Daily Energy Blog

Masters of the Midstream – Why MLPs Own So Much Midstream Infrastructure
Thursday, 10/18/2012
Category:
Energy

A couple of weeks ago RBN’s Sandy Fielden  attended the Platts Master Limited Partnership (MLP) Symposium in Las Vegas and listened to a number of presentations about the performance of these specialized corporate structures and the rivers of investment capital that their high income yields are attracting. You can’t turn your head in the energy midstream business without bumping into an MLP. Today we explain what MLPs are and why they dominate today’s energy midstream business.

Before we start – a quick disclaimer. RBN Energy does not advocate investment in in MLPs. We are not an investment advisor.  The purpose of this article is not investment advice or endorsement.

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Core Apps in Tough Times – Makin’ Steam and Coking Coal-a
Wednesday, 10/17/2012
Category:
Energy

Coal is having a tough year. Producers must be wondering what else can go wrong. In spite of everything, coal continues to play an invaluable role in supplying US energy and as a raw material in steel manufacture.  Today we take a closer look at where coal comes from and how it is used.

By now nearly everyone knows the US coal industry is on the ropes. In “Old King Coal is Down in the Hole” we learned how coal producers were hurting to the point of closing mines and restructuring. NYMEX Central Appalachian Coal prices have fallen 22 percent so far this year from $69.67/ short ton (ST) on January 3, 2012 to $54.60/ST on Wednesday (October 17, 2012). As natural gas prices fell below $2/MMBtu in April, power generators switched from using coal as a baseload fuel to natural gas on an unprecedented scale (see Talkin ‘Bout My Generation). Since over 90 percent of coal demand comes from power generation, coal consumption fell as a result. World demand for more valuable metallurgical coal has also slumped as China reduced steel output and the European economies continued to court recession. On top of all that, environmental legislation threatens future coal plant construction as well as the life of legacy plants that have to be retro fitted with expensive pollution control hardware to meet higher Clean Air standards.

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Gulf Coast Gas, We Don’t Need Ya Anymore - New Reality For Northeast Gas Supplies
Tuesday, 10/16/2012
Category:
Natural Gas

Faced with 7 Bcf/d of new Marcellus production over the past couple of years and possibly another 10 Bcf/d of production growth coming from the Northeast region between now and 2017, the interstate pipeline companies that traditionally delivered natural gas to the Northeast from outside the region have found it necessary to completely o reconfigure their assets. In effect, gas supplies that traditionally have originated from the Gulf Coast are being displaced by Marcellus production.  The resulting pipeline projects are expanding capacity and redirecting flows to provide new shippers with competitive access to existing markets.  Today we look at the types of pipeline projects going on and then zero in on Tennessee Gas Pipeline.

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How Rich is Rich? – Gas Processing Economics Part 3: Computing NGL Quantities
Monday, 10/15/2012
Category:
Natural Gas Liquids

Natural gas processing plants are being built or expanded at a feverish pace.  At least 90 projects are in the works around the U.S., expected to add more than 15 Bcf/d of capacity according to the latest Bentek NGL Facilities Databank numbers.  How do the economics of these investments work? We know that it is a lot more complicated than a simple frac spread.  But does that mean the calculations must be exclusively the purview of engineers armed with gas plant optimization models?  Heck no.  Anybody, even an MBA with a spreadsheet, a few standard factors and a gas analysis can figure out how a gas processing plant makes money.  So to prove that point today we’ll dive one more time into natural gas processing economics to understand how the composition of an inlet gas stream is converted to outlet streams of natural gas liquids and residue gas.

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Place Your Bets on Narrow Brent/WTI Spread for the Super Bowl
Sunday, 10/14/2012
Category:
Crude Oil

Next Year’s Super Bowl (February 3, 2013) will provide the usual mix of brawn and hokey consumer advertising. RBN is betting that the WTI discount to Brent will fall well below its current $22.76 /Bbl before then. Early next year new pipeline pathways out of the Midwest and West Texas to the Gulf Coast and growing railcar traffic out of the Bakken will put an end to the Cushing Supply glut. Important signals today suggest the WTI discount should narrow sooner, but prices for the two crudes remained stubbornly far apart last week. Today we explain why the spread hasn’t narrowed already and the fundamental pressures that will overwhelm it come the spring.

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Fifty Shades Lighter – What Should be Done with Condensates?
Thursday, 10/11/2012
Category:
Crude Oil

The new domestic energy rush has supplied North America with a potent new cocktail of hydrocarbons. Not only are we producing more oil and gas here than we have in decades, but we are producing more of certain kinds of hydrocarbons than North America’s existing energy infrastructure is built to handle.

We’re talking about the “C” word: Condensates. Today we introduce a blog series on condensates.

As RBN Energy explained last February (see “neither fish nor fowl”), condensates are a highly volatile hydrocarbon mixture that is classified somewhere between crude oil and natural gas liquids. Condensates are showing up in abundance both in new “wet gas” plays, where they drop down as liquids from gas streams during the field production process, and in oil shale plays, where condensate is part of the liquid coming straight out of a wellhead.

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As Time Goes By - The long Gestation for Gas Pipeline Projects
Wednesday, 10/10/2012
Category:
Natural Gas

The gestation period from concept to in-service for a new natural gas pipeline can take at least 3-4 years. A significant number of these projects are underway today in the Northeast US in response to dramatic increases in local production. Today we continue our series on changes in the Northeast with a look at the process required to develop pipeline infrastructure.

In our previous posting we talked about the dramatic changes in strategies, infrastructure and operations in the Northeast resulting from the successful development and growth of Marcellus natural gas production.  Some of these investments by pipelines, and shipper commitments for transportation agreements, are quite sizable and can cause a high degree of angst.  One of the factors that makes this so difficult for everyone is that the timeline for an interstate pipeline to place new capacity into service can typically take three to four years from conception to in-service.  That’s a long time in a dynamic industry and as we have seen, significant changes can take place in that long a period. Before we drill down to the strategic and 'operational aspects, it would be helpful to understand why it takes so long and what is involved in the development process to bring new pipeline capacity on stream.  

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Field of Dreams or Production Planning? Building Out Northeast NGL Infrastructure
Tuesday, 10/09/2012
Category:
Natural Gas Liquids

NGL production in the Marcellus is growing by leaps and bounds.  There is only one play projected to grow faster – Utica.  And Utica sits just a few thousand feet below the Marcellus.  Combined NGL production from the two plays is projected to range between 450 – 600 Mb/d depending on who’s forecast you like best.  But as fast as these volumes are coming on, natural gas processing capacity and fractionation capacity are being expanded even faster.  Are the midstreamers getting ahead of the producers with 22 gas plant projects and 11 new fractionators or expansions in the works?  Or do these midstreamers know something that is not baked into the various industry production forecasts? Let’s see what the most recent projections are telling us.

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The Sea and Mr Jones – How the Maritime Act Restricts Coastal Shipping
Monday, 10/08/2012
Category:
Crude Oil

Most Americans only come into contact with the Jones Act when they wonder why their cruise ship stopped off at a foreign port. This maritime legislation from a bygone era (1920) is nearly a century old. The Jones Act increases costs for US coastal shipping. That constraint has restricted the availability of waterborne options to alleviate recent US energy supply bottlenecks. Today we look at the impact of the legislation in energy markets.

The US American Phoenix, a 339 MBbl oil tanker built in Mobile, AL was launched earlier this year on June 21, 2012 (see picture below). The American Phoenix is the only US built tanker to be launched so far in 2012. On her maiden voyage in August the American Phoenix delivered a cargo of gasoline from Lake Charles, LA to Port Canaveral FL, two United States ports.

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A Tank Car Train for Hire – Part II – Understanding Rail Transportation Strategies
Saturday, 10/06/2012
Category:
Industry

News flash!  ---Rail transportation has become a very big deal in the business of transporting crude oil, NGLs and petroleum products!!----The whole world does not revolve around pipelines!   Yup, the media has discovered that hydrocarbons can ride the rails.   Never mind that liquid hydrocarbons have been moving in tank cars for 150 years.   The news is that rail is having a market impact like never before.  And that is because there has been a strategic shift in the way rail transportation is being used by the petroleum industry.   In Part II of our series we’ll dissect the strategies being used and discuss how things are evolving in the world of tank cars.

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Smoky and the Salt Caverns – A Saga of NGL Storage
Thursday, 10/04/2012
Category:
Natural Gas Liquids

Over the next five years, production of natural gas liquids (NGL’s) from gas processing plants will increase by at least one million barrels per day, or about 40% over 2012.  Perhaps more.  That’s good news for natural gas producers, processors and end-use markets.  But there is a catch.  The rate of production does not match up with demand.  While production is a steady, “ratable” volume, demand is anything but ratable.  Demand swings with petchem feedstock economics, the gasoline blending season, weather and a myriad of other factors.  The flywheel that balances supply and demand on any given day is storage.  But not just any storage.  For NGLs, storage of large volumes means salt caverns.  Huge caverns thousands of feet below the surface.  In this NGL storage blog series starting today, we’ll look at the history of NGL salt storage, where it exists, how it is used, and where more of it is needed.  In this first installment we’ll go all the way back to the origin of NGL salt storage. All the way back to Smoky Billue.

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Do We Need a New Gasoline Alley? - NYMEX October Settlement Spikes over Supply Fears
Wednesday, 10/03/2012
Category:
Natural Gas Liquids

The NYMEX New York October gasoline contract expired last Friday at $3.34/Gal, up 13 percent during the week from $2.91/Gal last Monday (September 24, 2012). In contrast the November contract closed 42 cents lower than October on Friday at  $2.92/Gal. The sudden jump in October New York gasoline prices during the last week of trading was caused by severe supply problems in the Northeast US. This week new cargoes en-route to New York have calmed market fears but the disruptions look set to repeat in a tightly balanced market. Today we investigate what happened.

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The New Adventures of Good Ole Boy Permian – WTI Back on Top of the Hill?
Monday, 10/01/2012
Category:
Crude Oil

Permian crude production is experiencing a renaissance. This month (September 2012) Bentek estimated current production at 1.3 MMb/d. Most of that production not absorbed by local refineries is shipped to Cushing or further into the Midwest where prices are depressed versus the Gulf Coast. New takeaway capacity projects look to change that balance towards the Gulf Coast over the next two years. Today we explore how West Texas crude prices will be impacted by access to the Gulf Coast.

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Regulatory Gas Pressure Party – R*VP Today!
Sunday, 9/30/2012
Category:
Natural Gas Liquids

Next time you fill up with regular; spare a thought for what the product went through to make it into your tank. Before you got a chance to put the pedal to the metal, the tiger in your tank had to treat a digestive problem that was causing too much gas. It was all in honor of something called Reid Vapor Pressure (RVP) regulations. Today we open the window on the issue to air the pungent details. 

Check out Kyle Cooper’s weekly view of natural gas markets at

http://www.rbnenergy.com/markets/kyle-cooper

RVP stands for "Reid Vapor Pressure" a measure of gasoline volatility indicated in pounds per square inch (PSI) at 100 degrees Fahrenheit. The higher a gasoline's RVP the more quickly it evaporates. The RVP for gasoline should always be below normal atmospheric pressure or 14.7 PSI. If the RVP gets higher than 14.7-PSI fuel might evaporate in the gas tank on a hot day resulting in a vapor locked engine (car won’t start) or worse yet, an explosion. At the same time you need a certain RVP level in the winter when it gets cold or your car won’t start because the fuel won’t vaporize in the carburetor.

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Panama Tailored to Fit Larger Vessels – How Crude Products and LNG Will Respond
Thursday, 9/27/2012
Category:
Industry

The 51-mile long Panama Canal completed in 1914 connects the Caribbean Sea to the Pacific Ocean. By passing through the Canal ships reduce voyage distances by thousands of miles and journey times by 10 days or more. The Canal is currently constrained by the dimensions of its lock system that limit the size of vessel that can pass through. An expansion project started in 2006 and set to complete in early 2015 will increase the dimensions so that larger ships can use the canal. Today we assess the consequences for tanker movements.

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