About two-thirds of all of the propane consumed in the U.S. is used as fuel — for indoor and outdoor cooking, home heating, water heaters, drying crops, and running forklifts and fleet vehicles. The other one-third is used as a feedstock for producing ethylene and other petchems. About 95% of the propane supply to meet this demand is produced and processed right here in the U.S. of A., making propane the most American fuel we’ve got. But when firing up the grill out back and watching that first propane molecule flash to life, most backyard chefs don’t think much about the long and winding road their propane has traveled. It’s actually a fascinating tale of supply-chain logistics that involves high pressures, bitter cold, wild rides up and down tall towers, storage deep underground, and, of course, trains, trucks, and tanks. We think it’s a tale that needs to be told, and that’s what we’ve been doing in this update of another Greatest Hit blog.
Just as U.S. LNG exports were beginning to recover from months of market-driven cargo cancellations, major Hurricane Laura has cut the rebound short. With Laura taking aim at the Texas-Louisiana border — the location of two large-scale LNG export terminals, including the U.S.’s largest export facility, Cheniere Energy’s Sabine Pass Liquefaction terminal — total feedgas flows to U.S. terminals the past two days dived to fresh lows for 2020 and the lowest since February 2019. Gas production is also way down, with offshore Gulf of Mexico production shut-ins compounding the effects of already depressed drilling and completion activity this year. But production has the potential to rebound more quickly than LNG exports, which could exacerbate the onshore demand effects of the storm; It already will bring cooler weather and drench gas demand for power generation as it moves inland over the Southeast and into the Mid-Atlantic states. Today, we look at how LNG exports are being affected by the storm and what that could mean for the overall gas market balance in the coming days.
Yet again, the Texas-Louisiana coast is bracing for a hurricane that has the potential to be really bad, not just for the people and homes in the storm’s path, but for the region’s all-important energy sector. Hurricane Laura will be crossing a swath of the Gulf of Mexico dotted with oil and gas production platforms, and is headed for an area chockablock with tank farms, refineries, and steam crackers, as well as export terminals of every stripe: crude oil, refined products, ethane, LPG, and LNG. There’s a good chance there’ll be a lot of disruption to many energy-related activities for at least the balance of this week — and maybe longer — but one of the biggest hits could come to Mont Belvieu, TX, the center of NGL storage and fractionation. Today, we discuss how the storm might affect not only storage at the U.S.’s largest NGL hub, but gas-processing activity hundreds of miles inland.
Not long ago, the economics for U.S. LNG exports were practically a no-brainer. Despite the longer voyage times and the resulting higher shipping costs from Gulf Coast and East Coast ports to Europe and Asia — by far the biggest LNG consuming regions — LNG priced at the U.S.’s Henry Hub gas benchmark presented a competitive alternative to other global LNG supply, much of which is indexed to oil prices, which were higher then. But earlier this year, as oil prices collapsed, COVID-19 lockdowns decimated worldwide gas demand, and international gas prices plummeted, the decision to lift U.S. cargoes has become much more nuanced, and the commercial agreements to support the development of new liquefaction capacity are much harder — if not impossible — to come by. Today, we discuss highlights from RBN’s latest Drill Down Report on the impact of recent market events on U.S. export demand, capacity utilization, and new project development.
The Dakota Access Pipeline isn’t the only interstate liquids pipe facing an uncertain future. The fate of Enbridge’s Line 5, which batches either light crude oil or a propane/butanes mix from Superior, WI, through Michigan and into Ontario, also hangs in the balance as the company renews its battle with Michigan’s top elected officials to keep the 67-year-old pipeline open and its effort win regulatory approval to replace the pipe’s most important water crossing. Line 5 supporters say that closing the 540-Mb/d pipeline would slash supplies to residential and commercial propane consumers in the Great Lakes State, steam crackers in Ontario, and refineries and gasoline blenders in three states and two Canadian provinces. Critics of Line 5 counter that there are plenty of supply alternatives. Today we discuss the pipeline, what it transports, and who it serves, as well as challenges it faces.
When you talk about energy molecules, propane takes the prize for the most versatile. In addition to its well-known uses for BBQ grills, indoor cooking, and home heating, propane is used for drying crops, as a feedstock for petrochemicals, as an engine fuel for forklifts and fleet vehicles, and in recent years, as an export product in its own right. Propane moves to market on pipelines, railcars, ships, barges, trucks — just about any form of transportation you can imagine. But exactly how any particular molecule of propane makes the journey from the instant it comes out of a well to all those market destinations can be a mystery to all but a small cadre of propane market insiders. In another in our series of updates to RBN’s greatest hit blogs, we are delving into this mystery, one step at a time, today focusing on transportation from the producing basin to storage and fractionation at the Mont Belvieu hub, and the transformation of the generic commodity to a marketable fuel.
Bakken associated gas production volume, after falling to its lowest levels in three years in early May and remaining depressed through June, has surged by 500 MMcf/d, or about 45%, in the past month and a half to 1.7 Bcf/d. However, the gains have occurred in the absence of a meaningful change in rig counts or well completion activity, which remains sluggish. Similar to the Permian, the Bakken production recovery has been almost entirely driven by existing wells returning to service after being shut in earlier this year in response to the oil price collapse. With little in the way of new drilling and completion activity, how long will it be before natural declines of existing wells begin to take a toll on Bakken output? Today, we examine prospects for continued strength in Bakken gas production volumes.
The oil price meltdown earlier this year and demand destruction wrought by COVID-19 forced Canadian crude oil producers to throttle back output. At the height of the cutbacks in May, almost 1 MMb/d of oil supply had been curtailed due to uneconomic prices and/or lack of downstream demand. With oil prices and demand having staged a partial recovery in the past few months, production is rising off the lows and producers are talking about even higher supplies in the months ahead, with the prospect of returning to pre-pandemic levels. Today, we begin a short series that reviews the recent production pullback and discusses how producers are positioning themselves for a resurgence of their oil supplies.
The U.S. power sector’s shift to natural gas over the past few years has been a boon to gas producers across the Lower 48, especially in the Northeast. Scores of new gas-fired power plants have been built there during the Shale Era, and a number of coal-fired, oil-fired, and nuclear plants have been taken offline. New England is a case in point; gas-fired power now accounts for about half of the installed generating capacity in the six-state region (Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, and Maine) — three times what it was 20 years ago. But New Englanders have a love-hate relationship with natural gas, and with renewables and energy storage on the rise, gas’s role in the land of the Red Sox, hard-to-understand accents, and lobsta’ rolls may well have peaked. Today, we discuss recent developments on the natural gas and power generation fronts in the northeastern corner of the U.S.
The global LNG market upheaval has wreaked havoc on U.S. LNG export demand this summer, which, in turn, has complicated operations at domestic export facilities. Gone are the days when U.S. LNG exports would move predictably, increasing with each new liquefaction train coming online and then mostly staying at or near capacity. Rather, as international LNG prices collapsed, U.S. LNG operators for the first time have had to contend with a relentless stream of cancelled cargoes and low facility utilization rates. More recently, cargo cancellations are showing signs of easing somewhat, as international price spreads are improving for fall and winter. But these recent market disruptions provide a window into the ways in which operational constraints and flexibilities will factor into LNG producers’ and offtakers’ decisions — and affect feedgas flows and capacity utilization — in a weak global market. Today, we consider some of the nuances of liquefaction operations.
When firing up the backyard propane grill and watching that first propane molecule flash to life, most people don’t think much about what it took to get that fuel to the cylinder they picked up at the store. But that long and winding road from the production well to the tank beneath your grill is actually a fascinating tale of supply-chain logistics involving producers, midstreamers, and propane retailers. In today’s blog, we will take that interesting and sometimes mysterious trip with a molecule of propane. We will travel over 1,000 miles, moving in and out of various facilities, purifying our product and incurring various costs each step of the way. So strap on your seat belt for a selection from our greatest blog hits, in which we track a typical propane molecule’s journey from beginning to end.
For U.S. refineries, the severe demand destruction that occurred this spring led to the worst financial performance in recent history. Not only did refiners produce less diesel, motor gasoline, and jet fuel in the second quarter than any quarter in recent memory, their refining margins were sharply lower than the historical range — a one-two punch that hit their bottom lines hard. The situation has improved somewhat this summer, but it’s still tough out there. So tough, in fact, that it’s reasonable to ask, does the coronavirus and its impacts to the energy sector signal the end of an era for refiners across the U.S.? Today, we review the decline in fuel demand and profitability in the second quarter and discuss the uncertainties refiners face in the second half of 2020 and beyond.
Canada’s propane market has quickly morphed from one characterized by abundant supply to one facing a tightening supply/demand balance, with direct exports to Asia playing an increasingly important role. This tension became evident in May 2019, when the start-up of the Ridley Island Propane Export Terminal (RIPET) in British Columbia, Canada’s first direct export connection for propane to Asian markets, effectively eliminated the usual seasonal surplus for propane in Western Canada. With rail exports of propane to the U.S. often reliant on that excess for restocking in the summer months and as a reliable fallback supply in the cold winter months, the prospect of fewer or no periods of excess supply may be signalling trouble for some U.S. regions that have come to rely on those volumes. What’s more, within a few months, another propane export terminal in BC will be starting up, further reducing what’s left for the U.S. market. In today’s blog, we conclude our series examining the Western Canadian propane market by considering the impacts of Canada-to-Asia propane sales on U.S. propane consumers and propane prices.
In their second-quarter earnings presentation last week, Energy Transfer said that they and their joint venture (JV) partners, Satellite Petrochemical, expect the first commissioning cargoes from their new 180-Mb/d ethane export facility in Nederland, TX — formally known as Orbit Gulf Coast NGL Exports LLC — to begin in November, only three months from now. This new outlet for U.S.-sourced ethane comes at a time when production of oil, gas, and NGLs faces near-term declines due to reduced drilling activity resulting from low crude prices. With those declines, will there be enough ethane supply to meet the capacity of the new Orbit export dock and other upcoming ethane-related projects? The short answer is, yes … for the right price. Today, we examine the latest supply and demand dynamics shaping the U.S. ethane market.
It’s only August, but the folks involved in Permian markets must feel like they’ve already packed in a full year’s worth of action. The events are well known by now, but they’re still remarkable. A crash in refining utilization, followed by massive field shut-ins, all precipitated by a novel virus and exacerbated by some unusual moves by global oil producers. The year’s not over, and the coronavirus hasn’t gone away like a miracle, but a calm has emerged in oil prices that has helped producers get their sea legs. While $40/bbl West Texas Intermediate (WTI) is a far cry from where we started 2020, it’s been just enough to get most of the shut-in crude production back online in West Texas. Today, we provide an update on the status of curtailments in the Permian Basin.