During 2012 the FERC jumped into the ring to involve itself in the long running debate to improve coordination between the gas and electric power industries. The FERC is motivated by concerns about reliability and the trend to increase power generation from natural gas at the expense of coal and oil. The commission held 5 regional conferences to identify the industry’s concerns and the role of regulation in any solutions. Today we examine progress on this important initiative.
Daily Energy Blog
Tuesday, 1/15/2013
Throughout 2012 and into this January natural gas producers have done far more hedging than consumers with the Henry Hub NYMEX futures contract. Producers are still locking in higher prices on the forward curve to protect the value of their future production in the ground. Today we review trends in hedger sentiment.
Sunday, 1/13/2013
Last week in Ethane Asylum Big Time we looked at the implications of ethane rejection at a typical Eagle Ford plant, using as our example the model developed a few weeks back in our blog series titled How Rich is Rich – Gas Processing Economics – Part 3. In order to get to the market implications and conclusions in “Ethane Asylum Big Time”, we skipped over some of the details of our calculations, promising to get back to the model this week. So that’s where we are going today – deep into the gas processing model abyss. Follow only if you dare.
Thursday, 1/10/2013
Mexico’s pipeline infrastructure is struggling to meet booming demand for cheap US natural gas imports across the Rio Grande. To open the way for increased flows of gas the state energy company PEMEX has launched an ambitious pipeline construction program on both sides of the border. Today we describe these pipeline projects.
Wednesday, 1/09/2013
We learned from our friends at Bentek this week that gas demand from the power sector averaged a record 25 Bcf/d in 2012 – nearly 20 percent higher than 2011. The increase in demand for natural gas for power generation largely resulted from system operators switching from coal plants to natural gas after the price of natural gas fell to 10 year lows in April 2012. Today we look at how power generation plant fuel costs drive coal-to-gas switching.
Thursday, 1/03/2013
US natural gas pipeline exports to Mexico increased by 45 percent in the 9 months to September 2012. This dramatic increase in flows across the US/Mexico border was caused by the need to fill a widening gap between Mexico’s dwindling supplies of gas from domestic production and higher demand for gas to generate electricity. Current low US natural gas prices have made increased pipeline imports an attractive option for Mexican State Energy Company PEMEX but not without complications. Today we take a look at Mexico’s rising gas imports from the US.
Thursday, 12/27/2012
The generation of power from natural gas will be the most important growth sector for the gas industry for the foreseeable future – certainly for producers, but also for the pipelines that provide the transportation service to deliver the gas to power generators. Handling the infrastructure and service challenges that come with increased power burn is therefore a priority. This is true for the nation as a whole, but was specifically raised this year by the Midwest Independent System Operator (MISO) in the heart of coal country - where coal-to-gas switching was most significant during 2012. We covered the MISO reports detailing their infrastructure concerns previously (see Hooking Up the Next Generation). This blog post is a review of challenges that the industry must address on both the regional and national level.
Wednesday, 12/19/2012
Since the world is scheduled to end tomorrow – at least according to the Mayans, it seems appropriate that we examine another looming catastrophe: the obliteration of existing North America natural gas market relationships and flow patterns, coming in 2016. The good news about the end of this natural gas world is that not only do we know it is coming, we can make a pretty good guess about how and when it will happen, and thus prepare for it. Today we’ll examine the market developments that will result in such dire consequences.
Thursday, 12/13/2012
The second of two Department of Energy reports on the impact of LNG exports on the US economy was published last week by NERA. These reports focus on macroeconomic impacts that do little to guarantee the investment returns of the 15 projects awaiting approval. Today we dig into the pricing mechanisms that have to work for buyers and sellers before these terminals can lock in the throughput they need to justify their investment.
Thursday, 11/15/2012
Front month NYMEX natural gas prices reached a twelve-month high of $3.76/MMBtu this past Wednesday - falling back to $3.70/MMBtu yesterday. NYMEX prices have been on a rising trend ever since they dipped under $2/MMBtu back in April of this year but can they sustain that momentum? The most important factor in answering that question over the next 4 months will be the weather. More specifically, will there be a winter this year and how much gas is withdrawn from storage as a result of the cold weather. Yesterday the EIA announced the first natural gas storage withdrawal of this winter. Today we examine the start of the storage withdrawal season.
Tuesday, 11/06/2012
Northeast bound interstate natural gas pipeline companies are busy reconfiguring their assets to accommodate significant supply growth expected by 2017. At the same time, regional natural gas supply and distribution companies are taking advantage of the opportunities that new local production brings.
Wednesday, 10/31/2012
Northeast regional interstate pipeline companies are coming to terms with significant supply growth expected between now and 2017. Companies that traditionally delivered natural gas to the Northeast from outside the region are busy reconfiguring their assets.
In two previous postings in this series we examined the major infrastructure projects being developed by interstate natural gas pipelines in response to the growth of Northeast natural gas production in the Marcellus shale. We reviewed projects developed by Tennessee Gas Pipeline (TGP), and then Spectra Energy (see TGP and Spectra). This time we look at the projects being pursued by Williams Companies through it Transcontinental Gas Pipeline Company (Transco) and its Master Limited Partnership (MLP) Williams Partners.
Tuesday, 10/30/2012
Our thoughts and prayers are with the families and friends of those who lost their lives to Hurricane Sandy and to those dealing with the aftermath of the storm. |
On Monday as record setting Hurricane Sandy was plowing into the East Coast, another record was quietly being broken. That record was all time U.S. natural gas production. According to Bentek numbers it increased to 64.9 Bcf/d (total natural gas production less NGLs and other shrinkage, lower 48 states). It is kind of spooky that this occurred just before Halloween. That’s because back in August we noted that Halloween could be an important date for natural gas production. It turns out that is true, but not for the reasons we thought at the time. So today we return to our original analysis to see what has changed and examine the consequences for the upcoming natural gas heating season.
Tuesday, 10/16/2012
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.
Wednesday, 10/10/2012
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.
