Whatever It Takes - Whistler Pipeline Project Goes the Extra Mile to Link Permian and Gulf Coast Markets

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.

Hell in Texas - A New Drill Down Report on Permian Gas Takeaway Constraints and Their Effects

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.

Deep Water - Contenders in the Race to Build Crude Oil Export Terminals Off the Texas Coast

As Gulf Coast marine terminal owners consider ways to at least partially load Very Large Crude Carriers (VLCCs) at their facilities, a handful of midstream companies also are planning offshore terminals in deep water that would allow the full loading of VLCCs via pipeline. Projects under development by Oiltanking and others for sites along the Texas coast would appear to have at least two legs up on the Louisiana Offshore Oil Port, or LOOP. For one, they’d have more direct access to the Permian, Eagle Ford and other crudes flowing to coastal Texas. For another, the new terminals would be focused on crude exports — no double-duty for them. Today, we begin a review of the projects vying to be the first LOOP-like project in the deep waters off the Lone Star State.

Coming Up - The Next Round of U.S. Liquefaction Plants and LNG Export Terminals

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.

Breakthru - Infrastructure Additions Send U.S. Gas Exports to Mexico Soaring Above 5 Bcf/d for the First Time Ever

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.

Got That Swing - U.S. Producers' New, Critically Important Role in Global Crude Oil Markets

U.S. crude oil production has doubled in the past eight years, from 5.5 MMb/d in 2010 to a record 11.0 MMb/d this month — an astonishing 9% compound annual growth rate. But there’s more to the Shale Revolution than higher production. Its most noteworthy characteristic may be a newfound market responsiveness that U.S. production volumes have to price, in which U.S. producers flex their “sweet spots” and an at-the-ready inventory of drilled-but-uncompleted wells (DUCs) that can be ramped up when prices warrant and pulled back when they don’t. This newfound flexibility has profoundly changed the role of the U.S. in global markets. In today’s blog, we take a big-picture look at crude oil production growth, the special ability of U.S. producers to respond to shifts in crude pricing, and the potential for the U.S. to have a stabilizing role in global markets.

Trouble Every Day, Part 2 - Permian Producers' Options When Severe Gas Takeaway Constraints Arise

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.

Magical Mystery Tour, Part 6 - More Texas Fractionation Capacity Beyond the Mont Belvieu Hub

The NGL storage and fractionation hub at Mont Belvieu, TX, grabs all the attention, but more than 1 MMb/d of fractionation capacity — nearly one-third of Texas’s total — is located elsewhere in the Lone Star State. And with NGL production and demand for fractionation services soaring in the Permian, SCOOP/STACK and other nearby plays, the market will need all the fractionation capacity it can find. We’ve heard that there’s little, if any, gap between what the existing fractionators in Mont Belvieu can handle and what they’re being asked to process. That’s music to the ears of fractionation-plant owners elsewhere in Texas — assuming they aren’t already at capacity themselves, they might be able to pick up some overflow business from Mont Belvieu. Today, we continue our review of fractionators and other key NGL-related infrastructure along the Gulf Coast.

Don't Play No Game That I Can't Win - Lotteries, Shippers and Trends in Midland Price Differentials

Since early this year, the Midland crude differential has continued to widen, trading one day last week at a discount of $15.75/bbl to West Texas Intermediate (WTI) at Cushing, the widest spread since August 2014 before settling back to $11.25/bbl on Monday. The wide price differential is a result of fast-growing production in the Permian and bottlenecked takeaway pipelines. But the trajectory of this increasing price spread has been anything but smooth. Lately, we have seen a blip in the price differentials right around the 19th or 20th of the month. In each of the last three months, for a short-lived 24 to 48 hours, the Midland-Cushing price differential has narrowed by $2/bbl or more as Permian shippers have gone on feeding frenzies. Today, we look at these brief upticks in pricing and the pipeline and trader mechanics behind them.

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