qatar, Russia, West Australia and East Africa, even APP Basin gas from the US,  it will because it's being sold at a financial loss, similar to how American shale oil is being exported at a financial loss. 

The western Delaware Basin has a very gassy contact, like the eastern Midland. Some internet expert said GOR is expected to go up, so there! Not really and not at the rate of increase it is in ALL shale oil basins, even the Williston. +10 GOR, like that in Culberson County in the Delaware (and rising!)  is NOT good. It means the shale "container" that was artificially stimulated is starting to deplete. When that GOR starts going down, the party is over. It will; it's just  a matter of time. Only the inexperienced will be surprised.

The unconventional shale industry is still in desperate need, now more than EVER! for monetary help. It can't stand on its on financial feet without that help, not and pay dividends and meet looming debt maturities. So, it hires folks like Enverus, and Rystad, and IHS to make stuff up. The fact that people still buy into that hooey, and investor presentations, says a lot about why the shale thing has lasted as long as it has. 

Look at GOR's in Culberson County for 2017, how they rolled over in 2018 and are going thru the roof in 2019. 

Thanks Mike,

I break it into two streams based on shale profile oil and gas data for the average well, I do not use BOE.  What is a good number in your opinion for the total revenue from the natural gas stream when average NGL sales are included, wrs suggested 25% extra so the when we include the revenue from the barrels NGL extracted from the average MCF of natural gas that a 50 cents in NGL sales for every $2 of natural gas sales results at a $2/MCF natural gas price, this implies at $40/b for NGL that for each MCF of natural gas we would on average get 0.0125 barrels of NGL or 1 barrel for every 80 MCF of natural gas (I have guessed at the price for NGL).  What is a better guess?

I may be mistaken about the natural gas pipelines, I had read they were being built, I expect this is being done because somebody believes it will be profitable, perhaps I and they are mistaken.

Do you agree that the trend line for West Texas natural gas prices looks to have a positive slope from April 2019 to November 2019?

 

I do not have access to the premium service at shale profile, just the blog.  I imagine the counties with too much gas might see less drilling, I would also think that the big oil companies may figure out the optimal way to develop the field, perhaps the completion rate will remain constant to increase the longevity of the field, perhaps it will decrease.  Scenario below assumes a constant completion rate in the Permian basin at 545 new wells per month from Sept 2019 to April 2030.  New well EUR starts to decrease in Jan 2020 in this scenario,  well profiles based on data from https://shaleprofile.com

Edited December 27, 2019 by D Coyne

[Gerry Maddoux + 3,627]

15 minutes ago, D Coyne said:

Not sure where you think all this oil is, but not a lot has been discovered lately

You're the one with the models, so it's hard to argue with that, but . . .

Guyana: 14 massive oil finds. Yamel Peninsula just in the edge of the Kara Sea: 15 Bboe. Cyprus: 8 T cu. ft. gas.

I am impressed that we had an interlude, right after the crash in 2014, when no exploration took place. During the last two years, exploration has been both explosive and rewarding. Success  begets success. More and more looking will yield more reserves, don't you think? I'm not well informed on this, maybe the ocean floors--especially just offshore--have been isopach mapped.

[James Gautreau + 86]

When this all started, no one knew anything. How long to drill laterals? How close to space the wells? How much oil coming out of each well? Decline rates? Decline rates of old wells vs new wells? How much oil is down there? Etc, etc, etc. Now we pretty much know everything. The bankers and investors now have a pretty good idea of what oil price will mean profitable wells and thus a profitable company. That is why oil workers are watching soap operas and not rough-necking. To make money in the Permian you need $150 oil and $3 nat gas. This year, if we're lucky, we'll hit 13 mbpd. I think by the end of next year we will have declined to 11 mbpd and the 450 million barrels in inventory will be down to 100 million, and there will go the glut, and thus will arrive scarcity. Then China and America will become equal in Saudi Arabia's eyes. The Great Tribulation will begin. 

[wrs + 893]

Well I just checked the W-1s on my Orla section and XTO have spudded 4 new wells all on the eastern side which had no wells previously.  It looks like they are doing parent-child pairs in this case.  The stated depths are the same but that doesn't mean much.  That brings them to 16 wells total on the section now.  They are not producing all of them at the same time and I assume they will do the same with these but they may keep them as DUCs for a while too.  When they do completions they typically stop producing the other wells and that means they lose a month of production. 

[Gerry Maddoux + 3,627]

2 minutes ago, D Coyne said:

I may be mistaken about the natural gas pipelines, I had read they were being built, I expect this is being done because somebody believes it will be profitable, perhaps I and they are mistaken.

I'm not trying to answer for Mike, but as someone who has six pipelines across one property, I have some knowledge of this. The pipelines were built because they likely will be wildly profitable for the pipeline owner/operator. They were built because Chevron, Exxon and Occidental, along with all the independents, were producing so much NG as a by-product from LTO drilling that it was choking the takeaway system. Obviously, the pipeline operators don't really care whether the NG carried in those pipeline is profitable to the producer or not, the simple fact is it has to be carried away before any more drilling can take place. The pipeline operators are going to be paid for transmission, by someone, and that is almost always the producer, because buyers would rather purchase at the termination of the pipeline, not at the wellhead. 

Well, you know all of this. Your earlier post made note of the fact that good producers reserve pipeline space in advance of drilling. The truth of the matter that any prolific field will outrun its pipeline capacity. That, in turn, promotes the building of a new pipeline--even the Texas Railroad Commission, the most sympathetic of the state oil and gas regulatory agencies, has its limits on venting and flaring. 

As long as someone is willing to pay transmission fees, new pipes will be laid. That's what's killing the producers: they're paying for NG to be taken away, yet for that natural gas commodity they're getting rock-bottom prices. The LNG folks are making out like bandits. This is not a viable long-term business plan. That's the reason I have Cheniere down as a takeover target, by one of the big oil companies that's losing its shirt. (Chevron?--they have the cash.)