RBN Energy

Thursday, 5/19/2022

The race is heating up for building natural gas pipeline takeaway capacity out of the Permian. Associated gas production from the crude-focused basin is at record highs this month and gaining momentum, which means that without additional pipeline capacity, the Permian is headed for serious pipeline constraints — and potentially negative pricing — by late this year or early next, which would, in turn, limit crude oil production growth there. Midstreamers are jockeying for the pole position to move surplus gas from the increasingly constrained basin to LNG export markets along the Gulf Coast. One of the contenders, Matterhorn Express Pipeline (MXP), a joint venture (JV) between WhiteWater, EnLink Midstream Partners, Devon Energy and MPLX, announced its final investment decision (FID) late yesterday. In today’s RBN blog, we provide new details on the greenfield project.

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Daily energy Posts

Thursday, 04/28/2022
Category:
Natural Gas

Extreme blizzard conditions wreaked havoc on North Dakota energy infrastructure last weekend, taking offline as much as 60% of the state’s crude oil production and more than 80% of natural gas output, and leaving utility poles and power lines strewn across the landscape. On the gas side, the unprecedented supply loss is having a never-before-seen impact on regional and upstream flows and storage activity. It is also compounding maintenance-related production declines in other basins, leaving Lower 48 natural gas output at its lowest since early February. Moreover, the extent of the storm-related damage to local infrastructure could prolong the supply recovery. In today’s RBN blog, we break down the aftereffects of the offseason winter storm on regional gas market fundamentals.

Wednesday, 04/27/2022
Category:
Natural Gas

It’s been more than two months since Russia invaded Ukraine, sending global energy markets into chaos as most of Europe tries to figure out a way to quickly reduce its reliance on Russian supplies. The initial response from the U.S. and its allies was a slate of economic sanctions, but those largely left natural gas out of the equation, as parts of Europe are so dependent on Russian gas that stopping the flows would pose serious threats to the continent’s economies and energy security. Now, with no sign of an end to military hostilities and continual increases in the scope of sanctions, Russia is responding by starting to shut off flows to European countries that refuse to pay for their gas in rubles. Where is this headed? In today’s RBN blog, we look at the latest escalation, what led to this point and where the market might go from here.

Tuesday, 04/26/2022
Category:
Natural Gas

In response to Russia’s invasion of Ukraine, Europe is planning massive and rapid changes in its natural gas supply, including a significant increase in LNG deliveries from the U.S. But there are major challenges and implications associated with this shift. For example, how can the U.S. government prod U.S. exporters to send more LNG to Europe? How can LNG buyers — or sellers — collaborate without running afoul of European Union antitrust laws? Can the development of new LNG import terminals be fast-tracked? And can long-term contracts for Russian pipeline gas be breached without penalty now that Russia has suspended deliveries to Poland and Bulgaria for not paying in rubles? In today’s RBN blog, we discuss what U.S. and European efforts need to overcome.

Monday, 04/25/2022
Category:
Natural Gas

Despite the highest natural gas futures prices in over a decade, its use for power generation in the Lower 48 has set records in recent months. This is in part by design: economics and environmental regulation have broadly favored gas-fired plants and pushed into retirement hundreds of coal-fired plants in the last decade or so, reducing price-driven fuel-switching capabilities between the two fuels. However, there’s more to it than that: a tight coal market, marked by low stockpiles, high export demand and record high prices, is limiting gas-to-coal switching even further, making gas burn for power much more inelastic to price. In today’s RBN blog, we take a closer look at this key intersection of the gas and coal markets.

Friday, 04/22/2022
Category:
Financial

The 43 large U.S. E&Ps that we monitor posted record earnings in 2021 and tripled their cash flow — an extraordinary turnaround from a very tough 2020. But as big a story, at least for investors, is how those oil and gas producers are allocating their surging cash reserves. Their dramatic strategic transformation from growth at any cost to maximizing returns is expected to result in 2022 yields approaching 10% for some E&Ps, rates higher than the much broader S&P 500 sector and more than double the payouts of the oil majors, the former dividend kings. In today’s RBN blog, we discuss the cash-flow allocation of the major E&P companies and explain what it means for investors.

Thursday, 04/21/2022
Category:
Natural Gas

The U.S. and its European allies have been working on ways to move away from Russian energy supplies after Russia’s invasion of Ukraine, with increased LNG exports to Europe expected to play an important role in that transition. And with global demand for LNG at an all-time high, it has put some important U.S. export projects closer to reaching a final investment decision (FID).  But even with U.S. LNG production surging, questions remain about how much more LNG Europe can realistically handle. Warning — today’s RBN blog is an advertorial in which we discuss the highlights from our new Drill Down Report on the global LNG market. 

Wednesday, 04/20/2022
Category:
Natural Gas

Increasing global LNG supplies has become of paramount importance given Europe’s decision to move away from pipelined imports of Russian natural gas. As such, any and all LNG export projects — from the expansion of existing sites to proposals for greenfield terminals — are getting a fresh look. As always, though, only the projects that make the most economic sense are likely to advance to a final investment decision (FID), construction and operation. Which raises the question, where do things stand with the handful of LNG export terminals proposed for Eastern Canada, which offers the shortest, most direct access to Europe? In today’s RBN blog, we conclude our series on Canada’s LNG export potential by assessing several greenfield export sites on its East Coast.

Tuesday, 04/19/2022
Category:
Natural Gas Liquids

It’s no secret that higher gasoline prices are a problem for a lot of folks, including everyday drivers, businesses and — maybe especially — the politicians who hear the complaints from the first two. Although prices at the pump have been trending higher for some time, they’ve really come to the forefront in the past several weeks following Russia’s invasion of Ukraine, which has stressed global energy markets and sent U.S. officials looking for any and all options to keep a lid on prices. In today’s RBN blog, we look at President Biden’s decision to allow the sale of E15 gasoline during the summer months, whether it’s likely to provide U.S. drivers significant relief from high prices this summer, and how global pressures are moving ethanol prices higher too.

Monday, 04/18/2022
Category:
Crude Oil

Vladimir Putin’s fateful decision to invade Ukraine and the ongoing brutality have made Russia a pariah state to many leading hydrocarbon-consuming nations, which in turn has caused cuts in Russian crude oil production and exports. That raises a few important questions, chief among them the degree to which other producers — including the U.S. and the non-Russian members of OPEC+ –– can ramp up their production and displace Russian oil. U.S. output has been increasing recently, albeit only gradually, and production could rise much more quickly under the right circumstances. But if it does, would there be enough crude export capacity available along the Gulf Coast to handle, say, another 500 Mb/d or 1 MMb/d? In today’s RBN blog, we examine the ability of key U.S. export facilities to stage, load and ship out increasing volumes of oil.

Sunday, 04/17/2022
Category:
Natural Gas

Massive LNG export terminals and shipments to Europe get all the attention these days, and for good reason. But there’s a lot more going on with U.S. LNG below the radar, and on a much smaller scale. Peak-shaving liquefaction plants to help gas-distribution utilities up north keep the lights on during high winter demand periods. Plants that make LNG for a wide variety of industrial, mining and oil-and-gas-production customers, and for LNG-powered trucks and ships — often to help reduce emissions and meet ESG goals. And there are a number of small liquefaction plants in the U.S. that export LNG to power-generation and industrial customers in the Caribbean and Mexico. In today’s RBN blog, we begin a short series on an often-overlooked but important market for U.S. natural gas.

Thursday, 04/14/2022
Category:
Crude Oil

The battle lines were drawn. The drive toward decarbonization was rushing headlong into the reality of energy markets. Things were going to get messy, but at least it was becoming more evident how the energy transition would impact key market developments, from the chaos in European natural gas, to producer capital restraint in the oil patch, to the rising impact of renewable fuels and, of course, the escalating roadblocks to pipeline construction. Then, a monkey wrench was thrown into the works. The world was confronted with the madness of war in Europe, with all sorts of consequences for energy markets: sanctions, boycotts, cutbacks, strategic releases, price spikes and, here in the U.S., what looks to be a softening of the Biden administration’s view against hydrocarbons — at least natural gas and LNG. So now the markets for crude oil, natural gas and NGLs aren’t only inextricably tied to renewables, decarbonization and sustainability, they must navigate the transition turmoil under the cloud of wartime disruptions. It’s simply impossible to understand energy market behavior without having a solid grasp of how these factors are linked together. That is what School of Energy Spring 2022 is all about! In the encore edition of today’s RBN blog — a blatant advertorial — we’ll highlight how our upcoming conference integrates existing, war-impacted market dynamics with prospects for the energy transition.

Wednesday, 04/13/2022
Category:
Crude Oil

Increases in crude oil and gasoline prices have caused widespread concern in recent months, made worse after Russia’s invasion of Ukraine that added even more uncertainty to the market. With the average U.S. price for regular gasoline now topping $4/gal — nearly 50% above where it was a year ago — the rising fuel costs have been especially painful for everyday drivers and threaten to slow or derail a global economy still recovering from the pandemic-induced recession. Government officials in the U.S. and elsewhere, while urging oil producers to ramp up output, have turned to their strategic reserves as a way to quickly balance the market and rein in prices. In today’s RBN blog, we look at the International Energy Agency’s (IEA) latest announced release from oil reserves, how the global drawdowns are intended to create a bridge to when increased production comes online, and the skepticism about whether those plans will work out as intended.

Tuesday, 04/12/2022
Category:
Renewables

Much like baling out a flooded basement with a spoon or shoveling the driveway in the middle of a snowstorm, carbon-capture projects to date have had minimal impact at best on the bigger goal of reducing global greenhouse gas (GHG) emissions and removing carbon dioxide (CO2) from the atmosphere. But an ExxonMobil-led project that’s taking shape in and around Houston could soon set a new mark for the scale at which carbon-capture projects operate. The plan calls for capturing, gathering, compressing and sequestering up to 50 million metric tons per annum (MMtpa) of CO2 by 2030, and up to twice that much by 2040 — enough to start making a real dent in Gulf Coast CO2 emissions. In today’s RBN blog, we take a closer look at the biggest carbon-capture project currently taking shape: ExxonMobil’s proposed Houston CCS Innovation Zone.

Monday, 04/11/2022
Category:
Natural Gas

Prompt CME/NYMEX Henry Hub natural gas futures prices averaged $4.54/MMBtu this winter, up 67% from $2.73/MMBtu in the winter of 2020-21 and the highest since the winter of 2009-10. Prices have barreled even higher in recent days, despite the onset of the lower-demand shoulder season, with the May contract hitting $6.643/MMBtu on Monday, the highest since November 2008 and up more than $1 from where the April futures contract expired a couple of weeks ago. Europe’s push to reduce reliance on Russian natural gas has turned the spotlight on U.S. LNG exports and their role in driving up domestic natural gas prices. However, a closer look at the Lower 48 supply-demand balance this winter vs. last suggests that near-record domestic demand, along with tepid production growth, also played a significant role in drawing down the storage inventory and tightening the balance. Today’s RBN blog breaks down the gas supply-demand factors that shaped the withdrawal season and contributed to the current price environment.

Friday, 04/08/2022
Category:
Renewables

On March 24, 2022, in the wake of the still-unfolding crisis in Ukraine, “energy and climate ministers” from 40 countries convened in Paris for an International Energy Agency summit to send a “strong message of unity” regarding energy security and to issue a consensus on accelerating “clean energy transitions worldwide.” But there are already strong signals that accelerating the construction of solar and wind power systems, battery storage and electric vehicles (EVs) won’t be easy and won’t be cheap. One of the greatest challenges ahead is this: The minerals and metals that will be needed to build it all may not be available in the massive, almost unthinkable volumes that will be required. And the materials that will be available may cost a lot more — maybe even enough to force a scale-back of energy transition goals. There was already evidence of impending shortages and higher prices well before Ukraine was invaded by Russia. And the price inflation has worsened considerably since then, in part because Russia is a major supplier of many key commodities. In today’s RBN blog, we discuss the major cost challenges of pursuing the energy transition.