Posts from Jim Simpson

With the start-up of new capacity on Energy Transfer Partners’ Rover Pipeline out of the Southwest Marcellus and Utica now a reality and the service on several other pipeline expansions out of the Northeast expected to begin soon, some of the questions that have been vexing the market for years are about to be answered. Principal among these: How much will natural gas production in the region grow and how fast? How will Northeast supply growth affect the larger U.S. market? And how will supply growth across the country compare with increasing demand? (Hint: the numbers could be staggering, the impact will be too, and there could be a big supply/demand disconnect.) Today we examine how a prospectively huge supply/demand imbalance in the U.S. natural gas market might be rectified.

When the Rockies Express (REX) Pipeline was being planned and built a few years ago, no one could have predicted that the natural gas-hungry Northeast REX was developed to serve would soon become a gas-production behemoth able to meet its own needs and have plenty of gas left over. But that’s just what happened, and in response, REX’s owners developed a revised strategy that deals with the reality of Marcellus/Utica production growth by making more and more of REX bi-directional. Now, Tallgrass Energy Partners (TEP), a master limited partnership (MLP), has acquired a 25% interest in REX from Sempra, joining existing co-owners Tallgrass Development (an affiliate with a 50% stake in REX) and Phillips 66 (with a 25% stake), and has laid out a long-term vision for maintaining—and even increasing—REX’s relevance in a still-changing energy world. Today, we consider TEP’s $1.08 billion investment in REX, and the steps that the pipeline’s co-owners are taking to bolster REX’s future.

A few years ago, natural gas storage was one of the hottest segments of midstream infrastructure development.   But along came shale, then oversupply, then depressed prices.  The forward curve flattened out, killing off new storage development projects and putting a lot of financial pressure on those companies that own or lease storage capacity.  But recently things have shifted, at least part of the way back to the good ole days. The summer/winter spread currently sits at $0.63/MMBtu (April 7, 2016), the highest level since 2012, and up significantly from the past years average of around $0.30/MMBtu.  Midstream companies with available storage should be able to lock in higher prices compared to past years.  In today’s blog, we look at the situation now facing natural gas storage operators and show how recent shifts in the market may affect their returns.

There was a lot of hand wringing and gnashing of teeth last week in energy markets, and it had nothing to do with the OPEC non-event.  Instead, the focus was Kinder Morgan (KMI), granddaddy of U.S. midstream companies, and usually a darling of analysts and media.  Not this time.   Over the past few days the stock has been hammered, Moody’s downgraded its debt, and a lot of folks in the market have been trying to figure out what is going on.   Particularly since all the hubbub would seem to be about a relatively minor investment (in energy infrastructure terms) in a pipeline called Natural Gas Pipeline of America, or NGPL, one of the oldest of the long-line systems in the U.S., which came online 84 years ago and Kinder Morgan has owned all (or part of) since 1999.  In today’s blog, we look at this pipeline system and what it tells us about the current state of the natural gas markets.