BP Offloads Key North Sea Infrastructure for
$486 Million
April 23, 2015

BP has agreed to the sale of its operating share in the Central Area Transmission System (CATS) in the U.K. North Sea for 324 million pounds ($486 million) to fellow stakeholder Antin Infrastructure Partners.

The deal for BP's 36.22% stake in CATS comprises a payment of 302 million pounds ($453 million) and a deferred amount of 22 million pounds ($33 million), pending post-closing adjustments.

"We believe securing this new owner will ensure a better long-term future for this key piece of North Sea infrastructure," Trevor Garlick, Regional President BP North Sea said.

BP aims to complete the sale and transfer of operatorship before the end of 2015, subject to regulatory and third-party approvals.

A contract operator is expected to be appointed by Antin in Q2 2015.

CATS has a processing capacity of 1,200 million standard cubic feet of gas per day (mmscf/d), transporting raw gas and NGLs from a riser platform in the North Sea to the Teesside gas terminal via a 404 km (250 mile) pipeline.  

The sale will result in the increase of Paris-based Antin's share in CATS to around 99%, with ConocoPhillips and and ENI holding a 0.66% and 0.34% stake, respectively.

The independent infrastructure group bought BG Group's 62.78% stake in CATS last June for 562 million pounds.

The oil major will retain its capacity rights in CATS.

BP Still Committed to the North Sea

BP maintained the North Sea is an "important region" for them and expects to sustain a "significant business" there for the long term.

However, CEO Bob Dudley warned this week at the IHS CERA conference that the North Sea was going to see "massive restructuring" amid the slump in oil prices. "The North Sea is a very high cost basin and it is going to be a painful adjustment."

The oil major said they are in the middle of a five year, 7 billion pound investment program in the North Sea, including major projects in the central region and Shetland area.

So far, the oil major has not yet identified further North Sea asset sales as part of its $10 billion divestment program by the end of 2015.

U.S. Ethane Advantage to Plummet to 10% of 2014 Levels: FGE
April 21, 2015

The cost advantage of U.S. ethane exports in the global market may shrink to about a tenth of 2014 levels under the current low oil price scenario, according to a new report by the consulting firm FGE (Facts Global Energy).

FGE's ethane study indicated that the advantage for importing U.S. ethane to Asia over rival feedstock naphtha hit $331/ton in 2014, when crude averaged $97/bbl and naphtha was trading at around $850/ton. This was after considering shipping costs and Panama Canal charges to Asia.

That advantage was forecast to descend to $35/ton in 2015 with crude at $55/bbl and naphtha subsequently under $500/ton. FGE, however, anticipated the economics to improve by more than $100/ton by 2017 before trending back down in 2020.

"The ethane advantage of 2014 has disappeared," FGE stated.

"We think it will re-emerge by 2017. But not to the same extent that existed in 2014."

In 2013 and 2014, the ethane advantage was such that it could cover the cost of shipping and building cryogenic storage tanks.

Companies deemed the best candidates for U.S. ethane exports -- those that already operate ethane crackers but are faced with a declining local source -- signed contracts then. These included Ineos, Borealis and Sabic in Europe, and
Reliance in India. 

In the new low oil price environment, the case for companies considering U.S. ethane as a naphtha alternative has now become marginal, FGE said. 

OPIS Gas Liquids Watch: NGLs Edge Higher as Crude Pares Losses
April 16, 2015

Mt. Belvieu NGLs pressed higher by afternoon as oil futures either trimmed losses or posted a small gain, putting the Gulf Coast spot values up 0.3%-0.8% from Wednesday.

After correcting lower from yesterday's run-up, the May WTI contract was off just a touch to $56.35/bbl. June Brent was up slightly to $63.39/bbl. May RBOB pared earlier losses to 0.9ct, putting futures prices at $1.9305/gal. Despite a bearing weekly inventory report, natural gas prices edged up 6.9cts, to $2.679/MMBtu.

Gleaning some support from increased European arbitrage activity, Mt. Belvieu TET (LST) spot propane anys traded at 55.5-57.25cts/gal, with the roll to May done at 0.25ct carry. Non-TETs were done at 55.625-56.5cts/gal, and at a 0.25ct discount to TETs. Targa propane was done at 56.375cts/gal, and at 0.375ct over non-TET anys. Getting a boost from stronger natural gas futures, ethane non-TET anys traded at 16.375-17.5cts/gal. Targa ethane was done at 0.5ct over non-TETs.

E/P mix was bid 16.75cts/gal, with no offer.

In the heavies, non-TET normal butane anys changed hands at 66.25-67.75cts/gal.

Isobutane anys had yet to trade but saw a bid at 67.25cts/gal, and an offer at 69.75cts/gal. The non-TET natural gasoline market saw more volatility today, with a wide bid-ask range talked and the anys done at $1.31/gal. May C5 is called 5cts/gal backward. The LST and Targa grades of natural gasoline saw only offers with no bids, with LST floated at 2.5cts over non-TETs, and Targa available at 1ct over non-TETs. 

Conway NGLs were mostly higher at midday. Propane anys ranged from 48.25cts- 49.75cts/gal, with the high end rising from an average 48.8125cts/gal Wednesday.

The E/P mix traded from 14cts-15cts/gal, steady from 14.9375cts/gal yesterday.

In the heavies, normal butane anys were done from 57.375cts-60.125cts/gal. The recent trades were at the high of the range, up from 59.125cts/gal Wednesday. 

Isobutane anys were done at 64.75cts/gal, slipping from 65.875cts/gal yesterday.

Natural gasoline anys traded at $1.21/gal, edging up from $1.20/gal Wednesday.

U.S Butane Exports Ramp Up in March
April 14, 2015

U.S. seaborne butane exports surged up to around 100,000 mt in March, OPIS records indicate, as a wider Trans-Atlantic arb improved export economics.

March figures were double that of February and more than four times that of January, while shipment sizes ranged from 4,500 mt to 33,000 mt.

Targa has been the most prolific exporter of butane, making up some 85% of March volumes, while Enterprise and newcomer East Coast terminal Chesapeake exported smaller lots.

"Butane got cheap -- worked its way into the cracker and into the export arb," commented a market source.

From premium levels in January, OPIS Mont Belvieu non-TET butane was trading under -$100/t (-22cts/gal) to northwest Europe CIF ARA prices in February, and then went on widen to -$176.63/t (-39cts/gal) on March 26.  

Domestic demand from the blending sector in March was said to be slack this year as high summer gasoline values led to an earlier transition away from winter spec, which uses butane to increase the RVP value.

"They started making summer spec early and storing," said the source.

The snapshot of March shows the U.S becoming an increasingly important supplier of butane in the Atlantic basin.

Arb margins were such that one northwest Europe petrochemical producer saw value in importing and cracking U.S. butane, with a 12,000-mt parcel from East Coast terminal Marcus Hook fixed for 2H April arrival in the ARA.

That was thought to be a contributing factor in northwest Europe butane prices diving from 88% of naphtha to below 75% last week as a mid-April loading North Sea cargo struggled to find a home.  

"Think they bought too much from the U.S.," a source noted on limited ullage.

Morocco has emerged as the foremost importer of U.S. origin butane, where it is predominantly used as a cooking and heating fuel, taking in some 69% of March exports. Other destinations include West Africa and Ecuador.

According to the EIA, the U.S. exported some 3.6 million bbl of LPG (approximately 324,000 mt) to Morocco last year, ahead of western European outlets such as France and Portugal.  

Furthermore, OPIS records indicate that Morocco's U.S. import volumes eclipsed that from neighboring gas producer Algeria, which was just over 37,000 mt in March.

Portland Planning Board Approves Pembina Propane Terminal: Reports
April 8, 2015

The Portland Planning and Sustainability Commission voted 6-4 Tuesday night to recommend approval of Pembina Pipeline's proposed $500 million propane export terminal, news reports said.

The terminal faced stiff local opposition and will continue to do so as the planning board's decision now moves to the Portland City Council for a vote. That vote is expected in at least a couple of weeks.

Pembina proposed building a 37,000-b/d terminal that would receive propane by rail. It would then be refrigerated and stored for up to 15 days in above-ground refrigerated holding tanks before being piped to the nearby Columbia River berth to be loaded onto a ship.

Pembina's proposal to build a propane export terminal at Portland's Terminal 6 was expected to be an easy project to build. What the company had not anticipated was that local zoning codes would prohibit building a short pipeline over a small parcel of land at the shoreline. That land is zoned for conservation.

The Portland Bureau of Emergency Management will also review the proposed terminal.