RBN Energy

Thursday, 2/02/2023

Pretty much everywhere you look, there’s a focus on decarbonizing the global economy, and a lot of those discussions start with the transportation sector. It generated 27% of U.S. greenhouse gas (GHG) emissions in 2020, putting it at the top of the list, just ahead of power generation and industrial production; combined, the three sectors account for more than three-quarters of the nation’s GHG emissions. For personal transportation, most of the attention has been on electric vehicles (EVs), but since the commercial transportation sector is largely powered by diesel and jet fuel, the push for decarbonization in trucking, air travel, and shipping has largely focused on ways to produce alternative fuels that reduce GHGs. Among those are ultra-low-carbon fuels called electrofuels, also referred to as eFuels, synthetic fuels, or Power-to-Liquids (PtL). In today’s RBN blog, we explain what eFuels are and how they compare to other alternatives, how they are produced, and what opportunity there might be to make a dent in the consumption of traditional transportation fuels.

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Daily Energy Blog

Wednesday, 02/01/2023
Category:
Natural Gas

Russia’s invasion of Ukraine last February upended long-standing expectations about natural gas supplies to Europe and resulted in elevated global gas prices as countries bid for LNG to fill the void. But U.S. suppliers can only produce so much LNG, and how much of it ends up in Europe versus Asia or other gas-consuming regions in 2023 and beyond will depend largely on market forces — in other words, who needs the LNG more and is willing to pay up for it. At the center of these market-based decisions about LNG cargo destinations are large portfolio players like Shell, BP, TotalEnergies and Naturgy and short-side portfolio players like Japan’s JERA. In today’s RBN blog we look at these two types of players, the roles they play, and their contributions to energy security.

Tuesday, 01/31/2023
Category:
Crude Oil

“Top-tier rock, massive scale, and ever-improving efficiency” — that’s the mantra of the largest publicly held E&Ps in the Permian, many of which have only added to their heft during the pandemic/post-pandemic era by acquiring complementary production and midstream assets from private equity funds and old-time oil-and-gas families. Yes, it’s either/or time in the U.S.’s leading oil and gas basin: Either you get bigger, high-grade the acreage you control and supercharge your free cash flow (and your stock buybacks and dividends) or you accept your fate as an also-ran or, if you’re lucky, an acquisition target. Just last week, Matador Resources announced a $1.6 billion deal to acquire Advance Energy Partners, which will boost Matador’s Delaware Basin output by 25% and give it a foothold in the Permian’s big-boy league. In today’s RBN blog, we discuss this and other recent asset acquisitions in West Texas and southeastern New Mexico and what they say about the Permian’s future.

Monday, 01/30/2023
Category:
Natural Gas

The Lower 48 natural gas market has had the most bearish start to a new year in a long time. Production has been at record highs, an exceptionally warm start to January suppressed demand, and LNG exports have been hobbled since last June when Freeport LNG went offline. The CME/NYMEX Henry Hub February gas futures contract slid to an 18-month low of $2.94/MMBtu last Thursday and expired Friday at $3.109/MMBtu, down 54% from where the prompt contract closed just two months earlier. The March contract extended the slide Monday to a 20-month low of $2.677/MMBtu. Freeport’s eventual return will restore existing export capacity, but there’s no new LNG export capacity due online this year — for the first time since 2016. After one of the tightest gas markets of the last decade in 2022, the stage is set for one of the most oversupplied markets we’ve seen in years. But the bulls out there can take solace: 2023 will also mark the final throes of the kind of oversupply conditions that defined the Shale Era as we know it. In today’s RBN blog, we discuss how we got here and RBN’s outlook for natural gas supply and demand.

Sunday, 01/29/2023
Category:
Natural Gas

For the past several years, Western Canada’s natural gas producers have been forced to sit on the sidelines of too many broader price rallies as their main benchmark, AECO, languished at painfully low levels. Though an increasing number of producers have been steadily diversifying their price exposure away from Western Canada and AECO, even greater pricing upside might be captured if marketing arrangements could be developed to access higher international LNG prices via U.S. Gulf Coast terminals. In today’s RBN blog, we look at the steps that two of Canada’s largest natural gas producers have taken to capture that LNG price upside.

Thursday, 01/26/2023
Category:
Natural Gas

We can’t conjure up a more old-school, more intrinsically American industry than whiskey-making, or more iconic whiskey names than Jack Daniel’s and Jim Beam — the latter, of course, being a bourbon, a particular type of whiskey. The recipes for both “Jack” and “Jim” have remained unchanged for generations and their distillers in Tennessee and Kentucky, respectively, are traditionalists to their core. That doesn’t mean, though, that they’re unaware of the need to reduce their greenhouse gas (GHG) emissions — or are blind to the opportunities that decarbonization may present. Now, as we discuss in today’s RBN blog, both Jack Daniel’s and Jim Beam are all-in on producing renewable natural gas (RNG) from spent grains.

Wednesday, 01/25/2023
Category:
Refined Fuels

If you buy premium gasoline, you’ve probably noticed its price differential versus regular has been increasing in recent years. That is a sign of the rising value of octane, the primary yardstick of gasoline quality and price. In this blog series we’ve examined a new gasoline sulfur specification called Tier 3, which is causing complications for U.S. refiners looking to balance octane and gasoline production while still meeting the regulatory limits on sulfur. In today’s RBN blog, the fourth and final on this topic, we provide an analysis of the obscure Sulfur Credit Averaging, Banking and Trading (ABT) system, which allows refiners to buy credits to stay in compliance with the Tier 3 specs. The price of these credits quintupled in 2022, another sign of a tight octane market that will be attracting increased attention in the months and years ahead.

Tuesday, 01/24/2023
Category:
Crude Oil

New, stiffer rules on well siting, drilling and production undoubtedly pose potential challenges to producers. After all, these changes typically impose further limits on what E&Ps can do on the acreage they control as well as new requirements. But like death and taxes, environmental regulation is a certainty that producers need to deal with and, if they’re lucky, they can find a way to work with new rules and minimize their impact on their businesses. That seems to be what’s happening in Colorado — home to the rebounding Denver-Julesburg (DJ) Basin and other production areas — which enacted a new oil and gas permitting law a couple of years ago and subsequently developed and implemented related regulations. As we discuss in today’s RBN blog, most producers seem to have figured out how to manage the new regs.

Monday, 01/23/2023
Category:
Crude Oil

Sixty percent of crude oil produced in the U.S. is exported, either as crude or in the form of gasoline, diesel, jet fuel or other petroleum products. Sure, a lot of crude and products are still imported, but the net import number is dwindling toward zero — and if you throw NGLs into the liquid fuels balance, the U.S. has been a net exporter since 2020. Yes, exports are now calling the shots in U.S. liquid fuel flow patterns, price differentials, infrastructure utilization and, to a great extent, the winners and losers in crude oil and product markets. It’s going to get way more intense as export economics increasingly dominate which pipelines, refineries and port facilities capture production growth from the Permian and other basins. In today’s RBN blog, we begin a series to explore this revolutionary shift in fortunes, why barrels move where they do and what it all means for U.S. producers, midstreamers, refiners, marketers, and exporters. And a warning! This is a subliminal advertorial for our upcoming xPortCon-Oil conference.

Sunday, 01/22/2023
Category:
Natural Gas

With the war in Ukraine ongoing and Europe largely cut off or quitting Russian natural gas imports, many feared that global gas prices would skyrocket this winter, but prices have fizzled out instead and are at their lowest level since September 2021. That’s not to say gas prices are low, as they are still well above historic norms and high enough to incentivize LNG imports and the development of future LNG capacity. But despite losing its largest gas supplier, and prices running up in the months ahead of this winter, Europe appears to be in much better shape than it was last winter and gas prices have been relatively calm and on the downswing. So why is that? The difference between this winter and last largely boils down to storage inventories and the ability to attract LNG cargoes. In today’s RBN blog, we look at the European gas market, the impact of U.S. LNG supplies, and what it all means for developing LNG projects.

Thursday, 01/19/2023
Category:
Renewables

If the world is going to reduce greenhouse gas (GHG) emissions to net-zero levels by 2050, a lot of things need to go right, with the success of the International Energy Agency’s (IEA) long-term plan balancing on three different pillars. First, there are emissions reductions from improvements to fossil fuels and processes, such as power generation and industrial production. Next, there are advancements in bioenergy, a category that includes biofuels like ethanol, sustainable aviation fuel (SAF), and renewable diesel (RD). And then there’s direct air capture (DAC) — a minor factor so far, but one with the potential for significant growth, especially given the billions in U.S. funding already set aside for it. In today’s RBN blog, we look at U.S. plans to develop four regional DAC hubs, how those proposals will be evaluated, and the likely timeline for their development.

Wednesday, 01/18/2023
Category:
Natural Gas Liquids

What’s the fastest-growing U.S. hydrocarbon? You guessed it — ethane. Since 2016, ethane production has grown at almost 2.5 times the rate of crude oil or natural gas and 1.5X that of other natural gas liquids (NGLs). And there’s a lot more upside potential where that came from. It’s entirely demand-pull, meaning that U.S. ethane production growth is being driven by increasing domestic and export demand for the petrochemical feedstock. Shell’s new steam cracker in Pennsylvania is online, CP Chem and Qatar Energy are planning a new cracker in Orange, TX, and other projects are in the works. On the exports front, both Enterprise and Energy Transfer announced export-terminal-expansion projects in 2022. All this new ethane demand needs supply, and fortunately the U.S. has the barrels, not only from ever-increasing NGL production, but also from ethane that today is being rejected and sold as natural gas. And the markets will need new pipes, fractionators, and ships to get that ethane to market. With today’s RBN blog, we begin a series to explore what these developments mean for U.S. ethane market players.

Tuesday, 01/17/2023
Category:
Natural Gas

If pipeline-constrained Haynesville Shale producers’ New Year’s resolution was to grow volumes, they just got a big boost: Energy Transfer recently placed in service its new Gulf Run Transmission natural gas pipeline in Louisiana, increasing north-to-south capacity in the state by 1.65 Bcf/d. It’s the first of several pipeline projects due online in 2023 — and among others proposed for subsequent years — that will be critical for debottlenecking the Louisiana pipeline network and connecting Haynesville and other gas production volumes to LNG export projects vying for feedgas supply on the Louisiana coast. U.S. LNG developers are in a race to capitalize on the tight global LNG market and finalize terminal plans, with much of the next wave of liquefaction and export capacity additions planned for the Louisiana coast which may, in time, help alleviate energy security concerns, particularly across the pond in Europe. If these pipeline projects don’t get built on time, the resulting supply shortage in southern Louisiana would not only wreak havoc on Henry Hub and the domestic gas market but would reverberate around the globe. Gulf Run’s in-service is good news for at least one facility: the under-construction Golden Pass LNG, which is the anchor shipper on the pipeline and due to begin commissioning later this year. In today’s blog, we look at what the new capacity could mean for flows and production growth in the short- and long-term.

Monday, 01/16/2023
Category:
Renewables

The U.S. has committed billions of dollars over the last couple of years to clean-energy initiatives, everything from advanced fuels and carbon-capture technology to renewable energy and electric vehicles. The “all-of-the-above” approach also includes clean hydrogen, whose development the U.S. Department of Energy (DOE) has deemed crucial to meeting the Biden administration’s goals of a 100% clean electric grid by 2035 and net-zero carbon emissions by 2050. As part of its efforts, the U.S. plans to provide generous financial support for the buildout of several hydrogen hubs — initial concept papers were submitted last year by dozens of applicants for the federal largesse, and the DOE recently provided formal “encouragement” to 33 proponents to submit a full application this spring, in what amounts to an informal cutdown, but declined to name them. In today’s RBN blog, we examine the 18 projects we’ve been able to identify that survived the trimming, what they tell us about the selection process, and how it compares to our previous expectations.

Sunday, 01/15/2023
Category:
Crude Oil

Worried about 2023? Well, you’ve got good reason to be. This year energy markets are at the mercy of a hot war in Europe, the threat of a global recession, looming China/Taiwan hostilities, the impending onslaught of new energy transition programs from recent legislation, and all sorts of other random black swans paddling around out there. With so much uncertainty ahead, predictions this year would be just crazy talk, right? Nah. No mere market murkiness will dissuade RBN from sticking our collective necks out to peer into our crystal ball one more time. Let’s hope it’s no bad bunny.

Thursday, 01/12/2023
Category:
Refined Fuels

Senior refining executives were called to Washington, DC, in June, around the time U.S. gas prices hit their high-water mark for the year, as the government sought recommendations about how to increase the supply of gasoline. One suggestion made to Secretary of Energy Jennifer Granholm was to relax sulfur specifications on fuels, including the Tier 3 gasoline sulfur specifications. But what is the connection between those rules and the U.S. refining system’s ability to produce gasoline? In today’s RBN blog, we explain how the Tier 3 rules constrain gasoline supply capacity in the U.S. and discuss ways to break free from those chains.