For more than six months now, the provincial government of energy-rich Alberta has been trying to mitigate the sometimes painful effects of having too little pipeline capacity to move crude oil to market. They’ve mandated production cuts by larger producers, contracted for crude-by-rail (CBR) services — then moved to undo those deals — and pressed the Canadian government to help advance long-delayed pipeline projects. Things appear to have reached a semi-happy medium for now: the price spread between Western Canadian Select (WCS) and West Texas Intermediate (WTI) has narrowed, but remains wide enough to justify sending crude out by train. Still, it’s clear that the big tranches of new pipeline capacity many had hoped would be built or at least under construction by now face more hurdles. How long will Alberta producers need to wait for unfettered pipeline access to the U.S. Midwest and Gulf Coast and to Canada’s West Coast? Today, we provide an update on WCS pricing, Alberta crude-by-rail, and the key pipeline projects that never seem to get finished.
A key to success for midstream companies developing crude oil gathering systems in the Permian is establishing strong, trusting relationships with the producers driving the region’s growth. Hitch your wagon to one or more producers with top-notch rock and aggressive expansion plans, develop gathering systems that meet their needs for flow assurance and destination optionality, and life will be good. Many of the midstreamers whose Permian gathering systems we’ve been discussing in our ongoing series have done just that. Today, we review the existing and planned systems of EnLink Midstream, another company whose growth is founded in large part on the relationships it has developed with major Permian producers.
The Northeast gas market has come a long way since 2013, when it first began net exporting gas supply to the rest of the U.S. The past several years were marked by dozens of pipeline expansions to relieve takeaway constraints and to balance oversupply conditions in the region; as a result, takeaway capacity is finally outpacing production growth. How much spare capacity is there now, and how long will it be before production growth hits the capacity wall again? Today, we continue our series on Northeast gas takeaway capacity vs. production, this time examining the utilization of pipes in the Northeast-to-Gulf Coast corridor.
Permian midstream development activity has been happening at a rapid pace over the past few years, and we’ve featured many of those projects in the RBN blogosphere. One of the most aggressive players has been Salt Creek Midstream, which is in the midst of a big Permian buildout focusing on natural gas, crude oil, natural gas liquids and even produced water. Salt Creek isn’t only developing local midstream infrastructure; it’s also at work on long-haul solutions that will enable Permian producers to access markets along the Texas Gulf Coast — a wellhead-to-water strategy, you might call it. Helping Permian producers meet their needs to take away all three hydrocarbons plus produced water with integrated transport and pricing options is the key to Salt Creek’s effort. Today, we dive into the details of the company’s expansive Permian infrastructure development plan.
Permian gas marketers were likely breathing a sigh of relief earlier this month when news came that the developers behind the Whistler Pipeline had made a final investment decision (FID) to proceed with the new 2.0-Bcf/d link between the Permian and South Texas. The project provides a crucial link in the gas takeaway picture for the Permian and makes it less likely that gas pipeline capacity constraints in the future will result in the negative prices that are plaguing the present-day gas markets in West Texas. Combined with the two other Permian greenfield gas pipelines that have taken FID — Kinder Morgan’s Gulf Coast Express (GCX) and Permian Highway Pipeline (PHP) — there is now ~6 Bcf/d of incremental Permian supply pointed at the Texas Gulf Coast over the next two years. That’s great news for Permian producers, as well as demand centers along the coast, where tremendous growth in LNG exports is under way. Today, we detail the third natural gas pipeline being built from the Permian to the Texas Gulf Coast.
Crude oil exports out of the U.S. are the topic du jour these days. At the heart of the discussion are the who, what, where and when of how the export capacity will be developed. Who is going to build the next crude oil export terminal, what type will it be (offshore or onshore), where are they going to put it (Corpus, Houston, Louisiana — the list goes on), and when will that new capacity be available? Everyone seems to have a different answer, and for good reason. Crude oil export terminals aren’t easy to develop, any way you look at them. Today, we examine the financial and logistical hurdles that export terminals must clear in order to reach a final investment decision, and what those obstacles mean for what kind of terminal gets built, where it gets built, who builds it and how soon.
Most crude oil gathering systems in the Permian — and elsewhere — have a relatively simple aim: to reliably and efficiently deliver crude from the lease to larger pipelines downstream that provide their shippers a high degree of destination optionality — end of story. A select few systems, though, have evolved into key elements of their owners’ larger value chain. With these, crude flows through gathering systems and takeaway pipes to export terminals — maybe even refineries — all held by the same company or its affiliates. By integrating assets from the site of crude production to the refinery or export dock, such owners add value each step of the way. Today, we continue our series with a look at Marathon Petroleum/Andeavor Logistics’ Permian crude gathering system, which started out relatively small and isolated but has evolved into something much bigger and better connected.
This much seems clear: natural gas demand along Texas’s Gulf Coast will be rising sharply, as will gas supply from the Permian and other inland plays to the coast. The catch is that, like clumsy dance partners, the increases in demand — mostly from new liquefaction/LNG export terminals and Mexico-bound gas pipelines — and the incremental supply to the coast via new, large-diameter pipes from the Permian are likely to be out of sync. That shifting imbalance, in turn, may well cause volatility in Houston Ship Channel gas prices as they relate to Henry Hub. In fact, we’re already seeing signs of what’s to come. Today, we continue our look at upcoming gas infrastructure expansions and their potential impact on the greater Texas Gulf Coast gas supply-demand balance.
A few months back, we discussed the quandary that crude oil shippers face when deciding whether to commit to proposed new pipeline capacity out of the Bakken and the Niobrara, and from the Cushing, OK, hub to the Gulf Coast. The dilemma boils down to this: more capacity is needed, based on current constraints or projected growth (or both), but there’s some reluctance among shippers to make long-term commitments. Their worries are that production gains might slow and too much takeaway capacity might be built, resulting in bidding wars for barrels at the lease to fill shipper commitments. Well, in recent weeks there’s been a bit of a break in the project logjam; among other things, P66 and its partners have decided to proceed with the construction of both the Liberty Pipeline, from the Bakken and Niobrara to Cushing, and the Red Oak Pipeline, from Cushing to Houston and Corpus Christi via Wichita Falls, TX. And that’s not all. Today, we provide an update on efforts to develop new pipeline capacity from North Dakota and the Rockies to Oklahoma and beyond.
Natural gas pipeline takeaway capacity additions out of the Northeast over the past year or two, along with suppressed gas production growth in recent months, have relieved years-long and severe constraints for moving Marcellus/Utica gas out of the region and even left some takeaway pipelines less than full. That, in turn, has supported Appalachian supply prices. Basis at the Dominion South hub in the first five months of 2019 averaged just $0.26/MMBtu below Henry Hub, compared with $0.46 below in the same period last year and nearly $1.00 below back in 2015, when constraints were the norm. Today, we continue our series providing an update on pipeline utilization out of the region, and how much spare capacity is left before constraints reemerge.
For some time, U.S. motor fuel exports to Mexico had been increasing at a healthy pace, reliably filling the void created by a series of production setbacks at Pemex’s refineries south of the border. From 2014 to 2018, U.S. gasoline exports to Mexico soared by more than 160%, from an average of 197 Mb/d five years ago to 517 Mb/d last year. Diesel exports rose by nearly 130%, to 279 Mb/d, over the same period. But that export-growth momentum has since sagged — in fact, export volumes for both gasoline and diesel actually declined in the first few months of 2019, primarily due to logistical challenges within Mexico. Also, Mexico’s new president has proposed ambitious plans to boost state-owned Pemex’s refining capacity, possibly posing a longer-term threat to U.S. exporters. So, is the boom in refined-product exports to Mexico over? Today, we examine what’s behind the downshift, and what the Mexican government’s effort to reinvigorate Pemex’s existing refineries — and build an entirely new one — may mean for U.S. gasoline and diesel exports in the 2020s.
When it comes to Texas natural gas markets, the Permian has been getting much of the attention lately, with its rapid supply growth, limited pipeline takeaway capacity and sometimes negative prices. However, a wave of gas infrastructure development just starting to come online along the Texas Gulf Coast is set to steal some of the Permian’s spotlight over the next few months. Two large liquefaction/LNG export facilities are ramping up on the coast, as are the pipeline reversal projects designed to supply them. Also, three announced Permian-to-Gulf-Coast gas pipelines slated for completion over the next 24 months will move supply cross-state to destinations spanning the area from the Houston Ship Channel to the Agua Dulce Hub near Corpus Christi. That’s a lot of change ahead for these key Texas gas markets. Today, we turn our attention downstream of the Permian to the Houston Ship Channel market, including upcoming gas infrastructure expansions and their potential impact on the greater Texas Gulf Coast gas supply and demand balance.
For evidence of America’s unwavering entrepreneurial spirit, look no further than smaller midstream companies that develop crude oil gathering systems in the Permian. These midstreamers — many of them backed by private equity — scramble to identify production areas on the cusp of needing gathering lines, propose systems to serve them, convince producers to dedicate acreage, then lay pipe, install tankage and get things up and running. All of this occurs in an atmosphere of intense competition. A number of new and growing crude gathering systems are under development today in southeastern New Mexico, an area that has experienced more than its share of production growth in the past couple of years. Today, we continue our series with a look at 3 Bear Energy’s Hat Mesa Oil Gathering System in the northern Delaware Basin, which was developed from scratch in Lea County and now serves 10 producers there.
Three months ago, the Pacific Northwest natural gas market recorded the highest trade in U.S. spot gas price history. The region at the time was dealing with extreme winter heating demand, a pipeline outage that limited access to gas supply and storage deliverability issues –– all of which were compounding constraints in the power markets. The result was a feeding frenzy that led gas prices to skyrocket to as much as $200/MMBtu at the Sumas, WA, hub on March 1. Fast forward to today — prices there have crumbled, falling to as low as $0.80/MMBtu in trading last week. Winter demand has dissipated, pipeline and storage constraints have eased, and the region is now dealing with an entirely different — even opposite — set of problems. Today, we take a closer look at the factors behind these latest price moves.
Keyera Corp. and SemCAMS Midstream, two major midstream players in Western Canada, in mid-May announced they are proceeding with the construction of their joint-venture project — a new NGL and condensate pipeline system out of the liquids-rich Montney and Duvernay plays of Alberta. The planned Key Access Pipeline System would provide the first direct competition for the transportation of NGLs and condensate out of these producing regions, currently dominated by Pembina Pipeline Co. Any and all transportation options for the movement of condensate and other NGLs out of the Montney and surrounding plays will likely be welcomed by Western Canadian natural gas producers, who are looking to capitalize on oil-sands producers’ growing demand for homegrown sources of condensate for use as diluent in bitumen transportation. Today, we provide key details about the project and how it fits into the region’s existing condensate/NGLs market.