S&P Global Market Intelligence rounds up some of the themes and events that made the most impact in the North American natural gas industry in 2018.
Company overhauls abound with implosion of MLP structure
MLPs face another reckoning after FERC tax allowance proclamation
A March 15 decision to extinguish a tax benefit for oil and gas pipelines organized as master limited partnerships compounded the drag on an already burdened sector, potentially accelerating decisions to abandon the MLP structure. Volatile commodity prices and rising interest rates have made MLPs less attractive of late because of incentive distribution rights, which affect how cash is divided between general and limited partners.
Energy MLP model 'fading' as tax changes, investor preferences favor C-corps
The rush of energy company consolidations wiping out master limited partnerships was a long time coming. A combination of low commodity prices and high leverage at MLPs became a nightmare cocktail when mixed with recent tax changes for partnerships that has accelerated a trend away from the partnership structure that started back in late 2014. "Anything structured as a partnership is seeing less and less of a reason to exist," CBRE Clarion Securities portfolio manager Hinds Howard said in an interview.
Corporate structure is the talk of MLP industry as consolidations mount
At the Master Limited Partnership Association's annual meeting, the fate of the master limited partnership itself was on the agenda. Equity analysts and investment managers in attendance sensed optimism owing to higher oil prices and lower debt loads but cited corporate governance and simplification as a major topic weighing on participants at the Orlando conference, given the recent wave of energy company consolidations wiping out energy pipeline MLPs in the wake of federal tax changes.
Series of explosions, fires rock Boston area
Boston-area gas blasts, fires leave 1 dead, thousands without service
A series of explosions and fires that rippled through communities north of Boston late Sept. 13 left one dead and at least 10 injured. Early reports indicated that an over-pressurization along the gas system run by NiSource Inc. utility Columbia Gas of Massachusetts was to blame for the disaster. The explosions caused fires in at least 39 homes in the Massachusetts towns of Lawrence, Andover and North Andover.
NiSource may face long-term uncertainty over Boston-area gas blasts
Investigators are combing through evidence to find the root cause of a deadly series of explosions and fires in NiSource's Massachusetts service territory, but the public and the company may have to wait months or years for final resolution. Major gas utility accident investigations are complex, and accidents rarely stem from a single point of failure.
Human error played key role in Mass. gas explosions, federal report says
Human error likely played a critical role in the explosions and fires on the Columbia Gas of Massachusetts natural gas distribution system that killed one person and injured about two dozen others, according to an Oct. 11 preliminary report from the National Transportation Safety Board. Prior to the fires, a utility-contracted work crew took an old pipe out of service and installed a new one but left key pressure-sensing equipment active on the old line. The sensors were in communication with nearby regulator equipment that determines how much gas should flow through the system. Because the sensors — which were monitoring the now-abandoned pipeline — detected abnormally low pressure, they prompted the regulator to send increasing amounts of gas through the active system.
US LNG exports take off
US to become world's 3rd-largest exporter of liquefied gas in 2019
The liquefied natural gas export capacity of the U.S. will climb to 8.9 Bcf/d by the end of 2019 as the country overtakes Malaysia to become the third-largest exporter of the commodity in the world, the U.S. Energy Information Administration said. The agency's projection reflects a major ramp-up for a budding U.S. industry that is on track to more than double the LNG export capacity of 3.6 Bcf/d that was reached when Dominion Energy Inc.'s Cove Point LNG in Maryland came online early in 2018.
DOE looks for 'win for everybody' in LNG exports to Europe
A top U.S. Department of Energy official said the Trump administration has made progress in its effort to spur European imports of U.S. liquefied natural gas. Undersecretary of Energy Mark Menezes cited recent developments: Cheniere Energy Inc. landed a deal to supply LNG to Poland, and Germany has discussed the prospect of a new receiving terminal. But he said the case for U.S. LNG is not driven by economics alone.
Asia to dominate world LNG demand growth and boost US exports, report says
Asia will account for 86% of the world's growth in demand for liquefied natural gas through 2030, adding 143 million tonnes per annum of demand from 2017 to 2030, Bloomberg New Energy Finance said in a study that highlighted the region's importance to the U.S. LNG industry. A trade dispute between China and the U.S. has created uncertainty in the LNG market, but Bloomberg NEF still anticipated that the growth of demand in Asia and a drive to cut the cost of U.S. LNG will lead to sales and purchase agreements with U.S. developers.
High-profile pipeline projects face legal, regulatory hurdles
'Bad time' for Atlantic Coast, Mountain Valley pipelines, analysts say
Energy industry analysts agreed that the moves of the Federal Energy Regulatory Commission to halt construction on the $6 billion to $6.5 billion Atlantic Coast Pipeline LLC project and the $3.5 billion to $3.7 billion Mountain Valley Pipeline LLC project will likely slow the two mid-Atlantic interstate natural gas transportation projects. Pipeline industry analysts said the orders stopping construction make the projected start dates for the two pipelines uncertain. The combination of rising costs and lengthy litigation could prompt regulators to take a closer look at the need for the pipelines.
Rover's rocky road: Series of issues keeps $4B gas pipeline project from finish
The $4.2 billion Rover Pipeline LLC project is almost ready to open its full 3.25 Bcf/d of natural gas takeaway capacity for Marcellus and Utica producers, but the kinds of problems that hampered its development and provoked federal and state regulators are still with the company and keeping the project from entering full operation. Slip-ups in construction and delays in environmental restoration brought the scrutiny of the Federal Energy Regulatory Commission and the Ohio Environmental Protection Agency at several points during construction of the 511-mile Rover pipeline.
With Trans Mountain pipeline sale, Kinder Morgan dodges debacle of delay
Kinder Morgan Inc. ended its 13-year tenure as owner of the Trans Mountain pipeline system, and its long-hoped-for expansion might be no closer to reality than it was in 2005 amid a regulatory and legal process that could drag on in Canadian courts and before regulators for years. The government of Canada closed its approximately C$4.5 billion purchase of Trans Mountain one day after Kinder Morgan Canada shareholders voted 99% in favor of the deal, just after news broke that the nation's Federal Court of Appeal had effectively annulled permits for the C$7.4 billion project to almost triple the line's capacity.