If you work for a producer or oil field services company, you might have a bit of an issue with that title. But just for a moment, put your worries aside and consider the silver lining – huge improvements in our industry’s productivity over the last few years. Things are getting better and better. In fact that is part of the problem. Producers have just become too productive for their own good. We’ve seen the consequences of this kind of productivity improvement before, not in the energy industry, but in electronics. Moore’s law, remember? In today’s posting we’ll look at some of the evidence of huge productivity improvements, what it has meant for production volumes, and the implications for U.S. producers now facing many of the same issues that electronics companies have dealt with for decades.
Daily Energy Blog
Many in the Northeast are digging out from what turned out to be a typical snowstorm – not a “Superstorm”. Thanks to worse crises in the past, however, a federal Northeast Home Heating Oil Reserve was set up in 2000 and--thanks to Superstorm Sandy--federal and New York gasoline strategic reserves were put in place much more recently. The winter propane crisis of 2013-14 also sparked talk of a possible strategic reserve for propane. The theory behind establishing these stockpiles is that in markets that depend heavily on steady, reliable flow of energy products it’s important to have a cushion, a squirreled-away supply to avoid the price spikes and near-panic that can follow the words, “Sorry folks, we’re all out.” Today we examine what’s been done, how it’s worked, and what might be next.
One positive element to the oil price crash is that consumers are paying less at the pump for their gasoline. Of course it is natural that prices at the pump don’t fall as fast as they do in spot or futures markets – there is a lag – usually measured in days. However, while average retail gas prices have fallen over $1/Gal in the past year – more or less in line with spot and futures markets, it seems that changes to diesel prices at the pump have lagged further behind refinery prices. The result is that retail buyers filling their diesel truck at the pump have benefited far less from the oil price windfall than gasoline powered vehicle owners – at least so far. Today we review the data.
Welcome to 2015! No, the last few months of 2014 were not a dream – or nightmare, depending on your perspective. Crude oil prices really did come crashing to earth, sucking down NGL prices in the process. And natural gas prices followed, falling to $3/MMbtu last week. Price relationships are out the window, as are drilling budgets. Over the next few months, these markets will be going through some of the most dynamic changes in years, with unpredictable consequences. Unpredictable? Nah. No mere market turmoil will dissuade RBN from sticking our collective necks out a third year in a row to peer once more into the crystal ball. Today we wrap up RBNs Top Ten Energy Prognostications for 2015 – Year of the Goat – #5 to #1.
Time to sober up. Not from excessive New Year’s Eve reveling, but instead from the past five years of euphoria in the shale oil and gas markets. In the past two months crude oil prices have come crashing to earth, sucking down NGL prices in the process. And lately even natural gas has succumbed to the malaise, falling below $3/MMbtu this week. Price relationships are out the window, as are drilling budgets. Over the next few months, these markets will be going through some of the most dynamic changes in years, with unpredictable consequences. Unpredictable? Nah. No mere market turmoil can dissuade RBN from sticking out our collective necks to peer into the crystal ball for a third year in a row for 2015 – Year of the Goat. Really. We did not make that up.
In time honored RBN blogging tradition – we’ve been at this blogging business three years –we look back today at the 250 blogs posted this year to see which ones had the highest hit rates. The number of hits any blog gets tells you a lot about what is going on in the energy markets – which topics resonate with our members, and which don’t attract much attention. Last year the big hitter blogs came in about 17,000 hits. This year the big numbers are closer to 50,000. With that many folks paying attention these days it is even more important that we take a page out of the late Casey Kasem’s playbook to look at the top blogs of 2014 based on numbers of website hits.
RBN’s School of Energy is headed north – all the way to Calgary. We have reworked, restructured and reorganized the curriculum to make the conference better than ever. And we guarantee it will be way cooler than our Houston Schools. We call it a Remix, because we have added new models, replaced some old models and enhanced them all. But even more important, we have increased the number of model labs from one to FOUR!! Each lab will step you through the model logic, how to input the data and how to interpret the results. You will work through cases that will test your knowledge on how the models work. And of course, all the course content has been updated to reflect the big changes in markets and pricing over the past few months. Warning, today’s blog is a blatant commercial for our Calgary conference.
RBN has been in the blogging business for almost three years, and ever since we started these postings one of the most frequent complaints we’ve heard is that “It doesn’t work on my iPhone”. Finally we are fixing that, and many more things too. But as with anything new delivered by internet, there are some things you need to know. So today is a blog about blogs, to make sure all of our members know what we are changing and how to take maximum advantage of our new website’s capabilities.
Between 2015 and 2018 five new U.S. propane dehydrogenation (PDH) plants are expected online – producing over 9 billion pounds a year of propylene. Williams are building another new PDH plant in western Canada. Five of these plants will be located on the Texas Gulf Coast – the center of the world’s chemical industry. Once they are up and running they should have a profound impact on U.S. and international markets for propane and propylene. Today we describe plans to develop these new plants.
On September 19, 2014, the operating margin for a representative Gulf Coast steam cracker running ethane hit a record high – an astonishing 70.4 cents per pound. Steam cracker margins depend not only on the spread between feedstock costs and the market price of ethylene but also on the varying amounts of propylene, butadiene and other byproducts that result from using different feedstocks. Understanding steam cracker profitability in the context of recent market developments is critically important, and it is the subject of RBN’s latest Drill-Down Report. In today’s blog we provide highlights of the report, which examines what is behind the ongoing shift from heavier to lighter NGL feedstocks, unveils RBN’s downloadable Steam Cracker Feedstock Selection Model, and discusses how new U.S. cracker capacity, NGL exports and other factors will impact these markets.
Starting at the end of 2015 six new North American propane dehydrogenation (PDH) plants are expected to come online. These new plants will have the capacity to convert up to 170 Mb/d of propane into much more valuable propylene. If all the plants are built, these new supplies of propylene should more than replace declining output from olefin crackers and refineries. These on-purpose PDH plants should also make propylene supply more directly responsive to feedstock prices. Today we describe how PDH plants are likely to impact the propane market.
Vacuum gas oil or VGO is one of those mystery products talked about by refiners but barely understood by those of us that are not engineers. However it is an important intermediate feedstock that can increase the output of valuable diesel and gasoline from refineries. Lighter shale crudes such as Eagle Ford can produce VGO material direct from primary distillation. Today we shed some light on this semi-finished refinery product.
Drones first made a name for themselves in the military, not just for their ability to remotely map and monitor but—when properly equipped—to target and kill. But drones are breaking through to the civilian side, and no commercial sector is more eager to explore their potential than the oil and gas industry. Some already are beginning to do so, especially in Canada, which is years ahead of the US in permitting civilian use of drones. But the US is catching up, with BP now testing drones at its operations in Prudhoe Bay, AK. In this blog, we examine what drones can do, how they already are helping the oil and gas industry, and what lies ahead.
Increased refined product exports from US Gulf refineries are being driven by diesel refining margins but a lot of by-product gasoline is being produced as a result. Domestic demand for diesel and gasoline has declined over the past 5 years. Fortunately for refiners there is strong demand for diesel and gasoline in Latin America as well as for diesel in Europe. Important cost advantages stemming from the shale revolution are helping Gulf Coast refiners secure these markets against international competitors. Today we conclude our analysis of booming Gulf Coast exports.
We just wrapped up our Spring School of Energy, and it was another huge success. RBN’s School of Energy is unlike other crude oil, natural gas or natural gas liquids (NGLs) conferences. Our two-day core curriculum includes an introduction to energy market fundamentals as well as a comprehensive analysis of current markets. We walk through key developments for each of the three hydrocarbons including the increasingly important links between them. A set of spreadsheet models supplements the presentation materials. Today’s blog – fair warning this is an advertorial - introduces our latest online offering.
