Midstream Business Magazine - March 2011
Cover Story
Trading Places
As midstream mergers, acquisitions and divestitures heat up, managers must find ways to efficiently manage their asset portfolios.
Editor's Note
Moving Parts
Typically, at the end of the first quarter of each year, oil and gas producers and their midstream service providers are fairly cognizant of their plans for the rest of the year. Not so this year. Upstream and midstream operators find themselves faced with more questions than answers.
Construction Update
Infrastructure Gains Momentum
P?roduction in the shale plays has ratcheted up and rig counts are continuing to rise as well, providing ample demand for additional midstream infrastructure. The majority of recent midstream projects involve expansions to increase much-needed capacity.
Feature
Back In Business
After bankruptcy and reorganization, SemGroup emerged as one of the major midstream energy companies to list on the New York Stock Exchange.
Bakken Take-Away
With production leveling or declining from Canadian conventional-gas plays, Alliance Pipeline and others are turning their eyes to Bakken liquids.
Barnett Barrels On
?Extensive, mature midstream infrastructure supports the big Barnett shale-gas play.
Corrosion Technology 101
Corrosion-induced failure is one of the greatest threats to pipeline safety and productivity, and pipeline corrosion engineers are intimately aware of the ever-increasing battle they face.
Diverse DCP
?The company targets expansion and new builds to support mounting NGL production, leveraging existing assets.
First Purchaser Insurance
Risk insurance can increase the availability of financing for companies purchasing at the wellhead.
Game-Changing Gas Flows
?U.S. shale-gas production is significantly changing every direction of traditional gas transmission flows, according to this group of North American energy experts.
Gas-Storage Strategies
Gas-storage operators see a logistical need for new capacity, driven by increasing unconventional gas production. Operating efficiencies are the key to success.
Go With The Flow
M?aster limited partnerships (MLPs) were a hot commodity during 2009 and 2010. But despite the space’s continued positive performance into 2011, MLPs fell below the S&P 500’s gain of 3.2% to end the month of February up 2.7%.
High-Btu Fuel Gas
?A case study of peak firing pressures and emission levels on an Ingersoll Rand engine in a gas-storage facility shows how to manage the change to high-Btu fuel gas from the Marcellus shale.
Investment Voyages
?As capital markets recover and respond to construction-growth demand in unconventional resource plays, nimble midstream investors are finding ways to navigate rocky market waters.
Keystone Conundrum
?TransCanada’s proposed extension of its oil pipeline system from Canada’s oil-sands region to U.S. Gulf Coast refineries is drawing debate.
Marcellus Full Throttle
Marcellus gas development continues at full throttle, and a variety of midstream infrastructure needs are following close behind.
Midstream Connections
?New Williams chief executive Alan Armstrong sees vast potential for the U.S. midstream industry, driven by upstream growth and hungry downstream markets.
More Infrastructure—Please
Marcellus shale gas has a ready market just next door, but the lack of regional midstream infrastructure continues to frustrate drillers and consumers.
Niobrara Economics
New wells are proving up the Niobrara liquids play as a winner, but only time will tell if the economics allow long-term development and justify new take-away infrastructure.
Processing Strategies
While the strategies of gas-processing executives vary, they share a common optimism about the sector’s prospects.
Storage Storm Savvy
Experienced storage providers know to keep an eye on the market to foresee avenues of growth, but what happens when the weather takes a turn for the worse? According to NorTex, absolutely nothing—and that’s a good thing.
The Liquids-Rich Rush
Gas processors are thriving in the current NGL market, which is brimming with liquids-rich potential. But how long can the NGL rush last?
Tricky Land Restoration
The pipeline is in the ground, but the work isn’t over yet. These final details ensure that land remediation is complete.
Urgent Safety Regulations
NTSB’s new rules are on the table, and the message is clear: Show documentation of pipeline characteristics, or test your pipelines—soon.
Alerian Index
MLPs Make Headlines
D?uring February, the Alerian MLP Infrastructure Index (AMZI) produced a total return of 3.7%, slightly outperforming the S&P 500 Index increase of 3.4%. The 10-year treasury increased from 3.4% at the end of January to a high of 3.7% on February 8 and back to 3.4% by month-end.
MLPs: Off To A Great Start
MLPs are off to the races this year, showing a 1.3% median quarter-on-quarter distribution growth, active debt markets and additional commitments in shale plays.
Finance Matters
M&A Trends Off To A Robust Start
M?idstream mergers and acquisitions (M&A) activity is off to a robust start in 2011, with 11 announced transactions worth $1.5 billion. This compares to 13 transactions worth $1.2 billion in the same period in 2010 (excluding the $12-billion Williams Partners LP restructuring) and 88 transactions worth $47.4 billion for all of 2010.
Master Limited Partnership
Midstream Movers
Meet Jarrett Vick
Shale plays bring significant risks to the midstream sector, including cash-flow lag, unmaterialized volume growth, speculative-grade-rated customers, contractual risks, joint ventures and commodity-price risks for those without fee-based revenue.
News Flow
In The Pipeline
Appalachian Basin production is set to rise dramatically as more Marcellus shale wells are drilled in Pennsylvania, speakers said at Hart Energy’s Marcellus Midstream Conference in Pittsburgh.
NGL Frac Spread
Fuel Switching, Supply Shortages Push Ethane, Propane Margins
T?he frac-spread margins for February and into early March were highlighted by strong ethane-margin rebounds at both Conway and Mont Belvieu. Margins were bolstered by increased demand from olefins crackers favoring ethane over naphtha due to price differences.
Transaction Update
Debt And Equity Action Heats Up
So far this year, the debt markets continue to be open to the midstream space, as many partnerships issue debt and call back bonds that were originally issued with significantly higher rates.