Yesterday (January 14, 2016) Cheniere Energy announced a delay to the first shipment of liquefied natural gas (LNG) out of its Sabine Pass liquefaction/export terminal in Louisiana that was expected this month (January 2016), but is now planned for late February or March of this year. Meanwhile, LNG demand has leveled off. LNG prices have collapsed and stayed low. And a slew of liquefaction capacity planned and committed to years ago—Sabine Pass and other U.S. projects included—is coming online, suggesting an LNG supply glut that could last into the early 2020s. But are the LNG market’s prospects really as grim as all that sounds? Today we begin a review of recent developments in the LNG market, and consider their implications for U.S. natural gas producers, midstream companies, and LNG exporters.
It’s hard to imagine how the massive build out of pipelines and processing plants required to deliver shale hydrocarbon production to end use markets in the past 5 years could ever have occurred without the corporate structures known as Master Limited Partnerships (MLP’s). These tax-efficient vehicles financed shale infrastructure by selling partnership units to investors that offered income in the form of cash distributions as well as growth from increasing unit prices. But the leading Alerian AMZ Index of MLP market capitalization fell 46% from August 2014 to December 31, 2015 in the wake of the oil price crash. Today we begin a series looking at past success and future prospects for MLPs.
The recent end to U.S. crude export prohibitions opens up a number of coastal infrastructure development opportunities. One of the best placed assets is Louisiana’s Offshore Oil Port (LOOP) – the largest U.S. waterborne crude receipt terminal. LOOP could become a Gulf Coast crude blending and trading hub if its infrastructure is upgraded to facilitate exports. Today we look at the existing LOOP operation and future opportunities for exports.
Crude oil production is off in most U.S. shale plays and at today’s prices will continue falling, but offshore Gulf of Mexico (GOM) output is resurging like a genie and it looks like 2016 will be another solid year. That means, with existing GOM wells producing at full throttle and new offshore production due online, U.S. production as a whole is down by less than you might expect, given that oil prices are stuck well under $35/Bbl. Today we begin a review of the resilience of GOM oil production, efforts to reduce costs, and new projects coming online.
From waves of reanimated corpses feeding on unfortunate strangers trapped in a western Pennsylvania farmhouse in Night of the Living Dead to the hordes stalking the beleaguered survivors in the current smash TV hit The Walking Dead, zombies have captivated audiences. But real life zombie companies aren’t as entertaining. The dramatic and sustained plunge in hydrocarbon prices since mid-2014 has ravaged the finances of oil and gas producers to the extent that some observers have labeled the weakest of these “zombie” companies. These cannot sustain themselves on current pretax cash flow and look to be shuffling slowly toward their ultimate demise. Today we take a walk through the living dead to uncover the zombies.
The race to load the first freely exported U.S. crude cargo was won by NuStar’s Corpus Christi terminal, edging out Enterprise’s Houston terminal, as the Theo T set sail for Italy on New Year’s Eve with Eagle Ford crude and condensate on board. Midstream companies are now set to fiercely compete, not just for bragging rights but for terminal fees, as more U.S. crude heads overseas. But where exactly will that crude go? With oil prices tracking below $40/Bbl and narrow differentials prevailing between U.S. and overseas crudes, breaking into new markets will be tough. Today we outline which markets are most likely to absorb U.S. crude supply.
The mild winter in the U.S. thus far has created a balancing nightmare for the natural gas market. A freakishly warm December has meant below-average withdrawals and contributed to a record storage surplus over last winter’s levels. Not surprisingly, natural gas futures prices have been struggling under the weight of this surplus. However, a closer look at gas consumption over the past few weeks shows some underlying demand strength despite the warm weather. Today we take a closer look at where gas demand is coming from.
Energy market volatility in 2015 was neither the result of random market fluctuations nor geopolitical orchestration. The market pressures had been building for years, as one market event triggered another, leading inexorably to the carnage of Q4 2015. In fact, there were thirty such market events, which are represented by dominos in the new book by Rusty Braziel, titled The Domino Effect now Amazon’s #1 bestselling book in four categories. More dominoes will topple in 2016 and the years b
Following the news that regulations restricting the export of U.S. crude had been lifted, West Texas Intermediate (WTI) crude rallied to a slight premium over its international counterpart Brent for 6 days at the end of December 2015 – apparently leveling the playing field between the two rival light sweet grades. Is this the green light for a surge in U.S. crude exports? Not hardly. In fact, it is the other way around. Prices for WTI need to be well below Brent for exports to make economic sense and – according to the futures market – that is not happening anytime soon. Today we conclude our analysis of the Brent/WTI price relationship with a look forward to 2016.
2015 was a transformational year for the U.S. shale revolution. Act I of the Shale Revolution is now behind us. We’ll look back at the first decade -- 2005-2015 as the halcyon days – when there was always another market just around the corner. Shale started with dry gas in Texas, but those prices were crushed by the economics of wet gas and NGLs. In just a few years, that market too was annihilated, but economically attractive Appalachia dry gas and the big kahuna, crude oil took center stage. Now after a year of being beaten senseless by low prices, it is clear that those markets too have succumbed to the scourge of shale oversupply. That’s the end of Act I. There is nowhere else for producers to turn. The market dynamics facing Act II of the shale revolution are unprecedented. There is simply no way to predict what is going to happen next. Right? That’s silly. Of course we can! It is the perfect time to roll out RBN’s crystal ball one more time for 2016 - Year of the Monkey. Yup, there is more monkey business coming to energy markets.
Energy markets will long remember 2015. For producers and midstreamers, the memories won’t be pleasant. But it was not all bad news. Particularly if you happen to be an energy buyer or refiner. As we’ve done for the past four years, today is a day for looking back over the past twelve months in the RBN blogosphere – to see which blogs have generated the most interest from you, our readers. We track the hit rate for each of our daily blogs, and the number of hits tells you a lot about what is going on in energy markets. So once again we have taken a page out of the late Casey Kasem’s playbook to look at the top blogs of 2015 based on numbers of website hits.
Although the current narrow price differentials between U.S. domestic crude (including Eagle Ford condensate) and international market prices suggest no flood of exports is likely in the short term, the considerable existing marine dock capacity at Corpus is already capable of shipping out over 750 Mb/d of crude and condensate and is still expanding. That could make Corpus a major center of crude exports going forward. Today we conclude our series with a look at infrastructure in the Ingleside area of Corpus Christi and preview our final Drill Down report for 2015 that provides deeper analysis and commentary on Corpus Christi infrastructure.
The Colonial System is the largest refined products pipeline in the U.S. and delivers as much as 2.7 MMb/d from Gulf Coast refineries to destinations up the East Coast as far as New York. The southern section of the pipeline has been running full for over three years – leading Colonial to apportion space to shippers. A desire to gain shipper support to expand the pipeline led Colonial to propose new tariff clauses limiting trading practices that have developed around apportionment such as the sale of shipper history. Earlier this month (December 3, 2015) the Federal Energy Regulatory Commission (FERC) postponed the latest Colonial tariff proposal pending a user conference to resolve differences between the pipeline and shippers on these issues. Today we explain the oddities of line space and shipper history trading.
Next week (January 2016 - according to press reports) Enterprise Products Partners will load the first cargo of U.S. crude oil to be exported without regard to the regulations that restricted such movements to most countries except in certain circumstances for the past forty years. It looks like the lifting of crude oil export restrictions came too late to have much impact on U.S. production or prices in an era of free falling prices. Today we look at the impact of the change on the crude price spread between U.S. benchmark West Texas Intermediate (WTI) and international counterpart Brent.
In the new world where unencumbered crude exports are permitted, Corpus Christi holds a lot of strong cards as a major hub for shipping crude oil and lease condensate to international markets. Crude and condensate shipments out of Corpus have gone through the roof since 2012 as production in the close-by Eagle Ford soared. Pipelines offer producers direct routes to marine docks that currently ship crude to domestic refineries but could just as easily serve international customers. Today, we continue our look at Corpus’s emerging role as a crude oil/condensate hub with a review of existing and planned storage and marine dock facilities.