Monday, November 16, 2015

Active rigs:

	11/16/2015	11/16/2014	11/16/2013	11/16/2012	11/16/2011
Active Rigs	64	186	183	187	201

RBN Energy: Can Permian Crude Gathering Infrastructure Be Overbuilt?

Permian Basin crude production more than doubled since 2011 to reach nearly 2 MMb/d today, but that rate of increase has leveled off since prices crashed last year. Meantime 750Mb/d of long-haul pipeline takeaway capacity came online in the first half of 2015 - greatly exceeding today’s take-away requirements. And there is more to come next year when the 470 Mb/d Enterprise Midland-to-Sealy pipeline is expected online – leading to fears regional pipeline infrastructure is overbuilt. How about inside the Permian Basin? Today we start a series reviewing Permian gathering system build out.

We recently looked at changing differentials between prices for Permian West Texas Intermediate (WTI) crude at the Midland, TX gathering hub close to producing areas and WTI prices at Cushing, OK the Midwest crude trading and storage hub.

In theory – if there is no congestion on pipelines between Midland and Cushing, the crude price differential between the two points (Cushing minus Midland) should equal the cost of transportation or less than $1/Bbl (depending on shipper commitments). And that is the way the differential traded for years before Permian crude production took off in 2011 after producers applied shale drilling technologies in the basin. Since then crude output in the region has more than doubled – reaching close to 2 MMb/d in July 2015 according to the Energy Information Administration (EIA) drilling productivity report.

Increasing production put pressure on crude takeaway capacity from the region as midstream companies scrambled to keep up with soaring output. When production exceeded takeaway capacity, producers had to accept discounted prices to get their barrels onto busy pipelines – causing prices at Midland to dip well below Cushing. Then as new pipelines came online the pressure was relieved and the differential narrowed. Over the summer we saw Midland prices at a rare premium to Cushing when a spate of new pipelines came online together creating the opposite of congestion – a shortage of crude - when shippers could not source enough barrels to meet their commitments to the new pipelines and bid up the price at Midland above Cushing. In the last month that situation has reversed again as refinery maintenance in the Permian Basin has freed up barrels at Midland. Between October 2, 2015 and last Friday (November 13, 2015) WTI Midland once again traded under Cushing – by an average of $0.57/Bbl.

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Glut of Coal-Fired Plants Casts Doubt on China's Energy Priorities -- New York Times

Link here.  

Just outside the southwest border of Beijing, a new coal-fired power and heating plant is rising in Dongxianpo, a rural town in Hebei Province. Cement mixers roll onto the site. Cranes tower above a landscape of metal girders.

When finished, the plant, run by a company owned by the Beijing government, is expected to have a generating capacity of 700 megawatts of power, more than the total of similar plants in Ohio. But whether it will actually be used to its fullest is questionable, despite the investment of $580 million.

That is because the plant is scheduled to come online in three years amid a glut of coal-fired power plants — an astounding 155 planned projects received a permit this year alone, with total capacity equal to nearly 40 percent of operational coal power plants in the United States.

China’s economic slowdown and the government’s pledges to use more renewable and nuclear energy make some of the country’s existing plants and most or all of the 155 new ones unnecessary, according to interviews with officials and scholars, a review of public statistics and a report released Wednesday about the “coal power bubble” by Greenpeace East Asia. There are already too many plants, as shown by a steady decline in the plants’ average operating hours since 2013.

The construction boom — with capital costs estimated by Greenpeace at $74 billion — is a clear sign that China remains entrenched in investment-driven growth, despite promises by leaders to transform the economic model to one based on consumer spending.

It also raises questions about whether China is weaning itself from coal as quickly as it can and whether officials are sufficiently supporting nonfossil fuel sources over coal, which is championed by some state-owned enterprises. China is the biggest emitter of greenhouse gases in the world and the main driver of climate change, and it has some of the worst air pollution.

Conflict within the system is rising. Renewable-energy interests — wind, solar and hydropower — are pushing back against coal-fired power plants, which have 40-year life spans. They say the rising number of coal plants prevents other energy sources from selling electricity on the grid and attracting more investment. They want the government to move faster with its promised “green dispatch,” giving priority to low-carbon electricity sources.

By the way, this allows China to come up with huge reductions of carbon emissions in the out-years -- all fake numbers, of course.  If they define the baseline as the "potential" CO2 emission of all these coal plants -- built or not built -- and then measure "actual" CO2 emissions, the delta will be so big, China will have bragging rights to the largest decrease in CO2 emissions in the entire universe.