Very good article about propane and US coulg face .....IHS Markit recently warned the U.S. propane market could face “Armageddon” this winter, as certain U.S. markets are expected to run short this winter. Canadian propane prices surge 300% — and could climb higher as U.S. markets brace for 'Armageddon'
Across North America, price of the fuel has risen faster than natural gas
« While all eyes have been on natural gas, propane prices have been skyrocketing too, thanks in large part to a huge export market for the heating source. Propane, usually produced as a by-product or derivative of natural gas, has jumped in the past three months, with prices in Edmonton up 296 per cent to US$1.40 per gallon from roughly US$0.25 per gallon, according to ATB Capital Markets. That rise is sharp enough to dramatically reduce the discount that Canadian propane prices usually face compared with pricing hubs like Mont Belvieu in Texas, where propane prices reached US$1.48 per gallon earlier this week.
Across North America, price of the fuel, sometimes called a natural gas liquid, has risen faster than natural gas. Propane prices have recently hit a 7.5-year high and are on course for their strongest rally since 2009, according to Bloomberg. IHS Markit recently warned the U.S. propane market could face “Armageddon” this winter, as certain U.S. markets are expected to run short this winter.
Propane inventories in the U.S. sat 21 per cent below the five-year average for storage in the middle of September, which Scotiabank noted was “concerning heading into winter.”
To compound the problem, the bank noted rising propane exports from both Canada and the U.S. mean storage levels are 42 per cent below the five-year average when exports are considered.
In the past 10 years, North American exports of propane have risen from 100,000 barrels per day to over 1 million. Natural gas exports have risen from zero to over 10 billion cubic feet per day from LNG facilities, and pipeline exports to Mexico have more than doubled from 3 billion cubic feet per day to 6.5 bcfd.
“Exports now make up a larger proportion of the total propane market, the total amount produced and distributed through the system, than is true for gas,” Johnston said, adding that natural gas exports make up about 15 per cent of total North American demand, whereas propane exports make up closer to 60 per cent of North American production .
“Notably, all three commodities are currently experiencing pricing highs well above their pre-pandemic levels,” ATB analysts wrote in an Oct. 13 research note, adding the rising commodity prices would boost the fortunes of Calgary-based midstream companies.
The Edmonton-based bank’s analysts said in a research note the strength in propane prices would provide a “tailwind” for Keyera Corp. and Pembina Pipeline Corp., both of which operate natural gas fractionators and have “significant exposure” to propane production.
Both Pembina and AltaGas Ltd. operate LPG export terminals in Prince Rupert, British Columbia, where propane is exported to Asian markets for winter heating. Neither company responded to requests for comment on how rising prices had affected demand for cargoes at their LPG facilities on the West Coast.
Canada Energy Regulator data shows Pembina’s facility can export 25,000 bpd of propane while the AltaGas terminal can handle 40,000 bpd.
Note From Bossu;
Ferndale and RIPET are going to export 100 000 b/d in 2021 and this represent 10 % of all North America exportation and ports only located 10 days away from Japan ports.
We can see by this article that ALTAGAS has done an extremely good investement at a cheapest possible costs.
Still repeating :Pertrogas has done an home run this year through Ferndale which is exporting more than anticipated and the EBITDA to erase the $ 43 M Q3 2020 loss to zero and hopefully a break even to show a total profit for the 3 quarters at the same level of last year at $ 437 M or $ 1,56 /share.
And has Johnwith30 years is looking at 2,00/share it woul need only 0,44 /share for the Q4 2021
Remembering that the Q1 2021 has been $ 1,20/share profit and according to seasonality the Q1 is 40 % contribution while the Q4 is 30%
In my mind ALA is in a great shape to beat its revised the $ 1,55 top end number but $ 2,00 is out of reach but would be great !
In summary a breakeven for the Q3 would place ALA for a big ''POP''for the end of the year !
Cheers
In the past 10 years, North American exports of propane have risen from 100,000 barrels per day to over 1 million. Natural gas exports have risen from zero to over 10 billion cubic feet per day from LNG facilities, and pipeline exports to Mexico have more than doubled from 3 billion cubic feet per day to 6.5 bcfd.
“Exports now make up a larger proportion of the total propane market, the total amount produced and distributed through the system, than is true for gas,” Johnston said, adding that natural gas exports make up about 15 per cent of total North American demand, whereas propane exports make up closer to 60 per cent of North American production .
Article content
“Similar to natural gas, we’re in a situation where prices for the arbitrage opportunity are so wide that you’re going to keep exporting as much as you can,” Johnston said, adding that it’s cheaper to export propane through LPG terminals than gas through LNG terminals.
Canadian natural gas liquids pricing has jumped in the last three months, according to ATB Capital Markets. Propane has led the way, but butane prices and condensate prices have also posted sharp increases, of 218 per cent and 65 per cent, respectively.
“Notably, all three commodities are currently experiencing pricing highs well above their pre-pandemic levels,” ATB analysts wrote in an Oct. 13 research note, adding the rising commodity prices would boost the fortunes of Calgary-based midstream companies.
Article content
The Edmonton-based bank’s analysts said in a research note the strength in propane prices would provide a “tailwind” for Keyera Corp. and Pembina Pipeline Corp., both of which operate natural gas fractionators and have “significant exposure” to propane production.
And while Canada has yet to build a large-scale LNG export terminal, the country is already home to two liquid petroleum gas export terminals.
Article content
Both Pembina and AltaGas Ltd. operate LPG export terminals in Prince Rupert, British Columbia, where propane is exported to Asian markets for winter heating. Neither company responded to requests for comment on how rising prices had affected demand for cargoes at their LPG facilities on the West Coast.
Canada Energy Regulator data shows Pembina’s facility can export 25,000 bpd of propane while the AltaGas terminal can handle 40,000 bpd.
Financial Post
• Email: gmorgan@nationalpost.com | Twitter:
_____________________________________________________________
If you liked this story, sign up for more in the FP Energy newsletter.
______________________________________________________________
Share this article in your social network
Advertisement
This advertisement has not loaded yet, but your article continues below.