Crude-by-rail has had a huge impact on the market for tank cars. Currently there are 53,000 tank cars on back order and more orders are coming in. That’s up from a backlog of 48,000 just a couple of months ago. The tank car manufactures are enjoying every bit of it but for the first time since the ethanol boom, they can’t keep up. In the old days it took 9 months to deliver a new car. Now, there is such a backlog that manufacturers can’t deliver a new car for 24 - 30 months. Today we will review the rapidly evolving tank car situation based on a recent presentation made by Travis Brock from Strobel Starostka, a construction and rail services firm deeply involved in in the crude-by-rail markets.
Posts from Callie Mitchell
These days natural gas can be traded in spot, term, or financial at over 120 locations across the US. Deals can be executed by Apps, by instant messages and by high-speed algorithm. And it is reported that a few human beings actually still trade gas bilaterally over the telephone as was done in the time of the Cro-Magnons. None of that would be happening without the big bang. Today we recall how the dust settled after the big bang in natural gas markets.
Storage, the great balancing mechanism of the natural gas market in North America is heading toward another evolution in its usage, flow patterns and economics. Not too many years ago, natural gas storage was the hottest midstream investment opportunity going, expected to synchronize inbound flotillas of LNG imports with seasonal domestic demand. Winter vs. summer price differentials were wide, prices were volatile and storage economics looked great. When shale gas happened, those differentials evaporated along with storage economics. Today another phase looms for natural gas storage as Marcellus and now Utica production ramp up on top of (or more accurately, underneath) the largest storage region in the world – the Northeast U.S. This is a big topic with big implications. So rather than jumping into the middle of the upcoming gas storage transformation, we will walk through a multi-part North America natural gas storage blog series - its history and status, its challenges, who’s involved, and finally what could be in store going forward. Today we’ll start with some natural gas storage basics.
Today’s blog is something different. It is a special feature covering a unique aspect of the NGL/LPG industry, known as the LPG Charity Fund. The organization is an integral part of this community, due both to its good works and its widely attended extracurricular events. In posting this blog we are not asking for contributions, volunteers or anything else. Instead, we just think it is important – when you are trying to understand an industry – that you know something about the people involved and how the market really connects. Today we talk about this important dimension of the NGL/LPG community.
The isobutane market has a traditional self-correcting mechanism whenever the market gets oversupplied - the iso vs. normal spread declines, the merchant isomerization units shut down, and the market moves back into balance. But there is a potential problem ahead for this orderly, self-correcting marketplace – shale. As high-BTU, “wet” shale gas production continues to push NGL volumes from gas plants ever higher, the supply of isobutane will be increasing proportionally. The math is simple. The more gas plant production of isobutane, the less merchant isomerization will be needed. Or is that really true? Could increasing demand for alkylate combined with increasing availability of propylene from dehydrogenation absorb enough isobutane to keep the merchant isomerization units running at high utilization rates? Today in our series on isobutane and isomerization we’ll look at the major isomerization centers, the major players, increasing export patterns and likely scenarios for the disposition of surplus isobutane supplies.
Of the five natural gas liquids (NGLs), isobutane stands apart in its sources and markets. Isobutane comes from gas processing plants and refineries, but it is also the only NGL intentionally made from another NGL – it’s cousin, normal butane. It has a variety of exotic uses, such as aerosol propellant for everything from hair spray, to cooking sprays to shaving cream and since the early 90s as a replacement for Freon in refrigerators. A refinery process called alkylation is the largest market for isobutane, producing a high-octane gasoline blending component called alkylate. Even though it has robust markets, isobutane supply/demand balances are not immune to the growing volumes of high-BTU, “wet” shale gas and the resulting torrent of NGL production. And as gas plant isobutane volumes increase, there are changes coming to isobutane balances and the demand for merchant isomerization. Today we begin our series on isomerization by exploring what it is, why it’s valuable, and how it’s done.
U.S. gas plant production of propane is up 25% since early 2011, far above growing volumes of ethane, held to only an 8% rise by rejection economics. As propane supplies have surged, prices have come down hard…. But not nearly as hard as would have been the case if it were not for rapidly increasing exports. And where are all these barrels going? That’s right. In a conga line of ships headed to Latin America where the growth in imports from the U.S. into some countries has been off the scale. Which countries are taking all this propane? How long can this go on? How much dock capacity does the U.S. need? What could derail this development? Today we begin a blog series to explore these questions.
No, this is not the Whoville located south of Mt. Crumpit within the mountainous high range of Pontoos. And there is no Grinch in this Houville, at least during the 2012 Christmas season. Instead, this Houville is the center of an emerging Marcellus/Utica based NGL hub soon to take its place among the largest in North America.
With all the new NGLs coming on, there has been periodic hand wringing about fractionator capacity. The good news is that there is a lot of capacity being built. So much so that it appears that the fractionators will be able to keep up with the producers and inbound pipes, at least most of the time. Notice however, that even though new NGL production from shale gas is growing most rapidly in the Northeast over 60 percent of the new capacity will be at Mont Belvieu or the Texas Gulf Coast region. Today we examine why Mont Belvieu remains the center of the NGL universe.
There is a close, symbiotic relationship between brine and natural gas liquids. Most NGL storage is in huge underground caverns washed out of salt formations thousands of feet below the surface. That washing or ‘leaching’ process makes lots of brine. When the storage caverns or wells go into service, the NGLs replace the brine. But when NGLs are removed from the wells, brine must displace the NGL barrels. Nowhere is this relationship between brine and NGLs more entwined with the history of the facilities than at Bumstead and Adamana, two storage facilities in Arizona. Today we continue our series looking at the unique niche these two operations fill in the NGL marketplace and where they may be headed in the future.
We’ve talked a lot here about NGL storage in Mont Belvieu and Conway. Those are the big underground storage caverns washed out of salt formations thousands of feet below the surface. But those are not the only places where NGLs are stored in underground salt caverns. Two important facilities, especially for West Coast NGL markets are located in the seemingly unlikely locations of Bumstead, AZ and Adamana, AZ. Today and in a later follow up we’ll look at why these facilities are in Arizona, how they got there, and the unique niche they fill in the NGL marketplace.
News flash! ---Rail transportation has become a very big deal in the business of transporting crude oil, NGLs and petroleum products!!----The whole world does not revolve around pipelines! Yup, the media has discovered that hydrocarbons can ride the rails. Never mind that liquid hydrocarbons have been moving in tank cars for 150 years. The news is that rail is having a market impact like never before. And that is because there has been a strategic shift in the way rail transportation is being used by the petroleum industry. In Part II of our series we’ll dissect the strategies being used and discuss how things are evolving in the world of tank cars.
Over the next five years, production of natural gas liquids (NGL’s) from gas processing plants will increase by at least one million barrels per day, or about 40% over 2012. Perhaps more. That’s good news for natural gas producers, processors and end-use markets. But there is a catch. The rate of production does not match up with demand. While production is a steady, “ratable” volume, demand is anything but ratable. Demand swings with petchem feedstock economics, the gasoline blending season, weather and a myriad of other factors. The flywheel that balances supply and demand on any given day is storage. But not just any storage. For NGLs, storage of large volumes means salt caverns. Huge caverns thousands of feet below the surface. In this NGL storage blog series starting today, we’ll look at the history of NGL salt storage, where it exists, how it is used, and where more of it is needed. In this first installment we’ll go all the way back to the origin of NGL salt storage. All the way back to Smoky Billue.
Unlike pipelines that take a long time to build and only deliver to a handful of destinations, rail freight cars offer the flexibility to deliver anywhere across North America. The rail freight industry can load, store and transport different NGLs (including those NGL products that must be transported under high pressure) as well as crude and petroleum products. Rail infrastructure is mostly already in place so new routes can easily be brought on line. That’s why rail freight has been used successfully by the energy industry for over 100 years as - a “pipeline on wheels”. Today we look at the rail tank car business for moving NGL and petroleum products.
The West Coast natural gas liquids (NGL) market is an island unto itself. Unlike the world east of the Rockies where pipelines link together producing and consuming regions, the West Coast NGL market is marooned except for rail tank cars and a few waterborne cargos. It is a fiercely independent market with its own unique players playing their own ballgame. But like the rest of the NGL world, big changes are rippling through that market. Today we begin a series looking at those changes and how West Coast NGLs are likely to evolve over the next few years.