An Open Season, Potential Interest Buy in Cheniere, and the Ballad of the SPR Motel

An Open Season, Potential Interest Buy in Cheniere, and the Ballad of the SPR Motel

RMR features the latest high-point news to keep you to up to date with midstream activities happening in the basins and shale plays that matter to you most.

Red Butte Pipeline Launches Open Season

Dallas-based Silver Creek Midstream has announced an open season for shipper commitments to make improvements on an eight-mile section of the company’s 495-mile Red Butte crude oil pipeline in Wyo. Deadline for bids is September 7. Red Butte is the largest transmission line to extend from the Big Horn and Wind River basins to Casper, Wyo. Upon completion of upgrades and refurbishments to the proposed section, the pipeline will offer 5,000 BPD of capacity. The Red Butte system includes two delivery points, multiple truck-loading stations, and more than 800,000 Bbls of storage.

PE Firms in Talks to Buy/Sell Large Interest in Cheniere

Private equity firm Blackstone began shopping its 41% interest in the nation’s largest LNG operator two months ago after investing $1.5 billion in Cheniere in 2012. Negotiations now appear to be on the table between Blackstone and alternative asset manager Brookfield for a stake in Cheniere valued at $7.8 billion. The company’s market value stands at about $18.9 billion. Amid demand destruction that has seen LNG exports nose-dive from a record-breaking 8.1 BCFD in January to 3.1 BCFD in July, and EIA projections of a serious recovery by the first of 2021, we’d love to see the calculus from each firm on this deal.

Producer Storage at the SPR Begins to Lighten

The nation’s Strategic Petroleum Reserve was never meant to be an extended-stay motel for producers’ crude oil supplies. Between the April oil glut and a near fever-pitch panic for storage wherever it could be found, the SPR offered up capacity in its underground salt caverns as a temporary sanctuary for U.S. oil whose price had free fallen into an abyss. While the Trump Administration advocated to purchase 77 MMBbls, Congress would have none of it. Instead, nine oil companies took advantage of the opportunity to store 23 MMBbls of oil in exchange for cheap rent and an eviction date of March 31, 2021. With the price of oil now rebounding, Exxon and the U.S. leg of Total this month have reclaimed 2.2 MMBbls of their crude. Take a load off, Fannie.

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U.S. LNG Export Leaders Hold on Tight, Move Forward in a World of Recovery

U.S. LNG Export Leaders Hold on Tight, Move Forward in a World of Recovery

Despite—or even in spite of—a pandemic that’s ravaged oil and gas demand across the globe, the U.S. remains on course to become the largest exporter of LNG in as little as five years. True, the world’s four LNG heavyweight suppliers (Qatar, Australia, the U.S., and Russia) all have reduced shipments due to decline in demand. This “ouch” period after more than two years of record growth, especially in the U.S. According to the EIA, the U.S. hit an all-time high in January of 8.1 BCFD LNG exported just before COVID-19 slammed the industry into a cliff.

Since then, we’ve experienced our share of woes, including cancellations of 46 cargos in June and 50 in July where Sabine Pass in La., and Corpus Christi and Freeport, Texas, terminals took the harshest brunt. We’ve seen July LNG exports fall to 3.1 BCFD ferried aboard a scant four vessels. And domestic LNG operators with plans to add new liquefaction terminals? They’re reaching for a bottle of Excedrin and a shot of Tequila to wait it out.

Still, the nation’s leading LNG exporters, while holding tight, also are moving forward to ramp up operations and growth projects. Our data-gatherers and prognosticators at EIA forecast U.S. LNG exports will return to pre-COVID levels by November and will remain high at about 8-9 BCFD this winter and into next year. The Trump Administration in July extended LNG export authorizations through 2050, compared with previous terms that lasted 20 years.

For now, here’s a brief look at the latest happenings among our largest LNG champions.

  • Sempra Energy’s Cameron LNG export terminal located in Hackberry, La., has begun full commercial operations. The 12 MTPA liquefaction facility has to date shipped nearly 100 LNG cargoes totaling more than 6 million tons. Planned expansions to Cameron also are on the whiteboard, as well as proposed LNG projects in Port Arthur, Texas, and Mexico.
  • Kinder Morgan has received the go-ahead to place its ninth train into service at the company’s Elba Island LNG plant near Savannah, Ga., with all 10 trains scheduled to begin service by this Fall.
  • Houston-based Cheniere announced earlier this month increased revenues during 2Q despite a reduced number of cargoes and volumes produced and loaded. Construction on the company’s Sabine Pass terminal is now 64% complete. Train 3 on its Corpus Christi liquefaction facility is a few winks away from final commissioning with startup services expected in 2021. And Cheniere’s Midship natural gas pipeline extending from the Cushing, Okla., hub to the Gulf Coast began service in April.

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The Operators:  Genesis Energy

The Operators: Genesis Energy

Since its formation in 1996, Houston-based Genesis Energy has built a powerful onshore and offshore midstream network that primarily caters to refiners. The company operates four divisions that include offshore pipeline transportation, onshore facilities and transportation, marine transportation, and sodium minerals and sulfur services.

Genesis Energy

Genesis Energy, L.P., is a growth-oriented master limited partnership headquartered in Houston, Texas.  Through their four divisions: offshore pipeline transportation, refinery services, marine transportation and onshore facilities and transportation, they provide an integrated suite of services to refineries, oil producers, and industrial and commercial enterprises. Their operations are primarily located in Texas, Louisiana, Arkansas, Mississippi, Alabama, Florida, Wyoming and the Gulf of Mexico.

Not surprisingly, demand destruction from COVID-19 has bee-stung all of Genesis’ operating segments this year with refiners hit hard, June’s Tropical Storm Cristobal in the La., Gulf wreaking havoc, and global orders of soda ash—a critical industrial component—cancelled for the rest of the year. Genesis, however, responded quickly by eliminating $33 million in debt during 2Q, delaying projects, tucking away cash flow, and confirming go-aheads of several major offshore projects already contracted to the company’s infrastructure in the Gulf.

Here’s a look at the company’s operations:

Offshore Pipeline Transportation

Genesis owns, and owns interest in, 2,400 miles of offshore crude oil pipelines that transport oil and natural gas from the Gulf of Mexico to onshore refining centers in Texas and La. Its offshore natural gas assets include 1,000 miles of pipe that primarily service deepwater production in the Gulf of Mexico and flow supplies to downstream pipelines or processing facilities. Genesis also holds interests in 19 offshore platforms in the Gulf that are used as hubs and production handling and pipeline maintenance facilities.

Onshore Pipelines and Terminals

With pipelines, storage, and multi-modal transportation options, Genesis operates a wealth of crude oil and refined products midstream infrastructure in Texas, La., Ark., Miss., Ala., Fla., Wyo., and the Gulf of Mexico. The company’s assets include 450 miles of crude oil pipelines in Ala., Fla., La., Miss., and Texas; four crude oil loading/unloading facilities in La., Fla., and Miss.; access to a suite of more than 200 trucks, 400 trailers, 504 railcars, and 4.3 MMBbls of storage capacity along the Gulf Coast; and 270 miles of CO2 pipelines in Miss.

Marine Transportation

Genesis Marine serves refineries and storage terminals along the Gulf and East coasts, Canada, the Great Lakes, Intracoastal Canal, and the nation’s western river systems where it also owns terminals. The company offers both inland and offshore fleets that include 130 vessels along with 82 inland and nine offshore barges.

Sodium Minerals and Sulfur Services

The company divides this segment into two businesses—Alkali and Refinery Services—with Alkali being the newest addition in 2017 to the Genesis family. And it’s kind of a big deal. Genesis’ Alkali is the largest leaseholder of the world’s largest known deposit of trona ore found in Green River, Wyo. Trona ore is a mineral that contains soda ash, which—once refined—is used in numerous applications including glass manufacturing, fiberglass insulation, coloring agents, synthetic detergents, and fertilizers. But soda ash also is used in the removal of sulfur dioxide and hydrochloric acid from stack gases. With two manufacturing sites and seven processing facilities in Wyo., Genesis produces more than 4 million tons of soda ash per year.

The company’s Refinery Services offers engineering, design, and construction, as well as treating and processing sour gas.

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