Over the past nine months, the frac spread —a rough-cut measure of the value of extracting NGLs from raw gas at gas processing plants — has taken a terrifying plunge, from $9.82/MMBtu in early March to only $2.16/MMBtu on Monday. Given that the frac spread is the differential between the price of natural gas and the weighted average price of a typical barrel of NGLs on a dollars-per-MMBtu basis, a 78% nosedive like that suggests that something is seriously out of whack, and that at least some market players are taking a real hit financially. In today’s RBN blog, we discuss the frac spread, the drivers behind its recent freefall, and what it would take for gas processing margins to rebound.
It's been almost a year since the co-owners of the massive Capline crude oil pipeline initiated southbound service between Patoka, IL, and St. James, LA, on what for a half-century had been a northbound conduit. How’s it working out? So far, so good, it seems. As expected, for the first several months the volumes of heavy Canadian crude oil flowing down the 632-mile, 40-inch-diameter pipeline to the St. James hub were modest. Since June, however, Capline has been offering a temporary incentive rate to attract more heavy oil, and starting December 1 it’s also been offering a temporary buck-a-barrel rate for light oil too. In today’s RBN blog, we discuss the latest Capline developments, the challenges associated with batching heavy and light crude on such a big pipe, and the prospects for much higher flows.
Alkylate is an important and valuable part of the U.S. gasoline pool, prized for its high octane, low volatility and low sulfur content. There are two primary catalysts that refiners can opt to use in the production of alkylate: hydrofluoric acid, or HF, and sulfuric acid, or H2SO4. Each is quite popular, with HF and sulfuric acid technologies each representing about half of domestic alkylation capacity — and with those shares varying significantly on a regional basis. While refiners have been safely operating both types of “alky” units for many decades, HF alkylation for some time has been in the crosshairs of the Environmental Protection Agency, which recently proposed that refiners be required to undertake extensive evaluations of potentially safer alternative technologies. It’s hard to know for sure, but if EPA’s proposed rule is made final it could ultimately force many refineries to make very costly changes — into the hundreds of million dollars per unit — or maybe even shut down entirely. In today’s RBN blog, we look at alkylate, how it’s made, and the potentially profound effects of the impending regulation.
The debate around the transition to electric vehicles (EVs) has often centered on the burden the shift will put on the power grid, both in terms of overall load and particularly peak load. Those concerns amplify risks to grid stability and sufficiency, the ability to meet summertime spikes in power demand, and the need to accommodate a growing share of power generation from renewable sources such as wind and solar. Now, the introduction of bidirectional charging and vehicle-to-grid (V2G) technology — both of which are just beginning to enter the conversation around EVs — is likely to make the discourse even more complicated and interesting. In today’s RBN blog, we explain the basics of V2G tech, some ways in which it could one day add strength and reliability to the power grid, and some barriers to wider adoption.
The Renewable Identification Number, or RIN, market is so misunderstood that even its main participants don’t agree on its financial impact, effectiveness, or even basic fairness. RINs are a feature of the federal Renewable Fuel Standard (RFS), which requires renewable fuels like ethanol and bio-based diesel to be blended into fuels sold in the U.S. And depending on your point of view — trader, farmer, refiner, blender, consumer, politician — you may have a very different perspective about how the system works. In today’s RBN blog, we discuss highlights from our new Drill Down Report that attempts to make sense of the complexities of the RINs market.
The Department of Energy’s (DOE’s) $8 billion program to accelerate the development of regional hydrogen hubs is shifting into a higher gear. DOE in early November received an unspecified number of “concept papers” on prospective hubs and is now reviewing their merits, with plans to provide applicants with initial feedback within the next few days. By April 2023 — when full proposals are due — there’s a good chance that, based on DOE’s input, a least a few individual projects will be combined into a smaller set of stronger proposals. A case in point may be two competing but seemingly complementary hydrogen-hub plans in the Pacific Northwest. In today’s RBN blog, we discuss those proposals and the prospects for a clean-hydrogen build-out in the region.
The first wave of Gulf Coast liquefaction and LNG export facilities was well-timed, coming as it did with fast-rising natural gas supplies in the Lower 48 and a slew of pipeline reversals and expansions that enabled billions of cubic feet a day of low-cost Marcellus-Utica gas supplies to reach Gulf Coast markets. Permian and Haynesville supplies helped too. The next wave of LNG development, which will kick off in earnest in 2024, may not go quite as smoothly, however. Global demand for LNG is there — there’s little doubt about that. But the next phase of export capacity growth may well be hemmed in by domestic factors, namely the timing and availability of gas supplies to the Gulf Coast due to potentially serious midstream constraints. In today’s RBN blog, we look at where the feedgas supply is likely to come from and what that will mean for pricing dynamics.
Despite many challenges, natural gas production in Western Canada has been hitting record highs this year, powered by what seems to be the inexhaustible energy of the unconventional Montney formation. This immense resource remains the primary focus of most Canadian gas producers, and those that operate in the British Columbia portion of the Montney know they have their work cut out for them in the next few years if they are to meet the growing need for gas, especially when the LNG Canada export terminal comes online mid-decade. In today’s RBN blog, we update the Montney’s production and productivity trends in British Columbia and evaluate whether enough progress is being made.
The U.S. market for distillates has been crazy the past few months — especially in PADD 1 — and given all that’s going on, it’s likely to stay that way for months to come. Inventories of ultra-low-sulfur diesel, heating oil and other distillates are at their lowest levels for this time of year since before the EIA started tracking them 40 years ago and diesel prices are in the stratosphere, all despite diesel crack spreads being in record-high territory — a strong incentive for refineries to churn out more distillate. In the encore edition of today’s RBN blog, we discuss the many factors affecting distillate supply, demand, inventories and prices and take a look ahead at where the market may be headed next.
Bragging rights are a big deal in Texas, and we’re not just talking pride about the Astros’ annual rampage through baseball’s post-season. Getting to the top is also a source of immense pride for oil and gas midstreamers, and right now Targa Resources claims the bragging rights as the largest gatherer and processor of associated natural gas in the Permian Basin. Targa’s bold decision to build an integrated gas and NGL business, its timely infrastructure expansions through and after the pandemic, and a recent, accretive acquisition have resulted in a massive footprint where a stunning 25% of forecast Permian gas production growth is expected to take place. But strong competitors such as Enterprise Product Partners, DCP Midstream and Energy Transfer are nipping at Targa’s heels. In today’s RBN blog, we discuss highlights from our Spotlight Report on the company.
For several months there’s been a scramble on to consolidate the U.S. landfill gas collection systems, dairy- and hog-farm digesters, and other assets that produce renewable natural gas (RNG) — a drop-in replacement for conventional natural gas that can qualify for federal and state financial incentives. But what really caught everyone’s attention was BP’s announcement a few weeks ago that it would acquire Archaea Energy, a Houston-based company with more than a dozen RNG projects in operation and many more under development, in a deal valued at $4.1 billion. That’s big bucks in the biogas space. In today’s RBN blog, we discuss the BP/Archaea deal and other recent acquisitions of RNG assets, as well as what’s driving the surging interest in RNG.
The need for more LNG export capacity, driven both by Europe’s push to wean itself off Russian gas and long-term Asian demand growth, is resulting in a new wave of development. Two major U.S. projects have reached a positive final investment decision (FID) in the past six months and more are likely to do so soon, both in the U.S. and elsewhere. But conventional export terminals take time to build, leading at least some, like New Fortress Energy, to explore the potential for floating LNG (FLNG) facilities — basically, an LNG export terminal located on the topside of a large tanker — which can bring new capacity online faster, much like the floating storage and regasification units (FSRUs) that are now boosting European import capacity. In today’s RBN blog, we take a look at FLNGs, what’s already out there, and what could be coming to North America in the next few years.
Shell’s new, multibillion-dollar steam cracker in Monaca, PA — the first of its kind in the Marcellus/Utica shale play — is finally up and running and breathing new life into a small town on the Ohio River. When it’s running flat-out, the cracker will churn out up to 9 million pounds of ethylene a day to supply three adjoining polyethylene units. Shell Polymers Monaca, as the petrochemicals complex is formally known, is a world-scale giant, consuming about 95 Mb/d of ethane, which raises this question: How is the start-up of the region’s only large ethane consumer affecting the broader market? In today’s RBN blog, we provide the answer.
While we’ve seen up-and-down spikes in stock market indices, cryptocurrency values and the prices of crude oil and motor fuel in recent years, the price of one important commodity has been quietly but relentlessly rocketing higher — octane, the primary yardstick of gasoline quality and price. The steady rise in octane prices is tied in part to the fundamental change in how octane is valued, with the retail market now being impacted more by demand than production costs. In today’s RBN blog, we look at why octane prices have climbed over the past decade and what market factors are limiting its supply.
The energy landscape in Texas has undergone significant changes in the two years since the calamitous events of Winter Storm Uri in February 2021. The extreme weather wreaked havoc on the state’s electric generation and natural gas systems, and subsequent investigations resulted in two reform bills — Senate Bill 2 and Senate Bill 3 — aimed at installing new leadership at the Electric Reliability Council of Texas (ERCOT), the electric grid operator, and requiring state regulators to develop rules and standards to address the points of failure in electricity and natural gas infrastructure and operations. Since the bills were signed into law in June 2021, oil-and-gas, electric-grid and utility monitors have adopted a number of requirements, some more prescriptive than others. In today’s RBN blog, we highlight what has changed and where there are still potential gaps.