Wednesday, September 30, 2015

Saudi Aramco sets October propane to $360/T, up $45 from the September Level

State-run Saudi Aramco has increased its October contract price for propane to $360 a tonne, up $45 from the September level, an industry source said on Wednesday. Butane prices for October 2015 were set to $365 a tonne, up $20 from September level of $345. The prices provide a benchmark against which Middle East sales of liquefied petroleum gas (LPG) to Asia are priced. Following is a table of Saudi Aramco's contract prices of propane and butane per tonne in U.S. dollars. 

Product   October 2015  - 
September 2015    Change 
Propane   $360                    $315                +45
Butane     $365                    $345               +20

Thursday, September 3, 2015

The U.S. is producing more natural gas than ever in 2015

The U.S. is producing more natural gas than ever in 2015, despite low prices that make it increasingly difficult for companies to spend money on drilling. In fact, the government's Energy Information Administration forecasts a 5.4% increase in output this year compared to 2014.

But new numbers from EIA suggest some trouble just ahead for gas production, especially in the resource-rich shale formations that have given rise to a U.S. renaissance in oil and gas production.

In its August "Drilling Productivity Report," EIA forecasts that gas production will decline in all seven of the United States' major shale regions in September, the first across-the-board slump in shale gas production ever recorded by the agency.

"We're starting to see a slow-down," said Lynn Westfall, director of EIA's Office of Energy Markets and Financial Analysis, which compiles the report.

In May, production reached an all-time high of 45.6 billion cubic feet a day in the shale regions, including the Marcellus in Pennsylvania, the biggest gas field in the U.S. By September, the daily output is expected to fall to 44.9 billion cubic feet, according to EIA's projections.

The other shale formations are Bakken in North Dakota, Eagle Ford in Texas, Haynesville in Louisiana and Texas, Niobrara in Colorado, Permian in Texas and Utica in Ohio.

EIA uses a relatively simple calculation for the report, comparing estimates of production from existing wells with that expected from newly drilled wells, based on the number of drilling rigs in operation. In its latest assessment, the agency concludes that output from new wells in shale formations will lag falloffs in production from older wells next month.

"Given the substantial drop in rig counts since the fourth quarter of 2014 in each of the (shale) regions and growing declines in production from legacy wells, productivity increases are less able to completely offset lower rig counts and legacy well declines," the report explains.

That said, the decline doesn't appear so great as to upset EIA's projections for gas production in the U.S. as a whole, including gas from other, conventional onshore wells and wells in the Gulf of Mexico. In fact, the agency in its "Short Term Energy Outlook" for August predicted that total U.S. gas production would climb by 4 billion cubic feet per day in 2015 compared to 2014, reaching 78.7 billion cubic feet per day, with improvements in drilling efficiency offsetting low prices.

But that growth tapers off in 2016, with total U.S. gas production rising 1.8 billion cubic feet per day, for a daily total of 80.5 billion cubic feet.

"Production in the first half of 2015 was well above the first half of 2014, so even if we have declining production now, just averaging over the year will give you an increase in 2015 over 2014," Westfall said in an interview. "In 2016, you'll start seeing the price effect."

The Henry Hub spot price for gas – the U.S. benchmark for the commodity – was $2.63 per million British thermal units on Thursday, down 34.5% from the same day one year ago. At that time, the price was $4.02.

Westfall cautions that the drilling report, unlike EIA's other market analyses, doesn't take into account economic factors, such as changes in the price of gas, or new infrastructure to carry gas from shale formations.

For example, the 1,698-mile Rockies Express Pipeline, originally built to carry gas east from Colorado and Wyoming, just recently began shipping gas west from the Marcellus and Utica shale formations, opening new markets and potentially providing higher prices for producers in those regions.

And with near-record levels of inventory, the U.S. gas industry will head into the winter heating season with more than enough supply to meet demand.

But discrepancies bear scrutiny, Westfall says.

"The purpose of the report is more to point out those inflection points, when we do see things start to change direction," he said. "It's very good for that. But beyond a couple of months, anything can happen."

Wednesday, September 2, 2015

Restart of first nuclear for Japan, still cloudy outlook

The number of Japanese nuclear reactors likely to restart in the next few years has halved, hit by legal challenges and worries about meeting tougher safety standards imposed in the wake of the Fukushima disaster, a Reuters analysis shows.
The country has been inching back to nuclear energy, turning on its first reactor in mid-August after a two-year blackout, with Prime Minister Shinzo Abe and many in industry looking to cut fuel bills despite widespread public opposition to atomic power.
But the analysis shows that of the other 42 operable reactors remaining in the country, just seven are likely to be turned on in the next few years, down from the 14 predicted in a similar survey last year.
The findings are based on reactor inspection data from industry watchdog the Nuclear Regulation Authority, court rulings and interviews with local authorities, utilities and energy experts. They also show that nine reactors are unlikely to ever restart and that the fate of the remaining 26 looks uncertain.
“Four-and-a-half years after the events started unfolding at Fukushima Daiichi, the Japanese government, the nuclear utilities and the NRA have not succeeded in overcoming complete planning insecurity for investors. The outlook for restarts is as cloudy as ever,” said Mycle Schneider, an independent energy consultant in Paris.
Japan’s utilities have been burning liquefied natural gas (LNG) in record quantities to make up for lost nuclear capacity, bolstering international markets for the fuel.
Legal challenges from local residents have hit all atomic plants, with the country’s most nuclear-reliant utility Kansai Electric Power issued with court rulings preventing the restart of four reactors despite two of them already receiving NRA approval to switch on.
Kansai has appealed the judgements but the court cases may take years to resolve if the rulings are not overturned on the first appeal.
Tougher safety standards and stricter implementation of rules since Fukushima have also been hitting restarts. Japan Atomic Power has been battling a regulatory ruling that one of its reactors sits above an active fault, meaning it must be decommissioned.
And highlighting the pitfalls of rebooting the industry, Kyushu Electric was forced to slow the ramp up of power from its Sendai No. 1 reactor after it restarted around mid-August due to problems with pumping equipment. Engineers warn that firing up reactors that have been offline for prolonged periods could be fraught with such troubles.
But offering some hope to nuclear operators, some aging units may be given a new lease of life as the NRA considers applications for operation beyond the standard 40 years.
Two Kansai units, both around 40 years old, are being vetted for extensions. The regulator has said it would be very strict on granting permission, but Kansai is pushing for acceptance of less costly measures on fireproofing thousands of kilometres of wiring.