As we move into the Golden Years of U.S. natural gas, it is important to understand the long-term sustainability of such a large expansion to U.S. natural gas supplies and their uses. Our strong conclusion is that US natural gas supply will comfortably meet expected increases in demand in the years out to 2025. And that is important, because if the rapid expansion of demand, including hotly debated sectors like LNG exports, really did start putting strain on the nation’s gas supplies, prices could be higher going forward. But if sufficient confidence exists in the ability of producers to supply enough gas to meet plausible demand scenarios for a long time to come, then stable prices can be expected (and are), which will allow some industrial demand projects to actually get built. Today’s blog concludes our series on natural gas supply and demand.
Daily Energy Blog
The recent tragic spate of four rail accidents involving crude-by-rail, three of them carrying crude from North Dakota, have increased pressure for regulation of rail tank car standards. The railroad industry- through the Association of American Railroads (AAR) - proposed improved safety standards in 2011 for tank cars carrying hazardous materials including crude oil. These standards have been adopted by US tank car builders and were mandated this week by the Canadian Government for new tank car construction. If the new standards applied to all existing tank cars then at least 75,000 cars manufactured before 2011 would require retrofitting. Today we examine the impact hastily implemented new regulatory requirements might have on Bakken crude oil takeaway.
Spectra Energy purchased the 280 Mb/d Express pipeline from Kinder Morgan in December 2012. The Express originates in Hardisty and ships crude to Caspar WY where it connects with the Platte pipeline into the Midwest. The Express is small compared to the huge 2.5 MMb/d Enbridge mainline and the planned 1.1 MMb/d TransCanada Energy East pipelines but it is not the smallest export pipe from Hardisty. That honor belongs to the Inter Pipeline Bow River that ships less than 100 Mb/d of crude across the border into Montana. Today we continue our Canadian crude storage series describing Edmonton and Hardisty crude oil infrastructure. And further down in this blog we announce that everyone attending our School of Energy - Session A in March will be joining us for the Brad Paisley concert at the Houston Rodeo!
In December 2013 US Midstream giant Kinder Morgan agreed to spend nearly $1 Billion to get into the oil tanker business by buying two companies that own 5 US registered “Jones Act” vessels and are in the process of building 4 more. These tankers are part of an exclusive fleet of just 42 self propelled ocean going vessels that deliver oil or refined products between US ports. Booming US crude production along with constrained onshore delivery infrastructure have increased demand for tankers that can ship oil along coastal waters. Long-term charter rates for these tankers jumped to over $100,000/day in 2013 compared to an average of $56,000/day in 2012. Today we begin a blog series looking at the US flagged tanker fleet and plans to expand it by 35 percent in the next 2 years.
The icy “polar vortex” that swept across the US earlier this week brought freezing cold temperatures and a record 134 Bcf/d demand for natural gas on Tuesday (Jan 7, 2014). As a result natural gas prices on that day spiked over $70/MMBtu at the TRANSCO non-New York hub. New England buyers fared better - paying “only” around $35/MMBtu for their gas - largely because of a timely supply boost from a rare import cargo of LNG at the Canaport New Brunswick terminal. But these price spikes and severe stresses on the Northeast system demonstrate one more time how the pipeline network that delivers natural gas to New England remains inadequate. Today we conclude our analysis of the region’s gas pipeline situation by examining projects in the wings that together could provide the robust, reliable gas supply New England longs for.
The wide scale adoption of crude-by-rail transportation since 2012 means that in the U.S. alone by the end of 2013 more than 740 Mb/d was being shipped to market by railroads or about 11 percent of domestic production (source: American Railroads Association). That percentage will continue to increase. RBN Energy research indicates that around 171 rail loading and offloading terminals have been built or are under development throughout North America since 2011. Pipeline infrastructure build out and increased regulatory scrutiny of rail tank car safety have not slowed the use of rail in production regions such as the North Dakota Bakken. Today we review the new RBN Energy Drill-Down report on crude by rail.
RBN Energy is branching out! Today we are launching our new premium services package called Backstage Pass. Just like it sounds, this new service gets you deep into the details of the data and models we put together at RBN, providing what we believe is a whole new level of information access, insights and connections across energy markets. Don’t panic. The blog is still free. But if you are like the many RBN members that have asked for a much broader range of services, then you will be happy to learn that the answer is now ‘yes’. We are rolling out the service with what we believe is the definitive study assessing the crude-by-rail phenomenon. Learn everything you need to know about our new premium services in today’s blog. But be warned, this is an unabashed commercial plug for our new service. We hope you find it intriguing.
TransCanada currently owns just over 1 MMBbl of crude storage at Hardisty that is used to stage operations on the existing 580 Mb/d Keystone pipeline to the US. With two huge new pipelines planned to originate at Hardisty – the 830 Mb/d Keystone XL (still awaiting Presidential approval) and the 1.1 MMb/d Energy East potentially coming online in the next four years, the company is rapidly expanding Hardisty capacity. At the same time Gibson Energy and US Development Group are building a 120 Mb/d rail terminal close by to Hardisty that will give Canadian producers the option to bypass pipeline congestion. Today we describe these companies’ infrastructure plans.
The golden years of natural gas abundance are off and running, with export projects, new industrial proposals, new power generation use, and expanded transportation use - all building on a perception of long-term abundant supply at reasonable prices. Does it all work out in the end? Do supply and demand balance at stable, affordable prices, even with a lot more demand? Today we examine the likelihood that gas producers can provide adequate supplies without causing significant upward pressure on prices.
This winter the Northeast US is being blasted with record cold weather. As a result, daily natural gas prices in both New York and New England have spiked more than $30/MMBtu above the US benchmark at Henry Hub, LA. But the average price you’ll pay for natural gas in the region will likely depend on whether you root for the New York Giants or the New England Patriots. With their dismal records and embarrassing mistakes, it’s not easy being a Giants (or Jets) fan these days. But on average – thanks to new gas pipeline capacity added this past fall, natural gas prices in New Jersey and New York have remained less volatile relative to US benchmark Henry Hub, LA than prices in New England. That is because the six-state region continues to suffer from woefully inadequate gas transmission infrastructure. Today we begin a two-part analysis of the still-stalled effort to deliver more supplies to gas-hungry New England.
So you are feeling pretty good about 2014, eh? Stock market on a tear. Most U.S. energy markets relatively stable. Gaps in the oil and gas infrastructure getting filled. Well let’s not get cocky. U.S. energy markets are still in the middle of a revolutionary transformation from shortage to surplus. Where there are big shifts, there are big market disruptions. And in such disruptions, there are always winners and losers. You don’t want to be on the short end of that stick. So in our time honored tradition – the second year in a row – we again stick our collective RBN necks out to peer into the crystal ball to see what 2014 may hold.
On this, the last day of 2013 we thought it would be interesting to look back at the 250 or so RBN blogs posted this year to see which ones had the highest hit rates. When a blog article gets a lot of hits – some up to 17,000 or more – it tells you something about what is going on in the market. So like we did last year, we’ll take a page out of Casey Kasem’s playbook to look back at the top blogs of 2013 based on numbers of website hits.
This year has seen the WTI discount to Brent trading in a range from $23/Bbl in February to less than $1/Bbl in July then back out to $19/Bbl in November. On Friday (December 27, 2013) the WTI discount to Brent was $11.85/Bbl. During the year the spread behaved differently in three distinct periods - reflecting changes in the fundamentals as well as market sentiment. Today we review how the granddaddy of crude spreads fared this year.
NGL volumes continue to climb because of all the surging “wet” shale gas production. These days about 7% of gas plant NGL production is “isobutane”, (also known as IC4, I Grade, methylpropane, R600a, iso and “izo” to our friends in Canada). Over the past two years gas plant production of iso is up about 25%, and that volume is expected to increase another 30% over the next two years. Most isobutane is used by refineries to make high-octane alkylate, but what about the rest? Today we take a closer look at this lesser known natural gas liquid (NGL) and the sometimes exotic uses it is put to.
As North American supplies of natural gas continue to grow, more industrial, commercial, institutional and residential customers who do not burn natural gas for heating or process use want to participate in the economic savings associated with natural gas versus alternate fuels such as heating oil or propane. Complications in the process of installing pipeline infrastructure are slowing the rollout of direct gas line service. Today we describe natural gas distribution alternatives.
