The Disconnect Between Natural Gas - Crude Oil Pricing -- December 9, 2019

See part 2 here.

From Rigzone, shale has "de-linked" pricing for natural gas and crude oil:

The diversion between oil and gas prices came in 2008-2009. This is right when the U.S. shale oil and gas revolution took off, when the deployment of hydraulic fracturing and horizontal drilling technologies became widespread. So just looking over this century, there have really been two distinct periods for oil and gas: the “pre-shale era” (2000-2008) and the “shale era” (2009-present).  

Talk about coincidental. Saturday my son-in-law and I were discussing exactly that. I pointed out that crude oil is international in scope whereas natural gas is much more regional. Natural gas can be transported long distances, but like crude oil that comes at a cost, and .... well, here is Rigzone again --

This is all noteworthy because both U.S. oil and gas production have boomed since 2009. Domestic crude output has risen 150 percent, with gas up 60 percent. The vital difference between these two commodities, however, is that oil is easily transportable and therefore sold on an immense international market with linked prices. For oil consuming nations, outside forces and decisions reverberate around the world. The U.S. shale oil boom is simply not able to shelter the domestic market like shale gas has. Gas remains a regional product with distinct markets: over 70 percent of the world’s oil usage is internationally traded, versus just 30 percent for gas. 

I also mentioned to my son-in-law that I could not imagine the price of natural gas dropping any further. But here is Rigzone again:

Looking forward, higher oil prices will generally mean lower U.S. gas prices. That is because of the Permian basin in West Texas, the largest oil field in the world. Higher prices will lead to more oil drilling and more associated gas supply. To illustrate, despite not having a single gas-directed rig in 16 months, the Permian now accounts for almost 20 percent of U.S. gas output. In the reverse, lower oil prices can lift gas prices by lowering gas production. The reality is that gas remains a secondary resource to oil, and its market is just too small to have a material impact on oil prices.

I don't think the Bakken has ever had a single gas-directed rig and look at the amount of natural gas being produced in North Dakota: over 3 billion cfpd.

The Bakken boom began in North Dakota in 2007. Tbe Bakken reached its stride in 2010 - 2012.

By the way, despite the stellar US jobs report last week, there was one very disheartening note:

The U.S. saw a sharp decline in support activities for mining in November, according to data released Friday from the U.S. Bureau of Labor Statistics (BLS).

Citing a challenging market environment, several upstream companies have continued to reduce their staff, including natural gas producer Range Resources, shale and gas producer Gulfport Energy and frac sand supplier U.S. Silica. 

Speaking of which, I forgot to post the most recent natural gas fill data:

 

Natural Gas -- Re-Posting -- October 24, 2019

I can't recall now but I think I might have said that this year (or last year or next year, I forget) would be the Year of Natural Gas. Re-posting two incredibly interesting articles.

First, the EIA report: natural gas inventories: lots of it and more coming -- graphic previously posted --

• for the week ending October, 11, 2019, first week since September 22, 2017, that working gas inventories have surpassed the previous five-year average (and the five-year average has been trending up)
• weekly injections in three of the past four weeks were all higher than 100 billion cubic feet
• weekly injections for three of the past four weeks, a whopping 27% more than usual injections for same time of year
• this week also ended a 106-week streak of lower-than-normal natural gas inventories
• this week's report will be out later today

Then, RBN Energy's blog today -- natural gas exports to Mexico swell, but is a tidal wave coming?

For some time now, natural gas producers in the Permian and the Eagle Ford have been counting on rising pipeline exports to Mexico to help absorb a lot of the incremental production in their plays.

Their hopes have been bolstered in the past couple of years by the build-out of a number of new pipelines from the Waha and Agua Dulce gas hubs to the U.S.-Mexico border. Gas pipeline development south of the border hasn’t kept pace, though, mostly due to regulatory and construction delays. Also, a recent dispute over tariffs on a newly completed large-diameter pipeline, extending from the southern tip of Texas to key points along Mexico’s Gulf Coast, had left the pipe sitting empty this summer.

That tiff has since been resolved and gas is flowing on the new pipeline, allowing those piped southbound exports to hit a daily record high near 5.9 Bcf/d earlier this month and average above 5.5 Bcf/d this month to date.

Plus, progress is being made on other planned Mexican pipes too. This all leads us to ask, is the long-promised surge in U.S. gas exports to Mexico just around the corner? Today, we look at the latest developments regarding Mexico’s natural gas pipeline infrastructure additions.

ONEOK Announces Additional Infrastructure -- July 25, 2019

If I can find the post from sometime earlier this week suggesting that we were about to see some announcements along this line, I will post the link.

Until then, a huge "thank you" to a reader for sending me this article. I had not seen it.

From a press release, ONEOK announces plans to expand natural gas and NGL infrastructure. Data points:

• North Dakota / Bakken / Bear Creek:
• a 200 million cfpd expansion of the Bear Creek natural gas processing facility
• Dunn County, ND
• $405 million project
• to be completed in 1Q21
• Mid-Continent NGL fractionation expansions totaling approx 65,000 bpd and additional NGL infrastructure capacity between the Elk Creek and Arbuckle II
• $150 million project
• 15,000 bpd expansion to be completed in 3Q20
• 50,000 bpd expansion to be completed 1Q21
• why? In expectation of accelerating volume growth from the Williston and Powder River basins, additional infrastructure will be constructed to increase connectivity between the Elk Creek and Arbuckle II pipelines.

More on the Bear Creek expansion:

ONEOK's Williston Basin natural gas processing capacity will increase to more than 1.6 billion cubic feet per day following the completion of the Bear Creek expansion. The expansion is expected to produce approximately 25,000 bpd of NGLs in ethane rejection, resulting in 225,000 bpd of raw feed contracted since the announcement of the Elk Creek Pipeline.

More at the link including expansion plans for the Permian.

Natural gas processing plants in North Dakota are tracked here.

At that link, there is a "Bear Creek II," 200 million cfpd, 2021 -- that may, in fact, represent this newest announcement. ONEOK calls is an expansion; ND regulators list it as a new project, co-located at existing Bear Creek I, it appears.

Call me naive, but this would suggest to me that ONEOK does not agree that the North Dakota Bakken is reaching peak production. 

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Natural Gas Records

It Looks Like Natural Gas Is The Big Story -- July 7, 2019

Link here.

From the linked article:

America is awash in natural gas. In parts of the country there’s hardly a drop to burn.

Earlier this year, two utilities that service the New York City area stopped accepting new natural-gas customers in two boroughs and several suburbs. Citing jammed supply lines running into the city on the coldest winter days, they said they couldn’t guarantee they’d be able to deliver gas to additional furnaces. Never mind that the country’s most prolific gas field, the Marcellus Shale, is only a three-hour drive away.

U.S. gas production rose to a record of more than 37 trillion cubic feet last year, up 44% from a decade earlier. Yet the infrastructure needed to move gas around the country hasn’t kept up. Pipelines aren’t in the right places, and when they are, they’re usually decades old and often too small.

That's as far as I read: I wonder if the article mentioned Cuomo, Schumer, Occasional-Cortex, or Algore.

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Boeing Update

We talked about this earlier. It will be interesting to see where this story goes.

From the linked article:

Analysts estimate it could take several years to get MAX deliveries back on plan. Hundreds of planes are sitting idle with airlines, more have been built but not yet delivered and Boeing also slowed MAX production in April, effectively delaying future deliveries to some customers.

US Natural Gas Production On Pace For One Of Strongest Refill Seasons Since 1994 -- July 7, 2019

New natural gas links:

• traderscommunity: into the vortex: EIA reports +89 Bcf build in natural gas storage (the reader who sent me this link suggests this site posts NG data every week); this looks like the "front page" for that link: https://traderscommunity.com/index.php/oil-energy/. 

The reader also noted this EIA note on US natural gas, dated July 2, 2019:

With the fast start to this injection season, 2019 is on pace to see one of the strongest refill seasons since 1994, even if the rate of increase slows.

For example, if net injections into storage match the five-year (2014–2018) average for the remainder of the refill season, cumulative net injections will total 2,399 Bcf by the end of October. If remaining refill season net injections equal the most recent five-year average:

• the 2019 refill season would be the fifth-largest refill season since 1994<>
• net injections for the season would exceed the five-year average fill by 16%
• working gas stocks would total 3,529 Bcf at the end of the refill season—only about 5% lower than the five-year average

The EIA site for above data: http://ir.eia.gov/ngs/ngs.html. 

Hess Reclaims Bragging Rights To Largest Natural Gas Processing Plant In North Dakota -- April 27, 2019

Natural gas processing plants in North Dakota are tracked here. 

Updates

April 27, 2019: see also this post on the Vantage Pipeline.

April 27, 2019: see second comment below --

Have often theorized the Hess and Targa want to deliver ethane to a cracker and convert the ethane pipeline to propane as Alberta has a propane cracker to be built. Targa owns half of the Little Missouri gas plant and is a supplier for Gulf Coast crackers.

There has been almost no word on a cracker for years- either dead or in the quiet phase.

April 27, 2019: see first comment below --

The Alliance pipeline, which only has conditioned Nat gas, ends in Illinois where that huge Nat gas is. Palermo, ND, has a lateral to that pipeline. Conditioned gas has all the sulfides, chlorides and non carbon gases removed.

It's a good way to deliver propane and butane etc to industrial parts. Nat gas delivered to users has an upper BTU limit, so they must be removed.

Original Post   

See tag, "NG_Plants_ND," although I have failed to tag a lot of posts that should have been tagged. My bad.

For gas plants in North Dakota, the "official site" of the North Dakota Pipeline Authority, link here.

I could be wrong, but when one thinks of natural gas processing in North Dakota, this is sort of the status in chronological order:

• Hess is the oldest; has always been there; has made Tioga what it is -- the oil capital of ND (Williston is "Boom Town, USA"); if Hess was "ND Gas" it was somewhat local;
• ONEOK was the big "outsider" to come into North Dakota at the very beginning of the boom; it probably did more than any other company to move the Bakken natural gas industry along; it deserves a lot of credit for having so much "faith" in North Dakota
• Oasis: one of the independent, small operators who saw the potential for NG plants; may have the largest plant (at one time it did, apparently, but I've lost track of who has the biggest plant now); updated below;
• CLR: does a lot of natural gas gathering but not known (at least in my mind) as a NG operator in the Bakken

All of that as background for newbies. If others have a different perspective on history of NG gathering and processing in the Bakken I would love to hear that, and post it (anonymously, of course, if so desired).

Disclaimer: I estimate that I understand 1% of all that is going on in the Bakken with regard to crude oil; I understand even less about the natural gas industry.

Hess to expand its natural gas processing capacity at its Tioga Gas Plant by 150 million cubic feet per day, creating a total of 400 million cfpd processing capacity north of the Missouri River. Link here.

• cost: the expansion to cost approximately $150 million gross; or, 
• $30 million net to Hess Midstream
•  will add residue and y-grade liquids processing capacity to the existing full fractionation and ethane extraction capability of the current plant
• I've forgotten but I believe Hess has a huge pipeline moving ethane from its Tioga plant to Canada (one pipeline not killed by the Obama administration)

Digression: this is really cool. For newbies, I have always divided the ND oil footprint into two geographic areas, the north and the south. The north would be the Bakken boom on both sides of the river; the south would be the legacy Red River wells and some Bakken in the southwestern part of the state. But looks like one can be a bit more specific, with four geographic areas:

• north of the river, Bakken boom (CLR)
• south of the river, excluding the reservation, Bakken boom (everyone)
• the reservation, south of the river, Bakken boom (KOG, now Whiting, Senator Dorgan)
• southwestern North Dakota: legacy Red River, and some Bakken boom (CLR)

Now back to Hess.

Again, repeating: for gas plants in North Dakota, the "official site" of the North Dakota Pipeline Authority, link here.

At that link, scroll down to see the spreadsheet. You can click on the spreadsheet to make it bigger. The spreadsheet now goes out to 2021. Oasis had bragging rights: it has the largest natural gas processing plant -- Wild Basin had a capacity of 320 million cfpd. The Oasis Wild Basin plant is in McKenzie County, south of the river.

But now Hess has reclaimed bragging rights. With its planned expansion, it will have a capacity of 400 million cfpd. 

How does 400 million cfpd compare with other natural gas processing plants across the US? I'm glad you asked.

See the EIA summary at this link. Wow, make my day. Making America great. Yeah, 400 million cfpd is huge, but there are plants out there with 1 billion and 2 billion cfpd capacity. The west has a few huge plants, but look at the number and size of the plants in Texas.

Okay, hold that image.

Now, move up to the northeast. Hard to make that out? Go to this link with this graphic:

Pretty impressive, huh?

Besides the "blue dots," there is something else of interest. Look at all the grey -- the shale plays. The graphic did not break out conventional plays and many (most?) of the shale plays overlap/extend the conventional plays.

Most surprising "data points" on that graph, at least for me, two:

• the size of the Illinois blue dot; and, 
• that huge shale play in Michigan; see this link; the narrative is very, very good

Well, that should keep enthusiasts busy all weekend. Go to the links, which will take you to more links, and before you know it, you will be in so deep in a rabbit hole, you will never get out. LOL. 

Haynesville Sets All-Time Natural Gas Production Record -- April 19, 2010

The Haynesville is tracked here. Beats production record set back in 2011. Data points:

• old record, 2011: 10.4 billion cubic feet per day (1.73 million boepd)
• April, 2019, currently producing: 10.522 billion cubic feet per day (1.75 million boepd)
• forecast: to hit 10.754 billion cubic feet per day
• Haynesville, currently #3 in US natural gas production (depths, 10,500 - 13,500 feet)
• #1: Appalachia basin: Marcellus and Utica (depths, 4,000 to 8,500 feet)
• #2: Permian
• Haynesville began to rebound in 2017: increasing rig count; improved IP rates

Natural Gas, April 11, 2019, T+99, Part 2 -- Making America Great

Updates

April 12, 2019: with regard to the note below, a reader noted --

"Unfortunately: NGCC power plants are less efficient than other forms of natural gas-fired capacity." Did you mean non combined cycle are less efficient - like single stage peak load generators....the other 1/2?

Original Post

Natural gas milestone, 2018: US natural gas-fired combined-cycle capacity overtook coal-fired capacity in 2018.

NGCC.

• 2019, US:
• NGCC capacity: 264 GW
• coal plant capacity: 243 GW
• NGCC capacity: accounts for about half of all natural gas-fired capacity in the US

Unfortunately: NGCC power plants are less efficient than other forms of natural gas-fired capacity.

Last four years:

• coal: shed 40 GW of capacity
• NGCC: added about 30 GW 

Examples:

• Duke Energy: $1.5 billion, 1.64 GW Citrus Combined Cycle Station in Florida
• Dominion Energy: $1.3 billion, 1.6 GW Greensville station in Virginia

$1.5 billion / 1.6 GW =  $1 million / MW
New natural gas capacity for 2019: should add 6 GW of electricity -- mostly in PA, FL, and LA

It's very interesting: California is not mentioned in the article. In fact, the entire west coast is AWOL.

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Skills For The 21st Century

Tuesday, February 19, 2019 -- Making America Great -- US Steel, Natural Gas. Hollywood? Not So Much....

Box Office: winter, 2019, revenue hit an 8-year low in the US. Link here. The entertainment coming out of Washington, DC, swamped (pun intended) whatever was coming out of Hollywood. Where are the Coen Brothers when we need them?

US Steel: making America great. US Steel reopens Texas mill as industry rebounds. Just as predicted.

U.S. Steel is opening a previously shuttered East Texas mill after market conditions that originally forced the manufacturer to close the facility have improved.

The process of reopening the shuttered No. 1 Electric-Weld Pipe Mill at Lone Star Tubular Operations in Lone Star, Texas — about two hours east of Dallas — began immediately, the Pittsburgh company announced earlier this month. About 140 people will be hired at the mill.

"We are encouraged by an improvement in market conditions and an increased customer demand for tubular products that are mined, melted and made in America," said David Burritt, president and chief executive of United States Steel Corp. (NYSE: X), in a prepared statement.

U.S. Steel permanently idled the facility in 2016 when oil prices were low and activity in the Permian Basin slowed considerably. Also, the domestic steel market was suffering from cheap Turkish and Indian imports that undercut American prices.

Three years later, the landscape looks very different.

The Permian Basin in West Texas is roaring and producing at record amounts. And after President Trump took office, he levied steel import tariffs against several countries in an attempt to kickstart the struggling industry.

Trump may not be the smartest man in the room, but .... he knows American business.

Natural gas: can US production keep up with demand? Data points:

• Mexico now imports 7 percent of US daily production
• consumption by electric power sector increased by nearly 50% from 2005 to 2016, reaching 27 Bcf/d
• industrial demand has also increased by 30 percent as some manufacturing relocated to the US to take advantage of low gas prices
• demand has also increased from LNG exports: LNG exports have reached almost 4 Bcf/d (December, 2019

Somewhere out there, there's gotta be intelligent life ... but then, again, it's hard enough finding intelligent life on earth. Scientists have just "found," "discovered," counted 300,000 more galaxies in the "known" universe. Link here. And that was just looking at "a segment of the northern sky." Of course, I can't put this into perspective because:

• they don't say how "big" that segment of the sky was (if the segment represented only 1% of the "sphere," the total number of observable galaxies might increase by a factor of 100
• they don't say how many galaxies they have counted so far

Where's Paul Sagan when you need him?