RBN Energy

Thursday, 8/16/2018

The countdown clock to January 1, 2020 — Implementation Day for the IMO 2020 rule on low-sulfur marine fuel — is ticking, and while that date may still seem far away, it is decidedly not. The impending switch from 3.5%-sulfur fuel oil to marine fuel with sulfur content no higher than 0.5% will affect a broad swath of the energy sector worldwide, not to mention consumers of diesel and other low-sulfur distillates that will be in much higher demand by this time next year as the run-up to IMO 2020 kicks into high gear. Already, complex and simple refineries alike are evaluating changes to their crude slates and planning to add equipment that will enable them to produce more high-value distillate and less “bottom-of-the-barrel” residual fuel oil, the source of high-sulfur marine fuel. U.S. midstream companies are gearing up to export more light, sweet crude from the Permian and other shale and tight-oil plays to simple refineries that will no longer be able to get by refining heavy, sour crudes. Marine-fuel suppliers are testing various blends to see which might produce IMO 2020-compliant fuel at the lowest cost. As for ship owners, they’re preparing for topsy-turvy fuel prices in late 2019 and 2020 as this wrenching change plays out. Today, we consider key market participants’ latest thinking on the likely effects of the new rule for low-sulfur marine fuel.

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Gusher Report Gusher - August 15, 2018 1 day 16 hours ago

Daily energy Posts

Tuesday, 08/14/2018

A perfect storm of hot weather, transportation constraints and limits on storage use recently sent natural gas prices in Southern California surging to the highest levels seen in that market going back to at least 2007. Spot prices at the SoCal Citygate hub averaged close to $40/MMBtu in late July and were again up over $20/MMBtu last week, levels that were several times higher than the national benchmark Henry Hub — and, for that matter, every other U.S. market hub — on the same day. Prices since then have retreated, but the whipsawing price action raises questions about what’s in store for SoCal this coming winter. Today, we analyze the factors behind the recent record prices and prospects for continued volatility at SoCal.

Sunday, 08/05/2018

Constructing greenfield pipelines is never easy — just ask any midstream developer you know — but building them across the breadth of Texas comes with its own unique challenges. There’s distance, for starters, and today’s massive associated gas growth in the Permian Basin is occurring more than 400 miles from the closest demand along the Gulf Coast. That makes the pipelines relatively expensive at somewhere near $2 billion a copy. Integrating Permian supply with Gulf Coast demand also requires a big network of pipelines along the coast, as the demand is spread out from Louisiana to Mexico. Few midstream companies have such a network. Kinder Morgan does, one reason why, in our view, the Gulf Coast Express project was the first — and to-date the only — greenfield project from the Permian to proceed with a final investment decision. In the race to be the next Permian natural gas relief valve pipeline, the same hurdles will have to be overcome. On Friday, news came that a group of four companies is planning the Whistler Pipeline, and a closer look at the project reveals it may be capable of meeting the challenges needed to make it a serious player in the Permian pipeline race. Today, we look at the details of the latest Permian natural gas pipeline project.

Thursday, 08/02/2018

A big push is on to mitigate and ultimately fix the Permian’s natural gas takeaway constraints, which in recent months have widened the price spread between gas at Waha and at Henry Hub to levels not seen in years. Despite the efforts to quickly add incremental capacity to existing pipelines and build greenfield pipes, however, the momentum behind Permian crude production growth — and, with it, the production of more associated gas — make a months-long blowout in the Waha basis in 2019 a good bet.  Questions about the degree and duration of that basis pain and the amount of new pipeline capacity that will be needed (and how soon) can only be answered by taking a detailed look at what’s been happening and what’s being planned. Today, we discuss highlights from our new 24-page report on Permian gas takeaway constraints and their effects.

Sunday, 07/29/2018

Federal regulators are preparing to accelerate their review of a wave of applications to build new liquefaction plants and LNG export terminals — most of them sited along the Gulf Coast and scheduled for commercial start-up in the early 2020s. Only a few of the multibillion-dollar projects are likely to advance to final investment decisions (FID), construction and operation, but even they will have profound impacts on U.S. natural gas production, pipeline flows, and the global LNG market. Today, we begin a look at projects still awaiting FIDs, their developers’ efforts to line up Sales and Purchase Agreements (SPAs), and the Federal Energy Regulatory Commission’s (FERC) push to review project applications in a timely manner. Warning: this blog includes a few ever-so-subtle promotions for RBN’s new LNG Voyager Report.

Wednesday, 07/25/2018

After idling near the 4.6-Bcf/d level for months, piped gas flows to Mexico raced to a record of more than 5 Bcf/d for the first time earlier in July, and have hung on to that level since. This new export volume signifies incremental demand for the U.S. gas market at a time when the domestic storage inventory is already approaching the five-year low. At the same time, it would also signify some much-needed relief for Permian producers hoping to avert disastrous takeaway constraints — that is, if the export growth is happening where it’s needed the most, from West Texas. However, that’s not exactly the case. What’s behind the sudden increase, where is it happening and what are the prospects for continued growth near-term? Today, we analyze the recent trends in exports to Mexico.

Sunday, 07/22/2018

Permian producers continue to walk a tightrope, almost perfectly balanced between still-rising production of natural gas and the availability of gas pipeline takeaway capacity to transport that gas to market. Don’t get us wrong. There are gas takeaway constraints out of the Permian, as evidenced by a Waha cash basis that averaged more than 50 cents/MMBtu last week. But a combination of factors — including increased flows to Mexico and a couple of small, under-the-radar expansions of existing takeaway pipes — has prevented the Waha basis from tumbling to $1 or even $2/MMBtu. But that big fall may still happen — in fact, you could say that odds are that severe takeaway constraints and differential blowouts will occur within the next few months. If and when that happens, what can producers do to quickly regain their balance? Today, we discuss recent developments in Permian gas markets and the options that producers, gas processors and midstream companies may need to consider if things get really tight.

Thursday, 07/19/2018

Despite intensifying competition from U.S. natural gas producers — or because of it — Western Canadian gas producers are ramping up their long-term commitments for intra-basin takeaway capacity from the Montney Shale, as well as for capacity at both intra-provincial and export delivery points. Not only has there been a slew of new project announcements in the region, but in some cases, commitments reportedly have exceeded proposed capacity during open seasons. Today, we provide an update of gas pipeline expansion projects in Western Canada.

Thursday, 07/12/2018

Lower 48 dry gas production has climbed 3 Bcf/d since April to nearly 82 Bcf/d this month to date, which is an average ~9 Bcf/d — or 12% — higher year-on-year. Despite that meteoric rise in supply, the U.S. gas storage inventory, which started the injection season well below year-ago and five-year average levels, continues to carry a substantial deficit. That’s because record demand volumes thus far have managed to keep storage injections in check. Today, we provide an update of the demand factors affecting the 2018 gas injection season.

Wednesday, 07/11/2018

The slower-than-hoped-for build-out of natural gas pipelines and gas-fired power plants in Mexico has been a source of frustration for producers in the Permian Basin, who face pipeline takeaway constraints to their west, north and east and who desperately want to send more gas south. But it’s not just the Permian that benefits as the doors to the Mexican market creak open. The Eagle Ford — the Permian’s less glamorous step-sister — was the primary source of the first wave of gas exports to points south of the border. Now, with the recent opening of the Nueva Era Pipeline from the Rio Grande to power plants and other customers in Monterrey and Escobedo, another Mexican demand outlet will be made available to South Texas producers. Today, we discuss Howard Energy Partners and Grupo CLISA’s newly completed pipeline and the boost it gives to Eagle Ford production.

Monday, 07/09/2018

After treading near the 79-Bcf/d level this past spring, Lower 48 natural gas production surged about 1.5 Bcf/d higher in the last three weeks of June to record highs approaching 82 Bcf/d by month’s end. The supply gains suspended the market’s bullish view of the persistently large storage deficit compared with last year and the five-year average and reeled in the prompt CME/NYMEX Henry Hub futures contract from the $3/MMBtu mark — at least for now. Where did the gains occur and how much of that influx truly is new production versus volumes returning from seasonal maintenance? Today, we examine the drivers behind the recent production jump.

Thursday, 07/05/2018

There was a time when natural gas prices in the Permian Basin spent most of the summer bouncing within a few cents of the benchmark Henry Hub, as ample pipeline takeaway capacity and seasonally strong demand combined to keep a lid on price blowouts. Times have certainly changed, with ballooning local production overwhelming existing takeaway capacity and widening the price spread between Permian gas markets and Henry Hub. However, the erosion in Permian gas basis has been anything but orderly. The current market is defined by significant swings in gas basis, depending on factors such as pipeline maintenance and weather. So, while the trend in Permian gas basis is decidedly lower, the path to get there is looking like a gut-wrenching roller coaster ride. Today, we look at recent swings in Permian natural gas basis pricing.

Wednesday, 07/04/2018

This spring, TransCanada launched service for its 230-MMcf/d Sundre Crossover expansion, increasing transportation capacity for moving Alberta natural gas production to the U.S. Pacific Northwest. That may seem like a trifling volume in the big scheme of the North American gas market. But considering that Canadian and U.S. producers already are locked in a heated battle for market share of U.S. demand and pipeline capacity, it’s enough for Canadian supply to gain ground. Since the Sundre in-service date, deliveries to the Kingsgate point at the British Columbia-Idaho border have ratcheted up to the highest levels in at least a decade. As a result, Canadian exports have managed to elbow out Rockies gas from the California market, and set off a ripple effect that’s pushing more gas east to the Midcontinent. Today, we examine the shifting gas flows in the West.

Thursday, 06/28/2018

Crude oil and natural gas production in the Bakken are at record highs, and with the surge in production has come infrastructure constraints and higher rates of flared gas, renewing concerns about possible production shut-ins. As gas production volumes exceeded gas processing capacity, the flaring rate in April 2018 rose to 15% of total monthly volumes –– precisely the current limit set by North Dakota’s gas capture plan and three percentage points above the 12% cap due to kick in this November. Rig counts, producers’ drilling plans and $70/bbl crude oil prices all point to further production growth, which means that without additional processing capacity — or a change in the gas-capture policy — it will be increasingly difficult for producers and processors to comply. Today, we look at the latest developments in Bakken gas production, gas-related infrastructure and the gas capture policy.

Wednesday, 06/27/2018

Permian natural gas fundamentals were rocked with some major infrastructure news on Monday, when Kinder Morgan announced its plans to build the 2-Bcf/d Permian Highway Pipeline (PHP) from Waha to the Texas Gulf Coast. The announcement revealed that EagleClaw Midstream, a Blackstone Energy Partners portfolio company, has signed a letter of intent to become a 50% owner in the project and commit natural gas volumes to the pipeline. Adding firepower to the project, Apache Corp. is committing significant volumes to the pipeline too, with an option to take an ownership stake. While Kinder Morgan and EagleClaw Midstream stopped short of a final investment decision (FID), the destination flexibility that PHP’s tie-ins with other key pipes offer makes the project a major contender in the race to become the second new long-haul natural gas pipeline out of the Permian. Today, we discuss the latest infrastructure development in the Permian natural gas market.

Sunday, 06/24/2018

As U.S. LNG exports play an increasing role in the global market, the U.S. will not only be exporting its vast natural gas supplies but also to a degree its market realities — namely, the risks, opportunities and, at times, volatility of a highly liquid, fungible and economically-driven spot market. The global LNG market also has shifted toward more flexible and spot-oriented trade, opening the window for some ad lib wheeling and dealing based on the prevailing economic conditions at any given time. These two factors together will come with significant implications across the supply chain — from the producing basins to the pipeline transport routes and from the export terminals to the destination markets they are serving. This month, with feedgas receipts at Sabine Pass LNG down and an explosion on a key supply route from Appalachia to Louisiana, we are starting to see how this integration of the U.S. and global markets is likely to play out. To help you keep up with this complicated dynamic and extrapolate the big-picture impacts, today we introduce RBN’s new LNG Voyager Report, featuring a comprehensive, pipe-to-port-to-destination approach to understanding how U.S. LNG fits into the global market.