Midstream Monitor

The New York State Department of Environmental Conservation (DEC) denied Williams Partners LP’s proposed 124-mile Constitution Pipeline approval, stating the project failed to meet the state’s water quality standards. In other news, proving that bigger is not necessarily better, tanker companies are beginning to place an emphasis on lower costs of operation. Also, when it comes to restructuring one expert says  companies will need to pick their poison when deciding how to proceed. But companies in need of debt restructuring have some strategies available, said Ron E. Meisler, partner, Skadden Arps, at a recent event hosted by Davis, Graham and Stubbs LLC. 
The oil and gas industry’s rapid Permian Basin expansion could push the power transmission and distribution capacity of the region’s electric system to its limits by 2020, a new GPA Midstream Association technical committee report cautions. To forestall potential power service limitations or reliability problems, midstream operators and upstream producers should contact their respective transmission and distribution service providers (TDSP) to discuss projections for future power needs over the next five or more years, James Meier, vice president of Permian gas and power infrastructure for Pioneer Natural Resources Co. and vice-chairman of GPA’s technical committee, said.
There’s light at the end of the long, dark ethane tunnel, according to a leading midstream consultant. Peter Fasullo, principal at Houston-based EnVantage Inc. told a standing-room-only crowd April 12 at the 95th annual GPA Midstream Association convention that the supply-demand balance for ethane has led to giveaway prices and large ethane-rejection volumes in which much of the ethane extracted from raw natural gas goes into the gas transmission system for consumption by gas users. Meanwhile, The topsy-turvy nature of the oil and gas prices over the past two years caused the INGAA Foundation to update its midstream infrastructure development forecast through 2035 to reflect the new market dynamics and austerity from both producers and midstream operators.
The already complicated relationship between Energy Transfer Equity LP and Williams Cos. Inc. is headed to counseling—the legal kind. The two companies, which are engaged in a nearly $38 billion merger, will now square off in the courts after Williams said April 6 that Energy Transfer and the company’s CEO, Kelcy Warren, violated terms with an equity sale made in March. Meanwhile, Adam Sieminski, head of the federal Energy Information Administration told the University of Oklahoma, Price College of Business Energy Institute annual Energy Symposium that “the end of fossil fuels is not on the horizon."
The Energy Information Administration reports that total exports of domestic petroleum products in general continued increasing in 2015 due to higher exports of distillate fuel, motor gasoline and propane specifically. Meanwhile, California refiners’ efforts to increase badly needed crude-by-rail service seem to have been derailed, but It wasn’t supposed to be this way, according to a new RBN Energy research report. In addition, Tallgrass Development LP is buying out its partner's stake in the Rockies Express Pipeline.
The U.S. Energy Information Administration (EIA) projects that 2016 is the tipping year from coal to natural gas in the fueling of U.S. power generation facilities. The EIA’s Short Term Energy Outlook forecasts that gas will provide 33% of electricity this year while coal’s share dips to 32%—the first time that gas will have the largest share for a year. The share of non-hydro renewables is expected to rise to 8%. Hydropower’s share is forecast to be 6%. 
Months after President Barack Obama blocked TransCanada Corp.’s cross-border Keystone XL pipeline, the Canadian company is back with a deal giving it enough pipe to circle the Earth twice.  TransCanada said March 17 it entered an agreement to acquire U.S.-based Columbia Pipeline Group Inc. for US$13 billion, which includes about US$2.8 billion of debt. As part of the agreement, Columbia shareholders will receive US$25.50 per common share, an 11% premium to its closing price on March 16.
On March 8, U.S. Bankruptcy Judge Shelley Chapman of the Southern District of New York authorized Sabine to reject certain gathering and processing agreements with Nordheim Eagle Ford Gathering LLC and HPIP Gonzales Holdings LLC. Sabine had argued that it was no longer able to deliver minimum amounts of natural gas and condensate and was subject to deficiency payments that would cost the company $35 million. Drilling an uneconomic well to avoid payments could cost it between $2.5 million and $80 million.
Midstream gas operators at IHS CERAWeek seeking to divine a strategy to return to the good old days may have been startled to learn that those days weren’t all that great. Salim Samaha, New York-based partner with Global Infrastructure Partners told attendees that without a conservative capital structure, companies will miss out on opportunities. He also said now is the time to invested. Meanwhile, the Appalachian Basin’s Marcellus and Utica shale plays will continue to pump out record volumes of natural gas in 2016, according to Ryan Horvat, Managing Director, RS Energy Group, who spoke at Hart Energy’s Marcellus-Utica Midstream Conference & Exhibition in Pittsburgh.
The stretch until mid-year will be brutal for the midstream, but the sector’s survivors can expect both stronger commodity prices and a stronger industry. A trio of leading executives mixed optimism with a cold, hard reality check at IHS CERAWeek: Well-run companies will make it through this rugged downturn intact and others will likely either be absorbed or die.

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