Thursday Morning -- September 8, 2022

Panic: "everybody" now panicked that the Fed will raise another 75 basis points. Say what? Jay Powell said that in his eight-minute speech at Jackson Hole a few weeks ago. Did folks miss that?

Panic: apparently California is coming close to running out of diesel. We're laughing but California trucks -- like trucks everywhere -- still run on diesel. Apparently, "everyone" took the state governor's advice last year and bought diesel generators. Irony.

Panic: in the US DOE. Great Britain will lift the fracking ban.

Panic: most expensive new Apple Watch already on six- to seven-week delay if ordered now. No one saw this coming. Except Apple. Tim Cook opened the "big event" with the Apple Watch .... not the iPhone. In fact, in the super slick presentation, the Apple Watch had pride of place. Meanwhile, the iPhone followed not only the Apple Watch but also the Air Pods Pro. Say what?

Panic: again, in the office of the US DOE. SLB sees North American oil activity growing faster than expected. I'll believe it when I start seeing increased dividends reflect that optimism. All of  sudden, announcements of quarterly dividend increases have disappeared.

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Back to the Bakken

The Far Side: link here.

WTI: $82.45. It's a fool's errand to predict the price of oil. GS has the price of WTI at $125 before the end of the year.

Natural gas: $7.807.

Thursday, September 8, 2022: 11 for the month, 61 for the quarter, 400 for the year. Great production; the Whiting Miller wells are followed here:

• 37413, conf, Whiting, Miller 31-15H,  Dollar Joe, t--; cum 77K 7/22;
• 37412, conf, Whiting, Miller 31-15-3H, Dollar Joe, t--; cum 110K 7/22;
• 37411, conf, Whiting, Miller 31-15-2H, Dollar Joe, t--; cum 76K 7/22;

RBN Energy: stars aligning as Gulf Coast ethylene-to-alkylate project advances.

The thinking behind Next Wave Energy Partners’ late-2019 decision to build a first-of-its-kind ethylene-to-alkylate plant was that a combination of NGL production growth and new ethylene supply — plus increasing demand for alkylate, an octane-boosting gasoline blendstock — would be a win-win-win for ethylene producers, refiners and Next Wave itself. Now, with construction of the plant along the Houston Ship Channel approaching the homestretch, things are shaking out very much as the company had anticipated — even better, in fact. In today’s RBN blog, we discuss the progress being made on Next Wave’s Project Traveler plant and the market forces validating the company’s final investment decision (FID).

Who among us didn’t make plans in late 2019 and early 2020 that didn’t pan out. Trips to the beach, to the mountains, to Europe. Family get-togethers and weddings. Plans to start new businesses, change jobs or retire. No, COVID reared its ugly head, and wreaked all kinds of havoc (beyond the obvious and sad human toll). The stock market crashed, and so did crude oil prices. Demand for gasoline, diesel and jet fuel tanked, and E&Ps, refiners and petrochemical companies tore up and threw out their 2020 and 2021 playbooks. More shocks followed, especially Russia's February 2022 invasion of Ukraine, which sent crude oil, natural gas and refined-product prices skyward and helped spur a round of inflation the likes of which we haven’t seen since the 1970s. And now there’s talk of a recession too.

After all the shocks and dislocations of the past two-and-a-half years, however, at least one of the plans made in the months before COVID did come to pass. Or, to put it more accurately, the project we’ll discuss in today’s blog is well on its way to becoming a reality, and the late-2019 rationale behind its owner's FID hasn’t just held up, it’s proved to be prescient.

We first looked at Next Wave’s plan for a 28-Mb/d ethylene-to-alkylate plant in January 2020 (soon after the company took FID), we began with a review of the many factors that, when considered collectively, led almost inevitably to Project Traveler’s fruition. These factors fall into three buckets:

• Trends in the market. These include (1) rising U.S. NGL production; (2) more Gulf Coast fractionators to separate out the purity products; (3) more ethane-only steam crackers to make more ethylene and other petrochemicals; (4) higher U.S. and international ethylene production and lower ethylene prices; and (5) low and relatively stable U.S. butane prices (butane is a low-cost but high-RVP gasoline blend component).
• The need for octane. Refiners and blenders develop gasoline recipes that satisfy the requirements of end-product specs like Reid vapor pressure (RVP) and octane ratings, with the latter reflecting the degree to which a fuel can be compressed before it self-ignites (causing “knocking”). High-octane, low-RVP and low-sulfur content are three of the most desirable qualities for gasoline blendstocks, and alkylate (typically produced as part of the crude oil refining process, and representing about 15% of the total gasoline pool) has perhaps the best combo of the three.
• The desire to hedge. Ethylene producers — especially those without adjoining polyethylene (PE) and monoethylene glycol (MEG) plants — want to mitigate their exposure to ethylene commodity price risk, and one way to hedge their long position is to explore other potential markets. Alkylate consumers like refiners and blenders may, in turn, want to hedge their short positions by locking in at least a portion of their supply of the octane booster.