RBN Energy

It’s possible for a single new infrastructure project to be a game-changer — the Transcontinental Railroad comes to mind, and so do the New York City subway system and the Hoover Dam. In the energy industry’s midstream sector, things work a little differently. There, projects are incremental. They’re privately, rather than publicly backed and so they must be commercially justified, which means they need to serve a specific purpose. That’s not to say they can’t shift the landscape of the areas they serve. For example, when the Shale Revolution transformed and disrupted U.S. hydrocarbon markets, supply and demand dynamics were turned on their head and waves of projects had to be built to handle surging production in suddenly supercharged shale plays like the Bakken, Appalachia, and Permian and to serve new markets, most notably exports. Sometimes, it’s a more complicated combination of projects and events that, as a group, cause not-so-subtle shifts in how things are done. Lately, handfuls of pipeline projects and refinery closures — plus increasing regional crude oil production in both the U.S. and Canada — have spurred changes in traditional pipeline-flow patterns and may breathe new life into oil-export activity at the Louisiana Offshore Oil Port and the Beaumont-Nederland area in Texas. In today’s RBN blog, we discuss these changes and their effects.

Pandemic. Deep freeze. Decarbonization. Stymied production growth. Sky-high prices. 2021 was definitely one for the record books. But thank goodness we made it and can look forward to a New Year! That means it is time for our annual Top 10 Energy Prognostications, the long-standing RBN tradition where we consider what’s coming next to energy markets. Say what? Surely it would be foolhardy to make predictions now. After all, we’re in the midst of a chaotic energy transition, a pandemic that’s becoming endemic, and political shenanigans in Washington and across the globe. Foolhardy? Nah. All we need to do is stick out our collective RBN necks one more time, peer into our crystal ball, and see what 2022 has in store for us. 

Activity in Oklahoma’s SCOOP/STACK play has been picking up. In 2021, the number of active rigs there improved by about 30 — that’s a bigger gain than any U.S. hydrocarbon production basin except the Permian. On a percentage basis, the 160% year-over-year increase in the SCOOP/STACK rig count was exceeded — and just barely — by only a couple of other rich-gas regions: the Niobrara and Ohio portion of Marcellus/Utica. Is SCOOP/STACK really on the rebound and, if so, why? The answers are tied to commodity prices and the fact that the Oklahoma play offers producers both crude oil and “rich,” NGL-saturated associated gas. In today’s RBN blog, we discuss recent developments in the Sooner State’s premier production area.

You can count on certain things this time of year. Alabama is in the hunt for a college football national championship, there’s fresh powder somewhere in the Rockies, it’s mostly still shorts weather in Houston, and there’s a catchy new country song ripe for blog titles. January also brings some unknowns, with pundits throwing out various scenarios for stock and commodity markets, as well as the more recent trend in postulating the outcomes of the latest COVID variant. When it comes to the U.S. onshore oil and natural gas markets, the Permian continues to be old reliable, especially with crude north of $70/bbl and natural gas prices flirting with $4/MMBtu. There’s a lot we can’t predict about the year ahead (like the NCAA football championship, though this writer, at least, is pulling for Georgia next week), but our view of Permian production growth hasn’t changed. In today’s blog, we provide this year’s outlook for Permian crude oil and natural gas markets.

Mexico’s state-owned Petróleos Mexicanos, the second-largest exporter of crude oil to the U.S. after Canada, said in late December that it will slash its export volumes in 2022 and eliminate them completely in 2023. The plan is premised on Pemex’s expectation that, with increased utilization of the company’s six existing refineries and the impending start-up of a new one, it will need every barrel of the Maya, Isthmus, Olmeca, and other varieties of oil it produces. While at first glance it may seem that Mexico phasing out exports of crude would pose a major challenge to some U.S. refineries, there’s good reason to believe that in reality it won’t. In fact, as we discuss in today’s RBN blog, there may be less to Pemex’s planned export phase-out than meets the eye.