reversal

The northern corn-belt states are winding down from a very wet bumper crop of corn which has required a lot of grain drying, fired by propane.  That has translated into a shortage of propane supplies – so much so that seven governors recently issued emergency orders to expedite propane deliveries to their states.  Now, with about three weeks left before the official onset of winter (and it feels like winter already), 2013 Midwestern propane problems should be behind us.  But what about next year?  In 2014, Cochin pipeline – one of the most significant traditional sources of propane for the region goes away.  Kinder Morgan (current owner and operator of Cochin) is reversing the system and turning it into a diluent pipeline.  Volumes of propane previously delivered by Cochin must come from somewhere else.  Today we’ll continue our series looking at upper Midwest propane and how the region is likely to adjust in the post-Cochin market.

Reversing the direction of flow on the eastern third of the Rockies Express (REX) pipeline would have a profound effect on natural gas markets throughout the industrial Midwest and the Midsouth. Not only would the plan significantly expand the regions’ access to gas from the Utica and western Marcellus shale plays, it would further erode the market shares held by traditional suppliers to those regions.   In this Part 3 of our series on the REX reversal we examine how moving large volumes of now-constrained gas west from southwestern Pennsylvania, Ohio and West Virginia would fundamentally change regional gas flow patterns, basis relationships, and even the operations of many pipelines.

Production forecasts for natural gas in the Appalachian Marcellus shale have doubled from 7 bcf/d to 14 bcf/d in less than two years. As a result northeast demand for natural gas will be almost entirely met from local production in coming years. Significant re-plumbing of the US natural gas pipeline distribution system will be needed and in many cases has already commenced. Today we review accelerating changes to US gas flows.

Since the world is scheduled to end tomorrow – at least according to the Mayans, it seems appropriate that we examine another looming catastrophe: the obliteration of existing North America natural gas market relationships and flow patterns, coming in 2016.   The good news about the end of this natural gas world is that not only do we know it is coming, we can make a pretty good guess about how and when it will happen, and thus prepare for it.  Today we’ll examine the market developments that will result in such dire consequences.

Shell is progressing toward early 2013 completion of the Houston, TX to Houma, LA (Ho-Ho) pipeline reversal. Bakken and Canadian Crude via Cushing, Eagle Ford crude from South Texas and Permian Basin crude from West Texas pipeline projects will all be showing up in the Houston area early next year via new or expanded pipeline projects. The Ho-Ho reversal will provide a missing link for these crudes to flow seamlessly to Louisiana Gulf Coast refineries. Today we describe the Ho-Ho project and its significance.