Reason #239 Why I Love To Blog: Indications That Prince Salman's Strategic Plan Is To Focus More On Midstream/Downstream; Less On Upstream

Updates

Later, 9:14 p.m. Central Time: Look at the blurb from The Oil & Gas Journal in the original post below. Think about it for a minute. "A fully integrated crude oil-to-chemicals complex in Saudi Arabia." Prince Salman is not thinking of a simple complex; he's going for a world-class, record-setting facility. But that requires cash. Lots of cash. And with oil at $50 his country continues to hemorrhage cash on a monthly basis.

In an earlier post, his energy minister was quoted as saying that he plans / Saudi plans to let KSA crude oil inventories to continue to decline. Once the data comes out showing how far KSA crude oil inventories have fallen, there's a very, very good chance the price of oil could spike.

Idle chatter.

Original Post

 

Earlier today I updated "Trending" over at the "Top Ten Lists."

The first thing I posted was something I have been alluding to for the past week or so and finally said it outright, so it cannot be mistaken:

1. There are indications that Saudi Arabia has changed strategy; will focus on refining; will not increase production; will concentrate on Prince Salman's plan with greater emphasis on midstream, downstream; less emphasis on upstream

Now this, from The Oil & Gas Journal which I just came across, posted over at Twitter, six hours ago:

Saudi Aramco and Saudi Arabian Basic Industries Corp. (SABIC) plan to conduct a joint feasibility study for development of a fully integrated crude oil-to-chemicals complex in Saudi Arabia.

The proposed plant would use a crude oil-to-chemicals process derived from improved refining technology that mixes innovative configurations with proven conversion technologies to create an integrated petrochemical complex capable of maximizing chemical yield, transforming and recycling byproducts, driving efficiencies of scale and resource optimization, and diversifying Saudi Arabia’s petrochemical feedstock mix, the companies said.

Pending a positive outcome of the study, Aramco and SABIC plan to establish a joint venture to advance the project, which if approved, would fulfill Saudi Vision 2030 goals for the downstream sector.

That second paragraph .... "mixes innovative configurations ... yada, yada, yada ...." sounds like it was written by:

a) MuskMelon
b) any recent Harvard MBA grad
c) former CEO of Shell
d) Bill Gates

Exxon's Global Energy Demand Forecast Through 2040 -- For The Archives -- June 28, 2016

For the archives: global energy demand forecast.

This graphic is in line with about almost everything else I see.

Observations:

• energy: all the above -- everything is represented here
• the graph goes out to 2040
• this is global energy demand
• coal: the amount actually increased significantly from 2000 to 2015, and really doesn't decrease all that much (if it does, its almost imperceptible)
• natural gas: the huge winner -- compare 2040 with 2015 (or 2000, for that matter)
• oil: even oil shows a huge increase
• nuclear: increases some (China? India? where?)
• other renewables (wind/solar): although there's a relative increase, it looks like about 25 quadrillion BTUs/700 quadrillion BTUs = 3.57%. I.N.C.O.N.S.E.Q.U.E.N.T.I.A.L. A rounding error at best.

By the way:

• 2015: 575 quadrillion BTUs
• 2040: 700 quadrillion BTUs
• (700 - 575) / 575 =  22% increase in global energy demand over the next 25 years.

Note: this is not an investment site. Do not make any investment, financial, travel, job, or relationship decisions based on what you read here. But this seems to be an open-book test when it comes to looking where to invest for the long term. 

There is no question that solar has some niches (wind has none, absolutely zero) but as a real global player, unreliable, expensive, non-dispatchable energy is irrelevant.

Enerplus Reports Two Nice Wells; Two New Permits -- June 28, 2016

One well coming off confidential list Wednesday:

• 30835, SI/NC, XTO, TAT State Federal 14X-36H, Bear Creek, no production data,

Active rigs:

	6/28/2016	06/28/2015	06/28/2014	06/28/2013	06/28/2012
Active Rigs	30	75	191	189	216

Two new permits -- 

• Operator: QEP
• Field: Heart Butte (Dunn County)
• Comments:

One well released from confidential list:

• 30282, SI/NC, BR, Jerome 21-15MBH, North Fork, no production data,

Seven (7) permits renewed --

• Slawson (4), four Pike Federal permits in Mountrail County
• Crescent Point (2), two Makowsky permits in Williams County
• Resource Energy Can-Am, a Lincoln State permit Divide County

Three (3) producing wells completed:

• 21111, 1,427, Enerplus, Anna G. Baker 6B-7-2H TF, Moccasin Creek, t6/16; cum --
• 32051, 2,066, Enerplus, Dance Hall 147-93-06B-07H, Moccasin Creek, t6/16; cum --
• 32052, 601, Enerplus, Town Hall 148-93-31C-30H, Moccasin Creek, t6/16; cum --

Oil Is Still Headed For $10 -- A. Gary Shilling -- Bloomberg -- June 28, 2016

The contributor must be "short oil" in trading. The article is reprinted at Yahoo!Finance but missing some graphics. The Bloomberg link is here. Archived.

No time-frames are provided in the linked article.

If I follow his analysis correctly: glut of oil leads to drop in price leads to "dot-com-like shock" or a shock like the subprime mortgage debacle that produced the 2008 financial crisis both of which led to recessions.

Others think that a global recession, perhaps brought on by Brexit, could result in price of oil plummeting to $10/bbl.

So,

• glut of oil results in $10 oil and recession; or
• recession results in $10 oil.

 Sic et non.

The good news, I guess: we're never gonna run out of hydrocarbon energy at accessible prices. 

Better news: oil at $10/bbl pretty much ends the unreliable energy scam (wind and solar).

Best news, I guess: at $10/bbl, GM is going to be selling a lot of SUVs.

Update On Bakken Ethane Production -- June 28, 2016

Updates

Later, 1:40 p.m. Central Time: after posting the story below, I went back and did a search on "Hess Ethane Canada" on the blog. Some of the posts:

• updates on all the crackers being considered, back in January, 2012
• expansion of the Hess Tioga plant, October 30, 2011
• Canada's biggest plastics producer will purchase all the ethane Hess produces at its Tioga plant, July 16, 2013
• $4 billion plastics plant announced for North Dakota, October 13, 2014
• connecting some dots, October 1, 2015
• Bakken ethane reaching Canadian feedstock facilities in Alberta, June 24, 2014
• this might have been the first, February 14, 2022

And that's just a small sampling.

Original Post

 

If you have time to read only one detailed report today, make it the RBN Energy post: US ethane exports to Asia and Latin America are about to pop.

Link here.

The entire post is eye-popping.

For newbies, it provides a lot of background to ethane.

When I first started blogging, I had no idea what "ethane rejection" meant. At risk of explaining it incorrectly, ethane is "more valuable" when used as feedstock rather than simply burned. Producers achieve a "higher margin" on ethane when it is used as feedstock for plastics and other derived products, than when it (ethane) is burned for heat or electricity. But because there is not enough midstream infrastructure to process all that ethane, much of it is currently being "rejected" and put back into / or left in the natural gas pipeline. Operators are "leaving money on the table" as they say.

The RBN Energy post at the link above provides an incredible update on the ethane situation. For folks interested in the Bakken, note this:

Let’s take a detailed look at all this capacity, beginning with a recap of the two ethane-only pipelines that for two years or more have been transporting U.S. ethane to Canada. 

Sunoco Logistics’ 50 Mb/d Mariner West Pipeline (blue layer in graph to the right of the figure below) since December 2013 has been moving ethane from the heart of the wet Marcellus/Utica (Houston, PA) to near Detroit (MI), and from there to steam crackers in Sarnia, ON.

Similarly, since May 2014 Pembina Corp.’s 40 Mb/d Vantage Pipeline (green layer) has been moving ethane from the Williston Basin in western North Dakota to the Alberta Ethane Gathering System (AEGS) near Empress, AB, again for use by Canadian ethylene plants.

Pembina is just finishing up a Vantage expansion project that (with a new lateral and pumping stations) will boost the pipeline’s capacity to 70 Mb/d this summer (note that the green layer thickens).

Here's the graphic:

One will find multiple posts regarding Pembina Corporation and its ethane pipeline on the blog. In addition, back in 2013, it made the top ten list for fastest growing energy companies in North America.

From RBN Energy:

As you can see from looking at the mid-2016 points in the two graphs in the figure above, the run-up in ethane demand from exports and from incremental ethylene plant capacity is only just beginning.

By late 2017/early 2018 (a year and a half from now), ethane exports could be approaching 300 Mb/d (200 Mb/d over today) and demand for ethane from new or expanded steam crackers could rise by 300 Mb/d—taken together, that’s some 500 Mb/d in new ethane demand!   

That rising demand will pull a lot more ethane out of volumes being rejected into natural gas today and increasingly move the ethane barrels through fractionators and into pipelines for deliver to petrochemical crackers, mostly crackers along the Gulf Coast.

But there is a catch. 

For ethane to be extracted instead of rejected, the price of ethane must be high enough to make the economics work.  That means higher than natural gas at the processing plant.  And that means high enough to cover the cost of transporting mixed NGLs (also know as Y-grade) to market (from a nickel per gallon all the way up to more than 25 cents per gallon) and fractionating that ethane out  (another nickel or dime per gallon).  And that means that all that new demand will not be satisfied unless ethane prices are higher. 

Perhaps a lot higher. 

One may want to take another look at Badlands NGLS. 

From RBN Energy, October 19, 2017: