Industry News & Events

July 30th, 2014

Low Electricity Demand a Result of Economic and Technological Changes

According to a Wall Street Journal article, electricity use no longer follows overall economic conditions, including GDP. Technological advances and government regulation have led to Americans using less energy.

American Electric Power Co., a Columbus, Ohio based power company saw customers starting to retract energy usage in early 2009 because of the recession. Executives assumed businesses and consumers were being conservative with usage and it would bounce back eventually. Five years later, electricity sales still haven’t reached the peak from 2008.

Historically, economic expansion meant expanding electricity sales. The EIA stated it, “no longer foresees any sustained period in which electricity sales will keep pace with GDP growth.”

For more, please read the WSJ article in which this information was derived from.

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July 30th, 2014

Where are the East Coast LNG Facilities?

Several liquefied natural gas (LNG) plants with up to 9 Bcf/day of combined export capacity will begin shipment from the United States in 2016. Exporting LNG from the US is based on the simple fact that natural gas is cheaper in the US than anywhere else in the world (see image below).

World LNG Prices

Cheniere Energy, who is constructing the Sabine Pass liquefaction plant, presents comparisons of current natural gas prices in LNG-importing regions to the effective price of US originated LNG based on the structure of their contracts (SeekingAlpha). The image below shows one of these price comparisons assuming a $4.00/MMBtu Henry Hub price. Delivered costs to Asian countries is about $11/MMBtu, and $9/MMBtu to European countries.

Cheniere Cost Comparisons

So far, 9 of the 13 proposed terminals in the United States are located on the Gulf Coast. Another two are off the coast of Oregon, one off the coast of Georgia and one Eastern location off the coast of Maryland. While the gulf coast region plants make the most sense for shipment to Asian countries, LNG facilities in the Northeast would make for an easier route to European countries.

As far as production goes, the Marcellus and Utica shale plays in the northeast have emerged as the largest and fastest growing in terms of production. Pipeline issues and a lack of capacity have hindered takeaway and production growth in both shale plays. It has also caused many producers to flare off natural gas.

If more LNG facilities, and therefore infrastructure, are built for take away from the eastern shale plays, it could provide a direct answer to the production surplus. Europe wishes to diversify its sources of natural gas in order to reduce dependence on Gazprom and constructing facilities to ship would benefit producers and communities alike in the northeast region.

UticaMarcellus

Marcellus and Utica Shale Plays. Courtesy of the EIA.

To read more, please view the following SeekingAlpha article here.

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July 11th, 2014

2014 Natural Gas Fast Facts

  • Natural gas futures hit a six-month low on Thursday, July 10, settling at $4.12/MMBtu – a 14% drop since June 12 (WSJ)
  • Extreme winter weather in January resulted in seven out of the 10 biggest demand days on record for the U.S. (Bentek)
  • The week ending January 10 posted a record-high withdrawal of 287 Bcf – the largest for the 20 years which data exists (EIA)
  • Natural Gas production hit a record 72 Bcf/day the in the first three months of 2014 (WSJ)
  • Since mid-May, gas inventories have risen 28% faster than the five-year average – see chart below (WSJ)
www.wsj.com

www.wsj.com

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July 3rd, 2014

Wyoming vs. The EPA

The newly overturned EPA standards seek to cut carbon pollution created by power plants by an average of 30% by 2030. The new emission standards will accelerate the United State’s transition to using alternative sources of energy for electricity generation. Coal is considered the dirtiest fossil fuel and since 202, 297 coal-fired units at power plants have already retired or are scheduled for retirement.

Wyoming produces approximately 40% of the coal for our nation and, similarly, accounts for the most carbon per capita in the US. While the United States still relies on coal for nearly 40% of it’s electricity needs, Wyoming governor, Matt Mead, believes the emissions standards will hurt not only his state but also the rest of the nation. Because coal is so prevalent in Wyoming, it obviously provides quite a number of jobs to its citizens. They have vowed to keep coal as an ‘economic bedrock’ even if it means shipping overseas.

For more information please click here.

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July 3rd, 2014

North Dakota Gas-Flaring

North Dakota, where you can find the oil and natural gas-rich Bakken Shale, lacks adequate infrastructure. This means any natural gas that isn’t captured is flared off and in April alone, these wells burned off 10.3 Bcf of natural gas - equating to nearly $50 million dollars. Flaring off natural gas degrades air quality and energy companies lose out on revenue though many companies make the money back in the amount of crude oil they generate.

On Tuesday, a new set of restrictions were introduced. The North Dakota Industrial Commission, which regulates and promotes the state’s oil industry, is now requiring oil producers to abide by production allowances that limit flaring at new and existing wells. The guidelines go into effect on September 30 and set targets for flaring at 23% of all gas produced by January 2015. After, the target is reduced to flaring only 20% of natural gas produced by 2020.

For more detail on this matter please visit the WSJ articles here and here.

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June 20th, 2014

FERC Approves LNG PLant

The Federal Energy Regulatory Commission (FERC) approved the second natural gas export terminal in Louisiana.

Cameron LNG, LLC, owned by Sempra Energy, will build a liquefied natural gas (LNG) export facility in Hackberry, La. The project will cost nearly $10 billion and construction begins later this year. It is expected to export up to 1.7 billion cubic feet of natural gas per day by 2019.

About 24 projects still wait review from the Energy Department or FERC.

For more information on the matter, please visit the Bloomberg article here.

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June 13th, 2014

Oil Prices Rise Due to Iraq Turmoil

Brent crude and light, sweet crude prices are currently at 9-month highs. Sunni militants continue advancing toward Baghdad – potentially threatening Iraq’s oil supply. Although most of the oil production is in the south of the country (far from where the current violence is occurring), market watchers worry that the situation will escalate. To read more please visit the Wall Street Journal article here.

Understanding the crisis in Iraq – at a glance:

Courtesy of the Wall Street Journal and Twitter’s @emjbanks

Courtesy of the Wall Street Journal and Twitter’s @emjbanks

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June 13th, 2014

Can Texas Comply With the Climate Change Rules?

According to a Texas Tribune article published on June 11, 2014, Texas will have to slash carbon emissions from its power plants by as much as 195 billion pounds. Some suggestions for how Texas can comply with the climate change rules are listed below:

  1. Make existing coal plants more efficient – the cost around this could cause many coal plants to retire.
  2. Switch from coal to natural gas – natural gas plants are expensive to build. The switch to natural gas may not be as easy as it seems.
  3. Add more renewable energy sources – Texas generated nearly 32 million megawatt hours of electricity from wind ALONE in 2012.
  4. Increase energy efficiency measures to reduce electricity consumption overall – The EPA estimates Texas could cut 1.78% of its current energy demand through efficiency measures.

For more detail on the suggestions above, please visit the Texas Tribune article here.

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June 6th, 2014

Solar Energy Gains Momentum in Texas

Recurrent Energy, a San Francisco based solar project developer, has announced plans to build a 150-megawatt solar facility in West Texas. It will be Texas’ largest solar plant.

The cost of solar has dropped 60-70 percent in the past two years according to Arno Harris, CEO of Recurrent Energy.

Residential customers are still a tough sell when it comes to solar applications. TXU Energy and Reliant Energy are marketing rooftop solar leasing programs aggressively but according to a Dallas Morning News article, the interest has been modest.

For more detail please visit the Dallas Morning News article.

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May 30th, 2014

The Nation’s Dirtiest Power Plant Plans to Get Clean

The Homer City Generating Station, a coal power plant in Homer City, Pa., releases more sulfur dioxide than any other plant in the US. The power plant supplies 2 million households with power.

Under the Cross State Air Pollution Rule (CSAPR), states are required to cut sulfur dioxide and carbon dioxide pollution across state lines. Many protested stating that it would cost millions to “scrub” the plants to get them to compliance and several threatened shut down.

This facility was no exception. They fought back and sued the Environmental Protection Agency stating “it would cause grave harm and bring a painful spike in electricity bills” (Associated Press).

Now the Homer City Generating Station plans to set a benchmark for other coal plants. The plant has committed to install $750 million worth of pollution control equipment by 2016 that makes it more compliant than the CSAPR requires.

GE Energy Financial Services, the majority owner of the power plant, believes they can comply with the rule without raising electricity bills and Andy Katell, a spokesman for GE, said they believe in the long term value of the plant.

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