Exporting LNG from western Canada to the Pacific Rim is seen by many as the silver bullet for reinvigorating Canada’s ailing natural gas sector. But while Canadian LNG may prove to be a cost-competitive alternative for buyers in Japan, Korea and other big consuming nations, prospective LNG exporters up north are certain to face stiff competition from Australia, the U.S., and other low-cost, high-volume gas producers. The point is, a silver bullet can miss its target. What if Canada’s aim is off?
Daily Energy Blog
Thursday, 7/25/2013
Category:
Natural Gas
Wednesday, 7/24/2013
Category:
Crude Oil
Just like every other kind of mechanical equipment, rail tank cars require maintenance every once in a while. Valves can leak. Linings wear down. Railings, platforms, and brake equipment need periodic repairs. And not surprisingly, the more miles you put on a tank car, the more maintenance it is going to need. As the crude-by-rail phenomenon has grown, so has the rate of ‘bad orders’ – rail cars that must be taken out of service for maintenance. Handling bad orders is a new issue for many producers and refiners just now getting their feet wet in the business. Everyone agrees that this is a very important issue, and the rail industry is not taking it lightly. Today we explore the implications of bad orders in the crude-by-rail market and how progressive solutions are on their way.
Tuesday, 7/23/2013
Category:
Natural Gas
Last Friday (July 19th, 2013) temperatures in New York City rose to 100 degrees Fahrenheit for the second day in a row. At 4:00 PM that day the New York Independent System Operator (NYISO) recorded a new State record peak power demand of 33,956 MW. In New York City (known as “Zone J”) real time power prices jumped as high as $1485/MWh. Today we examine the power price volatility.
Monday, 7/22/2013
Category:
Crude Oil
The Brent premium to WTI has traded as wide as $23/Bbl this year but was down to 2 cnts/Bbl on Friday July 19, 2013. At one point during trading nearby WTI prices rose above Brent – the first time that’s happened in three years. Yesterday (July 22, 2013) WTI August expired at 106.91 - $1.14 lower than Brent September. Today we look at why the spread has narrowed so rapidly and whether it will stay that way.
Sunday, 7/21/2013
Category:
Crude Oil
The latest available Energy Information Administration (EIA) data for April 2013 indicates that imports into Houston and Port Arthur region refineries on the Texas Gulf Coast included 425 Mb/d of light and 425 Mb/d of medium quality crudes. Seventy three percent of the imports that month were heavy crude. Domestic and/or Canadian supplies fed only 43 percent of the region’s 3.18 MMb/d crude demand. That balance of refinery crude supplies will change significantly by 2014 as increased domestic production finds a path to the Houston and Port Arthur regions via new and expanded pipeline capacity. Today we extend our Permian series by digging into the import data and building a Houston/Port Arthur refinery supply demand balance.
Thursday, 7/18/2013
Category:
Natural Gas
Canada enjoys vast natural gas resources and domestic demand for its gas is growing. But Canadian gas exports to the U.S. are plummeting, and it seems the only way to avoid a major gas glut north of the border will be to export large volumes of LNG to the Pacific Rim. The catch is, there’s a lot of competition out there, both from reigning LNG export giants like Australia and prospective players like the U.S. And Canada has its own issues with environmental concerns and permitting for natural gas pipelines and LNG terminals. What happens if Canada’s LNG export initiatives don’t happen?
Wednesday, 7/17/2013
Category:
Crude Oil
European refiners have shut down 1.7 MMb/d of capacity since 2008 in response to recession plagued economic conditions at home and competitive pressures in their traditional export markets. Refinery utilization in Europe is down to 75 percent (IEA Q1 2013). That contrasts sharply with high utilization, record exports and respectable product margins at US refineries - even as crude prices increase. Today we examine why Europe’s refineries are suffering.
Tuesday, 7/16/2013
Category:
Crude Oil
At the end of June Koch announced plans for an open season that started July 1, 2013 to solicit interest in a pipeline project to deliver 250 Mb/d of crude from the Bakken to Hartford and Patoka, IL. Koch’s plans suggest the new pipe could connect to St James, LA on the Gulf Coast via the proposed Energy Transfer/Enbridge Energy joint venture Gulf Coast Crude Access pipeline. If the pipeline proceeds, it would come into service in 2016. Earlier Bakken pipeline projects have failed because of flexible rail options. But rail rates from the Bakken to the coasts are currently underwater due to narrowing crude spreads. Today we review the project’s prospects.
Monday, 7/15/2013
Category:
Crude Oil
Permian crude production is set to increase 0.4 MMb/d to 1.8 MMb/d by December 2018 (Bentek). New pipeline capacity currently being built and planned to be in place by the end of 2015 should comfortably handle the output by then – primarily pushing Permian crude into the Houston market. The bigger question is whether Houston region Gulf Coast refineries can process the new crude without significant reconfiguration. Today we review whether Gulf Coast refiners can handle incoming Permian production.
Sunday, 7/14/2013
Category:
Natural Gas
Rapid growth in U.S. gas exports to Mexico already is having profound effects north of the border, and things will only get more interesting. Gas producers in the Eagle Ford and other Texas shale plays are finding the new buyers they need. But gas consumers in the Southwest—caught with a losing hand of stagnant regional gas production, rising gas demand, increasing gas exports to Mexico, and pipeline capacity tightness—face potentially serious delivery concerns and price premiums in the not too distant future.
Thursday, 7/11/2013
Category:
Natural Gas
The shale revolution has done away with natural gas price volatility, at least for now. And that has been a bad thing for natural gas storage. Merchant storage facilities make most of their money on either seasonal gas price differences or short-term price fluctuations, or both. Unfortunately, the oversupplied market has flattened out prices, removing the primary source of storage value. But there are other ways of extracting value out of natural gas storage. Today we explore several of these strategies.
Wednesday, 7/10/2013
Category:
Natural Gas Liquids
Over the past few weeks, NGL prices have dropped to levels relative to other hydrocarbon prices that we have not seen since the bad old days of 2009. Since early April 2013, the frac spread (see Another Fracing Problem and RBN Spotcheck graphs) has averaged less than a bargain basement level of $5.00/MMbtu. For months ethane at Mont Belvieu has been valued at no better than the price of natural gas at the Henry Hub. Propane at Mont Belvieu languishes below 40% of the value of crude oil, and normal butane at 50% of crude oil, levels not seen in years. Even natural gasoline (being exported in record volumes to Canada for diluent) is down to only 85% of crude. Must NGLs do some kind of dirty deeds to recapture their historical valuation? Or is this the new normal? Today we kick off a three part blog series to explore the sad case of rock bottom NGL prices.
Tuesday, 7/09/2013
Category:
Natural Gas
“Hey Joe, I said, where you goin' to run to now … where you gonna go?” now that no other options are left, Jimi Hendrix asked in his debut single, “Hey Joe.” Joe’s answer? “ I'm goin' way down south, way down south, way down south to Mexico way!”
Texas and other Southeast Gulf gas producers are in the same boat as Joe, Bentek says in a recent report titled “Growing Mexican Gas Market Creates Southwest Price Premiums.” Having lost some of their old buyers in the Northeast to shale gas producers closer to that market – and with the prospects of losing more - producers in the Eagle Ford and the Permian and Anadarko basins need new options, and are looking to the fast-growing Mexican market as a way out.
Monday, 7/08/2013
Category:
Crude Oil
The West Texas Intermediate (WTI) discount to Brent narrowed 80 percent since February 2013 to close at $4.05 on Monday July 8, 2013. As a result the netbacks that crude producers in North Dakota receive for barrels sent to the East Coast has tumbled and they can now make more money sending crude to market on the pipeline route to Cushing. Today we run the numbers on changing Bakken netbacks.
Sunday, 7/07/2013
Category:
Crude Oil
The West Texas Intermediate (WTI) discount to Brent has been as wide as $27/Bbl in the past two years and traded at an average of $17.50/Bbl in 2012. Since February this year the spread has narrowed 80 percent to less than $5/Bbl – closing at $4.55/Bbl on Friday (July 5, 2013). Surging WTI prices are over $100/Bbl for the first time since May 2012.Today we look at what is behind the recent sudden narrowing in the spread.
