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Daily Energy Post

You Can Just Iso my Butane: Isobutane and Isomerization in the Shale Gas World

Of the five natural gas liquids (NGLs), isobutane stands apart in its sources and markets.  Isobutane comes from gas processing plants and refineries, but it is also the only NGL intentionally made from another NGL – it’s cousin, normal butane.  It has a variety of exotic uses, such as aerosol propellant for everything from hair spray, to cooking sprays to shaving cream and since the early 90s as a replacement for Freon in refrigerators.  A refinery process called alkylation is the largest market for isobutane, producing a high-octane gasoline blending component called alkylate.     Even though it has robust markets, isobutane supply/demand balances are not immune to the growing volumes of high-BTU, “wet” shale gas and the resulting torrent of NGL production.   And as gas plant isobutane volumes increase, there are changes coming to isobutane balances and the demand for merchant isomerization.  Today we begin our series on isomerization by exploring what it is, why it’s valuable, and how it’s done.

Smokestack Lightning – Coal Emission Regulation Blues

Does lightning strike twice?  How about three times?  Sure seems like the coal industry has been hit by three lightning bolts in the past several years: a recession that reduced demand for electrical power, low prices for competing fuels (i.e., natural gas), and new federal regulations on smokestack emissions.  Today we review regulations that have left coal power generators singing the smokestack blues.

Fifty Shades of Eh? – The Canadian Market for Condensate

Western Canadian heavy crude production from tar sands (bitumen) is expected to increase from about 1.7 MMbd/ in 2011 to 2.9 MMbd/d in 2017.  Forty percent of that production is mixed with diluent (mostly natural gasoline or condensate) and shipped to the US market by pipeline. As tar sands production increases so does Canadian demand for diluent. That demand already outstrips local production - meaning Canada needs to import increasing volumes of diluent. Today we look at the potential sources of Canadian diluent supplies.

Crazy Little Crude Called Brent – Links to ICE Futures

Brent physical traders are members of an exclusive club that transacts roughly fifty 600 MBbl cargoes of crude a month representing about 1 MMb/d of production. ICE Brent futures traded an average of 500 MMb/d during 2012. These two markets are linked together by the ICE Brent Index that allows for cash settlement of futures. Today we explain the Brent futures delivery mechanism.

Goodbye Winter Freeze Days – Natural Gas Demand Looking Ahead to Summer

It’s the first week of March 2013 – the final month of the natural gas winter season. This winter has been colder than last so far reducing the record storage surplus that we started the season with. Natural gas prices have traded in a range between $3.25 and $3.50/MMBtu so far this year. Production continues at or near to record levels however and higher prices will likely reduce gas fired power generation. That means summer demand could be lower than last year and the storage surplus would rebound again. Today we review the current natural gas supply and demand situation.

Crude Loves Rock ‘n’ Rail – Bakken Oil Express, Dakota Plains, BakkenLink, & Savage

The US crude by rail industry has expanded rapidly since January 2011 as domestic crude production soared by 1.4 MMb/d over the same period. The growth of crude by rail followed pipeline bottlenecks in the Midwest that caused landlocked inland crudes to be discounted by upwards of $20/Bbl versus coastal destinations. That made shipping oil by rail to the coast a viable proposition in the absence of new pipeline capacity. Crude rail terminals in the Bakken now load over 400 Mb/d for shipment to coastal markets. Today we continue our survey of Bakken crude rail loading terminals.

Crazy Little Crude Called Brent – The Physical Trading Market

North Sea Brent crude plays a critical rolet in setting world oil prices. Here in the US, most folks pay more attention to West Texas Intermediate (WTI)  - the North American equivalent benchmark. We regard Brent as just a figurehead for the international market and rarely look beyond the Brent/WTI spread. Yet Brent crude assessments based on physical trades or the ICE Brent futures market are used directly or indirectly to price 70 percent of world oil. Today we begin a “deep dive” series explaining how the Brent crude market operates.

Return to Sender – The Constitution Amendment to Iroquois Gas Supplies

Natural gas imports into the Northeast US from Canada have fallen to around 1 Bcf/d from 3 Bcf/d in 2008. Infrastructure projects are underway or planned to replace Canadian supplies with gas from rapidly expanding Marcellus and Utica production. US gas is already flowing into Ontario at Niagara and will flow into Dawn if one or more Utica gas export projects are built. . Meantime the proposed Constitution pipeline from the Eastern Marcellus to New York would replace Canadian supplies into New York on the Iroquois pipeline. Today we review the next pieces of the reversal puzzle.

Crude Loves Rocking Rail – Plains, Enbridge and Global Terminals in the Bakken

North Dakota Bakken crude production continues to grow at record rates with nearly 770 Mb/d produced in December 2012 up 40 percent since January 2012. The North Dakota Pipeline Authority estimates that 64 percent of that crude was transported to market by rail in December. After local refinery consumption (80 Mb/d) that means 440 Mb/d moving by rail. Today we continue our survey of North Dakota crude rail loading terminals with an in-depth look at three midstream companies that between them can potentialy load 280 Mb/d of crude in North Dakota.

Bridge Over Troubled Water – Gulf of Mexico Oil Production Recovering From Macondo

The Deepwater Horizon explosion in April 2010 effectively halted new drilling in the offshore Gulf of Mexico (GOM). Between April 2010 and June 2012 production fell by 400 Mb/d. At the same time the shale revolution led to increases in US production – up 790 Mb/d during 2012 – the largest annual increase on record. In the last quarter of 2012 GOM oil production began to recover and is forecast to increase to 1.5 MMb/d by the end of 2014. Today we look at the impact Macondo had on GOM crude production.

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