Barclays on Condensate Export
Msg 142403 of 142412 at 6/27/2014 12:46:45 PM from bry board by
We believe condensate exports could help prevent
growing supply of light oils from overwhelming US markets and forcing US prices down
in future years. The forward WTI-Brent spread has already fallen ~$1 since the ruling
and will likely average $7-9 rather than the $12/bbl spread implied by ‘16-‘17 forward
prices. This suggests US prices will average of $3-5/bbl higher than what they would
have otherwise. We assume condensate prices will benefit by an extra +/- $2.
Most field condensates are extracted using stabilizers (i.e. distillation columns). The
Commerce Department view appears to be that the distillation process will qualify the
condensate for export. There are many uses for distillation columns – but this ruling
appears to apply only to one of the simpler uses – as a condensate stabilizer. The
condensate stabilizer creates 2 streams – a volatile gas stream (methane and ethane)
and heavier, stabilized, condensate (propane, or c3+) that is safe to transport to market.
A condensate splitter or NGL fractionation plant also use distillation columns – but the
purpose is to “split” the mixed hydrocarbon stream into several higher-value product
"... If the BIS did make such a change then the implications could run deep. For starters, if condensate can be exported after stabilization, then much of the condensate currently produced in the US – a number RBN estimates as at least 1.2 MMb/d today and expects to increase to 1.6 MMb/d by 2018 – would be eligible for export. That means producers would realize a higher price for condensate in overseas markets where demand is greater than here in the US (e.g. Asia). The change would also relieve pressure on US Gulf Coast light sweet crude prices such as Light Louisiana Sweet (LLS) that have been weighed down by a flood of light crude and condensate barrels descending on refineries not able to process those barrels easily. If the lightest crude can be exported, it would no longer compete for space in domestic refineries meaning crude prices should increase – at least initially. Many producers are hoping that this development is just the first notch in a general BIS retreat from the export ban that would end the regulations for good.
Wait and See
Of course, it is entirely possible that the special exemptions for Pioneer and Enterprise are no more than trial balloons – in effect BIS test cases to determine the market impact – and perhaps the political impact – of relaxing export regulations. But assuming some kind of change has really occurred to BIS definitions, producers and midstream companies would be well advised to wait and see the details before jumping on the bandwagon. The crude vs. lease condensate distinction requires more than a verbal definition using the word “condensate”. And a waiver of the export rules has to require more than just “processing through a stabilizer” as a condition. Otherwise, what is to stop crude producers simply putting their regular crude through a stabilizer to classify it for export?..."
for those wwithout access to rbn some points-part 1
"The implication of yesterday’s WSJ story and reported follow up statements from one of the companies that has received a ruling from the BIS – Pioneer – is that in this instance at least - the BIS may have changed or loosened or “redefined” what is meant by “processed though a crude oil distillation tower” to include a wellhead process called stabilization that is less complex and/or expensive to carry out than either a condensate splitter or a conventional refinery. In fact, condensate stabilization units are in common use at many Eagle Ford wellhead production facilities or at crude gathering points such as the Plains terminal at Gardendale, TX."
An important distinction between a condensate stabilizer and a condensate splitter in the context of this discussion is that the stabilizer is designed to make lease condensate stable and safe for transportation on pipelines and the splitter is designed to break condensate into its component fractions such as naphtha, propane, butane and distillates. A stabilizer outputs condensate, a splitter outputs condensate components. So even if condensate stabilizers are getting more sophisticated these days, they are not designed to split out component fractions.
What Does The Change Mean?
So the question of the day is whether or not the BIS has made a subtle change to the definition of what constitutes processing to transform lease condensate into a product that can be exported? In other words, can producers export field condensate once is has passed through a stabilization unit? The answer is unclear based on what we know so far because the statements made have not been specific as to the process required. As we said earlier, this whole thing could be a trial balloon from the BIS to test the waters and see what the response is....
ny agree they can modify plans if they have not already ordered the equipment as a stabilizer is cheaper to build than a splitter . that was why the kudos to mwe as they chose the simplistic cheaper route before going all in which was discussed at investor conference. ngls is my second largest holding and may not be too far along yet on splitter from recent presentation "35 Mbbl/d condensate splitter located at the Channelview Terminal expected to be completed 18 months after permitting is complete". "TRP has begun permitting, and expects the splitter to be inservice
18 months after completion of the permitting process", just hope they have not yet ordered all of the equipment
Msg 142256 of 142257 at 6/25/2014 2:04:18 PM bry bord by
Condensate Export Ruling Jeopardizes Splitter Projects: Barclays
By Barbara Powell
June 25 (Bloomberg) -- The U.S. approving stabilized
condensates for export as processed petroleum could delay
billion-dollar projects to separate ultra-light crude into
products, Michael Cohen, an analyst at Barclays Capital, says in
* Decision raises questions about viability of midstream co.-
announced condensate splitters, hydroskimming units, pre-
* Short term mkt implications support narrowing of Brent-LLS
spread; widespread lifting of crude export ban is “out of
the question” w/o lifting of Jones Act too
Condensate Export Approval-two different views WSJ (condensate) and FuelFix (after splitter/Distillation tower).
not sure which article is correct. can read both on iv bry and mlp boards
round about way PXD could accelerate drilling and producing more cassinghead gas for processing
another insticitive move by mwe initially going with a stabilizer rather than all out with a separator/splitter
EPD and PXD
Christian Berthelsen And
June 24, 2014 5:14 p.m. ET
The Obama administration has quietly cleared the way for the first exports of unrefined American oil in four decades, allowing energy companies to chip away at the long-standing ban on selling U.S. crude overseas.
Federal officials have told two energy companies that they can legally export a kind of ultra-light oil that has become plentiful as drillers tap shale formations across the U.S. With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter.
Using a process known as a private ruling, the U.S. Commerce Dept.'s Bureau of Industry and Security is allowing Pioneer Natural Resources Co. of Irving, Texas, and Enterprise Products Partners LP of Houston to export ultra-light oil known as condensate to foreign buyers who could turn it into gasoline, jet fuel and diesel.
Both companies confirmed they had received the rulings.
40,000 bls/d and 200 mmcf/d
I think it a continuation of the cycling to into higher yield investments, plus on mwe a few others I think its a move to more organic growth mlps
from some recent posts on iv mlp
“The midstream is where the money is right now,”....
"...“The midstream is where the money is right now,” said Bernard Weinstein, associate director of Southern Methodist University’s Maguire Energy Institute, in a telephone interview. “That’s why we’re seeing a lot of acquisition activity.”....
Could midcap growth mlp's be on the verge of becoming scarce? Will this drive more capital to the remaining visible organic growth MLP's?
"....News of the (MLP) World
An overwhelming amount of news to process this week, but there were a few big trends worth noting. The way the ACMP transaction went and the way the TRGP/NGLS acquisition by ETE was being speculated (where RGP would be merged into NGLS post acquisition), the sector’s mid-cap growth MLPs are at risk of having that growth diluted for the purposes of solving some other MLP or GP’s problem. That trend makes growth MLPs scarce, and drives more capital into the remaining MLPs that have visible growth.
The other big picture item is the first MLP IPO filing by a major integrated oil and gas company (Shell Midstream). If more majors launch MLP strategies, it reduces the overall pool of assets for existing MLPs to acquire, which is another argument in favor of MLPs with growth that is not dependent on 3rd party acquisitions generally...."
ny and dreiser thanks for dialogue, ny thanks for recap
hi nosweat. I would go with .01 due to preferred and still waiting to bring in some DCF from last acquisition (ie having to buy co2 from exxon)
Msg 38853 of 38870 at 6/20/2014 12:57:32 PM iv mlp by passandshoot
One Bank's Opinion
Targeting Targa? Our Thoughts...
Our Thoughts on the News Report: Right before market close, a Bloomberg report noted that ETE "is near an agreement to acquire Targa Resources Corp. [TRGP] and its operating unit [NGLS]" and noted that a deal could be announced as early as next week (with RGP also potentially being involved). Shortly after, Targa responded saying "that they have previously engaged in high level preliminary discussions..., but that those discussions have been terminated." Below are our thoughts on the situation, and what may lie ahead.
Energy Transfer-Targa Potential Deal: We believe a possible deal that makes sense is for ETE to buy TRGP, and for NGLS to merge with RGP (RGP merging into NGLS). Based on our analysis, on a net basis this is accretive to ETE by at least mid single digits from 2015 onwards. TRGP gets taken out at a large premium (we assume even above the $151/sh close), RGP gets acquired at a modest premium as it gets converted to NGLS units, and for NGLS this is accretive by 20+% from 2015 onwards. Please see our full report. Note that this is just one possible permutation of a deal, and in this case would be subject to NGLS unitholder approval. Another possible path could involve ETE acquiring a bigger stake in NGLS than what TRGP currently owns.
What's Ahead: While Targa's response appears to quell the possibility of an imminent deal, they did note that they have been engaged in possible discussions. We have long considered Targa to be a take-out candidate, and if a deal with ETE does not come to fruition, other likely candidates for a transaction involving Targa include Kinder Morgan (KMI/KMP/KMR), OneOk (OKE/OKS), Enterprise (EPD) and MarkWest (MWE) with Kinder being the best alternative from an asset overlap perspective and MWE being the most interesting combination in creating a national gatherer/processor.
ny has been very pointed in his view
Msg 141846 of 141847 at 6/19/2014 6:10:30 PM iv bry board by
In response to msg 141843 by RossA view thread
Re: Warren’s Energy Transfer Said Near Deal to Buy Targa Resources
Targa is the most strategic asset out there in the MLP space due to their position at Mont Belvieu, houston ship channel, Permian and Bakken. Would not be surprised to see other bidders emerge if it is not a knockout bid. I have a hard time believing that the astute management of TRGP/Ngls would sell for ETP shares unless it is a huge bid. EPD probably can't buy them for antitrust reasons but as a holder of PSX I hope they look hard at it...."
Msg 141837 of 141846 at 6/19/2014 3:37:31 PM by
Comments from CNX analysts day - Marcellus and Utica
Most recent price target increased to $57 by Brean Capital after analysts day. Plan an MLP for midsteam assets, stacked plays, and much more at the link:
I realize most aren't invested in CNX. Here are some takeaways for anyone interested in Marcellus and Utica:
In 2014, CNX expects the Marcellus Shale natural gas production to grow 87%, while overall gas production across the company may increase by 30%.
CNX projects that the Utica Shale has potential resource of ~26 trillion cubic feet equivalent.