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Daily Energy Post

The Night the Lights Almost Went out in Texas – Polar Vortex & Texas Power Markets

The “polar vortex” of 2014 dipped far south enough to impact power markets in Texas. On Monday January 6th, the Electric Reliability Council of Texas (ERCOT) came dangerously close to initiating rolling blackouts as power demand increased due to record low temperatures and unexpected generation unit outages. Real time electricity prices spiked to over $5,000/ Megawatt Hour (MWH). The close call served as a sobering reminder for Texas regulators of the ongoing debate over how the State will meet future power generation requirements. Today we detail the “polar vortex” event and explain the implications for Texas power. 

Miami 2017—Marcellus Natural Gas Heading to Florida, Part 2

The idea of using natural gas produced in Pennsylvania to generate power in South Florida would have been considered implausible or even unthinkable just a few years ago. But now it seems likely that by mid-2017 Marcellus-sourced gas will, in fact, be moving deep into the Southeast. Williams’ planned Atlantic Sunrise project will make its Transco mainline bi-directional as far south as Station 85 in southwestern Alabama. From there, Spectra Energy and NextEra Energy’s Sabal Trail pipeline will move Marcellus and other gas into central Florida, and NextEra’s Florida Southeast Connection line will take gas still further south. Today In the second of a two part series, we conclude our analysis of the transformational Atlantic Sunrise project.

Rock The Boat - Don’t Rock the Boat - The Jones Act Coastal Trade OSG and the Alaska Fleet

Two companies that own Jones Act tankers went through bankruptcy in recent years as the charter business declined following the Great Recession. They are Overseas Shipping Group (OSG) that own two US flag tankers and manage another ten and the smaller US Shipping Corp that owns three Jones Act tankers. These days the surge in US crude production has created strong demand for Jones Act tankers and record charter rates for owners. Now tankers once dedicated to the Alaska trade between Valdez and the West Coast are being considered for crude shuttle duty around the Lower 48.  Today we continue our review of US Flag fleet owners.

You Crack Me Up. A Brief History of Hydraulic Fracturing

Many who write about hydraulic fracturing suggest, or state explicitly, that it is a new technology in the oil and gas industry. This can hardly be further from the truth. Indeed, it is probably the case that hydraulic fracturing is older than most of the people writing about it.  Today we begin a series on hydraulic fracturing and why it has had such a significant impact on gas and oil production over the past few years.

“You Never Give Me Your Money”—Some Common Oil & Gas Royalty Disputes

Natural gas and oil development, especially in shale plays that require a lot of wells and a lot of activity, can be inconvenient and noisy.  There are also, of course, various criticisms and protests around some of the processes used, such as hydraulic fracturing, and around the overall level of activity, such as truck traffic.  The gas and oil producing industry values strong relationships with the communities where it needs to work, and can use all the friends it can get as it takes the lead in developing the nation’s vast energy resource.  Bringing big economic benefits to those communities, which are often rural or industrial areas hard-hit by economic downturns, is clearly really important in the efforts to build those relationships and friendships.  There are a lot of different kinds of economic benefits deriving from supply development, but by far the most important to the affected landowners are the royalties resulting from private mineral rights.  Today we continue our examination of the inner workings of oil and mineral rights issues, this time considering some common oil and gas royalty disputes.

Sail Away – Propane Exports Exceed 400 Mb/d for the First Time

We’ve been talking a lot over the past year about the need for increasing exports to balance the U.S propane market as growth in production from gas processing plants outruns domestic demand.  U.S. propane production from gas processing has increased by over 100 Mb/d since January 2013, and there’s lots more to come.  For the first time U.S. propane exports exceeded 400 Mb/d in October 2013 thanks to growing U.S supply and infrastructure developments including dock expansions by Enterprise and Targa.  But just after exports ramped up, the propane market was hit by a couple of wild cards – a late and very heavy crop drying season and a series of record cold temperature events. In today’s blog, we continue our series covering the record setting 2014 NGL markets.

Whole Lotta Splittin’ Going On - Processing Gulf Coast Condensate

Four midstream companies are building or planning condensate splitter capacity to process at least 400 Mb/d of Eagle Ford production by 2016.  These facilities will join BASF/Total, who have been operating a 75 Mb/d splitter at Port Arthur since 2000. Gulf Coast refiners are also increasing their capacity to process lighter crudes. These infrastructure developments are being made in response to a flood of condensate range material coming out of the Eagle Ford into Houston and Corpus Christi.  Today we detail these plans. 

A Perfect Storm – Polar Vortex Turns Propane and other NGL Markets Upside Down

Last week the U.S. NGL markets entered uncharted territory.   According to OPIS, cash propane prices in the Conway, KS market reached almost $5.00/gallon for a time, responding to a massive product shortage across the entire eastern half of the country.  But at the same NGL hub, OPIS also reported that the price for ethane/propane mix (EP mix) dropped deep into negative territory at $(0.50)/gallon.  That’s crazy.  The seller is paying the buyer to take the product.  Nothing like this has been seen before in these markets.  Propane inventories continue to drop, transport trucks are moving product hundreds of miles to markets, terminals remain on allocation and a state of emergency has been declared by at least 20 state governors.  The inventory graphs look so scary that the Black Swan is frozen stiff.   Today we begin a series on the NGL markets of 2014, a year that this industry will be talking about for a long time.

The Molecule Laws: I Fought the Law and the Law Won – Export Laws and Hydrocarbon Markets

Here at RBN, we have an often repeated view that the flood of oil and gas being produced from unconventional plays will change everything we once knew about energy markets (see Top Ten Energy Prognostications for 2014).  One such fundamental change is that the U.S. is now producing more natural gas, NGLs and some grades of crude oil than we can use (except for the past three weeks of Polar Vortex weather, of course).  Consequently the U.S. has shifted from a position of hydrocarbon shortage to one of surplus.  That is great news.  But just down the road there are potential problems developing – distortions in the markets.  Some of those surplus products can be exported, some can’t.  The rules regarding exports of these hydrocarbon products that we are living with today were all put on the books during the decades of shortage.  When you look closely at what those rules really say, you’ve got to scratch your head.  Today we begin a series to examine those rules.

“You Never Give Me Your Money”—Royalties are Critical but Complicated

There has been a great deal of publicity around royalties involved with the shale gas—stories of instant millionaires (or “shaleionaires,” as 60 Minutes called them in 2010), stories of producers reducing or even eliminating some royalty payments as the vast oversupply of natural gas took hold in the last couple of years, stories of long, excruciating negotiations to reach a royalty/lease agreement, only to find out that the seller’s side of the table didn’t actually contain the owner of the rights, and stories of neighbors turning on each other when they got radically different deals based on timing or whom they were dealing with, and so on.   Unless you have been directly involved in leasing and royalty work, a lot of it can be confusing.  So today we begin a blog series to illuminate the world of mineral rights, oil & gas leases and royalties.

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