RBN Energy

Thursday, 2/27/2020

The Bakken was among the first plays to benefit big-time from the Shale Revolution, experiencing a 400%-plus increase in crude production in the first half of the 2010s. The play has had more than its share of challenges, however, including a serious lack of takeaway capacity that spurred the first rapid deployment of modern-day crude-by-rail, followed by a rig-count collapse and major production decline after the mid-decade crash in oil prices. But the Bakken has been roaring back. Crude output there now tops 1.5 MMb/d — some 250 Mb/d higher than its late-2014 peak — and producers have been planning for continued production growth in 2020, though many may be reassessing those plans in light of this week’s coronavirus-related price slide. In any case, production growth is only possible if there’s sufficient gathering infrastructure in place to handle it. Today, we continue our series on crude-related infrastructure in western North Dakota with a look at a leading Bakken midstreamer’s assets.

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Daily energy Posts

Monday, 01/13/2020
Category:
Crude Oil

Occidental Petroleum’s recent acquisition of Anadarko Petroleum made Oxy the #1 producer in the Denver-Julesburg (D-J) Basin and gave it a majority stake in Western Midstream Partners, which owns crude-gathering and other midstream assets in the D-J, the Permian and the Marcellus. While Western Midstream’s gathering focus had been on helping Anadarko meet its own midstream needs, Oxy sees the partnership taking on a broader role as a provider of gathering services to third parties as well. Toward that end, Oxy and Western Midstream a few days ago announced a series of agreements designed to allow Western Midstream to operate as an independent company. Today, we continue a series on crude-related infrastructure in the D-J with a look at Western Midstream’s gathering and related assets owned in part by the basin’s largest oil, natural gas and NGL producer.

Sunday, 01/12/2020
Category:
Natural Gas

This year looks like it could be a better one for many Canadian natural gas producers. Like their brethren in the U.S., they have been forced in recent years to increasingly spend within — and even less than — cash flow as other sources of financing have dried up and investors have prioritized better returns over production volume growth. With Canadian gas producers having also faced some of the worst natural gas pricing conditions on record in 2019, far worse than those in the U.S., it is no wonder that Canadian natural gas supplies pulled back in 2019, marking the first down year for overall gas supplies since 2012. Despite what is likely still to be a cash flow and spending constrained environment in 2020, there is the potential for real upside for Western Canadian natural gas supplies this year, especially for the supply that flows into TC Energy’s Nova pipeline system. Today, we consider what may be setting the stage for gas supply gains on the Nova system in 2020 after a somewhat dismal 2019.

Thursday, 01/09/2020
Category:
Natural Gas

Southern California is poised to have greater natural gas supply flexibility this winter, buoyed by improved access to local storage and the completion of repairs on an important inbound pipeline. Ongoing pipeline outages and maintenance had limited flows over the past few years, creating supply constraints that were then compounded by restricted access to the Aliso Canyon storage field. This led to major volatility in gas prices, which spiked as high as $39/MMBtu in July 2018. Recent repairs and regulatory changes aim to alleviate the situation and limit the likelihood of dramatic pricing moves during the 2019-20 winter season. Today, we provide an overview of recent developments in the SoCal gas market.

Wednesday, 01/08/2020
Category:
Natural Gas

After showing relative strength through most of the fall, prices at the UK’s National Balancing Point (NBP) natural gas benchmark collapsed by more than $1/MMBtu in December and have kept falling, and Asia’s Japan-Korea Marker (JKM) index followed suit to some degree. Nevertheless, U.S. LNG export cargoes were at record highs in December as additional liquefaction and export capacity came online last month, including the first LNG export cargoes from the Elba Liquefaction project as well as Freeport LNG’s Train 2. Moreover, U.S. shipments are expected to climb further in the New Year as still more liquefaction trains are completed. While the global price spreads haven’t deterred U.S. exports, they, along with shipping costs, do influence export economics and cargo destinations. Today, we wrap up this series with a look at how LNG export costs interact with global price spreads and impact cargo destinations.

Tuesday, 01/07/2020
Category:
Financial

For much of the 2010s, the U.S. midstream sector has been on a development spree. New or expanded everything — pipelines, gas processing plants, fractionators, storage facilities, liquefaction trains, export terminals and more — all to keep pace with the production gains of the Shale Era. But now, at the start of the 2020s, the build-out frenzy appears to be fizzling and flickering. Midstreamers’ capital spending plans are on the decline, at least for now, as most of the infrastructure needed to handle current and expected volumes for the next few years is either in place or under construction. But that doesn’t mean things won’t stay interesting — far from it. This new decade brings with it a period of midstream-sector strategizing and portfolio rejiggering. Today, we discuss highlights from East Daley Capital’s newly released “Dirty Little Secrets” report about the next phase of midstream strategy.

Monday, 01/06/2020
Category:
Crude Oil

With 2020 already in full swing, some things in the Permian Basin’s oil and natural gas markets have changed dramatically since this time last year, others not so much. When it comes to crude oil, new pipelines that came online during 2019 had a huge impact on differentials: Permian barrels are now pricing very close to other regional hubs, versus massive discounts a year ago. That has enabled Permian producers to fully benefit from the recent run-up in global oil prices. On the gas side of things, the start of the new decade won’t look much different than the end of the last one. There is still way too much supply and not enough takeaway capacity. That means that regardless of what happens at Henry Hub, the U.S. benchmark for natural gas prices, Permian producers should expect dismal values for their natural gas in 2020. Today, we take a look at the year ahead for Permian producers.

Sunday, 01/05/2020
Category:
Crude Oil

For the first time since late September 2013, the ratio of crude oil to natural gas (CME/NYMEX) futures on Friday hit 30X. That means the price of crude oil in $/bbl was 30 times the price of natural gas in $/MMBtu. Such a wide disparity in the value of the liquid hydrocarbon versus the gaseous hydrocarbon has huge implications for where producers will be drilling, the proportion of associated and wet gas that will be produced, the outlook for NGL production, and a host of other energy market developments. The ratio has been moving higher for the past couple of years, and recently has been boosted by the combined impact of increased tension in the Middle East (higher oil prices) and a warm winter so far in many of the largest gas-burning population centers in the U.S (lower gas prices). But it’s pretty likely that the trend will be with us for the long term. So today, we’ll begin a series that looks at the implications of this price relationship.

Thursday, 01/02/2020
Category:
Crude Oil

Crude oil trading dynamics in West Texas and along the Texas Gulf Coast have experienced a whirlwind of change. Permian production was skyrocketing in 2018, but has now started to slow. It seemed for a time that crude takeaway pipeline capacity wouldn’t get built fast enough; now it looks like we’ll have far too much too soon. And along the coast, the once-overlooked Port of Corpus Christi is quickly becoming the epicenter of export activity, overtaking Houston, Beaumont and Louisiana — sometimes all three combined — for most volume moved on a monthly basis. With new export terminals coming online and increased connectivity, Corpus appears poised to continue its recent string of record-setting export numbers. In today’s blog, we review some recent breakthroughs in Corpus cargoes and shine a light on the new terminals in the area.

Wednesday, 01/01/2020
Category:
Crude Oil

Negative Permian gas prices. Wall Street sours on all things energy. E&Ps and midstreamers forced by capital markets to tighten their belts. Infrastructure coming online just as production growth is slowing. Oil, gas and NGLs totally dependent on export markets to balance. The list goes on. Just as producers and midstreamers came to terms with a new normal for oil and gas prices, this new round of challenges hit the market in 2019. And it is going to get a lot more complicated as we enter the new decade. There is just no way to predict what is going to happen next, right? Nah. All we need to do is stick our collective RBN necks out one more time, peer into our crystal ball, and see what 2020 has in store for us.

Monday, 12/30/2019
Category:
Crude Oil

December 2019 U.S. crude oil production soared 1.1 MMb/d above this time last year to 12.8 MMb/d. It’s a similar story for natural gas, with Lower-48 production climbing to 95 Bcf/d, up 6 Bcf/d over the year. That’s a little off the breakneck growth rate of 2018, but still quite healthy, even in the context of Shale Era increases. And it all happened in the face of continued infrastructure constraints, crude prices that fell from the mid-$60s/bbl in April to average $55/bbl from May through October, and gas prices that in several months were crushed to the lowest level in 20 years. It’s all too much supply to be absorbed by the U.S. domestic market. And that means more pipes to get the supply to the Gulf Coast and more export facilities to get the volumes on the water. What has all this meant for the market’s response to these developments? Well, at RBN we have a way to track that. We scrupulously monitor the website “hit rate” of the RBN blogs fired off to about 28,000 people each day and, at the end of each year, we look back to see which topics generated the most interest from you, our readers. That hit rate reveals a lot about major market trends. So, once again, we look into the rearview mirror to check out the top blogs of the year based on the number of rbnenergy.com website hits.

Sunday, 12/29/2019
Category:
Crude Oil

It’s safe to say that Permian producers had a good Christmas. Sure, their stock prices may be off a bit and their rig counts are down. But the absolute prices they are paid for their crude oil are up by almost $20/bbl versus this time in December 2018, and the price spreads between the Permian and neighboring markets have significantly narrowed as a result. What’s driving this change? There are a variety of factors at play, but chief among them is the new pipeline infrastructure that has helped lift Permian producers’ oil price realizations. Today, we check in on the status of one of the major new pipelines that have contributed to the seismic shift in the Permian oil market this year.

Thursday, 12/26/2019
Category:
Natural Gas Liquids

Over the past two years, MPLX has been ramping up its midstream development activity in the Lone Star State, or more specifically in the “Permian-to-Gulf” market, where it’s been building or buying into gathering systems, gas processing plants, and crude and natural gas takeaway pipelines, among other things. Marathon Petroleum Corp.’s midstream-focused master limited partnership also has been in hot pursuit of a number of possible NGL-related projects, including MPLX’s proposed Belvieu Alternative NGL (BANGL) Pipeline and three big fractionation plants in the Sweeny, TX, area, and a planned LPG export terminal in Texas City, TX. As a group, these projects would require millions of barrels of underground salt-cavern storage capacity for y-grade and NGL purity products along the Texas coast, as well as multiple pipeline connections to move the stuff to where it needs to be. Today, we continue our series on Gulf Coast NGL storage with a look at the NGL side of the MLP’s Permian-to-Gulf strategy.

Wednesday, 12/25/2019
Category:
Petroleum Products

It’s been more than three years since the International Maritime Organization (IMO) fully committed to the January 1, 2020, implementation of IMO 2020, a rule that slashes the allowable sulfur content in bunker fuel used in the open seas around most of the world from 3.5% to only 0.5%. There’s been a lot of angst in the interim, most of it regarding the changes in crude slates, refinery operations and fuel blending needed to meet a flip-of-a-switch spike in global demand for low-sulfur bunker. Also, shippers worried that prices for rule-compliant fuel would go through the roof. Well, it turns out that the transition period in the months leading up to the IMO 2020 era has been largely drama-free. Supplies of very low-sulfur fuel oil (VLSFO) and marine gasoil (MGO) — the bunker most ships will now use — have been building in most places, prices are up but moderating, and while there may be a few hiccups as ships shift to new, cleaner fuels, life will go on. Heck, life will likely be even better for most complex U.S. refineries, which can churn out large volumes of low-sulfur refined products and which will have access to price-discounted high-sulfur “resid” as an intermediate feedstock. Today, we take a big-picture look at the global bunker market as IMO 2020’s implementation day approaches.

Monday, 12/23/2019
Category:
Natural Gas Liquids

Much as production growth in the Permian required the development of new pipeline capacity to take away crude oil, natural gas and NGLs, increasing activity in the Williston Basin has spurred the need for incremental capacity to move all three of the energy commodities out of western North Dakota and eastern Montana. For NGLs, the recent start-up of ONEOK’s Elk Creek Pipeline has been the answer to producers’ prayers — not just in the Williston Basin (home of the Bakken formation), but also in the Rockies’ Powder River and the Denver-Julesburg (D-J) basins, through which the new, 240-Mb/d pipeline passes on its way to Bushton, KS. Elk Creek’s timing couldn’t have been better: it came online just as a number of new gas processing plants entered commercial service in the Williston Basin, and just in advance of possible Btu restrictions on the all-important Northern Border gas pipeline that may force cutbacks in ethane rejection. Today, we explain why the Elk Creek NGL Pipeline helps resolve a number of challenges Bakken producers have been facing.

Sunday, 12/22/2019
Category:
Crude Oil

The battle for pipeline supremacy in the Permian is really heating up. From Cactus II, to EPIC, to Gray Oak, to a bevy of upcoming expansions and a couple of longer-term behemoth greenfield projects, there are multiple new takeaway options for Permian producers. But could it all be coming online at the wrong time? If there’s one thing we’ve learned from third-quarter earnings calls and recent conversations with producers, it’s that balance-sheet management and fiscal conservativism are top of mind right now. As a result, drilling plans and production growth expectations have been tamped down considerably for 2020 and beyond. Midstreamers and pipeline companies in the Permian are responding quickly. Tariffs are being slashed, margins are getting cut, and competition for West Texas barrels is fierce. Today, we look at recent developments and what they’ll mean for revenues and market differentials heading into the New Year.