Daily Energy Blog

Category:
Crude Oil

Two maritime passages long regarded as essential shortcuts in the complex world of commodity shipping have become a lot more challenging to navigate. Transiting the Red Sea has turned potentially deadly because of geopolitical tensions, while severe drought has critically reduced operations at the Panama Canal. Combined, these issues are being felt across the energy industry, impacting U.S. and foreign producers and shippers, redrawing trade flows, extending voyage times and, ultimately, raising transportation costs. In today’s RBN blog, we’ll examine and quantify the extra time and costs that shippers of U.S. crude and refined products must bear when using alternative routes. 

Category:
Renewables

When the Inflation Reduction Act (IRA) was passed into law in August 2022, it earned near-unanimous acclaim from longtime supporters of renewable energy and decarbonization efforts. Industry types also approved of the bill’s focus on incentives to fuel new developments. One of its most ambitious elements was creation of the 45V production tax credit (PTC) for clean hydrogen, a central part of the Biden administration’s efforts to build a clean-energy economy. But while the PTC may have a significant impact on the U.S. energy landscape over the long run, the December 2023 rollout of the proposed rulemaking has generated no small amount of criticism. In today’s RBN blog, we’ll lay out some of the changes that some say should be included in the final rulemaking to help the clean-hydrogen economy make a quick break from the starting gate instead of getting left at the back of the pack. 

Category:
Natural Gas

The Energy Information Administration (EIA) recently changed the weather forecast methodology for one of its most important energy models — the Short-Term Energy Outlook (STEO) — and while we talk about the effects of weather on energy markets fairly often (571 times in the past 12 years, or about once a week, but who’s counting?), we rarely take a step back and explain how those weather forecasts are used. In today’s RBN blog, we look at different approaches to weather forecasting, the recent change made by the EIA, and how the new approach might affect our understanding of EIA forecasts.

Category:
Financial

The drivers behind most upstream M&A the past couple of years have been consistent — namely, to gain scale (mostly in the Permian) and the economies that come with it, boost free cash flow (and share more with shareholders), and replenish reserves to keep the good times rollin' into the 2030s. There are hints of all that in California Resources’ recently announced $2.1 billion agreement to acquire Aera Energy, creating what would be California’s largest crude oil producer. But in other ways the deal is as different as, well, California and Texas themselves. In today’s RBN blog, we examine the planned acquisition, what it reveals about the companies, and the pros and cons of operating in the nation’s most populous, least-friendly-to-hydrocarbons state. 

Category:
Natural Gas

Faced with sustained sub-$2/MMBtu natural gas prices and dim prospects for significant gas-demand growth until sometime next year, a number of major gas-focused E&Ps have been tapping the brakes on production and trimming their planned 2024 capex. But one company — Chesapeake Energy, slated to become the U.S.’s largest gas producer thanks to a recently announced acquisition — has taken a more dramatic step, implementing a novel strategy that will slash production by 25% but leave the E&P ready to quickly ramp up its output as soon as demand and prices warrant. In today’s RBN blog, we’ll review the 2024 guidance of the major U.S. gas producers and delve into the analysis of Chesapeake’s unusual approach. 

Category:
Natural Gas

It’s been a devastating few weeks for the natural gas market. Sure, Shale Era abundance was supposed to keep gas prices from skyrocketing — and it generally has. But seriously? Henry Hub gas sinking below $2/MMBtu — and staying there, in the depths of the winter heating season? Prices have stabilized a little in recent days as a few E&Ps announced cutbacks in capex and gas-focused drilling, but gas-storage levels are abnormally high, coal-plant retirements have trimmed opportunities for coal-to-gas switching, and any significant gains in LNG exports aren’t going to happen until this time next year. With all that, you’ve gotta ask — as we do in today’s RBN blog — how low could natural gas prices go? 

Category:
Natural Gas

Natural gas prices remain at near-record lows, but with so much production being driven by still-favorable crude oil economics there’s a distinct possibility — especially given the warm winter we’re in — that gas inventories may test storage capacity this year, perhaps as early as Labor Day. Of course, there are many market factors that might prevent this outcome, including lower production, a scorching-hot summer, and gas-to-coal fuel switching. But it could happen. And whenever we approach the limitations of natural gas infrastructure, we’ve seen time and again the disruptions and dislocations the market must deal with. The most obvious market signals are prices. But when it comes to gas flows another important barometer is the use of operational flow orders (OFOs). In today’s blog, we update one of RBN’s Greatest Hits and take a deep dive into the world of OFOs and what they can reveal about the state of the gas market. 

Category:
Natural Gas

Observers of the natural gas market over the past 20 years know that the main story has been one of enormous growth. The Shale Revolution gave new life to the U.S. natural gas sector, leading to the record production levels we are seeing in early 2024. The economy has found many uses for this new gas: increased power generation, more pipeline exports to Mexico, expanded industrial gas usage and — most prominently — the many LNG export facilities that have cropped up since 2016. But with the pause on new LNG export licenses and the push to renewables in the power sector, there’s a looming question of where the new natural gas would go if production continues to expand. In today’s RBN blog, we look at how that new gas might be absorbed, both domestically and internationally, and what continued growth would imply for gas prices and producers in the long term. 

Category:
Petrochemicals

It’s been nine years since Formosa Petrochemical filed its first permit applications for a proposed $9.4 billion petrochemical complex in Louisiana and, while the greenfield project has faced legal setbacks, it recently posted an important win and may — emphasis on may — eventually make it across the finish line. The Sunshine Project would be massive and consequential, with two steam crackers each capable of consuming 75 Mb/d of ethane, a big propane dehydrogenation (PDH) unit and a number of other petchem production facilities that together would employ more than 1,200. In today’s RBN blog, we’ll look at the project and its long and winding road toward potential construction and startup. 

Category:
Crude Oil

The Raceland crude oil hub is far from Louisiana’s largest but might be positioned to earn a little more of the spotlight after Sentinel Midstream and ExxonMobil Pipeline formed a joint venture in December to enhance business for a few crude oil pipelines connecting Louisiana hubs, including Raceland. In today’s RBN blog, we examine the infrastructure and connectivity that makes up the Raceland hub southwest of New Orleans, see how it stacks up against some of its larger cousins in the state — namely, Clovelly and St. James — and discuss why activity at the hub could be poised to pick up steam. 

Category:
Natural Gas Liquids

Way back in 2018-19, U.S. NGL production was rising fast, new ethane-only steam crackers were coming online along the Gulf Coast, and new fractionation capacity wasn’t being added quickly enough — the capacity shortfall sent the NGL market into near-panic. Fast forward to now: NGL production is still rising but domestic demand is flat, resulting in an NGL-exports surge and a race to develop new export capacity. And fractionation capacity in Mont Belvieu and elsewhere? The market learned its lesson five years ago and, to avert another capacity crunch, midstream companies have been adding new fractionators at an almost frenetic pace. In today’s RBN blog, we discuss the ongoing fractionation-capacity buildout — and the need to quickly expand NGL export terminals. 

Category:
Renewables

The federal government’s Hydrogen Production Tax Credit (PTC), also known as 45V, provides the highest incentives for hydrogen produced using clean sources of power generation, like wind and solar. That might seem like great news for current and potential hydrogen producers looking to take advantage of the credit, since the U.S. has added significant renewable generation capacity in the last several years, but the reality is much different. In today’s RBN blog, we’ll explain how “additionality” fits into the “three pillars” of clean hydrogen, how it would be calculated under the proposed guidance, and some ways the rules might be adjusted to give hydrogen producers and power generators a little more flexibility. 

Category:
Energy

Everyone in Texas remembers the infamous Winter Storm Uri of three years ago. What started out as a simple cold snap for many quickly turned into something far more serious: the biggest power outage in state history, with billions of dollars in property damage and hundreds of lives lost. Since then, the expected arrival of frigid temperatures has been met with some trepidation, but the critical failures of February 2021 have so far been avoided in subsequent storms. In today’s RBN blog, we look at the steps the state has taken in recent years to weatherize its power grid, show why January’s cold snap turned out to be no big deal, and explain why renewables are playing an increasingly important role in grid reliability during extreme weather conditions. 

Category:
Natural Gas

As mightily as U.S. LNG exports have impacted global trade dynamics, so have U.S. natural gas flows been reshaped by the pull toward Gulf Coast export terminals. The next new terminal on deck is Venture Global’s enormous Plaquemines facility in Louisiana, which could begin taking feedgas as early as late fall 2024 and will eventually ramp up to more than 2.6 Bcf/d. For Southeast Louisiana, home to a massive industrial corridor along the Mississippi River as well as the U.S. natural gas benchmark Henry Hub, the introduction of such a huge source of demand will change how gas flows into and out of the region — with knock-on effects across the Gulf Coast. In today’s RBN blog, we’ll turn once again to our Arrow Model to help illuminate what the path forward may look like. 

Category:
Refined Fuels

Around the world, a lot of smart people in the public and private sectors hold similar views on where we’re all headed, energy-wise. An accelerating shift to renewables and electric vehicles, driven by climate concerns. A not-so-far-away peak in global demand for refined products like gasoline and diesel. There are also what you might call consensus opinions on some energy-industry nuances, like how much global refining capacity will be operational in 2025 and what the spread between light and heavy crude oil will be in the years ahead. In today’s RBN blog, we discuss highlights from the new Future of Fuels report by RBN’s Refined Fuels Analytics (RFA) practice, including RFA’s different take on a few matters large and small — and all of critical concern to producers, refiners and marketers alike.