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A slower and steadier trickle of midstream consolidation has continued since the upstream buying spree that began last autumn, but energy executives and analysts warn there are still too many pipeline companies in a North American industry that is now producing less crude within an overbuilt infrastructure environment.

After a race to build long-haul pipelines and gathering and processing systems in recent years, the effects of both the coronavirus pandemic and a stricter regulatory administration have brought most new pipeline and terminal projects grinding to a halt in the last 18 months or so.

“Consolidation has been happening, but it’s a slow process,” said midstream analyst and CBRE Clarion Securities portfolio manager Hinds Howard, adding that CEOs are essentially daring their peers to make moves.

The biggest recent headline deals include Energy Transfer buying Enable Midstream, which is facing more regulatory scrutiny ahead of closing, and the Canadian bidding war for Inter Pipeline in which Brookfield Infrastructure Partners has seemingly outbid Pembina Pipeline.

Counting crude-by-rail shipments, there was also an ongoing fight between Canadian National Railway and Canadian Pacific to win Kansas City Southern.

Otherwise, only smaller deals have taken place, such as master-limited partnership rollups of TC Pipelines by TC Energy and Noble Midstream Partners by Chevron. BP is currently planning to fold up BP Midstream without even offering a premium, and analysts wondered if Shell will soon do the same with Shell Midstream.

There are also individual asset sales and joint ventures. Plains All American Pipeline has won recent praise for its new JV to combine its Permian Basin assets with Oryx Midstream and have operating control over the resulting Plains Oryx Permian Basin JV without spending much money.

US crude output has rebounded back to 11.2 million bpd, but that is still well down from a pre-pandemic record high of nearly 13 million bpd. S&P Global Platts Analytics projects US production to grow to more than 11.5 million bpd by the end of 2021 and to 12.4 million bpd exiting 2022.

By Tanknewsinternational, August 26, 2021

U.S. President Joe Biden’s administration on Wednesday urged OPEC and its allies to boost oil output to tackle rising gasoline prices that they see as a threat to the global economic recovery.

The request reflects the White House’s willingness to engage major world oil producers for more supply to help industry and consumers, even as it seeks the mantle of global leadership in the fight against climate change and discourages drilling at home.

Biden’s national security adviser Jake Sullivan criticized big drilling nations, including Saudi Arabia, for what he said were insufficient crude production levels in the aftermath of the global COVID-19 pandemic.

“At a critical moment in the global recovery, this is simply not enough,” Sullivan said in a statement.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, had implemented a record output cut of 10 million barrels per day, about 10% of world demand, as global energy demand slumped during the pandemic. But it has gradually raised output since, with the cut eased to about 5.8 million bpd as of July.

OPEC+ agreed in July to boost output by 400,000 bpd a month starting in August until the rest of the 5.8 million bpd cut is phased out. OPEC+ is scheduled to hold another meeting on Sept. 1 to review the situation.

Biden later told reporters on Wednesday that the United States had made clear to OPEC that “the production cuts made during the pandemic should be reversed” as the global economy recovers “in order to lower prices for consumers.”

U.S. gasoline prices are running at about $3.18 a gallon at the pumps, up more than a dollar from last year at this time when the pandemic sapped travel demand, according to the American Automobile Association.

White House press secretary Jen Psaki said the outreach to OPEC+ was aimed at long-term engagement to end anti-competitive practices, not necessarily to garner an immediate response.

The unusual statement ratcheted up international pressure and comes as the administration tries to contain a range of rising prices and supply bottlenecks across the economy that have fueled inflation concerns.

Biden has made recovering from the economic recession triggered by the pandemic a key priority for his administration.

The message also underscored the new dynamic between Washington and OPEC since Biden’s predecessor, Donald Trump, broke with prior practice in demanding specific policy changes from OPEC to adjust prices. Trump had threatened to withdraw military support from OPEC’s de facto leader Saudi Arabia over output, which at the time he thought was too high and hurting U.S.-based drillers.

Global benchmark Brent crude gained more than 1% to over $71 a barrel on Wednesday. That is lower than the prices above $77 in early July, but still represents an increase of nearly a third from the beginning of the year.

CLASHING PRIORITIES

The Biden administration’s push for lower fuel prices grates with its efforts to secure global leadership in the fight against climate change, an agenda anchored by efforts to transition the economy away from fossil fuels toward cleaner energy sources and electric vehicles.

Biden has set a goal to decarbonize the U.S. economy by 2050 and has paused new drilling lease auctions on federal lands pending a review of its environmental and climate impacts.

A Republican lawmaker criticized Biden for the clashing priorities.

“It’s pretty simple: if the President is suddenly worried about rising gas prices, he needs to stop killing our own energy production here on American soil,” said Republican Senator John Cornyn of Texas, the top U.S. oil producing state.

The administration also said on Wednesday that it had not called upon U.S. producers to ramp up output. U.S. oil production has been stagnant at about 11 million barrels per day (bpd) since the fallout of the pandemic pulled it from a record high of 12.3 million bpd in 2019.

Robert Yawger, director of energy futures at Japanese bank Mizuho, also critiqued the administration, saying: “I don’t know why they aren’t trying to get U.S. producers to increase production,” he said.

The White House on Wednesday also directed the Federal Trade Commission (FTC), which polices anti-competitive behavior in domestic U.S. markets, to investigate whether illegal practices were contributing to higher U.S. gasoline prices.

“During this summer driving season, there have been divergences between oil prices and the cost of gasoline at the pump,” Biden’s top economic aide, Brian Deese, wrote in a letter to FTC chair Lina Khan.

He encouraged the FTC to “consider using all of its available tools to monitor the U.S. gasoline market and address any illegal conduct.”

The American Petroleum Institute, which represents the U.S. oil industry, slammed the administration’s actions as a “return to the days of relying on OPEC to meet our supply needs” and called the request to the FTC “a distraction.”

“Rather than requesting investigations on markets that are regulated and monitored on a daily basis or pleading with OPEC to increase supply, let’s lift restrictions on U.S. energy right away,” the group’s senior vice president of regulatory affairs, Frank Macchiarola, said.

By Reuters, August 16, 2021

Days ago we pointed out a report that dove into the unique risks of placing lithium ion batteries all over the world (including in electric vehicles).

And just over the last two months, we’ve written not only about how much driving needs to be done in EVs to make them better for the environment than internal combustion engine vehicles, but we’ve also noted that EV carbon footprints aren’t necessarily as better than ICE vehicles as many people think.

Now, the hits keep on coming: we’re finding out that EVs cost more to service than internal combustion engine vehicles. Like the reduction in environmental harm that we noted last month, however, the gap narrows over time.

Automotive News published a report on Thursday of this week noting that EVs were 2.3 times more expensive to service than ICE vehicles after three months of ownership. Analytics firm We Predict compiled the data by looking at roughly 19 million vehicles between the 2016 and 2021 model years.

That figure drops to just 1.6 times more expensive after one year, the report noted, as a result of a 77% drop in maintenance costs and a decline in repair costs. The data showed that service techs spend about twice as much time diagnosing problems with EVs as they do with regular gas vehicles. They spend about 1.5 times longer fixing them and the labor rate for repairs was about 1.3 times higher.

“It’s an industry in launch. This is the launch factor you’re seeing,” said Renee Stephens, a vice president at We Predict.

EVs had a high rate of wheel problems, the study found. This was attributed to wear and tear associated with carrying bulky batteries.

Ford’s Mach-E scored the best marks in terms of cost of service. After 3 months of ownership, the Mach-E service costs were $93, compared to $366 for the Audi E-Tron and $667 for the Porsche Taycan.

OilPrice, by ZeroHedge, August 10, 2021

Kinder Morgan (NYSE:KMI) just reported excellent Q2 2021 earnings and raised its guidance. The pipeline giant is on its way to generating its highest distributable cash flow (DCF) and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in five years, as oil and natural gas prices remain at solid levels. 

The company just made two key acquisitions that will grow its natural gas business and give it exposure to the emerging renewable natural gas (RNG) industry. These acquisitions, paired with a rich project backlog, give Kinder Morgan plenty of outlets to increase its earnings.

Given this backdrop, is Kinder Morgan finally returning to growth? And if so, is that necessarily a good thing?

Cautious growth

Growth can be risky and capital intensive but can also pay off big time. Debt worked to Kinder Morgan’s advantage in the early 2010s. The company’s top- and bottom-line performances were impressive, and Kinder Morgan stock became a Wall Street darling. However, debt can be a double-edged sword and got the better of Kinder Morgan by bloating its balance sheet and straining its business during the oil downturn of 2014 and 2015.

For the past few years, Kinder Morgan has been pounding the table on capital discipline. To its credit, it has successfully transitioned its business away from high spending toward generating DCF to support a growing dividend. It’s also taken a lot of that excess DCF and used it to pay down debt. Now, it’s safe to say that its balance sheet is in its best shape in five years.

Given management’s conservative bent, investors may be surprised to learn that the company may be returning to growth. And given its rocky past, the last thing investors want to see is Kinder Morgan ramp spending, overexpand, and then implode again.

Funding acquisitions with cash

The good news is that Kinder Morgan seems to be taking a responsible yet purposeful approach to growing its business. Strong DCF generation and a decent existing cash position allowed it to acquire Stagecoach Gas Services for $1.23 billion in cash, not debt. 

Stagecoach plays into Kinder Morgan’s Northeast portfolio of assets by adding 185 miles of pipeline and 41 billion cubic feet (bcf) of storage capacity. Although Kinder Morgan sees most of the growth in U.S. natural gas coming out of Texas and Louisiana, it also views the east coast as an underserved region when it comes to natural gas infrastructure. 

During its 2Q 2021 conference call, Kinder Morgan CEO Steve Kean said that “the Stagecoach assets are well interconnected with our Tennessee Gas Pipeline system, as well as other third-party systems in a part of the country that is constrained from an infrastructure standpoint, and frankly, where it is difficult to get new infrastructure permitted and built.” 

For years, companies have tried and failed to build pipelines in the region. High upfront costs, regulatory hurdles, and environmental opposition have all been major barriers to entry. Therefore, Kinder Morgan is probably better off buying existing assets than building new ones.

Kinder Morgan’s $310 million acquisition of Kinetrex Energy plays into the long-term potential RNG. Landfills generate a substantial amount of methane emissions. Capturing methane from landfills and turning it into useful energy has potential as an ESG-friendly investment for companies like Kinder Morgan.

In the short term, Kinetrex also has significant LNG storage assets. In fact, Kinder Morgan estimates that around 40% of Kinetrex’s business is currently tied to LNG, but the RNG business will grow to comprise 90% of the business over time. 

Fewer dividend raises may be a good thing

During its 2Q 2021 conference call, Executive Chairman Rich Kinder stressed that the company remains focused on growing the dividend, preserving the balance sheet, making acquisitions, and buying back shares when the time is right. However, he views all of these opportunities “in concert,” indicating the company may feel less inclined to buy-back shares or significantly raise the dividend if it’s spending money on growing the business, instead.

At the end of 2019, Kinder Morgan announced its intentions to raise its annual dividend from $1 a share to $1.25 a share in 2020. The COVID-19 pandemic threw a wrench in this plan. The company’s most recent dividend raise puts the annual payout at just $1.08 per share.

If Kinder Morgan’s two recent acquisitions have a drawback, it’s that they eat up cash that may have otherwise been used to raise the dividend. But given that Kinder Morgan stock already yields over 6%, compared to just 1.27% for the average stock in the S&P 500, it seems best that the company institutes minor dividend raises and focuses on other ventures, instead.

Fool, by Daniel Foelber, August 10, 2021

Iraq wants another U.S. company to replace Exxon as a shareholder in the West Qurna 1 field, one of the country’s largest after the supermajor leaves the country.

“Exxon Mobil is considering exiting Iraq for reasons that are to do with its internal management practices, decisions, and not because of the particular situation in Iraq,” Prime Minister Mustafa al-Kadhimi told media after a meeting with President Joe Biden, as quoted by Reuters.

Exxon, which holds a $32.7-percent interest in West Qurna 1, has been looking for a buyer with plans to exit the country entirely. The stake was valued last year at up to $500 million. At the time, reports said two Chinese companies were interested in acquiring it, state-owned CNPC and CNOOC.

The plans for the stake sale appear to have been prompted by the impact the pandemic had on Exxon’s finances as it sought to keep its dividend intact and reduce debt. Later reports said that Iraq could end up buying the West Qurna 1 stake itself.

There could be other reasons for Exxon leaving Iraq, too. As Gerald Jansen wrote for Oilprice earlier this month, these have to do with the souring relationship between the company and Baghdad after Exxon ventured into Kurdistan oil, and with the continued political and financial instability in Iraq. This, according to Jansen, may have compromised the profitability of whatever plans Exxon may have had for its Iraqi business earlier.

Just two years ago, Exxon was all set to take part in a $53-billion plan to boost Iraq’s oil production, but it seems the pandemic and the Iraqi situation changed many things, including this ambitious plan.

“When Exxon Mobil departs, we will not accept its replacement to be other than another American company,” Prime Minister Kadhimi told media this week, but an American company has yet to express interest in acquiring Exxon’s holdings in Iraq.

Oilprice, byIrina Slav, August 3, 2021

Leading energy infrastructure company Kinder Morgan’s (KMI) strategic acquisitions to diversify its portfolio of assets have strengthened its position in the energy market. However, because the spread of the COVID-19 Delta variant continues to stoke fears around future energy demand, the stock’s near-term prospects look uncertain.

Let’s discuss.Houston, Tex.,-based energy infrastructure company Kinder Morgan, Inc. (NYSE:) specializes in owning and controlling oil and gas pipelines and terminals in North America. The company owns and operates approximately 83,000 miles of pipelines and 144 terminals. So far this year, the stock has gained 27.1%, driven primarily by higher contributions from all three of its business segments in the second quarter of 2021 relative to the second quarter of 2020.

Also, greater demand for natural gas transportation and storage contracts in Texas has helped the company generate robust sales in the last reported quarter.

However, its stock is down 4% over the past month. This can be attributed primarily to volatility in oil prices as the Organization of the Petroleum Exporting Countries and other producers, including Russia—collectively known as OPEC+—reached an agreement to boost oil supply to cool oil prices and meet rising demand.

Although KMI’s diversified portfolio and its plans to acquire a leading supplier of liquefied natural gas in the Midwest should help it stand out in the energy market, concerns related to the spread of the COVID-19 Delta variant and its potential reduce energy demand could cause KMI’s shares to retreat in the near term.

By Investing, August 3, 2021

Port of Rotterdam Authority, Koole Terminals, Chiyoda Corporation and Mitsubishi Corporation have signed an agreement to a joint study the feasibility of a commercial-scale import of hydrogen from overseas sources to one of Koole’s terminals in the port of Rotterdam utilizing Chiyoda’s proven hydrogen storage and transportation technology SPERA Hydrogen.

Northwest-Europe will have to import hydrogen on a large scale to become net zero CO2 emission. The Port of Rotterdam Authority is therefore looking at ways to set up new hydrogen supply chains from countries where hydrogen can be produced and supplied cost-effectively.

Several companies in Rotterdam, such as Koole Terminals, are highly interested in this rapidly developing new business and are making plans to innovate their existing facilities and/or build new ones. The Port of Rotterdam Authority is supporting such activities.

Shipping hydrogen is more challenging than shipping oil or coal. One option is for it to be made liquid by cryogenic process to minus 253 degrees, another is to transform it into a carrier, like ammonia or methanol or lastly it could be chemically combined in a so called liquid organic hydrogen carrier (LOHC).

Methylcyclohexane (MCH) is a LOHC. It maintains a stable liquid state under ambient temperature and pressure. As a means of storage and transportation of hydrogen, MCH is comparable with petroleum and petrochemical production in terms of the risks involved. Chiyoda Corporation has developed the SPERA Hydrogen technology to release hydrogen from MCH. MCH is produced from toluene through hydrogenation process. When hydrogen is generated from MCH, toluene produced simultaneously, which can be shipped back to be used as material of MCH again.

In 2020 Chiyoda Corporation, Mitsubishi Corporation and MITSUI & CO., LTD. and Nippon Yusen Kabushiki Kaisha successfully completed the demonstration project of the long distance transportation (5000km) and storage of hydrogen using Chiyoda Corporation’s SPERA Hydrogen technology by producing MCH in Brunei, shipping it to Japan and shipping toluene back to Brunei. This was the world’s very first global hydrogen supply chain project proving the technical readiness for commercial use.

SPERA Hydrogen is expected to play an important role in the realization of commercial scale hydrogen supply chains globally and contribute to global carbon neutrality in 2050. One of the major advantages of MCH over liquid hydrogen and ammonia as a hydrogen carrier is that it makes use of existing infrastructure and vessels, and is easier to handle.

Now Port of Rotterdam Authority, Koole Terminals, Chiyoda Corporation and Mitsubishi Corporation, are conducting a joint-study on the large scale import of hydrogen. The Port of Rotterdam Authority will provide a matchmaking role for major hydrogen end-users in Northwest Europe and competitive oversea hydrogen suppliers and support for materializing the project. Koole Terminals will pursue ways to innovate its terminal facilities and support development of onward transport to their end-users.

Chiyoda Corporation will be the technology provider for the project and Mitsubishi Corporation, as one of Japan’s top trading and investment company in the field of energy industry, will lead the commercial development of the project to make the overall hydrogen supply chain commercially viable.

The feasibility study is expected to take one year. It is the ambition of the companies to import 100 to 200 ktpa hydrogen in 2025 and 300 to 400 ktpa in 2030.

By Ajot, August 4, 2021