MARCELLUS/UTICA REGION: Dominion Energy, American Red Cross present April 6 preparedness day at nine Ohio locations; Pa. Senate bill aims to aid state nuclear plants; Dominion Energy CEO: Making the switch from coal to natural gas; OTHER U.S. REGIONS: Pacific Northwest sees highest daily natural gas spot prices in the U.S. since 2014; California’s oil industry collapses despite shale boom; Chesapeake opens ‘green’ natural gas vehicle fueling stop in Dover; Washington state rail bill could put 150,000 b/d of Bakken oil shipments at risk; NATIONAL: U.S. natural gas prices unmoved by colder winter, low inventories; The U.S. oil boom is sinking OPEC imports; INTERNATIONAL: Top 10 destinations for US LNG exports; South Korea’s crude oil imports from the US could surpass 40 mil barrels in H1 2019; LNG will be big part of China-U.S. trade once tensions resolved; U.S. LNG producers offer alternative pricing to woo buyers.
MARCELLUS/UTICA REGION
Dominion Energy, American Red Cross present April 6 preparedness day at nine Ohio locations
Dominion Energy
Dominion Energy Ohio, in partnership with the American Red Cross, is holding Preparedness Day on Saturday, April 6, 2019, at nine Ohio area premier malls and other retail locations. The goal is teaching participants the importance of being “Red Cross Ready” in the event of a disaster. Red Cross and Dominion Energy volunteers will distribute first aid kits between 10 a.m. and 2 p.m., or until supplies are exhausted. Trained Red Cross and Dominion Energy volunteers will administer a five-minute pre-test and post-test to determine participants’ safety and emergency preparedness knowledge. Participants will receive a free first aid kit, sponsored by Dominion Energy. The kits include such safety supplies as gauze, bandages, hand sanitizer, a cold pack and useful emergency information. [MDN: Just one more evidence of how our industry gives back and benefits the communities where we work. Click the link to find out where the events are being held (most of them in Utica territory). Show up and get a free first aid kit!]
Pa. Senate bill aims to aid state nuclear plants
Pittsburgh (PA) Post-Gazette
Legislation to direct several hundred million dollars from Pennsylvania electricity ratepayers to the state’s nuclear plants to save them from early retirement was introduced in the state Senate on Wednesday, three weeks after a similar bill landed in the House. One of the bill’s prime sponsors, Sen. Ryan Aument, R-Lancaster, said Senate Bill 510 will help preserve the state’s roughly 16,000 nuclear industry jobs that are otherwise at risk as flattening demand and competition from cheap natural gas threaten to price nuclear plants out of the market. The bill’s price tag is still being calculated, but Mr. Aument said the program’s total cost will likely be between $459 million and $551 million each year. For the average residential electric consumer, that translates to a cost of $1.53 per month. Many of the bills’ supporters say they are facing a daunting June 1 deadline to sway Chicago-based Exelon Corp.’s decision to either refuel its money-losing Three Mile Island nuclear plant near Harrisburg or close it permanently in September. Akron, Ohio-based FirstEnergy Solutions, currently in the midst of a messy bankruptcy case, plans to close its Beaver Valley Power Station in Shippingport in 2021. The nuclear rescue proposals are a central focus for the Legislature this spring, but their prospects are uncertain. They face strong opposition from the natural gas industry, other electricity generators, industrial energy consumers and other business and consumer groups who call the bills an expensive bailout and argue they would deeply distort the state’s competitive energy market. The Industrial Energy Consumers of Pennsylvania calculated that the state’s manufacturing sector would bear a large share of the program’s costs — an estimated $192 million a year. Leaders of the Republican-controlled Legislature have indicated they want to make space for the debate without taking clear positions on the bills’ substance. Senate Majority Leader Jake Corman “believes the nuclear industry is important to Pennsylvania and is interested in seeing this issue move forward with continued discussions,” his spokeswoman Jennifer Kocher said. The bill will be assigned to an appropriate committee, she said, but there is no timeline for its consideration. [MDN: You may be surprised to read that we think energy diversity is a good thing, and we have some sympathy for nuke plants. But honestly, if they can’t compete in the free and open market, it’s time for them to go the way of the dinosaurs. Extinct. To ask PA residents to pay to prop up an uncompetitive industry just to save 16,000 jobs? Not a good plan in our book.]
Dominion Energy CEO: Making the switch from coal to natural gas (video)
CNBC
Jim Cramer chats with Dominion Energy CEO Tom Farrell to hear about the direction the company is headed. [MDN: This is a great interview. Take the time to watch it (just over 8 minutes long). In it, Dominion CEO Tom Farrell talks about the SCANA merger and how that’s going, but most importantly (for us) he talks about Atlantic Coast Pipeline. Farrell says he has “high confidence” the pipeline will get built. Farrell says over the past two decades Dominion’s electricity production from coal has gone from 55% to 12% today, thanks to replacements by renewables and natural gas. Farrell said the company has cut carbon emissions by 50% in recent years. They’ve spent 1/3 of a billion dollars on philanthropy in the past 10 years. They have a great story to tell!]
OTHER U.S. REGIONS
Pacific Northwest sees highest daily natural gas spot prices in the U.S. since 2014
U.S. Energy Information Administration – Today in Energy
Natural gas spot prices at the Sumas trading point on the Canada-Washington border averaged $161.33 per million British thermal units (MMBtu) on Friday, March 1, the highest daily spot price recorded by Natural Gas Intelligence anywhere in the United States in at least five years. The price spike was caused by regional supply constraints and unseasonably cold temperatures. Limited supply coincided with unusually high demand when part of the polar vortex moved into the region during the beginning of March. Temperatures in Washington state averaged 33 degrees Fahrenheit (°F) from March 1 through March 4, 10°F lower than normal. These temperatures led to high heating demand in the Pacific Northwest and neighboring areas of the Rockies and Western Canada, regions that supply the Pacific Northwest with natural gas. The October 2018 explosion on Enbridge’s BC Pipeline—which transports natural gas through British Columbia, Canada, into the United States at Sumas, Washington—led to reduced flows and higher prices at the Sumas trading point throughout the 2018–2019 winter. From November through February, Genscape data show daily flow through Sumas onto Williams’s Northwest Pipeline in Washington averaged about 610 million cubic feet per day (MMcf/d), about one-third lower than the same period in the previous year. Sumas prices averaged $10.56/MMBtu during that period compared with $2.62/MMBtu a year earlier. [MDN: This is noteworthy for a few reasons. One is that the observation that an ongoing pipeline outage, a single pipeline, can have this kind of effect on prices in a particular region. Another reason is that somehow renewable energy supplies have not stepped up to meet the challenge–how can that be?! But the main reason we highlight this story is because it quotes our good friends at NGI. Notice it is NGI that the U.S. government quotes when they quote a price reporting authority (PRA). That says something about the quality of NGI’s data.]
California’s oil industry collapses despite shale boom
Rigzone/Jude Clemente
Not that long ago, California was the second most vital U.S. oil producing state. Since peaking in 1985, however, output has plunged almost 60 percent to 460,000 barrels per day (bpd). This collapse is made even more discouraging by the fact that total U.S. crude oil production has been soaring to record heights, up 140 percent to 12.1 million bpd over the past decade. Indeed, the shale revolution that has transformed the U.S. oil and gas industry has completely passed California by. Since 2008, while U.S. crude oil reserves have more than doubled to 45 billion barrels, California’s reserves have declined 25 percent to 2.2 billion barrels in the shale-era. The most troubling part for California is that the state still uses a lot of oil. California each day devours around 40 million gallons of gasoline, uses 8 million gallons of diesel fuel, and accounts for 20 percent of all U.S. jet fuel consumption. Although the state is surely a global leader on renewables, wind and solar are strictly sources of electricity and do not really displace the need for petroleum, a designed transportation fuel. For every passenger vehicle in California today that runs on electricity there are about 70 that run on oil. Even reaching the ambitious goal of 5 million plug-ins by 2030 would mean less than 15 percent of the state’s cars running on electricity. The inevitable result of plummeting production amid high consumption is that California is forced to import 70 percent of the oil that it needs. With the collapse of Alaska’s production, foreign sources now supply almost 60 percent of California’s crude oil, compared to just 15 percent 20 years ago. Additionally, a Low Carbon Fuel Standard (LCFS) has not just hampered the prospects of using locally sourced oil but also the heavier crude that comes from ally Canada. In contrast, California’s LCFS has supported the lighter, “cleaner” oil that comes from OPEC. Saudi Arabia, for instance, now supplies 37 percent of California’s oil imports, with Ecuador at 14 percent. Such a turn to distant international suppliers is actually a quiet environmental problem going ignored. These shipments arrive on crude supertankers, giant ships that not just burn loads of oil themselves but are also at greater risk for spills. Unfortunately, California’s leaders have generally stood against building the pipelines necessary to receive high-quality, lower cost shale oil from other U.S. states. [MDN: Isn’t it sad? California has become the equivalent of a third world country. Leftists ruin everything they touch when the assume power. Cali is a sterling example. They claim to be environmentally conscious and care so much about the environment–yet they are ruining the environment with their actions. And they are sentencing their residents to reliance on foreign energy suppliers. What a tragedy. What a shame.]
Chesapeake opens ‘green’ natural gas vehicle fueling stop in Dover
Delaware Business Now
Chesapeake Utilities and its Sharp Energy business held a summit this week on “green” fleet management in the region. The event will be highlighted by a ribbon cutting of the Chesapeake Utilities compressed natural gas (CNG) public fueling station. The ceremony was followed by a morning of presentations from federal and state public officials on fleet transitions in Delaware to natural gas and other options and alternative fuel corridors. Available grant programs for converting vehicles were also reviewed. The event was held at the company’s new campus in Dover. The utility and the State of Delaware have been promoting the use of alternatives to diesel and gasoline that can contribute to cleaner air conditions. The supply of natural gas that can be the basis of alternative fuels has been increasing, due to the discovery of massive reserves in neighboring Pennsylvania. Not all in the environmental community are supportive of the fuel option, due to concerns about the “fracking” process that extracts natural gas. Chesapeake has seen accelerated growth as natural gas becomes more competitive as a source of heating fuel. The company serves approximately 240,000 customers in the Mid-Atlantic, Midwest and Southeast with natural gas, propane or electricity. Further information about Chesapeake Utilities Corporation’s businesses is available at www.chpk.com or through our Investor Relations App. Chesapeake Utilities, the corporation’s Delmarva natural gas distribution operation, serves approximately 79,000 residential, commercial and industrial customers in Delaware and Maryland. [MDN: This is “the other Chesapeake”–not to be confused with the driller based in Oklahoma. CNG is great for fleet vehicles. Wish we’d see more adoption of CNG.]
Washington State rail bill could put 150,000 b/d of Bakken oil shipments at risk
S&P Global Platts
Washington state lawmakers may soon approve a bill which could put an estimated 150,000 b/d of Bakken crude at risk of being moved through the state, potentially causing a major adjustment in domestic crude flows. The bill, which was approved by the state senate on March 3 and is awaiting House approval, sets new vapor pressure limits for Bakken crude shipped through the state, prohibiting a facility from loading or unloading any crude from a rail tank car unless the oil has a vapor pressure of less than 9 psi. But analysts and opponents of the bill say it is built upon a false premise: that Bakken crude is inherently more dangerous to ship by rail than other crudes and commodities. “Bakken is light, it is, in some cases, more volatile, but to make the claim that it is somehow more dangerous or more hazardous, I don’t believe that is supported by the available evidence today,” said Dennis Sutton, executive director of the Crude Oil Quality Association. “Bakken crude oil is typically more volatile than other crude oil, increasing the flammability of the oil and the potential for far greater harm to the public in the event of a derailment,” the bill states. “Volatility limits are necessary to ensure that Bakken crude oil is packaged and handled safely and securely during transportation.” The new rules, if the bill becomes law, would take effect July 1, 2020. More than 90% of crude-by-rail shipments through Washington are carrying light crude from North Dakota, according to the Washington State Department of Ecology. The remainder are heavy oil shipments from Alberta, Canada, and, occasionally, shipments of light crude from Saskatchewan, according to the state agency. [MDN: How is this not a violation of the federal Interstate Commerce Clause? Answer: It IS a violation, and clearly will get thrown out by the courts if Washington legislators (and the governor) are stupid enough to pass it. Yet another misguided and irrational attempt to assassinate fossil fuels.]
NATIONAL
U.S. natural gas prices unmoved by colder winter, low inventories
Reuters
U.S. natural gas prices remain mired below $3 per million British thermal units despite a relatively cold winter that has left the volume of gas in storage well below normal for the time of year. Futures prices for natural gas delivered to Henry Hub in June 2019 are just over $2.70 per million BTUs, down from $2.90 in the middle of March, and have remained well below $3 throughout the last two years. Gas prices have remained relatively low even though a much colder winter in 2018/19 than in the previous three years pushed up consumption sharply and depleted inventories. Working stocks in underground storage fell to 1,107 billion cubic feet by March 22, 21 percent below the year-earlier level and 33 percent under the prior five-year seasonal average. Stocks are now at the lowest level for the time of year since 2014, despite a 13 percent increase in consumption in the last five years (“Monthly energy review”, U.S. Energy Information Administration, March 2019). Spot prices spiked briefly in October and November, reaching more than $4.80 at one point, and again in January to $3.60, but otherwise the market has not signalled any shortage. The combination of generally low prices with occasional spikes is the result of two trends: internationalisation of the U.S. gas market and the increasingly dominant role of gas as the marginal source of electric generation. [MDN: Extensive article written by John Kemp of Reuters. Every now and again we bring you insights and articles focused on where the price of natgas may go–which is nowhere. It’s staying at $3/Mcf or under, as indicated in this article. Even though storage numbers are down and demand is up. Why? Because producers can open the spigots up and flow more gas any time they need to. That is, production itself has taken the place of some storage. Thanks to prolific American shale.]
The U.S. oil boom is sinking OPEC imports
Forbes/Jude Clemente
One of the great energy security benefits that the U.S. shale revolution has provided us for petroleum, still easily our main source of energy, is the need to rely less on OPEC. It’s a huge advantage for our country that continues to go mostly ignored. Since the shale-era took flight in 2008, U.S. crude oil production has surged 140% to 12.1 million b/d. In turn, U.S. oil imports from OPEC have been sliced in half to less than 3 million b/d. Imports from Nigeria, for instance, are down 85% to just 180,000 b/d, with the country having its own major production problems and inconveniently selling the lighter oil that has been overflowing from our shale plays. Saudi Arabia though has led and accounted for 30% of all U.S. OPEC imports. Back in 2007, before the shale-era, OPEC supplied 30% of the oil that we consumed. In 2018, OPEC supplied less than 15%. The U.S. oil boom is why we have been able to put sanctions on rogue leadership in high oil producing nations Iran and Venezuela without crippling the global market. Although the “NOPEC bill” circulating on Capitol Hill today is misguided, there is no doubt that lowering dependence on OPEC enhances our oil security and moral standing in the world. OPEC is widely viewed as a cartel, and the bloc is full of “not free” nations as ranked by Freedom House. The good news is that friend, neighbor, and democratic Canada has filled in quite nicely for OPEC, with exports to the U.S. up 75% in the shale-era to 4.3 million b/d. Canada now supplies over 20% of US oil demand, double its share from a decade ago. Canadian oil has also helped rescue us from the collapse in Mexico’s oil production, cut in half since 2004 to below 2 million b/d. I knew I was right: “Canada is North America’s Great Oil Security Blanket.” This “Canada displacing OPEC thing” is of very high importance of course because U.S. oil demand is not falling like some want you to believe. What I call “buoyantly very high demand” is an inconvenient reality for some pushing other products. [MDN: Another great article from Jude Clemente. We had no idea that OPEC’s imports to our country had fallen that far, and that some of those imports have been replaced by Canadian oil imports (and our own shale production, of course). Or that Mexico’s oil production had fallen so far so fast. Ultimately shale has pulled our energy bacon out of the fire, and we thank God every day for the miracle of American shale energy.]
INTERNATIONAL
Top 10 destinations for US LNG exports
Rigzone
America became the fifth largest exporter of liquid natural gas (LNG) in the world last year. With more liquefied natural gas plants coming online along the eastern and southern coastlines of the United States, the number of LNG export cargoes grew to nearly 500 in 2018, according to new data from the Department of Energy. Four LNG export facilities accounted for 483 shipments in 2018 compared with just 262 the previous year, an increase of 84 percent in the space of a year. According to U.S. government data, 28 countries in total received LNG exports during 2018. However, just ten countries accounted for 82 percent of the U.S. LNG direct tanker exports that year and the top four markets shared 187 shipments between them. South Korea, the top destination, received 73 cargoes in all, followed by Mexico with 53, Japan with 37 and lastly China with 24. Of the remainder, Jordan, Chile, India, Turkey, Spain, Argentina, and Brazil took only a small number of shipments each. In addition to the standard large shipments of LNG in dedicated tankers, small shipments of LNG in special containers known as ISOs were sent to the Bahamas and Barbados. [MDN: Fascinating statistics. We always read about countries like Japan and India and China receiving US LNG imports, but almost never (if ever) read about the top destination, South Korea, or second top destination, Mexico.]
South Korea’s crude oil imports from the US could surpass 40 mil barrels in H1 2019
S&P Global Platts
South Korea will likely maintain its voracious appetite for US crude oil with at least 40 million barrels expected to reach the Asian consumer over the first half of 2019, as the import cost for lighter and sweeter North American grades have flipped to a discount against heavier Saudi grades. According to a survey of major South Korean refiners as well as market analysts from Seoul-based securities companies and state-run think tanks, conducted by S&P Global Platts, Asia’s fourth biggest oil consumer is expected to import a minimum of 7 million/month from the US during the first half of 2019.
This is equivalent to a total of at least 42 million barrels for the first six months, close to 70% of the annual import of 60.94 million barrels in 2018. South Korea imported a total of 20.94 million barrels of crude from the US over January-February, up from 5.85 million barrels received in Q1 2018, latest data from state-run Korea National Oil Corporation showed. “The average is already 10 million barrels/month so far this year … even after taking the spring refinery maintenance season and the expected cut in Q2 run rates into account, imports could total at least 40 million barrels in H1,” a market research manager at Korea Petroleum Association based in Seoul said. [MDN: Not only is South Korea the top buyer of U.S. LNG (see our other brief today), it’s also becoming, perhaps soon will be, the top importer of our oil! Who knew?!]
LNG will be big part of China-U.S. trade once tensions resolved
Reuters
Liquefied natural gas (LNG) will become a big part of China-U.S. trade once tensions are properly resolved between the two countries, a senior executive from China National Offshore Oil Corp (CNOOC) said on Wednesday. LNG will also continue to dominate China’s natural gas imports, already accounting for 60 percent of its gas imports last year, said CNOOC Vice President Li Hui on the sidelines of the LNG2019 conference in Shanghai. CNOOC is China’s largest investor in LNG facilities and its largest buyer of the super-chilled fuel. China has since 2017 become the world’s second-largest LNG buyer after Japan as gas demand surges under a government push to switch users from coal to cleaner burning gas. China and the United States, the world’s top two economies, are moving closer to a final trade deal after months of tough negotiations. If the trade spat is resolved, China could increase U.S. LNG, crude oil and soybean purchases to help narrow Washington’s trade deficit with Beijing. “For China-U.S. LNG trade you have to look at the big trends, and at the trade frictions. If this problem can be solved appropriately, LNG trade could be very big,” Li said. Sinopec Corp, China’s No.2 oil and gas firm, is ready to sign a 20-year LNG supply agreement with Cheniere Energy once the two countries end their trade dispute, Reuters has reported. The United States, the world’s fastest-growing gas exporter thanks to surging output from shale fields, is still facing competition from rival exporters such as Qatar and Australia. Peter Coleman, chief executive of Australia’s Woodside Petroleum, told reporters in Shanghai that the endgame in a well-supplied global LNG market is “all about prices”. “China has learned from the current issues with the United States that diversity of supply is very important,” he said. [MDN: Trump’s hard stance with China (and Europe) on trade deals is bearing fruit. We’re finally starting to see more favorable trade deals put in place. Americans are no longer getting screwed over by these other countries. And we LOVE IT. MAGA!]
U.S. LNG producers offer alternative pricing to woo buyers
Reuters
U.S. producers of liquefied natural gas (LNG) are wooing buyers with offers to sell gas priced against benchmarks other than U.S. domestic prices, ahead of an expected flood of supplies on global markets this year. The United States, the world’s fastest growing gas exporter thanks to surging output from shale fields, is set to become the world’s third-largest LNG exporter this year, taking on more established suppliers such as Qatar and Australia. U.S. producers only began exporting LNG in early 2016 and typically price their sales against U.S. domestic benchmarks such as Henry Hub. To stand out, at least two developers of new U.S. terminals have signed binding and non-binding deals using alternative pricing, executives said on the sidelines of the LNG2019 conference in Shanghai this week. On Wednesday, Tellurian Inc and French oil and gas major Total SA signed a deal that includes both companies entering into a binding agreement for 1.5 million tonnes per annum (mtpa) of LNG from Tellurian, which is developing the Driftwood LNG project in Louisiana. The price was based on Platts Japan Korea Marker (JKM), which is a fast-developing Asian benchmark for LNG though mainly for spot cargoes. Most LNG contracts in Asia are still priced off Brent crude. Tellurian and commodities trader Vitol have also signed a memorandum of understanding for long-term LNG supply priced off JKM. “I believe LNG is moving (toward) a gas index,” said Total’s chief executive Patrick Pouyanne. “Gas linked to oil is old world and we have seen in the past two years the JKM-linked market is growing,” he added. Banks are also getting more supportive of JKM-linked pricing for the sale of LNG cargoes, said Tellurian’s chief executive Meg Gentle. NextDecade Corp, which is developing the Rio Grande LNG export project in Brownsville, Texas, said on Tuesday it has signed a 20-year binding sales and purchase agreement (SPA) with Royal Dutch Shell for two million tonnes a year of LNG, which it said was first U.S. long-term contract indexed to Brent. Three quarters of the LNG will be indexed to Brent crude oil prices and the remaining volumes will be indexed to domestic U.S. gas price markers, including Henry Hub, the company said. NextDecade is also offering its potential buyers LNG priced on other U.S. gas indexes such as Agua Dulce and Waha. “U.S. gas producers may be willing to take exposure to oil linked LNG netback pricing compared with the depressed U.S. gas prices seen lately,” said Saul Kavonic, a Credit Suisse analyst. Next-day natural gas prices at the Waha hub in West Texas plunged to negative levels in late March, but have recovered slightly since. [MDN: We find this stuff fascinating. Although natural gas (and LNG) is a commodity, its price is linked to other commodities and financial instruments/indices. Such linkage provides safety and hedges risk of price fluctuations. And the price that someone is willing to pay (and sell for) determines how much of that thing will get sold. So although all this talk of linking LNG prices to financial instruments may make your eyes glaze over, it’s actually quite important to the future of our own Marcellus/Utica gas and exporting it to other countries.]
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