Daily Energy Blog

With an announcement in late 2023 by Dow Chemical that it would be undertaking an enormous expansion of its ethylene production site in Fort Saskatchewan, AB, it was immediately clear that Alberta’s ethane supplies would need to increase by a significant 110 Mb/d. As we’ll discuss in today’s RBN blog, a deal was signed in February between Dow and Pembina Pipeline Corp. that calls for the midstreamer to provide up to 50 Mb/d of additional ethane supplies and, according to executives at Pembina’s investor day earlier this month, will require the company to invest between C$300 million (US$220 million) and C$500 million (US$367 million) to build out its existing NGL/ethane infrastructure.

Rome wasn’t built in a day and neither were the large, wellhead-to-market natural gas and NGL networks that Phillips 66 and a handful of other midstream empires have assembled — many of them targeting the all-important Permian. Now, P66 has reached an agreement to acquire Pinnacle Midstream, whose associated gas gathering system and gas processing complex in the heart of the Midland Basin nicely complement a host of other gathering and processing assets P66 controls through its majority stake in DCP Midstream. In today’s RBN blog, we’ll discuss P66’s planned purchase of Pinnacle Midstream and what it means for the Permian piece of the acquiring company’s broader natgas/NGL system. 

For years, the South Texas NGL market was a world of its own — a self-contained liquids ecosystem centered around the refineries and petrochemical plants in the Corpus Christi area. But that all changed about six years ago when EPIC Midstream built a new NGL pipeline from the Permian into Corpus and a new fractionator to process those liquids. Corpus morphed into a vibrant NGL market in its own right. But nothing with South Texas NGLs is easy. Before the EPIC system was even up and running, a consortium calling itself BANGL — short for Belvieu Alternative NGL — announced another pipeline to compete for Permian NGLs that would parallel EPIC’s route out of the Permian, but then make a hard left toward Sweeny and Texas City, setting up a battle of the pipes for Permian NGLs. 

Normal butane is an important gasoline blendstock, with a great combination of high octane and relatively low cost. It also has a high Reid vapor pressure, or RVP, which is a good news/bad news kind of thing because while regulators allow higher-RVP gasoline — that is, gasoline with higher levels of butane — to be sold during the colder months of the year, they forbid its sale during the warmer months, thereby forcing butane levels in gasoline to be kept to a minimum. As we discuss in today’s RBN blog, air-quality regulations and seasonal shifts in butane blending may add complexity to gasoline production and marketing, but they also create opportunities to increase gasoline supply and earn substantially larger profits through much of the year. 

Way back in 2018-19, U.S. NGL production was rising fast, new ethane-only steam crackers were coming online along the Gulf Coast, and new fractionation capacity wasn’t being added quickly enough — the capacity shortfall sent the NGL market into near-panic. Fast forward to now: NGL production is still rising but domestic demand is flat, resulting in an NGL-exports surge and a race to develop new export capacity. And fractionation capacity in Mont Belvieu and elsewhere? The market learned its lesson five years ago and, to avert another capacity crunch, midstream companies have been adding new fractionators at an almost frenetic pace. In today’s RBN blog, we discuss the ongoing fractionation-capacity buildout — and the need to quickly expand NGL export terminals. 

In North Dakota’s Bakken production region, crude oil is king. The light, sweet crude produced there is attractive to buyers in the Midwest and Gulf Coast and is the primary driver of producer economics in the basin. And when the crude is produced, it comes along with a healthy dose of NGL-rich associated natural gas. But while those are valuable products in their own right, providing economic uplift when sold, it’s a double-edged sword. Natural gas and NGL volumes are increasing rapidly and will soon test the limits of takeaway capacity, with the potential to disrupt not only those commodities but also the crude production with which they’re associated. In today’s RBN blog, we discuss three potential limitations faced by Bakken producers: natural gas pipeline capacity, NGL pipeline capacity and, at the fulcrum of those two, the Btu heat content of the gas being piped out of the basin. 

The demand for ethane by Alberta’s petrochemical industry has experienced a slow expansion in the past 20 or so years. However, that demand is likely to increase sharply by the end of the decade now that Dow Chemical has sanctioned a major expansion at its operations in Fort Saskatchewan, AB, that will more than double the site’s ethane requirements. As we discuss in today’s RBN blog, this will call for an “all-hands-on-deck” approach to increasing Alberta’s access to ethane supplies from numerous sources. 

After a roughly three-year wait for a critical state permit, Enbridge’s Great Lakes Tunnel and Pipe Replacement project for its Line 5 pipeline across the Straits of Mackinac in Michigan has taken a step forward. The Army Corps of Engineers’ permits for the tunnel project would seem to be the only major obstacle standing in the way of construction, but there may well be more challenges ahead. Like a few other oil and gas projects — namely, Mountain Valley Pipeline (MVP) and Dakota Access Pipeline (DAPL) — Line 5 has become entangled in controversy, including local opposition worried that a spill would irreparably damage their surroundings and spoil the state’s natural resources. In today’s RBN blog, we take a closer look at the Line 5 project, its next steps, and the opposition it continues to encounter. 

Since the start of the Shale Revolution 15 years ago, U.S. NGL production has increased by an extraordinary 260% to more than 6.5 MMb/d. And it’s not just NGL production that’s up sharply. So are exports of NGL purity products, especially LPG (propane and normal butane) and ethane. All that growth — and the growth that’s still to come — wouldn’t be possible without a seemingly non-stop expansion of NGL-related infrastructure. Everything from gas processing plants and NGL pipelines to salt-dome storage, fractionators and export docks. And much of that infrastructure is in the hands of just a few large midstream companies that over the years have developed “well-to-water” NGL networks that enable their owners to collect multiple fees along the NGL value chain. In today’s RBN blog, we discuss highlights from our new Drill Down Report on NGL networks. 

Gulf Coast LPG export capacity is tight again, and it’s going to get worse before it gets better — terminal capacity to load more barrels of propane and butane simply has not kept up with production gains. A number of new LPG dock expansions and greenfield projects are in the works, but they are 18 months or so away. In the meantime, production keeps rising, inventories are high, and it’s very unlikely we will see enough cold weather to balance the propane market. Bottom line: 2024 is shaping up to be a tough year for propane and butane prices. In today’s RBN blog, we examine what has been happening with exports, the looming dock capacity constraints, and the projects that will eventually relieve the imbalance. 

It’s the 10-year anniversary of a polar vortex winter that’s seared into the memories of every propaner who lived through it. Shortages. High prices. Government inquiries. Sure, there were difficulties during that winter in the markets for natural gas and fuel oil too, but it was particularly bad for propane. It seemed like a perfect storm hit the propane market right where it hurt the most — in the heart of propane country: the Upper Midwest and the Northeast. A lot has changed since then, but it’s important to look back at what went wrong, what’s been done to make a repeat of that chaotic winter far less likely, and what those events still mean for the propane market today. 

Since the start of the Shale Revolution 15 years ago, U.S. NGL production has increased by an extraordinary 260% to more than 6.5 MMb/d. And it’s not just NGL production that’s up sharply. So are exports of NGL purity products, especially LPG (propane and normal butane) and ethane. All that growth — and the growth that’s still to come — wouldn’t be possible without a seemingly non-stop expansion of NGL-related infrastructure. Everything from gas processing plants and NGL pipelines to salt-dome storage, fractionators and export docks. And much of that infrastructure is in the hands of just a few large midstream companies that over the years have developed “well-to-water” NGL networks that enable their owners to collect multiple fees along the NGL value chain. In today’s RBN blog, we discuss highlights from our new Drill Down Report on NGL networks. 

U.S. Gulf Coast LPG exports are sky-high, averaging just under 2 MMb/d in October, with nearly two-thirds of those volumes bound for Asia — a straight-shot trip once a Very Large Gas Carrier (VLGC) has passed through the Panama Canal. But an unprecedented dry spell has left the canal’s operators — and LPG shippers — in a real bind. The century-old maritime shortcut, which was expanded just a few years ago to accommodate more and larger vessels, uses massive amounts of fresh water, and to help conserve what’s left in the system’s main reservoir, the Panama Canal Authority (PCA) is ratcheting down how many ships can pass through each day. Worse yet, VLGCs are a low priority compared to other, larger vessels that pay higher tolls. That means that far fewer Asia-bound LPG ships will be using the Panama Canal for who knows how long. Instead, many shippers will need to make far longer, more costly trips through the Suez Canal or around the southern tip of Africa. In today’s RBN blog, we discuss what LPG shippers in particular are up against.

Crude-oil-focused production growth in the Permian is generating increasing volumes of associated gas that need to be processed and mixed NGLs that need to be piped to Mont Belvieu, fractionated and exported. All that suggests the need for still more infrastructure — processing plants, NGL pipelines, fractionators and export facilities — and Enterprise Products Partners, a top-tier NGL midstreamer, recently laid out a multibillion-dollar plan to help Permian producers keep pace. In today’s RBN blog, we discuss the new set of projects Enterprise has in the works. 

Phillips 66 is probably best known for its fleet of complex refineries, but the Houston-based company also is involved in marketing, chemicals and midstream services. In fact, P66 is one of only a handful of midstreamers offering the full range of “well-to-market” or “well-to-water” NGL services — everything from associated-gas gathering systems and gas processing to NGL pipelines, storage, fractionators and export facilities. And P66’s standing among NGL midstream providers has only been enhanced by the recent doubling of its ownership interest in DCP Midstream. In today’s RBN blog, we continue our series on major NGL networks with a look at P66’s NGL-related assets, most of which run from the Rockies, West Texas and South Texas to the NGL hubs in Mont Belvieu and Old Ocean, TX.