New and expanded efforts to reduce greenhouse gases, most notably carbon dioxide, have been making headlines globally on a daily basis for a while now. Canada’s energy industry has been increasingly contributing to that newsfeed this year, with two large projects announced in Alberta that will capture, use, and sequester large volumes of CO2 generated from the oil sands as well as other sources of oil and gas production in Western Canada. In today’s blog, we review the emissions profile of the Canadian oil and gas sector and discuss two of the largest carbon capture, use, and sequestration projects announced to date.
Daily energy Posts
Yet again, the Texas-Louisiana coast is bracing for a hurricane that has the potential to be really bad, not just for the people and homes in the storm’s path, but for the region’s all-important energy sector. Hurricane Laura will be crossing a swath of the Gulf of Mexico dotted with oil and gas production platforms, and is headed for an area chockablock with tank farms, refineries, and steam crackers, as well as export terminals of every stripe: crude oil, refined products, ethane, LPG, and LNG. There’s a good chance there’ll be a lot of disruption to many energy-related activities for at least the balance of this week — and maybe longer — but one of the biggest hits could come to Mont Belvieu, TX, the center of NGL storage and fractionation. Today, we discuss how the storm might affect not only storage at the U.S.’s largest NGL hub, but gas-processing activity hundreds of miles inland.
When you talk about energy molecules, propane takes the prize for the most versatile. In addition to its well-known uses for BBQ grills, indoor cooking, and home heating, propane is used for drying crops, as a feedstock for petrochemicals, as an engine fuel for forklifts and fleet vehicles, and in recent years, as an export product in its own right. Propane moves to market on pipelines, railcars, ships, barges, trucks — just about any form of transportation you can imagine. But exactly how any particular molecule of propane makes the journey from the instant it comes out of a well to all those market destinations can be a mystery to all but a small cadre of propane market insiders. In another in our series of updates to RBN’s greatest hit blogs, we are delving into this mystery, one step at a time, today focusing on transportation from the producing basin to storage and fractionation at the Mont Belvieu hub, and the transformation of the generic commodity to a marketable fuel.
When firing up the backyard propane grill and watching that first propane molecule flash to life, most people don’t think much about what it took to get that fuel to the cylinder they picked up at the store. But that long and winding road from the production well to the tank beneath your grill is actually a fascinating tale of supply-chain logistics involving producers, midstreamers, and propane retailers. In today’s blog, we will take that interesting and sometimes mysterious trip with a molecule of propane. We will travel over 1,000 miles, moving in and out of various facilities, purifying our product and incurring various costs each step of the way. So strap on your seat belt for a selection from our greatest blog hits, in which we track a typical propane molecule’s journey from beginning to end.
Canada’s propane market has quickly morphed from one characterized by abundant supply to one facing a tightening supply/demand balance, with direct exports to Asia playing an increasingly important role. This tension became evident in May 2019, when the start-up of the Ridley Island Propane Export Terminal (RIPET) in British Columbia, Canada’s first direct export connection for propane to Asian markets, effectively eliminated the usual seasonal surplus for propane in Western Canada. With rail exports of propane to the U.S. often reliant on that excess for restocking in the summer months and as a reliable fallback supply in the cold winter months, the prospect of fewer or no periods of excess supply may be signalling trouble for some U.S. regions that have come to rely on those volumes. What’s more, within a few months, another propane export terminal in BC will be starting up, further reducing what’s left for the U.S. market. In today’s blog, we conclude our series examining the Western Canadian propane market by considering the impacts of Canada-to-Asia propane sales on U.S. propane consumers and propane prices.
In their second-quarter earnings presentation last week, Energy Transfer said that they and their joint venture (JV) partners, Satellite Petrochemical, expect the first commissioning cargoes from their new 180-Mb/d ethane export facility in Nederland, TX — formally known as Orbit Gulf Coast NGL Exports LLC — to begin in November, only three months from now. This new outlet for U.S.-sourced ethane comes at a time when production of oil, gas, and NGLs faces near-term declines due to reduced drilling activity resulting from low crude prices. With those declines, will there be enough ethane supply to meet the capacity of the new Orbit export dock and other upcoming ethane-related projects? The short answer is, yes … for the right price. Today, we examine the latest supply and demand dynamics shaping the U.S. ethane market.
Over the past five years, the production of natural gas liquids from gas processing plants has soared by almost 2 million barrels per day (2 MMb/d), or about 60%. That has been great news for natural gas producers, processors, and end-use markets. But there is a catch: the rate of production does not match up with demand. While production is a steady, “ratable” volume, demand is anything but ratable. Demand swings with the gasoline blending season, cold weather (or lack thereof) in the propane market, export demand, petchem feedstock economics, the impact of COVID-19 on transportation fuels, and a myriad of other factors. The flywheel that balances supply and demand on any given day is storage. Not just any storage, though. For NGLs, storage of large volumes means salt caverns. Huge caverns thousands of feet below the surface. Today, we update one of RBN’s Greatest Hits blogs and take a deep dive into the history of NGL storage — all the way back to Smoky Billue.
The Ridley Island Propane Export Terminal — Canada’s first propane export facility — has been a game changer since it started up in May 2019. Located along the coast of British Columbia, RIPET has been shipping record amounts of propane to Asian markets in recent months, just as Western Canadian propane production has been sagging due to the twin pressures of crude oil price weakness and COVID-19-related disruptions. With production down, RIPET gradually ramping up its export capacity, a second export terminal poised to come online nearby, and Canadian demand for propane holding steady, something has to give, right? Today, we examine the changing supply/demand outlook for Western Canadian propane, and what it might mean for railed exports to the U.S.
Propane exports from AltaGas and Vopak’s Ridley Island Propane Export Terminal on the west coast of British Columbia jumped to 52 Mb/d in May, the highest since it began operations in May 2019 and exceeding the terminal’s original design capacity for the second time this year. The increased exports suggest expanded capacity at the facility and the potential for sustained higher exports from there even as Western Canada’s propane supplies plateaued in 2019 and then were hammered lower earlier this year as oil prices and demand collapsed. The resulting tighter balance in the greater Pacific Northwest region has boosted prices there, wreaking havoc on price spreads and disrupting rail movements to U.S. destinations that have relied on them for the past few years, from the Midwest to California. Moreover, Western Canadian export capacity is poised to nearly double by next spring, when a second nearby export terminal is slated to begin operations. With supply upside looking tenuous, but overseas exports set to rise further in early 2021, there is a serious squeeze emerging for propane rail exports to the U.S. Today, we consider the implications of what could be a much tighter propane market in Western Canada over the next few years.
Since the mid-2010s, MPLX has been developing a far-reaching pipeline system for delivering heavier natural gas liquids and field condensate from the Utica and “wet” Marcellus plays to Midwest refineries for gasoline blending and refining, and to the Alberta oil sands for use as diluent. The multi-year, multi-project effort, which has involved the construction of new pipelines, the repurposing of existing pipes, and the development of new storage capacity, will reach another milestone next month, when MPLX starts batching normal butane and isobutane through most of the pipeline system. And further enhancements are on the horizon. Today, we provide an update on the master limited partnership’s long-running strategy for moving Marcellus/Utica-sourced liquids to market more efficiently and at a lower per-barrel cost.
Energy markets balance — eventually. In the midst of the turmoil we’ve experienced this year, there have been periods when it seemed like markets were going to hit the wall. But even with the historic WTI oil price glitch on April 20, the physical crude oil markets continued to function. That’s the way it is supposed to work, and it’s good news. The bad news is that figuring out how these markets are balancing in these volatile conditions can be challenging if not downright perplexing. Nowhere is that more true than the market for U.S. propane. Production is down, but so is demand. Inventories are up, and so are prices. Propane continues to be exported, even though global demand has been whacked by COVID. In today’s blog, we explore these developments and put the spotlight on RBN’s NGL Voyager, our subscriber report and data service that we have just reformatted, upgraded and generally reconstructed to meet the information needs of today’s NGL marketplace.
The Marcellus/Utica production region in the northeastern U.S. is not immune to the upheaval in global energy markets. There, a number of E&Ps are implementing further cutbacks in their natural gas production. That will result in lower NGL production, which may have serious implications for regional supplies of propane for heating this coming winter. LPG exports out of the Marcus Hook terminal near Philadelphia also may be impacted. Today, we look at recent developments in the Marcellus/Utica and the potential effects of lower NGL production in the region.
During the last two weeks of April, a barrel of propane in Mont Belvieu was more expensive than a barrel of WTI crude oil in Cushing. That’s never happened before. You might think that such an aberration could be blamed on the wacky April-May 2020 COVID crude market, but that is only part of the story. Propane production is falling and pre-COVID projections of continued supply growth are out the window. But new gas processing plants, pipelines, fractionation facilities, dock capacity and downstream demand have come online in recent years, in anticipation of those ill-fated additional supplies. Already we are seeing flows, price relationships and differentials convulsing in response to the new reality, and projections of future supply/demand imbalances suggest a previously unthinkable possibility: a market that can’t get enough propane supply, especially if the winter of 2020-21 is a cold one. In today’s blog, we will explore the evidence of these market developments that is already visible and look to what may be ahead for propane supply and demand.
The crude oil market garners all the headlines in the COVID/OPEC+ era, and understandably so. But the NGL market is also in turmoil and deserves attention too. Declining volumes of associated gas from crude-focused plays will soon be cutting into NGL supplies. Demand for natural gasoline has been hit hard, along with the crude, motor gasoline and jet fuel markets. But propane prices relative to crude oil have soared to historically high ratios, in part reflecting recent strong international demand for U.S. LPG exports. As for ethane — the lightest NGL, and the most important feedstock for the Gulf Coast petchem sector — it is going through wrenching changes, with major implications for both suppliers and steam crackers. Today, we begin a short series on the major dislocations that crude-market chaos is spurring in NGL production, ethane rejection, feedstock selection by steam crackers, and ethane/LPG exports.
If Saudi Arabia and Russia flood the world with their crude oil in the midst of a global demand crisis, it would have impacts and implications far beyond crude. A ramp-up in Saudi and Russian oil production this spring would also increase their output of associated gas and NGLs. At the same time, the opposite will be happening in the Permian and other liquids-rich U.S. shale plays, where producers, stunned by sub-$25/bbl oil prices, already are pulling back on drilling and later this year will see their oil and NGL production gradually level off and eventually decline. All this is already turning the international LPG market on its head — just last week, U.S. propane exports plummeted by nearly 40% versus the prior week, to only 889 Mb/d. Today, we consider recent extraordinary market developments and their effect on the arb between Mont Belvieu and Far East LPG prices.
The collapse in crude oil prices has sent shock waves throughout the global energy industry and Canada has been no exception. Sorting through all the impacts will take time, but what’s clear is that any earlier optimism surrounding supply growth in Canada has evaporated, including for propane supply to feed the new propane export terminals on British Columbia’s coastline. Edmonton propane prices fell 58% since the start of March to as low as 10.25 cents per gallon in U.S. dollars on March 23 — the lowest level since April 2016 — and settled yesterday at 13.13 cents per gallon, according to data from our friends at OPIS. A dampened supply outlook means future export expansion plans also are being reconsidered. Today, we explore what the sharp decline in propane prices could mean for the region’s supplies and future propane exports, including from Pembina Pipeline’s nearly completed export terminal in Prince Rupert, BC.