We Start The Day With 25 Active Rigs In North Dakota, A New Post-Boom Low -- Down From 200 During The Boom -- April 26, 2016

It should be noted that in addition to "everything else," all travel on gravel roads in McKenzie County has pretty much come to a stop due to rain and mud. The Bismarck Tribune is reporting:

This adds up to a substantial number of days when trucks have to severely lighten loads of oil and salt water, and freight, or sit tight until the ban is lifted.

“It’s one of the longest (stretches) since the spring of 2012. This is a long one,” agreed McKenzie County Commissioner Ron Anderson.

The immediate forecast doesn’t look promising for reopening the roads anytime soon, but six hours of warm sunshine, or even just a wind and no more rain could change that outlook in a hurry.

Counties post their road status on www.ndenergy.org.

Active rigs:

	4/26/2016	04/26/2015	04/26/2014	04/26/2013	04/26/2012
Active Rigs	25	84	182	187	208

RBN Energy: update on propane - propylene processing plants. Before starting, a reminder, all single bonds, these are alkanes: 

• CH4 = methane (C1)
• C2H6 = ethane (C2)
• C3H8 = propane (C3)
• C4H10 = butane (C4)

On the other hands, alkenes have one double bond. Propylene/propene is the second simplest (after ethene/ethylene) member of the alkene class of hydrocarbons.

Now back to the RBN link:

Several new propane dehydrogenation (PDH) plants are coming online along the U.S. Gulf Coast.

Now developers in Alberta are making plans for the province to become the next hot spot for PDH plant development.

Final Investment Decisions (FIDs) are due over the next year or so on two projects aimed at taking advantage of the increasing volumes of propane being produced in western Canada—propane so plentiful, in fact, that they are paying to have it hauled off. 

But what if propane prices rise due to increasing U.S. demand, more exports and lower U.S. production?  What might such developments do to PDH economics?   What could make Alberta different? Today, we consider the drivers behind two (maybe three) prospective PDH projects in Alberta, and look at how they may affect the propane market on both sides of the 49^th parallel.

We try not to play favorites among the hydrocarbon markets we blog about, but it’s hard not to like the propane sector, with its dynamic pricing, its variety of uses (heating, BBQ grilling, petrochemical feedstocks), its huge export potential, and the sometime remarkable differences between how much it costs at Point A versus Point B. As we have explained, propane is a “purity” product extracted from natural gas along with the other NGLs or (in smaller volumes) produced at refineries. 

Propane has three carbon atoms and eight hydrogen atoms (C3H8). We’ve written about propane frequently, and about propylene, a very in-demand petchem intermediary feedstock that for a long time was produced primarily by refineries or as a byproduct from ethylene steam crackers but more recently is increasingly being made “on purpose” at propane dehydrogenization (PDH) plants.

As their name suggests, PDH plants remove some hydrogen (specifically, two hydrogen atoms) from propane (again, C3H8) to make propylene (C3H6). The propylene molecule is significantly more reactive than propane, making it an ideal chemical building block.

Propylene is used in downstream petrochemical processes to make films, packaging and synthetic fibers. About two-thirds of propylene is used to make polypropylene--one of the best-selling plastics, second only to polyethylene. Polypropylene is used extensively in automobiles and in the manufacture of packaging films, bottle caps, fiber ropes as well as bicycle helmets and disposable diapers.

There are so many story lines here, one doesn't even know where to begin.

Yesterday it was reported that the Canadian government hopes to speed up the permitting process for crude oil and natural gas pipelines, suggesting that the Canadian government might be able to make a decision (yes/no/"we need more time") in only 27 months. Of course, that's better than the six years it took President Obama to make the decision to kill the Keystone -- another lost decade. Whatever.

But this is the story line I take away from this. If the industry waited for the government to act, no one would make any money, and at the end of the day, we would still be living in tar paper shacks. But free market capitalism (whatever is left in Canada and the US) finds entrepreneurs taking advantage (or finding workarounds) of the slow "progress" of their respective governments.

In this case, having maxed out takeaway capacity of natural gas, entrepreneurs in Alberta are looking for ways to solve the problem -- and one way: do the processing locally instead of shipping the raw product elsewhere.

By the way, how bad is takeaway capacity in Albert when it comes to natural gas? From the link at RBN Energy:

Then, through late 2014/early 2015, a combination of rising U.S. and western Canadian production of propane and a mild winter led to a propane glut, especially in Alberta, where in-province propane demand is modest and whose (equally modest) propane storage and (rail-based) take-away capacity are maxed-out. And when we say glut we mean it: in May and June 2015, spot prices for propane in Edmonton (light blue line in Figure 1) fell below zero several times—in other words, a bizarre-world in which propane “sellers” were actually paying “buyers to take the stuff off their hands.

Better living through chemistry.