Natural Gas

Blessed with vast amounts of hydroelectric capacity, the Pacific Northwest has traditionally only turned to natural gas as a supplemental source of power. Sure, gas use for power generation ramps up during drier months of the year, and rises significantly in “dry” years like 2010 when lower-than-normal wintertime precipitation reduced river flows and hydro plant output in late spring and early summer. This year is shaping up as another dry one, but other factors are boosting gas demand in the region. New gas-fired plants are being built to replace retiring coal units and to keep pace with load growth and the prospect of relatively low-cost gas for the foreseeable future is encouraging gas-based industrial growth in the region. Today we look at what’s driving gas demand in the Pacific Northwest and how the region’s pipeline infrastructure is being expanded.

Low natural gas prices are expected to fuel a revolution in US manufacturing industry over the coming years. This new industrial revolution affects not only gas and power intensive industries but downstream products produced from petrochemicals. Manufacturing industries that left the US decades ago are returning to take advantage of lower costs.  Today Taylor Robinson from PLG Consulting details three phases to this industrial renaissance.

Natural gas-fired power generation has always played second fiddle to hydropower in the Pacific Northwest, where dams in the Columbia River Basin typically supply well over half the region’s annual power needs. Gas takes on a more significant role, however, in years like this with lower-than-normal precipitation and hydro generation. And the ongoing phase-out of coal-fired plants in the Pacific Northwest is nudging gas closer to center stage—not just in 2014 but also over the long haul. Today we start a series examining the brightening outlook for gas use in the most hydro-dominant region in the US.

Two short years ago at the end of March 2012 natural gas marketers despaired of ever finding a home for surging natural gas production after a historically mild winter left underground gas storage bursting at the seams. A week later in April 2012 natural gas CME NYMEX Henry Hub prices dipped below $2/MMBtu and producers started shifting their drilling rigs to wet gas and liquids plays in search of higher returns. Fast-forward to today and we move towards the end of another record winter – this time a freezing cold one. Last week gas prices climbed over $6/MMBtu and the gas storage gauge will likely be close to empty (metaphorically speaking) by the end of March. Today we provide an update on this winter’s gas market.

“Aruba, Jamaica, ooo I wanna take ya. Bermuda, Bahama, come on pretty mama …” While most of us trapped in the icy grip of this winter’s Polar Vortex can only dream of cruising from Florida to the Caribbean, “tropical drink melting in your hand,” Nova Scotia-based Emera Inc. has a plan to do just that (minus the drink), and on a regular, ferry-like schedule. Emera wants to export compressed natural gas from the Port of Palm Beach to its Grand Bahama electric utility and other Caribbean buyers starting as soon as 2015. The volumes of natural gas involved aren’t huge, but the plan is an example of market innovation driven by the US shale revolution. Today we examine Emera’s plan to move US gas to “the islands.”

This year’s polar vortex winter has once again demonstrated how New England power generators suffer from the region’s shortage of natural gas pipeline capacity during peak demand periods. The Catch-22 to-date has been that new pipelines won’t get built without firm, long-term commitments for pipeline capacity, which the New England power market doesn’t compensate generators for. Faced with rising demand and few alternatives to gas fired generation, the six state governments in the region are now proposing a novel fix: an electric-rate surcharge that would help guarantee pipeline developers the steady revenue they need to justify new projects.  Today we examine the states’ plan and its prospects.

Using the US natural gas production boom to promote the idea of a sustainable “global gas glut”, Asian importers have successfully managed to chip away at the longstanding oil-indexed pricing mechanism for liquefied natural gas (LNG) overthe past two years. While oil-indexation in LNG contracts will certainly not disappear overnight, the shale revolution has provided gas importers with significant negotiating leverage and a new degree of pricing flexibility. Today we examine the trend toward more US centric LNG pricing.

The idea of using natural gas produced in Pennsylvania to generate power in South Florida would have been considered implausible or even unthinkable just a few years ago. But now it seems likely that by mid-2017 Marcellus-sourced gas will, in fact, be moving deep into the Southeast. Williams’ planned Atlantic Sunrise project will make its Transco mainline bi-directional as far south as Station 85 in southwestern Alabama. From there, Spectra Energy and NextEra Energy’s Sabal Trail pipeline will move Marcellus and other gas into central Florida, and NextEra’s Florida Southeast Connection line will take gas still further south. Today In the second of a two part series, we conclude our analysis of the transformational Atlantic Sunrise project.

Here at RBN, we have an often repeated view that the flood of oil and gas being produced from unconventional plays will change everything we once knew about energy markets (see Top Ten Energy Prognostications for 2014).  One such fundamental change is that the U.S. is now producing more natural gas, NGLs and some grades of crude oil than we can use (except for the past three weeks of Polar Vortex weather, of course).  Consequently the U.S. has shifted from a position of hydrocarbon shortage to one of surplus.  That is great news.  But just down the road there are potential problems developing – distortions in the markets.  Some of those surplus products can be exported, some can’t.  The rules regarding exports of these hydrocarbon products that we are living with today were all put on the books during the decades of shortage.  When you look closely at what those rules really say, you’ve got to scratch your head.  Today we begin a series to examine those rules.