Sunday, June 26, 2016

The Road To New England -- An Update -- Forbes -- June 26, 2016; RBN Energy Weighs In


June 27, 2016: one day after the Forbes article below was posted, we have an update from RBN Energy saying the same thing -- how more northeast propane and butane storage might help. The article is archived.
The U.S. Northeast now produces all the propane and butane it needs on an annual basis (Energy Information Administration - EIA PADD 1 plus Utica production from Ohio), but the seasonal nature of the region’s demand—and a dearth of in-region storage—means a lot of the natural gas liquid (NGL) production needs to be railed to storage facilities elsewhere during the warmer months, then be moved back in to meet wintertime needs. This propane/butane back-and-forth raises costs and reduces producer netbacks. Surely there is a better way. Today, we continue our review of NGL storage (or the lack thereof) in the Northeast, and how proposed NGL storage facilities in the region might help.
NGL production in the wet Marcellus and Utica shale plays has been rising fast. According to EIA, in 2012, production of NGLs in Petroleum Administration for Defense District (PADD) 1 from natural gas processing plants (the region includes Pennsylvania and West Virginia, but not Ohio) averaged less than 50 Mb/d; but by March 2016, it had risen to 321 Mb/d, including 115 Mb/d of ethane, 118 Mb/d of propane, 37 Mb/d of normal butane, 17 Mb/d of isobutane, and 34 Mb/d of pentanes+ (natural gasoline).
Ohio (part of PADD 2) only adds to the totals. The boom in Northeast NGL production has posed a real challenge to producers and midstream companies as demand for propane and butane swing sharply between summer and winter with heating demand for propane and motor gasoline blending demand for normal butane—and there is only a limited amount of NGL storage capacity in the region.
We also described the plan by Denver, CO-based Mountaineer NGL Storage to develop a facility of the same name at a riverfront site in Monroe County, OH (near Clarington, and just across the river from the base of West Virginia’s panhandle). Mountaineer’s proposed NGL storage facility would consist of several bedded salt deposit caverns that would be capable of storing a total of up to 2 MMbbl of ethane, propane, butane and mixed NGLs (also known as Y-grade). Mountaineer is planning an early 2017 construction start and an early 2018 commercial operation date.
The Northeast would benefit from additional in-region storage capacity for ethane—the lightest and, in many ways, the most challenging NGL to deal with. Ethane storage capacity near NGL production areas in western Pennsylvania, northern West Virginia and eastern Ohio, we said, would help deal with ethane market balancing issues not addressed by MarkWest’s unique ethane-management system, and would provide “safety stock” for any ethylene plant (steam cracker) that may be developed nearby.
Six days after that blog was posted, Shell Chemical announced its final investment decision (FID) to build a Beaver County, PA cracker that is being designed to convert 90 Mb/d of ethane into ethylene and other products, as well as three polyethylene units that will convert ethylene into about 1.6 million tons of polyethylene a year .  Shell’s press release indicated that construction will not begin for another 18 months, so the cracker will not be online until sometime in the early 2020s.
While ethane storage capacity in the heart of the Marcellus/Utica region would surely help, there are other alternatives to balance ethane supply and demand.  Ethane production surplus of local cracker needs can be either “rejected” into natural gas or transported out of the region on the Mariner East (to the Marcus Hook, PA export terminal), Mariner West (to the Sarnia, ON petrochemicals complex), or the Appalachian-to-Texas Express (ATEX) Pipeline to Mont Belvieu, TX.  So it is likely that the highest and best use of additional NGL storage in the region would be for two other NGLs – propane and butane. 
These NGL products are widely used within the Northeast, but mostly during the colder months of the year. We need to note up-front that while NGL storage capacity that serves the Marcellus/Utica region is quite small relative to the Gulf Coast (Mont Belvieu, TX and other Gulf Coast storage has more than ten times the capacity of storage serving the Marcellus/Utica), there is at least some. For example, MarkWest, a leading natural gas processor and NGL producer in the region, has access to storage for Y-grade and non-ethane purity products (propane, butanes and natural gasoline).
According to its website, MarkWest has 190 Mbbls of NGL storage at Houston, PA; 270 Mbbl at Hopedale, PA; and 40 Mbbl at Keystone, PA. It also has access to 1.2 MMbbl of shared third-party propane storage that is owned by Enterprise Products Partners (part of Enterprise’s Products Pipeline System that runs from the Gulf Coast to the Northeast, commonly known by its historical name, Teppco) and located in Watkins Glen, NY. Crestwood Equity Partners has 1.7 MMbbl of NGL salt-cavern storage capacity at its Bath facility in Steuben County, NY.
Original Post
As usual, a Forbes contributor does a great job updating the energy situation in New England.

I don't know if there's anything new in this article that we haven't talked about before, but it's in one place, now, and a great update. The article begins:
Despite not producing any itself, New England has rapidly surged its reliance on natural gas. ISO New England now gets about 50% of its power from gas, versus 10-15% a decade ago. From 2014-2015 alone, gas increased its share of New England’s power generation from 43% to 49%. Nearly 30 gas plants have been built in the region since 2000.
And largely based on the goal to reduce GHG emissions, plans for more energy efficiency, low levels of wind and solar generation, the shutdown/retirement of coal, oil, and nuclear plants, New England’s gas demand therefore will obviously continue to grow. ISO New England has “assessed the fleet of power plants in the six states and found that nearly a third of the grid’s generating capacity will have closed or be at risk of closure by 2020.”  [2020 is about four years from now; Hillary will still be president. First term.]
New England is the country’s most oil-reliant region, used for power generation and heating. Home heating takes priority in winter, and new and highly efficient electric plants don’t get reliable access to gas.  That’s why over 80% of the coal and oil used for power last year in New England occurred during the first quarter.
The claim that more renewables and more energy efficiency negate the need for more gas and more gas pipelines is simply not true. Take Massachusetts, which consistently ranks as the “most energy efficient state” and has still doubled its reliance on gas power to 50% since 2000. Massachusetts has nearly 20 times more gas power capacity than wind and solar capacity combined.
A big "thank you" to Don for sending this my way.

So, How Did The Inaugural "Crossing" Go For The Newly-Expanded Panama Canal? -- Apparently, Well -- June 26, 2016

See this post for the answer to the question.

In addition, in case you missed it, from an earlier post:  research study looks at nine US ports (East Coast and Houston) -- how they have prepared for the Panama Canal expansion.  Port of Savannah is already receiving these ships. The Port of Baltimore is the second East Coast port to be fully prepared for Panama Canal expansion. Port of Houston, ready, but congested. Port of Miami is accessible but infrastructure (intermodal system, waterside improvements) lacking.

Handicapping The Water Polo Teams

Handicapping the water polo teams before placing one's bets.

This was a two-day north Texas water polo tournament. Our older granddaughter, who turns 13 this summer, is on the 18-and-under team, and on the 14-and-under team. Exceptional players on the 12-and-under teams (where she started) can be "pulled" up to the 14-and-under, and rarely, even to the 18-and-under. 14-and-under can be coed teams, but 18-and-under are unisex.

Only Two Wells Coming Off Confidential List Over Weekend, Monday -- Liberty Resources With A Nice Well In McGregor -- June 26, 2016

Monday, June 27, 2016
  • 29514, 569, Liberty Resources, ND State 158-95-21-28-4TFH, McGregor, 50 stages, 4.4 million lbs; t1/16; cum 48K 4/16;
Sunday, June 26, 2016
  • None.
Saturday, June 25, 2016
  • 25202, SI/NC, BR, Jerome 21-15TFH 3SH, North Fork, no production data,

29514, see above, Liberty Resources, ND State 158-95-21-28-4TFH, McGregor:

DateOil RunsMCF Sold

Oil Futures, Pricing -- June 26, 2016; Fossil Fuel Center Of Gravity Clearly Shifted From Mideast, Russia To North America

The price of oil will be affected by the plummeting pound (London, sterling) and the surging dollar following Brexit. For us on the sidelines it will be interesting to watch. For Prince Salman, it has huge implications. Just when he saw the price of oil rising, it dropped on Brexit. I assume the price of oil will drop due to anxiety about Brexit (short term) and the surging dollar (short to medium term).

Swing Producer

The following was put together in an ad hoc manner, but reading through it, one starts to see tectonic changes occurring in the oil market. Clearly, things are changing; the center of gravity for fossil fuel has clearly moved from the Mideast and Russia to North America. 

From an earlier post:
  • October, 2015: Saudi's inventory at record levels; have since fallen almost 40 million bbls
  • over same period, US crude oil inventories have increased by slightly over 60 million bbls
Saudi policy appears to be to continue inventory drawdowns for the foreseeable future.

Saudi says they won't increase production -- note, they said they won't increase production. They said nothing about exports. For newbies: Saudi's domestic use of oil surges in July and August to provide electricity for air conditioning. Saudi imports to the US won't decrease: most of their US imports are to supply their Gulf Coast refinery and they won't cut that).

The price of oil is determined by the value of the last bbl produced or sitting in storage -- if that makes sense.

Which brings us to storage. First this article from February, 2016:
US crude oil inventories are at an 80-year high at this time of the year. Crude oil storage capacities have been increased due to rising crude oil inventories and long-term oversupply concerns. So, limited crude oil storage facilities caused crude oil storage costs to rise to $0.90 per barrel on February 9, 2016—compared to $0.10 per barrel in August 2015. Crude oil storage costs rose nine times in six months. The costs are even more than the long-term storage costs in the Gulf Coast.

The Louisiana Offshore Oil Port (LOOP) and Matrix launched the first innovative ETF contract based on the crude oil storage capacity at the LOOP Clovelly Hub in the CME Globex. The first trading started on March 30, 2015. The first listed and delivery month was May 2015. The trading floor would be NYMEX. The electronic platform would be CME Globex. This crude oil storage contract will help consumers store crude oil for 1–12 months. Also, it provides transparency for crude oil storage costs over the short term. The contracts provide access to storage at Gulf Coast facilities. Each crude oil storage contract gives the buyer the right to store 1,000 barrels of LOOP sour crude at the LOOP Clovelly Hub for any calendar month.
So, where do crude oil futures stand now? For August, 2016: 45 cents (if I'm reading the chart correctly).

See recent post on increasing storage capacity in the US, and increasing utilization of that storage. 

Bakken Fracking Shows Signs Of Life -- The Bismarck Tribune -- June 26, 2016


July 2, 2016: Hess, EOG, Enerplus, and SM Energy are fracking
Original Post
From The Bismarck Tribune, Amy Dalrymple reports: fracking jobs show signs of life in the Bakken. The byline is Williston --
The Williston office of Job Service North Dakota is seeing job orders for fracking crews and other openings related to well completion, such as workover rigs and trucking, said manager Cindy Sanford.
Unreliable Energy: Lessons Learned From Sweden and Germany

I was looking for an update on Germany's unreliable energy program after a reader sent me an article suggesting "challenges" in Germany. It's hard to find "current" data regarding unreliable, non-dispatchable energy.

Something called the "Institute For Energy Research" appears to have "somewhat fair and balanced" reporting on solar and wind energy, but the institute is definitely not being financed by Algore. It's a new site for me. This is the background for this "institute."
The Institute for Energy Research (IER), is a Washington, D.C.-based non-profit organization that conducts research and analysis on the functions, operations, and government regulation of global energy markets.[1] IER maintains that the free-market provides the most inexpensive solutions to global energy and environmental challenges.
This looks helpful, dated May 16, 2016: "Lessons from Sweden and Germany."

After receiving wind subsidies for years, Swedes are dismantling wind turbines and selling them abroad. About 50 wind turbines have been dismantled so far in Sweden where wind accounts for 5 percent of the country’s electricity consumption.
Investment in Sweden’s wind industry was down by 40 percent last year compared to the year before, and Norway’s Energy Minister wants to end the joint Swedish-Norwegian wind subsidy program in five years.
Germany paid wind farms $548 million last year to cut their power in order to prevent damage to its electric grid. Because of the damaging effects renewable energy has had on Germany’s grid, the government plans to cap the total amount of wind energy at 40 to 45 percent of national capacity, forcing the country to get rid of 6,000 megawatts of wind power capacity by 2019. The German government expects to spend more than $1.1 trillion on wind power, even though building wind turbines has not achieved the government’s goal of actually reducing carbon dioxide emissions. In fact, a greater percentage of Germany’s electricity is produced from coal than the United States.
That's another "first world problem": paying wind farms NOT to produce electricity. Wow, talk about a solution looking for a problem: wind farms.

Democrats Discriminate Against Muslims With "No Fly/No Buy" 

File under: I wish I had thought of that. LOL. Only in London newspapers. From an op-ed in The Guardian.
That using terrorist watchlists for gun bans is discriminatory to Muslims and Arabs was a prominent part of the national conversation during the congressional rush to “do something” after the San Bernardino shooting in December. But Democrats, who usually pride themselves on their pro-minority stance, made no mention of this grave concern during their supposedly heroic sit-in on the House floor this week, leaving a community already suffering from anti-Muslim and anti-immigrant sentiment wondering why.

The “No Fly/No Buy” bill members demanded to vote on is a problem in and of itself. It was introduced by none other than Representative Peter King, known for his controversial homegrown Islamic terrorism hearings, and would prevent anyone on government terrorist watchlists from purchasing a weapon.

But as of 2014, 40% of the 680,000 people on the master government watch list had no terrorist affiliation. Within that falls the notorious no-fly list, 64,000 people (including children) who are often Arab and/or Muslim. The reasons for their inclusion are largely unknown, and the process for getting off the list is extremely challenging – and, according to some civil rights groups, even unconstitutional. In April, the Michigan chapter of the Council on American Islamic Relations filed a class action lawsuit in a federal court on behalf of thousands of Americans who have been placed on the terror watchlist.

No member of Congress at the sit-in appeared to acknowledge that not only are these lists ineffective in catching actual terrorists, they also will not likely stop mass shooters, either. The vast majority of mass shooters in America have not been Muslim or Arab, but rather white, male and not suspected terrorists. Neither of the San Bernardino shooters were reported to be on a list. “No Fly/No Buy” legislation essentially amounts to nothing more than embarrassing political theater for gun control with dangerous consequences for Arab and Muslim communities.

The current frenzy to blindly take action at the expense of civil rights brings to mind the post-9/11 legislation that many Arab and Muslim Americans are still reeling from including sweeping arrests and secret detentions of South Asian and Arab men, indefinite detentions of Americans through the National Defense Authorization Act and warrantless surveillance of Americans through the Patriot Act. In addition to being rights violations, these programs simply haven’t been successful in catching terrorists. We cannot allow history to repeat itself.