September 2020, Vol. 247, No. 9
Global News
Global News
Pipeline Companies Deliver Largest Share of U.S. Gas Volumes
A new government report on the U.S. natural gas industry shows that local distribution companies supply 90% of natural gas to U.S. residential and commercial sectors, but pipeline companies handle the biggest volumes through direct delivery to electric power and industrial customers.
The U.S. Energy Information Administration’s (EIA) Natural Gas Annual Respondent Query System identified 2,022 natural gas delivery companies in 2018, defining a delivery company as any entity that delivers natural gas directly to end users. Its survey released in late July provides the most up-to-date snapshot across all U.S. natural gas markets.
A total of 553 pipeline companies delivered nearly 75 percent of natural gas consumed by electric power sector customers and more than 50 percent of the natural gas delivered to industrial sector customers in the United States during 2018, EIA said. They delivered an average of 65 MMcf/d directly to end users, but the largest pipeline companies delivered more than 2,100 MMcf/d.
Transported volumes are largely delivered by pipeline companies, and they accounted for 86% of industrial deliveries and 94% of electric power sector deliveries in 2018. Transported volumes are those in which the delivery company delivers natural gas to an end user, but the commodity is sold by another company.
LDCs primarily served homes and businesses, delivering 22 Bcf/d of end-use natural gas to the residential and commercial sectors in 2018, according to the EIA report. Municipally owned natural gas distributors were the most common, accounting for nearly half of all delivery companies, but these relatively small utilities averaged just 3 MMcf/d during the year, representing only 5% of residential and 6% of commercial deliveries
Municipal companies are most prevalent in Texas, Tennessee, Louisiana and Georgia, EIA said.
Dominion, Duke Take Combined $4.4 Billion Hit for Atlantic Coast Exit
Dominion Energy and Duke Energy took second-quarter charges of $2.8 billion and $1.6 billion, respectively, after cancellation of the Atlantic Coast natural gas pipeline from West Virginia to North Carolina. Atlantic Coast was the most expensive U.S. gas pipeline under construction when Dominion and Duke canceled the project in July due to regulatory uncertainty after years of delays and cost overruns.
Within days of the cancellation, Berkshire Hathaway Energy announced it had agreed to acquire Dominion Energy’s natural gas transmission and storage business at an enterprise value of $9.7 billion. The sale includes 7,700 miles of transmission lines with approximately 20.8 Bcf/d of transportation capacity; 900 Bcf of operated natural gas storage, including 364 Bcf of company-owned working storage capacity; and 25% ownership of the Cove Point LNG export, import and storage facility.
The acquisition did not include Atlantic Coast, which was estimated to cost a total $8 billion by the time it was to be completed in early 2022. When work began on the 600-mile (966-km) project in early 2018, it was expected to be completed in late 2019 and cost around $6 billion to $6.5 billion.
In addition to regulatory delays, Atlantic Coast was also hurt by a short-term hit to gas demand from the coronavirus pandemic.
Israel Approves Pipeline Deal to Sell Gas to Europe
The Israeli government approved an agreement with European countries for the construction of the subsea Eastmed natural gas pipeline, but a final investment decision (FID) is still pending.
The Eastmed pipeline, which has been in planning for several years, is meant to transport gas from offshore Israel and Cyprus to Greece and on to Italy. A deal to build the project that was signed in January between Greek, Cypriot and Israeli ministers had still required final approval in Israel.
The countries are aiming for an FID by 2022 and have the project completed by 2025 to help Europe diversify its energy resources. The 1,200-mile (1,900-km) Eastmed pipeline is projected to cost $6.86 billion (6 billion euro) pipeline.
Enbridge Sued by Victims of Kentucky Pipeline Explosion
A lawsuit filed on behalf of more than 80 people has been filed in relation to an August 2019 explosion on a natural gas pipeline in Kentucky.
The lawsuit accuses Enbridge’s Texas Eastern Transmission subsidiary of “failing to properly build and maintain the line, failing to identify and correct hazardous conditions, operating the pipeline at a dangerously high pressure and not having an adequate emergency plan.”
One person died and five others were injured in the incident, which damaged or destroyed more than a dozen homes and scorched 30 acres of land, according to authorities.
Government Forecasts Year-Long U.S. Petroleum Demand Recovery
The U.S. Energy Information Administration forecasts that U.S. consumption of total petroleum and other liquid fuels will continue increasing in the second half of 2020 as economic activity increases, but levels will remain lower than the 2019 average until August 2021.
In April, consumption of liquid fuels in the United States, as measured by product supplied, reached its all-time monthly low since the early 1980s at an average of 14.7 MMbpd. Weekly data showed consumption of petroleum products increased in July after states relaxed restrictions, but some of those were tightened again as infection rates increased.
Almost half of the decrease in U.S. consumption caused by the Covid-19 pandemic has come from reduced motor gasoline use, EIA said. The agency expects motor gasoline consumption will average 8.3 million b/d in 2020, down 1 MMbpd (10%) from 2019.
U.S. Senators Take Aim at German Port Over Russia Pipeline
Three U.S. senators threatened operators of a small German port with “crushing” sanctions for allegedly providing supplies to Russian vessels involved in construction of the Nord Stream 2 pipeline.
The letter from Sens. Ted Cruz, Tom Cotton and Ron Johnson targeted Faehrhafen Sassnitz GmbH, which operates Mukran Port located on Germany’s Baltic Sea island of Ruegen. The port is a key staging post for ships involved in the construction of the Nord Stream 2 pipeline that's intended to bring natural gas from Russia to Germany.
The Swiss company Allseas suspended pipelaying for Nord Stream 2 last December after President Donald Trump signed legislation threatening sanctions against companies linked to the project. The United States and some Eastern European countries argue that the pipeline will increase Europe's dependence on Russia, a claim both Berlin and Moscow reject. It also undercuts U.S. efforts to expand LNG exports to Europe.
Ukraine Says It Won’t Resume Gas Purchases from Russia
Ukraine's state energy firm Naftogaz said it would not resume buying natural gas from Russia, suspended since late 2015, until Moscow offered it competitive prices and conditions.
Ukraine was one of Russia's largest consumers of natural gas until the relations between the two ex-Soviet republics soured in 2014 when Moscow annexed Crimea peninsula from its neighbor. Kyiv stopped buying Russian gas in November 2015, increasing purchases from Europe instead.
Russian and Ukrainian companies signed a five-year deal at the end of 2019, safeguarding the transit of Russian gas to Europe via Ukraine, just hours before the previous agreement expired.
Poland Fines Gazprom $57 Million Over Nord Stream 2
Poland's anti-monopoly watchdog UOKiK said it has fined Gazprom $57 million (213 million zloty) for failing to cooperate in proceedings related to the Nord Stream 2 pipeline.
"At the beginning of the year, we requested Gazprom provide us with contracts concluded by its subsidiary with other companies financing the construction of Nord Stream 2...The company failed to provide such information," the head of UOKiK said in a statement.
Nord Stream 2 is led by Gazprom, with half of the funding provided by Germany's Uniper and BASF's Wintershall unit, Anglo-Dutch company Shell, Austria's OMV and Engie. Last year, UOKiK fined Engie $47 million (40 million euros) for failing to provide documents and information relating to the case.
Pipeline Operators Respond to Varying Pandemic Impact
North American pipeline operators described varying degrees of impact from Covid-19 and low commodity prices on their operations, with responses ranging from spending cuts to new financings through the second quarter of the year.
Plains All American Pipeline announced an additional $100 million in capital spending cuts in August, on top of the $750 million in cuts announced in April. Those figures exclude the $600 million reduction from its deferral of the Red Oak Pipeline joint venture with Phillips 66. Houston-based Plains reported net income of $142 million for the second quarter, about 68% lower than the second quarter of last year, as Permian long-haul movements were notably impacted by the downturn.
TC Energy posted a 6% year-over-year decline in second-quarter profit, partly due to a drop in uncontracted crude oil volumes on its Keystone pipeline. However, the Calgary-based operator said it did not expect the pandemic to have any material negative impact on its 2020 earnings or cash flows, because most of its earnings come from long-term contracts.
Kinder Morgan reported a second-quarter loss after downgrading the value of some assets by $1 billion due to the market impact of Covid-19, but it would have reported earnings of $363 without the accounting change. The company has scaled back on a number of planned expansion projects to offset the reduced cash flow, cutting $660 million from its original 2020 budget of $2.4 billion for expansion projects and contributions to joint ventures. It lowered distributable cash flow expectations by 10% for the year but said this will be more than offset by cutbacks.
Shell Midstream Partners said it would cut staffing and trim projects to save $10 million this year and up to $40 million next year in response to falling pipeline volumes. The Houston-based affiliate of Royal Dutch Shell transported 20% fewer barrels on its Zydeco oil pipeline while volumes on its Eastern Corridor pipeline fell nearly 23% during the second quarter. The declines were caused by “the continuing effects of COVID-19, along with a few shallow-water producer curtailments,” CFO Shawn Carsten said.
Enbridge deferred C$1 billion ($748 million) in capital spending. The Canadian company saw its quarterly earnings fall 5% in the quarter but posted a profit that slightly exceeded analyst expectations. Enbridge reported improving volumes in late July on its Mainline system, North America’s largest pipeline network.
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