February 14, 2012
LyondellBasell: Favorable Ethane Prices Seen Beyond Turnaround Season

LyondellBasell expects ethane prices to remain favorable in 2012 even beyond the period of heavy industry turnaround maintenance in the first and second quarters, company executives said Friday during an earnings conference call.
  
LyondellBasell CEO Jim Gallogly noted that the price of Mt. Belvieu purity ethane managed to top 90cts/gal during fourth quarter 2011 but is now under 50cts/gal.
  
"That's a very dramatic shift," Gallogly said, noting that it stems in part from several planned cracker turnarounds that are underway at the moment, as well as some unplanned outages. "That puts tremendous pressure to move ethane."
  
But Gallogly expects favorable ethane prices to continue into the second half of 2012.
  
"Going into the third and fourth quarter we expect there to be some NGL fractionation capacity coming on, and we'll see how markets are going to react to that. But personally I think ethane prices ... should stay fairly low for the year," Gallogly said.
  
LyondellBasell will be performing some maintenance of its own at its Channelview, Texas, facility starting in late February.
  
"This is a significant turnaround, and we expect to lose approximately seven weeks' production from one olefins plant and half a month at the second plant,"
Gallogly said.
  
During Friday's conference call, one analyst was looking beyond 2012.
  
Noting that there are some strips through 2013 of sub-45ct/gal ethane, the analyst asked if there has been any willingness on the part of producers and suppliers to lock in long-term contracts with LyondellBasell.
  
"We could do a fair amount of stuff through the end of this year at a minimum," Gallogly agreed, noting that suppliers from the Marcellus Shale as well as other regions would like some guarantee that they will be able to move product.
   
However, Gallogly said, "We think ethane is going to go long, and so we're hesitant to do that at this point in time. We have discussed it but at this point in time don't look to lock any of those margins."
  
In response to another analyst's question, Gallogly commented on the company's Midwest operations benefiting from low Conway ethane prices and on the Corpus Christi, Texas, facility benefiting from condensate output from the Eagle Ford Shale.
  
LyondellBasell's Midwest facilities include ethylene plants at Clinton, Iowa, and Morris, Ill.
  
"The Midwest is just dramatically advantaged at this point in time," Gallogly said, noting that ethane is currently priced even below the value of natural gas, which he noted is incredibly low for February at around $2.50/MMBtu (Henry Hub).
   
"Corpus Christi is a slightly heavier cracker although we have been moving significantly more ethane through that unit," Gallogly said. "The other thing that's happened as a result of the Eagle Ford production is we're taking in steeply discounted condensates into that unit. That's been helping our overall cost structure. So we saw that cracker move from a relatively high-cost cracker to middle-of-the-pack despite its being fairly heavy."

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January 25, 2012
Canada Considering Natural Gas Pipeline Extension

Canada's National Energy Board is considering NOVA Gas Transmission Ltd.'s application to extend the Komie North portion of its natural gas system in northeastern British Columbia and northwestern Alberta.
   
The project includes the construction and operation of two new pipeline sections and related facilities.
  
The Komie North Section would be located approximately 110 km north of Fort Nelson, B.C. This first leg of the project would consist of building approximately 97 km of 914 mm (36 inch) outside diameter pipeline with a starting point near the proposed Fortune Creek Meter Station with a tie-in point on the Horn River Mainline (Cabin Section) near the Encana Cabin Gas Plant.
  
The Chinchaga Section would be about 76 km northwest of Manning, AB. This second segment involves the construction of approximately 33 km of 1,219 mm (48
inch) outside diameter pipeline and would be built alongside the existing Chinchaga Lateral Loop No. 3 from the Chinchaga Meter Station to a tie-in point at the Meikle River Compressor Station.
  
NGTL is proposing to start clearing during winter 2012-2013, proceed with construction during fall and winter 2013-2014 and be ready for operation by the second quarter of 2014.
  
NGTL is a wholly-owned subsidiary of TransCanada.

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January 23, 2012
BASF to Add Ethane Cracking Capability

BASF FINA wants to take advantage of lower cost ethane feedstocks as it lays out plans for the construction a new ethylene furnace at its Port Arthur, Texas, plant.
  
The plant, which is a joint venture of BASF Corp. and Total Petrochemicals USA, has for most of its existence depended on heavier liquids feeds such as butanes and naphtha, sourced primarily from the adjacent Total Port Arthur refinery.
  
Yet with poor cracking margins for heavier liquid feedstocks, the plant has gradually added more ability to crack light gas feedstocks, such as ethane recycled from its naphtha furnaces.
  
But BASF is looking to join the many other U.S.-based ethylene makers in the march to cracking more ethane, thanks to the increasing abundance of the feedstock from shale gas production.
  
"When (the plant) was originally designed in the late 90s, crude oil was in the toilet," said Carlo Borosso, a director at CMAI. "Naphtha was really cheap and the refinery tie-in offered a good opportunity to crack naphthas. But the economics have changed so dramatically, this move makes sense."
   
To that end, BASF FINA has recently announced the award of a new contract to Selas Fluid to build a new furnace with flexible cracking capability for ethane, naphtha and LPG feedstock.
  
The plant, which produces about 1 million tons per year of ethylene, currently has nine furnaces. Although no specific capacity for the new furnace has been announced, Borosso said new furnaces can produce anywhere from 100,000 tons to 200,000 tons per year. That would translate to somewhere between 6,000 b/d and 12,000 b/d of ethane consumption if the furnace was running fully on ethane.
  
The addition of the new furnace should take about two years. Borosso said it's likely that the installation of the furnace will coincide with BASF FINA's regular turnaround, which generally takes place in March or April, according to Borosso.

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January 19, 2012
Williams' Springville Line Starts Up, Move Marcellus Gas to Northeast

Williams Partners' Springville natural gas gathering pipeline has begun operations, moving its Marcellus Shale supplies in northeast Pennsylvania to markets in the Northeast, the company said Thursday.
   
The 33.5-mile, 24-inch Springville pipeline will ship natural gas from Williams Partners' existing gathering system in Susquehanna County, Pa., to its Transco interstate gas transmission system in Luzerne County, Pa., Williams said in a statement.
   
The line will initially move 300 MMcf/day of natural gas, and now spans three counties -- Susquehanna, Wyoming and Luzerne, Williams said. 
   
"We expect to double the initial takeaway capacity on Springville by the end of this year by adding compression," the company's Senior Vice President of Midstream Rory Miller was quoted as saying in the statement.
   
Since mid-2009 Williams Partners has acquired two major gathering systems in Pennsylvania and is in the process of acquiring a third, the company said.
   
It has been quickly working to expand its operations in all areas.
   
Williams Partners' gathering system in northeast Pennsylvania includes the Springville pipeline and is connected to three interstate market outlets via the Tennessee Gas Pipeline, Millennium Pipeline and Williams Partners' Transco pipeline.
   
At the close of 2011, the company reached a new milestone moving more than
600 MMcf/d of natural gas in this region of the Marcellus Shale.
   
The partnership's recently announced deal to buy Delphi Midstream Partners'
Laser Northeast Gathering System will further add to Williams' scale in northeastern Pennsylvania, it also said.
   

The Laser Gathering System is currently comprised of 33 miles of 16-inch natural gas pipeline and associated gathering facilities in Susquehanna County, Pa., as well as 10 miles of gathering pipeline in southern New York.
   
The deal was announced on Dec. 22, 2010 and is expected to close in the first quarter of this year, the company said.
   
Meanwhile, work also continues on the Laurel Mountain Midstream joint venture in southwestern Pennsylvania, Williams said.
   
This system was acquired in 2009 and the company has been working to expand and upgrade the system, it added.
   
Williams has added 110 miles of extra gathering pipeline, and expects another 50 miles to be added by the end of the first quarter this year, the company said.

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January 17, 2012
NGL Energy Partners Buy Propane Assets in Northeast,
Mid-Atlantic

NGL Energy Partners LP said on Tuesday that it has signed an agreement with North American Propane Inc. (NAP) to acquire assets located in Massachusetts, Maine, Connecticut, New Hampshire, Rhode Island, Pennsylvania, Delaware, New Jersey and Maryland.
  
"This purchase expands our operations in the New England market and provides entry into the Mid-Atlantic market of the U.S.," according to H. Michael Krimbill, chief executive officer of the partnership.
   
NAP serves in excess of 50,000 customers and delivers about 18 million gallons of retail propane volume, 8 million gallons of wholesale propane volume, and 10 million gallons of distillate volume annually.
  
In addition, the assets include three propane terminals, two of which have rail and truck capability, with a combined propane storage capacity of 1.2 million gallons. Upon closing, NGL midstream will own 18 natural gas liquids terminals from coast to coast."
   
The transaction is subject to Hart-Scott-Rodino Act approval and is expected to close at the end of January or early February.
   
Wells Fargo Securities LLC acted as financial advisor to NGL Energy Partners LP on this transaction.

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January 11, 2012
'Sweet Spot' Prevails for Rich Gas Processors

Yesterday saw natural gas prices at the Henry Hub drop to one-eighth of the price of WTI crude oil. In a market that sees natural gas liquids (NGLs) trading at huge premiums to natural gas, rich gas processors appear to be experiencing a real renaissance.
  
Tuesday saw natural gas futures dip to $2.94/MMBTU at Henry Hub, the equivalent of about 38.25cts/gal or about one-eighth the price of oil. Today saw another decline for natural gas, with prices at $2.79/MMBTU.
  
To see how the value of NGLs shake out versus natural gas can involve complicated mathematics. But, in a simple comparison, natural gas at $2.79/MMBTU, multiplied by the BTU heat content of propane -- a product that has been under pressure lately due to the warm winter -- results in a "propane equivalent" of less than 26cts/gal. Mont Belvieu TET propane is currently trading around $1.21/gal.
   
"As long as we don't go into another recession, it seems to me we are in a really sweet spot for processing rich gas," said Peter Fasullo, principal of En*Vantage Inc.
   
Market watchers say there would have to be an incredible change in the price relationship between U.S. natural gas, oil and NGLs to see any decrease in processing.
   
Fasullo said, think of it this way: a dairy farmer has a herd of cows, some that produce lowfat milk and others that produce lowfat milk as well as cream. Imagine that the price of a gallon of milk crumbles, while the price of cream skyrockets. Which cows would be maximized and which would be sent to pasture?
   
In this analogy, the "milk cows" represent dry gas wells, which produce natural gas that does not contain valuable NGLs. Not all of these wells are in the "pasture stage," especially those in the Marcellus Shale region, as they are close to the Northeast heating market, Fasullo noted. Natural gas must have much of the NGL content extracted to meet U.S. specifications, so the geography of the Marcellus still sees dry gas fetching a premium to Henry Hub. But drilling has tapered off in some dry gas areas, like the Haynesville Shale of Arkansas, northern Louisiana and East Texas, which is further from heating market, he said. And if natural gas were to drop to $2/MMBTU, as Bank of America Merrill Lynch predicted, Fasullo thinks the "lean gas" could get shut in.
   
Of note, Fasullo thought that $2/MMBTU natgas was unlikely and that resulting shut-ins would probably make it short-lived.
  
The "milk and cream" wells are the ones being maximized now. That's because the "cream" portion -- ethane, propane, butane and natural gasoline -- garners not just $3/MMBTU, but another $2-4/MMBTU in uplift. That's why drilling is so active in the Eagle Ford region and the liquids-rich portions of Marcellus.
  
What could derail this market momentum? Not much, says Fasullo.
  
Crude could collapse, but Fasullo doesn't see much of a chance for a natural gas spike. A cold winter could do it, but so far this year is proving to be one of the mildest on record.
  
The government could intercede. This week, ClearView Energy Partners LLC said that in a second Obama term, and the implementation of pending or future federal rules on fracking, could increase wellhead costs by up to 95cts/mcf in 2014.
   
"I think Congress would really fight that," Fasullo said. "We'll have to see how that pans out."
   
The Environmental Protection Agency (EPA) could also shut down coal-fired power plants, Fasullo suggested, which could boost natural gas demand. But he also sees major pushback from power companies if that were attempted.

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