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2018. Expanding Beyond Lower 48: Mexico and Canada Are Markets That the Industry Keeps Pursuing
12/24/2018
A robust production growth of this year, which mainly concentrated in Permian, kept even more producers seeking additional takeaway options. Today we recall some of the major export-bound midstream projects of 2018: completed, announced or still being constructed at the moment. We also highlight the leading companies that make exports happen.
How Important Is Mexico as a Destination for Permian and Delaware Natural Gas?
In 2018 ONEOK and Energy Transfer have significantly added design capacity to their three major Mexican export pipelines:
- Roadrunner,
- Comanche Trail,
- and Trans-Pecos.
Additional 3.1 Bcfd of capacity should both help U.S. producers route the excessive by-product gas from Permian and Delaware and to meet the expected demand growth in the Mexican market.
Currently, though, despite the fact that Mexico has room for U.S. gas (does not really develop its extraction leaning in favor of crude oil business), the demand remains weak. The actual flows through the above lines are still limited to 0.3 Bcfd. Experts give various reasons for that while the overall picture of the Mexican market is not transparent enough. It may be infrastructure capacity technical constraints. Additionally, industry red tape and growing political resistance from the side of the newly elected leftist Mexican president Andrés Manuel López Obrador may be other reasons for the halted exports growth.
Meanwhile, U.S. producers still need to handle the excessive by-product gas issue. If not Mexico, the destination for the natural gas can be petrochemical facilities of the Texas Gulf Coast area. That option will emerge once these two following projects both stretching from Waha to Agua Dulce are completed:
- Gulf Coast Express (GCX) - 1.98 Bcfd - scheduled to enter service in late 2019
- Whistler Pipeline - 2 Bcfd - to be in-service by 4Q of 2020.
The former project has been advanced by Kinder Morgan Inc., DCP Midstream LP and Targa Resources Corp. The latter has NextEra Energy Pipeline Holdings LLC, WhiteWater Midstream LLC, and Marathon Petroleum’s MPLX LP collaborating on it.
Will Mexican market embrace the U.S. natural gas remains to be seen. Capacity to transport it will still be ultimately built.
Canadian natural Gas: Westward-Bound. How Will Canada LNG (Kitmat) Project Affect U.S. Natural Gas Market
Another long-term game-changer for the U.S. market may be the 1.8 Bcfd Kitmat (LNG Canada) project. It aims at both delivering West Canadian natural gas to the coast and starting the first Canadian LNG exports facility. The first phase consists of 420 mile Coastal GasLink pipeline construction. It should come into service by 2023. The second phase includes the gas liquefaction and storage plant with two liquefaction trains to be built.
In the long run experts believe Kitmat exports will primarily help Canadian producers escape the U.S. market with its low gas prices and improve its margins significantly. The project is thought to create no risks for the U..S. market itself. In fact the opposite can happen. Marcellus and Utica natural gas may find its way to Asia via the newly constructed Canadian West Coast facility.
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Look At The Future Of American And Appalachian Gas Production
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The crux of the matter is rather simple: productivity gains of local energy operators have been stable not only because they are drilling better acreage, but also because players finally realized capital efficiency gains. And even if some new obstacles impede Appalachia's growth at the same rate as the Permian or Haynesville, it does not detract from the value of the Marcellus and Utica basins. The Appalachians will still be the top producers at a very competitive pace as long as commercial inventory exists. After all, as long as there is commercial inventory, somebody will have to drill.
US Midstream Research 2022 Overview: TOP Providers, Their Assets and Stories
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The midstream sector plays a vital role in the oil and gas supply chain, serving as a crucial link. As the energy transition continues, this industry, like the broader sector, encounters various risks. Yet, existing analyses have predominantly concentrated on the risks faced by the upstream and downstream sectors, leaving the fate of the midstream relatively unexplored. In a nutshell, midstream operators differentiate themselves by offering services instead of products, resulting in potentially distinct revenue models compared to extraction and refining businesses. However, they are not immune to the long-term risks associated with the energy transition away from oil and gas. Over time, companies involved in transporting and storing hydrocarbons face the possibility of encountering a combination of reduced volumes, heightened costs, and declining prices.
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Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/187Blog_ONEOK Completes Acquisition of Magellan Midstream.png)
The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/186Blog_Viper Energy Secures $1 Billion in Permian.png)
Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.