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Released February 09, 2022 | SUGAR LAND
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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Two trends are pushing North American natural gas prices up this month--decreasing fears about any omicron-related shutdowns, and continued preference for natural gas over coal as the fossil fuel of choice for electricity generation.
This is good news for natural gas midstream companies that ended a frantic buildout spree in 2018, just before the pandemic put a choke hold on demand for fossil fuels of any kind, threatening that sector's profits. That year, carriers spent $12.4 billion in new projects, leading to the building of 60 new trains with 10.5 billion cubic feet per day (Bcf/d) of new gas processing capacity in 2019, according to Shane Mullins, Industrial Info's vice president of Product Development.
"That record year for commercial gas processing startups left us with more processing capacity than production in North America," Mullins said.
In its February 2 weekly natural gas report, the U.S. Energy Information Administration (EIA) reported average spot prices at $6.44 per million British thermal units (Btu). This is the highest level since grid overloads caused by Winter Storm Uri in February last year in Texas resulted in a massive price spike.
Click on the image at right for an EIA chart showing natural gas spot prices.
As a result of the latest rise in prices, rig counts in the Marcellus Shale region were up slightly from late 2021 numbers, averaging 40 per day in December 2021 and 42 per day in January 2022. The October 2021 average was 37 per day. Rig counts also are up in the Permian Basin.
In the Marcellus, rig count growth is somewhat hampered by pipeline capacity saturation, the EIA postulated. This situation seems unlikely to change given recent environment-related cancellations of proposed new projects.
An expected 20% increase in U.S. and Canadian upstream capital expenditures will mean more utilization of the facilities built in 2018-2019, Mullins said. He sees new processing and carrier additions limited to the Permian Basin and Bakken in the U.S. and the Montney and Duvernay regions in Canada.
In the Permian, many producers are announcing production growth for 2022. For example, Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) expects to grow Permian Shale production by 25% this year, similar to its growth in 2021 compared with 2020. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production and Terminals project databases can click here for detailed project reports.
Diamondback Energy Incorporated (NASDAQ:FANG) (Midland, Texas) and others also are talking about production increases. The basin's oil production levels have reached record highs in recent months, and natural gas is close by.
From about 2014 through early 2020, the Permian Basin's gas flares could have lit much of New York City. Experts estimated that the state's producers flared enough gas each day to generate electricity for the whole state. This was largely due to a lack of takeaway capacity, to the extent that some producers selling into the Waha hub had to actually pay to get their gas into the system.
Then 2020 happened and flaring dropped drastically, as did production. As demand, pricing and production have returned to near or beyond pre-COVID levels, the latter has benefitted from new pipeline infrastructure and processing plants, keeping flaring to a minimum. For related information, see March 22, 2021, article--EIA: U.S. Adds 4.4 Billion Cubic Feet per Day of Natural Gas Pipeline Capacity.
Targa Resources Corporation (NYSE:TRGP) (Houston, Texas), for example, in 2021 relocated its Longhorn processing plant from North Texas to the Permian, renaming it "the Heim plant." A company press release indicated that the relocation would "provide it with significant capital savings." Industrial Info is tracking three active Permian-related Targa projects. Subscribers can click here for the reports.
Additionally, the Whistler Pipeline, stretching from the Waha Header to Agua Dulce, is adding a 36-inch lateral that will connect it with multiple processing sites in Martin County by fourth-quarter. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipelines Project Database can click here for a detailed project report.
Marcellus takeaway capacity would benefit from completion of the Mountain Valley Pipeline, adding 2 Bcf/d. While construction has continued since 2018, the prospect of completion is dogged by local permitting resistance. Current completion is expected by late 2022 unless there are further delays. For related information, see February 8, 2022, article--New Legal Hurdles Cast Doubt on Mountain Valley Pipeline Completion Date.
Canadian midstream companies are adding more pipeline infrastructure as well.
Mullins said: "The midstream sector is financially on good footing with plenty of cash to spend on whatever opportunities lay ahead. While growth opportunities will be more limited than what we have seen in the past, improving utilization will be a focus. More relocations and acquisitions to connect gathering systems to improve performance still lay ahead of us."
Gas plants for the future will focus on such projects as "utilization, improved NGL (natural gas liquids) recovery, reducing methane emissions and CCS (carbon capture and storage) projects," he continued.
Environmental regulations regarding methane emissions, the ability to track methane from above and increasing difficulties in getting pipeline approvals also will have an effect on construction. However, it is important to note that International Energy Agency (Paris, France) statistics show that the U.S. has the sixth lowest upstream methane emissions intensity factor of all producing nations, while producing more natural gas than all five of the nations ahead of it combined.
One positive about improved methane emissions intensity is that any methane that is not emitted is sold into the pipeline for a profit, thus benefitting all parties.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
This is good news for natural gas midstream companies that ended a frantic buildout spree in 2018, just before the pandemic put a choke hold on demand for fossil fuels of any kind, threatening that sector's profits. That year, carriers spent $12.4 billion in new projects, leading to the building of 60 new trains with 10.5 billion cubic feet per day (Bcf/d) of new gas processing capacity in 2019, according to Shane Mullins, Industrial Info's vice president of Product Development.
"That record year for commercial gas processing startups left us with more processing capacity than production in North America," Mullins said.
In its February 2 weekly natural gas report, the U.S. Energy Information Administration (EIA) reported average spot prices at $6.44 per million British thermal units (Btu). This is the highest level since grid overloads caused by Winter Storm Uri in February last year in Texas resulted in a massive price spike.
As a result of the latest rise in prices, rig counts in the Marcellus Shale region were up slightly from late 2021 numbers, averaging 40 per day in December 2021 and 42 per day in January 2022. The October 2021 average was 37 per day. Rig counts also are up in the Permian Basin.
In the Marcellus, rig count growth is somewhat hampered by pipeline capacity saturation, the EIA postulated. This situation seems unlikely to change given recent environment-related cancellations of proposed new projects.
An expected 20% increase in U.S. and Canadian upstream capital expenditures will mean more utilization of the facilities built in 2018-2019, Mullins said. He sees new processing and carrier additions limited to the Permian Basin and Bakken in the U.S. and the Montney and Duvernay regions in Canada.
In the Permian, many producers are announcing production growth for 2022. For example, Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) expects to grow Permian Shale production by 25% this year, similar to its growth in 2021 compared with 2020. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production and Terminals project databases can click here for detailed project reports.
Diamondback Energy Incorporated (NASDAQ:FANG) (Midland, Texas) and others also are talking about production increases. The basin's oil production levels have reached record highs in recent months, and natural gas is close by.
From about 2014 through early 2020, the Permian Basin's gas flares could have lit much of New York City. Experts estimated that the state's producers flared enough gas each day to generate electricity for the whole state. This was largely due to a lack of takeaway capacity, to the extent that some producers selling into the Waha hub had to actually pay to get their gas into the system.
Then 2020 happened and flaring dropped drastically, as did production. As demand, pricing and production have returned to near or beyond pre-COVID levels, the latter has benefitted from new pipeline infrastructure and processing plants, keeping flaring to a minimum. For related information, see March 22, 2021, article--EIA: U.S. Adds 4.4 Billion Cubic Feet per Day of Natural Gas Pipeline Capacity.
Targa Resources Corporation (NYSE:TRGP) (Houston, Texas), for example, in 2021 relocated its Longhorn processing plant from North Texas to the Permian, renaming it "the Heim plant." A company press release indicated that the relocation would "provide it with significant capital savings." Industrial Info is tracking three active Permian-related Targa projects. Subscribers can click here for the reports.
Additionally, the Whistler Pipeline, stretching from the Waha Header to Agua Dulce, is adding a 36-inch lateral that will connect it with multiple processing sites in Martin County by fourth-quarter. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Pipelines Project Database can click here for a detailed project report.
Marcellus takeaway capacity would benefit from completion of the Mountain Valley Pipeline, adding 2 Bcf/d. While construction has continued since 2018, the prospect of completion is dogged by local permitting resistance. Current completion is expected by late 2022 unless there are further delays. For related information, see February 8, 2022, article--New Legal Hurdles Cast Doubt on Mountain Valley Pipeline Completion Date.
Canadian midstream companies are adding more pipeline infrastructure as well.
Mullins said: "The midstream sector is financially on good footing with plenty of cash to spend on whatever opportunities lay ahead. While growth opportunities will be more limited than what we have seen in the past, improving utilization will be a focus. More relocations and acquisitions to connect gathering systems to improve performance still lay ahead of us."
Gas plants for the future will focus on such projects as "utilization, improved NGL (natural gas liquids) recovery, reducing methane emissions and CCS (carbon capture and storage) projects," he continued.
Environmental regulations regarding methane emissions, the ability to track methane from above and increasing difficulties in getting pipeline approvals also will have an effect on construction. However, it is important to note that International Energy Agency (Paris, France) statistics show that the U.S. has the sixth lowest upstream methane emissions intensity factor of all producing nations, while producing more natural gas than all five of the nations ahead of it combined.
One positive about improved methane emissions intensity is that any methane that is not emitted is sold into the pipeline for a profit, thus benefitting all parties.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
