Baby, You Can Drive My Car. You Just Can’t Sit in It.

Baby, You Can Drive My Car. You Just Can’t Sit in It.

We don’t typically sit around discussing the state of the automobile industry, but this latest news has earned our attention. With the shutdown last month of Gulf Coast petrochem plants, car makers face a new headache that threatens to slow or even halt production starting as early as next week. REC today is following Automotive News, which reports vehicle plants now are dealing with a critical shortage of refined products used to make plastics, rubber, and special fibers. Of particular concern is propylene oxide—the raw material in polyurethane foam used to make vehicle seats. Last year’s cuts in automobile production meant less demand for propylene oxide, which then meant Texas plants stopped producing it for a stretch. Factor in a quicker-than-expected demand recovery topped with an unprecedented winter storm, and you have all the ingredients for no ingredients available. The looming scarcity has at least one auto exec predicting the problem will be larger than the shortage of microchips.

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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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Mexico Demand for U.S. Energy Continues to Soar

Mexico Demand for U.S. Energy Continues to Soar

President Trump has given the thumb’s up for more oil export infrastructure along the U.S.-Mexico border with the recent signoffs on two new permits. San Antonio-based NuStar Energy looks to construct additional crude oil pipelines under the Rio Grande to boost exports from West Texas to Mexico. The company last year doubled the capacity on its Valley Pipeline System to transport 90,000 BPD of refined products from Corpus Christi to the Rio Grande Valley and northern Mexico. The second permit has been granted to Kansas City Southern Railway to build a railway bridge in Laredo. Mexico ranks as the nation’s largest importer of U.S. crude oil purchasing last year 1.2 billion BPD of oil and refined products, especially gasoline.

NuStar Energy

NuStar Energy L.P., is a publicly traded master limited partnership. The company is one of the largest independent liquids terminal and pipeline operators in the nation.

The country’s immense consumption of natural gas also makes Mexico our biggest energy customer with volumes rising every month and lifting more than a few eyebrows along the way. The U.S. pipelined an average 6.4 BCFD of gas to Mexico from July 20-24 in what’s been described as the strongest five-day period ever seen in the market. This, primarily due to completion in June of the Waha-to-Guadalajara system via the new 232-mile Villa de Reyes-Aguascaliente-Guadalajara (VAG) pipeline, which now connects more Permian gas to central-western Mexico. According to Rystad Energy, U.S. natural gas exports to our friends South of the border could well climb to more than 1.5 BCFD during the year’s second half.

Other pipelines extending from West Texas to the Gulf with connections to Mexico are slated for commercial service as early as next year, including the 450-mile Whistler and 41-mile Permian Highway. Each will flow 2 BCFD of gas.

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