Did Oil And Imported LNG Save New England This Winter? -- February 20, 2015

Updates

Later, 3:30 p.m. CT: Reuters reports that heating oil spikes as severe cold crimps U.S. refining --

The heating oil rally came after Phillips 66 began experiencing extended delays in restarting a crude unit at its 238,000-barrel-per-day Bayway refinery in Linden, New Jersey, according to person familiar with the facility's operations.

In Trainer, Pennsylvania, Delta Refinery said the facility's cooling system, which normally draws water from the Delaware River, is partly frozen, and it had shut a fluid catalytic cracking unit.

Intelligence group Genscape reported that Philadelphia Energy Solutions Inc shut down a vacuum distillation unit at the Girard Point section of the 335,000 bpd refinery in Philadelphia.

Original Post 

Yesterday it was noted that the electric grid in the northeast is likely to "hold" this winter -- despite a brutal winter. In addition, the natural gas fill rate was "better" than the 5-year average. This was not predicted; it did not make sense to me; I simply reported it -- praised the oil and gas industry for their resourcefulness -- but never understood it. Now RBN Energy provides an answer. Very, very interesting. 

RBN Energy: did oil and imported LNG save New England this winter? This is an incredibly interesting story. I will post it again as a stand-alone. In addition, a reminder: these articles are archived at the source.

The much-discussed shortfall in natural gas pipeline capacity into New England has been largely mitigated this winter because generators—encouraged by low oil prices and incentives to lock in backup supplies of oil and LNG—are ready, willing and able to switch their dual-fuel power plants away from pipeline natural gas and onto oil and LNG-sourced gas if market conditions warrant.

But now that prices for those fuels are more attractive, could switching to oil and imported LNG during winter’s coldest days and nights actually be a longer term solution to New England’s pipeline capacity problem instead of just a stopgap until new pipelines are built?

Today, we begin a look at the changing economics of burning oil and LNG-sourced gas to help power New England when the region turns arctic, and what they may mean for proposed pipeline expansion projects.

This winter has provided some déjà vu to the power generation and fuel supply sectors in New England. As the season approached, oil (which was once, with coal, a fuel of choice for generators in the region) was being delivered to and stockpiled at the significant number of power plants in the region that can run on either natural gas or oil. More recently, imports of liquefied natural gas into the region’s LNG-receiving terminals spiked, with the expectation that LNG—like oil—will supplement and even displace gas piped into New England from the south and west when doing so makes economic sense. New England’s electricity market is highly competitive, and up-to-the-moment information about the degree to which oil (and LNG-sourced gas) is displacing piped-in gas for power generation is scarce.

But, as we’ll get to in a moment, there are signs that this winter oil and imported LNG are playing out-sized roles.