Monday, August 1, 2016

Thank You, Mr Cuomo For Bailing Out Nukes -- August 1, 2016


August 11, 2016: this seems to sum up the entire story at Forbes --
The James A. Fitzpatrick nuclear power plant in Oswego County, upstate New York, was set to close prematurely, 20 years ahead of schedule, because of a warped market structure that does not value clean reliable nuclear energy like it does short term-term low natural gas prices and subsidized renewables.
Fortunately, the Clean Energy Standard adopted last week by the New York Public Service Commission offered a way out by carbon-free nuclear power, which allowed Exelon Generation to assume ownership and operations of the plant.  
I have "trouble" with the "short term-term low natural gas prices" -- I'm not sure what's meant by that, but I certainly understand "subsidized renewables."

Original Post
From IER:
During the current heat wave on the Eastern Coast, New York power prices rose by over a factor of 20 to more than $1,000 per megawatt hour as hydropower imports from Quebec dropped by 80 percent. This was despite having all of the state’s back-up oil capacity on line.
New York, which sits atop of the Marcellus shale formation, could be producing its own natural gas, but it has banned hydraulic fracking, and despite its nearness to Pennsylvania, which is the second largest natural gas producer in the country, New York is limiting its construction of natural gas pipelines, which could bring Marcellus shale gas from Pennsylvania. As a result, electricity prices skyrocket in the state when shortages occur.
Meanwhile the state of New York is getting ready to bail out its nuclear plants under the guise of a renewable energy mandate.
Maintaining zero-emission nuclear power is a critical element to achieving New York’s ambitious climate goals. Starting in April 2017, the Clean Energy Standard requires all six New York investor-owned utilities and other energy suppliers to pay for the intrinsic value of carbon-free emissions from nuclear power plants by purchasing Zero-Emission Credits. The New York Power Authority and the Long Island Power Authority are also expected to adopt the same requirements. This will allow financially-struggling upstate nuclear power plants to remain in operation during New York’s transition to 50 percent renewables by 2030. A growing number of climate scientists have warned that if these nuclear plants were to abruptly close, carbon emissions in New York will increase by more than 31 million metric tons during the next two years, resulting in public health and other societal costs of at least $1.4 billion. 
The New York Times has a nice article on the cost to the average consumer.
Utility customers in New York State will pay nearly $500 million a year in subsidies aimed at keeping some upstate nuclear power plants operating.
The subsidies were included in an order from the Public Service Commission to establish new rules on how power consumed in the state is generated. The policy, championed by Gov. Andrew M. Cuomo, calls for half of the state’s electricity to come from renewable sources, such as solar or wind, by 2030.
But some environmental groups, including the Alliance for a Green Economy in Syracuse, had opposed the subsidies, calling them possibly “the largest corporate bailout or subsidy” in state history.
Jessica Azulay, program director for the group, said it supported the governor’s push to mandate the purchase of renewable energy by utilities but thought subsidies that could amount to several billion dollars over 12 years were a big mistake.
“They’re dangerous, they’re aging, they’re unprofitable and they should close,” Ms. Azulay said of the nuclear plants.
As long as people don't mind paying more for electricity, and as long as folks don't mind that companies will re-locate to other states where electricity is less expensive, it seems to be a non-issue. 

After Today, It Appears No Wells Coming Off The Confidential List Until August 6, 2016 -- August 1, 2016

Except for the ones reported today (and over the weekend -- reported earlier this morning) there are no more wells coming off confidential list until August 6, 2016.

Active rigs:

Active Rigs3474193178207

Four new permits:
  • Operator: MRO
  • Field: Antelope (McKenzie)
  • Comments: 
The Ecstasy Of Gold

I've seen the movie a dozen times and I've listened to the soundtrack many more times than that, but I've never seen this, until now. Wow:

The Ecstasy of Gold, Ennio Morricone

WTI Just Went Under $40 --1 Hour Ago; Saudi Arabia Already In A World Of Hurt -- Protecting Their Market Share -- August 1, 2016

I took down the poll about three hours ago, in which we asked if we would see $39 oil this week. The votes exactly split:
  • yes: 50%
  • no: 50%
Since there was nothing to lose, I would have expected close to 100% to say they expected to see $39-oil this week.

A talking head -- some years ago -- said we would see $100-oil before we saw $200-oil. After that call, he joined the rest of the talking heads over at CNBC.

Saudi Arabia


September 25, 2016: Saudi Arabia injects $5.3 billion to stabilize banking amid crunch

August 2, 2016: Saudi Arabia Oil Demand Growth at 6-Year Low on Slowdown.
Oil consumption in Saudi Arabia, the world’s biggest crude exporter, is expanding at the slowest pace in at least six years as low energy prices hurt economic growth.
The kingdom’s demand for oil increased by an average of 24,000 barrels a day in the first five months of 2016, the slowest growth rate for that period since at least 2010.
Demand has been crimped after governments in the oil-rich region cut or removed fuel subsidies
Original Post
Over the weekend I spoke about Saudi Arabia getting slammed by low oil prices and said I would be looking for stories on Saudi Arabia and how bad things are getting for them.

First, my blog of only a couple of weeks ago: update on Saudi Arabia's cash reserves. If you look closely, there was a slight "improvement" for the Saudis in May. Didn't last long:

Saudi Arabia Foreign Exchange Reserves
Most folks are just going to look at the one-year graph. Those folks who are really paying attention will note the incredible drop from May  (2016) to June (2016) -- the one-month drop.  I don't have the time, and I can't easily see the numbers, and I really don't care (at this moment -- I'm feeling really, really sick. I have whatever Sophia had yesterday and is recovering from today. I am deteriorating. Maybe I'll do the numbers later).

But, note: the drop from May, 2016, to June, 2016, look's like a 50% drop off the baseline. Of course, the graph is screwy -- with the baseline at 2,100,000 SAR million -- instead of at zero -- it's not really a 50%.

The interesting question is whether this website will have to set a new "y" axis next month. Enquiring minds are asking.

The other big story, of course, is whether the KSA Finance Minister and/or the KSA Energy Minister have had any of their fingers, toes, feet, or hands cut off in the past 72 hours.

Shoot-Out In The OPEC Corral

From The [London] TelegraphTexas shale oil has fought Saudi Arabia to a standstill. Bad, bad news for Saudi Arabia. No excerpts; one needs to read the entire article. I've archived the article.

Texas shale oil has fought Saudi Arabia to a standstill. Don't forget about Russia. This is called a Mexican standoff -- the name of the Ennio Morricone's "song" in this scene -- either "Mexican Standoff or The Trio. When you view the video, think of these three guys as representing the US, Russia, and Saudi Arabia in the current oil environment.

The Trio, from The Good, The Bad, and The Ugly, Ennio Morricone

My hunch is that Hillary Clinton will ban fracking -- not on global warming concerns, although that will be the message -- but rather, due to global social unrest that will make ISIS look like a kindergarten event. There is a real, real fear that the Mideast will implode due to social unrest; Venezuela will become a failed nation; Turkey will be identified as an Islamic state (connect the dots). Joe Kennedy, Sr, saw the 1929 stock market crash coming and -- most likely an apocryphal story -- and got out. He was one of the few lucky ones.

Warren Buffett can see this and that's why he's backing Hillary. $5 gasoline is a small price for Americans to pay to prevent total global meltdown, and the possibility of the Russian bear being backed into a corner and lashing out with the threat of nuclear missiles.

I've not read any books on this scenario (there are plenty) but reading The Oil Kings certainly puts things into perspective. For those who haven't been paying attention, this is what I would recommend:
  • watch VEEP from the beginning
  • watch House of Cards from the beginning
  • read The Oil Kings while watching the above
Those who fail to read and understand history will be forced to live through it again.

VEEP and House of Cards are both Emmy-winning shoes.  The Oil Kings is not particularly well-written but it's a great reference book.

Update On The Four Corners Coal Plant In Arizona -- One Step Closer To Closing; 2Q16 GDP Estimate On Track To Be Revised Lower -- August 1, 2016

El Paso Electric first Texas/New Mexico utility to go coal-free but the big story here is the update on the Four Corners coal plant in Arizona, located near the Grand Canyon. El Paso Electric had a 7% interest in the Four Corners coal plant.
El Paso Electric invested more than $100 million in the Four Corners plant during its 50-year ownership, Hirschi said. But depreciation reduced the book value of its ownership to $32 million on July 6.
El Paso Electric didn't get most of that money because it had to pay Arizona Public Service $27.8 million in future costs tied to closing the plant -- now predicted for 2031. That includes $20 million to help clean up the nearby coal mine supplying the plant after the plant closes, he said.
The company sold its 7 percent ownership stake, which it held for 50 years, for $32 million to Arizona Public Service Co., or APS, a Phoenix-based electric utility, which operates the plant. Three other electric utilities in New Mexico and Arizona still have ownership interests in the plant and get power from it.
El Paso Electric won't get most of the money for the sale because it had to pay almost $28 million in future costs for when the plant closes in possibly 15 years - making the deal a virtual wash for the company.
The company received 6 percent of its power from the Four Corners plant last year, and that dropped to 5 percent this year,. That's been replaced with cleaner-burning natural gas power generators and solar power.
The real question is whether the plant will actually stay open until 2031, but even more importantly, the glide slope to closure.

GDP -- 2Q16 -- Second Estimate -- On Track To Be Revised Downward 

Less than a week after the first estimate for 2Q16 US GDP was released, new data suggests that it is on track to be revised lower.
The Commerce Department said construction spending declined 0.6 percent to its lowest level since June 2015 after dipping 0.1 percent May. June marked the third straight month of declines in outlays.
Economists polled by Reuters had forecast construction spending rising 0.5 percent in June after a previously reported0.8 percent drop in May. Their June estimates were largely based on the government's assumptions for private residential and nonresidential construction spending in the advance GDP report.

Esoteric Or Too Important To Fail?

I'm not sure what to make of this story. I know very little about "government securities" but on the surface this story seems ... should we say, concerning? My hunch is that after the November election, Congress will look into this.

Over at Bloomberg:
JPMorgan Chase & Co. plans to exit the business of settling government securities for most dealers by the end of 2017, including some transactions in a key corner of the $1.6 trillion repurchase-agreement market.
The departure from the business of facilitating settlement of such trades with 30 dealers and broker-dealers, a fraction of the bank’s hundreds of clients, comes as the company focuses on more profitable areas like prime brokerage and custody services.
JPMorgan’s shift means that Bank of New York Mellon Corp. will be the only remaining institution handling these back-office type activities in a niche of the repo market known as general-collateral finance, where dealers turn for financing.
The middlemen.
The GCF repo market, where dealers finance more than $200 billion in securities daily, is the only slice of the tri-party repo market that’s centrally cleared. The Depository Trust & Clearing Corp.’s Fixed Income Clearing Corp. serves as the clearing agent for the agreements.
In a tri-party arrangement, a third entity, either JPMorgan or BNY, serves as the middleman to settle the deals and safeguard the collateral that’s behind them.
Perhaps it is no big deal: Mellon already handles 85% of these transactions; the rest were handled by JPMorgan.

But it seems with only one bank handling this slice of government securities moving $200 billion/day, it makes this bank almost too important to fail. But again, I'm way beyond my comfort zone here.

Pretty Scary, Huh?

Hours after MuskMelon announces the all-share merger between Tesla and SolarCity, the latter announces 3Q16 guidance: not good.

For folks who are paying attention, this is what just happened this morning: investors in a futuristic, sport EV company, are now invested in the equivalent of an aluminum siding company. The widgets are different, but the business plan is the same. From Fortune:
As it goes through the process of being acquired by electric car maker Tesla Motors, solar installer SolarCity has lowered its forecast for how many solar panels it would install this year, blaming weaker than expected bookings in the first half of the year.
The news on Monday sent SolarCity’s shares down 8% in morning trading to $24.56.
The solar company doesn’t plan to announce its full second quarter earnings until Aug. 9, but it likely had to release some financial metrics early because of updated deal terms for its acquisition that were also disclosed on Monday.
Tesla announced that it planned to acquire SolarCity in late June, but the deal announced on Monday was slightly less lucrative for SolarCity. SolarCity shareholders will now receive fewer shares of Tesla—0.110—than the 0.122 to 0.131 shares that were originally proposed.
This is not going to end well. 

Note: this is not an investment site. Nor is it a financial site. Not a travel site. I guess one might call it a social media site but that would be using the phrase liberally. Do not make financial, investment, travel, relationship, or job decisions based on what you read here. If this important to you, go to the source.

First Ethane Exports From Texas -- RBN Energy -- August 1, 2016


August 4, 2016: see RBN Energy story below regarding first ethane loading from Morgan's Point. It appears that loading has been aborted and that suggests the export terminal is not ready for operations. 

Original Post

RBN Energy: first ethane exports from Texas.
This week the first Gulf Coast ethane export cargo will depart Morgan’s Point, Enterprise Products Partners’ new export terminal on the Houston Ship Channel.  This is a history-making event for at least three reasons. 
First, it inaugurates ethane exports from the Gulf Coast, only five months after the first-ever U.S. overseas ethane exports out of Sunoco Logistics’ Marcus Hook, PA, terminal.  Second, it launches a battle for Mont Belvieu ethane, to be fought between ethane exporters and new ethane-only steam crackers (ethylene plants) that will be coming online along the Texas/Louisiana coast over the next couple of years.  And third, Morgan’s Point is not just another export terminal.  It is a location steeped in Texas history, known in the 1830s as New Washington, with an important role in the Battle of San Jacinto – decisive battle of the Texas Revolution -- and legend has it, inextricably tied to the Texas anthem “The Yellow Rose of Texas.”   In today’s blog we examine the upcoming fight between ethane exporters and U.S. crackers.
We spend a lot of time talking about ethane in the RBN blogosphere, not only because it is a fascinating hydrocarbon market, but also because it will be driving what will happen with all of the natural gas liquids (NGLs) – and, for that matter, “wet” (high-Btu) natural gas –– for years to come. 
That’s because the Shale Revolution led to huge increases in wet natural gas production and, with that, far more ethane than the U.S. petrochemical market was prepared to consume. That, in turn, resulted in massive ethane “rejection” – or leaving ethane in the gas stream and selling ethane at gas prices rather than selling it as a “purity” product for use as a cracker feedstock.  
Oversupply drove ethane prices down, and that inspired petrochemical companies to announce projects to debottleneck/expand/convert existing plants to use more ethane and to build several new multi-billion-dollar ethane only crackers, most of which are expected to come on line over the next two years.  
But others have been eyeing cheap U.S. ethane too – the overseas cracker market.  Six to seven years ago those international players initiated serious discussions with U.S. producers and midstream companies to do what had never been done before – put ships of ethane on the water. That finally happened on March 9, 2016, when the JS Ineos Intrepid departed Sunoco’s Marcus Hook, PA terminal (near Philadelphia) with the first overseas ethane cargo; it arrived at the INEOS petrochemical plant in Rafnes, Norway 10 days later.
Active rigs:

Active Rigs3574193178207

Statoil's Non-Core Marcellus Acreage Valued At $8,000/Acre 

11,000 non-core Marcellus acreage sold for $96 million.