Panama may be cheaper option to ship TMX crude to Asia
Very large crude carriers (VLCCs) off the Pacific coast of Panama could offer the cheapest option to ship Canadian crude to Asia-Pacific destinations when the Trans Mountain Expansion (TMX) project comes on line next year.
The cost of shipping crude from the Aframax-restricted Westridge Marine Terminal near Vancouver, British Columbia, to be reverse-lightered onto a VLCC in Panama and sent to China was about $6.70/bl for heavy sour Cold Lake on 28 August, compared with $7.14/bl to ship Cold Lake from Vancouver to China on an Aframax, according to Argus estimates. Between the two routes, the VLCC option has been an average of 39¢/bl cheaper than the Aframax option since 5 July.
Shipping economics would improve even more if the reverse lighterings were to occur off the coast of Vancouver or the US west coast, but this would not be possible due to environmental concerns, shipbroker BRS said in July. The cost to ship Cold Lake via Aframax from Vancouver to be reversed-lightered onto a VLCC in the Pacific Area Lightering zone off the coast of southern California then sent to China was about $5.99/bl on 28 August, according to Argus estimates.
VLCCs have hauled about 135,000 b/d of mostly Latin American crude from Panama's west coast to the Asia-Pacific region, according to data from analytics firm Vortexa. Crude from western Canada can be co-loaded with Latin American crudes for delivery in Asia.
The TMX project will boost pipeline capacity from Alberta to Vancouver by 590,000 b/d to 890,000 b/d, and will increase the number of Aframax berths at the Westridge Marine Terminal from one to three. Work on those berths was about 94pc complete as of August 9.
The project likely will start commercial service in the first quarter of 2024, but a specific in-service date appears premature for the massive project.
The original intent of the expansion was to better target refiners in Asia-Pacific, but some incremental crude may be coaxed to the US west coast or elsewhere in North America initially. About 23,000 b/d, or 93pc, of crude exported from Vancouver has gone to the US west coast this year, compared with about 2,000 b/d to China, according to Vortexa.
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Flooding closes upper Mississippi locks
Flooding closes upper Mississippi locks
Houston, 8 July (Argus) — High water levels in the Mississippi River have caused all lock and dams to close between Bellevue, Iowa, and Gladstone, Illinois, according to the US Army Corps of Engineers (Corps). Lock and Dams (L&D) 12-18 are closed as of 8 July, the Corps said. Water levels have reached the top of L&D 12 in Bellevue and L&D 11 in Dubuque, according to the National Weather Service. The outflow at L&D 16 was at 255,000 cubic feet per second (cfs) as of 8 July, about 68pc more than the average of 80,000cfs this time of year, the Corps said. It will be another two weeks until L&D 20 reopens, but L&Ds 11-15 could reopen as early as this weekend, the Corps said. About 15 inches of rain fell in Dubuque over the past week, bringing the expected forecast up to 22.1ft, according to the National Oceanic and Atmospheric Administration. Flooding at Dubuque and other locations along the river are expected to drop from major to moderate levels this week. L&D 19 reopened on 8 July as it fellow flood stage at 16ft, the Corps said. L&Ds 19, 21, and 22 are expected to remain open. The river widens around the locks, allowing for a greater outflow at higher water levels. By Trajan Greenwell Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Hurricane Beryl passes Houston, heads inland: Update
Hurricane Beryl passes Houston, heads inland: Update
Houston, 8 July (Argus) — Hurricane Beryl swept through the Houston area this morning with heavy rains and wind gusts near 90mph, bringing local flooding and cutting power to more than 2mn customers. Beryl, which has been downgraded to a tropical storm, was about 30 miles north-northwest of Houston according to a 12pm ET bulletin from the National Hurricane Center (NHC). The storm is expected to turn towards the northeast and increase speed tonight and into Tuesday. On its current forecast track, the center of Beryl will pass over eastern Texas today and into the lower Mississippi and Ohio valleys Tuesday and Wednesday. Beryl made landfall earlier today as a Category 1 hurricane near Matagorda, Texas, after regaining strength as it crossed the Gulf of Mexico from an earlier landfall on the Yucatan Peninsula. A weather station in Freeport, Texas, directly south of Houston on the Gulf of Mexico reported a wind gust of 94mph earlier today while a station at the entrance to Galveston Bay and the Houston Ship Channel recorded a gust of 82mph. Nearly 2mn Houston residents are without power as of 11:30am ET according to outages tracked by CenterPoint Energy. Heavy rainfall of 5-10 inches, with 15 inches in some spots, was recorded across the upper Texas coast and eastern Texas, with considerable flash and urban flooding expected to continue, NHC said in its bulletin. Water levels at the Interstate 610 bridge on the Houston Ship Channel -- home to several refineries and petrochemical plants –- were observed at 10 feet above mean low water levels at 11am ET, well into the "major flooding" range, according to data from the National Oceanic and Atmospheric Administration (NOAA). Several petrochemical plants pre-emptively shut down or experienced electrical surges over the weekend before Beryl hit the Texas coast today. US Gulf coast refiners appear to have robust fuel inventories for this time of year should the storm lead to operational issues. The four-week average of Gulf coast gasoline inventories in the week ended 28 June was up by over 4pc from the same period in 2023 and up by 6pc from 2022, after hitting a near six-month high in the penultimate week of June. The second named storm of the 2024 Atlantic hurricane season, Beryl followed tropical storm Alberto, which came ashore in northeastern Mexico late last month. This year's Atlantic hurricane season is expected to be more active than normal, according to the US National Oceanic and Atmospheric Administration, with 4-7 major hurricanes that pack sustained winds of 111mph or higher possible By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US shale deals pivot to lesser-known basins
US shale deals pivot to lesser-known basins
New York, 8 July (Argus) — After a burst of deal-making activity that has sent Permian valuations skyrocketing and seen the best drilling locations already swap hands, buyers' attention is turning to less prominent shale basins that have been overlooked up until now. Such was the case when US independent SM Energy splashed out $2bn for 80pc of the assets of privately held XCL Resources to gain a foothold in the Uinta basin of northeast Utah, best known for its waxy crude that is popular with refiners. The transaction marks a departure from the vast majority of deals in the past year, which have targeted the increasingly consolidated Permian basin of west Texas and New Mexico. It also represents a shift in strategy, given SM Energy is expanding beyond its core operations in the Midland basin and south Texas. Other takeovers have seen companies combine acreage in existing basins to squeeze out savings. Chief executive Herb Vogel told analysts he had looked at other deal options, but his priority was to keep a strong balance sheet and "maintain discipline so that we wouldn't overpay for something". About $41bn of non-Permian merger and acquisition opportunities are on the market, according to consultancy Rystad Energy. With premium acreage becoming increasingly scarce in the top-performing shale play, far-flung regions are poised totake centre stage. Another potential draw for SM Energy may have been that it sawless risk of its transaction being singled out for attention from anti-trust regulators, as several deals involving in-basin consolidation have attracted unwelcome scrutiny. But entry into a new play, as well as concerns over its legacy assets, spooked investors and contributed to a 10pc decline in SM Energy's share price on the day the deal was announced. "It could take a couple of quarters of performance for investors to digest this activity shift and to evaluate the Uinta's potential," analysts at RBC Capital Markets say. Producers are likely to continue the hunt for deals in lesser-known basins as they seek to scale up their inventory at reasonable prices. "A key driver of the deal, like most other transactions seen over the last few years, is adding inventory, particularly at the low end of the cost curve," consultancy Enverus principal analyst Andrew Dittmar says. The Uinta basin offers some of the highest rates of oil recovery per lateral foot in the Lower 48, according to Dittmar. Lubricating the transaction Parts of the basin could achieve oil production performance similar to that of the Permian, according to a recent report by data analyst Novi Labs. "The waxy nature is in high demand by refiners and upper-end lubricant markets," Vogel says. The latest acquisition hands SM Energy around 37,200 net acres, boosting its core net acreage by 14pc. It adds 43,000 b/d of oil equivalent (boe/d), increasing the company's overall production next year to 195,000 boe/d, with oil now making up more than 50pc of the mix. SM Energy also gets 390 drilling locations with breakevens of $43-57/bl, boosting the operator's inventory life by two years. As part of the same deal, US independent Northern Oil and Gas is purchasing 20pc of the XCL assets, helping to offset the total cost for SM Energy. XCL is backed by EnCap Investments and the Rice Investment Group. It was the second exit involving an EnCap-backed company in recent weeks after independent Matador Resources acquired a unit of private equity-backed Ameredev II for $1.9bn to expand in the Permian's Delaware basin. Private equity investors, which have mainly been sellers in recent years, look set to step up their search for undervalued assets as they seek to refill their portfolios. "Combined, those forces should drive a robust market for assets and see valuations rise outside the Permian, although not fully to Permian levels," Dittmar says. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Beryl menaces eastern Texas with storm surge, rain
Beryl menaces eastern Texas with storm surge, rain
New York, 8 July (Argus) — Hurricane Beryl crashed ashore early today, bringing life-threatening storm surge, strong winds and heavy rainfall to southeast Texas. The hurricane was packing maximum sustained winds of 75mph and was about 40 miles southwest of Houston, Texas, according to the latest advisory from the National Hurricane Center (NHC) issued at 8am ET. About 1.1 million Houston area customers are without power, US utility CenterPoint Energy said. Beryl made landfall as a Category 1 hurricane near Matagorda, Texas, after regaining strength as it crossed the Gulf of Mexico. Heavy rainfall of 5-10 inches is forecast across parts of the middle and upper Texas Gulf coast and eastern Texas. The NHC also warned of the risk of flash and urban flooding. A hurricane warning is in effect for the Texas coast from Mesquite Bay north to Port Bolivar, while a tropical storm warning is in place for the coast north of Port Bolivar to Sabine Pass. On its current forecast track, the center of Beryl will cross eastern Texas today, before sweeping through the lower Mississippi valley into the Ohio valley on Tuesday and 10 July, the NHC said. Beryl is forecast to weaken as it moves inland and is expected to be downgraded to a tropical storm later today and to a tropical depression on Tuesday. Disruptions to US Gulf of Mexico oil and gas operations appear to be limited so far, given Beryl's approach to the west of most US offshore oil and gas operations. But some platforms were evacuated late last week. ExxonMobil said on Sunday it was making operational adjustments in advance of the storm but expected minimal impact to production. It shut in output from the Hoover platform and evacuated remaining staff. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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