Monday, May 14, 2018

Zeits: takes a look at what effect the Trump decision on Iran will have on domestic production. A must read. This, from the middle of the interview:

SA: This recent article notes that the Permian may soon become a testing ground for oil producers to limit methane emissions. What does that mean for the companies active in that area, and how does that impact investors in those names?

LS: First, I want to point out that North Dakota has done a stellar job of achieving reduced methane emissions in an oil industry that developed there virtually overnight. The Permian faces the same issues: a great deal of natural gas is produced in association with the oil. Thus, reducing natural gas emissions means more natural gas pipeline capacity is needed - into markets that are not exactly screaming for it - or shutting in profitable oil wells.

Just as critical a concern that caught everyone by surprise is the lack of oil takeaway capacity. There are only a few refiners located in the Permian, so companies depend on trucks, gathering systems, and large pipelines to move oil to refining markets or export. We’re at the limit of that capacity.

The need for both Permian oil and gas takeaway capacity suggests a growth opportunity for pipeline and midstream companies, which - investors and their tax advisors should note - are usually structured as master limited partnerships. Examples are Magellan Midstream  and Energy Transfer Partners.

Wow, that was my thought some months ago: that everyone was caught by surprise in the lack of oil takeaway capacity. There are only a few refiners located in the Permian, so companies depend on trucks, gathering systems, and large pipelines to move oil to refining markets or export. [The Permian is] at the limit of that capacity.

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Back to the Bakken

 Active rigs:

$70.81↑	5/14/2018	05/14/2017	05/14/2016	05/14/2015	05/14/2014
Active Rigs	60	51	27	83	189

RBN Energy: the ethane price implications of rejection economics.

After years in the doldrums, ethane prices are increasing, not so much in absolute terms, but where it counts — relative to the price of natural gas. That means less ethane will be rejected — sold as natural gas — and more will be recovered as liquid ethane and sold as a petrochemical plant feedstock. As still more new ethane-only petrochemical plants come online over the next couple of years, ethane demand will increase, boosting ethane prices and resulting in still less ethane rejection. Does that mean ethane rejection will be a thing of the past? No, not even close. U.S. natural gas production, especially gas with a high ethane content, is growing so fast that ethane supply will continue to outstrip demand for the foreseeable future, with important consequences for ethane prices.

• Bakken: produced - 80,000 bbls/day; rejected: 100,000
• Marcellus/Utica: produced - 300,000; rejected: 300,000 
• PADD 4:  produced - 120,000; rejected: 180,000
• PADD 3: produced - 1,200,000; rejected -- 0
• everything else: produced - 345,000; rejected 20,000
• total: produced - 1,545,000; rejected 600,000
• Gulf Coast: demand: 1,800,000