RBN Energy

Friday, 9/30/2022

It’s hard to think of a $5.2 billion acquisition as a “bolt-on,” but that’s what EQT Resources — the U.S.’s #1 natural gas producer — is calling its recently announced purchase of Tug Hill’s gas production assets and XcL Midstream’s pipeline and processing assets in northern West Virginia. The deal, which represents the largest acquisition in the Marcellus/Utica Shale in five years, will not only give EQT even more scale in the nation’s leading gas-and-NGLs production region, it also will lower EQT’s breakeven gas price and its emissions intensity. Oh, and with the deal, EQT is doubling its share-repurchase authorization and increasing its year-end-2023 debt-reduction goal by 60%. In today’s RBN blog, we examine and assess these and other aspects of the agreement.

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Daily energy Posts

Friday, 09/30/2022

It’s hard to think of a $5.2 billion acquisition as a “bolt-on,” but that’s what EQT Resources — the U.S.’s #1 natural gas producer — is calling its recently announced purchase of Tug Hill’s gas production assets and XcL Midstream’s pipeline and processing assets in northern West Virginia. The deal, which represents the largest acquisition in the Marcellus/Utica Shale in five years, will not only give EQT even more scale in the nation’s leading gas-and-NGLs production region, it also will lower EQT’s breakeven gas price and its emissions intensity. Oh, and with the deal, EQT is doubling its share-repurchase authorization and increasing its year-end-2023 debt-reduction goal by 60%. In today’s RBN blog, we examine and assess these and other aspects of the agreement.

Wednesday, 09/28/2022

The recently passed Inflation Reduction Act (IRA) offers a lot of incentives, mostly in the way of tax credits, to advance the Biden administration’s clean-energy initiatives and reduce greenhouse gas (GHG) emissions. There are inducements for everything from carbon capture and electric vehicles to renewable energy and hydrogen production, but very few penalties. One exception is included in the new law’s Methane Emissions Reduction Program (MERP), which features the federal government’s first-ever fee on the emissions of any GHG. In today’s RBN blog, we look at recent attempts to mitigate methane emissions, how the new methane charge will work, and how it could one day be replaced by new federal rules.

Monday, 09/26/2022

The world needs more LNG and the U.S. is answering that call. Two U.S. liquefaction projects, Venture Global’s Plaquemines LNG and Cheniere’s Corpus Christi Stage III, have already reached a final investment decision (FID) on a combined 23.3 MMtpa (3.1 Bcf/d) of export capacity, which will be online by mid-decade. But by the looks of it, we are just getting started. Next up could be NextDecade’s Rio Grande LNG, which has sold 75% of its first two trains’ capacity — enough to take FID, possibly by the end of the year. If it moves forward, not only will the project add another 10.8 MMtpa (1.43 Bcf/d) or more of export capacity to the Gulf Coast, it could also come with a new carbon capture and sequestration (CCS) facility, which has long been a selling point for the project. In today’s RBN blog, we continue our series on the U.S. LNG projects most likely to move forward, this time with a look at Rio Grande LNG.

Sunday, 09/25/2022

The battle to restore energy reliability in Europe has breathed new life into North American LNG export projects — and into the Haynesville Shale in Louisiana, the closest supply basin to many of the planned and proposed liquefaction facilities. Gas production in the region has climbed more than 4 Bcf/d — an impressive 39% — since 2019 and we expect it to grow nearly as much over the next three years. The big question on everyone’s mind, however, is whether there will be enough pipeline capacity to move that gas to where it’s needed on the coast. Pipeline capacity for southbound flows through the Bayou State is already showing signs of stress. Will recently completed and upcoming debottlenecking projects help stave off major supply and pricing disruptions? In today’s RBN blog, we provide our outlook on Haynesville production and the nature and timing of Gulf-bound pipeline projects.

Thursday, 09/22/2022

There finally seems to be some momentum building for additional LNG export projects on Canada’s West Coast. Major pipeline and midstream operator Enbridge announced in late July that it was making an investment in Woodfibre LNG, a smaller-scale export project that has already come a long way in terms of approvals, pipeline connections, locking up gas supplies, and initial financing. With the Enbridge announcement — and the financial and technical clout the company brings to the table — it is now looking assured that the project will commence construction next year and be exporting LNG by 2027. In today’s blog, we take a detailed look at Woodfibre LNG.

Tuesday, 09/20/2022

It’s been another tumultuous few months for natural gas prices, particularly amid what European Commission President Ursula von der Leyen has called Russia’s war on Europe’s energy and economy.  Europe is staring down aggressive curtailments of Russian gas supplies and rising consumer utility bills, necessitating austerity measures and beyond to bail out consumers and utilities and prevent a dangerous shortfall this winter. Prices in continental Europe have now topped $20/MMBtu for a year, higher than the previous single-day record. On top of the elevated prices, outrageous spikes higher and lower have become a semi-regular occurrence as the gas market struggles to find balance. And high prices and volatility are not going anywhere anytime soon as Europe braces for a winter with little or even no Russian gas. In today’s RBN blog we look at European gas prices, the latest energy policy proposal from the EC and how U.S. LNG exports fit into the ongoing crisis.

Sunday, 09/18/2022

Lower 48 natural gas production this month hit a once-unthinkable milestone, topping the all-important psychological threshold of 100 Bcf/d for the first time. Volumes have remained at record highs through mid-September, with year-on-year gains expanding to a breathtaking 7-9 Bcf/d above last year at this time (when hurricane-related shut-ins were in effect). The record production levels coincided with a seasonal decline in weather-related demand, as well as the ongoing outage at the Freeport LNG export terminal. Remarkably, however, even with all-time high, ~100 Bcf/d natural gas production and Freeport LNG offline, the Lower 48 gas market balance averaged tighter year-on-year — a testament to just how strong consumption has been lately, and for much of this summer for that matter. In today’s blog, we look at how the supply-demand balance has shaped up this month and where it’s headed near-term.

Wednesday, 09/14/2022

With international gas prices ranging somewhere between ridiculous and ludicrous since last fall, the entire global trade of LNG is going through an unprecedented period of change as gas-consuming nations try to cope with the current situation and seek protection from tight supplies and high prices in the future. The problems of Europe in securing supplies for the imminent winter have been well documented here and elsewhere in the trade press. In addition to being a major struggle for consumers and a headwind to economic development, there are also numerous, less-obvious consequences of the tectonic shifts in gas fundamentals, including countries’ individual plans for long-term energy supplies, potential tax-related issues, the contractual structures used to transact LNG, and even the assessments of the commodity price itself. These issues aren’t new and, in many cases, have been discussed for years. What’s changed is that extremely high prices have thrown into sharp relief any inefficiency or risk that exposes market participants. In today’s RBN blog, we consider the impact of high global gas prices on countries in Asia and Europe and how pricing mechanisms might be affected.

Monday, 09/12/2022

The U.S. natural gas market is one of the most transparent, liquid and efficient commodity markets in the world. Physical trading is anchored by hundreds of thousands of miles of gathering, transmission and distribution pipelines, and well over 100 distinct trading locations across North America. The dynamic physical market is matched by the equally vigorous CME/NYMEX Henry Hub natural gas futures market. Then, there are the forward basis markets — futures contracts for regional physical gas hubs. These pricing mechanisms play related but distinct roles in the U.S. gas market, based on when and how they are traded, their respective settlement or delivery periods, and how they are used by market participants. In today’s RBN blog, we continue a series on natural gas pricing mechanisms, this time with a focus on the futures and forwards markets.

Thursday, 09/01/2022

Two of the biggest challenges that Europe faces in the race to wean itself off Russian natural gas are the need to develop new pipeline connections between the continent’s many isolated gas networks and to integrate the European Union’s multiple gas markets. Addressing these won’t be easy. Unlike the U.S., whose pipeline systems were designed to transport gas long distances and across jurisdictional lines, Europe’s networks are more regional or even local in nature, and only recently has the EU been taking steps to link the continent’s markets. Oh, by the way, U.S. producers and LNG exporters should care about all this, because if Europe gets its act together, it could become an even larger and longer-term recipient of gas originating from the Permian, Haynesville, Marcellus/Utica and other shale plays. In today’s RBN blog, we discuss the prospects for tying together the EU’s gas pipelines, gas storage facilities, LNG import terminals and gas markets.

Sunday, 08/28/2022

The 2022 hurricane season is off to a quiet start, but the tropics seem to have awakened in recent days and are likely to ramp up in September — the peak month for tropical storm activity. Forecasters are still predicting an above-average season, calling for as many as 10 hurricanes and up to five major ones. That would mean greater volatility for energy markets in any year, but the stakes are arguably higher this year than any time in recent memory — especially for natural gas. That’s because prices are already at the highest level in over a decade and flirting with the $10/MMBtu mark. The gas market is tight domestically and globally, particularly in Europe. Lower 48 storage remains near the five-year low. European gas storage, after lagging far behind, has caught up to the five-year average this month, but the continent is still dependent on a consistent stream of U.S. LNG cargoes, particularly as it works to wean itself off Russian gas supplies. What happens when you add to that the prospect of hurricane-related disruptions to Lower 48 production or LNG exports, or both? Much of that will come down to the timing, path and strength of any impending storms. That’s a lot of unknowns, and where there is that much uncertainty, volatility is sure to follow. With the National Hurricane Center (NHC) predicting high chances of potential cyclone development as early as later this week, today’s RBN blog considers the possible implications for the U.S. gas market balance.

Wednesday, 08/24/2022

We’ve seen this movie one too many times. Just when natural gas prices are rallying across the world to multi-year or historic highs, another monkey wrench gets thrown into the workings of the Western Canadian gas market, imploding its suite of price markers. Last week, gas prices in Western Canada collapsed to mere pennies and even went negative for a time due to an unfortunate combination of pipeline restrictions and record-high production — a situation that will cost the region’s gas industry billions if left unchecked. In today’s RBN blog, we examine the root cause of the latest price collapse and when a turnaround might be expected.

Sunday, 08/21/2022

The momentum for U.S. LNG right now is powerful. With Europe’s efforts to wean itself off Russian natural gas boosting long-term LNG demand and Asian consumption expected to grow even further, there has been a strong push for new LNG projects in North America. So far, that has helped propel two U.S. projects, Venture Global’s Plaquemines LNG and Cheniere’s Corpus Christi Stage III, to reach a final investment decision (FID). With these two projects getting a green light, total export capacity in the U.S. will be at least 130 MMtpa — or 17.3 Bcf/d — by mid-decade. That top-line export capacity could be much higher, however. There are currently eight U.S. Gulf Coast pre-FID projects with binding sales agreements, and a handful of projects that are fully subscribed in credible non-binding deals. If all those projects go forward, it would add a staggering 86 MMtpa (11.4 Bcf/d) of export capacity to the U.S., pushing the total toward 30 Bcf/d, or 225 MMtpa. In today’s RBN blog we look at U.S. LNG under development, how high export capacity could go, and the implications for the U.S. natural gas market.

Tuesday, 08/09/2022

The build-out of natural gas processing plants in the Permian continues unabated. In just the past few days, four of the largest midstream players in the U.S.’s premier hydrocarbon production area have unveiled plans for a combined 1.3 Bcf/d of new processing capacity, most of it in the gassier Delaware Basin portion of the crude-oil-focused play. And that’s on top of the 11.7 Bcf/d of processing that’s already been added in the Permian over the past four-and-a-half years — and the 2.6 Bcf/d of soon-to-be-finished projects announced previously. That’s quite a run, and still more processing plants may be in the cards — if midstreamers build more takeaway-pipeline capacity. In today’s RBN blog, we discuss recent processing-plant and pipeline developments in West Texas and southeastern New Mexico.

Monday, 08/01/2022

Just downstream from the Appalachian supply basin — where daily spot natural gas prices are among the lowest in the country — cash and forward prices in the Mid-Atlantic and Southeast have rocketed, becoming the highest gas prices in the land, and in some cases are at never-before-seen levels for this time of year. No doubt it’s been a sweltering summer so far, and low storage levels aren’t helping either. But there’s more to the price premiums than that. Limited access to supply and constraints on Williams’ Transco Pipeline — the primary system delivering gas to the region — have created a demand “island” there just as persistent heatwaves boosted cooling demand. Moreover, without additional pipeline capacity, the dynamics unfolding this summer could become a regular feature of the Southeast/Mid-Atlantic markets. In today’s RBN blog, we break down the factors driving regional prices to new heights.