In small steps and giant leaps, Enbridge has been building out two “supersystems” for transporting crude oil to refineries and the company’s own export terminals along Texas’s Gulf Coast, one moving heavy crude all the way from Alberta’s oil sands to the Houston area and the other shuttling light oil from the Permian to Enbridge’s massive terminal in Ingleside on the north side of Corpus Christi Bay. There’s nothing quite like it — first, an unbroken series of pipelines from Western Canada to Enbridge’s tank farm in Cushing, OK, (via the Midwest) and from there to Freeport, TX, on the twin Seaway pipelines; and second, the Gray Oak and Cactus II pipes from West Texas to the U.S.’s #1 crude export terminal. And the midstream giant is far from done. New projects and expansions are in the works, as we discuss in today’s RBN blog.
Posts from Housley Carr
The wave of M&A activity in South Texas apparently hasn’t crested yet. Over the past couple months, Chesapeake Energy announced two deals totaling $2.825 billion that will almost complete its planned departure from the Eagle Ford — and signal UK-based INEOS’s arrival in the basin and a more than doubling of WildFire Energy’s production there. Just as important, Western Canada’s Baytex Energy a few days ago unveiled a $2.5 billion plan to acquire Ranger Oil, a pure-play Eagle Ford E&P, and thereby triple its South Texas production and gain its first operating capability in the U.S. And international interest in the basin doesn’t end there — Spanish energy giant Repsol, which had previously acquired the share of an Eagle Ford partnership held by Norway’s Equinor, recently bought basin assets held by Japan’s INPEX. (How’s that for multi-national M&A?) In today’s RBN blog, we discuss the latest round of E&P acquisitions and sales in South Texas, where production has been on the rebound.
The numbers don’t add up. Literally. The most closely watched energy statistics in the world have a problem, and it’s been getting worse over the past two years. We’re talking about EIA’s U.S. crude oil supply, demand and inventory balances, which are published each week and then trued up about 60 days later in monthly data. The problem is that the balances don’t balance. EIA uses a plug number alternatively called “adjustment” or “unaccounted for” to force supply and demand to equate. That would not be an issue if the plug number was small and flipped frequently from positive to negative, likely due to timing inconsistencies with the input data. But that’s not the case. The number is mostly positive, meaning more demand than supply. And the difference can be mammoth: last week it was 2.3 MMb/d, or 18.4% of U.S. crude production. It seems like barrels are somehow materializing out of nowhere. But now we know where, because EIA just finished a 90-day study of the crude imbalance that reveals the sources of the problem and what it is going to take to fix it. In today’s RBN blog, we will delve into what has been causing the problem, what it means for interpreting EIA statistics, and what EIA is doing to address the issues.
New England’s aggressive effort to decarbonize is a tangled web. Over the past several years, the six-state region has replaced oil- and coal-fired power plants with natural gas-fired ones but most proposals to build new gas pipeline capacity have been rejected. It’s also made ambitious plans to add renewables — especially solar and offshore wind — to its power generation mix but many of the largest, most impactful projects have been delayed or canceled. And now there’s a big push to electrify space heating and transportation, which will significantly increase power demand, especially during the winter months, when New England’s electric grid is already skating on thin ice. In today’s RBN blog, we examine the region’s looming power supply challenges and how its energy transition plans may affect natural gas, LNG, heating oil and propane markets.
Production of waxy crude in the Uinta Basin is up by more than half since mid-2021 and E&Ps there would like to produce more — the dense, slippery hydrocarbon is in high demand, not just by refineries in nearby Salt Lake City but also by at least a few of their Gulf Coast counterparts. Producers seem to have a handle on transporting increasing volumes of the stuff to market by truck and rail. The problem is, waxy crude emerges from Uinta wells with associated gas that needs to be piped away, the gas pipelines out of the play are nearing capacity, and addressing the takeaway constraints is a very complicated matter. In today’s RBN blog, we discuss the northeastern Utah play’s gas-takeaway concerns and the prospects for continued growth in waxy crude production.
For several years now, almost all the Permian’s incremental crude oil production has moved to export markets along the Gulf Coast. Due to new pipeline capacity and shipping cost advantages, Corpus Christi has enjoyed a disproportionate share of those volumes. But the market is shifting. Pipelines to Corpus are filling up, and that is pushing more oil to Houston for export — and to Beaumont for ExxonMobil’s new 250-Mb/d refinery expansion. Unless the pipes to Corpus expand their capacity, much more oil supply will be targeting Houston, with important implications for pipeline capacity, dock capacity, and regional price differentials. In today’s RBN blog, we explore these issues and what could throw a curveball into the whole Gulf Coast crude oil market.
Times are good indeed in the Uinta Basin in northeastern Utah, where one of the world’s most unusual — and, in many ways, most desirable — crude oils is being produced with increasing efficiency and in fast-rising volumes. Yes, production of the Uinta’s trademark waxy crude is up by more than 50% in the past year and a half, to record-shattering levels, and demand for the dense, slippery hydrocarbon, with its minimal sulfur content, next-to-no impurities and favorable medium-to-high API numbers, is up too. Waxy crude may be a pain in the butt to transport and store — it needs to be kept warm to remain in a liquid state — but it is a staple at the five refineries in nearby Salt Lake City, and at least a handful of Gulf Coast refineries want as much of the stuff as they can get their hands on because of its desirable qualities. But without infrastructure enhancements, there may be limits to how much Uinta production can grow from here, as we discuss in today’s RBN blog.
It’s been an awesome run for the Port of Corpus Christi’s crude oil export business, which captured about 60% of total U.S. volumes in 2022, up from only 28% in early 2018. But the rate of increase has slowed way down, even though shipping economics give Corpus a distinct advantage. The problem? Pipeline capacity, or more accurately, a lack thereof. The pipelines from the Permian to Corpus that were the driving force behind the Corpus export success story are filling up. The only questions are, how much time is left before the pipes are truly maxed out and what is likely to be done about it? In today’s RBN blog, we examine the data to see what it reveals about the looming capacity constraints.
Refineries with hydrofluoric acid alkylation units account for about 40% of total U.S. refining capacity. Many in the refining sector are concerned that an Environmental Protection Agency (EPA) proposal to compel refineries to conduct exacting studies of newer, alternative alkylation technologies could be leveraged to discourage and effectively ban HF alkylation, and as a result, potentially lead to more refinery closures. The U.S. already has lost more than 1.3 MMb/d of refining capacity since 2019 — losses that exacerbated the run-up in motor fuel prices through the first half of last year — and the specter of another round of refinery closures on the horizon looms large. In today’s RBN blog, we consider the challenges that refineries with HF “alky” units might face if they were required to replace them.
“Top-tier rock, massive scale, and ever-improving efficiency” — that’s the mantra of the largest publicly held E&Ps in the Permian, many of which have only added to their heft during the pandemic/post-pandemic era by acquiring complementary production and midstream assets from private equity funds and old-time oil-and-gas families. Yes, it’s either/or time in the U.S.’s leading oil and gas basin: Either you get bigger, high-grade the acreage you control and supercharge your free cash flow (and your stock buybacks and dividends) or you accept your fate as an also-ran or, if you’re lucky, an acquisition target. Just last week, Matador Resources announced a $1.6 billion deal to acquire Advance Energy Partners, which will boost Matador’s Delaware Basin output by 25% and give it a foothold in the Permian’s big-boy league. In today’s RBN blog, we discuss this and other recent asset acquisitions in West Texas and southeastern New Mexico and what they say about the Permian’s future.
We can’t conjure up a more old-school, more intrinsically American industry than whiskey-making, or more iconic whiskey names than Jack Daniel’s and Jim Beam — the latter, of course, being a bourbon, a particular type of whiskey. The recipes for both “Jack” and “Jim” have remained unchanged for generations and their distillers in Tennessee and Kentucky, respectively, are traditionalists to their core. That doesn’t mean, though, that they’re unaware of the need to reduce their greenhouse gas (GHG) emissions — or are blind to the opportunities that decarbonization may present. Now, as we discuss in today’s RBN blog, both Jack Daniel’s and Jim Beam are all-in on producing renewable natural gas (RNG) from spent grains.
New, stiffer rules on well siting, drilling and production undoubtedly pose potential challenges to producers. After all, these changes typically impose further limits on what E&Ps can do on the acreage they control as well as new requirements. But like death and taxes, environmental regulation is a certainty that producers need to deal with and, if they’re lucky, they can find a way to work with new rules and minimize their impact on their businesses. That seems to be what’s happening in Colorado — home to the rebounding Denver-Julesburg (DJ) Basin and other production areas — which enacted a new oil and gas permitting law a couple of years ago and subsequently developed and implemented related regulations. As we discuss in today’s RBN blog, most producers seem to have figured out how to manage the new regs.
Sixty percent of crude oil produced in the U.S. is exported, either as crude or in the form of gasoline, diesel, jet fuel or other petroleum products. Sure, a lot of crude and products are still imported, but the net import number is dwindling toward zero — and if you throw NGLs into the liquid fuels balance, the U.S. has been a net exporter since 2020. Yes, exports are now calling the shots in U.S. liquid fuel flow patterns, price differentials, infrastructure utilization and, to a great extent, the winners and losers in crude oil and product markets. It’s going to get way more intense as export economics increasingly dominate which pipelines, refineries and port facilities capture production growth from the Permian and other basins. In today’s RBN blog, we begin a series to explore this revolutionary shift in fortunes, why barrels move where they do and what it all means for U.S. producers, midstreamers, refiners, marketers, and exporters. And a warning! This is a subliminal advertorial for our upcoming xPortCon-Oil conference.
Since 2019, more than 1.3 MMb/d of U.S. refinery capacity has been either shut down for economic reasons or converted to renewable diesel production. The decline in the nation’s ability to produce gasoline and diesel hampered the refining sector’s response to the post-COVID demand recovery and exacerbated the big run-up in motor fuel prices that followed Russia’s invasion of Ukraine last February. Now, there may be a new threat to U.S. refining, namely the possibility that a proposed Environmental Protection Agency (EPA) rule on hydrofluoric-acid-based alkylation could, over time, spur an even larger round of refinery closures. In today’s RBN blog, we continue our look at alkylate — a critically important part of the U.S. gasoline pool — the prospective regulation and its possible effects.
Over the past few years — and with a big boost from Permian production growth — the South Texas coast has transformed itself into a top-tier hub for hydrocarbons. Crude oil exports stand out, of course, with marine terminals in Corpus Christi/Ingleside accounting for 60% of U.S. export volumes in 2022. But Corpus also is home to the nation’s second-largest LNG export terminal (which is now being expanded), as well as a half-dozen refineries, and the broader region has the Agua Dulce natural gas hub, nine NGL fractionation plants, and four massive, NGL-consuming ethylene plants, including ExxonMobil/SABIC’s giant new steam cracker in San Patricio County. All of these assets are interconnected by a maze of crude oil, natural gas, NGL, “purity product,” and ethylene pipelines. And the region is well-positioned for additional growth as crude, gas, and NGL production in Texas continues to increase. In today’s RBN blog, we discuss our latest product: a digital, interactive map that helps makes sense of a spaghetti bowl of pipelines, plants and related assets in South Texas.