US energy export forecast
US energy exports are expected to grow by 5% each year through 2030 thanks, in part, to domestic unconventional oil and gas production, according to HSBC's Global Connections Trade Forecast released in September. On the flipside, petroleum imports are forecast to decline from 12% in the near-term to 7% in the long-term, the report continued.
US pipeline startups in 3Q14 will ease crude prices and displace imports
In 3Q14, the Flanagan South and Seaway Twin Pipeline startups will begin transporting incremental volumes of heavy sour and light sweet crude oil to Gulf Coast refineries, putting downward pressure on US crude prices and displacing imports, noted a GlobalData analyst.
Near completion, the $2.6 billion Flanagan South Pipeline, an Enbridge project, will connect to the company's existing main Canadian export pipeline in Illinois and move approximately 600 thousand barrels per day (mbd) of Canadian and North Dakota crude oil from Illinois to Cushing, Oklahoma, noted Carmine Rositano, GlobalData's managing analyst covering downstream oil and gas.
"The Flanagan South Pipeline is designed to increase throughput capacity to 800 mbd, with more pumping-power enhancements, transporting steadily rising volumes of both Canadian oil sands and US unconventional oil.
"In addition, Enbridge and Enterprise Product Partners are in a 50-50% joint venture building the Seaway Twin Oil Pipeline, which will move 400 mbd of crude oil from Cushing to Houston, where it can be shipped to refineries along the Texas Gulf Coast."
According to GlobalData, the increase in heavy sour crude oil volumes from Canada, arriving via the new pipeline connection to the Gulf Coast, will reduce imports of heavy sour crude oil, primarily from Venezuela, Ecuador and Colombia, as well as the Middle East.
"The increase in crude volumes into the Gulf Coast will also put price pressure on US crude oil production, especially in offshore areas," Rositano added.
"Oil production in the Gulf of Mexico is forecast to increase in 2015/2016, driven by a series of projects, including LLOG's Delta House, ExxonMobil's Julia, Shell's Stones, and Anadarko's Heidelberg, which combined will add over an estimated 100 mbd."
Buckeye Partners acquires South TeXas assets for $860M
Buckeye Partners LP has completed its purchase of an 80% interest in a company that will be owned jointly with Trafigura AG for $860 million. The company (Buckeye Texas Partners) and its subsidiaries will own and operate a vertically integrated system of midstream assets including a deep-water, high volume marine terminal located on the Corpus Christi Ship Channel, a condensate splitter and LPG storage complex in Corpus Christi, and three crude oil and condensate gathering facilities in the Eagle Ford shale. All of the assets are supported by 7- to 10-year minimum volume throughput, storage and tolling agreements with Trafigura.
Upon completion of initial development phase, the assets will form an integrated system with connectivity from the production in the field to the marine terminal infrastructure in Corpus Christi. Upon completion of the initial development phase, the facilities will offer approximately 5.6 million barrels of liquid petroleum products storage capacity along with rail and truck loading/unloading capability. A 50,000 bpd condensate splitter is anticipated to be completed by mid-2015, after which Buckeye Texas Partners will commence operations under a 7-year fixed-fee tolling agreement with Trafigura.
In addition, three field gathering facilities with associated storage and pipeline connectivity will allow Buckeye Texas Partners to move Eagle Ford crude and condensate production directly to the terminalling complex in Corpus Christi.
Buckeye Texas Partners is expected to invest approximately $240-$270 million in these initiatives through the first quarter of 2016. One hundred percent of the cash flows associated with the assets are supported by fee-based take-or-pay revenue commitments under 7- to 10-year commercial agreements with Trafigura.
Atlas Pipeline starts Permian processing plant
Atlas Pipeline Partners LP has brought into service its Edward processing plant, with capacity of 200 million cubic feet per day, in the Permian Basin. The addition of the Edward facility increases the name-plate processing capacity on APL's WestTX system from 455 MMcfd to 655 MMcfd, an increase of approximately 44%. The incremental capacity, located in Upton county near the Benedum plant, is fully integrated into the WestTX system and can process producer volumes from anywhere across APL's footprint.
The WestTX system is currently processing in excess of 515 MMcfd, approximately 79% of the new system-wide capacity of 655 MMcfd.
The partnership anticipates volumes to increase throughout the remainder of 2014 and into the first half of 2015, and is expecting the system to be fully utilized by mid-2015. Management expects the next processing expansion, the previously announced Buffalo plant, to be in service in mid-2015. The addition of the Buffalo plant would add a further 200 MMcfd of processing capacity and would bring the WestTX system to 855 MMcfd of total name-plate processing capacity.
Expected costs for both the Edward and Buffalo plant are anticipated to be $100-120 million (net) for each facility, not including field compression, gathering pipeline, and well connection costs. The partnership continues to anticipate adding an incremental 200 MMcfd processing plant in each of the next five years.
Magnum Hunter, MSI enter midstream asset partnership
Magnum Hunter Resources Corp. has entered into an agreement with Morgan Stanley Infrastructure Inc. (MSI) relating to a separate purchase agreement between MSI and Ridgeline Midstream Holdings LLC, an affiliate of ArcLight Capital Partners LLC, providing for the purchase by MSI of all convertible preferred and common equity interests in Eureka Hunter Holdings LLC owned by ArcLight. Eureka Hunter is Magnum Hunter's majority owned subsidiary through which various midstream services in West Virginia and Ohio are conducted, including the company's Eureka Hunter Pipeline.
The Transaction Agreement includes a new limited liability company agreement at Eureka Hunter to be entered into by Magnum Hunter, MSI and the minority interest members of Eureka Hunter contemporaneously with the closing of MSI's purchase of ArcLight's equity interests in Eureka Hunter. Such closing is expected to occur in early October 2014. In connection with such closing, all the preferred equity interests in Eureka Hunter acquired by MSI from ArcLight (approximately 41% of the total equity interests in Eureka Hunter) will be converted from preferred equity interests into common equity interests of Eureka Hunter, and all common equity owned by MSI will have a liquidation preference.
Additionally, Magnum Hunter will sell to MSI in a second closing, anticipated in mid-January 2015, an additional common equity interest in Eureka Hunter of approximately 6.5% of the total common equity interests in Eureka Hunter for $65 million, representing an implied equity value of Eureka Hunter of $1.0 billion. Such closing, together with follow on capital contributions expected to be made by MSI in 2014, will result in Magnum Hunter and MSI owning equal equity interests (approximately) in Eureka Hunter.
Magnum Hunter will have the right to defer its portion of certain required future capital contributions to Eureka Hunter, and, if Magnum Hunter elects to do so, MSI will make the capital contributions which otherwise would be made by Magnum Hunter, with Magnum Hunter having the right to make capital contributions within 180 days that will bring Magnum Hunter's ownership interest back to the level prior to the capital call. This catch-up feature will be at no cost to Magnum Hunter but will be subject to a maximum of $40 million for each 180-day period.
Cameron LNG receives regulatory approval for liquefaction-export
Sempra Energy subsidiary Cameron LNG received final authorization from the US DOE to export domestically produced liquefied natural gas (LNG) from its proposed liquefaction facilities in Hackberry, La., to countries that do not have a free-trade agreement (FTA) with the US.
"Today's decision marks the last major regulatory hurdle for our Cameron LNG liquefaction-export project, clearing the way for execution of the largest capital project in Sempra Energy's history," said Debra L. Reed, chairman and CEO of Sempra Energy.
The liquefaction-export project is expected to create approximately 3,000 on-site jobs, as well as several hundred jobs in Louisiana in support of the project, including fabrication, engineering and operational jobs. Nearly 200 full-time jobs will be added to the operations of Cameron LNG.
When fully completed, the project will have export capabilities of 12 million tonnes per annum of LNG, or approximately 1.7 bcfpd.
Subject to other conditions to the equity and debt financing, Sempra Energy will have an indirect 50.2% ownership interest in Cameron LNG and the related liquefaction project, and the remaining portion will be owned by affiliates of GDF SUEZ, Mitsubishi (through a related company jointly established with NYK) and Mitsui, each with 16.6% stakes.
The total project cost is expected to reach $10 billion, including contribution of the existing Cameron LNG facilities, construction of the new facilities, and financing cost.
Carib to export LNG to NFTA countries
Crowley Maritime Corp. subsidiary Carib Energy LLC has been granted a 20-year, small-scale US DOE export license for the supply, transportation, and distribution of US-sourced LNG into Non-Free Trade Agreement (NTFA) countries in the Caribbean, Central and South America.
The licensing permits Crowley to now export 14.6 bcf of LNG - roughly the equivalent of 480,000 gallons - per day via 10,700 gallon ISO tanks to these regions.
