Tuesday, Tuesday -- September 23, 2014

I've updated the "trending" page.

Active rigs:

	9/23/2014	09/23/2013	09/23/2012	09/23/2011	09/23/2010
Active Rigs	195	187	185	195	142

RBN Energy: Eagle Ford takeaway capacity, Magellan and Kinder Morgan, 2nd in a series, Condensate Tsunami

RBN Energy: ethane hits record high steam cracker margin.

It’s hard not to be amazed at how much the world of NGLs and U.S. petrochemical production has changed—and the changes keep coming. Just a few years ago, the margins for heavier feedstocks such as naphtha and natural gasoline were higher than margins for lighter feedstocks like ethane and propane.

As a result, steam crackers (a.k.a. petrochemical crackers or ethylene crackers) tended to maximize runs of those heavier feedstocks. Then came the Shale Revolution and lower natural gas prices, which in turn encouraged production of “wet” high-BTU natural gas that ultimately resulted in surpluses of lighter NGLs and low ethane, propane and butane prices. All that has caused a major shift at the 36 steam crackers operating in the U.S., which collectively produce about 60 billion pounds of ethylene per year.

Currently, the feedstock slate of U.S. crackers is about 65% ethane, 20% propane, 7% butane, and 8% a combination of natural gasoline, naphtha and gas oil. As recently as 2008, naphtha and gas oil made up 30% of the steam cracker slate. As new ethane crackers come online in the next few years, the shift toward lighter feedstocks will only increase.  At least that is the expectation.

The relative value of different feedstock margins is the most important factor that influences which feedstocks steam crackers choose to run.  

On Friday when the margin for ethane as a Gulf Coast steam cracker feedstock hit a record 70.4 cents per pound, ethane prices were very low, (24 cnts/gal) and ethylene prices were very high (76.5 cnts/lb). On the same day, the margin for a steam cracker running natural gasoline, a heavier NGL, was only 47.3 cnts/lb--an attractive margin for sure, but only two-thirds of the margin for ethane.

Weekly natural gas fill rates. Soon, the fill rates will return to withdrawal rates. This is over at Seeking Alpha; I assume the link will break soon. The article has short-term relevance.

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Siemens Fell A Decade Behind GE By Focusing On Renewables In Germany

The Street is reporting, with regard to the Dresser deal:

Nonetheless, the results of GE's deal-making in the oil patch speak for themselves. GE's Oil & Gas is nearing $20 billion in annual revenue and it is the company's fastest growing business line by sales and profit as it weans itself from financial services. In compression, GE commands over 30% of the market globally and might have even presented an antitrust hurdle in a Dresser Rand bid.

The merits of the Siemens deal are likewise evident. Only a few years ago, Citigroup characterized North America as "the new Middle East" as a result of an onshore energy production boom and the infrastructure investment that would be required to transport oil and gas to terminals and hubs. Industrial giants like GE and Siemens, faced with a lackluster economic backdrop, are eager to bolster their revenue and profits by moving into the fast-growing energy sector.

"I think this simply is a reflection of Siemens' belief that the US market for oil services remains very attractive -- enough for them to invest at this point in the cycle and to pay a high enough multiple that they believe will prevent interlopers from outbidding them. Is it vindication for GE? Only to the extent that a large rival is paying up for an asset in a space where GE had been active for the last decade," Steven Winoker, an analyst at Bernstein Research, said in an e-mail to TheStreet.

Winoker believes GE's oil and gas deals have begun paying off for shareholders within two-to-three years of their close given a trend of rising earnings in the sector.

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Wind?

I have to credit the Los Angeles Times for posting this story. The Los Angeles Times is incredibly liberal; it is probably more liberal than The New York Times, if that's possible. It speaks volumes that The LA Times chose to print this story, and they did so without hiding it:

Naturally occurring changes in winds, not human-caused climate change, are responsible for most of the warming on land and in the sea along the West Coast of North America over the last century, a study has found.

The analysis challenges assumptions that the buildup of greenhouse gases in the atmosphere has been a significant driver of the increase in temperatures observed over many decades in the ocean and along the coastline from Alaska to California.

Changes in ocean circulation as a result of weaker winds were the main cause of about 1 degree Fahrenheit of warming in the northeast Pacific Ocean and nearby coastal land between 1900 and 2012, according to the analysis of ocean and air temperatures over that time. The study, conducted by researchers from the National Oceanic and Atmospheric Administration and the University of Washington, was published Monday by the Proceedings of the National Academy of Sciences.

Again, this is another study sponsored by the NOAA.

I guess the science is not settled.