Over the past three-plus years, Corpus Christi has dominated the U.S. crude oil export market, largely because of the availability of straight-shot pipeline access from the Permian to two Corpus-area terminals at Ingleside — Enbridge Ingleside Energy Center (EIEC) and South Texas Gateway (STG) — that can partially load the huge 2-MMbbl VLCCs (Very Large Crude Carriers). But capacity on the pipes to Corpus is now nearly maxed out and, with Permian production rising and exports strong, an increasing share of West Texas crude output is instead being sent to Houston on pipelines with capacity to spare. The catch for Permian shippers with capacity on Permian-to-Houston pipes is that the Midland-to-MEH (Magellan East Houston) price differential for WTI has been depressingly low —$0.22/bbl on average this year, compared to almost $20/bbl for a few months in 2018 and averaging $5.50/bbl as recently as 2019. However, the Midland-to-MEH WTI price spread looks to be on the verge of a rebound of sorts, as we discuss in today’s RBN blog.
Analyst Insights are unique perspectives provided by RBN analysts about energy markets developments. The Insights may cover a wide range of information, such as industry trends, fundamentals, competitive landscape, or other market rumblings. These Insights are designed to be bite-size but punchy analysis so that readers can stay abreast of the most important market changes.
November WTI fell slightly on Monday, settling at $89.68/bbl, a decrease of $0.35/bbl (-0.4%). The minor slide was attributed to Russia easing its recent fuel export ban, which had led to the perception of tightening supplies.
A Gulf of Mexico lease sale scheduled for September 27 will include millions of acres that had been removed from the sale in August by the Bureau of Ocean Energy Management (BOEM), a federal judge ruled late last week.
Daily Energy Blog
Amid all the turmoil and negative news in energy markets this year, U.S. propane has been the exception, turning in a stellar performance. Even with exports up almost 10% in November from the same period last year, averaging 1.3 MMb/d for the month, inventories remain in good shape at 92.6 MMbbl, or about 5% above stocks in November 2019. Part of the reason has been strong production numbers, which are down only 5% since January, and up a whopping 14% since May. Weather has been another contributor to robust stock levels, with November 2020 coming in as one of the warmest on record. But winter is just arriving. And with export volumes now greater than total U.S. winter consumption, market dynamics have shifted. It now takes more inventory in the ground throughout the winter to support the combination of U.S. demand and exports. But how much more inventory is enough? And how should we factor in the potential for further increases in exports? At the same time, the market is still facing the possibility of another round of declining production due to COVID-related drilling cutbacks. This blog series is about making sense of what’s going on in the propane market today, and what may be coming up in the months ahead.
Like everything else in 2020, the propane market has been exceedingly difficult to navigate. So far this year, we’ve seen Mont Belvieu propane prices down to 24 cents/gallon (c/gal) and up to 57 cents. Exports continue to increase, but stocks seem to be reasonably healthy, partly thanks to November so far being one of the warmest on record. Propane production was projected to dip in the fourth quarter but has held up pretty well. During the spring there was considerable concern about the possibility of a tight supply-demand situation this winter, but so far, market conditions seem relatively benign. Does that mean we are in the clear for winter 2020-21? Unfortunately, there may be a few gotchas still out there. As always, a lot depends on the weather. But there are other factors at work that could surprise us because some of the statistics we’ve relied on in the past to gauge what’s ahead are not what they used to be. In today’s blog, we begin a series looking at those factors.
The leaves have already fallen off New England’s trees, the first snow has come and gone, and the six-state region is preparing for another long, cold winter — this time with no Tom Brady and little hope that their beloved Patriots will make it to the playoffs. There is at least some good news, though: record volumes of propane have been railed or shipped into New England and put in storage, which should help to ensure that the many homes and businesses that depend on the fuel for space heating will stay warm. Today, we discuss propane supply and demand in the northeastern corner of the U.S., including a look at SEA-3 Newington — New England’s largest propane storage and distribution center, which rails in the fuel from the Marcellus/Utica and Canada and imports and exports propane by ship.
Over the past 10 years, there’s been a 14-fold increase in U.S. LPG exports: from 132 Mb/d, on average, in 2010 to 1.85 MMb/d so far in 2020. That extraordinary growth in export volumes couldn’t have happened without the development of a lot of new, costly infrastructure — everything from gas processing plants, NGL pipelines, and fractionators to LPG storage capacity, marine terminals, and ocean-going gas carriers. And that build-out continues, not only along the Gulf Coast but on the shores of the Delaware River near Philadelphia. Energy Transfer has been working to expand the throughput of its Marcus Hook terminal on the Pennsylvania side of the river, and Delaware River Partners, an affiliate of Fortress Transportation & Infrastructure, will soon be transloading LPG from rail tank cars onto ships across the Delaware in New Jersey. Today, we discuss Delaware River Partners’ Gibbstown Logistics Center.
Down to only two months left in 2020. Whew! We’ll all be relieved to see this one disappear in the rear-view mirror. It’s been an extreme roller coaster ride for oil and gas — from the onset of the COVID pandemic and the crude price collapse in the spring, to withering demand for transportation fuels, to one hurricane after another, to chaotic swings in natural gas prices. And being thrashed about by all this turmoil are the natural gas liquids, with each NGL product taking its own wild ride through erratic market conditions. It’s been a challenge just keeping up with what is going on. At RBN, we’ve been working on a new app to address this challenge, and today we are rolling it out to you, as a reader of our daily blog. We are talking about access to everything from spot and futures prices, to market statistics, to reports on intra-day pricing, and to market alerts as they happen. Sound interesting? If so, hang on to your hat and read on in this RBN product advertorial.
For the past few years, demand for U.S.-sourced ethane has been on the rise as petrochemical companies in the U.S. and abroad developed new, ethane-only steam crackers and retrofitted existing crackers to allow more ethane to be used as feedstock. U.S. NGL production was increasing too, of course, alongside growth in crude oil-focused plays like the Permian and “wet” gas plays like the Marcellus/Utica. But recently, drilling-and-completion activity has slowed to a crawl and NGL production has been leveling off, which means that less of the ethane that comes out of the ground with oil and gas will be “rejected” into natural gas and more will be separated out at fractionation plants. Today, we conclude a series on ethane exports with a look at U.S. NGL production, ethane supply and demand, ethane exports, and ethane prices.
The U.S. is by far the world’s largest ethane producer, and exports one-seventh of what it produces, with most of the exported volumes tied to long-term contracts to supply ethane-consuming steam crackers. Canada is the #1 importer of U.S. ethane, receiving its volumes via three pipelines. As for U.S. exports by ship, India is on top, followed by the UK and Norway. But watch out! China, which started importing U.S. ethane a year or so ago, is poised to buy a heck of lot more, with most of the incremental volumes to be shipped out of a new ethane export terminal about to come online in Nederland, TX. Today, we continue our series with a look at the Orbit Ethane Export Terminal, which is being jointly developed by Energy Transfer and Satellite Petrochemical, the U.S. subsidiary of a Chinese petrochemical company.
Taken together, the ethane-related infrastructure projects developed in the U.S. over the past several years serve as a reliable feedstock-delivery network for a number of steam crackers in Europe, Asia, and Latin America. NGL pipelines transport y-grade to fractionation hubs, fractionators split the mixed NGLs into ethane and other “purity” products, ethane pipelines move the feedstock to export terminals fitted with the special storage and loading facilities that ethane requires, and a class of cryogenic ships — Very Large Ethane Carriers, or VLECs — sails ethane to mostly long-term customers in distant lands. The end results of all this development are virtual ethane pipelines between, say, the Marcellus/Utica and Scotland, or the Permian and India. Today, we continue our series on ethane exports with a look at the two existing export terminals, the ethane volumes they have been handling, and where all that ethane has been headed.
In the past three years, two major commitments were made to construct propane dehydrogenation and polypropylene plants in Alberta to take advantage of the rising bounty and generally low cost of propane supplies in Western Canada. Two Calgary-based midstream companies, Inter Pipeline Ltd. and Pembina Pipeline, each started developing PDH-PP plants in Alberta’s Industrial Heartland area northeast of Edmonton. But then came COVID-19, which set back the timeline for one of the projects and put the other on ice. All this comes as Western Canada’s propane market is in greater flux than usual, and facing a tightening supply/demand balance as exports to Asia ramp up. Today, we provide a status check on the development of these two plants, and what the increase in demand might portend for propane balances in the next few years.
The run-up in U.S. production of natural gas liquids over the past 10 years spurred the development of a whole lot of infrastructure. More pipelines to transport mixed NGLs from production areas to NGL storage and fractionation hubs, especially Mont Belvieu, TX. More fractionators to split y-grade into ethane, propane, and other “purity” products. And, specifically for ethane — the lightest, quirkiest, and most plentiful NGL — a number of ethane-only steam crackers were built along the Gulf Coast to take advantage of the new supply abundance, as were ethane-only pipelines, export terminals, and a whole new class of cryogenic ships — Very Large Ethane Carriers, or VLECs — to move the product to markets in Europe and Asia. Today, we begin a new series on the unique nature of overseas ethane exports, including why most incremental export volumes are tied to long-term supply deals with a handful of global ethylene plants designed — or reconfigured — to “crack” ethane.
The South Texas NGL market has always been a world of its own, a self-contained liquids ecosystem running from Brownsville to Markham, a distant 200 miles from the NGL epicenter at Mont Belvieu. In recent years, however, the South Texas market has been undergoing radical change, first with the emergence of the Eagle Ford basin, then with the onslaught of Permian production and, most recently, with the aptly named EPIC NGL Pipeline and new fractionation capacity in greater Corpus Christi. More supply and demand are on the way, with new pipes, exports, and the largest ethane-only petrochemical plant in the world under construction. And with these developments, a strategy by several large, well-financed players has emerged – to develop an NGL storage and fractionation hub competitive with Month Belvieu. Today, we begin a series to examine the South Texas NGL market and how changes there will impact flows, utilization, and pricing across North America and beyond.
Understanding whether propane production is up or down over the past few months is a bit more difficult than you might think, depending on which set of EIA numbers you choose to look at. The U.S. Energy Information Administration provides monthly numbers on the last day of the month lagged by about two months, and weekly numbers on Wednesdays, lagged by only five days. Both time series are closely watched by the propane market to assess the availability of supply for retail customers, petrochemical feedstock demand, and exports. Usually, these two sets of numbers move in tandem. But not always. The monthly numbers show production down by about 70 Mb/d from April to June, which is what you would expect given what was happening with crude and gas production at that point in time. Yet EIA weekly production numbers showed production increasing by about 90 Mb/d for the same period. So which way is propane production really trending? If you want to understand what’s going on, and you don’t mind delving into some deeply wonky NGL analytics, hang on for today’s blog.
About two-thirds of all of the propane consumed in the U.S. is used as fuel — for indoor and outdoor cooking, home heating, water heaters, drying crops, and running forklifts and fleet vehicles. The other one-third is used as a feedstock for producing ethylene and other petchems. About 95% of the propane supply to meet this demand is produced and processed right here in the U.S. of A., making propane the most American fuel we’ve got. But when firing up the grill out back and watching that first propane molecule flash to life, most backyard chefs don’t think much about the long and winding road their propane has traveled. It’s actually a fascinating tale of supply-chain logistics that involves high pressures, bitter cold, wild rides up and down tall towers, storage deep underground, and, of course, trains, trucks, and tanks. We think it’s a tale that needs to be told, and that’s what we’ve been doing in this update of another Greatest Hit blog.
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.