navigating covid-19: good times bad times in …...lng feedgas by terminal source: ice, genscape 0.0...
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INTERCONTINENTAL EXCHANGE
Navigating COVID-19: Good Times Bad Times in Natural Gas and NGL Markets
Special Guest Host
Rusty Braziel | CEO and Chief Principal Energy Consultant
RBN Energy
J.C. Kneale | VP of NA Natural Gas, NGLs and Power
Intercontinental Exchange
2© Copyright 2020 RBN Energy
Crude/Gas/NGL Production, Exports, and % Exports
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
10
20
30
40
50
60
70
80
90
Bcf
/d
Lower-48 Natural Gas
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0.0
1.0
2.0
3.0
4.0
5.0
MM
b/d
NGLs from Gas Processing
0%
5%
10%
15%
20%
25%
30%
35%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
MM
b/d
Crude Oil
Source: EIA; RBN
Production to U.S. Markets Production to International Markets Percentage Exports
3© Copyright 2020 RBN Energy
Permian Gas Takeaway Capacity & Price
WAHA
NGPL NNG
ETC & Oneok
** Roadrunner, Comanche Trail, Trans-Pecos
Trans-Western
El Paso
LegacyIntra-
states*
* ET Fuel, Atmos, Oasis,
Enterprise, Kinder
GCX
Gulf Coast Express to Agua Dulce$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
$1.00
$2.00
$3.00
$/M
MB
tu
Waha Hub Daily Average Price
----------------------2019 ---------------------- 2020
4© Copyright 2020 RBN Energy
Permian Crude and Gas Pipeline Projects
Kinder/DCP/Targa/Altus
Gulf Coast ExpressIn Service, 1.98
Bcf/d
Kinder/EagleClaw/OthersPermian Highway Pipeline
1Q-2021 2.1 Bcf/d
WhiteWater/MPLX/ Stonepeak- West Texas Gas
Whistler Pipeline3Q-2021, 2.0 Bcf/d
NAmericoPecos Trail Pipeline1H-2021, 2.0 Bcf/d
WilliamsBlue Bonnet Express
2020 2.0 Bcf/dBoardwalk
Permian-Katy (P2K)TBD, 1.5–2.0 Bcf/d
TellurianPermian Global Access
Pipeline (PGAP) 2H-2022 2.0 Bcf/d
HoustonCentral Plant
Katy/Ship
Sta. 30
Agua Dulce
Waha
Natural Gas Pipeline Projects
P66/Enbridge/Marathon/Rattler- Gray Oak
900 Mb/d Q4-2019
EPIC/Noble/Altus/Rattler- EPIC Crude (NGL conversion
temp. service 400 Mb/d Q3 2019) 600 Mb/d Q1 2020 (expandable to 900)
Plains- Cactus II585 Mb/d Q3-2019(expandable to 670)
Enterprise - Midland to Echo III450 MMb/d – 1H21
Midland, TX
Corpus Christi, TX
Nederland, TX
Houston, TX
Plains/Exxon/Lotus/MPLX/Delek/Rattler-
Wink-to -Webster1 MMb/d 1H 2021
(expandable to 1.5 MMb/d)
Energy Transfer –Permian Express IV
120 Mb/d – 3Q 2019
Enterprise - Midland to Echo IV450 MMb/d – 1H21
(expandable to 540 MMb/d)
Crude Oil Pipeline Projects
5© Copyright 2020 RBN Energy
LNG Export Projects by Status
Terminal Status
Operational
Under Construction/FID
Pending FID
Bear Head
Goldboro
QilakAlaska
Kitimat
Jordan Cove
Commonwealth
Magnolia
Annova
Pascagoula
Eagle
Texas LNG
Lake Charles
Plaquemines
Delta
Rio GrandePort Arthur
Energia Costa Azul
Driftwood
Calcasieu Pass
Woodfibre LNG Canada
Freeport
Golden PassElba Island
Cameron
Corpus Christi
Cove Point
Sabine Pass
Tier 1
Tier 2
Tier 3
Cedar
Energie Saguenay
Mexico Pacific Limited
Delfin
6© Copyright 2020 RBN Energy
U.S. Gulf Coast Crude Oil Exports
0.0
0.5
1.0
1.5
2.0
2.5
3.0
MM
b/d
Houston
Beaumont
Corpus Christi
Louisiana
Other
7© Copyright 2020 RBN Energy
Global Oil Supply/Demand Outlook
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
96
97
98
99
100
101
102
103
104
MM
b/d
Sto
ck C
han
ge
MM
b/d
Su
pp
ly/D
em
and
Stock Change Demand Supply
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
96
97
98
99
100
101
102
103
104
MM
b/d
Sto
ck C
han
ge
MM
b/d
Su
pp
ly/D
em
and
IEA Oil Market Report: Q4 2019
Stock Change Demand Supply
8© Copyright 2020 RBN Energy
0.0
0.5
1.0
1.5
2.0
2.5
MM
b/d
Ethane Exports + Petchem Demand
Exports
Petchem
NGL Export and Petchem Demand
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6 U.S. Overseas LPG Exports
Other
Marcus Hook
Freeport/P66
ETP/Sunoco
Targa
Enterprise
MM
b/d
9© Copyright 2020 RBN Energy
U.S. Lower 48 Rich and Associated Gas vs. Dry Gas
-
10
20
30
40
50
60
70
80
90
100
Bcf
/d
Other Associated & Wet
Eagle Ford
Permian
Appalachia - Wet
Appalachia - Dry
Haynesville
Other Dry Gas
Legacy
10© Copyright 2020 RBN Energy
Good Times Bad Times
Before AfterMarch 6, 2020
11© Copyright 2020 RBN Energy
-$50
-$40
-$30
-$20
-$10
$0
$10
$20
$30
$40
$50
$60
$70
$/b
bl
Crude Oil Cushing
$0.00
$0.50
$1.00
$1.50
$2.00
$/M
MB
tu
Natural Gas HH
$0
$5
$10
$15
$20
$/b
bl
NGLs Mont Belvieu
2020 COVID Era Energy Market Meltdown
11© Copyright 2020 RBN Energy Source: ICE
:
12© Copyright 2020 RBN Energy
U.S. Rig Count
75
95
115
135
155
175
195
Natural Gas
250
350
450
550
650
750
850
# o
f R
igs
Crude Oil
13© Copyright 2020 RBN Energy
Crude Oil and Natural Gas Production
11.0
11.5
12.0
12.5
13.0
MM
b/d
U.S. Crude Oil Production
Tropical Storm Barry
80
82
84
86
88
90
92
94
96
Lower-48 Gas Production
14© Copyright 2020 RBN Energy
Bakken Hit Hard
» 7,500 shut-in wells
» 510 Mb/d shut-in production
» Only 12 drilling rigs operating
» 1 frac crew operating – Most frac supply contracts
cancelled through the rest of the year
» 790 abandoned wells
» Gas plants near maximum turn down capacity (35%)
ND Department of Mineral ResourcesBakken Restart Task Force
May 15 2020
1.0
1.2
1.4
1.6
1.8
2.0
Total Bakken Gas Pipeline Receipts
15© Copyright 2020 RBN Energy
Bakken NGL Shortfall Impacts Conway
SemGroup(Energy Transfer)/DCP-
White Cliffs Conversion (Southern Hills)
90 Mb/d 4Q-2019
Conway, KS
ONEOK- Elk Creek240 Mb/d 4Q-2019
Expandable up to 400 Mb/d
(4.0)
(2.0)
-
2.0
4.0
6.0
c/G
al
Mont Belvieu less Conway Propane and Ethane (EP)
Ethane vs EP Propane
Source: ICE
:
16© Copyright 2020 RBN Energy
LNG Feedgas by Terminal
Source: ICE, Genscape
0.0
2.0
4.0
6.0
8.0
10.0
Bcf
/d
Pipeline Deliveries by LNG Terminal
Sabine Pass Cove PointCorpus Christi CameronFreeport Elba
$0
$2
$4
$6
$8
$10
$12
$/M
Mb
tu
Japan LNG, Europe, US Gas
Henry (US)
TTF (Dutch)
JKM (Japan Korea LNG)
Apr-May
$1.50
$1.70
$1.90
$2.10
$2.30
$2.50
$2.70
$2.90
$3.10Apr-May
17© Copyright 2020 RBN Energy
World Liquid Fuels Production and Consumption Balance
80
85
90
95
100
105
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
2015 2016 2017 2018 2019 2020 2021
MM
b/d
World production
World consumption
//
0
Source: EIA
-5
0
5
10
Stock Build
Stock Draw
18© Copyright 2020 RBN Energy
U.S. Crude Oil “Mid” Forecast Before & After
0
2
4
6
8
10
12
14
MM
b/d
History Before After15.4 @ $55/bbl & $2.55/MMbtu
11.3 @ $40/bbl & $2.35/MMbtu
Source: RBN U.S. Crude Oil Mid Forecast - Unconstrained
19© Copyright 2020 RBN Energy
U.S. Natural Gas Demand
20
25
30
35
40
45
Bcf
/d
Power Burn
2018 2019
2020 Projection
-
10
20
30
40
50
60 Residential Commercial
2018 2019
2020 Projection
19
20
21
22
23
24
25
26
27 Industrial
2018 2019
2020 Projection
-
2
4
6
8
10
12
14
16 Exports
2018 2019 2020
20© Copyright 2020 RBN Energy
U.S. Natural Gas Production
75
80
85
90
95
Bcf
/d
Lower-48 Dry Gas Production
2018 2019 2020 Projection
?
21© Copyright 2020 RBN Energy
NGL Markets
2, 36%
1.2, 21%0.6,
11%
1.8, 32%
Petchem
Consumer
Exports
Refinery/Fuels
NGL Markets MMb/d, %
22© Copyright 2020 RBN Energy
NGLs - Domestic Demand and Exports
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mb
/d
Ethane
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Propane
0
100
200
300
400
500
600
700
800
900
1,000Butanes
0
100
200
300
400
500
600
700
800Natural Gasoline
Domestic Demand Exports
23© Copyright 2020 RBN Energy
0
10
20
30
40
50
60
70
Propane
Mont Belvieu NGL Prices (ENT/non-TET)
0
5
10
15
20
25
30
35
c/ga
l
Ethane
0
10
20
30
40
50
60
70
80
90
100Butanes
IsoButane
N Butane
-100
-50
0
50
100
150Natural Gasoline
Crude/Gal
NGasoline
Source: ICE
:
24© Copyright 2020 RBN Energy
Ethane to Henry Hub Gas Ratio
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
Rat
io
0.0
1.0
2.0
3.0
4.0
Rat
io
Ethane to HH Gas Ratio
» Production cuts
» New ethane-only crackers online
» Attractive LDPE margins
Source: ICE
:
25© Copyright 2020 RBN Energy
Propane Price and Relationship to WTI Crude Oil
20
25
30
35
40
45
50
c/ga
l
Propane
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
160%Propane Ratio to
Cushing WTI
-$40
-$20
$0
$20
$40
$60
$80
$/B
bl
WTI Crude Oil Cushing
0%
10%
20%
30%
40%
50%
60%
70% Historical Ratio
Source: ICE
:
26© Copyright 2020 RBN Energy
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Mb
/dRejection Mid Scenario
Production Mid Scenario
U.S. NGL Gas Plant Potential Production Forecast (Mid Scenario)
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Mb
/d
Rejection Mid Scenario
Production Mid Scenario
$55/bbl Crude, $2.55/MMbtu Gas $40/bbl Crude, $2.35/MMbtu Gas
27© Copyright 2020 RBN Energy
The 2020 NGL Domino Effect
Rich natural gas production containing NGLs flattens or declines
Less NGLs are available for processing
Potential ethane volume falls along with all NGLs
Ethane that was previously being rejected must be recovered to meet petchem demand
To incentivize recovery of more ethane, the price of ethane must increase
Higher ethane prices result in flexible crackers switching to alternative feedstocks
Flexible crackers run more propane
Propane production falls along with all NGLs
With less propane supply and higher petchem demand for propane, there is less propane available for export
Will crackers cut runs due to lower demand?Will global demand for U.S. LPG exports hold up?
28© Copyright 2020 RBN Energy
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mb
/d
Butane
Propane
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mb
/d
Butane
Propane
Gulf Coast LPG Exports (Mid Scenario)
$55/bbl Crude, $2.55/MMbtu Gas $40/bbl Crude, $2.35/MMbtu Gas
29© Copyright 2020 RBN Energy
Crude to Gas Ratio
0
5
10
15
20
25
30
35Historical Annual Average
0
5
10
15
20
25
30
35
Daily 2020 Forward Curve
-20
Source: ICE
:
© Copyright 2020 RBN Energy
Rusty Braziel
RBN Energy2323 South Shepherd, Suite 1010
Houston, TX, 77019
www.rbnenergy.com/daily-energy-postthedominoeffect.com