Friday, June 7, 2019
Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
Curated weekly oil and gas newsletter
Fast Facts – Houston Chronicle “Fuel Fix” as of Sunday, June 2nd, 2019
Light, sweet crude (dollars per barrel): $53.50
- Last Week: $58.63
Natural Gas (dollars per million British thermal units): $2.454
- Last Week: $2.598
Rig count (United States): 984
- Last Week: 983
After dropping to $53.50 over the weekend, WTI fell further on Monday, closing at an abysmal $52.85. That steep drop puts WTI down over 20% from its late April high of over $66 a barrel.
On Wednesday, further damage ensued when WTI hit a weekly low of close to $51 before rebounding on Friday to close the week around $54 per barrel.
While this may seem to be a catastrophic drop, keep in mind that the EIA’s Short-Term Energy Outlook, which is released for free monthly, forecasts WTI to average $62.79 in 2019 and $63.00 in 2020. The January edition of the Short-Term Energy Outlook pegged WTI crude oil prices to average $54.19 in 2019 and $60.76 per barrel in 2020.
It’s interesting to note that, between January and May, the EIA increased their 2019 estimate substantially, but only marginally increased their 2020 estimate. This is likely due to crude oil prices that were about $60 just three weeks ago but are now testing $50 a barrel.
When volatility is high it can be helpful to avoid the noise and resort instead to trusted agencies like the EIA to give you an accurate reading on the markets. You can also find the EIA’s Annual Energy Outlook 2019 here, for free.
Data-Driven Drilling and Production (DDDP) Conference
The world’s largest data-driven oil and gas conference will take place at the Royal Sonesta Hotel in Houston, TX from June 11th-12th. Over 750 attendees, 60 speakers, and 60 exhibitors will attend the conference. I encourage you all to attend if you can. The conference is a hotbed of networking and educational opportunities.
This year, EKTi-affiliated Upstream Intelligence podcast is the official DDDP series sponsor. As such, we are offering a discount code on your admission to the conference!
Just use code EKTi5 at checkout to get 5% off your ticket.
Be sure to also check out Oil 101’s 10 e-learning modules, corresponding e-books, and podcasts, LMS hosted course to track completed and favorite modules, member-only discussion forum, and 2 hours of video content!
For more information on DDDP, check out the DDDP page on our website.
Natural Gas/ LNG
Europe’s share of US LNG exports
August 2018-April 2019: 30%
The article is a little misleading considering high percentage increases are easy to obtain when starting from such a low number. Still, it’s impressive that 30% of United States LNG exports went to Europe between August 2018 and April of this year.
“Natural gas will remain an important component of the EU’s energy mix in the near future as we move towards cleaner sources of energy. Given our heavy dependence on imports, U.S. liquefied natural gas, if priced competitively, could play an increasing and strategic role in EU gas supply,” European Commissioner for Energy and Climate Miguel Arias Cañete said.
Due to a lack of pipelines in places like the Permian, US natural gas is flared instead of used as an energy source. The increased construction of US LNG export terminals bodes well for the cooling and shipping of the United States’ abundant gas supply. With Europe coming to the table as a worthy buyer, the rise of US LNG to compete with Australia and Qatar on the global stage seems well underway.
+ The midstream money machine – World Pipelines
This article provides a solid update to the business side of US natural gas pipelines and production. The biggest takeaway I found was the Midland to Houston Spread (MEH) of oil prices increased from its normal $13 per barrel difference to $23 per barrel. This is, of course, a response to the Permian pipeline bottleneck, but seeing reality set in with a $23 price difference shows just how much of a toll some logistical issues can take on the industry.
Other than that, here are the most noteworthy facts and stats from the article:
- According to the EIA, US gas production averaged 83.2 billion cubic feet per day in 2018.
- “The Interstate Natural Gas Association of America (INGAA) estimates that North American midstream operators will spend an estimated $27.5 billion annually on oil, gas, and NGL infrastructure over the next 20 years”.
- EIA reported that oil exports had surged to 3.2 million bpd in early December 2018 and are expected to climb further in 2019.
- Many breakeven prices of major unconventional plays now sit in the $30-40 per barrel range.
- This efficiency gives US shale producers pricing power against OPEC
- EIA expects US production to be 12 million bpd by the end of 2019 and gas production to reach 100 billion cubic feet per day over the next few years.
Now back to that Permian Pipeline Bottleneck…
New Permian Pipelines
The two most notable pipelines are the Permian Highway Pipeline and the Gulf Coast Express Pipeline Project. Combined, they will increase takeaway capacity by nearly 4 billion cubic feet per day.
|Permian Highway Pipeline||Gulf Coast Express Pipeline Project|
|Partnership||Kinder Morgan and EagleClaw Midstream||Kinder Morgan and DCP Midstream|
|Cost||$2 billion||$1.7 billion|
|Capacity||Up to 2 billion cubic feet per day||Up to 1.92 billion cubic feet per day|
|Length||430 miles||445 miles|
|Pipe Diameter||42 in||36 in and 43 in|
|Route||Waha, TX to the U.S. Gulf Coast and Mexico||Permian Basin to Agua Dulce, TX|
|Completion||Late 2020||Late 2019|
+ Saudi energy conundrum deepens with gas deal – The Wall Street Journal
“Saudi Arabia has finally found a deal that makes sense. After forays into Uber and WeWork, state-controlled oil giant Saudi Aramco has lined up a deal to buy liquefied natural gas from U.S. utility Sempra Energy.”
Aramco has agreed to make an investment in Sempra Energy’s infrastructure project in Port Arthur, Texas, which is fast becoming a hub for U.S. natural gas exports. As part of the deal, it will have the opportunity to purchase 5 million tons per annum of LNG and a 25% equity interest in the project.
The ambitious plan is meant to transform Saudi Arabia from an oil-dependent country to one that focuses on logistics and tourism, as well as solving the world’s problems from water to power. Getting there will consume an awful lot of electricity.
+ Saudi Arabia Edges Toward Bet on Booming U.S. Energy Sector – The Wall Street Journal
“Saudi Arabia is nearing a deal to invest in U.S. liquefied natural gas, a landmark decision for the kingdom, which in the past had been a huge supplier of energy to America.”
Quite the changing of the guard. In years past it would be unbelievable for Saudi Arabia to make such an investment. The article is worth a read.
The “Energy Mix” Weekly Newsletter – Internal Energy Agency
- Globally, 2 million new electric vehicles were sold in 2018, a new record.
- The newsletter argues that carbon capture, utilization and storage, and methane emissions from oil and gas need a lot of work. Lagging progress in these innovative sectors is one reason why 38 of the 45 sectors and technologies assessed by the IEA’s tracking clean energy progress update are far from meeting global climate and sustainability goals.
- “The world faces a steep decline in its [nuclear power] use, particularly in advanced economies. This could result in an even greater call on wind and solar PV, and addition investment of $1.6 trillion.”
Most of you are already familiar with our Oil 101 course, at least the free version. Did you know that we have companies that license the course to use as internal training for sales, IT and operations teams? If your group needs this, let’s talk.
Have a great weekend!
EKT Interactive Contributing Editor
Head Writer | Eau Claire Writing
Eau Claire Writing is a Houston-based freelance writing company that specializes in gas compression, turbomachinery, onshore and offshore drilling, and well service content for the oil and gas industry.
Think you know someone who would enjoy this newsletter? Pass it on! They can subscribe here.